<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 17, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
FIRST WAVE MARINE, INC.
(Exact Name of Registrant as specified in its charter)
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<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:
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<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. [ ]
CALCULATION OF REGISTRATION FEE
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<CAPTION>
=================================================================================================================================
PROPOSED PROPOSED
TITLE OF EACH MAXIMUM MAXIMUM
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED(1) PER SHARE(1) OFFERING PRICE(2) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $0.01 per share $100,000,000 $30,305
=================================================================================================================================
</TABLE>
(1) In accordance with Rule 457(o) under the Securities Act of 1933, as amended,
the number of shares being registered and the proposed maximum offering
price per share are not included in this table.
(2) Estimated solely for the purpose of calculating the registration fee.
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.
================================================================================
<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 OCTOBER 17, 1997
PROSPECTUS
SHARES
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<S> <C> <C>
[FIRST WAVE LOGO] FIRST WAVE MARINE, INC.
</TABLE>
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>
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===================================================================================================================
UNDERWRITING PROCEEDS TO
DISCOUNTS AND PROCEEDS TO SELLING
PRICE TO PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
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<S> <C> <C> <C> <C>
Per Share.................... $ $ $ $
- ------------------------------------------------------------------------------------------------------------------
Total(3)..................... $ $ $ $
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</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 , 1997 at the offices of Schroder & Co. Inc., New York, New
York.
SCHRODER & CO. INC.
JEFFERIES & COMPANY, INC.
MORGAN KEEGAN & COMPANY, INC.
, 1997
<PAGE> 3
[aerial photograph of shipyard]
East Pelican Island Shipyard,
[photograph of offshore supply boat]
Offshore support vessel serving Gulf Coast drilling rigs
[photograph of power generation barge under tow]
Hull of power generation barge
[photograph of welder]
[photograph of inland tank barge by onshore gas free facility]
Inland tank barge, degassing facility, Brady Island Shipyard
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."
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and Consolidated Financial Statements, including the notes thereto,
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 -for-one stock split effected , 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 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. 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 six months of 1997,
the Company generated revenues of $16.9 million and EBITDA of $5.3 million,
compared to revenues and EBITDA of $11.8 million and $1.1 million, respectively,
in the first six 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:
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- 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
4
<PAGE> 6
business 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. The amended lease is subject to ratification by the City
of Galveston. 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, the assumption or payment of
approximately $7.0 million in long-term debt and the issuance of a $4.0 million
promissory note. The Company has agreed to pay or assume approximately $5.1
million in additional drydock construction debt.
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.
5
<PAGE> 7
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.
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<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......................... 26 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> 8
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 shares issuable upon the exercise of stock
options to be granted to management and employees effective upon
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> 9
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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YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
--------------------------------------- ------------------------------
1994 1995 1996 1996(A) 1996 1997 1997(A)(D)
------- ------- ------- --------- ------- ------- ----------
PRO FORMA PRO FORMA
(IN THOUSANDS, EXCEPT SHARE AND 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 $ 9,297 $13,505 $26,885
New construction.................... 1,391 3,321 2,841 5,044 475 881 881
Environmental services.............. 2,263 3,287 4,119 4,119 2,001 2,555 2,555
------- ------- ------- --------- ------- ------- -------
Total revenues...................... 15,347 22,000 27,957 44,950 11,773 16,941 30,321
Gross profit.......................... 2,756 4,957 9,334 12,229 3,470 7,448 9,733
Operating earnings (loss)............. (71) 1,334 3,705 4,662 968 4,641 5,845
Earnings (loss) before taxes.......... (257) 1,011 2,657 4,294 766 3,396 5,403
Net earnings (loss)................... (259) 728 1,559 2,464 506 2,032 3,345
Weighted average number of shares
outstanding.........................
Earnings (loss) per share.............
CASH FLOW AND OPERATING DATA:
Net Cash provided by (used in):
Operating activities................ ($2,962) $ 36 $ 1,184 $ -- $ 669 $ 1,916 $ --
Investing activities................ (569) (934) (1,425) -- (426) (300) --
Financing activities................ 3,610 884 175 -- (304) (1,258) --
EBITDA(b)............................. (23) 1,593 4,385 7,530 1,142 5,291 7,589
Depreciation and amortization......... 48 259 680 2,720 174 650 1,740
Capital expenditures(c)............... 569 934 16,322 -- (426) (300) --
Labor hours worked.................... 340 509 582 953 272 314 654
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1997
-----------------------
ACTUAL PRO FORMA(A)
------- ------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 358 $ 35,991
Total assets................................................ 26,697 104,036
Long-term debt.............................................. 18,711 6,894
Stockholders' equity........................................ 3,925 82,769
</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 June 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) 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.
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.
(c) Includes property and equipment acquired through the incurrence of debt.
(d) To reflect the historical consolidated operations of Bludworth for the six
months ended June 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.
8
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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 -- Operations."
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.
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
effect on the Company's business, financial condition and results of operations.
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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.
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
10
<PAGE> 12
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.
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.
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> 13
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 -- Backlog."
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 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 -- Regulation -- 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 -- 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). Consequently, these persons, if they were to act together, would have the
ability to exercise control over
12
<PAGE> 14
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, will (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 "Description of Capital Stock -- Statutory
Business Combination Statute."
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the Offering, the Company will have shares of
Common Stock outstanding. In addition, 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 shares 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> 15
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.
14
<PAGE> 16
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 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 $26.0 million of the proceeds will be used to fund the
purchase of the Bludworth Acquisition. An additional $5.1 million will be used
to pay off indebtedness of Bludworth incurred in connection with its
approximately 9,000-ton drydock currently under construction. 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.
The Company intends to use $14.1 million of the net proceeds of the
Offering to prepay indebtedness outstanding under four credit facilities. The
borrowings under the first facility bear interest at 10.4% per year and mature
on September 2003. The borrowings under the 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. Borrowings
under these four credit facilities were used to partially finance the
acquisitions of Brady Island and Greens Bayou.
15
<PAGE> 17
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> 18
DILUTION
The net tangible book value of the Company at June 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 after the Exchange and prior to the consummation of
this Offering. After giving effect to 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 June 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 Offering..... $
-------
Increase per share attributable to new investors.......... $
-------
Pro forma net tangible book value per share after the Offering....... $
-------
Dilution per share to new investors.................................. $
-------
</TABLE>
The following table sets forth, as of June 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......... $
New investors................. $
Total............... 100.0% 100.0%
===== =====
</TABLE>
- ---------------
(1) The above computations do not give effect to the shares issuable
pursuant to stock options to be granted at an exercise price per share equal
to the initial public offering price to officers and employees of the
Company under the 1997 Incentive Equity Plan upon completion of the
Offering.
17
<PAGE> 19
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1997 (i) on a historical basis, (ii) pro forma after giving effect to the
Reincorporation and 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>
JUNE 30, 1997
-------------------------------------------------
PRO FORMA FOR THE PRO FORMA AS
REINCORPORATION ADJUSTED FOR THE
HISTORICAL AND THE EXCHANGE OFFERING
---------- ----------------- ----------------
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C>
Cash and cash equivalents................. $ 358 $ $
=======
Short-term borrowings and current portion
of long-term debt....................... $ 1,152
Long-term debt............................ 17,772
-------
Total debt...................... 18,924
-------
Stockholders' equity:
Common Stock, $0.01 par value,
21,000,000 shares authorized(a);
shares issued and
outstanding, shares
outstanding pro forma and
shares issued and outstanding pro
forma as adjusted(b)................. 1
Preferred stock, $0.01 par value,
2,000,000 shares authorized; no
shares issued and outstanding........ --
Additional paid-in capital.............. --
Retained earnings....................... 3,924
-------
Total stockholders' equity...... 3,925
-------
Total capitalization............ $22,849 $
=======
</TABLE>
- ---------------
(a) Actual Common Stock of the predecessor to the Company, First Wave Marine,
Inc., a Texas corporation ("FWM-TX") was 10,000 shares authorized, no par
value. Pursuant to the Reincorporation, FWM-TX has merged into the Company
on September 30, 1997.
(b) Does not include an aggregate of (i) shares issuable pursuant to
stock options granted under the Company's 1997 Incentive Equity Plan at an
exercise per share equal to the initial public offering price. See
"Management -- 1997 Incentive Equity Plan" and "Description of Capital
Stock."
18
<PAGE> 20
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 are
derived from the Consolidated Financial Statements of the Company audited by
Grant Thornton LLP, independent certified public accountants. 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 for and as
of the end of each of the six-month periods ended June 30, 1996 and June 30,
1997 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 results for the six months ended June 30, 1997 are not
necessarily indicative of the results to be achieved for the full year. 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>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------- -----------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT SHARE AND 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 $ 9,297 $13,505
New construction.......................... -- -- 1,391 3,321 2,841 475 881
Environmental services.................... 2,118 2,176 2,263 3,287 4,119 2,001 2,555
------- ------- ------- ------- ------- ------- -------
Total revenue....................... 14,678 16,251 15,347 22,000 27,957 11,773 16,941
Cost of revenues............................ 10,695 14,994 12,591 17,043 18,623 8,303 9,493
------- ------- ------- ------- ------- ------- -------
Gross profit................................ 3,983 1,257 2,756 4,957 9,334 3,470 7,448
General and administrative expenses(a)...... 3,728 3,241 2,827 3,623 5,629 2,502 2,807
------- ------- ------- ------- ------- ------- -------
Operating income (loss)..................... 255 (1,984) (71) 1,334 3,705 968 4,641
Interest expense, net....................... 101 359 186 247 829 155 842
Minority interest........................... -- -- -- 76 219 47 403
------- ------- ------- ------- ------- ------- -------
Earnings (loss) before taxes................ 154 (2,343) (257) 1,011 2,657 766 3,396
Income tax provision(b)..................... -- -- 2 283 1,098 260 1,364
------- ------- ------- ------- ------- ------- -------
Net earnings (loss)................. $ 154 $(2,343) $ (259) $ 728 $ 1,559 $ 506 $ 2,032
======= ======= ======= ======= ======= ======= =======
Earnings (loss) per share(b)................
Weighted average number of shares
outstanding(b)............................
CASH FLOW AND OPERATING DATA:
Net cash provided by (used in):
Operating activities...................... 1,062 (1,363) (2,962) 36 1,184 669 1,916
Investing activities...................... (5,559) (317) (569) (934) (1,425) (426) (300)
Financing activities...................... 4,789 1,520 3,610 884 175 (304) (1,258)
EBITDA(c)................................... 859 (1,287) (23) 1,593 4,385 1,142 5,291
Depreciation and amortization............... 604 697 48 259 680 174 650
Capital expenditures(d)..................... 13,293 317 569 934 16,322 (426) (300)
Labor hours worked.......................... NA NA 340 509 582 272 314
Gross Margin................................ 27.1% 7.7% 18.0% 22.5% 33.4% 29.5% 44.0%
Operating Income Margin..................... 1.7% NM NM 6.1% 13.3% 8.2% 27.4%
Net Income Margin........................... NM NM NM 3.3% 5.6% 4.3% 12.0%
EBITDA Margin............................... 5.9% NM NM 7.2% 15.7% 9.7% 31.2%
</TABLE>
19
<PAGE> 21
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 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 $ -- $ 358
Total assets.............................................. 18,854 18,144 5,017 6,794 24,932 26,697
Long-term debt............................................ 4,520 4,161 1,434 1,128 18,663 18,711
Stockholders' equity (deficit)............................ (4,796) (7,139) (258) 334 1,893 3,925
</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.
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> 22
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 late 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
dominant 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 shipyard
acquisitions, 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
flatten the labor force highs and lows typical in the shipyard industry by
shifting workers to new construction as a means
21
<PAGE> 23
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 Six Months Ended June 30, 1997 to Six Months Ended June 30, 1996
Revenues increased 43.9% to $16.9 million in the six-month period ended
June 30, 1997 compared with $11.8 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
80.1% of total revenues in the six-month period ended June 30, 1997, rose 22.1%
over the same period in 1996, based on labor hours.
Cost of revenues rose 14.3% to $9.5 million in the six-month period ended
June 30, 1997 from $8.3 million in the same period in 1996 as a result of the
overall growth in labor hours.
Gross profits increased by 114.6% to $7.4 million in the six-month period
ended June 30, 1997 from $3.5 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 six-months of 1997 to 44.0% from 29.5% for the same
period in 1996.
General and administrative expenses rose 12.2% to $2.8 million in the
six-month period ended June 30, 1997 from $2.5 million in the same period in
1996 as a result of an increase in semi-variable expenses due to the larger
volume of services. General and administrative expenses as a percentage of
revenues for the first six months of 1997 represented 16.6% of total revenues,
as compared to 21.3% for the same period in 1996, attributable to greater
operating leverage realized from the general and administrative cost structure.
22
<PAGE> 24
Depreciation and amortization expense increased to $650,000 in the
six-month period ended June 30, 1997 from $174,000 in the same period in 1996
primarily due to the effect of a full six months of depreciation in the 1997
period of the assets acquired at the Brady Island facility in August 1996.
Interest expense rose to $842,000 in the six-month period ended June 30,
1997 from $155,000 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 $1.4 million
in the six-month period ended June 30, 1997 from $260,000 in the same period in
1996.
Net earnings rose 301.6% to $2.0 million in the six-month period ended June
30, 1997 from $506,000 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, 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%. In 1996, general and administrative expenses included a $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 $680,000 paid in discretionary bonuses
during 1996 compared with $68,000 paid 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 one-time, non-recurring pre-tax fee of $700,000
($441,000 after-tax).
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.
23
<PAGE> 25
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 $1.9
million and $669,000 in the six months ended June 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 $300,000 and $426,000
in the six months ended June 30, 1997 and 1996, respectively. During the
42-month period ended June 30, 1997, investing activities consisted largely of
the acquisition of the Brady Island shipyard facility and capital improvements
to expand capacity.
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 ($1.3
million) and ($304,000) in the six months ended June 30, 1997 and 1996,
respectively. Increases in financing activities represent 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. 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 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.
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
24
<PAGE> 26
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 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
25
<PAGE> 27
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 June 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 $19.0 million in cash. 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. A final determination
of the required purchase accounting adjustments, including the allocation of the
purchase price to the identifiable tangible and intangible assets, the acquired
assets of Bludworth and liabilities assumed based on their respective fair
values, has not yet been made. Accordingly, the purchase accounting adjustments
made in connection with the preparation of the Unaudited Pro Forma Consolidated
Combined Financial Information are preliminary and have been made solely for the
purposes of preparing such financial information. First Wave will undertake a
study to determine the fair value of certain of Bludworth's assets and
liabilities and will make appropriate purchase accounting adjustments upon
completion of that study. 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 significantly 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> 28
FIRST WAVE MARINE, INC.
PRO FORMA CONSOLIDATED COMBINED BALANCE SHEET
JUNE 30, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND 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......... $ 358 $ 493 $ 72,750(a) $ 35,991
(19,000)(b)
(18,610)(c)
Accounts receivable............... 7,970 6,931 -- 14,901
Inventories....................... 783 981 -- 1,764
Other............................. 287 321 -- 608
------- ------- -------- --------
Total current assets......... 9,398 8,726 35,140 53,264
Property and equipment, net....... 16,454 7,820 12,611(b) 36,885
Organization and loan costs,
net............................. 613 -- -- 613
Deposits and other................ 232 98 -- 330
Intangible assets................. -- -- 6,000(d) 12,944
6,944(b)
------- ------- -------- --------
Total assets................. $26,697 $16,644 $ 60,695 $104,036
======= ======= ======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Notes payable..................... $ 213 $ 3,285 $ -- $ 3,498
Current portion of long-term
debt............................ 939 372 (1,311)(c) --
Trade accounts payable............ 726 1,569 -- 2,295
Accrued liabilities............... 1,392 1,223 -- 2,615
------- ------- -------- --------
Total current liabilities.... 3,270 6,449 (1,311) 8,408
Long-term debt, net of current
portion......................... 10,878 5,721 (16,599)(c) --
Subordinated debt................. 6,894 -- -- 6,894
Deferred income taxes............. 591 363 4,666(b) 5,620
Other liabilities................. 345 -- -- 345
Minority interest in subsidiary... 794 -- (794)(d) --
------- ------- -------- --------
Total liabilities............ 22,772 12,533 (14,038) 21,267
STOCKHOLDERS' EQUITY
Common stock...................... 1 1 6,794(d) 80,470
73,675(a)
(1)(b)
Retained earnings................. 3,924 4,110 (4,110)(b)
(925)(a)
(700)(c) 2,299
------- ------- -------- --------
3,925 4,111 74,733 82,769
------- ------- -------- --------
Total liabilities and
stockholders' equity....... $26,697 $16,644 $ 60,695 $104,036
======= ======= ======== ========
</TABLE>
See accompanying notes to unaudited pro forma consolidated combined financial
statements.
27
<PAGE> 29
FIRST WAVE MARINE, INC.
PRO FORMA CONSOLIDATED COMBINED STATEMENT OF EARNINGS
SIX MONTH PERIOD ENDED JUNE 30, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND 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............................ $16,941 $13,380 $ -- $30,321
COST OF REVENUES.................... 9,493 10,539 556(e) 20,588
------- ------- ------- -------
Gross profit.............. 7,448 2,841 (556) 9,733
GENERAL AND ADMINISTRATIVE
EXPENSES.......................... 2,807 875 206(f) 3,888
------- ------- ------- -------
Earnings from
operations.............. 4,641 1,966 (762) 5,845
OTHER INCOME (EXPENSE)
Other income...................... -- 4 -- 4
Interest expense.................. (843) (384) 781(g) (446)
Minority interest................. (402) -- 402(d) --
------- ------- ------- -------
(1,245) (380) 1,183 (442)
------- ------- ------- -------
Earnings before income
taxes................... 3,396 1,586 421 5,403
INCOME TAXES........................ 1,364 622 72(h) 2,058
------- ------- ------- -------
NET EARNINGS.............. $ 2,032 $ 964 $ 349 $ 3,345
======= ======= ======= =======
Earnings per share:
Net income per share..............
Weighted average shares
outstanding....................
</TABLE>
See accompanying notes to unaudited pro forma consolidated combined financial
statements.
28
<PAGE> 30
FIRST WAVE MARINE, INC.
PRO FORMA CONSOLIDATED COMBINED STATEMENT OF EARNINGS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, MARCH 31,
1996 1997
------------ ----------
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 profit................... 9,334 4,006 (1,111) 12,229
GENERAL AND ADMINISTRATIVE EXPENSES...... 5,629 1,526 412(f) 7,567
------- ------- ------- -------
Earnings from operations....... 3,705 2,480 (1,523) 4,662
OTHER INCOME (EXPENSE)
Other income........................... -- 148 -- 148
Interest expense....................... (829) (443) 756(g) (516)
Minority interest...................... (219) -- 219(d) --
------- ------- ------- -------
(1,048) (295) 975 (368)
------- ------- ------- -------
Earnings before income taxes... 2,657 2,185 (548) 4,294
INCOME TAXES............................. 1,098 909 (177)(h) 1,830
------- ------- ------- -------
NET EARNINGS................... $ 1,559 $ 1,276 $ (371) $ 2,464
======= ======= ======= =======
Earnings per share:
Net income per share...................
Weighted average shares outstanding....
</TABLE>
See accompanying notes to unaudited pro forma consolidated combined financial
statements.
29
<PAGE> 31
FIRST WAVE MARINE, INC.
NOTES TO PRO FORMA CONSOLIDATED COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(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 a prepayment penalty of $700.
(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 in 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 net 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> 32
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. The amended lease is subject to ratification by
the City of Galveston. Pursuant to the terms of the amended lease, the Company
has committed to
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make $20 million in capital improvements and equipment at the East 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, the assumption or payment of
approximately $7.0 million in long-term debt and the issuance of a $4.0 million
promissory note. The Company has agreed to pay or assume approximately $5.1
million in additional drydock construction debt.
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
"-- Operations" 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 cantilever
jackups capable of drilling in water depths of 250 feet or more have increased
from an average of $34,700 in September 1995 to an average of $74,500 in
September 1997. Similarly, dayrates worldwide for third and fourth generation
semisubmersibles have increased from an average of $99,000 in September 1996 to
an average of $164,000 in September 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.
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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 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 307 in
September 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 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 feet to 225 feet) 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 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 26 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 amended lease is subject to final ratification by the
City of Galveston. 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 quarter 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
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five largest 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.
CONTRACT PROCEDURE, STRUCTURE AND PRICING
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 contracts 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 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. 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.
The Company has developed a "contract rate" system it has used to form
strategic alliances with its key customers. 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. Some contract rate arrangements are based on a
fixed-price and some are based on time and material. The contract rate system is
a significant departure from the traditional shipyard competitive bid process
which requires that for each job a customer submit specifications which the
shipyard bids on to obtain the work. The contracts are then usually awarded on a
fixed-price basis. 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.
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.
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.
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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.
HEALTH AND SAFETY
The Company has one of the best safety records in its industry. For the
last three consecutive years, Newpark Shipbuilding 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
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<PAGE> 42
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. To the extent laws are enacted or
other governmental action is taken that imposes environmental protection
requirements that results in increased costs to the shipbuilding and repair
business in general, the business and prospects of the Company could be
adversely affected. 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.
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
over 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.
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
41
<PAGE> 43
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 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. It also
establishes 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 are handled in
substantial compliance with the CWA and analogous state statutes and its
discharge permits. The NPDES program 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.
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<PAGE> 44
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 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.
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<PAGE> 45
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
Dale Payne, III...................... 48 Vice President, Shipyard Operations -- Brady Island
Ben Ramirez.......................... 45 Vice President, Shipyard Operations -- Greens Bayou
Hugh G. Walker, III.................. 37 Vice President, Environmental Services -- Brady Island
</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. 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, Corporate Secretary and Director of the Company since December 1993.
Mr. Ammons is a Certified Public
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<PAGE> 46
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 2 years as President and for 4 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 semi-submersible 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.
Dale Payne, III has served as Vice President of Shipyard
Operations -- 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 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 of Shipyard Operations -- Greens Bayou, 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.
Hugh G. Walker, III, Vice President of Environmental Services -- Brady
Island, 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.
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<PAGE> 47
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> 48
The following table sets forth for each of the last three years the
aggregate compensation of (i) the Company's chief executive officer and (ii) for
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 -- -- 4,094
Executive Vice President --
Operations
</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.
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 also provide for an
annual incentive bonus equal to 1.19%, 0.95% and 0.86% of annual EBITDA for
Messrs. S. Eakin, F. Eakin and Ammons, respectively. The contracts will provide
for a term of three years, with an option by the Company for termination upon 90
days' notice. 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.
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.
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<PAGE> 49
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 intends to adopt an Incentive Equity
Plan for employees. It is expected that the 1997 Incentive Equity Plan will
permit the granting of any or all of the following types of awards ("Awards"):
stock appreciation rights, stock options and restricted stock. Under the
intended 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 shares of Common Stock will be authorized and
reserved for issuance pursuant to the 1997 Incentive Equity Plan. It is expected
that options to purchase an aggregate of shares of Common Stock will
be 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 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. No Awards may be granted under the
1997 Incentive Equity Plan after , 2007.
48
<PAGE> 50
STOCK OPTIONS TO BE GRANTED TO EXECUTIVE OFFICERS UNDER THE 1997 INCENTIVE
EQUITY PLAN
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- -----------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES EXERCISE OR
UNDERLYING OPTIONS(A) BASE PRICE EXPIRATION
NAME GRANTED(#) ($/SH) DATE
---- --------------------- ----------- ----------
<S> <C> <C> <C>
Samuel F. Eakin................................... (b)
Frank W. Eakin.................................... (b)
David B. Ammons................................... (b)
Joseph O'Toole....................................
Dale Payne, III...................................
Ben Ramirez.......................................
Hugh G. Walker, III...............................
</TABLE>
- ---------------
(a) % of the options to be granted will become exercisable at each of
year, years and years, respectively, from the date of
grant.
(b) 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 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 financial and
administrative advisory services to the Company which services were billed to
the Company on a monthly basis.
In 1996 the Company paid SFA a 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 60% by Samuel F. Eakin, 20% by Frank
W. Eakin and 20% 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.
In August 1997, Samuel F. Eakin, Frank B. Eakin and David B. Ammons formed
a limited liability company which owns a Cessna 310 twin engine airplane. The
Company charters the airplane from such entity at a market charter rate of
$5,000 per month. In addition, the Company agreed to maintain the airplane in
good working condition, to pay all operating expenses related to the airplane
and to maintain insurance on the airplane. The charter agreement has a term of
one year and renews automatically on an annual basis unless terminated by either
party upon 30 days' written notice to the other party. The Company believes that
the terms of such agreement are no less favorable than the Company could have
received from an unrelated party. The Company adopted a
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<PAGE> 51
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.
At June 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."
50
<PAGE> 52
PRINCIPAL AND SELLING STOCKHOLDERS AND
STOCK OWNERSHIP OF DIRECTORS AND OFFICERS
Principal Stockholders and Officers. The following table sets forth certain
information with respect to each person who as of , 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.......................
Frank W. Eakin........................
David B. Ammons.......................
James Cole............................
Paul E. O'Neill II....................
Joseph O'Toole........................
Dale Payne, III.......................
Hugh G. Walker, III...................
Ben Ramirez...........................
All Directors and Officers as a Group
(9 persons).........................
------- ------- ------- ------- -------
TOTALS......................
======= ======= ======= ======= =======
</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.
51
<PAGE> 53
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
options, and 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 options are 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
52
<PAGE> 54
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
53
<PAGE> 55
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. Any provisions amended or repealed by the stockholders
may be re-amended or re-adopted by the Board of Directors.
Amendment of Certain Provisions of the Articles; Other Corporate
Action. Under Delaware law, unless a corporation's 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. 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 no vacancies. Moreover, the only business
that may be brought
54
<PAGE> 56
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 least two years would be entitled to sell
such shares under Rule 144 without regard to the volume
55
<PAGE> 57
limitations, manner of sale provisions, notice requirements or the availability
of current public information about the Company.
The Company has authorized the issuance of shares of its Common
Stock in accordance with the terms of the 1997 Incentive Equity Plan. Options to
purchase an aggregate of 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 Sales."
56
<PAGE> 58
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.
57
<PAGE> 59
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,
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, 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.
58
<PAGE> 60
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.
59
<PAGE> 61
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
NO.
----
<S> <C>
First Wave Marine, Inc. and Subsidiary
Report of Independent Certified Public Accountants........ F-2
Consolidated Balance Sheets as of December 31, 1995 and
1996 and as of June 30, 1997 (Unaudited)............... F-3
Consolidated Statements of Earnings for the years ended
December 31, 1994, 1995 and 1996 and for the six months
ended June 30, 1996 (Unaudited) and 1997 (Unaudited)... F-4
Consolidated Statement of Stockholders' Equity for the
years ended December 31, 1994, 1995 and 1996 and for
the six months ended June 30, 1997 (Unaudited)......... F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1995 and 1996 and for the six months
ended June 30, 1996 (Unaudited) and June 30, 1997
(Unaudited)............................................ 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 June 30, 1997 (Unaudited).................... F-17
Consolidated Statements of Earnings for the years ended
March 31, 1996 and 1997 and for the three months ended
June 30, 1996 (Unaudited) and 1997 (Unaudited)......... F-18
Consolidated Statement of Stockholders' Equity for the
years ended March 31, 1996 and 1997 and for the three
months ended June 30, 1997 (Unaudited)................. F-19
Consolidated Statements of Cash Flows for the years ended
March 31, 1996 and 1997 and for the three months ended
June 30, 1996 (Unaudited) and 1997 (Unaudited)......... F-20
Notes to Consolidated Financial Statements................ F-21
</TABLE>
F-1
<PAGE> 62
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 Subsidiary as of December 31, 1996 and 1995, and the related
consolidated statements of earnings, stockholders' equity, and cash flows for
each of the years in the three year period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above, present fairly,
in all material respects, the financial position of First Wave Marine, Inc. and
Subsidiary as of December 31, 1996 and 1995, and the results of its operations
and its cash flows 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
October 3, 1997
(except for the second and
third paragraphs of Note O,
as to which the date is
October 16, 1997)
F-2
<PAGE> 63
FIRST WAVE MARINE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- JUNE 30,
1995 1996 1997
------ ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents................................ $ 66 $ -- $ 358
Accounts receivable, including unbilled receivables of
$734, $1,973 and $3,055............................... 3,884 6,182 7,970
Inventories.............................................. 309 566 783
Costs and estimated earnings in excess of billings on
uncompleted contracts................................. 874 90 --
Other.................................................... 133 283 253
Income tax receivable.................................... -- 139 --
Deferred income taxes.................................... 43 23 34
------ ------- -------
Total current assets............................. 5,309 7,283 9,398
PROPERTY AND EQUIPMENT, NET................................ 1,028 16,755 16,454
ORGANIZATION AND LOAN COSTS, net of accumulated
amortization of $51, $136 and $185....................... 167 662 613
DEPOSITS................................................... 290 232 232
------ ------- -------
$6,794 $24,932 $26,697
====== ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Due to bank.............................................. $ -- $ 88 $ --
Notes payable............................................ 3,488 1,519 213
Current portion of long-term debt........................ 1,031 877 939
Trade accounts payable................................... 853 897 726
Accrued liabilities...................................... 871 1,188 1,392
------ ------- -------
Total current liabilities........................ 6,243 4,569 3,270
LONG-TERM DEBT, net of current portion..................... 97 10,872 10,878
SUBORDINATED DEBT.......................................... -- 6,914 6,894
DEFERRED INCOME TAXES...................................... 14 236 591
OTHER LIABILITIES.......................................... 21 57 345
MINORITY INTEREST IN SUBSIDIARY............................ 85 391 794
COMMITMENTS AND CONTINGENCIES.............................. -- -- --
STOCKHOLDERS' EQUITY
Common stock, no par value, 10,000 shares authorized,
1,000 shares issued and outstanding in 1995, 1996 and
1997.................................................. 1 1 1
Retained earnings........................................ 333 1,892 3,924
------ ------- -------
334 1,893 3,925
------ ------- -------
$6,794 $24,932 $26,697
====== ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 64
FIRST WAVE MARINE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------- ------------------
1994 1995 1996 1996 1997
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES
Repair and conversions............. $11,693 $15,392 $20,997 $ 9,297 $13,505
New construction................... 1,391 3,321 2,841 475 881
Environmental services............. 2,263 3,287 4,119 2,001 2,555
------- ------- ------- ------- -------
15,347 22,000 27,957 11,773 16,941
COST OF REVENUES..................... 12,591 17,043 18,623 8,303 9,493
------- ------- ------- ------- -------
Gross profit....................... 2,756 4,957 9,334 3,470 7,448
GENERAL AND ADMINISTRATIVE
EXPENSES........................... 2,827 3,623 5,629 2,502 2,807
------- ------- ------- ------- -------
Earnings (loss) from operations.... (71) 1,334 3,705 968 4,641
INTEREST EXPENSE..................... 186 247 829 155 842
MINORITY INTEREST IN NET EARNINGS OF
SUBSIDIARY......................... -- 76 219 47 403
------- ------- ------- ------- -------
Earnings (loss) before income
taxes........................... (257) 1,011 2,657 766 3,396
INCOME TAX EXPENSE (BENEFIT)
Current............................ 2 312 856 185 1,020
Deferred........................... -- (29) 242 75 344
------- ------- ------- ------- -------
2 283 1,098 260 1,364
------- ------- ------- ------- -------
NET EARNINGS (LOSS)............. $ (259) $ 728 $ 1,559 $ 506 $ 2,032
======= ======= ======= ======= =======
Earnings (loss) per common and common
equivalent share................... $ (259) $ 728 $ 1,559 $ 506 $ 2,032
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 65
FIRST WAVE MARINE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND
SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
---------------- RETAINED STOCKHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
------ ------ -------- -------------
<S> <C> <C> <C> <C>
Balance at January 1, 1994........................ 1,000 $ 1 $ -- $ 1
Net loss.......................................... -- -- (259) (259)
----- ---- ------ ------
Balance at December 31, 1994...................... 1,000 1 (259) (258)
Distribution to stockholders...................... -- -- (136) (136)
Net earnings...................................... -- -- 728 728
----- ---- ------ ------
Balance at December 31, 1995...................... 1,000 1 333 334
Net earnings...................................... -- -- 1,559 1,559
----- ---- ------ ------
Balance at December 31, 1996...................... 1,000 1 1,892 1,893
Net earnings (unaudited).......................... -- -- 2,032 2,032
----- ---- ------ ------
Balance at June 30, 1997 (unaudited).............. 1,000 $ 1 $3,924 $3,925
===== ==== ====== ======
</TABLE>
The accompanying notes are an integral part of this statement.
F-5
<PAGE> 66
FIRST WAVE MARINE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 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 $ 506 $ 2,032
Adjustments to reconcile net (loss) earnings to net cash
(used) provided by operating activities
Depreciation and amortization........................... 48 259 680 174 650
Minority interest on earnings........................... -- 76 219 47 403
Deferred income tax provision........................... -- (29) 242 75 344
Change in assets and liabilities
Increase in accounts receivable....................... (2,526) (1,357) (2,298) (1,715) (1,788)
(Increase) decrease in inventories.................... (623) 314 (256) (354) (217)
(Increase) decrease in costs and estimated earnings in
excess of billings on uncompleted contracts........ (1,156) 281 784 817 90
(Increase) decrease in prepaid expenses............... (48) (89) (150) 45 30
(Increase) decrease in income tax receivable.......... -- -- (139) -- 139
(Increase) decrease in deposits....................... -- (290) 58 (32) --
Increase (decrease) in due to bank.................... -- -- 88 -- (88)
Increase (decrease) in trade accounts payable......... 1,051 (198) 44 216 (171)
Increase in accrued liabilities....................... 433 376 317 676 204
Increase (decrease) in billings in excess of costs and
estimated earnings on uncompleted contracts........ 56 (56) -- 190 --
Increase in other liabilities......................... 62 21 36 24 288
------- ------- ------- ------- -------
Net cash (used) provided by operating activities... (2,962) 36 1,184 669 1,916
Cash flows from investing activities
Acquisition of property and equipment..................... (569) (934) (1,425) (426) (300)
Cash flows from financing activities
Proceeds from issuance of long-term debt.................. 41 105 3,260 20 611
Payments on long-term debt................................ -- (18) (208) (16) (562)
Proceeds from issuance of notes payable................... 3,151 3,288 175 -- 230
Payments on notes payable................................. (661) (3,377) (1,905) (912) (18)
Net (payments) proceeds on revolving line of credit....... 1,196 886 (567) 604 (1,519)
Loan costs................................................ -- -- (580) -- --
Investment in Affiliate................................... (117) -- -- -- --
------- ------- ------- ------- -------
Net cash provided (used) by financing activities... 3,610 884 175 (304) (1,258)
------- ------- ------- ------- -------
Net increase (decrease) in cash.................... 79 (14) (66) (61) 358
Cash and cash equivalents at beginning of period............ 1 80 66 66 --
------- ------- ------- ------- -------
Cash and cash equivalents at end of period.................. $ 80 $ 66 $ -- $ 5 $ 358
======= ======= ======= ======= =======
Supplemental disclosure of cash flow information
Cash paid during the period for
Interest................................................ $ 99 $ 335 $ 619 $ 156 $ 548
Income taxes............................................ -- 240 952 183 616
Supplemental disclosure of non-cash transactions
During 1996, the Company financed the purchase of assets
with term debt and notes payable in the amount of
$14,897
During 1995, assets of $136 were distributed to the
stockholders.
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 67
FIRST WAVE MARINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1997
AND JUNE 30, 1996 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND 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 subsidiary, Newpark
Shipbuilding and Repair, Inc. (Newpark). 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. ACCOUNTING FOR CONSTRUCTION CONTRACTS
Revenues from 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. Revenues from cost-plus-fee
contracts are recognized on the basis of costs incurred during the period plus
the fee earned.
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.
F-7
<PAGE> 68
FIRST WAVE MARINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1997
AND JUNE 30, 1996 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
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 as of June 30, 1997 and for the six months ended June
30, 1996 and 1997, 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 June 30, 1997 are not necessarily indicative of the results for the full
fiscal year.
11. EARNINGS PER SHARE
Earnings per common and common equivalent shares is calculated by dividing
net income available for common stockholders by the weighted average number of
common stock and common stock equivalents. Stock options are regarded as common
stock equivalents and are therefore considered in earnings per share
calculations, if dilutive. The number of common stock equivalents is determined
using the treasury stock method.
F-8
<PAGE> 69
FIRST WAVE MARINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1997
AND JUNE 30, 1996 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
NOTE B -- CONTRACTS IN PROGRESS
Information regarding lump-sum contracts in progress are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ JUNE 30,
1994 1995 1996 1997
------ ---- ------ -----------
(UNAUDITED)
<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>
DECEMBER 31
ESTIMATED USEFUL ------------------- JUNE 30,
LIVES IN YEARS 1995 1996 1997
---------------- ------ ------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Land............................. -- $ -- $ 3,355 $ 3,355
Buildings........................ 31-40 345 4,584 5,374
Automobiles...................... 5-7 33 59 94
Office furniture, fixtures and
equipment...................... 3-5 134 211 244
Equipment........................ 5-16 772 9,397 8,837
------ ------- -------
1,284 17,606 17,904
Less accumulated
depreciation......... 256 851 1,450
------ ------- -------
$1,028 $16,755 $16,454
====== ======= =======
</TABLE>
F-9
<PAGE> 70
FIRST WAVE MARINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1997
AND JUNE 30, 1996 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
NOTE D -- NOTES PAYABLE
Notes payable consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- JUNE 30,
1995 1996 1997
------ ------ -----------
(UNAUDITED)
<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%............................. -- -- 213
------ ------ ----
$3,488 $1,519 $213
====== ====== ====
</TABLE>
NOTE E -- LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- JUNE 30,
1995 1996 1997
------ ------- -----------
(UNAUDITED)
<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 $11,276
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
</TABLE>
F-10
<PAGE> 71
FIRST WAVE MARINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1997
AND JUNE 30, 1996 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- JUNE 30,
1995 1996 1997
------ ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
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 -- --
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.............................................. -- 586 566
Note payable to a financial institution; due in
monthly installments of $13, including interest at
9.25% through February 2002; collateralized by
equipment......................................... -- -- 541
------ ------- -------
1,128 18,663 18,711
Less current portion...................... 1,031 877 939
------ ------- -------
$ 97 $17,786 $17,772
====== ======= =======
</TABLE>
Maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, AMOUNT
- ------------ ------
<S> <C> <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> 72
FIRST WAVE MARINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1997
AND JUNE 30, 1996 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
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>
YEAR ENDED 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 $897 and $69 for the six months ended June
30, 1996 and 1997.
F-12
<PAGE> 73
FIRST WAVE MARINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1997
AND JUNE 30, 1996 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
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 $320 for
the six months ended June 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.
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 $2 and $11 for the six months ended June 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.
F-13
<PAGE> 74
FIRST WAVE MARINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1997
AND JUNE 30, 1996 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
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 six months ended June 30, 1996 and 1997
totaling $238 and $90. Included in management fees for the year ended December
31, 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.
Other current assets at June 30, 1997 include advances of $185 to a company
related by common ownership. Such advances bear interest at 12% and are due on
demand. The Company has pledged $100 to secure a bank loan of this related
company.
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
7,400 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.
F-14
<PAGE> 75
FIRST WAVE MARINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1997
AND JUNE 30, 1996 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
NOTE N -- MAJOR CUSTOMERS
The Company had the following customers to which it had sales exceeding 10%
of total Company sales:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------- -------------
1994 1995 1996 1996 1997
----- ----- ----- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
SEACOR Smit Inc........................... (a) (a) 22.1% (a) 17.1%
Kirby Corporation......................... (a) 28.0% 15.3% (a) 24.1%
Seariver Maritime......................... (a) 12.2% (a) (a) (a)
</TABLE>
- ---------------
(a) less than 10%
NOTE O -- SUBSEQUENT EVENTS
In July 1997, the Company purchased for $1,600 equipment located at a
shipyard in Houston, Texas and entered into a lease-purchase agreement for the
related land and facilities. The five year lease agreement provides for monthly
payments of $43 for 36 months followed by a lump sum payment of $200; $39 for 12
months followed by a lump sum payment of $300; and $35 for 12 months followed by
a lump sum payment of $350, subject to certain possible adjustments. The Company
is obligated to purchase the facility for $3,150 at the termination of the five
year lease or may do so at any time by paying all remaining lease payments and
the purchase price.
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, assumption or retirement of up to $7,000 in debt of the
company, and issuance of a subordinated promissory note of $4,000, subject to
certain adjustments.
In September 1997, the Company reincorporated as a Delaware corporation. In
October 1997, the Company entered into an agreement with the Newpark minority
interest shareholders to exchange the minority interest shares in Newpark with
93,840 shares of the Company representing 8.5% of ownership.
F-15
<PAGE> 76
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 March 31, 1997 and 1996, and the
related consolidated statements of earnings, stockholder's equity, and cash
flows for the years then ended. 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 consolidated financial statements referred to above,
present fairly, in all material respects, the financial position of John
Bludworth Marine, Inc. and Subsidiary as of March 31, 1997 and 1996, and the
results of their operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles.
