<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 26, 1998
REGISTRATION NO. 333-38157
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
FIRST WAVE MARINE, INC.
(Exact Name of Registrant as specified in its charter)
<TABLE>
<S> <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.)
NEWPARK SHIPBUILDING AND REPAIR, INC. TEXAS 3731
EAE SERVICES, INC. TEXAS 3731
EAE INDUSTRIES, INC. TEXAS 3731
NEWPARK MARINE FABRICATORS, INC. TEXAS 3731
LOUISIANA SHIP, INC. TEXAS 3731
(Exact name of registrant as specified in its (State or other jurisdiction of (Primary Standard
charter) incorporation or organization) Industrial
Classification Code Number)
<CAPTION>
<S> <C>
NEWPARK SHIPBUILDING AND REPAIR, INC. 76-0419955
EAE SERVICES, INC. 76-0508651
EAE INDUSTRIES, INC. 76-0508652
NEWPARK MARINE FABRICATORS, INC. 76-2852221
LOUISIANA SHIP, INC. 76-0490445
(Exact name of registrant as specified in its (I.R.S. Employer
charter) Identification Number)
</TABLE>
4000 SOUTH SHERWOOD FOREST BOULEVARD, SUITE 603
BATON ROUGE, LOUISIANA 70816
(504) 292-8800
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
DAVID B. AMMONS
EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER, SECRETARY
FIRST WAVE MARINE, INC.
4000 SOUTH SHERWOOD FOREST BOULEVARD, SUITE 603
BATON ROUGE, LOUISIANA 70816
(504) 292-8800
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
<TABLE>
<S> <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>
---------------------
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
================================================================================
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED UNIT(1) PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
% Senior Notes due 2008....... $90,000,000 100.00% $90,000,000 $26,550(2)
- ---------------------------------------------------------------------------------------------------------------------------------
Guarantees(2)................... -- -- -- --
=================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) $30,305 has been paid by the Registrant on October 17, 1997.
(3) Guarantees by subsidiaries of First Wave Marine, Inc. of the payment of the
principal and interest on the % Senior Notes due 2008. Pursuant to Rule
457(n), no additional fee is required.
---------------------
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 JANUARY 26, 1998
PROSPECTUS
$90,000,000
[FIRST WAVE LOGO]
FIRST WAVE MARINE, INC.
% SENIOR NOTES DUE 2008
The % Senior Notes due 2008 (the "Notes") are being offered (the
"Offering") by First Wave Marine, Inc., a Delaware corporation (the "Company" or
"First Wave"). The Offering is conditioned upon the consummation of the
Bludworth Acquisition (as defined herein).
Interest on the Notes will be payable semi-annually on and
of each year, commencing , 1998. The Notes will mature on
, 2008, unless previously redeemed. The Notes will be redeemable in
cash at the option of the Company, in whole or in part, on or after ,
2003, at the redemption prices set forth herein, together with accrued interest
thereon to the date of redemption. In addition, the Company will be entitled, at
any time on or before , 2001, to redeem in cash up to 35% of the
aggregate principal amount of the Notes with the net proceeds of one or more
Public Equity Offerings (as defined herein) at a redemption price equal to %
of the principal amount thereof, plus accrued interest to the date of
redemption; provided, however, that at least 65% of the aggregate principal
amount of Notes initially issued remains outstanding after giving effect to such
redemption.
Upon the occurrence of a Change of Control (as defined herein), the Company
will be required to make an offer to repurchase all of the outstanding Notes at
a price equal to 101% of the principal amount thereof, plus accrued and unpaid
interest to the date of repurchase.
Upon consummation of the Offering, the Company will be required to use a
portion of the proceeds from the sale of the Notes (currently estimated to be
approximately $9.5 million) to purchase a portfolio of U.S. government
securities (the "Pledged Securities") which will provide funds sufficient to pay
in full when due the first two scheduled interest payments on the Notes. The
Pledged Securities will be pledged as security for the repayment of principal of
and interest on the Notes and all other obligations under the Indenture (as
defined herein) pursuant to which the Notes will be issued. The Company is a
holding company and substantially all of its operations are conducted through
subsidiaries. The obligations of the Company under the Notes will be fully and
unconditionally guaranteed (the "Subsidiary Guarantees") on a senior unsecured
basis jointly and severally by all of the Company's current subsidiaries and
certain future subsidiaries of the Company (collectively, the "Restricted
Subsidiaries").
The Notes and the Subsidiary Guarantees will be senior obligations of the
Company and the Restricted Subsidiaries, respectively, and will rank pari passu
in right of payment with all other senior indebtedness of the Company and the
Restricted Subsidiaries, and will rank senior in right of payment to any future
subordinated indebtedness of the Company and the Restricted Subsidiaries. As of
December 31, 1997, after giving effect to the sale of the Notes and the
application of net proceeds therefrom, the Company on a consolidated basis would
have had $9.5 million of secured senior indebtedness outstanding and $0.2
million of pari passu indebtedness other than the Notes and trade payables. The
Indenture permits the Company and its subsidiaries to incur additional secured
and unsecured senior indebtedness pursuant to a debt incurrence test and
pursuant to certain allowances, including $20 million of indebtedness, which may
be secured indebtedness, pursuant to a bank credit agreement. See "Description
of Notes -- Certain Covenants -- Incurrence of Indebtedness."
The Company does not intend to list the Notes on any national securities
exchange.
THE NOTES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 11.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
===========================================================================================================================
UNDERWRITING
DISCOUNTS AND PROCEEDS TO
PRICE TO PUBLIC(1) COMMISSIONS(2) COMPANY(3)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note.............................................. $ $ $
- ---------------------------------------------------------------------------------------------------------------------------
Total(3).............................................. $ $ $
===========================================================================================================================
</TABLE>
(1) Plus accrued interest, if any, from the date of issuance.
(2) See "Underwriting" for the indemnification arrangements.
(3) Before deducting expenses payable by the Company estimated to be $725,000.
The Notes offered hereby are offered by the Underwriter, subject to prior
sale and acceptance by the Underwriter, and subject to its right to reject any
order in whole or in part. It is expected that delivery of the Notes will be
made through the facilities of the Depository Trust Company, against payment
therefor, on or about , 1998.
SCHRODER & CO. INC.
, 1998
<PAGE> 3
[photograph of bow of ship]
Integrity
Experience
Fast Turnaround
Innovativeness
Responsiveness
Safety Excellence
[First Wave Marine, Inc. logo]
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES.
SPECIFICALLY, THE UNDERWRITER MAY OVERALLOT IN CONNECTION WITH THE OFFERING, AND
MAY BID FOR, AND PURCHASE, NOTES IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
<PAGE> 4
[photograph of power generation barge under tow]
Hull of power generation barge constructed by First Wave
[aerial photograph of shipyard]
East Pelican Island Shipyard servicing offshore drilling rigs
[photograph of offshore supply boat]
Offshore support vessel serving Gulf Coast drilling rigs
[photograph of ocean-going ship]
Offshore petrochemical carrier serving oil and gas industry
[photograph of welder]
[photograph of inland tank barge by onshore gas free facility]
Inland tank barge, degassing facility, Brady Island Shipyard
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and Consolidated Financial Statements, including the notes thereto,
appearing elsewhere in this Prospectus. Unless 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. All references to shares of Common Stock of
the Company, $.01 par value (the "Common Stock") give effect to the
10.65-for-one stock split effected November 20, 1997.
THE COMPANY
First Wave is a leading provider of shipyard and related environmental
services to the offshore support vessel, offshore barge and inland marine
industries. The Company offers a full range of repair, conversion, new
construction and related environmental services, including cleaning,
degassing and wastewater treatment. Following the consummation of a pending
acquisition, the Company will significantly expand its operations and capacity,
particularly into the offshore drilling industry. The Company will be the
largest shipyard operator in the Houston-Galveston area with five of the eight
major shipyard facilities in this strategic location. First Wave believes that,
following the pending acquisition, it will be the only "one-stop" source of all
shipyard services for all segments of the offshore support vessel, offshore
barge and inland marine markets in Texas.
Since it acquired its first facility in December 1993, First Wave has
significantly improved revenues and profitability. The Company's success has
been the product of a focused strategy to build a high quality, dedicated
workforce, provide a high level of customer service and optimize the mix of its
services to maximize capacity utilization. As a result, revenues grew to $28.0
million in 1996 from $15.3 million in 1994 while EBITDA improved to $4.4 million
from a loss of $23,000 over the same period. In the first nine months of 1997,
the Company generated revenues of $24.5 million and EBITDA of $7.2 million,
compared to revenues and EBITDA of $19.9 million and $1.8 million, respectively,
in the first nine months of 1996.
The Company believes that as a result of its strategy and planned
expansion, it is well positioned to meet the growing demand for its services.
First Wave is experiencing strong demand growth for all of its services
primarily as a result of: (i) higher repair activity due to the aging offshore
support vessel and barge fleets; (ii) greater customer requirements for repair
and related environmental services due to increased utilization and
consolidation of the offshore support vessel and barge fleets; (iii) increasing
customer demand to convert and upgrade vessels in response to changing market
conditions; and (iv) increased levels of new vessel construction. To meet this
demand, First Wave plans to utilize capacity available at its newly acquired
facilities, as well as expand into new markets, in particular the offshore
drilling industry. The Company believes that this will enable it to perform a
greater number of projects and increase its revenues, while leveraging the
economies of scale available to a geographically concentrated multi-shipyard
operator.
BUSINESS STRATEGY
The Company's strategy is to leverage its reputation as an efficient,
reliable, customer driven shipyard operator providing a diversified range of
shipyard services to the offshore support vessel, offshore drilling, offshore
barge and inland marine industries. The Company intends to utilize its proven
strengths in order to expand into the Gulf of Mexico offshore drilling market.
Key elements of this strategy are:
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<PAGE> 6
- Maintaining a High Quality Dedicated Workforce. The Company invests
in its employees through training, superior benefits and the fostering of a
close-knit, supportive culture. As a result, the Company has not
experienced the significant labor shortages and attrition suffered by many
Gulf Coast shipyards and has consistently posted an award-winning safety
record. Management believes the Company has been able to maintain stable
manpower levels and has flattened the labor force highs and lows typical in
the shipyard industry through a superb relationship with its labor force,
sophisticated forecasting of labor needs, the implementation of its
strategic alliances and optimization of its mix of new construction and
repair services.
- Development of Strategic Alliances with Key Customers. The Company
has developed a "contract rate" system which it uses to form strategic
alliances with its key customers. The contract rate system enables the
Company to baseload its facilities with pre-booked work, improve planning
and execution of jobs through a cooperative process with the customer and
more effectively project its revenues and labor needs for the year. In
return, the alliance partner receives volume based pricing, assures itself
of needed drydock capacity, gains the ability to accurately budget its
work, benefits from improved turnaround on jobs and receives other services
on a preferred basis.
- Continuous Optimization of the Mix of Shipyard Services. The
Company generally negotiates flexible delivery dates for new construction
which greatly contributes to the efficiency of its shipyards. During
periods when demand for repair services is lower, the Company shifts
workers to new construction as a means of absorbing excess labor. By
continuously optimizing its mix of activities, the Company ensures that its
quality work force remains intact and motivated, and costs associated with
attrition are reduced. As a result of this strategy, the Company believes
that it can maximize its margins by allocating labor to higher margin
repair work or can absorb excess labor by shifting it to new construction,
as demand dictates.
- One-Stop Source for Shipyard Services. In addition to its core
shipyard repair and construction services, the Company offers a range of
related environmental services at its facilities, including tank cleaning,
degassing and wastewater treatment. Following the pending acquisitions,
complementary services such as these will enable the Company to become the
only one-stop source of all shipyard services for all segments of the
offshore support vessel, offshore barge and inland marine markets in Texas.
- Focus on Core Geographic Areas: Houston and Galveston. The
Houston-Galveston area is a very strategic location for its shipyards,
since three of the largest U.S. fleets of inland tank barges are based in
the Houston Ship Channel area. Additionally, the growing offshore support
vessel and barge fleets in the Gulf of Mexico can be efficiently served
from the Company's Houston and Galveston locations. Management believes the
expansion of the East Pelican Island and West Pelican Island facilities in
Galveston to service the offshore drilling industry is especially strategic
since Galveston is in close proximity to offshore Gulf of Mexico drilling
activity, thereby minimizing rig transit costs and downtime.
- Leveraging Economies of Scale. With all of its shipyards within a
50-mile corridor, management can more effectively operate the facilities
and consolidate overhead. Additionally, the proximity of the shipyards
allows for centralizing many administrative functions. Management believes
the uniformity of state regulations and the volume leverage gained from
using single suppliers among all its facilities, as well as the potential
interchangeability of the labor force, provides economic benefits for the
Company.
- Expansion into the Offshore Gulf of Mexico Market. Upon
consummation of the Bludworth Acquisition and the completion of the
improvements to the East Pelican Island shipyard, the Company will have two
adjacent shipyard facilities in Galveston, Texas, which will enable it to
take advantage of the rising demand for shipyard services to the oil and
gas industry in the Gulf of Mexico. Management has planned its expansion to
diversify the Company's business
4
<PAGE> 7
lines into services for offshore drilling rigs, larger offshore support
vessels and oil and gas related ship conversions.
RECENT DEVELOPMENTS
Greens Bayou Acquisition. The Company acquired the Greens Bayou Facility on
August 11, 1997. This facility is specifically designed to service the barge
industry with seven haul-up facilities, including a major six-position rail
transfer system. The Company believes it can efficiently operate this Houston
area shipyard by consolidating overhead with its nearby Brady Island shipyard.
These two shipyards will share accounting, training, sales, estimating, risk
management and general administrative functions. The potential
interchangeability of the labor force with the Brady Island facility, as well as
the ability of Greens Bayou barge customers to use Brady Island's environmental
services, should also result in economic benefits for the Company. The facility
provides necessary capacity for the Company to meet excess demand for its inland
barge services, especially due to the increasing utilization of its Brady Island
drydocks for the offshore support vessel market.
East Pelican Island Acquisition. After acquiring PMB Engineering Inc.'s
lease of the 110-acre East Pelican Island facility in Galveston, Texas, the
Company signed an amendment to such lease with Galveston Wharves providing for a
term of up to 99 years. For 1998, the Company has budgeted $24.4 million in
capital improvements to this facility. Upon completion of these planned capital
improvements, First Wave will be able to expand its business lines into
providing shipyard services for offshore drilling rigs, larger offshore support
vessels and oil and gas related ship conversions.
The Bludworth Acquisition. On October 15, 1997, the Company entered into a
purchase agreement to acquire (the "Bludworth Acquisition") all of the
outstanding capital stock of John Bludworth Marine, Inc. ("Bludworth"). The
purchase price consists of $15.0 million in cash and the issuance of a $4.0
million promissory note.
Bludworth is an established regional shipbuilder focusing on offshore
support vessel repair, as well as inland barge repair and inland boat
construction and repair. The Bludworth Acquisition expands the Company's
Houston-Galveston base of operations in a cost efficient manner, adding
significant new drydock capacity within its area of operation and diversifying
its current mix of services to include expanded capabilities in the offshore and
the inland boat segment of the marine industry. The Bludworth Acquisition
provides the Company with two additional shipyards: (i) the JBM Pasadena
facility in Pasadena, Texas, which is near the Company's other Houston shipyards
and (ii) the West Pelican Island facility which is adjacent to the East Pelican
Island facility in Galveston, Texas. The Bludworth Acquisition will close
simultaneously with the Offering.
Additional Galveston Shipyard. The Company has entered into a non-binding
letter of intent to purchase certain shipyard assets, including real property
and improvements, in Galveston, Texas ("Other Galveston Assets") for $4.5
million. There can be no assurance that such transaction will be consummated or
consummated on the terms described herein.
5
<PAGE> 8
SUMMARY SHIPYARD INFORMATION
The Company's shipyards are presented below, indicating the markets served
at each location. All shipyards offer or will offer repair, conversion and new
construction services. In addition, the Brady Island facility offers
environmental services.
<TABLE>
<CAPTION>
OFFSHORE OFFSHORE
NO. OF SUPPORT INLAND INLAND OFFSHORE DRILLING
ACRES VESSELS BARGES BOATS BARGES RIGS SHIPS
------ -------- ------ ------ -------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
HOUSTON AREA SHIPYARDS:
Brady Island......................... 23 X X X X
Greens Bayou......................... 20 X X
JBM Pasadena(a)...................... 63 X X X X
GALVESTON SHIPYARDS:
East Pelican Island.................. 110 X X X X
West Pelican Island(a)............... 23 X X X X
</TABLE>
- ---------------
(a) To be acquired in the Bludworth Acquisition.
SUMMARY
The Company believes that the additional financial resources and increased
financial flexibility afforded by the Offering will position the Company to fund
its strategic expansion plan and to participate in the ongoing consolidation of
the shipbuilding industry. Management believes that the expansion of the
Company's capacity and capabilities as a result of recent and pending
acquisitions have positioned First Wave to benefit from the improved demand for
shipyard services in the offshore oil and gas and inland marine industries.
6
<PAGE> 9
THE OFFERING
NOTES OFFERED.............. $90,000,000 aggregate principal amount of %
Senior Notes due 2008.
MATURITY................... , 2008.
INTEREST................... The Notes will bear interest at a rate of %
per annum, payable semi-annually in arrears on
and of each year,
commencing , 1998.
RANKING.................... The Notes will be senior obligations of the
Company, will rank pari passu in right of payment
with all existing and future unsecured senior
Indebtedness (as defined herein) of the Company and
will rank senior in right of payment to any future
Subordinated Indebtedness (as defined herein) of
the Company. As of December 31, 1997, after giving
pro forma effect to the sale of the Notes and the
application of the net proceeds therefrom, on a
consolidated basis the Company would have had
approximately $90.2 million of unsecured senior
Indebtedness outstanding and no Subordinated
Indebtedness outstanding. The Notes will be
effectively subordinated to all secured
Indebtedness of the Company to the extent of the
assets securing such Indebtedness. As of December
31, 1997, after giving pro forma effect to the sale
of the Notes and the application of the net
proceeds therefrom, on a consolidated basis the
Company would have had approximately $9.5 million
of secured senior Indebtedness outstanding. The
Company is a holding company and substantially all
of its operations are conducted through its
operating subsidiaries. Accordingly, except in the
case of Restricted Subsidiaries (which will
guarantee the obligations of the Company under the
Notes), the Notes will be effectively subordinated
to all Indebtedness and other obligations of the
Company's subsidiaries. The Indenture pursuant to
which the Notes will be issued permits the Company
and its subsidiaries to incur additional
Indebtedness, including senior Indebtedness and
secured Indebtedness, subject to certain
limitations. See "Capitalization" and "Description
of Notes -- Ranking" and "-- Certain
Covenants -- Incurrence of Indebtedness."
SECURITY................... Upon the consummation of the Offering, the Company
will purchase and pledge to the Trustee (as defined
herein), for the benefit of the holders of the
Notes, the Pledged Securities, which will be in
such amount as will be sufficient, upon receipt of
scheduled interest and principal payments, to
provide for payment in full when due of the first
two scheduled semi-annual interest payments on the
Notes. The Company expects to use approximately
$9.5 million of the net proceeds from the sale of
the Notes to purchase the Pledged Securities,
although the actual purchase price for such
securities will vary depending on the interest
rates of Government Securities (as defined herein)
prevailing at the time of the purchase of the
Pledged Securities. The Pledged Securities will be
pledged as security for the repayment of the
principal of and interest on the Notes and all
other obligations under the Indenture. When an
interest payment is due, the Company may either
deposit sufficient funds to pay the interest sched-
7
<PAGE> 10
uled to be paid or direct the Trustee to release
from the Pledge Account (as defined herein) funds
sufficient to pay the interest scheduled. In the
event the Company exercises the former option, the
Pledge Agreement provides the Company may direct
the Trustee to release proceeds or the Pledged
Securities from the Pledge Account in a like
amount. If the Company makes the first two
scheduled interest payments on the Notes in a
timely manner and no Default (as defined herein) or
Event of Default (as defined herein) is then
continuing, the remaining Pledged Securities, if
any, will be released from the Pledge Account and
the Notes will thereafter be unsecured obligations
of the Company. See "Description of
Notes -- Security."
SUBSIDIARY GUARANTEES...... The obligations of the Company under the Notes will
be fully and unconditionally guaranteed on a senior
unsecured basis jointly and severally by all
Restricted Subsidiaries. All of the Company's
existing Subsidiaries will initially be Restricted
Subsidiaries (the "Initial Restricted
Subsidiaries"), and future Restricted Subsidiaries
of the Company will be required to issue Subsidiary
Guarantees. All future subsidiaries of the Company
will not necessarily be Restricted Subsidiaries.
Each Subsidiary Guarantee will be a senior
unsecured obligation of the applicable Restricted
Subsidiary, will rank pari passu in right of
payment with all existing and future unsecured
senior Indebtedness of such Restricted Subsidiary
and will rank senior in right of payment to any
Subordinated Indebtedness of such Restricted
Subsidiary. As of December 31, 1997, after giving
effect to the sale of the Notes and the application
of the estimated net proceeds therefrom, the
aggregate amount of outstanding senior Indebtedness
of the Initial Restricted Subsidiaries would,
without regard to the Subsidiary Guarantees, have
been approximately $9.7 million. Furthermore, the
holders of the Notes will not share in the proceeds
from the sale of or other realization upon any
assets of such Restricted Subsidiary in which the
Restricted Subsidiary has granted security
interests until the repayment of the indebtedness
secured thereby. Under certain circumstances, a
Restricted Subsidiary may be designated an
Unrestricted Subsidiary (as defined herein) and its
Subsidiary Guarantee released. See "Description of
Notes -- Subsidiary Guarantees."
OPTIONAL REDEMPTION........ The Notes will be redeemable, at the option of the
Company, in whole or in part, at any time on or
after , 2003, at the redemption prices
set forth herein, plus accrued and unpaid interest
thereon to the applicable redemption date.
Notwithstanding the foregoing, on or prior to
, 2001, the Company may redeem at any
time or from time to time up to 35% of the
aggregate principal amount of the Notes at a
redemption price equal to % of the principal
amount thereof, plus accrued and unpaid interest
thereon to the applicable redemption date, with the
net proceeds of a Public Equity Offering; provided,
that at least 65% of the aggregate principal amount
of the Notes initially issued remains outstanding
after giving effect to the redemption thereof. See
"Description of Notes -- Optional Redemption."
8
<PAGE> 11
CHANGE OF CONTROL.......... Upon the occurrence of a Change of Control, the
Company will be required to make an offer to
repurchase all of the outstanding Notes at a price
equal to 101% of the principal amount thereof, plus
accrued and unpaid interest thereon to the
repurchase date. See "Description of
Notes -- Repurchase at the Option of
Holders -- Change of Control."
CERTAIN COVENANTS.......... The Indenture will contain certain covenants that,
among other things, limit the ability of the
Company and its Restricted Subsidiaries to incur
additional Indebtedness, pay dividends or make
other distributions, repurchase any capital stock
or Subordinated Indebtedness, make certain
investments, create certain liens, enter into
certain transactions with affiliates, sell assets,
enter into certain mergers and consolidations,
allow Restricted Subsidiaries to create certain
dividend and other payment restrictions, enter into
sale and leaseback transactions, and issue or sell
capital stock of Restricted Subsidiaries. See
"Description of Notes -- Certain Covenants."
EVENTS OF DEFAULT.......... The Indenture will contain certain events of
default, including a default in the payment when
due of interest, principal or premium, if any, on
the Notes, the failure by the Company to comply
with certain provisions of the Indenture, certain
defaults under other Indebtedness, the failure by
the Company to pay certain judgments rendered
against the Company, certain events of bankruptcy
or insolvency, certain events of breach, default,
repudiation or unenforceability of the Pledge
Agreement, and the failure of the Subsidiary
Guarantees to be in full force and effect. The
Company is required to deliver to the Trustee
annually a statement regarding compliance with the
Indenture, and the Company is required, upon
becoming aware of any default to deliver to the
Trustee a statement specifying such default. See
"Description of Notes -- Events of Default and
Remedies."
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, to fund the
purchase of the Pledged Securities and for general
corporate purposes. See "Use of Proceeds."
9
<PAGE> 12
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.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------- ------------------------------
1994 1995 1996 1996(a) 1996 1997 1997(a)(b)
------- ------- ------- --------- ------- ------- ----------
PRO FORMA PRO FORMA
(IN THOUSANDS, EXCEPT RATIOS 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 $14,965 $19,801 $40,504
New construction.................... 1,391 3,321 2,841 5,044 1,898 881 1,891
Environmental services.............. 2,263 3,287 4,119 4,119 3,062 3,784 3,784
------- ------- ------- ------- ------- ------- -------
Total revenues...................... 15,347 22,000 27,957 44,950 19,925 24,466 46,179
Gross profit.......................... 2,756 4,957 9,334 12,229 6,039 10,136 14,855
Operating earnings (loss)............. (71) 1,334 3,705 4,765 1,491 6,193 8,678
Earnings (loss) before taxes.......... (257) 1,011 2,657 (4,759) 1,045 4,377 1,410
Net earnings (loss)................... (259) 728 1,559 (2,885) 516 2,540 909
Weighted average number of shares
outstanding......................... 10,650 10,650 10,650 10,650 10,650
Earnings (loss) per share............. (.02) .07 .15 .05 .24
CASH FLOW AND OPERATING DATA:
Net Cash provided by (used in):
Operating activities................ ($2,962) $ 36 $ 1,184 $ -- $ (498) $ 4,436 $ --
Investing activities................ (569) (934) (1,425) -- (857) (2,008) --
Financing activities................ 3,610 884 175 -- 1,289 (1,349) --
EBITDA(c)............................. (23) 1,593 4,385 8,050 1,815 7,230 11,713
Ratio of EBITDA to interest
expense(c).......................... NM 6.4x 5.3x .8x 4.8x 5.6x 1.5x
Ratio of earnings to fixed
charges(d).......................... .7x 2.3x 3.2x .6x 2.3x 4.4x 1.2x
Depreciation and amortization......... 48 259 680 2,617 324 1,037 2,638
Capital expenditures(e)............... 569 934 16,322 -- 15,754 6,577 --
Labor hours worked.................... 340 509 582 953 435 466 1,003
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-----------------------
ACTUAL PRO FORMA(a)
------- ------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 1,079 $ 34,480
Total assets................................................ 32,558 117,729
Long-term debt.............................................. 23,229 99,537
Stockholders' equity........................................ 4,435 6,543
</TABLE>
- ---------------
NM -- Not meaningful
(a) Such data give effect to (i) the completion of the Bludworth Acquisition,
(ii) the completion of the Exchange and (iii) the completion of the Offering
and the application of estimated net proceeds as described in "Use of
Proceeds," as if they had occurred on January 1, 1996 as to the Pro Forma
Income Statement Data and on September 30, 1997 as to the Pro Forma Balance
Sheet Data. The Pro Forma financial data do not purport to be indicative of
the Company's financial condition or results of operations had the
transactions to which such data give effect been completed on the dates
assumed, nor do such data purport to project the Company's financial
condition or results of operations at any future date or for any future
period. See Unaudited Pro Forma Consolidated Combined Financial Information.
(b) To reflect the historical consolidated operations of Bludworth for the nine
months ended September 30, 1997, certain additions and deductions to
revenues and expenses have been made to convert such operations from a March
31 fiscal year to a calendar year.
(c) EBITDA (earnings before interest, minority interest, taxes, depreciation and
amortization expense) is presented here not as a measure of operating
results, but rather as a measure of the Company's operating performance.
Management of the Company believes that EBITDA, the Ratio of EBITDA to
interest expense and operating cash flow may provide additional information
about the Company's ability to meet its future requirements for debt
service, capital expenditures and working capital. EBITDA and the Ratio of
EBITDA to interest expense are widely used by financial analysts as a
measure of financial performance. Management further believes that the
Company's trends in increased EBITDA enhance the Company's ability to meet
capital expenditure requirements, and give the Company a more substantial
working capital base. EBITDA should not be construed as an alternative to
operating income (determined in accordance with generally accepted
accounting principles ("GAAP")) as an indicator of the Company's operating
performance or as an alternative to cash flows from operating activities
(determined in accordance with GAAP) as a measure of liquidity. EBITDA
measures presented herein may not be comparable to similarly titled measures
of other companies.
(d) For the purposes of computing the ratio of earnings to fixed charges,
"earnings" consists of earnings before income taxes and fixed charges.
"Fixed charges" consist of interest expense, amortization of deferred
financing costs and that portion of rental expense deemed representative of
the interest factor. Earnings were inadequate to cover fixed charges for the
year ended December 31, 1994 by $0.3 million and on a pro forma basis for
the year ended December 31, 1996 by $4.8 million.
(e) Includes property and equipment acquired through the incurrence of debt.
10
<PAGE> 13
RISK FACTORS
An investment in the Notes 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 Notes.
SUBSTANTIAL LEVERAGE AND DEBT SERVICE
After giving effect to the sale of the Notes, the Company will have
indebtedness that is substantial in relation to its stockholders' equity. As of
December 31, 1997, after giving effect to the sale of the Notes and the
application of the estimated net proceeds therefrom, the Company on a
consolidated basis would have had outstanding indebtedness with a principal
amount of $99.8 million and stockholders' equity of $6.5 million. In addition,
as of December 31, 1997, after giving effect to the sale of the Notes and the
application of the estimated net proceeds therefrom, the Company would have had
a debt-to-equity ratio of 15.4 to 1.0 (based on the principal amount). The
Indenture permits the Company to incur additional indebtedness under certain
conditions.
Following the consummation of the Offering, the Company will be required to
make semi-annual interest payments in respect of the Notes of approximately $4.7
million. The Company's ability to meet its debt service obligations and to
reduce its total indebtedness will be dependent upon the Company's future
performance, which will be subject to general economic conditions and to
financial, business and other factors affecting the operations of the Company,
many of which are beyond its control.
The Indenture will impose significant operating and financial limitations
on the Company. Such limitations will affect, and in many respects significantly
restrict or prohibit, among other things, the ability of the Company to pay
dividends, make investments and incur additional indebtedness. These
restrictions, in combination with the Company's substantial leverage, could
limit the ability of the Company to effect future financings or otherwise
restrict the nature and scope of its activities. The degree to which the Company
is leveraged could have important consequences to holders of Notes, including:
(i) the impairment of the Company's ability to obtain additional financing in
the future, (ii) the reduction of funds available to the Company for its
operations or for capital expenditures as a result of the dedication of a
substantial portion of the Company's net cash flow from operations to the
payment of principal of and interest on the Notes, (iii) the possibility of an
event of default under covenants contained in the Indenture, which could have a
material adverse effect on the Company, (iv) the placement of the Company at a
relative competitive disadvantage as compared to competitors who are not as
highly leveraged as the Company, and (v) the inability to adjust to rapidly
changing market conditions and consequent vulnerability in the event of a
downturn in general economic conditions or its business because of the Company's
reduced financial flexibility. In addition, to the extent that the Company
enters into a Bank Credit Agreement (as defined herein) in the future as
permitted by the Indenture, such agreement may impose additional operating and
financial restrictions on the Company, which may be more restrictive than those
provided for in the Indenture. See "Capitalization," "Selected Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and "Description of Notes."
RANKING OF THE NOTES
The Notes will be general unsecured obligations of the Company. The Notes
will rank pari passu in right of payment of principal, premium, if any, and
interest on, and any other amounts owing in respect of, the Notes with other
unsecured senior Indebtedness and will be effectively subordinated to all
secured Indebtedness of the Company and the Restricted Subsidiaries to the
extent of the assets securing such indebtedness. As of December 31, 1997, after
giving effect to the sale of the Notes and the application of the estimated net
proceeds therefrom, on a consolidated basis the Company would have had
approximately $90.2 million of unsecured senior Indebtedness, no Subordinated
Indebtedness and approximately $9.5 million of secured indebtedness
collateralized
11
<PAGE> 14
by certain properties and assets of the Company. Additionally, the Indenture
governing the Notes will permit the Company to incur up to $20 million of
Indebtedness pursuant to a Bank Credit Agreement which may be collateralized by
certain of the assets and properties of the Company. In the event of the
bankruptcy, liquidation, dissolution, reorganization or other winding up of the
Company, the assets of the Company which collateralize secured Indebtedness will
be available to pay obligations on the Notes only after the respective secured
Indebtedness of the Company has been paid in full. See "Description of Notes."
FRAUDULENT CONVEYANCE CONSIDERATIONS
The obligations of the Company under the Notes are guaranteed by the
Initial Restricted Subsidiaries and will be guaranteed by all future Restricted
Subsidiaries of the Company. It is possible that creditors of a Restricted
Subsidiary may challenge the Subsidiary Guarantee issued by it as a fraudulent
conveyance under applicable provisions of the United States Bankruptcy Code or
comparable provisions of federal and state statutes. The requirements for
establishing a fraudulent conveyance vary depending on the laws of the
applicable jurisdiction. If a court found, under relevant federal and state
fraudulent conveyance statutes in a bankruptcy, reorganization or rehabilitation
case or similar proceeding or lawsuit by or on behalf of unpaid creditors of the
Company or the Restricted Subsidiaries, that at the time a Subsidiary Guarantee
was issued that (i) the applicable Restricted Subsidiary issued its Subsidiary
Guarantee with the intent of hindering, delaying or defrauding current or future
creditors or (ii) the applicable Restricted Subsidiary received less than
reasonably equivalent value or fair consideration for issuing its Subsidiary
Guarantee and (A) was insolvent or was rendered insolvent by reason of the sale
of the Notes or issuance of the Subsidiary Guarantee, (B) was engaged, or about
to engage, in a business or transaction for which its assets constituted
unreasonably small capital or (C) intended to incur, or believed that it would
incur, debts beyond its ability to pay such debts as they matured (as all of the
foregoing terms are defined in or interpreted under such fraudulent conveyance
statutes), such court could void or rescind or reduce such Subsidiary Guarantee
or take other action detrimental to the rights of the holders of the Notes,
including invalidating such Subsidiary Guarantee and requiring the holders of
the Notes to return amounts previously paid in respect of the Notes to the
extent such payments were made by, or derived from the assets of, the Restricted
Subsidiary whose Subsidiary Guarantee was voided, rescinded or reduced. Among
other things, a legal challenge of a Subsidiary Guarantee on fraudulent
conveyance grounds may focus on the benefits, if any, realized by such
Restricted Subsidiary as a result of the issuance by the Company of the Notes.
To the extent a Subsidiary Guarantee is voided as a fraudulent conveyance or
held unenforceable for any other reason, the holders of the Notes would cease to
have any claim in respect of the assets of such Restricted Subsidiary. The
measure of insolvency under applicable law will vary depending upon the law
applied in such case. Generally, however, a Restricted Subsidiary would be
considered insolvent if at the time it issued its Subsidiary Guarantee or made
any payments in respect thereof, either (i) the fair market value (or fair
salable value) of its assets was less than the amount required to pay its total
existing debts and liabilities (including the probable liability on contingent
liabilities) as they become absolute and matured or (ii) it was incurring debts
beyond its ability to pay as such debts matured. See "Description of Notes."
REPURCHASE OF NOTES UPON CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company will be required to
offer to repurchase all of the outstanding Notes at a price equal to 101% of the
principal amount thereof, plus accrued and unpaid interest to the repurchase
date. There can be no assurance that the Company would have sufficient resources
to repurchase the Notes upon the occurrence of a Change of Control. The failure
to repurchase all of the Notes tendered to the Company would constitute an Event
of Default under the Indenture. Furthermore, the repurchase of the Notes by the
Company upon a Change of Control might result in a default on the part of the
Company in respect of other future indebtedness of the Company as a result of
the financial effect of such repurchase on
12
<PAGE> 15
the Company or otherwise. The change of control repurchase feature of the Notes
may have anti-takeover effects and may delay, defer or prevent a merger, tender
offer or other takeover attempt. See "Description of Notes."
SHORTAGE OF TRAINED SHIPYARD WORKERS
Shipyards located in certain portions of the U.S. Gulf Coast are
experiencing severe shortages of skilled shipyard labor as a result of recent
labor demands brought about by increases in demand for shipyard services,
offshore drilling activities, the construction of offshore facilities and
offshore field service personnel. This labor shortage has resulted in increased
costs of labor, and limitations on production capacity, for certain shipyards.
The labor shortage has not materially impacted the Company at the present time,
although no assurances can be given regarding whether shortages will be
experienced at the Company's shipyards in the future. Any labor shortages
experienced by the Company in the future could have a material adverse effect on
the Company's business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations" and "Business -- Services" and "-- Shipyard
Properties."
ACQUISITION RISKS
The Company's rapid growth in recent years has been attributable in
significant part to acquisitions. The Company expects to continue to evaluate
and, where appropriate, pursue acquisition opportunities on terms management
considers favorable to the Company. There can be no assurance that suitable
acquisition candidates will be identified in the future, that the Company will
be able to finance such acquisitions on favorable terms or that competition for
such assets will not render such acquisitions economically infeasible. In
addition, there can be no assurances that any acquisition made by the Company,
including the Bludworth Acquisition, will be integrated successfully into the
Company's operations or will achieve desired profitability objectives. While the
Company's current operations are focused in the Houston-Galveston area, there is
no assurance that the Company will not pursue acquisitions located in other
geographic areas. In connection with certain acquisitions, the Company may also
be required to assume certain liabilities, including environmental liabilities,
known or unknown. See "-Impact of Environmental Laws" and
"Business -- Background."
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, the availability of
which may be lower in the fourth quarter. Although the Company believes there
will be an increase in demand for offshore support vessels and offshore drilling
rigs, and the repair and maintenance of such vessels, the Company cannot predict
future levels of activity in offshore oil and gas exploration, development and
production. See "Business -- Industry Overview."
13
<PAGE> 16
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.
See "Business -- Shipyard Properties."
DEPENDENCE ON SIGNIFICANT CUSTOMERS
A large portion of the Company's revenue has historically been generated by
a few customers, although not necessarily the same customers from year to year.
For 1996, the Company derived more than 10% of its revenues from each of SEACOR
Smit Inc. (22%) and Kirby Corporation (15%) and more than 50% from its largest
five customers. Based on its current backlog of projects, the Company expects
that it will derive more than 10% of its revenues in 1997 from each of SEACOR
Smit Inc. and Kirby Corporation. Because the level of services that the Company
may provide to any particular customer depends on that customer's needs for
repairs in a particular year, customers that account for a significant portion
of revenue in one fiscal year may represent an immaterial portion of revenue in
subsequent years. However, the loss of a significant customer for any reason,
including a sustained decline in that customer's capital expenditure budget or
competitive factors, could result in a substantial loss of revenue and could
have a material adverse effect on the Company's operating performance. Further,
as a result of continuing consolidations in the inland marine, offshore support
vessel and offshore drilling industries, the Company may face more significant
pricing and margin pressure when dealing with volume commitments from such
customers. See "Business -- Principal Customers."
COMPETITIVE INDUSTRY
The shipbuilding industry is highly competitive. In general, during the
1990s, the U.S. shipbuilding industry has been characterized by substantial
excess capacity because of the significant decline in U.S. Navy shipbuilding
spending and the difficulties experienced by U.S. shipbuilders in competing
successfully for international commercial projects against foreign shipyards,
many of which are heavily subsidized by their governments. As a result of these
factors, competition by U.S. shipbuilders for domestic commercial projects has
increased significantly. Such increased competition has resulted in substantial
pressure on pricing and profit margins.
Contracts for the construction and conversion of vessels are often awarded
on a competitive bid basis. More than 30% of the Company's repair work is
awarded on a competitive bid basis. Although the Company believes customers
consider, among other things, the availability and technical capabilities of
equipment and personnel, efficiency, condition of equipment, safety record and
reputation, price is a primary factor in determining which qualified shipbuilder
is awarded a job.
The Company currently competes for a range of domestic commercial shipyard
projects principally with approximately 10 to 20 U.S. shipyards. The number and
identity of competitors on particular projects vary greatly, depending on the
type of service performed, the type of vessel and the size of project.
Additional competition, competitive bidding and downward pressures on profits
14
<PAGE> 17
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 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 intends to complete the first phase of the shipyard expansion
by the third quarter 1998. During the expansion the Company will incur
expenditures, some of which cannot be capitalized, without realizing any
significant revenues at this facility. The Company historically has not
conducted any operations in this segment of the shipbuilding industry. There can
be no assurance that the Company will be successful. Further, there can be no
assurance that market conditions, including dayrates realized by offshore
drilling contractors, will permit the Company to obtain sufficient orders for
the conversion and repair of offshore drilling rigs on a profitable basis, or
that the Company will realize orders of a sufficient quantity to justify the
costs and expenses of improving, equipping and operating the shipyard. There can
be no assurance that the shipyard capital improvements will be completed or, if
completed, that the shipyard improvements will be completed on the schedule or
at the total cost to complete currently estimated by the Company. See
"Business -- Shipyard Properties."
OPERATING RISKS
The Company's activities relating to the repair, conversion and
construction of large steel structures, the operation of cranes and other heavy
machinery and other operating hazards, can cause personal injury or loss of
life, severe damage to and destruction of property and equipment and suspension
of operations. The operation of the marine rails and the drydock vessels owned
by the Company can give rise to large and varied liability risks, such as risks
of collisions with other vessels or structures, sinkings, fires and other marine
casualties, which could result in significant claims for damages against both
the Company and third parties for, among other things, personal injury, death,
property damage, pollution and loss of business. Litigation arising from any
such
15
<PAGE> 18
occurrences may result in the Company being named as a defendant in lawsuits
asserting large claims. In addition, due to their proximity to the Gulf of
Mexico, the Company's facilities are subject to the possibility of electrical
outages, as well as physical damage caused by heavy winds, hurricanes or
flooding. See "Business -- Insurance", "-- Other Regulation" and "-- Legal
Proceedings."
DEPENDENCE ON KEY MANAGEMENT
The Company believes that its success to date is attributable to, and its
future performance will depend to a significant extent upon, the efforts and
abilities of Messrs. Samuel F. Eakin, Chief Executive Officer, Frank W. Eakin,
President and Chief Operating Officer, David B. Ammons, Executive Vice
President-Finance and Joe O'Toole, Executive Vice President-Operations. The loss
of the services of one or more of the Company's executive officers could have a
material adverse effect on the Company. See "Management."
BACKLOG
The Company's backlog is based on management's estimate of future revenue
attributable to (i) the remaining amounts to be invoiced with respect to those
projects, or portions of projects, as to which a customer has authorized the
Company to begin work or purchase materials and (ii) projects, or portions of
projects, that have been awarded to the Company as to which the Company has not
commenced work. All projects currently included in the Company's backlog are
subject to change and/or termination at the option of the customer, either of
which could substantially change the amount of backlog currently reported. The
loss of a significant customer could have a material adverse effect on the
Company's revenue. See "Business -- Principal Customers" and "-- Contract
Procedure, Structure and Pricing."
IMPACT OF ENVIRONMENTAL LAWS
The Company is subject to extensive and changing federal, state and local
laws (including common law) and regulations designed to protect the environment
("Environmental Laws"). The Company from time to time is involved in
administrative, enforcement and other proceedings under Environmental Laws
involving its operations and facilities. Environmental Laws could impose
liability for remediation costs or result in civil or criminal penalties in
cases of non-compliance. Compliance with Environmental Laws increases the
Company's costs of doing business. Additionally, Environmental Laws have been
subject to frequent change; therefore, the Company is unable to predict the
future costs or other future impact of Environmental Laws on its operations.
There can be no assurance that the Company will not incur material liability
related to the Company's operations and properties under Environmental Laws. See
"Business -- Environmental Regulation."
LEGISLATIVE PROPOSALS TO RESCIND PROVISIONS OF JONES ACT
Pursuant to the requirements of the Merchant Marine Act of 1920 (the "Jones
Act"), all vessels transporting products between U.S. ports ("Coastwise Trade")
must be constructed and repaired in U.S. shipyards, owned and crewed by U.S.
citizens and registered under U.S. law. Many customers elect to have vessels
constructed and repaired at U.S. shipyards, even if such vessels are eventually
intended for international use, in order to maintain flexibility to use such
vessels in the U.S. Coastwise Trade in the future. The Company believes that a
substantial portion of its revenues will result from the sale and repair of
vessels capable of being used for U.S. Coastwise Trade. In 1996, proposed
legislation was introduced in Congress to substantially modify the provisions of
the Jones Act mandating the use of vessels constructed in the United States for
U.S. Coastwise Trade. Similar bills seeking to rescind or substantially modify
the Jones Act and eliminate or adversely affect the competitive advantages it
affords to U.S. shipbuilders have been introduced in Congress from time to time
and are expected to be introduced in the future. Although management believes it
is unlikely that the Jones Act requirements will be rescinded or materially
modified in the foreseeable
16
<PAGE> 19
future, there can be no assurance that this will not occur. Many foreign
shipyards are heavily subsidized by their governments and, as a result, there
can be no assurance that the Company would be able to effectively compete with
such shipyards if they were permitted to construct vessels for use in the U.S.
coastwise trade. The repeal of the Jones Act or any amendment of the Jones Act
that would eliminate or adversely affect the competitive advantages provided to
U.S. shipbuilders could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business -- Other
Regulation -- Jones Act."
ABSENCE OF PUBLIC MARKET
There is no existing public market for the Notes and the Company does not
intend to list the Notes on any national securities exchange. Although the
Underwriter has advised the Company that it currently intends to make a market
in the Notes, the Underwriter is not obligated to do so and may discontinue such
market making at any time. Accordingly, there can be no assurance that an active
market will develop upon completion of this Offering or, if developed, that such
market will be sustained. The initial offering price of the Notes will be
determined through negotiations between the Company and the Underwriter, and may
bear no relationship to the market price of the Notes after the Offering.
Factors such as quarterly or cyclical variations in the Company's financial
condition and results of operations, variations in interest rates, future
announcements concerning the Company or its competitors, government regulation,
general economic and other conditions could cause the market price of the Notes
to fluctuate substantially.
17
<PAGE> 20
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"). On October 16, 1997, the Company entered into
a definitive agreement with the minority shareholders of Newpark Shipbuilding
and Repair, Inc. (Newpark Shipbuilding") to acquire the 17% of the outstanding
shares of Newpark Shipbuilding held by them in exchange for 999,390 shares of
Common Stock of the Company (the "Exchange"). The Exchange closed on December
31, 1997. As a result, the Company owns 100% of the outstanding shares of
Newpark Shipbuilding.
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.
18
<PAGE> 21
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 $86.1 million.
Approximately $15.0 million of the proceeds will be used to fund the cash
portion of the purchase price for the Bludworth Acquisition. It is anticipated
that in mid-1998 $4.0 million of the Offering proceeds will be used to pay the
promissory note issued as the remaining portion of the purchase price for the
Bludworth Acquisition. Approximately $12.1 million of the proceeds of the
Offering will be used to prepay indebtedness outstanding under all of
Bludworth's credit facilities, including $5.1 million relating to indebtedness
of Bludworth expected to be incurred in connection with its approximately
9,000-ton drydock currently under construction. Substantially all of the
remaining $7.0 million of Bludworth's indebtedness was incurred in connection
with Bludworth's start up of the West Pelican Island facility. See Consolidated
Financial Statements of Bludworth, including the notes thereto, contained
herein.
The Company intends to use $14.1 million of the net proceeds of the
Offering to prepay indebtedness outstanding under four of its credit facilities.
The borrowings under the first facility bear interest at 10.4% and 9.9% per year
and mature on September 2003. The borrowings under the second facility bear
interest at 8.0% and mature September 2003. The borrowings under the third
facility bear interest at 9.25% and mature February 2002. The borrowings under
the fourth facility bear interest at prime plus 1.0% and mature August 2000.
Approximately $1.7 million of the indebtedness proposed to be prepaid with
proceeds of the Offering was incurred in the last year to acquire certain assets
of Greens Bayou, $12.0 million was incurred in prior years to partially finance
the acquisition of the Brady Island facility and the balance was used for
general corporate purposes. All of the Company's credit facilities being prepaid
(excluding the Bludworth credit facilities) have been guaranteed by Samuel F.
Eakin.
Excluding the Bludworth Acquisition, the Company intends to use
approximately $27.6 million of the proceeds for its anticipated capital
requirements over the next 12 months, including capital expenditures to upgrade
the facilities at the East Pelican Island shipyard.
The Company intends to use approximately $9.5 million of the proceeds to
purchase the Pledged Securities.
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.
19
<PAGE> 22
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1997 (i) on a historical basis, (ii) pro forma after giving effect
to the Exchange, and (iii) pro forma as adjusted to reflect the Offering and the
application of the net proceeds therefrom as described under "Use of Proceeds."
This table should be read in conjunction with the Consolidated Financial
Statements of the Company, including the notes thereto, contained herein.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
---------------------------------------------
PRO FORMA PRO FORMA
FOR THE AS ADJUSTED
HISTORICAL EXCHANGE FOR THE OFFERING
---------- --------- ----------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE
DATA)
<S> <C> <C> <C>
Cash and cash equivalents............................ $ 1,079 $ 1,079 $ 34,480
======= ======= ========
Short-term borrowings and current portion of
long-term debt..................................... $ 1,552 $ 1,552 $ 219
Long-term debt....................................... 21,966 21,966 99,537
------- ------- --------
Total debt................................. 23,518 23,518 99,756
------- ------- --------
Stockholders' equity:
Common Stock, $0.01 par value, 21,000,000 shares
authorized; 10,757,565 shares issued and
outstanding and 11,756,955 shares outstanding
pro forma for the Exchange...................... 10 20 20
Preferred stock, $0.01 par value, 2,000,000 shares
authorized; no shares issued and outstanding.... -- -- --
Additional paid-in capital......................... 2 3,490 3,490
Retained earnings.................................. 4,423 4,423 3,033
------- ------- --------
Total stockholders' equity................. 4,435 7,933 6,543
------- ------- --------
Total capitalization....................... $27,953 $31,451 $106,299
======= ======= ========
</TABLE>
20
<PAGE> 23
SELECTED CONSOLIDATED FINANCIAL DATA
The historical financial data presented in the table below for and at the
end of each of the years in the three-year period ended December 31, 1996 and as
of and for the nine-month period ending September 30, 1997 are derived from the
Consolidated Financial Statements of the Company audited by Grant Thornton LLP,
independent certified public accountants. The results for the nine months ended
September 30, 1997 are not necessarily indicative of the results to be achieved
for the full year. The consolidated statements of operations data set forth
below for the years ending December 31, 1992 and 1993 and the consolidated
balance sheet data at December 31, 1992 and 1993 have been derived from
unaudited accounting records of a predecessor to the Company. The historical
financial data presented in the table below as of the end of the nine-month
period ended September 30, 1996 are derived from the unaudited Consolidated
Financial Statements of the Company. In the opinion of management of the
Company, all of such unaudited Consolidated Financial Statements include all
adjustments (consisting of normal recurring adjustments) necessary for a fair
presentation of the financial data for such periods. The data presented below
should be read in conjunction with the Company's Consolidated Financial
Statements and the notes thereto included elsewhere in this Prospectus and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------- -----------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT RATIOS, MARGINS 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 $14,965 $19,801
New construction.......................... -- -- 1,391 3,321 2,841 1,898 881
Environmental services.................... 2,118 2,176 2,263 3,287 4,119 3,062 3,784
------- ------- ------- ------- ------- ------- -------
Total revenue....................... 14,678 16,251 15,347 22,000 27,957 19,925 24,466
Cost of revenues............................ 10,695 14,994 12,591 17,043 18,623 13,886 14,330
------- ------- ------- ------- ------- ------- -------
Gross profit................................ 3,983 1,257 2,756 4,957 9,334 6,039 10,136
General and administrative expenses(a)...... 3,728 3,241 2,827 3,623 5,629 4,548 3,943
------- ------- ------- ------- ------- ------- -------
Operating income (loss)..................... 255 (1,984) (71) 1,334 3,705 1,491 6,193
Interest expense, net....................... 101 359 186 247 829 380 1,280
Minority interest........................... -- -- -- 76 219 66 536
------- ------- ------- ------- ------- ------- -------
Earnings (loss) before taxes................ 154 (2,343) (257) 1,011 2,657 1,045 4,377
Income tax provision(b)..................... -- -- 2 283 1,098 529 1,837
------- ------- ------- ------- ------- ------- -------
Net earnings (loss)................. $ 154 $(2,343) $ (259) $ 728 $ 1,559 $ 516 $ 2,540
======= ======= ======= ======= ======= ======= =======
Earnings (loss) per share(b)................ -- -- (.02) .07 .15 .05 .24
Weighted average number of shares
outstanding(b)............................ -- -- 10,650 10,650 10,650 10,650 10,650
CASH FLOW AND OPERATING DATA:
Net cash provided by (used in):
Operating activities...................... 1,064 (1,284) (2,962) 36 1,184 (498) 4,436
Investing activities...................... (5,560) (317) (569) (934) (1,425) (857) (2,008)
Financing activities...................... 4,204 1,441 3,610 884 175 1,289 (1,349)
EBITDA(c)................................... 859 (1,287) (23) 1,593 4,385 1,815 7,230
Ratio of earnings to fixed charges(d)....... 1.3x (4.1)x .7x 2.3x 3.2x 2.3x 4.4x
Depreciation and amortization............... 604 697 48 259 680 324 1,037
Capital expenditures(e)..................... 13,293 317 569 934 16,322 15,754 6,577
Labor hours worked.......................... NA NA 340 509 582 435 466
Gross Margin................................ 27.1% 7.7% 18.0% 22.5% 33.4% 30.3% 41.4%
Operating Income Margin..................... 1.7% NM NM 6.1% 13.3% 7.5% 25.3%
Net Income Margin........................... NM NM NM 3.3% 5.6% 2.6% 10.4%
EBITDA Margin............................... 5.9% NM NM 7.2% 15.7% 9.1% 29.6%
</TABLE>
21
<PAGE> 24
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
--------------------------------------------- -------------
1992 1993 1994 1995 1996 1997
------- ------- ------ ------ ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents......................... $ 974 $ 814 $ 79 $ 66 $ -- $ 1,079
Total assets...................................... 18,854 18,144 5,017 6,794 24,932 32,558
Long-term debt.................................... 4,520 4,161 1,434 1,128 18,663 23,299
Stockholders' equity (deficit).................... (4,796) (7,139) (258) 334 1,893 4,435
</TABLE>
- ---------------
NA -- Not available
NM -- Not meaningful
(a) Included in general and administrative expenses for 1992 and 1993 are $1.3
million and $2.2 million in administrative allocations charged by the
predecessor's parent company.
(b) In 1992 and 1993, the results of operations of the predecessor to the
Company were included in the consolidated financial statements and tax
returns of the predecessor's parent company. Therefore, earnings per share,
weighted average number of shares outstanding and income tax provisions were
reported by the predecessor's parent company and are not applicable.
(c) EBITDA (earnings before interest, minority interest, taxes, depreciation and
amortization expense) is presented here not as a measure of operating
results, but rather as a measure of the Company's operating performance.
Management of the Company believes that EBITDA and operating cash flow may
provide additional information about the Company's ability to meet its
future requirements for debt service, capital expenditures and working
capital. EBITDA is widely used by financial analysts as a measure of
financial performance. Management further believes that the Company's trends
in increased EBITDA enhance the Company's ability to meet capital
expenditure requirements, and give the Company a more substantial working
capital base. EBITDA should not be construed as an alternative to operating
income (determined in accordance with GAAP) as an indicator of the Company's
operating performance or as an alternative to cash flows from operating
activities (determined in accordance with GAAP) as a measure of liquidity.
EBITDA measures presented herein may not be comparable to similarly titled
measures of other companies.
(d) For purposes of determining the ratio of earnings to fixed charges,
"earnings" consist of earnings before income taxes and fixed charges. "Fixed
charges" consist of interest expense, amortization of deferred financing
costs and that portion of rental expense deemed representative of the
interest factor. Earnings were inadequate to cover fixed charges for the
years ended December 31, 1993 and 1994 by $2.3 million and $0.3 million.
(e) Includes property and equipment acquired through the incurrence of debt.
22
<PAGE> 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This information should be read in conjunction with the Company's
Consolidated Financial Statements, including the notes thereto, contained in
this Prospectus. See also "Selected Consolidated Financial Data."
GENERAL
The Company currently engages in the repair and conversion of offshore
support vessels and barges, as well as the construction of new barges at two
shipyards in the Houston area (Brady Island and Greens Bayou). Additionally, the
Company has entered into agreements to add three new shipyards through the
purchase of JBM Pasadena, West Pelican Island and the long-term lease of the
East Pelican Island shipyard. The JBM Pasadena and West Pelican Island
shipyards, located in Houston and Galveston, respectively, are dedicated
primarily to the offshore support vessel, inland barge and inland tow boat
markets. Management believes that the two Pelican Island facilities, which will
move the Company into offshore drilling rig repair, conversion and new
construction and expand its capacities in the offshore vessel market, offer
significant location and labor advantages. The Company has assembled a proven
management team with decades of experience in the offshore segment to operate
the Pelican Island facilities.
The Company's results of operations are primarily dependent upon: (i) the
conditions affecting the oil and gas and petrochemical industries in the Gulf of
Mexico; (ii) the Company's ability to obtain contracts; and (iii) the Company's
ability to manage contracts to successful completion. The Company's primary
source of revenue is derived from labor hours. The Company currently employs
approximately 400 people at the Brady Island and Greens Bayou facilities. The
shipyards to be acquired currently employ approximately 300 production workers.
Since the acquisition of the Brady Island shipyard in December 1993, the
Company has served the offshore support vessel and offshore and inland barge
markets. Historically, the Company's services have included repair, conversion,
construction and related environmental services. The Company's strategy has been
to achieve a balanced diversification and provide one-stop servicing for both
inland and offshore marine markets.
With the acquisition of the JBM Pasadena shipyard, the Company will enjoy a
significant market share in the highly competitive inland marine repair business
in the strategically important Houston market. This concentration of assets
allows for efficiencies and economies of scale which the Company believes will
provide it with a competitive advantage. With the consummation of the Bludworth
Acquisition, the Company's operations will be conducted at five shipyards along
a 50-mile corridor around the Houston-Galveston ports. Management believes that
growth generated by the offshore rig repair and construction segments will
result in larger unit contracts, and will enhance revenues and earnings. When
combined with the relative stability and consistent volumes of the inland marine
business, management believes its approach produces higher net income, less
cyclicality, and more consistent growth than is possible for companies servicing
a single segment of the industry.
Revenues derived from the repair and conversion segment of the shipyard
industry generally produce higher gross profit margins than new construction.
The repair and conversion market is currently experiencing growth due to several
factors, including the increased utilization of aging fleets, consolidation of
these fleets by well-capitalized vessel operators, and replenishment and
upgrading of fleets. The Company has also developed a specialization in the
conversion of offshore support vessels into longer and wider vessels in response
to increased demand for offshore vessels with deepwater capabilities.
Historically, the Company has used new construction of inland barges to
stabilize the labor force highs and lows typical in the shipyard industry by
shifting workers to new construction as a
23
<PAGE> 26
means of absorbing excess labor. Management views the lower-margin inland barge
new construction segment as an incremental contributor to the business. New
construction efforts to date at the Company have primarily been focused on the
construction of customized marine equipment such as power barges, offshore deck
barges with special lift capacities, and a new generation of tank barges.
Management believes that it has positioned the Company to undertake major new
construction projects in the offshore rig segment, while preserving the
advantages of high margins and lower volatility in the repair and related
environmental services business.
The Company also provides related environmental services, including
cleaning, degassing and wastewater treatment. Although this business comprises a
small percentage of the Company's total revenues, it generates high margins and
enhances the Company's strategy to be the only one-stop source of all shipyard
services for all segments of the offshore support vessel, offshore barge and
inland marine markets in Texas.
All statements other than statements of historical fact contained in this
Prospectus, including statements in this "Management's Discussion and Analysis
of Financial Condition and Results of Operations" concerning results of
operations, results from proposed shipyard acquisitions, future expansion plans
and other matters are forward-looking statements. Forward-looking statements in
this Prospectus generally are accompanied by words such as "anticipate,"
"believe," "estimate" or "expect" or similar statements. Although the Company
believes that the expectations reflected in such forward looking statements are
reasonable, no assurance can be given that such expectations will prove correct.
Factors that could cause the Company's results to differ materially from the
results discussed in such forward-looking statements include the risks described
under "Risk Factors," such as the dependence on the oil and gas industry,
difficulties related to managing growth in operations, dependence on significant
customers, competition, the risks associated with contractual pricing, the
success of proposed expansion into the offshore drilling rig segment, and labor,
operating, regulatory and other risks in the shipbuilding industry and risks
relating to the offshore support vessel, offshore barge and inland marine
markets. All forward-looking statements in this Prospectus are expressly
qualified in their entirety by the cautionary statements in this paragraph.
RESULTS OF OPERATIONS
Comparison of Nine Months Ended September 30, 1997 to Nine Months Ended
September 30, 1996
Revenues increased 22.8% to $24.5 million in the nine-month period ended
September 30, 1997 compared with $19.9 million in the same period in 1996
primarily due to growth in offshore support vessel repair and conversion
activity. Overall growth in repair and conversion activity, which accounted for
approximately 80.9% of total revenues in the nine-month period ended September
30, 1997, rose 18.5% over the same period in 1996, based on labor hours.
Cost of revenues rose 3.2% to $14.3 million in the nine-month period ended
September 30, 1997 from $13.9 million in the same period in 1996 as a result of
the overall growth in labor hours.
Gross profits increased by 67.8% to $10.1 million in the nine-month period
ended September 30, 1997 from $6.0 million in the same period in 1996 primarily
due to higher billing and bid rates. This is reflected in an increase in gross
profit margin for the first nine-months of 1997 to 41.4% from 30.3% for the same
period in 1996.
General and administrative expenses decreased 13.3% to $3.9 million in the
nine-month period ended September 30, 1997 from $4.5 million in the same period
in 1996 primarily due to a $700,000 non-recurring pre-tax fee, related to a
reduction in costs resulting from consolidation of the Company's insurance plan,
and management fees paid in 1996, which were offset by an increase in costs
necessary to support the continued growth of the Company. General and
administrative expenses as a percentage of revenues for the first nine months of
1997 represented 16.1% of total revenues, as compared to 22.8% for the same
period in 1996.
24
<PAGE> 27
Depreciation and amortization expense increased to $1.0 million in the
nine-month period ended September 30, 1997 from $324,000 in the same period in
1996 primarily due to the effect of a full nine months of depreciation in the
1997 period of the assets acquired at the Brady Island facility in August 1996.
Interest expense rose to $1.3 million in the nine-month period ended
September 30, 1997 from $380,000 in the same period in 1996 due to additional
financing costs associated with the debt incurred to finance the acquisition of
the Brady Island assets from Newpark Resources.
As a result of the foregoing, income tax expense increased to $1.8 million
in the nine-month period ended September 30, 1997 from $529,000 in the same
period in 1996.
Net earnings rose 392.2% to $2.5 million in the nine-month period ended
September 30, 1997 from $516,000 in the same period in 1996.
Comparison of Year Ended December 31, 1996 to Year Ended December 31, 1995
Revenues increased 27.1% to $28.0 million in 1996 compared with $22.0
million in 1995 primarily due to increased activity in the offshore support
vessel and inland tank barge markets. The growth in revenues was primarily
driven by higher levels of activity in repair and conversion services which rose
23.4% and related environmental services which increased 10.7% in 1996 over
1995, respectively, based on labor hours.
Cost of revenues rose 9.3% to $18.6 million in 1996 from $17.0 million in
1995 primarily due to increased activity.
Gross profits increased by 88.3% to $9.3 million in 1996 from $5.0 million
in 1995 primarily due to a shift in the business mix including higher levels of
activity generated from repair and conversions of offshore support vessels. As a
result, gross profit margin increased to 33.4% in 1996 from 22.5% in 1995.
General and administrative expenses rose 55.4% to $5.6 million in 1996 from
$3.6 million in 1995 and increased as a percentage of revenues to 20.1% from
16.5% as a result of the aforementioned $700,000 final, non-recurring fee. Also
included in general and administrative expenses was an aggregate $680,000 paid
in discretionary bonuses during 1996 compared with $62,000 in 1995.
Depreciation and amortization expense increased to $680,000 in 1996 from
$259,000 in 1995 due to additional depreciation associated with fixed assets
purchased at the Brady Island facility in the third quarter of 1996 from Newpark
Resources which had previously been under lease.
Interest expense rose to $829,000 in 1996 from $247,000 in 1995 due to the
additional financing costs associated with debt incurred to finance operations
and the fixed assets purchased at the Brady Island shipyard.
As a result of the foregoing, income tax expense increased to $1.1 million
in 1996 from $283,000 in 1995. The 1995 period included the utilization of a
$300,000 net operating loss carryover.
Net earnings rose 114.1% to $1.6 million in 1996 from $728,000 in 1995
including the aforementioned final, non-recurring pre-tax fee of $700,000
($441,000 after-tax).
25
<PAGE> 28
Comparison of Year Ended December 31, 1995 to Year Ended December 31, 1994
The Company's revenues increased 43.4% to $22.0 million in 1995, compared
to $15.3 million in 1994. This increase was attributable to higher levels of
activity across all segments of the service mix, based on labor hours.
Cost of revenues increased 35.4% to $17.0 million in 1995 from $12.6
million in 1994 primarily because of increased activity.
Gross profits increased 79.9% to $5.0 million in 1995 from $2.8 million in
1994 due to higher levels of activity in repair and conversion and related
environmental services, based on labor hours. Gross profit margin percentage of
revenues increased to 22.5% in 1995 from 18.0% in 1994.
General and administrative expenses rose 28.2% to $3.6 million in 1995 from
$2.8 million in 1994 but declined as a percentage of revenues from 18.4% to
16.5%. The decline in general and administrative expenses as a percentage of
revenues was attributable primarily to operating leverage realized from the
general and administrative cost structure.
Depreciation and amortization expense increased to $259,000 in 1995 from
$48,000 in 1994 due to additional depreciation associated with capital
improvements at the Brady Island shipyard during 1995.
Interest expense rose to $247,000 in 1995 from $186,000 in 1994 due to
additional financing costs associated with investment in capital improvements at
the Brady Island shipyard during 1995.
As a result of the foregoing, income tax expense increased to $283,000 in
1995 from $2,000 in 1994.
Net earnings improved to $728,000 in 1995 from a loss of ($259,000) in
1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary uses of cash have been to fund acquisitions and
capital expenditures and to service and repay debt.
Net cash provided by (used in) operating activities was $1.2 million,
$36,000 and ($3.0 million) in fiscal 1996, 1995 and 1994, respectively, and $4.4
million and ($498,000) in the nine months ended September 30, 1997 and 1996,
respectively. The increase in the Company's cash generated from operations
primarily reflect an increase in net earnings.
Net cash used in investing activities was $1.4 million, $934,000 and
$569,000 in fiscal 1996, 1995 and 1994, respectively, and $2.0 million and
$857,000 in the nine months ended September 30, 1997 and 1996, respectively.
During the 45-month period ended September 30, 1997, net cash used in investing
activities consisted largely of capital improvements.
Net cash provided by (used in) financing activities was $175,000, $884,000
and $3.6 million, in fiscal 1996, 1995 and 1994, respectively, and ($1.4
million) and $1.3 million in the nine months ended September 30, 1997 and 1996,
respectively. Net cash provided by financing activities represented debt
incurred to finance growth and expansion of the Company's operations, whereas
cash used in financing activities reflected repayment of the Company's
outstanding debt.
The Company has budgeted approximately $2.3 million for planned capital
projects at its current shipyard facilities for fiscal 1997, including $1.8
million and $524,000 in capital improvements for Brady Island and Greens Bayou,
respectively. Upon consummation of the Bludworth Acquisition in 1998, the
Company will spend $15.0 million in cash and issue a $4.0 million promissory
note, which note will be repaid in mid-1998 with the net proceeds of the
Offering. Excluding the Bludworth Acquisition, the Company has budgeted $27.6
million in capital expenditures for 1998, including $1.4 million, $1.8 million
and $24.4 million in capital improvements for the Brady Island, Greens Bayou and
East Pelican Island shipyard facilities, respectively. The Company is required
pursuant to the terms of the East Pelican Island lease to make $20 million in
capital improvements and equipment over the next three years, all of which the
Company has budgeted for 1998. If the Company consummates the purchase of the
Other Galveston Assets, it will spend $4.5 million for such purchase in 1998. At
the present time the Company has only entered into a non-binding letter of
intent with respect to the Other Galveston Assets, and there can be no assurance
that such transaction will be consummated or consummated on the terms described
herein.
26
<PAGE> 29
In August 1996, the Company entered into a Credit Agreement with a
financial institution providing up to $12.4 million in amortizing term debt
bearing an interest rate of approximately 10.4% to finance the acquisition of
shipyard assets from Newpark Resources which had previously been leased. The
Credit Agreement is collateralized by certain of the Company's assets and
requires the Company to maintain certain financial ratios. In connection with
the Company's acquisition of the Brady Island shipyard assets in August 1996,
the Company borrowed $11.8 million under the Credit Agreement and issued $6.3
million in subordinated debt to Newpark Resources to fund the purchase price.
The subordinated debt bears interest at 5.0% and matures 2003. In August 1997,
the Company borrowed the remaining $600,000 available under the Credit Agreement
to partially fund the acquisition of Greens Bayou. The Company, intends to use a
portion of the net proceeds from this Offering to repay the amount outstanding
under the Credit Agreement and approximately $2.2 million in other debt.
Currently, the Company has an aggregate $4.8 million in borrowing capacity
under two revolving lines of credit, both of which bear interest at prime plus
1.0%. The Company currently has $2.7 million outstanding under these facilities.
The Company, however, is negotiating to replace these facilities with a new
revolving line of credit to increase its borrowing capacity.
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.
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<PAGE> 30
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, Disclosures about Segments of an Enterprise and Related Information
("SFAS 131"). SFAS 131 establishes standards for the way public enterprises are
to report information about operating segments in annual financial statements
and requires the reporting of selected information about operating segments in
interim financial reports issued to shareholders. It also establishes standards
for related disclosures about products and services, geographic areas, and major
customers. SFAS 131 is effective for periods beginning after December 15, 1997.
UNAUDITED PRO FORMA CONSOLIDATED COMBINED
FINANCIAL INFORMATION
The following unaudited pro forma consolidated combined financial
information gives pro forma effect to: (i) the completion of the acquisition of
Bludworth by First Wave; (ii) the completion of the Exchange; and (iii) the
completion of the Offering and the application of estimated net proceeds
therefrom as described in "Use of Proceeds," as if they had occurred at January
1, 1996 with respect to the unaudited pro forma consolidated combined statements
of operations and as if they had occurred September 30, 1997 with respect to the
unaudited pro forma consolidated combined balance sheet. This pro forma
information should be read in conjunction with the respective consolidated
historical financial statements (including notes thereto) of First Wave and
Bludworth appearing elsewhere herein.
The pro forma adjustments reflecting the consummation of the Bludworth
Acquisition on the purchase method of accounting are based on available
financial information and certain estimates and assumptions set forth in the
notes to the Unaudited Pro Forma Consolidated Combined Financial Information.
The assumptions include the acquisition of all of the outstanding shares of
capital stock of Bludworth for $15.0 million in cash and the issuance of a $4.0
million promissory note which will be prepaid in mid-1998 with net proceeds of
the Offering. See "Use of Proceeds." The pro forma adjustments do not reflect
any operating efficiencies and cost savings that may be achievable with respect
to the combined businesses.
The following information is not necessarily indicative of the future
financial position or operating results of the combined businesses or the
financial position or operating results of the combined businesses had the
Bludworth Acquisition, the Exchange and the Offering occurred on the dates
discussed above. For purposes of preparing its Consolidated Financial
Statements, First Wave will establish a new basis for Bludworth's assets and
liabilities based upon the fair values thereof and First Wave's purchase price
thereof, including the costs of the Bludworth Acquisition. The Unaudited Pro
Forma Consolidated Combined Financial Information reflects First Wave's best
estimates; however, the actual financial position and results of operations may
differ from the pro forma amounts reflected herein because of various factors,
including, without limitation, access to additional information, changes in
value and changes in operating results between the date of preparation of the
Unaudited Pro Forma Consolidated Combined Financial Information and the date on
which the Bludworth Acquisition closed.
The pro forma adjustments reflecting the consummation of the Exchange are
based upon available financial information and estimates and assumptions
concerning the valuation of the Exchange. Upon completion of the Exchange, the
Company will record the purchase accounting allocation of the value of the
Company's shares exchanged to the assets acquired represented by the minority
shares of Newpark Shipbuilding. The Company will undertake a study to determine
the fair values of the exchanged shares and the net assets of Newpark
Shipbuilding for such purposes. A final determination of these values has not
been made. Therefore, the purchase accounting adjustments made for the purposes
of the Unaudited Pro Forma Consolidated Combined Financial Information reflects
First Wave's best estimates. The actual determination may result in differences
from those estimates.
28
<PAGE> 31
FIRST WAVE MARINE, INC.
PRO FORMA CONSOLIDATED COMBINED BALANCE SHEET
SEPTEMBER 30, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
JOHN
FIRST WAVE BLUDWORTH PRO FORMA PRO FORMA
MARINE, INC. MARINE, INC. ADJUSTMENTS COMBINED
------------ ------------ ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents................... $ 1,079 $ 316 $ 86,125 (a) $ 34,480
(19,000)(b)
(24,590)(c)
(9,450)(k)
Securities.................................. 9,450 (k) 9,450
Accounts receivable......................... 7,228 5,838 13,066
Inventories................................. 652 101 753
Other....................................... 323 829 1,152
------- ------- -------- --------
Total current assets................... 9,282 7,084 42,535 58,901
Property and equipment, net................. 22,372 10,524 12,611 (b) 45,507
Organization and loan costs, net............ 704 -- 3,875 (a) 4,089
(490)(c)
Deposits.................................... 200 146 -- 346
Intangible assets........................... -- -- 2,570 (d)
6,316 (b) 8,886
------- ------- -------- --------
Total assets........................... $32,558 $17,754 $ 67,417 $117,729
======= ======= ======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Notes payable............................... $ 219 $ 945 $ (945)(c) $ 219
Current portion of long-term obligations.... 1,333 624 (1,957)(c) --
Trade accounts payable...................... 812 1,033 -- 1,845
Accrued liabilities......................... 1,861 1,606 -- 3,467
------- ------- -------- --------
Total current liabilities.............. 4,225 4,208 (2,902) 5,531
Long-term obligations, net of current
portion................................... 15,082 8,359 (20,232)(c) 3,209
Senior Notes................................ 90,000 (a) 90,000
Subordinated debt........................... 6,884 -- (556)(c) 6,328
Deferred income taxes....................... 563 448 4,666 (b) 5,677
Other liabilities........................... 441 -- -- 441
Minority interest in subsidiary............. 928 -- (928)(d) --
------- ------- -------- --------
Total liabilities...................... 28,123 13,015 70,048 111,186
------- ------- -------- --------
STOCKHOLDERS' EQUITY
Common stock and additional paid-in
capital................................ 12 1 3,498 (d) 3,510
(1)(b)
Retained earnings......................... 4,423 4,738 (4,738)(b) 3,033
--
(1,390)(c)
------- ------- -------- --------
4,435 4,739 (2,631) 6,543
------- ------- -------- --------
Total liabilities and stockholders'
equity............................... $32,558 $17,754 $ 67,417 $117,729
======= ======= ======== ========
</TABLE>
See accompanying notes to unaudited pro forma consolidated combined financial
statements.
29
<PAGE> 32
FIRST WAVE MARINE, INC.
PRO FORMA CONSOLIDATED COMBINED STATEMENT OF EARNINGS
NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
JOHN
FIRST WAVE BLUDWORTH PRO FORMA PRO FORMA
MARINE, INC. MARINE, INC. ADJUSTMENTS COMBINED
------------ ------------ ----------- ---------
<S> <C> <C> <C> <C>
REVENUES..................................... $24,466 $21,713 $ -- $46,179
COST OF REVENUES............................. 14,330 16,160 834 (e) 31,324
------- ------- ------- -------
Gross margin....................... 10,136 5,553 (834) 14,855
GENERAL AND ADMINISTRATIVE EXPENSES.......... 3,943 2,002 232 (f) 6,177
------- ------- ------- -------
Earnings from operations........... 6,193 3,551 (1,066) 8,678
OTHER INCOME (EXPENSE)
Other income............................... -- 7 390 (k) 397
Interest expense........................... (1,280) (606) 1,599 (g) (7,665)
(7,378)(j)
Minority interest.......................... (536) -- 536 (d) --
------- ------- ------- -------
(1,816) (599) (4,853) (7,268)
------- ------- ------- -------
Earnings before income taxes....... 4,377 2,952 (5,919) 1,410
INCOME TAXES................................. 1,837 1,082 (2,418)(h) 501
------- ------- ------- -------
NET EARNINGS....................... $ 2,540 $ 1,870 $(3,501) $ 909
======= ======= ======= =======
Earnings per share:
Net earnings per share..................... $ 0.24 $ 0.08
Weighted average shares outstanding........ 10,650 11,649
</TABLE>
See accompanying notes to unaudited pro forma consolidated combined financial
statements.
30
<PAGE> 33
FIRST WAVE MARINE, INC.
PRO FORMA CONSOLIDATED COMBINED STATEMENT OF EARNINGS (LOSS)
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, 1997
1996 ----------
------------ JOHN
FIRST WAVE BLUDWORTH PRO FORMA PRO FORMA
MARINE, INC. MARINE, INC. ADJUSTMENTS COMBINED
------------ ------------ ----------- ---------
<S> <C> <C> <C> <C>
REVENUES................................... $27,957 $16,993 $ -- $44,950
COST OF REVENUES........................... 18,623 12,987 1,111 (e) 32,721
------- ------- ------- -------
Gross margin..................... 9,334 4,006 (1,111) 12,229
GENERAL AND ADMINISTRATIVE
EXPENSES................................. 5,629 1,526 309 (f) 7,464
------- ------- ------- -------
Earnings from operations......... 3,705 2,480 (1,420) 4,765
OTHER INCOME (EXPENSE)
Other income............................. -- 148 520 (k) 668
Interest expense......................... (829) (443) 918 (g) (10,192)
(9,838)(j)
Minority interest........................ (219) -- 219 (d) --
------- ------- ------- -------
(1,048) (295) (8,181) (9,524)
------- ------- ------- -------
Earnings (loss) before income
taxes.......................... 2,657 2,185 (9,601) (4,759)
INCOME TAXES............................... 1,098 909 (3,881)(h) (1,874)
------- ------- ------- -------
NET EARNINGS (LOSS).............. $ 1,559 $ 1,276 $(5,720) $(2,885)
======= ======= ======= =======
Earnings (loss) per share:
Net earnings (loss) per share............ $ 0.15 $ (0.25)
Weighted average shares outstanding...... 10,650 (i) 11,649
</TABLE>
See accompanying notes to unaudited pro forma consolidated combined financial
statements.
