<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 25, 1997
REGISTRATION NO. 333-38157
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
FIRST WAVE MARINE, INC.
(Exact Name of Registrant as specified in its charter)
<TABLE>
<C> <C> <C>
DELAWARE 3731 76-0461352
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classification Code No.)
</TABLE>
4000 SOUTH SHERWOOD FOREST BOULEVARD, SUITE 603
BATON ROUGE, LOUISIANA 70816
(504) 292-8800
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
DAVID B. AMMONS
EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER, SECRETARY
FIRST WAVE MARINE, INC.
4000 SOUTH SHERWOOD FOREST BOULEVARD, SUITE 603
BATON ROUGE, LOUISIANA 70816
(504) 292-8800
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
<TABLE>
<C> <C>
SUZANNE B. KEAN, ESQ. JOHN HUGGINS, ESQ.
GRIGGS & HARRISON, P.C. BAKER & BOTTS, L.L.P.
1301 MCKINNEY, SUITE 3200 599 LEXINGTON AVE., 29TH FLOOR
HOUSTON, TEXAS 77010-3033 NEW YORK, NEW YORK 10022-6030
(713) 651-0600 (212) 705-5080
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION -- DATED NOVEMBER 25, 1997
PROSPECTUS
SHARES
FIRST WAVE LOGO
FIRST WAVE MARINE, INC.
COMMON STOCK
($0.01 PAR VALUE)
Of the shares of Common Stock, $0.01 par value (the "Common
Stock"), of First Wave Marine, Inc. (the "Company" or "First Wave"), offered
hereby, shares are being sold by the Company and shares are
being sold by the Selling Stockholders. See "Principal and Selling
Stockholders." Prior to this Offering (the "Offering"), there has been no public
market for the Common Stock of the Company. It is currently estimated that the
initial public offering price will be between $ and $ per share. See
"Underwriting" for information relating to the factors considered in determining
the initial public offering price.
The Company has applied to have the Common Stock included in the Nasdaq
Stock Market's National Market (the "Nasdaq National Market") under the symbol
"FWAV."
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 9.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
===================================================================================================================
UNDERWRITING PROCEEDS TO
DISCOUNTS AND PROCEEDS TO SELLING
PRICE TO PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.................... $ $ $ $
- ------------------------------------------------------------------------------------------------------------------
Total(3)..................... $ $ $ $
==================================================================================================================
</TABLE>
(1) See "Underwriting" for the indemnification arrangements.
(2) Before deducting expenses payable by the Company estimated to be $725,000.
(3) The Selling Stockholders have granted the Underwriters a 30-day option to
purchase up to an additional shares of Common Stock, solely to
cover over-allotments, if any. If this option is exercised in full, the
total Price to Public, Underwriting Discounts and Commissions, Proceeds to
Company and Proceeds to Selling Stockholders will be $ ,
$ , $ and $ , respectively. The Company will not
receive any proceeds from the shares of Common Stock sold by the Selling
Stockholders. See "Underwriting" and "Principal and Selling Stockholders."
The shares of Common Stock offered hereby are offered by the several
Underwriters named herein, subject to prior sale and acceptance by the
Underwriters, and subject to their right to reject any order in whole or in
part. It is expected that the Common Stock will be available for delivery on or
about , 1998 at the offices of Schroder & Co. Inc., New York, New
York.
SCHRODER & CO. INC.
JEFFERIES & COMPANY, INC.
MORGAN KEEGAN & COMPANY, INC.
, 1998
<PAGE> 3
[photograph of bow of ship]
Integrity
Experience
Fast Turnaround
Innovativeness
Responsiveness
Safety Excellence
[First Wave Marine, Inc. logo]
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING,
AND MAY BID FOR, AND PURCHASE, SHARES OF THE COMMON STOCK IN THE OPEN MARKET.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE> 4
[photograph of power generation barge under tow]
Hull of power generation barge constructed by First Wave
[aerial photograph of shipyard]
East Pelican Island Shipyard servicing offshore drilling rigs
[photograph of offshore supply boat]
Offshore support vessel serving Gulf Coast drilling rigs
[photograph of ocean-going ship]
Offshore petrochemical carrier serving oil and gas industry
[photograph of welder]
[photograph of inland tank barge by onshore gas free facility]
Inland tank barge, degassing facility, Brady Island Shipyard
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and Consolidated Financial Statements, including the notes thereto,
appearing elsewhere in this Prospectus. Unless otherwise indicated, the
information in this Prospectus assumes that the Underwriters' over-allotment
option will not be exercised. All references to Common Stock give effect to the
10.65-for-one stock split effected November 20, 1997. Unless the context
indicates otherwise, references herein to the "Company" or "First Wave" shall
mean First Wave Marine, Inc. and its predecessors and subsidiaries and assumes
the consummation of the Exchange (as defined herein), and all financial data is
given for such combined entity unless specified otherwise.
THE COMPANY
First Wave is a leading provider of shipyard and related environmental
services to the offshore support vessel, offshore barge and inland marine
industries. The Company offers a full range of repair, conversion, new
construction and related environmental services, including cleaning,
degassing and wastewater treatment. Following the consummation of a pending
acquisition, the Company will significantly expand its operations and capacity,
particularly into the offshore drilling industry. The Company will be the
largest shipyard operator in the Houston-Galveston area with five of the eight
major shipyard facilities in this strategic location. First Wave believes that,
following the pending acquisition, it will be the only "one-stop" source of all
shipyard services for all segments of the offshore support vessel, offshore
barge and inland marine markets in Texas.
Since it acquired its first facility in December 1993, First Wave has
significantly improved revenues and profitability. The Company's success has
been the product of a focused strategy to build a high quality, dedicated
workforce, provide a high level of customer service and optimize the mix of its
services to maximize capacity utilization. As a result, revenues grew to $28.0
million in 1996 from $15.3 million in 1994 while EBITDA improved to $4.4 million
from a loss of $23,000 over the same period. In the first nine months of 1997,
the Company generated revenues of $24.5 million and EBITDA of $7.2 million,
compared to revenues and EBITDA of $19.9 million and $1.8 million, respectively,
in the first nine months of 1996.
The Company believes that as a result of its strategy and planned
expansion, it is well positioned to meet the growing demand for its services.
First Wave is experiencing strong demand growth for all of its services
primarily as a result of: (i) higher repair activity due to the aging offshore
support vessel and barge fleets; (ii) greater customer requirements for repair
and related environmental services due to increased utilization and
consolidation of the offshore support vessel and barge fleets; (iii) increasing
customer demand to convert and upgrade vessels in response to changing market
conditions; and (iv) increased levels of new vessel construction. To meet this
demand, First Wave plans to utilize capacity available at its newly acquired
facilities, as well as expand into new markets, in particular the offshore
drilling industry. The Company believes that this will enable it to perform a
greater number of projects and increase its revenues, while leveraging the
economies of scale available to a geographically concentrated multi-shipyard
operator.
BUSINESS STRATEGY
The Company's strategy is to leverage its reputation as an efficient,
reliable, customer driven shipyard operator providing a diversified range of
shipyard services to the offshore support vessel, offshore drilling, offshore
barge and inland marine industries. The Company intends to utilize its proven
strengths in order to expand into the Gulf of Mexico offshore drilling market.
Key elements of this strategy are:
3
<PAGE> 6
- Maintaining a High Quality Dedicated Workforce. The Company invests
in its employees through training, superior benefits and the fostering of a
close-knit, supportive culture. As a result, the Company has not
experienced the significant labor shortages and attrition suffered by many
Gulf Coast shipyards and has consistently posted an award-winning safety
record. Management believes the Company has been able to maintain stable
manpower levels and has flattened the labor force highs and lows typical in
the shipyard industry through a superb relationship with its labor force,
sophisticated forecasting of labor needs, the implementation of its
strategic alliances and optimization of its mix of new construction and
repair services.
- Development of Strategic Alliances with Key Customers. The Company
has developed a "contract rate" system which it uses to form strategic
alliances with its key customers. The contract rate system enables the
Company to baseload its facilities with pre-booked work, improve planning
and execution of jobs through a cooperative process with the customer and
more effectively project its revenues and labor needs for the year. In
return, the alliance partner receives volume based pricing, assures itself
of needed drydock capacity, gains the ability to accurately budget its
work, benefits from improved turnaround on jobs and receives other services
on a preferred basis.
- Continuous Optimization of the Mix of Shipyard Services. The
Company generally negotiates flexible delivery dates for new construction
which greatly contributes to the efficiency of its shipyards. During
periods when demand for repair services is lower, the Company shifts
workers to new construction as a means of absorbing excess labor. By
continuously optimizing its mix of activities, the Company ensures that its
quality work force remains intact and motivated, and costs associated with
attrition are reduced. As a result of this strategy, the Company believes
that it can maximize its margins by allocating labor to higher margin
repair work or can absorb excess labor by shifting it to new construction,
as demand dictates.
- One-Stop Source for Shipyard Services. In addition to its core
shipyard repair and construction services, the Company offers a range of
related environmental services at its facilities, including tank cleaning,
degassing and wastewater treatment. Following the pending acquisitions,
complementary services such as these will enable the Company to become the
only one-stop source of all shipyard services for all segments of the
offshore support vessel, offshore barge and inland marine markets in Texas.
- Focus on Core Geographic Areas: Houston and Galveston. The
Houston-Galveston area is a very strategic location for its shipyards,
since three of the largest U.S. fleets of inland tank barges are based in
the Houston Ship Channel area. Additionally, the growing offshore support
vessel and barge fleets in the Gulf of Mexico can be efficiently served
from the Company's Houston and Galveston locations. Management believes the
expansion of the East Pelican Island and West Pelican Island facilities in
Galveston to service the offshore drilling industry is especially strategic
since Galveston is in close proximity to offshore Gulf of Mexico drilling
activity, thereby minimizing rig transit costs and downtime.
- Leveraging Economies of Scale. With all of its shipyards within a
50-mile corridor, management can more effectively operate the facilities
and consolidate overhead. Additionally, the proximity of the shipyards
allows for centralizing many administrative functions. Management believes
the uniformity of state regulations and the volume leverage gained from
using single suppliers among all its facilities, as well as the potential
interchangeability of the labor force, provides economic benefits for the
Company.
- Expansion into the Offshore Gulf of Mexico Market. Upon
consummation of the Bludworth Acquisition and the completion of the
improvements to the East Pelican Island shipyard, the Company will have two
adjacent shipyard facilities in Galveston, Texas, which will enable it to
take advantage of the rising demand for shipyard services to the oil and
gas industry in the Gulf of Mexico. Management has planned its expansion to
diversify the Company's business
4
<PAGE> 7
lines into services for offshore drilling rigs, larger offshore support
vessels and oil and gas related ship conversions.
RECENT DEVELOPMENTS
Greens Bayou Acquisition. The Company acquired the Greens Bayou Facility on
August 11, 1997. This facility is specifically designed to service the barge
industry with seven haul-up facilities, including a major six-position rail
transfer system. The Company believes it can efficiently operate this Houston
area shipyard by consolidating overhead with its nearby Brady Island shipyard.
These two shipyards will share accounting, training, sales, estimating, risk
management and general administrative functions. The potential
interchangeability of the labor force with the Brady Island facility, as well as
the ability of Greens Bayou barge customers to use Brady Island's environmental
services, should also result in economic benefits for the Company. The facility
provides necessary capacity for the Company to meet excess demand for its inland
barge services, especially due to the increasing utilization of its Brady Island
drydocks for the offshore support vessel market.
East Pelican Island Acquisition. After acquiring PMB Engineering Inc.'s
lease of the 110-acre East Pelican Island facility in Galveston, Texas, the
Company signed an amendment to such lease with Galveston Wharves providing for a
term of up to 99 years. For 1998, the Company has budgeted $24.4 million in
capital improvements to this facility. Upon completion of these planned capital
improvements, First Wave will be able to expand its business lines into
providing shipyard services for offshore drilling rigs, larger offshore support
vessels and oil and gas related ship conversions.
The Bludworth Acquisition. On October 15, 1997, the Company entered into a
purchase agreement to acquire (the "Bludworth Acquisition") all of the
outstanding capital stock of John Bludworth Marine, Inc. ("Bludworth"). The
purchase price consists of $15.0 million in cash and the issuance of a $4.0
million promissory note.
Bludworth is an established regional shipbuilder focusing on offshore
support vessel repair, as well as inland barge repair and inland boat
construction and repair. The Bludworth Acquisition expands the Company's
Houston-Galveston base of operations in a cost efficient manner, adding
significant new drydock capacity within its area of operation and diversifying
its current mix of services to include expanded capabilities in the offshore and
the inland boat segment of the marine industry. The Bludworth Acquisition
provides the Company with two additional shipyards: (i) the JBM Pasadena
facility in Pasadena, Texas, which is near the Company's other Houston shipyards
and (ii) the West Pelican Island facility which is adjacent to the East Pelican
Island facility in Galveston, Texas. It is anticipated that the Bludworth
Acquisition will close shortly after consummation of the Offering.
Additional Galveston Shipyard. The Company has entered into a non-binding
letter of intent to purchase certain shipyard assets, including real property
and improvements, in Galveston, Texas ("Other Galveston Assets") for $4.5
million. There can be no assurance that such transaction will be consummated or
consummated on the terms described herein.
5
<PAGE> 8
SUMMARY SHIPYARD INFORMATION
The Company's shipyards are presented below, indicating the markets served
at each location. All shipyards offer or will offer repair, conversion and new
construction services. In addition, the Brady Island facility offers
environmental services.
<TABLE>
<CAPTION>
OFFSHORE OFFSHORE
NO. OF SUPPORT INLAND INLAND OFFSHORE DRILLING
ACRES VESSELS BARGES BOATS BARGES RIGS SHIPS
------ -------- ------ ------ -------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
HOUSTON AREA SHIPYARDS:
Brady Island......................... 23 X X X X
Greens Bayou......................... 20 X X
JBM Pasadena(a)...................... 63 X X X X
GALVESTON SHIPYARDS:
East Pelican Island.................. 110 X X X X
West Pelican Island(a)............... 23 X X X X
</TABLE>
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(a) To be acquired in the Bludworth Acquisition.
SUMMARY
The Company believes that the additional financial resources and increased
financial flexibility afforded by the Offering will position the Company to fund
its strategic expansion plan and to participate in the ongoing consolidation of
the shipbuilding industry. Management believes that the expansion of the
Company's capacity and capabilities as a result of recent and pending
acquisitions have positioned First Wave to benefit from the improved demand for
shipyard services in the offshore oil and gas and inland marine industries.
6
<PAGE> 9
THE OFFERING
Common Stock offered:
By the Company.................... shares
By the Selling Stockholders....... shares(1)
Total..................... shares(1)
Common Stock Outstanding:
Before the Offering............... shares(2)
After the Offering................ shares(2)
Use of Proceeds..................... To fund the Bludworth Acquisition, to
fund the Company's anticipated capital
requirements over the next 12 months,
including capital expenditures to
upgrade the East Pelican Island and
West Pelican Island shipyard facilities
in Galveston, to repay a portion of the
Company's indebtedness and for general
corporate purposes. See "Use of
Proceeds."
Nasdaq National Market Symbol....... FWAV
- ---------------
(1) Does not include shares which may be sold by the Selling
Stockholders pursuant to the Underwriters' over-allotment option. See
"Principal and Selling Stockholders" and "Underwriting."
(2) Does not include 1,472,971 shares issuable upon the exercise of stock
options granted to management and employees, subject to consummation of the
Offering, all of which options will have an exercise price per share equal
to the initial public offering price set forth on the cover page of the
Prospectus. See "Management -- Director and Executive Officer Compensation"
and "-- 1997 Incentive Equity Plan."
7
<PAGE> 10
SUMMARY OF CONSOLIDATED FINANCIAL DATA
The following summary of consolidated financial data is qualified in its
entirety by the more detailed information appearing in "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
Consolidated Financial Statements, including the notes thereto, appearing
elsewhere in this Prospectus.
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<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------- ------------------------------
1994 1995 1996 1996(a) 1996 1997 1997(a)(b)
------- ------- ------- --------- ------- ------- ----------
PRO FORMA PRO FORMA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Repair and conversions.............. $11,693 $15,392 $20,997 $ 35,787 $14,965 $19,801 $40,504
New construction.................... 1,391 3,321 2,841 5,044 1,898 881 1,891
Environmental services.............. 2,263 3,287 4,119 4,119 3,062 3,784 3,784
------- ------- ------- --------- ------- ------- -------
Total revenues...................... 15,347 22,000 27,957 44,950 19,925 24,466 46,179
Gross profit.......................... 2,756 4,957 9,334 12,229 6,039 10,136 14,855
Operating earnings (loss)............. (71) 1,334 3,705 4,683 1,491 6,193 8,617
Earnings (loss) before taxes.......... (257) 1,011 2,657 4,477 1,045 4,377 8,337
Net earnings (loss)................... (259) 728 1,559 2,591 516 2,540 5,128
Weighted average number of shares
outstanding......................... 10,650 10,650 10,650 10,650 10,650
Earnings (loss) per share............. (.02) .07 .15 .05 .24
CASH FLOW AND OPERATING DATA:
Net Cash provided by (used in):
Operating activities................ ($2,962) $ 36 $ 1,184 $ -- $ (498) $ 4,436 $ --
Investing activities................ (569) (934) (1,425) -- (857) (2,008) --
Financing activities................ 3,610 884 175 -- 1,289 (1,349) --
EBITDA(c)............................. (23) 1,593 4,385 7,530 1,815 7,230 11,323
Depreciation and amortization......... 48 259 680 2,720 324 1,037 2,699
Capital expenditures(d)............... 569 934 16,322 -- 15,754 6,577 --
Labor hours worked.................... 340 509 582 953 430 463 1,003
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-----------------------
ACTUAL PRO FORMA(a)
------- ------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 1,079 $ 30,555
Total assets................................................ 32,558 103,836
Long-term debt.............................................. 23,229 9,537
Stockholders' equity........................................ 4,435 82,650
</TABLE>
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(a) Such data give effect to (i) the completion of the Bludworth Acquisition,
(ii) the completion of the Exchange and (iii) the completion of the Offering
and the application of estimated net proceeds as described in "Use of
Proceeds," as if they had occurred on January 1, 1996 as to the Pro Forma
Income Statement Data and on September 30, 1997 as to the Pro Forma Balance
Sheet Data. The Pro Forma financial data do not purport to be indicative of
the Company's financial condition or results of operations had the
transactions to which such data give effect been completed on the dates
assumed, nor do such data purport to project the Company's financial
condition or results of operations at any future date or for any future
period. See Unaudited Pro Forma Consolidated Combined Financial Information.
(b) To reflect the historical consolidated operations of Bludworth for the nine
months ended September 30, 1997, certain additions and deductions to
revenues and expenses have been made to convert such operations from a March
31 fiscal year to a calendar year.
(c) EBITDA (earnings before interest, minority interest, taxes, depreciation and
amortization expense) is presented here not as a measure of operating
results, but rather as a measure of the Company's operating performance.
Management of the Company believes that EBITDA and operating cash flow may
provide additional information about the Company's ability to meet its
future requirements for debt service, capital expenditures and working
capital. EBITDA is widely used by financial analysts as a measure of
financial performance. Management further believes that the Company's trends
in increased EBITDA enhance the Company's ability to meet capital
expenditure requirements, and give the Company a more substantial working
capital base. EBITDA should not be construed as an alternative to operating
income (determined in accordance with generally accepted accounting
principles ("GAAP")) as an indicator of the Company's operating performance
or as an alternative to cash flows from operating activities (determined in
accordance with GAAP) as a measure of liquidity. EBITDA measures presented
herein may not be comparable to similarly titled measures of other
companies.
(d) Includes property and equipment acquired through the incurrence of debt.
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<PAGE> 11
RISK FACTORS
An investment in the Common Stock offered hereby involves a high degree of
risk. The following factors should be carefully considered together with the
information provided elsewhere in this Prospectus in evaluating an investment in
the Common Stock.
SHORTAGE OF TRAINED SHIPYARD WORKERS
Shipyards located in certain portions of the U.S. Gulf Coast are
experiencing severe shortages of skilled shipyard labor as a result of recent
labor demands brought about by increases in demand for shipyard services,
offshore drilling activities, the construction of offshore facilities and
offshore field service personnel. This labor shortage has resulted in increased
costs of labor, and limitations on production capacity, for certain shipyards.
The labor shortage has not materially impacted the Company at the present time,
although no assurances can be given regarding whether shortages will be
experienced at the Company's shipyards in the future. Any labor shortages
experienced by the Company in the future could have a material adverse effect on
the Company's business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations" and "Business -- Services" and "-- Shipyard
Properties."
DEPENDENCE OF OFFSHORE SUPPORT VESSEL AND OFFSHORE DRILLING MARKETS ON OIL AND
GAS INDUSTRY
Repair of offshore support vessels accounted for over 30% of the Company's
repair and conversion revenues in 1996, and volumes are expected to increase in
the future with the consummation of the Bludworth Acquisition and implementation
of the Company's expansion strategy. Additionally, after the capital
improvements to the East Pelican Island shipyard in Galveston have been
completed, the Company will be actively seeking customers from the offshore
drilling industry. Customer demand for offshore support vessels and offshore
drilling rigs is dependent on, among other things, the levels of activity in
offshore oil and gas exploration, development and production, particularly in
the Gulf of Mexico where many of the offshore support vessels repaired by the
Company have been put into service. The level of activity in offshore oil and
gas exploration, development and production is affected by such factors as
prevailing oil and gas prices, expectations about future prices, the cost of
exploring for, producing and delivering oil and gas, the sale and expiration
dates of available offshore leases, the discovery rate of new oil and gas
reserves in offshore areas, local and international political and economic
conditions, technological advances and the ability of oil and gas companies to
generate or otherwise obtain funds for capital expenditures. Although the
Company believes there will be an increase in demand for offshore support
vessels and offshore drilling rigs, and the repair and maintenance of such
vessels, the Company cannot predict future levels of activity in offshore oil
and gas exploration, development and production. See "Business -- Industry
Overview."
RISKS RELATED TO MANAGING GROWTH
Any significant increase in the current levels of repair, conversion, and
construction activity, as well as the Company's planned expansion into the
offshore drilling rig conversion, repair and new construction business, will
impose significant added responsibilities on members of senior management,
including the need to identify, recruit and integrate additional management
personnel and skilled laborers. Although the Company has hired and plans to hire
management personnel who have experience in the business of converting and
repairing offshore drilling rigs, there can be no assurance that additional
management personnel or skilled laborers will be identified and retained by the
Company. In addition, there can be no assurance that the Company's systems,
procedures and controls will be adequate to support the Company's operations as
they expand. If the Company is unable to manage its growth efficiently and
effectively, or if it is unable to attract and retain additional qualified
management personnel and skilled laborers, there could be a material adverse
9
<PAGE> 12
effect on the Company's business, financial condition and results of operations.
See "Business -- Shipyard Properties."
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 1996, the Company derived more than 10% of its revenues from each of SEACOR
Smit Inc. (22%) and Kirby Corporation (15%) and more than 50% from its largest
five customers. Based on its current backlog of projects, the Company expects
that it will derive more than 10% of its revenues in 1997 from each of SEACOR
Smit Inc. and Kirby Corporation. Because the level of services that the Company
may provide to any particular customer depends on that customer's needs for
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. Further,
as a result of continuing consolidations in the inland marine, offshore support
vessel and offshore drilling industries, the Company may face more significant
pricing and margin pressure when dealing with volume commitments from such
customers. See "Business -- Principal Customers."
COMPETITIVE INDUSTRY
The shipbuilding industry is highly competitive. In general, during the
1990s, the U.S. shipbuilding industry has been characterized by substantial
excess capacity because of the significant decline in U.S. Navy shipbuilding
spending and the difficulties experienced by U.S. shipbuilders in competing
successfully for international commercial projects against foreign shipyards,
many of which are heavily subsidized by their governments. As a result of these
factors, competition by U.S. shipbuilders for domestic commercial projects has
increased significantly. Such increased competition has resulted in substantial
pressure on pricing and profit margins.
Contracts for the construction and conversion of vessels are often awarded
on a competitive bid basis. More than 30% of the Company's repair work is
awarded on a competitive bid basis. Although the Company believes customers
consider, among other things, the availability and technical capabilities of
equipment and personnel, efficiency, condition of equipment, safety record and
reputation, price is a primary factor in determining which qualified shipbuilder
is awarded a job.
The Company currently competes for a range of domestic commercial shipyard
projects principally with approximately 10 to 20 U.S. shipyards. The number and
identity of competitors on particular projects vary greatly, depending on the
type of service performed, the type of vessel and the size of project.
Additional competition, competitive bidding and downward pressures on profits
and pricing margins could have a material adverse effect on the Company's
business, financial condition and the results of operations. See
"Business -- Competition."
BIDDING RISKS ASSOCIATED WITH CONTRACTUAL PRICING IN THE SHIPBUILDING INDUSTRY
Over 50% of the Company's commercial contracts are currently performed on a
fixed-priced basis. The Company attempts to cover anticipated increased costs of
labor and materials through an estimation of such costs, which is reflected in
the original price. Despite these attempts, however, the revenue, cost and gross
profit realized on a fixed-price contract will often vary from the estimated
amounts because of changes in job conditions and variations in labor and
material costs over the term of the contract. These variations and the risks
generally inherent in the shipbuilding industry may result in gross profits
realized by the Company being different from those originally estimated and may
result in the Company experiencing reduced profitability or losses on projects.
10
<PAGE> 13
Depending on the size of the project, these variations from estimated contract
performance could have a significant effect on the Company's operating results
for any particular fiscal quarter or year.
In addition, the Company's contract revenues are recognized on a percentage
of completion basis. Accordingly, contract price and cost estimates are reviewed
periodically as the work progresses, and adjustments proportionate to the
percentage of completion are reflected in income in the period when such
estimates are revised. To the extent that these adjustments result in a loss or
a reduction or elimination of previously reported profits with respect to a
project, the Company would recognize a charge against current earnings, which
could be material and have a material adverse effect on the financial condition
and the results of operations. See "Business -- Contract Procedure, Structure
and Pricing" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- General."
RISK OF SHIPYARD EXPANSION
The Company has entered into an agreement with the Board of Trustees of
Galveston Wharves to lease the East Pelican Island shipyard on approximately 110
acres in Galveston, Texas for a term of up to 99 years. The Company intends to
improve the facility so that it would be capable of converting and repairing
existing offshore drilling rigs and the construction of new offshore drilling
rigs. The Company historically has not conducted any operations in this segment
of the shipbuilding industry. There can be no assurance that the Company will be
successful. Further, there can be no assurance that market conditions, including
dayrates realized by offshore drilling contractors, will permit the Company to
obtain sufficient orders for the conversion and repair of offshore drilling rigs
on a profitable basis, or that the Company will realize orders of a sufficient
quantity to justify the costs and expenses of improving, equipping and operating
the shipyard. There can be no assurance that the shipyard capital improvements
will be completed or, if completed, that the shipyard improvements will be
completed on the schedule or at the total cost to complete currently estimated
by the Company. See "Business -- Shipyard Properties."
OPERATING RISKS
The Company's activities relating to the repair, conversion and
construction of large steel structures, the operation of cranes and other heavy
machinery and other operating hazards, can cause personal injury or loss of
life, severe damage to and destruction of property and equipment and suspension
of operations. The operation of the marine rails and the drydock vessels owned
by the Company can give rise to large and varied liability risks, such as risks
of collisions with other vessels or structures, sinkings, fires and other marine
casualties, which could result in significant claims for damages against both
the Company and third parties for, among other things, personal injury, death,
property damage, pollution and loss of business. Litigation arising from any
such occurrences may result in the Company being named as a defendant in
lawsuits asserting large claims. In addition, due to their proximity to the Gulf
of Mexico, the Company's facilities are subject to the possibility of electrical
outages, as well as physical damage caused by heavy winds, hurricanes or
flooding. See "Business -- Insurance", "-- Other Regulation" and "-- Legal
Proceedings."
DEPENDENCE ON KEY MANAGEMENT
The Company believes that its success to date is attributable to, and its
future performance will depend to a significant extent upon, the efforts and
abilities of Messrs. Samuel F. Eakin, Chief Executive Officer, Frank W. Eakin,
President and Chief Operating Officer, David B. Ammons, Executive Vice
President-Finance and Joe O'Toole, Executive Vice President-Operations. The loss
of the services of one or more of the Company's executive officers could have a
material adverse effect on the Company. See "Management."
11
<PAGE> 14
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. The
loss of a significant customer could have a material adverse effect on the
Company's revenue. See "Business -- Principal Customers" and "-- Contract
Procedure, Structure and Pricing."
IMPACT OF ENVIRONMENTAL LAWS
The Company is subject to extensive and changing federal, state and local
laws (including common law) and regulations designed to protect the environment
("Environmental Laws"). The Company from time to time is involved in
administrative, enforcement and other proceedings under Environmental Laws
involving its operations and facilities. Environmental Laws could impose
liability for remediation costs or result in civil or criminal penalties in
cases of non-compliance. Compliance with Environmental Laws increases the
Company's costs of doing business. Additionally, Environmental Laws have been
subject to frequent change; therefore, the Company is unable to predict the
future costs or other future impact of Environmental Laws on its operations.
There can be no assurance that the Company will not incur material liability
related to the Company's operations and properties under Environmental Laws. See
"Business -- Environmental Regulation."
LEGISLATIVE PROPOSALS TO RESCIND PROVISIONS OF JONES ACT
Pursuant to the requirements of the Merchant Marine Act of 1920 (the "Jones
Act"), all vessels transporting products between U.S. ports ("Coastwise Trade")
must be constructed and repaired in U.S. shipyards, owned and crewed by U.S.
citizens and registered under U.S. law. Many customers elect to have vessels
constructed and repaired at U.S. shipyards, even if such vessels are eventually
intended for international use, in order to maintain flexibility to use such
vessels in the U.S. Coastwise Trade in the future. The Company believes that a
substantial portion of its revenues will result from the sale and repair of
vessels capable of being used for U.S. Coastwise Trade. In 1996, proposed
legislation was introduced in Congress to substantially modify the provisions of
the Jones Act mandating the use of vessels constructed in the United States for
U.S. Coastwise Trade. Similar bills seeking to rescind or substantially modify
the Jones Act and eliminate or adversely affect the competitive advantages it
affords to U.S. shipbuilders have been introduced in Congress from time to time
and are expected to be introduced in the future. Although management believes it
is unlikely that the Jones Act requirements will be rescinded or materially
modified in the foreseeable future, there can be no assurance that this will not
occur. Many foreign shipyards are heavily subsidized by their governments and,
as a result, there can be no assurance that the Company would be able to
effectively compete with such shipyards if they were permitted to construct
vessels for use in the U.S. coastwise trade. The repeal of the Jones Act or any
amendment of the Jones Act that would eliminate or adversely affect the
competitive advantages provided to U.S. shipbuilders could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business -- Other Regulation -- Jones Act."
CONTROL BY EXISTING MANAGEMENT AND STOCKHOLDERS
Following the completion of the Offering, the Company's executive officers
and directors will beneficially own % of the outstanding shares of Common
Stock ( % if the Underwriters' over-allotment option is exercised in full).
In addition, Samuel F. Eakin, the Company's Chairman of the Board and Chief
Executive Officer will beneficially own % of the outstanding shares of
Common Stock ( % if the Underwriters' over-allotment option is exercised in
full). Conse-
12
<PAGE> 15
quently, these persons, if they were to act together, would have the ability to
exercise control over the Company's affairs, to elect all directors in the class
standing for election in any given year and to control the disposition of any
matter submitted to a vote of stockholders. See "Principal and Selling
Stockholders."
CERTAIN ANTI-TAKEOVER EFFECTS
The Certificate of Incorporation of the Company (the "Certificate"), the
Bylaws of the Company (the "Bylaws"), and applicable provisions of the Delaware
General Corporation Law (the "DGCL"), contain various provisions that may
hinder, delay or prevent the acquisition of control of the Company without the
approval of the Company's Board of Directors. Certain provisions of the
Certificate and the Bylaws, among other things, (i) authorize the issuance of
"blank check" preferred stock, (ii) divide the Company's Board of Directors into
three classes, the members of which (after an initial transition period) will
serve for three-year terms, (iii) establish advance notice requirements for
director nominations and stockholder proposals to be considered at annual
meetings and (iv) prohibit stockholder action by written consent. In addition,
Section 203 of the DGCL imposes certain restrictions on mergers and other
business combinations between the Company and any holder of 15% or more of the
Common Stock. See "Description of Capital Stock -- Certain Provisions of the
Company's Charter and Bylaws and Delaware Law," and "--Statutory Business
Combination Provision."
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the Offering, the Company will have shares of
Common Stock outstanding. In addition, 1,472,971 shares will be issuable upon
exercise of options outstanding under the Company's 1997 Equity Incentive Plan.
Of these shares, the shares sold in the Offering will be freely
tradeable without restrictions or registration under the Securities Act of 1933,
as amended (the "Securities Act"). All of the remaining shares of
Common Stock held by existing stockholders will be "restricted" securities as
that term is defined in Rule 144 as promulgated under the Securities Act. The
Company intends to register all of the shares issuable under the 1997 Equity
Incentive Plan under the Securities Act after consummation of the Offering.
Subject to the 180-day lock-up agreement described below, of the
"restricted" securities will be eligible for sale in the public market following
the consummation of the Offering pursuant to Rule 144. Additional shares of
Common Stock will also become eligible for sale in the public market from time
to time. However, the Company, its directors and executive officers and the
Selling Stockholders have agreed not to issue, sell, offer to sell, grant any
options for the sale of, or otherwise dispose of any shares of Common Stock or
any rights to purchase Common Stock for a period of 180 days from the date of
this Prospectus without the prior written consent of Schroder & Co. Inc. In
addition, an aggregate of 999,390 shares to be issued in the Exchange will be
subject to further contractual restrictions on sale. Following this Offering,
sales of substantial amounts of the Company's Common Stock in the public market
pursuant to Rule 144 or otherwise, or the availability of such shares for sale,
could adversely affect the prevailing market price of the Common Stock and
impair the Company's ability to raise additional capital through the sale of
equity securities. See "Shares Eligible for Future Sale."
IMMEDIATE AND SUBSTANTIAL DILUTION TO INVESTORS
Investors purchasing shares of Common Stock in the Offering will experience
immediate and substantial dilution in net tangible book value of approximately
$ per share of Common Stock. See "Dilution."
DIVIDEND POLICY
The Company does not anticipate paying any cash dividends on its Common
Stock in the foreseeable future. See "Dividend Policy."
13
<PAGE> 16
ABSENCE OF A PRIOR PUBLIC MARKET FOR THE COMMON STOCK
Prior to the Offering, there has been no public market for the Common Stock
and there can be no assurance that an active public market for the Common Stock
will develop or be sustained or that the price at which the Common Stock will
trade after the Offering will not be lower than the initial public offering
price. The initial public offering price of the Common Stock in the Offering has
been determined through negotiations between the Company and the managing
Underwriters. See "Underwriting." Market prices for the Common Stock following
the Offering will be influenced by a number of factors, including the depth and
liquidity of the market for the Common Stock, investor perceptions of the
Company and general economic and other conditions. The Company has applied to
have the Common Stock approved for quotation on the Nasdaq National Market. See
"Underwriting."
14
<PAGE> 17
THE COMPANY
First Wave Marine, Inc. is a leading provider of shipyard and related
environmental services to the offshore support vessel, offshore barge and inland
marine industries. The Company offers a full range of repair, conversion, new
construction and related environmental services, including cleaning, degassing
and wastewater treatment. Following the consummation of two pending
acquisitions, the Company will significantly expand its operations and capacity
particularly into the offshore drilling industry. The Company will be the
largest shipyard operator in the Houston-Galveston area with five of the eight
major shipyard facilities in this strategic location. First Wave believes that
following the pending acquisitions, it will be the only one-stop source of all
shipyard services for all segments of the offshore support vessel, offshore
barge and inland marine markets in Texas.
In December 1993, the Company's Brady Island shipyard was acquired by a
holding company formed by the partners of Eakin & Company, Ltd. ("Eakin & Co.")
through a lease of the facilities and equipment from Newpark Resources, Inc., an
unrelated corporation ("Newpark Resources"). Eakin & Co. specializes in
turnaround companies and complex transactions. In August 1996, the Company
purchased the Brady Island leased assets from Newpark Resources. In August 1997,
the Company acquired certain repair and new construction assets of the Greens
Bayou facility from Platzer Shipyard, Inc., a subsidiary of Trinity Industries,
Inc. After acquiring PMB Engineering, Inc.'s lease of the 110-acre East Pelican
Island facility in Galveston, Texas with Galveston Wharves, the Company has
signed an amendment to such lease providing, among other things, for a term of
up to 99 years at an annual rental rate of $700,000, subject to adjustment.
The Company was incorporated in Delaware on September 26, 1997. The
Company's predecessor, a Texas corporation, merged into the Company on September
30, 1997 (the "Reincorporation"). The Company currently owns 83% of the
outstanding shares of Newpark Shipbuilding and Repair, Inc. ("Newpark
Shipbuilding"). The Company has entered into a definitive agreement with the
minority shareholders of Newpark Shipbuilding to acquire the remaining 17% of
the outstanding shares of Newpark Shipbuilding in exchange for 999,390 shares of
Common Stock of the Company (the "Exchange").
The principal executive offices of the Company are located at 4000 South
Sherwood Forest Boulevard, Suite 603, Baton Rouge, Louisiana 70816, and its
telephone number at such offices is (504) 292-8800.
USE OF PROCEEDS
The estimated net proceeds to be received by the Company from the Offering,
after deducting underwriting discounts and commissions and other estimated
expenses payable by the Company, are approximately $ million.
Approximately $15.0 million of the proceeds will be used to fund the cash
portion of the purchase price for the Bludworth Acquisition. It is anticipated
that in mid-1998 $4.0 million of the Offering proceeds will be used to pay the
promissory note issued as the remaining portion of the purchase price for the
Bludworth Acquisition. Approximately $12.1 million of the proceeds of the
Offering will be used to prepay indebtedness outstanding under all of
Bludworth's credit facilities, including $5.1 million relating to indebtedness
of Bludworth expected to be incurred in connection with its approximately
9,000-ton drydock currently under construction. Substantially all of the
remaining $7.0 million of Bludworth's indebtedness was incurred in connection
with Bludworth's start up of the West Pelican Island facility. See Consolidated
Financial Statements of Bludworth, including the notes thereto, contained
herein.
The Company intends to use $14.1 million of the net proceeds of the
Offering to prepay indebtedness outstanding under four of its credit facilities.
The borrowings under the first facility bear interest at 10.4% and 9.9% per year
and mature on September 2003. The borrowings under the
15
<PAGE> 18
second facility bear interest at 8.0% and mature September 2003. The borrowings
under the third facility bear interest at 9.25% and mature February 2002. The
borrowings under the fourth facility bear interest at prime plus 1.0% and mature
August 2000. Approximately $1.7 million of the indebtedness proposed to be
prepaid with proceeds of the Offering was incurred in the last year to acquire
certain assets of Greens Bayou, $12.0 million was incurred in prior years to
partially finance the acquisition of the Brady Island facility and the balance
was used for general corporate purposes. All of the Company's credit facilities
being prepaid (excluding the Bludworth credit facilities) have been guaranteed
by Samuel F. Eakin.
Excluding the Bludworth Acquisition, the Company intends to use
approximately $27.6 million of the proceeds for its anticipated capital
requirements over the next 12 months, including capital expenditures to upgrade
the facilities at the East Pelican Island shipyard.
A financial advisor's fee of 0.5% of the Offering proceeds to the Company
and the Selling Stockholders net of underwriting discounts and commissions and
Offering expenses will be paid to each of Parker Point Capital Corp. and Eakin &
Co. See "Management -- Certain Transactions."
The balance of the net proceeds of the Offering, if any, will be used by
the Company for general corporate purposes, including satisfaction of working
capital needs, and other purposes. Pending such uses, the net proceeds will be
invested in short-term, interest-bearing, investment-grade securities.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its Common
Stock. The Company currently anticipates that, for the foreseeable future, any
earnings will be retained for the development of the Company's business. The
declaration of dividends is at the discretion of the Company's Board of
Directors. The Company's dividend policy will be reviewed by the Board of
Directors at such time as may be appropriate in light of future operating
conditions, dividend restrictions of subsidiaries, financial requirements,
general business conditions and other factors. Currently, two of the Company's
principal subsidiaries are restricted under their respective credit agreements
from paying dividends to the Company without their respective lender's approval.
It is anticipated that all of the outstanding indebtedness under one of these
facilities will be paid with the net proceeds of the Offering.
16
<PAGE> 19
DILUTION
The net tangible book value of the Company at September 30, 1997, was
$ or $ per share of Common Stock. Net tangible book value per
share of Common Stock is determined by dividing the tangible net worth (total
tangible assets less total liabilities) of the Company by the shares
of Common Stock outstanding prior to the Exchange and the consummation of this
Offering. After giving effect to the Exchange and the sale of Common Stock by
the Company in this Offering (assuming net proceeds to the Company of
$ ), the pro forma net tangible book value of the Company at September
30, 1997, would have been approximately $ or $ per share of
Common Stock. This represents an immediate increase in net tangible book value
of $ per share of Common Stock to present holders of Common Stock and
an immediate dilution of approximately $ per share to new investors
purchasing shares in this Offering. The following table illustrates this per
share dilution to new investors:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share...................... $
-------
Net tangible book value per share before the Exchange and
the Offering........................................... $
-------
Increase per share attributable to the Exchange........... $
-------
Increase per share attributable to new investors.......... $
-------
Pro forma net tangible book value per share after the Exchange and
the Offering....................................................... $
-------
Dilution per share to new investors.................................. $
-------
</TABLE>
The following table sets forth, as of September 30, 1997, the number of
shares of Common Stock purchased from the Company, the total consideration paid
and the average price per share paid by the existing Stockholders and by new
investors:
<TABLE>
<CAPTION>
TOTAL
SHARES PURCHASED(1) CONTRIBUTION AVERAGE
-------------------- ------------------- PRICE PER
AMOUNT PERCENT AMOUNT PERCENT SHARE
-------- -------- -------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders......... $
Exchange stockholders......... $
New investors................. $
Total............... 100.0% 100.0%
===== =====
</TABLE>
- ---------------
(1) The above computations do not give effect to the 1,472,971 shares issuable
pursuant to stock options granted under the 1997 Incentive Equity Plan to
management and employees, subject to consummation of the Offering, all of
which options will have an exercise price per share equal to the initial
public offering price set forth on the cover page of the Prospectus.
17
<PAGE> 20
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1997 (i) on a historical basis, (ii) pro forma after giving effect
to the Exchange, and (iii) pro forma as adjusted to reflect the issuance by the
Company of shares of Common Stock offered hereby and the application
of the net proceeds therefrom as described under "Use of Proceeds." This table
should be read in conjunction with the Consolidated Financial Statements of the
Company, including the notes thereto, contained herein.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
------------------------------------------------
PRO FORMA PRO FORMA
FOR THE AS ADJUSTED
HISTORICAL EXCHANGE FOR THE OFFERING
----------- --------- ----------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C>
Cash and cash equivalents.......................... $ 1,079 $ $
========
Short-term borrowings and current portion of
long-term debt................................... $ 1,552
Long-term debt..................................... 21,966
--------
Total debt............................... 23,518
--------
Stockholders' equity:
Common Stock, $0.01 par value, 21,000,000 shares
authorized; 10,757,565 shares issued and
outstanding, 11,756,955 shares outstanding pro
forma for the Exchange and shares
issued and outstanding pro forma as
adjusted for the Offering(a).................. 10
Preferred stock, $0.01 par value, 2,000,000
shares authorized; no shares issued and
outstanding................................... --
Additional paid-in capital....................... 2
Retained earnings................................ 4,423
--------
Total stockholders' equity............... 4,435
--------
Total capitalization..................... $ 27,953 $
========
</TABLE>
- ---------------
(a) Does not include an aggregate of 1,472,971 shares issuable pursuant to stock
options granted under the Company's 1997 Incentive Equity Plan to management
and employees, subject to consummation of the Offering, all of which will
have an exercise per share equal to the initial public offering price set
forth on the cover page of the Prospectus. See "Management -- 1997 Incentive
Equity Plan" and "Description of Capital Stock."
18
<PAGE> 21
SELECTED CONSOLIDATED FINANCIAL DATA
The historical financial data presented in the table below for and at the
end of each of the years in the three-year period ended December 31, 1996 and as
of and for the nine-month period ending September 30, 1997 are derived from the
Consolidated Financial Statements of the Company audited by Grant Thornton LLP,
independent certified public accountants. The results for the nine months ended
September 30, 1997 are not necessarily indicative of the results to be achieved
for the full year. The consolidated statements of operations data set forth
below for the years ending December 31, 1992 and 1993 and the consolidated
balance sheet data at December 31, 1992 and 1993 have been derived from
unaudited accounting records of a predecessor to the Company. The historical
financial data presented in the table below as of the end of the nine-month
period ended September 30, 1996 are derived from the unaudited Consolidated
Financial Statements of the Company. In the opinion of management of the
Company, all of such unaudited Consolidated Financial Statements include all
adjustments (consisting of normal recurring adjustments) necessary for a fair
presentation of the financial data for such periods. The data presented below
should be read in conjunction with the Company's Consolidated Financial
Statements and the notes thereto included elsewhere in this Prospectus and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------- -----------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Repair and conversions.................... $12,560 $14,075 $11,693 $15,392 $20,997 $14,965 $19,801
New construction.......................... -- -- 1,391 3,321 2,841 1,898 881
Environmental services.................... 2,118 2,176 2,263 3,287 4,119 3,062 3,784
------- ------- ------- ------- ------- ------- -------
Total revenue....................... 14,678 16,251 15,347 22,000 27,957 19,925 24,466
Cost of revenues............................ 10,695 14,994 12,591 17,043 18,623 13,886 14,330
------- ------- ------- ------- ------- ------- -------
Gross profit................................ 3,983 1,257 2,756 4,957 9,334 6,039 10,136
General and administrative expenses(a)...... 3,728 3,241 2,827 3,623 5,629 4,548 3,943
------- ------- ------- ------- ------- ------- -------
Operating income (loss)..................... 255 (1,984) (71) 1,334 3,705 1,491 6,193
Interest expense, net....................... 101 359 186 247 829 380 1,280
Minority interest........................... -- -- -- 76 219 66 536
------- ------- ------- ------- ------- ------- -------
Earnings (loss) before taxes................ 154 (2,343) (257) 1,011 2,657 1,045 4,377
Income tax provision(b)..................... -- -- 2 283 1,098 529 1,837
------- ------- ------- ------- ------- ------- -------
Net earnings (loss)................. $ 154 $(2,343) $ (259) $ 728 $ 1,559 $ 516 $ 2,540
======= ======= ======= ======= ======= ======= =======
Earnings (loss) per share(b)................ -- -- (.02) .07 .15 .05 .24
Weighted average number of shares
outstanding(b)............................ -- -- 10,650 10,650 10,650 10,650 10,650
CASH FLOW AND OPERATING DATA:
Net cash provided by (used in):
Operating activities...................... 1,064 (1,284) (2,962) 36 1,184 (498) 4,436
Investing activities...................... (5,560) (317) (569) (934) (1,425) (857) (2,008)
Financing activities...................... 4,204 1,441 3,610 884 175 1,289 (1,349)
EBITDA(c)................................... 859 (1,287) (23) 1,593 4,385 1,815 7,230
Depreciation and amortization............... 604 697 48 259 680 324 1,037
Capital expenditures(d)..................... 13,293 317 569 934 16,322 15,754 6,577
Labor hours worked.......................... NA NA 340 509 582 430 463
Gross Margin................................ 27.1% 7.7% 18.0% 22.5% 33.4% 30.3% 41.4%
Operating Income Margin..................... 1.7% NM NM 6.1% 13.3% 7.5% 25.3%
Net Income Margin........................... NM NM NM 3.3% 5.6% 2.6% 10.4%
EBITDA Margin............................... 5.9% NM NM 7.2% 15.7% 9.1% 29.6%
</TABLE>
19
<PAGE> 22
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
--------------------------------------------- -------------
1992 1993 1994 1995 1996 1997
------- ------- ------ ------ ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents......................... $ 974 $ 814 $ 79 $ 66 $ -- $ 1,079
Total assets...................................... 18,854 18,144 5,017 6,794 24,932 32,558
Long-term debt.................................... 4,520 4,161 1,434 1,128 18,663 23,299
Stockholders' equity (deficit).................... (4,796) (7,139) (258) 334 1,893 4,435
</TABLE>
- ---------------
NA -- Not available
NM -- Not meaningful
(a) Included in general and administrative expenses for 1992 and 1993 are $1.3
million and $2.2 million in administrative allocations charged by the
predecessor's parent company.
(b) In 1992 and 1993, the results of operations of the predecessor to the
Company were included in the consolidated financial statements and tax
returns of the predecessor's parent company. Therefore, earnings per share,
weighted average number of shares outstanding and income tax provisions were
reported by the predecessor's parent company and are not applicable.
(c) EBITDA (earnings before interest, minority interest, taxes, depreciation and
amortization expense) is presented here not as a measure of operating
results, but rather as a measure of the Company's operating performance.
Management of the Company believes that EBITDA and operating cash flow may
provide additional information about the Company's ability to meet its
future requirements for debt service, capital expenditures and working
capital. EBITDA is widely used by financial analysts as a measure of
financial performance. Management further believes that the Company's trends
in increased EBITDA enhance the Company's ability to meet capital
expenditure requirements, and give the Company a more substantial working
capital base. EBITDA should not be construed as an alternative to operating
income (determined in accordance with GAAP) as an indicator of the Company's
operating performance or as an alternative to cash flows from operating
activities (determined in accordance with GAAP) as a measure of liquidity.
EBITDA measures presented herein may not be comparable to similarly titled
measures of other companies.
(d) Includes property and equipment acquired through the incurrence of debt.
20
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This information should be read in conjunction with the Company's
Consolidated Financial Statements, including the notes thereto, contained in
this Prospectus. See also "Selected Consolidated Financial Data."
GENERAL
The Company currently engages in the repair and conversion of offshore
support vessels and barges, as well as the construction of new barges at two
shipyards in the Houston area (Brady Island and Greens Bayou). Additionally, the
Company has entered into agreements to add three new shipyards through the
purchase of JBM Pasadena, West Pelican Island and the long-term lease of the
East Pelican Island shipyard. The JBM Pasadena and West Pelican Island
shipyards, located in Houston and Galveston, respectively, are dedicated
primarily to the offshore support vessel, inland barge and inland tow boat
markets. Management believes that the two Pelican Island facilities, which will
move the Company into offshore drilling rig repair, conversion and new
construction and expand its capacities in the offshore vessel market, offer
significant location and labor advantages. The Company has assembled a proven
management team with decades of experience in the offshore segment to operate
the Pelican Island facilities.
The Company's results of operations are primarily dependent upon: (i) the
conditions affecting the oil and gas and petrochemical industries in the Gulf of
Mexico; (ii) the Company's ability to obtain contracts; and (iii) the Company's
ability to manage contracts to successful completion. The Company's primary
source of revenue is derived from labor hours. The Company currently employs
approximately 400 people at the Brady Island and Greens Bayou facilities. The
shipyards to be acquired currently employ approximately 300 production workers.
Since the acquisition of the Brady Island shipyard in December 1993, the
Company has served the offshore support vessel and offshore and inland barge
markets. Historically, the Company's services have included repair, conversion,
construction and related environmental services. The Company's strategy has been
to achieve a balanced diversification and provide one-stop servicing for both
inland and offshore marine markets.
With the acquisition of the JBM Pasadena shipyard, the Company will enjoy a
significant market share in the highly competitive inland marine repair business
in the strategically important Houston market. This concentration of assets
allows for efficiencies and economies of scale which the Company believes will
provide it with a competitive advantage. With the consummation of the Bludworth
Acquisition, the Company's operations will be conducted at five shipyards along
a 50-mile corridor around the Houston-Galveston ports. Management believes that
growth generated by the offshore rig repair and construction segments will
result in larger unit contracts, and will enhance revenues and earnings. When
combined with the relative stability and consistent volumes of the inland marine
business, management believes its approach produces higher net income, less
cyclicality, and more consistent growth than is possible for companies servicing
a single segment of the industry.
Revenues derived from the repair and conversion segment of the shipyard
industry generally produce higher gross profit margins than new construction.
The repair and conversion market is currently experiencing growth due to several
factors, including the increased utilization of aging fleets, consolidation of
these fleets by well-capitalized vessel operators, and replenishment and
upgrading of fleets. The Company has also developed a specialization in the
conversion of offshore support vessels into longer and wider vessels in response
to increased demand for offshore vessels with deepwater capabilities.
Historically, the Company has used new construction of inland barges to
stabilize the labor force highs and lows typical in the shipyard industry by
shifting workers to new construction as a
21
<PAGE> 24
means of absorbing excess labor. Management views the lower-margin inland barge
new construction segment as an incremental contributor to the business. New
construction efforts to date at the Company have primarily been focused on the
construction of customized marine equipment such as power barges, offshore deck
barges with special lift capacities, and a new generation of tank barges.
Management believes that it has positioned the Company to undertake major new
construction projects in the offshore rig segment, while preserving the
advantages of high margins and lower volatility in the repair and related
environmental services business.
The Company also provides related environmental services, including
cleaning, degassing and wastewater treatment. Although this business comprises a
small percentage of the Company's total revenues, it generates high margins and
enhances the Company's strategy to be the only one-stop source of all shipyard
services for all segments of the offshore support vessel, offshore barge and
inland marine markets in Texas.
All statements other than statements of historical fact contained in this
Prospectus, including statements in this "Management's Discussion and Analysis
of Financial Condition and Results of Operations" concerning results of
operations, results from proposed shipyard acquisitions, future expansion plans
and other matters are forward-looking statements. Forward-looking statements in
this Prospectus generally are accompanied by words such as "anticipate,"
"believe," "estimate" or "expect" or similar statements. 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 correct.
Factors that could cause the Company's results to differ materially from the
results discussed in such forward-looking statements include the risks described
under "Risk Factors," such as the dependence on the oil and gas industry,
difficulties related to managing growth in operations, dependence on significant
customers, competition, the risks associated with contractual pricing, the
success of proposed expansion into the offshore drilling rig segment, and labor,
operating, regulatory and other risks in the shipbuilding industry and risks
relating to the offshore support vessel, offshore barge and inland marine
markets. All forward-looking statements in this Prospectus are expressly
qualified in their entirety by the cautionary statements in this paragraph.
RESULTS OF OPERATIONS
Comparison of Nine Months Ended September 30, 1997 to Nine Months Ended
September 30, 1996
Revenues increased 22.8% to $24.5 million in the nine-month period ended
September 30, 1997 compared with $19.9 million in the same period in 1996
primarily due to growth in offshore support vessel repair and conversion
activity. Overall growth in repair and conversion activity, which accounted for
approximately 80.9% of total revenues in the nine-month period ended September
30, 1997, rose 18.5% over the same period in 1996, based on labor hours.
Cost of revenues rose 3.2% to $14.3 million in the nine-month period ended
September 30, 1997 from $13.9 million in the same period in 1996 as a result of
the overall growth in labor hours.
Gross profits increased by 67.8% to $10.1 million in the nine-month period
ended September 30, 1997 from $6.0 million in the same period in 1996 primarily
due to higher billing and bid rates. This is reflected in an increase in gross
profit margin for the first nine-months of 1997 to 41.4% from 30.3% for the same
period in 1996.
General and administrative expenses decreased 13.3% to $3.9 million in the
nine-month period ended September 30, 1997 from $4.5 million in the same period
in 1996. In the nine-month period ended September 30, 1996, general and
administrative expenses included a final $700,000 non-recurring pre-tax fee
related to a reduction in costs resulting from a consolidation of the Company's
insurance plan. Also included in general and administrative expenses was an
aggregate $400,000 paid in discretionary bonuses during the first nine months of
1997. General and administrative
22
<PAGE> 25
expenses for the nine-month period ended September 30, 1996 included
approximately $450,000 in additional management fees over the same period in
1997. General and administrative expenses as a percentage of revenues for the
first nine months of 1997 represented 16.1% of total revenues, as compared to
22.8% for the same period in 1996.
Depreciation and amortization expense increased to $1.0 million in the
nine-month period ended September 30, 1997 from $324,000 in the same period in
1996 primarily due to the effect of a full nine months of depreciation in the
1997 period of the assets acquired at the Brady Island facility in August 1996.
Interest expense rose to $1.3 million in the nine-month period ended
September 30, 1997 from $380,000 in the same period in 1996 due to additional
financing costs associated with the debt incurred to finance the acquisition of
the Brady Island assets from Newpark Resources.
As a result of the foregoing, income tax expense increased to $1.8 million
in the nine-month period ended September 30, 1997 from $529,000 in the same
period in 1996.
Net earnings rose 392.2% to $2.5 million in the nine-month period ended
September 30, 1997 from $516,000 in the same period in 1996.
Comparison of Year Ended December 31, 1996 to Year Ended December 31, 1995
Revenues increased 27.1% to $28.0 million in 1996 compared with $22.0
million in 1995 primarily due to increased activity in the offshore support
vessel and inland tank barge markets. The growth in revenues was primarily
driven by higher levels of activity in repair and conversion services which rose
23.4% and related environmental services which increased 10.7% in 1996 over
1995, respectively, based on labor hours.
Cost of revenues rose 9.3% to $18.6 million in 1996 from $17.0 million in
1995 primarily due to increased activity.
Gross profits increased by 88.3% to $9.3 million in 1996 from $5.0 million
in 1995 primarily due to a shift in the business mix including higher levels of
activity generated from repair and conversions of offshore support vessels. As a
result, gross profit margin increased to 33.4% in 1996 from 22.5% in 1995.
General and administrative expenses rose 55.4% to $5.6 million in 1996 from
$3.6 million in 1995 and increased as a percentage of revenues to 20.1% from
16.5% as a result of the aforementioned $700,000 final, non-recurring fee. Also
included in general and administrative expenses was an aggregate $680,000 paid
in discretionary bonuses during 1996 compared with $68,000 in 1995.
Depreciation and amortization expense increased to $680,000 in 1996 from
$259,000 in 1995 due to additional depreciation associated with fixed assets
purchased at the Brady Island facility in the third quarter of 1996 from Newpark
Resources which had previously been under lease.
Interest expense rose to $829,000 in 1996 from $247,000 in 1995 due to the
additional financing costs associated with debt incurred to finance operations
and the fixed assets purchased at the Brady Island shipyard.
As a result of the foregoing, income tax expense increased to $1.1 million
in 1996 from $283,000 in 1995. The 1995 period included the utilization of a
$300,000 net operating loss carryover.
Net earnings rose 114.1% to $1.6 million in 1996 from $728,000 in 1995
including the aforementioned final, non-recurring pre-tax fee of $700,000
($441,000 after-tax).
23
<PAGE> 26
Comparison of Year Ended December 31, 1995 to Year Ended December 31, 1994
The Company's revenues increased 43.4% to $22.0 million in 1995, compared
to $15.3 million in 1994. This increase was attributable to higher levels of
activity across all segments of the service mix, based on labor hours.
Cost of revenues increased 35.4% to $17.0 million in 1995 from $12.6
million in 1994 primarily because of increased activity.
Gross profits increased 79.9% to $5.0 million in 1995 from $2.8 million in
1994 due to higher levels of activity in repair and conversion and related
environmental services, based on labor hours. Gross profit margin percentage of
revenues increased to 22.5% in 1995 from 18.0% in 1994.
General and administrative expenses rose 28.2% to $3.6 million in 1995 from
$2.8 million in 1994 but declined as a percentage of revenues from 18.4% to
16.5%. The decline in general and administrative expenses as a percentage of
revenues was attributable primarily to operating leverage realized from the
general and administrative cost structure.
Depreciation and amortization expense increased to $259,000 in 1995 from
$48,000 in 1994 due to additional depreciation associated with capital
improvements at the Brady Island shipyard during 1995.
Interest expense rose to $247,000 in 1995 from $186,000 in 1994 due to
additional financing costs associated with investment in capital improvements at
the Brady Island shipyard during 1995.
As a result of the foregoing, income tax expense increased to $283,000 in
1995 from $2,000 in 1994.
Net earnings improved to $728,000 in 1995 from a loss of ($259,000) in
1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary uses of cash have been to fund acquisitions and
capital expenditures and to service and repay debt.
Net cash provided by (used in) operating activities was $1.2 million,
$36,000 and ($3.0 million) in fiscal 1996, 1995 and 1994, respectively, and $4.4
million and ($498,000) in the nine months ended September 30, 1997 and 1996,
respectively. The increase in the Company's cash generated from operations
primarily reflect an increase in net earnings.
Net cash used in investing activities was $1.4 million, $934,000 and
$569,000 in fiscal 1996, 1995 and 1994, respectively, and $2.0 million and
$857,000 in the nine months ended September 30, 1997 and 1996, respectively.
During the 45-month period ended September 30, 1997, net cash used in investing
activities consisted largely of capital improvements.
Net cash provided by (used in) financing activities was $175,000, $884,000
and $3.6 million, in fiscal 1996, 1995 and 1994, respectively, and ($1.4
million) and $1.3 million in the nine months ended September 30, 1997 and 1996,
respectively. Net cash provided by financing activities represented debt
incurred to finance growth and expansion of the Company's operations, whereas
cash used in financing activities reflected repayment of the Company's
outstanding debt.
The Company has budgeted approximately $2.3 million for planned capital
projects at its current shipyard facilities for fiscal 1997, including $1.8
million and $524,000 in capital improvements for Brady Island and Greens Bayou,
respectively. Upon consummation of the Bludworth Acquisition in 1998, the
Company will spend $15.0 million in cash and issue a $4.0 million promissory
note, which note will be repaid in mid-1998 with the net proceeds of the
Offering. Excluding the Bludworth Acquisition, the Company has budgeted $27.6
million in capital expenditures for 1998, including $1.4 million, $1.8 million
and $24.4 million in capital improvements for the Brady Island, Greens Bayou and
East Pelican Island shipyard facilities, respectively. The Company is required
pursuant to
24
<PAGE> 27
the terms of the East Pelican Island lease to make $20 million in capital
improvements and equipment over the next three years, all of which the Company
has budgeted for 1998. If the Company consummates the purchase of the Other
Galveston Assets, it will spend $4.5 million for such purchase in 1998. At the
present time the Company has only entered into a non-binding letter of intent
with respect to the Other Galveston Assets, and there can be no assurance that
such transaction will be consummated or consummated on the terms described
herein.
In August 1996, the Company entered into a Credit Agreement with a
financial institution providing up to $12.4 million in amortizing term debt
bearing an interest rate of approximately 10.4% to finance the acquisition of
shipyard assets from Newpark Resources which had previously been leased. The
Credit Agreement is collateralized by certain of the Company's assets and
requires the Company to maintain certain financial ratios. In connection with
the Company's acquisition of the Brady Island shipyard assets in August 1996,
the Company borrowed $11.8 million under the Credit Agreement and issued $6.3
million in subordinated debt to Newpark Resources to fund the purchase price.
The subordinated debt bears interest at 5.0% and matures 2003. In August 1997,
the Company borrowed the remaining $600,000 available under the Credit Agreement
to partially fund the acquisition of Greens Bayou. The Company, intends to use a
portion of the net proceeds from this Offering to repay the amount outstanding
under the Credit Agreement and approximately $2.2 million in other debt.
Currently, the Company has an aggregate $4.8 million in borrowing capacity
under two revolving lines of credit, one of which bears interest at prime plus
1.0%, the other at prime plus 0.5%. The Company currently has no debt
outstanding under these facilities.
Management believes that with the net proceeds from this Offering, the
Company will have sufficient financial resources available to meet its
anticipated requirements for acquisitions, capital expenditures, working capital
and debt amortization for the next 12 months.
INFLATION AND CHANGING PRICES
The Company does not believe that general price inflation has had a
significant impact on the Company's results of operations during the periods
presented. To the extent that the effects of inflation are not offset by
improvements in manufacturing and purchasing efficiency and labor productivity,
the Company generally has been able to take such effects into account in pricing
its contracts with customers. There can be no assurance, however, that inflation
will not have a material effect on the Company's business in the future. For
information regarding the effects of increases in labor costs on the Company's
results of operations in recent periods, see "-- General" and "-- Results of
Operations."
ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board ("FASB") has issued Financial
Accounting Standards No. 128, Earnings per Share, which is effective for
financial statements issued after December 15, 1997. The new standard eliminates
primary and fully diluted earnings per share and requires the presentation of
basic and diluted earnings per share together with disclosure of how the per
share amounts were computed.
Effective December 1997, the Company will be required to adopt Statement of
Financial Accounting Standards No. 129, Disclosure of Information about Capital
Structure ("SFAS 129"). SFAS 129 requires that all entities disclose in summary
form within the financial statement the pertinent rights and privileges of the
various securities outstanding. An entity is to disclose within the financial
statement the number of shares issued upon conversion, exercise, or satisfaction
of required conditions during at least the most recent annual fiscal period and
any subsequent interim period presented. Other special provisions apply to
preferred and redeemable stock. The Company will adopt SFAS 129 in the fourth
quarter of 1997.
The FASB has issued Financial Accounting Standards No. 130, Reporting
Comprehensive Income, which is effective for financial statements issued after
December 15, 1997. The new
25
<PAGE> 28
standard requires an entity to report and display comprehensive income and its
components. Comprehensive income will include net income plus net unrealized
gains or loss on securities.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, Disclosures about Segments of an Enterprise and Related Information
("SFAS 131"). SFAS 131 establishes standards for the way public enterprises are
to report information about operating segments in annual financial statements
and requires the reporting of selected information about operating segments in
interim financial reports issued to shareholders. It also establishes standards
for related disclosures about products and services, geographic areas, and major
customers. SFAS 131 is effective for periods beginning after December 15, 1997.
UNAUDITED PRO FORMA CONSOLIDATED COMBINED
FINANCIAL INFORMATION
The following unaudited pro forma consolidated combined financial
information gives pro forma effect to: (i) the completion of the acquisition of
Bludworth by First Wave; (ii) the completion of the Exchange; and (iii) the
completion of the Offering and the application of estimated net proceeds
therefrom as described in "Use of Proceeds," as if they had occurred at January
1, 1996 with respect to the unaudited pro forma consolidated combined statements
of operations and as if they had occurred September 30, 1997 with respect to the
unaudited pro forma consolidated combined balance sheet. This pro forma
information should be read in conjunction with the respective consolidated
historical financial statements (including notes thereto) of First Wave and
Bludworth appearing elsewhere herein.
The pro forma adjustments reflecting the consummation of the Bludworth
Acquisition on the purchase method of accounting are based on available
financial information and certain estimates and assumptions set forth in the
notes to the Unaudited Pro Forma Consolidated Combined Financial Information.
The assumptions include the acquisition of all of the outstanding shares of
capital stock of Bludworth for $15.0 million in cash and the issuance of a $4.0
million promissory note which will be prepaid in mid-1998 with net proceeds of
the Offering. See "Use of Proceeds." The pro forma adjustments do not reflect
any operating efficiencies and cost savings that may be achievable with respect
to the combined businesses.
The following information is not necessarily indicative of the future
financial position or operating results of the combined businesses or the
financial position or operating results of the combined businesses had the
Bludworth Acquisition, the Exchange and the Offering occurred on the dates
discussed above. For purposes of preparing its Consolidated Financial
Statements, First Wave will establish a new basis for Bludworth's assets and
liabilities based upon the fair values thereof and First Wave's purchase price
thereof, including the costs of the Bludworth Acquisition. The Unaudited Pro
Forma Consolidated Combined Financial Information reflects First Wave's best
estimates; however, the actual financial position and results of operations may
differ from the pro forma amounts reflected herein because of various factors,
including, without limitation, access to additional information, changes in
value and changes in operating results between the date of preparation of the
Unaudited Pro Forma Consolidated Combined Financial Information and the date on
which the Bludworth Acquisition closed.
The pro forma adjustments reflecting the consummation of the Exchange are
based upon available financial information and estimates and assumptions
concerning the valuation of the Exchange. Upon completion of the Exchange, the
Company will record the purchase accounting allocation of the value of the
Company's shares exchanged to the assets acquired represented by the minority
shares of Newpark Shipbuilding. The Company will undertake a study to determine
the fair values of the exchanged shares and the net assets of Newpark
Shipbuilding for such purposes. A final determination of these values has not
been made. Therefore, the purchase accounting adjustments made for the purposes
of the Unaudited Pro Forma Consolidated Combined Financial Information reflects
First Wave's best estimates. The actual determination may result in differences
from those estimates.
26
<PAGE> 29
FIRST WAVE MARINE, INC.
PRO FORMA CONSOLIDATED COMBINED BALANCE SHEET
SEPTEMBER 30, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
JOHN
FIRST WAVE BLUDWORTH PRO FORMA PRO FORMA
MARINE, INC. MARINE, INC. ADJUSTMENTS COMBINED
------------ ------------ ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents................... $ 1,079 $ 316 $ 72,750(a) $ 30,555
(19,000)(b)
(24,590)(c)
Accounts receivable......................... 7,228 5,838 13,066
Inventories................................. 652 101 753
Other....................................... 323 829 1,152
------- ------- -------- --------
Total current assets................... 9,282 7,084 29,160 45,526
Property and equipment, net................. 22,372 10,524 12,611(b) 45,507
Organization and loan costs, net............ 704 (490)(c) 214
Deposits.................................... 200 146 -- 346
Intangible assets........................... -- -- 5,927(d) 12,243
6,316(b)
------- ------- -------- --------
Total assets........................... $32,558 $17,754 $ 53,524 $103,836
======= ======= ======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Notes payable............................... $ 219 $ 945 $ (945)(c) $ 219
Current portion of long-term obligations.... 1,333 624 (1,957)(c) --
Trade accounts payable...................... 812 1,033 1,845
Accrued liabilities......................... 1,861 1,606 3,467
------- ------- -------- --------
Total current liabilities.............. 4,225 4,208 (2,902) 5,531
Long-term obligations, net of current
portion................................... 15,125 8,359 (20,275)(c) 3,209
Subordinated debt........................... 6,841 -- (513)(c) 6,328
Deferred income taxes....................... 563 448 4,666(b) 5,677
Other liabilities........................... 441 -- 441
Minority interest in subsidiary............. 928 -- (928)(d) --
------- ------- -------- --------
Total liabilities...................... 28,123 13,015 (19,952) 21,186
STOCKHOLDERS' EQUITY
Common stock and additional paid-in
capital................................ 12 1 6,855(d) 80,542
73,675(a)
(1)(b)
Retained earnings......................... 4,423 4,738 (4,738)(b) 2,108
(925)(a)
(1,390)(c)
------- ------- -------- --------
4,435 4,739 73,476 82,650
------- ------- -------- --------
Total liabilities and stockholders'
equity............................... $32,558 $17,754 $ 53,524 $103,836
======= ======= ======== ========
</TABLE>
See accompanying notes to unaudited pro forma consolidated combined financial
statements.
27
<PAGE> 30
FIRST WAVE MARINE, INC.
PRO FORMA CONSOLIDATED COMBINED STATEMENT OF EARNINGS
NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
JOHN
FIRST WAVE BLUDWORTH PRO FORMA PRO FORMA
MARINE, INC. MARINE, INC. ADJUSTMENTS COMBINED
------------ ------------ ----------- ---------
<S> <C> <C> <C> <C>
REVENUES..................................... $24,466 $21,713 $ -- $46,179
COST OF REVENUES............................. 14,330 16,160 834(e) 31,324
------- ------- ------- -------
Gross margin....................... 10,136 5,553 (834) 14,855
GENERAL AND ADMINISTRATIVE EXPENSES.......... 3,943 2,002 293(f) 6,238
------- ------- ------- -------
Earnings from operations........... 6,193 3,551 (1,127) 8,617
OTHER INCOME (EXPENSE)
Other income............................... -- 7 7
Interest expense........................... (1,280) (606) 1,599(g) (287)
Minority interest.......................... (536) -- 536(d) --
------- ------- ------- -------
(1,816) (599) 2,135 (280)
------- ------- ------- -------
Earnings before income taxes....... 4,377 2,952 1,008 8,337
INCOME TAXES................................. 1,837 1,082 290(h) 3,209
------- ------- ------- -------
NET EARNINGS....................... $ 2,540 $ 1,870 $ 718 $ 5,128
======= ======= ======= =======
Earnings per share:
Net earnings per share..................... $
Weighted average shares outstanding........
</TABLE>
See accompanying notes to unaudited pro forma consolidated combined financial
statements.
28
<PAGE> 31
FIRST WAVE MARINE, INC.
PRO FORMA CONSOLIDATED COMBINED STATEMENT OF EARNINGS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, 1997
1996 ----------
------------ JOHN
FIRST WAVE BLUDWORTH PRO FORMA PRO FORMA
MARINE, INC. MARINE, INC. ADJUSTMENTS COMBINED
------------ ------------ ----------- ---------
<S> <C> <C> <C> <C>
REVENUES................................... $27,957 $16,993 $ -- $44,950
COST OF REVENUES........................... 18,623 12,987 1,111(e) 32,721
------- ------- ------- -------
Gross margin..................... 9,334 4,006 (1,111) 12,229
GENERAL AND ADMINISTRATIVE
EXPENSES................................. 5,629 1,526 391(f) 7,546
------- ------- ------- -------
Earnings from operations......... 3,705 2,480 (1,502) 4,683
OTHER INCOME (EXPENSE)
Other income............................. -- 148 148
Interest expense......................... (829) (443) 918(g) (354)
Minority interest........................ (219) -- 219(d) --
------- ------- ------- -------
(1,048) (295) 1,137 (206)
Earnings before income taxes..... 2,657 2,185 (365) 4,477
INCOME TAXES............................... 1,098 909 (121)(h) 1,886
------- ------- ------- -------
NET EARNINGS..................... $ 1,559 $ 1,276 $ (244) $ 2,591
======= ======= ======= =======
Earnings per share:
Net earnings per share................... $
Weighted average shares outstanding......
</TABLE>
See accompanying notes to unaudited pro forma consolidated combined financial
statements.
29
<PAGE> 32
FIRST WAVE MARINE, INC.
NOTES TO PRO FORMA CONSOLIDATED COMBINED FINANCIAL STATEMENTS
(a) To record the net proceeds of the Offering and the payment of a financial
management fee.
(b) To record the acquisition of Bludworth, the allocation of the purchase
premium to property and equipment, deferred tax liability, non-compete
agreement and goodwill.
(c) To record the retirement of debt with the proceeds of the Offering,
including prepayment penalties of $900 and the write-off of loan costs of
$490.
(d) To record the acquisition by First Wave of the minority interest in Newpark
Shipbuilding through an exchange of shares.
(e) To record additional depreciation related to the increase in value of
property and equipment recorded in the Bludworth Acquisition.
(f) To record amortization based on 40-year lives of goodwill acquired in the
Bludworth Acquisition and the acquisition of minority interest in Newpark,
and to record amortization based on a five-year life of $500 allocated to a
non-compete agreement related to the Bludworth Acquisition.
(g) To record the decrease in interest expense related to the reduction of
long-term debt with the proceeds of the Offering.
(h) To record the income tax effects related to pro forma adjustments for
interest, depreciation and amortization of non-compete agreement.
