<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 22, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
FRIEDE GOLDMAN INTERNATIONAL INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 3731 72-1362492
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION CLASSIFICATION CODE NUMBER)
IDENTIFICATION NUMBER)
OF INCORPORATION OR 525 E. CAPITOL STREET, SUITE 402
ORGANIZATION) JACKSON, MISSISSIPPI 39201
(601) 352-1107
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
J. L. HOLLOWAY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
525 E. CAPITOL STREET, SUITE 402
JACKSON, MISSISSIPPI 39201
(601) 352-1107
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
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copy to: copy to:
THOMAS P. MASON ROBERT D. CAMPBELL
Andrews & Kurth L.L.P. Thompson & Knight, P.C.
4200 Texas Commerce Tower 1700 Pacific Avenue, Suite 3300
Houston, Texas 77002 Dallas, Texas 75201-4693
(713) 220-4200 (214) 969-1700
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
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If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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<TABLE>
<CAPTION>
PROPOSED
MAXIMUM
AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES OFFERING REGISTRATION
TO BE REGISTERED PRICE(1) FEE
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<C> <S> <C>
Common Stock, $.01 par value..... $61,180,000 $18,540
</TABLE>
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(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(a).
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION, DATED MAY 22, 1997
PROSPECTUS
[LOGO] 3,800,000 SHARES
FRIEDE GOLDMAN INTERNATIONAL INC.
COMMON STOCK
------------
Friede Goldman International Inc. ("Friede Goldman International" or the
"Company") is offering 2,300,000 shares, and certain selling stockholders (the
"Selling Stockholders") are offering 1,500,000 shares, of common stock (the
"Common Stock") of the Company (the "Offering"). Prior to the Offering, there
has been no public market for the Common Stock. The Company has applied for
listing of the Common Stock on the NASDAQ National Market under the symbol
"FGII." It is currently estimated that the initial public offering price will
be between $ and $ per share. See "Underwriting" for factors to be
considered in determining the initial public offering price.
------------
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY POTENTIAL INVESTORS.
------------
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.
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<TABLE>
<S> <C> <C> <C> <C>
PRICE PROCEEDS PROCEEDS TO
TO UNDERWRITING TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) STOCKHOLDERS
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Per Share........................ $ $ $ $
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Total(3)......................... $ $ $ $
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</TABLE>
(1) The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933. See "Underwriting."
(2) Before deducting expenses payable by the Company, estimated to be $ .
(3) The Company has granted the Underwriters a 30-day option to purchase up to
an aggregate of 570,000 additional shares of Common Stock on the same terms
and conditions as set forth above solely to cover over-allotments, if any.
If such option is exercised in full, the total Price to Public,
Underwriting Discount, Proceeds to Company and Proceeds to Selling
Stockholders will be $ , $ , $ and $ , respectively. See
"Underwriting."
------------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by the Underwriters.
The Underwriters reserve the right to reject orders in whole or in part. It is
expected that delivery of the shares of Common Stock will be made against
payment therefor in New York, New York on or about , 1997.
JEFFERIES & COMPANY, INC.
BEAR, STEARNS & CO. INC.
JOHNSON RICE & COMPANY L.L.C.
, 1997
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
<PAGE>
[PICTURES OF DRILLING RIGS BEING CONVERTED AND RETROFITTED]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT AND OTHER STABILIZING TRANSACTIONS. FOR A DESCRIPTION
OF THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements (including the notes thereto) included
elsewhere in this Prospectus. Unless otherwise indicated, all information in
this Prospectus assumes that the Underwriters' over-allotment option with
respect to the sale of Common Stock will not be exercised. Except as otherwise
specified, (a) all references to the Company include Friede Goldman
International Inc. and, unless the context otherwise requires, its wholly-owned
subsidiaries, HAM Marine, Inc. ("HAM Marine") and Friede & Goldman, Ltd.
("Friede & Goldman"), and (b) all references to the activities of Friede &
Goldman prior to December 2, 1996 relate to the activities of the predecessor
company with respect to which the Company acquired certain of its assets and
business on such date (the "Friede Acquisition") and all references to Friede &
Goldman refer to the assets and business of such predecessor company acquired
by the Company. See "The Company--Corporate Restructuring."
THE COMPANY
Friede Goldman International Inc. is a leading provider of conversion,
retrofit and repair services for offshore drilling rigs, including jackups,
submersibles, semisubmersibles and drillships, and has entered the emerging
market for conversion of offshore drilling units and tankers into deepwater
floating production, storage and offloading vessels ("FPSOs"). In the last
seven years, the Company has completed 47 offshore drilling rig conversion or
retrofit projects, which the Company believes is more than any other shipyard
company in the United States. The Company, through its acquisition of Friede &
Goldman in December 1996, is also one of the world's largest designers of
offshore drilling rigs. The Company offers its customers a full range of
design, engineering, construction, conversion, retrofit and repair services for
offshore drilling rigs, including construction of new-build offshore drilling
rigs. The Company's customers consist primarily of drilling contractors that
drill offshore exploratory and development wells for oil and gas companies
throughout the world, particularly in the Gulf of Mexico, the North Sea and
areas offshore of West Africa and South America.
The Company currently operates a 32-acre shipyard that is strategically
located in Pascagoula, Mississippi with direct access to the Gulf of Mexico.
The shipyard has the capacity to provide conversion, retrofit and repair
services on six offshore drilling rigs simultaneously. Due to increased demand
for its services, the Company has increased its backlog from $15.4 million at
March 31, 1996 to $65.5 million at March 31, 1997. To accommodate this
increased demand, the Company has recently leased additional dock space and
fabrication buildings adjacent to its existing shipyard in Pascagoula,
Mississippi and has increased its workforce from approximately 300 employees at
December 1, 1996 to approximately 800 employees at March 31, 1997.
The Company plans to commence construction in the second quarter of 1997 of a
new state-of-the-art shipyard on a 105-acre site located approximately six
miles from the existing shipyard. The new shipyard has been designed
specifically to promote the most timely and efficient construction of new
offshore drilling rigs, and could also be used for conversion, retrofit and
repair services. The Company believes that the expected efficiencies of its new
shipyard, together with the Company's offshore drilling rig design
capabilities, its established relationships with drilling contractor customers
and its extensive construction experience, will provide the Company with
competitive advantages in the developing market for new construction of
offshore drilling rigs.
OFFSHORE DRILLING INDUSTRY
The level of worldwide offshore drilling activity has increased substantially
over the last two years, resulting in an increase in worldwide utilization for
marketed offshore drilling rigs to 99% in May 1997. Dayrates worldwide for
cantilever jackups capable of drilling in water depths of 300 or more feet have
increased from an average of $37,000 in May 1996 to an average of $61,000 in
May 1997, with a recently reported high of
3
<PAGE>
$116,000. Similarly, dayrates worldwide for third and fourth generations of
semisubmersibles have increased from an average of $83,000 in May 1996 to an
average of $118,000 in May 1997, with a recently reported high of $175,000. In
addition, oil and gas operators have recently begun to enter into multi-year
contracts with drilling contractors for offshore drilling rigs due to the
tightness of supply for available units. In deepwater areas where larger and
more technically advanced drilling rigs are needed, increased drilling activity
has also increased demand for retrofitting offshore drilling rigs to enhance
their technical capabilities and improved pricing levels for such services. In
addition, increased drilling activity in and around more mature fields in
shallower waters has contributed to the increase in demand for conversion,
retrofit and repair services for jackups and other offshore drilling rigs.
The Company believes that these positive trends will continue due to (i) the
increasing percentage of worldwide oil supply being produced from offshore
areas, (ii) the increases in capital expenditure budgets of oil and gas
companies for offshore drilling activity, (iii) technological advancements that
have increased drilling success rates and (iv) the increased focus on deepwater
exploration and production projects, particularly in the Gulf of Mexico.
The Company believes that the current supply of offshore drilling rigs
worldwide is inadequate to satisfy increasing demand. From 1985 to 1996, there
has been a decrease in the total number of offshore drilling rigs worldwide
from 809 to 639 rigs. The Company believes that, of the 366 jackups currently
marketed worldwide, only 47 are capable of drilling in water depths greater
than 300 feet and, of the 139 semisubmersibles currently marketed worldwide,
only 25 are capable of drilling in water depths greater than 3,000 feet. In
addition, substantially all of the current fleet of offshore drilling rigs were
built more than ten years ago, and many of these rigs need to be converted or
modified in order to continue to operate economically or to meet the
requirements for deepwater drilling.
COMPANY OPERATIONS
The Company's operations currently consist primarily of conversion, retrofit
and repair services for offshore drilling rigs and the development of designs
for new offshore drilling rigs. The Company plans to construct a new shipyard
designed to build new offshore drilling rigs, which shipyard could also be used
for conversion, retrofit and repair services.
CONVERSION, RETROFIT AND REPAIR SERVICES. The Company's conversion and
retrofit projects primarily include the conversion of jackup drilling rigs from
a slot design to a cantilever design, the lengthening of legs on jackup rigs,
the conversion of submersible rigs into semisubmersible rigs and the retrofit
of early generation semisubmersible rigs to provide the enhanced capabilities
associated with later generation semisubmersibles. These conversion and
retrofit projects are designed to improve the operating efficiency of a
drilling rig or provide increased technical capabilities, such as the ability
to operate in deeper water. The Company also has been involved in the
conversion of offshore drilling units and tankers to production units,
including FPSOs and mobile offshore production units ("MOPUs"). In addition,
the Company provides a broad range of structural rig repairs, including the
replacement of legs on jackup rigs, the repair of pontoons on semisubmersible
rigs and the repair of deck structures on offshore drilling rigs and production
platforms.
OFFSHORE DRILLING RIG AND FPSO DESIGN. In December 1996, the Company acquired
Friede & Goldman, a company that designs mobile offshore drilling and
production units, including jackups, semisubmersibles, drillships and FPSOs,
and provides design and engineering services with respect to conversion and
retrofit projects. Friede & Goldman has more than 50 years of experience in
premier offshore rig design, beginning with the design of the first
semisubmersibles to operate in the Gulf of Mexico. The Company's designs
include the Friede & Goldman L-780 jackup design and Pacesetter and Trendsetter
semisubmersible designs. Approximately 10% of jackup rigs and approximately 30%
of semisubmersible rigs currently operating worldwide were designed by Friede &
Goldman. The Company has recently designed a new jackup for use in water depths
of approximately 400 feet that the Company believes would provide increased
operational efficiencies over
4
<PAGE>
currently available designs, at a cost to construct that would be similar to
the last generation of jackups. The Company has developed a series of FPSOs
suitable for operations worldwide and is also currently in the process of
developing new designs for a semisubmersible drilling rig for use in deepwater
environments.
CONSTRUCTION OF NEW OFFSHORE DRILLING RIGS AND FPSOS. Since the early 1980's
and until recently, there has not been any significant construction of new-
build offshore drilling rigs. The Company has recently completed a survey of
its customers that has indicated a substantial interest in new rig
construction. In addition, as of May 1997, 15 new offshore drilling rigs were
being constructed worldwide, consisting of six jackups, six semisubmersibles
and three drillships. Management of the Company attributes this increased
demand for new-build offshore drilling rigs to (i) the recent increases in
offshore drilling rig dayrates, (ii) the recent increases in offshore drilling
rig utilization and (iii) the recent willingness of oil and gas companies to
enter into longer-term contracts with drilling contractors.
Due to capacity constraints of the Company's existing shipyard, the Company
has not been able to participate in the developing market for new offshore
drilling rig construction. In order to participate in this market, the Company
plans to commence construction in the second quarter of 1997 of a state-of-the-
art shipyard scheduled to be operational by early 1998 and completed later that
year at a total cost of approximately $29 million. The new shipyard has been
designed specifically for the construction of new offshore drilling rigs and
FPSOs, and it will have the capacity to perform various stages of construction
and outfitting activities on up to three drilling rigs or FPSOs simultaneously.
In addition, the Company may use its shipyard facilities, or establish a
separate manufacturing facility, to construct and assemble various components
of Friede & Goldman designed jackups that it would sell as kits that could be
used in the construction of new-build jackups either at the Company's shipyards
or at other shipyards. These kits would consist of such manufactured
components, including Friede & Goldman's patented rack chock leg fixation
system, and a Friede & Goldman jackup design.
In addition to new offshore drilling rig construction, 13 new FPSOs were
under construction worldwide in early 1997, and management of the Company
anticipates that there will be an increase in the demand for new construction
of FPSOs for use in deepwater areas where there is not sufficient pipeline
infrastructure to adequately transport oil and gas production onshore. FPSOs
have only recently been constructed, typically through the conversion of a
crude oil tanker or a semisubmersible rig. The Company believes that demand for
FPSOs will increase as deepwater drilling activity increases, and that newly
constructed FPSOs will be more cost-effective than conversions of existing
crude oil tankers or semisubmersible rigs.
BUSINESS STRATEGY
The Company's business strategy is to enhance its position as a leader in the
conversion, retrofit and repair of offshore drilling rigs and production units
and to be a leading participant in the developing market for new offshore
drilling rig and FPSO construction. The key elements of the Company's business
strategy are as follows:
MAINTAIN FOCUS ON RIG CONVERSION, RETROFIT AND REPAIR SERVICES. Due to
increased demand for offshore drilling rigs with enhanced technical
capabilities, the demand for the Company's conversion, retrofit and repair
services has increased significantly during the past 12 months. As a result,
the Company's backlog has increased from $15.4 million at March 31, 1996 to
$65.5 million at March 31, 1997.
PURSUE NEW OFFSHORE DRILLING RIG AND FPSO CONSTRUCTION. The Company believes
that a market for construction of new offshore drilling rigs and FPSOs is
developing. The Company intends to pursue opportunities to construct new
offshore drilling rigs and FPSOs by capitalizing on its existing relationships
with drilling contractors, its expertise and reputation for design of new
offshore drilling rigs, its reputation for high quality and reliability and the
state-of-the-art construction capabilities of its new shipyard.
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<PAGE>
CAPITALIZE ON FRIEDE & GOLDMAN DESIGN CAPABILITIES. The Company intends to
emphasize its research and development efforts with respect to new designs for
offshore drilling rigs and floating production units. The Company believes that
its ability to provide its customers new designs for offshore drilling rigs and
production units will provide it with a competitive advantage in the developing
market for construction of new offshore drilling rigs and FPSOs.
PROVIDE INTEGRATED SERVICES. The Company offers its customers a full range of
design, engineering, construction, conversion, retrofit and repair services for
offshore drilling rigs, including construction of new-build drilling rigs. The
Company believes that its full range of services will enable it to achieve
vertical integration with respect to new-build offshore drilling rigs through
the ability to provide state-of-the-art designs, the ability to provide
engineering expertise and the capability to build drilling rigs at the
Company's facilities.
PURSUE STRATEGIC ACQUISITIONS AND JOINT VENTURES. The Company is actively
pursuing prospects to broaden its international exposure and expand its
capabilities to convert, retrofit and repair offshore drilling rigs, as well as
fabricate certain components of new offshore drilling rigs, through joint
ventures or subcontracting arrangements with one or more shipyards in the U.S.
or in foreign countries.
THE OFFERING (1)
<TABLE>
<C> <S>
Common Stock offered by the Company.... 2,300,000 shares
Common Stock offered by the
Selling Stockholders.................. 1,500,000 shares
Total Common Stock offered............ 3,800,000 shares
Common Stock to be outstanding
after the Offering.................... 11,500,000 shares
Use of proceeds........................ To fund a portion of the Company's
anticipated capital requirements over
the next 12 to 18 months, including
capital expenditures to construct and
equip a new shipyard, capital
expenditures to improve the productive
capacity and efficiency of the
existing shipyard, research and
development costs relating to the
design of new offshore drilling rigs
and floating production units, working
capital requirements and other general
corporate purposes. See "Use of
Proceeds."
Proposed NASDAQ National Market Symbol. FGII
</TABLE>
- --------
(1) Excludes the shares subject to the Underwriters' over-allotment option as
well as options to purchase shares which are currently outstanding and
options to purchase shares which are expected to be granted upon
consummation of this Offering. See "Management--Equity Incentive Plan."
6
<PAGE>
SUMMARY FINANCIAL DATA
The following table sets forth summary historical financial data as of the
dates and for the periods indicated. The historical financial data for the year
ended July 31, 1992 and for each of the years ended December 31, 1994, 1995 and
1996 are derived from the audited financial statements of the predecessors of
the Company (the "Predecessors"). The historical financial data for the year
ended December 31, 1993, for the three months ended March 31, 1996 and 1997 and
as of March 31, 1997 are derived from unaudited financial statements of the
Predecessors. The unaudited financial statements of the Predecessors for the
three months ended March 31, 1996 and 1997 and as of March 31, 1997 reflect, in
the opinion of the Company's management, all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation of its
financial condition and results of operations for such periods. The following
table also sets forth pro forma statement of operations data of the Company for
the year ended December 31, 1996 that give pro forma effect to certain
transactions, including the Friede Acquisition and the issuance of Common Stock
of the Company in exchange for all of the outstanding common stock of the
Predecessors (the "Reorganization"). The following data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," the historical financial statements of the
Predecessors and the related notes thereto, the historical financial statements
of the predecessor company to Friede & Goldman and the related notes thereto,
the historical balance sheet of the Company and the related notes thereto and
the pro forma statement of operations of the Company and the related notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
YEAR -------------------------------------------- THREE MONTHS
ENDED PRO ENDED MARCH 31,
JULY 31, FORMA -----------------
1992(1) 1993(1) 1994 1995 1996 1996(2) 1996 1997
-------- ------- ------- ------- ------- ------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenue................. $22,703 $10,355 $23,891 $19,865 $21,759 $25,533 $ 2,965 $ 18,655
Cost of revenue......... 18,186 6,770 18,063 13,510 15,769 18,663 2,426 12,800
------- ------- ------- ------- ------- ------- ------- --------
Gross profit........... 4,517 3,585 5,828 6,355 5,990 6,870 539 5,855
Selling, general and
administrative
expenses(3)............ 1,961 1,699 2,203 3,862 5,869 4,226 942 2,522
------- ------- ------- ------- ------- ------- ------- --------
Operating income....... 2,556 1,886 3,625 2,494 120 2,645 (404) 3,332
Net interest expense.... (265) (135) (346) (197) (448) (538) (83) (120)
Gain on asset sales(4).. 3 11 808 1,869 349 349 230 1,379
Litigation
settlements(5)......... -- -- -- 750 3,467 3,467 3,467 --
Other................... 84 55 23 6 104 104 (27) 66
------- ------- ------- ------- ------- ------- ------- --------
Net income............. $ 2,378 $ 1,817 $ 4,110 $ 4,921 $ 3,870 $ 6,027 $ 3,183 $ 4,658
======= ======= ======= ======= ======= ======= ======= ========
UNAUDITED PRO FORMA
DATA:
Net income as reported
above.................. $ 3,592 $ 6,027 $ 4,658
Pro forma provision for
income taxes(6)........ (1,329) (2,230) (1,810)
------- ------- --------
Pro forma net income... $ 2,263 $ 3,797 $ 2,848
======= ======= ========
Pro forma net income per
share(7)............... $ 0.25 $ 0.41 $ 0.31
Common and equivalent
shares outstanding..... 9,200 9,200 9,200
OTHER FINANCIAL DATA:
Depreciation and
amortization........... $ 426 $ 339 $ 347 $ 425 $ 696 $ 821 $ 174 $ 215
Capital expenditures.... 144 1,167 1,150 2,670 2,357 2,502 1,596 1,555
EBITDA(8)............... 2,982 2,225 4,054 2,919 1,092 3,466 (230) 3,922
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
--------------------------
PRO FORMA AS
HISTORICAL ADJUSTED(9)(10)
---------- ---------------
BALANCE SHEET DATA: (IN THOUSANDS)
<S> <C> <C>
Working capital...................................... $ 2,387
Net property, plant and equipment.................... 6,043
Total assets......................................... 31,456
Long-term debt....................................... 1,979
Stockholders' equity................................. 8,717
</TABLE>
7
<PAGE>
- --------
(1) Prior to December 31, 1992, the Company utilized a July 31 fiscal year end.
Beginning in 1993, the Company adopted a calendar year as its fiscal year.
Contract revenues for the five-month period ended December 31, 1992 were
approximately $2.6 million. Other statement of operations data for the
five-month period ended December 31, 1992 have not been presented because
the amounts were not material.
(2) The pro forma statement of operations data for the year ended December 31,
1996 give pro forma effect to (i) the Friede Acquisition as if it had
occurred as of the beginning of the period presented, (ii) a reduction in
selling, general and administrative expenses to reflect (a) a reduction of
compensation expense of approximately $2 million in the aggregate, the
amount by which the compensation paid in 1996 to three executive officers
and stockholders of HAM Marine (the "Stockholder Employees") exceeded the
compensation levels set forth in the employment contracts entered into
between the Company and the Stockholder Employees in May 1997 and (b) the
elimination of approximately $0.3 million of compensation expense
attributable to the granting of common stock by one of the Predecessors to
an employee in December 1996, and (iii) the Reorganization. See Note 3
below.
(3) Included in selling, general and administrative expenses are bonuses paid
to the Stockholder Employees of approximately $0.2 million, $1.2 million
and $2.1 million for the years ended December 31, 1994, 1995 and 1996,
respectively, which were intended primarily to provide a means by which the
Stockholder Employees could meet the individual income tax obligations
arising from the pass through of the Company's taxable income to the
Stockholder Employees due to the status of the Predecessors as S
Corporations in 1996 and prior periods. See Note 6 below.
(4) The gain on asset sales in 1994 and 1996 resulted primarily from the sale
of assets not used in the Company's operations. The gain on asset sales in
1995 resulted from the sale of assets acquired from an affiliated entity.
Gain on asset sales for the three months ended March 31, 1997 includes
approximately $0.9 million related to the distribution of real estate held
for investment and an airplane to the stockholders of one of the
Predecessors. The assets were not used directly in the Company's
operations. See Notes 7 and 14 of Notes to the historical financial
statements of the Predecessors included elsewhere in this Prospectus.
(5) The litigation settlement in 1995 represents the amount received as a
result of a claim by the Company against a general contractor for which the
Company served as a subcontractor. The litigation settlement in 1996
represents the amount received by the Company as a result of a claim
against a customer. See Note 13 of Notes to the Company's historical
financial statements included elsewhere in this Prospectus.
(6) The pro forma provision for income taxes gives pro forma effect to the
application of federal and state income taxes to the Company as if it were
a C Corporation for tax purposes. For all periods presented herein, the
Company and the Predecessors have operated as S Corporations for federal
and state income tax purposes. Immediately prior to the Offering, the
stockholders of the Company and the Predecessors intend to make elections
terminating the S Corporation status of the Company and the Predecessors.
As a result, the Company will become subject to corporate level income
taxation. See "The Company--Corporate Restructuring," "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and Notes 1 and 2 of Notes to the historical financial statements of the
Predecessors included elsewhere in this Prospectus.
(7) Pro forma net income per share is calculated by dividing the pro forma net
income by the 9,200,000 shares outstanding immediately after the
Reorganization as if such shares had been outstanding throughout each
period presented. See "The Company--Corporate Restructuring."
(8) EBITDA represents operating income plus depreciation, amortization and non-
cash compensation expense related to the issuance of stock and stock
options to employees. EBITDA is not presented as an indicator of the
Company's operations or performance or as a measure of liquidity calculated
in accordance with generally accepted accounting principles.
8
<PAGE>
(9) The pro forma balance sheet data of the Company as of March 31, 1997 give
pro forma effect to (i) the distribution of cash to the stockholders of one
of the Predecessors prior to the closing of the Offering in an amount equal
to the estimated federal and state income taxes payable by such
stockholders on the undistributed earnings of such Predecessor through the
closing of the Offering, (ii) the distribution of marketable securities and
the assumption by such stockholders of the margin account indebtedness
associated with such marketable securities, (iii) borrowings under the
Company's revolving credit facility to fund the cash portion of the
distribution to such stockholders, (iv) the recording of a deferred tax
liability as a result of the termination of the status of the Predecessors
as S Corporations prior to the closing of the Offering and (v) the
Reorganization, in each case as if such event had occurred as of March 31,
1997. See "The Company--Corporate Restructuring" and "Capitalization."
(10) Assumes the public offering of 2,300,000 shares of Common Stock by the
Company at an assumed price of $ per share resulting in net proceeds of
$ million (after deducting the underwriting discount and expenses of the
Offering estimated at $ million) and the application thereof as
described herein. See "Use of Proceeds."
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WORLDWIDE OFFSHORE DRILLING RIG UTILIZATION
The following table sets forth certain information relating to worldwide
offshore drilling rig utilization for the years ended December 31, 1992, 1993,
1994, 1995 and 1996 and the three months ended March 31, 1997. All information
in the following table has been derived from Offshore Data Services.
<TABLE>
<CAPTION>
AVERAGE FOR THE
AVERAGES FOR THE YEAR ENDED DECEMBER 31, THREE MONTHS
---------------------------------------- ENDED
1992 1993 1994 1995 1996 MARCH 31, 1997
-------- -------- -------- -------- -------- --------------- ---
<S> <C> <C> <C> <C> <C> <C> <C>
SEMISUBMERSIBLES:
Number of Total
Rigs(1).............. 167 161 159 142 143 144
Utilization of Total
Rigs(2).............. 77% 79% 78% 84% 92% 95%
Utilization of
Marketed Rigs(3)..... 82% 86% 85% 91% 99% 99%
JACKUPS:
Number of Total
Rigs(1).............. 399 394 392 388 382 378
Utilization of Total
Rigs(2).............. 76% 85% 82% 84% 91% 94%
Utilization of
Marketed Rigs(3)..... 84% 90% 87% 89% 96% 99%
ALL OFFSHORE DRILLING
RIGS:
Number of Total
Rigs(1).............. 682 666 661 644 639 636
Utilization of Total
Rigs(2).............. 76% 83% 81% 84% 89% 92%
Utilization of
Marketed Rigs(3)..... 83% 89% 87% 90% 96% 97%
</TABLE>
- --------
(1) Includes rigs held for disposition.
(2) Defined as rigs working as a percentage of total rigs.
(3) Defined as rigs working as a percentage of rigs available for work
(excludes mothballed, out of service, cold stacked and shipyard rigs).
10
<PAGE>
RISK FACTORS
Prospective investors should carefully consider the following factors as
well as the other information contained in this Prospectus.
DEPENDENCE ON CONDITIONS IN THE OFFSHORE DRILLING INDUSTRY
The Company's business and operations depend principally upon conditions
prevailing in the offshore drilling industry. In particular, the level of
demand for the Company's services is affected by the level of demand for the
services of offshore drilling contractors, which in turn is dependent upon the
condition of the oil and gas industry and, in particular, the level of capital
expenditures of oil and gas companies with respect to offshore drilling
activities. These capital expenditures are influenced by prevailing oil and
natural gas prices, expectations about future prices, the cost of exploring
for, producing and delivering oil and gas, the sale and expiration dates of
offshore leases in the United States and overseas, the discovery rate of new
oil and gas reserves in offshore areas, local and international political and
economic conditions, and the ability of oil and gas companies to access or
generate capital sufficient to fund capital expenditures for offshore
exploration, development and production activities. Although the trend of oil
and natural gas prices over the past year has been generally favorable, over
the past several years, oil and natural gas prices and the level of offshore
drilling and exploration activity have fluctuated substantially. A significant
or prolonged reduction in oil or natural gas prices in the future would likely
depress offshore drilling and development activity. A substantial reduction of
such activity would reduce demand for the Company's services and could have a
material adverse effect on the Company's financial condition and results of
operations.
EXPANSION OF OPERATIONS
The Company has recently expanded its capacity to convert, retrofit and
repair offshore drilling rigs through the lease of additional dockspace and
fabrication buildings adjacent to its existing shipyard in Pascagoula,
Mississippi and the charter of a drydock vessel. The Company has also recently
acquired Friede & Goldman, a company that designs offshore drilling rigs and
floating production units. In addition, the Company has recently entered into
a memorandum of understanding with Jackson County, Mississippi to construct a
new shipyard on 105 acres approximately six miles from its existing shipyard
that would be capable of building new drilling rigs as well as converting,
retrofitting and repairing existing drilling rigs. In conjunction with such
actions, the Company plans to utilize its existing capabilities to fabricate
the structural components of drilling rigs, the design capabilities of Friede
& Goldman and the production capabilities of the new shipyard to build new
drilling rigs to the extent market conditions permit such applications to be
commercially viable. The Company may establish a manufacturing operation,
either at its shipyards or at another location, that would be capable of
constructing components for new-build jackups that the Company would sell,
along with Friede & Goldman jackup designs, as kits that could be used in the
construction of new-build jackups. In addition, the Company is considering
various opportunities to enter into joint venture or subcontracting
arrangements with existing shipyards in the United States, Mexico and Canada
that would provide additional capabilities to perform structural fabrication
or repair operations. There can be no assurance that market conditions,
including dayrates realized by offshore drilling contractors, will permit the
Company to obtain orders for the construction of new drilling rigs on a
profitable basis or that the Company will realize orders for a sufficient
quantity of new drilling rigs to justify the costs and expenses of
constructing, equipping and operating the new shipyard. In addition, the
Company has not completed all of the arrangements necessary to commence
construction of the new shipyard or to establish a new jackup component
manufacturing operation. In particular, with respect to the new shipyard, the
Company has not completed the negotiation of a construction contract to build
the shipyard and has not received all necessary governmental approvals. As a
result, there can be no assurance that the new shipyard will be completed or,
if completed, that the new shipyard will be completed on the schedule or at
the total cost to complete currently estimated by the Company. In addition,
the Company has not determined that it will proceed with the establishment of
a jackup component manufacturing operation or any other joint venture or
subcontracting arrangement to perform other operations.
11
<PAGE>
Any significant increase in the level of conversion, retrofit and repair
activity, as well as the development of a new drilling and production unit
construction business, will impose significant added responsibilities on
members of senior management, including the need to identify, recruit and
integrate additional management personnel and skilled laborers. Although the
Company has hired senior level management personnel who have experience in the
business of building new drilling rigs, there can be no assurance that
additional management personnel or skilled laborers will be identified and
retained by the Company. In addition, there can be no assurance that the
Company's systems, procedures and controls will be adequate to support the
Company's operations as they expand. If the Company is unable to manage its
growth efficiently and effectively, or if it is unable to attract and retain
additional qualified management personnel and skilled laborers, there could be
a material adverse effect on the Company's financial condition and results of
operations.
OPERATING RISKS
The Company's activities relating to conversion, retrofit and repair of
drilling rigs and its proposed activities relating to new construction of
drilling rigs and production units involve the fabrication and refurbishment
of large steel structures, the operation of cranes and other heavy machinery
and other operating hazards that can cause personal injury or loss of life,
severe damage to and destruction of property and equipment and suspension of
operations. The failure of the structure of a drilling rig after the rig
leaves the Company's shipyard can result in similar injuries and damages. In
addition, the Company's employees who are engaged in offshore operations are
covered by provisions of the Jones Act, the Death on the High Seas Act and
general maritime law, which laws operate to exempt these employees from the
limits of liability established under worker's compensation laws and, instead,
permit them or their representatives to maintain actions against the Company
for damages or job-related injuries, with no limitations on the Company's
potential liability. The operation of the drydock vessel bareboat chartered by
the Company can give rise to large and varied liability risks, such as risks
of collisions with other vessels or structures, sinkings, fires and other
marine casualties, which could result in significant claims for damages
against both the Company and third parties for, among other things, personal
injury, death, property damage, pollution and loss of business. The failure to
adequately design a drilling rig or production unit could also result in
personal injury, loss of life or severe damage to and destruction of property
and equipment. Litigation arising from any such occurrences may result in the
Company being named as a defendant in lawsuits asserting large claims. In
addition, due to their proximity to the Gulf of Mexico, the Company's
facilities are subject to the possibility of physical damage caused by
hurricanes or flooding. Although the Company maintains such insurance
protection as it considers economically prudent, there can be no assurance
that any such insurance will be sufficient or effective under all
circumstances or against all hazards to which the Company may be subject. In
particular, due to the high cost of errors and omissions policies relating to
the design of drilling rigs and production units, the Company does not carry
insurance covering claims for personal injury, loss of life or property damage
relating to such design activity. A successful claim for which the Company is
not fully insured could have a material adverse effect on the Company.
Moreover, no assurance can be given that the Company will be able to maintain
adequate insurance in the future at rates that it considers economical.
CONTRACT BIDDING RISKS
Due to the nature of the drilling rig construction industry, the Company
generally performs a portion of the work on each project on a fixed-price
basis and a portion of the work on a cost-plus basis, particularly for
projects completed in stages. With respect to the fixed-price portions of a
project, the Company receives the price fixed for such portion, and therefore
the Company must absorb any cost overruns relating to such portion of the
project. Under cost-plus arrangements, the Company receives its direct labor
cost and material cost plus specified percentages of such labor costs and
material costs. As a result, the Company is protected against cost overruns
under these cost-plus arrangements but does not benefit directly from cost
savings. See "Business--Contract Structure and Pricing."
The revenue and costs associated with the fixed-price portion of any
particular project will often vary from the amounts originally estimated
therefor because of variations in the cost of labor and materials and
variations
12
<PAGE>
in productivity of labor from the original estimates. These variations and the
risks inherent in the drilling rig construction industry may result in revenue
and gross profits different from those originally estimated and may result in
reduced profitability or losses on projects. Depending on the size of a
project, variations from estimated performance may have a significant impact
on the Company's operating results for any particular fiscal quarter or year.
PERCENTAGE-OF-COMPLETION ACCOUNTING
Most of the Company's revenue is earned on a percentage-of-completion basis
based generally on the ratio of total costs incurred to the total estimated
costs. Accordingly, contract price and cost estimates are reviewed
periodically as the work progresses, and adjustments to income proportionate
to the percentage of completion are reflected in the period when such
estimates are revised. To the extent that these adjustments result in a
reduction or elimination of previously reported profits, the Company would
have to recognize a charge against current earnings, which may be significant
depending on the size of the project or the adjustment. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
DEPENDENCE ON SIGNIFICANT CUSTOMERS
A large portion of the Company's revenue has historically been generated by
a few customers, although not necessarily the same customers from year to
year. For the years ended December 31, 1994, 1995 and 1996, the Company's
three largest customers in such years collectively accounted for 89%, 91% and
66% of revenue, respectively. The Company expects that a significant portion
of the Company's revenues for 1997 will be derived from one customer. Because
the level of services that the Company may provide to any particular customer
depends on that customer's needs for drilling rig conversion, retrofit or
repairs in a particular year, customers that account for a significant portion
of revenue in one fiscal year may represent an immaterial portion of revenue
in subsequent years. However, the loss of a significant customer for any
reason, including a sustained decline in that customer's capital expenditure
budget or competitive factors, could result in a substantial loss of revenue
and could have a material adverse effect on the Company's operating
performance. See "Business--Customers and Marketing."
BACKLOG
The Company's backlog is based on management's estimate of future revenue
attributable to (i) the remaining amounts to be invoiced with respect to those
projects, or portions of projects, as to which a customer has authorized the
Company to begin work or purchase materials and (ii) projects, or portions of
projects, that have been awarded to the Company as to which the Company has
not commenced work. All projects currently included in the Company's backlog
are subject to change and/or termination at the option of the customer, either
of which could substantially change the amount of backlog currently reported.
In the case of a termination, the customer is required to pay the Company for
work performed and materials purchased through the date of termination;
however, due to the large dollar amounts of backlog estimated for each of a
small number of projects, amounts included in the Company's backlog could
decrease substantially if one or more of these projects were to be terminated
by the Company's customers. In particular, approximately 85% of the Company's
backlog as of March 31, 1997 was attributable to three projects, two of which
were with one customer. A termination of one or more of these large projects
or the loss of a significant customer could have a material adverse effect on
the Company's revenue, net income and cash flow for 1997. See "Business--
Backlog."
REGULATORY AND ENVIRONMENTAL MATTERS
The Company's operations and properties are subject to and affected by
various types of governmental regulation, including numerous federal, state
and local environmental protection laws and regulations, compliance with which
is becoming increasingly complex, stringent and expensive. These laws may
provide for "strict liability" for damages to natural resources or threats to
public health and safety, rendering a party liable
13
<PAGE>
for the environmental damage without regard to its negligence or fault.
Sanctions for noncompliance may include revocation of permits, corrective
action orders, administrative or civil penalties and criminal prosecution.
Certain environmental laws provide for strict, joint and several liability for
remediation of spills and other releases of hazardous substances. In addition,
companies may be subject to claims alleging personal injury or property damage
as a result of alleged exposure to hazardous substances. Such laws and
regulations may also expose the Company to liability for the conduct of or
conditions caused by others, or for acts of the Company that were in
compliance with all applicable laws at the time such acts were performed. In
addition, the Company depends on the demand for its services from the oil and
gas industry and is affected by changing taxes, price controls and other laws
and regulations relating to the oil and gas industry generally. The adoption
of laws and regulations curtailing exploration and development drilling for
oil and gas for economic, environmental and other policy reasons would
adversely affect the Company's operations by limiting demand for its services.
The Company cannot determine to what extent future operations and earnings of
the Company may be affected by new legislation, new regulations or changes in
existing regulations. See "Business--Government and Environmental Regulation."
FRIEDE ACQUISITION DEFAULT PROVISIONS
Pursuant to the terms of the Friede Acquisition, the Company is obligated to
pay the former owner of the predecessor company to Friede & Goldman (i)
certain design and licensing payments on sales by Friede & Goldman of designs
for new-build vessels and (ii) specified payments in the event the Company
fails to design at least 20% of the new-build vessels ordered by U.S.-based
drilling companies (subject to certain maximum amounts), in each case with
respect to a 10-year period that commenced in December 1996. In the event the
Company fails to make such required payments, the former owner of such
predecessor company will have the right to (i) require the Company to return
all Friede & Goldman assets purchased by the Company (including the design for
drilling rigs and production units in existence at the time of the acquisition
but excluding the name Friede & Goldman and derivatives thereof and excluding
new designs developed by the Company after the acquisition) and (ii) terminate
the consulting and noncompetition provisions of such acquisition. See
"Business--Friede Acquisition."
DEPENDENCE ON KEY PERSONNEL
The Company's operations are dependent on the continued efforts of its
executive officers. Although each of the Company's executive officers has
entered into an employment agreement with the Company, there can be no
assurance that any individual will continue in such capacity for any
particular period of time. The loss of key personnel, or the inability to hire
and retain qualified employees, could have an adverse effect on the Company's
business, financial condition and results of operations. The Company does not
carry key-person life insurance on any of its employees. See "Management."
CONTROL BY EXISTING MANAGEMENT AND STOCKHOLDERS
Following the completion of the Offering, the Company's executive officers
and directors will beneficially own 67.0% of the outstanding shares of Common
Stock (63.8% if the Underwriters' over-allotment option is exercised in full).
In addition, J. L. Holloway, the Company's Chairman of the Board, Chief
Executive Officer and President, will own 53.5% of the outstanding shares of
Common Stock (50.9% if the Underwriters' over-allotment option is exercised in
full). Consequently, these persons, if they were to act together, or Mr.
Holloway, acting alone, would have the ability to exercise control over the
Company's affairs, to elect the entire Board of Directors and to control the
disposition of any matter submitted to a vote of stockholders. See "Principal
and Selling Stockholders."
NO PRIOR MARKET, POSSIBLE VOLATILITY OF STOCK
Prior to this Offering, no public market for the Common Stock has existed,
and the initial public offering price, which will be determined by negotiation
between the Company and representatives of the Underwriters, may not be
indicative of the price at which the Common Stock will trade after the
Offering. See "Underwriting"
14
<PAGE>
for the factors to be considered in determining the initial public offering
price. Application has been made to list the Common Stock on the NASDAQ
National Market, but no assurance can be given that an active trading market
for the Common Stock will develop or, if developed, continue after the
Offering. The market price of the Common Stock after the Offering may be
subject to significant fluctuations from time to time in response to numerous
factors, including variations in the reported financial results of the Company
and changing conditions in the economy in general or in the Company's industry
in particular. In addition, the stock markets experience significant price and
volume volatility from time to time which may affect the market price of the
Common Stock for reasons unrelated to the Company's performance.
CERTAIN ANTI-TAKEOVER EFFECTS
The Company's Amended and Restated Certificate of Incorporation (the
"Charter") and Bylaws contain various provisions that may hinder, delay or
prevent the acquisition of control of the Company without the approval of the
Board of Directors of the Company. Certain provisions of the Charter and the
Bylaws, among other things, (i) authorize the issuance of "blank-check"
Preferred Stock without stockholder action, (ii) divide the Company's Board
into three classes, the members of which (after an initial transition period)
will serve for three-year terms, (iii) establish advance notice requirements
for director nominations and stockholder proposals to be considered at annual
meetings and (iv) prohibit stockholder action by written consent. Certain
provisions of the Delaware General Corporation Law may also discourage
takeover attempts that have not been approved by the Board of Directors. See
"Description of Capital Stock."
SHARES ELIGIBLE FOR FUTURE SALE
Immediately prior to the closing of the Offering, 9,200,000 shares of Common
Stock of the Company will be issued and outstanding. None of these shares was
or will be issued in a transaction registered under the Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, other than any such
shares included in the Offering, the shares may not be sold except in
transactions registered under the Securities Act or pursuant to an exemption
from registration, including the exemption contained in Rule 144 under the
Securities Act. When these shares become saleable, the market price of the
Common Stock could be adversely affected by the sale of substantial amounts of
the shares in the public market. The current stockholders of the Company have
certain registration rights with respect to their shares. If such
stockholders, by exercising such registration rights, cause a large number of
shares to be registered and sold in the public market, such sales may have an
adverse effect on the market price of the Common Stock. See "Description of
Capital Stock--Registration Rights" and "Shares Eligible for Future Sale."
Upon the closing of this Offering, the Company also will have outstanding
options to purchase up to a total of shares of Common Stock issued
pursuant to the Company's 1997 Equity Incentive Plan (the "Equity Incentive
Plan"). A total of 1,150,000 shares will be issuable pursuant to the Equity
Incentive Plan. The Company intends to register all the shares subject to
these options under the Securities Act for public resale. See "Management--
Equity Incentive Plan."
The effect, if any, that the availability for sale, or sale, of the shares
of Common Stock eligible for future sale will have on the market price of the
Common Stock prevailing from time to time is unpredictable, and no assurance
can be given that the effect will not be adverse.
DILUTION
The purchasers of the shares of Common Stock offered hereby will experience
immediate dilution in the net tangible book value of their shares of $ per
share (assuming an initial public offering price of $ per share). See
"Dilution." In the event the Company issues additional shares of Common Stock
in the future, including shares which may be issued in connection with
acquisitions or other public or private financings, purchasers of Common Stock
in the Offering may experience further dilution in the net tangible book value
per share of the Common Stock of the Company.
15
<PAGE>
THE COMPANY
GENERAL
Friede Goldman International Inc. is a leading provider of conversion,
retrofit and repair services for offshore drilling rigs, including jackups,
submersibles, semisubmersibles and drillships, and has entered the emerging
market for conversion of offshore drilling units into FPSOs. In the last seven
years, the Company has completed 47 offshore drilling rig conversion or
retrofit projects, which the Company believes is more than any other shipyard
company in the United States. The Company, through its acquisition of Friede &
Goldman, is also one of the world's largest independent designers of offshore
drilling rigs. The Company offers its customers a full range of design,
engineering, construction, conversion, retrofit and repair services for
offshore drilling rigs, including construction of new-build offshore drilling
rigs.
RECENT DEVELOPMENTS
Recently, the Company has taken several strategic initiatives to capitalize
on offshore drilling industry trends towards increased rig conversions and
retrofits and new rig construction.
. THE FRIEDE ACQUISITION. The Company recently acquired Friede & Goldman,
one of the world's largest designers of offshore drilling rigs. The
Friede Acquisition broadened the Company's range of services that it
can provide to its customers, and the Company believes that its design
capabilities will provide it with a competitive advantage with respect
to attracting new offshore drilling rig construction business.
. CAPACITY EXPANSION. In December 1996, the Company significantly
expanded its Pascagoula shipyard through the lease of additional
dockspace, land and covered buildings for machine and fabrication
shops, blast painting and storage.
. INCREASED WORKFORCE. The Company has increased its workforce from
approximately 300 employees at December 1, 1996 to approximately 800
employees at March 31, 1997 from the available supply of skilled
shipyard workers in the Pascagoula, Mississippi area.
. UNIQUE TOWABLE DRYDOCK VESSEL. The Company recently entered into a
bareboat charter that gives the Company operational control of a
towable drydock vessel with heavy lift capacity and 30,000-ton load
bearing capabilities. The Company believes that the towable drydock is
the only vessel of its kind in the Gulf of Mexico, where increasing
offshore vessel activity has significantly constrained drydock
capacity.
. NEW STATE-OF-THE-ART SHIPYARD. The Company plans to commence
construction in the second quarter of 1997 of a modern 105-acre yard
designed specifically for new offshore drilling rig construction and
could also be used for conversion, retrofit and repair of existing
offshore drilling rigs and production units. The Company expects that
its new shipyard will be operational by early 1998 and completed later
that year.
As a result of these strategic initiatives, the Company believes it is well
positioned to meet the needs of offshore drilling contractors and offshore
operators as they convert, retrofit, repair and expand their offshore drilling
rig fleets and floating production systems for the Gulf of Mexico and other
areas of the world.
CORPORATE RESTRUCTURING
The Company's business of converting, retrofitting and repairing offshore
drilling rigs has been conducted by HAM Marine since its formation in 1982. In
December 1996, a company controlled by the stockholders of HAM Marine acquired
certain assets and business of the predecessor company of Friede & Goldman
("Friede Predecessor"), including substantially all of the designs developed
by Friede Predecessor and the name "Friede & Goldman, Ltd." and all
derivatives thereof. Following the completion of the acquisition, the
acquiring company changed its name to Friede & Goldman, Ltd.
16
<PAGE>
The Company was incorporated in Delaware in February 1997 to serve as the
holding company for HAM Marine and Friede & Goldman, collectively referred to
herein as the Predecessors. The stockholders of each of HAM Marine and Friede
& Goldman have entered into an agreement (the "Exchange Agreement") pursuant
to which such stockholders will exchange their shares in such corporations for
shares of Common Stock of the Company prior to the closing of the Offering. In
accordance with the terms of the Exchange Agreement, the stockholders of HAM
Marine and Friede & Goldman will receive a number of shares of Common Stock
proportionate to their relative share holdings in each of HAM Marine and
Friede & Goldman.
Each of HAM Marine and Friede & Goldman has operated as an S Corporation for
federal and state income tax purposes. As a result, each of the Predecessors
currently pays no federal or state income tax, and their earnings are subject
to tax directly at the stockholder level. Immediately prior to the completion
of the Offering, the stockholders of each of the Predecessors intend to make
an election to terminate the S Corporation status of such Predecessors.
Accordingly, each of the Predecessors will become subject to corporate level
income taxation and, as a result, the Company will be required to record a net
deferred income tax liability through a charge to earnings estimated to be
approximately $0.8 million in the second quarter of 1997 attributable
primarily to the difference in financial reporting and tax reporting methods
of accounting for depreciation and sales-type leases. See the pro forma
statement of operations of the Company and related notes thereto included
elsewhere in this Prospectus and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
In the past, each of the Predecessors has made distributions to its
stockholders in order to provide a cash return to them and to fund their
federal and state income tax liability that resulted from the S Corporation
status of the Predecessors. In accordance with this practice, one of the
Predecessors intends to make a distribution, prior to the completion of the
Offering, of cash in an amount equal to the estimated federal and state income
taxes payable by the stockholders of the Predecessors on the aggregate
undistributed earnings of the Predecessors through the date of their election
to terminate S Corporation status of the Predecessors, which amount is
expected to be approximately $ million. In addition, in March 1997, one of
the Predecessors made a distribution to its stockholders of certain
nonoperating assets that have a fair market value of approximately $1.6
million in the aggregate. One of the Predecessors also plans to distribute to
its stockholders, prior to the completion of the Offering, marketable
securities having a fair market value of approximately $4.8 million as of
March 31, 1997 and in connection therewith such stockholders will assume the
related margin account indebtedness ($2.7 million as of March 31, 1997).
The Company's executive offices are located at 525 E. Capitol Street, Suite
402, Jackson, Mississippi 39201, and its telephone number at that address is
(601) 352-1107.
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USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
offered by the Company, after deducting the underwriting discount and offering
expenses payable by the Company, are estimated to be approximately $
million (approximately $ million if the Underwriters' over-allotment
option is exercised in full), based on an assumed initial public offering
price of $ per share.
The Company currently intends to utilize the net proceeds of the Offering to
fund a portion of its anticipated capital requirements over the next 12 to 18
months of between $50 million and $65 million, including (i) approximately $29
million to construct and equip its new shipyard, (ii) approximately $3 million
for capital expenditures to increase the productive capacity and efficiency of
its existing shipyard, (iii) approximately $3 million for research and
development expenditures related to the design of new, technologically
innovative offshore drilling rigs and floating production units, (iv) between
$10 million and $20 million of additional working capital related to increased
levels of conversion, retrofit and repair activities and new construction of
offshore drilling rigs and floating production units and (v) $5 million to $10
million for general corporate purposes, which may include the establishment of
a manufacturing operation, either at the Company's shipyards or at another
location, that would be capable of constructing and assembling components of
new-build jackups or the acquisition of one or more businesses that are
complementary to the Company's operations. The Company would expect to fund
the remaining portion of its anticipated capital requirements from cash flow
from operations, borrowings available under its existing revolving credit
facility or additional borrowings. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources."
Pending the Company's use of the net proceeds of the Offering, the Company
intends to repay borrowings under its existing revolving credit facility ($2.6
million in principal amount of borrowings outstanding as of March 31, 1997 and
$7.2 million as of March 31, 1997 giving pro forma effect to borrowings to be
incurred to fund a distribution of proceeds to the stockholders of one of the
Predecessors prior to the closing of the Offering) and to invest the remaining
net proceeds to be received by it from the Offering in short-term, investment-
grade, interest-bearing instruments. For a description of the terms of the
revolving credit facility, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources." The Company will not realize any of the proceeds from the sale of
the shares offered by the Selling Stockholders.
DIVIDEND POLICY
It is the Company's current intention to retain earnings to finance the
expansion of its business. Any future dividends will be at the discretion of
the Board of Directors of the Company after taking into account various
factors, including, among others, the Company's financial condition, results
of operations, cash flows from operations, current and anticipated cash needs
and expansion plans, the income tax laws then in effect and the requirements
of Delaware law. In addition, HAM Marine's current credit facility prohibits
the payment of dividends from HAM Marine to the Company in the event that HAM
Marine defaults under the terms of such facility. In such an event, the
Company's ability to receive sufficient funds from HAM Marine to pay dividends
to the Company's stockholders would be significantly impaired. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
18
<PAGE>
CAPITALIZATION
The following table sets forth as of March 31, 1997 (i) the historical
capitalization of the Predecessors and (ii) the capitalization of the Company
on a pro forma basis giving effect to (a) the distribution of cash to the
stockholders of one of the Predecessors prior to the closing of the Offering,
(b) borrowings under the Company's revolving credit facility to fund such
distribution, (c) the recording of a deferred income tax liability as a result
of the termination of the status of the Predecessors as S Corporations prior
to the closing of the Offering and (d) the completion of the Reorganization,
as adjusted to give effect to the Offering and the application of the
estimated net proceeds therefrom. See "The Company--Corporate Restructuring"
and "Use of Proceeds." This table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the historical financial statements of the Predecessors and
the related notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31,
1997
-------------------
PRO FORMA
ACTUAL AS ADJUSTED
------- -----------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Cash and cash equivalents(1)............................... $ 3,203 $
======= =======
Short-term debt and current maturities of long-term
debt(2)................................................... $ 7,506 $
======= =======
Long-term debt, less current maturities.................... $ 1,979 $
Stockholders' equity:
Preferred Stock: $0.01 par value, 5,000,000 shares
authorized; no shares issued and outstanding............ -- --
Common Stock: $0.01 par value, 25,000,000 shares
authorized; 9,200,000 shares issued and outstanding,
11,500,000 shares issued and outstanding pro forma as
adjusted(3)............................................. 5
Additional paid-in capital................................. 1,628
Retained earnings.......................................... 6,180
Unrealized gain on marketable securities................... 905
------- -------
Total stockholders' equity............................... 8,717
------- -------
Total capitalization................................... $10,696 $
======= =======
</TABLE>
- --------
(1) Includes certificates of deposit that are pledged as security for short-
term borrowings.
(2) Short-term debt and current maturities of long-term debt include $1.1
million of short-term debt secured by certificates of deposit and $2.7
million of brokerage margin account debt secured by marketable securities.
(3) Excludes the shares of Common Stock subject to the Underwriters' over-
allotment option as well as options to purchase shares which are
currently outstanding and options to purchase shares which are expected
to be granted upon consummation of this Offering.
19
<PAGE>
DILUTION
As of March 31, 1997, the net tangible book value per share of Common Stock
was $0.82. The "net tangible book value per share" represents the amount of
the net tangible book value (total book value of tangible assets less total
liabilities) of the Company divided by the number of shares of Common Stock
outstanding. After giving effect to the distribution of cash to the
stockholders of one of the Predecessors prior to the closing of the Offering
and the sale of the shares of Common Stock offered hereby (at an assumed price
of $ per share and after deducting the estimated underwriting discount and
estimated offering expenses payable by the Company), the pro forma net
tangible book value of the Company at March 31, 1997 would have been $ or
$ per share, representing an immediate increase in net tangible book value
of $ per share to existing stockholders and an immediate dilution of $
per share to the investors purchasing shares of Common Stock in the Offering
("New Investors"). See "The Company--Corporate Restructuring" and "Use of
Proceeds." The following table illustrates this dilution to New Investors:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................... $
Net tangible book value per share at March 31, 1997.............. $0.82
Increase per share attributable to sale of Common Stock in the
Offering........................................................
-----
Pro forma net tangible book value per share after giving effect to
the Offering......................................................
-----
Dilution in net tangible book value per share to New Investors..... $
=====
</TABLE>
The following table sets forth as of the date of this Prospectus the number
of shares of Common Stock purchased from the Company, the total consideration
received by the Company and the average price per share paid by existing
stockholders of the Company and by New Investors:
<TABLE>
<CAPTION>
TOTAL
SHARES PURCHASED CONSIDERATION
------------------ -------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)(2)..... 9,200,000 80.0% $ % $
New Investors................... 2,300,000 20.0
---------- ----- ----- ----
Total......................... 11,500,000 100.0% $ %
========== ===== ===== ====
</TABLE>
- --------
(1) The existing stockholders of the Company, after giving effect to the
Reorganization, will have acquired all of their shares of Common Stock in
exchange for the common stock of the Predecessors. Accordingly, the total
consideration paid by the existing stockholders for their shares of Common
Stock of the Company represents the total consideration paid by the
existing stockholders for their shares of common stock of the
Predecessors.
(2) The information shown for existing stockholders excludes options to
purchase shares of Common Stock at the initial public offering
price granted to certain officers and directors of the Company. See
"Management--Equity Incentive Plan."
20
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth summary historical financial data as of the
dates and for the periods indicated. The historical financial data for the
year ended July 31, 1992 and for each of the years ended December 31, 1994,
1995 and 1996 are derived from the audited financial statements of the
Predecessors. The historical financial data for the year ended December 31,
1993, for the three months ended March 31, 1996 and 1997 and as of March 31,
1997 are derived from unaudited financial statements of the Predecessors. The
unaudited financial statements of the Predecessors for the three months ended
March 31, 1996 and 1997 and as of March 31, 1997 reflect, in the opinion of
the Company's management, all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of its financial condition and
results of operations for such periods. The following table also sets forth
pro forma statement of operations data of the Company for the year ended
December 31, 1996 that give pro forma effect to certain transactions,
including the Friede Acquisition and the Reorganization. The following data
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," the historical financial
statements of the Predecessors and the related notes thereto, the historical
financial statements of the predecessor company to Friede & Goldman and the
related notes thereto, the historical balance sheet of the Company and the
related notes thereto and the pro forma statement of operations of the Company
and the related notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
YEAR -------------------------------------------- THREE MONTHS
ENDED PRO ENDED MARCH 31,
JULY 31, FORMA -----------------
1992(1) 1993(1) 1994 1995 1996 1996(2) 1996 1997
-------- ------- ------- ------- ------- ------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenue.................. $22,703 $10,355 $23,891 $19,865 $21,759 $25,533 $ 2,965 $ 18,655
Cost of revenue.......... 18,186 6,770 18,063 13,510 15,769 18,663 2,426 12,800
------- ------- ------- ------- ------- ------- ------- --------
Gross profit............ 4,517 3,585 5,828 6,355 5,990 6,870 539 5,855
Selling, general and
administrative
expenses(3)............... 1,961 1,699 2,203 3,862 5,869 4,226 942 2,522
------- ------- ------- ------- ------- ------- ------- --------
Operating income........ 2,556 1,886 3,625 2,494 120 2,645 (404) 3,332
Net interest expense..... (265) (135) (346) (197) (448) (538) (83) (120)
Gain on asset sales(4)... 3 11 808 1,869 349 349 230 1,379
Litigation
settlements(5).......... -- -- -- 750 3,467 3,467 3,467 --
Other.................... 84 55 23 6 104 104 (27) 66
------- ------- ------- ------- ------- ------- ------- --------
Net income.............. $ 2,378 $ 1,817 $ 4,110 $ 4,921 $ 3,870 $ 6,027 $ 3,183 $ 4,658
======= ======= ======= ======= ======= ======= ======= ========
UNAUDITED PRO FORMA DATA:
Net income as reported
above................... $ 3,592 $ 6,027 $ 4,658
Pro forma provision for
income taxes(6)......... (1,329) (2,230) (1,810)
------- ------- --------
Pro forma net income.... $ 2,263 $ 3,797 $ 2,848
======= ======= ========
Pro forma net income per
share(7)................ $ 0.25 $ 0.41 $ 0.31
Common and equivalent
shares outstanding...... 9,200 9,200 9,200
OTHER FINANCIAL DATA:
Depreciation and
amortization............ $ 426 $ 339 $ 347 $ 425 $ 696 $ 821 $ 174 $ 215
Capital expenditures..... 144 1,167 1,150 2,670 2,357 2,502 1,596 1,555
EBITDA(8)................ 2,982 2,225 4,054 2,919 1,092 3,466 (230) 3,922
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
AS OF AS OF DECEMBER 31, ----------------------------- ---
JULY 31, ----------------------------- PRO FORMA
1992 1993 1994 1995 1996 HISTORICAL AS ADJUSTED(9)(10)
-------- ------ ------ ------- ------- ---------- ------------------
(IN THOUSANDS)
BALANCE SHEET DATA:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Working capital......... $ 653 $ 88 $2,370 $ 2,714 $ 1,104 $ 2,387
Net property, plant and
equipment.............. 3,337 2,952 3,582 4,079 5,546 6,043
Total assets............ 6,921 7,069 8,584 14,980 27,582 31,456
Long-term debt.......... 3,252 3,971 3,217 2,853 3,589 1,979
Stockholders' equity.... 2,622 1,980 2,681 5,255 6,219 8,717
</TABLE>
21
<PAGE>
- --------
(1) Prior to December 31, 1992, the Company utilized a July 31 fiscal year
end. Beginning in 1993, the Company adopted a calendar year as its fiscal
year. Contract revenues for the five-month period ended December 31, 1992
were approximately $2.6 million. Other statement of operations data for
the five-month period ended December 31, 1992 have not been presented
because the amounts were not material.
(2) The pro forma statement of operations data for the year ended December 31,
1996 give pro forma effect to (i) the Friede Acquisition as if it had
occurred as of the beginning of the period presented, (ii) a reduction in
selling, general and administrative expenses to reflect (a) a reduction of
compensation expense of approximately $2 million in the aggregate, the
amount by which the compensation paid in 1996 to the Stockholder Employees
exceeded the compensation levels set forth in the employment contracts
entered into between the Company and the Stockholder Employees in May 1997
and (b) the elimination of approximately $0.3 million of compensation
expense attributable to the granting of common stock by one of the
Predecessors to an employee in December 1996, and (iii) the
Reorganization. See Note 3 below.
(3) Included in selling, general and administrative expenses are bonuses paid
to the Stockholder Employees of approximately $0.2 million, $1.2 million
and $2.1 million for the years ended December 31, 1994, 1995 and 1996,
respectively, which were intended primarily to provide a means by which
the Stockholder Employees could meet the individual income tax obligations
arising from the pass through of the Company's taxable income to the
Stockholder Employees due to the status of the Predecessors as S
Corporations in 1996 and prior periods. See Note 6 below.
(4) The gain on asset sales in 1994 and 1996 resulted primarily from the sale
of assets not used in the Company's operations. The gain on asset sales in
1995 resulted from the sale of assets acquired from an affiliated entity.
Gain on asset sales for the three months ended March 31, 1997 includes
approximately $0.9 million related to the distribution of real estate held
for investment and an airplane to the stockholders of one of the
Predecessors. The assets were not used directly in the Company's
operations. See Notes 7 and 14 of Notes to the historical financial
statements of the Predecessors included elsewhere in this Prospectus.
(5) The litigation settlement in 1995 represents the amount received as a
result of a claim by the Company against a general contractor for which
the Company served as a subcontractor. The litigation settlement in 1996
represents the amount received by the Company as a result of a claim
against a customer. See Note 13 of Notes to the historical financial
statements of the Predecessors included elsewhere in this Prospectus.
(6) The pro forma provision for income taxes gives pro forma effect to the
application of federal and state income taxes to the Company as if it were
a C Corporation for tax purposes. For all periods presented herein, the
Company and the Predecessors have operated as S Corporations for federal
and state income tax purposes. Immediately prior to the Offering, the
stockholders of the Company and the Predecessors intend to make elections
terminating the S Corporation status of the Company and the Predecessors.
As a result, the Company will become subject to corporate level income
taxation. See "The Company--Corporate Restructuring," "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and Notes 1 and 2 of Notes to the historical financial statements of the
Predecessors included elsewhere in this Prospectus.
(7) Pro forma net income per share is calculated by dividing the pro forma net
income by the 9,200,000 shares outstanding immediately after the
Reorganization as if such shares had been outstanding throughout each
period presented. See "The Company--Corporate Restructuring."
(8) EBITDA represents operating income plus depreciation, amortization and
non-cash compensation expense related to the issuance of stock and stock
options to employees. EBITDA is not presented as an indicator of the
Company's operations or performance or as a measure of liquidity
calculated in accordance with generally accepted accounting principles.
(9) The pro forma balance sheet data of the Company as of March 31, 1997 gives
pro forma effect to (i) the distribution of cash to the stockholders of
one of the Predecessors prior to the closing of the Offering in an amount
equal to the estimated federal and state income taxes payable by such
stockholders on the
22
<PAGE>
undistributed earnings of such Predecessor through the closing of the
Offering, (ii) the distribution of marketable securities and the assumption
by such stockholders of the margin account indebtedness associated with
such marketable securities, (iii) borrowings under the Company's revolving
credit facility to fund the cash portion of such distribution to such
stockholders, (iv) the recording of a deferred tax liability as a result of
the termination of the status of the Predecessors as S Corporations prior
to the closing of the Offering and (v) the Reorganization, in each case as
if such event had occurred as of March 31, 1997. See "The Company--
Corporate Restructuring" and "Capitalization."
(10) Assumes the public offering of 2,300,000 shares of Common Stock by the
Company at an assumed price of $ per share resulting in net proceeds
of $ million (after deducting the underwriting discount and expenses
of the Offering estimated at $ million) and the application thereof
as described herein. See "Use of Proceeds."
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The Company's results of operations are affected primarily by conditions
affecting offshore drilling contractors, including the level of offshore
drilling activity by oil and gas companies. The level of offshore drilling
activity is affected by a number of factors, including prevailing and expected
oil and natural gas prices, the cost of exploring for, producing and
delivering oil and gas, the sale and expiration dates of offshore leases in
the United States and overseas, the discovery rate of new oil and gas reserves
in offshore areas, local and international political and economic conditions
and the ability of oil and gas companies to access or generate capital
sufficient to fund capital expenditures for offshore exploration, development
and production activities. Improving oil and gas price levels over the past
five years have led to increased drilling activity in the Gulf of Mexico. This
increase in drilling activity is also attributable to a number of recent
industry trends, including three-dimensional seismic mapping, directional
drilling and other advances in technology that have increased drilling success
rates and efficiency and have led to the discoveries of oil and gas in subsalt
geological formations (which generally are located in depths of 300 to 800
feet of water) and deepwater areas of the Gulf of Mexico. In the deepwater
areas where larger and more technically advanced drilling rigs are needed,
increased drilling activity has increased demand for retrofitting offshore
drilling rigs and improved pricing levels for such services. In addition,
increased drilling activity in and around more mature fields in shallower
waters has contributed to the increase in demand for conversion, retrofit and
repair services for jackups and other offshore drilling rigs.
The Company believes that the current supply of offshore drilling rigs
worldwide is inadequate to satisfy increasing demand. From 1985 to 1996, there
has been a decrease in the number of offshore drilling rigs worldwide from 809
to 639 rigs. The Company believes that, of the 366 jackups currently marketed
worldwide, only 47 are capable of drilling in water depths greater than 300
feet and, of the 139 semisubmersibles currently marketed worldwide, only 25
are capable of drilling in water depths greater than 3,000 feet. In addition,
substantially all of the current fleet of offshore drilling rigs were built
more than ten years ago, and many of these rigs need to be converted or
modified in order to continue to operate economically or to meet the
requirements for deepwater drilling.
Due to increased demand for its services, the Company's backlog has
increased from $15.4 million at March 31, 1996 to $65.5 million at March 31,
1997. To accommodate this increased demand, the Company has recently leased
additional acreage adjacent to its existing shipyard in Pascagoula,
Mississippi that provides it with additional dockspace and covered fabrication
capacity and has increased its workforce from approximately 300 employees at
December 1, 1996 to approximately 800 employees at March 31, 1997. In
addition, the Company plans to commence construction in the second quarter of
1997 of a state-of-the-art shipyard that will be capable of constructing new
offshore drilling rigs and production units as well as converting,
retrofitting and repairing existing offshore drilling rigs and production
units.
The Company generally performs conversion, retrofit and repair services
pursuant to contracts that provide for a portion of the work to be performed
on a fixed-price basis and a portion of the work to be performed on a cost-
plus basis. In addition, the scope of the services to be performed with
respect to a particular drilling rig often increases as the project progresses
due to additional retrofits or modifications requested by the customer or
additional repair work necessary to meet the safety or environmental standards
established by the Coast Guard or other regulatory authorities. With respect
to the fixed-price portions of a project, the Company receives the negotiated
contract price, subject to adjustment only for change orders placed by the
customer. As a result, under fixed price arrangements, the Company retains all
cost savings but is also responsible for all cost over-runs. Under cost-plus
arrangements, the Company receives specified amounts in excess of its direct
labor and materials cost so that it is protected against cost overruns but
does not benefit from cost savings. The cost and productivity of the Company's
labor force are primary factors affecting the Company's operating profits.
Accordingly, control by the Company of the cost and productivity of direct
labor hours worked on its projects is essential. The
24
<PAGE>
Company has developed a cost reporting system that provides accurate cost
information to the Company's project managers on a daily basis. The Company
believes that the access to information provided in this system allows it to
better manage its current projects as well as to negotiate contracts on new
projects on a profitable basis. See "Business--Customers and Marketing."
The Company's operations are subject to variations from quarter to quarter
resulting from fluctuations in demand for the Company's services and, due to
the large amounts of revenue that are typically derived from a small quantity
of projects, the timing of the receipt of awards for new projects. In
addition, the Company schedules projects based on the timing of available
capacity to perform the services requested and, to the extent that there are
delays in the arrival of a drilling rig or production unit into the shipyard,
the Company generally is not able to utilize the excess capacity created by
such delays. Although the Company may be able to offset the effect of such
delays through adjustments to the size of its skilled labor force on a
temporary basis, such delays may adversely affect the Company's results of
operations in any period in which such delays occur.
The Company's revenue on contracts is earned, for the most part, on the
percentage-of-completion method based upon the percentage that incurred costs
to date bear to total estimated costs. Accordingly, contract price and costs
estimates are reviewed periodically as the work progresses, and adjustments
proportionate to the percentage of completion are reflected in the accounting
period in which the facts which require such adjustments become known.
Provisions for estimated losses on uncompleted contracts are made in the
period in which such losses are determined. Other changes, including those
arising from contract penalty provisions and final contract settlements, are
recognized in the period in which the revisions are determined. To the extent
that these adjustments result in a reduction or elimination of previously
reported profits, the Company would report such a change by recognizing a
charge against current earnings, which might be significant depending on the
size of the project or the adjustment. Cost of revenue includes costs
associated with the fabrication process and can be further broken down between
direct costs (such as direct labor hours and raw materials) allocated to
specific projects and indirect costs (such as supervisory labor, utilities,
welding supplies and equipment costs) that are associated with production but
are not directly related to a specific project.
Each of HAM Marine and Friede & Goldman has operated as an S Corporation for
federal and state income tax purposes. As a result, each of the Predecessors
currently pays no federal or state income tax, and their earnings are subject
to tax directly at the stockholder level. Immediately prior to the completion
of the Offering, the stockholders of each of the Predecessors intend to make
an election to terminate the S Corporation status of such Predecessors.
Accordingly, each of the Predecessors will become subject to corporate level
income taxation and, as a result, the Company will be required to record a net
deferred income tax liability through a charge to earnings estimated to be
approximately $0.8 million in the second quarter of 1997 attributable
primarily to the difference in financial reporting and tax reporting methods
of accounting for depreciation and sales-type leases.
RESULTS OF OPERATIONS
Comparison of Three Months Ended March 31, 1996 and 1997
During the three months ended March 31, 1997, the Company generated revenue
of $18.7 million, an increase of 529%, compared to the $3.0 million generated
in the three months ended March 31, 1996. This increase reflects the
substantial increase in demand for conversion and retrofit services for the
three months ended March 31, 1997, including a greater number of relatively
larger projects, as compared to the three months ended March 31, 1996.
Cost of revenue was $12.8 million for the three months ended March 31, 1997,
compared to $2.4 million for the three months ended March 31, 1996, reflecting
the significant increase in contract revenue. Gross profit for the three
months ended March 31, 1997 was $5.9 million as compared to $0.5 million for
the three months ended March 31, 1996. As a percent of revenue, gross profit
for the three months ended March 31, 1997 increased as a result of the nature
of the projects being performed. Generally, larger scale conversion and
modification projects provide an opportunity for a higher gross profit than do
repair and inspection services.
25
<PAGE>
Selling, general and administrative expenses ("SG&A expenses") were $2.5
million for the three months ended March 31, 1997 compared to $0.9 million for
the three months ended March 31, 1996. The increase in SG&A expenses is
primarily the result of the expansion of the Company's administrative staff
and facilities in relation to increased contract activity. SG&A expenses for
the three months ended March 31, 1997 also include $0.4 million in non-cash
compensation expenses related to stock granted to an employee. The decline in
SG&A expenses as a percent of revenue for the three months ended March 31,
1997 as compared to the three months ended March 31, 1996 is a result of the
relatively low level of contract activity in the three months ended March 31,
1996.
Operating income increased to $3.3 million for the three months ended March
31, 1997, from an operating loss of $0.4 million for the three months ended
March 31, 1996, reflecting primarily the significant increase in contract
revenue and related gross profit.
Net interest expense was $0.1 million for each of the three months ended
March 31, 1997 and 1996, reflecting a relatively stable interest rate
environment and a consistent level of net borrowings by the Company.
During the three months ended March 31, 1996, the Company received
approximately $3.5 million in proceeds from the settlement of a lawsuit filed
in 1992 related to a contract. There were no similar settlement proceeds
received in 1997.
In the three months ended March 31, 1997, the Company realized a gain of
approximately $0.9 million as a result of the distribution of certain
appreciated assets not used in the business to the stockholders of one of the
Predecessors. Also, gains of approximately $0.5 million resulted from the sale
of real estate held for investment and marketable securities. The gain on the
asset sales in the three months ended March 31, 1996 relates primarily to the
sale of marketable securities.
The pro forma provision for income taxes is the result of the application of
a combined federal and state tax rate (37%) to income before income taxes.
Prior to consummation of the Offering, the Predecessors will terminate their
status as S Corporations, and, as a result, the Predecessors will become tax
paying entities.
Comparison of the Years Ended December 31, 1996 and 1995
During the year ended December 31, 1996, the Company generated revenue of
$21.8 million, an increase of 9.5%, compared to the $19.9 million generated in
1995. This increase was caused primarily by an increase in overall demand for
conversion and retrofit services and a general increase in the size of the
conversion and retrofit projects in 1996 as compared to 1995.
Cost of revenue was $15.8 million in 1996 compared to $13.5 million in 1995,
resulting in a decline in gross profit from $6.4 million in 1995 to $6.0
million in 1996. This decline is primarily the result of the change in nature
of the contracts performed in each year. In 1995, a much larger portion of
contract revenue was derived from contracts performed under a pooled resources
arrangement between the Company and PMB Engineering, Inc. ("PMB"), a
subsidiary of Bechtel Corporation. See "Business--PMB Arrangement." Under this
arrangement, the Company's cost of revenue consisted primarily of direct and
indirect labor related charges. Gross profit, as a percentage of revenue,
under such arrangements was generally higher than under contracts performed
solely by the Company. For contracts performed solely by the Company, cost of
contract revenue includes charges related to materials purchased on which the
gross profit percentage realized by the Company is generally lower, resulting
in an lower overall gross profit percentage.
SG&A expenses were $5.9 million in 1996 compared to $3.9 million in 1995.
SG&A expenses for 1996 and 1995 include bonuses of approximately $2.1 million
and $1.2 million, respectively, paid to the Stockholder Employees. SG&A
expenses for 1996 include $0.3 million of compensation expense related to the
issuance of stock to an employee of one of the Predecessors. Excluding such
bonuses from both years and the compensation expense related to the issuance
of stock, SG&A expenses increased by approximately $0.8 million. Such increase
is primarily the result of costs incurred by the Company related to increased
business development activities,
26
<PAGE>
including the pursuit of alternatives to increase the Company's shipyard
capacity, the opening of a Houston sales office and an increase in charitable
contributions resulting from a one-time contribution of real property to a
college.
Operating income declined by $2.4 million as a result of a slightly lower
gross profit margin combined with higher SG&A expenses. Excluding the effect
of the increase in bonuses and the issuance of stock discussed above,
operating income declined approximately $1.2 million, reflecting the change in
gross profit margin and the increase in SG&A expenses.
Net interest expense increased to $0.4 million in 1996 from $0.2 million in
1995. Interest expense increased by $0.2 million as a result of increased
borrowings to finance capital expenditures and approximately $2.1 million in
increased brokerage margin account borrowings. Interest income remained
constant at approximately $0.4 million, representing primarily interest on
certificates of deposit pledged against borrowings and interest earned on a
sales-type lease.
During 1996, the Company received approximately $3.5 million in proceeds
from the settlement of a lawsuit filed in 1992 related to a contract. In 1995,
the Company received $0.8 million in settlement proceeds related to a claim
against a general contractor for which the Company had served as a
subcontractor.
The gain on the sale of assets in 1996 relates to the disposition of certain
nonoperating assets, primarily land, and, to a lesser degree, the sale of
certain marketable securities. The 1995 gain on sale of assets relates to the
sale, under a sales-type lease, of certain land, buildings and a dock facility
formerly operated by the Company.
The pro forma provision for income taxes is the result of the application of
a combined federal and state tax rate (37%) to income before income taxes.
Prior to the consummation of the Offering, the Predecessors will terminate
their status as S Corporations, and, as a result, the Predecessors will become
tax paying entities.
Comparison of the Years Ended December 31, 1995 and 1994
During the year ended December 31, 1995, the Company generated revenue of
$19.9 million, a decrease of 16.7%, compared to the $23.9 million generated in
1994. This decrease was caused primarily by a decrease in demand for
conversion and retrofit services and a general decrease in the size of the
conversion and modification projects in 1995 as compared to 1994. In February
1994, the Company entered into a pooled resources arrangement with PMB which
resulted in a large contract that accounted for approximately $16.2 million in
contract revenues in 1994 and $8.7 million in contract revenues in 1995.
Cost of revenue was $13.5 million in 1995 compared to $18.1 million in 1994,
resulting in an increase in gross profit from $5.8 million in 1994 to $6.4
million in 1995. This increase is primarily as a result of change orders and
contract renegotiations which occurred in 1995 during the later stages of a
major contract begun in 1994, thereby enabling the Company to realize a higher
gross profit than was realized in 1994 during the earlier stages of the
contract.
SG&A expenses were $3.9 million in 1995 compared to $2.2 million in 1994.
SG&A expenses for 1995 include bonuses of approximately $1.2 million paid to
the Stockholder Employees whereas SG&A expenses for 1994 include only $0.2
million of such bonuses. Excluding such bonuses from both years, SG&A expenses
increased by approximately $0.7 million in 1995. Such increase is primarily
the result of increases in marketing and corporate travel, and the addition to
administrative personnel.
Operating income declined by $1.1 million from 1994 to 1995 primarily as a
result of higher SG&A expenses. Excluding the effect of the increases in
bonuses discussed above, operating income declined approximately $0.1 million
reflecting the increase in gross profit and the increase in SG&A expenses
discussed above.
27
<PAGE>
Net interest expense decreased from $0.3 million in 1994 to $0.2 million in
1995. Interest expense increased by $0.3 million as a result of increased
borrowings to finance capital expenditures and to provide working capital.
Interest income increased by $0.4 million, representing primarily interest on
certificates of deposit pledged against borrowings and interest earned on a
sales-type lease.
The gain on the sale of assets in 1994 resulted primarily from the sales of
nonoperating assets.
PRO FORMA RESULTS OF OPERATIONS
On December 2, 1996, the Company completed the Friede Acquisition. On a pro
forma basis for 1996, giving effect to the Friede Acquisition as if completed
on January 1, 1996, the Company's revenues would have been $25.5 million,
gross profit would have been $6.9 million and operating income would have been
$2.6 million. See the Pro Forma Statement of Operations of the Company and the
related notes thereto included elsewhere in this Prospectus.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has financed its business activities through funds
generated from operations, a credit facility secured by accounts receivable,
and long-term borrowings secured by assets purchased with proceeds from such
borrowings. Net cash provided by operations was $3.1 million, $0.3 million and
$4.9 million for 1994, 1995 and 1996, respectively and $1.1 million and $5.4
million for the three months ended March 31, 1996 and 1997, respectively. Net
borrowings from all credit arrangements were $0.1 million, $4.8 million and
$4.0 million for 1994, 1995 and 1996, respectively, and $1.7 million for the
three months ended March 31, 1996. For the three months ended March 31, 1997,
the Company made net repayments on all credit arrangements of $3.6 million.
The Company's capital requirements historically have been primarily for
improvements to its facilities and related equipment. During 1996, capital
expenditures were approximately $2.4, including $1.2 million for the purchase
of cranes, $0.3 million for the improvements to existing facilities and $0.6
million for equipment. Capital expenditures were approximately $2.7 million in
1995 and $1.1 million in 1994, primarily for real estate and shipyard
equipment.
At March 31, 1997, the Company had approximately $9.5 million of outstanding
indebtedness, of which approximately $3.8 million was secured by certificates
of deposit or marketable securities. Management expects to repay $1.1 million
of such indebtedness upon maturity of the remaining certificates of deposit in
July 1997. Of the remaining debt, approximately $1.4 million is secured by a
sales-type lease under which the lessee makes payments directly to the lender.
At March 31, 1997, the Company held marketable securities with a fair market
value of approximately $4.8 million that were considered available for sale.
At March 31, 1997, the Company also owed $2.7 million on brokerage margin
account borrowings.
In March 1997, HAM Marine entered into a new credit facility (the "Credit
Facility") which provides for borrowings of up to $10.0 million, subject to a
borrowing base limitation equal to 80% of eligible receivables. The Credit
Facility is secured by contract-related receivables. In connection with
obtaining the Credit Facility, HAM Marine repaid all outstanding indebtedness
under the provisions of the existing credit facility and such facility was
terminated. At March 31, 1997, $2.6 million was outstanding under the Credit
Facility and the borrowing base amount was $6.7 million. Borrowings under the
Credit Facility bear interest equal to the lender's prime lending rate plus
1/2% per annum. At March 31, 1997, the interest rate under the Credit Facility
was 9.0% per annum. The Credit Facility contains a number of restrictions,
including a provision which would prohibit the payment of dividends by HAM
Marine to the Company in the event that HAM Marine defaults under the terms of
such facility.
The Company currently intends to utilize the net proceeds of the Offering to
fund a portion of its anticipated capital requirements over the next 12 to 18
months of between $50 million and $65 million, including (i) approximately $29
million to construct and equip its new shipyard, (ii) approximately $3 million
for capital
28
<PAGE>
expenditures to increase the productive capacity and efficiency of its
existing shipyard, (iii) approximately $3 million for research and development
expenditures related to the design of new, technologically innovative offshore
drilling rigs and floating production units, (iv) between $10 million and $20
million of additional working capital related to increased levels of
conversion, retrofit and repair activities and new construction of offshore
drilling rigs and floating production units and (v) $5 million to $10 million
for general corporate purposes, which may include the establishment of a
manufacturing operation, either at the Company's shipyards or at another
location, that would be capable of constructing and assembling components of
new-build jackups or the acquisition of one or more businesses that are
complementary to the Company's operations. The Company would expect to fund
the remaining portion of its anticipated capital requirements from cash flow
from operations, borrowings available under its existing revolving credit
facility or additional borrowings. Pending the Company's use of the net
proceeds of the Offering, the Company intends to repay borrowings under its
existing revolving credit facility ($2.6 million in principal amount of
borrowings outstanding as of March 31, 1997 and $7.2 million as of March 31,
1997 giving pro forma effect to borrowings to be incurred to fund a
distribution of proceeds to the stockholders of one of the Predecessors prior
to the closing of the Offering) and to invest the remaining net proceeds to be
received by it from the Offering in short-term, investment-grade, interest-
bearing instruments.
As an additional source of borrowing capacity, the Company has filed an
application with the United States Maritime Administration ("MARAD") for up to
$24.8 million of Title XI financing ("MARAD financing") which, if approved,
would enable the Company to sell bonds guaranteed by the full faith and credit
of the United States. The MARAD financing, if obtained, may be used only for
capital expenditures relating to the costs of constructing and equipping the
Company's new shipyard. In May 1997, MARAD approved the Company's eligibility
for such amount of financing for purposes of constructing and equipping the
new shipyard. The company is in the process of completing the necessary
documentation for obtaining the MARAD guarantee to be used in connection with
such financing. If such guarantee is obtained, the terms of the MARAD
financing would permit the Company to issue and sell bonds in increments. Due
to the generally favorable interest rates and payment terms of MARAD
financing, the Company anticipates that, if the MARAD financing is approved,
it would sell bonds under the MARAD financing arrangement in increments as
capital expenditures are incurred with respect to the new shipyard. Any funds
obtained from the MARAD financing would result in the availability of other
sources of capital, including proceeds from the Offering, cash from operations
and other borrowings, for use to satisfy the Company's other capital
requirements described above. There can be no assurance that any such MARAD
financing will be obtained.
Management believes that the net proceeds from the Offering, cash generated
by operating activities, and funds available under the Credit Facility will be
sufficient to fund the construction of the new shipyard and its working
capital needs at current levels of activity; however, additional debt
financing (such as the MARAD financing) or equity financing may be required in
the future if the Company increases its conversion, retrofit and repair
business or obtains orders to construct new drilling rigs or production units.
Although the Company believes that, under such circumstances, it would be able
to obtain additional financing, there can be no assurance that any additional
debt or equity financing will be available to the Company for these purposes
or, if available, will be available on terms satisfactory to the Company.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of"
("SFAS No. 121"). The Company adopted SFAS No. 121 on January 1, 1996 and
there was no material impact on the Company's financial statements.
In October 1995, the FASB issued Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation." The disclosure
requirements of this Statement are effective for the Company's financial
statements beginning in fiscal 1996. The Company intends to apply the
accounting provisions of Account Principles Board Opinion 25, "Accounting for
Stock Issued to Employees." With the Company's plan of adoption, the impact
will be limited to additional footnote disclosure.
29
<PAGE>
In March 1997, the FASB issued Statement of Financial Accounting Standards
No. 128 ("SFAS No. 128"), "Earnings Per Share," which adopts a revised
methodology for computing earnings per share for publicly owned companies. The
Company will be required to adopt the new methodology in the fourth quarter of
1997 and could also be required to restate previously reported amounts. Early
adoption of SFAS No. 128 is not permitted. The Company does not expect the
application of SFAS No. 128 to materially change the Company's reported
earnings per share.
