FRIEDE GOLDMAN INTERNATIONAL INC, 10-K, 1999-03-31

FRIEDE GOLDMAN INTERNATIONAL INC
10-K, 1999-03-31
OIL & GAS FIELD MACHINERY & EQUIPMENT

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998

[] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission file number: 0-22595

FRIEDE GOLDMAN INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)

Mississippi 72-1362492
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

525 East Capitol Street, 7th Floor
Jackson, Mississippi 39201
(Address of principal executive offices) (Zip Code)

(601) 352-1107
(Registrant's telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:
Common Stock, $.01, par value
(Title of Class)
Securities Registered Pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes [X] No [ ].

Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K ( 229.405 under the Securities
Exchange Act of 1934) is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. [ ]

As of March 1, 1999, there were 23,346,272 shares of Common
Stock, $.01 par value, of Friede Goldman International Inc. issued and
outstanding, 11,102,467 of which shares having an aggregate market
value of approximately $120.7 million, were held by non-affiliates of
the registrant (affiliates being, for these purposes only, directors,
executive officers and holders of more than 5% of the registrant's
Common Stock).

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the proxy statement related to the registrant's 1999
annual meeting of shareholders, which proxy statement will be filed
under the Securities Exchange Act of 1934 within 90 days of the end of
the registrant's fiscal year ended December 31, 1998, are incorporated
by reference into Part III of this Form 10-K.
<PAGE>
TABLE OF CONTENTS

Part I
Item 1. Business............................................... 3
Risk Factors...........................................13

Item 2. Properties.............................................17
Item 3. Legal Proceedings......................................18
Item 4. Submission of Matters to a Vote of Security
Holders.............................................19
Executive Officers of the Registrant...................19

Part II

Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters......................20
Item 6. Selected Financial Data................................21
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................22
Item 7a. Quantitative and Qualitative Disclosures about
Market Risk........................................29
Item 8. Financial Statements and Supplementary Data............30
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.................30

Part III

Item 10. Directors and Executive Officers of the
Registrant..........................................30
Item 11. Executive Compensation.................................30
Item 12. Security Ownership of Certain Beneficial Owners
and Management......................................30
Item 13. Certain Relationships and Related Transactions.........30

Part IV

Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K................................31

FORWARD LOOKING STATEMENTS

This Report on Form 10-K contains "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. All statements, other than statements of historical facts,
included in this Form 10-K, are forward-looking statements. Such
forward-looking statements are subject to certain risks, uncertainties
and assumptions, including (i) risks of reduced levels of demand for
the Company's products and services resulting from reduced levels of
capital expenditures of oil and gas companies relating to offshore
drilling and exploration activity and reduced levels of capital
expenditures of offshore drilling contractors, which levels of capital
expenditures may be affected by prevailing oil and natural gas prices,
expectations about future 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, the ability
of oil and gas companies to access or generate capital sufficient to
fund capital expenditures for offshore exploration, development and
production activities, and other factors, (ii) risks related to
expansion of operations, either at its shipyards or one or more other
locations, (iii) operating risks relating to conversion, retrofit and
repair of drilling rigs, new construction of drilling rigs and
production units and the design of new drilling rigs, (iv) contract
bidding risks, (v) risks related to dependence on significant
customers, (vi) risks related to the failure to realize the level of
backlog estimated by the Company due to determinations by one or more
customers to change or terminate all or portions of projects included
in such estimation of backlog and (vii) risks related to regulatory
and environmental matters. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those anticipated,
estimated or projected. Although the Company believes that the
expectations reflected in such forward-looking statements are
reasonable, no assurance can be given that such expectations will
prove to have been correct.
<PAGE>
ITEM 1. Business

Friede Goldman International Inc. (together with its
subsidiaries, the "Company") provides services and equipment to the
offshore drilling industry. Services provided include conversion,
retrofit, repair and modification of existing offshore drilling rigs
and the design, construction and equipping of new 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 was formed in February 1997 to hold the combined
assets of HAM Marine, Inc. ("HAM Marine") and Friede & Goldman, Ltd.
("F&G Ltd.") and completed an initial public offering in July of 1997.
Through its subsidiary Friede Goldman Offshore, Inc. ("FGO", formerly
HAM Marine, Inc.) the Company has been continuously engaged in the
business of converting, retrofitting and repairing offshore drilling
rigs since 1982. Moreover, through F&G Ltd., also a subsidiary, the
Company has been continuously engaged in the business of offshore rig
design for more than 50 years.

At the time of its initial public offering in July 1997, the
Company conducted all of its conversion, retrofit and repair services
at its 32-acre shipyard, located in Pascagoula, Mississippi (the
"Pascagoula Facility" or "FGO West Facility"). As of December 31,
1998, the Company was performing conversion, retrofit and modification
work on five semisubmersible drilling units at the Pascagoula
Facility. Since the initial public offering, the Company has (i)
opened its new shipyard on Greenwood Island, Mississippi (the
"Greenwood Island" or the "FGO East" Facility"), (ii) added two
Canadian shipyards to its operations and (iii) acquired a group of
affiliated French companies engaged in the design and fabrication of
marine and offshore rig deck equipment.

Recent Developments

OPENING OF FGO EAST (GREENWOOD ISLAND) FACILITY. In January
1998, the Company opened the FGO East Facility (formerly known as the
Greenwood Island Facility), a state-of-the-art shipyard on an 85-acre
site located approximately six miles from the Pascagoula Facility.
The new shipyard was specifically designed to promote efficient
construction of new offshore drilling rigs. The shipyard, which
became fully operational in the second half of 1998, allows the
Company to simultaneously construct, in varying phases, up to six
jackup or four semisubmersible offshore drilling rigs. At December
31, 1998, the Company was performing deckwork and outfitting on one
Bingo 7000 design and two Bingo 9000 design semisubmersible drilling
units at the new shipyard.

In the fourth quarter of 1998, the company began operating the
Pascagoula Facility and the Greenwood Island Facility as a single
business unit known as Friede Goldman Offshore. The Pascagoula
Facility is now referred to as the FGO West Facility and the Greenwood
Island Facility is referred to as the FGO East Facility. HAM Marine's
wholly owned subsidiary, Friede Goldman Offshore, Inc., was merged
into HAM Marine, Inc. as of January 12, 1999 and HAM Marine's name was
changed to Friede Goldman Offshore, Inc. These changes were made to
facilitate movement of personnel between the facilities and to bring
the Company's domestic construction, retrofit, modification and repair
services under a single management structure.

ACQUISITION OF MARYSTOWN FACILITIES. On January 1, 1998, the
Company acquired two deepwater, ice-free shipyard and fabrication
facilities located in Marystown, Newfoundland, Canada (the "Marystown
Facilities") from two entities controlled by the Province of
Newfoundland. The Canadian facilities give the Company additional
shipyard capacity and proximity to drilling areas off the eastern
coast of Canada and in the North Sea. The Company paid one dollar to
acquire the shipyards, but pursuant to the terms of the acquisition
agreement, the Company also agreed to (i) maintain a minimum number of
employee manhours with respect to the acquired shipyard operations
through the year 2,000, (ii) undertake certain capital improvements at
the acquired shipyards and (iii) pay fifty percent (50%) of net
after-tax profits of the acquired shipyards for the twelve-month
period ending March 31, 1998 to the Province of Newfoundland. As of
December 31, 1998, a final determination of such after-tax profits has
not been made. However, the Company expects the amount, if any, to be
immaterial. The Company met the minimum employee manhour requirement
for 1998. The Company also agreed to complete the remaining work on
contracts entered into by the Province prior to the acquisition.
Three major contracts were in progress at the Marystown Facilities at
the time of acquisition by the Company. During 1998, two of the
projects
<PAGE>
were completed and delivered. Also, during 1998, the Marystown
Facilities were utilized to perform fabrication and construction work
on several retrofit, conversion and new construction projects in
progress at the Company's two U.S. shipyards. As of December 31, 1998,
the Marystown Facilities were completing one of the three contracts in
progress at the date of acquisition and were providing fabrication
work on two projects for the Company's U.S. shipyards.

ACQUISITION OF BLM COMPANIES. As of February 5, 1998, the
Company acquired Achere, S.A., a French societe anonyme ("Achere"),
its wholly owned subsidiary France Marine S.A. ("France Marine") and
the four operating subsidiaries of France Marine: Brissonneau & Lotz
Marine S.A. ("BLM"), Brissonneau & Lotz Marine Offshore, S.A. ("BLM
Offshore"), BOPP S.A. ("BOPP") and Kerdranvant S.A.R.L.
("Kerdranvant") as of February 5, 1998. These entities are
collectively referred to herein as the "BLM Companies." France Marine
is a holding company, and the operating subsidiaries are engaged in
the design and fabrication of deck equipment used by offshore drilling
rigs and other marine vessels. BLM and BLM Offshore are based in
Carquefou, France (near Nantes), and BOPP and Kerdranvant have
operations in Lanveoc, France (near Brest). BLM designs and
manufactures deck machinery, including mooring, anchoring and cargo
handling equipment such as deck cranes, provision cranes, and hose
handling cranes. BLM Offshore designs and manufactures
rack-and-pinion jacking systems used on offshore drilling platforms,
anchoring/mooring systems used on semisubmersible drilling rigs
(winches, windlasses, fairleads). As well, BLM Offshore designs and
manufactures offshore cranes for jackup, semisubmersibles, barges and
F.P.S.O's. BOPP manufactures trawl and draw net winches for inshore
and ocean going fishing vessels and equipment for service vessels and
hydrographical survey ships. Kerdranvant manufactures hydraulic power
and rack-and-pinion steering systems used in all types of vessels.
The Company paid approximately $25 million to acquire the BLM
Companies.

Overview of Offshore Drilling Equipment

The Company's primary customers are drilling contractors with
operations offshore in the Gulf of Mexico, the North Sea, 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.

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, which allows the rig to remain on location over a
drillsite in deep waters without the use of anchors and mooring lines.

While the Company has performed some modification and repair work
on fourth generation semisubmersibles, a major portion 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
earlier generation 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 completed two
projects involving semisubmersibles in 1998
<PAGE>
and at March 1, 1999 was working on the conversion of three
submersibles into semisubmersibles, the retrofit of one
semisubmersible for deep water, and the new build completion of three
semisubmersible hulls. At March 1, 1999, the Company also had entered
into contracts to convert one additional F & G Ltd. submersible into a
semisubmersible and to perform the new build construction of one F & G
Ltd. semisubmersible drilling unit.

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,
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.

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
completed one project involving repair of a jackup in 1998.

DRILLSHIPS. Drillships, which are typically a self-propelled
ship shape hull, are positioned over a drillsite through the use of
either a mooring system or a computer controlled 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. The Company did not work
on any projects involving drillships in 1998.

FLOATING PRODUCTION FACILITIES. A floating production facility
("FPF") consists of a ship or semisubmersible vessel upon which
production equipment is mounted. In many 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 an 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 did not work on any projects involving FPFs
in 1998.

DRILLING AND MARINE DECK EQUIPMENT. Every offshore drilling
unit and production unit contains various types of drilling equipment
and marine deck equipment. Drilling equipment typically consists of
the items such as derricks, rotary tables, top drive units, blow out
preventers, pipe handling equipment, mud pumps, etc. required to
conduct drilling operations. Marine deck equipment typically consists
of mooring, anchoring, and cargo handling equipment. In connection
with most major retrofit, conversion or new build projects, the owner
of the drilling unit contracts directly with the suppliers of drilling
and marine deck equipment for the purchase of such equipment for the
rig. Typically such equipment will be installed by the shipyard, and
is often referred to as Owner Furnished Equipment or "OFE". With its
acquisition of the BLM Companies, the Company has the capability to
supply marine deck equipment to its offshore drilling unit customers
and to participate in the market for the marine deck equipment on
drilling units being modified or constructed by other shipyards. The
BLM companies are also involved in the design and manufacturing of
marine equipment for marine shipyards throughout the world (for
fitting on cruise liners, bulk carriers, cargo vessels, tankers,
L.N.G.'s, etc.).
<PAGE>

Description of Operations

In the year ended December 31, 1998, the Company's operations
consisted of several conversion, retrofit and repair projects for
offshore drilling contractors and work on the new build completion of
three semisubmersible offshore drilling units. In addition, the
company, through the BLM Companies, supplied marine deck equipment for
several offshore drilling units and to numerous customers in the
marine industry. Significant conversion or retrofit projects such as
these generally take 8 to 14 months to complete, whereas certain
repair projects may require only 1 to 3 months to complete. New rig
construction projects can require from 18 to 30 months to complete.
With the acquisition of the BLM Companies, the Company now offers
services in all phases of new offshore rig construction from design
and engineering, to manufacturing and equipment sales, including spare
parts, and after sale services.

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 an FPF. 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,
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.

The Company completed one conversion in 1998 and performed the
final outfitting of one other rig conversion. At March 1, 1999 the
Company was in the process of converting three submersibles into
semisubmersibles and had entered into a contract to convert one
additional submersible into a semisubmersible.

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.

At March 1, 1999, the Company was in the process of retrofitting
one semisubmersible drilling unit.

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 completed repair work on three rigs in 1998.

DESIGN AND NEW CONSTRUCTION. The FGO East Facility was designed
specifically for the efficient construction of new offshore drilling
rigs. Moreover, the combined capacity of the FGO East Facility and
the FGO West Facility allows the Company to work on new construction
projects without any significant loss in its capacity to perform
conversion, retrofit and repair projects. At March 1, 1999, the
Company was working on the new build completion of three
semisubmersible hulls. A new build completion project involves the
design and construction of a drilling rig on an existing hull. In
February 1999, the company entered into a contract for the new build
<PAGE>
construction of a Friede & Goldman Ltd. designed Millenimum S.A.
semisubmersible drilling unit. New build completion involves
performing the addition of deck, quarter, equipment installation and
final outfitting of an existing semisubmersible hull. New build
construction includes construction of the semisubmersible hull itself
and the new build completion of that hull.

MARINE DECK EQUIPMENT. With the acquisition of the BLM
Companies, the Company entered the rig equipment and rig component
manufacturing market. The BLM Companies design and manufacture
mooring, anchoring, rack-and-pinion jacking systems, cargo handling
equipment and steering systems. As a result, the Company now has the
capability to outfit rigs for existing customers and to supply other
offshore rig manufacturers with rig kits consisting of legs, jacking
systems, anchoring winches and offshore handling cranes.

Marine deck equipment is typically manufactured to individual
customer specifications based on the planned application of the
equipment. Manufacture of the equipment required to complete a
customer's order may require from a few weeks to several months.

Customers and Marketing

The Company's offshore drilling unit customers are primarily
offshore drilling contractors, many of whom have been customers of the
Company for more than 15 years. The Company believes that it has
developed strong relationships with its customer base. 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 FGO East
and West Facilities for a tour and presentation.

The Company's customers for marine deck equipment include
offshore drilling contractors, other shipyards, cruise lines and
shipping companies. The BLM Companies marketing efforts are conducted
in concert with the other Company's domestic marketing efforts and
through sales representatives in various locations in Europe, China
and Asian countries.

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 84%, 70%, and
66% of revenue for 1996, 1997, and 1998 respectively. In 1998, the
Company derived more than 10% of its revenue from each of Noble
Drilling Corporation, Marine Drilling Corporation and Ocean Rig ASA.
Because the level of new build 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. New build construction projects
typically involve a greater portion of the work performed on a fixed
price 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 reviewed 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
<PAGE>
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 has recently 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.

Marine deck equipment is generally sold pursuant to fixed price
contracts.

Competition

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 and its extensive fabrication experience with
drilling rigs are its key advantages in competing for projects. In the
new rig construction business, the Company competes in a global market
with companies based in the United States, Europe and Asia. The
Company believes that its long-term investment in the design of new
drilling rigs and production units will provide it with a competitive
advantage with respect to the new rig construction business.

The Company competes in a local market against other companies
based on the Gulf Coast for repair projects for drilling rigs that
operate in the Gulf of Mexico. The market for smaller retrofit and
conversion projects is also primarily local, but the market for larger
retrofit and conversion projects includes international competitors.
The company believes it competes favorably against companies located
in Europe or the Far East for retrofit and conversion projects
relating to drilling rigs operating in the Gulf of Mexico and, to a
lesser extent, rigs operating offshore West Africa and South America
due to, among other things, high European labor costs and the
Company's favorable geographical location. The Company believes that
the addition of the Marystown Facilities with their low costs
structure, enables the Company to compete favorably for retrofit and
conversion projects relating to drilling rigs operating in the North
Sea and offshore Canada.

The Company believes that certain barriers exist that prevent new
companies from competing with the Company for new rig construction,
conversion, retrofit and repair activities 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 repair projects and small retrofit and conversion
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 constructions.

The Company competes in a global market in the design and
manufacture of deck equipment, although several competitors are
domestically based. Prior to their acquisitions by the Company, the
BLM Companies did not actively market in the United States. The
Company began marketing its product line of anchoring winches, cranes
for jackup and semisubmersible drilling units, mooring equipment, deck
machinery, jacking equipment, mooring equipment, jacking equipment and
skidding equipment in the United States shortly after the acquisition.
<PAGE>
Backlog

As of December 31, 1998, the Company's backlog was approximately
$364.7 million, approximately 92% of which management expects to be
performed within the 12 months ending December 31, 1999. Certain of
the contracts for BLM manufactured equipment include delivery dates up
to the end of 2000. The Company's backlog as of December 31, 1997 was
approximately $324.6 million.

In February 1999, the Company entered into a $143.2 million
contract with a Brazilian company for the new build construction of a
Friede & Goldman, Ltd. designed Millennium S.A. semisubmersible
drilling rig. The contract, which is subject to the seller's obtaining
adequate rig financing, is not included in the Company's backlog as of
December 31, 1998. The Company has 23 months from the contract date to
complete construction of the rig.

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. Similar materials are used in
the manufacture of marine deck equipment. In addition, electric motor
components, steel forgings and casting are used. 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.

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 foreign, federal and state safety regulations. At its
Mississippi facilities, the Company 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. Similar practices are in place at the
Company's foreign facilities. The Company believes that its safety
program and commitment to quality are vital to attracting and
retaining customers and employees.

The Company's FGO East and West Facilities fabricate according to
the standards of the American Bureau of Shipping, Det Norske Veritas,
American Petroleum Institute, the American Welding Society, the
American Society of Mechanical Engineers and specific customer
specifications. The Company's international operations fabricate
according to certain of the above standards and certain additional
standards, including those of the Lloyds Registry of Shipping, the
Canadian Welding Bureau and Bureau Veritas. All of the Company's
welding and fabrication procedures are performed in accordance with
the latest technology and industry requirements. The Company's BLM
subsidiary is quality certified ISO 9001 by Det Norske Veritas. The
Company also maintains training pro-
<PAGE>
grams at each of its facilities to train skilled personnel and to
maintain high quality standards. Management believes that these
programs enhance the quality of its products and reduce their repair
rate.

Government and Environmental Regulation

OVERVIEW. Many aspects of the Company's operations and
properties are materially affected by foreign, 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 have constituted a significant portion
of the Company's revenues in some prior years. 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.

During 1998, the Company purchased 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 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.

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
<PAGE>
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 storm water 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 "large 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.

In connection with the Company's purchase of the Marystown
Facilities, the Newfoundland provincial government agreed to carry out
and pay for a complete environmental assessment and remediation
program. The Phase I investigation identified several issues that may
have caused subsurface contamination on site at one of the Marystown
Facilities. The Phase II investigation has been started. As of March
1, 1999, the Company has not been informed of any results of the Phase
II investigation. The Newfoundland provincial government has agreed to
bear the cost of remediation procedures associated with the Marystown
Facilities and to indemnify the Company against any environmental
liabilities associated therewith.

The Company's fabrication site in Carquefou, France was named a
"classified installation" under French environmental law. Under
French law, the operator of a "classified installation" has various
obligations with respect to the site, including compliance with
certain operating activities and clean-up obligations upon cessation
of the classified activity. In addition, the French authorities may
assess fines in the event of non-performance by the operator. As a
"classified installation", the site operates under an Arrete
Prefectoral, or administrative authorization, issued by regional
environmental authorities. An administrative authorization with
respect to the Carquefou site was granted in July of 1984 and renewed
in January 1991. The administrative authorization requires, among
other things, that the Company follow any instructions that
authorities may impose in the interest of public health and
agriculture and gives them the right to conduct tests on air and waste
quality at the site at any time. The Company does not believe that
"classified installation" status of the Carquefou site or the
requirements of the administrative authorization will have a material
effect on its operations.

The Company's compliance with environmental 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.

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
<PAGE>
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.

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 domestic and
international facilities. The Company also maintains commercial
general liability insurance including ship repairers' legal liability
coverage and builders' risk coverage if required. The Company has
workers' compensation and employers' liability insurance with respect
to its Mississippi operations that satisfies 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 (i) a $90 million limit with
respect to its U.S. and Canadian operations, and (ii) a FRF100 million
limit with respect to its French operations. Other coverages
currently in place include business income and extra expenses, water
pollution, aviation, automobile and commercial crime coverage.
Although management believes that the Company's insurance is adequate
with respect to all of its domestic and international operations 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.

Employees

The Company's workforce varies based on the level of ongoing
fabrication activity at any particular time. As of December 31, 1998,
the Company had approximately 4,200 employees, including 3,500 in the
United States, 500 in Canada and 200 in France. For several years
prior to May 1997, substantially all of the Company's work force had
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 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 $10.9 million in 1997. All contract 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. The Company believes that the cost of directly
employing its laborers is essentially the same as the historic cost of
the employee leasing arrangement most recently terminated.

None of the Company's United States employees is employed
pursuant to a collective bargaining agreement. The Company entered
into a five-year collective bargaining agreement with three Canadian
unions in connection with the acquisition of the Marystown Facilities.
The Company is currently subject to two collective bargaining
agreements with respect to its French employees. The Company is a
member of two employers' federations which are party to the respective
collective bargaining agreements. The collective bargaining agreements
have no expiration date and, under French law, remain in force unless
canceled or modified. The Company believes that its relationship with
its employees is good.
<PAGE>

ITEM 1. RISK FACTORS

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. Oil prices have declined
significantly over the past several months and over the past several
years, oil and natural gas prices and the level of offshore drilling
and exploration activity have fluctuated substantially. As a result
of such declining prices, the level of offshore drilling activity has
declined from higher levels of activity experienced in 1997 and early
1998. A prolonged reduction in oil or natural gas prices in the
future would likely further depress offshore drilling and development
activity. A sustained reduction of offshore drilling and development
activity or additional substantial reductions 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. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

Integration of Acquisitions/Management of Growth

The Company has a brief operating history with respect to the
Marystown Facilities and the BLM Companies. The acquisitions caused a
significant increase in the Company's costs due to increased labor,
lease rental and depreciation, amortization and interest expenses in
1998. In 1998, such costs directly correlated to increases in
revenues from increased construction, conversion, retrofit and repair
activity. If such activity fails to continue at the levels management
anticipates, the Company's financial condition and results of
operations could be materially adversely effected.

The acquisition of the Marystown Facilities and the BLM Companies
as well as the development of a new drilling rig construction business
represent a significant expansion of the Company's operations and
expose the Company to additional business and operating risks and
uncertainties. Such risks and uncertainties include, among others,
the ability of management of the Company to effectively manage the
expanded activities, the ability of the Company to realize its
investment in its expanded facilities, and the ability of the Company
to meet the contract obligations included in its backlog. 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 or 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 new construction,
conversion, retrofit and repair of offshore drilling rigs and
production units and the manufacture of marine deck equipment 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 could 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,
<PAGE>
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 Company's drydock vessel 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, production unit or marine deck
equipment 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 FGO East
and West 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 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 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."
<PAGE>

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, 1996,
1997, and 1998, the Company's largest customers (those which
individually accounted for more than 10% of revenue in a particular
year) collectively accounted for 84%, 70%, and 66% of revenue,
respectively. For 1998, the Company derived more than 10% of its
revenue from Noble Drilling Corporation and Marine Drilling
Corporation and Ocean Rig ASA. 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 one or more of the
Company's customers. In particular, approximately 25 % of the
Company's backlog as of December 31, 1998 was attributable to four
projects, all of which were with one customer and 59% was attributed
to two projects with one other 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 1999. See "Business Backlog."

Regulatory and Environmental Matters

The Company's operations and properties are subject to and
affected by various types of governmental regulation, including
numerous foreign, 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."
<PAGE>

Friede Acquisition Default Provisions

In connection with the acquisition of F&G Ltd. in December 1996
by a predecessor to the Company, the Company is obligated to pay the
former owner (i) certain design and licensing payments on sales by F&G
Ltd. 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 will
have the right to (i) require the Company to return all F&G Ltd.
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. No payments were due in 1998 under these provisions.

Obligations to Maintain Minimum Employment Levels

In connection with its acquisition of the Marystown Facilities
and the construction of the FGO East Facility, the Company agreed to
maintain certain minimum levels of employment at each facility and is
subject to financial penalties if it fails to do so. Under the terms
of its acquisition of the Marystown Facilities, the Company is
obligated to maintain a minimum of 1.2 million employee manhours
(including manhours for management, labor, salaried and hourly
employees) with respect to the shipyard operations acquired by the
Company for each of the 1998, 1999 and 2000 calendar years. The
Company agreed to pay liquidated damages of C$10 million for 1998 and
C$5 million in 1999 and 2000 if such minimum number of manhours is not
attained in such year. The 1.2 million minimum manhour requirement was
met in 1998. In addition, the County of Jackson, Mississippi has
dredged the ship channel and constructed roads and other
infrastructure related to the FGO East Facility, under an economic
incentive program. However, in the event that the Company does not
maintain a minimum employment level of 400 jobs at the FGO East
Facility for each year during the primary term of its 20-year lease,
the Company could face statutory penalties under Mississippi law,
which include the repayment of the remaining balance of the $6 million
loan incurred by the county to finance such improvements. No payments
were due in 1998 related to either of the above obligations.

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.

Control by Existing Management and Stockholders

The Company's executive officers and directors beneficially own
52.7% of the outstanding shares of Common Stock. In addition, J. L.
Holloway, the Company's Chairman of the Board, Chief Executive Officer
and President, beneficially owns 42.5% of the outstanding shares of
Common Stock. Consequently, these persons, if they were to act
together, 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
shareholders.

Business and Geographic Segments

Financial information about the Company's business and geographic
segments can be found in Note 14 of the Notes to Consolidated
Financial Statements included elsewhere in this Form 10-K.
<PAGE>

ITEM 2. Properties

FGO West Facility. The Company's original 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 20,000 square foot building used for
engineering and administrative personnel, 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 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 lease
was extended for an additional 2 years in December 1998.

FGO EAST FACILITY. The Company also operates a new shipyard on
85 acres located approximately six miles from the FGO West Facility.
The shipyard opened in January 1998 and all manufacturing components
were fully operational by the third quarter of 1998. The new shipyard
has approximately 35 feet of water depth dockside and unobstructed
access to the Gulf of Mexico. The new shipyard features
state-of-the-art design, including automated construction equipment,
floating and dockside cranes, panel lines, launchways and 2,000 feet
of reinforced bulkhead dockspace and an additional 1,950 feet of
dockspace that could be developed in the future. The Company leases
the FGO East Facility from Jackson County, Mississippi pursuant to a
long-term lease which expires in June 2017 with three additional
extensions of ten years each. The new shipyard contains an assembly
area covering in excess of 300,000 square feet, an 85,000 square foot
fabrication building and pipe shop, a 15,000 square foot machinery
building, a 20,000 square foot office building and a 20,000 square
foot warehouse are under construction and expected to be in service by
mid 1999. In addition, the County of Jackson, Mississippi has dredged
the ship channel and built roads and other infrastructure related to
the FGO East Facility, under an economic incentive program. However,
in the event that the new shipyard does not maintain a minimum level
of employment for each year during the primary term of the lease, the
Company could face statutory penalties under Mississippi law.

MARYSTOWN FACILITIES. In January 1998, the Company acquired two
deepwater, ice-free shipyard and fabrication facilities located in
Marystown, Newfoundland, Canada. The two shipyards are located six
miles apart by land. The Shipyard facility covers a total land area of
60,000 square meters with an in-house fabrication area of 9,358 square
meters. The shipyard has a syncrolift with a maximum vessel draft of
22 feet. It is 250 feet long by 64 feet wide and has a maximum lifting
capacity of 3000 tonnes. The shipyard also has 230 meters of dock
space with a water depth of 9 meters.

The Cow Head fabrication facility covers a total land area of
81,000 square meters, 14,000 of which is in-house fabrication area.
The facility also has an L-shaped wharf, with an average depth of 16
meters at the front face. It also has 30 meter long load out quay for
skidding large assemblies onto barges. The facility has 330 meters of
dock space. The Company owns the Marystown Facilities in fee simple.
The Company also assumed five water lot leases with the Canadian
government which run through 2015 covering the water area next to each
of the Marystown Facilities.

FRENCH PROPERTIES. Through the BLM Companies, the Company
operates two deck equipment fabrication facilities in Carquefou and
Lanveoc, France. The facilities cover an aggregate of approximately
100,000 square meters, and the Company owns the French fabrication
facilities in fee simple. The Company also leases office space in
Carquefou, France; Pusan, South Korea; Shanghai, China and St.
Petersburg, Russia.

OTHER PROPERTIES. The Company leases office space in Jackson,
Mississippi, New Orleans, Louisiana and Houston, Texas.
<PAGE>

ITEM 3. Legal Proceedings

On January 11, 1999, a subsidiary of the Company, FGO (formerly
HAM Marine, Inc.) was served with a summons by Hyundai Heary
Industries Co. Limited ("Hyundai") in an action styled Hyundai Heavy
Industries Co. Limited v. Ocean Rig ASA and HAM Marine, Inc. In the
High Court of Justice, Queen's Bench Division, Commercial Court, 1009
Folio No. 67. Hyundai alleges that FGO tortiously interfered with
Hyundai's contract (the "Hyundai Contract") with Ocean Rig ASA ("Ocean
Rig") to complete one oil and gas drilling rig for $149,913,000.00.
The Hyundai contract was signed on October 22, 1997 but was subject to
approval by the Ocean Rig Board of Directors on December 18, 1997. The
contract contained a "no shop" clause prohibiting Ocean Rig from
negotiating with any other party for the work on this one vessel while
the contract was in effect. After the Hyundai Contract was signed, but
before it was considered by the Ocean Rig Board of Directors, FGO
actively pursued a contract from Ocean Rig for the completion of 3
other drilling vessels. Ultimately, the Ocean Rig Board of Directors
did not approve the Hyundai contract and, thereafter, FGO received a
contract to complete two drilling vessels for Ocean Rig and an option
to complete 2 more. Hyundai alleges that FGO tortiously interfered
with the Hyundai Contract in order to obtain a contract from Ocean Rig
for the completion of the first drilling vessel. FGO denies all of
Ocean Rig's allegations and is vigorously defending the action. The
total potential exposure to FGO is approximately $15 million or 10
percent of the Hyundai Contract.

The Company is a party to various other 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.
<PAGE>
ITEM 4. Submission of Matters to a Vote of Security Holders

No matter was submitted to a vote of security holders during the
quarter ended December 31, 1998.

EXECUTIVE OFFICERS OF THE REGISTRANT

The Executive Officers of the Company are elected annually to
serve for the ensuing year or until their successors have been
elected. The following table sets forth certain information with
respect to the executive officers of the Company:

Name Age Position

J.L. Holloway.....................54 Chairman, President and
Chief Executive Officer
Carl M. Crawford..................55 Executive Vice President
John F. Alford....................39 Executive Vice President
Jobie T. Melton, Jr...............50 Chief Financial Officer
James A. Lowe, III................41 General Counsel and Secretary
Ronald W. Schnoor.................45 Executive Vice President,
Shipyard Operations

* As of March 1, 1999

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 (now Friede Goldman
Offshore, Inc., "FGO") from its formation in 1982 until April 1997,
and from April 1997 Mr. Holloway has been the Chairman of the Board of
FGO. 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 FGO, a position he has held for more than the last
five years. Prior to joining FGO in 1982, Mr. Crawford had been
employed in management and marketing positions with a number of
equipment and manufacturing companies.

John F. Alford has served as Executive Vice President of the
Company since December 1997. He served as Senior Vice President and
Chief Financial Officer of the Company from May 1997 to December 1997.
Mr. Alford joined FGO 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.

Jobie T. Melton, Jr. joined the Company as its Chief Financial
Officer on July 1, 1998. Prior to joining the company, Mr. Melton was
with Arthur Andersen LLP for twenty-seven years, the last 15 of which
he was a partner. Mr. Melton is a Certified Public Accountant.

James A. Lowe, III has served as General Counsel and Secretary
of the Company since May 1997. Mr. Lowe joined FGO on January 1, 1997
as General Counsel. He has also served as Director of FGO and
Director and Secretary of Friede & Goldman since February 1997. Prior
to joining Friede Goldman Offshore, 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.

Ronald W. Schnoor was named Executive Vice President of Shipyard
Operations for the Company in November 1998. He served as President of
FGO from April 1997 and as the Vice President, Manager of Operations
of since 1992. Mr. Schnoor joined FGO in 1984 and previously served as
both Senior Project Engineer and as a Project Manager.
<PAGE>

PART II

ITEM 5. Market for the Registrant's Common Equity and Related
Stockholder Matters

During most of 1998, the Company's Common Stock was traded on the
Nasdaq National Market. On December 1, 1998, the company's Common
Stock began trading on the New York Stock Exchange. At March 1, 1999,
there were 170 stockholders of record of the Common Stock. The
Company estimates that an additional 11,462 stockholders held the
Common Stock in street name as of such date. The Company's Common
Stock was first listed for quotation on the Nasdaq National Market on
July 22, 1997. The following table sets forth the high and low sales
price per share of the Common Stock, as quoted on the Nasdaq National
Market through November 30, 1998 and on the New York Stock Exchange
from December 1, 1998 through December 31, 1998, for the periods
indicated.

<TABLE>
Sales Price
------------------------
Period High Low Cash Dividend
- ---------------------------------------- ----- -------- -------------
<S> <C> <C> <C>
July 22, 1997 through September 30, 1997 30 11 13/16 N/A
Quarter ended December 31, 1997 46 26 5/16 N/A
Quarter ended March 31, 1998 35 1/2 20 9/16 N/A
Quarter ended June 30, 1998 41 7/8 26 N/A
Quarter ended September 30, 1998 30 10 1/4 N/A
Quarter ended December 31, 1998 18 15/16 9 3/4 N/A
</TABLE>

The Company does not anticipate paying cash dividends for the
foreseeable future. The Company expects that it will retain all
available earnings generated by the Company's operations for the
development and growth of its business. Any future determination as
to the payment of dividends will be made at the discretion of the
Board of Directors and will depend on the Company's operating results,
financial condition, capital requirements, general business condition
and other factors as the Board of Directors deems relevant.
<PAGE>

ITEM 6. Selected Financial Data

The following table sets forth selected historical financial data
as of the dates and for the periods indicated. The historical
financial data set forth below are derived from the audited financial
statements of the Company and the Company's predecessor companies, F&G
Ltd. and HAM Marine (collectively, the "Predecessors"). The following
data 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 Company and the related notes
thereto.

<TABLE>
Year Ended December 31,
---------------------------------------------------------
1994 1995 1996 1997 1998
------- ------- -------- ------- --------
(In Thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations Date:
Revenue.................................................. $23,891 $19,865 $21,759 $113,172 $382,913
Cost of Revenue.......................................... 18,063 13,510 15,769 75,236 293,712
------- ------- -------- ------- --------

Gross profit ....................................... 5,828 6,355 5,990 37,936 89,201
Selling, general and administrative expenses............. 2,203 3,862 6,673 12,097 32,699
------- ------- -------- ------- --------

Operating Income (loss)............................. 3,625 2,494 (684) 25,839 56,501
Net interest income (expense)............................ (346) (197) (448) 673
(201)
Gain on asset sales...................................... 808 1,869 349 3,922 --
Litigation settlement.................................... -- 750 3,467 611 --
Other.................................................... 23 6 104 165
(336)
------- ------- -------- ------- --------

Income before provision for income taxes............ 4,110 4,921 2,788 31,210 55,964
Provision for income taxes............................... -- -- -- 7,941 20,678
------- ------- -------- ------- --------
Net Income .............................................. $4,110 $4,921 $2,788 $23,269 $35,286
======= ======= ======== ======= ========
Unaudited Pro Forma Data:
Net income as reported above............................. $4,110 $4,921 $2,788 $23,269 $35,286
Pro forma provision for income taxes (1)................. (1,521) (1,821) (1,032) (3,980) --
------- ------- -------- ------- --------

Pro forma net income................................ $2,589 $3,100 $1,756 $19,289 $35,286
======= ======= ======== ======= ========
Earnings per common share:
Basic .............................................. $0.22 $0.27 $0.15 $1.10 $1.46
Diluted ............................................ $0.22 $0.27 $0.15 $1.09 $1.43
Pro Forma earnings per common share:
Basic............................................... $0.14 $0.17 $0.10 $0.92 $1.46
Diluted ............................................ $0.14 $0.17 $0.10 $0.91 $1.43
Weighted average common shares outstanding:
Basic............................................... 18,400 18,400 18,400 21,065 24,211
Diluted ............................................ 18,400 18,400 18,400 21,297 24,599
Statement of Cash Flows Data:
Cash provided by operating activities.................... $3,094 $269 $4,875 $51,122 $21,088
Cash provided by (used in) investing activities.......... 410 (2,410) (3,866) (26,541)
(77,299)
Cash provided (used in) financing........................ (3,123) 2,581 (706) 29,947 41,156
Other Financial Data:
Depreciation and amortization........................... $347 $425 $696 $1,609 5,875
Capital expenditures.................................... 1,150 2,670 2,357 26,595 60,738
EBITDA (2).............................................. 4,054 2,919 1,092 28,464 62,155
Balance Sheet Data:
Working capital......................................... $2,370 $2,714 $1,104 $45,522 $5,859
Net property, plant and equipment....................... 3,582 4,079 5,546 11,817 138,108

Total assets ........................................... 8,584 14,980 27,582 142,555 314,560
Long-term debt ......................................... 3,217 3,270 2,853 25,767 45,863
Stockholder's equity.................................... 2,681 5,255 6,219 63,805 85,290
</TABLE>
<PAGE>
(1) 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 had been a C Corporation for tax purposes for
all periods presented. Prior to June 1997, the Company and the
Predecessors 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.
(2) 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.

ITEM 7. 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 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. Despite declines in oil and
natural gas prices over the past year, worldwide offshore drilling
activity has remained relatively high over the past few years.
According to Offshore Data Services, Inc. as of February 5, 1999, the
utilization rate of the worldwide fleet of offshore mobile drilling
units was 79.2%. While this rate represents a decline from the 96.4%
utilization rate of one year ago, it is only slightly less than the
81% utilization rate of five years ago. This level of drilling
activity is generally attributed 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
resulted in increased demand for newly constructed semisubmersible
drilling rigs and for retrofitting offshore drilling rigs.

During the second half of calendar 1998, worldwide orders for the
construction of new offshore drilling rigs declined. However, the
Company has maintained a significant contract backlog of deepwater
related projects. At December 31, 1997, the Company's backlog was
approximately $324.6 million. The Company's backlog at December 31,
1998 was approximately $364.7 million, of which over $350 million was
related to deepwater projects. In addition, in February 1999, the
Company was awarded a $143.2 million contract for the new construction
of a Friede & Goldman, Ltd. designed Millennium S.A. semisubmersible
offshore drilling rig. The contract is subject to the securing of rig
financing by the owner.
<PAGE>
To accommodate its rapid growth, the Company has leased
additional acreage adjacent to FGO West's existing shipyard in
Pascagoula, Mississippi, that provides it with additional dock space
and covered fabrication capacity. In addition, the Company has
completed construction of a state-of-the-art shipyard, also in
Pascagoula, Mississippi, that is 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 new facility ("FGO East" formerly known as the "Greenwood Island
Facility") began generating revenue in the first quarter of 1998 and
became fully operational in the third quarter. Further, the Company
has increased its workforce from approximately 430 employees at
December 31, 1996 to approximately 4,200 employees at December 31,
1998.

In January 1998 the Company acquired substantially all of the
operating assets of a shipyard and fabrication facility in
Marystown, Newfoundland (the "Marystown Facility"). The Marystown
Facility expanded the Company's capacity for new construction as well
as retrofit and repair of offshore drilling rigs and production units.
Also, in February 1998, the Company acquired a company located near
Nantes, France, that designs and manufactures mooring, anchoring,
rack-and-pinion jacking systems and cargo handling equipment. This
additional capacity is expected to help the Company in meeting the
anticipated increase in demand for such equipment as components of new
and modified offshore drilling rigs.

Due to general declines in oil and gas prices during 1998, demand
for offshore drilling rigs has declined and, as a result, dayrates
earned by drilling contractors have also declined. While the
Company's backlog remains strong, it is possible that continued low
oil and gas prices could result in a further decline in demand for
deepwater drilling rigs and, as a result, dayrates for rigs could also
decline further. Substantially all of the contracts included in the
Company's backlog at December 31, 1998 relate to deepwater drilling
rigs. Some of these contracts are subject to cancellation by the
customers, however, the Company has had no indication that any of its
contracts might be cancelled.

At December 31, 1998, the Company has paid or committed
approximately $11.3 million for the manufacture of certain
jackup rig components. As noted above, demand for new construction of
jackup drilling rigs has declined. However, management of the Company
believes that contracts for new construction, modification or repairs
will be secured that will utilize these components and permit the
Company to realize its investment in the components.

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
believes that the access to information provided by its project
management system allows it to effectively manage its current projects
as well as to negotiate contracts on new projects on a profitable
basis.

The Company's operations are subject to variations from quarter
to quarter and year to year 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.
<PAGE>
The Company's revenue on contracts is earned on the
percentage-of-completion method which is based upon the percentage
that incurred costs to date, excluding the costs of any purchased but
uninstalled materials, 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 that require such adjustments become known. Provisions
for estimated losses on uncompleted contracts are made in the period
in which such losses are identified. Other changes, including those
arising from the 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.

Results of Operations

Comparison of the Years Ended December 31, 1998 and 1997

During the year ended December 31, 1998, the Company generated
revenue of $382.9 million, an increase of 238%, compared to the $113.2
million generated for the year ended December 31, 1997. This increase
was caused by (1) an increase in demand for conversion and retrofit
services related to deep water offshore drilling rigs, (2) revenues of
approximately $71.0 million attributable to the completion and
outfitting of an existing semisubmersible drilling rig hull, (3)
approximately $62.2 million of revenues attributable to the new
construction of semi-submersible drilling rigs, and (4)
revenues of approximately $113.9 million generated by the Company's
Marystown Facility and French operations.

Cost of revenue was $293.7 million for the year ended December
31, 1998 compared to $75.2 million for the year ended December 31,
1997, resulting in an increase in gross profit from $37.9 million for
the year ended December 31, 1997 to $89.2 million in the year ended
December 31, 1998. The decrease in gross profit as a percentage of
revenues can be explained as follows: (1) the new build construction
of semisubmersible offshore drilling rigs generally results in
lower gross margin percentages than those generated from repair and
retrofit work, (2) the company earned smaller margin percentages on
contracts assumed upon the acquisition of the Marystown Facility, and
(3) margin percentages earned on equipment sales from the Company's
French operations, while typically higher than margins earned on new
build construction are generally less than those earned from repair
and retrofit work. Management expects that gross margins, as a
percentage of revenues, may trend lower as a more significant portion
of the company's total revenues is derived from the new construction
of offshore drilling rigs and from sales of equipment. Such lower
gross margin percentages result from a higher dollar volume of lower
margin material and subcontract costs included in costs of revenues,
and from a greater portion of the total project being performed on a
fixed price basis. Gross margins on repair and retrofit projects also
vary based on, among other things, the size of the project undertaken.

Selling, general and administrative expenses "(SG&A expenses")
were $32.7 million in the year ended December 31, 1998 compared to
$12.1 million for the year ended December 31, 1997. The increase in
SG&A expenses reflects an increase in sales and administrative
workforce and facilities due to overall growth of the Company's
business, the additional administrative costs associated with
international activities and costs associated with being a publicly
held corporation.

Operating income increased by $30.7 million from the year ended
December 31, 1997 to $56.5 million for the year ended December 31,
1998 primarily as a result of increased revenue and gross profit
discussed in the preceding paragraphs.

Net interest income (interest income less interest expense)
declined to $0.2 million for the year ended December 31,
1998 from $0.6 million for the year ended December 31, 1997, primarily
as a result of increased interest expense attributable to borrowings
related to FGO East and equipment additions in the existing FGO West
yard.
<PAGE>
The change in other income (expense) is primarily attributable to
miscellaneous items, none of which are individually material.

The provision for income taxes for the year ended December 31,
1998 reflects a composite income tax rate of approximately 37%
including foreign taxes of approximately $2.9 million. The actual and
proforma provision for income taxes for the year ended December 31,
1997, reflects a combined Federal and State tax rate of 38%. The
decline in the overall rate for the year ended December 31, 1998 is
the result of available state income tax credits related to increased
employment levels at the Company's Pascagoula, Mississippi locations.

Comparison of the Years Ended December 31, 1997 and 1996

During the year ended December 31, 1997, the Company generated
revenue of $113.2 million, an increase of 420%, compared to the $21.8
million generated in 1996. This increase was caused primarily by an
increase in demand for conversion and retrofit services and a general
increase in the size of the conversion and modification projects in
1997 as compared to 1996.

Cost of revenue was $75.2 million in 1997 compared to $15.8
million in 1996, resulting in an increase in gross profit
from $6.0 million in 1996 to $37.9 million in 1997. The increase in
gross profit as a percentage of revenue is primarily due to the type
of work being completed in 1997 compared to 1996. During 1997, a
greater portion of the projects performed consisted of conversion and
retrofit projects, compared to primarily repair and inspection
projects completed in 1996. Conversion and retrofit projects generally
provide higher profit margins than repair and inspection projects. In
addition, during 1997, F&G Ltd. completed a major design project for a
customer that resulted in higher gross profits than those earned in
1996. SG&A expense were $12.1 million in 1997 compared to $6.7 million
in 1996. The increase in SG&A expenses reflects an increase in
administrative workforce and facilities due to overall growth of the
Company's business and costs associated with being a publicly held
corporation.

Operating income increased by $26.5 million from 1996 to 1997
primarily as a result of increased revenue and enhanced profit margins
discussed in the preceding paragraphs.

Net interest income (interest income less interest expense) was
$0.7 million in 1997 compared to net interest expense of $0.4 million
in 1996. This change reflects the favorable cash flows of the Company
which have provided capital sufficient to sustain current operations,
reducing the need to draw on its credit facilities. Cash flow was
further enhanced by the Company's initial public offering which
provided $46.7 million in cash to the Company.

During 1997, the Company realized gains of approximately $3.6
million as a result of the distribution of certain appreciated assets
not used in the business to the stockholder of one of the
Predecessors. Also, gains of approximately $0.3 million resulted from
the sale of real estate held for investment. The gain on the asset
sales in the year ended December 31, 1996 related primarily to the
sale of marketable securities.

During 1996, the Company received approximately $3.5 million in
proceeds from the settlement of a lawsuit filed in 1992 related to a
contract. Settlement proceeds of approximately $0.6 million were
received in 1997 related to another contract.

The provision for income taxes for 1997 represents income tax
expense for the period subsequent to the termination of the
Predecessors' status as S Corporations, plus a one time charge of
approximately $0.8 million attributable to the initial recording of a
net deferred tax liability. The pro forma provision for income taxes
is the result of the application of a combined federal and state tax
rate of 37% to estimated taxable income for the period prior to
termination of S Corporation status.
<PAGE>

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
acquired with proceeds from such borrowings. Net cash provided by
operations was $52.1 million and $21.1 million for the year ended
December 31, 1997 and 1998, respectively. Accounts receivable and
inventory related to contracts as of December 31, 1998 have increased
significantly over amounts outstanding at December 31, 1997 while, at
the same time, billing in excess of revenues and estimated profits on
several large projects being in progress have declined causing the
decline in operating cash flow.

During the year ended December 31, 1998, the Company incurred
approximately $60.7 million in capital expenditures primarily related
to the overall expansion of the Company's business activities. Of the
total, $52.3 million was expended for facilities and related
additional equipment. $0.9 million was also expended for furniture and
fixtures and $7.5 million was related to building improvements. In
addition, in February, 1998, approximately $25.0 million was
expended for the acquisition of the Company's French subsidiary. The
capital expenditures and acquisition costs were funded from operating
cash flow, proceeds from the initial public offering, the MARAD
arrangement and the $8 million and $18 million debt facilities
discussed below.

In March, 1997, FGO entered into a credit facility (the "Credit
Facility") which provided 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. During 1998, the borrowing capacity under the Credit
Facility was increased to $25.0 million and was extended until March
31, 1999. At December 31, 1998, $9.3 million was the outstanding
balance under the Credit Facility and $9.6 million was available.
Borrowings under the Credit Facility bear interest equal to the
lender's prime lending rate plus 1/2% per annum. At December 31, 1998,
the interest rate under the Credit Facility was 8.14% per annum. The
Credit Facility contains a number of restrictions, including a
provision that would prohibit the payment of dividends by FGO to the
Company in the event that FGO defaults under the terms of the
facility. In addition, the Company must maintain certain minimum net
worth and working capital levels and ratios and debt to equity ratios.

The Company has signed a commitment letter with the bank for $30
million credit facility that would provide up to $15 million in
receivable based credit and a $15 million capital expenditure and
acquisition facility that can be converted to a 3 year term loan upon
termination of the facility. Other terms and restrictions of the $30
million facility are similar to the existing facility.

As a source of borrowing for expansion, the United States
Maritime Administration ("MARAD") provided its guarantee for
$24.8 million of bonds issued by the Company. The proceeds from the
sale of MARAD guaranteed bonds were used for capital expenditures
relating to constructing and equipping the Company's FGO East
Facility. Borrowings under the MARAD facility are secured by the FGO
East Facility, bear interest at 6.35% and are repayable over 15 years.
As of December 31, 1998, approximately $24.8 million was outstanding
under the MARAD facility.

During 1998, the Company entered into an $8 million equipment
financing arrangement. Amounts borrowed bear interest at 7.05% and are
being repaid in quarterly installments of $500,000 plus interest
through March 2002. The balance outstanding at December 31, 1998 was
$6.5 million. During December 1998, the Company issued $18.0 million
of 10 year 7.99% Mississippi Business Finance Corporation Taxable
Industrial Development Revenue Bonds (the "MBFC Bonds"). The
bonds require annual principle and interest of approximately $2.6
million. The proceeds from both the $8.0 million equipment facility
and the $18.0 million MBFC Bonds were used to purchase equipment
(primarily cranes and welding related equipment) and a floating dry
dock. The borrowings are secured by the equipment purchased.

During 1998, the Board of Directors authorized a stock repurchase
plan under which the Company could repurchase shares of its common
stock in open market transactions with an aggregate fair value of up
to $30,000,000. Through December 31, 1998, the Company had repurchased
1,188,900 shares of its Common Stock for an aggregate of approximately
$15.5 million. The Company utilized a $15.0 million short-term credit
facility provided by
<PAGE>
an investment banking firm to finance a portion of the purchases. No
amounts were outstanding under that arrangement as of December 31,
1998.

In July 1997, the Company completed an initial public offering
(the "Offering") of 6,005,042 shares of its common stock for net
proceeds of approximately $46.7 million. Proceeds from the Offering
have been used to finance a portion of the Company's expansion of its
FGO West shipyard, the new FGO East Facility, and the acquisition of
the French operations and for working capital.

At December 31, 1998, the Company had invested approximately
$12.8 million in an unconsolidated subsidiary ("Ilion LLC") in which
the Company currently owns a 50% equity interest. The Company's
ownership interest in Ilion LLC is expected to be reduced to 30%.
Ilion LLC owns a hull for a semi-submersible drilling rig that
requires substantial completion and outfitting. The Company and the
other member of Ilion LLC (who is also one of the Company's largest
customers) are considering various options for formal arrangements
related to the hull, including financing of the completion, securing
a contract for utilization or sale of the rig, or other options. The
Company's investment in Ilion LLC was financed through cash flow from
operations. Other than the initial purchase of the drilling rig hull,
Ilion LLC has had no significant activity as of December 31, 1998. The
Company's investment in Ilion LLC is accounted for using the equity
method.

Management believes that cash generated by operating activities,
and funds available under its various credit facilities will be
sufficient to fund its capital expenditure requirements and its
working capital needs at current levels of activity. Management of
the Company has historically been able to manage cash flow from
construction contracts in such a manner as to minimize the need for
short-term contract related borrowings. However, in light of the
significant increase in revenues during 1998, additional debt
financing or equity financing may be required if the Company continues
to significantly increase its conversion, retrofit and repair business
or obtains significant additional 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.

As noted above, the company has experienced rapid growth during
the past two years. During this period, construction was completed on
the FGO East Facility; an initial public offering of common stock was
completed and the Company's employment level, revenues and backlog
increased significantly. The Company has also invested in an equity
ownership in an unconsolidated subsidiary that owns a semi-submersible
drilling rig, and, unlike prior operations, the Company has incurred
costs related to construction or fabrication of rig components for
which no specific customer has committed. In addition, in early 1998,
the Company completed the acquisition of foreign entities in Canada
and France. These changes in and significant expansion of the
Company's operation, expose the Company to additional business and
operating risks and uncertainties.

Year 2000 ("Y2K")

Many software applications, hardware and equipment and embedded
chip systems identify dates using only the last two digits of the
year. These products may be unable to distinguish between dates in the
Year 2000 and dates in the year 1900. That inability, if not
addressed, could cause applications, equipment or systems to fail or
provide incorrect information after December 31, 1999, or when using
dates after December 31, 1999. This in turn could have an adverse
effect on the Company, due to the Company's direct dependence on its
own applications, equipment and systems and indirect dependence on
those of other entities with which the Company must interact.

COMPLIANCE PROGRAM. In order to address the Y2K issue, the
Company has implemented a Y2K compliance plan to coordinate the five
phases of Y2K remediation. Those phases include: (1) awareness, (2)
assessment, (3) remediation, (4) testing and (5) implementation of
necessary modifications. The Company has made all applicable levels
of its organization aware of the Y2K issue and of the Company's plans
to assure Y2K compliance.

In connection with the rapid expansion of the Company's business
activities, the Company, with the assistance of third-party
consultants, has conducted an overall assessment of its computer and
information systems needs. As
<PAGE>
a result of such assessment, the Company has begun implementation of
an expanded and upgraded information system. The new system, which
will be Y2K compliant, includes upgraded software and hardware and
will involve the outsourcing of certain data processing functions.
Implementation of the new system is scheduled to be substantially
complete for the Company's domestic operations during the third
quarter of 1999. As part of the implementation process, the new
system will be tested for Y2K compliance. Implementation of the
system's applications at the Company's international locations will
follow the domestic implementation, but will not be complete prior to
the year 2000.

With respect to the Company's domestic non-financial systems
applications, and its international financial and non-financial
systems, the Company has initiated a review and testing program to
assess the Y2K compliance of the systems currently in place. Such
review will determine the nature and impact of the year 2000 issue for
hardware and equipment, embedded chip systems, and third-party
developed software. The review involves, among other things, obtaining
representations and assurances from third parties, including third
party vendors, that their hardware and equipment, embedded chip
systems, and software being used by or impacting the Company are or
will be modified to be Y2K compliant.

The Company's Non-IT Systems primarily consist of equipment with
embedded technology and computer assisted design software. The Company
is in the process of completing its preliminary assessment of all
date-sensitive components. Upon completion of its assessment, the
Company will replace or modify any non-compliant Non-IT Systems as
necessary.

COMPANY'S STATE OF READINESS. As noted above, the Company
expects that implementation of its new information systems at its
domestic locations will be complete before the end of the third
quarter of 1999. Nevertheless, the Company is currently testing its
existing domestic information systems for Y2K compliance and expects
to have such testing completed by the end of the second quarter of
1999. The review of Y2K compliance at international locations and for
domestic non-financial applications is underway. As previously noted,
the review involves soliciting responses from third parties concerning
Y2K compliance of their products. To date, the responses from such
third parties are inconclusive. As a result, management cannot
predict the potential consequences if these or other third parties are
not Y2K compliant. Management expects that the review, testing, and
any required remediation will be completed by the end of the third
quarter of 1999.

COSTS TO ADDRESS YEAR 2000 COMPLIANCE ISSUES. The costs of
acquiring and implementing the Company's expanded and upgraded
information system are not directly attributable to achieving Y2K
Compliance, rather, such costs are a direct result the Company's
growth. While these costs are expected to be significant in the
aggregate, the most significant portion is being financed through a
five-year operating lease. Annual lease payments are expected to
total approximately $1.4 million. Costs incurred to date and expected
to be incurred with respect to review, testing and remediation of
international financial and non-financial systems and domestics
non-financial systems are not anticipated to be significant.

RISKS OF NON-COMPLIANCE AND CONTINGENCY PLANS. The major
applications that pose the greatest threat to the Company if
the Y2K compliance program is not successful are the Company's
financial systems, including project management systems
and payroll. A failure of such systems could result in an inability
to determine the status of construction projects or to disburse
payroll to the Company's workforce on a timely basis or to perform its
other financial and accounting functions. Failure of embedded
technology could result in the temporary unavailability of equipment
and disruption of construction projects. The primary potential Y2K
risk attributable to third parties would be from a temporary
disruption in certain materials and services provided by such third
parties.

