<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 5, 1998
REGISTRATION NO. 333-38157
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
FIRST WAVE MARINE, INC.
(Exact Name of Registrant as specified in its charter)
<TABLE>
<C> <C> <C>
DELAWARE 3731 76-0461352
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classification Code No.)
NEWPARK SHIPBUILDING AND REPAIR, INC. TEXAS 3731 76-0419955
EAE SERVICES, INC. TEXAS 3731 76-0508651
EAE INDUSTRIES, INC. TEXAS 3731 76-0508652
NEWPARK MARINE FABRICATORS, INC. TEXAS 3731 76-2852221
LOUISIANA SHIP, INC. TEXAS 3731 76-0490445
(Exact name of registrant as specified in (State or other jurisdiction of (Primary Standard (I.R.S. Employer
its charter) incorporation or organization) Industrial Identification Number)
Classification Code 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>
<C> <C>
SUZANNE B. KEAN, ESQ. JOHN HUGGINS, ESQ.
GRIGGS & HARRISON, P.C. BAKER & BOTTS, L.L.P.
1301 MCKINNEY, SUITE 3200 599 LEXINGTON AVE., 29TH FLOOR
HOUSTON, TEXAS 77010-3033 NEW YORK, NEW YORK 10022-6030
(713) 651-0600 (212) 705-5080
</TABLE>
---------------------
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..... $85,000,000 100.00% $85,000,000 $25,075(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 5, 1998
PROSPECTUS
$85,000,000
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 40% 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 60% 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 $8.9 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 guaranteed
(the "Subsidiary Guarantees") on a senior unsecured basis 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
September 30, 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. The Indenture
permits the Company and its subsidiaries to incur additional senior
indebtedness, subject to certain limitations.
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:
3
<PAGE> 6
- Maintaining a High Quality Dedicated Workforce. The Company invests
in its employees through training, superior benefits and the fostering of a
close-knit, supportive culture. As a result, the Company has not
experienced the significant labor shortages and attrition suffered by many
Gulf Coast shipyards and has consistently posted an award-winning safety
record. Management believes the Company has been able to maintain stable
manpower levels and has flattened the labor force highs and lows typical in
the shipyard industry through a superb relationship with its labor force,
sophisticated forecasting of labor needs, the implementation of its
strategic alliances and optimization of its mix of new construction and
repair services.
- Development of Strategic Alliances with Key Customers. The Company
has developed a "contract rate" system which it uses to form strategic
alliances with its key customers. The contract rate system enables the
Company to baseload its facilities with pre-booked work, improve planning
and execution of jobs through a cooperative process with the customer and
more effectively project its revenues and labor needs for the year. In
return, the alliance partner receives volume based pricing, assures itself
of needed drydock capacity, gains the ability to accurately budget its
work, benefits from improved turnaround on jobs and receives other services
on a preferred basis.
- Continuous Optimization of the Mix of Shipyard Services. The
Company generally negotiates flexible delivery dates for new construction
which greatly contributes to the efficiency of its shipyards. During
periods when demand for repair services is lower, the Company shifts
workers to new construction as a means of absorbing excess labor. By
continuously optimizing its mix of activities, the Company ensures that its
quality work force remains intact and motivated, and costs associated with
attrition are reduced. As a result of this strategy, the Company believes
that it can maximize its margins by allocating labor to higher margin
repair work or can absorb excess labor by shifting it to new construction,
as demand dictates.
- One-Stop Source for Shipyard Services. In addition to its core
shipyard repair and construction services, the Company offers a range of
related environmental services at its facilities, including tank cleaning,
degassing and wastewater treatment. Following the pending acquisitions,
complementary services such as these will enable the Company to become the
only one-stop source of all shipyard services for all segments of the
offshore support vessel, offshore barge and inland marine markets in Texas.
- Focus on Core Geographic Areas: Houston and Galveston. The
Houston-Galveston area is a very strategic location for its shipyards,
since three of the largest U.S. fleets of inland tank barges are based in
the Houston Ship Channel area. Additionally, the growing offshore support
vessel and barge fleets in the Gulf of Mexico can be efficiently served
from the Company's Houston and Galveston locations. Management believes the
expansion of the East Pelican Island and West Pelican Island facilities in
Galveston to service the offshore drilling industry is especially strategic
since Galveston is in close proximity to offshore Gulf of Mexico drilling
activity, thereby minimizing rig transit costs and downtime.
- Leveraging Economies of Scale. With all of its shipyards within a
50-mile corridor, management can more effectively operate the facilities
and consolidate overhead. Additionally, the proximity of the shipyards
allows for centralizing many administrative functions. Management believes
the uniformity of state regulations and the volume leverage gained from
using single suppliers among all its facilities, as well as the potential
interchangeability of the labor force, provides economic benefits for the
Company.
- Expansion into the Offshore Gulf of Mexico Market. Upon
consummation of the Bludworth Acquisition and the completion of the
improvements to the East Pelican Island shipyard, the Company will have two
adjacent shipyard facilities in Galveston, Texas, which will enable it to
take advantage of the rising demand for shipyard services to the oil and
gas industry in the Gulf of Mexico. Management has planned its expansion to
diversify the Company's business
4
<PAGE> 7
lines into services for offshore drilling rigs, larger offshore support
vessels and oil and gas related ship conversions.
RECENT DEVELOPMENTS
Greens Bayou Acquisition. The Company acquired the Greens Bayou Facility on
August 11, 1997. This facility is specifically designed to service the barge
industry with seven haul-up facilities, including a major six-position rail
transfer system. The Company believes it can efficiently operate this Houston
area shipyard by consolidating overhead with its nearby Brady Island shipyard.
These two shipyards will share accounting, training, sales, estimating, risk
management and general administrative functions. The potential
interchangeability of the labor force with the Brady Island facility, as well as
the ability of Greens Bayou barge customers to use Brady Island's environmental
services, should also result in economic benefits for the Company. The facility
provides necessary capacity for the Company to meet excess demand for its inland
barge services, especially due to the increasing utilization of its Brady Island
drydocks for the offshore support vessel market.
East Pelican Island Acquisition. After acquiring PMB Engineering Inc.'s
lease of the 110-acre East Pelican Island facility in Galveston, Texas, the
Company signed an amendment to such lease with Galveston Wharves providing for a
term of up to 99 years. For 1998, the Company has budgeted $24.4 million in
capital improvements to this facility. Upon completion of these planned capital
improvements, First Wave will be able to expand its business lines into
providing shipyard services for offshore drilling rigs, larger offshore support
vessels and oil and gas related ship conversions.
The Bludworth Acquisition. On October 15, 1997, the Company entered into a
purchase agreement to acquire (the "Bludworth Acquisition") all of the
outstanding capital stock of John Bludworth Marine, Inc. ("Bludworth"). The
purchase price consists of $15.0 million in cash and the issuance of a $4.0
million promissory note.
Bludworth is an established regional shipbuilder focusing on offshore
support vessel repair, as well as inland barge repair and inland boat
construction and repair. The Bludworth Acquisition expands the Company's
Houston-Galveston base of operations in a cost efficient manner, adding
significant new drydock capacity within its area of operation and diversifying
its current mix of services to include expanded capabilities in the offshore and
the inland boat segment of the marine industry. The Bludworth Acquisition
provides the Company with two additional shipyards: (i) the JBM Pasadena
facility in Pasadena, Texas, which is near the Company's other Houston shipyards
and (ii) the West Pelican Island facility which is adjacent to the East Pelican
Island facility in Galveston, Texas. 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.............. $85,000,000 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 September 30, 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 $85.2 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 September
30, 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
$8.9 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 guaranteed on a senior unsecured basis 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. 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 September 30, 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.
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 40% 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 60% 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."
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."
8
<PAGE> 11
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."
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 (4,736) 1,045 4,377 1,427
Net earnings (loss)................... (259) 728 1,559 (3,234) 516 2,540 796
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 8,019 1,815 7,230 11,690
Ratio of EBITDA to interest
expense(c).......................... NM 6.4x 5.3x .8x 4.8x 5.6x 1.6x
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.................... 340 509 582 953 430 463 1,003
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-----------------------
ACTUAL PRO FORMA(a)
------- ------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 1,079 $ 30,180
Total assets................................................ 32,558 112,729
Long-term debt.............................................. 23,229 94,537
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 $4.2 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
September 30, 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 $94.8 million and stockholders' equity of $6.5 million. In addition,
as of September 30, 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 14.5 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 $4.5
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 September 30, 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 approximately
$85.2 million of unsecured senior Indebtedness, no Subordinated Indebtedness and
approximately $9.5 million of secured indebtedness collateralized by
11
<PAGE> 14
certain properties and assets of the Company. Additionally, the Indenture
governing the Notes will permit the Company to incur up to $30 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."
DEPENDENCE OF OFFSHORE SUPPORT VESSEL AND OFFSHORE DRILLING MARKETS ON OIL AND
GAS INDUSTRY
Repair of offshore support vessels accounted for over 30% of the Company's
repair and conversion revenues in 1996, and volumes are expected to increase in
the future with the consummation of the Bludworth Acquisition and implementation
of the Company's expansion strategy. Additionally, after the capital
improvements to the East Pelican Island shipyard in Galveston have been
completed, the Company will be actively seeking customers from the offshore
drilling industry. Customer demand for offshore support vessels and offshore
drilling rigs is dependent on, among other things, the levels of activity in
offshore oil and gas exploration, development and production, particularly in
the Gulf of Mexico where many of the offshore support vessels repaired by the
Company have been put into service. The level of activity in offshore oil and
gas exploration, development and production is affected by such factors as
prevailing oil and gas prices, expectations about future prices, the cost of
exploring for, producing and delivering oil and gas, the sale and expiration
dates of available offshore leases, the discovery rate of new oil and gas
reserves in offshore areas, local and international political and economic
conditions, technological advances and the ability of oil and gas companies to
generate or otherwise obtain funds for capital expenditures. Although the
Company believes there will be an increase in demand for offshore support
vessels and offshore drilling rigs, and the repair and maintenance of such
vessels, the Company cannot predict future levels of activity in offshore oil
and gas exploration, development and production. See "Business -- Industry
Overview."
RISKS RELATED TO MANAGING GROWTH
Any significant increase in the current levels of repair, conversion, and
construction activity, as well as the Company's planned expansion into the
offshore drilling rig conversion, repair and new construction business, will
impose significant added responsibilities on members of senior management,
including the need to identify, recruit and integrate additional management
personnel and skilled laborers. Although the Company has hired and plans to hire
management personnel who have experience in the business of converting and
repairing offshore drilling rigs, there can be no assurance that additional
management personnel or skilled laborers will be identified and retained by the
Company. In addition, there can be no assurance that the Company's systems,
procedures and controls will be adequate to support the Company's operations as
they expand. If the Company is unable to manage its growth efficiently and
effectively, or if it is unable to attract and retain additional qualified
management personnel and skilled laborers, there could be a material adverse
effect on the Company's business, financial condition and results of operations.
See "Business -- Shipyard Properties."
13
<PAGE> 16
DEPENDENCE ON SIGNIFICANT CUSTOMERS
A large portion of the Company's revenue has historically been generated by
a few customers, although not necessarily the same customers from year to year.
For 1996, the Company derived more than 10% of its revenues from each of SEACOR
Smit Inc. (22%) and Kirby Corporation (15%) and more than 50% from its largest
five customers. Based on its current backlog of projects, the Company expects
that it will derive more than 10% of its revenues in 1997 from each of SEACOR
Smit Inc. and Kirby Corporation. Because the level of services that the Company
may provide to any particular customer depends on that customer's needs for
repairs in a particular year, customers that account for a significant portion
of revenue in one fiscal year may represent an immaterial portion of revenue in
subsequent years. However, the loss of a significant customer for any reason,
including a sustained decline in that customer's capital expenditure budget or
competitive factors, could result in a substantial loss of revenue and could
have a material adverse effect on the Company's operating performance. Further,
as a result of continuing consolidations in the inland marine, offshore support
vessel and offshore drilling industries, the Company may face more significant
pricing and margin pressure when dealing with volume commitments from such
customers. See "Business -- Principal Customers."
COMPETITIVE INDUSTRY
The shipbuilding industry is highly competitive. In general, during the
1990s, the U.S. shipbuilding industry has been characterized by substantial
excess capacity because of the significant decline in U.S. Navy shipbuilding
spending and the difficulties experienced by U.S. shipbuilders in competing
successfully for international commercial projects against foreign shipyards,
many of which are heavily subsidized by their governments. As a result of these
factors, competition by U.S. shipbuilders for domestic commercial projects has
increased significantly. Such increased competition has resulted in substantial
pressure on pricing and profit margins.
Contracts for the construction and conversion of vessels are often awarded
on a competitive bid basis. More than 30% of the Company's repair work is
awarded on a competitive bid basis. Although the Company believes customers
consider, among other things, the availability and technical capabilities of
equipment and personnel, efficiency, condition of equipment, safety record and
reputation, price is a primary factor in determining which qualified shipbuilder
is awarded a job.
The Company currently competes for a range of domestic commercial shipyard
projects principally with approximately 10 to 20 U.S. shipyards. The number and
identity of competitors on particular projects vary greatly, depending on the
type of service performed, the type of vessel and the size of project.
Additional competition, competitive bidding and downward pressures on profits
and pricing margins could have a material adverse effect on the Company's
business, financial condition and the results of operations. See
"Business -- Competition."
BIDDING RISKS ASSOCIATED WITH CONTRACTUAL PRICING IN THE SHIPBUILDING INDUSTRY
Over 50% of the Company's commercial contracts are currently performed on a
fixed-priced basis. The Company attempts to cover anticipated increased costs of
labor and materials through an estimation of such costs, which is reflected in
the original price. Despite these attempts, however, the revenue, cost and gross
profit realized on a fixed-price contract will often vary from the estimated
amounts because of changes in job conditions and variations in labor and
material costs over the term of the contract. These variations and the risks
generally inherent in the shipbuilding industry may result in gross profits
realized by the Company being different from those originally estimated and may
result in the Company experiencing reduced profitability or losses on projects.
Depending on the size of the project, these variations from estimated contract
performance could have a significant effect on the Company's operating results
for any particular fiscal quarter or year.
In addition, the Company's contract revenues are recognized on a percentage
of completion basis. Accordingly, contract price and cost estimates are reviewed
periodically as the work
14
<PAGE> 17
progresses, and adjustments proportionate to the percentage of completion are
reflected in income in the period when such estimates are revised. To the extent
that these adjustments result in a loss or a reduction or elimination of
previously reported profits with respect to a project, the Company would
recognize a charge against current earnings, which could be material and have a
material adverse effect on the financial condition and the results of
operations. See "Business -- Contract Procedure, Structure and Pricing" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- General."
RISK OF SHIPYARD EXPANSION
The Company has entered into an agreement with the Board of Trustees of
Galveston Wharves to lease the East Pelican Island shipyard on approximately 110
acres in Galveston, Texas for a term of up to 99 years. The Company intends to
improve the facility so that it would be capable of converting and repairing
existing offshore drilling rigs and the construction of new offshore drilling
rigs. The Company historically has not conducted any operations in this segment
of the shipbuilding industry. There can be no assurance that the Company will be
successful. Further, there can be no assurance that market conditions, including
dayrates realized by offshore drilling contractors, will permit the Company to
obtain sufficient orders for the conversion and repair of offshore drilling rigs
on a profitable basis, or that the Company will realize orders of a sufficient
quantity to justify the costs and expenses of improving, equipping and operating
the shipyard. There can be no assurance that the shipyard capital improvements
will be completed or, if completed, that the shipyard improvements will be
completed on the schedule or at the total cost to complete currently estimated
by the Company. See "Business -- Shipyard Properties."
OPERATING RISKS
The Company's activities relating to the repair, conversion and
construction of large steel structures, the operation of cranes and other heavy
machinery and other operating hazards, can cause personal injury or loss of
life, severe damage to and destruction of property and equipment and suspension
of operations. The operation of the marine rails and the drydock vessels owned
by the Company can give rise to large and varied liability risks, such as risks
of collisions with other vessels or structures, sinkings, fires and other marine
casualties, which could result in significant claims for damages against both
the Company and third parties for, among other things, personal injury, death,
property damage, pollution and loss of business. Litigation arising from any
such occurrences may result in the Company being named as a defendant in
lawsuits asserting large claims. In addition, due to their proximity to the Gulf
of Mexico, the Company's facilities are subject to the possibility of electrical
outages, as well as physical damage caused by heavy winds, hurricanes or
flooding. See "Business -- Insurance", "-- Other Regulation" and "-- Legal
Proceedings."
DEPENDENCE ON KEY MANAGEMENT
The Company believes that its success to date is attributable to, and its
future performance will depend to a significant extent upon, the efforts and
abilities of Messrs. Samuel F. Eakin, Chief Executive Officer, Frank W. Eakin,
President and Chief Operating Officer, David B. Ammons, Executive Vice
President-Finance and Joe O'Toole, Executive Vice President-Operations. The loss
of the services of one or more of the Company's executive officers could have a
material adverse effect on the Company. See "Management."
15
<PAGE> 18
BACKLOG
The Company's backlog is based on management's estimate of future revenue
attributable to (i) the remaining amounts to be invoiced with respect to those
projects, or portions of projects, as to which a customer has authorized the
Company to begin work or purchase materials and (ii) projects, or portions of
projects, that have been awarded to the Company as to which the Company has not
commenced work. All projects currently included in the Company's backlog are
subject to change and/or termination at the option of the customer, either of
which could substantially change the amount of backlog currently reported. The
loss of a significant customer could have a material adverse effect on the
Company's revenue. See "Business -- Principal Customers" and "-- Contract
Procedure, Structure and Pricing."
IMPACT OF ENVIRONMENTAL LAWS
The Company is subject to extensive and changing federal, state and local
laws (including common law) and regulations designed to protect the environment
("Environmental Laws"). The Company from time to time is involved in
administrative, enforcement and other proceedings under Environmental Laws
involving its operations and facilities. Environmental Laws could impose
liability for remediation costs or result in civil or criminal penalties in
cases of non-compliance. Compliance with Environmental Laws increases the
Company's costs of doing business. Additionally, Environmental Laws have been
subject to frequent change; therefore, the Company is unable to predict the
future costs or other future impact of Environmental Laws on its operations.
There can be no assurance that the Company will not incur material liability
related to the Company's operations and properties under Environmental Laws. See
"Business -- Environmental Regulation."
LEGISLATIVE PROPOSALS TO RESCIND PROVISIONS OF JONES ACT
Pursuant to the requirements of the Merchant Marine Act of 1920 (the "Jones
Act"), all vessels transporting products between U.S. ports ("Coastwise Trade")
must be constructed and repaired in U.S. shipyards, owned and crewed by U.S.
citizens and registered under U.S. law. Many customers elect to have vessels
constructed and repaired at U.S. shipyards, even if such vessels are eventually
intended for international use, in order to maintain flexibility to use such
vessels in the U.S. Coastwise Trade in the future. The Company believes that a
substantial portion of its revenues will result from the sale and repair of
vessels capable of being used for U.S. Coastwise Trade. In 1996, proposed
legislation was introduced in Congress to substantially modify the provisions of
the Jones Act mandating the use of vessels constructed in the United States for
U.S. Coastwise Trade. Similar bills seeking to rescind or substantially modify
the Jones Act and eliminate or adversely affect the competitive advantages it
affords to U.S. shipbuilders have been introduced in Congress from time to time
and are expected to be introduced in the future. Although management believes it
is unlikely that the Jones Act requirements will be rescinded or materially
modified in the foreseeable future, there can be no assurance that this will not
occur. Many foreign shipyards are heavily subsidized by their governments and,
as a result, there can be no assurance that the Company would be able to
effectively compete with such shipyards if they were permitted to construct
vessels for use in the U.S. coastwise trade. The repeal of the Jones Act or any
amendment of the Jones Act that would eliminate or adversely affect the
competitive advantages provided to U.S. shipbuilders could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business -- Other Regulation -- Jones Act."
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
16
<PAGE> 19
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 $81.3 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 $8.9 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 $ 30,180
======= ======= ========
Short-term borrowings and current portion of
long-term debt..................................... $ 1,552 $ 1,552 $ 219
Long-term debt....................................... 21,966 21,966 94,537
------- ------- --------
Total debt................................. 23,518 23,518 94,756
------- ------- --------
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 $101,229
======= ======= ========
</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 340 509 582 430 463
Gross Margin................................ 27.1% 7.7% 18.0% 22.5% 33.4% 30.3% 41.4%
Operating Income Margin..................... 1.7% NM NM 6.1% 13.3% 7.5% 25.3%
Net Income Margin........................... NM NM NM 3.3% 5.6% 2.6% 10.4%
EBITDA Margin............................... 5.9% NM NM 7.2% 15.7% 9.1% 29.6%
</TABLE>
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 $68,000 in 1995.
Depreciation and amortization expense increased to $680,000 in 1996 from
$259,000 in 1995 due to additional depreciation associated with fixed assets
purchased at the Brady Island facility in the third quarter of 1996 from Newpark
Resources which had previously been under lease.
Interest expense rose to $829,000 in 1996 from $247,000 in 1995 due to the
additional financing costs associated with debt incurred to finance operations
and the fixed assets purchased at the Brady Island shipyard.
As a result of the foregoing, income tax expense increased to $1.1 million
in 1996 from $283,000 in 1995. The 1995 period included the utilization of a
$300,000 net operating loss carryover.
Net earnings rose 114.1% to $1.6 million in 1996 from $728,000 in 1995
including the aforementioned final, non-recurring pre-tax fee of $700,000
($441,000 after-tax).
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, one of which bears interest at prime plus
1.0%, the other at prime plus 0.5%. The Company currently has $2.2 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.
27
<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 $ 81,300(a) $ 30,180
(19,000)(b)
(24,590)(c)
(8,925)(k)
Securities.................................. 8,925(k) 8,925
Accounts receivable......................... 7,228 5,838 13,066
Inventories................................. 652 101 753
Other....................................... 323 829 1,152
------- ------- -------- --------
Total current assets................... 9,282 7,084 37,710 54,076
Property and equipment, net................. 22,372 10,524 12,611(b) 45,507
Organization and loan costs, net............ 704 3,700(a)
(490)(c) 3,914
Deposits.................................... 200 146 0 346
Intangible assets........................... -- -- 2,570(d)
6,316(b) 8,886
------- ------- -------- --------
Total assets........................... $32,558 $17,754 $ 62,417 $112,729
======= ======= ======== ========
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................................ 85,000(a) 85,000
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 65,048 106,186
------- ------- -------- --------
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 $ 62,417 $112,729
======= ======= ======== ========
</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 $ 0 $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............................... -- 7 367(k) 374
Interest expense........................... (1,280) (606) 1,599(g) (7,258)
(6,971)(j)
Minority interest.......................... (536) -- 536(d) --
------- ------- ------- -------
(1,816) (599) (4,469) (6,884)
------- ------- ------- -------
Earnings before income taxes....... 4,377 2,952 (5,535) 1,794
INCOME TAXES................................. 1,837 1,082 (2,484)(h) 435
------- ------- ------- -------
NET EARNINGS....................... $ 2,540 $ 1,870 $(3,051) $ 1,359
======= ======= ======= =======
Earnings per share:
Net earnings per share..................... $ 0.24 $ 0.12
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
(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 $ 0 $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............................. -- 148 489(k) 637
Interest expense......................... (829) (443) 918(g) (9,649)
(9,295)(j)
Minority interest........................ (219) -- 219(d) --
------- ------- ------- -------
(1,048) (295) (7,669) (9,012)
------- ------- ------- -------
Earnings before income taxes..... 2,657 2,185 (9,089) (4,247)
INCOME TAXES............................... 1,098 909 (3,760)(h) (1,753)
------- ------- ------- -------
NET EARNINGS..................... $ 1,559 $ 1,276 $(5,329) $(2,494)
======= ======= ======= =======
Earnings per share:
Net earnings per share................... $ 0.15 $ (0.21)
Weighted average shares outstanding...... 10,650 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.
(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.
35
<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 to approximately 2,800 in 1996. The Company believes
this decrease primarily resulted from: (i) increasing age of the domestic tank
barge fleet resulting in scrapping; (ii) rates inadequate to justify new
construction; (iii) a reduction in financial and tax incentives which previously
encouraged speculative construction of new equipment; (iv) more stringent
operating standards to adequately cope with safety and environmental risks; and
(v) an increase in environmental regulations that mandate expensive equipment
modification which some owners are unwilling or unable to undertake given
current rate levels and the age of their fleet.
Although well-maintained tank barges can be efficiently operated for more
than 30 years, the cost of hull work for required annual U.S. Coast Guard
certifications, as well as general safety and environmental concerns, force
operators to periodically reassess their ability to recover maintenance costs.
The tax and financing incentives which were previously available to operators
and investors to construct tank barges led to growth in the supply of domestic
tank barges to a peak of approximately 4,200 in 1981 have been largely
eliminated. The supply of tank barges resulting from the earlier programs has
slowly aligned with demand for tank barge services, primarily through attrition,
as discussed above. The average age of the nation's tank barge fleet is
approximately 20 years, only 17% of which were built in the last 10 years.
Single skin barges, which comprise approximately 20% of the nation's tank barge
fleet, are being driven from the national fleet by market forces, environmental
concerns and rising maintenance costs.
In addition to the reduction in the aggregate tank barge fleet, the
existing active fleet of tank barges has been consolidated by a few large
operators. Over the last two years, given the strength of the United States
economy, these operators have experienced improved utilization of their fleets
and increased profitability. With their improved financial condition, dominant
market positions and heightened concern for potential environment liabilities,
tank barge fleet operators demand better service and higher quality from the
shipyards that provide repair, new construction and other services. The Company
believes that it has the personnel, management systems and infrastructure to
meet the demands of these tank barge fleet operators.
BUSINESS STRATEGY
The Company's strategy is to leverage its reputation as an efficient,
reliable, customer driven shipyard operator in order to provide a diversified
range of shipyard services to the offshore support vessel, offshore drilling,
offshore barge and inland marine industries. The Company intends to utilize its
proven strengths in order to expand into the Gulf of Mexico offshore drilling
market. Key elements of this strategy are:
- Maintaining a High Quality Dedicated Workforce. The Company invests
in its employees through training, superior benefits and the fostering of a
close-knit, supportive culture. As a result, the Company has not
experienced the significant labor shortages and attrition suffered by many
Gulf Coast shipyards and has consistently posted an award-winning safety
record. Management believes the Company has been able to maintain stable
manpower levels and has flattened the labor force highs and lows typical in
the shipyard industry through a superb relationship with its labor force,
sophisticated forecasting of labor needs, the implementation of its
strategic alliances and optimization of its mix of new construction and
repair services.
36
<PAGE> 39
- 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.
37
<PAGE> 40
SERVICES
The Company performs five primary types of services, three of which are
conventional shipyard fabrication services and two of which are related
environmental services, each described as follows:
Shipyard Services -- Repair.
Approximately 75% of the Company's revenues are attributable to repair,
conversion and maintenance services for offshore support vessels, ocean-going
offshore barges and inland barges. The Company's shipyard repairs involve tasks
as simple as plugging a hole in a barge to more complex services such as
re-skinning an entire barge with new bottom plate, side shell, knuckle and
topside, then sandblasting and painting it. These repair services generally
range in price from $1,000 to $1.0 million. The U.S. Maritime Administration
("MARAD") has estimated that by the year 2000, approximately 25% of the current
domestic tank barge fleet between 10,000 and 30,000 tons will be more than 25
years old and more than 8% will be at least 30 years old. The vessels in this
aging domestic coastwise fleet are in continual need of repairs as they reach
the end of their useful life. Further, U.S. Coast Guard regulations require that
double-skinned inland barges be drydocked for bottom gauging to detect thickness
and structural fatigue every 10 years. All other inland barges require an
inspection of both the internal structures and drydocking once every five years.
Normally at this time the customer will request removal and replacement of
pitted and deteriorated steel as well as sandblasting, coating and painting
services. Offshore support vessels and offshore barges are subject to U.S. Coast
Guard inspections twice in a five year period. During the course of these
mandated inspections, in addition to routine scheduled maintenance, the
Company's customers often discover the need for additional repairs. Management
believes that the Bludworth Acquisition will further its business strategy of
diversifying its capabilities and provide additional expertise and facilities to
repair offshore support vessels, barges and inland marine boats.
Shipyard Services -- Conversions.
With the oil and gas industry's increasing interest in deepwater regions,
there has been a growing demand for the larger class of offshore support
vessels. In response to the increased demand, owners of offshore support vessel
fleets are converting existing vessels in their fleet into vessels capable of
serving deepwater regions. This trend has resulted in an increase in conversion
projects for the Company which consists of lengthening offshore support vessels
(generally from 185(#) to 225(#)) and installing liquid mud tanks, dynamic
positioning and other specialized features. The Company has also widened
offshore support vessels to significantly increase their deck and cargo
capacity. The Company's conversion jobs have ranged in price from approximately
$2.0 million to $4.0 million. Upon completion of the improvements to the
Company's East Pelican Island shipyard, the Company also intends to perform
repairs and conversions for offshore drilling rigs. For example, this work can
involve the conversion of a slot jack-up rig to a cantilevered jack-up rig,
strengthening and extending the rig legs, reinforcing the spud cans on the
existing legs and modifying older designs to incorporate newer technology. The
Company expects an average conversion for an offshore drilling rig to range in
price from $1.0 million to $20.0 million.
Shipyard Services -- New Construction.
Approximately 15% of the Company's current revenues are attributable to new
barge construction. The Company builds three to four new barges per year at its
Brady Island facility. Historically, the Company's new construction activities
have been for: (i) ocean-going deck barges with special lift capacities; (ii)
inland deck and tank barges; and (iii) specialized barges such as power
generation barges. The Company's price for construction of a new barge generally
ranges from $500,000 to $2.5 million. New construction is performed under
fixed-price contracts and averages three to four months per barge. The
acquisition of the Greens Bayou shipyard in August 1997 provides the Company the
shipyard capacity to build between seven to ten barges per year depending on the
type of barge.
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Historically, the Company has not been in the new construction sector for
offshore support vessels and inland towboats. Management believes the Bludworth
Acquisition adds the expertise, experience and capacity necessary to provide the
Company the ability to compete for new construction of inland towboats and
offshore support vessels.
Environmental Services -- Degassing/Cleaning Operations.
These services are provided at the Company's Brady Island facility. In
order for a barge to change the type of cargo it holds, the barge generally
requires cleaning. The Company provides cleaning services for change of cargo as
well as in preparation for repairs and maintenance at the shipyard. The cleaning
process begins with vapor recovery of gasses, if necessary. The barge is then
cleansed with water using special industrial cleaning equipment. The water is
vacuumed into the Company's wastewater treatment facility for proper treatment
and disposal. If the barge requires "hot work" (cutting or welding) while in the
shipyard, safety regulations require that it be "gas free" (non-explosive) as
certified by a marine chemist. The Company employs its own certified marine
chemist as well as a marine chemist trainee. In 1996, the Company provided
environmental services for over 800 barges.
Environmental Services -- Wastewater Treatment Services.
The Company provides non-hazardous wastewater treatment services on a fee
basis. The Company's new 2 million gallon tank, which should be completed in
January 1998, will allow the Company to increase, under its existing permit, its
current handling of approximately 300,000 gallons of wastewater per month to 1
million gallons per month. With minimal additional improvements to the facility
at Brady Island, the Company should be able to handle up to 2 million gallons of
third party non-hazardous wastewater per month under its existing permit. The
non-hazardous wastewater streams include tank truck wash water, industrial
process "oily" water, storm water, rail car, barge, or sea container wash water,
spill remediation water, landfill leachate and others. In an average job, a tank
truck arriving at the facility pumps out approximately 5,000 gallons of
wastewater into the Company's tanks after being tested. The non-hazardous
wastewater is then treated at the Company's bio-treatment plant and discharged.
SHIPYARD PROPERTIES
Upon the consummation of the Bludworth Acquisition, the Company will
operate the following five shipyard facilities.
