FRIEDE GOLDMAN INTERNATIONAL INC, S-1/A, 1997-06-30

FRIEDE GOLDMAN INTERNATIONAL INC
S-1/A, 1997-06-30
OIL & GAS FIELD MACHINERY & EQUIPMENT

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 30, 1997

REGISTRATION NO. 333-27599

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

AMENDMENT NO. 1

FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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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
ORGANIZATION)

525 E. CAPITOL STREET, SUITE 402
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)

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

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>
TITLE OF EACH CLASS OF SECURITIES PROPOSED MAXIMUM AMOUNT OF
TO BE REGISTERED AGGREGATE OFFERING PRICE REGISTRATION FEE
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<S> <C> <C>
Common Stock, $.01 par value......... 63,365,000 19,202(2)
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</TABLE>
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(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(a).

(2) The Company previously paid a fee of $18,540.

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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>

*******************************************************************************
* 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. *
*******************************************************************************

SUBJECT TO COMPLETION, DATED JUNE 30, 1997

PROSPECTUS

[FRIEDE GOLDMAN 3,800,000 SHARES
LOGO APPEARS
HERE] 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 $13.00 and $14.50 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.

<TABLE>
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- ------------------------------------------------------------------------------------
<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 $450,000.

(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

<PAGE>

[PICTURES OF DRILLING RIGS BEING CONVERTED AND RETROFITTED]

FRIEDE GOLDMAN INTERNATIONAL INC. CONVERTS, RETROFITS AND REPAIRS OFFSHORE
DRILLING RIGS AT ITS EXISTING SHIPYARD IN PASCAGOULA, MISSISSIPPI.

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. 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 $66.9 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.

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 a weighted average of $36,600 in May 1996 to a weighted average
of $61,100 in May 1997, with a recently reported high of $116,000. Similarly,
dayrates worldwide for third and fourth generations of semisubmersibles

3
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have increased from a weighted average of $83,500 in May 1996 to a weighted
average of $118,200 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 also developed a series of
FPSOs suitable for operations worldwide and is 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 four 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 be a leading participant in the
developing market for new offshore drilling rig and FPSO construction and to
enhance its position as a leader in the conversion, retrofit and repair of
offshore drilling rigs and production units. 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
$66.9 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. In particular,
the Company intends to pursue the construction of offshore drilling rigs
utilizing new Friede & Goldman designs, including its design for a JU 2000
jackup rig capable of drilling in water depths of approximately 400 feet.

5
<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
acquisitions, 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>
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(1) Excludes the shares subject to the Underwriters' over-allotment option as
well as options to purchase 89,410 shares which are currently outstanding
and options to purchase 295,500 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 4,577 942 2,522
------- ------- ------- ------- ------- ------- ------- -------
Operating income....... 2,556 1,886 3,625 2,494 120 2,293 (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 $ 3,592 $ 5,675 $ 3,183 $ 4,658
======= ======= ======= ======= ======= ======= ======= =======
UNAUDITED PRO FORMA
DATA:
Net income as reported
above.................. $ 2,378 $ 1,817 $ 4,110 $ 4,921 $ 3,592 $ 5,675 $ 3,183 $ 4,658
Pro forma provision for
income taxes(6)........ (880) (672) (1,521) (1,821) (1,329) (2,100) (1,178) (1,810)
------- ------- ------- ------- ------- ------- ------- -------
Pro forma net income... $ 1,498 $ 1,145 $ 2,589 $ 3,100 $ 2,263 $ 3,575 $ 2,005 $ 2,848
======= ======= ======= ======= ======= ======= ======= =======
Pro forma net income per
share(7)............... $ 0.23 $ 0.37 $ 0.30
Common and equivalent
shares outstanding..... 9,652 9,652 9,412
STATEMENT OF CASH FLOWS
DATA:
Cash provided by
operating activities... $ 2,542 $ 3,062 $ 3,094 $ 269 $ 4,875 $ 1,092 $ 5,352
Cash provided by (used
in) investing
activities............. (644) (1,143) 410 (2,410) (3,866) (2,228) (777)
Cash provided by (used
in) financing
activities............. (2,033) (1,704) (3,123) 2,581 (706) 879 (3,989)
OTHER FINANCIAL DATA:
Depreciation and
amortization........... $ 426 $ 339 $ 347 $ 425 $ 696 $ 896 $ 174 $ 215
Capital expenditures.... 144 1,167 1,150 2,670 2,357 2,502 1,596 1,358
EBITDA(8)............... 2,982 2,225 4,054 2,919 1,092 3,465 (230) 3,922
</TABLE>

7
<PAGE>

<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 $23,411
Net property, plant and equipment.................... 6,043 6,043
Total assets......................................... 31,456 47,194
Long-term debt....................................... 1,979 1,979
Stockholders' equity................................. 8,717 28,941
</TABLE>
- --------
(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 reduction of
compensation expense of approximately $1.9 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 (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. In June 1997, the stockholders of the
Company and the Predecessors made elections terminating the S Corporation
status of the Company and the Predecessors. As a result, the Company became
subject to corporate level income taxation following the termination of
such elections. 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.

8
<PAGE>

(7) Pro forma net income per share is based on the number of shares of Common
Stock to be outstanding immediately after the Reorganization (9,200,000) as
if such shares had been outstanding throughout each period presented, as
increased for each period to reflect sufficient additional shares required
to be sold for such period to pay the pro forma distribution payable to
stockholders in excess of historical net income for such period. The number
of such additional shares is based on the assumed initial public offering
price of $13.75 per share, net of offering expenses. 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 a measure of cash flow, operating
results or liquidity as determined by generally accepted accounting
principles. The Company has included information concerning EBITDA as
supplemental disclosure because management believes that EBITDA is commonly
accepted as providing useful information regarding a company's historical
ability to incur and service debt. Management of the Company believes that
factors which should be considered by investors in evaluating EBITDA
include, but are not limited to, trends in EBITDA as compared to cash flow
from operations, debt service requirements, and capital expenditures.
Management of the Company believes that the trends depicted by the
Company's historical EBITDA reflect historical fluctuations in the
Company's business and the recent increase in the level of the Company's
activities. EBITDA as defined and measured by the Company may not be
comparable to similarly titled measures of other companies. Further EBITDA
should not be considered in isolation or as an alternative to, or more
meaningful than, net income or cash flow provided by operations as
determined in accordance with generally accepted accounting principles as
an indicator of the Company's profitability or liquidity.

(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 of $4.5
million under the Company's revolving credit facility to fund a portion of
the cash 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 $13.75 per share resulting in net proceeds
of $29.0 million (after deducting the underwriting discount and expenses
of the Offering estimated at $2.7 million) and the application thereof as
described herein. See "Use of Proceeds."

9
<PAGE>

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>
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

Expansion of Existing Shipyard; Acquisition of Rig Design Business. 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. In addition, the Company has
increased its number of employees from approximately 300 employees at December
1, 1996 to approximately 800 employees at March 31, 1997. There can be no
assurance that the Company will effectively manage its additional capacity and
additional laborers. The Company has also recently acquired Friede & Goldman,
a company that designs offshore drilling rigs and floating production units.
As the rig design business is a new activity for the Company, the Company will
be dependent upon retaining the employees of the predecessor to Friede &
Goldman who have become employees of Friede & Goldman, as well as additional
managers hired by the Company, to manage this business effectively.

New Shipyard. The Company has recently entered into a memorandum of
understanding with Jackson County, Mississippi to construct a new shipyard on
85 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. 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.

Additional Expansion Possibilities. The Company is exploring opportunities
for establishing 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,

11
<PAGE>

as kits that could be used in the construction of new-build jackups. In
addition, the Company is considering various opportunities to acquire, or 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. The Company has not determined that it will proceed with the
establishment of a jackup component manufacturing operation nor has it
determined to make any acquisition, or enter into any joint venture or
subcontracting arrangement to obtain additional fabrication and repair
capabilities. As a result, there can be no assurance that the Company will
establish such an operation or obtain such additional capabilities.

Risks Related to Managing Growth. 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.

RISKS OF INADEQUATE INSURANCE

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

12
<PAGE>

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 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. For 1996, the Company derived more than 10% of
its revenue from each of Diamond Offshore Drilling, Inc., Hercules Offshore
Corporation, Noble Drilling Corporation and Sedco Forex S.A. 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 82% 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."

13
<PAGE>

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 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 a maximum payment of $1 million per year), 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 64.6% of the outstanding shares of Common
Stock (61.5% 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 beneficially 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."

14
<PAGE>

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" 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 384,910 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 $11.34
per share (assuming an initial public offering price of $13.75 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

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 85-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. In June 1997, the stockholders of
each of the Predecessors made an election to terminate the S Corporation
status of such Predecessors. Accordingly, each of the Predecessors became
subject to corporate level income taxation following the termination of such
elections 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 $5.9 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, (i) cash of
approximately $0.7 million received by such Predecessor in June 1997 in
settlement of claims for unpaid amounts related to a project completed prior
to 1997 and (ii) marketable securities having a fair market value of
approximately $4.8 million as of March 31, 1997. In connection with the
distribution of marketable securities, 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.

17
<PAGE>

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 $29.0
million (approximately $36.3 million if the Underwriters' over-allotment
option is exercised in full), based on an assumed initial public offering
price of $13.75 per share.

The Company currently intends to utilize the net proceeds to be received by
it from 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 is currently exploring opportunities for acquiring additional
shipyard capacity, either in the United States, Canada or Mexico, at which the
Company could construct and assemble new-build jackup rig components, such as
the rack chock system and the jacking components. Although the Company is
investigating several opportunities to acquire additional shipyard capacity
for this purpose, it does not have any agreements or understandings with
respect to any acquisition, and there can be no assurances that the Company
will be successful in acquiring such additional capacity on terms satisfactory
to the Company.

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. As an
additional source of borrowing capacity, the Company has received a commitment
letter from the United States Maritime Administration ("MARAD") specifying
that, subject to the completion of documentation and the satisfaction of
certain other conditions, MARAD would provide its guarantee, supported by the
full faith and credit of the United States, for up to $24.8 million of bonds
to be issued by the Company. The proceeds from the sale of any MARAD-
guaranteed bonds may be used only for capital expenditures relating to the
costs of constructing and equipping the Company's new shipyard. The terms of
the MARAD financing 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 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 the Company will sell any MARAD- guaranteed bonds. 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
$7.1 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.

18
<PAGE>

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."

19
<PAGE>

CAPITALIZATION

The following table sets forth as of March 31, 1997 (i) the historical
capitalization of the Predecessors, (ii) the capitalization of the Company on
a pro forma basis prior to the Offering giving effect to (a) the distribution
of cash during April and May 1997 to the stockholders of one of the
Predecessors of approximately $1.4 million, primarily to provide the
stockholders with cash to meet income tax obligations for income of the
Predecessor prior to 1997, (b) cash distributions expected to be made in July
1997, using borrowings under the Company's existing credit facilities, of
approximately $4.5 million to provide the stockholders of one of the
Predecessors with cash to meet income tax obligations for income of the
Company from January 1, 1997 through June 15, 1997, the date of the
termination of the Predecessors' status as S Corporations, (c) distributions
of marketable securities with a fair value of approximately $4.8 million,
together with related margin account debt of approximately $2.7 million, and
(d) the transfer of the balance in retained earnings (deficit) at the date of
the S Corporation termination of $(0.9) million to additional paid in capital,
and (iii) the capitalization of the Company on a pro forma basis after the
Offering giving effect to (a) the pro forma adjustments prior to the Offering
described in clause (ii) above, (b) 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 (c) 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
PRO FORMA AS ADJUSTED
PRIOR TO AFTER
ACTUAL OFFERING OFFERING
------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents(1)................. $ 3,203 $1,822 $23,722
======= ====== =======

Short-term debt and current maturities of
long-term debt(2)........................... $ 7,506 $9,321 $ 2,221
------- ------ -------
Long-term debt, less current maturities...... $ 1,979 $1,979 $ 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
after Offering(3)......................... 5 5 115
Additional paid-in capital................... 1,628 736 28,826
Retained earnings............................ 6,180 -- --
Unrealized gain on marketable securities..... 905 -- --
------- ------ -------
Total stockholders' equity................. 8,717 741 28,941
------- ------ -------
Total capitalization..................... $10,696 $2,720 30,920
======= ====== =======
</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 89,410 shares which are
currently outstanding and options to purchase 295,500 shares which are
expected to be granted upon consummation of this Offering.

20
<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 $13.75 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 $27.7
million or $2.41 per share, representing an immediate increase in net tangible
book value of $1.59 per share to existing stockholders and an immediate
dilution of $11.34 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................... $13.75
Net tangible book value per share at March 31, 1997............. $0.82
Increase per share attributable to sale of Common Stock in the
Offering....................................................... 1.59
-----
Pro forma net tangible book value per share after giving effect to
the Offering..................................................... 2.41
------
Dilution in net tangible book value per share to New Investors.... $11.34
======
</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, assuming a public offering
price of $13.75 per share:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------ ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing
stockholders(1)(2)....... 9,200,000 80.0% $ 1,632,567 4.9% $ 0.18
New Investors............. 2,300,000 20.0 31,625,000 95.1 13.75
---------- ----- ----------- -----
Total................... 11,500,000 100.0% $33,257,567 100.0%
========== ===== =========== =====
</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 an aggregate of 384,910 shares of Common Stock to be held by
employees, officers and directors of the Company upon the closing of the
Offering. See "Management--Equity Incentive Plan."

21
<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 4,577 942 2,522
------- ------- ------- ------- ------- ------- ------- -------
Operating income........ 2,556 1,886 3,625 2,494 120 2,293 (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 $ 3,592 $ 5,675 $ 3,183 $ 4,658
======= ======= ======= ======= ======= ======= ======= =======
UNAUDITED PRO FORMA DATA:
Net income as reported
above................... $ 2,378 $ 1,817 $ 4,110 $ 4,921 $ 3,592 $ 5,675 $ 3,183 $ 4,658
Pro forma provision for
income taxes(6)......... (880) (672) (1,521) (1,821) (1,329) (2,100) (1,178) (1,810)
------- ------- ------- ------- ------- ------- ------- -------
Pro forma net income.... $ 1,498 $ 1,145 $ 2,589 $ 3,100 $ 2,263 $ 3,575 $ 2,005 $ 2,848
======= ======= ======= ======= ======= ======= ======= =======
Pro forma net income per
share(7)................ $ 0.23 $ 0.37 $ 0.30
Common and equivalent
shares outstanding...... 9,652 9,652 9,412
STATEMENT OF CASH FLOWS
DATA:
Cash provided by
operating activities.... $ 2,542 $ 3,062 $ 3,094 $ 269 $ 4,875 $ 1,092 $ 5,352
Cash provided by (used
in) investing
activities.............. (644) (1,143) 410 (2,410) (3,866) (2,228) (777)
Cash provided by (used
in) financing
activities.............. (2,033) (1,704) (3,123) 2,581 (706) 879 (3,989)
OTHER FINANCIAL DATA:
Depreciation and
amortization............ $ 426 $ 339 $ 347 $ 425 $ 696 $ 896 $ 174 $ 215
Capital expenditures..... 144 1,167 1,150 2,670 2,357 2,502 1,596 1,358
EBITDA(8)................ 2,982 2,225 4,054 2,919 1,092 3,465 (230) 3,922
</TABLE>

22
<PAGE>

<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>
Working capital......... $ 653 $ 88 $2,370 $ 2,714 $ 1,104 $ 2,387 $23,411
Net property, plant and
equipment.............. 3,337 2,952 3,582 4,079 5,546 6,043 6,043
Total assets............ 6,921 7,069 8,584 14,980 27,582 31,456 47,194
Long-term debt.......... 3,589 3,252 3,217 3,270 2,853 1,979 1,979
Stockholders' equity.... 2,622 1,980 2,681 5,255 6,219 8,717 28,941
</TABLE>
- --------
(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 reduction of
compensation expense of approximately $1.9 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 (iii) the Reorganization. SeeNote 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.

(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. In June 1997, the stockholders of the
Company and the Predecessors made elections terminating the S Corporation
status of the Company and the Predecessors. As a result, the Company
became subject to corporate level income taxation following the
termination of such elections. 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 based on the number of shares
of Common Stock to be outstanding immediately after the Reorganization
(9,200,000) as if such shares had been outstanding throughout each period
presented, as increased for each period to reflect sufficient additional
shares required to be sold for such period to pay the pro forma
distribution payable to stockholders in excess of historical

23
<PAGE>

net income for such period. The number of such additional shares is based
on the assumed initial public offering price of $13.75 per share, net of
offering expenses. 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 a measure of cash flow, operating
results or liquidity as determined by generally accepted accounting
principles. The Company has included information concerning EBITDA as
supplemental disclosure because management believes that EBITDA is commonly
accepted as providing useful information regarding a company's historical
ability to incur and service debt. Management of the Company believes that
factors which should be considered by investors in evaluating EBITDA
include, but are not limited to, trends in EBITDA as compared to cash flow
from operations, debt service requirements, and capital expenditures.
Management of the Company believes that the trends depicted by the
Company's historical EBITDA reflect historical fluctuations in the
Company's business and the recent increase in the level of the Company's
activities. EBITDA as defined and measured by the Company may not be
comparable to similarly titled measures of other companies. Further EBITDA
should not be considered in isolation or as an alternative to, or more
meaningful than, net income or cash flow provided by operations as
determined in accordance with generally accepted accounting principles as
an indicator of the Company's profitability or liquidity.

(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 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 of $4.5
million under the Company's revolving credit facility to fund a portion of
the cash 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."

24
<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 $66.9 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 addition of such facilities and capacity and the related increase
in workforce will cause a significant increase in the Company's costs due to
increased labor, lease rental and depreciation and amortization expenses.
Selling, general and administrative expenses and interest expense are also
expected to increase as a result of these business growth activities.
Management expects the increases in such costs will directly correlate to
anticipated increases in revenue from increased construction, conversion,
retrofit and repair activity. If such activity does not increase to the extent
management anticipates, the Company's gross profits, operating income and net
income could be adversely impacted by such increased costs.

For the last several years, substantially all of the Company's work force
was leased to the Company by employee leasing companies serving the Company
exclusively. All employee leasing arrangements were 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. Management of the Company believes that the costs
of directly employing its laborers will be essentially the same as the
historic

25
<PAGE>

cost of the employee leasing arrangement most recently terminated. In
connection with the termination of employee leasing arrangements, the Company
restructured its workmen's compensation insurance arrangements and utilizes a
different carrier from that used by the employee leasing companies. Management
of the Company believes that the change in workmen's compensation insurance
arrangements and carriers will not result in costs which are significantly
different than those which would have been incurred under the previous
arrangements.

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 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.

26
<PAGE>

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.

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

27
<PAGE>

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, 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 16.9%, 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

28
<PAGE>

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.

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
$2.3 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.

29
<PAGE>

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 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 received a
commitment letter from MARAD specifying that, subject to the completion of
documentation and the satisfaction of certain other conditions, MARAD would
provide its guarantee, supported by the full faith and credit of the United
States, for up to $24.8 million of bonds to be issued by the Company. The
proceeds from the sale of any MARAD-guaranteed bonds may be used only for
capital expenditures relating to the costs of constructing and equipping the
Company's new shipyard. 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 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 the
Company will sell any MARAD-guaranteed bonds.

30
<PAGE>

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.

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.

31
<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. The Company, through its subsidiary HAM Marine, has been continuously
engaged in the business of converting, retrofitting and repairing offshore
drilling rigs since 1982. In the last seven years, the Company has completed
47 offshore drilling rig conversion or retrofit projects. The Company, through
its acquisition of Friede & Goldman in December 1996, is one of the world's
largest designers of offshore drilling rigs. Friede & Goldman and its
predecessors have been continuously engaged in the business of offshore rig
design for more than 50 years. 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 $66.9 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 85-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 a
weighted average of $36,600 in May 1996 to a weighted average of $61,100 in
May 1997, with a recently reported high of $116,000. Similarly, dayrates
worldwide for third and fourth generations of semisubmersibles have increased
from a weighted average of $83,500 in May 1996 to a weighted average of
$118,200 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

32
<PAGE>

many oil and gas companies, (iii) the increases in capital expenditure budgets
for offshore drilling activity by oil 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(1)

Noble Drilling Jackup Leonard Jones Convert slot jackup to
Corporation cantilevered jackup(1)

Sedco Forex S.A. Semisubmersible Bill Shoemaker Retrofit semisubmersible
for deepwater capabilities(1)

Noble Drilling Semisubmersible Paul Romano Convert submersible to
Corporation semisubmersible with
deepwater capabilities(1)

Marine Drilling Jackup Marine 15 Replace hull and quarters
Companies, Inc. damaged by fire(2)

Diamond Offshore Semisubmersible Saratoga Perform U.S. Coast Guard
Drilling, Inc. mandated 5-year inspection(2)

Reading & Bates Semisubmersible M. G. Hulme, Jr. Drill floor upgrade(1)
Corporation

Global Industries, Ltd. Crane barge Hercules Structural upgrade(1)
</TABLE>
- --------

(1) Projects currently in progress.

(2) Projects recently completed.

33
<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.

[PICTURE OF FRIEDE & GOLDMAN DESIGN PACESETTER -
CLASS SEMISUBMERSIBLE 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,

34
<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.

[PICTURE OF FRIEDE & GOLDMAN DESIGN L-780 JACKUP 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.

[PICTURE OF FRIEDE & GOLDMAN DESIGN DRILLSHIP APPEARS HERE]

FRIEDE & GOLDMAN DESIGN DRILLSHIP

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<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.

[PICTURE OF FRIEDE & GOLDMAN DESIGN FPSO 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.

36
<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.

37
<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

38
<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 85 acres located approximately six miles from the
Company's existing shipyard. The new shipyard will have approximately 35 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 1,100 feet of reinforced bulkhead dockspace and an
additional 1,950 feet of dockspace that could be developed in the future.
Improvements planned to be constructed on the site include an assembly area
covering in excess of 100,000 square feet, a 60,000 square foot fabrication
building, a 15,000 square foot machinery building, a 10,000 square foot office
building, a 10,000 square foot pipe shop and a 20,000 square foot warehouse.
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

39
<PAGE>

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 to be paid in any year with respect to 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.

40
<PAGE>

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%

41
<PAGE>

and 87%, of revenue for 1994, 1995 and 1996, respectively. For 1996, the
Company derived more than 10% of its revenue from each of Diamond Offshore
Drilling, Inc., Hercules Offshore Corporation, Noble Drilling Corporation and
Sedco Forex S.A. 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. The Company believes that recently
it has realized a majority of its revenue under fixed-price contracts,
although historically the percentages of revenue it has derived from fixed-
price contracts and cost-plus contracts have fluctuated significantly from
project to project and from period to period based on the nature of the
projects involved, the type of pricing arrangements preferred by its
customers, the timing of the commencement of work on a project in relation to
the timing of the completion of the negotiation and contracting process, and
other factors.

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.

42
<PAGE>

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 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 $66.9 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 $66.9 million of backlog as of March 31, 1997, approximately 82% was
attributable to three projects.

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,

43
<PAGE>

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

44
<PAGE>

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 $8.7 million and
$16.2 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

45
<PAGE>

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.

46
<PAGE>

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The Company's Board of Directors currently has eight directors. In
accordance with the Charter of the Company, the members of the Board of
Directors are divided into three classes and are elected for a term of office
or until a successor is duly elected and qualified. The Charter also provides
that such classes shall be as nearly equal in number as possible. The terms of
office of the Class I, Class II and Class III directors expire at the annual
meeting of stockholders to be held in 1998, 1999 and 2000, respectively. All
officers serve at the discretion of the Board of Directors, subject to terms
of their employment agreements, if applicable. See "--Employment Agreements."

The following table sets forth information concerning the Company's
directors and executive officers:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
J. L. Holloway........................ 53 Chairman of the Board, Chief
Executive Officer and
President of the Company(1)
Carl M. Crawford...................... 53 Executive Vice President of
the Company
Ronald W. Schnoor..................... 43 President of HAM Marine and
Director of the Company(1)
James A. Lowe, III.................... 39 General Counsel, Secretary and
Director of the Company(2)
John F. Alford........................ 37 Senior Vice President, Chief
Financial Officer and
Director of the Company(2)
Bruce Malcolm......................... 49 President of Friede & Goldman
and Director of the
Company(3)
Jerome L. Goldman(4).................. 72 Director of the Company(2)
Raymond E. Mabus, Jr.(4)(5)........... 48 Director of the Company(3)
Howell W. Todd(5)..................... 53 Director of the Company(1)
</TABLE>
- --------

(1) Class III Director.

(2) Class II Director.

(3) Class I Director.

(4) Member of audit committee.

(5) Member of compensation committee.

Set forth below are descriptions of the backgrounds of the executive
officers and directors of the Company and their principal occupations for the
past five years.

J. L. Holloway has served as the Chairman of the Board, Chief Executive
Officer and President of the Company since April 1997. In addition, Mr.
Holloway has served as the Chairman of the Board, Chief Executive Officer and
President of HAM Marine from its formation in 1982 until April 1997, and from
April 1997 Mr. Holloway has been the Chairman of the Board of HAM Marine. 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

47
<PAGE>

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.

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.

Jerome L. Goldman is currently the Chairman and sole owner of J. L. Goldman
Associates, Inc., naval architects and marine engineers. Mr. Goldman
previously served as Chairman of Friede & Goldman, Ltd. since co-founding the
company in 1949.

Raymond E. Mabus, Jr. has served as Of Counsel to the law firm of Baker,
Donelson, Bearman & Caldwell since October 1996. From July 1994 through May
1996, Mr. Mabus served as Ambassador to the Kingdom of Saudi Arabia. From
February 1992 through June 1994, Mr. Mabus served as Chairman of the Committee
on the Future of the South and as a consultant in the private sector. From
January 1988 through January 1992, Mr. Mabus served as Governor of the State
of Mississippi.

Howell W. Todd has served as President of Mississippi College since 1994.
Dr. Todd previously served as Executive Director and Chief Executive Officer
of the South Dakota Board of Regents, the governing board for the public
higher education system in the state of South Dakota. Dr. Todd holds a Ph.D.
from the University of Illinois.

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. Goldman and Mabus
will serve as members of the Company's Audit Committee, and Messrs. Mabus and
Todd will serve as members of the Company's Compensation Committee.

DIRECTOR COMPENSATION

Following completion of the Offering, each nonemployee director will receive
a fee of $1,000 for attendance at each Board of Directors meeting and $250 for
each committee meeting, as well as stock options to purchase 1,000 shares of
Common Stock annually, and each employee director of the Company will receive
$200 for attendance at each Board of Directors meeting and each committee
meeting. 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.