30
<PAGE> 33
BUSINESS
THE COMPANY
First Wave is a leading provider of shipyard and related environmental
services to the offshore support vessel, offshore barge and inland marine
industries. The Company offers a full range of repair, conversion, new
construction and related environmental services, including cleaning, degassing
and wastewater treatment. Following the consummation of two pending
acquisitions, the Company will significantly expand its operations and capacity,
particularly into the offshore drilling industry. The Company will be the
largest shipyard operator in the Houston-Galveston area with five of the eight
major shipyard facilities in this strategic location. First Wave believes that
following the pending acquisitions, it will be the only one-stop source of all
shipyard services for all segments of the offshore support vessel, offshore
barge and inland marine markets in Texas.
Since it acquired its first facility in January 1994, First Wave has
significantly improved revenues and profitability. The Company's success has
been the product of a focused strategy to build a high quality, dedicated
workforce, provide a high level of customer service and optimize the mix of its
services to maximize capacity utilization.
The Company believes that as a result of its strategy and planned
expansion, it is well positioned to meet the growing demand for its services.
First Wave is experiencing strong demand growth for all of its services
primarily as a result of: (i) higher repair activity due to the aging offshore
support vessel and barge fleets; (ii) greater customer requirements for repair
and related environmental services due to increased utilization and
consolidation of the offshore support vessel and barge fleets; (iii) increasing
customer demand to convert and upgrade vessels in response to changing market
conditions; and (iv) increased levels of new vessel construction. To meet this
demand, First Wave plans to utilize capacity available at its newly acquired
facilities, as well as expand into new markets, in particular the offshore
drilling industry. The Company believes that this will enable it to perform a
greater number of projects and increase its revenues, while leveraging the
economies of scale available to a geographically concentrated multi-shipyard
operator.
BACKGROUND
The Company's Brady Island facility was acquired through a lease of the
facilities and equipment from Newpark Resources, an unrelated corporation. In
August 1996, the Company purchased the Brady Island leased assets from Newpark
Resources. The Brady Island shipyard provides conversions and repairs for the
offshore support vessel industry, as well as repair, new construction and
related environmental services for the offshore and inland barge markets. In
1996, the Brady Island shipyard added a service line to its environmental
services division, by providing non-hazardous wastewater treatment on a fee
basis. The Company is currently constructing a 2 million gallon wastewater tank
to expand its environmental services division.
In August 1997, the Company acquired certain repair and new construction
assets of Platzer Shipyard, Inc. (the Greens Bayou facility), a subsidiary of
Trinity Industries, Inc. This facility is specifically designed to service the
barge industry with seven haul-up facilities, including a major six position
rail transfer system. The Company believes it can efficiently operate this
Houston area shipyard by consolidating overhead with its nearby Brady Island
shipyard. These two shipyards will share accounting, training, sales,
estimating, risk management and general administrative functions. The potential
interchangeability of the labor force with the Brady Island facility, as well as
the ability of the Greens Bayou barge customers to use Brady Island's
environmental services, should also result in economic benefits for the Company.
After acquiring PMB Engineering Inc.'s lease of the 110-acre East Pelican
Island facility in Galveston, Texas the Company signed an amendment to such
lease with Galveston Wharves, providing for, among other things, a term of 15
years with 28 three-year options (for up to 99 years) at an annual rate of
$700,000, subject to adjustment. Pursuant to the terms of the amended lease, the
Company has committed to make $20 million in capital improvements and equipment
at the East
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Pelican Island shipyard over the next three years, all of which have been
budgeted for 1998. Upon completion of the planned capital improvements to the
East Pelican Island shipyard, First Wave will be able to expand its business
lines into providing shipyard services for offshore drilling rigs, larger
offshore support vessels and oil and gas related ship conversions.
The Bludworth Acquisition. On October 15, 1997, the Company entered into a
purchase agreement to acquire all of the outstanding capital stock of Bludworth.
The purchase price consists of $15 million in cash and the issuance of a $4.0
million promissory note.
Bludworth is an established regional shipbuilder focusing on offshore
support vessel repair, as well as inland barge repair and inland boat
construction and repair. The Bludworth Acquisition expands the Company's
Houston-Galveston base of operations in a cost efficient manner, adding
significant new drydock capacity within its area of operation and diversifying
its current mix of services to include expanded capabilities in the offshore and
the inland boat segment of the marine industry. The Bludworth Acquisition
provides the Company with two additional shipyards: (i) the JBM Pasadena
facility in Pasadena, Texas, which is near the Company's other Houston shipyards
and (ii) the West Pelican Island facility which is adjacent to the East Pelican
Island facility in Galveston, Texas. It is anticipated that the Bludworth
Acquisition will close shortly after consummation of the Offering.
See "-- Services" and "-- Shipyard Properties" for additional information
about the Company's shipyards and its repair, conversion, new construction and
environmental services.
INDUSTRY OVERVIEW
The Company's current repair and conversion activities for the offshore
support vessel market as well as its planned strategy to provide shipyard
services for the offshore drilling rig market are primarily dependent upon the
demand for offshore drilling and related services in the Gulf of Mexico. In
addition, the Company's business is impacted by fundamentals and trends specific
to the offshore support vessel and offshore and inland tank barge markets. The
industry fundamentals and trends influencing these markets are summarized below.
Offshore Drilling Industry
The Company believes that the current supply of offshore drilling rigs is
inadequate to satisfy increasing demand. The level of worldwide offshore
drilling activity has increased substantially over the last two years, resulting
in current worldwide and Gulf of Mexico offshore drilling rig utilization of 95%
and 97%, respectively, in September 1997. Dayrates worldwide for jackups capable
of drilling in water depths of over 300 feet have increased from an average of
$38,000 in October 1995 to an average of $75,600 in October 1997. Similarly,
dayrates worldwide for third and fourth generation semisubmersibles have
increased from an average of $101,000 in October 1995 to an average of $162,500
in October 1997. In addition, oil and gas operators have recently begun to enter
into multi-year contracts with drilling contractors for offshore drilling rigs
due to the tightness of supply for available units in order to guarantee timely
access to drilling equipment.
In particular, the demand for deep water (deeper than 1,000 feet) drilling
services worldwide and in the Gulf of Mexico has increased substantially in
recent years as a result of reserve discoveries and technological advances which
have made development and production of reserves in deep water economically
viable. Deep water drilling requires larger and more technically advanced
drilling rigs. However, because of the limited number of offshore drilling rigs
with deep water capabilities, a number of offshore drilling contractors have
entered into long-term agreements to upgrade or convert existing or build new
offshore drilling rigs to meet the deep water drilling demand.
The Company believes that these positive trends will continue because of:
(i) the increasing percentage of worldwide oil supply being produced from
offshore areas, (ii) the large increases in
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cash flow experienced by many oil and gas companies, (iii) the increases in
capital expenditure budgets for offshore drilling activity by oil and gas
companies, (iv) technological advancements relating to exploration, development
and production techniques, including three-dimensional seismic, directional
drilling and subsea completions, that have increased drilling success rates and
improved efficiencies of development and production activities and (v) the
increased focus on deep water exploration and production projects, particularly
in the Gulf of Mexico, as evidenced by significant increases in the number of
deep water blocks under lease and the prices paid for deep water leases during
each of the last five years and the record $1.4 billion committed in the two
offshore lease sales in 1997.
The Company believes that the offshore drilling industry fundamentals will
remain strong for some time. Also, the majority of the offshore drilling rigs
operating in the Gulf of Mexico are ten years old or older and these rigs are
operating at almost full capacity. The Company believes that these rigs will
require repairs and that offshore drilling contractors will continue to evaluate
their existing fleets, and will undertake conversion and new construction
projects to meet demand for deep water rigs. The Company believes that the
proximity and capacity of its East Pelican Island facility will enable it to
execute its planned expansion strategy to perform offshore drilling rig repair,
conversion and new construction services.
Offshore Support Vessels
The primary role of offshore support vessels is to deliver the necessary
equipment, personnel and supplies to offshore drilling rigs and production
facilities. However, the number of such vessels in service in the Gulf of Mexico
decreased from a peak of approximately 700 in 1985 to approximately 317 in
October 1997 while the ratio of active support vessels to active offshore
drilling rigs has decreased from approximately 4:1 to roughly 2:1 over the same
period. As a result of the increase in offshore drilling and the reduced supply
of active vessels, dayrates have increased substantially over the last five
years. At the same time, a few offshore support vessel operators have
significantly consolidated this market. Currently, the top five offshore support
vessel operators now control approximately 80% of the Gulf of Mexico fleet.
Although construction of new offshore support vessels has commenced, a
majority of the support vessels currently in service in the Gulf of Mexico are
16 or more years old and a majority of the remainder are between 11 and 16 years
old. As these vessels age, maintenance, repair and vessel certification costs
increase significantly and eventually require replacement. New offshore support
vessels incorporating advances in engineering, technology and outfitting are
expected to cost between $6 million and $15 million each depending on the
vessel's size and capabilities. Offshore support vessels constructed to serve
deep water drilling operations will be larger and more powerful and will
generally require an investment in the upper end of this range.
The Company believes that given the current industry conditions and
improved dayrates, the opportunity cost of having an idle offshore support
vessel generally outweighs the expense associated with the rapid completion of
vessel repairs. Given the improved financial condition of the reduced number of
fleet operators, the Company believes that these operators will make additional
repairs, modifications and conversions at federally mandated inspection dates
which require vessels to be drydocked. Additionally, because of the estimated 18
months to two-year lead-time required to construct new offshore support vessels
capable of serving the deep water, the Company believes that fleet operators
will continue to convert and "stretch" existing support vessels for deep water
service. Because of its extensive experience in the repair and conversion of
offshore support vessels and its ability to expand its production at its
existing shipyards and shipyards that it is acquiring, the Company believes it
is well positioned to take advantage of the current upturn in the offshore
support vessel business.
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Tank Barges
The Company focuses its repair, new construction and related environmental
services on the tank barge market which predominantly transports petrochemicals
through the inland waterways and offshore. Domestic production of petrochemicals
has continued to increase annually, attributable to growth in the economy,
continued growth of the United States population and the continued substitution
of plastics and synthetics in a wide variety of products. Texas and Louisiana
currently account for approximately 80% of the total United States production of
petrochemicals.
The Company believes that the total number of tank barges that operate in
the inland waters of the United States has declined from an estimate of
approximately 4,200 in 1981 to approximately 2,800 in 1996. The Company believes
this decrease primarily resulted from: (i) increasing age of the domestic tank
barge fleet resulting in scrapping; (ii) rates inadequate to justify new
construction; (iii) a reduction in financial and tax incentives which previously
encouraged speculative construction of new equipment; (iv) more stringent
operating standards to adequately cope with safety and environmental risks; and
(v) an increase in environmental regulations that mandate expensive equipment
modification which some owners are unwilling or unable to undertake given
current rate levels and the age of their fleet.
Although well-maintained tank barges can be efficiently operated for more
than 30 years, the cost of hull work for required annual U.S. Coast Guard
certifications, as well as general safety and environmental concerns, force
operators to periodically reassess their ability to recover maintenance costs.
The tax and financing incentives which were previously available to operators
and investors to construct tank barges led to growth in the supply of domestic
tank barges to a peak of approximately 4,200 in 1981 have been largely
eliminated. The supply of tank barges resulting from the earlier programs has
slowly aligned with demand for tank barge services, primarily through attrition,
as discussed above. The average age of the nation's tank barge fleet is
approximately 20 years, only 17% of which were built in the last 10 years.
Single skin barges, which comprise approximately 20% of the nation's tank barge
fleet, are being driven from the national fleet by market forces, environmental
concerns and rising maintenance costs.
In addition to the reduction in the aggregate tank barge fleet, the
existing active fleet of tank barges has been consolidated by a few large
operators. Over the last two years, given the strength of the United States
economy, these operators have experienced improved utilization of their fleets
and increased profitability. With their improved financial condition, dominant
market positions and heightened concern for potential environment liabilities,
tank barge fleet operators demand better service and higher quality from the
shipyards that provide repair, new construction and other services. The Company
believes that it has the personnel, management systems and infrastructure to
meet the demands of these tank barge fleet operators.
BUSINESS STRATEGY
The Company's strategy is to leverage its reputation as an efficient,
reliable, customer driven shipyard operator in order to provide a diversified
range of shipyard services to the offshore support vessel, offshore drilling,
offshore barge and inland marine industries. The Company intends to utilize its
proven strengths in order to expand into the Gulf of Mexico offshore drilling
market. Key elements of this strategy are:
- Maintaining a High Quality Dedicated Workforce. The Company invests
in its employees through training, superior benefits and the fostering of a
close-knit, supportive culture. As a result, the Company has not
experienced the significant labor shortages and attrition suffered by many
Gulf Coast shipyards and has consistently posted an award-winning safety
record. Management believes the Company has been able to maintain stable
manpower levels and has flattened the labor force highs and lows typical in
the shipyard industry through a superb relationship with its labor force,
sophisticated forecasting of labor needs, the implementation of its
strategic alliances and optimization of its mix of new construction and
repair services.
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- Development of Strategic Alliances with Key Customers. The Company
has developed a "contract rate" system which it uses to form strategic
alliances with its key customers. The contract rate system enables the
Company to baseload its facilities with pre-booked work, improve planning
and execution of jobs through a cooperative process with the customer and
more effectively project its revenues and labor needs for the year. In
return, the alliance partner receives volume based pricing, assures itself
of needed drydock capacity, gains the ability to accurately budget its
work, benefits from improved turnaround on jobs and receives other services
on a preferred basis.
- Continuous Optimization of the Mix of Shipyard Services. The Company
generally negotiates flexible delivery dates for new construction which
produces cost savings to the customer and greatly contributes to the
efficiency of its shipyards. During periods when demand for repair services
is lower, the Company shifts workers to new construction as a means of
absorbing excess labor. By continuously optimizing its mix of activities,
the Company ensures that its quality work force remains intact and
motivated, and costs associated with attrition are reduced. As a result of
this strategy, the Company believes that it can maximize its margins by
allocating labor to higher margin repair work or can absorb excess labor by
shifting it to new construction.
- One-Stop Source for Shipyard Services. In addition to its core
shipyard repair and construction services, the Company offers a range of
related environmental services at its facilities, including tank cleaning,
degassing and wastewater treatment. Following the pending acquisitions,
complementary services such as these will enable the Company to become the
only one-stop source of all shipyard services for all segments of the
offshore support vessel, offshore barge and inland marine markets in Texas.
- Focus on Core Geographic Areas: Houston and Galveston. The
Houston-Galveston area is a very strategic location for its shipyards,
since three of the largest U.S. fleets of inland tank barges are based in
the Houston Ship Channel area. Additionally, the growing offshore support
vessel and barge fleets in the Gulf of Mexico can be efficiently served
from the Company's Houston and Galveston locations. Management believes the
expansion of the East Pelican Island and West Pelican Island facilities in
Galveston to service the offshore drilling industry, is especially
strategic since Galveston is in close proximity to offshore Gulf of Mexico
drilling activity, thereby minimizing rig transit costs and downtime time.
- Leveraging Economies of Scale. With all of its shipyards within a
50-mile corridor, management can more effectively operate the facilities
and consolidate overhead. Additionally, the proximity of the shipyards
allows for centralizing many administrative functions. Management also
believes the uniformity of state regulations and the volume leverage gained
from using single suppliers among all its facilities, as well as the
potential interchangeability of the labor force, provides economic benefits
for the Company.
- Expansion into the Offshore Gulf of Mexico Market. Upon consummation
of the Bludworth Acquisition and the completion of the improvements to the
East Pelican Island shipyard, the Company will have two adjacent shipyard
facilities in Galveston, Texas, which will enable it to take advantage of
the rising demand for shipyard services to the oil and gas industry in the
Gulf of Mexico. Management has planned its expansion to diversify the
Company's business lines into services for offshore drilling rigs, larger
offshore support vessels and oil and gas related ship conversions.
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SERVICES
The Company performs five primary types of services, three of which are
conventional shipyard fabrication services and two of which are related
environmental services, each described as follows:
Shipyard Services -- Repair.
Approximately 75% of the Company's revenues are attributable to repair,
conversion and maintenance services for offshore support vessels, ocean-going
offshore barges and inland barges. The Company's shipyard repairs involve tasks
as simple as plugging a hole in a barge to more complex services such as
re-skinning an entire barge with new bottom plate, side shell, knuckle and
topside, then sandblasting and painting it. These repair services generally
range in price from $1,000 to $1.0 million. The U.S. Maritime Administration
("MARAD") has estimated that by the year 2000, approximately 25% of the current
domestic tank barge fleet between 10,000 and 30,000 tons will be more than 25
years old and more than 8% will be at least 30 years old. The vessels in this
aging domestic coastwise fleet are in continual need of repairs as they reach
the end of their useful life. Further, U.S. Coast Guard regulations require that
double-skinned inland barges be drydocked for bottom gauging to detect thickness
and structural fatigue every 10 years. All other inland barges require an
inspection of both the internal structures and drydocking once every five years.
Normally at this time the customer will request removal and replacement of
pitted and deteriorated steel as well as sandblasting, coating and painting
services. Offshore support vessels and offshore barges are subject to U.S. Coast
Guard inspections twice in a five year period. During the course of these
mandated inspections, in addition to routine scheduled maintenance, the
Company's customers often discover the need for additional repairs. Management
believes that the Bludworth Acquisition will further its business strategy of
diversifying its capabilities and provide additional expertise and facilities to
repair offshore support vessels, barges and inland marine boats.
Shipyard Services -- Conversions.
With the oil and gas industry's increasing interest in deepwater regions,
there has been a growing demand for the larger class of offshore support
vessels. In response to the increased demand, owners of offshore support vessel
fleets are converting existing vessels in their fleet into vessels capable of
serving deepwater regions. This trend has resulted in an increase in conversion
projects for the Company which consists of lengthening offshore support vessels
(generally from 185(#) to 225(#)) and installing liquid mud tanks, dynamic
positioning and other specialized features. The Company has also widened
offshore support vessels to significantly increase their deck and cargo
capacity. The Company's conversion jobs have ranged in price from approximately
$2.0 million to $4.0 million. Upon completion of the improvements to the
Company's East Pelican Island shipyard, the Company also intends to perform
repairs and conversions for offshore drilling rigs. For example, this work can
involve the conversion of a slot jack-up rig to a cantilevered jack-up rig,
strengthening and extending the rig legs, reinforcing the spud cans on the
existing legs and modifying older designs to incorporate newer technology. The
Company expects an average conversion for an offshore drilling rig to range in
price from $1.0 million to $20.0 million.
Shipyard Services -- New Construction.
Approximately 15% of the Company's current revenues are attributable to new
barge construction. The Company builds three to four new barges per year at its
Brady Island facility. Historically, the Company's new construction activities
have been for: (i) ocean-going deck barges with special lift capacities; (ii)
inland deck and tank barges; and (iii) specialized barges such as power
generation barges. The Company's price for construction of a new barge generally
ranges from $500,000 to $2.5 million. New construction is performed under
fixed-price contracts and averages three to four months per barge. The
acquisition of the Greens Bayou shipyard in August 1997 provides the Company the
shipyard capacity to build between seven to ten barges per year depending on the
type of barge.
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Historically, the Company has not been in the new construction sector for
offshore support vessels and inland towboats. Management believes the Bludworth
Acquisition adds the expertise, experience and capacity necessary to provide the
Company the ability to compete for new construction of inland towboats and
offshore support vessels.
Environmental Services -- Degassing/Cleaning Operations.
These services are provided at the Company's Brady Island facility. In
order for a barge to change the type of cargo it holds, the barge generally
requires cleaning. The Company provides cleaning services for change of cargo as
well as in preparation for repairs and maintenance at the shipyard. The cleaning
process begins with vapor recovery of gasses, if necessary. The barge is then
cleansed with water using special industrial cleaning equipment. The water is
vacuumed into the Company's wastewater treatment facility for proper treatment
and disposal. If the barge requires "hot work" (cutting or welding) while in the
shipyard, safety regulations require that it be "gas free" (non-explosive) as
certified by a marine chemist. The Company employs its own certified marine
chemist as well as a marine chemist trainee. In 1996, the Company provided
environmental services for over 800 barges.
Environmental Services -- Wastewater Treatment Services.
The Company provides non-hazardous wastewater treatment services on a fee
basis. The Company's new 2 million gallon tank, which should be completed in
January 1998, will allow the Company to increase, under its existing permit, its
current handling of approximately 300,000 gallons of wastewater per month to 1
million gallons per month. With minimal additional improvements to the facility
at Brady Island, the Company should be able to handle up to 2 million gallons of
third party non-hazardous wastewater per month under its existing permit. The
non-hazardous wastewater streams include tank truck wash water, industrial
process "oily" water, storm water, rail car, barge, or sea container wash water,
spill remediation water, landfill leachate and others. In an average job, a tank
truck arriving at the facility pumps out approximately 5,000 gallons of
wastewater into the Company's tanks after being tested. The non-hazardous
wastewater is then treated at the Company's bio-treatment plant and discharged.
SHIPYARD PROPERTIES
Upon the consummation of the Bludworth Acquisition, the Company will
operate the following five shipyard facilities.
Brady Island.
The Brady Island shipyard was originally acquired in December 1993 and is
located on the Houston Ship Channel on approximately 23 acres. The shipyard has
the capability to handle the repair, construction and related environmental
services for both offshore and inland barges. It provides repair and conversion
services for offshore support vessels and offers repair, conversion and
construction services for offshore and inland barges. In addition to the
traditional shipyard assets described below, the Brady Island facility has a
high capacity bio-treatment plant, state-of-the-art vapor control equipment and
a 2 million gallon wastewater storage tank currently under construction. The
shipyard has six haul-up facilities which includes three dry docks, two marine
rails and one transfer system from drydock to rail. The facility's equipment
consists of three crawler cranes, two tower cranes and two 20-ton overhead
cranes. The shipyard employed more than 320 production employees at September
30, 1997.
Greens Bayou.
The Greens Bayou shipyard was acquired on August 11, 1997. The shipyard is
located near Houston, Texas on approximately 20 acres, near the Houston Ship
Channel and Brady Island. The
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shipyard performs repair, conversion and new construction services for barges.
It has seven haul-up facilities including a major six position rail transfer
system and one marine rail. The equipment at this facility includes two crawler
cranes, two tower cranes, two cherry pickers and multiple jib cranes. Maximum
lift capacity is 1,200 tons. Currently in the start-up phase, Greens Bayou
employed approximately 20 production workers at September 30, 1997. Management
believes that up to an additional 100 employees will be added in 1998. The
Company plans to make certain capital improvements to the Greens Bayou facility
including the construction of an all-weather, 24-hour paint and sandblast
facility. The covered facility will meet all required environmental regulations.
The Company believes the addition of the facility will significantly improve the
turnaround time to its customers for painting and sandblasting projects.
East Pelican Island.
The Company recently acquired this shipyard through an assignment of the
PMB Engineering, Inc. lease with Galveston Wharves. Galveston Wharves has
amended the PMB Engineering, Inc. lease, extending the possible eight years
remaining on such term of the lease to a lease with a potential 99-year term,
among other things. The shipyard is located in Galveston, Texas on approximately
110 acres. The equipment at this facility includes one 10-ton crane, one 15-ton
crane, one 20-ton crane and one 30-ton crane. There are no current employees at
the East Pelican Island facility. Management has a three phase program for the
capital improvements to this shipyard. In Phase I, the Company plans to improve
the facilities and make modifications to provide repair and conversion capacity
for offshore drilling rigs, offshore support vessels, offshore barges and ships.
Fabrication capacity will also be enhanced for support of repair operations and
for production of offshore drilling rig components such as blisters and
sponsons. Phase II will add drydocks for repair of vessels up to 20,000 tons and
Phase III will encompass various yard improvements for the construction of new
offshore drilling rigs. Management believes that by the third quarter of 1998,
East Pelican Island will commence providing conversion and repair services to
the offshore drilling industry. The shipyard can serve most classes of offshore
drilling rigs, offshore support vessels, offshore barges and large ships.
JBM Pasadena.
The JBM Pasadena facility will be acquired as part of the Bludworth
Acquisition. It is located in Pasadena, Texas on approximately 63 acres. It
currently has five drydocks, extensive topside bulkhead footage and is a builder
of inland tow boats. The shipyard performs repair services for offshore support
vessels, offshore barges and inland barges. At September 30, 1997, the shipyard
employed over 200 production employees.
West Pelican Island.
This shipyard will also be acquired in connection with the Bludworth
Acquisition. It is located at Pelican Island in Galveston, Texas on
approximately 23 acres. The newly renovated fabrication facility has over two
acres under roof, which will enable the Company to provide all-weather, 24-hour
service. The Company intends to use the shipyard primarily for conversion,
repair and new construction of offshore support vessels. An approximately
9,000-ton dry dock is expected to be completed in the first half of 1998.
Additionally, the facility has two 200-ton cranes. At September 30, 1997, the
shipyard employed approximately 100 production workers. The Company expects to
expand the labor force at this facility in the future.
PRINCIPAL CUSTOMERS
Following the consolidation of the inland barge industry, a large portion
of the Company's revenue has been generated by a relatively small number of
customers, although not necessarily the same customers from year to year. For
1996, the Company derived more than 10% of its revenue from each of SEACOR Smit
Inc. (22%) and Kirby Corporation (15%), and more than 50% from its five largest
customers. Based on its current backlog of projects, the Company expects that it
will
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derive more than 10% of its revenues in 1997 from each of SEACOR Smit Inc. and
Kirby Corporation. Because the level of services that the Company may provide to
any particular customer depends on that customer's needs for 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.
CONTRACT PROCEDURE, STRUCTURE AND PRICING
In performing its repair and conversion services, the Company seeks to
achieve a balance between fixed-price projects and time and materials work in
order to optimize the risk and reward of its project portfolio. More than 50% of
the Company's commercial projects are currently performed on a fixed-priced
basis. The Company attempts to cover anticipated increased costs of labor and
material through an estimation of such costs, which is reflected in the original
price. Despite these attempts, however, the revenue, cost and gross profit
realized on a fixed-price arrangement will often vary from the estimated amounts
because of changes in job conditions and variations in labor and material costs
over the term of the project. These variations and the risks generally inherent
in the shipbuilding and repair industry may result in gross profits realized by
the Company being different from those originally estimated and may result in
the Company experiencing reduced profitability or losses on projects. Revenues
from repair and conversion services performed under time and material and
fixed-price arrangements are recognized as the services are provided.
Adjustments to such revenues and costs recognized on fixed-price arrangements
are made in the period in which the adjustments are determined. Depending on the
size of the project, variations from estimated fixed-price arrangements could
have a significant effect on the Company's operating results for any particular
fiscal quarter or year.
The Company has developed a "contract rate" system it has used to form
strategic alliances with its key customers for repair and conversion services.
Under this system, the Company and the customer discuss the customer's planned
shipyard projects for the ensuing year and then develop a schedule of labor
rates and other charges applicable to the customer's projects for the year. When
the actual project date nears, the Company submits to its alliance partner the
estimated manhour budget for the particular job. The Company then agrees with
the customer on the budget and the delivery requirements. Most contract rate
arrangements are on a fixed-price basis with most change orders to such
arrangements performed on a time and material basis. Under the contract rate
system, the Company is responsible for all cost overruns; in some instances the
Company shares a portion of the cost savings with its contract rate alliance
partners. The contract rate system is a departure from the traditional shipyard
competitive bid process which requires that for each job a customer submit
specifications which the shipyard then uses to bid against other shipyards to
obtain the work. Under a competitive bid process, a customer's effective labor
and material mark-up rates may vary from job to job depending on fluctuating
market conditions. In contrast, under the contract rate system a customer is
charged the same hourly rates and material mark-ups for a period of time,
typically a year. In a competitively bid contract, the customer does not share
in any cost savings achieved by the Company as they might under the contract
rate system. The contract rate system enables the Company to baseload its
facilities with pre-booked work, improve planning and execution of jobs through
a cooperative process with the customer and more effectively project its
revenues and labor needs for the year. The alliance partner receives volume
based pricing, assures itself of needed drydock capacity, gains the ability to
accurately budget its work, benefits from improved turnaround on jobs and
receives other services on a preferred basis.
The Company's new construction (lump-sum) contract revenues are recognized
on a percentage of completion basis. Accordingly, contract price and cost
estimates are reviewed periodically as the work progresses, and adjustments
proportionate to the percentage of completion are reflected in income in the
period when such estimates are revised. To the extent that these adjustments
result
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<PAGE> 42
in a loss or a reduction or elimination of previously reported profits with
respect to a project, the Company would recognize a charge against current
earnings, which could be material.
MATERIALS AND SUPPLIES
The principal materials used by the Company in its construction, conversion
and repair businesses are standard steel shapes, steel plate and paint. Other
materials used in large quantities include steel pipe, electrical cable and
fittings. All these materials and parts are currently available in adequate
supply from numerous domestic and foreign sources. The Company's shipyards are
located in the Ports of Houston and Galveston, but typically obtain materials
and supplies by truck. Occasionally, the Company receives materials by barge.
The Company seeks to obtain favorable pricing and payment terms for its
purchases by coordinating purchases among all of its shipyards and buying in
large quantities. The Company has not engaged, and does not presently intend to
engage, in hedging transactions with respect to its purchase requirements for
materials. In the past, the Company believes it has been able to purchase steel
at favorable prices relative to those available to smaller shipyards in general.
While management believes that the Company will continue to be able to obtain
its materials, including steel, at relatively favorable prices, there can be no
assurance that this will be the case in the future.
SALES AND MARKETING
The Company's marketing efforts are geographically centralized at the Brady
Island facility in Houston, Texas. Marketing efforts are currently focused in
three areas: (i) traditional shipyard services, including repair and conversion;
(ii) new construction opportunities; and (iii) environmental services including
barge cleaning and wastewater treatment. Management intends to add a fourth
marketing focus with the Company's entry into services for the offshore drilling
industry.
COMPETITION
The Company principally competes in each of its service lines with
approximately 10 to 20 companies, based on the scope of work to be performed and
the type of projects. Some of these competitors have significantly greater
financial resources than the Company. Although the Company believes customers
consider, among other things, the availability and technical capabilities of
equipment and personnel, efficiency, condition of equipment, safety record and
reputation, price competition is a primary factor in determining which qualified
shipbuilder is awarded a job.
INSURANCE
The Company maintains insurance against property damage caused by fire,
explosion and similar catastrophic events that may result in physical damage or
destruction to the Company's premises or properties. The Company also maintains
general liability and umbrella liability insurance in amounts it deems
appropriate for the Company's business.
EMPLOYEES
At September 30, 1997, the Company had 342 employees, of which 41 were
salaried and 301 were employed on an hourly basis. None of the Company's
employees are represented by any collective bargaining unit. Management believes
that the Company's relationship with its employees is excellent. The Company has
not experienced any significant labor problems. Management also believes the
Company should invest in its people and has implemented improvements in the work
environment which benefit the workers. These improvements, as well as active
communication with employees, have helped to foster a closely-knit, supportive
culture at the Company.
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<PAGE> 43
HEALTH AND SAFETY
The Company has one of the best safety records in its industry. For the
last three consecutive years, Newpark Shipbuilding, the primary operating
subsidiary of the Company, was recognized with the national safety award given
annually by the National Shipyard Association (formerly American Waterways
Shipyard Conference) designating it as one of the safest shipyards in the
country. Management is concerned with the safety and health of the Company's
employees and maintains a safety assurance program to reduce the possibility of
costly accidents. The Company's safety department establishes guidelines for
compliance with all applicable state and federal safety regulations. Such laws
and regulations are complex, stringent and are often changed. The Company
provides training and safety education through orientations for new employees
and regular employee safety meetings. The Company also has a comprehensive drug
testing program. The Company's commitment to the safety of its employees
supports its labor management strategy and translates into reduced costs for
workers' compensation benefits.
ENVIRONMENTAL REGULATION
Company Philosophy. The Company has taken a highly visible leadership
position in a shipyard industry group which has cooperated with regulators to
develop innovative, economically achievable solutions to meet water quality
standards. This industry group was formed in response to federal, state and
local regulators demanding that (i) drydocks must be broom-swept after each job
and (ii) over-water sandblasting be eliminated in order to comply with the Clean
Water Act. Frank W. Eakin, President of the Company, developed a proprietary
sediment control system for drydocks and other containment solutions for
over-water sandblasting. The Company does not charge its competitors a licensing
fee for its patent-pending drydock sediment control system if they are
environmentally responsible.
General. The Company's operations are subject to a variety of federal,
state and local laws and regulations governing the discharge of materials into
the environment or otherwise relating to environmental protection
("Environmental Laws"). Stringent fines and penalties may be imposed for
non-compliance with these Environmental Laws. Like other members of the
industry, the Company is periodically subject to governmental compliance
inspections in the ordinary course of business. The Company is committed to full
compliance with applicable environmental laws and has instituted an
environmental compliance program to ensure such compliance on an ongoing basis.
The Company is presently integrating this compliance program with the practices
associated with recently acquired operational assets. Although no assurance can
be given, Management believes that the Company and its operations are in
compliance with all material respects with all Environmental Laws. However,
stricter interpretation and enforcement of Environmental Laws and compliance
with potentially more stringent future Environmental Laws could materially and
adversely affect the Company's operations. To the extent laws are enacted or
other governmental action is taken that imposes environmental protection
requirements that result in increased costs to the shipbuilding and repair
business in general, the business and prospects of the Company could be
adversely affected. With respect to air emissions, the Company anticipates that
additional expenditures may be required if federal or state air emissions
requirements were to be more strictly interpreted or strengthened. The TNRCC has
invited members of the shipyard industry to consult with the agency in its
current consideration of what, if any, new air emission control requirements are
appropriate for the industry. The Company is participating in these discussions
with the TNRCC. The Company cannot with certainty predict whether current
requirements will be interpreted more strictly, new requirements will be
proposed in the future, or the extent of an effect upon the Company.
Permits. Under federal and state environmental laws, the Company's
operations are subject to a variety of requirements for permits or other
governmental authorizations governing emissions to air; discharges to water;
dredging of waterways (for example, to maintain or improve access by vessels);
generation, storage, and shipment of wastes; and other operational aspects of
the business. The Company is in the process of notifying relevant agencies of
its recent acquisitions and
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<PAGE> 44
has sought or expects shortly to seek transfers of permits as necessary. The
Company does not anticipate unreasonable delay or difficulty in acquiring the
necessary approvals, but it cannot rule out such a possibility.
Certain operational assets of the Company are subject to the terms of
agreed orders negotiated with governmental agencies with enforcement authority
under environmental laws. The state of Texas has allowed Bludworth to operate
under an agreed order on an interim basis pending issuance of a final permit
that addresses Bludworth's change in blast medium. Newpark Shipbuilding has
negotiated a separate agreed order with the state governing the designation of
certain waste streams, the operation and inspection of certain tanks, and
related record keeping. Finally, the Board of Trustees of Galveston Wharves is
also operating under an agreed order with the TNRCC with respect to the
discharge of solids from its sewage collection system and septic tank wastewater
treatment plant at the East Pelican Island facility. The Company believes its
operations are in material compliance with the agreed orders.
RCRA. The federal Resource Conservation and Recovery Act ("RCRA") and
similar state laws regulate the generation, treatment, storage, disposal and
other handling of hazardous and nonhazardous solid wastes, with the most
stringent regulations applying to solid wastes that are considered hazardous.
The Company generates both hazardous and nonhazardous wastes in connection with
routine operations. Management believes that the wastes it generates are handled
in substantial compliance with RCRA and analogous state statutes. The Greens
Bayou property contains a solid waste landfill which was closed in compliance
with applicable federal and state laws as a non-hazardous industrial solid waste
site. Management believes that any environmental liability arising from this
landfill will be the primary responsibility of the previous owners; however,
there can be no assurances that the Company will not be subject to liability for
this matter in the future.
CERCLA. The federal Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended ("CERCLA" or the "Superfund Law") and
analogous state laws, impose liability without regard to fault or the legality
of the original conduct, on certain classes of persons with respect to the
release or imminent threat of release of a "hazardous substance" into the
environment. The classes of persons potentially held responsible include all
owners and operators of a site where a hazardous substance was released since
the time of disposal and any party that disposed of, or arranged for the
disposal of, or transported the hazardous substance found at the site. CERCLA
has been interpreted to create strict, joint and several liability for the cost
of removal and remediation, other necessary response costs and damages for
injury to natural resources unless there is a reasonable basis for divisibility
of the harm done by the potentially responsible party. The Company has never
been named as a potentially responsible party in any CERCLA action, and the
Company does not believe that there is any basis for such a claim. However,
because industrial operations have been conducted at some of the Company's
properties by the Company and previous owners and operators for years, various
materials from these operations might have been disposed of at such properties
or at other locations. The identification of one or more sites at which cleanup
action is required or has been completed could subject the Company to
liabilities that could have a material adverse effect on the Company's business,
financial condition and results of operation.
OPA '90. The Oil Pollution Act of 1990 ("OPA '90") and similar state laws,
and regulations promulgated thereunder impose a variety of regulations on
"responsible parties" related to the prevention of oil spills and liability for
damages resulting from such spills in the waters of the U.S. A "responsible
party" includes the owner or operator of a facility or vessel from which the
spill occurs. OPA '90 assigns liability, which can be joint and several, to each
responsible party for oil spill removal costs and for a variety of public and
private damages from oil spills. While OPA '90 defines "oil" to include
petroleum, fuel oil, sludge, oil refuse and oil mixed with other water wastes,
it specifically excludes any material defined as a hazardous substance under
CERCLA. While liability limits apply in some circumstances, a party cannot take
advantage of liability limits if the spill is caused by gross negligence or
wilful misconduct, if the spill resulted from violation of a federal
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<PAGE> 45
safety, construction or operation regulation, or if a party fails to report a
spill or to cooperate fully in the cleanup. Few defenses exist to the liability
imposed under OPA '90 for oil spills. Management is currently unaware of any oil
spills for which the Company has been designated as a responsible party under
OPA '90 which would have a material adverse impact on the Company.
CWA. The federal Clean Water Act ("CWA") and similar state laws regulate
the discharge of pollutants into all navigable waters of the U.S. They also
establish a system of standards, permits and enforcement procedures for the
discharge of pollutants from industrial and municipal wastewater sources. The
Company has federal and Texas state permits that allow it to discharge the non-
hazardous wastewater collected by its environmental services division.
Management believes that the non-hazardous wastewater it collects is handled in
substantial compliance with the CWA and analogous state statutes and its
discharge permits. The CWA also requires persons who dredge or fill wetlands in
navigable waters of the U.S. to obtain a permit or meet management practice
standards to qualify for an exemption from permitting requirements. The Company
must obtain such a permit or qualify for an exemption if it needs to dredge or
place fill material in wetlands in order to continue or modify operations at any
of its facilities in the future.
CAA. The federal Clean Air Act and its 1990 Amendments ("CAA") and similar
state laws govern the control of emissions from sources of air pollution.
Amendments to the CAA were adopted in 1990 and contain provisions that may
result in the gradual imposition of certain pollution control requirements with
respect to air emissions from the operations of the Company. These amendments
could increase the Company's capital and operational expenses after the U.S.
Environmental Protection Agency and similar state agencies fully implement
regulations authorized by the Amendments. Although the Company does not expect
these CAA amendments to result in material expenses at its properties, the
amount of increased expenses, if any, resulting from such amendments is not
presently determinable. There can be no assurance that the Company will not
incur material expenses in connection with these amendments in the future.
Additionally, the Company has a tank cleaning and degassing operation at its
Brady Island facility that involves removal of residue fumes from vapor spaces
in barges. Federal law requires the Company to identify, prepare for and respond
to risks associated with this operation, including possible explosion and
emission of hazardous substances to the environment.
OTHER REGULATION
Health and Safety Regulations. The Company's facilities and operations are
governed by laws and regulations, including the federal Occupational Safety and
Health Act, relating to worker health and workplace safety. The Company believes
that appropriate precautions are taken to protect employees and others from
workplace injuries and harmful exposure to materials handled and managed at its
facilities. While it is not anticipated that the Company will be required in the
near future to expend material amounts by reason of such health and safety laws
and regulations, the Company is unable to predict the ultimate cost of
compliance with these changing regulations.
Jones Act. The Jones Act requires that all vessels transporting products
between U.S. ports must be constructed and repaired in U.S. shipyards, owned and
crewed by U.S. citizens and registered under U.S. law, thereby eliminating
competition from foreign shipbuilders with respect to vessels to be constructed
for the U.S. coastwise trade. Many customers elect to have vessels constructed
at U.S. shipyards, even if such vessels are intended for international use, in
order to maintain flexibility to use such vessel in the U.S. coastwise trade in
the future. A legislative bill seeking to substantially modify the provisions of
the Jones Act mandating the use of ships constructed in the United States for
U.S. coastwise trade has been introduced in Congress. Similar bills seeking to
rescind or substantially modify the Jones Act and eliminate or adversely affect
the competitive advantages it affords to U.S. shipbuilders have been introduced
in Congress from time to time and are expected to be introduced in the future.
Although management believes it is unlikely that the Jones Act requirements will
be rescinded or materially modified in the foreseeable future, there can be no
assurance that such will not occur. Many foreign shipyards are heavily
subsidized
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<PAGE> 46
by their governments and, as a result, there can be no assurance that the
Company would be able to effectively compete with such shipyards if they were
permitted to construct and repair vessels for use in the U.S. coastwise trade.
LEGAL PROCEEDINGS
The Company is a party to various routine legal proceedings primarily
involving commercial claims and workers' compensation claims. While the outcome
of these lawsuits, legal proceedings and claims 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. Also, the Company has entered into certain
agreed orders with which it believes it is in material compliance. See
"-- Environmental Regulation -- Permits."
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Company's Board of Directors currently has five directors. In
accordance with the Certificate of Incorporation of the Company (the "Charter"),
the members of the Board of Directors are divided into three classes and are
elected for a term of three years, or until a successor is duly elected and
qualified. The terms of office of the Class I, Class II and Class III directors
expire at the annual meeting of stockholders to be held in 1998, 1999 and 2000,
respectively. All officers serve at the discretion of the Board of Directors.
The following table sets forth certain information with respect to the
Company's executive officers and directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Samuel F. Eakin...................... 42 Chairman of the Board, Chief Executive Officer(a)
Frank W. Eakin....................... 36 President and Chief Operating Officer, Director(b)
David B. Ammons...................... 47 Executive Vice President, Chief Financial Officer,
Secretary, Director(b)
James D. Cole........................ 56 Director(c)
Paul E. O'Neill, II.................. 48 Director(c)
Joseph O'Toole....................... 64 Executive Vice President -- Operations
Hugh G. Walker, III.................. 37 Vice President -- Environmental Services
Francis J. Fair...................... 58 Executive Vice President -- Operations, Newpark Marine
Fabricators, Inc.
Dale Payne, III...................... 48 Vice President -- Shipyard Operations, Newpark Marine
Fabricators, Inc.
Ben Ramirez.......................... 45 Vice President -- Shipyard Operations, Greens Bayou
Fabricators
</TABLE>
- ---------------
(a) Class III Director
(b) Class II Director
(c) Class I Director
Set forth below is a description of the backgrounds of each of the
executive officers and directors of the Company:
Samuel F. Eakin has served as Chairman of the Board and Chief Executive
Officer of the Company since December 1993 and has been an investor and energy
sector advisor since the 1970s. From 1976 to 1980, Eakin advised E.F. Hutton,
the U.S. Department of Energy and other governmental agencies and major
corporations on energy issues. From 1980 to 1986, he negotiated mergers and
acquisitions of offshore service businesses and other Gulf Coast companies on
behalf of private investors and corporations. In 1987, he founded Eakin & Co.
for the purpose of acquiring distressed energy industry companies and
restructuring complex credits and continues to be a principal in that company.
Mr. Eakin is the brother of Frank W. Eakin, President of the Company.
Frank W. Eakin has served as President, Chief Operating Officer and
Director of the Company since October 1997. Prior to that he served as President
of Newpark Shipbuilding and has been in charge of daily operations since
December 1993. In 1989 Mr. Eakin became a principal in Eakin & Co., with merger
and acquisition responsibilities. Mr. Eakin left that company in 1994 to
dedicate his full energies and focus to managing the Brady Island shipyard
operations. From 1983 to 1989, he founded and operated a successful
international food processing and distribution company.
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<PAGE> 48
Mr. Eakin received his undergraduate degree (B.S.) from Louisiana State
University in 1984. Mr. Eakin is the brother of Samuel F. Eakin, Chairman of the
Company.
David B. Ammons has served as Executive Vice President, Chief Financial
Officer, Secretary and Director of the Company since December 1993. Mr. Ammons
is a Certified Public Accountant and has a background in public accounting and
has owned and operated several businesses. In 1987, Mr. Ammons became a
principal in Eakin & Co. and continues to serve in that capacity. Mr. Ammons
received his undergraduate degree (B.S.) from Southeastern Louisiana University
in 1972.
James D. Cole has served as a Director of Newpark Shipbuilding, a
subsidiary of the Company since late 1993. Mr. Cole is the Chairman of the
Board, President and a Director of Newpark Resources, Inc., an unaffiliated
public company listed on the New York Stock Exchange. He has served in various
positions in that company since 1976.
Paul E. O'Neill, II has served as a Director of the Company since October
1997. Mr. O'Neill is President, Director and Chief Operating Officer of Acadian
Group, Ltd., a holding company formed in 1996 to oversee various construction
and service companies. Prior to joining Acadian Group, Ltd., Mr. O'Neill served
for two years as President and for four years as a Director of C-K Associates,
Inc., a regional Gulf Coast environmental engineering and consulting firm. Mr.
O'Neill spent 17 years in various positions, including as Vice President and
General Manager with TEAM, Inc., a public company listed on the American Stock
Exchange, which provides various industrial and environmental services in the
U.S. and 13 foreign countries.
Joseph O'Toole has served as Executive Vice President -- Operations of the
Company since October 1997. Mr. O'Toole joined the Company as Repair Manager in
1990 and has served as Executive Vice President -- Operations of Newpark
Shipbuilding since 1994. Mr. O'Toole's career in marine fabrication spans over
forty years, punctuated with long periods at large blue water shipyards
including General Dynamics' Quincy, Massachusetts shipyard and Electric Boat
Division. He has held senior positions with Marathon LeTourneau's Gulf Marine
Division shipyard in Brownsville, Texas and Pyramid Manufacturing in Houston,
Texas. Mr. O'Toole has been responsible for managing large shipyard operations
and has supervised major projects such as construction of semisubmersible rigs,
commercial and naval ships and nuclear submarines. Mr. O'Toole received a B.S.
in Civil Engineering in 1964 from Northeastern University in Boston.
Hugh G. Walker, III, Vice President -- Environmental Services, joined the
Company in 1996 to spearhead the development of a newly formed division, First
Wave Environmental Services. Mr. Walker was employed fourteen years with
Chevron, beginning his career in design and waste management, and from 1992 to
1996 serving as manager of a polyethylene plant at Chevron's Cedar Bayou, Texas
complex. Mr. Walker obtained a B.S. in Chemical Engineering from North Carolina
State University in 1982.
Francis J. Fair, Executive Vice President -- Operations, Newpark Marine
Fabricators, Inc. joined the Company in November 1997. Mr. Fair has nearly 40
years of experience in the offshore marine fabrication industry. Mr. Fair has
been responsible for large-scale project and shipyard operations management of
new construction, conversions and repair of deepwater offshore drilling rigs,
including semisubmersibles, jackups and marine components. From 1980 to 1992,
Mr. Fair served as Vice President for Marathon LeTourneau's Gulf Marine Division
at the Brownsville shipyard, supervising deepwater marine projects in excess of
$100 million per year. From 1993 to 1996, he was employed by Texas Drydock
where, among other things, he was the Operations Manager responsible for the
start-up of a 64,000-ton drydock and facility which serviced deepwater drilling
rigs. Immediately before joining the Company, Mr. Fair was Manager of Sales for
LeTourneau, Inc.
Dale Payne, III has served as Vice President -- Shipyard Operations of
Newpark Marine Fabricators, Inc., a subsidiary of the Company since November
1997. Prior to that he served as Vice President -- Shipyard Operations at Brady
Island since 1994. Mr. Payne joined the Company in 1990 as Assistant Repair
Manager. Mr. Payne began his marine fabrication career in 1972 with
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<PAGE> 49
Marathon LeTourneau's Gulf Marine Division shipyard in Brownsville, Texas,
starting as a leadman and finishing as Production Manager in 1989. During his
tenure, Mr. Payne supervised the new construction, conversion and repair of
jack-up, submersible and semi-submersible rigs. From 1981 to 1985, Mr. Payne
worked as Assistant to the Vice President of Operations at Marathon LeTourneau's
Singapore location, supervising the new construction of six Marathon LeTourneau
jack-ups. He also worked for Marathon LeTourneau in Indonesia and the Middle
East supervising various installation projects.
Ben Ramirez, Vice President -- Shipyard Operations, Greens Bayou
Fabricators, joined the Company in September 1997. From 1972 to 1989, Mr.
Ramirez was employed by Marathon LeTourneau's Gulf Marine Division shipyard in
Brownsville, Texas, beginning his career as a welder, and going on to supervise
new construction, conversions, and repair of jack-up, submersible and
semi-submersible rigs, as well as major ship repairs. The Marathon LeTourneau
facility was acquired by AMFELS, Inc., in 1989, where Mr. Ramirez was assistant
yard manager. Mr. Ramirez was serving as General Manager of a new shipyard he
started for AMFELS in Mexico at the time he left AMFELS in 1997.
COMMITTEES AND MEETINGS OF DIRECTORS
The standing committees of the Board of Directors of the Company includes
an Executive Committee and an Audit Committee. The function of each of these
three committees is described and the members of each are listed below.
Messrs. O'Neill, Cole and Ammons are the current members of the Company's
Audit Committee. The Audit Committee makes recommendations to the Board
concerning the selection and discharge of the Company's independent auditors,
reviews professional services performed by the auditors, the results of their
audit engagement and the fees charged for services performed by the auditors and
evaluates the Company's system of internal accounting controls.
Messrs. S. Eakin, F. Eakin and Ammons are the current members of the
Executive Committee, which acts on behalf of the Board of Directors between
regularly scheduled meetings of the Board of Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Paul E. O'Neill, President and Director of Acadian Group, Ltd., serves on
the Board of Directors of the Company which Board determines the compensation
for the executive officers of the Company, including David B. Ammons and Samuel
F. Eakin. Messrs. S. Eakin and Ammons serve on the Board of Directors of Acadian
Group, Ltd. which Board determines the compensation of Mr. O'Neill.
DIRECTOR AND EXECUTIVE OFFICER COMPENSATION
Retainer Arrangements. Directors who are employees of the Company are not
entitled to receive additional compensation for serving as directors. Each
non-employee director of the Company will be paid $1,000 for each meeting of the
Board of Directors and $500 for each committee meeting he attends which does not
fall on the same day as a Board of Directors meeting. In addition, a $1,250
retainer is paid to each non-employee director of the Company for each quarter
of the year in which such director serves as a director, plus such director's
direct out-of-pocket expenses for attendance at meetings.
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<PAGE> 50
The following table sets forth the aggregate compensation for 1996 of (i)
the Company's chief executive officer and (ii) for the four most highly
compensated executive officers of the Company whose total annual salary during
1996 exceeded $100,000.
1996 SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
------------------------------------- SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL UNDERLYING ALL OTHER
POSITION SALARY BONUS COMPENSATION(A) OPTIONS COMPENSATION(B)(C)
------------------ -------- -------- --------------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
Samuel F. Eakin.............. $ 96,000 $200,000 $-- $ -- $ 1,095
Chief Executive Officer
Frank W. Eakin............... 134,375 125,000 -- -- 7,500
President and Chief
Operating Officer
David B. Ammons.............. 88,000 125,000 -- -- 660
Executive Vice President,
Chief Financial Officer,
Secretary
Joseph O'Toole............... 90,000 33,296 -- -- 21,438(d)
Executive Vice President --
Operations
Dale Payne, III.............. 62,208 26,697 -- -- 13,088(d)
Vice President -- Shipyard
Operations, Newpark Marine
Fabricators, Inc.
</TABLE>
- ---------------
(a) Other annual compensation excludes perquisites and other benefits because
the aggregate amount of such compensation was less than 10% of the combined
total for salary and bonus.
(b) Includes matching contributions made by the Company pursuant to its 401(k)
savings plan of $1,095, $660 and $1,042 for Messrs. S. Eakin, Ammons and
O'Toole, respectively, and premiums associated with a term life insurance
policy of $1,852 for Mr. O'Toole.
(c) Includes $7,500 and $1,200 for a car allowance for Messrs. F. Eakin and
O'Toole, respectively.
(d) Includes $17,344 and $11,562 for compensation associated with the August
1996 issuance of shares of stock in Newpark Shipbuilding to Messrs. O'Toole
and Payne, respectively.
EMPLOYMENT AGREEMENTS
The Company will enter into employment agreements with Messrs. S. Eakin, F.
Eakin and Ammons that provide for annual base salaries of $250,000, $200,000 and
$180,000, respectively. The employment agreements will provide for semi-annual
incentive bonuses equal to 1.19%, 0.95% and 0.86% of semi-annual EBITDA for
Messrs. S. Eakin, F. Eakin and Ammons, respectively. The employment agreements
will also provide for payment of premiums of $12,965, $1,839 and $3,691 annually
for term life insurance policies for Messrs. S. Eakin, F. Eakin and Ammons,
respectively. The contracts will provide for a term of three years, with three
months severance upon termination by the Company without cause. The terms of the
employment agreements between Messrs. S. Eakin, F. Eakin and Ammons,
respectively, cannot be considered to have been determined through arms-length
negotiations.
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<PAGE> 51
CASH BONUS PLANS
The Company's Board of Directors has approved the payment of bonuses to key
employees of the Company for 1997 under several different bonus plans and
formulas. Generally, bonuses paid to vice presidents of the Company and its
subsidiaries are at the discretion of the Board of Directors with the exception
of the Vice President of Marketing and the Vice President of Environmental
Services who each earn a formula based bonus. Repair services superintendents,
gas free services superintendents and managers are also paid cash bonus
compensation based on a formula. The Director of Safety and his assistant earn
bonuses based on the Company's safety and claims performance. The Company also
pays discretionary bonuses to its nonexecutive employees based upon project
performance.
RETIREMENT PLAN
The Company has adopted a 401(k) plan for its employees. Employees are
eligible to participate in the plan after one year of service with the Company,
provided they work at least 1,000 hours during that first year and are at least
21 years of age. Under the plan, eligible employees are permitted to contribute
up to 15% of compensation. The plan provides that the Company will match an
amount equal to a percentage set by the Company of up to 6% of an employee's
contribution prior to the end of each calendar year. The Company is also
permitted to make qualified non-elective and discretionary contributions in
proportion to each eligible employee's compensation as a ratio of the aggregate
compensation of all eligible employees. The amounts held under the plan are
invested in investment funds maintained under the plan in accordance with the
directions of each participant.
All employees' contributions are immediately 100% vested. Contributions by
the Company vest at a rate of 10% beginning one year after the anniversary date
of employment, an additional 10% after year two and 20% each additional year
thereafter. Upon attaining age 65, participants are automatically 100% vested,
even with respect to Company contributions. Subject to certain limitations
imposed under the Internal Revenue Code, participants or their designated
beneficiaries are entitled to payment of vested benefits upon termination of
employment. On attaining age 65, participants are entitled to distribution of
the full value of their benefits even if they continue to be employed by the
Company. Such employees also have the option of deferring payment until April 1
following the year they attain the age of 70 1/2. In addition, hardship and
other in-service distributions and loans to participants from the plan are
available under certain circumstances and subject to certain conditions. The
amount of benefits ultimately payable to a participant under the plan depends on
the level of the participant's salary deferral contributions under the plan, the
amount of Company discretionary and matching contributions made to the plan and
the performance of the investment funds maintained under the plan in which
participants are invested.
1997 INCENTIVE EQUITY PLAN
The Board of Directors of the Company has adopted an Incentive Equity Plan
for employees. The 1997 Incentive Equity Plan permits the granting of any or all
of the following types of awards ("Awards"): stock appreciation rights, stock
options and restricted stock. Under the plan, all officers and employees of the
Company, or any affiliate of the Company, will be eligible for participation in
all Awards under the 1997 Incentive Equity Plan.
An aggregate of 1,800,000 shares of Common Stock have been authorized and
reserved for issuance pursuant to the 1997 Incentive Equity Plan. Options to
purchase an aggregate of 1,472,971 shares of Common Stock have been granted
under the 1997 Incentive Equity Plan, of which options will have an exercise
price equal to the initial public offering price for shares of Common Stock sold
in this Offering. The 1997 Incentive Equity Plan will be administered by the
entire Board of Directors. The 1997 Incentive Equity Plan contains appropriate
provisions to assure that it complies with the provisions of Section 16(b) of
the Securities Exchange Act of 1934 (the "Exchange Act") and the rules
promulgated thereunder. The Board of Directors, as a whole, will
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<PAGE> 52
have sole authority to select employees who are to be granted awards, as well as
the amount, type and terms of the awards to be granted. The Board of Directors,
as a whole, will be authorized to interpret the 1997 Incentive Equity Plan and
may adopt such rules and regulations as it may deem advisable to carry out the
1997 Incentive Equity Plan. All decisions made by the Board of Directors, as a
whole, in selecting employees for awards are final.
STOCK OPTIONS GRANTED TO EXECUTIVE OFFICERS UNDER THE 1997 INCENTIVE EQUITY PLAN
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- ----------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES EXERCISE OR
UNDERLYING OPTIONS BASE PRICE EXPIRATION
NAME GRANTED(#) ($/SH) DATE
---- --------------------- ----------- ----------
<S> <C> <C> <C>
Samuel F. Eakin.................................. 180,000(a) (c) 11/20/07
Frank W. Eakin................................... 180,000(a) (c) 11/20/07
David B. Ammons.................................. 180,000(a) (c) 11/20/07
Joseph O'Toole................................... 176,364(b) (c) 11/20/07
Hugh G. Walker, III.............................. 70,546(b) (c) 11/20/07
Francis J. Fair.................................. 17,636(b) (c) 11/20/07
Dale Payne, III.................................. 117,576(b) (c) 11/20/07
Ben Ramirez...................................... 17,636(b) (c) 11/20/07
</TABLE>
- ---------------
(a) 33 1/3% of the options granted will become exercisable at each of the first,
second, and third years, respectively, from the date of grant.
(b) 20% of the options granted will become exercisable at each of the first
through fifth years, respectively from the date of grant.
(c) The exercise prior of each option will be equal to the initial public
offering price per share set forth on the cover page of this Prospectus.
CERTAIN TRANSACTIONS
The Company paid management fees to Eakin & Co., an affiliated company
owned 80% by Samuel F. Eakin and 20% by David B. Ammons, in 1994, 1995 and 1996
of $240,000, $240,000 and $177,000. These fees were paid pursuant to an
understanding between the Company and Eakin & Co. under which Eakin & Co.
provided financial advisory services to the Company for a monthly fee of $20,000
in 1994 and 1995. The fee was reduced to $15,000 per month in mid-1996. Upon
consummation of the Offering, the Company will cease payment of monthly
management fees to Eakin & Co.
The Company paid management fees to SFA Industries, Inc. ("SFA"), an
affiliated company the Common Stock of which is owned 60% by Samuel F. Eakin,
20% by Frank W. Eakin and 20% by David B. Ammons, in 1994, 1995 and 1996 of
$93,000, $240,000 and $218,000, respectively. The fees paid to SFA were also
paid pursuant to an understanding between the Company and SFA under which SFA
provided insurance benefits from a consolidation of the Companies' insurance
plans which fees were billed to the Company on a monthly basis.
In 1996 the Company paid SFA the final nonrecurring fee of $700,000 related
to a reduction in costs resulting from a consolidation of the Company's
insurance plan.
The Company paid management fees of $251,000 in 1996 to NLCH Consultants,
Ltd. ("NLCH"), an affiliated company owned 48% by Samuel F. Eakin, 16% by Frank
W. Eakin and 16% by David B. Ammons. These fees were paid pursuant to an
understanding between the Company and NLCH under which NLCH provided certain
financial advisory services to the Company in 1996.
In August 1996 in Company paid Eakin & Co. a fee of $110,000 for arranging
a senior credit facility in connection with Newpark Shipbuilding's purchase of
the Brady Island assets.
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<PAGE> 53
In August 1997, Samuel F. Eakin and David B. Ammons formed a limited
liability company which owns a Cessna 310 twin engine airplane. The Company
leases the airplane from such entity at a market lease rate of $5,000 per month.
In addition, under the lease agreement, the Company is required to maintain the
airplane in good working condition, to pay all operating expenses related to the
airplane and to maintain insurance on the airplane. The lease agreement has a
term of five years. The Company believes that the terms of such agreement are no
less favorable than the Company could have received from an unrelated party. The
Company adopted a policy which requires an individual to reimburse the Company
for the Company's direct costs resulting from any trip on the airplane for
personal use.
The Company was the payee under two promissory notes from J. B. Talley &
Co., Inc., a company owned indirectly by Samuel F. Eakin and David B. Ammons,
each dated March 1997 in the original principal amounts of $100,000 and $85,000,
respectively, in the amount of $165,000. The Company also had pledged collateral
in the amount of $100,000 to secure a bank loan to such affiliated company. The
aggregate outstanding balances on the notes at October 1997 was $165,000. In
October 1997, Samuel F. Eakin and David B. Ammons purchased the promissory notes
and collateral from the Company in exchange for demand notes to the Company in
the aggregate amount of $265,000. The Company subsequently bonused the notes to
such shareholders as additional compensation.
Upon consummation of the Offering, the Company will pay Eakin & Co. 0.5% of
the Offering proceeds to the Company and Selling Stockholders, net of
underwriting discounts and commissions and Offering expenses, for financial
advisory services. Eakin & Co. is owned by Samuel F. Eakin and David B. Ammons.
Eakin & Co. has agreed to pay 20% of its fee to Frank W. Eakin.
At September 30, 1997, the Company had outstanding indebtedness owed to
Newpark Resources in the amount of $7.2 million. Newpark Resources has also
guaranteed the Company's indebtedness in favor of one of the Company's senior
secured lenders, which senior lender will be paid with a portion of the net
proceeds of the Offering. James D. Cole, a director of the Company is the Chief
Executive Officer and Chairman of the Board of Newpark Resources.
The Company intends to enter into employment agreements with Messrs. S.
Eakin, F. Eakin and David B. Ammons. See "-- Employment Agreements."
Samuel F. Eakin is the guarantor of each of the credit facilities of the
Company. Mr. S. Eakin is also the guarantor of the notes payable to Newpark
Resources. Some of these debt instruments are being repaid with the net proceeds
of the Offering. See "Use of Proceeds" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
51
<PAGE> 54
PRINCIPAL AND SELLING STOCKHOLDERS
Principal Stockholders and Officers. The following table sets forth certain
information with respect to each person who as of , 1997 was known
by the Company to be (i) the beneficial owner of more than 5% of the outstanding
Common Stock, (ii) each director and executive officer of the Company, (iii) all
executive officers and directors as a group and (iv) the Selling Stockholders.
<TABLE>
<CAPTION>
SHARES OWNED BEFORE SHARES OWNED
NAME AND ADDRESS OFFERING(A) AFTER OFFERING
OF -------------------- SHARES TO BE -----------------
BENEFICIAL OWNER NUMBER PERCENT SOLD IN THE OFFERING NUMBER PERCENT
---------------- ---------- ------- -------------------- ------- -------
<S> <C> <C> <C> <C> <C>
Samuel F. Eakin..................... 6,454,539 54.9%
Frank W. Eakin...................... 2,151,513 18.3%
David B. Ammons..................... 2,151,513 18.3%
James Cole.......................... -- --
Paul E. O'Neill II.................. -- --
Joseph O'Toole...................... 176,364 1.5%
Dale Payne, III..................... 117,576 1.0%
All Directors and Executive Officers
as a Group (9 persons)............ 11,122,050 94.6%
</TABLE>
- ---------------
(*) Less than 1%
(a) Unless otherwise indicated below, the persons or group listed have sole
voting and investment power with respect to their shares of Common Stock.
52
<PAGE> 55
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company's authorized capital stock consists of 21,000,000 shares of
Common Stock, par value $0.01 per share, and 2,000,000 shares of Preferred
Stock, par value $0.01 per share. Immediately prior to the closing of the
Offering, there were shares of Common Stock outstanding which were
held of record by 19 stockholders, and no shares of Preferred Stock outstanding.
After the closing of the Offering, shares of Common Stock will be
issued and outstanding, assuming no exercise of the Underwriters' over-allotment
option, and 1,800,000 shares of Common Stock will be reserved for issuance
pursuant to the 1997 Incentive Equity Plan. The following summary of the terms
and provisions of the Company's capital stock does not purport to be complete
and is qualified in its entirety by reference to the Company's Charter and
Bylaws, which have been filed as exhibits to the Company's registration
statement, of which this Prospectus is a part, and applicable law.
COMMON STOCK
Voting Rights. Each share of Common Stock entitles the holder to one vote
on each matter submitted to a vote of the Company's stockholders, including the
election of directors and, except as otherwise required by law or provided in
any resolution adopted by the Board of Directors with respect to any series of
Preferred Stock, the holders of such shares exclusively possess all voting
power. The Charter does not provide for cumulative voting. After the Offering,
the current officers and directors of the Company will hold approximately %
of the issued and outstanding Common Stock ( % if the Underwriters'
over-allotment option is exercised in full). The Charter prohibits the taking of
any action by written stockholder consent in lieu of a meeting.
Dividends. The holders of Common Stock are entitled to receive dividends
if, as and when such dividends are declared by the Board of Directors of the
Company out of assets legally available therefor after payment of dividends
required to be paid on shares of Preferred Stock, if any.
Liquidation or Dissolution. Upon liquidation or dissolution, holders of
Common Stock are entitled to share ratably in all net assets available for
distribution to stockholders after payment of any liquidation preferences to
holders of Preferred Stock.
Other Provisions. The Common Stock carries no conversion or preemptive
rights. All outstanding shares of Common Stock are, and the shares of Common
Stock to be sold by the Company in the Offering when issued will be, duly
authorized, validly issued, fully paid and nonassessable.
Transfer Agent and Registrar. The Transfer Agent and Registrar for the
Common Stock is American Stock Transfer & Trust Company, New York, New York.
Listing. The Company has filed application for quotation of its Common
Stock on the Nasdaq National Market under the trading symbol "FWAV".
PREFERRED STOCK
The Board of Directors has authority to divide the Preferred Stock into one
or more series and has broad authority to fix and determine the relative rights
and preferences, including voting rights, of the shares of each series.
Specifically, the Board of Directors of the Company is authorized, without
approval of the stockholders, to cause shares of Preferred Stock to be issued in
one or more series, to determine the number of shares to be included in each
series, to fix the designation, rights, powers, preferences and privileges of
the shares of each series and any qualifications, limitations or restrictions
thereon and to increase or decrease the number of shares of each such series.
Among the specific matters that may be determined by the Board of Directors are:
whether dividends shall be cumulative or non-cumulative and the annual rate of
dividends of each series; the dates at which dividends, if any, shall be
payable; the redemption price, if any; the terms and amount
53
<PAGE> 56
of a sinking or purchase fund, if any; the amount payable on shares of the
series in the event of any voluntary liquidation, dissolution or winding up of
the affairs of the Company; conversion rights, if any; and voting powers, if
any. Depending upon the terms of the Preferred Stock established by the Board of
Directors, any or all series of Preferred Stock could have preferences over the
Common Stock with respect to dividends and other distributions and upon
liquidation of the Company or could have voting or conversion rights that could
adversely affect the holders of the outstanding Common Stock. The Company has no
current plans to issue any shares of Preferred Stock of any class or series.
One of the effects of undesignated Preferred Stock may be to enable the
Board of Directors to render more difficult or to discourage an attempt to
obtain control of the Company by means of a tender offer, proxy contest, merger
or otherwise, and thereby to protect the continuity of the Company's management.
The issuance of shares of Preferred Stock pursuant to the Board of Directors'
authority described above may adversely affect the rights of the holders of
Common Stock. If, in the exercise of its fiduciary obligations, the Board of
Directors was to determine that a takeover proposal was not in the Company's
best interest, such shares could be issued by the Board of Directors without
stockholder approval in one or more transactions that might prevent or make more
difficult or costly the completion of the takeover transaction by diluting the
voting or other rights of the proposed acquiror or insurgent stockholder group,
by creating a substantial voting block in institutional or other hands that
might undertake to support the position of the incumbent Board of Directors, by
effecting an acquisition that might complicate or preclude the takeover, or
otherwise.
CERTAIN PROVISIONS OF THE COMPANY'S CHARTER AND BYLAWS AND DELAWARE LAW
The Certificate of Incorporation and the Bylaws of the Company contain
several provisions that may make the acquisition or control of the Company by
means of a tender offer, open market purchases, proxy fight or otherwise more
difficult. These provisions are expected to discourage certain types of
transactions that may involve an actual or threatened change of control of the
Company and to encourage persons seeking to acquire control of the Company to
consult first with the Company's Board to negotiate the terms of any proposed
business combination or offer. Takeovers or changes in the Board that might be
proposed and effected without prior consultation and negotiation with the Board
or the Company's management would not necessarily be detrimental to the Company
and its shareholders. However, the Company nonetheless believes that the
unfriendly or unsolicited proposal to take over or restructure the Company
outweigh the disadvantages of discouraging such proposal, because, among other
things, negotiation of such proposals could result in an improvement of their
terms. Although these provisions are intended to enhance the likelihood of
continuity and stability in the Board of Directors of the Company and in its
policies, but might have the effect of delaying or preventing a change in
control of the Company and may make more difficult the removal of incumbent
management even if such transactions could be beneficial to the interests of
stockholders. Set forth below is a summary description of such provisions:
Number of Directors; Filling Vacancies; Removal. The Charter provides
that the number of directors constituting the Company's Board of Directors
shall be fixed by the Bylaws, but shall not be less than three nor more
than 15. The Charter further provides that the directors shall be divided
into three classes, each class serving staggered three-year terms. The
Board of Directors of the Company, acting by a majority of the directors
then in office, may fill any vacancy or newly created directorship.
Advance Notice of Intention to Nominate a Director. The Charter and
Bylaws permit a stockholder to nominate a person for election as a director
only if written notice of such stockholder's intent to make a nomination
has been given to the Secretary of the Company not less than 80 days prior
to the date of any annual or special meeting. If the date of such annual or
special meeting was not publicly announced by the Company more than 90 days
in advance of
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<PAGE> 57
such meeting, notice by the stockholder must be received on the 10th day
after notice of the meeting or prior public disclosure of the date of the
meeting was given.
Stockholders' Right to Call Special Meeting. The Bylaws provide that a
special stockholders' meeting may not be called by stockholders.
Removal of Directors: Filling Vacancies on Board of Directors. The
Charter and Bylaws provide that any director may be removed at any time for
cause by the affirmative vote of the holders of not less than 80% of the
combined voting power of the outstanding shares of capital stock of the
Company entitled to vote in the election of directors. The Bylaws also
provide that any vacancies on the Board of Directors (including any
resulting from an increase in the authorized number of directors) may be
filled by the affirmative vote of a majority of the remaining directors.
Adoption and Amendment of Bylaws. The Bylaws provide that they may be
amended or repealed by either a majority vote of those present at any
meeting at which a quorum is present of the Board of Directors or a
majority vote of the holders of all shares of stock of the Company
represented and entitled to vote at any regular meeting of stockholders or
any special meeting thereof provided that notice of such special meeting
was properly given. Except for certain delineated articles of the Bylaws
and the Charter, provisions amended or repealed by the stockholders may be
almost immediately re-amended or re-adopted by the Board of Directors.
Amendment of Certain Provisions of the Articles; Other Corporate
Action. Under Delaware law, unless a corporation's certificate of
incorporation specifies otherwise, a corporation's certificate of
incorporation may be amended by the affirmative vote of the holders of a
majority of the voting power of each class of stock entitled to vote
thereon. The Charter requires the affirmative vote of not less than 80% of
the combined voting power of the outstanding shares of the capital stock of
the Company entitled to vote in the election of directors to amend, repeal
or adopt provisions of the Company's Charter with respect to (i) the
classification, election, filling of vacancies and removal of the Board of
Directors, and (ii) amendments to the certain provisions of the Bylaws.
Anti-takeover Provisions. Delaware law permits a corporation's board
of directors to adopt certain anti-takeover measures in response to
proposals to acquire the corporation, its assets or its outstanding capital
stock. Measures to be adopted could include a stockholder rights plan or
Bylaw provisions requiring super majority stockholder approval of
acquisition proposals.
Limitation of Personal Liability of Directors. The Charter limits the
liability of directors of the Company to the Company or its stockholders
(in their capacity as directors but not in their capacity as officers) to
the fullest extent permitted by Delaware law. The inclusion of this
provision in the Charter may have the effect of reducing the likelihood of
derivative litigation against directors and may discourage or deter
stockholders or management from bringing a lawsuit against directors for
breach of their duty of care, even though such an action, if successful,
might otherwise have benefited the Company and its stockholders.
Indemnification Arrangements. The Charter provides that, to the
fullest extent permitted by the Delaware General Corporation Law, the
directors and officers of the Company shall be indemnified by the Company
in connection with actual or threatened proceedings and claims arising out
of their status as such. The Company may enter into indemnification
agreements with each of its directors and executive officers that provide
for indemnification and expense advancement to the fullest extent permitted
under the Delaware General Corporation Law.
No Action by Written Consent; No Business Introduced by Shareholders
at Special Meetings. The Charter prohibits the taking of any action by
written stockholder consent in lieu of a meeting. In addition, the Charter
and Bylaws provide that special meetings of the stockholders of the Company
may be called only by the Chairman of the Board pursuant to a resolution
adopted by a majority of the total number of directors that the Board would
have if there were
55
<PAGE> 58
no vacancies. Moreover, the only business that may be brought before such a
meeting is that brought by the Chairman or the Secretary at the request of
a majority of the Board of Directors. Such provisions may not be amended or
repealed without the affirmative vote of the holders of at least 80% of the
outstanding shares of the capital stock of the Company entitled to vote on
such matters.
STATUTORY BUSINESS COMBINATION PROVISION
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law ("Section 203"). Section 203 provides, with certain
exceptions, that a Delaware corporation may not engage in any of a broad range
of business combinations with a person or an affiliate, or associate of such
person, who is an "interested stockholder" for a period of three years from the
date that such person became an interested stockholder unless: (i) the
transaction resulting in a person becoming an interested stockholder, or the
business combination, is approved by the Board of Directors of the corporation
before the person becomes an interested stockholder, (ii) the interested
stockholder acquired 85% or more of the outstanding voting stock of the
corporation in the same transaction that makes such person an interested
stockholder (excluding shares owned by persons who are both officers and
directors of the corporation, and shares held by certain employee stock
ownership plans), or (iii) on or after the date the person becomes an interested
stockholder, the business combination is approved by the corporation's board of
directors and by the holders of at least 2/3 of the corporation's outstanding
voting stock at an annual or special meeting, excluding shares owned by the
interest stockholder. Under Section 203, an "interested stockholder" is defined
as any person who is (i) the owner of 15% or more of the outstanding voting
stock of the corporation or (ii) an affiliate or associate of the corporation
and who was the owner of 15% or more of the outstanding voting stock of the
corporation at any time within the three-year period immediately prior to the
date on which it is sought to be determined whether such person is an interested
stockholder.
