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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE EXCHANGE ACT OF 1934
Commission file number 333-38157
FIRST WAVE MARINE, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 76-0461352
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4000 S. SHERWOOD FOREST BOULEVARD
SUITE 603
BATON ROUGE, LOUISIANA 70816
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (504) 292-8800
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Number of shares of common stock outstanding as of May 13, 1998: 11,756,955.
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FIRST WAVE MARINE, INC.
INDEX TO FORM 10-Q
FOR THE THREE MONTH PERIOD ENDED
MARCH 31, 1998
<TABLE>
<CAPTION>
PAGE
PART I: FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 1998 and
December 31, 1997 1
Consolidated Statements of Operations for the Three Month
Period Ended March 31, 1998 and 1997 2
Consolidated Statements of Cash Flows for the Three Month
Period Ended March 31, 1998 and 1997 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
PART II: OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 11
Item 6. Exhibits and Reports on Form 8-K 12
</TABLE>
<PAGE> 3
Item 1. Financial Statements
FIRST WAVE MARINE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
<TABLE>
<CAPTION>
ASSETS
March 31, December 31,
1998 1997
----------- ------------
(Unaudited)
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 33,821 $ 378
Investments-held-to-maturity 11,017 ---
Accounts receivable, less allowance of $134 in 1998
and $37 in 1997 17,504 8,488
Inventories 786 792
Costs and estimated earnings in excess of billings on
Uncompleted contracts 117 793
Prepaids and other 263 341
Income tax receivable 111 773
Deferred income taxes 81 281
----------- ------------
Total current assets 63,700 11,846
Property and equipment, net 47,891 23,326
Financing costs, net 4,302 1,438
Goodwill and other intangibles, net 16,629 2,726
Deposits and other 623 210
----------- ------------
$ 133,145 $ 39,546
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 10,847 $ 215
Trade accounts payable 2,973 1,354
Accrued liabilities 6,214 3,956
----------- ------------
Total current liabilities 20,034 5,525
Long-term obligations 3,209 17,781
Subordinated debt 6,328 6,876
Senior notes 90,000 ---
Deferred income taxes 5,229 632
Other liabilities 1,152 678
Commitments and contingencies --- ---
Stockholders' equity:
Preferred stock, $.01 par value, 2,000 shares
authorized, no shares issued --- ---
Common stock, $.01 par value, 21,000 shares
authorized, 11,757 shares issued and outstanding
at March 31, 1998 and December 31, 1997 118 118
Additional paid-in capital 3,490 3,490
Retained earnings 3,585 4,446
----------- ------------
7,193 8,054
----------- ------------
$ 133,145 $ 39,546
=========== ============
</TABLE>
The accompanying notes are an integral part of these statements.
1
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FIRST WAVE MARINE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Month Period Ended March 31,
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
--------- --------
Revenues:
<S> <C> <C>
Repair and upgrades $ 13,368 $ 6,801
New construction 1,019 764
Environmental services 1,380 1,360
---------- --------
15,767 8,925
Cost of revenues 10,182 5,280
---------- --------
Gross profit 5,585 3,645
General and administrative expenses 3,704 1,813
---------- --------
Income from operations 1,881 1,832
Interest expense - net 1,726 418
Minority interest in net earnings of subsidiary --- 166
---------- --------
Income before income taxes and extraordinary item 155 1,248
Income tax expense 83 493
---------- --------
Income before extraordinary item 72 755
Extraordinary item - loss on extinguishment of debt, net of
income tax benefit of $559 (933) ---
---------- --------
Net income (loss) $ (861) $ 755
========== ========
Basic and diluted earnings per share:
Before extraordinary item $ 0 .01 $ 0.07
Extraordinary item (0.08) ---
---------- --------
Net income (loss) $ (0.07) $ 0.07
========== ========
Weighted-averaged shares:
Basic and diluted 11,757 10,650
========== ========
</TABLE>
The accompanying notes are an integral part of these statements.
2
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FIRST WAVE MARINE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Month Period Ended March 31,
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
---------- -----------
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) $ (861) $ 755
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
Depreciation and amortization 733 344
Accretion of discounts on investments held-to-maturity (90) ---
Minority interest on earnings --- 166
Provision for doubtful accounts 88 ---
Write-off of financing costs 469 ---
Deferred income tax provision 204 172
Change in assets and liabilities, net of affects from
Acquisitions:
Accounts receivable (5,476) (1,469)
Inventories 36 237
Costs and estimated earnings in excess
of billings on uncompleted contracts 1,373 90
Other assets 916 (245)
Income tax receivable (502) 139
Deposits and other (271) ---
Due to bank --- (88)
Trade accounts payable 519 (319)
Accrued liabilities 931 1,213
Other liabilities 174 200
---------- -----------
Net cash (used in) provided by operating activities: (1,757) 1,195
---------- -----------
Cash flows from investing activities:
Acquisition of property and equipment (2,768) (191)
Acquisition of business, net of cash acquired (13,899) ---
Purchase of investments held-to-maturity (10,926) ---
---------- -----------
Net cash used in investing activities (27,593) (191)
---------- -----------
Cash flows from financing activities:
Proceeds from issuance of debt 90,000 734
Payments on long-term debt and notes payable (22,767) (216)
Net payments on revolving lines of credit (1,027) (1,437)
Financing costs (3,413) ---
---------- -----------
Net cash provided by (used in) financing activities 62,793 (919)
---------- -----------
Net increase in cash and cash equivalents 33,443 85
Cash and cash equivalents at beginning of period 378 ---
---------- -----------
Cash and cash equivalents at end of period $ 33,821 $ 85
========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 6
FIRST WAVE MARINE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
Note 1 In the opinion of management the accompanying unaudited
consolidated financial statements reflect all adjustments necessary
to present fairly the financial position of First Wave Marine, Inc.
("First Wave" or the "Company") as of March 31, 1998, and the
results of operations for the three month periods ended March 31,
1998 and 1997 and cash flows for the three month periods ended
March 31, 1998 and 1997. All such adjustments are of a normal
recurring nature. These interim financial statements should be read
in conjunction with the audited financial statements and related
notes included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1997.
Note 2 The consolidated financial statements include the accounts of
First Wave and its wholly-owned subsidiaries. All material
intercompany transactions are eliminated in consolidation.
Note 3 The results of operations for the three month period ended March
31, 1998 are not necessarily indicative of the results to be
expected for the entire year.