30
<PAGE>
BUSINESS
Friede Goldman International Inc. is a leading provider of conversion,
retrofit and repair services for offshore drilling rigs, including jackups,
submersibles, semisubmersibles and drillships, and has entered the emerging
market for conversion of offshore drilling units and tankers into deepwater
FPSOs. In the last seven years, the Company has completed 47 offshore drilling
rig conversion or retrofit projects, which the Company believes is more than
any other shipyard company in the United States. The Company, through its
acquisition of Friede & Goldman in December 1996, is one of the world's
largest designers of offshore drilling rigs. The Company offers its customers
a full range of design, engineering, construction, conversion, retrofit and
repair services for offshore drilling rigs, including construction of new-
build offshore drilling rigs. The Company's customers consist primarily of
drilling contractors that drill offshore exploratory and development wells for
oil and gas companies throughout the world, particularly in the Gulf of
Mexico, the North Sea and areas offshore of West Africa and South America.
The Company currently operates a 32-acre shipyard that is strategically
located in Pascagoula, Mississippi with direct access to the Gulf of Mexico.
The shipyard has the capacity to provide conversion, retrofit and repair
services on six offshore drilling rigs simultaneously. Due to increased demand
for its services, the Company has increased its backlog from $15.4 million at
March 31, 1996 to $65.5 million at March 31, 1997. To accommodate this
increased demand, the Company has recently leased additional dock space and
fabrication buildings adjacent to its existing shipyard in Pascagoula,
Mississippi and has increased its workforce from approximately 300 employees
at December 1, 1996 to approximately 800 employees at March 31, 1997.
The Company plans to commence construction in the second quarter of 1997 of
a new state-of-the-art shipyard on a 105-acre site located approximately six
miles from the existing shipyard. The new shipyard has been designed
specifically to promote the most timely and efficient construction of new
offshore drilling rigs, and could also be used for conversion, retrofit and
repair services. The Company believes that the expected efficiencies of its
new shipyard, together with the Company's offshore drilling rig design
capabilities, its established relationships with its drilling contractor
customers and its extensive construction experience, will provide the Company
with competitive advantages in the developing market for new construction of
offshore drilling rigs. In addition, the Company may use its shipyards, or
establish a separate manufacturing facility, to construct and assemble various
components of Friede & Goldman designed jackups that it would sell as kits
that could be used in the construction of new-build jackups either at the
Company's shipyards or other shipyards. These kits would include such
manufactured components, including Friede & Goldman's patented rack chock leg
fixation system, and a Friede & Goldman jackup design.
OFFSHORE DRILLING INDUSTRY
The level of worldwide offshore drilling activity has increased substantially
over the last two years, resulting in an increase in worldwide drilling rig
utilization to 99% in May 1997. Dayrates worldwide for cantilever jackups
capable of drilling in water depths of 300 or more feet have increased from an
average of $37,000 in May 1996 to an average of $61,000 in May 1997, with a
recently reported high of $116,000. Similarly, dayrates worldwide for third
and forth generations of semisubmersibles have increased from an average of
$81,000 in May 1996 to an average of $110,000 in May 1997, with a recently
reported high of $175,000. In addition, oil and gas operators have recently
begun to enter into multi-year contracts with drilling contractors for
offshore drilling rigs due to the tightness of supply for available units. In
deepwater areas where larger and more technically advanced drilling rigs are
needed, increased drilling activity has also increased demand for retrofitting
offshore drilling rigs to enhance their technical capabilities and improved
pricing levels for such services. In addition, increased drilling activity in
and around more mature fields in shallower waters has contributed to the
increase in demand for conversion, retrofit and repair services for jackups
and other offshore drilling rigs.
The Company believes that these positive trends will continue due to (i) the
increasing percentage of worldwide oil supply being produced from offshore
areas, (ii) the large increases in cash flow experienced by many oil and gas
companies, (iii) the increases in capital expenditure budgets for offshore
drilling activity by oil
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<PAGE>
and gas companies, (iv) technological advancements relating to exploration,
development and production techniques, including three-dimensional seismic
mapping and geological interpretation, directional drilling and subsea
completions, that have increased drilling success rates and improved
efficiencies of development and production activities and (v) the increased
focus on deepwater exploration and production projects, particularly in the
Gulf of Mexico, as evidenced by significant increases in the number of
deepwater blocks under lease and the prices paid for deepwater leases during
each of the last five years and the record $1.25 billion paid for offshore
leases at the most recent lease sale held in March 1997.
The Company believes that the current supply of offshore drilling rigs
worldwide is inadequate to satisfy increasing demand. From 1985 to 1996, there
has been a decrease in the total number of offshore drilling rigs worldwide
from 809 to 639 rigs. The Company believes that, of the 366 jackups currently
marketed worldwide, only 47 are capable of drilling in water depths greater
than 300 feet and, of the 139 semisubmersibles currently marketed worldwide,
only 25 are capable of drilling in water depths greater than 3,000 feet. In
addition, substantially all of the current fleet of offshore drilling rigs
were built more than ten years ago, and many of these rigs need to be
converted or modified in order to continue to operate economically or to meet
the requirements for deepwater drilling.
COMPETITIVE STRENGTHS
The Company believes that one of its principal competitive strengths is its
capability to offer its drilling contractor customers a full range of design,
engineering, construction, conversion, retrofit and repair services for
offshore drilling rigs, including construction of new-build offshore drilling
rigs. The Company also believes that its reputation for quality and
reliability, its long-standing relationships with most of the large offshore
drilling contractors, its experienced management team, its existing skilled
labor force and its extensive fabrication and construction experience are
competitive strengths. In addition, the Company's existing shipyard and the
site for its proposed new shipyard are located in an area that has a long
history of shipyard activity due to its access to the Gulf of Mexico. As a
consequence of slowdowns in the construction of other types of marine ships
and vessels, particularly those used for military defense purposes, the
Company believes that there are currently additional skilled workers available
in this area whom the Company could employ to the extent necessary to satisfy
any increased demand for conversion, retrofit and repair services and to staff
the new shipyard.
CURRENT ACTIVITIES
The following table sets forth certain information relating to the
conversion, retrofit and repair projects as to which the Company is currently
involved or recently completed.
<TABLE>
<CAPTION>
NAME OF
CUSTOMER TYPE OF RIG DRILLING RIG NATURE OF PROJECT
-------- ----------- ------------ -----------------
<S> <C> <C> <C>
Noble Drilling Jackup Bill Jennings Convert slot jackup to
Corporation cantilevered jackup
Noble Drilling Jackup Leonard Jones Convert slot jackup to
Corporation cantilevered jackup
Sedco Forex S.A. Semisubmersible Bill Shoemaker Retrofit semisubmersible
for deepwater capabilities
Noble Drilling Semisubmersible Paul Romano Convert submersible to
Corporation semisubmersible with
deepwater capabilities
Marine Drilling Jackup Marine 15 Replace hull and quarters
Companies, Inc. damaged by fire
Diamond Offshore Semisubmersible Saratoga Perform U.S. Coast Guard
Drilling, Inc. mandated 5-year inspection
</TABLE>
32
<PAGE>
OVERVIEW OF OFFSHORE DRILLING EQUIPMENT
The Company's primary customers are drilling contractors with operations in
the Gulf of Mexico, the North Sea, offshore West Africa and South America and
other offshore areas of the world. These drilling contractors generally own
and operate offshore drilling rigs and provide drilling services to oil and
gas companies. Several factors determine the type of rig most suitable for a
particular project, the more significant of which are the marine environment,
water depth and seabed conditions at the proposed drilling location, whether
the drilling is to be done over a production platform or other fixed
structure, the intended well depth, and variable deck load and well control
requirements. A brief description of the types of offshore drilling rigs and
production units currently serviced by the Company is set forth below.
SEMISUBMERSIBLES. Semisubmersible rigs consist of an upper working and
living deck resting on vertical columns connected to lower hull members. Such
rigs operate in a "semi-submerged" position, remaining afloat, in a position
which places the water-line approximately half way between the top of the
lower hulls and bottom of the deck. The rig is typically anchored in position
and remains stable for drilling in the semi-submerged floating position.
[GRAPHIC APPEARS HERE]
FRIEDE & GOLDMAN DESIGN PACESETTER - CLASS SEMISUBMERSIBLE
There have been four generations of semisubmersible drilling rigs, with each
successive generation incorporating improvements which enable the rigs to
drill more efficiently and in increasingly harsh marine environments. Fourth
generation semisubmersibles are typically capable of operating in water depths
of up to 5,000 feet and, in some cases, greater depths. Certain fourth
generation semisubmersibles are equipped with computer controlled thrusters to
allow for dynamic positioning of the rig, which allows it to remain on
location over a drillsite in deep waters without the use of anchors.
While the Company has performed some modification and repair work on fourth
generation semisubmersibles, the majority of the Company's work to date has
involved the retrofit and repair of earlier generation semisubmersibles which
generally operate in maximum water depths of between 1,000 to 2,000 feet. The
design of many of these semisubmersible rigs, including long fatigue-life and
advantageous stress characteristics, together with increasing demand for
deepwater drilling capabilities have made them well-suited for significant
retrofitting projects. The Company has completed 17 projects involving
semisubmersibles and is currently working on a conversion of a submersible rig
to a semisubmersible rig, the retrofit of a semisubmersible for deepwater
capabilities and one inspection of a semisubmersible required by U.S. Coast
Guard regulations.
JACKUPS. Jackup rigs are mobile, self-elevating drilling platforms equipped
with legs that are lowered to the ocean floor until a foundation is
established to support the drilling platform. The rig hull includes the
drilling rig, jacking system, crew quarters, loading and unloading facilities,
storage areas for bulk and liquid materials,
33
<PAGE>
heliport and other related equipment. Jackups are used extensively for
drilling in water depths from 20 feet to 400 feet. Some jackup rigs have a
lower hull (mat) attached to the bottom of the rig legs, while others have
independent legs.
[GRAPHIC APPEARS HERE]
FRIEDE & GOLDMAN DESIGN L-780 JACKUP
Jackup rigs can be generally characterized by their design as either slot
jackups or cantilevered jackups. Slot jackups are generally of an older
vintage and are configured for drilling operations to take place through a
slot at the aft of the hull. A slot design is generally appropriate for
drilling exploratory wells in the absence of any existing permanent structure,
such as a production platform. A cantilevered jackup can extend its drill
floor and derrick and either drill exploratory wells or drill over an
existing, fixed structure, thereby permitting the rig to drill new wells or
work over existing wells through such a structure. Many slot-design rigs have
been converted to cantilever configurations. The Company has completed 27
projects involving jackups and is currently working on conversions of two slot
jackups to cantilevered jackups as well as replacing the hull and quarters of
a third jackup damaged by fire.
DRILLSHIPS. Drillships, which are typically self-propelled, are positioned
over a drillsite through the use of either a mooring system or a computer
controlled thruster (dynamic positioning) system similar to those used on
certain fourth generation semisubmersible rigs. Drillships are capable of
operating in water depths ranging from 200 feet to 10,000 feet.
[GRAPHIC APPEARS HERE]
FRIEDE & GOLDMAN DESIGN DRILLSHIP
34
<PAGE>
FLOATING PRODUCTION FACILITIES. A floating production facility ("FPF")
consists of a ship or semisubmersible vessel upon which drilling and
production equipment is mounted. In most cases, the hull is a converted tanker
(often referred to as a floating, production, storage and offloading, or FPSO,
unit). In addition, semisubmersible drilling units have been converted into
floating production units. In a few cases, a new hull has been purpose-built
as a FPF. For harsh weather locations, FPFs are designed with a mooring system
that provides weathervaning capability so that the FPF can be rotated on
location to minimize the effects of wave, wind and current actions. The
production risers in these FPFs are connected to the hull through a swivel
system that also accommodates the mooring system. The hull of an FPF is
typically used for on-board oil storage, which is an important feature for
remote locations where export pipelines are not available and fixed oil
storage availability is limited or nonexistent. The Company has been involved
in the conversion of a tanker into a FPSO and the conversion of a
semisubmersible into a FPS.
[PHOTO APPEARS HERE]
FRIEDE & GOLDMAN DESIGN FPSO
DESCRIPTION OF OPERATIONS
The Company's current operations consist primarily of conversion, retrofit
and repair projects for offshore drilling contractors. In the last seven
years, the Company has been involved in 47 conversion, retrofit or repair
projects, consisting of 27 jackup projects, 17 semisubmersible projects and
three submersible projects. Significant conversion or retrofit projects such
as these generally take eight to 14 months to complete, whereas certain repair
projects may require only one to three months to complete. A brief summary of
the types of projects the Company completes is set forth below.
CONVERSIONS. Conversions consist generally of the conversion of one type of
drilling rig into a different type, such as the conversion of a slot jackup to
a cantilevered jackup, the conversion of a submersible rig to a
semisubmersible rig, or the conversion of a drilling rig or tanker into a FPF.
The Company has completed four conversions since 1988. Of these conversions,
three consisted of converting drilling rigs (jackups and semisubmersibles)
into FPFs and the other conversion consisted of the conversion of a
supertanker into a FPSO. FPF conversions typically require the demolition and
removal of all drilling equipment and substructure (including the derrick
system, rotary system, tubulars, mud treating and pumping units and well
control systems) and the reconfiguration of the decks to accommodate heavy
skid mounted processing modules and production risers and handling equipment.
This production equipment is then interconnected through the installation of
piping, electrical wiring and walkways. Because production, processing and
storage facility additions typically increase a rig's variable deck load, the
Company is typically required to complete hull reinforcements and buoyancy and
stability enhancements.
35
<PAGE>
The Company is currently in the process of converting two slot jackups to
cantilevered jackups and converting a submersible drilling rig into a
semisubmersible drilling rig.
A description of selected conversion projects completed by the Company is
set forth below:
<TABLE>
<CAPTION>
CUSTOMER PROJECT TYPE TASKS COMPLETED
-------- ------------ ---------------
<C> <C> <S>
Oceaneering Production Conversion of a tanker into a . fabrication and
Systems FPSO installation of 770
tons of structural
steel
. replacement of 130
tons of deteriorated
tank steel
. installation of 27
process modules
. installation of 24,000
feet of 18" process
piping
. installation of 5,000
feet of 26" ship
service, ballast and
cargo pipe
Oceaneering International, Inc. Conversion of jackup to a FPF . removal of 550 tons of
drilling equipment and
substructure
. replacement of 60 leg
members and joints and
bottom shell plate
. installation of
foundations and hull
reinforcement for
skid-on modules
. installation of
production modules,
together with piping,
wiring, walkways and
platforms
. installation of new
heliport
. renovation of crew
quarters
. installation of hull
ventilation system
. installation of 10-
year anode system for
leg protection
</TABLE>
RETROFITS. Retrofits consist generally of improvements to the technical
capabilities, tolerances and systems of drilling and production equipment.
Retrofits performed on semisubmersible rigs include buoyancy and stability
enhancements (typically pontoon extensions and additional column sponsons) and
the addition or improvement of self-propulsion systems, positioning thrusters
and self-contained mooring systems. Jackup retrofits include strengthening and
extending the rig legs and reinforcing the spud cans on the existing legs.
The Company is also capable of upgrading living quarters and facilities to
accommodate harsh environment drilling conditions and to meet North Sea
regulatory requirements, improving ventilation systems and strengthening or
replacing heliports to accommodate larger aircraft.
36
<PAGE>
A description of selected retrofit projects completed by the Company is set
forth below:
<TABLE>
<CAPTION>
CUSTOMER PROJECT TYPE TASKS COMPLETED
-------- ------------ ---------------
<C> <C> <S>
Sedco Forex S.A. Semisubmersible retrofit . dry dock of 12,000 ton
rig
. modification and
repair of pipe rack
deck
. installation of 10-
year anode system for
leg protection
. installation of
additional mud pits
. replacement of
production piping
. fabrication and
installation of hull
sponsons
. fabrication and
installation of third
level quarters and
helideck
Hercules Offshore Corporation Jackup retrofit (legs and hull) . removal of existing
lower legs
. repair and recondition
at upper 140' of legs
. acquisition,
fabrication and
installation of new
300 ton lower leg
sections
. dry docking for
replacement of 113
tons of deteriorated
steel in mat base
Noble Drilling Corporation Submersible retrofit and . refurbishment of
columns and footing
refurbishment . installation of
permanent access and
work platforms
. installation of water
tight bulkhead and
flats
. exterior blasting,
cleaning and painting
CONOCO, INC. TLP(1) retrofit . fabrication and
installation of
production manifolds
. installation of mud
piping and completion
fluid lines
. fabrication and
installation of towing
and mooring padeyes,
production riser
porches, drilling
substructure landing
guides
. exterior blasting,
cleaning and painting
</TABLE>
- --------
(1) Tension Leg Platform
REPAIRS. The Company performs a broad range of inspection and repair work for
its clients. Necessary repairs are identified both in connection with retrofit
and conversion projects as well as in connection with periodic inspections
performed at the shipyard which are required by the U.S. Coast Guard and by
vessel classification societies such as the American Bureau of Shipping. Rigs
are typically inspected for systems operability and structural integrity, with
ultrasonic thickness gauge readings employed to detect structural fatigue or
aberrations. Repair work may include the repair or renewal of piping, spud
cans, electrical and drilling systems, removal and replacement of deteriorated
or pitted steel and blasting, coating and painting of exterior surfaces. The
Company's repair work has also included the refurbishment of drilling systems
as well as the overhaul of generators, boilers, condensers, ballast and cargo
valves, rig cranes and production compressors. The Company recently completed
the replacement of the hull and living quarters for a jackup.
PROPERTY AND EQUIPMENT
PASCAGOULA SHIPYARD
FACILITIES. The Company's principal shipyard is located on the Pascagoula
River in Pascagoula, Mississippi. The shipyard occupies 32 acres and includes a
1,000 foot long concrete cap pile reinforced dock with 38 feet of water depth
dockside. The shipyard is adjacent to the port's turning basin and has
unobstructed access to the Gulf of Mexico. The shipyard includes approximately
13,000 square feet of office space, a 4,500 square foot pipe shop, a 7,500
square foot structural shop and 24,000 square feet of fabrication platens. The
Company leases the shipyard from the Jackson County Port Authority pursuant to
a long-term lease which expires in May 2005
37
<PAGE>
with two additional ten-year options for renewal. In December 1996, the
Company entered into a two-year lease for 522.5 additional feet of dockspace
and 160,000 additional square feet of covered fabrication areas adjacent to
its current facility. The Company is currently constructing a 20,000 square
foot building that will be used for engineering and administrative personnel,
which building is located on land covered by the long-term lease relating to
the main shipyard facility. This building is expected to be completed in July
1997.
EQUIPMENT. The Company owns and has access to a broad range of material
handling, cutting and beveling, and blasting and painting equipment. Both the
fabrication shop and pipe shops at the existing shipyard are equipped with 10-
ton and 5-ton overhead gantry cranes. In addition, the Company has a 300-ton
barge mounted crane and one 600-ton, one 200-ton and three 150-ton mobile land
cranes. Other equipment includes six cherry pickers with capacities ranging
from 15 to 55 tons and three fork lifts.
The Company utilizes a variety of oxy-gas cutting equipment for use in its
structural and piping work, including both manual hand-held equipment and
semi-automatic equipment. If appropriate for the work involved, the Company
also utilizes the services of numerous steel suppliers in the region who have
fully automatic multi-head equipment which produces materials which are fully
cut and beveled and ready for final assembly. The Company also owns a full
range of blasting and painting equipment capable of handling small and large
blasting and painting projects. The Company owns eight portable diesel
compressors ranging in size from 385 cubic feet per minute to 1,600 cubic feet
per minute totaling in excess of 9,000 cubic feet per minute for use in these
operations.
The Company utilizes the services of local steel suppliers and vendors who
efficiently provide for the majority of the Company's plate forming and
rolling requirements.
NEW SHIPYARD
In December 1996, the Company entered into an agreement with the Port
Authority of Jackson County, Mississippi pursuant to which the Company will
develop a new shipyard on 105 acres located approximately six miles from the
Company's existing shipyard. The new shipyard will have approximately 40 feet
of water depth dockside and will have unobstructed access to the Gulf of
Mexico. The design for the state-of-the-art shipyard provides for extensive
use of automated construction equipment, floating and dockside cranes, panel
lines, launchways and 2,050 feet of reinforced bulkhead dockspace and an
additional 1,000 feet of dockspace that could be developed in the future.
Buildings planned to be constructed on the site include an assembly area
covering in excess of 100,000 square feet, a 45,000 square foot fabrication
building, a 15,000 square foot machinery building, a 10,000 square foot office
building and a 10,000 square foot pipe shop. Other planned buildings will
house a welding shop, paint storage, bulk gas storage, air compressor
facilities, a safety building and warehouse space. The new shipyard is
expected to cost approximately $29 million to construct and equip. In
connection with the construction of the new shipyard, the County of Jackson,
Mississippi has agreed to dredge the ship channel and build roads and other
infrastructure related to the new shipyard, at a total cost to the County of
approximately $6 million, under an economic incentive program. The Company
plans to commence construction of the new shipyard in the second quarter of
1997 and expects that the shipyard will be operational by early 1998 and
completed later that year.
NEW MANUFACTURING OPERATION
The Company is currently considering the establishment of a manufacturing
operation, either at its shipyards or at a separate location, that would be
capable of constructing and assembling various components of Friede & Goldman
designed jackups, including Friede & Goldman's patented rack chock leg
fixation system, the jacking system (gears, pinions, jacking motors and
jacking controls), leg racks, chords, tubular members and the jacking system
foundation structure. If the Company determines to pursue this operation, it
expects that it would sell these components, along with Friede & Goldman
jackup designs, as kits that could be used in the construction of new-build
jackups either at the Company's new shipyard or at other shipyards. The
Company anticipates that it would pursue the establishment of this operation
if it concludes that there is sufficient demand for these kits
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and that such operation would be profitable in light of the necessary
expenditures involved and the anticipated revenues and costs associated with
such operation.
FRIEDE ACQUISITION
In December 1996, a company owned by certain of the current stockholders of
the Company entered into an agreement, as amended (the "Purchase Agreement"),
with the Friede Predecessor and Jerome L. Goldman, the sole owner of Friede
Predecessor. Pursuant to the terms of the Purchase Agreement, the acquiring
company purchased all of the Friede Predecessor's assets used in the creation,
development, licensing and sale of engineering designs for mobile offshore
drilling units and mobile production vessels. Friede Predecessor retained all
assets used in the design of marine vessels such as river craft and oceangoing
ships. The purchased assets included the corporate name Friede & Goldman (and
variations thereof), certain patents as well as all completed and drilling
vessel designs under development, business methods, engineering, know-how,
blueprints, drawings and computer programs relating to drilling vessels. The
Purchase Agreement specifically excludes from the purchased assets Friede
Predecessor's Mod V and Mod VI drilling vessel designs. The Mod V and Mod VI
are jackup designs, commonly referred to as the "Monarch Class," "Galaxy
Class" or "Universe Class," and have been sold by Friede Predecessor under a
separate agreement to a Singapore shipbuilding company. Following the
completion of the Friede Acquisition, the acquiring company changed its name
to Friede & Goldman, Ltd., and the Friede Predecessor discontinued use of such
name as its company name.
In conjunction with the execution of the Purchase Agreement, Friede
Predecessor entered into a non-competition agreement with Friede & Goldman
which prohibits Friede Predecessor from competing with Friede & Goldman (or
the Company) for a period of two years in Louisiana, Texas, Singapore, South
Korea, Japan, the United Kingdom, Norway and Brazil. Mr. Goldman likewise
entered into a ten-year consulting agreement with Friede & Goldman which
contains similar non-competition provisions. Friede & Goldman currently
employs most of Friede Predecessor's former employees.
In addition to the cash consideration paid by Friede & Goldman to Mr.
Goldman, the Purchase Agreement requires Friede & Goldman, until December
2006, to pay Mr. Goldman certain licensing and design fees received by Friede
& Goldman from the designs of new-build independent leg jackups and
semisubmersible drilling rigs as well as a percentage of all amounts collected
from sales of a patented chocking system designed by Friede Predecessor, a
system which improves the strength of the connection between the legs and the
hull of a jackup drilling rig. Friede & Goldman is also required to make
payments to Mr. Goldman in the event that future sales of designs purchased
from Friede Predecessor and new designs developed by Friede & Goldman
constitute 20% or less of all new-build independent leg jackup and
semisubmersible drilling rigs for which construction has begun by domestic
drillers (other than any domestic driller that builds rigs for its own use
with its own shipyard) during any consecutive three-year period prior to the
end of the year 2006, with the first three-year period commencing at the time
construction begins with respect to a new-build drilling rig. In such an
event, Friede & Goldman is required to pay Mr. Goldman $300,000 (subject to
adjustment for inflation) for each drilling unit design sale by which Friede &
Goldman is short of the 20% threshold for any such three-year period, subject
to a maximum of $1 million for any such three-year period. In the event that
Friede & Goldman fails to make any of the payments described on a timely
basis, Friede Predecessor has the right to require that all of the assets
purchased from Friede Predecessor (other than the name "Friede & Goldman" and
derivatives thereof) be returned to Friede Predecessor and the right to
terminate the consulting and non-compete provisions of the Purchase Agreement.
MATERIALS
The principal materials used by the Company in its fabrication business are
standard steel shapes, steel plate, pipe, welding wire and gases, fuel oil,
gasoline and paint. The Company believes that such materials are currently
available in adequate supply from many sources. The Company does not depend
upon any single supplier or source.
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SAFETY AND QUALITY ASSURANCE
Management is concerned with the safety and health of the Company's
employees and maintains a stringent safety assurance program to reduce the
possibility of accidents. The Company's safety department establishes
guidelines to ensure compliance with all applicable state and federal safety
regulations and provides training and safety education through orientations
for new employees and subcontractors, weekly crew safety meetings and first
aid and CPR training. The Company also employs a registered nurse as an in-
house medic. The Company has a comprehensive drug program and conducts
periodic employee health screenings. A safety committee, whose members consist
of management representatives and field supervisors, meet monthly to discuss
safety concerns and suggestions that could prevent future accidents. The
Company has contracted with a third party safety consultant to provide
training and suggestions and a licensed emergency medical technician in its
ongoing commitment to a safe and healthy work environment. The Company
believes that its safety program and commitment to quality are vital to
attracting and retaining customers and employees.
The Company fabricates according to the standards of the American Bureau of
Shipping, Det Norski Veritas, American Petroleum Institute, the American
Welding Society, the American Society of Mechanical Engineers and specific
customer specifications. The Company uses welding and fabrication procedures
in accordance with the latest technology and industry requirements. Training
programs have been instituted to train skilled personnel and to maintain high
quality standards. In addition, the Company contracts with independent
contractors to perform x-ray inspections of steel and pipe welds. Management
believes that these programs enhance the quality of its products and reduce
their repair rate.
CUSTOMERS AND MARKETING
The Company's customers are primarily offshore drilling contractors, many of
whom have been customers of the Company for more than 15 years, and the
Company believes that it has developed strong relationships with its customer
base. During the past five years, the Company has provided conversion,
retrofit and repair services to substantially all of the large offshore
drilling contractors. During such period, the Company's customers have
included Atwood Oceanics, Inc., Cliffs Drilling Company, Diamond Offshore
Drilling, Inc., ENSCO International Incorporated, Falcon Drilling Company,
Inc., Hercules Offshore Corporation, Marine Drilling Companies, Inc., Noble
Drilling Corporation, Reading & Bates Corporation, Sedco Forex S.A.,
Transocean Offshore Inc. and Oceaneering Production Systems. The Company has
recently commenced work on a project for Noble Drilling Corporation to convert
the Paul Romano submersible drilling rig into a semisubmersible drilling rig
capable of drilling in deeper water and to improve its technical drilling
capabilities.
The Company's marketing efforts are conducted from its sales offices in
Pascagoula and Houston and target drilling contractors located primarily in
the Gulf Coast area and in Europe. The Company's sales staff attempts to
identify future contracts by contacting its clients on a regular basis (in
some cases weekly) in order to anticipate projects that will be competitively
bid or negotiated exclusively with the Company. The Company's sales force
often invites potential clients to the Pascagoula shipyard for a tour and
presentation.
The Company is actively involved in strengthening its relationships with
drilling contractors through continuous interaction between the Company's
project managers and the customers' project supervisors with respect to
ongoing projects. To accommodate the needs of the customers' project
supervisors, the Company has established on-site office facilities that such
project supervisors may use during the duration of a major conversion or
retrofit project. In addition, the Company has established an advisory
committee, comprised of key management personnel from many of the largest U.S.
drilling contractors, that meets with the Company's management quarterly to
provide the Company with insight and advice with respect to both individual
current and future needs as well as broader industry trends that the Company
utilizes for planning purposes.
A large portion of the Company's revenue has historically been generated by
a few customers although not necessarily the same customers from year-to-year.
For example, the Company's largest customers (those which individually
accounted for more than 10% of revenue in a particular year) collectively
accounted for 89%, 91%
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and 87%, of revenue for fiscal 1994, 1995 and 1996, respectively. The Company
expects that a significant portion of the Company's revenues for 1997 will be
derived from one customer. Because the level of conversion, retrofit or repair
work that the Company may provide to any particular customer depends on the
size of that customer's capital expenditure budget devoted to such projects in
a particular year, customers that account for a significant portion of revenue
in one fiscal year may represent an immaterial portion of revenue in
subsequent years.
CONTRACT STRUCTURE AND PRICING
The Company generally performs conversion, retrofit and repair services
pursuant to contracts that provide for a portion of the work to be performed
on a fixed-price basis and a portion of the work to be performed on a cost-
plus basis. In many cases, the Company commences work with respect to certain
portions of a drilling rig conversion, retrofit or repair project on a cost-
plus arrangement as soon as the drilling rig arrives in the Company's shipyard
and thereafter the scope and pricing arrangements with respect to other
aspects of the project are negotiated. In the interest of expediting the
completion of a conversion, retrofit or repair project, a drilling rig may
arrive in the Company's shipyard before the design work for such project is
finished or before all necessary budgetary approval for such project has been
received at the appropriate level of management of the customer. In many of
these cases, the portion of the project as to which no firm pricing
arrangement has been agreed to at the time the drilling rig arrives at the
Company's shipyard ultimately becomes a significant portion of the overall
project. In addition, the scope of the services to be performed with respect
to a particular drilling rig often increases as the project progresses due to
additional retrofits or modifications requested by the customer or additional
repair work necessary to meet the safety, environmental or construction
standards established by the U.S. Coast Guard or other regulatory or vessel
classification authorities.
With respect to the fixed-price portions of a project, the Company receives
the price fixed in the contract for such aspect of the project, subject to
adjustment only for change orders placed by the customer. The Company
typically receives a significant number of change orders on each of its fixed-
price projects as to which the Company and its customer negotiate a separate
charge. With respect to fixed-price contracts, the Company generally retains
the ability to capture cost savings and must absorb cost over-runs. Under
cost-plus arrangements, the Company receives specified amounts in excess of
its direct labor and materials cost and so is protected against cost overruns
but does not benefit directly from cost savings. The Company generally prices
materials at a mark-up under its contracts.
COMPETITION
The Company has two primary competitors for conversion, retrofit and repair
projects for drilling rigs that operate in the Gulf of Mexico. In
international markets, the Company competes with several companies located,
primarily in the United States, Europe and the Far East. The Company believes
it competes favorably against companies located in Europe or the Far East for
conversion, retrofit and repair projects relating to drilling rigs operating
in the Gulf of Mexico and, to a lesser extent, rigs operating offshore West
Africa and South America. The Company believes this is due to (i) generally
higher labor costs in Europe, (ii) costs associated with transporting drilling
systems, mud treatment systems and other equipment necessary to convert or
retrofit a drilling rig (which items are generally produced in the U.S. Gulf
of Mexico region) to Europe or the Far East, (iii) costs associated with
relocating supervisory personnel of the owner of the drilling rig to oversee
the conversion and retrofit project, (iv) costs to transport the drilling rig
to and from the shipyard and (v) the loss of revenues during the time
necessary to transport the drilling rig to or from such foreign locations. In
addition, the Company believes that these same factors will enable it to
compete favorably against companies located in Europe and in the Far East with
respect to the construction and outfitting of new drilling rigs to be used in
the Gulf of Mexico, offshore West Africa and South America.
The Company believes that its reputation for quality and reliability, its
long-standing relationships with most of the large drilling contractors, its
experienced management team, its existing skilled labor force, its access to
additional skilled labor in the Pascagoula, Mississippi area and its extensive
fabrication experience with drilling rigs are its key advantages in competing
for projects. The Company also believes that its capabilities to design
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new drilling rigs and production units will provide it with a competitive
advantage with respect to new rig construction business.
The Company believes that certain barriers exist that prevent new companies
from competing with the Company for conversion, retrofit and repair
activities, as well as for new rig construction activity, including the
investment required to establish an adequate facility, the difficulty of
locating a facility adjacent to an adequate waterway due to environmental and
wetland regulations, and the limited availability of experienced supervisory
and management personnel. Although new companies can enter the market for
small projects more easily, management believes these factors will likely
prevent an increase in domestic competition for larger projects, especially
major conversions and retrofits and new rig construction.
BACKLOG
As of March 31, 1997, the Company's backlog was approximately $65.5 million,
all of which management expects to be performed within the 12 months ending
March 31, 1998. The Company's backlog as of March 31, 1996 was $15.4 million.
Of the $65.5 million of backlog as of March 31, 1997, approximately 85% was
attributable to three projects.
The Company's backlog is based on management's estimate of future revenue
attributable to (i) the remaining amounts to be invoiced with respect to those
projects, or portions of projects, as to which a customer has authorized the
Company to begin work or purchase materials and (ii) projects, or portions of
projects, that have been awarded to the Company as to which the Company has
not commenced work. Management's estimates are often based on incomplete
engineering and design specifications and as engineering and design plans are
finalized or changes to existing plans are made, management's estimate of the
total revenue for such projects is likely to change. In addition, all projects
currently included in the Company's backlog are subject to termination at the
option of the customer, although the customer in that case is generally
required to pay the Company for work performed and materials purchased.
GOVERNMENT AND ENVIRONMENTAL REGULATION
OVERVIEW. Many aspects of the Company's operations and properties are
materially affected by federal, state and local regulation, as well as certain
international conventions and private industry organizations. These
regulations govern worker health and safety and the manning, construction and
operation of vessels. For example, the Company is subject to the jurisdiction
of the U.S. Coast Guard, the National Transportation Safety Board, the U.S.
Customs Service and the Maritime Administration of the U.S. Department of
Transportation, as well as private industry organizations such as the American
Bureau of Shipping. These organizations establish safety criteria and are
authorized to investigate vessel accidents and recommend improved safety
standards. In addition, the exploration and development of oil and gas
properties located on the outer continental shelf of the United States is
regulated primarily by the Minerals Management Service ("MMS"). The MMS has
promulgated federal regulations under the Outer Continental Shelf Lands Act
requiring the construction of offshore platforms located on the outer
continental shelf to meet stringent engineering and construction
specifications. Violations of these regulations and related laws can result in
substantial civil and criminal penalties as well as injunctions curtailing
operations. The Company believes that its operations are in compliance with
these and all other regulations affecting the fabrication of platforms for
delivery to the outer continental shelf of the United States.
In addition, the Company depends on the demand for its services from the oil
and gas industry and, therefore, is affected by changing taxes, price controls
and other laws and regulations relating to the oil and gas industry. For
example, the U.S. Coast Guard regulates and enforces various aspects of marine
offshore vessel operations, such as certification, routes, drydocking
intervals, manning requirements, tonnage requirements and restrictions, hull
and shafting requirements and vessel documentation. U.S. Coast Guard
regulations require that all drilling and production vessels are drydocked for
inspection at least once within a five-year period, and such inspections and
resulting repair requirements constitute a significant portion of the
Company's revenues. In 1996,
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approximately 35% of the Company's revenues were generated by inspections and
repairs required by applicable U.S. Coast Guard regulations. While the Company
is not aware of any proposals to reduce the frequency or scope of such
inspections, any such reduction could adversely affect the Company's results
of operations. In addition, offshore construction and drilling in certain
areas have been opposed by environmental groups and, in certain areas, has
been restricted. To the extent laws are enacted or other governmental actions
are taken that prohibit or restrict offshore construction and drilling or
impose environmental protection requirements that result in increased costs to
the oil and gas industry in general and the offshore construction industry in
particular, the business and prospects of the Company could be adversely
affected. The Company cannot determine to what extent future operations and
earnings of the Company may be affected by new legislation, new regulations or
changes in existing regulations.
ENVIRONMENTAL. The Company's operations and properties are subject to a wide
variety of increasingly complex and stringent foreign, federal, state and
local environmental laws and regulations, including those governing discharges
into the air and water, the handling and disposal of solid and hazardous
wastes, the remediation of soil and groundwater contaminated by hazardous
substances and the health and safety of employees. These laws may provide for
"strict liability" for damages to natural resources and threats to public
health and safety, rendering a party liable for the environmental damage
without regard to negligence or fault on the part of such party. Sanctions for
noncompliance may include revocation of permits, corrective action orders,
administrative or civil penalties and criminal prosecution. Certain
environmental laws provide for strict, joint and several liability for
remediation of spills and other releases of hazardous substances, as well as
damage to natural resources. In addition, the Company may be subject to claims
alleging personal injury or property damage as a result of alleged exposure to
hazardous substances. Such laws and regulations may also expose the Company to
liability for the conduct of or conditions caused by others, or for acts of
the Company that were in compliance with all applicable laws at the time such
acts were performed.
The Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, and similar laws provide for responses to and liability for
releases of hazardous substances into the environment. Additionally, the Clean
Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, the
Safe Drinking Water Act, the Emergency Planning and Community Right to Know
Act, each as amended, and similar foreign, state or local counterparts to
these federal laws, regulate air emissions, water discharges, hazardous
substances and wastes, and require public disclosure related to the use of
various hazardous substances. For example, the Company's paint operations must
comply with a number of environmental regulations. All blasting and painting
is done in accordance with the requirements of the Company's air discharge
permit and disposal of paint waste is made in accordance with the National
Pollution Discharge Elimination System stormwater pollution plan. Lead based
paint is vacuum blasted and all blasting debris is contained for hazardous
waste disposal. Company policy requires that existing coating be sampled and
tested prior to blasting operations to eliminate the possibility of lead
contamination and to assure that lead based paint is appropriately treated.
The Company has been classified as a "small quantity hazardous waste
generator" and is registered with the State of Mississippi Department of
Environmental Quality as such. Compliance with these and other environmental
laws and regulations may require the acquisition of permits or other
authorizations for certain activities and compliance with various standards or
procedural requirements. The Company believes that its facilities are in
substantial compliance with current regulatory standards.
The Company's compliance with these laws and regulations has entailed
certain additional expenses and changes in operating procedures. The Company
believes that compliance with these laws and regulations will not have a
material adverse effect on the Company's business or financial condition for
the foreseeable future. However, future events, such as changes in existing
laws and regulations or their interpretation, more vigorous enforcement
policies of regulatory agencies, or stricter or different interpretations of
existing laws and regulations, may require additional expenditures by the
Company, which expenditures may be material.
The Company has recently entered into a bareboat charter providing for the
operation by the Company of a towable drydock vessel. Employees of the Company
who are engaged in offshore activities relating to such vessel may be covered
by the provisions of the Jones Act, the Death on the High Seas Act and general
maritime
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law, which laws operate to make the liability limits established under state
workers' compensation laws inapplicable to these employees and, instead,
permit them or their representatives to pursue actions against the Company for
damages or job related injuries, with generally no limitations on the
Company's potential liability.
HEALTH AND SAFETY MATTERS. The Company's facilities and operations are
governed by laws and regulations, including the federal Occupational Safety
and Health Act, relating to worker health and workplace safety. The Company
believes that appropriate precautions are taken to protect employees and
others from workplace injuries and harmful exposure to materials handled and
managed at its facilities. While it is not anticipated that the Company will
be required in the near future to expend material amounts by reason of such
health and safety laws and regulations, the Company is unable to predict the
ultimate cost of compliance with these changing regulations.
In addition to government regulation, various private industry
organizations, such as the American Bureau of Shipping, the American Petroleum
Institute, the American Society of Mechanical Engineers and the American
Welding Society, promulgate technical standards that must be adhered to in the
fabrication process.
INSURANCE
The Company maintains insurance against property damage caused by fire,
flood, explosion and similar catastrophic events that may result in physical
damage or destruction to the Company's facilities. The Company also maintains
commercial general liability insurance including ship repairers' legal
liability coverage and builders' risk coverage if required. Workers'
compensation and employers' liability is provided in accordance with the
Mississippi Workers' Compensation Act and includes the U.S. Longshore and
Harbor Workers Act and maritime and outer continental shelf endorsements. The
Company currently maintains excess and umbrella policies in addition to
primary liability insurance for up to a $20 million limit. Other coverages
currently in place include water pollution, aviation, automobile and
commercial crime coverage. Although management believes that the Company's
insurance is adequate, there can be no assurance that the Company will be able
to maintain adequate insurance at rates which management considers
commercially reasonable, nor can there be any assurance such coverage will be
adequate to cover all claims that may arise.
PMB ARRANGEMENT
In February 1994, the Company entered into an agreement with PMB, a wholly-
owned subsidiary of Bechtel Corporation, in connection with the conversion of
an offshore drilling rig. The Company recognized revenue of $8.6 million and
$16.7 million in 1995 and 1994, respectively, from the 1994 joint venture. The
1994 arrangement terminated upon the completion of such project. In December
1995, the Company and PMB entered into a second agreement to jointly pursue
rig design, conversion and retrofit projects for a term of five years.
Revenues attributable to the 1995 arrangement were approximately $9.8 million
for the year ended December 31, 1996. The 1995 arrangement was terminated by
mutual agreement in April 1996.
LEGAL PROCEEDINGS
The Company is a party to various routine legal proceedings primarily
involving commercial claims and workers' compensation claims. While the
outcome of these claims and legal proceedings cannot be predicted with
certainty, management believes that the outcome of all such proceedings, even
if determined adversely, would not have a material adverse effect on the
Company's business or financial condition.
EMPLOYEES
The Company's workforce varies based on the level of ongoing fabrication
activity at any particular time. As of March 31, 1997, the Company had
approximately 800 employees. For the last several years, substantially all of
the Company's work force has been leased to the Company by employee leasing
companies serving the Company exclusively. In exchange for its leasing
services, these employee leasing companies charged the
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Company an amount which covered wages paid to such employees, together with a
mark-up designed to cover health and workers' compensation insurance, the
provision of a 401(k) plan, payroll taxes, all other required insurance and a
nominal return to such companies. Payments for contract labor totaled
approximately $10.1 million in 1996. All contract leasing arrangements had
been terminated as of May 18, 1997, and the Company now directly employs its
employees at levels of wages and benefits substantially equivalent to those
formerly provided by the employee leasing companies. The Company believes that
the cost of directly employing its laborers will be essentially the same as
the historic cost of the employee leasing arrangement most recently
terminated. None of the Company's employees is employed pursuant to a
collective bargaining agreement, and the Company believes that its
relationship with its employees is good.
The Company's ability to remain productive and profitable depends
substantially on its ability to attract and retain skilled construction
workers, primarily welders, fitters and equipment operators. In addition, the
Company's ability to expand its operations depends primarily on its ability to
increase its labor force. The Company believes that its location in Pascagoula
gives it a strategic advantage over many other Gulf of Mexico shipyards due to
the long history of sophisticated marine construction in the Pascagoula area
and the substantial excess capacity of skilled labor which is currently
available in this area. While the Company believes its relationship with its
skilled labor force is good, a significant increase in the wages paid by
competing employers or an increase in the activity of those employers could
result in a reduction in the Company's skilled labor force, increases in the
wage rates paid by the Company, or both. If either of these occurred, in the
near-term, the profits expected by the Company from work in progress could be
reduced or eliminated and, in the long-term, the production capacity of the
Company would be diminished and the growth potential of the Company could be
impaired.
The Company has facilities to train its employees on productivity and safety
matters. The Company is committed to training its employees and offers
advancement through in-house training programs.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information concerning the Company's
directors and executive officers, and those persons who will become directors
and executive officers in connection with this Offering:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
J. L. Holloway........................ 52 Chairman of the Board, Chief
Executive Officer and
President of the Company
Carl M. Crawford...................... 53 Executive Vice President of
the Company
Ronald W. Schnoor..................... 43 President of HAM Marine and
Director of the Company
James A. Lowe, III.................... 39 General Counsel, Secretary and
Director of the Company
John F. Alford........................ 37 Senior Vice President, Chief
Financial Officer and
Director of the Company
Bruce Malcolm......................... 49 President of Friede & Goldman
and Director of the Company
(1)(2)......................... Director of the Company
(1)(2)......................... Director of the Company
</TABLE>
- --------
(1) Member of audit committee.
(2) Member of compensation committee.
Directors are elected at each annual meeting of stockholders. All officers
serve at the discretion of the Board of Directors, subject to terms of their
employment agreements, if applicable. See "--Employment Agreements."
J. L. Holloway has served as the Chairman of the Board, Chief Executive
Officer and President of the Company since the completion of the
Reorganization. In addition, Mr. Holloway has served as the Chairman of the
Board, Chief Executive Officer and President of HAM Marine since its formation
in 1982. Mr. Holloway also serves as a Director of Delta Health Group, a
company that operates and manages health care facilities in the South and as
President of State Street Properties, Inc., a commercial real estate
development firm headquartered in Mississippi.
Carl M. Crawford has served as Executive Vice President of the Company since
May 1997. Mr. Crawford also serves as the Executive Vice President of HAM
Marine, a position he has held for more than the last five years. Prior to
joining HAM Marine in 1982, Mr. Crawford had been employed in management and
marketing positions with a number of equipment and manufacturing companies.
Ronald W. Schnoor has served as President of HAM Marine since April 1997 and
a Director of the Company since May 1997. Previously, Mr. Schnoor served as
the Vice President, Manager of Operations of HAM Marine since 1992. Mr.
Schnoor joined HAM Marine in 1984 and previously served as both Senior Project
Engineer and as a Project Manager.
James A. Lowe, III has served as General Counsel, Secretary and Director of
the Company since May 1997. Mr. Lowe joined HAM Marine on January 1, 1997 as
General Counsel. He has also served as Director of HAM Marine and Director and
Secretary of Friede & Goldman since February 1997. Prior to joining HAM
Marine, Mr. Lowe was an attorney with the firm of Watkins & Eager PLLC, a law
firm in Jackson, Mississippi, for seven years, the last four of which he was a
member of such firm.
46
<PAGE>
John F. Alford has served as Senior Vice President, Chief Financial Officer
and Director of the Company since May 1997. Mr. Alford joined HAM Marine in
1996. Mr. Alford began his career in banking and previously served as a member
of the Board of Directors and as Chief Operating Officer of Baton Rouge Bank
and Trust Company, and a related financial firm, for more than the past five
years.
Bruce G. Malcolm was elected President of Friede & Goldman in May 1997. Mr.
Malcolm joined Friede & Goldman as Vice President of Operations in March 1997.
Prior to joining Friede & Goldman, Mr. Malcolm was a construction manager for
Bechtel Corporation from January 1996 to March 1997 and an Operations and
Technical Director for Dolphin Drilling, Ltd. from June 1993 to December 1995.
From May 1992 to June 1993, he was an independent consultant.
COMMITTEES OF THE BOARD
The Board of Directors has established an Audit Committee and Compensation
Committee. The Audit Committee recommends the appointment of auditors and
oversees the accounting and audit functions of the Company. The Compensation
Committee determines executive officers' and key employees' salaries and
bonuses and administers the Equity Incentive Plan. Messrs. and
will serve as members of the Company's Compensation Committee and Audit
Committee.
DIRECTOR COMPENSATION
Each director receives a fee of $1,000 for attendance at each Board of
Directors meeting and $500 for each committee meeting, as well as stock
options to purchase 1,000 shares of Common Stock annually. See "--Equity
Incentive Plan." Directors of the Company are also reimbursed for out-of-
pocket expenses incurred in attending meetings of the Board of Directors or
committees thereof, and for other expenses incurred in their capacity as
directors of the Company.
EXECUTIVE COMPENSATION
The following table sets forth for 1996 the cash compensation of (i) the
Company's chief executive officer and (ii) each executive officer of the
Company whose total annual salary and bonus during 1996 exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------
LONG-
OTHER ANNUAL TERM ALL OTHER
YEAR SALARY BONUS COMPENSATION(1) AWARDS COMPENSATION
---- -------- ---------- -------------- ------ ------------
<S> <C> <C> <C> <C> <C> <C>
J. L. Holloway.......... 1996 $196,000 $1,626,687 $ --
Chairman of the Board,
Chief Executive
Officer and President
of the Company
Carl M. Crawford........ 1996 70,540 333,668 84,213
Executive Vice
President of the
Company
Ronald W. Schnoor....... 1996 93,400 157,889 --
President of HAM Marine
</TABLE>
- --------
(1) Other annual compensation for Mr. Crawford consists of sales commissions.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Messrs. Holloway and
Alford and HAM Marine has entered into employment agreements with Messrs.
Crawford, Schnoor and Lowe. Pursuant to the terms of such agreements, the
salaries of these persons in 1997 will be: Mr. Holloway, $275,000; Mr.
Crawford, $150,000; Mr. Schnoor, $138,000; Mr. Lowe, $120,000; and Mr. Alford,
$100,000.
47
<PAGE>
The employment agreements relating to Messrs. Holloway, Crawford and Schnoor
were effective on January 1, 1997, have initial terms of one year and, unless
earlier terminated pursuant to the terms thereof, continue thereafter on a
year-to-year basis. Each of such agreements is terminable by the employer for
"cause" upon ten days' written notice and without "cause" by either party upon
thirty days' written notice. In the event an officer's employment is
terminated by the employer without "cause," such officer will be entitled to
receive a lump-sum severance payment at the effective time of termination
equal to the base salary at the rate then in effect for one year. In addition,
the employment agreements restrict these individuals from competing with the
Company for a period of two years from the date of the Reorganization;
provided that, in the event of termination without "cause," the time period
during which such individual is restricted from competing with the Company
will be shortened from two years to one year.
The employment agreements contain certain provisions concerning a change-in-
control of the employer, including the following: (i) in the event five days'
advance notice of the transaction giving rise to the change in control is not
given from the successor to the employer's business to the employer and such
officer wherein the successor agrees to assume performance of the employment
agreement, the change in control will be deemed a termination of the
employment agreement by the employer without "cause," and the provisions of
the employment agreement governing the same will apply, except that the
severance amount otherwise payable (discussed in the preceding paragraph)
shall be tripled and the provisions which restrict competition with the
employer shall not apply and (ii) in any change-of-control situation, such
officer may elect to terminate his employment by giving five days' written
notice prior to the anticipated closing of the transaction giving rise to the
change-in-control, which will be deemed a termination of the employment
agreement by the employer without "cause," and the provisions of the
employment agreement governing the same will apply, except that the severance
amount otherwise payable shall be doubled and except that the provisions which
restrict competition with the Company will apply for a period of two years
after such termination.
HAM Marine has entered into an employment agreement with Mr. Lowe effective
January 1, 1997, which agreement is terminable by the Company at any time. In
the event the agreement is terminated by the Company for any reason, Mr. Lowe
will receive a lump-sum severance payment of $60,000. Pursuant to the
agreement, Mr. Lowe received shares of common stock in HAM Marine which will
be exchanged for 76,820 shares of the Company's Common Stock pursuant to the
Reorganization.
The Company and HAM Marine entered into an employment agreement with Mr.
Alford on May 21, 1997, which agreement is terminable by the Company at any
time. Pursuant to the agreement, Mr. Alford received shares of common stock of
HAM Marine which will be exchanged for 38,410 shares of the Company's Common
Stock pursuant to the Reorganization. In addition, Mr. Alford was granted
options to purchase additional shares of common stock of HAM Marine effective
as of February 14, 1997 which, upon completion of the Reorganization, will be
converted into options to purchase an aggregate of 38,410 shares of the
Company's Common Stock, subject to a vesting schedule relating to the
exercisability of such options, at a purchase price of $2.39 per share.
CASH BONUSES
The Company's Board of Directors has approved the payment of bonuses to key
employees of the Company for 1997 in an aggregate amount not to exceed five
percent of the Company's EBITDA (defined as operating income plus
depreciation, amortization and non-cash compensation expenses related to the
issuance of stock and stock options to employees). The Board of Directors will
determine the actual amount of the bonus pool, subject to the limitation
described above, and the key employees who would be recipients of any such
cash bonuses and the individual amount of the cash bonus for each such key
employee following a determination of EBITDA for 1997.
48
<PAGE>
RETIREMENT PLAN
The Company has adopted a 401(k) plan for its employees. Employees are
eligible to participate in the plan after one year of service with the
Company, provided they work at least 1,000 hours during that first year. Under
the plan, but subject to certain limitations imposed under the Internal
Revenue Code, eligible employees are permitted to contribute up to 15% of
compensation plus 100% of any cash bonus paid by the Company on a pre-tax
basis. The plan provides for the Company to provide matching contributions of
an amount equal to a percentage of employee contributions to be set by the
Company, in its sole discretion, prior to the end of each calendar year. The
Company is also permitted to make qualified non-elective and discretionary
contributions in proportion to each eligible employee's compensation as a
ratio of the aggregate compensation of all eligible employees. The amounts
held under the plan are invested in investment funds maintained under the plan
in accordance with the directions of each participant.
All employees' contributions are immediately 100% vested. Contributions by
the Company vest at a rate of 20% a year beginning with the second year after
any such contribution. Upon attaining age 65, participants are automatically
100% vested, even with respect to Company contributions. Participants or their
designated beneficiaries are entitled to payment of vested benefits upon
termination of employment. On attaining age 65, participants are entitled to
distribution of the full value of their benefits even if they continue to be
employed by the Company. Such employees also have the option of deferring
payment until April 1 following the year they attain the age of 70 1/2. In
addition, hardship and other in-service distributions and loans to
participants from the plan are available under certain circumstances and
subject to certain conditions. The amount of benefits ultimately payable to a
participant under the plan depends on the level of the participant's salary
deferral contributions under the plan, the amount of Company discretionary and
matching contributions made to the plan and the performance of the investment
funds maintained under the plan in which participants are invested.
EQUITY INCENTIVE PLAN
The Equity Incentive Plan was adopted by the Board of Directors of the
Company and approved by the Company's stockholders in May 1997. The Equity
Incentive Plan permits the granting of any or all of the following types of
awards ("Awards"): stock appreciation rights, stock options, restricted stock,
dividend equivalents, performance units, automatic director options, phantom
shares, limited stock appreciation rights ("LSAR's"), bonus stock and cash tax
rights. All officers and employees of, and any consultants to, the Company or
any affiliate of the Company will be eligible for participation in all Awards
under the Equity Incentive Plan other than director options with tandem
LSAR's. The non-employee directors of the Company will only receive automatic
grants of director options with tandem LSAR's.
An aggregate of 1,150,000 shares of Common Stock have been authorized and
reserved for issuance pursuant to the Equity Incentive Plan. As of , 1997,
options to purchase an aggregate of shares of Common Stock have been
granted at an exercise price of $ per share. The Equity Incentive Plan is
administered by the Compensation Committee of the Company's Board of
Directors. The Compensation Committee will select the participants who will
receive Awards, determine the type and terms of Awards to be granted and
interpret and administer the Equity Incentive Plan. No Awards may be granted
under the Equity Incentive Plan after December 31, 2006.
CERTAIN TRANSACTIONS
The Company has from time to time made loans to and paid expenditures on
behalf of its stockholders. At March 31, 1997, outstanding loans to such
stockholders were approximately $136,000. During 1996, stockholders made
payments to the Company of $209,013 on amounts previously advanced.
49
<PAGE>
In October 1996, Mr. Holloway, the Chairman of the Board, Chief Executive
Officer and President of the Company, and Carl M. Crawford, Executive Vice
President of the Company, entered into personal guarantees of $5 million each
to secure a credit facility of HAM Marine. In addition, as of December 31,
1996, Mr. Holloway guaranteed a note of HAM Marine to an individual with a
principal balance of $197,508. In March 1997, Mr. Holloway and Mr. Crawford
entered into personal guarantees of $2.5 million each to secure the Credit
Facility. In March 1997, HAM Marine made a distribution of property, including
real estate previously held for investment, along with the related debt
guaranteed by Mr. Holloway, and an airplane, to its stockholders, which
property, and related liability, was contributed by such stockholders into a
newly formed company. Subsequent to such distribution, the Company has
chartered the airplane from such company on a "when needed" basis and has paid
fair market charter rates for such use of the airplane. The Company intends to
continue to use such airplane on this basis following the Offering.
At December 31, 1996, marketable securities owned by the Company with a
market value of approximately $1.4 million were pledged as collateral for a
loan to Mr. Holloway to finance the purchase of certain assets of Friede
Predecessor. In connection with the transfer of the purchased assets to Friede
& Goldman, Friede & Goldman recorded a $1.4 million payable to Mr. Holloway.
On March 31, 1997, the Company transferred the pledged marketable securities
to Mr. Holloway in payment of the obligation.
In June 1997, the Company purchased a crane from a company owned by the
stockholders of one of the Predecessors. The Company paid the same price for
such crane as such other company paid to acquire the crane from an unrelated
party in April 1997.
50
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information with respect to beneficial
ownership of the Company's Common Stock before and after giving effect to the
Offering, by (i) all persons known to the Company to be the beneficial owner
of 5% or more thereof, (ii) each director, (iii) each executive officer, (iv)
all officers and directors as a group and (v) each Selling Stockholder. The
address of each such person is c/o Friede Goldman International Inc., 525 E.
Capitol Street, Suite 402, Jackson, Mississippi 39201. All persons listed have
sole voting and investment power with respect to their shares unless otherwise
indicated.
<TABLE>
<CAPTION>
BENEFICIAL BENEFICIAL
OWNERSHIP PRIOR OWNERSHIP AFTER
TO OFFERING(1) NUMBER OF OFFERING(1)
----------------- SHARES -----------------
NUMBER OF BEING NUMBER OF
SHARES PERCENT OFFERED SHARES PERCENT
--------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
J. L. Holloway................... 7,362,979 80.0% 1,215,750 6,147,229 53.5%
Carl M. Crawford................. 1,359,310 14.8% 224,400 1,134,910 9.9%
Ronald W. Schnoor................ 362,481 3.9% 59,850 302,631 2.6%
James A. Lowe, III............... 76,820 * -- 76,820 *
John F. Alford................... 38,410 * -- 38,410 *
All officers and directors as a
group (6 persons)............... 9,200,000 100.0% 1,500,000 7,700,000 67.0%
</TABLE>
- --------
* Less than one percent.
(1) Excludes shares of Common Stock issuable pursuant to stock options not
exercisable within 60 days following the date of the Prospectus. See
"Management--Equity Incentive Plan."
51
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company's authorized capital stock consists of 25,000,000 shares of
Common Stock, par value $.01 per share, and 5,000,000 shares of Preferred
Stock, par value $.01 per share. Immediately prior to the closing of the
Offering, there were 9,200,000 shares of Common Stock outstanding which were
held of record by five stockholders, and no shares of Preferred Stock
outstanding. After the closing of the Offering, 11,500,000 shares of Common
Stock will be issued and outstanding, assuming no exercise of the
Underwriters' over-allotment option, and 1,150,000 shares of Common Stock will
be reserved for issuance pursuant to the Equity Incentive Plan. The following
summary of the terms and provisions of the Company's capital stock does not
purport to be complete and is qualified in its entirety by reference to the
Company's Charter and Bylaws, which have been filed as exhibits to the
Company's registration statement, of which this Prospectus is a part, and
applicable law.
COMMON STOCK
VOTING RIGHTS. Each share of Common Stock entitles the holder to one vote on
each matter submitted to a vote of the Company's stockholders, including the
election of directors. There is no cumulative voting. After the Offering, the
current officers and director of the Company will hold approximately 67.0% of
the issued and outstanding Common Stock (63.8% of the Underwriters' over-
allotment option is exercised in full) and will hold the voting power to
determine the outcome of all matters upon which a majority vote of the
stockholders of the Company is required for approval. The Charter prohibits
the taking of any action by written stockholder consent in lieu of a meeting.
DIVIDENDS. The holders of Common Stock are entitled to receive dividends if,
as and when such dividends are declared by the Board of Directors of the
Company out of assets legally available therefor after payment of dividends
required to be paid on shares of Preferred Stock, if any.
LIQUIDATION OR DISSOLUTION. Upon liquidation or dissolution, holders of
Common Stock are entitled to share ratably in all net assets available for
distribution to stockholders after payment of any liquidation preferences to
holders of Preferred Stock.
OTHER PROVISIONS. The Common Stock carries no conversion or preemptive
rights. All outstanding shares of Common Stock are, and the shares of Common
Stock to be sold by the Company in the Offering when issued will be, duly
authorized, validly issued, fully paid and nonassessable.
TRANSFER AGENT AND REGISTRAR. The Transfer Agent and Registrar for the
Common Stock is .
LISTING. Application has been made to list the Common Stock on the NASDAQ
National Market under the trading symbol "FGII."
PREFERRED STOCK
The Board of Directors of the Company is authorized, without approval of the
stockholders, to cause shares of Preferred Stock to be issued in one or more
series, to determine the numbers of shares of each series, to fix the rights,
powers, preferences and privileges of each series and any qualifications,
limitations or restrictions thereon and to increase or decrease the number of
shares of each such series. Among the specific matters that may be determined
by the board of directors are: the annual rate of dividends; the redemption
price, if any; the terms of a sinking or purchase fund, if any; the amount
payable in the event of any voluntary liquidation, dissolution or winding up
of the affairs of the Company; conversion rights, if any; and voting powers,
if any. Depending upon the terms of the Preferred Stock established by the
Board of Directors, any or all series of Preferred Stock could have
preferences over the Common Stock with respect to dividends and other
distributions and upon liquidation of the Company or could have voting or
conversion rights that could adversely affect the holders of the outstanding
Common Stock. The Company has no current plans to issue any shares of
Preferred Stock of any class or series.
52
<PAGE>
One of the effects of undesignated Preferred Stock may be to enable the
Board of Directors to render more difficult or to discourage an attempt to
obtain control of the Company by means of a tender offer, proxy contest,
merger or otherwise, and thereby to protect the continuity of the Company's
management. The issuance of shares of Preferred Stock pursuant to the Board of
Directors' authority described above may adversely affect the rights of the
holders of Common Stock. If, in the exercise of its fiduciary obligations, the
Board of Directors were to determine that a takeover proposal was not in the
Company's best interest, such shares could be issued by the Board of Directors
without stockholder approval in one or more transactions that might prevent or
make more difficult or costly the completion of the takeover transaction by
diluting the voting or other rights of the proposed acquiror or insurgent
stockholder group, by creating a substantial voting block in institutional or
other hands that might undertake to support the position of the incumbent
Board of Directors, by effecting an acquisition that might complicate or
preclude the takeover, or otherwise. In this regard, the Company's Charter
grants the Board of Directors broad power to establish the rights and
preferences of the authorized and unissued Preferred Stock, one or more series
of which could be issued that would entitle holders (i) to vote separately as
a class on any proposed merger or consolidation, (ii) to cast a
proportionately larger vote together with the Common Stock on any such
transaction or for all purposes, (iii) to elect directors having terms of
office or voting rights greater than those of other directors, (iv) to convert
Preferred Stock into a greater number of shares of Common Stock or other
securities, (v) to demand redemption at a specified price under prescribed
circumstances related to a change of control or (vi) to exercise other rights
designated to impede a takeover. Accordingly, the issuance of shares of
Preferred Stock may discourage bids for the Common Stock at a premium or may
otherwise adversely affect the rights of holders of, or the market price of,
the Common Stock.
CERTAIN PROVISIONS OF THE COMPANY'S CHARTER AND BYLAWS AND DELAWARE LAW
Certain provisions of the Charter and Bylaws are intended to enhance the
likelihood of continuity and stability in the Board of Directors of the
Company and in its policies, but might have the effect of delaying or
preventing a change in control of the Company and may make more difficult the
removal of incumbent management even if such transactions could be beneficial
to the interests of stockholders. Set forth below is a summary description of
such provisions:
NUMBER OF DIRECTORS; FILLING VACANCIES; REMOVAL. The Charter provides that
the number of directors constituting the Company's Board of Directors shall be
fixed by the Board of Directors, but shall not be less than three nor more
than 15. The Charter further provides that the directors shall be divided into
three classes, each class serving staggered three-year terms. The Board of
Directors of the Company, acting by a majority of the directors then in
office, may fill any vacancy or newly created directorship.
ADVANCE NOTICE OF INTENTION TO NOMINATE A DIRECTOR. The Charter and Bylaws
permit a stockholder to nominate a person for election as a director only if
written notice of such stockholder's intent to make a nomination has been
given to the Secretary of the Company not less than 60 days or more than 90
days prior to the anniversary of the annual meeting held for the immediately
preceding year (subject to certain adjustments if the annual meeting date is
changed by more than 30 days from the date of the prior annual meeting) or, in
the case of a special meeting at which directors are to be elected, not less
than 40 days notice or prior public disclosure of the date of the meeting is
given, in which case notice by the stockholder must be received on the 10th
day after notice of the meeting or prior public disclosure of the date of the
meeting was given. This provision also requires that the stockholder's notice
set forth, among other things, a description of all arrangements or
understandings between the nominee and the stockholder pursuant to which the
nomination is to be made or the nominee is to be elected and such other
information regarding the nominee as would be required to be included in a
proxy statement filed pursuant to the proxy rules promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), had the
nominee been nominated by the Board of Directors of the Company. Any
nomination that fails to comply with these requirements may be disqualified.
STOCKHOLDERS' RIGHT TO CALL SPECIAL MEETING. The Bylaws provide that a
special stockholders' meeting may not be called by stockholders.
53
<PAGE>
REMOVAL OF DIRECTORS; FILLING VACANCIES ON BOARD OF DIRECTORS. The Bylaws
provide that any director or the entire Board may be removed at any time for
cause by a vote of the holders of not less than a majority of the shares of
the Company entitled to vote in the election of directors. The Bylaws also
provide that any vacancies on the Board of Directors (including any resulting
from an increase in the authorized number of directors) may be filled by the
affirmative vote of a majority of the remaining directors.
ADOPTION AND AMENDMENT OF BY-LAWS. The Bylaws provide that they may be
amended or repealed by either a majority vote of the Board of Directors or the
holders of at least 80% of the total voting power of all shares of stock of
the Company entitled to vote in the election of directors voting as one class.
Any provisions amended or repealed by the stockholders may be re-amended or
re-adopted by the Board of Directors.
AMENDMENT OF CERTAIN PROVISIONS OF THE ARTICLES; OTHER CORPORATE ACTION.
Under Delaware law, unless a corporation's articles of incorporation specify
otherwise, a corporation's articles of incorporation may be amended by the
affirmative vote of the holders of a majority of the voting power of each
class of stock entitled to vote thereon. The Charter requires the affirmative
vote of not less than 80% of the total voting power of the Company to amend,
alter or repeal certain provisions of the Company's Charter with respect to
(i) the classification, filling of vacancies and removal of the Board of
Directors, (ii) amendments to the Bylaws, (iii) the application of certain
anti-takeover provisions of Delaware law to which the Company is currently
subject, (iv) changes to stockholder vote requirements, (v) limitation of
liability of directors and (vi) requirements for special meetings called by
stockholders.
ANTI-TAKEOVER PROVISIONS. Delaware law permits the Company's board of
directors to adopt certain anti-takeover measures in response to proposals to
acquire the Company, its assets or its outstanding capital stock. Measures to
be adopted could include a shareholder rights plan or bylaw provisions
requiring supermajority shareholder approval of acquisition proposals.
LIMITATION ON PERSONAL LIABILITY OF DIRECTORS. Delaware law authorizes
corporations to limit or eliminate the personal liability of directors to
corporations and their stockholders for monetary damages for breach of
director's fiduciary duty of care. The duty of care requires that, when acting
on behalf of the corporation, directors must exercise an informed business
judgment based on all material information reasonably available to them.
Absent the limitations authorized by Delaware law, directors are accountable
to corporations and their stockholders for monetary damages for conduct
constituting gross negligence in the exercise of their duty of care. Delaware
law enables corporations to limit available relief to equitable remedies such
as injunction or rescission. The Charter limits the liability of directors of
the Company to the Company or its stockholders (in their capacity as directors
but not in their capacity as officers) to the fullest extent permitted by
Delaware law. Specifically, directors of the Company will not be personally
liable for monetary damages for breach of a director's fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit.
The inclusion of this provision in the Charter may have the effect of
reducing the likelihood of derivative litigation against directors and may
discourage or deter stockholders or management from bringing a lawsuit against
directors for breach of their duty of care, even though such an action, if
successful, might otherwise have benefited the Company and its stockholders.
The Company's Bylaws provide indemnification to the Company's officers and
directors and certain other persons with respect to certain matters.
INDEMNIFICATION ARRANGEMENTS. The Charter and Bylaws provide that, to the
fullest extent permitted by the Delaware General Corporation Law, the
directors and officers of the Company shall be indemnified and shall be
advanced expenses in connection with actual or threatened proceedings and
claims arising out of their status as such. The Company has entered into
indemnification agreements with each of its directors and executive officers
that provide for indemnification and expense advancement to the fullest extent
permitted under the Delaware General Corporation Law.
54
<PAGE>
NO ACTION BY WRITTEN CONSENT. The Charter prohibits the taking of any action
by written stockholder consent in lieu of a meeting. Such provisions may not
be amended or repealed without the affirmative vote of the holders of at least
80% of the capital stock of the Company entitled to vote on such matters.
STATUTORY BUSINESS COMBINATION PROVISION
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law ("Section 203"). Section 203 provides, with certain
exceptions, that a Delaware corporation may not engage in any of a broad range
of business combinations with a person or an affiliate, or associate of such
person, who is an "interested stockholder" for a period of three years from
the date that such person became an interested stockholder unless: (i) the
transaction resulting in a person becoming an interested stockholder, or the
business combination, is approved by the Board of Directors of the corporation
before the person becomes an interested stockholder, (ii) the interested
stockholder acquired 85% or more of the outstanding voting stock of the
corporation in the same transaction that makes such person an interested
stockholder (excluding shares owned by persons who are both officers and
directors of the corporation, and shares held by certain employee stock
ownership plans), or (iii) on or after the date the person becomes an
interested stockholder, the business combination is approved by the
corporation's board of directors and by the holders of at least 66% of the
corporation's outstanding voting stock at an annual or special meeting,
excluding shares owned by the interested stockholder. Under Section 203, an
"interested stockholder" is defined as any person who is (i) the owner of 15%
or more of the outstanding voting stock of the corporation or (ii) an
affiliate or associate of the corporation and who was the owner of 15% or more
of the outstanding voting stock of the corporation at any time within the
three-year period immediately prior to the date on which it is sought to be
determined whether such person is an interested stockholder.
A corporation may, at its option, exclude itself from the coverage of
Section 203 by amending its Charter or bylaws by action of its shareholders to
exempt itself from coverage, provided that such bylaw or charter amendment
shall not become effective until 12 months after the date it is adopted. The
Company has not adopted such a charter or bylaw amendment.
REGISTRATION RIGHTS
Pursuant to the terms of a Registration Rights Agreement among the Company
and all of its current stockholders (the "Registration Agreement"), the
Company has provided such stockholders with certain registration rights,
including three demand registration rights and certain "piggy-back"
registration rights, with respect to Common Stock owned by such stockholders.
The Company's obligation is subject to certain limitations relating to a
minimum amount of Common Stock required for registration, the timing of
registration and other similar matters. For example, the Company will not be
obligated to register the Common Stock when, in the good faith judgment of its
Board of Directors, such registration would materially adversely affect a
pending or proposed public offering of the Company's securities, provided that
such delay may not extend for more than 180 days. The Company will indemnify
such stockholders for certain liabilities in connection with any such
offering, other than liabilities resulting or arising from untrue statements
or omissions made in conformity with information furnished to the Company in
writing by any such stockholder. The Company is obligated to pay all expenses
incidental to any such registration, excluding underwriters' discounts and
commissions and certain legal fees and expenses of such stockholders.
55
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
The market price of the Common Stock could be adversely affected by the sale
of substantial amounts of Common Stock in the public market. Immediately prior
to the closing of the Offering, 9,200,000 shares of Common Stock were issued
and outstanding. All of the 3,800,000 shares sold in the Offering, except for
shares acquired by affiliates of the Company, will be freely tradeable.
None of the 9,200,000 shares outstanding immediately prior to the closing of
the Offering was issued in a transaction registered under the Securities Act,
and, accordingly, such shares may not be sold except in transactions
registered under the Securities Act or pursuant to an exemption from
registration, including the exemption contained in Rule 144 under the
Securities Act.
In general, under Rule 144 as currently in effect, a person, or persons
whose shares are aggregated, who has beneficially owned his or her shares for
at least one year, or a person who may be deemed an "affiliate" of the Company
who has beneficially owned shares for at least one year, would be entitled to
sell within any three-month period a number of shares that does not exceed the
greater of 1% of the then outstanding shares of the Common Stock or the
average weekly trading volume of the Common Stock during the four calendar
weeks preceding the date on which notice of the proposed sale is sent to the
Securities and Exchange Commission. Sales under Rule 144 are also subject to
certain manner of sale provisions, notice requirements and the availability of
current public information about the Company. A person who is not deemed to
have been an affiliate of the Company at any time for 90 days preceding a sale
and who has beneficially owned his shares for at least two years would be
entitled to sell such shares under Rule 144 without regard to the volume
limitations, manner of sale provisions, notice requirements or the
availability of current public information about the Company.
The Company has authorized the issuance of 1,150,000 shares of its Common
Stock in accordance with the terms of the Equity Incentive Plan. It is
anticipated that options to purchase shares of Common Stock will be
granted upon closing of the Offering to certain officers and directors of the
Company. See "Management--Equity Incentive Plan." The Company intends to file
a registration statement on Form S-8 under the Securities Act registering the
issuance of shares upon exercise of options granted under the Equity Incentive
Plan. As a result, such shares will be eligible for resale in the public
market.
For limitations on the ability of the Company, the Selling Stockholders and
the directors and executive officers of the Company to sell shares of Common
Stock during the period of 180 days from the date of this Prospectus, see
"Underwriting."
Prior to this Offering, there has been no established trading market for the
Common Stock, and no predictions can be made as to the effect that sales of
Common Stock under Rule 144, pursuant to a registration statement, or
otherwise, or the availability of shares of Common Stock for sale, will have
on the market price prevailing from time to time. Sales of substantial amounts
of Common Stock in the public market, or the perception that such sales could
occur, could depress the prevailing market price. Such sales may also make it
more difficult for the Company to issue or sell equity securities or equity-
related securities in the future at a time and price that it deems
appropriate. See "Risk Factors--Shares Eligible for Future Sale."
Certain officers, directors and stockholders, whose holdings immediately
following the closing of this Offering will aggregate 7,700,000 shares of
Common Stock, are entitled to certain rights with respect to the registration
of their shares of Common Stock under the Securities Act. If the Company
proposes to register any of its securities under the Securities Act, such
stockholders are entitled to notice of such registration and are entitled to
include, at the Company's expense, all or a portion of their shares therein,
subject to certain conditions.
56
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
the Company and the Selling Stockholders have severally agreed to sell to the
underwriters named below (the "Underwriters"), for whom Jefferies & Company,
Inc. ("Jefferies"), Bear, Stearns & Co. Inc. and Johnson Rice & Company L.L.C.
are acting as representatives (the "Representatives"), and the Underwriters
have severally agreed to purchase, the number of shares of Common Stock set
forth opposite their respective names in the table below at the public
offering price less the underwriting discount set forth on the cover page of
this Prospectus:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
Jefferies & Company, Inc........................................
Bear, Stearns & Co. Inc.........................................
Johnson Rice & Company L.L.C....................................
---------
Total......................................................... 3,800,000
=========
</TABLE>
The Underwriting Agreement provides that the obligation of the Underwriters
to purchase the shares of Common Stock offered hereby is subject to certain
conditions. The Underwriters are committed to purchase all of the shares of
Common Stock offered hereby (other than those covered by the over-allotment
option described below), if any are purchased.
The Underwriters propose to offer the Common Stock initially at the public
offering price set forth on the cover page of this Prospectus and to certain
dealers at such price less a concession not in excess of $ per share.
The Underwriters may allow, and such dealers may reallow, a discount not in
excess of $ per share to certain other dealers. After the initial
public offering of Common Stock, the public offering price, concession to
selected dealers and reallowance to other dealers may be changed by the
Representatives.
The Company has granted the Underwriters an option, exercisable for 30 days
from the date of this Prospectus, to purchase up to 570,000 additional shares
of Common Stock at the initial public offering price, less the underwriting
discount. The Underwriters may exercise this option solely for the purpose of
covering over-allotments, if any, made in connection with the shares of Common
Stock offered by this Prospectus. To the extent such option is exercised, each
Underwriter will become obligated, subject to certain conditions, to purchase
additional shares of Common Stock proportionate to such Underwriters' initial
commitment as indicated in the preceding table.
The Company, the Selling Stockholders and the directors and executive
officers of the Company have agreed not to offer for sale, sell or otherwise
dispose of any shares of Common Stock or options, rights or warrants to
acquire any Common Stock, or any securities convertible into or exchangeable
for Common Stock, for a period of 180 days from the date of this Prospectus,
without the prior written consent of Jefferies.
The Representatives have informed the Company that they do not expect the
Underwriters to confirm sales of shares of Common Stock offered by this
Prospectus to any accounts over which they exercise discretionary authority.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities that may be incurred in connection
with the Offering, including liabilities under the Securities Act, or
contribute to payments the Underwriters may be required to make in respect
thereof.
Prior to the Offering, there has been no public trading market for the
Common Stock and there can be no assurance that an active trading market will
develop or be sustained upon the completion of the Offering. The initial
public offering price of the Common Stock will be determined by negotiations
among the Company, the Selling Stockholders and the Representatives. The
material factors considered in determining such public offering price will be
the history of and the prospects for the industry in which the Company
competes, an assessment of
57
<PAGE>
the Company's management, the Company's past and present operations, the
Company's past and present earnings and the trend of its earnings, the general
condition of the securities markets at the time of the Offering and the price-
earnings ratio and market prices of publicly traded securities of companies
that the Company and the Representatives believe to be comparable to the
Company.
In order to facilitate the Offering of the Common Stock, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Common Stock. Specifically, the Underwriters may over-allot in
connection with the Offering, creating a short position in the Common Stock
for their own account. In addition, to cover over-allotments or to stabilize
the price of the Common Stock, the Underwriters may bid for, and purchase, the
Common Stock in the open market. Finally, the underwriting syndicate may
reclaim selling concessions allowed to an Underwriter or a dealer in
distributing the Common Stock in the Offering, if the syndicate repurchases
previously distributed shares of Common Stock in transactions to cover
syndicate short positions, in stabilization transactions or otherwise. Any of
these activities may stabilize or maintain the market price of the Common
Stock above independent market levels. The Underwriters are not required to
engage in these activities and may end any of these activities at any time.
LEGAL MATTERS
Certain legal matters in connection with the Common Stock being offered
hereby will be passed upon for the Company by Andrews & Kurth L.L.P., Houston,
Texas and for the Underwriters by Thompson & Knight, P.C., Dallas, Texas.
EXPERTS
The audited balance sheet of the Company, the audited financial statements
of the Predecessors to Friede Goldman International Inc. and the audited
statement of operations of Friede & Goldman, Ltd. included in this Prospectus
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (together with all
amendments, schedules and exhibits thereto the "Registration Statement") under
the Securities Act with respect to the Common Stock offered hereby. This
Prospectus, which is included as part of the Registration Statement, does not
contain all the information contained in the Registration Statement, certain
portions of which have been omitted in accordance with 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 and the exhibits and schedules thereto. Statements made
in the Prospectus as to the contents of any contract, agreement or other
document are not necessarily complete; with respect to each such contract,
agreement or other document filed 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 Registration Statement and the exhibits thereto may be
inspected, without charge, at the public reference facilities maintained by
the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices at Citicorp
Center, 500 West Madison Street, Room 1400, Chicago, IL 60661, and 7 World
Trade Center, Suite 1300, New York, NY 10048 or on the Internet at
http://www.sec.gov. Copies of such material can also be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.
The Company intends to furnish its stockholders with annual reports
containing audited financial statements examined by an independent public
accounting firm for each fiscal year.
58
<PAGE>
FRIEDE GOLDMAN INTERNATIONAL INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Financial Statements of the Predecessors to Friede Goldman International
Inc.:
Report of Independent Public Accountants................................ F-2
Balance Sheets as of December 31, 1995 and 1996 and March 31, 1997
(unaudited)............................................................ F-3
Statements of Operations For the Years Ended December 31, 1994, 1995 and
1996, and the Three Months ended March 31, 1996 and 1997 (unaudited)... F-4
Statements of Stockholders' Equity For the Years Ended December 31,
1994, 1995 and 1996 and the Three Months Ended March 31, 1997
(unaudited)............................................................ F-5
Statements of Cash Flows For the Years Ended December 31, 1994, 1995 and
1996 and the Three Months Ended March 31, 1996 and 1997 (unaudited).... F-6
Notes to Financial Statements........................................... F-8
Financial Statements of Friede & Goldman, Ltd.:
Report of Independent Public Accountants................................ F-20
Statement of Income For the Eleven Months Ended November 30, 1996....... F-21
Notes to Statement of Income............................................ F-22
Financial Statements of Friede Goldman International Inc.:
Report of Independent Public Accountants................................ F-24
Balance Sheet as of April 21, 1997...................................... F-25
Notes to Balance Sheet.................................................. F-26
Pro Forma Statement of Operations (unaudited):
Pro Forma Statement of Operations For the Year Ended December 31, 1996.. F-27
Notes to Pro Forma Statement of Operations.............................. F-29
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Friede Goldman International Inc.:
We have audited the accompanying balance sheet of the principal predecessor
to Friede Goldman International Inc., a Delaware corporation (the "Company"),
as of December 31, 1995 and the accompanying combined balance sheet of its
predecessors as of December 31, 1996, and the related statements of
operations, stockholders' equity, and cash flows for each of the years in the
three year 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 the principal predecessor
of Friede Goldman International Inc. as of December 31, 1995 and the combined
financial position of its predecessors as of December 31, 1996, and the
results of their operations and their cash flows for each of the years in the
three year period ended December 31, 1996, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Jackson, Mississippi,
March 7, 1997.
F-2
<PAGE>
THE PREDECESSORS TO
FRIEDE GOLDMAN INTERNATIONAL INC.
BALANCE SHEETS (NOTE 1)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ MARCH 31,
1995 1996 1997
----------- ----------- -----------
ASSETS
------ (UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents............... $ 1,207,206 $ 1,509,876 $ 2,095,555
Restricted certificates of deposit...... 4,456,267 4,651,964 1,107,030
Marketable securities, at fair market
value.................................. 2,040,001 6,618,766 4,780,950
Accounts receivable..................... 1,035,057 4,869,576 11,726,569
Inventory and stockpiled materials...... -- 577,904 753,181
Investment in sales-type lease, current
portion................................ 381,352 457,710 394,249
Costs and estimated earnings in excess
of billings on uncompleted contracts... -- 284,052 1,101,142
Prepaid expenses........................ 49,346 644,482 1,187,452
----------- ----------- -----------
Total current assets.................. 9,169,229 19,614,330 23,146,128
Property, plant and equipment, net of
accumulated depreciation................. 4,078,961 5,546,399 6,043,349
Investment in sales-type lease, less
current portion.......................... 1,628,915 1,171,205 1,049,477
Intangibles and other assets.............. 103,182 1,250,121 1,216,620
----------- ----------- -----------
Total assets.......................... $14,980,287 $27,582,055 $31,455,574
=========== =========== ===========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C> <C>
Current liabilities:
Short-term debt, including current
portion of long-term debt.............. $ 5,752,603 $10,235,349 $ 7,506,482
Advance from stockholder................ -- 1,400,000 --
Accounts payable, trade................. 396,314 3,075,216 5,794,552
Accrued expenses........................ 305,949 537,786 590,215
Billings in excess of costs and
estimated earnings on uncompleted
contracts.............................. -- 3,262,168 6,868,230
----------- ----------- -----------
Total current liabilities............. 6,454,866 18,510,519 20,759,479
Long-term debt, less current maturities... 3,270,173 2,852,649 1,978,806
----------- ----------- -----------
Total liabilities..................... 9,725,039 21,363,168 22,738,285
----------- ----------- -----------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value; 2,000
shares authorized, none outstanding.... -- -- --
Common stock, $0.01 par value; 1,000
shares authorized, 501.25 shares issued
and outstanding at December 31, 1995
and 1996 .............................. 5,013 5,013 5,013
Additional paid-in capital.............. 876,554 1,252,554 1,627,554
Retained earnings....................... 4,531,924 3,352,649 6,180,111
Unrealized gain (loss) on marketable
securities............................. (158,243) 1,608,671 904,611
----------- ----------- -----------
Total stockholders' equity............ 5,255,248 6,218,887 8,717,289
----------- ----------- -----------
Total liabilities and stockholders'
equity............................... $14,980,287 $27,582,055 $31,455,574
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
THE PREDECESSORS TO
FRIEDE GOLDMAN INTERNATIONAL INC.