A corporation may, at its option, exclude itself from the coverage of
Section 203 by amending its Charter or Bylaws by action of its stockholders to
exempt itself from coverage, provided that such Bylaw or Charter amendment shall
not become effective until 12 months after the date it is adopted. The Company
has not adopted such a Charter or Bylaws amendment.
SHARES ELIGIBLE FOR FUTURE SALE
The market price of the Common Stock could be adversely affected by the
sale of substantial amounts of Common Stock in the public market. Immediately
prior to the closing of the Offering, shares of Common Stock were issued
and outstanding. All of the shares sold in the Offering, except for shares
acquired by affiliates of the Company, will be freely tradeable.
None of the shares outstanding immediately prior to the closing of the
Offering were issued in a transaction registered under the Securities Act, and,
accordingly, such shares may not be sold except in transactions registered under
the Securities Act or pursuant to an exemption from registration, including the
exemption contained in Rule 144 under the Securities Act.
In general, under Rule 144 as currently in effect, a person, or persons
whose shares are aggregated, who has beneficially owned his or her shares for an
least one year, or a person who may be deemed an "affiliate" of the Company who
has beneficially owned shares for at least one year, would be entitled to sell
within any three-month period a number of shares that does not exceed the
greater of 1% of the then outstanding shares of the Common Stock or the average
weekly trading volume of the Common Stock during the four calendar weeks
preceding the date on which notice of the proposed sale is sent to the
Commission. Sales under Rule 144 are also subject to certain manner of sale
provisions, notice requirements and the availability of current public
information about the Company. A person who is not deemed to have been an
affiliate of the Company at any time for 90 days preceding a sale and who has
beneficially owned his shares for at
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<PAGE> 59
least two years would be entitled to sell such shares under Rule 144 without
regard to the volume limitations, manner of sale provisions, notice requirements
or the availability of current public information about the Company.
The Company has authorized the issuance of 1,800,000 shares of its Common
Stock in accordance with the terms of the 1997 Incentive Equity Plan. Options to
purchase an aggregate of 1,472,971 shares of Common Stock have been granted as
of the date of this Prospectus to employees and officers of the Company. See
"Management -- 1997 Incentive Equity Plan." The Company intends to file a
registration statement on Form S-8 under the Securities Act registering the
issuance of shares upon the vesting of any restricted stock awards or the
exercise of options granted under the 1997 Incentive Equity Plan. As a result,
such shares will be eligible for resale in the public market.
For limitations on the ability of the Company, the Selling Stockholders and
the directors and executive officers of the Company to sell shares of Common
Stock during the period of 180 days from the date of this Prospectus, see
"Underwriting."
In addition, an aggregate of shares of Common Stock to be issued
in the Exchange are subject to contractual restrictions on their transfer that
are contained in the Exchange Agreement. The holders of such shares have agreed
that they will not, directly or indirectly, offer, sell, offer to sell, contract
to sell, pledge, grant any option to purchase or otherwise sell or dispose of
such shares without the prior consent of the Company; provided that such
restrictions lapse as to an aggregate of such shares on the first
anniversary of the closing of the Exchange and on each subsequent anniversary,
with these restrictions expiring as to all such shares on the fifth anniversary.
Prior to this Offering there has been no established trading market for the
Common Stock, and no predictions can be made as to the effect that sales of
Common Stock under Rule 144, pursuant to a registration statement, or otherwise,
or the availability of shares of Common Stock for sale, will have on the market
price prevailing from time to time. Sales of substantial amounts of Common Stock
in the public market, or the perception that such sales could occur, could
depress the prevailing market price. Such sales may also make it more difficult
for the Company to issue or sell equity securities or equity-related securities
in the future at a time and price that it deems appropriate. See "Risk
Factors -- Shares Eligible for Future Sale."
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<PAGE> 60
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Underwriters named below, for whom Schroder & Co. Inc., Jefferies
& Company, Inc. and Morgan Keegan & Company, Inc. are acting Representatives
(the "Representatives"), have severally agreed to purchase from the Company and
the Selling Stockholders, an aggregate of shares of Common Stock. The
number of shares of Common Stock that each Underwriter has agreed to purchase is
set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
------------ ---------
<S> <C>
Schroder & Co. Inc..........................................
Jefferies & Company, Inc....................................
Morgan Keegan & Company, Inc................................
---------
Total.............................................
=========
</TABLE>
The Underwriting Agreement provides that the Underwriters' obligation to
pay for and accept delivery of the shares of Common Stock offered hereby is
subject to certain conditions precedent and that the Underwriters will be
obligated to purchase all such shares, excluding shares covered by the
over-allotment option, if any are purchased. The Underwriters have informed the
Company that no sales of Common Stock will be confirmed to discretionary
accounts.
The Company has been advised by the Underwriters that they propose
initially to offer the Common Stock to the public at the public offering price
set forth on the cover page of this Prospectus and to certain dealers at such
price, less a concession not in excess of $ per share. The Underwriters
may allow and such dealers may reallow a concession not in excess of $
per share to certain other brokers and dealers. After the Offering, the public
offering price, the concession and reallowances to dealers and other selling
terms may be changed by the Underwriters.
The Selling Stockholders have granted to the Underwriters an option
exercisable for 30 days after the date of this Prospectus to purchase up to an
aggregate of additional shares of Common Stock to cover
over-allotments, if any, at the same price per share to be paid by the
Underwriters for the other shares of Common Stock offered hereby. If the
Underwriters purchase any such additional shares pursuant to the over-allotment
option, each Underwriter will be committed, subject to certain conditions, to
purchase a number of the additional shares of Common Stock proportionate to such
Underwriter's initial commitment.
The Company, its directors and executive officers, and each of the Selling
Stockholders have agreed with the Representatives, for a period of 180 days
after the date of this Prospectus, not to issue, sell, offer to sell, grant any
options for the sale of, or otherwise dispose of any shares of Common Stock or
any rights to purchase shares of Common Stock without the prior written consent
of Schroder & Co. Inc. See "Shares Eligible for Future Sale."
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters' against certain liabilities that they may incur in connection with
the sale of the Common Stock, including liabilities arising under the Securities
Act, and to contribute to payments that the Underwriters may be required to make
with respect thereto.
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<PAGE> 61
Prior to this Offering, there has been no public market for the Common
Stock. The initial public offering price for the Common Stock has been
determined by negotiation between the Company and the Representatives. Among
other factors considered in determining the public offering price were
prevailing market and economic conditions, revenues and earnings of the Company,
the state of the Company's business operations, an assessment of the Company's
management and consideration of the above factors in relation to market
valuation of companies in related businesses and other factors deemed relevant.
There can be no assurance, however, that the prices at which the Common Stock
will sell in the public market after the Offering will not be lower than the
public offering price.
In order to facilitate the Offering of the Common Stock, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Common Stock. Specifically, the Underwriters may overallot in
connection with the Offering, creating a short position in the Common Stock for
their own account. In addition, to cover over-allotments or to stabilize the
price of the Common Stock, the Underwriters may bid for, and purchase, shares of
Common Stock in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to an underwriter or a dealer for distributing the
Common Stock in the Offering, if the syndicate repurchases previously
distributed Common Stock in transactions to cover syndicate short positions, in
stabilization or otherwise. Any of these activities may stabilize or maintain
the market price of the Common Stock above independent market levels. The
Underwriters are not required to engage in these activities, and may end any of
these activities at any time.
The Company has filed an application for quotation of its Common Stock on
the Nasdaq National Market under the symbol "FWAV."
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon by Griggs & Harrison, P.C., Houston, Texas. Certain legal matters in
connection with the Offering will be passed upon for the Underwriters by Baker &
Botts, L.L.P., New York, New York.
EXPERTS
The Company's Consolidated Financial Statements as of December 31, 1996 and
1995 and for each of the three years in the period ended December 31, 1996, and
as of and for the nine-month period ended September 30, 1997, included in this
Prospectus and the Company's Registration Statement on Form S-1 (the
"Registration Statement"), have been audited by Grant Thornton LLP, independent
certified public accountants, as indicated in their report with respect thereto,
and are included herein in reliance upon the authority of said firm as experts
in accounting and auditing in giving said report.
Bludworth's Consolidated Financial Statements as of March 31, 1997 and 1996
and for each of the two years in the period ended March 31, 1997, and as of and
for the six-month period ended September 30, 1997, included in this Prospectus
and the Company's Registration Statement, have been audited by Grant Thornton
LLP, independent certified public accountants, as indicated in their report with
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in accounting and auditing in giving said report.
59
<PAGE> 62
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement under
the Securities Act, with respect to the Common Stock offered by this Prospectus.
This Prospectus, which constitutes a part of such Registration Statement, does
not contain all of the information set forth in the Registration Statement,
certain items of which are contained in exhibits to such Registration Statement
as permitted by the rules and regulations of the Commission. For further
information with respect to the Company and the Common Stock offered hereby,
reference is made to the Registration Statement, including the exhibits thereto.
The Registration Statement may be inspected without charge at the public
reference facilities maintained by the Commission and at the Regional Offices of
the Commission, and copies may be obtained from the Commission at prescribed
rates. Statements made in this Prospectus concerning the contents of any
document referred to herein are not necessarily complete. With respect to each
such document filed with the Commission as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description of
the matter involved, and each such statement shall be deemed qualified in its
entirety by such reference.
As a result of the Offering, the Company will become subject to the
information and reporting requirements of the Exchange Act, and, in accordance
therewith, will file periodic reports, proxy statements and other information
with the Commission. Such periodic reports, proxy statements and other
information will be available for inspection and copying at the Public Reference
Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and the Regional Offices of the Commission at Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511, and 7
World Trade Center, New York, New York 10048. Copies of such material can also
be obtained from the Public Reference Section of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission maintains a World Wide Web site on the Internet at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. Such reports, proxy and information statements and other information
concerning the Company will also be available for inspection and copying at the
offices of The Nasdaq National Market, 1735 K Street, N.W., Washington, D.C.
The Company intends to furnish its stockholders with annual reports
containing audited Consolidated Financial Statements certified by an independent
public accounting firm and quarterly reports for the first three quarters of
each fiscal year containing unaudited financial information.
60
<PAGE> 63
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
NO.
----
<S> <C>
First Wave Marine, Inc. and Subsidiaries
Report of Independent Certified Public Accountants........ F-2
Consolidated Balance Sheets as of December 31, 1995 and
1996 and as of September 30, 1997...................... F-3
Consolidated Statements of Earnings for the years ended
December 31, 1994, 1995 and 1996 and for the nine
months ended September 30, 1996 (Unaudited) and 1997... F-4
Consolidated Statement of Stockholders' Equity for the
years ended December 31, 1994, 1995 and 1996 and for
the nine months ended September 30, 1997............... F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1995 and 1996 and for the nine
months ended September 30, 1996 (Unaudited) and 1997... F-6
Notes to Consolidated Financial Statements................ F-7
John Bludworth Marine, Inc. and Subsidiary
Report of Independent Certified Public Accountants........ F-16
Consolidated Balance Sheets as of March 31, 1996 and 1997
and as of September 30, 1997........................... F-17
Consolidated Statements of Earnings for the years ended
March 31, 1996 and 1997 and for the six months ended
September 30, 1996 (Unaudited) and 1997................ F-18
Consolidated Statement of Stockholder's Equity for the
years ended March 31, 1996 and 1997 and for the six
months ended September 30, 1997........................ F-19
Consolidated Statements of Cash Flows for the years ended
March 31, 1996 and 1997 and for the six months ended
September 30, 1996 (Unaudited) and 1997................ F-20
Notes to Consolidated Financial Statements................ F-21
</TABLE>
F-1
<PAGE> 64
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
First Wave Marine, Inc.
We have audited the accompanying consolidated balance sheets of First Wave
Marine, Inc. and Subsidiaries as of September 30, 1997 and December 31, 1996 and
1995, and the related consolidated statements of earnings, stockholders' equity,
and cash flows for the nine months ended September 30, 1997 and for each of the
years in the three year period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above, present fairly,
in all material respects, the financial position of First Wave Marine, Inc. and
Subsidiaries as of September 30, 1997 and December 31, 1996 and 1995, and the
results of its operations and its cash flows for the nine months ended September
30, 1997 and for each of the years in the three year period ended December 31,
1996, in conformity with generally accepted accounting principles.
Grant Thornton LLP
Houston, Texas
November 8, 1997
(except for the
third paragraph of
Note A11, as to which
the date is November 20, 1997)
F-2
<PAGE> 65
FIRST WAVE MARINE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- SEPTEMBER 30,
1995 1996 1997
------ ------- -------------
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents............................... $ 66 $ -- $ 1,079
Accounts receivable, including unbilled receivables of
$734, $1,973 and $3,528.............................. 3,884 6,182 7,228
Inventories 309... 566 652
Costs and estimated earnings in excess of billings on
uncompleted contracts................................ 874 90 --
Other................................................... 133 283 243
Income tax receivable................................... -- 139 --
Deferred income taxes................................... 43 23 80
------ ------- -------
Total current assets............................ 5,309 7,283 9,282
PROPERTY AND EQUIPMENT, NET............................... 1,028 16,755 22,372
ORGANIZATION AND LOAN COSTS, net of accumulated
amortization of $51, $136 and $219...................... 167 662 704
DEPOSITS.................................................. 290 232 200
------ ------- -------
$6,794 $24,932 $32,558
====== ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Due to bank............................................. $ -- $ 88 $ --
Notes payable........................................... 3,488 1,519 219
Current portion of long-term obligations................ 1,031 877 1,333
Trade accounts payable.................................. 853 897 812
Accrued liabilities..................................... 871 1,188 1,861
------ ------- -------
Total current liabilities....................... 6,243 4,569 4,225
LONG-TERM OBLIGATIONS, net of current portion............. 97 10,872 15,125
SUBORDINATED DEBT......................................... -- 6,914 6,841
DEFERRED INCOME TAXES..................................... 14 236 563
OTHER LIABILITIES......................................... 21 57 441
MINORITY INTEREST IN SUBSIDIARY........................... 85 391 928
COMMITMENTS AND CONTINGENCIES............................. -- -- --
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 2,000 shares
authorized, no shares issued......................... -- -- --
Common stock, no par value in 1995 and 1996, $.01 par
value in 1997, 21,000 shares authorized, 10,650
shares issued and outstanding at December 31, 1995
and 1996 and 10,758 shares issued and outstanding at
September 30, 1997................................... 1 1 10
Additional paid-in capital.............................. -- -- 2
Retained earnings....................................... 333 1,892 4,423
------ ------- -------
334 1,893 4,435
------ ------- -------
$6,794 $24,932 $32,558
====== ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 66
FIRST WAVE MARINE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------- -----------------------------
1994 1995 1996 1996 1997
------------- ------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES
Repair and conversions................ $11,693 $15,392 $20,997 $14,965 $19,801
New construction...................... 1,391 3,321 2,841 1,898 881
Environmental services................ 2,263 3,287 4,119 3,062 3,784
------- ------- ------- ------- -------
15,347 22,000 27,957 19,925 24,466
COST OF REVENUES........................ 12,591 17,043 18,623 13,886 14,330
------- ------- ------- ------- -------
Gross profit.......................... 2,756 4,957 9,334 6,039 10,136
GENERAL AND ADMINISTRATIVE EXPENSES..... 2,827 3,623 5,629 4,548 3,943
------- ------- ------- ------- -------
Earnings (loss) from operations....... (71) 1,334 3,705 1,491 6,193
INTEREST EXPENSE........................ 186 247 829 380 1,280
MINORITY INTEREST IN NET EARNINGS OF
SUBSIDIARY............................ -- 76 219 66 536
------- ------- ------- ------- -------
Earnings (loss) before income taxes... (257) 1,011 2,657 1,045 4,377
INCOME TAX EXPENSE (BENEFIT)
Current............................... 2 312 856 424 1,567
Deferred.............................. -- (29) 242 105 270
------- ------- ------- ------- -------
2 283 1,098 529 1,837
------- ------- ------- ------- -------
NET EARNINGS (LOSS)................ $ (259) $ 728 $ 1,559 $ 516 $ 2,540
======= ======= ======= ======= =======
Earnings (loss) per common share........ $ (.02) $ .07 $ .15 $ .05 $ .24
Weighted average shares................. 10,650 10,650 10,650 10,650 10,650
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 67
FIRST WAVE MARINE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND
NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
---------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------ ------ ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994.......... 10,650 $ 1 $-- $ -- $ 1
Net loss.......................... -- -- -- (259) (259)
------ ---- --- ------ ------
Balance at December 31, 1994........ 10,650 1 -- (259) (258)
Distribution to stockholders...... -- -- -- (136) (136)
Net earnings...................... -- -- -- 728 728
------ ---- --- ------ ------
Balance at December 31, 1995........ 10,650 1 -- 333 334
Net earnings...................... -- -- -- 1,559 1,559
------ ---- --- ------ ------
Balance at December 31, 1996........ 10,650 1 -- 1,892 1,893
Change in par value............... -- 9 -- (9) --
Issuance of common stock.......... 108 -- 2 -- 2
Net earnings...................... -- -- -- 2,540 2,540
------ ---- --- ------ ------
Balance at September 30, 1997....... 10,758 $ 10 $ 2 $4,423 $4,435
====== ==== === ====== ======
</TABLE>
The accompanying notes are an integral part of this statement.
F-5
<PAGE> 68
FIRST WAVE MARINE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------- -----------------
1994 1995 1996 1996 1997
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net (loss) earnings................................... $ (259) $ 728 $ 1,559 $ 516 $ 2,540
Adjustments to reconcile net (loss) earnings to net
cash (used) provided by operating activities
Depreciation and amortization...................... 48 259 680 324 1,037
Minority interest on earnings...................... -- 76 219 66 536
Deferred income tax provision...................... -- (29) 242 105 270
Change in assets and liabilities
Increase in accounts receivable.................... (2,526) (1,357) (2,298) (2,330) (1,046)
(Increase) decrease in inventories............... (623) 314 (256) (61) (86)
(Increase) decrease in costs and estimated
earnings in excess of billings on uncompleted
contracts..................................... (1,156) 281 784 575 90
(Increase) decrease in other assets.............. (48) (89) (150) 70 40
(Increase) decrease in income tax receivable..... -- -- (139) (86) 139
(Increase) decrease in deposits.................. -- (290) 58 (32) 32
Increase (decrease) in due to bank............... -- -- 88 72 (88)
Increase (decrease) in trade accounts payable.... 1,051 (198) 44 135 (85)
Increase in accrued liabilities.................. 433 376 317 93 673
Increase (decrease) in billings in excess of
costs and estimated earnings on uncompleted
contracts..................................... 56 (56) -- -- --
Increase in other liabilities.................... 62 21 36 55 384
------- ------- ------- ------- -------
Net cash (used) provided by operating
activities.................................. (2,962) 36 1,184 (498) 4,436
Cash flows from investing activities
Acquisition of property and equipment................. (569) (934) (1,425) (857) (1,890)
Asset acquisition costs............................... -- -- -- -- (118)
------- ------- ------- ------- -------
Net cash used by investing activities......... (569) (934) (1,425) (857) (2,008)
Cash flows from financing activities
Proceeds from issuance of long-term obligations....... 41 105 3,260 3,260 900
Payments on long-term obligations..................... -- (18) (208) (208) (951)
Proceeds from issuance of notes payable............... 3,151 3,288 175 -- 230
Payments on notes payable............................. (661) (3,377) (1,905) (1,625) --
Net (payments) proceeds on revolving line of credit... 1,196 886 (567) (138) (1,530)
Loan costs............................................ -- -- (580)
Investment in Affiliate............................... (117) -- -- -- --
Issuance of common stock.............................. -- -- -- -- 2
------- ------- ------- ------- -------
Net cash provided (used) by financing
activities.................................. 3,610 884 175 1,289 (1,349)
------- ------- ------- ------- -------
Net increase (decrease) in cash............... 79 (14) (66) (66) 1,079
Cash and cash equivalents at beginning of period........ 1 80 66 66 --
------- ------- ------- ------- -------
Cash and cash equivalents at end of period.............. $ 80 $ 66 $ -- $ -- $ 1,079
======= ======= ======= ======= =======
Supplemental disclosure of cash flow information
Cash paid during the period for
Interest........................................... $ 99 $ 335 $ 619 $ 276 $ 1,023
Income taxes....................................... -- 240 952 489 1,155
Supplemental disclosure of non-cash transactions
During 1997 and 1996, the Company financed the
purchase of assets with term debt and notes payable
in the amount of $4,687 and $14,897, respectively
During 1995, assets of $136 were distributed to the
stockholders.
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 69
FIRST WAVE MARINE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 IS UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE A -- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying consolidated financial statements follows.
1. PRINCIPLES OF CONSOLIDATION AND NATURE OF BUSINESS
The accompanying consolidated financial statements include the accounts of
First Wave Marine, Inc. (the Company) and its majority-owned subsidiaries,
Newpark Shipbuilding and Repair, Inc. (Newpark), EAE Industries, Inc., Newpark
Marine Fabricators, Inc. and Louisiana Ship, Inc. The minority interest
stockholders of Newpark are current and former employees of Newpark. All
material intercompany balances and transactions have been eliminated in
consolidation.
The Company's business is concentrated in providing shipyard and related
environmental services to the offshore support vessel, offshore barge and inland
marine industries, and the Company customarily extends credit to such customers.
The Company provides a full range of repair and construction services as well as
environmental services including cleaning, degassing and wastewater disposal
from its location along the Houston Ship Channel in Houston, Texas.
2. ACCOUNTS RECEIVABLE
Management considers accounts receivable to be fully collectible;
accordingly, no allowance for doubtful accounts is recorded. If collection of
amounts become uncertain, an allowance will be established.
3. REVENUE RECOGNITION
Revenues from new construction performed under lump-sum contracts are
recognized on the percentage-of-completion method, measured by the percentage of
labor hours incurred to date to estimated total labor hours for each contract.
This method is used because management considers expended labor hours to be the
best available measure of progress on these contracts.
Contract costs include all direct material and labor costs and those
indirect costs related to contract performance, such as indirect labor,
supplies, tools, repairs, and depreciation costs. Selling, general, and
administrative costs are charged to expense as incurred. Provisions for
estimated losses on uncompleted contracts are made in the period in which such
losses are determined. Changes in job performance, job conditions, and estimated
profitability, including those arising from contract penalty provisions, and
final contract settlements may result in revisions to costs and income and are
recognized in the period in which the revisions are determined. Profit
incentives are included in revenues when their realization is reasonably
assured. An amount equal to contract costs attributable to claims is included in
revenues when realization is probable and the amount can be reliably estimated.
The asset, "costs and estimated earnings in excess of billings on
uncompleted contracts," represents revenues recognized in excess of amounts
billed.
Revenues from repairs, conversions and environmental services performed
under time-and-materials and fixed-fee arrangements are recognized as the
services are provided. Revisions to revenues and costs recognized on fixed-fee
arrangements are made in the period in which the revisions are determined.
F-7
<PAGE> 70
FIRST WAVE MARINE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. INVENTORIES
Inventories consist of raw materials and repair parts. Inventories are
valued at the lower of cost or market using the first-in, first-out method.
5. INCOME TAXES
Deferred tax assets and liabilities are determined based on the differences
between the financial statement and tax bases of assets and liabilities as
measured by the enacted tax rates which will be in effect when these differences
reverse. Deferred tax expense (benefit) is the result of changes in deferred tax
assets and liabilities.
6. PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization
are provided principally on the straight-line method over the estimated useful
lives of the assets.
7. USE OF ESTIMATES
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
8. CASH AND CASH EQUIVALENTS
The Company considers all highly liquid short-term investments purchased
with an original maturity of three months or less to be cash equivalents.
9. ORGANIZATION AND LOAN COSTS
Organization costs are amortized using the straight-line method over five
years. Loan costs are amortized over the life of the related loan.
10. INTERIM FINANCIAL INFORMATION
Financial information for the nine months ended September 30, 1996,
included herein, is unaudited. Such information includes all adjustments
(consisting only of normal recurring adjustments), which are, in the opinion of
management, necessary for a fair presentation of the financial information in
the interim periods. The results of operations for the nine months ended
September 30, 1997 are not necessarily indicative of the results for the full
fiscal year.
11. EARNINGS PER SHARE
Earnings per common share is calculated by dividing net earnings available
for common stockholders by the weighted average number of common stock shares
outstanding during the period.
On September 30, 1997, the Company merged into and became a Delaware
corporation which effectively resulted in a stock split of 1,000 for 1. All
share and per share data have been restated to give effect to the stock split.
F-8
<PAGE> 71
FIRST WAVE MARINE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On November 20, 1997, the Company's common stock was split 10.65 for 1 to
stockholders of record on November 20, 1997, and was effected as a stock
dividend. All share and per share data have been restated to give effect to the
stock split.
NOTE B -- CONTRACTS IN PROGRESS
Information regarding new construction under lump-sum contracts in progress
are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------ SEPTEMBER 30,
1994 1995 1996 1997
----------- -------- ----------- -------------
<S> <C> <C> <C> <C>
Expenditures on uncompleted contracts...... $1,389 $712 $1,487 $--
Estimated earnings......................... 1 162 531 --
------ ---- ------ ------
1,390 874 2,018 --
Less billings applicable thereto........... 290 -- 1,928 --
------ ---- ------ ------
Costs and estimated earnings in excess of
billings on uncompleted contracts........ $1,100 $874 $ 90 $--
====== ==== ====== ======
Included in the accompanying balance sheet
under the following caption:
Costs and estimated earnings in excess of
billings on uncompleted contracts..... $1,156 $874 $ 90 $--
Billings in excess of costs and estimated
earnings on uncompleted contracts..... (56) -- -- --
------ ---- ------ ------
$1,100 $874 $ 90 $--
====== ==== ====== ======
</TABLE>
NOTE C -- PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL DECEMBER 31,
LIVES IN --------------------------- SEPTEMBER 30,
YEARS 1995 1996 1997
--------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Land....................................... -- $-- $ 3,355 $ 4,831
Buildings.................................. 31-40 345 4,584 7,568
Automobiles................................ 5-7 33 59 160
Office furniture, fixtures and equipment... 3-5 134 211 2,546
Equipment.................................. 5-16 772 9,397 9,078
------ ------- -------
1,284 17,606 24,183
Less accumulated depreciation......... 256 851 1,811
------ ------- -------
$1,028 $16,755 $22,372
====== ======= =======
</TABLE>
F-9
<PAGE> 72
FIRST WAVE MARINE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE D -- NOTES PAYABLE
Notes payable consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- SEPTEMBER 30,
1995 1996 1997
------ ------ -------------
<S> <C> <C> <C>
Revolving line of credit of $4,000 at a bank;
interest at prime plus 1% (9.25% at December 31,
1996) due monthly; maturing September 4, 1997 or on
demand; collateralized by receivables, inventory
and guaranteed by the chairman of the Company...... $ -- $1,519 $ --
Revolving line of credit of $3,000 at a bank;
interest at prime plus 2.5% (11% at December 31,
1995) due monthly; paid in 1996.................... 2,086 -- --
Note payable to a bank; interest at prime plus 2%
(10.5% at December 31, 1995) due upon completion of
a certain construction contract; paid in 1996...... 850 -- --
Notes payable to corporations; interest ranging from
7% to 10% due monthly; paid in 1996................ 552 -- --
Note payable to a corporation; unsecured; due on
demand; interest at 7%............................. -- -- 219
------ ------ -------
$3,488 $1,519 $ 219
====== ====== =======
</TABLE>
NOTE E -- LONG-TERM OBLIGATIONS
Long-term obligations consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- SEPTEMBER 30,
1995 1996 1997
------ ------- -------------
<S> <C> <C> <C>
Note payable to a financial institution; due in
monthly installments of $159 including interest at
10.42% through September 2003; collateralized by
all assets, stock issued, and guaranteed by the
chairman of the Company........................... $ -- $11,630 $11,092
Subordinated note payable to a corporation; interest
at 5%; principal and interest due September 2003;
collateralized by all assets, stock issued, and
guaranteed by the chairman of the Company......... -- 6,328 6,328
Notes payable to a bank; interest ranging from 8% to
10.75%; due in monthly installments of $5 through
March 2000, collateralized by certain assets and
guaranteed by the chairman of the Company......... 128 119 --
Note payable to a corporation; interest at 7% due
monthly; principal and accrued but unpaid interest
due June 30, 1996, paid in 1996................... 1,000 -- --
</TABLE>
F-10
<PAGE> 73
FIRST WAVE MARINE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- SEPTEMBER 30,
1995 1996 1997
------ ------- -------------
<S> <C> <C> <C>
Subordinated note payable to a corporation; due in
monthly installments of $7 including interest of
8% through September 2003. Additional payments of
principal of $40 are due on each of the third,
fourth, fifth and sixth anniversary dates of the
note, and guaranteed by the chairman of the
Company........................................... -- 586 556
Note payable to a financial institution; due in
monthly installments of $10, including interest at
9.25% through February 2002; collateralized by
equipment, and guaranteed by the chairman of the
Company........................................... -- -- 512
Note payable to a financial institution; due in
monthly installments of $8, including interest at
9.90% through August 2003; collateralized by all
assets, stock issued, and guaranteed by the
chairman of the Company........................... -- -- 596
Note payable to a bank; due in monthly installments
of $21, including interest at prime plus 1%
through August 2000; collateralized by accounts
receivable, inventories and property and
equipment, and guaranteed by the chairman of the
Company........................................... -- -- 616
Capital lease obligation............................ -- -- 3,209
Other long-term obligations......................... -- -- 390
------ ------- -------
1,128 18,663 23,299
Less current portion.............................. 1,031 877 1,333
------ ------- -------
$ 97 $17,786 $21,966
====== ======= =======
</TABLE>
Maturities of long-term obligations at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, AMOUNT
- ------------------------------------------------------------ ------
<S> <C>
1997..................................................... $ 877
1998..................................................... 894
1999..................................................... 1,010
2000..................................................... 1,091
2001..................................................... 1,205
</TABLE>
Certain notes payable are subject to loan agreements which contain, among
other things, provisions restricting other borrowings, acquisitions, capital
expenditures, redemption of the Company's stock and dividends, and require the
Company to maintain certain financial ratios.
The $6,328 subordinated note payable contains a default penalty of $2,206
if the note is not fully paid by the maturity date. It is management's intention
to pay this note in full prior to the maturity date, September 30, 2003.
Based on the borrowing rates currently available to the Company for loans
with similar terms and average maturities, the fair value of long-term debt is
$1,118 and $17,643 at December 31, 1995 and 1996.
F-11
<PAGE> 74
FIRST WAVE MARINE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE F -- INCOME TAXES
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
1994 1995 1996
--------- ------- ---------
<S> <C> <C> <C>
Deferred tax assets:
Percentage of completion allowance..................... $ 50 $ 43 $ 23
Depreciation........................................... 4 24 --
Net operating loss..................................... 74 -- --
Other.................................................. 1 -- --
Valuation allowance.................................... (129) -- --
----- ---- -----
$ -- $ 67 $ 23
===== ==== =====
Deferred tax liabilities:
Capitalized small tools................................ $ (33) $(38) $ (39)
Depreciation........................................... -- -- (197)
Other.................................................. (9) -- --
Valuation allowance.................................... 42 -- --
----- ---- -----
$ -- $(38) $(236)
===== ==== =====
</TABLE>
The reconciliation between the Company's effective income tax rate and the
statutory federal income tax rate is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Statutory federal income tax rate.................... 34.00% 34.00% 34.00%
Change in valuation allowance........................ (33.05) (11.09) --
Minority interest.................................... -- 2.56 2.80
State taxes.......................................... -- 2.16 3.61
Other................................................ (0.95) 0.36 0.91
Effective income tax rate.......................... --% 27.99% 41.32%
</TABLE>
The Company utilized its remaining net operating loss carryforward of $300
during 1995.
NOTE G -- LEASING ARRANGEMENTS
Prior to the acquisition of facilities and equipment in 1996, the Company
conducted its operations in leased facilities and leased certain equipment under
operating leases. Rental expense for operating leases was $1,709, $1,631 and
$1,202 for 1994, 1995 and 1996, and $1,198 and $29 for the nine months ended
September 30, 1996 and 1997.
In August 1997, the Company began a portion of its operations in leased
facilities. For financial reporting purposes, minimum lease rentals relating to
the building and land have been capitalized. The related assets and obligations
have been recorded using the Company's incremental borrowing rate at the
inception of the lease. The lease, which is noncancelable, expires in August
2002, at
F-12
<PAGE> 75
FIRST WAVE MARINE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
which time ownership of the assets will transfer to the Company. The following
is a schedule of leased property under capital leases at September 30, 1997:
<TABLE>
<S> <C>
Land....................................................... $1,417
Buildings and equipment.................................... 1,792
------
$3,209
======
</TABLE>
The following is a schedule by years of future minimum lease payments under
capital leases together with present value of the net minimum lease payments as
of September 30, 1997:
<TABLE>
<S> <C>
Year ended December 31:
1997.................................................. $ --
1998.................................................. --
1999.................................................. 200
2000.................................................. 595
2001.................................................. 655
Succeeding years...................................... 3,323
------
Total minimum lease payments............................... 4,773
Less amount representing interest.......................... 1,564
------
3,209
Current portion............................................ --
------
Noncurrent portion......................................... $3,209
======
</TABLE>
NOTE H -- CONTINGENCIES
The Company is involved in certain claims and lawsuits occurring in the
normal course of business. Management, after consultation with outside legal
counsel, does not believe the outcome of these actions will have a material
impact on the financial statements of the Company.
The Company is subject to extensive and changing federal, state and local
laws and regulations designed to protect the environment. The Company from time
to time is involved in administrative and other proceedings under environmental
laws involving its operations and facilities. Environmental laws could impose
liability for remediation costs or result in civil or criminal penalties in
cases of noncompliance. Environmental laws have been subject to frequent change;
therefore, the Company is unable to predict the future costs or other future
impact of environmental laws on its operations.
NOTE I -- HEALTH INSURANCE PLAN
The Company has a self-insured health plan. The aggregate annual amount of
self-insurance that must be paid before stop-loss insurance applies varies based
on enrollment and approximated $710 at December 31, 1996. The individual amount
of insurance that must be paid before stop-loss insurance applies is $50 per
individual claim. Expense under this self-insured plan was approximately $452,
$469 and $694 for the years ended December 31, 1994, 1995 and 1996 and $620 for
the nine months ended September 30, 1996.
As of January 1, 1997 the Company terminated the self-insured health plan
and accrued $181 in estimated claims payable at December 31, 1996.
F-13
<PAGE> 76
FIRST WAVE MARINE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE J -- BENEFIT PLAN
Eligible employees of Newpark participate in a 401(k) deferred savings plan
(the Plan). Under the Plan, a participating employee may allocate up to 15% of
their salary and Newpark, at its discretion, may make contributions to the Plan.
Newpark contributed approximately $18, $26 and $42 for the years ended December
31, 1994, 1995 and 1996 and $24 and $22 for the nine months ended September 30,
1996 and 1997 to the Plan.
NOTE K -- NEW PRONOUNCEMENTS
The FASB has issued Financial Accounting Standards No. 128, Earnings per
Share, which is effective for financial statements issued after December 15,
1997. The new standard eliminates primary and fully diluted earnings per share
and requires the presentation of basic and diluted earnings per share together
with disclosure of how the per share amounts were computed.
Effective December 1997, the Company will be required to adopt Statement of
Financial Accounting Standards No. 129, Disclosure of Information about Capital
Structure (SFAS 129). SFAS 129 requires that all entities disclose in summary
form within the financial statement the pertinent rights and privileges of the
various securities outstanding. An entity is to disclose within the financial
statement the number of shares issued upon conversion, exercise, or satisfaction
of required conditions during at least the most recent annual fiscal period and
any subsequent interim period presented. Other special provisions apply to
preferred and redeemable stock. The Company will adopt SFAS 129 in the fourth
quarter of 1997.
The FASB has issued Financial Accounting Standards No. 130, Reporting
Comprehensive Income, which is effective for financial statements issued after
December 15, 1997. The new standard requires an entity to report and display
comprehensive income and its components. Comprehensive income will include net
income plus net unrealized gains or loss on securities.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, Disclosures about Segments of an Enterprise and Related Information
(SFAS 131). SFAS 131 establishes standards for the way public enterprises are to
report information about operating segments in annual financial statements and
requires the reporting of selected information about operating segments in
interim financial reports issued to shareholders. It also establishes standards
for related disclosures about products and services, geographic area, and major
customers. SFAS 131 is effective for periods beginning after December 15, 1997.
NOTE L -- RELATED PARTY TRANSACTIONS
The Company paid management fees to stockholders and entities related by
common ownership for the years ended December 31, 1994, 1995 and 1996 totaling
$333, $480 and $1,346 and for the nine months ended September 30, 1996 and 1997
totaling $1,311 and $285. Included in management fees in 1996 are $700 in
non-recurring fees paid.
The Company paid loan costs of $110 in 1996 to a related entity for
services rendered in connection with obtaining certain long-term debt.
Accounts receivable at September 30, 1997 include advances of $165 to a
company related by common ownership. Such advances bear interest at 12% and are
due on demand. The Company has pledged $100 cash to secure a bank loan of this
related company.
F-14
<PAGE> 77
FIRST WAVE MARINE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE M -- STOCKHOLDER AGREEMENT AND STOCK PURCHASE AGREEMENT
In January 1995, Newpark entered into a Stockholder Agreement and Stock
Purchase Agreement (the Agreement) with the employee stockholders. In accordance
with the Agreement, in August 1996, Newpark granted to the employee stockholders
7.4 additional shares of common stock and recorded compensation expense of $88.
Newpark paid an additional bonus to these stockholders to provide for the taxes
incurred from the stock compensation. Under the terms of the Agreement, in the
event of death, termination of employment or proposed sale of the stock, Newpark
has the right or obligation to purchase the shares at a price and subject to
certain conditions as prescribed in the Agreement.
NOTE N -- MAJOR CUSTOMERS
The Company had the following customers to which it had sales exceeding 10%
of total Company sales:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------ -------------------
1994 1995 1996 1996 1997
---- ------ ------ ----------- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
SEACOR Smit Inc....................... (a) (a) 22.1% 16.1% 14.9%
Kirby Corporation..................... (a) 28.0% 15.3% 15.3% 23.7%
Seariver Maritime..................... (a) 12.2% (a) (a) (a)
</TABLE>
- ---------------
(a) less than 10%
NOTE O -- SUBSEQUENT EVENTS
In October 1997, the Company entered into an agreement to acquire 100% of
the outstanding capital stock of a company that owns and operates shipyard
facilities in Pasadena, Texas and Galveston, Texas. The agreement provides for a
cash payment of $15,000 and issuance of a subordinated promissory note of
$4,000, subject to certain adjustments.
In October 1997, the Company entered into an agreement with the Newpark
minority interest shareholders to exchange the minority interest shares in
Newpark with approximately 1,000 shares of the Company representing 8.5% of
ownership.
In October 1997, the Company entered into a lease agreement for a shipyard
facility in Galveston, Texas. The lease agreement provides for an initial term
of 15 years with options to renew up to a total term of 99 years, and monthly
lease payments of $58. The Company is further obligated to spend at least
$20,000 on improvements and equipment for the facility prior to January 31,
2001.
In November 1997, the Company entered into a non-binding letter of intent
to purchase certain shipyard assets, including real property and improvements,
in Galveston, Texas for $4,500.
F-15
<PAGE> 78
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
John Bludworth Marine, Inc.
We have audited the accompanying consolidated balance sheets of John
Bludworth Marine, Inc. and Subsidiary as of September 30, 1997 and March 31,
1997 and 1996, and the related consolidated statements of earnings,
stockholder's equity, and cash flows for the six months ended September 30, 1997
and the years ended March 31, 1997 and 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above, present fairly,
in all material respects, the consolidated financial position of John Bludworth
Marine, Inc. and Subsidiary as of September 30, 1997 and March 31, 1997 and
1996, and the consolidated results of their operations and their consolidated
cash flows for the six months ended September 30, 1997 and for the years ended
March 31, 1997 and 1996, in conformity with generally accepted accounting
principles.
Grant Thornton LLP
Houston, Texas
November 8, 1997
F-16
<PAGE> 79
JOHN BLUDWORTH MARINE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
MARCH 31,
---------------------------- SEPTEMBER 30,
1996 1997 1997
----------- ------------- -------------
<S> <C> <C> <C>
CURRENT ASSETS Cash and cash equivalents................. $ 272 $ 183 $ 316
Accounts receivable, including unbilled receivables of
$44, $1,011 and $793................................ 1,872 4,811 5,838
Inventories............................................ 172 900 101
Costs and estimated earnings in excess of billings on
uncompleted contracts............................... 16 -- --
Prepaid expenses and other............................. 280 29 829
------ ------- -------
Total current assets........................... 2,612 5,923 7,084
PROPERTY AND EQUIPMENT, NET.............................. 3,934 7,411 10,524
DEPOSITS AND OTHER....................................... 56 66 146
------ ------- -------
$6,602 $13,400 $17,754
====== ======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Notes payable.......................................... $ 723 $ 1,538 $ 945
Current portion of long-term debt...................... 25 443 624
Trade accounts payable................................. 444 865 1,033
Accrued liabilities.................................... 237 283 411
Income taxes payable................................... 111 758 1,195
Billings in excess of costs and estimated earnings on
uncompleted contracts............................... 96 -- --
------ ------- -------
Total current liabilities...................... 1,636 3,887 4,208
LONG-TERM DEBT, net of current portion................... 2,512 5,743 8,359
DEFERRED INCOME TAXES.................................... 340 380 448
COMMITMENTS AND CONTINGENCIES............................ -- -- --
STOCKHOLDER'S EQUITY
Common stock, no par value, 300,000 shares authorized,
100 shares issued and outstanding................... 1 1 1
Retained earnings...................................... 2,113 3,389 4,738
------ ------- -------
2,114 3,390 4,739
------ ------- -------
$6,602 $13,400 $17,754
====== ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-17
<PAGE> 80
JOHN BLUDWORTH MARINE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
MARCH 31, SEPTEMBER 30,
---------------------------- ----------------------------
1996 1997 1996 1997
----------- ------------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES
Repair and conversions......................... $9,174 $14,790 $5,717 $15,030
New construction............................... -- 2,203 2,203 1,010
------ ------- ------ -------
9,174 16,993 7,920 16,040
COST OF REVENUES................................. 7,012 12,987 5,810 11,770
------ ------- ------ -------
Gross profit................................ 2,162 4,006 2,110 4,270
GENERAL AND ADMINISTRATIVE EXPENSES.............. 1,329 1,526 566 1,552
------ ------- ------ -------
Earnings from operations.................... 833 2,480 1,544 2,718
OTHER INCOME (EXPENSE)
Other income................................... 7 148 26 5
Interest expense............................... (326) (443) (154) (451)
------ ------- ------ -------
(319) (295) (128) (446)
------ ------- ------ -------
Earnings before income taxes................ 514 2,185 1,416 2,272
INCOME TAX EXPENSE
Current........................................ 111 774 513 848
Deferred....................................... 105 135 89 75
------ ------- ------ -------
216 909 602 923
------ ------- ------ -------
NET EARNINGS................................ $ 298 $ 1,276 $ 814 $ 1,349
====== ======= ====== =======
Earnings per common share........................ $2,980 $12,760 $8,140 $13,490
====== ======= ====== =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-18
<PAGE> 81
JOHN BLUDWORTH MARINE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
YEARS ENDED MARCH 31, 1996 AND 1997 AND SIX MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
TOTAL
COMMON RETAINED STOCKHOLDER'S
STOCK EARNINGS EQUITY
------ -------- -------------
<S> <C> <C> <C>
Balance at April 1, 1995................................. $ 1 $1,815 $1,816
Net earnings........................................... -- 298 298
--- ------ ------
Balance at March 31, 1996................................ 1 2,113 2,114
Net earnings........................................... -- 1,276 1,276
--- ------ ------
Balance at March 31, 1997................................ 1 3,389 3,390
Net earnings........................................... -- 1,349 1,349
--- ------ ------
Balance at September 30, 1997............................ $ 1 $4,738 $4,739
=== ====== ======
</TABLE>
The accompanying notes are an integral part of this statement.
F-19
<PAGE> 82
JOHN BLUDWORTH MARINE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
MARCH 31, SEPTEMBER 30,
--------------- ---------------------
1996 1997 1996 1997
----- ------- ----------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net earnings.............................................. $ 298 $ 1,276 $ 814 $ 1,349
Adjustments to reconcile net earnings to net cash provided
(used) by operating activities
Depreciation and amortization............................. 456 517 201 371
Deferred income taxes..................................... 105 135 89 75
Gain on sale of property and equipment.................... (2) -- -- --
Change in assets and liabilities
Increase in accounts receivable........................... (173) (2,939) (562) (1,027)
(Increase) decrease in inventories........................ (63) (728) (253) 799
Decrease (increase) in costs and estimated earnings in
excess of billings on uncompleted contracts............ 28 16 (63) --
(Increase) decrease in prepaid expenses and other...... (43) 156 92 (807)
Increase in deposits and other......................... (7) (10) (23) (80)
(Decrease) increase in trade accounts payable.......... (605) 421 (31) 168
Increase (decrease) in accrued liabilities............. 169 46 (16) 128
Decrease in billings in excess of costs and estimated
earnings on uncompleted contracts.................... (9) (96) (96) --
Increase in income taxes payable....................... 108 647 399 437
----- ------- ------ -------
Net cash provided (used) by operating
activities...................................... 262 (559) 551 1,413
Cash flows from investing activities
Acquisition of property and equipment..................... (283) (3,994) (152) (3,484)
Proceeds from sale of property and equipment.............. 29 -- -- --
----- ------- ------ -------
Net cash used by investing activities............. (254) (3,994) (152) (3,484)
Cash flows from financing activities
Proceeds from issuance of long-term debt.................. 38 6,248 1,980 2,996
Payments on long-term debt................................ (308) (2,599) (827) (199)
Proceeds from issuance of notes payable................... 185 13 -- 927
Payments on notes payable................................. -- (199) (80) (212)
Net proceeds (payments) on revolving line of credit....... 82 1,001 105 (1,308)
----- ------- ------ -------
Net cash (used) provided by financing
activities...................................... (3) 4,464 1,178 2,204
----- ------- ------ -------
Net increase (decrease) in cash................... 5 (89) 1,577 133
Cash and cash equivalents at beginning of period............ 267 272 272 183
----- ------- ------ -------
Cash and cash equivalents at end of period.................. $ 272 $ 183 $1,849 $ 316
===== ======= ====== =======
Supplemental disclosure of cash flow information
Cash paid during the period for
Interest.................................................. $ 326 $ 443 $ 154 $ 451
Income taxes.............................................. -- 108 108 406
Noncash transaction
Equipment acquired in exchange for debt................... $ 520 -- -- --
</TABLE>
The accompanying notes are an integral part of these statements.
F-20
<PAGE> 83
JOHN BLUDWORTH MARINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 1996 IS UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
NOTE A -- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
John Bludworth Marine, Inc. and Subsidiary's (the Company) business is
concentrated in providing shipyard services to the offshore support vessel,
offshore barge and inland marine industries, and the Company customarily extends
credit to such customers. The Company provides a full range of repair and
construction services from its locations along the Houston Ship Channel in
Pasadena, Texas and on Pelican Island in Galveston, Texas.
A summary of the significant accounting policies applied in the preparation
of the accompanying financial statements follows.
1. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of John
Bludworth Marine, Inc. and its wholly-owned subsidiary, Bludworth Shipyard and
Fabrication, Inc. All significant intercompany balances and transactions have
been eliminated.
2. ACCOUNTS RECEIVABLE
Management considers accounts receivable to be fully collectible;
accordingly, no allowance for doubtful accounts is recorded. If collection of
amounts becomes uncertain, an allowance will be established.
3. REVENUE RECOGNITION
Revenues from new construction performed under lump-sum contracts are
recognized on the percentage-of-completion method, measured by the cost-to-cost
method. This method is used because management considers this method to be the
best available measure of progress on these contracts.
Contract costs include all direct material and labor costs and those
indirect costs related to contract performance, such as indirect labor,
supplies, tools, repairs, and depreciation costs. Selling, general, and
administrative costs are charged to expense as incurred. Provisions for
estimated losses on uncompleted contracts are made in the period in which such
losses are determined. Changes in job performance, job conditions, and estimated
profitability, including those arising from contract penalty provisions, and
final contract settlements may result in revisions to costs and income and are
recognized in the period in which the revisions are determined. Profit
incentives are included in revenues when their realization is reasonably
assured. An amount equal to contract costs attributable to claims is included in
revenues when realization is probable and the amount can be reliably estimated.
The asset, "Costs and estimated earnings in excess of billings on
uncompleted contracts," represents revenues recognized in excess of amounts
billed. The liability, "Billings in excess of costs and estimated earnings on
uncompleted contracts," represents billings in excess of revenues recognized.
Revenues from repair and conversion services performed under
time-and-materials and fixed-fee arrangements are recognized as the services are
provided. Revisions to revenues and costs recognized on fixed-fee arrangements
are made in the period in which the revisions are determined.
F-21
<PAGE> 84
JOHN BLUDWORTH MARINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. INVENTORIES
Inventories consist of raw materials, repair parts and assets under
construction but not under contract. Inventories are valued at the lower of
average cost or market using the first-in, first-out method.
5. INCOME TAXES
Deferred tax assets and liabilities are determined based on the differences
between the financial statement and tax bases of assets and liabilities as
measured by the enacted tax rates which will be in effect when these differences
reverse. Deferred income tax expense is the result of changes in deferred tax
assets and liabilities.
6. PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization
are provided principally on the straightline method over the estimated useful
lives of the assets.
7. USE OF ESTIMATES
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
8. CASH AND CASH EQUIVALENTS
The Company considers all highly liquid short-term investments purchased
with an original maturity of three months or less to be cash equivalents.
Included in cash and cash equivalents at March 31, 1996 and 1997 and September
30, 1997 is $135 held on deposit by the Company's insurance carrier.
9. INTERIM FINANCIAL INFORMATION
Financial information for the six months ended September 30, 1996, included
herein, is unaudited. Such information includes all adjustments (consisting only
of normal recurring adjustments), which are, in the opinion of management,
necessary for a fair presentation of the financial information in the interim
periods. The results of operations for the six months ended September 30, 1997
are not necessarily indicative of the results of the full fiscal year.
10. EARNINGS PER SHARE
Earnings per common share is calculated by dividing net earnings available
for common stockholders by the weighted average number of common stock shares
outstanding during the period.
F-22
<PAGE> 85
JOHN BLUDWORTH MARINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE B -- COSTS AND ESTIMATED EARNINGS ON LUMP-SUM CONTRACTS IN PROGRESS
Costs and estimated earnings on new construction under lump-sum contracts
in progress are as follows:
<TABLE>
<CAPTION>
MARCH 31,
------------------- SEPTEMBER 30,
1996 1997 1997
------- ------ -------------
<S> <C> <C> <C>
Cost incurred on uncompleted contracts......... $ 1,614 $ -- $ --
Estimated earnings............................. -- -- --
------- ------ ------
1,614 -- --
Less billings applicable thereto............... (1,694) -- --
------- ------ ------
$ (80) $ -- $ --
======= ====== ======
Included in the accompanying balance sheets
under the following captions:
Cost and estimated earnings in excess of
billings on uncompleted contracts............ $ 16 $ -- $ --
Billings in excess of costs and estimated
earnings on uncompleted contracts............ (96) -- --
------- ------ ------
$ (80) $ -- $ --
======= ====== ======
</TABLE>
NOTE C -- PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL MARCH 31,
LIVES IN ---------------- SEPTEMBER 30,
YEARS 1996 1997 1997
--------- ------ ------ -------------
<S> <C> <C> <C> <C>
Land.................................... -- $ 819 $1,318 $ 1,318
Buildings and improvements.............. 5-20 1,128 3,887 4,555
Automobiles............................. 3-5 101 135 135
Office furniture, fixtures and
equipment............................. 5-10 69 93 164
Machinery and equipment................. 5-20 6,048 6,726 9,472
------ ------ -------
8,165 12,159 15,644
Less accumulated depreciation........... 4,231 4,748 5,120
------ ------ -------
$3,934 $7,411 $10,524
====== ====== =======
</TABLE>
F-23
<PAGE> 86
JOHN BLUDWORTH MARINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE D -- NOTES PAYABLE
Notes payable consists of the following:
<TABLE>
<CAPTION>
MARCH 31,
----------------------- SEPTEMBER 30,
1996 1997 1997
-------- ----------- -------------
<S> <C> <C> <C>
Revolving line of credit of $450 at a bank; interest
at 11.25%; due monthly; paid in 1997.............. $240 $ -- $ --
Revolving line of credit of $400 at a bank; interest
at prime plus 2.25% due monthly; paid in 1997..... 291 -- --
Revolving line of credit of $2,500 at a bank;
interest at the bank's base rate plus 1.25% (10.5%
at March 31, 1997) due monthly; maturing July 31,
1998; collateralized by accounts receivable,
inventory and equipment........................... -- 1,532 224
Other notes payable................................. 192 6 721
---- ------ ----
$723 $1,538 $945
==== ====== ====
</TABLE>
NOTE E -- LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
MARCH 31,
---------------- SEPTEMBER 30,
1996 1997 1997
------ ------ -------------
<S> <C> <C> <C>
Note payable to a bank; principal and interest of
$19 due monthly; paid in 1997................... $1,603 $ -- $ --
Note payable to a bank; principal and interest of
$18 due monthly; paid in 1997................... 780 -- --
Notes payable to a financial institution;
principal and interest at the short-term
government rate plus 3.25% (8.75% at March 31,
1997) of $45 due monthly; maturing at various
dates through July 2004; collateralized by
certain equipment............................... -- 1,883 2,770
Note payable to a bank; principal of $22 including
interest at prime plus 0.5% (9.75% at March 31,
1997) due monthly; maturing October 2008;
collateralized by real estate................... -- 1,791 2,437
Note payable to a financial institution; principal
and interest ranging from 10% to 13% of $19 due
monthly; collateralized by real estate.......... -- 1,733 1,705
Note payable to a bank; interest at prime plus
0.75% due monthly (9.75% at March 31, 1997)
until withdrawal of maximum commitment ($4,120),
then principal of $57 plus interest of prime
plus 1.75% due monthly; collateralized by real
estate.......................................... -- 656 1,969
Other notes payable............................... 154 123 102
------ ------ ------
2,537 6,186 8,983
Less current portion.............................. 25 443 624
------ ------ ------
$2,512 $5,743 $8,359
====== ====== ======
</TABLE>
F-24
<PAGE> 87
JOHN BLUDWORTH MARINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Maturities of long-term debt at March 31, 1997 are:
<TABLE>
<CAPTION>
YEAR ENDING
MARCH 31, AMOUNT
--------- ------
<S> <C>
1998................................................. $443
1999................................................. 549
2000................................................. 665
2001................................................. 717
2002................................................. 675
</TABLE>
Based on the borrowing rates currently available to the Company for loans
with similar terms and average maturities, the fair value of long-term debt
approximates recorded value.
NOTE F -- INCOME TAXES
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below:
<TABLE>
<CAPTION>
MARCH 31,
--------------
1996 1997
----- -----
<S> <C> <C>
Deferred tax assets:
Alternative minimum tax credit............................ $ 104 $ --
Other..................................................... 4 5
----- -----
$ 108 $ 5
===== =====
Deferred tax liabilities:
Depreciation.............................................. $(340) $(380)
===== =====
</TABLE>
Deferred tax assets are included in "Prepaid expenses and other" current
assets on the accompanying balance sheets.
The reconciliation between the Company's effective income tax rate and the
statutory federal income tax rate is as follows:
<TABLE>
<CAPTION>
YEAR ENDED,
MARCH 31,
----------------
1996 1997
------ ------
<S> <C> <C>
Statutory federal income tax rate........................... 34.00% 34.00%
Officers life insurance..................................... 5.74% 2.19%
State taxes................................................. -- 4.49%
Other....................................................... 2.28% 0.92%
42.02% 41.60%
</TABLE>
F-25
<PAGE> 88
JOHN BLUDWORTH MARINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE G -- COMMITMENTS AND CONTINGENCIES
The Company leases vehicles under noncancelable operating leases expiring
at various dates through June 2001. Future minimum lease payments under
operating leases by years at March 31, 1997 are:
<TABLE>
<CAPTION>
YEAR ENDING
MARCH 31,
-----------
<S> <C>
1998..................................................... $ 49
1999..................................................... 49
2000..................................................... 42
2001..................................................... 22
2002..................................................... 2
----
$164
====
</TABLE>
Rent expense for the years ended March 31, 1996 and 1997 was $49 and $124,
and for the six months ended September 30, 1996 and 1997 was $27 and $117.
The Company is involved in certain claims and lawsuits occurring in the
normal course of business. Management, after consultation with outside legal
counsel, does not believe the outcome of these actions will have a material
impact on the financial statements of the Company.
Based on the results of a sales tax audit, the Company was assessed
additional taxes, penalties and interest totaling approximately $240 for prior
years by the Comptroller of Public Accounts of the State of Texas. The Company
believes the assessment is without merit and intends to vigorously defend its
position. The Company filed a motion contesting the assessment which is
currently being reviewed by an administrative law judge.
The Company is subject to extensive and changing federal, state and local
laws and regulations designed to protect the environment. The Company from time
to time is involved in administrative and other proceedings under environmental
laws involving its operations and facilities. Environmental laws could impose
liability for remediation costs or result in civil or criminal penalties in
cases of noncompliance. Environmental laws have been subject to frequent change;
therefore, the Company is unable to predict the future costs or other future
impact of environmental laws on its operations.
NOTE H -- BENEFIT PLAN
Eligible employees of the Company participate in a 401(k) deferred savings
plan (the Plan). Under the Plan, a participating employee may allocate a
percentage of their salary and the Company, at its discretion, may make
contributions to the Plan. The Company contributed approximately $37 for the six
months ended September 30, 1997. The Company made no contributions to the Plan
for the years ended March 31, 1996 and 1997.
NOTE I -- NEW PRONOUNCEMENTS
The FASB has issued Financial Accounting Standards No. 128, Earnings per
Share, which is effective for financial statements issued after December 15,
1997. The new standard eliminates primary and fully diluted earnings per share
and requires the presentation of basic and diluted earnings per share together
with disclosure of how the per share amounts were computed. The adoption of the
new standard would not have a significant effect on the Company's earnings per
share.
Effective December 1997, the Company will be required to adopt Statement of
Financial Accounting Standards No. 129, Disclosure of Information about Capital
Structure (SFAS 129). SFAS 129 requires that all entities disclose in summary
form within the financial statement the pertinent rights and privileges of the
various securities outstanding. An entity is to disclose within the
F-26
<PAGE> 89
JOHN BLUDWORTH MARINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
financial statement the number of shares issued upon conversion, exercise, or
satisfaction of required conditions during at least the most recent annual
fiscal period and any subsequent interim period presented. Other special
provisions apply to preferred and redeemable stock. The Company will adopt SFAS
129 in the fourth quarter of 1997.
The FASB has issued Financial Accounting Standards No. 130, Reporting
Comprehensive Income, which is effective for financial statements issued after
December 15, 1997. The new standard requires an entity to report and display
comprehensive income and its components. Comprehensive income will include net
income plus net unrealized gains or loss on securities.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, Disclosures about Segments of an Enterprise and Related Information
(SFAS 131). SFAS 131 establishes standards for the way public enterprises are to
report information about operating segments in annual financial statements and
requires the reporting of selected information about operating segments in
interim financial reports issued to shareholders. It also establishes standards
for related disclosures about products and services, geographic areas, and major
customers. SFAS 131 is effective for periods beginning after December 15, 1997.
NOTE J -- MAJOR CUSTOMERS
The Company had the following customers to which it had sales exceeding 10%
of total Company sales:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
MARCH 31, SEPTEMBER 30,
----------------- ----------------------
1996 1997 1996 1997
------ ------ ----------- ------
(UNAUDITED)
<S> <C> <C> <C> <C>
Customer A................................... 26% (a) 10% 11%
Customer B................................... 17% 28% 20% 33%
Customer C................................... 10% (a) (a) (a)
Customer D................................... (a) 13% 24% (a)
Customer E................................... (a) 11% (a) (a)
Customer F................................... (a) (a) (a) (a)
Customer G................................... (a) (a) (a) (a)
</TABLE>
- ---------------
(a) Less than 10%.
NOTE K -- RELATED PARTY TRANSACTIONS
The Company engages in transactions with its stockholder and entities
controlled by its stockholder.
As a result of the aforementioned transactions, included in accounts
receivable on the accompanying balance sheets at March 31, 1996 and 1997 and
September 30, 1997 are $211, $298 and $172 of receivables from related parties.
Included in accounts payable on the accompanying balance sheets at March 31,
1996 and 1997 and September 30, 1997 are $50, $71 and $125 of payables to
related parties.
In 1996, the Company acquired $520 in certain equipment from a related
party.
NOTE L -- SUBSEQUENT EVENT
In October 1997, the stockholder entered into an agreement to sell 100% of
the outstanding capital stock of the Company.
F-27
<PAGE> 90
Anatomy of a lengthening job
[photograph of boat [photograph of section [photograph of side
being cut] lifted by crane] of boat]
cutting vessel in Placement of 40 foot Connection of sections
half mid-body
[photograph of supply vessel]
Voila! Vessel is lengthened from 180 feet to 220 feet
<PAGE> 91
======================================================
NO DEALER, SALESPERSON, OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE COMMON STOCK IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MAKE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF.
-------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary..................... 3
Risk Factors........................... 9
The Company............................ 15
Use of Proceeds........................ 15
Dividend Policy........................ 16
Dilution............................... 17
Capitalization......................... 18
Selected Consolidated Financial Data... 19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 21
Unaudited Pro Forma Consolidated
Combined Financial Information....... 26
Business............................... 31
Management............................. 45
Principal and Selling Stockholders..... 52
Description of Capital Stock........... 53
Shares Eligible for Future Sale........ 56
Underwriting........................... 58
Legal Matters.......................... 59
Experts................................ 59
Additional Information................. 60
Index to Consolidated Financial
Statements........................... F-1
</TABLE>
-------------------------
UNTIL , (25 DAYS AFTER THE DATE COMMENCEMENT OF THE OFFERING),
ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
======================================================
======================================================
SHARES
FIRST WAVE LOGO
FIRST WAVE MARINE, INC.
COMMON STOCK
($0.01 PAR VALUE)
SCHRODER & CO. INC.
JEFFERIES & COMPANY, INC.
MORGAN KEEGAN &
COMPANY, INC.
, 1998
======================================================
<PAGE> 92
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Estimated expenses in connection with the issuance and distribution of the
securities to be registered, other than underwriting discounts and commissions,
are as follows:
<TABLE>
<S> <C>
Securities Exchange Commission Registration Fee............. $ 30,305
NASD Fee.................................................... $ 10,500
Nasdaq National Market Listing Fee.......................... $ 50,000
Printing and Engraving Expenses............................. $150,000
Legal Fees and Expenses..................................... $175,000
Accounting Fees and Expenses................................ $200,000
Blue Sky Fees and Expenses.................................. $ 5,000
Transfer Agent Fees and Expenses............................ $ 3,500
Miscellaneous............................................... $100,695
--------
Total............................................. $725,000
========
</TABLE>
The foregoing expenses incident to the registration of the shares of Common
Stock, including any underwriting discounts and commissions attributable to the
sale of the shares by the Company, shall be paid by the Company. Underwriting
discounts and commissions attributable to the sale of shares by the Selling
Stockholders shall be paid by the Selling Stockholders.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
General
Article Ninth of the Company's Certificate of Incorporation, as amended
("Article Ninth") requires the Company to indemnify its directors, officers and
certain other individuals to the full extent permitted by the Delaware General
Corporation Law ("Delaware GCL") or other applicable laws and allows the Company
to enter into agreements with any person to provide greater or different
indemnification than that provided in Article Ninth or the Delaware GCL.
Article Tenth of the Company's Certificate of Incorporation ("Article
Tenth") limits the personal liability of the Company's directors to the Company
or its shareholders to the full extent permitted by the Delaware GCL, which
currently permits directors to be protected from monetary damages for breach of
their fiduciary duty of care. This limitation has no effect on claims arising
under the federal securities laws.
Indemnification and Insurance
Under the Delaware GCL, directors and officers as well as other employees
and individuals may be indemnified against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement in connection with specified
actions, suits or proceedings, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation such
as a derivative action) if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. A similar standard of
care is applicable in the case of actions by or in the right of the corporation,
except that indemnification extends only to expenses (including attorneys' fees)
incurred in connection with defense or settlement of such an action, and the
Delaware GCL requires court approval before there can be any indemnification
where the person seeking indemnification has been found liable to the
corporation.
Article Ninth provides that each person who is or was or had agreed to
become a director or officer of the Company, and each such person who is or was
serving or who had agreed to serve at
II-1
<PAGE> 93
the request of the Board of Directors or an officer of the Company as an
employee or agent of the Company, or as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise
(including the heirs, executors, administrators or estate of such person) shall
be indemnified by the Company to the full extent permitted by the Delaware GCL
or any other applicable laws as presently or hereafter in effect. Under Article
Ninth, subject to the limitations on indemnification imposed by the Delaware
GCL, a large award against an officer or director or other appropriate
individual could be paid by the Company, which could materially reduce the
assets of the Company.
Article Ninth provides that, without limiting the generality or effect of
the foregoing, the Company may enter into one or more agreements with any person
which provide for indemnification greater or different than that provided in
Article Ninth. Finally, Article Ninth and Article Tenth each provide that any
repeal or modification of such article shall not adversely affect any right or
protection existing thereunder immediately prior to such repeal or modification.
At present there is no pending litigation or proceeding involving a
director or officer of the Company in which indemnification would be required or
permitted by the Certificate of Incorporation or Delaware GCL. The Board of
Directors is not aware of any threatened litigation or proceeding which may
result in a claim for indemnification under any such provision.
Elimination of Liability in Certain Circumstances
Under the Delaware GCL, Article Tenth protects the Company's directors
against monetary damages for breaches of their duty of care, except as set forth
below. The inclusion of Article Tenth in the Company's Certificate of
Incorporation means that the Company and its shareholders forego the ability to
bring a cause of action against a director for monetary damages for certain
breaches of fiduciary duty, including actions in connection with proposals for
the acquisition of control of the Company. Directors remain liable for breaches
of their duty of loyalty to the Company and its shareholders, as well as acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law and transactions from which a director derives improper
personal benefit. Also, Article Tenth does not eliminate director liability
under Section 174 of the Delaware GCL, which makes directors personally liable
for unlawful dividends or unlawful stock repurchases or redemptions and
expressly sets forth a negligence standard with respect to such liability.
Although Article Tenth provides directors with protection from awards of
monetary damages for breaches of the duty of care, it does not eliminate the
directors' duty of care. Accordingly, Article Tenth has no effect on the
availability of equitable remedies such as an injunction or rescission based
upon a director's breach of the duty of care. The provisions of Article Tenth
which eliminate liability as described above applies to officers of the Company
only if they are directors of the Company and are acting in their capacity as
directors, and does not apply to officers of the Company who are not directors.
The Underwriting Agreement filed as Exhibit 1.1 hereto contains reciprocal
agreements of indemnity between the Company and the Underwriters as to certain
liabilities, including liabilities under the Securities Act of 1933, as amended
(the "Securities Act"), and in certain circumstances provides for
indemnification of the Company's directors and officers.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The Company was incorporated in Delaware on September 26, 1997 at which
time it issued 100 shares of Common Stock for a cash purchase price of $10 per
share. The Company received total consideration of $1000 for the sale of such
shares. The shares were sold to the following individuals:
On September 26, 1997 the Company issued 60 shares of Common Stock to
Samuel F. Eakin.
II-2
<PAGE> 94
On September 26, 1997 the Company issued 20 shares of Common Stock to
Frank W. Eakin.
On September 26, 1997 the Company issued 20 shares of Common Stock to
David B. Ammons.
Such issuance of shares was exempt from registration under the Securities Act
pursuant to Section 4(2) thereof as a transaction by the issuer not involving
any public offering.
The Company's predecessor, a Texas corporation ("Predecessor"), merged into
the Company on September 30, 1997. Pursuant to the terms of the Agreement and
Plan of Merger, each issued and outstanding share of the Predecessor was
surrendered and exchanged for 100 shares of the Company. Accordingly, the three
shareholders of the Predecessor, Samuel F. Eakin, Frank W. Eakin and David B.
Ammons, received 600,000, 200,000 and 200,000 shares of the Company's stock
respectively on September 30, 1997. This issuance of shares was exempt from
registration under the Securities Act pursuant to Section 4(2) thereof as a
transaction by the issuer not involving any public offering.
Samuel F. Eakin, Frank W. Eakin and David B. Ammons, the shareholders of
EAE Industries, Inc., determined it to be in their best interests and that of
EAE Industries to restructure their ownership in EAE Industries, Inc. through
the Company. Pursuant to the terms of that certain Stock Exchange Agreement
dated as of September 30, 1997 by and between EAE Industries, Inc., Samuel
Eakin, Frank Eakin and David Ammons as the shareholders of EAE Industries, Inc.
and the Company, such shareholders contributed all of the outstanding shares of
voting stock in EAE Industries, Inc. to the Company in exchange for the
following shares of voting stock of the Company:
<TABLE>
<S> <C>
Samuel F. Eakin....................................... 6000 Shares
Frank W. Eakin........................................ 2000 Shares
David B. Ammons....................................... 2000 Shares
</TABLE>
This issuance of shares was exempt from registration under the Securities Act
pursuant to Section 4(2) thereof as a transaction by the issuer not involving
any public offering.
The Company has signed an agreement to purchase the remaining 17% of
outstanding shares of Newpark Shipbuilding in exchange for 93,840 shares of the
Company's Common Stock. Prior to or contemporaneously with the consummation of
the Offering and pursuant to the terms of a Stock Exchange Agreement dated as of
October 16, 1997, the Company will issue 999,390 shares of Common Stock on a
post-split basis to certain shareholders of Newpark Shipbuilding. Such issuance
of shares will be exempt from registration under the Securities Act pursuant to
Section 4(2) thereof as a transaction by the issuer not involving any public
offering.
On November 20, 1997, the Company effected a 10.65-for-1 stock split
pursuant to which the 1,010,100 outstanding shares of Common Stock were
subdivided into 10,757,565 shares of Common Stock. All such shares were issued
to the three individuals listed above as they are the only shareholders of the
Company. Such issuance was exempt from registration under the Securities Act
pursuant to Section 3(a)(9) thereof as securities exchanged by the issuer with
its existing shareholders exclusively where no commission or other remuneration
was given directly or indirectly for soliciting such exchange.
II-3
<PAGE> 95
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
*1.1 -- Form of Underwriting Agreement by and between First Wave
Marine, Inc. and Schroder & Co. Inc., Jefferies &
Company, Inc. and Morgan Keegan & Company, Inc., as
representatives of the several underwriters.
**2.1 -- Stock Exchange Agreement dated as of October 16, 1997
between the Company and certain shareholders of Newpark
Shipbuilding & Repair, Inc.
**3.1 -- Certificate of Incorporation of the Company
**3.2 -- Bylaws of the Company
4.1 -- See Exhibit Nos. 3.1 and 3.2 for provisions of the
Certificate of Incorporation and By-laws of the Company
defining the rights of the holders of Common Stock
***5.1 -- Opinion of Griggs & Harrison, P.C.
**10.1 -- Stock Purchase Agreement dated October 15, 1997 between
the Company and John L. Bludworth III et al
*10.2 -- Amended and Restated Lease and Development Agreement
between the Board of Trustees of the Galveston Wharves as
Lessor and Newpark Marine Fabricators Inc. as Lessee and
PM Engineering, Inc. as Assignor dated October 17, 1997
and effective the first day of November 1997
*10.3 -- Assignment and Assumption of lease from PMB Engineering,
Inc. as Assignor and Newpark Marine Fabricators, Inc. as
Assignee effective the first day of November 1997
**10.4 -- Loan Agreement by and between Louisiana Ship, Inc. and
Southwest Bank of Texas, N.A. dated July 15, 1997 for (i)
a revolving credit advance in the maximum aggregate
principal amount of $800,000, (ii) an equipment guidance
line of credit in the maximum aggregate principal amount
of $300,000, (iii) a term loan in the amount of $650,000
and (iv) a term loan in the amount of $500,000
**10.5 -- First Amendment to Stock Purchase Agreement dated October
17, 1997 between the Company and John L. Bludworth, III
et al
*10.6 -- Credit Agreement by and between Newpark Shipbuilding and
Repair, Inc. and Heller Financial Leasing, Inc. dated
August 29, 1996 for two term loans in the principal
amount of $11,800,000 and $600,000, respectively
*10.7 -- Attornment Agreement by and between Newpark Marine
Fabricators, Inc., The Board of Trustees of the Galveston
Wharves and The City of Galveston dated effective as of
November 1, 1997.
*10.8 -- 1997 Incentive Equity Plan effective as of November 20,
1997.
*10.9 -- Form of Stock Option Agreement for certain options
granted by the Company to Messrs. S. Eakin, F. Eakin and
D. Ammons dated November 20, 1997.
*10.10 -- Form of Stock Option Agreement for certain options
granted by the Company to certain executives and other
employees dated November 20, 1997.
**21.1 -- Subsidiaries of Registrant
***23.1 -- Consent of Griggs & Harrison, P.C. (included in Exhibit
5.1)
*23.2 -- Consent of Grant Thornton LLP
**24.1 -- Power of Attorney
*27.1 -- Financial Data Schedule
</TABLE>
- ---------------
* Filed herewith
** Previously filed
*** To be filed by amendment
II-4
<PAGE> 96
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of Prospectus filed as a part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of Prospectus filed by the Company pursuant to rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at the time shall be
deemed to be the initial bona fide offering thereof.
If the Underwriters do not exercise their option to purchase additional
shares of Common Stock to cover over-allotments, if any, or if such option is
partially exercised, the Company hereby undertakes to file a post-effective
amendment to the Registration Statement deregistering all such shares as to
which such option shall not have been exercised.
II-5
<PAGE> 97
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Amendment No. 1 to Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Houston, State of
Texas, on November 25, 1997.
FIRST WAVE MARINE, INC.
By: /s/ DAVID B. AMMONS
----------------------------------
David B. Ammons
Executive Vice President,
CFO and Secretary
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ SAMUEL F. EAKIN* Chairman of the Board, November 25, 1997
- ----------------------------------------------------- Chief Executive Officer
Samuel F. Eakin and Director (Principal
Executive Officer)
/s/ FRANK W. EAKIN President, Chief November 25, 1997
- ----------------------------------------------------- Operating Officer and
Frank W. Eakin Director
/s/ DAVID B. AMMONS Executive Vice President, November 25, 1997
- ----------------------------------------------------- Chief Financial Officer,
David B. Ammons Secretary and Director
(Principal Financial
Officer and Principal
Accounting Officer)
/s/ JAMES COLE* Director November 25, 1997
- -----------------------------------------------------
James Cole
/s/ PAUL E. O'NEILL II* Director November 25, 1997
- -----------------------------------------------------
Paul E. O'Neill II
</TABLE>
* Signed by David B. Ammons as Attorney-in-Fact pursuant to Power of Attorney.