48
<PAGE>

EXECUTIVE COMPENSATION

The following table sets forth for 1996 the 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, $350,000; Mr.
Crawford, $150,000; Mr. Schnoor, $138,000; Mr. Lowe, $120,000; and Mr. Alford,
$100,000.

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 a period of 30 days.
In addition, the employment agreements restrict these individuals from
competing with the Company for a period of 30 days from the date of
termination.

HAM Marine has entered into an employment agreement with Mr. Lowe effective
January 1, 1997, which agreement is terminable by HAM Marine at any time. In
the event the agreement is terminated by HAM Marine 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.

49
<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 the date of
this Prospectus, options to purchase an aggregate of 384,910 shares of Common
Stock have been granted under the Equity Incentive Plan, of which options to
purchase an aggregate of 295,500 shares will have an exercise price equal to
the initial public offering price for shares of Common Stock sold in this
Offering, and options to purchase 89,410 shares have a weighted average
exercise price of $1.60 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 Messrs.
Holloway, Crawford and Schnoor were approximately $139,000 in the aggregate.
During 1996, Mr. Holloway made payments to the Company of $209,013 on amounts
previously advanced.

50
<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 unrelated party 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 Messrs. Holloway, Crawford and Schnoor,
which property, and related liability, was contributed by such stockholders
into a newly formed company owned by Messrs. Holloway, Crawford and Schnoor.
Subsequent to such distribution, the Company chartered the airplane from such
company on a "when needed" basis at fair market charter rates through June
1997.

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 from a bank to Mr. Holloway to finance a portion of the purchase price of
certain assets of Friede Predecessor, which loan proceeds were, in turn,
loaned by Mr. Holloway to Friede & Goldman. Friede & Goldman recorded a $1.4
million payable to Mr. Holloway in recognition of the loan. On March 31, 1997,
the Company transferred the pledged marketable securities to Mr. Holloway in
payment of the obligation.

In July 1997, the Company purchased a crane from a company owned by Messrs.
Holloway, Crawford and Schnoor. 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.

In July 1997, the Company entered into an agreement with a company owned by
Mr. Holloway, Mr. Crawford and Mr. Schnoor pursuant to which the Company
agreed to lease an airplane from such company for a monthly payment of $50,000
per month. In addition, the Company agreed to maintain the airplane in good
working condition, to pay all operating expenses related to the airplane and
to maintain insurance on the airplane. The agreement has a term of one year
and renews automatically on an annual basis unless terminated by either party
upon 30 days' written notice to the other party. The Company believes that the
terms of such agreement are no less favorable than the Company could have
received from an unrelated party.

51
<PAGE>

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth information with respect to the 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 more than 5% thereof, (ii) each director, (iii) each executive officer,
(iv) all executive 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(2)................ 7,362,979 80.0% 1,215,750 6,147,229 53.5%
Carl M. Crawford................. 1,085,835 11.8% 224,400 861,435 7.5%
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 *
Bruce G. Malcolm................. -- -- -- -- --
Jerome L. Goldman................ -- -- -- -- --
Raymond E. Mabus, Jr............. -- -- -- -- --
Howell W. Todd................... -- -- -- -- --
All executive officers and
directors as a group (9
persons)........................ 8,926,525 97.0% 1,500,000 7,426,525 64.6%
</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."

(2) Includes 1,920,500 shares of Common Stock owned by a limited partnership
of which Mr. Holloway is a general partner.

52
<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 directors of the Company will hold approximately 64.6% of
the issued and outstanding Common Stock (61.5% if 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 American Stock Transfer and Trust Company.

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 number 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.

53
<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.

54
<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 BYLAWS. 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 a corporation's board of
directors to adopt certain anti-takeover measures in response to proposals to
acquire the corporation, its assets or its outstanding capital stock. Measures
to be adopted could include a stockholder rights plan or bylaw provisions
requiring supermajority stockholder 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 a
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.

55
<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 stockholders 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.

56
<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. Options to
purchase an aggregate of 384,910 shares of Common Stock have been granted as
of the date of this Prospectus to employees, 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 7,426,525 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.

57
<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

58
<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.

59
<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-21
Statement of Income For the Eleven Months Ended November 30, 1996....... F-22
Notes to Statement of Income............................................ F-23
Financial Statements of Friede Goldman International Inc.:
Report of Independent Public Accountants................................ F-25
Balance Sheet as of April 21, 1997...................................... F-26
Notes to Balance Sheet.................................................. F-27
Pro Forma Statement of Operations (unaudited):
Pro Forma Statement of Operations For the Year Ended December 31, 1996.. F-29
Notes to Pro Forma Statement of Operations.............................. F-30
</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, PRO FORMA
------------------------ MARCH 31, MARCH 31,
1995 1996 1997 1997
----------- ----------- ----------- -----------
ASSETS
------ (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents... $ 1,207,206 $ 1,509,876 $ 2,095,555 $ 715,081
Restricted certificates of
deposit.................... 4,456,267 4,651,964 1,107,030 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 11,726,569
Inventory and stockpiled
materials.................. -- 577,904 753,181 753,181
Investment in sales-type
lease, current portion..... 381,352 457,710 394,249 394,249
Costs and estimated earnings
in excess of billings on
uncompleted contracts...... -- 284,052 1,101,142 1,101,142
Prepaid expenses............ 49,346 644,482 1,187,452 1,187,452
----------- ----------- ----------- -----------
Total current assets...... 9,169,229 19,614,330 23,146,128 16,984,704
Property, plant and equipment,
net of accumulated
depreciation................. 4,078,961 5,546,399 6,043,349 6,043,349
Investment in sales-type
lease, less current portion.. 1,628,915 1,171,205 1,049,477 1,049,477
Intangibles and other assets.. 103,182 1,250,121 1,216,620 1,216,620
----------- ----------- ----------- -----------
Total assets.............. $14,980,287 $27,582,055 $31,455,574 $25,294,150
=========== =========== =========== ===========
<CAPTION>
LIABILITIES AND STOCKHOLDERS'
EQUITY
-----------------------------
<S> <C> <C> <C> <C>
Current liabilities:
Short-term debt, including
current portion of long-
term debt.................. $ 5,752,603 $10,235,349 $ 7,506,482 $ 9,321,165
Advance from stockholder.... -- 1,400,000 -- --
Accounts payable, trade..... 396,314 3,075,216 5,794,552 5,794,552
Accrued expenses............ 305,949 537,786 590,215 590,215
Billings in excess of costs
and estimated earnings on
uncompleted contracts...... -- 3,262,168 6,868,230 6,868,230
----------- ----------- ----------- -----------
Total current liabilities. 6,454,866 18,510,519 20,759,479 22,574,162
Long-term debt, less current
maturities................... 3,270,173 2,852,649 1,978,806 1,978,806
----------- ----------- ----------- -----------
Total liabilities......... 9,725,039 21,363,168 22,738,285 24,552,968
----------- ----------- ----------- -----------
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 5,013
Additional paid-in capital.. 876,554 1,252,554 1,627,554 736,169
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 8,717,289 741,182
----------- ----------- ----------- -----------
Total liabilities and
stockholders' equity..... $14,980,287 $27,582,055 $31,455,574 $25,294,150
=========== =========== =========== ===========
</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................ $ 4,109,729 $ 4,920,906 $ 3,592,138 $3,183,393 $ 4,657,516
Pro forma provision
for income taxes
related to operations
as S Corporation..... 1,521,000 1,821,000 1,329,000 1,178,000 1,810,000
----------- ----------- ----------- ---------- -----------
Pro forma net income.. $ 2,588,729 $ 3,099,906 $ 2,263,138 $2,005,393 $ 2,847,516
=========== =========== =========== ========== ===========
Unaudited pro forma per
share data (Note 1):
Weighted average
shares outstanding... 9,651,932 9,411,625
=========== ===========
Pro forma net income
per share............ $ 0.23 $ 0.30
=========== ===========
</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 1,766,914
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 $ 4,657,516
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. 82,187 -- 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................ (8,455) (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 2,908,805
----------- ----------- ----------- ----------- -----------
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) (1,357,942)
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) (777,232)
----------- ----------- ----------- ----------- -----------
</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 $(2,227,960)
Proceeds from
borrowings under debt
facilities........... 943,741 6,188,196 1,736,109 588,978 290,212
Repayments on
borrowings under debt
facilities........... (713,598) (5,304,775) (1,492,917) -- (1,664,962)
Distributions to
shareholders......... (3,258,877) (2,226,137) (4,771,413) (851,276) (386,602)
---------- ---------- ---------- ---------- -----------
Net cash provided by
(used in) financing
activities............. (3,122,546) 2,581,343 (706,191) 879,228 (3,989,312)
---------- ---------- ---------- ---------- -----------
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 stockholders...... $ -- $ -- $ -- $ -- $ 1,641,000
========== ========== ========== ========== ===========
Assumption of note
payable by
stockholder.......... $ -- $ -- $ -- $ -- $ 198,000
========== ========== ========== ========== ===========
Distribution of
marketable securities
to stockholder to
satisfy note payable. $ -- $ -- $ -- $ -- $ 1,400,000
========== ========== ========== ========== ===========
</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 (the "Market Share Payment"). 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. The payments
to Mr. Goldman by the Company attributable to license and design fees or sales
will be charged to costs of revenue in connection with the related contracts.
Any amounts paid by the Company to Mr. Goldman attributable to the Market
Share Payment will be charged to expense in the period in which it becomes
known that such a payment will be required.

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)

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.

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"). Because HAM and Friede & Goldman are owned in substantially
identical proportions, the number of shares of common stock of the Company
received by each of the stockholders of HAM and Freide & Goldman in the
Reorganization will be determined based on each stockholder's percentage of
ownership of HAM shares. The Reorganization will be accounted for as a
reorganization of entities under common control. Accordingly, 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.

Unaudited Pro Forma March 31, 1997 Balance Sheet Data

Between March 31 and June 30, 1997, one of the Predecessors made cash
distributions to its stockholders of approximately $1.4 million, primarily to
provide the stockholders with cash to meet income tax obligations on earnings
of such Predecessor prior to 1997. In addition, in contemplation of the
proposed initial public offering, one of the Predecessors plans to distribute
to its stockholders marketable securities with a fair value of approximately
$4.8 million, together with related margin account debt of approximately $2.7
million (See Notes 3 and 6). Further, one of the Predecessors plans to
distribute approximately $4.5 million to its stockholders representing the
stockholders' estimated income tax obligations on the earnings of the
Predecessor during 1997 through the date of termination of its S Corporation
status. The $4.5 million distribution is expected to be funded through
borrowings under the Company's existing revolving credit facility (See Note
6). Such borrowings are expected to be repaid with a portion of the proceeds
from the initial public offering. The unaudited pro forma balance sheet data
as of March 31, 1997, reflect the impact on cash, marketable securities, short
term debt and stockholders' equity of the distributions discussed above as if
they had occurred as of that date, excluding, however, the anticipated
proceeds from the initial public offering. The unaudited pro forma balance
sheet data should not be considered indicative of actual balance sheet data
subsequent to such distributions.

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)

Unaudited 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 includes 9,200,000 shares for all periods presented. As discussed
above, one of the Predecessors has made or expects to make significant
distributions to its stockholders in contemplation of and in connection with
the proposed initial public offering. Such distributions exceed the earnings
of the Predecessor for the year ended December 31, 1996, and the twelve months
ended March 31, 1997. Accordingly, for purposes of the calculation of pro
forma earnings per share for the year ended December 31, 1996 and the three
months ended March 31, 1997, the weighted average number of shares outstanding
has been increased by the number of shares of common stock whose proceeds from
the initial public offering would be necessary to pay the amount by which such
distributions exceed earnings for the prior twelve month period. Because a
portion of the expected distributions represents amounts attributable to
operating results subsequent to March 31, 1997, pro forma earnings per share
should not be considered indicative of actual earnings per share.

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.

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).

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)

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.

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 (76,800 shares calculated on the pro forma share basis described in Note
1). As a result, HAM charged to selling, general and administrative expense in
1996 $276,000 representing the

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)

estimated fair value as of the date of the agreement of the shares to be
issued. In February 1997, HAM granted another employee fully vested shares of
common stock of HAM equal to approximately 0.418% of the common shares then
outstanding (38,410 shares calculated on the pro forma share basis described
in Note 1), and granted that employee options to purchase an equal amount of
additional shares at $2.39 per share (on the pro forma share basis described
in Note 1) that vest ratably on January 1, 1999, 2000 and 2001, subject to
forfeiture if the employee terminates employment. The options granted expire
if unexercised by December 31, 2006. 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 over the three-year vesting period
approximately $300,000 of compensation expense related to the options to
purchase additional shares. The deferred compensation to be recognized by the
Company related to options granted is based on the estimated initial public
offering price of the Company's common stock less the exercise price of the
options.

All of the shares issued to employees in connection with the agreements
described above will be exchanged for shares of the Company in connection with
the Reorganization. In addition, any options to purchase shares of HAM
outstanding at the time of the Reorganization will be exchanged for options to
purchase shares of the Company, with the number of shares and option price
being changed based on the share exchange ratio used in the Reorganization.

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" ("SFAS No. 123"). 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. The
Company's adoption of this statement does not materially impact the
disclosures that have been made for stock-based compensation granted through
March 31, 1997. For options that may subsequently be granted at the Company's
discretion, the impact of adoption of this statement will be limited to
additional footnote disclosure.

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)

In February 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.

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 $3,876,339, 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>

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)

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 $173,903 and $215,080,
respectively.

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, 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

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)
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.

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. No gain or loss was
recognized in connection with the purchase of the leased assets.

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, the
present value of future lease payments of $2,328,000 was 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. Such gain represented the amount by which the present value of
future lease payments

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)

under the sales type lease exceeded the Company's carrying value of the leased
assets. The unearned discount attributable to future lease payment is being
recognized as interest income over the remaining term of the lease on the
interest method.

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.

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.

In connection with the termination of contract labor arrangements, the
Company restructured its workmen's compensation insurance arrangements and
utilizes a different carrier from that used by the contract labor company. The
insurer who provided workmen's compensation coverage to the employment
contractor has asserted that rates higher than those charged during part of
1995, all of 1996 and through the date of termination of the contract labor
arrangement were more appropriate and has submitted billings to the labor
contractor totaling approximately $630,000. The labor contractor believes the
original rates charged by the insurer were appropriate and is vigorously
disputing the additional billings. No billings have been submitted to the
Company or claims asserted against the Company by the labor contractor or the
insurer. However, it is reasonably possible that the insurer may assert a
claim against the Company. Management of the Company is unable to assess
whether such a claim will be asserted. Management of the Company believes that
the Company has no obligation to the insurer, and that the outcome of this
matter will not have a material impact on the Company's financial position or
results of operations.

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

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)

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. During the year ended December 31,
1995, the most significant customer had a single contract with the Company
which represented 52% of contract revenue, with revenues derived from the next
largest customer representing 3% of contract revenue. During the year
endedDecember 31, 1994, the most significant customer had a single contract
with the Company which represented 16% of contract revenue, with revenues from
the next largest customer representing 7% of contract revenue.

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.

The Board of Directors of the Company 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 and recipients of any such
bonuses following a determination of EBITDA for 1997. The Company has recorded
accrued bonuses through March 31, 1997 based on management's estimate of
bonuses through that date. The actual amount of bonuses, if any, paid by the
Company attributable to earnings through March 31, 1997 may differ from the
estimated amount accrued.

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.

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)

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 a minimum annual payment under the
arrangement of $1.2 million.

Future minimum lease payments from all of the above arrangements are as
follows:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 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.

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>

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)

Modular Fabricators, Inc.

Some of the stockholders 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 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.

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 stockholder
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
$302,000, along with related debt of $198,000, an airplane with an estimated
market value of $566,000 and a carrying value of approximately $486,000. 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,

F-19
<PAGE>

THE PREDECESSORS TO
FRIEDE GOLDMAN INTERNATIONAL INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(DATA WITH RESPECT TO MARCH 31, 1996 AND 1997 ARE UNAUDITED)

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 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 received a commitment letter from the United States Maritime
Administration for Title XI debt financing which, if fully utilized by the
Company, would provide up to $24.8 million of the funds needed for completion
of the new shipyard. Specific terms of any such Title XI 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-20
<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 provides 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-21
<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-22
<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.

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-23
<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-24
<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-25
<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-26
<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.

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-27
<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, and (3) 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, included
elsewhere in the Prospectus.

F-28
<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
(1,937,397)(2)
Selling, general and
administrative expenses. 5,869,371 519,647 125,000 (3) 4,576,621
----------- ---------- ----------- -----------
Operating income....... 120,364 601,004 1,572,397 2,293,765
----------- ---------- ----------- -----------
Other income (expense):
Interest expense....... (891,458) -- (106,000)(4) (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 1,466,397 5,675,615
Income tax expense....... -- -- 2,100,000 (5) 2,100,000
----------- ---------- ----------- -----------
Pro forma net income..... $ 3,592,138 $ 617,080 $ (633,603) $ 3,575,615
=========== ========== =========== ===========
Pro forma net income per
share(6)................ $ 0.37
===========
</TABLE>

The accompanying notes are an integral part of this pro forma financial
statement.

F-29
<PAGE>

FRIEDE GOLDMAN INTERNATIONAL INC.

NOTES TO PRO FORMA STATEMENT 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 difference in compensation
expense was 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. 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) Reflects amortization of the intangible assets which resulted from
the Friede Acquisition using an amortization period of 10 years.

(4) Reflects interest expense at 8.25% on the $1,400,000 advance from
stockholder which was utilized to finance a portion of the purchase price
as if the advance had been made on January 1, 1996.

(5) 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.

(6) Pro forma net income per share is based on the number of shares of
common stock of the Company outstanding after the reorganization
(9,200,000) discussed elsewhere in this Prospectus, as increased for each
period to reflect sufficient additional shares required to be sold for such
period to pay the pro forma distribution payable to stockholders in excess
of historical net income for such period. The number of such additional
shares is based on an assumed initial public offering price of $13.75 per
share, net of offering expenses.

F-30
<PAGE>

NIGHT VIEW OF THE FRIEDE GOLDMAN INTERNATIONAL INC. SHIPYARD IN PASCAGOULA,
MISSISSIPPI.

<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........................................................... 19
Capitalization............................................................ 20
Dilution.................................................................. 21
Selected Financial Data................................................... 22
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 25
Business.................................................................. 32
Management................................................................ 47
Principal and Selling Stockholders........................................ 52
Description of Capital Stock.............................................. 53
Shares Eligible for Future Sale........................................... 57
Underwriting.............................................................. 58
Legal Matters............................................................. 59
Experts................................................................... 59
Additional Information.................................................... 59
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............................................ $ 19,202
NASD Filing Fee................................................. 6,837
NASDAQ Listing Fee.............................................. 46,250
Accounting Fees and Expenses.................................... 125,000
Legal Fees and Expenses......................................... 150,000
Printing Expenses............................................... 100,000
Transfer Agent's Fees........................................... 2,500
Miscellaneous................................................... 211
--------
Total......................................................... $450,000
========
</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 7 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 384,910 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 among Friede Goldman
International Inc., J. L. Holloway, Carl M. Crawford, Ronald W.
Schnoor, James A. Lowe, III and John F. Alford.
4.3 --Form of Amendment No. 1 to Registration Rights Agreement among
Friede Goldman International Inc., J. L. Holloway, Carl M. Crawford,
Ronald W. Schnoor, James A. Lowe, III, John F. Alford, Holloway
Partners, Carl Crawford Children's Trust and Bodin Children's Trust.
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 between Friede Goldman International
Inc. and J. L. Holloway.
10.3 --Form of Amendment No. 1 to Employment Agreement between Friede
Goldman International Inc. and J. L. Holloway.
*10.4 --Form of Employment Agreement between HAM Marine, Inc. and each of
Carl M. Crawford and Ronald W. Schnoor.
10.5 --Form of Amendment No. 1 to Employment Agreement between HAM Marine,
Inc. and each of Carl M. Crawford and Ronald W. Schnoor.
10.6 --Form of Employment Agreement between Friede Goldman International
Inc. and John F. Alford.
10.7 --Form of Amendment No. 1 to Employment Agreement between Friede
Goldman International Inc. and John F. Alford.
10.8 --Form of Employment Agreement between HAM Marine, Inc. and James A.
Lowe, III.
10.9 --Form of Amendment No. 1 to Employment Agreement between HAM Marine,
Inc. and James A. Lowe, III.
*10.10 --1997 Equity Incentive Plan.
10.11 --Amendment No. 1 to 1997 Equity Incentive Plan.
*10.12 --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.
*10.13 --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).
*10.14 --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.
*10.15 --Memorandum of Understanding, dated December 30, 1996, by and among
the Board of Supervisors of Jackson County, Mississippi and HAM
Marine, Inc. (New shipyard).
*10.16 --The Baltic and International Maritime Council Standard Bareboat
Charter, dated February 28, 1997 between Pontwin N.V. and HAM Marine,
Inc.
</TABLE>

II-3
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
-------
<C> <S>
10.17 --Form of Amended and Restated Stock Exchange Agreement by and among
Friede Goldman International Inc., HAM Marine, Inc., Friede & Goldman
Ltd., J. L. Holloway, Carl M. Crawford, Ronald W. Schnoor, James A.
Lowe, III, John F. Alford, Holloway Partners, L.P., Carl Crawford
Children's Trust and Bodin Children's Trust.
*10.18 --Business Purchase Agreement, dated November 22, 1996, by and among
J. L. Holloway Holdings, Inc., Friede & Goldman, Ltd. and Jerome L.
Goldman.
*10.19 --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.
*10.20 --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.
10.21 --Third Amendment to Business Purchase Agreement, dated June 13, 1997,
by and among Friede & Goldman, Ltd., J. L. Goldman Associates, Inc.
and Jerome L. Goldman.
10.22 --Form of Aircraft Dry Lease, dated as of July 1, 1997, by and between
Equipment Management Systems, LLC and HAM Marine, Inc.
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>
- --------

* Previously filed

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 June 30, 1997.

Friede Goldman International Inc.

/s/ James A. Lowe, III
By___________________________________

James A. Lowe, III

General Counsel and Secretary

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>
* Chairman of the Board, June 30, 1997
- ------------------------------------ President and Chief
J. L. Holloway Executive Officer
(Principal Executive
Officer)

* Chief Financial Officer June 30, 1997
- ------------------------------------ (Principal Financial
John F. Alford Officer)

* Treasurer (Chief Accounting June 30, 1997
- ------------------------------------ Officer)
Robert C. Andrews, Jr.

* Director June 30, 1997
- ------------------------------------
Ronald W. Schnoor

/s/ James A. Lowe, III Director June 30, 1997
- ------------------------------------
James A. Lowe, III

* Director June 30, 1997
- ------------------------------------
Bruce G. Malcolm
</TABLE>

II-5
<PAGE>

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Director June 30, 1997
- ------------------------------------
Jerome L. Goldman

/s/ Ray Mabus Director June 30, 1997
- ------------------------------------
Ray Mabus

/s/ Howell W. Todd Director June 30, 1997
- ------------------------------------
Howell W. Todd
</TABLE>

*By: /s/ James A. Lowe, III
-------------------------

James A. Lowe, III

Attorney-in-Fact

II-6
<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 among Friede Goldman
International Inc., J. L. Holloway, Carl M. Crawford, Ronald W.
Schnoor, James A. Lowe, III and John F. Alford.
4.3 --Form of Amendment No. 1 to Registration Rights Agreement among
Friede Goldman International Inc., J. L. Holloway, Carl M.
Crawford, Ronald W. Schnoor, James A. Lowe, III, John F.
Alford, Holloway Partners, Carl Crawford Children's Trust and
Bodin Children's Trust.
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 between Friede Goldman
International Inc. and J. L. Holloway.
10.3 --Form of Amendment No. 1 to Employment Agreement between Friede
Goldman International Inc. and J. L. Holloway.
*10.4 --Form of Employment Agreement between HAM Marine, Inc. and each
of Carl M. Crawford and Ronald W. Schnoor.
10.5 --Form of Amendment No. 1 to Employment Agreement between HAM
Marine, Inc. and each of Carl M. Crawford and Ronald W.
Schnoor.
10.6 --Form of Employment Agreement between Friede Goldman
International Inc. and John F. Alford.
10.7 --Form of Amendment No. 1 to Employment Agreement between Friede
Goldman International Inc. and John F. Alford.
10.8 --Form of Employment Agreement between HAM Marine, Inc. and
James A. Lowe, III.
10.9 --Form of Amendment No. 1 to Employment Agreement between HAM
Marine, Inc. and James A. Lowe, III.
*10.10 --1997 Equity Incentive Plan.
10.11 --Amendment No. 1 to 1997 Equity Incentive Plan.
*10.12 --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.
*10.13 --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).
*10.14 --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.
*10.15 --Memorandum of Understanding, dated December 30, 1996, by and
among the Board of Supervisors of Jackson County, Mississippi
and HAM Marine, Inc. (New shipyard).
*10.16 --The Baltic and International Maritime Council Standard
Bareboat Charter, dated February 28, 1997 between Pontwin N.V.
and HAM Marine, Inc.
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.17 --Form of Amended and Restated Stock Exchange Agreement by and
among Friede Goldman International Inc., HAM Marine, Inc.,
Friede & Goldman Ltd., J. L. Holloway, Carl M. Crawford, Ronald
W. Schnoor, James A. Lowe, III, John F. Alford, Holloway
Partners, L.P., Carl Crawford Children's Trust and Bodin
Children's Trust.
*10.18 --Business Purchase Agreement, dated November 22, 1996, by and
among J. L. Holloway Holdings, Inc., Friede & Goldman, Ltd. and
Jerome L. Goldman.
*10.19 --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.
*10.20 --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.
10.21 --Third Amendment to Business Purchase Agreement, dated June 13,
1997, by and among Friede & Goldman, Ltd., J. L. Goldman
Associates, Inc. and Jerome L. Goldman.
10.22 --Form of Aircraft Dry Lease, dated as of July 1, 1997, by and
between Equipment Management Systems, LLC and HAM Marine, Inc.
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>
- --------

* Previously filed

<PAGE>

EXHIBIT 1.1

FRIEDE GOLDMAN INTERNATIONAL INC.
(a Delaware corporation)

[3,800,000] Shares of Common Stock

UNDERWRITING AGREEMENT
----------------------

____________, 1997

Jefferies & Company, Inc.
Bear, Stearns & Co. Inc.
Johnson Rice & Company L.L.C.
As Representatives of
the Several Underwriters

c/o Jefferies & Company, Inc.
Attn: Syndicate Department
650 Fifth Avenue, 4th Floor
New York, New York 10019

Dear Sirs:

Friede Goldman International Inc., a Delaware corporation (the "Company"),
and the stockholders of the Company identified on Schedule I hereto
(collectively, the "Selling Stockholders"), hereby confirm their agreement with
you, as representatives (the "Representatives") of the underwriters named in
Schedule II hereto (the "Underwriters"), with respect to the issuance and sale
by the Company of [2,300,000] shares and the sale by the Selling Stockholders of
an aggregate of [1,500,000] shares (collectively, the "Firm Shares") of the
Company's Common Stock, $.01 par value per share (the "Common Stock"), and the
purchase of the Firm Shares by the Underwriters, acting severally and not
jointly. The Company also has agreed to sell up to [570,000] shares (the
"Additional Shares") of Common Stock to cover over-allotments, if any. The Firm
Shares and the Additional Shares are hereinafter collectively referred to as the
"Shares".