Grant Thornton LLP
Houston, Texas
October 10, 1997
(except for Note L,
as to which the date is
October 16, 1997)
F-16
<PAGE> 77
JOHN BLUDWORTH MARINE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31,
---------------- JUNE 30,
1996 1997 1997
------ ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. $ 272 $ 183 $ 493
Accounts receivable, including unbilled receivables of
$44, $1,011 and $2,514................................. 1,872 4,811 6,931
Inventories............................................... 172 900 981
Costs and estimated earnings in excess of billings on
uncompleted contracts.................................. 16 -- --
Prepaid expenses and other................................ 280 29 321
------ ------- -------
Total current assets.............................. 2,612 5,923 8,726
PROPERTY AND EQUIPMENT, NET................................. 3,934 7,411 7,820
DEPOSITS AND OTHER.......................................... 56 66 98
------ ------- -------
$6,602 $13,400 $16,644
====== ======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Notes payable............................................. $ 723 $ 1,538 $ 3,285
Current portion of long-term debt......................... 25 443 372
Trade accounts payable.................................... 444 865 1,569
Accrued liabilities....................................... 237 283 326
Income taxes payable...................................... 111 758 897
Billings in excess of costs and estimated earnings on
uncompleted contracts.................................. 96 -- --
------ ------- -------
Total current liabilities......................... 1,636 3,887 6,449
LONG-TERM DEBT, net of current portion...................... 2,512 5,743 5,721
DEFERRED INCOME TAXES....................................... 340 380 363
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 4,110
------ ------- -------
2,114 3,390 4,111
------ ------- -------
$6,602 $13,400 $16,644
====== ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-17
<PAGE> 78
JOHN BLUDWORTH MARINE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
MARCH 31, JUNE 30,
----------------- ------------------
1996 1997 1996 1997
------ ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES
Repair and conversions............................. $9,174 $14,790 $3,030 $7,294
New construction................................... -- 2,203 2,202 --
------ ------- ------ ------
9,174 16,993 5,232 7,294
COST OF REVENUES..................................... 7,012 12,987 4,201 5,458
------ ------- ------ ------
Gross profit.................................. 2,162 4,006 1,031 1,836
GENERAL AND ADMINISTRATIVE EXPENSES.................. 1,329 1,526 275 425
------ ------- ------ ------
Earnings from operations...................... 833 2,480 756 1,411
OTHER INCOME (EXPENSE)
Other income....................................... 7 148 12 2
Interest expense................................... (326) (443) (75) (229)
------ ------- ------ ------
(319) (295) (63) (227)
------ ------- ------ ------
Earnings before income taxes.................. 514 2,185 693 1,184
INCOME TAX EXPENSE (BENEFIT)
Current............................................ 111 774 130 473
Deferred........................................... 105 135 121 (10)
------ ------- ------ ------
216 909 251 463
------ ------- ------ ------
NET EARNINGS.................................. $ 298 $ 1,276 $ 442 $ 721
====== ======= ====== ======
Earnings per common and common equivalent share...... $2,980 $12,760 $4,420 $7,210
====== ======= ====== ======
</TABLE>
The accompanying notes are an integral part of these statements.
F-18
<PAGE> 79
JOHN BLUDWORTH MARINE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED MARCH 31, 1996 AND 1997 AND THREE MONTHS ENDED JUNE 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 (unaudited)................................... -- 721 721
--- ------ ------
Balance at June 30, 1997 (unaudited)....................... $ 1 $4,110 $4,111
=== ====== ======
</TABLE>
The accompanying notes are an integral part of this statement.
F-19
<PAGE> 80
JOHN BLUDWORTH MARINE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
MARCH 31, JUNE 30,
---------------- ------------------
1996 1997 1996 1997
----- ------- ------ --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net earnings....................................... $ 298 $ 1,276 $ 442 $ 721
Adjustments to reconcile net earnings to net cash
provided (used) by operating activities
Depreciation and amortization................... 456 517 98 164
Deferred income taxes........................... 105 135 121 (10)
Gain on sale of property and equipment.......... (2) -- -- --
Change in assets and liabilities
Increase in accounts receivable............... (173) (2,939) (751) (2,120)
Increase in inventories....................... (63) (728) (105) (81)
Decrease in costs and estimated earnings in
excess of billings on uncompleted
contracts.................................. 28 16 16 --
(Increase) decrease in prepaid expenses and
other...................................... (43) 156 19 (299)
(Increase) decrease in deposits and other..... (7) (10) 38 (32)
(Decrease) increase in trade accounts
payable.................................... (605) 421 (3) 704
Increase (decrease) in accrued liabilities.... 169 46 146 43
Decrease in billings in excess of costs and
estimated earnings on uncompleted
contracts.................................. (9) (96) (96) --
Increase in income taxes payable.............. 108 647 22 139
----- ------- ----- -------
Net cash provided (used) by operating
activities............................... 262 (559) (53) (771)
Cash flows from investing activities
Acquisition of property and equipment.............. (283) (3,994) (34) (573)
Proceeds from sale of property and equipment....... 29 -- -- --
----- ------- ----- -------
Net cash (used) provided by investing
activities............................... (254) (3,994) (34) (573)
Cash flows from financing activities
Proceeds from issuance of long-term debt........... 38 6,248 -- --
Payments on long-term debt......................... (308) (2,599) (65) (93)
Proceeds from issuance of notes payable............ 185 13 -- 321
Payments on notes payable.......................... -- (199) (34) (6)
Net proceeds (payments) on revolving line of
credit.......................................... 82 1,001 (50) 1,432
----- ------- ----- -------
Net cash (used) provided by financing
activities............................... (3) 4,464 (149) 1,654
----- ------- ----- -------
Net increase (decrease) in cash............ 5 (89) (236) 310
Cash and cash equivalents at beginning of period..... 267 272 272 183
----- ------- ----- -------
Cash and cash equivalents at end of period........... $ 272 $ 183 $ 36 $ 493
===== ======= ===== =======
Supplemental disclosure of cash flow information
Cash paid during the period for
Interest........................................ $ 326 $ 443 $ 75 $ 229
Income taxes.................................... -- 108 108 328
Noncash transaction
Equipment acquired in exchange for debt......... $ 520 -- -- --
</TABLE>
The accompanying notes are an integral part of these statements.
F-20
<PAGE> 81
JOHN BLUDWORTH MARINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED JUNE 30, 1996
AND JUNE 30, 1997 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 COST AND RECOGNITION
Revenues from lump-sum construction 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. Revenues from cost-plus-fee contracts
are recognized on the basis of costs incurred during the period plus the fee
earned.
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.
F-21
<PAGE> 82
JOHN BLUDWORTH MARINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED JUNE 30, 1996
AND JUNE 30, 1997 IS UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
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 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 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 June 30,
1997 is $135 held on deposit by the Company's insurance carrier.
9. INTERIM FINANCIAL INFORMATION
Financial information as of June 30, 1997 and for the three months ended
June 30, 1996 and 1997, 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 three
months ended June 30, 1997 are not necessarily indicative of the results of the
full fiscal year.
10. EARNINGS PER SHARE
Earnings per common and common equivalent shares is calculated by dividing
net income available for common stockholders by the weighted average number of
common stock and common stock equivalents. Stock options are regarded as common
stock equivalents and are therefore considered in earnings per share
calculations, if dilutive. The number of common stock equivalents is determined
using the treasury stock method.
F-22
<PAGE> 83
JOHN BLUDWORTH MARINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED JUNE 30, 1996
AND JUNE 30, 1997 IS UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
NOTE B -- COSTS AND ESTIMATED EARNINGS ON LUMP-SUM CONTRACTS IN
PROGRESS
Costs and estimated earnings on lump-sum contracts in progress are as
follows:
<TABLE>
<CAPTION>
MARCH 31,
-------------- JUNE 30,
1996 1997 1997
------ ---- -----------
(UNAUDITED)
<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 ---------------- JUNE 30,
YEARS 1996 1997 1997
--------- ------ ------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Land -- $819... $ 1,318 $ 1,318
Buildings and improvements.................. 5-20 1,128 3,887 4,198
Automobiles................................. 3-5 101 135 135
Office furniture, fixtures and equipment.... 5-10 69 93 135
Machinery and equipment..................... 5-20 6,048 6,726 6,946
------ ------- -------
8,165 12,159 12,732
Less accumulated depreciation............... 4,231 4,748 4,912
------ ------- -------
$3,934 $ 7,411 $ 7,820
====== ======= =======
</TABLE>
F-23
<PAGE> 84
JOHN BLUDWORTH MARINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED JUNE 30, 1996
AND JUNE 30, 1997 IS UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
NOTE D -- NOTES PAYABLE
Notes payable consists of the following:
<TABLE>
<CAPTION>
MARCH 31,
-------------- JUNE 30,
1996 1997 1997
---- ------ -----------
(UNAUDITED)
<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 $2,250 at a bank; interest
at the bank's base rate plus 1% (10.5% at March 31,
1997) due monthly; maturing June 30, 1997;
collateralized by accounts receivable -- 1,532 2,014
Construction draw loan of $1,000 at a bank; interest
at the bank's base rate plus 1% (10.5% at March 31,
1997) due monthly; maturing July 1, 1997;
collateralized by certain equipment -- -- 950
Other notes payable 192 6 321
---- ------ ------
$723 $1,538 $3,285
==== ====== ======
</TABLE>
F-24
<PAGE> 85
JOHN BLUDWORTH MARINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED JUNE 30, 1996
AND JUNE 30, 1997 IS UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
NOTE E -- LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
MARCH 31,
---------------- JUNE 30,
1996 1997 1997
------ ------ -----------
(UNAUDITED)
<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 $29 due
monthly; maturing at various dates through
September 2002; collateralized by certain
equipment......................................... -- 1,883 1,836
Note payable to a bank; principal of $22 plus
interest at prime plus 0.5% (9.75% at March 31,
1997) due monthly; maturing October 2008;
collateralized by real estate..................... -- 1,791 1,768
Note payable to a financial institution; principal
and interest ranging from 10% to 13% of $19 due
monthly; collateralized by real estate............ -- 1,733 1,719
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........ -- 656 656
Other notes payable................................. 154 123 114
------ ------ ------
2,537.. 6,186 6,093
Less current portion................................ 25 443 372
------ ------ ------
$2,512.. $5,743 $5,721
====== ====== ======
</TABLE>
Maturities of long-term debt at March 31, 1997 are:
<TABLE>
<CAPTION>
YEAR ENDING
MARCH 31, AMOUNT
- ----------- ------
<S> <C> <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.
F-25
<PAGE> 86
JOHN BLUDWORTH MARINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED JUNE 30, 1996
AND JUNE 30, 1997 IS UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
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>
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 three months ended June 30, 1996 and 1997 was $12 and $16.
F-26
<PAGE> 87
JOHN BLUDWORTH MARINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED JUNE 30, 1996
AND JUNE 30, 1997 IS UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
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 $17 for the
three months ended June 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 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
F-27
<PAGE> 88
JOHN BLUDWORTH MARINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED JUNE 30, 1996
AND JUNE 30, 1997 IS UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
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>
THREE MONTHS
YEAR ENDED ENDED
MARCH 31, JUNE 30,
------------- -------------
1996 1997 1996 1997
---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C>
Customer A.......................................... 26% (a) (a) 11%
Customer B.......................................... 17% 28% (a) 30%
Customer C.......................................... 10% (a) (a) (a)
Customer D.......................................... (a) 13% 20% (a)
Customer E.......................................... (a) 11% (a) (a)
Customer F.......................................... (a) (a) (a) 11%
Customer G.......................................... (a) (a) (a) 10%
</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
June 30, 1997 are $211, $298 and $358 of receivables from related parties.
Included in accounts payable on the accompanying balance sheets at March 31,
1996 and 1997 and June 30, 1997 are $50, $71 and $244 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-28
<PAGE> 89
================================================================================
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............................. 44
Principal and Selling Stockholders and
Stock Ownership of Directors and
Officers............................. 51
Description of Capital Stock........... 52
Shares Eligible for Future Sale........ 55
Underwriting........................... 57
Legal Matters.......................... 58
Experts................................ 58
Additional Information................. 59
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.
, 1997
================================================================================
<PAGE> 90
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.......................... $ 23,000
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............................................... $127,695
--------
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> 91
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 to be filed as Exhibit 1.1 hereto will contain
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 will provide 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> 92
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 shares of the
Company's Common Stock. Pursuant to the terms of a Stock Exchange Agreement
dated as of October 16, 1997, the Company will issue shares of stock 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.
II-3
<PAGE> 93
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
*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 (contained on page II-6)
*27.1 -- Financial Data Schedule
</TABLE>
- ---------------
* Filed herewith
** To be filed by amendment
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.
II-4
<PAGE> 94
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> 95
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on October 17, 1997.
FIRST WAVE MARINE, INC.
By: /s/ SAMUEL F. EAKIN
----------------------------------
Samuel F. Eakin
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints David B. Ammons, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments pursuant to Rule 462(b)
of the Securities Act) to this Registration Statement, and to file the same and
all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting said attorney-in-fact and agent,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitute, may
lawfully do or cause to be done by virtue hereof.
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
--------- ----- ----
<S> <C> <C>
/s/ SAMUEL F. EAKIN Chairman of the Board, October 17, 1997
- ----------------------------------------------------- Chief Executive Officer and
Samuel F. Eakin Director (Principal
Executive Officer)
/s/ FRANK W. EAKIN President, Chief Operating October 17, 1997
- ----------------------------------------------------- Officer and Director
Frank W. Eakin
/s/ DAVID B. AMMONS Executive Vice President, October 17, 1997
- ----------------------------------------------------- Chief Financial Officer,
David B. Ammons Secretary and Director
(Principal Financial
Officer and Principal
Accounting Officer)
/s/ JAMES COLE Director October 17, 1997
- -----------------------------------------------------
James Cole
/s/ PAUL E. O'NEILL II Director October 17, 1997
- -----------------------------------------------------
Paul E. O'Neill II
</TABLE>
II-6
<PAGE> 96
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
*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 (contained on page II-6)
*27.1 -- Financial Data Schedule
</TABLE>
- ---------------
* Filed herewith
** To be filed by amendment
<PAGE> 1
EXHIBIT 2.1
--------------------------------
STOCK EXCHANGE AGREEMENT
regarding shares in
NEWPARK SHIPBUILDING AND REPAIR, INC.
and
FIRST WAVE MARINE, INC.
--------------------------------
Dated as of October 16, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. Definitions..............................................................................................1
1.1 Defined Terms............................................................................................1
1.2 Certain Additional Defined Terms.........................................................................1
2. Exchange.................................................................................................2
3. Closing Date; Buyer Stock................................................................................2
3.1 Closing Date....................................................................................2
3.2 Buyer Stock.....................................................................................2
4. Representations and Warranties...........................................................................3
4.1 Representations and Warranties of the Sellers...................................................3
(a) Validity of Agreement; Capitalization..................................................3
(b) No Approvals or Notices Required; No Conflict with Instruments.........................3
(c) Title to Shares; Absence of Liens and Encumbrances.....................................3
(d) Certain Fees...........................................................................3
(e) Investment Representations.............................................................3
(f) No Reliance............................................................................4
4.2 Representations and Warranties of Buyer.........................................................5
(a) Due Organization; Good Standing and Power..............................................5
(b) Authorization and Validity of Agreement................................................5
(c) No Conflict with Instruments...........................................................5
(d) Certain Fees...........................................................................5
(e) No Reliance............................................................................5
(f) Legal Opinion..........................................................................5
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
4.3 Survival of Representations and Warranties......................................................6
5. Additional Restrictions on Transfer of Stock.............................................................6
6. Conditions to Closing, Termination.......................................................................6
6.1 Buyer's Conditions to Closing...................................................................6
(a) Representations and Warranties.........................................................6
(b) Covenants..............................................................................6
(c) Absence of Restraint...................................................................6
(d) Certificates...........................................................................7
(e) Consummation of Transfers..............................................................7
6.2 Sellers' Conditions to Closing..................................................................7
(a) Representations and Warranties.........................................................7
(b) Covenants..............................................................................7
(c) Absence of Restraint...................................................................7
(d) Certificates...........................................................................7
(e) Consummation of Transfers..............................................................7
6.3 Termination.....................................................................................8
7. Closing..................................................................................................8
7.1 Deliveries by Buyer.............................................................................8
7.2 Deliveries by Sellers...........................................................................8
7.3 Termination of Prior Agreement Regarding Purchased Shares.......................................8
8. Indemnification..........................................................................................8
8.1 Indemnification by the Sellers..................................................................8
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
8.2 Indemnification by Buyer........................................................................8
8.3 Limits on Indemnification Liability.............................................................9
9. Miscellaneous............................................................................................9
9.1 Payment of Certain Fees and Expenses............................................................9
9.2 Notices.........................................................................................9
9.3 Entire Agreement...............................................................................10
9.4 Binding Effect; Benefit........................................................................10
9.5 Assignability..................................................................................10
9.6 Amendment; Waiver..............................................................................10
9.7 Section Headings; Index........................................................................10
9.8 Severability...................................................................................10
9.9 Counterparts...................................................................................10
9.10 Applicable Law.................................................................................10
9.11 References.....................................................................................10
9.12 Dispute Resolution.............................................................................11
(a) Good Faith Negotiations...............................................................11
(b) Mediation.............................................................................11
(c) Arbitration...........................................................................11
(d) Consent to Jurisdiction; Venue........................................................11
9.13 Confidentiality................................................................................12
9.14 Heller Financial...............................................................................12
</TABLE>
<PAGE> 5
STOCK EXCHANGE AGREEMENT
This Stock Exchange Agreement (this "Agreement") is made as of October
16, 1997 by First Wave Marine, Inc., a Delaware corporation ("Buyer") and the
parties named on Schedule A, attached hereto and incorporated herein for all
purposes ("Sellers").
AGREEMENT
In consideration of the premises and of the respective
representations, warranties, covenants, agreements and conditions of the
parties contained herein, it is hereby agreed as follows:
1. Definitions.
1.1 Defined Terms. As used in this Agreement, each of the
following terms has the meaning given it below:
"Applicable Law" means any statute, law, rule or regulation
or any judgment, order, writ, injunction or decree, of any
governmental entity to which a specified person or property is
subject.
"Encumbrances" means liens, charges, pledges, options,
mortgages, deeds of trust, security interests, claims, restrictions
(whether on voting, sale, transfer, disposition or otherwise),
easements, licenses, sublicenses and other encumbrances of every type
and description, whether imposed by law, agreement, understanding or
otherwise.
"person" means any individual, corporation, partnership,
joint venture, association, joint-stock company, trust, enterprise,
unincorporated organization or governmental entity.
"reasonable best efforts" means a party's best efforts in
accordance with reasonable commercial practice and without the
incurrence of unreasonable expense.
"Restricted Stock" means Buyer Stock.
"Securities Act" means the Securities Act of 1933, as amended.
"Taxes" means any income taxes or similar assessments or any
sales, excise, occupation, use, ad valorem, property, production,
severance, transportation, employment, payroll, franchise or other tax
imposed by any United States federal, state or local, or any foreign
or provincial, taxing authority, including any interest, penalties or
additions attributable thereto.
1
<PAGE> 6
1.2 Certain Additional Defined Terms. In addition to such terms
as are defined in Section 1.1, the following terms are used in this Agreement
as defined in the Sections of this Agreement referenced opposite such terms:
Defined Terms Reference
- ------------- ---------
Agreement Preamble
Buyer Preamble
Buyer Stock Section 3.2
Closing Section 3.1
Closing Date Section 3.1
Damages Section 8.1
Dispositions Section 5
Dispute Section 9.12
Disputing Parties Section 9.12
Purchase Price Section 3.2
Purchased Shares Section 2
Sellers Preamble
2. Exchange. Subject to the terms and conditions of this Agreement,
Sellers shall deliver to Buyer all of Sellers' 17,000 shares in Newpark
Shipbuilding and Repair, Inc. (the "Purchased Shares"), free and clear of all
Encumbrances, solely in exchange for voting stock in Buyer as described in
Section 3.2.
3. Closing Date; Buyer Stock.
3.1 Closing Date. The closing of the transactions provided for in this
Agreement (the "Closing") shall take place at the offices of Griggs & Harrison,
P.C., 1301 McKinney, Suite 3200, Houston, Texas 77010. The date on which the
Closing takes place shall be a date before March 31, 1998 as determined by
Buyer on three (3) business days notice, and is herein referred to as the
"Closing Date".
3.2 Buyer Stock. Buyer shall exchange for the Purchased Shares 93,840
shares of voting common stock, $0.01 par value, of Buyer (the "Buyer Stock"),
which shall be issued to Sellers at the Closing. The number of shares of Buyer
Stock issuable to each Seller, and the
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<PAGE> 7
number of Purchased Shares exchanged therefor, are set forth beside such
Seller's name on the version of Schedule B signed by such Seller. Each Seller
will receive a copy of this Agreement, Schedule A and only the version of
Schedule B signed by such Seller. At the closing, Buyer shall deliver share
certificates representing the appropriate number of shares of Buyer Stock to
each Seller.
4. Representations and Warranties.
4.1 Representations and Warranties of the Sellers. Each Seller,
severally and not jointly, represents and warranties to Buyer, as of the date
hereof and as of the Closing Date, as follows:
(a) Validity of Agreement; Capitalization. This Agreement has
been duly executed and delivered by each Seller and constitutes a
legal, valid and binding obligation of each of them, enforceable
against them in accordance with its terms.
(b) No Approvals or Notices Required; No Conflict with
Instruments. The execution, delivery and performance of this Agreement
by the Sellers and the consummation by them of the transactions
contemplated hereby (i) will not violate (with or without the giving
of notice or the lapse of time or both) or require any consent,
approval, filing or notice under, any provision of any Applicable Law,
and (ii) will not result in the creation of any Encumbrance on the
Purchased Shares under, conflict with, or result in the breach or
termination of any provision of, or constitute a default under, or
result in the acceleration of the performance of the obligations of
the Sellers under, any instrument or agreement to which the Seller is
a party or by which any of them or any of their assets is bound or
affected, except under pledges to Heller Financial Leasing, Inc. to
secure the performance of obligations of Newpark Shipbuilding and
Repair, Inc. The Purchased Shares are transferable and assignable to
Buyer as contemplated by this Agreement without the waiver of any
right of first refusal or the consent of any other party being
obtained, and there exists no preferential right of purchase in favor
of any person with respect to any of the Purchased Shares.
(c) Title to Shares; Absence of Liens and Encumbrances. Each
of the Sellers owns good, marketable and indefeasible title to free
the Purchased Shares to be sold by such Seller pursuant to this
Agreement, free and clear of all Encumbrances, and other restrictions
of any kind and nature.
(d) Certain Fees. None of the Sellers has employed any
broker or finder or incurred any other liability for any brokerage fees,
commissions or finders' fees in connection with the transactions
contemplated hereby.
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<PAGE> 8
(e) Investment Representations.
(i) Each Seller is acquiring the Buyer Stock for
its own account for investment and not with a view to, or
for sale or other disposition in connection with, any
distribution of all or any part thereof, except pursuant to
an applicable exemption under the Securities Act or in an
offering covered by an effective registration statement
under the Securities Act relating to the Buyer Stock. In
acquiring the Buyer Stock, each Seller is not offering or
selling, and will not offer or sell, for Buyer in
connection with any distribution of the Buyer Stock, and no
Seller has a participation or will participate in any such
undertaking or in any underwriting of such an undertaking,
except in compliance with applicable federal and state
securities laws.
(ii) Each Seller acknowledges that it or its
representatives have been furnished with substantially the
same kind of information regarding Buyer and its business,
assets, results of operations and financial condition as
would be contained in a registration statement prepared in
connection with a public sale of the Buyer Stock.
(iii) Each Seller acknowledges that it can bear the
economic risk of its investment in the Buyer Stock, and has
such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks
of an investment in the Buyer Stock.
(iv) Each Seller understands that the Buyer Stock,
when issued to each Seller, will not have been registered
pursuant to the Securities Act or any applicable state
securities laws, that the Restricted Stock will be
characterized as "restricted securities" under federal
securities laws, and that under such laws and applicable
regulations the Restricted Stock cannot be sold or otherwise
disposed of without registration under the Securities Act or
an exemption therefrom. In this connection, each Seller
represents that it is familiar with Rule 144 promulgated
under the Securities Act, as currently in effect, and
understands the resale limitations imposed thereby and by the
Securities Act. Stop transfer instructions may be issued
accordingly to the transfer agent for the Restricted Stock.
(v) It is agreed and understood by each Seller that
the certificates representing the Buyer Stock shall each
conspicuously set forth on the face or back thereof, in
addition to any legends required by Applicable Law or other
agreement, a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. SUCH
SHARES MAY NOT BE SOLD OR OTHERWISE
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<PAGE> 9
TRANSFERRED EXCEPT (i) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT, OR (ii) IN
ACCORDANCE WITH RULE 144 UNDER SUCH ACT, UNLESS THE
CORPORATION RECEIVES A WRITTEN OPINION OF COUNSEL,
WHICH OPINION AND COUNSEL ARE SATISFACTORY TO THE
CORPORATION, TO THE EFFECT THAT SUCH REGISTRATION IS
NOT REQUIRED. THE SALE OF SUCH SHARES IS ALSO SUBJECT
TO RESTRICTIONS ON TRANSFER CONTAINED IN A STOCK
EXCHANGE AGREEMENT DATED OCTOBER ___, 1997, A COPY OF
WHICH IS IN THE CORPORATION'S OFFICE.
(f) No Reliance. Sellers have not relied and are not
relying on any representations or warranties made by Buyer or any
officer, representative or agent of Buyer, except the representations
and warranties written in this Agreement, and the statements in the
written materials described in Section 4.1(e)(ii) above, in deciding to
enter into this Agreement and to close this Agreement.
4.2 Representations and Warranties of Buyer. Buyer represents and
warrants to the Sellers, as of the date hereof and as of the Closing Date, as
follows:
(a) Due Organization; Good Standing and Power. Buyer is a
corporation duly organized, validly existing and in good standing
under the laws of Delaware. Buyer has all requisite corporate power
and authority to enter into this Agreement to perform its obligations
hereunder and to own, lease and operate its assets and to conduct its
business as now conducted.
(b) Authorization and Validity of Agreement. The execution,
delivery and performance of this Agreement by Buyer and the
consummation by Buyer of the transactions contemplated hereby has been
duly authorized by all requisite corporate action on its part. No
other corporate action is necessary for the authorization, execution,
delivery and performance by Buyer of this Agreement and the
consummation by Buyer of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Buyer and
constitutes a legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms.
(c) No Conflict with Instruments. The execution, delivery and
performance of this Agreement by Buyer and the consummation by it of
the transactions contemplated hereby (i) will not violate (with or
without the giving of notice or the lapse of time or both), or require
any consent, approval, filing or notice under any provision of any
law, rule or regulation, court order, judgment or decree applicable to
buyer, and (ii) will not result in the creation of any Encumbrance
(except as specifically provided in this Agreement) on the Buyer Stock
under, conflict with, or result in the breach or termination of any
provision of, or constitute a default under, or result in the
acceleration of the
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<PAGE> 10
performance of the obligations of Buyer, under, the Certificate of
Incorporation or bylaws of Buyer or any instrument or agreement to
which Buyer is a party or by which Buyer or any of its assets or
properties is bound.
(d) Certain Fees. Neither Buyer nor any of its respective
officers, directors or employees, on behalf of it, has employed any
broker or finder or incurred any other liability for any brokerage
fees, commissions or finders' fees in connection with the transactions
contemplated hereby.
(e) No Reliance. Buyer has not relied and is not relying on
any representations or warranties made by Sellers or agent of Sellers,
except the representations and warranties written in this Agreement,
in deciding to enter into this Agreement and to close this Agreement.
(f) Legal Opinion. At least three (3) days before the Closing
Date, Buyer will deliver to Sellers a legal opinion by Robert T.
Bowsher and Breazeale, Sachse & Wilson, L.L.P., addressed to Sellers,
that the exchange described in Section 2 of this Agreement will qualify
as a tax-free reorganization pursuant to Section 368(a)(1)(B) of the
Internal Revenue Code of 1986, as amended, in form and substance
reasonably satisfactory to Seller's counsel.
4.3 Survival of Representations and Warranties. The respective
representations and warranties of the parties contained herein shall survive
the Closing.
5. Additional Restrictions on Transfer of Stock. In addition to the
transfer restrictions described elsewhere in this Agreement or required under
Applicable Law, each Seller hereby covenants and agrees that it 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 (collectively,
"Dispositions") (i) more than 7% of the Restricted Stock issued to such Seller
prior to the first anniversary of the Closing Date or (ii) more than 27% of
such Restricted Stock (cumulatively with all prior Dispositions) until after
the second anniversary of the Closing Date or (iii) more than 47% of such
Restricted Stock (cumulatively with all prior Dispositions) until after the
third anniversary of the Closing Date or (iv) more than 67% of such Restricted
Stock (cumulatively with all prior Dispositions) until after the fourth
anniversary of the Closing Date or (v) more than 87% of such Restricted Stock
(cumulatively with all prior Dispositions) until after the fifth anniversary of
the Closing Date. The restrictions created by this Section 5 shall expire after
the fifth anniversary of the Closing Date. Sellers agree that the restrictions
created by this Section 5 may be waived, varied or extinguished, as to all
Sellers, or as to one or more but not all Sellers, by Buyer in its sole
discretion, without the joinder of any Sellers.
6. Conditions to Closing, Termination.
6.1 Buyer's Conditions to Closing. The obligations of Buyer to perform
its obligations under this Agreement are, at the option of the Buyer, subject
to the satisfaction on or before
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<PAGE> 11
the Closing Date of the conditions set forth below, any of which may be waived
by Buyer in writing; provided, however, Buyer's election to proceed with the
Closing of the transactions contemplated hereby shall not be deemed a waiver of
any breach of any representation, warranty or covenant herein, whether or not
known to Buyer or existing on the Closing Date, and such action shall not
prejudice Buyer's right to recover damages for such breach.
(a) Representations and Warranties. The representations and
warranties of Sellers contained in this Agreement shall be true and
correct in all material respects on the date hereof, and shall be true
and correct in all material respects on the Closing Date with the same
force and effect as if they had been made on and as of the Closing
Date.
(b) Covenants. The agreements and covenants of Sellers to be
performed or complied with on or before the Closing Date pursuant to
this Agreement shall have been performed or complied with by them in
all material respects.
(c) Absence of Restraint. No order to restrain, enjoin or
otherwise prevent the consummation of this Agreement or the
transactions in connection herewith shall have been entered and, on
the Closing Date, there shall not be any pending or threatened
litigation in any court, or any proceeding by or before any
governmental commission, board or agency, with a view to seeking to
restrain or prohibit consummation of the transactions contemplated
hereby or in which divestiture, rescission or significant damages are
sought in connection with the transactions contemplated hereby and no
investigation by any governmental agency shall be pending or
threatened that might result in any such litigation or other
proceeding.
(d) Certificates. Sellers shall have delivered to Buyer one
or more certificates dated as of the Closing Date executed by Sellers
certifying to the effect set forth in Sections 6.1(a) and (b) hereof.
(e) Consummation of Transfers. Heller Financial Leasing, Inc.
shall have approved the consummation of the transfers contemplated
hereunder.
6.2 Sellers' Conditions to Closing. The obligations of Sellers to
perform their obligations under this Agreement are, at the option of Sellers,
subject to the satisfaction on or before the Closing Date of the conditions set
forth below, any of which may be waived by Sellers in writing; provided,
however, Sellers' election to proceed with the Closing of the transactions
contemplated hereby shall not be deemed a waiver of any breach of any
representation, warranty or covenant herein, whether or not known to Sellers or
existing on the Closing Date, and such action shall not prejudice Sellers'
right to recover damages for such breach. If any Seller opts not to close
pursuant to this Section, the other Sellers may opt to close.
(a) Representations and Warranties. The representations and
warranties of Buyer contained in this Agreement shall be true and
correct in all material respects on the
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<PAGE> 12
date hereof, and shall be true and correct in all material respects on
the Closing Date with the same force and effect as if they had been
made on and as of the Closing Date.
(b) Covenants. The agreements and covenants of Buyer to be
performed or complied with on or before the Closing Date pursuant to
this Agreement shall have been performed or complied with by them in
all material respects.
(c) Absence of Restraint. No order to restrain, enjoin or
otherwise prevent the consummation of this Agreement or the
transactions in connection herewith shall have been entered and, on
the Closing Date, there shall not be any pending or threatened
litigation in any court, or any proceeding by or before any
governmental commission, board or agency, with a view to seeking to
restrain or prohibit consummation of the transactions contemplated
hereby or in which divestiture, rescission or significant damages are
sought in connection with the transactions contemplated hereby and no
investigation by any governmental agency shall be pending or
threatened that might result in any such litigation or other
proceeding.
(d) Certificates. Buyer shall have delivered to Sellers one
or more certificates dated as of the Closing Date executed by Buyer
certifying to the effect set forth in Sections 6.2(a) and (b) hereof.
(e) Consummation of Transfers. Heller Financial Leasing,
Inc. shall have approved the consummation of the transfers contemplated
hereunder.
6.3 Termination. If this Agreement has not closed by March 31, 1998,
it will terminate. In the event of any termination of this Agreement, this
Agreement shall forthwith become wholly void and of no further force or effect
and there shall be no liability on the part of Buyer, or its respective
officers, directors, or agents, or any Seller except that the provisions of
Section 9.1, 9.10, and 9.12 hereof shall remain in full force and effect, and
provided that termination shall not release any party from liability for any
prior failure to comply with any provision, covenant or agreement contained
herein.
7. Closing.
7.1 Deliveries by Buyer. At the Closing, the Buyer shall issue
and deliver to the Seller share certificates representing the Buyer Stock.
7.2 Deliveries by Sellers. At the Closing, the Sellers shall deliver
to the Buyer original share certificates representing the Purchased Shares and
duly executed share transfer certificates effecting the transfer of the
Purchased Shares to the Buyer.
7.3 Termination of Prior Agreement Regarding Purchased Shares. The
parties hereto include all parties to the Shareholder Agreement and Stock
Purchase Agreement regarding stock in Newpark Shipbuilding and
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<PAGE> 13
Repair, Inc. The parties, joined by Newpark Shipbuilding and Repair, Inc., for
this specific purpose, hereby terminate that agreement as of the Closing Date.
No covenant or agreement under that agreement will cause a default of any party
under this Agreement.
8. Indemnification.
8.1 Indemnification by the Sellers. Subject to the provisions of
Section 8.3, each Seller shall protect, indemnify and hold harmless Buyer, each
officer, director and agent of Buyer and each person who controls Buyer in
respect of any losses, claims, damages, liabilities, deficiencies,
delinquencies, defaults, assessments, fees, penalties or related costs or
expenses, including, but not limited to, court costs, attorneys' and
accountants' fees and disbursements, and any federal, state or local income or
franchise Taxes payable in respect of the receipt of cash or money in discharge
of the foregoing, (collectively referred to herein as "Damages") to which Buyer
(or such related parties) may become subject if such Damages arise out of or
are based upon the breach of any of the representations, warranties, covenants
or agreements made by that Seller in this Agreement, including Schedules A and
B hereto, or in any certificate or instrument delivered by or on behalf of that
Seller pursuant to this Agreement.
8.2 Indemnification by Buyer. Subject to the provisions of Section
8.3, Buyer shall protect, indemnify and hold harmless the Sellers in respect of
any Damages to which the Sellers may become subject if such Damages arise out
of or are based upon the breach of any of the representations, warranties,
covenants or agreements made by Buyer in this Agreement, including Schedule A
hereto or in any certificate or instrument delivered by or on behalf of Buyer
pursuant to this Agreement.
8.3 Limits on Indemnification Liability. Notwithstanding any other
provisions to the contrary in this Agreement, the indemnification obligations
of Buyer and the Sellers set forth in this Agreement shall be limited to
indemnification for actual damages, and shall not include incidental,
consequential, or punitive damages.
9. Miscellaneous.
9.1 Payment of Certain Fees and Expenses. Each of the parties hereto
shall pay the fees and expenses incurred by it in connection with the
negotiation, preparation, execution and performance of this Agreement,
including, without limitation, brokers' fees, attorneys' fees and accountants'
fees.
9.2 Notices. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given if delivered personally or by courier,
or mailed by first class mail, postage prepaid, return receipt requested, or
sent by facsimile, as follows:
(a) If to a Seller, to the address or facsimile
number shown on Schedule A with a copy to:
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Porter & Hedges, L.L.P.
700 Louisiana, 35th Floor
Houston, Texas 77002
Attention: Mr. Nick D. Nicholas
Facsimile: 228-1331
(b) If to Buyer:
First Wave Marine, Inc.
4000 S. Sherwood Forest Blvd., Suite 603
Baton Rouge, LA 70816
Attention: Frank W. Eakin
Facsimile: (504) 292-8100
with a copy to:
Griggs & Harrison, P.C.
1301 McKinney, Suite 3200
Houston, Texas 77010
Attention: Suzanne B. Kean, Esq.
Facsimile (713) 651-1944
or to such other address as either party shall have specified by notice in
writing to the other party. All such notices, requests, demands and
communications shall be deemed to have been received on the earlier of the date
of delivery or on the fifth business day after the mailing thereof.
9.3 Entire Agreement. This Agreement (including Schedules A and B
hereto) constitutes the entire agreement between the parties hereto and
supersedes all prior agreements and understandings, oral and written, between
the parties hereto with respect to the subject matter hereof.
9.4 Binding Effect; Benefit. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective permitted heirs,
personal representatives, successors and assigns. Nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the
parties hereto or their respective heirs, personal representatives, successors
and assigns, any rights, remedies, obligations or liabilities under or by
reason of this Agreement.
9.5 Assignability. This Agreement shall not be assignable by the
Sellers without the prior written consent of Buyer or by Buyer without the
prior written consent of the Sellers.
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9.6 Amendment; Waiver. This Agreement may be amended, supplemented or
otherwise modified only by a written instrument executed by the parties hereto.
No waiver by any party of any of the provisions hereof shall be effective
unless explicitly set forth in writing and executed by the party so waiving.
Except as provided in the preceding sentence, no action taken pursuant to this
Agreement, including without limitation, any investigation by or on behalf of
any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representations, warranties, covenants, or
agreements contained herein, and in any documents delivered or to be delivered
pursuant to this Agreement and in connection with the Closing hereunder. The
waiver by any party hereto of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any subsequent breach.
9.7 Section Headings; Index. The section headings contained in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
9.8 Severability. If any provision of this Agreement shall be declared
by any court of competent jurisdiction to be illegal, void or unenforceable,
all other provisions of this Agreement shall not be affected and shall remain
in full force and effect.
9.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
9.10 Applicable Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas.
9.11 References. All references in this Agreement to Sections,
paragraphs and other subdivisions refer to the Sections, paragraphs and other
subdivisions of this Agreement unless expressly provided otherwise. The words
"this Agreement", "herein", "hereof", "hereby", "hereunder" and words of similar
import refer to this Agreement as a whole and not to any particular subdivision
unless expressly so limited. Whenever the words "include", "includes" and
"including" are used in this Agreement, such words shall be deemed to be
followed by the words "without limitation".
9.12 Dispute Resolution. Any dispute, difference or question
("Dispute") between Buyer on the one hand and any Sellers on the other
("Disputing Parties"), arising with respect to this Agreement shall be resolved
in accordance with the following dispute resolution procedures:
(a) Good Faith Negotiations. The Disputing Parties shall
endeavor, in good faith, to resolve the Dispute through negotiations.
(b) Mediation. In the event that the negotiations do not
result in a mutually acceptable resolution, either Disputing Party may
require that the Dispute shall be referred to mediation in Houston,
Texas. One mediator shall be appointed by the agreement of the
Parties. The mediator shall be a suitably qualified person having no
direct or personal
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<PAGE> 16
interest in the outcome of the Dispute. Mediation shall be held within
thirty (30) days of referral to mediation. In the event the Disputing
Parties are unable to agree to a mediator, the Parties agree to the
appointment of a mediator pursuant to the Commercial Mediation Rules of
the American Arbitration Association.
(c) Arbitration. In the event the Parties are unsuccessful in
their mediation of the Dispute, either Disputing Party may request
that the Dispute will be settled by Arbitration by an arbitrator
mutually acceptable to the Disputing Parties in an Arbitration
Proceeding conducted in Houston, Texas in accordance with the rules
existing at the date hereof of the American Arbitration Association.
If the Disputing Parties hereto cannot agree on an arbitrator within
ten (10) business days of the initiation of the Arbitration
Proceeding, an arbitrator shall be selected for the Disputing Parties
by the American Arbitration Association. The Disputing Parties shall
use their reasonable best efforts to have the Arbitration Proceeding
concluded and a judgment rendered by the arbitrator within forty (40)
business days of the initiation of the Arbitration Proceeding. The
decision of such arbitrator shall be final, and judgment upon the
award rendered by the arbitration may be entered in any court having
jurisdiction thereof, and the costs (including, without limitation,
reasonable fees and expenses of counsel and experts for the Disputing
Parties) of such arbitration (including the costs to enforce or
preserve the rights awarded in the arbitration) shall be borne by the
Disputing Party whom the decision of the arbitrator is against. If the
decision of the arbitrator is not clearly against one of the disputing
Parties or the decisions of the arbitrator is against more than one
Disputing Party on one or more issues, the costs of such Arbitration
shall be borne equally by the Disputing Parties. Notwithstanding the
foregoing, Buyer may apply to any court of competent jurisdiction for
injunctive relief without breach of this arbitration provision.
(d) Consent to Jurisdiction; Venue. The parties hereto agree
that all actions relating to the enforcement of this Section 9.12 or
any award rendered hereunder, and over which the United States federal
courts have subject matter jurisdiction, shall be litigated, if at
all, exclusively in the United States District Court for the Southern
District of Texas, Houston Division, and, if necessary, the
corresponding appellate courts. The parties further agree that all
actions relating to the enforcement of this Section 9.12 or any award
rendered hereunder, and over which the United States federal courts
do not have subject matter jurisdiction, shall be litigated, if at
all, exclusively in the Courts of the State of Texas, in Harris
County, and, if necessary, the corresponding appellate courts. Each
party hereto hereby submits itself to the personal jurisdiction of,
and consents to venue in, any such court, and hereby waives any claim
it may otherwise have that such court lacks personal jurisdiction
over it, or that such court is an inconvenient forum, with respect to
any such matter or proceeding. Each party hereto further agrees to
voluntarily appear and to enter a general appearance in any such
proceeding which is brought in any such court.