31
<PAGE> 34
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 after deducting underwriting
discounts and commissions and estimated expenses of the offering which are
recorded as debt issuance costs.
(b) To record the acquisition of Bludworth, the allocation of the purchase
premium to property and equipment, deferred tax liability, non-compete
agreement and goodwill.
(c) To record the retirement of debt with the proceeds of the Offering,
including prepayment penalties of $900 and the write-off of loan costs of
$490.
(d) To record the acquisition by First Wave of the minority interest in Newpark
Shipbuilding through an exchange of 999,390 shares valued at $3.50 per
share. These shares of Common Stock have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and accordingly
are not tradeable except in transactions exempt from the registration
requirements of the Securities Act. Additionally, 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 contractual restrictions lapse as to an
aggregate of 27% of such shares on the first anniversary of the closing of
the Exchange and an additional 20% on the second, third and fourth
anniversaries, with any remaining restrictions expiring as to all such
shares on the fifth anniversary. The per share value of $3.50 was derived
from the Company's Enterprise Value (market capitalization plus net debt)
per share discounted for the aforementioned restrictions. The computation
assumes a public market earnings multiple of nine based on comparable
publicly traded companies and a discount of 20% related to the restrictions
placed on the shares in the Exchange and the absence of a public market for
the shares.
(e) To record additional depreciation related to the increase in value of
property and equipment recorded in the Bludworth Acquisition.
(f) To record amortization based on 40-year lives of goodwill acquired in the
Bludworth Acquisition and the acquisition of minority interest in Newpark,
and to record amortization based on a five-year life of $500 allocated to a
non-compete agreement related to the Bludworth Acquisition.
(g) To record the decrease in interest expense related to the reduction of
long-term debt with the proceeds of the Offering.
(h) To record the income taxes based on the application of SFAS 109.
(i) Pro forma combined weighted average shares outstanding includes 999,390
shares issued in the Exchange.
(j) To record interest expense at 10.5% and amortization of debt issuance costs
of the Offering.
(k) To record the purchase of the Pledged Securities, as required by the
Indenture, assuming non-liquidation of the Pledged Securities, and to
record the related interest income at an assumed rate of 5.5%.
32
<PAGE> 35
BUSINESS
THE COMPANY
First Wave is a leading provider of shipyard and related environmental
services to the offshore support vessel, offshore barge and inland marine
industries. The Company offers a full range of repair, conversion, new
construction and related environmental services, including cleaning, degassing
and wastewater treatment. Following the consummation of two pending
acquisitions, the Company will significantly expand its operations and capacity,
particularly into the offshore drilling industry. The Company will be the
largest shipyard operator in the Houston-Galveston area with five of the eight
major shipyard facilities in this strategic location. First Wave believes that
following the pending acquisitions, it will be the only one-stop source of all
shipyard services for all segments of the offshore support vessel, offshore
barge and inland marine markets in Texas.
Since it acquired its first facility in January 1994, First Wave has
significantly improved revenues and profitability. The Company's success has
been the product of a focused strategy to build a high quality, dedicated
workforce, provide a high level of customer service and optimize the mix of its
services to maximize capacity utilization.
The Company believes that as a result of its strategy and planned
expansion, it is well positioned to meet the growing demand for its services.
First Wave is experiencing strong demand growth for all of its services
primarily as a result of: (i) higher repair activity due to the aging offshore
support vessel and barge fleets; (ii) greater customer requirements for repair
and related environmental services due to increased utilization and
consolidation of the offshore support vessel and barge fleets; (iii) increasing
customer demand to convert and upgrade vessels in response to changing market
conditions; and (iv) increased levels of new vessel construction. To meet this
demand, First Wave plans to utilize capacity available at its newly acquired
facilities, as well as expand into new markets, in particular the offshore
drilling industry. The Company believes that this will enable it to perform a
greater number of projects and increase its revenues, while leveraging the
economies of scale available to a geographically concentrated multi-shipyard
operator.
BACKGROUND
The Company's Brady Island facility was acquired through a lease of the
facilities and equipment from Newpark Resources, an unrelated corporation. In
August 1996, the Company purchased the Brady Island leased assets from Newpark
Resources. The Brady Island shipyard provides conversions and repairs for the
offshore support vessel industry, as well as repair, new construction and
related environmental services for the offshore and inland barge markets. In
1996, the Brady Island shipyard added a service line to its environmental
services division, by providing non-hazardous wastewater treatment on a fee
basis. The Company is currently constructing a 2 million gallon wastewater tank
to expand its environmental services division.
In August 1997, the Company acquired certain repair and new construction
assets of Platzer Shipyard, Inc. (the Greens Bayou facility), a subsidiary of
Trinity Industries, Inc. This facility is specifically designed to service the
barge industry with seven haul-up facilities, including a major six position
rail transfer system. The Company believes it can efficiently operate this
Houston area shipyard by consolidating overhead with its nearby Brady Island
shipyard. These two shipyards will share accounting, training, sales,
estimating, risk management and general administrative functions. The potential
interchangeability of the labor force with the Brady Island facility, as well as
the ability of the Greens Bayou barge customers to use Brady Island's
environmental services, should also result in economic benefits for the Company.
After acquiring PMB Engineering Inc.'s lease of the 110-acre East Pelican
Island facility in Galveston, Texas the Company signed an amendment to such
lease with Galveston Wharves, providing for, among other things, a term of 15
years with 28 three-year options (for up to 99 years) at an annual rate of
$700,000, subject to adjustment. Pursuant to the terms of the amended lease, the
Company has committed to make $20 million in capital improvements and equipment
at the East
33
<PAGE> 36
Pelican Island shipyard over the next three years, all of which have been
budgeted for 1998. Upon completion of the planned capital improvements to the
East Pelican Island shipyard, First Wave will be able to expand its business
lines into providing shipyard services for offshore drilling rigs, larger
offshore support vessels and oil and gas related ship conversions.
The Bludworth Acquisition. On October 15, 1997, the Company entered into a
purchase agreement to acquire all of the outstanding capital stock of Bludworth.
The purchase price consists of $15 million in cash and the issuance of a $4.0
million promissory note.
Bludworth is an established regional shipbuilder focusing on offshore
support vessel repair, as well as inland barge repair and inland boat
construction and repair. The Bludworth Acquisition expands the Company's
Houston-Galveston base of operations in a cost efficient manner, adding
significant new drydock capacity within its area of operation and diversifying
its current mix of services to include expanded capabilities in the offshore and
the inland boat segment of the marine industry. The Bludworth Acquisition
provides the Company with two additional shipyards: (i) the JBM Pasadena
facility in Pasadena, Texas, which is near the Company's other Houston shipyards
and (ii) the West Pelican Island facility which is adjacent to the East Pelican
Island facility in Galveston, Texas. It is anticipated that the Bludworth
Acquisition will close shortly after consummation of the Offering.
See "-- Services" and "-- Shipyard Properties" for additional information
about the Company's shipyards and its repair, conversion, new construction and
environmental services.
INDUSTRY OVERVIEW
The Company's current repair and conversion activities for the offshore
support vessel market as well as its planned strategy to provide shipyard
services for the offshore drilling rig market are primarily dependent upon the
demand for offshore drilling and related services in the Gulf of Mexico. In
addition, the Company's business is impacted by fundamentals and trends specific
to the offshore support vessel and offshore and inland tank barge markets. The
industry fundamentals and trends influencing these markets are summarized below.
Offshore Drilling Industry
The Company believes that the current supply of offshore drilling rigs is
inadequate to satisfy increasing demand. The level of worldwide offshore
drilling activity has increased substantially over the last two years, resulting
in current worldwide and Gulf of Mexico offshore drilling rig utilization of 95%
and 97%, respectively, in September 1997. Dayrates worldwide for jackups capable
of drilling in water depths of over 300 feet have increased from an average of
$38,000 in October 1995 to an average of $75,600 in October 1997. Similarly,
dayrates worldwide for third and fourth generation semisubmersibles have
increased from an average of $101,000 in October 1995 to an average of $162,500
in October 1997. In addition, oil and gas operators have recently begun to enter
into multi-year contracts with drilling contractors for offshore drilling rigs
due to the tightness of supply for available units in order to guarantee timely
access to drilling equipment.
In particular, the demand for deep water (deeper than 1,000 feet) drilling
services worldwide and in the Gulf of Mexico has increased substantially in
recent years as a result of reserve discoveries and technological advances which
have made development and production of reserves in deep water economically
viable. Deep water drilling requires larger and more technically advanced
drilling rigs. However, because of the limited number of offshore drilling rigs
with deep water capabilities, a number of offshore drilling contractors have
entered into long-term agreements to upgrade or convert existing or build new
offshore drilling rigs to meet the deep water drilling demand.
The Company believes that these positive trends will continue because of:
(i) the increasing percentage of worldwide oil supply being produced from
offshore areas, (ii) the large increases in
34
<PAGE> 37
cash flow experienced by many oil and gas companies, (iii) the increases in
capital expenditure budgets for offshore drilling activity by oil and gas
companies, (iv) technological advancements relating to exploration, development
and production techniques, including three-dimensional seismic, directional
drilling and subsea completions, that have increased drilling success rates and
improved efficiencies of development and production activities and (v) the
increased focus on deep water exploration and production projects, particularly
in the Gulf of Mexico, as evidenced by significant increases in the number of
deep water blocks under lease and the prices paid for deep water leases during
each of the last five years and the record $1.4 billion committed in the two
offshore lease sales in 1997.
The Company believes that the offshore drilling industry fundamentals will
remain strong for some time. Also, the majority of the offshore drilling rigs
operating in the Gulf of Mexico are ten years old or older and these rigs are
operating at almost full capacity. The Company believes that these rigs will
require repairs and that offshore drilling contractors will continue to evaluate
their existing fleets, and will undertake conversion and new construction
projects to meet demand for deep water rigs. The Company believes that the
proximity and capacity of its East Pelican Island facility will enable it to
execute its planned expansion strategy to perform offshore drilling rig repair,
conversion and new construction services.
Offshore Support Vessels
The primary role of offshore support vessels is to deliver the necessary
equipment, personnel and supplies to offshore drilling rigs and production
facilities. However, the number of such vessels in service in the Gulf of Mexico
decreased from a peak of approximately 700 in 1985 to approximately 317 in
October 1997 while the ratio of active support vessels to active offshore
drilling rigs has decreased from approximately 4:1 to roughly 2:1 over the same
period. As a result of the increase in offshore drilling and the reduced supply
of active vessels, dayrates have increased substantially over the last five
years. At the same time, a few offshore support vessel operators have
significantly consolidated this market. Currently, the top five offshore support
vessel operators now control approximately 80% of the Gulf of Mexico fleet.
Although construction of new offshore support vessels has commenced, a
majority of the support vessels currently in service in the Gulf of Mexico are
16 or more years old and a majority of the remainder are between 11 and 16 years
old. As these vessels age, maintenance, repair and vessel certification costs
increase significantly and eventually require replacement. New offshore support
vessels incorporating advances in engineering, technology and outfitting are
expected to cost between $6 million and $15 million each depending on the
vessel's size and capabilities. Offshore support vessels constructed to serve
deep water drilling operations will be larger and more powerful and will
generally require an investment in the upper end of this range.
The Company believes that given the current industry conditions and
improved dayrates, the opportunity cost of having an idle offshore support
vessel generally outweighs the expense associated with the rapid completion of
vessel repairs. Given the improved financial condition of the reduced number of
fleet operators, the Company believes that these operators will make additional
repairs, modifications and conversions at federally mandated inspection dates
which require vessels to be drydocked. Additionally, because of the estimated 18
months to two-year lead-time required to construct new offshore support vessels
capable of serving the deep water, the Company believes that fleet operators
will continue to convert and "stretch" existing support vessels for deep water
service. Because of its extensive experience in the repair and conversion of
offshore support vessels and its ability to expand its production at its
existing shipyards and shipyards that it is acquiring, the Company believes it
is well positioned to take advantage of the current upturn in the offshore
support vessel business.
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<PAGE> 38
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 (1,600 of which were double skinned barges) to
approximately 2,800 in 1996 (2,200 of which were double skinned barges). The
Company believes this decrease primarily resulted from: (i) increasing age of
the domestic tank barge fleet resulting in scrapping; (ii) rates inadequate to
justify new construction; (iii) a reduction in financial and tax incentives
which previously encouraged speculative construction of new equipment; (iv) more
stringent operating standards to adequately cope with safety and environmental
risks; and (v) an increase in environmental regulations that mandate expensive
equipment modification which some owners are unwilling or unable to undertake
given current rate levels and the age of their fleet.
Although well-maintained tank barges can be efficiently operated for more
than 30 years, the cost of hull work for required annual U.S. Coast Guard
certifications, as well as general safety and environmental concerns, force
operators to periodically reassess their ability to recover maintenance costs.
The tax and financing incentives which were previously available to operators
and investors to construct tank barges led to growth in the supply of domestic
tank barges to a peak of approximately 4,200 in 1981 have been largely
eliminated. The supply of tank barges resulting from the earlier programs has
slowly aligned with demand for tank barge services, primarily through attrition,
as discussed above. The average age of the nation's tank barge fleet is
approximately 20 years, only 17% of which were built in the last 10 years.
Single skin barges, which comprise approximately 20% of the nation's tank barge
fleet, are being driven from the national fleet by market forces, environmental
concerns and rising maintenance costs.
In addition to the reduction in the aggregate tank barge fleet, the
existing active fleet of tank barges has been consolidated by a few large
operators. Over the last two years, given the strength of the United States
economy, these operators have experienced improved utilization of their fleets
and increased profitability. With their improved financial condition, dominant
market positions and heightened concern for potential environment liabilities,
tank barge fleet operators demand better service and higher quality from the
shipyards that provide repair, new construction and other services. The Company
believes that it has the personnel, management systems and infrastructure to
meet the demands of these tank barge fleet operators.
BUSINESS STRATEGY
The Company's strategy is to leverage its reputation as an efficient,
reliable, customer driven shipyard operator in order to provide a diversified
range of shipyard services to the offshore support vessel, offshore drilling,
offshore barge and inland marine industries. The Company intends to utilize its
proven strengths in order to expand into the Gulf of Mexico offshore drilling
market. Key elements of this strategy are:
- Maintaining a High Quality Dedicated Workforce. The Company invests
in its employees through training, superior benefits and the fostering of a
close-knit, supportive culture. As a result, the Company has not
experienced the significant labor shortages and attrition suffered by many
Gulf Coast shipyards and has consistently posted an award-winning safety
record. Management believes the Company has been able to maintain stable
manpower levels and has flattened the labor force highs and lows typical in
the shipyard industry through a superb
36
<PAGE> 39
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
produces cost savings to the customer and greatly contributes to the
efficiency of its shipyards. During periods when demand for repair services
is lower, the Company shifts workers to new construction as a means of
absorbing excess labor. By continuously optimizing its mix of activities,
the Company ensures that its quality work force remains intact and
motivated, and costs associated with attrition are reduced. As a result of
this strategy, the Company believes that it can maximize its margins by
allocating labor to higher margin repair work or can absorb excess labor by
shifting it to new construction.
- One-Stop Source for Shipyard Services. In addition to its core
shipyard repair and construction services, the Company offers a range of
related environmental services at its facilities, including tank cleaning,
degassing and wastewater treatment. Following the pending acquisitions,
complementary services such as these will enable the Company to become the
only one-stop source of all shipyard services for all segments of the
offshore support vessel, offshore barge and inland marine markets in Texas.
- Focus on Core Geographic Areas: Houston and Galveston. The
Houston-Galveston area is a very strategic location for its shipyards,
since three of the largest U.S. fleets of inland tank barges are based in
the Houston Ship Channel area. Additionally, the growing offshore support
vessel and barge fleets in the Gulf of Mexico can be efficiently served
from the Company's Houston and Galveston locations. Management believes the
expansion of the East Pelican Island and West Pelican Island facilities in
Galveston to service the offshore drilling industry, is especially
strategic since Galveston is in close proximity to offshore Gulf of Mexico
drilling activity, thereby minimizing rig transit costs and downtime time.
- Leveraging Economies of Scale. With all of its shipyards within a
50-mile corridor, management can more effectively operate the facilities
and consolidate overhead. Additionally, the proximity of the shipyards
allows for centralizing many administrative functions. Management also
believes the uniformity of state regulations and the volume leverage gained
from using single suppliers among all its facilities, as well as the
potential interchangeability of the labor force, provides economic benefits
for the Company.
- Expansion into the Offshore Gulf of Mexico Market. Upon consummation
of the Bludworth Acquisition and the completion of the improvements to the
East Pelican Island shipyard, the Company will have two adjacent shipyard
facilities in Galveston, Texas, which will enable it to take advantage of
the rising demand for shipyard services to the oil and gas industry in the
Gulf of Mexico. Management has planned its expansion to diversify the
Company's business lines into services for offshore drilling rigs, larger
offshore support vessels and oil and gas related ship conversions.
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SERVICES
The Company performs five primary types of services, three of which are
conventional shipyard fabrication services and two of which are related
environmental services, each described as follows:
Shipyard Services -- Repair.
Approximately 75% of the Company's revenues are attributable to repair,
conversion and maintenance services for offshore support vessels, ocean-going
offshore barges and inland barges. The Company's shipyard repairs involve tasks
as simple as plugging a hole in a barge to more complex services such as
re-skinning an entire barge with new bottom plate, side shell, knuckle and
topside, then sandblasting and painting it. These repair services generally
range in price from $1,000 to $1.0 million. The U.S. Maritime Administration
("MARAD") has estimated that by the year 2000, approximately 25% of the current
domestic tank barge fleet between 10,000 and 30,000 tons will be more than 25
years old and more than 8% will be at least 30 years old. The vessels in this
aging domestic coastwise fleet are in continual need of repairs as they reach
the end of their useful life. Further, U.S. Coast Guard regulations require that
double-skinned inland barges be drydocked for bottom gauging to detect thickness
and structural fatigue every 10 years. All other inland barges require an
inspection of both the internal structures and drydocking once every five years.
Normally at this time the customer will request removal and replacement of
pitted and deteriorated steel as well as sandblasting, coating and painting
services. Offshore support vessels and offshore barges are subject to U.S. Coast
Guard inspections twice in a five year period. During the course of these
mandated inspections, in addition to routine scheduled maintenance, the
Company's customers often discover the need for additional repairs. Management
believes that the Bludworth Acquisition will further its business strategy of
diversifying its capabilities and provide additional expertise and facilities to
repair offshore support vessels, barges and inland marine boats.
Shipyard Services -- Conversions.
With the oil and gas industry's increasing interest in deepwater regions,
there has been a growing demand for the larger class of offshore support
vessels. In response to the increased demand, owners of offshore support vessel
fleets are converting existing vessels in their fleet into vessels capable of
serving deepwater regions. This trend has resulted in an increase in conversion
projects for the Company which consists of lengthening offshore support vessels
(generally from 185(#) to 225(#)) and installing liquid mud tanks, dynamic
positioning and other specialized features. The Company has also widened
offshore support vessels to significantly increase their deck and cargo
capacity. The Company's conversion jobs have ranged in price from approximately
$1.7 million to $4.2 million. Upon completion of the improvements to the
Company's East Pelican Island shipyard, the Company also intends to perform
repairs and conversions for offshore drilling rigs. For example, this work can
involve the conversion of a slot jack-up rig to a cantilevered jack-up rig,
strengthening and extending the rig legs, reinforcing the spud cans on the
existing legs and modifying older designs to incorporate newer technology. The
Company expects an average conversion for an offshore drilling rig to range in
price from $1.0 million to $20.0 million.
Shipyard Services -- New Construction.
Approximately 15% of the Company's current revenues are attributable to new
barge construction. The Company builds three to four new barges per year at its
Brady Island facility. Historically, the Company's new construction activities
have been for: (i) ocean-going deck barges with special lift capacities; (ii)
inland deck and tank barges; and (iii) specialized barges such as power
generation barges. The Company's price for construction of a new barge generally
ranges from $400,000 to $2.0 million. New construction is performed under
fixed-price contracts and averages three to four months per barge. The
acquisition of the Greens Bayou shipyard in August 1997 provides the Company the
shipyard capacity to build between seven to ten barges per year depending on the
type of barge.
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Historically, the Company has not been in the new construction sector for
offshore support vessels and inland towboats. Management believes the Bludworth
Acquisition adds the expertise, experience and capacity necessary to provide the
Company the ability to compete for new construction of inland towboats and
offshore support vessels.
Environmental Services -- Degassing/Cleaning Operations.
These services are provided at the Company's Brady Island facility. In
order for a barge to change the type of cargo it holds, the barge generally
requires cleaning. The Company provides cleaning services for change of cargo as
well as in preparation for repairs and maintenance at the shipyard. The cleaning
process begins with vapor recovery of gasses, if necessary. The barge is then
cleansed with water using special industrial cleaning equipment. The water is
vacuumed into the Company's wastewater treatment facility for proper treatment
and disposal. If the barge requires "hot work" (cutting or welding) while in the
shipyard, safety regulations require that it be "gas free" (non-explosive) as
certified by a marine chemist. The Company employs its own certified marine
chemist as well as a marine chemist trainee. In 1996, the Company provided
environmental services for over 800 barges.
Environmental Services -- Wastewater Treatment Services.
The Company provides non-hazardous wastewater treatment services on a fee
basis. The Company's new 2 million gallon tank, which should be completed in
January 1998, will allow the Company to increase, under its existing permit, its
current handling of approximately 300,000 gallons of wastewater per month to 1
million gallons per month. With minimal additional improvements to the facility
at Brady Island, the Company should be able to handle up to 2 million gallons of
third party non-hazardous wastewater per month under its existing permit. The
non-hazardous wastewater streams include tank truck wash water, industrial
process "oily" water, storm water, rail car, barge, or sea container wash water,
spill remediation water, landfill leachate and others. In an average job, a tank
truck arriving at the facility pumps out approximately 5,000 gallons of
wastewater into the Company's tanks after being tested. The non-hazardous
wastewater is then treated at the Company's bio-treatment plant and discharged.
SHIPYARD PROPERTIES
Upon the consummation of the Bludworth Acquisition, the Company will
operate the following five shipyard facilities.
Brady Island.
The Brady Island shipyard was originally acquired in December 1993 and is
located on the Houston Ship Channel on approximately 23 acres. The shipyard has
the capability to handle the repair, construction and related environmental
services for both offshore and inland barges. It provides repair and conversion
services for offshore support vessels and offers repair, conversion and
construction services for offshore and inland barges. In addition to the
traditional shipyard assets described below, the Brady Island facility has a
high capacity bio-treatment plant, state-of-the-art vapor control equipment and
a 2 million gallon wastewater storage tank currently under construction. The
shipyard has six haul-up facilities which includes three dry docks, two marine
rails and one transfer system from drydock to rail. The facility's equipment
consists of three crawler cranes, two tower cranes and two 20-ton overhead
cranes. The shipyard employed more than 320 production employees at September
30, 1997.
Greens Bayou.
The Greens Bayou shipyard was acquired on August 11, 1997. The shipyard is
located near Houston, Texas on approximately 20 acres, near the Houston Ship
Channel and Brady Island. The
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shipyard performs repair, conversion and new construction services for barges.
It has seven haul-up facilities including a major six position rail transfer
system and one marine rail. The equipment at this facility includes two crawler
cranes, two tower cranes, two cherry pickers and multiple jib cranes. Maximum
lift capacity is 1,200 tons. Currently in the start-up phase, Greens Bayou
employed approximately 20 production workers at September 30, 1997. Management
believes that up to an additional 100 employees will be added in 1998. The
Company plans to make certain capital improvements to the Greens Bayou facility
including the construction of an all-weather, 24-hour paint and sandblast
facility. The covered facility will meet all required environmental regulations.
The Company believes the addition of the facility will significantly improve the
turnaround time to its customers for painting and sandblasting projects.
East Pelican Island.
The Company recently acquired this shipyard through an assignment of the
PMB Engineering, Inc. lease with Galveston Wharves. Galveston Wharves has
amended the PMB Engineering, Inc. lease, extending the possible eight years
remaining on such term of the lease to a lease with a potential 99-year term,
among other things. The shipyard is located in Galveston, Texas on approximately
110 acres. The equipment at this facility includes one 10-ton crane, one 15-ton
crane, one 20-ton crane and one 30-ton crane. There are no current employees at
the East Pelican Island facility. Management has a three phase program for the
capital improvements to this shipyard. In Phase I, the Company plans to improve
the facilities and make modifications to provide repair and conversion capacity
for offshore drilling rigs, offshore support vessels, offshore barges and ships.
Fabrication capacity will also be enhanced for support of repair operations and
for production of offshore drilling rig components such as blisters and
sponsons. Phase II will add drydocks for repair of vessels up to 20,000 tons and
Phase III will encompass various yard improvements for the construction of new
offshore drilling rigs. Management believes that by the third quarter of 1998,
East Pelican Island will commence providing conversion and repair services to
the offshore drilling industry. The shipyard can serve most classes of offshore
drilling rigs, offshore support vessels, offshore barges and large ships.
JBM Pasadena.
The JBM Pasadena facility will be acquired as part of the Bludworth
Acquisition. It is located in Pasadena, Texas on approximately 63 acres. It
currently has five drydocks, extensive topside bulkhead footage and is a builder
of inland tow boats. The shipyard performs repair services for offshore support
vessels, offshore barges and inland barges. At September 30, 1997, the shipyard
employed over 200 production employees.
West Pelican Island.
This shipyard will also be acquired in connection with the Bludworth
Acquisition. It is located at Pelican Island in Galveston, Texas on
approximately 23 acres. The newly renovated fabrication facility has over two
acres under roof, which will enable the Company to provide all-weather, 24-hour
service. The Company intends to use the shipyard primarily for conversion,
repair and new construction of offshore support vessels. An approximately
9,000-ton dry dock is expected to be completed in the first half of 1998.
Additionally, the facility has two 200-ton cranes. At September 30, 1997, the
shipyard employed approximately 80 production workers. The Company expects to
expand the labor force at this facility in the future.
PRINCIPAL CUSTOMERS
Following the consolidation of the inland barge industry, a large portion
of the Company's revenue has been generated by a relatively small number of
customers, although not necessarily the same customers from year to year. For
1996, the Company derived more than 10% of its revenue from each of SEACOR Smit
Inc. (22%) and Kirby Corporation (15%), and more than 50% from its five largest
customers. Based on its current backlog of projects, the Company expects that it
will
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derive more than 10% of its revenues in 1997 from each of SEACOR Smit Inc. and
Kirby Corporation. Because the level of services that the Company may provide to
any particular customer depends on that customer's needs for repairs in a
particular year, customers that account for a significant portion of revenue in
one fiscal year may represent an immaterial portion of revenue in subsequent
years. However, the loss of a significant customer for any reason, including a
sustained decline in that customer's capital expenditure budget or competitive
factors, could result in a substantial loss of revenue and could have a material
adverse effect on the Company's operating performance.
CONTRACT PROCEDURE, STRUCTURE AND PRICING
In performing its repair and conversion services, the Company seeks to
achieve a balance between fixed-price projects and time and materials work in
order to optimize the risk and reward of its project portfolio. More than 50% of
the Company's commercial projects are currently performed on a fixed-priced
basis. The Company attempts to cover anticipated increased costs of labor and
material through an estimation of such costs, which is reflected in the original
price. Despite these attempts, however, the revenue, cost and gross profit
realized on a fixed-price arrangement will often vary from the estimated amounts
because of changes in job conditions and variations in labor and material costs
over the term of the project. These variations and the risks generally inherent
in the shipbuilding and repair industry may result in gross profits realized by
the Company being different from those originally estimated and may result in
the Company experiencing reduced profitability or losses on projects. Revenues
from repair and conversion services performed under time and material and
fixed-price arrangements are recognized as the services are provided.
Adjustments to such revenues and costs recognized on fixed-price arrangements
are made in the period in which the adjustments are determined. Depending on the
size of the project, variations from estimated fixed-price arrangements could
have a significant effect on the Company's operating results for any particular
fiscal quarter or year.
The Company has developed a "contract rate" system it has used to form
strategic alliances with its key customers for repair and conversion services.
Under this system, the Company and the customer discuss the customer's planned
shipyard projects for the ensuing year and then develop a schedule of labor
rates and other charges applicable to the customer's projects for the year. When
the actual project date nears, the Company submits to its alliance partner the
estimated manhour budget for the particular job. The Company then agrees with
the customer on the budget and the delivery requirements. Most contract rate
arrangements are on a fixed-price basis with most change orders to such
arrangements performed on a time and material basis. Under the contract rate
system, the Company is responsible for all cost overruns; in some instances the
Company shares a portion of the cost savings with its contract rate alliance
partners. The contract rate system is a departure from the traditional shipyard
competitive bid process which requires that for each job a customer submit
specifications which the shipyard then uses to bid against other shipyards to
obtain the work. Under a competitive bid process, a customer's effective labor
and material mark-up rates may vary from job to job depending on fluctuating
market conditions. In contrast, under the contract rate system a customer is
charged the same hourly rates and material mark-ups for a period of time,
typically a year. In a competitively bid contract, the customer does not share
in any cost savings achieved by the Company as they might under the contract
rate system. The contract rate system enables the Company to baseload its
facilities with pre-booked work, improve planning and execution of jobs through
a cooperative process with the customer and more effectively project its
revenues and labor needs for the year. The alliance partner receives volume
based pricing, assures itself of needed drydock capacity, gains the ability to
accurately budget its work, benefits from improved turnaround on jobs and
receives other services on a preferred basis.
The Company's new construction (lump-sum) contract revenues are recognized
on a percentage of completion basis. Accordingly, contract price and cost
estimates are reviewed periodically as the work progresses, and adjustments
proportionate to the percentage of completion are reflected in income in the
period when such estimates are revised. To the extent that these adjustments
result
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in a loss or a reduction or elimination of previously reported profits with
respect to a project, the Company would recognize a charge against current
earnings, which could be material.
MATERIALS AND SUPPLIES
The principal materials used by the Company in its construction, conversion
and repair businesses are standard steel shapes, steel plate and paint. Other
materials used in large quantities include steel pipe, electrical cable and
fittings. All these materials and parts are currently available in adequate
supply from numerous domestic and foreign sources. The Company's shipyards are
located in the Ports of Houston and Galveston, but typically obtain materials
and supplies by truck. Occasionally, the Company receives materials by barge.
The Company seeks to obtain favorable pricing and payment terms for its
purchases by coordinating purchases among all of its shipyards and buying in
large quantities. The Company has not engaged, and does not presently intend to
engage, in hedging transactions with respect to its purchase requirements for
materials. In the past, the Company believes it has been able to purchase steel
at favorable prices relative to those available to smaller shipyards in general.
While management believes that the Company will continue to be able to obtain
its materials, including steel, at relatively favorable prices, there can be no
assurance that this will be the case in the future.
SALES AND MARKETING
The Company's marketing efforts are geographically centralized at the Brady
Island facility in Houston, Texas. Marketing efforts are currently focused in
three areas: (i) traditional shipyard services, including repair and conversion;
(ii) new construction opportunities; and (iii) environmental services including
barge cleaning and wastewater treatment. Management intends to add a fourth
marketing focus with the Company's entry into services for the offshore drilling
industry.
COMPETITION
The Company principally competes in each of its service lines with
approximately 10 to 20 companies, based on the scope of work to be performed and
the type of projects. Some of these competitors have significantly greater
financial resources than the Company. Although the Company believes customers
consider, among other things, the availability and technical capabilities of
equipment and personnel, efficiency, condition of equipment, safety record and
reputation, price competition is a primary factor in determining which qualified
shipbuilder is awarded a job.
INSURANCE
The Company maintains insurance against property damage caused by fire,
explosion and similar catastrophic events that may result in physical damage or
destruction to the Company's premises or properties. The Company also maintains
general liability and umbrella liability insurance in amounts it deems
appropriate for the Company's business.
EMPLOYEES
At September 30, 1997, the Company had 342 employees, of which 41 were
salaried and 301 were employed on an hourly basis. None of the Company's
employees are represented by any collective bargaining unit. Management believes
that the Company's relationship with its employees is excellent. The Company has
not experienced any significant labor problems. Management also believes the
Company should invest in its people and has implemented improvements in the work
environment which benefit the workers. These improvements, as well as active
communication with employees, have helped to foster a closely-knit, supportive
culture at the Company.
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HEALTH AND SAFETY
The Company has one of the best safety records in its industry. For the
last three consecutive years, Newpark Shipbuilding, the primary operating
subsidiary of the Company, was recognized with the national safety award given
annually by the National Shipyard Association (formerly American Waterways
Shipyard Conference) designating it as one of the safest shipyards in the
country. Management is concerned with the safety and health of the Company's
employees and maintains a safety assurance program to reduce the possibility of
costly accidents. The Company's safety department establishes guidelines for
compliance with all applicable state and federal safety regulations. Such laws
and regulations are complex, stringent and are often changed. The Company
provides training and safety education through orientations for new employees
and regular employee safety meetings. The Company also has a comprehensive drug
testing program. The Company's commitment to the safety of its employees
supports its labor management strategy and translates into reduced costs for
workers' compensation benefits.
ENVIRONMENTAL REGULATION
Company Philosophy. The Company has taken a highly visible leadership
position in a shipyard industry group which has cooperated with regulators to
develop innovative, economically achievable solutions to meet water quality
standards. This industry group was formed in response to federal, state and
local regulators demanding that (i) drydocks must be broom-swept after each job
and (ii) over-water sandblasting be eliminated in order to comply with the Clean
Water Act. Frank W. Eakin, President of the Company, developed a proprietary
sediment control system for drydocks and other containment solutions for
over-water sandblasting. The Company does not charge its competitors a licensing
fee for its patent-pending drydock sediment control system if they are
environmentally responsible.
General. The Company's operations are subject to a variety of federal,
state and local laws and regulations governing the discharge of materials into
the environment or otherwise relating to environmental protection
("Environmental Laws"). Stringent fines and penalties may be imposed for
non-compliance with these Environmental Laws. Like other members of the
industry, the Company is periodically subject to governmental compliance
inspections in the ordinary course of business. The Company is committed to full
compliance with applicable environmental laws and has instituted an
environmental compliance program to ensure such compliance on an ongoing basis.
The Company is presently integrating this compliance program with the practices
associated with recently acquired operational assets. Although no assurance can
be given, Management believes that the Company and its operations are in
compliance with all material respects with all Environmental Laws. However,
stricter interpretation and enforcement of Environmental Laws and compliance
with potentially more stringent future Environmental Laws could materially and
adversely affect the Company's operations. To the extent laws are enacted or
other governmental action is taken that imposes environmental protection
requirements that result in increased costs to the shipbuilding and repair
business in general, the business and prospects of the Company could be
adversely affected. With respect to air emissions, the Company anticipates that
additional expenditures may be required if federal or state air emissions
requirements were to be more strictly interpreted or strengthened. The TNRCC has
invited members of the shipyard industry to consult with the agency in its
current consideration of what, if any, new air emission control requirements are
appropriate for the industry. The Company is participating in these discussions
with the TNRCC. The Company cannot with certainty predict whether current
requirements will be interpreted more strictly, new requirements will be
proposed in the future, or the extent of an effect upon the Company.
Permits. Under federal and state environmental laws, the Company's
operations are subject to a variety of requirements for permits or other
governmental authorizations governing emissions to air; discharges to water;
dredging of waterways (for example, to maintain or improve access by vessels);
generation, storage, and shipment of wastes; and other operational aspects of
the business. The Company is in the process of notifying relevant agencies of
its recent acquisitions and
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has sought or expects shortly to seek transfers of permits as necessary. The
Company does not anticipate unreasonable delay or difficulty in acquiring the
necessary approvals, but it cannot rule out such a possibility.
Certain operational assets of the Company are subject to the terms of
agreed orders negotiated with governmental agencies with enforcement authority
under environmental laws. The state of Texas has allowed Bludworth to operate
under an agreed order on an interim basis pending issuance of a final permit
that addresses Bludworth's change in blast medium. Newpark Shipbuilding has
negotiated a separate agreed order with the state governing the designation of
certain waste streams, the operation and inspection of certain tanks, and
related record keeping. Finally, the Board of Trustees of Galveston Wharves is
also operating under an agreed order with the TNRCC with respect to the
discharge of solids from its sewage collection system and septic tank wastewater
treatment plant at the East Pelican Island facility. The Company believes its
operations are in material compliance with the agreed orders.
RCRA. The federal Resource Conservation and Recovery Act ("RCRA") and
similar state laws regulate the generation, treatment, storage, disposal and
other handling of hazardous and nonhazardous solid wastes, with the most
stringent regulations applying to solid wastes that are considered hazardous.
The Company generates both hazardous and nonhazardous wastes in connection with
routine operations. Management believes that the wastes it generates are handled
in substantial compliance with RCRA and analogous state statutes. The Greens
Bayou property contains a solid waste landfill which was closed in compliance
with applicable federal and state laws as a non-hazardous industrial solid waste
site. Management believes that any environmental liability arising from this
landfill will be the primary responsibility of the previous owners; however,
there can be no assurances that the Company will not be subject to liability for
this matter in the future.
CERCLA. The federal Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended ("CERCLA" or the "Superfund Law") and
analogous state laws, impose liability without regard to fault or the legality
of the original conduct, on certain classes of persons with respect to the
release or imminent threat of release of a "hazardous substance" into the
environment. The classes of persons potentially held responsible include all
owners and operators of a site where a hazardous substance was released since
the time of disposal and any party that disposed of, or arranged for the
disposal of, or transported the hazardous substance found at the site. CERCLA
has been interpreted to create strict, joint and several liability for the cost
of removal and remediation, other necessary response costs and damages for
injury to natural resources unless there is a reasonable basis for divisibility
of the harm done by the potentially responsible party. The Company has never
been named as a potentially responsible party in any CERCLA action, and the
Company does not believe that there is any basis for such a claim. However,
because industrial operations have been conducted at some of the Company's
properties by the Company and previous owners and operators for years, various
materials from these operations might have been disposed of at such properties
or at other locations. The identification of one or more sites at which cleanup
action is required or has been completed could subject the Company to
liabilities that could have a material adverse effect on the Company's business,
financial condition and results of operation.
OPA '90. The Oil Pollution Act of 1990 ("OPA '90") and similar state laws,
and regulations promulgated thereunder impose a variety of regulations on
"responsible parties" related to the prevention of oil spills and liability for
damages resulting from such spills in the waters of the U.S. A "responsible
party" includes the owner or operator of a facility or vessel from which the
spill occurs. OPA '90 assigns liability, which can be joint and several, to each
responsible party for oil spill removal costs and for a variety of public and
private damages from oil spills. While OPA '90 defines "oil" to include
petroleum, fuel oil, sludge, oil refuse and oil mixed with other water wastes,
it specifically excludes any material defined as a hazardous substance under
CERCLA. While liability limits apply in some circumstances, a party cannot take
advantage of liability limits if the spill is caused by gross negligence or
wilful misconduct, if the spill resulted from violation of a federal
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safety, construction or operation regulation, or if a party fails to report a
spill or to cooperate fully in the cleanup. Few defenses exist to the liability
imposed under OPA '90 for oil spills. Management is currently unaware of any oil
spills for which the Company has been designated as a responsible party under
OPA '90 which would have a material adverse impact on the Company.
CWA. The federal Clean Water Act ("CWA") and similar state laws regulate
the discharge of pollutants into all navigable waters of the U.S. They also
establish a system of standards, permits and enforcement procedures for the
discharge of pollutants from industrial and municipal wastewater sources. The
Company has federal and Texas state permits that allow it to discharge the non-
hazardous wastewater collected by its environmental services division.
Management believes that the non-hazardous wastewater it collects is handled in
substantial compliance with the CWA and analogous state statutes and its
discharge permits. The CWA also requires persons who dredge or fill wetlands in
navigable waters of the U.S. to obtain a permit or meet management practice
standards to qualify for an exemption from permitting requirements. The Company
must obtain such a permit or qualify for an exemption if it needs to dredge or
place fill material in wetlands in order to continue or modify operations at any
of its facilities in the future.
CAA. The federal Clean Air Act and its 1990 Amendments ("CAA") and similar
state laws govern the control of emissions from sources of air pollution.
Amendments to the CAA were adopted in 1990 and contain provisions that may
result in the gradual imposition of certain pollution control requirements with
respect to air emissions from the operations of the Company. These amendments
could increase the Company's capital and operational expenses after the U.S.
Environmental Protection Agency and similar state agencies fully implement
regulations authorized by the Amendments. Although the Company does not expect
these CAA amendments to result in material expenses at its properties, the
amount of increased expenses, if any, resulting from such amendments is not
presently determinable. There can be no assurance that the Company will not
incur material expenses in connection with these amendments in the future.
Additionally, the Company has a tank cleaning and degassing operation at its
Brady Island facility that involves removal of residue fumes from vapor spaces
in barges. Federal law requires the Company to identify, prepare for and respond
to risks associated with this operation, including possible explosion and
emission of hazardous substances to the environment.
OTHER REGULATION
Health and Safety Regulations. The Company's facilities and operations are
governed by laws and regulations, including the federal Occupational Safety and
Health Act, relating to worker health and workplace safety. The Company believes
that appropriate precautions are taken to protect employees and others from
workplace injuries and harmful exposure to materials handled and managed at its
facilities. While it is not anticipated that the Company will be required in the
near future to expend material amounts by reason of such health and safety laws
and regulations, the Company is unable to predict the ultimate cost of
compliance with these changing regulations.
Jones Act. The Jones Act requires that all vessels transporting products
between U.S. ports must be constructed and repaired in U.S. shipyards, owned and
crewed by U.S. citizens and registered under U.S. law, thereby eliminating
competition from foreign shipbuilders with respect to vessels to be constructed
for the U.S. coastwise trade. Many customers elect to have vessels constructed
at U.S. shipyards, even if such vessels are intended for international use, in
order to maintain flexibility to use such vessel in the U.S. coastwise trade in
the future. A legislative bill seeking to substantially modify the provisions of
the Jones Act mandating the use of ships constructed in the United States for
U.S. coastwise trade has been introduced in Congress. Similar bills seeking to
rescind or substantially modify the Jones Act and eliminate or adversely affect
the competitive advantages it affords to U.S. shipbuilders have been introduced
in Congress from time to time and are expected to be introduced in the future.
Although management believes it is unlikely that the Jones Act requirements will
be rescinded or materially modified in the foreseeable future, there can be no
assurance that such will not occur. Many foreign shipyards are heavily
subsidized
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by their governments and, as a result, there can be no assurance that the
Company would be able to effectively compete with such shipyards if they were
permitted to construct and repair vessels for use in the U.S. coastwise trade.
LEGAL PROCEEDINGS
The Company is a party to various routine legal proceedings primarily
involving commercial claims and workers' compensation claims. While the outcome
of these lawsuits, legal proceedings and claims cannot be predicted with
certainty, management believes that the outcome of all such proceedings, even if
determined adversely, would not have a material adverse effect on the Company's
business or financial condition. Also, the Company has entered into certain
agreed orders with which it believes it is in material compliance. See
"-- Environmental Regulation -- Permits."
46
<PAGE> 49
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Company's Board of Directors currently has five directors. In
accordance with the Certificate of Incorporation of the Company (the "Charter"),
the members of the Board of Directors are divided into three classes and are
elected for a term of three years, or until a successor is duly elected and
qualified. The terms of office of the Class I, Class II and Class III directors
expire at the annual meeting of stockholders to be held in 1998, 1999 and 2000,
respectively. All officers serve at the discretion of the Board of Directors.
The following table sets forth certain information with respect to the
Company's executive officers and directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Samuel F. Eakin...................... 42 Chairman of the Board, Chief Executive Officer(a)
Frank W. Eakin....................... 36 President and Chief Operating Officer, Director(b)
David B. Ammons...................... 47 Executive Vice President, Chief Financial Officer,
Secretary, Director(b)
James D. Cole........................ 56 Director(c)
Paul E. O'Neill, II.................. 48 Director(c)
Joseph O'Toole....................... 64 Executive Vice President -- Operations
Hugh G. Walker, III.................. 37 Vice President -- Environmental Services
Francis J. Fair...................... 58 Executive Vice President -- Operations, Newpark Marine
Fabricators, Inc.
Dale Payne, III...................... 48 Vice President -- Shipyard Operations, Newpark Marine
Fabricators, Inc.
Ben Ramirez.......................... 45 Vice President -- Shipyard Operations, Greens Bayou
Fabricators
</TABLE>
- ---------------
(a) Class III Director
(b) Class II Director
(c) Class I Director
Set forth below is a description of the backgrounds of each of the
executive officers and directors of the Company:
Samuel F. Eakin has served as Chairman of the Board and Chief Executive
Officer of the Company since December 1993 and has been an investor and energy
sector advisor since the 1970s. From 1976 to 1980, Eakin advised E.F. Hutton,
the U.S. Department of Energy and other governmental agencies and major
corporations on energy issues. From 1980 to 1986, he negotiated mergers and
acquisitions of offshore service businesses and other Gulf Coast companies on
behalf of private investors and corporations. In 1987, he founded Eakin & Co.
for the purpose of acquiring distressed energy industry companies and
restructuring complex credits and continues to be a principal in that company.
Mr. Eakin is the brother of Frank W. Eakin, President of the Company.
Frank W. Eakin has served as President, Chief Operating Officer and
Director of the Company since October 1997. Prior to that he served as President
of Newpark Shipbuilding and has been in charge of daily operations since
December 1993. In 1989 Mr. Eakin became a principal in Eakin & Co., with merger
and acquisition responsibilities. Mr. Eakin left that company in 1994 to
dedicate his full energies and focus to managing the Brady Island shipyard
operations. From 1983 to 1989, he founded and operated a successful
international food processing and distribution company.
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<PAGE> 50
Mr. Eakin received his undergraduate degree (B.S.) from Louisiana State
University in 1984. Mr. Eakin is the brother of Samuel F. Eakin, Chairman of the
Company.
David B. Ammons has served as Executive Vice President, Chief Financial
Officer, Secretary and Director of the Company since December 1993. Mr. Ammons
is a Certified Public Accountant and has a background in public accounting and
has owned and operated several businesses. In 1987, Mr. Ammons became a
principal in Eakin & Co. and continues to serve in that capacity. Mr. Ammons
received his undergraduate degree (B.S.) from Southeastern Louisiana University
in 1972.
James D. Cole has served as a Director of Newpark Shipbuilding, a
subsidiary of the Company since late 1993. Mr. Cole is the Chairman of the
Board, President and a Director of Newpark Resources, Inc., an unaffiliated
public company listed on the New York Stock Exchange. He has served in various
positions in that company since 1976.
Paul E. O'Neill, II has served as a Director of the Company since October
1997. Mr. O'Neill is President, Director and Chief Operating Officer of Acadian
Group, Ltd., a holding company formed in 1996 to oversee various construction
and service companies. Prior to joining Acadian Group, Ltd., Mr. O'Neill served
for two years as President and for four years as a Director of C-K Associates,
Inc., a regional Gulf Coast environmental engineering and consulting firm. Mr.
O'Neill spent 17 years in various positions, including as Vice President and
General Manager with TEAM, Inc., a public company listed on the American Stock
Exchange, which provides various industrial and environmental services in the
U.S. and 13 foreign countries.
Joseph O'Toole has served as Executive Vice President -- Operations of the
Company since October 1997. Mr. O'Toole joined the Company as Repair Manager in
1990 and has served as Executive Vice President -- Operations of Newpark
Shipbuilding since 1994. Mr. O'Toole's career in marine fabrication spans over
forty years, punctuated with long periods at large blue water shipyards
including General Dynamics' Quincy, Massachusetts shipyard and Electric Boat
Division. He has held senior positions with Marathon LeTourneau's Gulf Marine
Division shipyard in Brownsville, Texas and Pyramid Manufacturing in Houston,
Texas. Mr. O'Toole has been responsible for managing large shipyard operations
and has supervised major projects such as construction of semisubmersible rigs,
commercial and naval ships and nuclear submarines. Mr. O'Toole received a B.S.
in Civil Engineering in 1964 from Northeastern University in Boston.
Hugh G. Walker, III, Vice President -- Environmental Services, joined the
Company in 1996 to spearhead the development of a newly formed division, First
Wave Environmental Services. Mr. Walker was employed fourteen years with
Chevron, beginning his career in design and waste management, and from 1992 to
1996 serving as manager of a polyethylene plant at Chevron's Cedar Bayou, Texas
complex. Mr. Walker obtained a B.S. in Chemical Engineering from North Carolina
State University in 1982.
Francis J. Fair, Executive Vice President -- Operations, Newpark Marine
Fabricators, Inc. joined the Company in November 1997. Mr. Fair has nearly 40
years of experience in the offshore marine fabrication industry. Mr. Fair has
been responsible for large-scale project and shipyard operations management of
new construction, conversions and repair of deepwater offshore drilling rigs,
including semisubmersibles, jackups and marine components. From 1980 to 1992,
Mr. Fair served as Vice President for Marathon LeTourneau's Gulf Marine Division
at the Brownsville shipyard, supervising deepwater marine projects in excess of
$100 million per year. From 1993 to 1996, he was employed by Texas Drydock
where, among other things, he was the Operations Manager responsible for the
start-up of a 64,000-ton drydock and facility which serviced deepwater drilling
rigs. Immediately before joining the Company, Mr. Fair was Manager of Sales for
LeTourneau, Inc.
Dale Payne, III has served as Vice President -- Shipyard Operations of
Newpark Marine Fabricators, Inc., a subsidiary of the Company since November
1997. Prior to that he served as Vice President -- Shipyard Operations at Brady
Island since 1994. Mr. Payne joined the Company in 1990 as Assistant Repair
Manager. Mr. Payne began his marine fabrication career in 1972 with
48
<PAGE> 51
Marathon LeTourneau's Gulf Marine Division shipyard in Brownsville, Texas,
starting as a leadman and finishing as Production Manager in 1989. During his
tenure, Mr. Payne supervised the new construction, conversion and repair of
jack-up, submersible and semi-submersible rigs. From 1981 to 1985, Mr. Payne
worked as Assistant to the Vice President of Operations at Marathon LeTourneau's
Singapore location, supervising the new construction of six Marathon LeTourneau
jack-ups. He also worked for Marathon LeTourneau in Indonesia and the Middle
East supervising various installation projects.
Ben Ramirez, Vice President -- Shipyard Operations, Greens Bayou
Fabricators, joined the Company in September 1997. From 1972 to 1989, Mr.
Ramirez was employed by Marathon LeTourneau's Gulf Marine Division shipyard in
Brownsville, Texas, beginning his career as a welder, and going on to supervise
new construction, conversions, and repair of jack-up, submersible and
semi-submersible rigs, as well as major ship repairs. The Marathon LeTourneau
facility was acquired by AMFELS, Inc., in 1989, where Mr. Ramirez was assistant
yard manager. Mr. Ramirez was serving as General Manager of a new shipyard he
started for AMFELS in Mexico at the time he left AMFELS in 1997.
COMMITTEES AND MEETINGS OF DIRECTORS
The standing committees of the Board of Directors of the Company includes
an Executive Committee and an Audit Committee. The function of each of these
three committees is described and the members of each are listed below.
Messrs. O'Neill, Cole and Ammons are the current members of the Company's
Audit Committee. The Audit Committee makes recommendations to the Board
concerning the selection and discharge of the Company's independent auditors,
reviews professional services performed by the auditors, the results of their
audit engagement and the fees charged for services performed by the auditors and
evaluates the Company's system of internal accounting controls.
Messrs. S. Eakin, F. Eakin and Ammons are the current members of the
Executive Committee, which acts on behalf of the Board of Directors between
regularly scheduled meetings of the Board of Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Paul E. O'Neill, President and Director of Acadian Group, Ltd., serves on
the Board of Directors of the Company which Board determines the compensation
for the executive officers of the Company, including David B. Ammons and Samuel
F. Eakin. Messrs. S. Eakin and Ammons serve on the Board of Directors of Acadian
Group, Ltd. which Board determines the compensation of Mr. O'Neill.
DIRECTOR AND EXECUTIVE OFFICER COMPENSATION
Retainer Arrangements. Directors who are employees of the Company are not
entitled to receive additional compensation for serving as directors. Each
non-employee director of the Company will be paid $1,000 for each meeting of the
Board of Directors and $500 for each committee meeting he attends which does not
fall on the same day as a Board of Directors meeting. In addition, a $1,250
retainer is paid to each non-employee director of the Company for each quarter
of the year in which such director serves as a director, plus such director's
direct out-of-pocket expenses for attendance at meetings.
49
<PAGE> 52
The following table sets forth the aggregate compensation for 1996 of (i)
the Company's chief executive officer and (ii) for the four most highly
compensated executive officers of the Company whose total annual salary during
1996 exceeded $100,000.
1996 SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
------------------------------------- SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL UNDERLYING ALL OTHER
POSITION SALARY BONUS COMPENSATION(A) OPTIONS COMPENSATION(B)(C)
------------------ -------- -------- --------------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
Samuel F. Eakin.............. $ 96,000 $200,000 $-- $ -- $ 1,095
Chief Executive Officer
Frank W. Eakin............... 134,375 125,000 -- -- 7,500
President and Chief
Operating Officer
David B. Ammons.............. 88,000 125,000 -- -- 660
Executive Vice President,
Chief Financial Officer,
Secretary
Joseph O'Toole............... 90,000 33,296 -- -- 21,438(d)
Executive Vice President --
Operations
Dale Payne, III.............. 62,208 26,697 -- -- 13,088(d)
Vice President -- Shipyard
Operations, Newpark Marine
Fabricators, Inc.
</TABLE>
- ---------------
(a) Other annual compensation excludes perquisites and other benefits because
the aggregate amount of such compensation was less than 10% of the combined
total for salary and bonus.
(b) Includes matching contributions made by the Company pursuant to its 401(k)
savings plan of $1,095, $660 and $1,042 for Messrs. S. Eakin, Ammons and
O'Toole, respectively, and premiums associated with a term life insurance
policy of $1,852 for Mr. O'Toole.
(c) Includes $7,500 and $1,200 for a car allowance for Messrs. F. Eakin and
O'Toole, respectively.
(d) Includes $17,344 and $11,562 for compensation associated with the August
1996 issuance of shares of stock in Newpark Shipbuilding to Messrs. O'Toole
and Payne, respectively.
EMPLOYMENT AGREEMENTS
The Company will enter into employment agreements with Messrs. S. Eakin, F.
Eakin and Ammons that provide for annual base salaries of $250,000, $200,000 and
$180,000, respectively. The employment agreements will provide for semi-annual
incentive bonuses equal to 1.19%, 0.95% and 0.86% of semi-annual EBITDA for
Messrs. S. Eakin, F. Eakin and Ammons, respectively. The employment agreements
will also provide for payment of premiums of $12,965, $1,839 and $3,691 annually
for term life insurance policies for Messrs. S. Eakin, F. Eakin and Ammons,
respectively. The contracts will provide for a term of three years, with three
months severance upon termination by the Company without cause. The terms of the
employment agreements between Messrs. S. Eakin, F. Eakin and Ammons,
respectively, cannot be considered to have been determined through arms-length
negotiations.
50
<PAGE> 53
CASH BONUS PLANS
The Company's Board of Directors has approved the payment of bonuses to key
employees of the Company for 1997 under several different bonus plans and
formulas. Generally, bonuses paid to vice presidents of the Company and its
subsidiaries are at the discretion of the Board of Directors with the exception
of the Vice President of Marketing and the Vice President of Environmental
Services who each earn a formula based bonus. Repair services superintendents,
gas free services superintendents and managers are also paid cash bonus
compensation based on a formula. The Director of Safety and his assistant earn
bonuses based on the Company's safety and claims performance. The Company also
pays discretionary bonuses to its nonexecutive employees based upon project
performance.
RETIREMENT PLAN
The Company has adopted a 401(k) plan for its employees. Employees are
eligible to participate in the plan after one year of service with the Company,
provided they work at least 1,000 hours during that first year and are at least
21 years of age. Under the plan, eligible employees are permitted to contribute
up to 15% of compensation. The plan provides that the Company will match an
amount equal to a percentage set by the Company of up to 6% of an employee's
contribution prior to the end of each calendar year. The Company is also
permitted to make qualified non-elective and discretionary contributions in
proportion to each eligible employee's compensation as a ratio of the aggregate
compensation of all eligible employees. The amounts held under the plan are
invested in investment funds maintained under the plan in accordance with the
directions of each participant.
All employees' contributions are immediately 100% vested. Contributions by
the Company vest at a rate of 10% beginning one year after the anniversary date
of employment, an additional 10% after year two and 20% each additional year
thereafter. Upon attaining age 65, participants are automatically 100% vested,
even with respect to Company contributions. Subject to certain limitations
imposed under the Internal Revenue Code, participants or their designated
beneficiaries are entitled to payment of vested benefits upon termination of
employment. On attaining age 65, participants are entitled to distribution of
the full value of their benefits even if they continue to be employed by the
Company. Such employees also have the option of deferring payment until April 1
following the year they attain the age of 70 1/2. In addition, hardship and
other in-service distributions and loans to participants from the plan are
available under certain circumstances and subject to certain conditions. The
amount of benefits ultimately payable to a participant under the plan depends on
the level of the participant's salary deferral contributions under the plan, the
amount of Company discretionary and matching contributions made to the plan and
the performance of the investment funds maintained under the plan in which
participants are invested.
AMENDED AND RESTATED 1997 INCENTIVE EQUITY PLAN
The Board of Directors of the Company has adopted an Incentive Equity Plan
for employees. The Amended and Restated 1997 Incentive Equity Plan (the "1997
Incentive Equity Plan") permits the granting of any or all of the following
types of awards ("Awards"): stock appreciation rights, stock options and
restricted stock. Under the plan, all officers and employees of the Company, or
any affiliate of the Company, will be eligible for participation in all Awards
under the 1997 Incentive Equity Plan.
An aggregate of 1,800,000 shares of Common Stock have been authorized and
reserved for issuance pursuant to the 1997 Incentive Equity Plan. Options to
purchase an aggregate of 1,482,201 shares of Common Stock have been granted
under the 1997 Incentive Equity Plan, which options will have an exercise price
equal to $3.50 per share. The 1997 Incentive Equity Plan will be administered by
the entire Board of Directors. The 1997 Incentive Equity Plan contains
appropriate provisions to assure that it complies with the provisions of Section
16(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and the rules
promulgated thereunder. The Board of Directors,
51
<PAGE> 54
as a whole, will have sole authority to select employees who are to be granted
awards, as well as the amount, type and terms of the awards to be granted. The
Board of Directors, as a whole, will be authorized to interpret the 1997
Incentive Equity Plan and may adopt such rules and regulations as it may deem
advisable to carry out the 1997 Incentive Equity Plan. All decisions made by the
Board of Directors, as a whole, in selecting employees for awards are final.
STOCK OPTIONS GRANTED TO EXECUTIVE OFFICERS UNDER THE 1997 INCENTIVE EQUITY PLAN
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- ----------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES EXERCISE OR
UNDERLYING OPTIONS BASE PRICE EXPIRATION
NAME GRANTED(#) ($/SH) DATE
---- --------------------- ----------- ----------
<S> <C> <C> <C>
Samuel F. Eakin.................................. 180,000(a) $3.50 11/20/07
Frank W. Eakin................................... 180,000(a) $3.50 11/20/07
David B. Ammons.................................. 180,000(a) $3.50 11/20/07
Joseph O'Toole................................... 176,364(b) $3.50 11/20/07
Hugh G. Walker, III.............................. 70,546(b) $3.50 11/20/07
Francis J. Fair.................................. 17,636(b) $3.50 11/20/07
Dale Payne, III.................................. 117,576(b) $3.50 11/20/07
Ben Ramirez...................................... 17,636(b) $3.50 11/20/07
</TABLE>
- ---------------
(a) 33 1/3% of the options granted will become exercisable at each of the first,
second, and third years, respectively, from the date of grant.
(b) 20% of the options granted will become exercisable at each of the first
through fifth years, respectively from the date of grant.
CERTAIN TRANSACTIONS
The Company paid management fees to Eakin & Co., an affiliated company
owned 80% by Samuel F. Eakin and 20% by David B. Ammons, in 1994, 1995 and 1996
of $240,000, $240,000 and $177,000. These fees were paid pursuant to an
understanding between the Company and Eakin & Co. under which Eakin & Co.
provided financial advisory services to the Company for a monthly fee of $20,000
in 1994 and 1995. The fee was reduced to $15,000 per month in mid-1996. Upon
consummation of the Offering, the Company will cease payment of monthly
management fees to Eakin & Co.
The Company paid management fees to SFA Industries, Inc. ("SFA"), an
affiliated company the Common Stock of which is owned 60% by Samuel F. Eakin,
20% by Frank W. Eakin and 20% by David B. Ammons, in 1994, 1995 and 1996 of
$93,000, $240,000 and $218,000, respectively. The fees paid to SFA were also
paid pursuant to an understanding between the Company and SFA under which SFA
provided insurance benefits from a consolidation of the Companies' insurance
plans which fees were billed to the Company on a monthly basis.
In 1996 the Company paid SFA the final nonrecurring fee of $700,000 related
to a reduction in costs resulting from a consolidation of the Company's
insurance plan.
The Company paid management fees of $251,000 in 1996 to NLCH Consultants,
Ltd. ("NLCH"), an affiliated company owned 48% by Samuel F. Eakin, 16% by Frank
W. Eakin and 16% by David B. Ammons. These fees were paid pursuant to an
understanding between the Company and NLCH under which NLCH provided certain
financial advisory services to the Company in 1996.
In August 1996 in Company paid Eakin & Co. a fee of $110,000 for arranging
a senior credit facility in connection with Newpark Shipbuilding's purchase of
the Brady Island assets.
52
<PAGE> 55
In August 1997, Samuel F. Eakin and David B. Ammons formed a limited
liability company which owns a Cessna 310 twin engine airplane. The Company
leases the airplane from such entity at a market lease rate of $5,000 per month.
In addition, under the lease agreement, the Company is required to maintain the
airplane in good working condition, to pay all operating expenses related to the
airplane and to maintain insurance on the airplane. The lease agreement has a
term of five years. The Company believes that the terms of such agreement are no
less favorable than the Company could have received from an unrelated party. The
Company adopted a policy which requires an individual to reimburse the Company
for the Company's direct costs resulting from any trip on the airplane for
personal use.
The Company was the payee under two promissory notes from J. B. Talley &
Co., Inc., a company owned indirectly by Samuel F. Eakin and David B. Ammons,
each dated March 1997 in the original principal amounts of $100,000 and $85,000,
respectively, in the amount of $165,000. The Company also had pledged collateral
in the amount of $100,000 to secure a bank loan to such affiliated company. The
aggregate outstanding balances on the notes at October 1997 was $165,000. In
October 1997, Samuel F. Eakin and David B. Ammons purchased the promissory notes
and collateral from the Company in exchange for demand notes to the Company in
the aggregate amount of $265,000. The Company subsequently bonused the notes to
such shareholders as additional compensation.
At September 30, 1997, the Company had outstanding indebtedness owed to
Newpark Resources in the amount of $7.2 million. Newpark Resources has also
guaranteed the Company's indebtedness in favor of one of the Company's senior
secured lenders, which senior lender will be paid with a portion of the net
proceeds of the Offering. James D. Cole, a director of the Company is the Chief
Executive Officer and Chairman of the Board of Newpark Resources.
The Company intends to enter into employment agreements with Messrs. S.
Eakin, F. Eakin and David B. Ammons. See "-- Employment Agreements."
Samuel F. Eakin is the guarantor of each of the credit facilities of the
Company. Mr. S. Eakin is also the guarantor of the notes payable to Newpark
Resources. Some of these debt instruments are being repaid with the net proceeds
of the Offering. See "Use of Proceeds" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
53
<PAGE> 56
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to each
person who as of December 31, 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 and (iii) all executive officers
and directors as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS
OF NUMBER OF SHARES PERCENT
BENEFICIAL OWNER OF COMMON STOCK(A) OF CLASS
---------------- ------------------ --------
<S> <C> <C>
Samuel F. Eakin............................................. 6,454,539 54.9%
Frank W. Eakin.............................................. 2,151,513 18.3%
David B. Ammons............................................. 2,151,513 18.3%
James Cole.................................................. -- --
Paul E. O'Neill II.......................................... -- --
Joseph O'Toole.............................................. 176,364 1.5%
Dale Payne, III............................................. 117,576 1.0%
All Directors and Executive Officers as a Group (9
persons).................................................. 11,122,050 94.6%
</TABLE>
- ---------------
(*) Less than 1%
(a) The persons or group listed have sole voting and investment power with
respect to their shares of Common Stock.
54
<PAGE> 57
DESCRIPTION OF NOTES
GENERAL
The Notes will be issued pursuant to the Indenture (the "Indenture") among
the Company, the Initial Restricted Subsidiaries and Bank One, N.A., as trustee
(the "Trustee"). The terms of the Notes include those stated in the Indenture
and the Pledge Agreement and those made part of the Indenture and the Pledge
Agreement by reference to the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"). The Notes are subject to all such terms, and holders
("Holders") of Notes are referred to the Indenture, the Pledge Agreement and the
Trust Indenture Act for a statement thereof. The following summary of certain
provisions of the Indenture and the Pledge Agreement does not purport to be
complete and is qualified in its entirety by reference to the Indenture and the
Pledge Agreement, including the definitions therein of certain terms used below.
A copy of the proposed form of Indenture and Pledge Agreement is available as
set forth under "-- Additional Information." The definitions of certain terms
used in the following summary are set forth below under "-- Certain
Definitions." For purposes of this Section, references to the "Company" shall
mean First Wave Marine, Inc., excluding its Subsidiaries.
The obligations of the Company under the Notes will be jointly and
severally guaranteed by the Company's Restricted Subsidiaries. See
"-- Subsidiary Guarantees." As of the closing date of this Offering (the
"Closing Date"), all of the Company's Subsidiaries (the "Initial Restricted
Subsidiaries") will be Restricted Subsidiaries.
Under certain circumstances, the Company will be able to designate current
or future Subsidiaries as Unrestricted Subsidiaries. Unrestricted Subsidiaries
will not guarantee the Notes and will not be subject to any of the restrictive
covenants set forth in the Indenture.
RANKING
The Notes will be senior obligations of the Company, will rank pari passu
in right of payment with all existing and future unsecured senior Indebtedness
of the Company and will rank senior in right of payment to any Subordinated
Indebtedness of the Company. The Subsidiary Guarantee of each Restricted
Subsidiary will be an unsecured, senior obligation of such Restricted
Subsidiary, will rank pari passu in right of payment with all existing and
future unsecured senior Indebtedness of such Restricted Subsidiary and will rank
senior in right of payment to any Subordinated Indebtedness of such Restricted
Subsidiary. As of December 31, 1997, after giving pro forma effect to the
Offering, the aggregate principal amount of outstanding senior Indebtedness of
the Company would have been $99.8 million. As of December 31, 1997, after giving
pro forma effect to the Offering, the aggregate principal amount of outstanding
senior Indebtedness of the Initial Restricted Subsidiaries, but excluding the
Subsidiary Guarantees, would have been approximately $9.7 million.
SECURITY
The Indenture will provide that on the date of the closing of the Offering,
the Company shall purchase and pledge to the Trustee, for the benefit of the
Holders of the Notes, the Pledged Securities in such amount as will be
sufficient upon receipt of scheduled interest and principal payments of such
securities, in the opinion of a nationally recognized firm of independent public
accountants selected by the Company, to provide for payment in full when due of
the first two scheduled interest payments on the Notes. The Company expects to
use approximately $9.5 million of the net proceeds of the Offering to acquire
the Pledged Securities; however, the actual amount of the net proceeds used to
purchase the Pledged Securities will vary depending on the interest rates on
Government Securities prevailing at the time of the purchase of the Pledged
Securities. The Pledged Securities will be pledged by the Company to the Trustee
for the benefit of the Holders of the Notes pursuant to the Pledge Agreement and
will secure the payment of the principal of and
55
<PAGE> 58
interest on the Notes, and all other obligations under the Indenture, to the
extent of such security. The Pledged Securities and any proceeds thereof will be
held by the Trustee in the Pledge Account. Pursuant to the Pledge Agreement,
immediately prior to an interest payment date on the Notes, the Company may
either deposit with the Trustee from funds otherwise available to the Company
cash sufficient to pay the interest scheduled to be paid on such date or the
Company may direct the Trustee to release from the Pledge Account proceeds
sufficient to pay the interest scheduled to be paid on such date. In the event
that the Company exercises the former option, the Pledge Agreement provides that
the Company may thereafter direct the Trustee to release to the Company proceeds
or Pledged Securities from the Pledge Account in a like amount.
Interest earned on the Pledged Securities will be added to the Pledge
Account. In the event that the funds or Pledged Securities held in the Pledge
Account exceed the amount sufficient, in the opinion of a nationally recognized
firm of independent public accountants selected by the Company, to provide for
payment in full of the first two scheduled interest payments due on the Notes
(or, in the event an interest payment or interest payments have been made in an
amount sufficient to provide for payment in full of any interest payments
remaining, up to and including the second scheduled interest payment), if no
Default or Event of Default is then continuing, the Trustee will be permitted to
release to the Company at its request any such excess amount.
Under the Pledge Agreement, if the Company makes the first two scheduled
interest payments on the Notes in a timely manner and no Default or Event of
Default is then continuing, the remaining Pledged Securities, if any, will be
released from the Pledge Account and thereafter the Notes will be unsecured.
SUBSIDIARY GUARANTEES
The obligations of the Company under the Notes will be fully and
unconditionally guaranteed jointly and severally by the Restricted Subsidiaries.
The Subsidiary Guarantee of each Restricted Subsidiary will be an unsecured,
senior obligation of such Restricted Subsidiary, will rank pari passu in right
of payment with all existing and future unsecured senior Indebtedness of such
Restricted Subsidiary and will rank senior in right of payment to any
Subordinated Indebtedness of such Restricted Subsidiary. As of the Closing Date,
all of the Company's Subsidiaries will be Restricted Subsidiaries.
The Indenture contains provisions the intent of which is to provide that
the obligations of each Restricted Subsidiary will be limited to the maximum
amount that will, after giving effect to all other contingent and fixed
liabilities of such Restricted Subsidiary and after giving effect to any
collections from, rights to receive contribution from, or payments made by or on
behalf of any other Restricted Subsidiary in respect of the obligations of such
other Restricted Subsidiary under its Subsidiary Guarantee or pursuant to its
contribution obligations under the Indenture, result in the obligations of such
Restricted Subsidiary under its Subsidiary Guarantee not constituting a
fraudulent conveyance or fraudulent transfer under any applicable law. Each
Restricted Subsidiary that makes a payment or distribution under a Subsidiary
Guarantee shall be entitled to contribution from each other Restricted
Subsidiary so long as the exercise of such right does not impair the rights of
the Holders under the Subsidiary Guarantees. See "Risk Factors -- Fraudulent
Conveyance Considerations."
The Indenture will require the Company to cause any Person that becomes a
Restricted Subsidiary (including any Subsidiary that was previously an
Unrestricted Subsidiary and which becomes a Restricted Subsidiary) after the
Closing Date to execute and deliver to the Trustee a supplemental indenture
pursuant to which such Restricted Subsidiary will Guarantee the Notes. So long
as no Default or Event of Default exists or would be caused thereby, any Person
that is no longer a Restricted Subsidiary may, by execution and delivery to the
Trustee of a supplemental indenture satisfactory to the Trustee, be released
from its Subsidiary Guarantee and cease to Guarantee the Notes.
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<PAGE> 59
Each Subsidiary Guarantee will be a continuing Guarantee and shall (i)
remain in full force and effect until released pursuant to the Indenture or
pursuant to payment in full of all the obligations under the Indenture and the
Notes, (ii) be binding upon such Restricted Subsidiary and (iii) inure to the
benefit of and be enforceable by the Holders and their successors, transferees
and assigns.
The Indenture will provide that, subject to the provisions described in the
next succeeding paragraph, no Restricted Subsidiary may consolidate or merge
with or into (whether or not such Restricted Subsidiary is the surviving
Person), or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its properties or assets in one or more related
transactions, to another Person unless (i) the Person formed by or surviving any
such consolidation or merger (if other than such Restricted Subsidiary) or the
Person to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made assumes all the obligations of such Restricted
Subsidiary under the Subsidiary Guarantee, in form satisfactory to the Trustee;
(ii) immediately after such transaction, no Default or Event of Default exists;
(iii) the Company and its Restricted Subsidiaries would, at the time of such
transaction and after giving pro forma effect thereto as if such transaction had
occurred at the beginning of the applicable fiscal quarter, be permitted to
Incur at least $1.00 of additional Indebtedness pursuant to the Consolidated
Interest Coverage Ratio test set forth in the first paragraph of the covenant
described under the caption "-- Certain Covenants -- Incurrence of
Indebtedness"; (iv) the Company shall have delivered to the Trustee an Officers'
Certificate, and an Opinion of Counsel, each stating that such consolidation,
merger or transfer complies with the Indenture; and (v) such Restricted
Subsidiary (if such Restricted Subsidiary is the surviving Person) shall have
delivered a written instrument in form satisfactory to the Trustee confirming
its Subsidiary Guarantee after giving effect to such consolidation, merger or
transfer. Notwithstanding the foregoing, any Restricted Subsidiary may merge
into, consolidate with or transfer all or part of its properties or assets to
the Company or one or more Restricted Subsidiaries.
The Indenture will provide that in the event of a sale, assignment,
transfer, lease, conveyance or other disposition of all of the Equity Interests
in, or all or substantially all of the assets of, a Restricted Subsidiary to any
Person that is not the Company or any of its Restricted Subsidiaries, whether by
way of merger, consolidation or otherwise, if (i) the Net Proceeds of such sale
or other disposition are applied in accordance with provisions of the Indenture
described under "-- Repurchase at the Option of Holders -- Asset Sales," (ii) no
Default or Event of Default exists or would exist under the Indenture after
giving effect to such transaction, (iii) all obligations of such Restricted
Subsidiary under any other Indebtedness of the Company or any of its Restricted
Subsidiaries shall have been terminated (including, without limitation, all
Guarantees of any such Indebtedness), (iv) all Liens on assets of such
Restricted Subsidiary that secure any other Indebtedness of the Company or any
of its Restricted Subsidiaries shall have been terminated, and (v) all
obligations of the Company and its Restricted Subsidiaries under other
Indebtedness of such Restricted Subsidiary shall have been terminated
(including, without limitation, all Guarantees of such Indebtedness), then (A)
in the case of such a sale or other disposition, whether by way of merger,
consolidation or otherwise, of all of the Equity Interests in such former
Restricted Subsidiary, such former Restricted Subsidiary will be released and
relieved of any obligations under its Subsidiary Guarantee, or (B) in the case
of a sale or other disposition of all or substantially all of the assets of such
Restricted Subsidiary, the Person acquiring such assets will not be required to
assume the obligations of such Restricted Subsidiary under its Subsidiary
Guarantee.
PRINCIPAL, MATURITY AND INTEREST
The Notes will be limited in aggregate principal amount to $90 million and
will mature on , 2008. Interest on the Notes will accrue at the
rate of % per annum and will be payable semiannually in arrears on
and of each year, commencing on , 1998, to
Holders of record on the immediately preceding and .
Interest on the Notes will accrue from the most recent date to which interest
has been paid or, if no
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interest has been paid, from the date of original issuance. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
Principal of, premium, if any, and interest on the Notes will be payable by wire
transfer of immediately available funds to the holder of the Global Note (as
defined herein) and with respect to holders of Certificated Notes (as defined
herein), at the office or agency of the Company maintained for such purpose or,
at the option of the Company, payment of interest may be made by check mailed to
the Holders of the Notes at their respective addresses set forth in the register
of Holders of the Notes; provided that all payments with respect to Notes the
Holders of which have given wire transfer instructions to the Company will be
required to be made by wire transfer of immediately available funds to the
accounts specified by the Holders thereof. Until otherwise designated by the
Company, the Company's office or agency will be the office of the Trustee
maintained for such purpose. The Notes will be issued in denominations of $1,000
and integral multiples thereof.
OPTIONAL REDEMPTION
The Notes will not be redeemable at the Company's option prior to
, 2003. Thereafter, the Notes will be subject to redemption at the
option of the Company, in whole or in part, upon not less than 30 nor more than
60 days' notice, at the redemption prices (expressed as percentages of principal
amount) set forth below, plus accrued and unpaid interest thereon to the
applicable redemption date, if redeemed during the twelve-month period beginning
on of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003........................................................ %
2004........................................................ %
2005........................................................ %
2006 and thereafter......................................... 100.00%
</TABLE>
Notwithstanding the foregoing, on or prior to , 2001, the Company may,
at its option, redeem, from time to time, up to 35% in aggregate principal
amount of the Notes at a redemption price of % of the principal amount
thereof, plus accrued and unpaid interest, thereon to the redemption date with
the net proceeds of a Public Equity Offering; provided that no less than 65% of
the aggregate principal amount of Notes initially issued remains outstanding
immediately after giving effect to such redemption; and provided, further, that
notice of such redemption shall have been given not later than 30 days, and such
redemption shall occur not later than 90 days, after the date of the closing of
the transaction giving rise to such Public Equity Offering.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate; provided
that no Notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of Notes to be redeemed at its registered
address. If any Note is to be redeemed in part only, the notice of redemption
that relates to such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. On and after the redemption date, interest
ceases to accrue on Notes or portions thereof called for redemption.
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<PAGE> 61
MANDATORY REDEMPTION
Except as set forth below under "-- Repurchase at the Option of Holders,"
the Company is not required to repurchase the Notes or make mandatory redemption
or sinking fund payments with respect thereto.