You have advised us that you desire to purchase the Shares and that you
propose to make a public offering of the Shares as soon as you deem advisable
after the Registration Statement referred to below becomes effective upon the
terms set forth in the Prospectus referred to below.

The terms that follow, when used in this Agreement, shall have the meanings
indicated. "Preliminary Prospectus" shall mean any preliminary prospectus
referred to in Section 1(a)(i) below and any preliminary prospectus included in
the Registration Statement (as defined below) on the date that the Registration
Statement becomes effective (the "Effective Date") that omits any information
pursuant to Rule 430A (as defined below) or Rule 434 (as defined below).
"Registration Statement" shall mean the registration statement referred to in
Section 1(a)(i) below,
<PAGE>

Jefferies & Company, Inc.
Bear, Stearns & Co. Inc.
Johnson Rice & Company L.L.C.
, 1997
Page 2

including financial statements, exhibits and schedules, as amended at the
Representation Date (as defined below) or, if not effective at the
Representation Date, in the form in which it shall become effective, and, in the
event any post-effective amendment thereto becomes effective prior to the
Closing Date (as defined in Section 2 hereof), shall also mean such registration
statement as so amended. The term "Registration Statement" shall include any
Rule 430A Information (as defined below) deemed to be included therein at the
Effective Date as provided by Rule 430A (as defined below) and any information
deemed to be included therein at the Effective Time pursuant to Rule 434. If the
Company files an additional registration statement to register additional shares
of Common Stock pursuant to Rule 462(b) (defined below) (the "Additional
Registration Statement"), all references in this Underwriting Agreement to
"Registration Statement" shall include the Additional Registration Statement, as
amended at the Effective Date, including the contents of the initial
registration statement incorporated by reference therein and including all
information (if any) deemed to be a part of the Additional Registration
Statement as of its effective time pursuant to Rule 430A(b). The final
prospectus constituting a part of the Registration Statement (including the Rule
430A Information), and any prospectus subject to completion meeting the
requirements of Rule 434 under the Act provided by the Company with any term
sheet meeting the requirements of Rule 434 as the prospectus provided to meet
the requirements of Section 10(a) of the Act, as from time to time amended or
supplemented, is hereinafter referred to as the "Prospectus", except that if any
revised prospectus shall be provided to the Underwriters by the Company that
differs from the prospectus on file at the Securities and Exchange Commission
(the "Commission") at the Effective Date (whether or not such revised prospectus
is required to be filed by the Company pursuant to Rule 424 of the Act
Regulations (as defined below)), the term "Prospectus" shall refer to each such
revised prospectus from and after the time it is first provided to the
Underwriters for such use. For purposes of this Agreement, all references to the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement of any of the foregoing shall include the copy thereof
filed with the Commission pursuant to the Commission's Electronic Data
Gathering, Analysis and Retrieval System ("EDGAR"). "Rule 158", "Rule 424",
"Rule 430A", "Rule 434", "Rule 462" and "Regulation S-K" refer to such rules or
regulation under the Securities Act of 1933, as amended (the "Act"; and the
rules and regulations under the Act, the "Act Regulations"). "Rule 430A
Information" means information with respect to the Shares and the offering
thereof permitted to be omitted from the Registration Statement when it becomes
effective pursuant to Rule 430A. "Exchange Act" refers to the Securities
Exchange Act of 1934, as amended, and the rules and regulations of the
Commission promulgated thereunder.

SECTION 1. Representations and Warranties.

(a) The Company represents and warrants to the Underwriters as of the date
hereof (such date being referred to as the "Representation Date") and as of the
Closing Date, as follows:
<PAGE>

Jefferies & Company, Inc.
Bear, Stearns & Co. Inc.
Johnson Rice & Company L.L.C.
, 1997
Page 3

(i) The Company has filed with the Commission a registration statement
on Form S-1 (Registration No. 333-27599), including a related preliminary
prospectus, and one or more amendments thereto, including the related
preliminary prospectus, each of which has previously been furnished to the
Underwriters, for the registration under the Act of the offering and sale
of the Shares. The Company will file with the Commission either (A) prior
to effectiveness of such registration statement, a further amendment to
such registration statement (including the form of Prospectus), or (B)
after effectiveness of such registration statement, a Prospectus in
accordance with Rules 430A and 424(b) or Rule 434 of the Act Regulations.
The Company has included in such registration statement, as amended at the
Effective Date, all information (other than any Rule 430A Information or
any information omitted pursuant to Rule 434, in the case of clause (B))
required by the Act and the Act Regulations to be included in the
Prospectus with respect to the Shares and the offering thereof. As filed,
such further amendment or such form of Prospectus, as the case may be,
shall contain all Rule 430A Information, together with all other required
information, with respect to the Shares and the offering thereof and,
except to the extent the Underwriters shall agree in writing to a
modification, shall be in all substantive respects in the form furnished to
the Underwriters prior to the date hereof.

(ii) On the Effective Date, the Representation Date and the Closing
Date, the Registration Statement did and will, and when the Prospectus is
first filed (if required) in accordance with Rule 424(b) the Prospectus
will, comply in all material respects with the applicable requirements of
the Act and the Act Regulations; on the Effective Date, the Representation
Date and the Closing Date, the Registration Statement did not and will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make
the statements therein not misleading; and, on the Effective Date, the
Representation Date and the Closing Date, and on the date of any filing
pursuant to Rule 424(b), the Prospectus did not and will not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, that the Company makes no representation or warranty
as to the information provided in writing to the Company by or on behalf of
the Underwriters, expressly for use in the Registration Statement or the
Prospectus, and the Company agrees that the only information provided in
writing by or on behalf of the Underwriters to the Company, expressly for
use in the Registration Statement or the Prospectus, is that information
contained in the table and the second, third, fifth and eighth paragraphs
following the table in the section of the Prospectus entitled
"Underwriting" and the last paragraph on the cover page of the Prospectus.
If Rule 434 is used, the Company will comply with the requirements of such
rule. Each
<PAGE>

Jefferies & Company, Inc.
Bear, Stearns & Co. Inc.
Johnson Rice & Company L.L.C.
, 1997
Page 4

Preliminary Prospectus and the Prospectus was identical to the
electronically transmitted copy thereof filed with the Commission pursuant
to EDGAR, except to the extent permitted under Regulation S-T of the
Commission.

(iii) The Company is a corporation duly organized and validly
existing in good standing under the laws of the State of Delaware, with
full corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Registration Statement and
the Prospectus, and is duly registered and qualified to conduct its
business and is in good standing in each jurisdiction where the nature or
location of its properties (owned or leased) or the conduct of its business
requires such registration or qualification, except where the failure so to
register or qualify would not have a Material Adverse Effect. As used
herein, the term "Material Adverse Effect" shall mean an adverse effect on
the condition (financial or other), business, properties, net worth or
results of operations of the Company or any of the Subsidiaries (as
hereinafter defined) that would be, singly or in the aggregate, material to
the Company and the Subsidiaries, taken as a whole, whether or not
occurring in the ordinary course of business (a "Material Adverse Effect").

(iv) The only significant subsidiaries (as defined in the Act
Regulations) of the Company are the subsidiaries listed on Schedule III
hereto (collectively, the "Subsidiaries"). Each of the Subsidiaries is a
corporation duly organized and validly existing in good standing under the
laws of its jurisdiction of incorporation with full corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Registration Statement and in the Prospectus,
and is duly registered and qualified to conduct its business and is in good
standing in each jurisdiction where the nature or location of its
properties (owned or leased) or the conduct of its business requires such
registration or qualification, except where the failure so to register or
qualify would not have a Material Adverse Effect.

(v) Each of the Company and the Subsidiaries has all necessary
authorizations, approvals, orders, licenses, rights-of-way, operating
rights, easements, certificates and permits of and from, and has made all
declarations and filings with, all regulatory or governmental officials and
bodies, all self-regulatory organizations and all courts and other
tribunals ("Permits"), to own or lease its respective properties and to
conduct its respective businesses described in the Prospectus and the
Registration Statement, except where failure to have obtained or made the
same would not have a Material Adverse Effect, and neither the Company nor
any of the Subsidiaries has received any notice of proceedings relating to
the revocation or modification of any such Permits, if the failure to be so
licensed or
<PAGE>

Jefferies & Company, Inc.
Bear, Stearns & Co. Inc.
Johnson Rice & Company L.L.C.
, 1997
Page 5

approved or if the subject of an unfavorable decision, ruling or finding,
would have a Material Adverse Effect. The Company and each of the
Subsidiaries has fulfilled and performed all its current material
obligations with respect to such Permits and no event has occurred that
allows, or after notice or lapse of time, or both, would allow, revocation
or termination thereof or result in any other material impairment of the
rights of the holder of any such Permit. Such Permits contain no
restrictions that are materially burdensome to the Company and the
Subsidiaries; and the Company and each of the Subsidiaries is in compliance
with all applicable laws, rules, regulations, orders and consents, the
violation of which could have a Material Adverse Effect. The property and
business of the Company and the Subsidiaries conform in all material
respects to the descriptions thereof contained in the Prospectus and the
Registration Statement.

(vi) All of the Company's authorized and outstanding capital stock has
been duly authorized and validly issued and is fully paid and nonassessable
and the capitalization of the Company conforms to the descriptions thereof
and the statements made with respect thereto in the Registration Statement
and the Prospectus as of the date set forth therein. There are no
outstanding securities convertible into or exchangeable for, and no
outstanding options, warrants or other rights to purchase, any shares of
the capital stock of the Company, nor any agreements or commitments to
issue any of the same, except as described in the Registration Statement
and the Prospectus, and there are no preemptive or other rights to
subscribe for or to purchase, and no restrictions upon the voting or
transfer of, any capital stock of the Company pursuant to the Company's
restated certificate of incorporation or bylaws or any agreement or other
instrument to which the Company is a party, except as described in the
Registration Statement and the Prospectus.

(vii) All the outstanding shares of capital stock of each Subsidiary
have been duly authorized and are validly issued, fully paid and
nonassessable and were not issued in violation of or subject to any
preemptive or similar rights. All outstanding shares of capital stock of
the Subsidiaries are owned by the Company directly, free and clear of any
security interests, liens, encumbrances, equities or other claims.

(viii) Each of the Company and the Subsidiaries has good and
indefeasible title to all real property and good and marketable title to
all personal property owned by it, including those properties described in
the Registration Statement and Prospectus, in each case free and clear of
all liens, charges, encumbrances and restrictions, except such as are
described in the Registration Statement and Prospectus or such as would not
have a Material Adverse Effect. Each of the Company and the Subsidiaries
has valid, subsisting and enforceable leases for the properties described
in the Registration Statement and the
<PAGE>

Jefferies & Company, Inc.
Bear, Stearns & Co. Inc.
Johnson Rice & Company L.L.C.
, 1997
Page 6

Prospectus as leased by it, with such exceptions as are described in the
Registration Statement and the Prospectus or as would not in the aggregate
have a Material Adverse Effect.

(ix) The Company has all requisite power, authority, authorizations,
approvals, orders, licenses, certificates and permits to enter into this
Agreement and to carry out the provisions and conditions hereof, and to
issue and deliver the Shares being sold by it to the Underwriters as
provided herein. This Agreement has been duly authorized, executed and
delivered by the Company and constitutes a legal, valid and binding
agreement of the Company, enforceable against it in accordance with the
terms hereof, except to the extent rights to indemnity and contribution
hereunder may be limited by federal or state securities laws or public
policy underlying such laws and except to the extent the enforcement hereof
may be limited by bankruptcy, insolvency, reorganization, moratorium or
other laws relating to or affecting creditors' rights generally or by
equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).

(x) Each of the Company and the Subsidiaries owns, or possesses
adequate rights to use, all trademarks, trade names, service marks,
patents, copyrights, confidential information and other similar rights
necessary for the conduct of its business as currently conducted or as
planned to be conducted and as described in the Registration Statement and
the Prospectus, and neither the Company nor any of the Subsidiaries has
received a notice, or knows of any basis, of any conflict with the asserted
rights of others in any such respect that could have a Material Adverse
Effect.

(xi) The Shares to be issued and sold by the Company have been duly
and validly authorized for issuance by the Company, and the Company has
full corporate power and authority to issue, sell and deliver the Shares;
and, when such Shares are issued and delivered against payment therefor as
provided by this Agreement, the Shares will have been validly issued, fully
paid and nonassessable, and the issuance of such Shares will not be subject
to any statutory preemptive rights or similar statutory rights or any other
preemptive or similar rights. All corporate action required to be taken by
the Company for the authorization, issuance and sale of the Shares being
sold by it has been duly and validly taken.

(xii) Arthur Andersen LLP are independent accountants with respect to
the Company and the Subsidiaries as required by the Act.
<PAGE>

Jefferies & Company, Inc.
Bear, Stearns & Co. Inc.
Johnson Rice & Company L.L.C.
, 1997
Page 7

(xiii) The financial statements and related notes and schedules
included in the Registration Statement and the Prospectus present fairly
the financial position of the Company and the Subsidiaries as of the
respective dates thereof and the results of operations and cash flows of
the Company and the Subsidiaries for the respective periods covered
thereby; and such financial statements and the related schedules and notes
have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis throughout the entire period
involved, except as otherwise disclosed in the Registration Statement and
the Prospectus. The selected financial information included in the
Registration Statement and the Prospectus presents fairly the information
shown therein and has been compiled on a basis consistent with that of the
audited financial statements included therein. The pro forma financial
information in the Registration Statement and the Prospectus complies in
all material respects with the applicable accounting requirements of
Regulation S-X promulgated by the Commission and presents fairly the
information shown therein; the assumptions used in the preparation thereof
are reasonable and the adjustments used therein are appropriate to give
effect to the transactions or circumstances referred to therein. No other
financial statements or schedules of the Company and the Subsidiaries are
required by the Exchange Act, the Act or the Act Regulations to be included
in the Registration Statement or Prospectus.

(xiv) The Shares conform in all material respects to the descriptions
thereof in the Registration Statement and Prospectus.

(xv) Since the respective dates as of which information is provided in
the Registration Statement and Prospectus, except as otherwise specifically
stated therein, there has been no change or development with respect to the
condition (financial or otherwise) or business of the Company and the
Subsidiaries, taken as a whole, whether or not arising in the ordinary
course of business, that would have a Material Adverse Effect.

(xvi) Neither the Company nor any Subsidiary is in violation of its
certificate of incorporation or bylaws or other organizational documents.
Neither the Company nor any Subsidiary is, nor with the passage of time or
the giving of notice or both would be, in violation of any law, ordinance,
administrative or governmental rule or regulation applicable to the Company
or any of the Subsidiaries, or of any judgment, order or decree of any
court or governmental agency or body or of any arbitrator having
jurisdiction over the Company or any of the Subsidiaries, or in default in
the performance or observance of any obligation, agreement, covenant or
condition contained in any mortgage, loan agreement, note, bond, debenture,
credit agreement or any other evidence of indebtedness or in any agreement,
contract, indenture, lease or other instrument to which the Company
<PAGE>

Jefferies & Company, Inc.
Bear, Stearns & Co. Inc.
Johnson Rice & Company L.L.C.
, 1997
Page 8

or any of the Subsidiaries is a party or by which it may be bound, or to
which any of the property or assets of the Company or any of the
Subsidiaries is subject, the effect of which violation or default in
performance or observance would have a Material Adverse Effect.

(xvii) There is no action, suit or proceeding pending before or by
any court, arbitrator or governmental agency or body or, to the Company's
knowledge, threatened against the Company or any of the Subsidiaries or to
which any of their respective property is subject (A) that is required to
be described in the Registration Statement or the Prospectus but is not
described as required or (B) that, if adversely determined, could
reasonably be expected to have a Material Adverse Effect. There is no
agreement, contract, indenture, lease or other document or instrument that
is required to be described in the Registration Statement or Prospectus or
to be filed as an exhibit to the Registration Statement that is not
described or filed as required.

(xviii) No person has any right to the registration of any security
of the Company by reason of the filing of the Registration Statement with
the Commission or the consummation of the transactions contemplated hereby,
which right has not been waived or lapsed.

(xix) The Company is not an "investment company" within the meaning
of the Investment Company Act of 1940 and is not subject to registration
under such Act.

(xx) As of the date of the Prospectus, neither the Company nor any of
the Subsidiaries currently is planning any probable acquisitions for which
disclosure of pro forma financial information would be required by the Act.

(xxi) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus (or any amendment or
supplement thereto), except as otherwise stated therein, (A) neither the
Company nor any of the Subsidiaries (1) has issued any securities other
than in connection with the exercise of any outstanding options described
in the Registration Statement and the Prospectus, (2) incurred any material
liability or obligation, direct or contingent, for borrowed money, (3)
entered into any transaction, not in the ordinary course of business, that
is material to the Company and the Subsidiaries, taken as a whole, (4)
entered into any transaction with an affiliate of the Company (as the term
"affiliate" is defined in Rule 405 of the Act Regulations) that is required
to be disclosed in the Prospectus or the Registration Statement, or (5)
declared or paid any dividend on its capital stock, or made any other
distribution to its equity holders, (B) there has not been any material
change in the capital stock or other equity,
<PAGE>

Jefferies & Company, Inc.
Bear, Stearns & Co. Inc
Johnson Rice & Company L.L.C.
, 1997
Page 9

or material increase in the short-term or long-term debt, of the Company or
any of the Subsidiaries and (C) there has been no change or development
with respect to the condition (financial or otherwise) or business of the
Company and the Subsidiaries, taken as a whole, whether or not arising in
the ordinary course of business, that would have a Material Adverse Effect.

(xxii) The Company has not distributed and, prior to the later to
occur of (A) the Closing Date and (B) completion of the distribution of the
Shares, will not distribute without your prior written consent any offering
material in connection with the offering and sale of the Shares other than
the Registration Statement, the Prospectus or other materials, if any,
permitted by the Act.

(xxiii) The Company has filed an application to list the Shares on
the Nasdaq National Market, and has received notification that the listing
has been approved, subject to notice of issuance and delivery of the
Shares.

(xxiv) Neither the Company nor any Subsidiary is involved in any
labor dispute and, to the knowledge of the Company, no such dispute is
threatened.

(xxv) Neither the Company nor any Subsidiary nor, to the best of its
knowledge, any employee or agent of the Company or any Subsidiary has made
any payment of funds of the Company or any Subsidiary or received or
retained any funds of a character required to be disclosed in the
Prospectus.

(xxvi) Each of the Company and the Subsidiaries have filed (or have
obtained extensions thereto) all federal, state and local or foreign tax
returns that are required to be filed, which returns are complete and
correct in all material respects, and have paid all taxes shown on such
returns and all assessments with respect thereto to the extent that the
same have become due.

(xxvii) Except for the shares of capital stock of each of the
Subsidiaries, neither the Company nor any of the Subsidiaries owns any
shares of stock or any other securities of any corporation or has any
equity interest in any firm, partnership, association or other entity other
than as reflected in the financial statements included in the Registration
Statement and the Prospectus.

(xxviii) Neither the execution, delivery or performance of this
Agreement, the offer, issuance, sale or delivery of the Shares nor the
consummation by the Company
<PAGE>

Jefferies & Company, Inc.
Bear, Stearns & Co. Inc
Johnson Rice & Company L.L.C.
, 1997
Page 10

of the terms of this Agreement (A) requires the consent, approval,
authorization or order of any court or governmental agency or body, except
such as have been obtained under the Act and such as may be required under
the blue sky laws of any jurisdiction in connection with the purchase and
distribution of the Shares by the Underwriters or such as may be required
by the National Association of Securities Dealers, Inc. (the "NASD") and
such other approvals as have been obtained, (B) will conflict with, result
in a breach of, or constitute a default under the terms of any indenture,
agreement, lease or other instrument to which the Company or any of the
Subsidiaries is a party or by which any of them or any of their respective
properties may be bound, or will result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the Company
or any of the Subsidiaries pursuant to the terms of any agreement or
instrument to which any of them is a party or by which any of them may be
bound or to which any of the property or assets of any of them is subject,
(C) will conflict with or violate any law, order, statute, regulation,
consent or memorandum of understanding applicable to the Company or any
Subsidiary of any court, regulatory body, administrative agency,
governmental body or arbitrator having jurisdiction over the Company or any
of the Subsidiaries (in the case of (B) or (C) above, where such conflict,
breach, default or violation, individually or in the aggregate, would have
a Material Adverse Effect), or (D) will conflict with or violate the
certificate of incorporation or bylaws or other organizational documents of
the Company or any Subsidiary.

(xxix) The Company has not taken, directly or indirectly, any action
designed to cause or result in or that has constituted, or that might
reasonably be expected to constitute, the stabilization or manipulation of
the price of the Common Stock to facilitate the sale or resale of the
Shares.

(xxx) The Company is not required to comply with Section 517.075 of
the Florida statutes.

(xxxi) Each of the Company and the Subsidiaries (A) is in compliance
with any and all applicable federal, state, local and foreign laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (B) has received all permits, licenses
or other approvals required of it under applicable Environmental Laws to
conduct its business and (C) is in compliance with all terms and conditions
of any such permit, license or approval, except where such noncompliance
with Environmental Laws, failure to receive required permits, licenses or
approvals or failure to comply with the
<PAGE>

Jefferies & Company, Inc.
Bear, Stearns & Co. Inc
Johnson Rice & Company L.L.C.
, 1997
Page 11

terms and conditions of such permits, licenses or approvals would not have
a Material Adverse Effect.

(xxxii) There are no costs or liabilities, to the Company's knowledge
after due inquiry, associated with the effect of Environmental Laws on the
business, operations or properties of the Company and its Subsidiaries that
would have a Material Adverse Effect.

(xxxiii) The election by HAM Marine, Inc. and the consent to such
election by its stockholders (and, if applicable, by the spouses of such
stockholders) to cause such company to be taxed as an S corporation as
provided in Section 1362 of the Internal Revenue Code of 1986, as amended
(and the predecessor Code) (the "Code"), was valid and effective at all
times from ________________, 1982 through and including ________________,
1997, the date such election was terminated in connection with the offering
and sale of the Shares, and neither the Internal Revenue Service nor any
other person or entity has challenged or indicated a present intention to
challenge the status of such company as an S corporation during any portion
of such period; and HAM Marine, Inc. has incurred no liability for taxes
under Section 1374 or 1375 of the Code during or for any year in such
period.

(xxxiv) The election by Friede & Goldman, Ltd. and the consent to
such election by its stockholders (and, if applicable, by the spouses of
such stockholders) to cause such company to be taxed as an S corporation as
provided in Section 1362 of the Code, was valid and effective at all times
from ________________, 1996 through and including _______________, 1997,
the date such election was terminated in connection with the offering and
sale of the Shares, and neither the Internal Revenue Service nor any other
person or entity has challenged or indicated a present intention to
challenge the status of such company as an S corporation during any portion
of such period; and Friede & Goldman, Ltd. has incurred no liability for
taxes under Section 1374 or 1375 of the Code during or for any year in such
period.

(b) Each Selling Stockholder severally represents and warrants to the
Underwriters as of the Representation Date and as of the Closing Date, as
follows:

(i) The Selling Stockholder now has, and on the Closing Date will
have, valid and marketable title to the Shares to be sold by the Selling
Stockholder pursuant to this Agreement, free and clear of any security
interests, liens, encumbrances, equities or other claims, including,
without limitation, any restriction on transfer (except for restrictions

<PAGE>

Jefferies & Company, Inc.
Bear, Stearns & Co. Inc
Johnson Rice & Company L.L.C.
, 1997
Page 12

imposed by applicable federal or state securities laws) other than as
specified on the certificate(s) representing such Shares.

(ii) The Selling Stockholder now has, and on the Closing Date will
have, full legal right, power and authorization, and any approval required
by law (except such as may be required under the Act or such as may be
required by the NASD or under state securities or blue sky laws governing
the purchase and distribution of the Shares), to sell, assign, transfer and
deliver the Shares to be sold by the Selling Stockholder pursuant to this
Agreement in the manner provided in this Agreement, and upon delivery of
and payment for such Shares hereunder, the several Underwriters will
acquire valid and marketable title to such Shares free and clear of any
adverse claims, assuming that the Underwriters have acquired such Shares
for value, in good faith and without notice of any adverse claim.

(iii) This Agreement has been duly authorized, executed and delivered
by or on behalf of the Selling Stockholder and is the valid and binding
agreement of the Selling Stockholder enforceable against the Selling
Stockholder in accordance with its terms except (A) as limited by any
applicable bankruptcy, insolvency, reorganization, moratorium or other law
relating to or affecting creditors' rights generally, (B) general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law) and (C) as such
enforceability of rights to indemnity and contribution hereunder may be
limited by federal or state securities laws or public policy underlying
such laws.

(iv) Neither the execution and delivery of this Agreement by or on
behalf of the Selling Stockholder nor the consummation of the transactions
herein contemplated by or on behalf of the Selling Stockholder requires any
consent, approval, authorization or order of, or filing or registration
with, any court, regulatory body, administrative agency or other
governmental body, agency or official (except such as may be required under
the Act or such as may be required by the NASD or under state securities or
blue sky laws governing the purchase and distribution of the Shares) or
conflicts or will conflict with or constitutes or will constitute a breach
of, or default under, or violates or will violate, any agreement, indenture
or other instrument to which the Selling Stockholder is a party or by which
the Selling Stockholder is or may be bound or to which any of the Selling
Stockholder's property or assets is subject, or any statute, law, rule,
regulation, ruling, judgment, injunction, order or decree applicable to the
Selling Stockholder or to any property or assets of the Selling
Stockholder, which breach, default or violation would impair the Selling
Stockholder's ability to perform under this Agreement and would have any
adverse impact on the Company or the Underwriters under this Agreement.
<PAGE>

Jefferies & Company, Inc.
Bear, Stearns & Co. Inc
Johnson Rice & Company L.L.C.
, 1997
Page 13

(v) The information with respect to the Selling Stockholder contained
in the section entitled "Principal and Selling Stockholders" in the
Prospectus does not and will not on the Closing Date 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, in light of
the circumstances under which they were made, not misleading.