The goal of the Y2K project is to ensure that all of the
Company's critical systems and processes remain functional.
However, because certain systems and processes may be interrelated
with systems outside of the control of the Company, there can be no
assurance that all implementations will be successful. Accordingly, as
part of the Y2K project, contingency and business plans are being
developed to respond to any failures as they may occur. Such
contingency and business plans are scheduled to be completed by
mid-year 1999. Management does not expect the costs to the Company of
the Y2K project to have a material adverse effect on the Company's
financial
<PAGE>
position, results of operations or cash flows. Based on information
available at this time, however, the Company cannot conclude that any
failure of the Company or third-parties to achieve Y2K compliance will
not adversely affect the Company.

Recently Issued Accounting Pronouncements

In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 130 ("SFAS No. 130"), "Reporting Comprehensive Income,"
which is effective for fiscal years beginning after December 15, 1997.
SFAS No. 130 requires the company to (a) classify items of other
comprehensive income by their nature in a financial statement and (b)
display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital. SFAS
No. 130 was adopted in 1998.

In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 131 ("SFAS No. 131"), "Disclosures about Segments of an
Enterprise and Related Information," which is effective for periods
beginning after December 14, 1997. SFAS No. 131 requires the Company
to report financial and descriptive information about its operating
segments in its annual financial statements for the year ending
December 31, 1998. SFAS No. 131 was adopted in 1998.

In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities". The Statement
establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments
embedded in other contracts) be recorded in the balance sheet as
either an asset or liability measured at its fair value. The Statement
requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are
met. Special accounting for qualifying hedges allows a derivative's
gains and losses to offset related results on the hedged item in the
income statement, and requires that a company must formally document,
designate and assess the effectiveness of transactions that receive
hedge accounting. Given the Company's historically minimal use of
these types of instruments, the Company does not expect a material
impact on its statements from adoption of SFAS No. 133.

ITEM 7a. Quantitative and Qualitative Disclosures about Market Risk

The Company is exposed to interest rate risk due to changes in
interest rates, primarily in the United States. The company's policy
is to manage interest rates through the use of a combination of fixed
and floating rate debt. The Company currently does not use any
derivative financial instruments to manage its exposure to interest
rate risk. The table below provides information about the Company's
future maturities of principal for outstanding debt instruments and
fair value at August 31, 1998. All instruments described are
non-trading instruments ($ in millions).

<TABLE>
Fair
1999 2000 2001 2002 2003 Thereafter Total
Value
----- ----- ----- ------ ------ ---------- -------
- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long-term Debt
Fixed rate $6,801 $5,471 $5,582 $4,216 $3,798 $26,739 $52,607 $52,607
Average interest rate 7.07% 7.07% 7.02% 7.04% 7.03% 6.69%

Short-term Debt
Variable rate $9,328 $ 9,328 $ 9,328
Average interest rate 8.1% 8.1%
</TABLE>

Foreign Currency Risks

Although the majority of the Company's transactions are in U.S.
dollars, two of the Company's subsidiaries conduct some of their
operations in various foreign currencies. The company currently does
not use any off balance sheet hedging instruments to manage its risks
associated with its operating activities conducted in foreign
<PAGE>
currencies unless that particular operation enters into a contract in
a foreign currency which is different that the local currency of the
particular operation. In limited circumstances and when considered
appropriate, the Company will utilize forward exchange contracts to
hedge the anticipated purchases and/or sales. The Company has
historically used these instruments primarily in the manufacturing and
selling of certain marine deck equipment. The Company attempts to
minimize its exposure to foreign currency fluctuations by matching its
revenues and expenses in the same currency for its contracts.
As of December 31, 1998, the company does not have any outstanding
forward exchange contracts.

ITEM 8. Financial Statements and Supplementary Data

The information required by this Item 8 is contained in a
separate section of this report. See "Index to Consolidated
Financial Statements" on page F-1.

ITEM 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure

None

PART III

ITEM 10. Director and Executive Officers of the Registrant

The information required by this Item 10 is incorporated by
reference to the Company's definitive Proxy Statement (the "Proxy
Statement") to be filed with the Securities and Exchange Commission
pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended, within 120 days after the end of the fiscal year covered
by this report. See also "Executive Officers of the Registrant"
included in Part I hereof.

ITEM 11. Executive Compensation

The information required by this Item 11 is incorporated by
reference to the Proxy Statement.

ITEM 12. Security Ownership of Certain Beneficial Owners and
Management

The information required by this Item 12 is incorporated by
reference to the Proxy Statement.

ITEM 13. Certain Relationships and Related Transactions

The information required by this Item 13 is incorporated by
reference to the Proxy Statement.
<PAGE>

PART IV

ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K

(a)(1) Financial Statements
The Consolidated Financial Statements listed by the
Registrant on the accompanying Index to Consolidated Financial
Statements are filed as part of this Annual Report. (See page F-1).

(a)(2) Financial Statement Schedules
The required information is included in the Consolidated
Financial Statements or Notes thereto.

(a)(3) Exhibits

Exhibit

3.1 - Articles of Incorporation of Friede Goldman
Mississippi, Inc.

3.2 - Agreement and Plan of Merger of Friede Goldman
International Inc. and Friede Goldman Mississippi, Inc.

3.3 - Bylaws

*4.1 - Specimen Common Stock Certificate. (Incorporated by
reference to Exhibit 4.1 to the Company's Registration
Statement on Form S-1 (Registration No. 333-27599)
declared effective on July 18, 1997).

*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. (Incorporated by reference to Exhibit
4.2 to the Company's Registration Statement on Form S-1
(Registration No. 333-27599) declared effective on July
18, 1997).

*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, L.P.,
Carl Crawford Children's Trust and Bodin Children's
Trust. (Incorporated by reference to Exhibit 4.3 to
the Company's Registration Statement on Form S-1
(Registration No. 333-27599) declared effective on July
18, 1997).

*10.1 - Form of Officer and Director Indemnification Agreement.
(Incorporated by reference to Exhibit 10.1 to the
Company's Registration Statement on Form S-1
(Registration No. 333-27599) declared effective on July
18, 1997).

*10.2 - Form of Employment Agreement between Friede Goldman
International Inc. and J. L. Holloway. (Incorporated
by reference to Exhibit 10.2 to the Company's
Registration Statement on Form S-1 (Registration No.
333-27599) declared effective on July 18, 1997).

*10.3 - Form of Amendment No. 1 to Employment Agreement between
Friede Goldman International Inc. and J. L. Holloway.
(Incorporated by reference to Exhibit 10.3 to the
Company's Registration Statement on Form S-1
(Registration No. 333-27599) declared effective on July
18, 1997).

*10.4 - Form of Employment Agreement between HAM Marine, Inc.
and each of Carl M. Crawford and Ronald W. Schnoor.
(Incorporated by reference to Exhibit 10.4 to the
Company's Registration Statement on Form S-1
(Registration No. 333-27599) declared effective on July
18, 1997).

*10.5 - Form of Amendment No. 1 to Employment Agreement between
HAM Marine, Inc. and each of Carl M. Crawford and
Ronald W. Schnoor.(Incorporated by reference to Exhibit
10.5 to the Company's Registration Statement on Form
S-1 (Registration No. 333-27599) declared effective on
July 18, 1997).
<PAGE>
*10.6 - Form of Employment Agreement between Friede Goldman
International Inc. and John F. Alford. (Incorporated by
reference to Exhibit 10.6 to the Company's Registration
Statement on Form S-1 (Registration No. 333-27599)
declared effective on July 18, 1997).

*10.7 - Form of Amendment No. 1 to Employment Agreement between
Friede Goldman International Inc. and John F. Alford.
(Incorporated by reference to Exhibit 10.7 to the
Company's Registration Statement on Form S-1
(Registration No. 333-27599) declared effective on July
18, 1997).

*10.8 - Form of Employment Agreement between HAM Marine, Inc.
and James A. Lowe, III. (Incorporated by reference to
Exhibit 10.8 to the Company's Registration Statement on
Form S-1 (Registration No. 333-27599) declared
effective on July 18, 1997).

*10.9 - Form of Amendment No. 1 to Employment Agreement between
HAM Marine, Inc. and James A. Lowe, III.
(Incorporated by reference to Exhibit 10.9 to the
Company's Registration Statement on Form S-1
(Registration No. 333-27599) declared effective on July
18, 1997).

*10.10 - Amended and Restated 1997 Equity Incentive Plan.

*10.11 - 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. (Incorporated by reference
to Exhibit 10.13 to the Company's Registration
Statement on Form S-1 (Registration No. 333-27599)
declared effective on July 18, 1997).

10.12 - Fifth Amendment to Revolving Credit Agreement, dated as
of August 14, 1998 by and among HAM Marine, Inc. as
borrower, Friede Goldman International Inc. and Friede
& Goldman, Ltd. as guarantors, and Bank One, Louisiana,
National Association as 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). (Incorporated by
reference to Exhibit 10.14 to the Company's
Registration Statement on Form S-1 (Registration No.
333-27599) declared effective on July 18, 1997)

*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. (Incorporated by reference to Exhibit
10.15 to the Company's Registration Statement on Form
S-1 (Registration No. 333-27599) declared effective on
July 18, 1997).

*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). (Incorporated by reference to Exhibit 10.16
to the Company's Registration Statement on Form S-1
(Registration No. 333-27599) declared effective on July
18, 1997).

*10.16 - Form of Amended and Restated Stock Exchange Agreement
by and among Friede Goldman International Inc., HAM
Martine, 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.
(Incorporated by reference to Exhibit 10.18 to the
Company's Registration Statement on Form S-1
(Registration No. 333-27599) declared effective on July
18, 1997).

*10.17 - Business Purchase Agreement, dated November 22, 1996,
by and among J. L. Holloway Holdings, Inc., Friede &
Goldman, Ltd. and Jerome L. Goldman. (Incorporated by
reference to Exhibit 10.19 to the Company's
Registration Statement on Form S-1 (Registration No.
333-27599) declared effective on July 18, 1997).
<PAGE>
*10.18 - 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. (Incorporated by reference to
Exhibit 10.20 to the Company's Registration Statement
on Form S-1 (Registration No. 333-27599) declared
effective on July 18, 1997).

*10.19 - 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.
(Incorporated by reference to Exhibit 10.21 to the
Company's Registration Statement on Form S-1
(Registration No. 333-27599) declared effective on July
18, 1997).

*10.20 - 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.
(Incorporated by reference to Exhibit 10.22 to the
Company's Registration Statement on Form S-1
(Registration No. 333-27599) declared effective on July
18, 1997).

10.21 - Aircraft Dry Lease, dated as of December 1, 1998, by
and between Equipment Management Systems, LLC, lessor,
and Friede Goldman International Inc., lessee.

*10.22 - Stock Purchase Agreement, dated January 1, 1998, by and
among Marystown Shipyard Limited, Newfoundland Ocean
Enterprises Ltd., Friede Goldman Canada, Inc., Friede
Goldman International Inc. and Friede Goldman
Marystown, Ltd. (Incorporated by reference to Exhibit
99.2 to the Company's Current Repiort on Form 8-K,
dated January 1, 1998).

*10.23 - Sale and Purchase Agreement, dated February 5, 1998, by
and among Friede Goldman France S.A.S., Mr. Jean
Franaois Queru, Mr. Arnaud Queru, Ms. Helene Queru,
Mrs. Regine Queru, Mr. Jean Michel Gandreuil, Mrs.
Dominique Gandreuil and MGLV. (Incorporated by
reference to Exhibit 99.2 to the Company's Current
Report on Form 8-K, dated February 5, 1998).

*10.24 - Amendment No. 1 to Sale and Purchase Agreement, dated
February 5, 1998, by and among Friede Goldman France
S.A.S., Friede Goldman International Inc., Mr. Jean
Franaois Queru, Mr. Arnaud Qeru, Ms. Helene Queru,
Mrs. Regine Queru, Mr. Jean Michel Gandreuil, Mrs.
Dominique Gandreuil and MGLV. (Incorporated by
reference to Exhibit 99.3 to the Company's Current
Report on Form 8-K, dated February 5, 1998).

10.25 - Loan Agreement Among GE Capital Public Finance, Inc. as
lender, Mississippi Business Finance Corporation as
issuer and Friede Goldman International Inc. as
borrower, dated December 1, 1998.

10.26 - Substitution of Equipment and Security Agreement, dated
as of December 15, 1998, by and between General
Electric Capital Corporation as secured party and HAM
Marine, Inc. as debtor.

10.27 - Employment and Noncompetition Agreement between Friede
Goldman International Inc. and John F. Alford.

10.28 - Employment Agreement between Friede Goldman
International Inc. and Jobie T. Melton, Jr.

21.1 - Subsidiaries of Friede Goldman International Inc.

27.1 - Financial Data Schedule.

* Previously filed.

(b) Reports on Form 8-K

During the quarter ended December 31, 1998, the Company did not file
any Current Reports on Form 8-K.
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has caused
this report to be signed on its behalf by the undersigned, thereunto
duly authorized, on March 30, 1998.

FRIEDE GOLDMAN INTERNATIONAL INC.

/s/ J.L. HOLLOWAY
J. L. Holloway
Chairman, President and
Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities indicated on March 1,
1999.

Signature Title

/s/ J. L. HOLLOWAY Chairman of the Board, President and
J.L. Holloway Chief Executive Officer (Principal
Executive Officer)

/s/ JOBIE T. MELTON, JR. Chief Financial Officer (Principal
Jobie T. Melton, Jr. Financial Officer and
Principal Accounting Officer)

/s/ ALAN A. BAKER Director
Alan A. Baker

/s/ T. JAY COLLINS Director
T. Jay Collins

/s/ JOHN G. CORLEW Director
John G. Corlew

/s/ JEROME L. GOLDMAN Director
Jerome L. Goldman

/s/ RAYMOND E MABUS, JR. Director
Raymond E. Mabus, Jr.

/s/ HOWELL W. TODD Director
Howell W. Todd
<PAGE>
FRIEDE GOLDMAN INTERNATIONAL INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

Consolidated Financial Statements of Friede Goldman International Inc.
and Subsidiaries:

Report of Independent Public Accountants...........................F-2
Consolidated Balance Sheets as of December 31, 1997 and 1998.......F-3
Consolidated Statements of Operations for the years ended
December 31, 1996, 1997 and 1998................................F-4
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1996, 1997 and 1998...................F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1997 and 1998................................F-7
Notes to Consolidated Financial Statements.........................F-9
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Friede Goldman International Inc.:

We have audited the accompanying consolidated balance sheets of
Friede Goldman International Inc., a Mississippi corporation (the
"Company") and its subsidiaries as of December 31, 1997 and 1998, and
the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the years in the three year period
ended December 31, 1998. 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 consolidated financial
position of Friede Goldman International Inc. and its subsidiaries as
of December 31, 1997 and 1998, and the results of their operations and
their cash flows for each of the years in the three year period ended
December 31, 1998, in conformity with generally accepted accounting
principles.

ARTHUR ANDERSEN LLP

New Orleans, Louisiana,
February 9, 1999
<PAGE>
<TABLE>
FRIEDE GOLDMAN INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

December 31,
----------------------------------
1997 1998
------------ ------------
<S> <C> <C>
ASSETS

Current assets:
Cash and cash equivalents $ 57,038,036 $ 42,796,320
Accounts receivable 20,568,194 52,956,309
Inventory and stockpiled materials 5,216,651 34,191,727
Costs and estimated earnings in excess of billings on uncompleted contracts -- 14,397,714
Restricted escrowed funds 14,383,929 --
Prepaid expenses and other 607,448 2,535,947
Current deferred tax asset -- 2,246,084
------------ ------------

Total current assets 97,814,258 149,124,101

Investment in unconsolidated subsidiary 907,957 12,825,000
Property, plant and equipment, net of accumulated depreciation 11,816,664 138,108,264
Restricted escrowed funds 10,433,071 --
Construction in progress 17,934,877 969,978
Goodwill and other assets net of accumulated amortization 3,648,585 13,532,760
------------ ------------

Total assets $142,555,412 $314,560,103
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Short-term debt, including current portion of long-term debt $ 493,829 $ 16,129,380
Accounts payable 11,507,108 62,968,178
Accrued expenses 3,803,587 18,640,068
Billing in excess of costs and estimated earnings on uncompleted contracts 36,487,735 45,527,884
------------ ------------

Total current liabilities 52,292,259 143,265,510
Deferred income tax liability 691,000 6,794,177
Long-term debt, less current maturities 25,766,929 45,862,732
------------ ------------

Total liabilities 78,750,188 195,922,419
------------ ------------

Deferred government subsidy, net of accumulated amortization -- 33,347,604

Commitments and contingencies
Stockholders' equity:
Preferred stock; $0.01 par value; 5,000,000 shares authorized;
no shares issued and outstanding -- --
Common stock; par value $0.01; 125,000,000 shares authorized;
24,405,042 and 24,535,168 shares issued and outstanding at
December 31, 1997 and December 31, 1998, respectively 244,050 245,351
Additional paid-in capital 49,501,707 50,928,526
Retained earnings 14,059,467 49,345,947
Less: Treasury stock at cost, 1,188,900 shares at December 31, 1998 -- (15,827,557)
Accumulated other comprehensive income -- 597,813
------------ ------------

Total stockholders' equity 63,805,224 85,290,080
------------ ------------

Total liabilities and stockholders' equity $142,555,412 $314,560,103
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
FRIEDE GOLDMAN INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended December 31,
---------------------------------------------------------
1996 1997 1998
----------- ------------ ------------
<S> <C> <C> <C>
Revenue $21,758,715 $113,171,533 $382,912,819
Cost of revenue 15,768,980 75,235,691 293,712,117
----------- ------------ ------------
Gross profit 5,989,735 37,935,842 89,200,702
----------- ------------ ------------
Selling, general and administrative expenses 6,673,371 12,096,614 32,699,304
----------- ------------ ------------
Operating income/(loss) (683,636) 25,839,228 56,501,398
----------- ------------ ------------

Other income/(expense):
Interest expense (891,458) (563,601)
(2,227,627)
Interest income 443,317 1,236,152 2,026,198
Gain/(loss) on sale or distribution of assets 348,793 3,922,099
(374,225)
Litigation settlement 3,466,635 611,310 --
Other 104,487 165,217 38,438
----------- ------------ ------------
Total other income/(expense) 3,471,774 5,371,177
(537,216)
----------- ------------ ------------
Income before income taxes 2,788,138 31,210,405 55,964,182
Income tax provision -- 7,940,920 20,677,702
----------- ------------ ------------
Net income 2,788,138 23,269,485 35,286,480
=========== ============ ============

Pro forma income tax provision 1,032,000 3,980,000 --
----------- ------------ ------------
Pro forma net income $ 1,756,138 $ 19,289,485 $ 35,286,480
=========== ============ ============

Earnings per share:
Basic $ 0.15 $ 1.10 $ 1.46
=========== ============ ============
Diluted $ 0.15 $ 1.09 $ 1.43
=========== ============ ============

Pro forma earnings per share:
Basic $ 0.10 $ 0.92
=========== ============
Diluted $ 0.10 $ 0.91
=========== ============

Weighted average shares:
Basic 18,400,000 21,065,252 24,210,810
=========== ============ ============
Diluted 18,400,000 21,297,006 24,599,038
=========== ============ ============
</TABLE>

The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
FRIEDE GOLDMAN INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Common Stock Additional Other
---------------------- Paid-In Retained Treasury Comprehensive
Number Amount Capital Earnings Stock Income (Loss) Total
---------- -------- ---------- ------------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31,1995 501 $ 5,013 $ 876,554 $ 4,531,924 $ -- $ (158,243) $ 5,255,248
Comprehensive income:
Net income for year
ended 1996 -- -- -- 2,788,138 -- -- 2,788,138
Other comprehensive
income
Unrealized gain on
on marketable
securities -- -- -- -- -- 1,766,914 1,766,914
------------

Total comprehensive
income 4,555,052
Distribution to
stockholders -- -- -- (4,771,413) -- -- (4,771,413)
Capital contribution
from stockholders -- -- 100,000 -- -- -- 100,000
Stock granted to
employees as
compensation -- -- 1,080,000 -- -- -- 1,080,000
---------- -------- ---------- ------------- ------------ ----------- -----------
Balance,
December 31, 1996 501 $ 5,013 $2,056,554 $ 2,548,649 -- $ 1,608,671 $ 6,218,887
Comprehensive income:
Net income for year
ended 1997 -- -- -- 23,269,485 -- -- 23,269,485
Other comprehensive
income
Unrealized loss
on marketable
securities -- -- -- -- -- (704,060) (704,060)
------------
Total comprehensive
income 22,565,425
Stock granted to
employees as
compensation -- -- 475,000 -- -- -- 475,000
Distributions to
stockholders -- -- -- (11,758,667) -- (904,611) (12,663,278)
Exchange of stock in
connection with
reorganization
(Note 1) 9,199,499 86,987 (86,987) -- -- -- --
Sale of stock in
public offering
net of offering
costs 3,002,521 30,025 46,637,560 -- -- -- 46,667,585
Stock options
granted -- -- 541,605 -- -- -- 541,605
Stock split 12,202,521 122,025 (122,025) -- -- -- --
---------- -------- ---------- ------------- ------------ ---------- ------------
</TABLE>

The accompanying notes are an integral part of these financial statements
<PAGE>
<TABLE>
FRIEDE GOLDMAN INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY-(Continued)

Comprehensive income:
Net income for year
ended 1998 -- -- -- 35,286,480 -- -- 35,286,480
Other comprehensive
income
Net change in foreign
currency translation
adjustment -- -- -- -- -- 597,813 597,813
------------
Total comprehensive
income 35,884,293
Stock options granted
to employees as
compensation -- -- 315,869 -- -- -- 315,869
Stock options
exercised 119,195 1,192 772,193 -- -- -- 773,385
Sale of stock 10,931 109 338,757 -- -- -- 338,866
Purchase of treasury
stock -- -- -- -- (15,827,557) -- (15,827,557)
---------- -------- ---------- ------------- ------------ ---------- ------------
Balance,
December 31, 1998 24,535,168 $245,351 $50,928,526 $ 49,345,947 $(15,827,557) $ 597,813 $ 85,290,080
========== ======== =========== ============= ============ ========== ============
</TABLE>

The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
FRIEDE GOLDMAN INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31,
---------------------------------------------------------
1996 1997 1998
----------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 2,788,138 $ 23,269,485 $ 35,286,480
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 695,551 1,608,531 5,875,081
Compensation expense related to stock
or stock options issued to employees 1,080,000 1,016,605 315,869
(Gain)/loss on sale of assets (348,793) (3,922,099) 374,225
Deferred income tax provision/(benefit) -- 683,000 704,000
Net (increase)/decrease in billings in excess
on uncompleted contracts 2,978,116 33,509,619
(7,499,689)
Net increase/(decrease) related to costs and
estimated earnings in excess of billings on
uncompleted contracts -- --
(14,110,699)
Net effect of changes in assets and liabilities:
Restricted certificates of deposit (195,697) 4,651,964 --
Accounts receivable (3,834,519) (15,698,618)
(19,153,228)
Inventory and stockpiled materials (571,000) (4,638,747)
(23,209,369)
Prepaid expenses and other assets (464,966) (55,228) 2,383,674
Accounts payable and accrued expenses 2,747,893 11,697,693 40,122,016
----------- ------------ ------------
Net cash provided by operating activities 4,874,723 52,122,205 21,088,360
----------- ------------ ------------

Cash flows from investing activities:
Capital expenditures for plant and equipment (2,356,999) (26,595,481)
(60,738,266)
Cash received upon acquisition of Friede & Goldman 163,020 -- --
Acquisition of French subsidiary -- --
(25,285,072)
Cash acquired upon acquisition of French subsidiary -- -- 20,581,094
Proceeds from sale of property, plant and equipment 578,521 423,913 59,206
Investment in unconsolidated subsidiary -- (907,791)
(11,917,043)
Investment in marketable securities (2,631,756) -- --
Payments received on notes receivable or sales type lease 381,352 538,523 --
Cash acquired upon acquisition of Canadian Subsidiary -- -- 735
----------- ------------ ------------
Net cash used in investing activities $(3,865,862) $(26,540,836)
$(77,299,346)
----------- ------------ ------------
</TABLE>

The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
FRIEDE GOLDMAN INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS-(Continued)

For the Years Ended December 31,
--------------------------------------------------------
1996 1997 1998
----------- ----------- -------------
<S> <C> <C> <C>
Cash flows from financing activities:

Proceeds from stock offering $ -- $46,667,585 $ --
Proceeds from sale of stock -- -- 338,866
Proceeds from exercise of stock options -- -- 773,386
Net borrowings/(repayments) under lines of credit 3,822,030 (1,501,000) 9,327,950
Proceeds from borrowings under debt facilities 1,736,109 700,847 39,827,671
Release of restricted escrowed funds -- -- 24,817,000
Purchase of treasury stock -- -- (15,827,557)
Repayments on borrowings under debt facilities (1,492,917) (7,897,979) (18,101,355)
Distributions to stockholders (4,771,413) (6,672,682) --
Payments of financing charges for Title XII debt -- (1,349,980) --
----------- ----------- -------------
Net cash (used in)/provided by financing activities (706,191) 29,946,791 41,155,961
----------- ----------- -------------
Effect of exchange rate changes on cash -- -- 813,309
----------- ----------- -------------
Net increase (decrease) in cash and cash equivalents 302,670 55,528,160 (14,241,716)
Cash and cash equivalents at beginning of year 1,207,206 1,509,876 57,038,036
----------- ----------- -------------
Cash and cash equivalents at end of year $ 1,509,876 $57,038,036 $ 42,796,320
=========== =========== =============

Supplemental disclosure of cash flow information:

Cash paid during the period for interest $ 751,522 $ 1,255,792 $ 1,105,298
=========== =========== =============
Cash paid during the period for income taxes $ -- $ 4,750,000 $ 19,072,552
=========== =========== =============
Non-cash distributions of property to stockholders $ -- $ 1,641,000 $ --
=========== =========== =============
Assumption of note payable by stockholder $ -- $ 198,000 $ --
=========== =========== =============
Proceeds from borrowings under Title XI held in escrow $ -- $24,817,000 $ --
=========== =========== =============
Distribution of marketable securities to
stockholder to satisfy note payable $ -- $ 1,400,000 $ --
=========== =========== =============
Distribution of marketable securities to stockholder $ -- $ 6,391,000 $ --
=========== =========== =============
Assumption of margin account debt by stockholders $ -- $ 2,749,000 $ --
=========== =========== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
FRIEDE GOLDMAN INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Nature of Business:

The principal predecessor to Friede Goldman International Inc.,
HAM Marine, Inc., was formed in 1982 under the laws of the State of
Mississippi. The consolidated financial statements include the
accounts of Friede Goldman International Inc. and its wholly-owned
subsidiaries, HAM Marine, Inc. ("HAM"), Friede & Goldman, Ltd.
("FGL"), Friede Goldman Newfoundland Limited ("FGN"), Friede Goldman
France S.A.S. ("FGF"), BLM USA Inc., and World Rig Leasing, Inc.
("WRL")(collectively referred to as the "Company"). These
consolidated statements include the accounts of HAM for all periods
presented, FGL for all periods subsequent to December 2, 1996, FGN for
all periods subsequent to January 1, 1998, FGF for all periods
subsequent to February 5, 1998, and all other subsidiaries from their
dates of incorporation. All intercompany entries have been
eliminated.

As of December 31, 1998, HAM had one wholly-owned subsidiary,
Friede Goldman Offshore, Inc. ("FGO"). In January 1999, HAM and FGO
were merged into a single entity and HAM's name was changed to Friede
Goldman Offshore, Inc. When used throughout these notes to the
financial statements, FGO refers to HAM and FGO on a combined basis.

FGO's primary business is to provide new construction,
conversion, retrofit and repair services for offshore drilling
rigs. FGO's primary customers are offshore drilling contractors who
utilize the Company's services to build new drilling rigs or to
convert, retrofit, or modify existing drilling rigs in order to
increase their technical capabilities or to improve their efficiency.
As of December 31, 1998, substantially all of FGO's services were
conducted at two deepwater dock facilities on land leased from the
Port Authority in Pascagoula, Mississippi (the "Port Authority").

FGL'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.
FGL has offices in New Orleans, Louisiana and Houston, Texas.

FGN's business is substantially identical to FGO's, however, FGN
also provides boat and ship construction and repair services. FGN's
activities are conducted at two shipyard facilities in Marystown,
Newfoundland.

FGF's business is the design and manufacture of deck machinery
that includes mooring, anchoring and cargo handling equipment;
rack-and-pinion jacking systems used on offshore drilling platforms
and drilling rigs; trawl and draw net winches for fishing vessels; and
hydraulic power and rack-and-pinion steering systems used in all types
of vessels. FGF's manufacturing facilities are located in Carquefou
and Lanveoc, France. BLM USA Inc. is primarily a domestic sales agent
for FGF.

WRL has had no significant operations.

Effective October 6, 1998, the Company changed its state of
incorporation from Delaware to Mississippi. This change was
accomplished through the merger of the Company into a newly formed
Mississippi Corporation, Friede Goldman Mississippi, Inc. ("FGM").
Immediately upon the merger, FGM changed its name to Friede Goldman
International Inc. The change has no impact on the Company for
accounting and financial reporting purposes.

Acquisitions

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. Prior to Holdings' purchase of assets
and rights, Holdings had no material
<PAGE>
assets, liabilities or operations. This transaction was accounted for
under the purchase method of accounting by the Company in the
accompanying financial statements. The operations of FGL for the
period from December 2, 1996, to December 31, 1996, which were
immaterial, are included in the accompanying financial statements for
the year ended December 31, 1996. For the eleven months ended
November 30, 1996, revenues, gross profit and net income generated by
the purchased assets 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 2,
1996, were allocated a carrying value of approximately $1,246,000.

In addition to the cash consideration paid to Mr. Goldman, the
Purchase Agreement requires FGL, until December 2006, to pay Mr.
Goldman certain licensing and design fees received by FGL from the
designs of new-build independent leg jackups and semisubmersible
drilling rigs as well as a fee collected from sales of a patented rack
chock system, a system which improves the strength of the connection
between the legs and the hull of a jackup drilling rig. The Company
may also be required to make payments to Mr. Goldman of up to $1.0
million for each three year period in which the Company does meet
certain market share targets (the "Market Share Payment") for the sale
of designs for new-build independent leg jackup and semisubmersible
drilling rigs. If the Company fails to make any of the payments
described on a timely basis, the seller has the right to require that
all of the assets purchased (other than the name "Friede Goldman" and
derivatives thereof and excluding new designs developed by the Company
after the acquisition) be returned 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 are 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. As of December 31, 1998, no such Market Share
Payment is due.

Mr. Goldman was also elected to the Board of Directors of the
Company in 1997.

Acquisition of Friede Goldman Newfoundland

In January 1998, the Company purchased the assets of Newfoundland
Ocean Enterprises Ltd. of Marystown, Newfoundland ("Marystown"), a
steel fabrication and marine construction concern with operations
similar to those of the Company. The acquisition was effected
pursuant to a Share Purchase Agreement, dated January 1, 1998 (the
"Share Purchase Agreement"). Under the terms of the Share Purchase
Agreement, the Company paid a purchase price of C $1 (one dollar).
However, the Share Purchase Agreement also provides that, among other
things, the Company must (i) maintain a minimum of 1.2 million
man-hours (management, labor, salaried and hourly) for each of the
1998, 1999 and 2000 calendar years, (ii) undertake certain capital
improvements at the acquired shipyards and (iii) pay to the sellers
fifty percent (50%) of net after tax profit of Marystown for the
twelve-month period ending March 31, 1998. The Company has also
indicated its intent to invest C$5 million to C$15 million
(approximately $3 million to $10 million) to maintain and expand the
business. The Share Purchase Agreement provides that the Company will
pay to the Seller liquidated damages of C$10 million (approximately $7
million) in 1998 and C$5 million (approximately $3 million) in 1999
and 2000 in any of such years in which the minimum number of man-hours
described above is not attained. The minimum man-hour obligation for
1998 has been met for the calendar year ended December 31, 1998.
Pursuant to these provisions of the Share Purchase Agreement, the
Company has expended $5.5 million for capital improvements of the
shipyard facilities. The sellers' share of net income for the twelve
months ended March 31, 1998, is immaterial. The net assets acquired
have been recorded at their fair market values and, at the acquisition
date, included $47.7 million in fixed assets, $1.8 million in net
working capital, a deferred credit recorded to reflect the fair value
of the construction contracts that were in progress at the date of the
acquisition in the amount of $10.7 million, along with $1.6 million in
deferred taxes created by each of these items at the acquisition date.
The difference between the fair value of the acquired net assets and
the C$1 consideration was recorded as a deferred government subsidy
which is being
<PAGE>
amortized over the lives of the assets acquired, which is
approximately 17 years. Accumulated amortization of the deferred
subsidy as of December 31, 1998, was $2.3 million. Current year
amortization of the subsidy is recorded in the statement of operations
as a reduction to cost of revenues and represents a reduction in
depreciation and amortization in the statement of cash flows for the
year-ended December 31, 1998.

During 1997, prior to the acquisition, FGN was a subcontractor on
a number of the Company's construction projects. FGN recorded
revenues in the amount of $6.6 million with respect to these
arrangements.

Acquisition of Friede Goldman France S.A.S.

Effective February 5, 1998, the Company, through its wholly-owned
subsidiary, FGF a French entity, acquired all of the issued and
outstanding shares of a French holding company and its French
subsidiaries, for a cash payment of approximately $25.0 million. The
purchase price has been allocated to land, building and machinery in
the amount of $11.8 million, goodwill of $5.7 million (amortized over
25 years), and other assets net of liabilities in the amount of $7.5
million.

The following summarized income statement data reflects the
impact which the acquisitions of FGF and FGN would have had on
the Company's results of operations had the transactions taken place
as of the beginning of the periods presented:

Pro Forma Results for
the Years Ended
(In thousands, except
per share amount)
-------------------------------
1996 1997 1998
-------- -------- --------
Revenues $ 73,676 $215,185 $386,468
Operating income (2,554) 29,500 56,725
Net income 1,679 24,890 35,374
Earning per common share - Basic $ (0.09) $ 1.18 $ 1.46
Earnings per common share - Diluted $ (0.09) $ 1.17 $ 1.43

Reorganization and Initial Public Offering

The Company was incorporated under the laws of the State of
Delaware in February 1997. In anticipation of the Company's initial
public offering of its common stock, the stockholders of HAM and FGL
(collectively referred to as the "Predecessors") contributed all of
their ownership in HAM and FGL to the Company in exchange for shares
of common stock in the Company; and HAM and FGL became wholly-owned
subsidiaries of the Company (the "Reorganization"). Because HAM and
FGL were owned in substantially identical proportions, the number of
shares of common stock of the Company received by each of the
stockholders of HAM and FGL in the Reorganization was based on each
stockholder's percentage of ownership of HAM shares. The
Reorganization was accounted for as a reorganization of entities under
common control.

The Company's certificate of incorporation established authority
to issue 1,000 shares of $0.01 par value preferred stock and 2,000
shares of $0.01 par value common stock. Preferred stock may be issued
in one or more series and in such amounts as may be determined by the
Company's board of directors. The voting powers, designations,
preferences and relative, participating, optional or other special
rights, if any, and the qualifications, limitations or restrictions,
if any, of each preferred stock issue shall be fixed by resolution of
the board of directors providing for the issue. All shares of
common stock of the Company shall be identical, and, except as
otherwise provided in a resolution of the board of directors with
respect to preferred stock, the holders of common stock shall
exclusively possess all voting power with each share of common stock
having one vote.

In May 1997, in conjunction with the Company's 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 prior to the public offering, the Company
<PAGE>
issued, pursuant to a stock exchange agreement, 18,400,000 shares (as
adjusted for the 2-for-1 stock split discussed below) of the Company's
common stock to the stockholders of HAM and FGL as described above.
Therefore, for the historical per share and pro forma per share data
included in the statements of operations, the weighted average number
of common shares outstanding includes 18,400,000 shares for all
periods presented.

In July 1997, the Company completed an initial public offering
(the "Offering") of its common stock. In connection with the
Offering, the Company sold 3,002,521 (6,005,042 after the 2 for 1
stock split discussed below) shares of its common stock for net
proceeds of approximately $46.6 million. The company has utilized the
proceeds to fund the expansion of its facilities and equipment,
complete the acquisition of FGF, and for working capital.

Stock Split and Increase in Authorized Shares

In September 1997, the Company declared a 2 for 1 stock split,
effective October 16, 1997 for all stockholders of record as of
October 1, 1997. Unless otherwise indicated, all references to number
of shares and to per share information in the financial statements and
notes have been adjusted to reflect the stock split on a retroactive
basis.

In January 1998, in connection with a special meeting of the
stockholders of the Company, the number of authorized shares
of common stock of the Company was increased to 125,000,000 shares.

The Company adopted a stockholder rights plan on December 4,
1998, designed to assure that the Company's stockholders receive free
and equal treatment in the event of a takeover of the Company and to
guard against partial tender offers, squeeze-outs, open market
accumulations, and other abusive tactics to gain control without
paying all stockholders a fair price. The rights plan was not adopted
in response to any specific takeover proposal. Under the rights plan,
the Company's shareholders were issued a Preferred Stock Purchase
Right on each share of the Company's common stock. Each right
entitles its holder to purchase one one-thousandth of a share of a new
series of Junior Preferred Stock, par value, $0.01 per share for $75
per share. The Purchase Right grant was made on December 21, 1998, to
stockholders of record at that date. The rights will expire on
February 26, 2006.

2. Summary of Significant Accounting Policies:

Revenue Recognition

The Company's revenue is earned on the percentage-of-completion
method which is based upon the percentage that incurred costs to date,
excluding the costs of any purchased but uninstalled materials, 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 that require
such adjustments become known. Provisions for estimated losses on
uncompleted contracts are made in the period in which such losses are
identified. 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 costs 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.
<PAGE>
Research and Development

FGL performs new design work on rigs for subsequent licensing.
The costs of developing designs that are not performed pursuant to a
customer's contract are charged to cost of revenues as incurred. Such
charges amounted to $0.9 million and $1.2 million for the years ended
December 31, 1997 and 1998.

Cash Equivalents

The Company considers all short-term cash investments with an
origial maturity of less than three months to be cash equivalents.

Inventories and Stockpiled Materials

Inventories and stockpiled materials include materials purchased
for specific contracts which have not been installed as of December
31, 1997 and 1998, and are stated at the lower of specifically
identified cost or market (replacement cost or net realizable value).
At December 31, 1998, the Company had incurred costs of approximately
$6.1 million for the manufacture or purchase of certain jackup rig
components. Total commitments related to rig components, including
$6.1 million already expended, are approximately $11.3 million.
Management of the Company believes that contracts for new
construction, modification or repairs will be secured that will
utilize these components. The payments for jackup rig components are
included in inventory and stockpiled materials in the December 31,
1998 balance sheet.

Construction in Progress and Restricted Funds Held in Escrow

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, with
unobstructed deep water access to the Gulf of Mexico (the "FGO East
Facility"). This facility became operational in mid 1998, and at
December 31, 1998, construction of all operations related components
was completed. Administration and warehouse facilities were in
progress at December 31, 1998. The facility is located on real estate
leased from the Port Authority. In connection with the construction
of the new shipyard, the County of Jackson, Mississippi, has dredged a
ship channel and built 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 also
secured financing pursuant to an agreement dated December 2, 1997 from
the United States Maritime Administration ("MARAD") for Title XI debt
financing which provided $24.8 million of the funds needed for
completion of the new shipyard. The financing agreement required the
Company to fund the first 12.5% of qualifying construction expenses
with MARAD financing the remaining 87.5% of qualifying construction
expenses. In November 1997, the $24.8 million in proceeds from the
MARAD arrangement were placed in escrow for use by the Company upon
completion of documentation that qualifying expenditures had been
made. As of December 31, 1998, the Company had received all of the
$24.8 million from escrow. The Company has capitalized interest of
approximately $0.1 million and $1.3 million during the years ended
December 31, 1997 and 1998, respectively related to construction of
the FGO East Facility. Interest was capitalized based on the weighted
average borrowing rate on the Company's debt. (See Note 8)

Intangibles and Other Assets

Goodwill is recognized for the excess of the purchase price over
the value of the identifiable net assets. Realization of goodwill is
periodically assessed by management based on the expected future
profitability and undiscounted cash flows of acquired companies and
their overall contribution to the overall operation of the company.
In 1998, goodwill related to the acquisition of FGF was recorded in
the amount of $10.1 million which is being amortized over a 25 year
period. The related amortization expense was $0.2 million for the
year ended December 31, 1998.
<PAGE>
Intangible assets, which include design costs and patents, were
$1.1 million and $0.8 million at December 31, 1997 and 1998,
respectively, net of accumulated amortization of $0.1 million and $0.5
million at December 31, 1997 and 1998, respectively. In 1997 design
and patents of $1.1 million were recorded which consist primarily of
design and patents acquired in connection with the acquisition of FGL
that are being amortized over a 10 year period. The related
amortization expense was $0.1 million for each of the years ended
December 31, 1997 and 1998. Amortization for 1996 was immaterial.

Other assets at both December 31, 1997 and 1998 included $1.3
million of deferred financing costs associated with the Title XI debt
discussed above. These costs will be amortized over the 15 year
repayment term of the debt.

Accounting for Income Taxes

Subsequent to the termination of the Predecessor's status as S
corporations for income tax purposes (See Note 5), the Company has
followed the asset and liability method of accounting for deferred
income taxes prescribed by Statement of Financial Accounting Standards
No. 109 ("SFAS No. 109"), "Accounting for Income Taxes."

Use of Estimates

These financial statements have been prepared in conformity with
generally accepted accounting principles. Such preparation requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets
and liabilities as of the dates of the balance sheets and the reported
amounts of revenues and expenses for the years presented. Actual
results could differ materially from those estimates. Areas requiring
significant estimates to be made by management include the application
of the percentage-of-completion accounting method; recoverability of
inventory, equipment, goodwill and equity securities; depreciation and
amortization; provision for income taxes; and accruals for certain
estimated liabilities.

Fair Value of Financial Instruments

The carrying amount of the Company's financial instruments at
December 31, 1997 and 1998, including cash, marketable securities,
accounts receivable, investment in sales-type lease, accounts payable
and long-term debt, approximates fair value.

Earnings Per Common Share

In February 1997, the Financial Accounting Standards Board
("FASB") issued SFAS No. 128, "Earnings Per Share," which simplifies
the computation of earnings per share ("EPS"). SFAS No. 128 is
effective for financial statements issued for periods ending after
December 15, 1997, and requires restatement of all prior period EPS
data presented. Under SFAS No. 128, the Company computes two earnings
per share amounts - basic EPS and diluted EPS. Basic EPS is
calculated based on the weighted average number of shares of common
stock outstanding for the periods presented. Diluted EPS is based on
the weighted average number of shares of common stock outstanding for
the periods, including dilutive potential common shares which reflect
the dilutive effect of the Company's stock options. The retroactive
adoption of SFAS No. 128 did not result in any change in previously
reported historical earnings per share for any year prior to 1997.
Dilutive common equivalent shares for the years ended December 31,
1997 and 1998 were 231,754 and 338,228, respectively, all attributable
to stock options. There were no common equivalent shares outstanding
during 1996. As of December 31, 1997 and 1998, there were an
additional 13,403 and 277,183 outstanding common equivalent shares
which were potentially anti-dilutive.

Foreign Currency Translation

The financial statements of subsidiaries outside the United
States, (FGN and FGF, see Note 1), are measured using the local
currency as the functional currency. Assets and liabilities of these
subsidiaries are translated at the
<PAGE>
rates of exchange at the balance sheet date. The resulting
translation adjustments are included as a separate component of
stockholders' equity. Income and expense items are translated at
average monthly rates of exchange during the period.

Treasury Stock

During 1998, the Company's Board of Directors authorized a stock
repurchase plan. Through December 31, 1998, 1,188,900 shares of the
Company's Common Stock had been repurchased for an aggregate
consideration of approximately $15.8 million. Funds used to accomplish
the Common Stock repurchase were provided from operating cash flow and
borrowings under a short-term credit facility provided by an
investment banking firm. All such borrowings were repaid in November
1998.

Certain Risks and Uncertainties

The Company has experienced rapid growth during 1997 and 1998.
Contract revenues increased from $21.8 million in 1996 to $113 million
and $383 million in 1997 and 1998, respectively; construction was
completed on the FGO East Facility; the MARAD financing arrangement
was consummated; an initial public offering of common stock was
completed; the Company's backlog increased significantly; and in early
1998, the Company completed the acquisition of foreign entities in
Canada and France (See Note 1). In addition, the Company has engaged
in certain transactions outside of its traditional business
activities, including the acquisition of an equity interest in an
entity that owns a semisubmersible drilling rig requiring substantial
completion and outfitting, and the commitment for costs of
approximately $ 11.3 million related to certain inventory items for a
jackup rig for which no current contract is in place. Further, recent
historically low prices for crude oil and natural gas have created a
general decline in the demand for mobile offshore drilling units,
causing drilling contractors to cancel or delay plans for new
construction, modification and conversion projects. While the Company
has not had and does not expect any contract cancellations, these
economic conditions, together with the significant changes in and
expansion of the Company's operations expose the Company to additional
business and operating risks and uncertainties.

Recently Issued Accounting Pronouncements

In June 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income," which is effective for fiscal years beginning
after December 15, 1997. SFAS No. 130 requires the Company to (a)
classify items of other comprehensive income by their nature in a
financial statement and (b) display the accumulated balance of other
comprehensive income separately from retained earnings and additional
paid in capital. The Company adopted SFAS No. 130 in 1998.

In June 1997, the FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," which is effective
for periods beginning after December 15, 1997. SFAS No. 131 requires
the Company to report financial and descriptive information about its
operating segments. The Company adopted SFAS No. 131 in 1998.

In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities". The Statement
establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments
embedded in other contracts) be recorded in the balance sheet as
either an asset or liability measured at its fair value. The
Statement requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows a
derivative's gains and losses to offset related results on the hedged
item in the income statement, and requires that a company must
formally document, designate, and assess the effectiveness of
transactions that receive hedge accounting. Given
<PAGE>
the Company's historically minimal use of these types of instruments,
the Company does not expect a material impact on its statements from
adoption of SFAF No. 133.

3. Marketable Securities:

At December 31, 1996 the Company held marketable equity
securities with historical costs of $5,010,095. In accordance
with Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities," these
securities were classified as available for sale. As such, their
carrying values were adjusted to fair market value with net unrealized
gains/losses included as a separate component of stockholders' equity.

During the year ended December 31, 1996, the Company sold
securities classified as available for sale for proceeds of
$5,269,110, resulting in a realized gain of $180,095 in 1996. During
1997, the Company distributed the remaining marketable securities to
stockholders in conjunction with the Reorganization and realized a
gain of $3,922,099. The cost basis of securities sold was calculated
using the specific identification method.

4. Significant Customers:

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, 1998, the largest single contract represented 16%
of total contract revenues while the largest single customer accounted
for 32% of total revenue. A second and third customer accounted for
19% and 15% of revenue, respectively. During the year ended December
31, 1997, the largest single contract represented 23% of total
contract revenues while the largest single customer accounted for 53%
of total revenue. A second customer accounted for 17% of total
revenues. During the year ended December 31, 1996, the largest single
contract represented 15% of contract revenues and contracts with four
separate customers accounted for 31%, 24%, 17% and 12% of contract
revenues.

5. Income Taxes:

Prior to June 15, 1997, the stockholders of the Predecessors
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. On June 15, 1997, before the closing
of the public offering, the stockholders of the Predecessors elected
to terminate the status of each Predecessor as an S Corporation, and
the Company and the Predecessors became subject to federal and state
income taxes.

The election resulted 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. The initial
recordation of a net deferred tax liability by the Company resulted in
a provision for income taxes of $0.8 million.

All income before provision for income taxes for the years ended
December 31, 1996 and 1997 was domestic. Income before income taxes
for the year ended December 31, 1998 was comprised of the following:

Domestic $28,533,205
Foreign 6,753,275
-----------
Total $35,286,480
===========

<PAGE>
The provision (benefit) for income taxes included in the
statement of operations for the years ended December 31, 1997 and 1998
is as follows:

<TABLE>
1997 1998
---------- -----------
<S> <C> <C>
Current:
Domestic $7,258,000 $17,448,000
Foreign -- 2,526,000
---------- -----------
7,258,000 19,974,000
---------- -----------
Deferred:
Domestic - Attributable to activity subsequent to June 15, 1997 (117,000) 922,000
Domestic - Attributable to activity prior to June 15, 1997 800,000 --
Foreign -- (218,000)
---------- -----------
683,000 704,000
---------- -----------
Total $7,941,000 $20,678,000
========== ===========
</TABLE>

The provision for income taxes for the year ended December 31,
1997 and 1998 differs from the amount computed by applying the
statutory federal income tax rate to income before income taxes as a
result of the following:

<TABLE>
1997 1998
----------------------------
- ----------------------------
Percent of Percent
of
Tax Pretax Income Tax Pretax
Income
----------- ------------- -----------
- -------------
<S> <C> <C> <C> <C>
Federal income tax computed on income
before taxes $10,924,000 35.0% $19,587,000 35.0%
(Decrease) Increase in tax resulting from:
Income earned as an S Corporation (3,700,000) (11.9) -- --
Deferred income tax liability recorded
upon termination of S-Corporation
election 800,000 2.6 -- --

Taxes on foreign source income -- -- 127,000 0.2
Domestic tax credits -- -- (350,000) (0.6)
State income tax 658,000 2.1 1,551,000 2.8
Non-taxable distribution of marketable securities (890,000) (2.9) -- --
Other 149,000 0.5 (237,000) (0.5)
----------- ------------- -----------
- -------------
Income tax provision $ 7,941,000 25.4% $20,678,000 36.9%
=========== ============= ===========
=============
</TABLE>
<PAGE>
Temporary differences between the financial statement carrying
amounts and the tax bases of assets and liabilities give rise to the
following deferred income taxes at December 31, 1997 and 1998:

<TABLE>
1997 1998
------------------------------------
- ------------------------------------
Current Non-current Current Non-current
Asset (Liability) Asset (Liability) Asset (Liability) Asset
(Liability)
---------------- ---------------- ----------------
- ----------------
<S> <C> <C> <C> <C>
Fixed assets $ -- $(516,000) $ -- $(19,854,000)
Deferred government subsidy -- -- -- 12,839,000
Stock based compensation -- 96,000 -- 162,000
Gain on sale of assets -- (308,000) -- (233,000)
Foreign tax credit -- -- -- 900,000
Accounts receivable valuation (146,000) -- (109,000) --
Accrued expenses 154,000 -- 862,000 --
Fair value adjustment for contracts
in progress at acquisition -- -- 1,665,000 --
Other -- 37,000 (172,000) 92,000
Valuation allowance -- -- -- (700,000)
-------- --------- ---------- ------------

Deferred income tax asset (liability) $ 8,000 $(691,000) $2,246,000 $ (6,794,000)
======== ========= ========== ============
</TABLE>
The valuation allowance was established for the deferred tax
asset related to foreign tax credits. Companies may use foreign tax
credits to offset the United States income tax due on income earned
from foreign sources. However, the credit is limited by the total
income on the United States income tax return as well as by the ratio
of foreign source income in each statutory category total income.
Excess foreign tax credits may be carried back two years and forward
five years.

The Company has evaluated the need for an additional valuation
allowance for deferred tax assets other than those for foreign source
income. Based on the weight of the available evidence, the Company
has determined that it is more likely than not that all such assets
will be realized.

As an S Corporation, the tax attributes of the Predecessors
flowed to the stockholders and, accordingly, no provision for income
taxes is included in the results of operations for the Company prior
to June 15, 1997. The pro forma provision for income taxes is the
result of the application of a combined federal and state rate of 37%
to income before income taxes for periods prior to June 15, 1997.

6. Investment in Unconsolidated Subsidiary:

At December 31, 1998, the Company had invested approximately
$12.8 million in an unconsolidated subsidiary ("Ilion LLC") in which
the Company currently owns a 50% equity interest. The Company's
ownership interest in Ilion LLC may be reduced to 30% if the other
member (who is also a significant customer of the Company) of the LLC
exercises its option to convert a note receivable from Ilion LLC into
equity interest. Ilion LLC owns a hull for a semisubmersible drilling
rig that requires substantial completion and outfitting. The Company
and the other member of Ilion LLC are considering various
options for formal arrangements related to the hull, including
financing of its completion, securing a contract for utilization or
sale of the rig, or other options. Other than the initial purchase of
the drilling rig hull, Ilion LLC had no significant activity as of
December 31, 1998. The Company's investment in Ilion LLC is accounted
for using the equity method.
<PAGE>
7. Property, Plant, and Equipment and Construction in Progress:

Property, plant, and equipment is stated at cost less accumulated
depreciation. Ordinary maintenance and repairs that do not extend the
physical or economic lives of the assets are charged to expense as
incurred. Depreciation is computed on the straight-line basis over
the estimated useful lives of the assets.

Useful lives utilized in the depreciation of fixed assets for
each class of property, plant, and equipment are as follows:

Class Life
- ------------------------------------------------------------
Buildings and dock facilities 15 - 40 years
Leasehold improvements 10 - 40 years
Machinery and equipment 3 - 20 years
Other 3 - 7 years

A summary of property, plant, and equipment and construction in
progress follows:

<TABLE>
December 31,
----------------------------------
1997 1998
------------ ------------
<S> <C> <C>
Land $ -- $ 4,879,050
Leasehold improvements -- 11,818,736
Buildings 2,242,094 35,767,103
Machinery and equipment 11,715,715 70,714,295
Dock facilities 3,256,439 25,254,899
Other -- 1,840,882
------------ ------------
Total property, plant, and equipment 17,214,248 150,274,965
Less accumulated depreciation 5,397,584 12,166,701
------------ ------------
Total property, plant, and equipment, net 11,816,664 138,108,264
Construction in progress 17,934,877 969,978
------------ ------------

Total property, plant, and equipment and construction in progress $ 29,751,541 $139,078,242
============ ============
</TABLE>

Depreciation expense for the years ended December 31, 1996, 1997,
and 1998 was $695,551, $1,474,526 and $7,890,748, respectively.

Effective January 1, 1998, the Corporation revised its estimate
of the useful lives of certain machinery and equipment (primarily
cranes and dry docks), and dock facilities (bulkheads, foundations,
etc.) The useful lives of the machinery and equipment was extended
from an average of 9 years to 20 years and the useful lives of the
dock facilities were increased from an average of 18 years to 40
years. These changes were made to more accurately reflect the
estimated periods during which such assets will remain in service.

Machinery, equipment and facilities with a total book value of
approximately $70.7 million has been pledged as collateral under
various debt arrangements entered into by the Company. (See Note 8)
<PAGE>
8. Financing Arrangements:

A summary of short and long-term debt follows:

<TABLE>
December 31,
---------------------------------
Description 1997 1998
----------- -----------
<S> <C> <C>
Borrowings under 1998 Credit Facility $ -- $ 9,327,950
Note payable to a bank repayable in monthly installments,
maturing at dates ranging from January 1 999 through
March 2005, secured by sales-type lease and related
real estate, repaid in February 1999 1,090,392 1,565
Notes payable to financial institutions and others bearing
interest at rates ranging from 5% to 9. 1 5%, payable in
monthly insta11ments, maturing at dates ranging from
January 1999 to March 2005 and secured by equipment,
lease and rea1 property 353,366 1,976,257
Capita1 lease obligations bearing interest at rates ranging
from 7.05% to 10.00%, maturing at dates ranging from
February 2003 through November 2003 -- 1,369,340
Note payable, bearing interest at 7.05% payable in quarterly
installments commencing Apnl 1998, maturing
March 2002, secured by equipment -- 6,500,000
Bonds payable, bearing interest at 7.99% payable in monthly
installments commencing January 1999, maturing
December 2008, secured by equipment -- 18,000,000
Bonds payable to MARAD bearing interest at 6.35% payable
in semi-annual installments commencing July 1, 1999 24,817,000 24,817,000
----------- -----------
Total 26,260,758 6l,992,112
Less: Short-term debt and current maturities of long-term debt 493,829 16,129,380
----------- -----------
Long-term debt less current maturities $25,766,929 $45,862,732
=========== ===========
</TABLE>

In 1997, HAM entered into a credit facility (the "Credit
Facility") with a bank that provided for accounts receivable and
contract related inventory based borrowings of up to $20 million at
prime plus 1/2% (8.47% at December 31, 1997) through March 20, 1998.
These borrowings were secured by accounts receivable and personal
guarantees of certain stockholders of the Company. At December 31,
1997, there was no outstanding balance under the 1997 Credit Facility,
and the borrowing base amount was $20 million. The Credit Facility
expired in 1998 and was extended until May 3, 1999, and the borrowing
capacity was increased to $25 million at prime plus 1/2% (8.13% at
December 31, 1998). A balance of $ 9.3 million was outstanding at
December 31, 1998, and an additional $9.6 million was available. The
Credit Facility contains a number of restrictions, including a
provision that would prohibit the payment of dividends by FGO to the
Company in the event that FGO defaults under the terms of the
facility. The Credit Facility requires that the Company maintain
certain minimum net worth and working capital levels and ratios and
debt to equity ratios. At December 31, 1998, the Company was not in
compliance with one of the working capital ratio provisions of the
1998 Credit Facility agreement; however, the bank waived this
compliance requirement.