II-6
<PAGE> 98
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
*1.1 -- Form of Underwriting Agreement by and between First Wave
Marine, Inc. and Schroder & Co. Inc., Jefferies &
Company, Inc. and Morgan Keegan & Company, Inc., as
representatives of the several underwriters.
**2.1 -- Stock Exchange Agreement dated as of October 16, 1997
between the Company and certain shareholders of Newpark
Shipbuilding & Repair, Inc.
**3.1 -- Certificate of Incorporation of the Company
**3.2 -- Bylaws of the Company
4.1 -- See Exhibit Nos. 3.1 and 3.2 for provisions of the
Certificate of Incorporation and By-laws of the Company
defining the rights of the holders of Common Stock
***5.1 -- Opinion of Griggs & Harrison, P.C.
**10.1 -- Stock Purchase Agreement dated October 15, 1997 between
the Company and John L. Bludworth III et al
*10.2 -- Amended and Restated Lease and Development Agreement
between the Board of Trustees of the Galveston Wharves as
Lessor and Newpark Marine Fabricators Inc. as Lessee and
PM Engineering, Inc. as Assignor dated October 17, 1997
and effective the first day of November 1997
*10.3 -- Assignment and Assumption of lease from PMB Engineering,
Inc. as Assignor and Newpark Marine Fabricators, Inc. as
Assignee effective the first day of November 1997
**10.4 -- Loan Agreement by and between Louisiana Ship, Inc. and
Southwest Bank of Texas, N.A. dated July 15, 1997 for (i)
a revolving credit advance in the maximum aggregate
principal amount of $800,000, (ii) an equipment guidance
line of credit in the maximum aggregate principal amount
of $300,000, (iii) a term loan in the amount of $650,000
and (iv) a term loan in the amount of $500,000
**10.5 -- First Amendment to Stock Purchase Agreement dated October
17, 1997 between the Company and John L. Bludworth, III
et al
*10.6 -- Credit Agreement by and between Newpark Shipbuilding and
Repair, Inc. and Heller Financial Leasing, Inc. dated
August 29, 1996 for two term loans in the principal
amount of $11,800,000 and $600,000, respectively
*10.7 -- Attornment Agreement by and between Newpark Marine
Fabricators, Inc., The Board of Trustees of the Galveston
Wharves and The City of Galveston dated effective as of
November 1, 1997.
*10.8 -- 1997 Incentive Equity Plan effective as of November 20,
1997.
*10.9 -- Form of Stock Option Agreement for certain options
granted by the Company to Messrs. S. Eakin, F. Eakin and
D. Ammons dated November 20, 1997.
*10.10 -- Form of Stock Option Agreement for certain options
granted by the Company to certain executives and other
employees dated November 20, 1997.
**21.1 -- Subsidiaries of Registrant
***23.1 -- Consent of Griggs & Harrison, P.C. (included in Exhibit
5.1)
*23.2 -- Consent of Grant Thornton LLP
**24.1 -- Power of Attorney
*27.1 -- Financial Data Schedule
</TABLE>
- ---------------
* Filed herewith
** Previously filed
*** To be filed by amendment
<PAGE> 1
Exhibit 1.1
FIRST WAVE MARINE, INC.
___________Shares
Common Stock
(Par Value $0.01 Per Share)
--------------------------
UNDERWRITING AGREEMENT
New York, New York
____________, 1997
SCHRODER & CO. INC.
JEFFERIES & COMPANY, INC.
MORGAN KEEGAN & COMPANY, INC.
As Representatives of the several
Underwriters named in Schedule I hereto
c/o Schroder & Co. Inc.
Equitable Center
787 Seventh Avenue
New York, New York 10019-6016
Dear Sirs:
First Wave Marine, Inc., a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell,
and certain stockholders of the Company named in Schedule II hereto (the
"Selling Stockholders") propose to sell, to the Underwriters named in Schedule
I hereto (the "Underwriters"), an aggregate of ___________ shares of Common
Stock, par value $0.01 per share (the "Common Stock"), of the Company, of which
_________ shares are to be issued and sold by the Company and an aggregate of
________ shares are to be sold by the Selling Stockholders in the respective
amounts set forth in Schedule II hereto. The aggregate ________ shares of
Common Stock to be sold by the Company and the Selling Stockholders are herein
collectively referred to as the "Firm Securities." In addition, the Company and
the Selling Stockholders propose to grant to the Underwriters an option to
purchase up to an aggregate of an additional ________ shares of Common Stock
(the "Option Securities") on the terms and for the purposes set forth in
Section 2 hereof, of which up to _______ shares are to be issued and sold by
<PAGE> 2
the Company and up to an aggregate of _______ shares are to be sold by the
Selling Stockholders. The Firm Securities and the Option Securities are herein
collectively referred to as the "Securities." Except as may be expressly set
forth below, any reference to you in this Agreement shall be solely in your
capacity as the Representatives.
The Company and certain minority shareholders (the "Exchange
Participants") of Newpark Shipbuilding & Repair, Inc. ("Newpark") entered into
an Exchange Agreement, dated as of October 16, 1997 (the "Exchange Agreement")
whereby such Exchange Participants sold and delivered to the Company all of
their 17,000 shares of capital stock in Newpark in exchange for 93,840 shares
of Common Stock of the Company (collectively, the ("Exchange"). The Company,
EAE Services, Inc. ("EAE"), John Bludworth Marine, Inc., Bludworth Shipyard and
Fabrication, Inc., John L. Bludworth, III and Karla M. Bludworth have entered
into a Stock Purchase Agreement, dated as of October 15, 1997 (the "Acquisition
Agreement"), whereby EAE will purchase all of the outstanding capital stock of
John Bludworth Marine, Inc. and, indirectly, Bludworth Shipyard and,
Fabrication, Inc. (hereinafter collectively referred to as "Bludworth").
1. (a) The Company represents and warrants to, and agrees with,
each of the Underwriters that:
(i) A registration statement on Form S-1 (File No. 333- )
and as part thereof a preliminary prospectus, in respect of the
Securities, has been filed with the Securities and Exchange Commission
(the "Commission") in the form heretofore delivered to you and, with
the exception of exhibits to the registration statement, to you for
each of the other Underwriters; if such registration statement has not
become effective, an amendment (the "Final Amendment") to such
registration statement, including a form of final prospectus,
necessary to permit such registration statement to become effective,
will promptly be filed by the Company with the Commission; if such
registration statement has become effective and any post-effective
amendment to such registration statement has been filed with the
Commission prior to the execution and delivery of this Agreement,
which amendment or amendments shall be in acceptable form to you, the
most recent such amendment has been declared effective by the
Commission; if such registration statement has become effective, a
final prospectus (the "Rule 430A Prospectus") relating to the
Securities containing information permitted to be omitted at the time
of effectiveness by Rule 430A of the rules and regulations of the
Commission under the Securities Act of 1933, as amended (the "Act"),
will promptly be filed by the Company pursuant to Rule 424(b) of the
rules and regulations of the Commission under the Act (any preliminary
prospectus filed as part of such registration statement being herein
called a "Preliminary Prospectus," such registration statement as
amended at the time that it becomes or became effective, or, if
applicable, as amended at the time the most recent post-effective
amendment to such registration statement filed with the Commission
prior to the execution and delivery of this Agreement became effective
(the "Effective Date"), including a registration statement (if any)
filed pursuant to Rule 462(b) under the Act increasing the size of the
offering registered under the Act and including all exhibits thereto
and all information deemed to be a part thereof at such time
2
<PAGE> 3
pursuant to Rule 430A of the rules and regulations of the Commission
under the Act, being herein called the "Registration Statement" and
the final prospectus relating to the Securities in the form first
filed pursuant to Rule 424(b)(1) or (4) of the rules and regulations
of the Commission under the Act or, if no such filing is required, the
form of final prospectus included in the Registration Statement, being
herein called the "Prospectus");
(ii) No order preventing or suspending the use of any
Preliminary Prospectus has been issued by the Commission, and each
Preliminary Prospectus, at the time of filing thereof, conformed in
all material respects to the requirements of the Act and the rules and
regulations of the Commission thereunder, and did not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in
reliance upon and in conformity with information furnished in writing
to the Company by an Underwriter through you expressly for use
therein;
(iii) On the Effective Date and the date of Prospectus is
filed with the Commission, and when any further amendment or
supplements thereto become effective or are filed with the Commission,
as the case may be, the Registration Statement, the Prospectus and
such amendment or supplements did and will conform in all material
respects to the requirements of the Act and the rules and regulations
of the Commission thereunder, and did not and will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that this representation
and warranty shall not apply to any statements or omissions made in
reliance upon and in conformity with information furnished in writing
to the Company by an Underwriter through you expressly for use
therein;
(iv) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with power and authority (corporate and other) to own its
properties and to conduct its business as described in the Prospectus,
and has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each
other jurisdiction in which it owns or leases property, or conducts
any business, so as to require such qualification, except where the
failure to so qualify would not have a material adverse effect on the
condition, financial or otherwise, or the business affairs or
prospects of the Company and its subsidiaries, taken as a whole (such
adverse effect to be hereinafter referred to as a "Material Adverse
Effect"); and each of the Company's subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation, with power and
authority (corporate and other) to own its properties and to conduct
its business as described in the Prospectus, and has been duly
qualified as a foreign corporation for the transaction of business and
is in good standing under the laws of each other jurisdiction in which
it owns or leases property, or conducts any business, so as to require
such
3
<PAGE> 4
qualification, except where the failure to so qualify would not have a
Material Adverse Effect;
(v) All the issued shares of capital stock of each
subsidiary of the Company have been duly and validly authorized and
issued, are fully paid and non-assessable and, upon consummation of
the Exchange, will be owned directly or indirectly by the Company free
and clear of all liens, encumbrances, equities, security interests, or
claims with the exception of the Company's pledge of the capital stock
of Newpark to Heller Financial Leasing, Inc. ("Heller") pursuant to
that certain Pledge Agreement, dated August 29, 1996 ("Heller Pledge
Agreement"), and the Company's pledge of the capital stock of EAE
Industries, Inc. pursuant to the terms of that certain Pledge
Agreement with Heller dated August 8, 1997 ("EAE Pledge Agreement");
and there are no outstanding options, warrants or other rights calling
for the issuance of, and there are no commitments, plans or
arrangements to issue, any shares of capital stock of any subsidiary
or any security convertible or exchangeable or exercisable for capital
stock of any subsidiary; except for the shares of stock of each
subsidiary owned directly or indirectly by the Company, neither the
Company nor any subsidiary owns directly or indirectly any shares of
capital stock of any corporation or have any equity interest in any
firm, partnership, joint venture, association or other entity;
(vi) The Company has all requisite power and authority to
execute, deliver and perform its obligations under this Agreement; the
execution, delivery and performance by the Company of its obligations
under this Agreement have been duly and validly authorized by all
requisite corporate action of the Company; and this Agreement
constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except
as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally and except as enforceability of those provisions
relating to indemnity may be limited by Federal securities laws and
principles of public policy;
(vii) Neither the Company nor any of its subsidiaries has
sustained since the date of the latest audited financial statements
included in the Prospectus, any loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered
by insurance, or from any labor dispute or court or governmental
action, order or decree, which loss or interference is material to the
Company and its subsidiaries, taken as a whole; and, since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, there has not been, and prior to the
Time of Delivery (as defined in Section 4 hereof) there will not be,
any change in the capital stock (other than shares issued pursuant to
exercise of employee stock options that the Prospectus indicates are
outstanding (the "Employee Option Shares") or short-term debt or
long-term debt of the Company or any of its subsidiaries, or any
material adverse change, or any development involving a prospective
material adverse change, in or affecting the general affairs,
management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, taken as whole,
otherwise than as set forth or contemplated in the Prospectus;
4
<PAGE> 5
(viii) The Company and its subsidiaries and Bludworth have
good and marketable title in fee simple to all real property and good
and marketable title to all personal property owned by them, in each
case free and clear of all liens, encumbrances and defects except such
as are described or contemplated by the Prospectus, or such as do not
materially adversely interfere with the use made and proposed to be
made of such property by the Company and its subsidiaries and
Bludworth, and any real property and buildings held under lease by the
Company and its subsidiaries and Bludworth are held by them under
valid, subsisting and enforceable leases with such exceptions as are
not material and do not materially adversely interfere with the use
made and proposed to be made of such real property and buildings by
the Company and its subsidiaries and Bludworth;
(ix) The Company has an authorized, issued and outstanding
capitalization as set forth in the Registration Statement, and all the
issued shares of capital stock of the Company (including the
Securities to be sold by the Selling Stockholders) have been duly and
validly authorized and issued, are fully paid and non-assessable, are
free of any preemptive rights, rights of first refusal or similar
rights, were issued and sold in compliance with the applicable Federal
and state securities laws and conform in all material respects to the
description in the Prospectus; except as described in the Prospectus,
there are no outstanding options, warrants or other rights calling for
the issuance of, and there are no commitments, plans or arrangements
to issue, any shares of capital stock of the Company or any security
convertible or exchangeable or exercisable for capital stock of the
Company; there are no holders of securities of the Company who, by
reasons of the filing of the Registration Statement have the right
(and have not waived such right) to request the Company to include in
the Registration Statement securities owned by them;
(x) The Securities to be issued and sold by the Company
to the Underwriters hereunder have been duly and validly authorized
and, when issued and delivered against payment therefor as provided
herein, will be duly and validly issued, fully paid and
non-assessable, and will conform in all material respects to the
description thereof in the Prospectus and will be quoted on the Nasdaq
National Market as of the Effective Date;
(xi) The performance of this Agreement, the consummation
of the transactions herein contemplated and the issue and sale of the
Securities and the compliance by the Company with all the provisions
of this Agreement will not result in a breach or violation of any of
the terms or provisions of, or constitute a default under, or result
in the creation or imposition of any lien, charge, claim, or
encumbrance upon, any of the property or assets of the Company or any
of its subsidiaries pursuant to, any indenture, mortgage, deed of
trust, loan agreement or other material agreement or instrument to
which the Company or any of its subsidiaries is a party or by which
the Company or any of its subsidiaries is bound or to which any of the
property or assets of the Company or any of its subsidiaries is
subject, nor will such action result in any violation of the
provisions of the Certificate of Incorporation or the Bylaws, in each
case as amended to the date hereof, of the Company or any of its
subsidiaries or any statute or any order, rule or regulation of any
court or governmental
5
<PAGE> 6
agency or body having jurisdiction over the Company or any of its
subsidiaries or any of their properties; and no consent, approval,
authorization, order, registration or qualification of or with any
court or governmental agency or body is required for the issue and
sale of the Securities or the consummation of the other transactions
contemplated by this Agreement, except the registration under the Act
of the Securities, and such consents, approvals, authorizations,
registrations or qualifications as may be required under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and
state or foreign securities or Blue Sky laws in connection with the
purchase and distribution of the Securities by the Underwriters;
(xii) Except as set forth in the Prospectus, there are no
legal or governmental proceedings pending to which the Company or any
of its subsidiaries or any of their respective officers or directors
is a party or of which any property of the Company or any of its
subsidiaries is the subject, other than litigation or proceedings
incident to the business conducted by the Company and its subsidiaries
which will not, individually or in the aggregate if determined
adversely to the Company or any of its subsidiaries, have a Material
Adverse Effect; and, to the best of the Company's knowledge, no such
proceedings are threatened; and neither the Company nor any of its
subsidiaries is involved in any labor dispute, nor, to the Company's
knowledge, is any labor dispute threatened;
(xiii) The Company and its subsidiaries and Bludworth have
such licenses, permits and other approvals or authorizations of and
from governmental or regulatory authorities ("Permits") as are
necessary under applicable law to own their respective properties and
to conduct their respective businesses in the manner now being
conducted and as described in the Prospectus subject in each case to
such qualification as may be set forth in the Prospectus and except
where the failure to have such Permits would not have a Material
Adverse Effect; and the Company and its subsidiaries have fulfilled
and performed all of their respective obligations with respect to such
Permits, and no event has occurred which allows, or after notice or
lapse of time or both would allow, revocation or termination thereof
or result in any other material impairment of the rights of the holder
of any such permits subject in each case to such qualification as may
be set forth in the Prospectus and except where the failure to fulfill
or perform or the occurrence of such an event would not have a
Material Adverse Effect;
(xiv) Except as described in the Registration Statement and
except as would not, singly or in the aggregate, result in a Material
Adverse Effect, (A) none of the Company, any of its subsidiaries or
Bludworth is in violation of any federal, state, local or foreign
statute, law, rule, regulation, ordinance, code, policy or rule of
common law or any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent, decree or
judgment, relating to pollution or protection of human health, the
environment (including, without limitation, ambient air, surface
water, groundwater, land surface or subsurface strata) or wildlife,
including, without limitation, laws and regulations relating to the
release or threatened release of chemicals, pollutants, contaminants,
wastes, toxic
6
<PAGE> 7
substances, hazardous substances, petroleum or petroleum products
(collectively, "Hazardous Materials") or to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport
or handling of Hazardous Materials (collectively, "Environmental
Laws"), (B) the Company and its subsidiaries and Bludworth have all
permits, authorizations and approvals required under any applicable
Environmental Laws and are each in compliance with their requirements,
(C) there are no pending or threatened administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigation or proceedings
relating to any Environmental Law against the Company or any of its
subsidiaries or Bludworth and (D) there are no events or circumstances
that might reasonably be expected to form the basis of an order for
clean-up or remediation, or an action, suit or proceeding by any
private party or governmental body or agency, against or affecting the
Company or any of its subsidiaries or Bludworth relating to Hazardous
Materials or any Environmental Laws;
(xv) Grant Thornton LLP who have certified certain
financial statements of the Company and its consolidated subsidiaries
and delivered their report with respect to the audited consolidated
financial statements and schedules included in the Registration
Statement and the Prospectus, are independent public accountants as
required by the Act and the rules and regulations of the Commission
thereunder;
(xvi) The consolidated financial statements and schedules
of the Company and its subsidiaries and Bludworth included in the
Registration Statement and the Prospectus present fairly the financial
condition, the results of operations and the cash flows of the Company
and its subsidiaries and Bludworth as of the dates and for the periods
therein specified in conformity with U.S. generally accepted
accounting principles consistently applied throughout the periods
involved, except as otherwise stated therein; and the other financial
and statistical information and data set forth in the Registration
Statement and the Prospectus is accurately presented and, to the
extent such information and data is derived from the financial
statements and books and records of the Company and its subsidiaries
and Bludworth, is prepared on a basis consistent with such financial
statements and the books and records of the Company and its
subsidiaries and Bludworth; the pro forma financial information
included in the Registration Statement and the Prospectus have been
properly compiled and comply in form in all material respects with the
applicable accounting requirements of Rule 11-02 of Regulation S-X of
the Commission; no other financial statements or schedules are
required to be included in the Registration Statement and the
Prospectus;
(xvii) There are no statutes or governmental regulations, or
any contracts or other documents that are required to be described in
or filed as exhibits to the Registration Statement which are not
described therein or filed as exhibits thereto; and all such contracts
to which the Company or any subsidiary is a party have been duly
authorized, executed and delivered by the Company or such subsidiary,
constitute valid and binding agreements of the
7
<PAGE> 8
Company or such subsidiary and are enforceable against the Company or
subsidiary in accordance with the terms thereof;
(xviii) The Company and its subsidiaries and Bludworth own or
possess adequate patent rights or licenses or other rights to use
patent rights, inventions, trademarks, service marks, trade names,
copyrights, technology and know-how necessary to conduct the general
business now or proposed to be operated by them as described in the
Prospectus except where the failure to have such rights would not have
a Material Adverse Effect; none of the Company, any of its
subsidiaries or Bludworth has received any notice of infringement of
or conflict with asserted rights of others with respect to any patent,
patent rights, inventions, trademarks, service marks, trade names,
copyrights, technology or know-how which, singly or in the aggregate,
could materially adversely affect the business, operations, financial
condition, income or business prospects of the Company and its
subsidiaries considered as a whole; and, the discoveries, inventions,
products or processes of the Company and its subsidiaries and
Bludworth referred to in the Prospectus do not, to the Company's
knowledge, infringe or conflict with any patent or right of any third
party, or any discovery, invention, product or process which is the
subject of a patent application filed by any third party, known to the
Company;
(xix) None of the Company, any of and its subsidiaries or
Bludworth are in violation of any term or provision of its Certificate
of Incorporation or Bylaws (or similar corporate constituent
documents), in each case as amended to the date hereof, or are in
violation in any material respect of any law, ordinance, administrative
or governmental rule or regulation applicable to the Company or any of
its subsidiaries, or of any decree of any court or governmental agency
or body having jurisdiction over the Company or any of its
subsidiaries;
(xx) No default exists, and no event has occurred which
with notice or lapse of time, or both, would constitute a default in
the due performance and observance of any term, covenant or condition
of any indenture, mortgage, deed of trust, bank loan or credit
agreement, lease or other agreement or instrument to which the Company
or any of its subsidiaries is a party or by which any of them or their
respective properties is bound or may be affected where such default
would have a Material Adverse Effect;
(xxi) The Acquisition Agreement has been duly authorized,
executed and delivered by each of the Company, EAE, John Bludworth
Marine, Inc., Bludworth Shipyard and Fabrication, Inc., John L.
Bludworth, III and Karla M. Bludworth, and is in full force and effect
and constitute a valid and legally binding obligation of each of the
Company, EAE, John Bludworth Marine, Inc., Bludworth Shipyard and
Fabrication, Inc., John L. Bludworth, III and Karla M. Bludworth,
enforceable against each person in accordance with its terms, except
as enforcement may be limited by any bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally;
8
<PAGE> 9
(xxii) The Exchange Agreement has been duly authorized,
executed and delivered by each of the Company and the Exchange
Participants, and is in full force and effect and constitute a valid
and legally binding obligation of each of the Company and the Exchange
Participants enforceable against each person in accordance with its
terms, except as enforcement may be limited by any bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally;
(xxiii) The execution, delivery and performance of the
Exchange Agreement and the Acquisition Agreement and the consummation
of the transactions contemplated thereby will not result in a breach
or violation of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any lien,
charge, claim, or encumbrance upon, any of the property or assets of
the Company or any of its subsidiaries pursuant to, any indenture,
mortgage, deed of trust, loan agreement or other material agreement or
instrument to which the Company or any of its subsidiaries is a party
or by which the Company or any of its subsidiaries is bound or to
which any of the property or assets of the Company or any of its
subsidiaries is subject, nor will such action result in any violation
of the provisions of the Certificate of Incorporation or the Bylaws,
in each case as amended to the date hereof, of the Company or any of
its subsidiaries or any statute or any order, rule or regulation of
any court or governmental agency or body having jurisdiction over the
Company or any of its subsidiaries or any of their properties;
(xxiv) No authorization, approval, consent or order of, or
filing with, any court or governmental authority or agency is required
in connection with the consummation of the transactions effected or
contemplated by the Exchange Agreement or the Acquisition Agreement
other than (i) such authorizations, approvals, consents and orders as
have been obtained or such filing as have been made prior to the date
hereof and (ii) such authorizations, approvals, consents, orders and
filings as to which the failure to obtain or make would not,
individually or in the aggregate, have a Material Adverse Effect;
(xxv) Upon the consummation of the transactions
contemplated by the Exchange Agreement, all of the outstanding capital
stock of Newpark, will be duly and validly transferred and assigned to
the Company free and clear of all liens, security interests, pledges,
charges, encumbrances, mortgages and defects (except for the Company's
pledge of the capital stock of Newpark to Heller pursuant to the terms
of the Heller Pledge Agreement and such as are described or referred
to in the Prospectus and the financial statements and the notes
thereto contained therein or such as do not interfere with the use
made and proposed to be made of such property by the Company and its
subsidiaries);
(xxvi) It is not necessary in connection with the offer,
sale and delivery of the shares of Common Stock to the Exchange
Participants pursuant to the Exchange Agreement to register such
shares of Common Stock under the Act;
9
<PAGE> 10
(xxvii) Upon the consummation of the transactions contemplated
by the Acquisition Agreement, all of the outstanding capital stock of
John Bludworth Marine, Inc. will be duly and validly transferred and
assigned to EAE, a wholly owned subsidiary of the Company, and all
outstanding capital stock of Bludworth Shipyard and Fabrication, Inc.
will be held by John Bludworth Marine, Inc., in each case free and
clear of all liens, security interests, pledges, charges, encumbrances,
mortgages and defects (except such as are described or referred to in
the Prospectus and the financial statements and the notes thereto
contained therein or such as do not interfere with the use made and
proposed to be made of such property by the Company and the
subsidiaries);
(xxviii) The Company and its subsidiaries have timely filed
all federal and material state tax returns and notices required to be
filed by the Company or its subsidiaries and have paid all material
taxes of any nature whatsoever for all tax years through December 31,
1996, to the extent such taxes have become due. The Company has no
knowledge, or any reasonable grounds to know, of any tax deficiencies
which would have a Material Adverse Effect on the Company or any of
its subsidiaries; the Company and its subsidiaries have paid all taxes
which have become due, whether pursuant to any assessments, or
otherwise, and there is no further liability (whether or not disclosed
on such returns) or assessments for any such taxes, and no interest or
penalties accrued or accruing with respect thereto, except for any
such assessment, fine and penalty that is currently being contested in
good faith or as may be set forth or adequately reserved for in the
financial statements included in the Registration Statement; the
amounts currently set up as provisions for taxes or otherwise by the
Company and its subsidiaries on their books and records are sufficient
for the payment of all their unpaid federal, foreign, state, county
and local taxes accrued through the dates as of which they speak, and
for which the Company and its subsidiaries may be liable in their own
rights, or as a transferee of the assets of, or as successor to any
other corporation, association, partnership, joint venture or other
entity;
(xxix) The Company will not, during the period of 180 days
after the date hereof except pursuant to this Agreement, offer, sell,
contract to sell or otherwise dispose of any capital stock of the
Company (or securities convertible into, or exchangeable for, capital
stock of the Company), directly or indirectly, without the prior
written consent of Schroder & Co. Inc., except for grants of stock
options under the Company's 1997 Incentive Equity Plan;
(xxx) The Company and its subsidiaries maintain a system
of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences;
10
<PAGE> 11
(xxxi) Neither the Company nor any of its subsidiaries is
in violation of any federal or state law relating to discrimination in
the hiring, promotion or paying of employees nor any applicable
federal or state wages and hours laws, nor any provisions of the
Employee Retirement Income Security Act of 1974, as amended, or the
rules and regulations promulgated thereunder, where such violation
would have a Material Adverse Effect;
(xxxii) The Company and each of its subsidiaries are
insured by insurers of recognized financial responsibility against
such losses and risks and in such amounts as are prudent and customary
in the businesses in which they are engaged; neither the Company nor
any such subsidiary has been refused any insurance coverage sought or
applied for; and except as described in the Prospectus neither the
Company nor any such subsidiary has any reason to believe that it will
not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not
have a Material Adverse Effect;
(xxxiii) None of the Company or its subsidiaries, or its
officers, directors, employees or agents has used any corporate funds
for any unlawful contribution, gift, entertainment or other unlawful
expense relating to political activity, or made any unlawful payment
of funds of the Company or any subsidiary or received or retained any
funds in violation of any law, rule or regulation;
(xxxiv) The Company is not, and upon the issuance and sale
of the Securities as herein contemplated and the application of the
net proceeds therefrom as described in the Prospectus will not be, an
"investment company" or an entity "controlled" by an "investment
company" as such terms are defined in the Investment Company Act of
1940, as amended (the "1940 Act"); and
(xxxv) None of the Company or its subsidiaries, or its
officers, directors, employees or agents have taken or will take,
directly or indirectly, any action designed to or which has
constituted or that might be reasonably be expected to cause or result
in stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities.
(b) Each Selling Stockholder severally represents and warrants to,
and agrees with, each of the Underwriters, as follows:
(i) To the best knowledge of such Selling Stockholder, the
representations and warranties of the Company contained in Section 1(a)
hereof are true and correct; such Selling Stockholder has reviewed and
is familiar with the Registration Statement and the Prospectus and, to
the best knowledge of such Selling Stockholder, neither the Prospectus
nor any amendments or supplements thereto includes any untrue statement
of a material fact or omits to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under
which they were made, not
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<PAGE> 12
misleading; such Selling Stockholder is not prompted to sell the
Securities to be sold by such Selling Stockholder hereunder by any
information concerning the Company or any subsidiary of the Company
which is not set forth in the Prospectus;
(ii) Each Selling Stockholder has the full right, power
and authority to enter into this Agreement and a Power of Attorney and
Custody Agreement (the "Power of Attorney and Custody Agreement") and
to sell, transfer and deliver the Securities to be sold by such
Selling Stockholder hereunder. The execution and delivery of this
Agreement and the Power of Attorney and Custody Agreement and the sale
and delivery of the Securities to be sold by such Selling Stockholder
and the consummation of the transactions contemplated herein and
compliance by such Selling Stockholder with its obligations hereunder
have been duly authorized by such Selling Stockholder and do not and
will not, whether with or without the giving of notice or passage of
time or both, conflict with or constitute a breach of, or default
under, or result in the creation or imposition of any tax, lien,
charge or encumbrance upon the Securities to be sold by such Selling
Stockholder or any property or assets of such Selling Stockholder
pursuant to any contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, license, lease or other agreement or
instrument to which such Selling Stockholder is a party or by which
such Selling Stockholder may be bound, or to which any of the property
or assets of such Selling Stockholder is subject, nor will such action
result in any violation of the provisions of the charter or bylaws or
other organizational instrument of such Selling Stockholder, if
applicable, or any applicable treaty, law, statute, rule, regulation,
judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction
over such Selling Stockholder or any of its properties;
(iii) Such Selling Stockholder has and will at each of the
Time of Delivery and Option Securities Delivery Date have good and
marketable title to the Securities to be sold by such Selling
Stockholder hereunder, free and clear of any security interest,
mortgage, pledge, lien, charge, claim, equity or encumbrance of any
kind, other than pursuant to this Agreement; and upon delivery of such
Securities and payment of the purchase price therefor as herein
contemplated, assuming each such Underwriter has no notice of any
adverse claim, each of the Underwriters will receive good and
marketable title to the Securities purchased by it from such Selling
Stockholder, free and clear of any security interest, mortgage,
pledge, lien, charge, claim, equity or encumbrance of any kind;
(iv) Such Selling Stockholder has duly executed and
delivered, in the form heretofore furnished to the Representatives,
the Power of Attorney and Custody Agreement with Samuel F. Eakin,
Frank W. Eakin and David B. Ammons, or any of them, as
attorney(s)-in-fact (the "Attorney(s)-in-Fact") and the Company, as
custodian (the "Custodian"); the Custodian is authorized to deliver
the Securities to be sold by such Selling Stockholder hereunder and to
accept payment therefor; and each Attorney-in-Fact is authorized to
execute and deliver this Agreement and the certificate referred to in
Section 7(k), to sell, assign and transfer to the Underwriters the
Securities to be sold by such Selling
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<PAGE> 13
Stockholder hereunder, to determine the purchase price to be paid by
the Underwriters to such Selling Stockholder, to authorize the
delivery of the Securities to be sold by such Selling Stockholder
hereunder, to accept payment therefor, and otherwise to act on behalf
of such Selling Stockholder in connection with this Agreement;
(v) Such Selling Stockholder has not taken, and will not
take, directly or indirectly, any action which is designed to or which
has constituted or which might reasonably be expected to cause or
result in stabilization or manipulation of the price of any security
of the Company to facilitate the sale or resale of the Securities;
(vi) No filing with, or consent, approval, authorization,
order, registration, qualification or decree of, any court or
governmental authority or agency, domestic or foreign, is necessary or
required for the performance by each Selling Stockholder of its
obligations hereunder or in the Power of Attorney and Custody
Agreement, or in connection with the sale and delivery of the
Securities hereunder or the consummation of the transactions
contemplated by this Agreement, except such as may have previously
been made or obtained or as may be required under the Act or the
Exchange Act or the regulations promulgated thereunder or state
securities laws;
(vii) Such Selling Stockholder will not, during the period
of 180 days after the date hereof, offer, sell, contract to sell or
otherwise dispose of any capital stock of the Company (or securities
convertible into, or exchangeable for, capital stock of the Company),
directly or indirectly, without the prior written consent of Schroder
& Co. Inc.; the foregoing sentence shall not apply to the Securities
to be sold hereunder;
(viii) Certificates for all of the Securities to be sold by
such Selling Stockholder pursuant to this Agreement, in suitable form
for transfer by delivery or accompanied by duly executed instruments
of transfer or assignment in blank with signatures guaranteed, have
been placed in custody with the Custodian with irrevocable conditional
instructions to deliver such Securities to the Underwriters pursuant
to this Agreement; and
(ix) Neither such Selling Stockholder nor any of such
Selling Stockholder's affiliates directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under
common control with, or has any other association with (within the
meaning of Article I, Section 1(m) of the Bylaws of the National
Association of Securities Dealers, Inc.), any member firm of the
National Association of Securities Dealers, Inc.
2. Subject to the terms and conditions herein set forth, the
Company agrees to issue and sell to the several Underwriters an aggregate of
_____________ Firm Securities and the Selling Stockholders, severally and not
jointly, agree to sell an aggregate of ________ Firm Securities (each to sell
the number of Firm Securities set forth opposite the name of such Selling
Stockholder in Schedule II hereto), and each of the Underwriters agrees,
severally and not jointly, to purchase from the Company and the Selling
Stockholders, at a purchase price of $_____________ per share, the
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<PAGE> 14
respective aggregate number of Firm Securities determined in the manner set
forth below. The obligation of each Underwriter to the Company and the Selling
Stockholders shall be to purchase that portion of the number of shares of
Common Stock to be sold by the Company and the Selling Stockholders pursuant to
this Agreement as the number of Firm Securities set forth opposite the name of
such Underwriter on Schedule I bears to the total number of Firm Securities to
be purchased by the Underwriters pursuant to this Agreement, in each case
adjusted by you such that no Underwriter shall be obligated to purchase Firm
Securities other than in 100 shares amounts. In making this Agreement, each
Underwriter is contracting severally and not jointly.
In addition, subject to the terms and conditions herein set forth, the
Company agrees to issue and sell up to _______ Option Securities to the
Underwriters and the Selling Stockholders agree to sell up to an aggregate of
_________ Option Securities (each to sell up to the number of Option Securities
set forth opposite the name of such Selling Stockholder in Schedule II hereto)
to the Underwriters, as required (for the sole purpose of covering
over-allotments in the sale of the Firm Securities), at the purchase price per
share of the Firm Securities being sold by the Company and the Selling
Stockholders as stated in the preceding paragraph. The right to purchase the
Option Securities may be exercised by your giving prior written or telephonic
notice (subsequently confirmed in writing) to the Company of your determination
to purchase all or a portion of the Option Securities. Such notice may be given
at any time within a period of 30 days following the date of this Agreement.
The number of Option Securities which the Underwriters elect to purchase upon
any exercise of the option hereby granted shall be provided by the Company and
by each Selling Stockholder in proportion to the respective maximum numbers of
Option Securities which the Company and each such Selling Stockholder has
agreed to sell. Option Securities shall be purchased severally for the account
of each Underwriter in proportion to the number of Firm Securities set forth
opposite the name of such Underwriter in Schedule I hereto. No Option
Securities shall be delivered to or for the accounts of the Underwriters unless
the Firm Securities shall be simultaneously delivered or shall theretofore have
been delivered as herein provided. The respective purchase obligations of each
Underwriter shall be adjusted by you so that no Underwriter shall be obligated
to purchase Option Securities other than in 100 share amounts. The Underwriters
may cancel any purchase of Option Securities at any time prior to the Option
Securities Delivery Date (as defined in Section 4 hereof) by giving written
notice of such cancellation to the Company.
3. The Underwriters propose to offer the Securities for sale upon
the terms and conditions set forth in the Prospectus.
4. Certificates in definitive form for the Firm Securities to be
purchased by each Underwriter hereunder shall be delivered by or on behalf of
the Company and the Selling Stockholders to you for the account of such
Underwriter, against payment by such Underwriter or on its behalf of the
purchase price therefor by wire transfer, payable in same day funds, to the
order of the Company and the Selling Stockholders, as appropriate, for the
purchase price of the Firm Securities being sold by the Company and the Selling
Stockholders at the office of Schroder & Co. Inc., Equitable Center, 787
Seventh Avenue, New York, New York, at 9:30 A.M., New York City
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<PAGE> 15
time, on __________ ___, 1997, or at such other time, date and place as you and
the Company may agree upon in writing, such time and date being herein called
the "Time of Delivery."
Certificates in definitive form for the Option Securities to be purchased by
each Underwriter hereunder shall be delivered by or on behalf of the Company and
the Selling Stockholders to you for the account of such Underwriter, against
payment by such Underwriter or on its behalf of the purchase price thereof by
wire transfer, payable in same day funds, to the order of the Company and the
Selling Stockholders, as appropriate, for the purchase price of the Option
Securities, in New York, New York, at such time and on such date (not earlier
than the Time of Delivery nor later than ten business days after giving of the
notice delivered by you to the Company with reference thereto) and in such
denominations and registered in such names as shall be specified in the notice
delivered by you to the Company with respect to the purchase of such Option
Securities. The date and time of such delivery and payment are herein sometimes
referred to as the "Option Securities Delivery Date." The obligations of the
Underwriters shall be subject, in their discretion, to the condition that there
shall be delivered to the Underwriters on the Option Securities Delivery Date
opinions and certificates, dated such Option Securities Delivery Date, referring
to the Option Securities, instead of the Firm Securities, but otherwise to the
same effect as those required to be delivered at the Time of Delivery pursuant
to Section 7(d), 7(e), 7(f), 7(i) and 7(j).
Certificates for the Firm Securities and the Option Securities so to
be delivered will be in good delivery form, and in such denominations and
registered in such names as you may request not less than 48 hours prior to the
Time of Delivery and the Option Securities Delivery Date, respectively. Such
certificates will be made available for checking and packaging in New York, New
York, at least 24 hours prior to the Time of Delivery and Option Securities
Delivery Date.
5. The Company covenants and agrees with each of the
Underwriters:
(a) If the Registration Statement has not become
effective, to file promptly the Final Amendment with the Commission
and use its best efforts to cause the Registration Statement to become
effective; if the Registration Statement has become effective, to file
promptly the Rule 430A Prospectus with the Commission; to make no
further amendment or any supplement to the Registration Statement or
Prospectus which shall be disapproved by you after reasonable notice
thereof; to advise you, promptly after it receives notice thereof of
the time when the Registration Statement, or any amendment thereto, or
any amended Registration Statement has become effective or any
supplement to the Prospectus or any amended Prospectus has been filed,
of the issuance by the Commission of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus or the
Prospectus, of the suspension of the qualification of the Securities
for offering or sale in any jurisdiction, of the initiation or
threatening of any proceeding for any such purpose, or of any request
by the Commission for the amending or supplementing of the
Registration Statement or Prospectus or for additional information;
and in the event of the issuance of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus or the
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<PAGE> 16
Prospectus or suspending any such qualification, to use promptly its
best efforts to obtain withdrawal of such order;
(b) Promptly from time to time to take such action as you
may request to qualify the Securities for offering and sale under the
securities laws of such jurisdictions as you may request and to comply
with such laws so as to permit the continuance of sales and dealings
therein in such jurisdictions for as long as may be necessary to
complete the distribution, provided that in connection therewith the
Company shall not be required to qualify as a foreign corporation or
to file a general consent to service of process in any jurisdiction or
to take any action that would subject it to service of process in
suits other than those arising out of the offering of the Securities;
(c) To furnish each of the Representatives and counsel
for the Underwriters, without charge, signed copies of the
registration statement originally filed with respect to the Securities
and each amendment thereto (in each case including all exhibits
thereto) and to each other Underwriter, without charge, a conformed
copy of such registration statement and each amendment thereto (in
each case without exhibits thereto) and, so long as a prospectus
relating to the Securities is required to be delivered under the Act,
as many copies of each Preliminary Prospectus, the Prospectus and all
amendments or supplements thereto as you may from time to time
reasonably request. If at any time when a prospectus is required to be
delivered under the Act an event shall have occurred as a result of
which the Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact
necessary in order to make statements therein, in the light of the
circumstances under which they were made when such Prospectus is
delivered, not misleading, or if for any other reason it shall be
necessary to amend or supplement the Prospectus in order to comply
with the Act, the Company will forthwith prepare and, subject to the
provisions of Section 5(a) hereof, file with the Commission an
appropriate supplement or amendment thereto, and will furnish to each
Underwriter and to any dealer in securities, without charge, as many
copies as you may from time to time reasonably request of an amended
Prospectus or a supplement to the Prospectus which will correct such
statement or omission or effect such compliance in accordance with the
requirements of Section 10 of the Act;
(d) To make generally available to its stockholders as
soon as practicable, but in any event not later than 45 days after the
close of the period covered thereby, an earnings (which need not be
audited) statement in form complying with the provisions of Section
11(a) of the Act covering a period of 12 consecutive months beginning
not later than the first day of the Company's fiscal quarter next
following the Effective Date;
(e) To file promptly all documents required to be filed
with the Commission pursuant to Section 13, 14 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")
subsequent to the Effective Date and during any period when the
Prospectus is required to be delivered;
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<PAGE> 17
(f) For a period of five years from the Effective Date,
to furnish to its stockholders after the end of each fiscal year an
annual report (including a consolidated balance sheet and statements
of income, cash flow and stockholders' equity of the Company and its
subsidiaries certified by independent public accounts);
(g) During a period of five years from the Effective
Date, to furnish to you copies of all reports or other communications
(financial or other) furnished to its stockholders, and deliver to you
(i) as soon as they are available, copies of any reports and financial
statements furnished to or filed with the Commission or the Nasdaq
National Market or any national securities exchange on which any class
of securities of the Company is listed; and (ii) such additional
information concerning the business and financial condition of the
Company as you may from time to time reasonably request in connection
with your obligations hereunder;
(h) To apply the net proceeds from the sale of the
Securities in the manner set forth in the Prospectus under the caption
"Use of Proceeds";
(i) That it will not, and will cause its subsidiaries,
officers, directors, employees, agents and affiliates not to, take,
directly or indirectly, any action designed to cause or result in, or
that might reasonably be expected to cause or result in stabilization
or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities;
(j) That prior to the Time of Delivery there will not be
any change in the capital stock (other than shares issued pursuant to
the Company's 1997 Incentive Equity Plan) or material change in the
short-term debt or long-term debt of the Company or any of its
subsidiaries, or any material adverse change, or any development
involving a prospective material adverse change in or affecting the
general affairs, management, financial position, stockholders' equity
or results of operations of the Company or any of its subsidiaries,
taken as a whole, otherwise than as set forth or contemplated in the
Prospectus;
(k) That it will not, during the period of 180 days after
the date hereof (other than pursuant to this Agreement), offer, sell,
contract to sell or otherwise dispose of any capital stock of the
Company (or securities convertible into, or exchangeable for, capital
stock of the Company), directly or indirectly, without the prior
written consent of Schroder & Co. Inc., except for grants of stock
options under the Company's 1997 Incentive Equity Plan; and
(l) That it has caused the Securities to be included for
quotation on the Nasdaq National Market as of the Effective Date.
6. The Company covenants and agrees with the several Underwriters
that the Company will pay or cause to be paid: (i) the fees, disbursements and
expenses of counsel and accountants for the Company and the Selling
Stockholders, and all other expenses, in connection with the preparation,
printing and filing of the Registration Statement and the Prospectus and
amendments
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<PAGE> 18
and supplements thereto and the furnishing of copies thereof, including charges
for mailing, air freight and delivery and counting and packaging thereof and of
any Preliminary Prospectus and related offering documents to the Underwriters
and dealers; (ii) the cost of printing this Agreement, the Agreement Among
Underwriters, the Selling Agreement, communications with the Underwriters and
selling group and the Preliminary and Supplemental Blue Sky Memoranda and any
other documents in connection with the offering, purchase, sale and delivery of
the Securities; (iii) all expenses in connection with the qualification of the
Securities for offering and sale under securities laws as provided in Section
5(b) hereof, including filing and registration fees and the fees, disbursements
and expenses for counsel for the Underwriters in connection with such
qualification and in connection with Blue Sky surveys or similar advice with
respect to sales; (iv) the filing fees incident to securing any required review
by the National Association of Securities Dealers, Inc. of the terms of the
sale of the Securities; (v) all fees and expenses in connection with quotation
of the Securities on the Nasdaq National Market; and (vi) all other costs and
expenses incident to the performance of their obligations hereunder which are
not otherwise specifically provided for in this Section 6, including the fees
of the Company's Transfer Agent and Registrar, the cost of any stock issue or
transfer taxes on sale of the Securities to the Underwriters, the cost of the
Company's personnel and other internal costs, the cost of printing and
engraving the certificats representing the securities and all expenses and
taxes incident to the sale and delivery of the Securities to be sold by the
Company to the Underwriters hereunder. It is understood, however, that, except
as provided in this Section, Section 8 and Section 11 hereof, the Underwriters
will pay all their own costs and expenses, including the fees of their counsel,
stock transfer taxes on resale of any of the Securities by them, and any
advertising expenses connected with any offers they may make.
7. The obligations of the Underwriters hereunder shall be
subject, in their discretion, to the condition that all representations and
warranties and other statements of the Company and the Selling Stockholders
herein are, at and as of the Time of Delivery, true and correct, the condition
that the Company shall have performed all its obligations hereunder theretofore
to be performed, and the following additional conditions:
(a) The Registration Statement shall have become
effective, and you shall have received notice thereof not later than
10:00 P.M., New York City time, on the date of execution of this
Agreement, or at such other time as you and the Company may agree; if
required, the Prospectus shall have been filed with the Commission in
the manner and within the time period required by Rule 424(b); no stop
order suspending the effectiveness of the Registration Statement shall
have been issued and no proceeding for that purpose shall have been
issued and no proceeding for that purpose shall have been initiated or
threatened by the Commission; and all requests for additional
information on the part of the Commission shall have been complied
with to your reasonable satisfaction;
(b) All corporate proceedings and related legal matters
in connection with the organization of the Company and the
registration, authorization, issue, sale and delivery of the
Securities shall have been reasonably satisfactory to Baker & Botts,
L.L.P., counsel to the Underwriters, and Baker & Botts, L.L.P. shall
have been timely furnished with such
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<PAGE> 19
papers and information as they may reasonably have requested to enable
them to pass upon the matters referred to in this subsection;
(c) You shall not have advised the Company that the
Registration Statement or Prospectus, or any amendment or supplement
thereto, contains an untrue statement of fact or omits to state a fact
which in your judgment is in either case material and in the case of
an omission is required to be stated therein or is necessary to make
the statements therein, in light of the circumstances under which they
were made, not misleading;
(d) Griggs & Harrison, P.C., counsel to the Company and
the Selling Stockholders, shall have furnished to you their written
opinion, dated the Time of Delivery, in form and substance
satisfactory to you, to the effect that:
(i) The Company has been duly and validly
incorporated and is validly existing as a corporation in good
standing under the laws of the State of Delaware, and is
qualified to do business and is in good standing in each
jurisdiction in which, to the knowledge of such counsel, the
ownership or leasing of properties requires such qualification
or the conduct of its business requires such qualification
(except where the failure to so qualify would not have a
Material Adverse Effect); and the Company has all necessary
corporate power and all material governmental authorizations,
permits and approvals required to own, lease and operate its
properties and conduct its business as described in the
Prospectus;
(ii) Each of the Company's subsidiaries has been
duly and validly incorporated and is validly existing as a
corporation in good standing under the laws of the
jurisdiction of its incorporation, and is qualified to do
business and is in good standing in each jurisdiction in
which, to the knowledge of such counsel, the ownership or
leasing of properties requires such qualification or the
conduct of its business requires such qualification (except
where the failure to so qualify would not have a Material
Adverse Effect); and each such subsidiary has all necessary
corporate power and all material governmental authorizations,
permits and approvals required to own, lease and operate its
properties and to conduct its business as described in the
Prospectus;
(iii) All the outstanding shares of capital stock
of each of the Company's subsidiaries have been duly
authorized and are validly issued and outstanding, are fully
paid and non-assessable and, except as otherwise set forth in
the Prospectus, are owned by the Company of record and to the
best knowledge of such counsel, (A) beneficially and (B) free
and clear of all liens, encumbrances, equities, security
interests or claims of any nature whatsoever with the
exception of the Company's pledge of the capital stock of
Newpark to Heller pursuant to the Heller Pledge Agreement and
the Company's pledge of the capital stock of EAE Industries,
Inc. to Heller pursuant to the terms of the EAE Pledge
Agreement; and neither the Company
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<PAGE> 20
nor any of its subsidiaries has granted any outstanding
options, warrants or commitments with respect to any shares of
its capital stock, whether issued or unissued, except as
otherwise described in the Prospectus;
(iv) The Company has an authorized capitalization
as set forth in the Registration Statement and all the issued
shares of capital stock of the Company (including the
Securities to be sold by the Selling Stockholders) have been
duly and validly authorized and issued and are fully paid and
non-assessable; are free of any preemptive rights, and were
issued and sold in compliance with all applicable Federal and
state securities laws; except as described in the Prospectus,
to the knowledge of such counsel, there are no outstanding
options, warrants or other rights calling for the issuance of,
and there are no commitments, plans or arrangements to issue,
any shares of capital stock of the Company; the Securities
being sold by the Company have been duly and validly
authorized and, when duly countersigned by the Company's
Transfer Agent and Registrar and issued, delivered and paid
for in accordance with the provisions of the Registration
Statement and this Agreement, will be duly and validly issued,
fully paid and non-assessable; the Securities conform to the
description thereof in the Prospectus; the Securities have
been duly authorized for quotation on the Nasdaq National
Market, as of the Effective Date; and the certificates for the
Securities as are in valid and sufficient form;
(v) To the best of such counsel's knowledge,
there are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries or
any of their respective officers or directors is a party or of
which any property of the Company or any of its subsidiaries
is the subject which, if resolved against the Company or any
of its subsidiaries or any of their respective officers or
directors, individually, or to the extent involving related
claims or issues, in the aggregate, is of a character required
to be disclosed in the Prospectus which has not been properly
disclosed therein;
(vi) This Agreement has been duly authorized,
executed and delivered by the Company;
(vii) The Acquisition Agreement has been duly
authorized, executed and delivered by the Company and EAE and
is a legal, valid and binding obligation of the Company and
EAE enforceable in accordance with their terms, except as
enforceability of the same may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally;
(viii) The Exchange Agreement has been duly
authorized, executed and delivered by each of the Company and
the Exchange Participants and is a legal, valid and binding
obligation of each of the Company and the Exchange
Participants, enforceable against each person in accordance
with its terms, except as enforcement
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<PAGE> 21
may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights
generally;
(ix) The Company has full corporate power and
authority to execute, deliver and perform this Agreement, and
the execution, delivery and performance of this Agreement, the
consummation of the transactions herein contemplated and the
issue and sale of the Securities and the compliance by the
Company with all the provisions of this Agreement will not
result in a breach of any of the terms or provisions of, or
constitute a default under, or result in the creation or
imposition of any lien, charge, claim or encumbrance upon, any
of the property or assets of the Company or any of its
subsidiaries pursuant to, the terms of any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument filed as an exhibit to the Registration Statement
to which the Company or any of its subsidiaries is a party or
by which the Company or any of its subsidiaries is bound or to
which any of the property or assets of the Company or any of
its subsidiaries is subject, nor will such action result in
any violation of the provisions of the Certificate of
Incorporation or the Bylaws, in each case as amended, of the
Company or any of its subsidiaries, or any statute or any
order, rule or regulation known to such counsel of any court
or governmental agency or body having jurisdiction over the
Company or any of its subsidiaries or any of their properties;
(x) The execution, delivery and performance of
the Exchange Agreement and the Acquisition Agreement and the
consummation of the transactions contemplated thereby will not
result in a breach or violation of any of the terms or
provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge, claim, or
encumbrance upon, any of the property or assets of the Company
or any of its subsidiaries pursuant to, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument filed as an exhibit to the Registration Statement
to which the Company or any of its subsidiaries is a party or
by which the Company or any of its subsidiaries is bound or to
which any of the property or assets of the Company or any of
its subsidiaries is subject, nor will such action result in
any violation of the provisions of the Certificate of
Incorporation or the Bylaws, in each case as amended, of the
Company or any of its subsidiaries or any statute or any
order, rule or regulation known to such counsel of any court
or governmental agency or body having jurisdiction over the
Company or any of its subsidiaries or any of their properties;
(xi) No consent, approval, authorization, order,
registration or qualification of or with any court or any
regulatory authority or other governmental body is required
for the issue and sale of the Securities or the consummation
of the other transactions contemplated by this Agreement,
except such as have been obtained under the Act and such
consents, approvals, authorizations, registrations or
qualifications as may be required under state or foreign
securities or Blue Sky laws
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in connection with the purchase and distribution of the
Securities by the Underwriters, provided that such counsel
shall not be required to express any opinion as to the
requirements of state securities or blue sky laws;
(xii) No authorization, approval, consent or order
of, or filing with, any court or governmental authority or
agency is required in connection with the consummation of the
transactions effected or contemplated by the Exchange
Agreement or the Acquisition Agreement other than (i) such
authorizations, approvals, consents and orders as have been
obtained or such filing as have been made prior to the date
hereof and (ii) such authorizations, approvals, consents,
orders and filings as to which the failure to obtain or make
would not, individually or in the aggregate, have a Material
Adverse Effect;
(xiii) Upon the consummation of the transactions
contemplated by the Exchange Agreement, all of the outstanding
capital stock of Newpark will be owned by the Company of
record and to the best knowledge of such counsel, (A)
beneficially and (B) free and clear of all liens,
encumbrances, equities, security interests or claims of any
nature whatsoever except for the Company's pledge of the
capital stock of Newpark to Heller pursuant to the terms of
the Heller Pledge Agreement;
(xiv) It is not necessary in connection with the
offer, sale and delivery of the shares of Common Stock to the
Exchange Participants pursuant to the Exchange Agreement to
register such shares of Common Stock under the Act;
(xv) Upon the consummation of the transactions
contemplated by the Acquisition Agreement, all of the
outstanding capital stock of John Bludworth Marine, Inc. and
Bludworth Shipyard and Fabrication, Inc. will be owned,
directly or indirectly, by EAE, a wholly owned subsidiary of
the Company, of record and to the best knowledge of such
counsel, (A) beneficially and (B) free and clear of all liens,
encumbrances, equities, security interests or claims of any
nature whatsoever;
(xvi) To the best of such counsel's knowledge,
neither the Company nor any of its subsidiaries is currently
in violation of its Certificate of Incorporation or Bylaws or
in default under, any indenture, mortgage, deed of trust,
lease, bank loan or credit agreement or any other material
agreement or instrument of which such counsel has knowledge to
which the Company or any of its subsidiaries is a party or by
which any of them or any of their property may be bound or
affected (in any respect that is material in light of the
financial condition of the Company and its subsidiaries, taken
as a whole);
(xvii) There are no preemptive or other rights to
subscribe for or to purchase, nor any restriction upon the
voting or transfer of, any Securities pursuant
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to the Company's Certificate of Incorporation or Bylaws, in
each case as amended to the date hereof, or any agreement or
other instrument known to such counsel; and no holders of
securities of the Company have rights to the registration
thereof under the Registration Statement or, if any such
holders have such rights, such holders have waived such
rights;
(xviii) To the best of such counsel's knowledge,
there are no contracts or other documents required to be
summarized or disclosed in the Prospectus or to be so filed as
an exhibit to the Registration Statement, which have not been
so summarized or disclosed, or so filed;
(xix) The statements under the captions "Risk
Factors -- Impact of Environmental Laws", "Risk Factors --
Legislative Proposals to Rescind Provisions of Jones Act", "
Risk Factors -- Certain Anti-takeover Effects", "Risk Factors
-- Shares Eligible for Future Sale", "Business -- Environmental
Regulation", Business -- Other Regulation", "Business -- Legal
Proceedings", "Description of Capital Stock" and "Shares
Eligible for Future Sale" in the Prospectus and Items 14 and 15
of Part II of the Registration Statement insofar as such
statements constitute a summary of legal matters, documents or
proceedings referred to therein, fairly present the information
called for with respect to such legal matters, documents and
proceedings;
(xx) Nothing has come to such counsel's
attention to give such counsel reason to believe that any of
the representations and warranties of the Company contained in
this Agreement or in any certificate or document contemplated
under this Agreement to be delivered are not true or correct
or that any of the covenants and agreements herein contained
to be performed on the part of the Company or any of the
conditions herein contained, or set forth in the Registration
Statement and the Prospectus, to be fulfilled or complied with
by the Company have not been or will not be duly and timely
performed, fulfilled or complied with;
(xxi) Neither the Company nor any of its
subsidiaries is an "investment company" or a person
"controlled" by an "investment company" within the meaning of
the Investment Company Act of 1940, as amended;
(xxii) This Agreement has been duly authorized,
executed and delivered by or on behalf of each of the Selling
Stockholders and is a legal, valid and binding agreement of
each of the Selling Stockholders enforceable in accordance
with its terms, except as enforceability of the same may be
limited by bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting creditors'
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<PAGE> 24
rights generally and except as enforceability of those
provisions relating to indemnity may be limited by the Federal
securities laws, principles of public policy and general
principles of equity;
(xxiii) Each Power of Attorney and Custody
Agreement has been duly executed and delivered by the
respective Selling Stockholders named therein and constitutes
a legal, valid and binding agreement of such Selling
Stockholder enforceable in accordance with its terms, except
as enforceability of the same may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and except as
enforceability of those provisions relating to indemnity may
be limited by the Federal securities laws and principles of
public policy;
(xxiv) The execution, delivery and performance of
this Agreement and the Power of Attorney and Custody Agreement
and the sale and delivery of the Securities and the
consummation of the transactions contemplated in this Agreement
and compliance by the Selling Shareholders with its obligations
under this Agreement will not constitute a default under, or
result in the creation or imposition of any lien, charge,
claim, tax or encumbrance upon the Securities or any property
or assets of the Selling Shareholders pursuant to the terms of
any indenture, mortgage, deed of trust, loan or material
agreement or instrument known to such counsel to which any
Selling Shareholder is a party or by which it may be bound, or
to which any of the property or assets of the Selling
Shareholders is subject, nor will such action result in any
violation of the provisions of the charter or bylaws of the
Selling Stockholders, if applicable, or any statute or any
order, rule or regulation known to such counsel of any court or
governmental agency or body having jurisdiction over such
Selling Shareholder or any of its properties;
(xxv) To the best of such counsel's knowledge,
each Selling Shareholder has valid and marketable title to the
Securities to be sold by such Selling Shareholder pursuant to
this Agreement, free and clear of any pledge, lien, security
interest, charge, claim, equity or encumbrance of any kind,
and has full right, power and authority to sell, transfer and
deliver such Securities pursuant to this Agreement. Upon
purchase of the Securities to be sold by the Selling
Stockholders as provided in this Agreement, each of the
Underwriters (assuming that it is a bona fide purchaser within
the meaning of the Uniform Commercial Code) will acquire good
and marketable title to such securities, free and clear of any
pledge, lien, security interest, charge, claim, equity or
encumbrance of any kind; and
(xxvi) The Registration Statement has become
effective under the Act, the Prospectus has been filed in
accordance with Rule 424(b) of the rules and regulations of
the Commission under the Act, including the applicable time
periods set forth therein, or such filing is not required and,
to the knowledge of such counsel, no stop
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order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose
have been instituted or are pending or threatened under the
Act, and the Registration Statement, the Prospectus and each
amendment or supplement thereto, as of their respective
effective or issue dates, appeared on its face to comply as to
form in all material respects with the applicable requirements
of the Act and the rules and regulations thereunder; it being
understood that such counsel need express no opinion as to the
financial statements and schedules or other financial data
contained in the Registration Statement or the Prospectus;
Such counsel shall also state that nothing has come to such
counsel's attention that would lead such counsel to believe that the
Registration Statements or any amendment thereto (other than the
financial statements and schedules or other financial data contained
in the Registration Statement, as to which such counsel need express
no opinion) at the time such Registration Statement or any amendment
thereto become effective, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, or that
the Prospectus or any amendment or supplement thereto (other than the
financial statements and schedules or other financial data contained
in the Prospectus, as to which such counsel need express no opinion)
at the time the Prospectus was issued, at the time any such amended or
supplemented prospectus was issued, or at the Time of Delivery,
contained or contains an untrue statement of a material fact or
omitted or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
In rendering their opinions set forth in Section 7(d) above,
such counsel may rely, to the extent deemed advisable by such counsel,
(a) as to factual matters, upon certificates of public officials and
officers of the Company and the Selling Shareholders, and (b) as to
the laws of any jurisdiction other than the United States and
jurisdictions in which they are admitted, on opinions of counsel
(provided, however, that you shall have received a copy of each of
such opinions which shall be dated the Time of Delivery, addressed to
you or otherwise authorizing you to rely thereon, and Griggs &
Harrison, P.C. in its opinion to you delivered pursuant to this
subsection, shall state that such counsel are satisfactory to them and
Griggs & Harrison, P.C. has no reason to believe that the Underwriters
and they are not justified to so rely);
In addition, such counsel may state that its opinion is
limited to matters governed by the federal laws of the United States
of America, the laws of the State of Texas and the corporate laws of
the State of Delaware and that such counsel is not admitted in the
State of Delaware. The foregoing opinion may be qualified by a
statement to the effect that such counsel does not assume any
responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement or Prospectus,
except to the extent stated in (xix) above.
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(e) Baker & Botts, L.L.P., counsel to the Underwriters,
shall have furnished to you their written opinion or opinions, dated
the Time of Delivery, in form and substance satisfactory to you, with
respect to the incorporation of the Company, the validity of the
Securities, the Registration Statement, the Prospectus and other
related matters as you may reasonably request, and such counsel shall
have received such papers and information as they may reasonably
request to enable them to pass upon such matters;
(f) At the time this Agreement is executed and also at
the Time of Delivery, Grant Thornton LLP shall have furnished to you a
letter or letters, dated the date of this Agreement and the Time of
Delivery, in form and substance satisfactory to you, to the effect,
that:
(i) They are independent accountants with
respect to the Company and its subsidiaries within the meaning
of the Act and the applicable published rules and regulations
thereunder;
(ii) In their opinion the consolidated financial
statements of the Company and its subsidiaries (including the
related schedules and notes) included in the Registration
Statement and Prospectus and covered by their reports included
therein comply as to form in all material respects with the
applicable accounting requirements of the Act and the
published rules and regulations thereunder;
(iii) On the basis of specified procedures as of
a specified date not more than three days prior to the date of
their letter (which procedures do not constitute an
examination made in accordance with generally accepted
auditing standards), consisting of a reading of the latest
available unaudited interim consolidated financial statements
of the Company and its subsidiaries, a reading of the latest
available minutes of any meeting of the Board of Directors and
stockholders of the Company and its subsidiaries since the
date of the latest audited financial statements included in
the Prospectus, inquiries of officials of the Company and its
subsidiaries who have responsibility for financial and
accounting matters, and such other procedures or inquiries as
are specified in such letter, nothing came to their attention
that caused them to believe that:
(A) The unaudited consolidated condensed
financial statements of the Company and its
subsidiaries included in the Prospectus do not
comply in form in all material respects with the
applicable accounting requirements of the Act and
the rules and regulations promulgated thereunder or
are not presented in conformity with generally
accepted accounting principles applied on a basis
substantially consistent with that of the audited
consolidated financial statements included in the
Registration Statement and the Prospectus;
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(B) as of a specified date not more than
three days prior to the date of their letter, there
was any change in the capital stock, or increases in
the long-term debt or short-term debt of the Company
and its subsidiaries on a consolidated basis, or any
decrease in total assets, total current assets or
stockholders' equity or other items specified by the
Representatives, of the Company and its subsidiaries
on a consolidated basis, each as compared with the
amounts shown on the September 30, 1997 Consolidated
Balance Sheet included in the Registration Statement
and the Prospectus, except in each case for changes,
increases or decreases which the Prospectus
discloses have occurred or may occur; and
(C) for the period from October 1, 1997
to a specified date not more than three days prior
to the date of such letter, there was any decrease,
as compared with the corresponding period of the
preceding fiscal year, in the following consolidated
amounts: gross margin, earnings (loss) from
operations, earnings (loss) before income taxes, net
earnings (loss) or earnings (loss) per common and
common equivalent share of the Company and its
subsidiaries, except in all instances for decreases
which the Registration Statement discloses have
occurred or may occur;
(D) in addition to the examination
referred to in their reports included in the
Registration Statement and the Prospectus and the
limited procedures referred to in clause (iii)
above, they have carried out certain specified
procedures, not constituting an audit, with respect
to certain amounts, percentages and financial
information specified by the Representatives, which
are derived from the general accounting records of
the Company and its subsidiaries which appear in the
Prospectus, or in Part II of, or in exhibits and
schedules to, the Registration Statement, and have
compared such amounts and financial information with
the accounting records of the Company and its
subsidiaries, and have found them to be in agreement
and have proved the mathematical accuracy of certain
specified percentages; and
(E) On the basis of a reading of the pro
forma consolidated financial statements included in
the Registration Statement and the Prospectus,
carrying out certain specified procedures that would
not necessarily reveal matters of significance with
respect to the comments set forth in this clause
(v), inquiries of certain officials of the Company
and its consolidated subsidiaries and Bludworth who
have responsibility for financial and accounting
matters and proving the arithmetic accuracy of the
application of the pro forma adjustments to the
historical amounts in the proforma consolidated
financial statements, nothing came to their
attention that caused them to believe that the pro
forma consolidated financial
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statements do not comply in form in all material
respects with the applicable accounting requirements
of Rule 11-02 of Regulation S-X or that the pro
forma adjustments have not been properly applied to
the historical amounts in the compilation of such
statements.
(g) Neither the Company nor any of its subsidiaries
shall have sustained since the date of the latest audited financial
statements included in the Prospectus, any material loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree other than as
set forth or contemplated in the Prospectus; and since the respective
dates as of which information is given in the Prospectus, there shall
not have been any change in the capital stock (other than shares
issued pursuant to the 1997 Incentive Equity Plan) or short-term debt
or long-term debt of the Company or any of its subsidiaries nor any
change or any development involving a prospective material adverse
change, in or affecting the general affairs, management, consolidated
financial position, stockholders' equity or results of operations of
the Company and its subsidiaries, otherwise than as set forth or
contemplated in the Prospectus, the effect of which, in any such case
is in your judgment so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or
the delivery of the Securities on the terms and in the manner
contemplated in the Prospectus;
(h) Between the date hereof and the Time of Delivery
there shall have been no declaration of war by the Government of the
United States; at the Time of Delivery there shall not have occurred
any material adverse change in the financial or securities markets in
the United States or in political, financial or economic conditions in
the United States or any outbreak or material escalation of
hostilities or other calamity or crisis, the effect of which is such
as to make it, in the judgment of the Representatives, impracticable
to market the Securities or to enforce contracts for the resale of
Securities and no event shall have occurred resulting in (i) trading
in securities generally on the New York Stock Exchange or in the
Common Stock on the principal securities exchange or market in which
the Common Stock is listed or quoted being suspended or limited or
minimum or maximum prices being generally established on such exchange
or market, or (ii) additional material governmental restrictions, not
in force on the date of this Agreement, being imposed upon trading in
securities generally by the New York Stock Exchange or in the Common
Stock on the principal securities exchange or market in which the
Common Stock is listed or quoted or by order of the Commission or any
court or other governmental authority, or (iii) a general banking
moratorium being declared by either Federal, New York or Texas
authorities;
(i) The Company shall have furnished or caused to be
furnished to you at the Time of Delivery certificates signed by the
chief executive officer and the chief financial officer, on behalf of
the Company, satisfactory to you as to such matters as you may
reasonably request and as to (i) the accuracy of the Company's
representations and warranties herein at and as of the Time of
Delivery; (ii) the performance by the Company of all its
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obligations hereunder to be performed at or prior to the Time of
Delivery; (iii) the fact that they have carefully examined the
Registration Statement and Prospectus and, (A) as of the Effective
Date, the statements contained in the Registration Statement and the
Prospectus were true and correct and neither the Registration
Statement nor the Prospectus omitted to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading and (B) since the Effective Date, no event has occurred
that is required by the Act or the rules and regulations of the
Commission thereunder to be set forth in an amendment of, or a
supplement to, the Prospectus that has not been set forth in such an
amendment or supplement; and (iv) the matters set forth in subsections
(a) and (g) of this Section 7;
(j) A certificate, dated the Time of Delivery and
addressed to you, signed by or on behalf of each of the Selling
Stockholders to the effect that the representations and warranties of
such Selling Stockholder in this Agreement are true and correct, as if
made at and as of the Time of Delivery, and such Selling Stockholder
has complied with all the agreements and satisfied all the conditions
on his part to be performed or satisfied prior to the Time of
Delivery;
(k) Prior to or concurrently with the sale of the
Securities at the Time of Delivery, the closing of the Exchange shall
occur on the basis set forth in the Prospectus;
(l) Each director and executive officer of the Company
shall have delivered to you an agreement not to offer, sell, contract
to sell or otherwise dispose of any shares of capital stock of the
Company (or securities convertible into, or exchangeable for, capital
stock of the Company), directly or indirectly, for a period of 180
days after the date of this Agreement, without the prior written
consent of Schroder & Co. Inc.; and
(m) The Company shall have delivered to you evidence
that the Securities have been authorized for quotation on the Nasdaq
National Market as of the Effective Date.
8. (a) The Company will indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint
or several, to which such Underwriter may become subject, under the
Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon (i) any untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or
supplement thereto, or in any Blue Sky application or other document
executed by the Company specifically for that purpose or based upon
written information furnished by the Company filed in any state or
other jurisdiction in order to qualify any or all the Securities under
the security laws thereof or filed with the Commission or any
securities association or securities exchange (each, an
"Application"), or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements made therein not misleading, or (ii) any untrue statement
or alleged untrue statement made by the
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Company in Section 1(a) of this Agreement, or (iii) the employment by
the Company of any device, scheme or artifice to defraud, or the
engaging by the Company in any act, practice or course of business
which operates or would operate as a fraud or deceit, or any
conspiracy with respect thereto, in which the Company shall
participate, in connection with the issuance and sale of any of the
Securities, and will reimburse each Underwriter for any legal or other
expenses reasonably incurred by such Underwriter in connection with
investigating, preparing to defend, defending or appearing as a
third-party witness in connection with any such action or claim;
provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission relating to an Underwriter
made in any Preliminary Prospectus, the Registration Statement, the
Prospectus or such amendment or supplement or any Application in
reliance upon and in conformity with written information furnished to
the Company by such Underwriter through you expressly for use therein
and provided, further, that the indemnity agreement contained in this
Section 8(a) with respect to any Preliminary Prospectus shall not
inure to the benefit of any Underwriter (or any persons controlling
such Underwriter) on account of any losses, claims, damages, liability
or litigation arising from the sale of Securities to any person, if
such Underwriter fails to send or give a copy of the Prospectus, as
the same may be then supplemented or amended, to such person, within
the time required by the Act and the untrue statement or alleged
untrue statement or omission or alleged omission of a material fact
contained in such Preliminary Prospectus was corrected in the
Prospectus, unless such failure is the result of noncompliance by the
Company with Section 5(c) hereof.
(b) In addition to any obligations of the Company under
Section 8(a), the Company agrees that it shall perform its
indemnification obligations under Section 8(a) (as modified by the
last paragraph of this Section 8(b)) with respect to counsel fees and
expenses and other expenses reasonably incurred by making payments to
the Underwriter within 45 days of receipt of a statement in the amount
of the statements of the Underwriter's counsel or other statements
which shall be forwarded by the Underwriter, and that they shall make
such payments notwithstanding the absence of a judicial determination
as to the propriety and enforceability of the obligation to reimburse
the Underwriters for such expenses and the possibility that such
payments might later be held to have been improper by a court and a
court orders return of such payments.
The indemnity agreement in Section 8(a) shall be in addition
to any liability which the Company may otherwise have and shall extend
upon the same terms and conditions to each person, if any, who
controls any Underwriter within the meaning of the Act or the Exchange
Act.
(c) Each Selling Stockholder will indemnify and hold
harmless each Underwriter against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter may become
subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or
are based upon (i) any
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untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or
the Prospectus, or any amendment or supplement thereto, or any
Application, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements made therein not misleading, or (ii) any untrue statement
or alleged untrue statement made by the Selling Stockholder in Section
1(b) of this Agreement, and will reimburse each Underwriter for any
legal or other expenses reasonably incurred by such Underwriter in
connection with investigating, preparing to defend, defending or
appearing as a third-party witness in connection with any such action
or claim; provided, however, that the Selling Stockholders shall not
be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission relating
to an Underwriter made in any Preliminary Prospectus, the Registration
Statement, the Prospectus or such amendment or supplement or any
Application in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through you
expressly for use therein; provided, further, that in no event shall
the liability of any Selling Stockholder under this Section 8(c)
exceed the proceeds received by such Selling Stockholder from the sale
of Securities pursuant to this Agreement and provided, further, that
the indemnity agreement contained in this Section 8(a) with respect to
any Preliminary Prospectus shall not inure to the benefit of any
Underwriter (or any persons controlling such Underwriter) on account
of any losses, claims, damages, liability or litigation arising from
the sale of Securities to any person, if such Underwriter fails to
send or give a copy of the Prospectus, as the same may be then
supplemented or amended, to such person, within the time required by
the Act and the untrue statement or alleged untrue statement or
omission or alleged omission of a material fact contained in such
Preliminary Prospectus was corrected in the Prospectus, unless such
failure is the result of noncompliance by the Company with Section
5(c) hereof
(d) In addition to any obligations of each of the Selling
Stockholders under Section 8(c), each of the Selling Stockholders
agrees that it shall perform its indemnification obligations under
Section 8(c) (as modified by the last paragraph of this Section 8(d))
with respect to counsel fees and expenses and other expenses reasonably
incurred by making payments to the Underwriter within 45 days of
receipt of a statement in the amount of the statements of the
Underwriter's counsel or other statements which shall be forwarded by
the Underwriter, and that they shall make such payments notwithstanding
the absence of a judicial determination as to the propriety and
enforceability of the obligation to reimburse the Underwriters for such
expenses and the possibility that such payments might later be held to
have been improper by a court and a court orders return of such
payments.
The indemnity agreement in Section 8(c) shall be in addition
to any liability which the Selling Stockholders may otherwise have and
shall extend upon the same terms and conditions to each person, if
any, who controls any Underwriter within the meaning of the Act or the
Exchange Act.
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(e) Each Underwriter shall indemnify and hold harmless
the Company and each of its officers, employees and directors and the
Selling Stockholders against any losses, claims, damages or
liabilities to which the Company or any such officer, employee or
director or any of the Selling Stockholders may become subject, under
the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material
fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto,
or any Application, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or
alleged omission was made in any Preliminary Prospectus, the
Registration Statement, the Prospectus or such amendment or supplement
or any Application in reliance upon and in conformity with written
information furnished to the Company by such Underwriter relating to
such Underwriter through you expressly for use therein, and will
reimburse the Company for any legal or other expenses reasonably
incurred by the Company in connection with investigating or defending
any such action or claim.