Brady Island.
The Brady Island shipyard was originally acquired in December 1993 and is
located on the Houston Ship Channel on approximately 23 acres. The shipyard has
the capability to handle the repair, construction and related environmental
services for both offshore and inland barges. It provides repair and conversion
services for offshore support vessels and offers repair, conversion and
construction services for offshore and inland barges. In addition to the
traditional shipyard assets described below, the Brady Island facility has a
high capacity bio-treatment plant, state-of-the-art vapor control equipment and
a 2 million gallon wastewater storage tank currently under construction. The
shipyard has six haul-up facilities which includes three dry docks, two marine
rails and one transfer system from drydock to rail. The facility's equipment
consists of three crawler cranes, two tower cranes and two 20-ton overhead
cranes. The shipyard employed more than 320 production employees at September
30, 1997.
Greens Bayou.
The Greens Bayou shipyard was acquired on August 11, 1997. The shipyard is
located near Houston, Texas on approximately 20 acres, near the Houston Ship
Channel and Brady Island. The
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shipyard performs repair, conversion and new construction services for barges.
It has seven haul-up facilities including a major six position rail transfer
system and one marine rail. The equipment at this facility includes two crawler
cranes, two tower cranes, two cherry pickers and multiple jib cranes. Maximum
lift capacity is 1,200 tons. Currently in the start-up phase, Greens Bayou
employed approximately 20 production workers at September 30, 1997. Management
believes that up to an additional 100 employees will be added in 1998. The
Company plans to make certain capital improvements to the Greens Bayou facility
including the construction of an all-weather, 24-hour paint and sandblast
facility. The covered facility will meet all required environmental regulations.
The Company believes the addition of the facility will significantly improve the
turnaround time to its customers for painting and sandblasting projects.
East Pelican Island.
The Company recently acquired this shipyard through an assignment of the
PMB Engineering, Inc. lease with Galveston Wharves. Galveston Wharves has
amended the PMB Engineering, Inc. lease, extending the possible eight years
remaining on such term of the lease to a lease with a potential 99-year term,
among other things. The shipyard is located in Galveston, Texas on approximately
110 acres. The equipment at this facility includes one 10-ton crane, one 15-ton
crane, one 20-ton crane and one 30-ton crane. There are no current employees at
the East Pelican Island facility. Management has a three phase program for the
capital improvements to this shipyard. In Phase I, the Company plans to improve
the facilities and make modifications to provide repair and conversion capacity
for offshore drilling rigs, offshore support vessels, offshore barges and ships.
Fabrication capacity will also be enhanced for support of repair operations and
for production of offshore drilling rig components such as blisters and
sponsons. Phase II will add drydocks for repair of vessels up to 20,000 tons and
Phase III will encompass various yard improvements for the construction of new
offshore drilling rigs. Management believes that by the third quarter of 1998,
East Pelican Island will commence providing conversion and repair services to
the offshore drilling industry. The shipyard can serve most classes of offshore
drilling rigs, offshore support vessels, offshore barges and large ships.
JBM Pasadena.
The JBM Pasadena facility will be acquired as part of the Bludworth
Acquisition. It is located in Pasadena, Texas on approximately 63 acres. It
currently has five drydocks, extensive topside bulkhead footage and is a builder
of inland tow boats. The shipyard performs repair services for offshore support
vessels, offshore barges and inland barges. At September 30, 1997, the shipyard
employed over 200 production employees.
West Pelican Island.
This shipyard will also be acquired in connection with the Bludworth
Acquisition. It is located at Pelican Island in Galveston, Texas on
approximately 23 acres. The newly renovated fabrication facility has over two
acres under roof, which will enable the Company to provide all-weather, 24-hour
service. The Company intends to use the shipyard primarily for conversion,
repair and new construction of offshore support vessels. An approximately
9,000-ton dry dock is expected to be completed in the first half of 1998.
Additionally, the facility has two 200-ton cranes. At September 30, 1997, the
shipyard employed approximately 100 production workers. The Company expects to
expand the labor force at this facility in the future.
PRINCIPAL CUSTOMERS
Following the consolidation of the inland barge industry, a large portion
of the Company's revenue has been generated by a relatively small number of
customers, although not necessarily the same customers from year to year. For
1996, the Company derived more than 10% of its revenue from each of SEACOR Smit
Inc. (22%) and Kirby Corporation (15%), and more than 50% from its five largest
customers. Based on its current backlog of projects, the Company expects that it
will
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derive more than 10% of its revenues in 1997 from each of SEACOR Smit Inc. and
Kirby Corporation. Because the level of services that the Company may provide to
any particular customer depends on that customer's needs for repairs in a
particular year, customers that account for a significant portion of revenue in
one fiscal year may represent an immaterial portion of revenue in subsequent
years. However, the loss of a significant customer for any reason, including a
sustained decline in that customer's capital expenditure budget or competitive
factors, could result in a substantial loss of revenue and could have a material
adverse effect on the Company's operating performance.
CONTRACT PROCEDURE, STRUCTURE AND PRICING
In performing its repair and conversion services, the Company seeks to
achieve a balance between fixed-price projects and time and materials work in
order to optimize the risk and reward of its project portfolio. More than 50% of
the Company's commercial projects are currently performed on a fixed-priced
basis. The Company attempts to cover anticipated increased costs of labor and
material through an estimation of such costs, which is reflected in the original
price. Despite these attempts, however, the revenue, cost and gross profit
realized on a fixed-price arrangement will often vary from the estimated amounts
because of changes in job conditions and variations in labor and material costs
over the term of the project. These variations and the risks generally inherent
in the shipbuilding and repair industry may result in gross profits realized by
the Company being different from those originally estimated and may result in
the Company experiencing reduced profitability or losses on projects. Revenues
from repair and conversion services performed under time and material and
fixed-price arrangements are recognized as the services are provided.
Adjustments to such revenues and costs recognized on fixed-price arrangements
are made in the period in which the adjustments are determined. Depending on the
size of the project, variations from estimated fixed-price arrangements could
have a significant effect on the Company's operating results for any particular
fiscal quarter or year.
The Company has developed a "contract rate" system it has used to form
strategic alliances with its key customers for repair and conversion services.
Under this system, the Company and the customer discuss the customer's planned
shipyard projects for the ensuing year and then develop a schedule of labor
rates and other charges applicable to the customer's projects for the year. When
the actual project date nears, the Company submits to its alliance partner the
estimated manhour budget for the particular job. The Company then agrees with
the customer on the budget and the delivery requirements. Most contract rate
arrangements are on a fixed-price basis with most change orders to such
arrangements performed on a time and material basis. Under the contract rate
system, the Company is responsible for all cost overruns; in some instances the
Company shares a portion of the cost savings with its contract rate alliance
partners. The contract rate system is a departure from the traditional shipyard
competitive bid process which requires that for each job a customer submit
specifications which the shipyard then uses to bid against other shipyards to
obtain the work. Under a competitive bid process, a customer's effective labor
and material mark-up rates may vary from job to job depending on fluctuating
market conditions. In contrast, under the contract rate system a customer is
charged the same hourly rates and material mark-ups for a period of time,
typically a year. In a competitively bid contract, the customer does not share
in any cost savings achieved by the Company as they might under the contract
rate system. The contract rate system enables the Company to baseload its
facilities with pre-booked work, improve planning and execution of jobs through
a cooperative process with the customer and more effectively project its
revenues and labor needs for the year. The alliance partner receives volume
based pricing, assures itself of needed drydock capacity, gains the ability to
accurately budget its work, benefits from improved turnaround on jobs and
receives other services on a preferred basis.
The Company's new construction (lump-sum) contract revenues are recognized
on a percentage of completion basis. Accordingly, contract price and cost
estimates are reviewed periodically as the work progresses, and adjustments
proportionate to the percentage of completion are reflected in income in the
period when such estimates are revised. To the extent that these adjustments
result
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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."
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Company's Board of Directors currently has five directors. In
accordance with the Certificate of Incorporation of the Company (the "Charter"),
the members of the Board of Directors are divided into three classes and are
elected for a term of three years, or until a successor is duly elected and
qualified. The terms of office of the Class I, Class II and Class III directors
expire at the annual meeting of stockholders to be held in 1998, 1999 and 2000,
respectively. All officers serve at the discretion of the Board of Directors.
The following table sets forth certain information with respect to the
Company's executive officers and directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Samuel F. Eakin...................... 42 Chairman of the Board, Chief Executive Officer(a)
Frank W. Eakin....................... 36 President and Chief Operating Officer, Director(b)
David B. Ammons...................... 47 Executive Vice President, Chief Financial Officer,
Secretary, Director(b)
James D. Cole........................ 56 Director(c)
Paul E. O'Neill, II.................. 48 Director(c)
Joseph O'Toole....................... 64 Executive Vice President -- Operations
Hugh G. Walker, III.................. 37 Vice President -- Environmental Services
Francis J. Fair...................... 58 Executive Vice President -- Operations, Newpark Marine
Fabricators, Inc.
Dale Payne, III...................... 48 Vice President -- Shipyard Operations, Newpark Marine
Fabricators, Inc.
Ben Ramirez.......................... 45 Vice President -- Shipyard Operations, Greens Bayou
Fabricators
</TABLE>
- ---------------
(a) Class III Director
(b) Class II Director
(c) Class I Director
Set forth below is a description of the backgrounds of each of the
executive officers and directors of the Company:
Samuel F. Eakin has served as Chairman of the Board and Chief Executive
Officer of the Company since December 1993 and has been an investor and energy
sector advisor since the 1970s. From 1976 to 1980, Eakin advised E.F. Hutton,
the U.S. Department of Energy and other governmental agencies and major
corporations on energy issues. From 1980 to 1986, he negotiated mergers and
acquisitions of offshore service businesses and other Gulf Coast companies on
behalf of private investors and corporations. In 1987, he founded Eakin & Co.
for the purpose of acquiring distressed energy industry companies and
restructuring complex credits and continues to be a principal in that company.
Mr. Eakin is the brother of Frank W. Eakin, President of the Company.
Frank W. Eakin has served as President, Chief Operating Officer and
Director of the Company since October 1997. Prior to that he served as President
of Newpark Shipbuilding and has been in charge of daily operations since
December 1993. In 1989 Mr. Eakin became a principal in Eakin & Co., with merger
and acquisition responsibilities. Mr. Eakin left that company in 1994 to
dedicate his full energies and focus to managing the Brady Island shipyard
operations. From 1983 to 1989, he founded and operated a successful
international food processing and distribution company.
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Mr. Eakin received his undergraduate degree (B.S.) from Louisiana State
University in 1984. Mr. Eakin is the brother of Samuel F. Eakin, Chairman of the
Company.
David B. Ammons has served as Executive Vice President, Chief Financial
Officer, Secretary and Director of the Company since December 1993. Mr. Ammons
is a Certified Public Accountant and has a background in public accounting and
has owned and operated several businesses. In 1987, Mr. Ammons became a
principal in Eakin & Co. and continues to serve in that capacity. Mr. Ammons
received his undergraduate degree (B.S.) from Southeastern Louisiana University
in 1972.
James D. Cole has served as a Director of Newpark Shipbuilding, a
subsidiary of the Company since late 1993. Mr. Cole is the Chairman of the
Board, President and a Director of Newpark Resources, Inc., an unaffiliated
public company listed on the New York Stock Exchange. He has served in various
positions in that company since 1976.
Paul E. O'Neill, II has served as a Director of the Company since October
1997. Mr. O'Neill is President, Director and Chief Operating Officer of Acadian
Group, Ltd., a holding company formed in 1996 to oversee various construction
and service companies. Prior to joining Acadian Group, Ltd., Mr. O'Neill served
for two years as President and for four years as a Director of C-K Associates,
Inc., a regional Gulf Coast environmental engineering and consulting firm. Mr.
O'Neill spent 17 years in various positions, including as Vice President and
General Manager with TEAM, Inc., a public company listed on the American Stock
Exchange, which provides various industrial and environmental services in the
U.S. and 13 foreign countries.
Joseph O'Toole has served as Executive Vice President -- Operations of the
Company since October 1997. Mr. O'Toole joined the Company as Repair Manager in
1990 and has served as Executive Vice President -- Operations of Newpark
Shipbuilding since 1994. Mr. O'Toole's career in marine fabrication spans over
forty years, punctuated with long periods at large blue water shipyards
including General Dynamics' Quincy, Massachusetts shipyard and Electric Boat
Division. He has held senior positions with Marathon LeTourneau's Gulf Marine
Division shipyard in Brownsville, Texas and Pyramid Manufacturing in Houston,
Texas. Mr. O'Toole has been responsible for managing large shipyard operations
and has supervised major projects such as construction of semisubmersible rigs,
commercial and naval ships and nuclear submarines. Mr. O'Toole received a B.S.
in Civil Engineering in 1964 from Northeastern University in Boston.
Hugh G. Walker, III, Vice President -- Environmental Services, joined the
Company in 1996 to spearhead the development of a newly formed division, First
Wave Environmental Services. Mr. Walker was employed fourteen years with
Chevron, beginning his career in design and waste management, and from 1992 to
1996 serving as manager of a polyethylene plant at Chevron's Cedar Bayou, Texas
complex. Mr. Walker obtained a B.S. in Chemical Engineering from North Carolina
State University in 1982.
Francis J. Fair, Executive Vice President -- Operations, Newpark Marine
Fabricators, Inc. joined the Company in November 1997. Mr. Fair has nearly 40
years of experience in the offshore marine fabrication industry. Mr. Fair has
been responsible for large-scale project and shipyard operations management of
new construction, conversions and repair of deepwater offshore drilling rigs,
including semisubmersibles, jackups and marine components. From 1980 to 1992,
Mr. Fair served as Vice President for Marathon LeTourneau's Gulf Marine Division
at the Brownsville shipyard, supervising deepwater marine projects in excess of
$100 million per year. From 1993 to 1996, he was employed by Texas Drydock
where, among other things, he was the Operations Manager responsible for the
start-up of a 64,000-ton drydock and facility which serviced deepwater drilling
rigs. Immediately before joining the Company, Mr. Fair was Manager of Sales for
LeTourneau, Inc.
Dale Payne, III has served as Vice President -- Shipyard Operations of
Newpark Marine Fabricators, Inc., a subsidiary of the Company since November
1997. Prior to that he served as Vice President -- Shipyard Operations at Brady
Island since 1994. Mr. Payne joined the Company in 1990 as Assistant Repair
Manager. Mr. Payne began his marine fabrication career in 1972 with
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<PAGE> 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.
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<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.
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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 1,480,319 shares of Common Stock have been granted
under the 1997 Incentive Equity Plan, which options will have an exercise price
equal to $3.50 per share. The 1997 Incentive Equity Plan will be administered by
the entire Board of Directors. The 1997 Incentive Equity Plan contains
appropriate provisions to assure that it complies with the provisions of Section
16(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and the rules
promulgated thereunder. The Board of Directors,
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<PAGE> 54
as a whole, will have sole authority to select employees who are to be granted
awards, as well as the amount, type and terms of the awards to be granted. The
Board of Directors, as a whole, will be authorized to interpret the 1997
Incentive Equity Plan and may adopt such rules and regulations as it may deem
advisable to carry out the 1997 Incentive Equity Plan. All decisions made by the
Board of Directors, as a whole, in selecting employees for awards are final.
STOCK OPTIONS GRANTED TO EXECUTIVE OFFICERS UNDER THE 1997 INCENTIVE EQUITY PLAN
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- ----------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES EXERCISE OR
UNDERLYING OPTIONS BASE PRICE EXPIRATION
NAME GRANTED(#) ($/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.
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<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."
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<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.
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<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 , 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 September 30, 1997, after giving pro forma effect to the
Offering, the aggregate principal amount of outstanding senior Indebtedness of
the Company would have been $94.8 million. As of September 30, 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 $8.9 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
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<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 jointly and
severally guaranteed 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.
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
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<PAGE> 59
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 $85 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 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
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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 40% 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 60% 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.
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.
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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 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.
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.
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."
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
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<PAGE> 62
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).
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
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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 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
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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 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
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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 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) $30 million and (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;
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(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
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,
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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.
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
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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 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
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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 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
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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.
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.
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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, 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 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.
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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 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.
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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 may not be effective to
waive liabilities under the federal Securities laws and 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.
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"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 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 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 have been established to
the extent required by GAAP; (viii) Liens created by the Pledge
80
<PAGE> 83
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
consisting exclusively of (1) Permitted Indebtedness Incurred pursuant to clause
(vii) of the definition of such term and (2) Attributable Debt that could have
been Incurred as a Capital Lease Obligation pursuant to clause (vii) of the
definition of the term "Permitted Indebtedness"; provided that such Liens attach
only to assets subject to such capital lease or sale and leaseback transaction
and other assets directly related thereto; 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, $85.0 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
fifth and sixth paragraphs of Note O, as to
which the date is January 5, 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.
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 5, 1998, the Company filed a registration statement to sell
approximately $85 million in Senior Notes to mature in 2008. Upon consummation
of the Offering, the debt will be guaranteed by the Company's subsidiaries and
the Company will be subject to certain restrictive covenants under the related
trust indenture. The indenture will contain certain covenants that, among 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
F-15
<PAGE> 103
FIRST WAVE MARINE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
certain dividend and other payment restrictions, enter into sale and leaseback
transactions, and issue or sell capital stock of 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.
======================================================
======================================================
$85,000,000
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.
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
as Trustee
***5.1 -- Opinion of Griggs & Harrison, P.C.
</TABLE>
II-4
<PAGE> 122
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
**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 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 Subsidiary
Guarantor's signature pages; Power of Attorney relating
to First Wave Marine, Inc. was previously filed)
***25.1 -- Statement of Eligibility of
**27.1 -- Financial Data Schedule
</TABLE>
- ---------------
* Filed herewith
** Previously filed
*** To be filed by amendment
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. 2 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 5, 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 5, 1998
- ----------------------------------------------------- Chief Executive Officer
Samuel F. Eakin and Director (Principal
Executive Officer)
/s/ FRANK W. EAKIN President, Chief January 5, 1998
- ----------------------------------------------------- Operating Officer and
Frank W. Eakin Director
/s/ DAVID B. AMMONS Executive Vice President, January 5, 1998
- ----------------------------------------------------- Chief Financial Officer,
David B. Ammons Secretary and Director
(Principal Financial
Officer and Principal
Accounting Officer)
/s/ JAMES COLE Director January 5, 1998
- -----------------------------------------------------
James Cole
/s/ PAUL E. O'NEILL* Director January 5, 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. 2 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 5, 1998.
NEWPARK SHIPBUILDING AND REPAIR,
INC.
By: /s/ SAMUEL F. EAKIN
----------------------------------
Samuel F. Eakin
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints David B. Ammons, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments pursuant to Rule 462(b)
of the Securities Act) to this Registration Statement, and to file the same and
all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting said attorney-in-fact and agent,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitute, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ SAMUEL F. EAKIN Chairman of the Board, January 5, 1998
- ----------------------------------------------------- Chief Executive Officer
Samuel F. Eakin and Director (Principal
Executive Officer)
/s/ FRANK W. EAKIN President, Chief January 5, 1998
- ----------------------------------------------------- Operating Officer
Frank W. Eakin
/s/ DAVID B. AMMONS Executive Vice President, January 5, 1998
- ----------------------------------------------------- Chief Financial Officer
David B. Ammons and Secretary (Principal
Financial Officer and
Principal Accounting
Officer)
/s/ JAMES COLE Director January 5, 1998
- -----------------------------------------------------
James Cole
</TABLE>
II-8
<PAGE> 126
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Amendment No. 2 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 5, 1998.
EAE SERVICES, INC.
By: /s/ SAMUEL F. EAKIN
----------------------------------
Samuel F. Eakin
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints David B. Ammons, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments pursuant to Rule 462(b)
of the Securities Act) to this Registration Statement, and to file the same and
all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting said attorney-in-fact and agent,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitute, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ SAMUEL F. EAKIN Chairman of the Board, January 5, 1998
- ----------------------------------------------------- Chief Executive Officer and
Samuel F. Eakin Director (Principal
Executive Officer)
/s/ FRANK W. EAKIN President, Chief Operating January 5, 1998
- ----------------------------------------------------- Officer and Director
Frank W. Eakin
/s/ DAVID B. AMMONS Executive Vice President, January 5, 1998
- ----------------------------------------------------- Chief Financial Officer,
David B. Ammons Secretary and Director
(Principal Financial
Officer and Principal
Accounting Officer)
</TABLE>
II-9
<PAGE> 127
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Amendment No. 2 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 5, 1998.
EAE INDUSTRIES, INC.
By: /s/ SAMUEL F. EAKIN
----------------------------------
Samuel F. Eakin
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints David B. Ammons, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments pursuant to Rule 462(b)
of the Securities Act) to this Registration Statement, and to file the same and
all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting said attorney-in-fact and agent,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitute, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ SAMUEL F. EAKIN Chairman of the Board, January 5, 1998
- ----------------------------------------------------- Chief Executive Officer and
Samuel F. Eakin Director (Principal
Executive Officer)
/s/ FRANK W. EAKIN President, Chief Operating January 5, 1998
- ----------------------------------------------------- Officer and Director
Frank W. Eakin
/s/ DAVID B. AMMONS Executive Vice President, January 5, 1998
- ----------------------------------------------------- Chief Financial Officer,
David B. Ammons Secretary and Director
(Principal Financial
Officer and Principal
Accounting Officer)
</TABLE>
II-10
<PAGE> 128
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Amendment No. 2 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 5, 1998.
NEWPARK MARINE FABRICATORS, INC.
By: /s/ SAMUEL F. EAKIN
----------------------------------
Samuel F. Eakin
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints David B. Ammons, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments pursuant to Rule 462(b)
of the Securities Act) to this Registration Statement, and to file the same and
all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting said attorney-in-fact and agent,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitute, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ SAMUEL F. EAKIN Chairman of the Board, January 5, 1998
- ----------------------------------------------------- Chief Executive Officer
Samuel F. Eakin and Director (Principal
Executive Officer)
/s/ FRANK W. EAKIN President, Chief January 5, 1998
- ----------------------------------------------------- Operating Officer and
Frank W. Eakin Director
/s/ DAVID B. AMMONS Executive Vice President, January 5, 1998
- ----------------------------------------------------- Chief Financial Officer,
David B. Ammons Secretary and Director
(Principal Financial
Officer and Principal
Accounting Officer)
</TABLE>
II-11
<PAGE> 129
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Amendment No. 2 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 5, 1998.
LOUISIANA SHIP, INC.
By: /s/ SAMUEL F. EAKIN
----------------------------------
Samuel F. Eakin
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints David B. Ammons, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments pursuant to Rule 462(b)
of the Securities Act) to this Registration Statement, and to file the same and
all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting said attorney-in-fact and agent,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitute, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ SAMUEL F. EAKIN Chairman of the Board, January 5, 1998
- ----------------------------------------------------- Chief Executive Officer
Samuel F. Eakin and Director (Principal
Executive Officer)
/s/ FRANK W. EAKIN President, Chief January 5, 1998
- ----------------------------------------------------- Operating Officer and
Frank W. Eakin Director
/s/ DAVID B. AMMONS Executive Vice President, January 5, 1998
- ----------------------------------------------------- Chief Financial Officer,
David B. Ammons Secretary and Director
(Principal Financial
Officer and Principal
Accounting Officer)
</TABLE>
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.
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
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 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 Subsidiary
Guarantor's signature pages; Power of Attorney relating
to First Wave was previously filed)
***25.1 -- Statement of Eligibility of
**27.1 -- Financial Data Schedule
</TABLE>
- ---------------
* Filed herewith
** Previously filed
*** To be filed by amendment
<PAGE> 1
EXHIBIT 1.1
DRAFT OF DECEMBER 29, 1997
FIRST WAVE MARINE, INC.
$85,000,000
____% Senior Notes due 2008
__________________
UNDERWRITING AGREEMENT
New York, New York
____________, 1998
SCHRODER & CO. INC.
Equitable Center
787 Seventh Avenue
New York, New York 10019-6016
Dear Sirs:
First Wave Marine, Inc., a Delaware corporation (the "Company"),
Newpark Shipbuilding and Repair, Inc., a Texas corporation ("Newpark"), EAE
Services, Inc., a Texas corporation ("EAE Services"), EAE Industries, Inc., a
Texas corporation ("EAE Industries"), Newpark Marine Fabricators, Inc., a Texas
corporation ("Newpark Marine"), and Louisiana Ship, Inc., a Texas corporation
("Louisiana Ship" and together with Newpark, EAE Services, EAE Industries and
Newpark Marine, the "Subsidiary Guarantors"), propose, subject to the terms and
conditions stated herein, to issue and sell to Schroder & Co. Inc. (the
"Underwriter") $85,000,000 aggregate principal amount of the Company's ___%
Senior Notes due 2008 (the "Securities"). The Securities are to be issued
pursuant to the provisions of an Indenture, to be dated as of _________, 1998
(the "Indenture"), among the Company, as issuer, the Subsidiary Guarantors, as
guarantors, and ____________, as trustee (the "Trustee"). As provided in the
Indenture, the Securities are to be guaranteed on a senior unsecured basis
pursuant to guarantees (the "Subsidiary Guarantees") of the Subsidiary
Guarantors. The Company will use a portion of the proceeds from the sale of
the Securities to purchase a portfolio of U.S. government securities (the
"Pledged Securities") pursuant to the Pledge and Security Agreement, to be
dated as of _________, 1998 (the "Pledge Agreement"), among the Company and
_____________, as pledge agent (the "Pledge Agent"), which will provide funds
sufficient to pay in full when due the first two scheduled interest payments on
the Securities.
<PAGE> 2
The Company and certain minority shareholders (the "Exchange
Participants") of Newpark entered into an Exchange Agreement, dated as of
October 16, 1997 (the "Exchange Agreement") whereby such Exchange Participants
sold and delivered to the Company all of their 17,000 shares of capital stock
in Newpark in exchange for 999,390 shares of common stock, par value $0.01 per
share ("Common Stock"), of the Company (collectively, the "Exchange"). The
Company, EAE Services, John Bludworth Marine, Inc., Bludworth
Shipyard and Fabrication, Inc., John L. Bludworth, III and Karla M. Bludworth
have entered into a Stock Purchase Agreement, dated as of October 15, 1997 (the
"Acquisition Agreement"), whereby EAE Services will purchase (the "Bludworth
Acquisition") all of the outstanding capital stock of John Bludworth Marine,
Inc. and, indirectly, Bludworth Shipyard and Fabrication, Inc. (hereinafter
collectively referred to as "Bludworth").
1. (a) The Company and the Subsidiary Guarantors represent and
warrant to, and agree with the Underwriter that:
(i) A registration statement on Form S-1 (File No.