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control. Upon the occurrence of a Change of Control, the Company
will be required to make an offer (a "Change of Control Offer") to repurchase
all or any part (equal to $1,000 or an integral multiple thereof) of each
Holder's Notes, at an offer price in cash equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest thereon, to the date
of repurchase (the "Change of Control Payment"). Within 20 days following any
Change of Control, the Company will mail a notice to each Holder describing the
transaction that constitutes the Change of Control and offering to repurchase
Notes pursuant to the procedures required by the Indenture and described in such
notice. The Company will comply with the requirements of Rules 13e-4 and 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable in connection with the
repurchase of the Notes as a result of a Change of Control.
On a date that is at least 30 but no more than 60 days from the date on
which the Company mails notice of the Change of Control (the "Change of Control
Payment Date"), the Company will, to the extent lawful, (i) accept for payment
all Notes or portions thereof properly tendered pursuant to the Change of
Control Offer, (ii) deposit with the Trustee an amount equal to the Change of
Control Payment in respect of all Notes or portions thereof so tendered and
(iii) deliver or cause to be delivered to the Trustee the Notes so accepted
together with an Officers' Certificate stating the aggregate principal amount of
Notes or portions thereof being purchased by the Company. The Trustee will
promptly mail to each Holder of Notes so tendered the Change of Control Payment
for such Notes, and the Trustee will promptly authenticate and mail (or cause to
be transferred by book entry) to each Holder a new Note equal in principal
amount to any unpurchased portion of the Notes surrendered, if any; provided
that each such new Note will be in a principal amount of $1,000 or an integral
multiple thereof. The Company will publicly announce the results of the Change
of Control Offer on or as soon as practicable after the Change of Control
Payment Date. Unless the Company defaults in the payment for any Notes properly
tendered pursuant to the Change of Control Offer, any Notes accepted for payment
pursuant to the Change of Control Offer shall cease to accrue interest after the
Change of Control Payment Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable, and neither the
board of directors of the Company nor the Trustee (without the consent of a
majority of the Holders of the Notes) may waive compliance with these
provisions.
Subject to the limitations discussed below, the Company could in the future
enter into certain transactions, including acquisitions, refinancings or other
recapitalizations, that would not constitute a Change of Control under the
Indenture, but that could increase the amount of Indebtedness outstanding at
such time or otherwise affect the Company's capital structure or credit rating.
The occurrence of a Change of Control, or the exercise by the Holders of Notes
of their right to require the Company to repurchase the Notes upon a Change of
Control, could cause a default under other senior Indebtedness of the Company.
The Company's ability to pay cash to the Holders of Notes upon a Change of
Control may be limited by the Company's then existing financial resources. There
can be no assurance that sufficient funds will be available when necessary to
make any required repurchases. The failure of the Company to purchase any Notes
tendered in a Change of Control Offer will constitute an Event of Default under
the Indenture. See "-- Events of Default and Remedies."
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<PAGE> 62
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act) other than a Restricted Subsidiary; (ii) the adoption of a
plan relating to the liquidation or dissolution of the Company; (iii) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person" (as defined above),
other than a Permitted Holder, becomes the "beneficial owner" (as such term is
defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or
indirectly, of a greater percentage of the voting stock of the Company than the
percentage of the voting stock of the Company held by the Permitted Holders;
(iv) the first day on which the Permitted Holders in the aggregate hold less
than 35% of the voting stock of the Company; or (v) the first day on which a
majority of the members of the Board of Directors of the Company are not
Continuing Directors.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Restricted Subsidiaries taken as a whole.
Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a Holder of Notes to require
the Company to repurchase such Notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of the Company
and its Restricted Subsidiaries taken as a whole to another Person or group may
be uncertain.
"Continuing Director" means, as of any date of determination, any member of
the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board of Directors at the time of
such nomination of election.
Asset Sales. The Indenture will provide that the Company will not, and will
not permit any of its Restricted Subsidiaries to, engage in an Asset Sale unless
(i) the Company or such Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the Fair Market
Value (which, if it exceeds $1 million, shall be determined by, and set forth
in, a resolution of the Board of Directors of the Company and described in an
Officers' Certificate of the Company delivered to the Trustee) of the assets
(including, if appropriate, Equity Interests) disposed of or issued, as
appropriate, and (ii) at least 75% of the consideration therefor received by the
Company or such Restricted Subsidiary is in the form of cash or Cash
Equivalents. For purposes of this covenant (and not for purposes of any other
provision of the Indenture), the term "cash" shall be deemed to include (i) any
notes or other obligations received by the Company or such Restricted Subsidiary
as consideration as part of such Asset Sale that are immediately converted by
the Company or such Restricted Subsidiary into actual cash (to the extent of the
actual cash so received), and (ii) any liabilities of the Company or such
Restricted Subsidiary (as shown on the most recent balance sheet of the Company
or such Restricted Subsidiary) that (A) are assumed by the transferee of the
assets which are the subject of such Asset Sale as consideration therefor in a
transaction the result of which is that the Company and all of its Subsidiaries
are released from all liability for such assumed liability, (B) are not by their
terms subordinated in right of payment to the Notes, (C) are not owed to the
Company or any Subsidiary of the Company, and (D) constitute short-term
liabilities (as determined in accordance with GAAP).
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<PAGE> 63
Within 180 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply, directly or indirectly, such Net Proceeds (a) to
permanently reduce Indebtedness under the Bank Credit Agreement (and to
correspondingly reduce commitments with respect thereto) or (b) to invest in
properties and assets that will be used in the Shipyard Business of the Company
and its Restricted Subsidiaries. Pending the final application of any such Net
Proceeds, the Company may temporarily invest such Net Proceeds in any manner
that is not prohibited by the Indenture (including, without limitation, to the
reduction of Indebtedness under the Bank Credit Agreement). Any Net Proceeds
from Asset Sales that are not applied or invested as provided in the first
sentence of this paragraph will be deemed to constitute "Excess Proceeds." When
the aggregate amount of Excess Proceeds exceeds $5 million, the Company will be
required to make an offer to all Holders of Notes and, if the Company is
required to do so under the terms of any other senior Indebtedness, to the
holders of such other senior Indebtedness (an "Asset Sale Offer") to purchase
Notes and principal of such other senior Indebtedness, on a pro rata basis,
having an aggregate principal amount equal to the Excess Proceeds, at an offer
price in cash equal to, in the case of the Notes, 100% of the principal amount
thereof, plus accrued and unpaid interest thereon to the date of purchase, and,
in the case of all other senior Indebtedness, 100% of the principal amount
thereof, plus accrued and unpaid interest, or premium, if any, thereon to the
date of purchase, in accordance with the procedures set forth in the Indenture.
To the extent that the aggregate principal amount of Notes tendered pursuant to
an Asset Sale Offer is less than the Excess Proceeds, the Company may use any
remaining Excess Proceeds for general corporate purposes. If the aggregate
principal amount of Notes and such other senior Indebtedness surrendered by
holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select
the Notes to be purchased in compliance with the requirements of the principal
national securities exchange, if any, on which the Notes are listed or, if the
Notes are not so listed, on a pro rata basis with such other senior Indebtedness
based on the outstanding principal amounts thereof (with such adjustments as may
be deemed appropriate by the Company so that only Notes with denominations of
$1,000 or integral multiples thereof shall be purchased). Upon completion of
such offer to purchase, the amount of Excess Proceeds shall be reset at zero.
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, transfer, convey, sell, lease or
otherwise dispose of any Capital Stock of any Restricted Subsidiary of the
Company to any Person (other than the Company or a Wholly Owned Restricted
Subsidiary of the Company), unless (i) such transfer, conveyance, sale, lease or
other disposition is of all of the Capital Stock of such Restricted Subsidiary
owned by the Company and its Restricted Subsidiaries or is otherwise permitted
under the covenant described under the caption "-- Certain
Covenants -- Limitation on Issuance, Sale and Ownership of Capital Stock of
Restricted Subsidiaries" and (ii) such transaction is conducted in accordance
with the covenant described in the preceding two paragraphs.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes using Excess Proceeds.
CERTAIN COVENANTS
Restricted Payments. The Indenture will provide that the Company will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, (i) declare or pay any dividend or make any other payment or
distribution on account of the Company's or any Restricted Subsidiary's Equity
Interests (including, without limitation, any payment in connection with any
merger or consolidation) other than dividends or distributions (a) paid or
payable in Equity Interests (other than Disqualified Stock) of the Company or
(b) paid or payable to the Company or any Wholly Owned Restricted Subsidiary of
the Company; (ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company or any Affiliate of the Company (other than any
such Equity Interests owned by the Company or any Wholly Owned Restricted
Subsidiary of the
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Company); (iii) make any principal payment on, or purchase, redeem, defease or
otherwise acquire or retire for value prior to the scheduled maturity, scheduled
repayment or scheduled sinking fund payment, any Subordinated Indebtedness
(except, if no Default or Event of Default is continuing or would result
therefrom, any such payment, purchase, redemption, defeasance or other
acquisition or retirement for value made out of Excess Proceeds available for
general corporate purposes if (a) such payment or other action is required by
the indenture or other agreement or instrument pursuant to which such
Subordinated Indebtedness was issued and (b) the Company has purchased all Notes
and other senior Indebtedness properly tendered pursuant to an Asset Sale Offer
required under "-- Repurchase at the Option of Holders -- Asset Sales"; or (iv)
make any Restricted Investment (all such payments and other actions set forth in
clauses (i) through (iv) above being collectively referred to as "Restricted
Payments"), unless, at the time of and after giving effect to such Restricted
Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable fiscal quarter, have been
permitted to Incur at least $1.00 of additional Indebtedness pursuant to
the Consolidated Interest Coverage Ratio test set forth in the first
paragraph of the covenant described under the caption "-- Incurrence of
Indebtedness;" and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments declared or made by the Company and its
Restricted Subsidiaries after the Closing Date shall not exceed, at the
date of determination, the sum of (1) 50% of aggregate Consolidated Net
Income of the Company from the beginning of the first fiscal quarter
commencing after the Closing Date to the end of the Company's most recently
ended fiscal quarter for which financial statements are available at the
time of such Restricted Payment (or, if such aggregate Consolidated Net
Income for such period is a deficit, less 100% of such deficit), plus (2)
100% of the aggregate net cash proceeds received by the Company from the
issue or sale after the Closing Date of Equity Interests of the Company or
of Disqualified Stock or debt securities of the Company that have been
converted into such Equity Interests (other than Equity Interests (or
Disqualified Stock or convertible debt securities) sold to a Subsidiary of
the Company and other than Disqualified Stock or debt securities that have
been converted into Disqualified Stock), plus (3) the aggregate net cash
proceeds received by the Company as capital contributions to the Company
(other than from a Subsidiary of the Company) after the Closing Date, plus
(4) if any Restricted Investment that was made after the Closing Date is
sold for cash, to the extent such amount is not included in the
Consolidated Net Income of the Company, the lesser of (A) the Net Proceeds
from such sale to the extent received by the Company or any Restricted
Subsidiary, and (B) the initial amount of such Restricted Investment, plus
(5) in the event an Unrestricted Subsidiary is redesignated as a Restricted
Subsidiary, an amount equal to the lesser of (A) the book value of such
Unrestricted Subsidiary, and (B) the Fair Market Value of such Unrestricted
Subsidiary.
The foregoing provisions will not prohibit the following Restricted
Payments: (i) the payment of any dividend or other distribution within 60 days
after the date of declaration thereof, if at said date of declaration such
payment would have complied with the provisions of the Indenture; (ii) the
redemption, repurchase, retirement or other acquisition of any Equity Interests
of the Company (other than Disqualified Stock) in exchange for, or out of the
proceeds of, the substantially concurrent sale (other than to a Subsidiary of
the Company) of other Equity Interests of the Company (other than Disqualified
Stock); provided that the amount of any such net cash proceeds that are utilized
for any such redemption, repurchase, retirement or other acquisition shall be
excluded from clause (c) of the preceding paragraph (both for purposes of
determining the aggregate amount of Restricted Payments made and for purposes of
determining the aggregate
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amount of Restricted Payments permitted); (iii) the payment, purchase,
redemption, defeasance or other acquisition or retirement for value of
Subordinated Indebtedness with the net cash proceeds from a substantially
concurrent Incurrence of Permitted Refinancing Indebtedness or the substantially
concurrent sale (other than to a Subsidiary of the Company) of Equity Interests
of the Company (other than Disqualified Stock); provided that the amount of any
such net cash proceeds that are utilized for any such payment, purchase,
redemption, defeasance or other acquisition or retirement shall be excluded from
clause (c) of the preceding paragraph (both for purposes of determining the
aggregate amount of Restricted Payments made and for purposes of determining the
aggregate amount of Restricted Payments permitted); (iv) any Restricted
Investment made with the net cash proceeds from a substantially concurrent sale
(other than to a Subsidiary of the Company) of Equity Interests of the Company
(other than Disqualified Stock); and (v) so long as no Default or Event of
Default is continuing, any Restricted Investment which, together with all other
Restricted Investments outstanding made pursuant to this clause (v) does not
exceed $3 million. Except to the extent specifically noted above, Restricted
Payments made pursuant to this paragraph shall be included in calculating the
amount of Restricted Payments made after the Closing Date.
The Board of Directors of the Company may designate any Restricted
Subsidiary to be an Unrestricted Subsidiary if (i) such designation would not
cause a Default or Event of Default, (ii) at the time of and after giving effect
to such designation, the Company could incur $1.00 of additional Indebtedness
pursuant to the Consolidated Interest Coverage Ratio test set forth in the first
paragraph of the covenant entitled "-- Incurrence of Indebtedness," and (iii)
each of the other requirements of the definition of the term "Unrestricted
Subsidiary" are satisfied. For purposes of making such determination, all
outstanding Investments by the Company and its Restricted Subsidiaries (except
to the extent repaid in cash) in the Subsidiary so designated will be deemed to
be Restricted Payments at the time of such designation and will reduce the
amount available for Restricted Payments under the first paragraph of this
covenant. All such outstanding Investments will be deemed to constitute
Restricted Payments in an amount equal to the greater of (i) the net book value
of such Investments at the time of such designation and (ii) the Fair Market
Value of such Investments at the time of such designation. Such designation will
only be permitted if such Restricted Payment would be permitted at such time and
if such Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary. Upon being so designated as an Unrestricted Subsidiary, any
Subsidiary Guarantee that was previously executed by such Unrestricted
Subsidiary shall be deemed terminated.
The amount of all Restricted Payments not made in cash shall be the Fair
Market Value (which, if it exceeds $1 million, shall be determined by, and set
forth in, a resolution of the Board of Directors of the Company and described in
an Officers' Certificate delivered to the Trustee) on the date of the Restricted
Payment of the asset(s) proposed to be transferred by the Company or any
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payments during such quarter were permitted and setting forth the basis upon
which the calculations required by the covenant described under "-- Restricted
Payments" were computed, which calculations may be based upon the Company's
latest available financial statements.
Incurrence of Indebtedness. The Indenture will provide that the Company
will not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, Incur any Indebtedness (including Acquired Indebtedness), except for
Permitted Indebtedness, unless (i) at the time of such event and after giving
effect thereto on a pro forma basis the Company's Consolidated Interest Coverage
Ratio for the four full fiscal quarters immediately preceding such event, taken
as one period, would have been at least equal to (A) 2.0 to 1.0 for the first
two years after the Closing Date and (B) 2.25 to 1.0 thereafter and (ii) no
Default or Event of Default shall have occurred and be continuing at the
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time such additional Indebtedness is Incurred or would occur as a consequence of
the Incurrence of such additional Indebtedness.
"Permitted Indebtedness" means any and all of the following:
(i) Indebtedness of the Company and its Restricted Subsidiaries
pursuant to the Bank Credit Agreement (including all Guarantees thereof) in
an aggregate amount not to exceed the greater of (A) $20 million or (B) 85%
of Eligible Receivables, less the aggregate amount of all payments thereon
which are applied to permanently reduce the outstanding amount of or the
commitments with respect to such Indebtedness;
(ii) Indebtedness represented by the Notes, the Indenture, the
Subsidiary Guarantees and the Pledge Agreement;
(iii) intercompany Indebtedness between or among the Company and any
of its Restricted Subsidiaries; provided that (A) if the Company is an
obligor on such Indebtedness, such Indebtedness is expressly subordinate to
the payment in full of all Obligations with respect to the Notes and (B)
any subsequent issuance or transfer of Equity Interests that results in any
such Indebtedness being held by a Person other than the Company or a
Restricted Subsidiary of the Company, or any sale or other transfer of any
such Indebtedness to a Person that is not either the Company or a
Restricted Subsidiary of the Company, shall be deemed to constitute a new
Incurrence of such Indebtedness by the Company or such Restricted
Subsidiary, as the case may be;
(iv) Permitted Refinancing Indebtedness Incurred in exchange for, or
the net proceeds of which are used to extend, refinance, renew, replace,
defease or refund, (A) Indebtedness (other than Permitted Indebtedness)
that was Incurred in compliance with the Indenture, (B) Indebtedness
referred to in clause (ii) of the definition of the term "Permitted
Indebtedness," or (C) Existing Indebtedness;
(v) Indebtedness of a Restricted Subsidiary of the Company
constituting a Guarantee of Indebtedness of the Company or a Restricted
Subsidiary which Indebtedness was Incurred pursuant to this definition or
the Consolidated Interest Coverage Ratio test set forth in the first
paragraph of the covenant described under the caption "-- Incurrence of
Indebtedness;"
(vi) Hedging Obligations of the following types: (A) Interest Rate
Hedges the notional principal amount of which does not exceed the principal
amount of the Indebtedness to which such Interest Rate Hedge relates, and
(B) Currency Hedges that do not increase the outstanding loss potential or
liabilities other than as a result of fluctuations in foreign currency
exchange rates;
(vii) Indebtedness (in addition to Indebtedness permitted by any other
clause of this paragraph) in an aggregate principal amount at any time
outstanding not to exceed $5 million; and
(viii) Existing Indebtedness.
For purposes of determining compliance with the covenant entitled
"Incurrence of Indebtedness," (i) in the event that an item of Indebtedness
meets the criteria of more than one of the types of Indebtedness described
herein, the Company, in its sole discretion, will classify such item of
Indebtedness and only be required to include the amount and type of such
Indebtedness in one of the above clauses and (ii) an item of Indebtedness may be
divided and classified in more than one of the types of Indebtedness described
herein.
Liens. The Indenture will provide that the Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, create,
incur, affirm, assume or suffer to exist any Lien of any kind on any property
now owned or hereafter acquired, or any income or profits therefrom or assign or
convey any right to receive income therefrom, unless (i) in the case of Liens
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securing obligations subordinate to the Notes, the Notes are secured by a valid,
perfected Lien on such property that is senior in priority to such Liens, (ii)
in the case of Liens securing obligations subordinate to a Subsidiary Guarantee,
such Subsidiary Guarantee is secured by a valid, perfected Lien on such property
that is senior in priority to such Liens, and (iii) in all other cases, the
Notes (and, if such Lien secures obligations of a Restricted Subsidiary, a
Subsidiary Guarantee of such Restricted Subsidiary) are equally and ratably
secured; provided, however, that the foregoing shall not prohibit or restrict
Permitted Liens.
Dividend and Other Payment Restrictions Affecting Subsidiaries. The
Indenture will provide that the Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or restriction on
the ability of any Restricted Subsidiary to (i)(a) pay dividends or make any
other distributions to the Company or any of its Restricted Subsidiaries on its
Capital Stock or with respect to any other interest or participation in, or
measured by, its profits or (b) pay any Indebtedness owed to the Company or any
of its Restricted Subsidiaries, (ii) make loans or advances to the Company or
any of its Restricted Subsidiaries, (iii) transfer any of its properties to the
Company or any of its Restricted Subsidiaries, (iv) grant any Liens in favor of
the Holders of the Notes and the Trustee or (v) guarantee the Notes or any
renewals or refinancings thereof, except for such encumbrances or restrictions
existing under or by reason of (A) Existing Indebtedness, (B) the Bank Credit
Agreement, (C) applicable law, (D) any instrument governing Indebtedness or
Capital Stock of a Person acquired by the Company or any of its Restricted
Subsidiaries as in effect at the time of such acquisition (except to the extent
such Indebtedness was Incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties of any Person, other than the Person, or the property of the
Person, so acquired, provided that in the case of Indebtedness, such
Indebtedness was permitted by the terms of the Indenture to be Incurred, (E)
customary non-assignment provisions in leases, licenses, sales agreements or
other contracts (but excluding contracts related to the extension of credit)
entered into in the ordinary course of business and consistent with past
practices, (F) restrictions imposed pursuant to a binding agreement for the sale
or disposition of all or substantially all of the Equity Interests or assets of
any Restricted Subsidiary, provided such restrictions apply solely to the Equity
Interests or assets being sold, (G) restrictions imposed by Permitted Liens on
the transfer of the assets that are subject to such Liens, and (H) Permitted
Refinancing Indebtedness Incurred to refinance Existing Indebtedness or
Indebtedness of the type described in clause (D) above, provided that the
restrictions contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, as a whole, than those contained in the
agreements governing the Indebtedness being refinanced.
Limitation on Issuance, Sale and Ownership of Capital Stock of Restricted
Subsidiaries. The Indenture provides that the Company will not, and will not
permit any Restricted Subsidiary to (i) sell, assign, transfer, convey or
otherwise dispose of, any Equity Interests of any Restricted Subsidiary, other
than to the Company or a Wholly Owned Restricted Subsidiary, (ii) permit any
Restricted Subsidiary to issue any Equity Interests (including, without
limitation, pursuant to any merger, consolidation, recapitalization or similar
transaction) other than to the Company or a Wholly Owned Restricted Subsidiary
or (iii) permit any Person other than the Company or a Wholly Owned Restricted
Subsidiary to own any Equity Interests of any Restricted Subsidiary, except for
(A) a sale to a Person of all of the Equity Interests of a Restricted
Subsidiary, which sale was made by the Company or a Restricted Subsidiary
subject to, and in compliance with, the "Asset Sales" covenant, (B) the issuance
and subsequent ownership of directors' qualifying shares and (C) the Equity
Interests of a Restricted Subsidiary owned by a Person at the time such
Restricted Subsidiary became a Restricted Subsidiary or acquired by such Person
in connection with the formation of the Restricted Subsidiary, provided that the
Equity Interests owned by such Person do not exceed 20% of the total Equity
Interests of such Restricted Subsidiary.
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Merger, Consolidation, or Sale of Assets. The Indenture will provide that
the Company may not consolidate or merge with or into (whether or not the
Company is the surviving entity), or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its properties or assets in one
or more related transactions, to another Person, unless (i) the Company is the
surviving entity, or the Person formed by or surviving any such consolidation or
merger (if other than the Company) or to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made is a corporation
organized or existing under the laws of the United States, any state thereof or
the District of Columbia; (ii) the Person formed by or surviving any such
consolidation or merger (if other than the Company) or the Person to which such
sale, assignment, transfer, lease, conveyance or other disposition shall have
been made assumes all the obligations of the Company under the Notes and the
Indenture pursuant to a supplemental indenture in a form reasonably satisfactory
to the Trustee; (iii) immediately after giving effect to such transaction, no
Default or Event of Default exists or would exist; (iv) except in the case of a
merger of the Company with or into a Wholly Owned Restricted Subsidiary of the
Company, the Company or the Person formed by or surviving any such consolidation
or merger (if other than the Company) or to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made (A) will
(treating any Indebtedness not previously an obligation of the Company or any of
its Restricted Subsidiaries as a result of such transaction as having been
Incurred at the time of such transaction) have Consolidated Net Worth
immediately after the transaction equal to or greater than the Consolidated Net
Worth of the Company immediately preceding the transaction and (B) will, at the
time of such transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable fiscal quarter, be
permitted to Incur at least $1.00 of additional Indebtedness pursuant to the
Consolidated Interest Coverage Ratio test set forth in the first paragraph of
the covenant described under the caption "-- Incurrence of Indebtedness;" and
(v) the Company shall have delivered to the Trustee an Officers' Certificate and
an opinion of counsel, each stating that such consolidation, merger or transfer
and such supplemental indenture (if any) comply with the Indenture. For purposes
of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a
single transaction or series of transactions) of all or substantially all of the
properties or assets of one or more of the Restricted Subsidiaries of the
Company, the Capital Stock of which constitutes all or substantially all of the
properties and assets of the Company, shall be deemed to be the transfer of all
or substantially all of the properties and assets of the Company. For
restrictions on mergers, consolidations and disposition of assets involving
Restricted Subsidiaries, see "-- Subsidiary Guarantees."
Transactions with Affiliates. The Indenture will provide that the Company
will not, and will not permit any of its Restricted Subsidiaries to, make any
payment to, or sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make or amend any contract, agreement, understanding, loan, advance or
guarantee with, or for the benefit of, any Affiliate of the Company (other than
the Company or a Restricted Subsidiary), in one transaction or a series of
transactions (each of the foregoing an "Affiliate Transaction"), unless (i) such
Affiliate Transaction is on terms that are no less favorable to the Company or
the relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction with an unrelated Person and (ii) the Company delivers to
the Trustee (a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions after the Closing Date involving aggregate consideration
in excess of $500,000, an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (i) above, (b) with respect to any Affiliate
Transaction or series of related Affiliate Transactions after the Closing Date
involving aggregate consideration in excess of $2 million, a resolution
described in an Officers' Certificate, certifying that such Affiliate
Transaction complies with clause (i) above and such Affiliate Transaction has
been approved by a majority of the disinterested members of the Board of
Directors of the Company and (c) with respect to any Affiliate Transaction or
series of related Affiliate Transactions after the Closing Date involving
aggregate consideration in excess of $5 million, an opinion as to the fairness
to the Company of such Affiliate Transaction from a financial point of view
issued by an
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accounting, appraisal or investment banking firm of recognized national
standing; provided that the following types of transactions shall not constitute
Affiliate Transactions: (1) any transaction with an officer or director of the
Company or any Restricted Subsidiary in connection with such individual's
compensation (including directors' fees), employee benefits, severance
arrangements or indemnification (to the extent consistent with applicable law
and the charter and bylaws of the Company or such Restricted Subsidiary), in
each case entered into by the Company or any of its Restricted Subsidiaries in
the ordinary course of business; (2) transactions between or among the Company
and its Restricted Subsidiaries; (3) Restricted Payments that are permitted by
the provisions of the covenant described under "-- Restricted Payments;" (4)
sales of Capital Stock of the Company made at prevailing market rates; and (5)
loans to officers, directors and employees of the Company and its Restricted
Subsidiaries in an aggregate amount not to exceed $1 million at any one time
outstanding.
Sale and Leaseback Transactions. The Indenture will provide that the
Company will not, and will not permit any of its Restricted Subsidiaries to,
enter into any sale and leaseback transaction; provided that the Company or any
Restricted Subsidiary may enter into a sale and leaseback transaction if (a) the
Company could have (i) Incurred Indebtedness in an amount equal to the
Attributable Debt relating to such sale and leaseback transaction pursuant to
either (1) the Consolidated Interest Coverage Ratio test set forth in the first
paragraph of the covenant described under "-- Incurrence of Indebtedness" or (2)
clause (vii) of the definition of the term "Permitted Indebtedness" and (ii)
incurred a Lien to secure such Indebtedness pursuant to the covenant described
under "-- Liens," and (b) the sale portion of such sale and leaseback
transaction complies with the covenant described in "-- Repurchase at the Option
of Holders -- Asset Sales," and the net proceeds from such sale are applied in
accordance with such covenant.
Business Activities. The Indenture will provide that the Company will not,
and will not permit any of its Restricted Subsidiaries to, engage in any
business other than the Shipyard Business.
Payments for Consent. The Indenture will provide that the Company will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of the
Indenture, the Notes, the Pledge Agreement or the Subsidiary Guarantees unless
such consideration is offered to be paid or is paid to all Holders of the Notes
that so consent, waive or agree to amend in the time frame set forth in the
solicitation documents relating to such consent, waiver or agreement.
Reports. The Indenture will provide that, whether or not required by the
rules and regulations of the Commission, so long as any Notes are outstanding,
the Company will furnish to the Holders of Notes (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" that describes the financial condition and results of
operations of the Company and its Subsidiaries and, with respect to the annual
information only, a report thereon by the Company's certified independent
accountants and (ii) all current reports that would be required to be filed with
the Commission on Form 8-K if the Company were required to file such reports. In
addition, whether or not required by the rules and regulations of the
Commission, the Company will file a copy of all such information and reports
with the Commission for public availability (unless the Commission will not
accept such a filing) and make such information available to securities analysts
and prospective investors upon request.
EVENTS OF DEFAULT AND REMEDIES
The Indenture will provide that each of the following constitutes an "Event
of Default": (i) default for 30 days in the payment when due of any interest
payable with respect to the Notes at any time (provided that such 30-day grace
period shall be inapplicable for the first two scheduled
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interest payments due on the Notes); (ii) default in payment when due (whether
at maturity, upon redemption or repurchase, or otherwise) of the principal of or
premium, if any, on the Notes; (iii) failure by the Company or a Restricted
Subsidiary to comply with the provisions described under "-- Security,"
"-- Subsidiary Guarantees," "-- Repurchase at the Option of Holders -- Change of
Control," "-- Repurchase at the Option of Holders -- Asset Sales" or "Certain
Covenants -- Merger, Consolidation, or Sale of Assets;" (iv) failure by the
Company or any Restricted Subsidiary for 30 days after notice from the Trustee
or Holders of at least 25% in aggregate principal amount of the Notes to the
Company and the Trustee to comply with any of its other agreements in the
Indenture or the Notes; (v) default under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is Guaranteed by the Company or any of its
Restricted Subsidiaries), whether such Indebtedness or Guarantee now exists or
is created after the date of the Indenture, which default (a) is caused by a
failure to pay principal of or premium, if any, or interest on such Indebtedness
following the expiration of the grace period provided in such Indebtedness on
the date of such default (a "Payment Default") or (b) results in the
acceleration of such Indebtedness (including any obligation to redeem or
repurchase such Indebtedness) prior to its express maturity and, in each case,
the principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated, aggregates $1 million
or more; (vi) failure by the Company or any of its Restricted Subsidiaries to
pay final non-appealable judgments rendered against the Company or any of its
Restricted Subsidiaries aggregating in excess of $1 million, which judgments are
not paid, discharged or stayed for a period of 60 days after such judgments
become final and non-appealable; (vii) certain events of bankruptcy or
insolvency with respect to the Company or any Restricted Subsidiary; (viii)
certain events of breach, default, repudiation or unenforceability of the Pledge
Agreement; and (ix) any Guarantee of the Notes shall be held in a judicial
proceeding to be unenforceable or invalid or shall cease for any reason to be in
full force and effect, or any Restricted Subsidiary, or any Person acting on
behalf of any Restricted Subsidiary, shall deny or disaffirm its obligations
under its Guarantee of any Notes.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency with respect to the Company or any Restricted
Subsidiary of the Company, all outstanding Notes will become due and payable
without further action or notice by the Trustee or any Holder. Holders of the
Notes may not enforce the Indenture or the Notes except as provided in the
Indenture. Subject to certain limitations, Holders of a majority in principal
amount of the then outstanding Notes may direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from Holders of the Notes notice of
any continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company or a
Restricted Subsidiary with the intention of avoiding payment of the premium that
the Company would have had to pay if the Company then had elected to redeem the
Notes pursuant to the optional redemption provisions of the Indenture, an
equivalent premium shall also become and be immediately due and payable to the
extent permitted by law upon the acceleration of the Notes. If an Event of
Default occurs prior to , 2003 by reason of any willful action (or
inaction) taken (or not taken) by or on behalf of the Company or a Restricted
Subsidiary with the intention of avoiding the prohibition on redemption of the
Notes prior to such date, then the premium specified in the Indenture shall also
become immediately due and payable to the extent permitted by law upon the
acceleration of the Notes.
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The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
the principal of, premium or interest on the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required, upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to discharge all of
its obligations with respect to the outstanding Notes and all obligations of the
Restricted Subsidiaries under the Subsidiary Guarantees ("Legal Defeasance")
except for (i) the rights of Holders of outstanding Notes to receive payments in
respect of the principal of and premium, if any, and interest on the Notes when
such payments are due from the trust referred to below, (ii) the Company's
obligations with respect to the Notes concerning issuing temporary Notes,
registration of transfers or exchanges of Notes, replacement of mutilated,
destroyed, lost or stolen Notes as required by the Indenture and the maintenance
of an office or agency for payment and money for security payments held in
trust, (iii) the rights, powers, trusts, duties and immunities of the Trustee,
and the Company's obligations in connection therewith and (iv) the Legal
Defeasance and optional redemption provisions of the Indenture. In addition, the
Company may, at its option and at any time, elect to have its obligations
released with respect to certain covenants that are described in the Indenture
("Covenant Defeasance") and thereafter any omission to comply with such
obligations shall not constitute a Default or Event of Default with respect to
the Notes. In the event Covenant Defeasance occurs, certain events (not
including nonpayment, bankruptcy, receivership, rehabilitation and insolvency
events) described under "Events of Default" will no longer constitute an Event
of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Notes, cash in U.S. dollars or non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient,
without reinvestment (and without other assets held pursuant to the Pledge
Agreement), in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of and premium, if any, and interest on the
outstanding Notes on the stated maturity or on the applicable redemption date,
as the case may be; (ii) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that (a) the Company has received from, or
there has been published by, the IRS a ruling or (b) since the date of the
Indenture, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such opinion of counsel shall
confirm that, the Holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such Legal
Defeasance had not occurred; (iii) in the case of Covenant Defeasance, the
Company shall have delivered to the Trustee an opinion of counsel in the United
States reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred; (iv) no
Default or Event of Default shall have occurred and be continuing on the date of
such deposit or insofar as Events of Default from bankruptcy or insolvency
events are concerned, at any time in the period ending on the 91st day after the
date of deposit; (v) such Legal Defeasance or Covenant Defeasance will not
result in a breach or violation of, or constitute a default under any material
agreement or instrument to which the Company or any of its Subsidiaries is a
party or by which the
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Company or any of its Subsidiaries is bound; (vi) the Company shall have
delivered to the Trustee an Officer's Certificate stating that the deposit was
not made by the Company with the intent of preferring the Holders of Notes over
the other creditors of the Company with the intent of defeating, hindering,
delaying or defrauding creditors of the Company or others; and (vii) the Company
shall have delivered to the Trustee an Officer's Certificate and an opinion of
counsel, each stating that all conditions precedent provided for relating to the
Legal Defeasance or the Covenant Defeasance, as the case may be, have been
complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note selected
for redemption. Also, the Company is not required to transfer or exchange any
Note for a period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of such Note
for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture,
the Pledge Agreement, the Notes or the Subsidiary Guarantees may be amended or
supplemented by the Company, each Restricted Subsidiary, and the Trustee with
the consent of the Holders of at least a majority in principal amount of the
Notes then outstanding (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Notes),
and any existing default or non-compliance with any provision of the Indenture,
the Pledge Agreement, the Notes or the Subsidiary Guarantees may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a purchase of,
or tender offer or exchange offer for Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment, supplement
or waiver; (ii) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes (other than
provisions relating to the covenants described under " -- Repurchase at the
Option of Holders"); (iii) reduce the rate of or change the time for payment of
interest on any Note; (iv) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on the Notes (except a rescission
of acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount of the Notes and a waiver of the payment default that resulted
from such acceleration); (v) make any Note payable in money other than that
stated in the Notes; (vi) make any change in the provisions of the Indenture
relating to waivers of past Defaults or the rights of Holders of Notes to
receive payments of principal of or premium, if any, or interest on the Notes;
(vii) waive a redemption payment with respect to any Note (other than a payment
required by one of the covenants described under " -- Repurchase at the Option
of Holders"); (viii) release any Collateral from the Lien created by the Pledge
Agreement, except in accordance with the terms thereof, or amend the terms
thereof relating to release of Collateral; (ix) release any Restricted
Subsidiary from its Subsidiary Guarantee except as permitted hereunder; (x) make
any change in the provisions of the Indenture requiring any Guarantees thereof
or in the provisions of any such Guarantees; or (xi) make any change in the
foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company, the Restricted Subsidiaries and the Trustee may amend or supplement
the Indenture, the Pledge Agreement, the Notes or the Subsidiary Guarantees to
cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes
in addition to or in place of certificated Notes, to provide for the assumption
of the Company's obligations to Holders of Notes in the case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the
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Holders of Notes or that does not adversely affect the legal rights under the
Indenture of any such Holder, to add Guarantees of Restricted Subsidiaries with
respect to the Notes or to comply with requirements of the Commission in order
to effect or maintain the qualification of the Indenture under the Trust
Indenture Act.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights of registration of transfer or exchange of Notes)
as to all outstanding Notes when (i) either (a) all such Notes theretofore
authenticated and delivered (except lost, stolen or destroyed Notes that have
been replaced or paid and Notes for whose payment money has theretofore been
deposited in trust with the Trustee and thereafter repaid to the Company or
discharged from such trust) have been delivered to the Trustee for cancellation;
or (b) all such Notes not theretofore delivered to the Trustee for cancellation
have become due and payable, will become due and payable by their terms within
one year, or are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption, and in each
case the Company has irrevocably deposited or caused to be deposited with the
Trustee funds in an amount of money in U.S. dollars sufficient to pay and
discharge the entire indebtedness on the Notes not theretofore delivered to the
Trustee for cancellation, for the principal amount, premium, if any, and accrued
and unpaid interest to the date of such deposit together with irrevocable
instructions from the Company directing the Trustee to apply such funds to the
payment thereof; (ii) the Company has paid all other sums payable by it under
the Indenture; and (iii) the Company has delivered irrevocable instructions to
the Trustee to apply the deposited money toward the payment of the Notes at
maturity, as the case may be. In addition, the Company must deliver an Officers'
Certificate and an opinion of counsel stating that all conditions precedent
under the Indenture to satisfaction and discharge have been complied with.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, PARTNERS AND
STOCKHOLDERS
No past, present or future director, officer, employee, incorporator,
partner or stockholder of either of the Company or any of its Subsidiaries, as
such, shall have any liability for any obligations of the Company or its
Subsidiaries under the Notes, the Subsidiary Guarantees or the Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. Each Holder of Notes by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes and the Subsidiary Guarantees. Such waiver will not be effective to
waive liabilities under the federal Securities laws. It is the view of the
Commission that such a waiver is against public policy.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to
continue, or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any Holder of Notes, unless such Holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or
expense.
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ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain copies of the Indenture and
the Pledge Agreement without charge by writing to the Company, 4000 S. Sherwood
Forest Blvd., Suite 603, Baton Rouge, Louisiana, 70816, Attention: Chief
Financial Officer.
BOOK-ENTRY, DELIVERY AND FORM
The Notes to be sold as set forth herein will initially be issued in the
form of one Global Note (the "Global Note"). The Global Note will be deposited
on the date of the closing of the sale of the Notes offered hereby (the "Closing
Date") with the Trustee as custodian for The Depository Trust Company (the
"Depositary") and registered in the name of Cede & Co., as nominee of the
Depositary (such nominee being referred to herein as the "Global Note Holder").
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "Depositary's Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depositary's
Participants include securities brokers and dealers (including the
Underwriters), banks and trust companies, clearing corporations and certain
other organizations. Access to the Depositary's system is also available to
other entities such as banks, brokers, dealers and trust companies
(collectively, the "Indirect Participants" or the "Depositary's Indirect
Participants") that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly. Persons who are not Participants may
beneficially own securities held by or on behalf of the Depositary only through
the Depositary's Participants or the Depositary's Indirect Participants.
The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Note, the Depositary will credit the
accounts of Participants designated by the Underwriters with portions of the
principal amount of the Global Note and (ii) beneficial ownership of the Notes
evidenced by the Global Note will be shown on, and the transfer of such
ownership will be effected only through, records maintained by the Depositary
(with respect to the interests of the Depositary's Participants), the
Depositary's Participants and the Depositary's Indirect Participants.
Prospective purchasers are advised that the laws of some states require that
certain persons take physical delivery in definitive form ("Certificated Notes")
of securities that they own. Consequently, the ability to transfer Notes
evidenced by the Global Note will be limited to such extent.
So long as the Global Note Holder is the registered owner of the Global
Note, the Global Note Holder will be considered the sole owner or Holder under
the Indenture of any Notes evidenced by the Global Note. Beneficial owners of
Notes evidenced by the Global Note will not be considered the owners or Holders
thereof under the Indenture for any purpose, including with respect to the
giving of any directions, instructions or approvals to the Trustee thereunder.
Except as provided below, owners of beneficial interests in the Global Note will
not be entitled to have Notes registered in their names and will not receive or
be entitled to receive physical delivery of Notes in definitive form. Neither
the Company nor the Trustee will have any responsibility or liability for any
aspect of the records of the Depositary or for maintaining, supervising or
reviewing any records of the Depositary relating to the Notes.
Payments in respect of the principal of, premium, if any, and interest on
any Notes registered in the name of the Global Note Holder on the applicable
record date will be payable by the Company to or at the direction of the Global
Note Holder in its capacity as the registered Holder under the Indenture. Under
the terms of the Indenture, the Company and the Trustee may treat the persons in
whose names the Notes, including the Global Note, are registered as the owners
thereof for the purpose of receiving such payments. Consequently, neither the
Company nor the Trustee has or will have any responsibility or liability for the
payment of such amounts to beneficial owners of Notes. The Company believes,
however, that it is currently the policy of the Depositary to immediately credit
the accounts of the relevant Participants with such payments, in amounts
proportionate to their
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respective holdings of beneficial interests in the relevant security as shown on
the records of the Depositary. Payments by the Depositary's Participants and the
Depositary's Indirect Participants to the beneficial owners of Notes will be
governed by standing instructions and customary practice and will be the
responsibility of the Depositary's Participants or the Depositary's Indirect
Participants.
As long as the Notes are represented by a Global Note, the Depositary's
nominee will be the holder of the Notes and therefore will be the only entity
that can exercise a right to repayment or repurchase of the Notes. See
"-- Repurchase at the Option of Holders -- Change of Control" and "-- Asset
Sales." Notice by the Depositary's Participants or the Depositary's Indirect
Participants or by owners of beneficial interests in a Global Note held through
such Participants or Indirect Participants of the exercise of the option to
elect repayment of beneficial interests in Notes represented by a Global Note
must be transmitted to the Depositary in accordance with its procedures on a
form required by the Depositary and provided to Participants. In order to ensure
that the Depositary's nominee will timely exercise a right to repayment with
respect to a particular Note, the beneficial owner of such Note must instruct
the broker or other Participant or Indirect Participant through which it holds
an interest in such Note to notify the Depositary of its desire to exercise a
right to repayment. Different firms have cut-off times for accepting
instructions from their customers and, accordingly, each beneficial owner should
consult the broker or other Participant or Indirect Participant through which it
holds an interest in a Note in order to ascertain the cut-off time by which such
an instruction must be given in order for timely notice to be delivered to the
Depositary. The Company will not be liable for any delay in delivery of notices
of the exercise of the option to elect repayment.
The Company will issue Notes in definitive form in exchange for the Global
Note if, and only if, either (1) the Depositary is at any time unwilling or
unable to continue as depositary and a successor depositary is not appointed by
the Company within 90 days, or (2) an Event of Default has occurred and is
continuing and the Notes registrar has received a request from the Depositary to
issue Notes in definitive form in lieu of all or a portion of the Global Note.
In either instance, an owner of a beneficial interest in the Global Note will be
entitled to have Notes equal in principal amount to such beneficial interest
registered in its name and will be entitled to physical delivery of such Notes
in definitive form. Notes so issued in definitive form will be issued in
denominations of $1,000 and integral multiples thereof and will be issued in
registered form only, without coupons.
Certified Notes
If the Company notifies the Trustee in writing that the Depositary is no
longer willing or able to act as a depositary and the Company is unable to
locate a qualified successor within 90 days then, upon surrender by the Global
Note Holder of its Global Note, Notes in the form of registered definitive Notes
will be issued to each person that the Global Note Holder and the Depositary
identify as being the beneficial owner of the related Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
Same-Day Settlement and Payment
The Indenture will require that payments in respect of the Notes
represented by the Global Note (including principal, premium, if any, and
interest) be made by wire transfer of immediately available funds to the
accounts specified by the Global Note Holder. With respect to Certificated
Notes, the Company will make all payments of principal, premium, if any, and
interest by wire transfer of immediately available funds to the accounts
specified by the Holders thereof or, if no such account is specified, by mailing
a check to each such Holder's registered address. The Company expects that
secondary trading in the Certificated Notes will be settled in immediately
available funds.
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CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full description of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Acquired Indebtedness" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or becomes a Restricted Subsidiary of such specified Person,
including, without limitation, Indebtedness Incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Restricted Subsidiary of such specified Person and (ii) Indebtedness secured by
a Lien encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Asset Sale" means (a) the direct or indirect sale, lease, license,
conveyance or other disposition of any assets or rights (including, without
limitation, by way of a sale and leaseback or similar arrangement, by merger or
consolidation) by the Company or a Restricted Subsidiary (a "disposition"), in
one transaction or a series of transactions; provided that the disposition of
all or substantially all of the assets of the Company and its Restricted
Subsidiaries taken as a whole will be governed by the provisions of the
Indenture described under "-- Repurchase at the Option of Holders -- Change of
Control" and/or the provisions described under "-- Certain Covenants -- Merger,
Consolidation, or Sale of Assets" and not by the provisions of the covenant
described under "-- Repurchase at the Option of Holders -- Asset Sales," and (b)
the issuance or disposition by the Company or any of its Restricted Subsidiaries
of Equity Interests of the Company's Restricted Subsidiaries. Notwithstanding
the foregoing, none of the following will be deemed an Asset Sale: (i) a
disposition of assets by the Company to a Restricted Subsidiary or by a
Restricted Subsidiary to the Company or to a Restricted Subsidiary; (ii) an
issuance of Equity Interests by a Restricted Subsidiary to the Company or to a
Restricted Subsidiary; (iii) a Restricted Payment that is permitted by the
covenant described under "-- Certain Covenants -- Restricted Payments;" (iv)
dispositions in any fiscal year with Net Proceeds in the aggregate of $1 million
or less; (v) any liquidation of any Cash Equivalent; (vi) any disposition of
defaulted receivables for collection; and (vii) the grant of any Lien securing
Indebtedness (or any foreclosure thereon) to the extent that such Lien is
granted in compliance with the covenant set forth under "-- Certain
Covenants -- Liens."
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Bank Credit Agreement" means any senior revolving credit facility
governing Indebtedness for borrowed money owed by the Company or a Restricted
Subsidiary to banks, trust companies or other institutions that are principally
engaged in the business of lending money to businesses.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
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"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"Cash Equivalents" means (i) Government Securities having maturities of not
more than twelve months from the date of acquisition, (ii) certificates of
deposit and Eurodollar time deposits with maturities of twelve months or less
from the date of acquisition, bankers' acceptances with maturities not exceeding
six months and overnight bank deposits, in each case with any member bank of the
U.S. Federal Reserve System having capital and surplus in excess of $500
million, (iii) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clause (i) above entered
into with any financial institution meeting the qualifications specified in
clause (ii) above, and (iv) commercial paper having the rating of at least P-1
from Moody's Investors Service, Inc., or any successor to its rating business,
or at least A-1 from Standard & Poor's Ratings Group, or any successor to its
rating business, and in each case maturing within 180 days after the date of
acquisition.
"Collateral" means the Pledged Securities and the proceeds thereof.
"Consolidated EBITDA" means, with respect to the Company for any period,
the sum of, without duplication, (i) the Consolidated Net Income of the Company
and its Restricted Subsidiaries for such period, plus (ii) to the extent
deducted in the computation of such Consolidated Net Income, the Consolidated
Interest Expense for such period, plus (iii) to the extent deducted in the
computation of such Consolidated Net Income, amortization or write-off of
deferred financing charges for such period, plus (iv) provision for taxes based
on income or profits for such period (to the extent such income or profits were
included in computing Consolidated Net Income for such period), plus (v) to the
extent deducted in the computation of such Consolidated Net Income, consolidated
depreciation, depletion, amortization and other noncash charges of the Company
and its Restricted Subsidiaries required to be reflected as expenses on the
books and records of the Company, minus (vii) cash payments with respect to any
nonrecurring, noncash charges previously added back pursuant to clause (v), and
excluding (viii) the impact of foreign currency translations. Notwithstanding
the foregoing, the provision for taxes based on the income or profits of, and
the depreciation and amortization and other noncash charges of a Restricted
Subsidiary shall be added to Consolidated Net Income to compute Consolidated
EBITDA only to the extent (and in the same proportion) that the Net Income of
such Subsidiary was included in calculating the Consolidated Net Income of the
Company and only if a corresponding amount would be permitted at the date of
determination to be dividended to the Company by such Restricted Subsidiary
without prior approval (unless such approval has been obtained), pursuant to the
terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to that
Restricted Subsidiary or its stockholders.
"Consolidated Indebtedness" means, with respect to any Person as of any
date of determination, the sum, without duplication, of (i) the total amount of
Indebtedness of such Person and its Restricted Subsidiaries, plus (ii) the
aggregate liquidation value of all Disqualified Stock (and in the case of a
Restricted Subsidiary of the Company, preferred stock other than preferred stock
held by the Company or any of its Restricted Subsidiaries) of such Person, in
each case, determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Coverage Ratio" means with respect to the Company
and its Restricted Subsidiaries for any period, the ratio of (i) Consolidated
EBITDA of the Company and its Restricted Subsidiaries for such period to (ii)
Consolidated Interest Expense of the Company and its Restricted Subsidiaries for
such period. In the event that the Company or any of its Restricted Subsidiaries
Incurs any Indebtedness (other than revolving credit borrowings pursuant to
Indebted-
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ness already Incurred in accordance herewith) or issues or redeems preferred
stock subsequent to the commencement of the four-quarter reference period for
which the Consolidated Interest Coverage Ratio is being calculated but on or
prior to the date on which the event for which the calculation of the
Consolidated Interest Coverage Ratio is being made (the "Calculation Date") ,
then the Consolidated Interest Coverage Ratio shall be calculated giving pro
forma effect to such Incurrence of Indebtedness, or such issuance or redemption
of preferred stock, as if the same had occurred at the beginning of the
applicable four-quarter reference period. For purposes of making the computation
referred to above, (i) acquisitions that have been made by the Company or any of
its Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions, during the four-quarter reference
period or subsequent to such reference period and on or prior to the Calculation
Date shall be deemed to have occurred on the first day of the four-quarter
reference period, and (ii) the Consolidated EBITDA attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
disposed of during the four quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date, shall be excluded as
of the first day of the four quarter reference period, and (iii) the
Consolidated Interest Expense attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed of
during the four quarter reference period or subsequent to such reference period
and on or prior to the Calculation Date, shall be excluded, but only to the
extent that the obligations giving rise to such Consolidated Interest Expense
will not be obligations of the Company or any of its Restricted Subsidiaries
following the Calculation Date.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum, without duplication, of (i) the consolidated interest expense
of such Person and its Restricted Subsidiaries for such period, whether paid or
accrued (including, without limitation, amortization of debt issuance costs and
original issue discount, non-cash interest payments, the interest component of
any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, imputed interest with respect to
Attributable Debt, interest payments in respect of Indebtedness of another
Person that is Guaranteed by such Person or one of its Restricted Subsidiaries
or secured by a Lien on assets of such Person or one of its Restricted
Subsidiaries, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations), (ii) the consolidated interest
expense of such Person and its Restricted Subsidiaries that was capitalized
during such period, in each case, on a consolidated basis and in accordance with
GAAP, and (iii) the product of (A) the aggregate amount of dividends paid (to
the extent not accrued in a prior period) or accrued on Disqualified Stock of
the Company and its Restricted Subsidiaries or preferred stock of the Company's
Restricted Subsidiaries, to the extent such Disqualified Stock or preferred
stock is owned by Persons other than the Company and its Restricted Subsidiaries
and (B) a fraction, the numerator of which is one and the denominator of which
is one minus the then current combined federal, state, local and foreign
statutory tax rate of such Person, expressed as a decimal.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; provided
that (i) the Net Income (but not loss) of any Person that is not a Restricted
Subsidiary or that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions paid in
cash to the specified Person as to which Consolidated Net Income is being
calculated, (ii) the Net Income of any Restricted Subsidiary shall be excluded
to the extent that the declaration or payment of dividends or similar
distributions by such Restricted Subsidiary of such Net Income would not be
permitted at the date of determination directly or indirectly, pursuant to the
terms of its charter and by-laws and all agreements, instruments, judgments,
decrees, orders, statutes, rules or governmental regulations applicable to such
Restricted Subsidiary or its stockholders, (iii) the Net Income (if positive) of
any Person acquired in a pooling of interests transaction for any period prior
to the date
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of such acquisition shall be excluded, and (iv) the cumulative effect of a
change in accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common equity holders of such
Person and its consolidated Restricted Subsidiaries as of such date plus (ii)
the respective amounts reported on such Person's balance sheet as of such date
with respect to any series of preferred equity (other than Disqualified Stock)
that by its terms is not entitled to the payment of dividends or other
distributions, unless such dividends or other distributions may be declared and
paid only out of net earnings in respect of the year of such declaration and
payment, but only to the extent of any cash received by such Person upon
issuance of such preferred equity, less (x) all write-ups (other than write-ups
resulting from foreign currency translations and write-ups of tangible assets of
a going concern business made within 12 months after the acquisition of such
business) subsequent to the date of the Indenture in the book value of any asset
owned by such Person or a consolidated Restricted Subsidiary of such Person, (y)
all investments as of such date in Persons that are not Restricted Subsidiaries
(except, in each case, Permitted Investments), and (z) all unamortized debt
discount and expense and unamortized deferred charges as of such date, all of
the foregoing determined in accordance with GAAP.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Notes mature.
"Eligible Receivables" means the trade receivables of the Company and its
Restricted Subsidiaries less the allowance for doubtful accounts, each of the
foregoing determined in accordance with GAAP.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries in existence on the date of the Indenture pro forma
after giving effect to the Offering and the use of proceeds therefrom.
"Fair Market Value" means, with respect to any asset or property, the sale
value that would be obtained in an arm's-length transaction between an informed
and willing seller under no compulsion to sell and an informed and willing buyer
under no compulsion to buy; provided that if such value exceeds $1 million, such
determination shall be made in good faith by the Board of Directors of the
Company.
"GAAP" means generally accepted accounting principles in the United States
of America set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as have been approved by a
significant segment of the accounting profession, which are in effect on the
date of the Indenture.
"Government Securities" means direct obligations of, or obligations fully
guaranteed by, or participations in pools consisting solely of obligations of or
obligations guaranteed by, the United States of America for the payment of which
guarantee or obligations the full faith and credit of the United States of
America is pledged.
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"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest or currency exchange rate swap agreements,
interest or currency exchange rate cap agreements and interest or currency
exchange rate collar agreements and (ii) other agreements or arrangements, in
any case, designed to protect such Person against fluctuations in interest or
currency exchange rates (as appropriate, "Interest Rate Hedges" and "Currency
Hedges").
"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
Guarantee or otherwise become liable in respect of such Indebtedness or other
obligation or the recording, as required pursuant to GAAP or otherwise, of any
such Indebtedness or other obligation on the balance sheet of such Person (and
"Incurrence," "Incurred," "Incurrable" and "Incurring" shall have meanings
correlative to the foregoing); provided, however, that a change in GAAP that
results in an obligation of such Person that exists at such time, and is not
theretofore classified as Indebtedness, becoming Indebtedness shall not be
deemed an Incurrence of such Indebtedness.
"Indebtedness" means, with respect to any Person, (a) any liability of such
Person, whether or not contingent (i) for borrowed money, or under any
reimbursement obligation relating to a letter of credit, bankers' acceptance or
note purchase facility; (ii) evidenced by a bond, note, debenture or similar
instrument (including a purchase money obligation); (iii) for the payment of
money relating to a Capital Lease Obligation; (iv) for or pursuant to
Disqualified Stock; (v) for or pursuant to preferred stock of any Restricted
Subsidiary of the Company (other than preferred stock held by the Company or any
of its Restricted Subsidiaries); (vi) representing the balance deferred and
unpaid of the purchase price of any property or services (except any such
balance that constitutes a trade payable or accrued liability in the ordinary
course of business that is not overdue by more than 90 days or is being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted); or (vii) under or in respect of Hedging Obligations; (b)
any liability of others described in the preceding clause (a) that such Person
has guaranteed, that is recourse to such Person or that is otherwise its legal
liability, or the payment of which is secured by (or for which the holder of
such liability has an existing right to be secured by) any Lien upon property
owned by such Person, even though such Person has not assumed or become liable
for the payment of such liability; and (c) any amendment, supplement,
modification, deferral, renewal, extension or refunding of any liability of the
types referred to in clauses (a) and (b) above. The amount of any non-interest
bearing or other discount Indebtedness shall be deemed to be the principal
amount thereof that would be shown on the balance sheet of the issuer dated such
date prepared in accordance with GAAP, but such Indebtedness shall be deemed to
have been Incurred only on the date of the original issuance thereof.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations (but
excluding endorsements of negotiable instruments for collection in the ordinary
course of business)), advances or capital contributions (excluding commission,
travel and similar advances to directors, officers and employees made in the
ordinary course of business), purchases or other acquisitions (for
consideration) of Indebtedness, Equity Interests or other securities, together
with all items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP; provided that an acquisition of Equity
Interests or other securities by the Company or any of its Restricted
Subsidiaries for consideration consisting of common equity securities of the
Company shall not be deemed to be an Investment.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise
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perfected under applicable law (including any conditional sale or other title
retention agreement, and any lease in the nature thereof).
"Net Income" means, with respect to any Person for any period, the net
income (loss) of such Person for such period, determined in accordance with GAAP
and before any reduction in respect of preferred stock dividends, excluding,
however, (i) any gain (but not loss), together with any related provision for
taxes on such gain (but not loss), realized in connection with (a) any sales of
assets (including, without limitation, dispositions pursuant to sale and
leaseback transactions) other than in the ordinary course of business or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries, (ii) any extraordinary or non-recurring gain (but
not loss), together with any related provision for taxes on such extraordinary
or non-recurring gain (but not loss), and (iii) unrealized foreign exchange
gains (but not losses).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, (i) Cash Equivalents received as consideration in such Asset
Sale, (ii) any cash received upon the disposition of any non-cash consideration
received in such Asset Sale, and (iii) any assumption of liabilities deemed to
constitute "cash" for purposes of the covenant described in "-- Asset Sales"),
net of the direct costs relating to such Asset Sale (including, without
limitation, legal, accounting and investment banking fees, and sales
commissions), any relocation expenses incurred as a result thereof, any taxes
paid or payable by the Company or any of its Restricted Subsidiaries as a result
thereof (after taking into account any available tax credits or deductions and
any tax sharing arrangements), amounts required to be paid to any Person (other
than the Company and its Restricted Subsidiaries) having a Lien on the assets
subject to the Asset Sale, amounts required to be paid to any Person (other than
the Company or any Restricted Subsidiary) owning a beneficial interest in the
assets subject to the Asset Sale, and any reserve for adjustment in respect of
the sale price of such asset or assets established in accordance with GAAP
(provided that the amount of any such reserve shall be deemed to constitute Net
Proceeds at the time such reserve shall have been released or is not otherwise
required to be retained for such purpose).
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender, (ii) no default with respect to which
(including any rights that the holders thereof may have to take enforcement
action against an Unrestricted Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Indebtedness of the Company or any of its
Restricted Subsidiaries to declare a default on such other Indebtedness or cause
the payment thereof to be accelerated or payable prior to its stated maturity
and (iii) as to which the lenders have expressly waived any recourse which they
may have, in law, equity or otherwise, whether based on misrepresentation,
control, ownership or otherwise, to the Company or any of its Restricted
Subsidiaries, including, without limitation, a waiver of the benefits of the
provisions of Section 1111(b) of the U.S. Bankruptcy Code (Title 11, United
States Code), as amended.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officer" means, with respect to any Person, the chief executive officer,
the president, the chief operating officer, the chief financial officer, the
chief accounting officer, the treasurer, any assistant treasurer, the
controller, the secretary, any assistant secretary or any vice-president of such
Person.
"Officers' Certificate" means a certificate signed on behalf of a Person by
two Officers of such Person, one of whom must be the principal executive
officer, the principal financial officer or the principal accounting officer of
such Person, that meets the requirements set forth in the Indenture.
79
<PAGE> 82
"Permitted Holders" means (i) Samuel F. Eakin, Frank W. Eakin and David B.
Ammons; (ii) each of their beneficiaries, estates, spouse and lineal
descendants, legal representatives of any of the foregoing and the trustee of
any bona fide trust of which any of the foregoing are the sole beneficiaries or
grantors and (iii) all Affiliates controlled by the individuals named in clause
(i) (provided that, for purposes of this clause (iii) only, the proviso set
forth in the definition of the term "Affiliate" shall be deemed modified to
provide that beneficial ownership of 50% or more of the voting securities of a
Person shall constitute, and shall be necessary to constitute, control).
"Permitted Investments" means (i) any Investment in the Company (other than
the purchase of any Equity Interests of the Company) or in a Restricted
Subsidiary of the Company; (ii) any Investment in Cash Equivalents; (iii) any
Investment by the Company or any of its Restricted Subsidiaries in a Person
engaged in the Shipyard Business if, as a result of such Investment, (A) such
Person becomes a Restricted Subsidiary of the Company or (B) such Person is
merged, consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or a
Restricted Subsidiary of the Company; (iv) any Investment in Government
Securities in accordance with the provisions of the Pledge Agreement; (v)
Investments the payment for which consists exclusively of Equity Interests
(excluding Disqualified Stock) of the Company; (vi) Investments in shares of
money market mutual or similar funds having assets in excess of $500 million;
and (vii) Investments in negotiable instruments held for collection in the
ordinary course of business and lease, utility and similar deposits.
"Permitted Liens" means (i) Liens on receivables securing Permitted
Indebtedness Incurred pursuant to clause (i) of the definition of such term;
(ii) Liens in favor of the Company and/or its Restricted Subsidiaries; (iii)
Liens on property of a Person existing at the time such Person is merged into or
consolidated with the Company or any of its Restricted Subsidiaries, provided
that such Liens were in existence prior to the contemplation of such merger or
consolidation and do not extend to any assets other than those of the Person
merged into or consolidated with the Company or any such Restricted Subsidiary;
(iv) Liens securing any Acquired Indebtedness and which exist at the time of
acquisition thereof by the Company or any of its Restricted Subsidiaries,
provided that such Liens were in existence prior to the contemplation of such
acquisition; (v) Liens arising under the Indenture in favor of the Trustee; (vi)
Liens existing on the date of the Indenture; (vii) Liens arising by reason of
(1) any judgment, decree or order of any court not constituting an Event of
Default; (2) taxes not yet delinquent or which are being contested in good faith
by appropriate proceedings which suspend the collection thereof, promptly
instituted and diligently conducted, and for which adequate reserves have been
established to the extent required by GAAP; (3) security for payment of workers'
compensation or other insurance; (4) good faith deposits in connection with
tenders, leases and contracts (other than contracts for the payment of money),
bids, licenses, performance or similar bonds and other obligations of a like
nature, in the ordinary course of business; (5) zoning restrictions, easements,
licenses, reservations, provisions, covenants, conditions, waivers, restrictions
on the use of property or minor irregularities of title (and with respect to
leasehold interests, mortgages, obligations, Liens and other encumbrances
incurred, created, assumed or permitted to exist and arising by, through or
under a landlord or owner of the leased property, with or without consent of the
lessees), none of which materially impairs the use of any parcel of property
material to the operation of the business of the Company or any Restricted
Subsidiary or the value of such property for the purpose of such business; (6)
deposits to secure public or statutory obligations or in lieu of surety or
appeal bonds; (7) surveys, exceptions, title defects, encumbrances, easements,
reservations of, or rights of others for, rights of way, sewers, electric lines,
telegraph or telephone lines and other similar purposes or zoning or other
restrictions as to the use of real property not interfering with the ordinary
conduct of the business of the Company or any of its Restricted Subsidiaries; or
(8) operation of law or statute and incurred in the ordinary course of business,
including without limitation, those in favor of mechanics, materialmen,
suppliers, laborers or employees, and, if securing sums of money, for sums which
are not yet delinquent or are being contested in good faith by appropriate
proceedings which suspend the collection thereof, promptly instituted and
diligently conducted, and for which adequate reserves
80
<PAGE> 83
have been established to the extent required by GAAP; (viii) Liens created by
the Pledge Agreement; (ix) Liens resulting from the deposit of funds or
Government Securities in trust for the purpose of decreasing or defeasing
Indebtedness of the Company and its Restricted Subsidiaries so long as such
deposit of funds or Government Securities and such decreasing or defeasing of
Indebtedness are permitted under the "Restricted Payments" covenant; (x) Liens
securing obligations in a maximum aggregate amount not to exceed $5 million; and
(xi) any extension, renewal or replacement (or successive extensions, renewals
or replacements), in whole or in part, of any Lien referred to in the foregoing
clauses (iii), (iv) and (vi) above; provided that the principal amount of the
Indebtedness secured thereby shall not exceed the principal amount of
Indebtedness secured thereby immediately prior to the time of such extension,
renewal or replacement, and that such extension, renewal or replacement Lien
shall be limited to all or a part of the property that secured the Lien so
extended, renewed or replaced (plus improvements on such property).
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used by such Person to extend, refinance, renew, replace,
defease or refund other Indebtedness of such Person ("Old Indebtedness");
provided that: (i) the principal amount (or accreted value, if applicable) of
such Permitted Refinancing Indebtedness does not exceed the principal amount (or
accreted value, if applicable) of the Old Indebtedness; (ii) such Permitted
Refinancing Indebtedness has a final maturity date equal to or later than the
final maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the Old Indebtedness;
(iii) if the Old Indebtedness is subordinated in right of payment to the Notes,
such Permitted Refinancing Indebtedness is subordinated in right of payment to
the Notes on terms at least as favorable to the Holders as those contained in
the documentation governing the Old Indebtedness; (iv) such Permitted
Refinancing Indebtedness is on terms that are no more restrictive, as a whole,
than those governing such Old Indebtedness; and (v) such Permitted Refinancing
Indebtedness is Incurred only by the Company or the Restricted Subsidiary that
is the obligor on the Old Indebtedness.
"Person" means any individual, corporation, limited liability company,
partnership, limited partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Pledge Account" means an account established with the Trustee pursuant to
the terms of the Pledge Agreement for the deposit of the Pledged Securities
purchased by the Company with a portion of the proceeds from the sale of the
Notes.
"Pledge Agreement" means the Collateral Pledge and Security Agreement,
dated as of the date of the Indenture, by and between the Company and the
Trustee governing the disbursement of funds from the Pledge Account, as such may
be amended from time to time pursuant to the terms thereof.
"Pledged Securities" means the securities purchased with a portion of the
proceeds from the sale of the Notes, which shall consist of Government
Securities, to be deposited in the Pledge Account.
"Public Equity Offering" means an underwritten public offering for cash by
the Company of its Capital Stock (other than Disqualified Stock) to any Person
other than a Subsidiary of the Company pursuant to a registration statement that
has been declared effective by the Commission (other than a registration
statement on Form S-8 or any successor form or otherwise relating to equity
securities issuable under any employee benefit plan of the Company).
81
<PAGE> 84
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of such Person
that is not an Unrestricted Subsidiary.
"Securities Act" means the Securities Act of 1933, as amended.
"Shipyard Business" means the business of the provision of construction,
repair, fabrication, labor and environmental services to the maritime,
transportation and oilfield industries, together with all activities ancillary
thereto.
"Subordinated Indebtedness" means Indebtedness of the Company (or a
Restricted Subsidiary) that is expressly subordinated in right of payment to the
Notes (or a Subsidiary Guarantee, as appropriate).
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of such Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof). Unless indicated to
the contrary, "Subsidiary" refers to a Subsidiary of the Company.
"Subsidiary Guarantee" means an unconditional guaranty of the Notes and the
Indenture given by any Restricted Subsidiary or other Person pursuant to the
terms of the Indenture or any supplement thereto.
"Unrestricted Subsidiary" means any Subsidiary that is designated by the
Board of Directors of the Company as an Unrestricted Subsidiary pursuant to a
resolution of the Board of Directors of the Company, but only to the extent that
such Subsidiary (i) has no Indebtedness other than Non-Recourse Debt, (ii) does
not own any Equity Interests of, or own or hold any Lien on, any property of the
Company or any Restricted Subsidiary of the Company (other than any Subsidiary
of the Subsidiary to be so designated), (iii) has not, and the Subsidiaries of
such Subsidiary have not at the time of designation, and does not thereafter,
Incur any Indebtedness pursuant to which the lender has recourse to any of the
assets of the Company or any of its Restricted Subsidiaries, (iv) is not party
to any material agreement, contract, arrangement or understanding with the
Company or any of its Restricted Subsidiaries unless the terms of any such
agreement, contract, arrangement or understanding are no less favorable to the
Company or such Restricted Subsidiary than those that might be obtained at the
time from Persons who are not Affiliates of the Company, (v) is a Person with
respect to which neither the Company nor any of its Restricted Subsidiaries has
any direct or indirect obligation (a) to subscribe for additional Equity
Interests or (b) to maintain or preserve such Person's financial condition or to
cause such Person to achieve any specified levels of operating results, (vi) has
not guaranteed or otherwise directly or indirectly provided credit support for
any Indebtedness of the Company or any of its Restricted Subsidiaries and (vii)
has at least one director on its board of directors that is not a director or
executive officer of the Company or any of its Restricted Subsidiaries and has
at least one executive officer that is not a director or executive officer of
the Company or any of its Restricted Subsidiaries. Any such designation by the
Board of Directors of the Company shall be evidenced to the Trustee by filing
with the Trustee a certified copy of the resolution of the Board of Directors of
the Company giving effect to such designation and an Officers' Certificate
certifying that (i) such designation complied with the foregoing conditions,
(ii) such designation was permitted by the covenant described under "-- Certain
Covenants -- Restricted Payments," (iii) immediately after giving effect to such
designation, the Company could Incur at least $1.00 of additional Indebtedness
pursuant to the Consolidated Interest Coverage Ratio test set forth in the first
paragraph of the covenant described under the caption
82
<PAGE> 85
"-- Certain Covenants -- Incurrence of Indebtedness" and (iv) no Default or
Event of Default would be in existence immediately following such designation.
If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness,
Liens or agreements of such Subsidiary shall be deemed to be Incurred or created
by a Restricted Subsidiary of the Company as of such date (and, if such
Indebtedness, Liens or agreements are not permitted to be Incurred or created as
of such date under the covenants described under "-- Certain Covenants," the
Company shall be in default of such covenants). The Board of Directors of the
Company may at any time designate any Unrestricted Subsidiary to be a Restricted
Subsidiary, provided that such designation shall be deemed to be an Incurrence
of Indebtedness and a creation of Liens and agreements by a Restricted
Subsidiary of the Company of any outstanding Indebtedness, Liens or agreements
of such Unrestricted Subsidiary and such designation shall only be permitted if
(i) such Indebtedness, Liens and agreements are permitted under the covenants
described under "-- Certain Covenants," and (ii) no Default or Event of Default
would be in existence immediately following such designation.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person.
83
<PAGE> 86
UNDERWRITING
The Company and Schroder & Co. Inc. (the "Underwriter") have entered into
an agreement (the "Underwriting Agreement"), pursuant to which, subject to the
terms and conditions of the Underwriting Agreement, the Company has agreed to
sell to the Underwriter, and the Underwriter has agreed to purchase from the
Company, $90.0 million aggregate principal amount of the Notes.
The Underwriting Agreement provides that the Underwriter's obligation to
pay for and accept delivery of the Notes is subject to certain conditions
precedent and that the Underwriter will be obligated to purchase all such Notes
if any are purchased. The Underwriter has informed the Company that no sales of
Notes will be confirmed to discretionary accounts.
The Company has been advised by the Underwriter that it proposes initially
to offer the Notes 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 % of the principal amount of the Notes. The
Underwriter may allow and such dealers may reallow a concession not in excess of
% of the principal amount of the Notes 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
Underwriter.
The Company has agreed to indemnify the Underwriter against certain
liabilities that it may incur in connection with the sale of the Notes,
including liabilities arising under the Securities Act, and to contribute to
payments that the Underwriter may be required to make with respect thereto.
There is currently no trading market for the Notes, and the Company does
not intend to apply for listing of the Notes on a national securities exchange.
The Company has been advised by the Underwriter that the Underwriter currently
intends to make a market in the Notes; however, the Underwriter is not obligated
to do so and may discontinue any such market-making at any time without notice.
No assurance can be given as to the development or liquidity of any trading
market for the Notes.
In connection with this Offering, the Underwriter and its affiliates may
engage in transactions that stabilize, maintain or otherwise affect the market
price of the Notes. Such transactions may include stabilization transactions
effected in accordance with Rule 104 of Regulation M, pursuant to which such
persons may bid for or purchase Notes for the purpose of stabilizing their
market price. The Underwriter also may create a short position for its account
by selling more Notes in connection with the Offering than it is committed to
purchase from the Company, and in such case may purchase Notes in the open
market following completion of the Offering to cover all or a portion of such
short position. In addition, the Underwriter may impose "penalty bids" under
contractual arrangements with the Underwriter whereby it may reclaim from a
dealer participating in the Offering, for the account of the Underwriter, the
selling concession with respect to Notes that are distributed in the Offering
but subsequently purchased for the account of the Underwriter in the open
market. Any of the transactions described in this paragraph may result in the
maintenance of the price of the Notes at a level above that which might
otherwise prevail in the open market. None of the transactions described in this
paragraph are required, and, if they are undertaken, they may be discontinued at
any time.
LEGAL MATTERS
The validity of the Notes 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 Underwriter by Baker & Botts, L.L.P., New
York, New York.
84
<PAGE> 87
EXPERTS
The Company's Consolidated Financial Statements as of December 31, 1996 and
1995 and for each of the three years in the period ended December 31, 1996, and
as of and for the nine-month period ended September 30, 1997, included in this
Prospectus and the Company's Registration Statement on Form S-1 (the
"Registration Statement"), have been audited by Grant Thornton LLP, independent
certified public accountants, as indicated in their report with respect thereto,
and are included herein in reliance upon the authority of said firm as experts
in accounting and auditing in giving said report.
Bludworth's Consolidated Financial Statements as of March 31, 1997 and 1996
and for each of the two years in the period ended March 31, 1997, and as of and
for the six-month period ended September 30, 1997, included in this Prospectus
and the Company's Registration Statement, have been audited by Grant Thornton
LLP, independent certified public accountants, as indicated in their report with
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in accounting and auditing in giving said report.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement under
the Securities Act, with respect to the Notes 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 Notes 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.
The Company intends to furnish its security holders 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.
85
<PAGE> 88
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
NO.
----
<S> <C>
First Wave Marine, Inc. and Subsidiaries
Report of Independent Certified Public Accountants........ F-2
Consolidated Balance Sheets as of December 31, 1995 and
1996 and as of September 30, 1997...................... F-3
Consolidated Statements of Earnings for the years ended
December 31, 1994, 1995 and 1996 and for the nine
months ended September 30, 1996 (Unaudited) and 1997... F-4
Consolidated Statement of Stockholders' Equity for the
years ended December 31, 1994, 1995 and 1996 and for
the nine months ended September 30, 1997............... F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1995 and 1996 and for the nine
months ended September 30, 1996 (Unaudited) and 1997... F-6
Notes to Consolidated Financial Statements................ F-7
John Bludworth Marine, Inc. and Subsidiary
Report of Independent Certified Public Accountants........ F-17
Consolidated Balance Sheets as of March 31, 1996 and 1997
and as of September 30, 1997........................... F-18
Consolidated Statements of Earnings for the years ended
March 31, 1996 and 1997 and for the six months ended
September 30, 1996 (Unaudited) and 1997................ F-19
Consolidated Statement of Stockholder's Equity for the
years ended March 31, 1996 and 1997 and for the six
months ended September 30, 1997........................ F-20
Consolidated Statements of Cash Flows for the years ended
March 31, 1996 and 1997 and for the six months ended
September 30, 1996 (Unaudited) and 1997................ F-21
Notes to Consolidated Financial Statements................ F-22
</TABLE>
F-1
<PAGE> 89
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
First Wave Marine, Inc.
We have audited the accompanying consolidated balance sheets of First Wave
Marine, Inc. and Subsidiaries as of September 30, 1997 and December 31, 1996 and
1995, and the related consolidated statements of earnings, stockholders' equity,
and cash flows for the nine months ended September 30, 1997 and for each of the
years in the three year period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above, present fairly,
in all material respects, the financial position of First Wave Marine, Inc. and
Subsidiaries as of September 30, 1997 and December 31, 1996 and 1995, and the
results of its operations and its cash flows for the nine months ended September
30, 1997 and for each of the years in the three year period ended December 31,
1996, in conformity with generally accepted accounting principles.
Grant Thornton LLP
Houston, Texas
November 8, 1997
(except for the
third paragraph of
Note A11, as to which
the date is November 20, 1997, and the second,
fifth and sixth paragraphs of Note O, as to
which the date is January 26, 1998).