Note 4 11% Senior Notes Offering - On February 2, 1998, the Company
completed an offering of $90,000 aggregate principal amount of
senior notes. The senior notes bear interest at the rate of 11% per
annum; principal is due at maturity in February 2008. The senior
notes are fully and unconditionally guaranteed, jointly and
severally, by all of the Company's direct and indirect
subsidiaries. The Company is subject to certain restrictive
covenants under the related trust indenture. The indenture contains
certain covenants that, among other things, limit the ability of
the Company and its subsidiaries to incur additional indebtedness,
make certain investments, create certain liens, enter into certain
transactions with affiliates, sell assets, enter into certain
mergers and consolidations, allow subsidiaries to create certain
dividend and other payment restrictions, enter into sale and
leaseback transactions, and issue or sell capital stock of
subsidiaries.
The proceeds from the offering have been, and will be, used
primarily for the following: (1) to complete the John Bludworth
Marine, Inc. ("John Bludworth Marine") acquisition, (2) to prepay
debt of the Company's subsidiaries, (3) to fund capital
expenditures, and (4) to fund working capital needs. The Company
recorded a one-time extraordinary charge to net income of $933,
after benefit from income taxes, or $0.08 per share.
Note 5 Acquisition - On February 2, 1998, the Company completed the
acquisition of all of the outstanding capital stock of John
Bludworth Marine, a company that owns and operates shipyard
facilities in Pasadena, Texas and Galveston, Texas. The Company
paid $15,000 in cash and issued a
4
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promissory note in the amount of $4,000. The Company used a portion
of the proceeds from its $90,000 senior notes offering (discussed
above) to fund the cash portion of the acquisition. The promissory
note is adjustable upward or downward based upon outstanding debt
and a final calculation of earnings before interest, taxes,
depreciation and amortization of the acquired company. The final
calculation of the applicable outstanding debt of John Bludworth
Marine resulted in an increase to the purchase price of
approximately $5,157. The final calculation of EBITDA resulted in
an increase to the purchase price of approximately $1,480. As a
result, included in "Notes Payable" in the March 31, 1998
consolidated balance sheet of the Company is a note payable to the
former owner of John Bludworth Marine of approximately $10,637. The
promissory note bears interest at 8.5% per annum and must be paid
on or before July 31, 1998.
The acquisition has been accounted for as a purchase and the
results of John Bludworth Marine have been included in the
accompanying consolidated financial statements since the date of
the acquisition.
The following unaudited pro forma consolidated results of
operations have been prepared as if John Bludworth Marine had been
acquired as of January 1 of fiscal 1998 and 1997. This pro forma
information is not necessarily indicative of the results of
operations that would have occurred had the acquisition been made
on those dates or of results which may occur in the future.
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Revenues $17,871 $15,011
Income Before Extraordinary Item 222 371
Net Income (Loss) (711) 371
Basic and Diluted Earnings Per Share:
Before Extraordinary Item $ 0.02 $ 0.02
Net Income (Loss) (0.06) 0.02
</TABLE>
The allocation of the purchase price resulted in intangibles,
primarily goodwill, of approximately $14,081 which is being
amortized on a straight-line basis over a forty year period.
Note 6 Shareholder Line of Credit - In February 1998, the board of
directors of the Company approved a maximum $1,000 line of credit
available to three shareholders of the Company. The line of credit
allows borrowings of up to $600 to one of the shareholders and up to
$200 to each of the other two shareholders. Any borrowings under the
line of credit will bear an interest rate of 6% per annum with
interest payable annually and principal to be amortized over a ten
year period through the pro rata reduction of the line of credit
commencing March 2001.
5
<PAGE> 8
Note 7 Cash and Cash Equivalents - The Company maintains cash and cash
equivalents with various financial institutions. At times, the
balances in these accounts could exceed the FDIC insured balance
limit of $100 per bank.
At March 31, 1998, the Company had $30,000 invested in a money
market fund. The fund seeks to pay income monthly and to maintain a
constant value of $1 per share. The fund invests in high quality
money market instruments which consist primarily of U.S. Treasury
obligations, obligations issued or guaranteed by U.S. agencies or
instrumentalities, mortgage-backed securities, commercial paper,
bank obligations and deposit notes.
Note 8 Investments Held-to-Maturity - As a result of the 11% Senior Notes
offering, the Company was required to deposit funds into a trust
account to pay the first and second semi-annual interest payments on
the notes. As a result, two securities were purchased with maturity
dates as near as possible to the interest payment dates. A Fannie
Mae Discount Note with a maturity date of July 27, 1998 was
purchased for approximately $4,824 to cover the August 1, 1998
interest payment. A U.S. Treasury Bill with a maturity date of
January 7, 1999 was purchased for approximately $4,718 to cover the
February 1, 1999 interest payment. At maturity, the value of both
securities will approximate the amount of the semi-annual interest
payment, which is $4,950. The approximate fair value of the above
two securities at March 31, 1998 was $9,613.
Also included in Investments Held-to-Maturity are a certificate of
deposit with a Louisiana financial institution in the amount of
$1,000 with a maturity date of February 4, 1999, and another
certificate of deposit with another Louisiana financial institution
in the amount of $250 with a maturity date of February 3, 1999. The
balances of both certificates of deposit exceed the FDIC insured
balance limit of $100 per bank.
Note 9 Pending Acquisition - On May 1, 1998, the Company entered into a
sale and purchase agreement to acquire certain assets of the barge
construction business of Galveston Shipbuilding Company located in
Galveston, Texas. The Company will acquire the fixed assets,
including land, a contract to build four tank barges and four to
five barge covers, and the name "Galveston Shipbuilding Company" for
$5,500, subject to a final purchase price adjustment based
upon the performance of the business. The Company anticipates that
the acquisition will be completed by the end of May 1998.
6
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion of the Company's financial condition,
results of operations, liquidity and capital resources should be
read in conjunction with the Company's Consolidated Financial
Statements and the Notes to the Consolidated Financial Statements
included elsewhere in this report.
GENERAL
The Company engages in the repair and upgrade of inland and
offshore marine vessels, including barges, boats, drilling rigs and
ships, as well as the construction of various marine structures.
The Company currently operates three shipyards in the Houston,
Texas area (Brady Island, Greens Bayou and JBM Pasadena) and two in
the Galveston, Texas area (East Pelican Island and West Pelican
Island). The Company acquired the JBM Pasadena and West Pelican
Island shipyards on February 2, 1998.
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 and inland marine markets in
Texas.