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9.13 Confidentiality. Except as may be required by Applicable Law, no
party shall disclose to or discuss with anyone outside their immediate family,
the terms of this Agreement or the transactions contemplated hereby without the
prior written consent of the other parties.
9.14 Heller Financial. Any provision of this Agreement to the contrary
notwithstanding, neither the pledge of the Purchased Shares to Heller Financial
Leasing, Inc. to secure the performance of obligations of Newpark Shipbuilding
and Repair, Inc., nor the related covenants against transfer of the Purchased
Shares, shall be a default of any Seller of any provision hereunder.
[THE NEXT PAGE IS THE SIGNATURE PAGE TO THIS AGREEMENT]
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IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement on the date first above written.
SELLERS:
/s/ JOE O'TOOLE
--------------------------
Joe O'Toole
/s/ RICHARD WADE
--------------------------
Richard Wade
/s/ BRENT MILLER
--------------------------
Brent Miller
/s/ DALE PAYNE, III
--------------------------
Dale Payne, III
/s/ CHRIS ORTH
--------------------------
Chris Orth
/s/ HUGH G. WALKER, III
--------------------------
Hugh G. Walker, III
/s/ MICHAEL R. SADLER
--------------------------
Michael R. Sadler
/s/ JAMES H. SESSIONS
--------------------------
James H. Sessions
/s/ PAUL E. McCOY
--------------------------
Paul E. McCoy
/s/ WILFRED G. FINDLE, JR.
--------------------------
Wilfred G. Findle, Jr.
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<PAGE> 19
/s/ MARIO SALINAS, JR.
--------------------------
Mario Salinas, Jr.
/s/ THOMAS JAY WINTERS
--------------------------
Thomas Jay Winters
/s/ ABEL JUAREZ SALAZAR
--------------------------
Abel Juarez Salazar
/s/ ROBERT H. THEILMAN
--------------------------
Robert H. Theilman
/s/ GLENN BYRUM
--------------------------
Glenn Byrum
/s/ ANNA ENGELS (CHAKA)
--------------------------
Anna Engels (Chaka)
BUYER:
FIRST WAVE MARINE, INC.,
a Delaware corporation
By: /s/ FRANK W. EAKIN
-----------------------
Name: Frank W. Eakin
---------------------
Title: President
--------------------
The undersigned hereby joins the parties to terminate the Shareholder
Agreement and Stock Purchase Agreement described in Section 7.3 above.
NEWPARK SHIPBUILDING AND REPAIR,
INC., A TEXAS CORPORATION
By: /s/ FRANK W. EAKIN
-----------------------------
Name: Frank W. Eakin
---------------------------
Title: President
--------------------------
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SCHEDULE A
NAMES AND ADDRESSES OF SELLERS
Joe O'Toole
- --------------------------
- --------------------------
- --------------------------
Richard Wade
- --------------------------
- --------------------------
- --------------------------
Brent Miller
- --------------------------
- --------------------------
- --------------------------
Dale Payne, III
- --------------------------
- --------------------------
- --------------------------
Chris Orth
- --------------------------
- --------------------------
- --------------------------
Hugh G. Walker, III
- --------------------------
- --------------------------
- --------------------------
Michael R. Sadler
- --------------------------
- --------------------------
- --------------------------
<PAGE> 21
James H. Sessions
- --------------------------
- --------------------------
- --------------------------
Paul E. McCoy
- --------------------------
- --------------------------
- --------------------------
Wilfred G. Findle, Jr.
- --------------------------
- --------------------------
- --------------------------
Mario Salinas, Jr.
- --------------------------
- --------------------------
- --------------------------
Thomas Jay Winters
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Abel Juarez Salazar
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Robert H. Theilman
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Glenn Byrum
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Anna Engels (Chaka)
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<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
FIRST WAVE MARINE, INC.
I, the undersigned, for the purpose of incorporating and organizing a
corporation under the General Corporation Law of the State of Delaware, do
hereby certify as follows:
FIRST. The name of the Corporation (the "Corporation") is FIRST WAVE
MARINE, INC.
SECOND. The registered office of the Corporation in the State of
Delaware is located at Corporation Trust Center, 1209 Orange Street, in the
city of Wilmington, County of New Castle, Delaware, 19801. The name of the
Corporation's registered agent at such address is The Corporation Trust
Company.
THIRD. The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH. The total number of shares of stock which the Corporation
shall have authority to issue is 23 million, consisting of 2 million shares of
Preferred Stock, of the par value of $.01 per share (hereinafter called
"Preferred Stock"), and 21 million shares of Common Stock, of the par value of
$.01 per share (hereinafter called "Common Stock").
The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors hereby is authorized to provide for the
issuance of shares of Preferred Stock in series, and by filing a certificate
pursuant to the applicable law of the State of Delaware (hereinafter called a
"Preferred Stock Designation"), to establish from time to time the number of
shares to be included in each such series, and to fix the designation, powers,
preferences and rights of the shares of each such series and the
qualifications, limitations and restrictions thereof. The authority of the
Board of Directors with respect to each series shall include, but not be
limited to, determination of the following:
(a) The designation of the series, which may be by distinguishing
number, letter and title.
(b) The number of shares of the series, which number of the Board
of Directors may thereafter (except where otherwise provided in the creation of
the series) increase or decrease (but now below the number of shares thereof
then outstanding).
<PAGE> 2
(c) Whether dividends, if any, shall be cumulative or
noncumulative and the dividend rate of the series.
(d) The dates at which dividends, if any, shall be payable.
(e) The redemption rights and price or prices, if any, if shares
of the series.
(f) The terms and amount of any sinking fund provided for the
purchase or redemption of shares of the series.
(g) The amounts payable on shares of the series in the event of
any voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Corporation.
(h) Whether the shares of the series shall be convertible into
shares of any other class or series of shares, or any other security, of the
Corporation or any other corporation, and, if so, the specification of such
other class or series or such other security, the conversion price or prices or
rate or rates, any adjustments thereof, the date or dates as of which such
shares shall be convertible and all other terms and conditions upon which such
conversion may be made.
(i) Restrictions on the issuance of shares of the same series of
any other class or series.
(j) The voting rights, if any, of the holders of such series.
The Common Stock shall be subject to the express terms of the
Preferred Stock and any series thereof. Each share of Common Stock shall be
equal to each other share of Common Stock. The holders of Common Stock shall
be entitled to one vote for each such share upon all questions presented to the
stockholders.
Except as may be provided in this Certificate of Incorporation or by
the Board of Directors in a Preferred Stock Designation, the Common Stock shall
have the exclusive right to vote for the election of Directors and for all
other purposes, and holder of Preferred Stock shall not be entitled to receive
notice of any meeting of stockholders at which they are not entitled to vote.
The Corporation shall be entitled to treat the person in whose name
any share of its stock is registered as the owner thereof for all purposes and
shall not be bound to recognize any equitable or other claim to, or interest
in, such share on the part of any other person, whether or not the corporation
shall have notice thereof, except as expressly provided by applicable laws.
FIFTH. In furtherance of, and not in limitation of, the powers
conferred by statute, the Board of Directors is expressly authorized and
empowered:
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<PAGE> 3
(a) to adopt, amend or repeal the By-Laws of the corporation;
provided, however, that By-Laws adopted by the Board of Directors under the
powers hereby conferred may be amended or repealed by the Board of Directors or
by the stockholders having voting power with respect thereto, except that
Section 4 of Article I, all of Article II, Section I of Article III, and
Section 4 of Article VI of the By-Laws shall not be amended or repealed, nor
shall any provision inconsistent with such By-Laws be adopted, without the
affirmative vote of the holder of at lease 80 percent of the combined voting
power of all shares of the Corporation entitled to vote generally in the
election of Directors, voting together as a single class. Notwithstanding
anything contained in this Certificate of Incorporation to the contrary, the
affirmative vote of the holders of at least 80 percent of the combined voting
power of all shares of the Corporation entitled to vote generally in the
election of Directors, voting together as a single class, shall be required to
amend, repeal or adopt any provision inconsistent with this Section (a) of
Article FIFTH; and
(b) from time to time to determine whether and to what extent, and
at what times and places, and under what conditions and regulations, the
accounts and books of the Corporation, or any of them, shall be open to
inspection of stockholders; and no stockholder shall have any right to inspect
any account, book or document of the Corporation except as conferred by
applicable law and subject to the rights, if any, of the holders of any series
of Preferred Stock.
The Corporation may in its By-Laws confer powers upon the Board of
Directors in addition to the foregoing and in addition to the powers and
authorities expressly conferred upon the Board of Directors by applicable law.
SIXTH. Subject to the rights of the holders of any class of series of
stock having a preference over the Common Stock as to dividends or upon
liquidation to elect additional Directors under specific circumstances:
(a) any action required or permitted to be taken by the
stockholders of the Corporation must be effected at a duly called annual or
special meeting of stockholders of the Corporation and may not be affected by
any consent in writing of such stockholders:
(b) special meetings of the stockholders of the corporation may be
called only by the Chairman of the Board of Directors and shall be called
within 10 days after receipt of the written request of the Board of Directors,
pursuant to a resolution approved by a majority of the Whole Board; and
(c) the business permitted to be conducted at any special meeting
of the stockholders is limited to the business brought before the meeting by
the chairman or by the Secretary at the request of a majority of the Board of
Directors.
Notwithstanding anything contained in this Certificate of
Incorporation to the contrary, the affirmative vote of at least 80 percent of
the combined voting power of all shares of the Corporation entitled to vote
generally in the election of Directors, voting together as a single class,
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<PAGE> 4
shall be required to amend, repeal, or adopt any provision, inconsistent with
this Article SIXTH. For the purposes of this Certificate of Incorporation, the
"Whole Board" is defined as the total number of Directors which the Corporation
would have if there were no vacancies.
SEVENTH. SECTION 1. NUMBER, ELECTION AND TERMS OF DIRECTORS.
Subject to the rights of the holders of any class or series of stock
having a preference over the Common Stock as to dividends or upon liquidation
to elect additional Directors under specified circumstances, the number of
Directors of the Corporation shall be fixed by the By-Laws of the Corporation
and may be increased or decreased from time to time in such a manner as may be
prescribed by the By-Laws, but in no case shall the number be less than 3 nor
more than 15.
The Directors, other than those who may be elected by the holders of
any class or series of stock having preference over the Common Stock as to
dividends or upon liquidation and other than those Directors named herein to
serve until the first annual meeting of stockholders or until their successors
are duly elected and qualify, shall be divided into three classes, as nearly
equal in number as possible. At the first meeting of the stockholders held in
1997, one class shall be initially elected for a term expiring at the annual
meeting of the stockholders in 1998, and another class shall be initially
elected for a term expiring at the annual meeting of stockholders to be held in
1999, and another class shall be initially elected for a term expiring at the
annual meeting of stockholders to be held in 2000 with members of each class to
hold office until their successors are elected and qualified. At each
succeeding annual meeting of the stockholders of the Corporation, the
successors of the class of Directors whose term expires at that meeting shall
be elected by plurality of all votes cast at such meeting to hold office for a
term expiring at the annual meeting of stockholders held in the third year of
their election.
SECTION 2. STOCKHOLDER NOMINATION OF DIRECTOR CANDIDATES.
Advance notice of stockholder nominations for the election of
Directors and advance notice of business to be brought by stockholders before
an annual meeting shall be given in the manner provided in the By-Laws of the
Corporation.
SECTION 3. NEWLY CREATED DIRECTORSHIPS AND VACANCIES.
Subject to the rights of the holders of any class or series of stock
having a preference over the Common Stock as to dividends or upon liquidation
to elect additional Directors under specified circumstances, newly created
directorships resulting from any increase in the number of Directors and any
vacancy on the Board of Directors resulting from death, resignation,
disqualification, removal or other cause shall be filled solely by the
affirmative vote of a majority of the remaining Directors then in office, even
though less than a quorum of the Board of Directors, or by a sole remaining
Director. Any Director elected in accordance with the preceding sentence shall
hold office for the remainder of the full term of the class of Directors in
which the new directorship was created or the vacancy
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<PAGE> 5
occurred and until such Director's successor shall have been elected and
qualified. No decrease in the number of Directors constituting the Board of
Directors shall shorten the term of an incumbent Director.
SECTION 4. REMOVAL OF DIRECTORS.
Subject to the rights of the holders of any class or series of stock
having preference over the Common Stock as to dividends or upon liquidation to
elect additional Directors under specified circumstances, any Director may be
removed from office only for cause by the stockholders of the Corporation in
the manner provided in this Section 4 of Article SEVENTH. At any annual
meeting of the stockholders of the Corporation or at any special meeting of the
stockholders of the Corporation, the notice of which shall state that the
removal of a Director or Directors is among the purposes of the meeting, the
affirmative vote of the holders of at least 80 percent of the combined voting
power of the outstanding shares of Voting Stock (as defined below), voting
together as a single class, may remove such Director or Directors for cause.
For purposes of this Article SEVENTH, "Voting Stock" shall mean the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of Directors. In any vote required by or provided
for in this Article SEVENTH, each share of Voting Stock shall have the number
of votes granted to it generally in the election of Directors.
SECTION 5. AMENDMENT.
Notwithstanding anything contained in this Certificate of
Incorporation to the contrary, the affirmative vote of the holders of a least
80 percent of the combined voting power of the outstanding shares of Voting
Stock, voting together as a single class, shall be required to amend, repeal or
adopt any provision inconsistent with this Article SEVENTH.
EIGHTH: The names and mailing addresses of the persons who are to
serve as Directors of the Corporation until the first annual meeting of
stockholders or until their successors are elected and qualified are as
follows:
<TABLE>
<CAPTION>
Name Mailing Address
---- ---------------
<S> <C>
Samuel F. Eakin 4000 S. Sherwood Forest Blvd., Ste. 603
Baton Rouge, Louisiana 70816
Frank W. Eakin 4000 S. Sherwood Forest Blvd., Ste. 603
Baton Rouge, Louisiana 70816
David B. Ammons 4000 S. Sherwood Forest Blvd., Ste. 603
Baton Rouge, Louisiana 70816
</TABLE>
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<PAGE> 6
NINTH. Each person who is or was or had agreed to become a Director
or officer of the Corporation, or each such person who is or was serving or who
had agreed to serve at the request of the Board of Directors or an officer of
the Corporation as an employee or agent of the Corporation 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 Corporation to the full
extent permitted from time to time by the General Corporation Law of the State
of Delaware or any other applicable law as presently or hereafter in effect.
Without limiting the generality or the effect of the foregoing, the Corporation
may enter into one or more agreements with any person which provide for
indemnification greater or different that provided in this Article NINTH. Any
amendment or repeal or this Article NINTH shall not adversely affect any right
or protection existing hereunder immediately prior to such amendment or repeal.
TENTH. To the full extent permitted by General Corporation Law of the
State of Delaware or any other applicable laws presently or hereafter in
effect, no Director or the Corporation shall be personally liable to the
Corporation or its stockholders for or with respect to any acts or omissions in
the performance of his or her duties as a Director of the Corporation. Any
amendment or repeal of this Article TENTH shall not adversely affect any right
or protection of a Director or the Corporation existing immediately prior to
such amendment or repeal.
ELEVENTH. The Corporation reserves the right to amend or repeal any
provision contained in this Certificate of Incorporation, including a Preferred
Stock Designation, in the manner now or hereafter prescribed by statute, and
this Certificate of Incorporation, including any applicable Preferred Stock
Designation, and all rights conferred upon stockholders herein are created
subject to this reservation.
TWELFTH. The name and mailing address of the incorporator is David B.
Ammons, 4000 South Sherwood Forest Boulevard, Suite 603, Baton Rouge, Louisiana
70816.
IN WITNESS WHEREOF, I, the undersigned, being the incorporator
hereinabove named, do hereby execute this Certificate of Incorporation this
26th day of September, 1997.
/s/ DAVID B. AMMONS
----------------------------
David B. Ammons
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<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
FIRST WAVE MARINE, INC.
ARTICLE I: STOCKHOLDERS' MEETINGS
SECTION 1. PLACE OF MEETINGS.
Meeting of the stockholders shall be held at such place as the Board
of Directors shall determine and shall be designated in the notice of said
meeting.
SECTION 2. ANNUAL MEETING.
There shall be an annual meeting of the stockholders on the last
Thursday in May of each year at 10:00 a.m., or at such other date or time as
shall be designated from time to time by the Board of Directors and stated in
the notice of the meeting, for the election of directors and for the
transaction of such other business as may come before the meeting.
SECTION 3. SPECIAL MEETINGS.
Special meetings of the stockholders for any purpose may be called
only by the Chairman of the Board of Directors, and shall be called within 10
days after receipt of the written request of the Board of Directors, pursuant
to a resolution approved by a majority of the Whole Board, upon not fewer than
10 nor more than 60 days' written notice. Any such resolution shall be sent to
the Chairman of the Board of Directors and the Secretary of the Corporation and
shall state the purposes of the proposed meeting. Special meetings of holders
of the outstanding Preferred Stock may be called in the manner and for the
purposes provided in the resolutions of the Board of Directors providing for
the issue of such stock as filed pursuant to the applicable law of the State of
Delaware (a "Preferred Stock Designation"). Business transacted at any special
meeting is limited to the purposes stated in the notice.
For the purposes of the By-Laws, the "Whole Board" is defined as the
total number of Directors which the Corporation would have if there were no
vacancies.
SECTION 4. NOTICE OF STOCKHOLDER BUSINESS.
At an annual meeting of the stockholders, only such business shall be
conducted as shall have been property brought before the meeting. To be
properly brought before an annual meeting, business must be (a) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board of Directors. (b) otherwise properly brought before the meeting
by or at the direction of the Board of Directors, or (c) otherwise properly
brought before
<PAGE> 2
the meeting by a stockholder. For business to be properly brought before an
annual meeting by a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice must be delivered to or mailed to and received at the
principal executive offices of the Corporation, not less than 80 days prior to
the meeting; provided, however, that in the event that less than 90 days'
notice or prior public disclosure of the date of the meeting is given or made
to stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the tenth day following the date on which
such notice of the date of the annual meeting was mailed or such public
disclosure made.
A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting (a) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (b) the name
and address, as they appear on the Corporation's books, of the stockholder
proposing such business, (c) the class and number of shares of the Corporation
which are beneficially owned by the stockholder, and (d) any material interest
of the stockholder in such business. Notwithstanding anything in the By-Laws
to the contrary, no business shall be conducted at an annual meeting except in
accordance with the procedures set forth in this Section 4.
The presiding officer of an annual meeting shall, if the facts
warrant, determine and declare to the meeting that business was not properly
brought before the meeting in accordance with this Section 4, and if the
presiding officer should so determine, the presiding officer shall so declare
to the meeting and any such business not properly brought before the meeting
shall not be transacted.
SECTION 5. INSPECTORS.
The Board of Directors shall appoint inspectors of election to act as
judges of the voting and to determine those entitled to vote at any
stockholders' meeting, or any adjournment thereof, in advance of such meeting,
but if the Board of Directors fails to make such appointments or if an
appointee fails to serve, the presiding officer of the stockholders' meeting
may appoint substitute inspectors.
SECTION 6. QUORUM AND ADJOURNMENTS.
Except as otherwise provided in a Preferred Stock Designation or by
law, the holders of stock of record entitled to exercise not less than a
majority of the voting power of the Corporation present in person or by proxy
shall constitute a quorum for the transaction of business thereat. If,
however, such majority shall not be present in person or by proxy, the
stockholders entitled to vote thereat, present in person or by proxy, shall
have the power to adjourn the meeting from time to time and from place to place
without notice, other than an announcement at the meeting of the time and place
of the adjourned meeting, until the requisite amount of voting power shall be
present or the meeting has been adjourned permanently. At such adjourned
meeting, at which
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<PAGE> 3
the requisite amount of voting power shall be present, any business may be
transacted that might have been transacted at the meeting as originally called.
SECTION 7. VOTING.
At every meeting of stockholders, every stockholder having the right
to vote shall be entitled to vote in person or by proxy appointed by a legally
sufficient instrument. The vote for Directors, the vote upon any questions set
forth in the Proxy Statement for the meeting and the vote upon any other action
of business at the discretion of the presiding officer of the stockholders'
meeting shall be by written ballot. The vote upon any other question before
the meeting shall be by written ballot upon the demand of stockholders voting
at least 15 percent of the shares represented at the meeting. All questions,
except election or removal of Directors or as otherwise provided in these
By-Laws, the Certificate of Incorporation, a Preferred Stock Designation or the
laws of the State of Delaware, shall be decided by a majority vote of those
shares present and voting, and, with respect to any election or question to be
decided by any class of stock voting as a class, by a majority vote of those
shares present or represented and voting of that class.
SECTION 8. ORDER OF BUSINESS.
Unless otherwise determined by the Board of Directors prior to the
meeting, the presiding officer of the stockholders' meeting shall determine the
order of business and shall have the authority in his discretion to regulate
the conduct of any such meeting, including, without limitation, by imposing
restrictions on the persons (other than stockholders of the Corporation or
their duly appointed proxies) who may attend any such stockholders' meeting, by
ascertaining whether any stockholder or his proxy may be excluded from any
stockholders' meeting based upon any determination by the presiding officer, in
his sole discretion, that any such person has unduly disrupted or is likely to
disrupt the proceedings thereat, and by determining the circumstances in which
any person may make a statement or ask questions at any stockholders' meeting.
ARTICLE II: NOMINATION OF DIRECTOR CANDIDATES
SECTION 1. NOTIFICATION OF NOMINEES.
Subject to the rights of holders of any class or series of stock
having a preference over the Common Stock as to dividends or upon liquidation,
nominations for the election of Directors may be made by the Board of Directors
or a committee appointed by the Board of Directors or by any stockholder
entitled to vote in the election of Directors generally. However, any
stockholder entitled to vote in the election of the Directors generally may
nominate one or more persons for election as Directors at a meeting only if
written notice of such stockholder's intent to make such nomination or
nominations has been given, either by personal delivery or by United States
mail, postage prepaid, to the Secretary of the Corporation not later than 80
days prior to the date of any annual or special meeting. In the event that the
date of such annual or special meeting was not
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<PAGE> 4
publicly announced by the Corporation by mail, press release or otherwise more
than 90 days prior to the meeting, notice by the stockholder to be timely must
be delivered to the Secretary of the Corporation not later than the close of
business on the tenth day on which such announcement of the date of the meeting
was communicated to the stockholders.
Each such notice shall set forth: (a) the name and address of the
stockholder who intends to make the nomination and of the person or persons to
be nominated: (b) a representation that the stockholder is a holder of record
of stock of the Corporation entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice; (c) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; (d) such other information
regarding each nominee proposed by such stockholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had the nominee been nominated, or intended
to be nominated, by the Board of Directors; and (e) the consent of each nominee
to serve as a Director of the Corporation if so elected.
SECTION 2. SUBSTITUTION OF NOMINEES.
If a person is validly designated as a nominee in accordance with
Section I of this ARTICLE II, and shall thereafter become unable or unwilling
to stand for election to the Board of Directors, the Board of Directors or the
stockholder who proposed such nominee, as the case may be, may designate a
substitute nominee upon delivery, not fewer than 5 days prior to the date of
the meeting for election of such nominee, of a written notice to the Secretary
setting forth such information regarding such substitute nominee as would have
been required to be delivered to the Secretary pursuant to Section I of this
ARTICLE II, had such substitute nominee been initially proposed as a nominee.
Such notice shall include a signed consent to serve as a Director of the
Corporation, if elected, of each such substitute nominee.
SECTION 3. COMPLIANCE WITH PROCEDURES.
If the presiding officer of the meeting for the election of Directors
determines that a nomination for any candidate for election as a Director at
such meeting was not made in accordance with the applicable provisions of these
By-Laws, such nomination shall be void; provided, however, that nothing in
these By-Laws shall be deemed to limit any voting rights upon the occurrence of
dividend arrearages provided to holders of Preferred Stock pursuant to the
Preferred Stock Designation for any series of Preferred Stock.
ARTICLE III: BOARD OF DIRECTORS
SECTION 1. NUMBER, QUALIFICATION, ELECTION AND TERMS.
Except as otherwise fixed by, or pursuant to the provisions of Article
Fourth of the
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<PAGE> 5
Certificate of Incorporation relating to the rights of the holders of any class
or series of stock having a preference over the Common Stock as to dividends or
upon liquidation to elect additional Directors under specified circumstances,
the number of Directors shall be fixed from time to time by the Board of
Directors, but shall not be less than 3 nor more than 15 persons. The
Directors, other than those who may be elected by the holders of any class or
series of stock having a preference over the Common Stock as to dividends or
upon liquidation and other than those Directors named in the Certificate of
Incorporation, shall be classified, with respect to the time for which they
severally hold office, into three classes, as nearly equal in number as
possible, as determined by the Board of Directors. One class shall hold office
initially for a term expiring at the annual meeting of stockholders to be held
in 1998, another class to hold office initially for a term expiring at the
annual meeting of stockholders to be held in 1999, and another class to hold
office initially for a term expiring at the annual meeting of stockholders to
be held in 2000, with members of each class to hold office until their
successors are elected and qualified. At each succeeding annual meeting of the
stockholders of the Corporation, the successors of the class of Directors whose
term expires at that meeting shall be elected by plurality vote by written
ballot to hold office for a term expiring at the annual meeting of stockholders
held in the third year following the year of their election.
SECTION 2. NEWLY-CREATED DIRECTORSHIPS AND VACANCIES.
Except as otherwise fixed by or provided for or pursuant to the
provisions of Article Fourth of the Certificate of Incorporation relating to
the rights of the holders of any class or series of stock having a preference
over the Common Stock as to dividends or upon liquidation to elect Directors
under specified circumstances, newly created directorships resulting from any
increase in the number of Directors and any vacancies on the Board of Directors
resulting from death, resignation, disqualification, removal or other cause
shall be filled solely by the affirmative vote of a majority of the remaining
Directors then in office, even though less than a quorum of the Board of
Directors, or by a sole remaining Director. Any Director elected in accordance
with the preceding sentence shall hold office for the remainder of the full
term of the class of Directors in which the new directorship was created or the
vacancy occurred and until such Director's successor shall have been elected
and qualified. No decrease in the number or Directors constituting the Board
of Directors shall shorten the term of any incumbent Director.
SECTION 3. REMOVAL.
Subject to the rights of any class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation to elect
Directors under specified circumstances, any Director may be removed from
office only for cause and only by the affirmative vote of the holders of 80
percent of the combined voting power of the then-outstanding shares of stock
entitled to vote generally in the election of Directors, voting together as a
single class.
SECTION 4. RESIGNATION.
Any Director may resign at any time by giving written notice of his
resignation to the
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<PAGE> 6
Chairman or the Secretary, to be effective upon its acceptance by the Board or
at the time specified in such writing.
SECTION 5. RESPONSIBILITIES AND POWERS.
The business and affairs of the Corporation shall be managed under the
direction of the Board of Directors. In addition to the powers and authorities
expressly conferred by these By-Laws, the Board of Directors may exercise all
such powers of the Corporation and do all such lawful acts and things as are
not by statute or by the Certificate of Incorporation or by these By-Laws
directed or required to be exercised or done by the stockholders.
SECTION 6. ORGANIZATION MEETING.
Immediately after the adjournment of the annual meeting of the
stockholders each year, or special meeting held in lieu thereof, the Directors
elected thereat shall, without notice, convene the annual meeting of Directors
for the organization of the Board of Directors, the election of officers and
members of committees and the transaction of any other business which may
properly come before the meeting. If a quorum of the Board of Directors shall
not be present, the Chairman shall call a meeting for such purposes as promptly
as is practicable. Except as otherwise provided in this By-Law, Directors may
hold their regular and special meetings at such times and places and have one
or more offices and keep the books of the Corporation at such places as the
Board of Directors determines.
SECTION 7. NOTICES.
No notice of regular meetings of the Board of Directors need be given.
Special meetings of the Board of Directors may be called by the Chairman or the
President of the Corporation upon notice to each Director, given either in
person or by mail, telephone, telegram, telex, or similar medium of
communication: provided, however, that such notice shall be deemed to have ben
waived by the Directors attending or voting at any such meeting, without
protesting the lack of proper notice, and may be waived in writing or by
telegram, telex, or similar medium of communication by any Director either
before or after such meeting. Special meetings shall be called by the
Chairman, the President or the Secretary on like notice, on the written request
of three Directors. A minimum of 24 hours' notice of special meetings shall be
given to each Director. Unless otherwise indicated in the notice thereof, any
business may be transacted at any such special meeting.
SECTION 8. QUORUM.
Subject to Section 2 of this ARTICLE III, at all meetings of Directors
a majority of the total number of Directors then in office shall constitute a
quorum for the transaction of business and, except for the designation of
committees (as provided in Section 9 of this ARTICLE III), and the removal of
executive officers (as provided in Section 1 of ARTICLE IV), the act of a
majority of the Directors present at any meeting at which there is a quorum
shall be the act of the Board
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<PAGE> 1
EXHIBIT 10.1
================================================================================
STOCK PURCHASE AGREEMENT
BY AND AMONG
JOHN L. BLUDWORTH, III,
JOHN BLUDWORTH MARINE, INC.,
BLUDWORTH SHIPYARD AND FABRICATION, INC.
EAE SERVICES, INC.
AND
FIRST WAVE MARINE, INC.
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TABLE OF CONTENTS
(Not a Part of the Agreement)
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ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 1.01 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE II PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.01 Purchase and Sale of the Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.02 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.03 Closing/Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.04 Closing Deliveries by the Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.05 Closing Deliveries by the Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 2.06 Additional Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE
SELLERS AND THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.01 Capacity of the Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.02 Organization, Authority and Qualification
of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.03 Capital Stock of the Company; Ownership
of the Shares and Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.04 Subsidiaries; Capital Stock; Ownership of Shares . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.05 Corporate Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.06 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.07 Governmental Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.08 Financial Information and Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.09 Certain Additional Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.10 No Undisclosed Liabilities or Capital
Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.11 Acquired Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.12 Conduct in the Ordinary Course; Absence
of Certain Changes, Events and Conditions . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.13 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.14 Certain Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.15 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.16 Environmental and Other Permits
And Licenses; Related Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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SECTION 3.17 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.18 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.19 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.20 Tangible Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.21 Assets; Warranty of Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.22 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.23 Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.24 Employee Benefit Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.25 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.26 Key Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.27 Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.28 Accounts; Lockboxes; Safe Deposit Boxes;
Powers of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.29 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.30 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 3.31 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF
THE PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.01 Organization and Authority of the Purchaser . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.02 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.03 Governmental Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.04 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.05 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4.06 Investment Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE V ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.01 Conduct of Business Prior to the
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.02 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.03 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.04 Regulatory and Other Authorizations;
Notices and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.05 Notice of Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.06 Acquisition Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.07 Use of Names and Intellectual Property
SECTION 5.08 Non-Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.09 Right of First Refusal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.10 Further Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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SECTION 5.11 Miscellaneous Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.12 Certain Additional Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.13 Termination of Inter-Company
Arrangements, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.14 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.15 Break Up Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 5.16 Long Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE VI COVENANT OF FIRST WAVE MARINE, INC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 6.01 Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE VII TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.01 Tax Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.02 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.03 Returns and Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.04 Tax Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7.05 Cooperation and Exchange of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE VIII CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 8.01 Conditions to Obligations of the Sellers
and the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 8.02 Conditions to Obligations of the Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE IX SURVIVAL AND INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.01 Survival of Representations, Warranties
and Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.02 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.03 Limits on Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 9.04 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE X TERMINATION AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 10.01 Termination by the Sellers or Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 10.02 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 10.03 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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ARTICLE XI GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.01 Joint and Several Obligation of the
Sellers and the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.02 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.03 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.04 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.05 Headings; Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.06 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.07 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.08 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.09 No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.10 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.11 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.12 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.13 Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.14 Legal Advice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.15 Remedies Not Exclusive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.16 Arbitration of EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11.17 Arbitration of Other Claims . . . . . . . . . . . . . . . . . . .
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EXHIBITS
Exhibit A Assets
Exhibit 1.01(ii) Permitted Encumbrances
Exhibit 8.01(f) Legal Opinion of Purchaser's Counsel
Exhibit 8.01(h)(1) Employment Agreement
Exhibit 8.02(f) Legal Opinion of Company's Counsel
Exhibit 8.02(l) Escrow Agreement
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PREAMBLE
THIS STOCK PURCHASE AGREEMENT (hereinafter referred to as the
"Agreement"), dated as of the _________ day of ___________________, 1997 (the
"Execution Date"), is made and entered into by and among:
JOHN L. BLUDWORTH, III, an individual of lawful age domiciled in
Hockley, Texas, who is the sole shareholder of John Bludworth Marine,
Inc. (collectively, along with his undersigned spouse, the "Sellers");
and
JOHN BLUDWORTH MARINE, INC., a Texas corporation whose principal place
of business is located at Pasadena, Texas, and which is the owner of
all the outstanding shares of all of its subsidiaries, including but
not limited to its subsidiary, Bludworth Shipyard and Fabrication,
Inc., a Texas corporation; and
BLUDWORTH SHIPYARD AND FABRICATION, INC., a Texas corporation whose
principal place of business is located at Galveston, Texas, and which
is the wholly owned subsidiary of John Bludworth Marine, Inc.
The above two corporations hereinafter collectively referred to as the
"Company;" and
EAE SERVICES, INC., a Texas corporation whose principal place of
business is located at Baton Rouge, Louisiana (the "Purchaser"); and
FIRST WAVE MARINE, INC., a Delaware corporation whose principal place
of business is located at Baton Rouge, Louisiana, appearing herein for
the limited purposes of providing for certain stock options and
guarantying the Purchaser's promissory note provided for in Section
2.02.
RECITALS
WHEREAS, the Sellers own all the issued and outstanding shares (the
"Shares") of common stock, no par value per share (the "Common Stock"), of the
Company; and
WHEREAS, the Company owns all of the contract rights, properties and
assets used in the conduct of its Businesses (all such properties, contract
rights and assets being the "Assets"), including the major assets listed on
EXHIBIT A attached hereto and incorporated herein by reference; and
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WHEREAS, the Sellers wish to sell the Shares to the Purchaser, and the
Purchaser wishes to purchase the Shares from the Sellers, upon the terms and
subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, the Sellers, the Company and
the Purchaser hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Accounts Receivable" has the meaning specified in Section 3.22.
"Acquisition" means the acquisition of the Shares of the Company by
the Purchaser from the Sellers.
"Acquisition Documents" has the meaning specified in Section 9.01.
"Acquisition Proposal" has the meaning specified in Section 5.06.
"Action" means any claim, action, suit, arbitration, inquires,
proceeding or investigation by or before any Governmental Authority or
arbitration or mediation association.
"Affiliate" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person.
"Agreed Date" means the date on which the confirmation of the
Company's March 31, 1998 EBITDA amounts and any dispute resolution process
associated therewith shall be completed pursuant to Section 11.16. Such Agreed
Date shall be as soon as practicable, and in no event later than July 31, 1998.
"Agreement" or "this Agreement" means this Stock Purchase Agreement
dated as of the date set forth in the Preamble to this Agreement, by and among
the Sellers, the Company, and the Purchaser (including the Exhibits hereto and
the Disclosure Schedule)
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and all amendments hereto made in accordance with the provisions of Section
11.10 hereof.
"Appraisal Adjustment" means, in the event the Appraised Value of the
Company's fixed assets at Pasadena and Galveston, Texas, is between
$16,000,000.00 and $18,000,000.00, the Cash Payment due by the Purchaser to the
Sellers at the Closing pursuant to Section 2.02(a), shall be reduced by the
difference between the actual Appraised Value and $18,000,000.00. The
Appraisal Adjustment shall be added to the Note due by Purchaser to Sellers
pursuant to Section 2.02(c).
"Appraised Value" means the appraised value of all of the Company's
fixed assets at Pasadena and Galveston, Texas. Such Appraised Value shall be
not less than Sixteen Million and No/100 Dollars ($16,000,000.00). In the
event the Appraised Value of such fixed assets is between $16,000,000.00 and
$18,000,000.00, the Cash Payment due by the Purchaser to the Sellers at the
Closing pursuant to Section 2.02(a), shall be reduced by the difference between
the actual Appraised Value and $18,000,000.00 (the "Appraisal Adjustment").
The Appraisal Adjustment shall be added to the Note.
"Asset" or "Assets" has the meaning specified in Section 3.21.
"Balance Sheet Date" means August 30, 1997.
"Best" means A.M. Best Company, Inc.
"Business" means the operation of a commercial shipyard, and all other
businesses which are on the date hereof being or intended to be conducted by
the Company, its subsidiaries, the Sellers and their Affiliates, except Jay
Bludworth, Inc.
"Business Day" means any day that is not a Saturday, a Sunday or other
day on which banks are required or authorized by law to be closed in the State
of Texas.
"Cash Payment" has the meaning specified in Section 2.02(a).
"CERCLA" means the Comprehensive Environmental Response Compensation
and Liability Act, 4-2 U.S.C. Sections 9601 et seq.
"Claim Notice" has the meaning specified in Section 9.02.
"Closing" has the meaning specified in Section 2.03.
"Closing Date" has the meaning specified in Section 2.03.
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"COBRA" means continuation coverage as set forth in Sections 601 and
602 of ERISA.
"Code" means the Internal Revenue Code of 1986, as amended through the
date hereof, and any references to any Section of the Code includes
predecessors and successors of such Code Section, as appropriate.
"Commonly Controlled Entity" has the meaning specified in Section
3.24.
"Common Stock" has the meaning specified in the Recitals to this
Agreement.
"Company" has the meaning specified in the preamble to this Agreement.
"Company GAAP Statements" has the meaning specified in Section 3.08.
"Company Interim GAAP Statements" has the meaning specified in Section
3.08.
"Company's Counsel" means Meyer, Knight & Williams, L.L.P., Houston,
Texas, legal counsel to the Sellers and the Company in connection with this
Agreement and the transactions contemplated hereby.
"Control" (including, without limitations, the terms "controls",
"controlled by" and "under common control with"), with respect to the
relationship between or among two or more Persons, means the possession,
directly or indirectly, or as director, officer, trustee or executor, of the
power to direct or cause the direction of the affairs or management of a
Person, whether through the ownership of voting securities, as director,
officer, trustee or executor, by contract or otherwise, including, without
limitation, the ownership, directly or indirectly, of securities having the
power to elect a majority of the board of directors or similar body governing
the affairs of such Person.
"D&P" means Duff & Phelps Credit Rating Co.
"Debt Adjustment" shall be the amount by which the Long Term Debt (as
defined in Section 1.01) as of the Closing Date, is less than Seven Million and
No/100 Dollars ($7,000,000.00).
"Disclosure Schedule" means the schedules delivered to the Purchaser
by the Sellers and the Company together with this Agreement.
"EBITDA" the Company's EBITDA shall be calculated by using the
Company's net income before income taxes plus interest expense, depreciation
and amortization, and
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excluding nonoperating income (example: sale or exchange of assets). Such net
income is to be calculated in accordance with generally accepted accounting
principles consistently applied on a historical basis, and such income shall be
computed as if this sale had not been closed.
The parties agree that confirmation of the Company's March 31, 1998
EBITDA amounts and any dispute resolution process associated therewith shall be
completed as soon as practicable and pursuant to Section 11.16, but in no event
later than July 31, 1998, such date to be referred to herein as the "Agreed
Date."
"Execution Date" has the meaning specified in the Preamble of this
Agreement.
"Encumbrance" or "Encumbrances" means any security interest, pledge,
mortgage, lien (including, without limitation, environmental and tax liens),
charge, encumbrance, adverse claim, preferential arrangement or restriction of
any kind, including, without limitation, any restriction on the use, voting,
transfer, receipt of income or other exercise of any attributes of ownership.
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of
non-compliance or violation, notices of liability or potential liability,
investigations, proceedings, settlements, consent orders or consent agreements
by any Person relating in any way to any Environmental Law, Environmental
Permits or Hazardous Materials, or arising from alleged injury or threat of
injury to health, safety or the environment.
"Environmental Law" means any Law, now in effect, including, without
limitation, any judicial or administrative order, consent decree or judgment,
relating to or addressing the environment, health, safety or Hazardous
Materials, including without limitation any Occupational Safety and Health Law.
"Environmental Lien" means a lien in favor of any Governmental
Authority for any (a) liability under any Environmental Law, or (b) damages
arising from, or costs incurred by, such Governmental Authority in response to
a Release of a Hazardous Material.
"Environmental Permits" means all Permits required under any applicable
Environmental Law.
"ERISA" has the meaning specified in Section 3.24.
"Escrow Agent" means Southwest Bank of Texas, N.A.
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"Escrow Agreement" means the agreement referred to in Section 8.02(1).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Financial Statements" has the meaning specified in Section 3.08.
"GAAP" means United States generally accepted accounting principles
and practices as in effect from time to time.
"Governmental Authority" means any United States federal, state or
local or any foreign government, governmental, regulatory or administrative
authority, agency or commission or any court, tribunal, or judicial or arbitral
body.
"Governmental Order" or "Governmental Orders" means any order, writ,
judgment, injunction, decree, stipulation, determination or award entered by or
with any Governmental Authority.