(vi) The Selling Stockholder has not taken, directly or indirectly,
any action designed to or that might reasonably be expected to cause or
result in stabilization or manipulation of the price of the Common Stock to
facilitate the sale or resale of the Shares, except for the lock-up
arrangements described in the Prospectus.

(vii) The election by HAM Marine, Inc. and the consent to such
election by its stockholders (and, if applicable, by the spouses of such
stockholders) to cause such company to be taxed as an S corporation as
provided in Section 1362 of the Code, was valid and effective at all times
from ________________, 1982 through and including ________________, 1997,
the date such election was terminated in connection with the offering and
sale of the Shares, and neither the Internal Revenue Service nor any other
person or entity has challenged or indicated a present intention to
challenge the status of such company as an S corporation during any portion
of such period; and HAM Marine, Inc. has incurred no liability for taxes
under Section 1374 or 1375 of the Code during or for any year in such
period.

(viii) The election by Friede & Goldman, Ltd. and the consent to such
election by its stockholders (and, if applicable, by the spouses of such
stockholders) to cause such company to be taxed as an S corporation as
provided in Section 1362 of the Code, was valid and effective at all times
from ________________, 1996 through and including _______________, 1997,
the date such election was terminated in connection with the offering and
sale of the Shares, and neither the Internal Revenue Service nor any other
person or entity has challenged or indicated a present intention to
challenge the status of such company as an S corporation during any portion
of such period; and Friede & Goldman, Ltd. has incurred no liability for
taxes under Section 1374 or 1375 of the Code during or for any year in such
period.

(ix) Certificates in negotiable form for the Selling Stockholder's
Shares have been placed in custody, for delivery pursuant to the terms of
this Agreement, under a Power of Attorney and Custody Agreement duly
authorized, executed and delivered by the Selling Stockholder, in the form
heretofore furnished to you (the "Custody Agreement"), with
_____________________, as Custodian (the "Custodian"); the Shares
represented by
<PAGE>

Jefferies & Company, Inc.
Bear, Stearns & Co. Inc.
Johnson Rice & Company L.L.C.
, 1997
Page 14

the certificates so held in custody for the Selling Stockholder are subject
to the interests hereunder of the Underwriters, the Company and the other
Selling Stockholders; the arrangements for custody and delivery of such
certificates, made by the Selling Stockholder hereunder and under the
Custody Agreement, are not subject to termination by any acts of the
Selling Stockholder, or by operation of law or the occurrence of any other
event; and if any such other event shall occur before the delivery of such
Shares hereunder, certificates for the Shares will be delivered by the
Custodian in accordance with the terms and conditions of this Agreement and
the Custody Agreement as if such other event had not occurred, regardless
of whether or not the Custodian shall have received notice of such other
event.

(c) Any certificate signed by any officer of the Company or any Selling
Stockholder delivered to the Underwriters or to counsel for the Underwriters
pursuant to the terms of this Agreement shall be deemed a representation and
warranty by the Company or such Selling Stockholder, as the case may be, to each
Underwriter as to the matters covered thereby.

SECTION 2. Sale and Delivery to the Underwriters; Closing.

(a) Subject to the terms and conditions set forth herein:

(i) The Company agrees to sell to each Underwriter, severally and not
jointly, and, on the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, each
Underwriter, severally and not jointly, agrees to purchase from the
Company, at a purchase price of $___________ per share (the "Initial
Price"), the aggregate number of Firm Shares that bears the same proportion
to the aggregate number of Firm Shares to be issued and sold by the Company
as the number of Firm Shares set forth opposite the name of such
Underwriter in Schedule II (or such number of Firm Shares increased as
provided in Section 9 hereof) bears to the aggregate number of Firm Shares
to be sold by the Company and the Selling Stockholders, subject to such
adjustment as the Representatives may approve to eliminate fractional
shares. The Company will have no obligation to sell to the Underwriters
any of such Firm Shares that are being issued and sold by the Company
hereunder unless the Underwriters purchase all of the Firm Shares
hereunder.

(ii) Each Selling Stockholder agrees, severally and not jointly, to
sell to each Underwriter, severally and not jointly, and, on the basis of
the representations and warranties herein contained and subject to the
terms and conditions herein set forth, each Underwriter, severally and not
jointly, agrees to purchase from each Selling Stockholder
<PAGE>

Jefferies & Company, Inc.
Bear, Stearns & Co. Inc.
Johnson Rice & Company L.L.C.
, 1997
Page 15

at the Initial Price, the aggregate number of Firm Shares that bears the
same proportion to the aggregate number of Firm Shares to be sold by such
Selling Stockholder as the number of Firm Shares set forth opposite the
name of such Underwriter in Schedule II hereto (or such number of Firm
Shares increased as provided in Section 9 hereof) bears to the aggregate
number of Firm Shares to be sold by the Company and the Selling
Stockholders, subject to such adjustment as the Representatives may approve
to eliminate fractional shares. No Selling Stockholder will have any
obligation to sell to the Underwriters any of the Firm Shares to be sold by
such Selling Stockholder hereunder unless the Underwriters purchase all of
the Firm Shares hereunder.

(b) The Company grants to the Underwriters an option to purchase all or any
part of the Additional Shares at the Initial Price. Additional Shares shall be
purchased from the Company, severally and not jointly, for the accounts of the
Underwriters in proportion to the number of Firm Shares set forth in Schedule II
hereto opposite the name of such Underwriter. Such option may be exercised only
to cover over-allotments in the sale of the Firm Shares by the Underwriters and
may be exercised in whole or in part at any time on or before 12:00 noon, New
York City time, on the business day before the Firm Shares Closing Date (as
hereinafter defined), and only once thereafter within 30 days after the date of
the Prospectus, in each case upon written or telegraphic notice, or oral or
telephonic notice confirmed by written or facsimile notice, by the Underwriters
to the Company no later than 12:00 noon, New York City time, on the business day
before the Firm Shares Closing Date or at least two business days before the
Additional Shares Closing Date (as hereinafter defined), as the case may be,
setting forth the number of Additional Shares to be purchased and the time and
date (if other than the Firm Shares Closing Date) of such purchase.

(c) Payment of the purchase price for, and delivery of, the Firm Shares
shall be made at the offices of Jefferies & Company, Inc., 39 Broadway, New
York, New York 10006, or at such other place as shall be agreed upon by the
Underwriters and the Company, at 10:00 A.M., New York City time, on the third
(or, if pricing occurs after 4:30 p.m., New York City time, on any given day, on
the fourth) business day following the date hereof, or such other time not later
than 10 business days after such date as shall be agreed upon by the
Underwriters and the Company (such time and date of payment and delivery being
herein called the "Firm Shares Closing Date"). Payment shall be made to the
Company and the Selling Stockholders, as the case may be, by certified or
official bank check or checks drawn in New York Clearing House funds (or similar
next day funds) or by wire transfer in next day funds payable to the order of
the Company or the Selling Stockholders, as applicable, against delivery to the
Underwriters of the Firm Shares.
<PAGE>

Jefferies & Company, Inc.
Bear, Stearns & Co. Inc.
Johnson Rice & Company L.L.C.
, 1997
Page 16

(d) Payment of the purchase price for, and delivery of, the Additional
Shares to be purchased by the Underwriters shall be made at the office as set
forth above or at such other place as shall be agreed upon by the Underwriters
and the Company at the time and on the date (which may be the same as, but in no
event shall be earlier than, the Firm Shares Closing Date) specified in the
notice referred to in Section 2(b) (such time and date of delivery and payment
being herein called the "Additional Shares Closing Date"). The Firm Shares
Closing Date and the Additional Shares Closing Date are called, individually,
the "Closing Date" and together, the "Closing Dates". Payment shall be made to
the Company by certified or official bank check or checks drawn in New York
Clearing House funds (or similar next day funds) or by wire transfer in next day
funds payable to the order of the Company against delivery to the Underwriters
of the Additional Shares.

(e) Certificates representing the Shares shall be in such denominations and
registered in such names as the Underwriters may request in writing at least two
business days before the Firm Shares Closing Date or, in the case of Additional
Shares, on the day of notice of exercise of the option as described in Section
2(b). The certificates representing the Shares will be made available for
examination and packaging by the Underwriters not later than 1:00 P.M., New York
City time, on the last business day prior to the Firm Shares Closing Date (or
the Additional Shares Closing Date in the case of the Additional Shares) at such
place as is designated by the Underwriters.

SECTION 3. Covenants of the Company. The Company covenants with each of
the Underwriters as follows:

(a) The Company will use its best efforts to cause the Registration
Statement, if not effective at the Representation Date, and any amendment
thereof, to become effective, as promptly as possible after the filing thereof.
The Company will not file any amendment to the Registration Statement or any
amendment or supplement to the Prospectus, any term sheet under Rule 434, or any
Additional Registration Statement, to which the Underwriters shall object in
writing after a reasonable opportunity to review such amendment, supplement,
term sheet or registration statement. Subject to the foregoing sentences in
this clause (a), if the Registration Statement has become or becomes effective
pursuant to Rule 430A, or filing of the Prospectus or supplement to the
Prospectus is otherwise required under Rule 424(b), the Company will cause the
Prospectus, properly completed, or such supplement thereto to be filed with the
Commission pursuant to the applicable paragraph of Rule 424(b) within the time
period prescribed and will provide evidence satisfactory to the Underwriters of
such timely filing. The Company will promptly advise the Underwriters (i) when
the Registration Statement, if not effective at the Representation Date, and any
amendment thereto, shall have become effective, (ii) when the
<PAGE>

Jefferies & Company, Inc.
Bear, Stearns & Co. Inc.
Johnson Rice & Company L.L.C.
, 1997
Page 17

Prospectus, and any supplement thereto, shall have been filed (if required) with
the Commission pursuant to Rule 424(b), (iii) when any amendment to the
Registration Statement shall have been filed or become effective, (iv) of any
request by the Commission for any amendment of the Registration Statement or
supplement to any Prospectus or for any additional information, (v) of the
receipt by the Company of any notification of, or if the Company otherwise has
knowledge of, the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the institution or threatening of
any proceeding for that purpose and (vi) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the Shares
for sale in any jurisdiction or the initiation or threatening of any proceeding
for such purpose. The Company will use its best efforts to prevent the issuance
of any such stop order and, if issued, to obtain as soon as possible the lifting
thereof.

(b) If, at any time when a prospectus relating to the Shares is required to
be delivered under the Act or the Act Regulations, any event occurs as a result
of which the Prospectus as then amended or supplemented would contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it shall be
necessary to amend the Registration Statement or amend or supplement the
Prospectus to comply with the Act or the Act Regulations, the Company promptly
will prepare and file with the Commission, subject to the second sentence of
paragraph (a) of this Section 3, an amendment or supplement that will correct
such statement or omission or effect such compliance. Neither your consent to,
nor your delivery of, any such amendment or supplement shall constitute a waiver
of any of the conditions set forth in Section 5.

(c) The Company consents to the use of the Prospectus in accordance with
the provisions of the Act and with the securities or blue sky laws of the
jurisdictions in which the Shares are offered by the Underwriters and by all
dealers to whom Shares may be sold, both in connection with the offering and
sale of the Shares and for such period of time thereafter as the Prospectus is
required by the Act to be delivered in connection with the sales by any
Underwriter or dealer. The Company will comply with all requirements imposed
upon it by the Act, as now and hereafter amended, so far as necessary to permit
the continuance of sales of or dealing in the Shares in accordance with the
provisions hereof and the Prospectus.

(d) As soon as practicable, the Company will make generally available to
its security holders and to the Underwriters a consolidated earnings statement
or statements of the Company and the Subsidiaries covering a 12-month period
beginning after the Effective Date that will satisfy the provisions of Section
11(a) of the Act and Rule 158 under the Act Regulations.
<PAGE>

Jefferies & Company, Inc.
Bear, Stearns & Co. Inc.
Johnson Rice & Company L.L.C.
, 1997
Page 18

(e) The Company will furnish to the Representatives, without charge, five
signed copies of the Registration Statement (including exhibits thereto and all
documents incorporated by reference therein) and, so long as delivery of a
prospectus by an Underwriter or dealer may be required by the Act, or the Act
Regulations, as many copies of the Prospectus and all amendments and supplements
thereto as the Underwriters may reasonably request. The Prospectus and any
amendments or supplements thereto will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR, except
to the extent permitted by Regulation S-T of the Commission.

(f) During the period of five years hereafter, the Company will furnish to
you, as soon as practicable after the end of each fiscal year, a copy of its
annual report to stockholders for such year; and the Company will furnish to you
(i) as soon as available, a copy of each report or definitive proxy statement of
the Company filed with the Commission under the Exchange Act or mailed to
stockholders, and (ii) from time to time, such other information concerning the
Company as you may reasonably request, provided that prior to the Company's
furnishing any such other information that is nonpublic you shall enter into
such agreement respecting the confidentiality thereof as the Company may
reasonably request.

(g) The Company will not, and will cause each of its executive officers and
directors to enter into agreements with the Underwriters in the form set forth
in Exhibit A to the effect that they will not, for a period of 180 days
following the date of the Prospectus, without the prior written consent of
Jefferies & Company, Inc., offer, sell or contract to sell, or otherwise dispose
of, directly or indirectly, or announce the offering of, any shares of Common
Stock or any securities convertible into, or exchangeable for, shares of Common
Stock; provided, however, that the Company may issue and sell Common Stock
pursuant to any stock bonus plan, stock grant plan or stock option plan in
effect as of the date of the Prospectus.

(h) The Company will comply with all the provisions of any undertakings
contained in the Registration Statement.

(i) The Company will not at any time, directly or indirectly, take any
action intended, or that might reasonably be expected, to cause or result in, or
that will cause, stabilization of the price of the shares of Common Stock to
facilitate the sale or resale of any of the Shares.

(j) The Company will apply the net proceeds from the offering and sale of
the Shares to be sold by the Company in accordance with the description set
forth in the "Use of Proceeds" section of the Prospectus and shall file such
reports with the Commission with respect to the sale of the Shares and the
application of the proceeds therefrom as may be required by Rule 463 under
<PAGE>

Jefferies & Company, Inc.
Bear, Stearns & Co. Inc.
Johnson Rice & Company L.L.C.
, 1997
Page 19

the Act. The Company shall provide you a draft of each such report prior to its
filing for your approval, and shall furnish you with a signed copy of each such
report.

(k) The Company will cooperate with the Underwriters and their counsel in
connection with endeavoring to obtain and maintain the qualification or
registration, or exemption from qualification, of the Shares for offer and sale
under the applicable securities laws of such states and other jurisdictions of
the United States as the Underwriters may designate; provided, that in no event
shall the Company be obligated to qualify to do business in any jurisdiction
where it is not now so qualified or to take any action that would subject it to
taxation or general service of process in any jurisdiction where it is not now
so subject. In each jurisdiction in which the Shares are so qualified, the
Company will file all such statements and reports as may be required by the laws
of such jurisdiction to continue such qualification in effect for a period of
not less than one year from the effective date of the Registration Statement and
any Additional Registration Statement.

SECTION 4. Covenants of the Selling Stockholders. Each Selling
Stockholder covenants with each of the Underwriters as follows:

(a) The Selling Stockholder shall cooperate to the extent reasonably
necessary to cause the Registration Statement, if not effective at the
Representation Date, and any amendment thereof, to become effective, as promptly
as possible after the filing thereof.

(b) Without prejudice to any rights the Selling Stockholder may have
against the Company, the Selling Stockholder shall pay all federal and other
taxes, if any, on the transfer or sale of the Shares being sold by the Selling
Stockholder to the Underwriters.

(c) The Selling Stockholder shall do or perform all things required to be
done or performed by the Selling Stockholder prior to the Firm Shares Closing
Date to satisfy all conditions precedent to the delivery of and the payment for
the Shares to be sold by the Selling Stockholder pursuant to this Agreement.

(d) The Selling Stockholder will enter into an agreement with the
Underwriters in the form set forth in Exhibit A to the effect that the Selling
Stockholder will not, for a period of 180 days following the date of the
Prospectus, without the prior written consent of Jefferies & Company, Inc.,
offer, sell or contract to sell, or otherwise dispose of, directly or
indirectly, or announce the offering of, any shares of Common Stock or any
securities convertible into, or exchangeable for, shares of Common Stock.
<PAGE>

Jefferies & Company, Inc.
Bear, Stearns & Co. Inc.
Johnson Rice & Company L.L.C.
, 1997
Page 20

(e) The Selling Stockholder will not at any time, directly or indirectly,
take any action intended, or that might reasonably be expected, to cause or
result in, or that will cause, stabilization of the price of the shares of
Common Stock to facilitate the sale or resale of any of the Shares.

(f) The Selling Stockholder will advise the Representatives promptly, and
if requested by the Representatives will confirm such advice in writing, of any
change in the information relating to the Selling Stockholder contained in the
Registration Statement under the caption "Principal and Selling Stockholders".

SECTION 5. Payment of Expenses. The Company will pay, or reimburse if
paid by the Underwriters, all costs and expenses incident to the performance of
the obligations of the Company and the Selling Stockholders under this
Agreement, including (i) the fees, disbursements and expenses of counsel and
accountants for the Company and the Selling Stockholders and all other expenses
in connection with the preparation, printing and filing of the Registration
Statement, any Preliminary Prospectus, the Prospectus, and any amendments or
supplements thereto, and the mailing and delivery of copies thereof to the
Underwriters and dealers, (ii) the cost of printing the Agreement Among
Underwriters, this Agreement, the Selling Agreement, any Dealer Agreements, the
Underwriters' Questionnaire and the Blue Sky Memorandum (in both preliminary and
final form); (iii) all expenses in connection with qualification of the Shares
for offering and sale under state securities laws as provided in Section 3(k)
hereof, including filing and registration fees and the fees, disbursements and
expenses of counsel for the Underwriters in connection with such qualification
and in connection with Blue Sky surveys; (iv) the filing fees incident to
securing any required review by the NASD; (v) the cost of preparing stock
certificates; (vi) all fees of the Company's transfer agent and registrar; (vii)
any fees for listing the Shares on the Nasdaq National Market; and (viii) all
other costs and expenses incident to the performance of its obligations
hereunder that are not otherwise specifically provided for in this Section.

If this Agreement is terminated by the Underwriters because of any failure
or refusal on the part of the Company or the Selling Stockholders to comply with
the terms or fulfill any of the conditions of this Agreement, the Company shall
reimburse the Underwriters for all of their reasonable out-of-pocket expenses,
including the reasonable fees and disbursements of counsel for the Underwriters.
The Company shall not in any event be liable to any of the Underwriters for
consequential damages including loss of anticipated profits from the
transactions covered by this Agreement.

SECTION 6. Conditions of the Underwriters' Obligation. The obligation of
the Underwriters to purchase the Shares hereunder is subject to the continued
accuracy of the
<PAGE>

Jefferies & Company, Inc.
Bear, Stearns & Co. Inc.
Johnson Rice & Company L.L.C.
, 1997
Page 21

representations and warranties of the Company and the Selling Stockholders
herein contained, to the accuracy of the statements of the Company and the
Selling Stockholders made in any certificates pursuant to the provisions hereof,
to the performance by the Company and the Selling Stockholders of their
obligations hereunder, and to the following further conditions:

(a) The Registration Statement shall have become effective, and you shall
have received notice thereof, not later than 5:30 p.m., Washington D.C. time, on
the date hereof, or such later time and date as shall be approved by the
Representatives and the Company, and shall remain effective at the Closing Date.
No stop order suspending the effectiveness of the Registration Statement shall
have been issued under the Act or proceedings therefor initiated or threatened
by the Commission. No order suspending the effectiveness of the Registration
Statement or the qualification or registration of the Shares under the
securities or blue sky laws of any jurisdiction shall be in effect or
proceedings therefor initiated or threatened by the Commission or the
authorities of any such jurisdiction. If the Company has elected to rely upon
Rule 430A, the price of the Shares and any price-related or other information
previously omitted from the effective Registration Statement pursuant to Rule
430A shall have been transmitted to the Commission for filing pursuant to Rule
424(b) within the prescribed time period, and, prior to the Closing Date, the
Company shall have provided evidence satisfactory to the Underwriters of such
timely filing, or a post-effective amendment providing such information shall
have been promptly filed and declared effective in accordance with the
requirement of Rule 430A.

(b) Subsequent to the execution and delivery of this Agreement, there shall
not have occurred (i) any change, or any development involving a prospective
change, in or affecting particularly the business, properties, condition
(financial or other) or results of operations of the Company and the
Subsidiaries, taken as a whole, which, in the reasonable judgment of the
Underwriters, materially impairs the investment quality of the Shares and
constitutes a Material Adverse Effect; (ii) any material loss or interference
with the business or properties of the Company or any of the Subsidiaries from
fire, explosion, flood or other casualty, whether or not covered by insurance,
or from any labor dispute or any court or legislative or other governmental
action, order or decree, that is not set forth in the Registration Statement and
the Prospectus, if in the reasonable judgment of the Underwriters any such
development makes it impracticable or inadvisable to proceed with completion of
the sale of and payment for the Shares; (iii) any suspension or limitation of
trading in securities generally on the New York Stock Exchange or the Nasdaq
National Market, or any setting of minimum prices for trading on such exchange
or market, or any suspension of trading of any securities of the Company on any
exchange or market or in the over-the-counter market; (iv) any banking
moratorium declared by federal or New York authorities; or (v) any outbreak or
escalation of major hostilities in which the United States is involved, any
declaration of war by Congress or any other substantial national or
international
<PAGE>

Jefferies & Company, Inc.
Bear, Stearns & Co. Inc.
Johnson Rice & Company L.L.C.
, 1997
Page 22

calamity or emergency if, in the reasonable judgment of the Underwriters, the
effect of any such outbreak, escalation, declaration, calamity or emergency
makes it impractical or inadvisable to proceed with completion of the sale of
and payment for the Shares.

(c) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there shall have been no litigation
or other proceeding instituted against the Company or any of the Subsidiaries or
any of their respective officers or directors in their capacities as such,
before or by any federal, state or local court, commission, regulatory body,
administrative agency or other governmental body, domestic or foreign, or
arbitrator, in which litigation or proceeding an unfavorable ruling, decision or
finding would have a Material Adverse Effect.

(d) Each of the representations and warranties of the Company contained
herein shall be true and correct at the Closing Date, as if made at the Closing
Date, and all covenants and agreements contained herein to be performed on the
part of the Company, and all conditions contained herein to be fulfilled or
complied with by the Company at or prior to the Closing Date, shall have been
duly performed, fulfilled or complied with.

(e) Each of the representations and warranties of the Selling Stockholders
contained herein shall be true and correct at the Closing Date, as if made at
the Closing Date, and all covenants and agreements contained herein to be
performed on the part of the Selling Stockholders, and all conditions contained
herein to be fulfilled or complied with by the Selling Stockholders at or prior
to the Closing Date, shall have been duly performed, fulfilled or complied with,
and the Representatives shall have received a certificate to such effect, dated
the Closing Date and signed by or on behalf of each of the Selling Stockholders.

(f) The Underwriters shall have received an opinion from Andrews & Kurth
L.L.P., counsel for the Company, satisfactory in form and substance to counsel
for the Underwriters, dated as of each Closing Date, to the effect set forth in
Exhibit B.

(g) The Underwriters shall have received a favorable opinion, dated as of
each Closing Date, of Thompson & Knight, P.C., counsel for the Underwriters,
with respect to such matters as may be reasonably requested by the Underwriters,
and you shall have provided such counsel with such papers and information as
they may reasonably request to enable them to provide such opinion.

(h) On the Firm Shares Closing Date, the Underwriters shall have received
an opinion from [Watkins & Eager PLLC], legal counsel for the Selling
Stockholders, satisfactory in form
<PAGE>

Jefferies & Company, Inc.
Bear, Stearns & Co. Inc.
Johnson Rice & Company L.L.C.
, 1997
Page 23

and substance to counsel for the Underwriters, dated as of the Firm Shares
Closing Date, to the effect set forth in Exhibit C.

(i) The following conditions contained in clauses (i), (ii) and (iii) of
this Section 6(i) shall have been satisfied on and as of each Closing Date and
the Company shall have furnished to the Underwriters a certificate of the
Company, signed by the President and the principal financial or accounting
officer of the Company, dated such Closing Date to the effect that the signers
of such certificate have carefully examined the Registration Statement, the
Prospectus, any supplement or amendment to the Prospectus, and this Agreement
and that:

(i) the representations and warranties of the Company in this
Agreement are true and correct on and as of the Closing Date with the same
effect as if made on the Closing Date and the Company has complied with all
the agreements and satisfied all the conditions under this Agreement on its
part to be performed or satisfied at or prior to the Closing Date;

(ii) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or, to the Company's knowledge, threatened; and

(iii) since the date of the most recent financial statements included
in the Prospectus, there has been no change that would have a Material
Adverse Effect.

(j) At the Representation Date and at each Closing Date, Arthur Andersen
LLP shall have furnished to the Underwriters a letter or letters, dated
respectively as of the date of this Agreement and each Closing Date, in form and
substance satisfactory to the Underwriters, containing statements and
information of the type customarily included in accountants' "comfort letters"
to underwriters with respect to the financial statements and certain financial
and statistical information pertaining to the Company and the Subsidiaries
contained in the Registration Statement and the Prospectus.

(k) At the Representation Date, the Company shall have furnished to the
Underwriters a letter substantially in the form of Exhibit A hereto from each
executive officer and director of the Company and from the Selling Stockholders,
addressed to the Underwriters, in which each such person agrees not to offer,
sell or contract to sell, or otherwise dispose of, directly or indirectly, or
announce an offering of, any shares of Common Stock beneficially owned by such
person or any securities convertible into, or exchangeable for, shares of Common
Stock for a
<PAGE>

Jefferies & Company, Inc.
Bear, Stearns & Co. Inc.
Johnson Rice & Company L.L.C.
, 1997
Page 24

period of 180 days following the date of the Prospectus without the prior
written consent of Jefferies & Company, Inc.

(l) At the Closing Date, counsel for the Underwriters shall have been
furnished with such information, certificates and documents as they may
reasonably require for the purpose of enabling them to pass upon the issuance
and sale of the Shares as contemplated herein and related proceedings, or to
evidence the accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions, herein contained, or otherwise in
connection with the offering contemplated hereby; and all opinions and
certificates mentioned above or elsewhere in this Agreement shall be reasonably
satisfactory in form and substance to the Underwriters and counsel for the
Underwriters.

(m) The NASD shall not have raised any objection with respect to the
fairness and reasonableness of the underwriting terms and arrangements.

If any condition specified in this Section 6 shall not have been fulfilled
in all material respects when and as required to be fulfilled, this Agreement
may be terminated by the Underwriters by notice to the Company and such
termination shall be without liability of any party to any other party except as
provided in Section 5.