All statements other than statements of historical fact contained
in this document, 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
document 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 risks 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 the recent 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 document are expressly qualified
in their entirety by the cautionary statements in this paragraph.
7
<PAGE> 10
RECENT DEVELOPMENTS
On February 2, 1998, the Company completed an offering of $90
million of senior notes. The senior notes bear interest at the rate
of 11% per annum with principal due at maturity in February 2008.
The senior notes are fully guaranteed, jointly and severally, by
all of the Company's direct and indirect subsidiaries. The proceeds
from the offering have been, and will be, used primarily for the
following: (1) to complete the John Bludworth Marine Acquisition
(discussed below), (2) to prepay debt of the Company's
subsidiaries, (3) to fund capital improvements at the Company's
East Pelican Island facility, and (4) to fund working capital
needs. In connection with the early termination of debt, the
Company incurred prepayment penalties of approximately $1.0 million
and the writeoff of approximately $460,000 in loan origination
costs in the first quarter of 1998.
Simultaneously with closing the senior notes offering, the Company
completed the acquisition of all of the outstanding shares of John
Bludworth Marine, Inc. ("John Bludworth Marine"). The John
Bludworth Marine acquisition provides the Company with the JBM
Pasadena facility near Houston, Texas and the West Pelican Island
facility in Galveston, Texas. The Company paid $15.0 million in
cash and issued a promissory note in the amount of $4.0 million.
The promissory note is adjustable upward or downward based upon
outstanding debt and a final calculation of earnings before
interest, taxes, depreciation and amortization ("EBITDA") of the
acquired company. The final calculation of the applicable
outstanding debt of John Bludworth Marine resulted in an increase
to the purchase price of approximately $5.2 million. The final
calculation of EBITDA resulted in an increase to the purchase price
of approximately $1.5 million. As a result, included in "Notes
Payable" in the March 31, 1998 consolidated balance sheet of the
Company is a note payable to the former owner of John Bludworth
Marine of approximately $10.6 million. The promissory note bears
interest at 8.5% per annum and must be paid on or before July 31,
1998.
On May 1, 1998, the Company entered into a Sale and Purchase
agreement to acquire certain assets of the barge construction
business of Galveston Shipbuilding Company located in Galveston,
Texas. First Wave will acquire the fixed assets, including land, a
contract to build four tank barges and four to five barge covers,
and the name "Galveston Shipbuilding Company" for $5.5 million,
subject to a final purchase price adjustment based upon the
performance of the business. The Company anticipates that the
acquisition will be completed by the end of May 1998.
RESULTS OF OPERATIONS
Comparison of the three months ended March 31, 1998 to the three
months ended March 31, 1997.
Revenues increased 77% to $15.8 million in the 1998 period,
compared with $8.9 million in the 1997 period, primarily due to
four additional shipyards in operation during the 1998 period as
compared to only one shipyard in operation during the 1997 period.
The Greens Bayou facility did not begin operations until the third
quarter of 1997. The lease on the East Pelican Island facility was
not obtained until the fourth quarter of 1997 and this facility did
not begin generating revenues until this first quarter of 1998. As
discussed above, the JBM Pasadena and West Pelican Island
facilities were acquired on February 2, 1998 as a result of the
John Bludworth Marine acquisition. Only the results of operation of
John Bludworth Marine subsequent to the date of acquisition are
included in the results of operations of the Company for the three
month period ended March 31, 1998.
8
<PAGE> 11
Cost of revenues rose 93% to $10.2 million in the 1998 period from
$5.3 million in the 1997 period, primarily due to the additional
shipyards in operation during the 1998 period.
Gross profit increased 53% to $5.6 million in the 1998 period from
$3.6 million in the 1997 period due to the additional shipyards in
operation during the 1998 period. The gross profit margin decreased
to 35% in the 1998 period from 41% in the 1997 period, primarily
due to the start-up nature of the East Pelican Island shipyard, and
the decrease in higher margin environmental services revenue as a
percentage of total revenue.
General and administrative expenses increased 104% to $3.7 million
in the 1998 period from $1.8 million in the 1997 period. General
and administrative expenses as a percentage of revenues for the
1998 period represented 23% of total revenues, as compared to 20%
for the 1997 period. The increase in general and administrative
expenses as a percentage of revenues is primarily due to the full
staffing and certain overhead expenses incurred at the start-up
operations in advance of revenue generation.
Net interest expense rose to $1.7 million in the 1998 period from
$418,000 in the 1997 period due to two months of interest expense
on the $90 million 11% Senior Notes reflected in the 1998 period.
The elimination of minority interest in the 1998 period from
approximately $166,000 in the 1997 period is due to all of the
minority shareholders of this subsidiary exchanging their shares
for shares in First Wave effective December 31, 1997. As a result,
First Wave owned 100% of the common stock of all of its
subsidiaries for the entire 1998 period.
The decrease in income tax expense from approximately $493,000 in
the 1997 period to $83,000 in the 1998 period is directly
attributable to the decrease in income before income taxes and
extraordinary item.
The extraordinary item reflected in the 1998 period of $933,000
relates to approximately $1.5 million in loss on extinguishment of
debt, net of income tax benefit of approximately $559,000.
The decrease in net earnings from the 1997 period to the 1998
period is due primarily to the following: the loss on the
extinguishment of debt, the additional interest expense related to
the $90 million senior notes, and the increase in general and
administrative expenses related to start-up shipyards in
operation during the 1998 period.
9
<PAGE> 12
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.
LIQUIDITY AND CAPITAL RESOURCES
The Company's ongoing liquidity requirements arise primarily from
its need to service debt, fund working capital, acquire additional
shipyard facilities and make capital improvements to its
facilities. Prior to the Company's senior notes offering discussed
below, bank financing and internally generated funds provided
funding for these activities.
The Company completed its $90 million 11% Senior Notes offering on
February 2, 1998. Simultaneous with the senior notes offering, the
Company used $15.0 million of the net proceeds of the offering to
complete the John Bludworth Marine acquisition. As a provision of
the senior notes offering, the Company was required to deposit
sufficient funds in a trust account to cover the first two
semi-annual interest payments on the senior notes. The expenses
incurred by the Company in connection with the senior notes
offering were approximately $4.4 million. Subsequent to the senior
notes offering and the John Bludworth Marine acquisition,
approximately $25.2 million dollars was used to repay indebtedness
of the Company.
