<PAGE>
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 2, 1998
REGISTRATION NO. 333-44967
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
OMEGA PROTEIN CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
NEVADA 0912 76-0562134
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
1717 ST. JAMES PLACE, SUITE 550
HOUSTON, TEXAS 77056
(713) 940-6100
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
JOSEPH L. VON ROSENBERG III
CHIEF EXECUTIVE OFFICER AND PRESIDENT
OMEGA PROTEIN CORPORATION
1717 ST. JAMES PLACE, SUITE 550
HOUSTON, TEXAS 77056
(713) 940-6100
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
GORDON E. FORTH, ESQ. NEIL GOLD, ESQ.
WOODS, OVIATT, GILMAN, STURMAN & CLARKE LLP FULBRIGHT & JAWORSKI L.L.P.
44 EXCHANGE STREET 666 FIFTH AVENUE
ROCHESTER, NEW YORK 14614 NEW YORK, NEW YORK 10103
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the Registration Statement becomes
effective.
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 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 a prospectus is expected to be made pursuant to Rule 434,
please check the following box. [x]
------------------------
THE 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 AN 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>
<PAGE>
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 SALES 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 APRIL 2, 1998
PROSPECTUS
- --------------------------------------------------------------------------------
8,000,000 Shares
[Logo]
Common Stock
- --------------------------------------------------------------------------------
Of the 8,000,000 shares of common stock, par value $.01 per share (the 'Common
Stock'), offered hereby, 4,000,000 shares are being sold by Omega Protein
Corporation (the 'Company'), which, prior to this offering (the 'Offering'), was
a wholly-owned subsidiary of Zapata Corporation ('Zapata' or the 'Selling
Stockholder') and 4,000,000 shares are being offered by the Selling Stockholder.
The Company will not receive any proceeds from the sale of shares of Common
Stock being sold by the Selling Stockholder. See 'Principal and Selling
Stockholders.'
Prior to the Offering, there has been no public market for the Common Stock. It
is currently anticipated that the initial public offering price will be between
$14 and $16 per share. See 'Underwriting' for a discussion of the factors to be
considered in determining the initial public offering price. The Common Stock
has been authorized for listing on the New York Stock Exchange ('NYSE') under
the symbol 'OME.'
Zapata will own 66.2% of the Common Stock outstanding after the Offering (62.1%
if the Underwriters' over-allotment options are exercised in full) and, as a
result, will have the ability to control the outcome of all matters submitted to
a vote of the Company's stockholders, including the election of directors. See
'Principal and Selling Stockholders.'
SEE 'RISK FACTORS' ON PAGES 6 TO 10 FOR A DISCUSSION OF CERTAIN MATERIAL FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Underwriting Proceeds to
Price to Discounts and Proceeds to Selling
Public Commissions(1) Company(2) Stockholder(2)
<S> <C> <C> <C> <C>
Per Share............... $ $ $ $
Total(3)................ $ $ $ $
</TABLE>
(1) The Company and the Selling Stockholder have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See 'Underwriting.'
(2) Before deducting expenses payable by the Company, estimated to be $500,000,
and expenses payable by the Selling Stockholder, estimated to be $500,000.
(3) The Company and the Selling Stockholder have granted the Underwriters 30-day
over-allotment options to purchase, in the aggregate, up to 1,200,000
additional shares of Common Stock on the same terms and conditions as set
forth above. If all such additional shares are purchased by the
Underwriters, the total Price to Public will be $ , the total
Underwriting Discounts and Commissions will be $ , the total
Proceeds to Company will be $ and the total Proceeds to Selling
Stockholder will be $ . See 'Underwriting.'
- --------------------------------------------------------------------------------
The shares of Common Stock are offered by the several Underwriters subject to
delivery by the Company and the Selling Stockholder and acceptance by the
Underwriters, to prior sale and to withdrawal, cancellation or modification of
the offer without notice. Delivery of the shares to the Underwriters will be
made through the facilities of the Depository Trust Company, New York, New York
on or about , 1998.
PRUDENTIAL SECURITIES INCORPORATED DEUTSCHE MORGAN GRENFELL
April , 1998
<PAGE>
<PAGE>
[PHOTO]
Menhaden, the Company's raw material.
[PHOTO]
One of the Company's 66 steamers.
[MAP]
Location of the Company's operations
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK, INCLUDING
PURCHASES OF THE COMMON STOCK TO STABILIZE ITS MARKET PRICE, PURCHASES OF THE
COMMON STOCK TO COVER SOME OR ALL OF A SHORT POSITION IN THE COMMON STOCK
MAINTAINED BY THE UNDERWRITERS AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE 'UNDERWRITING.'
<PAGE>
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus and information under 'Risk Factors.' All
references to the Common Stock in this Prospectus reflect the 19,676-for-one
stock conversion effected in the Company's January 26, 1998 reincorporation
merger effected with Marine Genetics, Inc. Unless otherwise indicated, (i) all
information in this Prospectus assumes that the Underwriters' over-allotment
options will not be exercised, (ii) all references in this Prospectus to the
'Company' mean Omega Protein Corporation and its consolidated subsidiaries,
(iii) all references to a 'Fiscal' year refer to the 12 month period ended
September 30 of such year and (iv) all references to tons with respect to fish
catch, fish meal and fish solubles are to short tons and all references to tons
with respect to oil are to metric tons.
THE COMPANY
Omega Protein Corporation is the largest U.S. producer of protein-rich meal
and oil derived from marine sources. The Company markets a variety of products
derived from menhaden, a fish found in commercial quantities in coastal waters
off the U.S. mid-Atlantic and Gulf coasts. These products include regular grade
and value-added specialty fish meals, crude and refined fish oils and fish
solubles. The Company's fish meal products are used as protein additives by
animal feed manufacturers and by commercial livestock and poultry farmers. Fish
meal derived from menhaden generally possesses a higher protein content and a
superior amino acid profile than other fish meal produced in the U.S. The
Company's fish oil is used in hydrogenated form by European commercial food
processors in margarine and other shortenings. Due to its content of
nutritionally important omega-3 fatty acids, the oil is also used in Europe in
non-hydrogenated form as a nutritional supplement in foods such as bread, soup
and beverages. In its crude form, the Company's fish oil is used in aquaculture
feeds and certain industrial applications. Fish solubles are sold as protein
additives for animal feed and as organic fertilizers.
The Company is the largest U.S. harvester and processor of menhaden. The
menhaden catch is processed in one of the Company's five plants (one of which
was recently acquired) located in Virginia, Mississippi and Louisiana. The
Company's processing operations are vertically integrated and include 66 fishing
vessels and 44 spotter aircraft. In Fiscal 1997, the Company processed
approximately 507,358 tons of menhaden (representing approximately 54% of the
total menhaden harvested in the U.S.) into approximately 124,985 tons of fish
meal, 71,562 tons of fish oil and 16,531 tons of fish solubles. During Fiscal
1997, the Company produced approximately 43% of all fish meal and approximately
58% of all fish oil produced in the U.S. See 'Business -- Product Lines' and
' -- Harvesting and Processing.'
For Fiscal 1997, the Company reported revenues of $117.6 million and
operating income of $18.2 million. Between Fiscal 1993 and Fiscal 1997 operating
income increased at a compound annual growth rate of 43%. On a pro forma basis
adjusted for the sale of the Company's milling business as of October 1, 1996,
the Company had revenues of $85.6 million and operating income of $18.0 million
in Fiscal 1997. During the first quarter of Fiscal 1998, the Company had
revenues of $29.5 million and operating income of $9.1 million. See 'Pro Forma
Unaudited Consolidated Statement of Operations Data' and 'Management's
Discussion and Analysis of Financial Condition and Results of Operations.' In
early Fiscal 1998, the Company acquired certain operating assets of American
Protein, Inc. and Gulf Protein, Inc., two of the four other remaining menhaden
harvesters. The Company anticipates that these acquisitions will enhance its
harvesting and processing capabilities. See 'Company History and Recent
Transactions.'
The feeding practices utilized by certain livestock farmers have become
increasingly complex, requiring specific combinations of proteins, amino acids
and fats to be fed to animals so as to maximize the feed to weight gain ratio
and minimize the overall cost to raise an animal from birth to production. For
example, the Company's fish meal is sold to, among others, (i) dairy feed
manufacturers seeking to increase milk production per cow; (ii) turkey feed and
swine feed manufacturers seeking to improve feed efficiency, increase weight
gain and shorten time to market; and (iii) pet food manufacturers and
aquaculture farmers seeking consistency of texture and taste for their feed. A
growing portion of the Company's meal production is dedicated to higher priced
specialty meals marketed under its Company-owned brands, Sea-Lac and Special
Select. These specialty meals are designed for specific animal feed
applications, are more easily digestible and allow for greater protein
absorption than most other competing protein feed additives. See
'Business -- Industry Overview.'
3
<PAGE>
<PAGE>
In June 1997, the Food and Drug Administration (the 'FDA') approved the use
of refined (non-hydrogenated) menhaden oil for human consumption in the U.S.
Menhaden oil is the only non-hydrogenated fish oil approved by the FDA for human
consumption. Menhaden oil contains omega-3 fatty acids, which studies have
linked to the prevention and treatment of certain diseases, including
hypertension, cardiovascular disease, cancer and arthritis. The Company believes
that this recent development presents significant domestic market opportunities
for its menhaden oil.
The Company's strategy is to continue to enhance its position as the
leading domestic supplier of value-added marine protein products (such as
Special Select and Sea-Lac) and oil products, to become the leading domestic
supplier of omega-3 rich oil for human consumption and to broaden its
international presence. To achieve these objectives, the Company has established
the following strategies: (i) focus on the development of value-added products;
(ii) exploit the U.S. market for omega-3 fatty acids; (iii) maintain its status
as the largest U.S. source of marine-derived protein products and oils; and (iv)
expand its presence in the protein additives industry through future acquisition
of other producers of animal-derived protein products in the U.S. and abroad.
Although the Company is currently evaluating various acquisition opportunities,
as of the date of this Prospectus, the Company has no pending plans, agreements,
understandings, negotiations or arrangements with respect to any material
acquisitions. See 'Business -- Business Strategy.'
The Company is a wholly-owned subsidiary of Zapata and is the successor by
merger to the businesses previously conducted by Marine Genetics Corporation
(formerly known as Zapata Protein, Inc.) and its subsidiaries. See 'Company
History and Recent Transactions.' The Company was formed under the laws of the
State of Nevada on January 23, 1998. Its executive offices are located at 1717
St. James Place, Suite 550, Houston, Texas 77056, and its telephone number is
(713) 940-6100.
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered by the Company.............................................. 4,000,000 shares
Common Stock Offered by the Selling Stockholder.................................. 4,000,000 shares
Common Stock to be Outstanding after the Offering................................ 23,676,000 shares (1)
Use of Proceeds by the Company................................................... To repay indebtedness to Zapata and to a
bank and for general corporate purposes,
including working capital and
acquisitions. See 'Use of Proceeds.'
NYSE Symbol...................................................................... OME
</TABLE>
- ------------
(1) Excludes options to purchase an aggregate of 4,220,000 shares of Common
Stock authorized under the Company's 1998 Long-Term Incentive Plan (the
'1998 Incentive Plan') and the Company's Non-Management Directors Plan
('Directors Option Plan'), of which options to purchase 1,657,360 shares of
Common Stock have been granted at $12.75 per share under the 1998 Incentive
Plan and options to purchase 582,400 shares of Common Stock have been
granted at $12.75 per share under the Directors Option Plan. See
'Management -- Stock Option Plans.'
RISK FACTORS
Investors should consider the risk factors involved in connection with an
investment in the Common Stock and the impact to investors from various events
that could adversely affect the Company's business, including, among others, the
Company's dependence on menhaden as its single natural resource, the effect on
the prices for the Company's products caused by worldwide supply and demand
relationships for competing products, government regulations, restrictions on
foreign ownership required for the Company to maintain its fishing licenses in
U.S. jurisdictional waters, risk associated with the Company's attempts to
exploit the domestic market for omega-3 fatty acids, fluctuation of quarterly
results, and control of the Company by Zapata after the Offering. For a more
complete discussion of these and other risk factors affecting the Company and
its business, see 'Risk Factors.'
------------------------
Special Select'tm' and Sea-Lac'r' are trademarks of the Company.
4
<PAGE>
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AND SELECTED OPERATING DATA)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------------------------------------- THREE MONTHS ENDED
1997 DECEMBER 31,
-------------------------- ----------------------
1993(1) 1994(2) 1995 1996(1) ACTUAL PRO FORMA(3) 1996 1997(4)
------- -------- -------- ------- ----------- ------------ --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.................... $58,565 $ 96,614 $ 94,959 $93,609 $ 117,564 $ 85,599 $25,623(5) $29,503
Gross Profit................ 8,100 (2,142) 9,837 15,194 23,818 23,644 4,817 10,229
Operating income (loss)..... 4,295 (6,896) 5,904 10,504 18,205 18,031 3,792 9,075
Interest expense............ (818 ) (687) (1,102) (995 ) (592) (527) (202) (379)
Other (expense) income...... (148 ) 114 116 (118 ) (1,328) (791) (1) (13)
Income (loss) before income
taxes..................... 3,329 (7,469) 4,918 9,391 16,285 16,713 3,589 8,683
Net income (loss)........... $2,147 $ (5,220) $ 3,250 $5,928 $ 10,425 $ 10,703 $ 2,225 $ 5,312
Net income (loss) per share
(basic)................... $0.11 $(0.27) $0.17 $0.30 $0.53 $0.54 $0.11 $0.27
Average common shares
outstanding............... 19,676 19,676 19,676 19,676 19,676 19,676 19,676 19,676
Net income (loss) per share
(diluted)................. $0.11 $(0.27) $0.17 $0.30 $0.53 $0.54 $0.11 $0.27
Average common shares and
common share equivalents
outstanding............... 19,676 19,676 19,676 19,676 19,676 19,676 19,676 19,676
SELECTED OPERATING DATA:
Fish catch (tons)(6)........ 500,088 685,377 512,517 458,917 507,358 70,082 107,535
Sales (tons)
Fish meal:
Regular grade meal...... 77,896 133,515 108,435 61,494 51,995 8,483 10,429
Special Select.......... 27,558 30,568 37,084 38,964 47,217 11,018 14,053
Sea-Lac................. 5,127 7,576 7,790 9,379 13,917 3,147 3,501
Oil:
Refined................. 5,392 7,249 8,447 8,814 9,747 2,665 1,923
Crude................... 36,659 76,302 79,644 52,257 44,007 12,300 22,329
Solubles.................. 7,656 15,842 16,879 19,988 18,733 4,479 3,929
Average selling price per
ton:
Fish meal:
Regular grade meal...... $ 350 $ 329 $ 329 $ 383 $ 457 $ 436 $ 470
Special Select.......... 445 403 405 495 547 542 589
Sea-Lac................. 397 367 370 431 509 501 528
Oil:
Refined................. $ 470 $ 423 $ 448 $ 510 $ 529 $ 502 $ 552
Crude................... 320 300 321 390 424 410 539
Solubles.................. 173 162 157 163 191 173 209
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
--------------------------
ACTUAL AS ADJUSTED(7)
-------- --------------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital................................................................................ $ 36,898 $ 62,460
Total assets................................................................................... 130,620 150,581
Total debt..................................................................................... 40,938 10,758
Stockholders' equity........................................................................... 69,666 124,966
</TABLE>
- ------------
(1) In August 1993, the Company acquired a 60% equity interest in Venture
Milling Company, which was involved in the milling of animal feeds and
protein ingredients for the poultry, hog and dairy industries. In March
1996, the Company acquired the remaining 40% of Venture Milling Company's
equity.
(2) Includes a non-recurring charge of $12.3 million related to a write-down of
the Company's assets to estimated fair value which was computed in
connection with the Company's contemplated sale in Fiscal 1994.
(3) Gives effect to the September 16, 1997 sale by Venture Milling Company of
substantially all of its assets as if such sale occurred on October 1, 1996.
See 'Company History and Recent Transactions' and 'Pro Forma Unaudited
Consolidated Statement of Operations Data.'
(4) In November 1997, the Company acquired certain assets from American Protein,
Inc. and Gulf Protein, Inc. See 'Company History and Recent Transactions.'
The Company operated the 10 vessels acquired from American Protein, Inc.
through the end of the mid-Atlantic coast fishing season. The Company did
not operate any of the Gulf Protein, Inc. vessels since the 1997 Gulf Coast
fishing season had ended prior to the closing of that transaction.
(5) Includes $7.0 million of revenues from the operations of Venture Milling
Company.
(6) Fish catch has been converted to short tons using the conversion ratio
recognized for the menhaden species by the U.S. Department of Commerce
National Oceanic and Atmospheric Administration, National Marine Fisheries
Service ('NMFS'). NMFS uses a conversion of 670 pounds per 1,000 fish.
Pounds are converted into short tons by dividing the total pounds of fish
catch by 2,000 (the 'NMFS fish catch conversion ratio').
(7) As adjusted to give effect to the sale by the Company of 4,000,000 shares of
Common Stock at at an assumed initial public offering price of $15.00 per
share, the midpoint of the filing range (after deducting underwriting
discounts and commissions and estimated offering expenses payable by the
Company), and the application of the estimated net proceeds therefrom,
including the application of a portion of the $55.3 million in the Company's
net proceeds to the repayment of $33.3 million of indebtedness to Zapata (of
which $5.2 million are current maturities of long-term debt) and the
repayment of $2.1 million of bank indebtedness (of which $442,000 are
current maturities of long-term debt).
5
<PAGE>
<PAGE>
RISK FACTORS
An investment in the Common Stock involves a high degree of risk.
Prospective investors should consider carefully the following risk factors, in
addition to the other information presented in this Prospectus, in connection
with an investment in shares of Common Stock offered hereby.
When used in this Prospectus, the words 'may,' 'will,' 'expect,'
'anticipate,' 'continue,' 'estimate,' 'project,' 'intend' and similar
expressions are intended to identify forward-looking statements regarding among
other things: (i) trends affecting the Company's financial condition or results
of operations; (ii) the Company's business and growth strategies; (iii) the use
of the net proceeds to the Company from the Offering; (iv) trends in the animal
feed, protein additives, refined and crude oil and organic fertilizer
industries; (v) government regulations; and (vi) the Company's financing plans.
Prospective investors are cautioned that any forward-looking statements are not
assurances or guarantees of future performance and are subject to risks and
uncertainties and that actual results may differ materially from those included
within the forward-looking statements as a result of various factors. Factors
that could cause or contribute to such differences include, but are not limited
to, those described below, and under the heading 'Management's Discussion and
Analysis of Financial Condition and Results of Operation' and elsewhere in this
Prospectus.
DEPENDENCE ON SINGLE NATURAL RESOURCE. The Company's primary raw material
is menhaden. The Company's business is dependent on its annual menhaden harvest
in ocean waters along the U.S. mid-Atlantic and Gulf coasts. The Company's
annual menhaden harvest is subject to fluctuation due to natural conditions such
as varying fish population, adverse weather conditions and disease. The Company
has no control over these conditions and accordingly, there can be no assurance
that the Company will be able to meet its annual raw material requirements in
any year. A failure to harvest menhaden in sufficient numbers and in a timely
manner would have a material adverse effect on the Company's business, results
of operations and financial condition.
COMPETITION AND PRICE. The marine protein and oil business is subject to
significant competition from vegetable and animal protein and oil products, such
as soybean meal and oil, palm oil, spray dried blood meal, bone meal and feather
meal. The price for fish meal generally bears a relationship to prevailing
soybean meal prices, while prices for fish oil used as a replacement for
vegetable fats and oils usually bear a relationship to prices for these
alternative fats and oils. In addition, to a lesser extent, the Company competes
with international marine protein and oil producers located principally in
Scandinavia and South America. The prices for the Company's products are
significantly influenced by worldwide supply and demand relationships over which
the Company has no control and which tend to fluctuate to a significant extent
over the course of a year and from year to year. During the past three years,
worldwide prices for protein additives and oils have steadily increased,
reaching historic highs during Fiscal 1997 and the first quarter of Fiscal 1998.
There can be no assurance that the favorable pricing environment of the last
three years will continue. See 'Business -- Competition.'
GOVERNMENT REGULATIONS. Certain states have enacted legislation and
regulations that prohibit, limit or restrict menhaden fishing within their
jurisdictional waters. In addition, certain states regulate the length of the
fishing season. Violations of these laws and regulations can result in
substantial penalties, ranging from fines to seizure of catch and vessels. The
Company's operations are also subject to federal, state and local laws and
regulations relating to the protection of the environment and the health and
safety of its employees. Failure by the Company to continue to comply with
applicable laws and regulations could have a material adverse effect on the
Company's business, results of operations and financial condition. In addition,
there can be no assurance that new laws and regulations, or stricter
interpretations of existing laws or regulations, will not materially adversely
affect the Company's business or results of operations in the future. See
'Business -- Harvesting and Processing' and ' -- Regulation.'
RESTRICTION ON FOREIGN OWNERSHIP. Certain federal regulations related to
the Company's harvesting activities restrict the total percentage of the
Company's capital stock which may be held by non-U.S. citizens to less than 50%
of the Company's outstanding capital stock and voting stock. The Company has
established procedures that must be followed in the purchase, sale or other
transfer of the Company's common stock. The Company's failure at any time to
maintain the U.S. citizenship ownership requirements would result in the loss of
the Company's ability to harvest menhaden in U.S.
6
<PAGE>
<PAGE>
jurisdictional waters. Such a loss would have a material adverse effect on the
Company's business, results of operations and financial condition. See
'Business -- Regulation' and 'Description of Capital Stock -- Foreign Ownership
Restrictions.'
RISKS ASSOCIATED WITH NEW BUSINESS VENTURES. In June 1997, the FDA approved
the sale of refined (non-hydrogenated) menhaden oil for use in edible products
in the U.S. The Company intends to sell refined (non-hydrogenated) menhaden oil
to food processors who will incorporate it into their products for human
consumption in the U.S. and, therefore, it is subject to risks inherent with a
new business venture such as the unproven market for this product and the need
to train its sales and marketing staff. There can be no assurance that the
Company will be able to profitably sell menhaden oil in the U.S. for human
consumption or that it will not incur losses in attempting to do so.
RISKS ASSOCIATED WITH ACQUISITION STRATEGY. A significant element in the
Company's growth strategy is the acquisition of additional businesses to expand
the geographic and product markets in which it competes. The Company recently
acquired certain assets from two competitors. See 'Company History and Recent
Transactions.' There can be no assurance that the Company will be successful in
integrating these assets into its operations or be able to sell profitably the
increased production it anticipates from utilization of these assets. There also
can be no assurance that the Company will be able to identify or reach mutually
agreeable terms with acquisition candidates and their owners, that the Company
will be able to profitably manage future businesses it acquires or successfully
integrate future businesses it acquires into the Company without substantial
costs, delays or other problems. In addition, acquisitions may involve a number
of special risks, including adverse short-term effects on the Company's reported
operating results; diversion of management's attention; dependence on retention,
hiring and training of key personnel; and unanticipated problems or legal
liabilities. Some or all of these risks could have a material adverse effect on
the Company's business, results of operations and financial condition. There can
also be no assurance that any debt or equity financing needed for future
acquisitions can be obtained or that, if obtained, such financing will be on
terms that are favorable to the Company or sufficient for the Company's needs.
If the Company is unable to obtain sufficient financing, it may be unable to
fully implement its acquisition strategy.
SEASONALITY AND FLUCTUATION OF QUARTERLY RESULTS. The Company's menhaden
harvesting and processing business is seasonal. The Company generally has higher
sales during the harvesting season (which includes the third and fourth quarters
of each Fiscal year) due to increased availability, but prices during the
harvesting season tend to be lower than during the off-season. As a result, the
Company's quarterly operating results have fluctuated in the past and may
fluctuate in the future. Fluctuations caused by variations in quarterly
operating results may affect the market price of the Common Stock. In addition,
from time to time the Company defers sales of inventory based on worldwide
prices for competing products which may affect comparable period comparisons.
See 'Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Quarterly Results.'
DEPENDENCE ON KEY PERSONNEL. The Company's performance is substantially
dependent on the efforts of its executive officers and certain key employees.
The Company intends to enter into employment agreements with its key executive
officers prior to the consummation of this Offering, but does not carry
insurance on the life of any of its executive officers. The loss of the services
of the Company's key officers could have a material adverse effect on the
Company's business, financial condition and results of operations. See
'Management.'
DEPENDENCE ON LABOR FORCE. The Company's operations are labor intensive.
The Company's menhaden harvesting operations depend in large part upon its
ability to attract, motivate and retain vessel captains and crew members. From
time to time, the Company has experienced shortages of qualified personnel for
these positions. There can be no assurance that the Company will be able to
attract and retain sufficient numbers of vessel captains and crew members to
operate efficiently or that the Company's labor expense will not increase as a
result of labor shortages or increased labor expense in this area. Such labor
shortages or increased labor expenses could materially adversely affect the
Company's business, results of operations and financial condition.
RISKS RELATED TO INTERNATIONAL SALES AND EXPANSION. Approximately 25.1% of
the Company's pro forma Fiscal 1997 revenues were derived from sales outside of
the U.S., principally in Europe and
7
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<PAGE>
Canada. Presently all of the Company's international sales are denominated in
U.S. dollars and are not directly affected by fluctuations in the value of local
currencies. The competitive position of the Company's products are affected by
the strength of the U.S. dollar relative to the strength of local currencies of
the countries in which its products are sold. The Company's international sales,
which generally consist of fish oil sales, are also subject to various tariffs
and duties. See 'Business -- International Sales.' Further, an element of the
Company's strategy is to pursue growth opportunities in international markets,
including acquisitions in South America and sales to Asia and Mexico. These
activities are or will be exposed to the risk of changes in social, political
and economic conditions inherent in foreign operations and international trade,
including changes in the law and policies that govern foreign investment and
international trade in such countries, as well as, to a lesser extent, changes
in U.S. laws and regulations relating to foreign investment and trade. Changes
of tax or other laws, partial or total expropriation, currency exchange rate
fluctuations and restrictions on currency repatriation, the disruption of labor,
political disturbances, insurrection or war and the effect of requirements of
partial local ownership of operations in certain countries could have a material
adverse effect on the Company's business, results of operations or financial
conditions.
CONTROL BY ZAPATA. Upon completion of the Offering, Zapata will own
approximately 66.2% (approximately 62.1% if the Underwriters' over-allotment
options are exercised in full) of the shares of Common Stock outstanding.
Accordingly, Zapata will have the ability to elect all the members of the Board
of Directors of the Company (the 'Company's Board') and otherwise control the
management and affairs of the Company. Malcolm Glazer, through the Glazer Family
Limited Partnership, is the beneficial owner of approximately 45% of Zapata's
issued and outstanding voting common stock. Malcolm Glazer and his son, Avram
Glazer, are members of the Company's Board. The ability of Zapata and through
Zapata, the Glazers, to control the Company could have a material adverse effect
on the market price for shares of Common Stock. See 'Principal and Selling
Stockholders' and 'Shares Eligible For Future Sale.'
CONFLICTS OF INTEREST. In the future, conflicts of interest may arise
between Zapata and the Company in a number of areas relating to their past and
present relationships in which Zapata and the Glazers could exercise their
control to determine the outcome. Potential conflicts include future
acquisitions of businesses or properties, other business opportunities, the
election of new or additional directors, the payment of dividends, incurring
indebtedness, tax matters, financial commitments, registration rights and
issuance of capital stock of the Company. Any officer or director of Zapata who
serves as a director of the Company, such as Malcolm Glazer and Avram Glazer,
may have conflicts of interest in addressing business opportunities and
strategies as to which Zapata's and the Company's interest differ. There can be
no assurance that any such conflict of interest will be resolved in favor of the
Company.
The Company and Zapata intend to enter into certain agreements prior to the
consummation of the Offering. The agreements, which become effective on the
completion of the Offering, define the relationship between the Company and
Zapata generally with respect to indemnification and contribution for any losses
arising out of this Offering as a result of securities law violations,
restrictions on Zapata harvesting menhaden or engaging in the fish meal and oil
business following the closing of this Offering, corporate services, taxes, real
estate, and registration rights. As a result of Zapata's ownership interest in
the Company, the terms of such agreements were not the result of arm's-length
negotiations. Reimbursement for ongoing services provided by the Company to
Zapata will be at the Company's estimated cost. There can be no assurance that
such agreements, or the transactions provided for therein, will be effected on
terms at least as favorable to the Company as could have been obtained from
unaffiliated third parties. See 'Management -- Board Committees' and 'Certain
Transactions and Arrangements Between the Company and Zapata.'
LIABILITIES AS A MEMBER OF CONSOLIDATED TAX GROUP. The Company has been and
will continue to be through the closing of the Offering, a member of Zapata's
consolidated tax group under federal income tax law. Following the consummation
of this Offering, the Company will no longer be a member of Zapata's
consolidated tax group for federal income tax purposes. Each member of a
consolidated group for federal income tax purposes is jointly and severally
liable for the federal income tax liability of each other member of the
consolidated group. Similar rules may apply under state income tax laws.
Although Zapata and the Company intend to enter into a Tax Indemnity Agreement
prior to the
8
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<PAGE>
consummation of the Offering, if Zapata or members of its consolidated tax group
(other than the Company and its subsidiaries) fail to pay tax liabilities
arising prior to the time that the Company is no longer a member of Zapata's
consolidated tax group or during the tax period including the date on which the
Offering is consummated, the Company could be required to make payments in
respect of these tax liabilities and such payments could materially adversely
affect the Company's business, results of operations and financial condition.
See 'Certain Transactions and Arrangements Between the Company and Zapata -- Tax
Indemnity Agreement.'
POTENTIAL LEGAL LIABILITY. The Company is subject to the Jones Act which
permits seamen and their personal representatives and certain close family
members to recover damages if the seaman has been injured due to the negligence
of the Company or to the negligence of the seaman's fellow employees. Damages
are allowed for compensation of past and future loss of income, expenses of
medical care, pain and suffering and disability. The Company participates in an
insurance program that provides coverage for liability of the Company under the
Jones Act up to certain limits. There can be no assurance, however, that the
Company's insurance will be adequate to cover all potential claims under the
Jones Act. See 'Business -- Insurance.'
POTENTIAL EFFECT OF ANTITAKEOVER PROVISIONS. Certain provisions of the
Company's Articles of Incorporation and By-Laws, as well as the Nevada
Corporation Law could delay or frustrate the removal of incumbent directors and
could make difficult a merger, tender offer or proxy contest involving the
Company, even if such events could be viewed as beneficial by the Company's
stockholders. The Company's Board is empowered to issue preferred stock in one
or more series without stockholder action. Any issuance of this 'blank-check'
preferred stock could materially limit the rights of holders of the Common Stock
and render more difficult or discourage an attempt to obtain control of the
Company by means of a tender offer, merger, proxy contest or otherwise. In
addition, the Articles of Incorporation and By-Laws contain a number of
provisions which could impede a takeover or change in control of the Company,
including, among other things, staggered terms for members of the Company's
Board, the requiring of two-thirds vote of stockholders to amend certain
provisions of the Articles of Incorporation or the inability after Zapata no
longer owns a majority of the Company's Common Stock to take action by written
consent or to call special stockholder meetings. Certain provisions of the
Nevada Corporation Law to which the Company may become subject at some time in
the future could also discourage takeover attempts that have not been approved
by the Company's Board. See 'Description of Capital Stock -- Antitakeover
Effects of Certain Provisions of the Articles of Incorporation and By-Laws.'
SHARES ELIGIBLE FOR FUTURE SALE. Upon completion of the Offering, the
Company will have 23,676,000 shares of Common Stock outstanding (24,276,000 if
the Underwriters' over-allotment options are exercised in full). Of these
shares, the 8,000,000 shares offered hereby (9,200,000 shares if the
Underwriters' over-allotment options are exercised in full) will be freely
tradeable without restriction or requirement of future registration under the
Securities Act of 1933, as amended (the 'Securities Act'). All of the remaining
outstanding shares of Common Stock will continue to be held by Zapata and are
'restricted securities' as that term is defined by Rule 144 promulgated under
the Securities Act. Such shares will be eligible for sale beginning upon
expiration of the lock-up agreement described below, subject to the manner of
sale, volume, notice and information requirements of Rule 144. The Company, its
officers and directors and the Selling Stockholder have agreed that they will
not, for a period of 180 days (360 days in the case of the Selling Stockholder)
from the date of this Prospectus, directly or indirectly, offer, sell, offer to
sell, contract to sell, pledge, grant any option to purchase or otherwise sell
or dispose (or announce any offer, sale, offer of sale, contract of sale,
pledge, grant of any option to purchase or other sale or disposition) of any
shares of Common Stock or other capital stock of the Company or any securities
convertible into, or exercisable or exchangeable for, any Common Stock, or other
capital stock of the Company without the prior written consent of Prudential
Securities Incorporated, on behalf of the Underwriters, except that such
agreement does not prevent the Company from (i) granting additional options
under the Company's 1998 Incentive Plan or the Directors Option Plan and (ii)
issuing stock in connection with an acquisition if the recipient agrees to the
same 180 day restriction on resale. Prudential Securities Incorporated may, in
its sole discretion, at any time and without notice, release all or any portion
of the securities subject to such lock-up agreements.
9
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<PAGE>
The Company has outstanding options to purchase 2,239,760 shares of Common
Stock, all of which vest ratably over a three year period following the grant
date of January 26, 1998. Within 365 days after the date of this Prospectus, the
Company intends to file a Registration Statement on Form S-8 covering such
shares of Common Stock (including the shares subject to outstanding options that
have been reserved for issuance under its stock option plans) thus permitting
the resale of such shares in the public market without restriction under the
Securities Act (provided they are not held by affiliates). Further, the Company
has granted certain registration rights to Zapata with respect to shares of
Common Stock it will retain after the Offering that will effectively allow
Zapata to sell all of its shares of Common Stock approximately one year after
the Offering and to participate as a selling stockholder, subject to certain
limitations, in future public offerings of Common Stock by the Company. Although
no prediction can be made as to the effect, if any, that future sales of shares
or the availability of shares for sale will have on the market price for Common
Stock prevailing from time to time, sale of substantial amounts of Common Stock
in the public market, or the perception of the availability of shares for sale,
could adversely affect the prevailing market price of the Common Stock and could
impair the Company's ability to raise capital through the sale of its equity
securities. See 'Description of Capital Stock,' 'Shares Eligible for Future
Sale' and 'Certain Transactions and Arrangements between the Company and
Zapata -- Registration Rights Agreement.'
IMMEDIATE AND SUBSTANTIAL DILUTION. Purchasers of shares of Common Stock in
the Offering will experience an immediate and substantial dilution in the net
tangible book value of each share of Common Stock of $9.76 per share based upon
an assumed initial public offering price of $15.00 per share, the mid-point of
the filing range. See 'Dilution.'
DIVIDEND POLICY. The Company currently intends to retain earnings, if any,
to support its growth strategy and does not anticipate paying dividends on its
Common Stock in the foreseeable future. Payment of dividends on Common Stock
will be subject to restrictions contained in the Company's credit facilities.
DISCRETION IN APPLICATION OF PROCEEDS. The Company intends to utilize
approximately $19.9 million, representing approximately 36.0% of the Company's
estimated net proceeds from the Offering, for general corporate purposes,
including working capital. The Company may also allocate funds for potential
acquisitions. The Company does not have any current or pending arrangements,
understandings, negotiations or agreements with respect to any potential
acquisitions and there can be no assurance that any such transaction will be
consummated. Accordingly, the Company will have broad discretion as to the
application of such proceeds. See 'Use of Proceeds.'
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE. Prior to the
Offering, there has been no public market for the Common Stock, and there can be
no assurance that an active trading market for the Common Stock will develop or
be sustained upon completion of the Offering. The initial public offering price
will be determined by negotiations among the Company, the Selling Stockholder
and the representatives of the Underwriters based upon a number of factors,
including market valuations of other companies engaged in activities similar to
those of the Company, estimates of the business potential and prospects of the
Company, the present state of the Company's business operations, the Company's
management and other factors deemed relevant. The initial public offering price
may not be indicative of the market price of the Common Stock following
completion of the Offering. The trading price of the Common Stock could also be
subject to significant fluctuations in response to variations in quarterly
results of operations, changes in worldwide prices for protein additives or
vegetable oils, general trends in the animal feed, protein ingredients, edible
oil, and organic fertilizer industries, changes in government legislation and
regulation, overall market conditions or other factors. In addition, the stock
markets historically have experienced extreme price and volume fluctuations
which may affect the market price of the Common Stock in a manner unrelated or
disproportionate to the operating performance of the Company. These market
fluctuations may adversely affect the market price of the Common Stock. See
'Underwriting.'
10
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<PAGE>
COMPANY HISTORY AND RECENT TRANSACTIONS
HISTORY
The Company is the successor by merger to Marine Genetics Corporation
(formerly known as Zapata Protein, Inc.), a Delaware corporation, which was
formed in March 1994 to act as the holding company for Omega Protein, Inc.
(formerly known as Zapata Protein (USA), Inc.), Omega Protein, Inc., which is
the operating entity for the Company's current businesses, was formed in
Virginia in October 1986, and is the successor to businesses conducted since
1913. The Company has a number of direct and indirect subsidiaries.
The Company and its predecessors have been a wholly-owned subsidiary of
Zapata, a publicly traded company which has shares listed on the New York Stock
Exchange, Inc. ('NYSE'), since 1973 when Zapata acquired the Company's
operations. In Fiscal 1997, Zapata contributed as capital to the Company $41.9
million of intercompany indebtedness owed to Zapata by the Company. Prior to the
consummation of the Offering, the Company and Zapata intend to enter into a
Separation Agreement, Tax Indemnity Agreement, Registration Rights Agreement,
Administrative Services Agreement and Sublease Agreement for the purpose of
defining their continuing relationship. See 'Risk Factors -- Conflicts of
Interest' and 'Certain Transactions and Arrangements between the Company and
Zapata.'
RECENT TRANSACTIONS
To concentrate on and enhance its core business, the Company recently sold
a marginally profitable business and acquired certain assets to increase the
Company's harvesting and production capabilities.
On September 16, 1997, the Company's wholly-owned subsidiary, Venture
Milling Company, a Delaware corporation ('Venture Milling'), sold substantially
all of its assets to an unrelated third party (the 'Venture Milling
Disposition'). Venture Milling was primarily in the business of blending
different animal protein products (i.e., fish meal, blood meal and feather meal)
for sale to producers of feed for broilers and other animals with low
nutritional requirements. Venture Milling had annual revenues and operating
income (loss) of $32.0 million and $174,000, respectively, in Fiscal 1997, $17.5
million and ($122,000), respectively, in Fiscal 1996 and $8.1 million and
($115,000), respectively, in Fiscal 1995. The Venture Milling Disposition
resulted in a $531,000 pre-tax loss to the Company in Fiscal 1997 and did not
have a material impact on the Company's balance sheet since Venture Milling
leased most of the assets employed in its operations.
On November 3, 1997, the Company acquired for $14.5 million in cash, the
fishing and processing assets of American Protein, Inc. ('American Protein'),
which operated 10 steamers and a menhaden processing plant in the Chesapeake Bay
area (the 'American Protein Acquisition'). American Protein's facilities were
located in close proximity to the Company's Reedville, Virginia facility.