F-2
<PAGE> 90
FIRST WAVE MARINE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- SEPTEMBER 30,
1995 1996 1997
------ ------- -------------
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents............................... $ 66 $ -- $ 1,079
Accounts receivable, including unbilled receivables of
$734, $1,973 and $3,528.............................. 3,884 6,182 7,228
Inventories............................................. 309... 566 652
Costs and estimated earnings in excess of billings on
uncompleted contracts................................ 874 90 --
Other................................................... 133 283 243
Income tax receivable................................... -- 139 --
Deferred income taxes................................... 43 23 80
------ ------- -------
Total current assets............................ 5,309 7,283 9,282
PROPERTY AND EQUIPMENT, NET............................... 1,028 16,755 22,372
ORGANIZATION AND LOAN COSTS, net of accumulated
amortization of $51, $136 and $219...................... 167 662 704
DEPOSITS.................................................. 290 232 200
------ ------- -------
$6,794 $24,932 $32,558
====== ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Due to bank............................................. $ -- $ 88 $ --
Notes payable........................................... 3,488 1,519 219
Current portion of long-term obligations................ 1,031 877 1,333
Trade accounts payable.................................. 853 897 812
Accrued liabilities..................................... 871 1,188 1,861
------ ------- -------
Total current liabilities....................... 6,243 4,569 4,225
LONG-TERM OBLIGATIONS, net of current portion............. 97 10,872 15,082
SUBORDINATED DEBT......................................... -- 6,914 6,884
DEFERRED INCOME TAXES..................................... 14 236 563
OTHER LIABILITIES......................................... 21 57 441
MINORITY INTEREST IN SUBSIDIARY........................... 85 391 928
COMMITMENTS AND CONTINGENCIES............................. -- -- --
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 2,000 shares
authorized, no shares issued......................... -- -- --
Common stock, no par value in 1995 and 1996, $.01 par
value in 1997, 21,000 shares authorized, 10,650
shares issued and outstanding at December 31, 1995
and 1996 and 10,758 shares issued and outstanding at
September 30, 1997................................... 1 1 10
Additional paid-in capital.............................. -- -- 2
Retained earnings....................................... 333 1,892 4,423
------ ------- -------
334 1,893 4,435
------ ------- -------
$6,794 $24,932 $32,558
====== ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 91
FIRST WAVE MARINE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------- -----------------------------
1994 1995 1996 1996 1997
------------- ------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES
Repair and conversions................ $11,693 $15,392 $20,997 $14,965 $19,801
New construction...................... 1,391 3,321 2,841 1,898 881
Environmental services................ 2,263 3,287 4,119 3,062 3,784
------- ------- ------- ------- -------
15,347 22,000 27,957 19,925 24,466
COST OF REVENUES........................ 12,591 17,043 18,623 13,886 14,330
------- ------- ------- ------- -------
Gross profit.......................... 2,756 4,957 9,334 6,039 10,136
GENERAL AND ADMINISTRATIVE EXPENSES..... 2,827 3,623 5,629 4,548 3,943
------- ------- ------- ------- -------
Earnings (loss) from operations....... (71) 1,334 3,705 1,491 6,193
INTEREST EXPENSE........................ 186 247 829 380 1,280
MINORITY INTEREST IN NET EARNINGS OF
SUBSIDIARY............................ -- 76 219 66 536
------- ------- ------- ------- -------
Earnings (loss) before income taxes... (257) 1,011 2,657 1,045 4,377
INCOME TAX EXPENSE (BENEFIT)
Current............................... 2 312 856 424 1,567
Deferred.............................. -- (29) 242 105 270
------- ------- ------- ------- -------
2 283 1,098 529 1,837
------- ------- ------- ------- -------
NET EARNINGS (LOSS)................ $ (259) $ 728 $ 1,559 $ 516 $ 2,540
======= ======= ======= ======= =======
Earnings (loss) per common share........ $ (.02) $ .07 $ .15 $ .05 $ .24
Weighted average shares................. 10,650 10,650 10,650 10,650 10,650
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 92
FIRST WAVE MARINE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND
NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
---------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------ ------ ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994.......... 10,650 $ 1 $-- $ -- $ 1
Net loss.......................... -- -- -- (259) (259)
------ ---- --- ------ ------
Balance at December 31, 1994........ 10,650 1 -- (259) (258)
Distribution to stockholders...... -- -- -- (136) (136)
Net earnings...................... -- -- -- 728 728
------ ---- --- ------ ------
Balance at December 31, 1995........ 10,650 1 -- 333 334
Net earnings...................... -- -- -- 1,559 1,559
------ ---- --- ------ ------
Balance at December 31, 1996........ 10,650 1 -- 1,892 1,893
Change in par value............... -- 9 -- (9) --
Issuance of common stock.......... 108 -- 2 -- 2
Net earnings...................... -- -- -- 2,540 2,540
------ ---- --- ------ ------
Balance at September 30, 1997....... 10,758 $ 10 $ 2 $4,423 $4,435
====== ==== === ====== ======
</TABLE>
The accompanying notes are an integral part of this statement.
F-5
<PAGE> 93
FIRST WAVE MARINE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------- -----------------
1994 1995 1996 1996 1997
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net (loss) earnings................................... $ (259) $ 728 $ 1,559 $ 516 $ 2,540
Adjustments to reconcile net (loss) earnings to net
cash (used) provided by operating activities
Depreciation and amortization...................... 48 259 680 324 1,037
Minority interest on earnings...................... -- 76 219 66 536
Deferred income tax provision...................... -- (29) 242 105 270
Change in assets and liabilities
Increase in accounts receivable.................. (2,526) (1,357) (2,298) (2,330) (1,046)
(Increase) decrease in inventories............... (623) 314 (256) (61) (86)
(Increase) decrease in costs and estimated
earnings in excess of billings on uncompleted
contracts..................................... (1,156) 281 784 575 90
(Increase) decrease in other assets.............. (48) (89) (150) 70 40
(Increase) decrease in income tax receivable..... -- -- (139) (86) 139
(Increase) decrease in deposits.................. -- (290) 58 (32) 32
Increase (decrease) in due to bank............... -- -- 88 72 (88)
Increase (decrease) in trade accounts payable.... 1,051 (198) 44 135 (85)
Increase in accrued liabilities.................. 433 376 317 93 673
Increase (decrease) in billings in excess of
costs and estimated earnings on uncompleted
contracts..................................... 56 (56) -- -- --
Increase in other liabilities.................... 62 21 36 55 384
------- ------- ------- ------- -------
Net cash (used) provided by operating
activities.................................. (2,962) 36 1,184 (498) 4,436
Cash flows from investing activities
Acquisition of property and equipment................. (569) (934) (1,425) (857) (1,890)
Asset acquisition costs............................... -- -- -- -- (118)
------- ------- ------- ------- -------
Net cash used by investing activities......... (569) (934) (1,425) (857) (2,008)
Cash flows from financing activities
Proceeds from issuance of long-term obligations....... 41 105 3,260 3,260 900
Payments on long-term obligations..................... -- (18) (208) (208) (951)
Proceeds from issuance of notes payable............... 3,151 3,288 175 -- 230
Payments on notes payable............................. (661) (3,377) (1,905) (1,625) --
Net (payments) proceeds on revolving line of credit... 1,196 886 (567) (138) (1,530)
Loan costs............................................ -- -- (580)
Investment in Affiliate............................... (117) -- -- -- --
Issuance of common stock.............................. -- -- -- -- 2
------- ------- ------- ------- -------
Net cash provided (used) by financing
activities.................................. 3,610 884 175 1,289 (1,349)
------- ------- ------- ------- -------
Net increase (decrease) in cash............... 79 (14) (66) (66) 1,079
Cash and cash equivalents at beginning of period........ 1 80 66 66 --
------- ------- ------- ------- -------
Cash and cash equivalents at end of period.............. $ 80 $ 66 $ -- $ -- $ 1,079
======= ======= ======= ======= =======
Supplemental disclosure of cash flow information
Cash paid during the period for
Interest........................................... $ 99 $ 335 $ 619 $ 276 $ 1,023
Income taxes....................................... -- 240 952 489 1,155
Supplemental disclosure of non-cash transactions
During 1997 and 1996, the Company financed the
purchase of assets with term debt and notes payable
in the amount of $4,687 and $14,897, respectively
During 1995, assets of $136 were distributed to the
stockholders.
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 94
FIRST WAVE MARINE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 IS UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE A -- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying consolidated financial statements follows.
1. PRINCIPLES OF CONSOLIDATION AND NATURE OF BUSINESS
The accompanying consolidated financial statements include the accounts of
First Wave Marine, Inc. (the Company) and its majority-owned subsidiaries,
Newpark Shipbuilding and Repair, Inc. (Newpark), EAE Industries, Inc., Newpark
Marine Fabricators, Inc. and Louisiana Ship, Inc. The minority interest
stockholders of Newpark are current and former employees of Newpark. All
material intercompany balances and transactions have been eliminated in
consolidation.
The Company's business is concentrated in providing shipyard and related
environmental services to the offshore support vessel, offshore barge and inland
marine industries, and the Company customarily extends credit to such customers.
The Company provides a full range of repair and construction services as well as
environmental services including cleaning, degassing and wastewater disposal
from its location along the Houston Ship Channel in Houston, Texas.
2. ACCOUNTS RECEIVABLE
Management considers accounts receivable to be fully collectible;
accordingly, no allowance for doubtful accounts is recorded. If collection of
amounts become uncertain, an allowance will be established.
3. REVENUE RECOGNITION
Revenues from new construction performed under lump-sum contracts are
recognized on the percentage-of-completion method, measured by the percentage of
labor hours incurred to date to estimated total labor hours for each contract.
This method is used because management considers expended labor hours to be the
best available measure of progress on these contracts.
Contract costs include all direct material and labor costs and those
indirect costs related to contract performance, such as indirect labor,
supplies, tools, repairs, and depreciation costs. Selling, general, and
administrative costs are charged to expense as incurred. Provisions for
estimated losses on uncompleted contracts are made in the period in which such
losses are determined. Changes in job performance, job conditions, and estimated
profitability, including those arising from contract penalty provisions, and
final contract settlements may result in revisions to costs and income and are
recognized in the period in which the revisions are determined. Profit
incentives are included in revenues when their realization is reasonably
assured. An amount equal to contract costs attributable to claims is included in
revenues when realization is probable and the amount can be reliably estimated.
The asset, "costs and estimated earnings in excess of billings on
uncompleted contracts," represents revenues recognized in excess of amounts
billed.
Revenues from repairs, conversions and environmental services performed
under time-and-materials and fixed-fee arrangements are recognized as the
services are provided. Revisions to revenues and costs recognized on fixed-fee
arrangements are made in the period in which the revisions are determined.
F-7
<PAGE> 95
FIRST WAVE MARINE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. INVENTORIES
Inventories consist of raw materials and repair parts. Inventories are
valued at the lower of cost or market using the first-in, first-out method.
5. INCOME TAXES
Deferred tax assets and liabilities are determined based on the differences
between the financial statement and tax bases of assets and liabilities as
measured by the enacted tax rates which will be in effect when these differences
reverse. Deferred tax expense (benefit) is the result of changes in deferred tax
assets and liabilities.
6. PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization
are provided principally on the straight-line method over the estimated useful
lives of the assets.
7. USE OF ESTIMATES
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
8. CASH AND CASH EQUIVALENTS
The Company considers all highly liquid short-term investments purchased
with an original maturity of three months or less to be cash equivalents.
9. ORGANIZATION AND LOAN COSTS
Organization costs are amortized using the straight-line method over five
years. Loan costs are amortized over the life of the related loan.
10. INTERIM FINANCIAL INFORMATION
Financial information for the nine months ended September 30, 1996,
included herein, is unaudited. Such information includes all adjustments
(consisting only of normal recurring adjustments), which are, in the opinion of
management, necessary for a fair presentation of the financial information in
the interim periods. The results of operations for the nine months ended
September 30, 1997 are not necessarily indicative of the results for the full
fiscal year.
11. EARNINGS PER SHARE
Earnings per common share is calculated by dividing net earnings available
for common stockholders by the weighted average number of common stock shares
outstanding during the period.
On September 30, 1997, the Company merged into and became a Delaware
corporation which effectively resulted in a stock split of 1,000 for 1. All
share and per share data have been restated to give effect to the stock split.
F-8
<PAGE> 96
FIRST WAVE MARINE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On November 20, 1997, the Company's common stock was split 10.65 for 1 to
stockholders of record on November 20, 1997, and was effected as a stock
dividend. All share and per share data have been restated to give effect to the
stock split.
NOTE B -- CONTRACTS IN PROGRESS
Information regarding new construction under lump-sum contracts in progress
are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------ SEPTEMBER 30,
1994 1995 1996 1997
----------- -------- ----------- -------------
<S> <C> <C> <C> <C>
Expenditures on uncompleted contracts...... $1,389 $712 $1,487 $--
Estimated earnings......................... 1 162 531 --
------ ---- ------ ------
1,390 874 2,018 --
Less billings applicable thereto........... 290 -- 1,928 --
------ ---- ------ ------
Costs and estimated earnings in excess of
billings on uncompleted contracts........ $1,100 $874 $ 90 $--
====== ==== ====== ======
Included in the accompanying balance sheet
under the following caption:
Costs and estimated earnings in excess of
billings on uncompleted contracts..... $1,156 $874 $ 90 $--
Billings in excess of costs and estimated
earnings on uncompleted contracts..... (56) -- -- --
------ ---- ------ ------
$1,100 $874 $ 90 $--
====== ==== ====== ======
</TABLE>
NOTE C -- PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL DECEMBER 31,
LIVES IN --------------------------- SEPTEMBER 30,
YEARS 1995 1996 1997
--------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Land....................................... -- $-- $ 3,355 $ 4,831
Buildings.................................. 31-40 345 4,584 7,568
Automobiles................................ 5-7 33 59 160
Office furniture, fixtures and equipment... 3-5 134 211 2,546
Equipment.................................. 5-16 772 9,397 9,078
------ ------- -------
1,284 17,606 24,183
Less accumulated depreciation......... 256 851 1,811
------ ------- -------
$1,028 $16,755 $22,372
====== ======= =======
</TABLE>
F-9
<PAGE> 97
FIRST WAVE MARINE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE D -- NOTES PAYABLE
Notes payable consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- SEPTEMBER 30,
1995 1996 1997
------ ------ -------------
<S> <C> <C> <C>
Revolving line of credit of $4,000 at a bank;
interest at prime plus 1% (9.25% at December 31,
1996) due monthly; maturing September 4, 1997 or on
demand; collateralized by receivables, inventory
and guaranteed by the chairman of the Company...... $ -- $1,519 $ --
Revolving line of credit of $3,000 at a bank;
interest at prime plus 2.5% (11% at December 31,
1995) due monthly; paid in 1996.................... 2,086 -- --
Note payable to a bank; interest at prime plus 2%
(10.5% at December 31, 1995) due upon completion of
a certain construction contract; paid in 1996...... 850 -- --
Notes payable to corporations; interest ranging from
7% to 10% due monthly; paid in 1996................ 552 -- --
Note payable to a corporation; unsecured; due on
demand; interest at 7%............................. -- -- 219
------ ------ -------
$3,488 $1,519 $ 219
====== ====== =======
</TABLE>
NOTE E -- LONG-TERM OBLIGATIONS
Long-term obligations consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- SEPTEMBER 30,
1995 1996 1997
------ ------- -------------
<S> <C> <C> <C>
Note payable to a financial institution; due in
monthly installments of $159 including interest at
10.42% through September 2003; collateralized by
all assets, stock issued, and guaranteed by the
chairman of the Company........................... $ -- $11,630 $11,092
Subordinated note payable to a corporation; interest
at 5%; principal and interest due September 2003;
collateralized by all assets, stock issued, and
guaranteed by the chairman of the Company......... -- 6,328 6,328
Notes payable to a bank; interest ranging from 8% to
10.75%; due in monthly installments of $5 through
March 2000, collateralized by certain assets and
guaranteed by the chairman of the Company......... 128 119 --
Note payable to a corporation; interest at 7% due
monthly; principal and accrued but unpaid interest
due June 30, 1996, paid in 1996................... 1,000 -- --
</TABLE>
F-10
<PAGE> 98
FIRST WAVE MARINE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- SEPTEMBER 30,
1995 1996 1997
------ ------- -------------
<S> <C> <C> <C>
Subordinated note payable to a corporation; due in
monthly installments of $7 including interest of
8% through September 2003. Additional payments of
principal of $40 are due on each of the third,
fourth, fifth and sixth anniversary dates of the
note, and guaranteed by the chairman of the
Company........................................... -- 586 556
Note payable to a financial institution; due in
monthly installments of $10, including interest at
9.25% through February 2002; collateralized by
equipment, and guaranteed by the chairman of the
Company........................................... -- -- 512
Note payable to a financial institution; due in
monthly installments of $8, including interest at
9.90% through August 2003; collateralized by all
assets, stock issued, and guaranteed by the
chairman of the Company........................... -- -- 596
Note payable to a bank; due in monthly installments
of $21, including interest at prime plus 1%
through August 2000; collateralized by accounts
receivable, inventories and property and
equipment, and guaranteed by the chairman of the
Company........................................... -- -- 616
Capital lease obligation............................ -- -- 3,209
Other long-term obligations......................... -- -- 390
------ ------- -------
1,128 18,663 23,299
Less current portion.............................. 1,031 877 1,333
------ ------- -------
$ 97 $17,786 $21,966
====== ======= =======
</TABLE>
Maturities of long-term obligations at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, AMOUNT
- ------------------------------------------------------------ ------
<S> <C>
1997..................................................... $ 877
1998..................................................... 894
1999..................................................... 1,010
2000..................................................... 1,091
2001..................................................... 1,205
</TABLE>
Certain notes payable are subject to loan agreements which contain, among
other things, provisions restricting other borrowings, acquisitions, capital
expenditures, redemption of the Company's stock and dividends, and require the
Company to maintain certain financial ratios.
The $6,328 subordinated note payable contains a default penalty of $2,206
if the note is not fully paid by the maturity date. It is management's intention
to pay this note in full prior to the maturity date, September 30, 2003.
Based on the borrowing rates currently available to the Company for loans
with similar terms and average maturities, the fair value of long-term debt is
$1,118 and $17,643 at December 31, 1995 and 1996.
F-11
<PAGE> 99
FIRST WAVE MARINE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE F -- INCOME TAXES
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
1994 1995 1996
--------- ------- ---------
<S> <C> <C> <C>
Deferred tax assets:
Percentage of completion allowance..................... $ 50 $ 43 $ 23
Depreciation........................................... 4 24 --
Net operating loss..................................... 74 -- --
Other.................................................. 1 -- --
Valuation allowance.................................... (129) -- --
----- ---- -----
$ -- $ 67 $ 23
===== ==== =====
Deferred tax liabilities:
Capitalized small tools................................ $ (33) $(38) $ (39)
Depreciation........................................... -- -- (197)
Other.................................................. (9) -- --
Valuation allowance.................................... 42 -- --
----- ---- -----
$ -- $(38) $(236)
===== ==== =====
</TABLE>
The reconciliation between the Company's effective income tax rate and the
statutory federal income tax rate is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Statutory federal income tax rate.................... 34.00% 34.00% 34.00%
Change in valuation allowance........................ (33.05) (11.09) --
Minority interest.................................... -- 2.56 2.80
State taxes.......................................... -- 2.16 3.61
Other................................................ (0.95) 0.36 0.91
------ ------ ------
Effective income tax rate.......................... --% 27.99% 41.32%
====== ====== ======
</TABLE>
The Company utilized its remaining net operating loss carryforward of $300
during 1995.
NOTE G -- LEASING ARRANGEMENTS
Prior to the acquisition of facilities and equipment in 1996, the Company
conducted its operations in leased facilities and leased certain equipment under
operating leases. Rental expense for operating leases was $1,709, $1,631 and
$1,202 for 1994, 1995 and 1996, and $1,198 and $29 for the nine months ended
September 30, 1996 and 1997.
In August 1997, the Company began a portion of its operations in leased
facilities. For financial reporting purposes, minimum lease rentals relating to
the building and land have been capitalized. The related assets and obligations
have been recorded using the Company's incremental borrowing rate at the
inception of the lease. The lease, which is noncancelable, expires in August
2002, at
F-12
<PAGE> 100
FIRST WAVE MARINE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
which time ownership of the assets will transfer to the Company. The following
is a schedule of leased property under capital leases at September 30, 1997:
<TABLE>
<S> <C>
Land....................................................... $1,417
Buildings and equipment.................................... 1,792
------
$3,209
======
</TABLE>
The following is a schedule by years of future minimum lease payments under
capital leases together with present value of the net minimum lease payments as
of September 30, 1997:
<TABLE>
<S> <C>
Year ended December 31:
1997.................................................. $ --
1998.................................................. --
1999.................................................. 200
2000.................................................. 595
2001.................................................. 655
Succeeding years...................................... 3,323
------
Total minimum lease payments............................... 4,773
Less amount representing interest.......................... 1,564
------
3,209
Current portion............................................ --
------
Noncurrent portion......................................... $3,209
======
</TABLE>
NOTE H -- CONTINGENCIES
The Company is involved in certain claims and lawsuits occurring in the
normal course of business. Management, after consultation with outside legal
counsel, does not believe the outcome of these actions will have a material
impact on the financial statements of the Company.
The Company is subject to extensive and changing federal, state and local
laws and regulations designed to protect the environment. The Company from time
to time is involved in administrative and other proceedings under environmental
laws involving its operations and facilities. Environmental laws could impose
liability for remediation costs or result in civil or criminal penalties in
cases of noncompliance. Environmental laws have been subject to frequent change;
therefore, the Company is unable to predict the future costs or other future
impact of environmental laws on its operations.
NOTE I -- HEALTH INSURANCE PLAN
The Company has a self-insured health plan. The aggregate annual amount of
self-insurance that must be paid before stop-loss insurance applies varies based
on enrollment and approximated $710 at December 31, 1996. The individual amount
of insurance that must be paid before stop-loss insurance applies is $50 per
individual claim. Expense under this self-insured plan was approximately $452,
$469 and $694 for the years ended December 31, 1994, 1995 and 1996 and $620 for
the nine months ended September 30, 1996.
As of January 1, 1997 the Company terminated the self-insured health plan
and accrued $181 in estimated claims payable at December 31, 1996.
F-13
<PAGE> 101
FIRST WAVE MARINE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE J -- BENEFIT PLAN
Eligible employees of Newpark participate in a 401(k) deferred savings plan
(the Plan). Under the Plan, a participating employee may allocate up to 15% of
their salary and Newpark, at its discretion, may make contributions to the Plan.
Newpark contributed approximately $18, $26 and $42 for the years ended December
31, 1994, 1995 and 1996 and $24 and $22 for the nine months ended September 30,
1996 and 1997 to the Plan.
NOTE K -- NEW PRONOUNCEMENTS
The FASB has issued Financial Accounting Standards No. 128, Earnings per
Share, which is effective for financial statements issued after December 15,
1997. The new standard eliminates primary and fully diluted earnings per share
and requires the presentation of basic and diluted earnings per share together
with disclosure of how the per share amounts were computed.
Effective December 1997, the Company will be required to adopt Statement of
Financial Accounting Standards No. 129, Disclosure of Information about Capital
Structure (SFAS 129). SFAS 129 requires that all entities disclose in summary
form within the financial statement the pertinent rights and privileges of the
various securities outstanding. An entity is to disclose within the financial
statement the number of shares issued upon conversion, exercise, or satisfaction
of required conditions during at least the most recent annual fiscal period and
any subsequent interim period presented. Other special provisions apply to
preferred and redeemable stock. The Company will adopt SFAS 129 in the fourth
quarter of 1997.
The FASB has issued Financial Accounting Standards No. 130, Reporting
Comprehensive Income, which is effective for financial statements issued after
December 15, 1997. The new standard requires an entity to report and display
comprehensive income and its components. Comprehensive income will include net
income plus net unrealized gains or loss on securities.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, Disclosures about Segments of an Enterprise and Related Information
(SFAS 131). SFAS 131 establishes standards for the way public enterprises are to
report information about operating segments in annual financial statements and
requires the reporting of selected information about operating segments in
interim financial reports issued to shareholders. It also establishes standards
for related disclosures about products and services, geographic area, and major
customers. SFAS 131 is effective for periods beginning after December 15, 1997.
NOTE L -- RELATED PARTY TRANSACTIONS
The Company paid management fees to stockholders and entities related by
common ownership for the years ended December 31, 1994, 1995 and 1996 totaling
$333, $480 and $1,346 and for the nine months ended September 30, 1996 and 1997
totaling $1,311 and $285. Included in management fees in 1996 are $700 in
non-recurring fees paid.
The Company paid loan costs of $110 in 1996 to a related entity for
services rendered in connection with obtaining certain long-term debt.
Accounts receivable at September 30, 1997 include advances of $165 to a
company related by common ownership. Such advances bear interest at 12% and are
due on demand. The Company has pledged $100 cash to secure a bank loan of this
related company.
F-14
<PAGE> 102
FIRST WAVE MARINE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE M -- STOCKHOLDER AGREEMENT AND STOCK PURCHASE AGREEMENT
In January 1995, Newpark entered into a Stockholder Agreement and Stock
Purchase Agreement (the Agreement) with the employee stockholders. In accordance
with the Agreement, in August 1996, Newpark granted to the employee stockholders
7.4 additional shares of common stock and recorded compensation expense of $88.
Newpark paid an additional bonus to these stockholders to provide for the taxes
incurred from the stock compensation. Under the terms of the Agreement, in the
event of death, termination of employment or proposed sale of the stock, Newpark
has the right or obligation to purchase the shares at a price and subject to
certain conditions as prescribed in the Agreement.
NOTE N -- MAJOR CUSTOMERS
The Company had the following customers to which it had sales exceeding 10%
of total Company sales:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------ -------------------
1994 1995 1996 1996 1997
---- ------ ------ ----------- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
SEACOR Smit Inc....................... (a) (a) 22.1% 16.1% 14.9%
Kirby Corporation..................... (a) 28.0% 15.3% 15.3% 23.7%
Seariver Maritime..................... (a) 12.2% (a) (a) (a)
</TABLE>
- ---------------
(a) less than 10%
NOTE O -- SUBSEQUENT EVENTS
In October 1997, the Company entered into an agreement to acquire 100% of
the outstanding capital stock of a company that owns and operates shipyard
facilities in Pasadena, Texas and Galveston, Texas. The agreement provides for a
cash payment of $15,000 and issuance of a subordinated promissory note of
$4,000, subject to certain adjustments.
In October 1997, the Company entered into an agreement with the Newpark
minority interest shareholders to exchange the minority interest shares in
Newpark with approximately 1,000 shares of the Company representing 8.5% of
ownership. The exchange was consummated on December 31, 1997.
In October 1997, the Company entered into a lease agreement for a shipyard
facility in Galveston, Texas. The lease agreement provides for an initial term
of 15 years with options to renew up to a total term of 99 years, and monthly
lease payments of $58. The Company is further obligated to spend at least
$20,000 on improvements and equipment for the facility prior to January 31,
2001.
In November 1997, the Company entered into a non-binding letter of intent
to purchase certain shipyard assets, including real property and improvements,
in Galveston, Texas for $4,500.
On January 26, 1998, the Company filed a registration statement to sell
approximately $90 million in Senior Notes to mature in 2008. Upon consummation
of the Offering, the debt will be fully and unconditionally guaranteed, jointly
and severally, by all of the Company's direct and indirect subsidiaries. All
subsidiary guarantors were wholly-owned as of the date of the filing of the
registration statement. Newpark became a wholly-owned subsidiary on December 31,
1997, following the aforementioned exchange. The Company will be subject to
certain restrictive covenants under the related trust indenture. The indenture
will contain certain covenants that, among
F-15
<PAGE> 103
FIRST WAVE MARINE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
other things, limit the ability of the Company and its subsidiaries to incur
additional indebtedness, pay dividends or make other distributions, repurchase
any capital stock or subordinated indebtedness, make certain investments, create
certain liens, enter into certain transactions with affiliates, sell assets,
enter into certain mergers and consolidations, allow subsidiaries to create
certain dividend and other payment restrictions, enter into sale and leaseback
transactions, and issue or sell capital stock of subsidiaries.
Management has determined that presentation of separate financial
statements of the Company's subsidiaries who will guarantee the debt would not
be material to an investment decision. The Company has minimal operations and
assets other than its investment in subsidiaries. The condensed combined
financial information for the Company's subsidiaries who will guarantee the debt
is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- SEPTEMBER 30,
1995 1996 1997
------ ------- -------------
<S> <C> <C> <C>
Current Assets
Cash and Cash Equivalents............................... $ 66 $ -- $ 966
Accounts Receivable..................................... 4,759 6,182 7,063
Other................................................... 485 1,109 913
------ ------- -------
5,310 7,291 8,942
Other..................................................... 1,317 16,987 22,570
Intangible Assets......................................... 167 662 704
------ ------- -------
Total Assets.................................... $6,794 $24,940 $32,216
====== ======= =======
Current Liabilities....................................... $5,182 $ 4,191 $ 4,143
Noncurrent Liabilities.................................... 132 18,079 22,423
Stockholders' Equity...................................... 1,480 2,670 5,650
------ ------- -------
$6,794 $24,940 $32,216
====== ======= =======
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------- -----------------
1994 1995 1996 1996 1997
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenues...................................... $15,347 $22,000 $27,772 $19,690 $24,353
Gross Profit.................................. $ 2,756 $ 4,957 $18,623 $ 5,804 $10,023
Earnings from Operations...................... $ (204) $ 1,334 $ 3,736 $ 1,548 $ 6,129
Net Earnings.................................. $ (334) $ 804 $ 1,824 $ 643 $ 3,047
</TABLE>
F-16
<PAGE> 104
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
John Bludworth Marine, Inc.
We have audited the accompanying consolidated balance sheets of John
Bludworth Marine, Inc. and Subsidiary as of September 30, 1997 and March 31,
1997 and 1996, and the related consolidated statements of earnings,
stockholder's equity, and cash flows for the six months ended September 30, 1997
and the years ended March 31, 1997 and 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above, present fairly,
in all material respects, the consolidated financial position of John Bludworth
Marine, Inc. and Subsidiary as of September 30, 1997 and March 31, 1997 and
1996, and the consolidated results of their operations and their consolidated
cash flows for the six months ended September 30, 1997 and for the years ended
March 31, 1997 and 1996, in conformity with generally accepted accounting
principles.
Grant Thornton LLP
Houston, Texas
November 8, 1997
F-17
<PAGE> 105
JOHN BLUDWORTH MARINE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
MARCH 31,
---------------------------- SEPTEMBER 30,
1996 1997 1997
----------- ------------- -------------
<S> <C> <C> <C>
CURRENT ASSETS Cash and cash equivalents................. $ 272 $ 183 $ 316
Accounts receivable, including unbilled receivables of
$44, $1,011 and $793................................ 1,872 4,811 5,838
Inventories............................................ 172 900 101
Costs and estimated earnings in excess of billings on
uncompleted contracts............................... 16 -- --
Prepaid expenses and other............................. 280 29 829
------ ------- -------
Total current assets........................... 2,612 5,923 7,084
PROPERTY AND EQUIPMENT, NET.............................. 3,934 7,411 10,524
DEPOSITS AND OTHER....................................... 56 66 146
------ ------- -------
$6,602 $13,400 $17,754
====== ======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Notes payable.......................................... $ 723 $ 1,538 $ 945
Current portion of long-term debt...................... 25 443 624
Trade accounts payable................................. 444 865 1,033
Accrued liabilities.................................... 237 283 411
Income taxes payable................................... 111 758 1,195
Billings in excess of costs and estimated earnings on
uncompleted contracts............................... 96 -- --
------ ------- -------
Total current liabilities...................... 1,636 3,887 4,208
LONG-TERM DEBT, net of current portion................... 2,512 5,743 8,359
DEFERRED INCOME TAXES.................................... 340 380 448
COMMITMENTS AND CONTINGENCIES............................ -- -- --
STOCKHOLDER'S EQUITY
Common stock, no par value, 300,000 shares authorized,
100 shares issued and outstanding................... 1 1 1
Retained earnings...................................... 2,113 3,389 4,738
------ ------- -------
2,114 3,390 4,739
------ ------- -------
$6,602 $13,400 $17,754
====== ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-18
<PAGE> 106
JOHN BLUDWORTH MARINE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
MARCH 31, SEPTEMBER 30,
---------------------------- ----------------------------
1996 1997 1996 1997
----------- ------------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES
Repair and conversions......................... $9,174 $14,790 $5,717 $15,030
New construction............................... -- 2,203 2,203 1,010
------ ------- ------ -------
9,174 16,993 7,920 16,040
COST OF REVENUES................................. 7,012 12,987 5,810 11,770
------ ------- ------ -------
Gross profit................................ 2,162 4,006 2,110 4,270
GENERAL AND ADMINISTRATIVE EXPENSES.............. 1,329 1,526 566 1,552
------ ------- ------ -------
Earnings from operations.................... 833 2,480 1,544 2,718
OTHER INCOME (EXPENSE)
Other income................................... 7 148 26 5
Interest expense............................... (326) (443) (154) (451)
------ ------- ------ -------
(319) (295) (128) (446)
------ ------- ------ -------
Earnings before income taxes................ 514 2,185 1,416 2,272
INCOME TAX EXPENSE
Current........................................ 111 774 513 848
Deferred....................................... 105 135 89 75
------ ------- ------ -------
216 909 602 923
------ ------- ------ -------
NET EARNINGS................................ $ 298 $ 1,276 $ 814 $ 1,349
====== ======= ====== =======
Earnings per common share........................ $2,980 $12,760 $8,140 $13,490
====== ======= ====== =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-19
<PAGE> 107
JOHN BLUDWORTH MARINE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
YEARS ENDED MARCH 31, 1996 AND 1997 AND SIX MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
TOTAL
COMMON RETAINED STOCKHOLDER'S
STOCK EARNINGS EQUITY
------ -------- -------------
<S> <C> <C> <C>
Balance at April 1, 1995................................. $ 1 $1,815 $1,816
Net earnings........................................... -- 298 298
--- ------ ------
Balance at March 31, 1996................................ 1 2,113 2,114
Net earnings........................................... -- 1,276 1,276
--- ------ ------
Balance at March 31, 1997................................ 1 3,389 3,390
Net earnings........................................... -- 1,349 1,349
--- ------ ------
Balance at September 30, 1997............................ $ 1 $4,738 $4,739
=== ====== ======
</TABLE>
The accompanying notes are an integral part of this statement.
F-20
<PAGE> 108
JOHN BLUDWORTH MARINE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
MARCH 31, SEPTEMBER 30,
--------------- ---------------------
1996 1997 1996 1997
----- ------- ----------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net earnings.............................................. $ 298 $ 1,276 $ 814 $ 1,349
Adjustments to reconcile net earnings to net cash provided
(used) by operating activities
Depreciation and amortization............................. 456 517 201 371
Deferred income taxes..................................... 105 135 89 75
Gain on sale of property and equipment.................... (2) -- -- --
Change in assets and liabilities
Increase in accounts receivable........................ (173) (2,939) (562) (1,027)
(Increase) decrease in inventories..................... (63) (728) (253) 799
Decrease (increase) in costs and estimated earnings in
excess of billings on uncompleted contracts.......... 28 16 (63) --
(Increase) decrease in prepaid expenses and other...... (43) 156 92 (807)
Increase in deposits and other......................... (7) (10) (23) (80)
(Decrease) increase in trade accounts payable.......... (605) 421 (31) 168
Increase (decrease) in accrued liabilities............. 169 46 (16) 128
Decrease in billings in excess of costs and estimated
earnings on uncompleted contracts.................... (9) (96) (96) --
Increase in income taxes payable....................... 108 647 399 437
----- ------- ------ -------
Net cash provided (used) by operating
activities...................................... 262 (559) 551 1,413
Cash flows from investing activities
Acquisition of property and equipment..................... (283) (3,994) (152) (3,484)
Proceeds from sale of property and equipment.............. 29 -- -- --
----- ------- ------ -------
Net cash used by investing activities............. (254) (3,994) (152) (3,484)
Cash flows from financing activities
Proceeds from issuance of long-term debt.................. 38 6,248 1,980 2,996
Payments on long-term debt................................ (308) (2,599) (827) (199)
Proceeds from issuance of notes payable................... 185 13 -- 927
Payments on notes payable................................. -- (199) (80) (212)
Net proceeds (payments) on revolving line of credit....... 82 1,001 105 (1,308)
----- ------- ------ -------
Net cash (used) provided by financing
activities...................................... (3) 4,464 1,178 2,204
----- ------- ------ -------
Net increase (decrease) in cash................... 5 (89) 1,577 133
Cash and cash equivalents at beginning of period............ 267 272 272 183
----- ------- ------ -------
Cash and cash equivalents at end of period.................. $ 272 $ 183 $1,849 $ 316
===== ======= ====== =======
Supplemental disclosure of cash flow information
Cash paid during the period for
Interest.................................................. $ 326 $ 443 $ 154 $ 451
Income taxes.............................................. -- 108 108 406
Noncash transaction
Equipment acquired in exchange for debt................... $ 520 -- -- --
</TABLE>
The accompanying notes are an integral part of these statements.
F-21
<PAGE> 109
JOHN BLUDWORTH MARINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 1996 IS UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
NOTE A -- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
John Bludworth Marine, Inc. and Subsidiary's (the Company) business is
concentrated in providing shipyard services to the offshore support vessel,
offshore barge and inland marine industries, and the Company customarily extends
credit to such customers. The Company provides a full range of repair and
construction services from its locations along the Houston Ship Channel in
Pasadena, Texas and on Pelican Island in Galveston, Texas.
A summary of the significant accounting policies applied in the preparation
of the accompanying financial statements follows.
1. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of John
Bludworth Marine, Inc. and its wholly-owned subsidiary, Bludworth Shipyard and
Fabrication, Inc. All significant intercompany balances and transactions have
been eliminated.
2. ACCOUNTS RECEIVABLE
Management considers accounts receivable to be fully collectible;
accordingly, no allowance for doubtful accounts is recorded. If collection of
amounts becomes uncertain, an allowance will be established.
3. REVENUE RECOGNITION
Revenues from new construction performed under lump-sum contracts are
recognized on the percentage-of-completion method, measured by the cost-to-cost
method. This method is used because management considers this method to be the
best available measure of progress on these contracts.
Contract costs include all direct material and labor costs and those
indirect costs related to contract performance, such as indirect labor,
supplies, tools, repairs, and depreciation costs. Selling, general, and
administrative costs are charged to expense as incurred. Provisions for
estimated losses on uncompleted contracts are made in the period in which such
losses are determined. Changes in job performance, job conditions, and estimated
profitability, including those arising from contract penalty provisions, and
final contract settlements may result in revisions to costs and income and are
recognized in the period in which the revisions are determined. Profit
incentives are included in revenues when their realization is reasonably
assured. An amount equal to contract costs attributable to claims is included in
revenues when realization is probable and the amount can be reliably estimated.
The asset, "Costs and estimated earnings in excess of billings on
uncompleted contracts," represents revenues recognized in excess of amounts
billed. The liability, "Billings in excess of costs and estimated earnings on
uncompleted contracts," represents billings in excess of revenues recognized.
Revenues from repair and conversion services performed under
time-and-materials and fixed-fee arrangements are recognized as the services are
provided. Revisions to revenues and costs recognized on fixed-fee arrangements
are made in the period in which the revisions are determined.
F-22
<PAGE> 110
JOHN BLUDWORTH MARINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. INVENTORIES
Inventories consist of raw materials, repair parts and assets under
construction but not under contract. Inventories are valued at the lower of
average cost or market using the first-in, first-out method.
5. INCOME TAXES
Deferred tax assets and liabilities are determined based on the differences
between the financial statement and tax bases of assets and liabilities as
measured by the enacted tax rates which will be in effect when these differences
reverse. Deferred income tax expense is the result of changes in deferred tax
assets and liabilities.
6. PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization
are provided principally on the straightline method over the estimated useful
lives of the assets.
7. USE OF ESTIMATES
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
8. CASH AND CASH EQUIVALENTS
The Company considers all highly liquid short-term investments purchased
with an original maturity of three months or less to be cash equivalents.
Included in cash and cash equivalents at March 31, 1996 and 1997 and September
30, 1997 is $135 held on deposit by the Company's insurance carrier.
9. INTERIM FINANCIAL INFORMATION
Financial information for the six months ended September 30, 1996, included
herein, is unaudited. Such information includes all adjustments (consisting only
of normal recurring adjustments), which are, in the opinion of management,
necessary for a fair presentation of the financial information in the interim
periods. The results of operations for the six months ended September 30, 1997
are not necessarily indicative of the results of the full fiscal year.
10. EARNINGS PER SHARE
Earnings per common share is calculated by dividing net earnings available
for common stockholders by the weighted average number of common stock shares
outstanding during the period.
F-23
<PAGE> 111
JOHN BLUDWORTH MARINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE B -- COSTS AND ESTIMATED EARNINGS ON LUMP-SUM CONTRACTS IN PROGRESS
Costs and estimated earnings on new construction under lump-sum contracts
in progress are as follows:
<TABLE>
<CAPTION>
MARCH 31,
------------------- SEPTEMBER 30,
1996 1997 1997
------- ------ -------------
<S> <C> <C> <C>
Cost incurred on uncompleted contracts......... $ 1,614 $ -- $ --
Estimated earnings............................. -- -- --
------- ------ ------
1,614 -- --
Less billings applicable thereto............... (1,694) -- --
------- ------ ------
$ (80) $ -- $ --
======= ====== ======
Included in the accompanying balance sheets
under the following captions:
Cost and estimated earnings in excess of
billings on uncompleted contracts............ $ 16 $ -- $ --
Billings in excess of costs and estimated
earnings on uncompleted contracts............ (96) -- --
------- ------ ------
$ (80) $ -- $ --
======= ====== ======
</TABLE>
NOTE C -- PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL MARCH 31,
LIVES IN ---------------- SEPTEMBER 30,
YEARS 1996 1997 1997
--------- ------ ------ -------------
<S> <C> <C> <C> <C>
Land.................................... -- $ 819 $1,318 $ 1,318
Buildings and improvements.............. 5-20 1,128 3,887 4,555
Automobiles............................. 3-5 101 135 135
Office furniture, fixtures and
equipment............................. 5-10 69 93 164
Machinery and equipment................. 5-20 6,048 6,726 9,472
------ ------ -------
8,165 12,159 15,644
Less accumulated depreciation........... 4,231 4,748 5,120
------ ------ -------
$3,934 $7,411 $10,524
====== ====== =======
</TABLE>
F-24
<PAGE> 112
JOHN BLUDWORTH MARINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE D -- NOTES PAYABLE
Notes payable consists of the following:
<TABLE>
<CAPTION>
MARCH 31,
----------------------- SEPTEMBER 30,
1996 1997 1997
-------- ----------- -------------
<S> <C> <C> <C>
Revolving line of credit of $450 at a bank; interest
at 11.25%; due monthly; paid in 1997.............. $240 $ -- $ --
Revolving line of credit of $400 at a bank; interest
at prime plus 2.25% due monthly; paid in 1997..... 291 -- --
Revolving line of credit of $2,500 at a bank;
interest at the bank's base rate plus 1.25% (10.5%
at March 31, 1997) due monthly; maturing July 31,
1998; collateralized by accounts receivable,
inventory and equipment........................... -- 1,532 224
Other notes payable................................. 192 6 721
---- ------ ----
$723 $1,538 $945
==== ====== ====
</TABLE>
NOTE E -- LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
MARCH 31,
---------------- SEPTEMBER 30,
1996 1997 1997
------ ------ -------------
<S> <C> <C> <C>
Note payable to a bank; principal and interest of
$19 due monthly; paid in 1997................... $1,603 $ -- $ --
Note payable to a bank; principal and interest of
$18 due monthly; paid in 1997................... 780 -- --
Notes payable to a financial institution;
principal and interest at the short-term
government rate plus 3.25% (8.75% at March 31,
1997) of $45 due monthly; maturing at various
dates through July 2004; collateralized by
certain equipment............................... -- 1,883 2,770
Note payable to a bank; principal of $22 including
interest at prime plus 0.5% (9.75% at March 31,
1997) due monthly; maturing October 2008;
collateralized by real estate................... -- 1,791 2,437
Note payable to a financial institution; principal
and interest ranging from 10% to 13% of $19 due
monthly; collateralized by real estate.......... -- 1,733 1,705
Note payable to a bank; interest at prime plus
0.75% due monthly (9.75% at March 31, 1997)
until withdrawal of maximum commitment ($4,120),
then principal of $57 plus interest of prime
plus 1.75% due monthly; collateralized by real
estate.......................................... -- 656 1,969
Other notes payable............................... 154 123 102
------ ------ ------
2,537 6,186 8,983
Less current portion.............................. 25 443 624
------ ------ ------
$2,512 $5,743 $8,359
====== ====== ======
</TABLE>
F-25
<PAGE> 113
JOHN BLUDWORTH MARINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Maturities of long-term debt at March 31, 1997 are:
<TABLE>
<CAPTION>
YEAR ENDING
MARCH 31, AMOUNT
--------- ------
<S> <C>
1998................................................. $443
1999................................................. 549
2000................................................. 665
2001................................................. 717
2002................................................. 675
</TABLE>
Based on the borrowing rates currently available to the Company for loans
with similar terms and average maturities, the fair value of long-term debt
approximates recorded value.
NOTE F -- INCOME TAXES
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below:
<TABLE>
<CAPTION>
MARCH 31,
--------------
1996 1997
----- -----
<S> <C> <C>
Deferred tax assets:
Alternative minimum tax credit............................ $ 104 $ --
Other..................................................... 4 5
----- -----
$ 108 $ 5
===== =====
Deferred tax liabilities:
Depreciation.............................................. $(340) $(380)
===== =====
</TABLE>
Deferred tax assets are included in "Prepaid expenses and other" current
assets on the accompanying balance sheets.
The reconciliation between the Company's effective income tax rate and the
statutory federal income tax rate is as follows:
<TABLE>
<CAPTION>
YEAR ENDED,
MARCH 31,
----------------
1996 1997
------ ------
<S> <C> <C>
Statutory federal income tax rate........................... 34.00% 34.00%
Officers life insurance..................................... 5.74% 2.19%
State taxes................................................. -- 4.49%
Other....................................................... 2.28% 0.92%
------ ------
Effective income tax rate 42.02% 41.60%
====== ======
</TABLE>
F-26
<PAGE> 114
JOHN BLUDWORTH MARINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE G -- COMMITMENTS AND CONTINGENCIES
The Company leases vehicles under noncancelable operating leases expiring
at various dates through June 2001. Future minimum lease payments under
operating leases by years at March 31, 1997 are:
<TABLE>
<CAPTION>
YEAR ENDING
MARCH 31,
-----------
<S> <C>
1998..................................................... $ 49
1999..................................................... 49
2000..................................................... 42
2001..................................................... 22
2002..................................................... 2
----
$164
====
</TABLE>
Rent expense for the years ended March 31, 1996 and 1997 was $49 and $124,
and for the six months ended September 30, 1996 and 1997 was $27 and $117.
The Company is involved in certain claims and lawsuits occurring in the
normal course of business. Management, after consultation with outside legal
counsel, does not believe the outcome of these actions will have a material
impact on the financial statements of the Company.
Based on the results of a sales tax audit, the Company was assessed
additional taxes, penalties and interest totaling approximately $240 for prior
years by the Comptroller of Public Accounts of the State of Texas. The Company
believes the assessment is without merit and intends to vigorously defend its
position. The Company filed a motion contesting the assessment which is
currently being reviewed by an administrative law judge.
The Company is subject to extensive and changing federal, state and local
laws and regulations designed to protect the environment. The Company from time
to time is involved in administrative and other proceedings under environmental
laws involving its operations and facilities. Environmental laws could impose
liability for remediation costs or result in civil or criminal penalties in
cases of noncompliance. Environmental laws have been subject to frequent change;
therefore, the Company is unable to predict the future costs or other future
impact of environmental laws on its operations.
NOTE H -- BENEFIT PLAN
Eligible employees of the Company participate in a 401(k) deferred savings
plan (the Plan). Under the Plan, a participating employee may allocate a
percentage of their salary and the Company, at its discretion, may make
contributions to the Plan. The Company contributed approximately $37 for the six
months ended September 30, 1997. The Company made no contributions to the Plan
for the years ended March 31, 1996 and 1997.
NOTE I -- NEW PRONOUNCEMENTS
The FASB has issued Financial Accounting Standards No. 128, Earnings per
Share, which is effective for financial statements issued after December 15,
1997. The new standard eliminates primary and fully diluted earnings per share
and requires the presentation of basic and diluted earnings per share together
with disclosure of how the per share amounts were computed. The adoption of the
new standard would not have a significant effect on the Company's earnings per
share.
Effective December 1997, the Company will be required to adopt Statement of
Financial Accounting Standards No. 129, Disclosure of Information about Capital
Structure (SFAS 129). SFAS 129 requires that all entities disclose in summary
form within the financial statement the pertinent rights and privileges of the
various securities outstanding. An entity is to disclose within the
F-27
<PAGE> 115
JOHN BLUDWORTH MARINE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
financial statement the number of shares issued upon conversion, exercise, or
satisfaction of required conditions during at least the most recent annual
fiscal period and any subsequent interim period presented. Other special
provisions apply to preferred and redeemable stock. The Company will adopt SFAS
129 in the fourth quarter of 1997.
The FASB has issued Financial Accounting Standards No. 130, Reporting
Comprehensive Income, which is effective for financial statements issued after
December 15, 1997. The new standard requires an entity to report and display
comprehensive income and its components. Comprehensive income will include net
income plus net unrealized gains or loss on securities.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, Disclosures about Segments of an Enterprise and Related Information
(SFAS 131). SFAS 131 establishes standards for the way public enterprises are to
report information about operating segments in annual financial statements and
requires the reporting of selected information about operating segments in
interim financial reports issued to shareholders. It also establishes standards
for related disclosures about products and services, geographic areas, and major
customers. SFAS 131 is effective for periods beginning after December 15, 1997.
NOTE J -- MAJOR CUSTOMERS
The Company had the following customers to which it had sales exceeding 10%
of total Company sales:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
MARCH 31, SEPTEMBER 30,
----------------- ----------------------
1996 1997 1996 1997
------ ------ ----------- ------
(UNAUDITED)
<S> <C> <C> <C> <C>
Customer A................................... 26% (a) 10% 11%
Customer B................................... 17% 28% 20% 33%
Customer C................................... 10% (a) (a) (a)
Customer D................................... (a) 13% 24% (a)
Customer E................................... (a) 11% (a) (a)
Customer F................................... (a) (a) (a) (a)
Customer G................................... (a) (a) (a) (a)
</TABLE>
- ---------------
(a) Less than 10%.
NOTE K -- RELATED PARTY TRANSACTIONS
The Company engages in transactions with its stockholder and entities
controlled by its stockholder.
As a result of the aforementioned transactions, included in accounts
receivable on the accompanying balance sheets at March 31, 1996 and 1997 and
September 30, 1997 are $211, $298 and $172 of receivables from related parties.
Included in accounts payable on the accompanying balance sheets at March 31,
1996 and 1997 and September 30, 1997 are $50, $71 and $125 of payables to
related parties.
In 1996, the Company acquired $520 in certain equipment from a related
party.
NOTE L -- SUBSEQUENT EVENT
In October 1997, the stockholder entered into an agreement to sell 100% of
the outstanding capital stock of the Company.
F-28
<PAGE> 116
Anatomy of a lengthening job
[photograph of boat [photograph of section [photograph of side
being cut] lifted by crane] of boat]
cutting vessel in Placement of 40 foot Connection of sections
half mid-body
[photograph of supply vessel]
Voila! Vessel is lengthened from 180 feet to 220 feet
<PAGE> 117
======================================================
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 UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE NOTES 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........................... 11
The Company............................ 18
Use of Proceeds........................ 19
Capitalization......................... 20
Selected Consolidated Financial Data... 21
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 23
Unaudited Pro Forma Consolidated
Combined Financial Information....... 28
Business............................... 33
Management............................. 47
Security Ownership of Certain
Beneficial Owners and Management..... 54
Description of Notes................... 55
Underwriting........................... 84
Legal Matters.......................... 84
Experts................................ 85
Additional Information................. 85
Index to Consolidated Financial
Statements........................... F-1
</TABLE>
-------------------------
UNTIL , (25 DAYS AFTER THE DATE COMMENCEMENT OF THE OFFERING),
ALL DEALERS EFFECTING TRANSACTIONS IN THE NOTES, 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.
======================================================
======================================================
$90,000,000
FIRST WAVE LOGO
FIRST WAVE MARINE, INC.
% SENIOR NOTES DUE 2008
SCHRODER & CO. INC.
, 1998
======================================================
<PAGE> 118
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
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
Trustee Fee................................................. $ 15,000
Miscellaneous............................................... $139,195
--------
Total............................................. $725,000
========
</TABLE>
The foregoing expenses incident to the registration of the Notes, including
any underwriting discounts and commissions attributable to the sale of the Notes
by the Company, shall be paid by the Company.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
THE COMPANY
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.
II-1
<PAGE> 119
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 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 SUBSIDIARY GUARANTORS
The Bylaws of each of the Subsidiary Guarantors (except Newpark
Shipbuilding) provide for indemnification of their respective officers and
directors in certain circumstances. Specifically, pursuant to Section 3.14 of
the respective Bylaws, each Subsidiary Guarantor (except Newpark Shipbuilding)
must indemnify a director or an officer against reasonable expenses incurred by
him in connection with a proceeding in which he is named as a defendant because
he is or was a director or an officer of such corporation if (i) he has been
successful in the defense of the proceeding or (ii) a court orders the
corporation to indemnify the director or officer because the court determines
indemnification is proper and equitable. In addition, Article 2.02-1 of the
Texas Business Corporation Act permits, and in some cases requires, Texas
corporations to indemnify directors and officers
II-2
<PAGE> 120
who are or have been a party or are threatened to be made a party to litigation
against judgments, penalties (including excise and similar taxes), fines,
settlements and reasonable expenses under certain circumstances.
THE UNDERWRITING AGREEMENT
The Underwriting Agreement filed as Exhibit 1.1 hereto contains reciprocal
agreements of indemnity between the Company and the Subsidiary Guarantors and
the Underwriter as to certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"), and in certain
circumstances provides for indemnification of the Company's and the Subsidiary
Guarantors' 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.
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.
On November 20, 1997, the Company effected a 10.65-for-1 stock split
pursuant to which the 1,010,100 outstanding shares of Common Stock were
subdivided into 10,757,565 shares of
II-3
<PAGE> 121
Common Stock. All such shares were issued to the three individuals listed above
as they are the only shareholders of the Company. Such issuance was exempt from
registration under the Securities Act pursuant to Section 3(a)(9) thereof as
securities exchanged by the issuer with its existing shareholders exclusively
where no commission or other remuneration was given directly or indirectly for
soliciting such exchange.
On October 16, 1997 the Company signed an agreement with the minority
shareholders of Newpark Shipbuilding to purchase the 17% of outstanding shares
of Newpark Shipbuilding held by them in exchange for 93,840 shares of the
Company's Common Stock. Pursuant to the terms of the Stock Exchange Agreement,
on December 31, 1997 the Company closed the Exchange and issued 999,390 shares
of Common Stock on a post-split basis to such minority shareholders of Newpark
Shipbuilding. 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.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
**1.1 -- Form of Underwriting Agreement by and among First Wave
Marine, Inc., the Subsidiary Guarantors and Schroder &
Co. Inc.
**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
**3.3 -- Articles of Incorporation of Louisiana Ship, Inc.
**3.4 -- Articles of Amendment to the Articles of Incorporation of
Louisiana Ship, Inc.
**3.5 -- Amendment and Restated Bylaws of Louisiana Ship, Inc.
**3.6 -- Articles of Incorporation of EAE Services, Inc.
**3.7 -- Bylaws of EAE Services, Inc.
**3.8 -- Articles of Incorporation of EAE Industries, Inc.
**3.9 -- Articles of Amendment to the Articles of Incorporation of
EAE Industries, Inc.
**3.10 -- Amended and Restated Bylaws of EAE Industries, Inc.
**3.11 -- Articles of Incorporation of Newpark Marine Fabricators,
Inc.
**3.12 -- Bylaws of Newpark Marine Fabricators, Inc.
**3.13 -- Articles of Incorporation of Newpark Shipbuilding and
Repair, Inc.
**3.14 -- Articles of Amendment dated February 3, 1994 to the
Articles of Incorporation of Newpark Shipbuilding and
Repair, Inc.
**3.15 -- Articles of Amendment dated April 25, 1994 to the
Articles of Incorporation of Newpark Shipbuilding and
Repair, Inc.
**3.16 -- Amended and Restated Bylaws of Newpark Shipbuilding and
Repair, Inc.
*3.17 -- Articles of Amendment dated August 29, 1996 to the
Articles of Incorporation of Newpark Shipbuilding and
Repair, Inc.
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
</TABLE>
II-4
<PAGE> 122
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
*4.2 -- Form of Indenture to be entered into by and among the
Company as issuer, the Subsidiary Guarantors and Bank
One, N.A. as Trustee
*5.1 -- Opinion of Griggs & Harrison, P.C.
**10.1 -- Stock Purchase Agreement dated October 15, 1997 between
the Company and John L. Bludworth III et al
**10.2 -- Amended and Restated Lease and Development Agreement
between the Board of Trustees of the Galveston Wharves as
Lessor and Newpark Marine Fabricators Inc. as Lessee and
PM Engineering, Inc. as Assignor dated October 17, 1997
and effective the first day of November 1997
**10.3 -- Assignment and Assumption of lease from PMB Engineering,
Inc. as Assignor and Newpark Marine Fabricators, Inc. as
Assignee effective the first day of November 1997
**10.4 -- Loan Agreement by and between Louisiana Ship, Inc. and
Southwest Bank of Texas, N.A. dated July 15, 1997 for (i)
a revolving credit advance in the maximum aggregate
principal amount of $800,000, (ii) an equipment guidance
line of credit in the maximum aggregate principal amount
of $300,000, (iii) a term loan in the amount of $650,000
and (iv) a term loan in the amount of $500,000
**10.5 -- First Amendment to Stock Purchase Agreement dated October
17, 1997 between the Company and John L. Bludworth, III
et al
**10.6 -- Credit Agreement by and between Newpark Shipbuilding and
Repair, Inc. and Heller Financial Leasing, Inc. dated
August 29, 1996 for two term loans in the principal
amount of $11,800,000 and $600,000, respectively
**10.7 -- Attornment Agreement by and between Newpark Marine
Fabricators, Inc., The Board of Trustees of the Galveston
Wharves and The City of Galveston dated effective as of
November 1, 1997
*10.8 -- Amended and Restated 1997 Incentive Equity Plan effective
as of December 30, 1997
*10.9 -- Form of Stock Option Agreement for certain options
granted by the Company to Messrs. S. Eakin, F. Eakin and
D. Ammons dated December 30, 1997
*10.10 -- Form of Stock Option Agreement for certain options
granted by the Company to certain executives and other
employees dated December 30, 1997
*10.11 -- Form of Pledge and Security Agreement by and between the
Company and Bank One, N.A. as pledge agent
*12.1 -- Statement of computation of ratio of earnings to fixed
charges
**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 -- Powers of Attorney (included on each of the signature
pages)
*25.1 -- Statement of Eligibility of Bank One, N.A. dated January
14, 1998.
**27.1 -- Financial Data Schedule
</TABLE>
- ---------------
* Filed herewith
** Previously filed
II-5
<PAGE> 123
ITEM 17. UNDERTAKINGS.
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-6
<PAGE> 124
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Amendment No. 3 to Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Houston, State of
Texas, on January 26, 1998.
FIRST WAVE MARINE, INC.
By: /s/ DAVID B. AMMONS
----------------------------------
David B. Ammons
Executive Vice President,
CFO and Secretary
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ SAMUEL F. EAKIN* Chairman of the Board, January 26, 1998
- ----------------------------------------------------- Chief Executive Officer
Samuel F. Eakin and Director (Principal
Executive Officer)
/s/ FRANK W. EAKIN* President, Chief January 26, 1998
- ----------------------------------------------------- Operating Officer and
Frank W. Eakin Director
/s/ DAVID B. AMMONS Executive Vice President, January 26, 1998
- ----------------------------------------------------- Chief Financial Officer,
David B. Ammons Secretary and Director
(Principal Financial
Officer and Principal
Accounting Officer)
/s/ JAMES COLE* Director January 26, 1998
- -----------------------------------------------------
James Cole
/s/ PAUL E. O'NEILL* Director January 26, 1998
- -----------------------------------------------------
Paul E. O'Neill II
</TABLE>
* Signed by David B. Ammons as Attorney-in-Fact pursuant to Power of Attorney.
II-7
<PAGE> 125
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Amendment No. 3 to Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Houston, State of
Texas, on January 26, 1998.
NEWPARK SHIPBUILDING AND REPAIR,
INC.
By: /s/ DAVID B. AMMONS
----------------------------------
David B. Ammons
Executive Vice President, CFO and
Secretary
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ SAMUEL F. EAKIN* Chairman of the Board, Chief January 26, 1998
- ----------------------------------------------------- Executive Officer and
Samuel F. Eakin Director (Principal
Executive Officer)
/s/ FRANK W. EAKIN* President, Chief Operating January 26, 1998
- ----------------------------------------------------- Officer
Frank W. Eakin
/s/ DAVID B. AMMONS Executive Vice President, January 26, 1998
- ----------------------------------------------------- Chief Financial Officer and
David B. Ammons Secretary (Principal
Financial Officer and
Principal Accounting
Officer)
/s/ JAMES COLE* Director January 26, 1998
- -----------------------------------------------------
James Cole
</TABLE>
* Signed by David B. Ammons as Attorney-in-Fact pursuant to Power of Attorney.
II-8
<PAGE> 126
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Amendment No. 3 to Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Houston, State of
Texas, on January 26, 1998.
EAE SERVICES, INC.
By: /s/ DAVID B. AMMONS
----------------------------------
David B. Ammons
Executive Vice President, CFO and
Secretary
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ SAMUEL F. EAKIN* Chairman of the Board, January 26, 1998
- ----------------------------------------------------- Chief Executive Officer and
Samuel F. Eakin Director (Principal
Executive Officer)
/s/ FRANK W. EAKIN* President, Chief Operating January 26, 1998
- ----------------------------------------------------- Officer and Director
Frank W. Eakin
/s/ DAVID B. AMMONS Executive Vice President, January 26, 1998
- ----------------------------------------------------- Chief Financial Officer,
David B. Ammons Secretary and Director
(Principal Financial
Officer and Principal
Accounting Officer)
</TABLE>
* Signed by David B. Ammons as Attorney-in-Fact pursuant to Power of Attorney.
II-9
<PAGE> 127
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Amendment No. 3 to Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Houston, State of
Texas, on January 26, 1998.
EAE INDUSTRIES, INC.
By: /s/ DAVID B. AMMONS
----------------------------------
David B. Ammons
Executive Vice President, CFO and
Secretary
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ SAMUEL F. EAKIN* Chairman of the Board, January 26, 1998
- ----------------------------------------------------- Chief Executive Officer and
Samuel F. Eakin Director (Principal
Executive Officer)
/s/ FRANK W. EAKIN* President, Chief Operating January 26, 1998
- ----------------------------------------------------- Officer and Director
Frank W. Eakin
/s/ DAVID B. AMMONS Executive Vice President, January 26, 1998
- ----------------------------------------------------- Chief Financial Officer,
David B. Ammons Secretary and Director
(Principal Financial
Officer and Principal
Accounting Officer)
</TABLE>
* Signed by David B. Ammons as Attorney-in-Fact pursuant to Power of Attorney.
II-10
<PAGE> 128
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Amendment No. 3 to Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Houston, State of
Texas, on January 26, 1998.
NEWPARK MARINE FABRICATORS, INC.
By: /s/ DAVID B. AMMONS
----------------------------------
David B. Ammons
Executive Vice President, CFO and
Secretary
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ SAMUEL F. EAKIN* Chairman of the Board, January 26, 1998
- ----------------------------------------------------- Chief Executive Officer
Samuel F. Eakin and Director (Principal
Executive Officer)
/s/ FRANK W. EAKIN* President, Chief January 26, 1998
- ----------------------------------------------------- Operating Officer and
Frank W. Eakin Director
/s/ DAVID B. AMMONS Executive Vice President, January 26, 1998
- ----------------------------------------------------- Chief Financial Officer,
David B. Ammons Secretary and Director
(Principal Financial
Officer and Principal
Accounting Officer)
</TABLE>
* Signed by David B. Ammons as Attorney-in-Fact pursuant to Power of Attorney.
II-11
<PAGE> 129
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Amendment No. 3 to Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Houston, State of
Texas, on January 26, 1998.
LOUISIANA SHIP, INC.
By: /s/ DAVID B. AMMONS
----------------------------------
David B. Ammons
Executive Vice President, CFO and
Secretary
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ SAMUEL F. EAKIN* Chairman of the Board, January 26, 1998
- ----------------------------------------------------- Chief Executive Officer
Samuel F. Eakin and Director (Principal
Executive Officer)
/s/ FRANK W. EAKIN* President, Chief January 26, 1998
- ----------------------------------------------------- Operating Officer and
Frank W. Eakin Director
/s/ DAVID B. AMMONS Executive Vice President, January 26, 1998
- ----------------------------------------------------- Chief Financial Officer,
David B. Ammons Secretary and Director
(Principal Financial
Officer and Principal
Accounting Officer)
</TABLE>
* Signed by David B. Ammons as Attorney-in-Fact pursuant to Power of Attorney.
II-12
<PAGE> 130
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
**1.1 -- Form of Underwriting Agreement by and among First Wave
Marine, Inc., the Subsidiary Guarantors and Schroder &
Co. Inc.
**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
**3.3 -- Articles of Incorporation of Louisiana Ship, Inc.
**3.4 -- Articles of Amendment to the Articles of Incorporation of
Louisiana Ship, Inc.
**3.5 -- Amendment and Restated Bylaws of Louisiana Ship, Inc.
**3.6 -- Articles of Incorporation of EAE Services, Inc.
**3.7 -- Bylaws of EAE Services, Inc.
**3.8 -- Articles of Incorporation of EAE Industries, Inc.
**3.9 -- Articles of Amendment to the Articles of Incorporation of
EAE Industries, Inc.
**3.10 -- Amended and Restated Bylaws of EAE Industries, Inc.
**3.11 -- Articles of Incorporation of Newpark Marine Fabricators,
Inc.
**3.12 -- Bylaws of Newpark Marine Fabricators, Inc.
**3.13 -- Articles of Incorporation of Newpark Shipbuilding and
Repair, Inc.
**3.14 -- Articles of Amendment dated February 3, 1994 to the
Articles of Incorporation of Newpark Shipbuilding and
Repair, Inc.
**3.15 -- Articles of Amendment dated April 25, 1994 to the
Articles of Incorporation of Newpark Shipbuilding and
Repair, Inc.
**3.16 -- Amended and Restated Bylaws of Newpark Shipbuilding and
Repair, Inc.
*3.17 -- Articles of Amendment dated August 29, 1996 to the
Articles of Incorporation of Newpark Shipbuilding and
Repair, Inc.
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
*4.2 -- Form of Indenture to be entered into by and among the
Company as issuer, the Subsidiary Guarantors and Bank
One, N.A. as Trustee
*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
</TABLE>
<PAGE> 131
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
**10.4 -- Loan Agreement by and between Louisiana Ship, Inc. and
Southwest Bank of Texas, N.A. dated July 15, 1997 for (i)
a revolving credit advance in the maximum aggregate
principal amount of $800,000, (ii) an equipment guidance
line of credit in the maximum aggregate principal amount
of $300,000, (iii) a term loan in the amount of $650,000
and (iv) a term loan in the amount of $500,000
**10.5 -- First Amendment to Stock Purchase Agreement dated October
17, 1997 between the Company and John L. Bludworth, III
et al
**10.6 -- Credit Agreement by and between Newpark Shipbuilding and
Repair, Inc. and Heller Financial Leasing, Inc. dated
August 29, 1996 for two term loans in the principal
amount of $11,800,000 and $600,000, respectively
**10.7 -- Attornment Agreement by and between Newpark Marine
Fabricators, Inc., The Board of Trustees of the Galveston
Wharves and The City of Galveston dated effective as of
November 1, 1997
*10.8 -- Amended and Restated 1997 Incentive Equity Plan effective
as of December 30, 1997
*10.9 -- Form of Stock Option Agreement for certain options
granted by the Company to Messrs. S. Eakin, F. Eakin and
D. Ammons dated December 30, 1997
*10.10 -- Form of Stock Option Agreement for certain options
granted by the Company to certain executives and other
employees dated December 30, 1997
*10.11 -- Form of Pledge and Security Agreement by and between the
Company and Bank One, N.A. as pledge agent
*12.1 -- Statement of computation of ratio of earnings to fixed
charges
**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 -- Powers of Attorney (included on each of the signature
pages)
*25.1 -- Statement of Eligibility of Bank One, N.A. dated January
14, 1998.
**27.1 -- Financial Data Schedule
</TABLE>
- ---------------
* Filed herewith
** Previously filed
<PAGE> 1
EXHIBIT 3.17
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION OF
NEWPARK SHIPBUILDING AND REPAIR, INC.
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act, Newpark Shipbuilding and Repair, Inc. (hereinafter referred to
as the "Corporation") adopts the following Articles of Amendment to its
Articles of Incorporation:
(1) NAME. The name of the Corporation is NEWPARK SHIPBUILDING AND
REPAIR, INC.
(2) AMENDMENT IS ADDITION. The following amendment to Article
Seven of the Articles of Incorporation is an addition to Article Seven of the
original Articles of Incorporation. The full text of each provision added to
Article Seven by this Articles of Amendment to the Articles of Incorporation
is as quoted below:
"Material Action Committee. There shall be a Material Action
Committee ("MAC") of the Board of Directors of the Corporation whose
members shall consist of at least two (2) directors of the
Corporation, one director of whom shall be the "Resources Designated
Director," as that term is defined in that certain Shareholders
Agreement dated the 29th day of August, 1996, so long as the
Corporation's indebtedness to its lender Heller Financial Leasing,
Inc. under that certain credit agreement dated the 29th day of
August, 1996, remains outstanding."
"The prior written unanimous consent of all of the members of the MAC
of the Board of Directors of the Corporation shall be required for the
Board of Directors of the Corporation to authorize the Corporation to
take, or cause or permit to be taken, any of the following material
actions:
(a) An order for relief to be entered with respect to the
Corporation or to commence a voluntary case under the
Bankruptcy Code or any applicable bankruptcy,
insolvency or other similar law now or hereafter in
effect, or consent to the entry of an order for
relief in an involuntary case or to the conversion of
an involuntary case to a voluntary case under any
such law or consent to the appointment of or
<PAGE> 2
taking possession by a receiver, trustee or other
custodian for all or a substantial part of its
property; or,
(b) To make any assignment for the benefit of creditors;
or,
(c) To adopt any resolution or otherwise authorize action
to approve any of the actions referred to above; or,
(d) To enter into or consummate any merger or
consolidation; or,
(e) To liquidate, wind-up or dissolve itself (or suffer
or permit any liquidation or dissolution); or,
(f) To convey, lease, sell, transfer or dispose of, all
or substantially all of its assets."
"All actions consented to by the MAC of the Board of Directors must be
submitted to the Board of Directors for further consideration and vote
of the Board of Directors."
"The foregoing provisions relating to material actions of the
Corporation shall not be amended or modified without the prior written
consent of the "Resources Designated Director," as that term is
defined in that certain Shareholders Agreement dated the 29th day of
August, 1996."
(3) ADOPTION. The above Amendment to the Articles of
Incorporation was adopted by the unanimous written consent of all of the
shareholders of the Corporation on the 29th day of August, 1996, to be
effective on that same date of adoption.
(4) SHARES. The number of shares of the Corporation outstanding
at the time of the adoption of this Amendment to the Articles of Incorporation
was 100,000. The number of shares entitled to vote thereon as a class was
100,000, all of which were common stock.
2
<PAGE> 3
(5) VOTES. All of the shareholders of the Corporation voted in
favor of this Articles of Amendment to the Articles of Incorporation by signing
a consent in writing adopting such amendments.
(6) ISSUED SHARES. This Articles of Amendment does not provide
for an exchange, reclassification, or cancellation of issued shares.
(7) STATED CAPITAL. The Articles of Amendment does not effect a
change in the amount of stated capital.
DATED: August 29, 1996.
NEWPARK SHIPBUILDING AND REPAIR, INC.
BY: /s/ DAVID AMMONS
---------------------------------
David Ammons, Secretary
3
<PAGE> 1
EXHIBIT 4.2
- --------------------------------------------------------------------------------
FIRST WAVE MARINE, INC.
as Issuer
NEWPARK SHIPBUILDING AND REPAIR, INC.
EAE SERVICES, INC.
EAE INDUSTRIES, INC.
NEWPARK MARINE FABRICATORS, INC.
LOUISIANA SHIP, INC.
as Subsidiary Guarantors
$90,000,000
____% SENIOR NOTES DUE 2008
-----------------
INDENTURE
Dated as of ________________, 1998
-----------------
BANK ONE, N.A.
as Trustee
---------------
<PAGE> 2
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
- ----------------- -----------------
<S> <C>
310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(5) . . . . . . . . . . . . . . . . . . . . . . . 7.10
(b) . . . . . . . . . . . . . . . . . . . . . . . . 7.3,7.10
(c) . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311(a) . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . . . . . N.A.
312 (a) . . . . . . . . . . . . . . . . . . . . . . . . 2.5
(b) . . . . . . . . . . . . . . . . . . . . . . . . 12.3
(c) . . . . . . . . . . . . . . . . . . . . . . . . 12.3
313 (a) . . . . . . . . . . . . . . . . . . . . . . . . 7.6
(b)(1) . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . 7.6,7.7
(c) . . . . . . . . . . . . . . . . . . . . . . . . 7.6,12.2
(d) . . . . . . . . . . . . . . . . . . . . . . . . 7.6
314 (a) . . . . . . . . . . . . . . . . . . . . . . . . 4.3,12.5
(b) . . . . . . . . . . . . . . . . . . . . . . . . 11.2
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . 12.4
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . 11.4,12.4
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . . . . . 11.3,11.4
(e) . . . . . . . . . . . . . . . . . . . . . . . . 12.5
(f) . . . . . . . . . . . . . . . . . . . . . . . . N.A.
315 (a) . . . . . . . . . . . . . . . . . . . . . . . . 7.1(b)
(b) . . . . . . . . . . . . . . . . . . . . . . . . 7.5,12.2
(c) . . . . . . . . . . . . . . . . . . . . . . . . 7.1(a)
(d) . . . . . . . . . . . . . . . . . . . . . . . . 7.1(c)
(e) . . . . . . . . . . . . . . . . . . . . . . . . 6.11
316 (a)(last sentence) . . . . . . . . . . . . . . . . . 2.9
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . 6.5
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . 6.4
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . 6.7
(c) . . . . . . . . . . . . . . . . . . . . . . . . 9.4
</TABLE>
ii
<PAGE> 3
<TABLE>
<S> <C>
317 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . 6.8
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . 6.9
(b) . . . . . . . . . . . . . . . . . . . . . . . . 2.4
318 (a) . . . . . . . . . . . . . . . . . . . . . . . . 12.1
(b) . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c) . . . . . . . . . . . . . . . . . . . . . . . . 12.1
</TABLE>
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
iii
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Other Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 1.3. Incorporation by Reference of Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . 16
Section 1.4. Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 2
THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.1. Form and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.2. Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.3. Trustee, Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.4. Paying Agent to Hold Money in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.5. Holder Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 2.6. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 2.7. Replacement Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.8. Outstanding Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 2.9. Treasury Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 2.10. Temporary Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 2.11. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 2.12. Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 2.13. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 2.14. CUSIP Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 3
REDEMPTION AND PREPAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.1. Notices to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.2. Selection of Notes to Be Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.3. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.4. Effect of Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.5. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.6. Notes Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.7. Optional Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.8. Mandatory Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
</TABLE>
iv
<PAGE> 5
<TABLE>
<S> <C>
ARTICLE 4
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.1. Payment of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.2. Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.3. Provisions of Reports and Other Information . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.4. Compliance Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.5. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.6. Stay, Extension and Usury Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.7. Limitation on Restricted Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.8. Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries. . . 34
Section 4.9. Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 4.10. Limitation on Asset Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 4.11. Limitation on Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 4.12. Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 4.13. Limitation on Issuance and Sale of Capital Stock of Restricted
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 4.14. Offer to Repurchase Upon Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 4.15. Limitation on Sale and Leaseback Transactions . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 4.16 Covenant with respect to Business Activities . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 4.17. Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 4.18. Pledge Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 5
SUCCESSORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 5.1. Merger, Consolidation, or Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 5.2. Successor Company Substituted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE 6
DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 6.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 6.2. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 6.3. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 6.4. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 6.5. Control by Majority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 6.6. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 6.7. Rights of Holders of Notes to Receive Payment . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 6.8. Collection Suit by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 6.9. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
</TABLE>
v
<PAGE> 6
<TABLE>
<S> <C>
Section 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 6.11. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE 7
TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 7.1. Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 7.2. Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 7.3. Individual Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 7.4. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 7.5. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 7.6. Reports by Trustee to Holders of the Notes . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 7.7. Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 7.8. Replacement of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 7.9. Successor Trustee by Merger, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 7.10. Eligibility; Disqualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 7.11. Preferential Collection of Claims Against Company . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE 8
DEFEASANCE AND DISCHARGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 8.1. Option to Effect Legal Defeasance or Covenant Defeasance . . . . . . . . . . . . . . . . . 55
Section 8.2. Legal Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 8.3. Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 8.4. Conditions to Legal or Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 8.5. Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 8.6. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 8.7. Repayment to Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 8.8. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 9.1. Without Consent of Holders of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 9.2. With Consent of Holders of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 9.3. Compliance with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 9.4. Revocation and Effect of Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 9.5. Notation on or Exchange of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 9.6. Trustee to Sign Amendments, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 9.7. Payments for Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
</TABLE>
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<TABLE>
<S> <C>
ARTICLE 10
SUBSIDIARY GUARANTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 10.1. Guarantees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 10.2. Subsidiary Guarantors May Consolidate, Etc., on Certain Terms . . . . . . . . . . . . . . . 65
Section 10.3. Limitation on Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 10.4. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 10.5. No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 10.6. Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 10.7. Release of Subsidiary Guarantor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 10.8. Execution of Supplemental Indenture by Future Restricted
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
ARTICLE 11
COLLATERAL AND SECURITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 11.1. Pledge Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 11.2. Recording and Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 11.3. Release of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 11.4. Certificate of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 11.5. Authorization of Actions to Be Taken by the Trustee Under the Pledge
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 11.6. Authorization of Receipt of Funds by the Trustee Under the Pledge
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 11.7. Termination of Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
ARTICLE 12
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 12.1. Trust Indenture Act Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 12.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 12.3. Communication by Holders of Notes with Other Holders of Notes . . . . . . . . . . . . . . . 73
Section 12.4. Certificate and Opinion as to Conditions Precedent . . . . . . . . . . . . . . . . . . . . 73
Section 12.5. Statements Required in Certificate or Opinion . . . . . . . . . . . . . . . . . . . . . . . 73
Section 12.6. Rules by Trustee and Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 12.7. No Personal Liability of Directors, Officers, Employees and Others . . . . . . . . . . . . 74
Section 12.8. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 12.9. No Adverse Interpretation of Other Agreements . . . . . . . . . . . . . . . . . . . . . . . 74
Section 12.10. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 12.11. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 12.12. Originals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 12.13. Table of Contents, Headings, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 12.14. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
</TABLE>
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<TABLE>
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EXHIBITS
Exhibit A FORM OF NOTE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Exhibit B CERTIFICATE OF TRANSFEROR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
</TABLE>
viii
<PAGE> 9
This INDENTURE, dated as of ____________, 1998, is by and among
First Wave Marine, Inc., a Delaware corporation (the "Company"), as issuer,
Newpark Shipbuilding and Repair, Inc., a Texas corporation, as an Initial
Subsidiary Guarantor, EAE Services, Inc., a Texas corporation, as an Initial
Subsidiary Guarantor, EAE Industries, Inc., a Texas corporation, as an Initial
Subsidiary Guarantor, Newpark Marine Fabricators, Inc., a Texas corporation, as
an Initial Subsidiary Guarantor, Louisiana Ship, Inc., a Texas corporation, as
an Initial Subsidiary Guarantor, and Bank One, N.A., as trustee (the
"Trustee").