"Hazardous Materials" means any pollutant, hazardous substance,
radioactive substance, toxic substance, hazardous waste, medical waste,
radioactive waste, special waste, petroleum or petroleum-derived substance or
waste, asbestos, polychlorinated biphenyls, or any hazardous or toxic
constituent thereof and includes, but is not limited to, any substance defined
in or regulated under any Environmental Law.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"HUD" means the Department of Housing and Urban Development of the
United States of America or any successor thereto.
"Indebtedness" means, with respect to any Person, (a) all indebtedness
of such Person, whether or not contingent, for borrowed money, (b) all
obligations of such Person for the deferred purchase price of property or
services, (c) all obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments, (d) all indebtedness created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such property) , (e) all obligations of
such Person as lessee under leases that have been or should be, in accordance
with GAAP, recorded as capital leases, (f) all obligations, contingent or
otherwise, of such Person under acceptance, letter of credit or similar
facilities, (g) all obligations of such Person to purchase, redeem, retire,
defease or otherwise acquire for value any capital stock of such Person or any
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warrants, rights or options to acquire such capital stock, valued, in the case
of redeemable preferred stock, at the greater of its voluntary or involuntary
liquidation preference plus accrued and unpaid dividends, (h) all Indebtedness
of others referred to in clauses (a) through (f) above guaranteed directly or
indirectly in any manner by such Person, or in effect guaranteed directly or
indirectly by such Person through an agreement (i) to pay or purchase such
Indebtedness or to advance or supply funds for the payment or purchase of such
Indebtedness, (ii) to purchase, sell or lease (as lessee or lessor) property,
or to purchase or sell services, primarily for the purpose of enabling the
debtor to make payment of such Indebtedness or to assure the holder of such
Indebtedness against loss, (iii) to supply funds to or in any other manner
invest in the debtor (including, without limitation, any agreement to pay for
property or services irrespective of whether such property is received or such
services are rendered) or (iv) otherwise to assure a creditor against loss, and
(i) all Indebtedness referred to in clauses (a) through (f) above secured by
(or for which the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any Encumbrance on property (including, without
limitation, accounts and contract rights) owned by such Person, even though
such Person has not assumed or become liable for the payment of such
Indebtedness.
"Indemnified Party" has the meaning specified in Section 9.02.
"Indemnifying Party" has the meaning specified in Section 9.02.
"Indemnity Notice" has the meaning specified in Section 9.02.
"Intellectual Property" means (a) trademarks, service marks, trade
dress, logos, trade names and corporate names, whether or not registered, (b)
copyrights, whether or not registered, and all patents, patent applications and
inventions and discoveries, (c) registrations of and applications for
registration of any of the foregoing, (d) computer software, including, without
limitation, source code, operating systems and specifications, data, data
bases, files, documentation and other materials related thereto, data and
documentation, (e) trade secrets and confidential, technical and business
information, and (f) whether or not confidential, technology (including,
without limitation, know-how and show-how), research and development
information, drawings, plans, proposals, technical data, copyrightable works,
financial, marketing and business data, pricing information, business and
marketing plans and customer and supplier Lists and information.
"Inter-Company Arrangement" has the meaning specified in Section 3.14.
"IRS" means the Internal Revenue Service of the United States.
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"Law" or "Laws" means any United States federal, state, local or
foreign statute, law, ordinance, regulation, rule, code, order, Permit, other
legal requirement or rule of law.
"Lease" for purposes of Sections 3.17, 3.19 and 3.20 means any and all
leases, subleases, sale/leaseback agreements or similar arrangements, whether
or not capitalized.
"Leased Real Property" means the real property leased by the Company,
as tenant, together with, to the extent leased by the Company, all buildings
and other structures, facilities or improvements currently or hereafter located
thereon, all fixtures, systems, equipment and items of personal property of the
Company attached or appurtenant thereto, and all easements, licenses, rights
and appurtenances relating to the foregoing.
"Liabilities" means any and all Indebtedness, debts, liabilities and
obligations, whether accrued or fixed, absolute or contingent, matured or
unmatured or determined or determinable, including, without limitation, those
arising under any Law (including, without limitation, any Environmental Law) ,
Action or Governmental Order and those arising under any contract, agreement,
arrangement, commitment or undertaking.
"Licensed Intellectual Property" means all Intellectual Property
licensed or sublicensed to the Company from a third party.
"Long Term Debt" means all debt from commercial lenders incurred by
the Company prior to May 1, 1997. Long Term Debt shall not include: (a) the
revolving credit facility based on Accounts Receivable, or (b) the Company's
debt on the 1,200-ton and the 9,000-ton dry docks under construction. Pursuant
to Section 2.02(b), the Company's Long Term Debt shall not exceed Seven Million
and No/100 Dollars ($7,000,000.00) at Closing.
"Losses" has the meaning specified in Section 9.02.
"Material Adverse Effect" means any circumstance, change in, or effect
on the Business or the Company that, individually or in the aggregate with any
other circumstances, changes in, are effects on the Business or the Company:
(a) is or could be materially adverse to the business, operations, prospects,
results of operations or financial condition of the Company so as to cause its
annual gross revenues or actual net after tax income to decrease by 10% or
more, or (b) could materially and adversely affect the ability of the Purchaser
or the Company to operate or conduct the Business in the manner in which it is
currently operated or conducted by the Company.
"Material Contracts" has the meaning specified in Section 3.17.
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"Multi employer Plan" has the meaning specified in Section 3(37) or
4001(a)(3) of ERISA and Section 3.24 hereof.
"Name" has the meaning specified in Section 5.07.
"Note" has the meaning specified in Section 2.02(c).
"Notice Period" has the meaning specified in Section 9.02.
"Occupational Safety and Health Law" means any law, rule or regulation
designed to provide safe and healthful working conditions and to reduce
occupational safety and health hazards, and any mandatory program designed to
provide safe and healthful working conditions.
"Owned Intellectual Property" means all Intellectual Property in and
to which the Company holds, or has a right to hold, any right, title and
interest.
"Owned Real Property" means the real property owned by the Company
prior to the Closing, together with all buildings and other structures,
facilities or improvements currently or hereafter located thereon, all
fixtures, systems, equipment and items of personal property of the Company
attached or appurtenant thereto and all easements, licenses, rights and
appurtenances relating to the foregoing.
"PBGC" has the meaning specified in Section 3.24.
"Permits" has the meaning specified in Section 3.16.
"Permitted Encumbrances" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced: (a) liens for taxes, assessments and governmental charges or
Levies not yet due and payable which are not in excess of $15,000 in the
aggregate or which are being contested in good faith and for which reserves in
accordance with GAAP have been established on the Financial Statements; (b)
Encumbrances imposed by law, such as materialmen's, mechanics', carriers',
workmen's and repairmen's liens and other similar liens arising in the ordinary
course of business securing obligations that (i) are not overdue for a period
of more than 30 days or (ii) are not in excess of $5,000 in the case of a
single property or $10,000 in the aggregate at any time or which are being
contested in good faith and for which reserves in accordance with GAAP have
been established on the Financial Statements; (c) pledges or deposits to secure
obligations under worker's compensation laws or similar legislation or to
secure public or statutory obligations; (d) minor survey exceptions, reciprocal
easement agreements and other customary
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encumbrances on title to real property that (i) were not incurred in connection
with any Indebtedness, (ii) do not render title to the property encumbered
thereby unmarketable and (iii) do not, individually or in the aggregate,
materially adversely affect the value or use of such property for its current
purposes; (e) in the case of stock of a corporation, restrictions on the
payment of dividends arising under applicable corporate law or on
transferability arising under applicable securities Laws; (f) the Encumbrances
identified on Exhibit 1.01(ii); and (g) any liens or other Encumbrances of
record which do not secure any debt or other obligation of the Company.
"Person" means any individual, partnership, firm, corporation, limited
liability company, association, trust, unincorporated organization,
governmental authority or other entity, as well as any syndicate or group that
would be deemed to be a person under Section 13(d)(3) of the Exchange Act.
"Plans" has the meaning specified in Section 3.24.
"Post-Closing Adjustment." The Purchase Price defined in Section 2.02
hereof is based upon a 5.7X multiple of the minimum $4,500,000 EBITDA
requirement. The Post-Closing Adjustment shall be the amount obtained by
subtracting $4,500,000 from the Company's EBITDA for its fiscal year ending
March 31, 1998. If such amount is zero or a positive number, there shall be no
Post-Closing Adjustment. If such number is a negative number, it shall be
applied as follows as an offset to the Note:
For each dollar EBITDA falls below $4,500,000, $5.70 shall be offset
against the Note. For purposes of this Agreement, "EBITDA" shall be
calculated by using the Company's net income before income taxes plus
interest expense, depreciation and amortization, and excluding
nonoperating income (example: sale of assets). Such net income to be
calculated in accordance with generally accepted accounting principles
consistently applied on a historical basis.
The Post-Closing Adjustment shall be offset against the Note and the Note shall
be paid on the Agreed Date (as defined in Section 1.01) within ten (10)
Business days after final confirmation of the Company's EBITDA amounts for the
period ending March 31, 1998.
"Purchase Price" has the meaning specified in Section 2.02.
"Purchase Price Bank Account" means a bank account in the United
States of America to be designated by the Sellers in a written notice to the
Purchaser at least one Business Day before the Closing.
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"Purchaser" has the meaning specified in the Preamble to this
Agreement.
"Purchaser Businesses" means the provision of shipbuilding services,
including, but not limited to, repair, cleaning, maintenance and construction
of marine and inland barges and vessels.
"Purchaser's Counsel" means Breazeale, Sachse & Wilson, L.L.P., legal
counsel to the Purchaser in connection with this Agreement and the transactions
contemplated hereby.
"Real Property" means the Leased Real Property and the Owned Real
Property.
"Regulations" means the Treasury Regulations (including, without
limitation, Temporary Regulations) promulgated by the United States Department
of Treasury with respect to the Code or other federal tax statutes.
"Release" means the release or threatened release, spill, emission,
leaking, pumping, injection , deposit , disposal , discharge, dispersal ,
leaching or migrating into the indoor or outdoor environmental of any Hazardous
Material.
"Routine Purchases" means purchases by the Company of materials and
personal property in the ordinary course of business pursuant to oral and
written purchase agreements necessary for the Company to complete the
agreements identified in clause (i) of Section 3. 17(a), which oral and written
purchase agreements provide prices and terms consistent with the performance
obligations of the Company under, and the profit estimates utilized by the
Company in entering into, the agreements identified in such clause (i).
"S&P" means Standard & Poor's Corporation.
"Secured Real Property" has the meaning specified in Section 3.16.
"Securities" has the meaning specified in Section 2(11) of the
Securities Act.
"Securities Act" means the Securities Act of 1933, as amended.
"Sellers" has the meaning specified in the preamble to this Agreement.
"Sellers' Accountants" means Gainer, Donnelly & Desroches, independent
accountants of the Company.
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"Sellers' Knowledge" means the knowledge of Sellers or any of the key
managerial employees of the Company.
"Shares" has the meaning specified in the Recitals to this Agreement.
"Subsidiary" or "Subsidiaries" means any and all other corporations,
partnerships, joint ventures, limited liability companies, associations and
other entities controlled by John Bludworth Marine, Inc. directly or indirectly
through one or more intermediaries, including Bludworth Shipyard and
Fabrication, Inc., but excluding Jay Bludworth, Inc.
"Tangible Personal Property" has the meaning specified in Section
3.20.
"Tax" or "Taxes" means any and all taxes, fees, levies, duties,
tariffs, imposts, and other charges of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any government or taxing authority, including,
without limitation: taxes or other charges on or with respect to income,
franchises, windfall or other profits, gross receipts, premiums, property,
sales, use, capital stock, payroll, employment, social security, workers'
compensation, unemployment compensation, or net worth; taxes or other charges
in the nature of excise, withholding, ad valorem, stamp, transfer, value added,
or gains taxes; license, registration and documentation fees; and customs
duties, tariffs, and similar charges.
"Tax Return" means any return, claim for refund, report, declaration,
information return, statement or other document, whether original or amended,
and including all schedules, forms and/or elections required or permitted in
connection therewith, filed or required to be filed with any Governmental
Authority or provided to any person in connection with the determination,
assessment or collection of any Tax or the administration of any laws,
regulations or administrative requirements relating to any Tax.
"Third Party Claim" has the meaning specified in Section 9.02.
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale of the Shares. Upon the terms and
subject to the conditions of this Agreement, at the Closing, the Sellers shall
execute and deliver all documents and take all actions necessary to sell to the
Purchaser, and the Purchaser shall execute and deliver all documents and take
all actions necessary to purchase from the Sellers, the Shares.
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SECTION 2.02. Purchase Price. The aggregate purchase price for the
Shares shall be TWENTY-SIX MILLION AND NO/100 DOLLARS ($26,000,000.00) (the
"Purchase Price"), to be paid as follows, subject to adjustments as provided
below:
(a) Cash Payment. FIFTEEN MILLION AND NO/100 DOLLARS
($15,000,000.00) cash to be paid at Closing subject to the Appraisal Adjustment
as defined herein in Section 1.01 (the "Cash Payment").
(b) Assumption/Retirement of Debt. At Closing, the Company shall
have not more than and the Purchaser shall guarantee and/or retire up to SEVEN
MILLION AND NO/100 DOLLARS ($7,000,000.00) of Company's Long Term Debt as
defined herein in Section 1.01.
(c) Promissory Note. At Closing, the Purchaser shall deliver to
the Sellers a subordinated promissory note in the principal amount of FOUR
MILLION AND NO/100 DOLLARS ($4,000,000.00), adjusted by: (i) the amount of the
Debt Adjustment, (ii) the Appraisal Adjustment, and (iii) the Post-Closing
Adjustment (the "Note"). The final amount of the Note shall be allocated as
consideration for the noncompete agreement of John L. Bludworth, III.
When delivered, the Note shall be in the original principal amount of
Four Million and No/100 Dollars ($4,000,000.00), adjusted by: (i) the amount of
the Debt Adjustment and (ii) the Appraisal Adjustment, and shall bear interest
at 8.5% per annum for a term of five (5) years from the Closing Date. Interest
only (no principal) shall be due quarterly on the Note for the first two (2)
years. In the remaining three (3) years, the principal shall be amortized on a
5-year schedule, with equal payments of principal plus interest due quarterly
and a final balloon payment of principal and interest due five (5) years from
the Closing Date. The Note shall be secured by a guaranty of First Wave
Marine, Inc. The Note shall be subject to offset by the Post-Closing
Adjustment. The Note may be prepaid without penalty at any time. If First
Wave Marine, Inc. consummates a public offering of its securities, the
Purchaser agrees to prepay the Note within ten (10) Business Days after the
Agreed Date, as defined in Section 1.01, and following any Post-Closing
Adjustment.
SECTION 2.03. Closing/Closing Date. The parties shall use all
reasonable efforts to consummate the purchase and sale of stock hereby on or
before February 15, 1998, or such other date as agreed. Upon the terms and
subject to the conditions of this Agreement, the execution of the documents and
other actions relating to the sale and purchase of the Shares contemplated by
this Agreement shall take place at a closing (the "Closing") to be held at the
offices of Griggs & Harrison, P.C., 1301 McKinney, Suite 3200, Houston, Texas,
77010, at 10:00 a.m., on a day mutually selected by the Purchaser
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<PAGE> 19
and the Sellers within twenty (20) days of the Purchaser's closing on its debt
or equity financing for the Acquisition and following the expiration or
termination of any waiting period required under applicable law (the day on
which the Closing takes place being the "Closing Date").
SECTION 2.04. Closing Deliveries by the Sellers. At the Closing, the
Sellers shall deliver or cause to be delivered to the Purchaser:
(a) Stock certificates evidencing the Shares duly endorsed in
blank, or accompanied by stock powers duly executed in blank, in form
satisfaction to the Purchaser and with all required stock transfer tax stamps
affiliated, if applicable;
(b) A receipt from the Sellers; and
(c) The opinions, certificates and other documents required to be
delivered pursuant hereto.
SECTION 2.05. Closing Deliveries by the Purchaser. At the Closing,
the Purchaser shall deliver to the Sellers:
(a) The Cash Payment as provided for in Section 2.02(a), as
adjusted, by wire transfer in immediately available funds to the Purchase Price
Bank Account or as requested in writing by the Sellers;
(b) The Note as provided for in Section 2.02(c); and
(c) The opinions, certificates and other documents required to be
delivered pursuant hereto.
SECTION 2.06. Additional Consideration. In the event that the March
31, 1998 EBITDA of the Company exceeds $4,500,000.00, the Purchaser shall,
within ten (10) Business Days after the Agreed Date, pay to John L. Bludworth,
III, as a bonus, one-half ( 1/2) of the amount by which the Company's final
March 31, 1998 EBITDA exceeds $4,500,000.00. The parties anticipate that
through March 31, 1998, John L. Bludworth, III, shall remain employed as an
active executive officer of the Company for $30,000 per month, with normal and
customary fringes and use of Company car. Any dispute or disagreement with
respect to the computation of the Company's EBITDA or the bonus of John L.
Bludworth, III, shall be resolved by arbitration as provided in Section 11.16
hereof.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE
SELLERS AND THE COMPANY
Subject to the terms and conditions of this Agreement, each of the
Sellers and the Company hereby represents and warrants to the Purchaser as of
the Execution Date, except as may otherwise be set forth on the Disclosure
Schedule, as set forth in Sections 3.01 through 3.31, as follows. The term the
"Company" as used herein includes John Bludworth Marine, Inc. and all of its
subsidiaries unless otherwise indicated.
SECTION 3.01. Capacity of the Sellers. Each of the Sellers is an
individual with full legal capacity to enter into this Agreement, to carry out
the Sellers' obligations hereunder and to consummate the transactions
contemplated hereby. Each of the Sellers is a resident of the State of Texas.
This Agreement has been duly executed and delivered by the Sellers, and
(assuming due authorization, execution and delivery by the Purchaser) upon
receipt of the necessary approvals by Governmental Authorities this Agreement
constitutes a legal, valid and binding obligation of each of the Sellers
enforceable against each of the Sellers in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting rights of creditors
generally or by general principles of equity.
SECTION 3.02. Organization, Authority and Qualification of the
Company. The Company and each of its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas and has all necessary power and authority to own, operate or lease the
properties and assets now owned, operated or leased by it and to conduct the
Business. The Company has all necessary power and authority to enter into this
Agreement to carry out the Company's obligations hereunder and to consummate
the transactions contemplated hereby. This Agreement has been duly authorized,
executed and delivered by the Company, and (assuming due authorization,
execution and delivery by the Purchaser) upon receipt of the necessary
approvals by Governmental Authorities this Agreement constitutes a legal, valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting rights of creditors generally or by general principles of equity. The
Company and each of its subsidiaries is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which the properties
owned or leased by it or the operation of its business makes such licensing or
qualification necessary (other than those jurisdictions where the failure to be
so licensed or qualified are not reasonably likely to have a Material Adverse
Effect) and all such jurisdictions are set forth on Schedule 3.02 of the
Disclosure Schedule. All of the foregoing registrations,
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licenses, and qualifications are in full force and effect and the Company has
not received any notice of any event, inquiry, investigation or proceeding that
could result in the suspension, revocation or limitation of any such
registration, license, or qualification and to the best of the knowledge of the
Sellers and the Company, there is no sustainable basis for any such suspension,
revocation or limitation. All corporate actions taken by the Company have been
duly authorized or ratified, and the Company has not taken any action that in
any respect conflicts with, constitutes a default under or results in a
violation of any provision of its articles of incorporation or bylaws. True and
correct copies of the articles of incorporation and bylaws of the Company, each
as in effect on the date hereof, have been delivered by the Sellers to the
Purchaser.
SECTION 3.03. Capital Stock of the Company; Ownership of the Shares
and Assets.
(a) The authorized capital stock of the Company consists of
300,000 shares of Common Stock. As of the date hereof, 100 shares of Common
Stock are issued and outstanding, all of which are validly issued, fully paid
and nonassessable. None of the issued and outstanding shares of Common Stock
was issued in violation of any preemptive rights.
(b) There are no options, warrants, convertible securities or
other rights, agreements, arrangements or commitments of any character relating
to the capital stock of the Company or obligating the Sellers or the Company to
issue or sell any shares of capital stock of, or any securities or obligations
convertible into or exchangeable for shares of capital stock of the Company, or
any other interest in, the Company; and no options, warrants, convertible
securities or other such rights, agreements, assignments or commitments shall
be outstanding as of the Closing Date.
(c) The Shares constitute all the issued and outstanding capital
stock of the Company. The Shares are owned of record and beneficially solely by
the Sellers and are registered in the respective names of the Sellers free and
clear of all Encumbrances other than those set forth in item (e) of Permitted
Encumbrances.
(d) Except as disclosed in Section 3.03(d) of the Disclosure
Schedule, there are no voting trusts, stockholder agreements, proxies or other
agreements or understandings in effect with respect to the voting or transfer
of any of the Shares.
(e) The Company is the owner of all of the properties, contract
rights and assets used in the conduct of its Businesses (all such properties,
contract rights and assets being the "Assets"), including the major assets
listed on EXHIBIT A attached hereto and incorporated herein by reference.
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SECTION 3.04. Subsidiaries; Capital Stock; Ownership of Shares.
(a) John Bludworth Marine, Inc. has only one (1) subsidiary which
is Bludworth Shipyard and Fabrication, Inc. (the "Subsidiary"). John Bludworth
Marine, Inc. owns all of the outstanding stock of its Subsidiary free and clear
of all Encumbrances.
(b) The authorized capital stock of the Subsidiary, Bludworth
Shipyard and Fabrication, Inc., consists of 1,000,000 shares of common stock.
As of the date hereof, 100 shares of common stock are issued and outstanding,
all of which are validly issued, fully paid and nonassessable and owned by John
Bludworth Marine, Inc. None of the issued and outstanding shares of common
stock was issued in violation of any preemptive rights.
(c) There are no options, warrants, convertible securities or
other rights, agreements, arrangements or commitments of any character relating
to the capital stock of the Subsidiary or obligating the Subsidiary or the
Company to issue or sell any shares of capital stock of, or any securities or
obligations convertible into or exchangeable for shares of capital stock of the
Subsidiary, or any other interest in, the Subsidiary; and no options, warrants,
convertible securities or other such rights, agreements, assignments or
commitments shall be outstanding as of the Closing Date.
(d) The 100 shares of common stock constitute all the issued and
outstanding capital stock of the Subsidiary. The shares are owned of record and
beneficially solely by John Bludworth Marine, Inc. and are registered in its
name free and clear of all Encumbrances other than those set forth in item (e)
of Permitted Encumbrances.
(e) Except as disclosed in Section 3.04(e) of the Disclosure
Schedule, there are no voting trusts, stockholder agreements, proxies or other
agreements or understandings in effect with respect to the voting or transfer
of any of the shares of stock of the Subsidiary or the Company.
(f) Except as disclosed in Section 3.04(f) of the Disclosure
Schedule, neither the Company nor its Subsidiary is a partner or member of (nor
is any part of the Business conducted through) any partnership or limited
liability company. Neither the Company nor its Subsidiary is a participant in
any other joint venture or similar arrangement.
(g) None of the Sellers is a partner or member of any partnership,
limited liability company, joint venture or similar arrangement except as
completely and accurately set forth in Section 3.04(g) of the Disclosure
Schedule.
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(h) The Business is not conducted through any Affiliates of the
Company or the Sellers except as completely and accurately set forth in Section
3.04(h) of the Disclosure Schedule.
SECTION 3.05. Corporate Books and Records. The minute books of the
Company contains minutes of all meetings and unanimous consents of the
stockholders, Board of Directors and all committees, if any, of the Board of
Directors of the Company. Complete and accurate copies of such minute books of
the Company have been made available to the Purchaser by the Sellers and the
Company.
SECTION 3.06. No Conflict. Assuming that all consents, approvals,
authorizations and other actions described in Section 3.07 have been obtained
and all filings and notifications listed in Section 3.07 of the Disclosure
Schedule have been made, the execution, delivery and performance of this
Agreement by the Sellers and the Company do not and will not (a) violate,
conflict with or result in the breach of any provision of the articles of
incorporation or bylaws (or similar organizational documents) of the Company,
(b) conflict with or violate any Law or Governmental Order applicable to the
Sellers, the Company, or any of their respective assets, properties or
businesses, including, without limitation, the Business, or (c) conflict with,
result in any breach of, constitute a default (or event which with the giving
of notice or the lapse of time, or both, would become a default) under, require
any consent under, or give to others any rights of termination, amendment,
acceleration, suspension, revocation or cancellation of, or result in the
creation of any Encumbrance on any of the Shares or on any of the assets or
properties of the Sellers or the Company pursuant to any note, bond, mortgage
or indenture, contract, agreement, lease, sublease, license, permit, franchise
or other installment or arrangement to which the Sellers or the Company is a
party or by which any of the Shares or any of such assets or properties is
bound or affected.
SECTION 3.07. Governmental Consents and Approvals. The execution,
delivery and performance of this Agreement do not and will not require any
consent, approval, authorization or other order of, action by, filing with or
notification to any Governmental Authority or any other third party.
SECTION 3.08. Financial Information and Books and Records.
(a) The Sellers have previously furnished the Purchaser complete
and accurate copies of (i) the reviewed GAAP balance sheet of the Company for
each of the fiscal years ended as of March 31, 1995, March 31, 1996, and March
31, 1997, , and the related audited GAAP statements of earnings, stockholder's
equity and cash flows for each of such periods then ended together with all
related notes and schedules thereto, accompanied by the reports thereon of the
Company and the Sellers' Accountants
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<PAGE> 24
(collectively referred to herein as the "Company GAAP Statement") and (ii) the
unaudited GAAP balance sheets of the Company as of July 31, 1997 and September
30, 1997, and the related unaudited GAAP statements of earnings, stockholder's
equity and cash flows for each three-month period then ended, together with all
related notes and schedules thereto (collectively referred to herein as the
"Company Interim GAAP Statements" and, together with the Company GAAP
Statements, the "Financial Statements"). The Financial Statements (i) were
prepared in accordance with the books of account and other financial records of
the Company, (ii) present fairly in all material respects the financial
condition and results of operations of the Company as of the dates thereof or
for the periods covered thereby in accordance with GAAP, applied on a basis
consistent with the past practices of the Company, and (iii) include all
adjustments that are necessary for a fair presentation of the financial
condition and the results of the operations of the Company as of the dates
thereof or for the periods covered thereby in accordance with GAAP (subject, in
the case of the Company Interim GAAP Statements, to normal year-end audit
adjustments).
(b) The books of account and other financial records of the
Company: (i) reflect all items of income and expense and all assets and
liabilities required to be reflected therein in accordance with GAAP, (ii) are
in all material respects complete and correct, and (iii) have been maintained
in accordance with good business and accounting practices. Except as disclosed
on Section 3.08(b) of the Disclosure Schedule, no more than ten (10) percent of
the EBITDA of the Company for any fiscal year or the partial fiscal year
beginning April 1, 1997 is derived from the sale or exchange of assets.
SECTION 3.09. Certain Additional Representations. Except as
completely and accurately set forth in Section 3.09 of the Disclosure Schedule,
the Company has no obligation to pay any amounts to or perform any obligations
owing to, or indemnify, the Sellers or otherwise hold the Sellers harmless
pursuant to any agreement or other arrangement entered into prior to the
Closing between any of the Sellers or any Affiliate of the Sellers (other than
the Company) and the Company.
SECTION 3.10. No Undisclosed Liabilities or Capital Commitments.
(a) There are no Liabilities of the Company, other than
Liabilities (i) reflected or reserved against in the Financial Statements, (ii)
completely and accurately disclosed in Section 3. 10 of the Disclosure Schedule
or (iii) incurred since the Balance Sheet Date in the ordinary course of
business of the Company and which have not had and could not have a Material
Adverse Effect.
(b) Except as completely and accurately set forth in Section 3.10
of the Disclosure Schedule or arising in the ordinary course of business, the
Company is not
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<PAGE> 25
subject to any commitment, actual or contingent, to make any investment or
capital contribution, or purchase any securities, or supply funds to any
Person, in each case in excess of $10,000 or $25,000 in the aggregate.
SECTION 3.11. Acquired Assets. Each asset of the Company (including,
without limitation, the benefit of any licenses, leases or other agreements or
arrangements) acquired since the Balance Sheet Date has been acquired from
independent third parties.
SECTION 3.12. Conduct in the Ordinary Course; Absence of Certain
Changes, Events and Conditions. Since the Balance Sheet Date, except as
completely and accurately disclosed in Section 3.12 of the Disclosure Schedule:
(a) the Business has been conducted in the ordinary course; and
(b) the Company has not:
(i) Permitted or allowed any of the assets or properties
(whether tangible or intangible) of the Company to be
subjected to any Encumbrance, other than Permitted
Encumbrances and Encumbrances that will be released
at or prior to the Closing;
(ii) Except in the ordinary course of business, discharged
or otherwise obtained the release of any Encumbrance
or paid or otherwise discharged any Liability, other
than current liabilities reflected on the Financial
Statements and current liabilities incurred in the
ordinary course of business since the Balance Sheet
Date;
(iii) Guaranteed any Indebtedness of, or otherwise incurred
any Indebtedness on behalf of, any Person other than
the Company;
(iv) Failed to pay any creditor any amount owed to such
creditor for which a demand letter has been received
or suit instituted against the Company;
(v) Redeemed any of the capital stock or, except as
completely and accurately set forth in Section 3.12
of the Disclosure Schedule, declared, made or
paid-any dividends or distributions with respect to
capital (whether in cash, securities or other
property) to the holders of capital stock of the
Company or otherwise;
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(vi) Made any material changes in the customary methods of
operations of the Company, including, without
limitation, purchasing, marketing, selling,
servicing, pricing, investing or accounting practices
and policies;
(vii) Merged with, entered into a consolidation with or
acquired any interest in any Person or acquired a
substantial portion of the assets or business of any
Person or any division or line of business thereof,
or otherwise acquired any assets other than in the
ordinary course of business consistent with past
practice;
(viii) Made any capital expenditure or commitment for any
capital expenditure in excess of $10,000 in any
individual instance, $25,000 in the aggregate;
(ix) Sold, transferred, leased, subleased, licensed or
otherwise disposed of any properties or assets, real,
personal or mixed (including, without limitation,
investment assets, leasehold interests and intangible
assets), other than in the ordinary course of
business;
(x) Issued or sold any capital stock, notes, bonds or
other securities, or any option, warrant or other
right to acquire the same, of, or any other interest
in, the Company;
(xi) Except as completely and accurately set forth in
Section 3.12 of the Disclosure Schedule, entered into
any agreement, arrangement or transaction with any of
its directors, officers, employees or shareholders
(or with any relative, beneficiary, spouse or
Affiliate of such Person);
(xii) Except as completely and accurately set forth in
Section 3.12 of the Disclosure Schedule, (A) granted
any increase, or announced any increase, in the
wages, salaries, compensation, bonuses, incentives,
pension or other benefits payable by the Company to
any of its employees, including, without limitation,
any increase or change pursuant to any Plan, other
than in the ordinary course of business and which are
included in the compensation amounts payable to its
employees set forth in the written materials
previously provided by the Sellers to the Purchaser,
or (B) established or increased or promised to
increase any benefits under any Plan;
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<PAGE> 27
(xiii) Revalued (other than in accordance with GAAP and as
completely and accurately set forth in Section 3.12
of the Disclosure Schedule) or restructured any
assets of the Company;
(xiv) Amended, terminated, canceled or compromised any
material claims of the Company or waived any other
rights of substantial value to the Company;
(xv) Made any change in any method of accounting or
accounting practice or policy used by the Company
other than changes which were required by GAAP and
are completely and accurately set forth in Section
3.12 of the Disclosure Schedule;
(xvi) Failed to maintain the Assets material to the
operation of the Business in such operating condition
and repair as is suitable for the purposes for which
they are used;
(xvii) Allowed any material Permit or material Environmental
Permit that was issued or relates to the Company or
otherwise relates to any Asset to lapse or terminate
or failed to renew any such Permit or Environmental
Permit or any insurance policy under which the
Company is an insured that is scheduled to terminate
or expire within forty-five (45) days of the Closing
Date;
(xviii) Incurred any Indebtedness in excess of $10,000 in
any individual instance or since the Balance Sheet
Date $25,000 in the aggregate;
(xix) Amended or modified in any material respects, or
consented to the termination of, any Material
Contract or the Company's rights thereunder;
(xx) Amended or restated the articles of incorporation or
the bylaws (or other organizational documents) of the
Company;
(xxi) Terminated, discontinued, closed or disposed of any
office, facility or other business operation, or laid
off any employees (other than in the ordinary course
of business consistent with past practice and which
did not require any notifications to or filings with
any Governmental Authority or notifications to any
employees) or implemented any early retirement,
separation or program providing early retirement
window benefits within the meaning of Section
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<PAGE> 28
1.401(a)-4 of the Regulations or announced or planned
any such action or program for the future;
(xxii) Settled or compromised any liability, with respect to
Taxes of the Company;
(xxiii) Suffered any casualty loss or damage with respect
to any of the assets which is not covered by
insurance (excluding applicable insurance
deductibles);
(xxiv) Disclosed any confidential Intellectual Property
(other than as requested by the Purchaser) or
permitted to lapse or abandoned any Intellectual
Property (or any registration or grant thereof or any
application relating thereto) to which, or under
which, the Company has any right, title, interest or
license and which is material to the Business;
(xxv) Suffered any Material Adverse Effect; or
(xxvi) Agreed, whether in writing or otherwise, to take any
of the actions specified in this Section 3.12 or
granted any options to purchase, rights of first
refusal, rights of first offer or any other similar
rights or commitments with respect to any of the
actions specified in this Section 3.12, except as
expressly contemplated by this Agreement; and
(c) (i) All unfilled purchase orders of the Company at the
date of this Agreement are, and all unfilled purchase
orders of the Company on the Closing Date will be, at
prices that were competitive at the time the purchase
order was entered into, and no such purchase order
was, is or will be with Sellers or anyone who is
related to or affiliated with Sellers;
(ii) All uncompleted sales contracts of the Company at the
date of this Agreement are, and all uncompleted sales
contracts of the Company on the Closing Date will be,
with persons, corporations or other entities that are
not related to or affiliated with Sellers. The
Company has accounted for all uncompleted contracts
for financial accounting purposes under the
percentage of completion method in accordance with
generally accepted accounting principles consistently
applied; and
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<PAGE> 29
(iii) At the Execution Date, there are no material (in
excess of $25,000.00) warranty claims or similar
demands that have been made against the Company by
any customer and at the Execution Date, the aggregate
amount of all warranty claims or similar demands that
have been made against the Company by all customers
do not exceed in the aggregate $100,000.00. At the
date of this Agreement, there are no known customer
claims, charge backs, offsets, refunds or similar
demands that have been made by customers of the
Company.
SECTION 3.13. Litigation. Set forth in Section 3.13 of the Disclosure
Schedule (with respect to each Action disclosed therein) are the parties, the
nature of the proceeding, the date and method commenced and the amount of
damages or other relief sought and, if applicable, paid or granted. Except as
completely and accurately set forth in Section 3.13 of the Disclosure Schedule,
there are no Actions by or against the Company (or by or against any of the
Sellers or any Affiliate of the Company or any of the Sellers and relating to
the Business, or affecting any of the Assets , pending before any Governmental
Authority (or, to the best knowledge of the Sellers and the Company, threatened
to be brought by or before any Governmental Authority). No such scheduled
Action has, has had or could have a Material Adverse Effect or could affect the
legality, validity or enforceability of this Agreement or the consummation of
the transactions contemplated hereby. None of the Company, any of the Assets,
the Sellers or any Affiliate of the Company or the Sellers is subject to any
Governmental Order (nor, to the best of the knowledge of the Sellers and the
Company, are there any such Governmental Orders threatened to be imposed by any
Governmental Authority) which has, has had or could have a Material Adverse
Effect.
SECTION 3.14. Certain Interests. Neither the Sellers nor any
Affiliate of the Sellers (other than the Company) has and no officer or
director of the Company, and no relative or spouse (or relative of such spouse)
who resides with, or is a dependent of, any such officer or director has (i)
outstanding any Indebtedness to the Company, or (ii) entered into any
transactions with the Company, individually or in the aggregate, exceeding
$20,000, other than market rate loans which have been paid in full as of the
date hereof (any arrangement referred to in (i) or (ii) shall be referred to as
an "Inter-Company Arrangement") except as completely and accurately set forth
in Section 3.14 of the Disclosure Schedule. Except as set forth in Section 3.14
of the Disclosure Schedule, all Inter-Company Arrangements are on terms that
are at least as favorable to the Company as would prevail in a comparable
arm's-length transaction with a third party.
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SECTION 3.15. Compliance with Laws. The Company has conducted and
continues to conduct the Business in accordance with all material Laws and
Governmental Orders applicable to the Company or any of the Assets or the
Business, and the Company is not in violation of any such material Law or
Governmental Order. The Company has duly and validly filed or caused to be
filed all material reports, statements, documents, registrations, filings or
submissions that were required by applicable Laws to be filed; all such filings
complied with all applicable laws in all material respects when filed, and no
material deficiencies have been asserted with respect to any such filings which
have not been satisfied. None of the Company, any of the Sellers, any
Affiliates of the Company or any of the Sellers or any officer or director of
the Company has been subject to any of the matters described in clauses (1) -
(6), inclusive, of Paragraph (f) of Item 401 of Regulation S-K promulgated by
the Securities and Exchange Commission.
SECTION 3.16 Environmental and Other Permits and Licenses, Related
Matters.
Except as set forth in Section 3.16 of the Disclosure Schedule
(including without limitation the Phase II environmental audit report described
therein):
(a) The Sellers and the Company currently hold all the permits,
licenses, authorizations, certificates, consents, exemptions and approvals
required under any Law (collectively, "Permits"), including, without
limitation, Environmental Permits, necessary for the ownership, use, occupancy
and operation of each Asset of the Company and the conduct of the Business, and
all such Permits are in full force and effect.
(b) (i) Each tenant and occupant of the Real Property, to the
best of Sellers' Knowledge, holds all Permits, including, without limitation,
Environmental Permits, necessary for the use, occupancy and operation of the
Real Property by such tenant or occupant, and all such Permits are in full
force and effect; (ii) to the best of Sellers' Knowledge, there is no existing
practice, action or activity of any tenant or occupant of the Real Property, or
of any owner, tenant or occupant of any real property in which the Company or,
with
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<PAGE> 31
respect to the Business, the Sellers currently hold a security interest (the
"Secured Real Property"), which will give rise to any criminal liability or
civil Liability under, or violate or prevent compliance with, any applicable
material law, including, without limitation, any applicable Environmental law;
(iii) no tenant or occupant of the Owned Real Property, to the best of Sellers'
Knowledge, has received any notice from any Governmental Authority revoking,
canceling, rescinding, materially modifying or refusing to renew any Permit or
providing written notice of violations under any Law, including, without
limitation, any applicable Environmental Law; (iv) to the best of Sellers'
Knowledge, each tenant and occupant of the Owned Real Property is in all
respects in compliance with its Permits, including, without limitation,
Environmental Permits; (v) there is no existing practice, action or activity
of the Company or, with respect to any portion of the Business, the Sellers and
no existing condition of the Assets of the Company or the Business which has
given or will give rise to any unresolved civil liability or to the best of
Sellers' Knowledge, criminal Liability under, or violate or prevent compliance
with, any applicable law, including, without limitation, any applicable
Environmental Law; (vi) neither the Sellers nor the Company has received any
notice from any Governmental Authority revoking, canceling, rescinding,
materially modifying or refusing to renew any Permit; and (vii) the Company is
in all material respects in compliance with the Permits, including, without
limitation, Environmental Permits. Section 3.16(a) of the Disclosure Schedule
completely and accurately identifies all Permits, including, without
limitation, Environmental Permits and indicates by asterisk those that will
require the consent of any Governmental Authority in the event of the execution
of this Agreement or the consummation of the transactions contemplated by this
Agreement.
(c) (i) Neither the Company, nor, with respect to any portion of
the Business, the Sellers has violated or is violating any applicable
Environmental Law; (ii) to the best of Sellers' Knowledge, no tenant or
occupant of the Real Property or owner, tenant or occupant of the Secured Real
Property is violating any applicable Environmental Law in connection with the
ownership, use, occupancy or operation of the Real Property or Secured Real
Property; (iii) there has been no material Release of Hazardous Materials at,
to, from, or under any real property currently or formerly owned, leased, or
operated by the Company during its occupancy or, with respect to any portion of
the Business, the Sellers, or at, to, from or under any Secured Real Property
except (x) Releases which individually or collectively do not exceed the
applicable reportable quantity established pursuant to CERCLA, Federal Water
Pollution Control Act, 33 U.S.C. Section 1251, et seq. or the Oil Pollution
Act of 1990, or (y) Releases of petroleum or its derivatives which individually
or collectively do not exceed ten gallons; (iv) neither the Company nor, with
respect to any portion of the Business, the Sellers has generated, transported
or arranged for the transport of, or disposed of any Hazardous Materials at any
location, other than amounts and types of Hazardous Materials normally present
in ordinary office trash or household waste other than the transportation set
forth in Section 3.16 of the Disclosure Schedule; (v) to the best of Sellers'
Knowledge, no tenant or occupant of the Real Property has generated at such
Real Property any Hazardous Material, other than amounts and types of Hazardous
Materials normally present in ordinary office trash or household waste; (vi)
neither the Company nor, with respect to any portion of the Business, the
Sellers has any Liability in connection with the material Release of any
Hazardous Material at any location; (vii) there is not present at any of the
Real Property any underground storage tanks or sumps, asbestos, or
polychlorinated biphenyls; (viii) no Environmental Lien has attached to any of
the Real Property; and (ix) there are no unresolved past, pending or threatened
Environmental Claims against the Company, or,
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with respect to the Business, the Sellers, nor are there any circumstances that
may form the basis of any such Environmental Claim.