Shortly after closing this acquisition, the Company closed the American Protein
plant and began integrating its assets into the Company's existing operations.
On November 25, 1997, the Company purchased the fishing and processing
assets of Gulf Protein, Inc. ('Gulf Protein'), which included six steamers, five
spotter planes and the processing equipment at the Gulf Protein plant located
near Morgan City, Louisiana, for $13.6 million in cash and the assumption of
$883,000 in long-term liabilities (the 'Gulf Protein Acquisition' and, together
with the American Protein Acquisition, the 'Recent Acquisitions'). In connection
with the Gulf Protein Acquisition, the Company also entered into a five year
lease for the Gulf Protein plant at a $220,000 annual rental rate. The Company
is currently upgrading this plant's processing capabilities so that it can
manufacture specialty meals. The Company intends to begin operations at the
Morgan City, Louisiana plant at the start of the 1998 fishing season.
The Company financed the cash portion of the purchase price for the Recent
Acquisitions through loans from Zapata in the aggregate principal amount of
$28.1 million. These loans will be repaid with a portion of the proceeds of the
Offering.
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<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 4,000,000 shares of
Common Stock offered by the Company hereby (after deducting underwriting
discounts and commissions and estimated Offering expenses payable by the
Company) are estimated to be approximately $55.3 million ($63.6 million if the
Underwriters' over-allotment options are exercised in full), assuming an initial
public offering price of $15.00 per share, the mid-point of the filing range.
The Company intends to use approximately: (i) $33.3 million to repay the
Company's indebtedness to Zapata outstanding as of December 31, 1997 and (ii)
$2.1 million to repay bank indebtedness outstanding as of December 31, 1997. Of
the $33.3 million of intercompany indebtedness to be repaid to Zapata, $28.1
million was incurred to fund the cash portion of the purchase price for the
Recent Acquisitions and the balance was primarily incurred to pay the Company's
federal income taxes. The Zapata intercompany indebtedness incurred in
connection with the Recent Acquisitions bears interest at 8.5% per annum and
matures in November 2002. The balance of the intercompany indebtedness does not
bear interest. The $2.1 million of bank indebtedness was incurred to fund
working capital needs, bears interest at the bank's prime rate or LIBOR plus 175
basis points, at the Company's election, and matures in August 2002. See
'Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources.' Management of the Company will
have broad discretion concerning the allocation and use of the net proceeds of
this Offering remaining after the repayment of indebtedness described above.
Management intends to apply these remaining net proceeds to general corporate
purposes, including working capital and future acquisitions. Although the
Company is currently evaluating various acquisition opportunities, the Company
has no current or pending plans, agreements, understandings, negotiations or
arrangements with respect to any material acquisition. In addition to repaying
indebtedness, the Company's primary purposes in conducting this Offering are to
obtain additional equity capital, create a public market for the Common Stock,
facilitate future access to the public equity markets and provide increased
visibility for the Company.
Pending application of the net proceeds to the Company from the Offering,
the Company intends to invest such net proceeds in interest-bearing, short-term,
investment grade securities or guaranteed obligations of the U.S. government.
The Company will not receive any proceeds from the sale of shares of Common
Stock by the Selling Stockholder.
DIVIDEND POLICY
Prior to October 1, 1990, the Company from time to time declared and paid
cash dividends to Zapata as its only stockholder. Since October 1, 1990, the
Company has not declared or paid any dividends with respect to its Common Stock.
The Company currently anticipates that all future retained earnings will be
retained by the Company to support its growth strategy. Accordingly, the Company
does not anticipate paying cash dividends for the foreseeable future. The
payment of any cash dividends will be in the discretion of the Company's Board
and will depend upon the Company's results of operations, financial condition,
cash requirements, future prospects, contractual restrictions contained in the
Company's credit facilities and other factors deemed relevant by the Company's
Board. See 'Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources.'
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CAPITALIZATION
The following table sets forth the Company's current maturities of
long-term debt and capitalization at December 31, 1997 and on an as adjusted
basis to give effect to the sale by the Company of 4,000,000 shares of Common
Stock at an assumed initial public offering price of $15.00 per share, the
mid-point of the filing range (after the deduction of underwriting discounts and
commissions and estimated offering expenses payable by the Company) and the
application of the estimated net proceeds therefrom as described in 'Use of
Proceeds.' The table set forth below should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations and the historical consolidated financial statements of the Company
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Current portion of long-term debt....................................................... 1,540 1,098
-------- -----------
Total short-term debt......................................................... $ 1,540 $ 1,098
-------- -----------
-------- -----------
Long-term debt:
Bank............................................................................... $ 11,282 $ 9,660
Parent............................................................................. 28,116 --
-------- -----------
Total long-term debt.......................................................... $ 39,398 $ 9,660
Stockholders' equity:
Preferred stock, $.01 par value; 10,000,000 shares authorized; none issued......... -- --
Common stock, $.01 par value; 80,000,000 shares authorized; 19,676,000 shares
issued and outstanding; 23,676,000 shares issued and outstanding as adjusted(1)... 197 237
Capital in excess of par value..................................................... 43,731 98,991
Reinvested earnings from October 1, 1990(2)........................................ 25,738 25,738
-------- -----------
Total stockholders' equity.................................................... 69,666 124,966
-------- -----------
Total capitalization..................................................... $109,064 $ 134,626
-------- -----------
-------- -----------
</TABLE>
- ------------
(1) Excludes options to purchase an aggregate of 4,220,000 shares of Common
Stock authorized under the 1998 Incentive Plan and the Directors Option
Plan, of which options to purchase 1,657,360 shares of Common Stock have
been granted at $12.75 per share under the 1998 Incentive Plan and options
to purchase 582,400 shares of Common Stock have been granted at $12.75 per
share under the Directors Option Plan. See 'Management -- Stock Option
Plans.'
(2) See Note 1 to Consolidated Financial Statements.
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DILUTION
Purchasers of the Common Stock offered hereby will experience an immediate
and substantial dilution in the book value of the Common Stock from the initial
public offering price. At December 31, 1997 the net tangible book value of the
Company was $68.6 million or $3.49 per share. After giving effect to the sale by
the Company of the 4,000,000 shares of Common Stock in the Offering (at an
assumed initial public offering price of $15.00 per share, the mid-point of the
filing range, and after deducting underwriting discounts and commissions and
estimated Offering expenses to be paid by the Company), the Company's net
tangible book value will be $123.9 million or $5.24 per share. This represents
an immediate increase in net tangible book value of $1.75 per share of Common
Stock to the existing stockholder and an immediate and substantial dilution of
$9.76 per share of Common Stock to new investors purchasing shares of Common
Stock in the Offering. The following table illustrates the dilution per share:
<TABLE>
<S> <C> <C>
Assumed initial public offering price......................................................... $15.00
Net tangible book value before the Offering...................................... $3.49
Increase attributable to new investors........................................... $1.75
-----
Net tangible book value after the Offering.................................................... $ 5.24
------
Dilution to new investors..................................................................... 9.76
------
------
</TABLE>
14
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SELECTED CONSOLIDATED FINANCIAL DATA
The following table presents, for the periods and the dates indicated,
selected historical consolidated financial data of the Company. The information
presented under the caption 'Statement of Operations Data' for Fiscal 1995, 1996
and 1997 and 'Balance Sheet Data' as of September 30, 1996 and 1997 is derived
from, and is qualified by reference to, the Company's audited consolidated
financial statements included elsewhere in this Prospectus. The selected
financial data for the Company presented under the captions 'Statement of
Operations Data' for Fiscal 1993 and 1994 and 'Balance Sheet Data' at September
30, 1993, 1994 and 1995 are derived from the Company's audited consolidated
financial statements not included in this Prospectus. The financial information
set forth below as of December 31, 1997 and for the three month periods ended
December 31, 1996 and 1997, is derived from the Company's unaudited consolidated
financial statements, which, in the opinion of management include all
adjustments necessary for a fair presentation of the financial condition and
results of operations of the Company for such periods. The results of operations
for interim periods are not necessarily indicative of a full year's operations.
The historical financial data may not be indicative of the Company's future
performance and does not necessarily reflect what the financial position and
results of operations of the Company would have been had the Company operated
independently of Zapata during the periods covered. The pro forma financial data
presented below does not purport to represent what the financial performance of
the Company actually would have been had the related transaction occurred on the
date referred to below or to project the Company's financial performance or
position for any future date. The information set forth below should be read in
conjunction with 'Pro Forma Unaudited Consolidated Statement of Operations
Data,' 'Management's Discussion and Analysis of Financial Condition and Results
of Operations' and the historical consolidated financial statements and notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------------------------------------------- THREE MONTHS ENDED
1997 DECEMBER 31,
-------------------------- ----------------------
1993(1) 1994(2) 1995 1996(1) ACTUAL PRO FORMA(3) 1996 1997(4)
------- -------- -------- ------- ----------- ------------ --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues.................. $58,565 $ 96,614 $ 94,959 $93,609 $ 117,564 $ 85,599 $25,623(5) $29,503
Costs of sales............ 50,465 98,756 85,122 78,415 93,746 61,955 20,806 19,274
------- -------- -------- ------- ----------- ------------ --------- ---------
Gross profit (loss)... 8,100 (2,142) 9,837 15,194 23,818 23,644 4,817 10,229
------- -------- -------- ------- ----------- ------------ --------- ---------
Selling, general and
administrative.......... 3,805 4,754 3,933 4,690 5,613 5,613 1,025 1,154
------- -------- -------- ------- ----------- ------------ --------- ---------
Operating income (loss)... 4,295 (6,896) 5,904 10,504 18,205 18,031 3,792 9,075
------- -------- -------- ------- ----------- ------------ --------- ---------
Interest expense.......... (818 ) (687) (1,102) (995 ) (592) (527) (202) (379)
Other (expense) income.... (148 ) 114 116 (118 ) (1,328) (791) (1) (13)
------- -------- -------- ------- ----------- ------------ --------- ---------
Income (loss) before
income taxes............ 3,329 (7,469) 4,918 9,391 16,285 16,713 3,589 8,683
(Provision) benefit for
income taxes............ (1,182 ) 2,249 (1,668) (3,463 ) (5,860) (6,010) (1,364) (3,371)
------- -------- -------- ------- ----------- ------------ --------- ---------
Net income (loss)......... $2,147 $ (5,220) $ 3,250 $5,928 $ 10,425 $ 10,703 $ 2,225 $ 5,312
------- -------- -------- ------- ----------- ------------ --------- ---------
------- -------- -------- ------- ----------- ------------ --------- ---------
Net income (loss) per
share (basic)........... $0.11 $(0.27) $0.17 $0.30 $0.53 $0.54 $0.11 $0.27
Average common shares
outstanding............. 19,676 19,676 19,676 19,676 19,676 19,676 19,676 19,676
Net income (loss) per
share (diluted)......... $0.11 $(0.27) $0.17 $0.30 $0.53 $0.54 $0.11 $0.27
Average common shares and
common share equivalents
outstanding............. 19,676 19,676 19,676 19,676 19,676 19,676 19,676 19,676
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
---------------------------------------------------- ------------
1993 1994 1995 1996 1997 1997
------- ------- ------- ------- -------- ------------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital........... $30,559 $27,472 $16,398 $20,719 $ 31,396 $ 36,898
Total assets.............. 96,038 89,533 85,012 86,969 100,440 130,620
Total debt................ 69,127 62,898 61,255 50,674 12,328 40,938
Stockholders' equity(6)... 8,071 2,851 6,101 12,029 64,354 69,666
</TABLE>
- ------------
(1) In August 1993, the Company acquired a 60% equity interest in Venture
Milling Company, which was involved in the milling of animal feeds and
protein ingredients for the poultry, hog and dairy industries. In March
1996, the Company acquired the remaining 40% of Venture Milling Company's
equity.
(2) Includes a non-recurring charge of $12.3 million related to a write-down of
the Company's assets to estimated fair value which was computed in
connection with the Company's contemplated sale in Fiscal 1994.
(3) Gives effect to the September 16, 1997 sale by Venture Milling Company of
substantially all of its assets as if such sale occurred on October 1, 1996.
See 'Company History and Recent Transactions' and 'Pro Forma Unaudited
Consolidated Statement of Operations Data.'
(4) In November 1997, the Company acquired certain assets from American Protein,
Inc. and Gulf Protein, Inc. See 'Company History and Recent Transactions.'
The Company operated all 10 fishing vessels acquired from American Protein,
Inc. through the end of the mid-Atlantic coast fishing season. The Company
did not operate any of the Gulf Protein, Inc. vessels during the three
months ended December 31, 1997 since the 1997 Gulf Coast fishing season had
ended prior to the closing of that transaction.
(5) Includes $7.0 million of revenues from the operations of Venture Milling.
(6) In Fiscal 1997, Zapata contributed to the Company as capital $41.9 million
of existing intercompany debt owed to Zapata by the Company.
15
<PAGE>
<PAGE>
PRO FORMA UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS DATA
The following unaudited pro forma consolidated statement of operations data
gives effect to the Venture Milling Disposition which occurred on September 16,
1997 as if such transaction was effected as of October 1, 1996. See 'Company
History and Recent Transactions.'
The unaudited pro forma consolidated financial data set forth below may not
be indicative of the results that actually would have been achieved by the
Company if the Venture Milling Disposition had been consummated at the beginning
of the period presented, nor does it purport to present results of operations of
the Company for future periods.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1997
-------------------------------------
VENTURE
MILLING
ACTUAL RESULTS PRO FORMA
-------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................................................ $117,564 $ 31,965 $85,599
Cost of sales................................................... 93,746 31,791 61,955
-------- -------- ---------
Gross profit............................................... 23,818 174 23,644
Selling, general and administrative............................. 5,613 -- 5,613
-------- -------- ---------
Operating income................................................ 18,205 174 18,031
Interest expense................................................ (592) (65) (527)
Other expense, net.............................................. (1,328) (537) (791)
-------- -------- ---------
Income (loss) before income taxes............................... 16,285 (428) 16,713
(Provision) benefit for income taxes............................ (5,860) 150 (6,010)
-------- -------- ---------
Net income (loss)............................................... $ 10,425 ($ 278) $10,703
-------- -------- ---------
-------- -------- ---------
Net income (loss) per share (basic)............................. $0.53 ($0.01) $0.54
Average common shares outstanding............................... 19,676 19,676 19,676
Net income (loss) per share (diluted)........................... $0.53 ($0.01) $0.54
Average common shares and common share equivalents
outstanding................................................... 19,676 19,676 19,676
</TABLE>
16
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company owns 66 steamers (51 of which are directly involved in the
harvesting operations) and owns 33 and leases 11 aircraft (of which 41 are
directly involved in the harvesting operations) that are used to harvest
menhaden in ocean waters along the U.S. mid-Atlantic and Gulf coasts. The fish
catch is processed into regular grade fish meal, specialty fish meals, fish oils
and fish solubles at the Company's five plants (one of which was recently
acquired) located in Virginia, Mississippi and Louisiana.
The following table summarizes the Company's harvesting and production for
the indicated periods:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, DECEMBER 31,
------------------------------- -------------------
1995 1996 1997 1996 1997
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Fish catch (tons)(1)....................... 512,517 458,917 507,358 70,082 107,535
Production (tons):
Fish meal
Regular grade.................... 82,097 56,569 63,835 9,056 8,192
Special Select................... 38,920 46,325 46,409 3,583 13,106
Sea-Lac.......................... 8,346 10,631 14,741 4,108 4,908
Oil
Crude............................ 64,870 60,257 61,905 6,407 10,492
Refined.......................... 8,745 8,834 9,657 2,630 2,115
Solubles.............................. 21,108 17,139 16,531 3,221 4,474
------- ------- ------- ------- --------
Total production............ 224,086 199,755 213,078 29,005 43,287
------- ------- ------- ------- --------
------- ------- ------- ------- --------
</TABLE>
- ------------
(1) Fish catch has been converted to tons using the NMFS fish catch conversion
ratio.
The Company's harvesting season generally extends from May through December
in the mid-Atlantic coast and from April through October in the Gulf coast.
During the off season, the Company fills purchase orders from the inventory it
has accumulated during the fishing season. Prices for the Company's products
tend to be lower during the fishing season when product is more abundant than in
the off season. Throughout the entire year, prices are significantly influenced
by supply and demand in world markets for competing products, particularly
soybean meal for its fish meal products and vegetable oils and fats for its fish
oil products when used as an alternative to vegetable oils and fats. In an
effort to reduce price volatility and to generate higher, more consistent profit
margins, the Company has concentrated on the production and marketing of
specialty meal products, which generally have higher margins than the Company's
regular grade meal.
During Fiscal 1997, the Company sold approximately 35.0% of its regular
grade fish meal on a forward basis at fixed prices and the balance of its fish
meal and other products substantially in the spot markets. The Company
recognizes revenues when title to its products is transferred to the customer.
The Company's annual revenues are highly dependent on both annual fish catch and
inventories carried over from the previous Fiscal year. The Company determines
the level of inventory to be carried over based on prevailing market prices for
the products and anticipated customer usage and demand during the off season.
Thus, production volume does not necessarily correlate with sales volume in the
same Fiscal year.
17
<PAGE>
<PAGE>
The following table sets forth the Company's revenues by product, and the
approximate percentage of total revenues represented thereby, for the indicated
periods:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, THREE MONTHS ENDED DECEMBER 31,
--------------------------------------------------------------------------- ----------------------------------
1997
1995 1996 --------------------------------------- 1996 1997
---------------- ---------------- PRO FORMA PRO FORMA ---------------- ----------------
REVENUES PERCENT REVENUES PERCENT REVENUES PERCENT REVENUES(1) PERCENT REVENUES PERCENT REVENUES PERCENT
-------- ------- -------- ------- -------- ------- ----------- --------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Regular
Grade...... $ 35.7 37.6 % $ 23.6 25.2 % $ 23.7 20.2 % $ 23.7 27.7 % $ 3.7 14.5 % $ 4.9 16.6 %
Special
Select..... 15.0 15.8 19.3 20.6 25.8 21.9 25.8 30.1 6.0 23.4 8.3 28.2
Sea-Lac...... 2.9 3.1 4.0 4.3 7.1 6.0 7.1 8.3 1.6 6.3 1.8 6.1
Crude Oil.... 25.6 26.9 20.4 21.8 18.6 15.8 18.6 21.7 5.0 19.5 12.0 40.7
Refined
Oil........ 3.8 4.0 4.5 4.8 5.2 4.4 5.2 6.1 1.3 5.1 1.1 3.7
Fish
Solubles... 2.6 2.7 3.2 3.4 3.6 3.1 3.6 4.2 0.8 3.1 0.8 2.7
Venture
Milling.... 8.1 8.5 17.5 18.7 32.0 27.2 -- -- 7.0 27.3 -- --
Nets and
Other...... 1.3 1.4 1.1 1.2 1.6 1.4 1.6 1.9 0.2 0.8 0.6 2.0
-------- ------- -------- ------- -------- ------- ----- --------- -------- ------- -------- -------
Total.... $ 95.0 100.0 % $ 93.6 100.0 % $ 117.6 100.0 % $ 85.6 100.0 % $ 25.6 100.0 % $ 29.5 100.0 %
-------- ------- -------- ------- -------- ------- ----- --------- -------- ------- -------- -------
-------- ------- -------- ------- -------- ------- ----- --------- -------- ------- -------- -------
</TABLE>
- ------------
(1) The pro forma figures give effect to the Venture Milling Disposition as if
such sale had occurred on October 1, 1996.
Approximately 40% of the Company's cost of sales vary in direct proportion
to fish catch. For example, steamer crews and spotter pilots are paid according
to the size of the fish catch; fuel required for fish processing also varies
with the size of the catch. On a pro forma basis, the Company had variable costs
of $24.8 million in Fiscal 1997. In the three month period ended December 31,
1997 ('First Quarter Fiscal 1998'), the Company had $7.7 million of variable
costs. Approximately 60% of the Company's cost of sales are fixed and remain
relatively constant regardless of production or harvest volume. Fixed costs
include depreciation and amortization, rent, insurance and taxes. On a pro forma
basis, the Company had fixed costs of approximately $37.2 million in Fiscal
1997. In First Quarter Fiscal 1998, the Company had $11.6 million of fixed
costs.
The Company allocates production costs on the basis of total fish catch and
total costs associated with each fishing season. The fish meal and oil inventory
is calculated on a standard cost basis each month and adjusted to an actual cost
basis quarterly. The cost incurred during the off-season period from January
through April for regular maintenance of fishing vessels and plants are deferred
to the next fishing season (May through December) and allocated to production as
the fish catch is processed. The off-season deferred cost was approximately $2.2
million, $2.5 million and $2.4 million at September 30, 1995, 1996 and 1997,
respectively, and $3.4 million at December 31, 1997.
The Company depreciates its fixed assets on a straight-line basis over the
useful life of the respective asset. The Company's depreciation expense was $2.6
million, $3.2 million and $3.7 million for Fiscal 1995, 1996 and 1997,
respectively, and $1.4 million for First Quarter Fiscal 1998. The Company
expects depreciation expense to increase to approximately $6.0 million in Fiscal
1998 due to the assets acquired in the Recent Acquisitions, the substantial
completion of its Moss Point, Mississippi dry dock and vessel construction
facility and the completion during Fiscal 1997 and 1998 of certain capital
improvement projects.
The Company's selling, general and administrative expenses primarily
consist of employee wages and benefits paid to sales personnel and
administrative employees, rent, utilities and fees paid to outside service
providers such as lawyers, accountants and research and development consultants.
The Company's effective tax rate varies from year-to-year due to
variability in state income taxes payable and offsetting deductions.
18
<PAGE>
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth as a percentage of revenues, certain items
of the Company's operations for each of the indicated periods:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED SEPTEMBER 30, ENDED
------------------------------------------ DECEMBER 31,
PRO FORMA ----------------
1995 1996 1997 1997(1) 1996 1997
----- ----- ----- --------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Revenues...................................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales................................. 89.6 83.8 79.7 72.4 81.2 65.3
----- ----- ----- --------- ----- -----
Gross profit................................ 10.4 16.2 20.3 27.6 18.8 34.7
Selling, general and administrative........... 4.1 5.0 4.8 6.6 4.0 3.9
----- ----- ----- --------- ----- -----
Operating income.............................. 6.3 11.2 15.5 21.0 14.8 30.8
Interest expense.............................. (1.2) (1.1) (0.5) (0.6) (0.8) (1.3)
Other (expense) income........................ 0.1 (0.1) (1.1) (0.9) -- --
----- ----- ----- --------- ----- -----
Income before income taxes.................... 5.2 10.0 13.9 19.5 14.0 29.5
(Provision) for income taxes.................. (1.8) (3.7) (5.0) (7.0) (5.3) (11.4)
----- ----- ----- --------- ----- -----
Net income.................................... 3.4 6.3 8.9 12.5 8.7 18.1
----- ----- ----- --------- ----- -----
----- ----- ----- --------- ----- -----
</TABLE>
- ------------
(1) Gives effect to the Venture Milling Disposition as of October 1, 1996.
FIRST QUARTER FISCAL 1998 COMPARED TO FIRST QUARTER FISCAL 1997
Revenues. Revenues increased $3.9 million or 15.1% in First Quarter Fiscal
1998 from $25.6 million in the three months ended December 31, 1996 ('First
Quarter Fiscal 1997') to $29.5 million. This growth resulted primarily from a
23.9% increase in the tons of specialty grade fish meal and a 62.1% increase in
the tons of oil sold compared to First Quarter Fiscal 1997 coupled with an
overall increase in the average selling price of all of the Company's products.
Sales of oil increased due to the Company's decision to defer sale of fish oil
produced in Fiscal 1997 to First Quarter Fiscal 1998 in anticipation of higher
prices. Adjusted for the Venture Milling Disposition, revenues for First Quarter
Fiscal 1997 would have been $18.6 million
Gross profit. Gross profit increased $5.4 million, or 112.4% from $4.8
million in First Quarter Fiscal 1997 to $10.2 million in First Quarter Fiscal
1998. As a percentage of revenues, the Company's gross profit increased from
18.8% in First Quarter Fiscal 1997 to 34.7% in First Quarter Fiscal 1998. The
improvement in gross margin was the result of increasing sales of the Company's
higher margin specialty brand products, an overall increase in sales prices for
all of the Company's products and the elimination of lower gross margin sales
resulting from the Venture Milling Disposition.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased 12.6% from $1.0 million in First Quarter
Fiscal 1997 to $1.2 million in First Quarter Fiscal 1998 due to increased
personnel costs. As a percentage of revenues, selling, general and
administrative expenses were approximately 4% in both periods.
Operating income. As a result of the factors discussed above, the Company's
operating income for First Quarter Fiscal 1998 increased to $9.1 million from
$3.8 million for the corresponding quarter in the prior Fiscal year. As a
percentage of revenues, operating income increased from 14.8% in First Quarter
Fiscal 1997 to 30.8% in First Quarter Fiscal 1998.
Interest expense. Interest expense increased from $202,000 in First Quarter
Fiscal 1997 to $379,000 in First Quarter Fiscal 1998. This increase resulted
primarily from the increase in interest expense relating to the acquisition loan
made to the Company by Zapata.
Other (expense) income. Other (expense) income remained relatively constant
for both First Quarter Fiscal 1997 and First Quarter Fiscal 1998.
Income taxes. The Company recorded a $3.4 million provision for income tax
for First Quarter Fiscal 1998 for a 38.8% effective tax rate in comparison to a
$1.4 million provision, representing a
19
<PAGE>
<PAGE>
38.0% effective tax rate for the prior year period. The effective tax rates
approximate the applicable combined state and federal statutory tax rates for
the respective periods.
FISCAL 1997 COMPARED TO FISCAL 1996
Revenues. Fiscal 1997 revenues increased $24.0 million, or 25.6% from $93.6
million in Fiscal 1996 to $117.6 million in Fiscal 1997. Of this increase, $14.5
million was attributable to increased sales by Venture Milling. The balance of
the increase was attributable to a 26.5% increase in the tons of specialty grade
fish meal sold and an overall increase in the average selling price of the
Company's products. These increases were offset by a 12.0% decline in the tons
of fish oil shipped in Fiscal 1997 compared to Fiscal 1996 due to the Company's
decision to defer fish oil sales produced in Fiscal 1997 to the following Fiscal
year in anticipation of higher prices, coupled with the Company's lower level of
oil inventory carried over from the previous Fiscal year. Excluding Venture
Milling revenues, the Company had revenues of $76.1 million in Fiscal 1996 and
$85.6 million in Fiscal 1997.
Gross profit. Gross profit increased $8.6 million, or 56.8%, from $15.2
million in Fiscal 1996 to $23.8 million in Fiscal 1997. As a percentage of
revenues, the Company's gross profit increased from 16.2% in Fiscal 1996 to
20.3% in Fiscal 1997. This increased percentage was primarily the result of
increasing sales of the Company's higher margin specialty brand products. On a
pro forma basis, the Company had gross profit and a gross profit margin of $23.6
million and 27.6%, respectively, in Fiscal 1997.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $923,000, or 19.7% from $4.7 million in Fiscal
1996 to $5.6 million in Fiscal 1997. As a percentage of revenues, selling,
general and administrative expenses were approximately 5.0% in each of Fiscal
1996 and Fiscal 1997. The dollar increase was primarily due to a one-time
contract payment to the Company's former Chief Executive Officer who retired
during Fiscal 1997 and to severance expenses incurred in connection with the
reduction of the Company's administrative staff during Fiscal 1997. On a pro
forma basis, selling, general and administrative expenses were 6.6% of revenues
in Fiscal 1997.
Operating income. As a result of the factors discussed above, the Company's
operating income increased to $18.2 million in Fiscal 1997 from $10.5 million in
Fiscal 1996. As a percentage of revenues, operating income increased from 11.2%
in Fiscal 1996 to 15.5% in Fiscal 1997. On a pro forma basis, operating income
was $18.0 million or 21.0% as a percentage of revenues.
Interest expense. Interest expense declined $403,000 or 40.5% from $995,000
in Fiscal 1996 to $592,000 in Fiscal 1997. This decline resulted from the
Company's reduction in its average outstanding borrowings during Fiscal 1997
compared to the 1996 Fiscal year.
Other (expense) income. Other (expense) income increased to ($1.3 million)
in Fiscal 1997 from ($118,000) in Fiscal 1996. Other expense increased primarily
due to losses in joint ventures and the sale of Venture Milling's assets.
Income taxes. The Company recorded a $5.9 million provision for income tax
for Fiscal 1997 for a 36.0% effective tax rate in comparison to a $3.5 million
provision, representing a 36.8% effective tax rate for Fiscal 1996. The
effective tax rates approximate the applicable combined state and federal
statutory tax rates for the respective periods.
FISCAL 1996 COMPARED TO FISCAL 1995
Revenues. Fiscal 1996 revenues decreased $1.4 million, or 1.5% from $95.0
million in Fiscal 1995 to $93.6 million in Fiscal 1996. Revenues excluding
Venture Milling decreased $10.8 million in Fiscal 1996. This decrease occurred
as a result of a 43.3% decrease in the tons of regular grade fish meal sold and
a 34.4% decrease in the tons of crude oil sold due primarily to a lower fish
catch. The decline in the tons sold was offset in part by an increase in the
average selling price across all of the Company's product lines.
Gross profit. Gross profit increased $5.4 million, or 54.5%, from $9.8
million in Fiscal 1995 to $15.2 million in Fiscal 1996. As a percentage of
revenues, gross profit increased from 10.4% in Fiscal 1995 to 16.2% in Fiscal
1996. This increased percentage was primarily the result of increasing sales of
the Company's higher margin specialty brand products coupled with a decrease in
vessel crew and spotter pilot compensation resulting from the lower fish catch
in Fiscal 1996 compared to the previous Fiscal year.
20
<PAGE>
<PAGE>
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $757,000, or 19.2%, from $3.9 million in
Fiscal 1996 to $4.7 million in Fiscal 1997. As a percentage of revenues,
selling, general and administrative expenses increased from 4.1% in Fiscal 1995
to 5.0% in Fiscal 1996. These increases were primarily due to several business
development projects initiated and completed during Fiscal 1996 (including
pursuit of domestic and international acquisitions, initial research relating to
improved fishing vessel designs and the analysis of plant enhancement projects)
and the relocation of the Company's Louisiana administrative offices.
Operating income. As a result of the factors discussed above, the Company's
operating income increased to $10.5 million in Fiscal 1996 from $5.9 million in
Fiscal 1995. As a percentage of revenues, operating income increased to 11.2% in
Fiscal 1996 from 6.3% in Fiscal 1995.
Other (expense) income. Other expense was $118,000 in Fiscal 1996 in
comparison to other income of $116,000 in the prior Fiscal year. This expense
was due primarily to losses on retirement of assets.
Interest expense. Interest expense declined slightly from $1.1 million in
Fiscal 1995 to $1.0 million in Fiscal 1996. This decline resulted from the
Company's reduction in its average outstanding borrowings during Fiscal 1996
from the previous Fiscal year.
Income taxes. The Company recorded a $3.5 million provision for income tax
for Fiscal 1996 for an effective tax rate of 36.8% in comparison to a $1.7
million provision, representing a 34.0% effective tax rate for Fiscal 1995. The
effective tax rates approximate the applicable combined state and federal
statutory tax rates for the respective periods.
SEASONAL AND QUARTERLY RESULTS
The Company's menhaden harvesting and processing business is seasonal in
nature. The Company generally has higher sales during the menhaden harvesting
season (which includes the third and fourth quarter of each Fiscal year) due to
increased product availability, but prices during the fishing season tend to be
lower than during the off-season. As a result, the Company's quarterly operating
results have fluctuated in the past and may fluctuate in the future. In
addition, from time to time the Company defers sales of inventory based on
worldwide prices for competing products that affect prices for the Company's
products which may affect comparable period comparisons.
The following table presents certain unaudited operating results for each
of the Company's preceding nine quarters. The results of operations for Venture
Milling are included through September 16, 1997, the date of its disposition.
The Company believes that the following information includes all adjustments
(consisting only of normal recurring adjustments) that the Company considers
necessary for a fair presentation, in accordance with generally accepted
accounting principles. The operating results for any interim period are not
necessarily indicative of results for any other period.
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------------------------------
DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1995 1996 1996 1996 1996 1997 1997 1997 1997
-------- -------- -------- --------- -------- -------- -------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues............... $ 23,466 $ 14,383 $ 20,920 $ 34,840 $ 25,623 $ 22,964 $ 31,025 $ 37,952 $ 29,503
Gross profit........... 4,026 3,070 4,986 3,112 4,817 4,708 8,192 6,101 10,229
Operating income....... 3,063 1,980 3,771 1,690 3,792 3,503 6,451 4,459 9,075
Net income............. 1,725 1,114 2,200 889 2,225 2,185 3,713 2,302 5,312
</TABLE>
The following table sets forth certain unaudited operations data as a
percentage of revenues for each of the Company's preceding eight quarters:
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------------------------------
DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1995 1996 1996 1996 1996 1997 1997 1997 1997
-------- -------- -------- --------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit................ 17.2 21.3 23.8 8.9 18.8 20.5 26.4 16.1 34.7
Operating income............ 13.1 13.8 18.0 4.9 14.8 15.3 20.8 11.7 30.8
Net income.................. 7.4 7.8 10.5 2.5 8.7 9.5 12.0 6.1 18.0
</TABLE>
21
<PAGE>
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity and capital resources have been
cash flows from operations and borrowings from Zapata, bank credit facilities
and term loans from various lenders provided pursuant to the Title XI credit
facilities described below. These sources of cash flows have been offset by cash
used for capital expenditures (including acquisitions) and payment of long-term
debt. During Fiscal 1997, Zapata contributed to the Company as equity $41.9
million of intercompany debt owed to Zapata. As a result, the historical
liquidity and capital resources of the Company may not be indicative of the
Company's future liquidity and capital resources.
Operating activities as reflected in the Consolidated Statement of Cash
Flows provided $16.2 million, $10.1 million, $2.2 million and $5.7 million of
cash in Fiscal 1996, Fiscal 1997, First Quarter Fiscal 1997 and First Quarter
Fiscal 1998, respectively, and used $118,000 of cash in Fiscal 1995. The First
Quarter Fiscal 1998 increase over First Quarter Fiscal 1997 resulted primarily
from the Company's improved operating results during that quarter. The decline
in Fiscal 1997 resulted primarily from an increase in inventory balances. The
Fiscal 1996 increase was primarily attributable to improvement in the operating
results for Fiscal 1996 over Fiscal 1995, increases in amounts due to parent in
Fiscal 1996 compared to decreases in Fiscal 1995 and timing of accounts payable
and accrued liabilities.
The Company used $6.9 million, $4.0 million, $10.9 million, $1.7 million
and $28.7 million, respectively, for investing activities as reflected in the
Consolidated Statement of Cash Flows in Fiscal 1995, 1996 and 1997, the First
Quarter Fiscal 1997 and the First Quarter Fiscal 1998, respectively. The
Company's investing activities consisted mainly of capital expenditures for
equipment purchases and replacements in Fiscal 1995, 1996 and 1997 and First
Quarter Fiscal 1997 and cash paid in connection with the Recent Acquisitions in
First Quarter Fiscal 1998.
First Quarter Fiscal 1998's increase in net cash used in investing
activities as reflected in the Consolidated Statement of Cash Flows resulted
primarily from the American Protein Acquisition and the Gulf Protein
Acquisition, which the Company completed on November 3, 1997 and November 25,
1997, respectively. The Company paid $29.0 million for these acquisitions. The
higher level of expenditures in Fiscal 1997 reflects the complete refurbishment
of two steamers for the Cameron, Louisiana plant, the construction of a
significant portion of the Moss Point, Mississippi dry dock facility and
enhancement of the Reedville, Virginia plant to increase its production capacity
for Special Select. Expenditures in Fiscal 1996 include the refurbishment of a
steamer and the refurbishment of docks, dryers and oil tanks at the Reedville,
Virginia plant. Excluding the Recent Acquisitions, the Company anticipates
making $13.8 million of capital expenditures in Fiscal 1998, a significant
portion of which will be used to refurbish vessels, docks and to acquire certain
equipment, including a new evaporation unit for the Reedville, Virginia plant.
The Company expects to finance such expenditures through internally generated
cash flows and, if necessary, through funds available from the credit facility
and/or Title XI facilities described below.
Under a program offered through NMFS pursuant to Title XI of the Marine Act
of 1936 ('Title XI'), the Company has the ability to secure loans through
lenders with terms generally ranging between 12 and 20 years at interest rates
between 6% and 7% per annum which are enhanced with a government guaranty to the
lender for up to 80% of the financing. The Company's current Title XI borrowings
are secured by liens on 14 steamers and mortgages on the Company's Reedville,
Virginia and Abbeville, Louisiana plants. In 1996, Title XI borrowing was
modified to permit use of proceeds from borrowings obtained through this program
for shoreside construction. The Company is currently authorized to receive up to
$23.2 million in loans under this program. To date, the Company has used $15.0
million of these funds and currently has an application pending for $2.6 million
of additional Title XI borrowings for qualified Title XI projects.
Financing activities as reflected in the Consolidated Statement of Cash
Flows provided the Company with $8.2 million and $3.5 million of cash in Fiscal
1995 and 1997, respectively, and $1.7 million and $27.7 million of cash in First
Quarter Fiscal 1997 and in First Quarter Fiscal 1998, respectively. In Fiscal
1996, the Company used $10.6 million of cash in financing activities. The
increase in net cash provided by financing activities during First Quarter
Fiscal 1998 resulted from the Company's borrowing $28.1 million from Zapata to
fund the combined cash purchase price due for the Recent Acquisitions. These
borrowings bear interest at Zapata's fixed borrowing rate of 8.5% per
22
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<PAGE>
annum and will be repaid with a portion of the net proceeds from this Offering.
See 'Use of Proceeds.' Fiscal 1997 provided cash as a result of borrowings under
the Title XI financing program and secured equipment financing provided by
Hibernia National Bank. The use of cash in Fiscal 1996 is attributable to the
Company's repayment of $21.1 million on its prior line of credit, offset by
borrowings of $11.1 million under the same line. In Fiscal 1995, cash was
provided by additional borrowings.
On December 30, 1997, SunTrust Bank, South Florida, N.A. issued a
commitment letter to the Company which provides for a new two year secured
revolving credit facility for the Company (the 'Credit Facility'). The
commitment letter states that, under the Credit Facility, the Company may make
borrowings in a principal amount not to exceed $20.0 million at any time.
Borrowings under this facility may be used for working capital and capital
expenditures. Interest will accrue on borrowings that will be outstanding under
the Credit Facility at the Company's election, either (i) the bank's prime rate
less 75 basis points or (ii) LIBOR plus a margin based on the Company's
financial performance. The Credit Facility will be secured by all of the
Company's assets not pledged to secure the Company's other borrowings exclusive
of the Company's rolling stock, vessels and real estate. The Company and its
subsidiaries will be subject to customary secured lending covenants, including
limitations on additional liens, additional indebtedness, sale of assets, annual
dividends above 50% of the Company's net income for the year, affiliate
transactions, certain loans, investments, acquisitions and fundamental corporate
changes. The Company and its subsidiaries will also be required to comply with
certain financial covenants, including maintenance of a minimum tangible net
worth, debt to tangible net worth ratio, funded debt to cash flow ratio and
fixed charges ratio. The Company is negotiating the documentation required for
the Credit Facility and expects to close the Credit Facility shortly following
the consummation of the Offering.