In December 1997, the Company issued bonds under Title XI that
are guaranteed by the MARAD to partially finance construction of the
Company's FGO East Facility (See Note 1). The bonds bear interest at
a rate of 6.35% and are payable over 15 years in semi-annual
installments. The financing agreement includes several restrictive
<PAGE>
financial and non-financial covenants, the violation of which would
carry monetary penalties. The Company was in compliance with all
such covenants as of December 31, 1998.

In 1998, the Company borrowed $8.0 million from GE Capital
Corporation for the financing of the purchase of certain equipment
used in the Company's Pascagoula, Mississippi facilities. The loan,
which is secured by the purchased equipment, bears interest at 7.05%
and is repayable in quarterly installments of $500,000, plus interest
through 2002.

In December 1998, the Company issued $18 million of 7.99% taxable
revenue bonds through the Mississippi Business Finance Corporation to
finance the purchase of equipment used primarily at the FGO East
Facility. The Bonds are repayable in monthly installments of
approximately $219,000, including interest for 10 years. The Bonds
are secured by the purchased equipment. The Company received certain
state sales, use and state income tax incentives related to the bonds.

In December 1998, the Company signed a commitment letter with a
bank for a $30 million credit facility that would provide up to $15
million in receivable based credit and a $15 million capital
expenditure and acquisition facility that can be converted to a 3 year
term loan upon termination of the facility.

Short-term borrowings averaged $5,396,000 in 1996, $4,032,000 in
1997, and $4,862,000 in 1998. Such borrowings were at average
interest rates of 7.6%, 7.8%, and 8.1%, respectively. The weighted
average interest rates on all of the Company's short-term borrowings
was 7.99% at December 31, 1998. At December 31, 1997, the Company had
no short-term borrowings outstanding.

A summary of debt maturities in thousands at December 31, 1998,
follows:

Year Ending December 31, Amount
---------------------------------------
1999 16,129
2000 5,471
2001 5,582
2002 4,216
2003 3,798
Thereafter 26,796

9. 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. Under the plan, employees could make contributions and
defer income taxes on such contributions. The Company matched 25% of
the contributions of the employees up to a maximum of 5% of salary.
The Company also had the option to make an additional profit sharing
contribution to the plan. In July, 1998, the 401(k) plan was revised
to increase the Company's matching contribution to 50% of the first 5%
contributed by the employee. Employer contributions to the plan
during the years ended December 31, 1996, 1997 and 1998, amounted to
$38,109, $111,829, and $670,807, respectively.

In 1997 the Board of Directors of the Company approved the
payment of periodic discretionary incentive bonuses to key employees
of the Company 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 annually). During
the years ended December 31, 1997 and December 31, 1998, the Company
incurred $1,677,000 and $2,871,572 respectively under such agreements.
<PAGE>
Prior to the Reorganization, HAM had historically used
distributions, bonuses, or a combination thereof, to the stockholders,
who were also employees of HAM, in order to provide a means by which
the stockholders could meet their income tax obligations arising from
the pass through of HAM's taxable income due to the status of HAM as
an S Corporation. Included in selling, general and administrative
expenses are bonuses of approximately $2,118,000 for the year ended
December 31, 1996. During 1997, the Company entered into employment
agreements with the employees, who are also stockholders, and
established base compensation for the employees and provided for the
eligibility of the employees for participation in cash bonuses, if
any.

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 (153,640 shares). As a result, HAM charged
$1,080,000 to selling, general and administrative expenses in 1996,
which represents the value of the shares granted based on an estimated
initial public offering price for the Company's common stock, less a
10% discount because the shares received by the employee are not
registered. In February 1997, HAM agreed to grant another employee
fully vested shares of common stock of HAM equal to approximately
0.418% of the common shares then outstanding (76,820 shares) and
granted that employee options to purchase an equal amount of
additional shares at $1.20 per share that were to vest ratably on
January 1, 1999, 2000 and 2001, subject to forfeiture if the employee
terminates employment. The options expire if unexercised by December
31, 2006. Pursuant to the terms of the option agreements, all of the
options outstanding became fully vested subsequent to the initial
public offering because of a change in ownership of the Company.
Accordingly, HAM charged $839,000 to selling, general and
administrative expenses in the year ended December 31, 1997.

In July, August, and December of 1997 and in February of 1998,
respectively, the Company issued 202,000, 9,000, 27,130, and 15,038
stock options to certain employees. The option price for these issues
ranged from $0.50 to $17.00, which was less that their fair market
value at the date of grant, and vested over terms ranging from 3 to 5
years. Such differences in the option price and the per share fair
market value represent non-cash compensation to the individuals
receiving the options, which is measured at the date of the stock
option's grant, and is amortized and included in selling, general, and
administrative expenses over the respective vesting terms of the
options in accordance with APB 25. Future expense to be recognized
with respect to these options amounted to $0.5 million at December 31,
1998. Stock option expenses of $0.6 million and $0.3 million were
recognized as expense in 1997 and 1998, respectively. Total non-cash
compensation expense for the years ended December 31, 1996, 1997 and
1998 was $1.1 million, $1.0 million and $0.3 million, respectively.

All of the shares issued to employees in connection with the
agreements described above were 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
were 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.

The Company has an Incentive Compensation Plan (the Plan) under
which both qualified and non-qualified options, and restricted stock
and other forms of incentive compensation may be granted. As of
December 31, 1998, approximately 2,335,000 shares of common stock are
reserved for issuance under the Plan. The Plan is administered by a
committee of the Board, which selects persons eligible to receive
options and determines the number of shares subject to each option,
the vesting schedule, the exercise price and the duration of the
option. The exercise price of any option granted under the Plan
cannot be less than 100% of the fair market value on the date of grant
and its duration cannot exceed 10 years.

In October 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation," which became effective in 1996. Under SFAS
No. 123, companies can either record expense based on the fair value
of stock-based compensation upon issuance or elect to remain under the
current Accounting Principles Board Opin-
<PAGE>
ion No. 25 ("APB 25") method whereby no compensation cost is
recognized upon grant if certain requirements are met. The Company
accounts for its stock-based compensation under APB 25. However, pro
forma disclosures as if the Company adopted the cost recognition
requirements under SFAS No. 123 are presented below.

If the compensation cost for the Company's 1997 and 1998 grants
for stock-based compensation plans had been determined consistent with
SFAS No. 123, the Company's net income and earnings per common share
for the years ended December 31, 1997 and 1998 would have approximated
the pro forma amounts below (in thousands, except per share data):

<TABLE>
1997 1998
--------------------------- --------------------------
As Reported Pro Forma As Reported Pro Forma
----------- --------- ------------ ---------
<S> <C> <C> <C> <C>
Net income $23,269 $19,731 $35,286 $29,974
Earnings per common share:
Basic $ 1.10 $ 0.94 $ 1.46 $ 1.23
Diluted $ 1.09 0.93 $ 1.43 $ 1.22
</TABLE>
The fair value of each option granted during the period presented
is estimated on the date of grant using the Black-Scholes
option-pricing model with the following assumptions: (a) dividend
yield of 0%, (b) expected volatility of 95.55% (c) risk-free interest
rate ranging from 5.2% to 5.88% and (d) expected life of ten years.

A summary of the Company's stock options as of December 31, 1997
and 1998 and changes during the year then ended is presented below:

<TABLE>
1997 1998
------------------------------ -----------------------------
Number Weighted Average Number Weighted Average
Options Exercise Price Options Exercise Price
------- ---------------- -------- ----------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year 937,950 $ 7.08
Granted 937,950 $ 7.08 355,053 25.02
Expired -- -- -- --
Forfeited -- -- (119,698) 10.31
Exercised -- -- (119,195) 3.60
------- ------ --------- ------
Outstanding at year-end 937,950 7.08 1,054,110 13.44
======= ====== ========= ======

Options exercisable at year-end 76,820 $1.195 195,225 $ 8.14
Options vesting in future years 861,130 6.630 858,885 14.65
------- ------ --------- ------

Options outstanding at year-end 937,950 $ 7.08 1,054,110 $13.44
======= ====== ========= ======
</TABLE>
<PAGE>
The following table summarizes information about stock options
outstanding at December 3l, 1998.

<TABLE>
Options Outstanding Options Exercisable
-------------------------------------------- --------------------------
Weighted Number
Number Average Weighted Exercisable Weighted
Outstanding Remaining Average At Average
Range of Exercise At December 31, Contractual Excercise December 31, Exercise
Prices 1998 Life(Years) Prices 1998 Price
- -------------------- --------------- ----------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C>
$ 0.500 99,200 8.50 $ 0.50 17,600 $ 0.50
2.500 20,000 8.00 2.50 4,000 2.50
8.500 591,758 8.50 8.50 170,958 8.50
15.00 - 24.99 l03,000 9.75 15.321 -- --
24.00 - 46.50 240,152 9.50 29.79 2,667 43.67
</TABLE>

The following table summarizes information about stock options
outstanding at December 31, 1997.

<TABLE>
Options Outstanding Options Exercissble
-------------------------------------------- --------------------------
Weighted Number
Number Average Weighted Exercisable Weighted
Outstanding Remaining Average At Average
Range of Exercise At December 31, Contractual Excercise December 31, Exercise
Prices 1998 Life(Years) Prices 1998 Price
- -------------------- --------------- ----------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C>
$ 0.500 102,000 9.50 $ 0.500 -- --
1.195 76,820 9.00 1.195 76,820 $1.195
2.500 100,000 9.00 2.500 -- --
8.500 634,000 9.50 8.500 -- --
24 - 46.50 25,130 9.85 33.800 -- --
</TABLE>

10. Leases:

The Company entered into a lease agreement in May 1985, with the
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 21, 1995, the original
lease agreement was revised to include additional land.
The revised agreement increased the annual lease payment from $29,870
to $70,391. 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. The original lease agreement was
for a period of two years beginning in December 1996 and required
annual rental payments of $500,000. The lease expired in January 1999
and the Company signed a new lease with the Port Authority which
requires annual rental payments of $850,000 expiring in January 2001.

The Company is also committed to the lease of office space in
three locations at combined annual rentals of approximately $557,000.
<PAGE>
The Company 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 entered into another lease agreement in July 1997
with the Port Authority for the lease of land at the FGO East
Facility. The primary lease agreement expires in July 2017, with
three additional ten-year options for renewal. The lease requires
annual payments of $200,000 beginning July 1999 through July
2006. The annual payment will be increased to $300,000 in July
2007 and then to $500,000 in July 2015.

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

Year Ending December 31, Amount
--------------------------------------------------
1999 $1,642,997
2000 1,643,731
2001 804,711
2002 743,303
2003 640,999
Thereafter 5,549,740

Lease expense was $ 173,577, $2,298,982, and $ 1,270,447 for the
years ended December 31, 1996, 1997, and 1998, respectively.

The Company entered into short-term lease arrangements for
equipment needed to fulfill the requirements of specific jobs. Any
payments owed or committed under these lease arrangements as of
December 31, 1998, are not included as part of total minimum
lease payments. Rent expense for the fiscal years ended December
31, 1996, 1997, and 1998 was $0.5 million, $3.1 million, and
$5.8 million, respectively.

11. Related Party Transactions:

Transactions with Stockholders

During 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 value of the distributed assets has
been recognized as a gain in the statement of operations for year
ended December 31, 1997.

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 distributed 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.
Further, one of the Predecessors distributed 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 Company maintains substantial cash deposits in a single
financial institution on whose Board of Directors the Company's
President and Chief Executive Officer sits. Deposits in this bank
were in the amount of $37,068,611 and $19,722,336 as of December 31,
1997 and 1998, respectively.
<PAGE>
The Company is obligated to make payments pursuant to an aircraft
lease agreement with Equipment Management Systems, a company owned
primarily by the Company's President. Under previous leases, the
Company paid $50,000 per month during January 1997 through October
1998 and also paid operating expenses of the aircraft. The monthly
lease payment was increased to $65,000 for November 1998 and pursuant
to a new lease executed in December 1998, the payment increased to
$85,000 per month. The lease expires in December 1999.

12. 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 judgment totaling $3,725,000. The judgment was
appealed to the United States Court of Appeals, which, in December
1995, upheld a judgment for approximately $3,517,000. The defendants in
the suit petitioned the court for a rehearing. The rehearing was
ultimately denied, and, in February 1996, the Company received
$3,466,635 as settlement of this litigation.

In May 1997, the Company terminated its contract for craft labor
with a contract labor company. As a result, the Company directly
employs craft labor at levels of wages and benefits substantially
equivalent to those formerly provided. Prior to termination of the
contract labor arrangement, 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. Such payments for contract employment labor
totaled $10,132,000 and $10,444,000 for the years ended December 31,
1996 and 1997, respectively.

In September 1998, two insurance companies ("the Insurers") filed
suit against HAM and two contract labor providers and unnamed
individuals alleging that the contract labor providers were alter egos
of HAM established to obtain workers' compensation insurance at lower
rates than HAM could have otherwise obtained. The Insurers claim
actual damages of approximately $2.3 million and seek punitive damages
of $4.5 million. The Company and HAM believe that the original rates
charged by the Insurers were appropriate and are vigorously defending
this action. While the ultimate outcome of this matter is uncertain,
management of the Company believes that this matter will not have a
material effect on the Company's financial position or results of
operations.

In connection with the construction of the FGO East Facility, the
County of Jackson, Mississippi, agreed to dredge the ship channel
and build roads and other infrastructure under an economic incentive
program. The terms of the economic incentive program require that the
Company maintain a minimum employment level of 400 jobs through the
FGO East Facility during the primary term of the FGO East Facility's
20-year lease. If the Company fails to maintain the minimum employment
level. the Company could be required to pay the remaining balance of
the $6 million loan incurred by the county to finance such
improvements.

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 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's financial position
and results of operations.
<PAGE>
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.

13. Costs and Estimated Earnings on Uncompleted Contracts:

The Company's contracts in progress at December 31, 1997 and 1998,
consist of the following components:

<TABLE>

1997 1998
----------- ------------
<S> <C> <C>
Costs incurred on uncompleted contracts $31,285,459 $220,726,849
Estimated earnings thereon 20,357,148 51,605,595
----------- ------------
51,642,607 272,332,444
----------- ------------
Less billings applicable thereto 88,130,342 303,462,614
----------- ------------
$36,487,735 $ 31,130,170
=========== ============
Included in accompanying balance sheets under the following captions:
Costs and estimated earnings in excess of billings on uncompleted
contracts -- 14,397,714

Billings in excess of costs and estimated earnings on uncompleted
contracts $36,487,735 $ 45,527,884
=========== ============
</TABLE>

14. Business Segments:

The Company has adopted SFAS 131, "Disclosures About Segments of
an Enterprise and Related Information," which requires that companies
disclose segment data based on how management makes decisions about
allocating resources to segments and measuring their performance. The
Company has two operating segments, "offshore drilling rig
construction" and "equipment manufacturing." The offshore drilling
rig construction segment includes the Gulf Coast construction yards of
FGO and the Canadian yard of FGN. The equipment manufacturing segment
represents the Company's French operations, FGF. During 1996
and 1997, the Company operated as a single business segment. The
segment data presented for 1998 below were prepared on the same basis
as the Company's consolidated financial statements.

<TABLE>
Offshore
Drilling Rigs Equipment Intersegment
Construction Manufacturing Other Eliminations Total
------------ ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues $336,885,925 $51,906,418 $ 4,753,592 $(10,633,116) $382,912,819
Cost of receivables 248,933,806 39,986,270 4,691,041 101,000 293,712,117
Operating Income 68,620,054 4,146,381 (5,530,921) (10,734,116) 56,501,398
Capital expenditure 58,675,567 1,004,770 1,057,929 -- 60,738,266
Total assets 240,152,333 69,126,308 101,354,095 (96,072,633) 314,560,103
</TABLE>
<PAGE>
The Company's revenues attributable to the country of domicile
and to foreign countries based on the location of the customer are as
follows:

1998
------------
United States $233,389,232
Norway 62,254,433
Canada 35,362,742
Other 51,906,412
------------
Total $382,912,819
============

The Company had long lived assets which were held in foreign
countries of $69,293,520 with amounts of $46,617,282 and $22,676,238
in Canada and France, respectively. Included in long lived assets
held in France are $9,913,693 in intangible assets.

15. Unaudited Quarterly Financial Data:

<TABLE>
Quarter Ended
-----------------------------------------------------------
1998 March 31 June 30 September 30 December 31
- --------------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Revenue $68,751,285 $88,596,854 $92,669,670 $132,895,010
Gross profit 18,622,323 20,904,507 21,918,070 27,755,802
Operating income 11,003,889 12,698,977 14,235,800 18,562,732
Income before taxes 11,151,641 12,644,105 14,068,037 18,100,399
Net income 6,738,015 7,646,895 8,977,212 11,924,358
Net income per share
Basic $ 0.28 $ 0.31 $ 0.37 $ 0.51
Diluted $ 0.27 $ 0.31 $ 0.37 $ 0.51

Quarter Ended
-----------------------------------------------------------
1998 March 31 June 30 September 30 December 31
- --------------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Revenue $18,654,636 $26,868,560 $34,628,577 $ 33,019,760
Gross profit 5,854,739 10,244,570 11,410,748 10,425,785
Operating income 3,232,258 6,746,816 8,546,199 7,313,955
Income before taxes 4,557,516 9,722,114 8,945,328 7,985,447
Net income 4,557,516 8,472,114 5,475,267 4,764,588
Pro forma net income 2,872,516 6,177,114 5,475,267 4,764,588
Net income per share
Basic $ 0.25 $ 0.46 $ 0.24 $ 0.20
Diluted $ 0.25 $ 0.46 $ 0.23 $ 0.19
Pro forma net income per share
Basic $ 0.16 $ 0.34 $ 0.24 $ 0.20
Diluted $ 0.16 $ 0.34 $ 0.23 $ 0.19
</TABLE>
<PAGE>
During the fourth quarter of 1998, the Company finalized the
accounting for the acquisition of FGN and completed the determination
of the fair value of the construction contracts that were in progress
at the date of acquisition. The determination resulted in the
Company's recognizing revenue and net income and basic income per
share of approximately $2.2 million and $1.5 million and $0.06 per
share, respectively, in the quarter ended December 31, 1998, that were
more properly attributable to the first three quarters of 1998.

Effective January 1, 1998, the Company adopted a 13-week
quarterly reporting period by which the fiscal year is divided
into four 13-week periods ending on the last Sunday in each period.
The fiscal year-end continued to be December 31. Accordingly, for
calendar year 1998, quarterly periods ended on April 5, July 5,
October 4, and December 31. This change in reporting periods was made
to allow the close of interim financial reporting periods to coincide
with the close of direct labor reporting periods.

Effective January 1, 1999, the Company adopted a policy whereby
calendar quarters (March 31, June 30, and September 30) will be used
for interim reporting purposes. This change was made to provide more
direct comparability with other publicly traded entities
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK.)

ARTICLES OF AMENDMENT to the

ARTICLES OF INCORPORATION of

FRIEDE GOLDMAN INTERNATIONAL INC.

setting forth the terms of its

SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

(Pursuant to Section 79-4-6.02(d) of the Mississippi
Business Corporation Act)

In accordance with the provisions of Section 79-4-6.02(d)
of the Mississippi Business Corporation Act (the "MBCA"), Friede
Goldman International Inc., a Mississippi corporation (the
"Corporation"), hereby amends the Corporation's Articles of
Incorporation (the "Articles of Incorporation") to set forth the
terms of the Corporation's Series A Junior Participating
Preferred Stock:

WHEREAS, pursuant to the Corporation's Articles of
Incorporation, as amended to date, the Corporation is authorized
to issue up to 5,000,000 shares of preferred stock, par value
$0.01 per share (the "Preferred Stock") from time to time, of
which no shares are currently outstanding; and

WHEREAS, pursuant to the authority vested in the Board of
Directors of the Corporation (the "Board of Directors" or the
"Board") in accordance with Section 79-4-6.02(d) of the MBCA and
the Corporation's Articles of Incorporation, the Board of
Directors is authorized to amend the Corporation's Articles of
Incorporation to designate the number of shares of Preferred
Stock to be issued, in one or more series, and to set forth the
powers, designations, preferences and relative, participating,
optional or other special rights of the shares of such series,
and the qualifications, limitations or restrictions thereof.

FIRST: The name of the corporation is Friede Goldman
International Inc.

SECOND: Article FOURTH of the Corporation's Articles of
Incorporation is hereby amended and restated to read in its
entirety as follows:

FOURTH: The total number of shares of all classes of
capital stock which the Corporation shall have the authority
to issue is 130,000,000, of which 5,000,000 shares shall be
Preferred Stock, par value $0.01 per share, and 125,000,000
shares shall be Common Stock, par value $0.01 per share.
<PAGE>

A. Series A Junior Participating Preferred Stock.
(i) Designation and Amount. The shares of such series
shall be designated as "Series A Junior Participating
Preferred Stock" (the "Series A Preferred Stock") and the
number of shares constituting the Series A Preferred Stock
shall be 50,000.

(ii) Dividends and Distributions.

(a) Subject to the rights of the holders of any shares
of any series of Preferred Stock of the Corporation (the
"Preferred Stock") (or any similar stock) ranking prior and
superior to the Series A Preferred Stock with respect to
dividends, the holders of shares of Series A Preferred
Stock, in preference to the holders of Common Stock, par
value $0.01 per share, of the Corporation (the "Common
Stock") and of any other stock of the Corporation ranking
junior to the Series A Preferred Stock, shall be entitled to
receive, when, as and if declared by the Board of Directors
out of funds legally available therefor, quarterly dividends
payable in cash on the last day of January, April, July, and
October in each year (each such date being referred to
herein as a "Dividend Payment Date"), commencing on the
first Dividend Payment Date after the first issuance of a
share or fraction of a share of Series A Preferred Stock, in
an amount per share (rounded to the nearest cent) equal to
the greater of (1) $10.00 and (2) subject to the provision
for adjustment hereinafter set forth, 1,000 times the
aggregate per share amount of all cash dividends, and 1,000
times the aggregate per share amount (payable in kind) of
all non-cash dividends or other distributions other than a
dividend payable in shares of Common Stock, declared on the
Common Stock since the immediately preceding Dividend
Payment Date or, with respect to the first Dividend Payment
Date, since the first issuance of any share or fraction of a
share of Series A Preferred Stock. In the event that the
Corporation shall at any time after December 21, 1998,
declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in
each such case the amount to which holders of shares of
Series A Preferred Stock were entitled immediately prior to
such event under clause (2) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

(b) The Corporation shall declare a dividend or
distribution on the Series A Preferred Stock as provided in
paragraph (a) of this Section (ii) immediately after it
declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock);
provided that, in the event no dividend or distribution
shall have been declared on the Common Stock during the
period between any Dividend Payment Date and the next
subsequent Dividend Payment Date, a dividend of $10.00 per
share on the Series

<PAGE>
A Preferred Stock shall nevertheless be payable, when, as
and if declared, on such subsequent Dividend Payment Date.

(c) Dividends shall begin to accrue and be cumulative,
whether or not earned or declared, on outstanding shares of
Series A Preferred Stock from the Dividend Payment Date next
preceding the date of issue of such shares, unless the date
of issue of such shares is prior to the record date for the
first Dividend Payment Date, in which case dividends on such
shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Dividend Payment
Date or is a date after the record date for the
determination of holders of shares of Series A Preferred
Stock entitled to receive a quarterly dividend and before
such Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such
Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Series A
Preferred Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of
holders of shares of Series A Preferred Stock entitled to
receive payment of a dividend or distribution declared
thereon, which record date shall be not more than 60 days
prior to the date fixed for the payment thereof.

(iii) Voting Rights. The holders of shares of Series A
Preferred Stock shall have the following voting rights:

(a) Subject to the provision for adjustment
hereinafter set forth and except as otherwise provided
elsewhere in the Articles of Incorporation or required by
law, each share of Series A Preferred Stock shall entitle
the holder thereof to 1,000 votes on all matters upon which
the holders of the Common Stock of the Corporation are
entitled to vote. In the event the Corporation shall at any
time after December 21, 1998 declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the number of votes per share
to which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event shall be adjusted
by multiplying such number by a fraction, the numerator of
which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding
immediately prior to such event.

(b) Except as otherwise provided in these Articles of
Incorporation and except as otherwise required by law, the
holders of shares of Series A Preferred Stock and the
holders of shares of Common Stock and any other capital
stock of the Corporation having general voting rights shall
vote together as one class on all matters submitted to a
vote of stockholders of the Corporation.
<PAGE>

(c) Except as set forth in these Articles of
Incorporation, or as otherwise provided by law, holders of
Series A Preferred Stock shall have no special voting rights
and their consent shall not be required (except to the
extent they are entitled to vote with holders of Common
Stock as set forth herein) for taking any corporate action.

(iv) Certain Restrictions.

(a) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as
provided in Section (ii) of this Article FOURTH are in
arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not earned or
declared, on shares of Series A Preferred Stock outstanding
shall have been paid in full, the Corporation shall not:

(1) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior (as to
dividends) to the Series A Preferred Stock;

(2) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity
(as to dividends) with the Series A Preferred Stock, except
dividends paid ratably on the Series A Preferred Stock and
all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;

(3) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior
(either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred
Stock, provided that the Corporation may at any time
redeem, purchase or otherwise acquire shares of any
such junior stock in exchange for shares of any stock
of the Corporation ranking junior (as to dividends and
upon dissolution, liquidation or winding up) to the
Series A Preferred Stock or rights, warrants or options
to acquire such junior stock;

(4) redeem or purchase or otherwise acquire for
consideration any shares of Series A Preferred Stock,
or any shares of stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or
winding up) with the Series A Preferred Stock, except
in accordance with a purchase offer made in writing or
by publication (as determined by the Board of
Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of
the respective annual dividend rates and other relative
rights and preferences of the respective series and
classes, shall determine in good faith will result in
fair and equitable treatment among the respective
series or classes.

(b) The Corporation shall not permit any subsidiary of
the Corporation to purchase or otherwise acquire for
consideration any shares of stock of the
<PAGE>
Corporation unless the Corporation could, under
paragraph (a) of this Section (iv), purchase or
otherwise acquire such shares at such time and in such
manner.

(v) Reacquired Shares. Any shares of Series A Preferred
Stock purchased or otherwise acquired by the Corporation in
any manner whatsoever shall be retired and cancelled
promptly after the acquisition thereof. All such shares
shall upon their retirement become authorized but unissued
shares of Preferred Stock and may be reissued as part of a
new series of Preferred Stock to be created by resolution or
resolutions of the Board of Directors, subject to any
conditions and restrictions on issuance set forth herein.

(vi) Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation,
no distribution shall be made (a) to the holders of the
Common Stock or of shares of any other stock of the
Corporation ranking junior, upon liquidation, dissolution or
winding up, to the Series A Preferred Stock unless, prior
thereto, the holders of shares of Series A Preferred Stock
shall have received $10.00 per share, plus an amount equal
to accrued and unpaid dividend distributions thereon,
whether or not earned or declared, to the date of such
payment, provided that the holders of shares of Series A
Preferred Stock shall be entitled to receive an aggregate
amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 1,000 times the aggregate
amount to be distributed per share to holders of shares of
Common Stock, or (b) to the holders of shares of stock
ranking on a parity upon liquidation, dissolution or winding
up with the Series A Preferred Stock, except distributions
made ratably on the Series A Preferred Stock and all such
parity stock in proportion to the total amounts to which the
holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event,
however, that there are not sufficient assets available to
permit payment in full of the Series A Preferred Stock
liquidation preference and the liquidation preferences of
all other classes and series of stock of the Corporation, if
any, that rank on a parity with the Series A Preferred Stock
in respect thereof, then the assets available for such
distribution shall be distributed ratably to the holders of
the Series A Preferred Stock and the holders of such parity
shares in the proportion to their respective liquidation
preferences. In the event the Corporation shall at any time
after December 21, 1998 declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the aggregate amount to which
holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under the proviso in clause
(a) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction, the numerator of
which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding
immediately prior to such event.

(vii) Consolidation, Merger, etc. In the case the
Corporation shall enter into any consolidation, merger,
combination or other transaction in which the shares of
Common

<PAGE>
Stock are converted into, exchanged for or changed into
other stock or securities, cash and/or any property, then in
any such case each share of Series A Preferred Stock shall
at the same time be similarly converted into, exchanged for
or changed into an amount per share (subject to the
provision for adjustment hereinafter set forth) equal to
1,000 times the aggregate amount of stock, securities, cash
and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is
converted, exchanged or converted. In the event the
Corporation shall at any time after December 21, 1998
declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in
each such case the amount set forth in the preceding
sentence with respect to the conversion, exchange or change
of shares of Series A Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of
which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding
immediately prior to such event.

(viii) No Redemption. The shares of Series A Preferred
Stock shall not be redeemable from any holder.

(ix) Rank. The Series A Preferred Stock shall rank, with
respect to the payment of dividends and the distribution of
assets upon liquidation, dissolution or winding up of the
Corporation, junior to all other series of Preferred Stock
and senior to the Common Stock.

(x) Amendment. If any proposed amendment to the Articles
of Incorporation would alter, change or repeal any of the
preferences, powers or special rights given to the Series A
Preferred Stock so as to affect the Series A Preferred Stock
adversely, then the holders of the Series A Preferred Stock
shall be entitled to vote separately as a class upon such
amendment, and the affirmative vote of two-thirds of the
outstanding shares of the Series A Preferred Stock, voting
separately as a class, shall be necessary for the adoption
thereof, in addition to such other vote as may be required
by the Mississippi Business Corporation Act.

(xi) Fractional Shares. Series A Preferred Stock may be
issued in fractions of a share that shall entitle the
holder, in proportion to such holder's fractional shares, to
exercise voting rights, receive dividends, participate in
distributions and to have the benefit of all other rights of
holders of Series A Preferred Stock.

(B) Preferred Stock.

(i) One or more additional series of Preferred Stock may be
issued from time to time in such amounts as may be
determined by the Board of Directors. The voting powers,
designations, preferences and relative, participating,
optional or other special rights, if any, and the
qualifications, limitations or restrictions thereof, if any,
of the Preferred Stock of
<PAGE>
each series shall be such as are fixed by the Board of
Directors, the authority so to do being hereby expressly
granted, and as are stated and expressed in Articles of
Amendment to these Articles of Incorporation adopted by the
Board of Directors providing for the issue of such series of
Preferred Stock (herein called an "Preferred Stock
Amendment"). The Preferred Stock Amendment as to any series
shall (a) establish the number of shares constituting, and
the distinctive designation of, that series, (b) fix the
dividend rate, if any, of the shares of such series, the
payment dates for dividends on shares of such series and the
date or dates, or the method of determining the date or
dates, if any, from which dividends on shares of such series
shall be cumulative, (c) fix the amount or amounts payable
on shares of such series upon voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the
Corporation, (d) state the price or prices or rate or rates,
and adjustments, if any, at which, the time or times and the
terms and conditions upon which, the shares of such series
may be redeemed at the option of the Corporation or at the
option of the holder or holders of shares of such series or
upon the occurrence of a specified event, and state whether
such shares may be redeemed for cash, property or rights,
including securities of the Corporation or another entity;
and such Preferred Stock Amendment may (1) limit the number
of shares of such series that may be issued, (2) provide for
a sinking fund for the purchase or redemption of shares of
such series and specify the terms and conditions governing
the operations of any such fund, (3) grant voting rights to
the holders of shares of such series, provided that each
share shall not have more than one vote per share, (4)
impose conditions or restrictions upon the creation of
indebtedness of the Corporation or upon the issuance of
additional Preferred Stock or other capital stock ranking on
a parity therewith, or prior thereto, with respect to
dividends or distribution of assets upon liquidation, (5)
impose conditions or restrictions upon the payment of
dividends upon, or the making of other distributions to, or
the acquisition of, shares ranking junior to the Preferred
Stock or to any series thereof with respect to dividends or
distributions of assets upon liquidation, (6) state the time
or times, the price or prices or the rate or rates of
exchange and other terms, conditions and adjustments upon
which shares of any such series may be made convertible
into, or exchangeable for, at the option of the holder or
the Corporation or upon the occurrence of a specified event,
shares of any other class or classes or of any other series
of Preferred Stock or any other class or classes of stock or
other securities of the Corporation, and (7) grant such
other special rights and impose such qualifications,
limitations or restrictions thereon as shall be fixed by the
Board of Directors, to the extent not inconsistent with this
Article FOURTH and to the full extent now or hereafter
permitted by the laws of the State of Mississippi.

(ii) Except as by law expressly provided, or except as may
be provided in any Preferred Stock Amendment, the Preferred
Stock shall have no right or power to vote on any question
or in any proceeding or to be represented at, or to receive
notice of, any meeting of shareholders of the Corporation.

(iii) Preferred Stock that is redeemed, purchased or retired
by the Corporation shall assume the status of authorized but
unissued Preferred Stock and may thereafter, subject to
<PAGE>
the provisions of any Preferred Stock Amendment providing
for the issue of any particular series of Preferred Stock,
be reissued in the same manner as authorized but unissued
Preferred Stock.

All shares of the Common Stock of the Corporation shall
be identical and except as otherwise required by law or as
otherwise provided in the Directors' Amendment, if any,
adopted by the Board of Directors with respect to any series
of Preferred Stock, the holders of the Common Stock shall
exclusively possess all voting power, and each share of
Common Stock shall have one vote.

THREE: These Articles of Amendment to the Corporation's
Articles of Incorporation are adopted as of the date set forth
below.

FOUR: These Articles of Amendment to the Corporation's
Articles of Incorporation have been duly adopted by the Board of
Directors of the Corporation pursuant to the authority vested in
such board in accordance with the provisions of the Mississippi
Business Corporation Act and the Corporation's Articles of
Incorporation.

IN WITNESS WHEREOF, these Articles of Amendment to the
Corporation's Articles of Incorporation have been executed on
behalf of the Corporation by its Chairman of the Board, President
and Chief Executive Officer and attested by its Secretary this
7th day of December 1998.

/s/ J. L. HOLLOWAY
J. L. Holloway
Chairman of the Board, President
and Chief Executive Officer

Attest:/s/ JAMES A. LOWE, III
James A. Lowe, III
General Counsel and Secretary
<PAGE>
ARTICLES OF MERGER

The undersigned corporation pursuant to Section 79-4-11.05 of the
Mississippi Code of 1972, as amended, ( the "Code") hereby executes
the following document and sets forth:

FIRST: The name of the first corporation is:

Friede Goldman Mississippi, Inc.

SECOND: The name of the second corporation is:

Friede Goldman International Inc.

THIRD: The future effective date of the merger is 12:01 a.m.,
October 5, 1998.

FOURTH: The Plan of Merger ("Plan") between Friede Goldman
Mississippi, Inc. and Friede Goldman International Inc. is attached
hereto as Exhibit A.

FIFTH: Friede Goldman Mississippi, Inc. had 1,000 shares of
Common Stock outstanding and entitled to vote on the Plan. There were
no other classes of voting securities of Friede Goldman Mississippi,
Inc. outstanding. The total number of votes cast FOR the Plan was
1,000. The total number of votes cast AGAINST the Plan was 0.

SIXTH: Friede Goldman International Inc. had 24,492,797 shares of
Common Stock outstanding and entitled to vote on the Plan. There were
no other classes of voting securities of Friede Goldman International
Inc. outstanding. The total number of votes cast FOR the Plan was
18,741,647. The total number of votes cast AGAINST the Plan was
301,256.

SEVENTH: The number of shareholder votes cast by the shareholders
of both Friede Goldman Mississippi, Inc. and Friede Goldman
International Inc. were sufficient for approval by the shareholders of
both corporations.

IN WITNESS WHEREOF, these Articles of Merger have been executed
by the undersigned on the 28th day of September, 1998.

Friede Goldman Mississippi, Inc.

By: /s/ J.L. HOLLOWAY
J. L. Holloway, Chairman of the Board of Directors,
President and Chief Executive Officer

Friede Goldman International Inc.

By: /s/ J.L. HOLLOWAY
J. L. Holloway, Chairman of the Board of Directors,
President and Chief Executiive Officer
<PAGE>
Exhibit A

AGREEMENT AND PLAN OF MERGER
of
FRIEDE GOLDMAN INTERNATIONAL INC.
and FRIEDE GOLDMAN MISSISSIPPI, INC.

THIS IS AN AGREEMENT AND PLAN OF MERGER (this
"Agreement") by and between Friede Goldman International Inc., a
Delaware corporation ("Friede Goldman"), and Friede Goldman
Mississippi, Inc., a Mississippi corporation ("FGM"). Friede
Goldman and FGM are hereinafter collectively referred to as the
"Constituent Corporations."

RECITALS

WHEREAS, Friede Goldman is a corporation organized
and existing under the laws of the State of Delaware, having been
incorporated on May 21, 1997, and having authorized capital stock
consisting of (i) 125,000,000 shares of common stock, par value
$.01 per share ("Friede Goldman Common Stock") and (ii) 5,000,000
shares of preferred stock, par value $.01 per share ("Friede
Goldman Preferred Stock"), 24,492,797 of which shares of Friede
Goldman Common Stock are issued and outstanding and none of which
shares of Friede Goldman Preferred Stock are issued and
outstanding; and the outstanding shares of Friede Goldman Common
Stock are entitled to vote on the Merger (as described below);
and

WHEREAS, the Board of Directors of Friede Goldman has
determined that it is the best interests of Friede Goldman and
its stockholders to change the corporation's domicile from
Delaware to Mississippi; and Friede Goldman has formed FGM as a
wholly-owned subsidiary for the express purpose of effecting the
reincorporation of Friede Goldman in the State of Mississippi;
and

WHEREAS, FGM is a corporation organized and existing
under the laws of the State of Mississippi, having been
incorporated on September 22, 1998, and having authorized capital
stock consisting of (i) 125,000,000 shares of common stock, par
value $.01 per share (the "FGM Common Stock") and (ii) 5,000,000
shares of preferred stock, par value $.01 per share (the "FGM
Preferred Stock"), 1,000 of which shares of FGM Common Stock are
issued and outstanding, all of which outstanding shares of FGM
Common Stock are owned by Friede Goldman, and none of which
shares of FGM Preferred Stock are outstanding; and

WHEREAS, the respective Boards of Directors of the
Constituent Corporations have determined that it is in the best
interests of such corporations and the stockholders of Friede
Goldman and the sole shareholder of FGM, respectively, to merge
Friede Goldman with and into FGM, with FGM to be the surviving
corporation (such merger being hereinafter referred to as the
"Merger"), and each of such Boards of Directors have authorized,
approved and adopted this Agreement and has directed that it be
submitted to the stockholders of Friede Goldman and the sole
shareholder of FGM, respectively, for approval.
<PAGE>

NOW, THEREFORE, in consideration of the premises, the
mutual covenants herein contained and other good and valuable
consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

ARTICLE I: THE MERGER

Section 1.1. The Merger and Surviving Corporation.
At the Effective Time of the Merger (as hereinafter
defined), Friede Goldman shall be merged with and into FGM,
the separate existence of Friede Goldman shall cease and FGM
(hereinafter sometimes referred to as the "Surviving
Corporation") shall be the surviving corporation of the
Merger and shall continue to exist by virtue of, and shall
be governed by, the laws of the State of Mississippi. The
name of the Surviving Corporation shall be "Friede Goldman
International Inc." as provided in the Amendment to the
Articles of Incorporation of the Surviving Corporation set
forth in Section 3.1 below.

Section 1.2. Effective Time of the Merger. The
Merger shall be effective upon the later of the filing of a
Certificate of Merger with the Secretary of State of the
State of Delaware and Articles of Merger with the Secretary
of State of the State of Mississippi (the "Effective Time").

Section 1.3. Effect of Merger. At the Effective
Time, Friede Goldman shall merge with and into FGM, and the
separate existence of Friede Goldman shall cease. Without
limiting any provisions of applicable law of the State of
Delaware or the State of Mississippi, at the Effective Time:
(i) the Surviving Corporation shall succeed, without other
transfer, to all the assets, rights, powers and property of
the Constituent Corporations, and title to all real estate
and other property owned by each of the Constituent
Corporations shall be vested in the Surviving Corporation
without reversion or impairment; (ii) the Surviving
Corporation shall succeed, without other transfer, to all of
the debts, liabilities and obligations of the Constituent
Corporations as if it had incurred them itself; (iii) any
proceeding pending against either of the Constituent
Corporations may be continued as if the Merger did not occur
or the Surviving Corporation may be substituted in the
proceeding for Friede Goldman; (iv) the Surviving
Corporation shall be subject to all actions previously
taken by the Boards of Directors of the Constituent
Corporations, and shall assume all obligations of Friede
Goldman relating to the indemnification of its officers and
directors; (v) the Surviving Corporation shall assume,
without any further action, all employee benefit plans of
Friede Goldman, including, but not limited to, all stock
option, stock purchase, stock repurchase, deferred
compensation, welfare and savings plans, as well all
employment and severance agreements, subject, in each case,
to the terms and conditions of such plans and agreements.
and (vi) the shares of Friede Goldman Common Stock that are
to be converted into shares of common stock, par value $.01
per share, of the Surviving Corporation ("Surviving
Corporation Common Stock") shall be so converted.
<PAGE>

SECTION II: CONVERSION OF STOCK

Section 2.1 Conversion Shares of Friede Goldman Common
Stock. At the Effective Time, by virtue of the Merger and
without any action by the parties hereto or any other
person, (i) each share of Friede Goldman Common Stock
issued and outstanding immediately prior thereto shall be
converted into and exchanged for one fully paid and
nonassessable share of Surviving Corporation Common Stock
and (ii) each option or right to purchase a share of Friede
Goldman Common Stock issued and outstanding immediately
prior thereto shall be converted into and exchanged for one
option or right, as the case may be, to purchase a share of
Surviving Corporation Common Stock, upon the same terms and
subject to the same conditions.

Section 2.2. Cancellation of FGM Common Stock. At
the Effective Time of the Merger, each share of FGM Common
Stock issued and outstanding immediately prior thereto
shall, by virtue of the Merger and without any action by
FGM, the holder of such shares or any other person, be
canceled and returned to the status of authorized but
unissued shares.

Section 2.3. Exchange of Share Certificates. (a) After
the Effective Time, the holder of an outstanding certificate
representing shares of Friede Goldman Common Stock may, at
such stockholder's option, surrender the same for
cancellation to the Surviving Corporation and such holder
shall be entitled to receive in exchange therefor a
certificate or certificates representing the number of
shares of Surviving Corporation Common Stock into which the
surrendered shares were converted as herein provided. Until
so surrendered, each outstanding certificate theretofore
representing shares of Friede Goldman Common Stock shall be
deemed for all purposes to represent the number of shares of
Surviving Corporation Common Stock into which such shares of
Friede Goldman Common Stock were converted in the Merger.

(b) The registered owner on the books and records of
the Surviving Corporation of any such outstanding
certificate shall, until such certificate shall have been
surrendered for transfer or conversion or otherwise
accounted for to the Surviving Corporation, have and be
entitled to exercise any voting and other rights with
respect to and to receive dividends and other distributions
upon the shares of Common Stock of the Surviving Corporation
represented by such outstanding certificate as provided
above.

ARTICLE III: CHARTER DOCUMENTS; DIRECTORS AND OFFICERS

Section 3.1. Articles of Incorporation. The Articles
of Incorporation of FGM shall be the Articles of
Incorporation of the Surviving Corporation, except that
Article First thereof shall be amended to read in its
entirety as follows:
<PAGE>

FIRST: The name of the Corporation is:

Friede Goldman International Inc.

Section 3.2. Bylaws. The Bylaws of FGM as in effect
at the Effective Time shall continue to be the Bylaws of the
Surviving Corporation until amended as provided in said
Bylaws, except that the name of the Surviving Corporation
shall be "Friede Goldman International Inc."

Section 3.3. Directors. The persons who are serving
as the directors of Friede Goldman as of the Effective Time
shall be the directors of the Surviving Corporation until
changed in accordance with the Bylaws of the Surviving
Corporation and applicable law. Directors of the Surviving
Corporation shall serve on the committees on which they
served as directors of Friede Goldman. The persons who are
serving as the directors of FGM as of the Effective Time
shall hold no such position with the Surviving Corporation,
except insofar as such directors hold such position with
Friede Goldman.

Section 3.4. Officers. The persons who are serving as
the directors of FGM as of the Effective Time shall be the
directors of the Surviving Corporation until changed in
accordance with the Bylaws of the Surviving Corporation and
applicable law. The persons who are serving as the officers
of Friede Goldman as of the Effective Time shall hold no
such office with the Surviving Corporation, except insofar
as such officers hold such office with FGM.

ARTICLE IV: CONDITIONS TO CLOSING

Section 4.1 Conditions to Closing. The respective
obligations of the Constituent Corporation to consummate the
Merger are subject to the satisfaction at or prior to the
Effective Time of the following conditions:

(a) This Agreement and the Merger shall have been
authorized and approved by a majority of the
stockholders of Friede Goldman entitled to vote and
present, in person or by proxy, at the Special Meeting
of Stockholders of Friede Goldman to be held expressly
for such purpose, and by Friede Goldman, the sole
stockholder of FGM, in accordance with the relevant
provisions of the Delaware General Corporation Law (the
"DGCL"), the Certificate of Incorporation of Friede
Goldman, the Bylaws of Friede Goldman, the Mississippi
Business Corporation Act, the Articles of Incorporation
of FGM and the Bylaws of FGM, as applicable. After the
such approval and adoption of this Agreement, and the
satisfaction of the other conditions set forth herein,
all required documents shall be executed, verified,
filed, and recorded and all required acts shall be done
under the provisions of the

<PAGE>
applicable statutes of the States of Delaware and
Mississippi in order to accomplish the Merger;

(b) As of the Effective Time, no action, suit or
proceeding shall have been instituted or, to the
knowledge of the Constituent Corporations, be pending
or threatened before any court or other governmental
body by any public agency or governmental authority
seeking to restrain, enjoin or prohibit the
consummation of the transactions contemplated hereby or
to seek damages or other relief in connection therewith
against any officer or director of either of the
Constituent Corporations.

ARTICLE V: AMENDMENT AND TERMINATION

Section 5.1. Amendment. This Agreement may be
supplemented or amended in any manner at any time and from
time to time prior to the Effective Time by the mutual
consent of Friede Goldman and FGM without any action by the
stockholders of Friede Goldman or the sole shareholder of
FGM; provided, that any amendment, modification or
supplement to this Agreement after its approval by the
stockholders of Friede Goldman but prior to the Effective
Time shall require the approval of the stockholders of
Friede Goldman unless the amendment, modification or
supplement to this Agreement (i) does not alter (a) the
amount or kind of shares to be received thereunder in
exchange for shares of Friede Goldman Common Stock, or (b)
any term of the Articles of Incorporation of the Surviving
Corporation as provided for in this Agreement, and (ii) does
not alter any of the terms and conditions of this Agreement
in a manner that would adversely affect the holders of
Friede Goldman Common Stock.

Section 5.2. Termination. This Agreement may be
terminated and the Merger abandoned at any time prior to the
Effective Time by action taken by the Board of Directors of
either Constituent Corporation for any reason whatsoever,
notwithstanding the approval of this Agreement and the
Merger by the stockholders of Friede Goldman or the sole
shareholder of FGM, or by both.

ARTICLE VI: FURTHER ASSURANCES

Section 6.1. Further Assurances. If at any time the
Surviving Corporation shall consider or be advised that any
further assignments or assurances or any other things are
necessary or desirable to vest in the Surviving Corporation,
in accordance with the terms of this Agreement, the title of
any property or rights of Friede Goldman, or otherwise to
carry out this Agreement or the Merger, the last acting
officers and directors of Friede Goldman or the
corresponding officers and directors of the Surviving
Corporation shall and will execute and make all such proper
assignments and assurances and do all things necessary or
proper to vest title in such property or rights in the
Surviving Corporation, or otherwise to carry out this
Agreement or the Merger.
<PAGE>

ARTICLE VII: GENERAL

Section 7.1. Registered Office. The address of the
registered office of the Surviving Corporation of the Merger
in the State of Mississippi shall be 525 East Capitol Street,
Suite 402, Jackson, Mississippi 39201, and James A.
Lowe, III shall be the registered agent of the Surviving
Corporation at such address.

Section 7.2. Governing Law. This Agreement shall in
all respects be construed, interpreted and enforced in
accordance with and governed by the laws of the [State of
Mississippi] and, so far as applicable, the merger
provisions of the DGCL.

Section 7.3. Counterparts. This Agreement may be
executed in two or more counterparts, each of which shall be
deemed an original, and it shall not be necessary in making
proof of this Agreement or its terms to produce or account
for more than one of such counterparts.

<PAGE>

IN WITNESS WHEREOF, the Constituent Corporations have caused
this Agreement to be executed by their respective officers whose
signatures are set forth below, all as of the 28th day of
September 1998.

ATTEST: FRIEDE GOLDMAN INTERNATIONAL INC.
a Delaware corporation

By: /s/ JAMES A. LOWEE, III By: /s/ J.L. HOLLOWAY
James A. Lowe, III J. L. Holloway
Secretary Chairman of the Board,
President and Chief Executive
Officer

ATTEST: FRIEDE GOLDMAN MISSISSIPPI, INC.
a Mississippi corporation

By: /s/ JAMES A. LOWE, III By: /s/ J. L. HOLLOWAY
James A. Lowe, III J. L. Holloway
Secretary Chairman of the Board,
President and Chief Executive
Officer
<PAGE>
PAGE 1

State of Delaware
Office of the Secretary of State

I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF
DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF
THE CERTIFICATE OF MERGER, WHICH MERGES:

"FRIEDE GOLDMAN INTERNATIONAL INC.", A DELAWARE CORPORATION, WITH
AND INTO "FRIEDE GOLDMAN MISSISSIPPI, INC." UNDER THE NAME OF "FRIEDE
GOLDMAN INTERNATIONAL INC.", A CORPORATION ORGANIZED AND EXISTING
UNDER THE LAWS OF THE STATE OF MISSISSIPPI, AS RECEIVED AND FILED IN
THIS OFFICE THE SIXTH DAY OF OCTOBER, A.D. 1998, AT 1:30 O'CLOCK P.M.

A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW
CASTLE COUNTY RECORDER OF DEEDS.

/s/ EDWARD J. FREEL
Edward J. Freel, Secretary of State

AUTHENTICATION: 9340482

DATE: 10-06-98
<PAGE>
CERTIFICATE OF MERGER

Merger of Friede Goldman International Inc.
with and into
Friede Goldman Mississippi, Inc.

Pursuant to the provisions of Section 252 of the Delaware General
Corporation Law, the undersigned certifies as follows concerning the
merger (the "Merger") of Friede Goldman International Inc., a Delaware
corporation, with and into Friede Goldman Mississippi, Inc., a
Mississippi corporation, with Friede Goldman Mississippi, Inc. as the
surviving corporation (in such capacity, the "Surviving Corporation"):

1. The Agreement and Plan of Merger, dated as of September 28th,
1998 (the "Merger Agreement") has been approved, adopted, certified,
executed and acknowledged by each of the undersigned corporations in
accordance with Section 252(c) of the Delaware General Corporation
Law.

2. The Merger contemplated in the Agreement will be effective at
the Effective Time (as defined in the Merger Agreement).

3. The name of the Surviving Corporation shall be Friede Goldman
Mississippi, Inc., but shall be changed immediately after the
Effective Time (as defined in the Merger Agreement) as contemplated by
paragraph 4 below.

4. The Certificate of Incorporation of Friede Goldman
Mississippi, Inc., as in effect at the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation; provided,
however, Article FIRST thereof shall be amended immediately after the
Effective Time so that the name of the Surviving Corporation set forth
therein shall be "Friede Goldman International Inc."

5. The executed Agreement is on file at the principal place of
business of the Surviving Corporation, 525 East Capitol Street, Suite
402, Jackson, Mississippi 39201.

6. A copy of the Agreement will be furnished by the Surviving
Corporation, on request and without cost, to any stockholder of Friede
Goldman International Inc. or Friede Goldman Mississippi, Inc.

7. The Surviving Corporation may be served with process in the
State of Delaware in any proceeding for enforcement of any obligation
of Friede Goldman International Inc. as well as for enforcement of any
obligation of the Surviving Corporation arising from the Merger,
including any suit or other proceeding to enforce the right of any
stockholder as determined in appraisal proceedings pursuant to the
provisions of Section 262 of the Delaware
<PAGE>
General Corporation Law, and the Surviving Corporation does hereby
irrevocably appoint the Secretary of State of the State of Delaware as
its agent to accept service of process in any such suit or other
proceeding. The address to which a copy of such process shall be
mailed by the Secretary of State of the State of Delaware is 525 East
Capitol Street, Suite 402, Jackson, Mississippi 39201, Attention:
General Counsel, until the Surviving Corporation shall have hereafter
designated in writing to the Secretary of State of the State of
Delaware a different address for such purpose.

IN WITNESS WHEREOF, the Surviving Corporation has executed this
Certificate of Merger this 5th day of October, 1998, effective for all
purposes as of the Effective Time.

FRIEDE GOLDMAN MISSISSIPPI, INC.

By: /s/ JAMES A. LOWE, III
James A. Lowe, III
Secretary and General Counsel
<PAGE>
State of Mississippi
Secretary of State's Office
Eric Clark
Secretary of State
Jackson, Mississippi

MISSISSIPPI CORPORATION INFORMATION SYSTEM

Corporation Name:
FRIEDE GOLDMAN MISSISSIPPI, INC.

Corp ID: 0661478
Filed: 09/22/1998 AT 8:00 A. M.

Filing Fee Receipt: $50.00

[STATE SEAL HERE] SECRETARY OF STATE
P.O. Box 136
Jackson, MS 39205
(601) 359-1333

/s/ ERIC CLARK
ERIC CLARK
Secretary of State
<PAGE>
ARTICLES OF INCORPORATION
OF
FRIEDE GOLDMAN MISSISSIPPI, INC.

The undersigned, pursuant to Section 79-4-2.02 of the Mississippi
Code of 1972, hereby executes the following document and sets forth:

FIRST: The name of the corporation is:

Friede Goldman Mississippi, Inc.

SECOND: The address of the corporation's registered office in
the State of Mississippi is 525 East Capitol Street, Suite 402,
Jackson, Mississippi 39201. The name of the registered agent of the
corporation at such address is James A. Lowe, III.

THIRD: The purpose of the corporation is to engage in any lawful
act or activity for which corporations may be organized under the laws
of Mississippi.

FOURTH: The total number of shares of all classes of capital
stock which the Corporation shall have authority to issue is
130,000,000, of which 5,000,000 shares shall be Preferred Stock, par
value $0.01 per share, and 125,000,000 shares shall be Common Stock,
par value $0.01 per share.

A. Preferred Stock. (1) Preferred Stock may be issued from
time to time in one or more series and in such amounts as may be
determined by the Board of Directors. The voting powers,
designations, preferences and relative, participating, optional
or other special rights, if any, and the qualifications,
limitations or restrictions thereof, if any, of the Preferred
Stock of each series shall be such as are fixed by the Board of
Directors, authority so to do being hereby expressly granted, and
as are stated and expressed in a resolution or resolutions
adopted by the Board of Directors providing for the issue of such
series of Preferred Stock (herein called the "Directors'
Resolution"). The Directors' Resolution as to any series shall
(a) establish the number of shares constituting, and the
distinctive designation of, that series, (b) fix the dividend
rate, if any, of the shares of such series, the payment dates for
dividends on shares of such series and the date or dates, or the
method of determining the date or dates, if any, from which
dividends on shares of such series shall be cumulative, (c) fix
the amount or amounts payable on shares of such series upon
voluntary or involuntary liquidation, dissolution or winding up
of the affairs of the Corporation, (d) state the price or prices
or rate or rates, and adjustments, if any, at which, the time or
times and the terms and conditions upon which, the shares of such
series may be redeemed at the option of the Corporation or at the
option of the holder or holders of shares of such series or upon
the occurrence of a specified event, and state whether such
shares may be redeemed for cash, property or rights, including
securities of the Corporation or another entity; and such
Directors' Resolution may (i) limit the number of shares of such
series that may be issued, (ii) provide for a sinking fund for
the purchase or redemption of shares of such series and specify
the terms and conditions governing the operations of any such
fund, (iii) grant voting rights to the holders of shares of such
series, provided that each share shall not have more than one
vote per share, (iv) impose
<PAGE>
conditions or restrictions upon the creation of indebtedness of
the Corporation or upon the issuance of additional Preferred
Stock or other capital stock ranking on a parity therewith, or
prior thereto, with respect to dividends or distribution of
assets upon liquidation, (v) impose conditions or restrictions
upon the payment of dividends upon, or the making of other
distributions to, or the acquisition of, shares ranking junior to
the Preferred Stock or to any series thereof with respect to
dividends or distributions of assets upon liquidation, (vi) state
the time or times, the price or prices or the rate or rates of
exchange and other terms, conditions and adjustments upon which
shares of any such series may be made convertible into, or
exchangeable for, at the option of the holder or the Corporation
or upon the occurrence of a specified event, shares of any other
class or classes or of any other series of Preferred Stock or any
other class or classes of stock or other securities of the
Corporation, and (vii) grant such other special rights and impose
such qualifications, limitations or restrictions thereon as shall
be fixed by the Board of Directors, to the extent not
inconsistent with this Article FOURTH and to the full extent now
or hereafter permitted by the laws of the State of Mississippi.