333-38157), and as part thereof a preliminary prospectus, in respect
of the Securities, has been filed with the Securities and Exchange
Commission (the "Commission") in the form heretofore delivered to you;
if such registration statement has not become effective, an amendment
(the "Final Amendment") to such registration statement, including a
form of final prospectus, necessary to permit such registration
statement to become effective, will promptly be filed by the Company
and the Subsidiary Guarantors with the Commission; if such
registration statement has become effective and any post-effective
amendment to such registration statement has been filed with the
Commission prior to the execution and delivery of this Agreement,
which amendment or amendments shall be in acceptable form to you, the
most recent such amendment has been declared effective by the
Commission; if such registration statement has become effective, a
final prospectus (the "Rule 430A Prospectus") relating to the
Securities containing information permitted to be omitted at the time
of effectiveness by Rule 430A of the rules and regulations of the
Commission under the Securities Act of 1933, as amended (the "Act"),
will promptly be filed by the Company pursuant to Rule 424(b) of the
rules and regulations of the Commission under the Act (any preliminary
prospectus filed as part of such registration statement being herein
called a "Preliminary Prospectus," such registration statement as
amended at the time that it becomes or became effective, or, if
applicable, as amended at the time the most recent post-effective
amendment to such registration statement filed with the Commission
prior to the execution and delivery of this Agreement became effective
(the "Effective Date"), including a registration statement (if any)
filed pursuant to Rule 462(b) under the Act increasing the size of the
offering registered under the Act and including all exhibits thereto
and all information deemed to be a part thereof at such time pursuant
to Rule 430A of the rules and regulations of the Commission under the
Act, being herein called the "Registration Statement" and the final
prospectus relating to the Securities in the form first filed pursuant
to Rule 424(b)(1) or (4) of the rules and regulations of the
Commission under the Act or, if no such filing is required, the form
of final prospectus included in the Registration Statement, being
herein called the "Prospectus");
2
<PAGE> 3
(ii) No order preventing or suspending the use of any
Preliminary Prospectus has been issued by the Commission, and each
Preliminary Prospectus, at the time of filing thereof, conformed in
all material respects to the requirements of the Act and the rules and
regulations of the Commission thereunder, and did not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in
reliance upon and in conformity with information furnished in writing
to the Company by you expressly for use therein;
(iii) On the Effective Date and the date the Prospectus is
filed with the Commission, and when any further amendment or
supplements thereto become effective or are filed with the Commission,
as the case may be, the Registration Statement, the Prospectus and
such amendment or supplements did and will conform in all material
respects to the requirements of the Act and the rules and regulations
of the Commission thereunder, and did not and will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that this representation
and warranty shall not apply to any statements or omissions made in
reliance upon and in conformity with information furnished in writing
to the Company by you expressly for use therein;
(iv) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with power and authority (corporate and other) to own its
properties and to conduct its business as described in the Prospectus,
and has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each
other jurisdiction in which it owns or leases property, or conducts
any business, so as to require such qualification, except where the
failure to so qualify would not have a material adverse effect on the
condition, financial or otherwise, or the business affairs or
prospects of the Company and its subsidiaries, taken as a whole (such
adverse effect to be hereinafter referred to as a "Material Adverse
Effect"); and each of the Company's subsidiaries, including all of the
Subsidiary Guarantors, has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, with power and authority (corporate and
other) to own its properties and to conduct its business as described
in the Prospectus, and has been duly qualified as a foreign
corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases
property, or conducts any business, so as to require such
qualification, except where the failure to so qualify would not have a
Material Adverse Effect;
(v) All the issued shares of capital stock of each
subsidiary of the Company, including all of the Subsidiary Guarantors,
have been duly and validly authorized and issued, are fully paid and
non-assessable and, upon consummation of the Exchange, will be owned
directly or indirectly by the Company free and clear of all liens,
encumbrances,
3
<PAGE> 4
equities, security interests, or claims with the exception of the
Company's pledge of the capital stock of Newpark to Heller Financial
Leasing, Inc. ("Heller") pursuant to that certain Pledge Agreement,
dated August 29, 1996 ("Heller Pledge Agreement"), and the Company's
pledge of the capital stock of EAE Industries pursuant to the
terms of that certain Pledge Agreement with Heller dated August 8,
1997 ("EAE Pledge Agreement"); and there are no outstanding options,
warrants or other rights calling for the issuance of, and there are no
commitments, plans or arrangements to issue, any shares of capital
stock of any subsidiary or any security convertible or exchangeable or
exercisable for capital stock of any subsidiary; except for the shares
of stock of each Subsidiary Guarantor owned directly or indirectly by
the Company, neither the Company nor any subsidiary owns directly or
indirectly any shares of capital stock of any corporation or have any
equity interest in any firm, partnership, joint venture, association
or other entity;
(vi) The Company and each of the Subsidiary Guarantors
have all requisite power and authority to execute, deliver and perform
their obligations under this Agreement; the execution, delivery and
performance by the Company and each of the Subsidiary Guarantors of
their obligations under this Agreement have been duly and validly
authorized by all requisite corporate action of the Company and each
of the Subsidiary Guarantors; and this Agreement constitutes the
legal, valid and binding obligation of the Company and each of the
Subsidiary Guarantors, enforceable against the Company and each of the
Subsidiary Guarantors in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally
and general principles of equity (regardless of whether such
enforcement is considered in a proceeding at law or in equity) and
except as enforceability of those provisions relating to indemnity may
be limited by Federal securities laws and principles of public policy;
(vii) The Indenture has been duly and validly authorized by
the Company and each of the Subsidiary Guarantors and, when executed
and delivered by the Company and each of the Subsidiary Guarantors and
authorized, executed and delivered by the Trustee, will constitute a
valid and legally binding obligation of the Company and each of the
Subsidiary Guarantors enforceable in accordance with its terms, except
insofar as enforcement may be limited by any bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally and general principles of equity (regardless of
whether such enforcement is considered in a proceeding at law or in
equity); the Indenture has been duly qualified under the Trust
Indenture Act of 1939, as amended (the "1939 Act") and the rules and
regulations of the Commission thereunder (the "1939 Act Regulations");
and the Indenture conforms in all material respects to the description
thereof contained in the Registration Statement and the Prospectus;
(viii) The Pledge Agreement has been duly and validly
authorized by the Company and, when executed and delivered by the
Company and authorized, executed and delivered by the Pledge Agent,
will constitute a valid and legally binding obligation of the Company
4
<PAGE> 5
enforceable in accordance with its terms, except insofar as
enforcement may be limited by any bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally and general principles of equity (regardless of
whether such enforcement is considered in a proceeding at law or in
equity); and the Pledge Agreement conforms in all material respects to
the description thereof contained in the Registration Statement and
the Prospectus;
(ix) Neither the Company nor any of its subsidiaries has
sustained since the date of the latest audited financial statements
included in the Prospectus, any loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered
by insurance, or from any labor dispute or court or governmental
action, order or decree, which loss or interference is material to the
Company and its subsidiaries, taken as a whole; and, since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, there has not been, and prior to the
Time of Delivery (as defined in Section 4 hereof) there will not be,
any change in the capital stock (other than shares issued pursuant to
exercise of employee stock options that the Prospectus indicates are
outstanding (the "Employee Option Shares") or short-term debt or
long-term debt of the Company or any of its subsidiaries, or any
material adverse change, or any development involving a prospective
material adverse change, in or affecting the general affairs,
management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, taken as whole,
otherwise than as set forth or contemplated in the Prospectus;
(x) The Company and its subsidiaries and Bludworth have
good and marketable title in fee simple to all real property and good
and marketable title to all personal property owned by them, in each
case free and clear of all liens, encumbrances and defects except such
as are described or contemplated by the Prospectus, or such as do not
materially adversely interfere with the use made and proposed to be
made of such property by the Company and its subsidiaries and
Bludworth, and any real property and buildings held under lease by the
Company and its subsidiaries and Bludworth are held by them under
valid, subsisting and enforceable leases with such exceptions as are
not material and do not materially adversely interfere with the use
made and proposed to be made of such real property and buildings by
the Company and its subsidiaries and Bludworth;
(xi) The Company has an authorized, issued and outstanding
capitalization as set forth in the Registration Statement, and all the
issued shares of capital stock of the Company have been duly and
validly authorized and issued, are fully paid and non-assessable, are
free of any preemptive rights, rights of first refusal or similar
rights, were issued and sold in compliance with the applicable Federal
and state securities laws and conform in all material respects to the
description in the Prospectus; except as described in the Prospectus,
there are no outstanding options, warrants or other rights calling for
the issuance of, and there are no commitments, plans or arrangements
to issue, any shares of capital stock of the Company or any security
convertible or exchangeable or exercisable for capital stock of the
Company; there are no holders of securities of the Company who, by
reasons of the filing of the
5
<PAGE> 6
Registration Statement have the right (and have not waived such right)
to request the Company to include in the Registration Statement
securities owned by them;
(xii) The Securities have been duly and validly authorized
by the Company for issuance and sale to the Underwriter pursuant to
this Agreement and, when executed, authenticated and delivered in the
manner provided for in the Indenture against payment of the
consideration therefor in accordance with this Agreement, will be
valid and legally binding obligations of the Company, enforceable in
accordance with their terms and will be entitled to the benefits of
the Indenture, except insofar as enforcement may be limited by any
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and general principles of
equity (regardless of whether such enforcement is considered in a
proceeding at law or in equity); the issuance of the Securities is not
subject to preemptive or other similar rights to subscribe to or
purchase the same arising by operation of law or under the charter or
by-laws of the Company or otherwise; the form of the certificate to be
used to evidence the Securities will be in the form contemplated by
the Indenture; and the Securities conform in all material respects to
the description thereof contained in the Registration Statement and
the Prospectus;
(xiii) The Subsidiary Guarantees have been duly and validly
authorized by each of the Subsidiary Guarantors, and, when issued and
authenticated in accordance with the terms of the Indenture, each such
Subsidiary Guarantee will be a valid and legally binding obligation of
the respective Subsidiary Guarantor, enforceable against each such
Subsidiary Guarantor in accordance with its terms, except insofar as
enforcement may be limited by any bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally and general principles of equity (regardless of
whether such enforcement is considered in a proceeding at law or in
equity); the issuance of the Subsidiary Guarantees is not subject to
preemptive or other similar rights to subscribe to or purchase the same
arising by operation of law or under the charter or by-laws of the
Subsidiary Guarantors or otherwise; and the Subsidiary Guarantees
conform in all material respects to the description thereof contained
in the Registration Statement and the Prospectus;
(xiv) The performance of this Agreement, the Indenture and
the Pledge Agreement, the consummation of the transactions herein and
therein contemplated and the issue and sale of the Securities and the
compliance by the Company and the Subsidiary Guarantors with all the
provisions of this Agreement, the Indenture and the Pledge Agreement
will not result in a breach or violation of any of the terms or
provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge, claim, or encumbrance
upon, any of the property or assets of the Company or any of its
subsidiaries pursuant to, any indenture, mortgage, deed of trust, loan
agreement or other material agreement or instrument to which the
Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries is bound or to which any of the property or
assets of the Company or any of its subsidiaries is subject, nor will
such action result in any violation of the provisions of the
Certificate of Incorporation or the Bylaws, in each case as amended to
the date hereof, of the
6
<PAGE> 7
Company or any of its subsidiaries or any statute or any order, rule
or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of
their properties; and no consent, approval, authorization, order,
registration or qualification of or with any court or governmental
agency or body is required for the issue and sale of the Securities or
the consummation of the other transactions contemplated by this
Agreement, the Indenture and the Pledge Agreement, except the
registration under the Act of the Securities, and such consents,
approvals, authorizations, registrations or qualifications as may be
required under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and state or foreign securities or Blue Sky laws in
connection with the purchase and distribution of the Securities by the
Underwriter;
(xv) Except as set forth in the Prospectus, there are no
legal or governmental proceedings pending to which the Company or any
of its subsidiaries or any of their respective officers or directors
is a party or of which any property of the Company or any of its
subsidiaries is the subject, other than litigation or proceedings
incident to the business conducted by the Company and its subsidiaries
which will not, individually or in the aggregate if determined
adversely to the Company or any of its subsidiaries, have a Material
Adverse Effect; and, to the best of the Company's knowledge, no such
proceedings are threatened; and neither the Company nor any of its
subsidiaries is involved in any labor dispute, nor, to the Company's
knowledge, is any labor dispute threatened;
(xvi) The Company and its subsidiaries and Bludworth have
such licenses, permits and other approvals or authorizations of and
from governmental or regulatory authorities ("Permits") as are
necessary under applicable law to own their respective properties and
to conduct their respective businesses in the manner now being
conducted and as described in the Prospectus subject in each case to
such qualification as may be set forth in the Prospectus and except
where the failure to have such Permits would not have a Material
Adverse Effect; and the Company and its subsidiaries have fulfilled
and performed all of their respective obligations with respect to such
Permits, and no event has occurred which allows, or after notice or
lapse of time or both would allow, revocation or termination thereof
or result in any other material impairment of the rights of the holder
of any such permits subject in each case to such qualification as may
be set forth in the Prospectus and except where the failure to fulfill
or perform or the occurrence of such an event would not have a
Material Adverse Effect;
(xvii) Except as described in the Registration Statement and
except as would not, singly or in the aggregate, result in a Material
Adverse Effect, (A) none of the Company, any of its subsidiaries or
Bludworth is in violation of any federal, state, local or foreign
statute, law, rule, regulation, ordinance, code, policy or rule of
common law or any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent, decree or
judgment, relating to pollution or protection of human health, the
environment (including, without limitation, ambient air, surface
water, groundwater, land surface or subsurface strata) or wildlife,
including, without limitation, laws and regulations relating to
7
<PAGE> 8
the release or threatened release of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances,
petroleum or petroleum products (collectively, "Hazardous Materials")
or to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials
(collectively, "Environmental Laws"), (B) the Company and its
subsidiaries and Bludworth have all permits, authorizations and
approvals required under any applicable Environmental Laws and are
each in compliance with their requirements, (C) there are no pending
or threatened administrative, regulatory or judicial actions, suits,
demands, demand letters, claims, liens, notices of noncompliance or
violation, investigation or proceedings relating to any Environmental
Law against the Company or any of its subsidiaries or Bludworth and
(D) there are no events or circumstances that might reasonably be
expected to form the basis of an order for clean-up or remediation, or
an action, suit or proceeding by any private party or governmental
body or agency, against or affecting the Company or any of its
subsidiaries or Bludworth relating to Hazardous Materials or any
Environmental Laws;
(xviii) Grant Thornton LLP who have certified certain
financial statements of the Company and its consolidated subsidiaries
and delivered their report with respect to the audited consolidated
financial statements and schedules included in the Registration
Statement and the Prospectus, are independent public accountants as
required by the Act and the rules and regulations of the Commission
thereunder;
(xix) The consolidated financial statements and schedules
of the Company and its subsidiaries and Bludworth included in the
Registration Statement and the Prospectus present fairly the financial
condition, the results of operations and the cash flows of the Company
and its subsidiaries and Bludworth as of the dates and for the periods
therein specified in conformity with U.S. generally accepted
accounting principles consistently applied throughout the periods
involved, except as otherwise stated therein; and the other financial
and statistical information and data set forth in the Registration
Statement and the Prospectus is accurately presented and, to the
extent such information and data is derived from the financial
statements and books and records of the Company and its subsidiaries
and Bludworth, is prepared on a basis consistent with such financial
statements and the books and records of the Company and its
subsidiaries and Bludworth; the pro forma financial information
included in the Registration Statement and the Prospectus have been
properly compiled and comply in form in all material respects with the
applicable accounting requirements of Rule 11-02 of Regulation S-X of
the Commission; no other financial statements or schedules are
required to be included in the Registration Statement and the
Prospectus;
(xx) There are no statutes or governmental regulations, or
any contracts or other documents that are required to be described in
or filed as exhibits to the Registration Statement which are not
described therein or filed as exhibits thereto; and all such contracts
to which the Company or any subsidiary is a party have been duly
authorized, executed and delivered by the Company or such subsidiary,
constitute valid and binding agreements of the
8
<PAGE> 9
Company or such subsidiary and are enforceable against the Company or
subsidiary in accordance with the terms thereof;
(xxi) The Company and its subsidiaries and Bludworth own or
possess adequate patent rights or licenses or other rights to use
patent rights, inventions, trademarks, service marks, trade names,
copyrights, technology and know-how necessary to conduct the general
business now or proposed to be operated by them as described in the
Prospectus except where the failure to have such rights would not have
a Material Adverse Effect; none of the Company, any of its
subsidiaries or Bludworth has received any notice of infringement of
or conflict with asserted rights of others with respect to any patent,
patent rights, inventions, trademarks, service marks, trade names,
copyrights, technology or know-how which, singly or in the aggregate,
could materially adversely affect the business, operations, financial
condition, income or business prospects of the Company and its
subsidiaries considered as a whole; and, the discoveries, inventions,
products or processes of the Company and its subsidiaries and
Bludworth referred to in the Prospectus do not, to the Company's
knowledge, infringe or conflict with any patent or right of any third
party, or any discovery, invention, product or process which is the
subject of a patent application filed by any third party, known to the
Company;
(xxii) None of the Company, any of and its subsidiaries or
Bludworth are in violation of any term or provision of its Certificate
of Incorporation or Bylaws (or similar corporate constituent
documents), in each case as amended to the date hereof, or are in
violation in any material respect of any law, ordinance,
administrative or governmental rule or regulation applicable to the
Company or any of its subsidiaries, or of any decree of any court or
governmental agency or body having jurisdiction over the Company or
any of its subsidiaries;
(xxiii) No default exists, and no event has occurred which
with notice or lapse of time, or both, would constitute a default in
the due performance and observance of any term, covenant or condition
of any indenture, mortgage, deed of trust, bank loan or credit
agreement, lease or other agreement or instrument to which the Company
or any of its subsidiaries is a party or by which any of them or their
respective properties is bound or may be affected where such default
would have a Material Adverse Effect;
(xxiv) The Acquisition Agreement has been duly authorized,
executed and delivered by each of the Company, EAE Services, John
Bludworth Marine, Inc., Bludworth Shipyard and Fabrication, Inc., John
L. Bludworth, III and Karla M. Bludworth, and is in full force and
effect and constitute a valid and legally binding obligation of each of
the Company, EAE Services, John Bludworth Marine, Inc., Bludworth
Shipyard and Fabrication, Inc., John L. Bludworth, III and Karla M.
Bludworth, enforceable against each person in accordance with its
terms, except as enforcement may be limited by any bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and general principles
9
<PAGE> 10
of equity (regardless of whether such enforcement is considered in a
proceeding at law or in equity);
(xxv) The Exchange Agreement has been duly authorized,
executed and delivered by each of the Company and the Exchange
Participants, and is in full force and effect and constitute a valid
and legally binding obligation of each of the Company and the Exchange
Participants enforceable against each person in accordance with its
terms, except as enforcement may be limited by any bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and general principles of equity
(regardless of whether such enforcement is considered in a proceeding
at law or in equity);
(xxvi) The execution, delivery and performance of the
Exchange Agreement and the Acquisition Agreement and the consummation
of the transactions contemplated thereby will not result in a breach
or violation of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any lien,
charge, claim, or encumbrance upon, any of the property or assets of
the Company or any of its subsidiaries pursuant to, any indenture,
mortgage, deed of trust, loan agreement or other material agreement or
instrument to which the Company or any of its subsidiaries is a party
or by which the Company or any of its subsidiaries is bound or to
which any of the property or assets of the Company or any of its
subsidiaries is subject, nor will such action result in any violation
of the provisions of the Certificate of Incorporation or the Bylaws,
in each case as amended to the date hereof, of the Company or any of
its subsidiaries or any statute or any order, rule or regulation of
any court or governmental agency or body having jurisdiction over the
Company or any of its subsidiaries or any of their properties;
(xxvii) No authorization, approval, consent or order of, or
filing with, any court or governmental authority or agency is required
in connection with the consummation of the transactions effected or
contemplated by the Exchange Agreement or the Acquisition Agreement
other than (i) such authorizations, approvals, consents and orders as
have been obtained or such filing as have been made prior to the date
hereof and (ii) such authorizations, approvals, consents, orders and
filings as to which the failure to obtain or make would not,
individually or in the aggregate, have a Material Adverse Effect;
(xxviii) Upon the consummation of the transactions
contemplated by the Exchange Agreement, all of the outstanding capital
stock of Newpark, will be duly and validly transferred and assigned to
the Company free and clear of all liens, security interests, pledges,
charges, encumbrances, mortgages and defects (except for the Company's
pledge of the capital stock of Newpark to Heller pursuant to the terms
of the Heller Pledge Agreement and such as are described or referred
to in the Prospectus and the financial statements and the notes
thereto contained therein or such as do not interfere with the use
made and proposed to be made of such property by the Company and its
subsidiaries);
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<PAGE> 11
(xxix) It is not necessary in connection with the offer,
sale and delivery of the shares of Common Stock to the Exchange
Participants pursuant to the Exchange Agreement to register such
shares of Common Stock under the Act;
(xxx) Upon the consummation of the transactions
contemplated by the Acquisition Agreement, all of the outstanding
capital stock of John Bludworth Marine, Inc. will be duly and validly
transferred and assigned to EAE Services, a wholly owned subsidiary of
the Company, and all of the outstanding capital stock of Bludworth
Shipyard and Fabrication, Inc. will be held by John Bludworth Marine,
Inc., in each case free and clear of all liens, security interests,
pledges, charges, encumbrances, mortgages and defects (except such as
are described or referred to in the Prospectus and the financial
statements and the notes thereto contained therein or such as do not
interfere with the use made and proposed to be made of such property by
the Company and the subsidiaries);
(xxxi) The Company and its subsidiaries have timely filed
all federal and material state tax returns and notices required to be
filed by the Company or its subsidiaries and have paid all material
taxes of any nature whatsoever for all tax years through December 31,
1996, to the extent such taxes have become due. The Company has no
knowledge, or any reasonable grounds to know, of any tax deficiencies
which would have a Material Adverse Effect on the Company or any of
its subsidiaries; the Company and its subsidiaries have paid all taxes
which have become due, whether pursuant to any assessments, or
otherwise, and there is no further liability (whether or not disclosed
on such returns) or assessments for any such taxes, and no interest or
penalties accrued or accruing with respect thereto, except for any
such assessment, fine and penalty that is currently being contested in
good faith or as may be set forth or adequately reserved for in the
financial statements included in the Registration Statement; the
amounts currently set up as provisions for taxes or otherwise by the
Company and its subsidiaries on their books and records are sufficient
for the payment of all their unpaid federal, foreign, state, county
and local taxes accrued through the dates as of which they speak, and
for which the Company and its subsidiaries may be liable in their own
rights, or as a transferee of the assets of, or as successor to any
other corporation, association, partnership, joint venture or other
entity;
(xxxii) The Company and its subsidiaries maintain a system
of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences;
(xxxiii) Neither the Company nor any of its subsidiaries is
in violation of any federal or state law relating to discrimination in
the hiring, promotion or paying of employees nor
11
<PAGE> 12
any applicable federal or state wages and hours laws, nor any
provisions of the Employee Retirement Income Security Act of 1974, as
amended, or the rules and regulations promulgated thereunder, where
such violation would have a Material Adverse Effect;
(xxxiv) The Company and each of its subsidiaries are insured
by insurers of recognized financial responsibility against such losses
and risks and in such amounts as are prudent and customary in the
businesses in which they are engaged; neither the Company nor any such
subsidiary has been refused any insurance coverage sought or applied
for; and except as described in the Prospectus neither the Company nor
any such subsidiary has any reason to believe that it will not be able
to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not have a
Material Adverse Effect;
(xxxv) None of the Company or its subsidiaries, or its
officers, directors, employees or agents has used any corporate funds
for any unlawful contribution, gift, entertainment or other unlawful
expense relating to political activity, or made any unlawful payment
of funds of the Company or any subsidiary or received or retained any
funds in violation of any law, rule or regulation;
(xxxvi) The Company is not, and upon the issuance and sale
of the Securities as herein contemplated and the application of the
net proceeds therefrom as described in the Prospectus will not be, an
"investment company" or an entity "controlled" by an "investment
company" as such terms are defined in the Investment Company Act of
1940, as amended (the "1940 Act");
(xxxvii) None of the Company or its subsidiaries, or its
officers, directors, employees or agents have taken or will take,
directly or indirectly, any action designed to or which has
constituted or that might be reasonably be expected to cause or result
in stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities; and
(xxxviii) Each of the Company and the Subsidiary Guarantors
is, and immediately after the Time of Delivery will be, Solvent. As
used herein, the term "Solvent" means, with respect to an entity on a
particular date, that on such date (A) the aggregate fair market value
of the assets of such entity is greater than the total amount of the
liabilities (including the maximum amount of liability that may
reasonably be expected to result from contingent liabilities existing
on such date) of such entity as they become absolute and matured, (B)
the present fair salable value of the assets of such entity is greater
than the amount that will be required to pay the probable liabilities
of such entity on its debts as they become absolute and matured, (C)
such entity is able to realize upon its assets and pay its debts and
other liabilities including the maximum amount of liability that may
reasonably be expected to result from contingent obligations existing
on such date, as they become absolute and matured, (D) assuming sale
of the Securities as contemplated by this Agreement, such entity
12
<PAGE> 13
does not intend to, and does not believe that it will, incur debts or
liabilities beyond such entity's ability to pay as such debts and
liabilities mature, and (E) such entity is not engaged in any business
or a transaction, and is not about to engage in any business or a
transaction, for which the property of such entity and its
subsidiaries (to the extent of such entity's interest therein) would
constitute unreasonably small capital.
2. Subject to the terms and conditions herein set forth, the
Company agrees to issue and sell to the Underwriter, and the Underwriter
agrees to purchase from the Company, $85,000,000 aggregate principal amount of
Securities at ____% of the principal amount thereof plus accrued interest
thereon, if any, from __________, 1998 to the date of payment and delivery.
3. The Underwriter proposes to offer the Securities for sale upon
the terms and conditions set forth in the Prospectus.
4. Certificates in definitive form for the Securities to be
purchased by you hereunder shall be delivered by the Company to you against
payment of the purchase price therefor by wire transfer, payable in same day
funds, to the order of the Company, for the purchase price of the Securities at
the office of Schroder & Co. Inc., Equitable Center, 787 Seventh Avenue, New
York, New York, at 9:30 A.M., New York City time, on __________ ___, 1998, or
at such other time, date and place as you and the Company may agree upon in
writing, such time and date being herein called the "Time of Delivery."
Certificates for the Securities so to be delivered will be in good
delivery form, and in such denominations and registered in such names as you
may request not less than 48 hours prior to the Time of Delivery. Such
certificates will be made available for checking and packaging in New York, New
York, at least 24 hours prior to the Time of Delivery.
5. The Company and the Subsidiary Guarantors covenant and agree
with the Underwriter:
(a) If the Registration Statement has not become
effective, to file promptly the Final Amendment with the Commission
and use its best efforts to cause the Registration Statement to become
effective; if the Registration Statement has become effective, to file
promptly the Rule 430A Prospectus with the Commission; to make no
further amendment or any supplement to the Registration Statement or
Prospectus which shall be disapproved by you after reasonable notice
thereof; to advise you, promptly after it receives notice thereof of
the time when the Registration Statement, or any amendment thereto, or
any amended Registration Statement has become effective or any
supplement to the Prospectus or any amended Prospectus has been filed,
of the issuance by the Commission of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus or the
Prospectus, of the suspension of the qualification of the Securities
for offering or sale in any jurisdiction, of the initiation or
threatening of any proceeding for any such purpose, or of any request
by the Commission for the amending or supplementing of the
Registration Statement
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<PAGE> 14
or Prospectus or for additional information; and in the event of the
issuance of any stop order or of any order preventing or suspending
the use of any Preliminary Prospectus or the Prospectus or suspending
any such qualification, to use promptly its best efforts to obtain
withdrawal of such order;
(b) Promptly from time to time to take such action as you
may request to qualify the Securities for offering and sale under the
securities laws of such jurisdictions as you may request and to comply
with such laws so as to permit the continuance of sales and dealings
therein in such jurisdictions for as long as may be necessary to
complete the distribution, provided that in connection therewith the
Company and the Subsidiary Guarantors shall not be required to qualify
as a foreign corporation or to file a general consent to service of
process in any jurisdiction or to take any action that would subject
it to service of process in suits other than those arising out of the
offering of the Securities;
(c) To furnish each of the Underwriter and counsel for
the Underwriter, without charge, signed copies of the registration
statement originally filed with respect to the Securities and each
amendment thereto (in each case including all exhibits thereto) and,
so long as a prospectus relating to the Securities is required to be
delivered under the Act, as many copies of each Preliminary
Prospectus, the Prospectus and all amendments or supplements thereto
as you may from time to time reasonably request. If at any time when
a prospectus is required to be delivered under the Act an event shall
have occurred as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or
omit to state any material fact necessary in order to make statements
therein, in the light of the circumstances under which they were made
when such Prospectus is delivered, not misleading, or if for any other
reason it shall be necessary to amend or supplement the Prospectus in
order to comply with the Act, the Company and the Subsidiary
Guarantors will forthwith prepare and, subject to the provisions of
Section 5(a) hereof, file with the Commission an appropriate
supplement or amendment thereto, and will furnish to you and to any
dealer in securities, without charge, as many copies as you may from
time to time reasonably request of an amended Prospectus or a
supplement to the Prospectus which will correct such statement or
omission or effect such compliance in accordance with the requirements
of Section 10 of the Act;
(d) To make generally available to its security holders
as soon as practicable, but in any event not later than 45 days after
the close of the period covered thereby, an earnings (which need not
be audited) statement in form complying with the provisions of Section
11(a) of the Act covering a period of 12 consecutive months beginning
not later than the first day of the Company's fiscal quarter next
following the Effective Date;
(e) To file promptly all documents required to be filed
with the Commission pursuant to Section 13, 14 or 15(d) of the
Exchange Act subsequent to the Effective Date and during any period
when the Prospectus is required to be delivered;
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<PAGE> 15
(f) For a period of five years from the Effective Date,
to furnish to its security holders after the end of each fiscal year
an annual report (including a consolidated balance sheet and
statements of income, cash flow and stockholders' equity of the
Company and its subsidiaries certified by independent public
accounts);
(g) During a period of five years from the Effective
Date, to furnish to you copies of all reports or other communications
(financial or other) furnished to its security holders, and deliver to
you (i) as soon as they are available, copies of any reports and
financial statements furnished to or filed with the Commission or any
national securities exchange on which any class of securities of the
Company is listed; and (ii) such additional information concerning the
business and financial condition of the Company as you may from time
to time reasonably request in connection with your obligations
hereunder;
(h) To apply the net proceeds from the sale of the
Securities in the manner set forth in the Prospectus under the caption
"Use of Proceeds";
(i) That they will not, and will cause their, officers,
directors, employees, agents and affiliates not to, take, directly or
indirectly, any action designed to cause or result in, or that might
reasonably be expected to cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate
the sale or resale of the Securities;
(j) That prior to the Time of Delivery there will not be
any change in the capital stock (other than shares issued pursuant to
the Company's Amended and Restated 1997 Incentive Equity Plan) or
material change in the short-term debt or long-term debt of the Company
or any of its subsidiaries, or any material adverse change, or any
development involving a prospective material adverse change in or
affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company or any of
its subsidiaries, taken as a whole, otherwise than as set forth or
contemplated in the Prospectus; and
(k) That they will not, during the period beginning on
the date of this Agreement and continuing until the Time of Delivery,
offer, sell, contract to sell or otherwise dispose of any debt
securities of the Company or the Subsidiary Guarantors without the
prior written consent of the Underwriter.
6. The Company and the Subsidiary Guarantors covenant and agree
with the Underwriter that the Company and the Subsidiary Guarantors will pay
or cause to be paid: (i) the fees, disbursements and expenses of counsel and
accountants for the Company and the Subsidiary Guarantors, and all other
expenses, in connection with the preparation, printing and filing of the
Registration Statement and the Prospectus and amendments and supplements
thereto and the furnishing of copies thereof, including charges for mailing,
air freight and delivery and counting and packaging thereof and of any
Preliminary Prospectus and related offering documents to the Underwriter and
dealers; (ii) the cost of printing this Agreement, the Indenture, the Pledge
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<PAGE> 16
Agreement, the Selling Agreement, communications with the selling group and the
Preliminary and Supplemental Blue Sky Memoranda and any other documents in
connection with the offering, purchase, sale and delivery of the Securities;
(iii) all expenses in connection with the qualification of the Securities for
offering and sale under securities laws as provided in Section 5(b) hereof,
including filing and registration fees and the fees, disbursements and expenses
for counsel for the Underwriter in connection with such qualification and in
connection with Blue Sky surveys or similar advice with respect to sales; (iv)
the filing fees incident to securing any required review by the National
Association of Securities Dealers, Inc. of the terms of the sale of the
Securities; and (v) all other costs and expenses incident to the performance of
their obligations hereunder which are not otherwise specifically provided for
in this Section 6, including the fees of the Company's Transfer Agent and
Registrar, the cost of any transfer taxes on sale of the Securities to the
Underwriter, the cost of the Company's personnel and other internal costs, the
cost of printing and engraving the certificates representing the Securities and
all expenses and taxes incident to the sale and delivery of the Securities to
be sold by the Company and the Subsidiary Guarantors to the Underwriter
hereunder. It is understood, however, that, except as provided in this
Section, Section 8 and Section 10 hereof, the Underwriter will pay all its own
costs and expenses, including the fees of its counsel, stock transfer taxes on
resale of any of the Securities by it, and any advertising expenses connected
with any offers it may make.