The Company believes that the net proceeds from the Offering, borrowings
under the Credit Facility (or a similar facility) and cash flow from operations
will be sufficient to fund anticipated capital expenditures and working capital
needs through Fiscal 1999.
YEAR 2000
The Company has converted most of its computer information systems enabling
proper processing of transactions related to the year 2000 and beyond. The cost
of conversion was immaterial and has been expensed. The Company continues to
evaluate its systems and expects that all of its systems will be compliant prior
to the year 2000.
23
<PAGE>
<PAGE>
BUSINESS
Omega Protein Corporation is the largest U.S. producer of protein-rich meal
and oil derived from marine sources. The Company markets a variety of products
derived from menhaden, a fish found in commercial quantities in coastal waters
off the U.S. mid-Atlantic and Gulf coasts. These products include regular grade
and value-added specialty fish meals, crude and refined fish oils and fish
solubles. The Company's fish meal products are used as protein additives by
animal feed manufacturers and by commercial livestock and poultry farmers. Fish
meal derived from menhaden generally possesses a higher protein content and a
superior amino acid profile than other fish meal produced in the U.S. The
Company's fish oil is used in hydrogenated form by European commercial food
processors in margarine and other shortenings. Due to its content of
nutritionally important omega-3 fatty acids, the oil is also used in Europe in
non-hydrogenated form as a nutritional supplement in foods such as bread, soup
and beverages. In its crude form, the Company's fish oil is used in aquaculture
feeds and certain industrial applications. Fish solubles are sold as protein
additives for animal feed and as organic fertilizers.
The Company is the largest U.S. harvester and processor of menhaden. The
menhaden catch is processed in one of the Company's five plants (one of which
was recently acquired) located in Virginia, Mississippi and Louisiana. The
Company's processing operations are vertically integrated and include 66 fishing
vessels and 44 spotter aircraft. In Fiscal 1997, the Company processed
approximately 507,358 tons of menhaden (representing approximately 54% of the
total menhaden harvested in the U.S.) into approximately 124,985 tons of fish
meal, 71,562 tons of fish oil and 16,531 tons of fish solubles. During Fiscal
1997, the Company produced approximately 43% of all fish meal and approximately
58% of all fish oil produced in the U.S.
For Fiscal 1997, the Company reported revenues of $117.6 million and
operating income of $18.2 million. Between Fiscal 1993 and Fiscal 1997,
operating income increased at a compound annual growth rate of 43%. On a pro
forma basis adjusted for the Venture Milling Disposition as of October 1, 1996,
the Company had revenues of $85.6 million and operating income of $18.0 million
in Fiscal 1997. During First Quarter Fiscal 1998, the Company had revenues of
$29.5 million and operating income of $9.1 million. In early Fiscal 1998, the
Company acquired certain operating assets of American Protein and Gulf Protein,
two of the four other remaining menhaden harvesters. The Company anticipates
that these acquisitions will enhance its harvesting and processing capabilities.
In June 1997, the FDA approved the use of refined, non-hydrogenated
menhaden oil for human consumption in the U.S. Menhaden oil is the only
non-hydrogenated fish oil approved by the FDA for human consumption. Menhaden
oil contains omega-3 fatty acids, which studies have linked to the prevention
and treatment of certain diseases, including hypertension, cardiovascular
disease, cancer and arthritis. The Company believes that this recent development
presents significant domestic market opportunities for its menhaden oil.
INDUSTRY OVERVIEW
PROTEIN FEED ADDITIVES
Animal feed generally represents 50% to 70% of the total cost to raise an
animal from birth to production. To manage this cost, commercial livestock
farmers are demanding more efficient feeds which: (i) increase overall animal
weight gain; (ii) reduce the feed to weight gain ratio; (iii) increase the price
to performance relationship of certain feeds; (iv) increase animal birth
frequency and reduce time to market; and (v) improve animal health generally.
Major producers of animal feed, such as the Animal Nutrition Division of
Cargill, Inc. and Purina Mills, Inc., are increasingly relying upon protein feed
additives to meet farmers' demanding requirements. The Company believes, based
on an industry trade publication, that worldwide demand for protein additives
has increased from 158 million tons in 1992 to 190 million tons in 1997, with
the strongest growth in demand for protein additives coming from developing
countries such as China and Brazil due to improving economic conditions in these
countries which have led to increased demand for meat and, hence, animal feed
and protein additives. Soybean meal has traditionally been the primary protein
additive for animal feed and accounted for approximately 56% of total worldwide
protein meal production in 1997. The balance of worldwide protein meal
production was derived from rapeseed, sunseed, cottonseed, fish and animal
by-products.
24
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<PAGE>
Traditionally, the basis for competition among protein suppliers has been
price per ton. The Company believes that certain of its protein products derived
from menhaden are more desirable than alternative protein additives because fish
proteins are generally more easily digested and contain a superior amino acid
profile than competing protein additives, which enhance feed performance. For
example, the protein content of the Company's regular grade fish meal is
consistently in the range of 62% to 64% of total product weight compared to
soybean meal which generally has a 48% protein content. Building on this
advantage, the Company has been able to price its specialty feeds, Special
Select and Sea-Lac, at a premium to most competing products. The Company's fish
protein additives are used by, among others: (i) dairy feed producers seeking to
promote increased milk production; (ii) turkey and aquaculture feed producers
seeking to reduce the feed to weight gain ratios; (iii) swine feed producers
seeking quicker weight gain and reduced time to market; and (iv) pet food
manufacturers seeking consistent palatability.
The Company believes, based on an industry trade publication, that total
worldwide production of fish meal has increased from 6.8 million tons in 1993 to
7.1 million tons for the twelve months ended September 30, 1997, representing a
compound annual growth rate of 0.8% during this period. The largest producers of
fish meal are companies located in Chile and Peru, with total production of 1.3
million tons and 2.3 million tons in these countries, respectively. Leading
consumers of fish meal are China and Japan. For the twelve months ended
September 30, 1997, U.S. production of fish meal totaled 288,135 tons, 72% of
which was produced from menhaden with the remainder generally produced mostly
from fish remnants generated from the processing of other fish species which
generally contain lower levels of protein and amino acids and higher levels of
ash. Of the 207,863 tons of protein meal produced from menhaden for the 12
months ended September 30, 1997, the Company produced 124,985 tons or 60%.
EDIBLE AND INDUSTRIAL OILS
The Company derives oil from menhaden processing. Oils are classified for
either edible or industrial use with edible oil being the largest portion of
this market. Edible applications include use in hydrogenated form (hydrogenating
involves creating a solid product from a liquid through the addition of
hydrogen) for margarine and other shortenings, and use in non-hydrogenated form
as a nutritional supplement in processed foods, such as breads, soups and
beverages. Industrial oil applications include use in leather tanning,
lubricants, chemicals, paints and animal feeds. In the animal feed segment, the
major application is for aquaculture feeds. The Company believes, based on data
available from an United Nations' organization, that worldwide fish oil usage
for aquaculture in 1995 was 450,000 tons and that by the year 2000, aquaculture
usage will grow to approximately 550,000 tons.
In June 1997, the FDA approved the use of refined (non-hydrogenated)
menhaden oil for human consumption in the U.S. Refined (non-hydrogenated)
menhaden oil is the only non-hydrogenated fish oil approved by the FDA for human
consumption. Menhaden oil contains omega-3 fatty acids which have been linked by
researchers to the prevention of hypertension, cardiovascular diseases, cancer
and arthritis. The Company has begun to market refined (non-hydrogenated)
menhaden oil as a supplement to various processed and packaged foods which will
support the marketing of these food products as healthier alternatives. The use
of omega-3 rich oil in products for human consumption is already established in
Europe and Asia. The Company believes U.S. markets will be highly receptive to
menhaden oil supplements in processed foods due to (i) increased interest in
healthier lifestyles, (ii) the publication of research findings supporting the
positive health effects of omega-3 fatty acids consumption, and (iii) aging of
the population and the tendency of consumers to purchase more healthy foods as
they age.
SOLUBLES
Fish solubles are a by-product of the fish meal production process and are
a liquid protein product used as an additive in animal feeds and as an organic
fertilizer. The Company has traditionally used fish solubles as an additive to
fish meal in order to increase overall protein content. The Company has also
been successful in a recent initiative to market solubles as a natural means of
soil enhancement. The Company believes that increasing consumer demand for
organically raised products may support a
25
<PAGE>
<PAGE>
growing market for its solubles as a natural replacement for chemical
fertilizers. For example, the Company believes, based on trade publications,
that retail organic food sales have doubled in the U.S. between 1992 and 1996.
BUSINESS STRATEGY
The Company's strategy is to continue to enhance its position as the
leading domestic supplier of value-added marine protein and oil products, to
become the leading domestic supplier of omega-3 rich oil for human consumption
and to broaden its product offerings and geographical markets. The principal
elements of this strategy include:
Development of Value-Added Products. The Company intends to focus on
further developing higher margin, high performance marine protein and oil
products which have a sustainable and differentiated competitive advantage. The
Company believes that the development of specialty products will enable it to
command premium prices, higher margins and further strengthen brand recognition.
To date the Company has successfully developed two value-added fish meal
products, Special Select and Sea-Lac, which have generated unit volume growth at
a compound annual growth rate of 16.9% since 1993. In comparison, the Company
believes, based on data provided by an industry trade publication, that
worldwide fish meal production grew at a compound annual growth rate of
approximately 0.8% during the same time period. The Company is also leveraging
its product development expertise to enter new markets, including refined
(non-hydrogenated) fish oils for human consumption and organic fertilizers.
Exploit Domestic Market for Omega-3 Fatty Acids. Menhaden oil contains
omega-3 fatty acids, which studies have linked to the prevention of diseases
such as hypertension, cardiovascular disease, cancer and arthritis. In June
1997, the FDA approved the use of refined (non-hydrogenated) menhaden oil for
human consumption in the United States. Currently, there are no other
non-hydrogenated fish oils approved by the FDA for human consumption. The
Company plans to market refined (non-hydrogenated) menhaden oil as a supplement
to various processed and packaged foods which will support the marketing of
these foods products as healthier alternatives. As a result of its experience in
serving international edible fish oil markets and its position as the only
domestic producer of refined (non-hydrogenated) menhaden oil, the Company
believes that it is well positioned to become the leader in this developing
market.
Maintain Leading Domestic Market Position. The Company is currently the
largest menhaden processor in the U.S., operating 51 steamers, with the next two
largest menhaden competitors operating a combined total of 12 steamers. During
Fiscal 1997, the Company processed approximately 54% of all menhaden processed
in U.S. markets. After integrating the assets acquired in the Recent
Acquisitions which occurred in early Fiscal 1998, the Company anticipates that
it will harvest approximately 80% of all menhaden harvested in U.S. markets in
Fiscal 1998. The Company's leading position enables it to secure a steady supply
of menhaden fish (subject to natural conditions) as well as serve its large
national customers as a reliable first source for marine protein and oil
products.
Continue Strategic Acquisitions. The Recent Acquisitions have increased the
size of the Company's processing capabilities and are expected to increase its
harvesting capabilities. The Company believes that it can further improve its
competitive position by making acquisitions in South America or the U.S. West
Coast, which would provide it with year-round harvesting capabilities and a
production location from which to significantly increase the Company's presence
in the Asian market. The Company also intends to pursue complimentary product
acquisitions, such as producers of other valued added animal proteins, which
will allow it to enter new niche markets.
PRODUCT LINES
The Company produces meal, oil and solubles from the menhaden which it
harvests. In Fiscal 1997, the Company harvested approximately 507,358 tons of
menhaden which were processed into approximately 63,835 tons of regular grade
fish meal, 46,409 tons of Special Select, 14,741 tons of Sea-Lac, 61,905 tons of
crude fish oil, 9,657 tons of refined fish oil and 16,531 tons of fish solubles.
26
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<PAGE>
FISH MEAL
The Company produces three grades of fish meal: regular grade meal and two
specialty meals that are sold under Company-owned brand names, Special Select
and Sea-Lac. Fish meal is sold primarily as a high-protein ingredient and
supplement in commercial livestock, dairy, poultry, aquaculture and pet feeds to
enhance feed performance. The Company's fish meal products are marketed with
strict quality and protein content standards, requiring careful monitoring of
the freshness of the fish and processing conditions.
The Company processes its highest quality fish, as measured by freshness,
into Special Select and Sea-Lac. These products are marketed to specific niches
of the animal feed market. Special Select is an easily digestible protein which
facilitates greater protein absorption to meet the nutritional needs of young
animals. Special Select was originally introduced for use in piglet feed to
promote rapid weaning, thereby permitting sows to reproduce faster. This, in
turn, reduces the average number of days to market for piglets. After
successfully marketing this product to the pig market, the Company began selling
Special Select to new markets, including manufacturers of turkey and aquaculture
feed. Sea-Lac is used in the dairy industry as a by-pass protein product which
increases a cow's level of milk production. A by-pass protein delivers protein
more effectively into the cow's digestive system by escaping bacterial
degradation in the rumen.
Fish meal prices are related to the prices for soybean meal, the most
commonly available protein additive. Fish meal generally has a higher level of
protein than soybean meal and, therefore, is typically priced at a premium to
soybean meal on a per ton basis. Fish meal prices are also influenced by the
level of fish caught each season and fluctuate within the fishing season. The
storage life of fish meal is approximately one year, and fish meal prices are at
their lowest during the peak fishing season when other fish meal processors sell
the majority of their production due to lack of storage facilities. Since the
Company operates storage facilities, it can stockpile inventory for sale during
the offseason giving it the ability to meet the year-round demand for fish meal
and achieve higher average selling prices for its products when competing
supplies are limited.
During the last three years, the worldwide demand for protein has increased
at a rate faster than the supply of protein, resulting in increased prices. In
addition, during the last three years, the Company's specialty brand products
have gained greater acceptance in niche markets due to their special performance
characteristics.
On a pro forma basis, the Company's fish meal sales constituted 66.1% of
the Company's Fiscal 1997 revenues. The following table summarizes the Company's
fish meal sales in tons and the weighted average selling price per ton for the
indicated periods:
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER
31,
YEAR ENDED SEPTEMBER 30, -----------------------------
------------------------------------------------
AVERAGE SELLING SALES AVERAGE SALES PRICE
SALES IN TONS PRICE PER TON IN TONS PER TON
--------------------------- ------------------ ------- -------------------
PRODUCT TYPE 1995 1996 1997 1995 1996 1997 1997 1997
- ------------------------- ------- ------- ------- ---- ---- ---- ------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Regular Grade............ 108,435 61,494 51,995 $329 $383 $457 10,429 $ 470
Special Select........... 37,084 38,964 47,217 405 495 547 14,053 589
Sea-Lac.................. 7,790 9,379 13,917 370 431 509 3,501 528
------- ------- ------- -------
Total............... 153,309 109,837 113,129 27,983
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
OIL
The Company produces fish oil from menhaden in both a crude and refined
form for the European, Japanese and Mexican food industries, the animal feed
industry, the aquaculture industry and certain niche industrial applications.
Depending on its use, fish oil may be sold in its crude form, partially
processed for use in leather tanning, lubricants, chemicals, paints or other
industrial products or further processed by refining for use in margarine and
other shortenings in hydrogenated form and for use in health foods and health
source supplements in non-hydrogenated form. When used in margarine and other
shortenings, prices for fish oil are generally influenced by prices for
alternative vegetable fats and oils, such as soybean and palm oils.
27
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<PAGE>
Refined (non-hydrogenated) menhaden oil contains omega-3 fatty acids which
have been linked by research studies to the prevention of certain diseases. In
June, 1997, the FDA approved the use of refined (non-hydrogenated) menhaden oil
for human consumption in the United States. Currently, there are no other
non-hydrogenated fish oils approved by the FDA for human consumption. The
Company plans to market refined (non-hydrogenated) menhaden oil as a supplement
to various processed and packaged foods which will support the marketing of
these food products as healthier alternatives.
On a pro forma basis, the Company's fish oil sales constituted 27.8% of the
Company's Fiscal 1997 revenues. The following table summarizes the Company's oil
sales in tons and the weighted average selling price per ton for the indicated
periods:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, THREE MONTHS ENDED DECEMBER 31,
-------------------------------------------------- -------------------------------
SALES
AVERAGE SELLING IN AVERAGE SALES PRICE
SALES IN TONS PRICE PER TON TONS PER TON
-------------------------- -------------------- ------ -------------------
PRODUCT TYPE 1995 1996 1997 1995 1996 1997 1997 1997
- -------------------- ------ ------ ------ ---- ---- ---- ------ -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Crude Oil........... 79,644 52,257 44,007 $321 $390 $424 22,329 $ 539
Refined Oil......... 8,447 8,814 9,747 448 510 529 1,923 552
------ ------ ------ ------
Total.......... 88,091 61,071 53,754 24,252
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
FISH SOLUBLES
Fish solubles are a liquid protein product used as an additive in fish meal
and also marketed as an independent product to animal feed formulators and the
fertilizer industry. Solubles are sold to the pet food, livestock feed and
aquaculture industries. The Company has experienced recent success introducing a
value-added fish soluble product as an organic fertilizer for golf courses and
as a natural alternative to chemical fertilizer inputs for various row crop and
horticulture products. Fish solubles have begun to gain acceptance in these
markets because, unlike other organic products, they are suitable for spray
applications.
In Fiscal 1997, the Company produced approximately 54,572 tons of fish
solubles, of which 38,041 tons were used as additives to the Company's products
and 16,531 tons were sold to third parties. On a pro forma basis, fish solubles
sales represented 4.2% of the Company's Fiscal 1997 revenues.
NETS
The Company manufactures the nets used in its menhaden harvesting
operations. In Fiscal 1997, the Company used approximately 60.0% of the finished
nets for its own operations and generated $1.1 million of revenues from sales of
nets to third parties.
SALES, MARKETING AND DISTRIBUTION
The Company markets its products through a staff of nine sales personnel
located at its Hammond, Louisiana administrative offices. The Company sells its
products to manufacturers and processors who incorporate them into their
finished goods. The Company sells to more than 300 customers, including Ralston
Purina Company, Purina Mills, Inc., Friskies PetCare Company, the Animal
Nutrition Division of Cargill, Inc. and Unilever Raw Materials B.V.
Approximately 35% of the Company's fish meal sales in Fiscal 1997 were made
to customers in Mississippi, North Carolina, Georgia, Iowa, Texas and Arkansas.
Total sales to the Company's top ten customers represented approximately 23.8%
of the Company's Fiscal 1997 revenues; no single customer accounted for more
than 5.4% of the Company's Fiscal 1997 revenues.
In Fiscal 1997, approximately 35% of the Company's regular grade fish meal
was sold on a two to six month forward contract basis. The balance of regular
grade fish meal and other products was substantially sold on a spot basis
through purchase orders.
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The Company believes that its success in marketing its products is
attributable to four key factors:
Quality. Many of the Company's products are used to ensure and enhance
the performance of its customers' end products and, therefore, consistency
and high quality are essential. The Company assures the consistent high
quality of its products through rigorous testing at its five quality
control laboratories where staff personnel constantly sample and analyze
the Company's products for protein levels, digestibility, fatty acid
content, moisture and impurities.
Year-Round Availability. While the menhaden fishing season usually
extends from April to December, the Company endeavors to meet the demands
of its customers by making prompt and reliable delivery of the Company's
products on a year-round basis which also allows the Company to benefit
from higher off-season prices for its products. This is accomplished
through the use of storage facilities located at the Company's processing
plants, three strategically located leased regional warehouses in
Guntersville, Alabama, St. Louis, Missouri and East Dubuque, Illinois and a
leased liquid oil tank depot in Avondale, Louisiana (near New Orleans).
Since the Company's customers are principally manufacturers and processors,
its products are distributed mainly in bulk from the Company's processing
plants or storage facilities directly to the customers' facilities. The
Company uses various common carriers to transport its products to the
desired locations, including railway, truck, barge and vessel carriers. The
Company contracts on an annual basis with liquid and dry meal barge
carriers and ocean going vessel carriers. The Company believes that it is
the only marine protein and oil producer that provides products in the U.S.
throughout the year.
Technical Sales Force. Because of the specialized nature of many of
the niche markets the Company serves, its sales force must have technical
knowledge of the Company's products and the applications for which they are
used. The Company employs sales personnel with significant industry and
technical expertise.
Customer Driven Research and Development. The Company makes grants to
several university agricultural research departments to perform research
projects identified by the Company. The Company's research activities are
often developed jointly with customers enabling the Company to gain a
better understanding of customer's formulating needs and process
technology. The Company believes that university research enhances sales of
its products and results in stronger customer relationships. The Company
maintains a central laboratory in Hammond, Louisiana, to coordinate these
research activities.
INTERNATIONAL SALES
The Company's products are sold both in the U.S. and internationally.
International sales consist mainly of fish oil sales to Canada, Japan, Mexico
and The Netherlands. Sales outside the U.S. constituted 25.1% of the Company's
pro forma revenues after giving effect to the Venture Milling Disposition, and
30.7% and 27.5% of revenues for Fiscal 1995 and 1996, respectively. The
Company's sales in these foreign markets are denominated in U.S. dollars and are
not directly affected by currency fluctuations. Such sales could be adversely
affected by changes in demand resulting from fluctuations in currency exchange
rates.
A number of countries in which the Company currently sells products
impose various tariffs and duties, none of which have a significant impact on
the Company's foreign sales. These duties are being reduced annually under the
North American Free Trade Agreement in the case of Mexico and Canada and under
the Uruguay Round Agreement of the General Agreement on Trade and Tariffs in the
case of Japan. In all cases, the Company's products are shipped to its customers
F.O.B. shipping point and therefore the customer is responsible for any tariffs,
duties or other levies imposed on the Company's products sold into these
markets.
HARVESTING AND PROCESSING
Fishing. The Company owns a fleet of 66 steamers (51 of which are directly
involved in the harvesting operations) and owns 33 and leases 11 spotter
aircraft (41 of which are directly involved in locating menhaden). The Company's
operations in the U.S. Gulf coast are supported by 38 steamers and 32 spotter
aircraft and its operations off the mid-Atlantic coast are supported by 13
steamers and 9
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<PAGE>
spotter aircraft. The Company's fishing area in the Gulf stretches from the
south Texas coastline to the panhandle of western Florida, with fishing
operations concentrated off the Louisiana and Mississippi coasts. The Company's
fishing area in the Atlantic extends from North Carolina to New Jersey. The
fishing season runs from mid-April through October in the Gulf coast and May
through December in the Atlantic coast.
The Company's principal raw material is menhaden, a species of fish that
inhabit coastal and inland tidal waters in the U.S. Menhaden are undesirable for
human consumption due to their small size, boniness and high oil content.
Certain state agencies impose resource depletion restrictions on menhaden
fishing pursuant to fish management legislation. To date, the Company has not
experienced any material adverse impact on its fish catch or operations as a
result of these restrictions.
The following table shows the total tons of menhaden harvested in the
Atlantic Ocean and the Gulf coast waters for the following periods as reported
by NMFS:
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
---------------------------------------------------------------------------
DEC. 1993 DEC. 1994 DEC. 1995 DEC. 1996 SEPT. 1997 DEC. 1997
--------- --------- --------- --------- ---------- ---------
(IN TONS)
<S> <C> <C> <C> <C> <C> <C>
Menhaden(1)..................... 947,787 1,126,144 886,056 851,333 943,717 928,465
</TABLE>
- ------------
(1) The number of menhaden caught has been converted to short tons using the
NMFS fish catch conversion ratio.
Menhaden usually school in large, tight clusters and are commonly found in
warm, shallow coastal waters. Spotter aircraft locate the schools and direct the
steamers accordingly. Steamers range in size from 165 to 180 feet. The steamers
transport two 40-foot purse boats, each carrying several fishermen and one end
of a 1,500-foot net. The purse boats encircle the school and capture the school
in the net. The fish are pumped from the net into refrigerated holds of the
steamer. Each steamer has a capacity to hold between 500 to 600 tons of fish and
is equipped with a modern refrigeration system that recycles chilled water over
the stored fish to maintain their freshness until unloading. The steamers
generally make day and over-night fishing voyages though, in some instances, the
steamers will fish continuously for up to a week. Upon returning to the plants,
the steamers are unloaded quickly to maintain the freshness of the menhaden,
which is critical to the digestibility of the meal produced from the fish.
Processing Plants. The Company operates five on-shore menhaden processing
plants. The chart below sets forth certain information concerning the Company's
processing facilities at November 30, 1997:
<TABLE>
<CAPTION>
EMPLOYEES
----------------- TOTAL %
FISHING OFF SPOTTER OF 1997
FACILITY SEASON SEASON STEAMERS AIRCRAFT CATCH
- ---------------------------------------------------- ------- ------ -------- --------- --------
<S> <C> <C> <C> <C> <C>
Abbeville, LA....................................... 233 76 10 9 26%
Cameron, LA......................................... 297 80 13 11 33
Moss Point, MS...................................... 190 51 9 6 15
Reedville, VA....................................... 279 109 13 9 26
Morgan City, LA(1).................................. -- 25 6 6 --
------- ------ -- -- ---
Total.......................................... 999 341 51 41 100%
------- ------ -- -- ---
------- ------ -- -- ---
</TABLE>
- ------------
(1) The Company acquired the Morgan City plant from Gulf Protein in November
1997 and will not operate this facility until the beginning of the 1998
fishing season.
As of November 30, 1997, these plants had an aggregate capacity to process
approximately 950,000 tons of fish annually. The Company's processing plants are
located in coastal areas near the Company's fishing fleet. Annual volume
processed varies depending upon menhaden catch and demand. Each plant maintains
a dedicated dock to unload fish, fish processing equipment and storage capacity.
The Reedville, Virginia facility contains an oil refining plant and net making
facility. The Company periodically reviews possible application of new
processing technologies in order to enhance productivity and reduce costs.
The Company owns the Reedville, Virginia, Moss Point, Mississippi and
Abbeville, Louisiana plants and the real estate on which they are located
(except for a small leased parcel comprising a
30
<PAGE>
<PAGE>
portion of the Abbeville, Louisiana real estate). The Company leases from
unaffiliated third parties the real estate on which the Cameron, Louisiana and
Morgan City, Louisiana plants are located. The Cameron plant lease provides for
a 10 year term ending on June 30, 2002 (with two successive 10 year options) and
annual rent of $50,000. The Morgan City plant lease provides for a 5 year term
beginning on November 25, 1997 at an annual rent of $220,000. The Company has an
option under the Morgan City lease to purchase the plant for $656,000 during the
last month of the lease or earlier if all rent through the end of the term is
paid.
Processing. Prior to processing, the fish are evaluated for freshness
through visual inspection and measurement of total volatile nitrogen (which
increases as fish decay). The highest quality fish are selected for specialty
grade meal and the balance are used for regular grade meal. After evaluation,
the unloaded fish are transferred into steam cookers. After cooking, the fish
are passed through presses to remove substantially all of the oil and water. The
remaining solid portions of the fish are dried in rotary drum driers and then
ground into fish meal. Fish processed into specialty grade meal are dried at a
lower temperature than fish processed into regular grade meal. The lower drying
temperature enhances the digestibility level of the specialty grade meals. The
liquid side stream of the cooking and pressing operations contains oil, water,
dissolved protein and some fish solids. This liquid is passed through a decanter
to remove the solids and is then put through a centrifugal oil/water separation
process. The separated fish oil may be further refined by winterizing,
deodorizing, bleaching and polishing. The separated water and protein mixture is
further processed through evaporators to remove the soluble protein, which can
be sold as a finished product or added to the solid portions of the fish for
processing into fish meal.
Dry Dock Facilities. In July 1997, the Company commenced construction of a
dry dock facility in Moss Point, Mississippi to address the shortage of
shoreside maintenance in the U.S. Gulf coast and the increasing costs of these
services. The facility was completed in March 1998. The Company is using this
facility and other outside facilities to perform routine maintenance to its
fishing fleet. The Company will also provide shoreside maintenance services to
third party vessels if excess capacity exists. The Company believes this
facility will allow it to better control its future vessel maintenance and
refurbishment costs.
INSURANCE
The Company maintains insurance against physical loss and damage to its
assets, coverage against liabilities to third parties it may incur in the course
of its operations, as well as workers' compensation, United States Longshoremen
and Harbor Workers' Act and Jones Act coverages. Assets are insured at
replacement cost, market value or assessed earning power. Specifically, the
Company's fishing fleet is currently covered by hull and machinery insurance and
its owned or leased spotter aircraft are currently covered by aviation
insurance. The Company's potential liabilities to employees and third parties
are covered by various policies including protection and indemnity and marine
oil pollution policies. The Company's limits for liability coverage are
statutory or $50.0 million. The $50.0 million limit is comprised of several
excess liability policies which are subject to deductibles, underlying limits
and exclusions. The Company believes its insurance coverage to be in such form,
against such risks, for such amounts and subject to such deductibles as are
prudent and normal for its operations.
COMPETITION
The marine protein and oil business is subject to significant competition
from producers of vegetable and other animal protein products and oil products
such as Archer-Daniels Midland, Inc. and Cargill, Inc. In addition, but to a
lesser extent, the Company competes with international marine protein and oil
producers, including Scandinavian herring processors and South American anchovy
and sardine processors. Many of these competitors have greater financial
resources and more extensive operations than the Company. The Company's products
compete mainly on price, and to a lesser extent on quality and performance
characteristics, such as protein level and amino acid profile in the case of
fish meal.
31
<PAGE>
<PAGE>
REGULATION
The Company's operations are subject to federal, state and local laws and
regulations relating to the location and periods in which fishing may be
conducted. At the state and local level, certain state and local governmental
agencies have either enacted legislation and regulations or have the authority
to enact such legislation and regulations to prohibit or limit menhaden fishing
within their jurisdictional waters. Delaware, Florida, Maryland and South
Carolina have enacted legislation that prohibits the taking of menhaden from
their respective tidal waters. New York, Virginia, New Jersey and Mississippi,
have enacted legislation or have the authority to enact legislation prohibiting
menhaden fishing in certain areas within their respective tidal waters and/or
have established minimum distances from the coast line where menhaden fishing is
permitted. The laws of certain states regulate, among other things: (i) type and
size of menhaden vessels permitted to engage in fishing activities within a
state's tidal waters; (ii) length of the fishing seasons; (iii) level of fish
catch; (iv) fees, licenses and permits required in connection with menhaden
fishing activities; and (v) legal gear and equipment used in fishing. Violations
of these laws and regulations can result in substantial penalties ranging from
forfeiture of the unlawful menhaden fish catch, revocation of licenses and
permits, forfeiture of vessels involved and various other penalties and
sanctions. The Company endeavors to comply with all applicable laws and
regulations pertaining to menhaden fishing. To date, the Company has not
experienced any material impact on its fish catch or operations as a result of
these regulations.
The Company's operations are also subject to federal, state and local laws
and regulations relating to safety matters. The Company, through its operation
of fishing vessels, is subject to the jurisdiction of the U.S. Coast Guard, the
National Transportation Safety Board and the U.S. Customs Service, which set
safety standards for vessel operations and are authorized to investigate vessel
accidents and recommend improved safety standards. The U.S. Customs Service is
authorized to inspect vessels at will. The Company's shoreside operations are
subject to the federal Occupational Safety and Health Act ('OSHA').
The Company's operations are further subject to federal, state and local
laws and regulations relating to the protection of the environment, including
the Clean Water Act which imposes strict controls against the discharge of oil
and other water pollutants into navigable waters. The Clean Water Act also
imposes penalties for any discharge of pollutants in reportable quantities and,
along with the Oil Pollution Act of 1990, imposes substantial liability for the
costs of oil removal, remediation and damages. The Company's operations also are
subject to the federal Clean Air Act, as amended; the federal Resource
Conservation and Recovery Act, which regulates treatment, storage and disposal
of hazardous wastes; the federal Comprehensive Environmental Response,
Compensation and Liability Act, which imposes liability, without regard to
fault, on certain classes of persons that contributed to the release of any
'hazardous substance' into the environment. The OSHA hazard communications
standard, the Environmental Protection Agency community right-to-know
regulations under Title III of the federal Superfund Amendment and
Reauthorization Act and similar state statutes require the Company to organize
information about hazardous materials used or produced in its operations.
Certain of this information must be provided to employees, state and local
governmental authorities and local citizens. Numerous other environmental laws
and regulations, along with similar state laws, also apply to the marine protein
and oil operations of the Company, and all such laws and regulations are subject
to change.
The Company has made, and anticipates that it will make in the future,
expenditures in the ordinary course of its business to remain in compliance with
safety and environmental regulations. Such expenditures have not been material
in the past and are not expected to be material in the future. However, there is
no assurance that safety and environmental laws and regulations enacted in the
future will not adversely affect the Company's operations.
The Company's harvesting operations are subject to certain federal maritime
laws and regulations which require, among other things, that the Company be
incorporated under the laws of the U.S. or a state, the Company's chief
executive officer be a U.S. citizen, no more of the Company's directors be
non-citizens than a minority of the number necessary to constitute a quorum and
at least 50% of the Company's outstanding capital stock (including a majority of
the Company's voting capital stock) be owned by U.S. citizens. If the Company
fails to observe any of these requirements, it will not be eligible
32
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<PAGE>
to conducts its harvesting activities in U.S. jurisdictional waters. Such a loss
of eligibility would have a material adverse affect on the Company.
EMPLOYEES
At August 30, 1997, the peak of the Company's 1997 fishing season, the
Company employed approximately 1,000 persons, of whom approximately 400 were
employed on a permanent basis and approximately 600 were employed on a part-time
basis through the end of the fishing season. At January 1, 1998, which is during
the Company's off season, the Company employed approximately 554 persons, all on
a full-time basis. Of these full-time employees, 45 were employed in sales,
marketing, administration and finance, and 509 employees were employed in the
processing plants and the drydock facility. During the off season, plant
employees generally perform maintenance to the Company's facilities.
Approximately 290 employees are represented by an affiliate of the United Food
and Commercial Workers Union under a collective bargaining agreement which
expires April 22, 2000. The Company has not experienced any strike or work
stoppage which had a material impact on operations. The Company considers its
employee relations to be generally satisfactory.
LEGAL PROCEEDINGS
The Company is involved in various claims and disputes arising in the
normal course of business, including claims made by employees under the Jones
Act which generally are covered by the Company's insurance. The Company believes
that it has adequate insurance coverage for all existing matters and that the
outcome of all pending proceedings, individually and in the aggregate, will not
have a material adverse effect upon the Company's business, results of
operations, cash flows or financial position.
33
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<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The Company's executive officers and directors are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------------- --- --------------------------------------------------
<S> <C> <C>
Joseph L. von Rosenberg III(1)(2)............
39 Chief Executive Officer, President and Director
Robert W. Stockton...........................
47 Executive Vice President and Chief Financial
Officer
Kelsey D. Short, Jr..........................
43 Senior Vice President-Marketing and Product
Development
Clyde R. Gilbert.............................
59 Senior Vice President-Operations
Eric T. Furey................................
35 Vice President, General Counsel and Corporate
Secretary
Michael E. Wilson............................
46 President, Moss Point Drydock and Fabrication,
Inc.
Malcolm I. Glazer(1)(2)......................
69 Director
Avram A. Glazer(1)(2)........................
37 Chairman of the Board of Directors and Director
</TABLE>
- ------------
(1) Member of Compensation Committee
(2) Member of Audit Committee
Joseph L. von Rosenberg III is President and Chief Executive Officer of the
Company. He has served in these positions since July 1997. Mr. von Rosenberg is
also Executive Vice President of Zapata, a position he has held since November
1995. Prior to becoming Executive Vice President of Zapata, Mr. von Rosenberg
served as General Counsel of Zapata from August 1994 to July 1997 and Corporate
Secretary of Zapata from June 1993 to July 1997. From August 1994 through
November 1995, Mr. von Rosenberg also held the position of Vice President of
Zapata. Prior to joining Zapata in June 1993, he served as General Counsel and
Corporate Secretary of The Simmons Group. Mr. von Rosenberg intends to resign as
Executive Vice President of Zapata prior to the consummation of the Offering.
Robert W. Stockton is Executive Vice President and Chief Financial Officer
of the Company. He has served in these positions since July 1997. For the five
years prior to joining the Company, Mr. Stockton was Vice President and Chief
Financial officer of The Simmons Group and also served as Corporate Controller
of Proler International Corp.
Kelsey D. Short, Jr. is Senior Vice President-Marketing and Product
Development of the Company. He has served in this position since November 1993.
From 1985 to 1993, Mr. Short held a variety of positions in the Company's
marketing department, including Regional Sales Manager, Specialty Meal Manager
and Director of Product Development.
Clyde R. Gilbert is Senior Vice President-Operations of the Company. He has
served in this position since July 1997. Prior to assuming this position, Mr.
Gilbert served as Vice President -- Finance and Controller of the Company since
1990.
Eric T. Furey has served as General Counsel and Corporate Secretary of the
Company since January 1998. Mr. Furey is also General Counsel and Corporate
Secretary of Zapata, a position he has held since July 1997. He was engaged in
the private practice of law for more than five years before joining the Company.
Mr. Furey intends to resign as General Counsel and Secretary of Zapata prior to
the consummation of the Offering.
Michael E. Wilson is President of the Company's wholly-owned subsidiary,
Moss Point Drydock and Fabrication, Inc., a position he has held since June
1997. Since 1996, he has also served as the Company's Coordinator of Marine
Engineering & Maintenance. Mr. Wilson joined the Company in 1985 and served in
various operating capacities until 1996.
Malcolm I. Glazer has been a director of the Company since January 1998. He
is also a director and Chairman of the Board of Directors of Zapata, positions
he has held since July 1993 and July 1994, respectively. From August 1994 to
March 1995, Mr. Glazer has served as President and Chief Executive
34
<PAGE>
<PAGE>
Officer of Zapata. Mr. Glazer has also been a self-employed private investor for
more than five years whose diversified portfolio consists of ownership of the
Tampa Bay Buccaneers National Football League franchise and investments in
television broadcasting, restaurants, restaurant equipment, food services
equipment, health care, banking, real estate and stocks. He is also a director
of Specialty Equipment Companies, Inc. Malcolm I. Glazer is the father of Avram
A. Glazer.
Avram A. Glazer has been a director of the Company since January 1998. He
is also a director and President and Chief Executive Officer of Zapata,
positions which he has held since July 1993 and March 1995, respectively. For
the past five years, he has been employed by, and has worked on behalf of,
Malcolm I. Glazer and a number of entities owned and controlled by Malcolm I.
Glazer. He also serves as a director of Specialty Equipment Companies, Inc.
Avram A. Glazer is the son of Malcolm I. Glazer.
The Company intends to elect two independent directors to the Company's
Board within three months after consummation of the Offering.
BOARD COMMITTEES
The Company's Board has established an Audit Committee and a Compensation
Committee. The Board will establish, promptly following consummation of the
Offering, a Conflicts Committee.
The Audit Committee reviews the adequacy of the Company's internal control
systems and financial reporting procedures, reviews the general scope of the
annual audit and reviews and monitors the performance of non-audit services by
the Company's independent public accountants. The Audit Committee also meets
with the independent auditors and with appropriate financial personnel of the
Company regarding these matters. The Audit Committee recommends to the Company's
Board the appointment of the independent auditors. The independent auditors
periodically will meet alone with the Audit Committee and will have unrestricted
access to the Audit Committee.