(2) Except as by law expressly provided, or except as may be
provided in any Directors' Resolution, the Preferred Stock shall
have no right or power to vote on any question or in any
proceeding or to be represented at, or to receive notice of, any
meeting of shareholders of the Corporation.

(3) Preferred Stock that is redeemed, purchased or retired by
the Corporation shall assume the status of authorized but
unissued Preferred Stock and may thereafter, subject to the
provisions of any Directors' Resolution providing for the issue
of any particular series of Preferred Stock, be reissued in the
same manner as authorized but unissued Preferred Stock.

B. Common Stock. All shares of the Common Stock of the
Corporation shall be identical and except as otherwise required
by law or as otherwise provided in the Directors' Resolution or
Resolutions, if any, adopted by the Board of Directors with
respect to any series of Preferred Stock, the holders of the
Common Stock shall exclusively possess all voting power, and each
share of Common Stock shall have one vote.

FIFTH: The business and affairs of the Corporation shall be
managed and controlled by its Board of Directors. The number of
directors constituting the Board of Directors shall be fixed by the
Board of Directors, but shall not be less than three or more than 15.
The Board of Directors may increase or decrease the exact number of
directors from time to time subject to Miss. Code Ann. Section
79-4-8.03(b) which limits any change to 30% of the number of directors
last approved by the Shareholders.

At the expiration of the initial term of the directors, and of
each succeeding term, the directors shall be elected to serve until
the next annual meeting of shareholders [except in the event classes
are implemented as provided below] and until their successors are
elected and qualified or until their earlier death, resignation,
removal or retirement. Any director elected or appointed to fill a
vacancy shall hold office for the remaining term of the position to
which he was appointed. No decrease in the number of directors
constituting the Corporation's Board of Directors shall shorten the
term of
<PAGE>
any incumbent director. Any vacancy in the Board of Directors,
whether arising through death, resignation or removal of a director,
or through an increase in the number of directors, shall be filled by
the majority vote of the remaining directors.

A director of the Corporation may be removed only for cause and
only upon the affirmative vote of the holders of a majority of the
outstanding capital stock of the Corporation entitled to vote at an
election of directors, subject to further restrictions on removal, not
inconsistent with this Article FIFTH, as may be contained in the
Bylaws.

Notwithstanding the foregoing, whenever the holders of any one or
more classes or series of Preferred Stock issued by the Corporation
shall have the right, voting separately by class or series, to elect
directors at an annual or special meeting of shareholders, the
election, term of office, filling of vacancies and other features of
such directorships shall be governed by the terms of these Articles of
Incorporation applicable thereto.

At any time the number of directors is composed of nine or more
members, the Board of Directors may, upon majority vote, create
classes of directors, to take effect at the next annual meeting of the
shareholders. The directors shall be divided into three classes as
nearly equal in number as possible, designated Class I, Class II and
Class III. The initial term for the directors in Class I shall expire
at the annual meeting of the shareholders following the first election
by classes; the initial term of the directors in Class II shall expire
at the second annual meeting of the shareholders following the first
election by classes; and the initial term of the directors in Class
III shall expire at the third annual meeting of the shareholders
following the first election by classes. Thereafter, the term of
office for each class shall be three years. Any increase or decrease
in the number of directors constituting the Board shall be apportioned
among the classes so as to maintain the number of directors in each
class as nearly as possible to one-third the whole number of directors
as so adjusted. The Bylaws may contain any provision regarding
classification of the Corporation's directors not inconsistent with
the terms hereof.

SIXTH: The following provisions are inserted for the management
of the business and the conduct of the affairs of the Corporation, and
for further definition, limitation and regulation of the powers of the
Corporation and of its directors and shareholders:

A. The Board of Directors is authorized to alter, amend or
repeal the Bylaws or adopt new Bylaws of the Corporation. The
shareholders shall not repeal or change the Bylaws of the
Corporation unless such repeal or change is approved by the
affirmative vote of the holders of not less than 80% of the total
voting power of all shares of stock of the Corporation entitled
to vote in the election of directors, considered for the purposes
of this paragraph A as a single class.

B. Election of directors need not be by written ballot unless
the Bylaws so provide.

C. In addition to the powers herein or by statute expressly
conferred upon the Corporation's directors, the Corporation's
directors are hereby empowered to exercise all such powers and do
all such acts and things as may be exercised or done by the
Corporation,
<PAGE>
subject, nevertheless, to the provisions of the statutes of
Mississippi, these Articles of Incorporation, and any Bylaws
adopted by the shareholders; provided, however, that no Bylaws
hereafter adopted shall invalidate any prior act of the directors
which would have been valid if such Bylaws had not been adopted.

D. No action shall be taken by the shareholders except at an
annual or special meeting with prior notice and a vote. No
action shall be taken by the shareholders by written consent.

SEVENTH: The books of the Corporation may be kept (subject to
any provision contained in the statutes) outside the State of
Mississippi at such place or places as may be designated from time to
time by the Board of Directors or in the Bylaws of the Corporation.

EIGHTH: The Board of Directors is hereby authorized to create
and issue, whether or not in connection with the issuance and sale of
any of its stock or other securities, rights (the "Rights") entitling
the holders thereof to purchase from the Corporation shares of capital
stock or other securities. The times at which and the terms upon
which the Rights are to be issued will be determined by the Board of
Directors and set forth in the contracts or instruments that evidence
the Rights. The authority of the Board of Directors with respect to
the Rights shall include, but not be limited to, determination of the
following:

(a) The initial purchase price per share of the capital stock or
other securities of the Corporation to be purchased upon exercise
of the Rights.

(b) Provisions relating to the times at which and the
circumstances under which the Rights may be exercised or sold or
otherwise transferred, either together with or separately from,
any other securities of the Corporation.

(c) Provisions that adjust the number or exercise price of the
Rights or amount or nature of the securities or other property
receivable upon exercise of the Rights in the event of a
combination, split or recapitalization of any capital stock of
the Corporation, a change in ownership of the Corporation's
securities or a reorganization, merger, consolidation, sale of
assets or other occurrence relating to the Corporation or any
capital stock of the Corporation, and provisions restricting the
ability of the Corporation to enter into any such transaction
absent an assumption by the other party or parties thereto of the
obligations of the Corporation under such Rights.

(d) Provisions that deny the holder of a specified percentage of
the outstanding securities of the Corporation the right to
exercise the Rights and/or cause the Rights held by such holder
to become void.

(e) Provisions that permit the Corporation to redeem the Rights.

(f) The appointment of one or more agents to take specified
actions on behalf of the Corporation with respect to the Rights.
<PAGE>
NINTH: No director of the Corporation shall be personally liable
to the Corporation or its shareholders 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
shareholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii)
under Section 79-4-8.33 of the Mississippi Code of 1972, as amended,
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 laws of the State of Mississippi are
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 laws of the State of Mississippi, as so
amended.

TENTH: The provisions set forth in this Article TENTH and
Articles FIFTH, SIXTH, EIGHTH and NINTH hereof may not be amended,
altered, changed, repealed or rescinded in any respect unless such
action is approved by the affirmative vote of the holders of not less
than 80 percent of the total voting power of all shares of stock of
the Corporation entitled to vote in the election of directors,
considered for purposes of this Article TENTH as a single class. The
voting requirements contained in this Article TENTH and in Article
SIXTH hereof shall be in addition to voting requirements imposed by
law, other provisions of these Articles of Incorporation or any
designation of preferences in favor of certain classes or series of
shares of capital stock of the Corporation.

ELEVENTH: Whenever a compromise or arrangement is proposed
between this Corporation and its creditors or any class of them and/or
between this Corporation and its shareholders or any class of them,
any court of equitable jurisdiction within the State of Mississippi
may, on the application in a summary way of this Corporation or of any
creditor or shareholder thereof or on the application of any receiver
or receivers appointed for this Corporation or on the application of
trustees in dissolution or of any receiver or receivers appointed for
this Corporation order a meeting of the creditors or class of
creditors, and/or of the shareholders or class of shareholders of this
Corporation, as the case may be, to be summoned in such manner as the
said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or
of the shareholders or class of shareholders of this Corporation, as
the case may be, agree to any compromise or arrangement and to any
reorganization of this Corporation as a consequence of such compromise
or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said
application has been made, be binding on all the creditors or class of
creditors, and/or on all the shareholders or class of shareholders, of
this Corporation, as the case may be, and also on this Corporation.

TWELFTH: The Corporation is to have perpetual existence.

THIRTEENTH: The initial directors of the Corporation are J. L.
Holloway, John G. Corlew and Howell W. Todd.
<PAGE>

IN WITNESS WHEREOF, these Articles of Incorporation have been
executed by the incorporator of the Corporation on the 22nd day of
September, 1998.

INCORPORATOR

/s/ JOHN G. CORLEW
JOHN G. CORLEW
400 East Capitol, Suite 300
Jackson, MS 39201

AGREEMENT AND PLAN OF MERGER
of
FRIEDE GOLDMAN INTERNATIONAL INC.
and FRIEDE GOLDMAN MISSISSIPPI, INC.

RECITALS

ARTICLE I: THE MERGER

SECTION II: CONVERSION OF STOCK

ARTICLE III: CHARTER DOCUMENTS; DIRECTORS AND OFFICERS

FIRST: The name of the Corporation is:

Friede Goldman International Inc.

ARTICLE IV: CONDITIONS TO CLOSING

<PAGE>
applicable statutes of the States of Delaware and
Mississippi in order to accomplish the Merger;

ARTICLE V: AMENDMENT AND TERMINATION

ARTICLE VI: FURTHER ASSURANCES

ARTICLE VII: GENERAL

* * * * *
<PAGE>

IN WITNESS WHEREOF, the Constituent Corporations have caused
this Agreement to be executed by their respective officers whose
signatures are set forth below, all as of the 28th day of
September 1998.

ATTEST: FRIEDE GOLDMAN INTERNATIONAL INC.
a Delaware corporation

By: /s/ JAMES A. LOWE, III By: /s/ J. L. HOLLOWAY
James A. Lowe, III J. L. Holloway
Secretary Chairman of the Board,
President and Chief Executive
Officer

ATTEST: FRIEDE GOLDMAN MISSISSIPPI, INC.
a Mississippi corporation

By: /s/ JAMES A. LOWE, III By: /s/ J. L. HOLLOWAY
James A. Lowe, III J. L. Holloway
Secretary Chairman of the Board,
President and Chief Executive
Officer

BYLAWS

FRIEDE GOLDMAN INTERNATIONAL INC.

Dated: September 22, 1998
<PAGE>

I N D E X

Page

ARTICLE 1 OFFICES
Section 1.1 Principal Office 1
Section 1.2 Registered Office 1
Section 1.3 Other Offices 1

ARTICLE II SHAREHOLDERS' MEETINGS
Section 2.1 Annual Meeting 1
Section 2.2 Special Meetings 2
Section 2.3 Notice of Meetings and Adjourned
Meetings 2
Section 2.4 Voting Lists 3
Section 2.5 Quorum 3
Section 2.6 Organization 4
Section 2.7 Voting 4
Section 2.8 Authorization of Proxies 6
Section 2.9 Shareholders Entitled to Vote 6
Section 2.10 Order of Business 7
Section 2.11 Action by Written Consent 7
Section 2.12 Inspectors of Election 7
Section 2.13 Notice of Shareholder Nominees 8
Section 2.14 Shareholder Proposals 9

ARTICLE III DIRECTORS
Section 3.1 Management 11
Section 3.2 Number and Term 12
Section 3.3 Quorum and Manner of Action 12
Section 3.4 Vacancies 13
Section 3.5 Resignations 14
Section 3.6 Removals 14
Section 3.7 Annual Meetings 14
Section 3.8 Regular Meetings 14
Section 3.9 Special Meetings 15
Section 3.10 Organization of Meetings 15
Section 3.11 Place of Meetings 15
Section 3.12 Compensation of Directors 15
Section 3.13 Action by Unanimous Written
Consent 16
Section 3.14 Participation in Meetings by
Telephone 16
Section 3.15 Election of Directors by Class
Vote of Holders of Preferred
Stock 16
<PAGE>

ARTICLE IV COMMITTEES OF THE BOARD
Section 4.1 Membership and Authorities 17
Section 4.2 Minutes 18
Section 4.3 Vacancies 18
Section 4.4 Telephone Meetings 18
Section 4.5 Action Without Meeting 18

ARTICLE V OFFICERS
Section 5.1 Number and Title 19
Section 5.2 Term of Office; Vacancies 19
Section 5.3 Removal of Elected Officers 19
Section 5.4 Resignations 19
Section 5.5 The Chairman of the Board 20
Section 5.6 Chief Executive Officer 20
Section 5.7 President 21
Section 5.8 Vice Presidents 22
Section 5.9 Secretary 22
Section 5.10 Assistant Secretaries 23
Section 5.11 Chief Financial Officer 23
Section 5.12 Treasurer 24
Section 5.13 Assistant Treasurers 25
Section 5.14 Subordinate Officers; Agents 25
Section 5.15 Salaries and Compensation 25

ARTICLE VI INDEMNIFICATION
Section 6.1 Indemnification of Directors
and Officers 26

ARTICLE VII CAPITAL STOCK
Section 7.1 Certificates of Stock 30
Section 7.2 Lost Certificates 31
Section 7.3 Fixing Date for Determination of
Shareholders of Record for
Certain Purposes 31
Section 7.4 Dividends 32
Section 7.5 Registered Shareholders 32
Section 7.6 Transfer of Stock 32
Section 7.7 Stock Options, Warrants, Etc. 33

ARTICLE VIII MISCELLANEOUS PROVISIONS
Section 8.1 Corporate Seal 33
Section 8.2 Fiscal Year 34
Section 8.3 Checks, Drafts, Notes 34
Section 8.4 Corporate Contracts and Instruments 34
Section 8.5 Notice and Waiver of Notice 34
Section 8.6 Examination of Books and Records 35
Section 8.7 Voting Upon Shares Held by the
Corporation 35
<PAGE>
ARTICLE IX AMENDMENTS
Section 9.1 Amendment 36
<PAGE>
FRIEDE GOLDMAN INTERNATIONAL INC.

BYLAWS

ARTICLE I

Offices

Section 1.1 Principal Office. The principal office of the
Corporation shall be in Jackson, Mississippi.

Section 1.2 Registered Office. The registered office and
registered agent of the Corporation required to be maintained in
the State of Mississippi shall be as designated from time to time
by the appropriate filing by the Corporation in the office of the
Secretary of State of the State of Mississippi.

Section 1.3 Other Offices. The Corporation may also have
offices at such other places, both within and without the State
of Mississippi, as the Board of Directors may from time to time
determine or as the business of the Corporation may require.

ARTICLE II
Shareholders Meetings

Section 2.1 Annual Meeting. The annual meeting of the
holders of shares of each class or series of stock as are
entitled to notice thereof and to vote thereat pursuant to
applicable law and the Certificate of Incorporation for the
purpose of electing directors and transacting such other proper
<PAGE>
business as may come before it shall be held at such time and at
such place, within or without the State of Mississippi, as may be
designated by the Board of Directors.

Section 2.2 Special Meetings. In addition to such special
meetings as are provided by law or the Articles of Incorporation,
special meetings of the holders of any class or series or of all
classes or series of the Corporation s stock for any purpose or
purposes, may be called at any time by the Chief Executive
Officer and shall be called by the Secretary at the written
request, or by resolution adopted by the affirmative vote, of a
majority of the Board of Directors, which request shall fix the
date, time and place (within or without the State of
Mississippi), and state the purpose or purposes of the proposed
meeting. Except to the extent specified in the Corporation's
articles of incorporation, as amended and in effect from time to
time (the "Articles of Incorporation") or the resolutions of the
Board of Directors creating any class or series of preferred
stock of the Corporation, Shareholders of the Corporation may not
call a special meeting.

Section 2.3 Notice of Meetings and Adjourned Meetings.
Except as otherwise provided by law, written notice of any
meeting of Shareholders shall be given either by personal
delivery or by mail to each Shareholder of record entitled to
vote thereat. Notice of each meeting shall be in such form as is
approved by the Board of Directors and shall state the date,
place and hour of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called.
Unless otherwise provided by law, such written notice shall be
given not less than 10 nor more than 60 days before the date of
the meeting. Except when Shareholder attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to
the transaction of any business on the grounds that the meeting
is not lawfully called or convened, presence in person or by
proxy of a Shareholder shall constitute a waiver of notice of
such meeting. Further, a written waiver of any notice required
by law or by these Bylaws, signed by the person entitled to
notice, whether before
<PAGE>
or after the time stated therein, shall be deemed equivalent to
notice. Except as otherwise provided by law, the business that
may be transacted at any such meeting shall be limited to and
consist of the purpose or purposes stated in such notice. If a
meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken;
provided, however, that if the adjournment is for more than 30
days, or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be
given to each Shareholder of record entitled to vote at the
meeting.

Section 2.4 Voting Lists. The officer or agent having
charge of the stock transfer books for shares of the Corporation
shall make, at least 10 days before each meeting of the
Shareholders, a complete list of Shareholders entitled to vote at
such meeting or any adjournment thereof, arranged in alphabetical
order, with the address of each and the number of shares held by
each, which list, for a period of 10 days prior to such meeting,
shall be kept on file either at a place within the city where the
meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place
where the meeting is to be held, and such list shall be subject
to inspection by the Shareholders at any time during usual
business hours. Such list shall also be produced and kept open
at the time and place of the meeting and shall be subject to the
inspection of any Shareholder for the duration of the meeting.
The original stock transfer books shall be prima-facie evidence
as to who are the Shareholders entitled to examine such list or
transfer books or to vote at any meeting of Shareholders.

Section 2.5 Quorum. Except as otherwise provided by law or
by the Articles of Incorporation, the holders of a majority of
the Corporation s stock issued and outstanding and entitled to
vote at a meeting, present in person or represented by proxy,
without regard to class or
<PAGE>
series, shall constitute a quorum at all meetings of the
Shareholders for the transaction of business. If, however, such
quorum shall not be present or represented at any meeting of the
Shareholders, the Chairman of the Board of Directors or other
person presiding over such meeting or the holders of a majority
of such shares of stock, present in person or represented by
proxy, may adjourn any meeting from time to time without notice
other than announcement at the meeting, except as otherwise
required by these Bylaws, until a quorum shall be present or
represented. At any such adjourned meeting at which a quorum
shall be present or represented, any business may be transacted
which might have been transacted at the meeting as originally
called. A holder of a share of the Corporation's capital stock
shall be treated as being present or represented at a meeting if
such holder is (i) present in person at the meeting or (ii)
represented at the meeting by a valid proxy, regardless of
whether the instrument granting the proxy is marked as casting a
vote or abstaining, is left blank or does not empower such proxy
to vote with respect to some or all matters to be voted upon at
the meeting.

Section 2.6 Organization. Meetings of the Shareholders
shall be presided over by the Chairman of the Board of Directors,
if one shall be elected, or in his absence, by the Chief
Executive Officer, the President or by any Senior Vice President,
or, in the absence of any of such officers, by a chairman to be
chosen by a majority of the Shareholders entitled to vote at the
meeting who are present in person or by proxy. The Secretary,
or, in his absence, any Assistant Secretary or any person
appointed by the individual presiding over the meeting, shall act
as secretary at meetings of the Shareholders.

Section 2.7 Voting. Each Shareholder of record, as
determined pursuant to Section 2.9, who is entitled to vote in
accordance with the terms of the Articles of Incorporation of
Incorporation and in accordance with the provisions of these
Bylaws, shall, except to the extent specified in the Articles
<PAGE>
of Incorporation or any resolution adopted by the Board of
Directors to establish any series of Preferred Stock of the
Corporation, be entitled to one vote, in person or by proxy, for
each share of stock registered in his name on the books of the
Corporation. Every Shareholder entitled to vote at any
Shareholders' meeting may authorize another person or persons to
act for him by proxy duly appointed by instrument in writing
subscribed by such Shareholder and executed not more than three
years prior to the meeting, unless the proxy provides for a
longer period. Each proxy shall be revocable unless it expressly
states therein that it is irrevocable and, only so long as, it is
coupled with an interest sufficient in law to support an
irrevocable power. A Shareholder s attendance at any meeting,
when such Shareholder has theretofore given a proxy, shall not
have the effect of revoking such proxy unless such Shareholder
shall in writing so notify the Secretary of the meeting prior to
the voting of the proxy. Unless otherwise provided by law, no
vote on the election of directors or any question brought before
the meeting need be by ballot unless the chairman of the meeting
shall determine that it shall be by ballot or the holders of a
majority of the shares of stock present in person or by proxy and
entitled to participate in such vote shall so demand. In a vote
by ballot, each ballot shall state the number of shares voted and
the name of the Shareholder or proxy voting. Except as otherwise
provided by law, by the Articles of Incorporation or these
Bylaws, (i) action on a matter (other than the election of
directors) shall be approved if the votes cast by holders of
shares of stock present and entitled to vote on the matter at a
meeting at which a quorum is present in favor of the matter
exceed the votes cast opposing the matter and (ii) directors
shall be elected by a plurality of the votes cast by the holders
of shares present and entitled to vote in the election at a
meeting at which a quorum is present. In the election of
directors, votes may not be cumulated. In determining the number
of votes cast, shares abstaining from voting or not voted on a
matter (including director elections) will not be treated as
votes cast.
<PAGE>

Section 2.8 Authorization of Proxies. Without limiting the
manner in which a Shareholder may authorize another person or
persons to act for him as proxy, the following are valid means of
granting such authority. A Shareholder may execute a writing
authorizing another person or persons to act for him as proxy.
Execution may be accomplished by the Shareholder or his
authorized officer, director, employee or agent signing such
writing or causing his or her signature to be affixed to such
writing by any reasonable means including, but not limited to, by
facsimile signature. A Shareholder may also authorize another
person or persons to act for him as proxy by transmitting or
authorizing the transmission of a telegram, cablegram or other
means of electronic transmission must either set forth or be
submitted with information from which it can be determined that
the telegram, cablegram or other electronic transmission was
authorized by the Shareholder. If it is determined that such
telegrams, cablegrams or other electronic transmissions are
valid, the inspectors or, if there are no inspectors, such other
persons making that determination shall specify the information
upon which they relied. Any copy, facsimile telecommunication or
other reliable reproduction of the writing or transmission
created pursuant to this section may be substituted or used in
lieu of the original writing or transmission for any and all
purposes for which the writing or transmission could be used,
provided that such copy, facsimile telecommunication or other
reproduction shall be a complete reproduction of the entire
original writing or transmission.

Section 2.9 Shareholders Entitled to Vote. The Board of
Directors may fix a date not more than 60 days nor less than 10
days prior to the date of any meeting of Shareholders as a record
date for the determination of the Shareholders entitled to notice
of and to vote at such meeting and any adjournment thereof, and
in such case such Shareholders and only such Shareholders as
shall be Shareholders of record on the date so fixed shall be
entitled to notice of and to vote at, such
<PAGE>
meeting and any adjournment thereof notwithstanding any transfer
of any stock on the books of the Corporation after such record
date fixed as aforesaid.

Section 2.10 Order of Business. The order of business at
all meetings of Shareholders shall be as determined by the
chairman of the meeting or as is otherwise determined by the vote
of the holders of a majority of the shares of stock present in
person or by proxy and entitled to vote without regard to class
or series at the meeting.

Section 2.11 Action by Written Consent. No action required
or permitted to be taken by the Shareholders shall be taken
except at an annual or special meeting with prior notice and a
vote. No action may be taken by the Shareholders by written
consent.

Section 2.12 Inspectors of Election. Before any meeting of
Shareholders, the Board of Directors may, and if required by law
shall, appoint one or more persons to act as inspectors of
election at such meeting or any adjournment thereof. If any
person appointed as inspector fails to appear or fails or refuses
to act, the chairman of the meeting may, and if required by law
or requested by any Shareholder entitled to vote or his proxy
shall, appoint a substitute inspector. If no inspectors are
appointed by the Board of Directors, the chairman of the meeting
may, and if required by law or requested by any Shareholder
entitled to vote or his proxy shall, appoint one or more
inspectors at the meeting. Inspectors may include individuals
who serve the Corporation in other capacities (including as
officers, employees, agents or representatives); provided,
however, that no director or candidate for the office of director
shall act as an inspector. Inspectors need not be Shareholders.
The inspectors shall (i) determine the number of shares of
capital stock of the Corporation outstanding and the voting power
of each, the number of shares represented at the meeting, the
existence of a quorum and the validity and effect of proxies and
(ii) receive votes or ballots, hear and determine all challenges
and questions arising in connection with the right to vote, count
and tabulate
<PAGE>
all votes and ballots, determine the results and do such acts as
are proper to conduct the election or vote with fairness to all
Shareholders. On request of the chairman of the meeting, the
inspectors shall make a report in writing of any challenge,
request or matter determined by them and shall execute a
certificate of any fact found by them.

Section 2.13 Notice of Shareholder Nominees. Only persons
who are nominated in accordance with the procedures set forth in
this Section 2.13 shall be eligible for election as directors of
the Corporation. Nominations of persons for election to the
Board of Directors of the Corporation may be made at a meeting of
the Corporation's Shareholders (a) by or at the direction of the
Board of Directors or (b) by any Shareholder of the Corporation
entitled to vote for the election of directors at such meeting
who complies with the procedures set forth in this Section 2.13.
All nominations by Shareholders shall be made pursuant to timely
notice in proper written form submitted to the Secretary of the
Corporation. To be timely, a Shareholder's notice must be
delivered to or mailed and received at the principal executive
offices of the Corporation not less than 120 days nor more than
150 days prior to the anniversary of the annual meeting held for
the immediately preceding year, unless the date of the upcoming
annual meeting has been changed by more than 30 days from the
date of the prior year's meeting, in which case proposals must be
received at least 60 days prior to the distribution by the
Company of proxies relating to such upcoming annual meeting, or,
in the case of a special meeting at which directors are to be
elected and for which less than 40 days' notice or prior public
disclosure of the date of the meeting is given or made to
Shareholders, notice by the Shareholder to be timely must be so
received not later than the close of business on the 10th day
following the day on which such notice of the date of the meeting
was mailed or such public disclosure was made. To be in proper
written form, such Shareholder's notice to the Secretary shall
set forth in writing (a) as to each person whom such Shareholder
proposes to nominate for election
<PAGE>
or re-election as a director, all information relating to such
person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended, including, without limitation,
such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected;
and (b) as to such Shareholder (i) the name and address, as they
appear on the Corporation's books, and principal occupation of
such Shareholder, (ii) the class and number of shares of the
Corporation's capital stock that are beneficially owned by such
Shareholder and the dates upon which such Shareholder acquired
such shares and documentary support for any claims of beneficial
ownership, and (iii) a description of all agreements,
arrangements or understandings between such Shareholder and each
such person that such Shareholder proposes to nominate as a
director and any other person or persons (naming such person or
persons) pursuant to which the nomination or nominations are to
be made by such Shareholder. At the request of the Board of
Directors, any person nominated by the Board of Directors for
election as a director shall furnish to the Secretary of the
Corporation that information required to be set forth in a
Shareholder's notice of nomination which pertains to the nominee.
No person shall be eligible for election as a director unless
nominated in accordance with the procedures set forth in these
Bylaws of the Company. The chairman of the Shareholder's meeting
shall, if the facts warrant, determine and declare to the meeting
that a nomination was not made in accordance with the procedures
prescribed by these Bylaws of the Company, and if he shall so
determine, he shall announce such determination to the meeting
and the defective nomination shall be disregarded.

Section 2.14 Shareholder Proposals. At any special meeting
of the Corporation's Shareholders, only such business shall be
conducted as shall have been brought before the meeting by or at
the direction of the Board of Directors. At any annual meeting
of the Shareholders, only
<PAGE>
such business shall be conducted as shall have been brought
before the meeting (a) by or at the direction of the Board of
Directors or (b) by any Shareholder who complies with the
procedures set forth in this Section 2.14; provided, however,
that nothing in this Section 2.14 shall be deemed to preclude
discussion by any Shareholder of any business properly brought
before any annual meeting of Shareholders in accordance with such
procedures. For business properly to be brought before an annual
meeting by a Shareholder, the Shareholder must have given timely
notice thereof in proper written form to the Secretary of the
Corporation. To be timely, a Shareholder's notice must be
delivered to or mailed and received at the principal executive
offices of the Corporation not less than 120 days nor more than
150 days prior to the anniversary of the annual meeting held for
the immediately preceding year, unless the date of the upcoming
annual meeting has been changed by more than 30 days from the
date of the prior year's meeting, in which case proposals must be
received at least 60 days prior to the distribution by the
Company of proxies relating to such upcoming annual meeting. To
be in proper written form, such Shareholder's notice to the
Secretary shall set forth in writing as to each matter such
Shareholder proposes to bring before the annual meeting (a) a
brief description of the business desired to be brought before
the annual meeting, including the exact text of any proposal to
be presented for adoption and any supporting statement (which
shall not exceed 500 words in the aggregate), and such
Shareholder's reasons for conducting such business at the annual
meeting, (b) the name and address, as they appear on the
Corporation's books, and principal occupation of such
Shareholder, (c) the class and number of shares of the
Corporation's capital stock that are beneficially owned by such
Shareholder and the dates upon which such Shareholder acquired
such shares and documentary support for any claims of beneficial
ownership, and (d) any material interest of such Shareholder in
such business. Notwithstanding anything in these Bylaws to the
contrary, no business shall be conducted at an annual meeting
except
<PAGE>
in accordance with the procedures set forth in this Section 2.14
and the foregoing rights of a Shareholder to propose business for
consideration at an annual meeting of Shareholders shall be
subject to such conditions, restrictions and limitations as may
be imposed by the Articles of Incorporation. The chairman of an
annual Shareholder's meeting shall, if the facts warrant,
determine and declare to the meeting that business is not
properly brought before the meeting in accordance with the
provisions of this Section 2.14, and, if he should so determine,
he shall so announce such determination to the meeting and any
such business not properly brought before the meeting shall not
be transacted. Notwithstanding any other provision of these
Bylaws, the Corporation shall be under no obligation to include
any Shareholder proposal in its proxy statement material or
otherwise present any such proposal to Shareholders at a meeting
of Shareholders if the Board of Directors reasonably believes
that the proponents thereof have not complied with Sections 13
and 14 of the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder, and the
Corporation shall not be required to include in its proxy
statement material to Shareholders any Shareholder proposal not
required to be included in its proxy statement to Shareholders in
accordance with such act, rules or regulations.

ARTICLE III
Directors

Section 3.1 Management. The property, affairs and business
of the Corporation shall be managed by or under the direction of
the Board of Directors which may exercise all powers of the
Corporation and do all lawful acts and things as are not by law,
by the Articles of Incorporation or by these Bylaws directed or
required to be exercised or done by the Shareholders.

Section 3.2 Number and Term. The actual number of
directors constituting the entire Board of Directors shall be
fixed from time to time by resolution of the Board of Directors
adopted
<PAGE>
by the affirmative vote of a majority of the members of the
entire Board of Directors, but shall consist of not less than
three nor more than 15 members. The Board of Directors shall
have sole authority to determine the number of directors, within
the limits set forth above, and may increase or decrease the
exact number of directors from time to time by resolution duly
adopted by the affirmative vote of a majority of the entire Board
of Directors; subject to Miss. Code Ann. Section 79-4-8.03(b)
which limits any change to 30% of the number of directors last
approved by the Shareholders. Directors need not be
Shareholders. No decrease in the number of directors shall have
the effect of shortening the term of office of any incumbent
director.

Section 3.3 Quorum and Manner of Action. At all meetings
of the Board of Directors a majority of the total number of
directors holding office shall constitute a quorum for the
transaction of business and the act of a majority of the
directors present at any meeting at which there is a quorum shall
be the act of the Board of Directors, except as may be otherwise
specifically provided by law, by the Articles of Incorporation or
by these Bylaws. When the Board of Directors consists of one
director, the one director shall constitute a majority and a
quorum. If at any meeting of the Board of Directors there shall
be less than a quorum present, a majority of those present may
adjourn the meeting from time to time until a quorum is obtained,
and no further notice thereof need be given other than by
announcement at such adjourned meeting. Attendance by a director
at a meeting shall constitute a waiver of notice of such meeting
except where a director attends a meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction
of any business on the ground that the meeting is not lawfully
called or convened. A director who is present at a meeting of
the Board of Directors at which action on any corporate matter is
taken shall be presumed to have assented to such action unless
his dissent shall be entered in the minutes of the meeting or
unless he shall file his written dissent to such action with the
person acting as Secretary of the
<PAGE>
meeting before the adjournment thereof or shall forward any
dissent by certified or registered mail to the Secretary
immediately after the adjournment of the meeting. Such right to
dissent shall not apply to any director who voted in favor of
such action.

Section 3.4 Vacancies. Except as otherwise provided by law
and the Articles of Incorporation, in the case of any increase in
the authorized number of directors or of any vacancy in the Board
of Directors, however created, the additional director or
directors may be elected, or, as the case may be, the vacancy or
vacancies shall be filled by majority vote of the directors
remaining on the whole Board of Directors although less than a
quorum, or by a sole remaining director. In the event one or
more directors shall resign, effective at a future date, such
vacancy or vacancies shall be filled by a majority of the
directors who will remain on the whole Board of Directors,
although less than a quorum, or by a sole remaining director.
Any director elected or chosen as provided herein shall serve
until the sooner of (i) the unexpired term of the directorship to
which he is appointed; or (ii) until his successor is elected and
qualified; or (iii) until his earlier resignation or removal.
If, as a result of a disaster or emergency (as determined in good
faith by the then remaining Directors), it becomes impossible to
ascertain whether or not vacancies exist on the Board of
Directors and a person is or persons are elected by the
Directors, who in good faith believe themselves to be a majority
of the remaining Directors, to fill a vacancy or vacancies that
such remaining Directors in good faith believe exists, then the
acts of such person or persons who are so elected as Directors
shall be valid and binding upon the Corporation and the
Shareholders, although it may subsequently develop that at the
time of the election (i) there was in fact no vacancy or
vacancies existing on the Board of Directors or (ii) the
directors who so elected such person or persons did not in fact
constitute a majority of the remaining Directors.
<PAGE>

Section 3.5 Resignations. A director may resign at any
time upon written notice of resignation to the Corporation,
delivered to the Secretary. Any resignation shall be effective
immediately unless a certain effective date is specified therein,
in which event it will be effective upon such date and acceptance
of any resignation shall not be necessary to make it effective.

Section 3.6 Removals. Any director or the entire Board of
Directors may be removed before the expiration of such Director's
term of office only for cause, and another person or persons may
be elected to serve for the remainder of his or their term, and
only upon the affirmative vote of the holders of a majority of
the shares of the Corporation entitled to vote in the election of
directors. Shareholders may not remove any director without
cause. In case any vacancy so created shall not be filled by the
Shareholders at such meeting, such vacancy may be filled by the
directors as provided in Section 3.4.

Section 3.7 Annual Meetings. The annual meeting of the
Board of Directors shall be held, if a quorum be present,
immediately following each annual meeting of the Shareholders at
the place such meeting of Shareholders took place, for the
purpose of organization and transaction of any other business
that might be transacted at a regular meeting thereof, and no
notice of such meeting shall be necessary. If a quorum is not
present, such annual meeting may be held at any other time or
place that may be specified in a notice given in the manner
provided in Section 3.9 for special meetings of the Board of
Directors or in a waiver of notice thereof.

Section 3.8 Regular Meetings. Regular meetings of the
Board of Directors may be held without notice at such places and
times as shall be determined from time to time by resolution of
the Board of Directors. Except as otherwise provided by law, any
business may be transacted at any regular meeting of the Board of
Directors.
<PAGE>
Section 3.9 Special Meetings. Special meetings of the
Board of Directors may be called by the Chief Executive Officer
or by the Secretary on the written request of one-third of the
members of the whole Board of Directors stating the purpose or
purposes of such meeting. Notices of special meetings, if
mailed, shall be mailed to each director not later than two days
before the day the meeting is to be held or if otherwise given in
the manner permitted by these Bylaws, not later than the day
before such meeting. Neither the business to be transacted at,
nor the purpose of, any special meeting need be specified in any
notice or written waiver of notice unless so required by the
Articles of Incorporation or by the Bylaws. Unless limited by
law, the Articles of Incorporation or by these Bylaws, any and
all business may be transacted at a special meeting.

Section 3.10 Organization of Meetings. At any meeting of
the Board of Directors, business shall be transacted in such
order and manner as such Board of Directors may from time to time
determine, and all matters shall be determined by the vote of a
majority of the directors present at any meeting at which there
is a quorum, except as otherwise provided by these Bylaws or
required by law.

Section 3.11 Place of Meetings. The Board of Directors may
hold their meetings and have one or more offices, and keep the
books of the Corporation, inside or outside the State of
Mississippi, at any office or offices of the Corporation, or at
any other place as they may from time to time by resolution
determine.

Section 3.12 Compensation of Directors. The Board of
Directors shall have the authority to fix, and from time to time
to change, the compensation of Directors. Directors shall not
receive any stated salary for their services as directors, but by
resolution of the Board of Directors a fixed honorarium or fees
and expenses, if any, of attendance may be paid by the
Corporation for attendance at each meeting. Nothing herein
contained shall be construed to preclude any director
<PAGE>
from serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees
may be allowed like compensation for attending such committee
meetings.

Section 3.13 Action by Unanimous Written Consent. Unless
otherwise restricted by law, the Articles of Incorporation or
these Bylaws, any action required or permitted to be taken at any
meeting of the Board of Directors or of any committee thereof may
be taken without a meeting if all members of the Board of
Directors or of such committee, as the case may be, consent
thereto in writing and the writing or writings are filed with the
minutes of proceedings of the Board of Directors or the
committee.

Section 3.14 Participation in Meetings by Telephone.
Unless otherwise restricted by the Articles of Incorporation or
these Bylaws, members of the Board of Directors or of any
committee thereof may participate in a meeting of such Board of
Directors or committee by means of conference telephone or
similar communications equipment by means of which all persons
participating in the meeting can hear each other. Participation
in a meeting pursuant to this Section 3.14 shall constitute
presence in person at such meeting, except where a person
participates in the meeting for the express purpose of objecting,
at the beginning of the meeting, to the transaction of any
business on the ground that the meeting is not lawfully called or
convened.

Section 3.15 Election of Directors by Class Vote of Holders
of Preferred Stock. Notwithstanding the foregoing provisions of
this Article III, if the resolutions of the Board of Directors
creating any class or series of preferred stock of the
Corporation entitle the holders of such preferred stock, voting
separately by class or series, to elect additional Directors
under specified circumstances, then all provisions of such
resolutions relating to the nomination, election, term of office,
removal, filling of vacancies and other features of such
directorships shall, as to such
<PAGE>
directorships, govern and control over any conflicting provisions
of this Article III, and such Directors so elected need not be
divided into classes pursuant to this Article III unless
expressly provided by the provisions of such resolutions.

ARTICLE IV
Committees of the Board

Section 4.1 Membership and Authorities. The Board of
Directors may, by resolution or resolutions passed by a majority
of the whole Board of Directors, designate one or more Directors
to constitute an Executive Committee and such other committees as
the Board of Directors may determine, each of which committees to
the extent provided in said resolution or resolutions or in these
Bylaws, shall have and may exercise all the powers of the Board
of Directors in the management of the business and affairs of the
Corporation, except in those cases where the authority of the
Board of Directors is specifically denied to the Executive
Committee or such other committee or committees by law, the
Articles of Incorporation or these Bylaws, and may authorize the
seal of the Corporation to be affixed to all papers that may
require it. The designation of an Executive Committee or other
committee and the delegation thereto of authority shall not
operate to relieve the Board of Directors, or any member thereof,
of any responsibility imposed upon it or him by law. Each member
of a committee of the Board of Directors shall serve as such
until the earliest of (i) his death, (ii) the expiration of his
term as a Director, (iii) his resignation as a member of such
committee or as a Director and (iv) his removal as a member of
such committee or as a Director.

Section 4.2 Minutes. Each committee designated by the
Board of Directors shall keep regular minutes of its proceedings
and shall provide a report of its proceedings to the Board of
Directors when required or requested by the Board of Directors.
<PAGE>
Section 4.3 Vacancies. The Board of Directors may
designate one or more of its members as alternate members of any
committee who may replace any absent or disqualified member at
any meeting of such committee. If no alternate members have been
appointed, the committee member or members thereof present at any
meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member
of the Board of Directors to act at the meeting in the place of
any absent or disqualified member. The Board of Directors shall
have the power at any time to fill vacancies in, to change the
membership of, and to dissolve, any committee.

Section 4.4 Telephone Meetings. Members of any committee
designated by the Board of Directors may participate in or hold a
meeting by use of conference telephone or similar communications
equipment by means of which all persons participating in the
meeting can hear each other. Participation in a meeting pursuant
to this Section 4.4 shall constitute presence in person at such
meeting, except where a person participates in the meeting for
the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business on the ground that
the meeting is not lawfully called or convened.

Section 4.5 Action Without Meeting. Any action required or
permitted to be taken at a meeting of any committee designated by
the Board of Directors may be taken without a meeting if a
consent in writing, setting forth the action so taken, is signed
by all the members of the committee and filed with the minutes of
the committee proceedings. Such consent shall have the same force
and effect as a unanimous vote at a meeting.
<PAGE>
ARTICLE V
Officers

Section 5.1 Number and Title. The elected officers of the
Corporation shall be chosen by the Board of Directors and shall
be a Chief Executive Officer, the President, a Vice President, a
Secretary and a Treasurer. The Board of Directors may also
choose a Chairman of the Board, who must be a member of the Board
of Directors, and additional Vice Presidents (including one or
more Executive Vice Presidents and one or more Senior Vice
Presidents), a Chief Financial Officer, a General Counsel, one or
more Assistant Secretaries and/or one or more Assistant
Treasurers. One person may hold any two or more of these
offices.

Section 5.2 Term of Office; Vacancies. So far as is
practicable, all elected officers shall be elected by the Board
of Directors at the annual meeting of the Board of Directors in
each year, and except as otherwise provided in this Article V,
shall hold office until the next such meeting of the Board of
Directors in the subsequent year and until their respective
successors are elected and qualified or until their earlier
resignation or removal. All appointed officers shall hold office
at the pleasure of the Board of Directors. If any vacancy shall
occur in any office, the Board of Directors may elect or appoint
a successor to fill such vacancy for the remainder of the term.

Section 5.3 Removal of Elected Officers. Any elected
officer may be removed at any time, with or without cause, by
affirmative vote of a majority of the whole Board of Directors,
at any regular meeting or at any special meeting called for such
purpose.

Section 5.4 Resignations. Any officer may resign at any
time upon written notice of resignation to the Chief Executive
Officer, Secretary or Board of Directors of the Corporation. Any
resignation shall be effective immediately unless a date certain
is specified for it to take effect, in which event it shall be
effective upon such date, and acceptance of any resignation shall
not be
<PAGE>
necessary to make it effective, irrespective of whether the
resignation is tendered subject to such acceptance. Any such
resignation is without prejudice to the rights, if any, of the
Corporation under any contract to which the officer is a party.

Section 5.5 The Chairman of the Board. The Chairman of the
Board, if one shall be elected, shall preside at all meetings of
the Shareholders and Board of Directors. In addition, the
Chairman of the Board shall perform whatever duties and shall
exercise all powers that are given to him by the Board of
Directors.

Section 5.6 Chief Executive Officer. (a) The Chief
Executive Officer shall be the chief executive officer of the
Corporation and, subject to the supervision, direction and
control of the Board of Directors and the Chairman of the Board
(if any), shall have general supervision, direction and control
of the business and officers of the Corporation with all such
powers as may be reasonably incident to such responsibilities.
The Chief Executive Officer shall implement the general
directives, plans and policies formulated by the Board of
Directors and shall further have such duties, responsibilities
and authorities as may be assigned to him by the Board of
Directors. The Chief Executive Officer shall have the general
powers and duties of management usually vested in the chief
executive officer of a corporation. The Chief Executive Officer
may sign, with any other proper officer, certificates for shares
of the Corporation and any deeds, bonds, mortgages, contracts and
other documents which the Board of Directors has authorized to be
executed, except where required by law to be otherwise signed and
executed and except where the signing and execution thereof shall
be expressly delegated by the Board or Directors or these Bylaws
to some other officer or agent of the Corporation.
(b) During the time of any vacancy in the office of
Chairman of the Board or in the event of the absence or
disability of the Chairman of the Board, the Chief Executive
Officer shall
<PAGE>
have the duties and powers of the Chairman of the Board unless
otherwise determined by the Board of Directors. In the absence
of the Chairman of the Board, if one be elected, the Chief
Executive Officer shall preside at meetings of the Shareholders
and Board of Directors and shall be ex officio a member of all
standing committees. During the time of any vacancy in the
office of President or in the event of the absence or disability
of the President, the Chief Executive Officer shall have the
duties and powers of the President unless otherwise determined by
the Board of Directors. In no event shall any third party having
any dealings with the Corporation be bound to inquire as to any
facts required by the terms of this Section 5.6 for the exercise
by the Chief Executive Officer of the powers of the Chairman of
the Board or the President.

Section 5.7 President. (a) The President shall be the
chief operating officer of the Corporation and, subject to the
supervision, direction and control of the Chief Executive Officer
and the Board of Directors, shall manage the day-to-day
operations of the Corporation. He shall have the general powers
and duties of management usually vested in the chief operating
officer of a corporation and such other powers and duties as may
be assigned to him by the Board of Directors, the Chief Executive
Officer or these Bylaws. The President may sign, with any other
proper officer, certificates for shares of the Corporation and
any deeds, bonds, mortgages, contracts and other documents which
the Board of Directors has authorized to be executed, except
where required by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly
delegated by the Board or Directors or these Bylaws to some other
officer or agent of the Corporation. In the absence of the
President, his duties shall be performed and his authority may be
exercised by the Chief Executive Officer or a Vice President of
the Corporation as may have been designated by the President with
the right reserved to the Board of Directors to designate or
supersede any designation so made.
<PAGE>

(b) During the time of any vacancy in the offices of
the Chairman of the Board and Chief Executive Officer or in the
event of the absence or disability of the Chairman of the Board
and the Chief Executive Officer, the President shall have the
duties and powers of the Chief Executive Officer unless otherwise
determined by the Board of Directors. In no event shall any
third party having any dealings with the Corporation be bound to
inquire as to any facts required by the terms of this Section 5.7
for the exercise by the President of the powers of the Chief
Executive Officer.

Section 5.8 Vice Presidents. In the absence or disability
of the President, the Vice Presidents, if any, in order of their
rank as fixed by the Board of Directors, or if not ranked, the
Vice President designated by the President, shall perform all the
duties of the President as chief operating officer of the
Corporation, and when so acting shall have all the powers of, and
be subject to all the restrictions upon, the President as chief
operating officer of the Corporation. In no event shall any
third party having dealings with the Corporation be bound to
inquire as to any facts required by the terms of this Section 5.8
for the exercise by any Vice President of the powers of the
President as chief operating officer of the Corporation. The
Vice Presidents shall have such other powers and perform such
other duties as from time to time may be assigned to them by
these Bylaws and as may from time to time be assigned to them by
the Board of Directors, the Chief Executive Officer or the
President, and may sign, with any other proper officer,
certificates for shares of the Corporation.

Section 5.9 Secretary. The Secretary shall keep or cause
to be kept, at the principal office of the Corporation or such
other place as the Board of Directors may order, a book of
minutes of all meetings and actions of the Board of Directors,
committees of the Board of Directors and Shareholders, with the
time and place of holding, whether regular or special, and, if
special, how authorized, the notice thereof given, the names of
those present at meetings of the Board of Directors

<PAGE>
and committees thereof, the number of shares present or
represented at Shareholders' meetings and the proceedings
thereof. The Secretary, if available, shall attend all meetings
of the Board of Directors and all meetings of the Shareholders
and record the proceedings of the meetings in a book to be kept
for that purpose and shall perform like duties for any committee
of the Board of Directors as the Board of Directors or such
committee shall designate him to serve. The Secretary shall
give, or cause to be given, notice of all meetings of the
Shareholders and meetings of the Board of Directors and
committees thereof and shall perform such other duties incident
to the office of secretary or as may be prescribed by the Board
of Directors or the President, under whose supervision he shall
be. The Secretary shall have custody of the corporate seal of
the Corporation, if one be adopted pursuant to Section 8.1, and
he, or any Assistant Secretary, or any other person whom the
Board of Directors may designate, shall have authority to affix
the same to any instrument requiring it, and when so affixed it
may be attested by his signature or by the signature of any
Assistant Secretary or by the signature of such other person so
affixing such seal.

Section 5.10 Assistant Secretaries. Each Assistant
Secretary shall have the usual powers and duties pertaining to
his office, together with such other powers and duties as may be
assigned to him by the Board of Directors, the Chief Executive
Officer, the President or the Secretary. The Assistant Secretary
or such other person as may be designated by the Chief Executive
Officer shall exercise the powers of the Secretary during that
officer s absence or inability to act.

Section 5.11 Chief Financial Officer. The Chief Financial
Officer shall be the chief financial officer of the Corporation
and, subject to the supervision, direction and control of the
Chief Executive Officer and the Board of Directors, shall manage
the day-to-day financial operations of the Corporation. He shall
have the general powers and duties of management usually vested
in the chief financial officer of a corporation and such other
powers and duties as may be assigned to him
<PAGE>
by the Board of Directors, the Chief Executive Officer or these
Bylaws. The Chief Financial Officer may sign, with any other
proper officer, certificates for shares of the Corporation and
any deeds, bonds, mortgages, contracts and other documents which
the Board of Directors has authorized to be executed, except
where required by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly
delegated by the Board or Directors or these Bylaws to some other
officer or agent of the Corporation. In the absence of the Chief
Financial Officer, his duties shall be performed and his
authority may be exercised by the Treasurer or a Vice President
of the Corporation as may have been designated by the President
with the right reserved to the Board of Directors to designate or
supersede any designation so made.

Section 5.12 Treasurer. The Treasurer shall have the
custody of and be responsible for the corporate funds and
securities, shall keep full and accurate accounts of receipts and
disbursements in the books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to
the credit of the Corporation in such depositories as may be
designated by the Board of Directors. He shall disburse the
funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and
shall render to the President and the Board of Directors, at its
regular meetings, or when the Board of Directors so requires, an
account of all his transactions as Treasurer and of the financial
condition of the Corporation and he shall perform all other
duties incident to the position of Treasurer, or as may be
prescribed by the Board of Directors or the Chief Executive
Officer. If required by the Board of Directors, he shall give
the Corporation a bond in such sum and with such surety or
sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his office and for the
restoration to the Corporation, in case of his death,
resignation, retirement or removal from office, of all books,
<PAGE>
papers, vouchers, money and other property of whatever kind in
his possession or under his control belonging to the Corporation.

Section 5.13 Assistant Treasurers. Each Assistant
Treasurer shall have the usual powers and duties pertaining to
his office, together with such other powers and duties as may be
assigned to him by the Board of Directors, the President or the
Treasurer. The Assistant Treasurer or such other person
designated by the Chief Executive Officer shall exercise the
power of the Treasurer during that officer s absence or inability
to act.

Section 5.14 Subordinate Officers; Agents. The Board of
Directors may (a) appoint such other officers subordinate to the
Chief Executive Officer and President (including a Chief
Financial Officer and/or a General Counsel) as it shall deem
necessary or desirable who shall hold their offices for such
terms, have such authority and perform such duties as the Board
of Directors may from time to time determine, or (b) delegate to
any committee or officer the power to appoint any such
subordinate officers. The Board of Directors may also appoint
one or more agents as it shall deem necessary or desirable who
shall have such authority and perform such duties as the Board of
Directors may from time to time determine. Any agent may be
removed at any time, with or without cause, by affirmative vote
of a majority of the whole Board of Directors, at any regular
meeting or at any special meeting called for such purpose.

Section 5.15 Salaries and Compensation. The salary or
other compensation of officers shall be fixed from time to time
by the Board of Directors. The Board of Directors may delegate
to any committee or officer the power to fix from time to time
the salary or other compensation of officers and agents.
<PAGE>

ARTICLE VI
Indemnification

Section 6.1 Indemnification of Directors and Officers. (a)
The Corporation (i) shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action
by or in the right of the Corporation) by reason of the fact that
such person is or was, at any time prior to or during which this
Article VI is in effect, a director or officer of the
Corporation, or is or was, at any time prior to or during which
this Article VI is in effect, serving at the request of the
Corporation as a director or officer of another corporation,
partnership, joint venture, trust, other enterprise or employee
benefit plan and (ii) upon a determination by the Board of
Directors that indemnification is appropriate, the Corporation
may indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in
the right of the Corporation) by reason of the fact that such
person is or was, at any time prior to or during which this
Article VI is in effect, an employee or agent of the Corporation
or at the request of the Corporation was serving as an employee
or agent of any other corporation, partnership, joint venture,
trust, other enterprise or employee benefit plan, in the case of
(i) and (ii) against reasonable expenses (including attorneys'
fees), judgments, fines, penalties, amounts paid in settlement
and other liabilities actually and reasonably incurred by such
person in connection with such action, suit or proceeding if such
person acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Corporation,
and, with respect to any criminal action or proceeding, had no
reasonable cause to believe that his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement,
<PAGE>
conviction or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that such person did
not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was
unlawful.

(b) The Corporation (i) shall indemnify any person who was
or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the
right of the Corporation to procure a judgment in its favor by
reason of the fact that such person is or was, at any time prior
to or during which this Article VI is in effect, a director or
officer of the Corporation, or is or was, at any time prior to or
during which this Article VI is in effect, serving at the request
of the Corporation as a director or officer of another
corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise and (ii) upon a determination by the
Board of Directors that indemnification is appropriate, the
Corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that such
person is or was, at any time prior to or during which this
Article VI is in effect, an employee or agent of the Corporation
or at the request of the Corporation was serving as an employee
or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, in the case of
(i) and (ii) against expenses (including attorneys' fees),
actually and reasonably incurred by such person in connection
with the defense or settlement of such action or suit if such
person acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Corporation;
provided, that no indemnification shall be made under this
sub-section (b) in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that a Mississippi
Chancery Court, or other court of
<PAGE>
appropriate jurisdiction, shall determine upon application that,
despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity of such expenses which a Mississippi
Chancery Court, or other court of appropriate jurisdiction, shall
deem proper.

(c) Any indemnification under sub-sections (a) or (b)
(unless ordered by a Mississippi Chancery Court or other court of
appropriate jurisdiction) shall be made by the Corporation only
as authorized in the specific case upon a determination that
indemnification of such person is proper in the circumstances
because he has met the applicable standard of conduct set forth
in sub-sections (a) and (b). Such determination shall be made
(1) by the Board of Directors by a majority vote of a quorum
consisting of directors not parties to such action, suit or
proceeding; or (2) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by
independent legal counsel, in written opinion, selected by the
Board of Directors; or (3) by the Shareholders. In the event a
determination is made under this sub-section (c) that the
director, officer, employee or agent has met the applicable
standard of conduct as to some matters but not as to others,
amounts to be indemnified may be reasonably prorated.

(d) Expenses incurred by a person who is or was a director
or officer of the Corporation in appearing at, participating in
or defending any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative, shall be paid by the Corporation at reasonable
intervals in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf
of the director or officer to repay such amount if it shall
ultimately be determined that he is not entitled to be
indemnified by the Corporation as authorized by this Article VI.
In addition, the Corporation shall pay or reimburse expenses
incurred by any person who is or was a director or officer of the
Corporation in connection with such person's
<PAGE>
appearance as a witness or other participant in a proceeding in
which such person or the Corporation is not a named party to such
proceeding, provided that such appearance or participation is on
behalf of the Corporation or by reason of his capacity as a
director or officer, or former director or officer of the
Corporation.

(e) If in a suit or proceeding for indemnification required
under this Article VI of a director or officer, or former
director or officer, of the Corporation or any of its affiliates,
a court of competent jurisdiction determines that such person is
entitled to indemnification under this Article VI, the court
shall award, and the Corporation shall pay, to such person the
expenses incurred in securing such judicial determination.

(f) It is the intention of the Corporation to indemnify the
persons referred to in this Article VI to the fullest extent
permitted by law and with respect to any action, suit or
proceeding arising from events which occur at any time prior to
or during which this Article VI is in effect. The
indemnification and advancement of expenses provided by this
Article VI shall not be deemed exclusive of any other rights to
which those seeking indemnification or advancement of expenses
may be or become entitled under any law, the Articles of
Incorporation, these Bylaws, agreement, the vote of Shareholders
or disinterested directors or otherwise, or under any policy or
policies of insurance purchased and maintained by the Corporation
on behalf of any such person, both as to action in his official
capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such
person.

(g) The indemnification provided by this Article VI shall
be subject to all valid and applicable laws, and, in the event
this Article VI or any of the provisions hereof or the
indemnification contemplated hereby are found to be inconsistent
with or contrary to any such valid
<PAGE>
laws, the latter shall be deemed to control and this Article VI
shall be regarded as modified accordingly, and, as so modified,
to continue in full force and effect.