7. The obligations of the Underwriter hereunder shall be subject,
in its discretion, to the condition that all representations and warranties and
other statements of the Company and the Subsidiary Guarantors herein are, at
and as of the Time of Delivery, true and correct, the condition that the
Company and the Subsidiary Guarantors shall have performed all their
obligations hereunder theretofore to be performed, and the following additional
conditions:
(a) The Registration Statement shall have become
effective, and you shall have received notice thereof not later than
10:00 P.M., New York City time, on the date of execution of this
Agreement, or at such other time as you and the Company may agree; if
required, the Prospectus shall have been filed with the Commission in
the manner and within the time period required by Rule 424(b); no stop
order suspending the effectiveness of the Registration Statement shall
have been issued and no proceeding for that purpose shall have been
issued and no proceeding for that purpose shall have been initiated or
threatened by the Commission; and all requests for additional
information on the part of the Commission shall have been complied
with to your reasonable satisfaction;
(b) All corporate proceedings and related legal matters
in connection with the organization of the Company and the Subsidiary
Guarantors and the registration, authorization, issue, sale and
delivery of the Securities shall have been reasonably satisfactory to
Baker & Botts, L.L.P., counsel to the Underwriter, and Baker & Botts,
L.L.P. shall have been timely furnished with such papers and
information as they may reasonably have requested to enable them to
pass upon the matters referred to in this subsection;
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<PAGE> 17
(c) You shall not have advised the Company that the
Registration Statement or Prospectus, or any amendment or supplement
thereto, contains an untrue statement of fact or omits to state a fact
which in your judgment is in either case material and in the case of
an omission is required to be stated therein or is necessary to make
the statements therein, in light of the circumstances under which they
were made, not misleading;
(d) Griggs & Harrison, P.C., counsel to the Company and
the Subsidiary Guarantors, shall have furnished to you their written
opinion, dated the Time of Delivery, in form and substance
satisfactory to you, to the effect that:
(i) The Company has been duly and validly
incorporated and is validly existing as a corporation in good
standing under the laws of the State of Delaware, and is
qualified to do business and is in good standing in each
jurisdiction in which, to the knowledge of such counsel, the
ownership or leasing of properties requires such qualification
or the conduct of its business requires such qualification
(except where the failure to so qualify would not have a
Material Adverse Effect); and the Company has all necessary
corporate power and all material governmental authorizations,
permits and approvals required to own, lease and operate its
properties and conduct its business as described in the
Prospectus;
(ii) Each of the Company's subsidiaries (including
the Subsidiary Guarantors) has been duly and validly
incorporated and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its
incorporation, and is qualified to do business and is in good
standing in each jurisdiction in which, to the knowledge of
such counsel, the ownership or leasing of properties requires
such qualification or the conduct of its business requires
such qualification (except where the failure to so qualify
would not have a Material Adverse Effect); and each such
subsidiary has all necessary corporate power and all material
governmental authorizations, permits and approvals required to
own, lease and operate its properties and to conduct its
business as described in the Prospectus;
(iii) All the outstanding shares of capital stock
of each of the Company's subsidiaries (including the
Subsidiary Guarantors) have been duly authorized and are
validly issued and outstanding, are fully paid and
non-assessable and, except as otherwise set forth in the
Prospectus, are owned by the Company of record and to the best
knowledge of such counsel, (A) beneficially and (B) free and
clear of all liens, encumbrances, equities, security interests
or claims of any nature whatsoever with the exception of the
Company's pledge of the capital stock of Newpark to Heller
pursuant to the Heller Pledge Agreement and the Company's
pledge of the capital stock of EAE Industries to Heller
pursuant to the terms of the EAE Pledge Agreement; and neither
the Company nor any of its subsidiaries has granted any
outstanding options, warrants or commitments with respect to
any shares of its
17
<PAGE> 18
capital stock, whether issued or unissued, except as otherwise
described in the Prospectus;
(iv) The Company has an authorized capitalization
as set forth in the Registration Statement and all the issued
shares of capital stock of the Company have been duly and
validly authorized and issued and are fully paid and
non-assessable; are free of any preemptive rights, and were
issued and sold in compliance with all applicable Federal and
state securities laws; and except as described in the
Prospectus, to the knowledge of such counsel, there are no
outstanding options, warrants or other rights calling for the
issuance of, and there are no commitments, plans or
arrangements to issue, any shares of capital stock of the
Company;
(v) The Securities have been duly authorized by
the Company for issuance and sale to the Underwriter pursuant
to this Agreement and are in the form contemplated by the
Indenture, and, when executed, authenticated and delivered in
the manner provided for in the Indenture against payment of
the consideration therefor in accordance with this Agreement,
will be valid and legally binding obligations of the Company,
enforceable in accordance with their terms and the terms of
the Indenture and will be entitled to the benefits of the
Indenture, except insofar as may be limited by any bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and general principles
of equity (regardless of whether such enforcement is
considered in a proceeding at law or in equity);
(vi) The Subsidiary Guarantees have been duly and
validly authorized by each of the Subsidiary Guarantors, and
when the Subsidiary Guarantees are issued and authenticated
and delivered for value as contemplated by this Agreement and
the Indenture, each such Subsidiary Guarantee will be a valid
and binding obligation of the respective Subsidiary Guarantor,
enforceable against each such Subsidiary Guarantor in
accordance with its terms, except as such enforcement may be
limited by any bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights
generally and general principles of equity (regardless of
whether such enforcement is considered in a proceeding at law
or in equity); and the Subsidiary Guarantee does not violate
any law applicable to the Subsidiary Guarantee or the offering
and issuance of the Securities and the Subsidiary Guarantee;
(vii) To the best of such counsel's knowledge,
there are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries or
any of their respective officers or directors is a party or of
which any property of the Company or any of its subsidiaries
is the subject which, if resolved against the Company or any
of its subsidiaries or any of their respective officers or
directors, individually, or to the extent involving related
claims or issues, in the
18
<PAGE> 19
aggregate, is of a character required to be disclosed in the
Prospectus which has not been properly disclosed therein;
(viii) This Agreement has been duly authorized,
executed and delivered by the Company and each of the
Subsidiary Guarantors;
(ix) The Indenture (a) has been duly and validly
authorized, executed and delivered by the Company and each of
the Subsidiary Guarantors, (b) constitutes a valid and legally
binding obligation of the Company and each of the Subsidiary
Guarantors, enforceable in accordance with its terms, except
insofar as enforcement may be limited by any bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and general principles
of equity (regardless of whether such enforcement is
considered in a proceeding at law or in equity) and (c) is
duly qualified under the 1939 Act and the 1939 Act
Regulations;
(x) The Pledge Agreement has been duly and
validly authorized, executed and delivered by the Company and
constitutes a valid and legally binding obligation of the
Company enforceable in accordance with its terms, except
insofar as enforcement may be limited by any bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and general principles
of equity (regardless of whether such enforcement is
considered in a proceeding at law or in equity);
(xi) The Acquisition Agreement has been duly
authorized, executed and delivered by the Company and EAE
Services and is a legal, valid and binding obligation of the
Company and EAE Services enforceable in accordance with their
terms, except as enforceability of the same may be limited by
bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally and general
principles of equity (regardless of whether such enforcement is
considered in a proceeding at law or in equity);
(xii) The Exchange Agreement has been duly
authorized, executed and delivered by each of the Company and
the Exchange Participants and is a legal, valid and binding
obligation of each of the Company and the Exchange
Participants, enforceable against each person in accordance
with its terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally and general
principles of equity (regardless of whether such enforcement
is considered in a proceeding at law or in equity);
(xiii) The Company and the Subsidiary Guarantors
have full corporate power and authority to execute, deliver
and perform this Agreement, the Indenture
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<PAGE> 20
and the Pledge Agreement, and the execution, delivery and
performance of this Agreement, the Indenture and the Pledge
Agreement, the consummation of the transactions herein and
therein contemplated and the issue and sale of the Securities
and the compliance by the Company with all the provisions of
this Agreement, the Indenture and the Pledge Agreement, will
not result in a breach of any of the terms or provisions of,
or constitute a default under, or result in the creation or
imposition of any lien, charge, claim or encumbrance upon, any
of the property or assets of the Company or any of the
Subsidiary Guarantors pursuant to, the terms of any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument filed as an exhibit to the Registration Statement
to which the Company or any of the Subsidiary Guarantors is a
party or by which the Company or any of the Subsidiary
Guarantors is bound or to which any of the property or assets
of the Company or any of the Subsidiary Guarantors is
subject, nor will such action result in any violation of the
provisions of the Certificate of Incorporation or the Bylaws,
in each case as amended, of the Company or any of the
Subsidiary Guarantors, or any statute or any order, rule or
regulation known to such counsel of any court or governmental
agency or body having jurisdiction over the Company or any of
the Subsidiary Guarantors or any of their properties;
(xiv) The execution, delivery and performance of
the Exchange Agreement and the Acquisition Agreement and the
consummation of the transactions contemplated thereby will not
result in a breach or violation of any of the terms or
provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge, claim, or
encumbrance upon, any of the property or assets of the Company
or any of its subsidiaries pursuant to, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument filed as an exhibit to the Registration Statement
to which the Company or any of its subsidiaries is a party or
by which the Company or any of its subsidiaries is bound or to
which any of the property or assets of the Company or any of
its subsidiaries is subject, nor will such action result in
any violation of the provisions of the Certificate of
Incorporation or the Bylaws, in each case as amended, of the
Company or any of its subsidiaries or any statute or any
order, rule or regulation known to such counsel of any court
or governmental agency or body having jurisdiction over the
Company or any of its subsidiaries or any of their properties;
(xv) No consent, approval, authorization, order,
registration or qualification of or with any court or any
regulatory authority or other governmental body is required
for the issue and sale of the Securities or the consummation
of the other transactions contemplated by this Agreement, the
Indenture or the Pledge Agreement, except such as have been
obtained under the Act and the 1939 Act and such consents,
approvals, authorizations, registrations or qualifications as
may be required under state or foreign securities or Blue Sky
laws in connection with the purchase and distribution of the
Securities by the Underwriter, provided that such
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counsel shall not be required to express any opinion as to the
requirements of state securities or blue sky laws;
(xvi) No authorization, approval, consent or order
of, or filing with, any court or governmental authority or
agency is required in connection with the consummation of the
transactions effected or contemplated by the Exchange
Agreement or the Acquisition Agreement other than (i) such
authorizations, approvals, consents and orders as have been
obtained or such filing as have been made prior to the date
hereof and (ii) such authorizations, approvals, consents,
orders and filings as to which the failure to obtain or make
would not, individually or in the aggregate, have a Material
Adverse Effect;
(xvii) Upon the consummation of the transactions
contemplated by the Exchange Agreement, all of the outstanding
capital stock of Newpark will be owned by the Company of
record and to the best knowledge of such counsel, (A)
beneficially and (B) free and clear of all liens,
encumbrances, equities, security interests or claims of any
nature whatsoever except for the Company's pledge of the
capital stock of Newpark to Heller pursuant to the terms of
the Heller Pledge Agreement;
(xviii) It is not necessary in connection with the
offer, sale and delivery of the shares of Common Stock to the
Exchange Participants pursuant to the Exchange Agreement to
register such shares of Common Stock under the Act;
(xix) Upon the consummation of the transactions
contemplated by the Acquisition Agreement, all of the
outstanding capital stock of John Bludworth Marine, Inc. and
Bludworth Shipyard and Fabrication, Inc. will be owned,
directly or indirectly, by EAE Services, a wholly owned
subsidiary of the Company, of record and to the best knowledge
of such counsel, (A) beneficially and (B) free and clear of all
liens, encumbrances, equities, security interests or claims of
any nature whatsoever;
(xx) To the best of such counsel's knowledge,
neither the Company nor any of its subsidiaries is currently
in violation of its Certificate of Incorporation or Bylaws or
in default under, any indenture, mortgage, deed of trust,
lease, bank loan or credit agreement or any other material
agreement or instrument of which such counsel has knowledge to
which the Company or any of its subsidiaries is a party or by
which any of them or any of their property may be bound or
affected (in any respect that is material in light of the
financial condition of the Company and its subsidiaries, taken
as a whole);
(xxi) There are no preemptive or other rights to
subscribe for or to purchase, nor any restriction upon the
voting or transfer of, any Securities pursuant to the
Company's Certificate of Incorporation or Bylaws, in each case
as amended to
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<PAGE> 22
the date hereof, or any agreement or other instrument known to
such counsel; and no holders of securities of the Company have
rights to the registration thereof under the Registration
Statement or, if any such holders have such rights, such
holders have waived such rights;
(xxii) To the best of such counsel's knowledge,
there are no contracts or other documents required to be
summarized or disclosed in the Prospectus or to be so filed as
an exhibit to the Registration Statement, which have not been
so summarized or disclosed, or so filed;
(xxiii) The statements under the captions "Risk
Factors -- Impact of Environmental Laws", "Risk Factors --
Legislative Proposals to Rescind Provisions of Jones Act",
"Business -- Environmental Regulation", Business -- Other
Regulation", "Business -- Legal Proceedings" and "Description
of Notes" in the Prospectus and Items 14 and 15 of Part II of
the Registration Statement insofar as such statements
constitute a summary of legal matters, documents or
proceedings referred to therein, fairly present the
information called for with respect to such legal matters,
documents and proceedings;
(xxiv) Nothing has come to such counsel's
attention to give such counsel reason to believe that any of
the representations and warranties of the Company contained in
this Agreement or in any certificate or document contemplated
under this Agreement to be delivered are not true or correct
or that any of the covenants and agreements herein contained
to be performed on the part of the Company or any of the
conditions herein contained, or set forth in the Registration
Statement and the Prospectus, to be fulfilled or complied with
by the Company have not been or will not be duly and timely
performed, fulfilled or complied with;
(xxv) Neither the Company nor any of its
subsidiaries is an "investment company" or a person
"controlled" by an "investment company" within the meaning of
the Investment Company Act of 1940, as amended;
(xxvi) The Registration Statement has become
effective under the Act, the Prospectus has been filed in
accordance with Rule 424(b) of the rules and regulations of
the Commission under the Act, including the applicable time
periods set forth therein, or such filing is not required and,
to the knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued
and no proceedings for that purpose have been instituted or
are pending or threatened under the Act, and the Registration
Statement, the Prospectus and each amendment or supplement
thereto, as of their respective effective or issue dates,
appeared on its face to comply as to form in all material
respects with the applicable requirements of the Act and the
rules and regulations thereunder; it being understood that
such counsel need express no opinion (a) as to the financial
statements and schedules or
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<PAGE> 23
other financial data contained in the Registration Statement
or the Prospectus and (b) as to that part of the Registration
Statement that constitutes the Statement of Eligibility and
Qualification of the Trustee on Form T-1 (the "Form T-1");
Such counsel shall also state that nothing has come to such
counsel's attention that would lead such counsel to believe that the
Registration Statements or any amendment thereto (other than the
financial statements and schedules or other financial data and the
Form T-1 contained in the Registration Statement, as to which such
counsel need express no opinion) at the time such Registration
Statement or any amendment thereto become effective, contained an
untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading, or that the Prospectus or any amendment or
supplement thereto (other than the financial statements and schedules
or other financial data contained in the Prospectus, as to which such
counsel need express no opinion) at the time the Prospectus was
issued, at the time any such amended or supplemented prospectus was
issued, or at the Time of Delivery, contained or contains an untrue
statement of a material fact or omitted or omits to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
In rendering their opinions set forth in Section 7(d) above,
such counsel may rely, to the extent deemed advisable by such counsel,
(a) as to factual matters, upon certificates of public officials and
officers of the Company, and (b) as to the laws of any jurisdiction
other than the United States and jurisdictions in which they are
admitted, on opinions of counsel (provided, however, that you shall
have received a copy of each of such opinion which shall be dated the
Time of Delivery, addressed to you or otherwise authorizing you to
rely thereon, and Griggs & Harrison, P.C. in its opinion to you
delivered pursuant to this subsection, shall state that such counsel
are satisfactory to them and Griggs & Harrison, P.C. has no reason to
believe that the Underwriter and they are not justified to so rely);
In addition, such counsel may state that its opinion is
limited to matters governed by the federal laws of the United States
of America, the laws of the State of Texas, the laws of the State of
New York and the corporate laws of the State of Delaware and that
such counsel is not admitted in the State of Delaware. The foregoing
opinion may be qualified by a statement to the effect that such
counsel does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the
Registration Statement or Prospectus, except to the extent stated in
(xxiii) above.
(e) Baker & Botts, L.L.P., counsel to the Underwriter,
shall have furnished to you their written opinion or opinions, dated
the Time of Delivery, in form and substance satisfactory to you, with
respect to the incorporation of the Company, the validity of the
Securities, the Registration Statement, the Prospectus and other
related matters as you may reasonably request, and such counsel shall
have received such papers and information as they may reasonably
request to enable them to pass upon such matters;
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<PAGE> 24
(f) At the time this Agreement is executed and also at
the Time of Delivery, Grant Thornton LLP shall have furnished to you a
letter or letters, dated the date of this Agreement and the Time of
Delivery, in form and substance satisfactory to you, to the effect,
that:
(i) They are independent accountants with
respect to the Company and its subsidiaries within the meaning
of the Act and the applicable published rules and regulations
thereunder;
(ii) In their opinion the consolidated financial
statements of the Company and its subsidiaries (including the
related schedules and notes) included in the Registration
Statement and Prospectus and covered by their reports included
therein comply as to form in all material respects with the
applicable accounting requirements of the Act and the
published rules and regulations thereunder;
(iii) On the basis of specified procedures as of
a specified date not more than three days prior to the date of
their letter (which procedures do not constitute an
examination made in accordance with generally accepted
auditing standards), consisting of a reading of the latest
available unaudited interim consolidated financial statements
of the Company and its subsidiaries, a reading of the latest
available minutes of any meeting of the Board of Directors and
stockholders of the Company and its subsidiaries since the
date of the latest audited financial statements included in
the Prospectus, inquiries of officials of the Company and its
subsidiaries who have responsibility for financial and
accounting matters, and such other procedures or inquiries as
are specified in such letter, nothing came to their attention
that caused them to believe that:
(A) The unaudited consolidated condensed
financial statements of the Company and its
subsidiaries included in the Prospectus do not
comply in form in all material respects with the
applicable accounting requirements of the Act and
the rules and regulations promulgated thereunder or
are not presented in conformity with generally
accepted accounting principles applied on a basis
substantially consistent with that of the audited
consolidated financial statements included in the
Registration Statement and the Prospectus;
(B) as of a specified date not more than
three days prior to the date of their letter, there
was any change in the capital stock, or increases in
the long-term debt or short-term debt of the Company
and its subsidiaries on a consolidated basis, or any
decrease in total assets, total current assets or
stockholders' equity or other items specified by the
Underwriter, of the Company and its subsidiaries on
a consolidated basis, each as compared with the
amounts shown on the September 30, 1997 Consolidated
Balance
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Sheet included in the Registration Statement and the
Prospectus, except in each case for changes,
increases or decreases which the Prospectus
discloses have occurred or may occur; and
(C) for the period from October 1, 1997
to a specified date not more than three days prior
to the date of such letter, there was any decrease,
as compared with the corresponding period of the
preceding fiscal year, in the following consolidated
amounts: gross margin, earnings (loss) from
operations, earnings (loss) before income taxes, net
earnings (loss) or earnings (loss) per common and
common equivalent share of the Company and its
subsidiaries, except in all instances for decreases
which the Registration Statement discloses have
occurred or may occur;
(D) in addition to the examination
referred to in their reports included in the
Registration Statement and the Prospectus and the
limited procedures referred to in clause (iii)
above, they have carried out certain specified
procedures, not constituting an audit, with respect
to certain amounts, percentages and financial
information specified by the Underwriter, which are
derived from the general accounting records of the
Company and its subsidiaries which appear in the
Prospectus, or in Part II of, or in exhibits and
schedules to, the Registration Statement, and have
compared such amounts and financial information with
the accounting records of the Company and its
subsidiaries, and have found them to be in agreement
and have proved the mathematical accuracy of certain
specified percentages; and
(E) On the basis of a reading of the pro
forma consolidated financial statements included in
the Registration Statement and the Prospectus,
carrying out certain specified procedures that would
not necessarily reveal matters of significance with
respect to the comments set forth in this clause
(v), inquiries of certain officials of the Company
and its consolidated subsidiaries and Bludworth who
have responsibility for financial and accounting
matters and proving the arithmetic accuracy of the
application of the pro forma adjustments to the
historical amounts in the proforma consolidated
financial statements, nothing came to their
attention that caused them to believe that the pro
forma consolidated financial statements do not
comply in form in all material respects with the
applicable accounting requirements of Rule 11-02 of
Regulation S-X or that the pro forma adjustments
have not been properly applied to the historical
amounts in the compilation of such statements.
(g) Neither the Company nor any of its subsidiaries
shall have sustained since the date of the latest audited financial
statements included in the Prospectus, any material
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<PAGE> 26
loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree other than as
set forth or contemplated in the Prospectus; and since the respective
dates as of which information is given in the Prospectus, there shall
not have been any change in the capital stock (other than shares
issued pursuant to the 1997 Incentive Equity Plan) or short-term debt
or long-term debt of the Company or any of its subsidiaries nor any
change or any development involving a prospective material adverse
change, in or affecting the general affairs, management, consolidated
financial position, stockholders' equity or results of operations of
the Company and its subsidiaries, otherwise than as set forth or
contemplated in the Prospectus, the effect of which, in any such case
is in your judgment so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or
the delivery of the Securities on the terms and in the manner
contemplated in the Prospectus;
(h) Between the date hereof and the Time of Delivery
there shall have been no declaration of war by the Government of the
United States; at the Time of Delivery there shall not have occurred
any material adverse change in the financial or securities markets in
the United States or in political, financial or economic conditions in
the United States or any outbreak or material escalation of
hostilities or other calamity or crisis, the effect of which is such
as to make it, in the judgment of the Underwriter, impracticable to
proceed with completion of the sale of and payment for the Securities
and no event shall have occurred resulting in (i) trading in
securities generally on the New York Stock Exchange being suspended or
limited or minimum or maximum prices being generally established on
such exchange, or (ii) additional material governmental restrictions,
not in force on the date of this Agreement, being imposed upon trading
in securities generally by the New York Stock Exchange or in any
securities of the Company on the principal securities exchange or
market in which such securities are listed or quoted or by order of
the Commission or any court or other governmental authority, or (iii)
a general banking moratorium being declared by either Federal, New
York or Texas authorities;
(i) The Company shall have furnished or caused to be
furnished to you at the Time of Delivery certificates signed by the
chief executive officer and the chief financial officer, on behalf of
the Company and the Subsidiary Guarantors, satisfactory to you as to
such matters as you may reasonably request and as to (i) the accuracy
of the Company's and the Subsidiary Guarantors' representations and
warranties herein at and as of the Time of Delivery; (ii) the
performance by the Company and the Subsidiary Guarantors of all their
obligations hereunder to be performed at or prior to the Time of
Delivery; (iii) the fact that they have carefully examined the
Registration Statement and Prospectus and, (A) as of the Effective
Date, the statements contained in the Registration Statement and the
Prospectus were true and correct and neither the Registration
Statement nor the Prospectus omitted to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading and (B) since the Effective Date, no event has occurred
that is required by the Act or the rules and regulations of the
Commission thereunder to be set forth in an
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amendment of, or a supplement to, the Prospectus that has not been set
forth in such an amendment or supplement; and (iv) the matters set
forth in subsections (a) and (g) of this Section 7;
(j) Prior to or concurrently with the sale of the
Securities at the Time of Delivery, the closing of the Exchange shall
occur on the basis set forth in the Prospectus; and
(k) Prior to or currently with the sale of Securities at
the Time of Delivery, the closing of the Bludworth Acquisition shall
occur on the basis set forth in the Prospectus.
8. (a) The Company and each Subsidiary Guarantor, jointly
and severally, will indemnify and hold harmless the Underwriter
against any losses, claims, damages or liabilities, joint or several,
to which the Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon (i) any
untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or
the Prospectus, or any amendment or supplement thereto, or in any Blue
Sky application or other document executed by the Company or any of
the Subsidiary Guarantors specifically for that purpose or based upon
written information furnished by the Company or any of the Subsidiary
Guarantors filed in any state or other jurisdiction in order to
qualify any or all the Securities under the security laws thereof or
filed with the Commission or any securities association or securities
exchange (each, an "Application"), or the omission or alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statements made therein not misleading, or (ii)
any untrue statement or alleged untrue statement made by the Company
or any of the Subsidiary Guarantors in Section 1(a) of this Agreement,
or (iii) the employment by the Company or any of the Subsidiary
Guarantors of any device, scheme or artifice to defraud, or the
engaging by the Company or any of the Subsidiary Guarantors in any
act, practice or course of business which operates or would operate as
a fraud or deceit, or any conspiracy with respect thereto, in which
the Company or any of the Subsidiary Guarantors shall participate, in
connection with the issuance and sale of any of the Securities, and
will reimburse the Underwriter for any legal or other expenses
reasonably incurred by the Underwriter in connection with
investigating, preparing to defend, defending or appearing as a
third-party witness in connection with any such action or claim;
provided, however, that the Company and the Subsidiary Guarantors
shall not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission
relating to the Underwriter made in any Preliminary Prospectus, the
Registration Statement, the Prospectus or such amendment or supplement
or any Application in reliance upon and in conformity with written
information furnished to the Company by the Underwriter expressly for
use therein and provided, further, that the indemnity agreement
contained in this Section 8(a) with respect to any Preliminary
Prospectus shall not inure to the benefit of the Underwriter (or any
persons controlling the Underwriter) on account of any losses, claims,
damages, liability or litigation arising from the sale of Securities
to any person, if the Underwriter fails to send or give a copy of the
Prospectus, as the same may be then supplemented or amended, to such
person, within the time required by the Act and the untrue statement
or alleged untrue statement or omission or alleged omission of a
material
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fact contained in such Preliminary Prospectus was corrected in the
Prospectus, unless such failure is the result of noncompliance by the
Company with Section 5(c) hereof.
(b) In addition to any obligations of the Company and
the Subsidiary Guarantors under Section 8(a), the Company and each of
the Subsidiary Guarantors agree that it shall perform its
indemnification obligations under Section 8(a) (as modified by the
last paragraph of this Section 8(b)) with respect to counsel fees and
expenses and other expenses reasonably incurred by making payments to
the Underwriter within 45 days of receipt of a statement in the amount
of the statements of the Underwriter's counsel or other statements
which shall be forwarded by the Underwriter, and that they shall make
such payments notwithstanding the absence of a judicial determination
as to the propriety and enforceability of the obligation to reimburse
the Underwriter for such expenses and the possibility that such
payments might later be held to have been improper by a court and a
court orders return of such payments.
The indemnity agreement in Section 8(a) shall be in addition
to any liability which the Company and the Subsidiary Guarantors may
otherwise have and shall extend upon the same terms and conditions to
each person, if any, who controls the Underwriter within the meaning
of the Act or the Exchange Act.
(c) The Underwriter shall indemnify and hold harmless
the Company and the Subsidiary Guarantors and each of their officers,
employees and directors against any losses, claims, damages or
liabilities to which the Company or the Subsidiary Guarantors or any
such officer, employee or director may become subject, under the Act
or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or
the Prospectus, or any amendment or supplement thereto, or any
Application, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission
was made in any Preliminary Prospectus, the Registration Statement,
the Prospectus or such amendment or supplement or any Application in
reliance upon and in conformity with written information furnished to
the Company by the Underwriter relating to the Underwriter expressly
for use therein, and will reimburse the Company or any of the
Subsidiary Guarantors for any legal or other expenses reasonably
incurred by the Company or any of the Subsidiary Guarantors in
connection with investigating or defending any such action or claim.
The indemnity agreement in this Section 8(c) shall be in
addition to any liability which the Underwriter may otherwise have and
shall extend, upon the same terms and conditions, to each officer and
director of the Company and to each person, if any, who controls the
Company within the meaning of the Act or the Exchange Act.
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(d) Promptly after receipt by an indemnified party under
Section 8(a) or 8(c) of notice of the commencement of any action
(including any governmental investigation), such indemnified party
shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying
party in writing of the commencement thereof; but the omission so to
notify the indemnifying party shall not relieve it from any liability
which it may have to any indemnified party under Section 8(a) or 8(c)
except to the extent it was unaware of such action and has been
prejudiced in any material respect by such failure or from any
liability which it may have to any indemnified party otherwise than
under such Section 8(a) or 8(c). In case any such action shall be
brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party
shall be entitled to participate therein and, to the extent that it
shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to
such indemnified party, and after notice from the indemnifying party
to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such
indemnified party under such subsection for any legal or other
expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation.
If, however, (i) the indemnifying party has authorized the employment
of counsel for the indemnified party at the expense of the
indemnifying party or (ii) an indemnified party shall have reasonably
concluded that representation of such indemnified party and the
indemnifying party by the same counsel would be inappropriate under
applicable standards of professional conduct due to actual or
potential differing interests between them and the indemnified party
so notifies the indemnifying party, then the indemnified party shall
be entitled to employ counsel different from counsel for the
indemnifying party at the expense of the indemnifying party and the
indemnifying party shall not have the right to assume the defense of
such indemnified party. In no event shall the indemnifying parties be
liable for fees and expenses of more than one counsel (in addition to
local counsel) for all indemnified parties in connection with any one
action or separate but similar or related actions in the same
jurisdiction arising out of the same set of allegations or
circumstances. The counsel with respect to which fees and expenses
shall be so reimbursed shall be designated in writing by Schroder &
Co. Inc. in the case of parties indemnified pursuant to Section 8(a)
by the Company in the case of parties indemnified pursuant to Section
8(c).
If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and
expenses of counsel as contemplated by Section 8(b), the indemnifying
party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement
is entered into more than 30 days after receipt by such indemnifying
party of the aforesaid request and (ii) such indemnifying party shall
not have reimbursed the indemnified party in accordance with such
request prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party,
effect any settlement of any pending or threatened proceeding in
respect of which any indemnified party is or could have been a party
and indemnity could have been sought hereunder by such indemnified
party, unless such
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settlement includes an unconditional release of such indemnified party
from all liability on claims that are the subject matter of such
proceeding.
(e) In order to provide for just and equitable
contribution under the Act in any case in which (i) the Underwriter
(or any person who controls the Underwriter within the meaning of the
Act or the Exchange Act) makes claim for indemnification pursuant to
Section 8(a) hereof, but is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right of
appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that Section 8(a) provides for
indemnification in such case or (ii) contribution under the Act may be
required on the part of the Underwriter or any such controlling person
in circumstances for which indemnification is provided under Section
8(c), then, and in each such case, each indemnifying party shall
contribute to the aggregate losses, claims, damages or liabilities to
which they may be subject as an indemnifying party hereunder (after
contribution from others) in such proportion as is appropriate to
reflect the relative benefits received by the Company and the
Subsidiary Guarantors on the one hand and the Underwriter on the other
from the offering of the Securities. If, however, the allocation
provided by the immediately preceding sentence is not permitted by
applicable law or if the indemnified party failed to give the notice
required under Section 8(d) above, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in
such proportion as is appropriate to reflect not only such relative
benefits but also the relative fault of the Company and the Subsidiary
Guarantors on the one hand and the Underwriter on the other in
connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The
relative benefits received by the Company and the Subsidiary
Guarantors on the one hand and the Underwriter on the other shall be
deemed to be in the same proportion as the total net proceeds from the
offering of the Securities purchased under this Agreement (before
deducting expenses) received by the Company bear to the total
underwriting discounts and commissions received by the Underwriter
with respect to the Securities purchased under this Agreement, in each
case as set forth in the table on the cover page of the Prospectus.
The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company and the Subsidiary
Guarantors on the one hand or the Underwriter on the other and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The
Company, the Subsidiary Guarantors and the Underwriter agree that it
would not be just and equitable if contributions pursuant to this
Section 8(e) were determined by pro rata allocation or by any other
method of allocation which does not take account of the equitable
considerations referred to above in this Section 8(e). The amount
paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof)
referred to above in this Section 8(e) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or
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<PAGE> 31
defending any such action or claim. Notwithstanding the provisions of
this Section 8(e), the Underwriter shall not be required to contribute
any amount in excess of the amount by which the total price at which
the Securities underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which the
Underwriter has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission. No person guilty of a
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
(f) Promptly after receipt by any party to this
Agreement of notice of the commencement of any action, suit or
proceeding, such party will, if a claim for contribution in respect
thereof is to be made against another party (the "contributing
party"), notify the contributing party of the commencement thereof;
but the omission to so notify the contributing party will not relieve
it from any liability which it may have to any other party for
contribution under the Act except to the extent it was unaware of such
action and has been prejudiced in any material respect by such failure
or from any liability which it may have to any other party other than
for contribution under the Act. In case any such action, suit or
proceeding is brought against any party, and such party notifies a
contributing party of the commencement thereof, the contributing party
will be entitled to participate therein with the notifying party and
any other contributing party similarly notified.
9. The respective indemnities, agreements, representations,
warranties and other statements of the Company, the Subsidiary Guarantors and
the Underwriter, as set forth in this Agreement or made by or on behalf of
them, respectively, pursuant to this Agreement, shall remain in full force and
effect, regardless of any investigation (or any statement as to the results
thereof) made by or on behalf of the Underwriter or any controlling person of
the Underwriter, or the Company, or the Subsidiary Guarantors, or any officer
or director or controlling person of the Company or the Subsidiary Guarantors
and shall survive delivery of and payment for the Securities.
10. This Agreement shall become effective (a) if the Registration
Statement has not heretofore become effective, at the earlier of 12:00 Noon,
New York City time, on the first full business day after the Registration
Statement becomes effective, or at such time after the Registration Statement
becomes effective as you may authorize the sale of the Securities to the public
by you or other securities dealers, or (b) if the Registration Statement has
heretofore become effective, at the earlier of 24 hours after the filing of the
Prospectus with the Commission or at such time as you may authorize the sale of
the Securities to the public by the Underwriter or securities dealers, unless,
prior to any such time you shall have received notice from the Company that it
elects that this Agreement shall not become effective, or you shall have given
notice to the Company that you elect that this Agreement shall not become
effective; provided, however, that the provisions of this Section and Section 6
and Section 8 shall at all times be effective.
31
<PAGE> 32
If this Agreement, by election of you or the Underwriters, shall not
become effective pursuant to the provisions of this Section, the Company and
the Subsidiary Guarantors shall not then be under any liability to the
Underwriter except as provided in Section 6 and Section 8 hereof, but if this
Agreement becomes effective and is not so terminated but the Securities are not
delivered by or on behalf of the Company and the Subsidiary Guarantors as
provided herein because the Company and the Subsidiary Guarantors have been
unable for any reason beyond their control and not due to any default by them
to comply with the terms and conditions hereof, the Company and the Subsidiary
Guarantors will reimburse the Underwriter for all out-of-pocket expenses,
including fees and disbursements of counsel, reasonably incurred by the
Underwriter in making preparations for the purchase, sale and delivery of the
Securities, but the Company and the Subsidiary Guarantors shall then be under
no further liability to the Underwriter except as provided in Section 6 and
Section 8 hereof.
11. The statements set forth in the last paragraph on the front
cover page of the Prospectus, the paragraph on the inside front cover of the
Prospectus containing stabilization language and the third and sixth paragraphs
under the caption "Underwriting" in the Prospectus constitute the only
information furnished by the Underwriter.