(d) No Hazardous Materials exist on, under or in any properties
(i) securing loans, installment sale contracts or other receivables owned,
serviced and/or subserviced by the Company or (ii) of which the Company took
possession or title in its own name or as servicer or agent for a third Person
pursuant to foreclosure, liquidation, repossession, deed in lieu or otherwise.
SECTION 3.17. Material Contracts.
(a) Section 3.17(a) of the Disclosure Schedule completely and
accurately lists each of the following contracts and agreements including,
without limitation, oral agreements of the Company (such contracts and
agreements, together with all contracts, agreements and Leases concerning the
management or operation of any Real Property (including, without limitation,
brokerage contracts) listed or otherwise disclosed in Section 3. 19(a) or
3.19(b) of the Disclosure Schedule to which the Company is a party and all
agreements relating to Intellectual Property set forth in Section 3.18(a) of
the Disclosure Schedule, being "Material Contracts"):
(i) Each contract and agreement for maintenance or
construction services to be performed by the Company
which is not complete or which has been completed
within two (2) years of the date hereof;
(ii) Other than Routine Purchases, each contract and
agreement for the purchase of materials or personal
property with any supplier or for the furnishing of
services to the Company or otherwise related to the
Business under the terms of which the Company: (A) is
likely to pay or otherwise give consideration of more
than $25,000 individually and $50,000 in the
aggregate during the current fiscal year, (B) is
likely to pay or otherwise give consideration of more
than $25,000 in the aggregate over the remaining term
of such contract, or (C) cannot be canceled by the
Company without penalty or further payment and
without more than 30 days' notice;
(iii) Each contract and agreement for the sale of materials
or personal property or for the furnishing of
services by the Company which: (A) is likely to
involve consideration of more than $10,000 in the
aggregate during the calendar year ending December
31, 1997, (B) is likely to involve consideration of
more than $10,000 in the aggregate over the remaining
term of the contract or (C) cannot be
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<PAGE> 33
canceled by the Company without penalty or further
payment and without more than 30 days' notice;
(iv) All distributor, agency, sales promotion, market
research, marketing consulting and advertising
contracts and agreements to which the Company is a
party pursuant to which services were being provided
on the Balance Sheet Date in an amount more than
$10,000 individually and $20,000 in the aggregate
over the term of the contract or agreement;
(v) All management contracts and contracts with
independent contractors or consultants (or similar
arrangements) to which the Company is a party and
which are not cancelable without penalty or further
payment and without more than 30 days' notice;
(vi) All contracts and agreements relating to Indebtedness
of the Company in an amount more than $20,000
individually and $40,000 in the aggregate over the
term of the contract or agreement;
(vii) All contracts and agreements with any Governmental
Authority to which the Company is a party;
(viii) All contracts and agreements that limit or purport to
limit the ability of any of the Sellers or the
Company to compete in any line of business or with
any Person or in any geographic area or during any
period of time;
(ix) All Inter-Company Arrangements and all other
contracts and agreements between or among the Company
and the Sellers or any Affiliate of the Sellers
(other than the Company) or any Affiliate of the
Company (other than the Seller);
(x) All trust agreements, custodial agreements or other
security agreements related thereto, to which the
Company is a party that remain in force;
(xi) Each subcontract for the period from September 1,
1996 to August 31, 1997, under which the Company is
or was obligated to pay an amount more than $10,000
for a single subcontract and $50,000 in the aggregate
for all such subcontracts; and
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<PAGE> 34
(xii) All other contracts and agreements whether or not
made in the ordinary course of business, which are
material to the Company or the conduct of the
Business or the absence of which would have a
Material Adverse Effect.
(b) Each Material Contract is, to the best of Sellers' Knowledge,
legal, valid, binding, enforceable and in full force and effect except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratium or similar laws affecting rights of creditors, of
creditors generally or by general principles of equity, nor will the
consummation of the transactions contemplated by this Agreement constitute a
breach or default under such Material Contract. The Company is not in breach
of, or default under, any Material Contract. The Sellers have received no
notification, communication or other information that any of the customers of
the Company intend to terminate any Material Contract.
(c) To the best knowledge of the Sellers and the Company, no other
party to any Material Contract is in breach thereof or default thereunder.
(d) Except as set forth in Item 2 of Section 3.14 of the
Disclosure Schedule, there is no contract, agreement or other arrangement
granting any Person any preferential right to purchase, other than the ordinary
course of business consistent with past practice, any of the properties or
assets of the Company.
SECTION 3.18. Intellectual Property.
(a) Section 3.18(a)(i) of the Disclosure Schedule sets forth a
complete and accurate list and a brief description of the Owned Intellectual
Properly consisting of trademarks, service marks, corporate and assumed names,
trade names and copyrights, patents and pending registrations and applications
therefor, and Section 3.18(a)(ii) of the Disclosure Schedule sets forth a
complete and accurate list and a brief description, including, without
limitation, a description of any license or sublicense thereof, of all Licensed
Intellectual Property. In each case where a registration or application for
registration listed in Section 3.18(a)(i) of the Disclosure Schedule is held by
assignment, the assignment has been duly recorded with the United States Patent
and Trademark Office. To the best of Sellers' and the Company's knowledge, the
rights of the Company in or to such Intellectual Property do not conflict with
or infringe on the rights of any other Person, and neither the Sellers nor the
Company has received any claim or written notice of infringement or conflict in
respect of any Intellectual Property.
(b) (i) All the Owned Intellectual Property is owned by either the
Company free and clear of any Encumbrance other than Permitted Encumbrances,
(ii) the Company has
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<PAGE> 35
the right, pursuant to valid and enforceable licenses, to use the Licensed
Intellectual Property in the manner in which the Licensed Intellectual Property
is currently being used, and (iii) no Actions have been made or asserted or are
pending (nor, to the best knowledge of the Sellers and the Company, has any
such Action been threatened) against the Company either (A) based upon or
challenging or seeking to deny or restrict the use by the Company of any of the
Intellectual Property, or (B) alleging that any services provided or products
sold by the Company are being provided or sold in violation of any trademarks,
or any other rights of any Person. To the best of the knowledge of the Sellers
and the Company, no Person is using any trademarks, service marks, trade names
or similar property that are confusingly similar to the Owned Intellectual
Property or that infringe upon the Owned Intellectual Property or upon the
rights of the Company therein. Neither the Sellers nor the Company has granted
any license or other right to any other Person with respect to the Owned
Intellectual Property. The consummation of the transactions contemplated by
this Agreement will not result in the termination or impairment of any of the
owned Intellectual Property or any of the rights of the Company in any of the
Licensed Intellectual Property.
(c) The Intellectual Property described in Section 3.18(a)(i) and
3.18(a)(ii) of the Disclosure Schedule constitutes all of the Intellectual
Property used or held or intended to be used by the Company or forming a part
of all such Intellectual Property necessary and material in the conduct of the
Business and there are no other items of Intellectual Property that are
material to the Company or the Business. Such Intellectual Property is all that
is necessary for the operation of the Businesses as currently conducted.
SECTION 3.19. Real Property.
(a) Section 3.19(a) of the Disclosure Schedule lists: (i) the
street address of each parcel of Owned Real Property, (ii) the date on which
each parcel of Owned Real Property was acquired, (iii) the current owner of
each such parcel of Owned Real Property, (iv) information relating to the
recordation of the deed pursuant to which each such parcel of Owned Real
Property was acquired and (v) the current use of each such parcel of Owned Real
Property.
(b) Section 3.19(b) of the Disclosure Schedule lists: (i) the
street address of each parcel of Leased Real Property, (ii) the identity of the
lessor, lessee and current occupant (if different from lessee) of each such
parcel of Leased Real Property and (iii) the current use of each such parcel of
Leased Real Property.
(c) The Sellers have or have caused to be, delivered to the
Purchaser complete and accurate copies of all Leases listed in Section 3.19(b)
of the Disclosure Schedule.
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Each such Lease is legal, valid, binding, enforceable and in full force and
each such Lease will not cease to be in full force and effect on terms
identical to those currently in effect as a result of the consummation of the
transactions contemplated by this Agreement, except, in either case, as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting rights of creditors
generally or by general principles of equity, nor will the consummation of the
transactions contemplated by this Agreement constitute a breach or default
under such Lease or otherwise give the landlord a right to terminate such Lease
in accordance with the terms thereof.
(d) There are no condemnation proceedings or eminent domain
proceedings of any kind pending or, to the best of the knowledge of the Sellers
and the Company, threatened against the Real Property.
(e) The rental set forth in each Lease of the Leased Real Property
is the actual rental being paid, and there are no separate agreements or
understandings with respect to the same.
SECTION 3.20. Tangible Personal Property.
(a) Section 3.20 of the Disclosure Schedule lists, each group of
equipment, inventory, supplies, furniture, fixtures, personalty, vehicles and
other tangible personal property (the "Tangible Personal Property") used in the
Business or owned or leased by the Company with a value reasonably estimated by
the Sellers for each group to exceed $20,000. Except as set forth in Section
3.20 of the Disclosure Schedule, all of the Tangible Personal Property is
located at Pasadena and Galveston, Texas.
(b) The Sellers have, or have caused to be, delivered to the
Purchaser complete and accurate copies of all Leases for Tangible Personal
Property providing for annual rentals in excess of $20,000 and any and all
material ancillary documents pertaining thereto. Each such Lease is legal,
valid, binding, enforceable and in full force and effect and each such Lease
will not cease to be legal, valid, binding, enforceable and in full force and
effect on terms identical to those currently in effect as a result of the
consummation of the transactions contemplated by this Agreement except, in
either case, as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting rights of
creditors generally or by general principles of equity, nor will the
consummation of the transactions contemplated by this Agreement constitute a
breach or default under such Lease or otherwise give the lessor a right to
terminate such Lease in accordance with the terms thereof.
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SECTION 3.21. Assets.
(a) Except as set forth in Section 3.21(a) of the Disclosure
Schedule, the Company owns, leases or has the legal right to use all the
properties and assets, including, without limitation, all of the issued and
outstanding Stock of Bludworth Shipyard and Fabrication, Inc., the Owned
Intellectual Property, the Licensed Intellectual Property, the Real Property
and the Tangible Personal Property, used in the conduct of the Business or
otherwise purported to be owned, leased or used by the Company and, with
respect to contract rights, is a party to and enjoys the right to the benefits
of all material contracts, agreements and other arrangements used by the
Company or in or relating to the conduct of the Business (all such properties,
assets and contract rights being the "Assets"). The Company has good and
marketable title to, or, in the case of leased or subleased Assets, valid and
subsisting leasehold interests in, all the Assets, free and clear of all
Encumbrances, except for Permitted Encumbrances. All buildings, plants, and
structures owned by the Company lie wholly within the boundaries of the real
property owned by the Company and do not encroach upon the property of, or
otherwise conflict with the property rights of, any other Person.
(b) Except as set forth in Section 3.21 of the Disclosure
Schedule, all the Assets, including without limitation the buildings, plants,
structures, and equipment of the Company, are to the best of Sellers' Knowledge
structurally sound, are in good opening condition and repair, and are adequate
for the uses to which they are being put, and none of such buildings, plants,
structures, equipment or other Assets is in need of maintenance or repairs
except for ordinary, routine maintenance and repairs that are not material in
nature or cost. The building, plants, structures, and equipment of the Company
are, to the best of Sellers' Knowledge, sufficient for the continued conduct of
the Business after the Closing in substantially the same manner as conducted
prior to the Closing.
(c) Immediately following the Closing, the Company will continue
to own, pursuant to good and marketable title, or lease, under valid and
subsisting leases, or otherwise retain its respective interest in, the Assets
without incurring any material penalty or other materially adverse consequence,
including, without limitation, any increase in rentals, royalties, or licenses
or other fees imposed as a result of, or arising from, the consummation of the
transactions contemplated by this Agreement. Immediately following the Closing,
the Company shall own and possess all presently existing material documents,
books, records, agreements and financial data of any sort used by the Company
in the conduct of the Business or otherwise.
SECTION 3.22. Accounts Receivable. All accounts receivable of the
Company that are reflected on the Financial Statements or on the accounting
records of the Company
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as of the Closing Date less the reserve for doubtful accounts receivable
reflected on the August 30, 1997 balance sheet of the Company (collectively,
the "Accounts Receivable") represent or will represent valid obligations
arising from sales actually made or services actually performed in the ordinary
course of business or represent advance billings on contracts where billings to
date have exceeded costs and estimated earnings due and payable to date on
certain contracts. Unless paid prior to the Closing Date, the Accounts
Receivable are or will be as of the Closing Date, to the best of Sellers'
Knowledge, collectible and will not represent a material adverse change in the
composition of such Accounts Receivable in terms of aging at the Closing Date.
Each of the Accounts Receivable either has been or will be collectible in full,
without any set-off. There is no contest, claim or right of set-off, other than
returns in the ordinary course of business, under any contract with any obligor
of an Accounts Receivable relating to the amount or validity of such Accounts
Receivable. Section 3.22 of the Disclosure Schedule contains a complete and
accurate list of all Accounts Receivable as of the last day of the calendar
month preceding the date of this Agreement, which list sets forth the aging of
such Accounts Receivable.
SECTION 3.23. Customers. Listed in Section 3.23 of the Disclosure
Schedule are the names of the most significant customers (by dollar amount of
contract) of the Company for the twelve-month period ended March 31, 1997, and
the amount of revenue recognized by the Company for each during such period.
SECTION 3.24. Employee Benefit Matters.
(a) Plans and Material Documents. Section 3.24(a) of the
Disclosure Schedule is a complete and accurate list of (1) all employee welfare
benefit and employee pension benefit plans as defined in Sections 3(1) and 3(2)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
including, but not limited to, plans that provide retirement income or result
in a deferral of income by employees for periods extending to termination of
employment or beyond, and plans that provide medical, surgical, or hospital
care benefits or benefits in the event of sickness, accident, disability, death
or unemployment, (2) all other employee benefit agreements or arrangements,
including without Limitation deferred compensation plans, incentive plans,
bonus plans or arrangements, stock option plans, stock purchase plans, stock
award plans, golden parachute agreements, severance pay plans, dependent care
plans, cafeteria plans, employee assistance programs, scholarship programs,
employment contracts, vacation policies, and other similar plans, agreements
and arrangements that are currently in effect or were maintained within three
(3) years of the date of this Agreement, or have been approved before this date
but are not yet effective, for the benefit of directors, officers, employees or
former employees (or their beneficiaries) of the Company, (3) each employee
benefit plan for which the Company could reasonably be expected to incur
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liability under Section 4069 of ERISA in the event such plan has been or were
to be terminated, and (4) any plan in respect of which the Company could
reasonably be expected to incur liability under Section 4212(c) of ERISA
(collectively, the "Plans"). Section 3.24(a) of the Disclosure Schedule sets
forth a complete description of each Plan that is not in writing and, with
respect to each Plan that is in writing, the Sellers have furnished the
Purchaser with a complete and accurate copy of each Plan and a complete and
accurate copy of each material document prepared in connection with each such
Plan including, where applicable, without limitation, (i) a copy of each trust
or other funding arrangement, (ii) the most current summary plan description,
booklet, or other descriptive written materials, and each summary of material
modifications prepared since the last summary plan description, (iii) the three
(3) most recently filed annual IRS Forms 5500, 990 and 1041 reports, (iv) the
most recent actuarial report and financial statement, (v) the most recent IRS
determination letter and all rulings or determinations requested from the IRS
after the date of that determination letter, and (vi) all other correspondence
from the IRS or the Department of Labor received that relate to one or more of
the Plans with respect to any matter, audit or inquiry that is still pending.
Except as completely and accurately set forth in Section 3.24(a) of the
Disclosure Schedule, the Company has no express or implied commitment (i) to
create, incur liability with respect to, or cause to exist, any other employee
benefit plan, program or arrangement, (ii) to enter into any contract or
agreement to provide compensation or benefits to any individual, or (iii) to
modify, change or terminate any Plan, other than any modification required to
comply with ERISA or the Code.
(b) Absence of Certain Types of Plans. Except as completely and
accurately disclosed in Section 3.24(b) of the Disclosure Schedule, none of the
Plans provides for the payment of separation, severance, termination or
similar-type benefits to any Person or obligates the Company to pay separation,
severance, termination or similar-type benefits solely as a result of any
transaction contemplated by this Agreement or as a result of a "change in
control" within the meaning of Section 280G of the Code. Except as completely
and accurately described in Section 3.24(b) of the Disclosure Schedule, none of
the Plans provides for the deferral of compensation (other than any Plan
intended to be qualified under Section 401(a) of the Code) or for the grant of
stock options, restricted stock, stock appreciation rights, phantom shares or
other equity-based awards or contingent compensation. Except as completely and
accurately disclosed in Section 3.24(b) of the Disclosure Schedule, neither the
Company nor any entity (whether or not incorporated) that was at any time
during the six (6) years before the date of this Agreement treated as a single
employer together with the Company under Section 414 of the Code (a "Commonly
Controlled Entity") has ever maintained, had any obligation to contribute to,
or incurred any liability with respect to, a pension plan that is or was
subject to the provisions of Title IV of ERISA. During the last six (6) years
the Company has not (x) maintained, (y) had an obligation to contribute to or
(z) incurred any liability
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with respect to a voluntary employees beneficiary association that is or was
intended to satisfy the requirements of Section 501(c)(9) of the Code. Each of
the Plans is subject only to the laws of the United States or a political
subdivision thereof.
(c) Compliance with Applicable Law. Except as completely and
accurately disclosed in Section 3.24(c) of the Disclosure Schedule, each Plan
is now materially and always materially has been operated in accordance with
the requirements of all applicable law, including, without limitation, ERISA
and the Code, and all "fiduciaries" of such Plans (within the meaning of
Section 3(21) of ERISA) have always materially acted in accordance with the
provisions of all applicable Law, including, without limitation, ERISA and the
Code. The Company has performed all material obligations required to be
performed by it under, is not in any respect in default under or in violation
of, and has no knowledge of any default or violation by any party to, any Plan.
There is no litigation, action, proceeding, investigation or claim asserted or,
to the Sellers' or the Company's knowledge, threatened or contemplated, with
respect to any Plan (other than the payment of benefits in the normal course)
nor any issue resolved adversely to the Company that may subject the Company to
the payment of a penalty, interest, tax or other amount.
(d) Qualification of Certain Plans. Except as completely and
accurately disclosed in Section 3.24(d) of the Disclosure Schedule, each Plan
which is intended to be qualified under Section 401(a) of the Code or Section
401(k) of the Code has received a favorable determination letter from the IRS
that it is so qualified and each trust established in connection with any Plan
which is intended to be exempt from federal income taxation under Section
501(a) of the Code has received a determination letter from the IRS that it is
so exempt. No fact or event has occurred since the date of such determination
letter from the IRS which could adversely affect the qualified status of any
such Plan or the exempt status of any such trust.
(e) Absence of Certain Liabilities and Events. There has been no
prohibited transaction (within the meaning of Section 406 of ERISA or Section
4975 of the Code) with respect to any Plan. Except as completely and accurately
set forth in Section 3.24(e) of the Disclosure Schedule, the Company has, to
the best of Sellers' Knowledge, not incurred any liability for any penalty or
tax arising under Section 4971, 4972, 4979, 4980, 4980B or 6652 of the Code or
any liability under Section 502 of ERISA, and no fact or event exists which
could
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reasonably be expected to give rise to any such liability. The Company has, to
the best of Sellers' Knowledge, not incurred any liability under, arising out
of or by operation of Title IV of ERISA (other than liability for premiums to
the Pension Benefit Guaranty Corporation (the "PBGC") arising in the ordinary
course), including, without limitation, any liability in connection with (i)
the termination or reorganization of any employee benefit plan subject to Title
IV of ERISA, or (ii) the withdrawal from any Multi employer Plan, and no fact
or event exists which could reasonably be expected to give rise to any such
liability. With respect to any employee benefit plan, within the meaning of
Section 3(3) of ERISA, that is sponsored, maintained or contributed to, or has
been sponsored, maintained or contributed to within six years prior to the
Closing Date, by any Commonly Controlled Entity, (A) no withdrawal liability,
within the meaning of Section 4201 of ERISA, has been incurred by a Commonly
Controlled Entity, which withdrawal liability has not been satisfied, (B) no
liability to the PBGC has been incurred by a Commonly Controlled Entity, which
liability has not been satisfied, (C) no event has occurred that presents a
material risk of partial withdrawal, within the meaning of Section 4205 of
ERISA, by a Commonly Controlled Entity, (D) no accumulated funding deficiency,
whether or not waived, within the meaning of Section 302 of ERISA or Section
412 of the Code has been incurred, and (E) all contributions (including
installment payments) to such plan required by Section 302 of ERISA and Section
412 of the Code have been timely made. The aggregate withdrawal liability under
ERISA of the Company and any Commonly Controlled Entity, computed as if a
complete withdrawal by each Commonly Controlled Entity had occurred on the date
hereof under each employee benefit plan that is sponsored, maintained or
contributed to, or has been sponsored, maintained or contributed to within six
years prior to the Closing Date by a Commonly Controlled Entity, would not
exceed $50,000.00. Except as completely and accurately set forth in Section
3.24(e) of the Disclosure Schedule, no complete or partial termination has
occurred within the five (5) years preceding the date hereof with respect to
any Plan. No reportable event (within the meaning of Section 4043(c) of ERISA)
for which the 30 days' notice to the PBGC is not waived has occurred or is
expected to occur with respect to any Plan subject to Title IV of ERISA. No
Plan had an accumulated funding deficiency (within the meaning of Section 302
of ERISA or Section 412 of the Code), whether or not waived, as of the most
recently ended plan year of such Plan. None of the assets of the Company is the
subject of any lien arising under Section 302(f) of ERISA or Section 412(n) of
the Code; the Company has not been required to post any security under Section
307 of ERISA or Section 401(a)(29) of the Code; and no fact or event exists
which could reasonably be expected to give rise to any such lien or requirement
to post any such security. The Company has no Liability for any (i)
supplemental retirement benefits or other non-qualified deferred compensation,
(ii) severance pay relating to any termination of employment which occurs prior
to the Closing, (iii) for non-qualified deferred compensation or incentive or
contingent compensation relating to any Plan as in effect, or commitment made,
prior to the Closing Date (to the extent related to periods prior to the
Closing Date), (iv) for uninsured health, medical, disability or worker's
compensation claims incurred prior to the Closing Date, regardless of whether
such claims are reported prior to the Closing Date or are not so reported, or
(v) the payment of accrue bonuses to the extent related to periods prior to the
Closing Date and not accrued or reflected on the Balance Sheet.
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(f) Plan Contributions and Funding. All contributions, premiums or
payments required to be made with respect to any Plan have been made on or
before their due dates. All such contributions have been fully deducted for
income tax purposes and no such deduction has been challenged or disallowed by
any government entity and no fact or event exists which could reasonably be
expected to give rise to any such challenge or disallowance.
(g) Certain Employee-Benefit Assets. Except as completely and
accurately disclosed in Section 3.24(g) of the Disclosure Schedule, each of the
guaranteed investment contracts and other funding contracts with any insurance
company that are held by any of the Plans and any annuity contracts purchased
by any of the Plans was issued by an insurance company which carried the
highest rating from each of D&P, S&P, Best and Moody's Investors Service, Inc.,
as of the date such contract was issued, the date hereof and the Closing Date.
(h) Retiree Medical Benefits. No Plan is or includes any plan or
arrangement providing for post-employment health and/or medical benefit
coverage except to the extent required by COBRA.
(i) No Implied Rights. Nothing contained herein, express or
implied, is intended to or shall confer upon any employee or former employee of
the Company any right or remedy of any nature or kind whatsoever under or by
reason of this Agreement, including any rights of continued employment for any
period.
(j) Severance Pay and Vacation Pay. The Company has no liability
for severance pay or vacation pay except to the extent shown in Section 3.24(j)
of the Disclosure Schedule. No Plan will cause the Company to have liability
for severance pay or vacation pay as a result of the consummation of the
transactions described in this Agreement.
SECTION 3.25. Labor Matters.
(a) Except as completely and accurately disclosed in Section
3.25(a) of the Disclosure Schedule, the Company is not a party to any
collective bargaining agreement or other labor union contract applicable to
persons employed by the Company and currently there are no known organizational
campaigns, petitions or other unionization activities seeking recognition of
any other collective bargaining unit.
(b) There are no strikes, slowdowns, work stoppages or material
labor relations controversies pending or, to the best knowledge of the Sellers
and the Company, threatened between the Company and any of its employees, and
the Company has not
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experienced any such strike, slowdown, work stoppage or material controversy
within the past three years.
(c) The Company is in compliance, in all material respects, with
all applicable Laws relating to the employment of labor, including, without
limitation, those related to wages, hours and the payment and withholding of
taxes and other sums as required by the appropriate Governmental Authority, and
has withheld and paid to the appropriate Governmental Authority or is holding
for payment not yet due to such Governmental Authority all amounts required to
be withheld from employees of the Company and are not liable for any arrears of
wages, taxes, penalties or other sums for failure to comply with any of the
foregoing.
(d) The Company has paid in full to all its respective employees,
retired employees and contractors or adequately accrued for in accordance with
GAAP all wages, salaries, commissions, bonuses, benefits and other compensation
due to or on behalf of such employees, retired employees and contractors.
(e) There is no claim against the Company with respect to payment
of wages, salary or overtime pay that has been asserted or is now pending or,
to the best knowledge of the Sellers and the Company, threatened before any
Governmental Authority with respect to any Persons currently or formerly
employed by the Company.
(f) The Company is not a party to, or otherwise bound by, any
consent decree with, or citation by, any Governmental Authority relating to
employees or employment practices.
(g) There is no charge or proceeding with respect to a violation
of any occupational safety or health standards that has been asserted or is now
pending or, to the best of the knowledge of the Sellers and the Company,
threatened with respect to the Company.
(h) There is no charge against the Company of discrimination in
employment or employment practices, for any reason, including, without
limitation, age, gender, race, religion or other legally protected category ,
which has been asserted or is now pending or, to the best knowledge of the
Sellers and the Company, threatened before the United States Equal Employment
Opportunity Commission, or any other Governmental Authority in any jurisdiction
in which the Company has employed or currently employs any Person.
SECTION 3.26. Key Employees. Section 3.26 of the Disclosure Schedule
lists (i) the name, place of employment, the current annual salary rates,
bonuses, deferred or contingent compensation, pension, accrued vacation,
"golden parachute" and other like
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benefits paid or payable (in cash or otherwise) in 1996 and 1997, (ii) the name
and current annual salary rates in 1996, 1995, and 1994, and (iii) the date of
employment and a brief description of position and job function for each
current salaried employee, officer or director of the Company whose current
base salary exceeded (or, in 1997, is expected to exceed) $40,000.
SECTION 3.27. Risk Management.
(a) Section 3.27(a) of the Disclosure Schedule sets forth the
following Information with respect to each insurance policy (including, without
limitation, policies providing property, casualty, business interruption,
liability, workers' compensation, and bond and surety arrangements) under which
the Company is an insured, a named insured or otherwise the principal
beneficiary of coverage: (i) the name of the agent or broker; (ii) the name of
the insurer and the names of the principal insured and each named insured;
(iii) the policy number and the period of coverage; (iv) the type, scope
(including an indication of whether the coverage was on a claims made,
occurrence or other basis) and amount of coverage; and (v) the premium charged
for the policy, including, without limitation, a description of any retroactive
premium adjustments or other loss-sharing arrangements.
(b) With respect to each such insurance policy: (i) the policy is
in full force and effect; (ii) the Company is not in material breach or default
(including any breach or default with respect to the payment of premiums or the
giving of notice), and no event has occurred which, with the giving of notice
or the lapse of time or both, would constitute such a material breach or
default or permit termination or modification, under the policy; (iii) no party
to the policy has repudiated in writing, or given written notice of an intent
to repudiate, any provision thereof; and (iv) to the best knowledge of the
Sellers and the Company, no insurer on the policy has been declared insolvent
or placed in receivership, conservatorship or liquidation or currently has a
rating of "B+ " or below from Best or a claims paying ability rating of "EBB"
or below from S&P.
(c) Section 3.27(c) of the Disclosure Schedule completely and
accurately sets forth all risks of the Company which are covered under any
material risk retention program in which the Company participates, together
with details for the last three years of the Company's loss experience with
respect to such risks.
(d) Since April 1, 1993, the Company has been covered by insurance
policies or binders of insurance in such types and covering such risks as are
consistent with customary practices and standards of companies engaged in
businesses and operations similar to those of the Company in amounts deemed
reasonable by the Company.
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(e) Except as set forth in Section 3.27(e) of the Disclosure
Schedule, at no time subsequent to April 1, 1990, has the Company (i) been
denied any insurance or indemnity bond coverage which it has requested, (ii)
made any material reduction in the scope or amount of its insurance coverage,
or received notice from any of its insurance carriers that any insurance
coverage listed in Section 3.27(a) of the Disclosure Schedule will not be
available in the future substantially on the same terms as are now in effect,
or (iii) suffered any extraordinary increase in premium for renewed coverage.
Since April 1, 1993, no insurance carrier has canceled, failed to renew or
materially reduced any insurance coverage for the Company or given any notice
or other indication of its intention to cancel, not renew or reduce any such
coverage.
(f) The Sellers are not aware of any facts pertaining to the
Company or the Business which are reasonably likely to prevent the Purchaser
from obtaining insurance following the consummation of the transactions
contemplated by this Agreement on terms substantially similar to the terms
currently in effect.
SECTION 3.28. Accounts; Lockboxes; Safe Deposit Boxes; Powers of
Attorney. Section 3.28(i) of the Disclosure Schedule is a complete and
accurate list of (a) the names of each bank, savings and loan association,
securities broker or other financial institution in which the Company has an
account, including, without limitation, cash contribution accounts, and the
names of all persons authorized to draw thereon or have access thereto, (b) the
location of all lockboxes and safe deposit boxes of the Company and the names
of all Persons authorized to draw thereon or have access thereto, and (c) the
names of all Persons, if any, holding powers of attorney from the Sellers
relating to the Company or the Business, or from the Company. At the time of
the Closing, without the prior written consent of the Purchaser, the Company
shall not have any such account, lockbox or safe deposit box other than those
listed in Section 3.28(ii) of the Disclosure Schedule, nor shall any Person
have been authorized, from the date of this Agreement, to draw thereon or have
access thereto or to hold any such power of attorney relating to the Company or
the Business or from the Company except such Persons listed in Section
3.28(iii) of the Disclosure Schedule. There are no commingled monies or
accounts of the Company with other monies or accounts of the Sellers or
relating to the other businesses of the Sellers nor has the Sellers transferred
monies or accounts of the Company other than to an account of the Company. At
the time of the Closing, all monies and accounts of the Company shall be held
by, and be accessible only to, the Company.
SECTION 3.29. Full Disclosure. To the best of Sellers' Knowledge, no
representation or warranty of the Sellers or the Company in this Agreement, nor
any certificate furnished or to be furnished by the Sellers or the Company to
the Purchaser pursuant to this Agreement, contains or will contain any untrue
statement of a material
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fact, or omits or will omit to state a material fact necessary to make the
statements contained herein or therein not misleading.
SECTION 3.30. Reserved.
SECTION 3.31. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement from the Company based
upon arrangements made by or on behalf of the Sellers or the Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER
Subject to the terms and conditions of this Agreement, the Purchaser
hereby represents and warrants to the Sellers and the Company as of the
Execution Date as follows:
SECTION 4.01. Organization and Authority of the Purchaser. The
Purchaser is corporation duly organized, validly existing and in good standing
under the laws of the State of Texas and has all necessary corporate power and
authority to enter into this Agreement, to carry out its obligations hereunder
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by the Purchaser, the performance by the Purchaser
of its respective obligations hereunder and the consummation by the Purchaser
of the transactions contemplated hereby have been duly authorized by all
requisite corporate action on the part of the Purchaser. This Agreement has
been duly executed and delivered by the Purchaser, and (assuming due
authorization, execution and delivery by the Company and the Sellers) upon
receipt of the necessary approvals by Governmental Authorities, this Agreement
will constitute a legal, valid and binding obligation of the Purchaser
enforceable against the Purchaser in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting rights of creditors or by
general principles of equity.
SECTION 4.02. No Conflict. Assuming the making and obtaining of all
findings, notifications, consents, approvals, authorizations and other actions
referred to in Section 4.03, the execution, delivery and performance of this
Agreement by the Purchaser does not and will not (a) violate, conflict with or
result in the breach of any provision of the articles of incorporation or
by-laws of the Purchaser, (b) conflict with or violate any Law or Governmental
Order applicable to the Purchaser which would materially adversely
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affect the ability of the Purchaser to consummate the transactions contemplated
by this Agreement, or (c) conflict with, or result in any breach of, constitute
a default (or event which with the giving of notice or the lapse of time, or
both, would become a default) under, require any consent under, or give to
others any rights of termination, amendment, acceleration, suspension,
revocation, or cancellation of, or result in the creation of any Encumbrance on
any of the assets or properties of the Purchaser pursuant to, any note, bond,
mortgage or indenture, contract, agreement, lease, sublease, license, permit,
franchise or other instrument or arrangement to which the Purchaser is a party
or by which any of such assets or properties are bound or affected.
SECTION 4.03. Governmental Consents and Approvals. The execution,
delivery and performance of this Agreement by the Purchaser do not and will not
require any consent, approval, authorization or other order of, action by,
filing with, or notification to, any Governmental Authority or any other third
party, (except the expiration or termination of the waiting period under the
HSR Act.)
SECTION 4.04. Litigation. Except as disclosed in a writing given to
the Sellers by the Purchaser prior to the execution of this Agreement, no
claim, action, proceeding or investigation is pending or, to the best of the
knowledge of the Purchaser after due inquiry, threatened, which seeks to delay
or prevent the consummation of, or which could reasonably be expected to
materially adversely affect the Purchaser's ability to consummate, or which
could otherwise affect the legality, validity or enforceability of, the
transactions contemplated by this Agreement.
SECTION 4.05. Brokers. No broker, finder investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Purchaser.
SECTION 4.06. Investment Purpose. The Purchaser is acquiring the
Shares solely for the purpose of investment and not with a view to, or for
offer or sale in connection with, any distribution thereof. The Purchaser is
aware and understands that the Shares have not been registered under the
Securities Act or under the securities laws of any state, that any transfer of
the Shares by the Purchaser shall be restricted under the provisions of the
Securities Act and such state laws, and that the certificates representing the
Shares will bear legends to such effect. The Purchaser possesses such knowledge
and experience in financial and business matters generally and with respect to
the Business so as to enable it to evaluate the risks and merits of its
purchase of the Shares.
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SECTION 4.07. Personal Guaranties. The Purchaser agrees to indemnify
and hold harmless each of the Sellers from any and all personal guarantees of
indebtedness of the Company which is disclosed on the financial statement.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Conduct of Business Prior to the Closing Date.
(a) Each of the Sellers and the Company covenants and agrees that
from the Execution Date through the earlier of the Closing Date or the
termination of this Agreement, the Company shall not conduct its business other
than in the ordinary course in order to protect the value of the Company.
Without Limiting the generality of the foregoing, the Sellers shall cause the
Company, and the Company agrees, to (i) continue its business activities and
operations, and business plan implementation; (ii) not materially shorten or
lengthen the customary payment cycles for any of its payables or receivables,
however, the Company may reduce the principal amount of its indebtedness,
provided that the Company incurs no pre-payment penalties; (iii) use reasonable
efforts to attempt to (A) keep available to the Purchaser the services of the
employees of the Company, (B) continue in full force and effect without
material modification all existing policies or binders of insurance currently
maintained in respect of the Company and the Business except as required by
applicable law, and (C) preserve its current relationships with its employees,
customers, suppliers, subcontractors, regulators, and other persons with which
it has significant business relationships; (iv) exercise, but only after notice
to the Purchaser and receipt of the Purchaser's prior written approval, any
rights of renewal pursuant to the terms of any of the leases or subleases set
forth in Section 3.19(b) or Leases for Tangible Personal Property set forth in
Section 3.20 of the Disclosure Schedule which by their terms would otherwise
expire; (v) maintain all material licenses, qualifications, registrations and
authorizations to do business in each jurisdiction in which it is so licensed,
qualified, registered or authorized; (vi) not engage in any practice, take any
action, fail to take any action or enter into any transaction, in each case
outside the normal course of business which could reasonably be expected to
cause any representation or warranty of the Sellers or the Company to be untrue
for purposes of this Section 5.01(a) as of the date made in any material
respect or result in a breach of any covenant made by the Sellers or the
Company in this Agreement; and (vii) not pay any dividends, bonuses or other
extraordinary payments, except for $250,000.00 in bonuses to key Company
employees.
(b) Each of the Sellers and the Company covenants and agrees that,
prior to the Closing Date, without the prior written consent of the Purchaser,
which consent will not
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be unreasonably withheld, the Company will not make outside the ordinary course
of business any commitment, actual or contingent, to make any investment or
capital expenditure, or otherwise expend capital, or purchase any inventory, or
supply funds to any Person, in each case in excess of $20,000 individually or
$50,000 in the aggregate.
(c) Prior to the Closing Date, each of the Sellers and the Company
covenants and agrees to, and shall cause the Company to, use reasonable efforts
to minimize the termination, withdrawal or non-renewal of any Material
Contract.
(d) Prior to the Closing Date, neither the Sellers nor the
Company, without the prior written consent of the Purchaser, will:
(i) Except as set forth in Section 3.03 of the Disclosure
Schedule, issue, deliver, sell, dispose of, pledge or
otherwise encumber, or authorize or propose the
issuance, delivery, sale, disposition or pledge or
other encumbrance of, (A) any additional shares of
the capital stock of any class of the Company, or any
securities or rights convertible into, exchangeable
for, or evidencing the right to subscribe for any
shares of the capital stock of the Company, or any
rights, warrants, options, calls, commitments or any
other agreements of any character to purchase or
acquire any shares of the capital stock of the
Company or any securities or rights convertible into,
exchangeable for or evidencing the right to subscribe
for any shares of the capital stock, or (B) any other
securities in respect of, in lieu of, or in
substitution for the Shares;
(ii) Redeem, purchase or otherwise acquire any of the
outstanding Securities of the Company;
(iii) Declare, set aside for payment or pay any dividend,
or make any other actual constructive or deemed
distribution in respect of any shares of the capital
stock of the Company, or otherwise make any payments
to the shareholder or shareholders of the Company, as
the case may be, in its capacity as such, or split,
combine, subdivide or reclassify any shares of the
capital stock.
SECTION 5.02. Access to Information.
(a) From the Execution Date until the earlier of the Closing Date
or the termination of this Agreement, upon reasonable notice, each of the
Sellers and the Company shall and shall cause each of its Affiliates and each
of the Company's and such
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Affiliates' officers, directors, employees, agents, representatives,
accountants and counsel to: (i) afford the officers, employees and authorized
agents, accountants, counsel, financing sources, prospective financing sources,
and representatives of the Purchaser full access to the offices, properties,
other facilities, books and records of the Company and to those officers,
directors, employees, managers, members, agents, accountants and counsel of the
Sellers and the Company and each of their Affiliates who have any knowledge
relating to, and to the books and records of the Sellers and their Affiliates
relating to, the Company or the Business, (ii) furnish to the Purchaser monthly
financial and management statements of the Company as prepared in the ordinary
course of business, and (iii) furnish to the officers, employees and authorized
agents, accountants, counsel, financing sources, prospective financing sources,
and representatives of the Purchaser such additional financial and operating
data and other information regarding the assets, properties and good will of
the Company and the Business (or legible copies thereof as the Purchaser or any
of its officers, employees, authorized agents, accountants, counsel, financing
sources, prospective financing sources or representatives may from time to time
reasonably request.
(b) Subject to Section 7.01, in order to facilitate the resolution
of any claims made by or against or incurred by the Sellers or the Company
prior to the Closing for a period of seven years after the Closing, or for such
longer period as may be required so as to extend to the end of the applicable
statute of limitations, the Purchaser shall (i) retain the books and records
(or copies thereto of the Company relating to periods prior to the Closing in a
manner reasonably consistent with past practice, and (ii) upon reasonable
notice, afford the authorized agents and representatives of the Sellers
reasonable access (including, without limitation, the right to make, at the
Sellers' expense, photocopies), during normal business hours, to such books and
records.
(c) Subject to Section 7.01, in order to facilitate the resolution
of any claims made by or against or incurred by the Purchaser, any Affiliate of
the Purchaser or the Company after the Closing, for a period of seven years
following the Closing, or for such longer period as may be required so as to
extend to the end of the applicable statute of limitations, the Sellers shall
(i) retain the books and records (or copies thereof) of the Sellers which
relate to the Company and its operations for periods prior to the Closing and
which shall not otherwise have been delivered to the Purchaser or the Company
and (ii) upon reasonable notice, afford the officers, employees and authorized
agents and representatives of the Purchaser, any Affiliate of the Purchaser or
the Company reasonable access (including, without limitation, the right to make
photocopies, at the expense of the Purchaser, or such Affiliate of the
Purchaser or the Company), during normal business hours, to such books and
records.
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(d) Within twenty (20) days after the end of each month, each of
the Sellers and the Company covenants and agrees to provide to the Purchaser
the monthly financial statements of the Company prepared in accordance with
GAAP for each month ending between the Execution Date and the Closing Date,
together with all related notes, exhibits and schedules thereto.
SECTION 5.03. Confidentiality.