The Compensation Committee administers management incentive compensation
plans and makes recommendations to the Company's Board with respect to the
compensation of directors and officers of the Company.
The Conflicts Committee will review all proposed transactions between the
Company and Zapata to evaluate the fairness of the transaction to the Company.
The Conflicts Committee will consist solely of independent directors.
DIRECTOR COMPENSATION
Each director who is not an employee of the Company receives $1,000 for
each meeting of the Board attended and for each committee meeting attended.
Pursuant to the Directors Option Plan adopted by the Company's Board on January
26, 1998, Messrs. Avram Glazer and Malcolm Glazer were automatically granted
options to purchase 568,200 and 14,200 shares of the Common Stock, respectively,
which options vest ratably over three years commencing on January 26, 1998 and
are exercisable at a price of $12.75 per share. Following the Offering, each new
non-employee director will upon joining the Board automatically be granted
options to purchase 14,200 shares of Common Stock at the fair market value
thereof, and which will vest ratably over three years from the date of the
grant. See 'Management -- Stock Option Plans.'
EXECUTIVE COMPENSATION
The following table and accompanying footnotes provide summary information
concerning the compensation earned by the Company's current and former Chief
Executive Officer and the other executive officers of the Company whose salary
and bonus was in excess of $100,000 (the 'Named Officers') for Fiscal 1997:
35
<PAGE>
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION ALL OTHER
--------------------------------------- COMPENSATION
NAME AND POSITION SALARY ($) BONUS ($) OTHER ($)(1) ($)(2)(3)
- --------------------------------------------- ---------- --------- ------------ -------------------
<S> <C> <C> <C> <C>
Ronald Lassiter Former Chief Executive
Officer and President(4)................... -- 73,600 705,633 --
Joseph Oliver Former Executive Vice
President -- Finance and Development(5).... 105,608 33,120 64,283 3,126
Joseph L. von Rosenberg Chief Executive
Officer and President(4)................... -- -- -- --
Kelsey Short Senior Vice President --
Marketing and Product Development.......... 93,700 40,480 -- 3,430
</TABLE>
- ------------
(1) With respect to Mr. Lassiter represents payments made under a consulting
agreement and with respect to Mr. Oliver represents a severance payment
under his employment agreement.
(2) Pursuant to the Securities and Exchange Commission rules on executive
compensation disclosure, 'All Other Compensation' does not include
perquisites because the aggregate amount of such compensation for each of
the persons listed did not exceed the lesser of (i) $50,000 or (ii) ten
percent of the combined salary and bonus for such person in Fiscal 1997.
(3) Represents the Company's contribution pursuant to its profit sharing plan.
(4) Mr. Lassiter retired as Chief Executive Officer and President of the Company
effective as of July 1997. Mr. von Rosenberg was elected Chief Executive
Officer and President of the Company effective as of July 1997 and in Fiscal
1997 received $50,000 in compensation for this position from Zapata where he
continued to serve as Executive Vice President.
(5) Mr. Oliver left the Company's employ in July 1997.
EMPLOYMENT AGREEMENTS
The Company intends to enter into employment agreements with Messrs. von
Rosenberg, Stockton, Short, Gilbert and Furey prior to completion of the
Offering. The agreements will require Messrs. von Rosenberg and Furey to resign
as officers of Zapata effective upon the closing of the Offering. These
agreements will provide for base salaries which are subject to review at least
annually, provided that they may not be decreased without the employee's
consent. The initial base salaries under the agreements are as follows for the
indicated executive: Mr. von Rosenberg -- $230,000; Mr. Stockton -- $155,000;
Mr. Short -- $132,500; Mr. Gilbert -- $132,500; and Mr. Furey $120,000. Under
Mr. von Rosenberg's agreement, he will also receive an annual bonus equal to
1.5% of the increase, if any, in the Company's earnings before income taxes,
depreciation and amortization over the prior Fiscal year. The agreements will
also provide for a severance payment equal to 2.99 times the employee's annual
base salary in effect immediately preceding the event of termination of his
employment with the Company (i) by the executive for Good Reason (as defined in
the employment agreement) (ii) by the Company without Cause (as defined in the
employment agreement) or (iii) following any change in control of the Company
(as defined in the employment agreement). The agreements will provide for
rolling three year terms.
ANNUAL INCENTIVE COMPENSATION PLAN
The Company intends to establish an Annual Incentive Compensation Plan (the
'Bonus Plan') to provide bonuses to employees of the Company based on the
financial performance of the Company. The maximum bonus that will be awarded to
any participant will be 150% of that person's annual base salary.
RETIREMENT PLAN
The Company maintains a defined benefit plan for its employees (the
'Pension Plan'). The table below shows the estimated annual benefits payable on
retirement under the Pension Plan to persons in the specified compensation and
years of service classifications. The retirement benefits shown are based
36
<PAGE>
<PAGE>
upon retirement at age 65 and the payments of a single-life annuity to the
employee (although a participant can select other methods of calculating
benefits) to be received under the Company's Pension Plan using current average
Social Security wage base amounts and are not subject to any deduction for
Social Security or other offset amounts. With certain exceptions, the Internal
Revenue Code of 1986, as amended (the 'Code'), restricts to an aggregate amount
of $120,000 (subject to cost of living adjustments) the annual pension that may
be paid by an employer from a plan which is qualified under the Code. The Code
also limits the covered compensation which may be used to determine benefits to
$150,000.
RETIREMENT BENEFITS
<TABLE>
<CAPTION>
YEARS OF SERVICE
COVERED -------------------------------------------------------
COMPENSATION(1) 15 20 25 30 35
- --------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$ 125,000 $18,207 $24,277 $30,346 $36,415 $42,484
150,000 22,332 29,777 37,221 44,665 52,109
175,000 22,332 29,777 37,221 44,665 52,109
200,000 22,332 29,777 37,221 44,665 52,109
225,000 22,332 29,777 37,221 44,665 52,109
250,000 22,332 29,777 37,221 44,665 52,109
300,000 22,332 29,777 37,221 44,665 52,109
400,000 22,332 29,777 37,221 44,665 52,109
450,000 22,332 29,777 37,221 44,665 52,109
500,000 22,322 29,777 37,221 44,665 52,109
</TABLE>
- ------------
(1) Represents the highest average annual earnings during five consecutive
calendar years of service.
Compensation of Named Officers covered by the Pension Plan includes
salaries and bonuses as shown in the salary and bonus columns of the Summary
Compensation Table. As of December 31, 1997, the approximate years of credited
service (rounded to the nearest year) under the Retirement Plan of the Named
Officers were as follows: Mr. von Rosenberg, 0, Mr. Lassiter, 0, Mr. Oliver, 9,
and Mr. Short, 12.
STOCK OPTION PLANS
1998 LONG-TERM INCENTIVE PLAN
The 1998 Incentive Plan, approved by the Company's Board and Zapata as the
sole stockholder of the Company in January 1998, is intended to retain key
executives and other selected employees, reward them for making major
contributions to the Company's success and provide them with a proprietary
interest in the growth and performance of the Company and its subsidiaries.
Employees who participate in the 1998 Incentive Plan will be selected by
the Company's Board (or a committee designated by the Company's Board (the
'Committee') to make recommendations for grants under the 1998 Incentive Plan)
from among those employees who hold positions of responsibility and whose
performance, in the judgement of the Committee, has a significant effect on the
Company's success.
The total number of shares of Common Stock that may be issued pursuant to
the 1998 Incentive Plan will not exceed 3,600,000. Not more than 600,000 shares
of Common Stock are available for awards other than stock options and stock
appreciation rights granted at an exercise or strike price not less than fair
market value on the date of grant. The number of shares of Common Stock that may
be awarded pursuant to the 1998 Incentive Plan is subject to adjustment upon the
occurrence of certain events.
The 1998 Incentive Plan provides for the grant of any or all of the
following types of awards: stock options, stock appreciation rights, stock
awards and cash awards. Stock options may be incentive stock options that comply
with Section 422 of the Code. The allocation of awards under the 1998 Incentive
37
<PAGE>
<PAGE>
Plan is not currently determinable as such allocation is dependent upon future
decisions to be made by the Committee in its sole discretion, subject to the
applicable provisions of the 1998 Incentive Plan.
The exercise price of any stock option may, at the discretion of the
Committee, be paid in cash or by surrendering shares of Common Stock or another
award under the 1998 Incentive Plan, valued at fair market value on the date of
exercise or any combination thereof. Vesting conditions for a stock option will
be specified by the Committee and set forth in the applicable option agreement.
Vesting conditions may include, without limitation, provision for acceleration
in the case of a change in control of the Company or for stock appreciation
rights exercisable for cash (in lieu of the option) in the case of such a change
in control of the Company.
Stock appreciation rights are rights to receive, without payment to the
Company, cash or shares of Common Stock with a value determined by reference to
the difference between the exercise or 'strike' price of the stock appreciation
rights and the fair market value or other specified valuation of the Common
Stock at the time of exercise. Stock appreciation rights may be granted in
tandem with stock options or separately.
Stock awards may consist of Common Stock or be denominated in units of
Common Stock. Stock awards may be subject to conditions established by the
Committee, including service, vesting conditions and performance conditions
(including without limitation performance conditions based on achievement of
specific business objectives, increases in specified indices and attaining
specified growth measures or rates). A stock award may provide for voting rights
and dividend equivalent rights.
Cash awards may be subject to conditions specified by the Committee,
including service conditions and performance conditions.
No participant may be granted during any three-year period, awards
consisting of stock options or stock appreciation rights exercisable for more
than 20% of the shares of Common Stock reserved for issuance under the 1998
Incentive Plan.
Payment of awards may be made in cash or Common Stock or combinations
thereof, as determined by the Committee. An award may provide for the granting
or issuance of additional, replacement or alternative awards upon the occurrence
of specified events, including the exercise of the original award.
An award may provide for a tax gross-up payment to a participant if a
change in control of the Company results in the participant owing an excise tax
or other tax above the rate ordinarily applicable, pursuant to the parachute tax
provisions of Section 280G of the Code or otherwise. The gross-up payment would
be in an amount such that the net amount received by the participant, after
paying the increased tax and any additional taxes on the additional amount,
would be equal to that receivable by the participant if the increased tax were
not applicable.
Pursuant to the 1998 Incentive Plan, on January 26, 1998, the Company
granted options to purchase shares of Common Stock at an exercise price of
$12.75 per share to the following officers for the indicated number of shares:
Mr. von Rosenberg -- 568,200, Mr. Stockton -- 310,000, Mr. Short -- 250,000, Mr.
Gilbert -- 200,000 and Mr. Furey -- 116,160. These options vest ratably over a
three year period beginning on January 26, 1998, the date of the grant.
NON-MANAGEMENT DIRECTOR STOCK OPTION PLAN
The Directors Option Plan, approved by the Company's Board and Zapata as
the sole stockholder of the Company in January 1998, is intended to provide
incentives to the directors of the Company who are not employees of the Company
by providing them with options to purchase shares of Common Stock. Options for
up to a maximum of 620,000 shares of Common Stock may be issued under the
Directors Option Plan.
The Directors Option Plan provides that the initial Chairman of the Board
be granted an option to purchase up to 568,200 shares of Common Stock and each
other initial non-employee director of the Company will be granted options to
purchase 14,200 shares of the Common Stock at a price determined by the
Company's Board. All options granted under the Directors Option Plan vest
ratably over three years after the date of grant. Upon the occurrence of certain
events such as stock dividends and stock splits, consolidations or mergers, an
optionee's rights with respect to options granted are to be adjusted
38
<PAGE>
<PAGE>
as provided in the Directors Option Plan. Any non-employee director joining the
Company's Board after the Offering will be granted an option to purchase up to
14,200 shares of Common Stock at an exercise price to be determined by the
Company's Board.
Pursuant to the Directors Option Plan, the Company granted options on
January 26, 1998 to Messrs. Avram Glazer and Malcolm Glazer, to purchase 568,200
shares and 14,200 shares of Common Stock, respectively, at an exercise price of
$12.75 per share. All of these options vest ratably over the three year period
following the date of the grant.
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock by (i) all executive officers and
directors of the Company as a group, (ii) each of the Named Officers, (iii) each
of the Company's directors, (iv) all persons known by the Company to
beneficially own more than 5% of the Company's Common Stock and (v) the Selling
Stockholder.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO OFFERING(1) SHARES TO BE AFTER THE OFFERING(1)
--------------------- SOLD IN THE ---------------------
NAME & ADDRESS SHARES PERCENT OFFERING SHARES PERCENT
- ---------------------------------------------------- ---------- ------- ------------ ---------- -------
<S> <C> <C> <C> <C> <C>
Zapata Corporation(2) .............................. 19,676,000 100% 4,000,000 15,676,000 66.2%
1717 St. James Place, Suite 550
Houston, Texas 77056
Malcolm I. Glazer(2) ............................... 19,676,000 100% 4,000,000 15,676,000 66.2%
1482 Ocean Boulevard
Palm Beach, Florida 33480
Joseph L. von Rosenberg III ........................ -- -- -- -- --
Robert W. Stockton ................................. -- -- -- -- --
Kelsey D. Short, Jr. ............................... -- -- -- -- --
Clyde R. Gilbert ................................... -- -- -- -- --
Eric T. Furey ...................................... -- -- -- -- --
Avram A. Glazer .................................... -- -- -- -- --
Ronald Lassiter .................................... -- -- -- -- --
Joseph Oliver ...................................... -- -- -- -- --
All directors and executive officers as a group 19,676,000 100% 4,000,000 15,676,000 66.2%
(consists of 8 persons)...........................
</TABLE>
- ------------
(1) Beneficial Ownership is determined in accordance with the rules of the
Securities and Exchange Commission which generally attribute beneficial
ownership of securities to persons who possess sole or shared voting power
and/or investment power with respect to those securities.
(2) Prior to the Offering, all of the outstanding shares of Common Stock have
been owned by Zapata. After the Offering, Zapata will own approximately
66.2% of the Common Stock outstanding after the Offering (62.1% if the
Underwriters' over-allotment options are exercised in full) of the Common
Stock then outstanding. Zapata controls the Company. The Glazer Family
Limited Partnership, a Nevada limited partnership ('Glazer Partnership'),
owns beneficially and of record approximately 45% of Zapata's outstanding
common stock. By virtue of such ownership, the Glazer Partnership may be
deemed to control Zapata, and therefore may be deemed to beneficially own
the Company's Common Stock owned beneficially by Zapata. The Glazer
Partnership's sole partners are (i) MIG, Inc. a Nevada corporation, which is
as a general partner and of which Malcolm Glazer is the sole officer,
director and shareholder and (ii) the Malcolm Glazer Trust, a Florida trust,
which is a limited partner, and of which Malcolm Glazer is the sole trustee
and beneficiary during his lifetime.
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CERTAIN TRANSACTIONS AND ARRANGEMENTS
BETWEEN THE COMPANY AND ZAPATA
Prior to the Offering, Zapata provided the Company with certain
administrative services, including treasury and tax services, which were billed
at their approximate costs to Zapata. During Fiscal 1995, 1996 and 1997 and
First Quarter Fiscal 1998, fees for these services totaled $34,500, $110,000,
$30,000 and $7,500, respectively. Prior to the Offering, the Company has
provided Zapata with payroll and certain administrative services, which were
billed to Zapata at their approximate costs to the Company. During Fiscal 1996
and 1997, these fees totaled $30,000 each year. The costs of these services were
directly charged and/or allocated based on the estimated percentage of time that
employees spend working on the other party's matters as a percent of total time
worked. The Company's management believes this allocation method is reasonable.
The 1996 amount of taxation services charged to the Company by Zapata is higher
than the 1995 and 1997 amounts primarily due to additional taxation work
involving tax strategies to minimize state and federal income tax and to tax
work related to setting up a foreign sales corporation as it pertained to the
Company.
Prior to the Offering, Zapata advanced funds to the Company from time to
time. During Fiscal 1997, Zapata forgave the repayment of $41.9 million of
intercompany indebtedness owed to Zapata by the Company and the Company recorded
this amount as contributed capital. After forgiving such indebtedness, Zapata
advanced $28.1 million to the Company to meet the cash requirements of the
Recent Acquisitions and $5.2 million primarily for payment of the Company's
income taxes. As of December 31, 1997, Zapata had no outstanding guarantees of
Company indebtedness and the Company owed Zapata approximately $33.3 million of
intercompany debt. The intercompany balance attributable to the Recent
Acquisitions accrues interest at a rate equal to Zapata's cost of funds, which
is currently 8.5%; the balance of the Company's indebtedness to Zapata does not
bear any interest. Pursuant to the Separation Agreement described below, the
Company will repay $33.3 million of its intercompany indebtedness due Zapata at
the time of closing of the Offering with a portion of the net proceeds and the
remaining balance of intercompany indebtedness in the ordinary course. See 'Use
of Proceeds.'
Prior to the consummation of the Offering, the Company and Zapata intend to
enter into a number of agreements for the purpose of defining their continuing
relationship. These agreements will be negotiated in the context of a
parent-subsidiary relationship and therefore will not be the result of
negotiations between independent parties. It is the intention of the Company and
Zapata that such agreements and the transactions provided for therein, taken as
a whole, should accommodate the parties' interests in a manner that is fair to
both parties, while continuing certain mutually beneficial arrangements. There
can be no assurance that each of such agreements, or the transactions provided
for therein, will be effected on terms at least as favorable to the Company as
could have been obtained from unaffiliated third parties.
The following is a summary of certain agreements which the Company and
Zapata will enter into and which will become effective upon completion of the
Offering.
Separation Agreement. The Separation Agreement provides for the Company and
Zapata to enter into a Sublease Agreement, a Registration Rights Agreement, a
Tax Indemnity Agreement and an Administrative Services Agreement. The Separation
Agreement will require the Company to repay the $33.3 million of intercompany
indebtedness owed by the Company to Zapata contemporaneously with the
consummation of the Offering. See 'Use of Proceeds.' The Separation Agreement
will also prohibit Zapata from engaging in the harvesting of menhaden or the
production or marketing of fish meal, fish oil or fish solubles anywhere in the
United States for a period of five years from the date of the Separation
Agreement. Under the Separation Agreement, Zapata and the Company and its
subsidiaries will indemnify each other with respect to any future losses that
might arise from the Offering as a result of any untrue statement or alleged
untrue statement in any Offering document or the omission or alleged omission to
state a material fact in any Offering document (i) in the Company's case except
to the extent such statement was based on information provided by Zapata and
(ii) in Zapata's case, only to the extent such loss relates to information
supplied by Zapata.
Sublease Agreement. The Sublease between the Company and a subsidiary of
Zapata will provide for the Company to lease its principal corporate offices in
Houston, Texas, comprising approximately
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3,354 square feet, at an annual rent of approximately $36,204 and for a term
that coincides with the remaining term of the primary lease pursuant to which
Zapata occupies the space which expires in 2000.
The Sublease will also provide for the Company to utilize certain shared
office equipment for no additional charge.
Registration Rights Agreement. The Registration Rights Agreement which the
Company and Zapata will enter into prior to the consummation of the Offering
will provide for the Company to grant certain rights (the 'Registration Rights')
to Zapata with respect to the registration under the Securities Act of the
shares of Common Stock owned by Zapata at the closing of the Offering (the
'Registrable Securities'). Pursuant to the Registration Rights Agreement, Zapata
will be able to require the Company, not more than once in any 365 day period
commencing on the first anniversary of the closing of the Offering and on not
more than three occasions after Zapata no longer owns a majority of the voting
power of the outstanding capital stock of the Company, to file a registration
statement under the Securities Act covering the registration of the Registrable
Securities, including in connection with an offering by Zapata of its securities
that are exchangeable for the Registrable Securities (the 'Demand Registration
Rights'). Zapata's Demand Registration Rights are subject to certain
limitations, including that any such registration cover a number of Registrable
Securities having a fair market value of at least $50.0 million at the time of
the request for registration and that the Company may be able to temporarily
defer a Demand Registration to the extent it conflicts with another public
offering of securities by the Company or would require the Company to disclose
certain material non-public information. Zapata will also be able to require the
Company to include Registrable Securities owned by Zapata in a registration by
the Company of its securities (the 'Piggyback Registration Rights'), subject to
certain conditions, including the ability of the underwriters for the offering
to limit or exclude Registrable Securities therefrom.
The Company and Zapata will share equally the out-of-pocket fees and
expenses of the Company associated with a demand registration and Zapata will
pay its pro rata share of underwriting discounts, commissions and related
expenses (the 'Selling Expenses'). The Company will pay all expenses associated
with a piggyback registration, except that Zapata will pay its pro rata share of
the Selling Expenses. The Registration Rights Agreement contains certain
indemnification and contribution provisions (i) by Zapata for the benefit of the
Company and related persons, as well as any potential underwriter and (ii) by
the Company for the benefit of Zapata and related persons, as well as any
potential underwriter. Zapata's Demand Registration Rights will terminate on the
date that Zapata owns, on a fully converted or exercised basis with respect to
such securities held by Zapata, Registrable Securities representing less than
10% of the then issued and outstanding voting stock of the Company. Zapata's
Piggyback Registration Rights will terminate at such time as it is able to sell
all of its Registrable Securities pursuant to Rule 144 under the Securities Act
within a three month period. Zapata also may transfer its Registration Rights to
any transferee from it of Registrable Securities that represent, on a fully
converted or exercised basis with respect to the Registrable Securities
transferred, at least 20% of the then issued and outstanding voting stock of the
Company at the time of transfer; provided, however, that any such transferee
will be limited to (i) two demand registrations if the transfer conveys less
than a majority but more than 30% and (ii) one demand registration if the
transfer conveys 30% or less of the then issued and outstanding voting stock of
the Company.
Tax Indemnity Agreement. Prior to the Offering, the Company has been a
member of Zapata's affiliated group and has filed its tax returns on a
consolidated basis with such group. After the Offering, the Company will no
longer be a member of the Zapata affiliated group. Prior to the consummation of
the Offering, the Company and Zapata will enter into a Tax Indemnity Agreement
to define their respective rights and obligations relating to federal, state and
other taxes for periods before and after the Offering. Pursuant to the Tax
Indemnity Agreement, Zapata shall be responsible for paying all federal income
taxes relating to taxable periods ending before and including the date on which
the Company is no longer a member of Zapata's affiliated group. The Company
shall be responsible for all taxes of the Company with respect to taxable
periods beginning after the date on which the Company is no longer a member of
Zapata's affiliated group. The Company shall be entitled to any refunds (or
reductions in tax liability) attributable to any carryback of the Company's
post-Offering tax attributes (i.e., net operating losses) realized by the
Company after it is no longer a member of Zapata's affiliated
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group. Any other refunds arising from the reduction in tax liability involving
the Zapata affiliated group while the Company was a member of such group,
including but not limited to, taxable periods ending before or including such
date, (with the exception of any refunds arising from a reduction in tax
liability attributable to the Company) shall belong to Zapata.
Administrative Services Agreements. Zapata and the Company intend to enter
into an Administrative Services Agreement pursuant to which the Company will
provide Zapata with administrative services upon reasonable request of Zapata.
Zapata will pay the Company for these services at the Company's estimated cost
of providing these services. This Agreement will continue until Zapata
terminates it on 5 days advance written notice or the Company terminates it
after Zapata fails to cure a breach of the Agreement for 30 days after the
Company has given Zapata written notice of the breach.
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
Immediately after the Offering, the Company's authorized capital stock will
consist of 10,000,000 shares of preferred stock, par value $.01 per share (the
'Preferred Stock'), and 80,000,000 shares of Common Stock. Immediately following
the Offering, 23,676,000 shares (24,276,000 shares if the Underwriters'
over-allotment options are exercised in full) of Common Stock will be
outstanding. All of the shares of Common Stock that will be outstanding
immediately following the Offering, including the shares of Common Stock sold in
the Offering, will be validly issued, fully paid and nonassessable.
COMMON STOCK
The holders of Common Stock will be entitled to one vote for each share on
all matters voted on by stockholders, including elections of directors, and,
except as otherwise required by law or provided in any resolution adopted by the
Company's Board with respect to any series of Preferred Stock, the holders of
such shares will possess all voting power. The Company's Articles of
Incorporation (the 'Articles') do not provide for cumulative voting in the
election of directors. Subject to any preferential rights of any outstanding
series of Preferred Stock created by the Company's Board from time to time, the
holders of Common Stock will be entitled to such dividends as may be declared
from time to time by the Company's Board from funds available therefor, and upon
liquidation will be entitled to receive pro rata all assets of the Company
available for distribution to such holders. See 'Dividend Policy.'
PREFERRED STOCK
The Company's Board has the authority to issue up to 10,000,000 shares of
Preferred Stock in one or more series and to fix the number of shares
constituting any such series and the preferences, limitations and relative
rights, including dividend rights, dividend rate, voting rights, terms of
redemption, redemption price or prices, conversion rights and liquidation
preferences of the shares constituting any series, without any further vote or
action by the Company's stockholders. The issuance of Preferred Stock by the
Company's Board could adversely affect the rights of holders of Common Stock.
The potential issuance of Preferred Stock may have the effect of delaying,
deferring or preventing a change in control of the Company, may discourage bids
for the Common Stock at a premium over the market price of the Common Stock and
may adversely affect the market price of, and the voting and other rights of the
holders of, the Common Stock. The Company has no current plans to issue any
shares of Preferred Stock.
FOREIGN OWNERSHIP RESTRICTIONS
The Articles (i) contain provisions limiting the aggregate percentage
ownership by Non-Citizens of each class of the Company's capital stock to 49.99%
of the outstanding shares of each such class (the 'Permitted Percentage') to
ensure that such foreign ownership will not exceed the maximum percentage
permitted by applicable federal law (presently less than 50.00%), (ii) require
institution of a dual stock certificate system to help determine such ownership,
and (iii) permit the Company's Board to make such determinations as may
reasonably be necessary to ascertain such ownership and implement
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such limitations. These provisions are intended to protect the ability of the
Company's vessels to conduct fishing operations in U.S. territorial waters and
the U.S. Exclusive Economic Zone. See 'Risk Factors -- Restriction on Foreign
Ownership' and 'Business -- Regulation.'
To provide a method to enable the Company reasonably to determine stock
ownership by Non-Citizens, the Articles require the Company to institute (and to
implement through the transfer agent for the Common Stock) a dual stock
certificate system, pursuant to which certificates representing shares of Common
Stock will bear legends that designate such certificates as either 'citizen' or
'non-citizen,' depending on the citizenship of the owner. Accordingly, stock
certificates are denominated as 'citizen' (blue) in respect of Common Stock
owned by Citizens and as 'non-citizen' (red) in respect of Common Stock owned by
Non-Citizens. The Company may also issue non-certificated shares through
depositories if the Company determines such depositories have established
procedures that allow the Company to monitor the ownership of Common Stock by
Non-Citizens.
For purposes of the dual stock certificate system, a 'Non-Citizen' is
defined as any person other than a Citizen, and a 'Citizen' is defined as: (i)
any individual who is a citizen of the U.S. by birth, naturalization, or as
otherwise authorized by law; and (ii) any corporation, partnership, association,
limited liability company, joint venture (if not an association, corporation,
partnership or limited liability company) or other business organization which
is a citizen of the U.S. as determined by the Company's Board consistent with
the applicable regulations and statutes thereto as interpreted by the agencies
of the United States government charged with the administration of the Shipping
Act, 1916, as amended, or any court of law. The foregoing definition is
applicable at all tiers of ownership and in both form and substance at each tier
of ownership.
Shares of Common Stock are transferable to Citizens at any time and are
transferable to Non-Citizens if, at the time of such transfer, the transfer
would not increase the aggregate ownership by Non-Citizens of the Common Stock
above the Permitted Percentage in relation to the total outstanding shares of
Common Stock or all voting stock. Non-Citizen certificates may be converted to
Citizen certificates upon a showing, satisfactory to the Company, that the
holder is a Citizen. Any purported transfer to Non-Citizens of shares or of an
interest in shares of the Company represented by a Citizen certificate in excess
of the Permitted Percentage will be ineffective as against the Company for all
purposes (including for purposes of voting, dividends, and any other
distribution, upon liquidation or otherwise). In addition, the shares may not be
transferred on the books of the Company, and the Company, whether or not such
stock certificate is validly issued, may refuse to recognize the holder thereof
as a stockholder of the Company except to the extent necessary to effect any
remedy available to the Company. Subject to the foregoing limitations, upon
surrender of any stock certificate for transfer, the transferee will receive
citizen (blue) certificates or non-citizen (red) certificates, as applicable.
The Articles establish procedures with respect to the transfer of shares to
enforce the limitations referred to above and authorize the Company's Board to
implement such procedures. The Company's Board may take other ministerial
actions or make interpretations of the Company's foreign ownership policy as it
deems necessary in order to implement the policy. Under the Articles, the
Company's Board may require that as a condition precedent to each issuance
and/or transfer of stock certificates representing shares of Common Stock
(including the shares of Common Stock being sold in the Offering), a citizenship
certificate will be required from all transferees (and from any recipient upon
original issuance) of Common Stock and, with respect to the beneficial owner of
the Common Stock being transferred, if the transferee (or the original
recipient) is acting as a fiduciary or nominee for such beneficial owner. If
implemented, the registration of the transfer (or original issuance) will be
denied upon refusal to furnish such citizenship certificate, which will provide
information about the purported transferee's or beneficial owner's citizenship.
Furthermore, as part of the dual stock certificate system, depositories holding
shares of the Company's Common Stock will be required to maintain separate
accounts for 'Citizen' and 'Non-Citizen' shares. When the beneficial ownership
of such shares is transferred, the depositories' participants will be required
to advise such depositories as to which account the transferred shares should be
held. In addition, to the extent necessary to enable the Company to determine
the number of shares owned by Non-Citizens, the Company may from time to time
require record holders and beneficial owners of shares of Common Stock to
confirm their
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citizenship status and may, in the discretion of the Company's Board,
temporarily withhold dividends payable to, and deny voting rights to, any such
record holder or beneficial owner until confirmation of citizenship is received.
Should the Company (or its transfer agent for the Common Stock) become
aware that the ownership by Non-Citizens of Common Stock at any time exceeds the
Permitted Percentage (the 'Excess Shares'), the Company's Board is authorized to
withhold dividends and other distributions temporarily on the Excess Shares,
pending the transfer of such shares to a Citizen or the reduction in the
percentage of shares owned by Non-Citizens to or below the Permitted Percentage,
and to deny voting rights with respect to the Excess Shares. If dividends and
distributions are to be withheld, they will be set aside for the account of the
Excess Shares. At such time as such shares are transferred to a Citizen or the
ownership of such shares by Non-Citizens will not result in aggregate ownership
by Non-Citizens in excess of the Permitted Percentage, the dividends withheld
shall be paid to the then record holders of the related shares. Excess Shares
shall, so long as the excess exists, not be deemed to be outstanding for
purposes of determining the vote required on any matter brought before the
stockholders for a vote. The Articles provide that the Company's Board has the
power, in its reasonable discretion and based upon the records maintained by the
Company's transfer agent, to determine those shares of Common Stock that
constitute the Excess Shares. Such determination will be made by reference to
the date or dates on which such shares were purchased by Non-Citizens, starting
with the most recent acquisition of shares by a Non-Citizen and including, in
reverse chronological order, all other acquisitions of shares by Non-Citizens
from and after the acquisition that first caused the Permitted Percentage to be
exceeded; provided that Excess Shares resulting from a determination that a
record holder or beneficial owner is no longer a Citizen will be deemed to have
been acquired as of the date of such determination. To satisfy the Permitted
Percentage described above, the Articles authorize the Company's Board, in its
discretion, to redeem (upon written notice) Excess Shares in order to reduce the
aggregate ownership by Non-Citizens to the Permitted Percentage. As long as the
shares of Common Stock offered hereby continue to be listed on the NYSE, the
redemption price will be the average of the closing sale price of the shares (as
reported by the NYSE) during the 30 trading days next preceding the date of the
notice of redemption. The redemption price for Excess Shares will be payable in
cash.
ANTITAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION AND
BY-LAWS
BOARD OF DIRECTORS
The Articles provide that except as otherwise fixed by or pursuant to the
provisions of a Certificate of Designations setting forth the rights of the
holders of any class or series of Preferred Stock, the number of the directors
of the Company will be fixed from time to time exclusively pursuant to a
resolution adopted by a majority of the total number of directors which the
Company would have if there were no vacancies (the 'Whole Board') (but shall not
be less than three). The directors, other than those who may be elected by the
holders of Preferred Stock, will be classified, with respect to the time for
which they severally hold office, into three classes, as nearly equal in number
as possible. The terms of the directors elected at the Company's 1998
stockholders' meeting expire at the annual meeting of stockholders to be held in
1999 for one class, the annual meeting of stockholders to be held in 2000 for
another class and at the annual meeting of stockholders to be held in 2001 for a
third class, with each director to hold office until its successor is duly
elected and qualified. Commencing with the 1999 annual meeting of stockholders,
directors elected to succeed directors whose terms then expire will be elected
for a term of office to expire at the third succeeding annual meeting of
stockholders after their election, with each director to hold office until such
person's successor is duly elected and qualified.
The Articles provide that except as otherwise provided for or fixed by or
pursuant to a Certificate of Designation setting forth the rights of the holders
of any class or series of Preferred Stock, newly created directorships resulting
from any increase in the number of directors and any vacancies on the Company's
Board resulting from death, resignation, disqualification, removal or other
cause will be filled by the affirmative vote of a majority of the remaining
directors then in office, even though less than a quorum of the Company's Board,
and not by the stockholders. Any director elected in accordance with the
preceding sentence will hold office for the remainder of the full term of the
class of
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directors in which the new directorship was created or the vacancy occurred and
until such director's successor shall have been duly elected and qualified. No
decrease in the number of directors constituting the Company's Board will
shorten the term of any incumbent director. Subject to the rights of holders of
Preferred Stock, any director may be removed from office only for cause by the
affirmative vote of the holders of at least 66 2/3% of the voting power of all
voting stock then outstanding, voting together as a single class.
These provisions would preclude a third party from removing incumbent
directors and simultaneously gaining control of the Company's Board by filling
the vacancies created by removal with its own nominees. Under the classified
board provisions described above, it would take at least two elections of
directors for any individual or group to gain control of the Company's Board.
Accordingly, these provisions could discourage a third party from initiating a
proxy contest, making a tender offer or otherwise attempting to gain control of
the Company.
STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS
The Articles and the Company's By-Laws provide that as of the time at which
Zapata and its affiliates cease to be the beneficial owner of an aggregate of at
least a majority of the then outstanding shares of Common Stock, any action
required or permitted to be taken by the stockholders of the Company must be
effected at a duly called annual or special meeting of such holders and may not
be effected by any consent in writing by such holders. Effective as of the date
that Zapata no longer has beneficial ownership of at least a majority of the
Company's outstanding Common Stock, except as otherwise required by law and
subject to the rights of the holders of any Preferred Stock, special meetings of
stockholders of the Company for any purpose or purposes may be called only by
the Company's Board pursuant to a resolution stating the purpose or purposes
thereof approved by a majority of the Whole Board or by the Chairman of the
Company's Board and, effective as of the date Zapata ceases to have beneficial
ownership of a majority of the outstanding Common Stock, any power of
stockholders to call a special meeting is specifically denied. No business other
than that stated in the notice shall be transacted at any special meeting. In
addition, prior to the date on which Zapata no longer holds at least a majority
of the Company's outstanding Common Stock, the Company will call a special
meeting of stockholders promptly upon request by Zapata, or any of its
affiliates, in each case, if such entity is a stockholder of the Company and
stockholder actions may be effected by written consent of the holders of the
amount of the voting stock required to approve such actions. These provisions
may have the effect of delaying consideration of a stockholder proposal until
the next annual meeting unless a special meeting is called by the Company's
Board or the Chairman of the Board.
ADVANCE NOTICE PROCEDURES
The By-Laws establish an advance notice procedure for stockholders to make
nominations of candidates for election as directors or to bring other business
before an annual meeting of stockholders of the Company (the 'Stockholder Notice
Procedure'). The Stockholder Notice Procedure provides that only persons who are
nominated by, or at the direction of, the Chairman of the Board, or by a
stockholder who has given timely written notice to the Secretary of the Company
prior to the meeting at which directors are to be elected, will be eligible for
election as directors of the Company. The Stockholder Notice Procedure also
provides that at an annual meeting only such business may be conducted as has
been brought before the meeting by, or at the direction of, the Chairman of the
Board or the Company Board, or by a stockholder who has given timely written
notice to the Secretary of the Company of such stockholder's intention to bring
such business before such meeting. Under the Stockholder Notice Procedure, for
notice of stockholder nominations to be made at an annual meeting to be timely,
such notice must be received by the Company not later than the close of business
on the 60th calendar day nor earlier than the close of business on the 90th
calendar day prior to the first anniversary of the preceding year's annual
meeting (except that, in the event that the date of the annual meeting is more
than 30 calendar days before or more than 60 calendar days after such
anniversary date, notice by the stockholder to be timely must be so delivered
not earlier than the close of business on the 90th calendar day prior to such
annual meeting and not later than the close of business on the
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later of the 60th calendar day prior to such annual meeting or the 10th calendar
day following the day on which public announcement of a meeting date is first
made by the Company).
In addition, under the Stockholder Notice Procedure, a stockholder's notice
to the Company proposing to nominate a person for election as a director or
relating to the conduct of business other than the nomination of directors must
contain certain specified information. If the chairman of a meeting determines
that an individual was not nominated, or other business was not brought before
the meeting, in accordance with the Stockholder Notice Procedure, such
individual will not be eligible for election as a director, or such business
will not be conducted at such meeting, as the case may be.
The Stockholder Notice Procedure does not apply to Zapata and its
affiliates prior to the date on which Zapata no longer beneficially owns at
least a majority of the outstanding Common Stock.
AMENDMENTS
The Articles provide that the affirmative vote of the holders of at least
66 2/3% of the Company's voting stock, voting together as a single class, is
required to amend provisions of the Articles relating to stockholder action
without a meeting; the calling of special meetings; the number, election and
term of the Company's directors; the filling of vacancies; and the removal of
directors. The Articles further provide that the related By-Laws described above
(including the Stockholder Notice Procedure) may be amended only by the
Company's Board or by the affirmative vote of the holders of at least 66 2/3% of
the voting power of the outstanding shares of voting stock, voting together as a
single class.