STATEMENTS OF OPERATIONS (NOTE 1)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FOR THE YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------------- -----------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue................. $23,890,885 $19,864,895 $21,758,715 $2,964,895 $18,654,636
Cost of revenue......... 18,063,371 13,509,781 15,768,980 2,426,160 12,799,897
----------- ----------- ----------- ---------- -----------
Gross profit.......... 5,827,514 6,355,114 5,989,735 538,735 5,854,739
Selling, general and
administrative
expenses............... 2,202,569 3,861,564 5,869,371 942,297 2,522,411
----------- ----------- ----------- ---------- -----------
Operating income...... 3,624,945 2,493,550 120,364 (403,562) 3,332,298
----------- ----------- ----------- ---------- -----------
Other income (expense):
Interest expense...... (369,819) (650,171) (891,458) (199,832) (201,360)
Interest income....... 24,019 452,882 443,317 116,786 81,527
Gain on sale or
distribution of
assets............... 807,611 1,868,885 348,793 230,029 1,378,842
Litigation settlement. -- 750,000 3,466,635 3,466,635 --
Other................. 22,973 5,760 104,487 (26,663) 66,249
----------- ----------- ----------- ---------- -----------
Total other income
(expense).......... 484,784 2,427,356 3,471,774 3,586,955 1,325,258
----------- ----------- ----------- ---------- -----------
Net income.......... $ 4,109,729 $ 4,920,906 $ 3,592,138 $3,183,393 $ 4,657,516
=========== =========== =========== ========== ===========
Unaudited pro forma data
(Note 2):
Net income, reported
above................ $ 3,592,138 $ 4,657,516
Pro forma provision
for income taxes
related to operations
as
S Corporation........ 1,329,000 1,810,000
----------- -----------
Pro forma net income.. $ 2,263,138 $ 2,847,516
=========== ===========
Unaudited pro forma per
share data (Note 2):
Weighted average
shares outstanding... 9,200,000 9,200,000
=========== ===========
Pro forma net income
per share............ $ 0.25 $ 0.31
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
THE PREDECESSORS TO
FRIEDE GOLDMAN INTERNATIONAL INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (NOTE 1)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
AND THE THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
UNREALIZED
COMMON STOCK GAIN
$10 PAR VALUE ADDITIONAL (LOSS) ON TOTAL
-------------- PAID-IN RETAINED TREASURY MARKETABLE STOCKHOLDERS'
NUMBER AMOUNT CAPITAL EARNINGS STOCK SECURITIES EQUITY
------ ------ ---------- ---------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1993................... 500.00 $5,000 $1,211,812 $ 986,303 $(222,870) $ -- $1,980,245
Retirement of treasury
stock................ (18.75) (187) (222,683) -- 222,870 -- --
Merger with Gulf Boat,
Inc.................. -- -- (194,562) -- -- -- (194,562)
Distributions to
stockholders......... -- -- - (3,258,877) -- -- (3,258,877)
Issuance of stock as
compensation......... 20.00 200 81,987 -- -- -- 82,187
Unrealized loss on
marketable
securities........... -- -- -- -- -- (37,467) (37,467)
Net income............ -- -- -- 4,109,729 -- -- 4,109,729
------ ------ ---------- ---------- --------- --------- ----------
Balance, December 31,
1994................... 501.25 5,013 876,554 1,837,155 -- (37,467) 2,681,255
Distributions to
stockholders......... -- -- -- (2,226,137) -- -- (2,226,137)
Unrealized loss on
marketable
securities........... -- -- -- -- -- (120,776) (120,776)
Net income............ -- -- -- 4,920,906 -- -- 4,920,906
------ ------ ---------- ---------- --------- --------- ----------
Balance, December 31,
1995................... 501.25 5,013 876,554 4,531,924 -- (158,243) 5,255,248
Distributions to
stockholders......... -- -- -- (4,771,413) -- -- (4,771,413)
Capital contribution
from stockholders.... -- -- 100,000 -- -- -- 100,000
Stock granted to
employees as
compensation......... -- -- 276,000 -- -- -- 276,000
Unrealized gain on
marketable
securities........... -- -- -- -- -- 1,766,914 1,776,914
Net income............ -- -- -- 3,592,138 -- -- 3,592,138
------ ------ ---------- ---------- --------- --------- ----------
Balance, December 31,
1996................... 501.25 5,013 1,252,554 3,352,649 -- 1,608,671 6,218,887
Distributions to
stockholders......... -- -- -- (1,830,054) -- -- (1,830,054)
Stock granted to
employees as
compensation......... -- -- 375,000 -- -- -- 375,000
Unrealized loss on
marketable
securities........... -- -- -- -- -- (704,060) (704,060)
Net income............ -- -- -- 4,657,516 -- -- 4,657,516
------ ------ ---------- ---------- --------- --------- ----------
Balance, March 31, 1997. 501.25 $5,013 $1,627,554 $6,180,111 $ -- $ 904,611 $8,717,289
====== ====== ========== ========== ========= ========= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
THE PREDECESSORS TO
FRIEDE GOLDMAN INTERNATIONAL INC.
STATEMENTS OF CASH FLOWS (NOTE 1)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FOR THE YEARS ENDED DECEMBER 31, MARCH 31,
-------------------------------------- ------------------------
1994 1995 1996 1996 1997
----------- ------------ ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net income............ $ 4,109,729 $ 4,920,906 $ 3,592,138 $ 3,183,393 $ 4,657,556
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation and
amortization........ 347,190 425,445 695,551 173,903 215,080
Compensation expense
related to stock
issued to employees. 81,987 -- 276,000 -- 375,000
(Gain) loss on sale
of assets........... (807,611) (1,868,885) (348,793) 21,869 (1,430,969)
Net increase
(decrease) in
billings related to
costs and estimated
earnings on
uncompleted
contracts........... (534,891) 856,622 2,978,116 -- 2,788,972
Other................ (8,255) (21,119) -- -- --
Net effect of changes
in assets and
liabilities:
Restricted
certificates of
deposit........... (1,004,940) (3,451,327) (195,697) (23,306) 3,544,934
Accounts
receivable........ 1,081,483 (402,360) (3,834,519) (2,928,210) (7,022,369)
Inventory and
stockpiled
materials......... -- -- (571,000) -- (175,277)
Prepaid expenses
and other assets.. 11,072 41,338 (464,966) 26,921 (509,469)
Accounts payable
and accrued
expenses.......... (181,704) (231,444) 2,747,893 637,180 2,908,765
----------- ------------ ----------- ----------- -----------
Net cash provided
by operating
activities....... 3,094,060 269,176 4,874,723 1,091,750 5,352,223
----------- ------------ ----------- ----------- -----------
Cash flows from
investing activities:
Capital expenditures
for plant and
equipment............ (1,149,725) (2,669,855) (2,356,999) (1,596,430) (1,555,450)
Cash received upon
acquisition.......... -- -- 163,020 -- --
Proceeds from sale of
property, plant and
equipment............ 3,309,296 1,431,770 578,521 279,641 395,521
Development costs of
land held for resale. (148,373) -- -- -- --
Payments received on
sales-type lease..... -- 317,733 381,352 100,577 185,189
Release of (investment
in) long-term
restricted cash...... (569,731) 569,731 -- -- --
Investment in
marketable
securities........... (1,115,717) (2,058,910) (2,631,756) (1,011,978) --
Cash received in
merger with Gulf
Boat, Inc............ 83,920 -- -- -- --
----------- ------------ ----------- ----------- -----------
Net cash provided
by (used in)
investing
activities....... $ 409,670 $ (2,409,531) $(3,865,862) $(2,228,190) $ (974,740)
=========== ============ =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
THE PREDECESSORS TO
FRIEDE GOLDMAN INTERNATIONAL INC.
STATEMENTS OF CASH FLOWS--(CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FOR THE YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------------- ----------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from
financing activities:
Net borrowings
(repayments) under
lines of credit...... $ (93,812) $3,924,059 $3,822,030 $1,141,526 $1,099,000
Proceeds from
borrowings under debt
facilities........... 943,741 6,188,196 1,736,109 588,978 48,040
Repayments on
borrowings under debt
facilities........... (713,598) (5,304,775) (1,492,917) -- (4,749,750)
Distributions to
shareholders......... (3,258,877) (2,226,137) (4,771,413) (851,276) (189,094)
---------- ---------- ---------- ---------- ----------
Net cash provided (used)
in financing
activities............. (3,122,546) 2,581,343 (706,191) 879,228 (3,791,804)
---------- ---------- ---------- ---------- ----------
Net increase (decrease)
in cash and cash
equivalents............ 381,184 440,988 302,670 (257,212) 585,679
Cash and cash
equivalents at
beginning of year...... 385,034 766,218 1,207,206 1,207,206 1,509,876
---------- ---------- ---------- ---------- ----------
Cash and cash
equivalents at end of
year................... $ 766,218 $1,207,206 $1,509,876 $ 949,994 $2,905,555
========== ========== ========== ========== ==========
Supplemental disclosure
of cash flow
information--Cash paid
during the period for
interest............... $ 369,468 $ 621,387 $ 751,522 $ 167,412 $ 204,278
========== ========== ========== ========== ==========
Issuance of common
stock as
compensation......... $ 81,987 $ -- $ 276,000 $ -- $ 375,000
========== ========== ========== ========== ==========
Non-cash distributions
to shareholders...... $ -- $ -- $ -- $ -- $1,641,000
========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
THE PREDECESSORS TO
FRIEDE GOLDMAN INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS
(DATA WITH RESPECT TO MARCH 31, 1996 AND 1997 ARE UNAUDITED)
1. ORGANIZATION AND NATURE OF BUSINESS:
The principal predecessor to Friede Goldman International Inc. (the
"Company"), HAM Marine, Inc. ("HAM"), was formed in 1982 under the laws of the
State of Mississippi. HAM's primary business is to provide conversion, retrofit
and repair services for offshore drilling rigs. HAM's primary customers are
offshore drilling contractors who utilize the Company's services in connection
with the conversion and modification of existing drilling rigs in order to
increase their technical capabilities or to improve their efficiency. As of
March 31, 1997, substantially all of HAM's services were conducted at a
deepwater dock facility on land leased from the Port Authority in Pascagoula,
Mississippi.
Acquisition of Friede & Goldman, Ltd.
On December 2, 1996, a company related to HAM through identical equity
ownership, J.L. Holloway Holdings, Inc. ("Holdings"), purchased certain assets
and rights, including the rights to the trade name "Friede & Goldman" from an
unrelated third party ("Mr. Goldman"). Simultaneously with the closing of the
purchase, Holdings changed its name to Friede & Goldman, Ltd. ("Friede &
Goldman"). Prior to Holdings' purchase of assets and rights, Holdings had no
material assets, liabilities or operations. These transactions are accounted
for under the purchase method of accounting by the Company in the accompanying
financial statements. The operations of Friede & Goldman for the period from
December 2, 1996 to December 31, 1996, which were immaterial, are included in
the accompanying financial statements. For the eleven months ended November 30,
1996, revenues, gross profit and net income generated by the seller were $3.7
million, $1.1 million and $0.6 million, respectively.
Assets acquired included property and equipment with a value of approximately
$216,000, and designs and patents which, at December 31, 1996, had a carrying
value of approximately $1,246,000.
In addition to the cash consideration paid by Friede & Goldman to Mr.
Goldman, the Purchase Agreement requires Friede & Goldman, until December 2006,
to pay Mr. Goldman certain licensing and design fees received by Friede &
Goldman from the designs of new-build independent leg jackups and
semisubmersible drilling rigs as well as a percentage of all amounts collected
from sales of a patented rack chock system designed by Friede Predecessor, a
system which improves the strength of the connection between the legs and the
hull of a jackup drilling rig. Friede & Goldman is also required to make
payments to Mr. Goldman in the event that future sales of designs purchased
from Friede Predecessor and new designs developed by Friede & Goldman
constitute 20% or less of all new-build independent leg jackup and
semisubmersible drilling rigs for which construction has begun by domestic
drillers (other than any domestic driller that builds rigs for its own use with
its own shipyard) during any consecutive three-year period prior to the end of
the year 2006, with the first three-year period commencing at the time
construction begins with respect to a new-build drilling rig. In such an event,
Friede & Goldman is required to pay Mr. Goldman $300,000 (subject to adjustment
for inflation and certain maximum amounts) for each drilling unit design sale
by which Friede & Goldman is short of the 20% threshold for any such three-year
period, subject to a maximum of $1 million for any such three-year period. In
the event that Friede & Goldman fails to make any of the payments described on
a timely basis, Friede Predecessor has the right to require that all of the
assets purchased from Friede Predecessor (other than the name "Friede Goldman"
and derivatives thereof) be returned to Friede Predecessor and the right to
terminate the consulting and non-compete provisions of the Purchase Agreement.
Friede & Goldman's primary business is the design of offshore drilling and
production units, including jackups, semisubmersibles, drillships and floating
production, storage and offloading vessels, for new construction and with
respect to upgrade and modification projects. Friede & Goldman's offices are
located in New Orleans, Louisiana.
F-8
<PAGE>
THE PREDECESSORS TO
FRIEDE GOLDMAN INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DATA WITH RESPECT TO MARCH 31, 1996 AND 1997 ARE UNAUDITED)
Reorganization
The Company was incorporated under the laws of the State of Delaware in
February 1997. In anticipation of the Company's proposed initial public
offering of its common stock (see Note 14), the stockholders of HAM and Friede
& Goldman will contribute all of their ownership in HAM and Friede & Goldman
to the Company in exchange for shares of common stock in the Company; and HAM
and Friede & Goldman will become wholly-owned subsidiaries of the Company (the
"Reorganization"). The accompanying financial statements include the accounts
of HAM for all dates and periods presented and of Friede & Goldman for the
period since December 2, 1996. All significant intercompany accounts and
transactions have been eliminated. References to the "Company" included herein
include HAM and Friede & Goldman, which are also sometimes collectively
referred to as "the Predecessors".
The Company's certificate of incorporation established authority to issue
1,000 shares of $0.01 par value preferred stock and 2,000 shares of $0.01 par
value common stock. Preferred stock may be issued in one or more series and in
such amounts as may be determined by the Company's board of directors. The
voting powers, designations, preferences and relative, participating, optional
or other special rights, if any, and the qualifications, limitations or
restrictions, if any, of each preferred stock issue shall be fixed by
resolution of the board of directors providing for the issue. All shares of
common stock of the Company shall be identical, and, except as otherwise
provided in a resolution of the board of directors with respect to preferred
stock, the holders of common stock shall exclusively possess all voting power
with each share of common stock having one vote.
Pro Forma Earnings Per Share
In May 1997, in conjunction with the Company's plan to undertake an initial
public offering of its common stock (see Note 14), the Company authorized an
increase in the amount of authorized shares to 5,000,000 shares of $0.01 par
value preferred stock and 25,000,000 shares of $0.01 par value common stock.
Effective immediately prior to the public offering, the Company anticipates
issuing, pursuant to a stock exchange agreement, 9,200,000 shares of the
Company's common stock to the stockholders of HAM and Friede & Goldman as
described above. Therefore, for the pro forma per share data included in the
statement of operations, the weighted average number of common shares
outstanding is 9,200,000 shares for all periods presented.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Revenue Recognition
The Company records revenue on contracts on the percentage-of-completion
method. Contract revenue is earned based upon the percentage that incurred
costs to date, excluding the costs of any purchased but uninstalled materials,
bear to total estimated costs, commencing when progress reaches a point where
experience is sufficient to estimate final results with reasonable accuracy.
As contracts extend over one or more years, revisions in costs and earnings
estimates during the course of the work are reflected in the accounting period
in which the facts which require the revisions become known. Provisions for
estimated losses on uncompleted contracts are made in the period in which such
losses are determined. Other changes, including those arising from contract
penalty provisions, and final contract settlements are recognized in the
period in which the revisions are determined.
Contract costs include all direct material and labor costs and those
indirect costs related to contract performance, such as indirect labor,
supplies, tools, repairs and depreciation costs. Selling, general, and
administrative costs are charged to expense as incurred.
The asset, "Costs and estimated earnings in excess of billings on
uncompleted contracts," represents revenues recognized in excess of amounts
billed. The liability, "Billings in excess of costs and estimated earnings on
uncompleted contracts," represents billings in excess of revenues recognized.
F-9
<PAGE>
THE PREDECESSORS TO
FRIEDE GOLDMAN INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DATA WITH RESPECT TO MARCH 31, 1996 AND 1997 ARE UNAUDITED)
Inventories and Stockpiled Materials
Inventories and stockpiled materials consist primarily of materials
purchased for specific contracts and are stated at the lower of specifically
identified cost or market (replacement cost or net realizable value).
Property, Plant and Equipment
Property, plant and equipment is stated at cost less accumulated
depreciation. Depreciation is computed on the straight-line basis over the
estimated useful lives of the assets, which range from 5 to 39 years. Ordinary
maintenance and repairs which do not extend the physical or economic lives of
the plant or equipment are charged to expense as incurred.
Intangible Assets
Intangible assets consist primarily of design and patents acquired in
connection with the acquisition of Friede & Goldman which are being amortized
over a 10 year period. Amortization expense for the period from December 2,
1996 to December 31, 1996 and for the three months ended March 31, 1997 was
immaterial.
INCOME TAXES
The stockholders of the Predecessors have elected to have each entity taxed
as an S Corporation for federal and state income tax purposes, whereby the
stockholders are liable for individual federal and state income taxes on their
allocated portions of such entity's taxable income. Accordingly, the
accompanying financial statements do not include any provision for income
taxes. HAM has historically used distributions or bonuses, or a combination
thereof, to the stockholders, who are also employees, in order to provide a
means by which the stockholders can meet their income tax obligation. Included
in selling, general and administration expenses are bonuses of approximately
$223,000, $1,225,000 and $2,118,000 for the years ended December 31, 1994,
1995 and 1996, respectively, which were primarily intended to assist the
stockholders with their personal income tax liabilities resulting from HAM's
earnings.
As discussed in Note 14, the Company is contemplating a public offering of
equity securities. Before the closing of the public offering, the stockholders
of the Predecessors will elect to terminate the status of each Predecessor as
an S Corporation, and the Company and the Predecessors will be subject to
federal and state income taxes. This will result in the establishment of a net
deferred tax liability calculated at applicable federal and state income tax
rates resulting primarily from temporary differences arising from differences
in depreciation rates for tax and financial reporting purposes, timing of gain
recognition related to sales-type lease and unrealized appreciation in
marketable securities. At December 31, 1996, and March 31, 1997, such net
deferred tax liability would have been approximately $1,410,000 and
$1,100,000, respectively.
The pro forma provision for income taxes is the result of the application of
a combined federal and state rate (37%) to income before income taxes.
Cash Equivalents and Restricted Certificates of Deposit
For purposes of the statement of cash flows, the Company considers all
short-term cash investments with an original maturity of less than three
months to be cash equivalents. The restricted certificates of deposit are held
by financial institutions as collateral on debt facilities and are therefore
not considered a cash equivalent.
F-10
<PAGE>
THE PREDECESSORS TO
FRIEDE GOLDMAN INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DATA WITH RESPECT TO MARCH 31, 1996 AND 1997 ARE UNAUDITED)
Compensation Expense Related to Stock issued to Employees
In December 1996, HAM entered into an employment agreement with an
individual whereby the Company agreed to grant the employee shares of HAM's
common stock equal to 0.835% of the common shares outstanding as of January 1,
1997. As a result, HAM charged to selling, general and administrative expense
in 1996 of $276,000 representing the estimated fair value as of the date of
the agreement of the shares to be issued. In February 1997, HAM agreed to
grant another employee fully vested shares of common stock of HAM equal to
approximately 0.418% of the common shares then outstanding, and to grant that
employee options to purchase at $2.39 per share (on the pro forma share basis
described in Note 1) an equal amount of additional shares ratably over a three
year period, subject to forfeiture if the employee terminates employment.
Accordingly, HAM recognized selling, general and administrative expense in the
three months ended March 31, 1997 of $375,000 representing the estimated fair
value of the fully vested shares at the date of grant. HAM will recognize
compensation expense related to the options to purchase additional shares over
the three-year vesting period.
Use of Estimates
These financial statements have been prepared in conformity with generally
accepted accounting principles. In preparing the financial statements, the
Company is required to make estimates and assumptions that affect the reported
amounts of assets and liabilities as of the dates of the balance sheets and
the reported amounts of revenues and expenses for the years then ended. Actual
results could differ materially from those estimates.
Fair Value of Financial Instruments
The carrying amount of the Company's financial instruments at December 31,
1995 and 1996 and March 31, 1996 and 1997, including cash, restricted
certificates of deposit, marketable securities, contracts receivable,
investments in sales-type lease and notes payable, approximates fair value.
Recently Issued Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of."
("SFAS No. 121") The Company adopted SFAS No. 121 on January 1, 1996 and there
was no material impact on the Company's financial statements.
In October 1995, the FASB issued Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation." The disclosure
requirements of this Statement are effective for the Company's financial
statements beginning in fiscal 1996. The Company intends to apply the
accounting provisions of Accounting Principles Board Opinion 25, "Accounting
for Stock Issued to Employees." With the Company's plan of adoption, the
impact will be limited to additional footnote disclosure.
In March 1997, the FASB issued Statement of Financial Accounting Standards
No. 128 ("SFAS No. 128"), "Earnings Per Share," which adopts a revised
methodology for computing earnings per share for publicly owned companies. The
Company will be required to adopt the new methodology in the fourth quarter of
1997 and will also be required to restate previously reported earnings per
share. Early adoption of SFAS No. 128 is not permitted. The Company does not
expect the application of SFAS No. 128 to materially change the Company's
reported earnings per share.
F-11
<PAGE>
THE PREDECESSORS TO
FRIEDE GOLDMAN INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DATA WITH RESPECT TO MARCH 31, 1996 AND 1997 ARE UNAUDITED)
3. MARKETABLE SECURITIES:
At December 31, 1995 and 1996 and March 31, 1997, the Company held
marketable equity securities with historical costs of $2,198,244; $5,010,095
and $3,876,539, respectively. In accordance with Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," these securities are classified as available for sale. As
such, their carrying values are adjusted to fair market value with net
unrealized gains/losses included as separate component of stockholders'
equity. At December 31, 1995, the fair market value of marketable securities
was $2,040,001 resulting in net unrealized losses of $158,243. At December 31,
1996, the fair market value of marketable securities was $6,618,766 resulting
in net unrealized gains of $1,608,671. At March 31, 1997, the fair market
value of marketable securities was $4,780,950 resulting in net unrealized
gains of $904,611.
During the years ended December 31, 1995 and 1996, the Company sold
securities classified as available for sale for proceeds of $216,770, and
$5,269,110, respectively, resulting in realized losses of $5,733 in 1995 and
realized gains of $180,095 in 1996. There were no significant sales of
securities during 1994. The cost basis of securities sold was calculated using
the specific identification method.
4. ACCOUNTS RECEIVABLE:
A summary of accounts receivable follows:
<TABLE>
<CAPTION>
DESCRIPTION DECEMBER 31,
----------- --------------------- MARCH 31,
1995 1996 1997
---------- ---------- -----------
<S> <C> <C> <C>
Accounts receivable, contracts................ $ 717,108 $4,318,999 $11,474,311
Due from employment contractor (Note 8)....... 108,936 413,881 104,436
Due from stockholders (Note 12)............... 209,013 128,323 139,149
Other......................................... -- 8,373 8,673
---------- ---------- -----------
Total accounts receivable................... $1,035,057 $4,869,576 $11,726,569
========== ========== ===========
5. PROPERTY, PLANT AND EQUIPMENT:
A summary of property, plant and equipment follows:
<CAPTION>
DESCRIPTION DECEMBER 31,
----------- --------------------- MARCH 31,
1995 1996 1997
---------- ---------- -----------
<S> <C> <C> <C>
Land.......................................... $ 249,836 $ -- $ --
Land held for investment...................... 409,833 409,833 --
Buildings..................................... 639,213 333,694 771,758
Machinery and equipment....................... 4,013,739 6,115,284 6,295,106
Dock facility................................. 2,402,148 2,741,493 2,951,864
---------- ---------- -----------
Total property, plant and equipment......... 7,714,769 9,600,304 10,160,549
Less accumulated depreciation................. 3,635,808 4,053,905 4,117,200
---------- ---------- -----------
Property, plant and equipment, net.......... $4,078,961 $5,546,399 $ 6,043,349
========== ========== ===========
</TABLE>
Depreciation expense for the years ended December 31, 1994, 1995 and 1996
was $347,190, $425,445 and $695,551, respectively. Depreciation expense for
the three months ended March 31, 1996 and 1997 was $119,483 and $215,080,
respectively.
F-12
<PAGE>
THE PREDECESSORS TO
FRIEDE GOLDMAN INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DATA WITH RESPECT TO MARCH 31, 1996 AND 1997 ARE UNAUDITED)
6. FINANCING ARRANGEMENTS:
A summary of short and long-term debt follows:
<TABLE>
<CAPTION>
DESCRIPTION DECEMBER 31,
----------- --------------------- MARCH 31,
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Borrowings under 1996 Credit Facility........ $ -- $1,501,000 $ --
Borrowings under 1997 Credit Facility........ -- -- 2,600,000
Notes payable to banks bearing interest at
rates ranging from 6.10% to 6.25%, maturing
at dates ranging from February 1997 to July
1997, secured by certificates of deposit.... 2,025,000 4,475,000 1,100,000
Brokerage margin account bearing interest at
7.75%, due on demand and secured by equity
securities.................................. 526,247 2,637,277 2,685,317
Note payable to a bank bearing interest at
10%, repayable in monthly installments,
maturing March 2005, secured by sales-type
lease and related real estate (See Note 7).. 2,010,267 1,628,915 1,443,726
Notes payable to financial institutions and
others bearing interest at rates ranging
from 5% to 9.15%, payable in monthly
installments, maturing at dates ranging from
January 1998 to January 2000 and secured by
equipment, lease and real property.......... 2,221,262 2,845,806 1,656,245
Three revolving master notes with a bank
providing for aggregate borrowings up to
$3,000,000, bearing interest at rates
ranging from 5.94% to prime plus 1.75%
depending on amounts outstanding, secured by
certificates of deposit totaling $2,063,848,
accounts receivable and contract rights..... 2,240,000 -- --
---------- ---------- ----------
Total...................................... 9,022,776 13,087,998 9,485,288
Less: short-term debt and current
maturities of long-term debt.............. 5,752,603 10,235,349 7,506,482
---------- ---------- ----------
Long-term debt less current maturities..... $3,270,173 $2,852,649 $1,978,806
========== ========== ==========
</TABLE>
As of December 31, 1996, the Company has a line of credit facility (the
"1996 Credit Facility") with a bank which permits borrowings of up to the
lesser of $5,000,000 or 80% of eligible receivables. Borrowings under the 1996
Credit Facility bear interest at prime plus 1% (9.25% at December 31, 1996)
and are secured by accounts receivable and personal guarantees of certain
stockholders of the Company. The 1996 Credit Facility, which expires in July
1997, requires the Company to maintain certain minimum net worth and working
capital levels and debt to equity ratios and also requires the Company to
maintain at least $500,000 in unrestricted cash or marketable securities. As
of December 31, 1996, the Company was in compliance with these requirements.
At December 31, 1996, additional borrowings of $1,610,990 were available to
the Company under the 1996 Credit Facility.
On March 20, 1997, the Company entered into a new credit facility (the "1997
Credit Facility") which provides for accounts receivable and contract related
inventory based borrowings of up to $10,000,000 at prime plus 1/2% through
March 20, 1998. The 1997 Credit Facility contains similar provisions to those
required by the 1996 Credit Facility with respect to net worth and working
capital levels and debt to equity ratios. At March 31, 1997, additional
borrowings of $4,146,075 were available under the 1997 credit facility.
F-13
<PAGE>
THE PREDECESSORS TO
FRIEDE GOLDMAN INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DATA WITH RESPECT TO MARCH 31, 1996 AND 1997 ARE UNAUDITED)
Short-term borrowings averaged $435,000 in 1994, $1,697,000 in 1995 and
$5,396,000 in 1996, . Such borrowings were at average interest rates of 8.5%,
7.0% and 7.6%, respectively. The weighted average interest rate on all of the
Company's short-term borrowings was 6.2% and 7.2% at December 31, 1995 and
1996, respectively.
A summary of short and long-term debt maturities at December 31, 1996,
follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
------------------------ -----------
<S> <C>
1997.......................................................... $10,235,349
1998.......................................................... 1,327,776
1999.......................................................... 672,495
2000.......................................................... 131,015
2001.......................................................... 143,419
Thereafter.................................................... 577,944
-----------
Total maturities............................................ $13,087,998
===========
</TABLE>
The Company expects to use the proceeds from maturing certificates of
deposit to repay the notes payable secured by such certificates, and to repay
the brokerage margin account upon the ultimate sale of the related marketable
securities.
7. ACQUISITION, LEASE AND SALE OF ASSETS:
In November 1994, the Company merged with Gulf Boats, Inc. ("Gulf Boats"),
an entity with ownership identical to the Company's (See Note 12). In
connection with that acquisition, the Company assumed a long-term lease
obligation for certain land, buildings and a dock facility, as well as certain
other long term obligations to individuals affiliated with the owner of the
leased facilities. In February 1995, the Company purchased the leased assets
from the lessor for approximately $1.1 million and, in connection therewith,
was released from its obligations to the individuals.
In March 1995, the Company entered into an arrangement with an unrelated
party (the "Lessee") for lease of the property for a term of ten years. The
lease provides for monthly payments from the Lessee of $50,000 during the
first thirty-six months and $17,425 per month during the remaining term. At
about the same time, the Company borrowed $2,328,000 from a bank with the
lease being assigned as security for the loan. The loan bears interest at 10%
with the monthly payments and term of the promissory note equal to the lease
payments receivable from the Lessee.
The Company granted the Lessee an option to purchase the property at any
time for an amount equal to the outstanding principal balance, plus accrued
interest, of the bank loan.
This lease has been accounted for as a sale-type lease by the Company.
Accordingly, proceeds of $2,328,000 were recorded as an investment in sales-
type lease. In connection with the purchase of the property, release of
obligations and subsequent sales-type lease, the Company realized a gain of
approximately $1.7 million which is included in gain on sale of assets in the
1995 statement of operations.
During 1994, the Company sold 106 acres of real estate not used in the
Company's operations for proceeds of $3,260,000. The sale resulted in a net
realized gain of approximately $769,000 which is included in gain on sale of
assets in the 1994 statement of operations.
F-14
<PAGE>
THE PREDECESSORS TO
FRIEDE GOLDMAN INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DATA WITH RESPECT TO MARCH 31, 1996 AND 1997 ARE UNAUDITED)
8. CONTRACT LABOR ARRANGEMENT:
In May 1997, the Company terminated its contract for craft labor with a
contract labor company. As a result, craft labor is directly employed by the
Company at levels of wages and benefits substantially equivalent to those
formerly provided. Prior to termination of the contract company, the Company's
craft labor was provided by a contract employment company which was owned by
the spouse of an employee of the Company and whose only contract was with the
Company. The Company was charged the actual labor rate paid to the employees
plus a markup for employment taxes and insurance and the employment company's
profit, which was intended to be nominal. The marked up rates were reviewed
periodically and adjustments were made as considered necessary. Payments for
contract employment labor totaled $12,981,786, $8,386,028 and $10,131,603 for
the years ended December 31, 1994, 1995 and 1996, respectively.
The insurer who provides workmen's compensation coverage to both the Company
and the employment contractor has asserted that rates higher than those
charged during 1995 and 1996 may have been more appropriate, and that higher
rates may be assessed for future coverage. No specific claim has been asserted
against the Company, however, it is possible that the insurer may attempt to
impose retroactive premium adjustments on the contractor or the Company.
Management of the Company does not believe that the Company will be required
to pay any material amount of retroactive premiums.
9. POOLED RESOURCES ARRANGEMENT AND SIGNIFICANT CUSTOMERS:
In February 1994, the Company entered into an agreement (the "1994 Joint
Venture") with an unrelated entity to jointly perform services in connection
with the modification and upgrade of a customer's offshore drilling rig. Under
the terms of the 1994 Joint Venture, both the Company and the unrelated entity
were compensated for services each provided in connection with the contract at
agreed upon rates. Any net profits from the 1994 Joint Venture were shared
equally. The contract was completed during 1995, and the 1994 Joint Venture
was terminated. The Company recognized as contract revenue the amounts charged
to the 1994 Joint Venture for services provided during 1994 and 1995, together
with the Company's share of the net profit from the 1994 Joint Venture, using
the percentage of completion method. Such amounts were approximately
$16,249,000 and $8,652,000 in 1994 and 1995, respectively.
In December 1995, the Company and the same unrelated third party entered
into another agreement (the "1995 Joint Venture") to jointly pursue contract
opportunities and perform the related services. The 1995 Joint Venture was
originally for a term of five years; however, it was terminated by mutual
agreement in November 1996. The terms of the 1995 Joint Venture provided for
each party to be paid agreed upon rates for services performed in connection
with related contracts and for any net profits from the 1995 Joint Venture to
be shared equally. For the year ended December 31, 1995, activity conducted
through the 1995 Joint Venture was immaterial. For the year ended December 31,
1996, the Company recognized contract revenues of $9,838,000, together with
the Company's share of net profits from the 1995 Joint Venture. At December
31, 1996, the partners were involved in the dissolution of the joint venture
agreement.
The nature of the conversion and modification projects undertaken by the
Company can result in an individual contract comprising a large percentage of
a fiscal year's contract revenues. Similarly, relatively few companies own
offshore rigs. As a result, contracts performed for an individual customer may
comprise a significant portion of a particular year's contract revenue. During
the year ended December 31, 1996, the largest single contract represented 15%
of contract revenues and contracts with four separate customers comprised 12%,
17%, 24% and 31% of contract revenues.
F-15
<PAGE>
THE PREDECESSORS TO
FRIEDE GOLDMAN INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DATA WITH RESPECT TO MARCH 31, 1996 AND 1997 ARE UNAUDITED)
10. EMPLOYEE BENEFIT PLANS:
Effective July 1, 1995, the Company adopted a qualified 401(k) employee
savings and profit sharing plan for the benefit of substantially all eligible
employees, including those of the labor contractors (See Note 8). Under the
plan, employees can contribute and defer taxes on compensation contributed.
The Company matches 25% of the contributions of the employees up to a maximum
of 5% of salary. The Company also has the option to make an additional profit
sharing contribution to the plan. Employer contributions to the plan during
the years ended December 31, 1995 and 1996, amounted to $10,171 and $38,109,
respectively.
11. LEASES:
The Company entered into a lease agreement in May 1985, with the Jackson
County Port Authority ("Port Authority") for the lease of land for its dock
facility. The primary lease agreement expires in May 2005, with two additional
ten-year options for renewal. Effective June 31, 1995, the original lease
agreement was revised to include additional land. The revised agreement
increased the annual lease payment from $29,870 to $49,331. The lease has been
recorded as an operating lease for financial reporting purposes. In addition
to the lease payment, the Company pays $30,000 annually to the Port Authority
in dredging fees related to this lease.
In December 1996, the Company entered into another lease with the Port
Authority for additional dockspace and buildings adjacent to the Company's
existing shipyard facility. This lease agreement is for a period of two years
beginning in December 1996 and requires annual rental payments of $500,000.
The entire first year's rent was paid in December 1996 and is included in
prepaid expenses in the December 31, 1996 balance sheet, net of approximately
$26,000 amortized to lease expense.
The Company is also committed to the lease of office space in two locations
at combined annual rentals of approximately $185,000.
The Company also entered into a lease in March 1997 for additional
undeveloped land located near the Company's existing shipyard. This lease is
for a period of 2 years and requires minimum annual lease rentals of $41,000.
The Company has also recently entered into an arrangement that will give the
Company use of additional equipment for a period of 12 months. The
arrangement, which may be extended for an additional 12 month period by mutual
consent of the parties, requires minimum annual payments under the
arrangements of $1.2 million.
Future minimum lease payments from all of the above arrangements are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER TOTAL
-------------------- ----------
<S> <C>
1997................................... $1,998,982
1998................................... 805,815
1999................................... 271,648
2000................................... 253,595
2001................................... 219,935
Thereafter............................. 282,765
----------
$3,832,740
==========
</TABLE>
Lease expense was $29,870, $37,367 and $173,577, for the years ended
December 31, 1994, 1995 and 1996, respectively, and $32,640 and $464,594 for
the three months ended March 31, 1996 and 1997.
F-16
<PAGE>
THE PREDECESSORS TO
FRIEDE GOLDMAN INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DATA WITH RESPECT TO MARCH 31, 1996 AND 1997 ARE UNAUDITED)
12. RELATED PARTY TRANSACTIONS:
HAM Industrial, Inc.
The stockholders of the Company are also stockholders in HAM Industrial,
Inc. ("Industrial"). Prior to 1996, the Company paid certain common expenses,
such as officers' and administrative payroll which were allocated from
Industrial. These transactions between the Company and Industrial were
accounted for through a non-interest bearing intercompany loan account. There
were no transactions with Industrial during 1996, and, as of December 31,
1996, Industrial has no material assets or liabilities. A summary of
transactions between Industrial and the Company for the years ended December
31, 1995 and 1994, follows:
<TABLE>
<CAPTION>
1994 1995
---------- -----------
<S> <C> <C>
Balance due from Industrial, beginning of year..... $ 19,207 $ 310,836
Activity during the year:
Cash advanced to Industrial...................... 2,042,791 995,340
Repayment of advances by Industrial.............. (950,000) (1,262,170)
Payroll and administrative overhead paid by
Industrial for the Company...................... (828,588) (71,049)
Other............................................ 27,426 27,043
---------- -----------
Total activity, net............................ 291,629 (310,836)
---------- -----------
Balance due from Industrial, end of year........... $ 310,836 $ --
========== ===========
</TABLE>
Modular Fabricators, Inc.
Some of the stockholders of the Company are also stockholders in Modular
Fabricators, Inc. ("Modular"). During 1995, Modular advanced the Company
$1,113,934 which the Company repaid. Additionally, the Company advanced
Modular $103,610 with Modular repaying $56,416. The remaining amount due from
Modular was forgiven during 1995.
Gulf Boats, Inc.
As stated in Note 7, the stockholders of the Company were also stockholders
in Gulf Boats. The Company performed certain services for Gulf Boats totaling
$282,781 during the period from January 1, 1994 to November 30, 1994. On
November 30, 1994, Gulf Boats was merged into the Company, and Gulf Boats'
total assets of $955,655, including cash of $83,920, trade accounts receivable
of $174,299 and receivables from stockholders of $630,000, and total
liabilities of $1,150,217, including a payable to the Company of $282,781,
were recorded by the Company at Gulf Boats' historical cost basis.
Transactions with Stockholders
The Company has made loans to and paid expenditures on behalf of its
stockholders. These transactions are accounted for through a non-interest
bearing loan account. During the years ended December 31, 1994, 1995 and 1996,
the Company made advances to stockholders of $96,503, $209,013, and $128,323,
respectively. Additionally, the Company fully repaid a loan from a stockholder
in the amount of $55,797 during 1995. During the years ended December 31, 1995
and 1996, stockholders made payments to the Company of $177,941 and $209,013,
respectively. No amounts were repaid by stockholders during 1994. These
transactions resulted in receivables from stockholders of $209,013 and
$128,323 at December 31, 1995 and 1996, respectively. Two stockholders have
entered into personal guarantees of $5,000,000 each to secure a line of credit
with a bank. Additionally, a stockholder guarantees a note to an individual
with a principal balance of $197,508. See Note 6.
F-17
<PAGE>
THE PREDECESSORS TO
FRIEDE GOLDMAN INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DATA WITH RESPECT TO MARCH 31, 1996 AND 1997 ARE UNAUDITED)
At December 31, 1996, marketable securities owned by the Company with a
market value of approximately $1,390,000 were pledged as collateral for a
$1,400,000 loan from a financial institution to a stockholder which was used
to purchase the assets of Friede & Goldman, Ltd. (See Note 1). In connection
with the transfer of the purchased assets to Friede & Goldman, Friede &
Goldman recorded a $1,400,000 payable to the stockholder. On March 31, 1997,
the Company transferred the pledged marketable securities to the shareholder
in payment of the $1,400,000 payable and realized a gain of approximately
$237,868.
On March 31, 1997, HAM distributed certain assets to its stockholders.
Assets distributed included real estate previously held for investment with an
estimated market value of $1,075,000 and a carrying value of approximately
$410,000, along with related debt of $198,000, an airplane with an estimated
market value of $566,000 and a carrying value of approximately $508,000. The
difference between the estimated fair market value and the carrying of the
distributed assets has been recognized as a gain in the Statement of
Operations for the three months ended March 31, 1997.
13. LITIGATION SETTLEMENTS AND CONTINGENCIES:
In August 1992, the Company filed suit against a third party for breach of
contract in connection with a contract. In May 1994, the Company was awarded a
judgment totaling $3,725,000. The judgment was appealed to the United States
Court of Appeals, which, in December 1995, upheld a judgment for approximately
$3,517,000. The defendants in the suit petitioned the court for a rehearing.
The rehearing was ultimately denied, and, in February 1996, the Company
received $3,466,635 as settlement of this litigation. Because the ultimate
outcome of any litigation is uncertain, the Company recorded the settlement
proceeds as income in the period in which such proceeds were received.
In 1995, the Company settled a lawsuit against a general contractor for
which Gulf Boats had served as a subcontractor prior to Gulf Boats' merger
into the Company. Settlement proceeds of $750,000 are included in the
statement of operations for the year ended December 31, 1995.
The nature of the Company's activities relating to the conversion, retrofit
and repair of drilling rigs subjects its property and employees, along with
the property and employees of its customers and others to hazards which can
cause personal injury or damage or destruction of property. Although the
Company maintains such insurance protection as it considers economically
prudent, there can be no assurance that any such insurance will be sufficient
or effective under all circumstances or against all hazards to which the
Company may be subject. In particular, due to the high cost of errors and
omissions policies related to the design of drilling rigs and production
units, the Company does not carry insurance covering claims for personal
injury, loss of life or property damage relating to such design activity. A
successful claim for which the Company is not fully insured could have a
material adverse effect on the Company.
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's financial position or results of operations.
14. SUBSEQUENT EVENTS:
In January 1997, the Company announced plans to build an additional shipyard
at a location approximately six miles from the Company's existing shipyard in
Pascagoula, Mississippi, that will have unobstructed deep water access to the
Gulf of Mexico. The new shipyard will be located on real estate leased from
the Port
F-18
<PAGE>
THE PREDECESSORS TO
FRIEDE GOLDMAN INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DATA WITH RESPECT TO MARCH 31, 1996 AND 1997 ARE UNAUDITED)
Authority, and is expected to be completed in 1998. The new shipyard is
expected to cost approximately $29 million to construct and equip. In
connection with the construction of the new shipyard, the County of Jackson,
Mississippi has agreed to dredge the ship channel and build roads and other
infrastructure related to the new shipyard, at a total cost to the county of
approximately $6 million, under an economic incentive program. In that regard,
the Company has filed an application with the United States Maritime
Administration ("MARAD") for Title 11 debt financing which, if approved and
utilized by the Company, would provide up to $24.8 million of the funds needed
for completion of the new shipyard. In May 1997, MARAD approved the Company's
eligibility for such amount of financing for purposes of constructing and
equiping the new shipyard. Specific terms of any such Title 11 debt financing
are not yet known. The Company's existing shipyard facility is expected to
remain in use by the Company.
Management of the Company have indicated their intention to undertake an
initial public offering of the Company's common stock during 1997. Proceeds to
the Company are intended to be used for capital expenditures to construct and
equip the new shipyard, capital expenditures to improve the productive
capacity and efficiency of the existing shipyard, research and development
costs relating to the design of new offshore drilling rigs and floating
production units, working capital requirements and other general corporate
purposes. There can be no assurance, however, that the offering will occur or
that the proceeds, if any, will be sufficient for their intended use.
Additionally, in early 1997, the Company began construction of a new Company
office building with an estimated total cost of approximately $1.2 million.
F-19
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Friede Goldman International Inc.:
We have audited the accompanying statement of income of Friede & Goldman,
Ltd., a Louisiana corporation, (the "Friede Predecessor") for the eleven-month
period ended November 30, 1996. This financial statement is the responsibility
of the Friede Predecessor's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of income is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of income. 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 audit provide a reasonable basis
for our opinion.
In our opinion, the statement of income referred to above presents fairly,
in all material respects, the results of operations of Friede & Goldman, Ltd.
for the eleven-month period ended November 30, 1996, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
New Orleans, Louisiana,
February 28, 1997.
F-20
<PAGE>
FRIEDE & GOLDMAN, LTD.
STATEMENT OF INCOME
FOR THE ELEVEN MONTHS ENDED NOVEMBER 30, 1996
<TABLE>
<S> <C>
REVENUES:
Contract fees..................................................... $3,733,989
Part sales........................................................ 40,372
----------
Total revenues.................................................. 3,774,361
Contract costs.................................................... 2,653,710
----------
Gross margin.................................................... 1,120,651
GENERAL AND ADMINISTRATIVE EXPENSES:
Depreciation...................................................... 67,630
Amortization...................................................... 7,208
Accounting and legal.............................................. 32,661
Automotive........................................................ 9,372
Books and periodicals............................................. 6,539
Computer licenses and maintenance................................. 19,205
Dues and registration fees........................................ 10,900
Office and drafting supplies...................................... 32,180
Postage and transportation........................................ 13,374
Rent.............................................................. 172,858
Taxes, payroll.................................................... 78,060
Taxes and licenses................................................ 13,002
Telephone......................................................... 42,023
Repairs and maintenance........................................... 6,502
Other............................................................. 8,133
----------
519,647
INCOME FROM OPERATIONS.............................................. 601,004
INTEREST AND DIVIDEND INCOME........................................ 16,076
----------
NET INCOME.......................................................... $ 617,080
==========
</TABLE>
The accompanying notes are an integral part of this statement.
F-21
<PAGE>
FRIEDE & GOLDMAN, LTD.
NOTES TO STATEMENT OF INCOME
FOR THE ELEVEN MONTHS ENDED NOVEMBER 30, 1996
1. ORGANIZATION:
Friede & Goldman, Ltd. (the "Friede Predecessor") is a closely-held company
formed in 1949. The Friede Predecessor engages in offshore design of offshore
drilling and production units, including jackups, submersibles,
semisubmersibles, drillships and floating production, storage and offloading
vessels, for construction and with respect to upgrade and modification
projects. In addition, the Friede Predecessor designs floating and bottom
supported platforms for drilling, pipelay and accommodation services. The
Friede Predecessor offices are located in New Orleans, Louisiana.
On December 2, 1996 certain assets and rights of the Friede Predecessor,
including all rights to the trade name "Friede & Goldman," were sold to an
unrelated third party.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Accounting
The accompanying statements have been prepared in accordance with generally
accepted accounting principles.
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 amount of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reporting amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue Recognition
The Friede Predecessor records revenue on contracts on the percentage-of-
completion method. Contract revenue is earned based upon the percentage that
incurred costs to date, excluding the costs of any purchased but uninstalled
materials, bear to total estimated costs, commencing when progress reaches a
point where experience is sufficient to estimate final results with reasonable
accuracy. As contracts extend over one or more years, revisions in costs and
earnings estimates during the course of the work are reflected in the
accounting period in which the facts which require the revisions become known.
Provisions for estimated losses on uncompleted contracts are made in the
period in which such losses are determined. Other changes, including those
arising from contract penalty provisions, and final contract settlements are
recognized in the period in which the revisions are determined. There were no
contracts in progress at November 30, 1996.
Contract costs include all direct material and labor costs and those
indirect costs related to contract performance, such as indirect labor,
supplies, tools, repairs and depreciation costs. Selling, general, and
administrative costs are charged to expense as incurred.
Depreciation
Depreciation expense is calculated based on the following useful lives:
<TABLE>
<CAPTION>
USEFUL
LIFE
----------
<S> <C>
Furniture and fixtures......................................... 7 years
Equipment and machinery........................................ 5-7 years
Computer software.............................................. 3 years
Leasehold improvements......................................... 5-19 years
</TABLE>
F-22
<PAGE>
FRIEDE & GOLDMAN, LTD.
NOTES TO STATEMENT OF INCOME--(CONTINUED)
FOR THE ELEVEN MONTHS ENDED NOVEMBER 30, 1996
Depreciation expense totaled $67,630 for the 11 months ended November 30,
1996.
Income Taxes
The Friede Predecessors is an S corporation for income tax reporting
purposes. As a result, income from the corporation is treated as taxable
income of the individual shareholder. Accordingly, no provision for income
taxes has been included in the accompanying financial statements.
Amortization
Patents are stated at cost less accumulated amortization and are amortized
over fifteen years. Original cost totaled $119,303, accumulated amortization
totaled $63,037 at November 30, 1996 and amortization expense totaled $7,208
for the 11 months ended November 30, 1996.
3. OPERATING LEASES:
The Friede Predecessors leases office space and an automobile under
operating leases. Office lease expense was $175,191 and auto lease expense was
$1,954 for the 11 months ended November 30, 1996. Future minimum payments due
under non-cancellable operating leases for the next five calendar years are as
follows:
<TABLE>
<S> <C>
1997..................................... $146,329
1998..................................... 146,329
1999..................................... 146,329
2000..................................... 144,421
2001..................................... 140,604
Thereafter............................... 11,717
</TABLE>
F-23
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Friede Goldman International Inc.:
We have audited the accompanying balance sheet of Friede Goldman
International Inc. ( a recently formed Delaware Corporation) as of April 21,
1997. This financial statement is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheet is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. 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 audit provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Friede Goldman International Inc.
as of April 21, 1997, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Jackson, Mississippi,
April 22, 1997
F-24
<PAGE>
FRIEDE GOLDMAN INTERNATIONAL INC.
(A RECENTLY FORMED DELAWARE CORPORATION)
BALANCE SHEET
APRIL 21, 1997
<TABLE>
<CAPTION>
ASSETS
------
<S> <C>
CURRENT ASSETS:
Cash.................................................................. $1,000
------
Total assets........................................................ $1,000
======
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C>
LIABILITIES $ --
------
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value, 1,000 shares authorized; none issued
or outstanding....................................................... --
Common stock, $0.01 par value, 2,000 shares authorized; 1,000 shares
issued outstanding................................................... 10
Additional paid-in capital............................................ 990
------
Total stockholders' equity.......................................... 1,000
------
Total liabilities and stockholders' equity.......................... $1,000
======
</TABLE>
The accompanying notes are an integral part of this balance sheet.
F-25
<PAGE>
FRIEDE GOLDMAN INTERNATIONAL INC.
NOTES TO BALANCE SHEET
APRIL 21, 1997
1. ORGANIZATION AND NATURE OF BUSINESS:
Friede Goldman International Inc. (the "Company") was incorporated under the
laws of the State of Delaware in February 1997. Through April 22, 1997, the
Company has had no operations other than receipt of initial capital.
Management of the Company have indicated their intention to undertake an
initial public offering of the Company's equity securities during 1997. In
anticipation of the Company's proposed public offering, the stockholders of
the Company's predecessor entities, HAM Marine, Inc. ("HAM") and Friede &
Goldman, Ltd. ("Friede & Goldman"), will contribute all of their ownership in
HAM and Friede & Goldman to the Company in exchange for shares of common stock
in the Company; and HAM and Friede & Goldman will become wholly-owned
subsidiaries of the Company.
The Company's certificate of incorporation established authority to issue
1,000 shares of $0.01 par value preferred stock and 2,000 shares of $0.01 par
value common stock. Preferred stock may be issued in one or more series and in
such amounts as may be determined by the Company's board of directors. The
voting powers, designations, preferences and relative, participating, optional
or other special rights, if any, and the qualifications, limitations or
restrictions, if any, of each preferred stock issue shall be fixed by
resolution of the board of directors providing for the issue. All shares of
common stock of the Company shall be identical, and, except as otherwise
provided in a resolution of the board of directors with respect to preferred
stock, the holders of common stock shall exclusively possess all voting power
with each share of common stock having one vote.
In May 1997, in conjunction with the Company's plan to undertake an initial
public offering of its common stock, the Company authorized an increase in the
amount of authorized shares to 5,000,000 shares of $0.01 par value preferred
stock and 25,000,000 shares of $0.01 par value common stock. Effective
immediately prior to the public offering, the Company anticipates issuing,
pursuant to a stock exchange agreement, 9,200,000 shares of the Company's
common stock to the stockholders of HAM and Friede & Goldman as described
above.
HAM, the principal predecessor to the Company, was formed in 1982 under the
laws of the State of Mississippi. HAM's primary business is to provide
conversion, retrofit and repair services for offshore drilling rigs. HAM's
primary customers are offshore drilling contractors who utilize the Company's
services in connection with the conversion and modification of existing
drilling rigs in order to increase their technical capabilities or to improve
their efficiency. Substantially all of HAM's services are conducted at a deep
water dock facility on land leased from the Port Authority in Pascagoula,
Mississippi.
On December 2, 1996, a company related to HAM through substantially
identical equity ownership, J.L. Holloway Holdings, Inc. ("Holdings"),
purchased certain assets and rights, including the rights to the trade name
"Friede & Goldman" from an unrelated third party. Simultaneously with the
closing of the purchase, Holdings changed its name to Friede & Goldman, Ltd.
Friede & Goldman's primary business is the design of offshore drilling and
production units, including jackups, semisubmersibles, drillships and floating
production, storage and offloading vessels, for new construction and with
respect to upgrade and modification projects. Friede & Goldman's offices are
located in New Orleans, Louisiana.
Proceeds of the public offering to the Company are intended to be used for
capital expenditures to construct and equip the new shipyard, capital
expenditures to improve the productive capacity and efficiency of the existing
shipyard, research and development costs relating to the design of new
offshore drilling rigs and floating production units, working capital
requirements and other general corporate purposes. There can be no assurance,
however, that the offering will occur or that the proceeds, if any, will be
sufficient for their intended use.
F-26
<PAGE>
PRO FORMA STATEMENT OF OPERATIONS
OF FRIEDE GOLDMAN INTERNATIONAL INC.
(UNAUDITED)
The following pro forma condensed statement of operations of the Company for
the year ended December 31, 1996 reflects the combined historical financial
results of the Predecessors and gives effect to (1) the acquisition of the
Friede Predecessor as if such acquisition had occurred as of January 1, 1996,
(2) a reduction in selling, general and administrative expenses to reflect the
employment contracts entered into by J.L. Holloway, Carl Crawford and Ron
Schnoor in April 1997 as if such contracts had been in effect as of January 1,
1996, (3) the elimination of the compensation expense related to stock issued
to an employee, and (4) the change in tax status of each of the Predecessors
from an S Corporation to a C Corporation as if such change had occurred as of
January 1, 1996. The adjustments are described in more detail in the
accompanying notes. The pro forma condensed statements of operations should not
be considered indicative of the actual results that would have been achieved
had the events described above been consummated as of January 1, 1996, and do
not purport to indicate results of operations as of any date or for any future
period. The pro forma statements of operations should be read in conjunction
with the historical financial statements of the Company, the predecessors to
the Company and the Friede Predecessor, and the respective notes thereto,
include elsewhere in the Prospectus.
F-27
<PAGE>
FRIEDE GOLDMAN INTERNATIONAL INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
FRIEDE &
COMBINED GOLDMAN,
PREDECESSORS LTD. PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS COMBINED
------------ ---------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue.................. $21,758,715 $3,774,361 $ -- $25,533,076
Cost of revenue.......... 15,768,980 2,653,710 240,000 (1) 18,662,690
----------- ---------- ----------- -----------
Gross profit........... 5,989,735 1,120,651 240,000 6,870,386
(2,012,397)(2)
(276,000)(3)
Selling, general and
administrative expenses. 5,869,371 519,647 125,000 (4) 4,225,621
----------- ---------- ----------- -----------
Operating income....... 120,364 601,004 1,923,397 2,644,765
----------- ---------- ----------- -----------
Other income (expense):
Interest expense....... (891,458) -- (106,000)(5) (997,458)
Interest income........ 443,317 16,076 -- 459,393
Gain on sale or
distribution of
assets................ 348,793 -- -- 348,793
Litigation settlement.. 3,466,635 -- -- 3,466,635
Other.................. 104,487 -- -- 104,487
----------- ---------- ----------- -----------
Total other income
(expense)............. 3,471,774 16,076 (106,000) 3,381,850
----------- ---------- ----------- -----------
Pro forma income
before income tax
expense............. 3,592,138 617,080 1,817,397 6,026,615
Income tax expense....... -- -- 2,230,000 (6) 2,230,000
----------- ---------- ----------- -----------
Pro forma net income..... $ 3,592,138 $ 617,080 $ (412,603) $ 3,796,615
=========== ========== =========== ===========
Pro forma net income per
share(7)................ $ 0.41
===========
</TABLE>
The accompanying notes are an integral part of this pro forma financial
statement.
F-28
<PAGE>
FRIEDE GOLDMAN INTERNATIONAL INC.
NOTES TO PRO FORMA STATEMENTS OF OPERATIONS
The following are explanations of the Pro Forma Adjustments:
(1) Reflect the amount which would have been paid to the former owner of
the assets of Friede & Goldman for license and design fees as called for by
the Purchase Agreement as if such agreement had been in place as of January
1, 1996. See "BUSINESS--Friede Acquisition".
(2) Adjusts compensation expense by the difference in actual amounts paid
in 1996 and the amounts which would have been paid to J.L. Holloway, Carl
Crawford and Ron Schnoor if the employment contracts entered into in 1997
had been in effect as of January 1, 1996. This adjustment does not consider
any bonuses or additional compensation which may be payable pursuant to the
Company's Equity Incentive Plan. See "Management--Executive Compensation"
and "--Equity Incentive Plan".
(3) Eliminates compensation expense related to the issuance of stock to
an employee because subsequent to the the Offering, the Company does not
intend to use stock grants as a means of compensating employees. See
"Management--Equity Incentive Plan".
(4) Reflects amortization of the intangible assets which resulted from
the Friede Acquisition using an amortization period of 10 years.
(5) Reflects interest expense at 8.25% on the $1,400,000 advance form
shareholder which was utilized to finance a portion of the purchase price
as if the advance had been made on January 1, 1996.
(6) Immediately prior to the consummation of the Offering, the Company
will terminate its status as an S Corporation and will become subject to
corporate income taxes. This adjustment reflects the pro forma provision
for income taxes using a combined federal and state rate of 37% applied to
pro forma income before income tax expense as if the Company had been
subject to corporate income taxes during 1996.
(7) Pro forma net income per share is based on common shares of the
Company outstanding after the recapitalization discussed at elsewhere in
this prospectus.
F-29
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER IN-
FORMATION OR REPRESENTATIONS MUST NOT BE RELIED ON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, THE SELLING STOCKHOLDERS 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 HERE-
UNDER 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 IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 11
The Company............................................................... 16
Use of Proceeds........................................................... 18
Dividend Policy........................................................... 18
Capitalization............................................................ 19
Dilution.................................................................. 20
Selected Financial Data................................................... 21
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 24
Business.................................................................. 31
Management................................................................ 46
Principal and Selling Stockholders........................................ 51
Description of Capital Stock.............................................. 52
Shares Eligible for Future Sale........................................... 56
Underwriting.............................................................. 57
Legal Matters............................................................. 58
Experts................................................................... 58
Additional Information.................................................... 58
Index to Financial Statements............................................. F-1
</TABLE>
----------------
UNTIL , 1997 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES OFFERED HEREBY,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER
A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
3,800,000 SHARES
(LOGO)
FRIEDE GOLDMAN
INTERNATIONAL INC.
COMMON STOCK
----------------
PROSPECTUS
----------------
JEFFERIES & COMPANY, INC.
BEAR, STEARNS & CO. INC.
JOHNSON RICE & COMPANY L.L.C.
, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION(1)
<TABLE>
<S> <C>
SEC Registration Fee............................................. $18,540
NASD Filing Fee.................................................. 6,618
NASDAQ Listing Fee............................................... *
Accounting Fees and Expenses..................................... *
Legal Fees and Expenses.......................................... *
Printing Expenses................................................ *
Transfer Agent's Fees............................................ *
Miscellaneous.................................................... *
-------
Total.......................................................... $ *
=======
</TABLE>
- --------
(1) The amounts set forth above, except for the SEC and NASD fees, are in each
case estimated.
*To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Subsection (a) of section 145 of the General Corporation Law of the State of
Delaware empowers a corporation to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding
if he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that such person acted
in any of the capacities set forth above, against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with
the defense or settlement of such action or suit if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification may be made in
respect of any claim, issue or matter as to which such person shall have been
made to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
Section 145 further provides that to the extent a director or officer of a
corporation has been successful on the merits or otherwise in the defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
Section 145 in the defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith; that indemnification
provided for by Section 145 shall not be deemed exclusive of any other rights
to which the indemnified party may be entitled; that indemnification provided
for by Section 145 shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of such person's heirs,
executors and administrators; and empowers the corporation to
II-1
<PAGE>
purchase and maintain insurance on behalf of a director or officer of the
corporation against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such whether or not the
corporation would have the power to indemnify him against such liabilities
under Section 145.
Section 102(b)(7) of the General Corporation Law of the State of Delaware
provides that a Charter may contain a provision eliminating or limiting the
personal liability of a director to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director provided that such
provision shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174
of the Delaware General Corporation Law, or (iv) for any transaction from
which the director derived an improper personal benefit.
Article Ninth of the Company's Charter states that:
No director of the Corporation shall be personally liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty by such
director as a director; provided, however, that this Article Ninth shall not
eliminate or limit the liability of a director to the extent provided by
applicable law (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the DGCL or (iv) for any transaction from which the
director derived an improper personal benefit. No amendment to or repeal of
this Article Ninth shall apply to, or have any effect on, the liability or
alleged liability of any director of the Corporation for or with respect to
any acts or omissions of such director occurring prior to such amendment or
repeal. If the DGCL is amended to authorize corporate action further
eliminating or limiting the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited to
the fullest extent permitted by the DGCL, as so amended.
In addition, Article VI of the Company's Bylaws further provides that the
Company shall indemnify its officers, directors and employees to the fullest
extent permitted by law.
The Company intends to enter into indemnification agreements with each of
its executive officers and directors.
Under Section of the Underwriting Agreement filed as Exhibit 1.1 to this
Registration Statement, the Underwriters have agreed to indemnify, under
certain conditions, the Company, its officers and directors, and persons who
control the Company within the meaning of the Securities Act of 1933, as
amended, against certain liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The only securities issued by the Company during the past three years that
were not registered under the Securities Act of 1933 consist of (i) 1,000
shares of Common Stock issued to J.L. Holloway in connection with the
Company's organization, (ii) the 9,200,000 shares of Common Stock issued in
connection with the Reorganization and (iii) options to purchase an aggregate
of shares of Common Stock granted pursuant to the Equity Incentive Plan.
These transactions were completed without registration under the Securities
Act of 1933 in reliance on the exemption provided by Section 4(2) of the
Securities Act of 1933.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
-------
<C> <S>
*1.1 --Form of Underwriting Agreement.
3.1 --Amended and Restated Certificate of Incorporation.
3.2 --Bylaws.
*4.1 --Specimen Common Stock Certificate.
4.2 --Form of Registration Rights Agreement.
*5.1 --Opinion of Andrews & Kurth L.L.P. as to the legality of the
securities being registered.
10.1 --Form of Officer and Director Indemnification Agreement.
10.2 --Form of Employment Agreement to be entered between Friede Goldman
International Inc. and J.L. Holloway.
10.3 --Form of Employment Agreement to be entered into between HAM Marine,
Inc. and each of Carl M. Crawford and Ronald W. Schnoor.
*10.4 --Form of Employment Agreement to be entered into between Friede
Goldman International Inc. and John F. Alford.
*10.5 --Form of Employment Agreement to be entered into between HAM Marine,
Inc. and James A. Lowe, III.
10.6 --1997 Equity Incentive Plan.
10.7 --Revolving Credit Agreement, dated as of March 20, 1997, by and among
HAM Marine, Inc., as borrower, Friede & Goldman, Ltd., J.L. Holloway
and Carl Crawford, as guarantors, and Bank One, Louisiana, National
Association, as the Bank.
10.8 --Amended Lease Agreement, dated June 22, 1995, by and among the
Jackson County Port Authority, the Board of Supervisors of Jackson
County, Mississippi and HAM Marine, Inc. (Pascagoula shipyard).
10.9 --Lease Contract, dated December 12, 1996, by and among the Jackson
County Port Authority, the Board of Supervisors of Jackson County,
Mississippi and HAM Marine, Inc.
10.10 --Memorandum of Understanding, dated December 30, 1996, by and among
the Board of Supervisors of Jackson County, Mississippi and HAM
Marine, Inc. (New shipyard).
10.11 --The Baltic and International Maritime Council Standard Bareboat
Charter, dated February 28, 1997 between Pontwin N.V. and HAM Marine,
Inc.
10.12 --Form of Stock Exchange Agreement by and among HAM Marine, Inc. and
each of Messrs. Holloway, Crawford and Schnoor.
10.13 --Business Purchase Agreement, dated November 22, 1996, by and among
J. L. Holloway Holdings, Inc., Friede & Goldman, Ltd. and Jerome L.
Goldman.
10.14 --Amendment to Business Purchase Agreement, dated December 3, 1996, by
and among Friede & Goldman, Ltd. (f/k/a J.L. Holloway Holdings,
Inc.), J.L. Goldman Associates, Inc. (f/k/a Friede & Goldman, Ltd.)
and Jerome L. Goldman.
10.15 --Second Amendment to Business Purchase Agreement, dated May 19, 1997,
by and among Friede & Goldman, Ltd., J.L. Goldman Associates, Inc.
and Jerome L. Goldman.
*23.1 --Consent of Andrews & Kurth L.L.P. (included in Exhibit 5.1).
23.2 --Consent of Arthur Andersen LLP.
24.1 --Powers of Attorney (included in signature page).
27.1 --Financial Data Schedule
</TABLE>
- --------
* To be filed by Amendment
II-3
<PAGE>
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
The undersigned registrant hereby undertakes:
(1) That for purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this Registration Statement as of the time it was declared
effective.
(2) That for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
(3) To provide to the Underwriters at the closing specified in the
underwriting agreement certificates in such denominations and registered in
such names as required by the underwriters to permit prompt delivery to
each purchaser.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Jackson, State of
Mississippi, on May 22, 1997.
Friede Goldman International Inc.
/s/ J. L. Holloway
By___________________________________
J. L. Holloway
Chairman of the Board, President
and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below constitutes and appoints J. L. Holloway, James A. Lowe III and John F.
Alford, and each of them, his true and lawful attorneys-in-fact and agents
with full power of substitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-
effective amendments) to this Registration Statement and any subsequent
registration statements filed by the Registrant pursuant to Rule 462(b) of the
Securities Act of 1933, which relates to this Registration Statement, and to
file same, with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or his or their substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ J. L. Holloway
- ------------------------------------
J. L. Holloway Chairman of the Board,
President and Chief
Executive Officer
(Principal Executive
Officer) May 22, 1997
/s/ John F. Alford
- ------------------------------------
John F. Alford Chief Financial Officer
(Principal Financial
Officer) May 22, 1997
/s/ Robert C. Andrews, Jr.
- ------------------------------------
Robert C. Andrews, Jr. Treasurer (Chief Accounting
Officer) May 22, 1997
/s/ Ronald W. Schnoor
- ------------------------------------
Ronald W. Schnoor Director May 22, 1997
/s/ James A. Lowe, III
- ------------------------------------
James A. Lowe, III Director May 22, 1997
/s/ Bruce G. Malcolm
- ------------------------------------
Bruce G. Malcolm Director May 22, 1997
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
*1.1 --Form of Underwriting Agreement.
3.1 --Amended and Restated Certificate of Incorporation.
3.2 --Bylaws.
*4.1 --Specimen Common Stock Certificate.
4.2 --Form of Registration Rights Agreement
*5.1 --Opinion of Andrews & Kurth L.L.P. as to the legality of the
securities being registered.
10.1 --Form of Officer and Director Indemnification Agreement.
10.2 --Form of Employment Agreement to be entered between Friede
Goldman International Inc. and J.L. Holloway.
10.3 --Form of Employment Agreement to be entered into between HAM
Marine, Inc. and each of Carl M. Crawford and Ronald W.
Schnoor.
*10.4 --Form of Employment Agreement to be entered into between Friede
Goldman International Inc. and John F. Alford.
*10.5 --Form of Employment Agreement to be entered into between HAM
Marine, Inc. and James A. Lowe, III.
10.6 --1997 Equity Incentive Plan.
10.7 --Revolving Credit Agreement, dated as of March 20, 1997, by and
among HAM Marine, Inc., as borrower, Friede & Goldman, Ltd.,
J.L. Holloway and Carl Crawford, as guarantors, and Bank One,
Louisiana, National Association, as the Bank.
10.8 --Amended Lease Agreement, dated June 22, 1995, by and among the
Jackson County Port Authority, the Board of Supervisors of
Jackson County, Mississippi and HAM Marine, Inc. (Pascagoula
shipyard).
10.9 --Lease Contract, dated December 12, 1996, by and among the
Jackson County Port Authority, the Board of Supervisors of
Jackson County, Mississippi and HAM Marine, Inc.
10.10 --Memorandum of Understanding, dated December 30, 1996, by and
among the Board of Supervisors of Jackson County, Mississippi
and HAM Marine, Inc. (New shipyard).
10.11 --The Baltic and International Maritime Council Standard
Bareboat Charter, dated February 28, 1997 between Pontwin N.V.
and HAM Marine, Inc.
10.12 --Form of Stock Exchange Agreement by and among HAM Marine, Inc.
and each of Messrs. Holloway, Crawford and Schnoor.
10.13 --Business Purchase Agreement, dated November 22, 1996, by and
among J. L. Holloway Holdings, Inc., Friede & Goldman, Ltd. and
Jerome L. Goldman.
10.14 --Amendment to Business Purchase Agreement, dated December 3,
1996, by and among Friede & Goldman, Ltd. (f/k/a J.L. Holloway
Holdings, Inc.), J.L. Goldman Associates, Inc. (f/k/a Friede &
Goldman, Ltd.) and Jerome L. Goldman.
10.15 --Second Amendment to Business Purchase Agreement, dated May 19,
1997, by and among Friede & Goldman, Ltd., J.L. Goldman
Associates, Inc. and Jerome L. Goldman.
*23.1 --Consent of Andrews & Kurth L.L.P. (included in Exhibit 5.1).
23.2 --Consent of Arthur Andersen LLP.
24.1 --Powers of Attorney (included in signature page).
27.1 --Financial Data Schedule
</TABLE>
- --------
* To be filed by Amendment
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
FRIEDE GOLDMAN INTERNATIONAL INC.
The Original Certificate of Incorporation of Friede Goldman International
Inc. was filed with the Secretary of State of the State of Delaware on
February 28, 1997. The Original Certificate of Incorporation is hereby amended
and restated in accordance with Sections 242 and 245 of the General Corporate
Law of the State of Delaware to read in its entirety as follows:
FIRST: The name of the corporation is:
Friede Goldman International Inc.
SECOND: The address of the corporation's registered office in the State of
Delaware is 1209 Orange Street, Wilmington, County of New Castle, Delaware
19801. The name of the registered agent of the corporation at such address is
The Corporation Trust Company.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH: The total number of shares of all classes of capital stock which
the Corporation shall have authority to issue is 30,000,000, of which 5,000,000
shares shall be Preferred Stock, par value $0.01 per share, and 25,000,000
shares shall be Common Stock, par value $0.01 per share.
A. Preferred Stock. (1) Preferred Stock may be issued from time to time
in one or more series and in such amounts as may be determined by the Board
of Directors. The voting powers, designations, preferences and relative,
participating, optional or other special rights, if any, and the
qualifications, limitations or restrictions thereof, if any, of the
Preferred Stock of each series shall be such as are fixed by the Board of
Directors, authority so to do being hereby expressly granted, and as are
stated and expressed in a resolution or resolutions adopted by the Board of
Directors providing for the issue of such series of Preferred Stock (herein
called the "Directors' Resolution"). The Directors' Resolution as to any
series shall (a) establish the number of shares constituting, and the
distinctive designation of, that series, (b) fix the dividend rate, if any,
of the shares of such series, the payment dates for dividends on shares of
such series and the date or dates, or the method of determining the date or
dates, if any, from which dividends on shares of such series shall be
cumulative, (c) fix the amount or amounts payable on shares of such series
upon voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Corporation, (d) state the price or prices or rate or rates,
and adjustments, if any, at which, the time or times and the terms and
conditions upon which, the shares of such series may be redeemed at the
option of the Corporation or at the option of the holder or holders of
shares of such series or upon the occurrence of a specified event, and
state whether such shares may be redeemed for cash, property or rights,
including securities of the Corporation or another entity; and such
Directors' Resolution may
<PAGE>
(i) limit the number of shares of such series that may be issued, (ii)
provide for a sinking fund for the purchase or redemption of shares of such
series and specify the terms and conditions governing the operations of any
such fund, (iii) grant voting rights to the holders of shares of such
series, provided that each share shall not have more than one vote per
share, (iv) impose conditions or restrictions upon the creation of
indebtedness of the Corporation or upon the issuance of additional
Preferred Stock or other capital stock ranking on a parity therewith, or
prior thereto, with respect to dividends or distribution of assets upon
liquidation, (v) impose conditions or restrictions upon the payment of
dividends upon, or the making of other distributions to, or the acquisition
of, shares ranking junior to the Preferred Stock or to any series thereof
with respect to dividends or distributions of assets upon liquidation, (vi)
state the time or times, the price or prices or the rate or rates of
exchange and other terms, conditions and adjustments upon which shares of
any such series may be made convertible into, or exchangeable for, at the
option of the holder or the Corporation or upon the occurrence of a
specified event, shares of any other class or classes or of any other
series of Preferred Stock or any other class or classes of stock or other
securities of the Corporation, and (vii) grant such other special rights
and impose such qualifications, limitations or restrictions thereon as
shall be fixed by the Board of Directors, to the extent not inconsistent
with this Article FOURTH and to the full extent now or hereafter permitted
by the laws of the State of Delaware.
(2) Except as by law expressly provided, or except as may be provided in
any Directors' Resolution, the Preferred Stock shall have no right or power
to vote on any question or in any proceeding or to be represented at, or to
receive notice of, any meeting of stockholders of the Corporation.
(3) Preferred Stock that is redeemed, purchased or retired by the
Corporation shall assume the status of authorized but unissued Preferred
Stock and may thereafter, subject to the provisions of any Directors'
Resolution providing for the issue of any particular series of Preferred
Stock, be reissued in the same manner as authorized but unissued Preferred
Stock.
B. Common Stock. All shares of the Common Stock of the Corporation shall
be identical and except as otherwise required by law or as otherwise
provided in the Directors' Resolution or Resolutions, if any, adopted by
the Board of Directors with respect to any series of Preferred Stock, the
holders of the Common Stock shall exclusively possess all voting power, and
each share of Common Stock shall have one vote.
FIFTH: The business and affairs of the Corporation shall be managed and
controlled by its Board of Directors. The number of directors constituting the
Board of Directors shall be fixed by the Board of Directors, but shall not be
less than three or more than 15. The directors shall be divided into three
classes, designated Class I, Class II and Class III. The initial term for
directors in Class I shall expire at the annual meeting of stockholders to be
held in 1998; the initial term for directors in Class II shall expire at the
annual meeting of stockholders to be held in 1999; and the
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<PAGE>
initial term for directors in Class III shall expire at the annual meeting of
stockholders to be held in 2000.
At the expiration of the initial term of each class of directors, and of
each succeeding term of each class, each class of directors shall be elected to
serve until the annual meeting of stockholders held three years from such
expiration and until their successors are elected and qualified or until their
earlier death, resignation, removal or retirement. Any increase or decrease in
the number of directors constituting the Board shall be apportioned among the
classes so as to maintain the number of directors in each class as nearly as
possible to one-third the whole number of directors as so adjusted. Any director
elected or appointed to fill a vacancy shall hold office for the remaining term
of the class to which such directorship is assigned. No decrease in the number
of directors constituting the Corporation's Board of Directors shall shorten the
term of any incumbent director. Any vacancy in the Board of Directors, whether
arising through death, resignation or removal of a director, or through an
increase in the number of directors of any class, shall be filled by the
majority vote of the remaining directors. The Bylaws may contain any provision
regarding classification of the Corporation's directors not inconsistent with
the terms hereof.
A director of the Corporation may be removed only for cause and only upon
the affirmative vote of the holders of a majority of the outstanding capital
stock of the Corporation entitled to vote at an election of directors, subject
to further restrictions on removal, not inconsistent with this Article FIFTH, as
may be contained in the Bylaws.
Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of Preferred Stock issued by the Corporation shall have the
right, voting separately by class or series, to elect directors at an annual or
special meeting of stockholders, the election, term of office, filling of
vacancies and other features of such directorships shall be governed by the
terms of this Certificate of Incorporation applicable thereto, and such
directors so elected shall not be divided into classes pursuant to this Article
FIFTH unless expressly provided by such terms.
SIXTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
A. The Board of Directors is authorized to alter, amend or repeal the
Bylaws or adopt new Bylaws of the Corporation. The stockholders shall not
repeal or change the Bylaws of the Corporation unless such repeal or change
is approved by the affirmative vote of the holders of not less than 80% of
the total voting power of all shares of stock of the Corporation entitled
to vote in the election of directors, considered for the purposes of this
paragraph A as a single class.
B. Election of directors need not be by written ballot unless the Bylaws
so provide.
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<PAGE>
C. In addition to the powers herein or by statute expressly conferred upon
the Corporation's directors, the Corporation's directors are hereby
empowered to exercise all such powers and do all such acts and things as
may be exercised or done by the Corporation, subject, nevertheless, to the
provisions of the statutes of Delaware, this Certificate of Incorporation,
and any Bylaws adopted by the stockholders; provided, however, that no
Bylaws hereafter adopted shall invalidate any prior act of the directors
which would have been valid if such Bylaws had not been adopted.
D. No action shall be taken by the stockholders except at an annual or
special meeting with prior notice and a vote. No action shall be taken by
the stockholders by written consent.
SEVENTH: The books of the Corporation may be kept (subject to any
provision contained in the statutes) outside the State of Delaware at such place
or places as may be designated from time to time by the Board of Directors or in
the Bylaws of the Corporation.
EIGHTH: The Board of Directors is hereby authorized to create and issue,
whether or not in connection with the issuance and sale of any of its stock or
other securities, rights (the "Rights") entitling the holders thereof to
purchase from the Corporation shares of capital stock or other securities. The
times at which and the terms upon which the Rights are to be issued will be
determined by the Board of Directors and set forth in the contracts or
instruments that evidence the Rights. The authority of the Board of Directors
with respect to the Rights shall include, but not be limited to, determination
of the following:
(a) The initial purchase price per share of the capital stock or other
securities of the Corporation to be purchased upon exercise of the Rights.
(b) Provisions relating to the times at which and the circumstances under
which the Rights may be exercised or sold or otherwise transferred, either
together with or separately from, any other securities of the Corporation.
(c) Provisions that adjust the number or exercise price of the Rights or
amount or nature of the securities or other property receivable upon
exercise of the Rights in the event of a combination, split or
recapitalization of any capital stock of the Corporation, a change in
ownership of the Corporation's securities or a reorganization, merger,
consolidation, sale of assets or other occurrence relating to the
Corporation or any capital stock of the Corporation, and provisions
restricting the ability of the Corporation to enter into any such
transaction absent an assumption by the other party or parties thereto of
the obligations of the Corporation under such Rights.
(d) Provisions that deny the holder of a specified percentage of the
outstanding securities of the Corporation the right to exercise the Rights
and/or cause the Rights held by such holder to become void.
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<PAGE>
(e) Provisions that permit the Corporation to redeem the Rights.
(f) The appointment of one or more agents to take specified actions on
behalf of the Corporation with respect to the Rights.
NINTH: No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty by such director as a director; provided, however, that this Article NINTH
shall not eliminate or limit the liability of a director to the extent provided
by applicable law (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the General Corporation Law of the State of Delaware or (iv) for
any transaction from which the director derived an improper personal benefit.
No amendment to or repeal of this Article NINTH shall apply to, or have any
effect on, the liability or alleged liability of any director of the Corporation
for or with respect to any acts or omissions of such director occurring prior to
such amendment or repeal. If the General Corporation Law of the State of
Delaware is amended to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest extent
permitted by the General Corporation Law of the State of Delaware, as so
amended.
TENTH: The provisions set forth in this Article TENTH and Articles FIFTH,
SIXTH, EIGHTH and NINTH hereof may not be amended, altered, changed, repealed or
rescinded in any respect unless such action is approved by the affirmative vote
of the holders of not less than 80 percent of the total voting power of all
shares of stock of the Corporation entitled to vote in the election of
directors, considered for purposes of this Article TENTH as a single class. The
voting requirements contained in this Article TENTH and in Article SIXTH hereof
shall be in addition to voting requirements imposed by law, other provisions of
this Certificate of Incorporation or any designation of preferences in favor of
certain classes or series of shares of capital stock of the Corporation.
ELEVENTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
(S)291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this Corporation under
(S)279 of Title 8 of the Delaware Code order a meeting of the creditors or class
of creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as a consequence of
such compromise or arrangement, the said compromise or arrangement and the said
reorganization shall,
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if sanctioned by the court to which the said application has been made, be
binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
TWELFTH: The corporation is to have perpetual existence.
IN WITNESS WHEREOF, this Amended and Restated Certificate of
Incorporation, which has been duly adopted in accordance with the provisions of
Sections 242 and 245 of the General Corporate Law of the State of Delaware, has
been executed by the authorized officer of the Corporation on the 21st day of
May, 1997.
/s/ James A. Lowe, III
_________________________________
James A. Lowe, III
General Counsel and Secretary
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<PAGE>
EXHIBIT 3.2
B Y L A W S
OF
FRIEDE GOLDMAN INTERNATIONAL INC.
DATED: FEBRUARY 28, 1997
<PAGE>
I N D E X
PAGE
ARTICLE 1 OFFICES
Section 1.1 Principal Office....................................... 1
Section 1.2 Registered Office...................................... 1
Section 1.3 Other Offices.......................................... 1
ARTICLE II STOCKHOLDERS' MEETINGS
Section 2.1 Annual Meeting......................................... 1
Section 2.2 Special Meetings....................................... 2
Section 2.3 Notice of Meetings and Adjourned Meetings.............. 2
Section 2.4 Voting Lists........................................... 3
Section 2.5 Quorum................................................. 4
Section 2.6 Organization........................................... 4
Section 2.7 Voting................................................. 5
Section 2.8 Authorization of Proxies............................... 6
Section 2.9 Stockholders Entitled to Vote.......................... 7
Section 2.10 Order of Business...................................... 7
Section 2.11 Action by Written Consent.............................. 7
Section 2.12 Inspectors of Election 7
Section 2.13 Notice of Stockholder Nominees......................... 8
Section 2.14 Stockholder Proposals.................................. 10
ARTICLE III DIRECTORS
Section 3.1 Management............................................. 12
Section 3.2 Number and Term........................................ 12
Section 3.3 Quorum and Manner of Action............................ 13
Section 3.4 Vacancies.............................................. 14
Section 3.5 Resignations........................................... 14
Section 3.6 Removals............................................... 15
Section 3.7 Annual Meetings........................................ 15
Section 3.8 Regular Meetings....................................... 15
Section 3.9 Special Meetings....................................... 15
Section 3.10 Organization of Meetings............................... 16
Section 3.11 Place of Meetings...................................... 16
Section 3.12 Compensation of Directors.............................. 16
Section 3.13 Action by Unanimous Written Consent.................... 17
Section 3.14 Participation in Meetings by Telephone................. 17
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Section 3.15 Election of Directors by Class Vote of Holders
of Preferred Stock................................... 17
ARTICLE IV COMMITTEES OF THE BOARD
Section 4.1 Membership and Authorities............................. 18
Section 4.2 Minutes................................................ 18
Section 4.3 Vacancies.............................................. 19
Section 4.4 Telephone Meetings..................................... 19
Section 4.5 Action Without Meeting................................. 19
ARTICLE V OFFICERS
Section 5.1 Number and Title....................................... 20
Section 5.2 Term of Office; Vacancies.............................. 20
Section 5.3 Removal of Elected Officers............................ 20
Section 5.4 Resignations........................................... 20
Section 5.5 The Chairman of the Board.............................. 21
Section 5.6 Chief Executive Officer................................ 21
Section 5.7 President.............................................. 22
Section 5.8 Vice Presidents........................................ 23
Section 5.9 Secretary.............................................. 24
Section 5.10 Assistant Secretaries.................................. 24
Section 5.11 Treasurer.............................................. 25
Section 5.12 Assistant Treasurers................................... 25
Section 5.13 Subordinate Officers; Agents........................... 26
Section 5.14 Salaries and Compensation.............................. 26
ARTICLE VI INDEMNIFICATION
Section 6.1 Indemnification of Directors and Officers.............. 26
ARTICLE VII CAPITAL STOCK
Section 7.1 Certificates of Stock.................................. 31
Section 7.2 Lost Certificates...................................... 32
Section 7.3 Fixing Date for Determination of Stockholders of
Record for Certain Purposes.......................... 32
Section 7.4 Dividends.............................................. 33
Section 7.5 Registered Stockholders................................ 33
Section 7.6 Transfer of Stock...................................... 33
Section 7.7 Stock Options, Warrants, Etc........................... 34
ARTICLE VIII MISCELLANEOUS PROVISIONS
Section 8.1 Corporate Seal......................................... 34
Section 8.2 Fiscal Year............................................ 35
Section 8.3 Checks, Drafts, Notes.................................. 35
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Section 8.4 Corporate Contracts and Instruments.................... 35
Section 8.5 Notice and Waiver of Notice............................ 35
Section 8.6 Examination of Books and Records....................... 36
Section 8.7 Voting Upon Shares Held by the Corporation............. 36
ARTICLE IX AMENDMENTS
Section 9.1 Amendment.............................................. 37
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FRIEDE GOLDMAN INTERNATIONAL INC.