(a) Each of the Sellers and the Company agrees to, and shall use
his and its respective best efforts to cause his and its respective agents,
representatives, Affiliates, employees, officers and directors and those of his
and its respective Affiliates to: (i) treat and hold as confidential all
non-public information relating to trade secrets, trademark applications,
product development, price, customer lists, pricing and marketing plans,
policies and strategies, details of client and consultant contracts,
operations, methods, product development techniques, business acquisition
plans, new personnel acquisition plans and all other confidential information
with respect to the Business and the Company, except as the Sellers or the
Company reasonably believes is otherwise required to be disclosed by applicable
Law, in which event each of the Sellers or the Company agrees to, and shall
instruct its agents, representatives, Affiliates, employees, officers and
directors and those of its Affiliates to, furnish only that portion of such
confidential information which the Sellers or the Company are legally required
to be provided and exercise its reasonable efforts to obtain assurances that
confidential treatment will be accorded such information, and (ii) in the event
that the Sellers or the Company or any such agent, representative, Affiliate,
employee, officer or director and those of its Affiliates are served with a
subpoena, order or other legal process to disclose any such information,
provide the Purchaser with prompt written notice of such requirement so that
the Purchaser or the Company may, at the expense of the Purchaser, seek a
protective order or other remedy. Each of the Sellers and the Company agrees
to, and shall cause his and its respective agents, representatives, Affiliates,
employees, officers and directors to, furnish promptly (prior to, at, or as
soon as practicable following, the Closing) to the Purchaser any and all copies
(in whatever form or medium) of all such confidential information then in the
possession of the Sellers or the Company or any of his and its respective
agents, representatives, Affiliates, employees, officers and directors and,
except as otherwise required by Section 5.02(c), destroy any and all additional
copies then in the possession of the Sellers or any of such agents,
representatives, Affiliates (other than the Company), employees, officers and
directors of such information and of any analyses, compilations, studies or
other documents prepared, in whole or in part, on the basis thereof; provided,
however, this Section 5.03(a) shall not apply to any information that, at the
time of disclosure, is available publicly or was not disclosed in breach of
this Agreement by the Sellers or the Company or their agents, representatives,
Affiliates, employees or officers or directors of its Affiliate. Each of the
Sellers and the Company
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agrees and acknowledges that remedies at law for any breach of his or its
obligations under this Section 5.03(a) are inadequate and that in addition
thereto the Purchaser shall be entitled to seek equitable relief, including
injunction and specific performance, in the event of any such breach. The
non-disclosure obligations of the Company and the Sellers in this Section
5.03(a) shall include any non-public or proprietary information relating to the
Purchaser or its Affiliates which they may obtain in the course of their due
diligence activities permitted by this Agreement.
(b) Prior to the Closing Date or upon earlier termination of this
Agreement, the Purchaser agrees to, and shall use its best efforts to cause its
agents, representatives, Affiliates, employees, officers and directors and
those of its Affiliates to: (i) treat and hold as confidential all non-public
information relating to trade secrets, trademark applications, product
development, price, correspondent and dealer, and borrower lists, pricing and
marketing plans, policies and strategies, details of client and consultant
contracts, operations, methods, product development techniques, business
acquisition plans, new personnel acquisition plans and all other confidential
information with respect to the Business and the Company, except as the
Purchaser reasonably believes is otherwise required to be disclosed by
applicable law, in which event the purchaser agrees to, and shall instruct its
agents, representatives, Affiliates, employees, officers and directors and
those of its Affiliates to, furnish only that portion of such confidential
information which the purchaser are legally required to be provided and
exercise its reasonable efforts to obtain assurances that confidential
treatment will be accorded such information, and (ii) in the event that the
Purchaser or any such agent, representative, Affiliate, employee, officer or
director and those of its Affiliates are served with a subpoena, order or other
legal process to disclose any such information, provide the Sellers with prompt
written notice of such requirement so that the Company or the Sellers may, at
the expense of the Sellers seek a protective order or other remedy. Upon
termination of this Agreement, the Purchaser agrees to, and shall cause its
agents, representatives, Affiliates, employees, officers and directors to,
furnish promptly to the Company any and all copies (in whatever form or medium)
of all such confidential information then in the possession of the Purchaser or
any of their agents, representatives, Affiliates, employees, officers and
directors and, except as otherwise required by Section 5.02(b), destroy any and
all additional copies then in the possession of the Purchaser, or any of such
agents, representatives, Affiliates, employees, officers and directors of such
information and of any analyses, compilations, studies or other documents
prepared, in whole or in part, on the basis thereof: provided, however, this
Section 5.02(b) shall not apply to any information that, at the time of
disclosure, is available publicly or was not disclosed in breach of this
Agreement by the Purchaser or its agents, representatives, Affiliates,
employees or officers or directors of its Affiliate. The Purchaser agrees and
acknowledges that remedies at law for any breach of its obligations under this
Section 5.03(b) are inadequate and that in addition thereto, the Purchaser
shall be entitled to seek
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equitable relief, including injunction and specific performance, in the event
of any such breach, The non-disclosure obligations of the Purchaser in this
Section 5.03(b) shall include any non-public or proprietary information
relating to the Company or the Sellers which it may obtain in the course of its
due diligence activities permitted by this Agreement.
SECTION 5.04. Regulatory and Other Authorizations; Notices and
Consents.
(a) Each of the Sellers, the Company, and the Purchaser shall use
all reasonable efforts to make all findings required under applicable law, and
will cooperate fully with each other in connection therewith.
(b) The Sellers and the Purchaser agree that, in the event any
consent, approval or authorization reasonably necessary to preserve for the
Business of the Company any right or benefit under any lease, license,
contract, commitment or other agreement or arrangement to which the Sellers or
the Company are or is a party is not obtained prior to the Closing, the
Sellers will, subsequent to the Closing, cooperate with the purchaser in
attempting to obtain such consent, approval or authorization as promptly
thereafter as practicable and, in the case of contracts and agreements, so as
to provide for the Purchaser the benefits under such contracts and agreements-
SECTION 5.05. Notice of Developments.
(a) Prior to the earlier of the Closing Date or termination of
this Agreement, the Sellers and the Company shall notify promptly, and in any
event within two (2) Business Days, the Purchaser in writing, to the extent of
the best of the knowledge of the Sellers and the Company, of (i) all events,
circumstances, facts and occurrences arising subsequent to the date of this
Agreement which could reasonably be expected to result in any material breach
of a representation or warranty or covenant of the Sellers or the Company in
this Agreement or which could reasonably be expected to have the effect of
making any representation or warranty of the Sellers or the Company in this
Agreement untrue or incorrect in any material respect, and (ii) all other
material developments, other than general economic or market changes, and
changes in Tax Law materially adversely affecting the assets, Liabilities,
business, financial condition, operations, results of operations, customer or
employee relations or prospects of the Company or the Business.
(b) Prior to the earlier of the Closing Date or termination of
this Agreement, the Purchaser shall promptly, and in any event within two (2)
Business Days, notify the Sellers in writing, to the extent of the best of the
knowledge of the Purchaser, of all events, circumstances, facts and occurrences
arising subsequent to the date of this Agreement which could reasonably be
expected to result in any material breach of a
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representation or warranty or covenant of the Purchaser in this Agreement or
which could reasonably be expected to have the effect of making any
representation or warranty of the Purchaser in this Agreement untrue or
incorrect in any material respect.
SECTION 5.06. Acquisition Proposals.
(a) The Sellers and the Company and their respective officers,
directors, employees, representatives and agents shall immediately cease any
existing discussions or negotiations with any parties conducted heretofore with
respect to any Acquisition Proposal. Neither the Sellers, the Company, nor
their respective officers, directors, employees or investment bankers,
attorneys, accountants or other agents retained by either of them will (i)
initiate or solicit, directly or indirectly, any inquiries regarding the making
of any Acquisition Proposal, or (ii) engage in negotiations or discussions
with, or furnish any information or data to any third party relating to an
Acquisition Proposal.
(b) For purposes of this Agreement, the term "Acquisition
Proposal" shall mean any purchase offer made by a third party to acquire (i)
beneficial ownership (as defined pursuant to Section 13(d) of the Exchange Act)
of an equity interest in the Company or the Assets or Business pursuant to a
merger, consolidation or other business combination, sale of shares of capital
stock or similar transaction involving the Company, including, without
limitation, any single or multi step transaction or series of related
transactions which is structured to permit such third party to acquire
beneficial ownership of a majority or greater equity interest in the Company or
the Assets or Business, or (ii) all or substantially all of the business or
assets of the Company or the Business (other than the transactions contemplated
by this Agreement).
SECTION 5.07. Use of Names and Intellectual Property.
(a) The Sellers covenant and agree that following the Closing
Date, the Purchaser shall have the exclusive and royalty-free right to use the
Company's name (the "Name").
(b) From and after the Closing Date, neither the Sellers nor any
of its Affiliates shall use the Name, any of the Owned Intellectual Property or
any of the Licensed Intellectual Property.
SECTION 5.08. Non-Competition.
(a) For a period of five (5) years following the Closing, none of
the Sellers shall, directly or indirectly, or as a member, shareholder,
officer, director, consultant or employee of any other Person or entity, and
each of the Sellers shall cause his Affiliates
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not to, compete with the Purchaser or any of its subsidiaries or Affiliates, or
own, manage, operate, join, control or participate in the ownership,
management, operation, or control of, or become employed by, consult or advise,
or be connected in any manner with any business or activity which is in actual,
direct or indirect competition or anticipated competition with any of the
Purchaser Businesses in the States of Texas and Louisiana, so long as the
Purchaser or any of its subsidiaries or Affiliates carries on such Purchaser
Businesses. Not by way of limitation or exclusion, none of the Sellers shall,
and each of the Sellers shall cause his Affiliates not to, within the aforesaid
locations and during the aforesaid time period, call upon, solicit, advise or
otherwise do, or attempt to do, business with any customers of the Business,
the Company with whom the Business or the Company or any of the Sellers had any
dealings during the period of time in which the Company was an Affiliate of
such Sellers, or take away or interfere or attempt to interfere with any
custom, trade, business or patronage of the Business or the Company, or
interfere with or attempt to interfere with any officers, employees,
representatives or agents of the Business or the Company, or employ or induce
or attempt to induce any of them to leave the employ of the Company or violate
the terms of their contracts, or any employment arrangements, with the Company.
Each of the Sellers acknowledges and agrees that any breach of the foregoing
covenant not to compete would cause irreparable injury to the Purchaser and its
subsidiaries and Affiliates, and that the amount of injury would be impossible
or difficult to fully ascertain. Each of the Sellers agrees that the Purchaser
and its subsidiaries and affiliates shall, therefore, be entitled to obtain an
injunction restraining any violation, further violation or threatened violation
of the covenant not to compete hereinabove set forth, in addition to any other
remedies that the Purchaser or its subsidiaries or Affiliates may pursue.
Notwithstanding the foregoing provisions of this Section 5.08, each of the
Sellers, may own, solely as an investment, securities if the Sellers (A) is not
an affiliate of the issuer of such securities, and (B) does not, directly or
indirectly, beneficially own more than five percent (5%) of the class of which
such securities are a part. If the five (5) year period referred to in this
Section 5.08(a) shall be finally determined by a court to exceed the maximum
period which is permissible by applicable law, the said period shall be reduced
to the maximum period permitted by such law; provided, however, nothing herein
shall apply to Sellers' ownership or operation of Jay Bludworth, Inc. in Corpus
Christi, Texas, so long as such shipyard is operating with no more than one (1)
dry dock and acquires no more acreage than currently exists on the date hereof
at such shipyard.
(b) Each of the Sellers acknowledges that the covenants of the
Sellers set forth in Section 5.08(a) are an essential element of this Agreement
and that, but for the agreement of each of the Sellers to comply with these
covenants, the Purchaser would not have entered into this Agreement. Each of
the Sellers has independently consulted with its counsel and after such
consultation agrees that the covenants set forth in this Section 5.08 are
reasonable.
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SECTION 5.09. Right of First Refusal. For a period of five (5) years,
Sellers agree that the Purchaser shall have a right of first refusal to
purchase the Sellers' stock in Jay Bludworth, Inc. Sellers further agree that
they will not vote in favor of a sale of the assets of Jay Bludworth, Inc.
until first offering the assets for sale to Purchaser on the same terms and
conditions.
SECTION 5.10. Further Action. Each of the parties hereto shall use
all reasonable efforts to take, or cause to be taken, all appropriate action,
do or cause to be done all things necessary, proper or advisable under
applicable law, and execute and deliver such documents and other papers, as may
be required to carry out the provisions of this Agreement and consummate and
make effective the transactions contemplated by this Agreement.
SECTION 5.11. Miscellaneous Assets. After Closing, Purchaser agrees
to lease the dry dock, presently located on the premises of Jay Bludworth,
Inc., but owned by the Company, to Jay Bludworth, Inc. for a period of five (5)
years at a monthly rental of $5,416.00 per year, on a triple net basis provided
that (1) Lessee is required to maintain such dry dock in its present condition,
ordinary wear and tear excepted, and (2) Lessee has the dry dock appraised at
the commencement of the Lease, at Lessee's cost, and every two (2) years
thereafter.
SECTION 5.12. Certain Additional Covenants. At or prior to the
Closing, the Sellers shall cause any shareholders agreement to be terminated.
Such shareholders agreements are identified in Section 3.03(d) of the
Disclosure Schedule.
SECTION 5.13. Termination of Inter-Company Arrangements etc. At or
prior to the Closing, the Sellers shall cause the Inter-Company Arrangements,
other than those described in Section 5.13 of the Disclosure Schedule, to be
terminated on terms reasonably satisfactory to the Purchaser.
SECTION 5.14. Reserved.
SECTION 5.15. Break Up Fee.
(a) If by February 15, 1998, the Purchaser fails to consummate
this Agreement due to its failure to obtain financing satisfactory to the
Purchaser, the Purchaser shall pay to John L. Bludworth, III, $250,000.00 in
cash within two (2) Business Days of the occurrence of such event under the
terms of the Escrow Agreement with Southwest Bank of Texas, N.A.
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(b) If by February 15, 1998, the Sellers fail to consummate this
Agreement for any reason, other than Purchaser's default, the Sellers shall pay
to the Purchaser, $250,000.00 in cash within two (2) Business Days under the
terms of the Escrow Agreement with Southwest Bank of Texas, N.A. This sum
shall be in addition to any other damages or remedies available to Purchaser
at law or in equity.
SECTION 5.16 Long Term Debt. Nothing in this Agreement shall prevent
the Company from paying long term indebtedness of the Company, but the Company
shall not prepay long term indebtedness where a prepayment penalty results.
ARTICLE VI
COVENANT OF FIRST WAVE MARINE, INC.
SECTION 6.01. Stock Options. In the event First Wave Marine, Inc.
consummates its public offering or securities, First Wave Marine, Inc. agrees
to grant stock options to key Company employees on the same terms and
conditions as all key employees of other First Wave Marine, Inc. pursuant to a
First Wave Marine, Inc. Employee Stock Option Plan.
ARTICLE VII
TAX MATTERS
SECTION 7.01 Tax Representations, Warranties and Covenants. Each of
the Sellers and the Company hereby represent and warrant, as of the date hereof
and as of the Closing Date, except as specifically set forth in Schedule 7.01,
as follows:
(i) The Company has timely filed all returns, claims for refund,
reports, declarations, information returns, statements or
other documents (whether original or amended and including all
schedules, forms and/or elections required or permitted in
connection therewith) filed or required to be filed with any
federal, state, local or foreign governmental or
administrative authority, agency or commission ("Governmental
Authority"), or provided to any person in connection with the
determination, assessment or collection of any tax or the
administration of any laws, regulations or administrative
requirements relating to any tax ("Tax Returns" or "Tax
Return") and each such Tax Return is correct, accurate and
complete in all material respects.
(ii) All taxes, fees, levies, duties, tariffs, impost and other
charges of any kind (together with any and all interest,
penalties, additions to tax and additional
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amounts imposed with respect thereto) imposed by any
government or taxing authority ("Tax" or "Taxes") owed by the
Company, whether or not shown on any Tax Return, have been
appropriately paid.
(iii) Adequate reserves for the payment of all Taxes of the Company
with respect to any period or portion thereof ending on or
prior to the Closing Date for which Tax Returns have or have
not yet been filed have been established.
(iv) No liens for Taxes exist with respect to any of the assets or
properties of the Company, except for statutory liens for
Taxes not yet due.
(v) No Tax Returns of the Company have been audited or examined or
are being audited or examined by any tax authority, nor are
there any outstanding requests for information made by any tax
authority.
(vi) No assessment, audit or other proceeding by any tax authority
or other Governmental Authority is proposed, pending, or, to
the knowledge of the Seller or the Company, threatened with
respect to any Taxes or Tax Returns of the Company, nor has
any taxing authority advised the Seller or the Company of any
proposed reassessments of the value or other Tax base of any
property owned by the Company that could increase the amount
of a property Tax to which the Company would be subject.
(vii) There are no outstanding agreements, waivers, or arrangements
extending the statutory period of limitations applicable to
any claim for, or the period for the collection or assessment
of, Taxes of the Company due for any taxable period.
(viii) The Company will not be required to include in a taxable
period ending after the Closing Date any taxable income
attributable to income that economically accrued in a taxable
period ending on or before the Closing Date, as a result of
any method of accounting deferring such inclusion after the
time of such economic accrual. The Company is not required to
include in taxable income any adjustment pursuant to IRC
Section 481(a) (or similar provisions of other laws or
regulations) in its current or in any future taxable period by
reason of a change in accounting method; nor do the Sellers or
the Company have any knowledge that the IRS (or any other tax
authority) has proposed or is considering proposing any such
change in accounting method.
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(ix) The Company has not been advised by any Governmental Authority
of any proposed reassessments of the value (or other Tax base)
of any property owned by the Company that could increase the
amount of a property Tax to which the Company would be
subject.
(x) Schedule 7.01(x) completely and accurately list all Tax
Returns required to be filed by the Company between the date
of this Agreement and March 31, 1998.
SECTION 7.02 Access to Information.
(a) From the date hereof, the Sellers shall and shall cause the
Company to make available to the Purchaser and its representatives: (i) all Tax
Returns prepared and/or filed by or on behalf of the Company for taxable
periods ended on or after December 31, 1993, and any examination reports and
statements of deficiencies assessed against, proposed to be assessed against,
or agreed to by the Company for such taxable periods; (ii) any tax allocation
agreement or arrangement involving the Company and a complete and accurate
description of any such unwritten or informal agreement or arrangement; (iii)
any work papers or schedules showing (A) the Tax basis of the shareholder in
the Common Stock, (B) the Tax basis of the Company in its assets, and (C) the
amount, if any, of earnings and profits for Tax purposes for the Company.
(b) The information described in Section 5.02(A) shall be made
available to the Purchaser prior to the Closing Date upon reasonable request.
SECTION 7.03 Returns and Payments.
(a) The Sellers shall prepare and file or otherwise furnish in
proper form to the appropriate Governmental Authority (or cause to be prepared
and filed or furnished) in a timely manner all Tax Returns required to be filed
by the Company for all periods ending on or prior to the Closing Date. The
Sellers shall indemnify the Company and its employees or agents against any
liability or cost by reason of a claim by a Tax authority under IRC Section
6694, or any corresponding provision of any other law, to the extent relating
to such preparation. The Sellers shall pay or cause to be paid when due and
payable all Taxes with respect to the Company for any taxable period ending on
or before the Closing Date. Tax Returns of the Company filed for any taxable
period ending on or before the Closing Date shall be prepared substantially in
accordance with applicable laws.
(b) The Purchaser shall prepare and file or otherwise furnish in
proper form to the appropriate Governmental Authority (or cause to be prepared
and filed or furnished)
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in a timely manner all Tax Returns required to be filed by the Company for all
periods ending after the Closing Date. The Purchaser shall pay or cause to be
paid when due and payable all Taxes with respect to the Company for any taxable
period ending after the Closing Date (subject to any right of indemnification
from the Sellers hereunder for Taxes).
SECTION 7.04 Tax Indemnification. The Sellers agree to indemnify and
hold the Purchaser and the Company harmless against any breach of a covenant
contained in this Article VII, and against the following Taxes, and, against
any loss, damage, liability, or expense, including reasonable fees for
attorneys and consultants, incurred in contesting or otherwise in connection
with any such Taxes: (i) Taxes imposed on the Company with respect to taxable
periods ending before or on the Closing Date; (ii) Taxes imposed on the
Purchaser or the Company as a result of any breach of warranty or
misrepresentation under Section 7.01 (for which purpose the representations in
Section 7.01 shall be deemed to have been made with no exception for items
disclosed in Section 7.01 of the Disclosure Schedule or otherwise); (iv) Taxes
arising in any taxable period ending after the Closing Date as a result of the
disallowance or deferral of any expense or capitalized item from prior periods
or the deferral of income items from prior periods to the current period (net
of any applicable Tax reductions); and (v) Taxes arising in any taxable period
ending after the Closing Date from the failure of the Company to establish to
retain records required under applicable Tax law with respect to any
transaction, event or item occurring prior to the Closing Date.
SECTION 7.05. Cooperation and Exchange of Information. Pursuant to
the terms set forth in Section 7.02 of this Agreement, the Sellers, on the one
hand, and the Purchaser and the Company on the other hand, will provide each
other with such cooperation and information as any of them reasonably may
request of the others in filing any Tax Return, determining a liability for
Taxes or a right to a refund of Taxes, participating in or conducting any audit
or other proceeding in respect of Taxes or making representations to or
furnishing information to parties subsequently desiring to purchase the Company
or any part of the Business from the Purchaser. Such cooperation and
information shall include providing copies of relevant Tax Returns or portions
thereof, together with accompanying schedules, related work papers and
documents relating to rulings or other determinations by Tax authorities, as
well as such explanations of the same as may be requested by the Purchaser. The
Sellers, on the one hand, and the Purchaser and the Company, on the other hand,
shall sign any Tax Return reasonably requested by the party required to file
such Tax Return and for which the other party's signature is required.
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ARTICLE VIII
CONDITIONS TO CLOSING
SECTION 8.01. Conditions to Obligations of the Sellers and the
Company. The respective obligations of the Sellers and the Company to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment, at or prior to the Closing, of each of the following
conditions, any of which may be waived by the Sellers and the Company in
writing:
(a) Representations, Warranties and Covenants. The
representations and warranties of the Purchaser contained in this Agreement
shall have been true and correct as of the date they were deemed to have been
made, and the representations and warranties set forth in Sections 4.01 and
4.06 shall be true and correct in all material respects as of the Closing, with
the same force and effect as if made as of the Closing. The covenants and
agreements contained in this Agreement to be complied with by the Purchaser on
or before the Closing shall have been complied with. The Sellers shall have
received a certificate from the Purchaser to such effect signed by a duly
authorized representative thereof and dated as of the Closing Date;
(b) Escrow Agreement. The Purchaser shall have executed and
delivered the Escrow Agreement in the form of Exhibit 8.02(1);
(c) No Proceeding or Litigation. No Action shall have been
commenced or threatened by or before any Governmental Authority against any of
the Sellers, the Company, or the Purchaser, seeking to restrain or adversely
alter the transactions contemplated by this Agreement or which is likely to
render it impossible or unlawful to consummate such transactions; provided,
however, that the provisions of this Section 8.01(c) shall not apply if the
Sellers or the Company has directly or indirectly solicited or encouraged any
such Action;
(d) Resolutions. The Sellers shall have received a true and
complete copy, certified by the Secretary or an Assistant Secretary of the
Purchaser of the resolutions duly and validly adopted by the Board of Directors
of the Purchaser evidencing its authorization of the execution and delivery of
this Agreement and the other agreements to be executed by the Purchaser as
contemplated hereby and the consummation of the transactions contemplated
hereby;
(e) Incumbency Certificate. The Sellers shall have received a
certificate of the Secretary or an Assistant Secretary of the Purchaser
certifying the names and signatures
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of the officers of the Purchaser authorized to sign this Agreement and the
other documents to be delivered hereunder;
(f) Legal Opinion. The Sellers shall have received from
Purchaser's Counsel a legal opinion, addressed to the Sellers and dated the
Closing Date, substantially in the form of Exhibit 8.01(f);
(g) Consents and Approvals. Any waiting period (and any extension
thereof) under a law applicable to the purchase of the Shares contemplated
hereby (including the HSR Act) shall have expired or shall have been
terminated, and any consent or approval required shall have been obtained;
(h) Agreement. The Employment Agreement, in the form of Exhibit
8.01(h)(l), shall have been duly executed and delivered by the parties thereto;
(i) Reserved.
SECTION 8.02. Conditions to Obligations of the Purchaser. The
obligations of the Purchaser to consummate the transactions contemplated by
this Agreement shall be subject to the fulfillment, at or prior to the Closing,
of each of the following conditions, any of which may be waived by the
Purchaser in writing, and the Company and the Sellers shall use their best
efforts to cause such conditions to be fulfilled, provided, however, the
Purchaser's election to proceed with the Closing of the transactions
contemplated herein shall not be deemed a waiver of any breach of any
representation, warranty or covenant herein, whether or not known to the
Purchaser or existing on the Closing Date:
(a) Representations, Warranties and Covenants. The representations
and warranties of the Sellers and the Company contained in this Agreement shall
have been true and correct as of the date as of which they were deemed to have
been made, and the representations and warranties set forth in Sections 3.01
and 3.03 shall be true and correct in all material respects as of the Closing,
with the same force and effect as if made as of the Closing. The covenants and
agreements contained in this Agreement to be complied with by the Sellers and
the Company on or before the Closing shall have been complied with. The
Purchaser shall have received a certificate from the Sellers to such effect
dated as of the Closing Date;
(b) Due Diligence. The completion to the Purchaser's
satisfaction, of a due diligence investigation of the Company, including
completion of a satisfactory Phase II environmental audit and the preparation
of all sections of the Disclosure Schedules to this Agreement; provided
however, the Sellers and the Company shall deliver to the
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Purchaser, within twenty (20) Business days after the date of this Agreement, a
complete and accurate Disclosure Schedule. Within ten (10) Business Days of
the Purchaser's receipt of said Disclosure Schedule, the Purchaser shall
provide to the Sellers a list of objections and concerns regarding the
information contained in the Disclosure Schedule. The Sellers and the Company
shall then have thirty (30) Business days after the receipt of such list to
cure all such objections and concerns to the Purchaser's satisfaction. If
after said thirty (30) Business day cure period, the Purchaser remains
dissatisfied with the due diligence finding and the information disclosed in
the Disclosure Schedule and rejects in writing such Disclosure Schedule, or the
Purchaser does not accept in writing the Disclosure Schedule and the
information disclosed therein within ten (10) Business Days, the Purchaser
shall be deemed to have rejected the Disclosure Schedule. If the Purchaser
rejects or is deemed to have rejected the Disclosure Schedule, the Purchaser
may terminate this Agreement at any time pursuant to Article X hereof;
(c) No Proceeding or Litigation. No Action shall have been
commenced or threatened by or before any Governmental Authority against any of
the Sellers, the Company or the Purchaser, seeking to restrain or adversely
alter the transactions contemplated hereby or which is likely to render it
impossible or unlawful to consummate the transactions contemplated by this
Agreement or which could have a Material Adverse Effect, provided, however,
that the provisions of this Section 8.02(c) shall not apply if the Purchaser
has directly or indirectly solicited or encouraged any such Action;
(d) Termination of Shareholders Agreement. The shareholders
agreement identified in Section 3.03(d) of the Disclosure Schedule shall have
been terminated and evidence thereof satisfactory to the Purchaser shall have
been provided to the Purchaser;
(e) Compliance with FIRPTA. The Company shall have provided the
Purchaser with a statement, in a form reasonably satisfactory to the Purchaser,
pursuant to Section 1.897-2(h) of the Treasury Regulations certifying that the
Common Stock is not a U.S. real property interest within the meaning of Section
897(c)(1) of the Code and dated not more than thirty (30) days prior to the
Closing Date;
(f) Legal Opinions. The Purchaser shall have received from
Company's Counsel a legal opinion, addressed to the Purchaser and dated the
Closing Date, substantially in the form of Exhibit 8.02(f);
(g) Consents and Approvals. Any waiting period (and any extension
thereof) under a law applicable to the purchase of the Shares contemplated
hereby (including the HSR Act) shall have expired or shall have been
terminated, and any consent or approval required shall have been obtained;
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(h) Resignations of Directors and Officers. The Purchaser shall
have received the resignations, effective as of the Closing Date, or evidence
of removal as of the Closing Date, of all the directors and officers of the
Company;
(i) Organizational Documents. The Purchaser shall have received a
copy of (i) the articles of incorporation, as amended, of the Company,
certified by the Secretary of State of the State of its organization, as of a
date not earlier than 30 Business Days prior to the Closing Date and
accomplished by a certificate of the Secretary or Assistant Secretary of the
Company, dated as of the Closing Date, stating that no amendments have been
made to such articles of incorporation since such date and (ii) the by-laws of
the Company, as amended, certified by the Secretary or Assistant Secretary of
the Company as of the Closing Date;
(j) Minute Books and Stock Register. The Purchaser shall have
received copies of the minute books and stock register of the Company,
certified by its Secretary or Assistant Secretary as of the Closing Date;
(k) Good Standing; Licenses; Qualification to Do Business. The
Purchaser shall have received good standing certificates, licenses,
certificates of compliance, or certificates of existence, as applicable, for
the Company from the secretary of state, or the other applicable Governmental
Authority, of (i) the jurisdiction in which the Company is incorporated or
organized, and (ii) each other jurisdiction in which the Company does business
requiring it to be licensed and/or to qualify in such jurisdiction, in each
case dated as of a date not earlier than 30 Business Days prior to the Closing
Date;
(l) Escrow Agreement. The Sellers shall have executed and
delivered the Escrow Agreement in the form of Exhibit 8.02(l) and made the
transfers to the Escrow Agent as contemplated thereby;
(m) Resolutions. The Purchaser shall have received a true and
complete copy, certified by the Secretary or an Assistant Secretary of the
Company resolutions duly and validly adopted by the Board of Directors of the
Company evidencing its authorization of the execution and delivery of this
Agreement and the other agreements to be executed by the Company as
contemplated hereby and the consummation of the transactions contemplated
hereby;
(n) Financing. The Purchaser shall have obtained financing for
the Acquisition satisfactory to the Purchaser, in its sole discretion, through
public or private placement of debt or equity, including an initial public
offering of securities by First Wave Marine, Inc. or traditional commercial
lender financing;
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(o) Appraisals. Seller shall have obtained appraisals from
qualified appraisers that the appraised value of all the fixed assets of the
Company in the Pasadena and Galveston, Texas shipyards is not less than Sixteen
Million and No/100 Dollars ($16,000,000.00).
(p) No Regulatory Restrictions. The Company shall not be subject
to any material restriction (whether on its business, operations, ability to
pay dividends or incur indebtedness, or otherwise) imposed or proposed to be
imposed as a result of the transactions contemplated by this Agreement by any
Governmental Authority except restrictions generally applicable to companies
engaging in businesses substantially similar to the Business and restrictions
which result primarily from any action or inaction of the Purchaser or the fact
that the Purchaser is a participant in the transactions contemplated by this
Agreement;
(q) Minimum Asset and Debt Values. The total amount of the
accounts receivable, cash and cash equivalents and work-in-process of the
Company shall not be less than Six Million and No/100 Dollars ($6,000,000.00),
and the debt on the Revolving Credit Facility shall not be greater than Two
Million and No/100 Dollars ($2,000,000.00). The Company's Long Term Debt from
commercial lenders incurred prior to May 1, 1997, shall not exceed Seven
Million and No/100 Dollars ($7,000,000.00).
(r) Reserved.
(s) Inter-Company Arrangements. The Sellers and the Company, as
applicable, shall have terminated the Inter-Company Arrangements in accordance
with Section 5.13 and delivered to the Purchaser evidence thereof which is
reasonably acceptable to Purchaser; and
(t) Employment Agreement. The Employment Agreement in the form of
Exhibit 8.01(h)(l) shall have been duly executed and delivered by the parties
thereto.
ARTICLE IX
SURVIVAL AND INDEMNIFICATION
SECTION 9.01. Survival of Representations, Warranties and Covenants.
(a) The representations and warranties of the Sellers contained in
this Agreement, the Exhibits to this Agreement and the Disclosure Schedule and
any certificate, statement or report or other document delivered pursuant to
this Agreement
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(collectively, the "Acquisition Documents"), shall survive the Closing until
the third (3rd) anniversary of the Closing Date; provided, however, that all
representations and warranties made by Sellers in Sections 3.01, 3.03, 3.16 and
Article VII shall survive until the close of business on the 30th day
following the expiration of the applicable statute of limitations or any
extension thereof. No covenants of the Sellers shall survive after the Closing
Date except for those contained in Sections 5.03, 5.04, 5.07, 5.08, 5.09 5.10,
Article VII, Article IX and such other Sections, if any, as so expressly
provided. Neither the period of survival nor the liability of the Sellers or
the Purchaser with respect to the Sellers' or the Purchaser's representations
and warranties shall be reduced by any investigation made at any time by or on
behalf of the Purchaser or the Sellers, as the case may be. If written notice
of a claim has been properly given in the manner required by Section 9.02(d)
prior to the expiration of the applicable representations and warranties, then
the relevant representations and warranties shall survive as to such claim
until such claim has been finally resolved. No representation, warranty or
covenant of the Company contained in the Acquisition Documents shall survive
the Closing.
(b) The representations and warranties of the Purchaser contained
in this Agreement, the Exhibits to this Agreement and the Disclosure Schedule
and any certificate, statement or report or other document delivered pursuant
to this Agreement (collectively, the "Acquisition Documents"), shall survive
the Closing until the third (3rd) anniversary of the Closing Date. No covenants
of the Purchaser shall survive after the Closing Date except for those
contained in Sections 5.03, 5.04, 5.10, Article VII, Article IX, and such other
Sections, if any, as so expressly provided. If written notice of a claim has
been properly given in the manner required by Section 9.02(d) Prior to the
expiration of the applicable representations and warranties, then the relevant
representations and warranties shall survive as to such claim until such claim
has been finally resolved.
SECTION 9.02. Indemnification.
(a) The Purchaser (and, after the Closing, the Company) and its
other Affiliate, and each of their officers, directors, employees, agents,
consultants, successors and assigns shall be indemnified and held harmless by
the Sellers for the net amount (as provided for in Section 9.02 (e)(ii)) of any
and all liabilities, losses, damages, claims, reasonable costs and expenses,
interest, awards, judgments, damages (including punitive damages), fines, fees
and penalties (including, without limitation, attorneys', experts' and
consultants' fees and expenses) (collectively, "Losses") actually suffered or
incurred by them (including, without limitation, any Action brought or
otherwise initiated by any of them), arising out of or resulting from:
(i) The inaccuracy of any representation or warranty made
by the Sellers contained in any of the Acquisition
Documents; or
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(ii) the breach of any covenant or agreement by the
Sellers contained in the Acquisition Documents.
(b) The Sellers and their respective Affiliates, officers,
directors, employees, agents, consultants, successors and assigns shall be
indemnified and held harmless by the Purchaser for any and all Losses actually
suffered or incurred by any Indemnified Party (including, without limitation,
any Action brought or otherwise initiated by any of them), arising out of or
resulting from:
(i) the inaccuracy of any representation or warranty made
by the Purchaser contained in the Acquisition
Documents;
(ii) the breach of any covenant or agreement by the
Purchaser contained in the Acquisition Documents;
(iii) any liability of the Company relating solely to
actions taken by the Company after the Closing Date
and which do not relate, in whole or in part, to the
breach of any representation, warranty or covenant in
the Acquisition Documents by any of the Sellers,
disregarding for purposes of this clause (iii) any
knowledge limitation contained in the Acquisition
Documents on the Sellers' representations, warranties
or covenants, provided, however, the obligation of
the Purchaser pursuant to this clause (iii) shall
terminate on the (third) anniversary of the Closing
Date.
(c) To the extent that an Indemnifying Party's undertakings set
forth in this Section 9.02 may be unenforceable, such Indemnifying Party shall
contribute the maximum amount that it is permitted to contribute under
applicable law, and as limited by this Agreement, to the payment and
satisfaction of all Losses incurred by an Indemnified Party.
(d) All claims for indemnification against the Sellers or the
Purchaser, as the case may be (an "Indemnifying Party"), under any provision of
this Article IX shall be asserted and resolved as follows:
(i) In the event of any claim or demand for which an
Indemnifying Party would be liable for Losses to the
Persons specified in Section 9.02(a) or (b), as
applicable, (each an "Indemnified Party") which is
asserted against or sought to be collected from such
Indemnified Party by a Person other than the
Purchaser or the Sellers ("Third Party Claim"), the
Indemnified Party shall deliver a Claim Notice (as
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defined below) with reasonable promptness to the
Indemnifying Party after the Indemnified Party has
actual notice of the Third Party Claim. The failure
by any Indemnified Party to provide the Indemnifying
Party with the Claim Notice required by the preceding
sentence shall not impair the Indemnified Party's
rights hereunder except to the extent that an
Indemnifying Party demonstrates that it has been
materially prejudiced thereby. The Indemnifying Party
shall notify the Indemnified Party within thirty (30)
days of receipt of the Claim Notice ("Notice Period")
whether the Indemnifying Party desires, at the sole
cost and expense of the Indemnifying Party, to defend
the Indemnified Party against such Third Party Claim.
(ii) If the Indemnifying Party notifies the Indemnified
Party within the Notice Period that the Indemnifying
Party desires to defend the Indemnified Party with
respect to the Third Party Claim pursuant to this
Section 9.02(d), then the Indemnifying Party shall
have the right to defend, at its sole cost and
expense, and, except as provided in the following
sentence, through counsel of its choice reasonably
acceptable to the Indemnified Party such Third party
Claim by all appropriate proceedings, which
proceedings shall be diligently defended by the
Indemnifying Party to a final conclusion or shall be
settled at the discretion of the Indemnifying Party
(with the prior written consent of the Indemnified
Party, which consent shall not be unreasonably
withheld), so long as the Indemnified Party is fully
released with respect to such Third Party Claim. If
there exists or is reasonably likely to exist a
conflict of interest that would make it inappropriate
in the reasonable judgment of the Indemnified Party
for the same counsel to represent both the
Indemnified Party and the Indemnifying Party and the
Indemnifying Party does not provide separate counsel
reasonably acceptable to the Indemnified Party, then
the Indemnified Party shall be entitled to retain its
own counsel, in each jurisdiction for which the
Indemnified Party reasonably determines counsel is
required, at the expense of the Indemnifying Party.
Assumption by the Indemnifying Party of the defense
of such Third Party Claim will not constitute an
admission by the Indemnifying Party that the claim or
litigation is one for which the Indemnifying Party is
required to indemnify the Indemnifying Party under
this Article IX. The Indemnifying Party shall have
full control of such defense and proceedings;
provided, however, that the Indemnified Party may at
the sole cost and expense of the Indemnifying Party,
file during the Notice Period any motion,
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answer, or other pleadings that the Indemnified Party
may deem necessary or appropriate to protect its
interests and not irrevocably prejudicial to the
Indemnifying Party (it being understood and agreed
that, except as provided in Section 9.02(d)(iii)
hereof, if an Indemnified Party takes any such action
that is irrevocably prejudicial and conclusively
causes a final adjudication that is materially
adverse to the Indemnifying Party, the Indemnifying
Party will be relieved of its obligations hereunder
with respect to the portion of such Third Party Claim
prejudiced by the Indemnified Party's action); and
provided further, however, that if requested by the
Indemnifying Party, the Indemnified Party agrees, at
the sole cost and expense of the Indemnifying Party,
to cooperate with the Indemnifying Party and its
counsel in contesting any Third Party Claim that the
Indemnifying Party elects to contest, or, if
appropriate in the judgment of the Indemnified Party
and related to the Third Party Claim in question, in
making any counterclaim against the person asserting
the Third Party Claim or any cross-complaint against
any Person (other than the Indemnified Party). The
Indemnified Party may, at its sole cost and expense,
participate in, but not control, any defense or
settlement of any Third Party Claim controlled by the
Indemnifying Party pursuant to this Section
9.02(d)(ii).
(iii) If the Indemnifying Party fails to notify the
Indemnified Party within the Notice Period that the
Indemnifying Party desires to defend the Indemnified
Party pursuant to Section 9.02(d)(i), or if the
Indemnified Party gives such notice but fails to
defend the Third Party Claim, then the Indemnified
Party will have the right (but not the obligation) to
defend, at the sole cost and expense of the
Indemnifying Party, the Third Party Claim by all
appropriate proceedings, which proceedings will be
vigorously defended by the Indemnifying Party or will
be settled at the discretion of the Indemnified
Party. The Indemnified Party shall have full control
of such defense and proceedings, including any
compromise or settlement thereof provided, however,
that if requested by the Indemnified Party, the
Indemnifying Party agrees, at the sole cost and
expense of the Indemnifying Party, to cooperate with
the Indemnified Party and its counsel in contesting
any Third Party Claim which the Indemnified Party is
contesting, or, if appropriate and relating to the
Third Party Claim in question, in making any
counterclaim against the person asserting the Third
Party Claim, or
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any cross-complaint against any person (other than
the Indemnifying Party or any of its Affiliates).
Notwithstanding the foregoing provisions of this
Section 9.02(d)(iii), if the Indemnifying Party has
notified the Indemnified Party with reasonable
promptness that the Indemnifying Party disputes, or
reserves its rights to dispute, its liability to the
Indemnified Party with respect to such Third Party
Claim and if such dispute is resolved in favor of the
Indemnifying Party, the Indemnifying Party will not
be required to bear the costs and expenses of the
Indemnified Party's defense pursuant to this Section
9.02(d) (iii) or of the Indemnifying Party's
participation there in at the Indemnified Party's
request, and the Indemnified Party will reimburse the
Indemnifying Party in full for all costs and expenses
incurred by the Indemnifying Party in connection with
such litigation. The Indemnifying Party may
participate in, but not control, any defense or
settlement controlled by the Indemnified Party
pursuant to this Section 9.02(d)(iii), but the
Indemnifying Party will bear its own costs and
expenses with respect to such participation.