12. All statements, requests, notices and agreements hereunder,
unless otherwise specified in this Agreement, shall be in writing and, if to
the Underwriter, shall be delivered or sent by mail, telex or facsimile
transmission (with confirmation of receipt) to you at Schroder & Co. Inc.,
Equitable Center, 787 Seventh Avenue, New York, New York 10019, Attention:
Syndicate Department; if to the Company or any of the Subsidiary Guarantors,
shall be delivered or sent by mail, telex or facsimile transmission (with
confirmation of receipt) to the address of the Company set forth in the
Registration Statement, Attention: Frank W. Eakin. Any such statements,
requests, notices or agreements shall take effect at the time of receipt
thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriter, the Company, the Subsidiary Guarantors and, to the
extent provided in Section 8 and Section 9 hereof, the officers and directors
of the Company and the Subsidiary Guarantors and each person who controls the
Company, the Underwriter or any Subsidiary Guarantor, and their respective
heirs, executors, administrators, successors and assigns, and no other person
shall acquire or have any right under or by virtue of this Agreement. No
purchaser of any of the Securities from the Underwriter shall be deemed a
successor or assign by reason merely of such purchase.
14. Time shall be of the essence of this Agreement. As used
herein, the term "business day" shall mean any day when the Commission's office
in Washington, D.C. is open for business.
15. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS
PRINCIPLES THEREOF.
16. This Agreement may be executed by any one or more of the
parties hereto in any number of counterparts, each of which shall be deemed to
be an original, but all such counterparts shall together constitute one and the
same instrument.
32
<PAGE> 33
If the foregoing is in accordance with your understanding, please sign
and return to us two counterparts hereof, and upon the acceptance hereof by you
this letter and such acceptance hereof shall constitute a binding agreement
among the Underwriter, the Company and each of the Subsidiary Guarantors.
Very truly yours,
FIRST WAVE MARINE, INC.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
NEWPARK SHIPBUILDING AND REPAIR, INC.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
EAE SERVICES, INC.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
EAE INDUSTRIES, INC.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
33
<PAGE> 34
NEWPARK MARINE FABRICATORS, INC.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
LOUISIANA SHIP, INC.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
Accepted as of the date hereof:
SCHRODER & CO. INC.
By:
------------------------------
Managing Director
34
<PAGE> 1
EXHIBIT 3.3
ARTICLES OF INCORPORATION OF
LOUISIANA SHIP, INC.
The undersigned natural person of the age of 18 years or older, acting as
incorporator under the Texas Business Corporation Act, adopts the following
Articles of Incorporation for this corporation:
ARTICLE I
CORPORATE NAME
The name of the corporation is Louisiana Ship, Inc.
ARTICLE II
DURATION
The period of this corporation's duration is perpetual.
ARTICLE III
CORPORATE PURPOSES
The corporation is organized for the purpose of transacting any or all
lawful business for which corporations may be incorporated under the Texas
Business Corporation Act.
ARTICLE IV
AUTHORIZED STOCK AND SHARE STRUCTURE
The corporation is authorized to issue only one class of shares of stock.
The total number of shares that the corporation is authorized to issue is 10,000
shares. Each share shall be without par value. No distinction shall exist
between the shares of the corporation or between the holders of the shares.
1
<PAGE> 2
ARTICLE V
COMMENCING BUSINESS
The corporation will not begin business until it has received for issuing
its shares consideration of the value of one-thousand dollars ($1,000.00)
consisting of money, labor done, or property actually received.
ARTICLE VI
REGISTERED OFFICE AND AGENT
The street address of the initial registered office of the corporation is
8502 Cypress Street- Brady Island, Houston, Texas 77012, and the name of the
initial registered agent at this address is Frank Eakin.
ARTICLE VII
DIRECTORS
The number of directors constituting the initial Board of Directors is two.
The names and addresses of the persons who are to serve as directors until the
first annual shareholders' meeting or until their successors are elected and
qualify are:
Samuel F. Eakin
4000 S. Sherwood Forest Boulevard
Suite 603
Baton Rouge, Louisiana 70816
David Ammons
4000 S. Sherwood Forest Boulevard
Suite 603
Baton Rouge, Louisiana 70816
ARTICLE VIII
INCORPORATOR
The name and address of the incorporator is:
2
<PAGE> 3
David Ammons
4000 S. Sherwood Forest Boulevard
Suite 603
Baton Rouge, Louisiana 70816
The undersigned has executed these Articles of Incorporation on this 30th
day of November, 1995.
INCORPORATOR:
/s/ DAVID AMMONS
---------------------------
David Ammons
3
<PAGE> 1
EXHIBIT 3.4
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION OF
LOUISIANA SHIP, INC.
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act, Louisiana Ship, 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 Louisiana Ship, Inc.
(2) AMENDMENT IS ALTERATION. This Articles of Amendment to the Articles of
Incorporation alters Article IV of the Articles of Incorporation of the
Corporation. The full text of Article IV as it is amended to read by this
Articles of Amendment is quoted below:
"ARTICLE IV
AUTHORIZED STOCK AND SHARE STRUCTURE
A. Authorized Common Shares. The Corporation is authorized to issue
one million (1,000,000) shares of common stock, in the aggregate, at no par
value. No distinction shall exist between the shares of the Corporation or
between the holders of the shares. The shares of common stock shall have
identical rights and privileges in every respect.
B. Authorized Preferred Shares. The Corporation is authorized to
issue five hundred thousand (500,000) shares of preferred stock, in the
aggregate, with a par value of One and No/100 Dollars ($1.00). The
preferred shares of the Corporation shall be non-voting and shall be
preferred upon liquidation in the amount of One and No/100 Dollars ($1.00)
for each outstanding share. A noncumulative dividend of seventy cents
($.70) per share shall be payable with respect to such preferred shares out
of the funds legally available."
(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 16th day of July, 1997.
(4) SHARES. The number of shares of stock of the Corporation outstanding
at the time of the adoption of this Amendment to the Articles of Incorporation
was 10,000. The number
<PAGE> 2
of shares entitled to vote thereon as a class was 10,000, all of which were
shares of voting common stock.
(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 amendment.
(6) ISSUED SHARES. This Articles of Amendment does not provide for an
exchange, reclassification or cancellation of issued shares.
(7) STATED CAPITAL. This Articles of Amendment does not effect a change in
the amount of stated capital.
Pursuant to Article 4.05 of the Texas Business Corporation Act, this
original Articles of Amendment and a copy thereof shall be delivered for filing
to the Secretary of State of the State of Texas.
DATED:_______________, 1997.
LOUISIANA SHIP, INC.
BY: /s/DAVID AMMONS
-----------------------------------
David B. Ammons, Secretary
<PAGE> 1
EXHIBIT 3.5
AMENDED AND RESTATED BYLAWS
OF
LOUISIANA SHIP, INC.
ARTICLE ONE: REGISTERED OFFICE AND AGENT
1.1 REGISTER OFFICE AND AGENT. The registered office of the corporation is
located at 8052 Cypress Street, Houston, Texas, 77012. The name of the
registered agent of the corporation at such address is Frank W. Eakin.
ARTICLE TWO: SHAREHOLDERS' MEETINGS
2.1 PLACE OF MEETINGS. All meetings of the shareholders shall be held at
the registered office of the corporation, or by telephone, or at such other
places within or without the State of Texas, as may be designated from time to
time by the Board of Directors.
2.2 TIME OF ANNUAL MEETING. The annual meetings of the shareholders shall
be held each year at 2:00 p.m. on the first Tuesday of April. If this day falls
on a legal holiday, the annual meeting shall be held at the same time on the
next following business day.
2.3 NOTICE OF SHAREHOLDERS' MEETING. Written or printed notice stating the
place, day and hour of the shareholders' meeting and, in case of a special
meeting, the purpose or purposes for which the meeting is called, shall be
delivered to each shareholder entitled to vote at such meeting not less than ten
(10) days nor more than sixty (60) days before the date of the meeting, either
personally or by mail, by or at the direction of the President, the Secretary,
or the Officer or person calling the meeting, with postage thereon prepaid,
addressed to the shareholder at his address as it appears on the share transfer
records of the corporation, or that address given by the shareholder to the
corporation for the purpose of notice. Notice of adjourned meetings is not
<PAGE> 2
necessary unless the meeting is adjourned for thirty (30) days or more, in
which case notice of the adjourned meeting shall be given as in the case of any
special meeting.
2.4 SPECIAL MEETINGS. Special meetings of the shareholders for any purpose
or purposes whatsoever may be called at any time (1) by the President, the Board
of Directors, or such other person or persons as may be authorized in the
Articles of Incorporation or the Bylaws, or (2) by the holders of at least ten
percent (10%) of all the shares entitled to vote at the proposed special
meeting, unless the Articles of Incorporation provide for a number of shares
greater than or less than ten percent (10%), in which event special meetings of
the shareholders may be called by the holders of at least the percentage of
shares so specified in the Articles of Incorporation, but in no event shall the
Article of Incorporation provide for a number of shares greater than fifty
percent (50%). The record date for determining shareholders entitled to call a
special meeting shall be the date the first shareholder signs the notice of that
meeting. Only business within the purpose or purposes described in the notice
required in Article 2.03 may be conducted at a special meeting of the
shareholders.
2.5 QUORUM. With respect to any matter, a quorum shall be present at a
meeting of the shareholders if the holders of a majority of the shares entitled
to vote on that matter are represented at the meeting in person or by proxy.
Once a quorum is present at a meeting of shareholders, the shareholders
represented in person or by proxy at the meeting may conduct such business as
may be properly brought before the meeting until it is adjourned, and the
subsequent withdrawal from the meeting of any shareholder or the refusal of any
shareholder represented in person or by proxy shall not affect the presence of a
quorum at the meeting.
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<PAGE> 3
The shareholders represented in person or by proxy at a meeting of
shareholders at which a quorum is not present may adjourn the meeting until such
time and to such place as may be determined by vote of the holders of a majority
of the shares represented in person or by proxy at that meeting.
2.6 VOTING. Only persons listed as shareholders on the share transfer
records for shares of the corporation on the record date shall be entitled to
notice of and to vote at any shareholder meeting. The record date for such
determination of shareholders shall be the date on which notice of the meeting
is mailed, unless some other day is fixed by the Board of Directors for the
determination of shareholders of record. Each outstanding share, regardless of
class, shall be entitled to one vote on each matter submitted to a vote at a
meeting of the shareholders, except (a) to the extent the Articles of
Incorporation provide for more or less than one vote per share or (if and to the
extent permitted by the Texas Business Corporation Act) limit or deny voting
rights to the holders of the shares of any class or series, or (b) as otherwise
provided by the Texas Business Corporation Act.
With respect to any matter, other than the election of directors or a
matter for which the affirmative vote of the holders of a specified portion of
the shares entitled to vote is required by the Texas Business Corporation Act,
the affirmative vote of the holders of a majority of the shares entitled to vote
on that matter and represented in person or by proxy at a meeting of the
shareholders at which a quorum is present shall be the act of the shareholders
unless otherwise provided in the Articles of Incorporation or these Bylaws in
accordance with Article 2.28B of the Texas Business Corporation Act.
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<PAGE> 4
2.7 PROXIES. Any shareholder entitled to vote or execute consents may do
so either in person or by proxy executed in writing by the shareholder. A
telegram, telex, cablegram, or similar transmission by the shareholder, shall be
treated as an execution in writing for purposes of this provision. No proxy
shall be valid after eleven (11) months from the date of its execution, unless
otherwise provided in the proxy.
2.8 CONSENT OF ABSENTEES. No defect in the calling or noticing of a
shareholders' meeting will affect the validity of any action at the meeting if a
quorum was present and if each shareholder, not present in person or by proxy,
signs a written waiver of notice, consents to the holding of the meeting, or
approves the minutes of the meeting, either before or after the meeting, and
those waivers, consents, or approvals are filed with the corporate records or
made a part of the minutes of such meeting.
2.9 UNANIMOUS WRITTEN CONSENT IN LIEU OF MEETING. Any action required by
the Texas Business Corporation Act to be taken at any annual or special meeting
of the shareholders, or any action which may be taken at any annual or special
meeting of shareholders, may be taken without a meeting, without prior notice,
and without a vote, if a consent or consents in writing, setting forth the
action so taken, shall have been signed and dated by the holder or holders of
all the shares entitled to vote with respect to the action that is the subject
of the consent. Such consents are filed with the Secretary of the corporation.
ARTICLE THREE: DIRECTORS
3.1 POWERS. The powers of the corporation shall be exercised by or under
the authority of, and the business and affairs of the corporation shall be
managed under direction of, the Board of Directors of the corporation, subject,
however, to such limitations as are imposed by law, the
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<PAGE> 5
Articles of Incorporation, or these Bylaws as to actions to be authorized or
approved by the shareholders. The Board of Directors may, by contract or
otherwise, grant general, limited, or special power and authority to the
officers and employees of the corporation to transact the general business, or
any special business, of the corporation, and may give powers of attorney to
agents of the corporation to transact any special business requiring such
authorization.
3.2 NUMBER AND QUALIFICATION OF DIRECTORS. The authorized number of
Directors of this corporation shall be at least two (2) and not more than five
(five), as determined from time to time by the Board of Directors. The Directors
need not be shareholders of this corporation or residents of the State of Texas.
The number of Directors may be increased or decreased from time to time by
amendment to these Bylaws or in the manner provided in the Articles of
Incorporation or these Bylaws, but no decrease shall have the effect of
shortening the term of any incumbent Director.
3.3 ELECTION AND TERM OF OFFICE. At the first annual meeting of
shareholders and at each annual meeting thereafter, the holders of shares
entitled to vote in the election of directors shall elect directors by a
majority vote of the shares entitled to vote to hold office until the next
succeeding annual meeting. Unless removed in accordance with provisions of the
Articles of Incorporation or these Bylaws, each director shall hold office for
the term for which he is elected and until his successor shall have been elected
and qualified. At each election for directors, every shareholder entitled to
vote at such election shall have the right (a) to vote the number of shares
owned by him for as many persons as there are directors to be elected and for
whose election he has a right to vote, or (b) to cumulate his votes (unless the
Articles of Incorporation expressly prohibit such) by giving one candidate as
many votes as the
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<PAGE> 6
number of directors multiplied by his shares shall equal, or by distributing
such votes on the same principal among any number of such candidates. Voting for
the election of Directors shall be by voice unless any shareholder demands a
ballot vote before the voting begins.
3.4 VACANCIES. Any vacancy occurring in the Board of Directors after the
issuance of shares may be filled by the affirmative vote of a majority of the
remaining Directors though less than a quorum of the Board of Directors, or by
the sole remaining Director. The shareholders may elect a Director at any time
to fill any vacancy not filled by the Directors. A Director elected to fill a
vacancy shall be elected for the unexpired term of his predecessor in office.
Any directorship to be filled by reason of an increase in the number of
directors shall be filled by election at an annual or special meeting of
shareholders called for that purpose.
3.5 REMOVAL OF DIRECTORS. At any meeting of shareholders called expressly
for that purpose any Director or the entire Board of Directors may be removed,
with or without cause, by a vote of the holders of a majority of the shares then
entitled to vote at an election of directors.
3.6 PLACE OF MEETINGS. All meetings of the Board of Directors shall be
held at the principal office of the corporation, or by telephone, or at such
place within or without the State of Texas as may be designated from time to
time by resolution of the Board of Directors or by written consent of all
members of the Board of Directors.
3.7 REGULAR MEETINGS. Regular meetings of the Board of Directors shall be
held, without call or notice, immediately following or simultaneous with each
annual meeting of the shareholders of the corporation, and at such other times
as the Directors may from time to time determine.
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<PAGE> 7
3.8 SPECIAL MEETINGS -- CALL AND NOTICE. Special meetings of the Board of
Directors for any purpose may be called at any time by the President or any
Director upon written or printed notice. Written or printed notice of a special
meeting shall state the place, day, hour, and in general terms, the purpose or
purposes of the meeting and the business to be transacted. Notice shall be
mailed, telefaxed, or personally delivered to each Director not later than two
(2) days prior to the day appointed for the special meeting. The business
transacted at the special meeting shall be confined to the purpose(s) and
business stated in the notice. Attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except where a director attends a
meeting for the express purpose of objecting to the transaction of any business
on the ground that the meeting is not lawfully called or convened.
3.9 QUORUM. A majority of the authorized number of Directors shall be
necessary to constitute a quorum for the transaction of business of the Board of
Directors. The act of the majority of the Directors present at a meeting at
which a quorum is present shall be the act of the Board of Directors, unless the
act of a greater number is required by law or the Articles of Incorporation or
these Bylaws.
3.10 BOARD ACTION WITHOUT MEETING Any action required or permitted to be
taken at a meeting of the Board of Directors or any committee may be taken
without a meeting if a consent in writing, setting forth the action so taken, is
signed by all the members of the Board of Directors or committee, as the case
may be. Such consent shall have the same force and effect as a unanimous vote at
a meeting, and may be stated as such in any document or instrument filed with
the Secretary of State.
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<PAGE> 8
3.11 ADJOURNMENT -- NOTICE. A quorum of the Directors may adjourn any
meeting of the Board of Directors to meet again at a stated hour on a stated
day. Notice of the time and place where an adjourned meeting will be held need
not be given to absent Directors if the time and place is fixed at the adjourned
meeting. In the absence of a quorum, the Directors present at any Directors'
meeting, either regular or special, may adjourn from time to time until the time
fixed for the next regular meeting of the Board.
3.12 CONDUCT OF MEETINGS. The Chief Executive Officer of the corporation,
or in the Chief Executive Officer's absence, any Director selected by the
Directors present at the meeting, shall preside at meetings of the Board of
Directors. The Secretary of the corporation or, in the Secretary's absence, any
person appointed by the presiding officer, shall act as Secretary of the Board
of Directors.
3.13 COMPENSATION. Directors and members of any committee of the Board of
Directors may receive such compensation, if any, for their services, and such
reimbursement for expenses, as may be fixed or determined from time to time by
resolution of the Board of Directors.
3.14 INDEMNIFICATION OF DIRECTORS AND OFFICERS. The corporation shall
indemnify a director or an officer of the corporation against reasonable
expenses incurred by him in connection with a proceeding in which he is a named
defendant or respondent because he is or was a director or an officer of the
corporation if he has been wholly successful, on the merits or otherwise, in the
defense of the proceeding, or if a court of competent jurisdiction orders the
corporation to indemnify the director or officer because the court determines
indemnification is proper and equitable.
-8-
<PAGE> 9
ARTICLE FOUR: OFFICERS
4.1. TITLE AND APPOINTMENT. The officers of the corporation shall consist
of a Chief Executive Officer, President and Chief Operating Officer, Secretary,
and a Treasurer, each of whom shall be elected by a majority vote of the Board
of Directors at such time as the Board of Directors may from time to time
designate. Such other officers, including Vice Presidents, assistant officers,
and agents may be appointed by a majority vote of the Board of Directors, as the
Board of Directors shall from time to time determine necessary. Any two (2) or
more offices may be held by the same person. All officers shall be elected by
and shall hold office at the pleasure of the Board of Directors. The Board of
Directors shall fix the compensation and tenure of all officers.
4.2 CHIEF EXECUTIVE OFFICER/CHAIRMAN OF THE BOARD OF DIRECTORS. The
Chairman of the Board of Directors shall be the Chief Executive Officer of the
corporation and shall preside at all meetings of the shareholders and the Board
of Directors. The Chief Executive Officer shall have general supervisory
authority and power over the business and financial affairs of the corporation.
4.3 PRESIDENT AND CHIEF OPERATING OFFICER. The President of the Corporation
shall also be the Chief Operating Officer of the corporation. He shall have
active and general management of the business operations of the corporation and
shall see that all orders and resolutions of the Board of Directors are carried
into effect. The President and Chief Operating Officer shall have the general
powers and duties carried into effect. He shall have the general powers and
duties of supervision and management over the business operations of the
corporation. He also shall appoint and discharge all subordinate agents and
employees and fix their salaries, subject to review by the Board of Directors,
and shall designate the duties they are to perform.
-9-
<PAGE> 10
4.4 VICE-PRESIDENT. In the event of the absence, disability, or termination
of employment for any reason, of the President, the Vice-President shall in his
stead with the same authority, duties and responsibilities as the President.
4.5 SECRETARY. The Secretary shall keep the minutes of the meetings of the
Board of Directors and the minutes of the meetings of the shareholders in
appropriate books. He shall attend to the giving of all notices of the
corporation. He shall have charge of the books or records containing the names,
alphabetically arranged, of all persons who are shareholders of the corporation
and such other books and papers as the Board may direct, and shall perform all
the duties incidental to his office.
4.6 TREASURER. The Treasurer shall have the care and custody of all of the
funds and securities of the corporation and shall see that the same are
deposited in the name of the corporation in such bank or depositories as the
Board of Directors may from time to time select. The Treasurer shall supervise
and direct all bookkeeping and accounting personnel and functions and shall have
the authority and power to hire and dismiss any bookkeeping or accounting
personnel.
4.7 ASSISTANTS. Assistant secretaries or treasurers shall have such duties
as may be delegated to them by the secretary and treasurer, respectively.
4.8 TERM OF OFFICE. The officers of the corporation shall hold office until
their successors are chosen and qualify in their stead. Any officer or agent or
member of a committee elected or appointed by the Board of Directors may be
removed at any time by the affirmative vote of a majority of the Board of
Directors, whenever in its judgment the best interests of the corporation will
be served thereby, but such removal shall be without prejudice to the contract
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<PAGE> 11
rights, if any, of the person so removed. If any office becomes vacant for any
reason, the vacancy shall be filled by the affirmative vote of a majority of the
Board of Directors.
4.9 DELEGATION OF DUTIES AND AUTHORITY. In the case of the absence of any
officer of the Corporation, or for any other reason that the Board may deem
sufficient as to any officer, the Board may delegate, for the time being, the
powers or duties, or any of them, of such officer to any other officer, or to
any director, provided a majority of the entire Board concurs therein.
ARTICLE FIVE: EXECUTION OF INSTRUMENTS
5.1 The Board of Directors may, in its discretion, authorize an officer or
officers, or other person or persons, to execute any corporate instrument or
document, or to sign the corporate name without limitation, except where
otherwise provided by law, and such execution or signature shall be binding on
the corporation.
ARTICLE SIX: ISSUANCE AND TRANSFER OF SHARES
6.1 REQUIREMENT OF PAYMENT FOR SHARES. The corporation may issue the number
of shares stated in the Articles of Incorporation. Certificates for shares of
the corporation may not be issued until the full amount of the consideration for
the shares, fixed as provided by law, has been paid. When such consideration
shall have been paid to the corporation, the shares shall be deemed to have been
issued and shall be considered fully paid and non-assessable.
6.2 CERTIFICATES REPRESENTING SHARES. The corporation shall deliver
certificates representing shares to which shareholders are entitled. The
certificates shall be in such form as the Board of Directors may provide. The
certificates shall be signed by the President or Vice- President and the
Secretary-Treasurer, and may be sealed with the seal of the corporation or a
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facsimile thereof. The signatures of such officers may be facsimiles, if the
certificates are to be countersigned by a transfer agent or registered by a
registrar.
Each certificate representing shares of the corporation shall state
upon the fact thereof: (1) that the corporation is organized under the laws of
the State of Texas, (2) the name of the person to whom issued, (3) the number
and class of shares and the designation of the series, if any, which such
certificate represents, and (4) the par value of each share represented by such
certificate, or a statement that the shares are without par value.
6.3 REPLACEMENT OF CERTIFICATES. No new certificate representing shares of
the corporation shall be issued until the former certificate for the shares
represented thereby shall have been surrendered and canceled, except in the case
of lost or destroyed certificates in which case the Board of Directors may order
new certificates to be issued upon such terms, conditions, and guarantees as the
Board may deem necessary to impose, including the filing of sufficient
indemnity.
6.4 TRANSFER OF SHARES. The shares and other securities of the corporation
shall be personal property for all purposes and shall be transferrable in
accordance with the provisions of Chapter 8 -- Investment Securities -- of the
Texas Business and Commerce Code, as amended, except as otherwise provided in
the Texas Business Corporation Act. The shares may be transferred by
endorsement, by signature of the owner or the owner's agent, attorney or legal
representative, or by the delivery of the certificate. The transferee in any
transfer of shares shall be deemed to have full notice of, and to consent to,
the Bylaws of the corporation to the same extent as if the transferee had signed
a written assent thereto.
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6.5 RESTRICTIVE ENDORSEMENT. If a restriction on the transfer, or
registration of the transfer, of shares is imposed or agreed to by the
corporation, as permitted by the Texas Business Corporation Act, each
certificate representing shares so restricted: (1) shall conspicuously set forth
a full or summary statement of the restriction on the face of the certificate,
or (2) shall set forth such statement on the back of the certificate and
conspicuously refer to the same on the face of the certificate, or (3) shall
conspicuously state on the face or back of the certificate that such a
restriction exists pursuant to a specified document and (a) that the corporation
will furnish to the record holder of the certificate without charge upon written
request to the corporation at its principal place of business or registered
office a copy of the specified document, or (b) if such document is one required
or permitted to be and has been filed under the Texas Business Corporation Act,
that such specified document is on file in the office of the Secretary of State
and contains a full statement of such restriction.
6.6 RIGHTS TO PURCHASE STOCK OF A SHAREHOLDER.
(a) When a shareholder elects to sell his shares of stock in the
corporation, the right to purchase such shares shall first be made available to
Louisiana Ship, Inc., on the same terms made available or offered to any other
purchaser for a period of twenty (20) days, and thereafter offered for an
additional period of ten (10) days to the shareholders of the corporation, pro
rata, among the electing shareholders.
(b) In the event of the death of a shareholder, any successor in
interest to the deceased shareholder's stock shall take such stock subject to
the provisions of Paragraph 6.06(a) above.
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6.7 SALES AND OTHER TRANSFERS OF STOCK.
(a) Shareholder Agreements. The shareholders of this corporation may
make agreements between or among themselves through a written shareholders'
agreement, governing the purchase, among themselves, of the stock of this
corporation in the event of the death, bankruptcy, retirement, or disability of
any shareholder, and in the event of a transfer by a shareholder of his stock by
donation to the shareholder's spouse and lineal descendants. A copy of any such
agreement shall be placed on file by the corporation at its principal place of
business or its registered office and shall be subject to the same right of
examination by a shareholder of the corporation, in person or by agent, attorney
or accountant, as are the books and records of the corporation. The provisions
of any such agreement shall be binding upon the parties to the agreement and
their respective heirs, administrators, legatees, executors and assigns.
(b) Stock Redemption Agreements. The corporation and any number of the
shareholders of the corporation may enter into stock redemption agreements. A
copy of any such agreement shall be placed on file by the corporation at its
principal place of business or its registered office.
ARTICLE SEVEN: RECORD AND REPORTS
7.1 BOOKS AND RECORDS. The corporation shall keep books and records of
account, and shall keep minutes of the proceedings of its shareholders, its
Board of Directors, and each committee of its Board of Directors. The
corporation shall keep at its registered office or its principal place of
business, or at the office of its transfer agent or registrar, a record of the
original issuance of shares issued by the corporation and a record of each
transfer of those shares that have been presented to the corporation for
registration of transfer. Such records shall contain
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the names and addresses of all past and current shareholders of the corporation
and the number and class of shares issued by the corporation held by each of
them.
7.2 EXAMINATION OF BOOKS AND RECORDS. Any person who shall have been a
shareholder for at least six (6) months immediately preceding his demand, or
shall be the holder of at least five percent (5%) of all outstanding shares of
the corporation, upon written demand stating the purpose thereof, shall have the
right to examine, in person or by agent, accountant, or attorney, at any
reasonable time or times, for any proper purpose, its relevant books and records
of account, minutes, and share transfer records, and to make extracts therefrom.
A director may examine the corporation's books and records of account, share
transfer records, corporate minutes and any other corporate books and records
for any purpose reasonably related to the director's service as a director.
ARTICLE EIGHT: FIXING RECORD DATES
8.1 FIXING RECORD DATE. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or entitled to receive a distribution by the corporation
(other than a distribution involving a purchase or redemption by the corporation
of any of its own shares) or a share dividend, or in order to make a
determination of shareholders for any other proper purpose (other than
determining shareholders entitled to consent to action by shareholders proposed
to be taken without a meeting of shareholders), the Board of Directors may
provide that the share transfer records shall be closed for a stated period but
not to exceed, in any case, sixty (60) days. If the share transfer records shall
be closed for the purpose of determining shareholders entitled to notice of or
to vote at a meeting of shareholders, such records shall be closed for at least
ten (10) days immediately preceding such meeting.
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ARTICLE NINE: AMENDMENT OF BYLAWS
9.1 AMENDMENT OF BYLAWS. The power to alter, amend, or repeal these Bylaws
is vested in the Board of Directors of the corporation, subject to repeal,
change or amendment by the shareholders of the corporation.
The foregoing Amended and Restated Bylaws of Louisiana Ship, Inc., are
unanimously adopted as the Bylaws of Louisiana Ship, Inc. by the Board of
Directors of Louisiana Ship, Inc., on this 2nd day of October, 1997.
DIRECTORS:
/s/ Samuel F. Eakin
---------------------------------
Samuel F. Eakin, Director
/s/ David B. Ammons
---------------------------------
David B. Ammons, Director
Attest: /s/ David B. Ammons
--------------------------------------
David B. Ammons, Secretary
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EXHIBIT 3.6
ARTICLES OF INCORPORATION OF
EAE SERVICES, INC.
The undersigned natural person of the age of 18 years or older, acting as
incorporator under the Texas Business Corporation Act, adopts the following
Articles of Incorporation for this corporation:
ARTICLE I
CORPORATE NAME
The name of the corporation is EAE Services, Inc.
ARTICLE II
DURATION
The period of this corporation's duration is perpetual.
ARTICLE III
CORPORATE PURPOSES
The corporation is organized for the purpose of transacting any or all
lawful business for which corporations may be incorporated under the Texas
Business Corporation Act.
ARTICLE IV
AUTHORIZED STOCK AND SHARE STRUCTURE
The corporation is authorized to issue only one class of shares of stock.
The total number of shares that the corporation is authorized to issue is 10,000
shares. Each share shall be without par value. No distinction shall exist
between the shares of the corporation or between the holders of the shares.
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ARTICLE V
COMMENCING BUSINESS
The corporation will not commence business until it has received for
issuing its shares consideration of the value of one-thousand dollars
($1,000.00) consisting of money, labor done, or property actually received.
ARTICLE VI
REGISTERED OFFICE AND AGENT
The street address of the initial registered office of the corporation is
8502 Cypress Street- Brady Island, Houston, Texas 77012, and the name of the
initial registered agent at this address is Frank Eakin.
ARTICLE VII
DIRECTORS
The number of directors constituting the initial Board of Directors is two.
The names and addresses of the persons who are to serve as directors until the
first annual shareholders' meeting or until their successors are elected and
qualify are:
Samuel F. Eakin
4000 S. Sherwood Forest Boulevard
Suite 603
Baton Rouge, Louisiana 70816
David Ammons
4000 S. Sherwood Forest Boulevard
Suite 603
Baton Rouge, Louisiana 70816
ARTICLE VIII
INCORPORATOR
The name and address of the incorporator is:
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David Ammons
4000 S. Sherwood Forest Boulevard
Suite 603
Baton Rouge, Louisiana 70816
The undersigned has executed these Articles of Incorporation on this 18th
day of July, 1996.
INCORPORATOR:
/s/DAVID AMMONS
----------------------------------
David Ammons
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EXHIBIT 3.7
BYLAWS
OF
EAE SERVICES, INC.
ARTICLE ONE: REGISTERED OFFICE AND AGENT
1.1 REGISTER OFFICE AND AGENT. The registered office of the corporation
is located at 8052 Cypress Street, Houston, Texas, 77012. The name of the
registered agent of the corporation at such address is Frank W. Eakin.