SECTION 7. Indemnification and Contribution.

(a) The Company agrees to indemnify, defend and hold harmless each
Underwriter and its respective officers, shareholders, employees, directors and
agents and any person who controls any Underwriter within the meaning of Section
15 of the Act or Section 20 of the Exchange Act from and against any loss,
expense, damage, liability or claim (including the reasonable cost of
investigating such claim) that, jointly or severally, any such Underwriter or
any such officer, shareholder, employee, director, agent or controlling person
may incur under the Act, the Exchange Act or otherwise, as such expenses are
incurred, insofar as such loss, expense, damage, liability or claim arises out
of or is based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement (or in the Registration
Statement as amended by any post-effective amendment thereof) or any omission or
alleged omission to state a material fact required to be stated in such
Registration Statement or necessary to make the statements made therein not
misleading or any untrue statement or alleged untrue statement of a material
fact contained in a Prospectus (the term Prospectus for the purpose of this
Section 7(a) and Section 7(b) being deemed to include any Preliminary
Prospectus, the Prospectus, and the Prospectus as amended or supplemented) or
any omission or alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements therein, in light of
<PAGE>

Jefferies & Company, Inc.
Bear, Stearns & Co. Inc.
Johnson Rice & Company L.L.C.
, 1997
Page 25

the circumstances under which they were made, not misleading; provided,
however, the Company will not be liable in any such case to the extent any such
loss, expense, damage, liability or claim arises out of or is based upon any
untrue statement or omission or alleged untrue statement or omission that has
been made therein or omitted therefrom in reliance upon and in conformity with
the information provided in writing to the Company by or on behalf of any
Underwriter, expressly for use in the Registration Statement or the Prospectus;
and provided, further that with respect to any untrue statement or omission or
alleged untrue statement or omission made in any Preliminary Prospectus the
indemnity agreement contained in this Section 7(a) shall not inure to the
benefit of any such indemnified Underwriter or its respective officers,
shareholders, employees, directors and agents, and the Company shall not be
liable to any such indemnified Underwriter or its respective officers,
shareholders, employees, directors and agents, from whom the person asserting
any such losses, claims, expense, damage, or liabilities purchased the Shares
concerned, to the extent that any such loss, claim, expense, damage or liability
of such indemnified Underwriter or its respective officers, shareholders,
employees, directors, and agents results from the fact that there was not sent
or given to such person at or prior to the written confirmation of the sale of
such shares to such person, a copy of the Prospectus, as the same may be amended
or supplemented, and the untrue statement or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact in such
Preliminary Prospectus was corrected in such Prospectus and the Company had
previously furnished copies thereof to such indemnified Underwriter on a timely
basis to permit the Prospectus (as the same may be amended or supplemented) to
be sent or given. The Company agrees that the only such information provided in
writing by or on behalf of any Underwriter to the Company, expressly for use in
the Registration Statement or the Prospectus, is that information contained in
the table and the second, third, fifth and eighth paragraphs following the table
in the section of the Prospectus entitled "Underwriting" and the last paragraph
on the cover page of the Prospectus. The foregoing indemnity agreement shall be
in addition to any liability that the Company may otherwise have.

(b) The Selling Stockholders agree, severally, to indemnify, defend and
hold harmless each Underwriter and its respective officers, shareholders,
employees and directors and any person who controls any Underwriter within the
meaning of Section 15 of the Act from and against any loss, expense, liability
or claim (including the reasonable cost of investigating such claim) that,
jointly or severally, any such Underwriter or any such officer, shareholder,
employee, director or controlling person may incur under the Act, the Exchange
Act or otherwise, as such expenses are incurred, insofar as such loss, expense,
liability or claim arises out of or is based upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement (or in the Registration Statement as amended by any post-effective
amendment thereof) or any omission or alleged omission to state a material fact
required to be stated in such Registration Statement or necessary to make the
statements made therein not
<PAGE>

Jefferies & Company, Inc.
Bear, Stearns & Co. Inc.
Johnson Rice & Company L.L.C.
, 1997
Page 26

misleading, or any untrue statement or alleged untrue statement of a material
fact contained in a Prospectus or any omission or alleged omission therefrom of
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that with respect to any untrue statement or
omission or alleged untrue statement or omission made in any Preliminary
Prospectus, the indemnity agreement contained in this Section 7(b) shall not
inure to the benefit of any such indemnified Underwriter or its respective
officers, shareholders, employees and directors, and the Selling Stockholder
shall not be liable to any such indemnified Underwriter or its respective
officers, shareholders, employees and directors, from whom the person asserting
any such losses, claims, damages, or liabilities purchased the Shares concerned,
to the extent that any such loss, claim, damage or liability of such indemnified
Underwriter or its respective officers, shareholders, employees and directors
results from the fact that there was not sent or given to such person at or
prior to the written confirmation of the sale of such Shares to such person, a
copy of the Prospectus, as the same may be amended or supplemented, and the
untrue statement or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact in such Preliminary Prospectus was
corrected in such Prospectus and the Company had previously furnished copies
thereof to such indemnified Underwriter on a timely basis to permit the
Prospectus (as the same may be amended or supplemented) to be sent or given, and
provided further, that the liability of any Selling Stockholder pursuant hereto
shall not exceed an amount equal to the net proceeds received by such Selling
Stockholder from the sale of its Shares hereunder to the Underwriters.

(c) Each Underwriter agrees to indemnify, defend and hold harmless the
Selling Stockholders, and the Company and its officers, shareholders, employees
and directors and any person who controls the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, from and against any
loss, expense, damage, liability or claim (including the reasonable cost of
investigating such claim) that the Selling Stockholders, the Company or any such
officer, shareholder, employee, director or controlling person may incur under
the Act, the Exchange Act or otherwise to the same extent as the provisions of
Section 6(a) above, but only insofar as such loss, expense, damage, liability or
claim arises out of or is based upon any untrue statement or omission or alleged
untrue statement or omission made in reliance on or in conformity with
information relating to such Underwriter furnished in writing to the Company by
or on behalf of such Underwriter, expressly for use in the Registration
Statement or the Prospectus. The Selling Stockholders and the Company agree
that the only information provided in writing by or on behalf of the
Underwriters to the Company, expressly for use in the Registration Statement or
the Prospectus, is that information contained in the table and the second,
third, fifth and eighth paragraphs following the table in the section of the
Prospectus entitled "Underwriting" and the last paragraph on the cover page of
the Prospectus.
<PAGE>

Jefferies & Company, Inc.
Bear, Stearns & Co. Inc.
Johnson Rice & Company L.L.C.
, 1997
Page 27

(d) If any action is brought against an indemnified party under this
Section 7, the indemnified party or parties shall promptly notify the
indemnifying party in writing of the institution of such action (provided that
the failure to give such notice shall not relieve the indemnifying party of any
liability that it may have pursuant to this Agreement, unless and to the extent
the indemnifying party did not otherwise learn of such action and such failure
has resulted in the forfeiture of substantive rights or defenses by the
indemnifying party) and the indemnifying party shall assume the defense of such
action, including the employment of counsel and payment of reasonable expenses.
The indemnified party or parties shall have the right to employ its or their own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of the indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by the indemnifying party in
connection with the defense of such action, (ii) the indemnifying party shall
not have employed counsel reasonably satisfactory to the indemnified party to
take charge of the defense of such action within a reasonable time after notice
of the institution of such action, (iii) such indemnified party or parties shall
have reasonably concluded that there may be defenses available to it or them
that are different from or additional to those available to the indemnifying
party or (iv) the use of counsel chosen by the indemnifying party to represent
the indemnified party would present such counsel with a conflict of interest (in
which case the indemnifying party shall not have the right to direct the defense
of such action on behalf of the indemnified party or parties), in any of which
events such fees and expenses shall be borne by the indemnifying party and paid
as incurred; provided that the indemnifying party shall only be responsible for
the fees and expenses of one counsel for the indemnified party or parties
hereunder. Anything in this paragraph to the contrary notwithstanding, the
indemnifying party shall not be liable for any settlement of any such claim or
action effected without its written consent, which consent shall not be
unreasonably withheld.

(e) If the indemnification provided for in this Section 7 is unavailable to
an indemnified party under subsection (a), (b) or (c) of this Section 7 in
respect of any losses, damages, expenses, liabilities or claims referred to
therein, then each applicable indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, damages,
expenses, liabilities or claims (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company and the Selling
Stockholders on the one hand and the Underwriters on the other hand from the
offering of the Shares or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company and the Selling Stockholders on the one hand and
the Underwriters on the other hand in connection with the statements or
omissions that resulted in such losses, damages, expenses, liabilities or
claims, as well as any other relevant equitable considerations. The relative
benefits received by the Company and each Selling Stockholder on the one hand
and the Underwriters on the other hand
<PAGE>

Jefferies & Company, Inc.
Bear, Stearns & Co. Inc.
Johnson Rice & Company L.L.C.
, 1997
Page 28

shall be deemed to be in the same proportion as the total proceeds from the
offering (net of underwriting discounts and commissions but before deducting
expenses) received by the Company and such Selling Stockholder bear to the total
underwriting discounts and commissions received by the Underwriters. The
relative fault of the Company and each Selling Stockholder on the one hand and
of the Underwriters on the other hand shall be determined by reference to, among
other things, whether the untrue statement or alleged untrue statement of a
material fact or omission or alleged omission relates to information supplied by
the Company, such Selling Stockholder or by the Underwriters, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The amount paid or payable by a party as a
result of the losses, damages, expenses, liabilities and claims referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any claim
or action.

(f) The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in Section 7(e) above. Notwithstanding
the provisions of this Section 7, no Underwriter shall be required to contribute
any amount in excess of the underwriting discount received by it by reason of
such untrue statement or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.

SECTION 8. Representations, Warranties and Agreements to Survive Delivery.
The respective indemnity and contribution agreements contained in Section 7, and
the covenants, representations and warranties of the Company and the Selling
Stockholders contained in this Agreement or contained in certificates of
officers of the Company and the Selling Stockholders submitted pursuant hereto,
shall remain in full force and effect, regardless of any investigation, or
statement as to the results thereof, made by or on behalf of any Underwriter or
any of its respective officers, employees, directors, shareholders, agents or
any person who controls any Underwriters, or by or on behalf of the Company or
the Selling Stockholders or any of the officers or directors or any controlling
person of the Company, and will survive delivery of and payment for the Shares.

SECTION 9. Default of Underwriters. If any Underwriter or Underwriters
default in their obligations to purchase Shares hereunder on either the Firm
Shares Closing Date or the Additional Shares Closing Date and the aggregate
number of Shares that such defaulting Underwriter or Underwriters agreed but
failed to purchase does not exceed 10 percent of the total number of Shares that
the Underwriters are obligated to purchase on such Closing Date, the
<PAGE>

Jefferies & Company, Inc.
Bear, Stearns & Co. Inc.
Johnson Rice & Company L.L.C.
, 1997
Page 29

Representatives may make arrangements satisfactory to the Company and the
Selling Stockholders for the purchase of such Shares by other persons, including
any of the Underwriters, but if no such arrangements are made by such Closing
Date the non-defaulting Underwriters shall be obligated severally, in proportion
to their respective commitments hereunder, to purchase the Shares that such
defaulting Underwriters agreed but failed to purchase on such Closing Date. If
any Underwriter or Underwriters so default and the aggregate number of Shares
with respect to which such default or defaults occur exceeds 10 percent of the
total number of Shares that the Underwriters are obligated to purchase on such
Closing Date and arrangements satisfactory to the Representatives and the
Company and the Selling Stockholders for the purchase of such Shares by other
persons are not made within 36 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter, the
Company or the Selling Stockholders, except as provided in this Section 9
(provided that if such default occurs with respect to the Additional Shares
after the Firm Shares Closing Date, this Agreement will not terminate as to the
Firm Shares). As used in this Agreement, the term "Underwriter" includes any
person substituted for an Underwriter under this Section. Nothing herein will
relieve a defaulting Underwriter from liability for its default.

SECTION 10. Notices. All notices and other communications hereunder
will be in writing and shall be deemed to have been duly given if mailed or
transmitted by standard form of telecommunication. Notices to the Underwriters
shall be directed to the Underwriters in care of:

Jefferies & Company, Inc.
[11100 Santa Monica Boulevard
Los Angeles, California 90071
Attention of Jerry Gluck, Esq.]

with a copy to: Robert D. Campbell, Esq.
Thompson & Knight, P.C.
1700 Pacific Avenue, Suite 3300
Dallas, Texas 75201

or, if sent to the Company or any of the Selling Stockholders, directed to:

Friede Goldman International Inc.
525 East Capitol Street
Suite 402
Jackson, Mississippi 39210
<PAGE>

Jefferies & Company, Inc.
Bear, Stearns & Co. Inc.
Johnson Rice & Company L.L.C.
, 1997
Page 30

Attention of J.L. Holloway

with a copy to: Thomas P. Mason, Esq.
Andrews & Kurth L.L.P.
4200 Texas Commerce Tower
Houston, Texas 77002

SECTION 11. Parties. This Agreement shall inure to the benefit of and
be binding upon the Underwriters, the Company and the Selling Stockholders and
their respective successors, assigns, heirs and legal representatives. Nothing
expressed or mentioned in this Agreement is intended or shall be construed to
provide any person, firm or corporation, other than the Underwriters, the
Company and the Selling Stockholders and their respective successors, assigns,
heirs and legal representatives and the controlling persons, officers,
employees, directors and shareholders referred to in Sections 7 and 8 and their
respective heirs and legal representatives, any legal or equitable right, remedy
or claim under or in respect of this Agreement or any provision herein or
therein contained. This Agreement and all conditions and provisions hereof are
intended to be for the sole and exclusive benefit of the Underwriters, the
Company and the Selling Stockholders and their respective successors, assigns,
heirs and legal representatives, and such controlling persons, shareholders,
officers and directors and their respective heirs and legal representatives, and
for the benefit of no other person, firm or corporation. No purchaser of Shares
from any Underwriter shall be deemed to be a successor by reason merely of such
purchase.

SECTION 12. Governing Law and Time. This Agreement shall be governed
and construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed in such State. Specified times of day refer
to New York time, unless otherwise specified.

SECTION 13. Counterparts. This Agreement may be executed 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.
<PAGE>

Jefferies & Company, Inc.
Bear, Stearns & Co. Inc.
Johnson Rice & Company L.L.C.
, 1997
Page 31

If the foregoing is in accordance with your understanding of our agreement,
please sign and return a counterpart hereof, whereupon this instrument, along
with all counterparts, will become a binding agreement among the Company, the
Selling Stockholders and the Underwriters in accordance with its terms.

Very truly yours,

FRIEDE GOLDMAN INTERNATIONAL INC.

By:------------------------------------
Name:----------------------------------
Title:---------------------------------

SELLING STOCKHOLDERS

---------------------------------------
J.L. Holloway

---------------------------------------
Carl M. Crawford

---------------------------------------
Ronald W. Schnoor

The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written.

JEFFERIES & COMPANY, INC.
BEAR, STEARNS & CO. INC.
JOHNSON RICE & COMPANY L.L.C.
As Representatives of the Several Underwriters

JEFFERIES & COMPANY, INC.

By:--------------------------------------------
Name:------------------------------------------
<PAGE>

Jefferies & Company, Inc.
Bear, Stearns & Co. Inc.
Johnson Rice & Company L.L.C.
, 1997
Page 32

Title:-----------------------------------------
<PAGE>

SCHEDULE I

SELLING STOCKHOLDERS
--------------------
<TABLE>
<CAPTION>

Name Number of Shares
- ---- ----------------
<S> <C>

J. L. Holloway 1,215,750
Carl M. Crawford 224,400
Ronald W. Schnoor 59,850
</TABLE>
<PAGE>

SCHEDULE II

UNDERWRITERS
------------

<TABLE>
<CAPTION>
Number of Firm
Shares to be
Name of Underwriter Purchased
--------------------------------- --------------
<S> <C>
Jefferies & Company, Inc.
Bear, Stearns & Co. Inc.
Johnson Rice & Company L.L.C.

______________
Total [3,800,000]

</TABLE>
<PAGE>

SCHEDULE III

SUBSIDIARIES
------------

<TABLE>
<CAPTION>
Name Jurisdiction Ownership %
- ------------------------ ------------ -----------
<S> <C> <C>
HAM Marine, Inc. Mississippi 100%
Friede & Goldman, Ltd. Louisiana 100%
</TABLE>
<PAGE>

EXHIBIT A

______________, 1997

Jefferies & Company, Inc.
Bear, Stearns & Co. Inc.
Johnson Rice & Company L.L.C.
c/o Jefferies & Company, Inc.
909 Fannin Street
Houston, Texas 77010

Dear Sirs:

The undersigned has been informed that you, as representatives of the
underwriters (the "Underwriters"), are planning to enter into an Underwriting
Agreement (the "Underwriting Agreement") with Friede Goldman International Inc.,
a Delaware corporation (the "Company"), and certain stockholders of the Company
(the "Selling Stockholders"), providing for the purchase by the Underwriters of
[2,300,000] shares of the Company's common stock, $.01 par value (the "Common
Stock"), from the Company and an aggregate of [1,500,000] shares of Common Stock
from the Selling Stockholders, with the right to purchase up to [570,000]
additional shares of Common Stock from the Company to cover over-allotments.

To induce you to enter into the Underwriting Agreement and in consideration
of the purchase and public offering by you of such shares of Common Stock (which
the undersigned considers to be in the best interests of the Company and its
stockholders and to the undersigned's benefit), the undersigned agrees with the
Underwriters that for a period of 180 days from the date of the final Prospectus
relating to such sale of Common Stock covered by the Underwriting Agreement, the
undersigned will not without the prior written consent of Jefferies & Company,
Inc., or unless pursuant to bona fide gifts to persons or entities who agree to
be bound by the provisions of this letter, offer, sell or contract to sell, or
otherwise dispose of, directly or indirectly, or announce the offering of, any
shares of Common Stock beneficially owned by the undersigned or any securities
convertible into, or exchangeable for, shares of Common Stock.

Very truly yours,

A-1
<PAGE>

EXHIBIT B

(i) the Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with full
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Registration Statement and the
Prospectus;

(ii) each Subsidiary has been duly organized and is validly existing as a
corporation in good standing under the laws of its jurisdiction of incorporation
and has full corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Registration
Statement and the Prospectus;

(iii) each of the Company and the Subsidiaries is duly registered and
qualified to conduct its business and is in good standing in each jurisdiction
where the nature or location of its properties (owned or leased) or the conduct
of its business requires such registration or qualification, except where the
failure so to register or qualify would not have a Material Adverse Effect;

(iv) all the outstanding shares of capital stock of each Subsidiary have
been duly authorized and validly issued and are fully paid and nonassessable,
and all outstanding shares of capital stock of each such Subsidiary are owned of
record and, to such counsel's knowledge, beneficially by the Company free and
clear of any perfected security interests and, to such counsel's knowledge, any
other security interests, liens, encumbrances, equities, other rights to
purchase or other claims;

(v) there are no preemptive or other rights to subscribe for or to purchase
shares of capital stock of the Company pursuant to any statute, the certificate
of incorporation or bylaws of the Company or, to such counsel's knowledge, any
agreement or other instrument to which the Company is a party as to which any
person can successfully maintain an action, suit or proceeding against the
Company for violation of his or her preemptive rights with respect to the
issuance of any share of capital stock of the Company;

(vi) to such counsel's knowledge, there is no pending or threatened action,
suit or proceeding before any court or governmental agency, authority or body or
any arbitrator involving the Company or any of the Subsidiaries required to be
disclosed in the Prospectus that is not adequately disclosed in the Prospectus;

(vii) to such counsel's knowledge, there is no contract or other document
required to be described in the Registration Statement or Prospectus, or to be
filed as an exhibit, that is not described or filed as required;

(viii) all of the Company's issued and outstanding capital stock has been
duly authorized and validly issued and is fully paid and nonassessable as of the
date hereof and is as set forth in the Prospectus under the heading
"Capitalization", subject to the assumptions set forth therein,

B-1
<PAGE>

and the authorized capital stock of the Company conforms in all material
respects to the descriptions thereof under the caption "Description of Capital
Stock" in the Prospectus;

(ix) the Registration Statement has become effective under the Act; any
required filing of the Prospectus, and any supplements thereto, pursuant to Rule
424(b) has been made in the manner and within the time period required by Rule
424(b); to such counsel's knowledge, no stop order suspending the effectiveness
of the Registration Statement has been issued, no proceedings for that purpose
have been instituted or threatened, and the Registration Statement and the
Prospectus (other than the financial statements and supporting schedules
contained therein as to which such counsel need express no opinion) comply as to
form in all material respects with the requirements of the Act and the
applicable Act Regulations; and such counsel has no reason to believe that at
the Effective Date the Registration Statement contained any untrue statement of
a material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading or that the
Prospectus includes any untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;

(x) the statements in the Registration Statement and Prospectus, insofar as
they are descriptions of contracts, agreements or other legal documents, are
accurate in all material respects and present fairly the information required to
be shown;

(xi) the Underwriting Agreement has been duly authorized, executed and
delivered by the Company and the Company has full corporate power and authority
to enter into the Underwriting Agreement;

(xii) no consent, approval, authorization or order of any court or
governmental agency or body is required in connection with the consummation of
the transactions contemplated by the Underwriting Agreement, except such as have
been obtained under the Act and such as may be required under the blue sky laws
of any jurisdiction in connection with the purchase and distribution of the
Shares by the Underwriters and such other approvals (specified in such opinion)
as have been obtained;

(xiii) neither the execution and delivery of the Underwriting Agreement,
nor the consummation of any other of the transactions therein contemplated, nor
the fulfillment of the terms thereof, will result in a breach of, or constitute
a default under, (a) the terms of any indenture or other agreement or instrument
(i) to which the Company or any of the Subsidiaries is a party or by which it is
bound and (ii) that is either filed as an exhibit to the Registration Statement
or is identified to such counsel as being material to the Company and the
Subsidiaries, taken as a whole, and listed on a schedule to such counsel's
opinion, (b) any law, statute, rule, order, regulation or decree of any court,
regulatory body, administrative agency, governmental body or arbitrator having
jurisdiction over the Company or any of the Subsidiaries of which such counsel
is aware and that is known by such counsel to be applicable to the Company or
any of the Subsidiaries (where such conflict, breach or default would have a
Material Adverse Effect) or (c) the certificate of incorporation or bylaws of
the Company;

B-2
<PAGE>

(xiv) the Shares to be sold by the Company have been duly and validly
authorized by the Company for issuance, and the Company has full corporate power
and authority to issue, sell and deliver the Shares; and, when the Shares are
issued and delivered against payment therefor as provided by the Underwriting
Agreement, the Shares will have been validly issued and will be fully paid and
nonassessable, and the issuance of such Shares will not be subject to any
statutory preemptive rights or similar statutory rights or, to such counsel's
knowledge, any other preemptive or similar rights;

(xv) the certificates for the Shares are in due and proper form under
Delaware law and the bylaws of the Company and conform with the form of
certificates duly authorized by the Board of Directors of the Company;

(xvi) the Shares, when issued, will conform in all material respects to
the description thereof contained in the Prospectus and the Registration
Statement under the caption "Description of Capital Stock";

(xvii) to such counsel's knowledge, no holder of any securities of the
Company or any other person has the right, contractual or otherwise, to cause
the Company to sell or otherwise issue to such person, or to permit such person
to underwrite the sale of, any of the Shares or the right to have any Common
Stock or other securities of the Company included in the Registration Statement
or the right, as a result of the filing of the Registration Statement, to
require registration under the Act of any shares of Common Stock or other
securities of the Company that has not been waived or lapsed; and

(xviii) the Company is not an "investment company" as defined under the
Investment Company Act or subject to registration under such Act.

In addition, such counsel shall also state that such counsel has
participated in conferences with representatives of the Underwriters, officers
and other representatives of the Company and representatives of the independent
certified public accountants of the Company and the Subsidiaries at which
conferences the contents of the Registration Statement and the Prospectus and
related matters were discussed and that, although such counsel is not passing
upon and does not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement and the
Prospectus (except as set forth in clauses (viii), (x) and (xvi) of this Exhibit
B), on the basis of the foregoing (relying as to materiality upon officers and
other representatives of the Company), no facts have come to the attention of
such counsel that lead such counsel to believe that the Registration Statement
at the time it became effective or at the Representation Date and the Closing
Date contained or contains an untrue statement of a material fact or omitted or
omits to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading or that the Prospectus, at
the Representation Date (unless the term "Prospectus" refers to a prospectus
that has been provided to the Underwriters by the Company for use in connection
with the offering of the Shares that differs from the Prospectus on file at the
Commission at the Representation Date, in which case at the time it is first
provided to the Underwriters for such use) or at the Closing Date, contained or
contains an untrue statement of a material fact or omitted or omits to state a
material fact

B-3
<PAGE>

required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, that such counsel need not express any comment with
respect to the financial statements and schedules contained therein, including
the notes thereto, the auditors' report thereon and the related summary of
accounting policies.

The opinions of such counsel relate solely to, are based solely upon and
are limited exclusively to the laws of the State of Delaware and the federal
laws of the United States of America, to the extent applicable.

B-4
<PAGE>

EXHIBIT C

(i) each of the Underwriting Agreement and the Power of Attorney and
Custody Agreement has been duly executed and delivered by or on behalf of each
Selling Stockholder;

(ii) to such counsel's knowledge, each Selling Stockholder has full power
and authority to sell, assign, transfer and deliver the Shares to be sold by it;

(iii) to such counsel's knowledge, the execution and delivery of the
Underwriting Agreement and the Power of Attorney and Custody Agreement by or on
behalf of each Selling Stockholder and the sale of the Shares pursuant to the
terms thereof will not conflict with or violate, result in a breach of or
constitute a default under the terms or provisions of any agreement, indenture,
mortgage or other instrument to which such Selling Stockholder is a party or by
which it or any of its assets or property is bound and which has been identified
to such counsel as being material to such Selling Stockholder, or any court
order or decree or any laws, rule, or regulation (except such as may be required
under the Act or such as may be required by the NASD or under state securities
or blue sky laws governing the purchase and distribution of the Shares)
applicable to such Selling Stockholder or to any of the property or assets of
such Selling Stockholder, which breach, default or violation would impair such
Selling Stockholder's ability to sell Shares pursuant to the terms of the
Underwriting Agreement;

(iv) the Power of Attorney and Custody Agreement is valid and binding on
each Selling Stockholder and each Selling Stockholder has full legal right and
authority to sell, transfer and deliver in the manner provided in this Agreement
and the Power of Attorney and Custody Agreement the Shares being sold by such
Selling Stockholder under the Underwriting Agreement; and

(v) immediately prior to the delivery of certificates on the Closing Date,
each of the Selling Stockholders was the sole record owner of the Shares to be
sold by it, and upon delivery of the Shares that each Selling Stockholder has
agreed to sell pursuant to the Underwriting Agreement and payment therefor as
contemplated therein and assuming the Underwriters are acquiring the Shares in
good faith without notice of any adverse claims, the Underwriters will acquire
valid title to such Shares free and clear of any adverse claims.