B Y L A W S
ARTICLE I
OFFICES
SECTION 1.1 PRINCIPAL OFFICE. The principal office of the Corporation
shall be in Jackson, Mississippi.
SECTION 1.2 REGISTERED OFFICE. The registered office and registered
agent of the Corporation required to be maintained in the State of Delaware by
the General Corporation Law of the State of Delaware (the "DGCL") shall be as
designated from time to time by the appropriate filing by the Corporation in the
office of the Secretary of State of the State of Delaware.
SECTION 1.3 OTHER OFFICES. The Corporation may also have offices at such
other places, both within and without the State of Delaware, as the Board of
Directors may from time to time determine or as the business of the Corporation
may require.
ARTICLE II
STOCKHOLDERS' MEETINGS
SECTION 2.1 ANNUAL MEETING. The annual meeting of the holders of shares
of each class or series of stock as are entitled to notice thereof and to vote
thereat pursuant to applicable law and the
<PAGE>
Certificate of Incorporation for the purpose of electing directors and
transacting such other proper business as may come before it shall be held at
such time and at such place, within or without the State of Delaware, as may be
designated by the Board of Directors.
SECTION 2.2 SPECIAL MEETINGS. In addition to such special meetings as are
provided by law or the Certificate of Incorporation, special meetings of the
holders of any class or series or of all classes or series of the Corporation's
stock for any purpose or purposes, may be called at any time by the Chief
Executive Officer and shall be called by the Secretary at the written request,
or by resolution adopted by the affirmative vote, of a majority of the Board of
Directors, which request shall fix the date, time and place (within or without
the State of Delaware), and state the purpose or purposes of the proposed
meeting. Except to the extent specified in the Corporation's certificate of
incorporation, as amended and in effect from time to time (the "Certificate of
Incorporation") or the resolutions of the Board of Directors creating any class
or series of preferred stock of the Corporation, Stockholders of the Corporation
may not call a special meeting.
SECTION 2.3 NOTICE OF MEETINGS AND ADJOURNED MEETINGS. Except as
otherwise provided by law, written notice of any meeting of Stockholders shall
be given either by personal delivery or by mail to each Stockholder of record
entitled to vote thereat. Notice of each meeting shall be in such form as is
approved by the Board of Directors and shall state the date, place and hour of
the meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called. Unless otherwise provided by law, such written
notice shall be given not less than 10 nor more than 60 days before the date of
the meeting. Except when a Stockholder attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business on the grounds that the meeting is not lawfully called or convened,
presence in person or by proxy
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of a Stockholder shall constitute a waiver of notice of such meeting. Further, a
written waiver of any notice required by law or by these Bylaws, signed by the
person entitled to notice, whether before or after the time stated therein,
shall be deemed equivalent to notice. Except as otherwise provided by law, the
business that may be transacted at any such meeting shall be limited to and
consist of the purpose or purposes stated in such notice. If a meeting is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place thereof are announced at the meeting at which the
adjournment is taken; provided, however, that if the adjournment is for more
than 30 days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
Stockholder of record entitled to vote at the meeting.
SECTION 2.4 VOTING LISTS. The officer or agent having charge of the
stock transfer books for shares of the Corporation shall make, at least 10 days
before each meeting of the Stockholders, a complete list of Stockholders
entitled to vote at such meeting or any adjournment thereof, arranged in
alphabetical order, with the address of each and the number of shares held by
each, which list, for a period of 10 days prior to such meeting, shall be kept
on file either at a place within the city where the meeting is to be held, which
place shall be specified in the notice of the meeting, or, if not so specified,
at the place where the meeting is to be held, and such list shall be subject to
inspection by the Stockholders at any time during usual business hours. Such
list shall also be produced and kept open at the time and place of the meeting
and shall be subject to the inspection of any Stockholder for the duration of
the meeting. The original stock transfer books shall be prima-facie evidence as
to who are the Stockholders entitled to examine such list or transfer books or
to vote at any meeting of Stockholders.
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SECTION 2.5 QUORUM. Except as otherwise provided by law or by the
Certificate of Incorporation, the holders of a majority of the Corporation's
stock issued and outstanding and entitled to vote at a meeting, present in
person or represented by proxy, without regard to class or series, shall
constitute a quorum at all meetings of the Stockholders for the transaction of
business. If, however, such quorum shall not be present or represented at any
meeting of the Stockholders, the Chairman of the Board of Directors or other
person presiding over such meeting or the holders of a majority of such shares
of stock, present in person or represented by proxy, may adjourn any meeting
from time to time without notice other than announcement at the meeting, except
as otherwise required by these Bylaws, until a quorum shall be present or
represented. At any such adjourned meeting at which a quorum shall be present
or represented, any business may be transacted which might have been transacted
at the meeting as originally called. A holder of a share of the Corporation's
capital stock shall be treated as being present or represented at a meeting if
such holder is (i) present in person at the meeting or (ii) represented at the
meeting by a valid proxy, regardless of whether the instrument granting the
proxy is marked as casting a vote or abstaining, is left blank or does not
empower such proxy to vote with respect to some or all matters to be voted upon
at the meeting.
SECTION 2.6 ORGANIZATION. Meetings of the Stockholders shall be presided
over by the Chairman of the Board of Directors, if one shall be elected, or in
his absence, by the Chief Executive Officer, the President or by any Senior Vice
President, or, in the absence of any of such officers, by a chairman to be
chosen by a majority of the Stockholders entitled to vote at the meeting who are
present in person or by proxy. The Secretary, or, in his absence, any Assistant
Secretary or any
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person appointed by the individual presiding over the meeting, shall act as
secretary at meetings of the Stockholders.
SECTION 2.7 VOTING. Each Stockholder of record, as determined pursuant to
Section 2.9, who is entitled to vote in accordance with the terms of the
Certificate of Incorporation and in accordance with the provisions of these
Bylaws, shall, except to the extent specified in the Certificate of
Incorporation or any resolution adopted by the Board of Directors to establish
any series of Preferred Stock of the Corporation, be entitled to one vote, in
person or by proxy, for each share of stock registered in his name on the books
of the Corporation. Every Stockholder entitled to vote at any Stockholders'
meeting may authorize another person or persons to act for him by proxy duly
appointed by instrument in writing subscribed by such Stockholder and executed
not more than three years prior to the meeting, unless the proxy provides for a
longer period. Each proxy shall be revocable unless it expressly states therein
that it is irrevocable and, only so long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A Stockholder's attendance
at any meeting, when such Stockholder has theretofore given a proxy, shall not
have the effect of revoking such proxy unless such Stockholder shall in writing
so notify the Secretary of the meeting prior to the voting of the proxy.
Unless otherwise provided by law, no vote on the election of directors or any
question brought before the meeting need be by ballot unless the chairman of the
meeting shall determine that it shall be by ballot or the holders of a majority
of the shares of stock present in person or by proxy and entitled to participate
in such vote shall so demand. In a vote by ballot, each ballot shall state the
number of shares voted and the name of the Stockholder or proxy voting. Except
as otherwise provided by law, by the Certificate of Incorporation or these
Bylaws, (i) action on a matter (other than the election of directors) shall be
approved if the votes cast by holders of
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shares of stock present and entitled to vote on the matter at a meeting at which
a quorum is present in favor of the matter exceed the votes cast opposing the
matter and (ii) directors shall be elected by a plurality of the votes cast by
the holders of shares present and entitled to vote in the election at a meeting
at which a quorum is present. In the election of directors, votes may not be
cumulated. In determining the number of votes cast, shares abstaining from
voting or not voted on a matter (including director elections) will not be
treated as votes cast.
SECTION 2.8 AUTHORIZATION OF PROXIES. Without limiting the manner in
which a Stockholder may authorize another person or persons to act for him as
proxy, the following are valid means of granting such authority. A Stockholder
may execute a writing authorizing another person or persons to act for him as
proxy. Execution may be accomplished by the Stockholder or his authorized
officer, director, employee or agent signing such writing or causing his or her
signature to be affixed to such writing by any reasonable means including, but
not limited to, by facsimile signature. A Stockholder may also authorize
another person or persons to act for him as proxy by transmitting or authorizing
the transmission of a telegram, cablegram or other means of electronic
transmission must either set forth or be submitted with information from which
it can be determined that the telegram, cablegram or other electronic
transmission was authorized by the Stockholder. If it is determined that such
telegrams, cablegrams or other electronic transmissions are valid, the
inspectors or, if there are no inspectors, such other persons making that
determination shall specify the information upon which they relied. Any copy,
facsimile telecommunication or other reliable reproduction of the writing or
transmission created pursuant to this section may be substituted or used in lieu
of the original writing or
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<PAGE>
transmission for any and all purposes for which the writing or transmission
could be used, provided that such copy, facsimile telecommunication or other
reproduction shall be a complete reproduction of the entire original writing or
transmission.
SECTION 2.9 STOCKHOLDERS ENTITLED TO VOTE. The Board of Directors may fix
a date not more than 60 days nor less than 10 days prior to the date of any
meeting of Stockholders as a record date for the determination of the
Stockholders entitled to notice of and to vote at such meeting and any
adjournment thereof, and in such case such Stockholders and only such
Stockholders as shall be Stockholders of record on the date so fixed shall be
entitled to notice of and to vote at, such meeting and any adjournment thereof
notwithstanding any transfer of any stock on the books of the Corporation after
such record date fixed as aforesaid.
SECTION 2.10 ORDER OF BUSINESS. The order of business at all meetings of
Stockholders shall be as determined by the chairman of the meeting or as is
otherwise determined by the vote of the holders of a majority of the shares of
stock present in person or by proxy and entitled to vote without regard to class
or series at the meeting.
SECTION 2.11 ACTION BY WRITTEN CONSENT. No action required or permitted
to be taken by the Stockholders shall be taken except at an annual or special
meeting with prior notice and a vote. No action may be taken by the Stockholders
by written consent.
SECTION 2.12 INSPECTORS OF ELECTION. Before any meeting of Stockholders,
the Board of Directors may, and if required by law shall, appoint one or more
persons to act as inspectors of election at such meeting or any adjournment
thereof. If any person appointed as inspector fails to appear or fails or
refuses to act, the chairman of the meeting may, and if required by law or
requested by any Stockholder entitled to vote or his proxy shall, appoint a
substitute inspector. If no inspectors are appointed by the Board of Directors,
the chairman of the meeting may, and if required by law
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or requested by any Stockholder entitled to vote or his proxy shall, appoint one
or more inspectors at the meeting. Notwithstanding the foregoing, inspectors
shall be appointed consistent with Section 231 of the DGCL. Inspectors may
include individuals who serve the Corporation in other capacities (including as
officers, employees, agents or representatives); provided, however, that no
director or candidate for the office of director shall act as an inspector.
Inspectors need not be Stockholders. The inspectors shall (i) determine the
number of shares of capital stock of the Corporation outstanding and the voting
power of each, the number of shares represented at the meeting, the existence of
a quorum and the validity and effect of proxies and (ii) receive votes or
ballots, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes and ballots, determine the
results and do such acts as are proper to conduct the election or vote with
fairness to all Stockholders. On request of the chairman of the meeting, the
inspectors shall make a report in writing of any challenge, request or matter
determined by them and shall execute a certificate of any fact found by them.
The inspectors shall have such other duties as may be prescribed by Section 231
of the DGCL.
SECTION 2.13 NOTICE OF STOCKHOLDER NOMINEES. Only persons who are
nominated in accordance with the procedures set forth in this Section 2.13 shall
be eligible for election as directors of the Corporation. Nominations of
persons for election to the Board of Directors of the Corporation may be made at
a meeting of the Corporation's Stockholders (a) by or at the direction of the
Board of Directors or (b) by any Stockholder of the Corporation entitled to vote
for the election of directors at such meeting who complies with the procedures
set forth in this Section 2.13. All nominations by Stockholders shall be made
pursuant to timely notice in proper written form submitted to the Secretary of
the Corporation. To be timely, a Stockholders' notice shall be delivered to or
mailed
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and received at the principal executive offices of the Corporation not less than
60 days nor more than 90 days prior to the anniversary of the annual meeting
held for the immediately preceding year (provided, however, that if no annual
meeting was held in the previous year or the date of the annual meeting of
Stockholders has been changed by more than 30 calendar days from the date
contemplated at the time of the previous year's proxy statement, the notice must
be received by the Corporation at least 45 days prior to the date the
Corporation intends to distribute its proxy statement with respect to such
meeting) or, in the case of a special meeting at which directors are to be
elected and for which less than 40 days' notice or prior public disclosure of
the date of the meeting is given or made to Stockholders, notice by the
Stockholder to be timely must be so received not later than the close of
business on the 10th day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made. To be in proper
written form, such Stockholder's notice to the Secretary shall set forth in
writing (a) as to each person whom such Stockholder proposes to nominate for
election or re-election as a director, all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended, including, without
limitation, such person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected; and (b) as to such
Stockholder (i) the name and address, as they appear on the Corporation's books,
and principal occupation of such Stockholder, (ii) the class and number of
shares of the Corporation's capital stock that are beneficially owned by such
Stockholder and the dates upon which such Stockholder acquired such shares and
documentary support for any claims of beneficial ownership, and (iii) a
description of all agreements, arrangements or understandings between such
Stockholder and each such person
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that such Stockholder proposes to nominate as a director and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by such Stockholder. At the request of the Board of
Directors, any person nominated by the Board of Directors for election as a
director shall furnish to the Secretary of the Corporation that information
required to be set forth in a Stockholder's notice of nomination which pertains
to the nominee. No person shall be eligible for election as a director unless
nominated in accordance with the procedures set forth in these Bylaws of the
Company. The chairman of the Stockholder's meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the procedures prescribed by these Bylaws of the Company, and if
he shall so determine, he shall announce such determination to the meeting and
the defective nomination shall be disregarded.
SECTION 2.14 STOCKHOLDER PROPOSALS. At any special meeting of the
Corporation's Stockholders, only such business shall be conducted as shall have
been brought before the meeting by or at the direction of the Board of
Directors. At any annual meeting of the stockholders, only such business shall
be conducted as shall have been brought before the meeting (a) by or at the
direction of the Board of Directors or (b) by any Stockholder who complies with
the procedures set forth in this Section 2.14; provided, however, that nothing
in this Section 2.14 shall be deemed to preclude discussion by any Stockholder
of any business properly brought before any annual meeting of Stockholders in
accordance with such procedures. For business properly to be brought before an
annual meeting by a Stockholder, the Stockholder must have given timely notice
thereof in proper written form to the Secretary of the Corporation. To be
timely, a Stockholder's notice must be delivered to or mailed and received at
the principal executive offices of the Corporation not less than 60 days nor
more than 90 days prior to the anniversary of the annual meeting held for the
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immediately preceding year (provided, however, that if no annual meeting was
held in the previous year or the date of the annual meeting of Stockholders has
been changed by more than 30 calendar days from the date contemplated at the
time of the previous year's proxy statement, the notice must be received by the
Corporation at least 45 days prior to the date the Corporation intends to
distribute its proxy statement with respect to such meeting). To be in proper
written form, such Stockholder's notice to the Secretary shall set forth in
writing as to each matter such Stockholder proposes to bring before the annual
meeting (a) a brief description of the business desired to be brought before the
annual meeting, including the exact text of any proposal to be presented for
adoption and any supporting statement (which shall not exceed 500 words in the
aggregate), and such Stockholder's reasons for conducting such business at the
annual meeting, (b) the name and address, as they appear on the Corporation's
books, and principal occupation of such Stockholder, (c) the class and number of
shares of the Corporation's capital stock that are beneficially owned by such
Stockholder and the dates upon which such Stockholder acquired such shares and
documentary support for any claims of beneficial ownership, and (d) any material
interest of such Stockholder in such business. Notwithstanding anything in these
Bylaws to the contrary, no business shall be conducted at an annual meeting
except in accordance with the procedures set forth in this Section 2.14 and the
foregoing rights of a Stockholder to propose business for consideration at an
annual meeting of Stockholders shall be subject to such conditions, restrictions
and limitations as may be imposed by the Certificate of Incorporation. The
chairman of an annual stockholder's meeting shall, if the facts warrant,
determine and declare to the meeting that business is not properly brought
before the meeting in accordance with the provisions of this Section 2.14, and,
if he should so determine, he shall so announce such determination to the
meeting and any such business not properly brought
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before the meeting shall not be transacted. Notwithstanding any other provision
of these Bylaws, the Corporation shall be under no obligation to include any
Stockholder proposal in its proxy statement material or otherwise present any
such proposal to Stockholders at a meeting of Stockholders if the Board of
Directors reasonably believes that the proponents thereof have not complied with
Sections 13 and 14 of the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder, and the Corporation shall not be
required to include in its proxy statement material to Stockholders any
Stockholder proposal not required to be included in its proxy statement to
Stockholders in accordance with such act, rules or regulations.
ARTICLE III
DIRECTORS
SECTION 3.1 MANAGEMENT. The property, affairs and business of the
Corporation shall be managed by or under the direction of the Board of Directors
which may exercise all powers of the Corporation and do all lawful acts and
things as are not by law, by the Certificate of Incorporation or by these Bylaws
directed or required to be exercised or done by the Stockholders.
SECTION 3.2 NUMBER AND TERM. The Board of Directors shall be classified
in accordance with the Certificate of Incorporation and the actual number of
directors constituting the entire Board of Directors shall be fixed from time to
time by resolution of the Board of Directors adopted by the affirmative vote of
a majority of the members of the entire Board of Directors, but shall consist of
not less than three nor more than 15 members, one-third of whom shall be elected
each year by the Stockholders except as provided in Section 3.4. The Board of
Directors shall have sole authority to determine the number of directors, within
the limits set forth above, and may increase or decrease the exact number of
directors from time to time by resolution duly adopted by the affirmative vote
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of a majority of the entire Board of Directors. Such increases and decreases
shall be apportioned among the classes of directors so that all classes will be
as nearly equal in number as possible. Directors need not be Stockholders. No
decrease in the number of directors shall have the effect of shortening the term
of office of any incumbent director.
SECTION 3.3 QUORUM AND MANNER OF ACTION. At all meetings of the Board of
Directors a majority of the total number of directors holding office shall
constitute a quorum for the transaction of business and the act of a majority of
the directors present at any meeting at which there is a quorum shall be the act
of the Board of Directors, except as may be otherwise specifically provided by
law, by the Certificate of Incorporation or by these Bylaws. When the Board of
Directors consists of one director, the one director shall constitute a majority
and a quorum. If at any meeting of the Board of Directors there shall be less
than a quorum present, a majority of those present may adjourn the meeting from
time to time until a quorum is obtained, and no further notice thereof need be
given other than by announcement at such adjourned meeting. Attendance by a
director at a meeting shall constitute a waiver of notice of such meeting except
where a director attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business on the ground that
the meeting is not lawfully called or convened. A Director who is present at a
meeting of the Board of Directors at which action on any corporate matter is
taken shall be presumed to have assented to such action unless his dissent shall
be entered in the minutes of the meeting or unless he shall file his written
dissent to such action with the person acting as Secretary of the meeting before
the adjournment thereof or shall forward any dissent by certified or registered
mail to the Secretary immediately after the adjournment of the meeting. Such
right to dissent shall not apply to any Director who voted in favor of such
action.
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SECTION 3.4 VACANCIES. Except as otherwise provided by law and the
Certificate of Incorporation, in the case of any increase in the authorized
number of directors or of any vacancy in the Board of Directors, however
created, the additional director or directors may be elected, or, as the case
may be, the vacancy or vacancies shall be filled by majority vote of the
directors remaining on the whole Board of Directors although less than a quorum,
or by a sole remaining director. In the event one or more directors shall
resign, effective at a future date, such vacancy or vacancies shall be filled by
a majority of the directors who will remain on the whole Board of Directors,
although less than a quorum, or by a sole remaining director. Any director
elected or chosen as provided herein shall serve until the sooner of (i) the
unexpired term of the directorship to which he is appointed; or (ii) until his
successor is elected and qualified; or (iii) until his earlier resignation or
removal. If, as a result of a disaster or emergency (as determined in good
faith by the then remaining Directors), it becomes impossible to ascertain
whether or not vacancies exist on the Board of Directors and a person is or
persons are elected by the Directors, who in good faith believe themselves to be
a majority of the remaining Directors, to fill a vacancy or vacancies that such
remaining Directors in good faith believe exists, then the acts of such person
or persons who are so elected as Directors shall be valid and binding upon the
Corporation and the Stockholders, although it may subsequently develop that at
the time of the election (i) there was in fact no vacancy or vacancies existing
on the Board of Directors or (ii) the directors who so elected such person or
persons did not in fact constitute a majority of the remaining Directors.
SECTION 3.5 RESIGNATIONS. A director may resign at any time upon written
notice of resignation to the Corporation, delivered to the Secretary. Any
resignation shall be effective
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immediately unless a certain effective date is specified therein, in which event
it will be effective upon such date and acceptance of any resignation shall not
be necessary to make it effective.
SECTION 3.6 REMOVALS. Any director or the entire Board of Directors may
be removed before the expiration of such Director's term of office only for
cause, and another person or persons may be elected to serve for the remainder
of his or their term, and only upon the affirmative vote of the holders of a
majority of the shares of the Corporation entitled to vote in the election of
directors. Stockholders may not remove any director without cause. In case any
vacancy so created shall not be filled by the Stockholders at such meeting, such
vacancy may be filled by the directors as provided in Section 3.4.
SECTION 3.7 ANNUAL MEETINGS. The annual meeting of the Board of Directors
shall be held, if a quorum be present, immediately following each annual meeting
of the Stockholders at the place such meeting of Stockholders took place, for
the purpose of organization and transaction of any other business that might be
transacted at a regular meeting thereof, and no notice of such meeting shall be
necessary. If a quorum is not present, such annual meeting may be held at any
other time or place that may be specified in a notice given in the manner
provided in Section 3.9 for special meetings of the Board of Directors or in a
waiver of notice thereof.
SECTION 3.8 REGULAR MEETINGS. Regular meetings of the Board of Directors
may be held without notice at such places and times as shall be determined from
time to time by resolution of the Board of Directors. Except as otherwise
provided by law, any business may be transacted at any regular meeting of the
Board of Directors.
SECTION 3.9 SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by the Chief Executive Officer or by the Secretary on the written
request of one-third of the members
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of the whole Board of Directors stating the purpose or purposes of such meeting.
Notices of special meetings, if mailed, shall be mailed to each director not
later than two days before the day the meeting is to be held or if otherwise
given in the manner permitted by these Bylaws, not later than the day before
such meeting. Neither the business to be transacted at, nor the purpose of, any
special meeting need be specified in any notice or written waiver of notice
unless so required by the Certificate of Incorporation or by the Bylaws. Unless
limited by law, the Certificate of Incorporation or by these Bylaws, any and all
business may be transacted at a special meeting.
SECTION 3.10 ORGANIZATION OF MEETINGS. At any meeting of the Board of
Directors, business shall be transacted in such order and manner as such Board
of Directors may from time to time determine, and all matters shall be
determined by the vote of a majority of the directors present at any meeting at
which there is a quorum, except as otherwise provided by these Bylaws or
required by law.
SECTION 3.11 PLACE OF MEETINGS. The Board of Directors may hold their
meetings and have one or more offices, and keep the books of the Corporation,
inside or outside the State of Delaware, at any office or offices of the
Corporation, or at any other place as they may from time to time by resolution
determine.
SECTION 3.12 COMPENSATION OF DIRECTORS. The Board of Directors shall have
the authority to fix, and from time to time to change, the compensation of
Directors. Directors shall not receive any stated salary for their services as
directors, but by resolution of the Board of Directors a fixed honorarium or
fees and expenses, if any, of attendance may be paid by the Corporation for
attendance at each meeting. Nothing herein contained shall be construed to
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor. Members
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of special or standing committees may be allowed like compensation for attending
such committee meetings.
SECTION 3.13 ACTION BY UNANIMOUS WRITTEN CONSENT. Unless otherwise
restricted by law, the Certificate of Incorporation or these Bylaws, any action
required or permitted to be taken at any meeting of the Board of Directors or of
any committee thereof may be taken without a meeting if all members of the Board
of Directors or of such committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the Board of Directors or the committee.
SECTION 3.14 PARTICIPATION IN MEETINGS BY TELEPHONE. Unless otherwise
restricted by the Certificate of Incorporation or these Bylaws, members of the
Board of Directors or of any committee thereof may participate in a meeting of
such Board of Directors or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation in a meeting pursuant to this
Section 3.14 shall constitute presence in person at such meeting, except where a
person participates in the meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business on the ground that
the meeting is not lawfully called or convened.
SECTION 3.15 ELECTION OF DIRECTORS BY CLASS VOTE OF HOLDERS OF PREFERRED
STOCK. Notwithstanding the foregoing provisions of this Article III, if the
resolutions of the Board of Directors creating any class or series of preferred
stock of the Corporation entitle the holders of such preferred stock, voting
separately by class or series, to elect additional Directors under specified
circumstances, then all provisions of such resolutions relating to the
nomination, election, term of office, removal, filling of vacancies and other
features of such directorships shall, as to such
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directorships, govern and control over any conflicting provisions of this
Article III, and such Directors so elected need not be divided into classes
pursuant to this Article III unless expressly provided by the provisions of such
resolutions.
ARTICLE IV
COMMITTEES OF THE BOARD
SECTION 4.1 MEMBERSHIP AND AUTHORITIES. The Board of Directors may, by
resolution or resolutions passed by a majority of the whole Board of Directors,
designate one or more Directors to constitute an Executive Committee and such
other committees as the Board of Directors may determine, each of which
committees to the extent provided in said resolution or resolutions or in these
Bylaws, shall have and may exercise all the powers of the Board of Directors in
the management of the business and affairs of the Corporation, except in those
cases where the authority of the Board of Directors is specifically denied to
the Executive Committee or such other committee or committees by law, the
Certificate of Incorporation or these Bylaws, and may authorize the seal of the
Corporation to be affixed to all papers that may require it. The designation of
an Executive Committee or other committee and the delegation thereto of
authority shall not operate to relieve the Board of Directors, or any member
thereof, of any responsibility imposed upon it or him by law. Each member of a
committee of the Board of Directors shall serve as such until the earliest of
(i) his death, (ii) the expiration of his term as a Director, (iii) his
resignation as a member of such committee or as a Director and (iv) his removal
as a member of such committee or as a Director.
SECTION 4.2 MINUTES. Each committee designated by the Board of Directors
shall keep regular minutes of its proceedings and shall provide a report of its
proceedings to the Board of Directors when required or requested by the Board of
Directors.
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SECTION 4.3 VACANCIES. The Board of Directors may designate one or more
of its members as alternate members of any committee who may replace any absent
or disqualified member at any meeting of such committee. If no alternate
members have been appointed, the committee member or members thereof present at
any meeting and not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any absent or disqualified
member. The Board of Directors shall have the power at any time to fill
vacancies in, to change the membership of, and to dissolve, any committee.
SECTION 4.4 TELEPHONE MEETINGS. Members of any committee designated by
the Board of Directors may participate in or hold a meeting by use of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other. Participation in a meeting
pursuant to this Section 4.4 shall constitute presence in person at such
meeting, except where a person participates in the meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business on the ground that the meeting is not lawfully called or convened.
SECTION 4.5 ACTION WITHOUT MEETING. Any action required or permitted to
be taken at a meeting of any committee designated by the Board of Directors may
be taken without a meeting if a consent in writing, setting forth the action so
taken, is signed by all the members of the committee and filed with the minutes
of the committee proceedings. Such consent shall have the same force and effect
as a unanimous vote at a meeting.
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ARTICLE V
OFFICERS
SECTION 5.1 NUMBER AND TITLE. The elected officers of the Corporation
shall be chosen by the Board of Directors and shall be a Chief Executive
Officer, the President, a Vice President, a Secretary and a Treasurer. The
Board of Directors may also choose a Chairman of the Board, who must be a member
of the Board of Directors, and additional Vice Presidents (including one or more
Executive Vice Presidents and one or more Senior Vice Presidents), a Chief
Financial Officer, a General Counsel, one or more Assistant Secretaries and/or
one or more Assistant Treasurers. One person may hold any two or more of these
offices.
SECTION 5.2 TERM OF OFFICE; VACANCIES. So far as is practicable, all
elected officers shall be elected by the Board of Directors at the annual
meeting of the Board of Directors in each year, and except as otherwise provided
in this Article V, shall hold office until the next such meeting of the Board of
Directors in the subsequent year and until their respective successors are
elected and qualified or until their earlier resignation or removal. All
appointed officers shall hold office at the pleasure of the Board of Directors.
If any vacancy shall occur in any office, the Board of Directors may elect or
appoint a successor to fill such vacancy for the remainder of the term.
SECTION 5.3 REMOVAL OF ELECTED OFFICERS. Any elected officer may be
removed at any time, with or without cause, by affirmative vote of a majority of
the whole Board of Directors, at any regular meeting or at any special meeting
called for such purpose.
SECTION 5.4 RESIGNATIONS. Any officer may resign at any time upon written
notice of resignation to the Chief Executive Officer, Secretary or Board of
Directors of the Corporation. Any resignation shall be effective immediately
unless a date certain is specified for it to take effect, in
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which event it shall be effective upon such date, and acceptance of any
resignation shall not be necessary to make it effective, irrespective of whether
the resignation is tendered subject to such acceptance. Any such resignation is
without prejudice to the rights, if any, of the Corporation under any contract
to which the officer is a party.
SECTION 5.5 THE CHAIRMAN OF THE BOARD. The Chairman of the Board, if one
shall be elected, shall preside at all meetings of the Stockholders and Board of
Directors. In addition, the Chairman of the Board shall perform whatever duties
and shall exercise all powers that are given to him by the Board of Directors.
SECTION 5.6 CHIEF EXECUTIVE OFFICER. (a) The Chief Executive Officer shall
be the chief executive officer of the Corporation and, subject to the
supervision, direction and control of the Board of Directors and the Chairman of
the Board (if any), shall have general supervision, direction and control of the
business and officers of the Corporation with all such powers as may be
reasonably incident to such responsibilities. The Chief Executive Officer shall
implement the general directives, plans and policies formulated by the Board of
Directors and shall further have such duties, responsibilities and authorities
as may be assigned to him by the Board of Directors. The Chief Executive Officer
shall have the general powers and duties of management usually vested in the
chief executive officer of a corporation. The Chief Executive Officer may sign,
with any other proper officer, certificates for shares of the Corporation and
any deeds, bonds, mortgages, contracts and other documents which the Board of
Directors has authorized to be executed, except where required by law to be
otherwise signed and executed and except where the signing and execution thereof
shall be expressly delegated by the Board or Directors or these Bylaws to some
other officer or agent of the Corporation.
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(b) During the time of any vacancy in the office of Chairman of the
Board or in the event of the absence or disability of the Chairman of the Board,
the Chief Executive Officer shall have the duties and powers of the Chairman of
the Board unless otherwise determined by the Board of Directors. In the absence
of the Chairman of the Board, if one be elected, the Chief Executive Officer
shall preside at meetings of the Stockholders and Board of Directors and shall
be ex officio a member of all standing committees. During the time of any
vacancy in the office of President or in the event of the absence or disability
of the President, the Chief Executive Officer shall have the duties and powers
of the President unless otherwise determined by the Board of Directors. In no
event shall any third party having any dealings with the Corporation be bound to
inquire as to any facts required by the terms of this Section 5.6 for the
exercise by the Chief Executive Officer of the powers of the Chairman of the
Board or the President.
SECTION 5.7 PRESIDENT. (a) The President shall be the chief operating
officer of the Corporation and, subject to the supervision, direction and
control of the Chief Executive Officer and the Board of Directors, shall manage
the day-to-day operations of the Corporation. He shall have the general powers
and duties of management usually vested in the chief operating officer of a
corporation and such other powers and duties as may be assigned to him by the
Board of Directors, the Chief Executive Officer or these Bylaws. The President
may sign, with any other proper officer, certificates for shares of the
Corporation and any deeds, bonds, mortgages, contracts and other documents which
the Board of Directors has authorized to be executed, except where required by
law to be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the Board or Directors or
these Bylaws to some other officer or agent of the Corporation. In the absence
of the President, his duties shall be performed and his authority may
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be exercised by the Chief Executive Officer or a Vice President of the
Corporation as may have been designated by the President with the right reserved
to the Board of Directors to designate or supersede any designation so made.
(b) During the time of any vacancy in the offices of the Chairman of
the Board and Chief Executive Officer or in the event of the absence or
disability of the Chairman of the Board and the Chief Executive Officer, the
President shall have the duties and powers of the Chief Executive Officer unless
otherwise determined by the Board of Directors. In no event shall any third
party having any dealings with the Corporation be bound to inquire as to any
facts required by the terms of this Section 5.7 for the exercise by the
President of the powers of the Chief Executive Officer.
SECTION 5.8 VICE PRESIDENTS. In the absence or disability of the
President, the Vice Presidents, if any, in order of their rank as fixed by the
Board of Directors, or if not ranked, the Vice President designated by the
President, shall perform all the duties of the President as chief operating
officer of the Corporation, and when so acting shall have all the powers of, and
be subject to all the restrictions upon, the President as chief operating
officer of the Corporation. In no event shall any third party having dealings
with the Corporation be bound to inquire as to any facts required by the terms
of this Section 5.8 for the exercise by any Vice President of the powers of the
President as chief operating officer of the Corporation. The Vice Presidents
shall have such other powers and perform such other duties as from time to time
may be assigned to them by these Bylaws and as may from time to time be assigned
to them by the Board of Directors, the Chief Executive Officer or the President,
and may sign, with any other proper officer, certificates for shares of the
Corporation.
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SECTION 5.9 SECRETARY. The Secretary shall keep or cause to be kept, at
the principal office of the Corporation or such other place as the Board of
Directors may order, a book of minutes of all meetings and actions of the Board
of Directors, committees of the Board of Directors and Stockholders, with the
time and place of holding, whether regular or special, and, if special, how
authorized, the notice thereof given, the names of those present at meetings of
the Board of Directors and committees thereof, the number of shares present or
represented at Stockholders' meetings and the proceedings thereof. The
Secretary, if available, shall attend all meetings of the Board of Directors and
all meetings of the Stockholders and record the proceedings of the meetings in a
book to be kept for that purpose and shall perform like duties for any committee
of the Board of Directors as the Board of Directors or such committee shall
designate him to serve. The Secretary shall give, or cause to be given, notice
of all meetings of the Stockholders and meetings of the Board of Directors and
committees thereof and shall perform such other duties incident to the office of
secretary or as may be prescribed by the Board of Directors or the President,
under whose supervision he shall be. The Secretary shall have custody of the
corporate seal of the Corporation, if one be adopted pursuant to Section 8.1,
and he, or any Assistant Secretary, or any other person whom the Board of
Directors may designate, shall have authority to affix the same to any
instrument requiring it, and when so affixed it may be attested by his signature
or by the signature of any Assistant Secretary or by the signature of such other
person so affixing such seal.
SECTION 5.10 ASSISTANT SECRETARIES. Each Assistant Secretary shall have
the usual powers and duties pertaining to his office, together with such other
powers and duties as may be assigned to him by the Board of Directors, the Chief
Executive Officer, the President or the Secretary. The
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Assistant Secretary or such other person as may be designated by the Chief
Executive Officer shall exercise the powers of the Secretary during that
officer's absence or inability to act.
SECTION 5.11 TREASURER. The Treasurer shall have the custody of and be
responsible for the corporate funds and securities, shall keep full and accurate
accounts of receipts and disbursements in the books belonging to the Corporation
and shall deposit all moneys and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the Board
of Directors. He shall disburse the funds of the Corporation as may be ordered
by the Board of Directors, taking proper vouchers for such disbursements, and
shall render to the President and the Board of Directors, at its regular
meetings, or when the Board of Directors so requires, an account of all his
transactions as Treasurer and of the financial condition of the Corporation and
he shall perform all other duties incident to the position of Treasurer, or as
may be prescribed by the Board of Directors or the Chief Executive Officer. If
required by the Board of Directors, he shall give the Corporation a bond in such
sum and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of his office and for the
restoration to the Corporation, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
Corporation.
SECTION 5.12 ASSISTANT TREASURERS. Each Assistant Treasurer shall have
the usual powers and duties pertaining to his office, together with such other
powers and duties as may be assigned to him by the Board of Directors, the
President or the Treasurer. The Assistant Treasurer or such other person
designated by the Chief Executive Officer shall exercise the power of the
Treasurer during that officer's absence or inability to act.
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SECTION 5.13 SUBORDINATE OFFICERS; AGENTS. The Board of Directors may (a)
appoint such other officers subordinate to the Chief Executive Officer and
President (including a Chief Financial Officer and/or a General Counsel) as it
shall deem necessary or desirable who shall hold their offices for such terms,
have such authority and perform such duties as the Board of Directors may from
time to time determine, or (b) delegate to any committee or officer the power to
appoint any such subordinate officers. The Board of Directors may also appoint
one or more agents as it shall deem necessary or desirable who shall have such
authority and perform such duties as the Board of Directors may from time to
time determine. Any agent may be removed at any time, with or without cause, by
affirmative vote of a majority of the whole Board of Directors, at any regular
meeting or at any special meeting called for such purpose.
SECTION 5.14 SALARIES AND COMPENSATION. The salary or other compensation
of officers shall be fixed from time to time by the Board of Directors. The
Board of Directors may delegate to any committee or officer the power to fix
from time to time the salary or other compensation of officers and agents.
ARTICLE VI
INDEMNIFICATION
SECTION 6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS. (a) The
Corporation (i) shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that such person is or was, at any time prior to or during which this
Article VI is in effect, a director or officer of the Corporation, or is or was,
at any time prior to or during which this Article VI is in
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effect, serving at the request of the Corporation as a director or officer of
another corporation, partnership, joint venture, trust, other enterprise or
employee benefit plan and (ii) upon a determination by the Board of Directors
that indemnification is appropriate, the Corporation may indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Corporation) by reason of the fact that such person is or was, at any time prior
to or during which this Article VI is in effect, an employee or agent of the
Corporation or at the request of the Corporation was serving as an employee or
agent of any other corporation, partnership, joint venture, trust, other
enterprise or employee benefit plan, in the case of (i) and (ii) against
reasonable expenses (including attorneys' fees), judgments, fines, penalties,
amounts paid in settlement and other liabilities actually and reasonably
incurred by such person in connection with such action, suit or proceeding if
such person acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe that his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that such person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
(b) The Corporation (i) shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that such person is or was, at any
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time prior to or during which this Article VI is in effect, a director or
officer of the Corporation, or is or was, at any time prior to or during which
this Article VI is in effect, serving at the request of the Corporation as a
director or officer of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise and (ii) upon a determination by the
Board of Directors that indemnification is appropriate, the Corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that such
person is or was, at any time prior to or during which this Article VI is in
effect, an employee or agent of the Corporation or at the request of the
Corporation was serving as an employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise, in
the case of (i) and (ii) against expenses (including attorneys' fees), actually
and reasonably incurred by such person in connection with the defense or
settlement of such action or suit if such person acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Corporation; provided, that no indemnification shall be made under this sub-
section (b) in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the Corporation unless and only to the
extent that the Delaware Court of Chancery, or other court of appropriate
jurisdiction, shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity of such expenses which the Delaware
Court of Chancery, or other court of appropriate jurisdiction, shall deem
proper.
(c) Any indemnification under sub-sections (a) or (b) (unless ordered by
the Delaware Court of Chancery or other court of appropriate jurisdiction) shall
be made by the Corporation only
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as authorized in the specific case upon a determination that indemnification of
such person is proper in the circumstances because he has met the applicable
standard of conduct set forth in sub-sections (a) and (b). Such determination
shall be made (1) by the Board of Directors by a majority vote of a quorum
consisting of directors not parties to such action, suit or proceeding; or (2)
if such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel, in written
opinion, selected by the Board of Directors; or (3) by the Stockholders. In the
event a determination is made under this sub-section (c) that the director,
officer, employee or agent has met the applicable standard of conduct as to some
matters but not as to others, amounts to be indemnified may be reasonably
prorated.
(d) Expenses incurred by a person who is or was a director or officer
of the Corporation in appearing at, participating in or defending any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, shall be paid by the Corporation at
reasonable intervals in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized by this Article VI.
In addition, the Corporation shall pay or reimburse expenses incurred by any
person who is or was a director or officer of the Corporation in connection with
such person's appearance as a witness or other participant in a proceeding in
which such person or the Corporation is not a named party to such proceeding,
provided that such appearance or participation is on behalf of the Corporation
or by reason of his capacity as a director or officer, or former director or
officer of the Corporation.
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(e) If in a suit or proceeding for indemnification required under this
Article VI of a director or officer, or former director or officer, of the
Corporation or any of its affiliates, a court of competent jurisdiction
determines that such person is entitled to indemnification under this Article
VI, the court shall award, and the Corporation shall pay, to such person the
expenses incurred in securing such judicial determination.
(f) It is the intention of the Corporation to indemnify the persons
referred to in this Article VI to the fullest extent permitted by law and with
respect to any action, suit or proceeding arising from events which occur at any
time prior to or during which this Article VI is in effect. The indemnification
and advancement of expenses provided by this Article VI shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be or become entitled under any law, the Certificate
of Incorporation, these Bylaws, agreement, the vote of Stockholders or
disinterested directors or otherwise, or under any policy or policies of
insurance purchased and maintained by the Corporation on behalf of any such
person, both as to action in his official capacity and as to action in another
capacity while holding such office, and shall continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such person.
(g) The indemnification provided by this Article VI shall be subject
to all valid and applicable laws, and, in the event this Article VI or any of
the provisions hereof or the indemnification contemplated hereby are found to be
inconsistent with or contrary to any such valid laws, the latter shall be deemed
to control and this Article VI shall be regarded as modified accordingly, and,
as so modified, to continue in full force and effect.
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ARTICLE VII
CAPITAL STOCK
SECTION 7.1 CERTIFICATES OF STOCK. Certificates of stock shall be issued
to each Stockholder certifying the number of shares owned by him in the
Corporation and shall be in a form not inconsistent with the Certificate of
Incorporation and as approved by the Board of Directors. The certificates shall
be signed by the Chairman of the Board, the Chief Executive Officer, the
President or a Vice President and by the Secretary or an Assistant Secretary, or
the Treasurer or an Assistant Treasurer and may be sealed with the seal of the
Corporation or a facsimile thereof. Any or all of the signatures on the
certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent or registrar at the date
of issue.
If the Corporation shall be authorized to issue more than one (1) class of
stock or more than one (1) series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided by statute, in lieu of the foregoing requirements, there may
be set forth on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, a statement that the
Corporation will furnish without charge to each Stockholder who so requests the
powers, designations, preferences and relative, participating,
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optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights. The Board of Directors shall have the power and authority to provide
that certificates representing shares of stock of the Corporation bear such
legends and statements as the Board of Directors deems appropriate in connection
with the requirements of federal or state securities laws or other applicable
laws.
SECTION 7.2 LOST CERTIFICATES. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the owner of such certificate, or his legal
representative. When authorizing the issuance of a new certificate, the Board of
Directors may in its discretion, as a condition precedent to the issuance
thereof, require the owner, or his legal representative, to give a bond in such
form and substance with such surety as it may direct, to indemnify the
Corporation against any claim that may be made on account of the alleged loss,
theft or destruction of such certificate or the issuance of such new
certificate.
SECTION 7.3 FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD FOR
CERTAIN PURPOSES. (a) In order that the Corporation may determine the
Stockholders entitled to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of capital stock or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date, which
shall not be more than 60 days prior to the date of payment of such dividend or
other distribution or allotment of such rights or the date when any such rights
in respect of any change, conversion or exchange of stock may be exercised or
the date of such other action. In such a case, only Stockholders of record on
the date so fixed shall be entitled to receive any such dividend or other
distribution or allotment
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of rights or to exercise such rights or for any other purpose, as the case may
be, notwithstanding any transfer of any stock on the books of the Corporation
after any such record date fixed as aforesaid.
(b) If no record date is fixed, the record date for determining
Stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
SECTION 7.4 DIVIDENDS. Subject to the provisions of the Certificate of
Incorporation, if any, and except as otherwise provided by law, the directors
may declare dividends upon the capital stock of the Corporation as and when they
deem it to be expedient. Such dividends may be paid in cash, in property or in
shares of the Corporation's capital stock. Before declaring any dividend the
Directors may set apart out of the funds of the Corporation available for
dividend such sum or sums as the directors from time to time in their discretion
think proper for working capital or as a reserve fund to meet contingencies or
for equalizing dividends, or for such other purposes as the directors shall
determine to be conducive to the interests of the Corporation and the directors
may modify or abolish any such reserve in the manner in which it was created.
SECTION 7.5 REGISTERED STOCKHOLDERS. Except as expressly provided by law,
the Certificate of Incorporation and these Bylaws, the Corporation shall be
entitled to treat registered Stockholders as the only holders and owners in fact
of the shares standing in their respective names and the Corporation shall not
be bound to recognize any equitable or other claim to or interest in such shares
on the part of any other person, regardless of whether it shall have express or
other notice thereof.
SECTION 7.6 TRANSFER OF STOCK. Transfers of shares of the capital stock
of the Corporation shall be made only on the books of the Corporation by the
registered owners thereof, or by their legal representatives or their duly
authorized attorneys. Upon any such transfers the old certificates shall
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be surrendered to the Corporation by the delivery thereof to the person in
charge of the stock transfer books and ledgers, by whom they shall be canceled
and new certificates shall thereupon be issued.
SECTION 7.7 STOCK OPTIONS, WARRANTS, ETC. Unless otherwise expressly
prohibited in the resolutions of the Board of Directors creating any class or
series of preferred stock of the Corporation, the Board of Directors shall have
the power and authority to create and issue (whether or not in connection with
the issue and sale of any stock or other securities of the Corporation),
warrants, rights or options entitling the holders thereof to purchase from the
Corporation any shares of capital stock of the Corporation of any class or
series or any other securities of the Corporation for such consideration and to
such persons, firms or Corporations as the Board of Directors, in its sole
discretion, may determine setting aside from the authorized but unissued stock
of the Corporation the requisite number of shares for issuance upon the exercise
of such warrants, rights or options. Such warrants, rights and options shall be
evidenced by one or more instruments approved by the Board of Directors. The
Board of Directors shall be empowered to set the exercise price, duration, time
for exercise and other terms of such warrants, rights and operations; provided,
however, that the consideration to be received for any shares of capital stock
subject thereto shall not be less than the par value thereof.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
SECTION 8.1 CORPORATE SEAL. If one be adopted, the corporate seal shall
have inscribed thereon the name of the Corporation and shall be in such form as
may be approved by the Board of Directors. Said seal may be used by causing it
or a facsimile thereof to be impressed or affixed or in any manner reproduced.
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SECTION 8.2 FISCAL YEAR. The fiscal year of the Corporation shall be the
calendar year unless changed by resolution of the Board of Directors.
SECTION 8.3 CHECKS, DRAFTS, NOTES. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation shall be signed by such officer or officers, agent or
agents of the Corporation, and in such manner as shall from time to time be
determined by resolution (whether general or special) of the Board of Directors
or may be prescribed by any officer or officers, or any officer and agent
jointly, thereunto duly authorized by the Board of Directors.
SECTION 8.4 CORPORATE CONTRACTS AND INSTRUMENTS. Subject always to the
specific directions of the Board of Directors, the Chairman of the Board (if
any), the Chief Executive Officer, the President, any Vice President, the
Secretary or the Treasurer may enter into contracts and execute instruments in
the name and on behalf of the Corporation. The Board of Directors and, subject
to the specific directions of the Board of Directors, the Chairman of the Board
(if any), the Chief Executive Officer or the President may authorize one or more
officers, employees or agents of the Corporation to enter into any contact or
execute any instrument in the name of and on behalf of the Corporation, and such
authority may be general or confined to specific instances.
SECTION 8.5 NOTICE AND WAIVER OF NOTICE. Whenever notice is required to
be given to any director or Stockholder under the provisions of applicable law,
the Certificate of Incorporation or of these Bylaws it shall not be construed to
only mean personal notice, rather, such notice may also be given in writing, by
mail, addressed to such director or Stockholder at his address as it appears on
the records of the Corporation, with postage thereon prepaid (unless prior to
the mailing of such notice he shall have filed with the Secretary of the
Corporation a written request that notices
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intended for him be mailed to some other address in which case, such notice
shall be mailed to the address designated in the request), and such notice shall
be deemed to be given at the time when the same shall be deposited in the United
States mail. Notice to directors may also be given by telegram, cable or other
form of recorded communication, by personal delivery or by telephone. Whenever
notice is required to be given under any provision of law, the Certificate of
Incorporation or these Bylaws, a waiver thereof in writing, by telegraph, cable
or other form of recorded communication, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting at the beginning of the meeting, to
the transaction of any business on the ground that the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the Stockholders, directors, or members of
a committee of directors need be specified in any written waiver of notice
unless so required by the Certificate of Incorporation or these Bylaws.
SECTION 8.6 EXAMINATION OF BOOKS AND RECORDS. The Board of Directors
shall determine from time to time whether, and if allowed, when and under what
conditions and regulations the accounts and books of the Corporation (except
such as may by statute be specifically opened to inspection) or any of them
shall be open to inspection by the Stockholders, and the Stockholders' rights in
this respect are and shall be restricted and limited accordingly.
SECTION 8.7 VOTING UPON SHARES HELD BY THE CORPORATION. Unless otherwise
provided by law or by the Board of Directors, the Chairman of the Board of
Directors, if one shall be elected, or the Chief Executive Officer, if a
Chairman of the Board of Directors shall not be elected, acting
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on behalf of the Corporation, shall have full power and authority to attend and
to act and to vote at any meeting of Stockholders of any corporation in which
the Corporation may hold stock and, at any such meeting, shall possess and may
exercise any and all of the rights and powers incident to the ownership of such
stock which, as the owner thereof, the Corporation might have possessed and
exercised, if present. The Board of Directors by resolution from time to time
may confer like powers upon any person or persons.
ARTICLE IX
AMENDMENTS
SECTION 9.1 AMENDMENT. Except as otherwise expressly provided in the
Certificate of Incorporation, the directors, by the affirmative vote of a
majority of the entire Board of Directors and without the assent or vote of the
Stockholders, may at any meeting, provided the substance of the proposed
amendment shall have been stated in the notice of the meeting, make, repeal,
alter, amend or rescind any of these Bylaws. The Stockholders shall not make,
repeal, alter, amend or rescind any of the provisions of these Bylaws except by
the holders of not less than 80% of the total voting power of all shares of
stock of the Corporation entitled to vote in the election of directors,
considered for purposes of this Article IX as one class.
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EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of May 21,
1997, is by and among J.L. Holloway, Carl M. Crawford, Ronald W. Schnoor, James
A. Lowe, III and John F. Alford (collectively, the "Holders") and Friede Goldman
International Inc., a Delaware corporation (the "Company").
R E C I T A L S:
----------------
WHEREAS, the Company intends to sell up to 2,870,000 shares of its common
stock (the "Common Stock") through an initial public offering (the "IPO"); and
in connection with such IPO, the Company has filed a registration statement with
the Securities and Exchange Commission (the "SEC") under the Securities Act of
1933, as amended (the "Securities Act"); and
WHEREAS, following the IPO, the Common Stock will be registered under
Section 12 of the Securities and Exchange Act of 1934 (the "Exchange Act"); and
under the provisions of the Securities Act and the rules and regulations
promulgated thereunder, the Holders are or may be limited in the manner of the
sale of the shares of Common Stock owned by them, absent registration under the
Securities Act of the sale of such Common Stock or the availability of exemption
from the registration requirements of the Securities Act; and
A G R E E M E N T:
-----------------
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, the parties hereby agree as follows:
<PAGE>
1. Demand Registration.
-------------------
(A) Request for Registration. As used in this Agreement, "Restricted
Stock" shall mean all shares of Common Stock received by the Holders pursuant to
the Stock Exchange Agreement, dated as of May 21, 1997, by and among the
Company, HAM Marine, Inc., Friede & Goldman, Ltd. and each of the Holders,
together with any securities issued or issuable with respect to any such Common
Stock by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular issued Restricted Stock, such
securities shall cease to be Restricted Stock when (i) a registration statement
with respect to the sale of such securities shall have become effective under
the Securities Act and such securities shall have been disposed of in accordance
with such registration statement, (ii) such securities shall have been
distributed by the Holders to the public pursuant to Rule 144 (or any successor
provision) under the Securities Act, (iii) such securities shall have been
otherwise transferred by the Holders, new certificates representing the
transferred securities not bearing a legend restricting further transfer shall
have been delivered by the Company to the transferees thereof the and subsequent
disposition of such securities shall not require registration or qualification
of such securities under the Securities Act or any similar state law then in
force, (iv) such securities shall have ceased to be outstanding, or (v) the
Holders thereof shall agree in writing that such Restricted Stock shall no
longer be Restricted Stock. The Holders and any permitted assignee of any of
the Holder's rights and duties hereunder are referred to herein as the "Holders"
and a Holder selling or distributing Restricted Stock pursuant hereto is
referred to herein as a "selling Holder." Subject to the conditions and
limitations set forth in Section 5 of this Agreement, at any time and from time
to time after the limitation period referred to in Section 1, the
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Holder or Holders of Restricted Stock holding in the aggregate Twenty Percent
(20%) of the number of shares of Restricted Stock then outstanding may make a
written request for registration under the Securities Act of all or part of its
or their Restricted Stock pursuant to this Section 2 ("Demand Registration"),
provided that the number of shares of Restricted Stock proposed to be sold or
distributed shall be at least Twenty Percent (20%) of the aggregate number of
shares of Restricted Stock then outstanding. Such request will specify the
aggregate number of shares of Restricted Stock proposed to be sold or
distributed and will also specify the intended method of disposition thereof.
Within ten (10) business days after receipt of such request, the Company will
give written notice of such registration request to all other Holders of
Restricted Stock and include in such registration all Restricted Stock with
respect to which the Company has received written requests for inclusion therein
within fifteen (15) business days after the receipt by the applicable Holder of
the Company's notice. Each such request will also specify the aggregate number
of shares of Restricted Stock to be registered and the intended method of
disposition thereof. No other party, including the Company (but excluding
another Holder of Restricted Stock), shall be permitted to offer securities
under any such Demand Registration unless the Holder or Holders requesting the
Demand Registration shall consent thereto in writing.
(B) Priority on Demand Registrations. If the Holders of a majority in
number of shares of the Restricted Stock to be registered in a Demand
Registration so elect, the offering of such Restricted Stock pursuant to such
Demand Registration shall be in the form of an underwritten offering. In such
event, if the managing underwriter or underwriters of such offering advise the
Company and the Holders in writing that in their opinion the aggregate amount of
Restricted Stock requested to be included in such offering is so large that it
will materially and adversely affect the
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success of such offering, the Company will include in such registration only the
aggregate number of shares of Restricted Stock which in the opinion of such
managing underwriter or underwriters can be sold without any such material
adverse effect, and such number of shares shall be allocated pro rata among the
Holders of Restricted Stock on the basis of the number of shares of Restricted
Stock requested by such Holders to be included in such registration. To the
extent Restricted Stock so requested to be registered is excluded from the
offering based on the provisions of the foregoing sentence, then the Holders of
such Restricted Stock shall have the right to one additional Demand Registration
under this Section with respect to such Restricted Stock.
(C) Selection of Underwriters and Counsel. If any Demand Registration
is in the form of an underwritten offering, the Holders of a majority in number
of shares of Restricted Stock to be registered will select and obtain the
services of the investment banker or investment bankers and manager or managers
that will administer the offering and the counsel to such investment bankers and
managers; provided that such investment bankers, managers and counsel are
approved by the Company, which approval shall not be unreasonably withheld.
3. Piggyback Registration. If the Company proposes to file a
registration statement under the Securities Act with respect to an offering for
its own account or for the account of any of its respective securityholders of
any class of its equity securities (other than a registration statement on Form
S-8 (or any successor form) or any other registration statement relating solely
to an employee benefit plan or filed in connection with an exchange offer, a
transaction to which Rule 145 under the Securities Act applies or an offering of
securities solely to the Company's existing stockholders), then the Company
shall in each case give written notice of such proposed filing to the Holders of
Restricted Stock as soon as practicable (but no later than ten (10) business
days) before
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the anticipated filing date, and such notice shall offer such Holders the
opportunity to register such number of shares of Restricted Stock as each such
Holder may request. Each Holder desiring to have Restricted Stock included in
such registration statement shall so advise the Company in writing within ten
(10) business days after the date of the Company's notice, setting forth the
amount of such Holder's Restricted Stock for which registration is requested. If
the Company's offering is to be an underwritten offering, the Company shall,
subject to the further provisions of this Agreement, use its reasonable efforts
to cause the managing underwriter or underwriters to permit the Holders of the
Restricted Stock requested to be included in the registration for such offering
to include such securities in such offering on the same terms and conditions as
any similar securities of the Company included therein. The right of each Holder
to registration pursuant to this Section 3 shall, unless the Company otherwise
assents, be conditioned upon such Holder's participation as a seller in such
underwriting and its execution of an underwriting agreement with the managing
underwriter or underwriters selected by the Company. Notwithstanding the
foregoing, if the managing underwriter or underwriters of such offering deliver
a written opinion to the Holders of Restricted Stock that either because of (A)
the kind of securities which the Holders, the Company and any other persons or
entities intend to include in such offering or (B) the size of the offering
which the Holders, the Company and other persons intend to make, the success of
the offering would be materially and adversely affected by inclusion of the
Restricted Stock requested to be included, then (i) in the event that the size
of the offering is the basis of such managing underwriter's opinion, the number
of shares to be offered for the accounts of Holders of Restricted Stock shall be
reduced pro rata on the basis of the number of securities requested by such
Holders to be offered to the extent necessary to reduce the total amount of
securities to be included in such offering to the amount recommended by
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such managing underwriter or underwriters; provided that if securities are being
offered for the account of other persons or entities as well as the Company,
such reduction shall not represent a greater fraction of the number of
securities intended to be offered by Holders of Restricted Stock than the
fraction of similar reductions imposed on such other persons or entities over
the amount of securities they intended to offer; and (ii) in the event that the
kind of securities to be offered is the basis of such managing underwriter's
opinion, (x) the Restricted Stock to be included in such offering shall be
reduced as described in clause (i) above (subject to the proviso in clause (i))
or, (y) if such actions would, in the judgment of the managing underwriter, be
insufficient to substantially eliminate the adverse effect that inclusion of the
Restricted Stock requested to be included would have on such offering, such
Restricted Stock will be excluded entirely from such offering. Any Restricted
Stock excluded from an underwriting shall be withdrawn from registration and
shall not, without the consent of the Company and the managing underwriter, be
transferred in a public distribution or a sale into the public trading markets
prior to the earlier of 120 days (or such other shorter period of time as the
managing underwriter may require) after the effective date of the registration
statement or 180 days after the date the Holders of such Restricted Stock are
notified of such exclusion.
4. Registration Procedures. Whenever, pursuant to Section 2 or 3, the
Holders of Restricted Stock have requested that any Restricted Stock be
registered, the Company will, subject to the provisions of Section 5, use all
reasonable efforts to effect the registration and the sale or distribution of
such Restricted Stock in accordance with the intended method of disposition
thereof as promptly as practicable, and in connection with any such request, the
Company shall:
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(A) in connection with a request pursuant to Section 2, prepare and
file with the SEC, not later than 45 days after receipt of such a request,
a registration statement on any form for which the Company then qualifies
and which counsel for the Company shall deem appropriate and which form
shall be available for the sale or distribution of such Restricted Stock in
accordance with the intended method of distribution thereof, and use its
reasonable efforts to cause such registration statement to become
effective; provided that if the Board of Directors of the Company has
determined in its good faith judgment that the filing of such registration
statement would materially adversely affect a pending or proposed public
offering of the Company's securities or would otherwise be significantly
disadvantageous to the Company and the Company shall furnish to Holders
making such a request a certificate signed by either the chief executive
officer or the chief financial officer of the Company stating that the
Board of Directors has made such determination the Company shall have an
additional period of not more than 180 days within which to file such
registration statement (provided that the Company shall be entitled to
furnish such a certificate only once in any 12-month period); and provided
further, (i) that before filing a registration statement or prospectus or
any amendments or supplements thereto, the Company will furnish to one
counsel selected by the Holders of a majority in number of shares of the
Restricted Stock covered by such registration statement copies of all such
documents proposed to be filed, which documents will be subject to the
review and comment of such counsel, and (ii) that after the filing of the
registration statement, the Company will promptly notify each selling
Holder of Restricted Stock of any stop order issued or, to the knowledge of
the Company, threatened by the SEC and take all reasonable actions to
prevent the entry of such stop order or to remove it if entered;
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(B) in connection with a registration pursuant to Section 2, prepare
and file with the SEC such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for a period of not
less than 180 days or such shorter period as shall terminate when the
distribution of all Restricted Stock covered by such registration statement
shall have terminated (but not before the expiration of the applicable
period referred to in Section 4(3) of the Securities Act and Rule 174
thereunder), and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement during such period in accordance with the intended methods of
disposition by the selling Holders thereof set forth in such registration
statement;
(C) as soon as reasonably practicable, furnish to such selling
Holders, prior to filing a registration statement, copies of such
registration statement as proposed to be filed, and thereafter furnish to
such selling Holders such number of copies of such registration statement,
each amendment and supplement thereto (in each case, if specified by such
Holders, including all exhibits thereto), the prospectus included in such
registration statement (including each preliminary prospectus) and such
other documents as such selling Holders may reasonably request in order to
facilitate the disposition of the Restricted Stock owned by such selling
Holders;
(D) with reasonable promptness, use its reasonable efforts to register
or qualify such Restricted Stock under such other securities or blue sky
laws of such jurisdictions within the United States and Canada as any
selling Holder reasonably (in light of such selling Holder's intended plan
of distribution) requests and do any and all other acts and things
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which may be reasonably necessary or advisable to enable such selling
Holder to consummate the disposition in such jurisdictions of the
Restricted Stock owned by such selling Holder; provided that the Company
will not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for
this subsection (D), or (ii) subject itself to taxation in any such
jurisdiction.
(E) with reasonable promptness, use reasonable efforts to cause the
Restricted Stock covered by such registration statement to be registered
with or approved by such other governmental agencies or authorities as may
be necessary by virtue of the business and operations of the Company to
enable the selling Holders thereto to consummate the disposition of such
Restricted Stock;
(F) promptly notify each selling Holder of such Restricted Stock, at
any time when a prospectus relating thereto is required to be delivered
under the Securities Act, of the occurrence of any event known to the
Company requiring the preparation of a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers or recipients
of such Restricted Stock, such prospectus will not contain an untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading and promptly make available to each selling Holder any such
supplement or amendment;
(G) in connection with a request pursuant to Section 2, enter into an
underwriting agreement in customary form, the form and substance of such
underwriting agreement being subject to the reasonable satisfaction of the
Company and the Holders;
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(H) with reasonable promptness make available for inspection by any
selling Holder, any underwriter participating in any disposition pursuant
to such registration statement, and any attorney, accountant or other agent
retained by any such selling Holder or underwriter (collectively, the
"Inspectors"), all financial and other records, pertinent corporate
documents and the properties of the Company (collectively, the "Records")
as shall be reasonably necessary to enable them to exercise their due
diligence responsibility, and cause the Company's officers and employees to
supply all information reasonably requested for such purpose by any such
Inspector in connection with such registration statement. Each Inspector
that actually reviews Records supplied by the Company that include
information that the Company identifies, in good faith, to be confidential
("Confidential Information") shall be required, prior to any such review,
to execute an agreement with the Company providing that such Inspector
shall not publicly disclose any Confidential Information unless such
disclosure is required by applicable law or legal process. Each selling
Holder of Restricted Stock agrees that Confidential Information obtained by
it as a result of such inspections shall not be used by it as the basis for
any transactions in securities of the Company unless and until such
information is made generally available to the public. Each selling Holder
of Restricted Stock further agrees that it will, upon learning that
disclosure of Confidential Information is sought in a court of competent
jurisdiction, give notice to the Company and allow the Company, at its
expense, to undertake appropriate action to prevent disclosure of the
Confidential Information. Each selling Holder also agrees that the due
diligence investigation made by the Inspectors shall be conducted in a
manner which shall
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not unreasonably disrupt the operations of the Company or the work
performed by the Company's officers and employees;
(I) in the event such sale is pursuant to an underwritten offering,
use its reasonable efforts to obtain a comfort letter or letters from the
Company's independent public accountants in customary form and covering
such matters of the type customarily covered by comfort letters as the
managing underwriter reasonably requests;
(J) otherwise use its reasonable efforts to comply with all applicable
rules and regulations of the SEC, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering
a period of twelve months, beginning within three months after the
effective date of the registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act; and
(K) with reasonable promptness, use its reasonable efforts to cause
all such Restricted Stock to be listed on each securities exchange on which
the Common Stock of the Company is then listed, provided that the
applicable listing requirements are satisfied.
Each selling Holder of Restricted Stock agrees that, upon receipt of
any notice from the Company of the happening of any event of the kind
described in subsection (F) hereof, such selling Holder will forthwith
discontinue disposition of Restricted Stock pursuant to the registration
statement covering such Restricted Stock until such selling Holder's
receipt of the copies of the supplemented or amended prospectus
contemplated by subsection (F) hereof. In the event the Company shall give
any such notice, the Company shall extend the period during which such
registration statement shall be maintained effective pursuant to this
Agreement (including the period referred to in subsection (B)) by the
number of days during
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the period from and including the date of the giving of such notice
pursuant to subsection (F) hereof to and including the date when each
selling Holder of Restricted Stock covered by such registration statement
shall have received the copies of the supplemented or amended prospectus
contemplated by subsection (F) hereof. Each selling Holder also agrees to
notify the Company if any event relating to such selling Holder occurs
which would require the preparation of a supplement or amendment to the
prospectus so that such prospectus will not contain an untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.
5. Conditions and Limitations.
--------------------------
(A) The Company's obligations under Section 2 shall be subject to the
following limitations:
(i) the Company need not file a registration statement either (x)
during the period starting with the date 60 days prior to the Company's
estimated date of filing of, and ending 90 days after the effective date
of, any registration statement pertaining to securities of the Company
(other than a registration statement on Form S-8 (or any successor form) or
any other registration statement relating solely to employee benefit plans
or filed in connection with an exchange offer, a transaction to which Rule
145 under the Securities Act applies or an offering of securities solely to
the Company's existing stockholders), provided that if such Company
registration statement is not filed within 90 days after the first date on
which the Company notifies a Holder of Restricted Stock that it will delay
a Demand Registration pursuant to this clause (x), the Company may not
further postpone such Demand Registration
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pursuant to this clause; or (y) during the period specified in the first
proviso of subparagraph (A) of Section 4;
(ii) except as provided in Section 2(B), the Company shall not be
required to file more than three Demand Registrations. A registration
statement will not count as a Demand Registration until it has become
effective and the Holder or Holders have sold or distributed Restricted
Stock thereunder; and
(iii) the Company shall have received the information and documents
specified in Section 6 and each selling Holder shall have observed or
performed its other covenants and conditions contained in such Section and
Section 8.
(B) The Company's obligation under Section 3 shall be subject to the
limitations and conditions specified in such Section and in clause (iii) of
subsection (A) of this Section 5, and to the condition that the Company may at
any time terminate its proposal to register its shares and discontinue its
efforts to cause a registration statement to become or remain effective.
6. Information From and Certain Covenants of Holders of Restricted Stock.
Notices and requests delivered to the Company by Holders from whom Restricted
Stock is to be registered pursuant to this Agreement shall contain such
information regarding the Restricted Stock to be so registered, the Holder and
the intended method of disposition of such Restricted Stock as shall reasonably
be required in connection with the action to be taken. Any Holder whose
Restricted Stock is included in a registration statement pursuant to this
Agreement shall execute all consents, powers of attorney, registration
statements and other documents reasonably required to be signed by it in order
to cause such registration statement to become effective. Each selling Holder
covenants that, in disposing of such Holder's shares, such Holder shall comply
with Rules 10b-2,
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10b-5 and Regulation M of the SEC adopted pursuant to the Exchange Act (and any
successor rules thereto).
7. Registration Expenses. All Registration Expenses (as defined herein)
will be borne by the Company. Underwriting discounts and commissions applicable
to the sale of Restricted Stock shall be borne by the Holder of the Restricted
Stock to which such discount or commission relates, and each selling Holder
shall be responsible for the fees and expenses of any legal counsel, accountants
or other agents retained by such selling Holder and all other out-of-pocket
expenses incurred by such selling Holder in connection with any registration
under this Agreement.
As used herein, the term Registration Expenses means all expenses incident
to the Company's performance of or compliance with this Agreement (whether or
not the registration in connection with which such expenses are incurred
ultimately becomes effective), including, without limitation, all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws (including reasonable fees and disbursements of counsel in connection with
blue sky qualifications of the Restricted Stock), rating agency fees, printing
expenses, messenger and delivery expenses incurred by the Company, internal
expenses incurred by the Company (including, without limitation, all salaries
and expenses of its officers and employees performing legal or accounting
duties), the fees and expenses incurred in connection with the listing of the
securities to be registered on each securities exchange on which similar
securities issued by the Company are then listed, NASD fees (including filing
fees and reasonable fees and disbursements of counsel in connection with
compliance with NASD rules and regulations), and fees and disbursements of
counsel for the Company and its independent certified public accountants
(including the expenses of any special audit or comfort letters required by or
incident to such performance), securities act liability insurance
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(if the Company elects to obtain such insurance), the reasonable fees and
expenses of any special experts retained by the Company in connection with such
registration and the fees and expenses of other persons retained by the Company
in connection with such registration.
8. Indemnification; Contribution.
-----------------------------
(A) Indemnification by the Company. The Company agrees to indemnify
and hold harmless each selling Holder of Restricted Stock from and against any
and all losses, claims, damages, liabilities and expenses (including reasonable
costs of counsel) (i) arising out of or based upon (1) any untrue statement or
alleged untrue statement of a material fact contained in any registration
statement or prospectus relating to the Restricted Stock or in any amendment or
supplement thereto or in any preliminary prospectus relating to the Restricted
Stock, or (2) any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages, liabilities or
expenses arise out of, or are based upon, any such untrue statement or omission
or allegation thereof based upon information furnished in writing to the Company
by such selling Holder, or (ii) arising out of or based upon any violation of
any Federal or state securities laws or rules or regulations thereunder
committed by the Company in connection with the performance of its obligations
hereunder. The Company also agrees to include in any underwriting agreement
with any underwriters of the Restricted Stock provisions indemnifying and
providing for contribution to such underwriters and their officers and directors
and each person who controls such underwriters on substantially the same basis
as the provisions of this Section 8 indemnifying and providing for contribution
to the selling Holders.
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(B) Indemnification by Holders of Restricted Stock. Each selling
Holder agrees to indemnify and hold harmless the Company, its officers,
directors and agents and each person (other than a selling Holder), if any, who
controls the Company within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act, from and against any and all losses,
claims, damages, liabilities and expenses (including reasonable costs of
counsel) (i) arising out of or based upon (1) any untrue statement or alleged
untrue statement of a material fact contained in any registration statement or
prospectus relating to the Restricted Stock or in any amendment or supplement
thereto or in any preliminary prospectus relating to the Restricted Stock, or
(2) any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or (ii) arising out of or based upon any violation of any Federal or state
securities laws or rules or regulations thereunder committed by such Holder in
connection with the disposition of such Holder's Restricted Stock, provided (x)
that such losses, claims, damages, liabilities or expenses arise out of or are
based upon any such untrue statement or omission or allegation thereof based
upon information furnished in writing to the Company by such selling Holder or
upon such selling Holder's behalf expressly for use therein, and (y) that no
selling Holder shall be liable for any indemnification under this Section 8 in
an aggregate amount which exceeds the total net proceeds received by such
selling Holder from the offering. Each selling Holder also agrees to include in
any underwriting agreement with underwriters of the Restricted Stock provisions
indemnifying and providing for contribution to such underwriters, their officers
and directors and each person who controls such underwriters on substantially
the same basis as the provisions of this Section 8 indemnifying and providing
for contribution to the Company.
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(C) Conduct of Indemnification Proceedings. If any action or
proceeding (including any governmental investigation) shall be brought or any
claim shall be asserted against any indemnified party in respect of which
indemnity may be sought from an indemnifying party, the indemnifying party shall
assume the defense thereof, including the employment of counsel reasonably
satisfactory to such indemnified party, and shall assume the payment of all
expenses incurred in connection with the defense thereof; provided, that the
indemnifying party may require such indemnified party to undertake to reimburse
all such fees and expenses if it is ultimately determined that such indemnified
party is not entitled to indemnification or advancement of expenses hereunder.
Such indemnified party shall have the right to employ separate counsel in any
such action and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party has agreed to pay such fees and expenses, (ii) the
indemnifying party shall have failed to promptly assume the defense of such
action, claim or proceeding and to employ counsel reasonably satisfactory to
such indemnified party, or (iii) the named parties to any such action, claim or
proceeding (including any impleaded parties) include both such indemnified party
and such indemnifying party, and such indemnified party shall have been advised
in writing by counsel that there may be one or more legal defenses available to
such indemnified party which are different from or additional to those available
to the indemnifying party (in which case, if such indemnified party notifies the
indemnifying party in writing that it elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such action, claim or proceeding on behalf of
such indemnified party, it being understood, however, that the indemnifying
party shall not, in connection with any one such action or proceeding or
separate but substantially similar or
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related actions or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys (together with appropriate
local counsel, subject to the indemnifying party's approval of counsel, which
approval shall not be unreasonably withheld) at any time for such indemnified
party. The indemnifying party shall not be liable for any settlement of any such
action, claim or proceeding effected without its written consent (such consent
which shall not be unreasonably withheld), but if settled with its written
consent, or if there is a final judgment for the plaintiff in any such action or
proceeding, the indemnifying party agrees to indemnify and hold harmless such
indemnified party from and against any loss or liability (to the extent stated
above) by reason of such settlement or judgment.
(D) Contribution. If the indemnification provided for in this Section
8 is unavailable to the Company or the selling Holders in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each such
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments, in such proportion
as is appropriate to reflect the relative fault of each such party in connection
with such statements or omissions, as well as any other relevant equitable
considerations. The relative fault of each such party shall be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been taken or made by, or relates to
information supplied by, such indemnifying or indemnified party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission.
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The Company and the selling Holders agree that it would not be just and
equitable if contribution pursuant to this Section 8(D) were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages, liabilities or judgments referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claims. Notwithstanding the provisions of this Section 8(D), no
selling Holder shall be required to contribute an amount in excess of the amount
by which the total price at which the Restricted Stock of such selling Holder
was offered to the public exceeds the amount of any damages which such selling
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
9. Amendments. This Agreement may be amended or modified upon the
written consent thereto of the Company and the Holders of a majority in number
of shares of Restricted Stock.
10. Assignments. This Agreement shall be binding on and inure to the
benefit of the respective successors and assigns of the parties hereto. Without
the written consent of the Company, a Holder may not assign any rights hereunder
except to a transferee of such Holder of Restricted Stock aggregating Ten
Percent (10%) or more of the Restricted Stock then outstanding, provided that
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the foregoing will not prevent any successor by merger, consolidation or
transfer of substantially all the assets of such Holder from succeeding to a
Holder's rights hereunder.
11. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE,
WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW.
12. Notices. Any notice, request, instruction, correspondence or other
documents to be given hereunder by either party to the other (herein
collectively called "Notice") shall be in writing and delivered personally or
mailed, postage prepaid, or by telecopier, as follows:
If to J.L. Holloway:
J.L. Holloway
525 E. Capital Street, Suite 402
Jackson, Mississippi 39201
Telecopier No.: (601) 352-0588
If to Carl M. Crawford:
Carl M. Crawford
3500 Port Authority Road
Pascagoula, Mississippi 39567
Telecopier No.: (601) 769-1826
If to Ronald W. Schnoor:
Ronald W. Schnoor
3500 Port Authority Road
Pascagoula, Mississippi 39567
Telecopier No.: (601) 769-1826
If to James A. Lowe, III:
James A. Lowe III
525 E. Capital Street, Suite 402
Jackson, Mississippi 39201
Telecopier No.: (601) 352-0588
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If to John F. Alford:
John F. Alford
525 E. Capital Street, Suite 402
Jackson, Mississippi 39201
Telecopier No.: (601) 352-0588
If to the Company:
Friede Goldman International Inc.
525 E. Capital Street, Suite 402
Jackson, Mississippi 39201
Attention: James A. Lowe, III
Telecopier No. (601) 352-0588
Notice given by personal delivery or mail shall be effective upon actual
receipt. Notice given by telecopier shall be effective upon actual receipt if
received during the recipient's normal business hours, or at the beginning of
the recipient's next business day after receipt if not received during the
recipient's normal business hours. Any party may change any address to which
Notice is to be given to it by giving Notice as provided above of such change of
address.
13. Severability. In case any provision in or obligation under this
Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
14. Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and a complete and exclusive statement of
the agreement and understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein. This
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Agreement supersedes all prior agreements and understandings between the parties
with respect to such subject matter.
15. Attorneys' Fees. In any action or proceeding brought to enforce any
provision of this Agreement, or where any provision hereof is validly asserted
as a defense, the prevailing party, as determined by the court, shall be
entitled to recover reasonable attorneys' fees in addition to its costs and
expenses and any other available remedy.
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IN WITNESS WHEREOF, the Holders and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized.
By:____________________________________
J.L. Holloway
By:____________________________________
Carl M. Crawford
By:____________________________________
Ronald W. Schnoor
By:____________________________________
James A. Love, III
By:____________________________________
John F. Alford
FRIEDE GOLDMAN INTERNATIONAL INC.
By:____________________________________
J.L. Holloway
Chairman of the Board, President and Chief
Executive Officer
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EXHIBIT 10.1
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT is made as of May , 1997, and is
entered into by and between Friede Goldman International Inc., a Delaware
corporation (the "Company"), and [OFFICER/DIRECTOR] ("Indemnitee").
R E C I T A L S:
WHEREAS, the certificate of incorporation and bylaws of the Company
provide for the indemnification of its directors and executive officers to the
maximum extent permitted from time to time under applicable law and, along with
the Delaware General Corporation Law, contemplate that the Company may enter
into agreements with respect to such indemnification; and
WHEREAS, the Board of Directors of the Company has concluded that it is
reasonable, prudent and in the best interests of the Company's stockholders for
the Company to contractually obligate itself to indemnify certain of its
Authorized Representatives (defined below) so that they will serve or continue
to serve with greater certainty that they will be adequately protected.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Indemnitee hereby agree as follows:
1. Definitions. For purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires, the following terms
shall have the following respective meanings:
"Authorized Representative" means (i) a director, officer, employee,
agent or fiduciary of the Company or any Subsidiary and (ii) a person
serving at the request of the Company or any Subsidiary as a director,
officer, employee, fiduciary or other representative of another Enterprise.
"Enterprise" means any corporation, partnership, limited liability
company, association, joint venture, trust, employee benefit plan or other
entity.
"Expenses" means all expenses, including (without limitation) reasonable
fees and expenses of counsel.
"Liabilities" means all liabilities, including (without limitation) the
amounts of any judgments, fines, penalties, excise taxes and amounts paid in
settlement.
<PAGE>
"Proceeding" means any threatened, pending or completed claim, action
(including any action by or in the right of the Company), suit or proceeding
(whether formal or informal, or civil, criminal, administrative,
legislative, arbitrative or investigative) in respect of which Indemnitee
is, was or at any time becomes, or is threatened to be made, a party,
witness, subject or target, by reason of the fact that Indemnitee is or was
an Authorized Representative or a prospective Authorized Representative.
"Subsidiary" means, at any time, (i) any corporation of which at least a
majority of the outstanding voting stock is owned by the Company at such
time, directly or indirectly through subsidiaries, and (ii) any other
Enterprise in which the Company, directly or indirectly, owns more than a
50% equity interest at such time.
2. Interpretation. (a) In this Agreement, unless a clear contrary
intention appears:
(i) the singular number includes the plural number and vice versa;
(ii) reference to any gender includes each other gender;
(iii) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Section or other subdivision;
(iv) unless the context indicates otherwise, reference to any Section
means such Section hereof; and
(v) the words "including" (and with correlative meaning "include")
means including, without limiting the generality of any description
preceding such term.
(b) The Section headings herein are for convenience only and shall not
affect the construction hereof.
(c) No provision of this Agreement shall be interpreted or construed
against any party solely because that party or its legal representative drafted
such provision.
(d) In the event of any ambiguity, vagueness or other similar matter
involving the interpretation or meaning of this Agreement, this Agreement shall
be liberally construed so as to provide to Indemnitee the full benefits
contemplated hereby.
(e) If the indemnification to which Indemnitee is entitled as respects
any aspect of any claim varies between two or more provisions of this Agreement,
that provision providing the most comprehensive indemnification shall apply.
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3. Limitation on Personal Liability. To the fullest extent permitted
by applicable law, Indemnitee shall not be personally liable to the Company or
its stockholders for monetary damages for breach of fiduciary duty as a director
of the Company, provided that the foregoing shall not eliminate or limit the
liability of Indemnitee (i) for any breach of Indemnitee's duty of loyalty to
the Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law relating to unlawful
dividend payments and unlawful stock purchases or redemptions or (iv) for any
transaction from which Indemnitee derived an improper personal benefit.
4. Indemnity. (a) Subject to the following provisions of this
Agreement, the Company shall hold harmless and indemnify Indemnitee against all
Expenses and Liabilities actually incurred by Indemnitee in connection with any
Proceeding; provided, however, that no indemnity shall be paid by the Company
pursuant to this Agreement:
(i) for amounts actually paid to Indemnitee pursuant to one or more
policies of directors and officers liability insurance maintained by the
Company or pursuant to a trust fund, letter of credit or other security or
funding arrangement provided by the Company; provided, however, that if it
should subsequently be determined that Indemnitee is not entitled to retain
any such amount, this clause (i) shall no longer apply to such amount;
(ii) in respect of remuneration paid to Indemnitee if it shall be
determined by a final judgment or other final adjudication that payment of
such remuneration was in violation of applicable law;
(iii) on account of Indemnitee's conduct which is finally adjudged to
constitute willful misconduct or to have been knowingly fraudulent,
deliberately dishonest or from which the Indemnitee derives an improper
personal benefit; or
(iv) on account of any suit in which final judgment is rendered against
Indemnitee for an accounting of profits made from the sale or purchase by
Indemnitee of securities of the Company pursuant to the provisions of
Section 16(b) of the Securities Exchange Act of 1934, as amended.
(b) If Indemnitee is entitled under any provision of this Agreement to
indemnification by the Company for only a portion (but not, however, for the
total amount) of any Expenses or Liabilities actually incurred by Indemnitee in
connection with any Proceeding, the Company shall nevertheless indemnify
Indemnitee for the portion of such Expenses and Liabilities to which Indemnitee
is entitled. If the indemnification provided for herein in respect of any
Expenses or Liabilities actually incurred by Indemnitee in connection with any
Proceeding is finally determined by a court of competent jurisdiction to be
prohibited by applicable law, then the Company, in lieu of indemnifying
Indemnitee, shall contribute to the amount paid or payable by Indemnitee as a
result of such Expenses and Liabilities in such proportion as is appropriate to
reflect (i) the relative benefits
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received by the Company on the one hand and Indemnitee on the other hand from
the events, circumstances, conditions, happenings, actions or transactions from
which such Proceeding arose, (ii) the relative fault of the Company (including
its other Authorized Representatives) on the one hand and of Indemnitee on the
other hand in connection with the events, circumstances and happenings which
resulted in such Expenses and Liabilities, such relative fault to be determined
by reference to, among other things, the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent the events,
circumstances and/or happenings resulting in such Expenses and Liabilities, and
(iii) any other relevant equitable considerations, it being agreed that it would
not be just and equitable if such contribution were determined by pro rata or
other method of allocation which does not take into account the foregoing
equitable considerations.
(c) The indemnification provided herein shall be applicable only to
Proceedings commenced after the date hereof, regardless, however, of whether
they arise from acts, omissions, facts or circumstances occurring before or
after the date hereof.
(d) The indemnification provided herein shall be applicable whether or
not negligence of Indemnitee is alleged or proved, and regardless of whether
such negligence be contributory or sole.
(e) Amounts paid by the Company to Indemnitee under this Section 4 are
subject to refund by Indemnitee as provided in Section 8.