NEVADA ANTITAKEOVER LAWS AND CERTAIN CHARTER PROVISIONS
Nevada's 'Business Combinations' statute, Nevada Revised Statutes
78.411-78.444, which applies to Nevada corporations having at least 200
stockholders which have not opted-out of the statute, prohibits an 'interested
stockholder' from entering into a'combination' with the corporation, unless
certain conditions are met. A 'combination' includes (a) any merger or
consolidation with an 'interested stockholder,' or any other corporation which
is or after the merger or consolidation would be, an affiliate or associate of
the interested stockholder, (b) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition of assets, in one transaction or a series of
transactions, to or with an 'interested stockholder,' having (i) an aggregate
market value equal to 5% or more of the aggregate market value of the
corporation's assets determined on a consolidated basis, (ii) an aggregate
market value equal to 5% or more of the aggregate market value of all
outstanding shares of the corporation or (iii) representing 10% or more of the
earning power or net income of the corporation determined on a consolidated
basis, (c) any issuance or transfer of shares of the corporation or its
subsidiaries, to the stockholders, having an aggregate market value equal to 5%
or more of the aggregate market value of all the outstanding shares of the
corporation, except under the exercise of warrants or rights to purchase shares
offered, or a dividend or distribution paid or made pro rata to all stockholders
of the corporation, (d) the adoption of any plan or proposal for the liquidation
or dissolution of the corporation proposed by or under any agreement,
arrangement or understanding, whether or not in writing, with the 'interested
stockholder,' (e) certain transactions which would have the effect of increasing
the proportionate share of outstanding shares of the corporation owned by the
'interested stockholder,' or (f) the receipt of benefits, except proportionately
as a stockholder, of any loans, advances or other financial benefits by an
'interested stockholder.' An 'interested stockholder' is a person who (i)
directly or indirectly beneficially owns 10% or more of the voting power of the
outstanding voting shares of the corporation or (ii) an affiliate or associate
of the corporation which at any time within three years before the date in
question was the beneficial owner, directly or indirectly, of 10% or more of the
voting power of the then outstanding shares of the corporation.
A corporation to which the statute applies may not engage in a
'combination' within three years after the interested stockholder acquired its
shares, unless the combination or the interested stockholder's acquisition of
shares was approved by the board of directors before the interested stockholder
acquired the shares. If this approval was not obtained, then after the
three-year period expires, the combination may be consummated if all the
requirements in the corporation's articles of incorporation are met and either
(a)(i) the board of directors of the corporation approves, prior to the
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'interested stockholder's' date of acquiring shares, or as to which the purchase
of shares by the 'interested stockholder' has been approved by the corporation's
board of directors before that date or (ii) the combination is approved by the
affirmative vote of holders of a majority of voting power not beneficially owned
by the 'interested stockholder' at a meeting called no earlier than three years
after the date the 'interested stockholder' became such or (b) the aggregate
amount of cash and the market value of consideration other than cash to be
received by holders of common shares and holders of any other class or series of
shares meets the minimum requirements set forth in Sections 78.411 through
78.443, inclusive, and prior to the consummation of the combination, except in
limited circumstances, the 'interested stockholder' will not have become the
beneficial owner of additional voting shares of the corporation.
Nevada law permits a Nevada corporation to 'opt out' of the application of
the 'Business Combinations' statute by inserting a provision doing so in its
original articles of incorporation. The Company's Articles has such a provision.
The Articles can be amended at any time to subject the Company to the effect of
the 'Business Combinations' statutes. Under Nevada law, the Articles may be
amended pursuant to a resolution adopted by the Company's Board and ratified by
a vote of a majority of the voting power of the Company's outstanding voting
stock.
Nevada's 'Control Share Acquisition' statute, Nevada Revised Statute
78.378-78.3793, prohibits an acquiror, under certain circumstances, from voting
shares of a target corporation's stock after crossing certain threshold
ownership percentages, unless the acquiror obtains the approval of the target
corporation's stockholders. The statute specifies three thresholds: at least
one-fifth but less than one-third, at least one-third but less than a majority,
and a majority or more, of all the outstanding voting power. Once an acquiror
crosses one of the above thresholds, shares which it acquired in the transaction
taking it over the threshold or within ninety days become 'Control Shares' which
are deprived of the right to vote until a majority of the disinterested
stockholders restore that right. A special stockholders' meeting may be called
at the request of the acquiror to consider the voting rights of the acquiror's
shares no more than 50 days (unless the acquiror agrees to a later date) after
the delivery by the acquiror to the corporation of an information statement
which sets forth the range of voting power that the acquiror has acquired or
proposes to acquire and certain other information concerning the acquiror and
the proposed control share acquisition. If no such request for a stockholders'
meeting is made, consideration of the voting rights of the acquiror's shares
must be taken at the next special or annual stockholders' meeting. If the
stockholders fail to restore voting rights to the acquiror or if the acquiror
fails to timely deliver an information statement to the corporation, then the
corporation may, if so provided in its articles of incorporation or bylaws, call
certain of the acquiror's shares for redemption. The Company's By-laws provide
for such a redemption. The Control Share Acquisition statute also provides that
the stockholders who do not vote in favor of restoring voting rights to the
Control Shares may demand payment for the 'fair value' of their shares (which is
generally equal to the highest price paid in the transaction subjecting the
stockholder to the statute).
The Control Share Acquisition statute only applies to Nevada corporations
with at least 200 stockholders, including at least 100 record stockholders who
are Nevada residents, and which do business directly or indirectly in Nevada.
While the Company does not currently exceed these thresholds, it may do so in
the future. The Company presently does not 'do business' in Nevada within the
meaning of the Control Share Acquisition Statute and it does not plan to do so.
Therefore, the Control Share Acquisition statute does not currently apply to the
Company.
If the Business Combination statute and/or the Control Share Acquisition
statute become applicable to the Company in the future, the cumulative effect of
these terms may be to make it more difficult to acquire and exercise control of
the Company and to make changes in management more difficult.
LIABILITY OF DIRECTORS; INDEMNIFICATION
The Company believes that certain provisions of its Articles and By-Laws
will be useful to attract and retain qualified persons as directors and
officers. The Company's Articles limit the liability of directors to the fullest
extent permitted by Nevada law. This is intended to allow the Company's
directors the benefit of Nevada Corporation Law which provides that directors of
Nevada corporations
47
<PAGE>
<PAGE>
may be relieved of monetary liabilities for breach of their fiduciary duties as
directors, except under certain circumstances, including (i) acts or omissions
which involve intentional misconduct, fraud or a knowing violation of law, or
(ii) the willful or grossly negligent payment of unlawful distributions. The
Company's Articles and By-Laws generally require the Company to indemnify, its
directors and officers to the fullest extent permitted by Nevada law. The
Articles and the Company's By-laws also require the Company to advance expenses,
to its directors and its officers to the fullest extent permitted by Nevada law
upon receipt of an undertaking by or on behalf of such director or officer to
repay such amount if it should be ultimately determined that they are not
entitled to indemnification by the Company. Prior to the consummation of the
Offering, the Company intends to enter into indemnification agreements with its
officers and directors which provides for the indemnification and advancement of
expenses by the Company. Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to directors, officers or persons
controlling the Company pursuant to the foregoing provisions, the Company has
been informed, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. The Company intends to obtain, prior to the
completion of the Offering, officer and director liability insurance with
respect to liabilities arising out of certain matters, including matters arising
under the Securities Act. There is no pending litigation or proceeding involving
a director, officer, associate or other agent of the Company as to which
indemnification is being sought, nor is the Company aware of any threatened
litigation that may result in claims for indemnification by any director,
officer, associate or other agent.
TRANSFER AGENT AND REGISTRAR
American Stock Transfer & Trust Company will be the transfer agent and
registrar for the Common Stock.
48
<PAGE>
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Of the 23,676,000 shares of Common Stock to be outstanding as of the
closing of the Offering (24,276,000 shares if the Underwriters' over-allotment
options are exercised in full) the 8,000,000 shares of Common Stock sold in the
Offering (9,200,000 shares if the Underwriters exercise their over-allotment
options in full) will be freely tradable without restriction under the
Securities Act, except for any such shares which may be acquired by an affiliate
of the Company (an 'Affiliate'), as that term is defined in Rule 144 promulgated
under the Securities Act ('Rule 144'). The remaining 15,676,000 shares of Common
Stock outstanding upon the consummation of the Offering will be shares of Common
Stock held by Zapata and will be 'restricted securities,' as that term is
defined in Rule 144, that may be sold only if registered under the Securities
Act or in accordance with an applicable exemption from registration, such as
Rule 144.
In general, under Rule 144 a person (or persons whose shares are
aggregated) who has beneficially owned shares for at least one year (including
the holding period of any prior owner except an affiliate from whom such shares
were purchased) is entitled to sell in 'brokers transactions' or to market
makers, within any three month period commencing 90 days after the date of this
Prospectus, a number of shares that does not exceed the greater of (i) one
percent of the number of shares of Common Stock then outstanding (236,760 shares
immediately after the completion of the Offering) or (ii) generally, the average
weekly trading volume in the Common Stock during the four calendar weeks
preceding the required filing of a Form 144 with respect to such sale. Sales
under Rule 144 are generally subject to the availability of current public
information about the Company. Under Rule 144(k), a person who is not deemed to
have been an affiliate of the Company at any time during the 90 days preceding a
sale, and who has beneficially owned the shares proposed to be sold for at least
two years (including the holding period of any prior owner other than an
affiliate from whom such shares were purchased), is entitled to sell such shares
without having to comply with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.
As discussed above, the shares of Common Stock which Zapata will continue
to hold after the Offering are 'restricted securities' as defined in Rule 144,
and may not be sold other than through registration under the Securities Act or
pursuant to an exemption from the regulations thereunder, including exceptions
provided by Rule 144. Pursuant to lock-up agreements, all of the Company's
officers and directors, the Selling Stockholder and the Company have agreed that
they will not, for a period of 180 days from the date of this Prospectus (360
days in the case of the Selling Stockholder), directly or indirectly, offer,
sell, offer to sell, contract to sell, pledge, grant any option to purchase or
otherwise sell or dispose (or announce any offer, sale, offer of sale, contract
of sale, pledge, grant of any option to purchase or other sale or disposition)
of any shares of Common Stock or other capital stock of the Company or any
securities convertible into, or exercisable or exchangeable for, any shares of
Common Stock, or other capital stock of the Company without the prior written
consent of Prudential Securities Incorporated, on behalf of the Underwriters,
except that such agreement does not prevent the Company from (i) granting
additional options under the 1998 Incentive Plan or the Directors Option Plan or
(ii) issuing stock in connection with an acquisition if the recipient agrees to
the same 180 day restriction on resale. Prudential Securities Incorporated may
in its sole discretion, at any time and without notice, release all or any
portion of the securities subject to such lock-up agreements.
The Company intends to enter into a Registration Rights Agreement with the
Selling Stockholder, pursuant to which it grants the Selling Stockholder Demand
Registration Rights and Piggyback Registration Rights. See 'Certain Transactions
and Arrangements Between the Company and Zapata -- Registration Rights
Agreement.' The Selling Stockholder can exercise such rights any time one year
after the closing of the Offering to sell all of the Common Stock it holds or a
certain portion thereof until its beneficial ownership interest in the Company
falls below a certain level.
The Company has granted options to certain officers of the Company for the
purchase of up to 1,657,360 shares of Common Stock pursuant to the 1998
Incentive Plan and options to the Company's non-management directors for the
purchase of 582,400 shares of Common Stock pursuant to the Directors Option
Plan, subject to certain restrictions. See 'Management -- Stock Option Plans.'
Within 365 days after the date of this Prospectus, the Company intends to file a
Registration Statement on Form S-8 covering an aggregate of approximately
4,220,000 shares of Common Stock (including the
49
<PAGE>
<PAGE>
shares subject to outstanding options) that have been reserved for issuance
under its stock options and stock options plans for its officers and directors,
thus permitting the resale of such shares in the public market without
restriction under the Securities Act. Shares issued pursuant to these options
and plans after the effective date of such registration statement generally will
be freely tradable without restriction (other than shares issued to affiliates)
or further registration under the Securities Act.
No prediction can be made as to the effect, if any, that future sales of
shares, or the availability of shares for future sale, will have on the
prevailing market price for the Common Stock. Sales of substantial amounts of
Common Stock, or the perception that such sale could occur, may adversely affect
prevailing market prices for the Common Stock and could impact the Company's
future ability to raise capital through an offering of equity securities.
50
<PAGE>
<PAGE>
UNDERWRITING
The underwriters named below (the 'Underwriters'), for whom Prudential
Securities Incorporated and Deutsche Morgan Grenfell Inc. are acting as
representatives (the 'Representatives'), have severally agreed, subject to the
terms and conditions of the underwriting agreement (the 'Underwriting
Agreement') to purchase from the Company and the Selling Stockholder the
respective number of shares of Common Stock set forth opposite their respective
names below:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- --------------------------------------------------------------------------------- ---------
<S> <C>
Prudential Securities Incorporated...............................................
Deutsche Morgan Grenfell Inc.....................................................
---------
Total............................................................................ 8,000,000
---------
---------
</TABLE>
The Company and the Selling Stockholder are obligated to sell, and the
Underwriters are obligated to purchase, all of the shares of Common Stock
offered hereby, if any are purchased.
The Underwriters, through the Representatives, have advised the Company and
the Selling Stockholder that they propose to offer the Common Stock initially at
the public offering price set forth on the cover page of this Prospectus; that
the Underwriters may allow to selected dealers a concession of $ per share;
and that such dealers may reallow a concession of $ per share to certain
other dealers. After the Offering, the initial public offering price and the
concessions may be changed by the Representatives.
The Company and the Selling Stockholder have granted the Underwriters
over-allotment options, exercisable for 30 days from the date of this
Prospectus, to purchase, in the aggregate, up to 1,200,000 additional shares of
Common Stock at the initial public offering price, less underwriting discounts
and commissions as set forth on the cover page of this Prospectus. Such
additional shares will be purchased from the Company and the Selling Stockholder
on a pro rata basis. The Underwriters may exercise such options solely for the
purpose of covering over-allotments incurred in the sale of the shares of Common
Stock offered hereby. To the extent such options to purchase are exercised, each
Underwriter will become obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares as the number set
forth next to such Underwriters' name in the preceding table bears to 8,000,000.
The Company and the Selling Stockholder have agreed to indemnify the
several Underwriters and contribute to losses arising out of certain
liabilities, including liabilities under the Securities Act.
The Representatives have informed the Company and the Selling Stockholder
that the Underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.
The Company, its officers and directors and the Selling Stockholder have
agreed not to, directly or indirectly, offer, sell, offer to sell, contract to
sell, pledge, grant any option to purchase or otherwise sell or dispose (or
announce any offer, sale, offer of sale, contract of sale, pledge, grant of any
option to purchase or other sale or disposition) of any shares of Common Stock
or other capital stock or any securities convertible into or exercisable or
exchangeable for any shares of Common Stock or other capital stock of the
Company, for a period of 180 days (360 days with respect to the Selling
Stockholder) from the date of this Prospectus without the prior written consent
of Prudential Securities Incorporated, on behalf of the Underwriters, except for
shares offered pursuant to the Offering and issuances
51
<PAGE>
<PAGE>
pursuant to options granted to employees or directors or pursuant to the
Company's stock option plans or (ii) issuing stock in connection with an
acquisition if the recipient agrees to the same 180 day restriction on resale.
Prudential Securities Incorporated may in its sole discretion, any time and
without notice, release all or any portion of the securities subject to such
lock-up agreement.
Prior to the Offering, there has been no public market for the Common Stock
of the Company. Consequently, the initial public offering price will be
determined through negotiations between the Company, the Selling Stockholder and
the Representatives. Among the factors to be considered in making such
determination will be the prevailing market conditions, the Company's financial
and operating history and condition, its prospects and the prospects for its
industry in general, the management of the Company and the market prices of
securities for companies in businesses similar to that of the Company.
In connection with the Offering, certain Underwriters (and selling group
members if any) and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock.
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 Common Stock for the purpose of stabilizing its market price. The
Underwriters also may create a short position for the account of the
Underwriters by selling more Common Stock in connection with the Offering than
they are committed to purchase from the Company and the Selling Stockholder, and
in such case may purchase Common Stock in the open market following the closing
of the Offering to cover all or a portion of such short position. The
Underwriters may also cover all or a portion of such short position, up to
1,200,000 shares of Common Stock, by exercising the Underwriters' over-allotment
options referred to above. In addition, Prudential Securities Incorporated, on
behalf of the Underwriters, may impose 'penalty bids' under contractual
arrangements with the Underwriters whereby it may reclaim from an Underwriter
(or dealer participating in the Offering) for the account of the other
Underwriters, the selling concession with respect to the Common Stock that is
distributed in the Offering but subsequently purchased for the account of the
Underwriters in the open market. Any of the transactions described in this
paragraph may result in the maintenance of the price of the Common Stock at the
level above that which might otherwise prevail in the open market. None of the
transactions described in this paragraph is required, and, if they are
undertaken, they may be discontinued at any time.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
by the Company will be passed upon for the Company by Woods, Oviatt, Gilman,
Sturman & Clarke, LLP, Rochester, New York and Marshall, Hill, Cassass and
deLipkau, Reno, Nevada. Certain legal matters related to the sale of the Common
Stock will be passed upon for the Underwriters by Fulbright & Jaworski L.L.P.,
New York, New York.
EXPERTS
The consolidated balance sheet as of September 30, 1997 and 1996, and the
consolidated statements of operations, stockholder's equity, and cash flows for
each of the three years in the period ended September 30, 1997, included in this
Prospectus and in the Registration Statement of which this Prospectus forms a
part, have been included herein in reliance on the report of Coopers & Lybrand
L.L.P., independent accountants, given on the authority of that firm as experts
in auditing and accounting.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 (together with all amendments, exhibits, schedules and supplements thereto,
the 'Registration Statement') under the Securities Act with respect to the
Common Stock offered hereby. This Prospectus, which forms a part of the
Registration Statement, does not contain all the information set forth in the
Registration Statement, certain parts of which have been omitted in accordance
with the rules and regulations of the
52
<PAGE>
<PAGE>
Commission. For further information with respect to the Company and the Common
Stock offered hereby, reference is made to the Registration Statement.
Statements contained in this Prospectus as to the contents of any contract,
agreement or other document are not necessarily complete, and, in each instance,
reference is made to the copy of the document filed as an exhibit to the
Registration Statement. The Registration Statement can be inspected and copied
at the public reference facilities maintained by the Commission at Room 1024,
450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549; and at the
Commission's regional offices at Suite 1400, Northwest Atrium Center, 500 West
Madison Street, Chicago, Illinois 60661, and 7 World Trade Center (13th Floor),
New York, New York 10048. Copies of such material can also be obtained from the
Commission at prescribed rates through its Public Reference Section at 450 Fifth
Street, N.W., Washington, D.C. 20549 or accessed through the Commissioner's
internet web site at http://www.sec.gov. Additionally, the Company intends to
list the Common Stock sold in the Offering on the NYSE and copies of materials
filed by the Company with the NYSE can be inspected and copied at the offices of
the NYSE, 20 Broad Street, New York, New York 10005.
The Company is not currently subject to the informational requirements of
the Securities Exchange Act of 1934 (the '1934 Act'). As a result of the
Offering, the Company will become subject to the informational requirements of
the 1934 Act. The Company will fulfill its obligations with respect to such
requirements by filing periodic reports and other information with the
Commission. In addition, the Company intends to furnish to its stockholders
annual reports containing consolidated financial statements examined by an
independent public accounting firm.
53
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<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
<PAGE>
OMEGA PROTEIN CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants.......................................................................... F-2
Consolidated Balance Sheet, September 30, 1996 and 1997.................................................... F-3
Consolidated Statement of Operations, for the years ended September 30, 1995, 1996 and 1997................ F-4
Consolidated Statement of Stockholder's Equity, for the years ended September 30, 1995, 1996 and 1997...... F-5
Consolidated Statement of Cash Flows, for the years ended September 30, 1995, 1996 and 1997................ F-6
Notes to Consolidated Financial Statements................................................................. F-7
Condensed Consolidated Balance Sheet, September 30, 1997 and December 31, 1997............................. F-19
Condensed Consolidated Statement of Operations, for the three months ended December 31, 1996 and 1997...... F-20
Condensed Consolidated Statement of Cash Flows, for the three months ended December 31, 1996 and 1997...... F-21
Notes to Condensed Consolidated Financial Statements....................................................... F-22
</TABLE>
F-1
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholder and Board of Directors,
OMEGA PROTEIN CORPORATION:
We have audited the accompanying consolidated balance sheet of Omega
Protein Corporation (formerly Marine Genetics Corporation) as of September 30,
1997 and 1996, and the related consolidated statements of operations, cash flows
and stockholder's equity for each of the three years in the period ended
September 30, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Omega Protein Corporation as of September 30, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended September 30, 1997, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Houston, Texas
December 11, 1997, except for Note 16,
as to which the date is January 26, 1998 and except
for Note 17, as to which the date is
February 16, 1998
F-2
<PAGE>
<PAGE>
OMEGA PROTEIN CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
1996 1997
------- --------
(IN THOUSANDS,
EXCEPT FOR SHARES)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................................. $ 2,899 $ 5,504
Receivables, net...................................................................... 10,521 9,936
Inventories........................................................................... 29,919 38,448
Prepaid expenses and other current assets............................................. 800 746
------- --------
Total current assets............................................................. 44,139 54,634
------- --------
Other assets............................................................................... 6,319 4,917
------- --------
Property and equipment, net................................................................ 36,511 40,889
------- --------
Total assets..................................................................... $86,969 $100,440
------- --------
------- --------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current maturities of long-term debt.................................................. $ 487 $ 1,034
Accounts payable...................................................................... 5,466 1,622
Accrued liabilities................................................................... 14,741 15,423
Amounts due to parent -- current...................................................... 2,726 5,159
------- --------
Total current liabilities........................................................ 23,420 23,238
------- --------
Long-term debt............................................................................. 8,287 11,294
------- --------
Deferred income taxes...................................................................... 437 1,180
------- --------
Other liabilities.......................................................................... 896 374
------- --------
Amounts due to parent -- noncurrent........................................................ 41,900 --
------- --------
Commitments and contingencies (Note 13)....................................................
Stockholder's equity:
Preferred stock, $0.01 par value; 10,000,000 shares authorized; none issued........... -- --
Common stock, $.01 par value authorized; 80,000,000 shares; issued and outstanding:
19,676,000 shares.................................................................... 197 197
Capital in excess of par value........................................................ 1,831 43,731
Reinvested earnings, from October 1, 1990............................................. 10,001 20,426
------- --------
Total stockholder's equity....................................................... 12,029 64,354
------- --------
Total liabilities and stockholder's equity.................................. $86,969 $100,440
------- --------
------- --------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
<PAGE>
OMEGA PROTEIN CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
----------------------------------------
1995 1996 1997
------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenues $94,959 $93,609 $117,564
Cost of sales....................................................... 85,122 78,415 93,746
------- ------- --------
Gross profit........................................................ 9,837 15,194 23,818
Selling, general and administrative................................. 3,933 4,690 5,613
------- ------- --------
Operating income.................................................... 5,904 10,504 18,205
Interest expense, net............................................... (1,102) (995) (592)
Other income (expense).............................................. 116 (118) (1,328)
------- ------- --------
Income before income taxes.......................................... 4,918 9,391 16,285
Provision for income taxes.......................................... 1,668 3,463 5,860
------- ------- --------
Net income.......................................................... $ 3,250 $ 5,928 $ 10,425
------- ------- --------
------- ------- --------
Net income per share (basic)........................................ $ 0.17 $ 0.30 $ 0.53
------- ------- --------
------- ------- --------
Average common shares outstanding................................... 19,676 19,676 19,676
------- ------- --------
------- ------- --------
Net income per share (diluted)...................................... $ 0.17 $ 0.30 $ 0.53
------- ------- --------
------- ------- --------
Average common shares and common share equivalents outstanding...... 19,676 19,676 19,676
------- ------- --------
------- ------- --------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
<PAGE>
OMEGA PROTEIN CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
CAPITAL
IN
COMMON EXCESS OF REINVESTED
STOCK PAR VALUE EARNINGS
------ --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at September 30, 1994.................................................. $197 $ 1,831 $ 823
Net income..................................................................... -- -- 3,250
------ --------- ----------
Balance at September 30, 1995.................................................. 197 1,831 4,073
Net income..................................................................... -- -- 5,928
------ --------- ----------
Balance at September 30, 1996.................................................. 197 1,831 10,001
Net income..................................................................... -- -- 10,425
Capital contribution from parent............................................... -- 41,900 --
------ --------- ----------
Balance at September 30, 1997.................................................. $197 $43,731 $ 20,426
------ --------- ----------
------ --------- ----------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
<PAGE>
OMEGA PROTEIN CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-----------------------------
1995 1996 1997
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flow provided by (used in) operating activities:
Net income................................................................... $ 3,250 $ 5,928 $10,425
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Loss (gain) on disposal of assets, net..................................... (5) 42 483
Depreciation, amortization and write-downs................................. 3,607 4,210 4,868
Deferred taxes............................................................. 382 389 743
Changes in assets and liabilities, net of the effect of disposition:
Receivables............................................................. (2,279) 3,762 (836)
Inventories............................................................. 11,439 (3,614) (9,291)
Accounts payable and accrued liabilities................................ (5,638) 4,832 604
Amounts due to parent................................................... (11,249) 2,726 2,433
Other, net.............................................................. 375 (2,053) 624
------- ------- -------
Total adjustments.................................................. (3,368) 10,294 (372)
------- ------- -------
Net cash provided by (used in) operating activities................ (118) 16,222 10,053
------- ------- -------
Cash flow provided by (used in) investing activities:
Proceeds from sale of assets, net............................................ 213 624 (771)
Increase in note receivable.................................................. (450) -- (334)
Capital expenditures......................................................... (6,652) (4,673) (9,825)
------- ------- -------
Net cash used in investing activities.............................. (6,889) (4,049) (10,930)
------- ------- -------
Cash flow provided by (used in) financing activities:
Bank overdraft............................................................... (1,368) -- --
Borrowings................................................................... 10,020 11,100 4,061
Payments on revolving line of credit......................................... -- (21,100) --
Principal payments of debt obligations....................................... (414) (581) (579)
------- ------- -------
Net cash provided by (used in) financing activities................ 8,238 (10,581) 3,482
------- ------- -------
Net increase in cash and cash equivalents......................................... 1,231 1,592 2,605
Cash and cash equivalents at beginning of period.................................. 76 1,307 2,899
------- ------- -------
Cash and cash equivalents at end of period........................................ $ 1,307 $ 2,899 $ 5,504
------- ------- -------
------- ------- -------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
<PAGE>
OMEGA PROTEIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The Company's predecessor, Marine Genetics Corporation, was incorporated in
Delaware on February 19, 1976. The Company is a wholly-owned subsidiary of
Zapata Corporation (and was formerly known as Zapata Protein, Inc.).
The consolidated financial statements include the accounts of Omega Protein
Corporation and its wholly and majority owned subsidiaries (collectively, the
'Company'). Investments in affiliated companies and joint ventures representing
a 20% to 50% voting interest are accounted for using the equity method. All
significant intercompany accounts and transactions have been eliminated in
consolidation. The Company accounts for the results of its operations on a
fiscal year basis ending September 30.
BUSINESS DESCRIPTION
The Company produces and markets a variety of products produced from
menhaden (a fish found in commercial quantities), including regular grade and
value added specialty fish meals, crude and refined fish oils and fish solubles.
The Company's fish meal products are used as nutritional feed additives by
animal feed manufacturers and by commercial livestock and poultry farmers. The
Company's refined fish oil products are sold to food producers in Europe and its
crude fish oil products are used in aquaculture feeds and certain industrial
applications. Fish solubles are sold as protein additives for animal feed and as
organic fertilizers.
REVENUE RECOGNITION
The Company recognizes revenue when title to its products is transferred to
the customer.
INVENTORIES
Fish product inventories and materials, parts and supplies are stated at
the lower of cost (average cost) or market.
The Company's fishing season runs from mid-April to the end of October in
the Gulf Coast and runs from the beginning of May to the end of December in the
Atlantic Coast. Government regulations preclude the Company from fishing during
the off seasons. During the off seasons, the Company incurs costs (i.e. plant
and vessel related labor, utilities, rent and depreciation) that are directly
related to the Company's infrastructure that will be used in the upcoming
fishing season. Costs that are incurred subsequent to a fish catch are deferred
until the next season and are included within inventory.
The Company's inventory cost system considers all costs, both variable and
fixed, associated with an annual fish catch and its processing. The Company's
costing system allocates cost to inventory quantities on a per unit basis as
calculated by a formula that considers total estimated inventoriable costs for a
fishing season (including off season costs) to total estimated fish catch. The
inventory is relieved to cost of sales as the product is sold at average cost.
The Company adjusts the costs of sales, off-season costs and inventory balances
at the end of each quarter based on revised estimates of off-season costs and
fish catch.
INCOME TAXES
The Company utilizes the liability method to account for income taxes. This
method requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of existing temporary differences between the
financial reporting and tax reporting basis of assets and liabilities, and
operating loss and tax credit carryforwards for tax purposes. The Company is
included in Zapata Corporation's consolidated U.S. federal income tax return and
its income tax effects are reflected on a separate return basis for financial
reporting purposes.
F-7
<PAGE>
<PAGE>
OMEGA PROTEIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PROPERTY, EQUIPMENT AND DEPRECIATION
Depreciation of property and equipment is computed by the straight-line
method at rates expected to amortize the cost of property and equipment, net of
salvage value, over their estimated useful lives. Estimated useful lives of
assets acquired new, determined as of the date of acquisition are as follows:
<TABLE>
<CAPTION>
USEFUL LIVES
(YEARS)
------------
<S> <C>
Fishing vessels and fish processing plants...................................... 15 - 20
Furniture and fixtures.......................................................... 3 - 10
</TABLE>
Replacements and major improvements are capitalized; maintenance and
repairs are charged to expense as incurred. Upon sale or retirement, the costs
and related accumulated depreciation are eliminated from the accounts. Any
resulting gains or losses are included in the statement of operations. The
Company periodically evaluates its long-lived assets for impairment if events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash and trade accounts
receivable. Approximately 35% of the Company's fish meal sales in Fiscal 1997
were made to customers in Mississippi, North Carolina, Georgia, Iowa, Texas and
Arkansas. Total sales to the Company's top ten customers represented
approximately 23.8% of the Company's Fiscal 1997 revenues; no single customer
accounted for more than 5.4% of the Company's Fiscal 1997 revenues. The majority
of the Company's fish oil is sold to export markets, including Canada, Japan,
Mexico and The Netherlands. The Company's customer base generally remains
consistent from year to year and procedures are in effect to monitor the
creditworthiness of these customers and generally requires no collateral from
its customers. Historically, the Company has not experienced significant losses
on trade accounts receivable and has not experienced any losses on cash. The
Company does not believe that this concentration of sales and credit risk
represents a material risk of loss with respect to its financial position as of
September 30, 1997.
At September 30, 1996 and 1997, the Company had cash deposits concentrated
primarily in one major bank. The Company believes that credit risk in such
deposits is minimal.
INVESTMENT IN VENTURE MILLING COMPANY
In August 1993, the Company acquired a 60% equity interest in Venture
Milling Company ('Venture'), a Delaware corporation involved in the milling of
animal feeds and protein-ingredient products for the poultry, hog and dairy
industries. In March 1996, the Company acquired the remaining 40% of Venture's
equity. Venture leased and operated a feed mill in Seaford, Delaware. The
Company consolidated the financial results of Venture. The Company's net income
for the 1995, 1996 and 1997 fiscal years was not materially impacted by activity
related to Venture. The Company sold Venture in fiscal 1997 and recognized a
loss of $531,000, which is recorded in other expense.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
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.
F-8
<PAGE>
<PAGE>
OMEGA PROTEIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
QUASI-REORGANIZATION
In connection with the comprehensive restructuring accomplished in fiscal
1991, the Company, in conjunction with Zapata Corporation, implemented, for
accounting purposes, a 'quasi-reorganization,' an elective accounting procedure
that permits a company that has emerged from previous financial difficulty to
restate its accounts and establish a fresh start in an accounting sense. After
implementation of the accounting quasi-reorganization, the Company's assets and
liabilities were revalued at their estimated fair value and its deficit in
reinvested earnings was charged to capital in excess of par value. The Company
effected the accounting quasi-reorganization as of October 1, 1990.
RECLASSIFICATIONS
Reclassifications of prior years information have been made to conform with
the current year presentation. These reclassifications had no effect on net
income or total assets.
ACCOUNTING FOR STOCK OPTIONS
In October 1995, the Financial Accounting Standards Board ('FASB') issued
Statement of Financial Accounting Standards No. 123, 'Accounting for Stock Based
Compensation' ('SFAS 123'), which sets forth accounting and disclosure
requirements for stock option and other stock-based compensation plans. The new
statement encourages, but does not require, companies to record stock-based
compensation expense using the fair-value method, rather than the
intrinsic-value method prescribed by Accounting Principles Board ('APB') Opinion
No. 25 ('APB 25'). The Company intends to adopt only the disclosure requirements
of SFAS 123 and to record stock-based compensation expense using the
intrinsic-value approach prescribed by APB 25. Accordingly, the Company will
compute compensation cost as the amount by which the fair market price of the
Company's common stock exceeds the exercise price on the date of grant. The
amount of compensation cost, if any, would be charged to income over the vesting
period.
RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 128, 'Earnings Per Share' ('SFAS 128') which established standards
for computing and presenting earnings per share. SFAS 128 is effective for
periods ending after December 15, 1997, including interim periods. The Company
does not expect that adoption of SFAS 128 will have a significant effect on the
Company's earnings per share. Early adoption is not permitted. (See Note 17).
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, 'Reporting Comprehensive Income' ('SFAS 130') which is effective for
fiscal years beginning after December 15, 1997. SFAS 130 establishes standards
for reporting and display of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general-purpose financial
statements. It requires (a) classification of items of other comprehensive
income by their nature in a financial statement and (b) display of the
accumulated balance of other comprehensive income separate from retained
earnings and additional paid-in capital in the equity section of a statement of
financial position. SFAS 130 is effective for both interim and annual periods
beginning after December 15, 1997.
In June 1997, the FASB also issued Statement of Financial Accounting
Standards No. 131, 'Disclosure about Segments of an Enterprise and Related
Information' ('SFAS 131') which is effective for periods beginning after
December 15, 1997. The disclosures will be required beginning in the Company's
fiscal 1999 annual report. SFAS 131 establishes standards for reporting
information about operating segments in annual financial statements and requires
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. This
Statement
F-9
<PAGE>
<PAGE>
OMEGA PROTEIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
supersedes Statement of Financial Accounting Standards No. 14, 'Financial
Reporting for Segments of a Business Enterprise', but retains the requirement to
report information about major customers.
2. ACCOUNTS RECEIVABLE
Accounts receivable as of September 30, 1996 and 1997 are summarized as
follows:
<TABLE>
<CAPTION>
1996 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Trade................................................................... $ 9,606 $ 8,821
Insurance............................................................... 811 795
Employee................................................................ 64 95
Other................................................................... 201 401
------- -------
10,682 10,112
Less allowance for doubtful accounts.................................... (161) (176)
------- -------
$10,521 $ 9,936
------- -------
------- -------
</TABLE>
3. INVENTORY
Inventory as of September 30, 1996 and 1997 is summarized as follows:
<TABLE>
<CAPTION>
1996 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Fish meal............................................................... $15,311 $19,048
Crude fish oil.......................................................... 4,711 11,188
Other fish oil.......................................................... 1,507 1,558
Fish solubles........................................................... 1,434 983
Off-season costs (see Note 1)........................................... 2,533 2,420
Materials and supplies.................................................. 3,508 3,353
Other................................................................... 1,017 --
------- -------
30,021 38,550
Less oil inventory reserve.............................................. (102) (102)
------- -------
$29,919 $38,448
------- -------
------- -------
</TABLE>
4. OTHER ASSETS
Other assets as of September 30, 1996 and 1997 are summarized as follows:
<TABLE>
<CAPTION>
1996 1997
------ ------
(IN THOUSANDS)
<S> <C> <C>
Fishing nets............................................................... $1,201 $1,309
Qualified pension plan..................................................... 2,629 2,588
Title XI loan origination fee.............................................. 370 359
Property held for resale................................................... 304 304
Deposits................................................................... 373 116
Investments in unconsolidated affiliates................................... 516 188
Miscellaneous.............................................................. 926 53
------ ------
$6,319 $4,917
------ ------
------ ------
</TABLE>
Amortization expense for fishing nets amounted to $971,000, $1.0 million
and $965,000 for the years ended September 30, 1995, 1996 and 1997,
respectively.
F-10
<PAGE>
<PAGE>
OMEGA PROTEIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. PROPERTY AND EQUIPMENT
Property and equipment as of September 30, 1996 and 1997 are summarized as
follows:
<TABLE>
<CAPTION>
1996 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Land.................................................................. $ 3,861 $ 3,967
Plant................................................................. 36,852 38,310
Fishing vessels....................................................... 26,718 30,101
Furniture and fixtures................................................ 1,421 1,692
Other................................................................. 447 2,304
-------- --------
69,299 76,374
Less accumulated depreciation and impairment.......................... (32,788) (35,485)
-------- --------
$ 36,511 $ 40,889
-------- --------
-------- --------
</TABLE>
Depreciation expense for the years ended September 30, 1995, 1996 and 1997
was $2.6 million, $3.2 million and $3.6 million, respectively.
6. LONG-TERM DEBT
At September 30, 1996 and 1997, the Company's long-term debt consisted of
the following:
<TABLE>
<CAPTION>
1996 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
U.S. government guaranteed obligations collateralized by a first lien on certain
fishing vessels and certain plant assets:
Amounts due in installments through 2011, interest from 6.63% to 7.17%..... $ 7,267 $ 8,678
Amounts due in installments through 2014, interest at Eurodollar rates plus
.45%; 6.08% and 6.17% at September 30, 1996 and 1997, respectively....... 1,429 1,350
Term note due 2002, interest at prime (8.5% at September 30, 1997)
collateralized by certain assets of the Company............................... -- 2,175
Other debt at 5.6% and 4% at September 30, 1996 and 1997, respectively.......... 78 125
-------- --------
Total................................................................. 8,774 12,328
Less current maturities.......................................... 487 1,034
-------- --------
Long-term debt.................................................................. $ 8,287 $ 11,294
-------- --------
-------- --------
</TABLE>
The fair value of the Company's debt obligations are estimated based on the
current rates offered to the Company for the debt of the same remaining
maturities. At September 30, 1996 and 1997, the estimated fair value of debt
obligations approximated book value.
In 1995, the Company entered into a loan agreement with Internationale
Nederlanden (U.S.) Capital Corporation ('ING Loan Agreement'). The ING Loan
Agreement provided the Company with a $15 million revolving credit facility that
was due June 30, 1997. The ING Loan Agreement was terminated in fiscal 1997.
ANNUAL MATURITIES
The annual maturities of long-term debt for the five years ending September
30, 2002 are as follows (in thousands):
<TABLE>
<CAPTION>
1998 1999 2000 2001 2002
- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C>
$1,034 $1,061 $1,092 $1,136 $1,108
</TABLE>
F-11
<PAGE>
<PAGE>
OMEGA PROTEIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. CASH FLOW INFORMATION
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Net cash provided by operating activities reflects cash payments of
interest and income taxes.
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash paid during the fiscal year for:
Interest........................................................ $967 $950 $ 560
Income tax...................................................... 116 365 2,851
</TABLE>
During fiscal 1997, the Company completed the sale of substantially all of
Venture's assets and liabilities for cash proceeds of $180,000. Cash of
$1,128,000 was included in the net assets acquired by the third party puchaser.
Additionally during fiscal 1997, the Company sold various other assets for
cash proceeds of $177,000. The following summarizes these transactions:
<TABLE>
<S> <C>
Cash received by the Company for sale of assets............... $ 177,000
Cash received by the Company for the sale of various assets
of Venture.................................................. 180,000
Cash included with Venture's net assets sold.................. (1,128,000)
-----------
Proceeds from the sale of assets, net......................... $ (771,000)
-----------
-----------
</TABLE>
During fiscal 1995, the Company exchanged certain other assets held for
sale for property and equipment and also exercised an option to purchase certain
real estate resulting in the reclassification of a deposit from other assets to
property and equipment. These transactions resulted in the reclassification of
approximately $2.0 million from other assets to property and equipment.