C-1

<PAGE>

EXHIBIT 4.1

SPECIMEN COMMON STOCK CERTIFICATE

The common stock certificate indicates that the corporation is incorporated
under the laws of the State of Delaware, the par value of the shares is $.01 and
that the shares are denominated Common Stock. The certificate further states
that it is transferable in New York, New York and lists the CUSIP number, 358430
10 6. The certificate states that the shares are fully paid and non-assessable
shares, and the certificate bears the seal of the corporation along with the
signatures of the President and the Secretary of the corporation and the
countersignature of American Stock Transfer & Trust Company of New York,
Transfer Agent and Registrar.

The reverse side of the certificate is as follows:

Friede Goldman International Inc.

Any shareholder may obtain, without charge, by request to the Office of the
Secretary of the Corporation, a statement of the rights, preferences, powers,
privileges and restrictions granted to or imposed upon each class or series of
shares authorized to be issued by the Corporation and upon the holders thereof.

The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>

<S> <C> <C>
TEN COM -- as tenants in common
TEN END -- as tenants by the entireties
JT TEN -- as joint tenants with right of survivorship and not as tenants in common
</TABLE>

UNIF GIFT MIN ACT -- ________________ Custodian _________________
(Cust) (Minor)

under Uniform Gift to Minors Act ___________________________________
(State)

Additional abbreviations may also be used though not in the above list.

For Value Received ----------------------------------------------------
hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE

(NAME AND ADDRESS OF TRANSFEREE SHOULD BE PRINTED OR TYPEWRITTEN)

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

shares represented by the within Certificate and do hereby irrevocably
constitute and appoint Attorney to transfer the said
shares on the share register of the within-named Corporation, with full
power of substitution in the premises.

Dated ------------

NOTICE: The signature to this Assignment must correspond with the name(s) as
written upon the face of the certificate in every particular without
alternation or enlargement or any change whatever.

-------------------------------------
SIGNATURE

<PAGE>

EXHIBIT 4.3

AMENDMENT NO. 1
TO
REGISTRATION RIGHTS AGREEMENT

Amendment No. 1 to Registration Rights Agreement (this "Amendment"),
dated as of July ___, 1997, is by and among J.L. Holloway, Carl M. Crawford,
Ronald W. Schnoor, James A. Lowe, III, John F. Alford, Holloway Partners, L.P.,
Crawford Children's Trust, and Bodin Children's Trust, and Friede Goldman
International Inc. (the "Company").

RECITALS
--------

WHEREAS, the Company, J.L. Holloway, Carl M. Crawford, Ronald W.
Schnoor, James A. Lowe, III and John F. Alford desire to amend the Registration
Rights Agreement, dated as of May 21, 1997, by and among such parties (the
"Registration Rights Agreement") to include Holloway Partners, L.P., Crawford
Children's Trust and Bodin Children's Trust within the definition of "Holders"
therein;

AGREEMENT
---------

NOW, THEREFORE, in consideration of the premises and agreements
contained herein, the parties hereto hereby agree as follows:

1. The Registration Rights Agreement is hereby amended by changing
the definition of "Holders" to include J.L. Holloway, Carl M. Crawford,
Ronald W. Schnoor, James A. Lowe, III, John F. Alford, Holloway Partners,
L.P., Crawford Children's Trust and Bodin Children's Trust.

2. Section 12 of the Registration Rights Agreement is hereby amended
to include the following in the list of recipients for notice:

If to Holloway Partners, L.P.:

J.L. Holloway
525 E. Capital Street
Jackson, Mississippi 39201
Telecopier No.: (601) 352-0588

If to Crawford Children's Trust or Bodin Children's Trust:

[Name of Trustee]
<PAGE>

IN WITNESS WHEREOF, the undersigned parties have caused this Amendment
to be signed on the date first above written.

FRIEDE GOLDMAN INTERNATIONAL INC.

By: -----------------------------
Name: J. L. Holloway
Title: Chairman of the Board,
President and Chief
Executive Officer

---------------------------------
J. L. Holloway

---------------------------------
Carl M. Crawford

---------------------------------
Ronald W. Schnoor

---------------------------------
James A. Lowe III

---------------------------------
John F. Alford

HOLLOWAY PARTNERS, L.P.

By: ------------------------------
Name:
Title:

CRAWFORD CHILDREN'S TRUST

By: ------------------------------
Name:
Title:

BODIN CHILDREN'S TRUST

By: ------------------------------
Name:
Title:

<PAGE>

EXHIBIT 5.1

June 30, 1997

Friede Goldman International Inc.
52 E. Capitol Street
Suite 402
Jackson, Mississippi 39201

Gentlemen:

We have acted as counsel for Friede Goldman International Inc., a Delaware
corporation (the "Company"), in connection with the Company's Registration
Statement on Form S-1 (the "Registration Statement") relating to the
registration under the Securities Act of 1933, as amended, of the offering and
sale of up to an aggregate of 4,370,000 shares (the "Shares") of common stock,
$.01 par value per share (the "Common Stock"). The Shares include 2,300,000
shares being offered by the Company, 1,500,000 shares being offered by certain
selling stockholders and 570,000 shares of Common Stock being offered by the
Company which may be sold pursuant to an over-allotment option granted to the
Underwriters named in the Registration Statement.

As the basis for the opinion hereinafter expressed, we have examined such
statutes, regulations, corporate records and documents, certificates of
corporate and public officials, and other instruments as we have deemed
necessary or advisable for the purposes of this opinion. In such examination we
have assumed the authenticity of all documents submitted to us as originals and
the conformity with the original documents of all documents submitted to us as
copies.

Based upon the foregoing and having due regard for such legal
considerations as we deem relevant, we are of the opinion that the Shares have
been duly authorized and, when sold in the manner described in the Registration
Statement, will be legally issued and constitute fully paid and nonassessable
shares of Common Stock.

This opinion is limited in all respects to the General Corporation Law of
the State of Delaware and the laws of the United States of America insofar as
such laws are applicable.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the heading
"Legal Matters" in the Prospectus without admitting that we are "experts" under
the Securities Act of 1933, as amended, or the rules and regulations of the
Commission issued thereunder, with respect to any part of the Registration
Statement, including this exhibit.
<PAGE>

This opinion is rendered solely for your benefit in connection with the
above matter and may not be relied upon in any manner by any other person or
entity without our express written consent.

Very truly yours,

ANDREWS & KURTH L.L.P.

<PAGE>

EXHIBIT 10.3

AMENDMENT NO. 1 TO
EMPLOYMENT AND NON-COMPETITION AGREEMENT

This Amendment No. 1 to Employment and Non-Competition Agreement (the
"Amendment"), effective as of January 1, 1997, is by and among Friede Goldman
International Inc. corporation (the "Company"), and J.L. Holloway ("Employee").

WHEREAS, the Company and the Employee entered into an Employment and Non-
Competition Agreement, effective as of January 1, 1997 (the "Agreement"); and

WHEREAS, the Company and the Employee desire to amend certain provisions of
such Agreement;

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. The Recitals of the Agreement are hereby amended and restated to read,
in their entirety, as follows:

WHEREAS, the Company desires to engage Employee and Employee desires to
accept such engagement;

2. Section 2(a) of the Agreement is hereby amended and restated to read,
in its entirety, as follows:

Base Salary. Beginning on the date of this Agreement, the base salary
payable to Employee shall be $350,000.00 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.

3. Section 3(a) of the Agreement, exclusive of paragraphs (1), (2) and
(3) thereunder, is hereby amended and restated to read, in its entirety, as
follows:

thirty (30) days immediately following the termination of this Agreement,
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:

4. The last sentence of Section 4(b) of the Agreement is hereby amended
and restated to read, in its entirety, as follows:

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 a period of thirty (30) days.

5. Section 4(d) of the Agreement is hereby amended and restated to read,
in its entirety, as follows:

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 a
period of thirty (30) days. If Employee resigns or otherwise terminates his
employment without cause pursuant to this paragraph 4(d), Employee shall receive
no severance compensation.

6. Section 4(e) of the Agreement is hereby deleted therefrom.

7. Section 11 of the Agreement is hereby deleted therefrom.

8. Defined terms used but not otherwise defined herein shall have the
meanings set forth in the Agreement.

IN WITNESS WHEREOF, the parties to this Amendment have caused this
Amendment to be executed as of the day and year first written above.

FRIEDE GOLDMAN INTERNATIONAL INC.

By: ________________________________
Name:
Title:
<PAGE>

EMPLOYEE:

_____________________________________
J.L. Holloway

<PAGE>

EXHIBIT 10.5

AMENDMENT NO. 1 TO
EMPLOYMENT AND NON-COMPETITION AGREEMENT

This Amendment No. 1 to Employment and Non-Competition Agreement (the
"Amendment"), effective as of January 1, 1997, is by and among HAM Marine,
Inc., a Mississippi corporation (the "Company"), and
("Employee").

WHEREAS, the Company and the Employee entered into an Employment and Non-
Competition Agreement, effective as of January 1, 1997 (the "Agreement"); and

WHEREAS, the Company and the Employee desire to amend certain provisions of
such Agreement;

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. Section 3(a) of the Agreement, exclusive of paragraphs (1), (2) and (3)
thereunder, is hereby amended and restated to read, in its entirety, as follows:

Employee recognizes that the Company's willingness to enter into this
Agreement 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
an Employee of the Company, Employee agrees that the Employee shall not,
for a period of thirty (30) days immediately following the termination of
this Agreement, 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:

2. The last sentence of Section 4(b) of the Agreement is hereby amended
and restated to read, in its entirety, as follows:

3. Section 4(d) of the Agreement is hereby amended and restated to read,
in its entirety, as follows:

<PAGE>

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 a period of thirty (30) days. If Employee resigns or otherwise
terminates his employment without cause pursuant to this paragraph 4(d),
Employee shall receive no severance compensation.

4. Section 4(e) of the Agreement is hereby deleted therefrom.

5. Section 11 of the Agreement is hereby deleted therefrom.

6. Defined terms used but not otherwise defined herein shall have the
meanings set forth in the Agreement.

IN WITNESS WHEREOF, the parties to this Amendment have caused this
Amendment to be executed as of the day and year first written above.

HAM MARINE, INC.

By: ----------------------------------------
Name:
Title:

EMPLOYEE:

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

<PAGE>

EXHIBIT 10.6

EMPLOYMENT AND STOCK COMPENSATION AGREEMENT
-------------------------------------------

This Employment and Stock Compensation Agreement (the "Agreement") is
entered into this the 21st day of May, 1997, by and among Friede Goldman
International Inc., a Delaware corporation (the "Company"), HAM Marine, Inc. a
Mississippi corporation ("HAM Marine"), and John F. Alford, an adult resident
citizen of Jackson, Hinds County, Mississippi ("Alford").

WHEREAS, Alford has been employed by HAM Marine in various capacities since
October, 1996; and

WHEREAS, effective February 14, 1997, HAM Marine issued to Alford certain
shares of its no par value common stock in consideration for past services and
certain incentive stock options as encouragement for future services; and

WHEREAS, the Company desires to employ Alford as the Company's Chief
Financial Officer and Senior Vice President, and Alford desires to accept such
employment; and

WHEREAS, HAM Marine deems it to be in its best interest that Alford provide
services to the Company.

NOW, THEREFORE, in consideration of the premises and the mutual covenants
and representations set forth herein, the Company, HAM Marine and Alford hereby
agree as follows:
<PAGE>

ARTICLE I - EMPLOYMENT
----------------------

1.1 Term of Employment. Alford's employment with the Company shall continue
until terminated by the Company or voluntarily by Alford (the "Term"). Alford
acknowledges that his employment with the Company is terminable at the will of
the Company and that he has no rights of continued employment with the Company.

1.2 Duties. Alford shall be employed full-time as Chief Financial Officer
and Senior Vice President of the Company, reporting directly to the President of
the Company. Alford hereby accepts such employment and undertakes to use his
best efforts to discharge his duties and responsibilities. During the Term of
this Agreement, Alford shall devote substantially his full time to the discharge
of his duties and responsibilities under this Agreement, except for vacations in
accordance with this Agreement and with the Company's vacation policy applicable
to executive personnel.

1.3 Compensation. During the Term, Alford shall be entitled to a salary of
$100,000.00 per year payable in equal monthly installments of $8,333.33, as the
same may be increased from time to time by the Board of Directors of the
Company.

2
<PAGE>

1.4 Compensation-Stock. As of February 14, 1997, and as additional
compensation, HAM Marine transferred to Alford, free and clear of liens and
encumbrances, 5,000 shares of HAM Marine's 2,000,000 authorized shares of no par
value voting common stock. Also effective February 14, 1997, HAM Marine granted
Alford incentive stock options for an additional 5,000 shares of HAM Marine's no
par value voting common stock at an option price of $18.33 per share which HAM
Marine and Alford agree to be the current fair market value of HAM Marine's
common stock on that date. The incentive stock options (i) shall become vested,
with respect to the number of shares specified in the table below, at the dates
indicated in such table in the event Alford remains employed by the Company
through the date specified with respect to such shares and (ii) shall be
exercisable, in whole or in part, with respect to the number of shares covered
by vested options after the applicable vesting date therefor, by payment of the
applicable exercise price specified in the table below:

EXERCISE
PRICE
VESTING DATE NUMBER OF SHARES PER SHARE
------------ ---------------- ---------

January 1, 1999 1,666 $18.33

January 1, 2000 1,667 $18.33

January 1, 2001 1,667 $18.33

3
<PAGE>

TOTAL 5,000

All vested incentive stock options granted to Mr. Alford shall expire on
December 31, 2006, unless sooner exercised by Mr. Alford. All unvested
incentive stock options shall expire on the date of termination of Alford's
employment with the Company. In the event that HAM Marine is merged or enters
into a stock exchange agreement with the Company, such options shall be
converted into the number of options of the Company, in the same ratio as the
then outstanding shares of HAM Marine are converted into shares of the Company.
The exercise price per share shall be adjusted accordingly.

In the event that HAM Marine, or the Company (in the event of a merger or
stock exchange between HAM Marine and the Company) sells all or a substantial
portion of its operating assets, is merged with another entity or experiences a
change of ownership of more than fifty percent (50%) of its equity ownership in
any twelve (12) month period, then the incentive stock options granted to Alford
shall become exercisable immediately prior to such sale, merger or change of
ownership.

1.5 No Guaranty of Employment. The representation of HAM Marine to Alford
that HAM Marine will issue additional shares of

4
<PAGE>

HAM Marine's common stock to Alford in the event of his continued employment
with the Company is not to be construed as a guaranty by the Company or HAM
Marine of the continued employment of Alford, nor is it to be construed that
Alford has any rights in or to any unissued shares of HAM Marine's or the
Company's common stock other than the shares specifically covered by this
Agreement. Notwithstanding the foregoing sentence, upon the termination of
Alford's employment, for any reason, by the Company or voluntarily by Alford,
Alford shall have no rights in or to any shares of the common stock of HAM
Marine or the Company, as the case may be, or options to purchase shares which
options are not yet vested in Alford pursuant to Section 1.4 above.

1.6 Expense Reimbursements. The Company shall reimburse Alford for
business expenses reasonably incurred in connection with his employment in
accordance with the Company's reimbursement practice for executive officers upon
presentation of adequate documentation.

1.7 Benefits.

(a) Alford shall be entitled to paid vacation and sick leave as
determined in accordance with the

5
<PAGE>

Company's vacation and sick leave policies applicable to
executive personnel as in effect from time to time; provided,
however, that Alford shall be entitled to at least two (2) weeks'
paid vacation;

(b) Alford shall be entitled to receive all employee benefits and to
participate in any employee benefits plans or programs as are
generally offered to or provided for executives of the Company
from time to time, including, without limitation, participation
in the Section 401(k) plan and the payment of full medical and
dental insurance premiums for Alford.

1.8 Working Facilities. The Company shall furnish Alford with such
office, secretarial and technical facilities and assistance as are suitable for
his position and adequate for the performance of his duties.

ARTICLE II - COVENANTS OF EMPLOYEE
----------------------------------

2.1 Confidentiality. Alford recognizes the interest of the Company and
its subsidiaries and affiliates in maintaining the

6
<PAGE>

confidential nature of their proprietary and other business and commercial
information. In consideration thereof, during Alford's employment with the
Company and following termination thereof for any reason, Alford shall not
(except as authorized in writing by the Board of Directors of the Company)
publish, disclose or use for his own benefit or for the benefit of a business or
entity other than the Company or otherwise, any secret, confidential,
proprietary or other information not in the public domain which was acquired by
Alford during his employment relating to the Company's or any of its
subsidiaries or affiliates' businesses, operations, customers, suppliers,
products, employees, financial affairs, trade or industrial practices, trade
secrets, technology, know-how or intellectual property. All records, files,
data, documents and the like, relating to suppliers, customers, costs, prices,
systems, methods, personnel, technology and other materials relating to the
Company or its subsidiaries or affiliates shall be and remain the sole property
of the Company and such subsidiaries and affiliates.

7
<PAGE>

ARTICLE III - RESTRICTIONS ON TRANSFER,
----------------------------------------
S CORPORATION AND SECURITIES' PROVISIONS
----------------------------------------

3.1 Restrictions on Transfer of Stock. Alford shall not:

(a) sell, assign, transfer, convey, exchange or in any manner dispose
of all or any portion of HAM Marine's or the Company's stock to
be issued hereunder (the "Stock"), or any interest therein,
(hereinafter referred to as a "Transfer") except
upon compliance with the terms and provisions of this Section
3.1;

(b) make a Transfer of the Stock unless, prior to the Transfer, the
Stock is registered with the appropriate federal and state
securities agencies or, alternatively, an opinion of legal
counsel acceptable to the Corporation is provided to the
Corporation as to the exempt nature of the transaction from
registration requirements of federal and state securities laws;

(c) make a Transfer of the Stock if such Transfer would cause the S
Corporation status of the Corporation to terminate. Specifically,
no Transfer may be made to any person who would cause

8
<PAGE>

the Corporation to have more than the maximum number of
shareholders allowed under the Internal Revenue Code of 1986, as
amended (the "Code"), as then in effect, or to any person or
entity who would not be eligible to be a shareholder of an S
Corporation under the provisions of the Code as in effect at the
time of the purported Transfer; or

(d) pledge, encumber, hypothecate or grant a security interest in the
Stock without the prior written consent of the Corporation, which
consent may be given or withheld in the sole discretion of the
Corporation.

3.2 Waiver of Termination of S Status. In the event that HAM Marine's or
the Company's (as the case may be) status as an S corporation is terminated
inadvertently, and HAM Marine or the Company wishes to obtain a ruling under
Section 1362(f) of the Code, Alford agrees to make any adjustments required by
the Internal Revenue Service pursuant to Section 1362(f)(4) of the Code and
approved by HAM Marine's or the Company's board of directors, as the case may
be. Alford's obligation to make such

9
<PAGE>

adjustments shall continue after Alford has ceased to own stock in the Company
and after this Agreement has terminated.

3.3 Representations of Alford. Alford understands that the Stock has not
been registered under the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "Securities Act"), nor under the
Mississippi Securities Act, as amended, and the rules and regulations thereunder
(the "State Law"), in reliance on certain exemptions from registration/
qualification provided under those laws. Accordingly, Alford understands that
he will not be able to sell or transfer any of the Stock, or any interest
therein, unless such sale or transfer is registered pursuant to applicable
provisions of the Securities Act, the State Law and any other state securities
laws having applicability thereto, respectively, or an exemption from such
registration or qualification requirements is available. Alford hereby agrees
not to sell or transfer the Stock unless either of the foregoing conditions
shall have been satisfied.

Alford hereby represents, warrants and covenants to and with the Company as
follows:

10
<PAGE>

(a) The Stock is being acquired by Alford for his own account, for
investment purposes only, without intention of distributing,
selling or otherwise disposing of the Stock, or any interest
therein, to any other person or entity.

(b) By reason of his business experience, Alford has the capacity to
protect his own financial interest in this transaction and the
offer and sale of the securities has not been accomplished by
publication of any advertisement.

(c) Alford understands that HAM Marine is relying, to a material
degree, on the representations, warranties, and covenants which
pertain in this Agreement in issuing the Stock and hereby
authorizes HAM Marine to act as it sees fit in full reliance on
this understanding.

(d) Alford has been intimately involved in the business of HAM Marine
having been

11
<PAGE>

employed as its financial adviser and as a marketing
representative. As a result, Alford is familiar with and aware of
the past, present and potential prospects of HAM Marine. Alford
agrees that (1) he has had the opportunity to ask questions of,
and to receive answers from, representatives of HAM Marine
relating to HAM Marine's past, current and present operations;
(2) Alford is aware that HAM Marine's business is (i) highly
competitive, and (ii) subject to a number of significant risks of
which HAM Marine has little or no practical control; and (3)
because of HAM Marine's financial condition and such risks and
competitive factors, Alford may never recoup his investment in
the Stock or otherwise liquidate the Stock, or any portion
thereof even in the event of a personal emergency.

12
<PAGE>

(e) Alford has independently evaluated HAM Marine's business and the
value of the Stock, and Alford hereby agrees that he has not
relied upon any representations of HAM Marine, or that of any
other shareholder, officer or director thereof, with regard to
such value. Alford further acknowledges that, except as provided
in Section 3.5, HAM Marine is under no obligation to register the
sale, transfer or other distribution of the Stock, or any part of
it, by him or on his behalf or to take any other action necessary
in order to make compliance with exemption from such registration
available.

3.4 Endorsement on Stock Certificates. Upon execution of this Agreement,
the certificates representing the Stock shall be surrendered to HAM Marine and
endorsed as follows:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED WITHOUT
REGISTRATION OR QUALIFICATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "33 ACT"), OR THE

13
<PAGE>

MISSISSIPPI SECURITIES ACT, AS AMENDED (THE "STATE ACT"), AND,
THEREFORE, CONSTITUTE RESTRICTED SECURITIES, AND NO SALE, TRANSFER OR
OTHER DISPOSITION OF SUCH SECURITIES, OR ANY INTEREST THEREIN, MAY BE
MADE WITHOUT SUCH REGISTRATION OR QUALIFICATION UNDER THE 33 ACT AND
STATE ACT, UNLESS AN EXEMPTION THEREFROM IS AVAILABLE.

This certificate is transferrable only upon compliance with the
provisions of that certain Employment and Stock Compensation Agreement
dated May 21, 1997, by and between Friede Goldman International Inc.,
HAM Marine, Inc., and John F. Alford, a copy of which is on file in
the office of the Secretary of the Corporation.

After endorsement, the certificates shall be returned to Alford who
shall be entitled to exercise all rights of ownership of the Stock, subject to
the terms of this Agreement. All stock certificates hereafter issued to Alford
shall bear the same endorsement.

3.5 Piggyback Registration Rights. HAM Marine agrees that if HAM Marine
shall, at any time, propose a public offering of shares of HAM Marine's stock,
to be sold by HAM Marine for cash pursuant to a registration statement under the
Securities Act of 1933, as amended, on Form S-1, S-2, or S-3, HAM Marine shall
give written notice to Alford at least sixty (60) days prior to the date that
such registration statement is filed with the

14
<PAGE>

Securities and Exchange Commission. Upon the written request of Alford received
by HAM Marine, no later than the twentieth (20th) business day after giving of
such notice by HAM Marine, to register, on the same terms and conditions as the
shares of HAM Marine's stock otherwise being sold pursuant to such registration,
all or part of HAM Marine's stock held by such stockholder, HAM Marine shall use
its best efforts to cause such stock (the "Registrable Shares") to be included
in the securities to be covered by the registration statement proposed to be
filed by HAM Marine. Notwithstanding the foregoing, HAM Marine shall not be
obligated to include such Registrable Shares in such offering if HAM Marine is
advised in writing by its managing underwriter or underwriters that such an
offer would in its or their opinion be materially adversely affected by such
inclusion; provided, however, that HAM Marine shall in any case be obligated to
include such number or amount of Registrable Shares in such offering as such
managing underwriter or underwriters shall determine would not adversely affect
such offerings; and provided further, that such number of Registrable Shares
shall not be reduced unless the shares to be included in such offering for the
account of any other shareholder (not including HAM Marine) are

15
<PAGE>

also reduced on a pro rata basis. HAM Marine may at any time prior to the
effectiveness of such registration statement, in its sole discretion and without
the consent of any shareholder, abandon the offering to be made pursuant to such
registration statement.

If Alford participates in any such public offering, he shall pay (i)
the underwriting discounts and selling commissions applicable to HAM Marine's
stock sold by him in the offering and (ii) enter into such Agreements with HAM
Marine and with the underwriters with respect to the procedures to be filed in
connection with the registration and the offer and sale of securities,
indemnification, providing for information and other similar matters as HAM
Marine or any underwriter may reasonably request and which are comparable to
similar Agreements, if any, with any other persons (not including HAM Marine)
whose shares are included in the offering. Except as set forth in the first
sentence of this paragraph, all registration and filing fees, Blue Sky expenses,
printing expenses, legal and accounting fees, transfer taxes, transfer agent
fees and other expenses relating to the registration or offering of HAM Marine's
stock shall be

16
<PAGE>

paid by HAM Marine. The provisions of this Paragraph shall survive the
termination of this Agreement.

3.6 Specific Performance. The Stock cannot be readily purchased or sold
in the open market, therefore, the parties will be irreparably damaged in the
event that this Agreement is not specifically enforced. Should any dispute
arise concerning the Transfer of the Stock, an injunction may be issued
restraining any Transfer pending the determination of such controversy. In the
event of a controversy concerning the right or obligation to Transfer or
purchase any of the Stock, such right or obligation shall be enforceable in a
court of equity by a decree of specific performance. Such remedy shall be
cumulative and not exclusive and shall be in addition to any other remedy which
a party may have.

ARTICLE IV - GENERAL PROVISIONS
-------------------------------

4.1 Withholding of Taxes. The Company may withhold from any amounts
payable under this Agreement, all federal, state, city or other taxes as shall
be required pursuant to any law or government regulation or ruling.
Notwithstanding the foregoing sentence, Alford shall bear the payment of all
taxes associated

17
<PAGE>

with the issuance to him of the common stock of the Company as additional
compensation.