The parties listed above agree as follows for the benefit of
each other and for the equal and ratable benefit of the Holders of the _____%
Senior Notes due 2008 (the "Notes").
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.1. DEFINITIONS.
"Acquired Indebtedness" means, with respect to any specified
Person, (i) Indebtedness of any other Person existing at the time such other
Person is merged with or into or becomes a Restricted Subsidiary of such
specified Person, including, without limitation, Indebtedness Incurred in
connection with, or in contemplation of, such other Person merging with or into
or becoming a Restricted Subsidiary of such specified Person and (ii)
Indebtedness secured by a Lien encumbering any asset acquired by such specified
Person.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise;
provided that beneficial ownership of 10% or more of the voting securities of a
Person shall be deemed to be control.
"Agent" means any Registrar or Paying Agent.
"Applicable Law", except as the context may otherwise require,
means all applicable laws, rules, regulations, ordinances, judgments, decrees,
injunctions, writs and orders of any court or governmental or congressional
agency or authority and rules, regulations, orders, licenses and permits of any
United States federal, state, municipal, regional, or other governmental body,
instrumentality, agency or authority.
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<PAGE> 10
"Asset Sale" means (a) the direct or indirect sale, lease,
license, conveyance or other disposition of any assets or rights (including,
without limitation, by way of a sale and leaseback or similar arrangement, by
merger or consolidation) by the Company or a Restricted Subsidiary (a
"disposition"), in one transaction or a series of transactions; provided that
the disposition of all or substantially all of the assets of the Company and
its Restricted Subsidiaries taken as a whole will be governed by the provisions
of Section 4.14 and/or Section 5.1 and not by the provisions of Section 4.10,
and (b) the issuance or disposition by the Company or any of its Restricted
Subsidiaries of Equity Interests of the Company's Restricted Subsidiaries.
Notwithstanding the foregoing, none of the following will be deemed an Asset
Sale: (i) a disposition of assets by the Company to a Restricted Subsidiary or
by a Restricted Subsidiary to the Company or to a Restricted Subsidiary; (ii)
an issuance of Equity Interests by a Restricted Subsidiary to the Company or to
a Restricted Subsidiary; (iii) a Restricted Payment that is permitted by
Section 4.7; (iv) dispositions in any fiscal year with Net Proceeds in the
aggregate of $1,000,000 or less; (v) any liquidation of any Cash Equivalent;
(vi) any disposition of defaulted receivables for collection; and (vii) the
grant of any Lien securing Indebtedness (or any foreclosure thereon) to the
extent that such Lien is granted in compliance with Section 4.12.
"Attributable Debt" in respect of a sale and leaseback
transaction means, at the time of determination, the present value (discounted
at the rate of interest implicit in such transaction, determined in accordance
with GAAP) of the obligation of the lessee for net rental payments during the
remaining term of the lease included in such sale and leaseback transaction
(including any period for which such lease has been extended or may, at the
option of the lessor, be extended).
"Bank Credit Agreement" means any senior revolving credit
facility governing Indebtedness for borrowed money owed by the Company or a
Restricted Subsidiary to banks, trust companies or other institutions that are
principally engaged in the business of lending money to businesses.
"Bankruptcy Law" means Title 11, United States Code, as may be
amended from time to time, or any similar federal or state law for the relief
of debtors.
"Board of Directors" means, with respect to any Person, the
Board of Directors of such Person, or any authorized committee of the Board of
Directors of such Person.
"Board Resolutions" means, with respect to any Person, a copy of
a resolution certified by the Secretary or an Assistant Secretary of such
Person to have been duly adopted by the Board of Directors of such Person and
to be in full force and effect on the date of such certification, and delivered
to the Trustee.
"Business Day" means any day other than a Saturday, Sunday,
public holiday or day on which banking institutions in New York (or, with
respect to any payments or transfers to be made by the Trustee or any Agent, as
applicable, in the city where such Trustee or Agent is located) are authorized
or obligated by law or executive order to close.
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<PAGE> 11
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital
lease that would at such time be required to be capitalized on a balance sheet
in accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation,
corporate stock, (ii) in the case of an association or business entity, any and
all shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership, partnership
interests (whether general or limited) and (iv) any other interest or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.
"Cash Equivalents" means (i) Government Securities having
maturities of not more than twelve months from the date of acquisition, (ii)
certificates of deposit and Eurodollar time deposits with maturities of twelve
months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each case
with any member bank of the U.S. Federal Reserve System having capital and
surplus in excess of $500,000,000, (iii) repurchase obligations with a term of
not more than seven days for underlying securities of the types described in
clause (i) above entered into with any financial institution meeting the
qualifications specified in clause (ii) above, and (iv) commercial paper having
the rating of at least P-1 from Moody's Investors Service, Inc., or any
successor to its rating business, or at least A-1 from Standard & Poor's
Ratings Group, or any successor to its rating business, and in each case
maturing within 180 days after the date of acquisition.
"Certificated Notes" means Notes issued in definitive, fully
registered form to beneficial owners of interests in the Global Note pursuant
to Section 2.06(a) hereof.
"Change of Control" means the occurrence of any of the
following: (i) the sale, lease, transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Company and its
Restricted Subsidiaries taken as a whole to any "person" (as such term is used
in Section 13(d)(3) of the Exchange Act) other than a Restricted Subsidiary;
(ii) the adoption of a plan relating to the liquidation or dissolution of the
Company; (iii) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than a Permitted Holder, becomes the
"beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under
the Exchange Act), directly or indirectly, of a greater percentage of the
voting stock of the Company than the percentage of the voting stock of the
Company held by the Permitted Holders; (iv) the first day on which the
Permitted Holders in the aggregate hold less than 35% of the voting stock of
the Company; or (v) the first day on which a majority of the members of the
Board of Directors of the Company are not Continuing Directors.
"Closing Date" means the date of original issuance of the Notes.
"Collateral" means the Pledged Securities and the proceeds
thereof.
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<PAGE> 12
"Commission" or "SEC" means the Securities and Exchange
Commission, and any successor thereto.
"Consolidated EBITDA" means, with respect to the Company for any
period, the sum of, without duplication, (i) the Consolidated Net Income of the
Company and its Restricted Subsidiaries for such period, plus (ii) to the
extent deducted in the computation of such Consolidated Net Income, the
Consolidated Interest Expense for such period, plus (iii) to the extent
deducted in the computation of such Consolidated Net Income, amortization or
write-off of deferred financing charges for such period, plus (iv) provision
for taxes based on income or profits for such period (to the extent such income
or profits were included in computing Consolidated Net Income for such period),
plus (v) to the extent deducted in the computation of such Consolidated Net
Income, consolidated depreciation, depletion, amortization and other noncash
charges of the Company and its Restricted Subsidiaries required to be reflected
as expenses on the books and records of the Company, minus (vii) cash payments
with respect to any nonrecurring, noncash charges previously added back
pursuant to clause (v), and excluding (viii) the impact of foreign currency
translations. Notwithstanding the foregoing, the provision for taxes based on
the income or profits of, and the depreciation and amortization and other
noncash charges of a Restricted Subsidiary shall be added to Consolidated Net
Income to compute Consolidated EBITDA only to the extent (and in the same
proportion) that the Net Income of such Subsidiary was included in calculating
the Consolidated Net Income of the Company and only if a corresponding amount
would be permitted at the date of determination to be dividended to the Company
by such Restricted Subsidiary without prior approval (unless such approval has
been obtained), pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Restricted Subsidiary or its stockholders.
"Consolidated Indebtedness" means, with respect to any Person as
of any date of determination, the sum, without duplication, of (i) the total
amount of Indebtedness of such Person and its Restricted Subsidiaries, plus
(ii) the aggregate liquidation value of all Disqualified Stock (and in the case
of a Restricted Subsidiary of the Company, preferred stock other than preferred
stock held by the Company or any of its Restricted Subsidiaries) of such
Person, in each case, determined on a consolidated basis in accordance with
GAAP.
"Consolidated Interest Coverage Ratio" means with respect to the
Company and its Restricted Subsidiaries for any period, the ratio of (i)
Consolidated EBITDA of the Company and its Restricted Subsidiaries for such
period to (ii) Consolidated Interest Expense of the Company and its Restricted
Subsidiaries for such period. In the event that the Company or any of its
Restricted Subsidiaries Incurs any Indebtedness (other than revolving credit
borrowings pursuant to Indebtedness already Incurred in accordance herewith) or
issues or redeems preferred stock subsequent to the commencement of the
four-quarter reference period for which the Consolidated Interest Coverage
Ratio is being calculated but on or prior to the date on which the event for
which the calculation of the Consolidated Interest Coverage Ratio is being made
(the "Calculation Date") , then the Consolidated Interest Coverage Ratio shall
be calculated giving pro forma effect to such Incurrence of Indebtedness, or
such issuance or redemption of preferred stock, as if the same had
4
<PAGE> 13
occurred at the beginning of the applicable four-quarter reference period. For
purposes of making the computation referred to above, (i) acquisitions that
have been made by the Company or any of its Restricted Subsidiaries, including
through mergers or consolidations and including any related financing
transactions, during the four-quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date shall be deemed to
have occurred on the first day of the four-quarter reference period, and (ii)
the Consolidated EBITDA attributable to discontinued operations, as determined
in accordance with GAAP, and operations or businesses disposed of during the
four quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date, shall be excluded as of the first day of the
four quarter reference period, and (iii) the Consolidated Interest Expense
attributable to discontinued operations, as determined in accordance with GAAP,
and operations or businesses disposed of during the four quarter reference
period or subsequent to such reference period and on or prior to the
Calculation Date, shall be excluded, but only to the extent that the
obligations giving rise to such Consolidated Interest Expense will not be
obligations of the Company or any of its Restricted Subsidiaries following the
Calculation Date.
"Consolidated Interest Expense" means, with respect to any
Person for any period, the sum, without duplication, of (i) the consolidated
interest expense of such Person and its Restricted Subsidiaries for such
period, whether paid or accrued (including, without limitation, amortization of
debt issuance costs and original issue discount, non-cash interest payments,
the interest component of any deferred payment obligations, the interest
component of all payments associated with Capital Lease Obligations, imputed
interest with respect to Attributable Debt, interest payments in respect of
Indebtedness of another Person that is Guaranteed by such Person or one of its
Restricted Subsidiaries or secured by a Lien on assets of such Person or one of
its Restricted Subsidiaries, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations), (ii) the consolidated
interest expense of such Person and its Restricted Subsidiaries that was
capitalized during such period, in each case, on a consolidated basis and in
accordance with GAAP, and (iii) the product of (A) the aggregate amount of
dividends paid (to the extent not accrued in a prior period) or accrued on
Disqualified Stock of the Company and its Restricted Subsidiaries or preferred
stock of the Company's Restricted Subsidiaries, to the extent such Disqualified
Stock or preferred stock is owned by Persons other than the Company and its
Restricted Subsidiaries and (B) a fraction, the numerator of which is one and
the denominator of which is one minus the then current combined federal, state,
local and foreign statutory tax rate of such Person, expressed as a decimal.
"Consolidated Net Income" means, with respect to any Person for
any period, the aggregate of the Net Income of such Person and its Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the specified Person as to which Consolidated Net
Income is being calculated, (ii) the Net Income of any Restricted Subsidiary
shall be excluded to the extent that the declaration or payment of dividends or
similar distributions by such Restricted Subsidiary of such Net Income would
not be permitted
5
<PAGE> 14
at the date of determination directly or indirectly, pursuant to the terms of
its charter and by-laws and all agreements, instruments, judgments, decrees,
orders, statutes, rules or governmental regulations applicable to such
Restricted Subsidiary or its stockholders, (iii) the Net Income (if positive)
of any Person acquired in a pooling of interests transaction for any period
prior to the date of such acquisition shall be excluded, and (iv) the
cumulative effect of a change in accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of
any date, the sum of (i) the consolidated equity of the common equity holders
of such Person and its consolidated Restricted Subsidiaries as of such date
plus (ii) the respective amounts reported on such Person's balance sheet as of
such date with respect to any series of preferred equity (other than
Disqualified Stock) that by its terms is not entitled to the payment of
dividends or other distributions, unless such dividends or other distributions
may be declared and paid only out of net earnings in respect of the year of
such declaration and payment, but only to the extent of any cash received by
such Person upon issuance of such preferred equity, less (x) all write-ups
(other than write-ups resulting from foreign currency translations and
write-ups of tangible assets of a going concern business made within 12 months
after the acquisition of such business) subsequent to the Closing Date in the
book value of any asset owned by such Person or a consolidated Restricted
Subsidiary of such Person, (y) all investments as of such date in Persons that
are not Restricted Subsidiaries (except, in each case, Permitted Investments),
and (z) all unamortized debt discount and expense and unamortized deferred
charges as of such date, all of the foregoing determined in accordance with
GAAP.
"Continuing Director" means, as of any date of determination,
any member of the Board of Directors of the Company who (i) was a member of
such Board of Directors on the Closing Date or (ii) was nominated for election
or elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board of Directors at the time of
such nomination of election.
"Corporate Trust Office of the Trustee" shall be at the address
of the Trustee specified in Section 12.2 hereof or such other address as to
which the Trustee may give notice to the Company.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator, custodian or similar official under any Bankruptcy Law.
"Default" means any event that is or with the passage of time or
the giving of notice or both would be an Event of Default.
"Depositary" means, with respect to the Notes issuable or issued
in whole or in part in global form, the Person specified in Section 2.3 hereof
as the Depositary with respect to the Notes, until a successor shall have been
appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depositary" shall mean or include such successor.
6
<PAGE> 15
"Disqualified Stock" means any Capital Stock that, by its terms
(or by the terms of any security into which it is convertible or for which it
is exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
date that is 91 days after the date on which the Notes mature.
"Eligible Receivables" means the trade receivables of the
Company and its Restricted Subsidiaries less the allowance for doubtful
accounts, each of the foregoing determined in accordance with GAAP.
"Equity Interests" means Capital Stock and all warrants, options
or other rights to acquire Capital Stock (but excluding any debt security that
is convertible into, or exchangeable for, Capital Stock).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"Existing Indebtedness" means Indebtedness of the Company and
its Restricted Subsidiaries in existence on the Closing Date pro forma after
giving effect to the offering and sale of the Notes and the use of proceeds
therefrom.
"Fair Market Value" means, with respect to any asset or
property, the sale value that would be obtained in an arm's-length transaction
between an informed and willing seller under no compulsion to sell and an
informed and willing buyer under no compulsion to buy; provided that if such
value exceeds $1,000,000, such determination shall be made in good faith by the
Board of Directors of the Company.
"GAAP" means generally accepted accounting principles in the
United States of America set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as have been
approved by a significant segment of the accounting profession, which are in
effect on the date of this Indenture.
"Government Securities" means direct obligations of, or
obligations fully guaranteed by, or participations in pools consisting solely
of obligations of or obligations guaranteed by, the United States of America
for the payment of which guarantee or obligations the full faith and credit of
the United States of America is pledged.
"Guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit and reimbursement agreements in respect thereof), of all or any part of
any Indebtedness.
7
<PAGE> 16
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest or currency exchange rate swap
agreements, interest or currency exchange rate cap agreements and interest or
currency exchange rate collar agreements and (ii) other agreements or
arrangements, in any case, designed to protect such Person against fluctuations
in interest or currency exchange rates (as appropriate, "Interest Rate Hedges"
and "Currency Hedges").
"Holder" or "Securityholder" means a Person in whose name a Note
is registered on the Register.
"Incur" means, with respect to any Indebtedness or other
obligation of any Person, to create, issue, incur (by conversion, exchange or
otherwise), assume, Guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to GAAP
or otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and "Incurrence," "Incurred," "Incurrable" and "Incurring"
shall have meanings correlative to the foregoing); provided, however, that a
change in GAAP that results in an obligation of such Person that exists at such
time, and is not theretofore classified as Indebtedness, becoming Indebtedness
shall not be deemed an Incurrence of such Indebtedness.
"Indebtedness" means, with respect to any Person, (a) any
liability of such Person, whether or not contingent (i) for borrowed money, or
under any reimbursement obligation relating to a letter of credit, bankers'
acceptance or note purchase facility; (ii) evidenced by a bond, note, debenture
or similar instrument (including a purchase money obligation); (iii) for the
payment of money relating to a Capital Lease Obligation; (iv) for or pursuant
to Disqualified Stock; (v) for or pursuant to preferred stock of any Restricted
Subsidiary of the Company (other than preferred stock held by the Company or
any of its Restricted Subsidiaries); (vi) representing the balance deferred and
unpaid of the purchase price of any property or services (except any such
balance that constitutes a trade payable or accrued liability in the ordinary
course of business that is not overdue by more than 90 days or is being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted); or (vii) under or in respect of Hedging Obligations; (b)
any liability of others described in the preceding clause (a) that such Person
has guaranteed, that is recourse to such Person or that is otherwise its legal
liability, or the payment of which is secured by (or for which the holder of
such liability has an existing right to be secured by) any Lien upon property
owned by such Person, even though such Person has not assumed or become liable
for the payment of such liability; and (c) any amendment, supplement,
modification, deferral, renewal, extension or refunding of any liability of the
types referred to in clauses (a) and (b) above. The amount of any non-interest
bearing or other discount Indebtedness shall be deemed to be the principal
amount thereof that would be shown on the balance sheet of the issuer dated
such date prepared in accordance with GAAP, but such Indebtedness shall be
deemed to have been Incurred only on the date of the original issuance thereof.
"Indenture" means this Indenture, as amended or supplemented
from time to time.
8
<PAGE> 17
"Initial Subsidiary Guarantors" means collectively Newpark
Shipbuilding and Repair, Inc., a Texas corporation, EAE Services, Inc., a Texas
corporation, EAE Industries, Inc., a Texas corporation, Newpark Marine
Fabricators, Inc., a Texas corporation, and Louisiana Ship, Inc., a Texas
corporation.
"Interest Payment Date" means each ________ and ____________ of
each year.
"Investments" means, with respect to any Person, all investments
by such Person in other Persons (including Affiliates) in the forms of direct
or indirect loans (including guarantees of Indebtedness or other obligations
(but excluding endorsements of negotiable instruments for collection in the
ordinary course of business)), advances or capital contributions (excluding
commission, travel and similar advances to directors, officers and employees
made in the ordinary course of business), purchases or other acquisitions (for
consideration) of Indebtedness, Equity Interests or other securities, together
with all items that are or would be classified as investments on a balance
sheet prepared in accordance with GAAP; provided that an acquisition of Equity
Interests or other securities by the Company or any of its Restricted
Subsidiaries for consideration consisting of common equity securities of the
Company shall not be deemed to be an Investment.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law (including any conditional sale or other title retention agreement, and any
lease in the nature thereof) .
"Net Income" means, with respect to any Person for any period,
the net income (loss) of such Person for such period, determined in accordance
with GAAP and before any reduction in respect of preferred stock dividends,
excluding, however, (i) any gain (but not loss), together with any related
provision for taxes on such gain (but not loss), realized in connection with
(a) any sales of assets (including, without limitation, dispositions pursuant
to sale and leaseback transactions) other than in the ordinary course of
business or (b) the disposition of any securities by such Person or any of its
Restricted Subsidiaries or the extinguishment of any Indebtedness of such
Person or any of its Restricted Subsidiaries, (ii) any extraordinary or
non-recurring gain (but not loss), together with any related provision for
taxes on such extraordinary or non-recurring gain (but not loss), and (iii)
unrealized foreign exchange gains (but not losses).
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, (i) Cash Equivalents received as consideration
in such Asset Sale, (ii) any cash received upon the disposition of any non-cash
consideration received in such Asset Sale, and (iii) any assumption of
liabilities deemed to constitute "cash" for purposes of Section 4.10), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions), any
relocation expenses incurred as a result thereof, any taxes paid or payable by
the Company or any of its Restricted Subsidiaries as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be paid
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<PAGE> 18
to any Person (other than the Company and its Restricted Subsidiaries) having a
Lien on the assets subject to the Asset Sale, amounts required to be paid to
any Person (other than the Company or any Restricted Subsidiary) owning a
beneficial interest in the assets subject to the Asset Sale, and any reserve
for adjustment in respect of the sale price of such asset or assets established
in accordance with GAAP (provided that the amount of any such reserve shall be
deemed to constitute Net Proceeds at the time such reserve shall have been
released or is not otherwise required to be retained for such purpose).
"Non-Recourse Debt" means Indebtedness (i) as to which neither
the Company nor any of its Restricted Subsidiaries (a) provides credit support
of any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor
or otherwise), or (c) constitutes the lender, (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such
other Indebtedness or cause the payment thereof to be accelerated or payable
prior to its stated maturity and (iii) as to which the lenders have expressly
waived any recourse which they may have, in law, equity or otherwise, whether
based on misrepresentation, control, ownership or otherwise, to the Company or
any of its Restricted Subsidiaries, including, without limitation, a waiver of
the benefits of the provisions of Section 1111(b) of the Bankruptcy Law.
"Note Custodian" means the Trustee, as custodian with respect to
the Notes in global form, or any successor entity thereto.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officer" means, with respect to any Person, the chief executive
officer, the president, the chief operating officer, the chief financial
officer, the chief accounting officer, the treasurer, any assistant treasurer,
the controller, the secretary, any assistant secretary or any vice-president of
such Person.
"Officers' Certificate" means a certificate signed on behalf of
a Person by two Officers of such Person, one of whom must be the principal
executive officer, the principal financial officer or the principal accounting
officer of such Person, that meets the requirements of Section 12.5 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
12.5 hereof. The counsel may be counsel to the Company, any Subsidiary of the
Company or the Trustee.
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<PAGE> 19
"Permitted Holders" means (i) Samuel F. Eakin, Frank W. Eakin
and David B. Ammons; (ii) each of their beneficiaries, estates, spouse and
lineal descendants, legal representatives of any of the foregoing and the
trustee of any bona fide trust of which any of the foregoing are the sole
beneficiaries or grantors and (iii) all Affiliates controlled by the
individuals named in clause (i) (provided that, for purposes of this clause
(iii) only, the proviso set forth in the definition of the term "Affiliate"
shall be deemed modified to provide that beneficial ownership of 50% or more of
the voting securities of a Person shall constitute, and shall be necessary to
constitute, control).
"Permitted Investments" means (i) any Investment in the Company
(other than the purchase of any Equity Interests of the Company) or in a
Restricted Subsidiary of the Company; (ii) any Investment in Cash Equivalents;
(iii) any Investment by the Company or any of its Restricted Subsidiaries in a
Person engaged in the Shipyard Business if, as a result of such Investment, (A)
such Person becomes a Restricted Subsidiary of the Company or (B) such Person
is merged, consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or a
Restricted Subsidiary of the Company; (iv) any Investment in Government
Securities in accordance with the provisions of the Pledge Agreement; (v)
Investments the payment for which consists exclusively of Equity Interests
(excluding Disqualified Stock) of the Company; (vi) Investments in shares of
money market mutual or similar funds having assets in excess of $500,000,000;
and (vii) Investments in negotiable instruments held for collection in the
ordinary course of business and lease, utility and similar deposits.
"Permitted Liens" means (i) Liens on receivables securing
Permitted Indebtedness Incurred pursuant to clause (i) of the definition of such
term; (ii) Liens in favor of the Company and/or its Restricted Subsidiaries;
(iii) Liens on property of a Person existing at the time such Person is merged
into or consolidated with the Company or any of its Restricted Subsidiaries,
provided that such Liens were in existence prior to the contemplation of such
merger or consolidation and do not extend to any assets other than those of the
Person merged into or consolidated with the Company or any such Restricted
Subsidiary; (iv) Liens securing any Acquired Indebtedness and which exist at the
time of acquisition thereof by the Company or any of its Restricted
Subsidiaries, provided that such Liens were in existence prior to the
contemplation of such acquisition; (v) Liens arising under this Indenture in
favor of the Trustee; (vi) Liens existing on the Closing Date; (vii) Liens
arising by reason of (1) any judgment, decree or order of any court not
constituting an Event of Default; (2) taxes not yet delinquent or which are
being contested in good faith by appropriate proceedings which suspend the
collection thereof, promptly instituted and diligently conducted, and for which
adequate reserves have been established to the extent required by GAAP; (3)
security for payment of workers' compensation or other insurance; (4) good faith
deposits in connection with tenders, leases and contracts (other than contracts
for the payment of money), bids, licenses, performance or similar bonds and
other obligations of a like nature, in the ordinary course of business; (5)
zoning restrictions, easements, licenses, reservations, provisions, covenants,
conditions, waivers, restrictions on the use of property or minor irregularities
of title (and with respect to leasehold interests, mortgages, obligations, Liens
and other encumbrances incurred, created, assumed or permitted to exist and
arising by, through or under a landlord or owner of the leased property, with or
without consent of the lessees), none of which materially impairs the use of any
parcel of property material
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<PAGE> 20
to the operation of the business of the Company or any Restricted Subsidiary or
the value of such property for the purpose of such business; (6) deposits to
secure public or statutory obligations or in lieu of surety or appeal bonds;
(7) surveys, exceptions, title defects, encumbrances, easements, reservations
of, or rights of others for, rights of way, sewers, electric lines, telegraph
or telephone lines and other similar purposes or zoning or other restrictions
as to the use of real property not interfering with the ordinary conduct of the
business of the Company or any of its Restricted Subsidiaries; or (8) operation
of law or statute and incurred in the ordinary course of business, including
without limitation, those in favor of mechanics, materialmen, suppliers,
laborers or employees, and, if securing sums of money, for sums which are not
yet delinquent or are being contested in good faith by appropriate proceedings
which suspend the collection thereof, promptly instituted and diligently
conducted, and for which adequate reserves have been established to the extent
required by GAAP; (viii) Liens created by the Pledge Agreement; (ix) Liens
resulting from the deposit of funds or Government Securities in trust for the
purpose of decreasing or defeasing Indebtedness of the Company and its
Restricted Subsidiaries so long as such deposit of funds or Government
Securities and such decreasing or defeasing of Indebtedness are permitted under
Section 4.7; (x) Liens securing obligations in a maximum aggregate amount not
to exceed $5,000,000; and (xi) any extension, renewal or replacement (or
successive extensions, renewals or replacements), in whole or in part, of any
Lien referred to in the foregoing clauses (iii), (iv) and (vi) above; provided
that the principal amount of the Indebtedness secured thereby shall not exceed
the principal amount of Indebtedness secured thereby immediately prior to the
time of such extension, renewal or replacement, and that such extension,
renewal or replacement Lien shall be limited to all or a part of the property
that secured the Lien so extended, renewed or replaced (plus improvements on
such property).
"Permitted Refinancing Indebtedness" means any Indebtedness of
the Company or any of its Restricted Subsidiaries issued in exchange for, or
the net proceeds of which are used by such Person to extend, refinance, renew,
replace, defease or refund other Indebtedness of such Person ("Old
Indebtedness"); provided that: (i) the principal amount (or accreted value, if
applicable) of such Permitted Refinancing Indebtedness does not exceed the
principal amount (or accreted value, if applicable) of the Old Indebtedness;
(ii) such Permitted Refinancing Indebtedness has a final maturity date equal to
or later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of, the
Old Indebtedness; (iii) if the Old Indebtedness is subordinated in right of
payment to the Notes, such Permitted Refinancing Indebtedness is subordinated
in right of payment to the Notes on terms at least as favorable to the Holders
as those contained in the documentation governing the Old Indebtedness; (iv)
such Permitted Refinancing Indebtedness is on terms that are no more
restrictive, as a whole, than those governing such Old Indebtedness; and (v)
such Permitted Refinancing Indebtedness is Incurred only by the Company or the
Restricted Subsidiary that is the obligor on the Old Indebtedness.
"Person" means any individual, corporation, limited liability
company, partnership, limited partnership, joint venture, association,
joint-stock company, trust, unincorporated organization or government or any
agency or political subdivision thereof.
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<PAGE> 21
"Pledge Account" means an account established with the Trustee
pursuant to the terms of the Pledge Agreement for the deposit of the Pledged
Securities purchased by the Company with a portion of the proceeds from the
sale of the Notes.
"Pledge Agreement" means the Pledge and Security Agreement,
dated as of the Closing Date, by and among the Company, the Trustee and the
Pledge Agent named therein, governing the disbursement of funds from the Pledge
Account, as such may be amended from time to time pursuant to the terms
thereof.
"Pledged Securities" means the securities purchased with a
portion of the proceeds from the sale of the Notes, which shall consist of
Government Securities, to be deposited in the Pledge Account.
"Public Equity Offering" means an underwritten public offering
for cash by the Company of its Capital Stock (other than Disqualified Stock) to
any Person other than a Subsidiary of the Company pursuant to a registration
statement that has been declared effective by the Commission (other than a
registration statement on Form S-8 or any successor form or otherwise relating
to equity securities issuable under any employee benefit plan of the Company).
"Responsible Officer," when used with respect to the Trustee,
means any officer within the Corporate Trust Administration of the Trustee (or
any successor group of the Trustee) or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate
trust matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"Restricted Investment" means an Investment other than a
Permitted Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of such
Person that is not an Unrestricted Subsidiary.
"Securities Act" means the Securities Act of 1933, as amended.
"Shipyard Business" means the business of the provision of
construction, repair, fabrication, labor and environmental services to the
maritime, transportation and oil field industries, together with all activities
ancillary thereto.
"Subordinated Indebtedness" means Indebtedness of the Company
(or a Restricted Subsidiary) that is expressly subordinated in right of payment
to the Notes (or a Subsidiary Guarantee, as appropriate).
"Subsidiary" means, with respect to any Person, (i) any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of Capital Stock
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<PAGE> 22
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by such Person or one or more of the other
Subsidiaries of such Person (or a combination thereof) and (ii) any partnership
(a) the sole general partner or the managing general partner of which is such
Person or a Subsidiary of such Person or (b) the only general partners of which
are such Person or of one or more Subsidiaries of such Person (or any
combination thereof). Unless indicated to the contrary, "Subsidiary" refers to
a Subsidiary of the Company.
"Subsidiary Guarantee" means an unconditional guaranty of the
Notes and this Indenture given by any Restricted Subsidiary or other Person
pursuant to the terms of this Indenture or any supplement hereto.
"Subsidiary Guarantors" means (i) as of the Closing Date, the
Initial Subsidiary Guarantors, and (ii) thereafter, any other Restricted
Subsidiary that becomes a guarantor of the Notes in compliance with the
provisions of this Indenture and executes a supplemental indenture agreeing to
be bound by the terms of this Indenture; in each case until such time, if any,
as such Restricted Subsidiary is released from the Subsidiary Guarantee as
permitted by this Indenture.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) and the rules and regulations thereunder, as in effect on the
date on which this Indenture is qualified under the TIA (except as provided in
Sections 9.1(f) and 9.3 hereof).
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"Unrestricted Subsidiary" means any Subsidiary that is
designated by the Board of Directors of the Company as an Unrestricted
Subsidiary pursuant to a Board Resolution of the Company, but only to the
extent that such Subsidiary (i) has no Indebtedness other than Non-Recourse
Debt, (ii) does not own any Equity Interests of, or own or hold any Lien on,
any property of the Company or any Restricted Subsidiary of the Company (other
than any Subsidiary of the Subsidiary to be so designated), (iii) has not, and
the Subsidiaries of such Subsidiary have not at the time of designation, and
does not thereafter, Incur any Indebtedness pursuant to which the lender has
recourse to any of the assets of the Company or any of its Restricted
Subsidiaries, (iv) is not party to any material agreement, contract,
arrangement or understanding with the Company or any of its Restricted
Subsidiaries unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Company or such Restricted
Subsidiary than those that might be obtained at the time from Persons who are
not Affiliates of the Company, (v) is a Person with respect to which neither
the Company nor any of its Restricted Subsidiaries has any direct or indirect
obligation (a) to subscribe for additional Equity Interests or (b) to maintain
or preserve such Person's financial condition or to cause such Person to
achieve any specified levels of operating results, (vi) has not guaranteed or
otherwise directly or indirectly provided credit support for any Indebtedness
of the Company or any of its Restricted Subsidiaries and (vii) has at least one
director
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<PAGE> 23
on its board of directors that is not a director or executive officer of the
Company or any of its Restricted Subsidiaries and has at least one executive
officer that is not a director or executive officer of the Company or any of
its Restricted Subsidiaries. Any such designation by the Board of Directors of
the Company shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the Board Resolution of the Company giving effect to such
designation and an Officers' Certificate certifying that (i) such designation
complied with the foregoing conditions, (ii) such designation was permitted by
Section 4.7, (iii) immediately after giving effect to such designation, the
Company could Incur at least $1.00 of additional Indebtedness pursuant to the
Consolidated Interest Coverage Ratio test set forth in Section 4.9(a), and (iv)
no Default or Event of Default would be in existence immediately following such
designation. If, at any time, any Unrestricted Subsidiary would fail to meet
the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter
cease to be an Unrestricted Subsidiary for purposes of this Indenture and any
Indebtedness, Liens or agreements of such Subsidiary shall be deemed to be
Incurred or created by a Restricted Subsidiary of the Company as of such date
(and, if such Indebtedness, Liens or agreements are not permitted to be
Incurred or created as of such date under the covenants described in Article IV
of this Indenture, the Company shall be in default of such covenants). The
Board of Directors of the Company may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary, provided that such designation shall
be deemed to be an Incurrence of Indebtedness and a creation of Liens and
agreements by a Restricted Subsidiary of the Company of any outstanding
Indebtedness, Liens or agreements of such Unrestricted Subsidiary and such
designation shall only be permitted if (i) such Indebtedness, Liens and
agreements are permitted under the covenants described in Article IV of this
Indenture, and (ii) no Default or Event of Default would be in existence
immediately following such designation.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a
Restricted Subsidiary of such Person all of the outstanding Capital Stock or
other ownership interests of which (other than directors' qualifying shares)
shall at the time be owned by such Person or by one or more Wholly Owned
Restricted Subsidiaries of such Person.
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<PAGE> 24
1.2. SECTION OTHER DEFINITIONS.
<TABLE>
<CAPTION>
Defined in
Term Section
---- ----------
<S> <C>
"Affiliate Transaction" . . . . . . . . . . . . . . . . . . . 4.11
"Asset Sale Offer" . . . . . . . . . . . . . . . . . . . . . . 4.10(b)
"Change of Control Offer" . . . . . . . . . . . . . . . . . . 4.14(a)
"Change of Control Payment" . . . . . . . . . . . . . . . . . 4.14(a)
"Change of Control Payment Date" . . . . . . . . . . . . . . . 4.14(b)
"Covenant Defeasance" . . . . . . . . . . . . . . . . . . . . 8.3
"Discharge" . . . . . . . . . . . . . . . . . . . . . . . . . 8.5
"DTC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(b)
"DTC Participants" . . . . . . . . . . . . . . . . . . . . . . 2.1(b)
"Event of Default" . . . . . . . . . . . . . . . . . . . . . . 6.1
"Excess Proceeds" . . . . . . . . . . . . . . . . . . . . . . 4.10(b)
"Global Note" . . . . . . . . . . . . . . . . . . . . . . . . 2.1(a)
"Legal Defeasance" . . . . . . . . . . . . . . . . . . . . . . 8.2
"Paying Agent" . . . . . . . . . . . . . . . . . . . . . . . . 2.3
"Payment Default" . . . . . . . . . . . . . . . . . . . . . . 6.1(e)
"Permitted Indebtedness" . . . . . . . . . . . . . . . . . . . 4.9(b)
"Register" . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
"Registrar" . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
"Restricted Payments" . . . . . . . . . . . . . . . . . . . . 4.7(a)
"SEC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1 ("Commission")
</TABLE>
SECTION 1.3. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the
following meanings:
"indenture securities" means the Notes;
"indenture security holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee;
"obligor" on the Notes means the Company and any successor
obligor upon the Notes.
All other terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule under
the TIA have the meanings so assigned to them.
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<PAGE> 25
SECTION 1.4. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and in the
plural include the singular;
(e) provisions apply to successive events and
transactions;
(f) references to sections of or rules under the Exchange
Act or the Securities Act shall be deemed to include substitute, replacement of
successor sections or rules adopted by the SEC from time to time; and
(g) "herein," "hereof" and other words or similar import
refer to this Indenture as a whole (as amended or supplemented from time to
time) and not to any particular Article, Section or other subdivision.
ARTICLE 2
THE NOTES
SECTION 2.1. FORM AND DATING.
(a) General Form of Notes. The Notes and the Trustee's
certificate of authentication shall be substantially in the form of Exhibit A
hereto, which Exhibit is part of this Indenture. The Notes may have notations,
legends or endorsements required by law, stock exchange rule or usage. Each
Note shall be dated the date of its authentication. The Notes shall be issued
only in registered form without coupons and only in minimum denominations of
$1,000 and integral multiples thereof. The terms and provisions contained in
the Notes shall constitute, and are hereby expressly made, a part of this
Indenture and the Company and the Trustee, by their execution and delivery of
this Indenture, expressly agree to such terms and provisions and to be bound
thereby. The Notes shall be issued initially in the form of a permanent,
global note in definitive, fully registered form, without coupons,
substantially in the form of Exhibit A hereto (including the text and schedule
called for by footnotes 1 and 2 thereto) (the "Global Note"). Upon issuance,
such Global Note shall be duly executed by the Company and authenticated by the
Trustee as hereinafter provided and deposited with the Trustee as custodian for
the Depositary. Any Certificated Note that may be issued pursuant to Section
2.06(a) hereof, shall be issued in the form of a note in definitive, fully
registered form, without coupons, substantially in the form set forth in
Exhibit A hereto (excluding the text and schedule called for by footnotes 1 and
2 thereto). Upon issuance, any such
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<PAGE> 26
Certificated Note shall be duly executed by the Company and authenticated by
the Trustee as hereinafter provided.
(b) Form of Global Notes. Each Global Note (i) shall
represent such portion of the outstanding Notes as shall be specified therein,
(ii) shall provide that it shall represent the aggregate amount of outstanding
Notes from time to time endorsed thereon and that the aggregate amount of
outstanding Notes represented thereby may from time to time be reduced or
increased, as appropriate, to reflect exchanges and redemptions, (iii) shall be
registered in the name of the Depositary or its nominee, duly executed by the
Company and authenticated by the Trustee as provided herein, for credit to the
respective accounts of the Holders (or such accounts as they may direct) at the
Depositary, (iv) shall be delivered by the Trustee or its Agent to the
Depositary or a Note Custodian pursuant to the Depositary's instructions and
(v) shall bear a legend substantially to the following effect:
"Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), New York, New
York, to the Company or its agent for registration of transfer, exchange or
payment, and any certificate issued is registered in the name of Cede & Co. or
such other name as is required by an authorized representative of DTC (and any
payment hereon is made to Cede & Co. or to such other entity as is requested by
an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co., has an interest herein."
Members of, or participants in, the Depositary ("DTC Participants") shall have
no rights under this Indenture with respect to any Global Note held on their
behalf by the Depositary, and the Depositary may be treated by the Company, the
Trustee, and any agent of the Company or the Trustee as the absolute owner of
such Global Note for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee, or any agent of the
Company or the Trustee from giving effect to any written certification, proxy
or other authorization furnished to the Depositary or impair, as between the
Depositary and its agent members, the operation of customary practices
governing the exercise of the rights of a Holder of any Note.
Whenever, as a result of an optional redemption of Notes by
the Company, a Change of Control Offer, an Asset Sale Offer or an exchange
pursuant to the second sentence of Section 2.06(a) hereof, a Global Note is
redeemed, repurchased or exchanged in part, such Global Note shall be
surrendered by the Holder thereof to the Trustee who shall cause an adjustment
to be made to Schedule A thereof so that the principal amount of such Global
Note will be equal to the portion of such Global Note not redeemed, repurchased
or exchanged and shall thereafter return such Global Note to such Holder,
provided that any such Global Note shall be in a principal amount of $1,000 or
an integral multiple thereof.
(c) Form of Certificated Notes. Certificated Notes may
be produced in any manner determined by the Officers of the Company executing
such Notes, as evidenced by their
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execution of such Notes. The Trustee must register Certificated Notes so
issued in the name of, and cause the same to be delivered to, such Person (or
its nominee). Except as provided in Section 2.6, any Person having a
beneficial interest in the Global Note may not exchange such beneficial
interest for fully Certificated Notes in duly registered form.
(d) Provisions Applicable to Forms of Notes. The Notes
may also have such additional provisions, omissions, variations or
substitutions as are not inconsistent with the provisions of this Indenture,
and may have such letters, numbers or other marks of identification and such
legends or endorsements placed thereon as may be required to comply with this
Indenture, any Applicable Law or with any rules made pursuant thereto or with
the rules of any securities exchange or governmental agency or as may be
determined consistently herewith by the Officers of the Company executing such
Notes, as conclusively evidenced by their execution of such Notes. All Notes
shall be otherwise substantially identical except as provided herein.
Subject to the provisions of this Article 2, a registered
Holder of a beneficial interest in a Global Note may grant proxies and
otherwise authorize any Person to take any action that a Holder is entitled to
take under this Indenture or the Notes.
SECTION 2.2. EXECUTION AND AUTHENTICATION.
An Officer of the Company shall sign the Notes for the Company
by manual or facsimile signature. The Company's seal may be reproduced on the
Notes and may be in facsimile form.
If an Officer of the Company whose signature is on a Note no
longer holds that office at the time a Note is authenticated, the Note shall
nevertheless be valid.
A Note shall not be valid or obligatory for any purpose or
entitled to the benefits of this Indenture until authenticated by the manual
signature of the Trustee or its authenticating agent. The signature shall be
conclusive evidence that the Note has been authenticated under this Indenture.
The Trustee shall, upon the delivery to the Trustee of a
written order of the Company signed by two Officers, from time to time,
authenticate Notes for original issue up to an aggregate principal amount of
$90,000,000. The aggregate principal amount of Notes outstanding at any time
may not exceed such amount except as provided in Section 2.7 hereof.
The Trustee may appoint an authenticating agent to
authenticate Notes. An authenticating agent may authenticate Notes whenever
the Trustee may do so. Each reference in this Indenture to authentication by
the Trustee includes authentication by such agent. An authenticating agent has
the same rights as an Agent to deal with the Company or an Affiliate of the
Company.
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SECTION 2.3. TRUSTEE, REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Notes may
be presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent").
The Registrar shall keep a register ("Register") of the Notes and of their
transfer and exchange. The Company may also from time to time appoint one or
more co-registrars and one or more additional paying agents. The term
"Registrar" includes any co-registrar and the term "Paying Agent" includes any
additional paying agent. The Company may change any Paying Agent or Registrar
upon notice to the Holders. The Company shall notify the Trustee in writing of
the name and address of any Agent not a party to this Indenture. If the
Company fails to appoint or maintain another entity as Registrar or Paying
Agent, the Trustee shall act, subject to the last paragraph of this Section
2.3, as such. The Company or any of its Subsidiaries may act as Paying Agent
or Registrar; provided, however, that none of the Company, its Subsidiaries or
the Affiliates of the foregoing shall act (i) as Paying Agent in connection
with any redemption, offer to purchase, discharge or defeasance, as otherwise
specified in this Indenture, and (ii) as Paying Agent or Registrar if a Default
or Event of Default has occurred and is continuing.
The Company hereby appoints Bank One, N.A., at its Corporate
Trust Office, as the Trustee hereunder and Bank One, N.A., hereby accepts such
appointment. The Trustee shall have the powers and authority granted to and
conferred upon it in the Notes and hereby and such further powers and authority
to act on behalf of the Company as may be mutually agreed upon by the Company
and the Trustee, and the Trustee shall keep a copy of this Indenture available
for inspection during normal business hours at its Corporate Trust Office.
The Company initially appoints DTC to act as Depositary with
respect to the Global Notes.
The Company initially appoints the Trustee to act as the
Registrar and Paying Agent and to act as Note Custodian with respect to the
Global Notes.
All of the terms and provisions with respect to such powers
and authority contained in the Notes are subject to and governed by the terms
and provisions hereof.
The Trustee may resign as Registrar or Paying Agent upon 30
days prior written notice to the Company.
SECTION 2.4. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of the Holders and the Trustee all money held by the Paying Agent for
the payment of principal of, premium, if any, and interest on the Notes, and
shall notify the Trustee of any default by the Company in making any such
payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by
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<PAGE> 29
it to the Trustee. The Company at any time may require a Paying Agent to pay
all money held by it to the Trustee. Upon payment of all such money over to
the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall
have no further liability for the money. If the Company or a Subsidiary acts
as Paying Agent, it shall segregate and hold in a separate trust fund for the
benefit of the Holders all money held by it as Paying Agent. Upon any
bankruptcy or reorganization proceedings relating to the Company, the Trustee
shall serve as Paying Agent for the Notes.
SECTION 2.5. HOLDER LISTS.
The Trustee shall preserve in as current a form as is
reasonably practicable to it the most recent list available to it of the names
and addresses of all Holders and shall otherwise strictly comply with TIA
Section 312(a). If the Trustee is not the Registrar, the Company shall
furnish to the Trustee at least ten Business Days before each Interest Payment
Date and at such other times as the Trustee may request in writing, a list in
such form and as of such date as the Trustee may require of the names and
addresses of the Holders of Notes and the Company shall otherwise strictly
comply with TIA Section 312(a).
SECTION 2.6. TRANSFER AND EXCHANGE.
(a) The Global Note shall be exchanged by the Company for
one or more Certificated Notes if (a) the Depositary (i) has notified the
Company that it is unwilling or unable to continue as, or ceases to be, a
clearing agency registered under Section 17A of the Exchange Act and (ii) a
successor to the Depositary registered as a clearing agency under Section 17A
of the Exchange Act is not able to be appointed by the Company within 90
calendar days or (b) the Depositary is at any time unwilling or unable to
continue as Depositary and a successor to the Depositary is not able to be
appointed by the Company within 90 calendar days. If an Event of Default
occurs and is continuing, the Company shall, at the request of the Holder
thereof, exchange all or part of the Global Note for one or more Certificated
Notes; provided that the principal amount of each of such Certificated Notes
and such Global Note, after such exchange, shall be $1,000 or an integral
multiple thereof. In addition, the Holder of a beneficial interest in the
Global Note may at any time exchange such interest for a Certificated Note in a
principal amount of $1,000 or an integral multiple thereof. Whenever a Global
Note is exchanged as a whole for one or more Certificated Notes, such Global
Note shall be surrendered by the Holder thereof to the Trustee for
cancellation. Whenever a Global Note is exchanged in part for one or more
Certificated Notes pursuant to this Section 2.06(a), it shall be surrendered by
the Holder thereof to the Trustee and the Trustee shall make the appropriate
notations thereon pursuant to Section 2.1(b) hereof. All Certificated Notes
issued in exchange for a Global Note or any portion thereof shall be registered
in such names, and delivered, as the Depositary shall instruct the Trustee.
(b) A Holder may transfer a Note only upon the surrender
of such Note for registration of transfer. No such transfer shall be effected
until, and the transferee shall succeed to the rights of a Holder only upon,
final acceptance and registration of the transfer in the Register by the
Registrar. When Notes are presented to the Registrar with a request to
register the transfer of,
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or to exchange, such Notes, the Registrar shall register the transfer or make
such exchange as requested if its requirements for such transactions and any
applicable requirements hereunder are satisfied. To permit registrations of
transfers and exchanges, the Company shall execute and the Trustee shall
authenticate Certificated Notes at the Registrar's request.
(c) The Company shall not be required to make and the
Registrar need not register transfers or exchanges of Certificated Notes (i)
selected for redemption (except, in the case of Certificated Notes to be
redeemed in part, the portion thereof not to be redeemed) and (ii) for a period
of 15 calendar days before a selection of Notes to be redeemed.
(d) No service charge shall be made for any registration
of transfer or exchange of Notes, but the Company may require payment by
Holders of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any registration of transfer of Notes.
(e) All Notes issued upon any registration of transfer or
exchange pursuant to the terms of this Indenture will evidence the same debt
and will be entitled to the same benefits under this Indenture as the Notes
surrendered for such registration of transfer or exchange.
(f) Any Holder of a Global Note shall, by acceptance of
such Global Note, agree that transfers of beneficial interests in such Global
Note may be effected only through a book entry system maintained by such Holder
(or its agent), and that ownership of a beneficial interest in the Notes
represented thereby shall be required to be reflected in book entry form.
Transfers of a Global Note shall be limited to transfers in whole and not in
part, to the Depositary, its successors, and their respective nominees.
Interests of beneficial owners in a Global Note shall be transferred in
accordance with the rules and procedures of the Depositary (or its successors).
SECTION 2.7. REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee, or the
Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Note, the Company shall, upon the written
request of the Holder thereof, issue and the Trustee, upon the written order of
the Company signed by two Officers of the Company, shall authenticate a
replacement Note if the Trustee's requirements are met. If required by the
Trustee or the Company, an indemnity bond must be supplied by such Holder that
is sufficient in the judgment of the Trustee and the Company to protect the
Company, the Trustee, any Agent and any authenticating agent from any loss that
any of them may suffer if a Note is replaced. The Company may charge for its
expenses in replacing a Note.
Every replacement Note is an additional obligation of the
Company and shall be entitled to all of the benefits of this Indenture equally
and proportionately with all other Notes duly issued hereunder.
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The provisions of this Section 2.7 are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.8. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes
authenticated by the Trustee except for those canceled by it (or its agent),
those delivered to it (or its agent) for cancellation, those reductions in the
interest in a Global Note effected by the Trustee in accordance with the
provisions hereof, and those described in this Section as not outstanding.
Except as set forth in Section 2.9 hereof, a Note does not cease to be
outstanding because the Company or an Affiliate of the Company holds the Note.
If a Note is replaced pursuant to Section 2.7 hereof, it
ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced Note (other than a mutilated Note surrendered for
replacement) is held by a bona fide purchaser (as such term is defined in
Section 8-302 of the Uniform Commercial Code as in effect in the State of New
York).
If the principal amount of any Note is considered paid under
Section 4.1 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than the Company, a Subsidiary or
an Affiliate of any thereof) holds, on a redemption date or maturity date,
money sufficient to pay Notes payable on that date, then on and after that date
such Notes shall be deemed to be no longer outstanding and shall cease to
accrue interest.
SECTION 2.9. TREASURY NOTES.
In determining whether the Holders of the required principal
amount of Notes have concurred in any direction, waiver or consent, Notes owned
by the Company, or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company,
shall be considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes that a Responsible Officer of the
Trustee has actual knowledge are so owned shall be so disregarded.
SECTION 2.10. TEMPORARY NOTES.
Until definitive Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Notes upon a written order
of the Company signed by two Officers of the Company. Temporary Notes shall be
substantially in the form of definitive Notes but may have variations that the
Company considers appropriate for temporary Notes and as shall
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be reasonably acceptable to the Trustee. Without unreasonable delay, the
Company shall prepare and the Trustee shall authenticate definitive Notes in
exchange for temporary Notes.
Until such exchange, Holders of temporary Notes shall be
entitled to all of the benefits of this Indenture.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee or
its Agent for cancellation. The Registrar and Paying Agent shall forward to
the Trustee any Notes surrendered to them for registration of transfer,
exchange or payment. The Trustee (or its Agent) and no one else shall cancel
all Notes surrendered for registration of transfer, exchange, payment,
replacement or cancellation and shall destroy canceled Notes (subject to the
record retention requirement of the Exchange Act). Certification of the
destruction of all canceled Notes shall be delivered to the Company from time
to time. The Company may not issue new Notes to replace Notes that it has paid
or that have been delivered to the Trustee (or its Agent) for cancellation. If
the Company acquires any of the Notes, such acquisition shall not operate as a
redemption or satisfaction of the indebtedness represented by such Notes unless
and until the same are surrendered to the Trustee (or its Agent) for
cancellation pursuant to this Section 2.11.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes,
it shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in Section 4.1 hereof. The Company shall notify the Trustee
in writing of the amount of defaulted interest proposed to be paid on each Note
and the date of the proposed payment. The Company shall fix or cause to be
fixed each such special record date and payment date, provided that no such
special record date shall be less than 10 days prior to the related payment
date for such defaulted interest. At least 15 days before the special record
date, the Company (or, upon the written request of the Company, the Trustee in
the name and at the expense of the Company) shall mail or cause to be mailed to
Holders a notice that states the special record date, the related payment date
and the amount of such defaulted interest to be paid.
SECTION 2.13. PERSONS DEEMED OWNERS.
Prior to due presentment for the registration of a transfer of
any Note, the Trustee, any Agent, the Company and any agent of the foregoing
shall deem and treat the Person in whose name any Note is registered as the
absolute owner of such Note for all purposes (including the purpose of
receiving payment of principal of and interest on such Notes; provided that
defaulted interest shall be paid as set forth in Section 2.12), and none of the
Trustee, any Agent, the Company or any agent of the foregoing shall be affected
by notice to the contrary.
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SECTION 2.14. CUSIP NUMBERS
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company will print CUSIP
numbers on the Notes, and the Trustee may use CUSIP numbers in notices of
redemption and purchase as a convenience to Holders; provided, however, that
any such notices may state that no representation is made as to the correctness
of such numbers as printed on the Notes and that reliance may be placed only on
the other identification numbers printed on the Notes, and any such redemption
or purchase shall not be affected by any defect or omission in such numbers.
ARTICLE 3
REDEMPTION AND PREPAYMENT
SECTION 3.1. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.7 hereof, it shall furnish to the Trustee,
at least 30 days but not more than 60 days before a redemption date (unless a
shorter period is acceptable to the Trustee), an Officers' Certificate setting
forth (i) the clause of Section 3.7 pursuant to which the redemption shall
occur, (ii) the redemption date, (iii) the principal amount of Notes to be
redeemed, (iv) the redemption price and accrued and unpaid interest and (v)
whether it requests the Trustee to give notice of such redemption. Any such
notice may be canceled at any time prior to the mailing of notice of such
redemption to any Holder and shall thereby be void and of no effect.
SECTION 3.2. SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed at any time,
the Trustee shall select the Notes to be redeemed among the Holders of the
Notes in compliance with the requirements of the principal national securities
exchange, if any, on which the Notes are listed, or, if the Notes are not so
listed, on a pro rata basis, by lot or by such other method as the Trustee
shall deem fair and appropriate; provided that no Notes of $1,000 principal
amount or less shall be redeemed in part. In the event of partial redemption
by lot, the particular Notes to be redeemed shall be selected, unless otherwise
provided herein, not less than 30 nor more than 60 days prior to the redemption
date by the Trustee from the outstanding Notes not previously called for
redemption.
The Trustee shall promptly notify the Company in writing of
the Notes selected for redemption and, in the case of any Note selected for
partial redemption, the principal amount thereof to be redeemed. Notes and
portions of Notes selected shall be in amounts of $1,000 or whole multiples of
$1,000; except that if all of the Notes of a Holder are to be redeemed, the
entire outstanding amount of Notes held by such Holder, even if not a multiple
of $1,000, shall be
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<PAGE> 34
redeemed. Except as provided in the preceding sentence, provisions of this
Indenture that apply to Notes called for redemption also apply to portions of
Notes called for redemption.
SECTION 3.3. NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a redemption
date, the Company shall mail or cause to be mailed, by first class mail, a
notice of redemption to each Holder whose Notes are to be redeemed at such
Holder's registered address.
The notice shall identify the Notes to be redeemed and shall
state:
(a) the redemption date;
(b) the redemption price and accrued and unpaid interest;
(c) if any Note is being redeemed in part, the portion of
the principal amount of such Note to be redeemed and that, after the redemption
date upon surrender of such Note, a new Note or Notes in principal amount equal
to the unredeemed portion shall be issued upon cancellation of the original
Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered
to the Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such
redemption payment, interest on Notes called for redemption ceases to accrue on
and after the redemption date and the only remaining right of the Holders of
such Notes is to receive payment of the redemption price upon surrender to the
Paying Agent of the Notes redeemed;
(g) the paragraph of the Notes and/or Section of this
Indenture pursuant to which the Notes called for redemption are being redeemed;
and
(h) that no representation is made as to the correctness
or accuracy of the CUSIP number, if any, listed in such notice or printed on
the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that
the Company shall have delivered to the Trustee, at least 40 days prior to the
redemption date (unless a shorter period is acceptable to the Trustee), an
Officers' Certificate requesting that the Trustee give such notice and setting
forth the information to be stated in such notice as provided in the preceding
paragraph.
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SECTION 3.4. EFFECT OF NOTICE OF REDEMPTION.
Unless otherwise stated therein, once notice of redemption is
mailed in accordance with Section 3.3 hereof, Notes called for redemption
become irrevocably due and payable on the redemption date at the redemption
price.
SECTION 3.5. DEPOSIT OF REDEMPTION PRICE.
On or prior to the redemption date, the Company shall deposit
with the Paying Agent (other than the Company or any of its Subsidiaries) money
sufficient in same day funds to pay the redemption price of and accrued
interest on all Notes to be redeemed on that date. The Paying Agent shall
promptly return to the Company any money deposited with the Paying Agent by the
Company in excess of the amounts necessary to pay the redemption price of, and
accrued interest on, all Notes to be redeemed. If the money is deposited on
the redemption date, such deposit shall be made by 10:00 a.m. New York City
time.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption whether or not such
Notes are presented for payment, and the only remaining right of the Holders of
such Notes shall be to receive payment of the redemption price upon surrender
to the Paying Agent of the Notes redeemed. If a Note is redeemed on or after
an interest record date but on or prior to the related interest payment date,
then any accrued and unpaid interest shall be paid to the Person in whose name
such Note was registered at the close of business on such record date. If any
Note called for redemption shall not be so paid upon surrender for redemption
because of the failure of the Company to comply with the preceding paragraph,
interest shall be paid on the unpaid principal from the redemption date until
such principal is paid and to the extent lawful, on any interest not paid on
such unpaid principal, in each case at the rate provided in the Notes and in
Section 4.1 hereof.
SECTION 3.6. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company
shall issue and, upon the Company's written request, the Trustee shall
authenticate for the Holder at the expense of the Company a new Note equal in
principal amount to the unredeemed portion of the Note surrendered.
SECTION 3.7. OPTIONAL REDEMPTION.
(a) Except as set forth in clause (b) of this Section
3.7, the Company shall not have the option to redeem the Notes pursuant to this
Section 3.7 prior to _______________, 2003. Thereafter, the Notes will be
subject to redemption at the option of the Company, in whole or in part, upon
not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below, plus accrued
and unpaid interest thereon to the
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applicable redemption date, if redeemed during the twelve-month period
beginning on _____________ of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003 ______%
2004 ______%
2005 ______%
2006 and thereafter 100.000%
</TABLE>
(b) Notwithstanding the foregoing, on and prior to
September 15, 2001, the Company, at its option, may redeem, from time to time,
up to 35% of the aggregate principal amount of the Notes at a redemption price
of _______% of the principal amount thereof, plus accrued and unpaid interest
thereon to the redemption date with the net proceeds of a Public Equity
Offering; provided that no less than 65% of the aggregate principal amount of
the Notes initially issued remains outstanding immediately after giving effect
to such redemption; and provided, further, that notice of such redemption shall
have been given not later than 30 days, and such redemption shall occur not
later than 90 days, after the date of the closing of the transaction giving
rise to such Public Equity Offering.
(c) Any redemption pursuant to this Section 3.7 shall be
made pursuant to the provisions of Sections 3.1 through 3.6 hereof.
SECTION 3.8. MANDATORY REDEMPTION.
Except as set forth under Sections 4.10 and 4.14 hereof, the
Company shall not be required to repurchase the Notes or make mandatory
redemption or sinking fund payments with respect to the Notes.
ARTICLE 4
COVENANTS
SECTION 4.1. PAYMENT OF NOTES.
The Company shall pay or cause to be paid in New York, New
York the principal of, premium, if any, and interest on the Notes on the dates
and in the manner provided herein and in the Notes. Principal, premium, if
any, and interest shall be considered paid on the date due if the Paying Agent
(or, with respect to the first two interest payments, the Pledge Agent under
the Pledge Agreement), if other than the Company or a Subsidiary thereof, holds
as of 10:00 a.m. New York City time on the due date money deposited by the
Company in same day funds and designated for and sufficient to pay all
principal, premium, if any, and interest then due. The Paying Agent shall
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return to the Company, no later than three Business Days following the date of
payment, any money (including accrued interest) in excess of the amounts paid
on the Notes.
The Company shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue principal at
the rate specified therefor in the Notes; it shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law to the extent
that such interest is an allowed claim against the debtor under such Bankruptcy
Law) on overdue installments of interest (without regard to any applicable
grace period) at the same rate to the extent lawful.
SECTION 4.2. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the
City of New York, an office or agency (which may be an office of the Trustee or
an affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may
be served. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
The Company may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York for such purposes. The Company
shall give prompt written notice to the Trustee of any such designation or
rescission and of any change in the location of any such other office or
agency.
The Company hereby designates the Corporate Trust Office of
the Trustee as one such office or agency of the Company in accordance with
Section 2.3.
SECTION 4.3. PROVISIONS OF REPORTS AND OTHER INFORMATION.
(a) Whether or not required by the rules and regulations
of the Commission, so long as any Notes are outstanding, the Company will
furnish to the Trustee and the Holders of Notes (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Company were required to file such
forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" that describes the financial condition and results
of operations of the Company and its Subsidiaries and, with respect to the
annual information only, a report thereon by the Company's certified
independent accountants and (ii) all current reports that would be required to
be filed with
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the Commission on Form 8-K if the Company were required to file such reports.
In addition, whether or not required by the rules and regulations of the
Commission, the Company will file a copy of all such information and reports
with the Commission for public availability (unless the Commission will not
accept such a filing) and make such information available to securities
analysts and prospective investors upon request. If required by the terms
thereof, the Company shall also comply with the provisions of TIA Section
314(a).
(b) If the Company instructs the Trustee to distribute
any of the documents described in Section 4.3(a) to the Holders, the Company
shall provide the Trustee with a sufficient number of copies of all such
documents that the Company may be required to deliver to such Holders.
SECTION 4.4. COMPLIANCE CERTIFICATE.
(a) The Company shall deliver to the Trustee, within 45
days after the end of each fiscal year, an Officers' Certificate stating that a
review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under this Indenture, and further
stating, as to each such Officer signing such certificate, that to the best of
his or her knowledge the Company has kept, observed, performed and fulfilled
each and every covenant contained in this Indenture and is not in default in
the performance or observance of any of the terms, provisions and conditions of
this Indenture (or, if a Default or Event of Default shall have occurred,
describing all such Defaults or Events of Default of which he or she may have
knowledge and what action the Company is taking or proposes to take with
respect thereto) and that to the best of his or her knowledge no event has
occurred and remains in existence by reason of which payments on account of the
principal of, or interest on, the Notes are prohibited or, if such event has
occurred, a description of the event and what action the Company is taking or
proposes to take with respect thereto.
(b) So long as not contrary to the then current
recommendations of the American Institute of Certified Public Accountants, the
year-end financial statements delivered pursuant to Section 4.3 above shall be
accompanied by a written statement of the Company's independent public
accountants (who shall be a firm of established national reputation) that in
making the examination necessary for certification of such financial
statements, nothing has come to their attention that would lead them to believe
that the Company has violated any provisions of Article 4 or Article 5 hereof
or, if any such violation has occurred, specifying the nature and period of
existence thereof, it being understood that such accountants shall not be
liable directly or indirectly to any Person for any failure to obtain knowledge
of any such violation.
(c) The Company shall, so long as any of the Notes are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware
of any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes
to take with respect thereto.
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SECTION 4.5. TAXES.
The Company shall pay, and shall cause each of its
Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and
governmental levies except (i) such as are contested in good faith and by
appropriate proceedings or (ii) such as for which reserve or other appropriate
provision, if any, as shall be required to be in conformity with GAAP, has been
made therefor, or (iii) where the failure to effect such payment is not adverse
in any material respect to the Holders of the Notes.
SECTION 4.6. STAY, EXTENSION AND USURY LAWS.
The Company and each Subsidiary Guarantor covenants (to the
extent that it may lawfully do so) that it shall not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay, extension or usury law wherever enacted, now or at any time hereafter
in force, that may affect the covenants or the performance of this Indenture;
and the Company and each Subsidiary Guarantor (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it shall not, by resort to any such law, hinder, delay
or impede the execution of any power herein granted to the Trustee, but shall
suffer and permit the execution of every such power as though no such law has
been enacted.
SECTION 4.7. LIMITATION ON RESTRICTED PAYMENTS.
(a) The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any
dividend or make any other payment or distribution on account of the Company's
or any Restricted Subsidiary's Equity Interests (including, without limitation,
any payment in connection with any merger or consolidation) other than
dividends or distributions (A) paid or payable in Equity Interests (other than
Disqualified Stock) of the Company or (B) paid or payable to the Company or any
Wholly Owned Restricted Subsidiary of the Company; (ii) purchase, redeem or
otherwise acquire or retire for value any Equity Interests of the Company or
any Affiliate of the Company or any Restricted Subsidiary of the Company (other
than any such Equity Interests owned by the Company or any Wholly Owned
Restricted Subsidiary of the Company); (iii) make any principal payment on, or
purchase, redeem, defease or otherwise acquire or retire for value prior to the
scheduled maturity, scheduled repayment or scheduled sinking fund payment, any
Subordinated Indebtedness (except, if no Default or Event of Default is
continuing or would result therefrom, any such payment, purchase, redemption,
defeasance or other acquisition or retirement for value made out of Excess
Proceeds available for general corporate purposes if (1) such payment or other
action is required by the indenture or other agreement or instrument pursuant
to which such Subordinated Indebtedness was issued and (2) the Company has
purchased all Notes and other senior Indebtedness properly tendered pursuant to
an Asset Sale Offer required under Section 4.10; or (iv) make any Restricted
Investment (all such payments and other actions set forth in clauses (i)
through (iv) above being collectively referred to hereinafter as "Restricted
Payments"), unless, at the time of and after giving effect to such Restricted
Payment:
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(i) no Default or Event of Default shall have
occurred and be continuing or would occur as a consequence
thereof;
(ii) the Company would, at the time of such
Restricted Payment and after giving pro forma effect thereto
as if such Restricted Payment had been made at the beginning
of the applicable fiscal quarter, have been permitted to Incur
at least $1.00 of additional Indebtedness pursuant to the
Consolidated Interest Coverage Ratio test set forth in Section
4.9(a); and
(iii) such Restricted Payment, together with the
aggregate amount of all other Restricted Payments declared or
made by the Company and its Restricted Subsidiaries after the
Closing Date shall not exceed, at the date of determination,
the sum of (1) 50% of aggregate Consolidated Net Income of the
Company from the beginning of the first fiscal quarter
commencing after the Closing Date to the end of the Company's
most recently ended fiscal quarter for which financial
statements are available at the time of such Restricted
Payment (or, if such aggregate Consolidated Net Income for
such period is a deficit, less 100% of such deficit), plus (2)
100% of the aggregate net cash proceeds received by the
Company from the issue or sale after the Closing Date of
Equity Interests of the Company or of Disqualified Stock or
debt securities of the Company that have been converted into
such Equity Interests (other than Equity Interests (or
Disqualified Stock or convertible debt securities) sold to a
Subsidiary of the Company and other than Disqualified Stock or
debt securities that have been converted into Disqualified
Stock), plus (3) the aggregate net cash proceeds received by
the Company as capital contributions to the Company (other
than from a Subsidiary of the Company) after the Closing Date,
plus (4) if any Restricted Investment that was made after the
Closing Date is sold for cash, to the extent such amount is
not included in the Consolidated Net Income of the Company,
the lesser of (A) the Net Proceeds from such sale to the
extent received by the Company or any Restricted Subsidiary,
and (B) the initial amount of such Restricted Investment, plus
(5) in the event an Unrestricted Subsidiary is redesignated as
a Restricted Subsidiary, an amount equal to the lesser of (A)
the book value of such Unrestricted Subsidiary, and (B) the
Fair Market Value of such Unrestricted Subsidiary.
(b) The foregoing provisions of this Section 4.7 shall
not prohibit the following Restricted Payments:
(i) the payment of any dividend or other
distribution within 60 days after the date of declaration
thereof, if at said date of declaration such payment would
have complied with the provisions of this Indenture;
(ii) the redemption, repurchase, retirement or
other acquisition of any Equity Interests of the Company
(other than Disqualified Stock) in exchange for, or
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out of the proceeds of, the substantially concurrent sale
(other than to a Subsidiary of the Company) of other Equity
Interests of the Company (other than Disqualified Stock);
provided that the amount of any such net cash proceeds that
are utilized for any such redemption, repurchase, retirement
or other acquisition shall be excluded from clause (iii) of
the preceding subsection 4.7(a) (both for purposes of
determining the aggregate amount of Restricted Payments made
and for purposes of determining the aggregate amount of
Restricted Payments permitted);
(iii) the payment, purchase, redemption, defeasance
or other acquisition or retirement for value of Subordinated
Indebtedness with the net cash proceeds from a substantially
concurrent Incurrence of Permitted Refinancing Indebtedness or
the substantially concurrent sale (other than to a Subsidiary
of the Company) of Equity Interests of the Company (other than
Disqualified Stock); provided that the amount of any such net
cash proceeds that are utilized for any such payment,
purchase, redemption, defeasance or other acquisition or
retirement shall be excluded from clause (iii) of the
preceding subsection 4.7(a) (both for purposes of determining
the aggregate amount of Restricted Payments made and for
purposes of determining the aggregate amount of Restricted
Payments permitted);
(iv) any Restricted Investment made with the net
cash proceeds from a substantially concurrent sale (other than
to a Subsidiary of the Company) of Equity Interests of the
Company (other than Disqualified Stock); and
(v) so long as no Default or Event of Default is
continuing, any Restricted Investment which, together with all
other Restricted Investments outstanding made pursuant to this
clause (v) does not exceed $3 million.
Except to the extent specifically noted above, Restricted
Payments made pursuant to this Section 4.7(b) shall be included in calculating
the amount of Restricted Payments made after the Closing Date.
(c) The Board of Directors of the Company may designate
any Restricted Subsidiary to be an Unrestricted Subsidiary if (i) such
designation would not cause a Default or Event of Default, (ii) at the time of
and after giving effect to such designation, the Company could incur $1.00 of
additional Indebtedness pursuant to the Consolidated Interest Coverage Ratio
test set forth in Section 4.9(a), and (iii) each of the other requirements of
the definition of the term "Unrestricted Subsidiary" are satisfied. For
purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid in cash)
in the Subsidiary so designated will be deemed to be Restricted Payments at the
time of such designation and will reduce the amount available for Restricted
Payments under the first paragraph of this covenant. All such outstanding
Investments will be deemed to constitute Restricted Payments in an amount equal
to the greater of (i) the net book value of such Investments at the time of
such designation and (ii) the Fair Market Value of such Investments at the time
of such designation. Such
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designation will only be permitted if such Restricted Payment would be
permitted at such time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary. Upon being so designated as an
Unrestricted Subsidiary, any Subsidiary Guarantee that was previously executed
by such Unrestricted Subsidiary shall be deemed terminated.
(d) The amount of all Restricted Payments not made in
cash shall be the Fair Market Value (which, if it exceeds $1 million, shall be
determined by, and set forth in, a resolution of the Board of Directors of the
Company and described in an Officers' Certificate delivered to the Trustee) on
the date of the Restricted Payment of the asset(s) proposed to be transferred
by the Company or any Restricted Subsidiary, as the case may be, pursuant to
the Restricted Payment. Not later than the date of making any Restricted
Payment, the Company shall deliver to the Trustee an Officers' Certificate
stating that such Restricted Payments during such quarter were permitted and
setting forth the basis upon which the calculations required by this Section
4.7 were computed, which calculations may be based upon the Company's latest
available financial statements.
SECTION 4.8. LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS
AFFECTING RESTRICTED SUBSIDIARIES.
The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause
or suffer to exist or become effective any consensual encumbrance or
restriction on the ability of any Restricted Subsidiary to (i)(a) pay dividends
or make any other distributions to the Company or any of its Restricted
Subsidiaries on its Capital Stock or with respect to any other interest or
participation in, or measured by, its profits or (b) pay any Indebtedness owed
to the Company or any of its Restricted Subsidiaries, (ii) make loans or
advances to the Company or any of its Restricted Subsidiaries, (iii) transfer
any of its properties to the Company or any of its Restricted Subsidiaries,
(iv) grant any Liens in favor of the Holders of the Notes and the Trustee or
(v) guarantee the Notes or any renewals or refinancings thereof, except for
such encumbrances or restrictions existing under or by reason of (A) Existing
Indebtedness, (B) the Bank Credit Agreement, (C) applicable law, (D) any
instrument governing Indebtedness or Capital Stock of a Person acquired by the
Company or any of its Restricted Subsidiaries as in effect at the time of such
acquisition (except to the extent such Indebtedness was Incurred in connection
with or in contemplation of such acquisition), which encumbrance or restriction
is not applicable to any Person, or the properties of any Person, other than
the Person, or the property of the Person, so acquired, provided that in the
case of Indebtedness, such Indebtedness was permitted by the terms of this
Indenture to be Incurred, (E) customary non-assignment provisions in leases,
licenses, sales agreements or other contracts (but excluding contracts related
to the extension of credit) entered into in the ordinary course of business and
consistent with past practices, (F) restrictions imposed pursuant to a binding
agreement for the sale or disposition of all or substantially all of the Equity
Interests or assets of any Restricted Subsidiary, provided such restrictions
apply solely to the Equity Interests or assets being sold, (G) restrictions
imposed by Permitted Liens on the transfer of the assets that are subject to
such Liens, and (H) Permitted Refinancing Indebtedness Incurred to refinance
Existing Indebtedness or Indebtedness of the type described in clause (D)
above, provided that the restrictions contained in the agreements governing
such Permitted Refinancing Indebtedness
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are no more restrictive, as a whole, than those contained in the agreements
governing the Indebtedness being refinanced.
SECTION 4.9. LIMITATION ON INDEBTEDNESS.
(a) The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, Incur any Indebtedness
(including Acquired Indebtedness), except for Permitted Indebtedness, unless
(i) at the time of such event and after giving effect thereto on a pro forma
basis the Company's Consolidated Interest Coverage Ratio for the four full
fiscal quarters immediately preceding such event, taken as one period, would
have been at least equal to (A) 2.0 to 1.0 for the first two years after the
Closing Date and (B) 2.25 to 1.0 thereafter and (ii) no Default or Event of
Default shall have occurred and be continuing at the time such additional
Indebtedness is Incurred or would occur as a consequence of the Incurrence of
such additional Indebtedness.
(b) "Permitted Indebtedness" means any and all of the
following:
(i) Indebtedness of the Company and its
Restricted Subsidiaries pursuant to the Bank Credit Agreement
(including all Guarantees thereof) in an aggregate amount not
to exceed the greater of (A) $20 million or (B) 85% of
Eligible Receivables, less the aggregate amount of all
payments thereon which are applied to permanently reduce the
outstanding amount of or the commitments with respect to such
Indebtedness;
(ii) Indebtedness represented by the Notes, this
Indenture, the Subsidiary Guarantees and the Pledge Agreement;
(iii) intercompany Indebtedness between or among
the Company and any of its Restricted Subsidiaries; provided
that (A) if the Company is an obligor on such Indebtedness,
such Indebtedness is expressly subordinate to the payment in
full of all Obligations with respect to the Notes and (B) any
subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other
than the Company or a Restricted Subsidiary of the Company, or
any sale or other transfer of any such Indebtedness to a
Person that is not either the Company or a Restricted
Subsidiary of the Company, shall be deemed to constitute a new
Incurrence of such Indebtedness by the Company or such
Restricted Subsidiary, as the case may be;
(iv) Permitted Refinancing Indebtedness Incurred
in exchange for, or the net proceeds of which are used to
extend, refinance, renew, replace, defease or refund, (A)
Indebtedness (other than Permitted Indebtedness) that was
Incurred in compliance with this Indenture, (B) Indebtedness
referred to in clause (b) (ii) of this Section, or (C)
Existing Indebtedness;
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(v) Indebtedness of a Restricted Subsidiary of
the Company constituting a Guarantee of Indebtedness of the
Company or a Restricted Subsidiary which Indebtedness was
Incurred pursuant to this Section 4.9(b) or the Consolidated
Interest Coverage Ratio test set forth in Section 4.9(a);
(vi) Hedging Obligations of the following types:
(A) Interest Rate Hedges the notional principal amount of
which does not exceed the principal amount of the Indebtedness
to which such Interest Rate Hedge relates, and (B) Currency
Hedges that do not increase the outstanding loss potential or
liabilities other than as a result of fluctuations in foreign
currency exchange rates;
(vii) Indebtedness (in addition to Indebtedness
permitted by any other clause of this Section 4.9(b)) in an
aggregate principal amount at any time outstanding not to
exceed $5 million; and
(viii) Existing Indebtedness.
(c) For purposes of determining compliance with this
Section 4.9, (i) in the event that an item of Indebtedness meets the criteria
of more than one of the types of Indebtedness described herein, the Company, in
its sole discretion, will classify such item of Indebtedness and only be
required to include the amount and type of such Indebtedness in one of the
above clauses and (ii) an item of Indebtedness may be divided and classified in
more than one of the types of Indebtedness described herein.
SECTION 4.10. LIMITATION ON ASSET SALES.