8. INCOME TAXES
The Company's provision for income tax expense consisted of the following:
<TABLE>
<CAPTION>
1995 1996 1997
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
State....................................................... $ 241 $ 348 $ 489
U.S......................................................... 1,045 2,726 4,628
Deferred:
State....................................................... (300) -- --
U.S......................................................... 682 389 743
------ ------ ------
$1,668 $3,463 $5,860
------ ------ ------
------ ------ ------
</TABLE>
As of September 30, 1997, for federal income tax purposes, the Company has
approximately $610,000 of investment tax credit carryforwards expiring in 1999
through 2001, and has approximately $194,000 of alternative minimum tax credit
carryforwards. Investment tax credit carryforwards are reflected in the balance
sheet as a reduction of deferred taxes using the flow through method.
The following table reconciles the income tax provisions computed using the
U.S. statutory rate of 34% in 1995 and 1996 and 35% in 1997 to the provisions
reflected in the financial statements.
<TABLE>
<CAPTION>
1995 1996 1997
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Taxes at statutory rate.......................................... $1,672 $3,193 $5,700
Other............................................................ 35 40 (158)
State taxes, net of federal benefit.............................. (39) 230 318
------ ------ ------
$1,668 $3,463 $5,860
------ ------ ------
------ ------ ------
</TABLE>
F-12
<PAGE>
<PAGE>
OMEGA PROTEIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Temporary differences and tax credit carryforwards that gave rise to
significant portions of deferred tax assets and liabilities as of September 30,
1996 and 1997 are as follows:
<TABLE>
<CAPTION>
1996 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Asset write-downs and accruals not yet deductible................... $ 1,593 $ 1,221
Investment tax credit carryforwards................................. 632 610
Alternative minimum tax credit carryforwards........................ 194 194
Equity in loss of unconsolidated affiliates -- 146
Other............................................................... 272 367
------- -------
Total deferred tax assets...................................... 2,691 2,538
------- -------
Deferred tax liabilities:
Property and equipment.............................................. (2,135) (2,738)
Pension............................................................. (893) (880)
Other............................................................... (100) (100)
------- -------
Total deferred tax liabilities................................. (3,128) (3,718)
------- -------
Net deferred tax liability..................................... $ (437) $(1,180)
------- -------
------- -------
</TABLE>
9. ACCRUED LIABILITIES
Accrued liabilities as of September 30, 1996 and 1997 are summarized as
follows:
<TABLE>
<CAPTION>
1996 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Salary and benefits..................................................... $ 6,481 $ 6,454
Insurance............................................................... 4,806 3,618
Trade creditors......................................................... 2,224 2,707
Other................................................................... 1,230 2,644
------- -------
$14,741 $15,423
------- -------
------- -------
</TABLE>
10. EMPLOYEE'S PROFIT SHARING PLAN
All qualified employees of the Company are covered under the Zapata
Profit-Sharing Plan. The Company contributes matching and profit-sharing
contributions to the plan based on employee contributions and compensation.
Contributions to the plan totaled $638,000, $456,000 and $488,000 in 1995, 1996
and 1997, respectively.
11. PENSION PLAN
The Company has a pension plan covering substantially all U.S. employees.
Plan benefits are generally based on employees' years of service and
compensation level. The plan has adopted an excess benefit formula integrated
with covered compensation. Participants are 100% vested in the accrued benefit
after five years of service.
F-13
<PAGE>
<PAGE>
OMEGA PROTEIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Net pension cost (credit) for 1996 and 1997 included the following
components:
<TABLE>
<CAPTION>
1996 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Service cost-benefits earned during the year............................. $ 554 $ 612
Interest cost on projected benefit obligations........................... 1,249 1,327
Actual gain on plan assets............................................... (1,598) (1,707)
Amortization of transition asset and other deferrals..................... (303) (191)
------- -------
Net pension cost (credit)........................................... $ (98) $ 41
------- -------
------- -------
</TABLE>
The Company's funding policy is to make contributions as required by
applicable regulations. No contributions to the plan have been required since
1984. The plan's funded status and amounts recognized in the Company's balance
sheet at September 30, 1996 and 1997, are presented below:
<TABLE>
<CAPTION>
1996 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Fair value of plan assets......................................................... $19,538 $21,707
------- -------
Actuarial present value of benefit obligations
Vested benefits.............................................................. 15,865 16,252
Nonvested benefits........................................................... 440 339
------- -------
Accumulated benefit obligation............................................... 16,305 16,591
Additional benefits based on projected salary increases...................... 1,952 1,881
------- -------
Projected benefit obligations................................................ 18,257 18,472
------- -------
Excess of plan assets over projected benefit obligations.......................... 1,281 3,235
Unrecognized transition asset..................................................... (2,078) (1,732)
Unrecognized prior service cost................................................... 86 60
Unrecognized net loss............................................................. 3,340 1,025
------- -------
Prepaid pension cost.............................................................. $ 2,629 $ 2,588
------- -------
------- -------
</TABLE>
The unrecognized transition asset at October 1, 1987, was $5.2 million
which is being amortized over 15 years. For 1996 and 1997, the actuarial present
value of the projected benefit obligation was based on a 4.75% weighted-average
annual increase in salary levels and a 7.5% discount rate. Pension plan assets
are invested in cash, common and preferred stocks, short term investments and
insurance contracts. The projected long-term rate of return on plan assets was
9.0% in 1996 and 1997. The unrecognized net loss of $1.0 million at September
30, 1997 is expected to be reduced by future returns on plan assets and through
decreases in future net pension credits.
12. RELATED-PARTY TRANSACTIONS
Certain administrative services, including treasury and taxation services,
are provided to the Company by Zapata Corporation and billed at their
approximate cost. During fiscal 1995, 1996 and 1997, fees for these services
totaled $35,000, $110,000 and $30,000, respectively. The Company provides to
Zapata Corporation payroll and certain administrative services billed at their
approximate cost. During fiscal 1996 and 1997, fees for these services totaled
$30,000 in each year. The cost of such services is based on the estimated
percentage of time that employees spend working on the other party's matters as
a percent of total time worked. The Company's management deems this allocation
method to be reasonable. The 1996 amount of taxation services charged to the
Company by Zapata is higher than the 1995 and 1997 amounts due primarily to
additional work involving tax strategies to minimize state and federal income
tax and due to tax work related to setting up a foreign sales corporation as it
pertained to the Company.
The amounts due to parent-current consists primarily of the Company's
portion of income taxes.
F-14
<PAGE>
<PAGE>
OMEGA PROTEIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At September 30, 1997, the Company held receivables which totaled $334,000
from an entity in which it has an equity interest.
During 1997, Zapata Corporation forgave the repayment of $41.9 million and
the Company recorded the amount as contributed capital.
Average balances due to Zapata were:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Amounts due to parent........................................ $47,525 $43,263 $24,893
</TABLE>
The following represents the intercompany activity for the three year
period ended September 30, 1997:
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------------
1995 1996 1997
------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Beginning balance..................................................... $53,149 $ 41,900 $44,626
Income taxes payable to parent........................................ 1,668 3,463 5,860
Administrative services provided by parent............................ 35 110 30
Administrative services provided by the Company....................... -- (30) (30)
Payments to parent.................................................... (12,952) (817) (3,427)
Capital contribution from parent...................................... -- -- (41,900)
------- -------- -------
Ending balance........................................................ $41,900 $ 44,626 $ 5,159
------- -------- -------
------- -------- -------
Amounts due to parent -- current...................................... $ -- $ 2,726 $ 5,159
Amounts due to parent -- non-current.................................. 41,900 41,900 --
------- -------- -------
Total............................................................ $41,900 $ 44,626 $ 5,159
------- -------- -------
------- -------- -------
</TABLE>
13. COMMITMENTS AND CONTINGENCIES
OPERATING LEASE PAYABLE
Future minimum payments under non-cancelable operating lease obligations
aggregate $1.5 million, and for the five years ending September 30, 2002 are (in
thousands):
<TABLE>
<CAPTION>
1998 1999 2000 2001 2002
- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
$448 $451 $451 $199 $0
</TABLE>
Rental expense for operating leases was $1.4 million, $406,000 and $754,000
in 1995, 1996 and 1997, respectively.
LITIGATION
The Company is defending various claims and litigation arising from its
operations. In the opinion of management, any losses resulting from these
matters will not have a material adverse effect on the Company's results of
operations, cash flows or financial position.
ENVIRONMENTAL MATTERS
The Company is subject to various possible claims and lawsuits regarding
environmental matters. Management believes that costs, if any, related to these
matters will not have a material adverse effect on the results of operations,
cash flows or financial position of the Company.
F-15
<PAGE>
<PAGE>
OMEGA PROTEIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates within one industry segment, menhaden fishing for the
production and sale of fish meal, fish solubles and fish oil. Export sales of
fish oil and fish meal were approximately $26.7 million, $20.9 million and $21.5
million in fiscal 1995, 1996 and 1997, respectively. Such sales were made
primarily to European markets. In fiscal 1995, sales to one customer were
approximately $12.3 million; in 1996 and 1997, no sales to any one customer
exceeded 10% of consolidated sales.
The following table shows the geographical distribution of revenues based
on location of customers:
<TABLE>
<CAPTION>
1995 1996 1997
---------------- ---------------- -----------------
REVENUES % REVENUES % REVENUES %
------- ----- ------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
U.S.................................... $68,296 72.0% $72,711 77.7% $ 96,071 81.7%
Europe................................. 25,019 26.3 14,578 15.6 7,274 6.2
Canada................................. 1,179 1.2 1,896 2.0 6,381 5.4
Mexico................................. 22 -- 1,246 1.3 3,223 2.7
Other.................................. 443 0.5 3,178 3.4 4,615 4.0
------- ----- ------- ----- -------- -----
$94,959 100.0% $93,609 100.0% $117,564 100.0%
------- ----- ------- ----- -------- -----
------- ----- ------- ----- -------- -----
</TABLE>
15. SUBSEQUENT EVENTS -- ACQUISITIONS
On November 3, 1997, the Company acquired the fishing and processing assets
of American Protein, Inc. ('American Protein'), which operated ten steamers and
a menhaden processing plant in the Chesapeake Bay area, for $14.5 million in
cash (the 'American Protein Acquisition'). American Protein's facilities were
located in close proximity to the Company's Reedville, Virginia facility.
Shortly after completing this transaction, the Company closed the American
Protein processing plant and began integrating its assets into the Company's
existing operations.
On November 25, 1997, the Company purchased the fishing and processing
assets of Gulf Protein, Inc. ('Gulf Protein'), which included six steamers, five
spotter planes and the processing equipment located at the Gulf Protein plant
near Morgan City, Louisiana, for $13.6 million in cash and the assumption of
$883,000 in liabilities (the 'Gulf Protein Acquisition,' and together with the
American Protein Acquisition, the 'Recent Acquisitions'). The Company accounted
for this acquisition as a purchase, thus the results of operations began being
included in the Company's Statement of Operations beginning November 25, 1997.
In connection with the Gulf Protein Acquisition, the Company also entered into a
five-year lease for the Gulf Protein plant at a $220,000 annual rental rate. The
Company is currently upgrading this plant's processing capabilities so that it
can manufacture specialty meals. The Company intends to begin operations at the
Morgan City, Louisiana plant at the start of the 1998 fishing season.
Such acquisitions were financed by a $28.1 million intercompany loan from
Zapata. The interest rate on this loan is 8.5% and is repayable in quarterly
installments beginning May 1, 1998. The loan matures August 1, 2002.
16. SUBSEQUENT EVENTS -- OTHER
MERGER INTO OMEGA PROTEIN CORPORATION
On January 26, 1998, Marine Genetics Corporation merged into Omega Protein
Corporation, a Nevada corporation and wholly owned by Zapata, with Omega Protein
Corporation being the surviving entity. The common control merger was accounted
for at historical costs in a manner similar to that in a pooling of interests
accounting. In connection with the merger, Marine Genetics Corporation's
outstanding common stock was converted into Omega Protein Corporation common
stock at the rate of
F-16
<PAGE>
<PAGE>
OMEGA PROTEIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
one share for 19,676 shares of Omega Protein Corporation common stock and Omega
Protein Corporation's pre-merger outstanding common stock was cancelled and
treated as treasury stock. As a result, the Company's capitalization is as
follows: authorized capital stock of 80,000,000 shares common stock, par value
$0.01 per share, and 10,000,000 shares of preferred stock, par value $0.01 per
share; and outstanding shares of 19,676,000 shares of common stock.
CONTEMPLATED INITIAL PUBLIC OFFERING
The Company is currently contemplating an Initial Public Offering of
8,000,000 of its common stock, with 4,000,000 shares being offered by the
Company and 4,000,000 shares being offered by Zapata Corporation. Also in
connection with the planned Initial Public Offering, the Company will have
authorized Preferred Stock of 10,000,000 shares at a $0.01 par value per share.
Zapata will own approximately 66.2% (approximately 62.1% if the underwriters'
over-allotment options are exercised in full) of the shares of common stock upon
completion of the Initial Public Offering.
REVOLVING LINE OF CREDIT
On December 30, 1997, the Company entered into a commitment letter with a
financial institution to enter into a revolving line of credit with a maximum
credit limit of $20 million. Interest will be either LIBOR plus a margin of
1.35% to 1.50% or at prime minus 0.75%. The Company will be required to comply
with certain covenants upon the closing of this credit facility. The credit
facility will be collateralized by all of the Company's assets not pledged to
collateralize the Company's other borrowings exclusive of the Company's vessels
and real estate.
STOCK OPTION PLANS
1998 Long-Term Incentive Plan
On January 26, 1998, the 1998 Long-Term Incentive Plan of the Company (the
'1998 Incentive Plan') was approved by the Company's Board. The 1998 Incentive
Plan provides for the grant of any or all of the following types of awards:
stock options, stock appreciation rights, stock awards and cash awards. The
Board granted 1,657,360 stock options under the 1998 Incentive Plan at $12.75
per share on January 26, 1998. These options granted vest ratably over three
years from the date of grant and expire ten years from the date of grant.
Non-Management Director Stock Option Plan
On January 26, 1998, the Non-Management Director Stock Option Plan (the
'Directors Plan') was approved by the Board. The Directors Plan provides that
the initial Chairman of the Board be granted options to purchase 568,200 shares
of the common stock and each other initial non-employee director of the Company
will be granted options to purchase 14,200 shares of common stock at a price
determined by the Board. The Board granted 582,400 stock options under the
Directors Plan at $12.75 per share on January 26, 1998, of which 568,200 were
granted to the Chairman of the Board and 14,200 were granted to the other
non-management Board member. These options granted generally vest ratably over
the three years from the date of grant and expire ten years from the date of
grant.
17. IMPLEMENTATION OF SFAS 128
In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 128, 'Earnings Per Share' ('SFAS 128') which established standards
for computing and presenting earnings per share. The Company adopted the
statement on October 1, 1997. Basic earnings per share was computed by dividing
income by the weighted average number of common shares outstanding. Diluted
F-17
<PAGE>
<PAGE>
OMEGA PROTEIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
earnings per share was computed by dividing income by the sum of the weighted
average number of common shares outstanding and the effect of unexercised
employee stock options.
18. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------
DECEMBER 31 MARCH 31 JUNE 30 SEPTEMBER 30
----------- -------- ------- ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Fiscal 1996
Revenues....................................... $23,466 $14,383 $20,920 $ 34,840
Operating income............................... 3,063 1,980 3,771 1,690
Net income..................................... 1,725 1,114 2,200 889
Net income per share........................... $ 0.09 $ 0.06 $ 0.11 $ 0.04
Fiscal 1997
Revenues....................................... $25,623 $22,964 $31,025 $ 37,952
Operating income............................... 3,792 3,503 6,451 4,459
Net income..................................... 2,225 2,185 3,713 2,302
Net income per share........................... $ 0.11 $ 0.11 $ 0.19 $ 0.12
</TABLE>
19. CERTAIN TRANSACTIONS AND ARRANGEMENTS BETWEEN THE COMPANY AND ZAPATA
(UNAUDITED)
Upon completion of the Company's initial public offering, the Company and
Zapata will enter into certain agreements that will include the Separation,
Sublease, Registration Rights, Tax Indemnity and Administrative Services
Agreements. The Separation Agreement would require the Company to repay $33.3
million of indebtedness and current payables owed by the Company to Zapata
contemporaneously with the consummation of the Company's initial public offering
and would prohibit Zapata from competing with the Company for a period of five
years. The Sublease Agreement would provide for the Company to lease its
principal corporate offices in Houston, Texas from Zapata and would provide for
the Company to utilize certain shared office equipment for no additional charge.
The Registration Rights Agreement would set forth the rights and
responsibilities of each party concerning certain registration filings and would
provide for the sharing of fees and expenses related to such filings. The Tax
Indemnity Agreement would require the Company to be responsible for federal,
state and local income taxes from its operations and the Administrative Services
Agreement would allow the Company to provide certain administrative services to
Zapata at the Company's estimated cost.
F-18
<PAGE>
<PAGE>
OMEGA PROTEIN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1997
------------- ------------
(IN THOUSANDS,
EXCEPT FOR SHARES)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................................................... $ 5,504 $ 10,258
Receivables, net.............................................................. 9,936 9,387
Inventories................................................................... 38,448 35,787
Prepaid expenses and other current assets..................................... 746 1,368
------------- ------------
Total current assets..................................................... 54,634 56,800
------------- ------------
Other assets....................................................................... 4,917 5,574
------------- ------------
Property and equipment, net........................................................ 40,889 68,246
------------- ------------
Total assets............................................................. $ 100,440 $130,620
------------- ------------
------------- ------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current maturities of long-term debt.......................................... $ 1,034 $ 1,540
Accounts payable.............................................................. 1,622 1,356
Accrued liabilities........................................................... 15,423 8,208
Amounts due to parent -- current.............................................. 5,159 8,798
------------- ------------
Total current liabilities................................................ 23,238 19,902
------------- ------------
Long-term debt..................................................................... 11,294 11,282
------------- ------------
Deferred income taxes.............................................................. 1,180 1,280
------------- ------------
Other liabilities.................................................................. 374 374
------------- ------------
Amounts due to parent -- non-current............................................... -- 28,116
------------- ------------
Commitments and contingencies...................................................... -- --
Stockholder's equity:
Preferred stock, $0.01 par value; 10,000,000 shares authorized; none issued... -- --
Common stock, $0.01 par value authorized; 80,000,000 shares; issued and
outstanding: 19,676,000 shares............................................... 197 197
Capital in excess of par value................................................ 43,731 43,731
Reinvested earnings, from October 1, 1990..................................... 20,426 25,738
------------- ------------
Total stockholder's equity............................................... 64,354 69,666
------------- ------------
Total liabilities and stockholder's equity.......................... $ 100,440 $130,620
------------- ------------
------------- ------------
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
F-19
<PAGE>
<PAGE>
OMEGA PROTEIN CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
-----------------------
1996 1997
------- -------
(IN THOUSANDS,
EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C>
Revenues........................................................................ $25,623 $29,503
Cost of sales................................................................... 20,806 19,274
------- -------
Gross profit.................................................................... 4,817 10,229
Selling, general and administrative............................................. 1,025 1,154
------- -------
Operating income................................................................ 3,792 9,075
Interest expense, net........................................................... (202) (379)
Other expense, net.............................................................. (1) (13)
------- -------
Income before income taxes...................................................... 3,589 8,683
Provision for income taxes...................................................... 1,364 3,371
------- -------
Net income...................................................................... $ 2,225 $ 5,312
------- -------
------- -------
Net income per share (basic).................................................... $ 0.11 $ 0.27
------- -------
------- -------
Average common shares outstanding............................................... 19,676 19,676
------- -------
------- -------
Net income per share (diluted).................................................. $ 0.11 $ 0.27
------- -------
------- -------
Average common shares and common share equivalents outstanding.................. 19,676 19,676
------- -------
------- -------
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
F-20
<PAGE>
<PAGE>
OMEGA PROTEIN CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
---------------------
1996 1997
------- --------
(IN THOUSANDS)
<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net income....................................................................... $ 2,225 $ 5,312
Adjustments to reconcile net income to net cash provided by (used in) operating
activities:
Loss (gain) on disposal of assets, net......................................... -- (30)
Depreciation and amortization.................................................. 1,155 1,672
Deferred taxes................................................................. 186 100
Changes in assets and liabilities, net of the effect of disposition:
Receivables................................................................. 3,486 549
Inventories................................................................. 587 2,661
Prepaid expenses and other current assets................................... (498) (622)
Accounts payable and accrued liabilities.................................... (6,729) (7,481)
Amounts due to parent....................................................... 1,462 3,639
Other, net.................................................................. 363 (58)
------- --------
Total adjustments...................................................... 12 430
------- --------
Net cash provided by operating activities.............................. 2,237 5,742
------- --------
Cash flows provided by (used in) investing activities:
Proceeds from sale of assets, net................................................ -- 503
Capital expenditures............................................................. (1,698) (1,102)
Acquisitions..................................................................... -- (28,116)
------- --------
Net cash used in investing activities.................................. (1,698) (28,715)
------- --------
Cash flow provided by (used in) financing activities:
Long term debt................................................................... 1,849 --
Borrowings from parent -- non-current............................................ -- 28,116
Principal payments of debt obligations........................................... (119) (389)
------- --------
Net cash provided by financing activities.............................. 1,730 27,727
------- --------
Net increase in cash and cash equivalents............................................. 2,269 4,754
Cash and cash equivalents at beginning of period...................................... 2,899 5,504
------- --------
Cash and cash equivalents at end of period............................................ $ 5,168 $ 10,258
------- --------
------- --------
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
F-21
<PAGE>
<PAGE>
OMEGA PROTEIN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. FINANCIAL STATEMENTS
The condensed consolidated financial statements included herein have been
prepared by Omega Protein Corporation ('Omega' or the 'Company'), without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
The financial statements reflect all adjustments that are, in the opinion of
management, necessary to fairly present such information. All such adjustments
are of a normal recurring nature. Although Omega believes that the disclosures
are adequate to make the information presented not misleading, certain
information and footnote disclosures, including a description of significant
accounting policies, normally included in financial statements prepared in
accordance with generally accepted accounting principles, have been condensed or
omitted pursuant to such rules and regulations. These consolidated financial
statements should be read in conjunction with the financial statements and the
notes thereto included in this Registration Statement.
In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 128, 'Earnings Per Share' ('SFAS 128') which established standards
for computing and presenting earnings per share. The Company adopted the
statement October 1, 1997. Basic earnings per share was computed by dividing
income by the weighted average number of common shares outstanding. Diluted
earnings per share was computed by dividing income by the sum of the weighted
average number of common shares outstanding and the effect of unexercised
employee stock options.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, 'Reporting Comprehensive Income' ('SFAS 130') which is effective for
fiscal years beginning after December 15, 1997. SFAS 130 establishes standards
for reporting and display of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general-purpose financial
statements. It requires (a) classification of items of other comprehensive
income by their nature in a financial statement and (b) display of the
accumulated balance of other comprehensive income separate from retained
earnings and additional paid-in capital in the equity section of a statement of
financial position. The Company will adopt the provisions of the statement in
fiscal 1999.
In June 1997, the FASB also issued Statement of Financial Accounting
Standards No. 131, 'Disclosure about Segments of an Enterprise and Related
Information' ('SFAS 131') which is effective for periods beginning after
December 15, 1997. SFAS 131 establishes standards for reporting information
about operating segments in annual financial statements and requires 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. This Statement
supersedes SFAS 14, Financial Reporting for Segments of a Business Enterprise,
but retains the requirement to report information about major customers. The
Company will adopt the provisions of the statement in fiscal 1999.
In February 1998, the FASB issued Statement of Financial Accounting
Standards No. 132, 'Employers' Disclosures About Pensions and Other
Postretirement Benefits' ('SFAS 132') which is effective for fiscal year
beginning after December 15, 1997. SFAS 132 significantly changes current
financial statement disclosures requirements from those that were required under
SFAS 87, 'Employers' Accounting for Pensions,' SFAS 88, 'Employers' Accounting
for Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits,' and SFAS 106, 'Employers' Accounting for Postretirement
Benefits Other Than Pensions.' SFAS 132 does not change the existing measurement
or recognition provisions of FASB Statement Nos. 87, 88 or 106. It requires that
additional information be disclosed regarding changes in benefit obligation and
fair values of plan assets, standardizes the disclosure requirements for
pensions and other postretirement benefits and presents them in one footnote and
eliminates certain disclosures that are no longer considered useful. The Company
will adopt the provisions of the statement in fiscal 1999.
F-22
<PAGE>
<PAGE>
OMEGA PROTEIN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. ASSET ACQUISITIONS
On November 3, 1997, the Company acquired the fishing and processing assets
of American Protein, Inc. ('American Protein'), which operated ten steamers and
a menhaden processing plant in the Chesapeake Bay area, for $14.5 million in
cash (the 'American Protein Acquisition'). American Protein's facilities were
located in close proximity to the Company's Reedville, Virginia facility.
Shortly after completing this transaction, the Company closed the American
Protein processing plant and began integrating its assets into the Company's
existing operations.
On November 25, 1997, the Company purchased the fishing and processing
assets of Gulf Protein, Inc. ('Gulf Protein'), which included six steamers, five
spotter planes and the processing equipment located at the Gulf Protein plant
near Morgan City, Louisiana, for $13.6 million in cash and the assumption of
$883,000 in liabilities (the 'Gulf Protein Acquisition,' and together with the
American Protein Acquisition, the 'Recent Acquisitions'). The Company accounted
for this acquisition as a purchase, thus the results of operations began being
included in the Company's Statement of Operations beginning November 25, 1997.
In connection with the Gulf Protein Acquisition, the Company also entered into a
five-year lease for the Gulf Protein plant at a $220,000 annual rental rate. The
Company is currently upgrading this plant's processing capabilities so that it
can manufacture specialty meals. The Company intends to begin operations at the
Morgan City, Louisiana plant at the start of the 1998 fishing season.
Such acquisitions were financed by a $28.1 million intercompany loan from
Zapata. The interest rate on this loan is 8.5% and is repayable in quarterly
installments beginning May 1, 1998. The loan matures August 1, 2002.
3. INVENTORY
Inventory as of September 30, 1997 and December 31, 1997 is summarized as
follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1997
------------- ------------
(IN THOUSANDS)
<S> <C> <C>
Fish meal................................................................ $19,048 $ 18,909
Crude fish oil........................................................... 11,188 6,589
Other fish oil........................................................... 1,558 2,610
Fish solubles............................................................ 983 1,282
Off-season costs......................................................... 2,420 3,392
Materials and supply..................................................... 3,353 2,978
Other.................................................................... -- 129
------------- ------------
38,550 35,889
Less oil inventory reserve............................................... (102) (102)
------------- ------------
$38,448 $ 35,787
------------- ------------
------------- ------------
</TABLE>
4. LITIGATION
The Company is defending various claims and litigation arising from
operations. In the opinion of management, any losses resulting from these
matters will not have a material adverse affect on the Company's results of
operations, cash flows or financial position.
5. COMMITMENT LETTER FOR LINE OF CREDIT
On December 30, 1997, the Company entered into a commitment letter with a
financial institution to enter into a revolving line of credit with a maximum
credit limit of $20 million. At the Company's election interest will be either
LIBOR plus a margin of 1.35 percent to 1.5 percent or at prime minus
F-23
<PAGE>
<PAGE>
OMEGA PROTEIN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
0.75 percent. The Company will be required to comply with certain covenants upon
the closing of this credit facility. The credit facility will be collateralized
by all of the Company's assets not pledged to collateralize the Company's other
borrowings exclusive of the Company's vessels and real estate.
6. SUBSEQUENT EVENTS
MERGER INTO OMEGA PROTEIN CORPORATION
On January 26, 1998, Marine Genetics Corporation merged into Omega Protein
Corporation, a Nevada Corporation and wholly owned by Zapata, with Omega Protein
Corporation being the surviving entity. The common control merger was accounted
for at historical cost in a manner similar to that in a pooling of interests
accounting. In connection with the merger, Marine Genetics Corporation's
outstanding common stock was converted into Omega Protein Corporation common
stock at the rate of one share for 19,676 shares of Omega Protein Corporation
common stock and Omega Protein Corporation's pre-merger outstanding common stock
was cancelled and treated as treasury stock. As a result, the Company's
capitalization is as follows: authorized capital stock of 80,000,000 shares
common stock, par value $0.01 per share, and 10,000,000 shares of preferred
stock, par value of $0.01 per share, and outstanding shares of 19,676,000 shares
of common stock.
CONTEMPLATED INITIAL PUBLIC OFFERING
The Company is currently contemplating an Initial Public Offering of
8,000,000 of its common stock, with 4,000,000 shares being offered by the
Company and 4,000,000 shares being offered by Zapata Corporation. Also in
connection with the planned Initial Public Offering, the Company will have
authorized Preferred Stock of 10,000,000 shares at $0.01 par value per share.
Zapata will own approximately 66.2% (approximately 62.1% if the underwriters'
over-allotment options are exercised in full) of the shares of common stock
outstanding upon completion of the Initial Public Offering.
STOCK OPTION PLANS
1998 Long-Term Incentive Plan
On January 26, 1998, the 1998 Long-Term Incentive Plan of the Company (the
'1998 Incentive Plan') was approved by the Company's Board. The 1998 Incentive
Plan provides for the grant of any or all of the following types of awards:
stock options, stock appreciation rights, stock awards and cash awards. The
Board granted 1,657,360 stock options under the 1998 Incentive Plan at $12.75
per share on January 26, 1998. These options granted vest ratably over three
years from the date of grant and expire ten years from the date of grant.
Non-Management Director Stock Option Plan
On January 26, 1998, the Non-Management Director Stock Option Plan (the
'Director Plan') was approved by the Board. The Directors Plan provides that the
initial Chairman of the Board be granted options to purchase 568,200 shares of
the common stock and each other initial non-employee director of the Company
will be granted options to purchase 14,200 shares of common stock at a price
determined by the Board. The Board granted 582,400 stock options under the
Directors Plan at $12.75 per share on January 26, 1998, of which 568,200 were
granted to the Chairman of the Board and 14,200 were granted to the other Board
member. These options granted generally vest ratably over the three years from
the date of grant and expire ten years from the date of grant.
F-24
<PAGE>
<PAGE>
OMEGA PROTEIN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. CERTAIN TRANSACTIONS AND ARRANGEMENTS BETWEEN THE COMPANY AND ZAPATA
Upon completion of the Company's initial public offering, the Company and
Zapata will enter into certain agreements that will include the Separation,
Sublease, Registration Rights, Tax Indemnity and Administrative Services
Agreements. The Separation Agreement would require the Company to repay $33.3
million of indebtedness and current payables owed by the Company to Zapata
contemporaneously with the consummation of the Company's initial public offering
and would prohibit Zapata from competing with the Company for a period of five
years. The Sublease Agreement would provide for the Company to lease its
principal corporate offices in Houston, Texas from Zapata and would provide for
the Company to utilize certain shared office equipment for no additional charge.
The Registration Rights Agreement would set forth the rights and
responsibilities of each party concerning certain registration filings and would
provide for the sharing of fees and expenses related to such filings. The Tax
Indemnity Agreement would require the Company to be responsible for federal,
state and local income taxes from its operations and the Administrative Services
Agreement would allow the Company to provide certain administrative services to
Zapata at the Company's estimated cost.
F-25
<PAGE>
<PAGE>
[PHOTOS]
The Company's fish meal products are added to feeds to promote cost-effective
animal production.
[PHOTOS]
Menhaden oil, rich in nutritionally important Omega-3 fatty acids, is appoved
by the FDA for human consumption and is used as a nutritional
supplement in foods.
[PHOTOS]
Fish solubles are an organic replacement/supplement for chemical fertilizers.
<PAGE>
<PAGE>
__________________________________ __________________________________
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDER OR ANY OF THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY
OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON STOCK OFFERED BY THIS
PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY
OFFER TO BUY THE SHARES OF COMMON STOCK BY ANYONE IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 1998, ALL DEALERS EFFECTING TRANSACTIONS IN THE
REGISTERED SECURITIES, 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.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary......................................................................................................... 3
Risk Factors............................................................................................................... 6
Company History and Recent Transactions.................................................................................... 11
Use of Proceeds............................................................................................................ 12
Dividend Policy............................................................................................................ 12
Capitalization............................................................................................................. 13
Dilution................................................................................................................... 14
Selected Consolidated Financial Data....................................................................................... 15
Pro Forma Unaudited Consolidated Statement of Operations Data.............................................................. 16
Management's Discussion and Analysis of Financial Condition and Results of Operations...................................... 17
Business................................................................................................................... 24
Management................................................................................................................. 34
Principal and Selling Stockholders......................................................................................... 39
Certain Transactions and Arrangements Between the Company and Zapata....................................................... 40
Description of Capital Stock............................................................................................... 42
Shares Eligible for Future Sale............................................................................................ 49
Underwriting............................................................................................................... 51
Legal Matters.............................................................................................................. 52
Experts.................................................................................................................... 52
Available Information...................................................................................................... 52
Index to Financial Statements.............................................................................................. F-1
</TABLE>
8,000,000 Shares
[Logo]
Common Stock
---------------------
PROSPECTUS
---------------------
PRUDENTIAL SECURITIES INCORPORATED
DEUTSCHE MORGAN GRENFELL
April , 1998
__________________________________ __________________________________
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses in connection with the issuance and distribution of
the securities being registered hereby, other than underwriting discounts and
commissions, are itemized below.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............................. $ 43,424
NASD filing fee................................................................. 15,720
NYSE listing fee................................................................ 154,600
Accounting fees and expenses.................................................... 150,000
Legal fees and expenses......................................................... 225,000
Printing and engraving expenses................................................. 150,000
Blue Sky fees and expenses (including legal fees)............................... 3,000
Transfer Agent and Registrar fees and expenses.................................. 3,500
Miscellaneous................................................................... 254,756
----------
Total...................................................................... $1,000,000*
----------
----------
</TABLE>
- ------------
* Of this amount, the Company is paying $500,000 and the Selling Stockholder is
paying $500,000.
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company's Articles of Incorporation and By-Laws limit the liability of
directors to the fullest extent permitted by Nevada law. This is intended to
allow the Company's officers and directors the benefit of the Nevada Corporation
Law which provides that directors of Nevada corporations may be relieved of
monetary liabilities for breach of their fiduciary duties as directors, except
under certain circumstances, including (i) acts or omissions which involve
intentional misconduct, fraud or a knowing violation of law or (ii) the willful
or grossly negligent payment of unlawful distributions.
The Nevada Corporation Law and the Company's Articles of Incorporation and
Bylaws authorize indemnification of a director, officer, employee or agent of
the Company against expenses incurred by him or her in connection with any
action, suit or proceeding to which such person is named a party by reason of
having acted or served in such capacity, if he acted in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal proceeding, had
no reasonable cause to believe his conduct was unlawful. With respect to
judgments or settlements obtained against a director, officer, employee or agent
of the Company resulting from lawsuits filed by the Company or derivative suits
filed on behalf of the Company, such a person cannot be indemnified for such
expenses unless and only to the extent that a court determines that, in view of
all the circumstances, the person is fairly and reasonably entitled to indemnity
for such expenses. Prior to the closing of the Offering, the Company intends to
enter into indemnification agreements with its officers and directors which
provide for indemnification and advancement of expenses. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 (the
'Securities Act') may be permitted to directors, officers or persons controlling
the Company pursuant to the foregoing provisions, the Company has been informed
that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefor, unenforceable.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
During the previous three years, the registrant has issued and sold the
following securities without registration under the Securities Act (none of
which sales were underwritten):
The Company was formed on January 23, 1998, at which time it issued 100
of its shares of Common Stock for a purchase price of $1.00 per share to the
Selling Stockholder. 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.
On January 26, 1998, the Marine Genetics Corporation merged into the
Company. In connection with the Merger, the Company issued 19,676,000 shares of
Common Stock to the Selling Stockholder, which was Marine Genetics Corporation's
sole stockholder at the time. Such issuance 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.
II-1
<PAGE>
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<S> <C>
1. -- Form of Underwriting Agreement*
2.1 -- Agreement and Plan of Merger between Marine Genetics, Inc., a Delaware corporation and Omega Protein
Corporation, a Nevada corporation
3.1 -- Articles of Incorporation
3.2 -- By-Laws
4.1 -- Form of Common Stock Certificate (Citizen)
4.2 -- Form of Common Stock Certificate (Non-Citizen)
5.1 -- Opinion of Woods, Oviatt, Gilman, Sturman & Clarke, LLP*
5.2 -- Opinion of Marshall, Hill, Cassass and deLipkau*
10.1 -- Form of Employment Agreement with Joseph L. von Rosenberg III*
10.2 -- Form of Employment Agreement with Robert W. Stockton*
10.3 -- Form of Employment Agreement with Kelsey D. Short Jr.*
10.4 -- Form of Employment Agreement with Clyde R. Gilbert*
10.5 -- Form of Employment Agreement with Eric T. Furey*
10.6 -- Form of Separation Agreement with Zapata Corporation*
10.7 -- Form of Tax Indemnity Agreement with Zapata Corporation*
10.8 -- Form of Registration Rights Agreement with Zapata Corporation*
10.9 -- Form of Sublease Agreement with Zapata Corporation*
10.10 -- Form of Administrative Services Agreement, Zapata Corporation*
10.11 -- Lease Agreement dated April 1985 with General Jackson Partnership*
10.12 -- Lease dated July 1, 1992 with Ardoin Limited Partnership*
10.13 -- Lease Agreement dated November 25, 1997 with O.W. Burton Jr., individually and as trustee of the Trust of
Anna Burton*
10.14 -- Lease Agreement dated November 16, 1984 with Andre Cessac*
10.15 -- Commercial Lease Agreement dated January 1, 1971 with Purvis Theall and Ethlyn Cessac*
10.16 -- Lease Agreement dated January 4, 1994 with City of Abbeville, Louisiana*
10.17 -- Loan Agreement dated August 29, 1997 with Hibernia National Bank, Lender and Zapata Protein, Inc.,
Guarantor*
10.18 -- Security Agreement dated August 29, 1997 in favor of Hibernia National Bank*
10.19 -- Guarantee Agreement dated August 29, 1997 in favor of Hibernia National Bank*
10.20 -- United States Guaranteed Promissory Note dated March 31, 1993 in favor of Bear, Stearns Securities
Corporation*
10.21 -- Amendment No. 1 to Promissory Note dated March 31, 1993 to the United States of America pursuant to the
provisions of Title XI of the Marine Act of 1936 in favor of Bear, Stearns Securities Corporation*
10.22 -- Amendment No. 1 to First Preferred Ship Mortgage dated March 31, 1993 to the United States of America*
10.23 -- Supplement No. 5 to First Preferred Fleet Mortgage dated March 31, 1993 in favor of Chemical Bank, as
Trustee*
10.24 -- Amendment No. 1 to Guaranty Deed of Trust dated March 31, 1993 for the benefit of the United States of
America*
10.25 -- Supplement No. 2 to Security Agreement dated March 31, 1993 in favor of the United States of America*
10.26 -- Indemnity Agreement Regarding Hazardous Materials dated March 31, 1993 in favor of the United States of
America*
10.27 -- United States Guaranteed Promissory Note dated September 27, 1994 in favor of Sun Bank of Tampa Bay*
10.28 -- Promissory Note to the United States of America dated September 27, 1994 pursuant to the provisions of
Title XI of the Marine Act of 1936 in favor of Sun Bank of Tampa Bay*
10.29 -- First Preferred Ship Mortgage dated September 27, 1994 to the United States of America*
10.30 -- Collateral Mortgage and Collateral Assignment of Lease dated September 27, 1994 in favor of the United
States of America*
10.31 -- Collateral Mortgage Note dated September 27, 1994 in favor of the United States of America*
10.32 -- Collateral Pledge Agreement dated September 27, 1994 in favor of the United States of America*
10.33 -- Guaranty Agreement dated September 27, 1994 in favor of the United States of America*
10.34 -- Title XI Financial Agreement dated September 27, 1994 with the United States of America*
10.35 -- Security Agreement dated September 27, 1994 in favor of the United States of America*
10.36 -- United States Guaranteed Promissory Note dated October 30, in favor of Coastal Securities*
</TABLE>
II-2
<PAGE>
<PAGE>
<TABLE>
<S> <C>
10.37 -- Promissory Note dated October 30, to the United States of America pursuant to the provisions of Title XI
of the Marine Act of 1936 in favor of Coastal Securities*
10.38 -- Guaranty Agreement dated October 30, 1996 in favor of the United States of America*
10.39 -- Title XI Financial Agreement dated October 30, 1996 with the United States of America*
10.40 -- Certification and Indemnification Agreement Regarding Environmental Matters dated October 30, 1996 in
favor of the United States of America*
10.41 -- Deed of Trust dated October 30, 1996 for the benefit of the United States of America*
10.42 -- 1998 Long-Term Incentive Plan*
10.43 -- Non-Management Director Stock Options Plan*
10.44 -- Asset Purchase Agreement dated as of September 16, 1997, among Zapata Protein, Inc., Venture Milling
Company and Perdue Farms Incorporated
10.45 -- Asset Purchase Agreement dated as of November 3, 1997 among Protein (USA) Company, American Proteins, Inc.
and Chesapeake Bay Fishing Co., L.C.