Excluding the acquisition of the two John Bludworth Marine
shipyards, the Company has used approximately $2.8 million of
proceeds from the senior notes offering on capital expenditures
during the three month period ended March 31, 1998. The Company has
budgeted $28 to $30 million of capital expenditures for the
remainder of 1998.
During the second quarter of 1998, the Company will use
approximately $16.1 million of the remaining proceeds of the
offering to complete the Galveston Shipbuilding Company asset
acquisition ($5.5 million) and to pay the balance of the promissory
note to the former owner of John Bludworth Marine ($10.6 million).
Under its indenture entered into in connection with the senior
notes offering, the Company is permitted to borrow up to the
greater of $20 million or 85% of its accounts receivable.
Currently, the Company has an aggregate $4.8 million in borrowing
capacity under two revolving lines of credit. The Company is
negotiating to obtain a replacement revolving line of credit with
an initial borrowing capacity equal to the lesser of $10 million or
80% of eligible receivables.
10
<PAGE> 13
Net cash (used in) provided by operating activities for the three
month periods ended March 31, 1998 and 1997 was ($1,757,000) and
$1,195,000, respectively. The decrease in cash generated from
operations is primarily due to the net loss for the 1998 period and
the substantial growth in accounts receivable from December 31,
1997, net of accounts receivable received in the John Bludworth
Marine acquisition.
Net cash used in investing activities was $27,593,000 and $191,000
for the three month periods ended March 31, 1998 and 1997,
respectively. During the 1998 period, cash used in investing
activities was for the completion of the John Bludworth Marine
acquisition, capital improvements and the purchase of investment
securities to cover the first two semi-annual interest payments on
the senior notes.
Net cash provided by (used in) financing activities was $62,793,000
and ($919,000) for the three month periods ended March 31, 1998
and 1997, respectively. Cash provided by financing activities
resulted from the completion of the $90 million 11% Senior Notes
offering during the quarter. Cash generated from the 11% Senior
Notes offering was used to prepay indebtedness of the Company and
pay the remainder of the financing costs related to the 11% Senior
Notes offering.
Management believes that with the remaining proceeds from the 11%
Senior Notes offering, cash generated from operations, and if
necessary, borrowings under the Company's expected new revolving
credit facility, the Company will have sufficient resources
available to meet its anticipated requirements for capital
expenditures, working capital needs and future acquisitions through
the remainder of fiscal year 1998.
YEAR 2000 COMPUTER ISSUE
Many computer systems in use today were designed and developed
using two digits, rather than four, to specify the year. As a
result, such systems will recognize the year 2000 as "00". This
could cause many computer applications to fail completely or to
create erroneous results unless corrective measures are taken.
The Company currently believes that with recent upgrades made to
its existing software, the Year 2000 problem will not pose
significant operational problems for the Company's computer
systems.
11
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PART II: OTHER INFORMATION
Item 1. Not applicable.
Item 2. Use of proceeds.
The Company completed an offering of $90 million of 11% Senior
Notes on February 2, 1998. The underwriter was Schroder & Co.,
Inc.
Expenses incurred by the Company in connection with the senior
notes offering were as follows (in thousands):
<TABLE>
<S> <C>
Underwriting discounts and commissions $ 3,150
Legal and accounting fees 637
Printing 252
Other 336
---------
$ 4,375
=========
</TABLE>
From February 2, 1998 through March 31, 1998, the Company used
offering proceeds as follows (in thousands):
<TABLE>
<S> <C>
John Bludworth Marine, Inc. acquisition $ 15,000
Pledged securities - first year's interest 9,542
Repayment of indebtedness, including prepayment
penalties 25,172
Capital expenditures 2,768
Expenses of offering (see above) 4,375
--------
Total proceeds expended $ 56,857
========
</TABLE>
Of the remaining proceeds of $33.1 million, approximately
$31.85 million is included in cash and cash equivalents at
March 31, 1998 and $1.25 million is included in investments.
The remaining proceeds are scheduled to be used as follows:
(1) approximately $10.6 million will be used to pay the
promissory note to the former owner of John Bludworth Marine,
Inc.; (2) $5.5 million will be used to complete the Galveston
Shipbuilding Company acquisition; and (3) a portion of the
budgeted capital expenditures.
Item 3 - 5. Not Applicable
12
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description
------ -----------
*10.1 Promissory Note of Samuel F. Eakin
*10.2 Promissory Note of Frank W. Eakin
*10.3 Promissory Note of David B. Ammons
*27.1 Financial Data Schedule
(b) Reports on Form 8-K
On February 13, 1998, the Company filed a report on
Form 8-K relating to the Acquisition of John Bludworth
Marine, Inc.
13
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
FIRST WAVE MARINE, INC.
May 15, 1998 By: /s/ David B. Ammons
-------------------------------
David B. Ammons
Executive Vice President and
Chief Financial Officer
14
<PAGE> 17
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
10.1 Promissory Note of Samuel F. Eakin
10.2 Promissory Note of Frank W. Eakin
10.3 Promissory Note of David B. Ammons
27.1 Financial Data Schedule
<PAGE> 1
EXHIBIT 10.1
PROMISSORY NOTE
$600,000.00 HOUSTON, TEXAS February 27, 1998
SAMUEL F. EAKIN, (hereinafter called "Maker"), for value received,
promises and agrees to pay on or before December 31, 2009, in installments as
herein provided, unto the order of FIRST WAVE MARINE, INC., a Delaware
corporation (hereinafter called "Payee"), at its offices at 4000 S. Sherwood
Forest Boulevard, Suite 603, Baton Rouge Louisiana 70816, or at such other
location as Payee may designate in writing, in lawful money of the United States
of America, such sums as the holder hereof may loan or advance to or for the
benefit of Maker on or after the date hereof, in accordance with the terms
hereof, together with interest on the unpaid principal balance outstanding from
time to time hereon computed from the date of each advance until maturity at a
rate of six percent (6.0%) per annum. Interest shall be calculated on a per
annum basis of 365 days unless such calculation would result in a usurious rate,
in which event, interest shall be calculated on a full calendar year basis.
ALL PAST due principal and interest shall bear interest until paid at a
rate of seven percent (7.0%) per annum.
THE UNPAID principal balance hereof shall at no time exceed the sum of
SIX HUNDRED THOUSAND NO/100 DOLLARS ($600,000.00).
INTEREST on this note is due and payable in installments of accrued
interest which shall be due and payable on December 31, 1998 and thereafter on
December 31st of each consecutive calendar year during the term hereof and at
maturity.