ARTICLE VII
Capital Stock

Section 7.1 Certificates of Stock. Certificates of stock
shall be issued to each Shareholder certifying the number of
shares owned by him in the Corporation and shall be in a form not
inconsistent with the Articles of Incorporation and as approved
by the Board of Directors. The certificates shall be signed by
the Chairman of the Board, the Chief Executive Officer, the
President or a Vice President and by the Secretary or an
Assistant Secretary, or the Treasurer or an Assistant Treasurer
and may be sealed with the seal of the Corporation or a facsimile
thereof. Any or all of the signatures on the certificate may be
a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon
a certificate shall have ceased to be such officer, transfer
agent or registrar before such certificate is issued, it may be
issued by the Corporation with the same effect as if he were such
officer, transfer agent or registrar at the date of issue.

If the Corporation shall be authorized to issue more than
one (1) class of stock or more than one (1) series of any class,
the powers, designations, preferences and relative,
participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth
in full or summarized on the face or back of the certificate
which the Corporation shall issue to represent
<PAGE>
such class or series of stock, provided that, except as otherwise
provided by statute, in lieu of the foregoing requirements, there
may be set forth on the face or back of the certificate which the
Corporation shall issue to represent such class or series of
stock, a statement that the Corporation will furnish without
charge to each Shareholder who so requests the powers,
designations, preferences and relative, participating, optional
or other special rights of each class of stock or series thereof
and the qualifications, limitations or restrictions of such
preferences and/or rights. The Board of Directors shall have the
power and authority to provide that certificates representing
shares of stock of the Corporation bear such legends and
statements as the Board of Directors deems appropriate in
connection with the requirements of federal or state securities
laws or other applicable laws.

Section 7.2 Lost Certificates. The Board of Directors may
direct a new certificate to be issued in place of any certificate
theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact
by the owner of such certificate, or his legal representative.
When authorizing the issuance of a new certificate, the Board of
Directors may in its discretion, as a condition precedent to the
issuance thereof, require the owner, or his legal representative,
to give a bond in such form and substance with such surety as it
may direct, to indemnify the Corporation against any claim that
may be made on account of the alleged loss, theft or destruction
of such certificate or the issuance of such new certificate.

Section 7.3 Fixing Date for Determination of Shareholders
of Record for Certain Purposes. (a) In order that the
Corporation may determine the Shareholders entitled to receive
payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of capital stock or for the
purpose of any other lawful action, the Board of Directors may
fix, in advance, a record date, which shall not be more than 60
days prior to the date of payment of such dividend or other
distribution or allotment of such rights or the date when any
such rights in respect of any change, conversion or exchange of
stock may be exercised or the date of such other action. In such
a case, only Shareholders of record
<PAGE>
on the date so fixed shall be entitled to receive any such
dividend or other distribution or allotment of rights or to
exercise such rights or for any other purpose, as the case may
be, notwithstanding any transfer of any stock on the books of the
Corporation after any such record date fixed as aforesaid.

(b) If no record date is fixed, the record date for
determining Shareholders for any such purpose shall be at the
close of business on the day on which the Board of Directors
adopts the resolution relating thereto.

Section 7.4 Dividends. Subject to the provisions of the
Articles of Incorporation, if any, and except as otherwise
provided by law, the directors may declare dividends upon the
capital stock of the Corporation as and when they deem it to be
expedient. Such dividends may be paid in cash, in property or in
shares of the Corporation s capital stock. Before declaring any
dividend the Directors may set apart out of the funds of the
Corporation available for dividend such sum or sums as the
directors from time to time in their discretion think proper for
working capital or as a reserve fund to meet contingencies or for
equalizing dividends, or for such other purposes as the directors
shall determine to be conducive to the interests of the
Corporation and the directors may modify or abolish any such
reserve in the manner in which it was created.

Section 7.5 Registered Shareholders. Except as expressly
provided by law, the Articles of Incorporation and these Bylaws,
the Corporation shall be entitled to treat registered
Shareholders as the only holders and owners in fact of the shares
standing in their respective names and the Corporation shall not
be bound to recognize any equitable or other claim to or interest
in such shares on the part of any other person, regardless of
whether it shall have express or other notice thereof.

Section 7.6 Transfer of Stock. Transfers of shares of the
capital stock of the Corporation shall be made only on the books
of the Corporation by the registered owners thereof, or by their
legal representatives or their duly authorized attorneys. Upon
any such transfers the old certificates shall
<PAGE>
be surrendered to the Corporation by the delivery thereof to the
person in charge of the stock transfer books and ledgers, by whom
they shall be canceled and new certificates shall thereupon be
issued.

Section 7.7 Stock Options, Warrants, Etc. Unless otherwise
expressly prohibited in the resolutions of the Board of Directors
creating any class or series of preferred stock of the
Corporation, the Board of Directors shall have the power and
authority to create and issue (whether or not in connection with
the issue and sale of any stock or other securities of the
Corporation), warrants, rights or options entitling the holders
thereof to purchase from the Corporation any shares of capital
stock of the Corporation of any class or series or any other
securities of the Corporation for such consideration and to such
persons, firms or Corporations as the Board of Directors, in its
sole discretion, may determine setting aside from the authorized
but unissued stock of the Corporation the requisite number of
shares for issuance upon the exercise of such warrants, rights or
options. Such warrants, rights and options shall be evidenced by
one or more instruments approved by the Board of Directors. The
Board of Directors shall be empowered to set the exercise price,
duration, time for exercise and other terms of such warrants,
rights and operations; provided, however, that the consideration
to be received for any shares of capital stock subject thereto
shall not be less than the par value thereof.

ARTICLE VIII
Miscellaneous Provisions

Section 8.1 Corporate Seal. If one be adopted, the
corporate seal shall have inscribed thereon the name of the
Corporation and shall be in such form as may be approved by the
Board of Directors. Said seal may be used by causing it or a
facsimile thereof to be impressed or affixed or in any manner
reproduced.
<PAGE>

Section 8.2 Fiscal Year. The fiscal year of the
Corporation shall be the calendar year unless changed by
resolution of the Board of Directors.

Section 8.3 Checks, Drafts, Notes. All checks, drafts or
other orders for the payment of money, notes or other evidences
of indebtedness issued in the name of the Corporation shall be
signed by such officer or officers, agent or agents of the
Corporation, and in such manner as shall from time to time be
determined by resolution (whether general or special) of the
Board of Directors or may be prescribed by any officer or
officers, or any officer and agent jointly, thereunto duly
authorized by the Board of Directors.

Section 8.4 Corporate Contracts and Instruments. Subject
always to the specific directions of the Board of Directors, the
Chairman of the Board (if any), the Chief Executive Officer, the
President, any Vice President, the Secretary or the Treasurer may
enter into contracts and execute instruments in the name and on
behalf of the Corporation. The Board of Directors and, subject
to the specific directions of the Board of Directors, the
Chairman of the Board (if any), the Chief Executive Officer or
the President may authorize one or more officers, employees or
agents of the Corporation to enter into any contact or execute
any instrument in the name of and on behalf of the Corporation,
and such authority may be general or confined to specific
instances.

Section 8.5 Notice and Waiver of Notice. Whenever notice
is required to be given to any director or Shareholder under the
provisions of applicable law, the Articles of Incorporation or of
these Bylaws it shall not be construed to only mean personal
notice, rather, such notice may also be given in writing, by
mail, addressed to such director or Shareholder at his address as
it appears on the records of the Corporation, with postage
thereon prepaid (unless prior to the mailing of such notice he
shall have filed with the Secretary of the Corporation a written
request that notices intended for him be mailed to some other
address in which case, such notice shall be mailed to the
<PAGE>
address designated in the request), and such notice shall be
deemed to be given at the time when the same shall be deposited
in the United States mail. Notice to directors may also be given
by telegram, cable or other form of recorded communication, by
personal delivery or by telephone. Whenever notice is required
to be given under any provision of law, the Articles of
Incorporation or these Bylaws, a waiver thereof in writing, by
telegraph, cable or other form of recorded communication, signed
by the person or persons entitled to said notice, whether before
or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends
a meeting for the express purpose of objecting at the beginning
of the meeting, to the transaction of any business on the ground
that the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or
special meeting of the Shareholders, directors, or members of a
committee of directors need be specified in any written waiver of
notice unless so required by the Articles of Incorporation or
these Bylaws.

Section 8.6 Examination of Books and Records. The Board
of Directors shall determine from time to time whether, and if
allowed, when and under what conditions and regulations the
accounts and books of the Corporation (except such as may by
statute be specifically opened to inspection) or any of them
shall be open to inspection by the Shareholders, and the
Shareholders' rights in this respect are and shall be restricted
and limited accordingly.

Section 8.7 Voting Upon Shares Held by the Corporation.
Unless otherwise provided by law or by the Board of Directors,
the Chairman of the Board of Directors, if one shall be elected,
or the Chief Executive Officer, if a Chairman of the Board of
Directors shall not be elected, acting on behalf of the
Corporation, shall have full power and authority to attend and to
act and to vote at any meeting of Shareholders of any corporation
in which the Corporation may hold stock and, at any
<PAGE>
such meeting, shall possess and may exercise any and all of the
rights and powers incident to the ownership of such stock which,
as the owner thereof, the Corporation might have possessed and
exercised, if present. The Board of Directors by resolution from
time to time may confer like powers upon any person or persons.

ARTICLE IX
Amendments

Section 9.1 Amendment. Except as otherwise expressly
provided in the Articles of Incorporation, the directors, by the
affirmative vote of a majority of the entire Board of Directors
and without the assent or vote of the Shareholders, may at any
meeting, provided the substance of the proposed amendment shall
have been stated in the notice of the meeting, make, repeal,
alter, amend or rescind any of these Bylaws. The Shareholders
shall not make, repeal, alter, amend or rescind any of the
provisions of these Bylaws except by the holders of not less than
80% of the total voting power of all shares of stock of the
Corporation entitled to vote in the election of directors,
considered for purposes of this Article IX as one class.

FIFTH AMENDMENT TO REVOLVING CREDIT AGREEMENT

This FIFTH AMENDMENT TO REVOLVING CREDIT AGREEMENT (the "Fifth
Amendment"), dated as of the 14th day of August, 1998, is made by and
among HAM MARINE, INC., a Mississippi corporation, as borrower
("Borrower"), FRIEDE GOLDMAN INTERNATIONAL, INC. ("FGI"), a Delaware
corporation, and FRIEDE & GOLDMAN, LTD. ("F&G"), a Mississippi
corporation, as guarantors (FGI and F&G are sometimes hereinafter
referred to collectively as the "Guarantors"), and BANK ONE,
LOUISIANA, NATIONAL ASSOCIATION, a national banking association
("Bank").

WITNESSETH:

WHEREAS, Borrower, F&G, J.L. Holloway, Carl Crawford and Bank entered
into that certain Revolving Credit Agreement (the "Original Credit
Agreement") dated as of March 20, 1997, pursuant to which Borrower
agreed to borrow, and Bank agreed to lend, up to the aggregate
principal amount of $10,000,000 (the "Original Loan");

WHEREAS, Borrower, F&G, J.L. Holloway, Carl Crawford and Bank entered
into that certain Temporary Waiver and First Amendment to the
Revolving Credit Agreement (the "First Amendment") dated March 31,
1997, pursuant to which certain covenants contained in the Original
Credit Agreement were temporarily waived and the Original Credit
Agreement was amended;

WHEREAS, Borrower, the Guarantors and Bank entered into that certain
Second Amendment to the Revolving Credit Agreement (the "Second
Amendment"); together with the Original Credit Agreement and the First
Amendment, collectively hereinafter referred to as the "Credit
Agreement") dated effective as of September 26, 1997, pursuant to
which (I) the Original Credit Agreement, as amended by the First
Amendment, was further amended, (ii) J.L. Holloway and Carl Crawford
were released as guarantors of Borrower's obligations to Bank, and
(iii) FGI was added as a guarantor of Borrower's obligations to Bank;

WHEREAS, Borrower, the Guarantors and Bank entered into that certain
Third Amendment to Revolving Credit Agreement (the "Third Amendment");
together with the Original Credit Agreement, the First Amendment and
the Second Amendment, collectively hereinafter referred to as the
"Credit Agreement"), dated as if October 29, 1997, pursuant to which
the Original Credit Agreement, as amended by the First Amendment and
the Second Amendment, was further amended;

WHEREAS, Borrower, the Guarantors and Bank entered into that certain
Fourth Amendment to Revolving Credit Agreement (the "Fourth
Amendment"); together with the Original Credit Agreement, the First
Amendment, Second Amendment and the Third Amendment, collectively
hereinafter referred to as the "Credit Agreement"), dated as if March
20, 1998, pursuant to which the Original Credit Agreement, as amended
by the First Amendment, Second Amendment and the Third Amendment, was
further amended; and
<PAGE>
WHEREAS, Borrower, the Guarantors and Bank desire to amend further the
Credit Agreement as hereinafter set forth.

NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and premises contained herein, together with other
good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto have agreed and do hereby
agree as follows:

1. Capitalized terms used in the Fifth Amendment shall have the
meanings assigned to them in the Credit Agreement, as amended by
this Fifth Amendment.

2. Based upon information supplied by FGI to Bank, as of July 5,
1998, FGI was in violation of Section 6.1 (b) and (d) of the
Credit Agreement. Bank hereby waives compliance by FGI with
Section 6.1 (b) and (d) through the date of this Fifth Amendment.

3. Section 1. 1 of the Credit Agreement is hereby amended by
amending and restating the following definitions in their
entirety:

"Commitment" shall mean the obligation of Bank to make Loans
to Borrower pursuant to Section 2.1 in an aggregate
principal amount not to exceed the lesser of $25,000,000 or
the Borrowing Base at any time during the Commitment Period.

"Line of Credit" shall mean the aggregate revolving credit
line extended by Bank to Borrower for Loans pursuant to and
in accordance with the terms of this Agreement, in the
amount of $25,000,000.

"Termination Date" shall mean October 31, 1998.

4. It is further understood and agreed by and among the parties
hereto that all terms and conditions of the Credit Agreement and
the other Loan Documents, except as modified herein or by any
amendments to such other Loan Documents, shall remain in full
force and effect.

5. This Fifth Amendment may be executed in multiple counterparts,
each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

[THE REMAINDER OF THE PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Fifth
Amendment to be duly executed as of the day and year first above
written.

BORROWER:

HAM MARINE, INC.

By:/s/ RONALD W. SCHNOOR
Name: Ronald W. Schnoor
Title: President

GUARANTORS:

FRIEDE GOLDMAN INTERNATIONAL, INC.

By: /s/ JAMES A. LOWE III
Name: James A. Lowe III
Title: Secretary

FRIEDE & GOLDMAN, LTD.

By: /s/ J. L. HOLLOWAY
Name: J. L. Holloway
Title: Chairman of the Board

BANK:

BANK ONE, LOUISIANA, NATIONAL ASSOCIATION

By: /s/ LYNN S. RICHARD
Name: Lynn S. Richard - Vice President
Title: Vice President

Name: L S. Richard - Vice President
Title: Vice President

AIRCRAFT DRY LEASE

This Lease of aircraft is made effective as of December 1, 1998,
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 Friede Goldman
International Inc., a Mississippi corporation, with an address of
Suite 402, 525 East Capitol Street, Jackson, Mississippi 39201
(hereinafter referred to as "Lessee").

RECITALS

The parties recite that:

I. 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: N847RH
Aircraft Serial Number: 258224
Aircraft Manufacturer: British Aerospace BAE
Aircraft Model: 125 Hawker 800A
Aircraft Year: 1993

A. WHEREAS, Lessee desires to lease the Aircraft under such terms
and conditions as are mutually satisfactory to the parties.
<PAGE>
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 Eighty-five Thousand and 00/100 Dollars ($85,000.00) 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.
<PAGE>
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 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 $9,500,000.00
(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
<PAGE>
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

Medical Expense Coverage -
Each Person $10,000.00

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.
<PAGE>
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.

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.
<PAGE>
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 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
<PAGE>
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.

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
<PAGE>
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 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.
<PAGE>
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.

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.
<PAGE>
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 any investigation instituted by Lessor and in the recovery of
damages from third persons liable therefor.
<PAGE>
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 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
<PAGE>
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 601-352-1052)
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.
<PAGE>
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. 258224, CURRENTLY REGISTERED WITH THE
FEDERAL AVIATION ADMINISTRATION AS N847RH, 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, FRIEDE GOLDMAN INTERNATIONAL INC., SUITE 402, 525 EAST
CAPITOL STREET, JACKSON, MISSISSIPPI 39201, 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 REFERENCE.
<PAGE>
I, THE UNDERSIGNED, JOBIE T. MELTON, JR., CHIEF FINANCIAL OFFICER
OF FRIEDE GOLDMAN INTERNATIONAL INC., SUITE 402, 525 EAST CAPITOL
STREET, JACKSON, MISSISSIPPI 39201, 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: _____________________________________
J. L. Holloway, Member
________________________________________
Date and Time of Execution

FRIEDE GOLDMAN INTERNATIONAL INC.

By: ____________________________________
Jobie T. Melton, Jr., Chief Financial
Officer

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.

LOAN AGREEMENT

Among

GE CAPITAL PUBLIC FINANCE, INC.,

as Lender,

and

MISSISSIPPI BUSINESS FINANCE CORPORATION,

as Issuer,

and

FRIEDE GOLDMAN INTERNATIONAL INC.,

as Borrower

Dated as of December 1, 1998

_______________________________

This instrument constitutes a security agreement
under the Mississippi Uniform Commercial Code.
_________________________________

WATKINS & EAGER PLLC
400 EAST CAPITOL, SUITE 300
JACKSON, MS 39201
(601) 948-6470
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND EXHIBITS

Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . .2
Section 1.02. Exhibits. . . . . . . . . . . . . . . . . . . . . . . .5
Section 1.03. Rules of Construction . . . . . . . . . . . . . . . . .5

ARTICLE II

FINANCING OF COLLATERAL AND TERMS OF LOAN

Section 2.01. Acquisition of Collateral . . . . . . . . . . . . . . .6
Section 2.02. Loan. . . . . . . . . . . . . . . . . . . . . . . . . .6
Section 2.03. Interest. . . . . . . . . . . . . . . . . . . . . . . .6
Section 2.04. Payments. . . . . . . . . . . . . . . . . . . . . . . .6
Section 2.05. Payment on Non-Business Days. . . . . . . . . . . . . .7
Section 2.06. Loan Payments To Be Unconditional . . . . . . . . . . .7
Section 2.07. Prepayments . . . . . . . . . . . . . . . . . . . . . .7

ARTICLE III

CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . .8

ARTICLE IV

REPRESENTATIONS, WARRANTIES AND COVENANTS OF ISSUER. . . . . . . . . 11

ARTICLE V

REPRESENTATIONS, WARRANTIES AND COVENANTS OF
BORROWER AND LENDER . . . . . . . . . . . . . . . . . . . . . . . 13

ARTICLE VI

TITLE TO COLLATERAL; SECURITY INTEREST

Section 6.01. Title to Collateral . . . . . . . . . . . . . . . . . 17
Section 6.02. Security Interest in Collateral . . . . . . . . . . . 17
Section 6.03. Change in Name or Corporate Structure of
Borrower; Change in Location of
Borrower's Principal Place of Business . . . . . . 18
<PAGE>
Section 6.04. Liens and Encumbrances to Title . . . . . . . . . . . 18
Section 6.05. Personal Property . . . . . . . . . . . . . . . . . . 18
Section 6.06. Assignment of Insurance . . . . . . . . . . . . . . . 18
Section 6.07. Occupancy . . . . . . . . . . . . . . . . . . . . . . 19
Section 6.08. Agreement as Financing Statement. . . . . . . . . . . 19

ARTICLE VII

AFFIRMATIVE COVENANTS OF BORROWER

Section 7.01. Reporting Requirements. . . . . . . . . . . . . . . . 19
Section 7.02. Books and Records; Inspection and
Examination . . . . . . . . . . . . . . . . . . . . 21
Section 7.03. Compliance With Laws; Environmental
Indemnity . . . . . . . . . . . . . . . . . . . . . 21
Section 7.04. Payment of Taxes and Other Claims . . . . . . . . . . 22
Section 7.05. Maintenance of Collateral . . . . . . . . . . . . . . 22
Section 7.06. Insurance and Indemnification . . . . . . . . . . . . 23
Section 7.07. Preservation of Corporate Existence . . . . . . . . . 24
Section 7.08. Performance by Lender . . . . . . . . . . . . . . . . 24

ARTICLE VIII

NEGATIVE COVENANTS OF BORROWER

Section 8.01. Lien. . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 8.02. Sale of Assets. . . . . . . . . . . . . . . . . . . . 25
Section 8.03. Consolidation and Merger. . . . . . . . . . . . . . . 25
Section 8.04. Accounting. . . . . . . . . . . . . . . . . . . . . . 26
Section 8.05. [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . 26
Section 8.06. Other Defaults. . . . . . . . . . . . . . . . . . . . 27
Section 8.07. Place of Business . . . . . . . . . . . . . . . . . . 27
Section 8.08. Modifications and Substitutions . . . . . . . . . . . 27
Section 8.09. Use of the Collateral . . . . . . . . . . . . . . . . 27
Section 8.10. Location of the Collateral. . . . . . . . . . . . . . 27

ARTICLE IX

DAMAGE AND DESTRUCTION; USE OF NET PROCEEDS. . . . . . . . . . . . . 28

ARTICLE X

ASSIGNMENT, SUBLEASING AND SELLING

Section 10.01. Assignment by Lender. . . . . . . . . . . . . . . . . 28
Section 10.02. No Sale or Assignment by Borrower . . . . . . . . . . 29
<PAGE>
ARTICLE XI

EVENTS OF DEFAULT AND REMEDIES

Section 11.01. Events of Default . . . . . . . . . . . . . . . . . . 29
Section 11.02. Remedies on Default . . . . . . . . . . . . . . . . . 30
Section 11.03. Return of Collateral. . . . . . . . . . . . . . . . . 32
Section 11.04. No Remedy Exclusive . . . . . . . . . . . . . . . . . 32
Section 11.05. Late Charge . . . . . . . . . . . . . . . . . . . . . 32

ARTICLE XII

THE ACT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

ARTICLE XIII

MISCELLANEOUS
Section 13.01. Costs and Expenses of Lender. . . . . . . . . . . . . 35
Section 13.02. Disclaimer of Warranties. . . . . . . . . . . . . . . 35
Section 13.03. Notices . . . . . . . . . . . . . . . . . . . . . . . 36
Section 13.04. Further Assurance and Corrective
Instruments . . . . . . . . . . . . . . . . . . . . 36
Section 13.05. Binding Effect; Time of the Essence . . . . . . . . . 36
Section 13.06. Severability. . . . . . . . . . . . . . . . . . . . . 36
Section 13.07. Amendments. . . . . . . . . . . . . . . . . . . . . . 36
Section 13.08. Execution in Counterparts . . . . . . . . . . . . . . 37
Section 13.09. Applicable Law. . . . . . . . . . . . . . . . . . . . 37
Section 13.10. Captions. . . . . . . . . . . . . . . . . . . . . . . 37
Section 13.11. Entire Agreement. . . . . . . . . . . . . . . . . . . 37
Section 13.12. Usury . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 13.13. Waiver of Jury Trial. . . . . . . . . . . . . . . . . 37
EXHIBIT A1 - Friede Goldman Offshore, Inc. Schedule of
Collateral
EXHIBIT A2 - HAM Marine, Inc. Schedule of Collateral
EXHIBIT A3- Loan Payments
EXHIBIT B - Form of Certificate of Acceptance
EXHIBIT C - Form of Opinion of Counsel to Borrower and Guarantors
EXHIBIT D - Form of Opinion of Counsel to Issuer
EXHIBIT E - Form of Opinion of Bond Counsel
EXHIBIT F - Form of Bond
<PAGE>

LOAN AGREEMENT

Lender: GE Capital Public Finance, Inc.
Suite 470
8400 Normandale Lake Boulevard
Minneapolis, MN 55437
Telephone: (800) 346-3164
Telecopier: (612) 897-5601

Issuer: Mississippi Business Finance Corporation
550 High Street
13th Floor, Sillers Building
Jackson, MS 39201
Telephone: (601) 359-3552
Telecopier: (601) 359-2832

Borrower: Friede Goldman International Inc.
Bank of Mississippi Building
525 East Capitol Street, Suite 402
Jackson, MS 39201
Telephone: (601) 352-1107
Telecopier: (601) 352-0588

THIS LOAN AGREEMENT dated as of December 1, 1998 (this
"Agreement") among GE Capital Public Finance, Inc., a Delaware
corporation, as lender (with its successors and assigns,
"Lender"), Mississippi Business Finance Corporation, a public
body corporate and political subdivision duly organized and
validly existing under the laws of the state of Mississippi (the
"State"), as issuer ("Issuer"), and Friede Goldman International
Inc., a Mississippi corporation, as borrower ("Borrower").

WHEREAS, Issuer is authorized by law including Title 57,
Chapter 10, Articles 7 and 11 of the Mississippi Code of 1972, as
amended and supplemented (the "Act"), to among other things,
provide and finance economic development projects to eligible
companies in the State; and

WHEREAS, the Issuer has determined that the proposed project
by the Borrower is an eligible "economic development project" as
defined by the Act and that the Borrower is an "eligible
company" as defined by the Act; and

WHEREAS, the Issuer is authorized pursuant to the Act to
issue its revenue bonds to finance the cost of said project; and

WHEREAS, in furtherance of the purposes of the Act, Issuer
proposes to finance or refinance all or a portion of the
acquisition and installation of the Collateral (as hereinafter
defined) by
<PAGE>
Borrower pursuant to this Agreement by issuing its revenue bond
and obtaining a loan from Lender and lending the proceeds thereof
to Borrower; and

WHEREAS, the Issuer has, by due corporate action, authorized
the issuance, from time to time, of its Taxable Industrial
Development Revenue Bonds, Series 1998 (Friede Goldman
International Inc. Project) dated the date of delivery (the
"Bond") pursuant to the Act in the maximum aggregate principal
amount of $18,000,000 in order to loan the proceeds thereof to
the Borrower to finance the Project; and

WHEREAS, Borrower proposes to borrow the proceeds of the
loan made by Lender to Issuer upon the terms and conditions set
forth herein to finance or refinance the acquisition and
installation of the Collateral and contribute as capital the
proceeds thereof to each of the Guarantors in consideration of
Guarantors' granting of security interests and lien interests in
certain of the Collateral to Lender and each providing to Lender
a Guaranty; and

WHEREAS, Guarantors have purchased the Collateral either
directly from Vendors or from Borrower for adequate consideration
as set forth in Exhibit A hereto.

WHEREAS, Borrower shall make Loan Payments (as hereinafter
defined) directly to Lender as assignee of Issuer and holder of
the Bond (as hereinafter defined); and

WHEREAS, this Agreement and the Bond shall not be deemed to
constitute a debt or liability or moral obligation of the State
or any political subdivision thereof, or a pledge of the faith
and credit or taxing power of the State or any political
subdivision thereof, but shall be a special obligation
payable solely from the Loan Payments payable hereunder by
Borrower to Lender as assignee of Issuer;

NOW, THEREFORE, for good and valuable consideration, receipt
of which is hereby acknowledged, and in consideration of the
premises contained in this Agreement, Lender, Issuer and
Borrower agree as follows:

ARTICLE I

DEFINITIONS AND EXHIBITS

Section 1.01. Definitions. The following terms used herein
will have the meanings indicated below unless the context clearly
requires otherwise:

"Acquisition Costs" means the contract price paid or to be
paid to the Vendors or reimbursed to Borrower or either Guarantor
for any portion of the Collateral upon Borrower's or either
Guarantor's acceptance thereof, including administrative,
engineering, legal, financial and other costs incurred by Lender,
Issuer, Borrower, Escrow Agent and Vendors in connection with the
acquisition, installation and financing by Lender of such
Collateral, which Acquisition Costs are set forth in Exhibit A
hereto.
<PAGE>
"Administrative Expenses" means the reasonable and necessary
fees, costs or expenses incurred or payable by Borrower to the
Issuer pursuant to this Agreement, including (without
limitation) a one time fee of $20,000 to Issuer.

"Assignment of Earnings and Charter" means the Assignment of
Earnings and Charter of even date herewith executed on behalf of
HAM Marine, Inc. for the benefit of Lender.

"Assignment of Insurances" means the Assignment of
Insurances of even date herewith executed on behalf of HAM
Marine, Inc. for the benefit of Lender.

"Agreement" means this Agreement, including all exhibits
hereto, as any of the same may be supplemented or amended from
time to time in accordance with the terms hereof.

"Bond" means Issuer's $18,000,000 Taxable Industrial
Development Revenue Bond, Series 1998 (Friede Goldman
International Inc. Project) in the form attached hereto as
Exhibit F.

"Borrower" means Friede Goldman International Inc., a
Mississippi corporation.

"Business Day" means a day other than a Saturday or Sunday
on which banks are generally open for business in New York, New
York.

"Certificate of Acceptance" means a Certificate of
Acceptance, in substantially the form set forth as Exhibit B
hereto, whereby Borrower and each Guarantor acknowledges receipt
in good condition of particular items of Collateral identified
therein and confirms the date of delivery thereof and certain
other matters.

"Collateral" means the property identified in Exhibit A
hereto together with all replacement parts, additions, repairs,
accessions and accessories incorporated therein and/or affixed to
such property and the proceeds of all of the foregoing.

"Default" means an event that, with giving of notice or
passage of time or both, would constitute an Event of Default as
provided in Article XI hereof.

"Environmental Laws" has the meaning ascribed thereto in
paragraph (h) of Article V hereof.

"Escrow Agent" means National City Bank of Minneapolis, as
escrow agent under the Escrow Agreement, and its successors and
assigns permitted under the Escrow Agreement.

"Escrow Agreement" means the Escrow Agreement dated as of
December 1, 1998 among Lender, Issuer, Borrower and Escrow Agent.

"Escrow Fund" means the fund established and held by Escrow
Agent pursuant to the Escrow Agreement.

"Guarantor" means each of Friede Goldman Offshore, Inc., a
Mississippi corporation and
<PAGE>
HAM Marine, Inc., a Mississippi corporation.

"Guaranty" means each Guaranty Agreement of even date
herewith executed by each Guarantor for the benefit of Lender.

"HAM Security Agreement" means the Security Agreement of
even date herewith by and between HAM Marine, Inc and Lender.

"Interest" means the portion of any payment from Issuer to
Lender designated as and comprising interest as shown in Exhibit
A hereto.

"Issuer" means Mississippi Business Finance Corporation,
acting as issuer under this Agreement.

"Lender" means (i) GE Capital Public Finance, Inc., acting
as lender under this Agreement, (ii) any surviving, resulting or
transferee corporation of GE Capital Public Finance, Inc. and
(iii) except where the context requires otherwise, any
assignee(s) of Lender.

"Loan" means the loan from Issuer to Borrower pursuant to
this Agreement.

"Loan Payments" means the loan payments payable by Borrower
pursuant to the provisions of this Agreement and the Bond as
specifically set forth in Exhibit A hereto. As provided in
Article II hereof, Loan Payments shall be payable by Borrower
directly to Lender, as assignee of Issuer and holder of the Bond,
in the amounts and at the times as set forth in Exhibit A hereto.

"Loan Proceeds" means the total amount of money to be paid
pursuant to Section 2.02 hereof by Lender to Borrower, Guarantors
or Vendor(s) on behalf of Issuer or, upon agreement among
Lender, Issuer and Borrower, to be paid to Escrow Agent for
deposit and application in accordance with the Escrow Agreement.

"Offshore Security Agreement" means the Security Agreement
of even date herewith by and between Friede Goldman Offshore,
Inc. and Lender.

"Paying Agent Agreement" means the Paying Agent Agreement
dated as of December 1, 1998 by and among Lender, Issuer,
Borrower and Paying Agent.

"Prepayment Amount" means the amount which Borrower may or
must from time to time pay or cause to be paid to Lender as
assignee of Issuer and holder of the Bond in order to prepay the
Loan and the Bond, as provided in Article XII hereof, such
amounts being set forth in Exhibit A hereto, together with
accrued interest and all other amounts due hereunder.

"Principal" means the portion of any Loan Payment designated
as principal in Exhibit A hereto.

"Purchase Agreements" means Borrower's or either Guarantor's
purchase agreements with
<PAGE>
Vendors of the Collateral.

"Security Agreement" means each of the HAM Security
Agreement and the Offshore Security Agreement.

"Ship Mortgage(s)" means, collectively or individually as
the case may be, the First Preferred Mortgage dated of even date
herewith executed on behalf of HAM Marine, Inc. for the benefit
of Lender regarding the "Dual Carrier"and the First Preferred
Mortgage dated of even date herewith executed on behalf of Friede
Goldman Offshore, Inc. regarding the "Jack King" and the "Maggie
D."

"State" means the State of Mississippi.

"UCC" means the Uniform Commercial Code as adopted and in
effect in the State.

"Vendor" means the manufacturer or vendor of an item of
Collateral, as well as the agents or dealers of the manufacturer,
from whom Borrower or a Guarantor has purchased or is purchasing
items of Collateral.

Section 1.02. Exhibits. The following exhibits are
attached hereto and made a part hereof:

Exhibit A: Form of Schedule of Collateral and Loan Payments
describing the Collateral and setting forth the Loan Payments and
Prepayment Amounts. Issuer hereby authorizes Lender to insert
in Exhibit A the serial or other identifying numbers relating to
the Collateral when available.

Exhibit B: Form of Certificate of Acceptance.

Exhibit C: Form of opinion of counsel to Borrower.

Exhibit D: Form of opinion of counsel to Issuer.

Exhibit E: Form of opinion of Bond Counsel

Exhibit F: Form of Bond.

Section 1.03. Rules of Construction. (a) The singular form
of any word used herein, including the terms defined in Section
1.01 hereof, shall include the plural, and vice versa. The use
herein of a word of any gender shall include correlative words of
all genders.

(b) Unless otherwise specified, references to Articles,
Sections and other subdivisions of this Agreement are to the
designated Articles, Sections and other subdivision of this
Agreement as originally executed. The words "hereof," "herein,"
"hereunder" and words of similar import refer to this Agreement
as a whole.

(c) The headings or titles of the several articles and
sections shall be solely for
<PAGE>
convenience of reference and shall not affect the meaning,
construction or effect of the provisions hereof.

ARTICLE II

FINANCING OF COLLATERAL AND TERMS OF LOAN

Section 2.01. Acquisition of Collateral. Borrower or
Guarantors either have ordered or shall order the Collateral
pursuant to one or more Purchase Agreements from one or more
Vendors. Borrower and Guarantors shall remain liable to the
Vendor or Vendors in respect of their duties and obligations in
accordance with each Purchase Agreement and shall bear the risk
of loss with respect to any loss or claim relating to any item of
Collateral covered by any Purchase Agreement, and neither Lender
nor Issuer shall assume any such liability or risk of loss.
Borrower either has transferred or shall transfer title to the
Collateral to HAM Marine, Inc. or Friede Goldman Offshore,
Inc.

Section 2.02. Loan. Lender hereby agrees, subject to the
terms and conditions of this Agreement, to purchase the Bond in
the amount of $18,000,000; Issuer hereby agrees, subject to the
terms and conditions of this Agreement, to sell the bond to
Lender and to lend such amount to Borrower; and Borrower hereby
agrees to borrow such amount from Issuer. Upon fulfillment of
the conditions set forth in Article III hereof, Lender shall
disburse the Loan Proceeds to the Escrow Agent for distribution
as follows: (x) $________________ to Borrower of which (a)
$__________________ shall be distributed to HAM Marine, Inc. and
(b) $______________ shall be distributed to Friede Goldman
Offshore, Inc. and (y) $________________ deposited in the
Escrow Fund to be held, invested and disbursed as provided in the
Escrow Agreement. Issuer's obligation to repay the loan from
Lender and to make payments on the Bond, and Borrower's
obligation to repay the Loan, shall commence, and interest shall
begin to accrue, on the date that Loan Proceeds are disbursed to
Borrower or Guarantors on behalf of Issuer or deposited in the
Escrow Fund.

Section 2.03. Interest. The principal amount of the Bond
and the Loan hereunder outstanding from time to time shall bear
interest (computed on the basis of actual days elapsed in a
360-day year) at the rate of seven and ninety-nine hundredths
percent (7.99%). Interest accruing on the principal balance of
such loans outstanding from time to time shall be payable as
provided in Exhibit A and in the Bond and upon earlier demand in
accordance with the terms hereof or prepayment in accordance with
the terms of the Bond and Section 2.07 hereof.

Section 2.04. Payments. Issuer shall pay the principal of,
premium, if any in accordance with Section 2.07 hereof, and
interest on the Bond, but only out of the amounts paid by
Borrower pursuant to this Agreement. Borrower shall pay to
Lender, as assignee of Issuer, Loan Payments, in the amounts and
on the dates set forth in Exhibit A hereto. Additionally,
Borrower shall pay to Lender, as assignee of Issuer and holder of
the Bond, an amount equal to the product of (i) 13% per
annum and (ii) the delinquent amount of any Loan Payment not paid
when due. As security for its obligation to pay the principal of,
premium, if any in accordance with Section 2.07 hereof, and
interest on the loan from Lender, Issuer assigns to Lender all of
Issuer's right to receive Loan
<PAGE>
Payments from Borrower hereunder, all of Issuer's rights
hereunder and all of Issuer's right, title and interest in and to
the Collateral, and Issuer irrevocably constitutes and appoints
Lender and any present or future officer or agent of Lender as
its lawful attorney, with full power of substitution and
resubstitution, and in the name of Issuer or otherwise, to
collect the Loan Payments and any other payments due hereunder
and under the Bond and to sue in any court for such Loan Payments
or other payments, to exercise all rights hereunder with respect
to the Collateral, and to withdraw or settle any claims, suits or
proceedings pertaining to or arising out of this Agreement upon
any terms. Such Loan Payments and other payments shall be made
by Borrower directly to Lender, as Issuer's assignee and holder
of the Bond, and shall be credited against Issuer's payment
obligations hereunder and under the Bond. No provision, covenant
or agreement contained in this Agreement or any obligation
imposed on Issuer herein or under the Bond, or the breach
thereof, shall constitute or give rise to or impose upon Issuer a
pecuniary liability, a charge upon its general credit or taxing
powers or a pledge of its general revenues. In making the
agreements, provisions and covenants set forth in this Agreement,
Issuer has not obligated itself except with respect to the
Collateral and the application of the Loan Payments to be paid by
Borrower hereunder. All amounts required to be paid by Borrower
hereunder shall be paid in lawful money of the United States of
America in immediately available funds. No recourse shall be had
by Lender or Borrower for any claim based on this Agreement or
the Bond against any director, officer, employee or agent of
Issuer alleging personal liability on the part of such person,
unless such claim is based on the willful dishonesty of or
intentional violation of law by such person.

Section 2.05. Payment on Non-Business Days. Whenever any
payment to be made hereunder or under the Bond shall be stated to
be due on a day which is not a Business Day, such payment may be
made on the next succeeding Business Day, and such extension of
time shall in such case be included in the computation of
interest or the fees hereunder, as the case may be.

Section 2.06. Loan Payments To Be Unconditional. The
obligations of Borrower to make payment of the Loan Payments
required under this Article II and to make other payments
hereunder and to perform and observe the covenants and agreements
contained herein shall be absolute and unconditional in all
events, without abatement, diminution, deduction, setoff or
defense for any reason, including (without limitation) any
failure of the Collateral to be delivered or installed, any
defects, malfunctions, breakdowns or infirmities in the
Collateral or any accident, condemnation, destruction or
unforeseen circumstances. Notwithstanding any dispute between
Borrower and any of Issuer, Lender, any Vendor or any other
person, Borrower shall make all Loan Payments when due
and shall not withhold any Loan Payments pending final resolution
of such dispute, nor shall Borrower assert any right of set-off
or counterclaim against its obligation to make such payments
required under this Agreement.

Section 2.07. Prepayments. (a) Borrower may, in its
discretion, prepay the Loan in whole at any time after the third
anniversary of the date hereof by paying the applicable
Prepayment Amount.

(b) Borrower shall prepay the Loan and the Bond in whole or
in part at any time pursuant to Article IX hereof by paying the
applicable Prepayment Amount.
<PAGE>

(c) Borrower shall prepay the Loan and the Bond in full
immediately upon demand of Lender after the occurrence of an
Event of Default by paying the applicable Prepayment Amount.

(d) The amounts due hereunder shall be repaid, and the
amounts due under the Bond shall be paid, in part with funds
remaining in the Escrow Fund upon termination of the Escrow
Agreement as provided in Sections 2.03 or 2.04 of the Escrow
Agreement.

Upon any prepayment in part of the Loan and the Bond, the
prepayment shall be applied first to interest accrued thereon and
next to the Principal portion of the Loan Payments in the inverse
order of maturity.

Section 2.08. Security. The obligations of Borrower to
make Loan Payments required under this Article II and to make
other payments hereunder and to perform and observe the covenants
and agreements contained herein shall be secured, among other
things, by a security interest in the Collateral pursuant to the
HAM Security Agreement, the Offshore Security Agreement and the
Ship Mortgages.

ARTICLE III

CONDITIONS PRECEDENT

Lender's agreement to make the loan to Issuer hereunder and
to disburse the Loan Proceeds shall be subject to the condition
precedent that Lender shall have received all of the following,
each in form and substance satisfactory to Lender:

(a) This Agreement, properly executed on behalf of
Issuer and Borrower, and each of the Exhibits hereto
properly completed.

(b) The Bond, properly executed on behalf of Issuer.

(d) The Guaranty Agreement, properly executed by HAM
Marine, Inc. for the benefit of Lender.

(e) The Offshore Security Agreement, properly executed
by Friede Goldman Offshore, Inc. for the benefit of Lender.

(f) The Guaranty Agreement, properly executed by
Friede Goldman Offshore, Inc. for the benefit of Lender.

(g) The Paying Agent Agreement, properly executed on
behalf of Issuer, Lender, Escrow Agent and Paying Agent.
<PAGE>
(h) The Ship Mortgages, properly executed by HAM
Marine, Inc. and Friede Goldman Offshore, Inc. for the
benefit of Lender.

(i) An Assignment of Earnings and Charter, properly
executed by HAM Marine, Inc. for the benefit of Lender.

(j) An Assignment of Insurances, properly executed by
HAM Marine, Inc. for the benefit of Lender.

(k) The Escrow Agreement, properly executed on behalf
of Issuer, Borrower, Lender and Escrow Agent.

(l) A certificate of the Secretary or an Assistant
Secretary of Borrower, certifying as to (i) the resolutions
of the board of directors and, if required, the shareholders
of Borrower, authorizing the execution, delivery and
performance of this Agreement, the Escrow Agreement and the
Paying Agent Agreement and any related documents, (ii) the
bylaws of Borrower, and (iii) the signatures of the officers
or agents of Borrower authorized to execute and deliver this
Agreement, the Escrow Agreement and the Paying Agent
Agreement and other instruments, agreements and certificates
on behalf of Borrower.

(m) Currently certified copies of the Articles of
Incorporation of Borrower.

(n) A Certificate of Good Standing issued as to
Borrower by the Secretary of the State of the state of
Borrower's incorporation not more than 10 days prior to the
date hereof.

(o) A certificate of the Secretary or an Assistant
Secretary of each Guarantor, certifying as to (i) the
resolutions of the board of directors and, if required, the
shareholders of each Guarantor, authorizing the execution,
delivery and performance of each Guaranty and each Security
Agreement and any related documents, (ii) the bylaws of each
Guarantor, and (iii) the signatures of the officers or
agents of each Guarantor authorized to execute and deliver
each Guaranty and each Security Agreement and other
instruments, agreements and certificates on behalf of each
Guarantor.

(p) Currently certified copies of the Articles of
Incorporation of each Guarantor.

(q) A Certificate of Good Standing issued as to each
Guarantor by the Secretary of the State of the state of each
Guarantor's incorporation not more than 10 days prior to the
date hereof.

(r) Certificates of the insurance required hereunder
or under the Security Agreements, containing a lender's loss
payable clause or endorsement in favor of Lender.

(s) A resolution or evidence of other official action
taken by or on behalf of Issuer to authorize the
transactions contemplated hereby.
<PAGE>
(t) A true and correct copy of any and all leases
pursuant to which Borrower or either Guarantor is leasing
the property where the Collateral will be located, together
with a landlord's disclaimer and consent with respect to
each such lease.

(u) A true and correct copy of any and all mortgages,
deeds of trust or similar agreements (whether or not
Borrower or any Guarantor is a party to any such agreement)
relating to the property where the Collateral will be
located, together with a mortgagee's waiver with respect to
each such mortgage, deed of trust or similar agreement.

(v) As applicable, financing statements executed by
Borrower or either Guarantor (as the case may be), as
debtor, and naming Issuer, as secured party, and Lender, as
assignee, and/or the original certificate of title or
manufacturer's certificate of origin and title application
if any of the Collateral is subject to certificate of title
laws.

(w) Financing statements executed by Issuer, as
debtor, and naming Lender, as secured party.

(x) Current searches of appropriate filing offices
showing that (i) no state or federal tax liens have been
filed and remain in effect against Borrower or either
Guarantor, (ii) no financing statements have been filed and
remain in effect against Borrower or either Guarantor
relating to the Collateral except those financing statements
filed by Lender, (iii) Lender has duly filed all financing
statements necessary to perfect the security interest
created pursuant to this Agreement and (iv) Lender has duly
filed all financing statements necessary to perfect the
transfer of Issuer's interest in this Agreement and the Loan
Payments.

(y) A current abstract of title for the "Dual
Carrier", the "Jack King" and the "Maggie D" from the United
States Coast Guard, National Vessel Documentation Center
showing the fee title of the "Dual Carrier" vested in HAM
Marine, Inc. and fee title of the "Jack King" and the
"Maggie D" vested in Friede Goldman Offshore, Inc.
containing no liens which are unacceptable to Lender and
showing the Ship Mortgages as first-priority liens
on the vessels and related collateral.

(z) An opinion of counsel to Borrower and Guarantors,
addressed to Lender and Issuer, in the form attached hereto
as Exhibit C.

(aa) An opinion of counsel to Issuer, addressed to
Lender and Borrower, in the form attached hereto as Exhibit
D.

(bb) An opinion of bond counsel, addressed to Lender,
in the form attached hereto as Exhibit E.

(cc) Payment of Lender's fees, commissions and expenses
required by Section 12.01 hereof.
<PAGE>

(dd) Payment of Issuer's fees, commissions and expenses
incurred in connection with this Agreement and the
transactions contemplated hereby.

(ee) Any other documents or items required by Lender.

Lender's agreement to make the loan to Issuer hereunder, to
disburse the Loan Proceeds and to consider approval of any
disbursement from the Escrow Fund shall be subject to the further
conditions precedent that on the date thereof:

(ff) Lender shall have received each of the items
required for a disbursement pursuant to the Escrow
Agreement;

(gg) Lender shall have received in form and substance
satisfactory to Lender Vendor invoice(s) and/or bill(s) of
sale relating to the Collateral and, if such invoices have
been paid by Issuer, Borrower or either Guarantor (as the
case may be), evidence of payment thereof;

(hh) the representations and warranties contained in
Articles IV and V hereof are correct on and as of the date
of such disbursement as though made on and as of such date,
except to the extent that such representations and
warranties relate solely to an earlier date; and

(ii) no event has occurred and is continuing, or would
result from such loan to Issuer or the Loan which
constitutes a Default or an Event of Default.

ARTICLE IV

REPRESENTATIONS, WARRANTIES AND COVENANTS OF ISSUER

Issuer represents, warrants and covenants for the benefit of
Lender and Borrower, as follows:

(a) Issuer is a body corporate and a political
subdivision duly created and validly existing under the laws
of the State.

(b) Issuer will exercise its best efforts to preserve
and keep in full force and effect its existence as a public
body corporate and political subdivision.

(c) Issuer is authorized under the Constitution and
laws of the State to issue the Bond and to enter into this
Agreement, the Escrow Agreement, the Paying Agent Agreement
and the transactions contemplated hereby and to perform all
of its obligations hereunder.

(d) Issuer has duly authorized the issuance of the
Bond and the execution and delivery of this Agreement, the
Escrow Agreement and the Paying Agent Agreement under the
terms and provisions of the resolution of its governing body
or by other appropriate official approval, and further
represents, covenants and warrants that all requirements
have
<PAGE>
been met and procedures have occurred in order to ensure the
enforceability of the Bond, this Agreement, the Escrow
Agreement and the Paying Agent Agreement against Issuer, and
Issuer has complied with such public bidding requirements as
may be applicable to the Bond, this Agreement, the Escrow
Agreement, the Paying Agent Agreement and the Collateral.
Issuer has taken all necessary action and has complied with
all provisions of the Act, including but not limited to the
making of the findings required by the Act, required to make
the Bond, this Agreement, the Escrow Agreement and the
Paying Agent Agreement the valid and binding obligation of
Issuer.

(e) The officer of Issuer executing the Bond, this
Agreement and any related documents has been duly authorized
to issue the Bond and to execute and deliver this Agreement,
the Escrow Agreement and the Paying Agent Agreement and such
related documents under the terms and provisions of a
resolution of Issuer's governing body, or by other
appropriate official action.

(f) The Bond, this Agreement, the Escrow Agreement and
the Paying Agent Agreement are legal, valid and binding
obligations of Issuer, enforceable in accordance with their
respective terms, except to the extent limited by
bankruptcy, reorganization or other laws of general
application relating to or affecting the enforcement of
creditors' rights.

(g) Issuer has assigned to Lender all of Issuer's
rights in the Collateral and this Agreement (except any
indemnification payable to Issuer pursuant to Section 7.06
hereof and notice to Issuer pursuant to Section 12.03
hereof) including the assignment of all rights in the
security interest granted to Issuer by Borrower.

(h) Issuer will not pledge, mortgage or assign this
Agreement or its duties and obligations hereunder to any
person, firm or corporation, except as provided under the
terms hereof.

(i) None of the issuance of the Bond or the execution
and delivery of this Agreement, the Escrow Agreement or the
Paying Agent Agreement, the consummation of the transactions
contemplated hereby or the fulfillment of or compliance with
the terms and conditions of the Bond, this Agreement, the
Escrow Agreement or the Paying Agent Agreement violates any
law, rule, regulation or order, conflicts with or results in
a breach of any of the terms, conditions or provisions of
any restriction or any agreement or instrument to which
Issuer is now a party or by which it is bound or constitutes
a default under any of the foregoing or results in the
creation or imposition of any prohibited lien, charge or
encumbrance of any nature whatsoever upon any of the
property or assets of Issuer under the terms of any
instrument or agreement.

(j) There is no action, suit, proceeding, claim,
inquiry or investigation, at law or in equity, before or by
any court, regulatory agency, public board or body pending
or, to the best of Issuer's knowledge, threatened against or
affecting Issuer, challenging Issuer's authority to issue
the Bond or to enter into this Agreement, the Escrow
Agreement or the Paying Agent Agreement or any other action
wherein an unfavorable ruling or finding would
<PAGE>
adversely affect the enforceability of the Bond, this
Agreement, the Escrow Agreement or the Paying Agent
Agreement or any other transaction of Issuer which is
similar hereto, or would materially and adversely affect any
of the transactions contemplated by this Agreement.

(k) Issuer covenants that it will promptly pay or
cause to be paid the principal and premium, if any, and
interest at the place, on the dates and in the manner set
forth herein and in the Paying Agent Agreement; PROVIDED,
HOWEVER, THAT THE BOND DOES NOT NOW AND SHALL NEVER
CONSTITUTE A GENERAL OBLIGATION OF ISSUER OR A DEBT OR
PLEDGE OF THE FAITH AND CREDIT OF THE STATE OR ANY OTHER
POLITICAL SUBDIVISION THEREOF, AND ALL COVENANTS AND
UNDERTAKINGS BY ISSUER HEREUNDER TO MAKE PAYMENTS ARE
SPECIAL OBLIGATIONS OF ISSUER PAYABLE SOLELY FROM THE LOAN
PAYMENTS PLEDGED HEREUNDER.

ARTICLE V

REPRESENTATIONS, WARRANTIES AND COVENANTS
OF BORROWER AND LENDER

Section 5.01. Borrower. Borrower represents, warrants and
covenants for the benefit of Lender and Issuer, as follows:

(a) Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the state of
Mississippi, has power to enter into this Agreement and by
proper corporate action has duly authorized the execution
and delivery of this Agreement, the Escrow Agreement and the
Paying Agent Agreement. Borrower is in good standing and is
duly licensed or qualified to transact business in the State
and in all jurisdictions where the character of the property
owned or leased or the nature of the business transacted by
it makes such licensing or qualification necessary.

(b) Borrower has been fully authorized to execute and
deliver this Agreement, the Escrow Agreement and the Paying
Agent Agreement under the terms and provisions of the
resolution of its board of directors, or by other
appropriate official approval, and further represents,
covenants and warrants that all requirements have been met,
and procedures have occurred in order to ensure the
enforceability of this Agreement, the Escrow Agreement and
the Paying Agent Agreement and this Agreement, the Escrow
Agreement and the Paying Agent Agreement have been duly
authorized, executed and delivered.

(c) The officer of Borrower executing this Agreement,
the Escrow Agreement and the Paying Agent Agreement and any
related documents has been duly authorized to execute and
deliver this Agreement, the Escrow Agreement and the Paying
Agent Agreement and such related documents under the terms
and provisions of a resolution of Borrower's board of
directors.
<PAGE>

(d) This Agreement, the Escrow Agreement and the
Paying Agent Agreement constitute valid and legally binding
obligations of Borrower, enforceable against Borrower in
accordance with their respective terms, except to the extent
limited by bankruptcy, reorganization or other laws of
general application relating to effecting the enforcement of
creditors' rights.

(e) The execution and delivery of this Agreement, the
Escrow Agreement and the Paying Agent Agreement, the
consummation of the transactions contemplated hereby and the
fulfillment of the terms and conditions hereof do not and
will not violate any law, rule, regulation or order,
conflict with or result in a breach of any of the terms or
conditions of the articles of incorporation or bylaws of
Borrower or of any corporate restriction or of any agreement
or instrument to which Borrower is now a party and do not
and will not constitute a default under any of the foregoing
or result in the creation or imposition of any liens,
charges or encumbrances of any nature upon any of the
property or assets of Borrower contrary to the terms of any
instrument or agreement.

(f) The authorization, execution, delivery and
performance of this Agreement by Borrower do not require
submission to, approval of, or other action by any
governmental authority or agency, which action with respect
to this Agreement has not been taken and which is final and
nonappealable.

(g) There is no action, suit, proceeding, claim,
inquiry or investigation, at law or in equity, before or by
any court, regulatory agency, public board or body pending
or, to the best of Borrower's knowledge, threatened against
or affecting Borrower, challenging Borrower's authority to
enter into this Agreement, the Escrow Agreement or the
Paying Agent Agreement or any other action wherein an
unfavorable ruling or finding would adversely affect the
enforceability of this Agreement, the Escrow Agreement or
the Paying Agent Agreement or any other transaction of
Borrower which is similar hereto, or would materially and
adversely affect any of the transactions contemplated by
this Agreement.

(h) The property at which the Collateral is located is
properly zoned for its current and anticipated use and the
use of the Collateral will not violate any applicable
zoning, land use, environmental or similar law or
restriction. Borrower and Guarantors have all licenses and
permits to use the Collateral. Borrower and Guarantors have
obtained all permits, licenses and other authorizations
which are required under federal, state and local laws
relating to emissions, discharges, releases of pollutants,
contaminants, hazardous or toxic materials, or wastes into
ambient air, surface water, ground water or land, or
otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport
or handling of pollutants, contaminants or hazardous or
toxic materials or wastes ("Environmental Laws") at
Borrower's or Guarantors' facilities or in connection with
the operation of their facilities. Except as previously
disclosed to Lender in writing, Borrower and Guarantors and
all activities of Borrower and Guarantors at their
facilities comply with all Environmental Laws and with all
terms and conditions of any required permits, licenses and
authorizations applicable to Borrower and Guarantors with
respect thereto. Except as previously disclosed to Lender
in writing, Borrower and Guarantors are also in compliance
<PAGE>
with all limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and
timetables contained in Environmental Laws or contained in
any plan, order, decree, judgment or notice of which
Borrower or Guarantors are aware. Except as previously
disclosed to Lender in writing, Borrower or Guarantors are
not aware of, nor has Borrower or either Guarantor received
notice of, any events, conditions, circumstances,
activities, practices, incidents, actions or plans which may
interfere with or prevent continued compliance with, or
which may give rise to any liability under, any
Environmental Laws.

(i) The Collateral is of the type authorized and
permitted to be financed with the proceeds of the Bond
pursuant to the Act.

(j) Borrower or Guarantors own or will own the
Collateral and each intends to operate the Collateral, or
cause the Collateral to be operated, as a "project," within
the meaning of the Act, until the date on which all of the
Loan Payments have been fully paid or the applicable
Prepayment Amount has been fully paid.

(k) Borrower has heretofore furnished to Lender the
consolidated audited financial statement of Borrower for its
fiscal years ended December 31, 1997, December 31, 1996,
December 31, 1995 and December 31, 1994 and the consolidated
unaudited financial statement of Borrower for the months
ended June 30, 1998, and those statements fairly present the
financial condition of Borrower on the dates thereof and the
results of its operations and cash flows for the periods
then ended and were prepared in accordance with generally
accepted accounting principles. Since the date of the most
recent financial statements, there has been no material
adverse change in the business, properties or condition
(financial or otherwise) of Borrower.