10.46 -- Asset Purchase Agreement dated as of November 25, 1997 among Protein Securities Company, and Gulf Protein,
Inc.
10.47 -- Form of Indemnification Agreement of Omega Protein Corporation*
21.1 -- Schedule of Subsidiaries*
23.1 -- Consent of Coopers & Lybrand L.L.P.*
23.2 -- Consent of Woods, Oviatt, Gilman, Sturman & Clarke, LLP (Contained in Exhibit 5.1)
23.3 -- Consent of Marshall, Hill, Cassass and deLipkau (contained in Exhibit 5.2).
24 -- Power of Attorney**
27. -- Financial Data Schedule
</TABLE>
- ------------
* Previously filed.
** Previously filed on signature page to registration statement (File No.
333-444967) filed on January 27, 1998.
------------------------
(b) Financial Statements Schedules.
Schedule II -- Valuation and Qualifying Accounts
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
The undersigned registrant hereby undertakes that:
(1) 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 Act 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.
(2) For purposes of determining any liability under the Securities Act
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant 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.
(3) 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 that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, Maryland, on
April 2, 1998.
OMEGA PROTEIN CORPORATION
BY: /S/ JOSEPH L. VON ROSENBERG III
..................................
Name: Joseph L. von Rosenberg III
Title: Chief Executive Officer and
President
In accordance with the requirements of the Securities Act, this
Registration Statement on Form S-1 has been signed by the following persons in
their capacities and on the date signed.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<S> <C> <C>
/S/ JOSEPH L. VON ROSENBERG III Director, Chief Executive Officer and April 2, 1998
......................................... President
(JOSEPH L. VON ROSENBERG III)
/S/ ROBERT W. STOCKTON Executive Vice President, Chief Financial April 2, 1998
......................................... Officer and Principal Accounting Officer
(ROBERT W. STOCKTON)
* Director April 2, 1998
.........................................
(MALCOLM GLAZER)
* Chairman of the Board of Directors and April 2, 1998
......................................... Director
(AVRAM GLAZER)
</TABLE>
* By /s/ JOSEPH L. VON ROSENBERG III
...................................
JOSEPH L. VON ROSENBERG III
AS ATTORNEY-IN-FACT
II-4
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholder and Board of Directors
OMEGA PROTEIN CORPORATION:
In connection with our audits of the consolidated financial statements of
Omega Protein Corporation (formerly Marine Genetics Corporation) as of September
30, 1997 and 1996, and for each of the three years in the period ended September
30, 1997, which financial statements are included in this Prospectus and
Registration Statement, we have also audited the financial statement schedule
listed in Item 16(b) of Part II herein.
In our opinion, this financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Houston, Texas
December 11, 1997
II-5
<PAGE>
<PAGE>
SCHEDULE II
OMEGA PROTEIN
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS(A) PERIOD
- -------------------------------------------- ---------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
September 30, 1995:
Allowance for doubtful accounts........ $163,812 -- -- -- $163,812
Inventory reserve...................... 102,000 -- -- -- 102,000
September 30, 1996:
Allowance for doubtful accounts........ 163,812 $ 8,759 -- $ (11,690) 160,881
Inventory reserve...................... 102,000 -- -- -- 102,000
September 30, 1997:
Allowance for doubtful accounts........ 160,881 50,000 -- (35,164) 175,717
Inventory reserve...................... 102,000 -- -- -- 102,000
</TABLE>
- ------------
(A) Allowance for Doubtful Accounts -- uncollectible accounts written off
II-6
<PAGE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ------ ---------------------------------------------------------------------------------------------------- -----
<S> <C> <C>
1. -- Form of Underwriting Agreement*
2.1 -- Agreement and Plan of Merger between Marine Genetics, Inc., a Delaware corporation and Omega
Protein Corporation, a Nevada corporation
3.1 -- Articles of Incorporation
3.2 -- By-Laws
4.1 -- Form of Common Stock Certificate (Citizen)
4.2 -- Form of Common Stock Certificate (Non-Citizen)
5.1 -- Opinion of Woods, Oviatt, Gilman, Sturman & Clarke, LLP*
5.2 -- Opinion of Marshall, Hill, Cassass and deLipkau*
10.1 -- Form of Employment Agreement with Joseph L. von Rosenberg III*
10.2 -- Form of Employment Agreement with Robert W. Stockton*
10.3 -- Form of Employment Agreement with Kelsey D. Short Jr.*
10.4 -- Form of Employment Agreement with Clyde R. Gilbert*
10.5 -- Form of Employment Agreement with Eric T. Furey*
10.6 -- Form of Separation Agreement with Zapata Corporation*
10.7 -- Form of Tax Indemnity Agreement with Zapata Corporation*
10.8 -- Form of Registration Rights Agreement with Zapata Corporation*
10.9 -- Form of Sublease Agreement with Zapata Corporation*
10.10 -- Form of Administrative Services Agreement, Zapata Corporation*
10.11 -- Lease Agreement dated April 1985 with General Jackson Partnership*
10.12 -- Lease dated July 1, 1992 with Ardoin Limited Partnership*
10.13 -- Lease Agreement dated November 25, 1997 with O.W. Burton Jr., individually and as trustee of the
Trust of Anna Burton*
10.14 -- Lease Agreement dated November 16, 1984 with Andre Cessac*
10.15 -- Commercial Lease Agreement dated January 1, 1971 with Purvis Theall and Ethlyn Cessac*
10.16 -- Lease Agreement dated January 4, 1994 with City of Abbeville, Louisiana*
10.17 -- Loan Agreement dated August 29, 1997 with Hibernia National Bank, Lender and Zapata Protein,
Inc., Guarantor*
10.18 -- Security Agreement dated August 29, 1997 in favor of Hibernia National Bank*
10.19 -- Guarantee Agreement dated August 29, 1997 in favor of Hibernia National Bank*
10.20 -- United States Guaranteed Promissory Note dated March 31, 1993 in favor of Bear, Stearns
Securities Corporation*
10.21 -- Amendment No. 1 to Promissory Note dated March 31, 1993 to the United States of America pursuant
to the provisions of Title XI of the Marine Act of 1936 in favor of Bear, Stearns Securities
Corporation*
10.22 -- Amendment No. 1 to First Preferred Ship Mortgage dated March 31, 1993 to the United States of
America*
10.23 -- Supplement No. 5 to First Preferred Fleet Mortgage dated March 31, 1993 in favor of Chemical
Bank, as Trustee*
10.24 -- Amendment No. 1 to Guaranty Deed of Trust dated March 31, 1993 for the benefit of the United
States of America*
10.25 -- Supplement No. 2 to Security Agreement dated March 31, 1993 in favor of the United States of
America*
10.26 -- Indemnity Agreement Regarding Hazardous Materials dated March 31, 1993 in favor of the United
States of America*
10.27 -- United States Guaranteed Promissory Note dated September 27, 1994 in favor of Sun Bank of Tampa
Bay*
10.28 -- Promissory Note to the United States of America dated September 27, 1994 pursuant to the
provisions of Title XI of the Marine Act of 1936 in favor of Sun Bank of Tampa Bay*
10.29 -- First Preferred Ship Mortgage dated September 27, 1994 to the United States of America*
10.30 -- Collateral Mortgage and Collateral Assignment of Lease dated September 27, 1994 in favor of the
United States of America*
10.31 -- Collateral Mortgage Note dated September 27, 1994 in favor of the United States of America*
10.32 -- Collateral Pledge Agreement dated September 27, 1994 in favor of the United States of America*
10.33 -- Guaranty Agreement dated September 27, 1994 in favor of the United States of America*
10.34 -- Title XI Financial Agreement dated September 27, 1994 with the United States of America*
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ------ ---------------------------------------------------------------------------------------------------- -----
<S> <C> <C>
10.35 -- Security Agreement dated September 27, 1994 in favor of the United States of America*
10.36 -- United States Guaranteed Promissory Note dated October 30, in favor of Coastal Securities*
10.37 -- Promissory Note dated October 30, to the United States of America pursuant to the provisions of
Title XI of the Marine Act of 1936 in favor of Coastal Securities*
10.38 -- Guaranty Agreement dated October 30, 1996 in favor of the United States of America*
10.39 -- Title XI Financial Agreement dated October 30, 1996 with the United States of America*
10.40 -- Certification and Indemnification Agreement Regarding Environmental Matters dated October 30,
1996 in favor of the United States of America*
10.41 -- Deed of Trust dated October 30, 1996 for the benefit of the United States of America*
10.42 -- 1998 Long-Term Incentive Plan*
10.43 -- Non-Management Director Stock Options Plan*
10.44 -- Asset Purchase Agreement dated as of September 16, 1997, among Zapata Protein, Inc., Venture
Milling Company and Perdue Farms Incorporated
10.45 -- Asset Purchase Agreement dated as of November 3, 1997 among Protein (USA) Company, American
Proteins, Inc. and Chesapeake Bay Fishing Co., L.C.
10.46 -- Asset Purchase Agreement dated as of November 25, 1997 among Protein Securities Company, and Gulf
Protein, Inc.
10.47 -- Form of Indemnification Agreement of Omega Protein Corporation*
21.1 -- Schedule of Subsidiaries*
23.1 -- Consent of Coopers & Lybrand L.L.P.*
23.2 -- Consent of Woods, Oviatt, Gilman, Sturman & Clarke, LLP (Contained in Exhibit 5.1)
23.3 -- Consent of Marshall, Hill, Cassass and deLipkau (contained in Exhibit 5.2).
24 -- Power of Attorney**
27. -- Financial Data Schedule
- ------------
* Previously filed.
** Previously filed on signature page to registration statement (File No.
333-444967) filed on January 27, 1998.
<PAGE>
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT OF MERGER (this "Merger Agreement") made and entered into as of
the 26 day of January, 1998 by and between MARINE GENETICS CORPORATION, a
Delaware corporation ("MARINE"), and OMEGA PROTEIN CORPORATION, a Nevada
corporation ("OMEGA").
RECITALS
This Agreement is made with reference to the following facts:
(i) The respective Boards of Directors of MARINE and OMEGA have
determined that it is advisable and to the advantage of the two corporations
that MARINE merge into OMEGA upon the terms and conditions provided herein in
order to effect a reincorporation of MARINE into a Nevada corporation with the
Articles of Incorporation and Bylaws of OMEGA being the articles of
incorporation and bylaws of the surviving corporation; and
(ii) ZAPATA CORPORATION, a Delaware corporation owns all the issued and
outstanding common stock of OMEGA, being 100 shares of OMEGA's common stock, and
all issued and outstanding common stock of MARINE.
(iii) The respective Boards of Directors of MARINE and OMEGA have
approved this Merger Agreement and the Boards of Directors of MARINE and OMEGA
have directed that this Merger Agreement be submitted to a vote of their sole
stockholders;
In consideration of the mutual agreements and covenants set forth
herein, MARINE and OMEGA hereby agree to merge as follows:
1. MERGER. Subject to the terms and conditions of this Agreement, and in
accordance with the provisions of the Nevada Revised Statutes and the Delaware
General Corporation Law, at the Effective Date, MARINE will merge with and into
OMEGA, the separate corporate existence of MARINE shall thereupon cease, and
OMEGA will be the surviving corporation (the "Surviving Corporation") and shall
continue its corporate existence under the laws of the State of Nevada as
wholly-owned subsidiary of ZAPATA CORPORATION.
2. EFFECTIVE TIME OF THE MERGER. Subject to the provisions of this
Agreement, articles of merger (the "Articles of Merger") shall be duly prepared
and executed by OMEGA and MARINE and thereafter delivered to the office of the
Nevada Secretary of State for filing, as provided in Chapter 92A of the Nevada
Revised Statutes, and a Certificate of Merger shall be duly prepared, executed
and filed with the Secretary of State of the State of Delaware pursuant to
Section 251 of the Delaware General Corporation Law. The Merger shall become
effective upon the later of the
1
<PAGE>
<PAGE>
filing of the Articles of Merger with the Nevada Secretary of State and the
filing of a Certificate of Merger with the Delaware Secretary of State (the
"Effective Date").
3. EFFECTS OF MERGER. The Merger shall have the effects as set forth in
Section 259 of the Delaware General Corporation Law and Nevada Revised Statutes
("NRS") 92A.250.
4. DIRECTORS, OFFICERS AND GOVERNING DOCUMENTS. The directors and
officers of OMEGA shall be the same on the Effective Date as they are
immediately prior thereto. The Articles of Incorporation of OMEGA shall continue
to be the Articles of Incorporation of OMEGA as the surviving corporation
without change or amendment until further amended in accordance with the
provisions thereof and applicable laws. The Bylaws of OMEGA, in effect on the
Effective Date shall continue to be the Bylaws of OMEGA as the surviving
corporation without change or amendment until amended in accordance with the
provisions thereof and applicable laws.
5. FURTHER ASSURANCES. From time to time, as and when required by OMEGA
or by its successors and assigns, there shall be executed and delivered on
behalf or MARINE such deeds and other instruments, and there shall be taken or
caused to be taken by it such further and other action, as shall be appropriate
or necessary in order to vest, perfect or confirm, of record or otherwise, in
OMEGA the title to and possession of all the property, interest, assets, rights,
privileges, immunities, powers, franchises and authority of MARINE and otherwise
to carry out the purposes of this Merger Agreement. The officers and directors
of OMEGA are fully authorized in the name and on behalf of MARINE to take any
and all such action and to execute and deliver any and all such deeds and other
instruments.
6. CONVERSION OF SHARES. Upon the Effective Date, by virtue of the
Merger and without any action on the part of the holder thereof, each share of
common stock of OMEGA outstanding immediately prior thereto shall be cancelled
and returned to the status of authorized but unissued shares, without the
payment of any consideration therefor. Each issued and outstanding share of
Common Stock of MARINE shall be converted into validly issued, fully paid and
non-assessable OMEGA common stock at the rate of 19,676 shares of OMEGA common
stock for each share of MARINE common stock. Each stock certificate of MARINE
evidencing ownership of any shares of the common stock of MARINE shall continue
to evidence ownership of the number of shares of OMEGA into which the shares
evidenced thereby are converted by virtue hereof. All the outstanding options,
if any, for the stock of MARINE shall be deemed options and warrants to acquire
the same number of shares of the common stock of the Surviving Corporation.
7. COVENANTS OF OMEGA. OMEGA covenants and agrees that it will, on or
before the Effective Date qualify to do business as a foreign corporation in
such other states as MARINE is legally required to so qualify.
8. ABANDONMENT. At any time before the Effective Date, this Merger
Agreement may be terminated and the Merger may be abandoned by the Board of
Directors of either OMEGA or MARINE or both, notwithstanding approval of this
Merger Agreement by ZAPATA
2
<PAGE>
<PAGE>
CORPORATION, the sole stockholder of both OMEGA and MARINE.
9. COUNTERPARTS. In order to facilitate the filing and recording of this
Merger Agreement the same may be executed in any number of counterparts, each of
which shall be
deemed to be an original.
10. SERVICE OF PROCESS. OMEGA agrees that it may be served with process
in Delaware in any proceeding for enforcement of any obligation of MARINE, as
well as for enforcement of any obligation of OMEGA arising from the merger and
OMEGA irrevocably appoints the Secretary of State of Delaware as its agent to
accept service of process in any suit or other proceedings with respect to any
such obligation.
11. FURTHER ACTIONS. The Board of Directors and the proper officers of
each of OMEGA and MARINE are hereby authorized, empowered and directed to do any
and all acts and things, and to make, execute, deliver, file and/or record any
and all instruments, papers and documents which shall be or become necessary,
proper or convenient to carry out or put into effect any of the provisions of
this Agreement of Merger or of the merger herein provided for.
12. GOVERNING LAW. This Merger Agreement shall be governed by and construed
in accordance with the laws of the State of Nevada.
IN WITNESS WHEREOF, this Merger Agreement, having been first duly
approved by resolution of the Board of Directors of OMEGA and MARINE is hereby
executed on behalf of each corporation by their respective officers.
OMEGA PROTEIN CORPORATION,
a Nevada Corporation
By:
--------------------------------------
Joseph L. von Rosenberg, III,
Chief Executive Officer
By:
-------------------------------------
Eric T. Furey, Secretary
MARINE GENETICS CORPORATION,
a Delaware corporation
By:
-------------------------------------
Chief Executive Officer
By:
---------------------------------------
Secretary
3
<PAGE>
<PAGE>
ARTICLES OF INCORPORATION
OF
OMEGA PROTEIN CORPORATION
The undersigned incorporator hereby executes these Articles of
Incorporation for the purpose of forming a corporation under Chapter 78 of the
Nevada Revised Statutes.
ARTICLE I
NAME
The name of the corporation is: Omega Protein Corporation (the
"Corporation").
ARTICLE II
RESIDENT AGENT
The name and address of the Corporation's initial resident agent is John
P. Fowler, Marshall Hill Cassas & de Lipkau, 333 Holcomb Ave., Suite 300, Reno,
NV 89502. The Corporation may, from time to time, in the manner provided by law,
change the resident agent and the registered office within the State of Nevada.
The Corporation may also maintain an office or offices for the conduct of its
business, either within or without the State of Nevada.
ARTICLE III
PURPOSE
The Corporation is organized for the purpose of engaging in any lawful
activity, within or without the State of Nevada.
1
<PAGE>
<PAGE>
ARTICLE IV
STOCK
Section 4.01. Authorized Capital Stock. The total number of shares of
stock this Corporation is authorized to issue shall be ninety million
(90,000,000) shares. This stock shall be divided into two classes to be
designated as "Common Stock" and "Preferred Stock".
Section 4.02. Common Stock. Eighty million (80,000,000) shares of the
authorized stock have a par value of one cent ($0.01) per share and are
designated Common Stock. The holder of each share of Common Stock shall have one
(1) vote per share on all matters placed before the stockholders.
Section 4.03. Preferred Stock. Ten million (10,000,000) shares of the
authorized stock have a par value of one cent ($0.01) per share and are
designated Preferred Stock. The Board of Directors shall have the authority to
authorize the issuance of the Preferred Stock from time to time in one or more
classes or series, and to state in the resolution or resolutions from time to
time adopted providing for the issuance thereof the following:
(a) The number of shares to constitute the class or series
and the designation thereof;
(b) The preferences and relative, participating, optional or
other special rights, if any, and the qualifications, limitations, or
restrictions thereof, if any, with respect to any class or series;
(c) Whether or not the shares of any class or series shall be
redeemable and if redeemable the redemption price or prices, and the
time or times at which, and the terms and conditions upon which, such
shares shall be redeemable and the
2
<PAGE>
<PAGE>
manner of redemption;
(d) Whether or not the shares of a class or series shall be
subject to the operation of retirement or sinking funds to be applied to
the purchase or redemption of such shares for retirement, and if such
retirement or sinking funds be established, the annual amount thereof
and the terms and provisions relative to the operation thereof;
(e) The dividend rate, whether dividends are payable in cash,
stock of the Corporation, or other property, the conditions upon which
and the times when such dividends are payable, the preference to or the
relation to the payment of dividends payable on any other class or
classes or series of stock, whether or not such dividends shall be
cumulative or noncumulative, and if cumulative, the date or dates from
which such dividends shall accumulate;
(f) The preferences, if any, and the amounts thereof which the
holders of any class or series thereof are entitled to receive upon the
voluntary or involuntary dissolution of, or upon any distribution of the
assets of, the Corporation;
(g) Whether or not the shares of any class or series is
convertible into, or exchangeable for, the shares of any other class or
classes or of any other series of the same or any other class or classes
of stock of the Corporation and the conversion price or prices or ratio
or ratios or the rate or rates at which such exchange may be made, with
such adjustments, if any, as shall be stated and expressed or provided
for in such resolution or resolutions;
(h) Whether or not the holders of shares of each class or series
of Preferred Stock have voting rights for the election or removal of
directors or for any
3
<PAGE>
<PAGE>
other purpose and upon which circumstances any or all voting rights
shall be exercised or exercisable.
(i) Such other rights and provisions with respect to any class or
series as may to the Board of Directors seem advisable.
The shares of each class or series of the Preferred Stock may vary from the
shares of any other class or series thereof in any respect. The Board of
Directors may increase the number of shares of the Preferred Stock designated
for any existing class or series by a resolution adding to such class or series
authorized and unissued shares of the Preferred Stock not designated for any
other class or series. The Board of Directors may decrease the number of shares
of the Preferred Stock designated for any existing class or series of the
Preferred Stock and the shares so subtracted shall become authorized and
unissued shares of the Preferred Stock.
ARTICLE V
DIRECTORS AND INCORPORATORS
Section 5.01. Governing Board of Directors. The governing board shall be
styled "Board of Directors" and the first Board of Directors shall consist of
three (3) directors. Provided that the Corporation has at least three (3)
directors, the number of directors may at any time or times be increased or
decreased to a maximum number of nine (9) as provided in the bylaws. Further
provided that no more directors shall be Non-Citizens (as defined at Section
8.01(d) below) than a minority of the number necessary to constitute a quorum of
the Board of Directors.
Section 5.02. Initial Number of Directors. The names and post office
addresses of the members of the first Board of Directors, which shall be three
(3) in number, is as
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follows:
Malcolm Glazer
1482 South Ocean Blvd.
Palm Beach, FL 33480
Avram Glazer
18 Stoney Clover Lane
Pittsford, NY l4534
Joseph von Rosenberg III
14918 Broadgreen
Houston, TX 77079
These individuals shall serve as directors until the first annual
meeting of shareholders or until their successors are elected and qualified.
Section 5.03. Classification of Directors. The directors shall be
divided into three classes, designated Class I, Class II and Class III. Each
class shall consist, as nearly as may be possible, of one-third of the total
number of directors constituting the entire board of directors. At the 1998
annual meeting of stockholders, Class I directors shall be elected for a
one-year term, Class II directors for a two-year term and Class III directors
for a three-year term. At each succeeding annual meeting of stockholders,
beginning in the year 1999, successors to the class of directors whose term
expires at that annual meeting shall be elected for a term of office expiring at
the third succeeding annual meeting of stockholders after their election. If the
number of directors is changed, any increase or decrease shall be apportioned
among the classes so as to maintain the number of directors in each class as
nearly equal as possible, and any additional director of any class elected to
fill a vacancy resulting from an increase in such class shall hold office for a
term
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that shall coincide with the remaining term of that class, but in no case
will a decrease in the number of directors shorten the term of any incumbent
director. A director shall hold office until the annual meeting for the year in
which his term expires and until his successor is elected and qualifies,
subject, however, to the prior death, resignation, retirement, disqualification
or removal from office.
Section 5.04. Vacancies. Except as otherwise provided in a Certificate
of Designation setting forth the rights of the holders of any class or series of
Preferred Stock, any vacancy on the Board of Directors that results from the
death, resignation, retirement, disqualification or removal from office of any
director, an increase in the number of directors, or any other reason may be
filled by a majority of the Board of Directors then in office, or by a sole
remaining director. Vacancies shall not be filled by a vote or written consent
of the stockholders. Any director elected to fill a vacancy not resulting from
an increase in the number of directors shall have the same remaining term as
that of his predecessor.
Section 5.05. Classification If Preferred Stockholders Elect Directors.
Notwithstanding the foregoing, whenever the holders of any one or more classes
or series of Preferred Stock issued by the Corporation have the right, voting
separately by class or series, to elect directors at an annual or special
meeting of stockholders, the election, term of office, filling of vacancies and
other features of such directorships shall be governed by the terms of these
Articles or an amendment to these Articles applicable thereto, or the terms of a
Certificate of Designation of the Preferred Stock filed with the Nevada
Secretary of State applicable thereto, and such directors so elected shall not
be divided into classes pursuant to this Article Fifth unless expressly provided
by such terms.
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Section 5.06. Notice of Nominations. Advance notice of stockholder
nominations for the election of directors and the proposal of business by
stockholders shall be given in the manner provided in the Bylaws, as amended and
in effect from time to time.
Section 5.07. Incorporator. The name and post office address of the
incorporator signing these Articles of Incorporation is as follows:
John P. Fowler
Marshall Hill Cassas & de Lipkau
333 Holcomb Ave., Suite 300
Reno, NV 89502
ARTICLE VI
STATUTES NOT APPLICABLE
The provisions of Nevada Revised Statutes 78.411 through 78.444,
inclusive, regarding combinations with interested stockholders, shall not be
applicable to this Corporation.
ARTICLE VII
STOCKHOLDER VOTING
Section 7.01. Written Consent. During any period of time in which Zapata
Corporation, a Delaware corporation ("Zapata") is not the beneficial owner of an
aggregate of at least a majority of the then outstanding Common Stock, no action
required or permitted to be taken at a meeting of the stockholders of this
Corporation shall be taken by written consent of the stockholders.
Section 7.02. Calling Special Meeting. During any period of time in
which Zapata does not beneficially own an aggregate of a majority of the
outstanding Common Stock, subject to all the rights of holders of any class or
series of stock having a preference over
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Common Stock as to dividends or upon liquidation, special meetings of the board
of directors or stockholders may only be called by the Board of Directors
pursuant to a resolution stating the purpose or purposes thereof approved by a
majority of the total number of directors which the Corporation would have if
there were no vacancies or by the Chairman of the Board of Directors.
Section 7.03. Calling Meetings at Request of Zapata. Until Zapata
beneficially owns less than an aggregate of a majority of the outstanding Common
Stock, the officers of this Corporation shall call a meeting of the Stockholders
upon the written request of Zapata.
ARTICLE VIII
FOREIGN OWNERSHIP
Section 8.01. Definitions. For purposes of this Article VIII, the
following terms shall have the meanings specified below:
(a) A Person shall be deemed to be the "Beneficial Owner" of, or
to "Beneficially Own" shares of Common Stock to the extent such Person would be
deemed to be the beneficial owner thereof pursuant to Rule 13d-3 promulgated by
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as such rule may be amended from time to time.
(b) "Citizen" shall mean, at all tiers of ownership and in both
form and substance at each tier of ownership: (i) any individual who is a
citizen of the United States, by birth, naturalization or as otherwise
authorized by law; (ii) any corporation, partnership, association, limited
liability company, joint venture (if not an association, corporation,
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partnership or limited liability company) or other business organization which
is a citizen of the United States as determined by the Corporation's Board of
Directors consistent with the definition of U.S. Citizen as used in 46 C.F.R.
67.39(b)(2) and any successor regulation or statute thereto as interpreted by
the agencies of the United States government charged with the administration of
the Fishery License Laws (defined below) or any court of law.
(c) "Fair Market Value" shall mean the average Market Price of
one share of stock for the 30 consecutive trading days immediately preceding the
date of determination. The "Market Price" for a particular day shall mean: (i)
the last reported sales price, regular way, or, in case no sale takes place on
such day, the average of the reported closing bid and asked prices, regular way,
in either case as reported on the New York Stock Exchange, Inc. ("NYSE")
composite tape; and (ii) if the Common Stock is not then listed or admitted to
unlisted trading privileges on the NYSE, as such prices referred to in clause
(i) above are reported on the consolidated reporting system of the principal
national securities exchange (then registered as such pursuant to Section 6 of
the Securities Exchange Act of 1934, as amended) on which the Common Stock is
then listed or admitted to unlisted trading privileges; and (iii) if the Common
Stock is not then listed or admitted to unlisted trading privileges on the NYSE
or any national securities exchange, as such prices referred to in clause (i)
above are included for quotation through the National Association of Securities
Dealers, Inc. Automated Quotation ("NASDAQ") National Market System; and (iv) if
the Common Stock is not then listed or admitted to unlisted trading privileges
on the AMEX or on any national securities exchange, and is not then included for
quotation through the NASDAQ National Market System, (A) the average of the
closing "bid" and "asked" prices on such day in the over-the-counter market as
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reported by NASDAQ, or (B) if "bid" and "asked" prices for the Common Stock on
such day shall not have been reported on NASDAQ, the average of the "bid" and
"asked" prices for such day as furnished by any NASDAQ member firm regularly
making a market in and for the Common Stock. If the Common Stock ceases to be
publicly traded, the Fair Market Value thereof shall mean the fair value of one
share of Common Stock determined jointly by the Corporation and the holders of a
majority of the securities being effected by such determination. If such parties
are unable to reach agreement within a reasonable period of time, such fair
value shall be determined by an independent appraiser jointly selected by the
Corporation and the holders of the class or series of security being evaluated
for redemption, whose determination shall be final and binding and whose fees
shall be paid by the Corporation.
(d) "Non-Citizen" shall mean any Person other than a Citizen.
(e) "Permitted Percentage" shall mean 49.99% of the shares of
Common Stock from time to time issued and outstanding.
(f) "Person" shall mean any individual, corporation, trust,
partnership, joint venture, association, joint-stock company, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
Section 8.02. General Policy. It is the policy of the Corporation that
Non-Citizens should Beneficially Own, individually or in the aggregate, no more
than the Permitted Percentage of each class of the Common Stock. If at any time
Non-Citizens, individually or in the aggregate, become the Beneficial Owners of
more than the Permitted Percentage of any class of the Common Stock, then the
Corporation shall have the power to take the actions prescribed in Sections
8.03, 8.04, 8.05 and 8.06 of this Article VIII. The provisions
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of this Article VIII are intended to assure that the Corporation remains in
continuous compliance with the citizenship requirements of the General Federal
Documentation Statute with respect to United States registered vessels to be
engaged in fishing operations within United States territorial waters and the
United States Exclusive Economic Zone (as required by 46 U.S.C. 'SS'.12102 and
46 U.S.C. 'SS'.12108 and the regulations promulgated thereunder) ("Fishery
License Laws") so that the Corporation's vessels remain eligible for a fishery
license or, as provided in 46 U.S.C. 'SS'.12105(c), an appropriately endorsed
registry, Any amendments to the Fishery License Laws are deemed to be
incorporated herein by reference. The Board of Directors (or any duly
constituted committee thereof) is specifically authorized to make all such
reasonable determinations in accordance with applicable law and these Articles
of Incorporation to implement the provisions of this Article VIII.
Section 8.03. Dual Stock Certificate System. To implement the policy set
forth in Section 8.02 of this Article VIII, the Corporation shall institute a
Dual Stock Certificate System such that (a) each stock certificate representing
shares of Common Stock that are Beneficially Owned by a Citizen shall be marked
"Citizen" and each stock certificate representing shares of Common Stock that
are Beneficially Owned by a Non-Citizen shall be marked "Non-Citizen", but with
all such stock certificates to be identical in all other respects and to comply
with all provisions of the laws of the State of Nevada; (b) to the extent
necessary to enable the Corporation to submit any proof of citizenship required
by law or by contract with the United States government (or any agency thereof),
the Corporation may require the record holders and the Beneficial Owners of such
Common Stock to confirm their citizenship status from time to time, and
dividends payable with
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respect to stock held by such record holder or owned by such Beneficial Owner
may, in the discretion of the Board of Directors, be withheld until confirmation
of such citizenship status is received; and (c) the stock transfer records of
the Corporation shall be maintained in such manner as to enable the percentage
of Common Stock that is Beneficially Owned by Non-Citizens and by Citizens to be
confirmed. The Board of Directors is authorized to take such other ministerial
actions or make such interpretations of these Articles of Incorporation as it
may deem necessary or advisable in order to implement the policy set forth in
Section 8.02 of this Article VIII. Nothing contained in these Articles of
Incorporation shall be construed as requiring the Corporation to issue physical
certificates in connection with the issuance of shares of Common Stock held
through The Depository Trust Company or other depository if the Board of
Directors determines that The Depository Trust Company or such other depository
has established procedures that will allow the Corporation to determine the
citizenship of the Beneficial Owner of shares of Common Stock held through them.
The Board of Directors is authorized to take such ministerial actions or make
such interpretations of these Articles of Incorporation as it may deem necessary
or advisable in order to facilitate the trading of Common Stock through The
Depository Trust Company or other depository as the Board of Directors may
determine.
Section 8.04. Restrictions on Transfer. Any transfer, or attempted
transfer, of any shares of Common Stock, the affect of which would be to cause
one or more Non-Citizens to Beneficially Own Common Stock in excess of the
Permitted Percentage, shall be ineffective as against the Corporation, and
neither the Corporation nor its transfer agent shall register such transfer or
purported transfer on the stock transfer records of the Corporation and neither
the Corporation nor its transfer agent shall be required to
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recognize the transferee or purported transferee thereof as a stockholder of the
Corporation for any purpose whatsoever except to the extent necessary to effect
any remedy available to the Corporation under this Article VIII. A citizenship
certificate shall be required from all transferees (and from any recipient upon
original issuance) of stock certificates representing shares of Common Stock of
the Corporation and, if such transferee (or recipient) is acting as a fiduciary
or nominee for a Beneficial Owner, with respect to such Beneficial Owner, and
registration of transfer (or original issuance) shall be denied upon refusal to
furnish such certificate. All determinations of the percentage of shares of each
class of Common Stock Beneficially Owned by Non-Citizens shall be made on a
fully-diluted basis, treating all outstanding options, warrants and rights to
acquire Common Stock as outstanding.
Section 8.05. No Voting Rights, Temporary Withholding of Dividends and
Other Distributions. If on any date (including any record date) the number of
shares of Common Stock that is Beneficially Owned by Non-Citizens is in excess
of the Permitted Percentage (such shares herein referred to as the "Excess
Shares"), the Corporation shall determine those shares Beneficially Owned by
Non-Citizens that constitute such Excess Shares. The determination of those
shares that constitute Excess Shares shall be made by reference to the date or
dates such shares were acquired by Non-Citizens, starting with the most recent
acquisition of shares of Common Stock by a Non-Citizen and including, in reverse
chronological order of acquisition, all other acquisitions of shares of Common
Stock by Non-Citizens from and after the acquisition of those shares of Common
Stock by a NonCitizen that first caused the Permitted Percentage to be exceeded.
The determination of the Corporation as to those shares that constitute the
Excess Shares shall be conclusive.
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Shares deemed to constitute such Excess Shares shall (so long as such excess
exists) not be accorded any voting rights and shall not be deemed to be
outstanding for purposes of determining the vote required on any matter properly
brought before the stockholders of the Corporation for a vote thereon. The
Corporation shall (so long as such excess exists) withhold the payment of
dividends and the sharing of any other distribution (upon liquidation or
otherwise) in respect of the Excess Shares. Dividends withhheld by the
Corporation otherwise payable with respect to those Excess Shares, which are
sold to Citizens before the Permitted Percentage is no longer exceeded and
before such Excess Shares are redeemed pursuant to Section 8.06 below, shall be
paid by the Corporation to the Citizen-buyer of those Excess Shares. At such
time as the Permitted Percentage is no longer exceeded, full voting rights shall
be restored to any shares previously deemed to be Excess Shares and any dividend
or distribution with respect thereto that has been withheld shall be due and
paid solely to the record holders of such shares at the time the Permitted
Percentage is no longer exceeded.
Section 8.06. Redemption of Excess Shares. Unless such redemption is not
permitted under Nevada Revised Statute Chapter 78, or under other provisions of
applicable law, Excess Shares shall be subject to redemption by the Corporation
(by action of the Board of Directors, in its discretion) solely to the extent
necessary to reduce the aggregate number of shares of such capital stock owned
by Non-Citizens to the Permitted Percentage. The terms and conditions of such
redemption or purchase shall be as follows: (a) the per share redemption or
purchase price (the "Transfer Price") to be paid for the Excess Shares shall be
the sum of (i) the Fair Market Value of such shares of capital stock plus (ii)
an amount equal to the amount of any dividend or any other distribution (upon a
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liquidation or otherwise) declared in respect of such shares prior to the date
on which such shares are called for redemption or purchase and which amount has
been withheld by the Corporation pursuant to Section 8.05 of this Article VIII;
(b) the Transfer Price shall be paid in cash (by bank or cashier's check); (c)
the Excess Shares to be redeemed or purchased shall be selected in the same
manner as provided in Section 8.05 of this Article VIII and shall not exceed the
number necessary to reduce the percentage of shares of capital stock owned by
Non-Citizens, in the aggregate, to the Permitted Percentage; provided that the
Corporation may adjust upward to the nearest whole share the number of shares to
be redeemed or purchased so as not to be required to redeem or issue fractional
shares; (d) written notice of the date of redemption or purchase (the "Transfer
Date") together with a letter of transmittal to accompany certificates
representing shares of stock that are surrendered for redemption or purchase (if
any) shall be given either by hand delivery or by overnight courier service or
by first-class mail, postage prepaid, to each holder of record of the selected
shares to be redeemed or purchased, at such holder's last known address as the
same appears on the stock register of the Corporation (unless such notice is
waived in writing by any such holders) (the "Transfer Notice"); (e) The Transfer
Date (for purposes of determining right, title and Interest in and to shares of
capital stock being selected for redemption or purchase) shall be the later of
(i) the date specified in the Transfer Notice furnished to record holders (which
shall not be earlier than the date of such notice) or (ii) the date on which the
funds necessary to effect the redemption or purchase have been irrevocably
deposited in trust for the benefit of such record holders; (f) each Transfer
Notice shall specify (i) the Transfer Date (as determined pursuant to Subsection
(e) of this Section 8.06), (ii) the number of shares of capital stock to be
redeemed or purchased from
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such holder (and, to the extent such shares are certificated, the certificate
number(s) representing such shares), (iii) the Transfer Price and the manner of
payment thereof, (iv) the place where certificates for such shares (if such
shares are certificated) are to be surrendered for cancellation against the
simultaneous payment of the Transfer Price, (v) any instructions as to the
endorsement or assignment for transfer for such certificates (if any) and the
completion of the accompanying letter of transmittal, and (vi) the fact that all
right, title and interest in respect of the shares so selected for redemption or
purchase (including, without limitation, voting and dividend rights) shall cease
and terminate on the Transfer Date, except for the right to receive the Transfer
Price; (g) in the case of a redemption, from and after the Transfer Date, all
right, title and interest in respect of the shares selected for redemption
(including, without limitation, voting and dividend rights) shall cease and
terminate, such shares shall no longer be deemed to be outstanding (and may
either be retired or held by the Corporation as treasury stock) and the owners
of such shares shall thereafter be entitled only to receive the Transfer Price;
(h) In the case of a purchase, from and after the Transfer Date, all right,
title and interest in respect of the shares selected for purchase (including,
without limitation, voting and dividend rights) shall be transferred to the
purchasers thereof, the purchasers thereof shall be deemed the owners thereof
for all purposes and the transferors of such shares shall thereafter be entitled
only to receive the Transfer Price; and (i) upon surrender of the certificates
(if any) for any shares so redeemed or purchased in accordance with the
requirements of the Transfer Notice and accompanying letter of transmittal (and
otherwise in proper form for transfer as specified in the Transfer Notice), the
owner of such shares shall be entitled to payment of the Transfer Price. In case
fewer than all the shares represented by any such
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certificate are redeemed or purchased, a new certificate (or certificates), to
the extent such shares were certificated, shall be issued representing the
shares not redeemed or purchased without cost to the holder thereto.