(a) The Company will not, and will not permit any of its
Restricted Subsidiaries to, engage in an Asset Sale unless (i) the Company or
such Restricted Subsidiary, as the case may be, receives consideration at the
time of such Asset Sale at least equal to the Fair Market Value (which, if it
exceeds $1 million, shall be determined by, and set forth in, a resolution of
the Board of Directors of the Company and described in an Officers' Certificate
of the Company delivered to the Trustee) of the assets (including, if
appropriate, Equity Interests) disposed of or issued, as appropriate, and (ii)
at least 75% of the consideration therefor received by the Company or such
Restricted Subsidiary is in the form of cash or Cash Equivalents. For purposes
of this Section (and not for purposes of any other provision of this
Indenture), the term "cash" shall be deemed to include (i) any notes or other
obligations received by the Company or such Restricted Subsidiary as
consideration as part of such Asset Sale that are immediately converted by the
Company or such Restricted Subsidiary into actual cash (to the extent of the
actual cash so received), and (ii) any liabilities of the Company or such
Restricted Subsidiary (as shown on the most recent balance sheet of the Company
or such Restricted Subsidiary) that (A) are assumed by the transferee of the
assets which are the subject of such Asset Sale as consideration therefor in a
transaction the result of which is that the Company and all of its Subsidiaries
are released from all liability for such assumed liability, (B) are not by
their terms subordinated in right of payment to the Notes, (C) are not owed
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to the Company or any Subsidiary of the Company, and (D) constitute short-term
liabilities (as determined in accordance with GAAP).
(b) Within 180 days after the receipt of any Net Proceeds
from an Asset Sale, the Company may apply, directly or indirectly, such Net
Proceeds (a) to permanently reduce Indebtedness under the Bank Credit Agreement
(and to correspondingly reduce commitments with respect thereto) or (b) to
invest in properties and assets that will be used in the Shipyard Business of
the Company and its Restricted Subsidiaries. Pending the final application of
any such Net Proceeds, the Company may temporarily invest such Net Proceeds in
any manner that is not prohibited by this Indenture (including, without
limitation, to the reduction of Indebtedness under the Bank Credit Agreement).
Any Net Proceeds from Asset Sales that are not applied or invested as provided
in the first sentence of this Section 4.10(b) will be deemed to constitute
"Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $5
million, the Company will be required to make an offer to all Holders of Notes
and, if the Company is required to do so under the terms of any other senior
Indebtedness, to the holders of such other senior Indebtedness (an "Asset Sale
Offer") to purchase Notes and principal of such other senior Indebtedness, on a
pro rata basis, having an aggregate principal amount equal to the Excess
Proceeds, at an offer price in cash equal to, in the case of the Notes, 100% of
the principal amount thereof, plus accrued and unpaid interest thereon to the
date of purchase, and, in the case of all other senior Indebtedness, 100% of
the principal amount thereof, plus accrued and unpaid interest, or premium, if
any, thereon to the date of purchase, in accordance with the procedures set
forth in this Indenture. To the extent that the aggregate principal amount of
Notes tendered pursuant to an Asset Sale Offer is less than the Excess
Proceeds, the Company may use any remaining Excess Proceeds for general
corporate purposes. If the aggregate principal amount of Notes and such other
senior Indebtedness surrendered by holders thereof exceeds the amount of Excess
Proceeds, the Trustee shall select the Notes to be purchased in compliance with
the requirements of the principal national securities exchange, if any, on
which the Notes are listed or, if the Notes are not so listed, on a pro rata
basis with such other senior Indebtedness based on the outstanding principal
amounts thereof (with such adjustments as may be deemed appropriate by the
Company so that only Notes with denominations of $1,000 or integral multiples
thereof shall be purchased). Upon completion of such offer to purchase, the
amount of Excess Proceeds shall be reset at zero.
(c) The Company will not, and will not permit any of its
Restricted Subsidiaries to, transfer, convey, sell, lease or otherwise dispose
of any Capital Stock of any Restricted Subsidiary of the Company to any Person
(other than the Company or a Wholly Owned Restricted Subsidiary of the
Company), unless (i) such transfer, conveyance, sale, lease or other
disposition is of all of the Capital Stock of such Restricted Subsidiary owned
by the Company and its Restricted Subsidiaries or is otherwise permitted under
Section 4.13 and (ii) such transaction is conducted in accordance with clauses
(a) and (b) above.
(d) The Company will comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of Notes using Excess Proceeds.
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SECTION 4.11. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
The Company will not, and will not permit any of its
Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate of the Company (other than the Company or a Restricted
Subsidiary), in one transaction or a series of transactions (each of the
foregoing an "Affiliate Transaction"), unless (i) such Affiliate Transaction is
on terms that are no less favorable to the Company or the relevant Restricted
Subsidiary than those that would have been obtained in a comparable transaction
with an unrelated Person and (ii) the Company delivers to the Trustee (a) with
respect to any Affiliate Transaction or series of related Affiliate
Transactions after the Closing Date involving aggregate consideration in excess
of $500,000, an Officer's Certificate certifying that such Affiliate
Transaction complies with clause (i) above, (b) with respect to any Affiliate
Transaction or series of related Affiliate Transactions after the Closing Date
involving an aggregate consideration in excess of $2 million, a resolution
described in an Officers' Certificate, certifying that such Affiliate
Transaction complies with clause (i) above and such Affiliate Transaction has
been approved by a majority of the disinterested members of the Board of
Directors of the Company and (c) with respect to any Affiliate Transaction or
series of related Affiliate Transactions after the Closing Date involving
aggregate consideration in excess of $5 million, an opinion as to the fairness
to the Company of such Affiliate Transaction from a financial point of view
issued by an accounting, appraisal or investment banking firm of recognized
national standing; provided that the following types of transactions shall not
constitute Affiliate Transactions: (1) any transaction with an officer or
director of the Company or any Restricted Subsidiary in connection with such
individual's compensation (including directors' fees), employee benefits,
severance arrangements or indemnification (to the extent consistent with
applicable law and the charter and bylaws of the Company or such Restricted
Subsidiary), in each case entered into by the Company or any of its Restricted
Subsidiaries in the ordinary course of business, (2) transactions between or
among the Company and its Restricted Subsidiaries, (3) Restricted Payments that
are permitted by the provisions of Section 4.7; (4) sales of Capital Stock of
the Company made at prevailing market rates; and (5) loans to officers,
directors and employees of the Company and its Restricted Subsidiaries made in
the ordinary course of business in an aggregate amount not to exceed $1 million
at any one time outstanding.
SECTION 4.12. LIMITATION ON LIENS.
The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, affirm,
assume or suffer to exist any Lien of any kind on any property now owned or
hereafter acquired, or any income or profits therefrom or assign or convey any
right to receive income therefrom, unless (i) in the case of Liens securing
obligations subordinate to the Notes, the Notes are secured by a valid,
perfected Lien on such property that is senior in priority to such Liens, (ii)
in the case of Liens securing obligations subordinate to a Subsidiary
Guarantee, such Subsidiary Guarantee is secured by a valid, perfected Lien on
such property that is senior in priority to such Liens, and (iii) in all other
cases, the Notes (and, if such
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Lien secures obligations of a Restricted Subsidiary, a Subsidiary Guarantee of
such Restricted Subsidiary) are equally and ratably secured; provided, however,
that the foregoing shall not prohibit or restrict Permitted Liens.
SECTION 4.13. LIMITATION ON ISSUANCE AND SALE OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES.
The Company will not, and will not permit any Restricted
Subsidiary to (i) sell, assign, transfer, convey or otherwise dispose of, any
Equity Interests of any Restricted Subsidiary, other than to the Company or a
Wholly Owned Restricted Subsidiary, (ii) permit any Restricted Subsidiary to
issue any Equity Interests (including, without limitation, pursuant to any
merger, consolidation, recapitalization or similar transaction) other than to
the Company or a Wholly Owned Restricted Subsidiary or (iii) permit any Person
other than the Company or a Wholly Owned Restricted Subsidiary to own any
Equity Interests of any Restricted Subsidiary, except for (A) a sale to a
Person of all of the Equity Interests of a Restricted Subsidiary, which sale
was made by the Company or a Restricted Subsidiary subject to, and in
compliance with, Section 4.10, (B) the issuance and subsequent ownership of
directors' qualifying shares, and (C) the Equity Interests of a Restricted
Subsidiary owned by a Person at the time such Restricted Subsidiary became a
Restricted Subsidiary or acquired by such Person in connection with the
formation of the Restricted Subsidiary, provided that the Equity Interests
owned by such Person do not exceed 20% of the total Equity Interests of such
Restricted Subsidiary.
SECTION 4.14. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, the
Company will be required to make an offer (a "Change of Control Offer") to
repurchase all or any part (equal to $1,000 or an integral multiple thereof) of
each Holder's Notes, at an offer price in cash equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest thereon, to the date
of repurchase (the "Change of Control Payment").
(b) Notice of a Change of Control Offer shall be mailed
by the Company, with a copy to the Trustee, or, at the Company's option, by the
Trustee (at the Company's expense) not more than 20 calendar days after the
Change of Control to each Holder of the Notes at such Holder's last registered
address appearing in the Register. In such notice, the Company shall describe
the transaction that constitutes the Change of Control and offer to repurchase
Notes pursuant to the procedures required by this Section 4.14 and described in
such notice. The notice shall contain all instructions and materials necessary
to enable Holders to tender Notes pursuant to the Change of Control Offer. In
addition, the notice shall state: (1) that the Change of Control Offer is
being made pursuant to this Section 4.14 and that all Notes (or portions
thereof) properly tendered will be accepted for payment; (2) the Change of
Control Payment and the purchase date, which shall be no sooner than 30 nor
later than 60 days from the date on which the Company notifies the Holders of
the occurrence of the Change of Control (the "Change of Control Payment Date");
(3) that any Note (or portion thereof) not properly tendered will continue to
accrue interest; (4) that, unless the Company defaults in the payment of the
Change of Control Payment, all Notes (or portions thereof)
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accepted for payment pursuant to the Change of Control Offer shall cease to
accrue interest after the Change of Control Payment Date; and (5) the
procedures that Holders of Notes must follow in order to tender their Notes (or
portions thereof) for payment and the procedures that Holders of Notes must
follow in order to withdraw an election to tender Notes (or portions thereof)
for payment. The Company will comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to
the extent such laws and regulations are applicable in connection with the
repurchase of the Notes as a result of a Change of Control.
(c) On the Change of Control Payment Date, the Company
will, to the extent lawful, (i) accept for payment all Notes or portions
thereof properly tendered pursuant to the Change of Control Offer, (ii) deposit
with the Trustee an amount equal to the Change of Control Payment in respect of
all Notes or portions thereof so tendered and (iii) deliver or cause to be
delivered to the Trustee the Notes so accepted together with an Officers'
Certificate stating the aggregate principal amount of Notes or portions thereof
being purchased by the Company. The Trustee will promptly mail to each Holder
of Notes so tendered the Change of Control Payment for such Notes, and the
Trustee will promptly authenticate and mail (or cause to be transferred by book
entry) to each Holder a new Note equal in principal amount to any unpurchased
portion of the Notes surrendered, if any; provided that each such new Note will
be in a principal amount of $1,000 or an integral multiple thereof. The Company
will publicly announce the results of the Change of Control Offer on or as soon
as practicable after the Change of Control Payment Date. Unless the Company
defaults in the payment for any Notes properly tendered pursuant to the Change
of Control Offer, any Notes accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Change of Control
Payment Date.
(d) The Company will not be required to make a Change of
Control Offer upon a Change of Control if a third party makes the Change of
Control Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in this Section 4.14 applicable to a Change of Control
Offer made by the Company and purchases all Notes validly tendered and not
withdrawn under such Change of Control Offer.
SECTION 4.15. LIMITATION ON SALE AND LEASEBACK TRANSACTIONS.
The Company will not, and will not permit any of its
Restricted Subsidiaries to, enter into any sale and leaseback transaction;
provided that the Company or any Restricted Subsidiary may enter into a sale
and leaseback transaction if (a) the Company could have (i) Incurred
Indebtedness in an amount equal to the Attributable Debt relating to such sale
and leaseback transaction pursuant to either (1) the Consolidated Interest
Coverage Ratio test set forth in Section 4.9(a) or (2) clause (vii) of Section
4.9(b) and (ii) incurred a Lien to secure such Indebtedness pursuant to Section
4.12, and (b) the sale portion of such sale and leaseback transaction complies
with Section 4.10, and the net proceeds from such sale are applied in
accordance with Section 4.10.
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SECTION 4.16. COVENANT WITH RESPECT TO BUSINESS ACTIVITIES.
The Company will not, and will not permit any of its
Restricted Subsidiaries to, engage in any business other than the Shipyard
Business.
SECTION 4.17. CORPORATE EXISTENCE
Except as otherwise permitted pursuant to the terms hereof,
the Company shall do or cause to be done all things necessary to preserve and
keep in full force and effect (i) its corporate existence, and the corporate,
partnership or other existence of each of its Subsidiaries, in accordance with
their respective organizational documents (as the same may be amended from time
to time), and (ii) the material rights (charter and statutory), licenses and
franchises of the Company and its Subsidiaries; provided, however, that the
Company shall not be required to preserve any such right, license or franchise
of itself or any of its Subsidiaries, or the corporate, partnership or other
existence of any of its Subsidiaries, if the Board of Directors shall determine
that the preservation thereof is no longer desirable in the conduct of the
business of the Company and its Subsidiaries, taken as a whole, and that the
loss thereof is not adverse in any material respect to the Holders of the
Notes.
SECTION 4.18. PLEDGE ACCOUNT
The Company shall, on the date hereof, enter into the Pledge
Agreement, and pursuant thereto, shall purchase and pledge to the Trustee, for
the benefit of the Holders of the Notes, the Pledged Securities, in such amount
as will be sufficient upon receipt of scheduled interest and principal payments
of such securities, in the opinion of a nationally recognized firm of
independent public accountants selected by the Company (to be delivered
promptly after the Closing Date), to provide for payment in full when due of
the first two scheduled interest payments on the Notes. If for any reason the
Pledged Securities, together with the other funds in the Pledge Account, shall
not, in the opinion of such independent public accounting firm, be sufficient
to provide for payment of such first two interest payments, the Company shall
immediately pledge to the Trustee pursuant to the Pledge Agreement additional
Pledged Securities or other funds in such amounts as shall be sufficient, in
the opinion of such independent public accounting firm, to provide for payment
in full of such interest payments, and shall promptly deliver an opinion from
such accounting firm with regard thereto.
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ARTICLE 5
SUCCESSORS
SECTION 5.1. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
The Company may not consolidate or merge with or into (whether
or not the Company is the surviving entity), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions, to another Person, unless:
(i) the Company is the surviving entity, or the Person
formed by or surviving any such consolidation or merger (if other than
the Company) or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made is a corporation
organized or existing under the laws of the United States, any state
thereof or the District of Columbia;
(ii) the Person formed by or surviving any such
consolidation or merger (if other than the Company) or the Person to
which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made assumes all the obligations of the
Company under the Notes and this Indenture pursuant to a supplemental
indenture in a form reasonably satisfactory to the Trustee;
(iii) immediately after giving effect to such transaction,
no Default or Event of Default exists or would exist;
(iv) except in the case of a merger of the Company with or
into a Wholly Owned Restricted Subsidiary of the Company, the Company
or the Person formed by or surviving any such consolidation or merger
(if other than the Company) or to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made
(A) will (treating any Indebtedness not previously an obligation of
the Company or any of its Restricted Subsidiaries as a result of such
transaction as having been Incurred at the time of such transaction)
have Consolidated Net Worth immediately after the transaction equal to
or greater than the Consolidated Net Worth of the Company immediately
preceding the transaction and (B) will, at the time of such
transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable fiscal
quarter, be permitted to Incur at least $1.00 of additional
Indebtedness pursuant to the Consolidated Interest Coverage Ratio test
set forth in Section 4.9(a); and
(v) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger or transfer and such supplemental indenture
(if any) comply with this Indenture.
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For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets of one or
more of the Restricted Subsidiaries of the Company, the Capital Stock of which
constitutes all or substantially all of the properties and assets of the
Company, shall be deemed to be the transfer of all or substantially all of the
properties and assets of the Company.
SECTION 5.2. SUCCESSOR COMPANY SUBSTITUTED.
Upon any consolidation or merger or any transfer of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole in accordance with Section 5.1 hereof, the successor
corporation formed by such consolidation or into which the Company is merged or
to which such transfer is made, shall succeed to, and be substituted for, and
may exercise every right and power of the Company under this Indenture with the
same effect as if such successor corporation had been named as the Company
herein; and thereafter, if the Company is dissolved following a transfer of all
or substantially all of its assets in accordance with this Indenture, the
Company shall be discharged and released from all obligations and covenants
under this Indenture and the Notes. The Trustee shall enter into a
supplemental indenture to evidence the succession and substitution of such
successor Person and such discharge and release of the Company.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.1. EVENTS OF DEFAULT.
An "Event of Default" occurs if one of the following shall
have occurred (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(a) the Company defaults in the payment of interest on
the Notes when the same become due and payable, which default
continues for a period of 30 calendar days (provided that such 30-day
grace period shall be inapplicable for the first two Interest Payment
Dates);
(b) the Company defaults in the payment of the principal
of or premium, if any, on the Notes when the same become due and
payable whether at maturity, by acceleration, upon redemption or
repurchase, or otherwise;
(c) the Company or a Restricted Subsidiary fails to
comply with any of its obligations under Articles 5, 10 or 11 or
Sections 4.10, 4.14 or 4.18;
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(d) the Company or any Restricted Subsidiary of the
Company fails to comply with any of its covenants or agreements in the
Notes and this Indenture (other than those referred to in clauses (a),
(b) and (c) above and (i) below) and such failure continues for 30
calendar days after receipt by the Company of a notice of default
specifying such Default;
(e) a default under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of
its Restricted Subsidiaries (or the payment of which is Guaranteed by
the Company or any of its Restricted Subsidiaries), whether such
Indebtedness or Guarantee now exists or is created after the date of
this Indenture, which default (i) is caused by a failure to pay
principal of or premium, if any, or interest on such Indebtedness
following the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (ii)
results in the acceleration of such Indebtedness (including any
obligation to redeem or repurchase such Indebtedness) prior to its
express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the
maturity of which has been so accelerated, aggregates $1 million or
more;
(f) failure by the Company or any of its Restricted
Subsidiaries to pay final non-appealable judgments rendered against
the Company or any of its Restricted Subsidiaries aggregating in
excess of $1 million, which judgments are not paid, discharge or
stayed for a period of 60 calendar days after such judgments become
final and non-appealable;
(g) the Company or any Restricted Subsidiary of the
Company pursuant to or within the meaning of any Bankruptcy Law: (i)
commences a voluntary case or proceeding, (ii) consents to the entry
of an order for relief against it in an involuntary case or
proceeding, (iii) consents to the appointment of a Custodian of it or
for all or substantially all of its property, (iv) makes a general
assignment for the benefit of its creditors, or (v) admits in writing
its inability to pay its debts generally as they become due;
(h) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that: (i) is for relief against the
Company or any Restricted Subsidiary of the Company in an involuntary
case or proceeding, (ii) appoints a Custodian of the Company or any
Restricted Subsidiary of the Company or for all or substantially all
of its respective properties, (iii) orders the liquidation of the
Company or any Restricted Subsidiary of the Company, (iv) adjudicates
the Company or any Restricted Subsidiary of the Company as bankrupt or
insolvent, or (v) ratifies an accord or composition in bankruptcy
between the Company or a Restricted Subsidiary and the respective
creditors thereof; and in each case the order or decree remains
unstayed and in effect for 60 calendar days;
(i) breach by the Company of any representation or
warranty set forth in the Pledge Agreement, or default by the Company
in the performance of any covenant set forth
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in the Pledge Agreement and the expiration of any cure period set
forth therein, or repudiation by the Company of any of its obligations
under the Pledge Agreement or the unenforceability of the Pledge
Agreement against the Company for any reason (other than as permitted
pursuant to the terms thereof), which in any one of the foregoing
cases or in the aggregate results in a material impairment of the
rights intended to be afforded thereby; or
(j) any Guarantee of the Notes shall be held in a
judicial proceeding to be unenforceable or invalid or shall cease for
any reason to be in full force and effect, or any Restricted
Subsidiary, or any Person acting on behalf of any Restricted
Subsidiary, shall deny or disaffirm its obligations under its
Guarantee of any Notes.
A Default under clause (d) above is not an Event of Default
until the Trustee notifies the Company, or the Holders of at least 25% in
aggregate principal amount of the Notes at the time outstanding notify the
Company and the Trustee, of the Default and the Company does not cure such
Default within the time period specified in clause (d) above after receipt of
such notice. Such notice must be in writing and specify the Default, demand
that it be remedied and state that the notice is a "Notice of Default."
SECTION 6.2. ACCELERATION.
If any Event of Default (other than an Event of Default
described in clauses (g) and (h) of Section 6.1 hereof) occurs and is
continuing, then the Trustee or the Holders of at least 25% in aggregate
principal amount of the then outstanding Notes by written notice to the Company
(and to the Trustee, if given by the Holders) may declare the unpaid principal
of, and any accrued interest on, all the Notes to be due and payable
immediately. If any Event of Default specified in clauses (g) or (h) of
Section 6.1 hereof occurs, all outstanding principal and interest on the Notes
shall be immediately due and payable without any declaration or other act on
the part of the Trustee or any Holder. The Holders of a majority in aggregate
principal amount of the Notes then outstanding, by written notice to the
Trustee and to the Company, may rescind an acceleration (except an acceleration
due to a default in payment of the principal of, premium or interest on any of
the Notes) if the rescission would not conflict with any judgment or decree and
if all existing Events of Default (except nonpayment of principal, premium or
interest that have become due solely because of the acceleration) have been
cured or waived.
In the case of any Event of Default occurring by reason of any
willful action (or inaction) taken (or not taken) by or on behalf of the
Company or a Restricted Subsidiary with the intention of avoiding payment of
the premium that the Company would have had to pay if the Company then had
elected to redeem the Notes pursuant to Section 3.7(a), an equivalent premium
shall also become and be immediately due and payable to the extent permitted by
law upon the acceleration of the Notes. If an Event of Default occurs prior to
____________, 2003 by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company or a Restricted Subsidiary with the
intention of avoiding the prohibition on redemption of the Notes prior to such
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date, then the premium specified in Section 3.7(b) shall also become
immediately due and payable to the extent permitted by law upon the
acceleration of the Notes.
SECTION 6.3. OTHER REMEDIES.
Subject to Section 6.2, if an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy by proceeding at law or
in equity to collect any payment due on the Notes or to enforce the performance
of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Holder of a Note in exercising any
right or remedy accruing upon an Event of Default shall not impair the right or
remedy or constitute a waiver of or acquiescence in the Event of Default. All
remedies are cumulative to the extent permitted by law.
SECTION 6.4. WAIVER OF PAST DEFAULTS.
Subject to Section 9.2, Holders of a majority in aggregate
principal amount of the then outstanding Notes by notice to the Trustee may, on
behalf of the Holders of all of the Notes, waive an existing Default or Event
of Default and its consequences hereunder except a continuing Default or Event
of Default in the payment of the principal of, premium or interest on the
Notes. Upon any such waiver, such Default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon.
SECTION 6.5. CONTROL BY MAJORITY.
The Holders of a majority in aggregate principal amount of the
Notes then outstanding may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on it. However, the Trustee may refuse to follow any direction
that conflicts with law or this Indenture or that the Trustee determines may be
unduly prejudicial to the rights of another Holder or that involves the Trustee
in personal liability. The Trustee may take any other action deemed proper by
the Trustee that is not inconsistent with such direction.
SECTION 6.6. Limitation on Suits.
Subject to the provisions of Section 6.7 hereof, no Holder of
a Note may pursue any remedy with respect to this Indenture or the Notes
(including without limitation the institution of any proceeding, judicial or
otherwise, with respect to the Notes or this Indenture or for the appointment
of a receiver or trustee for the Company and/or any of its Subsidiaries)
unless:
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(a) the Holder has given to the Trustee written notice of
a continuing Event of Default;
(b) the Holders of at least 25% in aggregate principal
amount of the Notes then outstanding have made a written request to
the Trustee to pursue the remedy;
(c) such Holders have offered to provide to the Trustee
indemnity reasonably satisfactory to the Trustee against any loss,
liability or expense;
(d) the Trustee has not complied with the request within
60 calendar days after receipt of the request and the offer of
indemnity; and
(e) during such 60-day period, the Holders of a majority
in aggregate principal amount of the Notes then outstanding have not
given the Trustee a direction which, in the opinion of the Trustee, is
inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the
rights of another Holder of a Note or to obtain a preference or priority over
another Holder of a Note.
SECTION 6.7. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the
right of any Holder of a Note to receive payment of principal of, and premium,
if any, and interest on, the Note, on or after the respective due dates
expressed in the Note (including in connection with an offer to purchase), or
to bring suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of such
Holder.
SECTION 6.8. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.1(a) or (b)
occurs and is continuing, the Trustee is authorized to recover judgment in its
own name and as trustee of an express trust against the Company for principal
of, and premium, if any, and interest on, the Notes and interest on overdue
principal and, to the extent lawful, interest, and such further amount as shall
be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
SECTION 6.9. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and
other papers or documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel)
and the Holders of the Notes allowed in any judicial proceedings relative to
the Company (or any other obligor upon the Notes), its creditors or its
property and shall be entitled and
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empowered to collect, receive and distribute any money or other property
payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments
to the Trustee, and in the event that the Trustee shall consent to the making
of such payments directly to the Holders, to pay to the Trustee any amount due
to it for the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, and any other amounts due the Trustee
under Section 7.7 hereof. To the extent that the payment of any such
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, and any other amounts due the Trustee under Section 7.7
hereof out of the estate in any such proceeding, shall be denied for any
reason, payment of the same shall be secured by a Lien on, and shall be paid
out of, any and all distributions, dividends, money, securities and other
properties that the Holders may be entitled to receive in such proceeding
whether in liquidation or under any plan of reorganization or arrangement or
otherwise. Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement, adjustment or composition affecting the Notes
or the rights of any Holder, or to authorize the Trustee to vote in respect of
the claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article 6,
it shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.7
hereof, including payment of all compensation, expense and liabilities
incurred, and all advances made, by the Trustee and the costs and expenses of
collection;
Second: to Holders of Notes for amounts due and unpaid on the
Notes for principal, premium, if any, and interest ratably, without preference
or priority of any kind, according to the amounts due and payable on the Notes
for principal, premium, if any, and interest, respectively; and
Third: the remainder to the Company or to such party as a
court of competent jurisdiction shall direct.
The Trustee may fix a record date and payment date for any
payment to Holders of Notes pursuant to this Section 6.10. At least 15
calendar days before such record date, the Company shall mail to each Holder
and the Trustee a notice that states the record date, the payment date and the
amount to be paid.
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SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as a Trustee, each party to this Indenture agrees, and each
Holder by its acceptance of its Notes shall be deemed to have agreed, that any
court in its discretion may require the filing by any party litigant in the
suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit, having due regard to the merits and
good faith of the claims or defenses made by the party litigant. This Section
does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant
to Section 6.7 hereof, or a suit by Holders of more than 10% in principal
amount of the then outstanding Notes.
ARTICLE 7
TRUSTEE
SECTION 7.1. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture, and use the same degree of care and skill in its
exercise, as a prudent Person would exercise or use under the circumstances in
the conduct of its own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee shall not be liable hereunder
except for such duties of the Trustee which shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only those
duties that are specifically set forth in this Indenture and no others, and no
implied covenants or obligations shall be read into this Indenture against the
Trustee; and
(ii) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to determine
whether or not such documents conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for
its own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of
paragraph (b) of this Section;
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(ii) the Trustee shall not be liable for any error
of judgment made in good faith by a Responsible Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect
to any action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.5 hereof.
(d) Whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is subject
to paragraphs (a), (b), and (c) of this Section 7.1.
(e) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or incur any liability whatsoever in
the performance of any of its duties hereunder or in the exercise of any of its
rights or powers hereunder. The Trustee shall be under no obligation to
exercise any of its rights and powers under this Indenture at the request of
any Holders, unless such Holder shall have offered to the Trustee security and
indemnity satisfactory to it in its sole subjective discretion (which
discretion shall be exercised in good faith) against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any
money received by it except as the Trustee may agree in writing with the
Company. Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law.
(g) Every provision of this Indenture relating to the
conduct or affecting the liability of or affording protection to the Trustee
shall be subject to the provision of this Section 7.1 and to the provisions of
the TIA.
SECTION 7.2. RIGHTS OF TRUSTEE.
(a) Subject to Section 7.1, the Trustee may conclusively
rely upon any document believed by it to be genuine and to have been signed or
presented by the proper Person. The Trustee need not investigate any fact or
matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it
may consult with counsel and require an Officers' Certificate or an Opinion of
Counsel or both. The Trustee shall not be liable for any action it takes or
omits to take in good faith in reliance on such Officers' Certificate or
Opinion of Counsel.
(c) The Trustee may act through its attorneys and agents
and shall not be responsible for the misconduct or negligence of any agent
appointed with due care.
(d) The Trustee shall not be liable for any action it
takes or omits to take in good faith that it believes in its sole subjective
discretion (which discretion shall be exercised in good faith) to be authorized
or within the rights or powers conferred upon it by this Indenture.
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(e) The permissive right of the Trustee to act hereunder
shall not be construed as a duty.
(f) Unless otherwise specifically provided in this
Indenture, any demand, request, direction or notice from the Company shall be
sufficient if signed by an Officer of the Company.
(g) The Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders unless such Holders shall have offered to the
Trustee security or indemnity satisfactory to the Trustee in its sole
subjective discretion (which discretion shall be exercised in good faith)
against the costs, expenses and liabilities that might be incurred by it in
compliance with such request or direction.
(h) The Trustee shall not be required to take notice or
deemed to have notice of any Event of Default hereunder, except failure by the
Company to make any of the payments to the Trustee pursuant to Section 6.1(a)
or Section 6.1(b) hereof, unless the Trustee shall be specifically notified in
writing of such Event of Default by the Company or by one or more of the
Holders.
SECTION 7.3. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest (as such term is defined in TIA Section 310(b)), it must eliminate
such conflict within 90 days, apply to the SEC for permission to continue as
trustee (to the extent permitted under TIA Section 310(b)) or resign. Any
Agent may do the same with like rights and duties. The Trustee is also subject
to Sections 7.10 and 7.11 hereof.
SECTION 7.4. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or the Notes,
it shall not be accountable for the Company's use of the proceeds from the
Notes or any money paid to the Company or upon the Company's direction under
any provision of this Indenture, it shall not be responsible for the use or
application of any money received by any Paying Agent other than the Trustee,
and it shall not be responsible for any statement or recital herein or any
statement in the Notes or any other document in connection with the sale of the
Notes or pursuant to this Indenture other than its certificate of
authentication.
SECTION 7.5. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and
if it is actually known to the Trustee, the Trustee shall mail to Holders of
Notes a notice of the Default or Event of Default within 90 days after such
event occurs. Except in the case of a Default or Event of Default under
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Section 6.1(a) or (b), the Trustee may withhold such notice if it determines
that withholding the notice is in the interests of the Holders of the Notes.
SECTION 7.6. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each May 15 beginning with the May 15
following the date of this Indenture, and for so long as Notes remain
outstanding, the Trustee shall mail to the Holders of the Notes a brief report
dated as of such reporting date that complies with TIA Section 313(a) (but if
no event described in TIA Section 313(a) has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Trustee also
shall comply with TIA Section 313(b)(2). The Trustee shall also transmit by
mail all reports as required by TIA Section
313(c).
A copy of each report at the time of its mailing to the
Holders of Notes shall be mailed to the Company and filed with the SEC and each
stock exchange, if any, on which the Notes are listed in accordance with and to
the extent required by TIA Section 313(d). The Company shall promptly notify
the Trustee if the Notes become listed on any stock exchange or automatic
quotation system.
SECTION 7.7. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time
reasonable compensation as shall be agreed upon between the Company and the
Trustee for its acceptance of this Indenture and services hereunder, including
extraordinary services such as default administration. The Trustee's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Company shall reimburse the Trustee promptly upon request
for all reasonable disbursements, advances and expenses incurred or made by it
in addition to the compensation for its services. Such expenses shall include
the reasonable compensation, disbursements and expenses of the Trustee's agents
and counsel.
The Company shall indemnify the Trustee against any and all
losses, liabilities or expenses incurred by it arising out of or in connection
with the acceptance or administration of its duties under this Indenture,
including the costs and expenses of enforcing this Indenture against the
Company (including this Section 7.7) and defending itself against any claim
(whether asserted by the Company or any Holder or any other Person) or
liability in connection with the exercise or performance of any of its powers
or duties hereunder, except to the extent any such loss, liability or expense
may be attributable to its negligence or bad faith. The Trustee shall promptly
notify the Company of any claim for which it may seek indemnity. The Company
shall defend the claim and the Trustee shall cooperate in the defense. The
Trustee may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel; provided that the Company will not be required to
pay such fees and expenses if it assumes the Trustee's defense with counsel
acceptable to and approved by the Trustee (such approval not to be unreasonably
withheld) and there is no conflict of interest between the Company and the
Trustee in connection with such defense. The Company need not pay for any
settlement made without its written consent, which consent shall not
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be unreasonably withheld. The Company need not reimburse the Trustee for any
expense or indemnity against any liability or loss of the Trustee to the extent
such expense, liability or loss is attributable to the negligence, bad faith or
willful misconduct of the Trustee.
The obligations of the Company under this Section 7.7 shall
survive the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section,
the Trustee shall have a Lien prior to the Notes on all money or property held
or collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.1(g) or (h) hereof occurs, the expenses
and the compensation for the services (including the fees and expenses of its
agents and counsel) are intended to constitute expenses of administration under
any Bankruptcy Law.
The Trustee shall comply with the provisions of TIA Section
313(b)(2).
SECTION 7.8. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing upon 60 days notice and be
discharged from the trust hereby created by so notifying the Company in
writing. The Holders of Notes of a majority in principal amount of the then
outstanding Notes may remove the Trustee by so notifying the Trustee and the
Company in writing and may appoint a successor trustee with the consent of the
Company. The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or
an order for relief is entered with respect to the Trustee under any
Bankruptcy Law;
(c) a receiver, Custodian or public officer takes charge
of the Trustee or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint or
request the Trustee to appoint a successor
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Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company, or the Holders of Notes of at least 10% in principal amount of the
then outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Note
who has been a Holder of a Note for at least six months, fails to comply with
Section 7.10, such Holder of a Note may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee, provided
all sums owing to the Trustee hereunder have been paid and subject to the Lien
provided for in Section 7.7 hereof. Notwithstanding replacement of the Trustee
pursuant to this Section 7.8, the Company's obligations under Section 7.7
hereof shall continue for the benefit of the retiring Trustee.
SECTION 7.9. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United States of
America or of any state thereof that is authorized under such laws to exercise
corporate trustee power, that is subject to supervision or examination by
federal or state authorities and that has a combined capital and surplus of at
least $100 million as set forth in its most recent published annual report of
condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to
TIA Section 310(b).
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SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated therein.
ARTICLE 8
DEFEASANCE AND DISCHARGE
SECTION 8.1. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board of Directors
evidenced by a resolution set forth in an Officers' Certificate, at any time,
elect to have either Section 8.2 or 8.3 hereof be applied to all outstanding
Notes upon compliance with the conditions set forth below in this Article 8.
SECTION 8.2. LEGAL DEFEASANCE.
Upon the Company's exercise under Section 8.1 hereof of the
option applicable to this Section 8.2, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.4 hereof, be deemed to
have been discharged from its obligations with respect to all outstanding Notes
and all obligations of the Restricted Subsidiaries under the Subsidiary
Guarantees on the date the conditions set forth below are satisfied
(hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means
that the Company shall be deemed to have paid and discharged the entire
Indebtedness represented by the outstanding Notes, which shall thereafter be
deemed to be "outstanding" only for the purposes of Section 8.6 hereof and the
other Sections of this Indenture referred to in (a) and (b) below, and to have
satisfied all its other obligations under such Notes and this Indenture (and
the Trustee, on demand of and at the expense of the Company, shall execute
proper instruments acknowledging the same), except for the following provisions
which shall survive until otherwise terminated or discharged pursuant to this
Indenture: (a) the rights of Holders of outstanding Notes to receive solely
from the trust fund described in Section 8.4 hereof, and as more fully set
forth in such Section, payments in respect of the principal of and premium, if
any, and interest on such Notes when such payments are due, (b) the Company's
obligations with respect to such Notes under Sections 2.3, 2.4, 2.6, 2.7, 2.10
and 4.2 hereof, (c) the rights, powers, trusts, duties and immunities of the
Trustee hereunder and the Company's obligations in connection therewith and (d)
Sections 3.1 through 3.7 hereof and this Article 8. Subject to compliance with
this Article 8, the Company may exercise its option under this Section 8.2
notwithstanding the prior exercise of its option under Section 8.3 hereof.
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SECTION 8.3. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.1 hereof of the
option applicable to this Section 8.3, and subject to the satisfaction of the
conditions set forth in Section 8.4 hereof, the Company and the Subsidiary
Guarantors shall be released from their obligations under the covenants
contained in Sections 4.3, 4.4, 4.5, 4.7, 4.8, 4.9, 4.10, 4.11, 4.12, 4.13,
4.14, 4.15, 4.16, 4.17, 4.18, 5.1 and 5.2 and Articles 10 and 11 with respect
to the outstanding Notes on and after the date the conditions set forth below
are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall
thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder (it being understood that such
Notes shall not be deemed outstanding for accounting purposes). For this
purpose, Covenant Defeasance means that, with respect to the outstanding Notes,
the Company may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such covenant, whether
directly or indirectly, by reason of any reference elsewhere herein to any such
covenant or by reason of any reference in any such covenant to any other
provision herein or in any other document and such omission to comply shall not
constitute a Default or an Event of Default under Section 6.1 hereof, but,
except as specified above, the remainder of this Indenture and such Notes shall
be unaffected thereby. In addition, upon the Company's exercise under Section
8.1 hereof of the option applicable to this Section 8.3 hereof, subject to the
satisfaction of the conditions set forth in Section 8.4 hereof, Sections
6.1(e), 6.1(f), 6.1(i) and 6.1(j) hereof shall not constitute Events of
Default.
SECTION 8.4. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to application of either
Section 8.2 or Section 8.3 to the outstanding Notes:
(a) The Company must irrevocably deposit, or caused to be
deposited, with the Trustee (or another trustee satisfying the requirements of
this Indenture), in trust for such purpose, specifically pledged as security
for the benefit of the Holders of the Notes, (1) cash in U.S. dollars in an
amount, (2) non-callable Government Securities which through the payment of
principal and interest in accordance with their terms will provide money in an
amount, or (3) a combination thereof, in such amounts, as will be sufficient,
without reinvestment (and without other assets, including without limitation,
the Pledged Securities and other assets held pursuant to the Pledge Agreement),
in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee, to pay the principal of and premium, if any, and interest on the
outstanding Notes on the stated maturity or on the applicable redemption date,
as the case may be, together with all other amounts payable by the Company
under this Indenture.
(b) In the case of an election under Section 8.2, the
Company shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee
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confirming that (i) the Company has received from, or there has been published
by, the Internal Revenue Service a ruling or (ii) since the date hereof, there
has been a change in the applicable federal income tax law, in either case to
the effect that, and based thereon such Opinion of Counsel shall confirm that,
the Holders of the outstanding Notes will not recognize income, gain or loss
for federal income tax purposes as a result of such Legal Defeasance and will
be subject to federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such Legal Defeasance had not
occurred.
(c) In the case of an election under Section 8.3, the
Company shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income
tax purposes as a result of such Covenant Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not occurred.
(d) No Default or Event of Default shall have occurred
and be continuing on the date of such deposit or insofar as Sections 6.1(g) and
(h) are concerned, at any time in the period ending on the 91st day after the
date of deposit (it being understood that this condition shall not be deemed
satisfied until the expiration of such period).
(e) Such Legal Defeasance or Covenant Defeasance will not
result in a breach or violation of, or constitute a default under any material
agreement or instrument to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries is bound.
(f) The Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the Company with
the intent of preferring the Holders of Notes over the other creditors of the
Company with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others.
(g) The Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to either the Legal Defeasance under
Section 8.2 or the Covenant Defeasance under Section 8.3, as the case may be,
have been complied with as contemplated by this Section 8.4.
SECTION 8.5. DISCHARGE.
This Indenture will be discharged and will cease to be of
further effect (except as to surviving rights of registration of transfer or
exchange of Notes) as to all outstanding Notes ("Discharge") when (i) either
(a) all such Notes theretofore authenticated and delivered (except lost, stolen
or destroyed Notes that have been replaced or paid and Notes for whose payment
money has theretofore been deposited in trust with the Trustee and thereafter
repaid to the Company or discharged from such trust) have been delivered to the
Trustee for cancellation; or (b) all such Notes
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not theretofore delivered to the Trustee for cancellation have become due and
payable, will become due and payable by their terms within one year, or are to
be called for redemption within one year under arrangements satisfactory to the
Trustee for the giving of notice of redemption, and in each case the Company
has irrevocably deposited or caused to be deposited with the Trustee, as trust
funds solely for the benefit of the Holders for that purpose, funds in an
amount of money in U.S. dollars sufficient to pay and discharge the entire
indebtedness on the Notes not theretofore delivered to the Trustee for
cancellation, for the principal amount, premium, if any, and accrued and unpaid
interest to the date of such deposit together with irrevocable instructions
from the Company directing the Trustee to apply such funds to the payment
thereof; (ii) the Company has paid all other sums payable by it under this
Indenture; and (iii) the Company has delivered irrevocable instructions to the
Trustee to apply the deposited money toward the payment of the Notes at
maturity, as the case may be. In addition, the Company must deliver an
Officers' Certificate and an Opinion of Counsel stating that all conditions
precedent under this Indenture to satisfaction and discharge have been complied
with.
SECTION 8.6. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.7 hereof, all money and Government
Securities (including the proceeds thereof) deposited with the Trustee (or
other qualifying trustee, collectively for purposes of this Section 8.6, the
"Trustee") pursuant to Section 8.4 or 8.5 hereof in respect of the outstanding
Notes shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company or any of its Subsidiaries or
Affiliates acting as Paying Agent) as the Trustee may determine, to the Holders
of such Notes of all sums due and to become due thereon in respect of
principal, premium, if any, and interest, but such money need not be segregated
from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the cash or Government
Securities deposited pursuant to this Section 8.6 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders of the outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding,
the Trustee shall deliver or pay to the Company from time to time upon the
request of the Company any money or Government Securities held by it as
provided in this Section 8.6 which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
Section 8.4 hereof), are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Legal Defeasance, Covenant
Defeasance or Discharge.
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SECTION 8.7. REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company or any of its Subsidiaries or Affiliates, in trust for
the payment of the principal of, premium, if any, or interest on any Note and
remaining unclaimed for one year after such principal, premium, if any, or
interest has become due and payable shall be paid to the Company on its request
or (if then held by the Company or any of its Subsidiaries or Affiliates) shall
be discharged from such trust; and the Holder of such Note shall thereafter, as
an unsecured general creditor, look only to the Company for payment thereof,
and all liability of the Trustee or such Paying Agent with respect to such
trust money, and all liability of the Company or any of its Subsidiaries or
Affiliates as trustee thereof, shall thereupon cease.
SECTION 8.8. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any U.S.
dollars or Government Securities in accordance with Section 8.2, 8.3 or 8.5
hereof, as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.2, 8.3 or 8.5 hereof until such time as the Trustee or Paying Agent
is permitted to apply all such assets in accordance with Section 8.2, 8.3 or
8.5 hereof, as the case may be; provided, however, that, if the Company makes
any payment of principal of, premium, if any, or interest on any Note following
the reinstatement of its obligations, the Company shall be subrogated to the
rights of the Holders of such Notes to receive such payment from the money held
by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.1. WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.2 of this Indenture, the Company,
the Subsidiary Guarantors and the Trustee may amend or supplement this
Indenture, the Notes or the Pledge Agreement without the consent of any Holder:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or
in place of certificated Notes;
(c) to provide for the assumption of the Company's
obligations to the Holders of Notes in the case of a merger or
consolidation pursuant to Article 5 hereof;
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(d) to make any change that would provide any additional
rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights hereunder of any such Holder;
(e) to add a Subsidiary Guarantor pursuant to the
provisions set forth in this Indenture; or
(f) to comply with requirements of the SEC in order to
effect or maintain the qualification of this Indenture under the TIA
as then in effect.
Upon the request of the Company and the Subsidiary Guarantors,
accompanied by a Board Resolution of the Company and each Subsidiary Guarantor
authorizing the execution of any such amended or supplemental Indenture, and
upon receipt by the Trustee of the documents described in Section 7.2 hereof,
the Trustee shall join with the Company and the Subsidiary Guarantors in the
execution of any amended or supplemental Indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations that may be therein contained. After an amendment or supplement
under this Section 9.1 becomes effective, the Company shall mail to the Holders
of Notes a notice briefly describing the amendment or supplement. Any failure
of the Company to mail such notice, or any defect therein, shall not, however,
in any way impair or affect the validity of any such amended or supplemental
Indenture.
SECTION 9.2. WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.2, this Indenture,
the Notes or the Pledge Agreement may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the Notes
then outstanding (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Notes),
and, subject to Sections 6.4 and 6.7, any existing Default or Event of Default
(other than a Default or Event of Default in the payment of principal of,
premium, if any, or interest on, the Notes, except a payment default resulting
from an acceleration that has been rescinded) or compliance with any provision
of this Indenture or the Notes may be waived with the consent of the Holders of
a majority in principal amount of the then outstanding Notes (including
consents obtained in connection with a purchase of, or tender offer or exchange
offer for, Notes).
Upon the request of the Company and the Subsidiary Guarantors,
accompanied by a Board Resolution of the Company and each Subsidiary Guarantor
authorizing the execution of any such amended or supplemental Indenture, and
upon the filing with the Trustee of evidence satisfactory to the Trustee of the
consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee
of the documents described in Section 7.2 hereof, the Trustee shall join with
the Company and the Subsidiary Guarantors in the execution of such amended or
supplemental Indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental
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Indenture that adversely affects its own rights, duties, liabilities or
immunities under this Indenture or otherwise.
It shall not be necessary for the consent of the Holders of
Notes under this Section 9.2 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section
9.2 becomes effective, the Company shall mail to the Holders of Notes a notice
briefly describing the amendment, supplement or waiver. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such amended or supplemental Indenture
or waiver. Subject to Sections 6.4 and 6.7 hereof, the Holders of a majority
in principal amount of the Notes then outstanding may waive compliance in a
particular instance by the Company with any provision of this Indenture, the
Notes or the Pledge Agreement. However, without the consent of each Holder
affected, an amendment or waiver may not (with respect to any Notes held by a
non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders
must consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity
of any Note or alter the provisions with respect to the redemption of the Notes
(other than the provisions relating to Section 4.14);
(c) reduce the rate of or change the time for payment of
interest on any Note;
(d) waive a Default or Event of Default in the payment of
principal of, premium, if any, or interest on the Notes (except a rescission
of acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount of the Notes and a waiver of the payment default that resulted
from such acceleration);
(e) make any Note payable in money other than that stated
in the Notes;
(f) make any change in the provisions of this Indenture
relating to waivers of past Defaults or the rights of Holders of Notes to
receive payments of principal of, premium, if any, or interest on the Notes;
(g) waive a redemption payment with respect to any Note
(other than a payment required by Section 4.14);
(h) release any Collateral from the Lien created by the
Pledge Agreement, except in accordance with the terms thereof, or amend the
terms thereof relating to the release of Collateral;
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(i) release any Subsidiary Guarantor from its Subsidiary
Guarantee except as permitted hereunder;
(j) make any change in the provisions of this Indenture
requiring any Guarantee hereof or in the provisions of any such Guarantees; or
(k) make any change in the foregoing amendment and waiver
provisions.
SECTION 9.3. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes
shall be set forth in an amended or supplemental Indenture that complies with
the TIA as then in effect.
SECTION 9.4. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Note is a continuing consent by the Holder of a
Note and every subsequent Holder of a Note or portion of a Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
is not made on any Note. However, any such Holder of a Note or subsequent
Holder of a Note may revoke the consent as to its Note if the Trustee receives
written notice of revocation before the date the waiver, supplement or
amendment has been approved by the requisite Holders. An amendment, supplement
or waiver becomes effective when approved by the requisite Holders and executed
by the Trustee (or, if otherwise provided in such waiver, supplement or
amendment, in accordance with its terms) and thereafter binds every Holder.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to consent to any
amendment, supplement or waiver. If a record date is fixed, then
notwithstanding the last sentence of the immediately preceding paragraph, those
Persons who were Holders at such record date (or their duly designated
proxies), and only those Persons, shall be entitled to consent to such
amendment or waiver or revoke any consent previously given, whether or not such
Persons continue to be Holders after such record date. No consent shall be
valid or effective for more than 90 days after such record date except to the
extent that the requisite number of consents to the amendment, supplement or
waiver have been obtained within such 90-day period or as set forth in the next
paragraph of this Section 9.4.
After an amendment, supplement or waiver becomes effective, it
shall bind every Holder, unless it makes a change described in any of clauses
(a) through (k) of Section 9.2, in which case, the amendment, supplement or
waiver shall bind only each Holder of a Note who has consented to it and every
subsequent Holder of a Note or portion of a Note that evidences the same
indebtedness as the consenting Holder's Note.
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SECTION 9.5. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an
amendment, supplement or waiver on any Note thereafter authenticated. The
Company in exchange for all Notes may issue, and the Trustee shall
authenticate, new Notes that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note
shall not affect the validity and effect of such amendment, supplement or
waiver.
SECTION 9.6. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article 9 if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
In executing any amended or supplemental indenture, the Trustee shall be
entitled to receive and (subject to Section 7.1) shall be fully protected in
relying upon, an Officers' Certificate and an Opinion of Counsel stating that
the execution of such amended or supplemental indenture is authorized or
permitted by this Indenture.
SECTION 9.7. PAYMENTS FOR CONSENT.
The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder of
any Notes for or as an inducement to any consent, waiver or amendment of any
terms or provisions of this Indenture, the Notes, the Pledge Agreement or the
Subsidiary Guarantees unless such consideration is offered to be paid or is
paid to all Holders of the Notes that so consent, waive or agree to amend in
the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.
ARTICLE 10
SUBSIDIARY GUARANTEES
SECTION 10.1. GUARANTEES.
Each Subsidiary Guarantor hereby, jointly and severally,
unconditionally and irrevocably guarantees, to each Holder and to the Trustee
and its successors and assigns the due and punctual payment of principal of,
premium, if any, and interest on the Notes and all other amounts due and
payable under this Indenture and the Notes by the Company whether at maturity,
by acceleration, redemption, repurchase or otherwise, including, without
limitation, interest on the overdue principal of, premium, if any, and interest
on the Notes, to the extent lawful, all in accordance with the terms hereof and
thereof.
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Each Subsidiary Guarantor waives presentation to, demand of,
payment from and protest to the Company of any of the obligations contained in
the Notes and this Indenture and also waives notice of protest for nonpayment,
notice of intent to accelerate and notice of acceleration. Each Subsidiary
Guarantor waives notice of any default under the Notes or the obligations
guaranteed hereby. The obligations of each Subsidiary Guarantor hereunder
shall not be affected by (a) the failure of any Holder or the Trustee to assert
any claim or demand or to enforce any right or remedy against the Company or
any other Person under this Indenture, the Notes or any other agreement or
otherwise; (b) any extension or renewal of any thereof; (c) any rescission,
waiver, amendment or modification of any of the terms or provisions of this
Indenture, the Notes or any other agreement; (d) the release of any security
held by any Holder or the Trustee for the obligations guaranteed hereby or any
of them; (e) the failure of any Holder or the Trustee to exercise any right or
remedy against any other guarantor of the obligations guaranteed hereby; or (f)
any change in the ownership of such Subsidiary Guarantor.
Each Subsidiary Guarantor further agrees that its Subsidiary
Guarantee herein constitutes a guarantee of payment, performance and compliance
when due (and not a guarantee of collection) and waives any right to require
that any resort be had by any Holder or the Trustee to any security held for
payment of the obligations guaranteed hereby.
Except as expressly set forth in Sections 8.2, 8.3, 10.3 and
10.7, the obligations of each Subsidiary Guarantor hereunder shall not be
subject to any reduction, limitation, impairment or termination for any reason,
including any claim of waiver, release, surrender, alteration or compromise,
and shall not be subject to any defense of setoff, counterclaim, recoupment or
termination whatsoever or by reason of the invalidity, illegality or
unenforceability of the obligations guaranteed hereby or otherwise. Without
limiting the generality of the foregoing, the obligations of each Subsidiary
Guarantor herein shall not be discharged or impaired or otherwise affected by
the failure of any Holder or the Trustee to assert any claim or demand or to
enforce any remedy under this Indenture, the Notes or any other agreement, by
any waiver or modification of any thereof, by any default, failure or delay,
willful or otherwise, in the performance of the obligations guaranteed hereby,
or by any other act or thing or omission or delay to do any other act or thing
which may or might in any manner or to any extent vary the risk of such
Subsidiary Guarantor or would otherwise operate as a discharge of such
Subsidiary Guarantor as a matter of law or equity.
Each Subsidiary Guarantor further agrees that its Subsidiary
Guarantee herein shall continue to be effective or be reinstated, as the case
may be, if at any time payment, or any part thereof, of principal of, premium,
if any, or interest on any obligation guaranteed hereby is rescinded or must
otherwise be restored by any Holder or the Trustee upon the bankruptcy or
reorganization of the Company or otherwise.
In furtherance of the foregoing and not in limitation of any
other right which any Holder or the Trustee has at law or in equity against any
Subsidiary Guarantor by virtue hereof, upon the failure of the Company to pay
the principal of, premium, if any, or interest on any obligation guaranteed
hereby when and as the same shall become due, whether at maturity, by
acceleration, by
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redemption or otherwise, or to perform or comply with any other obligation
guaranteed hereby, each Subsidiary Guarantor hereby promises to and will, upon
receipt of written demand by the Trustee, forthwith pay, or cause to be paid,
in cash, to the Holders or the Trustee an amount equal to the sum of (i) the
unpaid amount of such obligations, (ii) accrued and unpaid interest on such
obligations (but only to the extent not prohibited by law) and (iii) all other
monetary obligations of the Company to the Holders and the Trustee.
Each Subsidiary Guarantor agrees that it shall not be entitled
to any right of subrogation in respect of any obligations guaranteed hereby
until payment in full of all such obligations. Each Subsidiary Guarantor
further agrees that, as between it, on the one hand, and the Holders and the
Trustee, on the other hand, (x) the maturity of the obligations guaranteed
hereby may be accelerated as provided in Article 6 for the purposes of such
Subsidiary Guarantor's Subsidiary Guarantee herein, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
obligations guaranteed hereby, and (y) in the event of any declaration of
acceleration of such obligations as provided in Article 6, such obligations
(whether or not due and payable) shall forthwith become due and payable by such
Subsidiary Guarantor for the purposes of this Section.
Each Subsidiary Guarantor also agrees to pay any and all costs
and expenses (including reasonable attorneys' fees) incurred by the Trustee or
any Holder in enforcing any rights under this Section.
SECTION 10.2. SUBSIDIARY GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.
(a) Subject to paragraph (b) of this Section 10.2, no
Restricted Subsidiary may consolidate or merge with or into (whether or not
such Restricted Subsidiary is the surviving Person), or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another Person
unless (i) the Person formed by or surviving any such consolidation or merger
(if other than such Restricted Subsidiary) or the Person to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made assumes all the obligations of such Restricted Subsidiary under the
Subsidiary Guarantee, pursuant to a supplemental indenture in form satisfactory
to the Trustee; (ii) immediately after such transaction, no Default or Event of
Default exists; (iii) the Company and its Restricted Subsidiaries would, at the
time of such transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable fiscal quarter, be
permitted to Incur at least $1.00 of additional Indebtedness pursuant to the
Consolidated Interest Coverage Ratio test set forth in Section 4.9(a); (iv) the
Company shall have delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that such consolidation, merger or transfer
complies with the provisions of this Indenture; and (v) such Restricted
Subsidiary (if such Restricted Subsidiary is the surviving Person) shall have
delivered a written instrument in form satisfactory to the Trustee confirming
its Subsidiary Guarantee after giving effect to such consolidation, merger or
transfer. Notwithstanding the foregoing, any Restricted Subsidiary may merge
into, consolidate with or transfer all or part of its properties or assets to
the Company or one or more Restricted Subsidiaries.
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(b) In the event of a sale, assignment, transfer, lease,
conveyance or other disposition of all of the Equity Interests in, or all or
substantially all of the assets of, a Restricted Subsidiary to any Person that
is not the Company or any of its Restricted Subsidiaries, whether by way of
merger, consolidation or otherwise, if (i) the Net Proceeds of such sale or
other disposition are applied in accordance with the provisions of Section
4.10, (ii) no Default or Event of Default exists or would exist under this
Indenture after giving effect to such transaction, (iii) all obligations of
such Restricted Subsidiary under any other Indebtedness of the Company or any
of its Restricted Subsidiaries shall have been terminated (including, without
limitation, all Guarantees of any such Indebtedness), (iv) all Liens on assets
of such Restricted Subsidiary that secure any other Indebtedness of the Company
or any of its Restricted Subsidiaries shall have been terminated, and (v) all
obligations of the Company and its Restricted Subsidiaries under other
Indebtedness of such Restricted Subsidiary shall have been terminated
(including, without limitation, all Guarantees of such Indebtedness), then (A)
in the case of such a sale or other disposition, whether by way of merger,
consolidation or otherwise, of all of the Equity Interests in such former
Restricted Subsidiary, such former Restricted Subsidiary will be released and
relieved of any obligations under its Subsidiary Guarantee, or (B) in the case
of a sale or other disposition of all or substantially all of the assets of
such Restricted Subsidiary, the Person acquiring such assets will not be
required to assume the obligations of such Restricted Subsidiary under its
Subsidiary Guarantee.
SECTION 10.3. LIMITATION ON LIABILITY.
Any term or provision of this Indenture to the contrary
notwithstanding, the maximum aggregate amount of the obligations guaranteed
hereunder by any Subsidiary Guarantor shall not exceed the maximum amount that
can be hereby guaranteed without rendering this Indenture, as it relates to
such Subsidiary Guarantor, voidable under applicable law relating to fraudulent
conveyance or fraudulent transfer or similar laws affecting the rights of
creditors generally. To effectuate the foregoing intention, the obligations of
each Subsidiary Guarantor shall be limited to the maximum amount as will, after
giving effect to all other contingent and fixed liabilities of such Subsidiary
Guarantor and after giving effect to any collections from, rights to receive
contributions from, or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other Subsidiary Guarantor
under its Subsidiary Guarantee or pursuant to its contribution obligations
hereunder, result in the obligations of such Subsidiary Guarantor under its
Subsidiary Guarantee not constituting a fraudulent conveyance or fraudulent
transfer under any Applicable Law. Each Subsidiary Guarantor that makes a
payment or distribution under a Subsidiary Guarantee shall be entitled to a
contribution from each other Subsidiary Guarantor so long as the exercise of
such right does not impair the rights of the Holders under the Subsidiary
Guarantees.
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SECTION 10.4. SUCCESSORS AND ASSIGNS.
This Article 10 shall be binding upon each Subsidiary
Guarantor and its successors and assigns and shall inure to the benefit of the
successors and assigns of the Trustee and the Holders and, in the event of any
transfer or assignment of rights by any Holder or the Trustee, the rights and
privileges conferred upon that party in this Indenture and in the Notes shall
automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions of this Indenture.
SECTION 10.5. NO WAIVER.
Neither a failure nor a delay on the part of either the
Trustee or the Holders in exercising any right, power or privilege under this
Article 10 shall operate as a waiver thereof, nor shall a single or partial
exercise thereof preclude any other or further exercise of any right, power or
privilege. The rights, remedies and benefits of the Trustee and the Holders
herein expressly specified are cumulative and not exclusive of any other
rights, remedies or benefits which either may have under this Article 10 at
law, in equity, by statute or otherwise.
SECTION 10.6. MODIFICATION.
No modification, amendment or waiver of any provision of this
Article 10, nor the consent to any departure by any Subsidiary Guarantor
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Trustee, and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which given. No notice
to or demand on any Subsidiary Guarantor in any case shall entitle such
Subsidiary Guarantor to any other or further notice or demand in the same,
similar or other circumstances.
SECTION 10.7. RELEASE OF SUBSIDIARY GUARANTOR.
Upon the sale or disposition of a Subsidiary Guarantor (or
substantially all of its assets) or the designation of a Subsidiary Guarantor
as an Unrestricted Subsidiary pursuant to and in compliance with the terms of
this Indenture, including, but not limited to the provisions of Section 10.2,
such Subsidiary shall be released from and relieved of its obligations under
its Subsidiary Guarantee upon execution and delivery of a supplemental
indenture satisfactory to the Trustee. Such supplemental indenture shall be
accompanied by an Officers' Certificate and an Opinion of Counsel, each stating
that such supplemental indenture and release of the Subsidiary Guarantee
complies with the provisions of this Indenture and that all conditions
precedent to such supplemental indenture and release of the Subsidiary
Guarantee have been complied with.
SECTION 10.8. EXECUTION OF SUPPLEMENTAL INDENTURE BY FUTURE RESTRICTED
SUBSIDIARIES.
The Company shall cause any Person that becomes a Restricted
Subsidiary after the Closing Date (including any Subsidiary that was previously
an Unrestricted Subsidiary and which becomes a Restricted Subsidiary) to
promptly execute and deliver to the Trustee a supplemental
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indenture pursuant to which such Restricted Subsidiary shall become a
Subsidiary Guarantor under this Article 10 and shall guarantee the Notes
pursuant to the terms hereof. Concurrently with the execution and delivery of
such supplemental indenture, the Company shall deliver to the Trustee an
Opinion of Counsel to the effect that such supplemental indenture has been duly
authorized, executed and delivered by such Restricted Subsidiary and that,
subject to the application of bankruptcy, insolvency, moratorium, fraudulent
conveyance or transfer and other similar laws relating to creditors' rights
generally and to the principles of equity, whether considered in a proceeding
at law or in equity, the Subsidiary Guarantee of such Subsidiary Guarantor is a
legal, valid and binding obligation of such Subsidiary Guarantor, enforceable
against such Subsidiary Guarantor in accordance with its terms.
ARTICLE 11
COLLATERAL AND SECURITY
SECTION 11.1. PLEDGE AGREEMENT.
(a) The due and punctual payment of the principal of,
premium, and interest on the Notes when and as the same shall be due and
payable on each Interest Payment Date, at maturity or by acceleration, and
interest on the overdue principal of and interest (to the extent permitted by
law), if any, on the Notes and payment and performance of all other obligations
of the Company to the Holders of the Notes or the Trustee under this Indenture
and the Pledge Agreement with respect to the Notes, according to the terms
hereunder or thereunder, shall be secured as provided in the Pledge Agreement
which the Company and the Trustee have entered into simultaneously with the
execution of this Indenture. Upon the acceleration of the maturity of the
Notes prior to the termination of the Pledge Agreement, the Pledge Agreement
will provide for the foreclosure by the Trustee of the net proceeds of the
Pledge Account. Each Holder of the Notes, by its acceptance thereof, consents
and agrees to the terms of the Pledge Agreement (including, without limitation,
the provisions providing for foreclosure and disbursement of Collateral) as the
same may be in effect or may be amended from time to time in accordance with
its terms and authorizes and directs the Trustee to enter into the Pledge
Agreement and to perform its obligations and exercise its rights thereunder in
accordance therewith. The Company shall deliver to the Trustee copies of the
Pledge Agreement, and shall do or cause to be done all such acts and things as
may be necessary or proper, or as may be required by the provisions of the
Pledge Agreement, to assure and confirm to the Trustee the security interest in
the Collateral contemplated by the Pledge Agreement or any part thereof, as
from time to time constituted, so as to render the same available for the
security and benefit of this Indenture with respect to, and of, the Notes,
according to the intent and purposes expressed in the Pledge Agreement. Prior
to the termination of the Pledge Agreement pursuant to its terms, the Company
shall take any and all actions reasonably required to cause the Pledge
Agreement to create and maintain (to the extent possible under applicable law),
as security for the obligations of the Company hereunder, a valid and
enforceable perfected first priority Lien in and on all the Collateral, in
favor of the Trustee for the benefit of the Trustee and the Holders of the
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Notes, superior to and prior to the rights of all third Persons and subject to
no other Liens. The Trustee shall have no responsibility for perfecting or
maintaining the perfection of the Trustee's security interest in the Collateral
or for filing any instrument, document or notice in any public office at any
time or times.
(b) The Pledge Agreement shall further provide that in
the event a portion of the Notes has been retired by the Company, if no Default
or Event of Default is then continuing, depending upon the amount available in
the Pledge Account, funds representing the interest payments which have not
previously been made on such retired Notes shall, upon the written request of
the Company to the Trustee, be paid to the Company upon compliance with the
release of collateral provisions of the TIA and upon receipt of a notice
relating thereto from the Trustee.
SECTION 11.2. RECORDING AND OPINIONS.
(a) The Company shall furnish to the Trustee
simultaneously with the execution and delivery of this Indenture an Opinion of
Counsel either (i) stating that in the opinion of such counsel all action has
been taken with respect to the recording, registering and filing of this
Indenture, financing statements or other instruments necessary to make
effective the Lien intended to be created by the Pledge Agreement and reciting
with respect to the security interests in the Collateral the details of such
action, or (ii) stating that in the opinion of such counsel no such action is
necessary to make such Lien effective.
(b) The Company shall furnish to the Trustee on
_____________, 1998, and on each ________________ thereafter until the date
upon which the balance of Available Funds (as defined in the Pledge Agreement)
shall have been reduced to zero, an Opinion of Counsel, dated as of such date,
satisfying the requirements of TIA Section 314(b) and either (i) stating that
(A) in the opinion of such counsel, all action has been taken with respect to
the recording, registering, filing, re-recording, re-registering and refiling
of all supplemental indentures, financing statements, continuation statements,
and other instruments of further assurance as is necessary to maintain the Lien
of the Pledge Agreement and reciting with respect to the security interests in
the Collateral the details of such action or referring to prior Opinions of
Counsel in which such details are given and (B) based on relevant laws as in
effect on the date of such Opinion of Counsel, all financing statements and
continuation statements have been executed and filed that are necessary as of
such date and during the succeeding 12 months fully to preserve and protect, to
the extent such protection and preservation are possible by filing, the rights
of the Holders of Notes and the Trustee hereunder and under the Pledge
Agreement with respect to the security interests in the Collateral or (ii)
stating that, in the opinion of such counsel, no such action is necessary to
maintain such Lien.
SECTION 11.3. RELEASE OF COLLATERAL.
(a) Subject to subsections (b), (c) and (d) of this
Section 11.3, Collateral may be released from the Lien created by the Pledge
Agreement only in accordance with the provisions of the Pledge Agreement.
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(b) Except to the extent that any Lien on proceeds of
Collateral is automatically released by operation of Section 9-306 of the
Uniform Commercial Code or other similar law, no Collateral shall be released
from the Lien created by the Pledge Agreement pursuant to the provisions of the
Pledge Agreement, other than to the Holders pursuant to the terms thereof,
unless there shall have been delivered to the Trustee the certificates, if any,
required by Section 11.3(d) and Section 11.4.
(c) At any time when an Event of Default shall have
occurred and be continuing and the maturity of the Notes shall have been
accelerated (whether by declaration or otherwise), no Collateral shall be
released pursuant to the provisions of the Pledge Agreement, and no release of
Collateral in contravention of this Section 11.3(c) shall be effective as
against the Holders of the Notes, except for the disbursement of all Available
Funds (as defined in the Pledge Agreement) to the Trustee pursuant to Section
6(b)(iii) of the Pledge Agreement.
(d) On or before each of the first two Interest Payment
Dates, if the conditions set forth in Sections 3.2(a) and 3.2(c) of the Pledge
Agreement have been satisfied, then the Pledge Agent under the Pledge Agreement
may release Collateral from the Liens created by this Indenture and the Pledge
Agreement and apply such funds as required by Section 4.1 of this Indenture.
Any such release of Collateral shall not be deemed to impair the security under
this Indenture in contravention of the provisions hereof. To the extent
applicable, the Company shall cause TIA Section 314(d) relating to the release
of property or securities from the Lien and security interest of the Pledge
Agreement to be complied with. Any certificate or opinion required by TIA
Section 314(d) may be made by an Officer of the Company except in cases where
TIA Section 314(d) requires that such certificate or opinion be made by an
independent Person, which Person shall be an independent engineer, appraiser or
other expert selected or approved by the Trustee in the exercise of reasonable
care.
SECTION 11.4. CERTIFICATE OF THE COMPANY.
The Company shall furnish to the Trustee, prior to any
proposed release of Collateral other than pursuant to the express terms of the
Pledge Agreement, (i) all documents required by TIA Section 314 and (ii) an
Opinion of Counsel to the effect that such accompanying documents constitute
all documents required by TIA Section 314 and that such release is permitted by
the terms of this Indenture and the Pledge Agreement.
SECTION 11.5. AUTHORIZATION OF ACTIONS TO BE TAKEN BY THE TRUSTEE UNDER THE
PLEDGE AGREEMENT.
Subject to the provisions of Section 7.1 and Section 7.2, the
Trustee may, without the consent of the Holders of the Notes, on behalf of the
Holders of the Notes, take all actions it deems necessary or appropriate in
order to (a) enforce any of the terms of the Pledge Agreement and (b) collect
and receive any and all amounts payable in respect of the obligations of the
Company hereunder and thereunder. The Trustee shall have power to institute
and maintain such suits and
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proceedings as it may deem expedient to prevent any impairment of the
Collateral by any acts that may be unlawful or in violation of the Pledge
Agreement or this Indenture, and such suits and proceedings as the Trustee may
deem expedient to preserve or protect its interests and the interests of the
Holders of the Notes in the Collateral (including power to institute and
maintain suits or proceedings to restrain the enforcement of or compliance with
any legislative or other governmental enactment, rule or order that may be
unconstitutional or otherwise invalid if the enforcement of, or compliance
with, such enactment, rule or order would impair the security interest
hereunder or be prejudicial to the interests of the Holders of the Notes or of
the Trustee).
SECTION 11.6. AUTHORIZATION OF RECEIPT OF FUNDS BY THE TRUSTEE UNDER THE
PLEDGE AGREEMENT.
The Trustee is authorized to receive any funds for the benefit
of the Holders of the Notes disbursed under the Pledge Agreement, and to make
further distributions of such funds to the Holders of the Notes according to
the provisions of this Indenture.
SECTION 11.7. TERMINATION OF SECURITY INTEREST.
Upon the earliest to occur of (i) the date upon which the
balance of Available Funds (as defined in the Pledge Agreement) shall have been
reduced to zero, (ii) if no Default or Event of Default exists, the date upon
which the Company shall have paid in full in accordance with the terms of this
Indenture the first two scheduled interest payments due on the Notes, (iii) the
payment in full of all obligations of the Company under this Indenture and the
Notes, (iv) Legal Defeasance under Article 8, (v) Covenant Defeasance under
Article 8, and (vi) the termination of the Pledge Agreement pursuant to the
terms thereof, the Trustee shall at the written request of the Company, release
the Liens pursuant to this Indenture and the Pledge Agreement upon the
Company's compliance with the provisions of the TIA pertaining to release of
collateral.
ARTICLE 12
MISCELLANEOUS
SECTION 12.1. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or
conflicts with the duties imposed by TIA Section 318(c), such TIA-imposed
duties shall control under this Indenture.
SECTION 12.2. NOTICES.
Any notice or communication by the Company, any Subsidiary
Guarantor or the Trustee to the other shall be sufficiently given if in writing
and delivered in person or mailed by first
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class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, addressed
as follows:
If to the Company or any Subsidiary Guarantor:
First Wave Marine, Inc.
4000 S. Sherwood Forest Blvd.
Suite 603
Baton Route, Louisiana 70816
Phone No.: (504) 292-8000
Telecopier No.: (504) 292-8100
Attention: Chief Financial Officer
If to the Trustee:
-------------------------------------------
-------------------------------------------
-------------------------------------------
Phone No.:
-------------------------------
Telecopier No.:
--------------------------
Attention: Corporate Trust Department
The Company, any Subsidiary Guarantor or the Trustee, by
notice to the other, may designate additional or different addresses for
subsequent notices or communications.
All notices and communications (other than those sent to
Holders) shall be deemed to have been duly given: at the time delivered by
hand, if personally delivered; five Business Days after being deposited in the
mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and
the next Business Day after timely delivery to the courier, if sent by
overnight air courier guaranteeing next day delivery, in each case to the
address shown above. Notwithstanding the foregoing, notices to the Trustee
shall only be effective upon actual receipt thereof by the Trustee at the
Corporate Trust Office of the Trustee.
Any notice or communication to a Holder shall be mailed by
first class mail, certified or registered, return receipt requested, or by
overnight air courier guaranteeing next day delivery to its address shown on
the register kept by the Registrar. Any notice or communication shall also be
so mailed to any Person described in TIA Section 313(c), to the extent
required by the TIA. Failure to mail a notice or communication to a Holder or
any defect in it shall not affect its sufficiency with respect to other
Holders.
If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the
addressee receives it.
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If the Company mails a notice or communication to Holders, it
shall mail a copy to the Trustee and each Agent at the same time.
SECTION 12.3. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
Holders may communicate pursuant to TIA Section 312(b) with
other Holders with respect to their rights under this Indenture or the Notes.
The Company, the Subsidiary Guarantors, the Trustee, the Registrar and anyone
else shall have the protection of TIA Section 312(c).
SECTION 12.4. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company or any
Subsidiary Guarantor to the Trustee to take any action under this Indenture,
the Company or such Subsidiary Guarantor, as the case may be, shall furnish to
the Trustee:
(a) an Officers' Certificate in form and substance
reasonably satisfactory to the Trustee (which shall include the
statements set forth in Section 12.5 hereof) stating that, in the
opinion of the signers, all conditions precedent and covenants, if
any, provided for in this Indenture relating to the proposed action
have been satisfied; and
(b) an Opinion of Counsel in form and substance
reasonably satisfactory to the Trustee (which shall include the
statements set forth in Section 12.5 hereof) stating that, in the
opinion of such counsel, all such conditions precedent and covenants
have been satisfied.
SECTION 12.5. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions
of TIA Section 314(e), shall comply with the definition of the term "Officers'
Certificate" and shall include:
(a) a statement that the Person making such certificate
or opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he
or she has made such examination or investigation as is necessary to
enable him to express an informed opinion as to whether or not such
covenant or condition has been satisfied; and
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(d) a statement as to whether or not, in the opinion of
such Person, such condition or covenant has been satisfied.
SECTION 12.6. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Registrar or Paying Agent may make reasonable rules and
set reasonable requirements for its functions.
SECTION 12.7. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
OTHERS.
No past, present or future director, officer, employee,
incorporator, partner or stockholder of either of the Company or any of its
Subsidiaries, as such, shall have any liability for any obligations of the
Company or its Subsidiaries under the Notes, the Subsidiary Guarantees or this
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability. This waiver and release are part of the
consideration for issuance of the Notes and the Subsidiary Guarantees.
SECTION 12.8. GOVERNING LAW.
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAW OF THE STATE OF NEW
YORK. THE COMPANY HEREBY SUBMITS TO THE PERSONAL JURISDICTION OF ANY COMPETENT
COURT OF THE STATE OF NEW YORK, OR A UNITED STATES FEDERAL COURT SITTING IN NEW
YORK CITY.
SECTION 12.9. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other
indenture, loan or debt agreement of the Company or its Subsidiaries or of any
other Person. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
SECTION 12.10. SUCCESSORS.
This Indenture shall inure to the benefit of and be binding
upon the parties hereto and each of their respective successors and assigns,
except that the Company may not assign this Indenture or its obligations
hereunder except as expressly permitted by Sections 5.1 and 5.2. Without
limiting the generality of the foregoing, this Indenture shall inure to the
benefit of all Holders from time to time. Nothing expressed or mentioned in
this Indenture is intended or shall be construed to give any Person, other than
the parties hereto, their respective successors and assigns, and the Holders,
any legal or equitable right, remedy or claim under or in respect of this
Indenture or any provision herein contained.
74
<PAGE> 83
SECTION 12.11. SEVERABILITY.
In case any provision in this Indenture or in the Notes shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
SECTION 12.12. ORIGINALS.
The parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together represent the
same agreement.
SECTION 12.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of
the Articles and Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part of this Indenture and shall
in no way modify or restrict any of the terms or provisions hereof.
SECTION 12.14. COUNTERPARTS
This Indenture may be signed in counterparts and by the
different parties hereto in separate counterparts, each of which shall
constitute an original and all of which together shall constitute one and the
same instrument.
75
<PAGE> 84
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the date first above written.
THE COMPANY:
FIRST WAVE MARINE, INC.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
INITIAL SUBSIDIARY GUARANTOR:
NEWPARK SHIPBUILDING AND REPAIR, INC.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
EAE SERVICES, INC.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
EAE INDUSTRIES, INC.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
76
<PAGE> 85
NEWPARK MARINE FABRICATORS, INC.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
LOUISIANA SHIP, INC.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
TRUSTEE:
BANK ONE, NA., as Trustee
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
77
<PAGE> 86
- --------------------------------------------------------------------------------
EXHIBIT A
(Form of Face of Note)
Unless and until it is exchanged in whole or in part for Notes in
definitive form, this Note may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary. Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
New York, New York, to the Company or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of
Cede & Co. or such other name as may be requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or such other
entity as may be requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an
interest herein.[1]
- --------------------------
[1] This paragraph should be included only if the Note is issued in global
form.
A-1
<PAGE> 87
FIRST WAVE MARINE, INC.
______% Senior Notes due 2008
No. $__________
CUSIP #__________
First Wave Marine, Inc., a Delaware corporation (the "Company"),
promises to pay to _________________ or its registered assigns, the principal
sum indicated on Schedule A hereof on _________________, 2008.
Interest Payment Dates: _____________ and ____________, commencing on
___________, 1998.
Record Dates: ______________ and _____________.