5. Notification and Defense of Claims. (a) Promptly after the receipt
by Indemnitee of notice of the commencement of any Proceeding, Indemnitee will,
if a claim in respect thereof is to be made against the Company under this
Agreement, notify the Company of the commencement of such Proceeding; provided,
however, that the omission to so notify the Company will not relieve the Company
(i) from any liability which it may have to Indemnitee under this Agreement
unless, and then only to the extent that, such omission results in insufficient
time being available to permit the Company or its counsel to effectively defend
against or make timely response to any loss, claim, damage, liability or expense
resulting from such Proceeding or otherwise has a material adverse effect on the
Company's ability to promptly deal with such loss, claim, damage, liability or
expense or (ii) from any liability which it may have to Indemnitee otherwise
than under this Agreement.
(b) The following provisions shall apply with respect to any such
Proceeding as to which Indemnitee notifies the Company of the commencement
thereof:
(i) The Company shall be entitled to participate therein at its own
expense.
(ii) Except as otherwise provided below, to the extent it may elect to
do so, the Company (jointly with any other indemnifying party similarly
notified) will be entitled to assume the defense thereof, with counsel of
its own selection reasonably satisfactory to Indemnitee. After notice from
the Company to Indemnitee of its election so to assume the defense thereof,
the Company will not be liable to Indemnitee under this Agreement for any
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Expenses subsequently incurred by Indemnitee in connection with the defense
of such Proceeding other than reasonable costs of investigation or as
otherwise provided below. Indemnitee shall have the right to employ separate
counsel in such Proceeding but the fees and expenses of such counsel
incurred after notice from the Company of its assumption of the defense
thereof shall be at the expense of Indemnitee unless (1) the employment of
separate counsel by Indemnitee has been authorized by the Company; (2)
Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of the defense of
such Proceeding; or (3) the Company shall not in fact have employed counsel
to assume the defense of such Proceeding, in each of which cases the
reasonable fees and expenses of Indemnitee's counsel shall be borne by the
Company. The Company shall not be entitled to assume the defense of any
Proceeding brought by or on behalf of the Company or as to which Indemnitee
shall have made the conclusion provided for in (2) above. Nothing in this
subparagraph (ii) shall affect the obligation of the Company to indemnify
Indemnitee against Expenses and Liabilities paid in settlement for which it
is otherwise obligated hereunder.
(iii) The Company shall not be liable to indemnify Indemnitee under
this Agreement for any amounts paid in settlement of any Proceedings or
claims effected without its prior written consent. The Company shall not
settle any Proceeding or claim in any manner which would impose any penalty
or limitation on Indemnitee without Indemnitee's prior written consent.
Neither the Company nor Indemnitee will unreasonably withhold or delay its
consent to any proposed settlement.
6. Advancement of Expenses, etc. If requested to do so by Indemnitee
with respect to any Proceeding, the Company shall advance to or for the benefit
of Indemnitee, in reasonable intervals prior to the final disposition of such
Proceeding, the Expenses actually incurred by Indemnitee in investigating,
defending or appealing such Proceeding. Any judgments, fines or amounts to be
paid in settlement of any Proceeding shall also be advanced by the Company upon
request by Indemnitee. Advances made by the Company under this Section 6 are
subject to refund by Indemnitee as provided in Section 8.
7. Right of Indemnitee to Bring Suit. (a) If a claim for
indemnification or a claim for an advance under this Agreement is not paid in
full by the Company within 30 days after receipt by the Company from Indemnitee
of a written request or demand therefor, Indemnitee may bring suit against the
Company to recover the unpaid amount of the claim. If, in any such action,
Indemnitee makes a prima facie showing of entitlement to indemnification under
this Agreement, the Company shall have the burden of proving that
indemnification is not required under this Agreement. The only defense to any
such action shall be that indemnification is not required by this Agreement.
(b) In the event that any action is instituted by Indemnitee to
enforce Indemnitee's rights or to collect monies due to Indemnitee under this
Agreement and if Indemnitee is successful in such action, the Company shall
reimburse Indemnitee for all Expenses incurred by Indemnitee with respect to
such action.
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8. Repayment Obligation of Indemnitee. If the Company advances or
pays any amount to Indemnitee under Section 4, 6 or 7 and if it shall thereafter
be finally adjudicated that Indemnitee was not entitled to be indemnified
hereunder for all or any portion of such amount, Indemnitee shall promptly repay
such amount or such portion thereof, as the case may be, to the Company. If the
Company advances or pays any amount to Indemnitee under Section 4, 6 or 7 and if
Indemnitee shall thereafter receive all or a portion of such amount under one or
more policies of directors and officers liability insurance maintained by the
Company or pursuant to a trust fund, letter of credit or other security or
funding arrangement provided by the Company, Indemnitee shall promptly repay
such amount or such portion thereof, as the case may be, to the Company.
9. Changes in Law. If any change after the date of this Agreement in
any applicable law, statute or rule expands the power of the Company to
indemnify Authorized Representatives, such change shall be within the purview of
Indemnitee's rights and the Company's obligations under this Agreement. If any
change after the date of this Agreement in any applicable law, statute or rule
narrows the right of the Company to indemnify an Authorized Representative, such
change shall, to the fullest extent permitted by applicable law, leave this
Agreement and the parties' rights and obligations hereunder unaffected.
10. Continuation of Indemnity. All agreements and obligations of the
Company hereunder shall continue during the period Indemnitee is an Authorized
Representative, and shall continue after Indemnitee has ceased to occupy such
position or have such relationship so long as Indemnitee shall be subject to any
possible Proceeding.
11. Maintenance of Insurance. (a) The Company represents that it
presently maintains in force and effect the following directors and officers
liability insurance ("D&O Insurance") policies (the "Insurance Policies"):
Insurer Policy No. Coverage
------- ---------- --------
Subject only to the provisions of Section 11(b) hereof, the Company hereby
agrees that, so long as Indemnitee shall continue to serve as an Authorized
Representative and thereafter so long as Indemnitee shall be subject to any
possible Proceeding, the Company shall use its best efforts to purchase and
maintain in effect for the benefit of Indemnitee one or more valid and
enforceable policy or policies of D&O Insurance providing, in all respects,
coverage at least comparable to that currently provided pursuant to the
Insurance Policies, provided that the Company shall have no obligation to
provide primary coverage in excess of $_____ million or excess coverage in
excess of $______ million.
(b) The Company shall not be required to purchase and maintain the
Insurance Policies in effect if D&O Insurance is not reasonably available or if,
in the reasonable business judgement of the then directors of the Company,
either (i) the premium cost for such insurance is excessive in light of the
amount of coverage or (ii) the coverage provided by such insurance is so
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limited by exclusions, retentions, deductibles or otherwise that there is
insufficient benefit from such insurance.
12. Nonexclusivity. The indemnification and other rights provided by
any provision of this Agreement shall not be deemed exclusive of any other
rights to which Indemnitee may be entitled under (i) any statutory or common
law, (ii) the Company's certificate of incorporation, (iii) the Company's
bylaws, (iv) any other agreement or (v) any vote of stockholders or
disinterested directors or otherwise, both as to action in Indemnitee's official
capacity and as to action in another capacity while occupying any of the
positions or having any of the relationships referred to in this Agreement.
Nothing in this Agreement shall in any manner affect, impair or compromise any
indemnification Indemnitee has or may have by virtue of any agreement previously
entered into between Indemnitee and the Company.
13. Severability. If any provision of this Agreement shall be held to
be invalid, illegal or unenforceable (i) the validity, legality or
enforceability of the remaining provisions of this Agreement shall not be in any
way affected or impaired thereby and (ii) to the fullest extent possible, the
provisions of this Agreement shall be construed so as to give effect to the
intent manifested by the provision held invalid, illegal or unenforceable. Each
provision of this Agreement is a separate and independent portion of this
Agreement.
14. Modification and Waiver. No supplement, modification or amendment
of this Agreement shall be binding unless executed in writing by both of the
parties. No waiver of any of the provisions of this Agreement shall be binding
unless executed in writing by the person making the waiver nor shall such waiver
constitute a continuing waiver.
15. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be addressed (i) if to the Company, at
its principal office address as shown on the signature page hereof or such other
address as it may have designated by written notice to Indemnitee for purposes
hereof, directed to the attention of the Secretary and (ii) if to Indemnitee, at
Indemnitee's address as shown on the signature page hereof or to such other
address as Indemnitee may have designated by written notice to the Company for
purposes hereof. Each such notice or other communication shall be deemed to
have been duly given if (a) delivered by hand and receipted for by the party to
whom said notice or other communication shall have been directed, (b)
transmitted by facsimile transmission, at the time that receipt of such
transmission is confirmed, or (c) mailed by certified or registered mail with
postage prepaid, on the third business day after the date on which it is so
mailed.
16. Governing Law. THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT
MADE UNDER, AND SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW.
17. Heirs, Successors and Assigns. (a) This Agreement shall be binding
upon, inure to the benefit of and be enforceable by (i) Indemnitee and
Indemnitee's personal or legal
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representatives, executors, administrators, heirs, devisees and legatees and
(ii) the Company and its successors and assigns. This Agreement shall not inure
to the benefit of any other person or Enterprise.
(b) The Company agrees to require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used herein, the term "Company" shall include any successor
to its business and/or assets as aforesaid which executes and delivers the
assumption and agreement provided for in this Section 17 or which otherwise
becomes bound by all terms and provisions of this Agreement by operation of law.
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ENTERED into on the day and year first above written.
FRIEDE GOLDMAN INTERNATIONAL INC.
By: __________________________________
Name:
Title:
Address:
Telecopier:
INDEMNITEE:
______________________________________
[OFFICER/DIRECTOR]
Address:
Telecopier:
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EXHIBIT 10.2
EMPLOYMENT AND NON-COMPETITION AGREEMENT
This Employment and Non-Competition Agreement (the "Agreement"), effective
as of January 1, 1997, is by and among Friede Goldman International Inc., a
Delaware corporation (the "Company"), and J. L. Holloway ("Employee").
R E C I T A L S
WHEREAS, HAM Marine, Inc. ("HAM Marine") is in the business of repairing,
retrofitting and constructing offshore oil and gas drilling units;
WHEREAS, Friede & Goldman, Ltd. ("F&G") is in the business of designing
offshore oil and gas drilling units;
WHEREAS, the Company, HAM Marine and Friede & Goldman, Ltd., Employee and
certain other persons entered into a Stock Exchange Agreement of even date
herewith pursuant to which HAM Marine and F&G will become wholly owned
subsidiaries of the Company (the "Exchange");
WHEREAS, in connection with the Exchange, the Company desires to engage
Employee and Employee desires to accept such engagement;
Therefore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:
A G R E E M E N T S
1. Employment and Duties.
(a) The Company hereby employs Employee as President and Chief Executive
Officer. As such, Employee shall have responsibilities, duties and authority
commensurate with such position and as may be assigned to him by the Company
from time to time during the term of this Agreement. Employee will report to the
Board of Directors of Company. Employee hereby accepts this employment upon the
terms and conditions herein contained and agrees to devote his time, attention
and best efforts to promote and further the business of the Company.
(b) Employee shall faithfully adhere to, execute and fulfill all policies
established by the Company.
(c) Employee shall not, during the term of his employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes
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with Employee's duties and responsibilities hereunder. However, the foregoing
limitations shall not be construed as prohibiting Employee from making personal
investments in such form or manner as will neither require his services in the
operation or affairs of the enterprises in which such investments are made nor
violate the terms of paragraph 3 hereof.
2. Compensation. For all services rendered by Employee, the Company
shall compensate Employee as follows:
(a) Base Salary. Beginning on the date of this Agreement, the base salary
payable to Employee shall be $275,000.00 per year, payable on a regular basis in
accordance with the Company's standard payroll procedures. On at least an
annual basis, the Compensation Committee of the Board of Directors of the
Company (the "Committee") will review Employee's performance and may recommend
increases to such base salary if, in the Committee's discretion, any such
increase is warranted.
(b) Executive Perquisites, Benefits and Other Compensation. Employee
shall be entitled to receive additional benefits and compensation from the
Company in such form and to such extent as specified below:
(1) Reimbursement for all business travel and other out-of-pocket expenses
(including those costs to maintain any professional certifications
held or obtained by Employee) reasonably incurred by Employee in the
performance of his services pursuant to this Agreement. All
reimbursable expenses shall be appropriately documented in reasonable
detail by Employee upon submission of any request for reimbursement
and in a format and manner consistent with the Company's expense
reporting policy.
(2) Two (2) weeks of paid vacation or such greater amount as may be
afforded officers and key employees at similar levels under the
Company's policies in effect from time to time.
(3) The Company shall provide Employee with other executive perquisites as
may be available to or deemed appropriate for Employee by the Board or
the Committee and participation in all other Company-wide employee
benefits as may be adopted from time to time by the Company.
3. Non-Competition Agreement.
(a) Employee recognizes that the Company's willingness to enter into the
Stock Exchange Agreement and to consummate the Exchange is based in material
part on Employee's agreement to the provisions of this paragraph 3, and that
Employee's breach of the provisions of this paragraph could materially damage
the Company. Therefore, in consideration of the benefits to be received by
Employee as a result of the Exchange, Employee agrees that the Employee shall
not, for a period of two (2) years immediately following the consummation of the
Exchange, for any
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reason whatsoever, directly or indirectly, for himself or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature:
(1) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any business selling any products or services in direct
competition with the Company or any of the Company's subsidiaries within
100 miles of where the Company or any of the Company's subsidiaries
conducts business (the "Territory");
(2) call upon any person who is a managerial employee of the Company
(including its subsidiaries) for the purpose or with the intent of enticing
such employee away from or out of the employ of the Company (including its
subsidiaries); or
(3) call upon any person or entity which is a customer of the Company
(including its subsidiaries) within the Territory for the purpose of
soliciting or selling products or services in direct competition with the
Company within the Territory.
(b) Because of the difficulty of measuring economic losses to the Company
as a result of a breach of the foregoing covenant, and because of the immediate
and irreparable damage that could be caused to the Company for which it would
have no other adequate remedy, Employee agrees that the foregoing covenant may
be enforced by the Company in the event of breach by him, by injunctions and
restraining orders.
(c) The covenants in this paragraph 3 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time or territorial restrictions set forth in
this paragraph 3 are unreasonable, then it is the intention of the parties that
such restrictions be enforced to the fullest extent which the court deems
reasonable, and this Agreement shall thereby be reformed.
(d) Each of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by the Company of such covenants.
4. Term; Termination; Rights on Termination. The term of this Agreement
shall begin on the date hereof and continue for one (1) year (the "Initial
Term"), and, unless terminated sooner as herein provided, shall continue
thereafter on a year-to-year basis on the same terms and conditions contained
herein. This Agreement and Employee's employment may be terminated in any one
of the followings ways:
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(a) Death. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from his full-time duties
hereunder for four (4) consecutive months, then thirty (30) days after receiving
written notice (which notice may occur before or after the end of such four (4)
month period, but which shall not be effective earlier than the last day of such
four (4) month period), the Company may terminate Employee's employment
hereunder provided Employee is unable to resume his full-time duties at the
conclusion of such notice period. Also, Employee may terminate his employment
hereunder if his health should become impaired to an extent that makes the
continued performance of his duties hereunder hazardous to his physical or
mental health or his life, provided that Employee shall have furnished the
Company with a written statement from a qualified doctor to such effect and
provided, further, that, at the Company's request made within thirty (30) days
of the date of such written statement, Employee shall submit to an examination
by a doctor selected by the Company who is reasonably acceptable to Employee or
Employee's doctor and such doctor shall have concurred in the conclusion of
Employee's doctor. In the event this Agreement is terminated as a result of
Employee's disability, Employee shall receive from the Company, in a lump-sum
payment due within ten (10) days of the effective date of termination, the base
salary at the rate then in effect for whatever time period is remaining under
the Initial Term of this Agreement or for six (6) months, whichever amount is
greater.
(c) Good Cause. The Company may terminate this Agreement ten (10) days
after written notice to Employee for good cause, which shall be: (1) Employee's
material and irreparable breach of this Agreement; (2) Employee's gross
negligence in the performance or intentional nonperformance (continuing for ten
(10) days after receipt of written notice of need to cure) of any of Employee's
material duties and responsibilities hereunder; (3) Employee's dishonesty, fraud
or misconduct with respect to the business or affairs of the Company which
materially and adversely affects the operations or reputation of the Company;
(4) Employee's conviction of a felony crime; or (5) chronic alcohol abuse or
illegal drug abuse by Employee. In the event of a termination for good cause,
as enumerated above, Employee shall have no right to any severance compensation.
(d) Without Cause. At any time after the commencement of employment, the
Company or Employee may, without cause, terminate this Agreement and Employee's
employment, effective thirty (30) days after written notice is provided to the
other party. Should Employee be terminated by the Company without cause,
Employee shall receive from the Company, in a lump-sum payment due on the
effective date of termination, the base salary at the rate then in effect for
twelve (12) months. Further, any termination without cause by the Company shall
operate to shorten the period set forth in paragraph 3(a) and during which the
terms of paragraph 3 apply to one (1) year from the date of termination of
employment. If Employee resigns or otherwise terminates his employment without
cause pursuant to this paragraph 5(d), Employee shall receive no severance
compensation.
(e) Change in Control of the Company. This Agreement may be considered
terminated upon a "change in control", as defined in paragraph 11 below.
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Upon termination of this Agreement for any reason provided above, Employee
shall be entitled to receive all compensation earned and all benefits and
reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
paragraph 11. All other rights and obligations of the Company and Employee
under this Agreement shall cease as of the effective date of termination, except
that the Company's obligations under paragraph 8 herein and Employee's
obligations under paragraphs 3, 5, 6, 7 and 9 herein shall survive such
termination in accordance with their terms.
If termination of Employee's employment arises out of the Company's failure
to pay Employee on a timely basis the amounts to which he is entitled under this
Agreement or as a result of any other breach of this Agreement by the Company,
as determined by a court of competent jurisdiction or pursuant to the provisions
of paragraph 15 below, the Company shall pay all amounts and damages to which
Employee may be entitled as a result of such breach, including interest thereon
and all reasonable legal fees and expenses and other costs incurred by Employee
to enforce his rights hereunder. Further, none of the provisions of paragraph 3
shall apply in the event this Agreement is terminated as a result of a breach by
the Company.
5. Return of Company Property. All records, designs, patents, business
plans, financial statements, manuals, memoranda, lists and other property
delivered to or compiled by Employee by or on behalf of the Company or its
subsidiaries or the representatives, vendors or customers thereof which pertain
to the business of the Company or its subsidiaries shall be and remain the
property of the Company and be subject at all times to the discretion and
control thereof. Likewise, all correspondence, reports, records, charts,
advertising materials and other similar data pertaining to the business,
activities or future plans of the Company or its subsidiaries which are
collected by Employee shall be delivered promptly to the Company without request
by it upon termination of Employee's employment.
6. Inventions. Employee shall disclose promptly to the Company any and
all significant conceptions and ideas for inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment or within one
(1) year thereafter, and which are directly related to the business or
activities of the Company or its subsidiaries and which Employee conceives as a
result of his employment by the Company. Employee hereby assigns and agrees to
assign all his interests therein to the Company or its nominee. Whenever
requested to do so by the Company, Employee shall execute any and all
applications, assignments or other instruments that the Company shall deem
necessary to apply for and obtain Letters Patent of the United States or any
foreign country or to otherwise protect the Company's interest therein.
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7. Confidentiality.
(a) Employee acknowledges and agrees that all Confidential Information (as
defined below) of the Company and its subsidiaries is confidential and a
valuable, special, and unique asset of the Company that gives the Company an
advantage over its actual and potential, current, and future competitors.
Employee further acknowledges and agrees that Employee owes the Company a
fiduciary duty to preserve and protect all Confidential Information from
unauthorized disclosure or unauthorized use; certain Confidential Information
constitutes "trade secrets" under the laws of the state of Mississippi; and
unauthorized disclosure or unauthorized use of the Company's Confidential
Information would irreparably injure the Company.
(b) Both during the term of Employee's employment and after the
termination of Employee's employment for any reason (including wrongful
termination), Employee shall hold all Confidential Information in strict
confidence, and shall not use any Confidential Information except for the
benefit of the Company, in accordance with the duties assigned to Employer.
Employee shall not, at any time (either during or after the term of Employee's
employment), disclose any Confidential Information to any person or entity
(except other employees of the Company who have a need to know the information
in connection with the performance of their employment duties), or copy,
reproduce, modify, decompile, or reverse engineer any Confidential Information,
or remove any Confidential Information from the Company's premises, without the
prior written consent of the Board of Directors of the Company, or permit any
other person to do so. Employee shall take reasonable precautions to protect the
physical security of all documents and other material containing Confidential
Information (regardless of the medium on which the Confidential Information is
stored). This Agreement applies to all Confidential Information, whether now
known or later to become known to Employee.
(c) Upon the termination of Employee's employment with the Company for any
reason, and upon request of the Company at any other time, Employee shall
promptly surrender and deliver to the Company all documents and other written
material of any nature containing or pertaining to any Confidential Information
and shall not retain any such document or other material. Within five days of
any such request, Employee shall certify to the Company in writing that all such
materials have been returned.
(d) As used in this Agreement, the term "Confidential Information" shall
mean any information or material known to or used by or for the Company or its
subsidiaries(whether or not owned or developed by the Company or its
subsidiaries and whether or not developed by Employee) that is not generally
known to the public. Confidential information included, but is not limited to,
the following: all trade secrets of the Company or its subsidiaries; all
information that the Company or its subsidiaries has marked as confidential or
has otherwise described to Employee (either in writing or orally) as
confidential; all nonpublic information concerning the Company's or its
subsidiaries products, services, prospective products or services, research,
product designs, prices, discounts, costs, marketing plans, marketing
techniques, market studies, test data, customers, customer lists and records,
suppliers, and contracts; all Company business records and plans; all
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Company personnel files; all financial information of or concerning the Company
or its subsidiaries; all information relating to operating system software,
application software, software and system methodology, hardware platforms,
technical information, inventions, computer programs and listings, source codes,
object codes, copyrights, and other intellectual property; all technical
specifications; any proprietary information belonging to the Company or its
subsidiaries; all computer hardware or software manual; all training or
instruction manuals; all data and all computer system passwords and user codes.
8. Indemnification. In the event Employee is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by the Company
against Employee), by reason of the fact that he is or was performing services
under this Agreement, then the Company shall indemnify Employee against all
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement, as actually and reasonably incurred by Employee in connection
therewith. In the event that both Employee and the Company are made a party to
the same third-party action, complaint, suit or proceeding, the Company agrees
to engage competent legal representation, and Employee agrees to use the same
representation, provided that if counsel selected by the Company shall have a
conflict of interest that prevents such counsel from representing Employee,
Employee may engage separate counsel and the Company shall pay all attorneys'
fees of such separate counsel. Further, while Employee is expected at all times
to use his best efforts to faithfully discharge his duties under this Agreement,
Employee cannot be held liable to the Company for errors or omissions made in
good faith where Employee has not exhibited gross, willful and wanton negligence
and misconduct or performed criminal and fraudulent acts which materially damage
the business of the Company.
9. No Prior Agreements. Employee hereby represents and warrants to the
Company that the execution of this Agreement by Employee and his employment by
the Company and the performance of his duties hereunder will not violate or be a
breach of any agreement with a former employer, client or any other person or
entity. Further, Employee agrees to indemnify the Company for any claim,
including, but not limited to, attorneys' fees and expenses of investigation, by
any such third party that such third party may now have or may hereafter come to
have against the Company based upon or arising out of any noncompetition
agreement, invention or secrecy agreement between Employee and such third party
which was in existence as of the date of this Agreement.
10. Assignment; Binding Effect. Employee understands that he has been
selected for employment by the Company on the basis of his personal
qualifications, experience and skills. Employee agrees, therefore, he cannot
assign all or any portion of his performance under this Agreement. Subject to
the preceding two (2) sentences and the express provisions of paragraph 12
below, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, legal
representatives, successors and assigns.
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11. Change in Control.
(a) Unless he elects to terminate this Agreement pursuant to (c) below,
Employee understands and acknowledges that the Company may be merged or
consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of the Company hereunder.
(b) In the event of a pending Change in Control wherein the Company and
Employee have not received written notice at least five (5) business days prior
to the anticipated closing date of the transaction giving rise to the Change in
Control from the successor to all or a substantial portion of the Company's
business and/or assets that such successor is willing as of the closing to
assume and agrees to perform the Company's obligations under this Agreement in
the same manner and to the same extent that the Company is hereby required to
perform, then such Change in Control shall be deemed to be a termination of this
Agreement by the Company without cause and the applicable portions of paragraph
5(d) will apply; however, under such circumstances, the amount of the lump-sum
severance payment due to Employee shall be triple the amount calculated under
the terms of paragraph 5(d) and the non-competition provisions of paragraph 3
shall not apply whatsoever.
(c) In any Change in Control situation, Employee may, at his sole
discretion, elect to terminate this Agreement by providing written notice to the
Company at least five (5) business days prior to the anticipated closing of the
transaction giving rise to the Change in Control. In such case, the applicable
provisions of paragraph 5(d) will apply as though the Company had terminated the
Agreement without cause; however, under such circumstances, the amount of the
lump-sum severance payment due to Employee shall be double the amount calculated
under the terms of paragraph 5(d) and the non-competition provisions of
paragraph 3 shall all apply for a period of two (2) years from the effective
date of termination.
(d) For purposes of applying paragraph 5 under the circumstances described
in (b) and (c) above, the effective date of termination will be the closing date
of the transaction giving rise to the Change in Control and all compensation,
reimbursements and lump-sum payments due Employee must be paid in full by the
Company at or prior to such closing.
(e) A "Change in Control" shall be deemed to have occurred if:
(1) any person, other than the Company or an employee benefit plan of
the Company, acquires directly or indirectly the Beneficial Ownership (as
defined in Section 13(d) of the Securities Exchange Act of 1934, as
amended) of any voting security of the Company and immediately after such
acquisition such Person is, directly or indirectly, the Beneficial Owner of
voting securities representing 50% or more of the total voting power of all
of the then-outstanding voting securities of the Company;
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(2) the individuals (A) who, as of the effective date of the Company's
registration statement with respect to its initial public offering,
constitute the Board of Directors of the Company (the "Original Directors")
or (B) who thereafter are elected to the Board of Directors of the Company
and whose election, or nomination for election, to the Board of Directors
of the Company was approved by a vote of at least two-thirds (2/3) of the
Original Directors then still in office (such directors becoming
"Additional Original Directors" immediately following their election) or
(C) who are elected to the Board of Directors of the Company and whose
election, or nomination for election, to the Board of Directors of the
Company was approved by a vote of at least two-thirds (2/3) of the Original
Directors and Additional Original Directors then still in office (such
directors also becoming "Additional Original Directors" immediately
following their election) (such individuals being the "Continuing
Directors"), cease for any reason to constitute a majority of the members
of the Board of Directors of the Company;
(3) the stockholders of the Company shall approve a merger,
consolidation, recapitalization, or reorganization of the Company, a
reverse stock split of outstanding voting securities, or consummation of
any such transaction if stockholder approval is not sought or obtained,
other than any such transaction which would result in at least 75% of the
total voting power represented by the voting securities of the surviving
entity outstanding immediately after such transaction being Beneficially
Owned by at least 75% of the holders of outstanding voting securities of
the Company immediately prior to the transaction, with the voting power of
each such continuing holder relative to other such continuing holders not
substantially altered in the transaction; or
(4) the stockholders of the Company shall approve a plan of complete
liquidation of The Company or an agreement for the sale or disposition by
the Company of all or a substantial portion of the Company's assets (i.e.,
50% or more of the total assets of the Company).
(f) Employee must be notified in writing by the Company at any time that
the Company anticipates that a Change in Control may take place.
(g) Employee shall be reimbursed by the Company or its successor for any
excise taxes that Employee incurs under Section 4999 of the Internal Revenue
Code of 1986, as a result of any Change in Control. Such amount will be due and
payable by the Company or its successor within ten (10) days after Employee
delivers a written request for reimbursement accompanied by a copy of his tax
return(s) showing the excise tax actually incurred by Employee.
12. Complete Agreement. Except as expressly provided herein, this
Agreement is not a promise of future employment. Employee has no oral
understandings or agreements with the Company or any of its officers, directors
or representatives covering the same subject matter as this Agreement. This
written Agreement is the final, complete and exclusive statement and expression
of the agreement between the Company and Employee and of all the terms of this
Agreement, and
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it cannot be varied, contradicted or supplemented by evidence of any prior or
contemporaneous oral or written agreements. This written Agreement may not be
later modified except by a further writing signed by a duly authorized officer
of the Company and Employee, and no term of this Agreement may be waived except
by writing signed by the party waiving the benefit of such term.
13. Notice. Whenever any notice is required hereunder, it shall be given
in writing addressed as follows:
To the Company: Friede Goldman International Inc.
525 E. Capitol Street, Suite 402
Jackson, Mississippi 39201
To Employee: __________________________
__________________________
__________________________
Notice shall be deemed given and effective three (3) days after the deposit
in the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party
may change the address for notice by notifying the other party of such change in
accordance with this paragraph 14.
14. Severability Headings. If any portion of this Agreement is held
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. The
paragraph headings herein are for reference purposes only and are not intended
in any way to describe, interpret, define or limit the extent or intent of the
Agreement or of any part hereof.
15. Arbitration. Any unresolved dispute or controversy arising under or
in connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three (3) arbitrators in Houston, Texas, in
accordance with the rules of the American Arbitration Association then in
effect. The arbitrators shall not have the authority to add to, detract from,
or modify any provision hereof nor to award punitive damages to any injured
party. The arbitrators shall have the authority to order back-pay, severance
compensation, vesting of options (or cash compensation in lieu of vesting of
options), reimbursement of costs, including those incurred to enforce this
Agreement, and interest thereon in the event the arbitrators determine that
Employee was terminated without disability or good cause, as defined in
paragraphs 4(b) and 4(c), respectively, or that the Company has otherwise
materially breached this Agreement. A decision by a majority of the arbitration
panel shall be final and binding. Judgment may be entered on the arbitrators'
award in any court having jurisdiction.
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16. Governing Law. This Agreement shall in all respects be construed
according to the laws of the State of Mississippi.
FRIEDE GOLDMAN INTERNATIONAL INC.
By: __________________________________
Name:
Title:
EMPLOYEE:
______________________________________
______________________________________
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EXHIBIT 10.3
EMPLOYMENT AND NON-COMPETITION AGREEMENT
This Employment and Non-Competition Agreement (the "Agreement"), effective
as of January 1, 1997, is by and among HAM Marine, Inc., a Mississippi
corporation (the "Company"), and _______________ ("Employee").
WHEREAS, the Company desires to engage Employee and Employee desires to
accept such engagement;
Therefore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:
1. Employment and Duties.
---------------------
(a) The Company hereby employs Employee as _________________. As such,
Employee shall have responsibilities, duties and authority commensurate with
such position and as may be assigned to him by the Company from time to time
during the term of this Agreement. Employee will report to the Board of
Directors of Company. Employee hereby accepts this employment upon the terms
and conditions herein contained and agrees to devote his time, attention and
best efforts to promote and further the business of the Company.
(b) Employee shall faithfully adhere to, execute and fulfill all policies
established by the Company.
(c) Employee shall not, during the term of his employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. However, the foregoing limitations shall not be
construed as prohibiting Employee from making personal investments in such form
or manner as will neither require his services in the operation or affairs of
the enterprises in which such investments are made nor violate the terms of
paragraph 3 hereof.
2. Compensation. For all services rendered by Employee, the Company
shall compensate Employee as follows:
(a) Base Salary. Beginning on the date of this Agreement, the base salary
payable to Employee shall be $_________________ per year, payable on a regular
basis in accordance with the Company's standard payroll procedures. On at least
an annual basis, the Compensation Committee of the Board of Directors of the
Company (the "Committee") will review Employee's performance and may recommend
increases to such base salary if, in the Committee's discretion, any such
increase is warranted.
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(b) Executive Perquisites, Benefits and Other Compensation. Employee
shall be entitled to receive additional benefits and compensation from the
Company in such form and to such extent as specified below:
(1) Reimbursement for all business travel and other out-of-pocket expenses
(including those costs to maintain any professional certifications held or
obtained by Employee) reasonably incurred by Employee in the performance of
his services pursuant to this Agreement. All reimbursable expenses shall
be appropriately documented in reasonable detail by Employee upon
submission of any request for reimbursement and in a format and manner
consistent with the Company's expense reporting policy.
(2) Two (2) weeks of paid vacation or such greater amount as may be
afforded officers and key employees at similar levels under the Company's
policies in effect from time to time.
(3) The Company shall provide Employee with other executive perquisites as
may be available to or deemed appropriate for Employee by the Board or the
Committee and participation in all other Company-wide employee benefits as
may be adopted from time to time by the Company.
3. Non-Competition Agreement.
-------------------------
(a) Employee recognizes that the Company's willingness to enter into the
Stock Exchange Agreement and to consummate the Exchange is based in material
part on Employee's agreement to the provisions of this paragraph 3, and that
Employee's breach of the provisions of this paragraph could materially damage
the Company. Therefore, in consideration of the benefits to be received by
Employee as a result of the Exchange, Employee agrees that the Employee shall
not, for a period of two (2) years immediately following the consummation of the
Exchange, for any reason whatsoever, directly or indirectly, for himself or on
behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature:
(1) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any business selling any products or services in direct
competition with the Company or any of the Company's affiliates within 100
miles of where the Company or any of the Company's affiliates conducts
business (the "Territory");
(2) call upon any person who is a managerial employee of the Company
(including its affiliates) for the purpose or with the intent of enticing
such employee away from or out of the employ of the Company (including its
affiliates); or
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(3) call upon any person or entity which is a customer of the Company
(including its affiliates) within the Territory for the purpose of
soliciting or selling products or services in direct competition with the
Company within the Territory.
(b) Because of the difficulty of measuring economic losses to the Company
as a result of a breach of the foregoing covenant, and because of the immediate
and irreparable damage that could be caused to the Company for which it would
have no other adequate remedy, Employee agrees that the foregoing covenant may
be enforced by the Company in the event of breach by him, by injunctions and
restraining orders.
(c) The covenants in this paragraph 3 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time or territorial restrictions set forth in
this paragraph 3 are unreasonable, then it is the intention of the parties that
such restrictions be enforced to the fullest extent which the court deems
reasonable, and this Agreement shall thereby be reformed.
(d) Each of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by the Company of such covenants.
4. Term; Termination; Rights on Termination. The term of this Agreement
shall begin on the date hereof and continue for one (1) year (the "Initial
Term"), and, unless terminated sooner as herein provided, shall continue
thereafter on a year-to-year basis on the same terms and conditions contained
herein. This Agreement and Employee's employment may be terminated in any one
of the followings ways:
(a) Death. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from his full-time duties
hereunder for four (4) consecutive months, then thirty (30) days after receiving
written notice (which notice may occur before or after the end of such four (4)
month period, but which shall not be effective earlier than the last day of such
four (4) month period), the Company may terminate Employee's employment
hereunder provided Employee is unable to resume his full-time duties at the
conclusion of such notice period. Also, Employee may terminate his employment
hereunder if his health should become impaired to an extent that makes the
continued performance of his duties hereunder hazardous to his physical or
mental health or his life, provided that Employee shall have furnished the
Company with a written statement from a qualified doctor to such effect and
provided, further, that, at the Company's request made within thirty (30) days
of the date of such written statement, Employee shall submit to an examination
by a doctor selected by the Company who is reasonably acceptable to Employee or
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Employee's doctor and such doctor shall have concurred in the conclusion of
Employee's doctor. In the event this Agreement is terminated as a result of
Employee's disability, Employee shall receive from the Company, in a lump-sum
payment due within ten (10) days of the effective date of termination, the base
salary at the rate then in effect for whatever time period is remaining under
the Initial Term of this Agreement or for six (6) months, whichever amount is
greater.
(c) Good Cause. The Company may terminate this Agreement ten (10) days
after written notice to Employee for good cause, which shall be: (1) Employee's
material and irreparable breach of this Agreement; (2) Employee's gross
negligence in the performance or intentional nonperformance (continuing for ten
(10) days after receipt of written notice of need to cure) of any of Employee's
material duties and responsibilities hereunder; (3) Employee's dishonesty, fraud
or misconduct with respect to the business or affairs of the Company which
materially and adversely affects the operations or reputation of the Company;
(4) Employee's conviction of a felony crime; or (5) chronic alcohol abuse or
illegal drug abuse by Employee. In the event of a termination for good cause,
as enumerated above, Employee shall have no right to any severance compensation.
(d) Without Cause. At any time after the commencement of employment, the
Company or Employee may, without cause, terminate this Agreement and Employee's
employment, effective thirty (30) days after written notice is provided to the
other party. Should Employee be terminated by the Company without cause,
Employee shall receive from the Company, in a lump-sum payment due on the
effective date of termination, the base salary at the rate then in effect for
twelve (12) months. Further, any termination without cause by the Company shall
operate to shorten the period set forth in paragraph 3(a) and during which the
terms of paragraph 3 apply to one (1) year from the date of termination of
employment. If Employee resigns or otherwise terminates his employment without
cause pursuant to this paragraph 5(d), Employee shall receive no severance
compensation.
(e) Change in Control of the Company. This Agreement may be considered
terminated upon a "change in control", as defined in paragraph 11 below.
Upon termination of this Agreement for any reason provided above, Employee
shall be entitled to receive all compensation earned and all benefits and
reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
paragraph 11. All other rights and obligations of the Company and Employee
under this Agreement shall cease as of the effective date of termination, except
that the Company's obligations under paragraph 8 herein and Employee's
obligations under paragraphs 3, 5, 6, 7 and 9 herein shall survive such
termination in accordance with their terms.
If termination of Employee's employment arises out of the Company's failure
to pay Employee on a timely basis the amounts to which he is entitled under this
Agreement or as a result of any other breach of this Agreement by the Company,
as determined by a court of competent jurisdiction or pursuant to the provisions
of paragraph 15 below, the Company shall pay all amounts and damages to which
Employee may be entitled as a result of such breach, including interest
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thereon and all reasonable legal fees and expenses and other costs incurred by
Employee to enforce his rights hereunder. Further, none of the provisions of
paragraph 3 shall apply in the event this Agreement is terminated as a result of
a breach by the Company.
5. Return of Company Property. All records, designs, patents, business
plans, financial statements, manuals, memoranda, lists and other property
delivered to or compiled by Employee by or on behalf of the Company or its
affiliates or the representatives, vendors or customers thereof which pertain to
the business of the Company or its affiliates shall be and remain the property
of the Company and be subject at all times to the discretion and control
thereof. Likewise, all correspondence, reports, records, charts, advertising
materials and other similar data pertaining to the business, activities or
future plans of the Company or its affiliates which are collected by Employee
shall be delivered promptly to the Company without request by it upon
termination of Employee's employment.
6. Inventions. Employee shall disclose promptly to the Company any and
all significant conceptions and ideas for inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment or within one
(1) year thereafter, and which are directly related to the business or
activities of the Company or its affiliates and which Employee conceives as a
result of his employment by the Company. Employee hereby assigns and agrees to
assign all his interests therein to the Company or its nominee. Whenever
requested to do so by the Company, Employee shall execute any and all
applications, assignments or other instruments that the Company shall deem
necessary to apply for and obtain Letters Patent of the United States or any
foreign country or to otherwise protect the Company's interest therein.
7. Confidentiality.
(a) Employee acknowledges and agrees that all Confidential Information (as
defined below) of the Company and its affiliates is confidential and a valuable,
special, and unique asset of the Company that gives the Company an advantage
over its actual and potential, current, and future competitors. Employee
further acknowledges and agrees that Employee owes the Company a fiduciary duty
to preserve and protect all Confidential Information from unauthorized
disclosure or unauthorized use; certain Confidential Information constitutes
"trade secrets" under the laws of the state of Mississippi; and unauthorized
disclosure or unauthorized use of the Company's Confidential Information would
irreparably injure the Company.
(b) Both during the term of Employee's employment and after the termination
of Employee's employment for any reason (including wrongful termination),
Employee shall hold all Confidential Information in strict confidence, and shall
not use any Confidential Information except for the benefit of the Company, in
accordance with the duties assigned to Employer. Employee shall not, at any
time (either during or after the term of Employee's employment), disclose any
Confidential Information to any person or entity (except other employees of the
Company who have a need to know the information in connection with the
performance of their employment duties), or
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<PAGE>
copy, reproduce, modify, decompile, or reverse engineer any Confidential
Information, or remove any Confidential Information from the Company's premises,
without the prior written consent of the Board of Directors of the Company, or
permit any other person to do so. Employee shall take reasonable precautions to
protect the physical security of all documents and other material containing
Confidential Information (regardless of the medium on which the Confidential
Information is stored). This Agreement applies to all Confidential Information,
whether now known or later to become known to Employee.
(c) Upon the termination of Employee's employment with the Company for any
reason, and upon request of the Company at any other time, Employee shall
promptly surrender and deliver to the Company all documents and other written
material of any nature containing or pertaining to any Confidential Information
and shall not retain any such document or other material. Within five days of
any such request, Employee shall certify to the Company in writing that all such
materials have been returned.
(d) As used in this Agreement, the term "Confidential Information" shall
mean any information or material known to or used by or for the Company or its
affiliates (whether or not owned or developed by the Company or its affiliates
and whether or not developed by Employee) that is not generally known to the
public. Confidential information included, but is not limited to, the
following: all trade secrets of the Company or its affiliates; all information
that the Company or its affiliates has marked as confidential or has otherwise
described to Employee (either in writing or orally) as confidential; all
nonpublic information concerning the Company's or its affiliates products,
services, prospective products or services, research, product designs, prices,
discounts, costs, marketing plans, marketing techniques, market studies, test
data, customers, customer lists and records, suppliers, and contracts; all
Company business records and plans; all Company personnel files; all financial
information of or concerning the Company or its affiliates; all information
relating to operating system software, application software, software and system
methodology, hardware platforms, technical information, inventions, computer
programs and listings, source codes, object codes, copyrights, and other
intellectual property; all technical specifications; any proprietary information
belonging to the Company or its affiliates; all computer hardware or software
manual; all training or instruction manuals; all data and all computer system
passwords and user codes.
8. Indemnification. In the event Employee is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by the Company
against Employee), by reason of the fact that he is or was performing services
under this Agreement, then the Company shall indemnify Employee against all
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement, as actually and reasonably incurred by Employee in connection
therewith. In the event that both Employee and the Company are made a party to
the same third-party action, complaint, suit or proceeding, the Company agrees
to engage competent legal representation, and Employee agrees to use the same
representation, provided that if counsel selected by the Company shall have a
conflict of interest that prevents such counsel from representing Employee,
Employee may engage separate counsel and the Company shall pay all attorneys'
fees of such separate counsel. Further, while Employee is expected
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<PAGE>
at all times to use his best efforts to faithfully discharge his duties under
this Agreement, Employee cannot be held liable to the Company for errors or
omissions made in good faith where Employee has not exhibited gross, willful and
wanton negligence and misconduct or performed criminal and fraudulent acts which
materially damage the business of the Company.
9. No Prior Agreements. Employee hereby represents and warrants to the
Company that the execution of this Agreement by Employee and his employment by
the Company and the performance of his duties hereunder will not violate or be a
breach of any agreement with a former employer, client or any other person or
entity. Further, Employee agrees to indemnify the Company for any claim,
including, but not limited to, attorneys' fees and expenses of investigation, by
any such third party that such third party may now have or may hereafter come to
have against the Company based upon or arising out of any noncompetition
agreement, invention or secrecy agreement between Employee and such third party
which was in existence as of the date of this Agreement.
10. Assignment; Binding Effect. Employee understands that he has been
selected for employment by the Company on the basis of his personal
qualifications, experience and skills. Employee agrees, therefore, he cannot
assign all or any portion of his performance under this Agreement. Subject to
the preceding two (2) sentences and the express provisions of paragraph 12
below, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, legal
representatives, successors and assigns.
11. Change in Control.
(a) Unless he elects to terminate this Agreement pursuant to (c) below,
Employee understands and acknowledges that the Company may be merged or
consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of the Company hereunder.
(b) In the event of a pending Change in Control wherein the Company and
Employee have not received written notice at least five (5) business days prior
to the anticipated closing date of the transaction giving rise to the Change in
Control from the successor to all or a substantial portion of the Company's
business and/or assets that such successor is willing as of the closing to
assume and agrees to perform the Company's obligations under this Agreement in
the same manner and to the same extent that the Company is hereby required to
perform, then such Change in Control shall be deemed to be a termination of this
Agreement by the Company without cause and the applicable portions of paragraph
5(d) will apply; however, under such circumstances, the amount of the lump-sum
severance payment due to Employee shall be triple the amount calculated under
the terms of paragraph 5(d) and the non-competition provisions of paragraph 3
shall not apply whatsoever.
(c) In any Change in Control situation, Employee may, at his sole
discretion, elect to terminate this Agreement by providing written notice to the
Company at least five (5) business days
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prior to the anticipated closing of the transaction giving rise to the Change in
Control. In such case, the applicable provisions of paragraph 5(d) will apply as
though the Company had terminated the Agreement without cause; however, under
such circumstances, the amount of the lump-sum severance payment due to Employee
shall be double the amount calculated under the terms of paragraph 5(d) and the
non-competition provisions of paragraph 3 shall all apply for a period of two
(2) years from the effective date of termination.
(d) For purposes of applying paragraph 5 under the circumstances described
in (b) and (c) above, the effective date of termination will be the closing date
of the transaction giving rise to the Change in Control and all compensation,
reimbursements and lump-sum payments due Employee must be paid in full by the
Company at or prior to such closing.
(e) A "Change in Control" shall be deemed to have occurred if:
(1) any person, other than the Company or an employee benefit plan of
the Company, acquires directly or indirectly the Beneficial Ownership (as
defined in Section 13(d) of the Securities Exchange Act of 1934, as
amended) of any voting security of the Company and immediately after such
acquisition such Person is, directly or indirectly, the Beneficial Owner of
voting securities representing 50% or more of the total voting power of all
of the then-outstanding voting securities of the Company;
(2) the individuals (A) who, as of the effective date of the Company's
registration statement with respect to its initial public offering,
constitute the Board of Directors of the Company (the "Original Directors")
or (B) who thereafter are elected to the Board of Directors of the Company
and whose election, or nomination for election, to the Board of Directors
of the Company was approved by a vote of at least two-thirds (2/3) of the
Original Directors then still in office (such directors becoming
"Additional Original Directors" immediately following their election) or
(C) who are elected to the Board of Directors of the Company and whose
election, or nomination for election, to the Board of Directors of the
Company was approved by a vote of at least two-thirds (2/3) of the Original
Directors and Additional Original Directors then still in office (such
directors also becoming "Additional Original Directors" immediately
following their election) (such individuals being the "Continuing
Directors"), cease for any reason to constitute a majority of the members
of the Board of Directors of the Company;
(3) the stockholders of the Company shall approve a merger,
consolidation, recapitalization, or reorganization of the Company, a
reverse stock split of outstanding voting securities, or consummation of
any such transaction if stockholder approval is not sought or obtained,
other than any such transaction which would result in at least 75% of the
total voting power represented by the voting securities of the surviving
entity outstanding immediately after such transaction being Beneficially
Owned by at least 75 % of the holders of outstanding voting securities of
the Company immediately prior to the transaction, with
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the voting power of each such continuing holder relative to other such
continuing holders not substantially altered in the transaction; or
(4) the stockholders of the Company shall approve a plan of complete
liquidation of The Company or an agreement for the sale or disposition by
the Company of all or a substantial portion of the Company's assets (i.e.,
50% or more of the total assets of the Company).
(f) Employee must be notified in writing by the Company at any time that
the Company anticipates that a Change in Control may take place.
(g) Employee shall be reimbursed by the Company or its successor for any
excise taxes that Employee incurs under Section 4999 of the Internal Revenue
Code of 1986, as a result of any Change in Control. Such amount will be due and
payable by the Company or its successor within ten (10) days after Employee
delivers a written request for reimbursement accompanied by a copy of his tax
return(s) showing the excise tax actually incurred by Employee.
12. Complete Agreement. Except as expressly provided herein, this
Agreement is not a promise of future employment. Employee has no oral
understandings or agreements with the Company or any of its officers, directors
or representatives covering the same subject matter as this Agreement. This
written Agreement is the final, complete and exclusive statement and expression
of the agreement between the Company and Employee and of all the terms of this
Agreement, and it cannot be varied, contradicted or supplemented by evidence of
any prior or contemporaneous oral or written agreements. This written Agreement
may not be later modified except by a further writing signed by a duly
authorized officer of the Company and Employee, and no term of this Agreement
may be waived except by writing signed by the party waiving the benefit of such
term.
13. Notice. Whenever any notice is required hereunder, it shall be given
in writing addressed as follows:
To the Company: HAM Marine, Inc.
3500 Port Authority Road
Pascagoula, Mississippi 39567
To Employee: __________________________
__________________________
__________________________
Notice shall be deemed given and effective three (3) days after the deposit
in the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party
may change the address for notice by notifying the other party of such change in
accordance with this paragraph 14.
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14. Severability Headings. If any portion of this Agreement is held
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. The
paragraph headings herein are for reference purposes only and are not intended
in any way to describe, interpret, define or limit the extent or intent of the
Agreement or of any part hereof.
15. Arbitration. Any unresolved dispute or controversy arising under or
in connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three (3) arbitrators in Houston, Texas, in
accordance with the rules of the American Arbitration Association then in
effect. The arbitrators shall not have the authority to add to, detract from,
or modify any provision hereof nor to award punitive damages to any injured
party. The arbitrators shall have the authority to order back-pay, severance
compensation, vesting of options (or cash compensation in lieu of vesting of
options), reimbursement of costs, including those incurred to enforce this
Agreement, and interest thereon in the event the arbitrators determine that
Employee was terminated without disability or good cause, as defined in
paragraphs 4(b) and 4(c), respectively, or that the Company has otherwise
materially breached this Agreement. A decision by a majority of the arbitration
panel shall be final and binding. Judgment may be entered on the arbitrators'
award in any court having jurisdiction.
16. Governing Law. This Agreement shall in all respects be construed
according to the laws of the State of Mississippi.
HAM MARINE, INC.
By:____________________________________
Name:
Title:
EMPLOYEE:
_______________________________________
_______________________________________
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EXHIBIT 10.6
FRIEDE & GOLDMAN INTERNATIONAL INC.
1997 EQUITY INCENTIVE PLAN
Friede & Goldman International Inc., a Delaware corporation (the
"Company"), hereby establishes this Friede Goldman International Inc. 1997
Equity Incentive Plan (the "Plan").
1. Purpose. The purpose of the Plan is to promote the interests of the
Company by encouraging employees of, and consultants to, the Company and its
Subsidiaries and the directors of the Company who are not also employees of the
Company or a Subsidiary, to acquire or increase their equity interests in the
Company and to provide a means whereby such persons may develop a sense of
proprietorship and personal involvement in the development and financial success
of the Company, and to encourage them to remain with and devote their best
efforts to the business of the Company, thereby advancing the interests of the
Company and its stockholders. The Plan is also contemplated to enhance the
ability of the Company and its Subsidiaries to attract and retain the services
of individuals who are believed to be essential for the growth and profitability
of the Company.
2. Definitions. As used in this Plan:
(a) "Appreciation Right" means a right granted pursuant to
Paragraph 5.
(b) "Award" means an Appreciation Right, an Option Right, a Director
Option, Phantom Shares, a Performance Unit, Bonus Stock, Restricted Stock,
or a Cash Tax Right.
(c) "Board" means the Board of Directors of the Company.
(d) "Bonus Stock" means unrestricted shares of Common Stock granted
pursuant to Paragraph 9.
(e) "Cash Tax Right" means a right granted pursuant to Paragraph 10.
(f) "Change in Control" shall be deemed to have occurred upon:
(i) the date of the acquisition by any "person" (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934 ("Exchange Act") and excluding any transfer to any family
members or entities controlled by family members of J. L. Holloway),
excluding the Company or any of its Subsidiaries or affiliates, of
beneficial ownership (within the meaning of Rule 13d-3 under the
Exchange Act) of 50% or more of either the then outstanding shares of
common stock of the Company, or the then outstanding voting securities
entitled to vote generally in the election of directors; or
(ii) the date the individuals who constitute the Board as of the
effective date of this Plan (the "Incumbent Board"), cease for any
reason to constitute at least a majority of the members of the Board,
provided that any person becoming a director subsequent to the
effective date of this Plan whose election, or nomination for election
by the Company's stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board (other
than any individual whose nomination for election to Board membership
was not endorsed by the Company's management prior to, or at the time
of, such individual's initial nomination for election) shall be, for
purposes of this Plan, considered as though such person were a member
of the Incumbent Board;
(iii) the date of consummation of a merger, consolidation,
recapitalization, reorganization, sale or disposition of all or a
substantial portion of the Company's assets, or the
<PAGE>
issuance of shares of stock of the Company in connection with the
acquisition of the stock or assets of another entity, provided,
however, that a Change in Control shall not occur under this clause
(iii) if consummation of the transaction would result in at least 50%
of the total voting power represented by the voting securities of the
Company (or, if not the Company, the entity that succeeds to all or
substantially all of the Company's business) outstanding immediately
after such transaction being beneficially owned (within the meaning of
Rule 13d-3 promulgated pursuant to the Exchange Act) by at least 50%
of the holders of outstanding voting securities of the Company
immediately prior to the transaction, with the voting power of each
such continuing holder relative to other such continuing holders not
substantially altered in the transaction; or
(iv) the date the Company files a report or proxy statement with
the Securities and Exchange Commission pursuant to the Exchange Act
disclosing in response to Form 8-K or Schedule 14A (or any successor
schedule, form or report or item therein) that a change in control of
the Company has or may have occurred or will or may occur in the
future pursuant to any then-existing contract or transaction.
(g) "Code" means the Internal Revenue Code of 1986, as in effect from
time to time.
(h) "Committee" means the Compensation Committee of the Board.
(i) "Common Stock" means the Common Stock, $0.01 par value, of the
Company or any security into which such Common Stock may be changed by
reason of any transaction or event of the type described in Paragraph 14.
(j) "Date of Grant" means (i) with respect to an Award, other than a
Director Option, the date specified by the Committee on which such Award
will become effective (which date will not be earlier than the date on
which the Committee takes action with respect thereto) and (ii) with
respect to a Director Option, the automatic date of grant as provided in
Paragraph 11.
(k) "Director" means a member of the Board.
(l) "Director Option" means the right to purchase a share of Common
Stock upon exercise of an option granted pursuant to Paragraph 11.
(m) "Dividend Equivalent" means, with respect to an Option or Phantom
Share, an amount equal to the amount of any dividends that are declared and
become payable after the Date of Grant for such Award and on or before the
date such Award is exercised, paid or forfeited, as the case may be.
(n) "Grant Price" means the price per share of Common Stock at which
an Appreciation Right not granted in tandem with an Option Right is
granted.
(o) "Management Objectives" means the objectives, if any, established
by the Committee that are to be achieved with respect to an Award granted
under this Plan, which may be described in terms of Company-wide
objectives, in terms of objectives that are related to performance of a
division, Subsidiary, department or function within the Company or a
Subsidiary in which the Participant receiving the Award is employed or in
individual or other terms, and which will relate to the period of time
("Performance Cycle") determined by the Committee. The Management
Objectives intended to qualify under Section 162(m) of the Code shall be
with respect to one or more of the following (i) net earnings; (ii)
operating income; (iii) earnings before interest and taxes ("EBIT"); (iv)
operating income plus interest, taxes, depreciation, amortization and non-
cash compensation expenses related to the issuance of stock and stock
options to employees ("EBITDA"); (v) earnings before taxes and unusual or
nonrecurring items; (vi) revenue; (vii) return on investment; (viii) return
on equity; (ix) return
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on total capital; (x) return on assets; (xi) total stockholder return;
(xii) return on capital employed in the business; (xiii) stock price
performance; (xiv) earnings per share growth; and (xv) cash flows.
Determinations of which objectives to use with respect to an Award, the
weighting of the objectives if more than one is used, and whether the
objective is to be measured against a Company-established budget or target,
an index or a peer group of companies, shall be made by the Committee in
its discretion at the time of grant of the Award. A Management Objective
need not be based on an increase or a positive result and may include, for
example, maintaining the status quo or limiting economic losses. The
Committee, in its sole discretion and without the consent of the
Participant, may amend any stock-based Award that is intended to qualify
under section 162(m) of the Code to reflect (1) a change in corporate
capitalization, such as a stock split or dividend, (2) a corporate
transaction, such as a corporate merger, a corporate consolidation, any
corporate separation (including a spinoff or other distribution of stock or
property by a corporation), any corporate reorganization (whether or not
such reorganization comes within the definition of such term in section 368
of the Code), (3) any partial or complete corporate liquidation, or (4) a
change in accounting rules required by the Financial Accounting Standard
Board. With respect to any Award that is subject to section 162 (m) of the
Code, the Committee must first certify that the Management Objectives have
been achieved before the Award may be paid. The Management Objectives of
any other Award may be amended by the Committee, in its sole discretion and
without the consent of the Participant, to reflect any significant event
that the Committee believes to be appropriate to reflect the original
intent of the Award.
(p) "Market Value per Share" means, at any date after the Common Stock
is readily tradeable on a national securities market, the closing sale
price per share of the Common Stock on that date (or, if there are no sales
on that date, the last preceding date on which there was a sale) in the
principal market in which the Common Stock is traded. Prior to such date,
Market Value per Share shall be determined by the Committee, in its good
faith opinion.
(q) "Option Price" means the purchase price per share payable on
exercise of an Option Right or Director Option.
(r) "Option Right" means the right to purchase a share of Common Stock
upon exercise of an option granted pursuant to Paragraph 4.
(s) "Participant" means an employee of, or consultant to, the Company
or any of its Subsidiaries who is selected by the Committee to receive an
Award under any of Paragraphs 4 through 10 and shall also include a
Director who has received an automatic grant of Director Options pursuant
to Paragraph 11.
(t) "Performance Unit" means a unit equivalent to $100 (or such other
value as the Committee determines) awarded pursuant to Paragraph 8.
(u) "Phantom Shares" means notional shares of Common Stock awarded
pursuant to Paragraph 7.
(v) "Restricted Stock" means shares of Common Stock granted or sold
pursuant to Paragraph 6 as to which neither the ownership restrictions nor
the restriction on transfers referred to therein has expired.
(w) "Spread" means the amount determined by multiplying (i) the excess
of the Market Value per Share on the date when an Appreciation Right is
exercised over the Option Price provided for in the related Option Right
or, if there is no tandem Option Right, the Grant Price provided for in the
Appreciation Right by (ii) the number of shares of Common Stock in respect
of which the Appreciation Right is exercised.
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(x) "Subsidiary" means, at any time, any corporation in which at the
time the Company then owns or controls, directly or indirectly, not less
than 50% of the total combined voting power represented by all classes of
stock issued by such corporation.
3. Shares Available Under Plan and Eligibility. (a) The total number of
shares of Common Stock reserved and available for issuance under the Plan shall
be the greater of 1,150,000 shares or 10% of the total number of shares of
Common Stock outstanding (on a fully diluted basis, assuming, if applicable, the
conversion of all warrants and convertible securities into Common Stock), as
such number of outstanding shares changes from time to time. Notwithstanding the
foregoing, the number of shares of Common Stock that may be delivered upon
exercise of an incentive stock option shall not exceed 1,150,000 shares of
Common Stock under the Plan, subject to adjustment in accordance with Paragraph
14. Such shares may be shares of original issuance or treasury shares or a
combination of the foregoing. Upon exercise of any Appreciation Rights or the
payment of any Phantom Shares, there will be deemed to have been delivered under
this Plan for purposes of this Paragraph 3 the number of shares of Common Stock
covered by the Appreciation Rights or equal to the Phantom Shares, as
applicable, regardless of whether such Appreciation Rights or Phantom Shares
were paid in cash or shares of Common Stock. Subject to the provisions of the
preceding sentence, any shares of Common Stock which are subject to Option
Rights, Appreciation Rights, or Phantom Shares awarded or sold as Restricted
Stock that are terminated unexercised, forfeited or surrendered or which expire
for any reason will again be available for issuance under this Plan.
(b) Directors, employees of the Company and its Subsidiaries, and persons
who provide consulting or other services to the Company or a Subsidiary, are
eligible to be granted Awards under the Plan. In addition, a person who has
been offered employment by the Company or a Subsidiary is eligible to be granted
an Award (other than an incentive stock option) under the Plan, provided that
such Award shall be canceled if such person fails to commence such employment,
and no payment of value may be made in connection with such Award until such
person has commenced such employment.
4. Option Rights. The Committee may from time to time authorize grants
to any employee or consultant (other than a Director) of options to purchase
shares of Common Stock upon such terms and conditions as it may determine in
accordance with the following provisions:
(a) Each grant will specify the number of shares of Common Stock to
which it pertains and whether Dividend Equivalents are awarded with respect
to the option and, if awarded, the payment or crediting of such Dividend
Equivalents.
(b) Each grant will specify its Option Price, which may not be less
than 100% of the Market Value per Share on the Date of Grant.
(c) Each grant will specify that the Option Price will be payable (i)
in cash or by check payable and acceptable to the Company or (ii) subject
to the approval of the Committee, which may be evidenced at the Date of
Grant in the grant agreement, (a) by tendering to the Company shares of
Common Stock owned by the optionee (if such shares were acquired pursuant
to the exercise of a Company stock option, such shares must have been held
by the Optionee for at least six months) having an aggregate Market Value
Per Share as of the date of exercise and tender that is not greater than
the full option exercise price for the shares with respect to which the
Option is being exercised and by paying any remaining amount of the option
exercise price as provided in (i) above (provided that the Committee may,
upon confirming that the optionee owns the number of shares being tendered,
authorize the issuance of a new certificate for the number of shares being
acquired pursuant to the exercise of the option less the number of shares
being tendered upon the exercise and return to the optionee (or not require
surrender of) the certificate for the shares being tendered upon the
exercise) or (b) by the optionee delivering to the Company a properly
executed exercise notice together with irrevocable instructions to a broker
to promptly deliver to the Company cash or a check payable and acceptable
to the Company to pay the option exercise price and any required tax
withholding amounts; provided that in
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the event the optionee chooses to pay the option exercise price as provided
in (ii)(b) above, the optionee and the broker shall comply with such
procedures and enter into such agreements of indemnity and other agreements
as the Committee shall prescribe as a condition of such payment procedure,
or (iii) by a combination of such payment methods. Payment instruments will
be received subject to collection.
(d) Successive grants may be made to the same Participant whether or
not any Option Rights previously granted to such Participant remain
unexercised.
(e) Each grant will specify the required period or periods of
continuous service by the Participant with the Company and the Affiliates
and/or the Management Objectives (if any) to be achieved before the Option
Rights or installments thereof will become exercisable, and any grant may
provide for the earlier exercise of the Option Rights in the event of a
Change in Control or other corporate transaction or event or upon
termination of the Participant's employment due to death, disability,
retirement or otherwise, including an involuntary termination other than
for cause.
(f) Each grant the exercise of which, or the timing of the exercise of
which, is dependent, in whole or in part, on the achievement of Management
Objectives may specify a minimum level of achievement in respect of the
specified Management Objectives below which no Options Rights will be
exercisable and may set forth a formula or other method for determining the
number of Option Rights that will be exercisable if performance is at or
above such minimum but short of full achievement of the Management
Objectives.
(g) Option Rights granted under this Plan may be (i) options which are
intended to qualify as incentive stock options under Section 422 of the
Code, provided, however, such options may only be granted to employees of
the Company, its parent corporation and subsidiaries of the Company, (ii)
options which are not intended to so qualify or (iii) combinations of the
foregoing.
(h) Option Rights granted to a Participant who is an officer of the
Company or a Subsidiary may, in the discretion of the Committee, provide
for an automatic "reload" grant upon the exercise of the Option Right, with
such terms and conditions on any such reload grant as the Committee may
choose, provided, however, the Option Price may not be less than 100% of
the Market Value per Share on the Date of Grant of the reload option and
its term may not exceed the remaining term for the exercised option.
(i) Each grant may, in the discretion of the Committee, provide that
the Common Stock acquired upon exercise of the Option Right shall remain
subject to a "substantial risk of forfeiture", within the meaning of
Section 83 of the Code and the regulations thereunder, with such
restrictions as the Committee may determine.
(j) Each grant shall specify the period during which the Option Right
may be exercised, but no Option Right will be exercisable more than ten
years from the Date of Grant.
(k) Each grant of Option Rights will be evidenced by an agreement
executed on behalf of the Company by any officer and delivered to the
Participant and containing such terms and provisions, consistent with this
Plan, as the Committee may approve.
(l) Notwithstanding the foregoing, Option Rights may be granted from
time to time in substitution for stock options held by employees of other
corporations who become Employees as the result of a merger or
consolidation of the employing corporation with the Company or any
Subsidiary, or the acquisition by the Company or any Subsidiary of the
assets of the employing corporation, or the acquisition by the Company or
any Subsidiary of stock of the employing corporation as the result of which
it becomes a Subsidiary. The terms and conditions of substitute Option
Rights granted may vary from the terms and
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conditions set forth above, to the extent the Committee, at the time of
grant, deems it appropriate to conform, in whole or in part, to the
provisions of the stock options in substitution for which they are granted.
No person may receive Option Rights with respect to more than 250,000
shares during any calendar year.
5. Appreciation Rights. The Committee may from time to time authorize
grants to any employee or consultant (other than a Director) of Appreciation
Rights upon such terms and conditions as it may determine in accordance with
this Paragraph. Appreciation Rights may be granted in tandem with Option Rights
or separate and apart from a grant of Option Rights. An Appreciation Right will
be a right of the Participant granted such Award to receive from the Company,
upon exercise, an amount which will be determined by the Committee at the Date
of Grant and will be expressed as a percentage of the Spread (not exceeding
100%) at the time of exercise. An Appreciation Right granted in tandem with an
Option Right may be exercised only by surrender of the related Option Right.
Each grant of an Appreciation Right may utilize any or all of the
authorizations, and will be subject to all of the limitations, contained in the
following provisions:
(a) Each grant will state whether it is made in tandem with Option
Rights and, if not made in tandem with any Option Rights, will specify the
number of shares of Common Stock in respect of which it is made.
(b) Each grant made in tandem with Option Rights will specify the
Option Price and each grant not made in tandem with Option Rights will
specify the Grant Price, which in either case will not be less than 100% of
the Market Value per Share on the Date of Grant.
(c) Any grant may specify that the amount payable on exercise of an
Appreciation Right may be paid by the Company in (i) cash or Company check,
(ii) shares of Common Stock having an aggregate Market Value per Share
equal to the Spread or (iii) any combination thereof, as determined by the
Committee in its sole discretion.
(d) Any grant may specify that the amount payable on exercise of an
Appreciation Right may not exceed a maximum specified by the Committee at
the Date of Grant (valuing shares of Common Stock for this purpose at their
Market Value per Share at the date of exercise).
(e) Each grant will specify the required period or periods of
continuous service by the Participant with the Company and its Subsidiaries
and/or Management Objectives to be achieved before the Appreciation Rights
or installments thereof will become exercisable. Any grant may provide for
the earlier exercise of the Appreciation Rights in the event of a Change in
Control or other corporate transaction or event or upon the Participant's
termination due to death, disability or retirement, including an
involuntary termination other than for cause.
(f) Each grant the exercise of which, or the timing of the exercise of
which, is dependent, in whole or in part, on the achievement of Management
Objectives may specify a minimum level of achievement in respect of the
specified Management Objectives below which no Appreciation Rights will be
exercisable and may set forth a formula or other method for determining the
number of Appreciation Rights that will be exercisable if performance is at
or above such minimum but short of full achievement of the Management
Objectives.
(g) Each grant of an Appreciation Right will be evidenced by an
agreement executed on behalf of the Company by any officer and delivered to
and accepted by the Participant receiving the grant, which agreement will
describe such Appreciation Right, identify any Option Right granted in
tandem with such
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Appreciation Right, state that such Appreciation Right is subject to all
the terms and conditions of this Plan and contain such other terms and
provisions, consistent with this Plan, as the Committee may approve.
No person may receive Appreciation Rights with respect to more than
250,000 shares during any calendar year.
6. Restricted Stock. The Committee may from time to time authorize
grants or sales to any employee or consultant (other than a Director) of
Restricted Stock upon such terms and conditions as it may determine in
accordance with the following provisions:
(a) Each grant or sale will constitute an immediate transfer of the
ownership of shares of Common Stock to the Participant in consideration of
the performance of services, entitling such Participant to voting and other
ownership rights, but subject to the restrictions hereinafter referred to.
Each grant or sale may limit the Participant's dividend rights during the
period in which the shares of Restricted Stock are subject to any such
restrictions.
(b) Each grant or sale will specify the Management Objectives, if any,
that are to be achieved in order for the ownership restrictions to lapse.
Each grant or sale that is subject to the achievement of Management
Objectives will specify a minimum acceptable level of achievement in
respect of the specified Management Objectives below which the shares of
Restricted Stock will be forfeited and may set forth a formula or other
method for determining the number of shares of Restricted Stock with
respect to which restrictions will lapse if performance is at or above such
minimum but short of full achievement of the Management Objectives.
(c) Each such grant or sale may be made without additional
consideration or in consideration of a payment by such Participant that is
less than the Market Value per Share at the Date of Grant.
(d) Each such grant or sale will provide that the shares of Restricted
Stock covered by such grant or sale will be subject, for a period to be
determined by the Committee at the Date of Grant, to one or more
restrictions, including, without limitation, a restriction that constitutes
a "substantial risk of forfeiture" within the meaning of Section 83 of the
Code and the regulations thereunder, and any grant or sale may provide for
the earlier termination of such period in the event of a Change in Control
or other corporate transaction or event or upon termination of the
Participant's employment due to death, disability, retirement or otherwise,
including an involuntary termination other than for cause.
(e) Each such grant or sale will provide that during the period for
which such restriction or restrictions are to continue, the transferability
of the Restricted Stock will be prohibited or restricted in a manner and to
the extent prescribed by the Committee at the Date of Grant (which
restrictions may include, without limitation, rights of repurchase or first
refusal in the Company or provisions subjecting the Restricted Stock to
continuing restrictions in the hands of any transferee).
(f) Each grant or sale of Restricted Stock will be evidenced by an
agreement executed on behalf of the Company by any officer and delivered to
and accepted by the Participant and containing such terms and provisions,
consistent with this Plan, as the Committee may approve.
(g) Unless otherwise approved by the Committee, certificates
representing shares of Common Stock transferred pursuant to a grant of
Restricted Stock will be held in escrow pursuant to an agreement
satisfactory to the Committee until such time as the restrictions on
transfer have expired or the shares have been forfeited.
No person may receive more than 250,000 shares of Restricted Stock
during any calendar year.
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7. Phantom Shares. The Committee may from time to time authorize grants
to any employee or consultant (other than a Director) of Phantom Shares upon
such terms and conditions as it may determine in accordance with the following
provisions:
(a) Each grant will specify the number of Phantom Shares to which it
pertains and the payment or crediting of any Dividend Equivalents with
respect to such Phantom Shares.
(b) Each grant will specify the Management Objectives, if any, that
are to be achieved in order for the Phantom Shares to be earned. Each
grant that is subject to the achievement of Management Objectives will
specify a minimum acceptable level of achievement in respect of the
specified Management Objectives below which the Phantom Shares will be
forfeited and may set forth a formula or other method for determining the
number of Phantom Shares to be earned if performance is at or above such
minimum but short of full achievement of the Management Objectives.
(c) Each grant will specify the time and manner of payment of Phantom
Shares which have been earned, which payment may be made in (i) cash, (ii)
shares of Common Stock or (iii) any combination thereof, as determined by
the Committee in its sole discretion.
(d) Each grant of Phantom Shares will be evidenced by an agreement
executed on behalf of the Company by any officer and delivered to and
accepted by the Participant and containing such terms and provisions,
consistent with this Plan, as the Committee may approve, including
provisions relating to a Change in Control or other corporate transaction
or event or upon the Participant's termination due to death, disability or
retirement.
No person may receive more than 250,000 Phantom Shares during any
calendar year.
8. Performance Units. The Committee may from time to time authorize
grants to any employee or consultant (other than a Director) of Performance
Units upon such terms and conditions as it may determine in accordance with the
following provisions:
(a) Each grant will specify the number of Performance Units to which
it pertains.
(b) Each grant will specify the Management Objectives that are to be
achieved in order for the Performance Units to be earned. Each grant will
specify a minimum acceptable level of achievement in respect of the
specified Management Objectives below which no payment will be made and may
set forth a formula or other method for determining the amount of payment
to be made if performance is at or above such minimum but short of full
achievement of the Management Objectives.
(c) Each grant will specify the time and manner of payment of
Performance Units which have become payable, which payment may be made in
(i) cash, (ii) shares of Common Stock having an aggregate Market Value per
Share equal to the aggregate value of the Performance Units which have
become payable or (iii) any combination thereof, as determined by the
Committee in its sole discretion at the time of payment.
(d) Each grant of a Performance Unit will be evidenced by an agreement
executed on behalf of the Company by any officer and delivered to and
accepted by the Participant and containing such terms and provisions,
consistent with this Plan, as the Committee may approve, including
provisions relating to a Change in Control or other corporate transaction
or event or upon the Participant's termination of employment due to death,
disability, retirement or otherwise, including an involuntary termination
other than for cause.
No person may receive Performance Units with a value greater than
$1,000,000 during any calendar year.
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9. Bonus Stock. The Committee may from time to time authorize grants to
any employee or consultant (other than a Director) of Bonus Stock, which shall
constitute a transfer of shares of Common Stock, without other payment therefor,
as additional compensation for the Participant's services to the Company or its
Subsidiaries.
10. Cash Tax Rights. (a) The Committee may from time to time authorize
grants to any Participant (other than a Director) of Cash Tax Rights upon such
terms and conditions as it may determine in accordance with this Paragraph.
Cash Tax Rights may be granted in tandem with any Award that is payable in
shares of Common Stock. A Cash Tax Right will entitle the Participant granted
such Award to receive from the Company, upon receipt of shares of Common Stock
pursuant to the tandem Award, an amount of cash, which will be determined by the
Committee at the Date of Grant and will be expressed as a percentage of the
Market Value per Share (not exceeding 100%) of each share of Common Stock
received upon payment of the tandem Award.
(b) Each grant of a Cash Tax Right will (i) identify the Award it is made
in tandem with and will specify the percentage of the Market Value per Share
that shall be payable in cash and (ii) be evidenced by an agreement extended on
behalf of the Company by any officer and delivered to and accepted, by the
Participant and containing such terms and provisions, consistent with this Plan,
as the Committee may approve, including provisions relating to a Change in
Control or other corporate transaction or event or upon the Participant's
termination of employment due to death, disability, retirement or otherwise,
including an involuntary termination other than for cause.
11. Director Options. (a) Each person who is a Director on the effective
date of the Plan, and each person who becomes a Director for the first time
after such date, shall automatically receive on the effective date of the Plan
or, if such person first becomes a Director after such date, the date of his or
her becoming a Director, whichever is applicable, a Director Option for 1,000
shares of Common Stock.
(b) On the day following the regular Annual Meeting of the Stockholders of
the Company in each year that this Plan is in effect (commencing with the 1997
Annual Meeting of Stockholders), each Director who is in office on that day and
who was not elected for the first time at such annual meeting shall
automatically receive a Director Option for 1,000 shares of Common Stock.
(c) Each Director Option will be subject to all of the limitations
contained in the following provisions:
(i) Each Director Option shall be exercisable (vested) 90 days
following the Date of Grant.
(ii) The Option Price of each Director Option shall be the Market
Value per Share on its Date of Grant.
(iii) Each Director Option that is vested may be exercised in
full at one time or in part from time to time by giving written notice
to the Company, stating the number of shares of Common Stock with
respect to which the Director Option is being exercised, accompanied
by payment in full of the Option Price for such shares, which payment
may be (1) in cash by check acceptable to the Company, (2) by
tendering to the Company shares of Common Stock owned by the optionee
having an aggregate Market Value Per Share as of the date of exercise
and tender that is not greater than the full option exercise price for
the shares with respect to which the Option is being exercised and by
paying any remaining amount of the option exercise price as provided
(1) above (provided that the Committee may, upon confirming that the
optionee owns the number of shares being tendered, authorize the
issuance of a new certificate for the number of shares being acquired
pursuant to the exercise of the option less the number of shares being
tendered upon the exercise and return to the optionee (or not require
surrender of) the certificate for the shares being tendered upon the
exercise), (3) by the optionee delivering to the Company a properly
executed exercise notice together with irrevocable instructions to a
broker to promptly deliver to the Company cash or a check payable and
acceptable to the Company to pay the option exercise price and any
required tax withholding
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amounts; provided that in the event the optionee chooses to pay the
exercise price in this manner, the optionee and the broker shall
comply with such procedures and enter into such agreements of
indemnity and other agreements as the Committee shall prescribe as a
condition of such payment procedure or (4) by a combination of such
methods of payment. Payment instruments will be received subject to
collection.
(iv) Each Director Option shall expire 10 years from the Date of
Grant thereof, but shall be subject to earlier termination as follows:
Director Options, to the extent exercisable as of the date the
Director ceases to serve as a director of the Company must be
exercised within one year of such date unless such termination results
from the Director's death, disability or retirement, in which case
the Director Options may be exercised by the optionee or the
optionee's legal representative or the person to whom the Director's
rights shall pass by will or the laws of descent and distribution, as
the case may be, within three years from the date of termination;
provided however, that no such event shall extend the normal
expiration date of such Director Options.
(v) In the event that the number of shares of Common Stock
available for grants under this Plan is insufficient to make all
automatic grants provided for in this Paragraph 11 on the applicable
date, then all Directors who are entitled to a grant on such date
shall share ratably in the number of shares then available for grant
under this Plan, and shall have no right to receive a grant with
respect to the deficiencies in the number of available shares and all
future grants under this Paragraph 11 shall terminate.
(d) Notwithstanding the provisions of this Section 11, the Committee may
grant such other Awards to Directors as are permissible under and are issued in
compliance with applicable federal or state laws or the rules of any stock
exchange or automated quotation system on which the Common Stock may then be
listed or quoted.
12. Acceleration upon a Change in Control. Notwithstanding anything
contained herein to the contrary, all conditions and/or restrictions relating to
the continued performance of services and/or the achievement of Management
Objectives with respect to the exercisability or full entitlement to an Award
shall immediately lapse upon a Change in Control, provided that this Paragraph
12 shall not be applicable with respect to a Participant if it is intended that
the transaction constituting such Change in Control be accounted for as a
pooling of interests under Accounting Principles Board Opinion No. 16 (or any
successor thereto), and operation of this Paragraph 12 with respect to this
Participant would otherwise preclude such accounting treatment.
13. Transferability. (a) Except as provided below, no Award will be
transferable by a Participant other than by will or the laws of descent and
distribution and Director Options, Option Rights or Appreciation Rights will be
exercisable during the Participant's lifetime only by the Participant or by the
Participant's guardian or legal representative.
(b) The Committee may, in its discretion, adopt rules or guidelines under
which any Award previously granted or to be granted to a Participant (other than
an incentive stock option) may be transferred (in whole or in part) by the
Participant to (i) the spouse, children or grandchildren of the Participant
("Immediate Family Members"), (ii) a trust or trusts for the exclusive benefit
of the Immediate Family Members and, if applicable, the Participant or (iii) a
partnership in which such Immediate Family Members and, if applicable, the
Participant are the only partners. Following transfer, any such Awards shall
continue to be subject to the same terms and conditions as were applicable to
the Award immediately prior to transfer; provided, however, that no transferred
Award shall be exercisable or payable, as the case may be, unless arrangements
satisfactory to the Company have been made to satisfy any tax withholding
obligations the Company may have with respect to the Award.
14. Adjustments. The Board may make or provide for such adjustments in
the maximum number of shares specified in Paragraph 3, in the numbers of shares
of Common Stock covered by outstanding Director Options, Option
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Rights, Appreciation Rights and Phantom Shares granted hereunder, in the Option
Price or Grant Price applicable to any such Director Options, Option Rights and
Appreciation Rights, and/or in the kind of shares covered thereby (including
shares of another issuer), as the Board, in its sole discretion exercised in
good faith, may determine is equitably required to prevent dilution or
enlargement of the rights of Participants that otherwise would result from any
stock dividend, stock split, combination of shares, recapitalization or other
change in the capital structure of the Company, merger, consolidation,
reorganization, partial or complete liquidation, issuance of rights or warrants
to purchase securities or any other corporation transaction or event having an
effect similar to any of the foregoing.
15. Fractional Shares. The Company will not be required to issue any
fractional share of Common Stock pursuant to this Plan. The Committee may
provide for the elimination of fractions for the settlement of fractions in
cash.
16. Taxes. (a) To the extent that the Company is required to withhold any
taxes in connection with any grant or payment made to a Participant or any other
person under this Plan and the amounts available to the Company for such
withholding are insufficient, it will be a condition to the receipt of such
grant or payment that the Participant or such other person make arrangements
satisfactory to the Company for the payment of the balance of the such taxes
required, which arrangements in the discretion the Committee may include
relinquishment of a portion of such Award or payment.
(b) To the extent that the acceleration of vesting or any payment,
distribution or issuance made to a Participant under the Plan (a "Benefit") is
subject to a golden parachute excise tax under Section 4999(a) of the Code (a
"Parachute Tax"), the Company shall pay such Participant an amount of cash (the
"Gross-up Amount") such that the "net" Benefit received by the Participant under
this Plan, after paying all applicable Parachute Taxes (including those on the
Gross-up Amount) and any income taxes on the Gross-up Amount, shall be equal to
the Benefit that such Participant would have received if such Parachute Tax had
not been applicable.
17. Award Forfeiture/Repayment Provisions. Notwithstanding anything in
this Plan to the contrary the Committee, in its sole discretion, may provide
with respect to any Award that such Award shall be immediately forfeited unpaid
if the Participant takes any action contrary to the interests of the Company as
the same may be specified in the Award agreement, which may include, without
limitation, limitations on non-competition, non-disclosure, non-disparagement
and non-solicitation (a "Restriction"). Further, to the extent any Award
containing such a prohibition has been exercised or paid within the one-year
period prior to the date of such violation of a Restriction, the Participant
must repay to the Company in cash an amount equal to the value of the Award at
the time of its prior exercise or payment, as the case may be. The exercise or
payment of such an Award shall be conditioned on the Participant's written
acknowledgment and acceptance of the repayment obligation.
18. Administration of the Plan. (a) This Plan will be administered by the
Committee. A majority of the Committee will constitute a quorum, and the action
of the members the Committee present at any meeting at which a quorum is
present, or acts unanimously approved writing, will be the acts of the
Committee.
(b) The interpretation and construction by the Committee of any provision
of this Plan or of any agreement, notification or document evidencing the grant
of an Award and any determination by the Committee pursuant to any provision of
this Plan or of any such agreement, notification or documentation will be final
and conclusive. No member of the Committee will be liable for any such action
or determination made in good faith or in the absence of gross negligence or
willful misconduct on the part of such member.
(c) Notwithstanding anything in the Plan or any Award Agreement to the
contrary, with respect to an Award granted to a "covered employee" that is
intended to qualify as "performance-based compensation" for purposes of section
162(m) of the Code, the Committee shall not take any action with respect to the
terms of such Award after its Date of Grant which would cause such Award not to
be deductible under section 162(m).
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19. Amendments, Etc. (a)The Board may amend, alter, suspend, discontinue,
or terminate the Plan or the Committee's authority to grant Awards under the
Plan without the consent of stockholders or Participants, except that any such
action shall be subject to the approval of the Company's stockholders at or
before the next annual meeting of stockholders for which the record date is
after such Board action if such stockholder approval is required by any federal
or state law or regulation or the rules of any stock exchange or automated
quotation system on which the Common Stock may then be listed or quoted, and the
Board may otherwise, in its discretion, determine to submit other such changes
to the Plan to stockholders for approval; provided, however, that without the
consent of an affected Participant, no such action may materially impair the
rights of such Participant under any Award theretofore granted to him. The
Committee may waive any conditions or rights under, or amend, alter, suspend,
discontinue, or terminate, any Award theretofore granted and any Award agreement
relating thereto; provided, however, that without the consent of an affected
Participant, no such action may materially impair the rights of such Participant
under such Award.
(b) This Plan will not confer upon any Participant any right with respect
to continuance of employment or other service with the Company or any
Subsidiary, nor will it interfere in any way with any right the Company or any
Subsidiary would otherwise have to terminate such Participant's employment or
other service at any time.
20. Term. This Plan shall be effective as of the date that an
underwriting agreement relating to the initial public offering of the Company's
Common Stock is entered into among the Company and a group of underwriters. In
the event that this Plan is not approved by the stockholders of the Company
within twelve months before or after the date of its adoption by the Board, any
Awards made under this Plan intended to be an incentive stock option shall be
automatically a nonqualified stock option. Unless sooner terminated, this Plan
shall terminate on December 31, 2006, and no further Awards shall be made, but
all outstanding Awards on such date shall remain effective in accordance with
their terms and the terms of this Plan.