ARTICLE TWO: SHAREHOLDERS' MEETINGS
2.1 PLACE OF MEETINGS. All meetings of the shareholders shall be held at
the registered office of the corporation, or by telephone, or at such other
places within or without the State of Texas, as may be designated from time to
time by the Board of Directors.
2.2 TIME OF ANNUAL MEETING. The annual meetings of the shareholders
shall be held each year at ______ p.m. on the first Tuesday of April. If this
day falls on a legal holiday, the annual meeting shall be held at the same time
on the next following business day.
2.3 NOTICE OF SHAREHOLDERS' MEETING. Written or printed notice stating
the place, day and hour of the shareholders' meeting and, in case of a special
meeting, the purpose or purposes for which the meeting is called, shall be
delivered to each shareholder entitled to vote at such meeting not less than
ten (10) days nor more than sixty (60) days before the date of the meeting,
either personally or by mail, by or at the direction of the President, the
Secretary, or the Officer or person calling the meeting, with postage thereon
prepaid, addressed to the shareholder at his address as it appears on the share
transfer records of the corporation, or that address given by the shareholder
to the corporation for the purpose of notice. Notice of adjourned meetings is
not
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necessary unless the meeting is adjourned for thirty (30) days or more, in which
case notice of the adjourned meeting shall be given as in the case of any
special meeting.
2.4 SPECIAL MEETINGS. Special meetings of the shareholders for any
purpose or purposes whatsoever may be called at any time (1) by the President,
the Board of Directors, or such other person or persons as may be authorized in
the Articles of Incorporation or the Bylaws, or (2) by the holders of at least
ten percent (10%) of all the shares entitled to vote at the proposed special
meeting, unless the Articles of Incorporation provide for a number of shares
greater than or less than ten percent (10%), in which event special meetings of
the shareholders may be called by the holders of at least the percentage of
shares so specified in the Articles of Incorporation, but in no event shall the
Article of Incorporation provide for a number of shares greater than fifty
percent (50%). The record date for determining shareholders entitled to call a
special meeting shall be the date the first shareholder signs the notice of
that meeting. Only business within the purpose or purposes described in the
notice required in Article 2.03 may be conducted at a special meeting of the
shareholders.
2.5 QUORUM. With respect to any matter, a quorum shall be present at a
meeting of the shareholders if the holders of a majority of the shares entitled
to vote on that matter are represented at the meeting in person or by proxy.
Once a quorum is present at a meeting of shareholders, the shareholders
represented in person or by proxy at the meeting may conduct such business as
may be properly brought before the meeting until it is adjourned, and the
subsequent withdrawal from the meeting of any shareholder or the refusal of any
shareholder represented in person or by proxy shall not affect the presence of
a quorum at the meeting.
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The shareholders represented in person or by proxy at a meeting of
shareholders at which a quorum is not present may adjourn the meeting until such
time and to such place as may be determined by vote of the holders of a majority
of the shares represented in person or by proxy at that meeting.
2.6 VOTING. Only persons listed as shareholders on the share
transfer records for shares of the corporation on the record date shall be
entitled to notice of and to vote at any shareholder meeting. The record date
for such determination of shareholders shall be the date on which notice of the
meeting is mailed, unless some other day is fixed by the Board of Directors for
the determination of shareholders of record. Each outstanding share, regardless
of class, shall be entitled to one vote on each matter submitted to a vote at a
meeting of the shareholders, except (a) to the extent the Articles of
Incorporation provide for more or less than one vote per share or (if and to
the extent permitted by the Texas Business Corporation Act) limit or deny
voting rights to the holders of the shares of any class or series, or (b) as
otherwise provided by the Texas Business Corporation Act.
With respect to any matter, other than the election of directors or a
matter for which the affirmative vote of the holders of a specified portion of
the shares entitled to vote is required by the Texas Business Corporation Act,
the affirmative vote of the holders of a majority of the shares entitled to
vote on that matter and represented in person or by proxy at a meeting of the
shareholders at which a quorum is present shall be the act of the shareholders
unless otherwise provided in the Articles of Incorporation or these Bylaws in
accordance with Article 2.28B of the Texas Business Corporation Act.
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2.7 PROXIES. Any shareholder entitled to vote or execute consents may
do so either in person or by proxy executed in writing by the shareholder. A
telegram, telex, cablegram, or similar transmission by the shareholder, shall
be treated as an execution in writing for purposes of this provision. No proxy
shall be valid after eleven (11) months from the date of its execution, unless
otherwise provided in the proxy.
2.8 CONSENT OF ABSENTEES. No defect in the calling or noticing of a
shareholders' meeting will affect the validity of any action at the meeting if
a quorum was present and if each shareholder, not present in person or by
proxy, signs a written waiver of notice, consents to the holding of the
meeting, or approves the minutes of the meeting, either before or after the
meeting, and those waivers, consents, or approvals are filed with the corporate
records or made a part of the minutes of such meeting.
2.9 UNANIMOUS WRITTEN CONSENT IN LIEU OF MEETING. Any action required
by the Texas Business Corporation Act to be taken at any annual or special
meeting of the shareholders, or any action which may be taken at any annual or
special meeting of shareholders, may be taken without a meeting, without prior
notice, and without a vote, if a consent or consents in writing, setting forth
the action so taken, shall have been signed and dated by the holder or holders
of all the shares entitled to vote with respect to the action that is the
subject of the consent. Such consents are filed with the Secretary of the
corporation.
ARTICLE THREE: DIRECTORS
3.1 POWERS. The powers of the corporation shall be exercised by or under
the authority of, and the business and affairs of the corporation shall be
managed under direction of, the Board of Directors of the corporation, subject,
however, to such limitations as are imposed by law, the
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Articles of Incorporation, or these Bylaws as to actions to be authorized or
approved by the shareholders. The Board of Directors may, by contract or
otherwise, grant general, limited, or special power and authority to the
officers and employees of the corporation to transact the general business, or
any special business, of the corporation, and may give powers of attorney to
agents of the corporation to transact any special business requiring such
authorization.
3.2 NUMBER AND QUALIFICATION OF DIRECTORS. The authorized number of
Directors of this corporation shall be at least two (2) and not more than five
(five), as determined from time to time by the Board of Directors. The Directors
need not be shareholders of this corporation or residents of the State of Texas.
The number of Directors may be increased or decreased from time to time by
amendment to these Bylaws or in the manner provided in the Articles of
Incorporation or these Bylaws, but no decrease shall have the effect of
shortening the term of any incumbent Director.
3.3 ELECTION AND TERM OF OFFICE. At the first annual meeting of
shareholders and at each annual meeting thereafter, the holders of shares
entitled to vote in the election of directors shall elect directors by a
majority vote of the shares entitled to vote to hold office until the next
succeeding annual meeting. Unless removed in accordance with provisions of the
Articles of Incorporation or these Bylaws, each director shall hold office for
the term for which he is elected and until his successor shall have been
elected and qualified.
At each election for directors, every shareholder entitled to
vote at such election shall have the right (a) to vote the number of shares
owned by him for as many persons as there are directors to be elected and for
whose election he has a right to vote, or (b) to cumulate his votes (unless
the Articles of Incorporation expressly prohibit such) by giving one candidate
as many votes as the
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number of directors multiplied by his shares shall equal, or by distributing
such votes on the same principal among any number of such candidates. Voting for
the election of Directors shall be by voice unless any shareholder demands a
ballot vote before the voting begins.
3.4 VACANCIES. Any vacancy occurring in the Board of Directors after the
issuance of shares may be filled by the affirmative vote of a majority of the
remaining Directors though less than a quorum of the Board of Directors, or by
the sole remaining Director. The shareholders may elect a Director at any time
to fill any vacancy not filled by the Directors. A Director elected to fill a
vacancy shall be elected for the unexpired term of his predecessor in office.
Any directorship to be filled by reason of an increase in the number of
directors shall be filled by election at an annual or special meeting of
shareholders called for that purpose.
3.5 REMOVAL OF DIRECTORS. At any meeting of shareholders called expressly
for that purpose any Director or the entire Board of Directors may be removed,
with or without cause, by a vote of the holders of a majority of the shares then
entitled to vote at an election of directors.
3.6 PLACE OF MEETINGS. All meetings of the Board of Directors shall be
held at the principal office of the corporation, or by telephone, or at such
place within or without the State of Texas as may be designated from time to
time by resolution of the Board of Directors or by written consent of all
members of the Board of Directors.
3.7 REGULAR MEETINGS. Regular meetings of the Board of Directors shall
be held, without call or notice, immediately following or simultaneous with each
annual meeting of the shareholders of the corporation, and at such other times
as the Directors may from time to time determine.
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3.8 SPECIAL MEETINGS -- CALL AND NOTICE. Special meetings of the Board of
Directors for any purpose may be called at any time by the President or any
Director upon written or printed notice. Written or printed notice of a special
meeting shall state the place, day, hour, and in general terms, the purpose or
purposes of the meeting and the business to be transacted. Notice shall be
mailed, telefaxed, or personally delivered to each Director not later than two
(2) days prior to the day appointed for the special meeting. The business
transacted at the special meeting shall be confined to the purpose(s) and
business stated in the notice. Attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except where a director attends a
meeting for the express purpose of objecting to the transaction of any business
on the ground that the meeting is not lawfully called or convened.
3.9 QUORUM. A majority of the authorized number of Directors shall be
necessary to constitute a quorum for the transaction of business of the Board
of Directors. The act of the majority of the Directors present at a meeting at
which a quorum is present shall be the act of the Board of Directors, unless
the act of a greater number is required by law or the Articles of Incorporation
or these Bylaws.
3.10 BOARD ACTION WITHOUT MEETING Any action required or permitted to be
taken at a meeting of the Board of Directors or any committee may be taken
without a meeting if a consent in writing, setting forth the action so taken,
is signed by all the members of the Board of Directors or committee, as the
case may be. Such consent shall have the same force and effect as a unanimous
vote at a meeting, and may be stated as such in any document or instrument
filed with the Secretary of State.
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3.11 ADJOURNMENT -- NOTICE. A quorum of the Directors may adjourn any
meeting of the Board of Directors to meet again at a stated hour on a stated
day. Notice of the time and place where an adjourned meeting will be held need
not be given to absent Directors if the time and place is fixed at the adjourned
meeting. In the absence of a quorum, the Directors present at any Directors'
meeting, either regular or special, may adjourn from time to time until the time
fixed for the next regular meeting of the Board.
3.12 CONDUCT OF MEETINGS. The Chief Executive Officer of the corporation,
or in the Chief Executive Officer's absence, any Director selected by the
Directors present at the meeting, shall preside at meetings of the Board of
Directors. The Secretary of the corporation or, in the Secretary's absence, any
person appointed by the presiding officer, shall act as Secretary of the Board
of Directors.
3.13 COMPENSATION. Directors and members of any committee of the Board of
Directors may receive such compensation, if any, for their services, and such
reimbursement for expenses, as may be fixed or determined from time to time by
resolution of the Board of Directors.
3.14 INDEMNIFICATION OF DIRECTORS AND OFFICERS. The corporation shall
indemnify a director or an officer of the corporation against reasonable
expenses incurred by him in connection with a proceeding in which he is a named
defendant or respondent because he is or was a director or an officer of the
corporation if he has been wholly successful, on the merits or otherwise, in the
defense of the proceeding, or if a court of competent jurisdiction orders the
corporation to indemnify the director or officer because the court determines
indemnification is proper and equitable.
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ARTICLE FOUR: OFFICERS
4.1. TITLE AND APPOINTMENT. The officers of the corporation shall
consist of a Chief Executive Officer, President and Chief Operating Officer,
Secretary, and a Treasurer, each of whom shall be elected by a majority vote of
the Board of Directors at such time as the Board of Directors may from time to
time designate. Such other officers, including Vice Presidents, assistant
officers, and agents may be appointed by a majority vote of the Board of
Directors, as the Board of Directors shall from time to time determine
necessary. Any two (2) or more offices may be held by the same person. All
officers shall be elected by and shall hold office at the pleasure of the Board
of Directors. The Board of Directors shall fix the compensation and tenure of
all officers.
4.2 CHIEF EXECUTIVE OFFICER/CHAIRMAN OF THE BOARD OF DIRECTORS. The
Chairman of the Board of Directors shall be the Chief Executive Officer of the
corporation and shall preside at all meetings of the shareholders and the Board
of Directors. The Chief Executive Officer shall have general supervisory
authority and power over the business and financial affairs of the corporation.
4.3 PRESIDENT AND CHIEF OPERATING OFFICER. The President of the
Corporation shall also be the Chief Operating Officer of the corporation. He
shall have active and general management of the business operations of the
corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. The President and Chief Operating Officer
shall have the general powers and duties carried into effect. He shall have the
general powers and duties of supervision and management over the business
operations of the corporation. He also shall appoint and discharge all
subordinate agents and employees and fix their salaries, subject to review by
the Board of Directors, and shall designate the duties they are to perform.
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4.4 VICE-PRESIDENT. In the event of the absence, disability, or
termination of employment for any reason, of the President, the Vice-President
shall in his stead with the same authority, duties and responsibilities as the
President.
4.5 SECRETARY. The Secretary shall keep the minutes of the meetings of
the Board of Directors and the minutes of the meetings of the shareholders in
appropriate books. He shall attend to the giving of all notices of the
corporation. He shall have charge of the books or records containing the names,
alphabetically arranged, of all persons who are shareholders of the corporation
and such other books and papers as the Board may direct, and shall perform all
the duties incidental to his office.
4.6 TREASURER. The Treasurer shall have the care and custody of all of
the funds and securities of the corporation and shall see that the same are
deposited in the name of the corporation in such bank or depositories as the
Board of Directors may from time to time select. The Treasurer shall supervise
and direct all bookkeeping and accounting personnel and functions and shall have
the authority and power to hire and dismiss any bookkeeping or accounting
personnel.
4.7 ASSISTANTS. Assistant secretaries or treasurers shall have such
duties as may be delegated to them by the secretary and treasurer, respectively.
4.8 TERM OF OFFICE. The officers of the corporation shall hold office
until their successors are chosen and qualify in their stead. Any officer or
agent or member of a committee elected or appointed by the Board of Directors
may be removed at any time by the affirmative vote of a majority of the Board of
Directors, whenever in its judgment the best interests of the corporation will
be served thereby, but such removal shall be without prejudice to the contract
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rights, if any, of the person so removed. If any office becomes vacant for any
reason, the vacancy shall be filled by the affirmative vote of a majority of the
Board of Directors.
4.9 DELEGATION OF DUTIES AND AUTHORITY. In the case of the absence of any
officer of the Corporation, or for any other reason that the Board may deem
sufficient as to any officer, the Board may delegate, for the time being, the
powers or duties, or any of them, of such officer to any other officer, or to
any director, provided a majority of the entire Board concurs therein.
ARTICLE FIVE: EXECUTION OF INSTRUMENTS
5.1 The Board of Directors may, in its discretion, authorize an officer
or officers, or other person or persons, to execute any corporate instrument or
document, or to sign the corporate name without limitation, except where
otherwise provided by law, and such execution or signature shall be binding on
the corporation.
ARTICLE SIX: ISSUANCE AND TRANSFER OF SHARES
6.1 REQUIREMENT OF PAYMENT FOR SHARES. The corporation may issue the
number of shares stated in the Articles of Incorporation. Certificates for
shares of the corporation may not be issued until the full amount of the
consideration for the shares, fixed as provided by law, has been paid. When
such consideration shall have been paid to the corporation, the shares shall be
deemed to have been issued and shall be considered fully paid and
non-assessable.
6.2 CERTIFICATES REPRESENTING SHARES. The corporation shall deliver
certificates representing shares to which shareholders are entitled. The
certificates shall be in such form as the Board of Directors may provide. The
certificates shall be signed by the President or Vice-President and the
Secretary-Treasurer, and may be sealed with the seal of the corporation or a
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facsimile thereof. The signatures of such officers may be facsimiles, if the
certificates are to be countersigned by a transfer agent or registered by a
registrar.
Each certificate representing shares of the corporation shall state upon
the fact thereof: (1) that the corporation is organized under the laws of the
State of Texas, (2) the name of the person to whom issued, (3) the number and
class of shares and the designation of the series, if any, which such
certificate represents, and (4) the par value of each share represented by such
certificate, or a statement that the shares are without par value.
6.3 REPLACEMENT OF CERTIFICATES. No new certificate representing shares
of the corporation shall be issued until the former certificate for the shares
represented thereby shall have been surrendered and canceled, except in the
case of lost or destroyed certificates in which case the Board of Directors may
order new certificates to be issued upon such terms, conditions, and guarantees
as the Board may deem necessary to impose, including the filing of sufficient
indemnity.
6.4 TRANSFER OF SHARES. The shares and other securities of the
corporation shall be personal property for all purposes and shall be
transferrable in accordance with the provisions of Chapter 8 -- Investment
Securities -- of the Texas Business and Commerce Code, as amended, except as
otherwise provided in the Texas Business Corporation Act. The shares may be
transferred by endorsement, by signature of the owner or the owner's agent,
attorney or legal representative, or by the delivery of the certificate. The
transferee in any transfer of shares shall be deemed to have full notice of,
and to consent to, the Bylaws of the corporation to the same extent as if the
transferee had signed a written assent thereto.
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6.5 RESTRICTIVE ENDORSEMENT. If a restriction on the transfer, or
registration of the transfer, of shares is imposed or agreed to by the
corporation, as permitted by the Texas Business Corporation Act, each
certificate representing shares so restricted: (1) shall conspicuously set forth
a full or summary statement of the restriction on the face of the certificate,
or (2) shall set forth such statement on the back of the certificate and
conspicuously refer to the same on the face of the certificate, or (3) shall
conspicuously state on the face or back of the certificate that such a
restriction exists pursuant to a specified document and (a) that the corporation
will furnish to the record holder of the certificate without charge upon written
request to the corporation at its principal place of business or registered
office a copy of the specified document, or (b) if such document is one required
or permitted to be and has been filed under the Texas Business Corporation Act,
that such specified document is on file in the office of the Secretary of State
and contains a full statement of such restriction.
6.6 RIGHTS TO PURCHASE STOCK OF A SHAREHOLDER.
(a) When a shareholder elects to sell his shares of stock in the
corporation, the right to purchase such shares shall first be made available to
EAE Services, Inc., on the same terms made available or offered to any other
purchaser for a period of twenty (20) days, and thereafter offered for an
additional period of ten (10) days to the shareholders of the corporation, pro
rata, among the electing shareholders.
(b) In the event of the death of a shareholder, any successor in
interest to the deceased shareholder's stock shall take such stock subject to
the provisions of Paragraph 6.06(a) above.
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6.7 SALES AND OTHER TRANSFERS OF STOCK.
(a) Shareholder Agreements. The shareholders of this corporation
may make agreements between or among themselves through a written shareholders'
agreement, governing the purchase, among themselves, of the stock of this
corporation in the event of the death, bankruptcy, retirement, or disability of
any shareholder, and in the event of a transfer by a shareholder of his stock by
donation to the shareholder's spouse and lineal descendants. A copy of any such
agreement shall be placed on file by the corporation at its principal place of
business or its registered office and shall be subject to the same right of
examination by a shareholder of the corporation, in person or by agent, attorney
or accountant, as are the books and records of the corporation. The provisions
of any such agreement shall be binding upon the parties to the agreement and
their respective heirs, administrators, legatees, executors and assigns.
(b) Stock Redemption Agreements. The corporation and any number of
the shareholders of the corporation may enter into stock redemption agreements.
A copy of any such agreement shall be placed on file by the corporation at its
principal place of business or its registered office.
ARTICLE SEVEN: RECORD AND REPORTS
7.1 BOOKS AND RECORDS. The corporation shall keep books and records of
account, and shall keep minutes of the proceedings of its shareholders, its
Board of Directors, and each committee of its Board of Directors. The
corporation shall keep at its registered office or its principal place of
business, or at the office of its transfer agent or registrar, a record of the
original issuance of shares issued by the corporation and a record of each
transfer of those shares that have been presented to the corporation for
registration of transfer. Such records shall contain the names
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<PAGE> 15
and addresses of all past and current shareholders of the corporation and the
number and class of shares issued by the corporation held by each of them.
7.2 EXAMINATION OF BOOKS AND RECORDS. Any person who shall have been a
shareholder for at least six (6) months immediately preceding his demand, or
shall be the holder of at least five percent (5%) of all outstanding shares of
the corporation, upon written demand stating the purpose thereof, shall have the
right to examine, in person or by agent, accountant, or attorney, at any
reasonable time or times, for any proper purpose, its relevant books and records
of account, minutes, and share transfer records, and to make extracts therefrom.
A director may examine the corporation's books and records of account, share
transfer records, corporate minutes and any other corporate books and records
for any purpose reasonably related to the director's service as a director.
ARTICLE EIGHT: FIXING RECORD DATES
8.1 FIXING RECORD DATE. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or entitled to receive a distribution by the corporation
(other than a distribution involving a purchase or redemption by the corporation
of any of its own shares) or a share dividend, or in order to make a
determination of shareholders for any other proper purpose (other than
determining shareholders entitled to consent to action by shareholders proposed
to be taken without a meeting of shareholders), the Board of Directors may
provide that the share transfer records shall be closed for a stated period but
not to exceed, in any case, sixty (60) days. If the share transfer records shall
be closed for the purpose of determining shareholders entitled to notice of or
to vote at a meeting of shareholders, such records shall be closed for at least
ten (10) days immediately preceding such meeting.
15
<PAGE> 16
ARTICLE NINE: AMENDMENT OF BYLAWS
9.1 AMENDMENT OF BYLAWS. The power to alter, amend, or repeal these
Bylaws is vested in the Board of Directors of the corporation, subject to
repeal, change or amendment by the shareholders of the corporation.
The foregoing Bylaws of EAE Services, Inc., are unanimously adopted as the
Bylaws of EAE Services, Inc. by the Board of Directors of EAE Services, Inc., on
this 20th day of July, 1997.
DIRECTORS:
/s/ Samuel F. Eakin
---------------------------
Samuel F. Eakin, Director
/s/ David B. Ammons
--------------------------
David B. Ammons, Director
Attest: /s/ David B. Ammons
-------------------------------
David B. Ammons, Secretary
16
<PAGE> 1
EXHIBIT 3.8
ARTICLES OF INCORPORATION OF
EAE INDUSTRIES, INC.
The undersigned natural person of the age of 18 years or older, acting as
incorporator under the Texas Business Corporation Act, adopts the following
Articles of Incorporation for this corporation:
ARTICLE I
CORPORATE NAME
The name of the corporation is EAE Industries, Inc.
ARTICLE II
DURATION
The period of this corporation's duration is perpetual.
ARTICLE III
CORPORATE PURPOSES
The corporation is organized for the purpose of transacting any or all
lawful business for which corporations may be incorporated under the Texas
Business Corporation Act.
ARTICLE IV
AUTHORIZED STOCK AND SHARE STRUCTURE
The corporation is authorized to issue only one class of shares of stock.
The total number of shares that the corporation is authorized to issue is 10,000
shares. Each share shall be without par value. No distinction shall exist
between the shares of the corporation or between the holders of the shares.
1
<PAGE> 2
ARTICLE V
COMMENCING BUSINESS
The corporation will not commence business until it has received for
issuing its shares consideration of the value of one-thousand dollars
($1,000.00) consisting of money, labor done, or property actually received.
ARTICLE VI
REGISTERED OFFICE AND AGENT
The street address of the initial registered office of the corporation is
8502 Cypress Street- Brady Island, Houston, Texas 77012, and the name of the
initial registered agent at this address is Frank Eakin.
ARTICLE VII
DIRECTORS
The number of directors constituting the initial Board of Directors is two.
The names and addresses of the persons who are to serve as directors until the
first annual shareholders' meeting or until their successors are elected and
qualify are:
Samuel F. Eakin
4000 S. Sherwood Forest Boulevard
Suite 603
Baton Rouge, Louisiana 70816
David Ammons
4000 S. Sherwood Forest Boulevard
Suite 603
Baton Rouge, Louisiana 70816
ARTICLE VIII
INCORPORATOR
The name and address of the incorporator is:
2
<PAGE> 3
David Ammons
4000 S. Sherwood Forest Boulevard
Suite 603
Baton Rouge, Louisiana 70816
The undersigned has executed these Articles of Incorporation on this 18th
day of July, 1996.
INCORPORATOR:
/s/DAVID AMMONS
--------------------------------
David Ammons
3
<PAGE> 1
EXHIBIT 3.9
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION OF
EAE INDUSTRIES, INC.
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act, EAE Industries, 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 EAE Industries, Inc.
(2) AMENDMENT IS ALTERATION. This Articles of Amendment to the Articles of
Incorporation alters Article IV of the Articles of Incorporation of the
Corporation. The full text of Article IV as it is amended to read by this
Articles of Amendment is quoted below:
"ARTICLE IV
AUTHORIZED STOCK AND SHARE STRUCTURE
A. Authorized Common Shares. The Corporation is authorized to issue
twenty thousand (20,000) shares of common stock, in the aggregate, at no
par value. No distinction shall exist between the shares of the Corporation
or between the holders of the shares. The shares of common stock shall have
identical rights and privileges in every respect.
B. Authorized Preferred Shares. The Corporation is authorized to issue
five hundred thousand (500,000) shares of preferred stock, in the
aggregate, with a par value of One and No/100 Dollars ($1.00). The
preferred shares of the Corporation shall be non-voting and shall be
preferred upon liquidation in the amount of One and No/100 Dollars ($1.00)
for each outstanding share. A noncumulative dividend of seventy cents
($.70) per share shall be payable with respect to such preferred shares out
of the funds legally available."
(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 16 day of July, 1997.
(4) SHARES. The number of shares of stock of the Corporation outstanding at
the time
<PAGE> 2
of the adoption of this Amendment to the Articles of Incorporation was 10,000.
The number of shares entitled to vote thereon as a class was 10,000, all of
which were shares of voting common stock.
(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 amendment.
(6) ISSUED SHARES. This Articles of Amendment does not provide for an
exchange, reclassification or cancellation of issued shares.
(7) STATED CAPITAL. This Articles of Amendment does not effect a change in
the amount of stated capital. Pursuant to Article 4.05 of the Texas Business
Corporation Act, this original Articles of Amendment and a copy thereof shall be
delivered for filing to the Secretary of State of the State of Texas.
DATED: August 5, 1997.
EAE INDUSTRIES, INC.
BY: /s/DAVID B. AMMONS
------------------------------------
David B. Ammons, Secretary
<PAGE> 1
EXHIBIT 3.10
AMENDED AND RESTATED BYLAWS
OF
EAE INDUSTRIES, INC.
ARTICLE ONE: REGISTERED OFFICE AND AGENT
1.1 REGISTER OFFICE AND AGENT. The registered office of the
corporation is located at 8052 Cypress Street, Houston, Texas, 77012. The name
of the registered agent of the corporation at such address is Frank W. Eakin.
ARTICLE TWO: SHAREHOLDERS' MEETINGS
2.1 PLACE OF MEETINGS. All meetings of the shareholders shall be
held at the registered office of the corporation, or by telephone, or at such
other places within or without the State of Texas, as may be designated from
time to time by the Board of Directors.
2.2 TIME OF ANNUAL MEETING. The annual meetings of the
shareholders shall be held each year at ______ p.m. on the first Tuesday of
April. If this day falls on a legal holiday, the annual meeting shall be held
at the same time on the next following business day.
2.3 NOTICE OF SHAREHOLDERS' MEETING. Written or printed notice
stating the place, day and hour of the shareholders' meeting and, in case of a
special meeting, the purpose or purposes for which the meeting is called, shall
be delivered to each shareholder entitled to vote at such meeting not less than
ten (10) days nor more than sixty (60) days before the date of the meeting,
either personally or by mail, by or at the direction of the President, the
Secretary, or the Officer or person calling the meeting, with postage thereon
prepaid, addressed to the shareholder at his address as it appears on the share
transfer records of the corporation, or that address given by the shareholder
to the corporation for the purpose of notice. Notice of adjourned meetings is
not
<PAGE> 2
necessary unless the meeting is adjourned for thirty (30) days or more, in
which case notice of the adjourned meeting shall be given as in the case of any
special meeting.
2.4 SPECIAL MEETINGS. Special meetings of the shareholders for any
purpose or purposes whatsoever may be called at any time (1) by the President,
the Board of Directors, or such other person or persons as may be authorized in
the Articles of Incorporation or the Bylaws, or (2) by the holders of at least
ten percent (10%) of all the shares entitled to vote at the proposed special
meeting, unless the Articles of Incorporation provide for a number of shares
greater than or less than ten percent (10%), in which event special meetings of
the shareholders may be called by the holders of at least the percentage of
shares so specified in the Articles of Incorporation, but in no event shall the
Article of Incorporation provide for a number of shares greater than fifty
percent (50%). The record date for determining shareholders entitled to call a
special meeting shall be the date the first shareholder signs the notice of
that meeting. Only business within the purpose or purposes described in the
notice required in Article 2.03 may be conducted at a special meeting of the
shareholders.
2.5 QUORUM. With respect to any matter, a quorum shall be present
at a meeting of the shareholders if the holders of a majority of the shares
entitled to vote on that matter are represented at the meeting in person or by
proxy. Once a quorum is present at a meeting of shareholders, the shareholders
represented in person or by proxy at the meeting may conduct such business as
may be properly brought before the meeting until it is adjourned, and the
subsequent withdrawal from the meeting of any shareholder or the refusal of any
shareholder represented in person or by proxy shall not affect the presence of
a quorum at the meeting.
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The shareholders represented in person or by proxy at a meeting of
shareholders at which a quorum is not present may adjourn the meeting until
such time and to such place as may be determined by vote of the holders of a
majority of the shares represented in person or by proxy at that meeting.
2.6 VOTING. Only persons listed as shareholders on the share
transfer records for shares of the corporation on the record date shall be
entitled to notice of and to vote at any shareholder meeting. The record date
for such determination of shareholders shall be the date on which notice of the
meeting is mailed, unless some other day is fixed by the Board of Directors for
the determination of shareholders of record. Each outstanding share,
regardless of class, shall be entitled to one vote on each matter submitted to
a vote at a meeting of the shareholders, except (a) to the extent the Articles
of Incorporation provide for more or less than one vote per share or (if and to
the extent permitted by the Texas Business Corporation Act) limit or deny
voting rights to the holders of the shares of any class or series, or (b) as
otherwise provided by the Texas Business Corporation Act.
With respect to any matter, other than the election of directors or a
matter for which the affirmative vote of the holders of a specified portion of
the shares entitled to vote is required by the Texas Business Corporation Act,
the affirmative vote of the holders of a majority of the shares entitled to
vote on that matter and represented in person or by proxy at a meeting of the
shareholders at which a quorum is present shall be the act of the shareholders
unless otherwise provided in the Articles of Incorporation or these Bylaws in
accordance with Article 2.28B of the Texas Business Corporation Act.
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<PAGE> 4
2.7 PROXIES. Any shareholder entitled to vote or execute
consents may do so either in person or by proxy executed in writing by the
shareholder. A telegram, telex, cablegram, or similar transmission by the
shareholder, shall be treated as an execution in writing for purposes of this
provision. No proxy shall be valid after eleven (11) months from the date of
its execution, unless otherwise provided in the proxy.
2.8 CONSENT OF ABSENTEES. No defect in the calling or noticing of
a shareholders' meeting will affect the validity of any action at the meeting
if a quorum was present and if each shareholder, not present in person or by
proxy, signs a written waiver of notice, consents to the holding of the
meeting, or approves the minutes of the meeting, either before or after the
meeting, and those waivers, consents, or approvals are filed with the corporate
records or made a part of the minutes of such meeting.
2.9 UNANIMOUS WRITTEN CONSENT IN LIEU OF MEETING. Any action
required by the Texas Business Corporation Act to be taken at any annual or
special meeting of the shareholders, or any action which may be taken at any
annual or special meeting of shareholders, may be taken without a meeting,
without prior notice, and without a vote, if a consent or consents in writing,
setting forth the action so taken, shall have been signed and dated by the
holder or holders of all the shares entitled to vote with respect to the action
that is the subject of the consent. Such consents are filed with the Secretary
of the corporation.