IF ANY PAYMENT of principal or interest on this note shall become due
on a Saturday, Sunday, or public holiday under the laws of the State of Texas on
which Payee is not open for business, such payment shall be made on the next
succeeding business day of Payee, and any such extension or reduction of time
shall in such case be included in computing interest in connection with such
payment.
PAYMENT of this note before maturity may be made at any time or from
time to time, in whole or in part, without penalty or premium. Any such payment
shall be applied first to accrued interest and secondly to principal.
THE UNPAID PRINCIPAL BALANCE of this note at any time shall be the
total amounts lent or advanced hereunder by the holder hereof from and after the
date hereof, less the amount of payments or prepayments of principal made hereon
by or for the account of Maker. It is contemplated that by reason of prepayments
hereon there may be times when no indebtedness is owing hereunder; but
notwithstanding such occurrences, this note shall remain valid and shall be in
full force and effect as to loans or advances made pursuant to and under the
terms of this note subsequent to each occurrence. In the event that the
SFE
--------
INITIAL
[Page 1 of a 4 Page Note]
<PAGE> 2
$600,000.00 HOUSTON, TEXAS February 27, 1998
unpaid principal amount hereof at any time, for any reason, exceeds the maximum
amount hereinabove specified or the Available Amount (as hereinafter defined),
Maker covenants and agrees to pay the excess principal amount forthwith upon
demand; such excess principal amount shall in all respects be deemed to be
included among the loans or advances made pursuant to the other terms of this
note and shall bear interest at the rates hereinabove stated.
ADVANCES hereunder may be made by the holder hereof (i) pursuant to the
terms of any written agreement executed in connection herewith between Maker and
the holder of this note, or (ii) at the oral or written request of Maker. Maker
covenants and agrees to furnish to the holder hereof written confirmation of any
such oral request within five (5) days of the resulting loan or advance, but any
such loan or advance shall be deemed to be made under and entitled to the
benefits of this note irrespective of any failure by Maker to furnish such
written confirmation. Any loan or advance shall be conclusively presumed to have
been made under the terms of this note to or for the benefit of Maker when made
pursuant to the terms of any written agreement executed in connection herewith
between Maker and the holder of this note, or in accordance with such requests
and directions. On December 31, 2000 and on December 31st of each consecutive
calendar year during the term hereof (the "Reduction Dates"), the right of Maker
to request advances on this note shall be reduced by $60,000.00 (such reduced
amount that is available to be advanced to be hereinafter referred to as the
"Available Amount"). On each such Reduction Date, Maker covenants and agrees to
repay the amount by which, on such Reduction Date, the unpaid principal balance
of this note exceeds the Available Amount as the same has been reduced on such
Reduction Date and all previous Reduction Dates.
IT IS ESPECIALLY agreed between the parties hereto that time is of the
essence of this note and if default is made in the payment of any installment of
principal or interest hereof, as and when the same is or becomes due, or if
default occurs under any instrument securing the payment hereof or executed in
connection herewith, the owner and holder of this note may, at its option,
without notice or demand (being specifically waived below), declare all sums
owing hereon at once due and payable. If default is made in the payment of this
note at maturity (regardless of how maturity may be brought about) and the same
is placed in the hands of an attorney for collection, or suit is filed hereon,
or proceedings are had in bankruptcy, probate, receivership, reorganization,
arrangement, or other judicial proceedings for the establishment or collection
of any amount called for hereunder, or any amount payable or to be payable
hereunder is collected through any such proceedings, Maker agrees and is also to
pay to the owner and holder of this note a reasonable amount as attorney's or
collection fees.
MAKER expressly waives demand, notice of intent to demand, presentment
for payment, notice of nonpayment, protest, notice of protest, grace, notice of
dishonor, notice
SFE
--------
INITIAL
[Page 2 of a 4 Page Note]
<PAGE> 3
$600,000.00 HOUSTON, TEXAS February 27, 1998
of intent to accelerate maturity, notice of acceleration of maturity, bringing
of suit and diligence in taking any action to collect amounts called for
hereunder and in the handling of securities at any time existing in connection
herewith; and is and shall be directly and primarily liable for the payment of
all sums owing and to be owing hereon, regardless of and without any notice,
diligence, act or omission as or with respect to the collection of any amount
called for hereunder. Failure by the holder of this note to exercise its option
to accelerate upon any default shall not constitute a waiver of the holder's
right to exercise such option in the event of any subsequent default.
IT IS the intention of Maker and Payee to conform strictly to
applicable usury laws. Accordingly, if the transactions contemplated hereby
would be usurious under applicable law (including the laws of the State of Texas
and the laws of the United States of America), then, in that event,
notwithstanding anything to the contrary in any agreement entered into in
connection with or as security for this note, it is agreed as follows: (i) the
aggregate of all consideration which constitutes interest under applicable law
that is taken, reserved, contracted for, charged or received under this note or
under any of the other aforesaid agreements or otherwise in connection with this
note shall under no circumstances exceed the maximum rate of nonusurious
interest allowed by law as of the date hereof (the "Highest Lawful Rate") and
any excess shall be credited on this note by the holder hereof (or, if this note
shall have been paid in full, refunded to Maker); (ii) in the event that
maturity of the note is accelerated by reason of an election by the holder
hereof resulting from any default hereunder or otherwise, or in the event of any
required or permitted prepayment, then such consideration that constitutes
interest may never include more than the maximum amount allowed by applicable
law, and excess interest, if any, provided for in this note or otherwise shall
be canceled automatically as of the date of such acceleration or prepayment and,
if theretofore prepaid, shall be credited on this note (or if this note shall
have been paid in full, refunded to Maker); (iii) it is further agreed, without
limitation of the foregoing, that all calculations of the rate of interest
contracted for, charged, or received on this note that are made for the purpose
of determining whether such rate exceeds the maximum amount of interest allowed
by applicable law, shall be made, to the extent permitted by applicable law, by
amortizing, prorating, allocating, and spreading throughout the full stated term
of this note so that such rate of interest on account of this note, as so
calculated, is uniform throughout the term thereof; and (iv) that the Maker and
Payee agree that for the purposes of this paragraph, the applicable interest
ceiling is the Highest Lawful Rate. Notwithstanding anything to the contrary
contained herein or in any other document executed in connection herewith, it is
not the intention of Payee to accelerate the maturity of any interest that has
not accrued at the time of such acceleration or to collect unearned interest at
the time of such acceleration.