The indemnity agreement in this Section 8(e) shall be in
addition to any liability which the respective Underwriters may
otherwise have and shall extend, upon the same terms and conditions,
to each officer and director of the Company and to each person, if
any, who controls the Company within the meaning of the Act or the
Exchange Act.
(f) Promptly after receipt by an indemnified party under
Section 8(a), 8(c) or 8(e) of notice of the commencement of any action
(including any governmental investigation), such indemnified party
shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying
party in writing of the commencement thereof; but the omission so to
notify the indemnifying party shall not relieve it from any liability
which it may have to any indemnified party under Section 8(a), 8(c) or
8(e) except to the extent it was unaware of such action and has been
prejudiced in any material respect by such failure or from any
liability which it may have to any indemnified party otherwise than
under such Section 8(a), 8(c) or 8(e). In case any such action shall
be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party
shall be entitled to participate therein and, to the extent that it
shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to
such indemnified party, and after notice from the indemnifying party
to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such
indemnified party under such subsection for any legal or other
expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation.
If, however, (i) the indemnifying party has authorized the employment
of counsel for the indemnified party at the expense of the
indemnifying party
32
<PAGE> 33
or (ii) an indemnified party shall have reasonably concluded that
representation of such indemnified party and the indemnifying party by
the same counsel would be inappropriate under applicable standards of
professional conduct due to actual or potential differing interests
between them and the indemnified party so notifies the indemnifying
party, then the indemnified party shall be entitled to employ counsel
different from counsel for the indemnifying party at the expense of
the indemnifying party and the indemnifying party shall not have the
right to assume the defense of such indemnified party. In no event
shall the indemnifying parties be liable for fees and expenses of more
than one counsel (in addition to local counsel) for all indemnified
parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same set
of allegations or circumstances. The counsel with respect to which
fees and expenses shall be so reimbursed shall be designated in
writing by Schroder & Co. Inc. in the case of parties indemnified
pursuant to Sections 8(a) and 8(c) and by the Company and the Selling
Stockholders in the case of parties indemnified pursuant to Section
8(e).
If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and
expenses of counsel as contemplated by Sections 8(b) or 8(d), the
indemnifying party agrees that it shall be liable for any settlement
of any proceeding effected without its written consent if (i) such
settlement is entered into more than 30 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying
party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional
release of such indemnified party from all liability on claims that
are the subject matter of such proceeding.
(g) In order to provide for just and equitable
contribution under the Act in any case in which (i) any Underwriter
(or any person who controls any Underwriter within the meaning of the
Act or the Exchange Act) makes claim for indemnification pursuant to
Section 8(a) or 8(c) hereof, but is judicially determined (by the
entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in
such case notwithstanding the fact that Section 8(a) or 8(c) provides
for indemnification in such case or (ii) contribution under the Act
may be required on the part of any Underwriter or any such controlling
person in circumstances for which indemnification is provided under
Section 8(e), then, and in each such case, each indemnifying party
shall contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject as an indemnifying party
hereunder (after contribution from others) in such proportion as is
appropriate to reflect the relative benefits received by the Company
and each of the Selling Stockholders on the one hand and the
Underwriters on the other from the offering of the Securities. If,
however, the allocation provided by the immediately preceding sentence
is not
33
<PAGE> 34
permitted by applicable law or if the indemnified party failed to give
the notice required under Section 8(f) above, then each indemnifying
party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not
only such relative benefits but also the relative fault of the Company
and the Selling Stockholders on the one hand and the Underwriters on
the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in
respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company or any
of the Selling Stockholders on the one hand and the Underwriters on
the other shall be deemed to be in the same proportion as the total
net proceeds from the offering of the Securities purchased under this
Agreement (before deducting expenses) received by the Company or any
of the Selling Stockholders bear to the total underwriting discounts
and commissions received by the Underwriters with respect to the
Securities purchased under this Agreement, in each case as set forth
in the table on the cover page of the Prospectus. The relative fault
shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission
or alleged omission to state a material fact relates to information
supplied by the Company or any of the Selling Stockholders on the one
hand or the Underwriters on the other and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company, the Selling
Stockholders and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 8(g) were
determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations
referred to above in this Section 8(g). The amount paid or payable by
an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this
Section 8(g) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding
the provisions of this Section 8(g), (i) no Underwriter shall be
required to contribute any amount in excess of the amount by which the
total price at which the Securities underwritten by it and distributed
to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or
alleged omission and (ii) no Selling Stockholder shall be required to
contribute any amount in excess of the proceeds received by such
Selling Stockholder from the sale of Securities pursuant to this
Agreement. No person guilty of a fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this Section 8(g)
to contribute are several in proportion to their respective
underwriting obligations and not joint.
(h) Promptly after receipt by any party to this
Agreement of notice of the commencement of any action, suit or
proceeding, such party will, if a claim for contribution in respect
thereof is to be made against another party (the "contributing
party"), notify the contributing party of the commencement thereof;
but the omission to so notify the
34
<PAGE> 35
contributing party will not relieve it from any liability which it may
have to any other party for contribution under the Act except to the
extent it was unaware of such action and has been prejudiced in any
material respect by such failure or from any liability which it may
have to any other party other than for contribution under the Act. In
case any such action, suit or proceeding is brought against any party,
and such party notifies a contributing party of the commencement
thereof, the contributing party will be entitled to participate
therein with the notifying party and any other contributing party
similarly notified.
9. (a) If any Underwriter shall default in its obligation
to purchase the Firm Securities which it has agreed to purchase
hereunder, you may in your discretion arrange for you or another party
or other parties to purchase such Firm Securities on the terms
contained herein. If the aggregate number of Firm Securities as to
which Underwriters default is more than one-eleventh of the aggregate
number of all the Firm Securities and within 36 hours after such
default by any Underwriter you do not arrange for the purchase of such
Firm Securities, then the Company shall be entitled to a further
period of 36 hours within which to procure another party or other
parties satisfactory to you to purchase such Firm Securities on such
terms. In the event that, within the respective prescribed periods,
you notify the Company that you have so arranged for the purchase of
such Firm Securities, or the Company notifies you that it has so
arranged for the purchase of such Firm Securities, you or the Company
shall have the right to postpone the Time of Delivery for a period of
not more than seven days, in order to effect whatever changes may
thereby be made necessary in the Registration Statement or the
Prospectus or in any other documents or arrangements, and the Company
agrees to file promptly any amendments to the Registration Statement
or the Prospectus which in you opinion may thereby be made necessary.
The term "Underwriter" as used in this Agreement shall include any
person substituted under this Section with like effect as if such
person had originally been a party to this Agreement with respect to
such Firm Securities.
(b) If, after giving effect to any arrangements for the
purchase of the Firm Securities of such defaulting Underwriter or
Underwriters by you or the Company or both as provided in subsection
(a) above, the aggregate number of such Firm Securities which remain
unpurchased does not exceed one-eleventh of the aggregate number of
all the Firm Securities, then the Company shall have the right to
require each non-defaulting Underwriter to purchase the number of the
Firm Securities which such Underwriter agreed to purchase hereunder
and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Firm Securities
which such Underwriter agreed to purchase hereunder) of the Firm
Securities of such defaulting Underwriter or Underwriters for which
such arrangements have not been made; but nothing shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the
purchase of the Firm Securities of a defaulting Underwriter or
Underwriters by you or the Company as provided in subsection (a)
above, the aggregate number of such Firm Securities which remain
35
<PAGE> 36
unpurchased exceeds one-eleventh of the aggregate number of all the
Firm Securities, or if the Company shall not exercise the right
described in subsection (b) above to require non-defaulting
Underwriters to purchase Firm Securities of a defaulting Underwriter
or Underwriters, then this Agreement shall thereupon terminate without
liability on the part of any non-defaulting Underwriter or the
Company, except for the expenses to be borne by the Company and the
Underwriters as provided in Section 6 hereof and the indemnity
agreement in Section 8 hereof; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations,
warranties and other statements of the Company, the Selling Stockholders and
the several Underwriters, as set forth in this Agreement or made by or on
behalf of them, respectively, pursuant to this Agreement, shall remain in full
force and effect, regardless of any investigation (or any statement as to the
results thereof) made by or on behalf of any Underwriter or any controlling
person of any Underwriter, or the Company, or any officer or director or
controlling person of the Company, or any Selling Stockholder, or any officer
or director or controlling person of any Selling Stockholder and shall survive
delivery of and payment for the Securities.
11. This Agreement shall become effective (a) if the Registration
Statement has not heretofore become effective, at the earlier of 12:00 Noon,
New York City time, on the first full business day after the Registration
Statement becomes effective, or at such time after the Registration Statement
becomes effective as you may authorize the Sale of the Securities to the public
by Underwriters or other securities dealers, or (b) if the Registration
Statement has heretofore become effective, at the earlier of 24 hours after the
filing of the Prospectus with the Commission or at such time as you may
authorize the sale of the Securities to the public by Underwriters or
securities dealers, unless, prior to any such time you shall have received
notice from the Company that it elects that this Agreement shall not become
effective, or you, or through you such of the Underwriters as have agreed to
purchase in the aggregate fifty percent or more of the Firm Securities
hereunder, shall have given notice to the Company that you or such Underwriters
elect that this Agreement shall not become effective; provided, however, that
the provisions of this Section and Section 6 and Section 8 shall at all times
be effective.
If this Agreement shall be terminated pursuant to Section 9 hereof, or
if this Agreement, by election of you or the Underwriters, shall not become
effective pursuant to the provisions of this Section, the Company shall not
then be under any liability to any Underwriter except as provided in Section 6
and Section 8 hereof, but if this Agreement becomes effective and is not so
terminated but the securities are not delivered by or on behalf of the Company
as provided herein because the Company has been unable for any reason beyond
its control and not due to any default by it to comply with the terms and
conditions hereof, the Company will reimburse the Underwriters through you for
all out-of- pocket expenses approved in writing by you, including fees and
disbursements of counsel, reasonably incurred by the Underwriters in making
preparations for the purchase, sale and delivery of the Securities, but the
Company shall then be under no further liability to any Underwriter except as
provided in Section 6 and Section 8 hereof.
36
<PAGE> 37
12. The statements set forth in the last paragraph on the front
cover page of the Prospectus, the paragraph on the inside front cover of the
Prospectus containing stabilization language, the table under the caption
"Underwriting" in the Prospectus and the third and eighth paragraphs under the
caption "Underwriting" in the Prospectus constitute the only information
furnished by any Underwriter made or given by you jointly or by Schroder & Co.
Inc. on behalf of you as the Representatives.
13. In all dealings hereunder, you shall act on behalf of each of
the Underwriters, and the parties hereto shall be entitled to act and rely upon
any statement, request, notice or agreement on behalf of any Underwriter made
or given by you jointly or by Schroder & Co. Inc. on behalf of you as the
Representatives.
All statements, requests, notices and agreements hereunder, unless
otherwise specified in this Agreement, shall be in writing and, if to the
Underwriters, shall be delivered or sent by mail, telex or facsimile
transmission (with confirmation of receipt) to you as the Representatives in
care of Schroder & Co. Inc., Equitable Center, 787 Seventh Avenue, New York,
New York 10019, Attention: Syndicate Department; if to the Company, shall be
delivered or sent by mail, telex or facsimile transmission (with confirmation
of receipt) to the address of the Company set forth in the Registration
Statement, Attention: Frank W. Eakin; and if to any Selling Stockholder, shall
be delivered or sent by mail, telex or facsimile transmission (with
confirmation of receipt) to the address of the Company set forth in the
Registration Statement, Attention: Frank W. Eakin, as Attorney-in-Fact;
provided, however, that any notice to any Underwriter pursuant to Section 8(f)
hereof shall be delivered or sent by mail, telex or facsimile transmission
(with confirmation of receipt) to such Underwriter at its address set forth in
its Underwriters' Questionnaire, or telex constituting such Questionnaire,
which address will be supplied to the Company by you upon request. Any such
statements, requests, notices or agreements shall take effect at the time of
receipt thereof.
14. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, the Company, the Selling Stockholders and, to the
extent provided in Section 8 and Section 10 hereof, the officers and directors
of the Company and the Selling Stockholders and each person who controls the
Company, any Underwriter or any Selling Stockholder, and their respective
heirs, executors, administrators, successors and assigns, and no other person
shall acquire or have any right under or by virtue of this Agreement. No
purchaser of any of the Securities from any Underwriter shall be deemed a
successor or assign by reason merely of such purchase.
15. Time shall be of the essence of this Agreement. As used
herein, the term "business day" shall mean any day when the Commission's office
in Washington, D.C. is open for business.
16. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS
PRINCIPLES THEREOF.
37
<PAGE> 38
17. This Agreement may be executed by any one or more of the
parties hereto in any number of counterparts, each of which shall be deemed to
be an original, but all such counterparts shall together constitute one and the
same instrument.
38
<PAGE> 39
If the foregoing is in accordance with your understanding, please sign
and return to us two counterparts hereof, and upon the acceptance hereof by
you, on behalf of each of the Underwriters, this letter and such acceptance
hereof shall constitute a binding agreement among each of the Underwriters',
the Company and each of the Selling Stockholders. It is understood that your
acceptance of this letter on behalf of each of the Underwriters is pursuant to
the authority set forth in a form of Agreement Among Underwriters, manually or
facsimile executed counterparts of which, to the extent practicable and upon
request, shall be submitted to the Company for examination, but without
warranty on you part as to the authority of the signers thereof.
Very truly yours,
FIRST WAVE MARINE, INC.
By:
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
SELLING STOCKHOLDERS
By:
-----------------------------------
As Attorney-in-Fact for each of the
several Selling Stockholders named
in Schedule II
39
<PAGE> 40
Accepted as of the date hereof:
SCHRODER & CO. INC.
JEFFERIES & COMPANY, INC.
MORGAN KEEGAN & COMPANY, INC.
Representatives of the several Underwriters
By: SCHRODER & CO. INC.
By:
-----------------------------------------
Managing Director
40
<PAGE> 41
SCHEDULE I
<TABLE>
<CAPTION>
Underwriter Number of Firm Securities
----------- -------------------------
<S> <C>
Schroder & Co. Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Jefferies & Company, Inc. . . . . . . . . . . . . . . . . . . . . . . . .
Morgan Keegan & Company, Inc. . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-------------------------
=========================
</TABLE>
<PAGE> 42
SCHEDULE II
<TABLE>
<CAPTION>
Maximum Number of
Number of Firm Securities Option Securities to be
to be Sold Sold by Selling
Name of Selling Stockholder by Selling Stockholder Stockholder
--------------------------- ------------------------- -----------------------
<S> <C> <C>
</TABLE>
<PAGE> 1
Exhibit 10.2
STATE OF TEXAS )
)
COUNTY OF GALVESTON )
AMENDED AND RESTATED
LEASE AND DEVELOPMENT AGREEMENT
This Amended and Restated Lease and Development Agreement
("Agreement") is made and entered into the 17th day of October, 1997 by and
between THE BOARD OF TRUSTEES OF THE GALVESTON WHARVES, a separate utility and
agency of the City of Galveston, Texas ("City") pursuant to authority granted
in Article XII of the Charter of the City of Galveston adopted in 1960 and
Article 1187f, Tex. Rev. Civ. Stat. ("Lessor"), and NEWPARK MARINE FABRICATORS,
INC., a Texas corporation ("Lessee"), assignee of PMB ENGINEERING, INC.
("PMB"), a wholly owned subsidiary of Bechtel Corporation, and is an amendment
and restatement of the Lease and Development Agreement with an effective date
of May 23, 1995, between Lessor and PMB. The parties hereby agree as follows:
ARTICLE 1 - DEMISE OF LEASED PREMISES
Section 1.01 - Leased Premises. Lessor, for and in consideration of
the rents, covenants and premises contained in this Agreement and to be kept,
performed and observed by Lessee, and subject to the reservations and
restrictions contained in this Agreement, does hereby lease and demise to
Lessee, and Lessee does hereby lease and accept from Lessor, the surface only
(but including submerged lands) of the real property described on Exhibit A,
which is attached and incorporated by reference (the "Land"), and the fixtures
and improvements located on the Land as of the Effective Date, including
without limitation all sheds, buildings, docks, wharfs, bulkheads, piers,
pilings, dolphins, ramps, warehouses, structures, paving, fences, and other
improvements located on the Land on the Effective Date (collectively, the
"Facilities"). The Land, Facilities, and Improvements (once completed, and as
defined in Article 8 below) are collectively defined as the "Leased Premises".
Within six months after the Effective Date, Lessor and Lessee will jointly
designate a licensed surveyor to perform a survey of the Land, the cost of
which will be shared equally by Lessor and Lessee. Once completed to the
reasonable satisfaction of Lessor and Lessee, the metes and bounds description
of the Land prepared by the surveyor will be attached to this Agreement as
Exhibit A-1 and will be deemed to be the description of the Land. To the
extent there are any discrepancies between Exhibit A and Exhibit A-1 with
respect to the description of the Land, the information contained in Exhibit A-
1 will control.
TO HAVE AND TO HOLD the Leased Premises, together with all rights,
privileges, easements, rights of way, appurtenances and other interests
belonging to or in any way pertaining to the Leased Premises, subject to the
terms of this Agreement. This Agreement will be subordinate to the deed of
trust dated December 16, 1993 to Ellis L. Tudzin, Trustee, recorded at Film
Code No. ###-##-#### of the Galveston County real property records (the "Deed
of Trust"), which creates a lien against the Leased Premises, and which secures
the payment of the $5,400,000.00 Wharves and Terminal Subordinate Lien Revenue
Bonds, Series 1993B (the "Bonds") as more fully described in the trust
indenture dated as of November 18, 1993, between the City and Texas Commerce
Bank, National Association, as Trustee, relating to the Bonds (as it may be
renewed, extended, or modified, and including any instrument created in lieu of
or in substitution thereof, the "Trust Indenture") and any other lien securing
payment of the Bonds as they may be renewed, extended, or modified. Lessor
will not create any other lien on the
1
<PAGE> 2
Leased Premises that would take priority over this Agreement, but may further
encumber the Leased Premises with any lien or mortgage subordinate to this
Agreement.
Section 1.02 - Option for Right of First Refusal on Option Property.
For a period of ten years following the Effective Date (defined below) in the
event that a third party offers to lease the property described on Exhibit B
(the "Option Property") under an agreement with Lessor that Lessor desires to
accept for operation of a Shipyard (defined in Section 7.01 below), Lessee has
the option to exercise a right of first refusal to lease the Option Property
under the same terms and conditions offered by the third party. To exercise
the right of first refusal, Lessee must pay Lessor the sum of $100,000.00 on or
before January 31, 1998. The right of first refusal is subject to, and
contingent upon, Lessee having adequately performed its material duties and
obligations under this Agreement. Lessor will furnish written notice to Lessee
stating the terms and conditions of the proposed lease acceptable to a third
party. Lessee has a period of 30 days from the date of notice within which to
exercise its right to lease the Option Property upon the same terms and
conditions as offered to the third party. This right of first refusal does not
apply to a sale of the Option Property.
ARTICLE 2 - TERM OF AGREEMENT
Section 2.01 - Term, Effective Date, and Security Deposit. This
Agreement is for a primary term of 15 years ("Term"), commencing on November 1,
1997 (the "Effective Date"), provided that on or before October 30, 1997, the
City shall have passed an Ordinance confirming their acceptance of this
Agreement and authorizing the execution by the City of an attornment agreement
in form and substance reasonably acceptable to Lessee. If the City has not
passed an Ordinance containing such terms by such date, this Agreement shall be
effective as among the parties as of the Effective Date unless Lessee elects in
writing to reject this Agreement prior to the Effective Date. As an additional
condition precedent to the effectiveness of this Agreement, Lessee must deliver
to Lessor the sum of $175,000.00 (the "Security Deposit") on or before the
Effective Date. The Security Deposit must be in the form of (i) cash,
certified or cashier's check, wire transfer, or other form of immediately
available federal funds acceptable to Lessor ("Cash"), or (ii) an irrevocable
clean letter of credit issued by an entity, and in such form and content, as
may be acceptable to Lessor ("Letter of Credit"). Any unused portion of the
Security Deposit will be delivered or released to Lessee on the day following
the PMB Release Date (defined in Section 17.05 below), provided that Lessee is
not then in default under this Agreement.
Section 2.02 - Renewal Options. Conditioned upon the rent provided
for herein being then current and Lessee not then being in default in the
performance of its covenants under this Agreement, Lessee is hereby granted the
option to renew the Term of this Agreement for 28 additional three year periods
(each a "Renewal Term"), to commence at the expiration of the Term of this
Agreement or the immediately preceding Renewal Term, whichever is applicable.
Each Renewal Term will automatically begin at the end of the Term or the
immediately preceding Renewal Term, whichever is applicable, without action of
any type by Lessor or Lessee, unless Lessee delivers written notice of its
intention not to renew to Lessor at least 12 months prior to the expiration of
the Term or Renewal Term, whichever is applicable. The renewal of this
Agreement shall be upon the same terms and conditions of this Agreement (other
than the option to renew).
Section 2.03 - Holding Over. If Lessee holds over after the
termination of this Agreement, such tenancy shall be from month to month under
all terms, covenants and conditions contained in this Agreement, except that
all rental amounts payable hereunder shall be 150% of those existing
immediately prior to such termination. The foregoing shall not apply in the
event the Parties intend to renegotiate a
2
<PAGE> 3
new lease and both Parties expect to continue the tenancy relationship and are
negotiating the terms of a written lease agreement with reasonable diligence.
Section 2.04 - Approval by Agency. The Effective Date of this
Agreement is set forth in Section 2.01. However, if this Agreement or any
amendments or modifications thereto are required to be submitted to a
governmental agency (the "Agency"), pursuant to 46 App. U.S.C. Section 1704,
then the Effective Date of this Agreement is such date as designated by the
Agency, or if the Agency declines to do so, the Effective Date is as set forth
in the introductory paragraph of this Agreement. Any extension of this
Agreement, and the terms and conditions thereof, will promptly be filed with
the Agency for its review and approval, if required. Lessee represents to
Lessor that as of the Effective Date it is not a marine terminal operator or
ocean common carrier as those terms are defined in 46 App. U.S.C. Section 1702.
ARTICLE 3 - RENT
Section 3.01 - Commencement of Rent. Rent under this Agreement shall
commence on the Effective Date.
Section 3.02 - Amount of Rent. Lessee will pay Lessor rent in a sum
equal to $700,000.00 per year (the " Minimum Rent"), subject to adjustment as
provided in Section 3.05 below (as adjusted, the "Adjusted Rent").
Section 3.03 Payment of Rent. The rent due hereunder shall be payable
in equal monthly installments, in advance, on the first business day of each
month while this Agreement is in effect.
Section 3.04 - Delinquency. All amounts payable pursuant to this
Article 3 that are not paid when due shall bear interest beginning the last
day of the month during which such payment is due until paid at the rate of
interest equal to the lesser of: (i) Lessor's tariff rate, or (ii) the highest
rate allowed by law.
Section 3.05 - Rent Adjustment. Rent payable hereunder is subject to
adjustment as provided below. An example of how rent adjustment should be
calculated is attached as Schedule 3.05.
Section 3.05.01 - Index Adjustments. Beginning on the first
anniversary date of the Effective Date of this Agreement, the rent will be
adjusted on each anniversary of such date (each an "Adjustment Date") to
reflect increases in the Consumer Price Index for All Urban Consumers (CPI-U)
for Houston-Galveston-Brazoria, Texas, All Items (1982-84 = 100) published by
the Bureau of Labor Statistics of the United States Department of Labor (the
"Index"), or such other economic index as the parties may agree to use as a
reference base as provided herein. If the Index is converted to a different
standard reference base or otherwise revised, the determination of the Index
will be made with the use of such conversion factor, formula, or table for
converting the Index as may be published, then with the use of such conversion
factor, formula or table as is published by the entity or authority that
establishes the Index or, if one is not published, then with the use of such
conversion factor, formula or table is published by any nationally recognized
publisher of similar statistical information. If the Index ceases to be
published, then within 30 days after such Index ceases to be published the
parties will substitute a new index of similar type to be used as the Index for
determining future rent escalation. If the parties fail to agree upon a
substitute Index during the 30 day period, Lessor and Lessee will jointly
designate a qualified independent third party who will select as a substitute
Index any independently published index of similar type. On each Adjustment
Date, rent will be recalculated to be equal to the lesser of (i) 105% of the
Minimum Rent (with respect to the calculation made on the first Adjustment
Date) or
3
<PAGE> 4
105% of the Adjusted Rent (with respect to the calculation made on each
subsequent Adjustment Date), or (ii) a number equal to the product of the
Minimum Rent multiplied by a fraction, the numerator of which is the Index
number for the last reporting period before the Adjustment Date and the
denominator of which is the Index number for the last reporting period before
the Effective Date. The recalculated rent, subject to any further adjustments
as permitted in Section 3.05.02 below, will be payable until the next
Adjustment Date. In no event will rent payable hereunder ever be less than the
Minimum Rent. Lessor will provide Lessee with notice of each adjustment to
rent and the calculation of the adjustment no later than 60 days after each
Adjustment Date.
Section 3.05.02 - FMV Adjustments. In addition to the index
adjustments provided for in Section 3.05.01, at the end of every five year
period during the Term and at the end of every second consecutive Renewal Term
(each an "Appraisal Date"), Lessee may assert a challenge to the fairness of
the rent by invoking the following procedure to appraise the Leased Premises
for the purpose of determining the fair market value of the Leased Premises
(the "FMV"), but in valuing the improvements, including only those
improvements in existence on the Effective Date. The procedure for
establishing FMV is as follows:
The FMV will be determined by a licensed real estate appraiser
jointly selected by Lessor and Lessee, or if they will be unable to
agree upon a single appraiser, then by three independent licensed real
estate appraisers, one of whom will be selected by the Lessor, one of
whom will be selected by the Lessee, and the third of whom will be
promptly selected by the first two appraisers. If the two appraisers
cannot promptly agree on a third appraiser, either the Lessor or
Lessee may petition a Texas court of competent jurisdiction (as
determined in accordance with the venue provisions of this Agreement)
for the appointment of the third appraiser. Each appraiser selected
hereunder will be independent, qualified, and experienced in the
valuation of the fair market value of property of the same or similar
quality and location as the Leased Premises herein. Within 30 days
after the appointment of the last of the three appraisers, or such
other period the parties may agree upon, the appraisers will furnish
in writing to Lessor and Lessee:
(a) The FMV for the Leased Premises agreed upon by the
three appraisers; or
(b) If the three appraisers cannot agree, then the FMV
agreed upon by the two appraisers; or
(c) If the two appraisers cannot agree, then the FMV
conclusions of each of the three appraisers.
The FMV for the Leased Premises agreed upon by two or more of
said appraisers will be binding on the parties; provided, however,
that if no two appraisers agree upon the FMV, then it will be
determined in the following manner:
(x) If the highest FMV set by one appraiser is not more
than 110% of the next lower FMV set by another appraiser and the
lowest FMV set by one appraiser is not less than 90% of the next
higher FMV, the amounts set by the three appraisers will be added
together and divided by three, and the amount resulting will be the
FMV; or
(y) If the highest FMV set by one appraiser is more than
110% of the next lower FMV set by another appraiser, then the highest
FMV will be reduced to an amount equal to said
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110% figure; and/or if the lowest FMV set by one appraiser is less
than 90% of the next higher FMV set by another appraiser, the lowest
FMV will be increased to an amount equal to said 90% figure. The
three appraisers' determination of FMV, adjusted as last
above-provided, will be added together and divided by three and the
amount resulting will be the FMV.
Lessee must pay all costs and expenses associated with the
appraisal procedure, including without limitation the costs of each
appraiser.
If the Adjusted Rent on any Appraisal Date, after making the
adjustments described in Section 3.05.01, exceeds 10% of the FMV on that date,
Adjusted Rent will be decreased as of that date to be equal to the greater of
(i) 10% of the FMV, (ii) the amount of all debt service and other sums payable
by Lessor or the City with respect to the Bonds, as they may be renewed,
extended, or modified, or any indebtedness created in lieu of or in
substitution thereof (provided, however, that the unpaid principal balance of
the Bonds or other indebtedness must never be increased), or (iii) the Minimum
Rent ; but will be subject to subsequent adjustment on the next Adjustment
Date as provided in Section 3.05.01.
ARTICLE 4 - TARIFFS AND OTHER CHARGES
Subject to any limitations contained herein, Lessor has the full right
and power to assess and collect all charges now published in its tariffs or
regulations, or that it may publish in the future against any commodities
moving over, or vessels berthing at the Leases Premises, and no such charge may
be assessed or collected by Lessee. Lessor has the right to collect all
switching charges on rail cars moved to or from the Leased Premises.
ARTICLE 5 - IMPOSITIONS
Section 5.01 - Impositions. The term "Impositions" shall mean all
taxes, assessments, use and occupancy taxes, excise, levies, license and sales
and permit fees and taxes, and other charges by public authority, general and
special, ordinary and extraordinary, foreseen and unforeseen, of any kind and
nature whatsoever, which shall or may during the term of this Agreement be
assessed, levied, charged, confirmed, or imposed by public authority upon, or
to accrue or become due or payable out of or on account of the rent and income
received by or for the account of Lessee from any subtenants or for any use or
occupation of the Leased Premises, and such franchises, licenses and permits as
may be appurtenant to the use of the Leased Premises, or any documents to which
Lessee is a party (except this Lease) creating or transferring an interest or
estate in the Leased Premises, in any manner related to or arising out of the
activities, interests or property of Lessee, its sublessees, and their
respective officers, agents and employees.
Section 5.02 - Payment of Impositions. During the term of this
Agreement, Lessee will pay or cause to be paid, as and when the same shall
become due, all Impositions for the Term and Renewal Term of this Agreement,
except that:
(a) all Impositions for the fiscal year or tax year of the entity
imposing such Imposition in which this Agreement begins as
well as during the year in which the term of this Agreement
expires shall be apportioned as of the Effective Date hereof
so that Lessee shall pay its proportionate share of the
Impositions which are payable in the year in which the term of
this Agreement expires;
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(b) where any Imposition is permitted by law to be paid in
installments, Lessee shall pay the installments due during the
term of this Agreement and Lessor shall pay, to the extent of
its liability therefor, the installments due before or after
the term of this Agreement; and
(c) for the year in which this Agreement expires, Lessee shall pay
to Lessor the estimated proportion of Lessee's share of
Impositions at least ninety (90) days prior to the expiration
of this Agreement. If the exact amount of Impositions for
such year are not then determined, then the most current
amounts shall be used and any underpayment or overpayment
shall be adjusted between Lessor and Lessee when the final
amount is established, even if after the expiration of this
Agreement.
(d) Lessor is a governmental entity. As such, the real property
under its management and control is exempt from ad valorem
taxes so long as it is owned by a governmental entity and is
held for a governmental purpose. Lessee agrees to timely pay
all taxes and impositions which may be assessed against
Lessee's property in or about the Leased Premises. Lessee
shall not be responsible for any taxes associated with the
Lessor's activities or the Land or Facilities
Notwithstanding the foregoing, Lessee shall have the right in good
faith at its own sole cost and expense (in its own name or in the name of
Lessor, or both, as Lessee may determine appropriate) to contest any such
Impositions and shall be obligated to pay the contested amount only if and when
finally determined to be due, if permitted to do so by law.
Section 5.03 - Payment by Lessor. Subject to the right of the Lessee
to contest Impositions, as provided for in Section 5.02 above, Lessor may at
any time that the payment of any Imposition which Lessee is obligated to pay
under the provisions of Section 5.02 of this Agreement remains unpaid, give
written notice to Lessee of its default, specifying the same, and if Lessee
continues to fail to pay such Imposition or to contest the same in good faith,
then at any time after ten (10) days from such written notice, Lessor may pay
the items specified in the notice and Lessee covenants thereupon, on demand, to
reimburse and pay Lessor any amount so paid or expended in the payment of the
items specified in the notice.
ARTICLE 6 - UTILITIES & DREDGING
Section 6.01 - Utilities. Lessee shall cause all services for water,
heat, gas, electricity, sewers, and any and all other utilities used on the
Leased Premises by Lessee throughout the term of this Agreement, including any
connection fees (the "Utilities") to be separately metered and billed to
Lessee, and Lessee shall pay or cause to be paid all charges for such
Utilities.
Section 6.02 - Dredging. Lessee shall be responsible for all dredging
in or adjacent to the Leased Premises needed for its operations on the Leased
Premises. Lessee and its sublessees shall have the right to use the dredged
material disposal area near the Leased Premises and the drainage ditch adjacent
thereto for so long as it is under the management and control of Lessor (or
such substitute facilities that Lessor may reasonably designate), to dispose of
any dredged material from such dredging; provided, however, that Lessee and its
sublessees shall not use the dredged material area for disposal of dredged
material which Lessee or its sublessees know to be contaminated with hazardous
waste as defined by applicable environmental regulations. Lessee will pay
Lessor the standard levee and dredge area maintenance fee or similar charge
charged to other users of the disposal area for similar services, which
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is currently 40 cents per cubic yard, but which may be increased from time to
time at Lessor's discretion. If Lessee disagrees with Lessor's determination
of the volume of spoil Lessee places in the disposal area, Lessee may, at its
sole cost and expense, hire an independent third party acceptable to Lessor to
perform an audit of the spoil placed by Lessee in the spoil disposal area. If
Lessor's calculations of volume are found to be greater than 10% more than
those made by the auditor, Lessor will pay for the costs associated with
performing the audit. Lessee must promptly pay to Lessor any deficiency or
Lessor must promptly refund to Lessee any overpayment, as the case may be, that
is established by the audit.
ARTICLE 7 - USE OF PREMISES
Section 7.01 - General Provisions. The Leased Premises may be used by
Lessee for the operation of a shipyard, including without limitation, services
relating to the repair, cleaning, maintenance, and construction of vessels
and/or rigs or any other drilling structure, including, but not limited to,
jack-up-rigs, semi-submersible rigs, drilling and production vessels, barges,
tankers and other vessels incident to Lessee's or its sublessee's permitted
purposes, and the repair, cleaning, maintenance, and construction of modular
units or other items for use on land or marine projects (collectively, a
"Shipyard"); for other fabrication, construction or manufacturing relating to
marine or heavy industrial activities; and for other purposes reasonably
related to the foregoing . Neither Lessee nor its sublessees shall compete
with Lessor for the berthing of vessels to which Lessor's dockage tariffs
apply . Lessor may not assess or collect dockage with respect to any vessel
to which Lessor's dockage tariffs apply unless such vessel is berthed at the
Leased Premises without repair or remodeling work being actively performed on
it for 72 consecutive hours, or such longer period if such vessel is in good
faith berthed at the premises for repairs or remodeling and Lessee certifies to
Lessor that such repairs and remodeling have not yet begun because Lessee has
not been able in good faith to commence such repairs or remodeling for some
reasonable basis. No part of the Leased Premises shall be used for:
(a) The docking or berthing of any floating vessel containing a
"gambling place", a "gambling device", or "gambling
paraphernalia", as those terms are defined in Section 47.01 of
the Texas Penal Code or any similar or successor statute
unless bona fide repairs or remodeling are being performed on
the vessel;
(b) The installation or use of container cranes, or the loading,
unloading, or dockage of container vessels; or
(c) Any illegal, obnoxious or offensive activity.
Section 7.02 - Permits, Certificates, etc. Lessee shall be
responsible for all permits, certifications and fees required for its
activities on or about the Leased Premises. To the extent Lessor holds any
permits or certifications of which Lessee may take advantage, they may do so,
provided that Lessee promptly pays on demand its proportionate share of any
permit fees and agrees to indemnify Lessor against any claims arising out of
Lessee's use of such permits. Lessor will provide Lessee reasonable assistance
of a non- financial nature to obtain any required permits or certifications.
Copies of each application for a permit or certification must be delivered to
Lessor prior to being filed with the entity that will consider such
application, and copies of each permit or certification obtained by Lessee for
its activities on the Leased Premises must be delivered to Lessor as soon as
practical upon receipt by Lessee.
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ARTICLE 8 - CONSTRUCTION OF IMPROVEMENTS BY LESSEE
Section 8.01 - General Conditions. Provided Lessee is in compliance
with all of the material terms and provisions of this Agreement, and subject to
the terms of this Agreement, Lessee shall have the right and obligation at any
time, and from time to time, during the term of this Agreement to erect,
maintain, alter, remodel, reconstruct, rebuild, demolish, remove, and replace
buildings and other improvements on the Leased Premises, necessary for its
planned activities at its sole cost. However, any demolition or removal (other
than for purposes of repair or replacement) of any docks, piers (except the
metal pile supported piers in existence on the Effective Date), or bulkheads,
or removal of fill from the Leased Premises, require the prior written consent
of Lessor. The improvements constructed or work performed by Lessee pursuant
to the provisions of this Article 8 are collectively defined in this Agreement
as the "Improvements". Plans and specifications for any major structures must
be provided to Lessor as soon as practical after they become available and
prior to commencement of the work, but no prior approval is necessary except as
provided herein. As soon as practical following completion of any
Improvements Lessee must deliver to Lessor as-built drawings for such work and
any other information or documentation concerning such work as Lessor may
reasonably request.
Section 8.02 - Lessor's Ownership of Improvements and Fixtures. Title
to and ownership of all Improvements and all additions, alterations and
replacements, installed or constructed on the Leased Premises during the term
of this Agreement by Lessee, shall be in the name of Lessee during the term of
this Agreement. All furniture, furnishings, trade fixtures, machinery, business
equipment and other movable personal property installed in the Improvements by
the Lessee or any sublessee shall not be deemed to be included as part of the
Leased Premises and may be removed at, prior to or within sixty (60) days
after, the termination hereof, provided, however, Lessee shall pay the cost of
restoration of, or for repairing any damage to, the Leased Premises and
Improvements arising from the removal of the property so excepted. Upon
termination of this Agreement for any reason, Lessor shall have the following
options, in its sole discretion: (i) require Lessee to remove its Improvements
and restore the Leased Premises to the condition existing at the Effective
Date; or (ii) accepting the Improvements at which time they shall become the
property of Lessor without reimbursement to Lessee.
Section 8.03 - Initial Development Obligation. Lessee must spend at
least $20 million on or before January 31, 2001 on improvements (including
costs of demolition) to or equipment installed or used on the Leased Premises
(collectively, the "Initial Development Obligation"). The Initial Development
Obligation would include, but is not limited to, the following: (a) an
expenditure of approximately $5 million in direct infrastructure improvements
(including costs of demolition; (b) construction or acquisition of new dry dock
facilities (or equivalent facilities) having aggregate capacity of
approximately 20,000 tons; and (c) the acquisition of $3 million worth of
additional crane and support equipment. Lessee intends to employ approximately
500 people in Galveston and will make every reasonable attempt to train its
personnel at locations in the Galveston area. Lessee will bear all costs
connected with this construction, including but not limited to the cost of
plans and specifications for the construction, labor, materials, and clean-up
costs. The construction will be in accordance with the plans and specifications
to be provided to Lessor as soon as practical following the Effective Date and
prior to commencement of construction. The Initial Development Obligation must
be completed or performed no later than January 31, 2001. If the Initial
Development Obligation is not completed or performed by that date, Lessor may
give Lessee written notice of its intention to terminate this Agreement. If the
Initial Development Obligation is not substantially completed or performed
within 120 days after Lessee receives this notice, this Agreement will
terminate on that date. Construction will be considered substantially
completed on the earliest of the following:
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a. The date on which Lessor acknowledges completion in writing;
b. The date on which the architect or contractor performing the
construction certifies in writing that the construction has
been substantially completed in conformity with the plans and
specifications; or
c. The date on which all local officials or agencies required to
approve the improvements certify that the improvements are fit
for Lessee's occupancy and intended use.
ARTICLE 9 - ASSIGNMENT & SUBLEASE
Section 9.01 - Subleases. Lessee may sublease portions of the Leased
Premises to its suppliers, operators, or subcontractors without Lessor's
consent, but only if each such sublease is for a term not to exceed five years
or the remainder of the Term or any Renewal Term, whichever is less, and the
portion of the Leased Premises being sublet for each such sublease does not
exceed 10% of the total square footage of the Leased Premises, provided that
such subleases shall require such third party tenants to be bound by the terms
of this Agreement as to the use of the Leased Premises, maintenance and
conditions of the Leased Premises, compliance with all environmental and other
laws and regulations, and other matters except for the payment of rental. No
sublease shall release Lessee of its obligations under the Lease. Lessee must
deliver a copy of each sublease to Lessor as soon as practical following
execution of the sublease by all parties or the date the sublessee takes
possession of the sublet premises, whichever is sooner.
Section 9.02 - Assignment. Lessee may not assign its rights
hereunder, and may not assign its interest under the Agreement unless approved
in writing in advance by Lessor, which consent shall not unreasonably be
withheld.
ARTICLE 10 - REPAIRS AND MAINTENANCE
Section 10.01 - Lessee's Duty to Repair and Maintain. Lessee, at its
own cost and expense at all times during the Term and all Renewal Terms, agrees
to (i) keep and maintain all improvements on the Leased Premises in a good
state of appearance and repair, reasonable wear and tear excepted, and (ii)
modify any improvements on the Leased Premises if necessary to cause the Leased
Premises to conform with all laws applicable thereto, including without
limitation the Americans with Disabilities Act (the "ADA"). All maintenance
and repairs required by this section must be performed promptly and so as not
to cause depreciation in the value of the Leased Premises or its improvements.
Section 10.02 - Mechanics' Liens. Lessee shall not suffer or permit
any mechanics' liens or other liens to be filed against the fee of the Leased
Premises nor against Lessee's leasehold interest in the land nor any
Improvements on the Leased Premises by reason of any work, labor, services, or
materials supplied or claimed to have been supplied to Lessee or to anyone
holding the Leased Premises or any part thereof through or under Lessee. If
any such mechanics' liens or materialmen's liens shall be recorded against the
Leased Premises, or any Improvements thereon, Lessee shall promptly notify
Lessor in writing of the existence of same, and shall either cause the same to
be removed or purchase a bond reasonably acceptable to Lessor against which
such lien shall attach in lieu of the Leased Premises. If Lessee in good faith
desires to contest the same, Lessee may do so, but in such case Lessee hereby
agrees to indemnify and save Lessor harmless from all liability for damages
occasioned thereby and shall, in the event of a judgment of foreclosure on said
mechanics' lien, cause the same to be discharged and removed prior to the
execution of such judgment.
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ARTICLE 11 - CASUALTY AND CONDEMNATION
Section 11.01 - Casualty. For purposes of this Article 11, the term
"Lessor's Portion" means that portion of any insurance proceeds attributable to
(i) the Land and Facilities, and (ii) that portion of the Improvements that
constitute "Wharves Facilities", as defined in the Trust Indenture. The term
"Lessee's Portion" means that portion of any insurance proceeds attributable to
that portion of the Improvements that do not constitute Wharves Facilities.
Section 11.01.01 - Notice. If the Leased Premises or any part
thereof is damaged or destroyed by fire, hurricane, flood, explosion or other
casualty (collectively, a "Casualty"), Lessee will immediately notify Lessor
thereof.
Section 11.01.02 - Repair Obligation. For as long as the
Trust Indenture remains in effect, all insurance proceeds and other funds
received on account of damages to the Wharves Facilities caused by a Casualty
shall promptly be applied to the repair or restoration of the Wharves
Facilities to its former condition or in such manner as will make the Wharves
Facilities afford approximately the same services; provided, however, if
Lessor, after consultation with the Lessee, determines that it would be to the
benefit of the Wharves Facilities to expend Lessor's Portion of such insurance
proceeds or other funds for the construction or acquisition of other and
additional improvements and facilities on the Land that would yield Net
Revenues (as defined in the Trust Indenture) anticipated to be not less than
that of the damaged or destroyed Wharves Facilities it may do so. Following
termination of the Trust Indenture, unless the parties otherwise agree within
30 days after such Casualty, Lessee will begin and continuously and diligently
thereafter proceed to repair and restore the Leased Premises to substantially
the same condition as they existed immediately before such Casualty. In either
event, this Agreement will continue but Base Rent for the portion of the Leased
Premises rendered untenantable by the Casualty will be equitably prorated and
abated on a reasonable basis from the date of the Casualty until the
substantial completion of the repairs or restoration (except there will be no
rent abatement when the Casualty is caused by the negligence or wilful
misconduct of Lessee, its employees, agents, contractors, subtenants or
invitees).
Section 11.01.03 - Agreement Not to Repair. Following
termination of the Trust Indenture, if Lessor and Lessee agree that the
Casualty damage should not be repaired but this Agreement should continue, all
insurance proceeds relating to the Land and Facilities existing at the time of
the Casualty will be paid to Lessor and all insurance proceeds relating to the
Improvements will be paid to Lessee.
Section 11.01.04 - Lessor's Termination Option. For so long
as the Trust Indenture remains in effect, if the insurance proceeds or other
funds received from the insurance policies or otherwise on account of any
damages or destruction to the Wharves Facilities, together with any other funds
available for such purpose (including without limitation any funds that may be
contributed by Lessee), be insufficient either to repair or restore the Wharves
Facilities or to construct or acquire other improvements and facilities on the
Land, Lessor's Portion of such money or funds shall be deposited into the
Parity Bond Interest and Sinking Fund (as defined in the Trust Indenture), and
Lessor may terminate this Agreement effective as of the date of the Casualty by
giving notice to Lessee within 30 days after the occurrence of such Casualty.
In that event, Base Rent will be abated as of the date of the Casualty.
Lessee's Portion of such money or funds will be paid to Lessee.
Section 11.01.05 - Lessee's Termination Option. If the (i)
Leased Premises are damaged by a Casualty occurring during the last year of the
Term or any Renewal Term, whichever is applicable;
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or (ii) a material portion of the Leased Premises are damaged by a Casualty and
Lessee makes a good faith determination that restoring the Leased Premises
would not be economically feasible; then in any of such events Lessee will have
the right to terminate this Agreement effective as of the date of the Casualty
by giving notice to Lessor within 30 days after the date of such Casualty. In
that event, Base Rent will be abated as of the date of the Casualty. If the
Casualty occurs when the Trust Indenture is in effect, Lessor's Portion of any
insurance proceeds will be paid to Lessor and Lessee's portion of any insurance
proceeds will be paid to Lessee. If the Casualty occurs after termination of
the Trust Indenture all insurance proceeds payable as a result of the Casualty
will be paid in accordance with Section 11.01.06.
Section 11.01.06 - Termination by Lessee following
Termination of Trust Indenture. If Lessee elects to terminate this Agreement
due to a Casualty occurring after termination of the Trust Indenture, all
insurance proceeds relating to the Improvements will be payable to Lessee, and
all insurance proceeds relating to the Land and Facilities existing at the time
of the casualty will be payable to Lessor.
Section 11.02 - Condemnation. In the event of a taking of, or damage
to, all or any part of the Leased Premises by reason of any exercise of the
power of eminent domain, whether by condemnation proceeding, inverse
condemnation or otherwise, or in the event of any transfer, conveyance or sale
of all or any part of the Leased Premises in lieu of any exercise of the power
of eminent domain (collectively, a "taking") prior to or during the Term,
including any exercised Renewal Term, the following provisions of this Section
11.02 will control. Any damages, just compensation, award or any other
proceeds of any kind, cash or non-cash, paid with respect to a taking is
hereinafter collectively referred to as an "award". Lessee and its
representatives will have the right to participate in any negotiations,
proceedings and settlements with respect to any taking or the amount or
allocation of any award, and Lessor will not agree to any settlement of such
proceedings without Lessee's consent or joinder, which will not be unreasonably
withheld.
Section 11.02.01 - Takings. In the event of a total taking or
a taking of such a material part of the Leased Premises that, in Lessee's
reasonable judgment, the remainder of the Leased Premises is unsuitable for
Lessee's business purposes, Lessee may terminate this Agreement upon written
notice to Lessor. In the event the taking is of less than all or a material
part of the Leased Premises and following such taking the portion of the Leased
Premises not so taken, in Lessee's reasonable judgment, remains suitable for
the continuation of Lessee's normal business at the Leased Premises, this
Agreement will continue and Base Rent will be equitably abated or
proportionately reduced according to the extent to which Lessee is deprived of
such economic use or rights. In such event, Lessee will promptly begin and
thereafter continuously and diligently repair such remaining portions of the
Leased Premises as have been damaged as a consequence of the taking. Base Rent
will also be abated for any portion of the Leased Premises that is not subject
to the taking but is rendered temporarily unusable for Lessee's intended
purposes by virtue of Lessee's repairs or restoration made necessary by the
taking.
Section 11.02.02 - Award. The award will be payable to Lessor
and Lessee as follows. Whether or not the Agreement is terminated by the
parties, Lessee will be entitled to receive the portions of any award
attributable to (i) the value to Lessee of the unexpired portion of the Term,
including any exercised Renewal Terms; (ii) any consequential, incidental or
special damages for anticipated loss of profits resulting from the loss of use
or enjoyment of the portion of the Leased Premises so taken during the
unexpired portion of the Term, including any exercised Renewal Term; and (iii)
the value of any Improvements so taken. Landlord will be entitled to receive
the remaining portion of any award.
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Further, notwithstanding any other provision of this Agreement, Lessee will
have the right to negotiate and receive payment for all relocation costs and
other expenses associated with any taking.
ARTICLE 12 - INSURANCE AND INDEMNIFICATION
Section 12.01 - Property Insurance. Lessee must insure all buildings
and other improvements located or being constructed on the Leased Premises
against loss or damage by fire, windstorm, flood, earthquake and all other
risks with extended coverage endorsement or its equivalent. The insurance must
be paid for by Lessee and must be in amounts not less than the full replacement
value of all improvements on the Leased Premises, and must have a replacement
cost endorsement or similar provision. The actual replacement value must be
confirmed from time to time by the insurer, at Lessor's request. Such policy
must name Lessor (and any successor or assign designated by Lessor) as a loss
payee, as its interests may appear.
Section 12.02 - Commercial General Liability Insurance. Lessee must
maintain commercial general liability insurance covering Lessor and Lessee for
liability for property damage, bodily injury, personal injury and death. The
insurance provided under this section must be in the amount of not less than
$5,000,000.00 per occurrence for property damage and not less than
$5,000,000.00 per occurrence for personal injury, bodily injury or death. This
insurance must protect against liability to any employees or servants of Lessee
and to any other person or persons whose property damage, personal injury or
death arises out of or in connection with the occupation, use, or condition of
the Leased Premises, and must include (i) coverage for premises and operations,
(ii) coverage for products liability, and (iii) contractual liability coverage
(as defined in such policy) insuring the obligations of Lessee under the terms
of this Agreement. Such policy must name Lessor (and any successor or assign
designated by Lessor) as an additional insured.
Section 12.03 - Construction Liability Insurance. Lessee must
maintain construction liability insurance at all times when demolition,
excavation, or construction work is in progress on the Leased Premises. The
insurance will have limits of not less than $5,000,000.00 per occurrence for
property damage and $5,000,000.00 per occurrence for personal injury, bodily
injury or death and must protect against all liability for injury or damage to
any person or property in any way arising out of demolition, excavation, or
construction work on the Leased Premises. Such policy must name Lessor (and
any successor or assign designated by Lessor) as an additional insured.
Section 12.04 - Workers Compensation. Lessee must maintain workers
compensation insurance to protect against claims under Texas Workers
Compensation laws as well as all Federal acts applicable to Lessee's operations
at the Leased Premises, including but not limited to U. S. Longshoremen and
Harborworkers Act, Jones Act and Federal Employees Liability Act. The limit of
liability for such coverage must at least meet applicable statutory
requirements. Additionally, each policy must contain an endorsement waiving
all rights of subrogation against Lessor and the City, and their respective
agents and employees.
Section 12.05 - Employer's Liability. Lessee must maintain employer's
liability insurance in the minimum amount of $1,000,000.00 per occurrence for
personal injury, bodily injury or death to any employee of Lessee who may bring
a claim outside the scope of the Texas Worker's Compensation laws or federal
acts applicable to Lessee's operations at the Leased Premises. This insurance
must contain all endorsements necessary to cover maritime operations, including
admiralty benefits and damages under the Jones Act, in the minimum amount of
$1,000,000.00 per occurrence. Additionally, each policy must
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contain an endorsement waiving all rights of subrogation against Lessor and the
City, and their respective agents and employees.
Section 12.06 - Automobile Insurance. Lessee must maintain automobile
liability insurance coverage on all its owned or rented vehicles in the minimum
amount of $1,000,000.00 combined single limit coverage per occurrence.
Additionally, each policy must contain an endorsement waiving all rights of
subrogation against Lessor and the City, and their respective agents and
employees.
Section 12.07 - Liquor Liability Insurance. If Lessee is engaged in
any way in the sale of alcoholic beverages, either for consumption of alcoholic
beverages on the Leased Premises or off the Leased Premises, Lessee must
maintain liquor liability insurance with limits of not less than $1,000,000.00
aggregate. If written on a separate policy from the commercial general
liability policy, such policy must name Lessor (and any successor or assign
designated by Lessor) as an additional insured.
Section 12.08 - Pollution Liability Insurance. Lessee must provide
liability insurance against claims arising out of sudden and accidental
pollution on the Leased Premises. Such insurance must be for a minimum limit
of liability of $5,000,000.00, and must name Lessor (and any successor or
assign designated by Lessor) as an additional insured.
Section 12.09 - Waiver of Subrogation. Lessor and Lessee agree to
waive any and all rights of recovery, claims, actions or causes of action
against the other, its agents, officers and employees for any injury, death,
loss or damage that may occur to persons or to the Leased Premises, or any
personal property of such party on the Leased Premises, by reason of fire,
windstorm, earthquake, flood or any other risks, or any other cause which is
insured under the insurance policy or policies that either party is required to
provide or maintain under this Agreement, to the extent and only to the extent
of any proceeds actually received by Lessor or Lessee, respectively, with
respect thereto, regardless of cause or origin, including negligence of either
party hereto, its agents, officers or employees, and each party covenants that
no insurer will hold any right of subrogation against the other. If such
waiver is not obtained, the party failing to do so indemnifies the other party
for any claim by an insurance carrier arising out of subrogation.
Section 12.10 - Increase in Insurance Coverage. Lessee agrees to
review, at least annually, the insurance covering the Leased Premises to
determine the full replacement value of the Leased Premises. Lessee agrees to
increase the policy limits for the property insurance required by Section
12.01, if necessary, to receive the full replacement value. With respect to
all other insurance required by Article 12, the coverage limits must be
increased periodically to a level appropriate under then market conditions and
industry standards, as reasonably approved by Lessor. Lessee is solely
responsible for the payment of any policy premium increases.
Section 12.11 - Insurance Requirements. The phrase "Required Policy"
means each policy of insurance required to be maintained by Lessee under the
terms of this Lease. Each Required Policy must be written by a company
satisfactory to Lessor, but in all events Lessee will use its best efforts to
obtain coverage from a company with an A.M. Best Company financial rating of
not less than A-XII, if commercially available on reasonable terms, but in no
event with a company rated less than A-VII (or a similar rating by a comparable
service selected by Lessor should A.M. Best Company cease providing such
ratings, or such other rating reasonably acceptable to Lessor should the
required rating not be commercially available on reasonable terms) and be
licensed to do business in Texas or by a company qualified to do business as a
non-admitted insurer in Texas under current Texas surplus lines
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requirements. Such policy may contain a deductible of not more than
$50,000.00. All Required Policies must be endorsed so as to require 30 days
prior written notice to Lessor in the event of cancellation, material change or
intent not to renew. Required Policies must contain separation of insured
provisions, when applicable and available. Lessee must deliver to Lessor a
certificate of insurance for any Required Policy on the Effective Date . The
required evidence of coverage must always be deposited with Lessor. If Lessee
fails to do so, such failure may be treated by Lessor as a default by Lessee
and Lessor, in addition to any other remedy under this Agreement, may purchase
and maintain such Required Policy and Lessee must immediately reimburse Lessor
for any premiums paid or costs incurred by Lessor in providing such insurance.
Failure of Lessee to reimburse Lessor is a default by Lessee in the payment of
rent.
Section 12.12 - Indemnity for Noncompliance with Insurance
Requirements. Lessee INDEMNIFIES and HOLDS HARMLESS Lessor from any loss it
may suffer due to Lessee's failure to comply with all the above insurance
requirements, including the requirement for obtaining waivers of subrogation,
and due to any insurance coverage being invalidated because of Lessee's failure
to comply with the terms, conditions and warranties of any Required Policy.
Section 12.13 - Indemnification of City and Lessor. Lessee
INDEMNIFIES and HOLDS HARMLESS Lessor, its trustees, officers, agents and
employees, and the City of Galveston, its officers, agents and employees
(collectively, the "Indemnified Persons"), against all costs and expenses,
including, without limitation, attorneys' fees and costs of investigation and
defense, as well as legal liability, whether from suit, judgment, settlement or
otherwise arising out of any or all claims for injury to persons or property,
including but not limited to injuries resulting in death, arising from, or
caused by, or incident to any wrongful or negligent act or omission of Lessee,
its agents, invitees, servants and employees upon the Leased Premises, or
arising or resulting from any defective or unsafe condition for which Lessee is
responsible, or of any apparatus, equipment or other property of Lessee, or in
any other manner arising out of any action or inaction of Lessee. Any language
to the contrary notwithstanding, the covenants and agreements contained in this
paragraph survive the termination or expiration of this Agreement for whatever
cause. IN ADDITION, THE COVENANTS AND AGREEMENTS CONTAINED IN THIS PARAGRAPH
ARE VALID AND ENFORCEABLE REGARDLESS OF WHETHER ANY INDEMNIFIED PERSON IS
NEGLIGENT OR WHETHER ANY INDEMNIFIED PERSON WAS IN ANY MANNER RESPONSIBLE FOR
THE NEGLIGENT OR WRONGFUL ACT OR OMISSION OR THE DEFECTIVE OR UNSAFE CONDITION
WHICH MAY HAVE CAUSED THE INJURY OR CLAIM.
ARTICLE 13 - DEFAULT AND REMEDIES
Section 13.01 - Default By Lessee.
(a) Lessee's Default For Failure To Maintain Insurance Coverage.
In the event Lessee does not maintain the insurance required
by Article 12, Lessor may, at its option, purchase such
insurance on behalf of Lessee, and the cost of such insurance
shall then be added to the amount of rent due on the next
succeeding due date. If Lessor is unwilling or unable to
secure such insurance on behalf of Lessee, Lessor shall
provide written notice thereof to Lessee, and Lessee shall
have a period of thirty (30) days to secure the insurance
required by Article 12 and provide the appropriate proof
thereof to Lessor
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(b) Lessee's Default Other Than Failure To Maintain Insurance
Coverage. Except as specifically provided in Section 12.01(a)
above, should Lessee default in the performance of any other
covenant, condition, or agreement in this Agreement other than
a monetary default and not commence to correct such default
within 60 days after receipt of written notice from Lessor to
Lessee and not diligently proceed to correct same, Lessor may
declare, by written notice, this Agreement, and all rights and
interest of Lessee created by it, to be terminated. Should
Lessee fail to timely pay any amount of money to Lessor owed
by it to Lessor under the terms of this Agreement, within ten
days after written notice from Lessor, Lessor may terminate
this Agreement and all rights and interest of Lessee created
by it by written notice.
(c) Termination. Upon Lessor electing to terminate, this
Agreement shall cease and come to an end as if that were the
day originally fixed herein for the expiration of this
Agreement.
Section 13.02 - Other Remedies. In addition to any other legal or
equitable remedy available to Lessor for Lessee's breach of this Agreement,
Lessor may use any portion of the Security Deposit to cure any default of
Lessee under this Agreement. Lessor may demand that Lessee restore the
Security Deposit with Cash or an additional Letter of Credit so that the amount
of the Security Deposit is at all times equal to $175,000.00, and Lessee's
failure to so restore the Security Deposit within ten days from written demand
will be an event of default under this Agreement. Any termination of this
Agreement as herein provided by Lessor due to Lessee's default shall not
relieve Lessee from the payment of any sum or sums due and payable to Lessor at
the time of termination, or any claim for damages then or theretofore accruing
against Lessee under this Agreement, and any such termination shall not prevent
Lessor from enforcing the payment of any such sum or sums or claim for damages
by any remedy provided for by law, or from recovering damages from Lessee for
any default. All rights, options, and remedies of Lessor and Lessee contained
in this Agreement shall be construed and held to be cumulative, and no one of
them shall be exclusive of the other, and Lessor and Lessee shall have the
right to pursue any one or all of such remedies or any other remedy or relief
which may be provided by law, whether or not stated in this Agreement. No
waiver by Lessor or Lessee of a breach of any of the covenants, conditions, or
restrictions of this Agreement shall be construed or held to be a waiver of any
succeeding or preceding breach of the same or any other covenant, condition, or
restriction contained in this Agreement.
Section 13.03 - Dispute Resolution. If a dispute arises with respect
to this Agreement, the parties to the dispute shall first attempt to resolve it
through direct discussions in the spirit of mutual cooperation. If the
parties' attempts to resolve their disagreements through negotiation fail, the
dispute shall be mediated by a mutually acceptable third-party to be chosen by
the disputing parties within 30 days after written notice by one of them
demanding mediation. The disputing parties shall share the costs of the
mediation equally. By mutual agreement the parties may postpone mediation
until each has completed some specified but limited discovery about the
dispute. By mutual agreement the parties may use a nonbinding form of dispute
resolution other than mediation. Any nonbinding dispute resolution process
conducted under the terms of this section shall be confidential within the
meaning of Tex. Civ. Pract. and Rem. Code Sections 154.053 and 154.073, to the
extent permitted by law. If neither a negotiated or mediated resolution is
obtained within the time periods provided by this section, the parties may
pursue any available legal or equitable remedy.
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ARTICLE 14 - WARRANTIES
Section 14.01 - Lessor's Warranty of Title. To the extent permitted
by law, or as limited thereby, Lessor hereby represents and warrants that the
City is the owner in fee simple absolute of the Leased Premises, that Lessor
has the legal authority to manage and control the Leased Premises, and that
Lessor has the legal authority to enter into this Agreement without the
necessity of any further action by the governing body of the City. To the
extent permitted by law, Lessor agrees to warrant and defend the title to the
Leased Premises against any and all persons claiming or to claim the same or
any part thereof, subject to exceptions, reservations, and other matters of
record existing on the Effective Date or apparent from a physical inspection of
the Leased Premises, the lien of the Deed of Trust, the Trust Indenture, and
any other interest securing payment of the Bonds (collectively, the "Permitted
Encumbrances").
Section 14.02 - Lessor's Warranty of Quiet Enjoyment. Subject to the
terms of this Agreement and the Permitted Encumbrances, Lessor covenants and
agrees that Lessee, on paying the rent and other charges herein provided for
and observing and keeping the covenants, conditions, and terms of this
Agreement on Lessee's part to be kept or performed, shall lawfully and quietly
hold, occupy, and enjoy the Leased Premises during the term of this Agreement
without hindrance or molestation of Lessor or any person claiming under Lessor
except such portion of the Leased Premises, if any, as shall be taken under the
power of eminent domain.
Section 14.03 - Condemnation and Casualty. Lessor hereby represents
and warrants that to its knowledge there is no pending condemnation or similar
proceeding affecting the Leased Premises, Lessor has not received any written
notice thereof, and to the best of Lessor's knowledge there is no such
proceeding contemplated. No part of the Leased Premises has been destroyed or
damaged by any casualty which has not been repaired or restored.
Section 14.04 - Maintenance and Operation. Lessor hereby represents
and warrants that to its knowledge the current continued maintenance,
operation, use or occupancy of the Leased Premises does not violate any
existing law, ordinance or governmental regulations, and no written notice of
any such violation has been received by Lessor.
Section 14.05 - Environmental and Condition of Leased Premises. Prior
to the Effective Date, Lessee has performed any and all inspections, studies or
assessments which it believes are advisable. Lessee takes the Leased Premises
and all improvements thereon or appurtenances thereto in "AS IS" condition, and
"WITH ALL FAULTS". Lessor has not made and will not make any representation or
warranty as to the condition of the Leased Premises or the suitability of the
Leased Premises for the planned activities of Lessee whatsoever, except as
follows: Except for those items which are hereby disclosed to Lessee in
Schedule 14.05, attached hereto and incorporated herein by reference, Lessor
hereby represents and warrants that to the actual knowledge of Lessor's current
officers and senior management employees, the Leased Premises and its existing
uses complies with, and Lessor is not in violation of, and has not violated, in
connection with the ownership, use, maintenance or operation of the Leased
Premises, any applicable federal, state, county or local statutes, laws,
regulations, rules, ordinances, codes, standards, orders, licenses and permits
of any governmental authorities relating to environmental matters (being
hereinafter collectively referred to as the "Environmental Laws"), including,
without limitation, (i) the Clean Air Act, 42 U.S.C. Section 7401 et seq., the
Federal Water Pollution Control Act , 33 U.S.C. Section 1251 et seq., the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
42 U.S.C. Section 9602 et seq. ("CERCLA"), as amended by the Superfund
Amendments and Reauthorization Act of 1986 ("SARA"), the Toxic Substances
Control Act, 15 U.S.C. Section 2601 et seq., the Solid Waste Disposal Act, 42
U.S.C. Section 6901 et seq., the Hazardous Materials Transportation Act, 49
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U.S.C. Section 1801 et seq., the Safe Drinking Water Act, 42 U.S.C. Section
300f et seq., the Texas Water Code, and the Texas Solid Waste Disposal Act,
Chapter 361 of the Texas Health and Safety Code (including any amendments or
extensions thereof and any rules, regulations, standards or guidelines issued
pursuant to any of said Environmental Laws), and (ii) all other applicable
environmental standards or requirements.
ARTICLE 15 - GENERAL PROTECTIVE PROVISIONS
Section 15.01 - Right of Entry and Inspection. Lessee shall permit
Lessor or Lessor's agents, representatives, or employees to enter on the Leased
Premises at reasonable times and upon having given Lessee reasonable advance
notice of the purpose for inspection, to determine whether Lessee is in
compliance with the terms of this Agreement, or for the purpose of showing the
Leased Premises to prospective lessees, purchasers, mortgagees, or
beneficiaries under trust deeds.
Section 15.02 - No Partnership. The relationship between Lessor and
Lessee at all times shall remain solely that of landlord and tenant and not be
deemed a partnership or joint venture.
Section 15.03 - Force Majeure. Lessor and Lessee shall be excused
from performing any of their respective duties, obligations or undertakings
provided for in this Agreement (except for paying rent or obtaining insurance
coverage) in the event and so long as the performance of such duty, obligation
or undertaking is prevented, delayed, retarded or hindered by an Act of God,
epidemic, fire, earthquake, flood, explosion, action of civil commotion,
sabotage, malicious mischief, strike, lockout, action of labor unions,
condemnation, governmental restriction, order of civil or military or naval
authorities, embargo, impossibility of obtaining materials, or any other cause,
whether similar or dissimilar to the foregoing, not within the reasonable
control of the party in question. Either party entitled to such extension
hereunder shall give prompt written notice to the other party as soon as
possible after the occurrence causing such delay asserting its claim of right
to such extension and the reasons therefor.
Section 15.04 - No Termination on Bankruptcy. Neither bankruptcy,
insolvency, assignment for the benefit of creditors, nor the appointment of a
receiver as to either party shall terminate this Agreement so long as all
covenants of the Lessee or Lessor, as the case may be, are continued in
performance by Lessee or Lessor and their respective successors or legal
representatives.
Section 15.05 - No Waiver. No waiver by Lessor or Lessee of any
default or breach of any covenant, condition, or stipulation herein contained
shall be treated as a waiver of any subsequent default or breach of the same or
any other covenant, condition, or stipulation hereof.
Section 15.06 - Use Clause. Lessee agrees not to use the Leased
Premises or any building situated upon said premises, or any part thereof, for
any use or purpose in violation of any valid and applicable law, regulation, or
ordinance of the United States, the State of Texas, the County of Galveston, or
the City of Galveston, or other lawful authority having jurisdiction over the
Leased Premises.
Section 15.07 - Release of Lessor. In the event City or Lessor shall
sell or transfer the Leased Premises or any part thereof and as a part of such
transaction shall assign its interest as Lessor in and to this Agreement, and
provided such buyer, transferee or assignee agrees to perform as Lessor under
this Agreement, then from and after the effective date of such sale,
assignment, or transfer, Lessor shall have no further liability under this
Agreement to Lessee except as to matters of liability which shall have accrued
and are unsatisfied as of such effective date, it being intended that the
covenants and obligations contained in this Agreement on the part of Lessor
shall be binding on Lessor and its successors and assigns only during and in
respect of their respective successive periods of management and control or
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ownership of the fee. Lessor agrees that it will use reasonable efforts to
cause any future recipient of any interest in the Leased Premises to be bound
by the releases and limitations of liability set forth in this Agreement such
that the total aggregate liability of Lessee to Lessor and such recipients
shall not exceed the limits of liability set forth in this Agreement.
Section 15.08 - Joint and Several Liability. If more than one Lessee
or Lessor is named under this Agreement, or becomes liable hereunder, the
obligation of all such Lessees or Lessors shall be, and is, joint and several.
ARTICLE 16 - MISCELLANEOUS
Section 16.01 - Delivery of Rents and Notices. All rents or other
sums, notices, demands, or requests from one party to another shall be in
writing and shall be personally delivered or sent by mail, certified,
registered, express, or overnight, postage prepaid, or by facsimile
transmission, to the addresses stated in this Section, or such other addresses
as the parties hereto may designate in writing, and shall be deemed to have
been given at the time of receipt. All payments, notices, demands, or requests
to Lessor shall be given to Lessor at P. O. Box 328, Galveston, Texas 77553
(for U. S. Mail), or 123 Rosenberg, 8th Floor, Galveston, Texas 77550 (for
express or overnight mail), or (409) 766-6171 (for facsimile transmissions), in
any case to the attention of the Port Director, with a copy to Mr. W. Daniel
Vaughn, McLeod, Alexander, Powel & Apffel, P. C., P. O. Box 629, Galveston,
Texas 77553 (for U.S. Mail), or 802 Rosenberg, Galveston, Texas 77550 (for
express or overnight mail), or (409) 762-1155 (for facsimile transmissions).
Lessee's address is 4000 South Sherwood Forest Blvd., Suite 603, Baton Rouge,
Louisiana 70816 (for all mail), or (504) 292-8100 (for facsimile
transmissions), to the attention of David B. Ammons, with a copy to Mr. Frank
Eakin, 8502 Cypress Street, Houston, Texas 77012 (for all mail), or (713) 923-
9310 (for facsimile transmissions) and to Mr. Robert T. Bowsher, Breazeale,
Sachse & Wilson, One American Place, 23rd Floor, Baton Rouge, Louisiana
70821(for all mail), or (504) 387-5397 (for facsimile transmissions).
Section 16.02 - Parties Bound. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, legal representatives, successors, and assigns.
Section 16.03 - Texas Law to Apply. This Agreement shall be construed
under and in accordance with the laws of the State of Texas, and all
obligations of the parties created hereunder are performable in Galveston
County, Texas.
Section 16.04 - Legal Construction. In case any one or more of the
provisions contained in this Agreement shall for any reason be held to be
invalid, illegal, or unenforceable in any respect, such invalidity, illegality,
or unenforceability shall not affect any other provision thereof and this
Agreement shall be construed as if such invalid, illegal, or unenforceable
provision had never been contained herein, if consistent with the overall
intent of this Agreement.
Section 16.05 - Prior Agreements Superseded. Except as expressly set
forth herein, this Agreement constitutes the sole and only agreement of the
parties hereto and supersedes any prior understandings or written or oral
agreements between the parties respecting the within subject matter.
Section 16.06 - Amendment. No amendment, modification, or alteration
of the terms hereof shall be binding unless the same be in writing, dated
subsequent to the Effective Date hereof and duly executed by Lessor and Lessee
or their successors and assigns.
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Section 16.07 - Attorney's Fees. In the event Lessor or Lessee
breaches any of the terms of this Agreement whereby the party not in default
employs attorneys to protect or enforce its rights hereunder and prevails, then
the defaulting party agrees to pay the other party reasonable attorney's fees
so incurred by such other party.
Section 16.08 - Exhibits. All Exhibits attached hereto are
incorporated herein by reference for all purposes as fully and to the same
extent as if set out in the text hereof verbatim.
Section 16.09 - Compliance with Laws. Lessor and Lessee shall comply
with all laws, ordinances, rules, regulations and codes governing or in any
manner applicable to this Agreement and all operations hereunder.
Section 16.10 - Further Assurances. Lessee agrees that it will from
time to time and at any reasonable time execute and deliver, or cause to be
executed and delivered to Lessor such documents and instruments, and shall
take, or cause to be taken, such other actions Lessor may reasonably request to
effectuate this Agreement.
Section 16.11 - Exhibits. All Exhibits attached to this Agreement are
incorporated by reference.
Section 16.12 - Survival of Provisions. The following provisions of
this Agreement expressly survive the termination of the Agreement: Sections
2.03, 3.04, 8.02, 10.02, 12.12, and 12.13, and Articles 13, 16, and 17.
Section 16.13 - Counterparts. This Agreement may be executed in any
number of counterparts, and each counterpart is deemed to be an original
instrument, but all such counterparts together constitute but one Agreement. A
photocopy or facsimile reproduction of an original signature of a party binds
that party to the terms, covenants and conditions of this Agreement.
Section 16.14 - Railroad Clearances. Lessee must not locate a
structure or materials closer than 8 feet 6 inches from the centerline of the
nearest railroad track on or adjoining the Leased Premises, or closer than 22
feet above the top of any railroad track on or adjoining the Leased Premises.
Lessee must keep all railroads and passageways on and adjoining the Leased
Premises free from obstruction by motor vehicles and other objects.
Section 16.15 - Remedies and Mitigation. Pursuit of any remedy under
this Agreement does not preclude pursuit of any other remedy under this
Agreement or provided by law. Lessor and Lessee have a duty to mitigate
damages.
Section 16.16 - Limitation of Warranties. Lessor disclaims any
implied warranties of merchantability, of fitness for a particular purpose, or
of any other kind arising out of this Agreement or the Leased Premises, and
Lessee acknowledges the disclaimer of such warranties.
Section 16.17 - Abandoned Property. In addition to any other remedy
under this Agreement or provided by law, Lessor may retain, destroy, or dispose
of any property left on the Leased Premises at the termination of this
Agreement.
Section 16.18 - Abatement. Lessee's covenant to pay rent and Lessor's
covenants are independent of each other and, except as otherwise provided in
this Agreement, Lessee is not entitled to abate rent for any reason.
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Section 16.19 - Time is of the Essence. Time is of the essence in
this Agreement.
Section 16.20 - Headings. The headings, captions, and arrangements
used in this Agreement are for convenience only and do not affect the
interpretation of this Agreement.
Section 16.21- Signage. Lessee must, at its sole expense, remove any
signs that it installed or erected on or about the Leased Premises and repair
any damage done to the Leased Premises or the adjacent land by installing,
erecting, or removing the signs. This removal and repair must be completed no
later than the termination of this Agreement.
Section 16.22 - Memorandum of Lease. The parties hereto agree to
execute a memorandum of this Agreement in recordable form.