-12-
<PAGE>
EXHIBIT 10.7
REVOLVING CREDIT AGREEMENT
among
HAM MARINE, INC.
as Borrower,
FRIEDE & GOLDMAN, LTD.,
J. L. HOLLOWAY AND CARL CRAWFORD
as Guarantors,
and
BANK ONE, LOUISIANA, NATIONAL ASSOCIATION
as the Bank
DATED AS OF MARCH 20, 1997
<PAGE>
TABLE OF CONTENTS
Section 1. DEFINITIONS.......................................... 1
1.1 Defined Terms............................................. 1
1.2 Other Definitional Provisions............................. 13
1.3 Accounting Terms and Determinations....................... 14
Section 2. AMOUNT AND TERMS OF COMMITMENT....................... 14
2.1 Commitment................................................ 14
2.2 Note...................................................... 14
2.3 Determination of Borrowing Base........................... 15
2.4 Procedure for Borrowing................................... 15
2.5 Commitment Controlling.................................... 16
2.6 Fees...................................................... 16
2.7 Optional Prepayments...................................... 16
2.8 Mandatory Prepayments..................................... 16
2.9 Use of Proceeds........................................... 16
2.10 Interest Rates and Interest Payment Dates................. 17
2.11 Computation of Interest and Fees.......................... 17
2.12 Payments.................................................. 18
Section 3. REPRESENTATIONS AND WARRANTIES....................... 18
3.1 Financial Condition....................................... 18
3.2 No Change................................................. 19
3.3 Corporate Existence; Compliance with Law.................. 19
3.4 Corporate Power; Authorization: Enforceable Obligations... 20
3.5 No Legal Bar.............................................. 20
3.6 No Material Litigation.................................... 20
3.7 No Default................................................ 20
3.8 Taxes..................................................... 20
3.9 Federal Regulations....................................... 21
3.10 ERISA..................................................... 21
3.11 Investment Company Act; Other Regulations................. 21
3.12 Subsidiaries.............................................. 21
3.13 Environmental Matters..................................... 21
3.14 Ownership of Property: Liens.............................. 22
3.15 No Burdensome Restrictions................................ 22
3.16 Patents, Trademarks, etc.................................. 22
3.17 Collateral Documents...................................... 22
3.18 Accuracy of Information................................... 23
3.19 Solvency.................................................. 23
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Section 4. CONDITIONS PRECEDENT................................. 23
4.1 Conditions to Initial Credit Extension.................... 23
4.2 Conditions to Each Loan................................... 25
Section 5. AFFIRMATIVE COVENANTS................................ 26
5.1 Financial Statements...................................... 26
5.2 Certificates; Other Information........................... 26
5.3 Payment of Obligation..................................... 28
5.4 Conduct of Business and Maintenance of Existence.......... 28
5.5 Maintenance of Property; Insurance........................ 28
5.6 Inspection of Property; Books and Records; Discussions.... 29
5.7 Notices................................................... 29
5.8 Environmental Laws........................................ 30
5.9 Speculative Building...................................... 30
5.10 Delivery; Further Assistances............................. 30
5.11 Operating Accounts........................................ 31
Section 6. NEGATIVE COVENANTS................................... 31
6.1 Financial Condition Covenants............................. 31
6.2 Limitation of Liens....................................... 32
6.3 Limitation on Dividends................................... 33
6.4 Limitation on Capital Expenditures........................ 33
6.5 Limitation on Debt........................................ 33
6.6 Limitation on Negative Pledges............................ 34
6.7 Prohibition of Fundamental Changes........................ 34
6.8 Prohibition on New Lines of Business...................... 34
6.9 Limitation on Investments, Loans and Advances............. 34
6.10 Prohibition on Ownership Changes.......................... 35
Section 7. EVENTS OF DEFAULT.................................... 35
Section 8. MISCELLANEOUS........................................ 38
8.1 Amendments and Waivers.................................... 38
8.2 Notices................................................... 38
8.3 No Waiver; Cumulative Remedies............................ 39
8.4 Survival of Representations and Warranties................ 40
8.5 Payment of Expenses and Taxes; Indemnity.................. 40
8.6 Successors and Assigns; Participations and Assignments.... 41
8.7 Setoff.................................................... 42
8.8 Counterparts.............................................. 42
8.9 Severability.............................................. 42
8.10 Integration............................................... 42
8.11 Governing Law............................................. 42
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8.12 Submission To Jurisdiction; Waivers....................... 42
8.13 Acknowledgments........................................... 43
8.14 WAIVERS OF JURY TRIAL..................................... 43
EXHIBITS
A Form of Note
B Form of Borrowing Base Certificate
C Form of Guaranty Agreement
D Form of Compliance Certificate
E Form of Closing Certificate
F Form of Security Agreement
G Form of Closing Opinion from Borrower's Counsel
SCHEDULES
Schedule I Subsidiaries
Schedule II Environmental Matters
Schedule III Existing Liens
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THIS REVOLVING CREDIT AGREEMENT is entered into as of March 20, 1997, among
HAM MARINE, INC. ("Borrower"), FRIEDE & GOLDMAN, LTD., J. L. HOLLOWAY AND CARL
CRAWFORD (collectively, "Guarantors"), and BANK ONE, LOUISIANA, NATIONAL
ASSOCIATION, a national banking association ("Bank").
RECITALS
A. Borrower wishes to obtain a revolving credit facility to provide
short-term seasonal financing of accounts receivable.
B. As security for the revolving credit facility provided for hereunder,
Guarantors have agreed to provide continuing guaranties of part of Borrower's
obligations.
C. Upon the terms and subject to the conditions set forth herein, Bank is
willing to make loans and advances to Borrower under the revolving credit
facility.
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrower, Guarantors and Bank
hereby agree as follows:
Section 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms shall
have the following meanings:
"Account Debtor" shall mean, with respect to any Account, the Person
who is obligated on such Account.
"Account" shall mean (i) any right to payment for goods sold,
delivered or leased or for services rendered which is not evidenced by an
instrument or chattel paper, whether or not it has been earned by performance
and (ii) without duplication of (i), any other right to payment due under any
and all contracts for the construction or repair of ships or other vessels.
"Acquisition" shall mean any transaction or series of transactions by
which Borrower acquires, either directly or through an Affiliate or Subsidiary
or otherwise, (x) any or all of the stock or other securities of any class of
any Person or (y) a substantial portion of the assets, or a division or line of
business of any Person.
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"Affiliate" of any Person shall mean any other Person who, directly or
indirectly, controls or is controlled by or is under common control with such
Person. A Person shall be deemed to be "controlled by" any other Person who
possesses, directly or indirectly, power: (a) to vote 5% or more of the
securities having ordinary voting power for the election of directors of such
Person, or (b) to direct or cause the direction of the management and policies
of such Person, whether by contract or otherwise.
"Agreement" shall mean this Revolving Credit Agreement, as amended,
supplemented or otherwise modified from time to time.
"Available Commitment" shall mean, at any time, an amount equal to
the excess, if any, of (a) the Commitment over (b) the aggregate principal
amount of the Loans then outstanding.
"Base Rate" shall mean a fluctuating rate of interest per annum as in
effect from time to time, which rate of interest per annum shall at all times be
equal to the rate of interest announced publicly by Bank One, Columbus, National
Association from time to time (whether or not charged in each instance) as its
prime or base rate; provided, however, that if Bank One, Columbus, National
Association has more than one announced prime or base rate, the highest publicly
announced prime or base rate shall be used for this calculation and, provided
further, that if Bank One, Columbus, National Association ceases to announce its
prime or base rate, the Base Rate shall be based upon such other publicly
announced or reported index as is mutually agreeable to Bank and Borrower.
"Borrowing Base" shall have the meaning given to said term in Section
2.3.
"Borrowing Base Certificate" shall mean a certificate substantially in
form of Exhibit B executed by a Responsible Officer of Borrower and delivered to
Bank.
"Borrowing Date" shall mean any Business Day specified in a notice
pursuant to Section 2.4 as a date on which Borrower requests Bank to make Loans
hereunder.
"Business Day" shall mean a day other than a Saturday, Sunday or other
day on which commercial banks in New Orleans, Louisiana are authorized or
required by law to close.
"Capital Expenditures" shall mean, as to any Person, without
duplication and for any period, the cost attributed in accordance with GAAP
consistent with those applied in preparation of the financial statements
referred to in Section 5.1 to acquisitions during such period by such Person of
any asset, or additions thereto which such Person treated as a noncurrent asset
on such Person's financial statements, including, without limitation, the
acquisition or construction of assets having a useful life of more than one year
and the acquisition of any ownership interest in any Person.
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<PAGE>
"Capital Lease Obligations" shall mean, as to any Person, the
obligations of such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property
(including vessels), or a combination thereof, which obligations are required to
be classified and accounted for as a capital lease on a balance sheet of such
Person under GAAP and, for the purposes of this Agreement, the amount of such
obligations at any time shall be the capitalized amount thereof at such time
determined in accordance with GAAP.
"Capital Stock" shall mean any and all shares, interests,
participations or other equivalents (however designated) of capital stock of a
corporation, any and all equivalent ownership interests in a Person (other than
a corporation) and any and all warrants or options to purchase any of the
foregoing.
"Cash Equivalents" shall mean (i) securities issued or directly and
fully guaranteed or insured by the United States Government or any agency or
instrumentality thereof having maturities of not more than one year from the
date of acquisition, (ii) time deposits and certificates of deposit, having
maturities of not more than one year from the date of acquisition, of Bank or
any domestic commercial bank which has, or the holding company of which has, a
commercial paper rating meeting the requirements specified in clause (iv) below,
(iii) repurchase obligations with a term of not more than 270 days for
underlying securities of the types described in clauses (i) and (ii) entered
into with any bank meeting the qualifications specified in clause (ii) above,
(iv) commercial paper rated at least A-1 or the equivalent thereof by Standard
Poor's Corporation or P-1 or the equivalent thereof by Moody's Investors
Service, Inc. and in either case maturing within one year after the date of
acquisition and (v) investments in money market funds registered under the
Investment Company Act of 1940, as amended, which have net assets of at least
$200,000,000 and at least eighty-five percent (85%) of whose assets consist of
securities and other obligations of the type described in clauses (i) through
(iv) above.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. 559601 et seq; as amended from
time to time.
"Change of Control" shall mean any of the following events:
(i) any change in the ownership of the Capital Stock of Borrower;
(ii) the failure of Borrower to own 80% of the Capital Stock of
any Subsidiary; or
(iii) the stockholders of Borrower shall approve any plan or
proposal for the liquidation or dissolution of Borrower.
3
<PAGE>
"Closing Date" shall mean March 20, 1997.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral" shall mean all assets of any Person (including any
Borrower) now owned or hereafter acquired, upon which a Lien is purported to be
created by any Collateral Document.
"Collateral Documents" shall mean the collective reference to any and
all security documents hereafter delivered to Bank granting a Lien on any asset
or assets of any Person to secure any or all of the obligations and liabilities
of Borrower hereunder and under any of the other Loan Documents or to secure any
guarantee of any such obligations and liabilities, including, without limitation
the Security Agreement.
"Commitment" shall mean the obligation of Bank to make Loans to
Borrower pursuant to Section 2.1 in an aggregate principal amount not to exceed
the lessor of $10,000,000 or the Borrowing Base at any time during the
Commitment Period.
"Commitment Period" shall mean the period from and including the
Closing Date to but not including the Termination Date or such earlier date on
which the Commitment shall terminate as provided herein.
"Commonly Controlled Entity" shall mean an entity, whether or not
incorporated, which is under common control with Borrower within the meaning of
Section 4001 of ERISA or is part of a group which includes Borrower and which is
treated as a single employer under Section 414 of the Code.
"Consolidated" shall mean the consolidation of any Person, in
accordance with GAAP, with its properly consolidated Subsidiaries. References
herein to a Person's Consolidated financial statements, financial position,
financial condition, income, assets, liabilities, etc. refer to the consolidated
financial statements, financial position, financial condition, income, assets,
liabilities, etc. of such Person and its properly consolidated Subsidiaries as
determined in accordance with GAAP.
"Consolidated Current Assets" shall mean as to any Person at any
time, the Consolidated current assets of such Person at such time, determined in
accordance with GAAP.
"Consolidated Current Liabilities" shall mean as to any Person at any
time, the Consolidated current liabilities of such Person at such time,
determined in accordance with GAAP.
4
<PAGE>
"Consolidated Net Income" shall mean as to any Person for any period,
the Consolidated net income (or loss) of such Person for such period, determined
in accordance with GAAP.
"Consolidated Total Assets" shall mean as to any Person at any time,
all amounts which would be included as assets on a consolidated balance sheet of
such Person at such time, determined in accordance with GAAP.
"Consolidated Total Liabilities" shall mean as to any Person at any
time, all amounts which would be included as liabilities on a consolidated
balance sheet of such Person at such time, determined in accordance with GAAP.
"Consolidated Tangible Net Worth" shall mean as to any Person at a
particular date, Consolidated Total Assets minus Consolidated Total Liabilities
minus the book value of all assets of such Person and its Consolidated
Subsidiaries which should be classified as intangibles, but in any event
including good-will, research and development costs, trade-marks, trade names,
copyrights, patents and franchises, unamortized debt discount and expense, all
reserves and any write-up in the book value of assets resulting from a
revaluation thereof (but excluding deferred charges, prepaid insurance and
prepaid taxes) minus accounts receivable due from any owners, managers or
employees of Borrower and its Consolidated Subsidiaries.
"Contractual Obligation" shall mean as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Continuing Guaranties" shall mean the guaranty agreements by the
Guarantors, guaranteeing part of the Obligations outstanding hereunder, each
substantially in the form of Exhibit C hereto, as amended or otherwise modified
from time to time.
"Credit Extension" shall mean the making of any Loan hereunder.
"Customary Permitted Liens" shall mean (i) Liens for taxes not yet due
or which are being contested in good faith and by appropriate proceedings if
adequate reserves with respect thereto are maintained on the books of Borrower,
in accordance with GAAP, and (ii) carriers', warehousemen's, mechanics',
materialmen's, repairmen's, vendor's, lessor's, workmen's, employee's, or other
like Liens, in each case, arising in the ordinary course of business by
operation of law which are not overdue for a period of more than thirty days or
which are being contested in good faith and by appropriate proceedings and for
which adequate reserves have been made.
"Debt" shall mean as to any Person, at a particular date, the sum
(without duplication and in conformity with GAAP), at such date of all (a)
indebtedness created,
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<PAGE>
issued or incurred by such Person for borrowed money (whether by loan or the
issuance and sale of debt securities), (b) obligations of such Person to pay the
deferred purchase or acquisition price of property or services, other than trade
accounts payable (other than for borrowed money) arising, and accrued expenses
incurred, in the ordinary course of business, (c) debt of others secured by a
Lien on the property of such Person, whether or not the respective debt so
secured has been assumed by such Person, (d) LC Obligations of such Person, (e)
Capital Lease Obligations of such Person, and (f) Guarantee Obligations of such
Person.
"Default" shall mean any of the events specified in Section 7 hereof,
whether or not any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"Dollars" shall mean dollars in lawful currency of the United States
of America.
"EBIT" shall mean with respect to any Person for any period,
Consolidated Net Income of such Person for such period, plus (i) interest
expense for such Person and its Consolidated Subsidiaries for such period, and
(ii) tax expense for such period for taxes which have been provided for by such
Person and its Consolidated Subsidiaries for such period, to the extent that any
of the same are deducted from net revenues in determining such Person's
Consolidated Net Income for such period.
"Eligible Billed Commercial Receivables" shall mean at any date,
except as hereinafter provided in this definition, the aggregate face amount of
all trade Accounts of Borrower, reduced (without duplication for the amounts
referred to in clauses (a) through (m) below) by the amount of all returns,
discounts, claims, credits, charges, or other allowances and by the aggregate
amount of all reserves and limits (including limits on credit exposure to any
Account Debtor) required by Bank pursuant to Section 2.3(b). Unless otherwise
approved in writing by Bank, no Account shall be deemed to be an Eligible Billed
Commercial Receivable unless it satisfies each of the following requirements to
the satisfaction of Bank:
(a) Borrower owns such Account;
(b) such Account is a valid, binding and legally enforceable obligation of
the applicable Account Debtor;
(c) such Account is not the subject of any dispute, setoff, counterclaim or
other claim or defense on the part of the Account Debtor denying liability under
such Account; provided that if only a portion of any such Account is the subject
of any such dispute, setoff, counterclaim, or other claim or defense on the part
of the Account Debtor denying liability under such Account, only the portion of
such Account which is subject to such
6
<PAGE>
dispute, setoff, counterclaim or defense shall be excluded as an Eligible Billed
Commercial Receivable as a result of the requirements specified in this clause
(c);
(d) Borrower has the right to assign and grant Liens in such Account to
Bank as security for the Obligations;
(e) such Account is subject to a fully perfected Lien in favor of Bank,
which Lien is fully perfected and, subject only to Customary Permitted Liens,
prior to the rights of, and enforceable as such against, all other Persons;
(f) such Account is not subject to any Lien in favor of any Person other
than the Liens created by the applicable Collateral Documents and Customary
Permitted Liens;
(g) such Account is a bona fide Account arising from the delivery, charge
or sale (on an absolute basis and not on a consignment, approval, or sale-and-
return basis) of goods or the rendering of services by Borrower in the ordinary
course of its business, which goods have been shipped, delivered or charged and
made available to, or which services have been performed for, the Account Debtor
for such Account;
(h) with respect to such Account, no Account Debtor is
(i) incorporated in or primarily conducting business in any
jurisdiction located outside the United States unless (A) such sale is
either on an irrevocable letter of credit acceptable to Bank or
acceptance terms acceptable to Bank or (B) such Account and the
related Account Debtor is otherwise approved by Bank in writing,
provided that, the provisions of this clause (h) shall not apply to
the extent that such Account Debtor is Schlumberger Technologies, Inc.
(or its division SEDCO Forex) or any of Schlumberger Technologies,
Inc.'s Subsidiaries;
(ii) an Affiliate of Borrower or any of its Subsidiaries,
(iii) a foreign government or any agency, department or
instrumentality thereof unless such sale is on an irrevocable letter
of credit acceptable to Bank or acceptance terms acceptable to Bank or
otherwise approved by Bank in writing,
(iv) the subject of any reorganization, bankruptcy, debt
arrangement, receivership, custodianship, insolvency or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution,
winding up or liquidation proceeding (and such Account Debtor has not
become insolvent or generally failed to pay, or admitted in writing
its inability or unwillingness to pay, debts as they become due), or
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<PAGE>
(v) an agency, department or instrumentality of the United States
or any state or local governmental authority in the United States;
(i) such Account is not outstanding more than 90 days after the date of the
original applicable invoice related thereto;
(j) such Account is not an Account owing by an Account Debtor as to which,
at the time of any determination of Eligible Billed Commercial Receivables, more
than 40% of the aggregate amount owing by such Account Debtor to Borrower has
been outstanding more than 90 days after the date of the original applicable
invoice related thereto;
(k) no warranty or representation contained in this Agreement or any Loan
Document applicable either to Accounts in general or to such Account has been
breached in any material respect with respect to such Account;
(l) such Account is denominated in Dollars and is payable within the United
States; and
(m) such Account does not arise from or relate to, directly or indirectly,
goods sold or services rendered by Borrower under or in connection with any
contract bonded or guaranteed in any manner by a surety or guarantor.
"Environmental Laws" shall mean the following:
(a) CERCLA;
(b) the Resource Conservation and Recovery Act, as amended by the
Hazardous and Solid waste Amendment Act of 1984, 42 U.S.C.A.
Section 6901 et seq.;
(c) the Clean Air Act, 42 U.S.C.A. Section 7401 et seq.;
(d) the Clean Water Act of 1977, 33 U.S.C.A. Section 1251 et seq.;
(e) the Toxic Substances Control Act, 15 U.S.C.A. Section 2601 et
seq.; and
(f) all other Federal, state and local laws, rules and regulations
relating to air pollution, water pollution, noise control and/or
the handling, discharge, existence, disposal or recovery of on-
site or off-site hazardous, toxic or dangerous waste, substances
or materials, as each of the foregoing may be amended from time to
time.
8
<PAGE>
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
"Event of Default" shall mean any of the events specified in Section
7, provided that any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"Friede" shall mean Friede & Goldman, Ltd., a Mississippi corporation.
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time.
"Governmental Authority" shall mean any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guarantee Obligation" shall mean, as to any Person, any obligation of
such Person guaranteeing or in effect guaranteeing any Debt, lease, dividend or
other obligation (the "primary obligations") of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, any obligation of such Person, whether or not contingent (a) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (b) to advance or supply funds (i) for the purchase
or payment of any such primary obligation or (ii) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor or to permit the primary obligor to meet
financial covenants, (c) to purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation or (d)
otherwise to assure or hold harmless the owner of any such primary obligation
against loss in respect thereof, including, without limitation contingent
obligations with respect to performance and other similar bonds and instruments
whether secured or unsecured; provided, however, that the term Guarantee
Obligation shall not include, (i) contingent obligations with respect to
performance and other similar bonds and instruments entered into by Borrower in
the ordinary course of its business consistent with past practice in connection
with vessel construction contracts between Borrower and its customers, (ii)
contingent obligations with respect to agreements to indemnify or hold harmless
entered into by Borrower in the ordinary course of its business consistent with
past practice in connection with vessel construction contracts between Borrower
and its customers or (iii) endorsements of instruments for deposit or collection
in the ordinary course of business. The amount of any Guarantee Obligation
shall be deemed to be an amount equal to the stated or determinable amount of
the primary obligation in respect of which such Guarantee Obligation is made or,
if not stated or determinable, the maximum reasonably anticipated liability in
respect thereof as determined by Borrower in good faith.
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<PAGE>
"Guarantors" shall mean J. L. Holloway, Carl Crawford, Friede and any
other Person that has executed a Guaranty.
"Guaranty" shall mean the Continuing Guaranties and any other guaranty
of some or all of the Obligations.
"Hazardous Material" shall mean (a) asbestos, PCBs, or dioxins, or
insulation or other material composed of or containing asbestos, PCBs or
dioxins, (b) any petroleum product, and (c) any hazardous, toxic, or dangerous
waste, substance, or material defined as such in (or for purposes of) CERCLA, in
any so-called "Superfund" or "Superlien" law, or in any other applicable
federal, state, local or other statute, law, ordinance, code, rule, regulation,
order or decree regulating, relating to, or imposing liability or standards of
conduct concerning, any hazardous, toxic, or dangerous waste, substance, or
material, as now or at any time hereafter in effect.
"Insolvency" shall mean with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section 4245 of
ERISA.
"Interest Expense" shall mean with respect to any Person for any
period, interest expense for such Person and its Consolidated Subsidiaries for
such period, determined in accordance with GAAP.
"Interest Payment Date" shall mean the last day of each month,
commencing on the first of such days to occur after the Closing Date, and the
Termination Date.
"Interest Rate Protection Agreement" shall mean any interest rate
protection agreement, interest rate futures contract, interest rate option,
interest rate cap or other interest rate hedge arrangement, to or under which
Borrower or any of its Subsidiaries is a party or a beneficiary on the date
hereof or becomes a party or a beneficiary after the date hereof.
"Inventory" shall have the meaning provided in Section 2.1(b) of the
Security Agreement.
"LC Obligations" shall mean as to any Person at any time, all
reimbursement obligations (absolute or contingent) and other liabilities of such
Person with respect to then-outstanding letters of credit, or similar
instruments issued or accepted by banks and other financial institutions, issued
for such Person's account or for which such Person is a co-applicant.
"Lien" shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge or other security interest or any preference, priority or other security
agreement or preferential
10
<PAGE>
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement and any financing lease
having substantially the same economic effect as any of the foregoing, and the
filing of any financing statement or similar notice under the Uniform Commercial
Code or the comparable law of any jurisdiction).
"Line of Credit" shall mean the aggregate revolving credit line
extended by Bank to Borrower for Loans and Letters of Credit pursuant to and in
accordance with the terms of this Agreement, in the amount of $10,000,000.00.
"Loan" shall mean, as more particularly defined in Section 2.1, any
loan or extension of credit made by Bank to Borrower pursuant to this Agreement.
"Loan Documents" shall mean this Agreement, the Note, the Collateral
Documents, the Continuing Guaranties and any other Guaranty, and all other
documents, agreements and instruments now or hereafter executed and delivered by
Borrower (or any other Person) to Bank in connection with this Agreement or the
transactions contemplated hereby.
"Material Adverse Effect" shall mean a material adverse effect on or
in relation to (a) the business, assets, operations, property, condition
(financial or otherwise) or prospects of (i) Borrower and its Consolidated
Subsidiaries (taken as a whole), (ii) any Guarantor, individually, or (iii)
Borrower, individually or (b) the validity or enforceability of this or any of
the other Loan Documents or the rights or remedies of Bank hereunder or
thereunder, as determined by Bank in its sole discretion.
"Note" shall have the meaning given to said term in Section 2.2.
"Obligations" shall mean the collective reference to (a) unpaid
principal of and interest (including interest accruing on or after the filing of
any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to any Guarantor, Borrower or any of
Borrower's Subsidiaries, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding) on the Note and any and all other
obligations and liabilities of Borrower, any Guarantor or any Person executing
and delivering a Collateral Document to Bank whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter
incurred, which may arise under, out of or in connection with this Agreement or
the Note, the other Loan Documents or any other document made, delivered or
given in connection therewith, whether on account of principal, interest, fees,
indemnities, costs, expenses (including, without limitation, all fees and
disbursements of counsel to Bank) or otherwise, and (b) any obligations of
Borrower under any Interest Rate Protection Agreement entered into between Bank
and Borrower.
"Participant" shall have the meaning given to said term in subsection
8.6(b).
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"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"Permitted Liens" shall have the meaning given to said term in
subsection 6.2.
"Person" shall mean an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of whatever
nature.
"Plan" shall mean at a particular time, any employee pension benefit
plan within the meaning of Section (3)(2) of ERISA sponsored and maintained by
Borrower and its Subsidiaries, including any such plan to which Borrower and its
Subsidiaries are required to contribute on behalf of their employees.
"Reportable Event" shall mean any of the events set forth in Section
4043(b) of ERISA, other than those events as to which the thirty day notice
period is waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg. S
2615.
"Requirement of Law" shall mean as to any Person, the certificate or
articles of incorporation and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental Authority, in
each case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"Responsible Officer" shall mean the President or any Vice President
of Borrower.
"Security Agreement" shall mean the Security Agreement dated as of the
date hereof made by Borrower in favor of Bank, substantially in the form of
Exhibit F, covering certain personal property of Borrower more particularly
described therein, including, without limitation, Accounts and Inventory, as
amended, supplemented or otherwise modified from time to time.
"Solvent" shall mean, with respect to any Person at any time, a
condition under which:
(a) the fair saleable value of such Person's assets on the date of
determination is greater than the present value of the total amount of such
Person's liabilities (including contingent and unliquidated liabilities) at such
time;
(b) such Person is able to pay all of its liabilities as such
liabilities mature; and
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(c) such Person does not have unreasonably small capital with which to
conduct its business.
For purposes of this definition:
(i) the amount of a Person's contingent or unliquidated
liabilities at any time shall be that amount which, in light of all
the facts and circumstances then existing, represents the amount which
can reasonably be expected to become an actual or matured liability;
(ii) the "fair saleable value" of an asset shall be the amount
which may be realized within a reasonable time either through
collection or sale of such asset at its regular market value; and
(iii) the "regular market value" of an asset shall be the amount
which a capable and diligent business person could obtain for such
asset from an interested buyer who is willing to purchase such asset
under ordinary selling conditions.
"Subsidiary" shall mean, as to any Person, a corporation, partnership
or other entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests having
such power only by reason of the happening of a contingency) to elect a majority
of the board of directors or other managers of such corporation, partnership or
other entity, or the management of which is otherwise controlled, directly or
indirectly through one or more intermediaries, or both, by such Person;
provided, however, that for purposes of this Agreement, Friede shall not be a
"Subsidiary" of Borrower.
"Termination Date" shall mean the first anniversary of the Closing
Date or, if such day is not a Business Day, the immediately preceding Business
Day.
"UCC" shall mean the Uniform Commercial Code as in effect from time to
time in the State of Mississippi.
1.2 Other Definitional Provisions.
(a) Unless otherwise specified therein, all terms defined in this
Agreement shall have the same meanings when used in the Note or any other
Loan Documents or any certificate or other document made or delivered
pursuant hereto.
(b) Terms not otherwise defined herein which are defined in the UCC
shall have the meanings given them in the UCC. The words "hereof,"
"herein" and
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"hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of
this Agreement, and references to Section, Schedule, Exhibit and like
references are references to this Agreement, and references in any Section
or definition to any clause means such clause of such Section or
definition, in each case, unless otherwise specified. An Event of Default
shall "continue" or be "continuing" until such Event of Default has been
waived in accordance with Section 8.1. References in this Agreement to any
Person shall include such Person's successors and permitted assigns.
(c) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
1.3 Accounting Terms and Determinations.
Unless otherwise specified herein, all accounting terms used herein
shall be interpreted, all accounting determinations hereunder shall be made, and
all financial statements required to be delivered hereunder shall be prepared in
accordance with GAAP, applied on a basis consistent (except for changes
concurred in by Borrower's auditors and except that unaudited interim financial
statements are subject to audit and normal year-end adjustments (including
absence of footnote disclosure)) with the most recent audited financial
statements of Borrower delivered to Bank.
Section 2. AMOUNT AND TERMS OF COMMITMENT
2.1 Commitment. Subject to the terms and conditions hereof, Bank agrees
to make revolving credit loans (each a "Loan" and, collectively, "Loans") to
Borrower from time to time during the Commitment Period, so long as the
aggregate principal amount of all Loans to Borrower at any one time outstanding
does not exceed the amount of the Available Commitment. During the Commitment
Period Borrower may use the Commitment by borrowing, prepaying its Loans in
whole or in part, and reborrowing (subject to the limit of the Available
Commitment), all in accordance with the terms and conditions hereof.
2.2 Note. The Loans made to Borrower by Bank shall be evidenced by a
promissory note of Borrower, substantially in the form of Exhibit A, with
appropriate insertions (as amended, endorsed, extended or otherwise modified
from time to time, the "Note") payable to the order of Bank and in a principal
amount equal to the Commitment. Bank is hereby authorized to record the date and
amount of each Loan made by it to Borrower, the date and amount of each payment
or prepayment of principal thereof by Borrower and the interest rate with
respect thereto, and such recordation may be evidenced by the Bank's internal
records, including the Bank's daily computer print out, and
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any such recordation shall constitute prima facie evidence of the accuracy of
the information so recorded, provided that the failure to make any such
recordation or any error in such recordation shall not affect Borrower's
obligations hereunder or under the Note executed by Borrower. The Note shall (x)
be dated the Closing Date, (y) be stated to mature on the Termination Date and
(z) provide for the payment of interest in accordance with Section 2.12.
2.3 Determination of Borrowing Base.
(a) Subject to Section 2.3(b), the principal amount of the Loans
shall not in the aggregate at any time exceed the lesser of:
(i) the Line of Credit; and
(ii) the amount then equal to eighty percent (80%) of the
Eligible Billed Commercial Receivables (hereinafter referred to as the
"Borrowing Base").
(b) Bank at any time shall be entitled to (i) establish and increase
or decrease reserves against Eligible Billed Commercial Receivables to
reflect any Liens or claims on or with respect to the foregoing, including,
without limitation Customary Permitted Liens, and any other costs and
expenses which Bank could reasonably be expected to expend or incur in
connection with a liquidation of, or foreclosure on, the Collateral and
(ii) impose limits on credit exposure to any Account Debtor, in each case
in its discretion. Bank may, but shall not be required to, rely on each
Borrowing Base Certificate and any other schedules or reports delivered to
Bank in connection herewith in determining the then eligibility of
Accounts.
2.4 Procedure for Borrowing.
(a) Borrower may borrow under the Commitment during the Commitment
Period on any Business Day (the "Borrowing Date"), subject to the limit of
the Available Commitment, provided that Borrower gives Bank notice of its
borrowing, which notice must be received by Bank prior to 10:00 A.M.,
Central Standard time, one (1) Business Day prior to the requested
Borrowing Date, specifying (i) the amount to be borrowed, (ii) the
requested Borrowing Date, and (iii) the amount of the Loan. Each borrowing
under the Commitment shall be in an amount equal to $100,000 or a whole
multiple of $50,000 in excess thereof (or, if the then Available
Commitment, is less than $100,000, such lesser amount). Such borrowing
will then be made available to Borrower by Bank by crediting the account of
Borrower on the books of Bank.
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(b) If Bank makes a new Loan to Borrower on a day on which Borrower is
to repay all or part of any outstanding Loan, Bank shall apply the proceeds
of its new Loan to Borrower to make such repayment and only an amount equal
to the difference (if any) between the amount being borrowed from Bank by
Borrower and the amount being repaid to Bank by Borrower shall be made
available by Bank to Borrower as provided in paragraph (a) above.
Notwithstanding the foregoing, Bank and Borrower may change the
procedure for borrowing pursuant to a written agreement at any time prior
to the Termination Date.
2.5 Commitment Controlling. Notwithstanding anything in this Agreement to
the contrary, Bank is not obligated to make any Loans to Borrower which would
cause the aggregate principal amount of all Loans at any one time outstanding to
exceed the Available Commitment.
2.6 Fees. A commitment fee equal to one-quarter of one percent (0.25%) per
annum (based on a year of 360 days for the actual number of days elapsed) on the
average daily amount of the difference between $10,000,000.00 and Loans shall be
payable by Borrower to Bank quarterly in arrears on the last day of each March,
June, September and December and on the Termination Date, beginning March 31,
1997 through and including the Termination Date.
2.7 Optional Prepayments. Borrower may, at its option, at any time and
from time to time, prepay the Loans, in whole or in part, without premium or
penalty, upon at least one (1) Business Day's prior written notice to Bank
(specifying the date and amount of prepayment); provided, however, (a) any
partial prepayment of principal for any Loan shall be in a principal amount of
$50,000 or any higher integral multiple of $10,000; and (b) all prepayments
shall be in addition to, and not in lieu of, scheduled installments of principal
or interest on Borrower's Loans. Notwithstanding the foregoing, Bank and
Borrower may change the conditions for optional prepayment pursuant to a written
agreement at any time prior to the Termination Date.
2.8 Mandatory Prepayments. If the aggregate unpaid principal balance of
the Loans ever exceeds the Available Commitment, Borrower shall, immediately
upon receipt of a notice from Bank of such fact, prepay the principal amount of
the Loans as necessary in an amount at least equal to such excess. Any
principal and interest prepaid pursuant to this Section shall be in addition to,
and not in lieu of, all payments otherwise required to be paid under the Loan
Documents at the time of such prepayment.
2.9 Use of Proceeds. The proceeds of each Loan shall be used by Borrower
for the short term seasonal financing of accounts receivable and for the short
term financing of general working capital.
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2.10 Interest Rates and Interest Payment Dates.
(a) The outstanding principal amount of each Loan shall bear interest
from the date such Loan is made to the date the principal amount of such
Loan is repaid in full at a fluctuating rate per annum equal to the Base
Rate plus one-half of one percent (0.50%) per annum. The Base Rate shall
be determined on a daily basis.
(b) If all or a portion of (i) the principal amount of any Loan, (ii)
any interest payable thereon or (iii) any fee or other amount payable
hereunder shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), such overdue amount shall, without limiting the
rights of Bank under Section 7, bear interest at a rate per annum which is
3% above the Base Rate plus one-half of one percent (0.50%) per annum in
each case from the date of such non-payment until such amount is paid in
full (as well after as before judgment).
(c) Interest shall be payable in arrears on each Interest Payment
Date, provided that interest accruing pursuant to paragraph (b) of this
Section shall be payable from time to time on demand.
2.11 Computation of Interest and Fees.
(a) Interest on all Loans shall be calculated on the basis of a 360-
day year for the actual days elapsed. Any change in the Base Rate shall
become effective as of the opening of business on the day on which such
change in the Base Rate is established.
(b) Each determination of an interest rate by Bank pursuant to any
provision of this Agreement shall be conclusive and binding on Borrower in
the absence of manifest error.
(c) It is the intention of the parties hereto to comply strictly with
applicable usury laws; accordingly, notwithstanding any provision to the
contrary in this Agreement, the Note or any other Loan Document, in no
event shall this Agreement, the Note or any other Loan Document require or
permit the payment, charging, taking, reserving, or receiving of any sums
constituting interest under applicable laws which exceed the maximum amount
permitted by such laws. If any such excess interest is contracted for,
charged, taken,
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reserved, or received in documents securing the payment of the Obligations
or otherwise relating hereto, or in any communication by Bank or any other
Person to Borrower or any other Person, or in the event all or part of the
principal or interest hereunder shall be prepaid or accelerated, so that
under any of such circumstances or under any other circumstance whatsoever
the amount of interest contracted for, charged, taken, reserved, or
received on the amount of principal actually outstanding from time to time
under this Agreement, the Note or any Loan Document shall exceed the
maximum amount of interest permitted by applicable laws, then in any such
event it is agreed as follows: (i) the provisions of this Section shall
govern and control, (ii) any such excess shall be deemed an accidental and
bona fide error and canceled automatically to the extent of such excess,
and shall not be collected or collectible, (iii) any such excess which is
or has been paid or received notwithstanding this paragraph shall be
automatically reduced to the maximum lawful rate allowed under applicable
laws as construed by courts having jurisdiction hereof or thereof. The
terms of this Section shall be deemed to be incorporated in every Loan
Document and every communication relating thereto. The term "applicable
law" shall mean such laws of the State of Louisiana, the State of
Mississippi or the laws of the United States, whichever laws allow the
higher rate of interest, as such laws now exist; provided, however, that if
such laws shall hereafter allow higher rates of interest, then the
applicable laws shall be the laws allowing the higher rates, to be
effective as of the effective date of such laws.
2.1 Payments. All payments (including prepayments) to be made by Borrower
hereunder, whether on account of principal, interest, fees or otherwise, shall
be made without set off or counterclaim and shall be made prior to 12:00 Noon,
Central Standard time, on the due date thereof to Bank, at Bank's office
specified in Section 8.2, in Dollars and in immediately available funds. If
any payment hereunder becomes due and payable on a day other than a Business
Day, such payment shall be extended to the next succeeding Business Day and,
with respect to payments of principal, interest thereon shall be payable at the
then applicable rate during such extension.
Section 3. REPRESENTATIONS AND WARRANTIES
To induce Bank to enter into this Agreement and to make the Loans,
Borrower, and the Guarantors, as applicable, hereby represents and warrants to
Bank that:
3.1 Financial Condition.
(a) The audited Consolidated balance sheet of Borrower as at December
31, 1995 and the related audited Consolidated statements of income and
retained earnings and changes in financial position for the fiscal year
ended on such date, reported on by Breazeale, Saunders & O'Neil Limited
copies of which have heretofore been furnished to Bank, are complete and
correct and present fairly the Consolidated financial condition of Borrower
as at such date, and the Consolidated results of Borrower's operations and
Borrower's Consolidated cash flows for the fiscal year then ended.
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(b) The unaudited Consolidated balance sheet of Borrower as at
December 31, 1996 and the related unaudited Consolidated statements of
income and retained earnings and changes in financial position for the
twelve month period ended on such date, certified by a Responsible Officer,
copies of which have heretofore been furnished to Bank, are complete and
correct and present fairly the Consolidated financial condition of Borrower
as at such date, and the Consolidated results of Borrower's operations and
Borrower's Consolidated cash flows for the twelve month period then ended
(subject to normal year-end audit adjustments).
(c) All the financial statements described in subsections 3.1(a) and
(b), including the related schedules and notes thereto, have been prepared
in accordance with GAAP applied consistently throughout the periods
involved (except as approved by such accountants or Responsible Officer, as
the case may be, and as disclosed therein). Neither Borrower nor any of
its Subsidiaries had, at the date of the most recent balance sheet referred
to above, any material Guarantee Obligation, contingent liability or
liability for taxes, or any long-term lease or unusual forward or long-term
commitment, including, without limitation, any interest rate or foreign
currency swap or exchange transaction, which is not reflected in the
financial statements described in this Section 3.1 or in the notes thereto.
3.2 No Change. There has been no development or event which has had or
could be expected to have a Material Adverse Effect in relation to the business,
operation, assets, financial or other condition of Borrower and its Consolidated
Subsidiaries (taken as a whole), from that reflected in the audited financial
statements referred to in subsection 3.1(a) and the unaudited financial
statements reflected in subsection 3.1(b) and during the period from December
31, 1996 to and including the date hereof no dividends or other distributions
have been declared, paid or made upon the Capital Stock of Borrower, nor has any
of the Capital Stock of Borrower been redeemed, retired, purchased or otherwise
acquired for value by Borrower or any of its Subsidiaries.
3.3 Corporate Existence; Compliance with Law. Each of Borrower and its
Subsidiaries (a) is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization, (b) has the corporate power
and authority, and the legal right, to own and operate its property, to lease
the property it operates as lessee and to conduct the business in which it is
currently engaged, (c) is duly qualified as a foreign corporation and in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such qualification
except to the extent that the failure to be so qualified in the aggregate could
not, in the aggregate, have a Material Adverse Effect and (d) is in compliance
with all Requirements of Law except to the extent that the failure to comply
therewith could not, in the aggregate, have a Material Adverse Effect.
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3.4 Corporate Power; Authorization: Enforceable Obligations. Borrower has
the corporate or other power and authority, and the legal right, to make,
deliver and perform the Loan Documents and to borrow hereunder; and Borrower has
taken all necessary corporate action to authorize the borrowings on the terms
and conditions of this Agreement and the Note; Borrower has taken all necessary
corporate or other action to authorize the execution, delivery and performance
of the Loan Documents to be executed as of the date hereof. No consent or
authorization of, filing with, notice to or other act by or in respect of, any
Governmental Authority or any other Person is required in connection with the
borrowings hereunder or with the execution, delivery, performance, validity or
enforceability of the Loan Documents. This Agreement and each other Loan
Document have been duly executed and delivered on behalf of Borrower. This
Agreement and each other Loan Document constitutes a legal, valid and binding
obligation of Borrower, enforceable against Borrower in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
3.5 No Legal Bar. The execution, delivery and performance of the Loan
Documents, the borrowings hereunder and the use of the proceeds thereof will not
violate any Requirement of Law or Contractual Obligation of Borrower or of any
of its Subsidiaries and will not result in, or require the creation or
imposition of any Lien on, any of their respective properties or revenues
pursuant to any such Requirement of Law or Contractual Obligation, except Liens
permitted to be granted on the Closing Date in favor of Bank.
3.6 No Material Litigation. No litigation, investigation or proceeding of
or before any arbitrator or Governmental Authority is pending or, to the
knowledge of Borrower, threatened by or against Borrower or any of its
Subsidiaries or against any of their respective properties or revenues (a) with
respect to any of the Loan Documents or any of the transactions contemplated
hereby or thereby, or (b) which could be expected to have a Material Adverse
Effect, except as described in the financial statements, or in the notes
thereto, referred to in Section 3.1 or as otherwise heretofore disclosed to Bank
in writing.
3.7 No Default. None of Borrower or any of its Subsidiaries is in default
under or with respect to any of its Contractual Obligations in any respect which
could be expected to have a Material Adverse Effect. No Default or Event of
Default has occurred and is continuing.
3.8 Taxes. Except as described in the financial statements, or in the
notes thereto, referred to in Section 3.1, each of Borrower, its Subsidiaries
and the Guarantors has filed or caused to be filed all tax returns which, to the
knowledge of Borrower, are required to be filed and has paid all taxes shown to
be due and payable on said returns or on any assessments made against it or any
of its property and all other taxes, fees or other charges imposed on it or any
of its property by any Governmental Authority (other than any
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amount the validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which reserves in conformity with
GAAP have been provided on the books of Borrower or the appropriate Subsidiary,
as the case may be); and no tax Lien has been filed, and, to the knowledge of
Borrower and the Guarantors, no claim is being asserted, with respect to any
such tax, fee or other charge.
3.9 Federal Regulations. No part of the proceeds of any Loans will be
used for "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation G or Regulation U of the
Board of Governors of the Federal Reserve System as now and from time to time
hereafter in effect. If requested by Bank, Borrower will furnish to Bank a
statement to the foregoing effect in conformity with the requirements of FR Form
G-1 or FR Form U-1 referred to in said Regulation G or Regulation U, as the case
may be.
3.10 ERISA. Except as disclosed in the financial statements, or in the
notes thereto, referred to in Section 3.1, Borrower and the Plans are in
compliance in all material respects with the applicable provisions of ERISA, and
no Reportable Event, as such term is defined in Title IV of ERISA, has occurred
with respect to any Plan or Borrower or any of is Subsidiaries.
3.11 Investment Company Act; Other Regulations. Borrower is not an
"investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act Of 1940, as amended. Borrower
is not subject to regulation under any Federal or State statute or regulation
which limits its ability to incur Debt.
3.12 Subsidiaries. The Subsidiaries listed on Schedule I hereto constitute
all Subsidiaries of Borrower at the date hereof, and Schedule I properly
designates which of such Subsidiaries are wholly-owned Subsidiaries.
3.13 Environmental Matters. Except as set forth in Schedule II:
(a) all facilities and property (including underlying groundwater)
owned, leased or operated by Borrower or any of its Subsidiaries are in
compliance with all Environmental Laws the non-compliance with which could
be expected to have a Material Adverse Effect;
(b) there have been no releases (as such term is defined in CERCLA)
of Hazardous Materials at, on or under any facilities or property now or
previously owned, leased or operated by Borrower or any of its Subsidiaries
that, singly or in the aggregate, have, or could be expected to have, a
Material Adverse Effect;
(c) there are no underground storage tanks, active or abandoned,
including petroleum storage tanks, on or under any facilities or property
now or
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previously owned, leased or operated by Borrower or any of its Subsidiaries
that, singly or in the aggregate, have, or could be expected to have, a
Material Adverse Effect;
(d) there are no polychlorinated biphenyls or friable asbestos present
at any facilities or property now owned, leased or operated by Borrower or
any of its Subsidiaries that, singly or in the aggregate, have, or could be
expected to have, a Material Adverse Effect;
(e) no conditions exist at, on or under any facilities or property now
or previously owned, leased or operated by Borrower or any of its
Subsidiaries which, with the passage of time or the giving of notice or
both, would give rise to liability under any Environmental Law which could
be expected to have a Material Adverse Effect; and
(f) neither Borrower nor any of its Subsidiaries has received any
notice of violation, alleged violation, noncompliance, liability or
potential liability from a Governmental Authority regarding environmental
matters or compliance with Environmental Laws with regard to any such
facilities or properties or such business, in which the matters referred to
therein, in the aggregate, could be expected to have a Material Adverse
Effect.
3.14 Ownership of Property: Liens. Borrower has good, valid and marketable
title in fee simple to or valid leasehold interests in all its real property,
and good title to or valid leasehold interests in all its other property
material to its business, and none of such property is subject to any Lien,
except as permitted in Section 6.2 of this Agreement.
3.15 No Burdensome Restrictions. No Contractual Obligation of Borrower or
any of its Subsidiaries and no Requirement of Law to which Borrower or any of
its Subsidiaries is subject could reasonably be expected to have a Material
Adverse Effect.
3.16 Patents, Trademarks, etc. Borrower owns and possesses all such
patents, patent rights, trademarks, trademark rights, trade names, trade name
rights, service marks, service mark rights and copyrights required in connection
with the conduct of their business as now conducted without, to the best of its
knowledge, any material infringement upon rights of other Persons.
3.17 Collateral Documents. The provisions of the Collateral Documents
executed or to be executed by Borrower in favor of Bank will be, on and after
the due execution and delivery thereof in accordance herewith, effective to
create, in favor of Bank, legal, valid and enforceable Liens in all right, title
and interest of Borrower in any and all of the Collateral described therein,
securing the Note and all other Obligations from time to time outstanding, and
upon all filings and recordings being duly made in the locations referred
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to in the applicable Collateral Documents or the taking of possession of the
Collateral by Bank in accordance with the provisions of such Collateral
Documents or the taking of such other action by Bank as is contemplated by the
Collateral Documents, each of such Collateral Documents shall constitute, as of
and after the Closing Date, a fully perfected first priority Lien in such
Collateral superior in right to any Liens, existing or future, which Borrower or
any creditors thereof or purchasers therefrom, or an other Person, may have
against such Collateral or interests therein, other than interests of Persons
with respect to Permitted Liens.
3.18 Accuracy of Information. All factual information heretofore or
contemporaneously furnished by or on behalf of Borrower in writing to Bank for
purposes of or in connection with this Agreement or any transaction contemplated
hereby is, and all other such factual information hereafter furnished by or on
behalf of the Borrower to Bank in connection with this Agreement or any
transaction contemplated hereby will be, true and accurate in every material
respect on the date as of which such information is dated or certified and such
information is not, or shall not be, as the case may be, incomplete by omitting
to state any material fact necessary to make such information not misleading.
3.19 Solvency. Borrower and each of the Guarantors is Solvent.
Section 4. CONDITIONS PRECEDENT
4.1 Conditions to Initial Credit Extension. The agreement of Bank to make
the initial Credit Extension requested to be made by it is subject to the
satisfaction, immediately prior to or concurrently with the making of such
initial Credit Extension of the following conditions precedent:
(a) Loan Documents. Bank shall have received (i) this Agreement,
executed and delivered by a duly authorized officer of Borrower, as well as
the Guarantors, (ii) the Note, conforming to the requirements hereof and
executed and delivered by a duly authorized officer of Borrower, (iii) the
Collateral Documents, in form and substance satisfactory to Bank, and
executed and delivered by a duly authorized officer of Borrower, and (iv)
the Continuing Guaranties, executed and delivered by J. L. Holloway and
Carl Crawford, respectively.
(b) Guarantors' Financial Statements. Bank shall have received from
each Guarantor, other than Friede, such Guarantor's personal financial
statements, in a form satisfactory to Bank and dated within the last twelve
(12) months, and such Guarantor's federal income tax return most recently
filed with the Internal Revenue Service. With respect to Friede, Bank
shall have received Friede's internal balance sheet and income statement in
a form satisfactory to Bank as of December 31, 1996.
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(c) Closing Certificate. Bank shall have received a certificate
executed by the President or any Vice President and the Chief Financial
Officer of Borrower, dated the Closing Date, substantially in the form of
Exhibit E, with appropriate insertions and attachments, satisfactory in
form and substance to Bank.
(d) Corporate Proceedings of Borrower and Friede. Bank shall have
received a copy of the resolutions, in form and substance satisfactory to
Bank, of the Board of Directors of each of Borrower and Friede authorizing
(i) the execution, delivery and performance of the Loan Documents to which
each is a party, and (ii) the borrowings contemplated hereunder, and
certified by the Secretary or an Assistant Secretary of Borrower and
Friede, respectively, as of the Closing Date, which certificate shall be in
form and substance satisfactory to Bank and shall state that the
resolutions thereby certified have not been amended, modified, revoked or
rescinded.
(e) Incumbency Certificates of Borrower. Bank shall have received a
certificate of Borrower, dated the Closing Date, as to the incumbency and
signature of the officers of Borrower executing any Loan Document,
satisfactory in form and substance to Bank, executed by the President or
any Vice President and the Secretary or any Assistant Secretary of
Borrower.
(f) Actions to Perfect Liens. Bank shall have received evidence, in
form and substance satisfactory to Bank, that all filings, recordings,
registrations and other actions, necessary or, in the opinion of Bank,
desirable to perfect the Liens created by the Collateral Documents shall
have been completed.
(g) Legal Opinions. Bank shall have received the executed legal
opinion of Watkins & Eager, P.L.L.C., counsel to Borrower, dated the
Closing Date and addressed to Bank, substantially in the form of Exhibit G,
and such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement as Bank may reasonably require.
(h) Borrowing Base Certificate. Bank shall have received a Borrowing
Base Certificate of Borrower, with appropriate insertions and attachments,
reasonably satisfactory in form and substance to Bank, and executed by a
Responsible Officer of Borrower.
(i) Insurance. Bank shall have received evidence that all insurance
policies, coverages and riders (including loss payable endorsements in
favor of and in form and substance satisfactory to Bank) required pursuant
to the requirements of this Agreement and the other Loan Documents are in
full force and effect.
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(j) Fees and Expenses. Bank shall have received payment in full of
those fees and expenses which are due on or prior to the Closing Date (or
an irrevocable authorization to pay such fees or expenses out of the
proceeds of the Loans).
(k) Additional Matters. All other documents, and legal matters in
connection with the transactions contemplated by this Agreement and the
other Loan Documents shall be satisfactory in form and substance to Bank.
4.2 Conditions to Each Loan. The agreement of Bank to make any Loan
requested to be made by it on any date (including, without limitation, the
initial Loan) is subject to the satisfaction of the following conditions
precedent:
(a) Representations and Warranties. Each of the representations and
warranties made by any Person in favor of Bank in or pursuant to the Loan
Documents shall be true and correct in all material respects on and as of
such date as if made on and as of such date.
(b) No Default. No Default or Event of Default shall have occurred
and be continuing on such date or after giving effect to the Loans
requested to be made on such date.
(c) Borrowing Certificate. Bank shall have received Borrowing Request
in accordance with Section 2.4.
(d) Fees. Bank shall have received all fees due and owing pursuant to
Section 2.6.
(e) No Federal Tax or ERISA Liens. No notice of or any other document
or instrument creating any federal tax Lien or Lien under Section 412 of
the Code or Section 4068 of ERISA shall have been issued, recorded or filed
with respect to the assets of Borrower or any of its Subsidiaries.
(f) No Material Adverse Effect. No event or events have occurred
which, individually or in the aggregate has had, or could reasonably be
expected to have, a Material Adverse Effect.
Each borrowing by Borrower hereunder shall constitute a representation and
warranty by Borrower as of the date thereof that the conditions contained in
this Section have been satisfied.
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Section 5. AFFIRMATIVE COVENANTS
Borrower and Guarantors, as applicable, hereby agree that, so long as the
Commitment remains in effect or any amount is owing to Bank hereunder or under
any other Loan Document, Borrower and Guarantors, as applicable, shall and
(except in the case of delivery of financial information, reports and notices)
Borrower shall cause each of its Subsidiaries to:
5.1 Financial Statements. Furnish to Bank:
(a) with respect to Borrower, as soon as available, but in any event
within 120 days after the end of each fiscal year of Borrower, a copy of
the audited Consolidated balance sheet of Borrower and its Subsidiaries as
at the end of such year and the related audited Consolidated statements of
income and retained earnings and of cash flows for such year, setting forth
in each case in comparative form the figures for the previous year,
reported on without qualification or exception, by independent certified
public accountants acceptable to Bank;
(b) with respect to Borrower, as soon as available, but in any event
not later than 60 days after the end of each non year-end fiscal quarter of
Borrower, the unaudited Consolidated balance sheet of Borrower and its
Subsidiaries as at the end of such quarter and the related unaudited
Consolidated statements of income and retained earnings and cash flows of
Borrower and its Subsidiaries for such quarter and the portion of the
fiscal year through the end of such quarter, and including jobs closed and
jobs in progress, setting forth in each case (other than jobs closed and
jobs in progress) in comparative form the figures for the previous year,
certified by a Responsible Officer as being fairly stated in all material
respects (subject to normal year-end audit adjustments);
(c) with respect to Friede, as soon as available, but in any event
within 120 days after the end of each fiscal year of Friede, a copy of the
audited Consolidated balance sheet of Friede and its Subsidiaries as at the
end of such year and the related audited Consolidated statements of income
and retained earnings and of cash flows for such year, setting forth in
each case in comparative form the figures for the previous year, reported
on without qualification or exception, by independent certified public
accountants acceptable to Bank;
(d) with respect to each Guarantor, other than Friede, as soon as
available, but in any event not later than 15 days prior to the Termination
Date, a copy of such Guarantor's annual personal financial statement, in a
form satisfactory to Bank;
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(e) with respect to each Guarantor, other than Friede, as soon as
available, but in any event not later than 10 days after filing with the
Internal Revenue Service, a copy of such Guarantor's annual federal income
tax return;
all such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein).
5.2 Certificates; Other Information. Furnish to Bank:
(a) concurrently with the delivery of the financial statements
referred to in subsection 5.1(a), a certificate of the independent
certified public accountants reporting on such financial statements stating
that in making the examination necessary therefor no knowledge was obtained
of any Default or Event of Default, except as specified in such
certificate;
(b) concurrently with the delivery of any financial statements
referred to in subsections 5.1(a) and (b), a certificate of a Responsible
Officer of the Borrower delivering such financial statements in the form of
Exhibit D stating that, to the best of such Responsible Officer's
knowledge, Borrower during such period has observed or performed all of its
covenants and other agreements, and satisfied every condition, contained in
this Agreement and the other Loan Documents to be observed, performed or
satisfied by it, and that no Default or Event of Default has occurred,
except as specified in such certificate, and showing in detail the
calculations supporting such statement in respect of Section 6.1 and 6.4;
(c) as promptly as practicable, and in any event within 30 days after
the end of each calendar month, a completed Borrowing Base Certificate
setting forth the Borrowing Base as of the last day of such calendar month
(such day being the "Borrowing Base Calculation Date"), accompanied by
supporting calculations in reasonable detail and such new information as
the Responsible Officer executing such Borrowing Base Certificate, after
making due inquiries, has obtained or is otherwise aware of, certifying:
(i) that the information contained in such Borrowing Base
Certificate is true and complete in all material respects as of the
Borrowing Base Calculation Date or the relevant date of any such new
information, as appropriate,
(ii) that, except as disclosed therein, there has been no
material adverse change in Borrower's Eligible Billed Commercial
Receivables since the end of the immediately preceding fiscal calendar
month, and
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(iii) that, as of the date of such Borrowing Base Certificate,
the outstanding principal amount of all Loans does not exceed the
Borrowing Base,
(d) as promptly as practicable and in any event within 30 days after
the end of each calendar month, a report as of the end of such calendar
month signed by the chief accounting or chief financial officer of Borrower
and setting forth in reasonable detail the agings of Accounts, both
receivable and payable, of Borrower;
(e) as promptly as practicable and in any event within 30 days after
the end of each calendar year, a report as of the end of such calendar year
signed by the chief accounting or chief financial officer of Borrower and
setting forth in reasonable detail:
(i) any material changes in the reserves made for bad Accounts
and the amount of Accounts written off during the immediately
preceding calendar year, and
(ii) any material Inventory write-offs or write-downs during such
immediately preceding year;
(f) within 10 days after the end of each calendar year, a certificate
of insurance that evidences the existence of each policy of insurance
required to be maintained by Borrower and its Subsidiaries in accordance
with the requirements of this Agreement or any other Loan Document, and the
payment of all premiums therefor;
(g) promptly upon learning thereof, notice of (i) the occurrence of
any event causing loss or depreciation in the value of any of Borrower's
Inventory or Accounts in excess of $500,000 and (ii) the amount of such
loss or depreciation; and
(h) promptly, and in any event, within fourteen (14) days after any
request by Bank therefor, such additional financial and other information
regarding Borrower or any Guarantor as Bank may from time to time
reasonably request.
5.3 Payment of Obligation. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, in the
ordinary course of business, except where delay in payment would not have a
Material Adverse Effect, all trade payables of whatever nature.
5.4 Conduct of Business and Maintenance of Existence. Continue to engage
in business of the same general type as now conducted by it and preserve, renew
and keep
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in full force and effect its corporate existence and take all reasonable action
to maintain all rights, privileges and franchises necessary or desirable in the
normal conduct of its business except as otherwise permitted pursuant to Section
5.5; comply with all Contractual Obligations and Requirements of Law except to
the extent that failure to comply therewith could not, in the aggregate, be
reasonably expected to have a Material Adverse Effect.
5.5 Maintenance of Property; Insurance. Keep all property useful and
necessary in its business in good working order and condition; and maintain with
financially sound and reputable insurance companies insurance on all its
property in at least such amounts and against at least such risks (but including
in any event public liability, product liability and business interruption) as
are usually insured against in the same general area by companies engaged in the
same or a similar business; and furnish to Bank, promptly upon any request
therefor by Bank, full information as to the insurance carried (including,
without limitation, a listing of all policies of insurance outstanding in
respect of the Borrower's respective assets or Collateral, on which insurance
may be obtained, and copies of all significant policies of insurance referred to
in such listing). In addition, maintain all insurance on the Collateral on
which insurance may be obtained as required by any Collateral Document.
5.6 Inspection of Property; Books and Records; Discussions. Keep proper
books of records and account in conformity with GAAP and satisfy all
Requirements of Law in respect of all dealings and transactions in relation to
its business and activities; and permit representatives of Bank to visit and
inspect any of its properties and examine and make abstracts from any of its
books and records at any reasonable time and as often as may reasonably be
desired and to discuss the business, operations, properties and financial and
other condition of Borrower and its Subsidiaries with officers and employees of
Borrower and its Subsidiaries and with their independent certified public
accountants.
5.7 Notices. Promptly, and in any event within five (5) Business Days of
the occurrence of any event described in subsections (a) through (e) below
(unless otherwise stated), give notice to Bank of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of Borrower or any of its Subsidiaries or (ii) litigation,
investigation or proceeding which may exist at any time between Borrower or
any of its Subsidiaries and any Governmental Authority, which in either
case, if not cured or if adversely determined, as the case may be, could be
expected to have a Material Adverse Effect;
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(c) any litigation or proceeding affecting Borrower or any of its
Subsidiaries in which (i) the amount claimed from Borrower or any such
Subsidiary is $1,000,000 or more and not covered by insurance or in which
injunctive or similar relief is sought or (ii) injunctive or similar relief
is sought which if granted would have a Material Adverse Effect;
(d) the following events, as soon as possible and in any event within
30 days after Borrower knows or has reason to know thereof: (i) the
occurrence or expected occurrence of any Reportable Event (as defined under
Title IV of ERISA) with respect to any Plan, a failure to make any required
contribution to a Plan, the creation of any Lien in favor of the PBGC or a
Plan or any withdrawal from, or the termination, reorganization or
Insolvency of, any Plan or (ii) the institution of proceedings or the
taking of any other action by the PBGC or Borrower or any Commonly
Controlled Entity or any Plan with respect to the withdrawal from, or the
terminating, reorganization or Insolvency of, any Plan; and
(e) any other development or event which could be expected to have a
Material Adverse Effect.
Each notice pursuant to subsections (a) through (e) above shall be accompanied
by a statement of the President or any Vice President of Borrower setting forth
details of the occurrence referred to therein and stating what action Borrower
proposes to take with respect thereto.
5.8 Environmental Laws. Comply with, and ensure compliance by all tenants
and subtenants, if any, with, all applicable Environmental Laws and obtain and
comply with and maintain, and ensure that all tenants and subtenants obtain and
comply with and maintain, any and all licenses, approvals, notifications,
registrations or permits required by applicable Environmental Laws except to the
extent that failure to do so could not be reasonably expected to have a Material
Adverse Effect.
5.9 Speculative Building. Borrower's Contractual Obligations to build, in
whole or in part, any vessel or equipment shall at all times be for a sum
certain and Borrower shall not build any vessel or equipment on speculation.
5.10 Delivery; Further Assistances. Borrower will, at its expense:
(a) execute and deliver any and all instruments necessary or as Bank
may request to grant and perfect a first priority Lien on all of its
Accounts and Inventory, subject to no other Liens other than Customary
Permitted Liens, and, without any request by Bank, immediately deliver or
cause to be delivered to Bank, in due form for transfer (duly endorsed in
blank or, if appropriate, accompanied by
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duly executed blank stock or bond powers), all chattel paper, instruments
and documents of title, if any, at any time representing all or any of the
Collateral;
(b) upon the reasonable request of Bank, furnish or cause to be
furnished to Bank such opinions of counsel in connection with the
execution and document delivery contemplated by this Section 5.10;
(c) upon request of Bank, forthwith execute and deliver or cause to be
executed and delivered to Bank, in due form for filing or recording (and
pay the cost of filing or recording the same in all public offices deemed
necessary by Bank), such assignments, security agreements, pledge
agreements, consents, waivers, financing statements, and other documents,
and do such other acts and things, all as Bank may from time to time
reasonably request, to establish and maintain to the satisfaction of Bank
valid perfected Liens in all Collateral (free of all other Liens, claims,
and rights of third parties other than Customary Permitted Liens); and
(d) such other agreements, instruments and documents which Bank may
request from time to time in connection with the foregoing.
5.11 Operating Accounts. Except for local payroll accounts, maintain
Borrower's primary operating accounts with Bank.
Section 6. NEGATIVE COVENANTS
Without the prior written consent of the Bank, Borrower hereby agrees that,
so long as the Commitment remains in effect or any amount is owing to Bank
hereunder or under any other Loan Document, Borrower shall not, and shall not
allow any of its Subsidiaries to, directly or indirectly:
6.1 Financial Condition Covenants.
(a) Maintenance of Consolidated Net Worth. Permit Borrower's
Consolidated Tangible Net Worth at any time to be less than the sum of (a)
Borrower's audited Tangible Net Worth as of December 31, 1996 plus (b) 75%
of Borrower's cumulative Consolidated Net Income less 100% of
distributions to Borrower's shareholders attributable to tax obligations
arising out of such shareholders' ownership interests in Borrower.
(b) Consolidated Total Liabilities to Consolidated Tangible Net Worth.
Permit Borrower's ratio of Consolidated Total Liabilities to Consolidated
Tangible Net Worth to exceed the following levels as of the following
dates:
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Ratio As of
--------- -----
4.25:1.00 12/31/96
3.00:1.00 3/31/97 and 6/30/97
2.50:1.00 9/30/97
2.00:1.00 12/31/97
(c) EBIT to Interest Expense. Permit Borrower's ratio of EBIT to
Interest Expense at any time to be less than 2.00 to 1.00.
(d) Consolidated Current Assets to Consolidated Current Liabilities.
Permit Borrower's ratio of Consolidated Current Assets to Consolidated
Current Liabilities to be less than the following levels as of the
following dates:
Ratio As of
----- -----
1.35:1.00 12/31/96, 3/31/97 and 6/30/97
1.50:1.00 9/30/97 and 12/31/97
(e) Permit Borrower's Consolidated Net Income to be less than $0 at
any time.
6.2 Limitation of Liens. Create, incur, assume or suffer to exist any
Lien upon any of Borrower's property, assets or revenues, whether now owned or
hereafter acquired, except:
(a) Customary Permitted Liens;
(b) pledges or deposits in connection with worker's compensation,
unemployment insurance and other social security legislation;
(c) deposits to secure the performance of bids, trade contracts (other
than for borrowed money), leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred
in the ordinary course of business;
(d) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount, and which do not in any case
materially detract from the
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value of the property subject thereto or interfere with the ordinary
course of the business of Borrower or any of its Subsidiaries;
(e) Liens existing on the date hereof and which are identified on
Schedule III attached hereto and made a part hereof;
(f) Liens granted pursuant to the terms of the Collateral Documents;
(g) Liens granted in connection with and securing only the financing
of Capital Expenditures permitted under Section 6.4 hereof, provided, any
such Liens shall not encumber, or otherwise impair the value of, any
Collateral; and
(h) Liens on Accounts in favor of commercial sureties or bonding
companies to secure the reimbursement or indemnification obligations of
Borrower with respect to bonds provided on behalf of Borrower by such
sureties or bonding companies, provided that (i) such bonds are expressly
required by the applicable ship construction or repair contracts of
Borrower and (ii) the Lien on Accounts is limited to the Accounts arising
under the bonded contract.
Clauses (a) through (h) of this Section 6.2 are referred to as the
"Permitted Liens."
6.3 Limitation on Dividends. If a Default or an Event of Default shall
have occurred and be continuing, declare any dividends on, or make any payment
on account of, any shares of any class of stock of Borrower, whether now or
hereafter outstanding, or make any other distribution in respect thereof, either
directly or indirectly, whether in cash or property or in obligations of
Borrower, or make any payment on account of, or purchase, redeem or otherwise
acquire, any securities of Borrower from any Person, or pay any management fees,
loan or advance money, or make any distributions of any kind to any owner or
beneficial holder of Capital Stock of Borrower. If no Default or Event of
Default exists, Borrower may declare and pay dividends on the capital stock of
Borrower in an amount not to exceed the Subchapter S tax obligations of
Borrower's shareholders. Anything in this Section 6.3 to the contrary
notwithstanding, Borrower shall not declare, distribute or pay any of the
dividends, distributions or fees, or make any loans or advances, or take any
other action permitted by the preceding sentence if such action creates or
causes a Default or an Event of Default.
6.4 Limitation on Capital Expenditures. Incur Capital Expenditures which,
in the aggregate for Borrower and its Subsidiaries taken as a whole, exceed
$3,000,000 for the Commitment Period, without Bank's prior written consent.
6.5 Limitation on Debt. Create, incur, assume, guarantee, endorse, become
or be liable in any manner with respect to any Debt, except:
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(a) taxes, assessments and governmental charges or levies which are
not delinquent or which are being contested in good faith by appropriate
proceedings and for which the obligor has set aside on its books adequate
reserves;
(b) trade payables which are not more than sixty (60) days past due or
which are being contested in good faith by appropriate proceedings and for
which the obligor has set aside on its books adequate reserves;
(c) contingent liabilities arising out of the endorsement in the
ordinary course of business of negotiable instruments in the course of
collection;
(d) Debt existing on the date hereof which is listed in the financial
statements described in subsection 3.1(a); and
(e) Debt incurred for the financing of Capital Expenditures as
permitted under Section 6.4 above; and
(f) the Obligations.
6.6 Limitation on Negative Pledges. Create, incur, assume or suffer to
exist any Contractual Obligation in favor of any Person other than Bank which
prohibits, restricts or limits the ability of Borrower from creating, assuming,
incurring, granting, or suffering to exist, Liens on any assets or properties of
Borrower.
6.7 Prohibition of Fundamental Changes. Without the Bank's prior written
consent, enter into any merger, consolidation or amalgamation, or liquidate,
wind up or dissolve itself (or suffer any liquidation or dissolution), or
convey, sell, lease, assign, transfer or otherwise dispose of, in one
transaction or a series of transactions, all or a substantial part of its
business or assets, or make any material change in its present method of
conducting business.
6.8 Prohibition on New Lines of Business. Without the Bank's prior
written consent, enter into any significant line of business or engage in any
significant operation which is not directly related to the shipyard and marine
industry.
6.9 Limitation on Investments, Loans and Advances. Without the Bank's
prior written consent, make or commit to make any advance, loan, extension of
credit or capital contribution to, or purchase any stock, bonds, notes,
debentures or other securities of or any assets constituting a business unit of,
or make any other investment in, any Person (all such transactions being herein
called "investments"), except:
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(a) investments in accounts, contract rights and chattel paper (as
defined in the Uniform Commercial Code), and notes receivable, arising or
acquired in the ordinary course of business;
(b) investments arising from sales of property (including products and
services) not prohibited by this Section 6; and
(c) investments in Cash Equivalents;
(d) as allowed for in Section 6.4;
(e) investments, loans and advances to employees, which in the
aggregate shall not exceed $250,000 at any given time; and
(f) investments, loans and advances to Affiliates, which in the
aggregate shall not exceed $1,000,000 at any given time.
6.10 Prohibition on Ownership Changes. Permit any change in the ownership
of the Capital Stock of Borrower, as such ownership exists on the Closing Date,
without the prior written consent of Bank.
Section 7. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) Borrower shall fail to pay any principal of or interest on any
Loan or the Note or Borrower shall fail to pay any other amount payable
hereunder or under any other Loan Document, within five days after any such
amount becomes due in accordance with the terms thereof or hereof; or
(b) Any representation or warranty made or deemed made by Borrower or
any other Person herein or in any other Loan Document or which is contained
in any certificate, document or financial or other statement furnished by
Borrower or Guarantor at any time under or in connection with this
Agreement or any such other Loan Document shall prove to have been
incorrect in any material respect on or as of the date made or deemed made;
or
(c) Borrower shall default in the observance or performance of any
agreement contained in Section 6; or
(d) Borrower or any Guarantor shall default in the observance or
performance of any other agreement contained in this Agreement or any other
Loan Document (other than as provided in paragraphs (a) through (c) of this
Section), and
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<PAGE>
such default shall continue unremedied for a period of 15 days after
written notice of default is delivered to Borrower and any Guarantor by
Bank specifying such default; or
(e) Borrower or any Guarantor shall (i) default in any payment of (A)
any Debt to a third party (including any Guarantee Obligation), or (B) any
Debt to Bank (including any Guarantee Obligation) other than the
Obligations, in either case beyond the period of grace (not to exceed 30
days), if any, provided in the instrument or agreement under which such
Debt was created; or (ii) default in the observance or performance of any
other agreement or condition relating to any such Debt contained in any
instrument or agreement evidencing, securing or relating thereto, or any
other event shall occur or condition exist, the effect of which default or
other event or condition is to cause, or to permit the holder or holders of
such Debt (including Bank) or beneficiary or beneficiaries of such
Guarantee Obligation (or a trustee or agent on behalf of such holder or
holders or beneficiary or beneficiaries) to cause, with the giving of
notice if required, such Debt to become due prior to its stated maturity or
such Guarantee Obligation to become payable; or
(f) (i) Borrower, any Guarantor, or any Subsidiary of Borrower shall
commence any case, proceeding or other action (A) under any existing or
future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking to
have an order for relief entered with respect to it, or seeking to
adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition
or other relief with respect to it or its debts, or (B) seeking appointment
of a receiver, trustee, custodian, conservator or other similar official
for it or for all or any substantial part of its assets, or any such Person
shall make a general assignment for the benefit of its creditors; or (ii)
there shall be commenced against any such Person any case, proceeding or
other action of a nature referred to in clause (i) above which (A) results
in the entry of an order for relief or any such adjudication or appointment
or (B) remains undismissed, undischarged or unbonded for a period of 60
days; or (iii) there shall be commenced against any such Person any case,
proceeding or other action seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or any substantial part
of its assets which results in the entry of an order for any such relief
which shall not have been vacated, discharged, or stayed or bonded pending
appeal within 60 days from the entry thereof; or (iv) any such Person shall
take any action in furtherance of, or indicating its consent to, approval
of, or acquiescence in, any of the acts set forth in clause (i), (ii), or
(iii) above; or (v) any such Person shall generally not, or shall be unable
to, or shall admit in writing its inability to, pay its debts as they
become due; or
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<PAGE>
(g) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302
of ERISA), whether or not waived, shall exist with respect to any Plan or
any Lien in favor of the PBGC or a Plan shall arise on the assets of
Borrower or any Commonly Controlled Entity, (iii) a Reportable Event (as
defined under Title IV of ERISA) shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a trustee shall
be appointed, to administer or to terminate, any Plan, which Reportable
Event or commencement of proceedings or appointment of a trustee is, in the
reasonable opinion of Bank, likely to result in the termination of such
Plan for purposes of Title IV of ERISA, (iv) any Plan shall terminate for
purposes of Title IV of ERISA, (v) Borrower or any Commonly Controlled
Entity shall, or in the reasonable opinion of Bank is likely to, incur any
liability in connection with a withdrawal from, or the Insolvency or
reorganization of, a Plan or (vi) any other event or condition shall occur
or exist with respect to a Plan; and in each case in clauses (i) through
(vi) above, such event or condition, together with all other such events or
conditions, if any, could be expected to have a Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered against any
Guarantor, Borrower or any Subsidiary of Borrower involving in the
aggregate a liability (not paid or fully covered by insurance) of $500,000
or more, and all such judgments or decrees shall not have been vacated,
discharged, stayed or bonded pending appeal within 60 days from the entry
thereof; or
(i) (i) Any Guaranty or, any of the Collateral Documents shall cease,
for any reason, to be in full force and effect, or any Person party thereto
shall so assert or (ii) the Lien created by any of the Collateral Documents
shall cease to be enforceable and of the same effect and priority purported
to be created thereby; or
(j) All or a substantial part of the Collateral shall be condemned,
seized or otherwise appropriated, or custody or control of such properties
shall be assumed or the operation thereof or production therefrom shall
cease by or as a result of any action by any Governmental Authority or
court of competent jurisdiction or at the insistence of any Governmental
Authority, and such circumstance shall continue for a period of 45 days;
(k) Without the Bank's prior written consent, the occurrence of a
Change of Control with respect to Borrower;
(l) In the sole opinion of Bank, any material adverse change occurs in
(a) the business, operations, property, condition (financial or otherwise)
or prospects of (i) Borrower and its Consolidated Subsidiaries (taken as a
whole), (ii) any Guarantor, individually, or (iii) Borrower, individually,
or (b) the facts, circumstances
37
<PAGE>
or conditions utilized by or deemed material to Bank, or upon which Bank
relied, in making its decision to issue the Commitment to Borrower;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) of this Section, automatically the
Commitment shall immediately terminate and the Loans hereunder (with accrued
interest thereon) and all other amounts owing under this Agreement shall
immediately become due and payable, and (B) if such event is any other Event of
Default, either or both of the following actions may be taken: (i) Bank may, by
notice to Borrower declare the Commitment to be terminated forthwith, whereupon
the Commitment shall immediately terminate; and (ii) Bank may, by notice to
Borrower, declare the Loans hereunder (with accrued interest thereon) and all
other amounts owing under this Agreement to be due and payable forthwith,
whereupon the same shall immediately become due and payable. Except as
expressly provided above in this Section, presentment, demand, protest and all
other notices of any kind are hereby expressly waived.
Section 8. MISCELLANEOUS
8.1 Amendments and Waivers. Neither this Agreement nor any other Loan
Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in writing executed by the parties hereto. Bank may, from time
to time, (a) waive, on such terms and conditions as Bank may specify in a
written instrument, any of the requirements of this Agreement or the other Loan
Documents or any Default or Event of Default and its consequences. In the case
of any waiver, Borrower and Bank shall be restored to their former positions and
rights hereunder and under the other Loan Documents, and any Default or Event of
Default waived shall be deemed to be cured and not continuing; no such waiver
shall extend to any subsequent or other Default or Event of Default or impair
any right consequent thereon.
8.2 Notices. Any notice or communication required or permitted hereunder
shall be given in writing, sent by (a) personal delivery, (b) expedited delivery
service with proof of delivery, (c) registered or certified United States mail,
postage prepaid, or (d) telegram, telex or facsimile notice, addressed to the
appropriate party as follows:
BORROWER:
HAM MARINE, INC.
525 East Capitol Street, Suite 402
Jackson, Mississippi 39201
Attention: Mr. J. L. Holloway, President
Fax No.: (601) 352-0588
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<PAGE>
With a copy to:
James A. Lowe, III
525 East Capitol Street, Suite 402
Jackson, Mississippi 39201
Fax No.: (601) 352-0588
GUARANTORS:
Friede & Goldman, Ltd.
935 Gravier Street, Suite 2100
New Orleans, LA 70112
Attention: William T. Bennett
Telephone: (504) 523-4621
Facsimile: (504) 529-5135
Mr. J. L. Holloway or
Mr. Carl Crawford
525 East Capital Street, Suite 402
Jackson, Mississippi 39201
Fax No.: (601) 352-0588
BANK:
BANK ONE, LOUISIANA, NATIONAL ASSOCIATION
201 St. Charles Avenue, Suite 1410
New Orleans, Louisiana 70170-0001
Attention: Emile J. Dumesnil, Vice President
Fax No.: (504) 558-1279
With a copy to:
JONES, WALKER, WAECHTER, POITEVENT,
CARRERE & DENEGRE, L.L.P.
201 St. Charles Avenue, 50th Floor
New Orleans, Louisiana 70170
Attention: William H. Hines, Esq.
Fax No.: (504) 582-8583
provided that any notice, request or demand to or upon Bank pursuant to Section
2.4 or 2.7 shall not be effective until received.
39
<PAGE>
8.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay
in exercising, on the part of Bank, any right, remedy, power or privilege
hereunder or under the other Loan Documents shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges herein provided are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.
8.4 Survival of Representations and Warranties. All representations and
warranties made hereunder, in the other Loan Documents and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the making of the
Loans hereunder.
8.5 Payment of Expenses and Taxes; Indemnity. Borrower agrees (a) to pay
or reimburse Bank for all its reasonable out-of-pocket costs and expenses
incurred in connection with the development, preparation and execution of, and
any amendment, supplement or modification to, this Agreement and the other Loan
Documents and any other documents prepared in connection herewith or therewith,
and the consummation and administration of the transactions contemplated hereby
and thereby, including, without limitation, the reasonable fees and
disbursements of counsel to Bank, (b) to pay or reimburse Bank for all its costs
and expenses incurred in connection with the enforcement or preservation of any
rights under this Agreement, the other Loan Documents and any such other
documents, including, without limitation, the fees and disbursements of counsel
to Bank, (c) to pay, indemnify, and hold Bank harmless from, any and all
recording and filing fees and any and all liabilities with respect to, or
resulting from any delay in paying, stamp, excise and other taxes, if any, which
may be payable or determined to be payable in connection with the execution and
delivery of, or consummation or administration of any of the transactions
contemplated by, or any amendment, supplement or modification of, or any waiver
or consent under or in respect of, this Agreement, the other Loan Documents and
any such other documents, and (d) to pay, indemnify, and hold Bank harmless from
and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement, the other Loan Documents and
any such other documents, including, without limitation, any of the foregoing
relating to the violation of, noncompliance with or liability under, any
Environmental Law applicable to the operations of Borrower, any of its
Subsidiaries or any of their respective properties (all the foregoing in this
clause (d), collectively, the "Indemnified Liabilities"). The agreements in this
Section shall survive repayment of the Loans and all other amounts payable
hereunder.
THE INDEMNIFICATION PROVIDED IN THIS SECTION SHALL APPLY WHETHER OR NOT
SUCH COSTS, EXPENSES OR INDEMNIFIED LIABILITIES ARE IN ANY WAY OR TO ANY EXTENT
CAUSED, IN WHOLE OR IN PART, BY ANY
40
<PAGE>
NEGLIGENT ACT OR OMISSION OF ANY KIND BY BANK, provided only that Bank shall not
be entitled under this Section to receive indemnification for that portion, if
any, of any Indemnified Liabilities which is proximately caused by its own
individual gross negligence or willful misconduct, as determined in a final
judgment. If any Person (including Borrower or any of its affiliates) ever
alleges such gross negligence or willful misconduct by Bank, the indemnification
provided for in this section shall nonetheless be paid upon demand, subject to
later adjustment or reimbursement until such time as a court of competent
jurisdiction renders a final judgment as to the extent and effect of the alleged
gross negligence or willful misconduct. As used in this section the term "Bank"
shall refer not only to the Person designated as such in this Agreement but also
to each director, officer, agent, attorney, employee, representative and
Affiliate of such Person.
8.6 Successors and Assigns; Participations and Assignments.
(a) This Agreement shall be binding upon and inure to the benefit of
Borrower, Bank and their respective successors and assigns, except that
Borrower may not assign or transfer any of its rights or obligations under
this Agreement without the prior written consent of Bank.
(b) Bank may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time sell to one or
more banks or other entities ("Participants") participating interests in
any Loan, the Commitment, or any other interest of Bank hereunder and under
the other Loan Documents. In the event of any such sale by Bank of a
participating interest to a Participant, Bank's obligations under this
Agreement to the other parties to this Agreement shall remain unchanged,
Bank shall remain solely responsible for the performance thereof, Bank
shall remain the holder of any such Loan for all purposes under this
Agreement and the other Loan Documents, and Borrower shall continue to deal
solely and directly with Bank in connection with Bank's rights and
obligations under this Agreement and the other Loan Documents. Borrower
agrees that if amounts outstanding under this Agreement are due or unpaid,
or shall have been declared or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall, to the maximum
extent permitted by applicable law, be deemed to have the right of setoff
in respect of its participating interest in amounts owing under this
Agreement to the same extent at if the amount of its participating interest
were owing directly to it as Bank under this Agreement. Borrower also
agrees that each Participant shall be entitled to the benefits of Sections
2.10, 2.11 and 8.5 with respect to its participation in the Commitments and
the Loans outstanding from time to time as if it was Bank; provided that no
Participant shall be entitled to receive any greater amount pursuant to any
such Section than Bank would have been entitled to receive in respect of
the amount of the participation transferred by Bank to such Participant had
no such transfer occurred.
41
<PAGE>
(c) Borrower authorizes Bank to disclose to any Participant and any
prospective Participant any and all financial information in Bank's
possession concerning Borrower and its Affiliates which has been delivered
to Bank by or on behalf of Borrower pursuant to this Agreement or which has
been delivered to Bank by or on behalf of Borrower in connection with
Bank's credit evaluation of Borrower and its Affiliates prior to becoming a
party to this Agreement.
8.7 Setoff. In addition to any rights and remedies of Bank provided by
law, Bank shall have the right, without prior notice to Borrower, any such
notice being expressly waived by Borrower to the extent permitted by applicable
law, upon any amount becoming due and payable by Borrower hereunder (whether at
the stated maturity, by acceleration or otherwise) to set-off and appropriate
and apply against such amount (i) any and all deposits, in any currency, at any
time held or owing by Bank or any branch or agency thereof to or for the credit
or the account of Borrower, and (ii) any other credits, indebtedness or claims,
in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by Bank or any
branch or agency thereof to or for the credit or the account of Borrower. Bank
agrees promptly to notify Borrower after any such set-off and application made
by Bank, provided that the failure to give such notice shall not affect the
validity of such set-off and application.