THIS NOTE has been executed and delivered in and shall be construed in
accordance with and governed by the laws of the State of Texas and of the United
States of America,
SFE
--------
INITIAL
[Page 3 of a 4 Page Note]
<PAGE> 4
$600,000.00 HOUSTON, TEXAS February 27, 1998
except that Tex. Rev. Civ. Stat. Ann. art. 5069 Ch. l5, as amended (which
regulates certain revolving credit loan accounts and revolving triparty
accounts) shall not apply to the revolving loan account created pursuant hereto.
UNLESS CHANGED in accordance with law, the applicable rate ceiling
under Texas law shall be the indicated (weekly) rate ceiling from time to time
in effect, as provided in Tex. Rev. Civ. Stat. Ann. art. 5069-1.04, as amended.
/s/ Samuel F. Eakin
-------------------------------------
Samuel F. Eakin
[Page 4 of a 4 Page Note]
<PAGE> 1
EXHIBIT 10.2
PROMISSORY NOTE
$200,000.00 HOUSTON, TEXAS February 27, 1998
FRANK W. EAKIN, (hereinafter called "Maker"), for value received,
promises and agrees to pay on or before December 31, 2009, in installments as
herein provided, unto the order of FIRST WAVE MARINE, INC., a Delaware
corporation (hereinafter called "Payee"), at its offices at 4000 S. Sherwood
Forest Boulevard, Suite 603, Baton Rouge, Louisiana 70816, or at such other
location as Payee may designate in writing, in lawful money of the United States
of America, such sums as the holder hereof may loan or advance to or for the
benefit of Maker on or after the date hereof in accordance with the terms
hereof, together with interest on the unpaid principal balance outstanding from
time to time hereon computed from the date of each advance until maturity at a
rate of six percent (6.0%) per annum. Interest shall be calculated on a per
annum basis of 365 days unless such calculation would result in a usurious rate,
in which event, interest shall be calculated on a full calendar year basis.
ALL PAST due principal and interest shall bear interest until paid at a
rate of seven percent (7.0%) per annum.
THE UNPAID principal balance hereof shall at no time exceed the sum of
TWO HUNDRED THOUSAND NO/100 DOLLARS ($200,000.00).
INTEREST on this note is due and payable in installments of accrued
interest which shall be due and payable on December 31, 1998 and thereafter on
December 31st of each consecutive calendar year during the term hereof and at
maturity.
IF ANY PAYMENT of principal or interest on this note shall become due
on a Saturday, Sunday, or public holiday under the laws of the State of Texas on
which Payee is not open for business, such payment shall be made on the next
succeeding business day of Payee, and any such extension or reduction of time
shall in such case be included in computing interest in connection with such
payment.
PAYMENT of this note before maturity may be made at any time or from
time to time, in whole or in part, without penalty or premium. Any such payment
shall be applied first to accrued interest and secondly to principal.
THE UNPAID PRINCIPAL BALANCE of this note at any time shall be the
total amounts lent or advanced hereunder by the holder hereof from and after the
date hereof, less the amount of payments or prepayments of principal made hereon
by or for the account of Maker. It is contemplated that by reason of prepayments
hereon there may be times when no indebtedness is owing hereunder; but
notwithstanding such occurrences, this note shall remain valid and shall be in
full force and effect as to loans or advances made pursuant to and under the
terms of this note subsequent to each occurrence. In the event that the
FWE
--------
INITIAL
[Page 1 of a 4 Page Note]
<PAGE> 2
$200,000.00 HOUSTON, TEXAS FEBRUARY 27, 1998
unpaid principal amount hereof at any time, for any reason, exceeds the maximum
amount hereinabove specified or the Available Amount (as hereinafter defined),
Maker covenants and agrees to pay the excess principal amount forthwith upon
demand; such excess principal amount shall in all respects be deemed to be
included among the loans or advances made pursuant to the other terms of this
note and shall bear interest at the rates hereinabove stated.
ADVANCES hereunder may be made by the holder hereof (i) pursuant to the
terms of any written agreement executed in connection herewith between Maker and
the holder of this Note, or (ii) at the oral or written request of Maker. Maker
covenants and agrees to furnish to the holder hereof written confirmation of any
such oral request within five (5) days of the resulting loan or advance, but any
such loan or advance shall be deemed to be made under and entitled to the
benefits of this note irrespective of any failure by Maker to furnish such
written confirmation. Any loan or advance shall be conclusively presumed to have
been made under the terms of this note to or for the benefit of Maker when made
pursuant to the terms of any written agreement executed in connection herewith
between Maker and the holder of this Note, or in accordance with such requests
and directions. On December 31, 2000 and on December 31st of each consecutive
calendar year during the term hereof (the "Reduction Dates"), the right of Maker
to request advances on this note shall be reduced by $20,000.00 (such reduced
amount that is available to be advanced to be hereinafter referred to as the
"Available Amount"). On each such Reduction Date, Maker covenants and agrees to
repay the amount by which, on such Reduction Date, the unpaid principal balance
of this note exceeds the Available Amount as the same has been reduced on such
Reduction Date and all previous Reduction Dates.
IT IS ESPECIALLY agreed between the parties hereto that time is of the
essence of this note and if default is made in the payment of any installment of
principal or interest hereof, as and when the same is or becomes due, or if
default occurs under any instrument securing the payment hereof or executed in
connection herewith, the owner and holder of this note may, at its option,
without notice or demand (being specifically waived below), declare all sums
owing hereon at once due and payable. If default is made in the payment of this
note at maturity (regardless of how maturity may be brought about) and the same
is placed in the hands of an attorney for collection, or suit is filed hereon,
or proceedings are had in bankruptcy, probate, receivership, reorganization,
arrangement, or other judicial proceedings for the establishment or collection
of any amount called for hereunder, or any amount payable or to be payable
hereunder is collected through any such proceedings, Maker agrees and is also to
pay to the owner and holder of this note a reasonable amount as attorney's or
collection fees.
MAKER expressly waives demand, notice of intent to demand, presentment
for payment, notice of nonpayment, protest, notice of protest, grace, notice of
dishonor, notice
FWE
--------
INITIAL
[Page 2 of a 4 Page Note]
<PAGE> 3
$200,000.00 HOUSTON, TEXAS FEBRUARY 27, 1998
of intent to accelerate maturity, notice of acceleration of maturity, bringing
of suit and diligence in taking any action to collect amounts called for
hereunder and in the handling of securities at any time existing in connection
herewith; and is and shall be directly and primarily liable for the payment of
all sums owing and to be owing hereon, regardless of and without any notice,
diligence, act or omission as or with respect to the collection of any amount
called for hereunder. Failure by the holder of this note to exercise its option
to accelerate upon any default shall not constitute a waiver of the holder's
right to exercise such option in the event of any subsequent default.