4.2 Notices. All notices or other documents required to be delivered
under this Agreement shall be given in writing and shall be personally
delivered, delivered by United States certified mail, return-receipt requested,
or by facsimile to the parties at the addresses listed below. Such notices shall
be effective as of the time of delivery if personally delivered, as of the date
of 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 receipt as
reflected by facsimile acknowledgement. The addresses of the parties are as
follows:

IF TO THE COMPANY:
-----------------

Friede Goldman International Inc.
525 East Capitol Street, Suite 402
Jackson, Mississippi 39201

Attention: J. L. Holloway
Telephone: (601) 352-1107
Facsimile: (601) 352-0588

IF TO HAM MARINE:
----------------

HAM Marine, Inc.
3500 Port Authority Road
Post Office Box 43
Pascagoula, Mississippi 39567

Attention: Ronald W. Schnoor

18
<PAGE>

Telephone: (601) 769-0275
Facsimile: (601) 769-1826

IF TO EMPLOYEE:
--------------

John F. Alford
51 Northtowne Drive, Apartment 16A
Jackson, Mississippi 39211
Telephone: (601) 899-8680

Other addresses may be substituted for the foregoing addresses upon the
giving of written notice to the other parties in accordance with the provisions
of this Section.

4.3 Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the state of
Mississippi, without giving effect to the principles of conflict of laws of such
State.

4.4 Validity. If any provisions of this Agreement or the application of
any provision hereof to any person or circumstance is held invalid,
unenforceable or otherwise illegal, the remainder of this Agreement and the
application of such provision to any other person or circumstances shall not be
affected, and the provision so held to be invalid, unenforceable or otherwise
illegal shall be reformed to the extent (and only to the extent) necessary to
make it enforceable, valid and legal.

19
<PAGE>

4.5 Entire Agreement. This Agreement supersedes any other agreement, oral
or written, between the parties with respect to the employment of Alford by the
Company and the issuance of shares of stock by HAM Marine to Alford, and
contains all of the agreements and understandings between the parties with
respect to such employment and stock issuance. Any waiver or modification of
any term of this Agreement shall be effective only if it is signed in writing by
all parties.

4.6 Captions. The captions in this Agreement are solely for convenience
of reference and shall not be given any effect in the construction or
interpretation of the Agreement.

4.7 Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by Alford, the Company and HAM Marine. No waiver by any party
hereto at any time of any breach by any party hereto or compliance with any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or any prior or subsequent time. No agreements or representations, oral
or otherwise, expressed or implied, with respect to the subject matter hereof

20
<PAGE>

have been made by any party which are not set forth expressly in this Agreement.

4.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same Agreement.

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered on the date first set forth above.

FRIEDE GOLDMAN INTERNATIONAL INC.

By:___________________________________
J. L. Holloway, President

HAM MARINE, INC.

By:___________________________________
Ronald W. Schnoor, President

______________________________________
John F. Alford

<PAGE>

EXHIBIT 10.7

AMENDMENT NO. 1 TO
EMPLOYMENT AND STOCK COMPENSATION AGREEMENT

This Amendment No. 1 to Employment and Stock Compensation Agreement (the
"Amendment"), effective as of May 21, 1997, is entered into by and among Friede
Goldman International Inc., a Delaware corporation (the "Company"), HAM Marine,
Inc., a Mississippi corporation ("HAM Marine"), and John F. Alford ("Alford").

WHEREAS, the Company, HAM Marine and Alford entered into an Employment and
Stock Compensation Agreement dated May 21, 1997, (the "Agreement"); and

WHEREAS, the Company, HAM Marine and Alford desire to amend certain
provisions of the Agreement.

Therefore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and in the Agreement, and the performance of each,
it is hereby agreed as follows:

1. Section 3.5 Piggyback Registration Rights of the Agreement is hereby
deleted in its entirety.

2. Defined terms used but not otherwise defined herein shall have the
meanings set forth in the Agreement.

IN WITNESS WHEREOF, the parties to this Amendment have caused this
Amendment to be executed as of the day and year first written above.

FRIEDE GOLDMAN INTERNATIONAL INC.

By:___________________________________
Name:
Title:

HAM MARINE, INC.

By:___________________________________
Name:
<PAGE>

Title:

EMPLOYEE:

______________________________________
John F. Alford

<PAGE>

EXHIBIT 10.8

EMPLOYMENT AGREEMENT
--------------------

This Employment Agreement ("Agreement") is made and entered into this the
14th day of December, 1996 to be effective as of the 1st day of January, 1997
(the "Effective Date") by and between HAM MARINE, INC., a Mississippi
Corporation (the "Company"), and JAMES A. LOWE, III ("Employee").

Whereas, the Company desires Employee to render legal services as an
attorney licensed to practice in the state of Mississippi, aid in the
negotiations of certain transactions arising in the course of the Company's
business and render general legal advice to the Company, its subsidiaries and
affiliates; and

Whereas, Employee is willing to render services to the Company, its
subsidiaries and affiliates, on the terms and subject to the conditions set
forth herein.

NOW, THEREFORE, in consideration of the premises and the mutual covenants
and representations set forth herein, the Company and Employee hereby agree as
follows:

ARTICLE I
---------
EMPLOYMENT
----------
1.1 TERM OF EMPLOYMENT. Employee's employment shall commence on the
Effective Date and shall continue until terminated as herein provided (the
"Term").

1.2 DUTIES OF EMPLOYEE. As of the Effective Date, Employee shall be
employed full time to render general, non-litigation, legal and tax planning
services to the Company, its subsidiaries and affiliates, reporting directly to
the Chairman of the Board of the Company; provided, however, that the Company
shall not impose employment duties or constraints of any kind which would
require
<PAGE>

Employee to infringe upon or violate the ethics of the legal profession or
violate any ordinance or law. Employee agrees to perform such duties as are
normally performed by general legal counsel of enterprises similar to the
Company. Employee hereby accepts such employment and undertakes to use his best
efforts to discharge his duties and responsibilities. During the Term of this
Agreement, Employee shall devote substantially his full time to the discharge of
his duties and responsibilities under this Agreement, except for vacations in
accordance with this Agreement and with the Company's vacation policy applicable
to executive personnel. This provision shall not prevent Employee from (i)
devoting a reasonable amount of time during normal business hours to his current
duties as Chairman of the Taxation Section of the Mississippi Bar Association,
(ii) completing certain specific legal matters for which he has been previously
engaged by other individual clients, and (iii) managing his other interests and
business affairs (so long as such interests and affairs are not in substantial
and direct competition with the Company or any of its subsidiaries or
affiliates). Employee shall not be required to move his residence.

1.3 COMPENSATION. During the Term, Employee shall be entitled to a salary
of $120,000.00 per year payable in equal monthly installments of $10,000.00 plus
any future increases and bonuses authorized by the Board of Directors of the
Company.

1.4 COMPENSATION - STOCK. On the Effective Date, and as additional
compensation, the Company shall transfer to Employee, free and clear of liens
and encumbrances, a number of shares of the Company's outstanding common capital
stock equal to two percent (2%) of the outstanding common capital stock as of
December 1, 1996. However, if, on the Effective Date, the Company has completed
an anticipated recapitalization then the Company shall transfer to Employee,
free and clear of liens and encumbrances, one and 67/100ths percent (1.67%) of
the Company's total
<PAGE>

authorized shares of common capital stock. The shares of the Company's common
capital stock transferred to Employee (the "Common Stock") shall be fully vested
in Employee subject only to the provisions of a stock redemption agreement to be
executed by the Company, J. L. Holloway (the "Majority Shareholder") and
Employee on the Effective Date providing for a thirty (30) day right of first
refusal in the Company, and then in the Majority Shareholder, to purchase
Employee's Common Stock for fair market value, to be paid in full at closing, in
the event of Employee's (i) desire to sell or hypothecate the Common Stock
during his lifetime, (ii) death, (iii) total disability (as defined in the
disability income insurance policies maintained by Employee pursuant to Section
1.8 of this Agreement) , (iv) retirement, or (v) voluntary or involuntary
termination of employment with Company. At all times following the receipt of
the Common Stock Employee shall enjoy all rights associated with the ownership
of the Common Stock including, but not limited to, the right to vote and receive
dividends thereon.

1.5 COMPENSATION - TAX PAYMENTS. The parties acknowledge that the
transfer to Employee of the Common Stock in accordance with the provisions of
Section 1.4 shall be deemed to be additional compensation to Employee for
federal and state income tax purposes. Company agrees to pay as bonuses to
Employee such amounts at such times as the certified public accountants normally
providing services to the Company and Employee determine to be necessary to pay
in a timely manner all taxes imposed upon Employee by federal, state and local
statutes, regulations and rulings due to the receipt by Employee of such stock
and the receipt by Employee of each of such bonuses. The provisions of this
Section 1.5 shall survive the termination of this Agreement for any reason.
<PAGE>

1.6 EXPENSE REIMBURSEMENTS. The Company shall reimburse Employee for
business expenses reasonably incurred in connection with his employment in
accordance with the Company's reimbursement practice for executive officers upon
presentation of adequate documentation. Such business expenses shall include up
to $2,500.00 per year for tuition, fees, travel, lodging and meals associated
with continuing legal education seminars necessary to maintain Employee's
license to practice law in the State of Mississippi and insurance premiums
necessary to maintain up to $1,500,000.00 in professional errors and omissions
insurance coverage for Employee.

1.7 BENEFITS.

(a) Employee shall be entitled to paid vacation and sick leave as
determined in accordance with the Company's vacation and sick leave policies
applicable to executive personnel as in effect from time to time; provided,
however, that Employee shall be entitled to at least two (2) weeks paid vacation
and two (2) weeks paid sick leave each year.

(b) Employee shall be entitled to receive all employee benefits and to
participate in any employee benefit plans or programs as are generally offered
to or provided for executives of the Company from time to time, including
without limitation, participation in the Section 401(k) Plan and the payment of
full medical and dental insurance premiums for Employee and his dependents.

1.8 DISABILITY OF EMPLOYEE. Employee has secured (or will secure, as soon
as practicable after the date hereof) disability income insurance for the
benefit of Employee such that, should Employee become totally or partially
disabled, and, by reason of such disability is unable to perform the duties of
his employment under this Agreement for a period of six (6) consecutive months,
Employee will receive monthly disability income payments through such disability
income insurance
<PAGE>

program commencing at the end of said six (6) month period and continuing until
the termination or discontinuance of such disability or the period provided for
in the insurance program, whichever is longer. In the event of Employee's
disability, as defined in Employee's insurance policies, Employee's compensation
provided for in Section 1.3 shall continue for a period of six (6) consecutive
months following the date of Employee's disability.

1.9 WORKING FACILITIES. The Company shall furnish Employee with such
office, secretarial and technical facilities and assistance and legal and tax
publications as are suitable for his position and adequate for the performance
of his duties.

ARTICLE II
----------
COVENANTS OF EMPLOYEE
---------------------

2.1 CONFIDENTIALITY. Employee recognizes the interest of the Company and
its subsidiaries and affiliates in maintaining the confidential nature of their
proprietary and other business and commercial information. In consideration
thereof, during Employee's employment with the Company and following termination
thereof for any reason, Employee shall not (except as authorized in writing by
the Board of Directors of the Company) publish, disclose or use for his own
benefit or for the benefit of a business or entity other than the Company or
otherwise, any secret, confidential, proprietary or other information not in the
public domain which was acquired by Employee during his employment relating to
the Company's or any of its subsidiaries' businesses, operations, customers,
suppliers, products, employees, financial affairs, trade or industrial
practices, trade secrets, technology, know-how or intellectual property. All
records, files, data, documents and the like relating to suppliers, customers,
costs, prices, systems, methods, personnel, technology and other materials
relating to the Company or its subsidiaries shall be and remain the sole
property of
<PAGE>

the Company and such subsidiaries. Upon termination of Employee's employment
hereunder, Employee shall not remove from the Company's premises or retain any
of the materials described in this Section 2.1 except with the prior written
consent of the Board of Directors of the Company, and all such materials in
Employee's possession shall be returned promptly to the Company.

ARTICLE III
-----------
TERMINATION OF EMPLOYMENT
-------------------------

3.1 TERMINATION BY COMPANY. Employee's employment may be terminated at
will by the Company. Upon the termination of Employee's employment, for any
reason, by the Company, Employee shall receive his base salary pro-rated to the
date of termination, a termination payment equal to six (6) months base salary,
payable in one (1) lump sum immediately upon termination, and any amounts
remaining unpaid as provided in Section 1.5 Compensation - Tax Payments of this
Agreement.

ARTICLE IV
----------
GENERAL PROVISIONS
------------------

4.1 WITHHOLDING OF TAXES. The Company may withhold from any amounts
payable under this Agreement all federal, state, city or other taxes as shall be
required pursuant to any law or government regulation or ruling.

4.2 NOTICES. All notices or other documents required to be delivered
under this Agreement shall be given in writing and shall be personally
delivered, delivered by United States certified mail, return-receipt requested
or by facsimile to the parties at the addresses listed below. Such notices shall
be effective as of the time of delivery if personally delivered, as of the date
of receipt as referenced by the official receipt of the Unites States Postal
Service if delivered by
<PAGE>

certified mail, or as of the date and time of receipt as reflected by facsimile
acknowledgment. The addresses of the parties are as follows:

If to the Company:
-----------------
Ham Marine, Inc.
3500 Port Authority Road
Post Office Box 43
Pascagoula, Mississippi 39567
Telephone: (601) 769-0275
Facsimile: (601) 769-1826

If to Employee:
---------------

James A. Lowe, III
852 Briarfield Road
Jackson, Mississippi 39211
Telephone: (601) 957-7914
Facsimile: None

Other addresses may be substituted for the foregoing addresses upon the
giving of written notice to the other parties in accordance with the provisions
of this Section.

4.3 GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Mississippi, without giving effect to the principles of conflict of laws of such
State.

4.4 VALIDITY. If any provisions of this Agreement or the application of
any provision hereof to any person or circumstance is held invalid,
unenforceable or otherwise illegal, the remainder of this Agreement and the
application of such provision to any other person or circumstances shall not be
affected, and the provision so held to be invalid, unenforceable or otherwise
illegal shall be reformed to the extent (and only to the extent) necessary to
make it enforceable, valid and legal.
<PAGE>

4.5 ENTIRE AGREEMENT. This Agreement supersedes any other agreement, oral
or written, between the parties with respect to the employment of Employee by
the Company, and contains all of the agreements and understandings between the
parties with respect to such employment. Any waiver or modification of any term
of this Agreement shall be effective only if it is signed in writing by both
parties.

4.6 SUCCESSORS AND BINDING AGREEMENTS.

(a) This Agreement shall be binding upon and inure to the benefit of
the Company and any Successor of or to the Company, but shall not otherwise be
assignable or delegable by the Company. "Successor" shall mean any successor in
interest, including, without limitation, any entity, individual or group of
persons acquiring directly or indirectly all or substantially all of the
business or assets of the Company whether by sale, merger, consolidation,
reorganization, stock purchase or otherwise.

(b) This Agreement shall inure to the benefit of and be enforceable by
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees and legatees.

(c) The Company shall require any Successor to agree (by agreement in
form and substance satisfactory to Employee) within thirty (30) days after
becoming a Successor to perform this Agreement to the same extent as the
original parties would be required if no succession had occurred.

(d) This Agreement is personal in nature and neither of the parties
shall, without the consent of the other, assign, transfer or delegate this
Agreement or any rights or obligations hereunder except as expressly provided in
this Section 4.6.
<PAGE>

4.7 CAPTIONS. The captions in this Agreement are solely for convenience
of reference and shall not be given any effect in the construction or
interpretation of the Agreement.

4.8 MISCELLANEOUS. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by Employee, the Company. No waiver by any party hereto at
any time of any breach by any party hereto or compliance with any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
expressed or implied with respect to the subject matter hereof have been made by
any party which are not set forth expressly in this Agreement.

4.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same Agreement.

4.10 INDEPENDENT ADVICE. At Employee's request, due to the nature of the
relationship between the company and Employee, the Company has obtained the
advice of independent legal counsel with respect to the terms and provisions of
this Agreement and the signature of such independent legal counsel appears below
for the sole purpose of evidencing his review of this Agreement and the
rendering of such advice.

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.

COMPANY: COUNSEL FOR COMPANY:

Ham Marine, Inc.
<PAGE>

- ----------------------------- ------------------------------
J. L. Holloway, President David Mockbee
EMPLOYEE:

- -----------------------------
James A. Lowe, III

<PAGE>

EXHIBIT 10.9

AMENDMENT NUMBER ONE TO EMPLOYMENT AGREEMENT
--------------------------------------------

This Amendment Number One to Employment Agreement (the "Amendment"),
effective as of January 1, 1997, is made and entered into by and between HAM
Marine, Inc., a Mississippi corporation (the "Company"), and James A. Lowe, III
("Employee").

WHEREAS, the Company and Employee executed an Employment Agreement on
December 14, 1996, to be effective as of January 1, 1997 (the "Agreement"); and

WHEREAS, the Company and Employee desire to amend certain provisions of the
Agreement.

NOW, THEREFORE, in consideration of the mutual promises, terms, covenants
and conditions set forth herein and in the Agreement, it is hereby agreed as
follows:

1. Section 1.4 Compensation - Stock of the Agreement, is hereby amended
and restated to read, in its entirety, as follows:

1.4 Compensation - Stock. On the Effective Date, and as
additional compensation, the Company shall transfer to Employee, free
and clear of liens and encumbrances, 10,000 shares of the Company's
anticipated 1,197,604.80 shares of outstanding common capital stock
(0.835
<PAGE>

percent). The shares of the Company's common capital stock transferred
to Employee (the "Common Stock") shall be fully vested in Employee
subject only to the provisions of a stock redemption agreement to be
executed by the Company, J. L. Holloway (the "Majority Shareholder")
and Employee on the Effective Date providing for a thirty (30) day
right of first refusal in the Company, and then in the Majority
Shareholder, to purchase Employee's Common Stock for fair market
value, to be paid in full at closing, in the event of Employee's (i)
desire to sell or hypothecate the Common Stock during his lifetime,
(ii) death, (iii) total disability (as defined in the disability
income insurance policies maintained by Employee pursuant to Section
1.8 of this Agreement), (iv) retirement, or (v) voluntary or
involuntary termination of employment with Company. At all times
following the receipt of the Common Stock

2
<PAGE>

Employee shall enjoy all rights associated with the ownership of the
Common Stock including, but not limited to, the right to vote and
receive dividends thereon.

2. Defined terms used but not otherwise defined herein shall have the
meaning set forth in the Agreement.

3. All other terms and provisions of the Agreement shall continue in full
force and effect as set forth therein.

IN WITNESS WHEREOF, the parties to this Amendment have caused this
Amendment to be executed as of the day and year first written above.

HAM MARINE, INC.

By:___________________________________
Ronald W. Schnoor, President

EMPLOYEE:

______________________________________
James A. Lowe, III

<PAGE>

EXHIBIT 10.11

FRIEDE & GOLDMAN INTERNATIONAL INC.

AMENDMENT NO. 1 TO 1997 EQUITY INCENTIVE PLAN

Friede & Goldman International Inc., a Delaware corporation (the
"Company"), hereby amends the Friede Goldman International Inc. 1997 Equity
Incentive Plan (the "Plan").

1. Paragraph 4(b) of the Plan is hereby amended and restated, in its
entirety, as follows:

(b) Each grant will specify its Option Price, which Option Price
may not be less than 100% of the Market Value per Share on the Date of
Grant except for any grants made prior to the date of the closing of the
initial public offering of the Company's Common Stock, which grants may
have an Option Price less than the Market Price per Share on the Date of
Grant.

2. Paragraph 11(b) of the Plan is hereby amended and restated to
read, in its entirety, as follows:

(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 1998 Annual Meeting of Stockholders), each Director
who is in office on that day, who is not an employee of the Company or any
of its subsidiaries 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.

3. Defined terms used but not otherwise defined herein shall have the
meanings set forth in the Plan.

<PAGE>

EXHIBIT 10.17

AMENDED AND RESTATED
STOCK EXCHANGE AGREEMENT

This Amended and Restated 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"), John F.
Alford ("Alford"), Holloway Partners, L.P. ("Holloway Partners"), Carl Crawford
Children's Trust ("Crawford Trust") and Bodin Children's Trust ("Bodin Trust").

WITNESSETH:
----------

WHEREAS, FGII has been organized to serve as a holding company for HAM
Marine and Friede & Goldman;

WHEREAS, Holloway, Crawford, Schnoor, Lowe, Alford, Holloway Partners,
Crawford Trust and Bodin Trust (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, Schnoor, Holloway Partners, Crawford
Trust and Bodin Trust (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, Alford,
Holloway Partners, Crawford Trust and Bodin Trust (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 708,471.63

Holloway Partners 250,000.00

Crawford 141,348.04

Crawford Trust 17,799.72

Bodin Trust 17,799.73

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 &

2
<PAGE>

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:

Number of Shares
Shareholders Issued and Outstanding
------------ ----------------------

Holloway 369.6

Holloway Partners 130.4

Crawford 73.74

Crawford Trust 9.27

Bodin Trust 9.28

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.

3
<PAGE>

(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.

(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.

4
<PAGE>

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 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 5,442,479

5
<PAGE>

Holloway Partners 1,920,500

Crawford 1,085,835

Crawford Trust 136,737

Bodin Trust 136,738

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.

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.

6
<PAGE>

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.

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

7
<PAGE>

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.

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>

HOLLOWAY PARTNERS, L.P.

By: ___________________________
Name: J.L. Holloway
Title: General Partner

CRAWFORD CHILDREN'S TRUST

By: ___________________________
Name:
Title:

BODIN CHILDREN'S TRUST

By: ___________________________
Name:
Title:

<PAGE>

EXHIBIT 10.21

THIRD AMENDMENT TO
------------------
BUSINESS PURCHASE AGREEMENT
---------------------------

This Third Amendment to Business Purchase Agreement (the "Third 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"), that certain
Amendment to Business Purchase Agreement dated December 3, 1996 (the "First
Amendment"), and that certain Second Amendment to Business Purchase Agreement
dated May 19, 1997 (the "Second 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, the Second
Amendment and in this Third
<PAGE>

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 Third Amendment shall have the same
definitions as set forth in the Agreement, unless otherwise defined herein.

II. Amendments to Agreement
-----------------------

1. Section 6 Post-Closing Payments, including Section 6(a) Vessel
Design, Section 6(b) Chocking System Payments, and Section 6(c) Date of Payment
(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 6:

6. Post-Closing Payments.
---------------------

(a) Vessel Design Payments. Buyer shall pay to Seller the sum
of $350,000.00 for each design of a new-build Vessel for which Buyer
receives an order during the ten (10) year period beginning on the
Closing Date (the "Order Period") which order is subsequently accepted
by Buyer. Such payments shall be made by Buyer to Seller solely from
the fees actually received by Buyer for each sale and shall be made
proportionately to Seller based upon the ratio of the amount of each
fee payment received by Buyer under the order to the total amount of
fees to be collected by the

Page 2
<PAGE>

Buyer under the order multiplied by the $350,000.00 total payment to
Seller. The payment from Buyer to Seller described in this Section
6(a) shall be increased on the first anniversary of the Closing Date
and on each subsequent anniversary thereof within the Order Period as
set forth in Section 7(b) Indexing of Payments below.

(b) Chocking System Payments. Buyer shall pay to Seller (i) the
sum of $400,000.00 for each chocking system, as described in the
Chocking Patent, for an L780 Mod II Class drilling unit and (ii) the
sum of $600,000.00 for each chocking system, as described in the
Chocking Patent, for all other drilling units, for which Buyer
receives an agreement for the sale of such chocking system during the
Order Period executed by a third-party purchaser, which agreement is
subsequently accepted by Buyer. Such payment shall be made by Buyer to
Seller solely from the proceeds actually received by Buyer from each
sale and shall be made proportionately to Seller based upon the ratio
of the amount of each payment received by Buyer under the agreement to
the total sale price to be collected by Buyer under the agreement
multiplied by the total required payment to Seller.

(c) Date of Payment. Within thirty (30) days following (i) the
receipt by Buyer of any order for the design of a new-build Vessel
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

Page 3
<PAGE>

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.

III. Miscellaneous
-------------

1. Continuation of Agreement. Except as modified or amended by the First
Amendment, the Second Amendment, or this Third Amendment, each and every
provision of the Agreement shall continue in full force and effect.

Page 4
<PAGE>

2. Counterparts. This Third 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 June, 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

Page 5

<PAGE>

EXHIBIT 10.22

AIRCRAFT DRY LEASE

This Lease of aircraft is made effective as of July 1, 1997, by and between
Equipment Management Systems, LLC, a Mississippi limited liability company, with
an address of Bank of Mississippi Building, 525 East Capitol Street, Suite 402,
Jackson, Mississippi 39201 (hereinafter referred to as "LESSOR") and HAM Marine,
Inc., a Mississippi corporation, with an address of 3500 Port Authority Road,
P.O. Box 43, Pascagoula, Mississippi 39567 (hereinafter referred to as
"LESSEE").

RECITALS

The parties recite that:

A. WHEREAS, Lessor is the registered owner of the following aircraft,
together with the Engines, APU(s) and all appliances, parts, instruments,
avionics and appurtenances thereto, including any replacement part(s) or
engine(s) which may be installed on the Aircraft from time to time, and all
logs, manuals and other records relating to such Aircraft (hereinafter
collectively referred to as the "AIRCRAFT"):

FAA Registration Number: N80BR
Aircraft Serial Number: 258012
Aircraft Manufacturer: British Aerospace BAE
Aircraft Model: 125 Hawker 800A
Aircraft Year: 1984

B. WHEREAS, Lessee desires to lease the Aircraft under such terms and
conditions as are mutually satisfactory to the parties.

The parties agree as follows:
<PAGE>

SECTION ONE
LEASE OF AIRCRAFT

Lessor agrees to lease the Aircraft to Lessee on a nonexclusive basis.
Lessee shall pay Lessor as basic rent for the Aircraft, the amount of Fifty
Thousand and 00/100 Dollars ($50,000.00) per month, payable in advance, on the
first day of each month. The first payment of basic rent is due upon the
commencement date of this Lease. Rent for any fractional month at the beginning
or the end of the term of this Lease shall be prorated. It is the intention of
the parties and they hereby agree that this shall be an absolutely net lease and
Lessor shall have no obligation to provide any services, perform any acts or pay
any expenses, charges, obligations or costs of any kind whatsoever with respect
to the Aircraft and Lessee hereby agrees to pay any and all such expenses,
charges, obligations and costs.

It shall be conclusively presumed between the parties that Lessee has fully
inspected the Aircraft having knowledge that it is in good condition and repair
and that Lessee is satisfied with and has accepted the Aircraft in such
condition and repair. THE AIRCRAFT IS LEASED "AS IS" AND "WHERE IS." LESSOR
HEREBY DISCLAIMS ALL WARRANTIES, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN,
INCLUDING FITNESS FOR A PARTICULAR PURPOSE.