ARTICLE THREE: DIRECTORS
3.1 POWERS. The powers of the corporation shall be exercised by
or under the authority of, and the business and affairs of the corporation
shall be managed under direction of, the Board of Directors of the corporation,
subject, however, to such limitations as are imposed by law, the
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<PAGE> 5
Articles of Incorporation, or these Bylaws as to actions to be authorized or
approved by the shareholders. The Board of Directors may, by contract or
otherwise, grant general, limited, or special power and authority to the
officers and employees of the corporation to transact the general business, or
any special business, of the corporation, and may give powers of attorney to
agents of the corporation to transact any special business requiring such
authorization.
3.2 NUMBER AND QUALIFICATION OF DIRECTORS. The authorized number
of Directors of this corporation shall be at least two (2) and not more than
five (five), as determined from time to time by the Board of Directors. The
Directors need not be shareholders of this corporation or residents of the
State of Texas. The number of Directors may be increased or decreased from
time to time by amendment to these Bylaws or in the manner provided in the
Articles of Incorporation or these Bylaws, but no decrease shall have the
effect of shortening the term of any incumbent Director.
3.3 ELECTION AND TERM OF OFFICE. At the first annual meeting of
shareholders and at each annual meeting thereafter, the holders of shares
entitled to vote in the election of directors shall elect directors by a
majority vote of the shares entitled to vote to hold office until the next
succeeding annual meeting. Unless removed in accordance with provisions of the
Articles of Incorporation or these Bylaws, each director shall hold office for
the term for which he is elected and until his successor shall have been
elected and qualified.
At each election for directors, every shareholder entitled to vote at
such election shall have the right (a) to vote the number of shares owned by
him for as many persons as there are directors to be elected and for whose
election he has a right to vote, or (b) to cumulate his votes (unless the
Articles of Incorporation expressly prohibit such) by giving one candidate as
many votes as the
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<PAGE> 6
number of directors multiplied by his shares shall equal, or by distributing
such votes on the same principal among any number of such candidates. Voting
for the election of Directors shall be by voice unless any shareholder demands
a ballot vote before the voting begins.
3.4 VACANCIES. Any vacancy occurring in the Board of Directors
after the issuance of shares may be filled by the affirmative vote of a
majority of the remaining Directors though less than a quorum of the Board of
Directors, or by the sole remaining Director. The shareholders may elect a
Director at any time to fill any vacancy not filled by the Directors. A
Director elected to fill a vacancy shall be elected for the unexpired term of
his predecessor in office. Any directorship to be filled by reason of an
increase in the number of directors shall be filled by election at an annual or
special meeting of shareholders called for that purpose.
3.5 REMOVAL OF DIRECTORS. At any meeting of shareholders called
expressly for that purpose any Director or the entire Board of Directors may be
removed, with or without cause, by a vote of the holders of a majority of the
shares then entitled to vote at an election of directors.
3.6 PLACE OF MEETINGS. All meetings of the Board of Directors
shall be held at the principal office of the corporation, or by telephone, or
at such place within or without the State of Texas as may be designated from
time to time by resolution of the Board of Directors or by written consent of
all members of the Board of Directors.
3.7 REGULAR MEETINGS. Regular meetings of the Board of Directors
shall be held, without call or notice, immediately following or simultaneous
with each annual meeting of the shareholders of the corporation, and at such
other times as the Directors may from time to time determine.
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<PAGE> 7
3.8 SPECIAL MEETINGS -- CALL AND NOTICE. Special meetings of the
Board of Directors for any purpose may be called at any time by the President
or any Director upon written or printed notice. Written or printed notice of a
special meeting shall state the place, day, hour, and in general terms, the
purpose or purposes of the meeting and the business to be transacted. Notice
shall be mailed, telefaxed, or personally delivered to each Director not later
than two (2) days prior to the day appointed for the special meeting. The
business transacted at the special meeting shall be confined to the purpose(s)
and business stated in the notice. Attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except where a director attends
a meeting for the express purpose of objecting to the transaction of any
business on the ground that the meeting is not lawfully called or convened.
3.9 QUORUM. A majority of the authorized number of Directors shall
be necessary to constitute a quorum for the transaction of business of the
Board of Directors. The act of the majority of the Directors present at a
meeting at which a quorum is present shall be the act of the Board of
Directors, unless the act of a greater number is required by law or the
Articles of Incorporation or these Bylaws.
3.10 BOARD ACTION WITHOUT MEETING Any action required or permitted
to be taken at a meeting of the Board of Directors or any committee may be
taken without a meeting if a consent in writing, setting forth the action so
taken, is signed by all the members of the Board of Directors or committee, as
the case may be. Such consent shall have the same force and effect as a
unanimous vote at a meeting, and may be stated as such in any document or
instrument filed with the Secretary of State.
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<PAGE> 8
3.11 ADJOURNMENT -- NOTICE. A quorum of the Directors may adjourn
any meeting of the Board of Directors to meet again at a stated hour on a
stated day. Notice of the time and place where an adjourned meeting will be
held need not be given to absent Directors if the time and place is fixed at
the adjourned meeting. In the absence of a quorum, the Directors present at
any Directors' meeting, either regular or special, may adjourn from time to
time until the time fixed for the next regular meeting of the Board.
3.12 CONDUCT OF MEETINGS. The Chief Executive Officer of the
corporation, or in the Chief Executive Officer's absence, any Director selected
by the Directors present at the meeting, shall preside at meetings of the Board
of Directors. The Secretary of the corporation or, in the Secretary's absence,
any person appointed by the presiding officer, shall act as Secretary of the
Board of Directors.
3.13 COMPENSATION. Directors and members of any committee of the
Board of Directors may receive such compensation, if any, for their services,
and such reimbursement for expenses, as may be fixed or determined from time to
time by resolution of the Board of Directors.
3.14 INDEMNIFICATION OF DIRECTORS AND OFFICERS. The corporation
shall indemnify a director or an officer of the corporation against reasonable
expenses incurred by him in connection with a proceeding in which he is a named
defendant or respondent because he is or was a director or an officer of the
corporation if he has been wholly successful, on the merits or otherwise, in
the defense of the proceeding, or if a court of competent jurisdiction orders
the corporation to indemnify the director or officer because the court
determines indemnification is proper and equitable.
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ARTICLE FOUR: OFFICERS
4.1. TITLE AND APPOINTMENT. The officers of the corporation shall
consist of a Chief Executive Officer, President and Chief Operating Officer,
Secretary, and a Treasurer, each of whom shall be elected by a majority vote of
the Board of Directors at such time as the Board of Directors may from time to
time designate. Such other officers, including Vice Presidents, assistant
officers, and agents may be appointed by a majority vote of the Board of
Directors, as the Board of Directors shall from time to time determine
necessary. Any two (2) or more offices may be held by the same person. All
officers shall be elected by and shall hold office at the pleasure of the Board
of Directors. The Board of Directors shall fix the compensation and tenure of
all officers.
4.2 CHIEF EXECUTIVE OFFICER/CHAIRMAN OF THE BOARD OF DIRECTORS.
The Chairman of the Board of Directors shall be the Chief Executive Officer of
the corporation and shall preside at all meetings of the shareholders and the
Board of Directors. The Chief Executive Officer shall have general supervisory
authority and power over the business and financial affairs of the corporation.
4.3 PRESIDENT AND CHIEF OPERATING OFFICER. The President of the
Corporation shall also be the Chief Operating Officer of the corporation. He
shall have active and general management of the business operations of the
corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. The President and Chief Operating Officer
shall have the general powers and duties carried into effect. He shall have
the general powers and duties of supervision and management over the business
operations of the corporation. He also shall appoint and discharge all
subordinate agents and employees and fix their salaries, subject to review by
the Board of Directors, and shall designate the duties they are to perform.
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<PAGE> 10
4.4 VICE-PRESIDENT. In the event of the absence, disability, or
termination of employment for any reason, of the President, the Vice-President
shall in his stead with the same authority, duties and responsibilities as the
President.
4.5 SECRETARY. The Secretary shall keep the minutes of the
meetings of the Board of Directors and the minutes of the meetings of the
shareholders in appropriate books. He shall attend to the giving of all
notices of the corporation. He shall have charge of the books or records
containing the names, alphabetically arranged, of all persons who are
shareholders of the corporation and such other books and papers as the Board
may direct, and shall perform all the duties incidental to his office.
4.6 TREASURER. The Treasurer shall have the care and custody of
all of the funds and securities of the corporation and shall see that the same
are deposited in the name of the corporation in such bank or depositories as
the Board of Directors may from time to time select. The Treasurer shall
supervise and direct all bookkeeping and accounting personnel and functions and
shall have the authority and power to hire and dismiss any bookkeeping or
accounting personnel.
4.7 ASSISTANTS. Assistant secretaries or treasurers shall have
such duties as may be delegated to them by the secretary and treasurer,
respectively.
4.8 TERM OF OFFICE. The officers of the corporation shall hold
office until their successors are chosen and qualify in their stead. Any
officer or agent or member of a committee elected or appointed by the Board of
Directors may be removed at any time by the affirmative vote of a majority of
the Board of Directors, whenever in its judgment the best interests of the
corporation will be served thereby, but such removal shall be without prejudice
to the contract
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<PAGE> 11
rights, if any, of the person so removed. If any office becomes vacant for any
reason, the vacancy shall be filled by the affirmative vote of a majority of
the Board of Directors.
4.9 DELEGATION OF DUTIES AND AUTHORITY. In the case of the
absence of any officer of the Corporation, or for any other reason that the
Board may deem sufficient as to any officer, the Board may delegate, for the
time being, the powers or duties, or any of them, of such officer to any other
officer, or to any director, provided a majority of the entire Board concurs
therein.
ARTICLE FIVE: EXECUTION OF INSTRUMENTS
5.1 The Board of Directors may, in its discretion, authorize an
officer or officers, or other person or persons, to execute any corporate
instrument or document, or to sign the corporate name without limitation,
except where otherwise provided by law, and such execution or signature shall
be binding on the corporation.
ARTICLE SIX: ISSUANCE AND TRANSFER OF SHARES
6.1 REQUIREMENT OF PAYMENT FOR SHARES. The corporation may issue
the number of shares stated in the Articles of Incorporation. Certificates for
shares of the corporation may not be issued until the full amount of the
consideration for the shares, fixed as provided by law, has been paid. When
such consideration shall have been paid to the corporation, the shares shall be
deemed to have been issued and shall be considered fully paid and
non-assessable.
6.2 CERTIFICATES REPRESENTING SHARES. The corporation shall
deliver certificates representing shares to which shareholders are entitled.
The certificates shall be in such form as the Board of Directors may provide.
The certificates shall be signed by the President or Vice-President and the
Secretary-Treasurer, and may be sealed with the seal of the corporation or a
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facsimile thereof. The signatures of such officers may be facsimiles, if the
certificates are to be countersigned by a transfer agent or registered by a
registrar.
Each certificate representing shares of the corporation shall state
upon the fact thereof: (1) that the corporation is organized under the laws of
the State of Texas, (2) the name of the person to whom issued, (3) the number
and class of shares and the designation of the series, if any, which such
certificate represents, and (4) the par value of each share represented by such
certificate, or a statement that the shares are without par value.
6.3 REPLACEMENT OF CERTIFICATES. No new certificate representing
shares of the corporation shall be issued until the former certificate for the
shares represented thereby shall have been surrendered and canceled, except in
the case of lost or destroyed certificates in which case the Board of Directors
may order new certificates to be issued upon such terms, conditions, and
guarantees as the Board may deem necessary to impose, including the filing of
sufficient indemnity.
6.4 TRANSFER OF SHARES. The shares and other securities of the
corporation shall be personal property for all purposes and shall be
transferrable in accordance with the provisions of Chapter 8 -- Investment
Securities -- of the Texas Business and Commerce Code, as amended, except as
otherwise provided in the Texas Business Corporation Act. The shares may be
transferred by endorsement, by signature of the owner or the owner's agent,
attorney or legal representative, or by the delivery of the certificate. The
transferee in any transfer of shares shall be deemed to have full notice of,
and to consent to, the Bylaws of the corporation to the same extent as if the
transferee had signed a written assent thereto.
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6.5 RESTRICTIVE ENDORSEMENT. If a restriction on the transfer, or
registration of the transfer, of shares is imposed or agreed to by the
corporation, as permitted by the Texas Business Corporation Act, each
certificate representing shares so restricted: (1) shall conspicuously set
forth a full or summary statement of the restriction on the face of the
certificate, or (2) shall set forth such statement on the back of the
certificate and conspicuously refer to the same on the face of the certificate,
or (3) shall conspicuously state on the face or back of the certificate that
such a restriction exists pursuant to a specified document and (a) that the
corporation will furnish to the record holder of the certificate without charge
upon written request to the corporation at its principal place of business or
registered office a copy of the specified document, or (b) if such document is
one required or permitted to be and has been filed under the Texas Business
Corporation Act, that such specified document is on file in the office of the
Secretary of State and contains a full statement of such restriction.
6.6 RIGHTS TO PURCHASE STOCK OF A SHAREHOLDER.
(a) When a shareholder elects to sell his shares of stock in
the corporation, the right to purchase such shares shall first be made
available to EAE Industries, Inc., on the same terms made available or offered
to any other purchaser for a period of twenty (20) days, and thereafter offered
for an additional period of ten (10) days to the shareholders of the
corporation, pro rata, among the electing shareholders.
(b) In the event of the death of a shareholder, any successor
in interest to the deceased shareholder's stock shall take such stock subject
to the provisions of Paragraph 6.06(a) above.
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6.7 SALES AND OTHER TRANSFERS OF STOCK.
(a) Shareholder Agreements. The shareholders of this
corporation may make agreements between or among themselves through a written
shareholders' agreement, governing the purchase, among themselves, of the stock
of this corporation in the event of the death, bankruptcy, retirement, or
disability of any shareholder, and in the event of a transfer by a shareholder
of his stock by donation to the shareholder's spouse and lineal descendants. A
copy of any such agreement shall be placed on file by the corporation at its
principal place of business or its registered office and shall be subject to the
same right of examination by a shareholder of the corporation, in person or by
agent, attorney or accountant, as are the books and records of the corporation.
The provisions of any such agreement shall be binding upon the parties to the
agreement and their respective heirs, administrators, legatees, executors and
assigns.
(b) Stock Redemption Agreements. The corporation and any
number of the shareholders of the corporation may enter into stock redemption
agreements. A copy of any such agreement shall be placed on file by the
corporation at its principal place of business or its registered office.
ARTICLE SEVEN: RECORD AND REPORTS
7.1 BOOKS AND RECORDS. The corporation shall keep books and
records of account, and shall keep minutes of the proceedings of its
shareholders, its Board of Directors, and each committee of its Board of
Directors. The corporation shall keep at its registered office or its
principal place of business, or at the office of its transfer agent or
registrar, a record of the original issuance of shares issued by the
corporation and a record of each transfer of those shares that have been
presented to the corporation for registration of transfer. Such records shall
contain the names
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and addresses of all past and current shareholders of the corporation and the
number and class of shares issued by the corporation held by each of them.
7.2 EXAMINATION OF BOOKS AND RECORDS. Any person who shall have
been a shareholder for at least six (6) months immediately preceding his
demand, or shall be the holder of at least five percent (5%) of all outstanding
shares of the corporation, upon written demand stating the purpose thereof,
shall have the right to examine, in person or by agent, accountant, or
attorney, at any reasonable time or times, for any proper purpose, its relevant
books and records of account, minutes, and share transfer records, and to make
extracts therefrom. A director may examine the corporation's books and records
of account, share transfer records, corporate minutes and any other corporate
books and records for any purpose reasonably related to the director's service
as a director.
ARTICLE EIGHT: FIXING RECORD DATES
8.1 FIXING RECORD DATE. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or entitled to receive a distribution by the
corporation (other than a distribution involving a purchase or redemption by
the corporation of any of its own shares) or a share dividend, or in order to
make a determination of shareholders for any other proper purpose (other than
determining shareholders entitled to consent to action by shareholders proposed
to be taken without a meeting of shareholders), the Board of Directors may
provide that the share transfer records shall be closed for a stated period but
not to exceed, in any case, sixty (60) days. If the share transfer records
shall be closed for the purpose of determining shareholders entitled to notice
of or to vote at a meeting of shareholders, such records shall be closed for at
least ten (10) days immediately preceding such meeting.
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ARTICLE NINE: AMENDMENT OF BYLAWS
9.1 AMENDMENT OF BYLAWS. The power to alter, amend, or repeal
these Bylaws is vested in the Board of Directors of the corporation, subject to
repeal, change or amendment by the shareholders of the corporation.
The foregoing Amended and Restated Bylaws of EAE Industries, Inc., are
unanimously adopted as the Bylaws of EAE Industries, Inc. by the Board of
Directors of EAE Industries, Inc., on this __________ day of _______________,
1997.
DIRECTORS:
/s/ Samuel F. Eakin
--------------------------------
Samuel F. Eakin, Director
/s/ David B. Ammons
--------------------------------
David B. Ammons, Director
Attest: /s/ David B. Ammons
-----------------------------
David B. Ammons, Secretary
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<PAGE> 1
EXHIBIT 3.11
ARTICLES OF INCORPORATION OF
NEWPARK MARINE FABRICATORS, INC.
The undersigned natural person of the age of 18 years or older, acting
as incorporator under the Texas Business Corporation Act, adopts the following
Articles of Incorporation for this corporation:
ARTICLE I
CORPORATE NAME
The name of the corporation is Newpark Marine Fabricators, Inc.
ARTICLE II
DURATION
The period of this corporation's duration is perpetual.
ARTICLE III
CORPORATE PURPOSES
The corporation is organized for the purpose of transacting any or all
lawful business for which corporations may be incorporated under the Texas
Business Corporation Act.
ARTICLE IV
AUTHORIZED STOCK AND SHARE STRUCTURE
The corporation is authorized to issue only one class of shares of
stock. The total number of shares that the corporation is authorized to issue
is 10,000 shares. Each share shall be without par value. No distinction shall
exist between the shares of the corporation or between the holders of the
shares.
<PAGE> 2
ARTICLE V
COMMENCING BUSINESS
The corporation will not commence business until it has received for
issuing its shares consideration of the value of one-thousand dollars
($1,000.00) consisting of money, labor done, or property actually received.
ARTICLE VI
REGISTERED OFFICE AND AGENT
The street address of the initial registered office of the corporation
is 811 Dallas Avenue, Houston, Texas 77012, and the name of the initial
registered agent at this address is CT Corporation System.
ARTICLE VII
DIRECTORS
The number of directors constituting the initial Board of Directors is
two. The names and addresses of the persons who are to serve as directors
until the first annual shareholders' meeting or until their successors are
elected and qualify are:
Samuel F. Eakin
4000 S. Sherwood Forest Boulevard
Suite 603
Baton Rouge, Louisiana 70816
David Ammons
4000 S. Sherwood Forest Boulevard
Suite 603
Baton Rouge, Louisiana 70816
ARTICLE VIII
INCORPORATOR
The name and address of the incorporator is:
2
<PAGE> 3
Elizabeth Sherman Cox
One American Place, 23rd Floor
Baton Rouge, Louisiana 70825
The undersigned has executed these Articles of Incorporation on this
10th day of September, 1997.
INCORPORATOR:
/s/ ELIZABETH SHERMAN COX
----------------------------
Elizabeth Sherman Cox
3
<PAGE> 1
EXHIBIT 3.12
BYLAWS
OF
NEWPARK MARINE FABRICATORS, INC.
ARTICLE ONE: REGISTERED OFFICE AND AGENT
1.1 REGISTER OFFICE AND AGENT. The registered office of the
corporation is located at 811 Dallas Avenue, Houston, Texas, 77012. The name
of the registered agent of the corporation at such address is CT Corporation
System.
ARTICLE TWO: SHAREHOLDERS' MEETINGS
2.1 PLACE OF MEETINGS. All meetings of the shareholders shall be
held at the registered office of the corporation, or by telephone, or at such
other places within or without the State of Texas, as may be designated from
time to time by the Board of Directors.
2.2 TIME OF ANNUAL MEETING. The annual meetings of the
shareholders shall be held each year at ______ p.m. on the first Tuesday of
April. If this day falls on a legal holiday, the annual meeting shall be held
at the same time on the next following business day.
2.3 NOTICE OF SHAREHOLDERS' MEETING. Written or printed notice
stating the place, day and hour of the shareholders' meeting and, in case of a
special meeting, the purpose or purposes for which the meeting is called, shall
be delivered to each shareholder entitled to vote at such meeting not less than
ten (10) days nor more than sixty (60) days before the date of the meeting,
either personally or by mail, by or at the direction of the President, the
Secretary, or the Officer or person calling the meeting, with postage thereon
prepaid, addressed to the shareholder at his address as it appears on the share
transfer records of the corporation, or that address given by the shareholder
to the corporation for the purpose of notice. Notice of adjourned meetings is
not
<PAGE> 2
necessary unless the meeting is adjourned for thirty (30) days or more, in
which case notice of the adjourned meeting shall be given as in the case of any
special meeting.
2.4 SPECIAL MEETINGS. Special meetings of the shareholders for any
purpose or purposes whatsoever may be called at any time (1) by the President,
the Board of Directors, or such other person or persons as may be authorized in
the Articles of Incorporation or the Bylaws, or (2) by the holders of at least
ten percent (10%) of all the shares entitled to vote at the proposed special
meeting, unless the Articles of Incorporation provide for a number of shares
greater than or less than ten percent (10%), in which event special meetings of
the shareholders may be called by the holders of at least the percentage of
shares so specified in the Articles of Incorporation, but in no event shall the
Article of Incorporation provide for a number of shares greater than fifty
percent (50%). The record date for determining shareholders entitled to call a
special meeting shall be the date the first shareholder signs the notice of
that meeting. Only business within the purpose or purposes described in the
notice required in Article 2.03 may be conducted at a special meeting of the
shareholders.
2.5 QUORUM. With respect to any matter, a quorum shall be present
at a meeting of the shareholders if the holders of a majority of the shares
entitled to vote on that matter are represented at the meeting in person or by
proxy. Once a quorum is present at a meeting of shareholders, the shareholders
represented in person or by proxy at the meeting may conduct such business as
may be properly brought before the meeting until it is adjourned, and the
subsequent withdrawal from the meeting of any shareholder or the refusal of any
shareholder represented in person or by proxy shall not affect the presence of
a quorum at the meeting.
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The shareholders represented in person or by proxy at a meeting of
shareholders at which a quorum is not present may adjourn the meeting until
such time and to such place as may be determined by vote of the holders of a
majority of the shares represented in person or by proxy at that meeting.
2.6 VOTING. Only persons listed as shareholders on the share
transfer records for shares of the corporation on the record date shall be
entitled to notice of and to vote at any shareholder meeting. The record date
for such determination of shareholders shall be the date on which notice of the
meeting is mailed, unless some other day is fixed by the Board of Directors for
the determination of shareholders of record. Each outstanding share,
regardless of class, shall be entitled to one vote on each matter submitted to
a vote at a meeting of the shareholders, except (a) to the extent the Articles
of Incorporation provide for more or less than one vote per share or (if and to
the extent permitted by the Texas Business Corporation Act) limit or deny
voting rights to the holders of the shares of any class or series, or (b) as
otherwise provided by the Texas Business Corporation Act.
With respect to any matter, other than the election of directors or a
matter for which the affirmative vote of the holders of a specified portion of
the shares entitled to vote is required by the Texas Business Corporation Act,
the affirmative vote of the holders of a majority of the shares entitled to
vote on that matter and represented in person or by proxy at a meeting of the
shareholders at which a quorum is present shall be the act of the shareholders
unless otherwise provided in the Articles of Incorporation or these Bylaws in
accordance with Article 2.28B of the Texas Business Corporation Act.
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<PAGE> 4
2.7 PROXIES. Any shareholder entitled to vote or execute
consents may do so either in person or by proxy executed in writing by the
shareholder. A telegram, telex, cablegram, or similar transmission by the
shareholder, shall be treated as an execution in writing for purposes of this
provision. No proxy shall be valid after eleven (11) months from the date of
its execution, unless otherwise provided in the proxy.
2.8 CONSENT OF ABSENTEES. No defect in the calling or noticing of
a shareholders' meeting will affect the validity of any action at the meeting
if a quorum was present and if each shareholder, not present in person or by
proxy, signs a written waiver of notice, consents to the holding of the
meeting, or approves the minutes of the meeting, either before or after the
meeting, and those waivers, consents, or approvals are filed with the corporate
records or made a part of the minutes of such meeting.
2.9 UNANIMOUS WRITTEN CONSENT IN LIEU OF MEETING. Any action
required by the Texas Business Corporation Act to be taken at any annual or
special meeting of the shareholders, or any action which may be taken at any
annual or special meeting of shareholders, may be taken without a meeting,
without prior notice, and without a vote, if a consent or consents in writing,
setting forth the action so taken, shall have been signed and dated by the
holder or holders of all the shares entitled to vote with respect to the action
that is the subject of the consent. Such consents are filed with the Secretary
of the corporation.
ARTICLE THREE: DIRECTORS
3.1 POWERS. The powers of the corporation shall be exercised by
or under the authority of, and the business and affairs of the corporation
shall be managed under direction of, the Board of Directors of the corporation,
subject, however, to such limitations as are imposed by law, the
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<PAGE> 5
Articles of Incorporation, or these Bylaws as to actions to be authorized or
approved by the shareholders. The Board of Directors may, by contract or
otherwise, grant general, limited, or special power and authority to the
officers and employees of the corporation to transact the general business, or
any special business, of the corporation, and may give powers of attorney to
agents of the corporation to transact any special business requiring such
authorization.
3.2 NUMBER AND QUALIFICATION OF DIRECTORS. The authorized number
of Directors of this corporation shall be at least two (2) and not more than
five (five), as determined from time to time by the Board of Directors. The
Directors need not be shareholders of this corporation or residents of the
State of Texas. The number of Directors may be increased or decreased from
time to time by amendment to these Bylaws or in the manner provided in the
Articles of Incorporation or these Bylaws, but no decrease shall have the
effect of shortening the term of any incumbent Director.
3.3 ELECTION AND TERM OF OFFICE. At the first annual meeting of
shareholders and at each annual meeting thereafter, the holders of shares
entitled to vote in the election of directors shall elect directors by a
majority vote of the shares entitled to vote to hold office until the next
succeeding annual meeting. Unless removed in accordance with provisions of the
Articles of Incorporation or these Bylaws, each director shall hold office for
the term for which he is elected and until his successor shall have been
elected and qualified.
At each election for directors, every shareholder entitled to vote at
such election shall have the right (a) to vote the number of shares owned by
him for as many persons as there are directors to be elected and for whose
election he has a right to vote, or (b) to cumulate his votes (unless the
Articles of Incorporation expressly prohibit such) by giving one candidate as
many votes as the
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number of directors multiplied by his shares shall equal, or by distributing
such votes on the same principal among any number of such candidates. Voting
for the election of Directors shall be by voice unless any shareholder demands
a ballot vote before the voting begins.
3.4 VACANCIES. Any vacancy occurring in the Board of Directors
after the issuance of shares may be filled by the affirmative vote of a
majority of the remaining Directors though less than a quorum of the Board of
Directors, or by the sole remaining Director. The shareholders may elect a
Director at any time to fill any vacancy not filled by the Directors. A
Director elected to fill a vacancy shall be elected for the unexpired term of
his predecessor in office. Any directorship to be filled by reason of an
increase in the number of directors shall be filled by election at an annual or
special meeting of shareholders called for that purpose.
3.5 REMOVAL OF DIRECTORS. At any meeting of shareholders called
expressly for that purpose any Director or the entire Board of Directors may be
removed, with or without cause, by a vote of the holders of a majority of the
shares then entitled to vote at an election of directors.
3.6 PLACE OF MEETINGS. All meetings of the Board of Directors
shall be held at the principal office of the corporation, or by telephone, or
at such place within or without the State of Texas as may be designated from
time to time by resolution of the Board of Directors or by written consent of
all members of the Board of Directors.
3.7 REGULAR MEETINGS. Regular meetings of the Board of Directors
shall be held, without call or notice, immediately following or simultaneous
with each annual meeting of the shareholders of the corporation, and at such
other times as the Directors may from time to time determine.
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3.8 SPECIAL MEETINGS -- CALL AND NOTICE. Special meetings of the
Board of Directors for any purpose may be called at any time by the President
or any Director upon written or printed notice. Written or printed notice of a
special meeting shall state the place, day, hour, and in general terms, the
purpose or purposes of the meeting and the business to be transacted. Notice
shall be mailed, telefaxed, or personally delivered to each Director not later
than two (2) days prior to the day appointed for the special meeting. The
business transacted at the special meeting shall be confined to the purpose(s)
and business stated in the notice. Attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except where a director attends
a meeting for the express purpose of objecting to the transaction of any
business on the ground that the meeting is not lawfully called or convened.
3.9 QUORUM. A majority of the authorized number of Directors shall
be necessary to constitute a quorum for the transaction of business of the
Board of Directors. The act of the majority of the Directors present at a
meeting at which a quorum is present shall be the act of the Board of
Directors, unless the act of a greater number is required by law or the
Articles of Incorporation or these Bylaws.
3.10 BOARD ACTION WITHOUT MEETING Any action required or permitted
to be taken at a meeting of the Board of Directors or any committee may be
taken without a meeting if a consent in writing, setting forth the action so
taken, is signed by all the members of the Board of Directors or committee, as
the case may be. Such consent shall have the same force and effect as a
unanimous vote at a meeting, and may be stated as such in any document or
instrument filed with the Secretary of State.
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3.11 ADJOURNMENT -- NOTICE. A quorum of the Directors may adjourn
any meeting of the Board of Directors to meet again at a stated hour on a
stated day. Notice of the time and place where an adjourned meeting will be
held need not be given to absent Directors if the time and place is fixed at
the adjourned meeting. In the absence of a quorum, the Directors present at
any Directors' meeting, either regular or special, may adjourn from time to
time until the time fixed for the next regular meeting of the Board.
3.12 CONDUCT OF MEETINGS. The Chief Executive Officer of the
corporation, or in the Chief Executive Officer's absence, any Director selected
by the Directors present at the meeting, shall preside at meetings of the Board
of Directors. The Secretary of the corporation or, in the Secretary's absence,
any person appointed by the presiding officer, shall act as Secretary of the
Board of Directors.
3.13 COMPENSATION. Directors and members of any committee of the
Board of Directors may receive such compensation, if any, for their services,
and such reimbursement for expenses, as may be fixed or determined from time to
time by resolution of the Board of Directors.
3.14 INDEMNIFICATION OF DIRECTORS AND OFFICERS. The corporation
shall indemnify a director or an officer of the corporation against reasonable
expenses incurred by him in connection with a proceeding in which he is a named
defendant or respondent because he is or was a director or an officer of the
corporation if he has been wholly successful, on the merits or otherwise, in
the defense of the proceeding, or if a court of competent jurisdiction orders
the corporation to indemnify the director or officer because the court
determines indemnification is proper and equitable.
ARTICLE FOUR: OFFICERS
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4.1. TITLE AND APPOINTMENT. The officers of the corporation shall
consist of a Chief Executive Officer, President and Chief Operating Officer,
Secretary, and a Treasurer, each of whom shall be elected by a majority vote of
the Board of Directors at such time as the Board of Directors may from time to
time designate. Such other officers, including Vice Presidents, assistant
officers, and agents may be appointed by a majority vote of the Board of
Directors, as the Board of Directors shall from time to time determine
necessary. Any two (2) or more offices may be held by the same person. All
officers shall be elected by and shall hold office at the pleasure of the Board
of Directors. The Board of Directors shall fix the compensation and tenure of
all officers.