IT IS the intention of Maker and Payee to conform strictly to
applicable usury laws. Accordingly, if the transactions contemplated hereby
would be usurious under applicable law (including the laws of the State of Texas
and the laws of the United States of America), then, in that event,
notwithstanding anything to the contrary in any agreement entered into in
connection with or as security for this note, it is agreed as follows: (i) the
aggregate of all consideration which constitutes interest under applicable law
that is taken, reserved, contracted for, charged or received under this note or
under any of the other aforesaid agreements or otherwise in connection with this
note shall under no circumstances exceed the maximum rate of nonusurious
interest allowed by law as of the date hereof (the "Highest Lawful Rate") and
any excess shall be credited on this note by the holder hereof (or, if this note
shall have been paid in full, refunded to Maker); (ii) in the event that
maturity of the note is accelerated by reason of an election by the holder
hereof resulting from any default hereunder or otherwise, or in the event of any
required or permitted prepayment, then such consideration that constitutes
interest may never include more than the maximum amount allowed by applicable
law, and excess interest, if any, provided for in this note or otherwise shall
be canceled automatically as of the date of such acceleration or prepayment and,
if theretofore prepaid, shall be credited on this note (or if this note shall
have been paid in full, refunded to Maker); (iii) it is further agreed, without
limitation of the foregoing, that all calculations of the rate of interest
contracted for, charged, or received on this note that are made for the purpose
of determining whether such rate exceeds the maximum amount of interest allowed
by applicable law, shall be made, to the extent permitted by applicable law, by
amortizing, prorating, allocating, and spreading throughout the full stated term
of this note so that such rate of interest on account of this note, as so
calculated, is uniform throughout the term thereof; and (iv) that the Maker and
Payee agree that for the purposes of this paragraph, the applicable interest
ceiling is the Highest Lawful Rate. Notwithstanding anything to the contrary
contained herein or in any other document executed in connection herewith, it is
not the intention of Payee to accelerate the maturity of any interest that has
not accrued at the time of such acceleration or to collect unearned interest at
the time of such acceleration.
THIS NOTE has been executed and delivered in and shall be construed in
accordance with and governed by the laws of the State of Texas and of the United
States of America,
FWE
--------
INITIAL
[Page 3 of a 4 Page Note]
<PAGE> 4
$200,000.00 HOUSTON, TEXAS FEBRUARY 27, 1998
except that Tex. Rev. Civ. Stat. Ann. art. 5069 Ch. l5, as amended (which
regulates certain revolving credit loan accounts and revolving triparty
accounts) shall not apply to the revolving loan account created pursuant hereto.
UNLESS CHANGED in accordance with law, the applicable rate ceiling
under Texas law shall be the indicated (weekly) rate ceiling from time to time
in effect, as provided in Tex. Rev. Civ. Stat. Ann. art. 5069-1.04, as amended.
/s/ FRANK W. EAKIN
-------------------------------------
Frank W. Eakin
[Page 4 of a 4 Page Note]
<PAGE> 1
EXHIBIT 10.3
PROMISSORY NOTE
$200,000.00 HOUSTON, TEXAS FEBRUARY 27, 1998
DAVID B. AMMONS, (hereinafter called "Maker"), for value received,
promises and agrees to pay on or before December 31, 2009, in installments as
herein provided, unto the order of FIRST WAVE MARINE, INC., a Delaware
corporation (hereinafter called "Payee"), at its offices at 4000 S. Sherwood
Forest Boulevard, Suite 603, Baton Rouge, Louisiana 70816, or at such other
location as Payee may designate in writing, in lawful money of the United States
of America, such sums as the holder hereof may loan or advance to or for the
benefit of Maker on or after the date hereof in accordance with the terms
hereof, together with interest on the unpaid principal balance outstanding from
time to time hereon computed from the date of each advance until maturity at a
rate of six percent (6.0%) per annum. Interest shall be calculated on a per
annum basis of 365 days unless such calculation would result in a usurious rate,
in which event, interest shall be calculated on a full calendar year basis.
ALL PAST due principal and interest shall bear interest until paid at a
rate of seven percent (7.0%) per annum.
THE UNPAID principal balance hereof shall at no time exceed the sum of
TWO HUNDRED THOUSAND NO/100 DOLLARS ($200,000.00).
INTEREST on this note is due and payable in installments of accrued
interest which shall be due and payable on December 31, 1998 and thereafter on
December 31st of each consecutive calendar year during the term hereof and at
maturity.
IF ANY PAYMENT of principal or interest on this note shall become due
on a Saturday, Sunday, or public holiday under the laws of the State of Texas on
which Payee is not open for business, such payment shall be made on the next
succeeding business day of Payee, and any such extension or reduction of time
shall in such case be included in computing interest in connection with such
payment.
PAYMENT of this note before maturity may be made at any time or from
time to time, in whole or in part, without penalty or premium. Any such payment
shall be applied first to accrued interest and secondly to principal.
THE UNPAID PRINCIPAL BALANCE of this note at any time shall be the
total amounts lent or advanced hereunder by the holder hereof from and after the
date hereof, less the amount of payments or prepayments of principal made hereon
by or for the account of Maker. It is contemplated that by reason of prepayments
hereon there may be times when no indebtedness is owing hereunder; but
notwithstanding such occurrences, this note shall remain valid and shall be in
full force and effect as to loans or advances made pursuant to and under the
terms of this note subsequent to each occurrence. In the event that the
DBA
--------
INITIAL
[Page 1 of a 4 Page Note]
<PAGE> 2
$200,000.00 HOUSTON, TEXAS FEBRUARY 27, 1998
unpaid principal amount hereof at any time, for any reason, exceeds the maximum
amount hereinabove specified or the Available Amount (as hereinafter defined),
Maker covenants and agrees to pay the excess principal amount forthwith upon
demand; such excess principal amount shall in all respects be deemed to be
included among the loans or advances made pursuant to the other terms of this
note and shall bear interest at the rates hereinabove stated.