(l) Borrower and Guarantors have paid or caused to be
paid to the proper authorities when due all federal, state
and local taxes required to be withheld by them. Borrower
and Guarantors have filed all federal, state and local tax
returns which are required to be filed, and Borrower and
Guarantors have paid or caused to be paid to the respective
taxing authorities all taxes as shown on said returns or on
any assessment received by them to the extent such taxes
have become due.

(m) Borrower or Guarantors have or will have good and
absolute title to all Collateral and all proceeds thereof,
free and clear of all mortgages, security interests, liens
and encumbrances except for the security interest created
pursuant to this Agreement, each Security Agreement and the
Ship Mortgage.

(n) All financial and other information provided to
Lender by or on behalf of Borrower and Guarantors in
connection with Borrower's request for the Loan contemplated
hereby is true and correct in all material respects and, as
to projections, valuations or pro forma financial
statements, present a good faith opinion as to such
projections, valuations and pro forma condition and results.

(o) Borrower and Guarantors have provided to Lender
signed financing
<PAGE>
statements and other documents sufficient when filed to
perfect the security interest created pursuant to this
Agreement, the Security Agreements and the Ship Mortgage.
When such financing statements and other documents are filed
in the offices noted therein, Lender, as assignee of Issuer
and holder of the Bond, will have a valid and perfected
security interest in the Collateral, subject to no other
security interest, assignment, lien or encumbrance. None of
the Collateral is or will become a fixture on real estate.
None of the Collateral constitutes a replacement of,
substitution for or accessory to any property of Borrower
subject to a lien of any kind. Borrower leases the real
property where the Collateral will be located subject to no
liens or encumbrances of any kind.

(p) Borrower will comply fully at all times with the
Paying Agent Agreement, and Borrower will not take any
action, or omit to take any action, which, if taken or
omitted, respectively, would violate the Paying Agent
Agreement.

(q) No person other than Borrower or either Guarantor
is in occupancy or possession of any portion of the real
property where the Collateral is located.

Section 5.02. Lender. Lender represents, warrants and
covenants for the benefit of Borrower and Issuer, as follows:

(a) Lender is a corporation, duly organized, validly
existing and in good standing under the laws of the state of
Delaware, has power to enter into this Agreement and by
proper corporate action has duly authorized the execution
and delivery of this Agreement and the documents
contemplated to be entered into by the Lender by said
Agreement. Lender is in good standing and is duly licensed
or qualified to transact business in the State and in all
jurisdictions where the character of the property owned or
leased or the nature of the business transacted by it makes
such licensing or qualification necessary.

(b) Lender has been fully authorized to execute and
deliver this Agreement and related documents, under the
terms and provisions of the resolution of its board of
directors, or by other appropriate official approval, and
further represents, covenants and warrants that all
requirements have been met, and procedures have occurred in
order to ensure the enforceability of this Agreement, and
this Agreement has been duly authorized, executed and
delivered.

(c) The officer of Lender executing this Agreement and
any related documents has been duly authorized to execute
and deliver this Agreement and such related documents under
the terms and provisions of a resolution of Lender's board
of directors.

(d) This Agreement constitutes the valid and legally
binding obligation of Lender, enforceable against Lender in
accordance with their respective terms, except to the extent
limited by bankruptcy, reorganization or other laws of
general application relating to effecting the enforcement of
creditors' rights.

(e) The execution and delivery of this Agreement, the
consummation of the
<PAGE>
transactions contemplated hereby and the fulfillment of the
terms and conditions hereof do not and will not violate any
law, rule, regulation or order, conflict with or result in a
breach of any of the terms or conditions of the articles of
incorporation or bylaws of Lender or of any corporate
restriction or of any agreement or instrument to which
Lender is now a party.

(f) The authorization, execution, delivery and
performance of this Agreement by Lender do not require
submission to, approval of, or other action by any
governmental authority or agency, which action with respect
to this Agreement has not been taken and which is final and
nonappealable.

(g) Lender is not subject to the Small Loan Regulatory
Law and Small Loan Privilege Tax Law of the State of
Mississippi.

(h) Lender is not subject to the Mississippi Finance
Company Privilege Tax (Miss. Code Ann. Pargraph 27-21-1 et.
seq.) with respect to the Loan.

ARTICLE VI

TITLE TO COLLATERAL; SECURITY INTEREST

Section 6.01. Title to Collateral. Legal title to the
Collateral and any and all repairs, replacements, substitutions
and modifications to such Collateral shall be in Borrower or
either Guarantor. Borrower will, and will cause each Guarantor
to, at all times protect and defend, at its own cost and expense,
its title from and against all claims, liens and legal processes
of creditors of Borrower and Guarantos, and keep all Collateral
free and clear of all such claims, liens and processes.

Section 6.02. Security Interest in Collateral. This
Agreement is intended to constitute a security agreement within
the meaning of the UCC. As security for Borrower's payment to
Lender, as assignee of Issuer, of Loan Payments and all other
amounts payable to Lender hereunder, or any other obligation
(whether direct or indirect and whether now existing or hereafter
arising) to Lender or any of its affiliates, Borrower hereby
grants and agrees to cause each Guarantor to grant to Lender,
a security interest constituting a first lien on the Collateral,
all repairs, replacements, substitutions and modifications
thereto or thereof and all proceeds of the foregoing. Issuer
agrees and Borrower agrees and hereby agrees to cause each
Guarantor to execute such additional documents, including
financing statements, assignments, affidavits, mortgages, notices
and similar instruments, in form satisfactory to Lender, and take
such other actions that Lender deems necessary or appropriate to
establish and maintain the security interest created by this
Section, and Issuer and Borrower hereby designate and appoint
Lender as their agent, and grant to Lender a power of attorney
(which is coupled with an interest), to execute on behalf of
Issuer and Borrower, as the case may be, such additional
documents and to take such other actions. If requested by
Lender, Borrower shall obtain a landlord and/or mortgagee's
consent and waiver with respect to the property where the
Collateral is located. If requested by Lender, Borrower shall,
and shall cause each Guarantor to, conspicuously mark the
Collateral with appropriate lettering, labels or tags, and
maintain such markings, so as clearly to disclose Lender's
security interest in the Collateral.
<PAGE>
Section 6.03. Change in Name or Corporate Structure of
Borrower; Change in Location of Borrower's Principal Place of
Business. Borrower's chief executive office is located at the
address set forth above, and all of Borrower's records relating
to its business and the Collateral are kept at such location or
the locations of Guarantors identified below. Guarantors chief
executive offices are located at the following addresses and all
of Guarantors' records relating to their business are kept at
such location:

HAM Marine, Inc. Friede Goldman Offshore, Inc.
3400 Litton Road 600 Louise Street
Pascagoula, MS 39567 Pascagoula, MS 39581

Borrower hereby agrees to provide written notice to Lender and
Issuer of any change or proposed change in its or either
Guarantor's name, corporate structure, place of business or chief
executive office or change or proposed change in the location of
the Collateral. Such notice shall be provided thirty (30) days
in advance of the date that such change or proposed change is
planned to take effect except as otherwise provided herein.
Lender and Issuer hereby acknowledge the planned merger
of Friede Goldman Offshore, Inc. into HAM Marine, Inc. with HAM
Marine, Inc. being the surviving corporation which shall
immediately thereafter change its name to Friede Goldman
Offshore, Inc., and no further notice to Lender or Issuer of such
planned change in corporate name and structure shall be required.
Borrower and Guarantors do business, and have done business, only
under their own name and the trade names, if any, set forth on
the execution page hereof.

Section 6.04. Liens and Encumbrances to Title. Borrower
shall not, and shall not permit any Guarantor to, directly or
indirectly, create, incur, assume or suffer to exist any
mortgage, pledge, lien, charge, encumbrance, maritime lien or
claim on or with respect to the Collateral (together,
"Liens") other than the respective rights of Lender and Issuer as
herein provided. Borrower shall and shall cause each Guarantor
to promptly, at its own expense, take such action as may be
necessary duly to discharge or remove any such Lien. Borrower
shall reimburse Lender for any expenses incurred by Lender to
discharge or remove any Lien.

Section 6.05. Personal Property. The parties hereby agree
that the Collateral is, and during the period this Agreement is
in force will remain, personal property and, when subjected to
use by Borrower hereunder, will not be or become fixtures;
provided, however, that if contrary to the parties' intent the
Collateral is or may be deemed to be a fixture, Borrower and
Guarantors shall cause filings to be made with the applicable
government officials or filing offices to create and preserve for
Lender as assignee of Issuer a perfected first priority security
interest in the Collateral.

Section 6.06. Assignment of Insurance. As additional
security for the payment and performance of Borrower's
obligations hereunder, Borrower hereby assigns and shall cause
each Guarantor to assign to Lender, as assignee of Issuer, any
and all moneys (including, without limitation, proceeds of
insurance and refunds of unearned premiums) due or to become due
under, and all other rights of Borrower and Guarantors with
respect to, any and all policies of insurance now or at any time
hereafter covering the Collateral or any evidence thereof or any
business records or valuable papers pertaining thereto, and
Borrower hereby directs the issuer of any such policy to pay
all such moneys directly to Lender. Borrower hereby assigns and
shall cause each Guarantor
<PAGE>
to assing to Lender, as assignee of Issuer, any and all moneys
due or to become due with respect to any condemnation proceeding
affecting the Collateral. At any time, whether before or after
the occurrence of any Event of Default, Lender may (but need
not), in Lender's name or in Borrower's name, execute and deliver
proof of claim, receive all such moneys, endorse checks and other
instruments representing payment of such moneys, and adjust,
litigate, compromise or release any claim against the issuer of
any such policy or party in any condemnation proceeding.

Section 6.07. Occupancy. (a) Borrower hereby irrevocably
grants and shall cause each Guarantor to grant, to Lender the
right to occupy the property where the Collateral is located (the
"Premises") at any time after the occurrence and during the
continuance of an Event of Default.

(b) Lender may occupy the Premises only to hold, sell,
store, liquidate, realize upon or otherwise dispose of the
Collateral and for other purposes that Lender may in good faith
deem to be related or incidental purposes.

(c) The right of Lender to occupy the Premises shall cease
and terminate upon the earlier of (1) payment in full and
discharge of all obligations of Borrower and Issuer hereunder,
and (2) final sale or disposition of all of the Collateral and
delivery of all such Collateral to purchasers.

(d) Lender shall not be obligated to pay or account for any
rent or other compensation for the occupancy of the Premises.
Borrower will pay, or reimburse Lender for, and shall cause each
Guarantor to pay or reimburse Lender for, all taxes, fees,
duties, levies, charges and expenses at any time incurred by or
imposed upon Lender by reason of the execution, delivery,
existence, recordation, performance or enforcement of this
Section.

Section 6.08. Agreement as Financing Statement. To the
extent permitted by applicable law, a carbon, photographic or
other reproduction of this Agreement or of any financing
statements signed by signed by Borrower is sufficient as a
financing statement in any state to perfect the security
interests granted in this Agreement.

ARTICLE VII

AFFIRMATIVE COVENANTS OF BORROWER

So long as the Loan shall remain unpaid, Borrower will
comply with the following requirements:

Section 7.01. Reporting Requirements. Borrower will
deliver, or cause to be delivered, to Lender each of the
following, which shall be in form and detail acceptable to
Lender:

(a) as soon as available, and in any event within 120
days after the end of each fiscal year of Borrower and each
Guarantor, consolidated audited financial statements of
Borrower and each Guarantor with the unqualified opinion of
independent certified public accountants selected by
Borrower or either Guarantor and acceptable to Lender, which
annual financial statements shall include the balance sheet
of Borrower and each Guarantor
<PAGE>
as at the end of such fiscal year and the related statements
of income, retained earnings and cash flows of Borrower and
each Guarantor for the fiscal year then ended, all in
reasonable detail and prepared in accordance with generally
accepted accounting principles applied on a basis consistent
with the accounting practices applied in the financial
statements referred to in Article V hereof, together with
(i) a report stating that in connection with their audit,
nothing came to their attention that caused them to believe
that the Company was not in compliance with any of the
terms, covenants, provisions or conditions of Articles V,
VI, VII, and VIII inclusive, of the Loan Agreement dated
December 1, 1998, among Lender, Issuer, and Borrower insofar
as they relate to accounting matters except as specifically
stated; and (ii) a certificate of the chief financial
officer of Borrower and each Guarantor stating that such
financial statements have been prepared in accordance with
generally accepted accounting principles applied on a basis
consistent with the accounting practices reflected in the
annual financial statements referred to in Article V hereof
and whether or not such officer has knowledge of the
occurrence of any Default or Event of Default hereunder and,
if so, stating in reasonable detail the facts with respect
thereto;

(b) as soon as available and in any event within 90
days after the end of each fiscal quarter of Borrower and
each Guarantor, a consolidated unaudited/internal balance
sheet and statements of income and retained earnings of
Borrower and each Guarantoras at the end of and for such
month and for the year to date period then ended, in
reasonable detail and stating in comparative form the
figures for the corresponding date and periods in the
previous year, all prepared in accordance with generally
accepted accounting principles applied on a basis consistent
with the accounting practices reflected in the financial
statements referred to in Article V hereof and certified by
the chief financial officer of Borrower and each Guarantor,
subject to year-end audit adjustments; and accompanied by a
certificate of that officer stating (i) that such financial
statements have been prepared in accordance with generally
accepted accounting principles applied on a basis consistent
with the accounting practices reflected in the financial
statements referred to in Article V hereof, and (ii) whether
or not such officer has knowledge of the occurrence of any
Default or Event of Default hereunder not theretofore
reported and remedied and, if so, stating in reasonable
detail the facts with respect thereto;

(c) immediately after the commencement thereof, notice
in writing of all litigation and of all proceedings before
any governmental or regulatory agency affecting Borrower or
any Guarantor of the type described in Article V hereof or
which seek a monetary recovery against Borrower or any
Guarantor in excess of $500,000;

(d) as promptly as practicable (but in any event not
later than ten Business Days) after an officer of Borrower
obtains knowledge of the occurrence of any event that
constitutes a Default or an Event of Default hereunder or
under the Security Agreements, notice of such occurrence,
together with a detailed statement by a responsible officer
of Borrower of the steps being taken by Borrower to cure the
effect of such Default or Event of Default;

(e) promptly upon knowledge thereof, notice of any
loss or destruction of or
<PAGE>
damage to any portion of the Collateral or of any material
adverse change in any portion of the Collateral in an amount
greater than $100,000 on a single occurrence or amounting to
an aggregate of more than $500,000;

(f) promptly upon their distribution, copies of all
financial statements, reports and proxy statements that
Borrower shall have sent to its stockholders;

(g) promptly after the amending thereof, copies of any
and all amendments to its certificate of incorporation,
articles of incorporation or bylaws;

(h) promptly upon knowledge thereof, notice of the
violation by Borrower or any Guarantor of any law, rule or
regulation;

(i) promptly upon knowledge thereof, notice of any
material adverse change in the financial or operating
condition of Borrower or any Guarantor.

Section 7.02. Books and Records; Inspection and
Examination. Borrower will keep and will cause each Guarantor to
keep, accurate books of record and account for itself pertaining
to the Collateral and pertaining to Borrower's and such
Guarantor's business and financial condition and such other
matters as Lender may from time to time request in which true and
complete entries will be made in accordance with generally
accepted accounting principles consistently applied and, upon
request of Lender (on two (2) days notice if no event of default
has occurred), will permit any officer, employee, attorney or
accountant for Lender to audit, review, make extracts from, or
copy any and all corporate and financial books, records and
properties of Borrower and Guarantors at all times during
ordinary business hours, and to discuss the affairs of Borrower
and Guarantors with any of their directors, officers, employees
or agents. Borrower will permit and will cause each Guarantor
to permit Lender, or its employees, accountants, attorneys or
agents, to examine and copy any or all of its records and to
examine and inspect the Collateral at any time during Borrower's
or such Guarantor's business hours. Lender agrees to take normal
and reasonable precautions and exercise due care to maintain the
confidentiality of all non-public information provided to it by
Borrower or any of its subsidiaries in connection with this
Agreement and agrees and undertakes that neither it nor any of
its affiliates shall use any such information for any purpose or
in any manner other than pursuant to the terms contemplated by
this Agreement. Lender may disclose such information (i) at the
request of any regulatory authority or in connection with an
examination of Lender by any such authority; (ii) pursuant to
subpoena or other court process; (iii) when required to do so in
accordance with the provisions of any applicable law; and (iv) to
Lender's independent auditors and other professional auditors.

Section 7.03. Compliance With Laws; Environmental
Indemnity. Borrower will (a) comply and will cause each
Guarantor to comply with the requirements of applicable laws and
regulations, the noncompliance with which would materially and
adversely affect their business or its financial condition, (b)
comply and will cause each Guarantor to comply with all
applicable Environmental Laws and regulations and obtain any
permits, licenses or similar approvals required by any such laws
or regulations and (c) use and keep and cause each Guarantor to
use and keep the Collateral, and will require that others use and
keep the Collateral, only for lawful purposes, without
<PAGE>
violation of any federal, state or local law, statute or
ordinance. Borrower shall secure and shall cause each Guarantor
to secure all permits and licenses, if any, necessary for the
installation and operation of the Collateral. Borrower shall
comply and shall cause each Guarantor to comply in all respects
(including, without limitation, with respect to the use,
maintenance and operation of each item of the Collateral) with
all laws of the jurisdictions in which its operations involving
any component of Collateral may extend and of any legislative,
executive, administrative or judicial body exercising any power
or jurisdiction over the items of the Collateral or its interest
or rights under this Agreement. Borrower will indemnify, defend
and hold Lender harmless from and against any claims, loss or
damage to which Lender may be subjected as a result of any past,
present or future existence, use, handling, storage,
transportation or disposal of any hazardous waste or substance or
toxic substance by Borrower or on property owned, leased or
controlled by Borrower. This indemnification shall survive the
termination of this Agreement and payment of the indebtedness
hereunder and under the Bond.

Section 7.04. Payment of Taxes and Other Claims. Borrower
will pay or discharge and will cause each Guarantor to pay or
discharge, when due, (a) all taxes, assessments and governmental
charges levied or imposed upon it or upon its income or profits,
upon any properties belonging to it (including, without
limitation, the Collateral) or upon or against the creation,
perfection or continuance of the security interest created
pursuant to this Agreement, prior to the date on which
penalties attach thereto, (b) all federal, state and local taxes
required to be withheld by it, and (c) all lawful claims for
labor, materials and supplies which, if unpaid, might by law
become a lien or charge upon any properties of Borrower;
provided, that Borrower and Guarantors shall not be required to
pay any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by
appropriate proceedings. Borrower will pay, as the same
respectively come due, all taxes and governmental charges of any
kind whatsoever that may at any time be lawfully assessed or
levied against or with respect to the Collateral, as well as all
gas, water, steam, electricity, heat, power, telephone, utility
and other charges incurred in the operation, maintenance, use,
occupancy and upkeep of the Collateral.

Section 7.05. Maintenance of Collateral. (a) Borrower
shall and shall cause each Guarantor to, at their own expense,
maintain, preserve and keep the Collateral in good repair,
working order and condition, and each shall from time to time
make all repairs and replacements necessary to keep the
Collateral in such condition, and in compliance with state and
federal laws, ordinary wear and tear excepted. Borrower shall
and shall cause each Guarantor to maintain the Collateral in a
condition suitable for certification by the manufacturer thereof
(if certification is available) and in conformance with all
manufacturer's recommended maintenance requirements. In the
event that any parts or accessories forming part of any item or
items of Collateral become worn out, lost, destroyed, damaged
beyond repair or otherwise rendered unfit for use, Borrower or
either Guarantor, at their own expense and expeditiously, will
replace or cause the replacement of such parts or accessories
by replacement parts or accessories free and clear of all liens
and encumbrances and with a value and utility at least equal to
that of the parts or accessories being replaced (assuming that
such replaced parts and accessories were otherwise in good
working order and repair). All such replacement parts
and accessories shall be deemed to be incorporated immediately
into and to constitute an integral portion of the Collateral and,
as such, shall be subject to the terms of this Agreement.
Neither Lender nor Issuer shall have any responsibility in any of
these matters, or for the making of
<PAGE>
improvements or additions to the Collateral.

(b) Borrower will defend and will cause each Guarantor
to defend the Collateral against all claims or demands of
all persons (other than Lender) claiming the Collateral or
any interest therein.

(c) Borrower will keep and will cause each Guarantor
to keep the Collateral free and clear of all security
interests, liens and encumbrances except the security
interest created pursuant to this Agreement.

Section 7.06. Insurance and Indemnification. (a) Borrower
shall and shall cause each Guarantor to, at their own expense,
procure and maintain continuously in effect: (i) public liability
insurance for personal injuries, death or damage to or loss of
property arising out of or in any way relating to the Collateral
sufficient to protect Lender from liability in all events, with a
coverage limit of not less than $1,000,000 per occurrence unless
a different coverage minimum with respect to particular
Collateral is required by Lender, and (ii) insurance against such
hazards as Lender may require, including, but not limited to,
all-risk casualty and property insurance, in an amount equal
to the greater of the full replacement cost of the Collateral
with new Collateral having substantially similar specifications
or the applicable Prepayment Amount.

(b) If required by State law, Borrower shall carry and
shall cause each Guarantor to carry workers' compensation
insurance covering all employees on, in, near or about the
Collateral, and upon request, shall furnish to Lender
certificates evidencing such coverage.

(c) All insurance policies required by this Article
shall be taken out and maintained with insurance companies
acceptable to Lender; and shall contain a provision that the
insurer shall not cancel or revise coverage thereunder
without giving written notice to the insured parties at
least 30 days before the cancellation or revision becomes
effective. No insurance shall be subject to any
co-insurance clause. Each insurance policy required by this
Article shall name Lender as an additional insured party and
loss payee without regard to any breach of warranty or other
act or omission of Borrower or either Guarantor and shall
include a lender's loss payable endorsement for the benefit
of Lender. Prior to the delivery of Collateral, Borrower
shall deposit and shall cause each Guarantor to deposit with
Lender evidence satisfactory to Lender of such insurance
and, prior to the expiration thereof, shall provide Lender
evidence of all renewals or replacements thereof.

(d) As among Lender, Borrower and Issuer, Borrower
assumes all risks and liabilities from any cause whatsoever,
whether or not covered by insurance, for loss or damage to
any Collateral and for injury to or death of any person or
damage to any property, whether such injury or death be with
respect to agents or employees of Borrower, the Guarantors
or of third parties, and whether such property damage be to
Borrower's property, the Guarantor's property or the
property of others.

(e) Whether or not covered by insurance, Borrower
hereby assumes responsibility for and agrees to reimburse
Lender and Issuer for and will indemnify, defend and hold
Lender and Issuer
<PAGE>
harmless from and against all liabilities, obligations,
losses, damages, penalties, claims, actions, costs and
expenses (including reasonable attorneys' fees) of
whatsoever kind and nature, imposed on, incurred by or
asserted against Lender or Issuer that in any way relate to
or arise out of this Agreement, the transactions
contemplated hereby and the Collateral, including but not
limited to, (i) the selection, manufacture, purchase,
acceptance or rejection of Collateral or the ownership of
the Collateral, (ii) the delivery, lease, possession,
maintenance, use, condition, return or operation of the
Collateral, (iii) the condition of the Collateral sold or
otherwise disposed of after possession by Borrower or either
Guarantor, (iv) any patent or copyright infringement, (v)
the conduct of Borrower or any Guarantor, their officers,
employees and agents, (vi) a breach of Borrower of any of
its covenants or obligations hereunder, (vii) a breach by
either Guarantor of any covenant or obligation under either
Security Agreement and (viii) any claim, loss, cost or
expense involving alleged damage to the environment relating
to the Collateral, including, but not limited to
investigation, removal, cleanup and remedial costs. All
amounts payable by Borrower pursuant to the immediately
preceding sentence shall be paid immediately upon demand of
Issuer or Lender, as the case may be, but in no event prior
to Lender or Issuer (as the case may be) actually incurring
the liability or expense. This provision shall survive the
termination of this Agreement.

Section 7.07. Preservation of Corporate Existence.
Borrower will preserve and maintain and shall cause each
Guarantor to preserve and maintain its corporate existence and
all of its rights, privileges and franchises necessary or
desirable in the normal conduct of its business; and shall
conduct its business in an orderly, efficient and regular manner.

Section 7.08. Performance by Lender. If Borrower at any
time fails to perform or observe any of the covenants or
agreements contained in this Agreement, and if such failure shall
continue for a period of 10 calendar days after Lender gives
Borrower written notice thereof (or in the case of the agreements
contained in Section 7.06 hereof, immediately upon the occurrence
of such failure, without notice or lapse of time), Lender may,
but need not, perform or observe such covenant on behalf and in
the name, place and stead of Borrower (or, at Lender's option, in
Lender's name) and may, but need not, take any and all other
actions which Lender may reasonably deem necessary to cure or
correct such failure (including, without limitation, the payment
of taxes, the satisfaction of security interests, liens or
encumbrances, the performance of obligations owed to account
debtors or other obligors, the procurement and maintenance of
insurance, the execution of assignments, security agreements and
financing statements, and the endorsement of instruments); and
Borrower shall thereupon pay to Lender on demand the amount of
all moneys expended and all costs and expenses (including
reasonable attorneys' fees and legal expenses) incurred by Lender
in connection with or as a result of the performance or
observance of such agreements or the taking of such action
by Lender, together with interest thereon from the date expended
or incurred at the lesser of 12% per annum or the highest rate
permitted by law. To facilitate the performance or observance by
Lender of such covenants of Borrower, Borrower hereby irrevocably
appoints Lender, or the delegate of Lender, acting alone, as the
attorney in fact of Borrower with the right (but not the duty)
from time to time to create, prepare, complete, execute, deliver,
endorse or file in the name and on behalf of Borrower any and all
instruments, documents, assignments, security agreements,
financing statements, applications for insurance and other
agreements and writings required to be obtained, executed,
delivered or endorsed by Borrower under this Agreement.
<PAGE>

ARTICLE VIII

NEGATIVE COVENANTS OF BORROWER

So long as the Loan and the Bond shall remain unpaid,
Borrower agrees that:

Section 8.01. Lien. Borrower will not create, incur or
suffer to exist or permit either Guarantor to create, incur or
suffer to exist any mortgage, deed of trust, pledge, lien,
maritime lien, security interest, assignment or transfer upon or
of any of the Collateral except for the security interest created
pursuant to this Agreement, the Security Agreements and the Ship
Mortgage.

Section 8.02. Sale of Assets. Borrower will not sell,
lease, assign, transfer or otherwise dispose of or permit either
Guarantor to sell, lease, assign, transfer or otherwise dispose
of all or a substantial part of its assets or of any of the
Collateral or any interest therein (whether in one transaction or
in a series of transactions).

Section 8.03. Consolidation and Merger.

Borrower will not, and will not permit any Guarantor to,
consolidate with or merge into any person, or permit any other
person to merge into it, or acquire (in a transaction analogous
in purpose or effect to a consolidation or merger) all or
substantially all of the assets of any other person; provided,
however, either Guarantor shall be permitted to participate in a
transaction described hereunder if:

(a) the resulting entity is a wholly owned subsidiary
of Borrower;

(b) Lender and Issuer shall have received an opinion
of counsel to the resulting entity as to the enforceability
of this Agreement against such entity;

(d) Borrower shall comply with the following financial
covenants:

(i) Ratio of Debt to Tangible Net Worth.
Borrower, on a consolidated basis, will maintain at all
times its ratio of Debt (as defined below) to Tangible
Net Worth (as defined below) at not more than 4.50 to
1.00. "Debt" shall mean (i) all items of indebtedness
or liability which in accordance with generally
accepted accounting principles or federal tax law would
be included in determining total liabilities as shown
on the liabilities side of a balance sheet, (ii)
indebtedness secured by any mortgage, pledge, lien or
security interest existing on property owned by
Borrower, whether or not the indebtedness secured
thereby shall have been assumed, and (iii) guaranties
and endorsements (other than for purposes of collection
in the ordinary course of business) by Borrower and
other contingent obligations of Borrower in respect of,
or to purchase or otherwise acquire, indebtedness of
others. "Tangible Net Worth" means the excess of:
<PAGE>
(a) the tangible assets of Borrower, which, in
accordance with generally accepted accounting principles,
are tangible assets, after deducting adequate reserves in
each case where, in accordance with generally accepted
accounting principles, a reserve is proper over

(b) all Debt of Borrower;

provided, however, that (i) inventory shall be taken into account
on the bas is of the cost (determined on a first-in, first-out
basis) or current market value, whichever is lower, (ii) in no
event shall there be included as such tangible assets patents,
trademarks, trade names, copyrights, licenses, good will,
advances or loans to, or receivables from, directors, officers,
employees or affiliates, prepaid or intangible assets, amounts
relating to covenants not to compete, pensions assets, deferred
charges or treasury stock or any securities or Debt of Borrower
or any other securities unless the same are readily marketable in
the United States of America or entitled to be used as a credit
against federal income tax liabilities, (iii) securities included
as such tangible assets shall be taken into account at
their current market price or cost, whichever is lower, and (iv)
any write-up in the book value of any assets shall not be taken
into account.

(ii) Debt Service Coverage Ratio. Borrower and
the resulting entity, on a consolidated basis, shall
have, as of the effective date of the transaction and
for each fiscal year thereafter, will maintain Debt
Service Coverage Ratio (as defined below) at not less
than 3.00 to 1.00. "Debt Service Coverage Ratio" means
the ratio of (i) Borrower's Cash Flow Available for
Debt Service (as defined below) to (ii) Borrower's Debt
Service (as defined below). "Cash Flow Available for
Debt Service" of Borrower means, with respect to the
applicable period of determination, the Borrower's
income, plus interest expense, depreciation,
amortization and other non-cash charges. "Debt
Service" of Borrower means, with respect to the
applicable period of determination, the aggregate of
(i) interest expense of Borrower, (ii) all installments
of principal on Debt of Borrower that are due on demand
or during the period of determination, (iii) all
installments of rent under capitalized lease
obligations (to the extent not already accounted for in
computation of net income or Debt) of Borrower that are
due on demand or during the period of determination and
(iv) distributions and dividends to stockholders and
advances to affiliates of Borrower during the period of
determination.

(iii) Tangible Net Worth. Borrower, on a
consolidated basis, will maintain at all times its
Tangible Net Worth at not less than $60,000,000.

(iv) Total Assets. Borrower, on a consolidated
basis, shall maintain Total Assets of not less than
$250,000,000. Total Assets shall be determined in
accordance with generally accepted accounting
principles.

Section 8.04. Accounting. Borrower will not, and will not
permit any Guarantor to, adopt, permit or consent to any material
change in accounting principles or any change in its fiscal year
other than as required by generally accepted accounting
principles unless Borrower provides restated financial statements
prepared on a consistent basis and satisfies the financial
covenants contained in Section 8.03 hereof with and without
giving effect to such change.

Section 8.05. [This section intentionally omitted.]
<PAGE>
Section 8.06. Other Defaults. Borrower will not, and will
not permit any Guarantor to, permit any breach, default or event
of default to occur under any note, loan agreement, indenture,
lease, mortgage, contract for deed, security agreement or other
contractual obligation binding upon Borrower or any Guarantor or
any judgment, decree, order or determination applicable to
Borrower or any Guarantor.

Section 8.07. Place of Business. Borrower will not permit
any of the Collateral or any records pertaining to the Collateral
to be located in any state or area in which, in the event of such
location, a financing statement covering such Collateral would be
required to be, but has not in fact been, filed in order to
perfect the security interest created pursuant to this Agreement.

Section 8.08. Modifications and Substitutions. (a)
Borrower will not and will not permit either Guarantor to make
any material alterations, modifications or additions to the
Collateral which cannot be removed without materially damaging
the functional capabilities or economic value of the Collateral.
Upon return of the Collateral to Lender and at the request of
Lender, Borrower, at its sole cost and expense, will remove all
alterations, modifications and additions and repair the
Collateral as necessary to return the Collateral to the condition
in which it was furnished, ordinary wear and tear and permitted
modifications excepted.

(b) Notwithstanding the provisions of subparagraph (a)
of this section, Borrower may, with the prior written
consent of Lender, substitute for parts, elements, portions
or all of the Collateral, other parts, elements, portions,
Collateral or facilities; provided, however, that any
substitutions made pursuant to Borrower's obligations to
make repairs referenced under any provision of this
Agreement shall not require such prior written consent.
Borrower shall provide and shall cause each Guarantor to
provide such documents or assurances as Lender may
reasonably request to maintain or confirm the security
interest assigned to Lender in the Collateral as so modified
or substituted.

Section 8.09. Use of the Collateral. Borrower will not and
will not permit either Guarantor to install, use, operate or
maintain the Collateral improperly, carelessly, in violation of
any applicable law or in a manner contrary to that contemplated
by this Agreement.

Section 8.10. Location of the Collateral. Neither the
Borrower nor the Guarantors shall remove the Collateral from
Jackson County, Mississippi without prior approval of MBFC.
<PAGE>
ARTICLE IX

DAMAGE AND DESTRUCTION; USE OF NET PROCEEDS

Borrower shall provide and shall cause each Guarantor to
provide a complete written report to Lender immediately upon any
loss, theft, damage or destruction of any Collateral and of any
accident involving any Collateral. If all or any part of the
Collateral is lost, stolen, destroyed or damaged beyond repair
("Damaged Collateral"), Borrower shall and shall cause each
Guarantor to, as soon as practicable after such event either: (a)
replace the same at Borrower's or such Guarantor's sole cost and
expense with Collateral having substantially similar depreciable
life and of equal or greater value to the Damaged Collateral
immediately prior to the time of the loss occurrence, such
replacement Collateral to be subject to Lender's approval,
whereupon such replacement Collateral shall be substituted in
this Agreement and the other related documents by appropriate
endorsement or amendment; or (b) pay the applicable Prepayment
Amount of the Damaged Collateral. Borrower shall notify and
shall cause each Guarantor to notify Lender of which course of
action it will take within 15 calendar days after the loss
occurrence. If, within 45 calendar days of the loss occurrence,
(a) Borrower or either Guarantor fails to notify Lender; (b)
Borrower or either Guarantor and Lender fail to execute an
amendment to this Agreement to delete the Damaged Collateral and
add the replacement Collateral or (c) Borrower or either
Guarantor fails to pay the applicable Prepayment Amount, then
Lender may, at its sole discretion, declare the applicable
Prepayment Amount to be immediately due and payable, and Borrower
or the appropriate Guarantor is required to pay the same.
The Net Proceeds of insurance with respect to the Damaged
Collateral shall be made available by Lender to be applied to
discharge Borrower's obligation under this Article. The payment
of the Prepayment Amount and the termination of Lender's interest
in the Damaged Collateral is subject to the terms of Section 2.07
hereof. For purposes of this Article, the term "Net Proceeds"
shall mean the amount remaining from the gross proceeds of any
insurance claim or condemnation award after deducting all
expenses (including reasonable attorneys' fees) incurred in the
collection of such claim or award.

ARTICLE X

ASSIGNMENT, SUBLEASING AND SELLING

Section 10.01. Assignment by Lender. This Agreement, and
the obligations of Borrower to make payments hereunder, may be
assigned and reassigned in whole or in part to one or more
assignees or subassignees (who shall be purchaser of the Bond or
an interest therein) by Lender at any time subsequent to its
execution, without the necessity of obtaining the consent of
Issuer or Borrower; provided, however, that no such assignment or
reassignment shall be effective unless and until (a) Issuer and
Borrower shall have received notice of the assignment or
reassignment disclosing the name and address of the assignee or
subassignee, which notice Issuer shall maintain as evidence
of the ownership and registration of the Bond, and (b) in the
event that such assignment or reassignment is made to a bank or
trust company as trustee for holders of certificates representing
interests in this Agreement and the Bond, such bank or trust
company agrees to maintain, or cause to be maintained, a
book-entry system by which a record of the names and addresses of
such holders as of any particular time is kept and agrees, upon
request of Issuer or Borrower, to furnish such
<PAGE>
information to Issuer or Borrower. Upon receipt of notice of
assignment, Borrower will reflect in a book-entry the assignee
designated in such notice of assignment, and shall agree to make
all payments to the assignee designated in the notice of
assignment, notwithstanding any claim, defense, setoff or
counterclaim whatsoever (whether arising from a breach of this
Agreement or otherwise) that Issuer and Borrower may from time to
time have against Lender or the assignee. Issuer and Borrower
agree to execute all documents, including notices of assignment
and chattel mortgages or financing statements, which may be
reasonably requested by Lender or its assignee to protect their
interest in the Collateral and in this Agreement.

Section 10.02. No Sale or Assignment by Borrower. This
Agreement and the interest of Borrower or Guarantors in the
Collateral may not be sold, assumed, assigned or encumbered by
Borrower or either Guarantor.

ARTICLE XI

EVENTS OF DEFAULT AND REMEDIES

Section 11.01. Events of Default. The following constitute
"Events of Default" under this Agreement:

(a) failure by Borrower to pay to Lender, as assignee
of Issuer, when due any Loan Payment or to pay any other
payment required to be paid hereunder and the continuation
of such failure for a period of 10 days;

(b) failure by Borrower to maintain insurance on the
Collateral in accordance with Section 7.06 hereof;

(d) failure by Borrower, any Guarantor or Issuer to
observe and perform any other covenant, condition or
agreement contained herein, in the Escrow Agreement, in the
Paying Agent Agreement, in either Guaranty or in any other
document or agreement executed in connection herewith on its
part to be observed or performed for a period of 30 days
after written notice is given to Borrower, any Guarantor or
Issuer, as the case may be, specifying such failure and
requesting that it be remedied; provided, however, that, if
the failure stated in such notice cannot be corrected within
such 30-day period, Lender will not unreasonably withhold
its consent to an extension of such time if corrective
action is instituted by Borrower or Issuer, as the case may
be, within the applicable period and diligently pursued
until the default is corrected;

(e) initiation by Issuer of a proceeding under any
federal or state bankruptcy or insolvency law seeking relief
under such laws concerning the indebtedness of Issuer;

(f) Borrower or either Guarantor shall be or become
insolvent, or admit in
<PAGE>
writing its inability to pay its or his debts as they
mature, or make an assignment for the benefit of creditors;
or Borrower or either Guarantor shall apply for or consent
to the appointment of any receiver, trustee or similar
officer for it or for all or any substantial part of its
property; or such receiver, trustee or similar officer shall
be appointed without the application or consent of Borrower
or either Guarantor, as the case may be; or Borrower or
either Guarantor shall institute (by petition, application,
answer, consent or otherwise) any bankruptcy, insolvency,
reorganization, arrangement, readjustment of debt,
dissolution, liquidation or similar proceeding relating to
it under the laws of any jurisdiction; or any such
proceeding shall be instituted (by petition, application or
otherwise) against Borrower or either Guarantor; or any
judgment, writ, warrant of attachment or execution or
similar process shall be issued or levied against a
substantial part of the property of Borrower or either
Guarantor;

(g) good faith determination by Lender that any
representation or warranty made by Borrower, Issuer or
either Guarantor herein, in the Paying Agent Agreement, in
either Security Agreement, in the Ship Mortgage or in any
other document executed in connection herewith was untrue in
any material respect when made;

(h) the occurrence of a default or an event of default
under any instrument, agreement or other document evidencing
or relating to any indebtedness or other monetary obligation
of Borrower or either Guarantor in an amount greater than
$100,000, and the continuation of such default for a period
of five (5) days;

(i) either Guarantor shall repudiate, purport to
revoke or fail to perform such Guarantor's obligations under
such Guaranty, and the continuation of such default for a
period of five (5) days; or

(j) a default or an event of default under any
agreement between or among HAM Marine, Inc and General
Electric Capital Corporation or its affiliates, including
(without limitation) the Promissory Note and First Preferred
Mortgage dated February 27, 1998.

Section 11.02. Remedies on Default. Whenever any Event of
Default shall have occurred and be continuing, Lender, as
assignee of Issuer, shall have the right, at its sole option
without any further demand or notice, to take any one or any
combination of the following remedial steps insofar as the same
are available to secured parties under Article 9 of the UCC in
effect in the State from time to time and which are otherwise
accorded to Lender, as assignee of Issuer, by applicable law:

(a) by notice to Issuer and Borrower, declare the
entire unpaid principal amount of the Loan and the Bond then
outstanding, all interest accrued and unpaid thereon and all
amounts payable under this Agreement to be forthwith due and
payable, whereupon the Loan, all such accrued interest and
all such amounts shall become and be forthwith due and
payable, without presentment, notice of dishonor, protest or
further notice of any kind, all of which are hereby
expressly waived by Borrower;

(b) take possession of the Collateral wherever
situated, without any court order
<PAGE>
or other process of law and without liability for entering
the premises, and lease, sublease or make other disposition
of the Collateral for use over a term in a commercially
reasonable manner, all for the account of Lender, provided
that Borrower shall remain directly liable for the
deficiency, if any, between the rent or other amounts paid
by a lessee or Borrower of the Collateral pursuant to such
lease or sublease during the same period of time, after
deducting all costs and expenses, including reasonable
attorneys' fees and expenses, incurred with respect to the
recovery, repair and storage of the Collateral during such
period of time;

(c) take possession of the Collateral wherever
situated, without any court order or other process of law
and without liability for entering the premises, and sell
the Collateral in a commercially reasonable manner. All
proceeds from such sale shall be applied in the following
manner:

FIRST, to pay all proper and reasonable costs and
expenses associated with the recovery, repair, storage
and sale of the Collateral, including reasonable
attorneys' fees and expenses;

SECOND, to pay (i) Lender the amount of all unpaid
Loan Payments or other obligations (whether direct or
indirect owed by Borrower to Lender), if any, which are
then due and owing, together with interest and late
charges thereon, (ii) Lender the then applicable
Prepayment Amount (taking into account the payment of
past-due Loan Payments as aforesaid), plus a pro rata
allocation of interest, at the rate utilized to
calculate the Loan Payments, from the next preceding
due date of a Loan Payment until the date of payment by
the buyer, and (iii) any other amounts due hereunder,
including indemnity payments, taxes, charges,
reimbursement of any advances and other amounts payable
to Lender or Issuer hereunder; and

THIRD, to pay the remainder of the sale proceeds,
purchase moneys or other amounts paid by a buyer of the
Collateral to Borrower;

(d) proceed by appropriate court action to enforce
specific performance by Issuer or Borrower of the applicable
covenants of this Agreement or to recover for the breach
thereof, including the payment of all amounts due from
Borrower. Borrower shall pay or repay to Lender or Issuer
all costs of such action or court action, including, without
limitation, reasonable attorneys' fees;

(e) exercise all rights and remedies available under
the Guaranties, the Security Agreements and the Ship
Mortgages.

(f) take whatever action at law or in equity may
appear necessary or desirable to enforce its rights with
respect to the Collateral. Borrower shall pay or repay to
Lender or Issuer all costs of such action or court action,
including, without limitation, reasonable attorneys' fees.

Notwithstanding any other remedy exercised hereunder,
Borrower shall remain obligated to
<PAGE>
pay to Lender any unpaid portion of the Prepayment Amount.

Section 11.03. Return of Collateral. Upon an Event of
Default, Borrower shall and shall cause Guarantors to, within 10
calendar days after notice from Lender, at its own cost and
expense: (a) perform any testing and repairs required to place
the Collateral in the condition required by Article VII; (b) if
deinstallation, disassembly or crating is required, cause the
Collateral to be deinstalled, disassembled and crated by an
authorized manufacturer's representative or such other
service person as is satisfactory to Lender; and (c) deliver the
Collateral to a location specified by Lender, freight and
insurance prepaid by Borrower. If Borrower or any Guarantor
refuses to deliver the Collateral in the manner designated,
Lender may enter upon Borrower's or Guarantor's premises
where the Collateral is kept and take possession of the
Collateral and charge to Borrower the costs of such taking.
Borrower hereby expressly waives any damages occasioned by such
taking.

Section 11.04. No Remedy Exclusive. No remedy herein
conferred upon or reserved to Lender or Issuer is intended to be
exclusive and every such remedy shall be cumulative and shall be
in addition to every other remedy given under this Agreement or
now or hereafter existing at law or in equity. No delay or
omission to exercise any right or power accruing upon any Event
of Default shall impair any such right or power or shall be
construed to be a waiver thereof, but any such right or power may
be exercised from time to time and as often as may be deemed
expedient. In order to entitle Lender or Issuer to exercise any
remedy reserved to it in this Article, it shall not be necessary
to give any notice other than such notice as may be required by
this Article. All remedies herein conferred upon or reserved to
Lender or Issuer shall survive the termination of this Agreement.

Section 11.05. Late Charge. Any Loan Payment not paid by
Borrower on the due date thereof shall, to the extent permissible
by law, bear a late charge equal to the lesser of four cents
($.04) per dollar of the delinquent amount or the lawful maximum,
and Borrower shall be obligated to pay the same immediately upon
receipt of Lender's written invoice therefor.

ARTICLE XII

THE ACT

The parties hereto acknowledge that Borrower has been
induced to proceed with the acquisition of the Collateral in part
by the benefits conferred by the Act. Issuer hereby agrees that
Borrower shall be permitted to take advantage of all of the
benefits provided by the Act to the fullest extent therein set
forth subject to the rules and regulations of Issuer. Issuer
agrees that it will not take any action to limit, curtail or
otherwise make unavailable to Borrower any of such benefits
available under the Act. This Agreement shall constitute a
"Financing Agreement" under Section 57-10-409 of the Act.

With respect to benefits conferred by the Act referenced in
this Article XII the following shall apply:

(a) the maximum benefits accruing in any calendar year
with respect to the income tax credit (other than any
credits which may be carried forward to future years
<PAGE>
pursuant to the Act) shall not exceed the Loan Payments
during such year and the fees and expenses of Escrow Agent
together with the Administration Expenses which are paid
during such year, provided, however, the tax credit allowed
under the Act shall not exceed 80% of the amount of taxes
due the State of Mississippi prior to the application of the
credit as provided in Section 27-7-22.3 of the Mississippi
Code of 1972, as amended;

(b) any income tax credit benefit claimed or received
by Borrower in connection with any Acquisition Costs shall
prevent such cost (or a portion thereof) from generating a
deduction under the laws of the State in order to determine
the taxable income of the Borrower in the State;

(c) The Paying Agent shall provide to Issuer not later
than 90 days after the end of each calendar year, with a
certificate setting forth the amount of all payments made to
Lender with respect to the Loan, whether for Loan Payments
or other sums due hereunder;

(d) the income tax credit benefits accruing to the
Borrower under this Article XII shall cease in the event:
(i) a Default should occur under this Agreement; and (ii)
Borrower should fail to operate the Collateral in connection
with Borrower's operations at its Jackson County,
Mississippi facility for a period of nine consecutive months
following acquisition of the Collateral, except for force
majeure, strikes, lockouts, damage, destruction, act of God
or in general, reasons beyond Borrower's reasonable control
excepting, however, general economic conditions.

(e) Borrower agrees to comply with the terms and
provisions of the Act in all respects with respect to the
benefits available under the Act;

(f) the income tax benefits or credits available under
the Act shall cease to accrue on the date the principal and
interest on the Loan are paid in full whether at maturity or
by way of prepayment and any benefits for credits carried
forward as permitted by the Act shall be available to
Borrower for three years following the date upon which the
credit was earned as provided in 27-7-22.3 of the
Mississippi Code of 1972, as amended;

(g) the income tax credit benefits accruing to
Borrower under this Article XII shall be limited to the
annual Loan Payments and other fees and expenses of Escrow
Agent paid for such year together with Administration
Expenses paid during such year and shall be reduced by the
amount of surplus funds which shall be used to prepay this
Lease-Purchase as provided for in Section 2.07 of this
Agreement;

(h) Borrower will report to the Mississippi Employment
Security Commission ("MESC") its employees as required by
law, and shall annually report to Issuer the average number
of employees reported for each year the MESC.; and

(i) In addition to the income tax credit benefits
under the Act, all personal property purchased with Loan
Proceeds (or reimbursed with Loan Proceeds) will be subject
to the full sales and use tax exemption set forth in
Sections 57-10-255, 439 of the Act. This
<PAGE>
exemption shall not apply to the contractor's tax imposed by
Section 27-65-21 of the Mississippi Code.

This shall be done for each year after the year in which
acquisition of the Collateral was induced for financing by
Issuer.

(1) for purposes of determining the income tax
benefits to which the Borrower is eligible under the Act,
the following definitions shall apply:

(i) "Base Employment" ("BE") means the average
number of employees of Borrower in the State during the
preceding 12-month period preceding the month which the
Borrower is induced for financing by the Issuer, as
reported by Borrower to the MESC.

(ii) "Base Investment" ("BI") means the present
true value of the capital assets owned or leased by
Borrower within the State as determined by the Tax
Assessor of each County in which Borrower owns or
leases capital assets related to manufacturing,
processing, distribution, warehousing, facilities or
corporate or regional offices.

(iii)"Future Employment" ("FE") means the average
number of employees of Borrower in the State after the
Collateral is acquired, which may be an estimate for
the first 12 months after acquisition, and as reported
by Borrower to the MESC over each 12-month period
thereafter.

(iv) "Future Investment" ("FI") means the sum of
(A) the Base Investment; (B) the Acquisition Costs paid
with Loan Proceeds; and (C) funds of Borrower used to
pay Acquisition Costs.

(2) Borrower represents and warrants that as of the
date of this Agreement that:

(i) the Base Employment is ________ employees and
the Base Investment is $__________; and

(ii) Borrower reasonably anticipates that the
Future Employment for the first 12 months after
acquisition of the Collateral will be employees, which
represents increased employment of employees in
connection with acquisition of the Collateral, and the
Future Investment will be $________.

(3) The percentage of Borrower's total state income
tax liability in which the Borrower shall be entitled to an
income tax credit provided by the Act shall be determined
annually as follows: (i) (FE - BE) DIVIDED BY FE = Employment
Valuation Percentage ("EVP");(ii) (FI - BI) DIVIDED BY FI =
Investment Valuation Percentage ("IVP"); and (iii) [(EVP x
2) + IVP] DIVIDED BY 3 = Percentage of income tax liability of
Borrower to which Borrower is entitled to an income tax
credit.
<PAGE>
Provided, however, the tax credit allowed under the Act
shall not exceed 80% of the amount of taxes due the State of
Mississippi prior to the application of the credit as
provided in Section 27-7-22.3 of the Mississippi Code of
1972, as amended.

With respect to the benefits that may accrue to Borrower
under this Article XII, Borrower acknowledges and agrees that the
Issuer makes no representation, warranty or covenant regarding
the enforceability of the Borrower's rights to receive the
benefits, the extent that such benefits may be received nor the
term under which the Borrower may be entitled to receive the
benefits.

Benefits under the Act shall be reduced by the amount of
surplus proceeds, if any, remaining after completion of the
Project, which surplus proceeds shall be applied as provided in
this Lease and the Escrow Agreement.

The income tax credit benefits under the Act shall be
applicable and available to the Borrower and\or its subsidiaries.
The manner in which the credits are applied to the subsidiaries
shall be approved by the State Tax Commission.

ARTICLE XIII

MISCELLANEOUS

Section 13.01. Costs and Expenses of Lender. Borrower
shall pay to Lender, in addition to the Loan Payments payable by
Borrower hereunder, such amounts in each year as shall be
required by Lender in payment of any reasonable costs and
expenses incurred by Lender as a result of action necessitated by
requests of the Borrower or the Issuer acting on a request of the
Borrower. In the event of a default under this Agreement,
Borrower shall pay to Lender, in addition to the Loan Payments
payable by Borrower hereunder, such amounts as shall be required
by Lender in payment of any reasonable costs and expenses
incurred by Lender in connection with the performance or
enforcement of this Agreement, including but not limited to
payment of all reasonable fees, costs and expenses of Lender in
connection with the Collateral, expenses (including, without
limitation, attorneys' fees and disbursements), fees of auditors
or attorneys, insurance premiums not otherwise paid hereunder and
all other direct and necessary costs of Lender or charges
required to be paid by it in order to comply with the terms of,
or to enforce its rights under, this Agreement. Such costs and
expenses shall be billed to Borrower by Lender from time to time,
together with a statement certifying that the amount so billed
has been paid by Lender for one or more of the items above
described, or that such amount is then payable by Lender for such
items. Amounts so billed shall be due and payable by Borrower
within thirty (30) days after receipt of the bill by Borrower.
Nothing herein shall obligate Borrower to pay administrative or
"overhead" costs incurred by Lender.

Section 13.02. Disclaimer of Warranties. LENDER AND ISSUER
MAKE NO WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS
TO THE VALUE, DESIGN, CONDITION, MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE
<PAGE>
OR FITNESS FOR USE OF THE COLLATERAL, OR ANY OTHER WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT THERETO. In no
event shall Lender or Issuer be liable for any loss or damage in
connection with or arising out of the Collateral or the
existence, furnishing, functioning or Borrower's use of any item
or products or services provided for in this Agreement.

Section 13.03. Notices. All notices, certificates,
requests, demands and other communications provided for hereunder
or under the Escrow Agreement or the Paying Agent Agreement shall
be in writing and shall be (a) personally delivered, (b) sent by
first class United States mail, (c) sent by overnight courier of
national reputation, or (d) transmitted by telecopy, in each case
addressed to the party to whom notice is being given at its
address as set forth above and, if telecopied, transmitted to
that party at its telecopier number set forth above or, as to
each party, at such other address or telecopier number as may
hereafter be designated by such party in a written notice to the
other party complying as to delivery with the terms of this
Section. All such notices, requests, demands and other
communications shall be deemed to have been given on (a) the date
received if personally delivered, (b) when deposited in the mail
if delivered by mail, (c) the date sent if sent by overnight
courier, or (d) the date of transmission if delivered by
telecopy. If notice to Borrower of any intended disposition of
the Collateral or any other intended action is required by
law in a particular instance, such notice shall be deemed
commercially reasonable if given (in the manner specified in this
Section) at least 10 calendar days prior to the date of intended
disposition or other action.

Section 13.04. Further Assurance and Corrective
Instruments. Issuer and Borrower hereby agree that they will,
from time to time, execute, acknowledge and deliver, or cause to
be executed, acknowledged and delivered, such further acts,
instruments, conveyances, transfers and assurances, as Lender
reasonably deems necessary or advisable for the implementation,
correction, confirmation or perfection of this Agreement, the
Escrow Agreement or the Paying Agent Agreement and any rights of
Lender hereunder or thereunder.

Section 13.05. Binding Effect; Time of the Essence. This
Agreement shall inure to the benefit of and shall be binding upon
Lender, Issuer, Borrower and their respective successors and
assigns. Time is of the essence.

Section 13.06. Severability. In the event any provision of
this Agreement shall be held invalid or unenforceable by any
court of competent jurisdiction, such holding shall not
invalidate or render unenforceable any other provision hereof.

Section 13.07. Amendments. To the extent permitted by law,
the terms of this Agreement shall not be waived, altered,
modified, supplemented or amended in any manner whatsoever except
by written instrument signed by the parties hereto, and then such
waiver, consent, modification or change shall be effective only
in the specific instance and for the specific purpose given.

Borrower and Lender agree to amend Exhibit A to this
Agreement to more specifically identify the Collateral being
financed hereunder at such time as such identification is
possible. Such amendment shall be effected by written instrument
signed by Borrower and Lender. Issuer's consent
<PAGE>
to the amendment referred to in this paragraph shall not be
required. Such amendment may take the form of a Payment Request
Form in the form attached to the Escrow Agreement as Exhibit A
executed by Borrower and Lender.

Section 13.08. Execution in Counterparts. This Agreement
may be executed in several counterparts, each of which shall be
an original and all of which shall constitute one and the same
instrument, and any of the parties hereto may execute this
Agreement by signing any such counterpart, provided that only the
original marked "Original: 1 of 6" on the execution page thereof
shall constitute chattel paper under the UCC.

Section 13.09. Applicable Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State.

Section 13.10. Captions. The captions or headings in this
Agreement are for convenience only and in no way define, limit or
describe the scope or intent of any provisions or sections of
this Agreement.

Section 13.11. Entire Agreement. This Agreement, the
Paying Agent Agreement, the Escrow Agreement, each Security
Agreement, the Ship Mortgage, each Guaranty and the exhibits
hereto and thereto constitute the entire agreement among Lender,
Issuer, Borrower, Guarantors and Escrow Agent. There are no
understandings, agreements, representations or warranties,
express or implied, not specified herein or in such documents
regarding this Agreement or the Collateral financed hereby.

Section 13.12. Usury. It is the intention of the parties
hereto to comply with any applicable usury laws; accordingly, it
is agreed that, notwithstanding any provisions to the contrary in
this Agreement, in no event shall this Agreement require the
payment or permit the collection of interest or any amount in the
nature of interest or fees in excess of the maximum permitted by
applicable law.

Section 13.13. Waiver of Jury Trial. LENDER, ISSUER AND
BORROWER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF,
DIRECTLY OR INDIRECTLY, THIS AGREEMENT, ANY OF THE RELATED
DOCUMENTS, ANY DEALINGS AMONG LENDER, ISSUER OR BORROWER RELATING
TO THE SUBJECT MATTER OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT OR ANY RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP
THAT IS BEING ESTABLISHED AMONG LENDER, ISSUER AND BORROWER. THE
SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY
AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT (INCLUDING,
WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF
DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS). THIS
WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO
THIS AGREEMENT, ANY RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS
OR AGREEMENTS RELATING TO THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT OR ANY RELATED TRANSACTIONS. IN THE EVENT OF
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.
<PAGE>

[REMAINDER OF PAGE INTENTIONALLY BLANK; EXECUTION PAGE FOLLOWS.]
PAGE
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement in their respective corporate names by their duly
authorized officers, all as of the date first written above.