Regardless of whether the Indemnifying Party defends
a Third Party Claim on behalf of the Indemnified
Party or participates in the defense thereof, the
Indemnified Party and the Indemnifying Party shall
reasonably cooperate with each other in all material
respects in connection with the defense for such
Third Party Claim. Each Indemnified Party shall
furnish such information regarding itself and the
Third Party Claim as the Indemnifying Party may
reasonably request in writing and as shall be
reasonably required in connection with the defense
hereof. No Third Party Claim may be settled by the
Indemnifying Party without the prior written consent
of the Indemnified Party (which consent shall not be
unreasonably withheld), unless such settlement
provides a release of the Indemnified Party for such
claim.
(iv) In the event any Indemnified Party should have a
claim for Losses against any Indemnifying Party
hereunder that does not involve a Third Party Claim
being asserted against or sought to be collected from
the Indemnified Party, the Indemnified Party shall
deliver an Indemnity Notice (as defined below) with
reasonable promptness to the Indemnifying Party after
the Indemnified Party has actual notice of such
claim. The failure by any Indemnified Party to give
the notice referred to in the preceding sentence
shall not impair such party's rights hereunder except
to the extent that an Indemnifying Party demonstrates
that it has been irreparably prejudiced thereby.
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The Indemnifying Party and the Indemnified Party
agree to proceed in good faith to negotiate a
resolution of any dispute relating to such a claim
for Losses within sixty (60) days following receipt
of any Indemnity Notice. If any such claim is not
resolved within the foregoing period, the parties may
pursue any available remedies.
(v) The term "Claim Notice" shall mean written
notification of a Third Party Claim by an Indemnified
Party to an Indemnifying Party pursuant to Section
9.02(d)(i), enclosing a copy of all papers served, if
any, and specifying the nature of the alleged basis
for such Third Party Claim and, to the extent then
feasible, the alleged amount or the estimated amount
of such Third Party Claim.
(vi) The term "Indemnity Notice" shall mean written
notification of a claim for indemnity (which claim
does not involve a Third Party Claim) by an
Indemnified Party to an Indemnifying Party pursuant
to Section 9.02(d)(iv) hereof, specifying the nature
of and specific basis for such claim and, to the
extent then feasible, the amount or the estimated
amount of such claim.
(vii) Any estimated amount of a claim submitted in a Claim
Notice or an Indemnity Notice shall not be conclusive
of the final amount of such claim.
(viii) Reserved.
(ix) In connection with each Third Party Claim, the
Indemnifying Party shall obligated to provide only
one counsel to all Indemnified Parties.
(e) (i) The terms and provisions set forth in this Section
9.02 shall constitute the sole rights and remedies of
the parties for money damages in respect of any
inaccuracies of representations or warranties or any
breaches of covenants or agreements contained in this
Agreement.
(ii) In the event of a claim pursuant to Section
9.02(a)(v), the Purchaser agrees, to the extent
practical, to seek recovery for the related Losses
from any proceeds of insurance providing coverage to
the Purchaser therefor, prior to collection of such
Losses from the Sellers; provided, however, the
foregoing provision shall in no way
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limit or restrict any actions or proceedings by the
Purchaser against any Indemnifying Party, including
without limitation the Sellers, to the extent the
Purchaser deems, in its discretion, such actions or
proceedings to be necessary to preserve, maintain or
enforce any of its rights against any Indemnifying
Party.
SECTION 9.03. Limits on Indemnification.
(a) No amount shall be payable by any Indemnifying Party pursuant
to Section 9.02(a) unless and until the aggregate amount of Losses
indemnifiable under Section 9.02(a) exceeds $350,000.00 and then the
Indemnifying Party shall indemnify the Indemnified Party to the full extent of
such Losses in excess of $350,000.00, up to but not to exceed $6,000,000.00.
(b) The limitations set forth in Sections 9.03(a) shall not apply
with respect to any Losses suffered or incurred by the Purchaser in connection
with the representations contained in Sections 3.01, 3.03, and Article VII, and
the Sellers shall fully indemnify the Purchaser for any such Losses from the
first dollar of such Losses to the full extent of such Losses.
(c) However, this Section 9.03 shall not apply to any to any
breach of any representations and warranties of the Sellers or the Company
which any of the Sellers knew to be untrue or false at the time such
representation and warranty was made or any intentional breach of any covenant
or obligation of any of the Sellers or the Company under this Agreement.
SECTION 9.04. Reserved.
ARTICLE X
TERMINATION AND WAIVER
SECTION 10.01. Termination by the Sellers or Purchaser. This
Agreement may be terminated at any time prior to the Closing Date:
(a) By the Purchaser if, between the date hereof and the Closing
Date: (i) any representation or warranty of the Sellers or the Company
contained in this Agreement shall not have been true and correct in all
material respects as of the date when deemed to have been made and, in the case
of a breach reasonably susceptible to cure, shall not have been cured within
thirty (30) calendar days, (ii) the Sellers or the Company shall not have
complied in all material respects with any covenant or agreement to be complied
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with by it and contained in this Agreement and, in the case of a breach
reasonably susceptible to cure, shall not have been cured within thirty (30)
calendar days, or (iii) any of the Sellers or the Company makes a general
assignment for the benefit of creditors, or any proceeding shall be instituted
by or against, any of the Sellers or the Company seeking to adjudicate any of
them a bankrupt or insolvent, or seeking liquidation, winding up or
reorganization, arrangement, adjustment, protection, relief or composition of
its debts under any Law relating to bankruptcy, insolvency or reorganization;
and (iv) the Sellers fail to provide a complete and accurate Disclosure
Schedule satisfactory to Purchaser, in Purchaser's sole discretion, or are
unable to cure any objections or concerns which the Purchaser has regarding the
information contained in the Disclosure Schedule within the time periods
provided for in Section 8.02(b) hereof; or
(b) By the Sellers, if, between the date hereof and the Closing
Date; (i) any representation or warranty of the Purchaser contained in this
Agreement shall not have been true and correct in all material respects as to
the date when deemed to have been made and, in the case of a breach reasonably
susceptible to cure, shall not have been cured within thirty (30) calendar
days, (ii) the Purchaser shall not have complied in all material respects with
any covenant or agreement to be complied with by it and contained in this
Agreement, and, in the case of a breach reasonably susceptible to cure, shall
not have been cured within thirty (30) calendar days, or (ii) the Purchaser
makes a general assignment for the benefit of creditors, or any proceeding
shall be instituted by or against the Purchaser seeking to adjudicate it
bankrupt or insolvent, or seeking liquidation, winding up or reorganization,
arrangement, adjustment, protection, relief or composition of its debts under
any Law relating to bankruptcy, insolvency or reorganization; or
(c) By either the Sellers or the Purchaser if the Closing Date
shall not have occurred by February 15, 1998; provided, however, that the right
to terminate this Agreement under this Section 10.01(c) shall not be available
to any party whose failure to fulfill any obligation under this Agreement shall
have been the cause of, or shall have resulted in, the failure of the Closing
Date to occur on or prior to such date; or
(d) By either the Purchaser or the Sellers in the event that any
Governmental Authority shall have issued an order, decree or ruling or taken
any other action restraining, or enjoining or otherwise prohibiting the
transactions contemplated by this Agreement or in the reasonable determination
of the Purchaser of the Sellers, otherwise render inadvisable the consummation
of the transaction contemplated by this Agreement and such order, decree,
ruling or other action shall have become final and nonappealable; or
(f) By the mutual written consent of the Sellers, the Company and
the Purchaser.
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SECTION 10.02 Effect of Termination. In the event of termination of
this Agreement as provided in Section 10.01, this Agreement shall forthwith
become void and there shall be no liability on the part of any party hereto
except that nothing herein shall relieve any party from liability for any fraud
or willful breach of this Agreement.
SECTION 10.03 Waiver. Any party to this Agreement may (a) extend the
time for the performance of any of the obligations or other acts of the other
party, (b) waive any inaccuracies in the representation and warranties of the
other party contained herein or in any document delivered by the other party
pursuant hereto, or (c) waive compliance with any of the agreements or
conditions of the other party contained herein. Any such extension or waiver
shall be valid only if set forth in an instrument in writing signed by the
party to be bound thereby. Any waiver of any term or condition shall not be
construed as a waiver of any subsequent breach or a subsequent waiver of the
same term or condition, or a waiver of any other term or condition, of this
Agreement. The failure of any party to assert any of its rights hereunder
shall not constitute a waiver of any of such rights.
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01. Joint and Several Obligation of the Sellers and the
Company. Prior to the Closing Date, the obligations of the Sellers and the
Company under this Agreement shall be joint and several. Following the Closing
Date, the Sellers shall remain jointly and severally obligated hereunder but
shall have no right of or claim to contribution or indemnity against the
Company with respect to any breach, violation, default, or alleged breach,
violation or default of any representation, warranty or covenant of the Company
in any of the Acquisition Documents.
SECTION 11.02. Expenses. All costs and expenses, including,
without limitation, fees and disbursements of counsel, financial advisors and
accountants, incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses, whether or not the Closing shall have occurred.
SECTION 11.03. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by delivery
in person, by courier service, by telecopy (confirmed by telephone within 24
hours following receipt thereof, or by registered or certified mail (postage
prepaid, return receipt requested) to the
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respective parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this Section
11.03):
(a) If to the Company:
John Bludworth Marine, Inc.
Post Office Box 6504
Pasadena, Texas 77506-6504
Telecopy: (713) 473-7077
Telephone: (713) 473-5561
(b) If to the Sellers:
John L. Bludworth, III
21511 Hegar Road
Hockley, Texas 77447
Telecopy: (409) 931-5308
Telephone: (409) 931-1400
With a copy to:
Meyer, Knight & Williams, L.L.P.
Attention: L. Don Knight
8100 Washington Avenue, Suite 1000
Houston, Texas 77007
Telecopy: (713) 868-2262
Telephone: (713) 868-2222
and
(c) If to the Purchaser:
EAE Services, Inc.
4000 South Sherwood Forest Boulevard, Suite 603
Baton Rouge, Louisiana 70816
Attention: David B. Ammons, Secretary
Telecopy: (504) 292-8000
Telephone: (504) 292-8100
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With a copy to:
Breazeale, Sachse & Wilson, L.L.P.
One American Place, 23rd Floor (70825)
P. O. Box 3197
Baton Rouge, Louisiana 70821-3197
Attention: Robert T. Bowsher, Esq.
Telecopy: (504) 387-4000
Telephone: (504) 387-5397
SECTION 11.04. Public Announcements. Except to the extent that the
Sellers or the Purchaser believes on the advice of counsel that public
disclosure is required by law, no party to this Agreement shall make, or cause
to be made, any press release or public announcement in respect of this
Agreement or the transactions contemplated hereby or otherwise communicate with
any news media without prior notification to the other parties, and the parties
shall cooperate as to the timing and contents of any such press release or
public announcement.
SECTION 11.05. Headings; Construction. The descriptive headings
contained in this Agreement are for convenience of reference only and shall not
affect in any way the meaning or interpretation of this Agreement. The
provisions of this Agreement were negotiated by the parties hereto and this
Agreement shall be deemed to have been drafted by all the parties hereto.
SECTION 11.06. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner in order that the transactions contemplated hereby are consummated as
originally contemplated to the greatest extent possible.
SECTION 11.07. Entire Agreement. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof and
thereof and supersede all prior agreements and undertakings, both written and
oral, between the parties with respect to the subject matter hereof.
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SECTION 11.08. Assignment. This Agreement may not be assigned by any
party hereto by operation of law or otherwise without the express written
consent of the other parties hereto (which consent may be granted or withheld
in the sole discretion of such other parties); provided, however,
notwithstanding the foregoing, the Purchaser may assign its rights under this
Agreement to a wholly-owned subsidiary but such assignment shall not release
the Purchaser from any of its obligations hereunder.
SECTION 11.09. No Third Party Beneficiaries. Except for the provisions
of Article IX relating to Indemnified Parties, this Agreement shall be binding
upon and inure solely to the benefit of the parties hereto and their permitted
assigns and nothing herein, express or implied, is intended to or shall confer
upon any other Person any legal or equitable right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement.
SECTION 11.10. Amendment. This Agreement may not be amended or
modified except (a) by an installment in writing signed by, or on behalf of,
the parties hereto, or (b) by a waiver in accordance with Section 10.03.
SECTION 11.11. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas, applicable to
contracts executed in and to be performed entirely within that state.
SECTION 11.12. Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
SECTION 11.13. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
SECTION 11.14. Legal Advice. Each party hereto represents and warrants
to the other party that he, she or it has consulted attorneys, accountants and
tax advisors of their own choosing concerning the legal, financial and tax
consequences of this Agreement.
SECTION 11.15. Remedies Not Exclusive. Subject to the provisions of
Section 9.02(e), no remedy conferred by any of the specific provisions of this
Agreement is intended to be exclusive of any other remedy, and each and every
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or not or hereafter existing at law or in equity or by state or
otherwise. The election of any one or
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more remedies by any party hereto shall not constitute a waiver of the right to
pursue other available remedies.
SECTION 11.16. Arbitration of EBITDA. Any dispute or disagreement
with respect to the computation of the EBITDA of the Company with respect to
the (1) Post-Closing Adjustment, as defined in Section 1.01, or (2) the bonus
of John L. Bludworth, III, as defined in Section 2.06, shall be submitted for a
final and binding determination of an arbitrator, which shall be an independent
so called "Big Six" accounting firm (the "Arbitrator"). The Arbitrator shall
be mutually agreed upon by the parties or if the parties cannot agree, by the
agreement of the Sellers' and Purchaser's accountants. A condition precedent
to the appointment of the Arbitrator shall be its agreement that the Arbitrator
shall render a decision within ten (10) days of the submission by the
respective parties of information to the Arbitrator. To the extent applicable,
the Commercial Arbitration Rules of the American Arbitration Association as
then in effect shall apply. The findings of the Arbitrator shall be in
writing. The determination of the Arbitrator shall be final and conclusive
upon the parties for which judgment thereon may be entered by any court of
competent jurisdiction. The costs of such arbitration shall be shared equally.
SECTION 11.17 Arbitration of Other Claim. Any dispute, controversy or
claim arising out of or relating to this Agreement, except for disputes arising
out of the calculation of the Company's EBITA with respect to the Post Closing
Adjustment or the bonus of John l. Bludworth, III, which shall be finally
settled in accordance with Section 11.16 hereof, shall be finally settled under
the Commercial Arbitration Rules of the American Arbitration Association as
then in force, by three (3) arbitrators, one of whom shall be designated by
Sellers, one of whom shall be designated by the Purchaser, and one of whom
shall be designated jointly by the Sellers' and the Purchasers' designees in
accordance with said rules. In rendering a decision, the arbitrators shall
make specific findings of fact and take into account all applicable judicial
precedents and industry practice. All disputes, controversies or claims, or
any rights or obligations of the parties hereto, shall be governed by and
resolved in accordance with the governing law provisions set forth in Section
11.11 hereof. The place of arbitration shall be Houston, Texas. An award or
determination of the arbitration tribunal shall be final and conclusive upon
the parties, judgment thereon may be entered by any court of competent
jurisdiction and no appeal thereof shall be made by the parties.
The parties agree that the award of the arbitrators (i) shall provide
that the prevailing party shall be entitled to recover from the other party
reasonable attorneys' fees and expenses in addition to any other relief that
may be awarded; (ii) shall be promptly payable free of any tax, deduction or
off-set except as otherwise provided by any law; (iii) shall provide that any
cost, fees or taxes incident to enforcing the award
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shall, to the maximum extent permitted by law, be charged against the party
resisting such enforcement; and (iv) shall include interest from the date of
any damages incurred, and from the date of the award until paid in full, at a
rate fixed by the arbitrators but in no event less than the "prime rate" per
annum quoted for the corresponding period by Bank One, Louisiana.
IN WITNESS WHEREOF, the Sellers, the Company, the Purchaser and First
Wave Marine, Inc. have caused this Agreement to be executed as of the date
first written above, the corporate parties represented herein by their
respective officers thereunto duly authorized.
SELLERS:
/s/ JOHN L. BLUDWORTH, III
----------------------------------
John L. Bludworth, III
/s/ KARLA M. BLUDWORTH
----------------------------------
Karla M. Bludworth
THE COMPANY:
JOHN BLUDWORTH MARINE, INC.
By: /s/ JOHN L. BLUDWORTH, III
-------------------------------
Name: John L. Bludworth, III
Title: President
BLUDWORTH SHIPYARD AND FABRICATION,
INC.
By: /s/ JOHN L. BLUDWORTH, III
-------------------------------
Name: John L. Bludworth, III
Title: President
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<PAGE> 80
THE PURCHASER:
EAE SERVICES, INC.
By: /s/ SAMUEL F. EAKIN
-------------------------------
Name: Samuel F. Eakin
Title: Chief Executive Officer
and Chairman of the Board
Intervening for the purpose of
agreeing to guarantee Purchaser's
Note as provided in Section
2.02(f), and to grant stock
options as provided in Section 6.01:
FIRST WAVE MARINE, INC.
BY: /s/ SAMUEL F. EAKIN
-------------------------------
Name: Samuel F. Eakin
Title: Chief Executive Officer
and Chairman of the Board
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<PAGE> 81
EXHIBIT A
ASSETS
1. Assets listed in appraisals, dated ______________________, 1997
2. Assets listed in depreciation schedules attached hereto
<PAGE> 82
EXHIBIT 1.01 (ii)
PERMITTED ENCUMBRANCES
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EXHIBIT 8.01(f)
LEGAL OPINION OF PURCHASER'S COUNSEL
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<PAGE> 84
1 EXHIBIT 8.01(h)(l)
EMPLOYMENT AGREEMENT
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<PAGE> 85
EXHIBIT 8.02(f)
LEGAL OPINION OF COMPANY'S COUNSEL
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<PAGE> 86
EXHIBIT 8.02(l)
ESCROW AGREEMENT
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<PAGE> 1
EXHIBIT 10.4
LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of July 15, 1997 (this "Agreement"), is
between LOUISIANA SHIP, INC., a Texas corporation ("Borrower"), and SOUTHWEST
BANK OF TEXAS, N.A., a national banking association ("Lender").
R E C I T A L S :
Borrower has requested that Lender extend credit to Borrower in the
form of (a) revolving credit advances which shall not exceed an aggregate
principal amount of $800,000.00 at any time outstanding, (b) an equipment
guidance line of credit which shall not exceed an aggregate principal amount of
$300,000.00, (c) a term loan in the amount of $650,000.00, and (d) a term loan
in the amount of $500,000.00. Lender is willing to make such extensions of
credit to Borrower upon the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I.
Definitions
Section 1.01. Definitions. As used in this Agreement, the following
terms have the following meanings:
"Advance-A" means an advance of funds by Lender to Borrower
pursuant to Article II.
"Advance-B" means an advance of funds by Lender to Borrower
pursuant to Article III.
"Advance Request Form-A" means a certificate, in substantially
the form of Exhibit "L" hereto, properly completed and signed by
Borrower requesting an Advance-A.
"Advance Request Form-B" means a certificate, in substantially
the form of Exhibit "M" hereto, properly completed and signed by
Borrower requesting an Advance-B.
"Advances" means the Advances-A and the Advances-B.
"Arbitration Agreement" means the Arbitration Agreement
executed by Borrower, Guarantor and NS&R in substantially the form of
Exhibit "K" hereto, as the same may be amended, supplemented, or
modified.
<PAGE> 2
"Borrowing Base-A" means, at any particular time, an amount
equal to the lesser of (a) 80% of Eligible Accounts or (b)
$800,000.00.
"Borrowing Base Certificate" means a certificate substantially
in the form of Exhibit "I" executed by an officer of Borrower
acceptable to Lender.
"Borrowing Limit-B" means for each Advance-B, an amount equal
to the lesser of (a) eighty percent (80%) of the purchase price of the
Purchased Equipment-B purchased with such Advance-B or (b)
$300,000.00.
"Business Day" means any day on which commercial banks are not
authorized or required to close in Houston, Texas.
"Closing Date" means the date on which this Agreement has been
executed and delivered by the parties hereto, the conditions set forth
in Section 8.01 have been satisfied and Lender has funded the loans
evidenced by the Notes.
"Collateral" has the meaning specified in Section 7.01.
"Commitment-A" means the obligation of Lender to make
Advances-A hereunder in an aggregate principal amount at any time
outstanding up to but not exceeding $800,000.00, as such amount may be
reduced as provided in Section 2.08.
"Contingency Agreement" means that Contingency Agreement
executed by NS&R and Borrower in substantially the form of Exhibit "G"
hereto.
"Current Maturities of Long Term Debt" means for Borrower, the
principal amount due and payable during the next succeeding twelve
month period of Debt of Borrower for borrowed money, other than
Subordinated Debt, which Debt has a final maturity more than twelve
months from the date of calculation.
"Debt" means for Borrower (a) all indebtedness, whether or not
represented by bonds, debentures, notes, securities, or other
evidences of indebtedness, for the repayment of money borrowed, (b)
all indebtedness representing deferred payment of the purchase price
of property or assets, (c) all indebtedness under any lease which, in
conformity with GAAP, is required to be capitalized for balance sheet
purposes, (d) all indebtedness under guaranties, endorsements,
assumptions, or other contingent obligations, in respect of, or to
purchase or otherwise acquire, indebtedness of others, (e) all
indebtedness secured by a Lien existing on property owned, subject to
such Lien, whether or not the indebtedness secured thereby shall have
been assumed by the owner thereof, and (f)
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<PAGE> 3
any obligation to redeem or repurchase any of such Person's capital
stock, warrants, or stock equivalents.
"Debt Service Coverage Ratio" means for Borrower the sum of
(a) net income, plus (b) depreciation, amortization and other non cash
charges, plus (c) interest expense, divided by the sum of (x)
principal payments made on Current Maturities of Long Term Debt, plus
(y) interest expense.
"Default Rate" means the lesser of (a) the sum of the Prime
Rate in effect from day to day plus four percent (4%) or (b) the
Maximum Rate.
"EAE" means EAE Industries, Inc., a Texas corporation, and its
successors and assigns.
"Eligible Accounts" means the aggregate of all accounts
receivable of Borrower that are acceptable to Lender in its sole
discretion and satisfy the following conditions: (a) are due and
payable within thirty (30) days; (b) have been outstanding less than
ninety (90) days past the original date of invoice; (c) have arisen in
the ordinary course of business from services performed by Borrower to
or for the account debtor or the sale by Borrower of goods in which
Borrower had sole ownership where such goods have been shipped or
delivered to the account debtor; (d) represent complete bona fide
transactions which require no further act under any circumstances on
the part of Borrower to make such accounts receivable payable by the
account debtor, provided that progress billings may constitute
Eligible Accounts if such progress billings are contemplated in the
underlying contract; (e) the goods and services the sale of which gave
rise to such accounts receivable were shipped or delivered to the
account debtor on an absolute sale basis and not on consignment, a
sale or return basis, a guaranteed sale basis, a bill and hold basis,
or on the basis of any similar understanding; (f) the goods and
services the sale of which gave rise to such accounts receivable were
not, at the time of sale thereof, subject to any Lien, except the
security interest in favor of Lender created by the Loan Documents;
(g) are not subject to any provisions prohibiting assignment or
requiring notice of or consent to such assignment; (h) are subject to
a perfected, first priority security interest in favor of Lender and
are not subject to any other Lien; (i) are not subject to setoff,
counterclaim, defense, allowance, dispute, or adjustment other than
normal discounts for prompt payment, and the goods of sale which gave
rise to such accounts receivable have not been returned, rejected,
repossessed, lost, or damaged; (j) the account debtor is not insolvent
or the subject of any bankruptcy or insolvency proceeding and has not
made an assignment for the benefit of creditors, suspended normal
business operations, dissolved, liquidated, terminated its
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existence, ceased to pay its debts as they become due, or suffered a
receiver or trustee to be appointed for any of its assets or affairs;
(k) are not evidenced by chattel paper or any instrument of any kind;
(l) are owed by a Person or Persons that are citizens of or organized
under the laws of the United States or any State and are not owed by
any Person located outside of the United States of America; (m) if any
accounts receivable are owed by the United States of America or any
department, agency, or instrumentality thereof, the Federal Assignment
of Claims Act shall have been complied with; and (n) are not owed by
an affiliate of Borrower. No account receivable owed by an account
debtor to Borrower shall be included as an Eligible Account if more
than twenty percent (20%) of the balances then outstanding on accounts
receivable owed by such account debtor and its affiliates to Borrower
have remained unpaid for more than eighty-nine (89) days from the
dates of their original invoices; provided that this sentence shall
not apply to accounts receivable from account debtors whose exemption
from the provisions of this sentence has been approved by Lender. The
amount of any Eligible Accounts owed by an account debtor to Borrower
shall be reduced by the amount of all "contra accounts" and other
obligations owed by Borrower to such account debtor. In the event
that at any time the accounts receivable from any account debtor and
its affiliates to Borrower exceed twenty percent (20%) of the accounts
receivable of Borrower, the accounts receivable from such account
debtor and its affiliates shall not constitute Eligible Accounts to
the extent to which such accounts receivable exceed twenty percent
(20%) of the accounts receivable of Borrower.
"Environmental Laws" means any and all federal, state and
local laws, regulations, and requirements pertaining to health,
safety, or the environment, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act
of 1980, 42 U.S.C. Section 9601 et seq.,the Resource Conservation and
Recovery Act of 1976, 42 U.S.C. Section 6901 et seq., the
Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq.,
the Clean Water Act, 33 U.S.C. Section 1251 et seq., the Toxic
Substances Control Act, 15 U.S.C. Section 2601 et seq., and all
similar laws, regulations, and requirements of any governmental
authority or agency having jurisdiction over Borrower or any of its
properties or assets, as such laws, regulations, and requirements may
be amended or supplemented from time to time.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations and published
interpretations thereunder.
"Event of Default" has the meaning specified in Section 12.01.
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<PAGE> 5
"First Wave" means First Wave Marine, Inc, a Texas
corporation, and its successors and assigns.
"GAAP" means generally accepted accounting principles, applied
on a consistent basis, as set forth in Opinions of the Accounting
Principles Board of the American Institute of Certified Public
Accountants or in statements of the Financial Accounting Standards
Board or their respective successors and which are applicable in the
circumstances as of the date in question. Accounting principles are
applied on a "consistent basis" when the accounting principles
observed in a current period are comparable in all material respects
to those accounting principles applied in a preceding period.
"Guarantor" means Samuel F. Eakin, and his heirs, executors,
successors and assigns.
"Guaranty" means the Guaranty Agreement executed by Guarantor
in favor of Lender in substantially the form of Exhibit "F" hereto, as
the same may be amended, supplemented or modified from time to time.
"Hazardous Substance" means any substance, product, waste,
pollutant, material, chemical, contaminant, constituent, or other
material which is or becomes listed, regulated, or addressed under any
Environmental Law, including, without limitation, asbestos, petroleum,
and polychlorinated biphenyls.
"Lien" means any lien, mortgage, security interest, tax lien,
financing statement, pledge, charge, hypothecation, assignment,
preference, priority, or other encumbrance of any kind or nature
whatsoever (including, without limitation, any conditional sale or
title retention agreement), whether arising by contract, operation of
law, or otherwise.
"Loan Documents" means this Agreement and all promissory
notes, security agreements, assignments, guaranties, contingency
agreements, subordination agreements, and other instruments,
documents, and agreements executed and delivered pursuant to or in
connection with this Agreement, as such instruments, documents, and
agreements may be amended, modified, renewed, extended, or
supplemented from time to time.
"Loan-C" means the term loan made by Lender to Borrower
pursuant to Article IV.
"Loan-D" means the term loan made by Lender to Borrower
pursuant to Article V.
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"Maximum Amount-Advances-B" means the amount of $300,000.00.
"Maximum Rate" means the maximum rate of nonusurious interest
permitted from day to day by applicable law, including as to Article
52069-1.04, Vernon's Texas Civil Statutes (and as the same may be
incorporated by reference in other Texas statutes), but otherwise
without limitation, that rate based upon the "indicated rate ceiling"
and calculated after taking into account any and all relevant fees,
payments, and other charges in respect of the Loan Documents which are
deemed to be interest under applicable law.
"No Default Certificate" means a certificate substantially in
the form of Exhibit "J" executed by an officer of Borrower acceptable
to Lender.
"Note-A" means the promissory note executed by Borrower
payable to the order of Lender, in substantially the form of Exhibit
"A" hereto, and all extensions, renewals, and modifications thereof
and all substitutions therefor.
"Note-B" means the promissory note executed by Borrower
payable to the order of Lender, in substantially the form of Exhibit
"B" hereto, and all extensions, renewals, and modifications thereof
and all substitutions therefor.
"Note-C" means the promissory note executed by Borrower
payable to the order of Lender, in substantially the form of Exhibit
"C" hereto, and all extensions, renewals, and modifications thereof
and all substitutions therefor.
"Note-D" means the promissory note executed by Borrower
payable to the order of Lender, in substantially the form of Exhibit
"D" hereto, and all extensions, renewals, and modifications thereof
and all substitutions therefor.
"Notes" means Note-A, Note-B, Note-C and Note-D.
"NS&R" means Newpark Shipbuilding and Repair, Inc., a Texas
corporation, and its successors and assigns.
"Obligated Party" means Guarantor, NS&R and any other Person
who is or becomes party to any agreement pursuant to which such Person
guarantees or secures payment and performance of the Obligations or
any part thereof.
"Obligations" means all obligations, indebtedness, and
liabilities of Borrower to Lender, now existing or hereafter arising,
whether direct, indirect, related, unrelated, fixed, contingent,
liquidated, unliquidated, joint, several, or joint and several,
including, without limitation, the obligations,
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indebtedness, and liabilities of Borrower under this Agreement and the
other Loan Documents including, without limitation, all attorneys'
fees and other expenses incurred in the enforcement or collection
thereof.
"Person" means any individual, corporation, business trust,
association, company, partnership, joint venture, governmental
authority, or other entity.
"Prime Rate" means that variable rate of interest per annum
established by Lender from time to time as its prime rate which shall
vary from time to time. Such rate is set by Lender as a general
reference rate of interest, taking into account such factors as Lender
may deem appropriate, it being understood that many of Lender's
commercial or other loans are priced to relation to such rate, that it
is not necessarily the lowest or best rate charged to any customer and
that Lender may make various commercial or other loans at rates of
interest having no relationship to such rate.
"Purchased Equipment-B" means the machinery and equipment
purchased by Borrower with the proceeds of the Advances-B.
"Section 12.01 Event of Default" means the failure of Borrower
to comply with the provisions of Section 12.01 as evidenced by the
most recent financial statements of Borrower delivered under Section
10.01(a) or (b).
"Security Agreement" means the Security Agreement executed by
Borrower in favor of Lender in substantially the form of Exhibit "E"
hereto, as the same may be amended, supplemented, or modified.
"Subordinated Debt" means (a) the Subordinated Debt-NS&R, (b)
the Subordinated Debt-EAE, (c) the Subordinated Debt-First Wave, and
(d) Debt of Borrower the payment of which has otherwise been
subordinated to the payment of the Obligations by an agreement
satisfactory to Lender.
"Subordinated Debt-EAE" means Debt of Borrower which is
subject to the Subordination Agreement-EAE.
"Subordinated Debt-First Wave" means Debt of Borrower which is
subject to the Subordination Agreement- First Wave.
"Subordinated Debt-NS&R" means Debt of Borrower which is
subject to the Subordination Agreement-NS&R.
"Subordination Agreement-EAE" means the Subordination
Agreement executed by Borrower and EAE in favor of Lender in
substantially the form of Exhibit "N" hereto, as the same may be
amended, supplemented, or modified.
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"Subordination Agreement-First Wave" means the Subordination
Agreement executed by Borrower and First Wave in favor of Lender in
substantially the form of Exhibit "O" hereto, as the same may be
amended, supplemented, or modified.
"Subordination Agreement-NS&R" means the Subordination
Agreement executed by Borrower and NS&R in favor of Lender in
substantially the form of Exhibit "H" hereto, as the same may be
amended, supplemented, or modified.
"Termination Date-A" means 11:00 a.m., Houston, Texas time on
August 1, 1998, or such earlier date on which the Commitment-A
terminates as provided in this Agreement.
"Termination Date-B" means 11:00 a.m., Houston, Texas time on
August 1, 1998, or such earlier date on which the Commitment-A
terminates as provided in this Agreement.
"Test Date" shall mean that date which is sixty (60) days
following the Closing Date.
Section 1.02. Other Definitional Provisions. All definitions
contained in this Agreement are equally applicable to the singular and plural
forms of the terms defined. The words "hereof", "herein", and "hereunder" and
words of similar import referring to this Agreement refer to this Agreement as
a whole and not to any particular provision of this Agreement. Unless
otherwise specified, all Article and Section references pertain to this
Agreement. All accounting terms not specifically defined herein shall be
construed in accordance with GAAP. Terms used herein that are defined in the
Uniform Commercial Code as adopted by the State of Texas, unless otherwise
defined herein, shall have the meanings specified in the Uniform Commercial
Code as adopted by the State of Texas.
ARTICLE II.
Advances-A
Section 2.01. Advances-A. Subject to the terms and conditions of
this Agreement, Lender agrees to make one or more Advances-A to Borrower from
time to time from the date hereof to and including the Termination Date-A in an
aggregate principal amount at any time outstanding up to but not exceeding the
Commitment-A; provided that the aggregate amount of all Advances-A at any time
outstanding (a) shall not exceed $300,000.00 at any time prior to the Test
Date, and (b) commencing on the Test Date and at all times thereafter shall not
exceed the lesser of (i) the Commitment-A or (ii) the Borrowing Base-A.
Subject to the foregoing limitations, and the other terms and provisions of
this Agreement, Borrower may borrow, repay, and reborrow hereunder.
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Section 2.02. Note-A. The obligation of Borrower to repay the
Advances-A shall be evidenced by Note-A executed by Borrower, payable to the
order of Lender, in the principal amount of the Commitment-A.
Section 2.03. Repayment of Advances-A. Borrower shall repay the
unpaid principal amount of all Advances-A on the earlier of (a) the Termination
Date-A or (b) such other dates on which the Advances-A are or may be required
to be paid pursuant to this Agreement.
Section 2.04. Interest. The unpaid principal amount of the
Advances-A shall bear interest prior to maturity at a varying rate per annum
equal from day to day to the lesser of (a) the Maximum Rate or (b) the sum of
the Prime Rate in effect from day to day plus one percent (1.0%), and each
change in the rate of interest charged on the Advances-A shall become
effective, without notice to Borrower, on the effective date of each change in
the Prime Rate or the Maximum Rate, as the case may be; provided, however, if
at any time the rate of interest specified in clause (b) preceding shall exceed
the Maximum Rate, thereby causing the interest on the Advances-A to be limited
to the Maximum Rate, then any subsequent reduction in the Prime Rate shall not
reduce the rate of interest on the Advances-A below the Maximum Rate until the
aggregate amount of interest actually accrued on the Advances-A equals the
amount of interest which would have accrued on the Advances-A if the interest
rate specified in clause (b) preceding had at all times been in effect.
Accrued and unpaid interest on the Advances-A shall be payable on the first day
of each month commencing on September 1, 1997 and on the earlier of the
Termination Date-A or any other date on which the principal amount of the
Advances-A is paid (whether as a result of optional or mandatory prepayment or
acceleration). All past due principal and interest shall bear interest at the
Default Rate.
Section 2.05. Requests for Advances-A. Borrower shall give Lender
notice of each requested Advance-A at least one (1) Business Day prior to the
requested date of such Advance-A by delivery to Lender of an Advance Request
Form-A properly completed and containing the information required therein.
Lender at its option may accept telephonic requests for Advances-A. Each such
telephonic request for an Advance-A shall constitute a representation by
Borrower to Lender as to each of the matters set forth in the Borrowing Base
Certificate, including representations that the (a) sum of (i) the amount of
the outstanding Advances-A, plus (ii) the amount of the requested Advance-A
does not exceed (A) $300,000.00 if such request is prior to the Test Date and
(B) the lesser of the Commitment or the Borrowing Base if such request is on or
after the Test Date, and (b) no Event of Default exists. At any time,
including prior to making any Advance-A, Lender may request a Borrowing Base
Certificate from Borrower dated of a recent date acceptable to Lender.
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Section 2.06. Use of Proceeds. The proceeds of Advances-A shall be
used for general working capital purposes.
Section 2.07. Mandatory Prepayment. If at any time prior to the
Test Date the outstanding principal amount of the Advances-A exceeds
$300,000.00, or if at any time after the Test Date the outstanding principal
amount of the Advances-A exceeds the lesser of the Borrowing Base-A or the
Commitment-A, Borrower shall promptly prepay the outstanding Advances-A by the
amount of the excess plus accrued and unpaid interest on the amount so prepaid.
Section 2.08. Commitment Fee; Reduction or Termination of
Commitment-A. Borrower agrees to pay to Lender a commitment fee on the average
daily unused portion of the Commitment-A, from and including the Closing Date
to and including the Termination Date-A, at the rate of one half of one percent
(1/2%) per annum based on a 360 day year and the actual number of days elapsed,
payable on the first day of each month, commencing on September 1, 1997, and on
the Termination Date-A. Borrower shall have the right at any time to terminate
in whole or from time to time to irrevocably reduce in part the Commitment-A
upon at least three (3) Business Days prior notice to Lender specifying the
effective date thereof, whether a termination or reduction is being made, and
the amount of any partial reduction. Simultaneously with giving such notice,
Borrower shall prepay the amount by which the unpaid principal amount of the
Advances-A exceeds the Commitment-A (after giving effect to such notice) plus
accrued and unpaid interest on the principal amount so prepaid. The
Commitment-A may not be reinstated after it has been terminated or reduced.
ARTICLE III.
Advances-B
Section 3.01. Advances-B. At the sole discretion of Lender and
subject to the terms and conditions of this Agreement, Lender may make one or
more Advances-B to Borrower from time to time from the date hereof to and
including the Termination Date-B in an aggregate principal amount at any time
outstanding up to but not exceeding the Maximum Amount-Advances-B; provided
that the amount of each Advance-B shall not exceed the Borrowing Limit-B for
such Advance-B.
Section 3.02. Note-B. The obligation of Borrower to repay the
Advances-B shall be evidenced by Note-B executed by Borrower, payable to the
order of Lender, in the principal amount of the Maximum Amount-Advances-B.
Section 3.03. Repayment of Advances-B. Principal of and interest
on the Advances-B shall be due and payable as provided in
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Note-B. All past due principal and interest shall bear interest at the Default
Rate.
Section 3.04. Interest. The unpaid principal amount of the
Advances-B shall bear interest prior to maturity at a varying rate per annum
equal from day to day to the lesser of (a) the Maximum Rate or (b) the sum of
the Prime Rate in effect from day to day plus one percent (1.0%), and each
change in the rate of interest charged on the Advances-B shall become
effective, without notice to Borrower, on the effective date of each change in
the Prime Rate or the Maximum Rate, as the case may be; provided, however, if
at any time the rate of interest specified in clause (b) preceding shall exceed
the Maximum Rate, thereby causing the interest on the Advances-B to be limited
to the Maximum Rate, then any subsequent reduction in the Prime Rate shall not
reduce the rate of interest on the Advances-B below the Maximum Rate until the
aggregate amount of interest actually accrued on the Advances-B equals the
amount of interest which would have accrued on the Advances-B if the interest
rate specified in clause (b) preceding had at all times been in effect. All
past due principal and interest shall bear interest at the Default Rate.
Section 3.05. Requests for Advances-B. Borrower shall give Lender
notice of each requested Advance-B at least two (2) Business Days prior to the
requested date of such Advance-B by delivery to Lender of an Advance Request
Form-B properly completed and containing the information required therein.
Lender at its option may accept telephonic requests for Advances-B, provided
that such acceptance shall not constitute a waiver of Lender's right to require
delivery of an Advance Request Form-B in connection with subsequent Advances-B.
Any telephonic request for an Advance-B by Borrower shall be promptly confirmed
by submission of a properly completed Advance Request Form-B to Lender.
Section 3.06. Use of Proceeds. The proceeds of Advances-B shall be
used to purchase equipment.
ARTICLE IV.
Loan-C
Section 4.01. Agreement for Loan-C. Subject to the terms and
conditions of this Agreement, Lender agrees to make Loan-C to Borrower in the
amount of $650,000.00.
Section 4.02. Note-C. The obligation of Borrower to repay Loan-C
shall be evidenced by Note-C executed by Borrower, payable to the order of
Lender, in the principal amount of $650,000.00.
Section 4.03. Interest. Loan-C shall bear interest prior to maturity
at a varying rate per annum equal from day to day to the
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lesser of (a) the Maximum Rate or (b) the Prime Rate in effect from day to day
plus one percent (1.0%), and each change in the rate of interest charged on
Loan-C shall become effective, without notice to Borrower, on the effective
date of each change in the Prime Rate or the Maximum Rate, as the case may be;
provided, however, if at any time the rate of interest specified in clause (b)
preceding shall exceed the Maximum Rate, thereby causing the interest on Loan-C
to be limited to the Maximum Rate, then any subsequent reduction in the Prime
Rate shall not reduce the rate of interest on Loan-C below the Maximum Rate
until the aggregate amount of interest actually accrued on Loan-C equals the
amount of interest which would have accrued on Loan-C if the interest rate
specified in clause (b) preceding had at all times been in effect.