SECTION TWO
TERM

This Lease will commence on the date first above written and continue for
one year after said date. Thereafter, this Lease will be automatically renewed
on an annual basis, unless sooner terminated by either party as hereinafter
provided. Either party may at any time terminate this Lease upon thirty (30)
days written notice to the other party, delivered

2
<PAGE>

personally or by certified mail, return receipt requested, at the address for
said other party as set forth above.

SECTION THREE
COMMERCIAL OPERATION RESTRICTION

Neither Lessee nor Lessor will make the Aircraft available for hire within
the meaning of the Federal Aviation Regulations. The Aircraft is to be operated
strictly in accordance with 14 C.F.R. Part 91.

SECTION FOUR
INSURANCE

At all times during the term of this Lease, Lessee will cause to be carried
and maintained physical damage insurance with respect to the Aircraft in the
amount set forth below:

Aircraft Physical Damage $6,500,000.00
(No Deductible While
In Motion or Not In Motion)

At all times during the term of this Lease, Lessee will also cause to be
carried and maintained third party aircraft liability insurance, passenger legal
liability insurance, property damage liability insurance, and medical expense
insurance in the amounts set forth below:

Combined Liability Coverage for
Bodily Injury and Property Damage
Including Passengers -
Each Occurrence $25,000,000.00

3
<PAGE>

Medical Expense Coverage -
Each Person $5,000.00

Lessee will also bear the cost of paying any deductible amount on any policy of
insurance in the event of a claim or loss.

Any policies of insurance carried in accordance with this Lease: (i) shall
name Lessor as an additional insured; (ii) shall contain a waiver by the
underwriter thereof of any right of subrogation against Lessor; (iii) shall
provide that in respect of the interests of Lessor, such policies of insurance
shall not be invalidated by any action or inaction of Lessee or any other person
and shall insure Lessor (subject to the limits of liability and war risk
exclusion set forth in such policies) regardless of any breach or any violation
of any warranty, declarations or conditions contained in such policies by Lessee
or any other person; and (iv) shall provide that if the insurers cancel
insurance for any reason whatsoever, or the same is allowed to lapse for non-
payment of premium, or if there is any material change in policy terms and
conditions, such a cancellation, lapse or change shall not be effective as to
Lessor. Each liability policy shall be primary without right of contribution
from any other insurance which is carried by Lessee or Lessor and shall
expressly provide that all of the provisions thereof, except the limits of
liability, shall operate in the same manner as if there were a separate policy
covering each insured.

Lessee will submit this Lease for approval to the insurance carrier for
each policy of insurance on the Aircraft. Lessee will arrange for a Certificate
of Insurance evidencing appropriate coverage as to the Aircraft and the
satisfaction of the requirements set forth above to be given by its insurance
carriers to Lessor.

4
<PAGE>

SECTION FIVE
RESTRICTIONS ON USE

Lessee may operate the Aircraft only for the purposes and within the
geographical limits set forth in the insurance policy or policies obtained in
compliance with this Lease. The Aircraft will be operated at all times in
accordance with the flight manual and all manufacturer's suggested operating
procedures. Furthermore, Lessee will not use the Aircraft in violation of any
foreign, federal, state, territorial, or municipal law or regulation and will be
solely responsible for any fines, penalties, or forfeitures occasioned by any
violation by Lessee. If such fines or penalties are imposed on Lessor and paid
by Lessor, Lessee will reimburse Lessor for the amount thereof within thirty
(30) days of receipt by Lessee of written demand from Lessor. Lessee will not
base the Aircraft, or permit it to be based, outside the limits of the United
States of America, without the written consent of Lessor.

The Aircraft will be flown only by certificated and qualified pilots and
will be maintained only by certificated and qualified mechanics. In the event
the insurance on the Aircraft would be invalidated because Lessee is unable to
obtain certificated and qualified pilots and mechanics, Lessee will not operate
the Aircraft until such time as certificated and qualified pilots and mechanics
are obtained and insurance on the Aircraft is made valid.

Lessee will not directly or indirectly create, incur, assume or suffer to
exist any lien on or with respect to the Aircraft. Lessee will promptly, at its
own expense, take such action as may be necessary to discharge any lien not
excepted above if the same will arise at any time.

SECTION SIX
INSPECTION BY LESSOR

Lessee agrees to permit Lessor or any authorized agent to inspect the
Aircraft at any

5
<PAGE>

reasonable time and to furnish any information in respect to the Aircraft and
its use that Lessor may reasonably request.

SECTION SEVEN
ALTERATIONS

Except in accordance with other written agreements entered into subsequent
to the date of this Lease between Lessee and Lessor regarding maintenance of the
Aircraft, Lessee will not have the right to alter, modify, or make additions or
improvements to the Aircraft without the written permission of Lessor. All such
alterations, modifications, additions, and improvements as are so made will
become the property of Lessor and will be subject to all of the terms of this
Lease.

SECTION EIGHT
MAINTENANCE AND REPAIR

Lessee, at Lessee's own cost and expense, will repair and maintain the
Aircraft during the term of this Lease so as to keep it in as good and safe
operating condition as when delivered by Lessor to Lessee, ordinary wear and
tear from use and ordinary deterioration excepted. Lessee will pay all costs
and expenses of replacement parts and accessories, including transportation
charges thereon. Lessee will be entitled to any and all salvage from broken or
worn out parts. The workers who inspect, maintain, and repair the Aircraft on
Lessee's behalf will not be employees of Lessor, but will at all times be
employees of Lessee or independent contractors, and Lessor will have no control
or authority to direct, employ, discharge or pay compensation to such employees.
Subject to the foregoing limitations, Lessee agrees to indemnify Lessor against
any liability arising from the negligent repair and

6
<PAGE>

maintenance of the Aircraft, as well as from failure to repair and maintain the
Aircraft, and also against any claim or liability arising out of the repair
work, and the delivery of material to and from the place where such repair and
maintenance work is performed.

All inspections, repairs, modifications, maintenance, and overhaul work to
be accomplished by Lessee will be performed by personnel certificated to perform
such work and will be performed in accordance with the standards set by the
Federal Aviation Regulations. Lessee will maintain all log books and records
pertaining to the Aircraft during the term of this Lease in accordance with the
Federal Aviation Regulations. Such records will be made available for
examination by Lessor, and Lessee, at the termination of this Lease, will
deliver such records to Lessor.

SECTION NINE
DEFAULT AND REMEDY

Lessee shall be in breach of this Lease if Lessee defaults in the
performance of any of its obligations under this Lease and such default
continues for five (5) days after receipt by Lessee of written notice thereof
from Lessor, unless such default shall be of such a nature that the same cannot
be completely remedied or cured within such five (5) day period, then such
default shall not be a breach of this Lease for the purposes of this Section if
Lessee shall have commenced curing such default within such five (5) day period
and shall proceed with reasonable diligence and in good faith to remedy the
default. In the event of any breach by Lessee, Lessee shall not fly the Aircraft
and Lessor shall have the right to repossess the Aircraft without further
demand, notice or court order, or other process of law and Lessor shall have the
right to terminate this Lease immediately. Exercise by Lessor of either or both

7
<PAGE>

of the rights specified above shall not prejudice Lessor's right to pursue any
remedy available to Lessor in law or equity.

Lessor shall be in breach of this Lease if Lessor defaults in its
obligations under this Lease and such default continues for five (5) days after
receipt by Lessor of written notice thereof from Lessee, unless such default
shall be of such a nature that the same cannot be completely remedied or cured
within such five (5) day period, then such default shall not be a breach of this
Lease for the purposes of this Section if Lessor shall have commenced curing
such default within such five (5) day period and shall proceed with reasonable
diligence and in good faith to remedy the default. In the event of any breach
by Lessor, Lessee shall have the right to terminate this Lease immediately and
to pursue any remedy available to Lessee in law or equity. Exercise by Lessee
of any of the rights specified above shall not prejudice Lessee's right to
pursue any other remedy available to Lessee in law or equity.

The failure of either party to enforce strictly any provision of this Lease
shall not be construed as a waiver thereof and shall not preclude such party
from demanding performance in accordance with the terms hereof.

SECTION TEN
TITLE

The registration of and title to the Aircraft will be in the name of the
Lessor, and the Aircraft, at all times during the term of this Lease or any
extension, will bear United States registration markings. All responsibility
and obligations in regard to the operation of the Aircraft as above owned,
registered, and marked will be borne by Lessee during the term of this Lease.

8
<PAGE>

SECTION ELEVEN
PAYMENT OF TAXES

Lessor will pay or cause to be paid all taxes incurred by reason of
ownership of the Aircraft during the term of this Lease, including personal
property taxes. Lessee shall pay its proportional share of personal property
taxes, based on Lessee's hours of use of the Aircraft as a percentage of the
entire number of hours of use of the Aircraft for the calendar year for which
the personal property taxes are imposed. Lessee will pay all taxes associated
with Lessee's use of the Aircraft on Lessee's own business, including landing
fees, fuel taxes, and any other taxes or fees which may be assessed against a
specific flight by Lessee.

SECTION TWELVE
ASSIGNMENT

Lessee shall not assign this Lease or any interest in the Aircraft, or
sublet the Aircraft, without prior written consent of Lessor. Subject to the
foregoing, this Lease inures to the benefit of, and is binding on, the heirs,
legal representatives, successors, and permitted assigns of the parties.

SECTION THIRTEEN
ACCIDENT AND CLAIM

Lessee will immediately notify Lessor of each accident involving the
Aircraft, which notification will specify the time, place, and nature of the
accident or damage, the names and addresses of parties involved, persons
injured, witnesses, and owners of properties damaged, and such other information
as may be known. Lessee will advise Lessor of all correspondence, papers,
notices, and documents whatsoever received by Lessee in connection with any
claim or demand involving or relating to the Aircraft or its operation, and will
aid in

9
<PAGE>

any investigation instituted by Lessor and in the recovery of damages from third
persons liable therefor.

SECTION FOURTEEN
INDEMNIFICATION

Lessee assumes liability for, and hereby agrees to indemnify, defend,
protect, save, keep and hold harmless Lessor, its successors, agents,
accountants, counsel, affiliates and assigns from and against any and all
claims, liabilities, demands, obligations, losses, damages, penalties, claims
(including without limitation, claims involving strict or absolute liability in
tort), actions, suits, costs, expenses and disbursements (including, without
limitation, reasonable legal fees and expenses) of any kind and nature
whatsoever ("CLAIMS") which may be imposed on, incurred by or asserted against
Lessor, in any way relating to or arising out of this Lease, and/or the
operation of the Aircraft, or the performance or enforcement of any of the terms
hereof, or in any way relating to or arising out of the manufacture, or, as
contemplated under this Lease, acceptance, rejection, ownership, delivery,
lease, possession, use, operation, maintenance, function, registration, sale,
return, storage, termination or other disposition of the Aircraft or any part
thereof or any accident in connection therewith (including, without limitation,
latent and other defects, whether or not discoverable). If any Claim is made
against Lessor, Lessor shall promptly notify Lessee and cooperate fully in the
defense or settlement. Whether the indemnity granted by Lessee to Lessor herein
is deemed subordinate or primary to any other indemnity to which each Lessor may
be entitled, Lessor may look solely to Lessee and need not pursue any Claims
against any third person prior to or subsequent to seeking the indemnity from
Lessee hereunder. Lessor

10
<PAGE>

shall have the opportunity, but not the obligation, to defend if Lessee fails to
assert a defense in any such Claim hereunder, the cost of which defense shall be
borne by Lessee. THE INDEMNITIES IN THIS SECTION SHALL CONTINUE IN FULL FORCE
AND EFFECT NOTWITHSTANDING THE EXPIRATION OR OTHER TERMINATION OF THIS LEASE.

SECTION FIFTEEN
RETURN OF AIRCRAFT TO LESSOR

On the termination of this Lease by expiration or otherwise, Lessee will
return the Aircraft to Lessor at Jackson International Airport (JAN), in as good
operating condition and appearance as when received, ordinary wear, tear and
deterioration excepted, and will indemnify Lessor against any claim for loss or
damage occurring prior to the actual physical delivery of the Aircraft to
Lessor.

SECTION SIXTEEN
MODIFICATION OF AGREEMENT

This Lease constitutes the entire understanding between the parties, and
any change or modification must be in writing and signed by both parties.

SECTION SEVENTEEN
NOTICES

All communications and notices provided for herein shall be in writing and
shall become effective when delivered by facsimile transmission (to Lessor at
601-352-0588 or to Lessee at 601-769-1826) or by Federal Express or other
overnight courier or four (4) days following deposit in the United States mail,
with correct postage for first-class mail prepaid, addressed to Lessor or
Lessee at their respective addresses set forth above, or else as

11
<PAGE>

otherwise directed by the other party from time to time in writing.

SECTION EIGHTEEN
GOVERNING LAW

This Lease is entered into under, and is to be construed in accordance
with, the laws of the State of Mississippi.

SECTION NINETEEN
TRUTH IN LEASING STATEMENT

THE AIRCRAFT, A BRITISH AEROSPACE BAE 125 HAWKER 800A MANUFACTURER'S SERIAL
NO. 258012, CURRENTLY REGISTERED WITH THE FEDERAL AVIATION ADMINISTRATION AS
N80BR, HAS BEEN MAINTAINED AND INSPECTED UNDER FAR PART 91 DURING THE 12 MONTH
PERIOD PRECEDING THE DATE OF THIS LEASE.

THE AIRCRAFT WILL BE MAINTAINED AND INSPECTED UNDER FAR PART 91 FOR
OPERATIONS TO BE CONDUCTED UNDER THIS LEASE. DURING THE DURATION OF THIS LEASE,
HAM MARINE, INC., 3500 PORT AUTHORITY ROAD, P.O. BOX 43, PASCAGOULA, MS 39567,
IS CONSIDERED RESPONSIBLE FOR OPERATIONAL CONTROL OF THE AIRCRAFT UNDER THIS
LEASE.

AN EXPLANATION OF FACTORS BEARING ON OPERATIONAL CONTROL AND PERTINENT
FEDERAL AVIATION REGULATIONS CAN BE OBTAINED FROM THE NEAREST FAA FLIGHT
STANDARDS DISTRICT OFFICE.

THE "INSTRUCTIONS FOR COMPLIANCE WITH TRUTH IN LEASING REQUIREMENTS"
ATTACHED HERETO ARE INCORPORATED HEREIN BY

12
<PAGE>

REFERENCE.

I, THE UNDERSIGNED, RONALD W. SCHNOOR, AS PRESIDENT OF HAM MARINE, INC.,
3500 PORT AUTHORITY ROAD, P.O. BOX 43, PASCAGOULA, MS 39567, CERTIFY THAT IT IS
RESPONSIBLE FOR OPERATIONAL CONTROL OF THE AIRCRAFT AND THAT IT UNDERSTANDS ITS
RESPONSIBILITIES FOR COMPLIANCE WITH APPLICABLE FEDERAL AVIATION REGULATIONS.

IN WITNESS WHEREOF, the parties have executed this Lease.

EQUIPMENT MANAGEMENT SYSTEMS, LLC

By:
-----------------------------

Name: J.L. Holloway
---------------------------
Title: Member
--------------------------

--------------------------------
Date and Time of Execution

HAM MARINE, INC.

By:
-----------------------------
Ronald W. Schnoor, President

-----------------------------
Date and Time of Execution

13
<PAGE>

INSTRUCTIONS FOR COMPLIANCE WITH "TRUTH IN LEASING"
REQUIREMENTS

1. Mail a copy of the lease agreement to the following address via certified
mail, return receipt requested, immediately upon execution of the agreement
(14 C.F.R. 91.23 requires that the copy be sent within twenty-four hours
after it is signed):

Federal Aviation Administration
Aircraft Registration Branch
ATTN: Technical Section
P.O. Box 25724
Oklahoma City, Oklahoma 73125

2. Telephone the nearest Flight Standards District Office at least forty-eight
hours prior to the first flight under this lease agreement.

3. Carry a copy of the lease agreement in the aircraft at all times.

<PAGE>

AIRCRAFT DRY LEASE

This Lease of aircraft is made effective as of July 1, 1997, by and between
Equipment Management Systems, LLC, a Mississippi limited liability company, with
an address of Bank of Mississippi Building, 525 East Capitol Street, Suite 402,
Jackson, Mississippi 39201 (hereinafter referred to as "Lessor") and HAM Marine,
Inc., a Mississippi corporation, with an address of 3500 Port Authority Road,
P.O. Box 43, Pascagoula, Mississippi 39567 (hereinafter referred to as
"Lessee").

RECITALS

The parties recite that:

FAA Registration Number: N80BR
Aircraft Serial Number: 258012
Aircraft Manufacturer: British Aerospace BAE
Aircraft Model: 125 Hawker 800A
Aircraft Year: 1984

B. WHEREAS, Lessee desires to lease the Aircraft under such terms and
conditions as are mutually satisfactory to the parties.

The parties agree as follows:

SECTION ONE
LEASE OF AIRCRAFT

Lessor agrees to lease the Aircraft to Lessee on a nonexclusive basis.
Lessee shall pay Lessor as basic rent for the Aircraft, the amount of Fifty
Thousand and
<PAGE>

00/100 Dollars ($50,000.00) per month, payable in advance, on the first day of
each month. The first payment of basic rent is due upon the commencement date of
this Lease. Rent for any fractional month at the beginning or the end of the
term of this Lease shall be prorated. It is the intention of the parties and
they hereby agree that this shall be an absolutely net lease and Lessor shall
have no obligation to provide any services, perform any acts or pay any
expenses, charges, obligations or costs of any kind whatsoever with respect to
the Aircraft and Lessee hereby agrees to pay any and all such expenses, charges,
obligations and costs.

SECTION TWO
TERM

SECTION THREE
COMMERCIAL OPERATION RESTRICTION

SECTION FOUR
INSURANCE

At all times during the term of this Lease, Lessee will cause to be carried
and maintained physical damage insurance with respect to the Aircraft in the
amount set forth below:

Aircraft Physical Damage $6,500,000.00
(No Deductible While
In Motion or Not In Motion)

Combined Liability Coverage for
Bodily Injury and Property Damage
Including Passengers -
Each Occurrence $25,000,000.00
Medical Expense Coverage -
Each Person $5,000.00

Lessee will also bear the cost of paying any deductible amount on any policy of
insurance in the event of a claim or loss.

any violation of any warranty, declarations or conditions contained in such
policies by Lessee or any other person; and (iv) shall provide that if the
insurers cancel insurance for any reason whatsoever, or the same is allowed to
lapse for non-payment of premium, or if there is any material change in policy
terms and conditions, such a cancellation, lapse or change shall not be
effective as to Lessor. Each liability policy shall be primary without right of
contribution from any other insurance which is carried by Lessee or Lessor and
shall expressly provide that all of the provisions thereof, except the limits of
liability, shall operate in the same manner as if there were a separate policy
covering each insured.

SECTION FIVE
RESTRICTIONS ON USE

The Aircraft will be flown only by certificated and qualified pilots and
will be maintained only by certificated and qualified mechanics. In the event
the insurance on
<PAGE>

the Aircraft would be invalidated because Lessee is unable to obtain
certificated and qualified pilots and mechanics, Lessee will not operate the
Aircraft until such time as certificated and qualified pilots and mechanics are
obtained and insurance on the Aircraft is made valid.

SECTION SIX
INSPECTION BY LESSOR

Lessee agrees to permit Lessor or any authorized agent to inspect the
Aircraft at any reasonable time and to furnish any information in respect to the
Aircraft and its use that Lessor may reasonably request.

SECTION SEVEN
ALTERATIONS

SECTION EIGHT
MAINTENANCE AND REPAIR

deterioration excepted. Lessee will pay all costs and expenses of replacement
parts and accessories, including transportation charges thereon. Lessee will be
entitled to any and all salvage from broken or worn out parts. The workers who
inspect, maintain, and repair the Aircraft on Lessee's behalf will not be
employees of Lessor, but will at all times be employees of Lessee or independent
contractors, and Lessor will have no control or authority to direct, employ,
discharge or pay compensation to such employees. Subject to the foregoing
limitations, Lessee agrees to indemnify Lessor against any liability arising
from the negligent repair and maintenance of the Aircraft, as well as from
failure to repair and maintain the Aircraft, and also against any claim or
liability arising out of the repair work, and the delivery of material to and
from the place where such repair and maintenance work is performed.

SECTION NINE
DEFAULT AND REMEDY

default. In the event of any breach by Lessee, Lessee shall not fly the Aircraft
and Lessor shall have the right to repossess the Aircraft without further
demand, notice or court order, or other process of law and Lessor shall have the
right to terminate this Lease immediately. Exercise by Lessor of either or both
of the rights specified above shall not prejudice Lessor's right to pursue any
remedy available to Lessor in law or equity.

Lessor shall be in breach of this Lease if Lessor defaults in its
obligations under this Lease and such default continues for five (5) days after
receipt by Lessor of written notice thereof from Lessee, unless such default
shall be of such a nature that the same cannot be completely remedied or cured
within such five (5) day period, then such default shall not be a breach of this
Lease for the purposes of this Section if Lessor shall have commenced curing
such default within such five (5) day period and shall proceed with reasonable
diligence and in good faith to remedy the default. In the event of any breach by
Lessor, Lessee shall have the right to terminate this Lease immediately and to
pursue any remedy available to Lessee in law or equity. Exercise by Lessee of
any of the rights specified above shall not prejudice Lessee's right to pursue
any other remedy available to Lessee in law or equity.

SECTION TEN
TITLE

The registration of and title to the Aircraft will be in the name of the
Lessor, and the Aircraft, at all times during the term of this Lease or any
extension, will bear United States registration markings. All responsibility and
obligations in regard to the operation of the Aircraft as above owned,
registered, and marked will be borne by Lessee during the term of this Lease.
<PAGE>

SECTION ELEVEN
PAYMENT OF TAXES

SECTION TWELVE
ASSIGNMENT

SECTION THIRTEEN
ACCIDENT AND CLAIM

SECTION FOURTEEN
<PAGE>

INDEMNIFICATION

Lessee assumes liability for, and hereby agrees to indemnify, defend,
protect, save, keep and hold harmless Lessor, its successors, agents,
accountants, counsel, affiliates and assigns from and against any and all
claims, liabilities, demands, obligations, losses, damages, penalties, claims
(including without limitation, claims involving strict or absolute liability in
tort), actions, suits, costs, expenses and disbursements (including, without
limitation, reasonable legal fees and expenses) of any kind and nature
whatsoever ("Claims") which may be imposed on, incurred by or asserted against
Lessor, in any way relating to or arising out of this Lease, and/or the
operation of the Aircraft, or the performance or enforcement of any of the terms
hereof, or in any way relating to or arising out of the manufacture, or, as
contemplated under this Lease, acceptance, rejection, ownership, delivery,
lease, possession, use, operation, maintenance, function, registration, sale,
return, storage, termination or other disposition of the Aircraft or any part
thereof or any accident in connection therewith (including, without limitation,
latent and other defects, whether or not discoverable). If any Claim is made
against Lessor, Lessor shall promptly notify Lessee and cooperate fully in the
defense or settlement. Whether the indemnity granted by Lessee to Lessor herein
is deemed subordinate or primary to any other indemnity to which each Lessor may
be entitled, Lessor may look solely to Lessee and need not pursue any Claims
against any third person prior to or subsequent to seeking the indemnity from
Lessee hereunder. Lessor shall have the opportunity, but not the obligation, to
defend if Lessee fails to assert a defense in any such Claim hereunder, the cost
of which defense shall be borne by Lessee. THE INDEMNITIES IN THIS SECTION SHALL
CONTINUE IN FULL FORCE AND EFFECT NOTWITHSTANDING THE EXPIRATION OR OTHER
TERMINATION OF THIS LEASE.

SECTION FIFTEEN
RETURN OF AIRCRAFT TO LESSOR
<PAGE>

SECTION SIXTEEN
MODIFICATION OF AGREEMENT

This Lease constitutes the entire understanding between the parties, and
any change or modification must be in writing and signed by both parties.

SECTION SEVENTEEN
NOTICES

All communications and notices provided for herein shall be in writing and
shall become effective when delivered by facsimile transmission (to Lessor at
601-352-0588 or to Lessee at 601-769-1826) or by Federal Express or other
overnight courier or four (4) days following deposit in the United States mail,
with correct postage for first-class mail prepaid, addressed to Lessor or Lessee
at their respective addresses set forth above, or else as otherwise directed by
the other party from time to time in writing.

SECTION EIGHTEEN
GOVERNING LAW

This Lease is entered into under, and is to be construed in accordance
with, the laws of the State of Mississippi.

SECTION NINETEEN
TRUTH IN LEASING STATEMENT

THE AIRCRAFT, A BRITISH AEROSPACE BAE 125 HAWKER 800A MANUFACTURER'S SERIAL
NO. 258012, CURRENTLY REGISTERED WITH THE FEDERAL AVIATION ADMINISTRATION AS
N80BR, HAS BEEN
<PAGE>

MAINTAINED AND INSPECTED UNDER FAR PART 91 DURING THE 12 MONTH PERIOD PRECEDING
THE DATE OF THIS LEASE.

AN EXPLANATION OF FACTORS BEARING ON OPERATIONAL CONTROL AND PERTINENT
FEDERAL AVIATION REGULATIONS CAN BE OBTAINED FROM THE NEAREST FAA FLIGHT
STANDARDS DISTRICT OFFICE.

THE "INSTRUCTIONS FOR COMPLIANCE WITH TRUTH IN LEASING REQUIREMENTS"
ATTACHED HERETO ARE INCORPORATED HEREIN BY REFERENCE.

IN WITNESS WHEREOF, the parties have executed this Lease.

EQUIPMENT MANAGEMENT SYSTEMS, LLC

By:
--------------------------------------

Name: J.L. Holloway
---------------------------

Title: Member
--------------------------

-----------------------------------------
Date and Time of Execution

<PAGE>

HAM MARINE, INC.

By: ______________________________________
Ronald W. Schnoor, President

__________________________________________
Date and Time of Execution
<PAGE>

INSTRUCTIONS FOR COMPLIANCE WITH "TRUTH IN LEASING"
REQUIREMENTS

1. Mail a copy of the lease agreement to the following address via
certified mail, return receipt requested, immediately upon execution
of the agreement (14 C.F.R. 91.23 requires that the copy be sent
within twenty-four hours after it is signed):

Federal Aviation Administration
Aircraft Registration Branch
ATTN: Technical Section
P.O. Box 25724
Oklahoma City, Oklahoma 73125

2. Telephone the nearest Flight Standards District Office at least forty-
eight hours prior to the first flight under this lease agreement.

3. Carry a copy of the lease agreement in the aircraft at all times.

<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 Amendment No. 1 to 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

June 29, 1997