Lender: GE CAPITAL PUBLIC FINANCE, INC.

By:

Title: Vice President

Issuer: MISSISSIPPI BUSINESS FINANCE
CORPORATION

By: /s/ B. BARRY

Attest Title: Executive Director

By:/s/

Title: Secretary

Borrower: FRIEDE GOLDMAN INTERNATIONAL INC.

By: /s/

Title: Chief Financial Officer

Trade Names of Borrower, if any:

HAM Marine, Inc.
Friede Goldman, Ltd.
Friede Goldman Offshore, Inc.
<PAGE>
Exhibit A1 to Loan Agreement

SCHEDULE OF COLLATERAL AND LOAN PAYMENTS

Description of Collateral

The following Collateral is the subject of the Loan Agreement
dated as of December 1, 1998 among GE Capital Public Finance, Inc.
("Lender"), Mississippi Business Finance Corporation ("Issuer"), and
Friede Goldman Intentional Inc. ("Borrower"):

Description Manufacturer
Quantity of Collateral or Vendor Serial Number

SEE ATTACHED

The Collateral is located at the following address. Prior to the
relocation of the Collateral or portion thereof, Borrower will provide
30 days' prior written notice to Lender:

Friede Goldman Offshore, Inc.
600 Louise Street
Pascagoula, MS 39581
<PAGE>
<TABLE>
Friede Goldman Offshore Equipment List
M/E 09/97 thru 09/98

Item Acq. Date Serial Numbers Description
<S> <C> <C> <C>
1 25-Feb-98 250111 (A) Two 300 Ton Cranes - M250 Mantowoc
13-Mar-98 250111 (B)
2 6-Jun-98 1720,1721,1722,1723,1724 Panel Line
3 5-Mar-98 #1 - 98U152-9564 -
#2 - V152C - 4305 Burning Machines and Installation of Machines
4 5-Mar-98 1944 Shot Blast Equipment
5 27-Feb-98 6165 Gantry Crane (125 Ton Washington Crane)
6 10-Aug-98 41524 4100 Mantowoc Ringer Barge
7 20-Jan-98 554-20 8ton Grandall Forklift
8 19-Feb-98 8506 Used 15 ton Cherry Picker 1002 Model 150A
9 31 -May-98 003-113928, 003-113927 Sullair Yard Air Compressors
10 31-Mar-98 AXM 12190-1,
AXM 120189-1,-2,-3,4 Plate Magnetic Handling System (Pipe Shop)
11 6-May-98 001392 Plate Handling System Permadur
12 23-Sep-97 N/A Clark Propane Forklift
13 23-Sep-97 741138 Clark Diesel Forklift
14 23-Sep-97 4-568 Clark Diesel Forklift
15 23-Sep-97 577 Wallace Hyd Bender
16 23-Sep-97 047155 Wallace Hyd Pipe Bender
17 24-Sep-98 56790 50 ton Cherry Picker
18 18-Aug-98 10424 Used 40' Hobbs Trailer
19 18-Aug-98 25070FB6S Used 40' Hobbs Trailer
20 14-Aug-98 17540HR50E1215402 Used 1988 Spotter Truck
21 12-Mar-98 3195 Used 1989 Spotter Truck
22 24-Feb-98 860808 Used 1988 Utility Flatbed Trailer
23 24-Feb-98 535154 Used 1981 Fontain Flatbed Trailer
24 24-Feb-98 473702 Fruehauf Flatbed Trailer
25 24-Apr-98 1FTHF25M9KNA89257 Used 1992 Hyster H80XL Forklift
26 1-May-98 1FTHF25F3TEA15285 Used 1989 Ford 250 Diesel
27 1-May-98 1FTDX1726VNB74028 Used 1997 Ford 150
28 19-May-98 1FEEV15H7LLB11805 Used 1991 Ford Bronco
29 18-Jun-98 1GCDC14Z4NZ188404 Used 1992 Chevy C-1500
30 26-Jun-98 1N65D1155MC363429 Used 1991 Nissan P/U
</TABLE>
<PAGE>
Exhibit A2 to Loan Agreement

SCHEDULE OF COLLATERAL AND LOAN PAYMENTS

Description of Collateral

Description Manufacturer
Quantity of Collateral or Vendor Serial Number

SEE ATTACHED

The Collateral is located at the following address. Prior to the
relocation of the Collateral or portion thereof, Borrower will provide
30 days' prior written notice to Lender:

HAM Marine, Inc.
3400 Litton Road
Pascagoula, MS 39567
<PAGE>
<TABLE>

HAM MARINE, INC
MACHINERY/ EQUIPMENT ACQUIRED SINCE . SEPTEMBER, 1C 197

Date Acq Serial Number Description Vendor Inv #

MACHINERY & EQUIPMENT
<S> <C> <C> <C> <C>
10/1/97 1062576 DUAL DRY DOCK BARGE

9/30/97 41 MUR/2 9827-41 M 7335 COMETTO TRANSPORTER
5/31/98 CAPITALIZE BALANCE OF
SCAFFOLDING SYSTEM Aluma Systems 2919579

2/28/98 K02H1487 / K02H1488 (2) CHAMPION ELEVATORS Champion Elevators 21882/ 21776
1/31/98 VARIOUS ADVANTA WELDING MACHINES
3/31/98 JIB #27AB FOR #63BOOM-4600
RINGER CRANE Lampson International 4437
3/31/98 0300016596 JLG 120' MANLIFT Yeates Equip Sales 1718
1/31/98 VARIOUS 14 WESCO WELDING MACHINES
11/30/97 SCAFFOLDING Aluma Systems 2849843/ 2856876
4/30/98 WELDERS/WIRE FEEDERS
(NORDAN SMITH) Nordan Smith 95950/ 805071
8/31/98 PLATE MATERIAL HANDLING O. S. Walker 32756 /32896
2/28/98 29257 MANITOWOC 2900T TRK CRANE Yeates Equip Sales 1686
4/30/98 SCAFFOLDING SYSTEM
(ALUMA SYSTEMS) Aluma Systems 2919579
11/30/97 AUCTION ASSETS-CHARLESTON Industrial Assets, Inc. Wire Transfer
11/24/97 SCAFFOLDING Aluma Systems 2849842 /2850126/
2856886
2/28/98 9603 DRESSER 150A 15-T CRANE Yeates Equip Sales 1687
11/30/97 ESAB CNC FLAME CUTTER Industrial Assets, Inc. Wire Transfer
3/31/98 0300014756 JLG 60' MANLIFT Escatawpa River Woo n/a
1/31/98 190174 MANITOWOC BOOM POINT EXTENSION Lampson Int'l 4098
1/31/98 2987 USED 1990 LULL FORKLIFT Yeates Equip Sales 1679
12/31/97 N/A T40 BLAST POT Tab Industries 72559
1/31/98 2 4100 RINGER DOUBLE HOOK ROLLERS Coastal Equipment 131174
6/30/98 ARONSON WRD 60 TON DRIVE TANK
TURNING ROLL Weldinghouse 241164
9/30/97 N/A CLEMCO INDUSTRI ES:
SANDBLAST SYS Clemco Industries 326547
11/30/97 (4) FREE STANDING JIB Industrial Assets, Inc. Wire Transfer
6/30/98 (10) ESAB 652 WELDING MACHINES Nordan Smith 834174
3/31/98 LOA10582B898 LOBELL CUSTOM 20' BOAT W/MOTOR Lobell's Custom Boats 980128
7/31/98 WELDERS/WIRE FEEDERS Nordan Smith 875220
4/30/98 19814 GROVE MANLIFT AMZ 40 MODEL 7-40 Multi Machine 15689
7/31/98 14P-00806 XEROX 3050 COPIER Southern Blueprint & S 19546
2/28/98 WIRE FEEDERS Nordan Smith 740114 / 740911
/740115
7/31/98 Hl-PRESSURE WASHERS (2) Hilco 12753
1/31/98 AC100 / AC103 1600CFM AFTERCOOLERS Mayer Hammant 401364
11/30/97 N/A CLEAN AIR SYSTEM Tab Industries 72431
11/30/97 GANTRY Industrial Assets, Inc. Wire Transfer
3/31/98 6E5L403293 MOTOR FOR LOBELL CUSTOM BOAT Lobell's Custom Boats 980128
6/30/98 ACCU RITE DIGITAL READ OUT UNIT Amtoo 24445
1/31/98 IDEALARC DC-1000 W/AMMETER Nordan Smith 748843
6/30/98 MARVEL NO.8 VERTICAL BAND SAW G & G Machinery n/a
9/30/97 41 M7334-21 M 7332-7333 COMETTO TRANSPORTER

AUTOS & TRUCKS

1/31/98 1HSLRUXN9GHA61784 USED 1986 FUELTRUCK Yeates Equip Sales 1662
2/28/98 1XT5D29X8KN288134 1989 PETERBILT Yeates Equip Sales 1662
4/30/98 YARD MULE (SPOTTER TRUCK) Yeates Equip Sales 1767
6/30/98 62717 1988 OTTAWA 30 SPOTTER TRUCK Yeates Equip Sales 1833
2/28/98 2PO482XLW025304 48' FREUHAUF TRAILER Yeates Equip Sales 2833
</TABLE>
<PAGE>
Exhibit A3 to Loan Agreement

Schedule of Loan Payments

Interest Rate: 7.99%

PMT. PAYMENT TOTAL PRINCIPAL INTEREST PREPAYMENT
NO. DATE PAYMENT COMPONENT COMPONENT AMOUNT

SEE ATTACHED
<PAGE>
<TABLE>
GE CapitaI pubic Finance, Inc.
Payment schedule

Friede Goldman, /nc,

Funding Date December 17,1999
Coupon Rate 7 99%

Payment Loan Principal Interest Principal Prepayment
Date Number Payment Component Component Balance* Amount*
<S> <C> <C> <C> <C> <C> <C>
12/17/98 0 -- -- -- 18,00O,000.00 18,36O,000.00
1/17/99 1 218,294.57 98,444.57 119,850.00 17,901,555.43 18,259,586.54
2/17/99 2 218,294.57 99,100.05 119,194.52 17,802,455.38 18,158,504.49
3/17/99 3 218,294.57 99,759.89 118,534.68 17,702,695.49 18,056,749.40
4/17/99 4 218,294.57 10O,424.12 117,870.45 17,602,271.37 17,954,316.80
5/17/99 5 218,294.57 101,092.78 117,201.79 17,501,178.59 17,851,202.16
6/17/99 6 218,294.57 101,765.89 116,528.68 17,399,412.70 17,747,400.95
7/17/99 7 218,294.57 102,443.48 115,851.09 17,296,969.22 17,642,908.60
8/17/99 8 218,294.57 103,125.58 115,168.99 17,193,843.64 17,537,720.51
9/17/99 9 218,294.57 103,812.23 114,482.34 17,09O,031.41 17,431,832.04
10/17/99 10 218,294.57 104,503.44 113,791.13 16,985,527.97 17,325,238.53
11/17/99 11 218,294.57 105,199.26 113,095.31 16,88O,328.71 17,217,935.28
12/17/99 12 218,294.57 105,899.71 112,394.86 16,774,429.00 17,109,917.58
1/17/00 13 218,294.57 106,604.83 111,689.74 16,667,824.17 17,001,180.65
2/17/00 14 218,294.57 107,314.64 11O,979.93 16,56O,509.53 16,891,719.72
3/17/00 15 218,294.57 108,029.18 11O,265.39 16,452,480.35 16,781,529.96
4/17/00 16 218,294.57 108,748.47 109,546.10 16,343,731.88 16,67O,606.52
5/17/00 17 218,294.57 109,472.56 108,822.01 16,234,259.32 16,558,944.51
6/17/00 18 218,294.57 11O,201.46 108,093.11 16,124,057.86 16,446,539.02
7/17/00 19 218,294.57 11O,935.22 107,359.35 16,013,122.64 16,333,385.09
8/17/00 20 218,294.57 111,673.86 106,620.71 15,901,448.78 16,219,477.76
9/17/00 21 218,294.57 112,417.42 105,877.15 15,789,031.36 16,104,811.99
10/17/00 22 218,294.57 113,165.94 105,128.63 15,675,865.42 15,989,382.73
11/17/00 23 218,294.57 113,919.43 104,375.14 15,561,945.99 15,873,184.91
12/17/00 24 218,294.57 114,677.95 103,616.62 15,447,268.04 15,756,213.40
1/17/01 25 218,294.57 115,441.51 102,853.06 15,331,826.53 15,638,463.06
2/17/01 26 218,294.57 116,210.16 102,084.41 15,215,616.37 15,519,928.70
3/17/01 27 218,294.57 116,983.92 101,310.65 15,098,632.45 15,400,605.10
4/17/01 28 218,294.57 117,762.84 10O,531.73 14,98O,869.61 15,280,487.00
5/17/01 29 218,294.57 118,546.95 99,747.62 14,862,322.66 15,159,569.11
6/17/01 30 218,294.57 119,336.27 98,958.30 14,742,986.39 15,O37,846.12
7/17/01 31 218,294.57 12O,130.85 98,163.72 14,622,855.54 14,915,312.65
8/17/01 32 218,294.57 12O,930.72 97,363.85 14,501,924.82 14,791,963.32
9/17/01 33 218,294.57 121,735.92 96,558.65 14,38O,188.90 14,667,792.68
10/17/01 34 218,294.57 122,546.48 95,748.09 14,257,642.42 14,542,795.27
11/17/01 35 218,294.57 123,362.43 94,932.14 14,134,279.99 14,416,965.59
12/17/01 36 218,294.57 124,183.82 94,110.75 14,01O,096.17 14,290,298.09
1/17/02 37 218,294.57 125,010.68 93,283.89 13,885,085.49 14,162,787.20
2/17/02 38 218,294.57 125,843.04 92,451.53 13,759,242.45 14,034,427.30
3/17/02 39 218,294.57 126,680.95 91,613.62 13,632,561.50 13,905,212.73
4/17/02 40 218,294.57 127,524.43 9O,770.14 13,505,037.07 13,775,137.81
5/17/02 41 218,294.57 128,373.53 89,921.04 13,376,663.54 13,644,196.81
6/17/02 42 218,294.57 129,228.29 89,O66.28 13,247,435.25 13,512,383.96
7/17/02 43 218,294.57 13O,088.73 88,205.84 13,117,346.52 13,379,693.45
8/17/02 44 218,294.57 13O,954.90 87,339.67 12,986,391.62 13,246,119.45
9/17/02 45 218,294.57 131,826.85 86,467.72 12,854,564.77 13,111,656.07
10/17/02 46 218,294.57 132,704.59 85,589.98 12,721,860.18 12,976,297.38
11/17/02 47 218,294.57 133,588.18 84,706.39 12,588,272.00 12,84O,037.44
12/17/02 48 218,294.57 134,477.66 83,816.91 12,453,794.34 12,702,870.23
1/17/03 49 218,294.57 135,373.06 82,921.51 12,318,421.28 12,564,789.71
2/17/03 50 218,294.57 136,274.41 82,O20.16 12,182,146.87 12,425,789.81
3/17/03 51 218,294.57 137,181.78 81,112.79 12,044,965.09 12,285,864.39
4/17/03 52 218,294.57 138,095.18 8O,199.39 11,906,869.91 12,145,007.31
5/17/03 53 218,294.57 139,014.66 79,279.91 11,767,855.25 12,003,212.36
6/17/03 54 218,294.57 139,940.27 78,354.30 11,627,914.98 11,86O,473.28
7/17/03 55 218,294.57 14O,872.04 77,422.53 11,487,O42.94 11,716,783.80
8/17/03 56 218,294.57 141,810.01 76,484.56 11,345,232.93 11,572,137.59
9/17/03 57 218,294.57 142,754.23 75,540.34 11,202,478.70 11,426,528.27
10/17/03 58 218,294.57 143,704.73 74,589.84 11,058,773.97 11,279,949.45
11/17/03 59 218,294.57 144,661.57 73,633.00 1O,914,112.40 11,132,394.65
12/17/03 60 218,294.57 145,624.77 72,669.80 10,768,487.63 1O,768,487.63
1/17/04 61 218,294.57 146,594.39 71,700.18 1O,621,893.24 1O,621,893.24
2/17/04 62 218,294.57 147,570.46 7O,724.11 1O,474,322.78 1O,474,322.78
3/17/04 63 218,294.57 148,553.04 69,741.53 1O,325,769.74 1O,325,769.74
4/17/04 64 218,294.57 149,542.15 68,752.42 1O,176,227.59 1O,176,227.59
5/17/04 65 218,294.57 15O,537.85 67,756.72 1O,025,689.74 1O,025,689.74
6/17/04 66 218,294.57 151,540.19 66,754.38 9,874,149.55 9,874,149.55
7/17/04 67 218,294.57 152,549.19 65,745.38 9,721,600.36 9,721,600.36
8/17/04 68 218,294.57 153,564.91 64,729.66 9,568,O35.45 9,568,O35.45
9/17/04 69 218,294.57 154,587.40 63,707.17 9,413,448.05 9,413,448.05
10/17/04 70 218,294.57 155,616.69 62,677.88 9,257,831.36 9,257,831.36
11/17/04 71 218,294.57 156,652.84 61,641.73 9,101,178.52 9,101,178.52
12/17/04 72 218,294.57 157,695.89 6O,598.68 8,943,482.63 8,943,482.63
1/17/05 73 218,294.57 158,745.88 59,548.69 8,784,736.75 8,784,736.75
2/17/05 74 218,294.57 159,802.86 58,491.71 8,624,933.89 8,624,933.89
</TABLE>
<PAGE>
<TABLE>
Payment Loan Principal Interest Principal Prepayment
Date Number Payment Component Component Balance* Amount*
<S> <C> <C> <C> <C> <C> <C>
3/17/05 75 218,294.57 16O,866.88 57,427.69 8,464,067.01 8,464,067.01
4/17/05 76 218,294.57 161,937.99 56,356.58 8,302,129.02 8,302,129.02
5/17/05 77 218,294.57 163,016.23 55,278.34 8,139,112.79 8,139,112.79
6/17/05 78 218,294.57 164,101.64 54,192.93 7,975,011.15 7,975,011.15
7/17/05 79 218,294.57 165,194.29 53,100.28 7,809,816.86 7,809,816.86
8/17/05 80 218,294.57 166,294.21 52,O00.36 7,643,522.65 7,643,522.65
9/17/05 81 218,294.57 167,401.45 5O,893.12 7,476,121.20 7,476,121.20
10/17/05 82 218,294.57 168,516.06 49,778.51 7,307,605.14 7,307,605.14
11/17/05 83 218,294.57 169,638.10 48,656.47 7,137,967.04 7,137,967.04
12/17/05 84 218,294.57 17O,767.61 47,526.96 6,967,199.43 6,967,199.43
1/17/06 85 218,294.57 171,904.63 46,389.94 6,795,294.80 6,795,294.80
2/17/06 86 218,294.57 173,O49.23 45,245.34 6,622,245.57 6,622,245.57
3/17/06 87 218,294.57 174,201.45 44,093.12 6,448,O44.12 6,448,O44.12
4/17/06 88 218,294.57 175,361.34 42,933.23 6,272,682.78 6,272,682.78
5/17/06 89 218,294.57 176,528.96 41,765.61 6,O96,153.82 6,O96,153.82
6/17/06 90 218,294.57 177,704.35 4O,590.22 5,918,449.47 5,918,449.47
7/17/06 91 218,294.57 178,887.56 39,407.01 5,739,561.91 5,739,561.91
8/17/06 92 218,294.57 18O,078.65 38,215.92 5,559,483.26 5,559,483.26
9/17/06 93 218,294.57 181,277.68 37,016.89 5,378,205.58 5,378,205.58
10/17/06 94 218,294.57 182,484.68 35,809.89 5,195,720.90 5,195,720.90
11/17/06 95 218,294.57 183,699.73 34,594.84 5,012,021.17 5,012,021.17
12/17/06 96 218,294.57 184,922.86 33,371.71 4,827,098.31 4,827,098.31
1/17/07 97 218,294.57 186,154.14 32,140.43 4,640,944.17 4,640,944.17
2/17/07 98 218,294.57 187,393.62 30,900.95 4,453,550.55 4,453,550.55
3/17/07 99 218,294.57 188,641.35 29,653.22 4,264,909.20 4,264,909.20
4/17/07 100 218,294.57 189,897.38 28,397.19 4,075,011.82 4,075,011.82
5/17/07 101 218,294.57 191,161.78 27,132.79 3,883,850.04 3,883,850.04
6/17/07 102 218,294.57 192,434.60 25,859.97 3,691,415.44 3,691,415.44
7/17/07 103 218,294.57 193,715.90 24,578.67 3,497,699.54 3,497,699.54
8/17/07 104 218,294.57 195,005.72 23,288.85 3,302,693.82 3,302,693.82
9/17/07 105 218,294.57 196,304.13 21,990.44 3,106,389.69 3,106,389.69
10/17/07 106 218,294.57 197,611.19 20,683.38 2,908,778.50 2,908,778.50
11/17/07 107 218,294.57 198,926.95 19,367.62 2,709,851.55 2,709,851.55
12/17/07 108 218,294.57 200,251.47 18,043.10 2,509,600.08 2,509,600.08
1/17/08 109 218,294.57 201,584.82 16,709.75 2,308,015.26 2,308,015.26
2/17/08 110 218,294.57 202,927.03 15,367.54 2,105,088.23 2,105,088.23
3/17/08 111 218,294.57 204,278.19 14,016.38 1,900,810.04 1,900,810.04
4/17/08 112 218,294.57 205,638.34 12,656.23 1,695,171.70 1,695,171.70
5/17/08 113 218,294.57 207,007.55 11,287.02 1,488,164.15 1,488,164.15
6/17/08 114 218,294.57 208,385.88 9,908.69 1,279,778.27 1,279,778.27
7/17/08 115 218,294.57 209,773.38 8,521.19 1,070,004.89 1,070,004.89
8/17/08 116 218,294.57 211,170.12 7,124.45 858,834.77 858,834.77
9/17/08 117 218,294.57 212,576.16 5,718.41 646,258.61 646,258.61
10/17/08 118 218,294.57 213,991.56 4,303.01 432,267.05 432,267.05
11/17/08 119 218,294.57 215,416.39 2,878.18 216,850.66 216,850.66
12/17/08 120 218,294.57 216,850.66 1,443.91 (0.00) (0.00)
------------- ------------- ------------
TOTAL 26,195,348.40 18,000,000.00 8,195,348.40
============= ============= ============
</TABLE>

* After payment of loan payment due on such date
<PAGE>

Exhibit B to Loan Agreement

FORM OF CERTIFICATE OF ACCEPTANCE

[ I, the undersigned, hereby certify that I am the duly qualified
and acting __________ of Friede Goldman International Inc.
("Borrower") and, with respect to the Loan Agreement dated as of
December 1, 1998 ("Agreement") by and among Borrower, GE Capital
Public Finance, Inc. ("Lender") and Mississippi Business Finance
Corporation ("Issuer"), that:]

OR:

I, the undersigned, hereby certify that I am the duly qualified
and acting ______________ of _____________________ ("Guarantor") and,
with respect to the Guaranty Agreement dated as of December __, 1998
("Agreement") by and among Guarantor and GE Capital Public Finance,
Inc., that:]

1. The Collateral described in Exhibit A to the Agreement (the
"Collateral") has been delivered and installed in accordance with
[Borrower's/Guarantor's] specifications and has been accepted by
[Borrower/Guarantor's].

2. [Borrower/Guarantor] has obtained from a reputable insurance
company qualified to do business in the State (as defined in the
Agreement) insurance with respect to all risks required to be covered
thereby pursuant to Section 7.06 of the Agreement.

3. Attached to this Certificate of Acceptance are Vendor
invoice(s) and/or bill(s) of sale relating to the Collateral
and, if such invoices have been paid by [Borrower/Guarantor], evidence
of payment thereof.

4. Borrower hereby directs Lender, on behalf of Issuer, to pay
the Loan Proceeds (as defined in the Agreement) as follows:

5. All of the representations and warranties of Borrower and
each Guarantor contained in the Agreement, the Security Agreements and
the Guaranties are true and correct as of the date hereof and no
Default or Event of Default has occurred thereunder.

Dated: _____________________, 19_.

By:______________________

Title:___________________

Date:____________________
<PAGE>

Exhibit C to Loan Agreement

FORM OF OPINION OF COUNSEL TO BORROWER AND GUARANTORS
<PAGE>
January 7, 1999

Mississippi Business Finance Corporation
550 High Street
13th Floor, Sillers Building
Jackson, MS 39201

GE Capital Public Finance, Inc.
Suite 470
8400 Normandale Lake Boulevard
Minneapolis, MN 55437

Re: $18,000,000 Mississippi Business Finance Corporation Taxable
Industrial Development Revenue Bond, Series 1998 (Friede Goldman
International Inc. Project)

Ladies and Gentlemen:

We have acted as counsel to Friede Goldman International Inc.
("Borrower"), a Mississippi corporation; and also as counsel to Friede
Goldman Offshore, Inc., a Delaware corporation, and a subsidiary of
Borrower, and HAM Marine, Inc., a Mississippi corporation, and a
subsidiary of Borrower (each a "Guarantor" and collectively referred
to herein as "Guarantors") for purposes of rendering an opinion to you
as required by Article III of the Loan Agreement dated as of
December 1, 1998, by and among Borrower, GE Capital Public Finance,
Inc. ("Lender") and Mississippi Business Finance Corporation
("Issuer") (the "Loan Agreement"). Terms used herein shall have the
same meaning as the meaning set forth in the Loan Agreement.

In connection with this opinion, we have examined the following:

a. the Loan Agreement (defined above);
<PAGE>

b. the Escrow Agreement dated as of December 1, 1998 (the
"Escrow Agreement") among Lender, Issuer, Borrower and
National City Bank of Minneapolis, as escrow agent;

c. the Paying Agent Agreement dated as of December 1, 1998 (the
"Paying Agent Agreement") among Lender, Issuer, Borrower and
National City Bank of Minneapolis, as paying agent

d. the Guaranty Agreement, one executed by each Guarantor, in
favor of Lender and dated as of December 1,1998 (each a
"Guaranty" and collectively referred to herein as
"Guaranties");

e. the Security Agreement, one executed by each Guarantor, by
and among the particular Guarantor end the Lender, dated as
of December 1,1998 (Bach a "Security Agreement" and
collectively referred to herein as "Security Agreements");

f. the First Preferred Mortgages applicable to the Dual Carrier
and the-Maggie D (all registered vessels) by and among a
Guarantor and Lender, dated as of December 1, 1998 (each a
"Ship Mortgage" and collectively referred to herein as the
"Ship Mortgages");

g. The Uniform Commercial Code Financing Statements (UCC-1) to
be filed with the Mississippi Secretary of State and the
Chancery Clerks of Hinds and Jackson County, Mississippi
(the "Financing Statements");

h. Uniform Commercial Code Search Requests (WCC-l l) prepared
by the Mississippi Secretary of State dated December 10,
1998, the Chancery Clerks of Hinds County dated December
7,1998, and Jackson County, Mississippi dated December
9,1998; and

i. such other documents and items as we have deemed necessary
to render this opinion.

The Loan Agreement, the Escrow Agreement and the Paying Agent
Agreement are collectively referred to herein as the "Agreements." The
Agreements, the Guaranties, the Security Agreements, the Ship
Mortgages and the Financing Statements are collectively referred to
herein as the "Borrower Documents."

As to various factual matters set forth herein, we have made
certain assumptions as hereinafter set forth and relied upon the
factual representations of the Borrower and Guarantors
<PAGE>
made in the Borrower Documents and officer certificates and filings
with the Securities Exchange Commission, and upon certificates of
public officials, which facts we have not independently verified.

For purposes of the opinions expressed below, we have assumed (i)
the authenticity of all documents submitted to us as originals, (ii)
the conformity to the originals of all documents submitted as
certified or photostatic copies and the authenticity of the originals,
and (iii) the due authorization, execution and delivery of all
documents by all parties and the validity and binding effect thereof
(other than the authorization, execution and delivery of documents by
Borrower and Guarantors and the validity and binding effect thereof
upon Borrower and Guarantors).

Based on the foregoing and subject to each of the assumptions,
limitations, qualifications and restrictions set forth herein, we are
of the opinion that:

1. Borrower has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of
Mississippi with full power and authority to own its properties
and conduct its business.

2. Borrower has full power and authority to execute and
deliver the Agreements and to carry out the terms thereof. The
Agreements have been duly and validly authorized, executed and
delivered, are in full force and effect and are the legal, valid
and binding contracts of Borrower enforceable in accordance with
their respective terms.

3. The consummation of the transactions contemplated by the
Agreements and the carrying out of the terms thereof will not, in
any material respect, result in violation of any provisions of
the articles of incorporation or bylaws of Borrower or, to the
best of our knowledge based on reasonable inquiry of the
Borrower, result in the violation of any provision of, or in a
default under, any indenture, mortgage, deed of trust,
indebtedness, agreement, judgment, decree, order, statute, rule
or regulation to which Borrower is a party or by which it or its
property is bound.

4. To the best of our knowledge based on reasonable inquiry
of the Borrower, there are no legal or governmental actions,
suits, proceedings, inquiries or investigations pending,
threatened or contemplated, to which Borrower is or may become a
party or of which any property of Borrower is or may become
subject, other than ordinary routine litigation incident to the
kind of business conducted by Borrower which, if determined
adversely to Borrower, would have a material adverse effect on
the financial position or results of operations of Borrower.

5.To the best of our knowledge based on reasonable inquiry
of the Borrower,
<PAGE>

there are no legal or governmental proceedings pending,
threatened or contemplated, wherein an unfavorable decision,
ruling or finding would adversely affect the validity of or
security for the Agreements or the transactions contemplated
thereby.

6. Each Guarantor has full power and authority to execute
and deliver each Guaranty, Security Agreement and Ship Mortgage
executed by such Guarantor and to carry out the terms thereof.
Each Guaranty, Security Agreement and Ship Mortgage has been duly
and validly authorized, executed and delivered, is in full force
and effect and is the legal, valid and binding contract of such
Guarantor enforceable in accordance with their respective terms.

7. To the best of our knowledge after reasonable inquiry of
the Guarantors, the consummation of the transactions contemplated
by each Guaranty, Security Agreement and Ship Mortgage and the
carrying out of the terms thereof will not, in any material
respect, result in the violation of any provision of, or in a
default under, any indenture, mortgage, deed of trust,
indebtedness, agreement, judgment, decree, order, statute, rule
or regulation to which any Guarantor is a party or by which it or
its property is bound.

8. To the best of our knowledge based on reasonable inquiry
of the Guarantors, there are no legal or governmental actions,
suits, proceedings, inquiries or investigations pending,
threatened or contemplated to which any Guarantor is or may
become a party or of which any property of any Guarantor is or
may become subject, other than ordinary routine litigation
incident to the kind of business conducted by each Guarantor
which, if determined adversely to any Guarantor, would have a
material adverse effect on the financial position or results of
operations of any Guarantor.

9. The Financing Statements identified in item (g) above
have been filed in the noted jurisdictions. These filings are
sufficient to perfect a security interest in the described
personal property (other than the vessels described in the Ship
Mortgages) to the extent that (i) a security interest may be
perfected by filing a financing statement in the State of
Mississippi, (ii) the Guarantors own the described personal
property, and (iii) the described personal property is located in
the described jurisdictions. Subject to these limitations, such
security interest has been properly perfected and is subject to
no prior liens or encumbrances.

10. The Ship Mortgages are in proper form for execution and
recording in the official vessel records of the United States
Coast Guard National Vessel Documentation Center and when so
recorded will be effective to create in favor of Lender a valid
and enforceable lien and mortgage on the vessel described
therein.

11. The provisions of the Loan Agreement and the
Security Agreements are
<PAGE>

effective to create a security interest in favor of Lender in all
of Borrower's and Guarantor's right, title and interest in and to
the Collateral (other than the vessels described in the Ship
Mortgages) and all proceeds thereof.

12. Fraudulent Conveyance. Generally, under both the laws of
the state of Mississippi and the U.S. Bankruptcy Code, a transfer
may be deemed fraudulent and avoidable when made (i) with actual
intent to hinder, delay or defraud creditors, or (ii) for less
than "reasonably equivalent value"' and the transferor is or
thereby becomes insolvent, was engaged or is about to engage in
business with unreasonably small capital or assets, or intended
to incur or believed he would incur debts beyond his ability to
repay; or (iii) to an insider to repay an antecedent debt. See
Bankruptcy Code Paragraph 548(a); Miss. Code Ann., Paragraph
Paragraph 153-3, 5.

The term "reasonably equivalent value" is not specifically
defined in the Bankruptcy Code. The term "consideration deemed
valuable in law" is not specifically defined in the Mississippi
Code. With respect to the inter-company transfers by and among
Borrower and the Guarantors, the grant of security interests from
the Guarantors to the Lender and the execution and delivery of
the Guaranties from the Guarantors to the Lender (the "Actions"),
we have assumed as to factual matters that (i) the Borrower and
Guarantors acted without any intent to hinder, delay, or defraud
any current or future creditor of the Borrower; (ii) the Borrower
and Guarantors were not insolvent or did not become insolvent as
a result of the Actions; (iii) the Borrower and Guarantors were
not engaged and were not about to engage in any business or
transaction for which any property remaining was an unreasonably
small capital or for which the remaining assets were unreasonably
small in relation to the business of the Borrower and\or
Guarantors or the transaction; (iv) the Borrower and Guarantors
did not intend to incur, and did not believe or reasonably should
not have believed that they would incur debts beyond their
ability to pay as they become due; (v) the consideration paid for
the personal property is equivalent to the fair market value of
the personal property transferred by and among the Borrower and
the Guarantors; and (vi) the transfer of the personal property to
the Guarantors was not made by Borrower to repay an antecedent
debt owed by Borrower to the Guarantors. With regard to these
assumptions, we have relied upon an officer's certificate from
the Borrower and the Guarantors.

Based upon the foregoing, we believe that, if either
Guarantor were to become a debtor under the Bankruptcy Code, in a
properly argued and presented case, a court would not order, at
the petition of a creditor of or a trustee in bankruptcy for such
Guarantor, the
- ------------
[Superscript]1 The Bankruptcy Code uses the phrase "reasonably
equivalent value." The Mississippi statute uses the phrase
"consideration deemed valuable in law."
<PAGE>

avoidance of such transfers on the basis that such transfers
constituted fraudulent conveyance.
- ------------
The opinions rendered herein are subject to the following
additional assumptions and qualifications:

A. Except as expressly set forth herein, we have made no
examination of, and express no opinion as to, matters of title
or priority with respect to any personal property covered by the
Borrower Documents or any mortgage, lien, or security interest
therein.

B. The opinions expressed herein are expressly subject to: (i)
the effect of any applicable bankruptcy, insolvency, moratorium,
reorganization, or other similar laws now or hereinafter in effect
relating to or limiting the rights of creditors generally, including
but not limited to, those laws involving or applicable to preferences,
fraudulent transfers and obligations or equitable subordination,
whether predicated upon lack of fair value, lack of adequate
consideration or otherwise, (ii) general principles of equity,
commercial reasonableness, conscionability, and public policy, whether
the effect of such principles is considered in a proceeding in equity
or at law, and the discretion of the court before which any such
proceeding therefor may be brought. Except to the extent set forth in
paragraph 12 above, we express no opinion regarding such laws and
principles except to point out that they may adversely affect not
only the enforceability but the validity of the Borrower Documents and
transactions contemplated thereby.

C. Certain rights, remedies and waivers contained in the
Borrower Documents may be limited or rendered ineffective by
applicable laws or judicial decisions, however, such laws and judicial
decisions do not make the remedies afforded by the Borrower Documents
inadequate for the practical realization of the material benefits
purported to be provided thereby.

D. As represented in the Loan Agreement by Lender, we have
assumed that the Lender is not subject to the Finance Company
Privilege Tax Law as to this Loan or the Small Loan Privilege Tax Law
or the Small Loan Regulatory Law; all of the State of Mississippi. We
express no opinion as to the applicability of such laws. Failure to
comply with the laws may result in a lender being denied access to the
courts of Mississippi for the purposes of collecting and enforcing
indebtedness.

E. We express no opinion as to actions necessary to continue
the perfection of a security interest.

F. We have assumed that each party to the Borrower Documents
(other than the Borrower and the Guarantor) are validly existing and
in good standing under the laws of the jurisdiction of its
organization, and, if organized in a state other than Mississippi, is
duly authorized
<PAGE>

to do business in Mississippi, has all requisite power and authority
to enter into the Borrower Documents and other documents and to
perform and observe the terms and conditions of such documents which
are required to be performed or observed by it or them.

G. These opinions are based solely on the laws of the State of
Mississippi and we do not express any opinion as to the laws of any
other jurisdiction. We have assumed for the purposes of rendering the
opinions expressed herein that the Borrower Documents are governed by
Mississippi law, notwithstanding that the Borrower Documents may
purport to be governed by the law of another state, as the case may
be. The law covered by our opinions consists of the statutes, the
judicial and administrative decisions, and the rules and regulations
of agencies of the State of Mississippi. The law covered by our
opinions does not include the statutes or ordinances, the
administrative decisions, or the rules or regulations of counties,
towns, municipalities, or political subdivisions (whether created or
enabled at the state or regional level), or judicial decisions to the
extent that they deal with any of the foregoing.

H. These opinions are given solely to you in connection with
this transaction and may not be relied upon by any other person other
than your assignees and counsel or in connection with any other
transaction.

I. Except for any such opinions expressly stated above, we
express no opinion (and nothing in this letter should be construed as
implying any such opinion) with respect to the effect of any state or
federal securities, margin lending, pension benefit, trade regulation,
antitrust, fiduciary, tax, intellectual property, labor, or banking
laws or regulations which may be applicable to any of the transactions
contemplated by the Borrower Documents.

J. We undertake no obligation to revise or supplement these
opinions should any law in effect be changed by legislative action,
judicial decision, or otherwise.

K. The opinions expressed herein do not create or establish an
attorney-client relationship between this law firm, or any of its
attorneys and the addressees, and any such relationship is expressly
disavowed.

Very truly yours,

WATKINS & EAGER PLLC
<PAGE>

Exhibit D to Loan Agreement

FORM OF OPINION OF COUNSEL TO ISSUER
<PAGE>
[HOLCOMB DUNBAR LETTERHEAD]

December 17, 1998

GE Capital Public Finance, Inc.
Suite 470
8400 Normandale Lake Boulevard
Minneapolis, MN 55437

Mississippi Business Finance Corporation
550 High Street
13th Floor, Sillers Building
Jackson, Mississippi 39201

National City Bank of Minneapolis
651 Nicollet Mall
Minneapolis, MN 55402

Watkins & Eager, PLLC
Attorneys and Counselors at Law
400 East Capitol, Suite 300
Jackson, Mississippi 39201

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

RE: $18,000,000 Maximum Aggregate Principal Amount Mississippi
Business Finance Corporation Taxable Industrial Development
Revenue Bond, Series 1998 (Friede Goldman International Inc.
Project)

Ladies and Gentlemen:

We have acted as counsel to Mississippi Business Finance
Corporation (the "MBFC" or "Issuer") in connection with the issuance
and sale of $18,00,000 maximum aggregate principal
<PAGE>
amount of its Taxable Industrial Development Revenue Bond. Series 1998
(Friede Goldman International Inc. Project) to be issued as of
December 1, 199S, (the "Bond"). The Bond is being issued under and
pursuant to a Loan Agreement dated as of December 1, 1998 (the "Loan
Agreement") among MBFC, Friede Goldman International Inc., a
Mississippi corporation ("FGII"), and GE Capital Public Finance, Inc.,
a Delaware corporation ("GE"). as Lender (the "Lender"), and under and
pursuant to resolutions adopted by the Board of Directors of MBFC on
September 25, 1997, March 18, 1998, and November 18, 1998 (the
"Resolutions"). The Bond is being sold to GE under and pursuant to the
Loan Agreement. The Loan Agreement. the Escrow Agreement dated
December 1, 1998 ("Escrow Agreement") among GE, MBFC, FGII and
National City Bank of Minneapolis, a national banking association
("National" ). the Paying Agent Agreement dated December 1. 1998
("Paying Agent Agreement") among GE. MBFC. FGII and National, and the
Promissory Note dated as of today's date (the "Note") from
FGII to the Issuer collectively comprise the "issuer Documents."

Capitalized terms not defined herein shall have the meaning
ascribed to them in the Loan Agreement.

We have examined. among other things. the Bonds, the Issuer
Documents, and the proceedings of the Issuer authorizing the
Bonds and the Issuer documents.

Based on the foregoing, and subject to the exceptions and
limitations set forth below, we are of the opinion that:

1. The Issuer is a public corporation of the State.

2. The Issuer has lawful authority to undertake the permanent
financing of the Project, to execute and deliver and to
perform its respective obligations under the Issuer
Documents, and to issue, sell and deliver the Bonds.

3. All resolutions adopted by the Issuer's Board of Directors
relating to the Bonds and the Project have been duly and
validly adopted by the Issuer's Board of Directors and are
in full force and effect.

4. The Issuer Documents and the Bonds have each been duly
authorized, executed and delivered by the Issuer, and each
constitutes a legal. valid and binding obligation of the
Issuer enforceable against the Issuer in accordance with
their respective terms, except insofar as the enforcement
thereof may be limited by any applicable bankruptcy,
moratorium or other similar laws relating to the enforcement
of the creditors" rights generally. However. we render no
opinion as to the enforceability
<PAGE>
of Article XII of the Loan Agreement concerning the benefits
under the Act. Further, we express no opinion as to the
enforceability of (a) provisions which purport to confer
self-help remedies or equitable remedies, such as specific
performance and injunctive relief, (b) provisions that
purport to establish evidentiary standards for suits or
proceedings. (c) provisions for waivers in advance by any
party, or (d) provisions regarding consent to jurisdiction
or venue.

5. The execution and delivery by the Issuer of the Issuer
Documents and the Bonds. and the performance by the Issuer
of its obligations in respect thereof, do not result in any
violation of the provisions of the Constitution or laws of
the State. nor to our knowledge do these actions conflict
with or result in any breach of any of the provisions of. or
constitute a default under, any agreement or instrument to
which the Issuer is a party or by which it or any of its
property is or may be bound.

6. There is no action, suit. proceeding or investigation at law
or in equity before or by any court, public board or body
pending or, to our knowledge, threatened against or
affecting the Issuer wherein an unfavorable decision, ruling
or finding would adversely affect the transactions
contemplated by' or the validity of, the Issuer Documents,
the Bonds or any other agreement or instrument to which the
Issuer is a party and which is used, or contemplated for
use, in consummation of the transactions contemplated in the
Indenture or the Agreement.

7. No further authorization, approval, consent or other order
of any governmental authority or agency is required for the
valid authorization. execution and delivery of the Issuer
Documents and the Bonds.

Whenever our opinion herein with respect to the existence or
absence of facts is indicated to be "to our knowledge", or "known to
us" or similar words. it is intended to signify that during the course
of our representation of the Issuer, no information has come to our
attention which would give us actual knowledge contrary to such
statement. However, except to the extent expressly set forth herein,
we have not undertaken any independent investigation to determine the
existence or absence of such facts, and no inference as to our
knowledge of the existence or absence of such facts should be drawn
from our representation of the Issuer.

We do not hold ourselves out as expects on, or express any
opinion herein concerning, the laws of any jurisdiction other than the
laws of the State of Mississippi and applicable federal law of the
United States. This opinion is being furnished to the addressees for
their use. No other use or distribution of this opinion or any part
thereof may be made without our prior written consent.
<PAGE>

This letter expresses our legal opinion as to the foregoing
matters based on our professional judgment at this time; it is not,
however, to be construed as a guaranty, nor is it a warranty that a
court considering such matters would not rule in a manner contrary to
the opinions set forth above.

Sincerely yours.

HOLCOLM DUNBAR
A Professional Association
<PAGE>
Exhibit E to the Loan Agreement

FORM OF OPINION OF BOND COUNSEL
<PAGE>
As of December 1, 1998

GE Capital Public Finance, Inc.
Suite 470
8400 Normandale Lake Boulevard
Minneapolis, MN 55437

Mississippi Business Finance Corporation
550 High Street
13th Floor, Sillers Building
Jackson, Mississippi 39201

National City Bank of Minneapolis
651 Nicollet Mall
Minneapolis, MN 55402

RE: $18,000,000 Maximum Aggregate Principal Amount Mississippi
Business Finance Corporation Taxable Industrial Development
Revenue Bond, Series 1998 (Friede Goldman International Inc.
Project)

Ladies and Gentlemen:

We have examined the record of proceedings relating to the
issuance by Mississippi Business Finance Corporation ("MBFC"), a
public corporation of the State of Mississippi (the "State"), of
$18,000,000 maximum aggregate principal amount of its Taxable
Industrial Development Revenue
<PAGE>

Bond, Series 1998 (Friede Goldman International Inc. Project) to be
issued as of December 1,1998, (the "Bond").

The Bond is issued under and pursuant to Title 57, Chapter 10,
Articles 7 and 11 of the Mississippi Code of 1972, as amended (the
"Act"), and under and pursuant to a Loan Agreement dated as of
December 1,1998 (the "Loan Agreement") among MBFC, Friede Goldman
International Inc., a Mississippi corporation ("FGII") and GE Capital
Public Finance, Inc., a Delaware corporation ("GE"), as Lender (the
"Lender"), and under and pursuant to resolutions adopted by the Board
of Directors of MBFC on September 25, 1997, March 18, 1998, and
November 18, 1998 (the "Resolutions").

The Bond is dated December 1,1998, and matures on the date and in
the maximum aggregate principal amount as set forth in the Bond and
the Loan Agreement. The Bond bears interest at the rate as set forth
in the Bond and the Loan Agreement, and such interest is payable on
the dates as set forth in the Bond and the Loan Agreement. The Bond is
subject to redemption prior to maturity in the manner and upon the
terms and conditions as set forth in the Bond and the Loan Agreement.
The Bond is issued without coupons in denominations as set forth in
the Loan Agreement and is not subject to transfer or exchange except
as provided in the Loan Agreement.

The Bond is being issued to loan the proceeds thereof to FGII to
finance the Acquisition Costs of the Project (as defined in the Loan
Agreement) in order to promote, among other things, employment
opportunities in the State. Pursuant to the Loan Agreement, FGII is
obligated to make loan payments sufficient, among other things, to pay
the principal of, redemption premium, if any, and interest on the Bond
as the same shall become due and, in connection therewith, has
delivered its promissory note (the "Note") to the Issuer. All right,
title and interest of MBFC in and to the Loan Agreement and the Note
have been assigned by MBFC to the Lender pursuant to the Loan
Agreement.

The Bond is being sold to GE under and pursuant to the Loan
Agreement. The Loan Agreement, the Escrow Agreement dated December 1,
1998 ("Escrow Agreement") among GE, MBFC, FGII and National City Bank
of Minneapolis, a national banking association ("National") and the
Paying Agent Agreement dated December 1,1998 ("Paving Agent
Agreement") among GE, MBFC, FGII and National collectively comprise
the "Issuer Documents."

We are of the opinion that:

1. MBFC is a public corporation of the State.
<PAGE>
2. MBFC has the right and power to authorize, execute and
deliver the Issuer Documents, and the Issuer Documents have
been duly authorized, executed and delivered by MBFC and
constitute legal, valid and binding agreements of MBFC
enforceable in accordance with their terms.

3. MBFC is duly authorized and entitled to issue the Bond, and
the Bond has been duly and validly authorized and issued in
accordance with the Constitution and statutes of the State,
including the Act and the Resolution. The Bond is a legal,
valid and binding limited obligation of MBFC enforceable in
accordance with its terms and the terms of the Loan
Agreement and is entitled to the benefits of the Loan
Agreement, the Act and the Resolution. The Bond is secured,
to the extent provided in the Loan Agreement, solely by a
pledge of MBFC's right, title and interest in, to and under
the Loan Agreement and amounts paid pursuant to the Note
and proceeds of the Bond and the investment earnings
thereon, if any.

4. The Loan Agreement and Escrow Agreement are exempt from the
qualification requirement of the Trust Indenture Act of
1939, as amended (the " 1939 Act") and the Bond may
therefore be sold without qualification of the Indenture
under the 1939 Act.

We have examined the executed Bond and, in our opinion, the form
of the Bond and its execution are regular and proper.

It is to be understood that interest on the Bond should be
treated as includable in gross income of the holder thereof for
federal income tax purposes.

The opinions contained in Paragraphs 2 and 3 above are qualified
to the extent that the enforceability of the Issuer Documents and the
Bond, respectively, may be limited by bankruptcy, insolvency,
moratorium, reorganization or other laws affecting creditors' rights
generally or as to the availability of any particular remedy.

In connection with the delivery of this opinion letter, we have
assumed and we are not passing upon the due authorization, execution
and delivery of the Loan Agreement, the Note, the Escrow Agreement, or
the Paying Agent Agreement by, nor the binding effect upon or
enforceability against, FGII and GE, respectively. We understand that
various opinions with respect to such matters are being rendered this
day by other counsel.

The foregoing opinions are limited to the laws of the State of
Mississippi and the federal laws of the United States of America. We
express no opinion as to matters governed by the laws of any
<PAGE>

other state. Furthermore, no opinion is expressed herein as to the
effect of any future acts of the parties or changes in existing law.
We undertake no responsibility to advise you of any changes after the
date hereof in the law or the facts presently in effect that would
alter the scope or substance of the opinions herein expressed.

The opinions expressed herein are rendered as of the date hereof,
may be relied upon only by you and shall not be otherwise used,
circulated or quoted.

This letter expresses our legal opinion as to the foregoing
matters based on our professional judgment at this time; it
is not, however, to be construed as a guaranty nor is it a warranty
that a court or administrative agency considering such matters would
not rule in a manner contrary to the opinions set forth above.

Sincerely yours,
<PAGE>

Exhibit F to Loan Agreement

FORM OF BOND

$18,000,000 Taxable Industrial Development Revenue Bond, Series 1998
(Friede Goldman International Inc Project)

No.: R-1 $18,000,000

Maturity Date Interest Rate
December 17,2008 7.99%

Mississippi Business Finance Corporation, a public body and
political subdivision duly created and validly existing under the laws
of the State of Mississippi (hereafter referred to as "Issuer"), for
value received, hereby promises to pay GE Capital Public Finance,
Inc., 8400 Normandale Lake Boulevard, Suite 470, Minneapolis,
Minnesota 55437, or to registered assigns, but solely from the Loan
Payments hereinafter described, the principal sum of

EIGHTEEN MILLION DOLLARS

in any coin or currency of the United States of America which on the
date of payment thereof is the legal tender for the payment of public
and private debts, and to pay, solely from such Loan Payments, in like
coin and currency, interest on the principal sum from the date hereof,
such interest to be at the rates, and all such payments of interest,
principal or interest and principal to be payable at the time and
place, in the amounts and in accordance with the terms set forth
in that certain Loan Agreement dated as of December 1, 1998 (the "Loan
Agreement") among Issuer, GE Capital Public Finance, Inc. and Friede
Goldman International Inc. ("Borrower") in accordance with the
attached "Payment Schedule". All terms used herein in capitalized form
and not otherwise defined herein shall have the meanings ascribed
thereto in the Loan Agreement.

This Bond is payable as to principal and prepayment premium, if
any, solely from Loan Payments to be made by Borrower and is secured
by, among other things, a lien on the Collateral financed pursuant to
the Loan Agreement.

This Bond shall not represent or constitute a debt or pledge of
the faith and credit of Issuer, and this Bond is payable
solely from the revenues pledged therefor pursuant to the Loan
Agreement, and no moneys of Issuer raised by taxation shall be
obligated or pledged for the payment of Loan Payments or any other
amounts due under this Bond.

This Bond is subject to prepayment upon the terms and conditions
set forth in the Loan Agreement.
<PAGE>

It is hereby certified, recited and declared that all acts,
conditions and things required to exist to happen and to be performed
precedent to and in the issuance of this Bond exist, have happened and
have been performed in regular and due form and time as required by
the Constitution and laws of the State of Mississippi applicable
thereto end that the issuance of this Bonds in fully compliance with
all Constitutional and statutory limitations, provisions and
restrictions.

IN WITNESS WHEREOF, the Issuer has caused this Bond to be signed
in its name and on its behalf by the manual or facsimile signature of
its Executive Director and its seal or a facsimile thereof to be
impressed, imprinted or otherwise reproduced hereon and attested by
the manual or facsimile signature of its Secretary as of the _ day of
December, 1998.

MIISSISSIPPI BUSINESS FINANCE CORPORATION

By:________________________
Executive Director

ATTEST:

_________________________
Secretary

SUBSTITUTION OF EQUIPMENT and
SECURITY AGREEMENT

THIS SUBSTITUTION OF EQUIPMENT and SECURITY AGREEMENT ( the
"Agreement" ), is entered into as of December , 1998, by and between
GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation with an
address at 1000 Windward Concourse, Ste. 403, Alpharetta GA 30005
("Secured Party"), and HAM MARINE, INC., a corporation organized and
existing under the laws of the State of Mississippi with its chief
executive offices located at 3400 Litton Road, Pascagoula, MS 39567
("Debtor").

RECITALS

WHEREAS, Debtor and Secured Party entered into a FIRST PREFERRED
MORTGAGE and related documents dated as of February 27, 1998 ( the
"Mortgage" ), whereby Debtor granted Secured Party a security interest
in and against that certain twin hull semi-submersible ocean service
barge named the "Dual Carrier", bearing U.S. Coast Guard official
number 1 0 6 2 5 7 6 ( the "Vessel" ).

WHEREAS, the Mortgage was executed by Debtor and delivered to
Secured Party to secure the repayment of a loan made by Secured Party
to Debtor in the principal amount of EIGHT MILLION and 00/100 United
States Dollars ( $8,000,000.00 ), said loan being evidenced by a
promissory note dated as of March 16,1998 (the "Note").

WHEREAS, the principal on the Note is payable in Sixteen (16)
equal consecutive quarterly installments of FIVE-HUNDRED THOUSAND and
00/100 Dollars ($500,000.00) which commenced June 1, 1998. As of the
date herein (i) Debtor has paid three (3) principal installments of
$500,000.00; (ii) the next principal installment is due March 1, 1999;
and (iii) the current outstanding principal balance is SIX-MILLION
FIVE-HUNDRED THOUSAND and 00/100 Dollars ( the "Remaining Principal
Indebtedness" ).

WHEREAS, Debtor desires to replace the Vessel as the collateral
securing the payment of its Remaining Principal Indebtedness to
Secured Party under the Note by substituting the Equipment described
on Collateral Schedule 001 attached ( the "Replacement Equipment" ).

NOW THEREFORE, in consideration of the promises herein contained
and of certain other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Debtor and Secured Party
hereby agree as follows:

1. SUBSTITUTION OF EQUIPMENT.

Secured Party agrees to substitute the Replacement Equipment for
the Vessel and hereby releases ail of its rights, title, and interest
in the Vessel and any proceeds thereof to Debtor. Debtor hereby gives,
grants and assigns to Secured Party, its successors and assigns
forever, a security interest in and against the Replacement Equipment.
Debtor hereby represents, warrants, and covenants that Debtor is, and
will remain, the sole and lawful owner of, and in possession of the
Replacement Equipment, and has the sole right and lawful authority to
grant the security interest described herein, and the Replacement
Equipment is, and will remain, free and clear of all liens, claims, or
encumbrances of any kind, nature and description whatsoever; except
for the lien granted herein to Secured Party.

2. CREATION OF SECURITY INTEREST.

Debtor grants to Secured Party, its successors and assigns, a
security interest in and against all property listed on the collateral
schedule annexed hereto or made a part hereof ("Collateral Schedule"),
and in and against any and all additions, attachments, accessories and
accessions to such property, any and all substitutions, replacements
or exchanges therefor, and all insurance and/or other proceeds thereof
(all of the foregoing being hereinafter individually and collectively
referred to as the "Collateral"). This security interest is given to
secure the payment and performance of any and all debts, obligations
and liabilities of any kind whatsoever of Debtor to Secured Party, now
existing or arising in the future, under the Note and this Agreement,
and any other documents evidencing, or given in connection with, any
of the Indebtedness (all of the foregoing are called the "Debt
Documents") and any renewals, extensions and modifications of such
debts, obligations and liabilities (such Note, debts, obligations and
liabilities are called the "Indebtedness")
<PAGE>
Notwithstanding anything to the contrary contained in this Agreement,
to the extent that Secured Party asserts a purchase money security
interest in any items of Collateral ("PMSI Collateral"): (i) the PMSI
Collateral shall secure only that portion of the Indebtedness which
has been advanced by Secured Party to enable Debtor to purchase, or
acquire rights in or the use of such PMSI Collateral (the "PMSI
Indebtedness"), and (ii) no other Collateral shall secure the PMSI
Indebtedness.

3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF DEBTOR.