ADVANCES hereunder may be made by the holder hereof (i) pursuant to the
terms of any written agreement executed in connection herewith between Maker and
the holder of this note, or (ii) at the oral or written request of Maker. Maker
covenants and agrees to furnish to the holder hereof written confirmation of any
such oral request within five (5) days of the resulting loan or advance, but any
such loan or advance shall be deemed to be made under and entitled to the
benefits of this note irrespective of any failure by Maker to furnish such
written confirmation. Any loan or advance shall be conclusively presumed to have
been made under the terms of this note to or for the benefit of Maker when made
pursuant to the terms of any written agreement executed in connection herewith
between Maker and the holder of this note, or in accordance with such requests
and directions. On December 31, 2000 and on December 31st of each consecutive
calendar year during the term hereof (the "Reduction Dates"), the right of Maker
to request advances on this note shall be reduced by $20,000.00 (such reduced
amount that is available to be advanced to be hereinafter referred to as the
"Available Amount"). On each such Reduction Date, Maker covenants and agrees to
repay the amount by which, on such Reduction Date, the unpaid principal balance
of this note exceeds the Available Amount as the same has been reduced on such
Reduction Date and all previous Reduction Dates.
IT IS ESPECIALLY agreed between the parties hereto that time is of the
essence of this note and if default is made in the payment of any installment of
principal or interest hereof, as and when the same is or becomes due, or if
default occurs under any instrument securing the payment hereof or executed in
connection herewith, the owner and holder of this note may, at its option,
without notice or demand (being specifically waived below), declare all sums
owing hereon at once due and payable. If default is made in the payment of this
note at maturity (regardless of how maturity may be brought about) and the same
is placed in the hands of an attorney for collection, or suit is filed hereon,
or proceedings are had in bankruptcy, probate, receivership, reorganization,
arrangement, or other judicial proceedings for the establishment or collection
of any amount called for hereunder, or any amount payable or to be payable
hereunder is collected through any such proceedings, Maker agrees and is also to
pay to the owner and holder of this note a reasonable amount as attorney's or
collection fees.
MAKER expressly waives demand, notice of intent to demand, presentment
for payment, notice of nonpayment, protest, notice of protest, grace, notice of
dishonor, notice
DBA
--------
INITIAL
[Page 2 of a 4 Page Note]
<PAGE> 3
$200,000.00 HOUSTON, TEXAS FEBRUARY 27, 1998
of intent to accelerate maturity, notice of acceleration of maturity, bringing
of suit and diligence in taking any action to collect amounts called for
hereunder and in the handling of securities at any time existing in connection
herewith; and is and shall be directly and primarily liable for the payment of
all sums owing and to be owing hereon, regardless of and without any notice,
diligence, act or omission as or with respect to the collection of any amount
called for hereunder. Failure by the holder of this note to exercise its option
to accelerate upon any default shall not constitute a waiver of the holder's
right to exercise such option in the event of any subsequent default.
IT IS the intention of Maker and Payee to conform strictly to
applicable usury laws. Accordingly, if the transactions contemplated hereby
would be usurious under applicable law (including the laws of the State of Texas
and the laws of the United States of America), then, in that event,
notwithstanding anything to the contrary in any agreement entered into in
connection with or as security for this note, it is agreed as follows: (i) the
aggregate of all consideration which constitutes interest under applicable law
that is taken, reserved, contracted for, charged or received under this note or
under any of the other aforesaid agreements or otherwise in connection with this
note shall under no circumstances exceed the maximum rate of nonusurious
interest allowed by law as of the date hereof (the "Highest Lawful Rate") and
any excess shall be credited on this note by the holder hereof (or, if this note
shall have been paid in full, refunded to Maker); (ii) in the event that
maturity of the note is accelerated by reason of an election by the holder
hereof resulting from any default hereunder or otherwise, or in the event of any
required or permitted prepayment, then such consideration that constitutes
interest may never include more than the maximum amount allowed by applicable
law, and excess interest, if any, provided for in this note or otherwise shall
be canceled automatically as of the date of such acceleration or prepayment and,
if theretofore prepaid, shall be credited on this note (or if this note shall
have been paid in full, refunded to Maker); (iii) it is further agreed, without
limitation of the foregoing, that all calculations of the rate of interest
contracted for, charged, or received on this note that are made for the purpose
of determining whether such rate exceeds the maximum amount of interest allowed
by applicable law, shall be made, to the extent permitted by applicable law, by
amortizing, prorating, allocating, and spreading throughout the full stated term
of this note so that such rate of interest on account of this note, as so
calculated, is uniform throughout the term thereof; and (iv) that the Maker and
Payee agree that for the purposes of this paragraph, the applicable interest
ceiling is the Highest Lawful Rate. Notwithstanding anything to the contrary
contained herein or in any other document executed in connection herewith, it is
not the intention of Payee to accelerate the maturity of any interest that has
not accrued at the time of such acceleration or to collect unearned interest at
the time of such acceleration.
THIS NOTE has been executed and delivered in and shall be construed in
accordance with and governed by the laws of the State of Texas and of the United
States of America,
DBA
--------
INITIAL
[Page 3 of a 4 Page Note]
<PAGE> 4
$200,000.00 HOUSTON, TEXAS FEBRUARY 27, 1998
except that Tex. Rev. Civ. Stat. Ann. art. 5069 Ch. l5, as amended (which
regulates certain revolving credit loan accounts and revolving triparty
accounts) shall not apply to the revolving loan account created pursuant hereto.
UNLESS CHANGED in accordance with law, the applicable rate ceiling
under Texas law shall be the indicated (weekly) rate ceiling from time to time
in effect, as provided in Tex. Rev. Civ. Stat. Ann. art. 5069-1.04, as amended.
/s/ DAVID B. AMMONS
-------------------------------------
David B. Ammons
[Page 4 of a 4 Page Note]
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 33,821
<SECURITIES> 11,017
<RECEIVABLES> 17,638
<ALLOWANCES> 134
<INVENTORY> 786
<CURRENT-ASSETS> 63,700
<PP&E> 50,682
<DEPRECIATION> 2,791
<TOTAL-ASSETS> 133,145
<CURRENT-LIABILITIES> 20,034
<BONDS> 90,000
0
0
<COMMON> 118
<OTHER-SE> 7,075
<TOTAL-LIABILITY-AND-EQUITY> 133,145
<SALES> 15,767
<TOTAL-REVENUES> 15,767
<CGS> 10,182
<TOTAL-COSTS> 10,182
<OTHER-EXPENSES> 3,704
<LOSS-PROVISION> 88
<INTEREST-EXPENSE> 1,726
<INCOME-PRETAX> 155
<INCOME-TAX> 83
<INCOME-CONTINUING> 72
<DISCONTINUED> 0
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