Dated: ___________, _____
FIRST WAVE MARINE, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
This is one of the
Notes referred to in the
within-mentioned Indenture:
BANK ONE, N.A., as Trustee
By:
----------------------------------
Authorized Signatory
Dated:
--------------------------------
A-2
<PAGE> 88
(Form of Reverse Side of Note)
_____% Senior Notes due 2008
Capitalized terms used herein but not defined shall have the meanings
assigned to them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. The Notes will be limited in aggregate principal
amount to $90 million (except as otherwise provided in Section 2.7 of the
Indenture referred to below) and will mature on ______________, 2008. The
Company promises to pay interest on the principal amount of this Note from the
Closing Date until maturity. The Company will pay interest semi-annually on
______________ and _____________ of each year, commencing ______________, 1998,
or if any such day is not a Business Day, on the next succeeding Business Day
(each an "Interest Payment Date") to Holders of record on the immediately
preceding ______________ and _____________, as appropriate (each, a "Record
Date"). Interest on the Notes will accrue at the rate of ____% per annum from
the most recent date to which interest has been paid or, if no interest has
been paid, from the Closing Date. The Company shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law to the extent
that such interest is an allowed claim enforceable against the debtor under
such Bankruptcy Law) on overdue principal and premium, if any, from time to
time on demand at the rate equal to 1% per annum in excess of the rate then in
effect; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of
a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company shall pay the principal of,
and premium, and interest on, the Notes on the dates and in the manner provided
herein and in the Indenture. Principal of, and premium, and interest on,
Certificated Notes will be payable, and Certificated Notes may be presented for
registration of transfer or exchange, at the office or agency of the Company
maintained for such purpose. Principal of, and premium, and interest on,
Global Notes will be payable by the Company through the Trustee to the
Depositary by wire transfer of immediately available funds. Holders of
Certificated Notes will be entitled to receive interest payments by wire
transfer in immediately available funds if appropriate wire transfer
instructions have been received in writing by the Trustee not less than 15 days
prior to the applicable Interest Payment Date. Such wire instructions, upon
receipt by the Trustee, shall remain in effect until revoked by such Holder.
If wire instructions have not been received by the Trustee with respect to any
Holder of a Certificated Note, payment of interest may be made by check in
immediately available funds mailed to such Holder at the address set forth upon
the Register maintained by the Registrar.
3. PAYING AGENT AND REGISTRAR. Initially, Bank One, N.A., the
Trustee under the Indenture, will act as Paying Agent and Registrar. The
Company may change any Paying Agent or Registrar without notice to any Holder.
The Company or any of its Subsidiaries may act in any such
A-3
<PAGE> 89
capacity, except that none of the Company, its Subsidiaries or their Affiliates
shall act (i) as Paying Agent in connection with any redemption, offer to
purchase, discharge or defeasance, as otherwise specified in the Indenture, and
(ii) as Paying Agent or Registrar if a Default or Event of Default has occurred
and is continuing.
4. INDENTURE.
The Company issued the Notes under an Indenture dated as of
_______________, 1998 (as such may be amended, supplemented or restated from
time to time, the "Indenture") by and among the Company, the Initial Subsidiary
Guarantors named therein, and the Trustee. The terms of the Notes include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-
77bbbb). The Notes are subject to all such terms, and Holders are referred to
the Indenture and such Act for a statement of such terms. The Notes are senior
obligations of the Company limited to $90 million in aggregate principal amount
(except as otherwise provided in Section 2.7 of the Indenture).
Each of the Initial Subsidiary Guarantors will Guarantee the
Notes, and the Indenture requires the Company to cause any other Person that
becomes a Restricted Subsidiary after the Closing Date to execute and deliver
to the Trustee a supplemental indenture pursuant to which such Restricted
Subsidiary will Guarantee the Notes. So long as no Default or Event of Default
exists or would be caused thereby, any Person that is no longer a Restricted
Subsidiary may, by execution and delivery to the Trustee of a supplemental
indenture satisfactory to the Trustee, be released from its Subsidiary
Guarantee and cease to Guarantee the Notes.
The Indenture contains certain covenants that, among other
things, limit the ability of the Company and its Restricted Subsidiaries to
incur additional Indebtedness, pay dividends or make other distributions,
repurchase any capital stock or Subordinated Indebtedness, make certain
investments, create certain liens, enter into certain transactions with
affiliates, sell assets, enter into certain mergers and consolidations, allow
Restricted Subsidiaries to create certain dividend and other payment
restrictions, enter into sale and leaseback transactions, and issue or sell
capital stock of Restricted Subsidiaries.
5. OPTIONAL REDEMPTION.
The Notes will not be redeemable at the Company's option prior
to ______________, 2003, except as provided below. Thereafter, the Notes will
be subject to redemption at the option of the Company, in whole or in part,
upon not less than 30 nor more than 60 days' notice to the Holders, at the
redemption prices (expressed as percentages of principal amount) set forth
below plus accrued and unpaid interest thereon to the applicable redemption
date, if redeemed during the twelve-month period beginning on ______________ of
the years indicated below:
A-4
<PAGE> 90
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001 . . . . . . . . . . . . . . . . . . . . . ______%
2002 . . . . . . . . . . . . . . . . . . . . . ______%
2003 . . . . . . . . . . . . . . . . . . . . . ______%
2004 and thereafter . . . . . . . . . . . . . 100.000%
</TABLE>
Notwithstanding the foregoing, on and prior to
_____________, 2001, the Company, at its option, may redeem, from time to time,
up to 35% of the aggregate principal amount of the Notes at a redemption price
of ____% of the principal amount thereof, plus accrued and unpaid interest
thereon to the redemption date with the net proceeds of a Public Equity
Offering, as described in Section 3.7 of the Indenture; provided that no less
than 65% of the aggregate principal amount of the Notes initially issued
remains outstanding immediately after giving effect to such redemption; and
provided, further, that such notice of redemption shall be given not later than
30 days, and such redemption shall occur not later than 90 days, after the date
of the closing of the transaction giving rise to such Public Equity Offering.
Unless the Company defaults in making such redemption payment, on and after the
redemption date, interest ceases to accrue on the Notes or portions thereof
called for redemption.
6. MANDATORY REDEMPTION. Except as set forth in paragraph 7
below, the Company shall not be required to make mandatory redemption payments
with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) Upon a Change of Control, the Company shall be
required to make an offer to Holders to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of each Holder's Notes at a purchase
price equal to 101% of the aggregate principal amount thereof, plus accrued and
unpaid interest thereon to the date of purchase as provided in, and subject to
the terms of, the Indenture.
(b) If the Company or any Restricted Subsidiary
consummates any Asset Sale, the Company may be required, subject to the terms
and conditions of the Indenture, to utilize a certain portion of the proceeds
received from such Asset Sale to repurchase Notes at a purchase price equal to
100% of the principal amount thereof, plus accrued and unpaid interest thereon
to the date of purchase.
8. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Notes may be registered and Notes may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture. The Company need not
exchange or register the transfer of any Note or portion of a Note selected for
redemption, except for the unredeemed portion of any Note being
A-5
<PAGE> 91
redeemed in part. Also, it need not exchange or register the transfer of any
Notes for a period of 15 days before a selection of Notes to be redeemed or
during the period between a Record Date and the corresponding Interest Payment
Date.
9. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
10. UNCLAIMED MONEY. If money for the payment of principal,
premium, or interest remains unclaimed for one year, the Trustee and the Paying
Agent will pay the money back to the Company at its request. After that, all
liability of the Trustee and such Paying Agent with respect to such money shall
cease.
11. DEFEASANCE PRIOR TO REDEMPTION OR MATURITY. Subject to
certain conditions contained in the Indenture, the Company at any time may
terminate some or all of its obligations under the Notes and the Indenture if
the Company deposits with the Trustee money or Government Securities sufficient
to pay the principal of, premium, and interest on, the Notes to redemption or
maturity, as the case may be.
12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
exceptions, the Indenture or the Notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the Notes
then outstanding, and any existing Default or Event or Default or compliance
with any provision of the Indenture or the Notes may be waived with the consent
of the Holders of a majority in principal amount of the then outstanding Notes.
Without the consent of any Holder of a Note, the Indenture or the Notes may be
amended or supplemented to cure any ambiguity, defect or inconsistency, to
provide for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption of the Company's obligations to Holders of
Notes in case of a merger or consolidation, to make any change that would
provide any additional rights or benefits to the Holders of the Notes or that
does not adversely affect the legal rights under the Indenture of any such
Holder, or to comply with the requirements of the SEC in order to effect or
maintain the qualification of the Indenture under the TIA as then in effect.
13. DEFAULTS AND REMEDIES.
Events of Default include: (i) default for 30 days in the
payment when due of any interest payable with respect to the Notes at any time
(provided that such 30-day grace period shall be inapplicable for the first two
scheduled interest payments due on the Notes); (ii) default in payment when due
(whether at maturity, upon redemption or repurchase, or otherwise) of the
principal of or premium, if any, on the Notes; (iii) failure by the Company or
any Restricted Subsidiary to comply with the provisions described under
Articles 5, 10 or 11 or Sections 4.10 or 4.14 of the Indenture; (iv) failure by
the Company or any Restricted Subsidiary for 30 calendar days after notice from
the Trustee or Holders of at least 25% in aggregate principal amount of the
Notes to the Company and the Trustee to comply with any of its other agreements
in the Indenture, the Notes or the Pledge Agreement; (v) default under any
mortgage, indenture or instrument under
A-6
<PAGE> 92
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is Guaranteed by the Company or any of
its Restricted Subsidiaries), whether such Indebtedness or Guarantee now exists
or is created after the date of the Indenture, which default (a) is caused by a
failure to pay principal of or premium, if any, or interest on such
Indebtedness following the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (b) results
in the acceleration of such Indebtedness (including any obligation to redeem or
repurchase such Indebtedness) prior to its express maturity and, in each case,
the principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated, aggregates $1 million
or more; (vi) failure by the Company or any of its Restricted Subsidiaries to
pay final non-appealable judgments rendered against the Company or any of its
Restricted Subsidiaries aggregating in excess of $1 million, which judgments
are not paid, discharged or stayed for a period of 60 days after such judgments
become final and non-appealable; (vii) certain events of bankruptcy or
insolvency with respect to the Company or any Restricted Subsidiary; (viii)
certain events of breach, default, repudiation or unenforceability of the
Pledge Agreement; and (ix) any Guarantee of the Notes shall be held in a
judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect, or any Restricted Subsidiary, or any
Person acting on behalf of any Restricted Subsidiary, shall deny or disaffirm
its obligations under its Guarantee of any Notes.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy by proceeding at law or in equity to collect
any payment due, or to enforce the performance of any provision, under the
Notes or the Indenture. The Trustee may refuse to enforce the Indenture or the
Notes unless it receives reasonable indemnity or security. Holders of Notes
may not enforce the Indenture or the Notes except as provided in the Indenture.
Subject to certain limitations, Holders of a majority in principal amount of
the Notes may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Holders of the Notes notice of any continuing Default
or Event of Default (except under clauses (i) or (ii) above) if it determines
that withholding notice is in their interest.
14. PLEDGE AGREEMENT. In order to secure the due and punctual
payment of the principal of, premium, and interest on the Notes and the payment
and performance of all other obligations of the Company to the Holders of the
Notes or the Trustee under the Indenture, the Company has granted a first
priority Lien on certain funds and Government Securities to the Trustee for the
benefit of the Holders, as more particularly described in the Pledge Agreement.
If the funds and Government Securities held in the Pledge Account exceed the
amount sufficient, in the opinion of a nationally recognized firm of
independent public accountants selected by the Company, to provide for payment
in full of the first two scheduled interest payments due on the Notes (or, in
the event an interest payment or interest payments have been made, an amount
sufficient to provide for payment in full of any interest payments remaining,
up to and including the second scheduled interest payment), if no Default or
Event of Default is then continuing, upon the satisfaction of certain
conditions specified in the Pledge Agreement, any such excess amount of funds
and Government
A-7
<PAGE> 93
Securities shall be paid to the Company. Upon such payment to the Company, the
Lien of the Trustee thereon for the benefit of the Holders shall be released.
15. TRUSTEE'S DEALINGS WITH COMPANY. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise deal with
the Company or its Affiliates, as if it were not the Trustee, subject to the
provisions of TIA Section 310.
16. NO RECOURSE AGAINST OTHERS. No past or present director,
officer, employee, incorporator, partner or stockholder of either of the
Company or any of its Subsidiaries, as such, shall have any liability for any
obligations of the Company or its Subsidiaries under any of the Notes, the
Subsidiary Guarantees or the Indenture or for any claim based on, in respect of
or by reason of such obligations or their creation. Each Holder by accepting a
Note waives and releases all such liability. This waiver and release are part
of the consideration for the issuance of the Notes.
17. AUTHENTICATION. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
18. ABBREVIATIONS. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN
ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
20. GOVERNING LAW. THE INDENTURE AND THIS NOTE SHALL BE GOVERNED
BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAW OF THE
STATE OF NEW YORK.
21. SUCCESSOR CORPORATION. In the event a successor corporation
assumes all the obligations of the Company under the Notes and the Indenture,
pursuant to the terms thereof, the Company will be released from all such
obligations.
A-8
<PAGE> 94
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture and the Pledge Agreement. Requests
may be made to:
First Wave Marine, Inc.
4000 S. Sherwood Forest Blvd.
Suite 603
Baton Rouge, Louisiana 70816
Phone No.: (504) 292-8000
Telecopier No.: (504) 292-8100
Attention: Chief Financial Officer
A-9
<PAGE> 95
ASSIGNMENT FORM
To assign this Note, fill in the form below and have your
signature guaranteed:
(I) or (we) assign and transfer this Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date: Your Name:
----------------------- ------------------------------------
(Print your name exactly as it
appears on the face of this Note)
Your Signature:
-------------------------------
(Sign exactly as your name
appears on the face of this Note)
Signature Guarantee*:
-------------------------
- ----------------------------------
* Participant in a recognized Signature Guarantee Medallion Program (or
other signature guarantor acceptable to the Trustee).
A-10
<PAGE> 96
OPTION OF HOLDER TO ELECT PURCHASE
If you elect to have this Note purchased by the Company
pursuant to Section 4.10 or Section 4.14 of the Indenture, check the
appropriate box below:
[ ] Section 4.10
[ ] Section 4.14
If you elect to have only part of this Note purchased by the
Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state the
amount (in minimum denominations of $1000 or integral multiples thereof) you
elect to have purchased: $___________
Date: Your Name:
--------------------- ------------------------------------
(Print your name exactly as it
appears on the face of this Note)
Your Signature:
-------------------------------
(Sign exactly as your name appears on the face of this Note)
Social Security or Tax Identification No.:
----------------------------------------------
Signature Guarantee*:
-------------------------
- --------------------------
* Participant in a recognized Signature Guarantee Medallion Program (or
other signature guarantor acceptable to the Trustee).
A-11
<PAGE> 97
SCHEDULE A
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE [2]
The initial principal amount at maturity of this Global Note
shall be $______________. The following increases or decreases in this Global
Note have been made:
<TABLE>
<CAPTION>
Principal Amount of
this Global Note Signature of
Amount of decrease Amount of increase following such authorized officer
in Principal Amount in Principal Amount decrease (or of Trustee or Note
Date of Exchange of this Global Note of this Global Note increase) Custodian
---------------- ------------------- ------------------- ------------------- ------------------
<S> <C> <C> <C> <C>
</TABLE>
[2] This schedule should be included only if the Note is issued in global
form.
A-12
<PAGE> 1
EXHIBIT 5.1
January ___, 1998
Board of Directors
First Wave Marine, Inc.
4000 South Sherwood Forest Boulevard, Suite 603
Baton Rouge, Louisiana 70816
Re: _____% Senior Notes due 2008
Gentlemen:
Reference is made to (i) the proposed issuance under the Securities
Act of 1933, as amended (the "Securities Act") by First Wave Marine, Inc., a
Delaware corporation (the "Company"), of up to $90,000,000 aggregate principal
amount of its ____% Senior Notes due 2008 and the guarantee of such notes by
certain subsidiaries of the Company (the "Debt Securities") and (ii) the
Company's Registration Statement on Form S-1 (the "Registration Statement")
with respect to such Debt Securities to be filed with the Securities and
Exchange Commission under the Securities Act. The Debt Securities are to be
issued in accordance with resolutions of the Company's Board of Directors duly
adopted on December 30, 1997 and under and pursuant to the provisions of the
Indenture dated as of January ___, 1998 between the Company, certain of its
subsidiaries and Bank One, N.A., as trustee (the "Trustee") (such Indenture as
amended and supplemented to date, being hereinafter called the "Indenture").
We have examined the Indenture, the form of note(s) attached to and to
be issued under the Indenture and such statutes, corporate records and
documents, certificates of corporate and public officials and such other
instruments and documents as we have deemed necessary or appropriate for the
purposes of the opinions expressed herein.
Based upon the foregoing and subject to the qualifications,
limitations, assumptions and other statements set forth herein, we are of the
opinion that:
(1) the Company is a validly existing corporation under the laws
of the State of Delaware; and
(2) the Debt Securities when issued will be validly issued and
will constitute valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms (subject to applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other similar laws affecting creditors' rights generally from time to time in
effect and subject to general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law).
<PAGE> 2
Board of Directors
First Wave Marine, Inc.
January ___, 1998
Page 2
The opinion expressed in paragraph (2) assumes that with respect to
Debt Securities issued under the Indenture (i) the Trustee is qualified to act
as Trustee under the Indenture, (ii) the Trustee has duly executed and
delivered the Indenture, (iii) the Indenture has been duly authorized and
validly executed and delivered by the Company to the Trustee, (iv) the
Indenture has been duly qualified under the Trust Indenture Act of 1939, as
amended, and (v) the Debt Securities issued under the Indenture have been duly
executed, authenticated, issued and delivered in accordance with the provisions
of the Indenture.
Except as otherwise stated below, the opinions expressed herein are
based upon, and limited to, the laws of the State of Texas, the State of New
York, the federal law of the United States and the Delaware General Corporation
Law, and to case decisions reported as of this date under such laws, and to
facts known to us on this date, and we do not undertake to provide any opinion
as to any matter or to advise any persons with respect to any events or changes
occurring subsequent to the date of this letter.
The opinions expressed in this letter are provided as legal opinions
only and not as any guaranties or warranties of the matters discussed herein,
and such opinions are strictly limited to the matters stated herein, and no
other opinions may be implied. This opinion letter is intended solely for your
benefit. Without our prior written consent, the opinions expressed herein may
not be published or relied upon by you other than in connection with the
Registration Statement or the transactions contemplated therein, or published
or relied upon by any other person in connection with any matter or in any
manner whatsoever.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the heading
"Experts" in the Prospectus constituting part of the Registration Statement.
Very truly yours,
/s/ GRIGGS & HARRISON, P.C.
<PAGE> 1
EXHIBIT 10.8
FIRST WAVE MARINE, INC.
CERTIFICATE
I, David B. Ammons, Secretary of First Wave Marine, Inc., having in my
custody and possession the corporate records of said corporation, do hereby
certify that attached hereto is a true and correct copy of the First Wave
Marine, Inc. Amended and Restated 1997 Incentive Equity Plan as in effect as of
December 30, 1997.
WITNESS my hand this 30th day of December, 1997
/s/ David B. Ammons
-------------------------------
As Aforesaid
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FIRST WAVE MARINE, INC.
AMENDED AND RESTATED 1997 INCENTIVE EQUITY PLAN
SECTION 1
GENERAL
1.1. Purpose. The Amended and Restated 1997 Incentive Equity Plan
(the "Plan") has been established by First Wave Marine, Inc. (the "Company") to
(i) attract and retain persons eligible to participate in the Plan; (ii)
motivate Participants, by means of appropriate incentives, to achieve
long-range goals; (iii) provide incentive compensation opportunities that are
competitive with those of other similar companies; and (iv) further identify
Participants' interests with those of the Company's other shareholders through
compensation that is based on the Company's common stock; and thereby promote
the long-term financial interest of the Company and the Related Companies,
including the growth in value of the Company's equity and enhancement of
long-term shareholder return.
1.2. Participation. Subject to the terms and conditions of the
Plan, the Committee shall determine and designate, from time to time, from
among the Eligible Employees, those persons who will be granted one or more
Awards under the Plan, and thereby become "Participants" in the Plan. In the
discretion of the Committee, a Participant may be granted any Award permitted
under the provisions of the Plan, and more than one Award may be granted to a
Participant. Awards may be granted as alternative to or replacement of awards
outstanding under the Plan, or any other plan or arrangement of the Company or
a Related Company (including a plan or arrangement of a business or entity, all
or a portion of which is acquired by the Company or a Related Company.)
1.3. Operation, Administration, and Definitions. The operation and
administration of the Plan, including the Awards made under the Plan, shall be
subject to the provisions of Section 4 (relating to operation and
administration). Capitalized terms in the Plan shall be defined as set forth
in the Plan (including the definition provisions of Section 7 of the Plan).
SECTION 2
2.1. Options and SARs Definitions.
(a) The grant of an "Option" entitles the Participant to
purchase shares of Stock at an Exercise Price
established by the Committee. Options granted under
this Section 2 may be either Incentive Stock Options
or Non-Qualified Stock Options, as determined in the
discretion of the Committee. An "Incentive Stock
Option" is an Option that is intended to satisfy the
requirements applicable to an "incentive stock
option" described in Section 422(b) of the Code. A
"Non-Qualified Option" is an Option that is not
intended to be an
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"incentive stock option" as that term is described in
Section 422(b) of the Code. To the extent that the
aggregate fair market value of Stock with respect to
which Incentive Stock Options are exercisable for the
first time by the Participant during any calendar
year (under all plans of the Company and all Related
Companies) exceeds $100,000, such options shall be
treated as Non-Qualified Stock Options, to the extent
required by section 422 of the Code.
(b) A stock appreciation right (an "SAR") entitles the
Participant to receive, in cash or Stock (as
determined in accordance with Subsection 2.5), value
equal to all or a portion of the excess of: (a) the
Fair Market Value of a specified number of shares of
Stock at the time of exercise; over (b) an Exercise
Price established by the Committee.
2.2. Exercise Price. The "Exercise Price" of each Option and SAR
granted under this Section 2 shall be established by the Committee or shall be
determined by a method established by the Committee at the time the Option or
SAR is granted; except that the Exercise Price shall not be less than 100% of
the Fair Market Value of a share of Stock as of the Pricing Date. For purposes
of the preceding sentence, the "Pricing Date" shall be the date on which the
Option or SAR is granted.
2.3. Exercise. An Option and an SAR shall be exercisable in
accordance with such terms and conditions and during such periods as may be
established by the Committee.
No Option may be exercised by a Participant: (i) prior to the date on
which the Participant completes one continuous year of employment with the
Company, or any Related Company, after the date as of which the Option is
granted (provided, however, that the Committee may permit earlier exercise
following the Participant's Date of Termination by reason of death or
Disability or a change in control of the Company); or (ii) after the Expiration
Date applicable to that Option.
2.4 Expiration Date. The "Expiration Date" with respect to an
Option means the date established as the Expiration Date by the Committee at
the time of the grant; provided, however, that the Expiration Date with respect
to any Option shall not be later than the earliest to occur of:
(a) the ten-year anniversary of the date on which the
Option is granted;
(b) if the Participant's Date of Termination occurs by
reason of death or Disability, the one-year
anniversary of such Date of Termination; or
(c) if the Participant's Date of Termination occurs by
reason of Employment Separation, the one- year
anniversary of such Date of Termination;
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2.5. Payment of Option Exercise Price. The payment of the Exercise
Price of an Option granted under this Section 2 shall be subject to the
following:
(a) Subject to the following provisions of this
Subsection 2.5, the full Exercise Price for shares of
Stock purchased upon the exercise of any Option shall
be paid at the time of such exercise (except that, in
the case of an exercise arrangement approved by the
Committee and described in Paragraph 2.5(c), payment
may be made as soon as practicable after the
exercise).
(b) The Exercise Price shall be payable in cash or by
tendering shares of Stock (by either actual delivery
of shares or by attestation, with such shares valued
at Fair Market Value as of the day of exercise), or
in any combination thereof, as determined by the
Committee.
(c) The Committee may permit a Participant to elect to
pay the Exercise Price upon the exercise of an Option
by authorizing a third party to sell shares of Stock
(or a sufficient portion of the shares) acquired upon
exercise of the Option and remit to the Company a
sufficient portion of the sale proceeds to pay the
entire Exercise Price and any tax withholding
resulting from such exercise.
2.6. Settlement of Award. Distribution following exercise of an
Option or SAR, and shares of Stock distributed pursuant to such exercise, shall
be subject to such conditions, restrictions and contingencies as the Committee
may establish. Settlement of SARs may be made in shares of Stock (valued at
their Fair Market Value at the time of exercise), in cash, or in a combination
thereof, as determined in the discretion of the Committee. The Committee, in
its discretion, may impose such conditions, restrictions and contingencies with
respect to shares of Stock acquired pursuant to the exercise of an Option or an
SAR as the Committee determines to be desirable.
SECTION 3
OTHER STOCK AWARDS
3.1. Stock Award Definition. A "Stock Award" is a grant of shares
of Stock or of a right to receive shares of Stock (or their cash equivalent or
a combination of both) in the future.
3.2. Restrictions on Stock Awards. Each Stock Award shall be
subject to such conditions, restrictions and contingencies as the Committee
shall determine. These may include continuous service and/or the achievement
of Performance Measures. The "Performance Measures" that may be used by the
Committee for such Awards shall be measured by a single goal criterion or
multiple goal criteria with the measurement based on absolute Company or
business unit performance and/or on performance as compared with that of other
similar companies. If the
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right to become vested in a Stock Award granted under this Section 3 is
conditioned on the completion of a specified period of service with the Company
and the Related Companies, without achievement of Performance Measures or other
objectives being required as a condition of vesting, then the required period
of service for vesting shall be not less than one year (subject to acceleration
of vesting, to the extent permitted by the Committee, in the event of the
Participant's death or Disability or a change in control of the Company).
SECTION 4
OPERATION AND ADMINISTRATION
4.1. Effective Date. Subject to the approval of the shareholders
of the Company at the Company's 1997 annual meeting of its shareholders, the
Plan shall be effective as of November 20, 1997 (the "Effective Date");
provided, however, that, to the extent that Awards are made under the Plan
prior to its approval by shareholders, they shall be contingent on approval of
the Plan by the shareholders of the Company. The Plan shall be unlimited in
duration and, in the event of Plan termination, shall remain in effect as long
as any Awards under it are outstanding; provided, however, that, to the extent
required by the Code, no Incentive Stock Options may be granted under the Plan
on a date that is more than ten years from the date the Plan is adopted or, if
earlier, the date the Plan is approved by shareholders.
4.2. Shares Subject to Plan.
(a) (i) Subject to the following provisions of this
Subsection 4.2, the maximum number shares of
Stock that may be delivered to Participants
and their beneficiaries under the Plan shall
be 1,800,000 shares of Stock.
(ii) Any shares of Stock granted under the Plan
that are forfeited because of the failure to
meet an Award contingency or condition shall
again be available for delivery pursuant to
new Awards granted under the Plan. To the
extent any shares of Stock covered by an
Award are not delivered to a Participant or
beneficiary because the Award is forfeited or
canceled, or the shares of Stock are not
delivered because the Award is settled in
cash, such shares shall not be deemed to have
been delivered for purposes of determining
the maximum number of shares of Stock
available for delivery under the Plan.
(iii) If the Exercise Price of any stock option
granted under the Plan is satisfied by
tendering shares of Stock to the Company (by
either actual delivery or by attestation),
only the number of shares of Stock issued
net of the shares of Stock tendered shall be
deemed delivered
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for purposes of determining the maximum
number of shares of Stock available for
delivery under the Plan.
(iv) Shares of Stock delivered under the Plan in
settlement, assumption or substitution of
outstanding awards (or obligations to grant
future awards) under the plans or
arrangements of another entity shall not
reduce the maximum number of shares of Stock
available for delivery under the Plan, to the
extent that such settlement, assumption or
substitution is as a result of the Company or
a Related Company acquiring another entity
(or an interest in another entity).
(b) Subject to Paragraph 4.2(c), the following additional
maximums are imposed under the Plan.
(i) The maximum number of shares of Stock that
may be issued upon exercise of Options
intended to be Incentive Stock Options shall
be 300,000 shares.
(ii) The maximum number of shares of Stock that
may be issued in conjunction with Awards
granted pursuant to Section 3 (relating to
Stock Awards) shall be 300,000 shares.
(iii) The maximum number of shares that may be
covered by Awards under this Plan granted to
any one individual pursuant to Section 2
(relating to Options and SARs) shall be
300,000 shares during any three consecutive
calendar years.
(iv) The maximum payment that can be made for
awards granted to any one individual pursuant
to Section 3 (relating to Stock Awards) shall
be $200,000 for any single or combined
performance goals established for any annual
performance period. If an Award granted
under Section 3 is, at the time of grant,
denominated in shares, the value of the
shares of Stock for determining this maximum
individual payment amount will be the Fair
Market Value of a share of Stock on the first
day of the applicable performance period.
(c) In the event of a corporate transaction involving the
Company (including, without limitation, any stock
dividend, stock split, extraordinary cash dividend,
recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination or
exchange of shares), the Committee may adjust Awards
to preserve the benefits or potential benefits of the
Awards. Action by the Committee may include
adjustment of: (i) the number and kind of shares
which mya be delivered under the Plan; (ii) the
number and kind of
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shares subject to outstanding Awards; and (iii) the
Exercise Price of outstanding Options and SARs; as
well as any other adjustments that the Committee
determines to be equitable.
4.3. Limit on Distribution. Distribution of shares of Stock or
other amounts under the Plan shall be subject to the following:
(a) Notwithstanding any other provision of the Plan, the
Company shall have no liability for failure to
deliver any shares of Stock under the Plan or make
any other distribution of benefits under the Plan
unless such delivery or distribution would comply
with all applicable laws (including, without
limitation, the requirements of the Securities Act of
1933), and the applicable requirements of any
securities exchange or similar entity.
(b) To the extent that the Plan provides for issuance of
stock certificates to reflect the issuance of shares
of Stock, the issuance may be effected on a
non-certificated basis, to the extent not prohibited
by applicable law or the applicable rules of any
stock exchange.
4.4. Tax Withholding. Whenever the Company proposes or is required
to distribute Stock under the Plan, the Company may require the recipient to
remit to the Company an amount sufficient to satisfy any Federal, state and
local tax withholding requirements prior to the delivery of any certificate for
such shares or, in the discretion of the Committee, the Company may withhold
from the shares to be delivered shares sufficient to satisfy all or a portion
of such tax withholding requirements. Whenever, under the Plan, payments are
to be made in cash, such payments may be net of an amount sufficient to satisfy
any Federal, state and local tax withholding requirements.
4.5. Payment Shares. Subject to the overall limitation on the
number of shares of Stock that may be delivered under the Plan, the Committee
may use available shares of Stock under the Plan as the form of payment for
compensation, grants or rights earned or due under any other compensation plans
or arrangements of the Company or a Related Company.
4.6. Dividends and Dividend Equivalents. An Award may provide the
Participant with the right to receive dividends or dividend equivalent payments
with respect to Stock which may be either paid currently or credited to an
account for the Participant and may be settled in cash or Stock as determined
by the Committee. Any such settlements, and any such crediting of dividends or
dividend equivalents or reinvestment in shares of Stock, may be subject to such
conditions, restrictions and contingencies as the Committee shall establish,
including the reinvestment of such credited amounts in Stock equivalents.
4.7. Payments. Awards may be settled through cash payments, the
delivery of shares of Stock, the granting of replacement Awards, or combination
thereof as the Committee shall determine. Any Award settlement, including
payment deferrals, may be subject to such
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conditions, restrictions and contingencies as the Committee shall determine.
The Committee may permit or require the deferral of any Award payment, subject
to such rules and procedures as it may establish, which may include provisions
for the payment or crediting of interest, or dividend equivalents, including
converting such credits into deferred Stock equivalents. Each Related Company
shall be liable for payment of cash due under the Plan with respect to any
Participant to the extent that such benefits are attributable to the services
rendered for that Related Company by the Participant. Any disputes relating to
liability of a Related Company for cash payments shall be resolved by the
Committee.
4.8. Proceeds. All cash proceeds from the purchase of Stock under
this Plan shall constitute part of the unrestricted general funds of the
Company, and may be used for such corporate purposes as the Company, in its
sole and exclusive discretion, may determine from time to time.
4.9. Transferability. The Committee may, in its discretion,
authorize all or a portion of any Award (other than Incentive Stock Options) to
be granted on terms which permit transfer by the Participant to (i) the spouse,
parents, children, stepchildren, adoptive relationships, sisters, brothers or
grandchildren of the Participant, (ii) a trust or trusts for the exclusive
benefit of the spouse, parents, children, stepchildren, adoptive relationships,
sisters, brothers or grandchildren of the Participant, or (iii) a partnership
or limited liability company in which the spouse, parents, children,
stepchildren, adoptive relationships, sisters, brothers or grandchildren of the
Participant are the only partners or members, as applicable; provided in each
case that (x) there may be no consideration for any such transfer (other than
in the case of Clause (iii), units in the partnership or membership interests
in the limited liability company), (y) the agreement pursuant to which such
Awards are granted must be approved by the Committee, and must expressly
provide for transferability in a manner consistent with this Subsection, and
(z) subsequent transfers of transferred Awards shall be prohibited except those
made in accordance with this Subsection or by will or by the laws of descent
and distribution. Following transfer, any such Awards shall continue to be
subject to the same terms and conditions as were applicable immediately prior
to transfer. The provisions with respect to termination set forth in
Subsection 2.4 shall continue to apply with respect to the original
Participant, in which event the Awards shall be exercisable by the transferee
only to the extent and for the periods specified herein. The original
Participant will remain subject to withholding taxes upon exercise of any such
Awards by the transferee. The Company shall have no obligation whatsoever to
provide notice to any transferee of any matter, including without limitation,
early termination of an Award on account of termination of the original option
pursuant to Subsection 2.4.
Except as set forth above and in the applicable agreement, no Awards
shall be voluntarily or involuntarily assigned, sold, transferred, pledged,
mortgaged or encumbered by the Participant otherwise than by will or by laws of
descent and distribution, and all Awards shall be exercisable, during the
Participant's lifetime, only by the Participant. At the request of a
Participant, Stock purchased upon exercise of an Option may be issued or
transferred into the name of the Participant and another person jointly with
rights of survivorship. All Awards issued under this Plan, and all rights
under this Plan, shall not be subject to involuntary seizure, or other process
by any creditor
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<PAGE> 9
of any holder of any such Awards, and the Company shall not honor or recognize
any such involuntary seizure or other such process. Except as set forth above,
any attempted assignment, sale, transfer, pledge, mortgage or encumbrance
("Assignment") or any attempted involuntary seizure or other process shall be
null, void and without any effect whatsoever. Should it be determined, by a
court of law or otherwise, that any such Assignment or involuntary seizure or
other process is effective, then all Awards for which such is effective shall
terminate and be forfeited as of the moment of such involuntary seizure or
other process, and shall thereafter be null, void and without any effect
whatsoever.
4.10. Form and Time of Elections. Unless otherwise specified
herein, each election required or permitted to be made by any Participant or
other person entitled to benefits under the Plan, and any permitted
modification, or revocation thereof, shall be in writing filed with the
Committee at such times, in such form, and subject to such restrictions and
limitations, not inconsistent with the terms of the Plan, as the Committee
shall require.
4.11. Agreement With Company. At the time of an Award to a
Participant under the Plan, the Committee may require a Participant to enter
into an agreement with the Company (the "Agreement") in a form specified by the
Committee, agreeing to the terms and conditions of the Plan and to such
additional terms and conditions, not inconsistent with the Plan, as the
Committee may, in its sole discretion, prescribe.
4.12. Limitation of Implied Rights.
(a) Neither a Participant nor any other person shall, by
reason of the Plan, acquire any right in or title to
any assets, funds or property of the Company or any
Related Company whatsoever, including, without
limitation, any specific funds, assets, or other
property which the Company or any Related Company, in
their sole discretion, may set aside in anticipation
of a liability under the Plan. A Participant shall
have only a contractual right to the Stock or
amounts, if any, payable under the Plan, unsecured by
any assets of the Company or any Related Company.
Nothing contained in the Plan shall constitute a
guarantee that the assets of such companies shall be
sufficient to pay any benefits to any person.
(b) The Plan does not constitute a contract of
employment, and selection as a Participant will not
give any employee the right to be retained in the
employ of the Company or any Related Company, nor any
right or claim to any benefit under the Plan, unless
such right or claim has specifically accrued under
the terms of the Plan. Except as otherwise provided
in the Plan, no Award under the Plan shall confer
upon the holder thereof any right as a shareholder of
the Company prior to the date on which the individual
fulfills all conditions for receipt of such rights.
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4.13. Evidence. Evidence required of anyone under the Plan may be
by certificate, affidavit, document or other information which the person
acting on it considers pertinent and reliable, and signed, made or presented by
the proper party or parties.
4.14. Action by Company or Related Company. Any action required or
permitted to be taken by the Company or any Related Company shall be by
resolution of its board of directors, or by action of one or more members of
the board (including a committee of the board) who are duly authorized to act
for the board, or (except to the extent prohibited by applicable law or
applicable rules of any stock exchange) by a duly authorized officer of the
Company. No failure on the part of the Company or the Board to exercise, and
no delay on the part of the Company or the Board in exercising any right or
power established hereunder shall operate as a waiver of such right or power.
4.15. Gender and Number. Where the context admits, words in any
gender shall include any other gender, words in the singular shall include the
plural and the plural shall include the singular.
4.16 Headings. The various headings and captions in this Plan are
for convenience only and shall not affect the meaning, construction or
interpretation of this Plan.
SECTION 5
COMMITTEE
5.1. Administration. The authority to control and manage the
operation and administration of the Plan shall be vested in a committee (the
"Committee") in accordance with this Section 5.
5.2. Selection of Committee. The Committee shall be selected by
the Board, and shall consist of two or more members of the Board. If the Board
has not selected a Committee, the Committee shall consist of the entire Board
of Directors.
5.3. Powers of Committee. The authority to manage and control the
operation and administration of the Plan shall be vested in the Committee,
subject to the following:
(a) Subject to the provisions of the Plan, the Committee
will have the authority and discretion to select from
among the Eligible Employees those persons who shall
receive Awards, to determine the time or times of
receipt, to determine the types of Awards and the
number of shares covered by the Awards, to establish
the terms, conditions, performance criteria,
restrictions, and other provisions of such Awards,
and (subject to the restrictions imposed by Section
6) to cancel or suspend Awards. In making such Award
determinations, the Committee may take into account
the
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nature of services rendered by the individual, the
individual's present and potential contribution to
the Company's success and such other factors as the
Committee deems relevant.
(b) Subject to the provisions of the Plan, the Committee
will have the authority and discretion to determine
the extent to which Awards under the Plan will be
structured to conform to the requirements applicable
to performance-based compensation as described in
Code Section 162(m), and to take such action,
establish such procedures, and impose such
restrictions at the time such Awards are granted as
the Committee determines to be necessary or
appropriate to conform to such requirements.
(c) The Committee will have the authority and discretion
to establish terms and conditions of Awards as the
Committee determines to be necessary or appropriate
to conform to applicable requirements or practices of
jurisdictions outside of the United States.
(d) The Committee will have the authority and discretion
to interpret the Plan, to establish, amend, and
rescind any rules and regulations relating to the
Plan, to determine the terms and provisions of any
agreements made pursuant to the Plan, and to make all
other determinations that may be necessary or
advisable for the administration of the Plan.
(e) Any interpretation of the Plan by the Committee and
any decision made by it under the Plan is final and
binding.
(f) Except as otherwise expressly provided in the Plan,
where the Committee is authorized to make a
determination with respect to any Award, such
determination shall be made at the time the Award is
made, except that the Committee may reserve the
authority to have such determination made by the
Committee in the future (but only if such reservation
is made at the time the Award is granted and is
expressly stated in the Agreement reflecting the
Award).
(g) In controlling and managing the operation and
administration of the Plan, the Committee shall act
by a majority of its then members, by meeting or by
writing filed without a meeting. The Committee shall
maintain and keep adequate records concerning the
Plan and concerning its proceedings and acts in such
form and detail as the Committee may decide.
5.4. Delegation by Committee. Except to the extent prohibited by
applicable law or the applicable rules of a stock exchange, the Committee may
allocate all or any portion of its responsibilities and powers to any one or
more of its members and may delegate all or any part
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of its responsibilities and powers to any person or persons selected by it.
Any such allocation or delegation may be revoked by the Committee at any time.
5.5. Information to be Furnished to Committee. The Company and
Related Companies shall furnish the Committee with such data and information as
may be required for it to discharge its duties. The records of the Company and
Related Companies as to an employee's or Participant's employment, termination
of employment, leave of absence, reemployment and compensation shall be
conclusive on all persons unless determined to be incorrect. Participants and
other persons entitled to benefits under the Plan must furnish the Committee
such evidence, data or information as the Committee considers desirable to
carry out the terms of the Plan.
SECTION 6
AMENDMENT AND TERMINATION
The Board may, at any time, amend or terminate the Plan, provided
that, subject to Subsection 4.2 (relating to certain adjustments to shares), no
amendment or termination may (i) in the absence of written consent to the
change by the affected Participant (or, if the Participant is not then living,
the affected beneficiary), adversely affect the rights of any Participant or
beneficiary under any Award granted under the Plan prior to the date such
amendment is adopted by the Board or (ii) without the approval of the Company's
stockholders, increase (except as provided expressly in this Plan) the total
number of shares reserved for purposes of the Plan.
SECTION 7
DEFINED TERMS AND MISCELLANEOUS
7.1 For purposes of the Plan, the terms listed below shall be
defined as follows:
(a) Award. The term "Award" shall mean any award or
benefit granted to any Participant under the Plan,
including, without limitation, the grant of Options,
SARs, and Stock Awards.
(b) Board. The term "Board" shall mean the Board of
Directors of the Company.
(c) Code. The term "Code" means the Internal Revenue
Code of 1986, as amended. A reference to any
provision of the Code shall include reference to any
successor provision of the Code.
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(d) Date of Termination. The Participant's "Date of
Termination" shall be the first day occurring on or
after the date of Participant's Agreement, on which
the Participant's employment with the Company and all
Related Companies terminates for any reason (death,
Disability or Employment Separation); provided that a
termination of employment shall not be deemed to
occur by reason of a transfer of the Participant
between the Company and a Related Company or between
two Related Companies; and further provided that the
Participant's employment shall not be considered
terminated while the Participant is on a leave of
absence from the Company or a Related Company
approved by the Participant's employer. If, as a
result of a sale or other transaction, the
Participant's employer ceases to be the Company or a
Related Company, the occurrence of such transaction
shall be treated as the Participant's Date of
Termination caused by the Participant being
discharged by the employer.
(e) Disability. The term "Disability" means the
permanent and total disability of Participant as
determined by the Committee.
(f) Eligible Employee. The term "Eligible Employee"
shall mean any employee of the Company or a Related
Company or an individual to whom a bona fide written
offer of employment from the Company or a Related
Company, has been extended.
(g) Employment Separation. The term "Employment
Separation" means Participant's voluntary resignation
from employment, including retirement, or the
termination of a Participant from employment of the
Company or a Related Company.
(h) Fair Market Value. The "Fair Market Value" of a
share of Stock means the closing price of the Stock
on such date as reported on the principal United
States securities exchange on which the Stock is
listed, or if the Stock is not so listed, the closing
price as quoted on the NASDAQ National Market System,
or if the Stock is not so listed or quoted, the
closing bid as quoted on the NASDAQ over-the-counter
market; provided, that if no such prices are so
reported or quoted on that date or if, in the
discretion of the Committee, another means of
determining the Fair Market Value of a share of Stock
at such date is deemed necessary or advisable, the
Fair Market Value shall be determined in good faith
by the Committee.
(i) Related Company. The term "Related Company"
means (i) any corporation, partnership, joint venture
or other entity during any period in which it owns,
directly or indirectly, at least fifty percent of the
voting power of all classes of stock of the Company
(or successor to the Company) entitled to vote; and
(ii) any corporation, partnership, joint venture or
other
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entity during any period in which at least a fifty
percent voting or profits interest is owned, directly
or indirectly, by the Company, by an entity that is a
successor to the Company, or by an entity that is a
Related Company by reason of clause (i) next above.
(j) Stock. The term "Stock" shall mean shares of common
stock of the Company.
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<PAGE> 1
EXHIBIT 10.9
STOCK OPTION AGREEMENT
THIS AGREEMENT, entered into as of the Agreement Date (as defined in
paragraph 1), by and between the Participant and First Wave Marine, Inc. (the
"Company");
WITNESSETH:
WHEREAS, the Company maintains the 1997 Incentive Equity Plan (the
"Plan"), which is incorporated into and forms a part of this Agreement, and the
Participant has been selected by the committee administering the Plan (the
"Committee") to receive a Non-Qualified Stock Option Award under the Plan;
NOW, THEREFORE, IT IS AGREED, by and between the Company and the
Participant, as follows:
1. Terms of Award. The following terms used in this Agreement
shall have the meanings set forth in this paragraph 1:
a. The "Participant" is Name.
b. The "Agreement Date" is December 30, 1997.
c. The number of "Covered Shares" shall be Number
shares of Stock.
d. The "Exercise Price" is $3.50 per share.
The number of Covered Shares and the Exercise Price shall be subject
to adjustment as provided in the Plan. Other terms used in this Agreement are
defined in paragraph 8 or elsewhere in this Agreement.
2. Award and Exercise Price. The Participant is hereby granted
an option (the "Option") to purchase the number of Covered Shares of Stock at
the Exercise Price per share as set forth in paragraph 1. The Option is not
intended to constitute an "incentive stock option" as that term is used in Code
Section 422.
3. Date of Exercise. The Option shall become exercisable
according to the following vesting schedule.
--------------------------------------------------------------------------
The Option shall become
As of the following Anniversary of the exercisable with respect to the
Agreement Date: following percentage of the
Covered Shares:
--------------------------------------------------------------------------
One-year anniversary 33 1/3%
--------------------------------------------------------------------------
Two-year anniversary 33 1/3%
--------------------------------------------------------------------------
Three-year anniversary 33 1/3%
--------------------------------------------------------------------------
<PAGE> 2
The Option shall not become exercisable in accordance with the foregoing
schedule as of any anniversary if the Participant's Date of Termination (as
defined below) occurs before such anniversary. Exercisability under this
schedule is cumulative, and after the Option becomes exercisable under the
schedule with respect to any portion of the Covered Shares, it shall continue
to be exercisable with respect to that portion of the Covered Shares until the
Option expires. Notwithstanding the foregoing provisions of this paragraph 3,
the Option shall become immediately fully exercisable, accelerating all further
vesting requirements, with respect to all of the Covered Shares which
Participant has not exercised as follows:
a. The Option shall become fully exercisable upon the
date of the Participant's Date of Termination by
reason of the Participant's death or Disability.
b. The Option shall become fully exercisable upon the
date of a Change in Control, if the Board of
Directors of the Company provides in a resolution
after the Change in Control that vesting will be
accelerated, and the Participant's Date of
Termination does not occur before the Change in
Control.
4. Expiration. The Option shall not be exercisable on or after
the Expiration Date. The "Expiration Date" shall be earliest to occur of:
a. the ten-year anniversary of the Agreement Date; or
b. if the Participant's Date of Termination occurs by
reason of death, Disability or Employment Separation,
the one-year anniversary of such Date of Termination.
5. Method of Option Exercise. The Option may be exercised in
whole or in part by filing a written notice with the Secretary of the Company
at its corporate headquarters prior to the Expiration Date. Such notice shall
specify the number of shares of Stock which the Participant elects to purchase,
and shall be accompanied by payment of the Exercise Price for such shares of
Stock indicated by the Participant's election. Payment shall be by cash or by
check payable to the Company. Except as otherwise provided by the Committee
before the Option is exercised: (i) all or a portion of the Exercise Price may
be paid by the Participant by delivery of shares of Stock acceptable to the
Committee and having an aggregate Fair Market Value (valued as of the date of
exercise) that is equal to the amount of cash that would otherwise be required;
and (ii) the Participant may pay the Exercise Price by authorizing a third
party to sell shares of Stock (or a sufficient portion of the shares) acquired
upon exercise of the Option and remit to the Company a sufficient portion of
the sale proceeds to pay the entire Exercise Price and any tax withholding
resulting from such exercise.
-2-
<PAGE> 3
6. Withholding. All distributions under this Agreement are
subject to withholding of all applicable taxes. At the election of the
Participant, and subject to such rules as may be established by the Committee,
such withholding obligations may be satisfied through the surrender of shares
of Stock which the Participant already owns, or to which the Participant is
otherwise entitled under the Plan.
7. Transferability. Except as otherwise provided in this
paragraph 7, the Option is not transferable other than as designated by the
Participant by will or by the laws of descent and distribution, and during the
Participant's life, may be exercised only by the Participant. However, the
Participant, with the express written approval of the Committee, may transfer
the Option to (i) the spouse, parents, children, stepchildren, adoptive
relationships, sisters, brothers or grandchildren of the Participant, (ii) a
trust or trusts for the exclusive benefit of the spouse, parents, children,
stepchildren, adoptive relationships, sisters, brothers or grandchildren of the
Participant, or (iii) a partnership or limited liability company in which the
spouse, parents, children, stepchildren, adoptive relationships, sisters,
brothers or grandchildren of the Participant are the only partners or members,
as applicable; provided in each case that (x) there may be no consideration for
any such transfer (other than in the case of Clause (iii), units in the
partnership or membership interests in the limited liability company) and (y)
subsequent transfers of transferred Options shall be prohibited except those
made in accordance with this section or by will or by the laws of descent and
distribution. Following transfer, any such Options shall continue to be
subject to the same terms and conditions as were applicable immediately prior
to transfer. The provisions with respect to termination set forth in Section
2.4 of the Plan shall continue to apply with respect to the original
Participant, in which event the Options shall be exercisable by the transferee
only to the extent and for the periods specified herein. The original
Participant will remain subject to withholding taxes upon exercise of any such
Options by the transferee. The Company shall have no obligation whatsoever to
provide notice to any transferee of any matter, including without limitation,
early termination of an Option on account of termination of the original Option
pursuant to Section 2.4 of the Plan.
Except as set forth above and in the applicable agreement, (i) no
Options shall be voluntarily or involuntarily assigned, sold, transferred,
pledged, mortgaged or encumbered by the Participant otherwise than by will or
by laws of descent and distribution, and (ii) all Options shall be exercisable,
during the Participant's lifetime, only by the Participant. At the request of
a Participant, Stock purchased upon exercise of an Option may be issued or
transferred into the name of the Participant and another person jointly with
rights of survivorship. All Options issued under this Agreement, and all
rights under the Plan, shall not be subject to involuntary seizure, or other
process by any creditor of any holder of any such Options, and the Company
shall not honor or recognize any such involuntary seizure or other such
process. Except as set forth above, any attempted assignment, sale, transfer,
pledge, mortgage or encumbrance ("Assignment") or any attempted involuntary
seizure or other process shall be null, void and without any effect whatsoever.
Should it be determined, by a court of law or otherwise, that any such
Assignment or involuntary seizure or other process is effective, then all
Options for which such is effective shall terminate and be forfeited as of the
moment of such involuntary seizure or other process, and shall thereafter be
null, void and without any effect whatsoever.
-3-
<PAGE> 4
8. Definitions. For purposes of this Agreement, the terms
listed below shall be defined as follows:
a. Date of Termination. The Participant's "Date of
Termination" shall be the first day occurring on or
after the Agreement Date on which the Participant's
employment with the Company and all Related Companies
terminates for any reason (death, Disability or
Employment Separation); provided that a termination
of employment shall not be deemed to occur by reason
of a transfer of the Participant between the Company
and a Related Company or between two Related
Companies; and further provided that the
Participant's employment shall not be considered
terminated while the Participant is on a leave of
absence from the Company or a Related Company
approved by the Participant's employer.
b. Disability. The term "Disability" means the
permanent and total disability of Participant as
determined by the Committee.
c. Employment Separation. The term "Employment
Separation" means Participant's voluntary resignation
from employment, including retirement, or the
termination of a Participant from employment of the
Company or a Related Company.
d. Plan Definitions. Except where the context clearly
implies or indicates the contrary, a word, term, or
phrase used in the Plan is similarly used in this
Agreement.
9. Change in Control Provisions.
a. Impact of Event. In the event of a "Change in
Control" as defined in Section 9(b), the Committee or
the Board may provide that one or more of the
following acceleration and valuation provisions shall
apply:
(i) Any or all SARs outstanding for at least six
months on the date that such Change in
Control is determined to have occurred and
any or all Options awarded under this Plan
not previously exercisable and vested shall
become fully exercisable and vested.
(ii) The restrictions and deferral limitations
applicable to all Stock Awards shall lapse
and such shares and such Stock Awards shall
be fully vested.
(iii) The value of any or all outstanding Options,
SARs and Stock Awards shall be cashed out on
the basis of the "Change in Control Price" as
defined in Section 9(c) as of the date such
Change in Control is determined to have
occurred or such other date as the Committee
may determine prior to the Change in Control.
-4-
<PAGE> 5
b. Definition of "Change in Control". For purposes of
Section 9(a), a "Change in Control" means the
happening of any of the following:
(i) A tender offer is made and consummated for
the ownership of 30% or more of the
outstanding voting securities of the Company;
(ii) The Company shall merge or consolidate with
another corporation and as a result of such
merger or consolidation less than 75% of the
outstanding voting securities of the
surviving or resulting corporation shall be
owned in the aggregate by the former
shareholders of the Company, other than
affiliates (within the meaning of the
Securities Exchange Act of 1934 ("Exchange
Act")) of any party to such merger or
consolidation, as the same shall have existed
immediately prior to such merger or
consolidation;
(iii) The Company shall sell substantially all of
its assets to another corporation which is
not a Related Company;
(iv) A person, within the meaning of Section
3(a)(9) or of Section 13(d)(3) of the
Exchange Act, shall acquire 30% or more of
the outstanding voting securities of the
Company (whether directly, indirectly,
beneficially or of record); or
(v) If, as a result of a sale or other
transaction, the Participant's employer
ceases to be a Related Company (and the
Participant's employer is or becomes an
entity that is separate from the Company).
For purposes hereof, ownership of voting securities
shall take into account and shall include ownership
as determined by applying the provisions of Rule
13d-3(d)(1)(i) pursuant to the Exchange Act.
c. Change in Control Price. For the purposes of this
Section 9, "Change in Control Price" means the
highest price per share paid in any transaction
reported on the principal United States securities
exchange, the NASDAQ National Market System or other
principal market on which the Stock is traded, or
paid or offered in any bona fide transaction related
to a Change in Control of the Company, at the time
during the preceding sixty-day period as determined
by the Committee, except that, in the case of
Incentive Options and SARs relating to Incentive
Stock Options, such price shall be based only on
transactions reported for the date as of which the
Committee decides to cashout such options.
10. Heirs and Successors. This Agreement shall be binding upon,
and inure to the benefit of, the Company and its successors and assigns, and
upon any person acquiring, whether by merger, consolidation, purchase of assets
or otherwise, all or substantially all of the Company's
-5-
<PAGE> 6
assets and business. In the event of the Participant's death prior to exercise
of this Option, the Option may be exercised by the estate of the Participant to
the extent such exercise is otherwise permitted by the Agreement. Subject to
the terms of the Plan, any benefits distributable to the Participant under this
Agreement that are not paid at the time of the Participant's death shall be
paid at the time and in the form determined in accordance with the provisions
of this Agreement and the Plan, to the beneficiary designated by the
Participant in writing filed with the Committee in such form and at such time
as the Committee shall require. If a deceased Participant fails to designate a
beneficiary, or if the designated beneficiary of the deceased Participant dies
before the Participant or before complete payment of the amounts distributable
under this Agreement, the amounts to be paid under this Agreement shall be paid
to the legal representative or representatives of the estate of the last to die
of the Participant and the beneficiary.
11. Requirements of Law. The Company shall not be required to
sell or issue any shares on the exercise of the Option if the issuance of such
shares shall constitute a violation by the Participant or the Company of any
provisions of any law or regulation of any governmental authority. The Option
shall be subject to the requirements that, if at any time the Board of
Directors of the Company or the Committee shall determine that the listing,
registration or qualification of the Covered Shares subject thereto upon any
securities exchange or under any state or federal law of the United States or
of any other country or governmental subdivision thereof, or the consent or
approval of any governmental regulatory body, or investment or other
representations, are necessary or desirable in connection with the issue or
purchase of the Covered Shares subject thereto, the Option may not be exercised
in whole or in part unless such listing, registration, qualification, consent,
approval or representation shall have been effected or obtained free of any
conditions not acceptable to the Board of Directors. If required at any time
by the Board of Directors or the Committee, the Option may not be exercised
until the Participant has delivered an investment letter to the Company. In
addition, specifically in connection with the Securities Act of 1933 (as now in
effect or hereafter amended, the "Act"), upon exercise of the Option, the
Company shall not be required to issue the underlying shares unless the
Committee has received evidence satisfactory to it to the effect that such
shares will be issued in compliance with such Act or unless an opinion of
counsel satisfactory to the Company has been received by the Company to the
effect that such registration is not required. Any determination in this
connection by the Committee shall be final, binding and conclusive. In the
event the shares issuable on exercise of the Option are not registered under
the Securities Act of 1933, the Company may imprint on the certificate for such
shares the following legend or any other legend which counsel for the Company
considers necessary or advisable to comply with the Act:
The shares of stock represented by this certificate
have not been registered under the Securities Act of 1933 or
under the securities laws of any state and may not be sold or
transferred except upon registration or upon receipt by the
Corporation of an opinion of counsel satisfactory to the
Corporation, in form and substance satisfactory to the
Corporation, that registration is not required for such sale
or transfer.
The Company may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Act. The Company shall not be
obligated to take any other affirmative
-6-
<PAGE> 7
action in order to cause the exercise of the Option or the issuance of shares
of Stock pursuant thereto to comply with any law or regulation of any
governmental authority.
12. Release by Participant. Participant acknowledges that the
Option and this Option Agreement constitute the entire understanding and
agreement between the parties hereto with respect to the issuance of Stock of
the Company or any Related Company and there are no agreements, understandings,
restrictions, representations or warranties between such parties other than
those set forth herein; all other agreements and understandings being
superseded hereby. Participant hereby remises, releases, acquits and forever
discharges the Company and its successors and assigns from any and all claims,
counterclaims, demands, damages, debts, agreements, covenants, suits,
contracts, obligations, liabilities, accounts, offsets, rights, actions and
causes of action which in any manner relate to or arise out of any claims of
agreements, understandings, restrictions, representations or warranties with
respect to the issuance of Stock of the Company or any Related Company to the
Participant, including, without limitation, claims of fraud, breach of
contract, negligent or intentional misrepresentation, breach of fiduciary duty,
conspiracy, negligence, securities violations, duress, mistake, tortious
interference, usury, control, or other obligations, whether at law or in
equity, whether already accrued or accruing hereafter.
13. Administration. The authority to manage and control the
operation and administration of this Agreement shall be vested in the
Committee, and the Committee shall have all powers with respect to this
Agreement as it has with respect to the Plan. Any interpretation of the
Agreement by the Committee and any decision made by it with respect to the
Agreement is final and binding.
14. Plan Definitions. Notwithstanding anything in this Agreement
to the contrary, the terms of this Agreement shall be subject to the terms of
the Plan, a copy of which may be obtained by the Participant from the office of
the Secretary of the Company. Inconsistencies between this document and the
Plan shall be resolved in accordance with the terms of the Plan.
15. Amendment. This Agreement may be amended by written agreement
of the Participant and the Company, without the consent of any other person.
IN WITNESS WHEREOF, the Participant has executed this Agreement, and
the Company has caused these presents to be executed in its name and on its
behalf, all as of the Agreement Date.
PARTICIPANT
---------------------------------
Name
FIRST WAVE MARINE, INC.
By:
------------------------------
Frank W. Eakin
President
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<PAGE> 1
EXHIBIT 10.10
STOCK OPTION AGREEMENT
THIS AGREEMENT, entered into as of the Agreement Date (as defined in
paragraph 1), by and between the Participant and First Wave Marine, Inc. (the
"Company");
WITNESSETH:
WHEREAS, the Company maintains the 1997 Incentive Equity Plan (the
"Plan"), which is incorporated into and forms a part of this Agreement, and the
Participant has been selected by the committee administering the Plan (the
"Committee") to receive a Non-Qualified Stock Option Award under the Plan;
NOW, THEREFORE, IT IS AGREED, by and between the Company and the
Participant, as follows:
1. Terms of Award. The following terms used in this Agreement
shall have the meanings set forth in this paragraph 1:
a. The "Participant" is Name.
b. The "Agreement Date" is December 30, 1997.
c. The number of "Covered Shares" shall be Number
shares of Stock.
d. The "Exercise Price" is $3.50 per share.
The number of Covered Shares and the Exercise Price shall be subject
to adjustment as provided in the Plan. Other terms used in this Agreement are
defined in paragraph 8 or elsewhere in this Agreement.
2. Award and Exercise Price. The Participant is hereby granted
an option (the "Option") to purchase the number of Covered Shares of Stock at
the Exercise Price per share as set forth in paragraph 1. The Option is not
intended to constitute an "incentive stock option" as that term is used in Code
Section 422.
3. Date of Exercise. The Option shall become exercisable
according to the following vesting schedule.
-----------------------------------------------------------------------------
The Option shall become exercisable
As of the following Anniversary of the respect to the following
Agreement Date: percentage of the Covered Shares:
-----------------------------------------------------------------------------
One-year anniversary 20%
-----------------------------------------------------------------------------
Two-year anniversary 20%
-----------------------------------------------------------------------------
Three-year anniversary 20%
-----------------------------------------------------------------------------
Four-year anniversary 20%
-----------------------------------------------------------------------------
Five-year anniversary 20%
-----------------------------------------------------------------------------
<PAGE> 2
The Option shall not become exercisable in accordance with the foregoing
schedule as of any anniversary if the Participant's Date of Termination (as
defined below) occurs before such anniversary. Exercisability under this
schedule is cumulative, and after the Option becomes exercisable under the
schedule with respect to any portion of the Covered Shares, it shall continue
to be exercisable with respect to that portion of the Covered Shares until the
Option expires. Notwithstanding the foregoing provisions of this paragraph 3,
the Option shall become immediately fully exercisable, accelerating all further
vesting requirements, with respect to all of the Covered Shares which
Participant has not exercised as follows:
a. The Option shall become fully exercisable upon the
date of the Participant's Date of Termination by
reason of the Participant's death or Disability.
b. The Option shall become fully exercisable upon the
date of a Change in Control, if the Board of
Directors of the Company provides in a resolution
after the Change in Control that vesting will be
accelerated, and the Participant's Date of
Termination does not occur before the Change in
Control.
4. Expiration. The Option shall not be exercisable on or after
the Expiration Date. The "Expiration Date" shall be earliest to occur of:
a. the ten-year anniversary of the Agreement Date; or
b. if the Participant's Date of Termination occurs by
reason of death, Disability or Employment Separation,
the one-year anniversary of such Date of Termination.
5. Method of Option Exercise. The Option may be exercised in
whole or in part by filing a written notice with the Secretary of the Company
at its corporate headquarters prior to the Expiration Date. Such notice shall
specify the number of shares of Stock which the Participant elects to purchase,
and shall be accompanied by payment of the Exercise Price for such shares of
Stock indicated by the Participant's election. Payment shall be by cash or by
check payable to the Company. Except as otherwise provided by the Committee
before the Option is exercised: (i) all or a portion of the Exercise Price may
be paid by the Participant by delivery of shares of Stock acceptable to the
Committee and having an aggregate Fair Market Value (valued as of the date of
exercise) that is equal to the amount of cash that would otherwise be required;
and (ii) the Participant may pay the Exercise Price by authorizing a third
party to sell shares of Stock (or a sufficient portion of the shares) acquired
upon exercise of the Option and remit to the Company a sufficient portion of
the sale proceeds to pay the entire Exercise Price and any tax withholding
resulting from such exercise.
6. Withholding. All distributions under this Agreement are
subject to withholding of all applicable taxes. At the election of the
Participant, and subject to such rules as may be established by the Committee,
such withholding obligations may be satisfied through the surrender of shares
of Stock which the Participant already owns, or to which the Participant is
otherwise entitled under the Plan.
-2-
<PAGE> 3
7. Transferability. Except as otherwise provided in this
paragraph 7, the Option is not transferable other than as designated by the
Participant by will or by the laws of descent and distribution, and during the
Participant's life, may be exercised only by the Participant. However, the
Participant, with the express written approval of the Committee, may transfer
the Option to (i) the spouse, parents, children, stepchildren, adoptive
relationships, sisters, brothers or grandchildren of the Participant, (ii) a
trust or trusts for the exclusive benefit of the spouse, parents, children,
stepchildren, adoptive relationships, sisters, brothers or grandchildren of the
Participant, or (iii) a partnership or limited liability company in which the
spouse, parents, children, stepchildren, adoptive relationships, sisters,
brothers or grandchildren of the Participant are the only partners or members,
as applicable; provided in each case that (x) there may be no consideration for
any such transfer (other than in the case of Clause (iii), units in the
partnership or membership interests in the limited liability company) and (y)
subsequent transfers of transferred Options shall be prohibited except those
made in accordance with this section or by will or by the laws of descent and
distribution. Following transfer, any such Options shall continue to be
subject to the same terms and conditions as were applicable immediately prior
to transfer. The provisions with respect to termination set forth in Section
2.4 of the Plan shall continue to apply with respect to the original
Participant, in which event the Options shall be exercisable by the transferee
only to the extent and for the periods specified herein. The original
Participant will remain subject to withholding taxes upon exercise of any such
Options by the transferee. The Company shall have no obligation whatsoever to
provide notice to any transferee of any matter, including without limitation,
early termination of an Option on account of termination of the original Option
pursuant to Section 2.4 of the Plan.
Except as set forth above and in the applicable agreement, (i) no
Options shall be voluntarily or involuntarily assigned, sold, transferred,
pledged, mortgaged or encumbered by the Participant otherwise than by will or
by laws of descent and distribution, and (ii) all Options shall be exercisable,
during the Participant's lifetime, only by the Participant. At the request of
a Participant, Stock purchased upon exercise of an Option may be issued or
transferred into the name of the Participant and another person jointly with
rights of survivorship. All Options issued under this Agreement, and all
rights under the Plan, shall not be subject to involuntary seizure, or other
process by any creditor of any holder of any such Options, and the Company
shall not honor or recognize any such involuntary seizure or other such
process. Except as set forth above, any attempted assignment, sale, transfer,
pledge, mortgage or encumbrance ("Assignment") or any attempted involuntary
seizure or other process shall be null, void and without any effect whatsoever.
Should it be determined, by a court of law or otherwise, that any such
Assignment or involuntary seizure or other process is effective, then all
Options for which such is effective shall terminate and be forfeited as of the
moment of such involuntary seizure or other process, and shall thereafter be
null, void and without any effect whatsoever.
8. Definitions. For purposes of this Agreement, the terms listed
below shall be defined as follows:
a. Date of Termination. The Participant's "Date of
Termination" shall be the first day occurring on or
after the Agreement Date on which the Participant's
employment with the Company and all Related Companies
terminates for any reason (death, Disability or
Employment Separation);
-3-
<PAGE> 4
provided that a termination of employment shall not
be deemed to occur by reason of a transfer of the
Participant between the Company and a Related Company
or between two Related Companies; and further
provided that the Participant's employment shall not
be considered terminated while the Participant is on
a leave of absence from the Company or a Related
Company approved by the Participant's employer.
b. Disability. The term "Disability" means the
permanent and total disability of Participant as
determined by the Committee.
c. Employment Separation. The term "Employment
Separation" means Participant's voluntary resignation
from employment, including retirement, or the
termination of a Participant from employment of the
Company or a Related Company.
d. Plan Definitions. Except where the context clearly
implies or indicates the contrary, a word, term, or
phrase used in the Plan is similarly used in this
Agreement.
9. Change in Control Provisions.
a. Impact of Event. In the event of a "Change in
Control" as defined in Section 9(b), the Committee or
the Board may provide that one or more of the
following acceleration and valuation provisions shall
apply:
(i) Any or all SARs outstanding for at least six
months on the date that such Change in
Control is determined to have occurred and
any or all Options awarded under this Plan
not previously exercisable and vested shall
become fully exercisable and vested.
(ii) The restrictions and deferral limitations
applicable to all Stock Awards shall lapse
and such shares and such Stock Awards shall
be fully vested.
(iii) The value of any or all outstanding Options,
SARs and Stock Awards shall be cashed out on
the basis of the "Change in Control Price" as
defined in Section 9(c) as of the date such
Change in Control is determined to have
occurred or such other date as the Committee
may determine prior to the Change in Control.
b. Definition of "Change in Control". For purposes of
Section 9(a), a "Change in Control" means the
happening of any of the following:
(i) A tender offer is made and consummated for
the ownership of 30% or more of the
outstanding voting securities of the Company;
-4-
<PAGE> 5
(ii) The Company shall merge or consolidate with
another corporation and as a result of such
merger or consolidation less than 75% of the
outstanding voting securities of the
surviving or resulting corporation shall be
owned in the aggregate by the former
shareholders of the Company, other than
affiliates (within the meaning of the
Securities Exchange Act of 1934 ("Exchange
Act")) of any party to such merger or
consolidation, as the same shall have existed
immediately prior to such merger or
consolidation;
(iii) The Company shall sell substantially all of
its assets to another corporation which is
not a Related Company;
(iv) A person, within the meaning of Section
3(a)(9) or of Section 13(d)(3) of the
Exchange Act, shall acquire 30% or more of
the outstanding voting securities of the
Company (whether directly, indirectly,
beneficially or of record); or
(v) If, as a result of a sale or other
transaction, the Participant's employer
ceases to be a Related Company (and the
Participant's employer is or becomes an
entity that is separate from the Company).
For purposes hereof, ownership of voting securities
shall take into account and shall include ownership
as determined by applying the provisions of Rule
13d-3(d)(1)(i) pursuant to the Exchange Act.
c. Change in Control Price. For the purposes of this
Section 9, "Change in Control Price" means the
highest price per share paid in any transaction
reported on the principal United States securities
exchange, the NASDAQ National Market System or other
principal market on which the Stock is traded, or
paid or offered in any bona fide transaction related
to a Change in Control of the Company, at the time
during the preceding sixty-day period as determined
by the Committee, except that, in the case of
Incentive Options and SARs relating to Incentive
Stock Options, such price shall be based only on
transactions reported for the date as of which the
Committee decides to cashout such options.
10. Heirs and Successors. This Agreement shall be binding upon,
and inure to the benefit of, the Company and its successors and assigns, and
upon any person acquiring, whether by merger, consolidation, purchase of assets
or otherwise, all or substantially all of the Company's assets and business. In
the event of the Participant's death prior to exercise of this Option, the
Option may be exercised by the estate of the Participant to the extent such
exercise is otherwise permitted by the Agreement. Subject to the terms of the
Plan, any benefits distributable to the Participant under this Agreement that
are not paid at the time of the Participant's death shall be paid at the time
and in the form determined in accordance with the provisions of this Agreement
and the Plan, to the beneficiary designated by the Participant in writing filed
with the Committee
-5-
<PAGE> 6
in such form and at such time as the Committee shall require. If a deceased
Participant fails to designate a beneficiary, or if the designated beneficiary
of the deceased Participant dies before the Participant or before complete
payment of the amounts distributable under this Agreement, the amounts to be
paid under this Agreement shall be paid to the legal representative or
representatives of the estate of the last to die of the Participant and the
beneficiary.
11. Requirements of Law. The Company shall not be required to
sell or issue any shares on the exercise of the Option if the issuance of such
shares shall constitute a violation by the Participant or the Company of any
provisions of any law or regulation of any governmental authority. The Option
shall be subject to the requirements that, if at any time the Board of
Directors of the Company or the Committee shall determine that the listing,
registration or qualification of the Covered Shares subject thereto upon any
securities exchange or under any state or federal law of the United States or
of any other country or governmental subdivision thereof, or the consent or
approval of any governmental regulatory body, or investment or other
representations, are necessary or desirable in connection with the issue or
purchase of the Covered Shares subject thereto, the Option may not be exercised
in whole or in part unless such listing, registration, qualification, consent,
approval or representation shall have been effected or obtained free of any
conditions not acceptable to the Board of Directors. If required at any time
by the Board of Directors or the Committee, the Option may not be exercised
until the Participant has delivered an investment letter to the Company. In
addition, specifically in connection with the Securities Act of 1933 (as now in
effect or hereafter amended, the "Act"), upon exercise of the Option, the
Company shall not be required to issue the underlying shares unless the
Committee has received evidence satisfactory to it to the effect that such
shares will be issued in compliance with such Act or unless an opinion of
counsel satisfactory to the Company has been received by the Company to the
effect that such registration is not required. Any determination in this
connection by the Committee shall be final, binding and conclusive. In the
event the shares issuable on exercise of the Option are not registered under
the Securities Act of 1933, the Company may imprint on the certificate for such
shares the following legend or any other legend which counsel for the Company
considers necessary or advisable to comply with the Act:
The shares of stock represented by this certificate
have not been registered under the Securities Act of 1933 or
under the securities laws of any state and may not be sold or
transferred except upon registration or upon receipt by the
Corporation of an opinion of counsel satisfactory to the
Corporation, in form and substance satisfactory to the
Corporation, that registration is not required for such sale
or transfer.
The Company may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Act. The Company shall not be
obligated to take any other affirmative action in order to cause the exercise
of the Option or the issuance of shares of Stock pursuant thereto to comply
with any law or regulation of any governmental authority.
12. Release by Participant. Participant acknowledges that the
Option and this Option Agreement constitute the entire understanding and
agreement between the parties hereto with respect to the issuance of Stock of
the Company or any Related Company, other than, if applicable
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<PAGE> 7
to Participant, that certain Stock Exchange Agreement dated as of October 16,
1997 regarding shares in Newpark Shipbuilding and Repair, Inc. ("Exchange
Agreement"), and there are no agreements, understandings, restrictions,
representations or warranties between such parties other than those set forth
herein and, if applicable to Participant, in the Exchange Agreement; all other
agreements and understandings being superseded hereby. Except for any rights
and obligations under the Exchange Agreement, if applicable, which are
expressly not released or discharged, Participant hereby remises, releases,
acquits and forever discharges the Company and its successors and assigns from
any and all claims, counterclaims, demands, damages, debts, agreements,
covenants, suits, contracts, obligations, liabilities, accounts, offsets,
rights, actions and causes of action which in any manner relate to or arise out
of any claims of agreements, understandings, restrictions, representations or
warranties with respect to the issuance of Stock of the Company or any Related
Company to the Participant, including, without limitation, claims of fraud,
breach of contract, negligent or intentional misrepresentation, breach of
fiduciary duty, conspiracy, negligence, securities violations, duress, mistake,
tortious interference, usury, control, or other obligations, whether at law or
in equity, whether already accrued or accruing hereafter.
13. Administration. The authority to manage and control the
operation and administration of this Agreement shall be vested in the
Committee, and the Committee shall have all powers with respect to this
Agreement as it has with respect to the Plan. Any interpretation of the
Agreement by the Committee and any decision made by it with respect to the
Agreement is final and binding.
14. Plan Definitions. Notwithstanding anything in this Agreement
to the contrary, the terms of this Agreement shall be subject to the terms of
the Plan, a copy of which may be obtained by the Participant from the office of
the Secretary of the Company. Inconsistencies between this document and the
Plan shall be resolved in accordance with the terms of the Plan.
15. Amendment. This Agreement may be amended by written agreement
of the Participant and the Company, without the consent of any other person.
IN WITNESS WHEREOF, the Participant has executed this Agreement, and
the Company has caused these presents to be executed in its name and on its
behalf, all as of the Agreement Date.
PARTICIPANT
----------------------------------
Name
FIRST WAVE MARINE, INC.
By:
-------------------------------
Frank W. Eakin, President
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<PAGE> 1
EXHIBIT 10.11
PLEDGE AND SECURITY AGREEMENT
This PLEDGE AND SECURITY AGREEMENT, dated as of
________________, 1998, is by and among Bank One, N.A., as pledge agent (in
such capacity, the "Pledge Agent"), Bank One, N.A., as Trustee (in such
capacity, the "Trustee") under the Indenture (as defined herein), and First
Wave Marine, Inc., a Delaware corporation (the "Company").
RECITALS
A. Pursuant to the Indenture, dated as of the date hereof, by
and among the Company, the Trustee and the Subsidiary Guarantors named therein
(as such may be amended or supplemented from time to time, the "Indenture"),
the Company is issuing $90,000,000 aggregate principal amount of its
____________% Senior Notes Due 2008 (the "Notes").
B. As security for its obligations under the Notes and the
Indenture, the Company hereby grants to the Trustee, for the benefit of the
Trustee and the holders of the Notes, a security interest in and lien upon the
Pledge Account (as defined herein).
C. The parties have entered into this Agreement in order to
set forth the conditions upon which, and the manner in which, funds will be
disbursed from the Pledge Account and released from the security interest and
Lien described above.
NOW, THEREFORE, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. DEFINED TERMS. All capitalized terms used but not
defined herein shall have the meanings ascribed to them in the Indenture. In
addition to any other defined terms used herein, the following terms shall
constitute defined terms for purposes of this Agreement and shall have the
meanings set forth below:
"Agreement" means this Pledge and Security Agreement, as
amended or supplemented from time to time.
"Applied" means that disbursed funds have been applied (i) to
the payment of interest on the Notes, (ii) pursuant to Section 3.3, or (iii)
pursuant to Section 6(b) (iii).
"Available Funds" means (A) the sum of (i) the Initial Pledge
Amount and (ii) interest earned or dividends paid on the funds in the Pledge
Account (including holdings of Government Securities), less (B) the aggregate
disbursements previously made pursuant to this Agreement.
"Collateral" shall have the meaning given in Section 6(a)
hereof.
"Initial Pledge Amount" shall mean approximately
$_________________.
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"Payment Notice and Disbursement Request" means a notice sent
by the Trustee to the Pledge Agent requesting a disbursement of funds from the
Pledge Account, in substantially the form of Exhibit A hereto. Each Payment
Notice and Disbursement Request shall be signed by an officer of the Trustee.
"Pledge Account" shall mean the pledge account established
pursuant to Section 2.2.
2. PLEDGE ACCOUNT; PLEDGE AGENT.
2.1 Appointment of Pledge Agent. The Company and the
Trustee hereby appoint the Pledge Agent, and the Pledge Agent hereby accepts
appointment, as Pledge Agent, under the terms and conditions of this Agreement.