Debtor represents, warrants and covenants as of the date of this
Agreement and as of the date of the Collateral Schedule that:

( a) Debtor is, and will remain, duly organized, existing and in
good standing under the laws of the State set forth in the preamble of
this Agreement, has its chief executive offices at the location
specified in the preamble, and is, and will remain, duly qualified and
licensed in every jurisdiction wherever necessary to carry on its
business and operations;

(b) Debtor has adequate power and capacity to enter into, and to
perform its obligations under each of the Debt Documents;

(c) This Agreement and the other Debt Documents have been duly
authorized, executed and delivered by Debtor and constitute legal,
valid and binding agreements enforceable under all applicable laws in
accordance with their terms, except to the extent that the enforcement
of remedies may be limited under applicable bankruptcy and insolvency
laws;

(d) No approval, consent or withholding of objections is required
from any governmental authority or instrumentality with respect to the
entry into, or performance by, Debtor of any of the Debt Documents,
except any already obtained;

(e) The entry into, and performance by, Debtor of the Debt
Documents will not (i) violate any of the organizational documents of
Debtor or any judgment, order, law or regulation applicable to Debtor,
or (ii) result in any breach of, constitute a default under, or result
in the creation of any lien, claim or encumbrance on any of Debtor's
property (except for liens in favor of Secured Party) pursuant to any
indenture, mortgage, deed of trust, bank loan, credit agreement, or
other agreement or instrument to which Debtor is a party;

(f) There are no suits or proceedings pending in court or before
any commission, board or other administrative agency against or
affecting Debtor which could, in the aggregate, have a material
adverse effect on Debtor, its business or operations, or its ability
to perform its obligations under the Debt Documents, nor does Debtor
have reason to believe that any such suits or proceedings are
threatened;

(g) All financial statements delivered to Secured Party in
connection with the Indebtedness have been prepared in accordance with
generally accepted accounting principles, and since the date of the
most recent financial statement, there has been no material adverse
change in Debtors financial condition;

(h) The Collateral is not, and will not be, used by Debtor for
personal, family or household purposes;

(i) The Collateral is, and will remain, in good condition and
repair and Debtor will not be negligent in its care and use;

(j) Debtor is, and will remain, the sole and lawful owner, and in
possession of, the Collateral, and has the sole right and lawful
authority to grant the security interest described in this Agreement;
and

(k) The Collateral is, and will remain, free and clear of all
liens, claims and encumbrances of any kind whatsoever, except for (i)
liens in favor of Secured Party, (ii) liens for taxes not yet due or
for taxes being contested in good faith and which do not involve, in
the judgment of Secured Party, any risk of the sale, forfeiture or
loss of any of the Collateral, and (iii) inchoate materialmen's,
mechanic's, repairmen's and similar liens arising by operation of law
in the normal course of business for amounts which are not delinquent
(all of such liens are called "Permitted Liens").
<PAGE>

4. COLLATERAL.

(a) Until the declaration of any default, Debtor shall remain in
possession of the Collateral; except that Secured Party shall have the
right to possess (i) any chattel paper or instrument that constitutes
a part of the Collateral, and (ii) any other Collateral in which
Secured Party's security interest may be perfected only by possession.
Secured Party may inspect any of the Collateral during normal business
hours after giving Debtor reasonable prior notice. if Secured Party
asks, Debtor will promptly notify Secured Party in writing of the
location of any Collateral.

(b) Debtor shall (i) use the Collateral only in its trade or
business, (ii) maintain all of the Collateral in good operating order
and repair, normal wear and tear excepted, (iii) use and maintain the
Collateral only in compliance with manufacturers recommendations and
all applicable laws, and (iv) keep all of the Collateral free and
clear of all liens, claims and encumbrances (except for Permitted
Liens).

(c) Debtor shall not, without the prior written consent of
Secured Party, (i) part with possession of any of the Collateral
(except to Secured Party or for maintenance and repair), (ii) remove
any of the Collateral from the continental United States, or (iii)
sell, rent, lease, mortgage, grant a security interest in or otherwise
transfer or encumber (except for Permitted Liens) any of the
Collateral.

(d) Debtor shall pay promptly when due all taxes, license fees,
assessments and public and private charges levied or assessed on any
of the Collateral, on its use, or on this Agreement or any of the
other Debt Documents. At its option, Secured Party may discharge
taxes, liens, security interests or other encumbrances at any time
levied or placed on the Collateral and may pay for the maintenance,
insurance and preservation of the Collateral and effect compliance
with the terms of this Agreement or any of the other Debt Documents.
Debtor agrees to reimburse Secured Party, on demand, all costs and
expenses incurred by Secured Party in connection with such payment or
performance and agrees that such reimbursement obligation shall
constitute Indebtedness.

(e) Debtor shall, at all times, keep accurate and complete
records of the Collateral, and Secured Party shall have the right to
inspect, and make copies of all of Debtor's books and records relating
to the Collateral during normal business hours, after giving Debtor
reasonable prior notice.

(f) Debtor agrees and acknowledges that any third person who may
at any time and from time to time possess all or any portion of the
Collateral shall be deemed to hold, and shall hold, the Collateral as
the agent of, and as pledge holder for, Secured Party. Secured Party
may at any time give notice to any third person described in the
preceding sentence that such third person is holding the Collateral as
the agent of, and as pledge holder for, the Secured Party.

5. INSURANCE.

(a) Debtor shall at all times bear the entire risk of any loss,
theft, damage to, or destruction of, any of the Collateral from any
cause whatsoever.

(b) Debtor agrees to keep the Collateral insured against loss or
damage by fire and extended coverage perils, theft, burglary, and for
any or all Collateral which are vehicles, for risk of loss by
collision, and if requested by Secured Party, against such other risks
as Secured Party may reasonably require. The insurance coverage shall
be in an amount no less than the full replacement value of the
Collateral, and deductible amounts, insurers and policies shall be
acceptable to Secured Party. Debtor shall deliver to Secured Party
policies or certificates of insurance evidencing such coverage. Each
policy shall name Secured-Party as a loss payee, shall provide for
coverage to Secured Party regardless of the breach by Debtor of any
warranty or representation made therein, shall not be subject to
co-insurance, and shall provide that coverage may not be canceled or
altered by the insurer except upon thirty (30) days prior written
notice to Secured Party. Debtor appoints Secured Party as its
attorney-in-fact to make proof of loss, claim for insurance and
adjustments with insurers, and to receive payment of and execute or
endorse all documents, checks or drafts in connection with insurance
payments. Lessor shall not act as Debtors attorney-in-fact unless
Debtor is in default. Proceeds of insurance shall be applied, at the
option of Secured Party, to repair or replace the Collateral or to
reduce any of the Indebtedness.
<PAGE>
6. REPORTS.

(a) Debtor shall promptly notify Secured Party of (i) any change
in the name of Debtor, (ii) any relocation of its chief executive
offices, (iii) any relocation of any of the Collateral, (iv) any of
the Collateral being lost, stolen, missing, destroyed, materially
damaged or worn out, or (v) any lien, claim or encumbrance other than
Permitted Liens attaching or being made against any of the Collateral.

(b) Debtor will deliver to Secured Party Debtors complete
financial statements, certified by a recognized firm of certified
public accountants, within ninety (90) days of the close of each
fiscal year of Debtor. If Secured Party requests, Debtor will deliver
to Secured Party copies of Debtors quarterly financial reports
certified by Debtors chief financial officer, within ninety (90) days
after the close of each of Debtors fiscal quarter. Debtor will deliver
to Secured Party copies of all Forms 10-K and 10-Q, if any, within 30
days after the dates on which they are filed with the Securities and
Exchange Commission.

7. FURTHER ASSURANCES.

(a) Debtor shall, upon request of Secured Party, furnish to
Secured Party such further information, execute and deliver to Secured
Party such documents and instruments (including, without limitation,
Uniform Commercial Code financing statements) and do such other acts
and things, as Secured Party may at any time reasonably request
relating to the perfection or protection of the security interest
created by this Agreement or for the purpose of carrying out the
intent of this Agreement. Without limiting the foregoing, Debtor shall
cooperate and do all acts deemed necessary or advisable by Secured
Party to continue in Secured Party a perfected first security interest
in the Collateral, and shall obtain and furnish to Secured Party any
subordinations, releases, landlord, lessor, or mortgagee waivers, and
similar documents as may be from time to time requested by, and in
form and substance satisfactory to, Secured Party.

(b) Debtor irrevocably grants to Secured Party the power to sign
Debtor's name and generally to act on behalf of Debtor to execute and
file applications for title, transfers of title, financing statements,
notices of lien and other documents pertaining to any or all of the
Collateral; this power is coupled with Secured Partys interest in the
Collateral. Debtor shall, if any certificate of title be required or
permitted by law for any of the Collateral, obtain such certificate
showing the lien hereof with respect to the Collateral and promptly
deliver to Secured Party such certificate showing the lien of this
Agreement with respect to the Collateral.

(c) Debtor shall indemnify and defend the Secured Party, its
successors and assigns, and their respective directors, officers and
employees, from and against any and all claims, actions and suits
(including, without limitation, related attorneys' fees) of any kind
whatsoever arising, directly or indirectly, in connection with any of
the Collateral.

8. DEFAULT AND REMEDIES.

(a) Debtor shall be in default under this Agreement and each of
the other Debt Documents if:

(i) Debtor breaches its obligation to pay when due any
installment or other amount due or coming due under any of the Debt
Documents;

(ii) Debtor, without the prior written consent of Secured
Party, attempts to or does sell, rent, lease, mortgage, grant a
security interest in, or otherwise transfer or encumber (except for
Permitted Liens) any of the Collateral;

(iii) Debtor breaches any of its insurance obligations under
Section 4;

(iv) Debtor breaches any of its other obligations under any
of the Debt Documents and fails to cure that breach within thirty (30)
days after written notice from Secured Party;
<PAGE>

(v) Any warranty, representation or statement made by Debtor
in any of the Debt Documents or otherwise in connection with any of
the Indebtedness shall be false or misleading in any material respect;

(vi) Any of the Collateral is subjected to attachment,
execution, levy, seizure or confiscation in any legal proceeding or
otherwise, or if any legal or administrative proceeding is commenced
against Debtor or any of the Collateral, which in the good faith
judgment of Secured Party subjects any of the Collateral to a material
risk of attachment, execution, levy, seizure or confiscation and no
bond is posted or protective order obtained to negate such risk;

(vii) Debtor breaches or is in default under any other
agreement between Debtor and Secured Party;

(viii) Debtor or any guarantor or other obligor for any of
the indebtedness (collectively "Guarantor") dissolves, terminates its
existence, becomes insolvent or ceases to do business as a going
concern;

(ix) If Debtor or any Guarantor is a natural person, Debtor
or any such Guarantor dies or becomes incompetent;

(x) A receiver is appointed for all or of any part of the
property of Debtor or any Guarantor, or Debtor or any Guarantor makes
any assignment for the benefit of creditors; or

(xi) Debtor or any Guarantor files a petition under any
bankruptcy, insolvency or similar law, or any such petition is filed
against Debtor or any Guarantor and is not dismissed within forty-five
(45) days.

(b) If Debtor is in default, the Secured Party, at its option,
may declare any or all of the Indebtedness to be immediately due and
payable, without demand or notice to Debtor or any Guarantor. The
accelerated obligations and liabilities shall bear interest (both
before and after any judgment) until paid in full at the lower of
eighteen percent (18%) per annum or the maximum rate not prohibited by
applicable law.

(c) After default, Secured Party shall have all of the rights and
remedies of a Secured Party under the Uniform Commercial Code, and
under any other applicable law. Without limiting the foregoing,
Secured Party shall have the right (i) with legal process, to enter
any premises where the Collateral may be and take possession of and
remove the Collateral from the premises or store it on the premises,
(ii) sell the Collateral at public or private sale, in whole or in
part, and have the right to bid and purchase at said sale, or (iii)
lease or otherwise dispose of all or part of the Collateral, applying
proceeds from such disposition to the obligations then in default. If
requested by Secured Party, Debtor shall promptly assemble the
Collateral and make it available to Secured Party at a place to be
designated by Secured Party which is reasonably convenient to both
parties. Secured Party may also render any or all of the Collateral
unusable at the Debtor's premises and may dispose of such Collateral
on such premises without liability for rent or costs. Any notice that
Secured Party is required to give to Debtor under the Uniform
Commercial Code of the time and place of any public sale or the time
after which any private sale or other intended disposition of the
Collateral is to be made shall be deemed to constitute reasonable
notice if such notice is given to the last known address of Debtor at
least five (5) days prior to such action.

(d) Proceeds from any sale or lease or other disposition shall be
applied: first, to all costs of repossession, storage, and disposition
including without limitation attorneys', appraisers', and auctioneers'
fees; second, to discharge the obligations then in default; third, to
discharge any other Indebtedness of Debtor to Secured Party, whether
as obligor, endorser, guarantor, surety or indemnitor; fourth, to
expenses incurred in paying or settling liens and claims against the
Collateral; and lastly, to Debtor, if there exists any surplus. Debtor
shall remain fully liable for any deficiency.

(e) Debtor agrees to pay all reasonable attorneys' fees and other
costs incurred by Secured Party in connection with the enforcement,
assertion defense or preservation of Secured Partys rights and
remedies under this Agreement, or if prohibited by law, such lesser
sum as may be permitted.

(f) Secured Party's rights and remedies under this Agreement or
otherwise arising are cumulative and may be exercised singularly or
concurrently. Neither the failure nor any delay on the part of the
Secured Party to exercise any right, power or privilege under this
Agreement shall operate as a waiver, nor shall any single or
<PAGE>
partial exercise of any right, power or privilege preclude any other
or further exercise of that or any other right, power or privilege.
SECURED PARTY SHALL NOT BE DEEMED TO HAVE WAIVED ANY OF ITS RIGHTS
UNDER THIS AGREEMENT OR UNDER ANY OTHER AGREEMENT, INSTRUMENT OR PAPER
SIGNED BY DEBTOR UNLESS SUCH WAIVER IS EXPRESSED IN WRITING AND SIGNED
BY SECURED PARTY. A waiver on any one occasion shall not be construed
as a bar to or waiver of any right or remedy on any future occasion.

(g) DEBTOR AND SECURED PARTY UNCONDITIONALLY WAIVE THEIR RIGHTS
TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF THIS AGREEMENT, ANY OF THE OTHER DEBT DOCUMENTS, ANY OF THE
INDEBTEDNESS SECURED HEREBY, ANY DEALINGS BETWEEN DEBTOR AND SECURED
PARTY RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY
RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING
ESTABLISHED BETWEEN DEBTOR AND SECURED PARTY. THE SCOPE OF THIS WAIVER
IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE
FILED IN ANY COURT. THIS WAIVER IS IRREVOCABLE. THIS WAIVER MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING. THE WAIVER ALSO SHALL APPLY TO
ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO
THIS AGREEMENT, ANY OTHER DEBT DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR
AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED TRANSACTION.
THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.

9. MISCELLANEOUS.

(a) This Agreement, the Note and/or any of the other Debt
Documents may be assigned, in whole or in part, by Secured Party
without notice to Debtor, and Debtor agrees not to assert against any
such assignee, or assignee's assigns, any defense, set-off, recoupment
claim or counterclaim which Debtor has or may at any time have against
Secured Party for any reason whatsoever. Debtor agrees that if Debtor
receives written notice of an assignment from Secured Party, Debtor
will pay all amounts payable under any assigned Debt Documents to such
assignee or as instructed by Secured Party. Debtor also agrees to
confirm in writing receipt of the notice of assignment as may be
reasonably requested by assignee.

(b) All notices to be given in connection with this Agreement
shall be in writing, shall be addressed to the parties at their
respective addresses set forth in this Agreement (unless and until a
different address may be specified in a written notice to the other
party), and shall be deemed given (i) on the date of receipt if
delivered in hand or by facsimile transmission, (ii) on the next
business day after being sent by express mail, and (iii) on the fourth
business day after being sent by regular, registered or certified
mail. As used herein, the term "business day" shall mean and include
any day other than Saturdays, Sundays, or other days on which
commercial banks in New York, New York are required or authorized to
be closed.

(c) Secured Party may correct patent errors herein and fill in
all blanks herein or in the Collateral Schedule consistent with the
agreement of the parties.

(d) Time is of the essence of this Agreement. This Agreement
shall be binding, jointly and severally, upon all parties described as
the "Debtor" and their respective heirs, executors, representatives,
successors and assigns, and shall inure to the benefit of Secured
Party, its successors and assigns.

(e) This Agreement and its Collateral Schedule constitute the
entire agreement between the parties with respect to the subject
matter of this Agreement and supersede all prior understandings
(whether written, verbal or implied) with respect thereto. THIS
AGREEMENT AND ITS COLLATERAL SCHEDULE SHALL NOT BE CHANGED OR
TERMINATED ORALLY OR BY COURSE OF CONDUCT, BUT ONLY BY A WRITING
SIGNED BY BOTH PARTIES. Section headings contained in this Agreement
have been included for convenience only, and shall not affect the
construction or interpretation of this Agreement.

(f) This Agreement shall continue in full force and effect until
all of the Indebtedness has been indefeasibly paid in full to Secured
Party. The surrender, upon payment or otherwise, of any Note or any of
the other documents evidencing any of the Indebtedness shall not
affect the right of Secured Party to retain the Collateral for such
other Indebtedness as may then exist or as it may be reasonably
contemplated will exist in the future. This Agreement shall
automatically be reinstated if Secured Party is ever required to
<PAGE>
return or restore the payment of all or any portion of the
Indebtedness (all as though such payment had never been made).

(g) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CONNECTICUT
(WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES OF SUCH STATE),
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE,
REGARDLESS OF THE LOCATION OF THE EQUIPMENT.

IN WITNESS WHEREOF, Debtor and Secured Party, intending to be legally
bound hereby, have duly executed this Agreement in one or more
counterparts, each of which shall be deemed to be an original, as of
the day and year first aforesaid.

SECURED PARTY:

General Electric Capital Corporation

By:

Title:

DEBTOR:

HAM MARINE, INC.

By: /s/ RONALD W. SCHNOOR
Title: President

GUARANTOR'S CONSENT:

The undersigned guaranteed all of Debtors' liabilities and obligations
under the Mortgage and Note pursuant to that Corporate Guaranty dated
March 13, 1998 (the "Guaranty") in accordance with the terms and
conditions set forth therein. The undersigned acknowledges and agrees
to the terms and conditions set forth above and confirms and ratifies
that its obligations under the Guaranty are not reduced, diminished,
expired or terminated by virtue of the matters set forth above, and
that the terms and conditions set forth in the Guaranty remain in full
force and effect are herein reaffirmed respecting the present and any
hereafter liabilities and obligations of Debtor. to Secured Party. The
undersigned hereby waives any right to assert that its obligations
under the Guaranty are released by virtue of the matters set forth
above.

GUARANTOR:

FRIEDE GOLDMAN INTERNATIONAL, INC.

By: /s/

TITLE: Chief Financial Officer

DATE: 12-15-98
<PAGE>

COLLATERAL SCHEDULE NO. 001
TO SUBSTITUTION OF EQUIPMENT and SECURITY AGREEMENT
DATED AS OF DECEMBER , 1998
BETWEEN GENERAL ELECTRIC CAPITAL CORPORATION AS SECURED PARTY
AND HAM MARINE, INC., AS DEBTOR

THIS COLLATERAL SCHEDULE is annexed to and made a part of that
certain Substitution of Equipment and Security Agreement ( the
"Agreement" ) dated as of December , 1998 between GENERAL ELECTRIC
CAPITAL CORPORATION as Secured Party and HAM MARINE, INC. as Debtor
and describes collateral in which Debtor has granted Secured Party a
security interest in connection with the Indebtedness (as defined in
the Agreement ) including without limitation that certain Promissory
Note dated as of March 16,1998 in the original principal amount of
$8,000,000.00.

<TABLE>
<S> <C> <C> <C> <C> <C>
Quantity Manufacturer Model Type of Equipment Year Serial Number
- -------- ------------ ----- ----------------- ---- -------------
One Gradall 554-2S 8-Ton Forklift 1995 01116015
One Manitowoc 4000 Crawler Mounted Crane 1965 40466
One Manitowoc 4100 Crawler Mounted Crane 1975 413001
One Manitowoc 4000 Crawler Mounted Crane 1966 40069
One Dresser 150F 15-Ton Cherry Picker 1996 9606
One Dresser 150F 15-Ton Cherry Picker 1999 9619
One Manitowoc 4100 Barge Mounted Ringer Crane 1978 10263/ 41558
One Galion 150FA 15-Ton Cherry Picker 1996 10754
One Galion 150FA 15-Ton Cherry Picker 1996 10757
One Manitowoc 4600 600-Ton Ringer Mounted Crane 1990 10237/ 460078
</TABLE>
Together with:

(a) all tracks, booms, jibs, counterweights, engines,
stabilization pads;

(b) all other components, attachments, parts, fittings,
accessories, replacements, upgrades, now existing or
hereafter becoming a part thereof;

(c) to the extent related to the Equipment, all of Debtor's
right, title, and interest to all books, diagrams, repair
and maintenance records, invoices, and other papers and
documents in the possession or control of Debtor; and

(d) all proceeds (including without limitation insurance
proceeds), accounts, contract rights and chattel paper
arising out of the sale or lease or other disposition of
said Equipment, whenever or however acquired ( Collectively,
the "Collateral" ).

SECURED PARTY: DEBTOR:
GENERAL ELECTRIC CAPITAL CORPORATION HAM MARINE, INC.
BY: BY: /s/
TITLE: TITLE: President
DATE: DATE: 12/15/98
<PAGE>

EMPLOYMENT AND NON-COMPETITION AGREEMENT

This Employment and Non-competition Agreement (the "Agreement"),
effective as of August 1, 1998 (the "Effective Date"), is by and
between Friede Goldman International Inc., a Delaware corporation (the
"Company"), and John F. Alford (Employee").

RECITALS

WHEREAS, the Company desires to engage Employee as its Executive
Vice President in charge of the Company's Mergers and Acquisitions
Department and in other related capacities, and Employee desires to
accept such engagement.

Therefore, in consideration of the mutual promises, terms,
covenants and conditions set forth herein and the performance of each,
the Company and Employee hereby agree as follows:

AGREEMENTS

I. Employment and Duties.

(a) The Company hereby employs Employee as Executive Vice
President-Mergers and Acquisitions. As such, Employee shall have
responsibility for identifying, evaluating and, with the approval of
the Company's Board of Directors, negotiating the acquisition of those
businesses within the oil and gas industry which would complement the
existing business activities carried on by the Company and its various
subsidiaries. In addition, Employee shall be responsible for
maintaining communications with, and making presentations to,
investment bankers, fund managers, analysts and other individuals in
the financial community who might invest in, or recommend that others
invest in, the Company's common stock. Employee shall also oversee
the entry into the U.S. market of the products produced by the
Company's subsidiary, Brissonneau et Lotz Marine SA. Employee shall
have such additional responsibilities, duties and authorities as may
be assigned to him by the Company from time to time. Employee will
report to the Chairman of the Board of Directors of the Company.
Employee hereby accepts this employment upon the terms and conditions
herein contained and agrees to devote his time, attention and best
efforts to promote and further the business of the Company.

(a) Employee shall faithfully adhere to, execute and fulfill all
policies established by the Company.

(a) Employee shall not, during the term of his employment
hereunder, be engaged in any other business activity pursued for gain,
profit or other pecuniary advantage if such activity interferes with
Employee's duties and responsibilities hereunder. However, the
foregoing limitations shall not be construed
<PAGE>
as prohibiting Employee from making personal investments in such form
or manner as will neither require his services in the operation or
affairs of the enterprises in which such investments are made nor
violate the terms of paragraph 3 hereof.

1. Compensation. For all services rendered by Employee, the
Company shall compensate Employee as follows:

(a) Base Salary. Beginning on the Effective Date, the base
salary payable to Employee shall be $175,000.00 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 an increase to such base
salary, or the payment of a bonus, if, in the Committee's discretion,
any such salary increase or bonus payment is warranted.

(a) Stock Options. The Company shall cause to be granted to
Employee nonqualified stock options to purchase 70,000 shares of the
common stock of the Company, at an exercise price equal to the closing
sale price per share of the Company's common stock on the date that
the Compensation Committee of the Company's Board of Directors
approves the grant of options described herein to Employee.
Employee's stock options shall be exercisable, on a cumulative basis,
as follows:

Exercise Date Total Shares Exercisable

1st Anniversary of Effective Date 20,000
2nd Anniversary of Effective Date 45,000
3rd Anniversary of Effective Date 70,000

All stock options granted to Employee shall expire upon the
earlier of the termination of Employee's employment with the
Company or 5:00 p.m. CST, September 11, 2008, unless sooner
exercised by Employee. The provisions of the Company's Amended
and Restated 1997 Equity Incentive Plan shall control all other
aspects of the stock options to be granted to Employee hereunder.

If, during the term of this Agreement or any extension
thereof, any one individual or entity, other than J. L. Holloway
or any entity in which J. L. Holloway has a fifty percent (50%)
or greater ownership interest, acquires ownership of more than
fifty percent (50%) of the Company's outstanding common stock,
whether by purchase, merger or any other form of business
combination (a "Change in Control"), then, in that event, the
stock options granted to Employee pursuant to the provisions of
this subparagraph 2(b) which are unexercised at
<PAGE>
the date of such Change in Control shall automatically double and
shall become immediately exercisable by Employee. In all other
events, the preceding paragraph of this subparagraph 2(b) shall
control the timing of the exercise of Employee's stock options
granted herein.

The representation of the Company to Employee that the
Company will grant options to purchase shares of the Company's
common stock in the event of his continued employment with the
Company is not to be construed as a guaranty by the Company of
the continued employment of Employee, nor is it to be construed
that Employee has any rights in or to any unissued shares of the
Company's common stock. Upon the termination of Employee's
employment, for any reason, by the Company or voluntarily by
Employee, Employee shall have no rights in or to any shares of
the common stock of the Company remaining unissued to Employee
pursuant to options to be granted under this subparagraph 2(b).

(a) Executive Perquisites, Benefits and Other Compensation.
Employee shall be entitled to receive additional benefits and
compensation from the Company in such form and to such extent as
specified below.

(1) Reimbursement for all business travel and other
out-of-pocket expenses (including those costs to maintain
any professional certifications held or obtained by
Employee) reasonably incurred by Employee in the performance
of his services pursuant to this Agreement. All
reimbursable expenses shall be appropriately documented in
reasonable detail by Employee upon submission of any request
for reimbursement and in a format and manner consistent with
the Company's expense reporting policy.

(2) Two (2) weeks of paid vacation per year following
the first anniversary of the Effective Date.

(3) The Company shall provide Employee with a leased
vehicle of Employee's reasonable choice having a maximum
monthly rental of $500.00, plus insurance and normal
maintenance.

(4) The Company shall provide Employee with other
executive perquisites as may be available to or deemed
appropriate for Employee by the Board of Directors or the
Committee and participation in all other Company-wide
employee benefits as may be adopted from time to time by the
Company, including, but not limited to, the Company's
current medical and dental insurance program and 401(k)
profit sharing plan.
<PAGE>
1. Non-competition Agreement.

(a) Employee recognizes that the willingness of the Company 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, and its Affiliates. For purposes of this Agreement, the term
"Affiliate" shall mean an entity which, directly or indirectly,
controls, is controlled by, or is under common control with the
Company (the Company and its Affiliates are hereinafter collectively
referred to as the "Affiliates" and individually as an "Affiliate").
Therefore, in consideration of the benefits to be received by Employee
as a result of his employment with the Company, Employee agrees that
Employee shall not, for a period of two (2) years 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:

(1) contact any customer of any Affiliate or other
person for the purpose of inducing or attempting to induce
such customer or other person to cease doing business with
any Affiliate;

(2) induce or attempt to induce any agent or employee
of any Affiliate to terminate employment with an Affiliate
or to commence work with any competitor of any Affiliate;

(3) call on, solicit, attempt to obtain, accept, or in
any way secure business from any of the customers of any
Affiliate, nor, directly or indirectly, aid or assist any
other person, firm or corporation in the solicitation of
such customer; and

(4) engage, as an officer, director, shareholder,
owner, partner, joint venturer, or in a managerial capacity,
whether as an employee, independent contractor, consultant
or advisor, or as a sales representative, in any business
selling any products or services in direct competition with
any Affiliate within the United States, Canada or France.

(a) Because of the difficulty of measuring economic losses to
the Affiliates as a result of a breach of the foregoing covenant, and
because of the immediate and irreparable damage that could be caused
to the Affiliates for which they would have no other adequate remedy,
Employee agrees that the foregoing covenant may be enforced by the
Affiliates, or any of them, in the event of breach by him, by
injunctions and restraining orders without the necessity of posting
any bond or other security therefor.

(a) The covenants in this paragraph 3 are severable and
separate, and the unenforceability of any specific covenant shall not
affect the provisions of any other covenant. Moreover, in the event
any court of competent jurisdiction shall
<PAGE>
determine that any restrictions set forth in this paragraph 3 are
unreasonable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent which the court deems
reasonable, and this Agreement shall thereby be reformed.

(a) Each of the covenants in this paragraph 3 shall be construed
as an agreement independent of any other provision in this Agreement,
and the existence of any claim or cause of action of Employee against
the Company or any Affiliate, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the
Company or any Affiliate of such covenants.

1. Term; Termination; Rights on Termination.

(a) The term of this Agreement shall begin on the Effective Date
and continue for a period of two (2) years unless earlier terminated
by either party. At any time after the commencement of employment,
the Company or Employee may, at the will of either, for any reason,
terminate this Agreement and Employee's employment, effective
immediately. At the end of the initial two (2) year term, this
Agreement shall automatically continue for an additional two (2) years
pursuant to the same terms and conditions.

(a) Upon termination of this Agreement by the Company for any
reason other than Cause, Employee shall be entitled to receive all
compensation earned and all benefits and reimbursements due through
the effective date of termination, plus one (1) year base salary as
the same may have been increased by the Committee from time to time.

(a) Upon the termination of this Agreement by the Company or any
successor thereto upon a Change in Control for any reason other than
Cause, Employee shall be entitled to receive all compensation earned
and all benefits and reimbursements due through the effective date of
termination, plus three (3) years base salary as the same may have
been increased by the Committee from time to time.

(a) Upon termination of this Agreement by the Company or any
successor thereto for Cause, or by the Employee for any reason,
Employee shall be entitled to receive all compensation earned and all
benefits and reimbursements due through the effective date of
termination.

(a) For purposes of this Agreement "Cause" is defined as (i) an
act or acts of personal dishonesty taken by Employee and intended to
result in substantial personal enrichment of Employee at the expense
of the Company, (ii) repeated violations of Employee of Employee's
obligations under paragraph 1 hereof and which are not remedied in a
reasonable period of time after receipt of written notice by Employee
from the Company, or (iii) the conviction of Employee of a felony.
<PAGE>
(a) Upon termination of this Agreement by either party for any
reason, all other rights and obligations of the Company and Employee
under this Agreement shall cease as of the effective date of
termination, except that Employee's obligations under paragraphs 3, 5,
6, 7 and 8 herein shall survive such termination in accordance with
their terms.

1. Return of Company Property. All records, designs, patents,
business plans, financial statements, manuals, memoranda, lists and
other property delivered to or compiled by Employee by or on behalf of
the Company or any Affiliate or the representatives, vendors or
customers thereof which pertain to the business of the Company or any
Affiliate shall be and remain the property of the Company or an
Affiliate, as the case may be, and be subject at all times to the
discretion and control thereof. Likewise, all correspondence,
reports, records, charts, advertising materials and other similar data
pertaining to the business, activities or future plans of the Company
or of any Affiliate which are collected by Employee shall be delivered
promptly to the Company without request by it upon termination of
Employee's employment.

1. Inventions. Employee shall disclose promptly to the Company
any and all significant conceptions and ideas for inventions,
improvements and valuable discoveries, whether patentable or not,
which are conceived or made by Employee, solely or jointly with
another, during the period of employment or within one (1) year
thereafter, and which are directly related to the business or
activities of the Company or any Affiliate and which Employee
conceives as a result of his employment by the Company. Employee
hereby assigns and agrees to assign all his interests therein to the
Company or its nominee. Whenever requested to do so by the Company,
Employee shall execute any and all applications, assignments or other
instruments that the Company shall deem necessary to apply for and
obtain Letters Patent of the United States or any foreign country or
to otherwise protect the Company's interest therein.

1. Confidentiality.

(a) Employee acknowledges and agrees that all Confidential
Information (as defined below) of the Company and any Affiliate is
confidential and a valuable, special, and unique asset of the Company
that gives the Company an advantage over its actual and potential,
current, and future competitors. Employee further acknowledges and
agrees that Employee owes the Company and any Affiliate a fiduciary
duty to preserve and protect all Confidential Information from
unauthorized disclosure or unauthorized use and unauthorized
disclosure or unauthorized use of the Company's or any Affiliate's
Confidential Information would irreparably injure the Company and its
Affiliates.

(a) Both during the term of Employee's employment and after the
termination of Employee's employment for any reason (including
wrongful termination), Employee shall hold all Confidential
Information in strict confidence, and
<PAGE>
shall not use any Confidential Information except for the benefit of
the Company, in accordance with the duties assigned to Employee.
Employee shall not, at any time (either during or after the term of
Employee's employment), disclose any Confidential Information to any
person or entity (except other employees of the Company who have a
need to know the information in connection with the performance of
their employment duties), or copy, reproduce, modify, decompile, or
reverse engineer any Confidential Information, or remove any
Confidential Information from the Company's premises, without the
prior written consent of the Board of Directors of the Company, or
permit any other person to do so. Employee shall take reasonable
precautions to protect the physical security of all documents and
other material containing Confidential Information (regardless of the
medium on which the Confidential Information is stored). This
Agreement applies to all Confidential Information, whether now known
or later to become known to Employee.

(a) Upon the termination of Employee's employment with the
Company for any reason, and upon request of the Company at any other
time, Employee shall promptly surrender and deliver to the Company all
documents and other written material of any nature containing or
pertaining to any Confidential Information and shall not retain any
such document or other material. Within five days of any such
request, Employee shall certify to the Company in writing that all
such materials have been returned.

(a) As used in this Agreement, the term "Confidential
Information" shall mean any information or material known to or used
by or for the Company or any Affiliate (whether or not owned or
developed by the Company or any Affiliate and whether or not developed
by Employee) that is not generally known to the public. Confidential
Information includes, but is not limited to, the following: all trade
secrets of the Company or any Affiliate; all information that the
Company or any Affiliate has marked as confidential or has otherwise
described to Employee (either in writing or orally) as confidential;
all nonpublic information concerning the Company's or any Affiliate's
products, services, prospective products or services, research,
product designs, prices, discounts, costs, marketing plans, marketing
techniques, market studies, test data, customers, customer lists and
records, suppliers, and contracts; all Company and Affiliate business
records and plans; all Company and Affiliate personnel files; all
financial information of or concerning the Company or any Affiliate;
all information relating to operating system software, application
software, software and system methodology, hardware platforms,
technical information, inventions, computer programs and listings,
source codes, object codes, copyrights, patents, trademarks,
servicemarks and other intellectual property; all technical
specifications; any proprietary information belonging to the Company
or to any Affiliate; all computer hardware or software manual; all
training or instruction manuals; all data and all computer system
passwords and user codes.

1. No Prior Agreements. Employee hereby represents and
warrants to the Company that the execution of this Agreement by
Employee and his employment by the Company and the performance of his
duties hereunder will not
<PAGE>
violate or be a breach of any agreement with a former employer, client
or any other person or entity. Further, Employee agrees to indemnify
the Company for any claim, including, but not limited to, attorneys'
fees and expenses of investigation, by any such third party that such
third party may now have or may hereafter come to have against the
Company based upon or arising out of any noncompetition agreement,
invention or secrecy agreement between Employee and such third party
which was in existence as of the date of this Agreement.

1. Assignment; Binding Effect. Employee understands that he
has been selected for employment by the Company on the basis of his
personal qualifications, experience and skills. Employee agrees,
therefore, that he cannot assign all or any portion of his performance
under this Agreement. Subject to the preceding two (2) sentences and
the express provisions of paragraph 10 below, this Agreement shall be
binding upon, inure to the benefit of and be enforceable by the
parties hereto and their respective heirs, legal representatives,
successors and assigns.

1. Complete Agreement. Except as expressly provided herein,
this Agreement is not a promise of future employment. Employee has no
oral understandings or agreements with the Company or any of its
officers, directors or representatives covering the same subject
matter as this Agreement. This written Agreement is the final,
complete and exclusive statement and expression of the agreement
between the Company and Employee and of all the terms of this
Agreement, and it cannot be varied, contradicted or supplemented by
evidence of any prior or contemporaneous oral or written agreements.
This written Agreement may not be later modified except by a further
writing signed by a duly authorized officer of the Company and
Employee, and no term of this Agreement may be waived except by
writing signed by the party waiving the benefit of such term.

1. 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 acknowledgment. The addresses of the
parties are as follows:

To the Company: Friede Goldman
International Inc.
525 E. Capitol Street, Suite 402
Jackson, Mississippi 39201

Attention: J. L. Holloway, Chairman
<PAGE>
Telephone: (601) 352-1107
Facsimile: (601) 352-0588

To Employee: John F. Alford
51 Northtown Drive #16A
Jackson, Mississippi 39211

Telephone: (601) 899-8680

The addresses set forth above may be changed by either party upon
fifteen (15) days' prior notice given to the other party in accordance
with the provisions of this paragraph.

1. Severability; Headings. If any portion of this Agreement is
held invalid or inoperative, the other portions of this Agreement
shall be deemed valid and operative and, so far as is reasonable and
possible, effect shall be given to the intent manifested by the
portion held invalid or inoperative. The paragraph headings herein
are for reference purposes only and are not intended in any way to
describe, interpret, define or limit the extent or intent of the
Agreement or of any part hereof.

1. Governing Law. This Agreement shall in all respects be
construed according to the laws of the State of Mississippi.

FRIEDE GOLDMAN INTERNATIONAL INC.

By:/s/ J. L. HOLLOWAY
J. L. Holloway
Chairman

EMPLOYEE:

/s/ JOHN F. ALFORD
John F. Alford

Jobie T. Melton, Jr.

Employment Agreement

This Employment Agreement, dated as of the ___ day of June, 1998,
by and between Friede Goldman International Inc., a Delaware
corporation ("the Company"), and Jobie T. Melton, Jr. ("Melton").

WITNESSETH:

WHEREAS, Company has determined that it is in its best interest
that Company retain the services of Melton as its Chief Financial
Officer ("CFO") or in such other position will duties and
responsibilities customarily associated with those of a CFO of a
publicly traded corporation; and

WHEREAS, Melton has agreed that on July 1, 1998, (the "Effective
Date") he shall assume the responsibilities of the CFO of the Company,
subject to the terms and conditions contained herein.

NOW, THEREFORE, for good and valuable consideration, the receipt
and legal sufficiency of which are hereby expressly acknowledged, the
parties agree as follows:

1. Employment Period.

Company hereby agrees to employ Melton, and Melton hereby agrees
to become employed by Company commencing on July 1, 1998, and
terminating as provided for herein (the "Employment Period"). Upon
mutual agreement of Melton and the Company, this Agreement may be
extended for such time as Melton and the Company agree.

2. Terms of Employment.

a. Position and Duties.

(i) During the Employment Period, Melton shall be employed
as an executive officer of the Company with the authority, duties and
responsibilities assigned to Melton by J. L. Holloway, the Chairman
and Chief Executive Officer of Company, which duties shall be
<PAGE>
reasonably comparable to, but need not be the same as, those held,
exercised or assigned to the CFO at the date of this Employment
Agreement. During the Employment Period, Melton's place of employment
shall remain in the Jackson, Mississippi metropolitan area.

(ii) During the Employment Period (excluding any periods of
vacation and sick leave to which Melton is entitled), Melton agrees to
devote reasonable attention, and time during normal business hours to
the business and affairs of Company and to use his best efforts to
perform faithfully and efficiently such responsibilities. It shall not
be a violation of this Agreement for Melton to: (a) serve on
corporate, civic or charitable boards or committees; (b) deliver
lectures, fulfill speaking engagements or teach at educational
institutions; or (c) manage personal investments, so long as such
activities do not interfere with the performance of Melton's
responsibilities as CFO in accordance with this Agreement.

b. Compensation and Benefits.

(i) Base Salary. During the Employment Period, Melton shall
be paid an annual base salary of $250,000.00 ("Annual Base Salary")
which shall be paid at least as often as monthly until such time as
Annual Base Salary may be increased in accordance with the wishes of
the Board of Directors of the Company. Any increase in Annual Base
Salary shall not limit or reduce any other obligation to Melton under
this Agreement. The Annual Base Salary shall not be reduced after any
such increase. During the Employment Period, Annual Base Salary shall
be reviewed at least annually.

(ii) Annual Bonus. Melton shall be entitled to an annual
cash bonus, at the discretion of the Board of Directors, which is to
be based upon Melton's general performance and the financial and
operational performance of the Company.

(iii) Signing Bonus. On the Effective Date, Melton shall at
his sole election be entitled to a signing bonus of either (1)
$150,000 cash or (2) a combination of shares of common stock of the
Company, the number and fair market value thereof to be determined in
accordance with the following sentence, and cash having an combined
value of $150,000. If Melton elects to receive Company stock as a
portion of his signing bonus pursuant to (2) above, he shall receive
(i) the number of shares determined by dividing $90,000 by the closing
market price of the Company's common stock on June 30, 1998, and (ii)
cash of $60,000.

(iv) Incentive. Welfare and Retirement Plans. In addition to
Annual Base Salary, Annual Bonus and Signing Bonus which may be earned
during the Employment Period as hereinabove provided, Melton shall be
entitled to participate in any of the following plans or programs
which may be in effect at any time during the Employment Period with
respect to other senior, corporate executive officers of Company: (a)
all incentive, bonus, stock option, savings and retirement plans and
programs; (b) all benefits under welfare benefit plans and programs
provided by the Company (including, without limitation, medical,
prescription, dental, salary
<PAGE>
continuance, employee life, group life, accidental death and travel
accident insurance plans and programs); and (c) all other fringe
benefits.

(v) Stock Options. Concurrently with the execution of this
Employment Agreement, the Company shall execute and deliver to Melton
an Employee Stock Option Contract which grants to Melton the option to
purchase 150,000 shares of the common stock of the Company, subject to
the provisions of the next sentence, at a price equal to the closing
price of the Company's common stock on June 30, 1998. Options to
purchase Thirty Thousand (30,000) shares of the common stock of the
Company may be exercised at any time commencing with the Effective
Date and an additional Thirty Thousand (30,000) shares become
exercisable in each of the four (4) succeeding years beginning on the
annual anniversary date of the Effective Dale, except as provided in
4d(i)D. Subject to the following sentence, once options to purchase
shares become exercisable, the right to exercise an option cannot be
forfeited. The right to exercise an option expires at the earlier of 5
years from the date the option became exercisable or 90 days
subsequent to termination of this Agreement. In addition to the
foregoing Employee Stock Option Contract, Melton shall be eligible to
receive the grant of additional Stock Options on an annual basis
during the Employment period.

(vi) Automobile. The Company shall at its expense provide
Melton with an automobile and pay all expenses related thereto,
including without limitation, fuel, insurance, maintenance and
parking, subject to existing Company policy.

(vii) Expenses. During the Employment Period, Melton shall
be entitled to receive prompt reimbursement for all reasonable
expenses incurred by Melton in the performance of his duties as CFO,
such reimbursement to be made against the submission by Melton of
signed, itemized expense reports in accordance with the travel and
business expense reimbursement policies as in effect at any time
applicable to executives of the Company.

(viii) Office and Support Staff. During the Employment
Period, Melton shall be entitled to an executive office with
furnishings and other appointments commensurate with his position, and
to personal secretarial and other staff assistance.

(ix) Vacation. During the Employment Period, Melton shall be
entitled to three weeks of paid vacation, plus traditional holidays,
in accordance with the practices of the Company.

(x) Additional Fringe Benefits. The Company shall pay the
costs of a cellular phone, including the monthly fee, and all costs
associated with the business usage of such phone.

(xi) Professional Dues. The Company shall pay for Melton's
costs in connection with the maintenance of his professional
designation, certification and membership in any professional
societies, including his registration as a certified public accountant
in
<PAGE>
Mississippi, Louisiana, Arkansas, including membership in AICPA, MSCPA
and SLCPA. The Company shall also pay for any continuing education
required to continue his certification as a Certified Public
Accountant in any state in which he is licensed, as well as pay for
all costs associated with Melton's attendance at the annual MSCPA
convention.

3. Termination of Employment.

a. Death or Disability.

Melton's employment shall terminate automatically upon Melton's
death during the Employment Period. If during the Employment Period
Melton should suffer from Disability (pursuant to the definition of
"Disability" set forth below), Company may give Melton written notice
in accordance with Section 7b of this Agreement of an intention to
terminate Melton's employment. In such event, Melton's employment with
the Company shall terminate effective on the 30th day after receipt of
such notice by Melton (the "Disability Effective Date). 'Disability'
for purposes of this agreement means Melton's inability or a
substantial impairment of his ability to perform the material duties
of his employment under this Agreement with the Company as a result of
physical disease, injury, accident, sickness or mental disorder which
is determined to be total and permanent, by a physician selected by
Melton and the Company.

b. Cause.

The Company may terminate Melton's employment during the
Employment Period for "Cause." For purposes of this Agreement, "Cause"
means (i) an act or acts of personal dishonesty taken by Melton and
intended to result in substantial personal enrichment of Melton at the
expense of the Company, (ii) repeated violations by Melton of Melton's
obligations under section 2a(i) hereof which are demonstrably willful
and deliberate on Melton's part and which are not remedied in a
reasonable period of time after receipt of written notice from the
Company, or (iii) the conviction of Melton of a felony.

c. Good Reason.

Melton's employment may be terminated during the Employment Period by
Melton, at his election, for Good Reason. For purposes of this
Agreement, "Good Reason" means:

(i) any material failure by the Company to comply with any
of the provisions of this Agreement, unless consented to in writing by
Melton;

(ii) the departure of J. L. Holloway as Chairman of thc
Company, or i 1; as a result of any merger, acquisition or other
transaction the Company is not, in substance, the surviving entity;
<PAGE>
(iii) any purported termination by the Company of Melton's
employment prior to the expiration of the Employment Period otherwise
than as expressly permitted by this Agreement.

d. Notice of Termination.

Any termination by the Company for Cause or by Melton for Good
Reason shall be communicated by Notice of Termination to the other
party hereto given in accordance with Section 10b For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i)
indicates the specific termination provision in this Agreement relied
upon, (ii) sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Melton's employment
under the provision so indicated, and (iii) if the Date of Termination
(as defined below) is other than the date of receipt of such notice,
specifies the termination date (which date shall be not more than
fifteen days after the giving of such notice). The failure by Melton
or by the Company, as the case may be, to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of
Cause or Good Reason, as the case may be, shall not waive any right of
the Company or Melton hereunder or preclude the Company or Melton from
asserting such fact or circumstance in any subsequent action to
enforce their respective rights hereunder.

e. Date of Termination. "Date of Termination" means the date of
receipt of the Notice of Termination or any later date specified
therein, as the case may be; provided, however, (i) if Melton's
employment is terminated by Company for Cause, the Date of Termination
shall be earlier of the date on which Company gives Melton actual
notice of such termination or the date of receipt of the Notice of
Termination, and (ii) if Melton's employment is terminated by reason
of death or Disability, the Date of Termination shall be the date of
death of Melton or the Disability Effective Date, as the case may be.

4. Obligation of the Company upon Termination.

a. Death.

If Melton's employment is terminated by reason of Melton's death
during the Employment Period, this Agreement shall terminate, other
than the payment of following obligations of Company, without further
obligations of Melton's legal representatives under this Agreement:

(i) the portion of Annual Base Salary accrued through the
Date of Termination to the extent not theretofore paid,

(ii) an amount equal to the product of any annual bonus paid
or payable (and

<PAGE>
annualized for any fiscal year in which Melton has been employed for
less than twelve full months) with respect to the fiscal year
immediately preceding the Date of Termination, if any, multiplied by a
fraction, the numerator of which is the number of days in the current
fiscal year through the Date of Termination, and the denominator of
which is 365, and

(iii) any compensation previously deferred by Melton
(together with any accrued interest thereon) and not yet paid by
Company and any accrued vacation pay not yet paid by Company (the
amounts described in paragraphs (i), (ii) and (iii) are hereafter
referred to as "Accrued Obligations").

Any stock options granted pursuant to this Agreement or any
other stock option plan or agreement which are exercisable by Melton
at the time of death shall remain exercisable by the executor or
administrator of Melton's estate for a period of one year.

All Accrued Obligations shall be paid to Melton's estate or
beneficiary, as applicable, in a lump sum in cash within 30 days of
the Date of Termination. Anything in this Agreement to the contrary
notwithstanding, Melton's family shall be entitled to receive thc
benefits provided by Company to surviving families of executive
officers of Company.

b. Disability.

If Melton's employment is terminated by reason of Melton's
Disability, this Agreement shall terminate and the Company shall pay
to Melton the Accrued Obligations and the Company shall continue to
pay Melton the monthly Base Salary for a period of. six ( ) months
following termination.. All Accrued Obligations shall be paid to
Melton in a lump sum in cash within 30 days of the Date of
Termination. Any stock options granted pursuant to this Agreement or
any other stock option plan or agreement which are exercisable by
Melton at thc Disability Effective Date shall remain exercisable by
Melton for a period of one year. Anything in this Agreement to the
contrary notwithstanding, Melton shall be entitled after the
Disability Effective Date to receive disability and other benefits as
in effect with respect to executive officers of Company and their
families.

c. Cause Other Than for Good Reason.

If Melton's employment shall be terminated for Cause during the
Employment Period, this Agreement shall terminate without further
obligations to Melton other than the obligation to pay to Melton his
Annual Base Salary accrued through the Date of Termination plus the
amount of any compensation previously deferred by Melton, in each case
to the extent theretofore unpaid, and any stock options held by Melton
that are exercisable at the Dale of Termination shall remain
exercisable for a period of 90 days subsequent to the Date of
Termination. If Melton terminates employment during the Employment
Period other than for Good Reason, this Agreement shall terminate
without further obligations to Melton, except that the Company pay
Melton the Accrued Obligations in lump sum in cash within 30 days of
the Date of Termination
<PAGE>
and Melton's rights under any stock options that are exercisable shall
be retained as set forth in this agreement or other applicable stock
option plan or agreement.

d. Termination for Good Reason or Other Than for Cause or
Disability.

If, during the first five (5) years of the Employment Period,
Company should terminate Melton's employment other than for Cause or
Disability, or if Melton should terminate employment under this
Agreement for Good Reason:

(i) Company shall pay to Melton in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the
following amounts:

A. all Accrued Obligations; and

B. a lump sum payment equal to the Annual Base Salary
in effect on the Date of Termination.

C. for a period of one year, or such longer period as
any plan, program, practice or policy may provide, Company, as the
case may be, shall continue benefits to Melton and/or Melton's family
at least equal to those which would have been provided to them in
accordance with the plans and programs described in Section
2(b)(iv)(b) hereof if Melton's employment had not been terminated.

D. if Melton should terminate this Agreement pursuant
to paragraph 3(c)(ii) above, the stock options granted to Melton
pursuant to this Agreement which have not become exercisable in
accordance with the terms and conditions of the applicable stock
option plans and the stock option agreements shall become exercisable
in accordance with the following schedule:

Date of termination Options which become
Exercisable

Prior to December 31, 1998 30,000
Subsequent to December 31,1998,
but prior to December 31, 1999 60,000
Subsequent to December31, 1999,
but prior to December 31, 2000 90,000
Subsequent to December31,2000 120,000

Subject to the following sentence, once options to purchase shares
become exercisable, the right to exercise an option cannot be
forfeited. The terms of paragraph 2b(v) above notwithstanding, options
that become exercisable pursuant to the schedule above as a result of
termination of this
<PAGE>
Agreement for Good Reason and any other stock options held by Melton
that are exercisable at the time of termination of this Agreement for
Good Reason shall remain exercisable for a period of 1 year subsequent
to termination.

If Melton should terminate this Agreement for Good Reason other than
pursuant to paragraph 3(c)(ii), any stock options granted pursuant to
this Agreement that are exercisable at the date of termination shall
remain exercisable for 90 days subsequent to termination.

E. In addition, any stock options granted to Melton
subsequent to the date of this agreement shall become exercisable in
accordance with the terms and conditions of the applicable stock
option plans and the stock option agreements.

If, after the first five (5) years of the Employment Period,
Company should terminate Melton's employment other than for Cause or
Disability, or if Melton should terminate employment under this
Agreement for Good Reason, the Company's only obligation to Melton
shall be the Accrued Obligations which shall be paid to Melton in a
lump sum in cash within 30 days after the Date of Termination

5. Non-exclusivity of Rights.

Nothing in this Agreement shall prevent or limit Melton's
continuing or future participation in any benefit, bonus, incentive or
other plans, programs, policies or practice, provided by Company for
which Melton may qualify during the Employment Period, nor shall
anything herein limit or otherwise affect such rights as Melton may
have under any other agreements with Company. Amounts which are
vested benefits or which Melton is otherwise entitled to receive under
any plan, policy, practice or program of Company at subsequent to the
Date of termination shall be payable in accordance with such plan,
policy, practice or program except as explicitly modified by this
Agreement.

6. Successors.

a. This Agreement is personal to Melton and without the prior
written consent of the Company shall not be assignable by Melton
otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by Melton's
legal representatives.

b. Subject to the limitations of Section 3c, this Agreement
shall inure to the benefit of and be binding upon the Company and its
successors and assigns.

c. Subject to the limitations of Section 3c, the Company will
use its best efforts to require any successor (whether direct or
indirect, by purchase, merger, consolidation or
<PAGE>
otherwise) to all or substantially all of the business and/or assets
of the Company to assume expressly and agree to perform this Agreement
in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. As used
in this Agreement, "Company" shall mean Friede Goldman International
Inc. and any successor to its business and/or assets as aforesaid
which assumes and agrees to perform this Agreement by operation of
law, or otherwise.

7. Miscellaneous.

a. This Agreement shall be governed by and construed in
accordance with the laws of the State of Mississippi, without
reference to principles of conflict of laws. The captions of this
Agreement are not part of the provisions hereof and shall have no
force or effect. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto
or their respective successors and legal representatives.

b. All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or be
registered or certified nail, return receipt requested, postage
prepaid, addressed as follows:

If to Melton:

Jobie T. Melton, Jr.
2436 Massena Dr.
Jackson, MS 39211

If to the Company:

Friede Goldman International Inc.
525 East Capitol St.
Suite 402
Jackson, MS 39201

or to such other address as either party shall have furnished to the
other in writing in accordance herewith. Notice and communications
shall be effective when actually received by the addressee.

c. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.

d. Melton's or the Company's failure to insist upon strict
compliance with any provision hereof shall not be deemed to be a
waiver of such provision or any other provision thereof.
<PAGE>
e. This Agreement contains the entire understanding of Company
and Melton with respect to the subject matter hereof. From and after
the Effective Date, this Agreement shall supersede all prior
agreements in all respects.

IN WITNESS WHEREOF, Melton has hereunto set his hand and the
Company has caused these presents to be executed in their names on
their behalf, all as of the day and year first above written.

/s/ JOBIE T. MELTON, JR.
Jobie T. Melton, Jr.

FRIEDE GOLDMAN INTERNATIONAL, INC.

By: /s/

Its: President

Attest:/s/

Exhibit 21.1

<TABLE>
Jurisdiction of Percentage of
Name of Subsidiary Incorporation Ownership
- ---------------------------------- --------------- -------------
<S> <C> <C>
Brissonneau & Lotz Marine USA, Inc. Delaware 100%

World Rig Leasing Company Delaware 100%
Ilion, LLC Delaware 50%

Friede Goldman Canada Inc. The Government of
Newfoundland and
Labrador 100%

Friede Goldman Newfoundland Limited The Government of
Newfoundland and
Labrador 100%

Friede & Goldman, Ltd. Mississippi 100%

Friede Goldman Offshore, Inc. Mississippi 100%

Friede Goldman France SAS France 100%
Achere France 100%
BLM France 100%
BOPP France 100%
Trawler Rabelais France 10%
Trawler Villion France 10%
SCI Lesvenez France 100%
SCI Du Croissant France 100%

Friede Goldman International
FSC Incorporated Barbados 100%

Friede Goldman Delaware, Inc. Delaware 100%

</TABLE>

<ARTICLE> 5
<CURRENCY> U.S. DOLLARS

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1,000
<CASH> 42,796,320
<SECURITIES> 0
<RECEIVABLES> 52,956,309
<ALLOWANCES> 0
<INVENTORY> 34,191,727
<CURRENT-ASSETS> 149,124,101
<PP&E> 138,108,264
<DEPRECIATION> 12,166,701
<TOTAL-ASSETS> 314,560,103
<CURRENT-LIABILITIES> 143,265,510
<BONDS> 61,992,112
0
0
<COMMON> 245,351
<OTHER-SE> 85,044,729
<TOTAL-LIABILITY-AND-EQUITY> 314,560,103
<SALES> 382,912,819
<TOTAL-REVENUES> 382,912,819
<CGS> 293,712,117
<TOTAL-COSTS> 326,411,421
<OTHER-EXPENSES> 374,225
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,227,627
<INCOME-PRETAX> 55,964,182
<INCOME-TAX> 20,677,702
<INCOME-CONTINUING> 35,286,480
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 35,286,480
<EPS-PRIMARY> 1.46
<EPS-DILUTED> 1.43

</TABLE>