ARTICLE 17 - LIABILITY
Section 17.01 - Limitation of Liability of the City. It is expressly
agreed and understood that no provision of this contract shall create any
obligation of the City to respond in damages or make indemnity, or
contribution, or payment of any character from any source other than the
properties, income and revenues of the Galveston Wharves and any applicable
insurance policies.
Section 17.02 - No Personal Liability of Board. It is further
understood and agreed that the members of the BOARD OF TRUSTEES OF THE
GALVESTON WHARVES, either singularly or collectively, shall not be personally
liable on this Agreement or for any breach thereof.
Section 17.03 - Liability of Parties. As between the parties hereto,
Lessor shall be responsible for all liability arising from any condition which
existed on or in the Leased Premises on December 19, 1994, including, without
limitation, liability resulting from the existence of hazardous or toxic
materials on the Leased Premises, which are not introduced into the Leased
Premises by Lessee, Lessee's sublessees, subcontractors, suppliers, invitees,
clients or entities subject to Lessee's control or any officers, agents or
employees of same. Lessee shall be responsible to the extent liability arises
from any condition which is attributable to the activities of Lessee, its
sublessees, subcontractors, suppliers, invitees, clients or other entities
subject to Lessee's control, or any officers, agents or employees of same,
including, without limitation, hazardous or toxic materials introduced into the
Leased Premises by any of the foregoing. In addition, as between the parties
hereto, Lessor shall be responsible for toxic chemicals migrating onto or into
the Leased Premises from properties under the management and control of Lessor
adjacent to the Leased Premises not caused, in whole or in part, by Lessee, or
Lessee's sublessees, subcontractors, suppliers, invitees, clients or other
entities subject to Lessee's control or any officers, agents or employees of
same. The respective responsibilities of each party in this Section shall
include, without limitation, fines, remediation costs, and all other liability
associated with hazardous or toxic materials. The provisions hereof are not
intended to benefit any third party, nor shall they waive any right the parties
may have as to any third party.
Section 17.04 - Miscellaneous. Under no circumstances shall the
Parties or Lessee's sublessees be liable to the other for, nor shall any Party
or Lessee's sublessee make claim for, consequential loss or damage, including
but not limited to loss or damage resulting from loss of use, loss of profits
or revenues, cost of capital, loss of goodwill, or like items of loss or
damage, and each Party and Lessee's sublessees hereby releases the other Party
and Lessee's sublessees from liability therefrom to the extent permitted by
law. THE WAIVERS AND DISCLAIMERS OF LIABILITY, RELEASES FROM LIABILITY,
LIMITATIONS AND APPORTIONMENTS OF LIABILITY AND INDEMNITY AND HOLD-HARMLESS
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OBLIGATIONS EXPRESSED THROUGHOUT THIS AGREEMENT SHALL APPLY EVEN IN THE EVENT
OF THE FAULT, NEGLIGENCE (IN WHOLE OR IN PART) STRICT LIABILITY, BREACH OF
CONTRACT, OR OTHERWISE OF THE PARTY RELEASED OR WHOSE LIABILITY IS WAIVED,
DISCLAIMED, LIMITED, APPORTIONED OR FIXED BY SUCH EXCLUSIVE REMEDY PROVISION,
INDEMNIFIED OR HELD HARMLESS, AND SHALL EXTEND TO SUCH PARTY'S RELATED OR
AFFILIATED ENTITIES AND ITS AND THEIR DIRECTORS, OFFICERS, EMPLOYEES AND
AGENTS.
Section 17.05 - Liability of PMB. For so long as this Agreement has
not been terminated because of Lessee's default, PMB will not be obligated to
perform any of Lessee's obligations under this Agreement and PMB will not be
entitled to any rights of possession of the Leased Premises as lessee or
otherwise. However, if this Agreement is terminated because of Lessee's
default prior to May 22, 2000 (such date, or such earlier date that PMB may be
released pursuant to the provisions of Section 17.06, is referred to herein as
the "PMB Release Date"), PMB must enter and take possession of the Leased
Premises as lessee pursuant to the terms of the agreement attached as Exhibit C
(the "PMB Lease"). The PMB Lease will become effective as a new lease between
Lessor and PMB as of the first day following termination of this Agreement
without any further action by Lessor or PMB, and will terminate on the PMB
Release Date. In any event, PMB will be responsible for all liability arising
from any condition attributable to the activities of or substances introduced
onto the Leased Premises by PMB, PMB's sublessees, subcontractors, suppliers,
invitees, clients or entities subject to PMB's control or any officers, agents
or employees of same, including without limitation any hazardous or toxic
materials, from December 19, 1994 until the PMB Release Date; provided,
however, that such liability will not include those matters listed on Exhibit C
to the PMB Lease, and will not include conditions caused by Lessee or those
introduced onto the premises by Lessee during Lessee's possession of the Leased
Premises. This obligation will survive PMB's termination of liability
following the PMB Release Date.
Section 17.06 - Release of PMB. After the PMB Release Date, PMB will
have no liability for the performance of any term, covenant, or condition of
this Agreement, except those provisions that specifically survive the
termination of PMB's liability following the PMB Release Date. Lessor reserves
the right to release PMB from its obligations hereunder prior to the PMB
Release Date upon payment by PMB, or by Lessee on behalf of PMB, of the sum of
$450,000.00 (the "Release Price") if such payment is accepted by Lessor on or
before January 31, 1998. The Release Price will be reduced by $1,500.00 per
day beginning February 1, 1998. If Lessor accepts the Release Price, the PMB
Release Date will be the day Lessor receives final payment of the Release
Price.
THIS AGREEMENT has been executed by the parties on the date and year
first above written. Each party is signing this Agreement on a separate page
exclusively for such party.
21
<PAGE> 22
LESSOR
------
Board of Trustees of the Galveston Wharves
By: /s/ Ron R. Surovik
-----------------------------------------------
Ron R. Surovik
Port Director
THE STATE OF TEXAS )
COUNTY OF GALVESTON )
This instrument was acknowledged before me on the 17th day of October,
1997, by Ron R. Surovik, Port Director of the Board of Trustees of the
Galveston Wharves, on its behalf.
/s/ Blanche Evelyn Lamb
--------------------------------------------------
Notary Public, State of Texas
Commission Expires: 4-20-98
LESSEE
------
Newpark Marine Fabricators, Inc. a Texas
corporation
By: /s/ Samuel F. Eakin
-----------------------------------------------
Name: Samuel F. Eakin
Title: Chairman and CEO
THE STATE OF LOUISIANA )
PARISH OF EAST BATON ROUGE )
This instrument was acknowledged before me on the 21st day of October,
1997, by Samuel F. Eakin, Chairman and CEO of Newpark Marine Fabricators, Inc.,
a Texas corporation, on behalf of said corporation.
/s/ Robert T. Bowsher
--------------------------------------------------
Notary Public, State of Louisiana
My Commission Expires at death.
22
<PAGE> 23
PMB
---
PMB Engineering, Inc., a wholly owned subsidiary
of Bechtel Corporation
By: /s/ W. G. Henry, Jr.
-----------------------------------------------
Name: W. G. Henry, Jr.
Title: Construction Manager
THE STATE OF TEXAS )
COUNTY OF HARRIS )
This instrument was acknowledged before me on the 27th day of October,
1997, by W. G. Henry, Jr., ____________________ of PMB Engineering, Inc., a
wholly owned subsidiary of Bechtel Corporation on its behalf.
/s/ Marquitta C. Brown
--------------------------------------------------
Notary Public, State of Texas
My Commission Expires 07/03/00
23
<PAGE> 24
LIST OF EXHIBITS
A - Description of Land [Section 1.01]
A-1 - Metes and bounds description of the Land [Section 1.01]
B - Description of Option Property [Section 1.02]
C - Form of PMB Lease [Section 17.05]
LIST OF SCHEDULES
3.05 - Example of rent adjustment calculations [Section 3.05]
14.05 - Disclosure of environmental matters [Section 14.05]
24
<PAGE> 1
EXHIBIT 10.3
ASSIGNMENT AND ASSUMPTION OF
LEASE
STATE OF TEXAS )
) KNOW ALL PERSONS BY THESE PRESENTS:
COUNTY OF GALVESTON )
THIS ASSIGNMENT AND ASSUMPTION OF LEASE (Agreement) is executed by PMB
Engineering, Inc., as (Assignor) and Newpark Marine Fabricators, Inc., a Texas
corporation (Assignee), effective as of the 1st day of November, 1997.
W I T N E S S E T H :
WHEREAS, Assignor is the lessee under that certain Lease and
Development Agreement dated effective as of May 23, 1995 (Lease), between
Assignor and The Board of Trustees of the Galveston Wharves (Wharves), a
separate utility and agency of the City of Galveston, Texas (City) covering that
certain 110 acre, more or less, tract of land (including submerged lands)
located at the Port of Galveston on Pelican Island, and as shown on Exhibit A
attached hereto and made a part hereof, together with all improvements thereon
and appurtenances thereto (collectively, the Leased Premises);
WHEREAS, Assignor desires to assign and transfer all of its interests
under the Lease (including but not limited to the right to exercise any renewal
options and to modify or amend the Lease) to Assignee in accordance with the
provisions of Section 8.02 of the Lease;
WHEREAS, Assignor has terminated all subleases of any portion of the
Leased Premises, including but not limited to QCI Offshore, Inc.; and
WHEREAS, Assignor has requested that Wharves and City agree to this
Assignment to Assignee and they have agreed to recognize Assignee as the lessee
under the Lease (releasing Assignor of its obligation under the lease as set
forth in the Amended Lease) as evidenced by the joinder of Wharves and City to
this Assignment.
WHEREAS, Assignor has requested that Assignee agree to continue to
allow IMODCO, Inc. (IMODCO) to store an IMODCO buoy (Buoy) as more particularly
described in Exhibit B attached hereto, at its present location on the Leased
Premises; and
WHEREAS, Assignor has requested that Assignee purchase that certain
equipment located on the Leased Premises (Equipment), and the Equipment is more
particularly described in Exhibit C attached hereto.
NOW, THEREFORE, in consideration of Ten Dollars ($10.00) and other good
and valuable consideration, the receipt and legal sufficiency of which are
hereby acknowledged, Assignor hereby transfers and assigns to Assignee all of
Assignor's interest in and to the Lease.
<PAGE> 2
Assignor represents and warrants to Assignee that as of the date
hereof, Assignor is not in default under the Lease; that Assignor has not
received any notice of default from Wharves; and that Assignor is the sole
entity occupying or having any right to occupy any portion of the Leased
Premises.
Assignee hereby assumes all obligations of Assignor under or incidental
to the Lease that are payable or performable, in whole or in part, from and
after the date hereof; save and except, Assignee shall not assume or be liable
for any environmental matters arising out of events occurring between December
19, 1994 to the effective date hereof which such matters remain the
responsibility of Assignor as more particularly addressed in the Amended Lease.
Assignee hereby agrees that IMODCO may, without charge, leave the Buoy
on the Leased Premises until May 23, 2000; provided, however, IMODCO shall be
responsible for all maintenance, insurance and removal costs associated with the
Buoy, as documented on Exhibit B and any and all damages or costs associated
with the removal of the Buoy on or before May 23, 2000.
Assignee hereby agrees to purchase the Equipment from Assignor upon the
terms set forth in Exhibit C, subject to inspection of such Equipment and
obtaining financing to purchase all or such acceptable portion of the Equipment.
The terms of this Agreement shall be binding on and inure to the
benefit of the respective parties thereto, and their respective successors and
assigns.
This Agreement may be executed in a number of counterparts, each of
which for all purposes shall be deemed an original and all of which, when taken
together, shall constitute but one and the same instrument.
EXECUTED as of the date of the acknowledgments to be effective as of
the day and year first above written; provided, that, (i) The Board of Trustees
of the Galveston Wharves shall have confirmed its approval of this Agreement and
shall also have agreed to and confirmed its approval the Amended Lease and (ii)
the City Council of the City of Galveston shall have confirmed their acceptance
of this Agreement and the Amended Lease prior to October 30, 1997. In the event
that the City Council of the City of Galveston shall not have confirmed their
acceptance of each such document prior to said date, this Agreement and the
Amended Lease shall be effective as among the parties, unless Assignee, before
November 1, 1997, elects in writing to reject this Assignment and the Amended
Lease.
Each party hereto is executing this Agreement on a separate signature
page.
- 2 -
<PAGE> 3
SIGNATURE PAGE
ASSIGNMENT AND ASSUMPTION OF LEASE
ASSIGNOR:
PMB ENGINEERING, INC., A CALIFORNIA
CORPORATION
BY: /S/ W. G. HENRY , JR.
--------------------------
OCTOBER 30, 1997
STATE OF TEXAS )
)
COUNTY OF HARRIS )
This instrument was acknowledged before me on the 30th day of October,
1997, by W.G.Henry, Jr., ______________ of PMB Engineering, Inc., a California
corporation, on behalf of said corporation.
/s/ Marquitta C. Brown
--------------------------------
NOTARY PUBLIC, STATE OF TEXAS
Commission Expires: 07/03/00
- 3 -
<PAGE> 4
SIGNATURE PAGE
ASSIGNMENT AND ASSUMPTION OF LEASE
ASSIGNEE:
NEWPARK MARINE FABRICATORS, INC., A TEXAS
CORPORATION
BY: /S/ SAMUEL F. EAKIN
-------------------------------
SAMUEL F. EAKIN
CHIEF EXECUTIVE OFFICER
STATE OF TEXAS )
)
COUNTY OF HARRIS )
This instrument was acknowledged before me on the 15th day of October,
1997, by Samuel F. Eakin, Chief Executive Officer of Newpark Marine Fabricators,
Inc., a Texas corporation, on behalf of said corporation.
/s/ Lee Ann May
--------------------------------
NOTARY PUBLIC, STATE OF TEXAS
Commission Expires: 05-21-2001
- 4 -
<PAGE> 5
ACCEPTANCE PAGE
ASSIGNMENT AND ASSUMPTION OF LEASE
ACCEPTED AND APPROVED
THIS 22ND DAY OF OCTOBER, 1997
THE BOARD OF TRUSTEES OF THE THE CITY OF GALVESTON, TEXAS
GALVESTON WHARVES
BY: /S/ RON SUROVIK BY: /S/ STEVE LEBLANC
----------------------------- ------------------------------
NAME: RON SUROVIK STEVE LEBLANC, CITY MANGER
TITLE: PORT DIRECTOR
BY: /S/ HENRY FREUDENBURG, III
-----------------------------
HENRY FREUDENBURG, III, MAYOR
STATE OF TEXAS )
COUNTY OF GALVESTON )
This instrument was acknowledged before me on the 22nd day of October,
1997, by Ron Surovik, Port Director, of The Board of Trustees of the Galveston
Wharves, a separate utility and agency of the City of Galveston, on behalf of
said board.
/s/ Blanche Evelyn Lamb
--------------------------------
NOTARY PUBLIC, STATE OF TEXAS
Commission Expires: 4/20/98
STATE OF TEXAS )
COUNTY OF ___________ )
This instrument was acknowledged before me on the 24th day of October,
1997, by Steve LeBlanc, City Manager of the City of Galveston, on behalf of said
City.
/s/ T D Williams
--------------------------------
NOTARY PUBLIC, STATE OF TEXAS
Commission Expires: 02/21/2001
STATE OF TEXAS )
COUNTY OF GALVESTON )
This instrument was acknowledged before me on the 24th day of October,
1997, by Henry Freudenburg, Mayor of the City of Galveston, on behalf of said
City.
/s/ T D Williams
--------------------------------
NOTARY PUBLIC, STATE OF TEXAS
Commission Expires: 02/21/2001
- 5 -
<PAGE> 1
EXHIBIT 10.6
================================================================================
CREDIT AGREEMENT
DATED AS OF AUGUST 29, 1996
BETWEEN
NEWPARK SHIPBUILDING AND REPAIR, INC.,
AS BORROWER
AND
HELLER FINANCIAL LEASING, INC.
AS LENDER
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
SECTION 1
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under Agreement . . . . . . . . . . 11
1.3 Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2
AMOUNTS AND TERMS OF LOANS . . . . . . . . . . . . . . . . . . . . . 12
2.1 Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(A) Term Loan A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(B) Term Loan B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.2 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(A) Rate of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(B) Computation and Payment of Interest . . . . . . . . . . . . . . . . . . . . . . . . 13
(C) Interest Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.3 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(A) Prepayment Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(B) Fixed Rate Breakage Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(C) Late Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.4 Payments and Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(A) Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(B) Manner and Time of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(C) Payments on Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(D) Voluntary Prepayments and Repayments . . . . . . . . . . . . . . . . . . . . . . . 16
(E) Application of Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 3
CONDITIONS TO LOANS . . . . . . . . . . . . . . . . . . . . . . . 16
3.1 Conditions to Initial Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(A) Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(B) Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(C) Performance of Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(D) Security Interests, UCC Filings and Stock Certificates . . . . . . . . . . . . . . 17
(E) Termination of Prior Indebtedness Liens and Other Liens . . . . . . . . . . . . . . 17
(F) Insurance Policies and Endorsements . . . . . . . . . . . . . . . . . . . . . . . . 17
3.2 Conditions to All Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.3 Conditions to Term Loan B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 4
BORROWER'S REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . 19
4.1 Organization, Powers, Capitalization, Good Standing, Business and Subsidiaries . . . . . . . . . . . 19
(A) Organization and Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(B) Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(C) Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(D) Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(E) Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.2 Authorization of Borrowing, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(A) Authorization of Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(B) No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(C) Governmental Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(D) Binding Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(E) Valid Issuance of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.3 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(A) Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(B) Pro Forma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(C) Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.4 Indebtedness and Contingent Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.5 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.6 Title to Properties; Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.7 Litigation; Adverse Facts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.8 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.9 Adverse Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.10 Performance of Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.11 Governmental Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.12 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(A) No Other Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(B) ERISA and IRC Compliance and Liability . . . . . . . . . . . . . . . . . . . . . . 24
(C) Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(D) Prohibited Transactions and Payments . . . . . . . . . . . . . . . . . . . . . . . 24
(E) No Termination Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(F) ERISA Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.13 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.14 Broker's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.15 Environmental Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(A) No Environmental Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(B) Storage of Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(C) Compliance with Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . 25
4.16 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.17 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.18 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.19 Use of Proceeds and Margin Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.20 Representations and Warranties from the Purchase Agreement . . . . . . . . . . . . . . . . . . . . . 27
(A) Borrower Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(B) Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.21 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.22 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.23 Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.24 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 5
BORROWER'S AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . 28
5.1 Financial Statements and Other Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(A) Interim Financials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(B) Year-End Financials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(C) Borrower Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(D) Accountants' Certification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(E) Accountants' Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(F) Appraisals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(G) Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(H) SEC Filings and Press Releases . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(I) Subordinated Indebtedness Notices . . . . . . . . . . . . . . . . . . . . . . . . . 31
(J) Events of Default, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(K) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(L) Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(M) Termination Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(N) ERISA Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(O) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(P) Supplemented Schedules; Notice of Corporate Changes . . . . . . . . . . . . . . . . 32
(Q) Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(R) Tax Returns and Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 32
(S) Management Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(T) Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.2 Access to Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.3 Corporate Existence, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.4 Payment of Taxes and Claims; Tax Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.5 Maintenance of Properties; Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.6 Inspection; Lender Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.7 Environmental Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(A) Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(B) Remedial Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(C) Further Assurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.8 Environmental Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.9 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.10 Covenants in Acquisition Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.11 Mortgages; Title Insurance; Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(A) Title Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(B) Additional Mortgaged Property . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(C) Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.12 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.13 Environmental Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
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<TABLE>
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SECTION 6
INTENTIONALLY OMITTED . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 7
BORROWER'S NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . 41
7.1 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.2 Liens and Related Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(A) No Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(B) No Negative Pledges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(C) No Restrictions on Subsidiary Distributions to Borrower . . . . . . . . . . . . . . 42
7.3 Investments; Joint Ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.4 Contingent Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.5 Restricted Junior Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.6 Restriction on Fundamental Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.7 Disposal of Assets or Subsidiary Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.8 Restriction on Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.9 Sales and Lease-Backs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.10 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.11 Management Fees and Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.12 Environmental Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.13 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.14 Changes Relating to Subordinated Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.15 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.16 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.17 Press Release; Public Offering Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.18 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.19 Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.20 Fixed Charge Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.21 Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.22 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
7.23 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under Agreement . . . . . . . . . 49
SECTION 8
DEFAULT, RIGHTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . 50
8.1 Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(A) Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(B) Default in Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(C) Breach of Certain Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(D) Breach of Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(E) Other Defaults Under Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . 50
(F) Involuntary Bankruptcy; Appointment of Receiver, etc. . . . . . . . . . . . . . . . 51
(G) Voluntary Bankruptcy; Appointment of Receiver, etc. . . . . . . . . . . . . . . . . 51
(H) Governmental Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
(I) Judgment and Attachments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
(J) Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
(K) Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
(L) Injunction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
(M) ERISA - Pension Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
(N) ERISA - Multiemployer Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
(O) Invalidity of Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
</TABLE>
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<TABLE>
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(P) Damage, Strike, Casualty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
(Q) Licenses and Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
(R) Failure of Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
(S) Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
(T) Board Seat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
(U) Adequate Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
8.2 Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
8.3 Performance by Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 9
ASSIGNMENT AND PARTICIPATION . . . . . . . . . . . . . . . . . . . . . 54
9.1 Assignments and Participations in Loans and Notes . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 10
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 54
10.1 Expenses and Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
10.2 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.3 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
10.4 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
10.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
10.6 Survival of Warranties and Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
10.7 Failure or Indulgence Not Waiver; Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . 58
10.8 Marshaling; Payments Set Aside . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
10.9 Independence of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
10.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
10.11 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
10.12 APPLICABLE LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
10.13 Successors and Assigns; Subsequent Holders of Notes . . . . . . . . . . . . . . . . . . . . . . . . 59
10.14 No Fiduciary Relationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
10.15 Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
10.16 No Duty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
10.17 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
10.18 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
10.19 CONSENT TO JURISDICTION AND SERVICE OF PROCESS . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
10.20 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
10.21 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
10.22 Counterparts; Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
</TABLE>
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<PAGE> 7
CREDIT AGREEMENT
This CREDIT AGREEMENT is dated as of August 29, 1996 and entered into by
and between NEWPARK SHIPBUILDING AND REPAIR, INC., a Texas corporation
("Borrower"), with its principal place of business and chief executive office
at 8502 Cypress Street, Houston, Texas 70112 and HELLER FINANCIAL LEASING,
INC., a Delaware corporation ("Lender"), with offices at 500 West Monroe
Street, Chicago, Illinois 60661.
RECITALS:
WHEREAS, pursuant to Section 14 of that certain Equipment Lease Agreement
dated as of March 11, 1994 (the "Equipment Lease") by and among Newpark
Resources, Inc., a Delaware corporation ("Resources"), and Newpark Shipholding
Texas, L.P., a Texas limited partnership and successor by merger to Newpark
Shipholding, Inc., a Texas corporation ("Shipholding"), as Co-Lessees, and
Republic Financial Corporation, a Colorado corporation ("Republic"), as Lessor,
as assigned by Co-Lessees to Borrower pursuant to that certain Assignment and
Assumption Agreement of even date herewith by and among Co-Lessees, Borrower
and Republic, Republic has agreed to sell, and Borrower has agreed to purchase,
certain property of Republic; and
WHEREAS, pursuant to that certain Agreement for Purchase and Sale of
Assets dated as of August 29, 1996 (the "Purchase Agreement") by and between
Borrower and Shipholding, Shipholding has agreed to sell, and Borrower has
agreed to purchase, certain real and personal property of Shipholding (the
"Acquisition"); and
WHEREAS, Borrower desires that Lender extend certain term credit
facilities to Borrower to fund the purchase pursuant to the Equipment Lease and
a portion of the Acquisition, the repayment of certain indebtedness, provide
working capital financing for Borrower and provide funds for other general
purposes of Borrower as permitted herein; and
WHEREAS, Borrower desires to secure all of its obligations under the Loan
Documents by granting to Lender a security interest in and lien upon all of its
personal and real property; and
WHEREAS, each of Newpark Resources, Inc., a Delaware corporation
("Resources"), and Samuel F. Eakin ("Eakin"), among others, is willing to
guarantee all of the Obligations under the Loan Documents subject to the
limitations, if any, set forth in the guaranty executed by such guarantor; and
WHEREAS, First Wave Marine, Inc., a Texas corporation ("First Wave"),
the majority shareholder of Borrower, is willing to guarantee all of the
Obligations under the Loan Documents and to pledge the capital stock of
Borrower owned by First Wave to Lender to secure the Obligations under the Loan
Documents.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Borrower and Lender agree as
follows:
<PAGE> 8
SECTION 1
DEFINITIONS
1.1 CERTAIN DEFINED TERMS
The terms defined below are used in this Agreement as so defined. Terms
defined in the preamble and recitals to this Agreement are used in this
Agreement as so defined.
"ACQUISITION DOCUMENTS" means the Purchase Agreement, the Equipment
Lease and all other documents, agreements and certificates executed in
connection with the Purchase Agreement and, to the extent Borrower is a party
thereto or beneficiary thereof, with the Equipment Lease; excluding, however,
all Loan Documents, Capitalization Documents and Subordinated Loan Documents.
"AFFILIATE" means any Person (other than Lender and, on the Closing
Date, Resources and the Management Shareholders): (a) directly or indirectly
controlling, controlled by, or under common control with, Borrower; (b)
directly or indirectly owning or holding five percent (5%) or more of any
equity interest in Borrower; or (c) five percent (5%) or more of whose voting
stock or other equity interest is directly or indirectly owned or held by
Borrower. For purposes of this definition, "control" (including with
correlative meanings, the terms "controlling", "controlled by" and "under
common control with") means the possession directly or indirectly of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities or by contract or otherwise.
"AGREEMENT" means this Credit Agreement (including all schedules,
exhibits, annexes and appendices hereto).
"BANKRUPTCY CODE" means Title 11 of the United States Code entitled
"Bankruptcy", as amended from time to time and all rules and regulations
promulgated thereunder.
"BIG SIX ACCOUNTING FIRM" means any of Arthur Andersen & Co., KPMG
Peat Marwick, Coopers & Lybrand, Ernst & Young, Deloitte & Touche and Price
Waterhouse or any of their respective successors.
"BUSINESS DAY" means any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the Commonwealth of Pennsylvania or
the State of Illinois.
"CAPITAL EXPENDITURES" means, without duplication, for any period, the
aggregate of all expenditures on a consolidated basis including deposits
(whether paid in cash or property or accrued as liabilities and including the
aggregate amount of all principal payments due for the entire term of all
Capital Leases which are required to be capitalized on the balance sheet) made
by Borrower and its Subsidiaries that, in conformity with GAAP, are required to
be included in the property, plant, or equipment, or similar fixed asset
account.
2
<PAGE> 9
"CAPITALIZATION DOCUMENTS" means, collectively: (a) any or all of the
stock certificates, partnership agreement, notes or debentures representing
Securities of the Loan Parties; (b) the indentures or other documents pursuant
to which such notes and debentures are issued or to be issued; (c) each
document governing the issuance of, or setting forth the terms of, such notes
or debentures; and (d) any stockholders, partnership or intercreditor agreement
among or between the holders of Securities of a Loan Party.
"CAPITAL LEASE" means any lease of any property (whether real,
personal or mixed) that, in conformity with GAAP, should be accounted for as a
capital lease.
"CASH EQUIVALENTS" means: (a) marketable direct obligations issued or
unconditionally guarantied by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (b)
commercial paper maturing no more than one year from the date issued and, at
the time of acquisition, having a rating of at least A-1 from Standard & Poor's
Corporation or at least P-1 from Moody's Investors Service, Inc.; (c)
certificates of deposit or bankers' acceptances maturing within one year from
the date of issuance thereof issued by, or overnight reverse repurchase
agreements from, any commercial bank organized under the laws of the United
States of America or any state thereof or the District of Columbia having
combined capital and surplus of not less than $500,000,000 and not subject to
setoff rights in favor of such bank; (d) time deposits maturing no more than
thirty (30) days from the date of creation thereof with commercial banks having
membership in the Federal Deposit Insurance Corporation in amounts not
exceeding the lesser of $100,000 or the maximum amount of insurance applicable
to the aggregate amount of a Person's deposits at such institution; and (e)
deposits or investments in mutual or similar funds offered or sponsored by
brokerage or other companies having membership in the Securities Investor
Protection Corporation in amounts not exceeding the lesser of $100,000 or the
maximum amount of insurance applicable to the aggregate amount of a Person's
deposits at such institution.
"CLOSING DATE" means August 30, 1996.
"COLLATERAL" means, collectively: (a) all capital stock and other
property pledged pursuant to the Pledge Agreements; (b) all "Collateral" as
defined in the Security Agreement; (c) all real property mortgaged pursuant to
the Mortgages; and (d) any property or interest provided in addition to or in
substitution for any of the foregoing.
"COMPLIANCE CERTIFICATE" means a certificate substantially in the form
of Exhibit 1.1(A).
"CONTINGENT OBLIGATION", as applied to any Person, means any direct or
indirect liability, contingent or otherwise, of that Person: (a) with respect
to any indebtedness, lease, dividend or other obligation of another Person if
the primary purpose or intent
3
<PAGE> 10
of the Person incurring such liability, or the primary effect thereof, is to
provide assurance to the obligee of such liability that such liability will be
paid or discharged, or that any agreements relating thereto will be complied
with, or that the holders of such liability will be protected (in whole or in
part) against loss with respect thereto; (b) with respect to any letter of
credit issued for the account of that Person or as to which that Person is
otherwise liable for reimbursement of drawings; (c) under Interest Rate
Agreements; or (d) under any foreign exchange contract, currency swap agreement
or other similar agreement or arrangement designed to protect that Person
against fluctuations in currency values. Contingent Obligations shall include
(i) the direct or indirect guarantee, endorsement (other than for collection or
deposit in the ordinary course of business), co-making, discounting with
recourse or sale with recourse by such Person of the obligation of another,
(ii) the obligation to make take-or-pay or similar payments if required
regardless of nonperformance by any other party or parties to an agreement, and
(iii) any liability of such Person for the obligations of another through any
agreement to purchase, repurchase or otherwise acquire such obligation or any
property constituting security therefor, to provide funds for the payment or
discharge of such obligation or to maintain the solvency, financial condition
or any balance sheet item or level of income of another. The amount of any
Contingent Obligation shall be equal to the amount of the obligation so
guaranteed or otherwise supported or, if not a fixed and determined amount, the
maximum amount so guaranteed.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any
indenture, mortgage, deed of trust, contract, undertaking, agreement or other
instrument to which that Person is a party or by which it or any of its
properties is bound or to which it or any of its properties is subject
including, without limitation, the Related Transaction Documents.
"CORPORATE LOAN PARTY" means, collectively, each Loan Party other than
Eakin and any other individual who is or becomes a party to any Loan Document.
"DEFAULT" means a condition or event that, after notice or lapse of
time or both, would constitute an Event of Default if that condition or event
were not cured or removed within any applicable grace or cure period.
"DOLLARS" and the sign "$" mean the lawful money of the United States
of America.
"EMPLOYEE BENEFIT PLAN" means any employee benefit plan within the
meaning of Section 3(3) of ERISA which (a) is maintained for employees of any
Corporate Loan Party or any ERISA Affiliate or (b) has at any time within the
preceding six years been maintained for the employees of any Corporate Loan
Party or any current or former ERISA Affiliate.
"ENVIRONMENTAL CLAIMS" has the meaning assigned to that term in
subsection 4.15(A).
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<PAGE> 11
"ENVIRONMENTAL LAWS" means all present and future federal, state or
local laws, statutes, ordinances, codes, rules, regulations, orders, decrees or
directives imposing liability or standards of conduct for relating to the
environment, industrial hygiene, land use or the protection of human health and
safety, natural resources, pollution or waste management.
"ERISA" means the Employee Retirement Income Security Act of 1974, and
all rules and regulations promulgated thereunder.
"ERISA AFFILIATE", as applied to any Corporate Loan Party, means any
Person who is a member of a group which is under common control with any
Corporate Loan Party, who together with any Corporate Loan Party is treated as
a single employer within the meaning of Section 414(b) and (c) of the IRC.
"EVENT OF DEFAULT" means each of the events set forth in subsection
8.1.
"EXCHANGE ACT" means the Securities Exchange Act of 1934.
"FIRST WAVE NOTE" means that certain promissory note of even date
herewith in the amount of $600,000 made by First Wave payable to Shipholding,
in form and substance satisfactory to Lender.
"FISCAL YEAR" means the year ending December 31 of such year.
"FUNDING DATE" means the date of each funding of a Loan.
"GAAP" means generally accepted accounting principles as set forth in
statements from Auditing Standards No. 69 entitled "The Meaning of 'Present
Fairly in Conformance with Generally Accepted Accounting Principles in the
Independent Auditors Reports'" issued by the Auditing Standards Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board that are applicable
to the circumstances as of the date of determination.
"GUARANTOR" or "GUARANTORS" means Resources, Eakin, First Wave and, if
applicable as provided in subsection 5.12(C), Frank Eakin and David Ammons.
"GUARANTY" or "GUARANTIES" means individually and/or collectively, the
continuing guaranty to be executed and delivered by each Guarantor, in form and
substance satisfactory to Lender.
"HAZARDOUS MATERIAL" means all or any of the following: (a) substances
that are defined or listed in, or otherwise classified pursuant to, any
applicable Environmental Laws as "hazardous substances", "hazardous materials",
"hazardous wastes", "toxic substances" or any other formulation intended to
define, list or classify substances by reason of deleterious properties such as
ignitability, corrosivity, reactivity, carcinogenicity, reproductive toxicity
or "TLCP" toxicity, "EP toxicity"; (b) oil, petroleum or petroleum derived
substances, natural gas, natural gas liquids or synthetic gas and drilling
fluids, produced waters and
5
<PAGE> 12
other wastes associated with the exploration, development or production of
crude oil, natural gas or geothermal resources; (c) any flammable substances or
explosives or any radioactive materials; and (d) asbestos in any form or
electrical equipment which contains any oil or dielectric fluid containing
levels of polychlorinated biphenyls in excess of fifty parts per million.
"INDEBTEDNESS", as applied to any Person, means: (a) all indebtedness
for borrowed money; (b) that portion of obligations with respect to Capital
Leases that is properly classified as a liability on a balance sheet in
conformity with GAAP; (c) notes payable and drafts accepted representing
extensions of credit whether or not representing obligations for borrowed
money; (d) any obligation owed for all or any part of the deferred purchase
price of property or services if the purchase price is due more than six months
from the date the obligation is incurred or is evidenced by a note or similar
written instrument; and (e) all indebtedness secured by any Lien on any
property or asset owned or held by that Person regardless of whether the
indebtedness secured thereby shall have been assumed by that Person or is
nonrecourse to the credit of that Person. Obligations under Interest Rate
Agreements constitute Contingent Obligations and not Indebtedness.
"INTEREST RATE AGREEMENT" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other similar
agreement or arrangement designed to protect a Person against fluctuations in
interest rates.
"INVESTMENT" means, with respect to any Person (a) any direct or
indirect purchase or other acquisition by such Person or any of its
Subsidiaries of any beneficial interest in, including stock, partnership
interest or other Securities of, any other Person (other than a Person that
prior to the relevant purchase or acquisition was a Subsidiary of such Person)
or (b) any direct or indirect loan, advance or capital contribution by such
Person or any of its Subsidiaries to any other Person (other than a Subsidiary
of such Person), including all indebtedness and accounts receivable from that
other Person that are not current assets or did not arise from sales to that
other Person in the ordinary course of business. The amount of any Investment
shall be the original cost of such Investment plus the cost of all additions
thereto, without any adjustments for increases or decreases in value, or
write-ups, write-downs or write-offs with respect to such investment.
"IRC" means the Internal Revenue Code of 1986, and any rule or
regulation promulgated thereunder from time to time.
"JOINT VENTURE" means a joint venture, partnership or other similar
arrangement, regardless of the legal form of such arrangement.
"LIEN" means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind, whether voluntary or involuntary, (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security interest).
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"LOAN" or "LOANS" means Term Loan A and/or Term Loan B.
"LOAN DOCUMENTS" means this Agreement, the Notes, the Security
Documents and all other instruments, documents and agreements executed by or on
behalf of any Loan Party or Resources and delivered concurrently herewith or at
any time hereafter to or for the benefit of Lender in connection with the Loans
and other transactions contemplated by this Agreement, all as amended,
supplemented or modified from time to time, but excluding all Acquisition
Documents, Capitalization Documents and Subordinated Loan Documents. For
purposes of this Agreement and the other Loan Documents, the Shareholders
Agreement is deemed to be a Loan Document.
"LOAN PARTY" means, collectively, Borrower, Guarantors (other than
Resources) and any other Person (other than Lender, Resources and Management
Shareholders) which is or becomes a party to any Loan Document.
"LOAN YEAR" means each period of twelve (12) consecutive months
commencing on the Closing Date and on each anniversary thereof.
"MANAGEMENT SHAREHOLDERS" means the owners (other than First Wave) of
the outstanding capital stock of Borrower which are or become parties to that
certain Pledge Agreement of even date herewith among such Persons and Lender
with respect to the capital stock of Borrower.
"MATERIAL ADVERSE EFFECT" means (a) a material adverse effect upon the
business, operations, properties, assets or condition (financial or otherwise)
of any Loan Party or Resources on an individual basis or (b) the impairment of
the ability of any Loan Party or Resources to perform its obligations under any
Loan Document to which it is a party or Lender to enforce or collect any of the
Obligations, including the obligations of any Loan Party or Resources to
perform or Lender to enforce any Guaranty. In determining whether any
individual event would result in a Material Adverse Effect, notwithstanding
that such event does not of itself have such effect, a Material Adverse Effect
shall be deemed to have occurred if the cumulative effect of such event and all
other then existing events would result in a Material Adverse Effect.
"MORTGAGE" means each of the mortgages, deeds of trust, leasehold
mortgages, leasehold deeds of trust, collateral assignments of leases or other
real estate security documents delivered by any Loan Party to Lender, with
respect to Mortgaged Property or Additional Mortgaged Property, all in form and
substance satisfactory to Lender.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA to which any Corporate Loan Party or any ERISA
Affiliate is making, or is accruing an obligation to make, contributions or has
made, or been obligated to make, contributions within the preceding six years.
"NOTE" or "NOTES" means Term Note A and/or Term Note B.
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<PAGE> 14
"OBLIGATIONS" means all obligations, liabilities and indebtedness of
every nature of each Loan Party or Resources from time to time owed to Lender
under the Loan Documents including the principal amount of all debts, claims
and indebtedness, accrued and unpaid interest and all fees, costs and expenses,
whether primary, secondary, direct, contingent, fixed or otherwise, heretofore,
now and/or from time to time hereafter owing, due or payable whether before or
after the filing of a proceeding under the Bankruptcy Code by or against
Borrower or its Subsidiaries or any other Loan Party or Resources.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"PENSION PLAN" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to the provisions of Part 3 of Title I of
ERISA, Title IV of ERISA or Section 412 of the IRC and which (a) is maintained
for employees of any Corporate Loan Party or any of their ERISA Affiliates or
(b) has at any time within the preceding six years been maintained for the
employees of any Corporate Loan Party or any of their current or former ERISA
Affiliates.
"PERMITTED ENCUMBRANCES" means the following:
(a) Liens (other than Liens relating to Environmental Claims
or ERISA) for taxes, assessments or other governmental charges not yet
due and payable;
(b) Any attachment or judgment Lien subordinate to Liens in
favor of Lender and which do not constitute an Event of Default under
subsection 8.1(I);
(c) Liens in favor of Lender;
(d) Subject to the Subordination Agreement, liens in
favor of Shipholding securing the Subordinated Note granted pursuant
to the Subordinated Loan Documents;
(e) Liens existing on the date hereof, which Liens are set
forth on Schedule II to the Security Agreement, and renewals and
extensions thereof;
(f) Liens solely encumbering accounts receivable and
inventory of Borrower securing Indebtedness permitted under subsection
7.1(h);
(g) Liens encumbering specific equipment purchased by
Borrower securing Indebtedness permitted under subsections 7.1(e) and
(f); and
(h) Liens securing the flare permitted to be purchased
pursuant to subsection 7.19.
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"PERSON" means and includes natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof
and their respective permitted successors and assigns (or in the case of a
governmental person, the successor functional equivalent of such Person).
"PLEDGE AGREEMENT" or "PLEDGE AGREEMENTS" means, individually and/or
collectively, the stock pledge agreement to be executed by the Management
Shareholders and the stock pledge agreement to be executed by First Wave, in
each case with respect to the capital stock of Borrower and in each instance in
form and substance satisfactory to Lender.
"PRIOR INDEBTEDNESS" means the indebtedness and other obligations
identified on Schedule 1.1(A), which are to be paid on the Closing Date.
"PRO FORMA" means, with respect to any Person, the unaudited
consolidated balance sheet of such Person and its Subsidiaries as of the
Closing Date after giving effect to the Related Transactions. Notwithstanding
any other term contained in this Agreement, should the application of purchase
or other accounting principles permit such Person, in accordance with GAAP, to
characterize certain expenditures as capital items rather than expense, then
such expenditures shall be treated as expense in the period such expenditures
were incurred or paid for all purposes under this Agreement unless such
expenditure was identified and capitalized in the Pro Forma. The Pro Forma of
Borrower is annexed hereto as Schedule 1.1(B).
"PROJECTIONS" means, with respect to any Person, the forecasted
consolidated and consolidating of such Person: (a) balance sheets; (b) profit
and loss statements; (c) cash flow statements; and (d) capitalization
statements, all prepared Subsidiary by Subsidiary basis and otherwise
consistent with such Person's historical financial statements, together with
appropriate supporting details and a statement of underlying assumptions.
"RELATED TRANSACTIONS" means the Acquisition, the execution and
delivery of the Related Transactions Documents, the funding of Term Loan A on
the Closing Date, the funding of the Subordinated Indebtedness, the repayment
of the Prior Indebtedness and the payment of all fees, costs and expenses
associated with all of the foregoing.
"RELATED TRANSACTIONS DOCUMENTS" means the Acquisition Documents, the
Loan Documents, the Subordinated Loan Documents and the Capitalization
Documents.
"RESTRICTED JUNIOR PAYMENT" means, with respect to any Person: (a) any
dividend or other distribution, direct or indirect, on account of any shares of
any class of stock, partnership interest or other equity security of such
Person or any of its Subsidiaries
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<PAGE> 16
now or hereafter outstanding, except a dividend payable solely in shares of
that class of stock to the holders of that class; (b) any redemption,
conversion, exchange, retirement, sinking fund or similar payment, purchase or
other acquisition for value, direct or indirect, of any shares of any class of
stock or other equity security of such Person or any of its Subsidiaries now or
hereafter outstanding; (c) any payment or prepayment of principal of, premium,
if any, or interest on, redemption, conversion, exchange, purchase, retirement,
defeasance, sinking fund or similar payment with respect to, any Subordinated
Indebtedness; and (d) any payment made to retire, or to obtain the surrender
of, any outstanding warrants, options or other rights to acquire shares of any
class of stock or other equity security of such Person or any of its
Subsidiaries now or hereafter outstanding.
"SECURITIES" means any stock, shares, partnership interests, voting
trust certificates, bonds, debentures, options, warrants, notes, or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as "securities" or any
certificates of interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire, any of the foregoing.
"SECURITY AGREEMENT" means the security agreement to be executed and
delivered by Borrower, in form and substance satisfactory to Lender.
"SECURITY DOCUMENTS" means all instruments, documents and agreements
executed by or on behalf of any Loan Party, Resources or Management
Shareholders to guarantee or provide collateral security with respect to the
Obligations and other transactions contemplated by this Agreement, including,
without limitation, the Guaranties, the Pledge Agreements, the Mortgages, the
Security Agreement and all instruments, documents and agreements executed
pursuant to the terms of the foregoing, including, without limitation, those
executed pursuant to the Security Agreement.
"SHAREHOLDERS AGREEMENT" means that certain Shareholder Agreement of
even date herewith among Borrower, First Wave, Management Shareholders and
Resources.
"SUBORDINATED INDEBTEDNESS" means the Indebtedness evidenced by the
Subordinated Note and all other Indebtedness of Borrower or any of its
Subsidiaries which is subordinated in right of payment to the Obligations.
"SUBORDINATED LOAN DOCUMENTS" means the Subordinated Note, the First
Wave Note, Subordination Agreement and all documents and instruments executed
in connection with any of the foregoing.
"SUBORDINATED NOTE" means that certain promissory note of even date
herewith in the amount of $8,534,000 made by Borrower payable to Shipholding,
in form and substance satisfactory to Lender.
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"SUBORDINATION AGREEMENT" means that certain Subordination and
Intercreditor Agreement of even date herewith among Lender, Shipholding, First
Wave and Borrower.
"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership, association or other business entity of which more than 50% of the
total voting power of shares of stock (or equivalent ownership or controlling
interest) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by that Person or one or more of
the other Subsidiaries of that Person or a combination thereof. A partnership
is a subsidiary of each general partner thereof.
"TERM LOAN A" means the advance made pursuant to subsection 2.1(A).
"TERM LOAN B" means the advance made pursuant to subsection 2.1(B).
"TERM NOTE A" means each promissory note of Borrower evidencing Term
Loan A.
"TERM NOTE B" means each promissory note of Borrower evidencing Term
Loan B.
"TERMINATION EVENT" means: (a) a "Reportable Event" described in
Section 4043 of ERISA and the regulations issued thereunder; or (b) the
withdrawal of any Corporate Loan Party or any ERISA Affiliate from a Pension
Plan during a plan year in which it was a "substantial employer" as defined in
Section 4001(a)(2) or 4068(f) of ERISA; or (c) the termination of a Pension
Plan, the filing of a notice of intent to terminate a Pension Plan or the
treatment of a Pension Plan amendment as a termination under Section 4041 of
ERISA; or (d) the institution of proceedings to terminate, or the appointment
of a trustee with respect to, any Pension Plan by the PBGC; or (e) any other
event or condition which would constitute grounds under Section 4042(a) of
ERISA for the termination of, or the appointment of a trustee to administer,
any Pension Plan; or (f) the partial or complete withdrawal of any Corporate
Loan Party or any ERISA Affiliate from a Multiemployer Plan; or (g) the
imposition of a Lien pursuant to Section 412 of the IRC or Section 302 of
ERISA; or (h) any event or condition which results in the reorganization or
insolvency of a Multiemployer Plan under Sections 4241 or 4245 of ERISA; or (i)
any event or condition which results in the termination of a Multiemployer Plan
under Section 4041A of ERISA or the institution by the PBGC of proceedings to
terminate a Multiemployer Plan under Section 4042 of ERISA.
"UCC" means the Uniform Commercial Code as in effect on the date
hereof in the State of Illinois, or as in effect in any jurisdiction in which
Collateral is located.
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1.2 ACCOUNTING TERMS; UTILIZATION OF GAAP FOR PURPOSES OF CALCULATIONS UNDER
AGREEMENT
For purposes of this Agreement, all accounting terms not otherwise defined
herein shall have the meanings assigned to such terms in conformity with GAAP.
Financial statements and other information furnished to Lender pursuant to
subsection 5.1 shall be prepared in accordance with GAAP as in effect at the
time of such preparation.
1.3 OTHER DEFINITIONAL PROVISIONS
References to "Sections", "subsections", "Exhibits" and "Schedules" shall
be to Sections, subsections, Exhibits and Schedules, respectively, of this
Agreement unless otherwise specifically provided. Any of the terms defined in
subsection 1.1 may, unless the context otherwise requires, be used in the
singular or the plural depending on the reference. In this Agreement,
"hereof," "herein," "hereto," "hereunder" and the like mean and refer to this
Agreement as a whole and not merely to the specific section, paragraph or
clause in which the respective word appears; words importing any gender include
the other genders; references to "writing" include printing, typing,
lithography and other means of reproducing words in a tangible visible form;
the words "including," "includes" and "include" shall be deemed to be followed
by the words "without limitation"; references to agreements and other
contractual instruments shall be deemed to include subsequent amendments,
assignments, and other modifications thereto, but only to the extent such
amendments, assignments and other modifications are not prohibited by the terms
of this Agreement or any other Loan Document; references to Persons include
their respective permitted successors and assigns or, in the case of
governmental Persons, Persons succeeding to the relevant functions of such
Persons; and all references to statutes and related regulations shall include
any amendments of same and any successor statutes and regulations.
SECTION 2
AMOUNTS AND TERMS OF LOANS
2.1 LOANS
(A) TERM LOAN A. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of
Borrower contained herein, Lender agrees to lend to Borrower on the
Closing Date Term Loan A. The aggregate amount of Term Loan A shall
be $11,800,000.00. Term Loan A shall be funded in one drawing.
Amounts borrowed under this subsection 2.1(A) and repaid may not be
reborrowed.
(B) TERM LOAN B. Subject to the terms and conditions of
this Agreement and in reliance upon the representations and warranties
of Borrower contained herein, Lender agrees to lend to Borrower on a
date no later than August 31, 1997 Term Loan B. The aggregate amount
of Term Loan B shall not exceed
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$600,000. Term Loan B shall be funded in one drawing. Amounts
borrowed under this subsection 2.1(B) and repaid may not be
reborrowed.
2.2 INTEREST
(A) RATE OF INTEREST. Term Loan A and all other
Obligations (other than Term Loan B) shall bear interest from the date
such Loans are made or such other Obligations become due to the date
paid at a fixed rate per annum equal to ten and forty-two one
hundredths percent (10.42%). Term Loan B shall bear interest from the
date such Loan is made to the date paid at a fixed rate per annum
equal to the sum of (i) the U.S. Treasury Note yield having a
maturity at least equal to, but not less than, the remaining term of
Term Loan A as of the date which is 3 Business Days prior to the
Funding Date of Term Loan B plus (ii) three and three quarters percent
(3.75%).
Notwithstanding the foregoing, at the election of Lender in
its sole discretion, after the occurrence of an Event of Default and
for so long as such Event of Default continues, the Loans and all
other Obligations shall bear interest until paid in full at a rate per
annum that is four percent (4.0%) in excess of the rate of interest
otherwise payable under this Agreement.
(B) COMPUTATION AND PAYMENT OF INTEREST. Interest on the
Loans and all other Obligations shall be computed on the basis of a
360-day year consisting of twelve (12) thirty (30) day months.
(C) INTEREST LAWS. Notwithstanding any provision to the
neither contrary contained in this Agreement or the other Loan
Documents, Borrower nor any other Loan Party (or Resources) shall be
required to pay, and Lender shall not be permitted to collect, any
amount of interest in excess of the maximum amount of interest
permitted by law ("Excess Interest"). If any Excess Interest is
provided for or determined by a court of competent jurisdiction to
have been provided for in this Agreement or in any of the other Loan
Documents, then in such event: (1) the provisions of this subsection
shall govern and control; (2) neither Borrower nor any other Loan
Party (or Resources) shall be obligated to pay any Excess Interest;
(3) any Excess Interest that Lender may have received hereunder shall
be, at Lender's option, (a) applied as a credit against the
outstanding principal balance of the Obligations or accrued and unpaid
interest (not to exceed the maximum amount permitted by law), (b)
refunded to the payor thereof, or (c) any combination of the
foregoing; (4) the interest rate(s) provided for herein shall be
automatically reduced to the maximum lawful rate allowed from time to
time under applicable law (the "Maximum Rate"), and this Agreement and
the other Loan Documents shall be deemed to have been and shall be,
reformed and modified to reflect such reduction; and (5) neither
Borrower nor any other Loan Party (or Resources) shall have any action
against Lender for any damages arising out of
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the payment or collection of any Excess Interest. Notwithstanding the
foregoing, if for any period of time interest on any Obligation is
calculated at the Maximum Rate rather than the applicable rate under
this Agreement, and thereafter such applicable rate becomes less than
the Maximum Rate, the rate of interest payable on such Obligations
shall remain at the Maximum Rate until each Lender shall have received
the amount of interest which such Lender would have received during
such period on such Obligations had the rate of interest not been
limited to the Maximum Rate during such period.
2.3 FEES
(A) PREPAYMENT FEES. If Borrower prepays the Obligations
in full or in part whether voluntarily, as a result of acceleration or
otherwise, Borrower shall pay to Lender as liquidated damages and
compensation for the costs of being prepared to make funds available
to Borrower under this Agreement, and not as a penalty, an amount
determined by multiplying the percentage set forth below by the sum of
the outstanding principal balance of the Term Loans at the date of
such prepayment or, in the case of a partial prepayment, the amount of
such prepayment: four percent (4%) for a prepayment during the first
Loan Year, three percent (3%) for a prepayment during the second Loan
year, two percent (2%) for a prepayment during the third Loan Year and
one percent (1%) for a prepayment during each Loan Year thereafter.
(B) FIXED RATE BREAKAGE FEE. Upon any prepayment of a
Loan (regardless of the source of such prepayment and whether
voluntary, by acceleration or otherwise), in addition to any other
prepayment fees due from Borrower, Borrower shall pay Lender, an
amount (the "Fixed Rate Breakage Fee" which for purposes hereof shall
not be less than zero) equal to the present value, for each remaining
year of the term of such prepaid Loan, of (1) the yield as reported on
the Closing Date, in the Federal Reserve statistical release H.15
(519) under the caption "U.S. Government Securities/Treasury Constant
Maturities" (hereinafter "H.15 (519)") for a Treasury Note with a term
equal to the Original Term on such Loan on the Closing Date (which
will be obtained by interpolating between the yield reported on the
H.15 (519) for specific whole years) on the date the Loan was funded
less (2) the yield as reported on the date of such prepayment in the
H.15 (519) for a Treasury Note with a term equal to that remaining on
such Loan (which will be obtained by interpolating between the yield
reported on the H.15 (519) for specific whole years) on the date of
such prepayment, multiplied by (a) the outstanding principal balance
of such Loan at the time of prepayment for purposes of calculating
such amount for the month during which such prepayment occurs and by
(b) the principal balance that would have been outstanding at the
beginning of each successive Loan Year in the remaining term of such
Loan had the amortization schedule set forth for such Loan been
adhered to; provided, that the rate determined in (2) above will be
used as the discount rate
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in computing such present value. The Fixed Rate Breakage Fee
represents Lender's reinvestment loss resulting from making a fixed
rate loan.
(C) LATE CHARGES. If payments of principal, interest or
any other amount due hereunder or under any of the other Loan
Documents are not timely made and remain overdue for a period of ten
(10) days, Borrower, without notice or demand by Lender, promptly
shall pay to Lender an amount equal to five percent (5%) of each
delinquent payment.
2.4 PAYMENTS AND PREPAYMENTS
(A) PAYMENTS.
(i) Interest on the outstanding principal balance of
Term Loan A from the Closing Date through August 31, 1996
shall be due and payable on September 3, 1996. Thereafter,
Borrower shall make consecutive monthly payments of principal
and interest with respect to Term Loan A, each in the amount
of $158,696. Each such payment shall be due and payable
monthly on the first day of each month commencing October 1,
1996 and continuing on the first day of each month thereafter.
(ii) Interest on the outstanding principal balance
of Term Loan B from the Funding Date of Term Loan B through
the last day of the month in which the Funding Date occurs
shall be due and payable on the first day of the month
immediately succeeding the month in which such Funding Date
occurs. Thereafter, Borrower will make consecutive monthly
payments of principal and interest with respect to Term Loan B
based on a ten (10) year amortization schedule utilizing the
interest rate calculated pursuant to subsection 2.2(A) with
respect to Term Loan B. Each such payment shall be due and
payable monthly on the first day of each month commencing on
the first day of the second month following the month in which
the Funding Date with respect to Term Loan B occurs and
continuing on the first day of each month thereafter.
(iii) The outstanding principal balances of Term
Loan A and Term Loan B and all accrued and unpaid interest
shall be due and payable on August 31, 2003 or any earlier
date on which the Obligations shall be required to be paid in
full, whether by acceleration or otherwise. In addition to
the foregoing, interest shall be payable on the date of
prepayment of any Loan, whether by acceleration or otherwise.
(B) MANNER AND TIME OF PAYMENT. All payments by Borrower
of the Obligations shall be made without deduction, defense, setoff or
counterclaim and in same day funds and delivered to Lender by wire
transfer to Lender's account, ABA No. 0710-0001-3, Account No. 5296404
at The First National Bank of Chicago, One First National Plaza,
Chicago, IL 60670,
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Reference: Commercial Equipment Finance Division Loan Account No.
192-0136 or at such other place as Lender may direct from time to time
by notice to Borrower. Borrower shall receive credit for such funds
on the date received if such funds are received by Lender by 12:00
noon (Chicago time) on such day. In the absence of timely receipt,
such funds shall be deemed to have been paid by Borrower on the next
succeeding Business Day. Borrower shall issue to the bank at which
Borrower maintains its depositary accounts an irrevocable direction to
pay to Lender automatically (via ACH debit) no later than the seventh
day of each month, the payments required to be made pursuant to
subsection 2.4(A). Such irrevocable direction may not be amended or
revoked without the prior written consent of Lender.
(C) PAYMENTS ON BUSINESS DAYS. Whenever any payment to
be made hereunder shall be stated to be due on a day that is not a
Business Day, the payment may be made on the next succeeding Business
Day and such extension of time shall be included in the computation of
the amount of interest or fees due hereunder.
(D) VOLUNTARY PREPAYMENTS AND REPAYMENTS. Borrower may,
upon at least thirty (30) day's prior written notice to Lender, prepay
the Loans in whole at any time or from time to time in part; provided
that (1) concurrently with such payment Borrower pays any fees due
under subsection 2.3, (2) Loans may be prepaid only on a day on which
a payment is scheduled to be made hereunder, (3) each partial
prepayment under the Loans shall be in the minimum principal of
$100,000 and (4) no partial prepayment shall be permitted if an Event
of Default has occurred and is continuing. After notice of prepayment
is given, the amount specified to be prepaid in such notice shall
become due and payable on the prepayment date.
(E) APPLICATION OF PREPAYMENTS. All prepayments under
Section 2.4 shall include payment of accrued interest, fees and
expenses and shall be applied to the payment of interest, fees and
expenses before application to principal. All payments of principal
shall be applied in inverse order of maturity.
SECTION 3
CONDITIONS TO LOANS
The obligations of Lender to make Loans are subject to satisfaction of
all of the applicable conditions set forth below.
3.1 CONDITIONS TO INITIAL LOANS
The obligations of Lender to fund Term Loan A on the Closing Date are,
in addition to the conditions precedent specified in subsection 3.2, subject to
the prior or concurrent satisfaction of the conditions set forth below.
(A) DELIVERIES. Lender shall have received the
documents, instruments, agreements and other deliveries set
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<PAGE> 23
forth in the Closing Agenda provided by Lender to Borrower, all of
which must be in form and substance satisfactory to Lender and duly
executed, notarized and delivered, as applicable.
(B) PURCHASE AGREEMENT AND EQUIPMENT LEASE. On the
Closing Date: (1) each of the Equipment Lease and the Purchase
Agreement shall be in full force and effect and no material term or
condition thereof shall have been amended, modified or waived after
the execution thereof except with the prior written consent of Lender;
(2) none of the parties to the Purchase Agreement and Equipment Lease
shall have failed to perform any material obligation or covenant
required by the Purchase Agreement and Equipment Lease to be performed
or complied with by it on or before the Closing Date. In addition,
all certificates, opinions and letters delivered in connection with
the Purchase Agreement and Equipment Lease shall be addressed to
Lender or accompanied by a written authorization from the person
delivering such certificate, opinion or letter stating that Lender may
rely on such document as though it were addressed to it.
(C) PERFORMANCE OF AGREEMENTS. Each of the Loan Parties
and Resources shall have performed in all material respects all
agreements which this Agreement provides shall be performed on or
before the Closing Date except as otherwise agreed to in writing by
Lender.
(D) SECURITY INTERESTS, UCC FILINGS AND STOCK
CERTIFICATES. Lender shall have received satisfactory evidence that
Lender has a valid and perfected first priority security interest in
the Collateral, subject only to Permitted Encumbrances. Borrower and
the other Loan Parties shall have delivered to or caused to be
delivered to Lender executed documents (including financing statements
under the UCC and other applicable documents under the laws of any
jurisdiction with respect to the perfection of Liens) as Lender may
deem necessary to perfect its security interests in the Collateral.
(E) TERMINATION OF PRIOR INDEBTEDNESS LIENS AND OTHER
LIENS. Lender shall have received a pay-off letter from each holder
of Prior Indebtedness, together with duly executed UCC-3 termination
statements, mortgage releases and such other instruments, in form and
substance satisfactory to Lender, as shall be necessary to terminate
and satisfy all Liens created pursuant to the Prior Indebtedness and
all other Liens except Permitted Encumbrances.
(F) INSURANCE POLICIES AND ENDORSEMENTS. Copies of
policies of insurance required to be maintained under this Agreement
and the other Loan Documents together with endorsements satisfactory
to Lender naming Lender as loss payee and additional insured under
such policies.
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3.2 CONDITIONS TO ALL LOANS
The obligations of Lender to fund Term Loan A and Term Loan B on each
Funding Date are subject to the further conditions precedent set forth below.
(A) The representations and warranties contained herein
and in the Loan Documents shall be true, correct and complete in all
material respects on and as of that Funding Date to the same extent as
though made on and as of that date, except for any representation or
warranty limited by its terms to a specific date and taking into
account any amendments to the Schedules or Exhibits as a result of any
disclosures made in writing by Borrower to Lender after the Closing
Date and approved by Lender.
(B) No event shall have occurred and be continuing or
would result from the consummation of the borrowing that would
constitute an Event of Default or a Default.
(C) No order, judgment or decree of any court, arbitrator
or governmental authority shall purport to enjoin or restrain Lender
from making any Loans.
3.3 CONDITIONS TO TERM LOAN B.
The obligations of Lender to fund Term Loan B is subject to the
further conditions precedent set forth below:
(A) The proceeds of Term Loan B shall be used solely to
purchase preferred stock of First Wave, which acquisition shall be on
terms and conditions acceptable to Lender. Lender shall have received
such information with respect to such acquisition as Lender shall
reasonably require.
(B) Lender shall have received written notice of the
request for disbursement of Term Loan B not less than sixty days (60)
prior to the requested Funding Date with respect thereto.
(C) Borrower shall have executed and delivered to Lender
a Term Note B in the amount of Term Loan B and with other appropriate
insertions and otherwise in form and substance similar to Term Note A.
(D) Borrower shall execute and deliver to Lender such
security agreements and financing statements as Lender shall require.
Lender shall have received a perfected first (or, in the event other
financing is involved, a second) priority security interest in the
equipment and other assets which are purchased by First Wave from the
proceeds of such acquisition and shall have received evidence of the
proper filing in all required filing offices of duly executed UCC
financing statements or amendments to existing financing statements
and other appropriate security instruments, including, if applicable,
mortgages or deeds of trusts with respect to real property.
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(E) There shall have occurred no adverse change or effect
upon the business, operations, properties, assets or condition
(financial or otherwise) of any Loan Party or Resources.
(F) Term Loan A shall not have been prepaid.
(G) The Funding Date with respect to Term Loan B shall be
no later than August 31, 1997.
(H) The conditions specified in subsection 7.3(c) shall
have been satisfied.
(I) Borrower shall have executed a pledge agreement, in
form and substance satisfactory to Lender, with respect to the
preferred stock of First Wave purchased with the proceeds of Term Loan
B.
SECTION 4
BORROWER'S REPRESENTATIONS AND WARRANTIES
In order to induce Lender to enter into this Agreement and to make Loans,
Borrower represents and warrants to Lender that the following statements are
and, after giving effect to the Related Transactions, will be true, correct and
complete:
4.1 ORGANIZATION, POWERS, CAPITALIZATION, GOOD STANDING, BUSINESS AND
SUBSIDIARIES
(A) ORGANIZATION AND POWERS. Each of the Corporate Loan
Parties is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or
formation (which jurisdiction is set forth on Schedule 4.1(A)). Each
of the Corporate Loan Parties has all requisite power and authority to
own and operate its properties, to carry on its business as now
conducted and proposed to be conducted, to enter into each Related
Transactions Document to which it is a party and to carry out the
Related Transactions.
(B) CAPITALIZATION. The authorized capital stock of each
of the Corporate Loan Parties which is a corporation is as set forth
on Schedule 4.1(B). All issued and outstanding shares of capital
stock of each of such Corporate Loan Parties are duly authorized and
validly issued, fully paid, nonassessable, free and clear of all Liens
other than, with respect to the capital stock of Borrower, those in
favor of Lender, and such shares were issued in compliance with all
applicable state and federal laws concerning the issuance of
securities. The capital stock of each of such Corporate Loan Parties
is owned by the stockholders and in the amounts set forth on Schedule
4.1(B). No shares of the capital stock of any such Corporate Loan
Party, other than those described above, are issued and outstanding.
Except as provided under Texas law, there are no preemptive or other
outstanding
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rights, options, warrants, conversion rights or similar agreements or
understandings for the purchase or acquisition from any Corporate Loan
Party of any shares of capital stock or other securities of any such
entity.
(C) QUALIFICATION. Each of the Corporate Loan Parties is
duly qualified and in good standing wherever necessary to carry on its
present business and operations. All jurisdictions in which each
Corporate Loan Party is qualified to do business are set forth on
Schedule 4.1(C).
(D) CONDUCT OF BUSINESS. On the date hereof and after
the consummation of the Related Transactions, the Loan Parties will be
engaged only in businesses of the type described on Schedule 4.1(D).
(E) SUBSIDIARIES. No Corporate Loan Party has any
Subsidiaries except as set forth on Schedule 4.1(E) and Schedule
4.1(E) accurately sets forth the percentage ownership of such
Corporate Loan Party, as applicable, of each of their respective
Subsidiaries.
4.2 AUTHORIZATION OF BORROWING, ETC.
(A) AUTHORIZATION OF BORROWING. Borrower has the power
and authority to incur the Indebtedness evidenced by the Notes. The
execution, delivery and performance of each of the Related
Transactions Documents and the consummation of the Related
Transactions by each Loan Party have been duly authorized by all
necessary corporate and shareholder action.
(B) NO CONFLICT. The execution, delivery and performance
by each Loan Party of each Related Transactions Document to which it
is a party and the consummation of the Related Transactions do not and
will not: (1) violate any provision of law applicable to such Loan
Party, the certificate or articles of incorporation or bylaws of any
Loan Party which is a corporation, or any order, judgment or decree of
any court or other agency of government binding on any Loan Party; (2)
conflict with, result in a breach of or constitute (with due notice or
lapse of time or both) a default under any Contractual Obligation of
any Loan Party; (3) result in or require the creation or imposition of
any material Lien upon any of the properties or assets of any Loan
Party (other than Liens in favor of Lender); or (4) require any
approval or consent of any Person under any Contractual Obligation of
any Loan Party which has not been obtained.
(C) GOVERNMENTAL CONSENTS. The execution, delivery and
performance by each Loan Party of each Related Transactions Document
to which it is a party, and the consummation of the Related
Transactions do not and will not require any registration with,
consent or approval of, or notice to, or other action to, with or by,
any federal, state or other governmental authority or regulatory body
except for filings required by federal or state securities laws (which
filings have been made and true and complete copies of which have been
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delivered to Lender), filings required in connection with the
perfection of security interests granted pursuant to the Loan
Documents, and other filings, authorizations, consents and approvals,
all of which have been made or obtained or the absence of which would
not have a Material Adverse Effect. The Hart-Scott-Rodino Antitrust
Improvements Act of 1976 does not apply to the Acquisition or the
purchase pursuant to the Equipment Lease.
(D) BINDING OBLIGATION. This Agreement is, and the
Acquisition Documents and the other Related Transactions Documents,
including the Notes, when executed and delivered will be, the legally
valid and binding obligations of the applicable Loan Parties,
respectively, each enforceable against the Loan Parties, as
applicable, in accordance with their respective terms.
(E) VALID ISSUANCE OF SECURITIES. Borrower has the power
and authority to incur the Indebtedness evidenced by the Subordinated
Note and to issue the Subordinated Note. Such Securities are the
legally valid and binding obligations of Borrower enforceable against
Borrower in accordance with their respective terms (including those
pertaining to subordination). Borrower has delivered to Lender a
complete and correct copy of the Subordinated Loan Documents and each
of the representations and warranties given by Borrower therein is
true and correct in all material respects. The subordination
provisions of the Subordinated Loan Documents will be enforceable
against the holders of the Subordinated Note by the holder of any
Notes which has not effectively waived the benefits thereof. All
obligations, including the Obligations to pay principal of and
interest on the Loans, constitute senior Indebtedness entitled to the
benefits of subordination created by the Subordinated Loan Documents.
The principal of and interest on the Notes and all other Obligations
will constitute "senior debt" as that or any similar term is or may be
used in any other instrument evidencing or applicable to any other
Subordinated Indebtedness of Borrower. Borrower acknowledges that
Lender is entering into this Agreement in reliance upon the
subordination provisions of the Subordinated Loan Documents and this
subsection 4.2(E).
4.3 FINANCIAL CONDITION
(A) FINANCIAL STATEMENTS. All financial statements
concerning a Loan Party which have been or will hereafter be furnished
by or on behalf of Borrower to Lender pursuant to this Agreement or
other Loan Documents, including those listed below, have been or will
be prepared in accordance with GAAP consistently applied (except as
disclosed therein) and do or will present fairly the financial
condition of the corporations covered thereby as at the dates thereof
and the results of their operations for the periods then ended.
(1) The consolidated balance sheets at December 31, 1994 and
December 31, 1995 and the related statements of
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income of Borrower and its Subsidiaries, for the fiscal years
then ended, certified by Grant Thornton.
(2) The consolidated balance sheet at March 31, 1996 and the
related statement of income of Borrower and its Subsidiaries
for the 3 months then ended.
(B) PRO FORMA. The Pro Forma of Borrower was prepared by
Borrower based on the unaudited consolidated balance sheet of Borrower
dated as of December 31, 1995 and was prepared in accordance with
GAAP, with only such adjustments thereto as would be required in
accordance with GAAP.
(C) PROJECTIONS. The Projections delivered and to be
delivered (including the Projections of Borrower annexed hereto as
Schedule 4.3) have been and will be prepared by Borrower in light of
the past operations of the business of Borrower and its Subsidiaries.
The Projections represent and will represent as of the date thereof
the good faith estimate of Borrower and its senior management
concerning the most probable course of its business.
4.4 INDEBTEDNESS AND CONTINGENT OBLIGATIONS
As of the Closing Date after giving effect to the Related
Transactions, no Corporate Loan Party has any Indebtedness or Contingent
Obligations except as set forth on Schedule 4.4.
4.5 NO MATERIAL ADVERSE CHANGE
Since December 31, 1995 there have been no events or changes in facts
or circumstances affecting any Loan Party which individually or in the
aggregate have had or would reasonably be expected to have a material adverse
effect.
4.6 TITLE TO PROPERTIES; LIENS
Each of the Loan Parties has good, sufficient and legal title, subject
to Permitted Encumbrances, to all their respective material properties and
assets. Except for Permitted Encumbrances, all such properties and assets are
free and clear of Liens. Schedule 4.6 sets forth all of the real property
owned by Borrower.
4.7 LITIGATION; ADVERSE FACTS
Except as set forth on Schedule 4.7, there are no judgments
outstanding against any Loan Party or affecting any property of any Loan Party,
nor is there any action, charge, claim, demand, suit, proceeding, petition,
governmental investigation or arbitration now pending or, to the best knowledge
of Borrower after due inquiry, threatened against any Loan Party, or affecting
any property of any Loan Party. No Loan Party has received any opinion or
memorandum or legal advice from legal counsel to the effect that it is exposed
to any liability or disadvantage which could reasonably be expected to result
in any Material Adverse Effect. The actions, charges, claims, demand, suits,
proceedings, petitions, investigations and arbitrations set forth on Schedule
4.7 or disclosed pursuant to
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subsection 5.1(K) will not result, if adversely determined, and could not
reasonably be expected to result, either individually or in the aggregate, in
any Material Adverse Effect and do not relate to and will not affect the
consummation of the Related Transactions.
4.8 PAYMENT OF TAXES
Except to the extent permitted by subsection 5.4, all material tax
returns and reports of each Loan Party and each of its Subsidiaries (and their
predecessors in interest) required to be filed by any of them have been timely
filed, and all taxes, assessments, fees and other governmental charges upon
such Persons and upon their respective properties, assets, income and
franchises which are shown on such returns as due and payable have been paid
when due and payable. None of the United States income tax returns of the Loan
Parties are under audit. No tax liens are outstanding and no claims are being
asserted with respect to any such taxes. The charges, accruals and reserves on
the books of the Loan Parties in respect of any taxes or other governmental
charges are in accordance with GAAP.
4.9 ADVERSE CONTRACTS
None of the Loan Parties and none of their respective Subsidiaries is
a party to nor is it or any of its property subject to or bound by any forward
purchase contract, futures contract, covenant not to compete, unconditional
purchase, take or pay or other agreement which restricts its ability to conduct
its business or, either individually or in the aggregate, has a Material
Adverse Effect or could reasonably be expected to have a Material Adverse
Effect.
4.10 PERFORMANCE OF AGREEMENTS
None of the Loan Parties and none of their respective Subsidiaries is
in default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any Contractual Obligation of
any such Person, and no condition exists that, with the giving of notice or the
lapse of time or both, would constitute such a default.
4.11 GOVERNMENTAL REGULATION
None of the Loan Parties and none of their respective Subsidiaries is,
or after giving effect to any loan will be, subject to regulation under the
Public Utility Holding Company Act of 1935, the Federal Power Act or the
Investment Company Act of 1940 or to any federal or state statute or regulation
limiting its ability to incur indebtedness for borrowed money.
4.12 EMPLOYEE BENEFIT PLANS
(A) NO OTHER PLANS. No Corporate Loan Party nor any
ERISA Affiliate maintains or contributes to, or has any obligation
under, any Employee Benefit Plans other than those identified on
Schedule 4.12.
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(B) ERISA AND IRC COMPLIANCE AND LIABILITY. Each
Corporate Loan Party, and each ERISA Affiliate is in compliance with
all applicable provisions of ERISA and the regulations and published
interpretations thereunder with respect to all Employee Benefit Plans
except where failure to comply would not result in a material
liability to any Corporate Loan Party and except for any required
amendments for which the remedial amendment period as defined in
Section 401(b) of the Code has not yet expired. Each Employee Benefit
Plan that is intended to be qualified under Section 401(a) of the IRC
has been determined by the Internal Revenue Service ("IRS") to be so
qualified, and each trust related to such plan has been determined to
be exempt under Section 501(a) of the IRC. No material liability has
been incurred by any Corporate Loan Party, or ERISA Affiliate which
remains unsatisfied for any taxes or penalties with respect to any
Employee Benefit Plan or any Multiemployer Plan.
(C) FUNDING. No Pension Plan has been terminated, nor
has any accumulated funding deficiency (as defined in Section 412 of
the IRC) been incurred (without regard to any waiver granted under
Section 412 of the IRC), nor has any funding waiver from the IRS been
received or requested with respect to any Pension Plan, nor has any
Corporate Loan Party, or any ERISA Affiliate failed to make any
contributions or to pay any amounts due and owing as required by
Section 412 of the IRC, Section 302 of ERISA or the terms of any
Pension Plan prior to the due dates of such contributions under
Section 412 of the IRC or Section 302 of ERISA, nor has there been any
event requiring any disclosure under Section 4041(c)(3)(C), 4063(a) or
4068(f) of ERISA with respect to any Pension Plan.