8.8 Counterparts. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts (including by
facsimile transmission), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
8.9 Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
8.10 Integration. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT
THE ENTIRE AGREEMENT OF BORROWER, GUARANTORS AND BANK WITH RESPECT TO THE
SUBJECT MATTER HEREOF, AND THERE ARE NO PROMISES, UNDERTAKINGS, REPRESENTATIONS
OR WARRANTIES BY BANK RELATIVE TO SUBJECT MATTER HEREOF NOT EXPRESSLY SET FORTH
OR REFERRED TO HEREIN OR IN THE OTHER LOAN DOCUMENTS.
8.11 Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAW
OF THE STATE OF LOUISIANA.
42
<PAGE>
8.12 Submission To Jurisdiction; Waivers. Borrower hereby irrevocably and
unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which
it is a party, or for recognition and enforcement of any judgement in
respect thereof, to the non-exclusive general jurisdiction of the Courts of
the State of Louisiana, the courts of the United States of America for the
Eastern District of Louisiana, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to Borrower
at its address set forth in Section 8.2 or at such other address of which
Bank shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this Section any special, exemplary, punitive or consequential damages.
8.13 Acknowledgments. Borrower and Guarantors hereby acknowledge that:
(a) Bank has no fiduciary relationship with or duty to Borrower or any
Guarantor arising out of or in connection with this Agreement or any of the
other Loan Documents, and the relationship between Bank, on one hand, and
Borrower on the other hand, in connection herewith or therewith is solely
that of creditor and debtor and the relationship between Bank, on one hand,
and each Guarantor on the other hand, in connection herewith or therewith
is solely that of creditor and a guarantor of debtors' obligations; and
(b) no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby
between Bank and Borrower or between Bank and any Guarantor.
43
<PAGE>
8.14 WAIVERS OF JURY TRIAL. BORROWER, GUARANTORS, AND BANK HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY
LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
AND FOR ANY COUNTERCLAIM THEREIN.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
BORROWER:
HAM MARINE, INC.
By: ______________________________________
Name:
Title:
BANK:
BANK ONE, LOUISIANA, NATIONAL ASSOCIATION
By: ______________________________________
Name:
Title:
GUARANTORS:
FRIEDE & GOLDMAN, LTD.
By: ______________________________________
Name:
Title:
44
<PAGE>
Schedule I
SUBSIDIARIES
NONE
45
<PAGE>
Schedule II
ENVIRONMENTAL MATTERS
NONE
46
<PAGE>
[To be supplemented by Watkins & Eager]
Schedule III
EXISTING LIENS
Those certain liens in favor of Trustmark National Bank and evidenced by the
following UCC-1 Financing Statements:
1. UCC-1 Financing Statement No. 352517 filed November 27, 1996 with the
Chancery Clerk, First Judicial District, Hinds County, Mississippi.
2. UCC-1 Financing Statement No. 816658 filed July 18, 1994 with the Secretary
of State, Mississippi.
3. UCC-1 Financing Statement No. 912523 filed August 2, 1995 with the
Secretary of State, Mississippi.
4. UCC-1 Financing Statement No. 1055862 filed December 2, 1996 with the
Secretary of State, Mississippi.
5. UCC-1 Financing Statement No. 94-79439 filed July 18, 1994 with the
Chancery Clerk, Jackson County, Mississippi.
6. UCC-1 Financing Statement No. 95-83255 filed August 1, 1995 with the
Chancery Clerk, Jackson County, Mississippi.
7. UCC-1 Financing Statement No. 96-87114 filed April 16, 1996 with the
Chancery Clerk, Jackson County, Mississippi.
47
<PAGE>
EXHIBIT 10.8
STATE OF MISSISSIPPI
COUNTY OF JACKSON
AMENDED LEASE AGREEMENT
THIS Amended Lease Agreement made and entered by and between the JACKSON
COUNTY PORT AUTHORITY, an agency of Jackson County, Mississippi created under
Chapter 199, Laws of Mississippi 1956, and the BOARD OF SUPERVISORS OF JACKSON
COUNTY, MISSISSIPPI acting jointly, of Post office Box 70, Pascagoula,
Mississippi 39567, hereinafter collectively referred to as the "COUNTY", and
HAM MARINE, INC, (formerly Ham Industries, Inc.), a corporation organized
and existing under the laws of the State of Mississippi, Post Office Box 43,
Pascagoula, Mississippi 39567, hereinafter referred to as the "LESSEE";
W I T N E S S E T H:
WHEREAS; COUNTY is primarily interested in promoting industrial
development, employment and tonnage for the Port and the efficient operation
thereof, and
WHEREAS, LESSEE leases certain lands from the County on the West side of
the East Pascagoula River in the Pascagoula River Harbor area, which is used for
drilling rig modification/retrofits, repair and construction of production units
for the offshore petroleum industry, and for industrial development in the Port
of Pascagoula; and
WHEREAS, COUNTY and LESSEE entered a Lease Agreement on May 6,1985,
recorded in Book 824, Page 418, Land Deed Records, Jackson County, Mississippi,
which was amended and restated by instrument dated as of October 1, 1985,
recorded in Book 838, Page 6, Land Deed Records, Jackson County, Mississippi,
and which Lease Agreement has further been amended by unrecorded instrument
dated November 16, 1988, and parking area lease dated March 8, 1994; and
WHEREAS, the COUNTY and LESSEE desire to amend certain terms and conditions
of the Lease Agreement, and to embody all of their understandings in a single
document; and
This instrument prepared by JOHN G. CORLEW, P.O. Box 650 Jackson, MS 39205 (60
1-948-6470). Property located in SECTION 10, TOWNSHIP 8 SOUTH, RANGE 6 WEST,
Jackson County, Mississippi.
<PAGE>
WHEREAS, the COUNTY finds and determines that this Amended Lease Agreement
would be for the best interest and benefit of the Port of Pascagoula and the
citizens of Jackson County, Mississippi.
NOW, THEREFORE, in consideration of the mutual covenants and undertakings
of the parties hereto, the COUNTY and LESSEE hereby amend their prior lease
agreements as hereinabove referenced, intending to incorporate all terms and
conditions of their agreement into this instrument and to otherwise cancel and
hold for naught all prior understandings between them, except as set forth
hereinafter.
The following terms and conditions apply to this Amended Lease Agreement,
to-wit:
1. DEMISED PREMISES: The property subject to this Lease Agreement is
described in Exhibit "A" attached hereto. COUNTY warrants that it has good
title to the demised premises, full authority to lease same pursuant to this
Amended Lease Agreement, and that LESSEE shall have quiet enjoyment of the
demised premises during the primary term of this Lease and any renewal term.
2. TERM: The primary term of the Lease shall be twenty (20) years, and
shall commence on the first day of May, 1985, and end on the first day of May,
2005.
3. RENTAL:
(A) LESSEE hereby agrees and covenants it will pay to the COUNTY as
rent for the aforesaid property the sum of $49,331 per annum, commencing on
January 1, 1996. LESSEE has delivered to COUNTY as of the date hereof $7,496.50
representing rental to January 1, 1996, on additional property included within,
the demised premises beyond that included in the May 6, 1985, lease as amended
November 16, 1988, and in the parking area lease of March 8, 1994.
(B) ADDITIONAL RENTS: In addition to the rent referred to in Paragraph
3(A), LESSEE hereby agrees and covenants it will pay to the COUNTY as additional
rents for the aforesaid property the sum of $30,000.00 per annum, commencing
January 1, 1996. It is agreed and understood by and between the parties that
said additional rents herein shall be used for maintenance dredging of that
portion of the Pascagoula River adjacent to the demised premises as described in
Exhibit "A" attached hereto and by the description attached hereto as Exhibit
"B". These additional rents shall accrue and be carried forward from year to
year. In the event that the accrued additional annual rents are not sufficient
to cover the cost of the maintenance dredging as hereinabove described, the
LESSEE shall
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<PAGE>
pay the difference to the COUNTY within thirty (30) days of written notification
of such deficiency. In the event that the accrued additional annual rents shall
exceed the sum necessary for the required maintenance dredging, said surplus
shall be carried forward and used to fund future maintenance dredging. Any
surplus of accrued additional rents at the expiration of the primary term of
this Lease or any renewal thereof shall become the exclusive property of the
COUNTY.
4. DREDGING: The Pascagoula River alongside the demised premises has been
dredged to a depth of not less than 38 feet at the bulkhead constructed by the
LESSEE. COUNTY agrees to perform necessary maintenance dredging of the
Pascagoula River alongside the demised premises to coincide with maintenance
dredging of the turning basin by the United States Corps of Engineers, and of
the public docks on the Pascagoula River by the Port Authority, and COUNTY
agrees that such maintenance dredging shall be adequate so as to maintain said
38-foot depth of the river alongside the demises premises.
5. EMPLOYMENT: LESSEE hereby covenants and agrees, during the primary
term of the Lease herein referred to, to exercise due diligence to maintain and
operate a business on such land and to provide steady employment in such
operations, and to use all reasonable means to employ local labor.
6. INSURANCE AGAINST PERSONAL INJURY: LESSEE shall take out and carry
throughout the term of said Lease, and pay the premium on liability insurance in
an amount not less than $5,000,000 for the death or bodily injury of any one
person, and in an amount of not less than $5,000,000 for the death of or bodily
injury to two or more persons, in any one accident or series of accidents
arising out of one event, and shall include the COUNTY as additional named
insured under the terms of said policy, an without cost to the COUNTY.
LESSEE shall carry throughout the term of said Lease, and pay the premiums
on Workers' Compensation Insurance as required by the Laws of the State of
Mississippi and/or the United States of America.
7. POSSESSION ON TERMINATION: LESSEE hereby agrees and obligates itself
that it will, upon the expiration of the primary term of this Lease, or any
renewal thereof, surrender and deliver to COUNTY, peaceable possession of said
land, cleared of all persons, goods and things not properly belonging to same,
and in order and condition as when received, ordinary wear and tear excepted.
Except for movable equipment and personal property,
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<PAGE>
any permanent improvements, including buildings, placed upon the land by LESSEE
shall remain with the land and become the property of COUNTY.
8. OPTIONS TO EXTEND LEASE: LESSEE shall have the option to renew this
Lease for an additional ten-year term upon the same terms and conditions as set
forth, provided that the Annual Rent set forth in Section 3(A) shall be
$87,341.98 per annum. Notice of intention to renew shall be in writing by the
LESSEE to the COUNTY delivered not less than 180 days prior to expiration of the
initial term of this Lease. At the end of such ten-year renewal term, LESSEE
shall have the option to renew this Lease for a second ten-year renewal term on
the same terms and conditions herein set forth, provided that the Annual Rent
set forth in Section 3(A) shall be $123,587.39 per annum. Additional Rents as
set forth in Section 3(B) shall be the same in any renewal terms as in the
primary term. Notice to renew shall be given in the same manner set forth
hereinabove. Such options, if exercised, shall be exercised by written notice
to the COUNTY, addressed as follows:
DIRECTOR
JACKSON COUNTY PORT AUTHORITY
Post Office Box 70
Pascagoula, Mississippi 39567
and shall be deposited in the United States Mail, or personally delivered to the
addressee at least one hundred eighty (180) days prior to the termination of the
primary or renewal term.
9. ASSIGNABILITY: The LESSEE may assign this agreement and the Lease
provided for herein, to any other person, firm or corporation; however, any such
assignment shall have prior written approval from the COUNTY requested at least
sixty (60) days prior to such assignment, and no assignment shall release LESSEE
from any of its obligations or liabilities thereunder, unless the COUNTY
executes a written release thereof. COUNTY shall not unreasonably refuse
approval of any assignment nor shall it unreasonably refuse to release LESSEE
from obligations of the Lease in connection with approval of any such
assignment.
10. SUBLEASE OF PORTION OF PROPERTY: LESSEE may sublease so much of its
dock space to be constructed on the demised premises to third parties as the
LESSEE, in its discretion, deems advisable, provided that the rental for such
dock space shall be the same as Port Authority published rates for similar dock
usage in the Port of Pascagoula. LESSEE, with COUNTY's written consent, may
grant easements, licenses, rights of way and other rights
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<PAGE>
or privileges in the nature of easements in and to the demised premises, or
release existing such rights or privileges. COUNTY shall not unreasonably refuse
to agree to the grant or release of any such right or privilege.
11. INDEMNIFICATION: LESSEE agrees to release, indemnify and save
harmless, COUNTY and its respective officers, agents and employees, from and
against any and all loss of, or damage to property or injuries to, or death to
any person or persons, including property and officers, employees and agents of
COUNTY, and from any and all claims, damages, suits, costs, expense, liability,
actions or proceedings of any kind or nature whatsoever, or by anyone
whomsoever, in any way resulting from damage to property or injury to or death
of persons, and arising out of LESSEE's use of the property leased by this
Lease.
Additionally, LESSEE shall indemnify, hold harmless, and hereby waives any
claim for contribution against COUNTY for any damages to the extent they arise
from events or conditions which arise after the commencement date of the Lease,
related to LESSEE's use of the demised premises through the termination date of
the Lease or any renewal term thereof which involve (i) any release, threatened
release or disposal of any hazardous material at the demises premises; (ii) the
operation or violation of any environmental law at the demises premises; or
(iii) any environmental claim in connection with the demised premises. COUNTY
shall indemnify, hold harmless, and hereby waives any claim for contribution
against LESSEE for any damages to the extent, they wise from events or
conditions which existed before the commencement of the Lease and relate to: (i)
any release, threatened release, or disposal of any hazardous material at the
demised premises; (ii).the operation or violation of any environmental law at
the demises premises; or (iii) any environmental claim in connection with the
demised premises.
12. TAX EXEMPTION; ADDITIONAL RENTALS IN LIEU OF TAXES: The subject
property, and all improvements thereon, including the leasehold interest, shall
be exempt from and valorem taxation for a period of ten years from the
completion of the initial $1.7 million dock improvements constructed on the
demised premises by LESSEE, and the COUNTY hereby agrees to take any and all
action which might be required in order to assure that LESSEE receives the
benefit of same. Thereafter, LESSEE shall be liable for payment of and valorem
taxes with respect to the subject property to the extent of its ownership
interest therein and to the extent said property is not taxable because of its
ownership by the COUNTY, LESSEE will pay annually to the taxing authorities who
otherwise would be entitled to IM and valorem taxes on the Project, an amount
equal to what LESSEE would have been required to pay
-5-
<PAGE>
to such taxing authorities as and valorem taxes were they entitled to levy and
valorem taxes on the Project. Provided, however, that in no event shall said in
lieu payments by LESSEE exceed that amount which LESSEE would otherwise pay to
the respective taxing authorities if LESSEE were the sole owner of the subject
property and all improvements thereon. LESSEE shall be entitled to additional
tax exemptions for expansions and/or additions to its facilities pursuant to the
provisions of Section 27-31-105, Miss. Code of 1972, as amended, or as otherwise
provided by law, and COUNTY agrees to cooperate with LESSEE in the securing of
same.
13. GENERAL DEFAULT: If LESSEE shall fail to perform any of its
obligations or agreements hereunder, or under any Lease to be executed pursuant
hereto; or if LESSEE, or any assignee thereof shall, during the primary term of
this Lease, and any renewals and extensions thereof, discontinue its operations
on the lands described hereinabove, for a continuous period of one (1) year, at
any one time (strikes, war, acts of God, fire, acts of Government, and other
casualties not under LESSEE's control excepted), LESSEE shall be deemed to be in
default, and in addition to any other rights that may accrue to the COUNTY under
the provisions hereof the COUNTY shall have the right at its option, to
terminate this Lease, and any renewal Lease, executed under the provisions
hereof and the COUNTY shall, in the event of such termination, be entitled to,
and LESSEE shall surrender to the COUNTY peaceable possession of such land,
provided, however, that before terminating this Contract, the COUNTY shall give
LESSEE notice of its intention to terminate by registered mail, addressed to
LESSEE, and LESSEE shall have thirty (30) days after receipt thereof to cure
such default, and provided further, however, that such termination by the
COUNTY, because of LESSEE's failure to continue operations for a continuous
period of one (1) year, shall release LESSEE, with the exception of the
continued payments by LESSEE of rentals provided for hereinabove, from any
further obligations under this Lease, or such renewals or extensions of this
Lease, and such termination shall constitute the COUNTY's sole remedy for
LESSEE's default by reason of such discontinuance. Delay shall not constitute a
waiver of such right. In any action for non-payment of rent due hereunder, it
is understood and agreed that the COUNTY shall have the usual owners-landlords
obligation to mitigate damages.
14. DOCK AND BULKHEAD INTEGRITY: LESSEE agrees that it will maintain its
dock and bulkheading in a manner which will insure sufficient stability to
prevent failure or damage during maintenance dredging to be performed by the
COUNTY, as referred to in Paragraph 4. The LESSEE further agrees that in the
event of such
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<PAGE>
damage or failure, LESSEE shall hold COUNTY harmless and shall indemnify COUNTY,
its officers, agents and employees from and against any and all loss, damages,
injury or death of any person or persons, including the property, officers,
employees and agents of the COUNTY, and from any and all claims, damages, suits,
costs, expenses, liability, actions or proceedings of any kind or nature
whatsoever as a result thereof.
15. PORT TARIFF: LESSEE agrees that it will comply as applicable with
COUNTY's published Port Tariff.
16. COMMON AREA USE: It is recognized that there is an area at the
junction of HAM's dock and PORT's Terminal "D" that, when utilized for mooring a
vessel will obstruct a portion of the other facility. This area includes the
area south of the western 250 feet of the HAM dock.
On the occasions when HAM has a drilling rig or other vessel located/moored
in this area, and where a vessel(s) assigned to the PORT's facilities incurs
charges directly related to the PORT's inability to provide the full length of
Terminal "D" due to the drilling rig/vessel's location at HAM's dock, HAM shall
be responsible for the reasonable amount of such charges, provided that HAM be
notified by PORT prior to charges being incurred.
-7-
<PAGE>
EXHIBIT "A"
Commencing at the Southeast comer of Terminal "C", Jackson County Port
Authority; thence North 21 degrees 05 minutes West along the East side of
Terminal "C" and Terminal "D", 1,450.00 feet to the POINT OF BEGINNING: thence
South 68 degrees 55 minutes West, 360.08 feet to a point 40 feet from the
centerline of a railroad track to the Jackson County Port Authority West Bank
Terminals; thence Northerly 40 feet from said railroad center line and along a
curve to the right having a radius of 714.32 feet and a chord bearing and
distance of North 08 degrees 09 minutes 24 seconds West ,198.76 feet; thence
North 00 degrees 09 minutes 27 seconds West 40.0 feet; thence South 89 degrees
50 minutes 33 seconds West, 25 .0 feet to the East, Right-of-Way of the CSX
Transportation Railroad lead track; thence North 00 degrees 09 minutes 27
seconds West along said East Right-of-Way 394.30 feet to a curve to the right
thence following said curve having a radius of 344.26 feet and a chord bearing
and distance of North 32 degrees 29 minutes 56 seconds East, 395.06 feet to the
South Right-of-Way of the CSX Transportation Railroad mainline; thence South 77
degrees 33 minutes 15 seconds East, 1105 feet, more or less, along the South
Right-of-Way of the CSX Transportation Railroad to the West Bank of the
Pascagoula River, thence Southerly along sold West Bank to a point on the West
Bank where a line running parallel to and 150 feet South of said CSX
Transportation Railroad mainline intersects the said West Bank; thence North 77
degrees 33 minutes 15 seconds West, 195 feet, more or less, to a point; thence
South 60 degrees 30 minutes West, 900 feet; thence South 21 degrees 05 minutes
East, 150.0 feet to the POINT OF BEGINNING. Said parcel containing 13.267
acres, more or less.
LESS AND EXCEPT:
Commencing at the Southeast corner of Terminal "C", Jackson County Port
Authority; thence run North 21 degrees 05 minutes West along the East side of
Terminal "C" and Terminal "D" 1450.00 feet to the Northeast comer of Terminal
"D"; thence run South 68 degrees 55 minutes West 187.33 feet to the Point of
Beginning; thence continue South 68 degrees 55 minutes West, 48.72 feet; thence
North 30 degrees 56 minutes 22 seconds West, 75.00 feet, thence along a curve to
the right with a delta of 7 degrees 09 minutes 08 seconds, radius of 495.40 feet
and chord of 61.80 feet and bearing of North 27 degrees 21 minutes 48 seconds
West; thence North 23 degrees 47 minutes 12 seconds West, 82.00 feet; thence
North 30 degrees 56 minutes 22 seconds West, 53.26 feet; thence along a curve to
the right with a delta of 12 degrees 38 minutes 32 seconds, radius of 518.94
feet and chord of 114.27 feet and bearing of North 24 degrees 37 minutes 06
seconds West to the East Right-of-Way line of CSX Transportation Railroad Watts
Spur, thence North 0 degrees 09 minutes 27 seconds West, 204.27 feet along said
East Right-of-Way; thence South 7 degrees 19 minutes 24 seconds East, 111.21
feet; thence along a curve to the left with a delta of 23 degrees 36 minutes 58
seconds, radius of 461.34 feet and chord of 188.81 feet and bearing of South 19
degrees 07 minutes 53 seconds East; thence South 30 degree 56 minutes 22 seconds
East, 282.00 feet to the POINT OF BEGINNING. Containing 0.417 acres.
<PAGE>
EXHIBIT "B"
An area of the Pascagoula River lying In Section 10, Township 8 South, Range 6
West located in Jackson County, Mississippi, more particularly described as
follows:
Beginning at a point 1600 feet North 21 degrees 05 minutes 00 seconds West from
the Southeast comer of Terminal "C" Dock (Coordinates North 254, 818.30, East
583,611.02) run North, 0 degrees 14 minutes 07 seconds East, 900 feet to a
point; thence turn an angle of 0 degrees 0 minutes 00 seconds Right, run for a
distance of 250 feet more or less to a point; thence turn an angle of 0 degrees
00 minutes 00 seconds Right, run for a distance of 250 feet more or less to a
point on the limits of Federally Maintained Dredging; thence follow said limits
of Federally Maintained Dredging 681 feet more or less to a point; thence run
North 0 degrees 25 minutes 26.5 seconds West, 480 feet to the POINT OF
BEGINNING, containing 4.75 acres, more or less.
All coordinated are plane coordinated, Transverse Mercator Projection for the
State of Mississippi, East Zone. All bearings refer to grid North, Transverse
Mercator Projection for the State of Mississippi, East Zone.
<PAGE>
EXHIBIT 10.9
RESOLUTION OF JACKSON COUNTY PORT AUTHORITY BOARD OF
COMMISSIONERS REGARDING HAM MARINE, INC.
WHEREAS, the mission statement of the Jackson County Port Authority is "to
acquire, develop and manage assets as necessary to build and sustain a world-
class, multi-use industrial port; and to encourage and support private
investment In Jackson County by industries which provide, serve, or are
dependent on water transportation"; and
WHEREAS, HAM Marine is an existing maritime industry dependent on water
transportation which provides a substantial economic impact to Jackson County;
and
WHEREAS, it is understood that the Port and Ham Marine are working
diligently toward the expansion of Ham Marine's operations through the
construction of an additional drill rig repair, modification, and construction
facility on Greenwood Island in the Port's Bayou Casotte Harbor; and
WHEREAS, the Terminal D lease is entered into for the sole purpose of
providing HAM Marine with an area to accommodate increased business on an
interim basis with the full expectation of continued progress toward the
construction of the expanded facility on Greenwood Island; and
WHEREAS, the Jackson County Port Authority's primary interest in leasing
Terminal D is to support a local industry, promote industrial development of the
port, to efficiently operate the leased facilities without adversely impacting
the business of other Port tenants, and provide jobs for the citizens of Jackson
County; and
WHEREAS, the Port recognizes Ham's critical need for additional waterfront
and adjacent acreage to accommodate customers targeted for the expanded facility
and thereby immediately creating additional skilled jobs for Jackson County
residents;
THEREFORE BE IT RESOLVED that the Port does hereby agree to enter into said
lease agreement with HAM Marine for the Terminal D facility for a period not to
exceed two (2) years.
<PAGE>
The motion to approve the foregoing resolution was made by Commissioner
_________________________________, seconded by Commissioner
_______________________________________, and the following vote was recorded:
Commissioner Brown ---------
Commissioner Colmar ---------
Commissioner Easley ---------
Commissioner Engle ---------
Commissioner McCool ---------
Commissioner Miller ---------
Commissioner Stallworth ---------
Commissioner Persons Presiding
---------
RESOLVED, this _____________, day of December, 1996.
ATTEST:
- ------------------------------------
State Stallworth, Sr., Secretary
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<PAGE>
STATE OF MISSISSIPPI
COUNTY OF JACKSON
LEASE CONTRACT
This LEASE CONTRACT made and entered into on this the _____________ day of
January, 1997.
BETWEEN
THE JACKSON COUNTY PORT AUTHORITY, an agency of Jackson County,
Mississippi, created under Chapter 199, Laws of Mississippi, 1956, and the BOARD
OF SUPERVISORS of Jackson County, Mississippi, acting jointly, hereinafter
collectively referred to as "PORT", and
HAM MARINE, INC., 3500 Port Road, Pascagoula, Mississippi 39567, a
corporation organized and existing under the laws of the State of Mississippi,
hereinafter referred to as "HMI";
WITNESSETH
WHEREAS, PORT,, under the terms of a contract with the State of
Mississippi, through the Mississippi Board of Economic Development, as provided
for in Chapter 365, Laws of Mississippi, 1958, secured funds through the
issuance of bonds for the building of certain port facilities herein referred to
generally as the Port; the Port includes the real property together with
improvements, equipment and personal property, described in Appendix "A". The
properties described in Appendix "A" are generally known as Terminals "D-1" and
"D-2" of the Port and are herein referred to as the Facilities; and
WHEREAS, it is recognized that the PORT and HMI are working in good faith
to develop a permanent drill rig repair, modification and construction facility
on Greenwood Island, this Lease is to provide HMI with an area to accommodate
increased business on an interim basis and this Lease is entered into with the
expectation of continued progress toward the construction of a permanent
facility on Greenwood Island; and
(1)
<PAGE>
WHEREAS, PORT's primary interest in this Lease is to support a local
industry and promote industrial development for the Port and to efficiently
operate the leased Facilities without adversely impacting the business of other
PORT tenants; and
WHEREAS, PORT is the owner of the leased premises, and is the Lessor under
the Lease Contract. HMI is the Lessee under the Lease Contract. This is the
sole relationship between PORT and HMI; and
NOW THEREFORE, in consideration of the mutual covenants and undertakings of
the parties hereto, PORT leases to HMI the Facilities on the terms and
conditions and for the periods hereinafter set forth:
1. DESCRIPTION: The leased property, both real and personal, covered by
this Lease Contract is fully described in detail in Appendix "A", which is
attached hereto and made a part hereof, and is herein referred to as the
Facilities.
2. TERM: The term under this Lease Contract shall be for two (2) years
and shall commence upon execution of this Lease by all parties and receipt by
PORT of the first years rental payment. This lease contains no provisions for
renewal or extension beyond the two (2) year lease term.
3. RENTAL: For and in consideration of the Lease and the privileges
herein granted, HMI agrees to pay to PORT during the term of the agreement, in
lieu of all dockage, storage, and wharfage charges the following Rental Charges:
(a) First year rental of $500,000.00 payable at the time this lease is
executed.
(b) Second year rental of $500,000.00, payable on or before the first day
of the second year rental period.
4. ACCEPTANCE OF FACILITY: Prior to HMI occupying Facilities, HMI and
PORT shall conduct a joint inspection of Facilities. A condition report
detailing the overall condition of the Facilities and all deficiencies shall be
signed by both parties and attached to this Lease. This
(2)
<PAGE>
condition report shall serve as the basis for the acceptable condition of the
facilities when returned to PORT at the and or termination of this Lease.
5. TARIFF CHARGES: The PORT shall collect for its own account all Tariff
charges other than those as described in Section 3 of this lease, including
harbormaster fees, water and other services provided by it to HMI.
6. UTILITIES: HMI shall be responsible for its electrical service,
sanitary facilities, water, and gas on the leased premises and shall make the
necessary arrangements for separate metering and pay the costs incidental
thereto.
7. PORT WARRANTS AND REPRESENTS:
(a) That PORT has good fee simple title to all of the Facilities, both real
and personal.
(b) That the wharf and foundation of the Facilities are, at the time of
execution of this Lease contract, in good repair.
(c) That the channel from the Gulf of Mexico into the Pascagoula Harbor,
the approach channel and turning basin are a federally maintained project
depth of thirty-eight (38) feet.
8. ENFORCEMENT OF RULES AND REGULATIONS: It is understood and agreed by
HMI that PORT reserves the right to enforce local, federal and state laws, rules
and regulations concerning the use of the harbor, channel, waterways, etc. HMI
shall at all times grant, bona fide representatives of PORT free access to the
Facilities.
9. QUIET ENJOYMENT: PORT grants to HMI quiet enjoyment of the Facilities
for the term of this Lease Contract, and, provided that HMI maintains payments
herein set forth, grants to HMI the exclusive right to use the Facilities at all
times. PORT and HMI recognize that situations might possibly arise in which
wharf space might be inadequate for all vessels, and agrees that in such case,
HMI and PORT shall work together to minimize the impact of such situations. HMI
agrees to allow vessels calling PORT public facilities to encroach onto the
leased wharf facilities provided that such an encroachment onto the leased
facilities does not interfere with HMIs operations.
(3)
<PAGE>
PORT retains the right to use the mooring bollards on the leased
Facilities, to the extent that such use does not interfere with HMIs operations.
10. USE OF PREMISES: The Facilities are to be used by HMI solely as a
waterfront drill rig repair and modification facility and for associated
purposes. Operation of the premises as a cargo facility is not intended and is
specifically excepted.
11. DISRUPTION TO OTHER PORT TENANTS: HMI shall conduct operations in
such a manner as to not interfere with cargo operations at adjacent facilities.
Upon request by PORT, HMI shall immediately cease all blasting, spraying, or
other activities which are determined by PORT to be detrimental to cargo
activities. HMI agrees to moor vessels at the northern most end of the Facility
as practical in such a manner to have the least impact on cargo vessels working
at adjacent terminals.
PORT shall at all times have full use of, and access to, all rail lines
servicing PORTs public facilities.
12. ACCESS TO FACILITY: HMIs primary access to the Facilities shall be
through PORTS northern most gate and HMIs adjacent facility. Limited access
shall be made available through PORTs other gates provided that such access does
not interfere with other PORT operations.
13. INSURANCE AGAINST PERSONAL INJURY AND PROPERTY DAMAGE:
(a) HMI shall provide, at its own expense, liability insurance in the
minimum amount of $5,000,000.00 coverage with an insurance agency agreeable to
the PORT, which policy shall protect the PORT and HMI from any claims for
damages arising out of any alleged accident or occurrence on the above described
property.
(b) Both the PORT and HMI shall be listed as named insureds as their
interests may appear, on the property damage policy. Loss, if any, shall be
adjusted with and payable solely to the PORT as to PORT property.
(c) PORT should be shown as "additional insured" on HMI's liability
policies.
(4)
<PAGE>
(d) HMI's Workmen's Compensation insurance policy should be endorsed to
provide a "waiver of subrogation" in favor of PORT.
(e) PORT shall insure the Facilities at its expense against fire and
extended coverage hazards. HMI shall insure all equipment and materials handled
through the Facilities against fire, explosion and extended coverage hazards.
In the event HMIs use of Facilities cause an increase in PORT's insurance
premiums on the Facilities, the cost of such increase in premiums shall be paid
by HMI, or HMI shall have the option to meet PORTs additional requirements.
(f) The parties hereto agree to maintain and keep in force, fire and
extended coverage insurance to the extent of their respective interest on the
demised premises and the building of which the demised premises are a part and
personal property, fixtures and equipment located thereon or therein, said
insurance containing, or to contain, a provision that any release from liability
granted to any person prior to loss shall not invalidate said insurance; and
each party hereby agrees that it will not make any claim against, or seek to
recover from the other for any loss or damage to its property or the property of
others, covered by such fire and extended coverage insurance, whether or not
such loss or damage shall have been due to the negligence of either party, its
agents or employees.
14. INDEMNIFICATION: HMI agrees to release, indemnify and save harmless
the PORT and its assigns, agents and employees, from and against any and all
loss of, or damage to property, or injury tor or death of, any person or
persons, including property and employees and agents of HMI or its assigns, and
from any and all claims, damages, suits, costs (including legal fees), expense,
liability, actions or proceedings of any kind or nature whatsoever of or by
anyone whomsoever, any way resulting from damage to property or injury to or
death of persons, and arising out of HMI's use of the promises.
15. MODIFICATIONS/ALTERATIONS TO FACILITIES: HMI may, at is discretion,
place removable or portable equipment on the leased premises and shall be
entitled to remove the same at any time, provided the installation or use of
such removable or portable equipment does not require modification of
Facilities, damage the premises, or endanger in any way the structural
(5)
<PAGE>
integrity of the Facilities. HMI shall not make any structural modifications or
alterations to Facilities without prior written approval of PORT. Upon
termination of this Lease Contract, HMI shall have the right and may be required
in writing by PORT, to remove any and all equipment, machinery and appliances
which remain the property of HMI or of HMI's agents or assignees, placed by HMI
or HMI's agents on the Facilities. Such removal shall be completed within
thirty (30) days after the termination of this Lease and the receipt of notice
in writing to remove. HM covenants and agrees to surrender the Facilities to
the PORT at the end of the term hereof or upon prior termination thereof in
accordance with the provisions of this Lease Contract, said Facilities to be
surrendered in as good order and condition as when received, with the exception
of any loss or damage by fire or other casualty or event beyond the control of
HMI or which is insured against any PORT, as provided herein. Also, upon such
termination, HMI shall remove all trash, plus stocks of materials, supplies,
tools, etc., belonging to HMI or HMI's agents, and shall leave the site in good
condition.
16. MAINTENANCE OF FACILITIES: PORT assumes full responsibility for the
structural integrity of the Facilities infrastructure (viz, the wharf and
foundations) and shall be responsible for all major structural repairs thereto.
HMI shall make all repairs and perform all other work necessary on the building
and to the interior of the promises to keep them in the condition required for
HMI's use and occupancy.
Nothing contained herein shall relieve HMI from its responsibility to
effect repairs at its own expense for damage to any structure, exterior or
interior, resulting from its use of, and operations at, Facilities. HMI shall,
at its sole cost and expense during the entire term of the Lease, keep the
demised premises and the improvements thereon in a neat and orderly appearance
without accumulation of debris or trash. PORT shall keep the berth adjacent to
the demised premises dredged to a sufficient depth for use in general ocean-
going cargo service. PORT shall have access at all times to any part of the
demised promises for purposes of inspection and for the purpose of fulfilling
its obligations set forth herein. It is recognized that dredging of leased
facilities will be required once, in conjunction with the federal maintenance
cycle, within the two year lease period. HMI agrees to provide PORT with access
to the wharf areas to conduct dredging. PORT shall work with HMI to minimize
the impact of dredging on HMIs operations.
(6)
<PAGE>
17. ASSIGNABILITY: This Lease Contract and all of the terms and
conditions, shall inure to and be binding upon the parties hereto and their
respective successors. HMI shall not have the right to assign or sublet this
agreement.
18. DESTRUCTION OF FACILITIES: In the event of the total destruction of
the Facilities, or in the event that the Facilities are damaged to such an
extent as to render them inoperative for the purposes of this Lease and
agreement, either party hereto may terminate this Lease by giving written notice
thereof to the other party, and the rental shall be paid only to the time of
such termination and any rental paid in advance beyond the date of such
termination shall be returned by PORT to HMI, on demand.
If the Facilities, or any substantial part thereof, shall be appropriated
and HMI's use denied by virtue of eminent domain or condemnation proceeding, or
sold under threat thereof, HMI shall have the right to terminate this Lease and
agreement upon written notice to PORT, and rental shall be paid only to the time
when HMI surrenders possession of the premises, or HMI, in the event of partial
appropriation as aforesaid, may elect to continue in possession of that part of
the demised premises not so appropriated, under the same terms and conditions
hereof, except that in such case HMI shall be entitled to an equitable reduction
in the rental payable hereunder. Any unearned rental paid in advance beyond
such time shall be returned by PORT to HMI, on demand.
19. DEFAULT: In the event of any major default or any material terms or
conditions of this Lease contract, the other party shall have the right to
terminate this Lease contract without releasing the defaulting party from any
damages or monetary obligations, if any such default is not cured or corrected
within a period of sixty (60) days after written notice to the defaulting party
by the other party, describing in detail the default. If any such default
cannot be fully cured or corrected within such sixty (60) day period, the
defaulting party shall have the right to complete such cure or correction after
the expiration of such sixty (60) day period, if within such sixty (60) day
period, the defaulting party has commenced procedures to accomplish the cure or
correction and thereafter, in good faith, diligently prosecutor the cure or
correction to completion.
(7)
<PAGE>
In the event of HMIs uncured or uncorrected major default PORT shall be
entitled to recover all reasonable costs, attorney fees, and expenses reasonably
necessary to enforce the provisions of the lease and to make Port whole.
In the event of PORT's failure to cure or correct any major default of
PORT's obligations under this Lease Contract after proper written notice by HMI,
PORT agrees that HMI may terminate this Lease Contract without further liability
to PORT for any further rents, holding PORT liable for all reasonable damages
suffered by HMI. If HMI does not so terminate this Lease Contract, PORT agrees
that HMI may require it to specifically perform its obligations under this Lease
Contract, or that HMI may recover damages against PORT for its uncured default,
which damages shall include such monies as may be reasonably necessary to affect
a cure of PORT's default.
20. CANCELLATION/TERMINATION: This Lease Contract may be canceled and
terminated by HMI as a result of any one of the following conditions:
In the event that the State of Mississippi or PORT, or any agency which
either has created, shall create a condition by official action which would
substantially affect HMI's operation of the Facilities to its detriment then HMI
may exercise its right to terminate this Lease Contract under this sub-paragraph
by giving PORT not less than thirty (30) days prior written notice for any
conditions created by PORT, or any PORT agency, or by giving PORT not less than
sixty (60) days prior written notice for any conditions created by the State of
Mississippi or any state agency, which shall fix the termination date, after
which HMI shall be discharged from all further obligations under this Lease
Contract, including but not limited to the payment of all rent.
This Lease may be canceled and terminated by PORT at the and of the first
one year period unless substantial progress is made for the development of a
permanent facility by HMI on Greenwood Island. In the event that PORT elects to
terminate this Lease agreement, PORT shall provide HMI with thirty (30) days
written notice of intent to cancel and PORT shall prorate and refund the
unearned Portion of HMIs rental payment.
(8)
<PAGE>
In the event either party elects to terminate this Lease Contract under any
provision hereof, PORT agrees to allow HMI sufficient time to execute and
complete all open commitments that are scheduled at the time of the notice of
termination. The period of time to be allowed by PORT shall be mutually agreed
in writing between PORT and HMI, but shall not exceed ninety (90) days from the
date of the giving of such termination notice.
20. OBLIGATIONS: Delay in, or failure to, carry out the obligations imposed
upon by either party to this Lease Contract shall not be deemed breaches of the
Lease Contract, if such delay or failure results from fire, explosion, labor
disputes, casualties or accidents, lack or failure of transportation facilities,
epidemics, cyclones, flood, drought, lack or failure of other parties to perform
work or supply labor, materials or utilities as required by this Lease Contract,
or by reason of war, declared or undeclared revolution, civil commotion, acts of
public enemies, blockade or embargo, or by reason of any law, proclamation,
regulation, ordinance, demand or reason of any government, or any reason of any
other cause whatsoever, whether similar or dissimilar to those enumerated,
beyond the control of the parties involved. Each party agrees to use reasonable
diligence in attempting to remove any such cause.
22. ENVIRONMENTAL CLAUSE: Since HMI will be in control of the Facilities
during the term of the Lease, it is agreed that it will be HMI's responsibility
to operate the Facilities in an environmentally sound manner and lessee must
comply with all environmental laws and regulations including Title 49 of the
Code of Federal Regulations (CFR).
If HMI or its agents causes, or allows, or permits the discharge or release
of hazardous waste and/or materials in violation of any federal, state or local
law, and that discharge or release results in present or future damage to the
environment, property or port area, HMI shall notify PORT and shall, at its sole
expense, remediate the promises in accordance with acceptable engineering,
scientific and construction principles and practices, and in accordance with
existing laws and regulations. HMI shall also hold harmless and indemnify PORT
for any and all obligations imposed upon PORT by any regulating agency charged
by law with environmental protection or any claims of damages made by others as
a result of actions conducted pursuant to this Lease including costs,
(9)
<PAGE>
tests, attorney fees, and expenses incurred by PORT. Nothing herein shall
detract from or diminish any rights which HMI may have against third parties.
23. ENTIRE AGREEMENT: This contract constitutes the entire agreement
between the parties hereto, and there are no understandings, representations or
warranties of any kind, expressed or implied, which are not expressly set forth
herein.
24. BINDING CONTRACT: This Contract shall bind and inure to the benefit
of the successors of the respective parties hereto.
25. NOTICES: Any notice given under this contract shall be in writing and
transmitted by registered or certified mail, or by telegraph or messenger,
addressed to the party to which the notice is given, at its address shown below
or at such other address as the addressee shall have theretofore furnished, in
writing, to the other party, and shall be deemed to have been given when sent.
Until changed, the respective addresses of the parties shall be:
PORT:
JACKSON COUNTY PORT AUTHORITY
c/o Port Director
Post Office Box 70
Pascagoula, MS 39567-0070
HMI:
HAM MARINE, INC.
Post Office Box 43
Pascagoula, MS 39568-0043
26. GOVERNING LAWS: The validity, operation and performance of this
Contract shall be governed and controlled by the laws of the State of
Mississippi, and its terms shall be construed and interpreted in accordance with
said laws.
27. INVALID TERMS: If any term, condition, or other provision of this
Contract shall be held invalid or unenforceable to any extent, no remaining
term, condition or other provision
(10)
<PAGE>
hereof shall be affected thereby, but any and all other remaining terms,
conditions, and other provisions hereof shall be valid and be enforced to the
fullest permitted by law.
IN WITNESS WHEREOF, the parties hereto have executed this Contract by
signature of their respective officers thereunto duly constituted on this the
_______________ day of December, 1996.
ATTEST: JACKSON COUNTY PORT AUTHORITY
___________________________ By:__________________________
State Stallworth, Secretary Charles Persons, President
ATTEST: BOARD OF SUPERVISORS OF
JACKSON COUNTY, MISSISSIPPI
___________________________ By:__________________________
Lynn Presley, Clerk Larry Lee
President
APPROVED BY: HAM MARINE, INC.
___________________________ By:__________________________
Mississippi Board of J. L. Holloway, President
Economic Development
(11)
<PAGE>
EXHIBIT 10.10
MEMORANDUM OF UNDERSTANDING
WHEREAS, Jackson County, Mississippi, acting by and through its Board of
Supervisors and the Jackson County Port Authority ("COUNTY"), pursuant to the
provisions of Section 59-9-1, et seq., Mississippi Code of 1972, as amended, has
full authority to own, lease and develop property for industrial purposes and to
create employment opportunities for its citizens; and
WHEREAS, HAM MARINE, INC., a Mississippi corporation, ("HAM") proposes to
construct a new facility for drilling rig repair, retrofit and new construction
on approximately 120 acres of COUNTY-owned land; to invest in excess of $20
million for the improvement of such property; and to operate same pursuant to a
business plan which contemplates creation of 800 to 1000 new jobs;
NOW, THEREFORE, COUNTY and HAM agree as follows:
1. COUNTY agrees to lease to HAM approximately 120 acres of land located
at Greenwood Island along Bayou Casotte on terms and conditions to be embodied
in a Lease Agreement between the parties, some of the basic terms and conditions
of which are attached hereto as Exhibit "A."
2. HAM will improve the subject property with dock and bulkhead
improvements and establish an enterprise which will more than double its present
employee level and payroll. HAM certifies that present employment at its
facility on the West bank of the East Pascagoula River is not less than 350
employees, nor more than 400, and its present annual payroll is approximately
$12,000,000. HAM's present facility site is maximumly utilized; it has
opportunities for additional drilling rig repair, retrofit and new construction
work which cannot be met without additional space
<PAGE>
and facilities; a new facility and additional property is essential to
HAM's efficient and cost effective operation and expansion. HAM intends to
continue to operate its present facility and the new facility after same is
developed.
3. HAM will not proceed with the expansion and new facility on the
subject property unless COUNTY, secures all authorizations and permits necessary
for certain site preparation prerequisites to the construction of HAM's
improvements, and commits funding, not to exceed $6,000,000, to such site
preparation as follows: the East 73 acres of the subject property must be
completely filled and leveled to an elevation of approximately 5 to 10 feet mean
sea level with surface and underground drainage with subsurface suitable for
filter fabric, compacted to handle uniform loading at 1500 lbs per square foot;
the west 47 acres of the subject property (constituting roughly the East one-
half of the present Greenwood Island dredge disposal area) must be likewise
prepared to similar parameters. All of the subject property must be fully
permitted by all applicable governmental agencies to allow full utilization by
HAM. Dredging to a minimum depth of 30 feet along the entire Eastern boundary
of the subject property shall be required to the federal channel of Bayou
Casotte. Spoils dredge material will be utilized for fill to the extent
possible, and other suitable borrow material if required. Excess material shall
be otherwise disposed of. COUNTY shall be responsible for all applicable
government permits with respect to the foregoing.
4. In order to induce HAM to proceed with the project, COUNTY has agreed
to undertake and pay for the work described in paragraph 3, provided however
that it shall not expend greater than the sum of $6,000,000 for same. HAM shall
pay any cost for such work which exceeds $6,000,000. In no event shall HAM have
responsibility for any off-site cost associated with initial
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<PAGE>
construction, nor shall any such cost be included within calculation of COUNTY's
required on-site commitment.
5. COUNTY shall be responsible over and beyond the commitment described
in paragraphs 3 and 4 for the following:
(a) COUNTY shall use its best good faith efforts to work with the City of
Pascagoula, State Department of Transportation and federal agencies to
provide suitable access by public road to the subject property for
HAM's employees, suppliers and invitees as expeditiously as possible;
(b) provide adequate public water and sewer utilities to the North
property line.
6. COUNTY shall seek grant money for the purpose of defraying the site
preparation costs described in paragraph 3, including any environmental cleanup
required with respect to the subject property. Any such grant money, if
available, shall be used to defray COUNTY's cost, provided that if such grant
money is available in an amount exceeding $6,000,000, and the project is
eligible therefor, COUNTY shall use its best efforts to obtain same and further
provided that if unforeseen environmental or other cleanup costs are encountered
as the project progresses, the parties agree to use their collective best
efforts to resolve same and particularly to obtain maximum benefit of any
federal or state program for which the project is eligible.
7. The COUNTY intends to seek a loan from the State of Mississippi
through the Mississippi Department of Economic Development pursuant to the
Mississippi Business Investment Act, not to exceed $6,000,000, (the "MBIA" loan)
to defray its site preparation commitment herein in whole or in part. In this
regard, HAM commits as follows:
(a) The new facility, when operational, will create and maintain not less
than 400 net new full-time equivalent jobs.
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<PAGE>
(i) If HAM's average employment is less than 400 during the first
five years of its business operations at the subject property, it
shall pay COUNTY at that time a pro rata portion of the interest
which COUNTY has then paid with respect to the MBIA loan based on
the percentage by which employment is below 400, e.g., if average
employment is 300 HAM would pay 100/400, or 25% of the interest
COUNTY has paid.
(ii) If HAM's average employment is less than 400 during the first ten
years of its business operations at the subject property
(including in the average jobs over the first five years), it
shall pay COUNTY at that time a pro rata portion of the interest
which COUNTY has then paid with respect to the MBIA loan computed
in the same manner as subparagraph (i) with credit to HAM for
payment, if any, made pursuant to subparagraph (i).
(iii) If HAM's average employment is less than 400 during the first
fifteen years of its business operations at the subject property
(including in the average jobs over the first ten years), it
shall pay COUNTY at that time a pro rata portion of the interest
which COUNTY has then paid with respect to the MBIA loan computed
in the same manner as subparagraphs (i) and (ii) with credit to
HAM for payment, if any, made pursuant to subparagraphs (i) and
(ii).
(iv) If HAM's average employment is less than 400 during the first
twenty years of its business operations at the subject property
(including in the average jobs over the first fifteen years), it
shall pay COUNTY at that time a pro rata portion of the interest
which COUNTY has then paid with respect to the MBIA loan computed
in the same manner as subparagraphs (i) through iii) with credit
to HAM for payment, if any, made pursuant to subparagraphs (i)
through (iii).
(b) HAM and COUNTY acknowledge that the MBIA loan program also carries
certain penalty provisions to HAM if its net new full time equivalent
jobs fall below certain parameters based on the amount of said loan
pursuant to Miss. Code (S) 57-61-15(6). The provisions of
subparagraphs (a)(i) through (iv) are in addition to the MBIA loan
program requirement, except that HAM shall not be required to
duplicate any payment.
(c) HAM shall pay rental to the County with respect to the subject
property in the amounts set forth in the attached Exhibit "A."
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<PAGE>
(d) HAM shall expend a minimum of $3.00 for every $1.00 expended by COUNTY
with respect to improvements to the subject property, and provide
satisfactory evidence thereof to COUNTY.
(e) COUNTY shall not be required to expend any funds until it has
satisfactory evidence from HAM that it has expended not less than the
amount then required from the COUNTY.
8. In order to coordinate and expedite the work associated with the
subject project, COUNTY shall contract with HAM to develop and manage all of
said work on the following basis:
(a) Neither COUNTY nor HAM shall be entitled to seek compensation or
credit, or expenses, for efforts of their respective employees in
accomplishing the subject work.
(b) HAM shall act as Project Manager to accomplish the subject work, and
for this purpose HAM and COUNTY shall each designate a qualified
representative to coordinate the project.
(c) It shall be HAM's responsibility to select and manage all contractors
and consultants necessary to accomplish the subject work, provided,
however, that all contracts and expenditures shall be in strict
compliance with all applicable laws.
9. HAM and COUNTY agree that time is of the essence.
(a) HAM shall immediately undertake such engineering and other
investigation of the subject property to ascertain that it can be
filled, improved and permitted for its intended purposes at a cost
which is not prohibitive to HAM. HAM shall provide written notice to
the COUNTY on or before November 25, 1996, of its intention to execute
a proposed Lease Agreement, or if the subject property cannot be so
utilized, its written notice so stating.
(b) COUNTY shall fully cooperate with HAM in its investigation pursuant to
subparagraph (a) and shall expeditiously seek permits for the intended
purposes, provided, however, that HAM may terminate this agreement if
it determines permits required for the intended purposes may not be
obtained.
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<PAGE>
WITNESS OUR SIGNATURES on the respective dates hereinbelow.
JACKSON COUNTY BOARD OF SUPERVISORS
BY:_______________________________________
ITS PRESIDENT
DATE: DECEMBER ______, 1996
JACKSON COUNTY PORT AUTHORITY
BY:_______________________________________
ITS PRESIDENT
DATE: DECEMBER ______, 1996
HAM MARINE, INC.
BY:_______________________________________
ITS PRESIDENT
DATE: DECEMBER ______, 1996
-6-
<PAGE>
Item #6 Exhibit A
EXHIBIT "A"
-----------
1. DEMISED PREMISES: The property subject to this Lease Agreement is
described in Exhibit "1" attached hereto. COUNTY warrants that it has good
title to the demised premises, fall authority to lease same pursuant to this
Lease Agreement, and that HAM shall have quiet enjoyment of the demised premises
during the primary term of this Lease and any renewal term.
2. TERM: The primary term of the Lease shall be 20 years, and shall
commence on the earlier of (1) the date HAM completes the dock and bulkhead
improvements described in paragraph 2 of the Memorandum of Understanding, or (2)
the date HAM begins use of the subject property for its drilling rig repair,
retrofit, and construction work. HAM shall have three options to extend the
Lease for additional terms of ten years each on the same terms and conditions as
the primary term except rental shall be as set forth in Section 3. At the
appropriate time, the parties shall execute a certificate defining the
commencement date and rental due date per paragraph 3.
3. RENTAL: HAM hereby agrees and covenants it will pay to the COUNTY as
rent for the aforesaid property the sum of $200,000 per annum, commencing on the
earlier of the following dates: (1) two years after commencement of the primary
term as described in paragraph 2; (2) two years after COUNTY's final drawdown on
the MBIA loan, or (3) to coincide with COUNTY's first MBIA loan repayment. Rent
shall be payable annually thereafter for eight total such payments, then
$300,000 annually for eight such payments, and two annual payments thereafter of
$500,000. Rent during the three ten year option terms shall be $500,000 per
annum.
4. DREDGING: HAM shall perform, or cause to be performed, necessary
maintenance dredging.
<PAGE>
5. DOCK IMPROVEMENTS AND BULKHEAD INTEGRITY: HAM shall commence as soon
as practicable dock improvements on the East side of the subject property
alongside Bayou Casotte which shall be set back 350 feet from the federal
channel. HAM agrees that it will maintain its dock and bulkheading in a manner
which will insure sufficient stability to prevent failure or damage during
maintenance dredging, as referred to in Paragraph 4.
6. OCCUPANCY: HAM shall be permitted to occupy the premises immediately
upon execution of the Lease Agreement, and before commencement date of the
primary term, for the purpose of commencing construction of improvements.
7. WETLANDS: Any wetlands mitigation required for HAMs fall usage of the
subject property shall be COUNTY's responsibility.
8. CORPORATE HEADQUARTERS: HAM will construct a new corporate
headquarters on the subject property, or on property presently under lease from
the COUNTY pursuant to Amended Lease Agreement dated June 21, 1995, recorded in
Book 1066, Page 805, Land Deed Records, Jackson County, Mississippi.
9. OTHER: The parties shall incorporate other appropriate lease
provisions in their final Lease Agreement, including applicable provisions of
the Amended Lease Agreement between the parties dated June 21, 1995, recorded in
Book 1066, Page 805, Land Deed Records, Jackson County, Mississippi.
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<PAGE>
EXHIBIT 10.11
<TABLE>
<CAPTION>
<S> <C>
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1. Shipbroker THE BALTIC AND INTERNATIONAL MARITIME COUNCIL (BIMCO)
STANDARD BAREBOAT CHARTER
None CODE NAME: "BARECON 89" PART I
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2. Place and date
Pascagoula, 10 February 1997
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3. Owners/Place of Business 4. Bareboat charterers (Charterers)/Place of business
Pontwin N.V.
Anthony Veder Building HAM Marine, Inc.
Kaya Jacob Posner 3500 Port Authority Road
Willemstad, Curacao Pascagoula, Mississippi 39567
Netherlands Antilles U.S.A.
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5. Vessel's name, Call Sign and Flag (Cl. 9(c))
DUAL CARRIER, Netherlands Antilles, Callsign PJZR
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6. Type of Vessel 7. GRT/NRT
Twin Hull Submersible Barge 14364 / 4309
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8. When/Where built 9. Total DWT (abt.) in metric tons on summer freeboard
Les Abeilles 1201 built 1975 30.500 T
Federal 400-1, built 1975
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10. Class (Cl. 9) 11. Date of last special survey by the Vessel's classification society
Lloyd's Register 100A1 Pontoon SS due 1999
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12. Further particulars of Vessel (also indicate minimum number of months' validity of class certificates agreed acc. to Cl. 14)
Class to be maintained at all times / Validity of certificates
three months
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13. Port of Place of delivery (Cl. 2) 14. Time for delivery (Cl. 3) 15. Cancelling date (Cl. 4)
February 10, 1997 February 28, 1997
Pascagoula, Mississippi USA
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16. Port or Place of redelivery (Cl. 14)
Pascagoula, Mississippi USA
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17. Running days' notice if other than stated in Cl. 3 18. Frequency of dry-docking if other than stated in Cl. 9(f)
n/a
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19. Trading Limits (Cl. 5)
Gulf of Mexico
African - South American Coastal
For drydocking, launch or workplatform or for transport upon
mutual agreement of parties
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20. Charter period 21. Charter hire (Cl. 10)
365 days 150 days minimum during 365 day
period at US$8,000.00 per 24 hrs.
Additional revenue days, as defined
in Attachment, at US$6,000.00/24 h
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22. Rate of interest payable acc. to Cl. 10(f) and, if applicable, acc. to PART IV 23. Currency and method of payment (Cl. 10)
8 Percent US Currency by electronic transfer
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(continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C>
(continued) "BARECON 89" Standard Bareboat Charter PART I
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24. Place of payment; also state beneficiary and bank account (Cl. 10) 25. Bank guarantee/bond (sum and place) (Cl. 22) (optional)
Banque Paribas
Parklaan 22 Not applicable
3000 BC Rotterdam
The Netherlands
Acc. no. 63.38.48.549
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26. Mortgage(s), if any, (state whether Cl. 11(a) or (b) applies; 27. Insurance (marine and war risks) (state value acc. to
if 11(b) applies state date of Deed(s) of Covenant and name of Cl. 12(f) or, if applicable, acc. to Cl. 13(k)) (also
Mortgagee(s)/Place of business) (Cl. 11) state if Cl. 13 applies)
Banque Paribas Nederland US$5,500,000.00
Rotterdam Branch
Register CSI - Part 10, number 1521 Clause 13 applies
Seal 1996-C-1521
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28. Additional insurance cover, if any, for Owner's account 29. Additional insurance cover, if any, for Charterers'
limited to (Cl. 12(b)) or, if applicable, (Cl. 13(g)) account limited to (Cl. 12(b)) or if applicable,
(Cl. 13(g)) Cl. 13(k)) (also state if Cl. 13 applies)
Clause 13(b) applies Not applicable
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30. Latent defects (only to be filled in if period other than 31. War cancellation (indicate countries agreed) (Cl. 24)
stated in Cl. 2)
12 months See box 19
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32. Brokerage commission and to whom payable (Cl. 25)
Not applicable
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33. Law and arbitration (state 26.1, 26.2, or 26.3 of Cl. 26 34. Number of additional clauses covering special
as agreed; if 26.3 agreed, also state place of provisions, if agreed
arbitration) (Cl. 26)
26.1 applies Attachment 1 up to and including
attachment 6
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35. Newbuilding Vessel (indicate with "yes" or "no" whether 36. Name and place of Builders (only to be filled in if
Part III applies) (optional) Part III applies)
No Not applicable
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37. Vessel's Yard Building No. (only to be filled in if 38. Date of Building Contract (only to be filled in if
Part III applies) Part III applies)
Not applicable Not applicable
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39. Hire/Purchase Agreement (indicate with "yes" or "no" 40. Bareboat Charter Registry (indicate with "yes" or "no"
whether Part IV applies) (optional) whether Part V applies) (optional)
Not applicable Not applicable
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41. Flag and Country of the Bareboat Charter Registry (only to be 42. Country of the Underlying Registry (only to be filled
filled in if Part V applies) in if Part V applies)
Not applicable Not applicable
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PREAMBLE - It is mutually agreed that this Contract shall be performed subject to the conditions contained in this Charter which
shall include PART I and PART II. In the event of a conflict of conditions, the provisions of PART I shall prevail over those of
PART II to the extent of such conflict but no further. It is further mutually agreed that PART III and/or PART IV and/or PART V
shall only apply and shall only form part of this Charter if expressly agreed and stated in the Boxes 35, 39 and 40. If PART III
and/or PART IV and/or PART V apply, it is further mutually agreed that in the event of a conflict of conditions, the provisions of
PART I and PART II shall prevail over those of PART III and/or PART IV and/or PART V to the extent of such conflict but no further.
Signature (Owners) Signature (Charterers)
____________________________________________________ ______________________________________________________
</TABLE>
<PAGE>
PART II
"BARECON 89" Standard Bareboat Charter
1. DEFINITIONS
In this Charter, the following terms shall have the meanings hereby assigned
to them:
"The Owners" shall mean the person or company registered as Owners of the
Vessel.
"The Charterers" shall mean the Bareboat charterers and shall not be
construed to mean a time charterer or a voyage charterer.
2. DELIVERY (not applicable to newbuilding vessels)
The Vessel shall be delivered and taken over by the Charterers at the port
or place indicated in Box 13, in such ready berth as the Charterers may
direct. The Owners shall before and at the time of delivery exercise due
diligence to make the Vessel seaworthy and in every respect ready in hull,
machinery and equipment for service under this Charter. The Vessel shall be
properly documented at time of delivery.
The delivery to the Charterers of the Vessel and the taking over of the
Vessel by the Charterers shall constitute a full performance by the Owners
of all the Owners' obligations under Clause 2, and thereafter the Charterers
shall not be entitled to make or assert any claim against the Owners on
account of any conditions, representations or warranties expressed or
implied with respect to the Vessel but the Owners shall be responsible for
repairs or renewals occasioned by latent defects in the Vessel, her
machinery or appurtenances, existing at the time of delivery under Charter,
provided such defects have manifested themselves within 18 months after
delivery unless otherwise provided in Box 30.
3. TIME FOR DELIVERY (not applicable to newbuilding vessels)
The Vessel to be delivered not before the date indicated in Box 14 unless
with the Charterers' consent.
Unless otherwise agreed in Box 17, the Owners to give the Charterers not
less than 30 running days' preliminary and not less than 14 days' definite
notice of the date on which the Vessel is expected to be ready for delivery.
The Owners to keep the Charterers closely advised of possible changes in the
Vessel's position.
4. CANCELLING (not applicable to newbuilding vessels)
If it appears that the Vessel will be delayed beyond the cancelling date,
the owners shall, as soon as they are in a position to state with reasonable
certainty the day on which the Vessel should be ready, give notice thereof
to the Charterers asking whether they will exercise their option of
cancelling, and the option must then be declared within one hundred and
sixty-eight (168) hours of the receipt by the Charterers of such notice. If
the Charterers do not then exercise their option of cancelling, the seventh
day after the readiness date stated in the Owners' notice shall be regarded
as a new cancelling date for the purpose of this Clause.
5. TRADING LIMITS
The Vessel shall be employed in lawful trades for the carriage of suitable
lawful merchandise within the trading limits indicated in Box 19.
The Charterers undertake not to employ the Vessel or suffer the Vessel to be
employed otherwise than in conformity with the terms of the instruments of
insurance (including any warranties expressed or implied therein) without
first obtaining the consent to such employment of the insurers and complying
with such requirements as to extra premium or otherwise as the Insurers may
prescribe. If required, the Charterers shall keep the Owners and the
Mortgagees advised of the intended employment of the Vessel.
The Charterers also undertake not to employ the Vessel or suffer her
employment in any trade or business which is forbidden by the law of any
country to which the Vessel may sail or is otherwise illicit or in carrying
illicit or prohibited or in any manner whatsoever which may render her
liable to condemnation, destruction, seizure or confiscation.
Notwithstanding any other provisions contained in this Charter it is agreed
that nuclear fuels or radioactive products or waste are a specialty excluded
from the cargo permitted to be loaded or carried under this Charter. This
exclusion does not apply to radio-isotopes used or intended to be used for
any industrial, commercial, agricultural, medical or scientific purposes
provided the Owners' prior approval has been obtained to loading thereof.
6. SURVEYS (not applicable to newbuilding vessels)
Survey on Delivery and Redelivery. - The Owners and Charterers shall each
appoint surveyors for the purpose of determining and agreeing in writing the
condition of the Vessel at the time of delivery and redelivery hereunder.
The Owners shall bear all expenses of the On-Survey including loss of time,
if any, and the Charterers shall bear all expenses of the Off-Survey
including loss of time, if any, at the rate of hire per day or pro rata,
also including in each case the cost of any docking and undocking, if
required, in connection herewith.
7. INSPECTION
Inspection. - The Owners shall have the right at any time to inspect or
survey the Vessel or instruct a duly authorised surveyor to carry out such
survey on their behalf to ascertain the condition of the Vessel and satisfy
themselves that the Vessel is being properly repaired and maintained.
Inspection or survey in dry-dock shall be made only when the Vessel shall be
in dry-dock for the Charterers' purpose. However, the Owners shall have the
right to require the Vessel to be dry-docked for inspection if the
Charterers are not docking her at normal classification intervals. The fees
for such inspection or survey shall in the event of the Vessel being found
to be in the condition provided in Clause 9 of this Charter be payable by
the Owners and shall be paid by the Charterers only in the event of the
Vessel being found to require repairs or maintenance in order to achieve the
condition so provided. All time taken in respect of inspection, survey or
repairs shall count as time on hire and shall form part of the Charter
period.
The Charterers shall also permit the Owners to inspect the Vessel's log
books whenever requested and shall whenever required by the Owners furnish
them with full information regarding any casualties or other accidents or
damage to the Vessel. For the purpose of this Clause, the Charterers shall
keep the Owners advised of the intended employment of the Vessel.
8. INVENTORIES AND CONSUMABLE OIL AND STORES
A complete inventory of the Vessel's entire equipment, outfit, appliances
and of all consumable stores on board the Vessel shall be made by the
Charterers in conjunction with the Owners on delivery and again on
redelivery of the Vessel. The Charterers and the owners, respectively, shall
at the time of delivery and redelivery take over and pay for all bunkers,
lubricating oil, water
1
2
3
4
5
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and unbroached provisions, paints, oils, ropes and other consumable stores
in the said Vessel at the then current market prices and the ports of
delivery and redelivery, respectively.
9. MAINTENANCE AND OPERATION
(a) The Vessel shall during the Charter period be in the full possession and
at the absolute disposal for all purposes of the Charterers and under their
complete control in every respect. The Charterers shall maintain the Vessel,
her machinery, boilers, appurtenances and spare parts in a good state of
repair, in efficient operating condition and in accordance with good
commercial maintenance practice and, except as provided for in Clause 13
(1), they shall keep the Vessel with unexpired classification of the class
indicated in Box 10 and with other required certificates in force at all
times. The Charterers to take immediate steps to have the necessary repairs
done within a reasonable time failing which the Owners shall have the right
of withdrawing the Vessel from the service of the Charterers without noting
any protest and without prejudice to any claim the Owners may otherwise have
against the Charterers under the Charter.
Unless otherwise agreed, in the event of any improvement, structural changes
or expensive new equipment becoming necessary for the continued operation of
the Vessel by reason of new class requirements or by compulsory legislation
costing more than 5 per cent of the Vessel's marine insurance value as
stated in Box 27, then the extent, if any, to which the rate of hire shall
varied and the ratio in which the cost of compliance shall be shared between
the parties concerned in order to achieve a reasonable distribution thereof
as between the Owners and the Charterers having regard, inter alia, to the
length of the period remaining under the Charter, shall in the absence of
agreement, be referred to arbitration according to Clause 26.
The Charterers are required to establish and maintain financial security or
responsibility in respect of oil or other pollution damage as required by
any government, including Federal, state or municipal or other division or
authority thereof, to enable the Vessel, without penalty or charge, lawfully
to enter, remain at, or leave any port, place, territorial or contiguous
waters of any country, state or municipality in performance of this Charter
without any delay. This obligation, shall apply whether or not such
requirements have been lawfully imposed by such government or division or
authority thereof. The Charterers shall make and maintain all arrangements
by bond or otherwise as may be necessary to satisfy such requirements at the
Charterers' sole expense and the Charterers shall indemnify the Owners
against all consequences whatsoever (including loss of time) for any failure
or inability to do so.
(b) During the currency of this Charter, the Vessel shall retain her present
name as indicated in Box 5 and shall remain under and fly the flag as
indicated in Box 5. Provided, however, that the Charterers shall have the
liberty to paint the Vessel in their ow colours, install and display their
funnel insignia and fly their own house flag. Painting and re-painting,
instalment and re-instalment to be for the Charterers' account and time used
thereby to count as time on hire.
(c) The Charterers shall make no structural changes in the Vessel or changes
in the machinery, boilers, appurtenances or spare parts thereof without in
each instance first securing the Owners' approval thereof. If the Owners so
agree, the Charterers shall, if the Owners so require, restore the Vessel to
its former condition before the termination of the Charter.
(d) The Charters shall have the use of all outfit, equipment, and appliances
on board the Vessel at the time fo delivery, provided the same or their
substantial equivalent shall be returned to the Owners on redelivery in the
same good order and condition as when received, ordinary wear and tear
excepted. The Charterers shall from time to time during the Charter period
replace such items of equipment as shall be so damaged or worn as to be
unfit for use. The Charterers are to procure that all repairs to or
replacement of any damaged, worn or lost parts or equipment be effected in
such manner (both as regards workmanship and quality of materials) as not to
diminish the value of the Vessel. The Charterers have the right to fit
additional equipment at their expense and risk but the Charterers shall
remove such equipment at the end of the period if requested by the Owners.
(e) The Charterers shall dry-dock the Vessel and clean and paint her
underwater parts whenever the same may be necessary, but not less than once
in every eighteen calendar months after delivery unless otherwise agreed in
Box 18.
10. HIRE
(a) The Charterers shall pay to the Owners for the hire of the Vessel at the
rate per calendar day as indicated in Box 21 commencing on and from the date
and hour of her delivery to the Charterers and at and after the agreed rate
for any part of a day. Hire to continue until the date and hour when the
Vessel is redelivered by the Charterers to her Owners.
(b) Payment of Hie for the first and last month's Hire if less than a full
monthy shall be calculated proportionally according to the number of days in
the particular calendar month and advance payment to be effected
accordingly.
(c) Should the Vessel be lost or missing, Hire to cease from the date and
time wen she was lost or last heard of. Any Hire paid in advance to be
adjusted accordingly.
(e) Time shall be of the essence in relation to payment of Hire hereunder.
In default of payment beyond a period of seven running days, the Owners
shall have the right to withdraw the Vessel from the service of the
Charterers without noting any protest and without interference by any court
or any other formality whatsoever, and shall, without prejudice to any other
claim the Owners may otherwise have against the Charterers under the
Charter, be entitled to damages in respect of all costs and losses incurred
as a result of the Charterers' default and the ensuing withdrawal of the
Vessel.
(e) Any delay in payment of Hire shall entitle the Owners to an interest at
the rate per annum as agreed in Box 22. If Box 22 has not been filled in the
current market rate in the country where the owners have their Principal
Place of Business shall apply.
11. MORTGAGE
*) (a) Owners warrant that they have not effected any mortgage of the Vessel.
*) (b) The Vessel chartered under this Charter is financed by a mortgate
according to the Deed(s) of Covenant annexed to this Charter and as stated
in Box 26. By their counter-signature on the Deed(s) of Covenant, the
Charterers undertake to have acquainted themselves with all terms,
conditons, provisions of the said (Deed(s) of covenant, The Charterers
undertake that they will comply with all such instructions or directions in
regard to the employment, insurances, repairs and maintenance of the Vessel,
etc., as laid down in the Deed(s) of Covenant or as may be directed from
time to time during the currency of the Charter by the Mortgagee(s) in
conformity with the Deed(s) of covenant.
(c) The owners warrant that they have not effected any mortgage(s) other
than stated in Box 26 and that they will not effect any other mortgage(s)
withou the prior written consent of the Charterers.
*) Optional. Clauses 11(a) and 11(b) are alternatives; indicate alternative
agreed (Box 26).
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12. INSURANCE REPAIRS AND CLASSIFICATION
(Optional, only to apply if expressly agreed and stated in Box 27, in which
event Clause 12 shall be considered deleted).
(a) During th Charter period the Vessel shall be kept insured by the Owners
at their expense against marine and war risks under the form of policy or
policies attached hereto. The Owners and/or insurers shall not have any
right of recovery or subrogation against the Charterers on account of loss
of or any damage to the Vessel or her machinery or appurtenances covered by
such insurance, or on account of payments made to discharge claims against
or liabilities of the Vessel or the Owners covered by such insurance. All
insurance polciies shall be in the joint names of the Owners and the
Charterers as their interests may appear.
(b) During the Charter period the Vessel shall be kept insured by the
Charterers at their expense against Protetion and Indemnity risks in such
form as the Owners shall in writing approve which approval shallnot be
unreasonably withheld. If the Charterers fail to arrange and kep any of the
insurances provided for under the provisions of sub-clause (b) in the manner
described therein, the Owners shall notify the Charterers whereupon the
Charterers shall rectify the position within seven running days, failing
which the Owners shall have the right to withdraw the Vessel fromt the
service of the Charterers without prejudice to any claim the Owners may
otherwise have against the Charterers.
(c) In the event that any act or negligence of the Charterers shall vitiate
any of the insurance herein provided, the Charterers shall pay to the Owners
all losses and indemnify the Owners against all claims and demands which
would otherwise have been covered by such insurance.
(d) The Charterers shall, subject to the approval of the Owners or Owners'
Underwriters, effect all insured repairs, and the Charterers shall undertake
settlement of all miscellaneous expenses in connection with such repairs as
well as all insured charges, expenses and liabilities, to the extent of
coverage under the insurances provided for under the provisions of sub-
clause (a) of this Clause. The Charterers to be secured reimbursement
through the Owners' Underwriters for such expenditures upon presentation of
accounts.
(e) The Charterers to remain responsible for and to effect repairs and
settlement of costs and expenses incurred thereby in respect of all other
repairs not covered by the insurances and/or not exceeding any possible
franchise(s) or deductibles provided for in the insurances.
(f) All time used for repairs under the provisions of sub-clause (d) and (e)
of this Clause and for repairs of latent defects according to Clause 2
above, including any deviation, shall count as time on hire and shall form
part of the Charter period.
The Owners shall not be responsible for any expenses as are incident to the
use and operation of the Vessel for such time as may be required to make
such repairs.
(g) If the conditions of the above insurances permit additional insurance to
be placed by the parties such cover shall be limited to the amount for each
party set out in Box 28 and Box 29, respectively. The Owners or the
Charterers as the case may be shall immediately furnish the other party with
particulars of any additional insurance effected, including copies of any
cover notes or policies and the written consent of the Insurers of any such
required insurance in any case where the consent of such Insurers is
necessary.
(h) Should the Vessel become an actual, constructive, compromised or agreed
total loss under the insurances required under sub-clause (a) of this
Clause, all insurance payments for such loss shall be paid to the Owners,
who shall distribute the moneys between themselves and the Charterers
according to their respective interests.
(i) If the Vessel becomes an actual constructive, compromised or agreed
total loss under the insurances arranged by the Owners in accordance with
sub-clause (a) of this Clause, this Charter shall terminate as of the date
of such loss.
(j) The Charterers shall upon the request of the Owners, promptly execute
such documents as may be required to enable the Owners to abandon the Vessel
to Insurers and claim a constructive total loss.
(k) For the purpose of insurance coverage against marine and war risks under
the provisions of sub-clause (a) of this Clause, the value of the Vessel is
the sum indicated in Box 27.
(l) Notwithstanding anything contained in Clause 9(a), it is agreed that
under the provisions of Clause 13, if applicable, the Owners shall keep the
Vessel with unexpired classification in force at all times during the
Charter period
13. REDELIVERY
The Charterers shall at the expiration of the Charter period redeliver the
Vessel at a safe and ice-free port or place as indicated in Box 16. The
Charterers shall give the Owners not less than 30 running days' preliminary
and not less than 14 days' definite notice of expected date, range of ports
of redelivery or port or place of redelivery. Any changes thereafter in
Vessel's position shall be notified immediately to the Owners.
Should the Vessel be ordered on a voyage by which the Charter period may be
exceeded the Charterers to have the use of the Vessel to enable them to
complete the voyage, provided it could be reasonably calculated that the
voyage would allow redelivery about the time fixed for the termination of
the Charter. See Article 2.
The Vessel shall be redelivered to the Owners in the same or as good
structure, state, condition and class as that in which she was delivered,
fair wear and tear not affecting class excepted. See Attachment.
The Vessel upon redelivery shall have her survey cycles up to date and class
certificates valid for at least the number of months agreed in Box 12.
14. NON-LIEN AND INDEMNITY
The Charterers will not suffer, nor permit to be continued, any lien or
encumbrance incurred by them or their agents, which might have priority over
the title and interest of the Owners in the Vessel.
The Charterers further agree to fasten to the Vessel in a conspicuous place
and to keep so fastened during the Charter period a notice reading as
follows:-
"This Vessel is the property of (name of Owners). It is under charter to
(name of Charterers) and by the terms of the Charter Party neither the
Charterers nor the Master have any right, power or authority to create,
incur or permit to be imposed on the Vessel any lien whatsoever."
The Charterers shall indemnify and hold the Owners harmless against any lien
of whatsoever nature arising upon the Vessel during the Charter period while
she is under the control of the Charterers, and against any claims against
the Owners arising out of or in relation to the operation of the Vessel by
the Charterers. Should the Vessel be arrested by reason of claims or liens
arising out of her operation hereunder by the Charterers, the Charterers
shall at their own expense take all reasonable steps to secure that within a
reasonable time the Vessel is released and at their own expense put up bail
to secure release of the Vessel.
15. LIEN
The Owners to have a lien upon all cargoes and sub-freights belonging to the
Charterers any Bill of Lading freight for all claims under this Charter, and
the Charterers to have a lien on the Vessel for all moneys paid in advance
and not earned.
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16. SALVAGE
All salvage and towage performed by the Vessel shall be for the Charterers'
benefit and the cost of repairing damage occasioned thereby shall be borne
by the Charterers.
17. WRECK REMOVAL
In the event of the Vessel becoming a wreck or obstruction to navigation the
Charterers shall indemnify the Owners against any sums whatsoever which the
Owners shall become liable to pay and shall pay in consequence of the Vessel
becoming a wreck or obstruction to navigation.
18. GENERAL AVERAGE
General Average, if any, shall be adjusted according to the York-Antwerp
Rules 1974 or any subsequent modification thereof current at the time of the
casualty.
The Charter Hire not to contribute to General Average.
19. ASSIGNMENT AND SUB-DEMISE
The Charterers shall not assign this Charter nor sub-demise the Vessel
except with the prior consent in writing of the Owners which shall not be
unreasonably withheld and subject to such terms and conditions as the Owners
shall approve.
20. BILL OF LADING
The Charterers are to procure that all Bills of Lading issued for carriage
of goods under this Charter shall contain a Paramount Clause incorporating
any legislation of relating to Carrier's liability for cargo compulsorily
applicable in the trade; if no such legislation exists, the Bills of Lading
shall incorporate the British Carriage of Goods by Sea Act. The Bills of
Lading shall also contain the amended New Jason Clause and the Both-to-Blame
Collision Clause.
The Charterers agree to indemnify the Owners against all consequences or
liabilities arising from the Master, officers or agents signing Bills of
Lading or other documents.
21. REQUISITION/ACQUISITION
(a) In the event of the Requisition for Hire of the Vessel by any
governmental or other competent authority (hereinafter referred to as
"Requisition for Hire") irrespective of the date during the Charter period
when "Requisition for Hire" may occur and irrespective of the length thereof
and whether or not it be for an indefinite or a limited period of time, and
irrespective of whether it may or will remain in force for the remainder of
the Charter period, this Charter shall not be deemed thereby or thereupon to
be frustrated or otherwise terminated and the Charterers shall continue to
pay the stipulated hire in the manner provided by this Charter until the
time when the Charter would have terminated pursuant to any of the
provisions hereof always provided however that in the event of "Requisition
for Hire" any Requisition Hire or compensation received or receivable by the
Owners shall be payable to the Charterers during the remainder of the
Charter period or the period of the "Requisition for Hire" whichever be the
shorter.
The Hire under this Charter shall be payable to the Owners from the same
time as the Requisition Hire is payable to the Charterers.
(b) In the event of the Owners being deprived of their ownership in the
Vessel by any Compulsory Acquisition of the Vessel or requisition for title
by any governmental or other competent authority (hereinafter referred to as
"Compulsory Acquisition"), then, irrespective of the date during the Charter
period when "Compulsory Acquisition" may occur, this Charter shall be deemed
terminated as of the date of such "Compulsory Acquisition". In such event
Charter Hire to be considered as earned and to be paid up to the date and
time of such "Compulsory Acquisition".
22. WAR
(a) The Vessel unless the consent of the Owners be first obtained not to be
ordered nor continue to any place or on any voyage nor be used on any
service which will bring her within a zone which is dangerous as the result
of any actual or threatened act of war, war, hostilities, warlike
operations, acts of piracy or of hostility or malicious damage against this
or any vessel or its cargo by any person, body or State whatsoever,
revolution, civil war, civil commotion or the operation of international
law, not be exposed in any way to any risks or penalties whatsoever
consequent upon the imposition of Sanctions, nor carry any goods that may in
any way expose her to any risks of seizure, capture, penalties or any other
interference of any kind whatsoever by the belligerent or fighting powers or
parties or by any Government or Ruler.
(b) the Vessel to have liberty to comply with any orders or directions as to
departure, arrival, routes, ports of call, stoppages, destination, delivery
or in any other wise whatsoever given by the Government of the nation under
under whose flag the Vessel sails or any other Government or any person (or
body) acting or purporting to act with the authority of such Government or
by any committee or person having under the terms of the war risks insurance
on the Vessel the right to give any such orders or directions.
(c) In the event of outbreak of war (whether there be a declaration of war
or not) between any two or more of the countries as stated in Box 31, both
the Owners and the Charterers shall have the right to cancel this Charter,
whereupon the Charterers shall redeliver the Vessel to the Owners in
accordance with Clause 14, if she has cargo on board after discharge thereof
at destination, or if debarred under this Clause from reaching or entering
it at a near open and safe port as directed by the Owners, or if she has no
cargo on board, at the port at which she then is or if at sea at a near open
and safe port as directed by the Owners. In all cases hire shall continue to
be paid in accordance with Clause 10 and except as aforesaid all other
provisions of this Charter shall apply until redelivery.
23. LAW AND ARBITRATION
*) 23.1 This Charter shall be governed by English law and any dispute arising
out of this Charter shall be referred to arbitration in London, one
arbitrator being appointed by each party, in accordance with the Arbitration
Acts 1950 and 1979 or any statutory modification or re-enactment thereof for
the time being in force. On the receipt by one party of the nomination in
writing of the other party's arbitrator, that party shall appoint their
arbitrator within fourteen days, failing which the decision of the single
Arbitrator appointed shall apply. If two Arbitrators properly appointed
shall not agree they shall appoint an umpire whose decision shall be final.
*) 23.3 Any dispute arising out of this Charter shall be referred to
arbitration at the place indicated in Box 33, subject to the law and
procedures applicable there.
*) 26.4. If Box 33 in Part I is not filled in, sub-clause 23.1 of this Clause
shall apply.
*) 23.1, 23.2 and 23.3 are alternatives; indicate alternative agreed in Box 33.
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<PAGE>
ATTACHMENT 1
This Agreement is made this 29th of November 1996 and is attached to the
Barecon 89 charter party between PONTWIN NV, a Company incorporated under the
law of the Netherlands Antilles and having its address at Anthony Veder
Building, Kaya Jacob Posner, Willemstad, Curacao, Netherlands Antilles,
hereinafter referred to as Owner of the One Part and HAM MARINE, INC. a Company
incorporated in the United States of America with its registered office in 3500
Port Authority Road, Pascagoula, Mississippi 39567, USA hereinafter referred to
as "Operator" of the Other Part. In this Attachment "Operator" and "Charterer"
are one and the same.
Both the Owner and Operator are hereinafter referred to individually as
"Party" and collectively as "Parties".
WHEREAS the Owner desires to provide the Barge Dual Carrier to be placed at
the Operators yard at Pascagoula in connection with their operations in the Gulf
of Mexico. These operations are related to the dry-docking of semi-submersibles
and other floating bodies within the capabilities of subject barge.
AND WHEREAS the Operator will exploit the Dual Carrier barge, shown in
Appendix A, and will furnish fully qualified and trained crew, personnel and has
available all the necessary equipment, materials, supplies, berths and
facilities capable of rendering the above mentioned services in a safe manner.
NOW THEREFORE, the Parties hereto, each in consideration of the promises
and mutual covenants of the other, have agreed as follows:
As used in this Contract, the term Agreement shall mean this contract and
subsequent Agreements to be executed from time to time for 12 month periods by
the Parties in which they agree that the Dual Carrier will be exploited at a
rate and for a term and upon such other terms and conditions to be specified in
such subsequent Agreement; and said Agreement shall incorporate and supplement
the terms and conditions of this Contract and the Barecon 89 charter contract.
ARTICLE 1 - DURATION
This Agreement shall come into force on the 10th day of February 1997
(hereinafter called the "Effective Date") and shall continue in force, for a
period of one year, unless terminated in accordance with Article 15 hereto;
provided however that on the expiration of the initial term, this Agreement may
be extended, for an additional 12 month period, by mutual consent.
ARTICLE 2 - OPERATOR'S OBLIGATIONS
- Provide budget estimates for modifications and maintenance on annual
basis.
- Ensure that all work is carried out, at cost, and under approved budget
- Equipment manufacturers guidelines regarding routine service and
maintenance.
Maintenance Records must be available for Owners perusal.
- Provide each month a report to Owner with actual USE days which are
defined being days for which the barge is being prepared for dry-docking
until such time the barge is cleared off anything belonging to the
relevant dry-docking. For accounting purposes it is understood that one
USE day is chargeable for preparation of the Dual Carrier for dry-
docking a unit and one USE day for cleaning and removing of relevant
dry- docking equipment/materials at the completion of the dry-docking.