Section 4.04. Payment of Principal and Interest. Principal of and
interest on Loan-C shall be due and payable as provided in Note-C. All past
due principal and interest shall bear interest at the Default Rate.
Section 4.05. Purpose. The purpose of Loan-C shall be used to
purchase equipment and for the acquisition of the assets of Platzer
Shipbuilding, Inc.
ARTICLE V.
Loan-D
Section 5.01. Agreement for Loan-D. Subject to the terms and
conditions of this Agreement, Lender agrees to make Loan-D to Borrower in the
amount of $500,000.00.
Section 5.02. Note-D. The obligation of Borrower to repay Loan-D
shall be evidenced by Note-D executed by Borrower, payable to the order of
Lender, in the principal amount of $500,000.00.
Section 5.03. Interest. Loan-D shall bear interest prior to maturity
at a varying rate per annum equal from day to day to the lesser of (a) the
Maximum Rate or (b) the Prime Rate in effect from day to day plus one percent
(1.0%), and each change in the rate of interest charged on Loan-D shall become
effective, without notice to Borrower, on the effective date of each change in
the Prime Rate or the Maximum Rate, as the case may be; provided, however, if
at any time the rate of interest specified in clause (b) preceding shall exceed
the Maximum Rate, thereby causing the interest on Loan-D to be limited to the
Maximum Rate, then any subsequent reduction in the Prime Rate shall not reduce
the rate of interest on Loan-D below the Maximum Rate until the aggregate
amount of interest actually accrued on Loan-D equals the amount of interest
which would have accrued on Loan-D if the interest rate specified in clause (b)
preceding had at all times been in effect.
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Section 5.04. Payment of Principal and Interest. Principal of and
interest on Loan-D shall be due and payable as provided in Note-D. All past
due principal and interest shall bear interest at the Default Rate.
Section 5.05. Purpose. The purpose of Loan-D shall be used to
purchase a flare, the cost of which is $651,457, including $158,783 of
installation costs, and for the acquisition of the assets of Platzer
Shipbuilding, Inc.
ARTICLE VI.
Payments
Section 6.01. Method of Payment. All payments of principal,
interest, and other amounts to be made by Borrower under this Agreement, the
Notes or any other Loan Documents shall be made to Lender at its office at 4400
Post Oak Parkway, Houston, Texas 77027, without setoff, deduction, or
counterclaim in immediately available funds. Whenever any payment under this
Agreement, the Note or any other Loan Document shall be stated to be due on a
day that is not a Business Day, such payment may be made on the next Business
Day, and interest shall continue to accrue during such extension.
Section 6.02. Voluntary Prepayment. Borrower may prepay the Notes
in whole at any time or from time to time in part without premium or penalty
but with accrued interest to the date of prepayment on the amount so prepaid.
Section 6.03. Computation of Interest. Interest on the
indebtedness evidenced by the Notes shall be computed on the basis of a year of
360 days and the actual number of day elapsed (including the first day but
excluding the last day) unless such calculation would result in a usurious
rate, in which case interest shall be calculated on the basis of a year of 365
or 366 days, as the case may be.
ARTICLE VII.
Collateral
Section 7.01. Collateral. To secure full and complete payment and
performance of the Obligations, Borrower shall execute and deliver or cause to
be executed and delivered the documents described below covering the property
and collateral described therein and in this Section 7.01 (which, together with
any other property and collateral which may now or hereafter secure the
Obligations or any part thereof, is sometimes herein called the "Collateral"):
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(a) Borrower shall grant to Lender a first priority
security interest in all of its accounts, accounts receivable,
inventory, equipment, machinery, fixtures, chattel paper, documents,
instruments, and general intangibles, whether now owned or hereafter
acquired, and all products and proceeds thereof, pursuant to the
Security Agreement.
(b) Borrower shall execute and cause to be executed such
further documents and instruments, including without limitation,
Uniform Commercial Code financing statements, as Lender, in its sole
discretion, deems necessary or desirable to evidence and perfect its
liens and security interests in the Collateral.
Section 7.02. Setoff. Upon the occurrence of an Event of Default,
Lender shall have the right to set off and apply against the Obligations in
such a manner as Lender may determine, at any time and without notice to
Borrower, any and all deposits (general or special, time or demand, provisional
or final) or other sums at any time credited by or owing from Lender to
Borrower whether or not the Obligations are then due. In addition to Lender's
right of setoff and as further security for the Obligations, Borrower hereby
grants to lender a security interest in all deposits (general or special, time
or demand, provisional or final) and other accounts of Borrower now or
hereafter on deposit with or held by lender and all other sums at any time
credited by or owing from Lender to Borrower. The rights and remedies of
Lender hereunder are in addition to other rights and remedies (including,
without limitation, to the rights of setoff) which Lender may have.
Section 7.03. Guaranty; Repurchase Agreement. Guarantor shall
unconditionally and irrevocably guarantee payment and performance of the
Obligations by execution and delivery of the Guaranty. NS&R shall
unconditionally and irrevocably agree to purchase the Notes upon the terms and
conditions set forth in the Note Purchase Agreement.
ARTICLE VIII.
Conditions Precedent
Section 8.01. Initial Extension of Credit. The obligation of
Lender to make the initial Advance or fund either Loan-C or Loan-D is subject
to the condition precedent that prior thereto Lender shall have received all of
the documents set forth below in form and substance satisfactory to Lender.
(a) Resolutions - Borrower. Resolutions of the Board
of Directors of Borrower certified by its Secretary or an Assistant
Secretary which authorize the execution, delivery
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and performance by Borrower of this Agreement and the other Loan
Documents to which Borrower is or is to be a party.
(b) Incumbency Certificate - Borrower. A certificate of
incumbency certified by the Secretary or an Assistant Secretary of
Borrower certifying the names of the officers of Borrower authorized
to sign this Agreement and each of the other Loan Documents to which
Borrower is or is to be party together with specimen signatures of
such officers.
(c) Articles of Incorporation - Borrower. The articles
of incorporation of Borrower certified by the Secretary or an
Assistant Secretary of Borrower.
(d) Bylaws - Borrower. The bylaws of Borrower certified
by the Secretary or an Assistant Secretary of Borrower.
(e) Governmental Certificates - Borrower. Certificates
of the appropriate government officials of the state of Texas as to
the existence and good standing of Borrower.
(f) Notes. Note-A, Note-B, Note-C and Note-D executed by
Borrower.
(g) Security Agreement. The Security Agreement executed
by Borrower.
(h) Financing Statements. Uniform Commercial Code
financing statements executed by Borrower.
(i) Guaranty. The Guaranty executed by Guarantor.
(j) Contingency Agreement. The Contingency Agreement
executed by NS&R and Borrower.
(k) Subordination Agreement-NS&R. The Subordination
Agreement-NS&R executed by the parties thereto.
(l) Subordination Agreement-EAE. The Subordination
Agreement-EAE executed by the parties thereto.
(m) Subordination Agreement-First Wave. The
Subordination Agreement-First Wave executed by the parties thereto.
(n) UCC Search. A Uniform Commercial Code search showing
all financing statements and other documents or instruments on file
against Borrower in the office of the Secretary of State of Texas.
(o) Attorneys' Fees and Expenses. Evidence that the
costs and expenses (including reasonable attorneys' fees)
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referred to in Section 13.01, to the extent incurred, have been paid
in full by Borrower.
(p) Additional Documentation. Such additional approvals,
opinions or documents as Lender may reasonably request.
Section 8.02. All Extensions of Credit. (a) The obligation of Lender
to make any Advance-A (including the initial Advance-A) is subject to the
additional conditions precedent that Lender shall have received (i) a request
for such Advance-A as provided in Section 2.05 and (ii) such additional
approvals, opinions or documents as Lender may reasonably request, including a
Borrowing Base Certificate dated as of a recent date acceptable to Lender.
(b) The obligation of Lender to make any Advance-B (including the
initial Advance-B) is subject to the additional condition precedent that Lender
shall have received an Advance Request Form-B as provided in Section 3.05
executed by an officer of Borrower acceptable to Lender, all of the statements
in which shall be true and correct on and as of such date.
(c) The obligation of Lender to make any Advance is subject to the
additional condition precedent that Lender shall have received such additional
approvals, opinions or documents as Lender may reasonably request.
ARTICLE IX.
Representations and Warranties
To induce Lender to enter into this Agreement, commencing on the
Closing Date and at all times thereafter while the Obligations are outstanding,
Borrower represents and warrants to Lender that:
Section 9.01. Corporate Existence. Borrower (a) is a corporation
duly organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation, (b) has all requisite corporate power and
authority to own its assets and carry on its business as now being or as
proposed to be conducted and (c) is qualified to do business in all
jurisdictions necessary and where failure to so qualify would have a material
adverse effect on its business, condition (financial or otherwise), operations,
prospects, or properties. Borrower has the corporate power and authority to
execute, deliver and perform its obligations under this Agreement and the other
Loan Documents to which it is or may become a party.
Section 9.02. Financial Statements. Borrower has delivered to Lender
proforma financial statements of Borrower (the "Proformas") and financial
statements of NS&R for the fiscal year ended December 31, 1996 and for the
three month period ended March
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31, 1997 (the "NS&R Statements"). To the best of Borrower's knowledge, the
Proformas reflect the estimated financial position of Borrower as of the dates
set forth therein. To the best of Borrower's knowledge the NS&R Statements are
true and correct, have been prepared in accordance with GAAP, and, to the best
of Borrower's knowledge, the NS&R Statements fairly and accurately present the
financial condition of NS&R as of the respective dates indicated therein and
the results of operations for the respective periods indicated therein. To the
best of Borrower's knowledge, neither Borrower nor NS&R has any material
contingent liabilities, liabilities for taxes, material forward or long-term
commitments, or unrealized or anticipated losses from any unfavorable
commitments not reflected in the Proformas or the NS&R Statements. There has
been no material adverse change in the business, condition (financial or
otherwise), operations, prospects, or properties of Borrower or, to the best of
Borrower's knowledge, NS&R since the effective date of the Proformas or the
NS&R Statements.
Section 9.03. Corporate Action; No Breach. The execution, delivery,
and performance by Borrower of this Agreement and the other Loan Documents to
which Borrower is or may become a party have been duly authorized by all
requisite action on the part of Borrower and do not and will not violate or
conflict with the articles of incorporation or bylaws of Borrower or any law,
rule or regulation or any order, writ, injunction, or decree of any court,
governmental authority, or arbitrator, and do not and will not conflict with,
result in a breach of, or constitute a default under, or result in the
imposition of any Lien (except as provided in this Agreement) upon any of the
revenues or assets of Borrower pursuant to the provisions of any indenture,
mortgage, deed of trust, security agreement, franchise, permit, license, or
other instrument or agreement by which Borrower or any of its properties is
bound.
Section 9.04. Operation of Business. Borrower possesses all
licenses, permits, franchises, patents, copyrights, trademarks, and tradenames,
or rights thereto, to conduct its business substantially as now conducted and
as presently proposed to be conducted.
Section 9.05. Litigation and Judgments. There is no action, suit,
investigation, or proceeding before or by any court, governmental authority, or
arbitrator pending, or to the knowledge of Borrower, threatened against or
affecting Borrower that would, if adversely determined, have a material adverse
effect on the business, condition (financial or otherwise), operations,
prospects or properties of Borrower or the ability of Borrower to pay and
perform the Obligations. There are no outstanding judgments against Borrower.
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Section 9.06. Rights in Properties; Liens. Borrower has good and
indefeasible title to or valid leasehold interests in its properties and
assets, real and personal, including the properties, assets and leasehold
interests reflected in the financial statements described in Section 9.02, and
none of the properties, assets or leasehold interests of Borrower is subject to
any Lien, except as permitted by this Agreement.
Section 9.07. Enforceability. This Agreement constitutes, and the
other Loan Documents to which Borrower is party, when delivered, shall
constitute the legal, valid, and binding obligations of Borrower, enforceable
against Borrower in accordance with its respective terms, except as
enforceability thereof may be limited by bankruptcy, insolvency, or other laws
of general application relating to the enforcement of creditor's rights.
Section 9.08. Approvals. No authorization, approval, or consent of,
and no filing or registration with, any court, governmental authority, or third
party is or will be necessary for the execution, delivery, or performance by
Borrower of this Agreement and the other Loan Documents to which Borrower is or
may become a party or the validity or enforceability thereof.
Section 9.09. Debt. Borrower has no Debt except Debt which is
permitted by this Agreement and is disclosed in the financial statements
referred to in Section 9.02.
Section 9.10. Use of Proceeds; Margin Securities. Borrower is not
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulations G, T, U, or X of the Board of Governors of the
Federal Reserve System), and no part of the proceeds of any extension of credit
under this Agreement will be used to purchase or carry any such margin stock or
to extend credit to others for the purpose of purchasing or carrying margin
stock.
Section 9.11. ERISA. Borrower has complied with all applicable
minimum funding requirements and all other applicable and material requirements
of ERISA, and there are no existing conditions that would give rise to
liability thereunder. No Reportable Event (as defined in Section 4043 of
ERISA) has occurred in connection with any employee benefit plan that might
constitute grounds for the termination thereof by the Pension Benefit Guaranty
Corporation or for the appointment by the appropriate United States District
Court of a trustee to administer such plan.
Section 9.12. Taxes. Borrower has filed all tax returns (federal,
state, and local) required to be filed, including all income, franchise,
employment, property, and sales taxes, and has paid all of its liabilities for
taxes, assessments, governmental charges, and other levies that are due and
payable, and Borrower
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knows of no pending investigation of Borrower by any taxing authority or of any
pending but unassessed tax liability of Borrower.
Section 9.13. Disclosure. There is no fact known to Borrower which
has a material adverse effect, or which might in the future have a material
adverse effect, on the business, condition (financial or otherwise),
operations, prospects, or properties of Borrower that has not been disclosed in
writing to Lender.
Section 9.14. Subsidiaries. Borrower has no Subsidiaries.
Section 9.15. Compliance with Laws. Borrower is not in violation in
any material respect of any law, rule, regulation, order, or decree of any
court, governmental authority, or arbitrator.
Section 9.16. Inventory. All inventory of Borrower has been and will
hereafter be produced in compliance with all applicable laws, rules,
regulations, and governmental standards, including, without limitation, the
minimum wage and overtime provisions of the Fair Labor Standards Act, as
amended (29 U.S.C. Sections 201-219), and the regulations promulgated
thereunder.
Section 9.17. Investment Company Act. Borrower is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
Section 9.18. Environmental Matters. Borrower and its properties are
in compliance with all applicable Environmental laws and Borrower is not
subject to any liability or obligation for remedial action thereunder. There
is no pending or threatened investigation or inquiry by any governmental
authority of Borrower or any of its properties pertaining to any Hazardous
Substance. There are no Hazardous Substances located on or under any of the
properties of Borrower. Borrower has not caused or permitted any Hazardous
Substance to be disposed of on or under or released from any of its properties.
Borrower has obtained all permits, licenses, and authorizations which are
required under and by all Environmental Laws.
Section 9.19. Solvency. Borrower is not insolvent, and Borrower will
not be rendered insolvent by the execution or performance of the Loan Documents
to which Borrower is a party.
ARTICLE X.
Positive Covenants
Borrower covenants and agrees that, as long as the Obligations or any
part thereof are outstanding or Lender has any Commitment
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hereunder, Borrower will perform and observe the covenants set forth below,
unless Lender shall otherwise consent in writing.
Section 10.01. Reporting Requirements. Borrower will deliver to
Lender:
(a) Annual Financial Statements - Borrower. As soon as
available, and in any event within one hundred twenty (120) days after
the end of each fiscal year of Borrower, beginning with the fiscal
year ending December 31, 1997, a copy of the annual compiled financial
statements of Borrower for such fiscal year containing balance sheets,
statements of income, statements of stockholders equity and statements
of cash flows as at the end of such fiscal year and for the 12-month
period then ended, in each case setting forth in comparative form the
figures for the preceding fiscal year, all in reasonable detail,
prepared in accordance with GAAP and compiled by independent certified
public accountants of recognized standing acceptable to Lender.
(b) Monthly Financial Statements - Borrower. As soon as
available, and in any event within forty-five (45) days after the end
of each month of each fiscal year of Borrower, a copy of the unaudited
financial report of Borrower as of the end of such month and for the
portion of the fiscal year then ended, containing balance sheets,
statements of income and statements of cash flows, in each case
setting forth in comparative form the figures for the corresponding
period of the preceding fiscal year, all in reasonable detail and
certified by an officer of Borrower acceptable to Lender to have been
prepared in accordance with GAAP and to fairly and accurately present
the financial condition and results of operations of Borrower at the
date and for the period indicated therein.
(c) No Default Certificate. As soon as available, but in
any event within forty-five (45) days after the end of each month of
each year of Borrower, a No Default Certificate, as of the last day of
such month certified by an officer of Borrower acceptable to Lender.
(d) Borrowing Base Certificate. At any time, promptly
upon request therefor by Lender, and as soon as available but in any
event within forty-five (45) days after the end of each month of each
fiscal year of Borrower, a Borrowing Base Certificate, as of the most
recent date available or the last day of such month, as applicable,
certified by an officer of Borrower acceptable to Lender.
(e) Accounts Receivable Reports. As soon as available,
and in any event within forty-five (45) days after the end of each
month of each fiscal year of Borrower, aged accounts receivable
reports for Borrower as of the last day of such
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month certified by an officer of Borrower acceptable to Lender.
(f) Annual Financial Statement-Guarantor. As soon as
available, and in any event on or before each March 1, a copy of the
financial statement of the Guarantor as of the preceding December 31,
consisting of a balance sheet, a statement of income and expenses, a
list of liabilities, including contingent liabilities (and stating the
holder of such liabilities, the repayment terms thereof and any
collateral therefor), and a statement of cash flows.
(g) Notice of Litigation. Promptly after the
commencement thereof, notice of all actions, suits, and proceedings
before any court or governmental department, agency or
instrumentality, affecting Borrower, Guarantor or NS&R which, if
determined adversely such Person, could have a material adverse effect
on the business, condition (financial or otherwise), operations,
prospects, or properties of such Person.
(h) Notice of Default. As soon as possible and in any
event within five (5) days after the occurrence of each Event of
Default and each event which, with the giving of notice or lapse of
time or both, would constitute an Event of Default, a written notice
setting forth the details of such Event of Default or event and the
action which Borrower has taken and proposes to take with respect
thereto.
(i) General Information. Promptly, such other
information concerning Borrower, Guarantor or NS&R as Lender may from
time to time reasonably request.
Section 10.02. Maintenance of Existence; Conduct of Business.
Borrower will preserve and maintain its corporate existence and all of its
leases, privileges, licenses, permits, franchises, qualifications and rights
that are necessary or desirable in the ordinary conduct of its business.
Section 10.03. Maintenance of Properties. Borrower will maintain its
assets and properties in good condition and repair.
Section 10.04. Taxes and Claims. Borrower will pay or discharge at
or before maturity or before becoming delinquent (a) all taxes, levies,
assessments, and governmental charges imposed on it or its income or profits or
any of its property, and (b) all lawful claims for labor, material, and
supplies, which, if unpaid, might become a Lien upon any of its property;
provided, however, that Borrower shall not be required to pay or discharge any
tax, levy, assessment, or governmental charge which is being contested in good
faith by appropriate proceedings diligently pursued, and for which adequate
reserves have been established.
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Section 10.05. Insurance. Borrower will maintain with financially
sound and reputable insurance companies workmen's compensation insurance,
liability insurance, and insurance on its property, assets and business at
least in such amounts and against such risks as are usually insured against by
Persons engaged in similar businesses. Each insurance policy covering
Collateral shall name Lender as lender loss payee and provide that such policy
will not be cancelled without thirty (30) days prior written notice to Lender.
Section 10.06. Inspection; Audits. At any reasonable time and from
time to time, Borrower will permit, and, upon the occurrence and during the
continuance of an Event of Default, will cause Guarantor and NS&R to permit,
representatives of Lender (including agents of Lender and third parties engaged
by Lender):
(a) To examine and make copies of the books and records
of, and visit and inspect the properties or assets of Borrower,
Guarantor and NS&R and to discuss the business, operations, and
financial condition of any such Persons with their respective officers
and employees with their independent certified public accountants; and
(b) At the expense of Borrower, to conduct audits,
verifications and inspections of the accounts receivable and inventory
of Borrower.
Section 10.07. Keeping Books and Records. Borrower will maintain
proper books of record and account in which full, true, and correct entries in
conformity with GAAP shall be made of all dealings and transactions in relation
to its business and activities.
Section 10.08. Compliance with Laws. Borrower will comply in all
material respects with all applicable laws, rules, regulations, and orders of
any court, governmental authority, or arbitrator.
Section 10.09. Compliance with Agreements. Borrower will comply in
all material respects with all agreements, contracts, and instruments binding
on it or affecting its properties or business.
Section 10.10. Further Assurances. Borrower will execute and
deliver, and will cause NS&R to execute and deliver, such further instruments
as may be requested by Lender to carry out the provisions and purposes of this
Agreement and the other Loan Documents and to preserve and perfect the Liens of
Lender in the Collateral.
Section 10.11. ERISA. Borrower will comply with all minimum funding
requirements, and all other material requirements, of ERISA, if applicable, so
as not to give rise to any liability thereunder.
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Section 10.12. Continuity of Operations. Borrower will (a) continue
to conduct its primary businesses as conducted as of the date of this Agreement
and will continue its operations in such businesses, and (b) not make any
material change in the nature of their businesses as carried on as of the
Closing Date.
ARTICLE XI
Negative Covenants
Borrower covenants and agrees that, as long as the Obligations or any
part thereof are outstanding or Lender has any Commitment hereunder, Borrower
will perform and observe the covenants set forth below, unless Lender shall
otherwise consent in writing.
Section 11.01. Debt. Borrower will not incur, create, assume or
permit to exist, any Debt, except (a) Debt to Lender, (b) Subordinated Debt,
(c) Debt which does not exceed an aggregate principal amount of $100,000
outstanding at any time, (d) accounts payable in the ordinary course of
business, and (e) Debt arising from the endorsement of instruments for
collection in the ordinary course of business.
Section 11.02. Limitation on Liens. Borrower will not incur, create,
assume, or permit to exist, any Lien upon any of its property, assets or
revenues, whether now owned or hereafter acquired, except (a) Liens in favor of
Lender, (b) Liens securing the Subordinated Debt, (c) purchase money liens
securing the Debt permitted by Section 11.01(c), (d) Encumbrances consisting of
minor easements, zoning restrictions, or other restrictions on the use of real
property that do not (individually or in the aggregate) materially affect the
value of the assets encumbered thereby or materially impair the ability of
Borrower to use such assets in its business, and none of which is violated in
any material aspect by existing or proposed structures or land use, (e) Liens
for taxes, assessments, or other governmental charges which are not delinquent
or which are being contested in good faith and for which adequate reserves have
been established, and (f) Liens of mechanics, materialmen, warehousemen,
carriers or other similar statutory Liens securing obligations that are not yet
due and are incurred in the ordinary course of business.
Section 11.03. Mergers, Acquisitions, Dissolutions and Disposition of
Assets. Borrower will not (a) become a party to a merger, consolidation,
partnership or joint venture or purchase or otherwise acquire all or a
substantial part of the assets of any Person or any shares or other evidence of
beneficial ownership of any Person, (b) dissolve or liquidate, or (c) sell,
lease, assign, transfer or otherwise dispose of a material portion of its
assets, except dispositions of inventory in the ordinary course of business.
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<PAGE> 24
Section 11.04. Restricted Payments. Borrower will not declare or pay
any dividends or make any other payment or distribution (in cash, property, or
obligations) on account of its capital stock, or redeem, purchase, retire, or
otherwise acquire any of its capital stock, or set apart any money for a
sinking or other analogous fund for any dividend or other distribution on its
capital stock or for any redemption, purchase, retirement, or other acquisition
of any of its capital stock, or grant or issue any capital stock or any
warrant, right, or option pertaining to its capital stock, or issue any
security convertible into capital stock; provided that Borrower may issue
additional shares of stock and offer such stock to key management of Borrower
in amounts such that the total amount of stock so owned by key management of
Borrower does not exceed twenty percent (20%) of the total voting stock of
Borrower.
Section 11.05. Loans and Investments. Borrower will not make any
advance, loan, extension of credit, or capital contribution to or investment
in, or purchase any stock, bonds, notes, debentures, or other securities of any
Person, except (a) readily marketable direct obligations of the United States
of America, (b) fully insured certificates of deposit with maturities of one
year or less from the date of acquisition of any commercial bank operating in
the United States having capital and surplus in excess of $50,000,000.00, and
(c) commercial paper of a domestic issuer if at the time of purchase such paper
is rated in one of the two highest rating categories of Standard and Poor's
Corporation or Moody Investors Service.
Section 11.06. Compliance with Environmental Laws. Except in the
ordinary course of business and in accordance with law, Borrower will not (a)
use (or permit any tenant to use) any of their respective properties or assets
for the handling, processing, storage, transportation, or disposal of any
Hazardous Substance, (b) generate any Hazardous Substance, (c) conduct any
activity which is likely to cause a release or threatened release of any
Hazardous Substance, or (d) otherwise conduct any activity or use any of their
respective properties or assets in any manner that is likely to violate any
Environmental Law.
Section 11.07. Accounting. Borrower will not make any change in
accounting treatment or reporting practices, except as required by GAAP.
Section 11.08. Subordination. If no Event of Default has occurred,
Borrower may pay principal of and interest on the Subordinated Debt. If a
Section 12.01 Event of Default has occurred and no other Event of Default has
occurred and is continuing, Borrower shall not pay payments of principal of the
Subordinated Debt, however, (a) Borrower may pay payments of interest on the
Subordinated Debt and (b) Borrower may pay payables of Borrower to NS&R, EAE or
First Wave incurred in the ordinary
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course of business. If any Event of Default other than a Section 12.01 Event
of Default has occurred and is continuing, Borrower shall not pay payments of
interest or principal on the Subordinated Debt or payables of Borrower to NS&R,
EAE or First Wave incurred in the ordinary course of business.
ARTICLE XII
Financial Covenants
Borrowers covenants and agrees that, as long as the Obligations or any
part thereof are outstanding or Lender has any commitment hereunder, Borrower
will observe and perform the following financial covenants set forth below,
unless Lender shall otherwise consent in writing.
Section 12.01. Debt Service Coverage Ratio. Borrower will at all
times maintain a Debt Service Coverage Ratio of not less than 1.50 to 1.00.
The Debt Service Coverage Ratio shall be calculated as of the last day of each
month on a cumulative basis for the twelve months ended as of such date;
provided that for the first eleven months following the Closing Date, the Debt
Service Coverage Ratio shall be based only upon the months following the
Closing Date, calculated on an annualized basis.
ARTICLE XIII
Default
Section 13.01. Events of Default. Each of the following shall be
deemed an "Event of Default":
(a) Borrower shall fail to pay when due the Obligations or
any part thereof.
(b) Any representation or warranty made or deemed made by
Borrower or any Obligated Party (or any of their respective officers)
in any Loan Document or in any certificate, report, notice, or
financial statement furnished at any time in connection with this
Agreement shall be false, misleading, or erroneous in any material
respect when made or deemed to have been made.
(c) Borrower or any Obligated Party shall fail to perform,
observe, or comply with any covenant, agreement, or term contained in
this Agreement or any other Loan Document.
(d) Borrower or any Obligated Party shall commence a
voluntary proceeding seeking liquidation, reorganization, or other
relief with respect to itself or its debts under any
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bankruptcy, insolvency, or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator,
custodian, or other similar official of it or a substantial part of
its property or shall consent to any such relief or to the appointment
of or taking possession by any such official in an involuntary case or
other proceeding commenced against it or shall make a general
assignment for the benefit of creditors or shall generally fail to pay
its debts as they become due or shall take any corporate action to
authorize any of the foregoing.
(e) An involuntary proceeding shall be commenced against
Borrower or any Obligated Party seeking liquidation, reorganization,
or other relief with respect to it or its debts under any bankruptcy,
insolvency, or other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian or other
similar official for it or a substantial part of its property, and
such involuntary proceeding shall remain undismissed and unstayed for
a period of thirty (30) days.
(f) Borrower or any Obligated Party shall fail to discharge
within a period of thirty (30) days after the commencement thereof any
attachment, sequestration, or similar proceeding or proceedings
involving an aggregate amount in excess of $25,000.00 against any of
its assets or properties.
(g) Borrower or any Obligated Party shall fail to satisfy and
discharge promptly any final judgement or judgements against it for
the payment of money in an aggregate amount in excess of $25,000.00.
(h) Borrower or any Obligated Party shall fail to pay when
due any principal of or interest on any Debt (other than the
Obligations), or the maturity of any such Debt shall have been
accelerated, or any such Debt shall have been required to be prepaid
prior to the stated maturity thereof, or any event shall have occurred
that permits (or, with the giving of notice or lapse of time or both,
would permit) any holder or holders of such Debt or any Person acting
on behalf of such holder or holders to accelerate the maturity thereof
or require any such prepayment.
(i) This Agreement or any other Loan Document shall cease to
be in full force and effect or shall be declared null and void or the
validity or enforceability thereof shall be contested or challenged by
Borrower or any Obligated Party, or Borrower or any Obligated Party
shall deny that it has any further liability or obligation under any
of the Loan Documents, or any lien or security interest created by the
Loan Documents shall for any reason cease to be a valid, first
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priority perfected security interest in and lien upon any of the
Collateral purported to be covered thereby.
(j) Guarantor shall have died or have been declared
incompetent by a court of law.
Section 13.02. Remedies Upon Default. If any Event of Default shall
occur, Lender may do any one or more of the following: (a) declare the
outstanding principal of and accrued and unpaid interest on the Notes and the
Obligations or any part thereof to be immediately due and payable, and the same
shall thereupon become immediately due and payable, without notice, demand,
presentment, notice of dishonor, notice of acceleration, notice of intent to
accelerate, notice of intent to demand, protest, or other formalities of any
kind, all of which are hereby expressly waived by Borrower, (b) terminate the
Commitment-A without notice to Borrower, (c) foreclose or otherwise enforce any
Lien granted to the Lender to secure payment and performance of the
Obligations, and (d) exercise any and all rights and remedies afforded by the
laws of the State of Texas or any other jurisdiction by any of the Loan
Documents, by equity or otherwise; provided, however, that upon the occurrence
of an Event of Default under Section 13.01(d) or Section 13.01(e), the
Commitment-A shall automatically terminate, and the outstanding principal of
and accrued and unpaid interest on the Notes and the other Obligations shall
become immediately due and payable without notice, demand, presentment, notice
of dishonor, notice of acceleration, notice of intent to accelerate, notice of
intent to demand, protest, or other formalities of any kind, all of which are
hereby expressly waived by Borrower.
Section 13.03. Performance by Lender. If Borrower 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. In such event, Borrower shall, at the request
of Lender, promptly pay any amount expended by Lender in such performance or
attempted performance to Lender, together with interest thereon at the Default
Rate 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 under this
Agreement or any other Loan Document.
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ARTICLE XIV.
Miscellaneous
Section 14.01. Expenses of Lender. Borrower hereby agrees to pay
Lender on demand (a) all reasonable costs and expenses incurred by Lender in
connection with the preparation, negotiation, and execution of this Agreement
and the other Loan Documents and any and all amendments, modifications,
renewals, extensions, and supplements thereof and thereto, including, without
limitation, the fees and expenses of Lender's legal counsel, (b) all reasonable
costs and expenses incurred by Lender in connection with the enforcement of
this Agreement or any other Loan Document, including, without limitation, the
fees and expenses of Lender's legal counsel, and (c) all other reasonable costs
and expenses incurred by Lender in connection with this Agreement or any other
Loan Document, including, without limitation, all costs, expenses, taxes,
assessments, filing fees, and other charges levied by an governmental authority
or otherwise payable in respect of this Agreement or any other Loan Document or
in obtaining any insurance policy, audit or appraisal in respect of the
Collateral.
Section 14.02. Indemnification. Borrower hereby indemnifies Lender
and each affiliate thereof and their respective officers, directors, employees,
attorneys, and agents from, and holds each of them harmless against, any and
all losses, liabilities, claims, damages, penalties, judgments, disbursements,
costs, and expenses (including attorneys' fees) (collectively, "Claims") to
which any of them may become subject which directly or indirectly arise from or
relate to (a) the negotiation, execution, delivery, performance,
administration, or enforcement of any of the Loan Documents, (b) any of the
transactions contemplated by the Loan Documents, (c) any breach by Borrower of
any representation, warranty, covenant, or other agreement contained in any of
the Loan Documents, or (d) the presence, release, threatened release, disposal,
removal, or cleanup of any Hazardous Substance located on, about, within, or
affecting any of the properties or assets of Borrower; provided, however, that
such indemnification obligation shall not arise to the extent that any Claim
arises from the negligence or willful misconduct of Lender.
Section 14.03. 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
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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 other Loan Documents.
Section 14.04. No Waiver; Cumulative Remedies. No failure on the
part of Lender to exercise and no delay in exercising, and no course of dealing
with respect to, any right, power, or privilege under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power, or privilege under this Agreement preclude any other or further
exercise thereof or the exercise of any other right, power, or privilege. The
rights and remedies provided for in this Agreement and the other Loan Documents
are cumulative and not exclusive of any rights and remedies provided by law.
Section 14.05. Successors and Assigns. This Agreement is binding
upon and shall inure to the benefit of Lender and Borrower and their respective
successors and assigns, except that Borrower may not assign or transfer any of
its rights or obligations under this Agreement without prior written consent of
Lender.
Section 14.06. Survival. All representations and warranties made
in this Agreement or any other Loan Document or in any document, statement, or
certificate furnished in connection with this Agreement shall survive the
execution and delivery of this Agreement and the other Loan Documents, and no
investigation by Lender or any closing shall affect the representations and
warranties or the right of Lender to rely upon them. Without prejudice to the
survival of any other obligation of Borrower hereunder, the obligations of
Borrower under Sections 14.01 and 14.02 shall survive repayment of the Notes
and termination of the Commitment-A.
Section 14.07. Amendment. The provisions of this Agreement and the
other Loan Documents to which Borrower is a party may be amended or waived only
by an instrument in writing signed by the parties hereto.
Section 14.08. Maximum Interest Rate. No provision of this Agreement
or of any other Loan Documents shall require the payment or the collection of
interest in excess of the maximum permitted by applicable law. If any excess
of interest in such respect is hereby provided for, or shall be adjudicated to
be so provided, in any other Loan Documents or otherwise in connection wit this
loan transaction, the provisions of this Section shall govern and prevail and
neither Borrower nor the sureties, guarantors, successors, or assigns of
Borrower shall be obligated to pay the excess amount of such interest or any
other excess sum paid for the use, forbearance, or detention of sums loaned
pursuant hereto. In the event Lender ever receives, collects, or applies as
interest any such sum, such amount which would be in excess of the maximum
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amount permitted by applicable law shall be applied as payment and reduction
of the principal of the indebtedness evidenced by the Note; and, if the
principal of the Notes has been paid in full, any remaining excess shall
forthwith be paid to Borrower. In determining whether or not the interest paid
or payable exceeds the Maximum Rate, Borrower and Lender shall, to the extent
permitted by applicable law, (a) characterize any non-principal payment as an
expense, fee, or premium rather than as interest, (b) exclude voluntary
prepayments and the effects thereof, and (c) amortize, prorate, allocate, and
spread in equal or unequal parts the total amount of interest throughout the
entire contemplated term of the indebtedness evidenced by the Notes so that
interest for the entire term does not exceed the Maximum Rate.
Section 14.09. Notices. All notices and other communications
provided for in this Agreement and the other Loan Documents shall be in writing
and may be telecopied, mailed by certified mail return receipt requested, or
delivered to the intended recipient at the addresses specified below or at such
other address as shall be designated by any party listed below in a notice to
the other parties listed below given in accordance with this Section.
If to Borrower: Louisiana Ship, Inc.
13601 Industrial Road
Houston, Texas 77015
If to Guarantor: Samuel F. Eakin
4000 South Sherwood Forest, Suite 603
Baton Rouge, Louisiana 70816
Telephone No.: 504-292-8000
Fax: 504-292-8100
If to NS&R: Newpark Shipbuilding and Repair, Inc.
8502 Cypress Street
Houston, Texas 77012
Attention: Chairman and Chief Executive Officer
Telephone No.: 713-928-5051
Fax: 713-923-9301
If to Lender: Southwest Bank of Texas, N.A.
4400 Post Oak Parkway
Houston, Texas 77027
Attention: Carmen Billings
Telephone No.: 713-235-8881, ext. 1766
Fax: 713-621-2031
Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given when transmitted by
telecopy, subject to telephone confirmation of receipt, when personally
delivered or, in the case of a mailed notice, when duly deposited in the mails,
in each case given or
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addressed as aforesaid; provided, however, that notices to Lender pursuant to
Articles II and III shall not be effective until received by Lender.
Section 14.10. Applicable Law; Venue; Service of Process. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Texas and the applicable laws of the United States of America. This
Agreement has been entered into in Harris County, Texas and it shall be
performable for all purposes in Harris County, Texas. Except as provided in
the Arbitration Agreement, any action or proceeding against Borrower under or
in connection with any of the Loan Documents may be brought in any state or
federal court in Harris County, Texas, and Borrower hereby irrevocably submits
to the nonexclusive jurisdiction of such courts and waives any objection it may
now or hereafter have as to the venue of any such action or proceeding brought
in any such court or that any such court is an inconvenient forum. Borrower
agrees that service of process upon it may be made by certified or registered
mail, return receipt requested, at its office specified in this Agreement.
Except as provided in the Arbitration Agreement, nothing herein or in any of
the other Loan Documents shall affect the right of Lender to serve process in
any other manner permitted by law or shall limit the right of Lender to bring
any action or proceeding against Borrower or with respect to any of its
property in courts in other jurisdictions. Except as provided in the
Arbitration Agreement, any action or proceeding by Borrower against Lender
shall be brought only in a court located in Harris County, Texas.
Section 14.11. Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Section 14.12. Severability. Any provision of this Agreement held by
a court of competent jurisdiction to be invalid or unenforceable shall not
impair or invalidate the remainder of this Agreement and the effect thereof
shall be confined to the provision held to be invalid or illegal.
Section 14.13. Headings. The headings, captions, and arrangements
used in this Agreement are for convenience only and shall not affect the
interpretation of this Agreement.
Section 14.14. Non-Application of Chapter 15 of Texas Credit Code.
The provisions of Chapter 15 of the Texas Credit Code (Vernon's Texas Civil
Statutes, Article 5069-15) are specifically declared by the parties hereto not
to be applicable to this Agreement or any of the other Loan Documents or to the
transactions contemplated hereby.
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Section 14.15. Participations. Lender shall have the right at any
time and from time to time to grant participations in the Note and any other
Loan Documents. Each actual or proposed participant shall be entitled to
receive all information received by Lender regarding the creditworthiness of
Borrower, including, without limitation, information required to be disclosed
to a participant pursuant to Banking Circular 181 (Rev., August 2, 1984),
issued by the Comptroller of the Currency (whether the actual or proposed
participant is subject to the circular or not).
Section 14.16. ENTIRE AGREEMENT. THIS AGREEMENT, THE NOTES, AND
THE OTHER LOAN DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE AGREEMENT
AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF
AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND
UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF
AND THEREOF 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.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
BORROWER:
LOUISIANA SHIP, INC.
By: /s/ SAMUEL F. EAKIN
------------------------------
Samuel F. Eakin
President
LENDER:
SOUTHWEST BANK OF TEXAS, N.A.
By: /s/ CARMEN BILLINGS
------------------------------
Carmen Billings
Vice President
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LIST OF EXHIBITS
<TABLE>
<CAPTION>
Exhibits Document
-------- --------
<S> <C>
A Note-A
B Note-B
C Note-C
D Note-D
E Security Agreement
F Guaranty
G Contingency Agreement
H Subordination Agreement-NS&R
I Borrowing Base Certificate
J No Default Certificate
K Arbitration Agreement
L Advance Request Form-A
M Advance Request Form-B
N Subordination Agreement - EAE
O Subordination Agreement - First Wave
</TABLE>
-33-
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF REGISTRANT
<TABLE>
<S> <C>
Newpark Shipbuilding and Repair, Inc........ Texas
Newpark Marine Fabricators, Inc............. Texas
EAE Services, Inc........................... Texas
EAE Industries, Inc......................... Texas
Louisiana Ship, Inc......................... Texas d/b/a Greens Bayou Fabricators
</TABLE>
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report accompanying the consolidated financial
statements of First Wave Marine, Inc. and Subsidiary, and our report
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
October 17, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> JUN-30-1997 DEC-31-1996
<CASH> 358 0
<SECURITIES> 0 0
<RECEIVABLES> 7,970 6,182
<ALLOWANCES> 0 0
<INVENTORY> 783 566
<CURRENT-ASSETS> 9,398 7,283
<PP&E> 17,904 17,606
<DEPRECIATION> 1,450 851
<TOTAL-ASSETS> 20,697 24,932
<CURRENT-LIABILITIES> 3,793 5,114
<BONDS> 0 0
0 0
0 0
<COMMON> 1 1
<OTHER-SE> 3,924 1,892
<TOTAL-LIABILITY-AND-EQUITY> 26,697 24,932
<SALES> 16,941 27,957
<TOTAL-REVENUES> 16,941 27,957
<CGS> 9,493 18,623
<TOTAL-COSTS> 9,493 18,623
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 842 829
<INCOME-PRETAX> 3,799 2,876
<INCOME-TAX> 1,364 1,098
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,032 1,559
<EPS-PRIMARY> 2,032 1,559
<EPS-DILUTED> 2,032 1,559
</TABLE>