(D) PROHIBITED TRANSACTIONS AND PAYMENTS. No Corporate
Loan Party nor any ERISA Affiliate has: (1) engaged in a nonexempt
prohibited transaction described in Section 406 of ERISA or Section
4975 of the IRC; (2) incurred any liability to the PBGC which remains
outstanding other than the payment of premiums and there are no
premium payments which are due and unpaid; (3) failed to make a
required contribution or payment to a Multiemployer Plan; or (4)
failed to make a required installment or other required payment under
Section 412 of the IRC.
(E) NO TERMINATION EVENT. No Termination Event has
occurred or is reasonably expected to occur.
(F) ERISA LITIGATION. No material proceeding, claim,
lawsuit and/or investigation is existing or, to the best knowledge of
Borrower after due inquiry, threatened concerning or involving any (1)
employee welfare benefit plan (as defined in Section 3(1) of ERISA)
currently maintained or contributed to by any Corporate Loan Party, or
any ERISA Affiliate, (2) Pension Plan or (3) Multiemployer Plan.
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4.13 INTELLECTUAL PROPERTY
Each Loan Party owns, is licensed to use or otherwise has the right to
use, all patents, trademarks, trade names, copyrights, technology, know-how and
processes used in or necessary for the conduct of its business as currently
conducted that are material to the condition (financial or other), business or
operations of such Person (collectively called "Intellectual Property") and all
such Intellectual Property is identified on Schedule 4.13 and fully protected
and/or duly and properly registered, filed or issued in the appropriate office
and jurisdictions for such registrations, filing or issuances. All
Intellectual Property that is registered or for which application for
registration is pending is identified on Schedule 4.13. Except as disclosed in
Schedule 4.13, no material claim has been asserted by any Person with respect
to the use of any Intellectual Property, or challenging or questioning the
validity or effectiveness of any Intellectual Property. Except as disclosed in
Schedule 4.13, the use of such Intellectual Property by such Person does not
infringe on the rights of any Person, subject to such claims and infringements
as do not, in the aggregate, give rise to any liabilities on the part of such
Person that are material to such Person.
4.14 BROKER'S FEES
No closing, broker's or finder's fee, commission, compensation,
reimbursement or other similar payment will be payable with respect to the
issuance and sale of the Notes, consummation of the Acquisition, the purchase
pursuant to the Equipment Lease or any of the other transactions contemplated
hereby or by any Related Transactions Documents. Except for reimbursements of
out-of-pocket expenses to Eakin & Company, Ltd. approved in writing by Lender,
no fee, commission, compensation, reimbursement or other payment will be paid
or payable by or to any Loan Party or any Affiliate thereof for any other
services rendered to Borrower or any of its Subsidiaries ancillary to the
transactions contemplated hereby.
4.15 ENVIRONMENTAL COMPLIANCE
(A) NO ENVIRONMENTAL CLAIMS. Except as set forth on
Schedule 4.15(A), there are no claims, liabilities, investigations,
litigation, administrative proceedings, whether pending or threatened,
or judgments or orders relating to any Hazardous Materials
(collectively called "Environmental Claims") asserted or threatened
against any Loan Party or relating to any real property currently or
formerly owned, leased or operated by any Loan Party. No Loan Party
or any other Person has caused or permitted any Hazardous Material to
be used, generated, reclaimed, transported, released, treated, stored
or disposed of in a manner which could form the basis for an
Environmental Claim against any Loan Party. Except as set forth on
Schedule 4.15(A), no Loan Party has assumed (by contract or by
operation of law) any liability of any Person for cleanup, remediation
compliance or required Capital Expenditures in connection with any
Environmental Claim. The items disclosed pursuant to this subsection
4.15(A) could not
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reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect.
(B) STORAGE OF HAZARDOUS MATERIALS. Except as set forth
on Schedule 4.15(B), no Hazardous Materials are or were stored or
otherwise located, and no underground storage tanks or surface
impoundments are or were located, on real property currently or
formerly owned, leased or operated by any Loan Party or to the best
knowledge of Borrower after due inquiry, on adjacent parcels of real
property, and no part of such real property or, to the best knowledge
of Borrower after due inquiry, no part of such adjacent parcels of
real property, including the groundwater located thereon, is presently
contaminated by Hazardous Materials. The items disclosed pursuant to
this subsection 4.15(B) could not reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect.
(C) COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as set
forth on Schedule 4.15(C), each Loan Party has been and is currently
in compliance with all applicable Environmental Laws, including
obtaining and maintaining in effect all permits, licenses or other
authorizations required by applicable Environmental Laws. The items
disclosed pursuant to this subsection 4.15(C) will not, either
individually or in the aggregate, have a Material Adverse Effect.
4.16 EMPLOYEE MATTERS
Except as set forth on Schedule 4.16, (a) no Loan Party nor any of
their respective employees is subject to any collective bargaining agreement,
(b) no petition for certification or union election is pending with respect to
the employees of any Loan Party and no union or collective bargaining unit has
sought such certification or recognition with respect to the employees of any
Loan Party and (c) there are no strikes, slowdowns, work stoppages or
controversies pending or, to the best knowledge of Borrower after due inquiry,
threatened between any Loan Party and its respective employees, other than
employee grievances arising in the ordinary course of business which could not
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect. Except as set forth on Schedule 4.16, neither of
Borrower nor any of its Subsidiaries is subject to an employment contract.
4.17 SOLVENCY
As of and from and after the date of this Agreement and after giving
effect to the consummation of the Related Transactions, Borrower: (a) owns and
will own assets the fair saleable value of which are (i) greater than the total
amount of liabilities (including contingent liabilities) of such Loan Party and
(ii) greater than the amount that will be required to pay the probable
liabilities of such Loan Party's then existing debts as they become absolute
and matured considering all financing alternatives and potential asset sales
reasonably available to such Loan Party; (b) has capital that is not
unreasonably small in relation to its
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business as presently conducted or any contemplated or undertaken transaction;
and (c) does not intend to incur and does not believe that it will incur debts
beyond its ability to pay such debts as they become due.
4.18 DISCLOSURE
No representation or warranty of any Loan Party contained in this
Agreement, the financial statements referred to in subsection 4.3, the other
Related Transactions Documents or any other document, certificate or written
statement furnished to Lender by or on behalf of any such Person for use in
connection with the Loan Documents or the Related Transactions Documents
contain any untrue statement of a material fact or omitted, omits or will omit
to state a material fact necessary in order to make the statements contained
herein or therein not misleading in light of the circumstances in which the
same were made. The Projections and pro forma financial information contained
in such materials are based upon good faith estimates and assumptions believed
by such Persons to be reasonable at the time made, it being recognized by
Lender that such projections as to future events are not to be viewed as facts
and that actual results during the period or periods covered by any such
projections may differ from the projected results. There is no material fact
known to Borrower that has had or will have a Material Adverse Effect and that
has not been disclosed herein.
4.19 USE OF PROCEEDS AND MARGIN SECURITY
Borrower shall use the proceeds of all Loans and the Subordinated Note
for proper business purposes (as described in the recitals to this Agreement)
consistent with all applicable laws, statutes, rules and regulations and, with
respect to Term Loan A, as described in Schedule 1.1(A). Schedule 1.1(A)
completely and accurately describes the indebtedness or other obligations being
paid with proceeds of Term Loan A. No portion of the proceeds of any Loan
shall be used by Borrower or any of its Subsidiaries in any manner that might
cause the borrowing or the application of such proceeds to violate Regulation
G, Regulation U, Regulation T or Regulation X or any other regulation of the
Board of Governors of the Federal Reserve System or to violate the Exchange
Act.
4.20 REPRESENTATIONS AND WARRANTIES FROM THE PURCHASE AGREEMENT.
(A) BORROWER WARRANTIES. Borrower represents and
warrants that each of the representations and warranties given by each
party to the Purchase Agreement are true and correct in all material
respects as of the date hereof and as of the Closing Date, and such
representations and warranties are hereby incorporated herein by this
reference as of such dates with the same effect as though set forth in
their entirety herein.
(B) SURVIVAL. The representations and warranties of each
party to the Purchase Agreement incorporated in this Agreement by
subsection 4.20(A) shall, solely for the purposes of this Agreement,
survive the execution and delivery of the
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Purchase Agreement, the execution and delivery of this Agreement, the
making of the Loans hereunder and the execution and delivery of the
Notes.
4.21 COMPLIANCE WITH LAWS
Each Loan Party and each of their respective Subsidiaries are not in
violation of any law, ordinance, rule, regulation, order, policy, guideline or
other requirement of any domestic or foreign government or any instrumentality
or agency thereof, having jurisdiction over the conduct of their respective
businesses or the ownership of their respective properties, including, without
limitation, any violation relating to any use, release, storage, transport or
disposal of any Hazardous Material, which violation would subject any Loan
Party or any such Subsidiary, or any of their respective officers to criminal
liability or could reasonably be expected to have, either individually or
together with all such other violations, a Material Adverse Effect and no such
violation has been alleged. Each Loan Party has filed in a timely manner all
reports, documents and other materials required to be filed by them with any
governmental bureau, agency or instrumentality (and the information contained
in each of such filings is true, correct and complete in all respects), except
where failure to make such filings would not have a Material Adverse Effect.
Each Loan Party has retained all records and documents required to be retained
by it pursuant to any law, ordinance, rule, regulation, order, policy,
guideline or other requirement of any governmental authority, except where
failure to retain such records would not subject any Loan Party or such
Subsidiary or any of their respective officers to criminal liability and could
not reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect.
4.22 INVESTMENTS
Borrower does not have an Investment in any Person other than
Investments permitted under subsection 7.3.
4.23 TITLE
Borrower has legal title to all of the real and personal property set
forth in the appraisal prepared by Bullitt-Hutchins, Inc. entitled "An
Appraisal of Newpark Shipbuilding and Repair, Located at 8502 Cypress, Houston,
Harris County, Texas" dated as of July 15, 1996 and the appraisal prepared by
J. R. Bencal & Associates, Inc. dated July 12, 1996 and entitled Newpark
Shipbuilding & Repair, Inc. Appraisal-Drydocks and Marine Related Equipment.
4.24 INSURANCE
Schedule 4.24 sets forth a complete and accurate description of all
policies of insurance that will be in effect as of the Closing Date for
Borrower and its Subsidiaries. Borrower and its Subsidiaries are adequately
insured under such policies, no notice of cancellation has been received with
respect to such policies and Borrower and its Subsidiaries are in compliance
with all conditions contained in such policies.
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SECTION 5
BORROWER'S AFFIRMATIVE COVENANTS
Borrower covenants and agrees that until payment in full of all
Obligations, unless Lender shall otherwise give its prior written consent,
Borrower shall perform and comply with, and shall cause each of its
Subsidiaries to perform and comply with, all covenants in this Section 5
applicable to such Person.
5.1 FINANCIAL STATEMENTS AND OTHER REPORTS
Borrower will maintain, and cause each of its Subsidiaries to
maintain, a system of accounting established and administered in accordance
with sound business practices to permit preparation of financial statements in
conformity with GAAP. Borrower will deliver to Lender the financial statements
and other reports described below.
(A) INTERIM FINANCIALS. As soon as available and in any
event within sixty (60) days after the end of each quarter and, if
requested by Lender, within thirty-five (35) days after the end of
each month, Borrower will deliver the consolidated and consolidating
balance sheet of Borrower (showing intercompany eliminations), as at
the end of such period and the related consolidated and consolidating
statements of income (showing intercompany eliminations),
stockholders' equity. At Lender's request, Borrower shall deliver
statements of cash flow for such period and for the period from the
beginning of the then current fiscal year to the end of such period.
(B) YEAR-END FINANCIALS. As soon as available and in any
event within one hundred and ten (110) days after the end of each
Fiscal Year, Borrower will deliver: (1) the consolidated balance sheet
of Borrower as at the end of such year and the related consolidated
statements of income, stockholders' equity and cash flow for such
fiscal year; (2) a schedule of the outstanding Indebtedness for
borrowed money of Borrower and its Subsidiaries describing in
reasonable detail each such debt issue or loan outstanding and the
principal amount and amount of accrued and unpaid interest with
respect to each such debt issue or loan; (3) a report with respect to
the financial statements from Grant Thornton or a Big Six Accounting
Firm selected by Borrower, or other firm of independent certified
public accountants acceptable to Lender, which report shall be without
Qualification and shall state that (a) such consolidated financial
statements present fairly the consolidated financial position of
Borrower and its Subsidiaries as at the dates indicated and the
results of their operations and cash flow for the periods indicated in
conformity with GAAP applied on a basis consistent with prior years
and (b) that the examination by such accountants in connection with
such consolidated financial statements has been made in accordance
with generally accepted auditing standards; and (4) copies of the
consolidating financial
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statements of Borrower and its Subsidiaries, including (a)
consolidating balance sheets of Borrower and its Subsidiaries as at
the end of such Fiscal Year showing intercompany eliminations and (b)
related consolidating statements of earnings of Borrower and its
Subsidiaries showing intercompany eliminations. As used in this
subsection 5.1(B), "Qualification" means, with respect to any
certificate covering financial statements, a qualification to such
certificate (such as a "subject to" or "except for" statement or
emphasis paragraph therein) (a) resulting from a limitation on the
scope of examination of such financial statements or the underlying
data, (b) as to the capability of the Person whose financial
statements are certified to continue operations as a going concern, or
(c) which could be eliminated by changes in financial statements or
notes thereto covered by such certificate (such as by the creation of
or increase in a reserve or a decrease in the carrying value of
assets) and which if so eliminated by the making of any such change
and after giving effect thereto would occasion a Default or an Event
of Default; provided that, without limitation, neither of the
following shall constitute a Qualification: (x) a consistency
exception relating to a change in accounting principles with which the
independent public accountants for the Person whose financial
statements are being certified have concurred, or (y) a qualification
relating to the outcome or disposition of threatened litigation,
pending litigation being contested in good faith, pending or
threatened claims or other contingencies, the impact of which
litigation, claims or contingencies cannot be determined with
sufficient certainty to permit quantification in such financial
statements.
(C) BORROWER COMPLIANCE CERTIFICATE. Together with each
delivery of financial statements of Borrower and its Subsidiaries
pursuant to subdivisions (A) and (B) above, Borrower will deliver a
fully and properly completed Compliance Certificate signed by the
chief executive officer or chief financial officer of Borrower's
general partner.
(D) ACCOUNTANTS' CERTIFICATION. Together with each
delivery of consolidated financial statements of Borrower and its
Subsidiaries pursuant to subsection 5.1(B), Borrower will deliver a
written statement by its independent certified public accountants (a)
stating that the examination has included a review of the terms of
this Agreement as same relate to accounting matters and (b) stating
whether, in connection with the examination, any condition or event
that constitutes a Default or an Event of Default has come to their
attention and, if such a condition or event has come to their
attention, specifying the nature and period of existence thereof.
(E) ACCOUNTANTS' REPORTS. Promptly upon receipt thereof,
Borrower will deliver copies of all significant reports submitted to
Borrower by independent public accountants in connection with each
annual, interim or special audit of the financial statements of
Borrower made by such
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accountants, including the comment letter submitted by such
accountants to management in connection with their annual audit.
(F) APPRAISALS. From time to time, if Lender determines
that obtaining appraisals is necessary in order to comply with
applicable laws or regulations, Lender will obtain appraisal reports
in form and substance and from appraisers satisfactory to Lender
stating the then current fair market values of all or any portion of
the real estate owned by Borrower or any of its Subsidiaries. In
addition, not more than once each Loan Year prior to an Event of
Default and at any time while and so long as an Event of Default shall
have occurred and be continuing, Borrower, at Lender's request, will
obtain and deliver to Lender appraisal reports in form and substance
and from appraisers satisfactory to Lender, stating (1) the then
current fair market and orderly liquidation values of all or any
portion of the equipment and real estate owned by Borrower or any of
its Subsidiaries and (2) the then current business value of Borrower
or any of its Subsidiaries.
(G) PROJECTIONS. At Lender's request, Borrower will
deliver promptly Projections of Borrower and its Subsidiaries for the
current and forthcoming three Fiscal Years, year by year, and for the
current and forthcoming Fiscal Year, month by month.
(H) SEC FILINGS AND PRESS RELEASES. Promptly upon their
becoming available, Borrower will deliver copies of: (1) all financial
statements, reports, notices and proxy statements sent or made
available by Borrower to its security holders; (2) all regular and
periodic reports and all registration statements and prospectuses, if
any, filed by Borrower with any securities exchange or with the
Securities and Exchange Commission or any governmental or private
regulatory authority; and (3) all press releases and other statements
made available by Borrower to the public concerning developments in
the business of any such Person.
(I) SUBORDINATED INDEBTEDNESS NOTICES. Borrower shall
promptly deliver copies of all notices given or received by Borrower
with respect to Subordinated Indebtedness, including those with
respect to noncompliance with any term or condition related to any
Subordinated Indebtedness, and shall notify Lender within two (2)
Business Days of any potential or actual event of default with respect
to any Subordinated Indebtedness.
(J) EVENTS OF DEFAULT, ETC. Promptly upon any officer of
Borrower obtaining knowledge of any of the following events or
conditions, Borrower shall deliver a certificate of Borrower's chief
executive officer specifying the nature and period of existence of
such condition or event and what action Borrower has taken, is taking
and proposes to take with respect thereto: (1) any condition or event
that constitutes an Event of Default or Default; (2) any notice that
any Person has given to Borrower or any of its Subsidiaries or any
other
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action taken with respect to a claimed default or event or condition
of the type referred to in subsection 8.1(B); or (3) any Material
Adverse Effect.
(K) LITIGATION. Promptly upon any officer of Borrower
obtaining knowledge of (1) the institution of any action, suit,
proceeding, governmental investigation or arbitration not previously
disclosed by Borrower to Lender against or affecting any Loan Party or
any property of any Loan Party or (2) any material development in any
action, suit, proceeding, governmental investigation or arbitration at
any time pending against or affecting any Loan Party or any property
of any Loan Party which, in each case, is reasonably likely to have a
Material Adverse Effect, Borrower will promptly give notice thereof
to Lender and provide such other information as may be reasonably
available to them to enable Lender and its counsel to evaluate such
matter.
(L) EMPLOYEE BENEFIT PLANS. With reasonable promptness,
and in any event within thirty (30) days, Borrower will give notice of
and/or deliver to Lender copies of: (1) the establishment of any new
Employee Benefit Plan, Pension Plan or Multiemployer Plan the
commencement of contributions to any Employee Benefit Plan, Pension
Plan or Multiemployer Plan to which any Corporate Loan Party or any of
its ERISA Affiliates was not previously contributing or any increase
in the benefits of any existing Employee Benefit Plan, Pension Plan or
Multiemployer Plan; (2) each funding waiver request filed with respect
to any Employee Benefit Plan and all communications received or sent
by any Corporate Loan Party or any ERISA Affiliate with respect to
such request; and (3) the failure of any Corporate Loan Party or ERISA
Affiliate to make a required installment or payment under Section 302
of ERISA or Section 412 of the IRC by the due date.
(M) TERMINATION EVENTS. Promptly and in any event within
ten (10) days of becoming aware of the occurrence of or forthcoming
occurrence of any (1) Termination Event or (2) "prohibited
transaction", as such term is defined in Section 406 of ERISA or
Section 4975 of the IRC, in connection with any Pension Plan or any
trust created thereunder, Borrower will deliver to Lender a notice
specifying the nature thereof, what action the applicable Corporate
Loan Party has taken, is taking or proposes to take with respect
thereto and, when known, any action taken or threatened by the
Internal Revenue Service, the Department of Labor or the PBGC with
respect thereto.
(N) ERISA NOTICES. With reasonable promptness but in any
event within ten (10) days for purposes of clauses (1), (2) and (3),
Borrower will deliver to Lender copies of: (1) any favorable or
unfavorable determination letter from the Internal Revenue Service
regarding the qualification of an Employee Benefit Plan under Section
401(a) of the IRC; (2) all notices received by any Corporate Loan
Party or any ERISA Affiliate of the PBGC's intent to terminate any
Pension Plan or to have a trustee appointed to administer any Pension
Plan;
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(3) each Schedule B (Actuarial Information) to the annual report (Form
5500 Series) filed by any Corporate Loan Party or any ERISA Affiliate
with the Internal Revenue Service with respect to each Pension Plan;
and (4) all notices received by any Corporate Loan Party or any ERISA
Affiliate from a Multiemployer Plan sponsor concerning the imposition
or amount of withdrawal liability pursuant to Section 4202 of ERISA.
Borrower will notify Lender in writing within two (2) Business Days of
any Corporate Loan Party obtaining knowledge or reason to know that
any Corporate Loan Party or any ERISA Affiliate has filed or intends
to file a notice of intent to terminate any Pension Plan under a
distress termination within the meaning of Section 4041(c) of ERISA.
(O) INSURANCE. Within the sixty (60) day period prior to
the end of each Fiscal Year of Borrower, Borrower will deliver a
report in form and substance reasonably satisfactory to Lender
outlining all material insurance coverage maintained as of the date of
such report by Borrower and its Subsidiaries and all material
insurance coverage planned to be maintained by such Persons in the
subsequent Fiscal Year.
(P) SUPPLEMENTED SCHEDULES; NOTICE OF CORPORATE CHANGES.
At Lender's request, Borrower shall supplement in writing and deliver
to Lender revisions of the Schedules annexed to this Agreement to the
extent necessary to disclose new or changed facts or circumstances
after the Closing Date; provided that subsequent disclosures shall not
constitute a cure or waiver of any Default or Event of Default
resulting from the matters disclosed. Borrower shall provide written
notice to Lender of (1) all jurisdictions in which a Corporate Loan
Party becomes qualified after the Closing Date to transact business,
(2) any material change after the Closing Date in the authorized and
issued capital stock or other equity interests of any Corporate Loan
Party or any of their respective Subsidiaries or any other material
amendment to their charter, by-laws or other organization documents
and (3) any Subsidiary created or acquired by any Corporate Loan Party
after the Closing Date, such notice, in each case, to identify the
applicable jurisdictions, capital structures or Subsidiaries, as
applicable.
(Q) TAX RETURNS. As soon as available and in any event
not later than thirty (30) days after the filing thereof, Borrower
will cause to be delivered to Lender the first 2 pages of executed IRS
Form 1040 (or its equivalent) and all Form W-2's and Form 1099's for
each of Frank Eakin and David Ammons.
(R) TAX RETURNS AND FINANCIAL STATEMENTS. As soon as
available and in any event not later than thirty (30) days after the
filing thereof, Borrower will cause to be delivered to Lender complete
executed (i) tax returns for (a) Borrower, if any, and (b) First Wave
so long as First Wave files consolidated returns which include
Borrower, which tax returns shall be accompanied by an explanation of
Borrower's tax liability in connection with such tax return, and (ii)
IRS
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Form 1040 (or its equivalent) for Eakin, which tax return shall be
accompanied by complete personal financial statements of Eakin
certified by Eakin as true, correct and complete copies, for each year
during the term hereof.
(S) MANAGEMENT REPORT. Together with each delivery of
financial statements of Borrower and its Subsidiaries pursuant to
subdivisions (A) and (B) of this subsection 5.1, Borrower will deliver
a management report: (1) describing the operations and financial
condition of Borrower and its Subsidiaries for the period then ended
and the portion of the current fiscal year then elapsed (or for the
Fiscal Year then ended in the case of year-end financials); (2)
setting forth in comparative form the corresponding figures for the
corresponding periods of the previous Fiscal Year and the
corresponding figures from the most recent Projections for the current
Fiscal Year delivered to Lender pursuant to 5.1(G), if any; and (3)
discussing the reasons for any significant variations. The
information above shall be presented in reasonable detail and shall be
certified by the chief financial officer of Borrower to the effect
that such information fairly presents the results of operations and
financial condition of Borrower and its Subsidiaries as at the dates
and for the periods indicated.
(T) OTHER INFORMATION. With reasonable promptness,
Borrower will deliver such other information and data with respect to
any Loan Party or any Subsidiary of any Loan Party as from time to
time may be reasonably requested by Lender.
5.2 ACCESS TO ACCOUNTANTS
Borrower authorizes Lender to discuss the financial condition of
Borrower and its Subsidiaries with Borrower's independent public accountants
upon reasonable notice to Borrower of its intention to do so. Borrower shall
be given the reasonable opportunity to participate in any such discussion. At
Lender's request, Borrower shall deliver a letter to such accountants
authorizing them to comply with the provisions of subsection 5.1 and this
subsection 5.2.
5.3 CORPORATE EXISTENCE, ETC.
Except as otherwise permitted by Section 7.6, Borrower will, and will
cause each of its Subsidiaries to, at all times preserve and keep in full force
and effect its corporate existence and all rights and franchises material to
its business.
5.4 PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION
Borrower will, and will cause each of its Subsidiaries to, pay (a) all
taxes, assessments and other governmental charges imposed upon it or any of its
properties or assets or with respect to any of its franchises, business, income
or property before any penalty accrues thereon and (b) all claims (including
claims for labor, services, materials and supplies) for sums that have become
due and payable and that by law have or may become a Lien upon any of its
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properties or assets before any penalty or fine is incurred with respect
thereto; provided that no such tax, charge or claim need be paid if Borrower or
one of its Subsidiaries is contesting same in good faith by appropriate
proceedings promptly instituted and diligently conducted and if Borrower or
such Subsidiary has established a reserve with respect to such tax, charge or
claim, or other appropriate provision, if any, as shall be required in
conformity with GAAP.
5.5 MAINTENANCE OF PROPERTIES; INSURANCE
(A) Borrower will maintain or cause to be maintained in
good repair, working order and condition and in compliance with all
applicable laws, rules, regulations and manufacturer's basic warranty,
extended warranty and/or maintenance programs, all properties used in
the business of Borrower and its Subsidiaries and will make or cause
to be made all appropriate repairs, renewals and replacements thereof.
Any alteration or modification that may at any time be required to
comply with any applicable law, rule, regulation, warranty or
maintenance program shall promptly be made by Borrower.
(B) With respect to Borrower's business and properties
and the business and properties of its Subsidiaries, Borrower will
maintain or cause to be maintained, with financially sound and
reputable insurers, the following coverages with the following limits:
(1) "Special Form" Physical Damage insurance
including windstorm, flood insurance if the property is
located within a federal mandated Flood Area and earthquake
insurance if the property is located within an earthquake
zone. Such insurance shall be written for the full
replacement cost of the property as determined by Borrower and
Lender.
(2) Business Interruption insurance for at least
6 months of net income before income of Borrower taxes plus
continuing expenses of Borrower.
(3) Commercial general liability insurance,
including products/completed operations, ship repairers legal
liability and contractual liability, insuring the
indemnification provisions contained in this Agreement, in an
amount not less than $5,000,000 per occurrence.
(4) Hull and machinery insurance with respect to
any vessels owned or operated by Borrower. Such insurance
shall be written on a form at least as broad as the American
Institute Hull Clauses (June 2, 1977) and shall be written on
an agreed value basis in an amount not less than the greater
of the current Casualty Loss Value of each such vessel or the
full commercial value of each such vessel.
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(5) Protection and Indemnity (P&I) insurance and
water quality insurance (in accordance with the Oil Pollution
Act and the Water Pollution Control Act) or equivalent
insurance with respect to each vessel owned or operated by
Borrower except for the NP Sunshade, Official No. 504633.
(6) Workers Compensation (not included in P&I)
with statutory limits coverage and employer's liability
insurance with limits not less than $5,000,000 for each
accident.
Each policy set forth above shall contain the following provisions:
(1) With respect to property, business
interruption and hull and machinery insurance, Lender shall be
named by endorsement as mortgagee/loss payee.
(2) With respect to commercial general liability,
umbrella/excess liability, protection and indemnity and water
quality insurance, Lender shall be named by endorsement as
additional insured.
(3) Such insurance shall not be invalidated and
shall protect the interests of Lender/additional insureds
regardless of any action or inaction of Borrower or any other
insured whether or not such action or inaction is a breach or
violation of any warranties, declarations or conditions.
(4) Such insurance as is afforded the additional
insureds shall be primary and without any right of
contribution from any insurance which is carried by the
additional insureds. Any insurance carried by the additional
insureds shall be deemed to be excess insurance and solely for
the benefit of said additional insureds.
(5) With respect to insurance as is afforded
additional insureds, the inclusion of more than one
corporation, person, organization, firm or entity as insured
or additional insured under the policies shall not in any way
affect the rights of any such corporation, person,
organization, firm, or entity with respect to any claim,
demand, suit, or judgement made, brought or recovered by or in
favor of any other insured or additional insured. The policy
shall protect each corporation, person, organization, firm or
entity in the same manner as though a separate policy had been
issued to each, but nothing herein shall operate to increase
the insurer's limit of liability as set forth in the policy.
(6) All insurance shall provide for 30 days prior
written notice from the underwriter or the insurance broker to
Lender of any cancellation or material change.
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Prior to the commencement of this Agreement and on or before the
expiration of each insurance policy, the insurance broker and/or
insurance company shall issue:
(1) Evidence of property insurance for property,
business interruption and hull and machinery insurance,
reflecting limits, policy numbers, expiration dates, all
risk/special form, replacement cost, agreed amount/
co-insurance percentage and locations covered. Lender shall
be named as mortgagee/loss payee with no less than 30 days
notice of cancellation.
(2) Loss payable/Mortgagee endorsement for each
policy on the evidence of property certificate shall be
executed by the insurance company and/or insurance broker.
(3) Certificate of insurance for commercial
general liability, umbrella/excess liability, protection and
indemnity and water quality insurance policies reflecting
limits, policy numbers and expiration dates. Lender shall be
named as additional insured with no less than 30 days notice
of cancellation.
(4) Additional insured endorsement for each
policy on the certificate of insurance shall be executed by
the insurance company and/or insurance broker.
(5) Certificate of insurance evidencing workers
compensation coverage.
All casualty insurance proceeds in excess of $50,000 shall be payable
to Lender and applied, at Lender's option, to the Indebtedness.
5.6 INSPECTION; LENDER MEETING
Upon reasonable prior notice by Lender to Borrower (provided notice
need not be given after the occurrence of a Default or an Event of Default),
Borrower shall permit any authorized representatives designated by Lender to
visit and inspect any of the properties of Borrower or any of its Subsidiaries,
including its and their financial and accounting records, and to make copies
and take extracts therefrom, and to discuss its and their affairs, finances and
business with its and their officers and independent public accountants, at
such reasonable times (which shall be during normal business hours prior to the
occurrence of a Default or an Event of Default, and at any time after the
occurrence of a Default or an Event of Default), and in each case as often as
may be reasonably requested. Without in any way limiting the foregoing,
Borrower will participate and will cause its key management personnel to
participate in a meeting of Lender at least once during each fiscal year to be
held at such time and at such place as may be agreed to by Borrower and Lender.
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5.7 ENVIRONMENTAL COMPLIANCE
(A) ENVIRONMENTAL LAWS. Each Loan Party shall at all
times comply with all applicable Environmental Laws.
(B) REMEDIAL ACTION. Each Loan Party and each of their
respective Subsidiaries shall promptly take any and all necessary
remedial actions in response to the presence, storage, use, disposal,
transportation, release or discharge of any Hazardous Materials on,
under or about any real property owned, leased or operated by any Loan
Party or any of their Subsidiaries. In the event any Loan Party or
any of their Subsidiaries undertakes any remedial action with respect
to any Hazardous Material on, under or about any real property owned,
leased or operated by any Loan Party or any of their Subsidiaries,
such Loan Party or Subsidiary shall conduct and complete such remedial
action in compliance with all applicable Environmental Laws, and in
accordance with the policies, orders and directives of all federal,
state and local governmental authorities except when such Loan Party's
or Subsidiary's liability for such presence, storage, use, disposal,
transportation, release or discharge of any Hazardous Material is
being contested in good faith by such Loan Party or Subsidiary and
appropriate reserves therefor have been established in accordance with
GAAP.
(C) FURTHER ASSURANCE. If Lender at any time has a
reasonable basis to believe that there may be a material violation of
any Environmental Law by, or any material liability arising thereunder
of, any Loan Party or any of their Subsidiaries or related to any real
property owned, leased or operated by any Loan Party or any of their
Subsidiaries or real property adjacent to such real property, then
Borrower agrees, upon request from Lender, to provide Lender with such
reports, certificates, engineering studies or other written material
or data as Lender may reasonably require so as to satisfy Lender that
such Loan Party or Subsidiary is in compliance with all applicable
Environmental Laws.
5.8 ENVIRONMENTAL DISCLOSURE
(A) Borrower shall promptly advise Lender in writing and
in reasonable detail of: (1) any release, disposal or discharge by
any Loan Party or any of their Subsidiaries of any Hazardous Material
required to be reported to any federal, state or local governmental or
regulatory agency under all applicable Environmental Laws except such
releases, disposals or discharges pursuant to and in compliance with
valid permits, authorizations or registrations under said
Environmental Laws; (2) any and all written communications sent or
received by any Loan Party or any of their Subsidiaries with respect
to any Environmental Claims or any release, disposal or discharge of
Hazardous Material required to be reported to any federal, state or
local governmental or regulatory agency; (3) any remedial action taken
by any Loan Party or any of their Subsidiaries or any other Person in
response to any Hazardous Material on, under or about any real
property owned, leased or operated by any Loan Party, the
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existence of which could result in an Environmental Claim that could
have a Material Adverse Effect; (4) the discovery by any Loan Party or
any of their Subsidiaries of any occurrence or condition on any real
property adjoining or in the vicinity of any real property owned,
leased or operated by any Loan Party that could cause such real
property or any part thereof to be classified as "border-zone
property" or to be otherwise subject to any restrictions on the
ownership, occupancy, transferability or use thereof under any
Environmental Laws; and (5) any request for information from any
governmental agency that indicates such agency is investigating
whether any Loan Party or any of their Subsidiaries may be potentially
responsible for a release, disposal or discharge of Hazardous
Materials.
(B) Borrower shall promptly notify Lender of (1) any
proposed acquisition of stock, assets, or property by any Loan Party
that could reasonably be expected to expose such Loan Party or any of
their Subsidiaries to, or result in, Environmental Claims that could
have a Material Adverse Effect and (2) any proposed action to be taken
by any Loan Party or any of their Subsidiaries to commence any
operations that could reasonably be expected to subject such Loan
Party or Subsidiary to additional laws, rules or regulations,
including laws, rules and regulations requiring additional or amended
environmental permits or licenses. Borrower shall, at its own
expense, provide copies of such documents or information as Lender may
reasonably request in relation to any matters disclosed pursuant to
this subsection 5.8.
5.9 COMPLIANCE WITH LAWS
Borrower will (a) comply with and will cause each of its Subsidiaries
to comply with the requirements of all applicable laws, rules, regulations and
orders of any governmental authority as now in effect and which may be imposed
in the future in all jurisdictions in which Borrower or its Subsidiaries are
now doing business or may hereafter be doing business, other than those laws,
rules, regulations and orders the noncompliance with which would not reasonably
be expected to have, either individually or in the aggregate, a Material
Adverse Effect, and (b) maintain and will cause each of its Subsidiaries to
maintain, as the case may be, all licenses and permits now held or hereafter
acquired by Borrower, the loss, suspension, or revocation of which, or failure
to renew, could have a Material Adverse Effect.
5.10 COVENANTS IN ACQUISITION DOCUMENTS
At all times prior to the effective date of the Acquisition, Borrower
shall comply with its covenants under the applicable Acquisition Documents.
5.11 MORTGAGES; TITLE INSURANCE; SURVEYS
(A) TITLE INSURANCE. On the Closing Date (or within
thirty (30) days following delivery of any Mortgage with respect to
Additional Mortgaged Property), Borrower shall
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deliver or cause to be delivered to Lender ALTA lender's title
insurance policies issued by title insurers reasonably satisfactory to
Lender (the "Mortgage Policies") in form and substance and in amounts
reasonably satisfactory to Lender assuring Lender that the Mortgages
are valid and enforceable first priority mortgage liens on the
respective Mortgaged Property or Additional Mortgaged Property, free
and clear of all defects and encumbrances except Permitted
Encumbrances. The Mortgage Policies shall be in form and substance
reasonably satisfactory to Lender and shall include an endorsement
insuring against mechanics' liens and for any other matter that Lender
may reasonably request, and shall provide for affirmative insurance as
Lender may reasonably request. In the case of each leasehold
constituting Mortgaged Property or Additional Mortgaged Property,
Lender shall have received such estoppel letters, consents and waivers
from the landlords, non-disturbance agreements from any holders of
mortgages or deeds of trust and subordination and attornment
agreements from the tenants on such real estate as may have been
requested by Lender, which items shall be in form and substance
satisfactory to Lender.
(B) ADDITIONAL MORTGAGED PROPERTY. Lender may from time
to time designate real property or leasehold interests of Borrower or
any of its Subsidiaries after the date hereof as "Additional Mortgaged
Property", in which case Borrower shall as promptly as possible (and
in any event within sixty (60) days after such designation) deliver to
Lender a fully executed Mortgage, in form and substance satisfactory
to Lender together with title insurance policies and surveys as
required by this subsection 5.11. Borrower agrees that, following the
taking of the actions with respect to any Additional Mortgaged
Property required by the immediately preceding sentence, Lender shall
have a valid and enforceable first priority mortgage on the respective
Additional Mortgaged Property, free and clear of all defects and
encumbrances except for Permitted Encumbrances.
(C) SURVEYS. On or before the Closing Date (or within
thirty (30) days following delivery of any Mortgage with respect to
Additional Mortgaged Property), Borrower shall deliver or cause to be
delivered to Lender current surveys, certified by a licensed surveyor,
for all real property that is the subject of the Mortgage Policies
including Additional Mortgaged Property for which a Mortgage Policy is
issued. All such surveys shall be sufficient to allow the issuer of
the mortgage policy to issue an ALTA lender's policy.
5.12 FURTHER ASSURANCES
(A) Borrower shall and shall cause each Loan Party to,
from time to time, execute such guaranties, financing statements,
documents, security agreements and reports as Lender at any time may
reasonably request to evidence, perfect or otherwise implement the
guaranties and other security for repayment of the Obligations
provided for in the Loan Documents.
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(B) At Lender's request, Borrower shall cause any
Subsidiaries of Borrower promptly to guarantee the Obligations and to
grant to Lender a security interest in the real, personal and mixed
property of such Subsidiary to secure the Obligations. The
documentation for such guarantee or security shall be substantially
similar to the Loan Documents with such modifications as are
reasonably requested by Lender.
(C) In the event Frank Eakin and/or David Ammons acquire,
directly or indirectly, any voting equity interest in any Loan Party,
Borrower shall cause such person to personally guarantee the
Obligations of Borrower under the Loan Documents, the principal amount
of which guarantee shall be limited to an equitable percentage of the
Loans based upon such Persons aggregate voting interest, directly or
indirectly, in Borrower, as reasonably determined by Lender.
5.13 ENVIRONMENTAL CONDITIONS.
Within 60 days after the Closing Date, Borrower shall deliver to
Lender evidence of Borrower's compliance with the recommendations on
environmental testing and reporting set forth in the Environmental Site
Assessment prepared by ATEC Associates, Inc., Report No. 44-07-96-00127 and
those set forth in the compliance audit letter from ATEC Associates, Inc. to
Mr. Mike Nawara, dated August 22, 1996 with respect to ATEC Project No.
44-07-96-00158 and report to be issued pursuant thereto.
SECTION 6
INTENTIONALLY OMITTED
SECTION 7
BORROWER'S NEGATIVE COVENANTS
Borrower covenants and agrees that until payment in full of all
Obligations, unless Lender shall otherwise give its prior written consent,
Borrower shall comply with and shall cause each other Loan Party to comply with
all covenants in this Section 7 applicable to such Person.
7.1 INDEBTEDNESS
Borrower will not and will not permit any of its Subsidiaries directly
or indirectly to create, incur, assume, guarantee, or otherwise become or
remain directly or indirectly liable with respect to any Indebtedness except:
(a) The Obligations;
(b) Indebtedness arising as a result of Contingent
Obligations permitted under subsection 7.4;
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(c) Indebtedness evidenced by the Subordinated Note;
(d) Indebtedness existing on the Closing Date as
described on Schedule 7.1, it being agreed that the amount of the
existing LaSalle National Bank revolving Indebtedness may not exceed
$3,300,000 in the aggregate at any time outstanding;
(e) Indebtedness incurred to finance vessel construction
not to exceed $1,700,000 in the aggregate at any time outstanding;
(f) Indebtedness incurred by Borrower in connection with
Capitalized Leases and other Indebtedness not in excess of $250,000,
in the aggregate, per annum;
(g) provided no Default or Event of Default has occurred
and is continuing or would arise as a result thereof, Indebtedness
incurred by Borrower as a result of a mandate by any governmental
authority to purchase equipment or make Capital Expenditures in order
to comply with such governmental authorities mandate so long as (i)
Borrower provides Lender with evidence of such mandate prior to the
incurrence of such Indebtedness and (ii) if Lender determines in its
sole and absolute discretion not to fund such purchase of equipment or
Capital Expenditure, then Lender has consented to the incurrence of
such Indebtedness and the execution of such documents and agreements
to be executed in connection therewith (which consent shall not be
unreasonably withheld). Lender agrees that the flare described in
subsection 7.19 is equipment required to be purchased by governmental
authority mandate; and
(h) working capital Indebtedness not to exceed, in the
aggregate, $4,500,000 incurred to refinance the LaSalle National Bank
revolving line of credit described on Schedule 7.1; provided (i)
simultaneously with the incurrence of such Indebtedness, Borrower
grants to Lender, or confirms the grant of, a security interest in
inventory, accounts receivable and general intangibles, and (ii) the
lender extending such Indebtedness enters into such documents and
agreements reasonably requested by Lender.
7.2 LIENS AND RELATED MATTERS
(A) NO LIENS. Borrower will not and will not permit any
of its Subsidiaries directly or indirectly to create, incur, assume or
permit to exist any Lien on or with respect to any property or asset
(including any document or instrument with respect to goods or
accounts receivable) of Borrower or any of its Subsidiaries, whether
now owned or hereafter acquired, or any income or profits therefrom,
except Permitted Encumbrances.
(B) NO NEGATIVE PLEDGES. Neither Borrower nor any
Subsidiary of Borrower shall enter into or assume any agreement (other
than the Loan Documents and the Subordinated
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Loan Documents) prohibiting the creation or assumption of any Lien
upon its properties or assets, whether now owned or hereafter
acquired.
(C) NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS TO
BORROWER. Except as provided herein, Borrower will not and will not
permit any of its Subsidiaries directly or indirectly to create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any such
Subsidiary to: (1) pay dividends or make any other distribution on any
of such Subsidiary's capital stock or other equity interest owned by
Borrower or any Subsidiary of Borrower; (2) subject to subordination
provisions satisfactory to Lender, pay any indebtedness owed to
Borrower or any other Subsidiary; (3) make loans or advances to
Borrower or any other Subsidiary; or (4) transfer any of its property
or assets to Borrower or any other Subsidiary.
7.3 INVESTMENTS; JOINT VENTURES
Borrower will not and will not permit any of its Subsidiaries directly
or indirectly to make or own any Investment in any Person including any Joint
Venture, except:
(a) as set forth on Schedule 7.3; and
(b) Borrower and its Subsidiaries may make and own
Investments in Cash Equivalents; provided that such Cash Equivalents
are not subject to setoff rights in favor of the issuing bank arising
from any banking relationship with Borrower or its Subsidiaries; and
(c) Borrower may purchase preferred stock of First Wave
with the proceeds of Term Loan B provided (i) no Default or Event of
Default has occurred and is continuing; (ii) the terms and conditions
of such purchase are acceptable to Lender; and (iii) the conditions
specified in subsections 3.2 and 3.3 shall have been satisfied.
7.4 CONTINGENT OBLIGATIONS
Borrower will not and will not permit any of its Subsidiaries directly
or indirectly to create or become or be liable with respect to any Contingent
Obligation except:
(a) Contingent Obligations existing on the Closing Date
and described in Schedule 7.4 annexed hereto; and
(b) Contingent Obligations with respect to Indebtedness
permitted by subsection 7.1.
7.5 RESTRICTED JUNIOR PAYMENTS
Borrower will not and will not permit any of its Subsidiaries to
directly or indirectly declare, order, pay, make or set apart any sum for any
Restricted Junior Payment, except:
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(a) so long as no Default or Event of Default has
occurred and is continuing or would arise as a result thereof and
subject to the terms and provisions of the Pledge Agreements, Borrower
may repurchase its capital stock from the Management Shareholders in
accordance with the provisions of the Shareholder Agreement and Stock
Purchase Agreement dated January 31, 1995 among First Wave, Borrower
and Management Shareholders in effect as of the date hereof;
(b) Borrower may make payments and distributions to First
Wave solely to permit First Wave to pay actual federal and state
income taxes then due and owing by First Wave; provided, however,
Borrower's contribution to taxes as a result of the filing of a
consolidated return by First Wave shall not be greater, nor the
receipt of tax benefits less, than they would have been had Borrower
not filed a consolidated return with First Wave; and
(c) so long as no Default or Event of Default has
occurred and is continuing or would arise as a result thereof,
Borrower may make payments, dividends and distributions to First Wave
solely to permit First Wave to pay scheduled installments of principal
and interest on the First Wave Note as in effect on the date hereof.
7.6 RESTRICTION ON FUNDAMENTAL CHANGES
Neither Borrower nor any of its Subsidiaries will: (a) amend, modify
or waive any term or provision of their articles of incorporation or by-laws
unless required by law provided in no event will Borrower amend, or permit the
amendment of, Article Seven of the Articles of Incorporation of Borrower; (b)
enter into any transaction of merger or consolidation; (c) liquidate, wind-up
or dissolve itself (or suffer any liquidation or dissolution); (d) convey,
sell, lease, sublease, transfer or otherwise dispose of, in one transaction or
a series of transactions, any part of its business or assets, or the capital
stock of or other equity interests in any of its Subsidiaries, whether now
owned or hereafter acquired; or (e) acquire by purchase or otherwise all or any
substantial part of the business or assets of, or stock or other evidence of
beneficial ownership of, any Person, except: (i) the Loan Parties may enter
into transactions contemplated by the Acquisition Documents and may consummate
the Acquisition; (ii) Borrower and its Subsidiaries may make Investments
permitted under subsection 7.3; and (iii) any Subsidiary of Borrower may be
merged with or into Borrower (provided that Borrower is the surviving entity)
or any other Subsidiary of Borrower.
7.7 DISPOSAL OF ASSETS OR SUBSIDIARY STOCK
(A) Neither Borrower nor any of its Subsidiaries will
sell, lease, transfer or otherwise dispose of any of its property,
business or assets, or grant any Person an option to acquire any such
property, business or assets except for dispositions of obsolete
equipment not used or useful in the business.
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(B) Borrower will not and will not permit any of its
Subsidiaries directly or indirectly to issue, sell, assign, pledge or
otherwise encumber or dispose of any of the shares of capital stock or
other equity securities in Borrower or any such Subsidiary including
warrants, rights or options to acquire shares or other equity
securities of any of its Subsidiaries, except to Borrower.
7.8 RESTRICTION ON LEASES
Borrower will not and will not permit any of its Subsidiaries to
become or remain liable in any way, whether directly or by assignment or as a
guarantor or other surety, for the obligations of the lessee under any lease
(other than intercompany leases between Borrower and its Subsidiaries), if the
aggregate amount of all rents paid by Borrower and its Subsidiaries under all
such leases would exceed $200,000 in any Fiscal Year.
7.9 SALES AND LEASE-BACKS
Borrower will not and will not permit any of its Subsidiaries directly
or indirectly to become or remain liable as lessee or as guarantor or other
surety with respect to any lease of any property whether real or personal or
mixed or whether now owned or hereafter acquired which Borrower or any of its
Subsidiaries has sold or transferred or intends to sell or transfer to any
other Person.
7.10 TRANSACTIONS WITH AFFILIATES
Borrower will not and will not permit any of its Subsidiaries directly
or indirectly to enter into or permit to exist any transaction (including the
purchase, sale, lease or exchange of any property or the rendering of any
service) with any Affiliate of Borrower or with any director, officer or
employee of any Loan Party, except (a) as set forth on Schedule 7.10, (b)
transactions in the ordinary course of and pursuant to the reasonable
requirements of the business of Borrower or any of its Subsidiaries and upon
fair and reasonable terms which are fully disclosed to Lender and are no less
favorable to Borrower or such Subsidiary than would be obtained in a comparable
arm's length transaction with a Person that is not an Affiliate of Borrower and
(c) compensation arrangements which are governed by subsection 7.11 below.
Notwithstanding the foregoing, except as permitted by subsection 7.11 below, no
payments may be made with respect to any items set forth on Schedule 7.10 upon
the occurrence and during the continuation of a Default or Event of Default.
7.11 MANAGEMENT FEES AND COMPENSATION
(A) Borrower will not and will not permit any other Loan
Party or any of Borrower's Affiliates to pay any management,
consulting or similar fees (collectively, "Management Fees") to any
Affiliate of Borrower or to any director, officer or employee of any
Loan Party except as set forth on Schedule 7.11.
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(B) Borrower will not and will not permit any Subsidiary
to pay compensation to the individuals identified on Schedule 7.11 in
excess of those amounts set forth on Schedule 7.11, whether such
compensation consists of salary, bonus, management, consulting or
other fees, capital distributions, or other benefits or otherwise
(collectively, "Salaries").
(C) Notwithstanding the foregoing, no payments may be
made with respect to (i) Management Fees set forth on Schedule 7.11
upon the occurrence and during the continuance of a Default or Event
of Default under subsection 8.1, (ii) Salaries payable to Eakin and
David Ammons set forth on Schedule 7.11 upon the occurrence and during
the continuance of a Default or Event of Default under subsection
8.1(A) and (iii) Salary payable to Frank Eakin set forth on Schedule
7.11 upon the occurrence and during the continuance of a Default or
Event of Default under subsection 8.1(A) which is not cured within 30
days after such Default or Event of Default.
7.12 ENVIRONMENTAL LIABILITIES
Borrower will not and will not permit any Loan Party to: (a) violate
any applicable Environmental Law; or (b) dispose of any Hazardous Materials
into or onto or (except in accordance with applicable law) from, any real
property owned, leased or operated by any Loan Party; or (c) permit any Lien
imposed pursuant to any Environmental Law to be imposed or to remain on any
real property owned, leased or operated by any Loan Party.
7.13 CONDUCT OF BUSINESS
From and after the Closing Date, Borrower will not and will not permit
any of its Subsidiaries to engage in any business other than businesses of the
type described on Schedule 4.1(D).
7.14 CHANGES RELATING TO SUBORDINATED INDEBTEDNESS
Borrower will not and will not permit any of its Subsidiaries to
change or amend the terms of any Subordinated Indebtedness.
7.15 FISCAL YEAR
Neither Borrower nor any Subsidiary of Borrower shall change its
Fiscal Year.
7.16 COMPLIANCE WITH ERISA
Neither Borrower nor any Subsidiary of Borrower shall:
(a) permit the occurrence of any Termination Event which
would result in a liability to any Corporate Loan Party or ERISA
Affiliate in excess of $100,000;
(b) permit the present value of all benefit liabilities
under all Pension Plans to exceed the current value of the assets of
such Pension Plans allocable to such benefit liabilities by more than
$100,000;
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(c) permit any accumulated funding deficiency in excess
of $100,000 (as defined in Section 302 of ERISA and Section 412 of the
IRC) with respect to any Pension Plan, whether or not waived;
(d) fail to make any contribution or payment to any
Multiemployer Plan which any Corporate Loan Party or ERISA Affiliate
may be required to make under any agreement relating to such
Multiemployer Plan, or any law pertaining thereto which results in or
is likely to result in a liability in excess of $100,000;
(e) engage, or permit any Corporate Loan Party or ERISA
Affiliate to engage, in any prohibited transaction under Section 406
of ERISA or Section 4975 of the IRC for which a civil penalty pursuant
to Section 502(i) of ERISA or a tax pursuant to Section 4975 of the
IRC in excess of $100,000 is imposed;
(f) permit the establishment of any Employee Benefit Plan
providing post-retirement welfare benefits or establish or amend any
Employee Benefit Plan which establishment or amendment could result in
liability to any Corporate Loan Party or ERISA Affiliate or increase
the obligation of any Corporate Loan Party or ERISA Affiliate to a
Multiemployer Plan which liability or increase, individually or
together with all similar liabilities and increases, is material to
any Corporate Loan Party or ERISA Affiliate; or
(g) fail, or permit any Corporate Loan Party or ERISA
Affiliate to fail, to establish, maintain and operate each Employee
Benefit Plan in compliance in all material respects with the
provisions of ERISA, the IRC and all other applicable laws and the
regulations and interpretations thereof.
7.17 PRESS RELEASE; PUBLIC OFFERING MATERIALS
Borrower will not and will not permit any Loan Party to disclose the
name of Lender in any press release or in any prospectus, proxy statement or
other materials filed with any governmental entity relating to a public
offering of the capital stock of any Corporate Loan Party.
7.18 SUBSIDIARIES
Borrower will not and will not permit any of its Subsidiaries to
establish, create or acquire any new Subsidiary.
7.19 CAPITAL EXPENDITURE LIMITS
The aggregate amount of all Capital Expenditures of Borrower and its
Subsidiaries will not exceed $1,100,000 for the 1996 Fiscal Year and $750,000
in any Fiscal Year thereafter; provided, however, that a maximum of up to
$250,000 per annum may be financed through Capital Leases and other
Indebtedness. In addition to the foregoing, Borrower may make a one-time
Capital Expenditure not to
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exceed $600,000 for the purchase of a flare and related equipment which is
already on order.
7.20 FIXED CHARGE COVERAGE
Borrower shall not permit Fixed Charge Coverage for the twelve (12)
month period ending on the last day of each quarter to be less than 1.1.
7.21 LEVERAGE RATIO
Borrower shall not permit Leverage Ratio as of and for the twelve (12)
month period on the last day of each quarter to be greater than 6.0.
7.22 DEFINITIONS
For purposes of this Section 7, the following terms shall have the
following meanings:
"CAPITAL EXPENDITURES" means, without duplication, for any period, the
aggregate of all expenditures on a consolidated basis including deposits
(whether paid in cash or property or accrued as liabilities and including the
aggregate amount of all principal payments due for the entire term of all
Capital Leases which are required to be capitalized on the balance sheet) made
by Borrower and its Subsidiaries that, in conformity with GAAP, are required to
be included in the property, plant, or equipment, or similar fixed asset
account.
"CAPITAL LEASE" means any lease of any property (whether real,
personal or mixed) that, in conformity with GAAP, should be accounted for as a
capital lease.
"EBIDAT" means, without duplication, for any period, the following,
each calculated for such period: (a) Net Income; plus (b) any provision for
(or less any benefit from) income or franchise taxes included in the
determination of Net Income; plus (c) Interest Expense deducted in the
determination of Net Income; plus (d) amortization and depreciation deducted in
the determination of Net Income; plus (e) losses from (or less gains from)
asset dispositions or other non-cash items (excluding sales, expenses or losses
related to current assets) included in the determination of Net Income; less
(f) after tax extraordinary gains (or plus after tax extraordinary losses) (in
each case as defined under GAAP); plus (g) expenses of the Related Transactions
included in the determination of Net Income provided that such expenses were
accrued for or otherwise identified in the Pro Forma delivered by Borrower to
Lender at closing; less (h) changes pursuant to the last sentence of subsection
6.9 applicable to, but not included in, such Pro Forma.
"FIXED CHARGE COVERAGE" means, for any period, (a) EBIDAT, less (b)
the unfinanced portion of Capital Expenditures; divided by (c) Fixed Charges.
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"FIXED CHARGES" means, without duplication, for any period, the
following, each calculated for such period: (a) Interest Expenses; plus (b) any
provision for (or less any benefit from) income or franchise taxes included in
the determination of Net Income, adjusted for the net change in deferred tax
and liability accounts; plus (c) scheduled payments of principal with respect
to all Indebtedness (including scheduled payments of Capital Leases) of
Borrower and its Subsidiaries on a consolidated basis, plus (d) Restricted
Junior Payments with respect to Borrower made in cash.
"INTEREST EXPENSES" means, without duplication, for any period, the
following, each calculated for such period: interest expense (net of any
interest income) deducted in the determination of Net Income excluding: (a)
the amortization of fees and costs incurred with respect to the Related
Transactions which have been capitalized as transaction costs; and (b) any
interest paid in kind.
"LEVERAGE RATIO" means, for any period, (a) total Indebtedness as of
the last day of such period, divided by (b) EBIDAT, for such period.
"NET INCOME" means, for any period, the net income (or loss) of
Borrower after provision for or benefit from income and franchise taxes
determined in accordance with GAAP, but excluding: (a) the income (or loss) of
any Person (other than Subsidiaries of Borrower) in which Borrower has an
ownership interest unless received by Borrower in a cash distribution; and (b)
the income (or loss) of any Person accrued prior to the date it became a
Subsidiary of Borrower or is merged into or consolidated with Borrower.
7.23 ACCOUNTING TERMS; UTILIZATION OF GAAP FOR PURPOSES OF CALCULATIONS
UNDER AGREEMENT
For purposes of this Agreement, all accounting terms not otherwise
defined herein shall have the meanings assigned to such terms in conformity with
GAAP. Financial statements and other information furnished to Lender pursuant to
subsection 6.1 shall be prepared in accordance with GAAP as in effect at the
time of such preparation. No "Accounting Changes" (as defined below) shall
effect financial covenants, standards or terms in this Agreement; provided, that
Borrower shall prepare footnotes to each Compliance Certificate and the
financial statements required to be delivered hereunder that show the
differences between the financial statements delivered (which reflect such
Accounting Changes) and the basis for calculating financial covenant compliance
(without reflecting such Accounting Changes). "Accounting Changes" means: (a)
changes in accounting principles required by GAAP and implemented by Borrower;
(b) changes in accounting principles recommended by Borrower's certified public
accountants; and (c) changes in carrying value of Borrower's (or any of its
Subsidiaries') assets, liabilities or equity accounts resulting from (i) the
application of purchase accounting principles (A.P.B. 16 and/or 17 and EITF
88-16 and FASB 109) to the Related Transactions or (ii) as the result of any
other adjustments that,
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in each case, were applicable to, but not included in, the Pro Forma delivered
by Borrower to Lender. All such adjustments resulting from expenditures made
subsequent to the Closing Date (including, but not limited to, capitalization
of costs and expenses or payment of pre-Closing Date liabilities) shall be
treated as expenses in the period the expenditures are made and deducted as
part of the calculation of EBIDAT in such period.
SECTION 8
DEFAULT, RIGHTS AND REMEDIES
8.1 EVENT OF DEFAULT
"Event of Default" shall mean the occurrence or existence of any one
or more of the following:
(A) PAYMENT. Failure to pay (i) any installment of
principal or interest of the Loan within ten (10) days after the date
such payment is due, or (ii) any other amount due under this Agreement
or any other Loan Document within twenty (20) days after delivery of
notice from Lender with respect thereto; or
(B) DEFAULT IN OTHER AGREEMENTS. (1) Failure of
Borrower, any of Borrower's Subsidiaries, any other Loan Party or
Resources to pay when due or within any applicable grace period any
principal or interest on Indebtedness (other than the Loans) or any
Contingent Obligations or (2) breach or default of Borrower, any of
Borrower's Subsidiaries, any other Loan Party or Resources with
respect to any Indebtedness (other than the Loans) or any Contingent
Obligations, if the effect of such failure to pay, default or breach
is to cause or to permit the holder or holders then to cause
Indebtedness and/or Contingent Obligations to become or be declared
due prior to their stated maturity, whether or not such failure to
pay, default or breach is waived by such holder or holders; or
(C) BREACH OF CERTAIN PROVISIONS. (A) Failure of
Borrower to perform or comply with any term or condition contained in
subsections 5.1, 5.5(B) or 5.6 or contained in Section 7; or (B)
failure of any Guarantor to perform or comply with any term or
condition contained in the Guaranty executed by such Guarantor; or
(D) BREACH OF WARRANTY. Any representation, warranty,
certification or other statement made by any Loan Party or Resources
in any Loan Document or in any statement or certificate at any time
given by such Person in writing pursuant or in connection with any
Loan Document is false in any material respect on the date made; or
(E) OTHER DEFAULTS UNDER LOAN DOCUMENTS. Borrower, any
other Loan Party or Resources defaults in the performance of or
compliance with any term contained in this Agreement or the other Loan
Documents and such default is not remedied or waived within thirty
(30) days after receipt by Borrower of
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notice from Lender of such default (other than occurrences described
in other provisions of this subsection 8.1 for which a different grace
or cure period is specified or which constitute immediate Events of
Default); or
(F) INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
(1) A court enters a decree or order for relief with respect to
Borrower, any of its Subsidiaries, any Guarantor, any other Loan Party
or Resources in an involuntary case under the Bankruptcy Code or any
applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, which decree or order is not stayed or other
similar relief is not granted under any applicable federal or state
law; or (2) the continuance of any of the following events for
forty-five (45) days unless dismissed, bonded or discharged: (a) an
involuntary case is commenced against Borrower, any of its
Subsidiaries, any Guarantor, any other Loan Party or Resources, under
any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect; or (b) a decree or order of a court for the
appointment of a receiver, liquidator, sequestrator, trustee,
custodian or other officer having similar powers over Borrower, any of
its Subsidiaries, any Guarantor, any other Loan Party or Resources, or
over all or a substantial part of its property, is entered; or (c) an
interim receiver, trustee or other custodian is appointed without the
consent of Borrower, any of its Subsidiaries, any Guarantor, any other
Loan Party or Resources, for all or a substantial part of the property
of Borrower, any such Subsidiary, any Guarantor, any other Loan Party
or Resources; or
(G) VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
(1) An order for relief is entered with respect to Borrower, any of
its Subsidiaries, any Guarantor, any other Loan Party or Resources; or
(2) Borrower, any of its Subsidiaries, any Guarantor, any other Loan
Party or Resources commences a voluntary case under the Bankruptcy
Code or any applicable bankruptcy, insolvency or other similar law now
or hereafter in effect, or consents to the entry of an order for
relief in an involuntary case or to the conversion of an involuntary
case to a voluntary case under any such law or consents to the
appointment of or taking possession by a receiver, trustee or other
custodian for all or a substantial part of its property; or (3)
Borrower, any of its Subsidiaries, any Guarantor, any other Loan Party
or Resources makes any assignment for the benefit of creditors; or (4)
the Borrower, any of its Subsidiaries, any Guarantor, any other Loan
Party or Resources adopts any resolution or otherwise authorizes
action to approve any of the actions referred to in this subsection
8.1(G); or
(H) GOVERNMENTAL LIENS. Any lien, levy or assessment is
filed or recorded with respect to or otherwise imposed upon all or any
part of the Collateral or the assets of Borrower, any of its
Subsidiaries, any other Loan Party or Resources by the United States
or any department or instrumentality thereof or by any state, county,
municipality or other governmental
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agency (other than Permitted Encumbrances) and such lien, levy or
assessment is not stayed, vacated, paid or discharged within ten (10)
days; or
(I) JUDGMENT AND ATTACHMENTS. Any money judgment, writ
or warrant of attachment, or similar process (other than those
described in subsection 8.1(H)) involving (1) an amount in any
individual case in excess of $100,000 or (2) an amount in the
aggregate at any time in excess of $250,000 (in either case not
adequately covered by insurance as to which the insurance company has
acknowledged coverage) is entered or filed against Borrower or any of
its Subsidiaries, any other Loan Party, Resources or any of their
respective assets and remains undischarged, unvacated, unbonded or
unstayed for a period of thirty (30) days or in any event later than
five (5) days prior to the date of any proposed sale thereunder; or
(J) DISSOLUTION. Any order, judgment or decree is
entered against Borrower, any of its Subsidiaries, any Guarantor, any
other Loan Party or Resources decreeing the dissolution or split up of
Borrower, that Subsidiary, Guarantor, such Loan Party or Resources and
such order remains undischarged or unstayed for a period in excess of
twenty (20) days; or
(K) SOLVENCY. Borrower, any Guarantor, any other Loan
Party or Resources ceases to be solvent or admits in writing its
present or prospective inability to pay its debts as they become due;
or
(L) INJUNCTION. Borrower or any of its Subsidiaries or
any Guarantor is enjoined, restrained or in any way prevented by the
order of any court or any administrative or regulatory agency from
conducting all or any material part of its business and such order
continues for more than thirty (30) days; or
(M) ERISA - PENSION PLANS. (1) Any Corporate Loan Party
or any ERISA Affiliate fails to make full payment when due of all
amounts which, under the provisions of any Pension Plan or Section 412
of the IRC, any Corporate Loan Party or any ERISA Affiliate is
required to pay as contributions thereto and such failure results in
or is likely to result in a Material Adverse Effect; or (2) an
accumulated funding deficiency in excess of $100,000 occurs or exists,
whether or not waived, with respect to any Pension Plan; or (3) a
Termination Event occurs which results in or is likely to result in a
Material Adverse Effect; or
(N) ERISA - MULTIEMPLOYER PLANS. Any Corporate Loan
Party or any ERISA Affiliate as employers under one or more
Multiemployer Plans makes a complete or partial withdrawal from such
Multiemployer Plans and the plan sponsor of such Multiemployer Plans
notifies such withdrawing employer that such employer has incurred a
withdrawal liability requiring payments in an amount exceeding
$100,000; or
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(O) INVALIDITY OF LOAN DOCUMENTS. Any of the Loan
Documents for any reason, other than a partial or full release in
accordance with the terms thereof, ceases to be in full force and
effect or is declared to be null and void, or any Corporate Loan Party
or Resources denies that it has any further liability under any Loan
Documents to which it is party, or gives notice to such effect; or
(P) DAMAGE, STRIKE, CASUALTY. Any material damage to, or
loss, theft or destruction of, any Collateral, whether or not insured,
or any strike, lockout, labor dispute, embargo, condemnation, act of
God or public enemy, or other casualty which causes, for more than
fifteen (15) consecutive days, the cessation or substantial
curtailment of revenue producing activities at any facility of
Borrower, any of its Subsidiaries, Resources or any other Loan Party
if any such event or circumstance could reasonably be expected to have
a Material Adverse Effect; or
(Q) LICENSES AND PERMITS. The loss, suspension or
revocation of, or failure to renew, any license or permit now held or
hereafter acquired by Borrower, any of its Subsidiaries, Resources or
any other Loan Party, if such loss, suspension, revocation or failure
to renew could have a Material Adverse Effect; or
(R) FAILURE OF SECURITY. Lender does not have or ceases
to have a valid and perfected first priority security interest in the
Collateral (subject to Permitted Encumbrances), in each case, for any
reason other than the failure of Lender to take any action within its
control; or
(S) CHANGE IN CONTROL. (A) First Wave ceases to own and
control, directly, at least 80% of the issued and outstanding shares
of each class of capital stock of Borrower, free and clear of all
Liens (other than those in favor of Lender); (B) Eakin ceases to own
and control, directly, at least 100% of the issued and outstanding
voting shares of each class of capital stock of First Wave, free and
clear of all Liens; provided, however, with respect to this clause
(B), if Frank Eakin and/or David Ammons exercises their option to
convert their non-voting capital stock of First Wave to voting capital
stock of First Wave, guarantees the Obligations as set forth in
subsection 5.12(C) of this Agreement, then such percentage threshold
shall be lowered to the percentage equal to 100% minus the amount of
such voting capital stock owned by Frank Eakin and David Ammons, in
the aggregate; or (C) Resources ceases to beneficially own and
control, directly or indirectly, 100% of the equity interests of
Shipholding, free and clear of all Liens; or
(T) BOARD SEAT. An individual designated by Resources is
not a member of the Board of Directors of Borrower, provided in the
event of the death of the then acting Resources Designated Director
(as defined in the Shareholder Agreement), an Event of Default shall
not be deemed to occur
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if a new Resources Designated Director is elected to the Board of
Directors, within 30 days of the vacancy.
8.2 ACCELERATION
Upon the occurrence of any Event of Default described in the foregoing
subsections 8.1(F) or 8.1(G), the unpaid principal amount of and accrued
interest and fees on the Term Loans and all other Obligations shall
automatically become immediately due and payable, without presentment, demand,
protest, notice of intent to accelerate, notice of acceleration or other
requirements of any kind, all of which are hereby expressly waived by Borrower.
Upon the occurrence and during the continuance of any other Event of Default,
Lender may declare all or any portion of the Loans and all or some of the other
Obligations to be, and the same shall forthwith become, immediately due and
payable together with accrued interest thereon, without presentment, demand,
protest, notice of intent to accelerate, notice of acceleration or other
requirements of any kind, all of which are hereby expressly waived by Borrower.
8.3 PERFORMANCE BY LENDER.
If Borrower, any other Loan Party or Resources shall fail to perform
any covenant, duty or agreement contained in any of the Loan Documents, Lender
may perform or attempt to perform such covenant, duty or agreement on behalf of
Borrower after the expiration of any cure or grace periods set forth herein or
therein. In such event, Borrower shall, at the request of Lender, promptly pay
any amount reasonably expended by Lender in such performance or attempted
performance to Lender, together with interest thereon at the rate of interest
in effect upon the occurrence of an Event of Default as specified in subsection
2.2(A) from the date of such expenditure until paid. Notwithstanding the
foregoing, it is expressly agreed that Lender shall not have any liability or
responsibility for the performance of any obligation of Borrower, any other
Loan Party or Resources under this Agreement or any other Loan Document.
SECTION 9
ASSIGNMENT AND PARTICIPATION
9.1 ASSIGNMENTS AND PARTICIPATIONS IN LOANS AND NOTES.
Lender may assign its rights and delegate its obligations under this
Agreement and further may assign, or sell participations in, all or any part of
the Loans to an Affiliate or to another Person.
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SECTION 10
MISCELLANEOUS
10.1 EXPENSES AND ATTORNEYS' FEES
Whether or not the transactions contemplated hereby shall be
consummated, Borrower agrees to promptly pay all fees, costs and expenses
incurred by Lender in connection with any matters contemplated by or arising
out of this Agreement or the other Loan Documents including the following, and
all such fees, costs and expenses shall be part of the Obligations, payable on
demand and secured by the Collateral: (a) reasonable fees, costs and expenses
(including attorneys' fees, allocated costs of internal counsel and fees of
environmental consultants, industry consultants, accountants and other
professionals retained by Lender) incurred in connection with the examination,
review, due diligence investigation, documentation and closing of the financing
arrangements evidenced by the Loan Documents; (b) fees, costs and expenses
(including reasonable attorneys' fees, allocated costs of internal counsel and
fees of environmental consultants, industry consultants, accountants and other
professionals retained by Lender) incurred in connection with the negotiation,
preparation, execution and administration of the Loan Documents, the Loans, the
Related Transactions Documents and any amendments, modifications and waivers
relating thereto and all fees, costs and expenses incurred by Lender in
connection with the inspections and investigations described in subsection 5.6;
(c) fees, costs and expenses incurred in creating, perfecting and maintaining
perfection of Liens in favor of Lender, pursuant to any Loan Document,
including lien search fees, filing and recording fees, taxes and expenses,
title insurance policy fees, fees and expenses of attorneys for providing such
opinions as Lender may reasonably request and fees and expenses of attorneys to
Lender; (d) fees, costs and expenses (including attorneys' fees and allocated
costs of internal counsel) incurred in connection with the review,
documentation, negotiation, closing and administration of any subordination or
intercreditor agreements; (e) fees, costs, expenses (including attorneys' fees
and allocated costs of internal counsel) and costs of settlement incurred in
collecting upon or enforcing rights against the Collateral; and (f) fees, costs
and expenses (including attorneys' fees, allocated costs of internal counsel
and fees of other professionals retained by Lender) incurred in any action to
enforce this Agreement or the other Loan Documents or to collect any payments
due from Borrower, any other Loan Party or Resources under this Agreement, the
Notes or any other Loan Document or incurred in connection with any refinancing
or restructuring of the credit arrangements provided under this Agreement,
whether in the nature of a "workout" or in connection with any insolvency or
bankruptcy proceedings or otherwise.
10.2 INDEMNITY
In addition to the payment of expenses pursuant to subsection 10.1,
whether or not the transactions contemplated hereby shall be consummated,
Borrower agrees to indemnify, pay and hold Lender and any holder of any of the
Notes, and the officers, directors,
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employees, agents, affiliates and attorneys of Lender and such holders
(collectively called the "Indemnities") harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, broker's or finders fees, costs, expenses and disbursements of
any kind or nature whatsoever (including the fees and disbursements of counsel
for such Indemnities in connection with any investigative, administrative or
judicial proceeding commenced or threatened, whether or not such Indemnitee
shall be designated a party thereto) that may be imposed on, incurred by, or
asserted against that Indemnitee, in any manner relating to or arising out of
(a) the negotiation, execution, delivery, performance, administration, or
enforcement of any of the Related Transactions Documents, (b) any of the
transactions contemplated by the Related Transactions Documents, (c) any breach
by Borrower, any other Loan Party or Resources of any representation, warranty,
covenant, or other agreement contained in any of the Related Transactions
Documents, (d) the presence, release, threatened release, disposal, removal, or
cleanup of any Hazardous Material located on, about, within or affecting any of
the properties or assets of any Loan Party or any of their Subsidiaries or any
violation of any applicable Environmental Law for which any Loan Party is
liable, (e) the statements contained in the commitment letters, if any,
delivered by Lender, (f) Lender's agreement to make the Loans hereunder, or (i)
the use or intended use of the proceeds of any of the Loans (the foregoing
liabilities herein collectively referred to as the "Indemnified Liabilities");
provided that Borrower shall have no obligation to an Indemnitee hereunder with
respect to Indemnified Liabilities arising from the gross negligence or willful
misconduct of that Indemnitee as determined by a court of competent
jurisdiction. To the extent that the undertaking to indemnify, pay and hold
harmless set forth in the preceding sentence may be unenforceable because it is
violative of any law or public policy, Borrower shall contribute the maximum
portion that it is permitted to pay and satisfy under applicable law to the
payment and satisfaction of all Indemnified Liabilities incurred by the
Indemnities or any of them.
10.3 AMENDMENTS AND WAIVERS
Except as otherwise provided herein, no amendment, modification,
termination or waiver of any provision of this Agreement, the Notes or any
other Loan Document, or consent to any departure by any Loan Party or Resources
therefrom, shall in any event be effective unless the same shall be in writing
and signed by Lender. Each amendment, modification, termination or waiver
shall be effective only in the specific instance and for the specific purpose
for which it was given. No amendment, modification, termination or waiver
shall be required for Lender to take additional Collateral pursuant to any Loan
Document. No amendment, modification, termination or waiver of any provision
of any Note shall be effective without the written concurrence of the holder of
that Note. No notice to or demand on Borrower, any other Loan Party or
Resources in any case shall entitle Borrower, any other Loan Party or Resources
to any other or further notice or demand in similar or other circumstances.
Any amendment, modification, termination, waiver or consent effected in
accordance
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with this subsection 10.3 shall be binding upon each holder of the Notes at the
time outstanding, each future holder of the Notes, and, if signed by a Loan
Party or Resources, on such Loan Party or Resources.