4.2 CHIEF EXECUTIVE OFFICER/CHAIRMAN OF THE BOARD OF DIRECTORS.
The Chairman of the Board of Directors shall be the Chief Executive Officer of
the corporation and shall preside at all meetings of the shareholders and the
Board of Directors. The Chief Executive Officer shall have general supervisory
authority and power over the business and financial affairs of the corporation.
4.3 PRESIDENT AND CHIEF OPERATING OFFICER. The President of the
Corporation shall also be the Chief Operating Officer of the corporation. He
shall have active and general management of the business operations of the
corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. The President and Chief Operating Officer
shall have the general powers and duties carried into effect. He shall have
the general powers and duties of supervision and management over the business
operations of the corporation. He also shall appoint and discharge all
subordinate agents and employees and fix their salaries, subject to review by
the Board of Directors, and shall designate the duties they are to perform.
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4.4 VICE-PRESIDENT. In the event of the absence, disability, or
termination of employment for any reason, of the President, the Vice-President
shall in his stead with the same authority, duties and responsibilities as the
President.
4.5 SECRETARY. The Secretary shall keep the minutes of the
meetings of the Board of Directors and the minutes of the meetings of the
shareholders in appropriate books. He shall attend to the giving of all
notices of the corporation. He shall have charge of the books or records
containing the names, alphabetically arranged, of all persons who are
shareholders of the corporation and such other books and papers as the Board
may direct, and shall perform all the duties incidental to his office.
4.6 TREASURER. The Treasurer shall have the care and custody of
all of the funds and securities of the corporation and shall see that the same
are deposited in the name of the corporation in such bank or depositories as
the Board of Directors may from time to time select. The Treasurer shall
supervise and direct all bookkeeping and accounting personnel and functions and
shall have the authority and power to hire and dismiss any bookkeeping or
accounting personnel.
4.7 ASSISTANTS. Assistant secretaries or treasurers shall have
such duties as may be delegated to them by the secretary and treasurer,
respectively.
4.8 TERM OF OFFICE. The officers of the corporation shall hold
office until their successors are chosen and qualify in their stead. Any
officer or agent or member of a committee elected or appointed by the Board of
Directors may be removed at any time by the affirmative vote of a majority of
the Board of Directors, whenever in its judgment the best interests of the
corporation will be served thereby, but such removal shall be without prejudice
to the contract
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<PAGE> 11
rights, if any, of the person so removed. If any office becomes vacant for any
reason, the vacancy shall be filled by the affirmative vote of a majority of
the Board of Directors.
4.9 DELEGATION OF DUTIES AND AUTHORITY. In the case of the
absence of any officer of the Corporation, or for any other reason that the
Board may deem sufficient as to any officer, the Board may delegate, for the
time being, the powers or duties, or any of them, of such officer to any other
officer, or to any director, provided a majority of the entire Board concurs
therein.
ARTICLE FIVE: EXECUTION OF INSTRUMENTS
5.1 The Board of Directors may, in its discretion, authorize an
officer or officers, or other person or persons, to execute any corporate
instrument or document, or to sign the corporate name without limitation,
except where otherwise provided by law, and such execution or signature shall
be binding on the corporation.
ARTICLE SIX: ISSUANCE AND TRANSFER OF SHARES
6.1 REQUIREMENT OF PAYMENT FOR SHARES. The corporation may issue
the number of shares stated in the Articles of Incorporation. Certificates for
shares of the corporation may not be issued until the full amount of the
consideration for the shares, fixed as provided by law, has been paid. When
such consideration shall have been paid to the corporation, the shares shall be
deemed to have been issued and shall be considered fully paid and
non-assessable.
6.2 CERTIFICATES REPRESENTING SHARES. The corporation shall
deliver certificates representing shares to which shareholders are entitled.
The certificates shall be in such form as the Board of Directors may provide.
The certificates shall be signed by the President or Vice-President and the
Secretary-Treasurer, and may be sealed with the seal of the corporation or a
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facsimile thereof. The signatures of such officers may be facsimiles, if the
certificates are to be countersigned by a transfer agent or registered by a
registrar.
Each certificate representing shares of the corporation shall state
upon the fact thereof: (1) that the corporation is organized under the laws of
the State of Texas, (2) the name of the person to whom issued, (3) the number
and class of shares and the designation of the series, if any, which such
certificate represents, and (4) the par value of each share represented by such
certificate, or a statement that the shares are without par value.
6.3 REPLACEMENT OF CERTIFICATES. No new certificate representing
shares of the corporation shall be issued until the former certificate for the
shares represented thereby shall have been surrendered and canceled, except in
the case of lost or destroyed certificates in which case the Board of Directors
may order new certificates to be issued upon such terms, conditions, and
guarantees as the Board may deem necessary to impose, including the filing of
sufficient indemnity.
6.4 TRANSFER OF SHARES. The shares and other securities of the
corporation shall be personal property for all purposes and shall be
transferrable in accordance with the provisions of Chapter 8 -- Investment
Securities -- of the Texas Business and Commerce Code, as amended, except as
otherwise provided in the Texas Business Corporation Act. The shares may be
transferred by endorsement, by signature of the owner or the owner's agent,
attorney or legal representative, or by the delivery of the certificate. The
transferee in any transfer of shares shall be deemed to have full notice of,
and to consent to, the Bylaws of the corporation to the same extent as if the
transferee had signed a written assent thereto.
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6.5 RESTRICTIVE ENDORSEMENT. If a restriction on the transfer, or
registration of the transfer, of shares is imposed or agreed to by the
corporation, as permitted by the Texas Business Corporation Act, each
certificate representing shares so restricted: (1) shall conspicuously set
forth a full or summary statement of the restriction on the face of the
certificate, or (2) shall set forth such statement on the back of the
certificate and conspicuously refer to the same on the face of the certificate,
or (3) shall conspicuously state on the face or back of the certificate that
such a restriction exists pursuant to a specified document and (a) that the
corporation will furnish to the record holder of the certificate without charge
upon written request to the corporation at its principal place of business or
registered office a copy of the specified document, or (b) if such document is
one required or permitted to be and has been filed under the Texas Business
Corporation Act, that such specified document is on file in the office of the
Secretary of State and contains a full statement of such restriction.
6.6 RIGHTS TO PURCHASE STOCK OF A SHAREHOLDER.
(a) When a shareholder elects to sell his shares of stock in
the corporation, the right to purchase such shares shall first be made
available to Newpark Marine Fabricators, Inc., on the same terms made available
or offered to any other purchaser for a period of twenty (20) days, and
thereafter offered for an additional period of ten (10) days to the
shareholders of the corporation, pro rata, among the electing shareholders.
(b) In the event of the death of a shareholder, any successor
in interest to the deceased shareholder's stock shall take such stock subject
to the provisions of Paragraph 6.06(a) above.
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<PAGE> 14
6.7 SALES AND OTHER TRANSFERS OF STOCK.
(a) Shareholder Agreements. The shareholders of this corporation may
make agreements between or among themselves through a written shareholders'
agreement, governing the purchase, among themselves, of the stock of this
corporation in the event of the death, bankruptcy, retirement, or disability of
any shareholder, and in the event of a transfer by a shareholder of his stock
by donation to the shareholder's spouse and lineal descendants. A copy of any
such agreement shall be placed on file by the corporation at its principal
place of business or its registered office and shall be subject to the same
right of examination by a shareholder of the corporation, in person or by
agent, attorney or accountant, as are the books and records of the corporation.
The provisions of any such agreement shall be binding upon the parties to the
agreement and their respective heirs, administrators, legatees, executors and
assigns.
(b) Stock Redemption Agreements. The corporation and any
number of the shareholders of the corporation may enter into stock redemption
agreements. A copy of any such agreement shall be placed on file by the
corporation at its principal place of business or its registered office.
ARTICLE SEVEN: RECORD AND REPORTS
7.1 BOOKS AND RECORDS. The corporation shall keep books and
records of account, and shall keep minutes of the proceedings of its
shareholders, its Board of Directors, and each committee of its Board of
Directors. The corporation shall keep at its registered office or its
principal place of business, or at the office of its transfer agent or
registrar, a record of the original issuance of shares issued by the
corporation and a record of each transfer of those shares that have been
presented to the corporation for registration of transfer. Such records shall
contain the names
-14-
<PAGE> 15
and addresses of all past and current shareholders of the corporation and the
number and class of shares issued by the corporation held by each of them.
7.2 EXAMINATION OF BOOKS AND RECORDS. Any person who shall have
been a shareholder for at least six (6) months immediately preceding his
demand, or shall be the holder of at least five percent (5%) of all outstanding
shares of the corporation, upon written demand stating the purpose thereof,
shall have the right to examine, in person or by agent, accountant, or
attorney, at any reasonable time or times, for any proper purpose, its relevant
books and records of account, minutes, and share transfer records, and to make
extracts therefrom. A director may examine the corporation's books and records
of account, share transfer records, corporate minutes and any other corporate
books and records for any purpose reasonably related to the director's service
as a director.
ARTICLE EIGHT: FIXING RECORD DATES
8.1 FIXING RECORD DATE. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or entitled to receive a distribution by the
corporation (other than a distribution involving a purchase or redemption by
the corporation of any of its own shares) or a share dividend, or in order to
make a determination of shareholders for any other proper purpose (other than
determining shareholders entitled to consent to action by shareholders proposed
to be taken without a meeting of shareholders), the Board of Directors may
provide that the share transfer records shall be closed for a stated period but
not to exceed, in any case, sixty (60) days. If the share transfer records
shall be closed for the purpose of determining shareholders entitled to notice
of or to vote at a meeting of shareholders, such records shall be closed for at
least ten (10) days immediately preceding such meeting.
-15-
<PAGE> 16
ARTICLE NINE: AMENDMENT OF BYLAWS
9.1 AMENDMENT OF BYLAWS. The power to alter, amend, or repeal
these Bylaws is vested in the Board of Directors of the corporation, subject to
repeal, change or amendment by the shareholders of the corporation.
The foregoing Bylaws of Newpark Marine Fabricators, Inc., are
unanimously adopted as the Bylaws of Newpark Marine Fabricators, Inc. by the
Board of Directors of Newpark Marine Fabricators, Inc., on this 10th day of
September, 1997.
DIRECTORS:
/s/ Samuel F. Eakin
-----------------------------------------
Samuel F. Eakin, Director
/s/ David B. Ammons
-----------------------------------------
David B. Ammons, Director
Attest: /s/ David B. Ammons
---------------------------
David B. Ammons, Secretary
-16-
<PAGE> 1
EXHIBIT 3.13
=========================================================
ARTICLES OF INCORPORATION
OF
EAE INDUSTRIES, INC.
=========================================================
ARTICLE ONE
The name of the Corporation is EAE INDUSTRIES, INC.
ARTICLE TWO
The period of its duration is perpetual.
ARTICLE THREE
The purpose for which the Corporation is organized is the transaction
of any and all lawful business for which a corporation may be incorporated under
the Texas Business Corporation Act.
ARTICLE FOUR
The aggregate number of shares which the Corporation shall have
authority to issue is One Million (1,000,000). The shares shall have a par value
of One Dollar.
ARTICLE FIVE
The Corporation will not commence business until it has received for
the issuance of its shares consideration of the value of $1,000.00.
ARTICLE SIX
The street address of its initial Registered Office, and the number of
its initial Registered Agent at this address, is as follows:
William R. Henderson
13131 Champions Drive, Suite 114
Houston, Texas 77069
- 1 -
<PAGE> 2
ARTICLE SEVEN
The number of initial Directors is one. The name and address of the
initial director is:
William R. Henderson
13131 Champions Drive, Suite 114
Houston, Texas 77069
ARTICLE EIGHT
The name and address of the Incorporator is:
Marilyn S. Hershman
408 W. 17th Street, Suite 101
Austin, Texas 78701-1207
(512) 474-2002
IN WITNESS WHEREOF: I have hereunto set my hand this 14th day of
December 1993.
/s/ Marilyn S. Hershman
----------------------------------
Marilyn S. Hershman, Incorporator
- 2 -
<PAGE> 1
EXHIBIT 3.14
ARTICLES OF AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
EAE INDUSTRIES, INC.
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act, the undersigned corporation adopts the following Articles of
Amendment to its Articles of Incorporation:
ARTICLE ONE
The name of the corporation is EAE INDUSTRIES, INC.
ARTICLE TWO
The following amendment to the Articles of Incorporation was adopted by
the shareholders of the corporation on February 3, 1994. The amendment alters
Article One of the original Articles of Incorporation and the full text of such
amendment is as follows:
"ARTICLE ONE
The name of the corporation is NEWPARK SHIPBUILDING AND REPAIR, INC."
ARTICLE THREE
The number of shares of the corporation outstanding at the time of such
adoption was 90,000; and the number of shares entitled to vote thereon was
90,000 shares, all of which were common stock.
ARTICLE FOUR
Holders of all of the shares outstanding entitled to vote on said
amendment have signed a consent in writing adopting said amendment.
Dated: February 3, 1994.
EAE INDUSTRIES, INC.
By: /s/ James H. Sessions
------------------------------
James H. Sessions
President
By: /s/ David Ammons
-------------------------------
David Ammons
Secretary
<PAGE> 1
EXHIBIT 3.15
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. (the "Corporation")
adopts the following Articles of Amendment to its Articles of Incorporation
which changes the par value of the common stock and establishing a new class of
preferred stock:
1. Name. The name of the Corporation is NEWPARK SHIPBUILDING AND
REPAIR, INC., charter number 012935367.
2. Amendment. The following amendment to the Articles of Incorporation
was adopted by the shareholders of the Corporation on April 25, 1994 to be
effective December 14, 1993.
"ARTICLE FOUR
(A) Authorized Common Shares. The Corporation has authority to issue
one million (1,000,000) shares in the aggregate, at no par value. The
shares are common stock and have identical rights and privileges in
every respect.
(B) Authorized Preferred Shares. The Corporation has authority to issue
one million four hundred (1,400,000) shares, in the aggregate, with a
par value of One and No/100 ($1.00) Dollar per share. The preferred
shares are nonvoting and are preferred on liquidation in the amount of
One and No/100 ($1.00) Dollar for each outstanding share. A
noncumulative annual dividend of $.70 per share shall be payable with
respect to such shares out of funds legally available."
3. Outstanding Shares. The number of shares of the corporation
outstanding at the time of such adoption was 90,000; and the number of shares
entitled to vote thereon was 90,000 shares, all of which were common stock.
4. Adoption of Amendment. Holders of all of the shares outstanding
entitled to vote on said amendment have signed a consent in writing adopting
said amendment.
Dated: April 25, 1994.
NEWPARK SHIPBUILDING AND REPAIR, INC.
By: /s/ David Ammons
-----------------------------
David Ammons, Secretary
<PAGE> 1
EXHIBIT 3.16
WHEREAS, LaSalle National Bank has requested the amendment of the
Bylaws of the Corporation to include specific authorization for action to be
taken by unanimous consent of the Directors;
WHEREAS, the name of the Corporation has been changed and the principal
office of the Corporation is now 8502 Cypress Street-Brady Island, Houston,
Texas.
NOW, THEREFORE,
BE IT RESOLVED, that the Board of Directors hereby amends and restates
the Bylaws of EAE Industries, Inc., dated December 14, 1994, as follows: (the
changes are marked)
BYLAWS
OF
NEWPARK SHIPBUILDING AND REPAIR, INC.
ARTICLE I.
Meetings of Shareholders
Section 1. Place. All meetings of the shareholders shall be held at the
principal office of the Corporation in Texas, or at such other place, either
within or without the State of Texas, as from time to time may be determined by
the Board of Directors and specified in the notice of such meeting.
Section 2. Annual Meeting. The annual meeting of shareholders shall be
held on the first Tuesday in April at 11:00 a.m., if not a legal holiday, and if
a legal holiday, then at the same hour on the next business day. At such
meeting, the shareholders shall elect the directors of the Corporation and shall
transact such other business as may come before the meeting.
Section 3. Special Meetings. Special meetings of the shareholders may
be called at any time by the President or by a majority of the directors. It
shall also be the duty of the President to call such meetings whenever requested
in writing to do so by the holders of not less than one-fifth of all the shares
entitled to vote at the meeting, which request shall state the objects of the
proposed meeting. Business transacted at all special meetings shall be confined
to the objects stated in the notice.
Section 4. Quorum. A majority of the shares issued and outstanding and
entitled to vote, represented by the holders in person, or by proxy, shall be
required at all meetings to constitute a quorum for the election of directors or
the transaction of any other business. If, however, such majority shall not be
present at any such meeting, the shareholders entitled to vote thereat, present
in person or represented by proxy, shall have the power to adjourn the meeting
from time to time without notice other than the announcement at the meeting,
until the requisite amount of voting shares shall be represented. At any such
adjourned meeting at which
- 1 -
<PAGE> 2
the requisite amount of voting shares shall be represented, any business may be
transacted which might have been transacted at the meeting as originally
notified.
Section 5. Voting. At any meeting of the shareholders at which a quorum
is present, the affirmative vote of the holders of a majority of the shares
entitled to vote thereat shall be had on any matter coming before such meeting
in order to constitute such action the valid act of the shareholders thereon,
unless otherwise provided by law, or by the Certificate of Incorporation, or
these Bylaws. Every shareholder of record shall be entitled to one vote for
every share standing in his name on the books of the corporation on the record
date fixed as hereafter provided or, if no such record date was fixed with
respect to such meeting, on the day of the meeting.
Section 6. Record Date. The Board of Directors may close the stock
transfer books of the Corporation for a period not exceeding fifty nor less than
ten days preceding the date of any meeting of shareholders, or, in lieu of
closing the stock transfer books, the Board of Directors may fix in advance a
date, not exceeding fifty nor less than ten days prior to the date of holding
any meeting of shareholders, as a record date for the determination of the
shareholders entitled to such notice of, and to vote at, such meeting.
Section 7. Notice. Notice of the time and place of the annual meeting
of shareholders and notice of the time, place, and purpose of each special
meeting of the shareholders shall be given at least ten and not more than fifty
days before the date set for such meeting to each shareholder of record who is
entitled to vote at such meeting; except that if the authorized shares are to be
increased, at least thirty days' notice shall be given.
ARTICLE II.
Directors
Section 1. Number and Qualifications. The management and control of the
affairs, business, and property of the Corporation shall be vested in its Board
of Directors. The number of directors of the Corporation shall be no less than
one (1) and no more than seven (7), which number may be increased or decreased
from time to time by amendment to these Bylaws. The directors shall be elected
at the annual meeting of shareholders, except as otherwise provided for filling
vacancies. Each director shall hold office until the annual meeting of
shareholders held next after his election or other manner of appointment, and
until his successor shall have been elected and shall qualify or until his
death, resignation, or removal.
Section 2. Annual Meetings. The annual meeting of the Board of
Directors shall be held in each year immediately after and at the same place as
the annual meeting of shareholders. No notice of the annual meeting of the Board
of Directors need be given.
Section 3. Regular Meetings. Regular meetings of the Board of Directors
may be held at such places and at such times as the Board may from time to time
determine by resolution.
- 2 -
<PAGE> 3
If any day fixed for a regular meeting shall be a legal holiday at the place
where the meeting is to be held, then the meeting which otherwise would be held
on that day shall be held at the same hour on the next succeeding business day
not a legal holiday. No notice of regular meetings of the Board of Directors
need be given.
Section 4. Special Meetings. Special meetings of the Board of Directors
shall be held whenever called by the President or by a majority of the
directors. Notice of each special meeting of the Board of Directors shall be
given to each director at least two days before the day on which the special
meeting is to be held. Every such notice shall state the time and place of the
meeting and the purpose thereof. The business transacted at such special meeting
shall be confined to the purposes stated in the notice.
Section 5. Telephonic Meeting. Any meeting of the Board of Directors
may be held telephonically.
Section 6. Quorum. At each meeting of the Board of Directors, at least
a majority of the directors shall be present in order to constitute a quorum for
the transaction of business. In the absence of a quorum, any of the directors
present may adjourn any meeting from time to time until a quorum is had. Notice
of any such adjourned meeting need not be given.
Section 7. Place of Meeting. The Board of Directors may hold its
meetings at such places within or without the State of Texas as shall be
specified or fixed in the respective notice or waivers of notice thereof.
Section 8. Vacancies. All vacancies in the Board of Directors,
whether caused by death, resignation, removal, or otherwise, shall be filled by
a majority vote of the remaining directors.
Section 9. Removal. Any director may be removed at any time, with or
without cause by written request of stockholders holding more than fifty (50%)
percent of the voting stock of this Corporation issued and outstanding.
Section 10. Resignation. Any director may resign at any time by giving
written notice to the Chairman of the Board of Directors. The resignation of any
director shall take effect at the time specified in such notice, and, unless
otherwise specified therein, the acceptaince of such resignation shall not be
necessary to make it effective.
Section 11. Executive Committee - Investment Committee. If an executive
committee and/or investment comittee is appointed, the Chairman of the board of
Directors shall be a member, and the committee shall have all the powers of the
board when the board is not in session except the power to declare dividends,
make or alter Bylaws, fill vacancies on the board of change the membership of
the executive committee.
Section 12. Minutes of Meetings of Committees. Any committees
designated by the Board shall keep regular minutes of their proceedings and
shall report the same to the board
- 3 -
<PAGE> 4
when required; but no approval by the Board of any action properly taken by a
committee shall be required.
Section 13. Procedure. If the Board fails to designate the chairman of
a committee, the Chairman of the Board of Directors, if a member, shall be
chairman. Each committee shall meet at such times as it shall determine and at
any time on call of the chairman. A mojority of a committee constitutes a
quorum, and the committee may take action either by vote of a majority of the
members present at any meeting at which there is a quorum or by written
concurrence of a majority of the members. In case of absence or disqualification
of a member of a committee at any meeting thereof, the qualified members
present, whether or not they constitute a quorum, may unanimously appoint a
director to act in place of the absent or disqualified member. The board has the
power to change the members of any committee at any time, to fill vacancies, and
to discharge any committee at any time.
Section 14. Unanimous Consent. Any action which may be taken at a
meeting of the Board of Directors or any committee thereof, may be taken by a
consent in writing signed by all of the Directors or by all of the members of
the committee, as the case may be, and filed with the records of the proceeding
of the Board or committee.
ARTICLE III.
Officers
Section 1. Officers and Qualifications. The officers of the
corporation shall be a Chairman of the Board of Directors, a President, a
Secretary and a Treasurer.
Section 2. Chairman of the Board of Directors. Chairman of the Board of
Directors shall be the Chief Executive and Administrative Officer of the
Corporation and shall preside at all meetings of the shareholders and the Board
of Directors. As Chief Executive Officer he shall have the general supervision
over the business and financial affairs of the Corporation.
Section 3. President. The President shall be the chief operating
officer of theCorporation. He shall have active and general management of the
business operations of the Corporation and shall see that all orders and
resolutions of the Board are carried into effect. He shall have the general
powers and duties of supervision and management over the business operations of
the Corporation. The President also shall appoint and discharge all subordinate
agents and employees and fix their salaries, subject to review by the Board of
Directors, and shall designate the duties they are to perform.
Section 4. Secretary. The Secretary shall keep the minutes of the
meetings of the Board of Directors and the minutes of the meetings of the
shareholders in appropriate books. He shall attend to the giving of all notices
of the Corporation. He shall have charge of the books or records containing the
names, alphabetically arranged, of all persons who are shareholders of
- 4 -
<PAGE> 5
the Corporation and such other books and papers as the Board may direct, and
shall perform all the duties incidental to his office.
Section 5. Treasurer. The Treasurer shall have the care and custody of
all of the funds and securities of the Corporation and shall see that the same
are deposited in the name of the corporation in such bank or depositories as the
Board of Directors may from time to time select. The Treasurer shall supervise
and direct all bookkeeping and accounting personnel and functions and shall have
the authority and power to hire and dismiss any bookkeeping or accounting
personnel.
Section 6. Assistants. Assistant secretaries or treasurers shall
have such duties as may be delegated to them by the secretary and treasurer,
respectively.
Section 7. Compensation of Officers. The compensation of all officers
shall be fixed by the Board of Directors.
Section 8. Appointment of Other Officers. The Board may appoint such
other officers and agents as it shall deem necessary, who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board.
Section 9. Term of Office. The officers of the Corporation shall hold
office until their successors are chosen and qualify in their stead. Any officer
elected or appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the whole Board of Directors. If the office of
any officer or officers becomes vacant for any reason, the vacancy shall be
filled by the affirmative vote of a majority of the Board of Directors.
Section 10. Delegation of Duties and Authority. In the case of the
absence of any officer of the Corporation other than the President, or for any
other reason that the Board may deem sufficient as to any officer other than the
President, the Board may delegate, for the time being, the powers or duties, or
any of them, of such officer to any other officer, or to any director, provided
a majority of the entire Board concurs therein.
ARTICLE IV.
Office
The principal office of the Corporation in Texas shall be located at
8502 Cypress Street-Brady Island, Houston, Texas 77012. The Corporation may have
such additional offices as the Board of Directors from time to time may
determine as the business of the Corporation may require.
- 5 -
<PAGE> 6
ARTICLE V.
Shares
Section 1. Certificates. The certificates for shares of the Corporation
shall be in such form as shall be approved by the Board of Directors. The shares
of the Corporation shall be transferable only on the books of the Corporation by
the holder thereof in person or by his attorney, upon surrender for cancellation
of the certificate or certificates, with an assignment and power of transfer
endorsed thereon or attached thereto duly executed, and with such proof of
authenticity of the signature as the Corporation or its agents reasonably may
require. The certificates shall be numbered and shall be entered in the books of
the Corporation as they are issued. They shall show the number of shares and
shall be signed by the President and the Secretary.
Section 2. Lost Certificates. No certificates for shares in the
Corporation shall be issued in place of any certificate alleged to have been
lost, stolen, or destroyed, except upon production to the Corporation or its
agents of satisfactory evidence of such loss, theft, or destruction, and upon
delivery to the corporation of a bond of indemnity in such amount and upon such
terms as the Board of Directors in its discretion may require.
Section 3. Restrictive Endorsement. Each certificate representing
shares of the Corporation shall contain an endorsement reading substantially as
follows:
"The shares represented by this certificate are subject to
certain transfer requirements as provided in the Articles of
Incorporation and Bylaws of the Corporation, which are on file
at the Corporation's principal office."
ARTICLE VI.
Sales and Other Transfers of Stock
Section 1. Shareholder Agreements. The shareholders in this Corporation
may make agreements, either in Bylaws or by a shareholder agreement, between
themselves relative to the purchase, among themselves, of the stock of this
Corporation in the event of the death, insanity, retirement or disability of any
shareholder, and in the event of a transfer of his stock by donation to the
shareholder's spouse and lineal descendants. A copy of any such agreement shall
be binding upon the persons who are parties to it and their respective heirs,
administrators, legatees, executors and assigns.
Section 2. Stock Redemption Agreements. The Corporation and any or
all of its shareholders may enter into stock redemption agreements. A copy of
any such agreement shall be filed with the Chairman of the Corporation.
- 6 -
<PAGE> 7
Section 3. Expiration of Option Period. Except as to a transfer on
death or a gift of the stock of a shareholder to his spouse or lineal
descendants (which shall be controlled if at all by a shareholder agreement), no
sale, mortgage, pledge, conveyance, transfer, seizure, donation, sale under
legal process or attachment, or by virtue of any pledge of hypothecation, and no
other disposal of stock of any nature whatsoever, shall have any effect as
related to the Corporation or its shareholders, nor shall it be valid in any
fashion, unless the provisions of Article VIII of the Articles of Incorporation
have been complied with.
SECTION VII.
Notices
Section 1. Written Notice. Whenever the provisions of a statute or the
Certificate of Incorporation, or any of these Bylaws require or permit notice to
be given to any director, or shareholder, it shall not be construed to require
personal notice, but any such notice may be given in writing by deposition the
same in a post office or letter box in a postpaid, sealed wrapper, the cost
thereof being prepaid, in either case addressed to such director, officer, or
shareholder at his address as the same appears on the books of the Corporation,
and the time when the same shall be so mailed or delivered to the telegraph
company shall be deemed to be the time of the giving of such notice.
Section 2. Waivers. Any shareholder or director may waive in writing
any notice required or permitted to be given under any provisions of any statute
or of the Certificate of Incorporation or of these Bylaws, either before, at, or
after the meeting or other event of which notice is so provided. All
shareholders or directors present at any meeting shall be deemed to have waived
any and all notice thereof.
ARTICLE VIII.
Indemnification of Officers and Directors
The Corporation shall indemnify and hold harmless each director and
officer now or hereafter serving the Corporation from and against any and all
claims and liabilities to which he may be or become subject by reason of his now
or hereafter being or having heretofore been a director or officer of the
Corporation and/or by reason of his alleged acts or omissions as such director
or officer, whether or not he continued to be such officer or director at the
time when any such claim or liability is asserted, and shall reimburse each such
director and officer for all legal and other expenses reasonably incurred by him
in connection with defending any and all such claims or liabilities, including
amounts paid or agreed to be paid in connection with reasonable settlements made
before final adjudication with the approval of the Board of Directors, whether
or not he continued to be such director or officer at the time such expenses are
incurred; provided, however that no director or officer shall be indemnified
against any claim or liability arising out of his own negligence or willful
misconduct nor shall he be indemnified against or reimbursed for any expenses
incurred in defending any or all such claims
- 7 -
<PAGE> 8
or liability or in settling the same unless in the judgment of the directors of
the Corporation the director or officer against whom such claim or liability is
asserted has not been guilty of negligence or willful misconduct. The foregoing
right of indemnification shall not be exclusive of other rights to which any
director or officer may be entitled as a matter of law.
ARTICLE IX.
Amendments
These Bylaws may be altered or amended or repealed by the Affirmative
vote or written consent of a majority of the stock issued and outstanding and
titled to vote at any regular or special meeting of the shareholders called for
that purpose; or by the affirmative vote of a majority of the Board of Directors
at any regular or special meeting of the Board called for that purpose;
provided, however, that no change of the time or place for the election of
directors shall be made within sixty days preceding the day on which such
election is to be held, and that in case of any change of such time or place
notice thereof shall be given to each shareholder in person or by letter mailed
to his last known port office address, at least twenty days before the election
is held.
APPROVED:
\s\ SAMUEL F. EAKIN
-------------------------------
Samuel F. Eakin, Director
\s\ JAMES H. SESSIONS
-------------------------------
James H. Sessions, Director
\s\ JAMES COLE
-------------------------------
James Cole, Director
CERTIFICATE
I, David Ammons, Secretary of Newpark Shipbuilding and Repair, Inc.,
hereby certify that the above and foregoing Bylaws were adopted as the Bylaws of
the Corporation at a meeting of the Board of Directors duly held in Houston,
Texas, on June 28, 1994 and are in full force and effect.
June 28, 1994
\s\ DAVID AMMONS
-------------------------------
David Ammons, Secretary
- 8 -
<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 $(4,247) $1,045 $4,377 $1,794
Add: fixed charges . . . . . . . . . . . . 529 460 756 791 1,230 10,091 779 1,290 7,307
---- ------- ----- ------ ------ ------- ------ ------ ------
Earnings as adjusted . . . . . . . . . . . $683 $(1,883) $ 499 $1,802 $3,887 $ 5,844 $1,824 $5,667 $9,101
==== ======= ===== ====== ====== ======= ====== ====== ======
Fixed Charges:
Interest expense . . . . . . . . . . . . $101 $ 359 $ 186 $ 247 $ 829 $ 9,649 $ 380 $1,280 $7,258
Interest portion of rental expense(2) . . 428 101 570 544 401 442 399 10 49
---- ------- ----- ------ ------ ------- ------ ------ ------
$529 $ 460 $ 756 $ 791 $1,230 $10,091 $ 779 $1,290 $7,307
==== ======= ===== ====== ====== ======= ====== ====== ======
Ratio of earnings to fixed charges(1) . . . 1.29x (4.09)x 0.66x 2.28x 3.16x 0.58x 2.34x 4.39x 1.25x
</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 $4.2 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 5, 1998