2.2 Establishment of Pledge Account. On the Closing
Date, the Pledge Agent shall establish a pledge account entitled "Pledge
Account pledged by First Wave Marine, Inc. to Bank One, N.A., as Trustee" (the
"Pledge Account") at its office located at ____________________________________.
All funds accepted by the Pledge Agent pursuant to this Agreement shall be held
for the exclusive benefit of the Trustee and the holders of the Notes, as
secured parties hereunder (the "Beneficiaries"). All such funds shall be held
in the Pledge Account until disbursed or paid in accordance with the terms
hereof. The Pledge Account, the funds held therein and any Government
Securities held by the Pledge Agent shall be under the sole dominion and
control of the Pledge Agent for the benefit of the Beneficiaries. On the
Closing Date, the Company shall deliver the Initial Pledge Amount to the Pledge
Agent for deposit into the Pledge Account against the Pledge Agent's written
acknowledgment and receipt.
2.3 Pledge Agent Compensation. The Company shall pay to
the Pledge Agent such compensation for services to be performed by it under
this Agreement as the Company and the Pledge Agent may agree in writing from
time to time. The Pledge Agent shall be paid any compensation owed to it
directly by the Company and shall not disburse from the Pledge Account any such
amounts.
The Company shall reimburse the Pledge Agent upon request for
all reasonable expenses, disbursements, and advances incurred or made by the
Pledge Agent in implementing any of the provisions of this Agreement, including
compensation and the reasonable expenses and disbursements of its counsel. The
Pledge Agent shall be paid any such expenses owed to it directly by the Company
and shall not disburse from the Pledge Account any such amounts.
2.4 Investment of Funds in Pledge Account. Funds
deposited in the Pledge Account shall be invested and reinvested only upon the
following terms and conditions:
(a) Acceptable Investments. All funds deposited
or held in the Pledge Account at any time shall be invested by the
Pledge Agent in Government Securities in accordance with the Initial
Instructions annexed hereto as Exhibit B and thereafter the Company's
written instructions from time to time to the Pledge Agent; provided,
however,
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that the Company shall only designate investment of funds in
Government Securities maturing in an amount sufficient to and/or
generating interest income sufficient to, when added to the balance of
funds held in the Pledge Account, provide for the payment of interest
on the outstanding Notes on each Interest Payment Date beginning on
and including ________________,1998 and through and including the
Interest Payment Date on ________________, 1999; provided, further,
however, that any such written instruction shall specify the
particular investment to be made, shall state that such investment is
authorized to be made hereby and in particular satisfies the
requirements of the preceding proviso and Section 2.4(e), shall
contain the certification referred to in Section 2.4(b), if required,
and shall be executed by an Officer of the Company. All Government
Securities shall be assigned to and held in the possession of, or, in
the case of Government Securities maintained in book entry form with
the Federal Reserve Bank, transferred to a book entry account in the
name of, the Pledge Agent, for the benefit of the Trustee, with such
guarantees as are customary, except that Government Securities
maintained in book entry form with the Federal Reserve Bank shall be
transferred to a book entry account in the name of the Pledge Agent at
the Federal Reserve Bank that includes only Government Securities held
by the Pledge Agent for its customers and segregated by separate
recordation in the books and records of the Pledge Agent. The Pledge
Agent shall not be liable for losses on any investments made by it
pursuant to and in compliance with such instructions. In the absence
of qualifying instructions from the Company that meet the requirements
of this Section 2.4(a), the Pledge Agent shall have no obligation to
invest funds held in the Pledge Account.
(b) Security Interest in Investments. No
investment of funds in the Pledge Account shall be made unless the
Company has certified to the Pledge Agent and the Trustee that, upon
such investment, the Trustee will have a first priority perfected
security interest in the applicable investment. If a certificate as
to a class of investments has been provided to the Pledge Agent, a
certificate need not be issued with respect to individual investments
in securities in that class if the certificate applicable to the class
remains accurate with respect to such individual investments, which
continued accuracy the Pledge Agent may conclusively assume. On the
Closing Date, and from time to time thereafter as required by Section
11.2 of the Indenture and as required by the TIA, until the
termination of this Agreement, the Trustee shall receive an Opinion of
Counsel to the Company, dated each such date as applicable, which
opinion shall meet the requirements of Section 314(b) of the TIA and
shall comply with Section 11.2 of the Indenture.
(c) Interest and Dividends. All interest earned
and dividends paid on funds invested in Government Securities shall be
deposited in the Pledge Account as additional Collateral for the
exclusive benefit of the Beneficiaries and, if not required to be
disbursed in accordance with the terms hereof, shall be reinvested in
accordance with the terms hereof at the Company's written instruction,
and shall be available for disbursement to the Company upon
satisfaction of the conditions set forth in Section 3.3.
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(d) Limitation on Pledge Agent's
Responsibilities. The Pledge Agent's sole responsibilities under this
Section 2 shall be (A) to retain possession of certificated Government
Securities (except, however, that the Pledge Agent may surrender
possession to the issuer of any such Government Security for the
purposes of effecting assignment, crediting interest, or reinvesting
such security or reducing such security to cash) and to be the
registered or designated owner of Government Securities which are not
certificated, (B) to follow the Company's written instructions given
in accordance with Section 2.4(a), (C) to invest and reinvest funds
pursuant to this Section 2.4 and (D) to use reasonable efforts to
reduce to cash such Government Securities as may be required to fund
any disbursement or payment in accordance with Section 3. In
connection with clause (A) above, the Pledge Agent will maintain
continuous possession in the State of New York of certificated
Government Securities and cash included in the Collateral and will
cause uncertificated Government Securities to be registered in the
book-entry system of, and transferred to an account of the Pledge
Agent or a sub-agent of the Pledge Agent at, the Federal Reserve Bank
of New York or Dallas. Except as provided in Section 6, the Pledge
Agent shall have no other responsibilities with respect to perfecting
or maintaining the perfection of the Trustee's security interest in
the Collateral and shall not be required to file any instrument,
document or notice in any public office at any time or times. In
connection with clause (D) above and subject to the following
sentence, the Pledge Agent shall not be required to reduce to cash any
Government Securities to fund any disbursement or payment in
accordance with Section 3 in the absence of written instructions
signed by an Officer of the Company specifying the particular
investment to liquidate. If no such written instructions are
received, the Pledge Agent may liquidate those Government Securities
having the lowest interest rate per annum or if none such exist, those
having the nearest maturity.
(e) Manner of Investment. Funds deposited in the
Pledge Account shall initially be invested in accordance with the
Initial Instructions (attached hereto as Exhibit B), which is in a
manner such that there will be sufficient funds available without any
further investment by the Company to cover all interest due on the
outstanding Notes, as such interest becomes due, for each Interest
Payment Date beginning on and including the Closing Date and through
and including ________________, 1999, provided that such investments
shall have such maturities and/or interest payment dates such that
funds will be available with respect to each such Interest Payment
Date no later than the time the Pledge Agent is required to disburse
such funds to the Trustee pursuant to Section 3.1. The Pledge Agent
shall have no responsibility for determining whether funds held in the
Pledge Account shall have been invested in such a manner so as to
comply with the requirements of this subsection (e)
2.5 Substitution of Pledge Agent. The Pledge Agent may
resign by giving no less than 20 Business Days prior written notice to the
Company and the Trustee. Such resignation shall take effect upon the later to
occur of (i) delivery of all funds and Government Securities maintained by the
Pledge Agent hereunder and copies of all books, records, plans and other
documents in the Pledge Agent's possession relating to such funds or Government
Securities or this Agreement to a
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<PAGE> 5
successor Pledge Agent mutually approved by the Company and the Trustee (which
approvals shall not be unreasonably withheld or delayed) and (ii) the Company,
the Trustee and such successor agent enter into this Agreement or any written
successor agreement no less favorable to the interests of the holders of the
Notes and the Trustee than this Agreement. The Pledge Agent shall thereafter
be discharged of all obligations under this Agreement and shall have no further
duties, obligations or responsibilities in connection herewith, except as set
forth in Section 4. If a successor pledge agent has not been appointed or has
not accepted such appointment within 20 Business Days after notice of
resignation is given to the Company, the Pledge Agent may apply to a court of
competent jurisdiction for the appointment of a successor pledge agent.
2.6 Pledge Account Statement. At least 30 days prior to
each Interest Payment Date, the Pledge Agent shall deliver to the Company and
the Trustee a statement setting forth with reasonable particularity the balance
of funds then in the Pledge Account and the manner in which such funds are
invested. The parties hereto irrevocably instruct the Pledge Agent that on the
first date upon which the balance in the Pledge Account (including the holdings
of all Government Securities) is reduced to zero, the Pledge Agent shall
deliver to the Company and to the Trustee a notice that the balance in the
Pledge Account has been reduced to zero.
3. DISBURSEMENTS.
3.1 Payment Notice and Disbursement Request;
Disbursements. The Trustee shall, at least five Business Days prior to an
Interest Payment Date, submit to the Pledge Agent a completed Payment Notice
and Disbursement Request substantially in the form of Exhibit A hereto.
The Pledge Agent's disbursement pursuant to any Payment Notice
and Disbursement Request shall be subject to the satisfaction of the applicable
conditions set forth in Section 3.2. If such Payment Notice and Disbursement
Request is not rejected by the Pledge Agent, the Pledge Agent, as soon as
reasonably practicable on the Interest Payment Date, but in no event later than
12:00 Noon (New York City time) on the Interest Payment Date, shall disburse
the funds requested in such Payment Notice and Disbursement Request by wire or
book-entry transfer of immediately available funds to the account of the
Trustee for the benefit of the Beneficiaries. The Pledge Agent shall notify
the Trustee as soon as reasonably possible (but not later than two Business
Days from the date of receipt of the Payment Notice and Disbursement Request)
if any Payment Notice and Disbursement Request is rejected and the reason(s)
therefor. In the event such rejection is based upon nonsatisfaction of the
condition in Section 3.2(a) below, the Trustee shall thereupon resubmit the
Payment Notice and Disbursement Request with appropriate changes.
3.2 Conditions Precedent to Disbursement. The Pledge
Agent's payment of any disbursement shall be made only if: (a) the Trustee
shall have submitted, in accordance with the provisions of Section 3.1 herein,
a completed Payment Notice and Disbursement Request to the Pledge Agent
substantially in the form of Exhibit A with blanks appropriately filled in, (b)
the Company shall have complied with the requirements of Section 11.3 of the
Indenture, and (c) the Pledge Agent shall not have received any notice from the
Trustee that as a result of an Event of Default the indebtedness represented by
the Notes has been accelerated and has become due and
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<PAGE> 6
payable (in which event the Pledge Agent shall apply all Available Funds as
required by Section 6(b) (iii)).
3.3 Disbursements to Company. If (i) a portion of the
Notes has been retired by the Company and submitted to the Trustee for
cancellation or the Company has deposited with the Trustee from funds otherwise
available to the Company cash sufficient to pay interest scheduled to be paid
on an Interest Payment Date, and as a result of such retirement or deposit, or
(ii) as a result of overfunding of the Pledge Account, interest or dividends
earned on Collateral, or realization of proceeds thereof in accordance with the
terms hereof, the funds or Pledged Securities held in the Pledge Account exceed
the amount sufficient, in the opinion of a nationally recognized firm of
independent public accountants selected by the Company, to provide for payment
in full of the first two scheduled interest payments due on the Notes (or, in
the event an interest payment or interest payments have been made, an amount
sufficient to provide for payment in full of any interest payments remaining,
up to and including the second scheduled interest payment), if no Default or
Event of Default is then continuing, upon the written request of the Company to
the Pledge Agent and the Trustee, any such excess amount of Collateral shall be
paid to the Company upon compliance with the release of collateral provisions
of the TIA and upon receipt by the Pledge Agent of a notice relating thereto
from the Trustee.
4. PLEDGE AGENT.
The Pledge Agent's responsibility and liability under this
Agreement shall be limited as follows: (i) the Pledge Agent does not
represent, warrant or guaranty to the holders of the Notes from time to time
the performance of the Company; (ii) the Pledge Agent shall have no
responsibility to the Company or the holders of the Notes or the Trustee from
time to time as a consequence of performance or non-performance by the Pledge
Agent hereunder, except for any gross negligence or willful misconduct of the
Pledge Agent; (iii) the Company shall remain solely responsible for all aspects
of the Company's business and conduct; and (iv) the Pledge Agent is not
obligated to supervise, inspect or inform the Company or any third party of any
matter referred to above.
No implied covenants or obligations shall be inferred from
this Agreement against the Pledge Agent, nor shall the Pledge Agent be bound by
the provisions of any agreement beyond the specific terms hereof. Specifically
and without limiting the foregoing, the Pledge Agent shall in no event have any
liability in connection with its investment, reinvestment or liquidation, in
good faith and in accordance with the terms hereof, of any funds or Government
Securities held by it hereunder, including without limitation any liability for
any delay not resulting from gross negligence or willful misconduct in such
investment, reinvestment or liquidation, or for any loss of principal or income
incident to any such delay.
The Pledge Agent shall be entitled to rely upon any judicial
order or judgment, upon any written opinion of counsel or upon any
certification, instruction, notice, or other writing delivered to it by the
Company or the Trustee in compliance with the provisions of this Agreement
without being required to determine the authenticity or the correctness of any
fact stated therein or
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<PAGE> 7
the propriety or validity of service thereof. The Pledge Agent may act in
reliance upon any instrument comporting with the provisions of this Agreement
or signature believed by it to be genuine and may assume that any person
purporting to give notice or receipt or advice or make any statement or execute
any document in connection with the provisions hereof has been duly authorized
to do so.
At any time the Pledge Agent may request in writing an
instruction in writing from the Company, and may at its own option include in
such request the course of action it proposes to take and the date on which it
proposes to act, regarding any matter arising in connection with its duties and
obligations hereunder; provided, however, that the Pledge Agent shall state in
such request that it believes in good faith that such proposed course of action
is consistent with another identified provision of this Agreement. The Pledge
Agent shall not be liable to the Company for acting without the Company's
consent in accordance with such a proposal on or after the date specified
therein if (i) the specified date is at least two (2) Business Days after the
Company receives the Pledge Agent's request for instructions and its proposed
course of action, and (ii) prior to so acting, the Pledge Agent has not
received the written instructions requested from the Company.
The Pledge Agent may act pursuant to the written advice of
counsel chosen by it with respect to any matter relating to this Agreement and
(subject to clause (ii) of the first paragraph of this Section 4) shall not be
liable for any action taken or omitted in accordance with such advice.
The Pledge Agent shall not be called upon to advise any party
as to selling or retaining, or taking or refraining from taking any action with
respect to, any securities or other property deposited hereunder.
In the event of any ambiguity in the provisions of this
Agreement with respect to any funds or property deposited hereunder, the Pledge
Agent shall be entitled to refuse to comply with any and all claims, demands or
instructions with respect to such funds or property, and the Pledge Agent shall
not be or become liable for its failure or refusal to comply with conflicting
claims, demands or instructions. The Pledge Agent shall be entitled to refuse
to act until either any conflicting or adverse claims or demands shall have
been finally determined by a court of competent jurisdiction or settled by
agreement between the conflicting claimants as evidenced in a writing,
satisfactory to the Pledge Agent, or the Pledge Agent shall have received
security or an indemnity satisfactory to the Pledge Agent sufficient to save
the Pledge Agent harmless from and against any and all loss, liability or
expense which the Pledge Agent may incur by reason of its acting. The Pledge
Agent may in addition elect in its sole option to commence an interpleader
action or seek other judicial relief or orders as the Pledge Agent may deem
necessary.
No provision of this Agreement shall require the Pledge Agent
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder.
5. INDEMNITY. The Company shall indemnify, hold
harmless and defend the Pledge Agent and its directors, officers, agents,
employees and controlling persons, from and against any and all claims,
actions, obligations, liabilities and expenses, including defense costs,
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<PAGE> 8
investigative fees and costs, legal fees, and claims for damages, arising from
the Pledge Agent's performance or non- performance, or in connection with its
acceptance or appointment as Pledge Agent, under this Agreement, except to the
extent that such liability, expense or claim is solely and directly
attributable to the negligence or willful misconduct of any of the foregoing
persons. The provisions of this Section 5 shall survive any termination,
satisfaction or discharge of this Agreement as well as the resignation or
removal of the Pledge Agent.
6. GRANT OF SECURITY INTERESTS; INSTRUCTIONS TO PLEDGE
AGENT.
(a) The Company hereby irrevocably grants a first
priority security interest in and lien on, and pledges, assigns, and sets over
to the Trustee for the benefit of the Beneficiaries, all of the Company's
right, title and interest in the Pledge Account, and all property now or
hereafter placed or deposited in, or delivered to the Pledge Agent for
placement or deposit in, the Pledge Account, including, without limitation, all
funds held therein, all Government Securities held by (or otherwise maintained
in the name of) the Pledge Agent pursuant to Section 2, and all proceeds
thereof as well as all rights of the Company under this Agreement
(collectively, the "Collateral"), in order to secure the due and punctual
payment of the principal of, premium, and interest on the Notes when and as the
same shall be due and payable on each Interest Payment Date, at maturity or by
acceleration, and interest on the overdue principal of and interest (to the
extent permitted by law), if any, on the Notes and the payment and performance
of all other obligations of the Company to the Holders of the Notes or the
Trustee under the Indenture and this Agreement with respect to the Notes,
according to the terms hereunder or thereunder. The Pledge Agent hereby
acknowledges the Trustee's security interest and lien as set forth above. The
Company shall take all actions necessary on its part to insure the continuance
of a first priority security interest in the Collateral in favor of the Trustee
in order to secure all such obligations and indebtedness.
(b) The Company and the Trustee hereby irrevocably
instruct the Pledge Agent to, and the Pledge Agent shall: (i) (A) maintain
sole dominion and control over funds and Government Securities in the Pledge
Account for the benefit of the Trustee to the extent specifically required
herein, (B) maintain, or cause its agent within the State of New York to
maintain, possession of all certificated Government Securities purchased
hereunder that are physically possessed by the Pledge Agent in order for the
Trustee to enjoy a continuous perfected first priority security interest
therein under the law of the State of New York (the Company hereby agreeing
that in the event any certificated Government Securities are in the possession
of the Company or a third party, the Company shall use its best efforts to
deliver all such certificates to the Pledge Agent), (C) take all steps
specified by the Company pursuant to Section 6 to cause the Trustee to enjoy a
continuous perfected first priority security interest under any applicable
Federal and State of New York law in all Government Securities purchased
hereunder that are not certificated and (D) maintain the Collateral free and
clear of all Liens, security interests, safekeeping or other charges, demands
and claims against the Pledge Agent of any nature now or hereafter existing in
favor of anyone other
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than the Trustee; (ii) promptly notify the Trustee if the Pledge Agent receives
written notice that any Person other than the Trustee has a Lien or security
interest upon any portion of the Collateral; and (iii) in addition to
disbursing amounts pledged pursuant to any Payment Notice and Disbursement
Requests given to it by the Trustee pursuant to Section 3, upon receipt of
written notice from the Trustee of the acceleration of the maturity of the
Notes, and direction from the Trustee to disburse all Available Funds to the
Trustee, as promptly as practicable, after following, if it so chooses, the
procedures set forth in the fourth paragraph of Section 4, disburse all funds
held in the Pledge Account to the Trustee and transfer title to all Government
Securities held by the Pledge Agent hereunder to the Trustee. The Lien and
security interest provided for by this Section 6 shall automatically terminate
and cease as to, and shall not extend or apply to, and the Trustee shall have
no security interest in or Lien on, any funds disbursed by the Pledge Agent to
the Company pursuant to this Agreement to the extent not inconsistent with the
terms hereof. Notwithstanding any other provision contained in this Agreement,
the Pledge Agent shall act solely as the Trustee's agent in connection with its
duties under this Agreement. The Pledge Agent shall not have any right to
receive compensation from the Trustee and shall have no authority to obligate
the Trustee or to compromise or pledge its security interest hereunder.
Accordingly, the Pledge Agent is hereby directed to cooperate with the Trustee
in the exercise of its rights in the Collateral provided for herein.
(c) Any money and Government Securities collected by the
Trustee pursuant to Section 6(b) (iii) shall be applied as provided in Section
6.10 of the Indenture.
(d) Upon demand, the Company will execute and deliver to
the Trustee such instruments and documents as the Trustee may deem necessary or
advisable to confirm or perfect the rights of the Trustee under this Agreement
and the Trustee's interest in the Collateral. The Trustee shall be entitled to
take all necessary action to preserve and protect the security interest created
hereby as a lien and encumbrance upon the Collateral.
(e) The Company hereby appoints the Trustee as its
attorney-in-fact with full power of substitution to do any act which the
Company is obligated hereto to do, and the Trustee may exercise such rights as
the Company might exercise with respect to the Collateral and take any action
in the Company's name to protect the Trustee's security interest hereunder. In
addition to the rights provided under Section 6(b)(iii) hereof, upon an Event
of Default and for so long as such Event of Default continues, the Trustee may
exercise in respect of the Collateral, in addition to other rights and remedies
provided for herein or otherwise available to it, all the rights and remedies
of a secured party under the Uniform Commercial Code or other applicable law,
and the Trustee may also upon obtaining possession of the Collateral as set
forth herein, without notice to the Company except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private
sale, at any exchange, broker's board or at any of the Trustee's offices or
elsewhere, for cash, on credit or for future delivery, and upon such other
terms as the Trustee may deem commercially reasonable. The Company
acknowledges and agrees that any such private sale may result in prices and
other terms less favorable to the seller than if such sale were a public sale.
The Company agrees that, to the extent notice of sale shall be required by law,
at least 10 days notice to the Company of
9
<PAGE> 10
the time and place of any public sale or the time after which any private sale
is to be made shall constitute reasonable notification. The Trustee shall not
be obligated to make any sale regardless of notice of sale having been given.
The Trustee may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
7. TERMINATION. Upon the earliest to occur of (i) the
date upon which the balance of Available Funds shall have been reduced to zero,
(ii) if no Default or Event of Default exists, the date upon which the Company
shall have paid in full in accordance with the terms of the Indenture the first
two scheduled interest payments due on the Notes, (iii) the payment in full of
all obligations of the Company under the Indenture and the Notes, (iv) Legal
Defeasance under Article 8 of the Indenture, (v) Covenant Defeasance under
Article 8 of the Indenture, and (vi) the agreement of the parties hereto to
terminate this Agreement (in accordance with the terms hereof and not in
violation of the Indenture; provided, that the Trustee may not agree to
terminate unless it has received the consent of 100% of the holders of all of
the Notes outstanding), then the Trustee shall at the written request of the
Company, release the Liens pursuant to the Indenture and this Agreement upon
the Company's compliance with the provisions of the TIA pertaining to release
of collateral and terminate this Agreement; provided, however, that the
obligations of the Company under Section 2.3 and Section 5 (and any existing
claims thereunder) shall survive termination of this Agreement and any
resignation of the Pledge Agent.
8. MISCELLANEOUS.
8.1 Waiver. Any party hereto may specifically waive any
breach of this Agreement by any other party, but no such waiver shall be deemed
to have been given unless such waiver is in writing, signed by the waiving
party and specifically designating the breach waived, nor shall any such waiver
constitute a continuing waiver of similar or other breaches.
8.2 Invalidity. If for any reason whatsoever any one or
more of the provisions of this Agreement shall be held or deemed to be
inoperative, unenforceable or invalid in a particular case or in all cases,
such circumstances shall not have the effect of rendering any of the other
provisions of this Agreement inoperative, unenforceable or invalid, and the
inoperative, unenforceable or invalid provision shall be construed as if it
were written so as to effectuate, to the maximum extent possible, the parties'
intent.
8.3 Assignment. This Agreement is personal to the
parties hereto, and the rights and duties of any party hereunder shall not be
assignable except with the prior written consent of the other parties.
Notwithstanding the foregoing, this Agreement shall inure to and be binding
upon the parties and their successors and permitted assigns.
8.4 Benefit. The parties hereto and their successors and
permitted assigns, but no others, shall be bound hereby and entitled to the
benefits hereof; provided, however, that the Holders shall be entitled to the
benefits hereof and to enforce this Agreement, subject to Article 6 of the
Indenture.
10
<PAGE> 11
8.5 Time. Time is of the essence with respect to each
provision of this Agreement.
8.6 Entire Agreement; Amendments. This Agreement and the
Indenture contain the entire agreement among the parties with respect to the
subject matter hereof and supersede any and all prior agreements,
understandings and commitments, whether oral or written. This Agreement may be
amended only in accordance with Article 9 of the Indenture and further by a
writing signed by a duly authorized representative of each party hereto.
8.7 Notices. All notices and other communications
required or permitted to be given or made under this Agreement shall be in
writing and shall be deemed to have been duly given and received when actually
received, including: (a) on the day of hand delivery; (b) three business days
following the day sent, when sent by United States certified mail, postage and
certification fee prepaid, return receipt requested, addressed as set forth
below; (c) when transmitted by telecopy with verbal confirmation of receipt by
the telecopy operator to the telecopy number set forth below; or (d) one
business day following the day timely delivered to a next-day air courier
addressed as set forth below:
To Pledge Agent:
--------------------------------------------
--------------------------------------------
--------------------------------------------
Telephone:
------------------------------
Telecopy:
------------------------------
Attention: Corporate Trust Department
To Trustee:
--------------------------------------------
--------------------------------------------
--------------------------------------------
Telephone:
------------------------------
Telecopy:
------------------------------
Attention: Corporate Trust Department
To the Company:
First Wave Marine, Inc.
4000 S. Sherwood Forest Blvd.
11
<PAGE> 12
Suite 603
Baton Rouge, Louisiana 70816
Telephone: (504) 292-8000
Telecopy: (504) 292-8100
Attention: Chief Financial Officer
or at such other address as the specified entity most recently may have
designated in writing in accordance with this Section.
8.8 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.
8.9 Captions. Captions in this Agreement are for
convenience only and shall not be considered or referred to in resolving
questions of interpretation of this Agreement.
8.10 Choice of Law. THE CONSTRUCTION AND ENFORCEABILITY
OF ANY AND ALL TERMS AND PROVISIONS OF THIS AGREEMENT SHALL BE DETERMINED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. THE COMPANY HEREBY SUBMITS TO THE
PERSONAL JURISDICTION OF ANY COMPETENT COURT OF THE STATE OF NEW YORK, OR A
UNITED STATES FEDERAL COURT SITTING IN NEW YORK CITY.
8.11 Representations and Warranties.
(a) The Company hereby represents and warrants that this
Agreement has been duly authorized, executed and delivered on its behalf and
constitutes the legal, valid and binding obligation of the Company. The
execution, delivery and performance of this Agreement by the Company does not
violate any applicable law or regulation to which the Company is subject and
does not require the consent of any governmental or other regulatory body to
which the Company is subject, except for such consents and approvals as have
been obtained and are in full force and effect.
(b) Each of the Pledge Agent and the Trustee hereby
represents and warrants that this Agreement has been duly authorized, executed
and delivered on its behalf and constitutes its legal, valid and binding
obligation of the Pledge Agent and the Trustee, respectively.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
12
<PAGE> 13
IN WITNESS WHEREOF, the parties have executed and delivered
this Pledge Agreement as of the day first above written.
PLEDGE AGENT: BANK ONE, N.A., as Pledge Agent
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
TRUSTEE: BANK ONE, N.A., as Trustee
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
COMPANY: FIRST WAVE MARINE, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
13
<PAGE> 14
EXHIBIT A
Form of Payment Notice and Disbursement Request
[Letterhead of the Trustee]
[Date]
- ---------------------------------
- ---------------------------------
- ---------------------------------
Attention: Corporate Trust Department
Re: Disbursement Request No._________________
[indicate whether revised]
Ladies and Gentlemen:
A-1
1
<PAGE> 15
We refer to the Pledge and Security Agreement, dated as of
_____________, 1998 by and among you (the "Pledge Agent"), the undersigned as
Trustee, and First Wave Marine, Inc., a Delaware corporation (the "Company")
(as amended and supplemented to the date hereof, the "Pledge Agreement").
Capitalized terms used herein shall have the meaning given in the Pledge
Agreement unless otherwise defined herein.
This letter constitutes a Payment Notice and Disbursement Request
under the Pledge Agreement.
[CHOOSE ONE OF THE FOLLOWING, AS APPLICABLE:]
[The undersigned hereby notifies you that a scheduled interest payment
in the amount of $___________ is due and payable on _____________, ____ and the
Company has not deposited with the Trustee from funds otherwise available to
the Company funds sufficient to pay such interest payment. Accordingly, the
undersigned requests a disbursement of funds contained in the Pledge Account in
such amount to the Trustee.]
[The undersigned (i) hereby notifies you that [CHOOSE ONE:]
[Notes equaling $_____________ in aggregate principal amount
have been retired]
[The Company deposited with the Trustee from funds otherwise
available to the Company funds sufficient to pay interest that
was due on a prior Interest Payment Date]
[as a result of interest or dividends earned on Collateral, or
realization of proceeds thereof in accordance with the terms
of the Pledge Agreement, excess Collateral exists]
and (ii) authorizes you to release $____________ of funds in the
Pledge Account to the Company (to an account designated by the Company
in writing), which amount represents the amount permitted to be
released in accordance with Section 3.3 of the Pledge Agreement.]
[The undersigned hereby notifies you that there has been an
acceleration of the maturity of the Notes. Accordingly, you are hereby
requested to disburse all remaining funds contained in the Pledge Account to
the Trustee such that the balance in the Pledge Account is reduced to zero.]
In connection with the requested disbursement, the undersigned hereby
notifies you that:
1. [The Notes have not, as a result of an Event of
Default, been accelerated and become due and payable.]
2. All prior disbursements from the Pledge Account have
been Applied.
A-2
2
<PAGE> 16
3. [add wire instructions]
The Pledge Agent is entitled to rely on the foregoing in disbursing
funds relating to this Payment Notice and Disbursement Request.
BANK ONE, N.A., as Trustee
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
A-3
3
<PAGE> 1
EXHIBIT 12.1
FIRST WAVE MARINE, INC. AND SUBSIDIARIES
STATEMENT OF COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS, EXCEPT RATIO)
<TABLE>
<CAPTION>
Nine months ended
Year ended December 31, September 30,
--------------------------------------------------- -------------------------
1996 1997
1992 1993 1994 1995 1996 pro-forma 1996 1997 pro-forma
---- ------- ----- ------ ------ ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings (loss) before income taxes . . . . $154 $(2,343) $(257) $1,011 $2,657 $(4,759) $1,045 $4,377 $1,410
Add: fixed charges . . . . . . . . . . . . 529 460 756 791 1,230 10,634 779 1,290 7,714
---- ------- ----- ------ ------ ------- ------ ------ ------
Earnings as adjusted . . . . . . . . . . . $683 $(1,883) $ 499 $1,802 $3,887 $ 5,875 $1,824 $5,667 $9,124
==== ======= ===== ====== ====== ======= ====== ====== ======
Fixed Charges:
Interest expense . . . . . . . . . . . . $101 $ 359 $ 186 $ 247 $ 829 $10,192 $ 380 $1,280 $7,665
Interest portion of rental expense(2) . . 428 101 570 544 401 442 399 10 49
---- ------- ----- ------ ------ ------- ------ ------ ------
$529 $ 460 $ 756 $ 791 $1,230 $10,634 $ 779 $1,290 $7,714
==== ======= ===== ====== ====== ======= ====== ====== ======
Ratio of earnings to fixed charges(1) . . . 1.29x (4.09)x 0.66x 2.28x 3.16x 0.55x 2.34x 4.39x 1.18x
</TABLE>
- ---------------
(1) Earnings were inadequate to cover fixed charges for the years ended December
31, 1993 and 1994 by $2.3 million and $257 and on a pro-forma basis for the
year ended December 31, 1996 by $4.8 million.
(2) The interest factor of rental expense is estimated at one-third of total
rental expense, which the Company believes to be a reasonable approximation.
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated November 8, 1997, accompanying the
consolidated financial statements of First Wave Marine, Inc. and Subsidiaries,
and our report dated November 8, 1997, accompanying the consolidated financial
statements of John Bludworth Marine, Inc. and Subsidiary contained in the
Registration Statement and Prospectus. We consent to the use of the
aforementioned reports in the Registration Statement and Prospectus, and to the
use of our name as it appears under the caption "Experts".
GRANT THORNTON LLP
/s/ GRANT THORNTON LLP
Houston, Texas
January 26, 1998
<PAGE> 1
Registration No. 33-60067
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST INDENTURE ACT OF
1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
BANK ONE, N.A. F/K/A BANK ONE, COLUMBUS, N.A.
Not Applicable 31-4148768
(State of Incorporation (I.R.S. Employer
if not a national bank) Identification No.)
100 East Broad Street, Columbus, Ohio 43271-0181
(Address of trustee's principal (Zip Code) executive offices)
Jon Beacham
c/o Bank One Trust Company, NA
100 East Broad Street
Columbus, Ohio 43271-0181
(614) 248-6229
(Name, address and telephone number of agent for service)
FIRST WAVE MARINE, INC.
(Exact name of obligor as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 76-0461352
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
Newpark Shipbuilding and Repair, Inc. Texas 76-0419955
EAE Services, Inc. Texas 76-0508651
EAE Industries, Inc. Texas 76-0508652
Newpark Marine Fabricators, Inc. Texas 76-2852221
Louisiana Ship, Inc. Texas 76-0490445
(Exact name of registrant as specified in its charter) (State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
4000 South Sherwood Forest Boulevard 70816
Baton Rouge, Louisiana (Zip Code)
(Address of principal executive
office)
% SENIOR NOTES DUE 2008
(Title of the Indenture securities)
<PAGE> 2
GENERAL
1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
Comptroller of the Currency, Washington, D.C.
Federal Reserve Bank of Cleveland, Cleveland, Ohio
Federal Deposit Insurance Corporation, Washington, D.C.
The Board of Governors of the Federal Reserve System,
Washington, D.C.
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate trust powers.
2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee.
16. LIST OF EXHIBITS
LIST BELOW ALL EXHIBITS FILED AS A PART OF THIS STATEMENT OF
ELIGIBILITY AND QUALIFICATION. (EXHIBITS IDENTIFIED IN PARENTHESES, ON
FILE WITH THE COMMISSION, ARE INCORPORATED HEREIN BY REFERENCE AS
EXHIBITS HERETO.)
Exhibit 1 - A copy of the Articles of Association of the trustee as now in
effect.
Exhibit 2 - A copy of the Certificate of Authority of the trustee to commence
business, see Exhibit 2 to Form T-1, filed in connection with Form S-3 relating
to Wheeling-Pittsburgh Corporation 9 3/8% Senior Notes due 2003, Securities and
Exchange Commission File No. 33-50709.
Exhibit 3 - A copy of the Authorization of the trustee to exercise corporate
trust powers, see Exhibit 3 to Form T-1, filed in connection with Form S-3
relating to Wheeling-Pittsburgh Corporation 9 3/8% Senior Notes due 2003,
Securities and Exchange Commission File No. 33-50709.
Exhibit 4 - A copy of the Bylaws of the trustee as now in effect.
<PAGE> 3
Exhibit 5 - Not applicable.
Exhibit 6 - The consent of the trustee required by Section 321(b) of the Trust
Indenture Act of 1939, as amended.
Exhibit 7 - Report of Condition of the trustee as of the close of business on
June 30, 1997, published pursuant to the requirements of the Comptroller of the
Company, see Exhibit 7 to Form T-1, filed in connection with Form S-4 relating
to National Energy Group, Inc.10 3/4% Senior Notes due 2006, Securities and
Exchange Commission File No. 333-38075.
Exhibit 8 - Not applicable.
Exhibit 9 - Not applicable.
Items 3 through 15 are not answered pursuant to General Instruction B which
requires responses to Item 1, 2 and 16 only, if the obligor is not in default.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the Trustee, Bank One, NA, a national banking association organized
under the National Banking Act, has duly caused this statement of eligibility
and qualification to be signed on its behalf by the undersigned, thereunto duly
authorized, all in Columbus, Ohio, on January 14, 1998.
Bank One, NA
By: /s/ Jon Beacham
-----------------------------
Jon Beacham
Authorized Signer
<PAGE> 4
Exhibit 1
BANK ONE, COLUMBUS, NATIONAL ASSOCIATION
ARTICLES OF ASSOCIATION
For the purpose of organizing an association to carry on the business of
banking under the laws of the United States, the following Articles of
Association are entered into:
FIRST. The title of this Association shall be BANK ONE, COLUMBUS, NATIONAL
ASSOCIATION.
SECOND. The main office of the Association shall be in Columbus, County of
Franklin, State of Ohio. The general business of the Association shall be
conducted at its main office and its branches.
THIRD. The Board of Directors of this Association shall consist of not
less than five nor more than twenty-five Directors, the exact number of
Directors within such minimum and maximum limits to be fixed and determined
from time-to-time by resolution of the shareholders at any annual or special
meeting thereof, provided, however, that the Board of Directors, by resolution
of a majority thereof, shall be authorized to increase the number of its
members by not more than two between regular meetings of the shareholders. Each
Director, during the full term of his directorship, shall own, as qualifying
shares, the minimum number of shares of either this Association or of its
parent bank holding company in accordance with the provisions of applicable
law. Unless otherwise provided by the laws of the United States, any vacancy in
the Board of Directors for any reason, including an increase in the number
thereof, may be filled by action of the Board of Directors.
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<PAGE> 5
FOURTH. The annual meeting of the shareholders for the election of
Directors and the transaction of whatever other business may be brought before
said meeting shall be held at the main office of this Association or such other
place as the Board of Directors may designate, on the day of each year
specified therefor in the By-Laws, but if no election is held on that day, it
may be held on any subsequent business day according to the provisions of law;
and all elections shall be held according to such lawful regulations as may be
prescribed by the Board of Directors.
FIFTH. The authorized amount of capital stock of this Association shall
be 2,073,750 shares of common stock of the par value of Ten Dollars ($10) each;
but said capital stock may be increased or decreased from time-to-time, in
accordance with the provisions of the laws of the United States.
No holder of shares of the capital stock of any class of the
Association shall have the preemptive or preferential right of subscription to
any share of any class of stock of this Association, whether now or hereafter
authorized or to any obligations convertible into stock of this Association,
issued or sold, nor any right of subscription to any thereof other than such,
if any, as the Board of Directors, in its discretion, may from time-to-time
determine and at such price as the Board of Directors may from time-to-time
fix.
This Association, at any time and from time-to-time, may
authorize and issue debt obligations, whether or not subordinated, without the
approval of the shareholders.
SIXTH. The Board of Directors shall appoint one of its members President
of the Association, who shall be Chairman of the Board, unless the Board
appoints another director to be the Chairman. The Board of Directors shall have
the power to appoint one or more Vice Presidents and to appoint a Secretary and
such other officers and employees as may be required to transact the business
of this Association.
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<PAGE> 6
The Board of Directors shall have the power to define the duties
of the officers and employees of this Association; to fix the salaries to be
paid to them; to dismiss them; to require bonds from them and to fix the
penalty thereof; to regulate the manner in which any increase of the capital of
this Association shall be made; to manage and administer the business and
affairs of this Association; to make all By-Laws that it may be lawful for them
to make; and generally to do and perform all acts that it may be legal for a
Board of Directors to do and perform.
SEVENTH. The Board of Directors shall have the power to change the
location of the main office to any other place within the limits of the City of
Columbus, Ohio, without the approval of the shareholders but subject to the
approval of the Comptroller of the Currency; and shall have the power to
establish or change the location of any branch or branches of this Association
to any other location, without the approval of the shareholders but subject to
the approval of the Comptroller of the Currency.
EIGHTH. The corporate existence of this Association shall continue until
terminated in accordance with the laws of the United States.
NINTH. The Board of Directors of this Association, or any three or more
shareholders owning, in the aggregate, not less than 10 percent of the stock of
this Association, may call a special meeting of shareholders at any time.
Unless otherwise provided by the laws of the United States, a notice of the
time, place and purpose of every annual and special meeting of the shareholders
shall be given by first-class mail, postage prepaid, mailed at least ten days
prior to the date of such meeting to each shareholder of record at his address
as shown upon the books of this Association.
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<PAGE> 7
TENTH. Every person who is or was a Director, officer or employee of the
Association or of any other corporation which he served as a Director, officer
or employee at the request of the Association as part of his regularly assigned
duties may be indemnified by the Association in accordance with the provisions
of this paragraph against all liability (including, without limitation,
judgments, fines, penalties and settlements) and all reasonable expenses
(including, without limitation, attorneys' fees and investigative expenses)
that may be incurred or paid by him in connection with any claim, action, suit
or proceeding, whether civil, criminal or administrative (all referred to
hereafter in this paragraphs as "Claims") or in connection with any appeal
relating thereto in which he may become involved as a party or otherwise or
with which he may be threatened by reason of his being or having been a
Director, officer or employee of the Association or such other corporation, or
by reason of any action taken or omitted by him in his capacity as such
Director, officer or employee, whether or not he continues to be such at the
time such liability or expenses are incurred, provided that nothing contained
in this paragraph shall be construed to permit indemnification of any such
person who is adjudged guilty of, or liable for, willful misconduct, gross
neglect of duty or criminal acts, unless, at the time such indemnification is
sought, such indemnification in such instance is permissible under applicable
law and regulations, including published rulings of the Comptroller of the
Currency or other appropriate supervisory or regulatory authority, and provided
further that there shall be no indemnification of directors, officers, or
employees against expenses, penalties, or other payments incurred in an
administrative proceeding or action instituted by an appropriate regulatory
agency which proceeding or action results in a final order assessing civil
money penalties or requiring affirmative action by an individual or individuals
in the form of payments to the Association. Every person who may be indemnified
under the provisions of this paragraph and who has been wholly successful on
the merits with respect to any Claim shall be entitled to indemnification as of
right. Except as provided in the preceding sentence, any indemnification under
this paragraph shall be at the sole discretion of the Board of Directors and
shall be made only if the Board of Directors or the Executive Committee acting
by a quorum consisting of
-7-
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<PAGE> 8
Directors who are not parties to such Claim shall find or if independent legal
counsel (who may be the regular counsel of the Association) selected by the
Board of Directors or Executive Committee whether or not a disinterested quorum
exists shall render their opinion that in view of all of the circumstances then
surrounding the Claim, such indemnification is equitable and in the best
interests of the Association. Among the circumstances to be taken into
consideration in arriving at such a finding or opinion is the existence or
non-existence of a contract of insurance or indemnity under which the
Association would be wholly or partially reimbursed for such indemnification,
but the existence or non-existence of such insurance is not the sole
circumstance to be considered nor shall it be wholly determinative of whether
such indemnification shall be made. In addition to such finding or opinion, no
indemnification under this paragraph shall be made unless the Board of
Directors or the Executive Committee acting by a quorum consisting of Directors
who are not parties to such Claim shall find or if independent legal counsel
(who may be the regular counsel of the Association) selected by the Board of
Directors or Executive Committee whether or not a disinterested quorum exists
shall render their opinion that the Director, officer or employee acted in good
faith in what he reasonably believed to be the best interests of the
Association or such other corporation and further in the case of any criminal
action or proceeding, that the Director, officer or employee reasonably
believed his conduct to be lawful. Determination of any Claim by judgment
adverse to a Director, officer or employee by settlement with or without Court
approval or conviction upon a plea of guilty or of nolocontendere or its
equivalent shall not create a presumption that a Director, officer or employee
failed to meet the standards of conduct set forth in this paragraph. Expenses
incurred with respect to any Claim may be advanced by the Association prior to
the final disposition thereof upon receipt of an undertaking satisfactory to
the Association by or on behalf of the recipient to repay such amount unless it
is ultimately determined that he is entitled to indemnification under this
paragraph. The rights of indemnification provided in this paragraph shall be in
addition to any rights to which any Director, officer or employee may otherwise
be entitled by contract or as a matter of law.
-8-
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<PAGE> 9
Every person who shall act as a Director, officer or employee of this
Association shall be conclusively presumed to be doing so in reliance upon the
right of indemnification provided for in this paragraph.
ELEVENTH. These Articles of Association may be amended at any regular or
special meeting of the shareholders by the affirmative vote of the holders of a
majority of the stock of this Association, unless the vote of the holders of a
greater amount of stock is required by law, and in that case by the vote of the
holders of such greater amount.
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<PAGE> 10
Exhibit 4
BY-LAWS
OF
BANK ONE, COLUMBUS, NATIONAL ASSOCIATION
ARTICLE I
MEETING OF SHAREHOLDERS
SECTION 1.01. ANNUAL MEETING. The regular annual meeting of the Shareholders of
the Bank for the election of Directors and for the transaction of such business
as may properly come before the meeting shall be held at its main banking
house, or other convenient place duly authorized by the Board of Directors, on
the third Monday of January of each year, or on the next succeeding banking
day, if the day fixed falls on a legal holiday. If from any cause, an election
of directors is not made on the day fixed for the regular meeting of
shareholders or, in the event of a legal holiday, on the next succeeding
banking day, the Board of Directors shall order the election to be held on some
subsequent day, as soon thereafter as practicable, according to the provisions
of law; and notice thereof shall be given in the manner herein provided for the
annual meeting. Notice of such annual meeting shall be given by or under the
direction of the Secretary or such other officer as may be designated by the
Chief Executive Officer by first-class mail, postage prepaid, to all
shareholders of record of the Bank at their respective addresses as shown upon
the books of the Bank mailed not less than ten days prior to the date fixed for
such meeting.
SECTION 1.02. SPECIAL MEETINGS. A special meeting of the shareholders of this
Bank may be called at any time by the Board of Directors or by any three or
more shareholders owning, in the aggregate, not less than ten percent of the
stock of this Bank. The notice of any special meeting of the shareholders
called by the Board of Directors, stating the time, place and purpose of the
meeting, shall be given by or under the direction of the Secretary, or such
other officer as is designated by the Chief Executive Officer, by first-class
mail, postage prepaid, to all shareholders of
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1/18/94
<PAGE> 11
record of the Bank at their respective addresses as shown upon the books of the
Bank, mailed not less than ten days prior to the date fixed for such meeting.
Any special meeting of shareholders shall be conducted and its
proceedings recorded in the manner prescribed in these By-Laws for annual
meetings of shareholders.
SECTION 1.03. SECRETARY OF SHAREHOLDERS' MEETING. The Board of Directors may
designate a person to be the Secretary of the meetings of shareholders. In the
absence of a presiding officer, as designated in these By-Laws, the Board of
Directors may designate a person to act as the presiding officer. In the event
the Board of Directors fails to designate a person to preside at a meeting of
shareholders and a Secretary of such meeting, the shareholders present or
represented shall elect a person to preside and a person to serve as Secretary
of the meeting.
The Secretary of the meetings of shareholders shall cause the returns
made by the judges and election and other proceedings to be recorded in the
minute book of the Bank. The presiding officer shall notify the directors-elect
of their election and to meet forthwith for the organization of the new board.
The minutes of the meeting shall be signed by the presiding officer and
the Secretary designated for the meeting.
SECTION 1.04. JUDGES OF ELECTION. The Board of Directors may appoint as many as
three shareholders to be judges of the election, who shall hold and conduct the
same, and who shall, after the election has been held, notify, in writing over
their signatures, the secretary of the shareholders' meeting of the result
thereof and the names of the Directors elected; provided, however, that upon
failure for any reason of any judge or judges of election, so appointed by the
directors, to serve, the presiding officer of the meeting shall appoint other
shareholders or their proxies to fill the vacancies. The judges of election at
the request of the chairman of the
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meeting, shall act as tellers of any other vote by ballot taken at such
meeting, and shall notify, in writing over their signatures, the secretary of
the Board of Directors of the result thereof.
SECTION 1.05. PROXIES. In all elections of Directors, each shareholder of
record, who is qualified to vote under the provisions of Federal Law, shall
have the right to vote the number of shares of record in his name for as many
persons as there are Directors to be elected, or to cumulate such shares as
provided by Federal Law. In deciding all other questions at meetings of
shareholders, each shareholder shall be entitled to one vote on each share of
stock of record in his name. Shareholders may vote by proxy duly authorized in
writing. All proxies used at the annual meeting shall be secured for that
meeting only, or any adjournment thereof, and shall be dated, and if not dated
by the shareholder, shall be dated as of the date of receipt thereof. No
officer or employee of this Bank may act as proxy.
SECTION 1.06. QUORUM. Holders of record of a majority of the shares of the
capital stock of the Bank, eligible to be voted, present either in person or by
proxy, shall constitute a quorum for the transaction of business at any meeting
of shareholders, but shareholders present at any meeting and constituting less
than a quorum may, without further notice, adjourn the meeting from time to
time until a quorum is obtained. A majority of the votes cast shall decide
every question or matter submitted to the shareholders at any meeting, unless
otherwise provided by law or by the Articles of Association.
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ARTICLE II
DIRECTORS
SECTION 2.01. MANAGEMENT OF THE BANK. The business of the Bank shall be managed
by the Board of Directors. Each director of the Bank shall be the beneficial
owner of a substantial number of shares of BANC ONE CORPORATION and shall be
employed either in the position of Chief Executive Officer or active leadership
within his or her business, professional or community interest which shall be
located within the geographic area in which the Bank operates, or as an
executive officer of the Bank. A director shall not be eligible for nomination
and re-election as a director of the Bank if such person's executive or
leadership position within his or her business, professional or community
interests which qualifies such person as a director of Bank terminates. The age
of 70 is the mandatory retirement age as a director of the Bank. When a
person's eligibility as director of the Bank terminates, whether because of
change in share ownership, position, residency or age, within 30 days after
such termination, such person shall submit his resignation as a director to be
effective at the pleasure of the Board provided, however, that in no event
shall such person be nominated or elected as a director. Provided, however,
following a person's retirement or resignation as a director because of the age
limitations herein set forth with respect to election or re-election as a
director, such person may, in special or unusual circumstances, and at the
discretion of the Board, be elected by the directors as a Director Emeritus of
the Bank for a limited period of time. A Director Emeritus shall have the right
to participate in board meetings but shall be without the power to vote and
shall be subject to re-election by the Board at its organizational meeting
following the Bank's annual meeting of shareholders.
SECTION 2.02. QUALIFICATIONS. Each director shall have the qualification
prescribed by law. No person elected a director may exercise any of the powers
of his office until he has taken the oath of such office.
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SECTION 2.03. TERM OF OFFICE/VACANCIES. A director shall hold office until the
annual meeting for the year in which his term expires and until his successor
shall be elected and shall qualify, subject, however, to his prior death,
resignation, or removal from office. Whenever any vacancy shall occur among the
directors, the remaining directors shall constitute the directors of the Bank
until such vacancy is filled by the remaining directors, and any director so
appointed shall hold office for the unexpired term of his or her successor.
Notwithstanding the foregoing, each director shall hold office and serve at the
pleasure of the Board.
SECTION 2.04. ORGANIZATION MEETING. The directors elected by the share- holders
shall meet for organization of the new board at the time fixed by the presiding
officer of the annual meeting. If at the time fixed for such meeting there is
no quorum present, the Directors in attendance may adjourn from time to time
until a quorum is obtained. A majority of the number of Directors elected by
the shareholders shall constitute a quorum for the transaction of business.
SECTION 2.05. REGULAR MEETINGS. The regular meetings of the Board of Directors
shall be held on the third Monday of each calendar month excluding March and
July, which meeting will be held at 4:00 p.m. When any regular meeting of the
Board falls on a holiday, the meeting shall be held on such other day as the
Board may previously designate or should the Board fail to so designate, on
such day as the Chairman of the Board of President may fix. Whenever a quorum
is not present, the directors in attendance shall adjourn the meeting to a time
not later than the date fixed by the Bylaws for the next succeeding regular
meeting of the Board.
SECTION 2.06. SPECIAL MEETINGS. Special meetings of the Board of Directors
shall be held at the call of the Chairman of the Board or President, or at the
request of two or more Directors. Any special meeting may be held at such place
in Franklin County, Ohio, and at such time as may be fixed in the call. Written
or oral notice shall be given to each Director not later than the day next
preceding the day on which special meeting is to be held, which notice may be
waived in writing.
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The presence of a Director at any meeting of the Board shall be deemed a waiver
of notice thereof by him. Whenever a quorum is not present the Directors in
attendance shall adjourn the special meeting from day to day until a quorum is
obtained.
SECTION 2.07. QUORUM. A majority of the Directors shall constitute a quorum at
any meeting, except when otherwise provided by law; but a lesser number may
adjourn any meeting, from time-to-time, and the meeting may be held, as
adjourned, without further notice. When, however, less than a quorum as herein
defined, but at least one-third and not less than two of the authorized number
of Directors are present at a meeting of the Directors, business of the Bank
may be transacted and matters before the Board approved or disapproved by the
unanimous vote of the Directors present.
SECTION 2.08. COMPENSATION. Each member of the Board of Directors shall receive
such fees for, and transportation expenses incident to, attendance at Board and
Board Committee Meetings and such fees for service as a Director irrespective
of meeting attendance as from time to time are fixed by resolution of the
Board; provided, however, that payment hereunder shall not be made to a
Director for meetings attended and/or Board service which are not for the
Bank's sole benefit and which are concurrent and duplicative with meetings
attended or board service for an affiliate of the Bank for which the Director
receives payment; and provided further, that payment hereunder shall not be
made in the case of any Director in the regular employment of the Bank or of
one of its affiliates.
SECTION 2.09. EXECUTIVE COMMITTEE. There shall be a standing committee of the
Board of Directors known as the Executive Committee which shall possess and
exercise, when the Board is not in session, all powers of the Board that may
lawfully be delegated. The Executive Committee shall also exercise the powers
of the Board of Directors in accordance with the Provisions of the "Employees
Retirement Plan" and the "Agreement and Declaration of Trust" as the same now
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exist or may be amended hereafter. The Executive Committee shall consist of not
fewer than four board members, including the Chairman of the Board and
President of the Bank, one of whom, as hereinafter required by these By-laws,
shall be the Chief Executive Officer. The other members of the Committee shall
be appointed by the Chairman of the Board or by the President, with the
approval of the Board and shall continue as members of the Executive Committee
until their successors are appointed, provided, however, that any member of the
Executive Committee may be removed by the Board upon a majority vote thereof at
any regular or special meeting of the Board. The Chairman or President shall
fill any vacancy in the Committee by the appointment of another Director,
subject to the approval of the Board of Directors. The regular meetings of the
Executive Committee shall be held on a regular basis as scheduled by the Board
of Directors. Special meetings of the Executive Committee shall be held at the
call of the Chairman or President or any two members thereof at such time or
times as may be designated. In the event of the absence of any member or
members of the Committee, the presiding member may appoint a member or members
of the Board to fill the place or places of such absent member or members to
serve during such absence. Not fewer than three members of the Committee must
be present at any meeting of the Executive Committee to constitute a quorum,
provided, however that with regard to any matters on which the Executive
Committee shall vote, a majority of the Committee members present at the
meeting at which a vote is to be taken shall not be officers of the Bank and,
provided further, that if, at any meeting at which the Chairman of the Board
and President are both present, Committee members who are not officers are not
in the majority, then the Chairman of the Board or President, which ever of
such officers is not also the Chief Executive Officer, shall not be eligible to
vote at such meeting and shall not be recognized for purposes of determining if
a quorum is present at such meeting. When neither the Chairman of the Board nor
President are present, the Committee shall appoint a presiding officer. The
Executive Committee shall keep a record of its proceedings and report its
proceedings and the action taken by it to the Board of Directors.
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SECTION 2.10 COMMUNITY REINVESTMENT ACT AND COMPLIANCE POLICY COMMITTEE. There
shall be a standing committee of the Board of Directors known as the Community
Reinvestment Act and Compliance Policy Committee the duties of which shall be,
at least once in each calendar year, to review, develop and recommend policies
and programs related to the Bank's Community Reinvestment Act Compliance and
regulatory compliance with all existing statutes, rules and regulations
affecting the Bank under state and federal law. Such Committee shall provide
and promptly make a full report of such review of current Bank policies with
regard to Community Reinvestment Act and regulatory compliance in writing to
the Board, with recommendations, if any, which may be necessary to correct any
unsatisfactory conditions. Such Committee may, in its discretion, in fulfilling
its duties, utilize the Community Reinvestment Act officers of the Bank, Banc
One Ohio Corporation and Banc One Corporation and may engage outside Community
Reinvestment Act experts, as approved by the Board, to review, develop and
recommend policies and programs as herein required. The Community Reinvestment
Act and regulatory compliance policies and procedures established and the
recommendations made shall be consistent with, and shall supplement, the
Community Reinvestment Act and regulatory compliance programs, policies and
procedures of Banc One Corporation and Banc One Ohio Corporation. The Community
Reinvestment Act and Compliance Policy Committee shall consist of not fewer
than four board members, one of whom shall be the Chief Executive Officer and a
majority of whom are not officers of the Bank. Not fewer than three members of
the Committee, a majority of whom are not officers of the Bank, must be present
to constitute a quorum. The Chairman of the Board or President of the Bank,
whichever is not the Chief Executive Officer, shall be an ex officio member of
the Community Reinvestment Act and Compliance Policy Committee. The Community
Reinvestment Act and Compliance Policy Committee, whose chairman shall be
appointed by the Board, shall keep a record of its proceedings and report its
proceedings and the action taken by it to the Board of Directors.
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SECTION 2.11. TRUST COMMITTEES. There shall be two standing Committees known as
the Trust Management Committee and the Trust Examination Committee appointed as
hereinafter provided.
SECTION 2.12. OTHER COMMITTEES. The Board of Directors may appoint such special
committees from time to time as are in its judgment necessary in the interest
of the Bank.
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ARTICLE III
OFFICERS, MANAGEMENT STAFF AND EMPLOYEES
SECTION 3.01. OFFICERS AND MANAGEMENT STAFF.
(a) The officers of the Bank shall include a President, Secretary and
Security Officer and may include a Chairman of the Board, one or
more Vice Chairmen, one or more Vice Presidents (which may
include one or more Executive Vice Presidents and/or Senior Vice
Presidents) and one or more Assistant Secretaries, all of whom
shall be elected by the Board. All other officers may be elected
by the Board or appointed in writing by the Chief Executive
Officer. The salaries of all officers elected by the Board shall
be fixed by the Board. The Board from time-to-time shall
designate the President or Chairman of the Board to serve as the
Bank's Chief Executive Officer.
(b) The Chairman of the Board, if any, and the President shall be
elected by the Board from their own number. The President and
Chairman of the Board shall be re-elected by the Board annually
at the organizational meeting of the Board of Directors following
the Annual Meeting of Shareholders. Such officers as the Board
shall elect from their own number shall hold office from the date
of their election as officers until the organization meeting of
the Board of Directors following the next Annual Meeting of
Shareholders, provided, however, that such officers may be
relieved of their duties at any time by action of the Board in
which event all the powers incident to their office shall
immediately terminate.
(c) Except as provided in the case of the elected officers who are
members of the Board, all officers, whether elected or appointed,
shall hold office at the pleasure of the Board. Except as
otherwise limited by law or these By-laws, the Board assigns to
Chief Executive Officer and/or his
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designees the authority to appoint and dismiss any elected or
appointed officer or other member of the Bank's management staff
and other employees of the Bank, as the person in charge of and
responsible for any branch office, department, section,
operation, function, assignment or duty in the Bank.
(d) The management staff of the Bank shall include officers elected
by the Board, officers appointed by the Chief Executive Officer,
and such other persons in the employment of the Bank who,
pursuant to written appointment and authorization by a duly
authorized officer of the Bank, perform management functions and
have management responsibilities. Any two or more offices may be
held by the same person except that no person shall hold the
office of Chairman of the Board and/or President and at the same
time also hold the office of Secretary.
(e) The Chief Executive Officer of the Bank and any other officer of
the Bank, to the extent that such officer is authorized in
writing by the Chief Executive Officer, may appoint persons other
than officers who are in the employment of the Bank to serve in
management positions and in connection therewith, the appointing
officer may assign such title, salary, responsibilities and
functions as are deemed appropriate by him, provided, however,
that nothing contained herein shall be construed as placing any
limitation on the authority of the Chief Executive Officer as
provided in this and other sections of these By-Laws.
SECTION 3.02. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the Bank
shall have general and active management of the business of the Bank and shall
see that all orders and resolutions of the Board of Directors are carried into
effect. Except as otherwise prescribed or limited by these By-Laws, the Chief
Executive Officer shall have full right, authority and power to control all
personnel, including elected and appointed officers, of the Bank, to employ or
direct the
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employment of such personnel and officers as he may deem necessary, including
the fixing of salaries and the dismissal of them at pleasure, and to define and
prescribe the duties and responsibility of all Officers of the Bank, subject to
such further limitations and directions as he may from time-to-time deem
proper. The Chief Executive Officer shall perform all duties incident to his
office and such other and further duties, as may, from time-to-time, be
required of him by the Board of Directors or the shareholders. The
specification of authority in these By-Laws wherever and to whomever granted
shall not be construed to limit in any manner the general powers of delegation
granted to the Chief Executive Officer in conducting the business of the Bank.
The Chief Executive Officer or, in his absence, the Chairman of the Board or
President of the Bank, as designated by the Chief Executive Officer, shall
preside at all meetings of shareholders and meetings of the Board. In the
absence of the Chief Executive Officer, such officer as is designated by the
Chief Executive Officer shall be vested with all the powers and perform all the
duties of the Chief Executive Officer as defined by these By-Laws. When
designating an officer to serve in his absence, the Chief Executive Officer
shall select an officer who is a member of the Board of Directors whenever such
officer is available.
SECTION 3.03. POWERS OF OFFICERS AND MANAGEMENT STAFF. The Chief Executive
Officer, the Chairman of the Board, the President, and those officers so
designated and authorized by the Chief Executive Officer are authorized for an
on behalf of the Bank, and to the extent permitted by law, to make loans and
discounts; to purchase or acquire drafts, notes, stock, bonds, and other
securities for investment of funds held by the Bank; to execute and purchase
acceptances; to appoint, empower and direct all necessary agents and attor-
neys; to sign and give any notice required to be given; to demand payment
and/or to declare due for any default any debt or obligation due or payable to
the Bank upon demand or authorized to be declared due; to foreclose any mort-
gages, to exercise any option, privilege or election to forfeit, terminate,
extend or renew any lease; to authorize and direct any proceedings for the
collection of any money or for the enforcement
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of any right or obligation; to adjust, settle and compromise all claims of
every kind and description in favor of or against the Bank, and to give
receipts, releases and discharges therefor; to borrow money and in connection
therewith to make, execute and deliver notes, bonds or other evidences of
indebtedness; to pledge or hypothe- cate any securities or any stocks, bonds,
notes or any property real or personal held or owned by the Bank, or to
rediscount any notes or other obligations held or owned by the Bank, to employ
or direct the employment of all personnel, including elected and appointed
officers, and the dismissal of them at pleasure, and in furtherance of and in
addition to the powers hereinabove set forth to do all such acts and to take
all such proceedings as in his judgment are necessary and incidental to the
operation of the Bank.
Other persons in the employment of the Bank, including but not limited to
officers and other members of the management staff, may be authorized by the
Chief Executive Officer, or by an officer so designated and authorized by the
chief Executive Officer, to perform the powers set forth above, subject,
however, to such limitations and conditions as are set forth in the
authorization given to such persons.
SECTION 3.04. SECRETARY. The Secretary or such other officers as may be
designated by the Chief Executive Officer shall have supervision and control of
the records of the Bank and, subject to the direction of the Chief Executive
Officer, shall undertake other duties and functions usually performed by a
corporate secretary. Other officers may be designated by the Chief Executive
Officer or the Board of Directors as Assistant Secretary to perform the duties
of the Secretary.
SECTION 3.05. EXECUTION OF DOCUMENTS. The Chief Executive Officer, Chairman of
the Board, President, any officer being a member of the Bank's management staff
who is also a person in charge of and responsible for any department within the
Bank and any other officer to the extent such officer is so designated and
authorized by the Chief Executive Officer, the Chairman of the Board, the
President, or any other officer who is a member of the Bank's management staff
who is in charge of and responsible for any department within
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the Bank, are hereby authorized on behalf of the Bank to sell, assign, lease,
mortgage, transfer, deliver and convey any real or personal property now or
hereafter owned by or standing in the name of the Bank or its nominee, or held
by this Bank as collateral security, and to execute and deliver such deeds,
contracts, leases, assignments, bills of sale, transfers or other papers or
documents as may be appropriate in the circumstances; to execute any loan
agreement, security agreement, commitment letters and financing statements and
other documents on behalf of the Bank as a lender; to execute purchase orders,
documents and agreements entered into by the Bank in the ordinary course of
business, relating to purchase, sale, exchange or lease of services, tangible
personal property, materials and equipment for the use of the Bank; to execute
powers of attorney to perform specific or general functions in the name of or
on behalf of the Bank; to execute promissory notes or other instruments
evidencing debt of the Bank; to execute instruments pledging or releasing
securities for public funds, documents submitting public fund bids on behalf of
the Bank and public fund contracts; to purchase and acquire any real or
personal property including loan portfolios and to execute and deliver such
agreements, contracts or other papers or documents as may be appropriate in the
circumstances; to execute any indemnity and fidelity bonds, proxies or other
papers or documents of like or different character necessary, desirable or
incidental to the conduct of its banking business; to execute and deliver
settlement agreements or other papers or documents as may be appropriate in
connection with a dismissal authorized by Section 3.01(c) of these By-laws; to
execute agreements, instruments, documents, contracts or other papers of like
or difference character necessary, desirable or incidental to the conduct of
its banking business; and to execute and deliver partial releases from and
discharges or assignments of mortgages, financing statements and assignments or
surrender of insurance policies, now or hereafter held by this Bank.
The Chief Executive Officer, Chairman of the Board, President, any
officer being a member of the Bank's management staff who is also a person in
charge of and responsible for any department within the Bank, and any other
officer of the Bank so designated and authorized by the Chief Executive
Officer, Chairman of the
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Board, President or any officer who is a member of the Bank's management staff
who is in charge of and responsible for any department within the Bank are
authorized for and on behalf of the Bank to sign and issue checks, drafts, and
certificates of deposit; to sign and endorse bills of exchange, to sign and
countersign foreign and domestic letters of credit, to receive and receipt for
payments of principal, interest, dividends, rents, fees and payments of every
kind and description paid to the Bank, to sign receipts for property acquired
by or entrusted to the Bank, to guarantee the genuineness of signatures on
assignments of stocks, bonds or other securities, to sign certifications of
checks, to endorse and deliver checks, drafts, warrants, bills, notes,
certificates of deposit and acceptances in all business transactions of the
Bank.
Other persons in the employment of the Bank and of its subsidiaries,
including but not limited to officers and other members of the management
staff, may be authorized by the Chief Executive Officer, Chairman of the Board,
President or by an officer so designated by the Chief Executive Officer,
Chairman of the Board, or President to perform the acts and to execute the
documents set forth above, subject, however, to such limitations and conditions
as are contained in the authorization given to such person.
SECTION 3.06. PERFORMANCE BOND. All officers and employees of the Bank shall be
bonded for the honest and faithful performance of their duties for such amount
as may be prescribed by the Board of Directors.
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ARTICLE IV
TRUST DEPARTMENT
SECTION 4.01. TRUST DEPARTMENT. Pursuant to the fiduciary powers granted to
this Bank under the provisions of Federal Law and Regulations of the
Comptroller of the Currency, there shall be maintained a separate Trust
Department of the Bank, which shall be operated in the manner specified herein.
SECTION 4.02. TRUST MANAGEMENT COMMITTEE. There shall be a standing Committee
known as the Trust Management Committee, consisting of at least five members, a
majority of whom shall not be officers of the Bank. The Committee shall consist
of the Chairman of the Board who shall be Chairman of the Committee, the
President, and at least three other Directors appointed by the Board of
Directors and who shall continue as members of the Committee until their
successors are appointed. Any vacancy in the Trust Management Committee may be
filled by the Board at any regular or special meeting. In the event of the
absence of any member or members, such Committee may, in its discretion,
appoint members of the Board to fill the place of such absent members to serve
during such absence. Three members of the Committee shall constitute a quorum.
Any member of the Committee may be removed by the Board by a majority vote at
any regular or special meeting of the Board. The Committee shall meet at such
times as it may determine or at the call of the Chairman, or President or any
two members thereof.
The Trust Management Committee, under the general direction of the Board
of Directors, shall supervise the policy of the Trust Department which shall be
formulated and executed in accordance with Law, Regulations of the Comptroller
of the Currency, and sound fiduciary principles.
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SECTION 4.03. TRUST EXAMINATION COMMITTEE. There shall be a standing Commit-
tee known as the Trust Examination Committee, consisting of three directors
appointed by the Board of Directors and who shall continue as members of the
committee until their successors are appointed. Such members shall not be
active officers of the Bank. Two members of the Committee shall constitute a
quorum. Any member of the Committee may be removed by the Board by a majority
vote at any regular or special meeting of the Board. The Committee shall meet
at such times as it may determine or at the call of two members thereof.
This Committee shall, at least once during each calendar year and within
fifteen months of the last such audit, or at such other time(s) as may be
required by Regulations of the Comptroller of the Currency, make suitable
audits of the Trust Department or cause suitable audits to be made by auditors
responsible only to the Board of Directors, and at such time shall ascertain
whether the Department has been administered in accordance with Law, Regula-
tions of the Comptroller of the Currency and sound fiduciary principles.
The Committee shall promptly make a full report of such audits in writing
to the Board of Directors of the Bank, together with a recommendation as to
what action, if any, may be necessary to correct any unsatisfactory condition.
A report of the audits together with the action taken thereon shall be noted in
the Minutes of the Board of Directors and such report shall be a part of the
records of this Bank.
SECTION 4.04. MANAGEMENT. The Trust Department shall be under the management
and supervision of an officer of the Bank or of the trust affiliate of the Bank
designated by and subject to the advice and direction of the Chief Executive
Officer. Such officer having supervisory responsibility over the Trust
Department shall do or cause to be done all things necessary or proper in
carrying on the business of the Trust Department in accordance with provi-
sions of law and applicable regulations.
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SECTION 4.05. HOLDING OF PROPERTY. Property held by the Trust Department may be
carried in the name of the Bank in its fiduciary capacity, in the name of Bank,
or in the name of a nominee or nominees.
SECTION 4.06. TRUST INVESTMENTS. Funds held by the Bank in a fiduciary capacity
awaiting investment or distribution shall not be held uninvested or
undistributed any longer than is reasonable for the proper management of the
account and shall be invested in accordance with the instrument establishing a
fiduciary relationship and local law. Where such instrument does not specify
the character or class of investments to be made and does not vest in the Bank
any discretion in the matter, funds held pursuant to such instrument shall be
invested in any investment which corporate fiduciaries may invest under local
law.
The investments of each account in the Trust Department shall be kept
separate from the assets of the Bank, and shall be placed in the joint custody
or control of not less than two of the officers or employees of the Bank or of
the trust affiliate of the Bank designated for the purpose by the Trust
Management Committee.
SECTION 4.07. EXECUTION OF DOCUMENTS. The Chief Executive Officer, Chairman of
the Board, President, any officer of the Trust Department, and such other
officers of the trust affiliate of the Bank as are specifically designated and
authorized by the Chief Executive Officer, the President, or the officer in
charge of the Trust Department, are hereby authorized, on behalf of this Bank,
to sell, assign, lease, mortgage, transfer, deliver and convey any real
property or personal property and to purchase and acquire any real or personal
property and to execute and deliver such agreements, contracts, or other papers
and documents as may be appropriate in the circumstances for property now or
hereafter owned by or standing in the name of this Bank, or its nominee, in any
fiduciary capacity, or in the name of any principal for whom this Bank may now
or hereafter be acting under a power of attorney, or as agent and to execute
and deliver partial releases from
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any discharges or assignments or mortgages and assignments or surrender of
insurance policies, to execute and deliver deeds, contracts, leases,
assignments, bills of sale, transfers or such other papers or documents as may
be appropriate in the circumstances for property now or hereafter held by this
Bank in any fiduciary capacity or owned by any principal for whom this Bank may
now or hereafter be acting under a power of attorney or as agent; to execute
and deliver settlement agreements or other papers or documents as may be
appropriate in connection with a dismissal authorized by Section 3.01(c) of
these By-laws; provided that the signature of any such person shall be attested
in each case by any officer of the Trust Department or by any other person who
is specifically authorized by the Chief Executive Officer, the President or the
officer in charge of the Trust Department.
The Chief Executive Officer, Chairman of the Board, President, any
officer of the Trust Department and such other officers of the trust affiliate
of the Bank as are specifically designated and authorized by the Chief
Executive Officer, the President, or the officer in charge of the Trust
Department, or any other person or corporation as is specifically authorized by
the Chief Executive Officer, the President or the officer in charge of the
Trust Department, are hereby authorized on behalf of this Bank, to sign any and
all pleadings and papers in probate and other court proceedings, to execute any
indemnity and fidelity bonds, trust agreements, proxies or other papers or
documents of like or different character necessary, desirable or incidental to
the appointment of the Bank in any fiduciary capacity and the conduct of its
business in any fiduciary capacity; also to foreclose any mortgage, to execute
and deliver receipts for payments of principal, interest, dividends, rents,
fees and payments of every kind and description paid to the Bank; to sign
receipts for property acquired or entrusted to the Bank; also to sign stock or
bond certificates on behalf of this Bank in any fiduciary capacity and on
behalf of this Bank as transfer agent or registrar; to guarantee the
genuineness of signatures on assignments of stocks, bonds or other securities,
and to authenticate bonds, debentures, land or lease trust certificates or
other forms of security issued pursuant to any indenture under which this Bank
now or hereafter is acting as
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Trustee. Any such person, as well as such other persons as are specifically
authorized by the Chief Executive Officer or the officer in charge of the Trust
Department, may sign checks, drafts and orders for the payment of money
executed by the Trust Department in the course of its business.
SECTION 4.08. VOTING OF STOCK. The Chairman of the Board, President, any
officer of the Trust Department, any officer of the trust affiliate of the Bank
and such other persons as may be specifically authorized by Resolution of the
Trust Management Committee or the Board of Directors, may vote shares of stock
of a corporation of record on the books of the issuing company in the name of
the Bank or in the name of the Bank as fiduciary, or may grant proxies for the
voting of such stock of the granting if same is permitted by the instrument
under which the Bank is acting in a fiduciary capacity, or by the law
applicable to such fiduciary account. In the case of shares of stock which are
held by a nominee of the Bank, such shares may be voted by such person(s)
authorized by such nominee.
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ARTICLE V
STOCKS AND STOCK CERTIFICATES
SECTION 5.01. STOCK CERTIFICATES. The shares of stock of the Bank shall be
evidenced by certificates which shall bear the signature of the Chairman of the
Board, the President, or a Vice President (which signature may be engraved,
printed or impressed), and shall be signed manually by the Secretary, or any
other officer appointed by the Chief Executive Officer for that purpose.
In case any such officer who has signed or whose facsimile signature has
been placed upon such certificate shall have ceased to be such before such
certificate is issued, it may be issued by the Bank with the same effect as if
such officer had not ceased to be such at the time of its issue. Each such
certificate shall bear the corporate seal of the Bank, shall recite on its fact
that the stock represented thereby is transferable only upon the books of the
Bank properly endorsed and shall recite such other information as is required
by law and deemed appropriate by the Board. The corporate seal may be facsimile
engraved or printed.
SECTION 5.02. STOCK ISSUE AND TRANSFER. The shares of stock of the Bank shall
be transferable only upon the stock transfer books of the Bank and except as
hereinafter provided, no transfer shall be made or new certificates issued
except upon the surrender for cancellation of the certificate or certificates
previously issued therefor. In the case of the loss, theft, or destruction of
any certificate, a new certificate may be issued in place of such certificate
upon the furnishing of any affidavit setting forth the circumstances of such
loss, theft, or destruction and indemnity satisfactory to the Chairman of the
Board, the President, or a Vice President. The Board of Directors, or the Chief
Executive Officer, may authorize the issuance of a new certificate therefor
without the furnishing of indemnity. Stock Transfer Books, in which all
transfers of stock shall be recorded, shall be provided.
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The stock transfer books may be closed for a reasonable period and under
such conditions as the Board of Directors may at any time determine for any
meeting of shareholders, the payment of dividends or any other lawful purpose.
In lieu of closing the transfer books, the Board may, in its discretion, fix a
record date and hour constituting a reasonable period prior to the day
designated for the holding of any meeting of the shareholders or the day
appointed for the payment of any dividend or for any other purpose at the time
as of which shareholders entitled to notice of and to vote at any such meeting
or to receive such dividend or to be treated as shareholders for such other
purpose shall be determined, and only shareholders of record at such time shall
be entitled to notice of or to vote at such meeting or to receive such
dividends or to be treated as shareholders for such other purpose.
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ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 6.01. SEAL. The impression made below is an impression of the seal
adopted by the Board of Directors of BANK ONE, COLUMBUS, NATIONAL ASSOCIATION.
The Seal may be affixed by any officer of the Bank to any document executed by
an authorized officer on behalf of the Bank, and any officer may certify any
act, proceedings, record, instrument or authority of the Bank.
SECTION 6.02. BANKING HOURS. Subject to ratification by the Executive
Committee, the Bank and each of its Branches shall be open for business on such
days and during such hours as the Chief Executive Officer of the Bank shall,
from time to time, prescribe.
SECTION 6.03. MINUTE BOOK. The organization papers of this Bank, the Articles
of Association, the returns of the judges of elections, the By-Laws and any
amendments thereto, the proceedings of all regular and special meetings of the
shareholders and of the Board of Directors, and reports of the committees of
the Board of Directors shall be recorded in the minute book of the Bank. The
minutes of each such meeting shall be signed by the presiding Officer and
attested by the secretary of the meetings.
SECTION 6.04. AMENDMENT OF BY-LAWS. These By-Laws may be amended by vote of a
majority of the Directors.
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EXHIBIT 6
Securities and Exchange Commission
Washington, D.C. 20549
CONSENT
The undersigned, designated to act as Trustee under the Indenture for First
Wave Marine, Inc. described in the attached Statement of Eligibility and
Qualification, does hereby consent that reports of examinations by Federal,
State, Territorial, or District Authorities may be furnished by such
authorities to the Commission upon the request of the Commission.
This Consent is given pursuant to the provision of Section 321(b) of the Trust
Indenture Act of 1939, as amended.
Bank One, NA
Dated: January 14, 1998 By: /s/ Jon Beacham
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Jon Beacham
Authorized Signer
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