10.4 INTENTIONALLY OMITTED
10.5 NOTICES
Unless otherwise specifically provided herein, any notice or other
communication required or permitted to be given shall be in writing addressed
to the respective party as set forth below and may be personally served,
telecopied, telexed or sent by overnight courier service or United States mail
and shall be deemed to have been given: (a) if delivered in person, when
delivered; (b) if delivered by telecopy or telex, on the date of transmission
if transmitted on a Business Day before 4:00 p.m. (Atlanta time) or, if not, on
the next succeeding Business Day; (c) if delivered by overnight courier, two
days after delivery to such courier properly addressed; or (d) if by U.S. Mail,
four Business Days after depositing in the United States mail, with postage
prepaid and properly addressed.
Notices shall be addressed as follows:
If to Borrower: Newpark Shipbuilding and Repair, Inc.
8502 Cypress Street
Houston, Texas 70112
Attention: Samuel F. Eakin
Telecopy: (504) 292-8100
With a copy to: Breazeale, Sachse & Wilson, LLP
23rd floor, One American Place
P. O. Box. 3197
Baton Rouge, Louisiana 70816
Attention: Robert Bowsher, Esq.
Telecopy: (504) 387-5397
With a courtesy copy to: Newpark Resources, Inc.
3850 North Causeway Blvd.
Suite 1770
Metairie, LA 70002-1752
Attention: Matthew Hardey
Telecopy: (504) 833-9506
With a courtesy copy to: First Wave Marine, Inc.
4000 S. Sherwood Forest Boulevard
Suite 603
Baton Rouge, LA 70816
Attention: Samuel F. Eakin
Telecopy: (504) 292-8100
57
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If to Lender: Heller Financial Leasing, Inc.
900 Circle 75 Parkway, N.W.
Suite 1800
Atlanta Georgia 30339
Attention: Credit Manager
Commercial Equipment Finance Division
Telecopy: (770) 980-6090
With a copy to: Heller Financial Leasing, Inc.
900 Circle 75 Parkway, N.W.
Suite 1800
Atlanta Georgia 30339
Attention: Elizabeth A. Edelman, Esq.
Telecopy: (770) 980-6215
or to such other address as the party addressed shall have previously
designated by written notice to the serving party,
given in accordance with this subsection 10.5. A notice not given as provided
above shall, if it is in writing, be deemed given if and when actually received
by the party to whom given. The parties hereto hereby agree that the failure
to deliver a courtesy copy of any notice provided hereunder to Resources or
First Wave shall not effect the validity or enforceability of such notice to
Borrower or any other party hereto.
10.6 SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS
All agreements, representations and warranties made herein shall
survive the execution and delivery of this Agreement, the making of the Loans
hereunder and the execution and delivery of the Notes. Notwithstanding
anything in this Agreement or implied by law to the contrary, the agreements of
Borrower set forth in subsections 10.1, 10.2 and 10.15 shall survive the
payment of the Loans and the termination of this Agreement.
10.7 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE
No failure or delay on the part of Lender or any holder of any Note in
the exercise of any power, right or privilege hereunder or under the Notes or
any other Loan Document shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privilege. All
rights and remedies existing under this Agreement, the Notes and the other Loan
Documents are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
10.8 MARSHALING; PAYMENTS SET ASIDE
Lender shall not be under any obligation to marshal any assets in
favor of any Loan Party, Resources or any other party or against or in payment
of any or all of the Obligations. To the extent that any Loan Party or
Resources makes a payment or payments to Lender, or Lender enforces their
security interests or exercise its rights of setoff, and such payment or
payments or the proceeds of such
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enforcement or setoff or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or required to be
repaid to a trustee, receiver or any other party under any bankruptcy law,
state or federal law, common law or equitable cause, then to the extent of such
recovery, the Obligations or part thereof originally intended to be satisfied,
and all Liens, rights and remedies therefor, shall be revived and continued in
full force and effect as if such payment had not been made or such enforcement
or setoff had not occurred.
10.9 INDEPENDENCE OF COVENANTS
All covenants hereunder shall be given in any jurisdiction independent
effect so that if a particular action or condition is not permitted by any of
such covenants, the fact that it would be permitted by an exception to, or be
otherwise within the limitations of, another covenant shall not avoid the
occurrence of a Default or an Event of Default if such action is taken or
condition exists.
10.10 SEVERABILITY
The invalidity, illegality or unenforceability in any jurisdiction of
any provision in or obligation under this Agreement, the Notes or other Loan
Documents shall not affect or impair the validity, legality or enforceability
of the remaining provisions or obligations under this Agreement, the Notes or
other Loan Documents or of such provision or obligation in any other
jurisdiction.
10.11 HEADINGS
Section and subsection headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
10.12 APPLICABLE LAW
THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF ILLINOIS,
WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
10.13 SUCCESSORS AND ASSIGNS; SUBSEQUENT HOLDERS OF NOTES
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns except that Borrower
may not assign its rights or obligations hereunder without the written consent
of Lender.
10.14 NO FIDUCIARY RELATIONSHIP
No provision in this Agreement or in any of the other Loan Documents
and no course of dealing between the parties shall be deemed to create any
fiduciary duty by Lender to Borrower, any other Loan Party or Resources.
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10.15 LIMITATION OF LIABILITY
Neither Lender nor any affiliate, officer, director, employee,
attorney, or agent of Lender shall have any liability with respect to, and
Borrower hereby waives, releases, and agrees not to sue any of them upon, any
claim for any special, indirect, incidental, or consequential damages suffered
or incurred by Borrower in connection with, arising out of, or in any way
related to, this Agreement or any of the other Loan Documents, or any of the
transactions contemplated by this Agreement or any of the other Loan Documents.
Borrower hereby waives, releases, and agrees not to sue Lender or any of
Lender's affiliates, officers, directors, employees, attorneys, or agents for
punitive damages in respect of any claim in connection with, arising out of, or
in any way related to, this Agreement or any of the other Loan Documents, or
any of the transactions contemplated by this Agreement or any of the Related
Transactions Documents.
10.16 NO DUTY
All attorneys, accountants, appraisers, and other professional Persons
and consultants retained by Lender shall have the right to act exclusively in
the interest of Lender and shall have no duty of disclosure, duty of loyalty,
duty of care, or other duty or obligation of any type or nature whatsoever to
Borrower or any of Borrower's partners or any other Person.
10.17 ENTIRE AGREEMENT
This Agreement, the Notes, and the other Loan Documents referred to
herein embody the final, entire agreement among the parties hereto and
supersede any and all prior commitments, agreements, representations, and
understandings, whether written or oral, relating to the subject matter hereof
and may not be contradicted or varied by evidence of prior, contemporaneous, or
subsequent oral agreements or discussions of the parties hereto. There are no
oral agreements among the parties hereto.
10.18 CONSTRUCTION
Lender and Borrower acknowledge that each of them has had the benefit
of legal counsel of its own choice and has been afforded an opportunity to
review this Agreement and the other Loan Documents with its legal counsel and
that this Agreement and the other Loan Documents shall be construed as if
jointly drafted by Lender and Borrower.
10.19 CONSENT TO JURISDICTION AND SERVICE OF PROCESS
BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL
COURT LOCATED WITHIN THE COUNTY OF COOK, STATE OF ILLINOIS AND IRREVOCABLY
AGREES THAT, SUBJECT TO LENDER'S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE
LITIGATED IN SUCH COURTS. BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION WITH
ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF
THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS,
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AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN
CONNECTION WITH THIS AGREEMENT, SUCH NOTE, SUCH OTHER LOAN DOCUMENT OR SUCH
OBLIGATION. BORROWER DESIGNATES AND APPOINTS CT CORPORATION SYSTEM AND SUCH
OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY BORROWER WHICH IRREVOCABLY AGREE
IN WRITING TO SO SERVE AS ITS AGENT TO RECEIVE ON ITS BEHALF SERVICE OF ALL
PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY
ACKNOWLEDGED BY BORROWER TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT.
A COPY OF ANY SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO
BORROWER AT ITS ADDRESS PROVIDED IN SUBSECTION 10.5 EXCEPT THAT UNLESS
OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT
AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY BORROWER
REFUSES TO ACCEPT SERVICE, BORROWER HEREBY AGREES THAT SERVICE UPON IT BY MAIL
SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF
LENDER TO BRING PROCEEDINGS AGAINST BORROWER IN THE COURTS OF ANY OTHER
JURISDICTION.
10.20 WAIVER OF JURY TRIAL
BORROWER AND LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT, ANY OF THE LOAN DOCUMENTS, OR ANY DEALINGS BETWEEN THEM RELATING TO
THE SUBJECT MATTER OF THIS LOAN TRANSACTION AND THE LENDER/BORROWER
RELATIONSHIP THAT IS BEING ESTABLISHED. BORROWER AND LENDER ALSO WAIVE ANY
BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE
REQUIRED OF LENDER. THE SCOPE OF THIS WAIVER IS INTENDED TO BE
ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND
THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT
LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW AND STATUTORY CLAIMS. BORROWER AND LENDER ACKNOWLEDGE THAT THIS
WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT
EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT
EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS.
BORROWER AND LENDER FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS
WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES
ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER
IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN
WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT, THE LOAN DOCUMENTS, OR TO ANY
OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS. IN THE EVENT OF
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.
10.21 CONFIDENTIALITY
Lender agrees to exercise its best efforts to keep any non-public
information delivered or made available to Lender pursuant to the Loan
Documents, which Borrower has identified in writing to the Lender as
confidential information, confidential from any Person other than Persons
employed or retained by Lender who are or are expected to become engaged in
evaluating, approving,
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structuring or administering the Loans; provided that, nothing herein shall
prevent Lender from disclosing such information to any bona fide assignee,
transferee or participant that has agreed to comply with this subsection 10.21
in connection with the contemplated assignment or transfer of any Loans or
participation therein or as required or requested by any governmental agency or
representative thereof or pursuant to legal process or as required in
connection with the exercise of any remedy under the Loan Documents.
10.22 COUNTERPARTS; EFFECTIVENESS
This Agreement and any amendments, waivers, consents, or supplements
may be executed in any number of counterparts and by different parties hereto
in separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all of which counterparts together shall constitute but
one and the same instrument. This Agreement shall become effective upon the
execution of a counterpart hereof by each of the parties hereto.
[remainder of page intentionally blank]
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Witness the due execution hereof by the respective duly authorized
officers of the undersigned as of the date first written above.
HELLER FINANCIAL LEASING, INC.,
a Delaware corporation
By: /s/ MICHAEL B. NAWARA
----------------------------
Title: Asst. Vice President
-------------------------
NEWPARK SHIPBUILDING AND REPAIR,
INC., a Texas corporation
By: /s/ SAMUEL F. EAKIN
----------------------------
Title: CEO
-------------------------
63
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EXHIBIT 10.7
ATTORNMENT AGREEMENT
THE STATE OF TEXAS )
)
COUNTY OF GALVESTON )
This Attornment Agreement (the "Agreement") is entered into by and
between Newpark Marine Fabricators, Inc. ("Tenant"), The Board of Trustees of
the Galveston Wharves, a separate utility and agency of the City of Galveston,
Texas, organized pursuant to the provisions of Article 1187f, Vernon's Texas
Civil Statutes, as amended, and Article XII of the Charter of the City of
Galveston, Texas ("Landlord'), and the City of Galveston, Texas ("City").
WHEREAS, Landlord and Tenant have entered into (i) an Assignment and
Assumption of Lease ("Assignment") and (ii) an Amended and Restated Lease
("Lease"), each dated effective November 1, 1997, covering a certain 110 acre,
more or less, tract of land (including submerged lands) located on Pelican
Island in Galveston County, Texas, and shown on Exhibit A (the "Land"); and
WHEREAS, the City is the owner of the fee simple title to the Land;
and
WHEREAS, as a condition to entering into the Assignment and the Lease,
Tenant has requested that City enter into this Agreement; and
WHEREAS, capitalized terms not defined in this Agreement have the
definitions given to them in the Lease.
NOW, THEREFORE, in consideration of the premises, the covenants set
forth herein and other good and valuable consideration, receipt whereof is
hereby acknowledged, the parties do hereby mutually covenant and agree as
follows:
1. So long as Tenant is not in default (beyond any period given
Tenant to cure such default) in the payment of rent or other sums due under the
Lease, Tenant's possession under the Lease and Tenant's rights and privileges
thereunder, shall not be diminished or interfered with by City, and
accordingly, Tenant's occupancy shall not be disturbed by City during the term
of the Lease, except in accordance with the terms of the Lease or the City's
exercise of its governmental authority, including the power of eminent domain
and its general police powers.
2. If City (i) dissolves Landlord without creating a replacement
utility and agency of the City to act as the landlord under the Lease,
whereupon City becomes the successor landlord under the Lease, or if the City
(ii) sells the Land, or (iii) succeeds to the interests of Landlord under the
Lease in any other manner, Tenant shall attorn and be bound to such party
(whether City or another party) upon any such succession in interest, sale, or
otherwise and shall
<PAGE> 2
recognize such party as the Landlord under the Lease. Such attornment shall be
effective and self-operative without the execution of any further instrument on
the part of any of the parties hereto. Tenant agrees, however, to execute and
deliver at any time and from time to time, upon the request of City or any
purchaser, any instrument or certificate which, in the sole judgment of the
requesting party may be necessary or appropriate (in any such sale or
otherwise) to evidence such attornment.
3. If City succeeds to the interest of Landlord under the Lease,
City shall be bound to Tenant under all of the terms, covenants and conditions
of the Lease, and Tenant shall, from and after City's succession to the
interest of Landlord under the Lease, have the same remedies against City for
the breach of any agreement contained in the Lease that Tenant might have had
under the Lease against Landlord if City had not succeeded to the interest of
Landlord. Tenant acknowledges and agrees that, from and after City's
succession to the interest of Landlord under the Lease, Tenant shall be bound
to City as Landlord under all of the terms, covenants and conditions of the
Lease, and City as Landlord shall, from and after City's succession to the
interest of Landlord under the Lease, have the same remedies against Tenant for
the breach of any agreement contained in the Lease as are available thereunder
to Landlord.
4. For purposes of this Agreement, City will be deemed to have
succeeded to the interest of Landlord under the Lease upon (i) the transfer of
management and control of the Leased Premises to City, whether by virtue of
dissolution of Landlord, or pursuant to the exercise of any rights and remedies
under the law or otherwise, or (ii) any other means by which City may acquire
the right, title and interest of Landlord in and to the Lease or the Leased
Premises.
5. This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their successors and assigns. All references
herein to "City" shall be deemed to include also any person or entity who
claims by, through or under City.
6. This Agreement may not be modified orally or in any other
manner other than by an agreement in writing signed by the parties hereto or
their respective successors in interest.
7. Except in the event described in Paragraph 2, clause (i)
above, nothing contained in this Agreement shall be construed to impose any
duty upon City under any circumstances to succeed to the interest of Landlord
under the Lease by dissolution of Landlord.
8. This Agreement may be simultaneously executed in a number of
counterparts, each of which for all purposes shall be deemed an original and
all of which, when taken together, shall constitute but one and the same
instrument.
EXECUTION PAGE FOLLOWS
-2-
<PAGE> 3
Effective as of the 1st day of November, 1997.
TENANT:
NEWPARK MARINE FABRICATORS, INC.
By: /s/ SAMUEL F. EAKIN
---------------------------------------
Name: Samuel F. Eakin
-------------------------------------
Title: Chairman & CEO
------------------------------------
LANDLORD:
THE BOARD OF TRUSTEES OF THE
GALVESTON WHARVES
By: /s/ RON R. SUROVIK
---------------------------------------
Name: Ron R. Surovik
-------------------------------------
Title: Port Director
------------------------------------
CITY:
THE CITY OF GALVESTON, TEXAS
By: /s/ STEVE LEBLANC
---------------------------------------
Steve LeBlanc, City Manager
By: /s/ HENRY FREUDENBURG, III
---------------------------------------
Henry Freudenburg, III, Mayor
APPROVED:
/s/ BARBARA LAURENCE
- ---------------------------
City Secretary
STATE OF LOUISIANA )
PARISH OF EAST BATON PARISH )
This instrument was acknowledged before me on this the 30th day of
October, 1997, by Samuel F. Eakin, Chairman and CEO of Newpark Marine
Fabricators, Inc., a Texas corporation, on behalf of said corporation.
/s/ ROBERT T. BOWSHER
----------------------------------
Notary Public, State of Louisiana
My Commission expires at death.
-3-
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Exhibit A
[Plat showing Leased Tract and surrounding tracts]
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EXHIBIT 10.8
FIRST WAVE MARINE, INC.
CERTIFICATE
I, David B. Ammons, Secretary of First Wave Marine, Inc., having in my
custody and possession the corporate records of said corporation, do hereby
certify that attached hereto is a true and correct copy of the First Wave
Marine, Inc. Incentive Equity Plan as in effect as of November 20, 1997.
WITNESS my hand this 20 day of November, 1997
/s/ DAVID B. AMMONS
-----------------------------
As Aforesaid
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FIRST WAVE MARINE, INC.
1997 INCENTIVE EQUITY PLAN
SECTION 1
GENERAL
1.1. Purpose. The 1997 Incentive Equity Plan (the "Plan") has been
established by First Wave Marine, Inc. (the "Company") to (i) attract and
retain persons eligible to participate in the Plan; (ii) motivate Participants,
by means of appropriate incentives, to achieve long-range goals; (iii) provide
incentive compensation opportunities that are competitive with those of other
similar companies; and (iv) further identify Participants' interests with those
of the Company's other shareholders through compensation that is based on the
Company's common stock; and thereby promote the long-term financial interest of
the Company and the Related Companies, including the growth in value of the
Company's equity and enhancement of long-term shareholder return.
1.2. Participation. Subject to the terms and conditions of the
Plan, the Committee shall determine and designate, from time to time, from
among the Eligible Employees, those persons who will be granted one or more
Awards under the Plan, and thereby become "Participants" in the Plan. In the
discretion of the Committee, a Participant may be granted any Award permitted
under the provisions of the Plan, and more than one Award may be granted to a
Participant. Awards may be granted as alternative to or replacement of awards
outstanding under the Plan, or any other plan or arrangement of the Company or
a Related Company (including a plan or arrangement of a business or entity, all
or a portion of which is acquired by the Company or a Related Company.)
1.3. Operation, Administration, and Definitions. The operation and
administration of the Plan, including the Awards made under the Plan, shall be
subject to the provisions of Section 4 (relating to operation and
administration). Capitalized terms in the Plan shall be defined as set forth
in the Plan (including the definition provisions of Section 7 of the Plan).
SECTION 2
2.1. Options and SARs Definitions.
(a) The grant of an "Option" entitles the Participant to
purchase shares of Stock at an Exercise Price
established by the Committee. Options granted under
this Section 2 may be either Incentive Stock Options
or Non-Qualified Stock Options, as determined in the
discretion of the Committee. An "Incentive Stock
Option" is an Option that is intended to satisfy the
requirements applicable to an "incentive stock
option" described in Section 422(b) of the Code. A
"Non-Qualified Option" is an Option that is not
intended to be an
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"incentive stock option" as that term is described in
Section 422(b) of the Code.
(b) A stock appreciation right (an "SAR") entitles the
Participant to receive, in cash or Stock (as
determined in accordance with Subsection 2.5), value
equal to all or a portion of the excess of: (a) the
Fair Market Value of a specified number of shares of
Stock at the time of exercise; over (b) an Exercise
Price established by the Committee. To the extent
that the aggregate fair market value of Stock with
respect to which Incentive Stock Options are
exercisable for the first time by the Participant
during any calendar year (under all plans of the
Company and all Related Companies) exceeds $100,000,
such options shall be treated as Non-Qualified Stock
Options, to the extent required by section 422 of the
Code.
2.2. Exercise Price. The "Exercise Price" of each Option and SAR
granted under this Section 2 shall be established by the Committee or shall be
determined by a method established by the Committee at the time the Option or
SAR is granted; except that the Exercise Price shall not be less than 100% of
the Fair Market Value of a share of Stock as of the Pricing Date. For purposes
of the preceding sentence, the "Pricing Date" shall be the date on which the
Option or SAR is granted.
2.3. Exercise. An Option and an SAR shall be exercisable in
accordance with such terms and conditions and during such periods as may be
established by the Committee.
No Option may be exercised by a Participant: (i) prior to the date on
which the Participant completes one continuous year of employment with the
Company, or any Related Company, after the date as of which the Option is
granted (provided, however, that the Committee may permit earlier exercise
following the Participant's Date of Termination by reason of death or
Disability or a change in control of the Company); or (ii) after the Expiration
Date applicable to that Option.
2.4 Expiration Date. The "Expiration Date" with respect to an
Option means the date established as the Expiration Date by the Committee at
the time of the grant; provided, however, that the Expiration Date with respect
to any Option shall not be later than the earliest to occur of:
(a) the ten-year anniversary of the date on which the
Option is granted;
(b) if the Participant's Date of Termination occurs by
reason of death or Disability, the one-year
anniversary of such Date of Termination; or
(c) if the Participant's Date of Termination occurs by
reason of Employment Separation, the one- year
anniversary of such Date of Termination;
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2.5. Payment of Option Exercise Price. The payment of the Exercise
Price of an Option granted under this Section 2 shall be subject to the
following:
(a) Subject to the following provisions of this
Subsection 2.5, the full Exercise Price for shares of
Stock purchased upon the exercise of any Option shall
be paid at the time of such exercise (except that, in
the case of an exercise arrangement approved by the
Committee and described in Paragraph 2.5(c), payment
may be made as soon as practicable after the
exercise).
(b) The Exercise Price shall be payable in cash or by
tendering shares of Stock (by either actual delivery
of shares or by attestation, with such shares valued
at Fair Market Value as of the day of exercise), or
in any combination thereof, as determined by the
Committee.
(c) The Committee may permit a Participant to elect to
pay the Exercise Price upon the exercise of an Option
by authorizing a third party to sell shares of Stock
(or a sufficient portion of the shares) acquired upon
exercise of the Option and remit to the Company a
sufficient portion of the sale proceeds to pay the
entire Exercise Price and any tax withholding
resulting from such exercise.
2.6. Settlement of Award. Distribution following exercise of an
Option or SAR, and shares of Stock distributed pursuant to such exercise, shall
be subject to such conditions, restrictions and contingencies as the Committee
may establish. Settlement of SARs may be made in shares of Stock (valued at
their Fair Market Value at the time of exercise), in cash, or in a combination
thereof, as determined in the discretion of the Committee. The Committee, in
its discretion, may impose such conditions, restrictions and contingencies with
respect to shares of Stock acquired pursuant to the exercise of an Option or an
SAR as the Committee determines to be desirable.
SECTION 3
OTHER STOCK AWARDS
3.1. Stock Award Definition. A "Stock Award" is a grant of shares
of Stock or of a right to receive shares of Stock (or their cash equivalent or a
combination of both) in the future.
3.2. Restrictions on Stock Awards. Each Stock Award shall be
subject to such conditions, restrictions and contingencies as the Committee
shall determine. These may include continuous service and/or the achievement
of Performance Measures. The "Performance Measures" that may be used by the
Committee for such Awards shall be measured by a single goal criterion or
multiple goal criteria with the measurement based on absolute Company or
business unit performance and/or on performance as compared with that of other
publicly-traded
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companies. If the right to become vested in a Stock Award granted under this
Section 3 is conditioned on the completion of a specified period of service
with the Company and the Related Companies, without achievement of Performance
Measures or other objectives being required as a condition of vesting, then the
required period of service for vesting shall be not less than one year (subject
to acceleration of vesting, to the extent permitted by the Committee, in the
event of the Participant's death or Disability or a change in control of the
Company).
SECTION 4
OPERATION AND ADMINISTRATION
4.1. Effective Date. Subject to the approval of the shareholders
of the Company at the Company's 1997 annual meeting of its shareholders, the
Plan shall be effective as of November ___, 1997 (the "Effective Date");
provided, however, that, to the extent that Awards are made under the Plan
prior to its approval by shareholders, they shall be contingent on approval of
the Plan by the shareholders of the Company. The Plan shall be unlimited in
duration and, in the event of Plan termination, shall remain in effect as long
as any Awards under it are outstanding; provided, however, that, to the extent
required by the Code, no Incentive Stock Options may be granted under the Plan
on a date that is more than ten years from the date the Plan is adopted or, if
earlier, the date the Plan is approved by shareholders.
4.2. Shares Subject to Plan.
(a) (i) Subject to the following provisions of this
Subsection 4.2, the maximum number shares of
Stock that may be delivered to Participants
and their beneficiaries under the Plan shall
be 1,800,000 shares of Stock.
(ii) Any shares of Stock granted under the Plan
that are forfeited because of the failure to
meet an Award contingency or condition shall
again be available for delivery pursuant to
new Awards granted under the Plan. To the
extent any shares of Stock covered by an
Award are not delivered to a Participant or
beneficiary because the Award is forfeited or
canceled, or the shares of Stock are not
delivered because the Award is settled in
cash, such shares shall not be deemed to have
been delivered for purposes of determining
the maximum number of shares of Stock
available for delivery under the Plan.
(iii) If the Exercise Price of any stock option
granted under the Plan is satisfied by
tendering shares of Stock to the Company (by
either actual delivery or by attestation),
only the number of shares of Stock issued net
of the shares of Stock tendered shall be
deemed delivered
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for purposes of determining the maximum
number of shares of Stock available for
delivery under the Plan.
(iv) Shares of Stock delivered under the Plan in
settlement, assumption or substitution of
outstanding awards (or obligations to grant
future awards) under the plans or
arrangements of another entity shall not
reduce the maximum number of shares of Stock
available for delivery under the Plan, to the
extent that such settlement, assumption or
substitution is as a result of the Company or
a Related Company acquiring another entity
(or an interest in another entity).
(b) Subject to Paragraph 4.2(c), the following additional
maximums are imposed under the Plan.
(i) The maximum number of shares of Stock that
may be issued by Options intended to be
Incentive Stock Options shall be 300,000
shares.
(ii) The maximum number of shares of Stock that
may be issued in conjunction with Awards
granted pursuant to Section 3 (relating to
Stock Awards) shall be 300,000 shares.
(iii) The maximum number of shares that may be
covered by Awards under this Plan granted to
any one individual pursuant to Section 2
(relating to Options and SARs) shall be
300,000 shares during any three consecutive
calendar years.
(iv) The maximum payment that can be made for
awards granted to any one individual pursuant
to Section 3 (relating to Stock Awards) shall
be $200,000 for any single or combined
performance goals established for any annual
performance period. If an Award granted
under Section 3 is, at the time of grant,
denominated in shares, the value of the
shares of Stock for determining this maximum
individual payment amount will be the Fair
Market Value of a share of Stock on the first
day of the applicable performance period.
(c) In the event of a corporate transaction involving the
Company (including, without limitation, any stock
dividend, stock split, extraordinary cash dividend,
recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination or
exchange of shares), the Committee may adjust Awards
to preserve the benefits or potential benefits of the
Awards. Action by the Committee may include
adjustment of: (i) the number and kind of shares
which may be delivered under the Plan; (ii) the
number and kind of
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shares subject to outstanding Awards; and (iii) the
Exercise Price of outstanding Options and SARs; as
well as any other adjustments that the Committee
determines to be equitable.
4.3. Limit on Distribution. Distribution of shares of Stock or
other amounts under the Plan shall be subject to the following:
(a) Notwithstanding any other provision of the Plan, the
Company shall have no liability for failure to
deliver any shares of Stock under the Plan or make any
other distribution of benefits under the Plan unless
such delivery or distribution would comply with all
applicable laws (including, without limitation, the
requirements of the Securities Act of 1933), and the
applicable requirements of any securities exchange or
similar entity.
(b) To the extent that the Plan provides for issuance of
stock certificates to reflect the issuance of shares
of Stock, the issuance may be effected on a
non-certificated basis, to the extent not prohibited
by applicable law or the applicable rules of any
stock exchange.
4.4. Tax Withholding. Whenever the Company proposes or is required
to distribute Stock under the Plan, the Company may require the recipient to
remit to the Company an amount sufficient to satisfy any Federal, state and
local tax withholding requirements prior to the delivery of any certificate for
such shares or, in the discretion of the Committee, the Company may withhold
from the shares to be delivered shares sufficient to satisfy all or a portion
of such tax withholding requirements. Whenever, under the Plan, payments are
to be made in cash, such payments may be net of an amount sufficient to satisfy
any Federal, state and local tax withholding requirements.
4.5. Payment Shares. Subject to the overall limitation on the
number of shares of Stock that may be delivered under the Plan, the Committee
may use available shares of Stock as the form of payment for compensation,
grants or rights earned or due under any other compensation plans or
arrangements of the Company or a Related Company, including the plans and
arrangements of the Company or a Related Company acquiring another entity (or
an interest in another entity).
4.6. Dividends and Dividend Equivalents. An Award may provide the
Participant with the right to receive dividends or dividend equivalent payments
with respect to Stock which may be either paid currently or credited to an
account for the Participant and may be settled in cash or Stock as determined
by the Committee. Any such settlements, and any such crediting of dividends or
dividend equivalents or reinvestment in shares of Stock, may be subject to such
conditions, restrictions and contingencies as the Committee shall establish,
including the reinvestment of such credited amounts in Stock equivalents.
4.7. Payments. Awards may be settled through cash payments, the
delivery of shares of Stock, the granting of replacement Awards, or combination
thereof as the Committee shall
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determine. Any Award settlement, including payment deferrals, may be subject
to such conditions, restrictions and contingencies as the Committee shall
determine. The Committee may permit or require the deferral of any Award
payment, subject to such rules and procedures as it may establish, which may
include provisions for the payment or crediting of interest, or dividend
equivalents, including converting such credits into deferred Stock equivalents.
Each Related Company shall be liable for payment of cash due under the Plan
with respect to any Participant to the extent that such benefits are
attributable to the services rendered for that Related Company by the
Participant. Any disputes relating to liability of a Related Company for cash
payments shall be resolved by the Committee.
4.8. Proceeds. All cash proceeds from the purchase of Stock under
this Plan shall constitute part of the unrestricted general funds of the
Company, and may be used for such corporate purposes as the Company, in its
sole and exclusive discretion, may determine from time to time.
4.9. Transferability. The Committee may, in its discretion,
authorize all or a portion of any Award (other than Incentive Stock Options) to
be granted on terms which permit transfer by the Participant to (i) the spouse,
parents, children, stepchildren, adoptive relationships, sisters, brothers or
grandchildren of the Participant, (ii) a trust or trusts for the exclusive
benefit of the spouse, parents, children, stepchildren, adoptive relationships,
sisters, brothers or grandchildren of the Participant, or (iii) a partnership
or limited liability company in which the spouse, parents, children,
stepchildren, adoptive relationships, sisters, brothers or grandchildren of the
Participant are the only partners or members, as applicable; provided in each
case that (x) there may be no consideration for any such transfer (other than
in the case of Clause (iii), units in the partnership or membership interests
in the limited liability company), (y) the agreement pursuant to which such
Awards are granted must be approved by the Committee, and must expressly
provide for transferability in a manner consistent with this section, and (z)
subsequent transfers of transferred Awards shall be prohibited except those
made in accordance with this section or by will or by the laws of descent and
distribution. Following transfer, any such Awards shall continue to be subject
to the same terms and conditions as were applicable immediately prior to
transfer. The provisions with respect to termination set forth in Section 2.4
shall continue to apply with respect to the original Participant, in which
event the Awards shall be exercisable by the transferee only to the extent and
for the periods specified herein. The original Participant will remain subject
to withholding taxes upon exercise of any such Awards by the transferee. The
Company shall have no obligation whatsoever to provide notice to any transferee
of any matter, including without limitation, early termination of an Award on
account of termination of the original option pursuant to Section 2.4.
Except as set forth above and in the applicable agreement, no Awards
shall be voluntarily or involuntarily assigned, sold, transferred, pledged,
mortgaged or encumbered by the Participant otherwise than by will or by laws of
descent and distribution, and all Awards shall be exercisable, during the
Participant's lifetime, only by the Participant. At the request of a
Participant, Stock purchased upon exercise of an Option may be issued or
transferred into the name of the Participant and another person jointly with
rights of survivorship. All Awards issued under this Plan, and all
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rights under this Plan, shall not be subject to involuntary seizure, or other
process by any creditor of any holder of any such Awards, and the Company shall
not honor or recognize any such involuntary seizure or other such process.
Except as set forth above, any attempted assignment, sale, transfer, pledge,
mortgage or encumbrance ("Assignment") or any attempted involuntary seizure or
other process shall be null, void and without any effect whatsoever. Should it
be determined, by a court of law or otherwise, that any such Assignment or
involuntary seizure or other process is effective, then all Awards for which
such is effective shall terminate and be forfeited as of the moment of such
involuntary seizure or other process, and shall thereafter be null, void and
without any effect whatsoever.
4.10. Form and Time of Elections. Unless otherwise specified
herein, each election required or permitted to be made by any Participant or
other person entitled to benefits under the Plan, and any permitted
modification, or revocation thereof, shall be in writing filed with the
Committee at such times, in such form, and subject to such restrictions and
limitations, not inconsistent with the terms of the Plan, as the Committee
shall require.
4.11. Agreement With Company. At the time of an Award to a
Participant under the Plan, the Committee may require a Participant to enter
into an agreement with the Company (the "Agreement") in a form specified by the
Committee, agreeing to the terms and conditions of the Plan and to such
additional terms and conditions, not inconsistent with the Plan, as the
Committee may, in its sole discretion, prescribe.
4.12. Limitation of Implied Rights.
(a) Neither a Participant nor any other person shall, by
reason of the Plan, acquire any right in or title to
any assets, funds or property of the Company or any
Related Company whatsoever, including, without
limitation, any specific funds, assets, or other
property which the Company or any Related Company, in
their sole discretion, may set aside in anticipation
of a liability under the Plan. A Participant shall
have only a contractual right to the Stock or
amounts, if any, payable under the Plan, unsecured by
any assets of the Company or any Related Company.
Nothing contained in the Plan shall constitute a
guarantee that the assets of such companies shall be
sufficient to pay any benefits to any person.
(b) The Plan does not constitute a contract of
employment, and selection as a Participant will not
give any employee the right to be retained in the
employ of the Company or any Related Company, nor any
right or claim to any benefit under the Plan, unless
such right or claim has specifically accrued under
the terms of the Plan. Except as otherwise provided
in the Plan, no Award under the Plan shall confer
upon the holder thereof any right as a shareholder of
the Company prior to the date on which the individual
fulfills all conditions for receipt of such rights.
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4.13. Evidence. Evidence required of anyone under the Plan may be
by certificate, affidavit, document or other information which the person
acting on it considers pertinent and reliable, and signed, made or presented by
the proper party or parties.
4.14. Action by Company or Related Company. Any action required or
permitted to be taken by the Company or any Related Company shall be by
resolution of its board of directors, or by action of one or more members of
the board (including a committee of the board) who are duly authorized to act
for the board, or (except to the extent prohibited by applicable law or
applicable rules of any stock exchange) by a duly authorized officer of the
Company. No failure on the part of the Company or the Board to exercise, and
no delay on the part of the Company or the Board in exercising any right or
power established hereunder shall operate as a waiver of such right or power.
4.15. Gender and Number. Where the context admits, words in any
gender shall include any other gender, words in the singular shall include the
plural and the plural shall include the singular.
4.16 Headings. The various headings and captions in this Plan are
for convenience only and shall not affect the meaning, construction or
interpretation of this Plan.
SECTION 5
COMMITTEE
5.1. Administration. The authority to control and manage the
operation and administration of the Plan shall be vested in a committee (the
"Committee") in accordance with this Section 5.
5.2. Selection of Committee. The Committee shall be selected by
the Board, and shall consist of two or more members of the Board. If the Board
has not selected a Committee, the Committee shall consist of the entire Board
of Directors.
5.3. Powers of Committee. The authority to manage and control the
operation and administration of the Plan shall be vested in the Committee,
subject to the following:
(a) Subject to the provisions of the Plan, the Committee
will have the authority and discretion to select from
among the Eligible Employees those persons who shall
receive Awards, to determine the time or times of
receipt, to determine the types of Awards and the
number of shares covered by the Awards, to establish
the terms, conditions, performance criteria,
restrictions, and other provisions of such Awards,
and (subject to the restrictions imposed by Section
6) to cancel or suspend Awards. In making such Award
determinations, the Committee may take into account
the
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nature of services rendered by the individual, the
individual's present and potential contribution to
the Company's success and such other factors as the
Committee deems relevant.
(b) Subject to the provisions of the Plan, the Committee
will have the authority and discretion to determine
the extent to which Awards under the Plan will be
structured to conform to the requirements applicable
to performance-based compensation as described in
Code Section 162(m), and to take such action,
establish such procedures, and impose such
restrictions at the time such Awards are granted as
the Committee determines to be necessary or
appropriate to conform to such requirements.
(c) The Committee will have the authority and discretion
to establish terms and conditions of Awards as the
Committee determines to be necessary or appropriate
to conform to applicable requirements or practices of
jurisdictions outside of the United States.
(d) The Committee will have the authority and discretion
to interpret the Plan, to establish, amend, and
rescind any rules and regulations relating to the
Plan, to determine the terms and provisions of any
agreements made pursuant to the Plan, and to make all
other determinations that may be necessary or
advisable for the administration of the Plan.
(e) Any interpretation of the Plan by the Committee and
any decision made by it under the Plan is final and
binding.
(f) Except as otherwise expressly provided in the Plan,
where the Committee is authorized to make a
determination with respect to any Award, such
determination shall be made at the time the Award is
made, except that the Committee may reserve the
authority to have such determination made by the
Committee in the future (but only if such reservation
is made at the time the Award is granted and is
expressly stated in the Agreement reflecting the
Award).
(g) In controlling and managing the operation and
administration of the Plan, the Committee shall act
by a majority of its then members, by meeting or by
writing filed without a meeting. The Committee shall
maintain and keep adequate records concerning the
Plan and concerning its proceedings and acts in such
form and detail as the Committee may decide.
5.4. Delegation by Committee. Except to the extent prohibited by
applicable law or the applicable rules of a stock exchange, the Committee may
allocate all or any portion of its responsibilities and powers to any one or
more of its members and may delegate all or any part
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of its responsibilities and powers to any person or persons selected by it.
Any such allocation or delegation may be revoked by the Committee at any time.
5.5. Information to be Furnished to Committee. The Company and
Related Companies shall furnish the Committee with such data and information as
may be required for it to discharge its duties. The records of the Company and
Related Companies as to an employee's or Participant's employment, termination
of employment, leave of absence, reemployment and compensation shall be
conclusive on all persons unless determined to be incorrect. Participants and
other persons entitled to benefits under the Plan must furnish the Committee
such evidence, data or information as the Committee considers desirable to
carry out the terms of the Plan.
SECTION 6
AMENDMENT AND TERMINATION
The Board may, at any time, amend or terminate the Plan, provided that,
subject to Subsection 4.2 (relating to certain adjustments to shares), no
amendment or termination may (i) in the absence of written consent to the change
by the affected Participant (or, if the Participant is not then living, the
affected beneficiary), adversely affect the rights of any Participant or
beneficiary under any Award granted under the Plan prior to the date such
amendment is adopted by the Board, or (ii) without the approval of the Company's
stockholders, increase (except as provided expressly in this Plan) the total
number of shares reserved for purposes of the Plan.
SECTION 7
DEFINED TERMS AND MISCELLANEOUS
7.1 For purposes of the Plan, the terms listed below shall be
defined as follows:
(a) Award. The term "Award" shall mean any award or
benefit granted to any Participant under the Plan,
including, without limitation, the grant of Options,
SARs, and Stock Awards.
(b) Board. The term "Board" shall mean the Board of
Directors of the Company.
(c) Code. The term "Code" means the Internal Revenue
Code of 1986, as amended. A reference to any
provision of the Code shall include reference to any
successor provision of the Code.
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(d) Date of Termination. The Participant's "Date of
Termination" shall be the first day occurring on or
after the date of Participant's Agreement, on which
the Participant's employment with the Company and all
Related Companies terminates for any reason (death,
Disability or Employment Separation); provided that a
termination of employment shall not be deemed to
occur by reason of a transfer of the Participant
between the Company and a Related Company or between
two Related Companies; and further provided that the
Participant's employment shall not be considered
terminated while the Participant is on a leave of
absence from the Company or a Related Company
approved by the Participant's employer. If, as a
result of a sale or other transaction, the
Participant's employer ceases to be a Related Company
(and the Participant's employer is or becomes an
entity that is separate from the Company), the
occurrence of such transaction shall be treated as
the Participant's Date of Termination caused by the
Participant being discharged by the employer.
(e) Disability. The term "Disability" means the
permanent and total disability of Participant as
determined by the Committee.
(f) Eligible Employee. The term "Eligible Employee"
shall mean any employee of the Company or a Related
Company or an individual to whom a bona fide written
offer of employment from the Company or a Related
Company, has been extended.
(g) Employment Separation. The term "Employment
Separation" means Participant's voluntary resignation
from employment, including retirement, or the
termination of a Participant from employment of the
Company or a Related Company.
(h) Fair Market Value. For purposes of determining the
"Fair Market Value" of a share of Stock, the
following rules shall apply: (a) as to any grants
made after the date the Company's Registration
Statement on Form S-1, as originally filed with the
Securities and Exchange Commission on October 17,
1997 (as amended), is declared effective, "Fair
Market Value" means the closing price of the Stock on
such date as reported on the principal United States
securities exchange on which the Stock is listed, or
if the Stock is not so listed, the closing price as
quoted on the NASDAQ National Market System, or if
the Stock is not so listed or quoted, the closing bid
as quoted on the NASDAQ over-the-counter market;
provided, that if no such prices are so reported or
quoted on that date or if, in the discretion of the
Committee, another means of determining the Fair
Market Value of a share of Stock at such date is
deemed necessary or advisable, the Committee may
provide for another means for determining such Fair
Market Value, and (b) as to any grants made on or
before the date the Company's Registration
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Statement on Form S-1, as originally filed with the
Securities and Exchange Commission on October 17,
1997 (as amended), is declared effective, "Fair
Market Value" means the initial public offering
price, as determined by the Company's underwriters
for such offering, once such registration statement
is declared effective by the Securities and Exchange
Commission.
(i) Related Company. The term "Related Company" means
(i) any corporation, partnership, joint venture or
other entity during any period in which it owns,
directly or indirectly, at least fifty percent of the
voting power of all classes of stock of the Company
(or successor to the Company) entitled to vote; and
(ii) any corporation, partnership, joint venture or
other entity during any period in which at least a
fifty percent voting or profits interest is owned,
directly or indirectly, by the Company, by an entity
that is a successor to the Company, or by an entity
that is a Related Company by reason of clause (i)
next above.
(j) Stock. The term "Stock" shall mean shares of common
stock of the Company.
Page 14 of 14
<PAGE> 1
EXHIBIT 10.9
FORM OF
STOCK OPTION AGREEMENT
THIS AGREEMENT, entered into as of the Agreement Date (as defined in
paragraph 1), by and between the Participant and First Wave Marine, Inc. (the
"Company");
WITNESSETH:
WHEREAS, the Company maintains the 1997 Incentive Equity Plan (the
"Plan"), which is incorporated into and forms a part of this Agreement, and the
Participant has been selected by the committee administering the Plan (the
"Committee") to receive a Non-Qualified Stock Option Award under the Plan;
NOW, THEREFORE, IT IS AGREED, by and between the Company and the
Participant, as follows:
1. Terms of Award. The following terms used in this Agreement
shall have the meanings set forth in this paragraph 1:
a. The "Participant" is (Name).
b. The "Agreement Date" is November 20, 1997.
c. The number of "Covered Shares" shall be (Number)
shares of Stock.
d. The "Exercise Price" is the initial public offering
price per share to the public set forth in the
Company's final prospectus included as a part of the
Registration Statement on Form S-1, as originally
filed on October 17, 1997, and subsequently amended.
A copy of the final prospectus with the price will be
provided to the Participant.
The number of Covered Shares and the Exercise Price shall be subject
to adjustment as provided in the Plan. Other terms used in this Agreement are
defined in paragraph 8 or elsewhere in this Agreement.
2. Award and Exercise Price. The Participant is hereby granted
an option (the "Option") to purchase the number of Covered Shares of Stock at
the Exercise Price per share as set forth in paragraph 1. The Option is not
intended to constitute an "incentive stock option" as that term is used in Code
Section 422.
3. Date of Exercise. The Option shall become exercisable
according to the following vesting schedule.
<PAGE> 2
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
The Option shall become exercisable
with respect to the following
As of the following Anniversary of the percentage of the
Agreement Date: Covered Shares:
- --------------------------------------------------------------------------------
<S> <C>
One-year anniversary 33 1/3%
- --------------------------------------------------------------------------------
Two-year anniversary 33 1/3%
- --------------------------------------------------------------------------------
Three-year anniversary 33 1/3%
- --------------------------------------------------------------------------------
</TABLE>
The Option shall not become exercisable in accordance with the foregoing
schedule as of any anniversary if the Participant's Date of Termination (as
defined below) occurs before such anniversary. Exercisability under this
schedule is cumulative, and after the Option becomes exercisable under the
schedule with respect to any portion of the Covered Shares, it shall continue
to be exercisable with respect to that portion of the Covered Shares until the
Option expires. Notwithstanding the foregoing provisions of this paragraph 3,
the Option shall become immediately fully exercisable, accelerating all further
vesting requirements, with respect to all of the Covered Shares which
Participant has not exercised as follows:
a. The Option shall become fully exercisable upon the
date of the Participant's Date of Termination by
reason of the Participant's death or Disability.
b. The Option shall become fully exercisable upon the
date of a Change in Control, if the Board of
Directors of the Company provides in a resolution
after the Change in Control that vesting will be
accelerated, and the Participant's Date of
Termination does not occur before the Change in
Control.
4. Expiration. The Option shall not be exercisable on or after
the Expiration Date. The "Expiration Date" shall be earliest to occur of:
a. the ten-year anniversary of the Agreement Date; or
b. if the Participant's Date of Termination occurs by
reason of death, Disability or Employment Separation,
the one-year anniversary of such Date of Termination.
5. Method of Option Exercise. The Option may be exercised in
whole or in part by filing a written notice with the Secretary of the Company
at its corporate headquarters prior to the Expiration Date. Such notice shall
specify the number of shares of Stock which the Participant elects to purchase,
and shall be accompanied by payment of the Exercise Price for such shares of
Stock indicated by the Participant's election. Payment shall be by cash or by
check payable to the Company. Except as otherwise provided by the Committee
before the Option is exercised: (i) all
-2-
<PAGE> 3
or a portion of the Exercise Price may be paid by the Participant by delivery
of shares of Stock acceptable to the Committee and having an aggregate Fair
Market Value (valued as of the date of exercise) that is equal to the amount of
cash that would otherwise be required; and (ii) the Participant may pay the
Exercise Price by authorizing a third party to sell shares of Stock (or a
sufficient portion of the shares) acquired upon exercise of the Option and
remit to the Company a sufficient portion of the sale proceeds to pay the
entire Exercise Price and any tax withholding resulting from such exercise.
6. Withholding. All distributions under this Agreement are
subject to withholding of all applicable taxes. At the election of the
Participant, and subject to such rules as may be established by the Committee,
such withholding obligations may be satisfied through the surrender of shares
of Stock which the Participant already owns, or to which the Participant is
otherwise entitled under the Plan.
7. Transferability. Except as otherwise provided in this
paragraph 7, the Option is not transferable other than as designated by the
Participant by will or by the laws of descent and distribution, and during the
Participant's life, may be exercised only by the Participant. However, the
Participant, with the express written approval of the Committee, may transfer
the Option to (i) the spouse, parents, children, stepchildren, adoptive
relationships, sisters, brothers or grandchildren of the Participant, (ii) a
trust or trusts for the exclusive benefit of the spouse, parents, children,
stepchildren, adoptive relationships, sisters, brothers or grandchildren of the
Participant, or (iii) a partnership or limited liability company in which the
spouse, parents, children, stepchildren, adoptive relationships, sisters,
brothers or grandchildren of the Participant are the only partners or members,
as applicable; provided in each case that (x) there may be no consideration for
any such transfer (other than in the case of Clause (iii), units in the
partnership or membership interests in the limited liability company) and (y)
subsequent transfers of transferred Options shall be prohibited except those
made in accordance with this section or by will or by the laws of descent and
distribution. Following transfer, any such Options shall continue to be
subject to the same terms and conditions as were applicable immediately prior
to transfer. The provisions with respect to termination set forth in Section
2.4 of the Plan shall continue to apply with respect to the original
Participant, in which event the Options shall be exercisable by the transferee
only to the extent and for the periods specified herein. The original
Participant will remain subject to withholding taxes upon exercise of any such
Options by the transferee. The Company shall have no obligation whatsoever to
provide notice to any transferee of any matter, including without limitation,
early termination of an Option on account of termination of the original Option
pursuant to Section 2.4 of the Plan.
Except as set forth above and in the applicable agreement, (i) no
Options shall be voluntarily or involuntarily assigned, sold, transferred,
pledged, mortgaged or encumbered by the Participant otherwise than by will or by
laws of descent and distribution, and (ii) all Options shall be exercisable,
during the Participant's lifetime, only by the Participant. At the request of a
Participant, Stock purchased upon exercise of an Option may be issued or
transferred into the name of the Participant and another person jointly with
rights of survivorship. All Options issued under this Agreement, and all rights
under the Plan, shall not be subject to involuntary seizure, or other process by
any
-3-
<PAGE> 4
creditor of any holder of any such Options, and the Company shall not honor or
recognize any such involuntary seizure or other such process. Except as set
forth above, any attempted assignment, sale, transfer, pledge, mortgage or
encumbrance ("Assignment") or any attempted involuntary seizure or other
process shall be null, void and without any effect whatsoever. Should it be
determined, by a court of law or otherwise, that any such Assignment or
involuntary seizure or other process is effective, then all Options for which
such is effective shall terminate and be forfeited as of the moment of such
involuntary seizure or other process, and shall thereafter be null, void and
without any effect whatsoever.
8. Definitions. For purposes of this Agreement, the terms listed
below shall be defined as follows:
a. Date of Termination. The Participant's "Date of
Termination" shall be the first day occurring on or
after the Agreement Date on which the Participant's
employment with the Company and all Related Companies
terminates for any reason (death, Disability or
Employment Separation); provided that a termination
of employment shall not be deemed to occur by reason
of a transfer of the Participant between the Company
and a Related Company or between two Related
Companies; and further provided that the
Participant's employment shall not be considered
terminated while the Participant is on a leave of
absence from the Company or a Related Company
approved by the Participant's employer.
b. Disability. The term "Disability" means the
permanent and total disability of Participant as
determined by the Committee.
c. Employment Separation. The term "Employment
Separation" means Participant's voluntary resignation
from employment, including retirement, or the
termination of a Participant from employment of the
Company or a Related Company.
d. Plan Definitions. Except where the context clearly
implies or indicates the contrary, a word, term, or
phrase used in the Plan is similarly used in this
Agreement.
9. Change in Control Provisions.
a. Impact of Event. In the event of a "Change in
Control" as defined in Section 9(b), the Committee or
the Board may provide that one or more of the
following acceleration and valuation provisions shall
apply:
(i) Any or all SARs outstanding for at least six
months on the date that such Change in
Control is determined to have occurred and
any or
-4-
<PAGE> 5
all Options awarded under this Plan not
previously exercisable and vested shall
become fully exercisable and vested.
(ii) The restrictions and deferral limitations
applicable to all Stock Awards shall lapse
and such shares and such Stock Awards shall
be fully vested.
(iii) The value of any or all outstanding Options,
SARs and Stock Awards shall be cashed out on
the basis of the "Change in Control Price" as
defined in Section 9(c) as of the date such
Change in Control is determined to have
occurred or such other date as the Committee
may determine prior to the Change in Control.
b. Definition of "Change in Control". For purposes of
Section 9(a), a "Change in Control" means the
happening of any of the following:
(i) A tender offer is made and consummated for
the ownership of 30% or more of the
outstanding voting securities of the Company;
(ii) The Company shall merge or consolidate with
another corporation and as a result of such
merger or consolidation less than 75% of the
outstanding voting securities of the
surviving or resulting corporation shall be
owned in the aggregate by the former
shareholders of the Company, other than
affiliates (within the meaning of the
Securities Exchange Act of 1934 ("Exchange
Act")) of any party to such merger or
consolidation, as the same shall have existed
immediately prior to such merger or
consolidation;
(iii) The Company shall sell substantially all of
its assets to another corporation which is
not a Related Company;
(iv) A person, within the meaning of Section
3(a)(9) or of Section 13(d)(3) of the
Exchange Act, shall acquire 30% or more of
the outstanding voting securities of the
Company (whether directly, indirectly,
beneficially or of record); or
(v) If, as a result of a sale or other
transaction, the Participant's employer
ceases to be a Related Company (and the
Participant's employer is or becomes an
entity that is separate from the Company).
For purposes hereof, ownership of voting securities
shall take into account and shall include ownership
as determined by applying the provisions of Rule
13d-3(d)(1)(i) pursuant to the Exchange Act.
-5-
<PAGE> 6
c. Change in Control Price. For the purposes of this
Section 9, "Change in Control Price" means the
highest price per share paid in any transaction
reported on the principal United States securities
exchange, the NASDAQ National Market System or other
principal market on which the Stock is traded, or
paid or offered in any bona fide transaction related
to a Change in Control of the Company, at the time
during the preceding sixty-day period as determined
by the Committee, except that, in the case of
Incentive Options and SARs relating to Incentive
Stock Options, such price shall be based only on
transactions reported for the date as of which the
Committee decides to cashout such options.
10. Heirs and Successors. This Agreement shall be binding upon,
and inure to the benefit of, the Company and its successors and assigns, and
upon any person acquiring, whether by merger, consolidation, purchase of assets
or otherwise, all or substantially all of the Company's assets and business. In
the event of the Participant's death prior to exercise of this Option, the
Option may be exercised by the estate of the Participant to the extent such
exercise is otherwise permitted by the Agreement. Subject to the terms of the
Plan, any benefits distributable to the Participant under this Agreement that
are not paid at the time of the Participant's death shall be paid at the time
and in the form determined in accordance with the provisions of this Agreement
and the Plan, to the beneficiary designated by the Participant in writing filed
with the Committee in such form and at such time as the Committee shall
require. If a deceased Participant fails to designate a beneficiary, or if the
designated beneficiary of the deceased Participant dies before the Participant
or before complete payment of the amounts distributable under this Agreement,
the amounts to be paid under this Agreement shall be paid to the legal
representative or representatives of the estate of the last to die of the
Participant and the beneficiary.
11. Requirements of Law. The Company shall not be required to sell
or issue any shares on the exercise of the Option if the issuance of such shares
shall constitute a violation by the Participant or the Company of any provisions
of any law or regulation of any governmental authority. The Option shall be
subject to the requirements that, if at any time the Board of Directors of the
Company or the Committee shall determine that the listing, registration or
qualification of the Covered Shares subject thereto upon any securities exchange
or under any state or federal law of the United States or of any other country
or governmental subdivision thereof, or the consent or approval of any
governmental regulatory body, or investment or other representations, are
necessary or desirable in connection with the issue or purchase of the Covered
Shares subject thereto, the Option may not be exercised in whole or in part
unless such listing, registration, qualification, consent, approval or
representation shall have been effected or obtained free of any conditions not
acceptable to the Board of Directors. If required at any time by the Board of
Directors or the Committee, the Option may not be exercised until the
Participant has delivered an investment letter to the Company. In addition,
specifically in connection with the Securities Act of 1933 (as now in effect or
hereafter amended, the "Act"), upon exercise of the Option, the Company shall
not be required to issue the underlying shares unless the Committee has received
evidence satisfactory to it to the effect that such shares will be issued in
compliance with such Act or unless an opinion of counsel satisfactory to the
Company has been received by the Company to the effect that such registration
-6-
<PAGE> 7
is not required. Any determination in this connection by the Committee shall
be final, binding and conclusive. In the event the shares issuable on exercise
of the Option are not registered under the Securities Act of 1933, the Company
may imprint on the certificate for such shares the following legend or any
other legend which counsel for the Company considers necessary or advisable to
comply with the Act:
The shares of stock represented by this certificate
have not been registered under the Securities Act of 1933 or
under the securities laws of any state and may not be sold or
transferred except upon registration or upon receipt by the
Corporation of an opinion of counsel satisfactory to the
Corporation, in form and substance satisfactory to the
Corporation, that registration is not required for such sale
or transfer.
The Company may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Act. The Company shall not be
obligated to take any other affirmative action in order to cause the exercise
of the Option or the issuance of shares of Stock pursuant thereto to comply
with any law or regulation of any governmental authority.
12. Release by Participant. Participant acknowledges that the
Option and this Option Agreement constitute the entire understanding and
agreement between the parties hereto with respect to the issuance of Stock of
the Company or any Related Company and there are no agreements, understandings,
restrictions, representations or warranties between such parties other than
those set forth herein; all other agreements and understandings being superseded
hereby. Participant hereby remises, releases, acquits and forever discharges
the Company and its successors and assigns from any and all claims,
counterclaims, demands, damages, debts, agreements, covenants, suits, contracts,
obligations, liabilities, accounts, offsets, rights, actions and causes of
action which in any manner relate to or arise out of any claims of agreements,
understandings, restrictions, representations or warranties with respect to the
issuance of Stock of the Company or any Related Company to the Participant,
including, without limitation, claims of fraud, breach of contract, negligent or
intentional misrepresentation, breach of fiduciary duty, conspiracy, negligence,
securities violations, duress, mistake, tortious interference, usury, control,
or other obligations, whether at law or in equity, whether already accrued or
accruing hereafter.
13. Administration. The authority to manage and control the
operation and administration of this Agreement shall be vested in the
Committee, and the Committee shall have all powers with respect to this
Agreement as it has with respect to the Plan. Any interpretation of the
Agreement by the Committee and any decision made by it with respect to the
Agreement is final and binding.
-7-
<PAGE> 8
14. Plan Definitions. Notwithstanding anything in this Agreement
to the contrary, the terms of this Agreement shall be subject to the terms of
the Plan, a copy of which may be obtained by the Participant from the office of
the Secretary of the Company. Inconsistencies between this document and the
Plan shall be resolved in accordance with the terms of the Plan.
15. Amendment. This Agreement may be amended by written agreement
of the Participant and the Company, without the consent of any other person.
IN WITNESS WHEREOF, the Participant has executed this Agreement, and
the Company has caused these presents to be executed in its name and on its
behalf, all as of the Agreement Date.
PARTICIPANT
---------------------------------
(Name)
FIRST WAVE MARINE, INC.
By:
------------------------------
Frank W. Eakin
President
-8-
<PAGE> 1
EXHIBIT 10.10
FORM OF
STOCK OPTION AGREEMENT
THIS AGREEMENT, entered into as of the Agreement Date (as defined in
paragraph 1), by and between the Participant and First Wave Marine, Inc. (the
"Company");
WITNESSETH:
WHEREAS, the Company maintains the 1997 Incentive Equity Plan (the
"Plan"), which is incorporated into and forms a part of this Agreement, and the
Participant has been selected by the committee administering the Plan (the
"Committee") to receive a Non-Qualified Stock Option Award under the Plan;
NOW, THEREFORE, IT IS AGREED, by and between the Company and the
Participant, as follows:
1. Terms of Award. The following terms used in this Agreement
shall have the meanings set forth in this paragraph 1:
a. The "Participant" is (Name).
b. The "Agreement Date" is November 20, 1997.
c. The number of "Covered Shares" shall be (Number)
shares of Stock.
d. The "Exercise Price" is the initial public offering
price per share to the public set forth in the
Company's final prospectus included as a part of the
Registration Statement on Form S-1, as originally
filed on October 17, 1997, and subsequently amended.
A copy of the final prospectus with the price will be
provided to the Participant.
The number of Covered Shares and the Exercise Price shall be subject
to adjustment as provided in the Plan. Other terms used in this Agreement are
defined in paragraph 8 or elsewhere in this Agreement.
2. Award and Exercise Price. The Participant is hereby granted
an option (the "Option") to purchase the number of Covered Shares of Stock at
the Exercise Price per share as set forth in paragraph 1. The Option is not
intended to constitute an "incentive stock option" as that term is used in Code
Section 422.
3. Date of Exercise. The Option shall become exercisable
according to the following vesting schedule.
<PAGE> 2
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
The Option shall become exercisable
with respect to the following
As of the following Anniversary of the percentage of the
Agreement Date: Covered Shares:
- --------------------------------------------------------------------------------
<S> <C>
One-year anniversary 20%
- --------------------------------------------------------------------------------
Two-year anniversary 20%
- --------------------------------------------------------------------------------
Three-year anniversary 20%
- --------------------------------------------------------------------------------
Four-year anniversary 20%
- --------------------------------------------------------------------------------
Five-year anniversary 20%
- --------------------------------------------------------------------------------
</TABLE>
The Option shall not become exercisable in accordance with the foregoing
schedule as of any anniversary if the Participant's Date of Termination (as
defined below) occurs before such anniversary. Exercisability under this
schedule is cumulative, and after the Option becomes exercisable under the
schedule with respect to any portion of the Covered Shares, it shall continue
to be exercisable with respect to that portion of the Covered Shares until the
Option expires. Notwithstanding the foregoing provisions of this paragraph 3,
the Option shall become immediately fully exercisable, accelerating all further
vesting requirements, with respect to all of the Covered Shares which
Participant has not exercised as follows:
a. The Option shall become fully exercisable upon the
date of the Participant's Date of Termination by
reason of the Participant's death or Disability.
b. The Option shall become fully exercisable upon the
date of a Change in Control, if the Board of
Directors of the Company provides in a resolution
after the Change in Control that vesting will be
accelerated, and the Participant's Date of
Termination does not occur before the Change in
Control.
4. Expiration. The Option shall not be exercisable on or after
the Expiration Date. The "Expiration Date" shall be earliest to occur of:
a. the ten-year anniversary of the Agreement Date; or
b. if the Participant's Date of Termination occurs by
reason of death, Disability or Employment Separation,
the one-year anniversary of such Date of Termination.
5. Method of Option Exercise. The Option may be exercised in
whole or in part by filing a written notice with the Secretary of the Company
at its corporate headquarters prior to the Expiration Date. Such notice shall
specify the number of shares of Stock which the Participant
-2-
<PAGE> 3
elects to purchase, and shall be accompanied by payment of the Exercise Price
for such shares of Stock indicated by the Participant's election. Payment
shall be by cash or by check payable to the Company. Except as otherwise
provided by the Committee before the Option is exercised: (i) all or a portion
of the Exercise Price may be paid by the Participant by delivery of shares of
Stock acceptable to the Committee and having an aggregate Fair Market Value
(valued as of the date of exercise) that is equal to the amount of cash that
would otherwise be required; and (ii) the Participant may pay the Exercise
Price by authorizing a third party to sell shares of Stock (or a sufficient
portion of the shares) acquired upon exercise of the Option and remit to the
Company a sufficient portion of the sale proceeds to pay the entire Exercise
Price and any tax withholding resulting from such exercise.
6. Withholding. All distributions under this Agreement are
subject to withholding of all applicable taxes. At the election of the
Participant, and subject to such rules as may be established by the Committee,
such withholding obligations may be satisfied through the surrender of shares
of Stock which the Participant already owns, or to which the Participant is
otherwise entitled under the Plan.
7. Transferability. Except as otherwise provided in this
paragraph 7, the Option is not transferable other than as designated by the
Participant by will or by the laws of descent and distribution, and during the
Participant's life, may be exercised only by the Participant. However, the
Participant, with the express written approval of the Committee, may transfer
the Option to (i) the spouse, parents, children, stepchildren, adoptive
relationships, sisters, brothers or grandchildren of the Participant, (ii) a
trust or trusts for the exclusive benefit of the spouse, parents, children,
stepchildren, adoptive relationships, sisters, brothers or grandchildren of the
Participant, or (iii) a partnership or limited liability company in which the
spouse, parents, children, stepchildren, adoptive relationships, sisters,
brothers or grandchildren of the Participant are the only partners or members,
as applicable; provided in each case that (x) there may be no consideration for
any such transfer (other than in the case of Clause (iii), units in the
partnership or membership interests in the limited liability company) and (y)
subsequent transfers of transferred Options shall be prohibited except those
made in accordance with this section or by will or by the laws of descent and
distribution. Following transfer, any such Options shall continue to be
subject to the same terms and conditions as were applicable immediately prior
to transfer. The provisions with respect to termination set forth in Section
2.4 of the Plan shall continue to apply with respect to the original
Participant, in which event the Options shall be exercisable by the transferee
only to the extent and for the periods specified herein. The original
Participant will remain subject to withholding taxes upon exercise of any such
Options by the transferee. The Company shall have no obligation whatsoever to
provide notice to any transferee of any matter, including without limitation,
early termination of an Option on account of termination of the original Option
pursuant to Section 2.4 of the Plan.
Except as set forth above and in the applicable agreement, (i) no
Options shall be voluntarily or involuntarily assigned, sold, transferred,
pledged, mortgaged or encumbered by the Participant otherwise than by will or by
laws of descent and distribution, and (ii) all Options shall be exercisable,
during the Participant's lifetime, only by the Participant. At the request of a
Participant, Stock
-3-
<PAGE> 4
purchased upon exercise of an Option may be issued or transferred into the name
of the Participant and another person jointly with rights of survivorship. All
Options issued under this Agreement, and all rights under the Plan, shall not
be subject to involuntary seizure, or other process by any creditor of any
holder of any such Options, and the Company shall not honor or recognize any
such involuntary seizure or other such process. Except as set forth above, any
attempted assignment, sale, transfer, pledge, mortgage or encumbrance
("Assignment") or any attempted involuntary seizure or other process shall be
null, void and without any effect whatsoever. Should it be determined, by a
court of law or otherwise, that any such Assignment or involuntary seizure or
other process is effective, then all Options for which such is effective shall
terminate and be forfeited as of the moment of such involuntary seizure or
other process, and shall thereafter be null, void and without any effect
whatsoever.
8. Definitions. For purposes of this Agreement, the terms listed
below shall be defined as follows:
a. Date of Termination. The Participant's "Date of
Termination" shall be the first day occurring on or
after the Agreement Date on which the Participant's
employment with the Company and all Related Companies
terminates for any reason (death, Disability or
Employment Separation); provided that a termination
of employment shall not be deemed to occur by reason
of a transfer of the Participant between the Company
and a Related Company or between two Related
Companies; and further provided that the
Participant's employment shall not be considered
terminated while the Participant is on a leave of
absence from the Company or a Related Company
approved by the Participant's employer.
b. Disability. The term "Disability" means the
permanent and total disability of Participant as
determined by the Committee.
c. Employment Separation. The term "Employment
Separation" means Participant's voluntary resignation
from employment, including retirement, or the
termination of a Participant from employment of the
Company or a Related Company.
d. Plan Definitions. Except where the context clearly
implies or indicates the contrary, a word, term, or
phrase used in the Plan is similarly used in this
Agreement.
9. Change in Control Provisions.
a. Impact of Event. In the event of a "Change in
Control" as defined in Section 9(b), the Committee or
the Board may provide that one or more of the
following acceleration and valuation provisions shall
apply:
-4-
<PAGE> 5
(i) Any or all SARs outstanding for at least six
months on the date that such Change in
Control is determined to have occurred and
any or all Options awarded under this Plan
not previously exercisable and vested shall
become fully exercisable and vested.
(ii) The restrictions and deferral limitations
applicable to all Stock Awards shall lapse
and such shares and such Stock Awards shall
be fully vested.
(iii) The value of any or all outstanding Options,
SARs Stock Awards shall be cashed out on the
basis of the "Change in Control Price" as
defined in Section 9(c) as of the date such
Change in Control is determined to have
occurred or such other date as the Committee
may determine prior to the Change in Control.
b. Definition of "Change in Control". For purposes of
Section 9(a), a "Change in Control" means the
happening of any of the following:
(i) A tender offer is made and consummated for
the ownership of 30% or more of the
outstanding voting securities of the Company;
(ii) The Company shall merge or consolidate with
another corporation and as a result of such
merger or consolidation less than 75% of the
outstanding voting securities of the
surviving or resulting corporation shall be
owned in the aggregate by the former
shareholders of the Company, other than
affiliates (within the meaning of the
Securities Exchange Act of 1934 ("Exchange
Act")) of any party to such merger or
consolidation, as the same shall have existed
immediately prior to such merger or
consolidation;
(iii) The Company shall sell substantially all of
its assets to another corporation which is
not a Related Company;
(iv) A person, within the meaning of Section
3(a)(9) or of Section 13(d)(3) of the
Exchange Act, shall acquire 30% or more of
the outstanding voting securities of the
Company (whether directly, indirectly,
beneficially or of record); or
(v) If, as a result of a sale or other
transaction, the Participant's employer
ceases to be a Related Company (and the
Participant's employer is or becomes an
entity that is separate from the Company).
-5-
<PAGE> 6
For purposes hereof, ownership of voting securities
shall take into account and shall include ownership
as determined by applying the provisions of Rule
13d-3(d)(1)(i) pursuant to the Exchange Act.
c. Change in Control Price. For the purposes of this
Section 9, "Change in Control Price" means the
highest price per share paid in any transaction
reported on the principal United States securities
exchange, the NASDAQ National Market System or other
principal market on which the Stock is traded, or
paid or offered in any bona fide transaction related
to a Change in Control of the Company, at the time
during the preceding sixty-day period as determined
by the Committee, except that, in the case of
Incentive Options and SARs relating to Incentive
Stock Options, such price shall be based only on
transactions reported for the date as of which the
Committee decides to cashout such options.
10. Heirs and Successors. This Agreement shall be binding upon,
and inure to the benefit of, the Company and its successors and assigns, and
upon any person acquiring, whether by merger, consolidation, purchase of assets
or otherwise, all or substantially all of the Company's assets and business. In
the event of the Participant's death prior to exercise of this Option, the
Option may be exercised by the estate of the Participant to the extent such
exercise is otherwise permitted by the Agreement. Subject to the terms of the
Plan, any benefits distributable to the Participant under this Agreement that
are not paid at the time of the Participant's death shall be paid at the time
and in the form determined in accordance with the provisions of this Agreement
and the Plan, to the beneficiary designated by the Participant in writing filed
with the Committee in such form and at such time as the Committee shall
require. If a deceased Participant fails to designate a beneficiary, or if the
designated beneficiary of the deceased Participant dies before the Participant
or before complete payment of the amounts distributable under this Agreement,
the amounts to be paid under this Agreement shall be paid to the legal
representative or representatives of the estate of the last to die of the
Participant and the beneficiary.
11. Requirements of Law. The Company shall not be required to
sell or issue any shares on the exercise of the Option if the issuance of such
shares shall constitute a violation by the Participant or the Company of any
provisions of any law or regulation of any governmental authority. The Option
shall be subject to the requirements that, if at any time the Board of
Directors of the Company or the Committee shall determine that the listing,
registration or qualification of the Covered Shares subject thereto upon any
securities exchange or under any state or federal law of the United States or
of any other country or governmental subdivision thereof, or the consent or
approval of any governmental regulatory body, or investment or other
representations, are necessary or desirable in connection with the issue or
purchase of the Covered Shares subject thereto, the Option may not be exercised
in whole or in part unless such listing, registration, qualification, consent,
approval or representation shall have been effected or obtained free of any
conditions not acceptable to the Board of Directors. If required at any time
by the Board of Directors or the Committee, the Option may not be exercised
until the Participant has delivered an investment letter to the Company. In
addition, specifically in connection with the
-6-
<PAGE> 7
Securities Act of 1933 (as now in effect or hereafter amended, the "Act"), upon
exercise of the Option, the Company shall not be required to issue the
underlying shares unless the Committee has received evidence satisfactory to it
to the effect that such shares will be issued in compliance with such Act or
unless an opinion of counsel satisfactory to the Company has been received by
the Company to the effect that such registration is not required. Any
determination in this connection by the Committee shall be final, binding and
conclusive. In the event the shares issuable on exercise of the Option are not
registered under the Securities Act of 1933, the Company may imprint on the
certificate for such shares the following legend or any other legend which
counsel for the Company considers necessary or advisable to comply with the Act:
The shares of stock represented by this certificate
have not been registered under the Securities Act of 1933 or
under the securities laws of any state and may not be sold or
transferred except upon registration or upon receipt by the
Corporation of an opinion of counsel satisfactory to the
Corporation, in form and substance satisfactory to the
Corporation, that registration is not required for such sale
or transfer.
The Company may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Act. The Company shall not be
obligated to take any other affirmative action in order to cause the exercise
of the Option or the issuance of shares of Stock pursuant thereto to comply
with any law or regulation of any governmental authority.
12. Release by Participant. Participant acknowledges that the
Option and this Option Agreement constitute the entire understanding and
agreement between the parties hereto with respect to the issuance of Stock of
the Company or any Related Company, other than, if applicable to Participant,
that certain Stock Exchange Agreement dated as of October 16, 1997 regarding
shares in Newpark Shipbuilding and Repair, Inc. ("Exchange Agreement"), and
there are no agreements, understandings, restrictions, representations or
warranties between such parties other than those set forth herein and, if
applicable to Participant, in the Exchange Agreement; all other agreements and
understandings being superseded hereby. Except for any rights and obligations
under the Exchange Agreement, if applicable, which are expressly not released
or discharged, Participant hereby remises, releases, acquits and forever
discharges the Company and its successors and assigns from any and all claims,
counterclaims, demands, damages, debts, agreements, covenants, suits,
contracts, obligations, liabilities, accounts, offsets, rights, actions and
causes of action which in any manner relate to or arise out of any claims of
agreements, understandings, restrictions, representations or warranties with
respect to the issuance of Stock of the Company or any Related Company to the
Participant, including, without limitation, claims of fraud, breach of
contract, negligent or intentional misrepresentation, breach of fiduciary duty,
conspiracy, negligence, securities violations, duress, mistake, tortious
interference, usury, control, or other obligations, whether at law or in
equity, whether already accrued or accruing hereafter.
13. Administration. The authority to manage and control the
operation and administration of this Agreement shall be vested in the
Committee, and the Committee shall have
-7-
<PAGE> 8
all powers with respect to this Agreement as it has with respect to the Plan.
Any interpretation of the Agreement by the Committee and any decision made by
it with respect to the Agreement is final and binding.
14. Plan Definitions. Notwithstanding anything in this Agreement
to the contrary, the terms of this Agreement shall be subject to the terms of
the Plan, a copy of which may be obtained by the Participant from the office of
the Secretary of the Company. Inconsistencies between this document and the
Plan shall be resolved in accordance with the terms of the Plan.
15. Amendment. This Agreement may be amended by written agreement
of the Participant and the Company, without the consent of any other person.
IN WITNESS WHEREOF, the Participant has executed this Agreement, and
the Company has caused these presents to be executed in its name and on its
behalf, all as of the Agreement Date.
PARTICIPANT
----------------------------------------
(Name)
FIRST WAVE MARINE, INC.
By:
-------------------------------------
Frank W. Eakin
President
-8-
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated November 8, 1997, accompanying the
consolidated financial statements of First Wave Marine, Inc. and Subsidiaries,
and our report dated November 8, 1997, accompanying the consolidated financial
statements of John Bludworth Marine, Inc. and Subsidiary contained in the
Registration Statement and Prospectus. We consent to the use of the
aforementioned reports in the Registration Statement and Prospectus, and to the
use of our name as it appears under the caption "Experts".
GRANT THORNTON LLP
/s/ Grant Thornton LLP
Houston, Texas
November 25, 1997
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