<PAGE>
PAGE 2
- Provide each month a report to Owners indicating expected and confirmed
dry-dock requirements. This information will assist Owner and Operator
in contemplating other business opportunities for the barge.
- Provide for Standard Insurance respecting the dry-docking of semi-
submersibles and other floating bodies. Copies to be made available to
Owners.
b. be fully responsible for obtaining and paying for registering,
importation, surveying, licensing and other charges and or documentation
necessary for the exploitation of the Dual Carrier in the United States
of America.
c. for performance of the exploitation:
- at Operators expense supply all fuels, lubricants, greases and potable
water as necessary for the operation of its equipment.
- at Operators expense, and with prior knowledge of the Owner, change and
or add to the barge to enhance Operators specific requirements in
respect to dry-docking of by Operator contracted units. These
enhancements may, when owners agree, be kept on board at redelivery of
the barge.
- at Operators expense provide for a safe and adequate berth
- at Operators expense be responsible for all charges for importation of
the barge into the USA, agency fees, harbor duties, clearing and
Customs charges.
ARTICLE 3 - CONTRACT PRICE TERMS OF PAYMENT
For and in respect of the exploitation of the Dual Carrier by Operator the
Operator agrees to pay Owner a minimum of 150 days during the 365 day term of
this Agreement at $8,000.00 per day. For additional USE days over and above
150, Operator agrees to pay $6,000.00 per day.
For purpose of this Agreement, a use day, whether additional or not, shall
mean any 24 hour period during which the Dual Carrier is actually utilized by
the Operator to dry dock a vessel or as a workbarge.
Owner will charter for the tow of the Dual Carrier from Stavanger, Norway
to Pascagoula, Mississippi, USA at the best possible rate. Parties agree to
cover for 50 percent each of the actual contracted tow value together with
related costs i.e. tow inspection and certification.
Owner may request Operator to install ventlines, tankgauging piping,
waterblasting and coating of the tanks and the cleaning/preparation of the hull
and deck for appropriate coating and Operator will provide at actual cost, these
costs being defined as costs plus 5% for handling for all third party costs and
$28.00 per hour for skilled labor and $22.00 per hour for unskilled labor
inclusive of tools, consumables and Operator owned equipment. These costs are,
subject to approval of the initial budget, fully chargeable to the Owner.
ARTICLE 4 - TEMPORARY WITHDRAWAL
a. In the event the Owner foresees for any good reason the need to dry-dock
the Amethyst the Dual Carrier must be temporarily withdrawn during which
period Owner will credit Operator the sum of
<PAGE>
PAGE 3
$8,000.00 per use day or $6,000.00 per use day, as applicable, such that
Operator will not owe Owner any payments for those days during which the
Dual Carrier is withdrawn in order to dry-dock the Amethyst. The Owner
shall be given every assistance to expedite delivery of the Dual Carrier
within the shortest possible time. Delivery and operating cost shall be
for owners account, and redelivery to Operator shall be for owners
account
b. If, during the term of this Agreement, there exists a period of time
during which Operator is not utilizing the Dual Carrier then Operator
and Owner may enter into a separate written agreement with a third party
for the use of the Dual Carder whereby Operator shall continue to
operate the Dual Carrier and all revenues ( Less direct operating costs)
from the third party contract shall be divided 75% to Owner and 25% to
Operator.
ARTICLE 5 - INVOICING AND PAYMENT
Owner shall bill Operator and Operator shall pay Owner $100,000.00 at the
end of each calendar month. Payment for the first and last month will be pro-
rata. Additional revenue days, reported by Operator will be invoiced upon
receipt of monthly statements and will be payable within 30 days of invoice
date. If the Dual Carrier is lost, payment shall be made up to and including
the date of loss.
Some of the earned revenues may be applied to the costs of the by Owner
approved modifications, and initial tank and hull maintenance of the Dual
Carrier.
ARTICLE 6 - INSPECTION
See clause 7 of the Barecon A
ARTICLE 7 - INDEMNITY
The Operator agrees to fully protect, defend, indemnify and hold harmless
the Owner and its employees against each and every claim, demand, cause of
action and any liability, cost, expense (including, but not limited to,
Attorneys fees and expenses incurred in defense of the Owner and its employees
and punitive damages) loss or damage which may be made or asserted by the
Operator, or its employees or agents, or any subcontractor or third party on
account of personal injury or death or property damaged caused by, or arising
out of, or in any way incidental to, or in connection with the performance and
exploitation of the Dual Carrier, except as may result solely from the willful
misconduct or negligence of the Owner.
The Owner agrees to fully protect, defend, indemnify and hold harmless the
Operator and its employees against each and every claim, demand, cause of action
and any liability, cost, expense (including, but not limited to, Attorneys fees
and expenses incurred in defense of the Operator and its employees and punitive
damages) loss or damage which may be made or asserted by the Owner, or its
employees or agents, or any subcontractor or third party on account of personal
injury or death of Owners representatives or agents, or arising out of, or in
any way incidental to, or in connection with the performance and exploitation of
the Dual Carrier, except as may result solely from the willful misconduct or
negligence of the Operator.
It is expressly understood that neither Party shall be liable to the other
for any consequential or indirect damage, including, but not limited to, loss of
profit, revenues or loss of product arising or alleged to arise out of either
<PAGE>
PAGE 4
Party failing to properly carry out its obligations under this Agreement and the
Parties hereby expressly indemnify each other against such losses.
ARTICLE 8 - TAXES
The Owner shall not be responsible for any taxes, levies, duties or fees
assessed directly or indirectly against the Operator or its personnel by the
Government of the United States of America, by local authorities, government
agencies, or any other taxing jurisdiction in connection with this Agreement.
The Operator in recognition of its accounting and tax obligations agrees to
defend, indemnify and hold the Owner harmless from any and all claims for taxes
and other charges which may be levied upon the Operator or its subcontractors or
on the wages and salaries of its employees or agents; as well as the employees
or agents of its subcontractors pursuant to this Agreement.
ARTICLE 9 - INSURANCES
Deleted - Barecon Clause 13 applies.
SUBROGATION
Each policy shall be endorsed to provide waiver of subrogation rights in
favor of the Owner and Operator as the case be as follows:
"THE INSURERS HEREBY WAIVE ANY RIGHTS, REMEDIES OR RELIEF'S TO WHICH THEY
MIGHT BECOME ENTITLED BY SUBROGATION AGAINST:
a. THE OWNER OR OPERATOR ITS SHAREHOLDERS, AFFILIATES, ANY OFFICER,
EMPLOYEE, AGENT, SERVANT, OR CONTRACTOR OF THE OWNER OR OPERATOR OR ITS
AFFILIATES, AND
b. AN INDIVIDUAL, FIRM, OR CORPORATION FOR WHOM OR WITH WHOM THE OWNER OR
OPERATOR MAY BE LEGALLY RESPONSIBLE."
INSURANCE WAIVER
The insolvency, liquidation, bankruptcy or failure of any insurance company
providing insurance for the Operator or its sub-contractors, or failure of any
insurance company to pay claims accruing, or failure of the Operator to
diligently pursue any valid claim against its insurers, shall not be held to
waive any provisions of this Agreement.
The Operator shall continue the said insurances during the course of the
Services and shall, prior to commencement of the services and at any time
required by the Owner during the course of the services, deliver to the Owner
such policies, certificates and receipt for the payment of premiums evidencing
that the said insurances are in effect and specifically including the
indemnification provisions set forth in Article 7. Such policies or
certificates shall provide that any change restricting or reducing coverage or
the cancellation of any policies under which certificates are issued shall not
be valid as respects the Owner's interest therein unless the Owner receives ten
(10) days written notice from the Operator prior to such change or cancellation.
INSURANCE COMPLIANCE
If the Operator fails to comply with the aforesaid insurance requirements,
the Owner may, at its sole option, without prejudice to any other rights or
remedies under this Agreement, terminate or suspend this Agreement or,
<PAGE>
PAGE 5
notwithstanding Article 5, withhold payment on any invoice until the Operator
has complied with insurance requirements of this Agreement.
OWNER WILL HAVE THIS INSURANCE COVER PERUSED BY OUR INSURANCE UNDERWRITER
AND WILL RESERVE THE RIGHT TO ENSURE ADEQUATE PROTECTION TOWARDS ANY CLAIMS THAT
MAY FLOW FROM THE EXPLOITATION BY OPERATOR OF THE DUAL CARRIER.
ARTICLE 10 - REPRESENTATIVES
The Operator shall designate in writing one of its personnel as the
Operators representative who shall be in charge of the Operators personnel and
who shall be vested with full authority to resolve with the Owner's
representative day-to-day matters and disputes or differences which may arise
between the Operator and the Owner.
ARTICLE 11 - CONFIDENTIALITY
The Operator agrees that all information regarding the terms, conditions,
rates and other matters contained in the Agreement and all information regarding
the Owner's operations obtained by the Operator in the performance of the
Services under this Agreement shall be considered CONFIDENTIAL and shall not be
divulged by the Operator or its employees to any person, firm or corporation,
other than the Owner, without the Owner's prior written consent.
The Owner agrees that all information regarding the terms, conditions and
rates and other matters contained in this Agreement shall be considered as
CONFIDENTIAL and shall not be divulged to any person, firm or corporation
without the Operator's written consent. This covenant shall survive the
termination or expiration of this Agreement.
ARTICLE 12 - ASSIGNMENT
Neither Party may in whole or in part assign this Agreement without the
prior written consent of the other, which consent shall not be unreasonably
withheld; provided that any such assignment shall not relieve the Parties from
any obligations under this Agreement.
ARTICLE 13 - GOVERNING LAW AND ARBITRATION
SEE CLAUSE 26.1 OF BARECON A
ARTICLE 14 - WAIVERS
No change in, addition to, or waiver of any of the provisions of this
Agreement shall be binding upon either Party unless the same is done in writing,
and then only by the persons executing this Agreement, or other duly authorized
agents or representatives of the Parties. Further, failure by either Party to
enforce any rights shall not be interpreted as constituting a waiver thereof or
a waiver in respect of any further breach or non-compliance with that provision
or any other provision of the Agreement.
<PAGE>
PAGE 6
ARTICLE 15 - TERMINATION
a. Where the Operator is in breach of the term of this Agreement, the Owner
may by verbal notice, to be confirmed in writing within seven (7) days
thereafter, require the Operator immediately to remedy the breach and
where the Operator fails to remedy the said breach or to take such
reasonable actions with a view to remedying the said breach within
twenty-four (24) hours of the receipt of the verbal notice the Owner may
terminate this Agreement or take such action as it deems fit including
suspension of the Operator and removal of the Dual Carrier.
b. In the event, the Operator or its agents, at any time during this
Agreement, makes an arrangement with the creditors or makes a voluntary
assignment of its assets for the benefit of creditors, or is judged
bankrupt or insolvent, or being a corporation, goes into liquidation,
whether voluntary or compulsory, (save for the purpose of amalgamation
or reconstruction) or should an attachment be levied or permitted to
remain for fifteen (15) days upon or against interest, rights or
privileges of the Operator or its agents in or to any of the equipment,
in such event the Owner, at its option, may terminate this Agreement.
c. The termination of this Agreement howsoever occasioned, shall be without
prejudice to the rights and remedies of the Parties accrued up to and
including the day of such termination and shall not affect or prejudice
any provision of this Agreement that is expressly or by implication
provided to continue in effect after such termination.
ARTICLE 16 - FORCE MAJEURE
Except for the duty to make payments, modifications and maintenance
requirements, for the services performed, neither Party shall be liable for
delays or failure of performance or for damage occasioned or caused by Force
Majeure, which shall include, but not limited to, acts of God, earthquakes,
tidal waves, flood, action of the elements, fire, destruction of the Owners
equipment, acts of the public enemy, riot, insurrection, war (declared or
undeclared), or any local or national emergency, rules or regulations of any
governmental authority asserting jurisdiction or control, compliance with which
makes continuance of operations impossible, or any other cause beyond the
reasonable control of either Party which makes continuance of operations
impossible.
Inability of either Party to secure funds, arrange bank loans or other
financing or to obtain credit shall not be regarded as Force Majeure.
Strikes or labor unrest on the part of the Operator's workforce is not
considered grounds for Force Majeure.
The Party asserting the Force Majeure shall notify the other Party within
the shortest possible time after the happening of the event specifying the
nature and the date of commencement of the Force Majeure and any other relevant
details.
In all cases, the concerned Party shall take all useful steps to ensure the
normal recovery, within the shortest possible time, of the execution of
contractual obligations affected by the Force Majeure event.
Any time after Force Majeure condition affecting any of the Services has
occurred and continues for a period of two (2) consecutive days or for so long
as such condition continues either Party shall have the right to suspend all of
the Services performed with immediate effect and the Operator shall be liable
for payment for the services actually performed up to the time of the
commencement of the Force Majeure event. Any time after a Force Majeure
condition affecting any of the services under this Agreement has occurred and
continues for a period of thirty (30) consecutive
<PAGE>
PAGE 7
days and for so long thereafter as such condition continues, either Party shall
have the right to terminate this Agreement with respect to all Services with
immediate effect and the Operator shall be liable for payment for the services
actually performed under this Agreement up to the time of the commencement of
the Force Majeure event.
ARTICLE 17 - NOTICES
All notices and other communication required or permitted to be given under
this Agreement shall be in writing and shall be effective as of the date of
receipt if delivered by hand, sent by registered letter, cable, telex or
facsimile transmission and duly addressed as specified below.
If for the Owner: a. Managing Director
Pontwin NV
Anthony Veder Building
Kaya Jacob Posner, zeelandia
Willemstad
Curacao, Netherlands Antilles
b. Fax Number (5999 9) 465 8727
If for the Operator: a. Manager Operations
HAM MARINE, INC.
P.O. Box 43 (If mailed)
Pascagoula, Mississippi 39568-0043
USA
3500 Port Authority Road (If by hand delivery)
Pascagoula, Mississippi 39567
USA
b. Fax Number 1-601-769-1826
Either Party may change its address under this Article by giving fifteen
(15) days written notice to the other Party.
ARTICLE 18 - HEADINGS
Headings are inserted in this Agreement only for convenience of reference
and are not intended to modify, define, limit or explain the intent of the
Parties as expressed in this Agreement.
ARTICLE 19 - ENTIRE AGREEMENT
This Agreement and the Appendices hereto contain the entire agreement
between the Parties and supersede and replace any oral or written communications
heretofore made between the Parties relating to the subject matter hereof and
shall inure to the benefit of and shall bind the successors and assigns of the
Parties. This Agreement shall not be modified except by written instrument
signed by the persons executing this Agreement or other duly authorized agent or
representatives of both Parties.
<PAGE>
PAGE 8
AS WITNESS whereof the Parties hereto have caused their signature to be
affixed hereunto with due authority the day and year first hereinabove written.
SIGNED for and on behalf of
PONTWIN NV
by ______________________________
its _____________________________
in the presence of: _____________
SIGNED for and on behalf of
HAM MARINE, INC.
by ______________________________
its _____________________________
in the presence of: _____________
<PAGE>
EXHIBIT 10.12
STOCK EXCHANGE AGREEMENT
This Stock Exchange Agreement (the "Agreement") is made and entered
into as of May 21, 1997 by and among Friede Goldman International Inc., a
Delaware corporation ("FGII"), HAM Marine, Inc., a Mississippi corporation ("HAM
Marine"), Friede & Goldman, Ltd., a Mississippi corporation ("Friede &
Goldman"), J. L. Holloway ("Holloway"), Carl M. Crawford ("Crawford"), Ronald W.
Schnoor ("Schnoor"), James A. Lowe III ("Lowe") and John F. Alford ("Alford").
WITNESSETH:
WHEREAS, FGII has been organized to serve as a holding company for HAM
Marine and Friede & Goldman;
WHEREAS, Holloway, Crawford, Schnoor, Lowe and Alford (the "HAM Marine
Shareholders") are the sole owners of the no par value common stock of HAM
Marine (the "HAM Marine Common Stock");
WHEREAS, Holloway, Crawford and Schnoor (the "Friede & Goldman
Shareholders") are the sole owners of the common stock, par value $1.00 per
share, of Friede & Goldman (the "Friede & Goldman Common Stock");
WHEREAS, pursuant to Section 351 of the Internal Revenue Code of 1986,
as amended (the "Code"), each of Holloway, Crawford, Schnoor, Lowe and Alford
(collectively, the "Participants") desire to exchange all of their shares of HAM
Marine Common Stock and Friede & Goldman Common Stock for shares of common
stock, par value $0.01 per share, of FGII (the "FGII Common Stock"), it being
the intent of FGII and each Participant that such exchange of shares pursuant to
this Agreement (the "Stock Exchange") shall satisfy the requirements of such
section;
WHEREAS, as part of the transaction qualifying under Section 351 of
the Code, it is contemplated that following the Stock Exchange FGII will make a
public offering of FGII Common Stock (the "Public Offering") pursuant to the
Securities Act of 1933, as amended (the "Securities Act");
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto hereby agree
as follows:
<PAGE>
ARTICLE I
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 1.1. Representation of FGII. (a) FGII hereby represents and
warrants to each of the Participants that it is a corporation duly incorporated
under the laws of Delaware and that it has 1,000 shares of its capital stock
issued and outstanding consisting of 1,000 shares of FGII Common Stock issued to
Holloway.
(b) FGII hereby represents and warrants to each of the Participants
that the shares of FGII Common Stock to be issued pursuant to the Stock
Exchange, when issued in exchange for the shares of HAM Marine Common Stock and
Friede & Goldman Common Stock as set forth in this Agreement, will be duly
issued, fully paid and nonassessable.
Section 1.2. Representations of HAM Marine and the HAM Marine
Shareholders. HAM Marine represents and warrants to FGII that HAM Marine is a
corporation duly incorporated under the laws of Mississippi. HAM Marine and the
HAM Marine Shareholders represent and warrant to FGII that the only shares of
the capital stock issued and outstanding consist of 1,197,604.80 shares of HAM
Marine Common Stock issued to the following persons in the amounts set forth
opposite their names:
Number of Shares
Shareholders Issued and Outstanding
-------------- ----------------------
Holloway 958,471.63
Crawford 176,947.49
Schnoor 47,185.68
Lowe 10,000.00
Alford 5,000.00
------------
Total 1,197,604.80
============
Each of the HAM Marine Shareholders represents and warrants to FGII that
the shares set forth opposite his name are owned by such HAM Marine Shareholder
free and clear of all liens, encumbrances, options, calls, voting trusts and
other charges ("Encumbrances"), and no other person has any ownership interest
in such shares.
Section 1.3. Representations of Friede & Goldman and the Friede & Goldman
Shareholders. Friede & Goldman represents and warrants to FGII that Friede &
Goldman is a corporation duly incorporated under the laws of Mississippi.
Friede & Goldman and the Friede & Goldman Shareholders represent and warrant to
FGII that the only shares of the capital stock issued and outstanding consist of
616.90 shares of Friede & Goldman Common Stock issued to the following persons
in the amounts set forth opposite their names:
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<PAGE>
Number of Shares
Shareholders Issued and Outstanding
------------ ----------------------
Holloway 500.00
Crawford 92.29
Schnoor 24.61
------
Total 616.90
======
Each of the Friede & Goldman Shareholders represents and warrants to FGII
that the shares set forth opposite his name are owned by such Friede & Goldman
Shareholder free and clear of all Encumbrances, and no other person has any
ownership interest in such shares.
Section 1.4. Representations of Participants. (a) Each Participant
represents and warrants that such Participant (i) has the requisite authority to
enter into this Agreement and to perform his obligations under this Agreement,
(ii) he has duly executed and delivered this Agreement, (iii) all filings,
approvals and consents necessary for the execution, delivery and performance of
this Agreement by such Participant have been made or obtained or shall have been
made or obtained prior to the Closing (as defined in Section 4.1 hereof), (iv)
this Agreement, when executed and delivered by such Participant, will be a valid
and binding agreement of such Participant, (v) the execution, delivery and
performance of this Agreement by such Participant and the consummation of the
transactions contemplated hereby by such Participant will not (A) conflict with
or result in a breach of any of the terms and provisions of, or constitute a
default (or an event which with notice or lapse of time, or both, would
constitute a default) or require consent under the terms of any agreement,
instrument, franchise, license or permit to which such Participant is a party or
by which such Participant may be bound or (B) violate or conflict with any
provision of any judgment, decree, order, statute, rule or regulation of any
court or any public, governmental or regulatory agency or body having
jurisdiction over such Participant, and (vi) no consent, approval,
authorization, order, registration, filing, qualification, license or permit of
or with any court or any public governmental or regulatory agency or body having
jurisdiction over such Participant is required for the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby, except such as have been obtained or will be obtained by
such Participant prior to the Closing.
(b) Each Participant acknowledges receipt of (i) a copy of the Certificate
of Incorporation and Bylaws of FGII, (ii) the historical financial statements of
HAM Marine for the three years ended December 31, 1994, 1995 and 1996, (iii) the
historical financial statements of Friede & Goldman for the eleven-month period
ended November 30, 1996, (iv) the pro forma financial statements of FGII for the
year ended December 31, 1996 that give effect to the Stock Exchange as if it had
occurred on January 1, 1996 and (v) certain other information concerning FGII
and the Stock Exchange, and each Participant acknowledges that he received all
information necessary in order to make an informed decision concerning his
participation in the Stock Exchange.
-3-
<PAGE>
(c) Each Participant acknowledges that such Participant has such knowledge
and experience in financial and business matters so that such Participant is
capable of evaluating the merits and risks of an investment in FGII. Based upon
such Participant's own knowledge, such Participant recognizes the speculative
nature of such an investment.
(d) Each Participant hereby acknowledges that the issuance of the shares
of FGII Common Stock being acquired or received by such Participant hereunder is
not and will not be registered under the Securities Act. Each Participant
represents that the shares of FGII Common Stock being acquired or received
hereunder is being acquired or received for such Participant's own account, for
investment purposes only and not with a view for distribution or resale to
others, except as set forth in paragraph (e) below. Each Participant agrees
that such Participant will not sell or otherwise transfer any shares of FGII
Common Stock being acquired or received hereunder unless such shares of FGII
Common Stock are registered under the Securities Act or unless an exemption from
such registration is available.
(e) Each Participant has no present plan, intention, arrangement or
understanding to dispose of any of the shares of FGII Common Stock to be
received pursuant to the transactions described in Article III hereof, other
than a sale of shares of FGII Common Stock pursuant to the Registration
Statement to be filed in connection with the Public Offering.
(f) Each Participant agrees not to sell, transfer, convey, pledge,
encumber or otherwise dispose of such Participant's shares of HAM Marine Common
Stock or shares of Friede & Goldman Common Stock from the date hereof until the
Closing, except with the written consent of FGII or as contemplated by this
Agreement.
(g) Each Participant consents to the placement of a legend on any
certificate or other document evidencing the shares of FGII Common Stock to be
received hereunder stating that such shares of FGII Common Stock have not been
registered under the Securities Act and setting forth or referring to the
restrictions on transferability and sale hereof.
ARTICLE II
TERMINATION OF
STOCKHOLDER AGREEMENTS
Section 2.1. Crawford HAM Marine Stock Purchase Agreement. HAM Marine,
Holloway and Crawford hereby terminate the Stock Purchase Agreement, dated
January 30, 1997, by and among HAM Marine, Holloway and Crawford effective
immediately prior to the consummation of the Stock Exchange.
Section 2.2. Schnoor HAM Marine Stock Purchase Agreement. HAM Marine,
Holloway, Crawford and Schnoor hereby terminate the Stock Purchase Agreement,
dated April 20, 1994, by
-4-
<PAGE>
and among HAM Marine, Holloway, Crawford and Schnoor effective immediately prior
to the consummation of the Stock Exchange.
Section 2.3. Lowe HAM Marine Stock Purchase Agreement. HAM Marine,
Holloway and Lowe hereby terminate the Stock Purchase Agreement, dated January
1, 1997, by and among HAM Marine, Holloway and Lowe effective immediately prior
to the consummation of the Stock Exchange.
Section 2.4. Crawford Friede & Goldman Stock Purchase Agreement. Friede
& Goldman, Holloway and Crawford hereby terminate the Stock Purchase Agreement,
dated May 21, 1997, by and among Friede & Goldman, Holloway and Crawford
effective immediately prior to the consummation of the Stock Exchange.
Section 2.5. Schnoor Friede & Goldman Stock Purchase Agreement. Friede &
Goldman, Holloway and Schnoor hereby terminate the Stock Purchase Agreement,
dated May 21, 1997, by and among Friede & Goldman, Holloway and Schnoor
effective immediately prior to the consummation of the Stock Exchange.
ARTICLE III
STOCK EXCHANGE
Section 3.1. Stock Exchange. Effective immediately prior to the
consummation of the Public Offering, each HAM Marine Shareholder shall exchange
all of his shares of HAM Marine Common Stock and each Friede & Goldman
Shareholder shall exchange all of his shares of Friede & Goldman Common Stock
for the number of shares of FGII Common Stock set forth opposite his name
(collectively, the "Exchange Stock"):
Stockholders Number of Shares
------------ ----------------
Holloway 7,362,979
Crawford 1,359,310
Schnoor 362,481
Lowe 76,820
Alford 38,410
Certificates representing the number of shares of FGII Common Stock set forth
above will be issued to the Participants upon the presentation of certificates
representing the shares of HAM Marine Common Stock and Friede & Goldman Common
Stock to be exchanged therefor. The exchange of shares of FGII Common Stock for
shares of HAM Marine Common Stock and Friede & Goldman Common Stock shall all
occur simultaneously.
-5-
<PAGE>
Section 3.2. Cancellation of Previously Issued FGII Common Stock.
Simultaneously with the Stock Exchange specified in Section 3.1 of this
Agreement, all of the 1,000 shares of FGII Common Stock issued to Holloway in
connection with the original organization of FGII shall be canceled.
ARTICLE IV
CLOSING
Section 4.1. Closing. The consummation of the transactions contemplated
by Article II shall occur in the order set forth herein substantially
concurrently and shall close immediately prior to the closing of the Public
Offering at the offices of the Company, unless another place or time is agreed
upon in writing by the Company (the consummation of such transactions is herein
called the "Closing").
Section 4.2. Conditions. The Closing shall be contingent upon
satisfaction of the following conditions:
(a) An underwriting agreement relating to the Public Offering shall have
been entered into among FGII and a group of underwriters and all conditions
precedent to the consummation of the transactions contemplated thereby shall
have been satisfied.
(b) All consents and approvals by, or filings with, any governmental
authority, agency or official, or any other person required in connection with
the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby shall have been received or made and
shall be in full force and effect.
Section 4.3. Termination. In the event that the Closing does not occur
by September 30, 1997 by reason of the failure of any of the conditions set
forth in Section 4.2 hereof to be satisfied, this Agreement shall thereafter
become null and void and have no effect, and no party hereto shall have any
liability to the other parties hereto.
ARTICLE V
GENERAL PROVISIONS
Section 5.1. Further Assurances. At any time, and from time to time,
each party will execute such additional instruments and take such action as may
be reasonably requested by any other party to confirm or perfect title to any
shares of HAM Marine Common Stock or Friede & Goldman Common Stock to be
transferred hereunder or otherwise to carry out the intent and purposes of this
Agreement, including, without limitation, giving any consents required under any
applicable agreements affecting the parties necessary to consummate the
transactions specified in this Agreement.
-6-
<PAGE>
Section 5.2. Waivers. Any failure on the part of any party hereto to
comply with any of its obligations, agreements, or conditions hereunder may be
waived in writing by the party to whom such compliance is owed.
Section 5.3. Entire Agreement. This Agreement constitutes the entire
agreement between the parties and supersedes and cancels any other agreement,
representation, or communication, whether oral or written, between the parties
hereto relating to the transactions contemplated herein or the subject matter
hereof.
Section 5.4. Headings. The section and subsection headings in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
Section 5.5. Governing Law. This Agreement shall be construed under and
in accordance with the laws of the State of Delaware without giving effect to
the principles of conflict of laws thereof.
Section 5.6. Amendment. No amendment of this Agreement shall be
effective without the written consent of any party affected adversely thereby.
Section 5.7. Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
Section 5.8. Notice. Any notice or other communication given hereunder
shall be deemed sufficient in writing and sent by registered or certified mail,
return receipt requested, or hand delivered and addressed to any party at FGII's
offices at 525 E. Capitol Street, Suite 402, Jackson, Mississippi 39201, or such
other address as may be specified by a party by like notice. Notices shall be
deemed to have been given on the date of mailing, except notices of change of
address, which shall be deemed to have been given when received.
Section 5.9. Successors and Assigns. This Agreement shall be binding on
the parties hereto and their permitted successors and assigns. None of the
parties hereto shall assign their rights under this Agreement without the prior
written consent of FGII.
Section 5.10. Unenforceable Provisions. If any provision of this
Agreement is held to be invalid or unenforceable by a court of competent
jurisdiction, in lieu of such invalid provision there shall be added a provision
which is as similar in terms as possible to such invalid provision and which is
valid and enforceable; such invalid provision shall not affect any other
provision of this Agreement, and, as so modified, this Agreement shall remain in
full force and effect.
-7-
<PAGE>
Section 5.11. Expenses. FGII shall pay its own and each of the parties'
pre-approved expenses incurred in connection with the transactions specified
herein, other than separate legal, accounting or investment banking counsel
independently retained by a Participant, which shall be for the Participant's
own account.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
FRIEDE GOLDMAN INTERNATIONAL INC.
By:_______________________________
Name: J. L. Holloway
Title: President
HAM MARINE, INC.
By:_______________________________
Name: Ronald W. Schnoor
Title: President
FRIEDE & GOLDMAN, LTD.
By:_______________________________
Name: Bruce Malcolm
Title: President
__________________________________
J. L. Holloway
__________________________________
Carl M. Crawford
__________________________________
Ronald W. Schnoor
__________________________________
James A. Lowe III
__________________________________
John F. Alford
-9-
<PAGE>
EXHIBIT 10.13
BUSINESS PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into by and among J. L. HOLLOWAY
HOLDINGS,INC., a Mississippi corporation("Buyer"), FRIEDE & GOLDMAN, LTD., a
Louisiana corporation ("Seller"), and JEROME L. GOLDMAN, an individual resident
of the State of Louisiana ("Shareholder").
WITNESSETH:
WHEREAS, Seller engages in the business of creating, developing, licensing
and selling engineering designs of two classes of marine craft, namely marine
vessels such as river craft and full oceangoing ships (collectively "Ships") and
mobile offshore oil and gas drilling units such as jack-up and semi-submersible
drill rigs, drill ships and mobile production units (collectively "Vessels");
and
WHEREAS, Seller desires to sell and Buyer desires to purchase all of the
assets, with certain specified exceptions, used in Seller's business of
creating, developing, licensing and selling engineering designs of Vessels (the
"Vessel Design Business") while allowing Seller to continue in its business of
creating, developing, licensing and selling engineering designs of ships (the
"Ship Design Business"); and
WHEREAS, simultaneously with Buyer's purchase of the Vessel Design
Business, Buyer and Shareholder shall execute a consulting agreement, in the
form attached hereto as EXHIBIT 1, whereby Shareholder agrees to serve as a
consultant to Buyer for a period of ten (10) years serving as Chairman of a
steering committee overseeing Vessel design marketing and improvement and
enhancement of the Vessel Design Business (the "Consulting Agreement").
NOW, THEREFORE, in consideration of the premises and the mutual promises
and covenants contained in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Buyer, Seller and Shareholder hereby agree as follows:
1. Sale and Purchase of Assets.
(a) Purchased Assets. Subject to, and upon the terms and conditions
set forth in this Agreement, Seller agrees to sell, transfer, convey,
assign and deliver to Buyer, and Buyer agrees to purchase from Seller, the
following assets used in
<PAGE>
the Ship Design Business and the Vessel Design Business (the "Assets"):
(i) All furniture, fixtures, computers,, machinery, equipment,
leasehold improvements, automobiles vehicles, and other tangible
assets of Seller ("FF&E") as set forth on SCHEDULE 1(a)(i);
(ii) The corporate name or trade name "Friede & Goldman, Ltd.",
any and all variations and uses of the name "Friede & Goldman" and all
trademarks, logos, labels and other distinctive marks, badges or
insignias associated with such name and all other names, trademarks,
logos, labels and other distinctive marks, badges or insignias used in
the Vessel Design Business of Seller, whether or not registered, and
the goodwill of Seller associated with the Vessel Design Business and
associated with such names or marks (collectively, the "Trademarks")
as set forth on SCHEDULE 1(a)(ii);
(iii) Those certain Chocking System Patent Rights including
United States Reissue Patent 32,589 issued February 2, 1988 for Mobile
Offshore, Self-elevating (jack-up) Unit Leg/Hull Rigidification
System, (the "Chocking Patent") relating to chocking systems used to
jack-up oil and gas drill rigs, and all improvements and modifications
made thereto by or for Seller;
(iv) All rights, benefits and interests of Seller under all
Vessel Design (as defined below) and engineering contracts, agreements
and commitments for sale or licensing of Vessel Designs (as defined
below) or design products or services to customers and other selected
contracts, if any ("Purchased Contracts") as set forth on SCHEDULE
1(a)(iv);
(v) All business methods, engineering, know how, blue
prints, drawings, shop drawings, specifications, manuals, marketing
plans, marketing aids, videos, materials and customer or prospect
lists of Seller ("Methods and Materials");
(vi) All books, records, files, documents, telephone
numbers, computer programs, computer disks, licenses, permits and
other information, written or
2
<PAGE>
electronic, or used in the operation of Seller's Vessel Design
Business ("Records");
(vii) All Vessel designs, including completed designs,
modifications and enhancements thereto and designs currently under
development, and Seller's files of past Vessel designs and design
engineering ("Vessel Designs") specifically excluding, however, the
Mod V and Mod VI designs, which excluded designs are more specifically
described on SCHEDULE 1(a)(vii);
(viii) That certain lease relating to Seller's current office
space (the Lease");
(ix) All licenses and permits required to conduct the Vessel
Design Business to the extent that they are assignable; and
(x) One hundred percent (100%) of the common stock and
other equity interest, if any, of Freide & Goldman International,
Inc., a Louisiana corporation.
(b) Inclusive Interpretation. All specific descriptions of the Assets
on Schedules l(a)(i) through (iv) are intended to be cumulative
descriptions of the general classifications of Assets described in
Paragraphs l(a)(i) through (iv) and are not exclusive. All Schedules and
Exhibits have been prepared by the parties from information furnished by
Seller and may be supplemented by additional written information delivered
by Buyer to Seller upon expiration of the Due Diligence Period, as defined
herein.
(c) Assumed Liabilities. Buyer shall not assume or in any way be
responsible for any liability or obligation of Seller or Shareholder
whatsoever, disclosed, undisclosed, absolute, contingent or otherwise,
including, but not limited to (i) any federal, state or local income,
withholding, sales or excise taxes, (ii) any pending, threatened or future
litigation or product or services liability claim which arises out of the
operation or conduct of the business of Seller or from any products or
services sold or licensed by Seller and (iii) any liabilities or
obligations to or for the benefit of employees or agents of Seller. Seller
and Shareholder hereby indemnify and hold Buyer harmless from any and all
such liabilities.
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2. Purchase Price.
(a) Purchase Price. The Purchase Price for the Assets and the
Non-Competition Agreement referred to in SECTION 17 shall be $1,500,000.00
plus the post-closing payments described in SECTIONS 6 and 7.
(b) Allocation. Prior to the termination of the Due Diligence
Period, as defined herein, Buyer and Seller shall agree to the allocation
of the Purchase Price for federal and state income tax purposes among the
various categories of Assets and the Non-Competition Agreement referred to
in SECTION 17.
3. Deposit. Seller acknowledges receipt of the sum of $100,000.00
tendered herewith by Buyer as a deposit to be applied to the Purchase Price at
Closing, as defined herein (the "Deposit"). In the event Buyer notifies Seller,
within five (5) days following the termination of the Due Diligence Period, as
defined herein, of Buyer's decision to terminate this Agreement or, if the
transactions contemplated herein cannot be consummated on the Closing Date, as
defined herein, due to the misrepresentation, either intentional or
unintentional, by Seller of any representation, warranty or covenant or the
default by Seller under any provision or term of this Agreement, then, upon
written notification by Buyer to Seller of the termination of this Agreement,
Seller shall immediately refund the Deposit, in full, to Buyer. In the event
the transactions contemplated herein cannot be consummated on the Closing Date,
as defined herein, due to the misrepresentation, either intentional or
unintentional, by Buyer of any representation, warranty or covenant, or the
default by Buyer under any provision or term of this Agreement, then upon
written notification by Seller to Buyer of the termination of this Agreement,
Seller shall be entitled to retain the Deposit as liquidated damages.
4. Due Diligence Period. Seller and Shareholder acknowledge that this
Agreement has been executed by Buyer prior to the attachment by Seller of the
various Schedules and Exhibits described in certain Sections of this Agreement.
Therefore, for a period of thirty (30) days following the receipt by Buyer of a
counterpart of this Agreement duly executed by Seller and Shareholder, with all
required Schedules and Exhibits attached (the "Due Diligence Period"), Buyer
shall have the right to review all books, records, contracts, agreements,
designs, patents, licenses and any other information maintained by Seller
relating in any way
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to the Assets or the Vessel Design Business which Buyer, in its sole discretion,
deems necessary or appropriate to obtain sufficient information to complete the
consummation of the transactions contemplated herein. Within five (5) days
following the expiration of the Due Diligence Period, Buyer shall notify Seller
and Shareholder in writing of his decision to proceed with the Closing, as
defined herein, or to terminate this Agreement in which case Seller shall
immediately return the Deposit to Buyer and no party shall owe any further duty
or obligation to any other party hereunder.
5. Closing. Unless terminated pursuant to the provisions of Sections 3
or 4 above, the consummation of the transactions contemplated by this Agreement
(the "Closing") shall occur on or before the tenth (10th) day following the
expiration of the Due Diligence Period (the "Closing Date"), on such date as the
parties may agree, at the offices of Watkins & Eager PLLC, 400 East Capitol
Street, Suite 300, Jackson, Mississippi 39201, or at the offices of Liskow &
Lewis, One Shell Square, 50th Floor, New Orleans, Louisiana 70139, as the
parties may agree. The sum of $1,500,000.00 less the Deposit shall be paid by
Buyer to Seller in full in cash or by wire transfer at Closing.
6. Post-Closing Payments.
(a) Vessel Design Payments. Buyer shall pay to Seller an amount
equal to fifteen percent (15%) of all licensing and design fees collected
by Buyer on orders received by Buyer during the ten (10) year period
beginning on the Closing Date (the "Order Period") for designing new-build
Vessels and twenty percent (20%) of the licensing fees collected by Buyer
on orders received by Buyer during the Order Period for subsequent designs
of the same Vessels which are part of a series of Vessels designed by Buyer
for the same owner and fabricated by the same builder to similar design
criteria, i.e. Classification and Regulatory Rules and Regulations.
(b) Chocking System Payments. Buyer shall pay to Seller an
amount equal to twenty percent (20%) of all amounts collected by Buyer from
agreements entered into by Buyer during the Order Period for sales of the
chocking system as described in the Chocking Patent.
(c) Date of Payment. The sums required to be paid to Seller
pursuant to the provisions of Sections 4(a) and (b)
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above shall be paid by Buyer to Seller within thirty (30) days following
the receipt of Buyer of the respective fees upon which such payments are
calculated. Buyer shall provide Seller an accounting reflecting the
calculation of each required payment at the time each payment is made to
Seller.
7. Market Share.
(a) Market Share Payments. Buyer anticipates that its strongest
market for sales of its designs will be new-build independent leg jack-up
or semi-submersible drilling units ("Drilling Units") ordered by a domestic
(U.S.A. headquartered) drilling company, excluding any domestic drilling
company, its subsidiaries or affiliates, that builds its own Drilling Units
pursuant to a design which it owns ("Domestic Drillers"). Therefore, for a
period of ten (10) years beginning with the Closing Date (the "Guaranty
Period"), Buyer guarantees that for the three (3) year period ending with
the third anniversary of the Closing Date and for each three year period
thereafter ending with the fourth through the tenth anniversaries of the
Closing Date (each such three year period shall be referred to as a
"Construction Period"), twenty percent (20%) of all new-build Drilling
Units ordered by Domestic Drillers whose keels are laid during a
Construction Period shall be constructed pursuant to the Vessel Designs or
designs subsequently created or developed by Buyer. In the event Buyer
fails to attain an average twenty percent (20%) of such new-build Drilling
Unit market in any Construction Period, Buyer shall pay Seller the sum of
$300,000.00 for each Drilling Unit design sale by which Buyer is short of
the twenty percent (20%) goal. The sum required to be paid to Seller shall
be paid by Buyer within ninety (90) days following the end of any
Construction Period in which the required market share is not attained.
Buyer will maintain an aggressive worldwide marketing staff to assure the
market share necessary to make the sales required herein.
(b) Indexing of Payments. The $300,000.00 payment from Buyer to
Seller described in Section 7(a) above shall be increased on the first
anniversary of the Closing Date and on each subsequent anniversary thereof
within the Guaranty Period as follows: Buyer shall calculate the
percentage increase in the Consumer Price Index for All Urban Consumers-
U.S. City Average for All Items (unadjusted for seasonal change) published
by the Bureau of Labor Statistics of the United States Department of Labor
(the "Index") using the Index for
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the month in which the Closing occurs as the Base Index number and the
Index for the same month of each subsequent year during the Guaranty Period
as the then current Index number. The current Index number shall be divided
by the Base Index number. From the quotient thereof, there shall be
subtracted the integer one (1) and any resulting positive number shall be
deemed to be the percent of increase in the cost of living. The percentage
of increase in the cost of living multiplied by $300,000.00 shall be the
increase required to be determined by this Section.
8. Office Space. Buyer shall allow Shareholder to maintain his current
office space at Seller's offices at no cost so long as Shareholder continues to
provide services to Buyer pursuant to the provisions of the Consulting Agreement
or any amendment thereto or extension thereof. Should the current lease of
Seller's offices expire and not be renewed by Buyer, then Buyer shall provide
comparable office space to Shareholder at no cost at the offices of the Vessel
Design Business for such time as Shareholder continues to provide services to
Buyer pursuant the provisions of the Consulting Agreement and any extension
thereof or amendment thereto. Buyer shall allow William Hamilton to maintain
his current office space at Seller's offices at no cost for a period of five (5)
years following the Closing Date or until Shareholder no longer requires the
space, if sooner. Should the current lease of Seller's offices expire prior to
the expiration of the five (5) year period and not be renewed by Buyer, then
Buyer shall provide comparable office space to William Hamilton at no cost at
the new offices of the Vessel Design Business for the remainder of the five (5)
year period.
9. Representations and Warranties of Seller and Shareholder. Seller and
Shareholder hereby jointly and severally represent and warrant to Buyer, with
the full understanding that Buyer is relying thereon, the following:
(a) Due Organization. Seller (i) is a corporation duly organized
and validly existing under the laws of the State of Louisiana and is
qualified to do business in Louisiana, and is not engaged in any activities
in any other state which would require Seller to qualify to do business in
any other state or, if so engaged, is qualified in any such state which
would require Seller to qualify to do business and (ii) has the full
corporate power to own and operate its assets and properties and to carry
on its business as now conducted. True, correct and complete copies of
Seller's
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Articles of Incorporation and the Certificate of Good Standing in Louisiana
have been furnished to Buyer.
(b) Corporate Authority. Seller has the full legal right, power
and authority to execute and deliver this Agreement and to perform in
accordance with its terms, without the consent or approval of any other
person, firm, governmental agency or other legal entity. The execution and
delivery of this Agreement and the performance by Seller of its obligations
under this Agreement are within the corporate powers of Seller and have
been duly authorized by all necessary corporate actions, and do not and
will not contravene or conflict with any provision of law, any applicable
judgment, ordinance, regulation or order of any court or governmental
agency, the Articles of Incorporation or Bylaws of Seller, or any other
incorporation or organizational document.
(c) Shareholder Authority. Shareholder has the full legal right,
power and authority to execute and deliver this Agreement and to perform in
accordance with its terms, without the consent or approval of any other
person, firm, governmental agency or other legal entity. The execution and
delivery of this Agreement and the performance by Shareholder of his
obligations under this Agreement do not and will not contravene or conflict
with any provision of law, any applicable judgment, ordinance, regulation
or order of any court or governmental agency.
(d) Enforceability. This Agreement, when executed and delivered,
will constitute the legal, valid and binding obligation of Seller and
Shareholder, enforceable in accordance with its terms.
(e) No Violation. The consummation of the transactions
contemplated by this Agreement and the performance of the obligations of
Seller and Shareholder under this Agreement will not:
(i) conflict with, result in any breach of, or constitute a
default under, any mortgage, security deed or agreement, deed of
trust, lease, bank loan or credit agreement, license, franchise,
contract or any other instrument or agreement to which Seller or
Shareholder is a party or by which Seller or Shareholder may be bound
or affected; or
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(ii) result in the creation or imposition of any lien,
security interest or encumbrance of any nature whatsoever upon the
Assets.
(f) Defaults; Consents. No default, breach or violation by
Seller or Shareholder exists under any law, rule, regulation or agreement
to which either is a party or by which either may be bound or affected, and
no event has occurred and is continuing which, with notice or passage of
time or both, would constitute a default, breach or violation thereunder.
All approvals, consents and other authorizations (governmental or
otherwise) of and filings with, all courts, agencies, commissions and other
authorities and entities required for the due performance by Seller and
Shareholder of their obligations under this Agreement have been obtained or
will be obtained prior to Closing.
(g) Taxes. Seller has filed or caused to be filed all tax
returns required to be filed by Seller in all jurisdictions in which Seller
is subject to taxation and has paid all taxes shown to be due and payable
by Seller on such returns or upon any assessments or deficiencies made
against Seller to the extent that such taxes have become due and payable.
Seller has set up reserves which are adequate for the payment of additional
taxes for years which have not been audited by the tax authorities for the
respective jurisdictions. True, correct and complete copies of Seller's
federal income tax returns for 1993 and 1994 and, if prepared by the date
of this Agreement, for 1995, have been furnished to Buyer. No tax
liability of Seller in any jurisdiction, whether in dispute or otherwise,
in any way affects or impairs transferability of the Assets or constitutes
or will constitute a lien or charge upon any of the Assets. After
consummation of the transactions contemplated by this Agreement, Seller
will file all tax returns and pay all taxes necessary to prevent any lien
or charge against the Assets.
(h) Assets. The Assets constitute all intangible and tangible
assets and properties of any kind and nature which are necessary to or used
in the operation of Seller's Vessel Design Business as currently conducted.
The Assets are free and clear of any mortgage, pledge, lien, encumbrance,
security interest or charge. No claims have been asserted and no claims
are pending by any person, firm, corporation or entity against Seller or
Shareholder, nor does Seller or
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Shareholder know or have any reasonable ground to know of any basis for any
such claims with respect to the ownership or use of any of the Assets or
questioning the validity or effectiveness of any of the Assets. The use of
the Assets by Seller has not infringed the rights of any other person,
firm, corporation or entity.
(i) Mod V and Mod VI Enhancements. By purchasing the Vessel
Designs, Buyer shall obtain the right to use the technology, methods,
systems and know how arising from Seller's development of the Mod V and Mod
VI designs for future designs currently under development by Seller or
created or developed by Buyer subsequent to the Closing Date and such use
will not infringe upon the rights of Seller, or any assignee of Seller, to
the use, licensing or sale of the Mod V or Mod VI designs. In the event
that the Mod V or Mod VI designs are sold or otherwise transferred to a
third party (including but not limited to Seller's proposed transfer to Far
East Levingston Shipbuilding Limited as set forth in Seller's proposed
agreement attached hereto as EXHIBIT 9(i)), such sale or transfer shall be
subject to Buyer's rights of use hereunder, which rights of use are not
conditioned upon any further payments from Buyer.
(j) Title. Seller has good and marketable title to the Assets
and the Assets are being sold, transferred, conveyed, assigned and
delivered to Buyer free and clear of all liens and encumbrances of every
kind and nature.
(k) Lease Agreement. The Lease is not in default and is in full
force and effect and is legally and validly assignable to Buyer.
(l) FF&E. All of the FF&E are in good working order and good
repair, ordinary wear and tear excepted.
(m) Litigation. There is no litigation or proceeding pending or,
to the knowledge of Seller or Shareholder, threatened against or relating
to Seller, its business or the Assets, nor does Seller or Shareholder know
or have any reasonable ground to know of any basis for any such action, or
of any governmental investigation relative to the Assets, properties or
business of Seller.
(n) Financial Statements. Seller has delivered to Buyer as part
of SCHEDULE 9(n) the following financial
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statements with respect to the business, operations and financial condition
of Seller: (i) unaudited statements of assets and liabilities as of
December 31, 1993, 1994 and 1995, prepared by the independent accounting
firm that normally provides services to Seller and (ii) the related
statements regarding operations for the periods then ended; and (iii)
interim unaudited statements of assets and liabilities as of September 30,
1996 and the related statements regarding operations for the period then
ended. Such financial statements are in accordance with the books and
records of Seller and are complete and accurate in all material respects
and have been maintained in accordance with good business practices and
fairly present the financial position and results of operations of Seller
for the periods therein indicated. All such unaudited financial statements
have been prepared and maintained in a matter consistent with generally
accepted accounting principles.
(o) Undisclosed Liabilities. There are no material debts,
obligations or liabilities of Seller, or of Shareholder relating to Seller,
absolute or contingent, including without limitation liabilities for
federal, state, local or foreign taxes, which are not reflected as
liabilities on the most recent balance sheet of Seller (a copy of which has
been delivered to Buyer as part of SCHEDULE 9(n)), including the notes
thereto, except liabilities arising since the date of such balance sheet in
the ordinary course of business which are not materially different in
amount or type from those reflected on such balance sheet and are not
materially adverse to the Assets, business, operations or financial
condition of Seller.
(p) Adverse Changes. Except as reflected on the financial
statements delivered to Buyer by Seller, during the twelve (12) month
period immediately preceding the date of this Agreement there have been no
materially adverse changes in the business, operations or financial
condition of Seller.
(q) Purchased Contracts. The Purchased Contracts constitute all
contracts, agreements, leases and commitments that relate to the Assets and
necessary or appropriate to enable Buyer to begin the Vessel Design
Business and operations formerly conducted by Seller. True, correct and
complete copies of the Purchased Contracts, as amended, have been provided
to Buyer. The Purchased Contracts are in full force and effect, are not in
default, are valid and binding
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obligations of the parties to the Purchased Contracts and are legally and
validly assignable to Buyer.
(r) Names. Other than the name Friede & Goldman, Ltd., Seller
has not been known as or used any other corporate or fictitious name.
(s) Records. Seller's books, accounts and records are complete
and accurate in all material respects and have been maintained in their
usual, regular and ordinary manner, consistent with good business practices
and fairly reflect the business and operations of the Seller.
(t) Employees. SCHEDULE 9(t) contains a true and complete list
of the names, positions, salaries and other forms of compensation and
accrued vacation and sick leave of each employee of Seller. None of
Seller's employees have given notice to Seller of their intent to terminate
their employment with Seller nor does Seller intend to terminate any of its
employees.
(u) Employee Benefits. SCHEDULE 9(u) contains a true and
complete list of each employee bonus, deferred compensation, stock
purchase, stock option, or other employee benefit plan, program, agreement,
commitment or arrangement to which Seller contributes, is required to
contribute, or has any other obligation (collectively "Plans"). None of
the Plans is subject to the Employee Retirement Income Security Act of
1974, as amended.
(v) Conduct of Business Reflected in Financial Statements. Since
the date of the December 31, 1995, financial statements delivered to Buyer,
Seller has not:
(i) conducted its business other than in the ordinary
course of business;
(ii) suffered any material adverse change in its financial
condition or the prospects or operations of its business;
(iii) experienced, or received notice or information
respecting, any material adverse change in Seller's relationships with
any major customers or sales agents;
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(iv) done or agreed to do anything which, if completed,
would violate or cause to be untrue any of Seller's or Shareholder's
representations and warranties contained in this Agreement; or
(v) experienced any other event or condition which may
materially and adversely affect the Assets or the future operation and
conduct of the Vessel Design Business currently conducted by Seller.
(w) Licenses. SCHEDULE 9(w) identifies all licenses or permits
required to conduct the business of Seller.
(x) Compliance with Laws. To the best of its knowledge, Seller
has operated its business in full compliance with all applicable federal,
state or local laws, rules, regulations, guidelines, ordinances and
administrative and judicial orders and rulings.
(y) Environmental Matters. Without limiting the generality of
SUBSECTION 9(x), Seller has operated its business in full compliance with
all applicable federal, state or local laws, rules, regulations,
guidelines, ordinances and administrative and judicial orders and rulings
relating to the generation, recycling, use, reuse, sale, storage, handling,
transport, treatment, disposal and discharge of hazardous or toxic
substances or waste, including without limitation the Federal Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended,
the Federal Resource Conservation and Recovery Act, as amended, the Federal
Clean Air Act, as amended, and the Federal Clean Water Act, as amended,
together with any rules, regulations or executive orders promulgated
thereunder.
(z) Full Disclosure. To the best of Seller's and Shareholder's
knowledge, Seller and Shareholder have disclosed to Buyer all facts
material to the consummation of the transactions contemplated by this
Agreement, including without limitation all facts material to the Assets.
No representation, warranty, statement made or information furnished by
Seller or Shareholder in this Agreement or otherwise in connection with
this Agreement contains any untrue statement of a material fact or omits to
state any material fact necessary in order to make such statement not
misleading.
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(aa) Labor Force. Seller is not a party to or bound by any
collective bargaining agreement, nor has it experienced any unfair labor
practices, or other collective bargaining disputes. Seller has committed
no unfair labor practice. None of Shareholder, the directors and officers
of Seller and employees with responsibility for employment matters of
Seller has any knowledge of any organizational effort presently being made
or threatened by or on behalf of any labor union with respect to employees
of the Seller.
10. Representations and Warranties of Buyer. Buyer hereby represents and
warrants to Seller, with the full understanding that Seller is relying thereon,
the following:
(a) Buyer Authority. Buyer has the full legal right, power and
authority to execute and deliver this Agreement and to perform in
accordance with its terms, without the consent or approval of any person,
firm, governmental agency or other legal entity. The execution and
delivery of this Agreement and the performance by Buyer of its obligations
under this Agreement do not and will not contravene or conflict with any
provision of law, any applicable judgment, ordinance, regulation or order
of any court or governmental agency.
(b) Enforceability. This Agreement, when executed and delivered,
will constitute the legal, valid and binding obligation of Buyer,
enforceable in accordance with its terms.
(c) No Violation. The consummation of the transactions
contemplated by this Agreement and the performance of the obligations of
Buyer under this Agreement will not conflict with, result in any breach of
or constitute a default under, any mortgage, security deed or agreement,
deed of trust, lease, bank loan or credit agreement, license, franchise or
any other instrument or agreement to which Buyer is a party or by which
Buyer may be bound or affected.
(d) Default. In the event Buyer fails to make full payment of
those sums required to be paid to Seller pursuant to the provisions of
Section 6 Post-Closing Fees and Section 7 Market Share and such failure
shall continue for a period of sixty (60) days following written demand
from Seller to Buyer for payment, Buyer shall then be in default hereunder
(the "Default Date") and the Assets, as they exist on the Default
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Date, shall be transferred to Seller and all provisions of this Agreement,
the Noncompetition Agreement and the Consulting Agreement shall terminate
as of the Default Date.
(e) No Litigation. There is not any litigation or proceeding
pending or, to the knowledge of Buyer, threatened against or relating to
Buyer.
(f) Marketing Effort. With Seller's assistance, Buyer shall
prepare and carry out an aggressive worldwide marketing plan targeting all
shipbuilders and other potential users of Seller's Vessel designs with the
intent to invest such capital into research and development as may be
necessary to maintain the outstanding reputation of Seller in the Vessel
Design Business and to meet the market share required by SECTION 7(a).
11. Survival of Representations and Warranties. Notwithstanding any
independent investigation made by any party, the representations and warranties
of Seller, Shareholder and Buyer which are contained in this Agreement shall
survive the consummation of the transactions contemplated by this Agreement.
Seller, Shareholder and Buyer expressly agree that (i) any misrepresentation or
breach of any warranty whatsoever contained in this Agreement shall be deemed
material and (ii) the acceptance by Buyer of a bill of sale, assignment or other
document of transfer shall not be deemed to be a waiver of any misrepresentation
or breach of warranty.
12. Covenants of Seller and Shareholder.
(a) Confidential Information. Seller and Shareholder acknowledge
and agree that the Assets include certain confidential information relating
to the business of Seller. Except to the extent necessary in connection
with any matter referred to in SECTION 22(j), neither Seller nor
Shareholder will at any time (except as authorized in writing by Buyer)
directly or indirectly use for Seller's or Shareholder's own benefit, or
directly or indirectly divulge, disclose or communicate to any person, firm
or corporation, any confidential information relating to the Assets, Vessel
Design Business or operations of Seller, including without limitation any
processes, procedures, information, research, engineering designs, business
methods, marketing plans, customer or prospect lists, information regarding
cost of products sold or pricing practices.
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(b) Conduct of Business. Except as required to consummate the
transactions contemplated by this Agreement, from the date of this
Agreement until the Closing Date, Seller and Shareholder shall conduct the
Vessel Design Business of Seller in the ordinary course consistent with
past practices.
(c) Consents. Seller and Shareholder shall use their best
efforts to obtain as promptly as possible any consent, authorization or
approval required to be obtained in connection with the transactions
contemplated by this Agreement.
(d) Standstill. Neither Seller nor Shareholder will, directly or
indirectly, solicit any inquiries or accept any proposals for any
acquisition, merger or other transaction which would, if consummated,
materially and adversely affect the transactions contemplated by this
Agreement.
(e) Access to Assets. Buyer and Buyer's officers and
representatives shall be given reasonable access to all of Seller's
facilities, properties, books, and other records relating to the business
of Seller and shall be allowed to make copies and abstracts therefrom.
Buyer's inspection rights under this Agreement shall not in any way (i)
limit Seller's or Shareholder's representations and warranties under this
Agreement or any schedule, exhibit or certificate delivered pursuant to
this Agreement or (ii) diminish or impair Buyer's right to rely in good
faith thereon.
(f) Change of Seller's Name. At or prior to Closing, Seller
shall adopt an amendment to its Articles of Incorporation changing its
corporate name to a name which is not confusingly similar to "Friede &
Goldman, Ltd." Seller shall deliver such amendment, executed and in a form
acceptable for filing to the Louisiana Secretary of State's office and to
Buyer at Closing and shall immediately after Closing cause such amendment
to be filed in the offices of the Secretary of State of all states in which
Seller is qualified to do business.
13. Conditions to Seller's and Shareholder's Obligations. The obligations
of Seller and Shareholder to consummate the transactions contemplated hereby are
subject to the fulfillment of all of the following conditions precedent
(compliance with which
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may be waived in whole or in part by Seller and Shareholder in writing):
(a) Representations True. Each and every representation and
warranty made by Buyer shall have been true in all material respects when
made and shall be true in all material respects at Closing as if originally
made on and as of the Closing Date.
(b) Covenants Satisfied. All obligations of Buyer to be
performed under this Agreement at or prior to Closing shall have been
timely performed in all material respects.
(c) Consulting Agreement. Buyer shall have executed the
Consulting Agreement.
14. Conditions to Buyer's Obligations. The obligation of Buyer to
consummate the transactions contemplated hereby are subject to the fulfillment
of all of the following conditions precedent (compliance with which may be
waived in whole or in part by Buyer in writing):
(a) Representations True. Each and every representation and
warranty made by Seller and Shareholder shall have been true in all
material respects when made and shall be true in all material respects at
Closing as if originally made on and as of the Closing Date.
(b) Covenants Satisfied. All obligations of Seller and
Shareholder to be performed under this Agreement at or prior to Closing
shall have been timely performed in all material respects.
(c) Corporate Proceedings and Approvals. At or prior to Closing,
all requisite corporate and shareholder proceedings shall have been taken
and all requisite corporate and shareholder authorizations shall have been
secured which are necessary to authorize the execution, delivery, and
performance of this Agreement by Seller. At or prior to Closing, Seller
shall have delivered to Buyer certified copies of all resolutions
pertaining to such authorizations.
(d) Employment Agreements. At or prior to Closing, Buyer shall
have entered into such employment or other agreements with those employees
of Seller deemed by Buyer, in
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his sole discretion, to be necessary to the profitable continuation of the
Vessel Design Business.
(e) Investigations. No investigation by Buyer or any document or
information delivered to Buyer by Seller or Shareholder shall have revealed
any facts or circumstances which, in the reasonable discretion of Buyer,
have or could have a material adverse effect on the Assets or the Vessel
Design Business of Seller.
(f) Schedules. At Closing, Buyer shall have received all
Schedules to this Agreement with the certification of the duly authorized
officer or agent of Seller or Shareholder and in a form satisfactory to
Buyer in all respects.
(g) Noncompetition Agreement. At or prior to Closing, Buyer
shall have received an executed noncompetition agreement from Seller
containing provisions substantially in the form attached as SCHEDULE 17 to
this Agreement.
(h) Opinion of Counsel. At or prior to Closing Buyer shall have
received an opinion from Seller's counsel reasonably satisfactory to Buyer
that the entire rights to the Chocking Patent are assignable by Seller and
that upon the filing with the United States Patent and Trademark Office of
an assignment, Buyer shall have the complete title to, ownership of and
right to the Chocking Patent free and clear of any and all liens, claims
and encumbrances.
(i) Consulting Agreement. Shareholder shall have executed the
Consulting Agreement.
(j) Accounts Receivable. At or prior to Closing, Seller shall
provide Buyer a list of all accounts receivable due with respect to the
Purchased Contracts as of the Closing Date in amounts acceptable to Buyer,
which Seller shall retain and which shall not be a part of the Assets.
(k) UCC Search. At or prior to Closing, Seller shall provide
Buyer with copies of Uniform Commercial Code searches performed in all
jurisdictions in which the Assets are located, certified by the officer
performing the search and which reflect no liens or encumbrances upon the
Assets.
15. Instruments of Transfer. Seller shall execute and deliver to Buyer at
Closing a full warranty bill of sale and such
18
<PAGE>
assignments and other instruments of conveyance and transfer, each in a form
satisfactory to Buyer, as shall be necessary to vest in Buyer good and
marketable title to the Assets.
16. Employees. Seller, Shareholder and Buyer agree that Buyer shall have
the right, but not the obligation, to employ or solicit for employment any
employee of Seller (salaried or hourly) and that any such employee hired by
Buyer shall be employable and terminable at will by Buyer.
17. Noncompetition. Seller shall execute a noncompetition agreement with
Buyer substantially in the form attached as EXHIBIT 17 to this Agreement.
Seller and Shareholder represent and agree that the duration, geographical
coverage and general terms and conditions of the noncompetition agreement are
reasonable and necessary to protect the interests of Buyer and the subsidiaries
and affiliates of Buyer.
18. Indemnification of Buyer. Seller and Shareholder hereby jointly and
severally covenant and agree to indemnify and hold harmless and defend Buyer
against all loss, injury, liability and damage, including expenses and
reasonable attorneys' fees, which result from: (i) any misrepresentation made by
Seller or Shareholder, (ii) any breach of any of the warranties which Seller or
Shareholder have given under this Agreement, (iii) any breach or failure of
Seller or Shareholder to perform in accordance with any term or condition of
this Agreement, (iv) any assertion against Buyer of any claim relating to any
liability of Seller or Shareholder not assumed by Buyer under this Agreement or
(v) any assertion against Buyer of any claim relating to the operation,
ownership, use or maintenance of the Assets for all periods prior to the Closing
Date.
19. Further Assurances. Each party to this Agreement agrees to perform or
cause to be performed any act, and to execute and deliver any agreement,
document or instrument, which may be reasonably necessary to effect and carry
out the terms and provisions of this Agreement.
20. Expenses. The parties agree that each party shall bear and pay his or
its own expenses incident to the execution and delivery of this Agreement and
the consummation of the transactions contemplated by this Agreement.
19
<PAGE>
21. Remedies.
(a) In the event of a breach or threatened breach by Seller or
Shareholder of any provision of this Agreement, Buyer shall be entitled to
an injunction restraining such party from violating that provision, or to
an order requiring such party to comply with the terms of that provision,
or both. Nothing in this Section 21(a) shall limit the availability of any
legal or equitable remedies to Buyer not referred to in this Section 21(a),
including the right to specific performance.
(b) Seller and Shareholder each acknowledge and agree that in
the event of breach of any warranty or representation contained herein, in
the Consulting Agreement or in the Noncompetition Agreement referred to in
Section 17, which results in loss or damages, including all costs and
attorneys' fees, to Buyer, Buyer may set off such loss or damages against
any payments thereafter owing to Seller or Shareholder for whatever reason
and may use all proper means of legal redress to recover such damages.
Buyer shall not be limited in its recourse to the payments owed to Seller
or Shareholder.
(c) In the event of a breach by Buyer of any provision of this
Agreement, Seller and Shareholder shall be entitled to terminate this
Agreement and retain the Deposit as liquidated damages and Buyer shall owe
no further duty or obligation to Seller or Shareholder hereunder.
22. Miscellaneous Provisions. The following additional provisions are
agreed upon:
(a) This Agreement shall be governed by, and construed in
accordance with, the law of the State of Mississippi without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Mississippi or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Mississippi.
(b) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors, assigns,
heirs, executors, administrators, and transferees.
(c) No failure to enforce any term, condition or provision of
this Agreement shall operate as a waiver of such
20
<PAGE>
term, condition or provision, or as a waiver of any other term, condition
or provision hereof.
(d) This Agreement constitutes the entire and complete agreement
between the parties hereto.
(e) No amendment or modification of this Agreement shall be
valid unless the same is in writing and is executed by each of the parties
hereto.
(f) Neither this Agreement nor any right or obligation hereunder
may be assigned by any party.
(g) All Exhibits and Schedules referred to in this Agreement and
which are attached to this Agreement, as they may be amended from time to
time as provided in this Agreement, are made a part hereof and are
incorporated herein by reference.
(h) If any provision of this Agreement is found by a court of
competent jurisdiction to be legally invalid or unenforceable: (i) the
validity and enforceability of the remainder of this Agreement shall not be
affected (ii) such provision shall be deemed modified to the minimum extent
necessary to make such provision consistent with applicable law and (iii)
such provision shall be valid, enforceable and enforced in its modified
form.
(i) Time is of the essence with respect to each and every
covenant, agreement and obligation of the parties to this Agreement.
(j) Notwithstanding anything to the contrary contained in this
Agreement, Seller and Shareholder shall have reasonable access to the books
and records of Seller which have been purchased by Buyer pursuant to this
Agreement, for any reasonable purpose material to Seller or Shareholder,
including matters relating to indemnification under this Agreement, the
preparation of financial statements or tax returns, responses to audits by
tax authorities, and governmental or legal investigations or proceedings.
(k) Until Closing, the parties agree to consult with each other
before making any public statement with respect to the transactions
contemplated by this Agreement or making any statement with respect to the
transactions
21
<PAGE>
contemplated by this Agreement to any of the customers, suppliers or
creditors of Seller; provided, however, that the parties may discuss the
transactions contemplated by this Agreement with their respective legal
counsel, accountants and similar representatives.
23. Notices. All Notices given under the provisions of this Agreement
shall be given in writing and shall be personally delivered, delivered by
certified mail, return-receipt requested, or by facsimile directed to the
parties at the addresses given below. Such Notices shall become effective as of
the time of delivery if personally delivered, as of the date of the receipt as
referenced by the official receipt of the United States Postal Service if
delivered by certified mail, or as of the date and time of the actual
confirmation of receipt of the facsimile. Addresses of the parties are as
follows:
BUYER: J. L. Holloway Holdings, Inc.
525 E. Capitol Street, Suite 402
Bank of Mississippi Building
Jackson, MS 39201
Telephone: (601) 352-1107
Facsimile: (601) 352-0588
SELLER
& SHAREHOLDER: Jerry L. Goldman
Friede & Goldman, Ltd.
935 Gravier Street, Suite 2100
New Orleans, LA 70112
Telephone: (504) 523-4621
Facsimile: (504) 529-5135
24. AGREEMENT DATE; TERMINATION OF OFFER. THE DATE OF THIS AGREEMENT
SHALL BE THE DATE WHEN THE LAST ONE OF BUYER, SELLER AND SHAREHOLDER HAS SIGNED
THIS AGREEMENT. BUYER'S OFFER TO SELLER TO ENTER INTO THIS AGREEMENT SHALL
AUTOMATICALLY TERMINATE ON THE FIFTEENTH (15TH) DAY FOLLOWING THE DATE OF
BUYER'S EXECUTION OF THIS AGREEMENT AND SELLER SHALL IMMEDIATELY REFUND BUYER'S
DEPOSIT, IN FULL, UNLESS BUYER RECEIVES A COUNTERPART OF THIS AGREEMENT DULY
EXECUTED BY SELLER AND SHAREHOLDER WITH ALL REQUIRED SCHEDULES AND EXHIBITS
ATTACHED. A FACSIMILE COPY OF THIS AGREEMENT AND ANY SIGNATURES HEREON SHALL BE
CONSIDERED FOR ALL PURPOSES AS ORIGINALS.
WITNESS the signatures of the parties on the dates set forth below.
22
<PAGE>
BUYER:
J. L. HOLLOWAY HOLDINGS, INC.
_____________________________ ___________________________
J. L. HOLLOWAY, PRESIDENT DATE
SELLER:
FRIEDE & GOLDMAN, LTD.
_____________________________ ___________________________
JEROME L. GOLDMAN, __________ DATE
SHAREHOLDER:
_____________________________ ___________________________
JEROME L. GOLDMAN DATE
23
<PAGE>
EXHIBIT 10.14
AMENDMENT TO BUSINESS PURCHASE AGREEMENT
This Amendment to Business Purchase Agreement (the "Amendment") is entered
into by and among FRIEDE & GOLDMAN, LTD., a Mississippi corporation formerly
known as J. L. HOLLOWAY HOLDINGS, INC. ("Buyer"), J. L. GOLDMAN ASSOCIATES,
INC., a Louisiana corporation formerly known as FRIEDE & GOLDMAN, LTD.
("Seller") and JEROME L. GOLDMAN, an individual resident of the State of
Louisiana ("Shareholder").
WHEREAS, Buyer, Seller and Shareholder executed that certain Business
Purchase Agreement dated November 22, 1996 (the "Agreement"); and
WHEREAS, the closing of the transactions contemplated by the Agreement
occurred on November 27, 1996 to be effective December 2, 1996; and
WHEREAS, at the closing the parties agreed to certain amendments to the
Agreement which amendments are hereby reduced to writing.
NOW, THEREFORE, in consideration of the premises and the mutual promises
and covenants contained in the Agreement and in this Amendment, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Buyer, Seller and Shareholder hereby agree as follows:
I. Definitions. All capitalized terms used in this Amendment shall have
the same definitions as set forth in the Agreement.
II. Amendments to Agreement.
1. Section 1(a)(vi) of the Agreement, defining the term "Records", is
hereby amended by the deletion of that Section in its entirety and the
substitution
<PAGE>
of the following provisions as Section 1(a)(vi):
(vi) All books, records, files, documents, telephone numbers,
computer programs, computer disks, licenses, permits and other
information, written or electronic, used in the operation of Seller's
Vessel Design Business excluding financial and accounting books and
records ("Records");
2. Section 1 Sale and Purchase of Assets of the Agreement is hereby
amended by the addition of the following provisions as Section 1(d):
(d) Seller and Shareholder acknowledge that certain of the
Assets are used in connection with both the Ship Design Business and
the Vessel Design Business. The parties agree that title to any of
Seller's or Shareholder's assets used in the Ship Design Business not
conveyed to Buyer pursuant to that certain Assignment and Bill of Sale
executed by Seller to Buyer effective as of December 2, 1996 shall
remain in Seller or Shareholder, as the case may be.
3. Section 6(c) Date of Payment is hereby amended by the deletion of
that Section in its entirety and the substitution of the following
provisions as Section 6(c):
(c) Date of Payment. Within thirty (30) days following (i) the
receipt by Buyer of any order containing licensing or design fees
described in Section 6(a) above, or (ii) the execution by Buyer of an
agreement for the sale of a chocking system described in Section 6(b)
above, Buyer shall notify Seller of the existence, date and terms of
each such order and/or agreement pursuant to which Seller would
eventually be entitled to receive payments from Buyer under the
provisions of Sections 6(a) and (b) above. The sums required to be
paid to Seller pursuant to the provisions of Sections 6(a) and (b)
above shall be paid by Buyer to Seller within thirty (30) days
following the receipt by Buyer of the respective fees upon which such
payments are calculated. Buyer shall provide Seller an accounting
reflecting the calculation of each required payment at the time each
payment is made to Seller.
2
<PAGE>
4. Section 7(a) Market Share Payments is hereby amended by the
addition of the following provision as the last sentence of Section 7(a):
Within sixty (60) days following the end of any Construction
Period, Buyer shall notify Seller as to whether or not the required
market share was obtained by Buyer during the preceding Construction
Period along with proof of Buyer's sales in support thereof.
5. Section 9(f) Defaults; Consents is hereby amended by the insertion
of the following clause at the beginning of that Section:
To the best of Seller's knowledge, information and belief, after
diligent inquiry, ....
6. Section 9(i) Mod V and Mod VI is hereby amended by the deletion in
its entirety of the last sentence of that Section.
7. Section 16 Employees is hereby amended by the addition of the
following provision as the last sentence of Section 16:
It is Buyer's intent to hire all employees currently employed by
Seller.
8. Section 23 Notices is hereby amended by the deletion of that
Section in its entirety and the substitution of the following provisions as
Section 23:
All notices given under the provisions of this Agreement shall be
given in writing and shall be personally delivered, delivered by
certified mail, return-receipt requested, or by facsimile directed to
the parties at the addresses given below. Such notices shall become
effective as of the time of delivery if personally delivered, as of
the date of the receipt as referenced by the official receipt of the
United States Postal Service if delivered by certified mail, or as of
the date and time of the actual confirmation of receipt of the
facsimile. Any party may change its respective address for the
receipt of notices given under this Agreement by notifying all other
parties of that
3
<PAGE>
party's new address in accordance with the provisions
of this Section. Addresses of the parties are as follows:
BUYER: Friede & Goldman, Ltd.
(formerly J. L. Holloway Holdings, Inc.)
525 E. Capitol Street, Suite 402
Bank of Mississippi Building
Jackson, MS 39201
Telephone: (601) 352-1107
Facsimile: (601) 352-0588
with a copy to: James A. Lowe, III, Esq.
Watkins & Eager PLLC
400 East Capitol Street, Suite 300
Jackson, MS 39201
Telephone: (601) 948-6470
Facsimile: (601) 354-3623
SELLER
& SHAREHOLDER: Jerry L. Goldman
J. L. Goldman Associates, Inc.
(formerly Friede & Goldman, Ltd.)
935 Gravier Street, Suite 2100
New Orleans, LA 70112
Telephone: (504) 523-4621
Facsimile: (504) 529-5135
with a copy to: Robert M. Steeg
Steeg and O'Connor
201 Saint Charles Avenue, Suite 3201
New Orleans, LA 70170
Telephone: (504) 582-1199
Facsimile: (504) 582-1240
III. Waiver of Closing Requirements. Buyer hereby waives the conditions
precedent to Closing set forth in Section 14(h) Opinion of Counsel and Section
14(k) UCC Search of the Agreement. Buyer's waiver of these conditions precedent
to Closing in no
4
<PAGE>
way releases Seller or Shareholder from any warranties or
representations made by Seller and/or Shareholder to Buyer in the Agreement or
in this Amendment.
IV. Transfer of Assets. The parties acknowledge that the description of
the Assets set forth in the Agreement differs from the description of the Assets
set forth in that certain Assignment and Bill of Sale executed by Seller to
Buyer effective December 2, 1996 (the "Bill of Sale") and that such difference
in description results from facts revealed during Buyer's performance of its due
diligence. The parties agree that the description of the Assets set forth in
the Bill of Sale is the true and correct description of the Assets as conveyed
from Seller to Buyer for all purposes.
WITNESS THE SIGNATURES of the parties this the ___ day of December, 1996.
BUYER:
FRIEDE & GOLDMAN, LTD. (formerly J. L.
Holloway Holdings, Inc.)
BY: _________________________________
J. L. HOLLOWAY, PRESIDENT
SELLER:
J. L. GOLDMAN ASSOCIATES, INC. (formerly
Friede & Goldman, Ltd.)
BY: __________________________________
JEROME L. GOLDMAN, CHAIRMAN OF THE
BOARD OF DIRECTORS
5
<PAGE>
SHAREHOLDER:
_________________________________________
JEROME L. GOLDMAN
6
<PAGE>
EXHIBIT 10.15
SECOND AMENDMENT TO
-------------------
BUSINESS PURCHASE AGREEMENT
---------------------------
This second Amendment to Business Purchase Agreement (the "Second
Amendment") is entered into by and among Friede & Goldman, Ltd., a Mississippi
corporation, formerly known as J. L. Holloway Holdings, Inc. ("Buyer"), J. L.
Goldman Associates, Inc., a Louisiana corporation, formerly known as Friede &
Goldman, Ltd. ("Seller"), and Jerome L. Goldman, an individual resident of the
State of Louisiana ("Shareholder").
WHEREAS, Buyer, Seller and Shareholder (collectively referred to herein as
the "Parties" and individually as a "Party") executed that certain Business
Purchase Agreement dated November 22, 1996 (the "Agreement"), and that certain
Amendment to Business Purchase Agreement dated December 3, 1996 (the "First
Amendment"); and
WHEREAS, the Parties have agreed to certain additional amendments to the
Agreement which each Party acknowledges and agrees will benefit that Party.
NOW, THEREFORE, in consideration of the premises and the mutual promises
and covenants contained in the Agreement, the First Amendment and in this Second
Amendment, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereby agree as
follows:
I. DEFINITIONS
-----------
All capitalized terms used in this Second Amendment shall have the same
definitions as set forth in the Agreement, unless otherwise defined herein.
<PAGE>
II. AMENDMENTS TO AGREEMENT
-----------------------
1. Section 7(a) Market Share Payments, as amended by the First Amendment,
is hereby amended by the deletion of that Section in its entirety and the
substitution of the following provisions as Section 7(a):
(a) Market Share Payments. Buyer anticipates that its strongest
market for sales of its designs will be new-build independent leg
Jack-up or semi-submersible drilling units ("Drilling Units")
ordered by a domestic (U.S.A. headquartered) drilling company,
excluding any domestic drilling company, its subsidiaries or
affiliates, that builds its own Drilling Units pursuant to a
design which it owns ("Domestic Drillers"). Therefore, for a
period of ten (10) years beginning with the Closing Date (the
"Guaranty Period"), Buyer guarantees that for the three (3) year
period ending with the third anniversary of the Closing Date and
for each three year period thereafter ending with the fourth
through the tenth anniversaries of the Closing Date (each such
three year period shall be referred to as a "Construction
Period"), twenty percent (20%) of all new-build Drilling Units
ordered by Domestic Drillers whose keels are laid during a
Construction Period shall be constructed pursuant to the Vessel
Designs or designs subsequently created or developed by Buyer.
In the event Buyer fails to attain an average twenty percent
(20%) of such new-build Drilling Unit market in any Construction
Period, Buyer shall pay Seller the sum of $300,000.00 for each
Drilling Unit design sale by which Buyer is short of the twenty
percent (20%) goal up to a maximum payment from Buyer to Seller
of $1,000,000.00 for any Construction Period in which the
required market share is not attained. The sum required to be
paid to Seller shall be paid by Buyer within ninety (90) days
following the end of any Construction Period in which the
required market share is not attained. Buyer will maintain an
aggressive worldwide marketing staff to assure the market share
necessary to make the sales required herein. Within sixty (60)
days following the end of any Construction Period, Buyer shall
notify seller as to whether or not the required market share was
obtained by Buyer during the preceding Construction Period along
with proof of Buyer's sales in support thereof.
2. Section 7(b) Indexing of Payments is hereby amended by the deletion of
that Section in its entirety and the substitution of the following provisions as
Section 7(b):
2
<PAGE>
(b) The payment from Buyer to Seller described in Section 7(a) above
shall be increased on the first anniversary of the Closing Date
and on each subsequent anniversary thereof within the Guaranty
Period as follows: Buyer shall calculate the percentage increase
in the Consumer Price Index for All Urban Consumers-U.S. City
Average for All Items (unadjusted for seasonal change) published
by the Bureau of Labor Statistics of the United States Department
of Labor (the "Index") using the Index for the month in which the
Closing occurs as the Base Index number and the Index for the
same month of each subsequent year during the Guaranty Period as
the then current Index number. The current Index number shall be
divided by the Base Index number. From the quotient thereof,
there shall be subtracted the integer one (1) and any resulting
positive number shall be deemed to be the percent of increase in
the cost of living. The percentage of increase in the cost of
living multiplied by the payment from Buyer to Seller described
in Section 7(a) above shall be the increase required to be
determined by this Section.
required to be determined by this Section.
3. Section 10(d) Default is hereby amended by the deletion of that
Section in its entirety and the substitution of the following provisions as
Section 10(d):
(d) Default. In the event Buyer fails to make full payment of those
sums required to be paid to seller pursuant to the provisions of
Section 6 Post-Closing Fees and Section 7 Market Share and such
failure shall continue for a period of sixty (60) days following
written demand from Seller to Buyer for payment, Buyer shall then be
in default hereunder (the "Default Date") and the Assets, as they
exist on the Default Date, with the exception of the corporate name
"Friede & Goldman, Ltd.,"and any and all variations and uses of the
name as more fully defined below, shall be transferred to Seller and
all provisions of this Agreement, the Noncompetition Agreement and the
Consulting Agreement shall terminate as of the Default Date. In the
event of a default as defined above, Buyer shall, nevertheless, retain
the full and complete title to, ownership of and right to use the
corporate name or trade name "Friede & Goldman, Ltd.", any and all
variations and uses of the name Friede & Goldman and all trademarks,
logos, labels and other distinctive marks, badges or insignias
associated with such name, whether or not registered, and the goodwill
of Seller associated with such names or marks, including, but not
limited to, the trademark set forth on Schedule 1(a)(ii) to this
Agreement.
3
<PAGE>
III. MISCELLANEOUS
-------------
1. Continuation of Agreement. Except as modified or amended by the First
Amendment or this Second Amendment, each and every provision of the Agreement
shall continue in full force and effect.
2. Counterparts. This second Amendment may be executed in multiple
counterparts, each with multiple signatures pages, and each counterpart shall
constitute one and the same agreement and shall be fully effective to bind the
Parties.
WITNESS THE SIGNATURES of the Parties this the _____ day of May, 1997.
BUYER:
FRIEDE & GOLDMAN, LTD.
(formerly J. L. Holloway Holdings, Inc.)
By:_________________________________________
J. L. HOLLOWAY, CHAIRMAN OF THE
BOARD OF DIRECTORS
SELLER:
J. L. GOLDMAN ASSOCIATES, INC.
(formerly Friede & Goldman, Ltd.)
By:_________________________________________
JEROME L. GOLDMAN, CHAIRMAN OF
THE BOARD OF DIRECTORS
SHAREHOLDER:
____________________________________________
JEROME L. GOLDMAN
4
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
As independent public accountants we hereby consent to the use in this
Registration Statement (the "Registration Statement") of Friede Goldman
International Inc. ("FGII") on Form S-1 of our reports (i) dated March 7,
1997, with respect to the financial statements of the Predecessors (as such
term is defined in the Registration Statement) to FGII, (ii) dated February
28, 1997, with respect to the statement of operations of Friede & Goldman,
Ltd. and (iii), dated April 22, 1997, with respect to the balance sheet of
FGII, appearing in the Prospectus, which is a part of this Registration
Statement, and to the reference to us under the heading "Experts" in such
Prospectus.
ARTHUR ANDERSEN LLP
Jackson, Mississippi
May 22, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 MAR-31-1997
<CASH> 1,509,876 2,095,555
<SECURITIES> 11,270,730 5,887,980
<RECEIVABLES> 4,869,576 11,726,569
<ALLOWANCES> 0 0
<INVENTORY> 577,904 753,181
<CURRENT-ASSETS> 19,614,330 23,146,128
<PP&E> 5,546,399 6,043,349
<DEPRECIATION> 696,000 215,000
<TOTAL-ASSETS> 27,582,055 31,455,574
<CURRENT-LIABILITIES> 18,510,519 20,759,479
<BONDS> 0 0
0 0
0 0
<COMMON> 1,257,567 1,632,567
<OTHER-SE> 4,961,320 7,084,722
<TOTAL-LIABILITY-AND-EQUITY> 27,582,055 31,455,574
<SALES> 21,758,715 18,654,636
<TOTAL-REVENUES> 21,758,715 18,654,636
<CGS> 15,768,980 12,799,897
<TOTAL-COSTS> 15,768,980 12,799,897
<OTHER-EXPENSES> 104,487 66,249
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 891,458 201,360
<INCOME-PRETAX> 3,592,138 4,657,516
<INCOME-TAX> 1,329,000 1,810,000
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 3,466,635 0
<CHANGES> 0 0
<NET-INCOME> 2,263,138 2,847,516
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