Section 8.07. Determination of Citizenship. In determining the
citizenship of the Beneficial Owners or their transferees of its Common Stock,
the Corporation may rely on the stock transfer records of the Corporation and
the citizenship certificates given by Beneficial Owners or their transferees or
any recipients (in the case of original issuance) (in each case whether such
certificates have been given on their own behalf or on behalf of others) to
prove the citizenship of such Beneficial Owners, transferees or recipients of
the Common Stock. The determination of the citizenship of Beneficial Owners and
their transferees of the Common Stock may also be subject to proof in such other
way or ways as the Corporation may deem reasonable. The Corporation may at
anytime reasonably require proof, in addition to the citizenship certificates,
of the Beneficial Owner or proposed transferee of Common Stock, and the payment
of dividends may be withheld, and any application for transfer of ownership on
the stock transfer records of the Corporation may be refused" until such
additional proof is submitted.
Section 8.08. Severability. Each provision of this Article VIII is
intended to be severable from every other provision. If, any one or more of the
provisions contained in this Article VIII is held to be invalid, illegal or
unenforceable, the validity, legality or enforceability of any other provision
of this Article VIII shall not be affected, and this Article VIII shall be
construed as if the provisions held to be invalid, illegal or unenforceable had
never been contained herein.
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ARTICLE IX
DIRECTORS' AND OFFICERS' LIABILITY
No director or officer of the Corporation shall be personally liable to
the Corporation or any of its stockholders for damages for breach of fiduciary
duty as a director or officer involving any act or omission of any such director
or officer. However, the foregoing provision shall not eliminate or limit the
liability of a director or officer for (i) acts or omissions which involve
intentional misconduct, fraud or a knowing violation of law, or (ii) the payment
of dividends in violation of Section 78.300 of the Nevada Revised Statutes. Any
repeal or modification of this Article by the stockholders of the Corporation
shall be prospective only, and shall not adversely affect any limitation on the
personal liability of a director or officer of the Corporation for acts or
omissions prior to such repeal or modification.
ARTICLE X
INDEMNITY
Section 10.01. Right to Indemnity. Subject to any restrictions set forth
in the bylaws of this Corporation, every person who was or is a party, or is
threatened to be made party to or is involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he or a person of whom he is the legal representative is or was a director
or officer of the Corporation, or is or was serving at the request of the
Corporation as a director or officer of another corporation, or as its
representative in a partnership, joint venture, trust or other enterprise, shall
be indemnified and held harmless to the fullest extent legally permissible under
the laws of the State of Nevada from time to time against all expenses,
liability and loss (including attorney's fees,
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judgments, fines and amounts paid or to be paid in settlement) reasonably
incurred or suffered by him in connection therewith. Such right of
indemnification shall be a contract right which may be enforced in any manner
desired by such person. Such right of indemnification shall not be exclusive of
any other right which such directors, officers or representatives may have or
hereafter acquire, and, without limiting the generality of such statement, they
shall be entitled to their respective rights of indemnification under any bylaw,
agreement, vote of shareholders, provision of law, or otherwise, as well as
their rights under this Article.
Section 10.02. Expenses Advanced. Subject to any restrictions set forth
in the bylaws of this Corporation, expenses of directors and officers incurred
in defending a civil or criminal action, suit or proceeding by reason of any act
or omission of such director or officer acting as a director or officer shall be
paid by the Corporation as they are incurred and in advance of the final
disposition of the action, suit or proceeding, upon receipt of any undertaking
by or on behalf of the director or officer to repay the amount if it is
ultimately determined by a court of competent jurisdiction that he is not
entitled to be indemnified by the Corporation.
Section 10.03. Bylaws; Insurance. Without limiting the application of
the foregoing, the Board of Directors may adopt bylaws from time to time with
respect to indemnification, to provide at all times the fullest indemnification
permitted by the laws of the State of Nevada, to limit the right of
indemnification, and may cause the Corporation to purchase and maintain
insurance or make other financial arrangements on behalf of any person who is or
was a director or officer of the Corporation as a director or officer of another
corporation, or as its representative in a partnership, joint venture, trust or
other enterprise
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against any liability asserted against such person and incurred in any such
capacity or arising out of such status, to the fullest extent permitted by the
laws of the State of Nevada, whether or not the Corporation would have the power
to indemnify such person.
The indemnification and advancement of expenses provided in this Article
shall continue for a person who has ceased to be a director, officer, employee
or agent, and inures to the benefit of the heirs, executors and administrators
of such a person.
ARTICLE XI
AMENDMENT OF CERTAIN ARTICLES AND BYLAWS
Notwithstanding any other provision of these Articles, an amendment
thereto, a resolution of the board of directors or a Certificate of Designation
of the rights, powers, limitations, preferences, restrictions and relative
rights of any class or series of stock filed with the Nevada Secretary of State,
or the Bylaws of this Corporation in effect from time to time, the affirmative
vote of holders of 66-2/3% of the voting power of the Common Stock shall be
required to amend, alter, change or repeal Article V, Article VII or Article XI
of these Articles of Incorporation and amend, alter, change or repeal any Bylaw
relating to the following subject matters: stockholder action without a meeting;
the calling of special stockholder meetings; notices of stockholder meetings;
the number election and term of the Company's directors; the filling of
vacancies in the Board of Directors; and the removal of directors. Neither the
Directors nor the Stockholders shall promulgate Bylaws inconsistent with these
Articles of Incorporation and any and all such inconsistent Bylaws shall be null
and void.
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Executed this ____ day of January, 1998.
----------------------------
John P. Fowler
Incorporator
STATE OF NEVADA
COUNTY OF WASHOE
This instrument was acknowledged before me on January ____, 1998 by John
P. Fowler.
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NOTARY PUBLIC
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CERTIFICATE OF ACCEPTANCE
OF APPOINTMENT BY AGENT FOR SERVICE OF PROCESS
In accordance with NRS 78.030(1)(b), the undersigned certifies
acceptance of the appointment as the agent for service of process Omega Protein
Corporation, a Nevada corporation.
Date:--------------- --------------------------------
John P. Fowler
Marshall Hill Cassas & de Lipkau
333 Holcomb Ave., Suite 300
Reno, NV 89502
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BYLAWS
OMEGA PROTEIN CORPORATION, A NEVADA CORPORATION
ARTICLE I
STOCKHOLDERS' MEETING
SECTION 1.1 PLACE OF MEETINGS.
All meetings of the stockholders shall be held at the principal office
of the corporation in the State of Texas ("Principal Office"), or at any other
place within or without the State of Nevada as may be designated for that
purpose from time to time by the Board of Directors.
SECTION 1.2 ANNUAL MEETINGS.
Commencing with the first annual meeting of the stockholders held after
September 30, 1998, the annual meeting of Stockholders shall be held not later
than 210 days after the close of the previous fiscal year, on the date and at
the time set by the Board of Directors, at which time the stockholders shall
elect directors, consider reports of the affairs of the Corporation, and
transact such other business as may properly be brought before the meeting.
SECTION 1.3 SPECIAL MEETINGS.
Except as otherwise required by law as of the time at which Zapata
Corporation, a Delaware corporation ("Zapata"), and its affiliates cease to be
the beneficial owners of an aggregate of at least a majority of the then
outstanding shares of Common Stock of this Corporation (the "Common Stock"),
special meetings of the stockholders cannot be called by the holders of the
Common Stock, but only by the Chairman of the Board or by the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors, the number of directors the Corporation would have if there were no
vacancies (the "Whole Board"). At any time during which Zapata and its
affiliates own an aggregate of at least a majority of the then outstanding
shares of Common Stock, special meetings of the stockholders may be called by
the Chairman of the Board, Chief Executive Officer, the President, a majority of
the Board of Directors, or upon request by Zapata, or any of Zapata's
affiliates.
SECTION 1.4 NOTICE OF MEETINGS.
1.4.1 Notice of each meeting of stockholders, whether annual or special,
shall be given at least 10 and not more than 60 days before the meeting by the
Secretary or any Assistant Secretary causing to be delivered or mailed to each
stockholder of record entitled
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to vote at the meeting a written notice stating the time and place of the
meeting and the purpose or purposes for which the meeting is called. The notice
shall be signed by the Chairman of the Board, the Vice Chairman of the Board,
the Chief Executive Officer, the President, the Secretary or any Assistant
Secretary and shall be delivered or mailed postage prepaid to each stockholder
at such stockholder's address as it appears on the stock books of the
corporation. If any stockholder has failed to supply an address, notice shall be
deemed to have been given if mailed to the address of the Principal Office, or
published at least once in a newspaper having general circulation in the county
in which the Principal Office is located.
1.4.2 It shall not be necessary to give any notice of the adjournment of
or the business to be transacted at an adjourned meeting other than by
announcement at the meeting at which such adjournment is taken. However, when a
meeting is adjourned for 30 days or more, notice of the adjourned meeting must
be given as in the case of an original meeting.
SECTION 1.5 CONSENT BY STOCKBROKERS.
As of the time at which Zapata Corporation and its affiliates cease to
be the beneficial owners of an aggregate of at least a majority of the then
outstanding shares of Common Stock, no action required or permitted to be taken
at a meeting of the stockholders shall be taken by written consent. However, at
any time during which Zapata Corporation and its affiliates are the beneficial
owners of an aggregate of at least a majority of the then outstanding shares of
Common Stock, any action required or permitted to be taken at a meeting of the
stockholders of the Corporation may be taken without a meeting by the written
consent of stockholders entitled to vote on such action holding at least a
majority of the voting power.
SECTION 1.6 QUORUM.
1.6.1 The presence in person or by proxy of the persons entitled to vote
a majority of the voting stock at any meeting constitutes a quorum for the
transaction of business. Particular shares of stock shall not be counted in
determining the number of shares of stock represented or required for a quorum
or in any vote at a meeting, if the voting of such shares at the meeting has
been enjoined or for any reason such shares cannot be lawfully voted at the
meeting.
1.6.2 The stockholders present at a duly called or held meeting at which
a quorum is present may continue to do business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum.
1.6.3 In the absence of a quorum, the holders of a majority of the
shares of stock present in person or by proxy and entitled to vote may adjourn
any meeting from time to time, but not for a period of more than 30 days at any
one time, until a quorum is in attendance.
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SECTION 1.7 VOTING RIGHTS.
1.7.1 Except as otherwise provided by law or by the Articles of
Incorporation, any amendment thereto, or any Certificate of Designation of the
rights and privileges of the holders of Preferred Stock filed in the office of
the Nevada Secretary of State (a "Certificate of Designations"), every
stockholder of record of the Corporation entitled to vote is entitled at each
meeting of the stockholders to one vote for each share of stock standing in the
stockholder's name on the books of the Corporation. Except as otherwise provided
by law or by the Articles of Incorporation or any amendment thereto, or any
Certificate of Designations or by these Bylaws, if a quorum is present, the vote
of the holders of a majority of votes cast on a particular matter is binding
upon all stockholders of the Corporation.
1.7.2 The Board of Directors may designate a day not more than 60 days
before any meeting of the stockholders as the day as of which stockholders
entitled to notice of and to vote at the meeting is determined.
SECTION 1.8 PROXIES.
Every stockholder entitled to vote or to execute consents may do so
either in person or by written proxy executed in accordance with the provisions
of Chapter 78 of the Nevada Revised Statutes and filed with the Secretary of the
Corporation.
SECTION 1.9 MANNER OF CONDUCTING MEETINGS.
To the extent not in conflict with the provisions of law relating
thereto, the Articles of Incorporation or any amendment thereto, or these
Bylaws, meetings must be conducted pursuant to such rules as may be adopted by
the chairman presiding at the meeting.
SECTION 1.10 BUSINESS BROUGHT BEFORE MEETINGS.
1.10.1 At any annual meeting of stockholders, the only business which
may be conducted must have been brought before the meeting (i) by or at the
direction of the Chairman of the Board, (ii) by or at the direction of the Board
of Directors or (iii) by any stockholder of the Corporation who is entitled to
vote with respect to the matter and who complies with the notice procedures set
forth in this Section 1.10. For business to be properly brought before an annual
meeting by a stockholder, the stockholder must give timely notice thereof in
writing to the Secretary of the Corporation. To be timely, a stockholder's
notice must be delivered or mailed by first class United States mail, postage
prepaid, to the Secretary of the Corporation not less than 90 days before the
annual meeting. A stockholder's notice to the Secretary must set forth details
of each matter the stockholder proposes to bring before the annual meeting as
follows: (i) a brief description of the business desired to be brought before
the annual meeting and the reasons for conducting such business at the annual
meeting, (ii) the name and address, as they appear on the books of the
Corporation, of the stockholder of the Corporation proposing such business,
(iii) the class and number of shares of the stock of the Corporation that are
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beneficially owned by the stockholder and (iv) any material interest of the
stockholder in such business.
1.10.2 At any special meeting of stockholders, the only business which
may be conducted must have been described in general terms in the notice of the
special meeting.
1.10.3 Notwithstanding anything in these Bylaws to the contrary, no
business shall be brought before or conducted at any annual or special meeting
except in accordance with the foregoing procedures. The officer of the
Corporation or other person presiding over the annual meeting ("Presiding
Person") shall, if the facts so warrant, determine and declare to the meeting
that business was not properly brought before the meeting in accordance with the
provisions of this Section 1.10. If the Presiding Person determines that a
matter was not properly brought before the meeting, the Presiding Person shall
so declare to the meeting and the business shall not be transacted. Except as
otherwise provided in this Bylaws, at any special meeting of the stockholders,
the only business which shall be conducted must have been brought before the
meeting by or at the direction of the Board of Directors.
SECTION 1.11 NOTICE OF NOMINATIONS.
Nominations for the election of directors may be made only by the
Chairman of the Board of Directors or upon timely notice given by any
stockholder entitled to vote for the election of directors. No persons other
than those nominated pursuant to this Section 1.11 are eligible for election as
a director. For such a stockholder notice to be timely, the notice must be made
in writing, and physically received by the Secretary of the Corporation not
later, than the close of business on the 60th calendar day nor earlier than the
close of business on the 90th calendar day before the first anniversary of the
preceding year's annual meeting (except that, in the event that the date of the
annual meeting is more than 30 calendar days before or more than 60 calendar
days after such anniversary date, notice by the stockholder to be timely must be
so delivered not earlier than the close of business on the 90th calendar day
before such annual meeting and not later than the close of business on the later
of the 60th calendar day before such annual meeting or the 10th calendar day
following the day on which public announcement of a meeting date is first made
by the Corporation). The stockholder notice must contain the name and business
address of the nominee. The notice must also contain all the information set
forth in clauses (ii) through (iv) of the last sentence of Section 1.10.1 above.
SECTION 1.12 APPLICABILITY TO ZAPATA.
Sections 1.10 and 1.11 shall not apply to Zapata and its affiliates
before the date on which Zapata no longer owns at least a majority of the
outstanding Common Stock.
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ARTICLE II
DIRECTORS - MANAGEMENT
SECTION 2.1 POWERS.
Subject to any limitation contained in the laws of the State of Nevada,
the Articles of Incorporation or any amendment thereto, or these Bylaws, or as
to action to be authorized or approved by the stockholders, all corporate powers
shall be exercised by or under authority of, and the business and affairs of
this Corporation shall be controlled by, the Board of Directors.
SECTION 2.2 NUMBER AND QUALIFICATION.
2.2.1 The number of directors which shall constitute the whole Board of
Directors shall be no less than three nor more than 9. The number of directors
shall be fixed from time to time within this range exclusively by the Board of
Directors pursuant to a resolution adopted by a majority of the Whole Board. No
increase or decrease in the number of directors shall shorten the term of any
incumbent director.
2.2.2 No more of the Directors shall be Non-Citizens of the United
States than a minority of the number necessary to constitute a quorum of the
Board of Directors. For the purposes of this Section 2.2 a "Citizen of the
United States" is a natural person who is a citizen of the United States by
birth, naturalization or otherwise by law. A "Non-Citizen of the United States"
is any natural person who is not a Citizen of the United States.
SECTION 2.3 CLASSES OF DIRECTORS AND TERM OF OFFICE.
2.3.1 The directors (exclusive of directors who may be elected by the
holders of one or more classes or series of preferred stock) must be divided by
a resolution of the Board of Directors into three classes, as nearly equal in
number as possible. If there are no classes of directors, each director has a
term of office of one year. If the directors have been divided into classes, the
resolution of the Board which creates the classes must set forth the term of
office of each class. In the event of vacancy, either by death, resignation, or
removal of a director, or by reason of an increase in the number of directors,
each replacement or new director shall serve for the balance of the term of the
class of the director he or she succeeds or, in the event of an increase in the
number of directors, of the class to which he or she is assigned. All directors
elected for a term shall continue in office until the election and qualification
of their respective successors, their death, their resignation in accordance
with Section 2.6, their removal in accordance with Section 2.5, or if there has
been a reduction in the number of directors and no successor is to be elected,
until the end of the term.
2.3.2 Directors elected by holders of preferred stock of the Corporation
voting as a class shall not be members of any of the foregoing classes and shall
hold office until the
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next annual meeting of stockholders unless the terms of the series or class of
preferred stock of the Corporation provides otherwise.
SECTION 2.4 ELECTION OF DIRECTORS.
2.4.1 At each annual meeting of stockholders, the class of directors to
be elected at the meeting shall be chosen by a plurality of the votes cast by
the holders of shares entitled to vote in the election at the meeting, provided
a quorum is present. The election of directors by the stockholders shall be by
written ballot if directed by the chairman of the meeting or if the number of
nominees exceeds the number of directors to be elected.
2.4.2 Except as otherwise provided for in a Certificate of Designations,
any vacancy on the Board of Directors shall be filled by the affirmative vote of
a majority of the remaining directors, or a sole remaining director, though less
than a quorum. Vacancies on the Board of Directors shall not be filled by the
vote or written consent of the stockholders, except directors elected by the
holders of preferred stock as may be provided in any Certificate of
Designations.
2.4.3 If the holders of Preferred Stock voting as a class are entitled
to elect directors, those directors shall be elected by a plurality of the votes
cast by the holders of shares of preferred stock of the Corporation entitled to
vote, voting separately as a class.
SECTION 2.5 REMOVAL OF DIRECTORS.
Any director, other than a director elected by holders of preferred
stock of the corporation voting as a class, may be removed from office at any
time but only upon the affirmative vote of the holders of at least 66-2/3% of
the voting power of all of the Common Stock, voting together as a single class.
Directors elected by holders of preferred stock may be removed from office as
provided in the Certificate of Designations or at any time upon the affirmative
vote of the holders of at least 66-2/3% of the voting power of the shares of
preferred stock the holders of which are entitled to elect the director.
SECTION 2.6 RESIGNATIONS.
Any director of the Corporation may resign at any time either by oral
tender of resignation at any meeting of the Board of Directors or by giving
written notice thereof to the Chairman of the Board, the Chief Executive
Officer, the President or the Secretary of the Corporation. Such resignation
shall take effect at the time it specifies, and the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 2.7 PLACE OF MEETINGS.
Meetings of the Board of Directors shall be held at the Principal Office
or at such other place within or without the State of Nevada as may be
designated for that purpose by the Board of Directors.
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SECTION 2.8 MEETINGS AFTER ANNUAL STOCKHOLDERS' MEETING.
The first meeting of the Board of Directors held after the annual
stockholders' meeting shall be held at such time and place within without the
State of Nevada as is fixed by announcement of the Chairman of the Board, the
Chief Executive Officer or the President of the Corporation given at the annual
stockholders' meeting, and no other notice of such meeting shall be necessary,
provided a majority of the whole Board is present. Alternatively, such meeting
may be held at the time and place fixed in a notice given under other provisions
of these Bylaws.
SECTION 2.9 OTHER REGULAR MEETINGS.
2.9.1 Regular meetings of the Board of Directors shall be held at such
time and place within or without the State of Nevada as may be determined from
time to time by a majority of the Board.
2.9.2 No notice need be given of regular meetings, except that each
director must be given written notice of the specific meeting dates or regular
meeting dates, and the day of the month, the time, and the place of the meeting.
SECTION 2.10 SPECIAL MEETINGS.
Special meetings of the Board of Directors must be held whenever called
by the Chairman of the Board, the Chief Executive Officer or the President of
the Corporation or any two other directors, except that when the Board of
Directors consists of one director, then the one director may call a special
meeting. At any time during which Zapata and its affiliates have ceased to own
an aggregate of at least a majority of the then outstanding shares of Common
Stock, special meetings of the Board of Directors shall not be called by holders
of the Common Stock. Notice of any special meeting must be mailed to each
director not later than three days before the day on which the meeting is to be
held, or shall be sent to him or her by telecopy, or delivered personally or by
telephone, not later than midnight of the day before the day of the meeting. Any
meeting of the Board of Directors shall be a legal meeting, without any notice
thereof having been given, if each director consents to the holding thereof or
waives notice in the manner specified in Section 2.11. Except as otherwise
provided in this Bylaws or as my be indicated in the notice thereof, any and all
business may be transacted at any special meeting.
SECTION 2.11 WAIVER OF NOTICE.
Anything herein to the contrary notwithstanding, notice of any meeting
of directors shall not be required as to any director who waives notice in
writing (including telecopy) before or after the meeting, which waiver shall be
filed with the Secretary of the Corporation. Attendance of a director at a
meeting is equivalent to a written waiver of notice of the meeting if the
director's oral consent is entered in the minutes or the director takes part in
the deliberations of the meeting without objection.
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SECTION 2.12 NOTICE OF ADJOURNMENT.
Notice of the time and place of holding an adjourned meeting need not be
given to absent directors if the time and place is fixed at the meeting
adjourned.
SECTION 2.13 QUORUM.
A majority of the number of directors as fixed by the Articles of
Incorporation or any amendment thereto, or pursuant to these Bylaws, shall be
necessary to constitute a quorum for the transaction of business, and the action
of a majority of the directors present at any meeting at which there is a
quorum, when duly assembled, is valid as a corporate act. However, a minority of
the directors, in the absence of a quorum, may adjourn from time to time or fill
vacant directorships in accordance with Section 2.4 but may not transact any
other business. When the Board of Directors consists of one or two directors,
then the one or two directors, respectively, constitute a quorum.
SECTION 2.14 ACTION BY UNANIMOUS WRITTEN CONSENT.
Any action required or permitted to be taken at any meeting of the Board
of Directors may be taken without a meeting, if all members of the Board
individually or collectively consent in writing to the meeting. The written
consent must be filed with the minutes of the proceedings of the Board and has
the same force and effect as a unanimous vote of the directors.
SECTION 2.15 COMPENSATION.
The directors may be paid their expenses of attendance at each meeting
of the Board of Directors. Additionally, the Board of Directors may from time to
time, in its discretion, pay to directors either or both a fixed sum for
attendance at each meeting of the Board of Directors or a stated salary for
services as a director. No such payment precludes any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like reimbursement and
compensation for attending committee meetings.
SECTION 2.16 TRANSACTIONS INVOLVING INTERESTS OF DIRECTORS.
In the absence of fraud, no contract or other transaction of the
corporation is affected or invalidated by the fact that any of the directors of
the corporation are in any way interested in, or connected with, any other party
to, such contract or transaction, provided that such transaction satisfies the
applicable provisions of Chapter 78 of the Nevada Revised Statutes. Each and
every person who becomes a director of the Corporation is hereby relieved, to
the extent permitted by law, from any liability that might otherwise exist from
contracting in good faith with the corporation for the benefit of himself or
herself or any person in which he or she may be in any way interested or with
which he or she may be in any way connected. Any director of the corporation may
vote and act upon any matter, contract or transaction between the Corporation
and any other person without
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regard to the fact that he or she is also a stockholder, director or officer of,
or has any interest in, such other person.
ARTICLE III
OFFICERS
SECTION 3.1 EXECUTIVE OFFICERS.
The executive officers of the Corporation shall be a Chief Executive
Officer (who may be the Chairman of the Board, the Vice Chairman of the Board or
the President), a President, one or more Vice Presidents, a Secretary and a
Treasurer. Any person may hold two or more offices. The executive officers of
the corporation must be elected annually by the Board of Directors and hold
office for one year or until their respective successors are elected and
qualify. The Chief Executive Officer, the President, the Chairman of the Board
and any other officer of the Corporation by whatever title he or she may be
known who functions as the chief executive officer, must be a "citizen of the
United States" as defined in Section 2.2.2 above.
SECTION 3.2 APPOINTED OFFICERS: TITLES.
3.2.1 The Chief Executive Officer or a person designated by such
officer, or the Secretary in the case of assistant secretaries or the Treasurer
in the case of assistant treasurers, may appoint one or more assistant
secretaries or one or more assistant treasurers, each of whom shall hold such
title at the pleasure of the appointing officer, have such authority and perform
such duties as are provided in these Bylaws, or as the Chief Executive Officer
or other appointing officer may determine from time to time. Any person
appointed under this Section 3.2.1 to serve in any of the foregoing positions is
deemed by reason of such appointment or service in such capacity to be an
"officer" of the Corporation.
3.2.2 The Chief Executive Officer or a person designated by such officer
may also appoint one or more vice presidents and one or more assistant vice
presidents for each corporate staff function and a corporate controller and one
or more assistant controllers. Each of these persons hold such title at the
pleasure of the Chief Executive Officer and have authority to act for and shall
perform duties with respect to only the staff function for which the person is
appointed. Any person appointed under this Section 3.2.2 to serve in any of the
foregoing positions is not deemed by reason of such appointment or service in
such capacity to be an "officer" of the Corporation.
SECTION 3.3 REMOVAL AND RESIGNATION.
3.3.1 Any officer may be removed, either with or without cause, by a
majority of the directors at the time in office, at any regular or special
meeting of the Board. Any
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appointed person may be removed from such position at any time by the person
making such appointment or such person's successor.
3.3.2 Any officer may resign at any time, by giving written notice to
the Board of Directors, the Chief Executive Officer, the President or the
Secretary of the Corporation. Any such resignation takes effect at the date of
the receipt of such notice, or at any later time specified in the notice. Unless
otherwise specified, the acceptance of the resignation is not necessary to make
it effective.
SECTION 3.4 VACANCIES.
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these Bylaws for regular appointments to such office.
SECTION 3.5 CHAIRMAN OF THE BOARD AND VICE CHAIRMAN OF THE BOARD.
The Chairman of the Board shall preside at all meetings of the Board of
Directors and shall exercise and perform such other powers and duties as may be
from time to time assigned to him or her by the Board of Directors or these
Bylaws. The Vice Chairman of the Board shall, in the absence of the Chairman,
preside at all meetings of the Board of Directors and shall exercise and perform
such other powers and duties as may be from time to time assigned to him or her
by the Board of Directors or these Bylaws.
SECTION 3.6 CHIEF EXECUTIVE OFFICER.
The Chief Executive Officer shall, subject to the control of the Board
of Directors, have general supervision, direction and control of the business
and affairs of the Corporation. The Chief Executive Officer shall preside at all
meetings of the stockholders and, in the absence of the Chairman of the Board
and the Vice Chairman of the Board, at all meetings of the Board of Directors.
The Chief Executive Officer is ex officio a member of the Executive Committee
and has the general powers and duties of management usually vested in the office
of chief executive officer of a corporation and such other powers and duties as
may be prescribed by the Board of Directors or these Bylaws.
SECTION 3.7 PRESIDENT.
In the absence or disability of the Chief Executive Officer, the
President shall perform all of the duties of the Chief Executive Officer and
when so acting has all the powers and is subject to all the restrictions upon
the Chief Executive Officer, including the power to sign all instruments and to
take all actions which the Chief Executive Officer is authorized to perform by
the Board of Directors or these Bylaws. The President has the general powers and
duties usually vested in the office of president of a corporation and such other
powers and duties as may be prescribed by the Chief Executive Officer, the
Deputy Chief Executive Officer or the Board of Directors or these Bylaws.
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SECTION 3.8 VICE PRESIDENT
In the absence or disability of the Chief Executive Officer and the
President, the Vice President most senior in the order of his or her rank and
seniority shall perform all of the duties of the Chief Executive Officer, and
when so acting has all the powers of and is subject to all the restrictions upon
the Chief Executive Officer, including the power to sign all instruments and to
take all actions which the Chief Executive Officer is authorized to perform by
the Board of Directors or these Bylaws. The various ranks of Vice Presidents
have the general powers and duties usually vested in the office of a vice
president of a corporation and each of them has such other powers and perform
such other duties as from time to time may be prescribed for them respectively
by the Board of Directors, the Executive Committee of the Board of Directors,
the Chief Executive Officer or these Bylaws.
SECTION 3.9 SECRETARY AND ASSISTANT SECRETARIES.
3.9.1 The Secretary shall (1) attend all meetings of the Board of
Directors and all meetings of the stockholders; and (2) record and keep, or
cause to be kept, all votes and the minutes of all proceedings in a book or
books to be kept for that purpose at the Principal Office, or at such other
place as the Board of Directors may from time to time determine, specifying
therein (i) the time and place of holding, (ii) whether regular or special, and
if special, how authorized, (iii) the notice thereof given, (iv) the names of
those present at directors' meetings, (v) the number of shares of stock the
holders of which are present or represented at stockholders' meetings, and (vi)
the proceedings thereof; and (3) perform like duties for the Executive and other
standing committees, when required. In addition, the Secretary must keep or
cause to be kept, at the office of the Corporation's resident agent in Nevada,
those documents required to be kept at such office by Section 5.2 of these
Bylaws and the applicable provisions of Chapter 78 of the Nevada Revised
Statutes.
3.9.2 The Secretary shall give, or cause to be given, notice of meetings
of the stockholders and special meetings of the Board of Directors, and has such
other powers and perform such other duties as may be prescribed by these Bylaws
or by the Board of Directors or the Chief Executive Officer, or the President,
under whose supervision he or she shall be. The Secretary must keep in safe
custody the seal of the Corporation (if any) and affix it to any instrument
requiring it, and when so affixed, it shall be attested by his or her signature
or by the signature of the Treasurer or an Assistant Secretary. The Secretary is
hereby authorized to issue certificates, to which the corporate seal may be
affixed, attesting to the incumbency of officers of this Corporation or to
actions taken by the Board of Directors or any committee of officers or
directors or the stockholders.
3.9.3 In the absence or disability of the Secretary, the Assistant
Secretaries, in the order of their seniority, shall perform the duties and
exercise the powers of the Secretary, and shall perform such other duties as the
Chief Executive Officer, the President or the Secretary prescribe.
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SECTION 3.10 TREASURER AND ASSISTANT TREASURERS.
3.10.1 The Treasurer shall deposit all moneys and other valuables in the
name and to the credit of the Corporation, with such depositories as may be
ordered by the Board of Directors. The Treasurer shall disburse the funds of the
Corporation as may be ordered by the Board of Directors, shall render to the
Chief Executive Officer, or the President or directors, whenever they request
it, an account of all his or her transactions as Treasurer, and of the financial
condition of the Corporation, as may be prescribed by these Bylaws or by the
Board of Directors or the Chief Executive Officer or the President, under whose
supervision he or she shall be.
3.10.2 In the absence or disability of the Treasurer, the Assistant
Treasurers, in the order of their seniority shall perform the duties and
exercise the powers of the Treasurer and shall perform such other duties as the
Chief Executive Officer, the President or the Treasurer prescribe.
SECTION 3.11 ADDITIONAL POWERS, SENIORITY AND SUBSTITUTION OF OFFICERS.
In addition to the foregoing powers and duties specifically prescribed
for the respective officers, the Board of Directors may from time to time by
resolution (i) impose or confer upon any of the officers such additional duties
and powers as the Board of Directors may see fit, (ii) determine the order of
seniority among the officers, and/or (iii) except as otherwise provided above,
provide that in the absence of any officer or officers, any other officer or
officers shall substitute for and assume the duties, powers and authority of the
absent officer or officers. Any such resolution may be final, subject only to
further action by the Board of Directors, or the resolution may grant such
discretion, as the Board of Directors deems appropriate, to the Chief Executive
Officer (or in his or her absence the executive officer serving in his or her
place) to impose or confer additional duties and powers, to determine the order
of seniority among officers, and/or provide for substitution of officers as
above described.
SECTION 3.12 COMPENSATION.
The officers of the Corporation shall receive such compensation as is
fixed from time to time by the Board of Directors. No officer is prohibited from
receiving such salary by reason of the fact that the officer is also a director
of the Corporation.
SECTION 3.13 TRANSACTION INVOLVING INTEREST OF OFFICER.
In the absence of fraud, no contract or other transaction of the
Corporation shall be affected or invalidated by the fact that any of the
officers of the Corporation are in any way interested in, or connected with, any
other party to such contract or transaction, or are themselves parties to such
contract or transaction, provided that the transaction complies with the
applicable provisions of Chapter 78 of the Nevada Revised Statutes. Each and
every person who is or may become an officer of the Corporation is hereby
relieved, to the extent permitted by law, when acting in good faith, from any
liability that might otherwise
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exist from contracting with the Corporation for the benefit of such officer or
any person in which he or she may be in any way interested or with which he or
she may be in any way connected.
ARTICLE IV
EXECUTIVE AND OTHER COMMITTEES
SECTION 4.1 STANDING.
The Board of Directors may appoint an Executive Committee, an Audit
Committee and/or a Compensation Committee, consisting of such number of its
members as it may designate, consistent with the laws of the State of Nevada,
the Articles of Incorporation or any amendment thereto, or these Bylaws,
including, if deemed desirable, alternate members who, in the order specified by
the Board of Directors, may replace any absent or disqualified member at any
meeting of the Committee.
4.1.1 The Executive Committee shall have and may exercise, when the
Board is not in session, all of the powers of the Board of Directors in the
management of the business and affairs of the Corporation, but the Executive
Committee shall not have the power to fill vacancies on the Board, or to change
the membership of or to fill vacancies in the Executive Committee or any other
committee of the Board, or to adopt, amend or repeal the Bylaws, or to declare
dividends.
4.1.2 The Audit Committee shall select and engage on behalf of the
Corporation, and fix the compensation of a firm of certified public accountants
whose duty it shall be to audit the books and accounts of the Corporation and
its subsidiaries for the fiscal year in which they are appointed, and who shall
report to the Audit Committee. The Audit Committee shall confer with the
auditors and shall determine, and from time to time shall report to the Board of
Directors upon, the scope of the auditing of the books and accounts of the
Corporation and its subsidiaries. The Audit Committee shall also be responsible
for determining that the business practices and conduct of employees and other
representatives of the corporation and its subsidiaries comply with the policies
and procedures of the Corporation. A majority of the members of the Audit
Committee shall not be officers or employees of the Corporation or any of its
subsidiaries.
4.1.3.1 The Compensation Committee shall establish a general
compensation policy for the Corporation and shall have responsibility for the
approval of increases in directors' fees and in salaries paid to officers and
senior employees earning in excess of an annual salary to be determined by the
Committee. The Compensation Committee also shall evaluate and make
recommendations to the Board of Directors with respect to the adoption,
substantive modification to or termination of any benefit plan of this
Corporation, and with respect to employee benefit plans of the Corporation has
such additional responsibilities as are described in Section 4.1.3.2 hereof.
None of the members of the Compensation Committee shall be officers or employees
of the Corporation or any of its subsidiaries.
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4.1.3.2 To assist the Corporation in fulfilling its business goals, the
Board of Directors may from time to time establish or adopt those benefit plans,
which it shall designate as constituting a Level 1 plan (which designation
generally shall connote a compensatory plan in which participation is designed
solely for directors or senior management employees, or involves stock of this
Corporation, or is an incentive compensation plan that includes senior
management) or as constituting a Level 2 plan (which designation generally shall
connote a compensatory plan which is a savings plan or a corporate-wide capital
accumulation plan in which participation is broader than senior management
employees). The Board of Directors may modify or terminate any such plan.
However, the Compensation Committee is authorized to take action to adopt
non-substantive amendments to any Level 1 or Level 2 plan as it deems necessary
or appropriate, unless such plan involves the issuance of stock of the
Corporation. The Chief Executive Officer, or his designee, may take any and all
actions to establish or adopt any Level 3 plan (which would include medical
plans, dental plans, insurance plans, welfare plans and other benefit plans and
any other plan which is not a Level 1 or Level 2 plan) which he deems necessary
or convenient to the management of the Corporation, or to modify or terminate
such Level 3 plan, so long as such action is not primarily for the benefit of
directors or senior management employees of the Corporation, either individually
or collectively.
Notwithstanding the foregoing, the Compensation Committee is responsible
for the control and management of the operation and administration (which shall
exclude ministerial activities) of the benefit plans of the Corporation, subject
to the limitations of this section. The Compensation Committee is responsible
for the control and management of the operation and administration (which shall
exclude ministerial activities) of those plans designated by the Board of
Directors as Level 1 plans. The Compensation Committee's responsibilities with
respect to the control and management of the operation and administration (which
shall exclude ministerial activities) of those plans designated by the Board of
Directors as Level 2 plans, is limited to the appointment of members of any
committee as may be constituted as under such plans, and such periodic oversight
as the Compensation Committee deems prudent under the circumstances then
prevailing in order to evaluate the prudence of the continued appointment of
such members. The Compensation Committee has no responsibility with respect to
the control and management of the operation and administration of any Level 3
plan.
SECTION 4.2 OTHER COMMITTEES.
Subject to any limitations in the laws of the State of Nevada, the
Articles of Incorporation or any amendment thereto, or these Bylaws as to action
to be authorized or approved by the stockholders, or duties not delegable by the
Board of Directors, any or all of the corporate powers may be exercised by or
under authority of, and the business and affairs of this Corporation may be
controlled by, such other committee or committees as may be appointed by the
Board of Directors. The powers to be exercised by any such committee shall be
designated by the Board of Directors.
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SECTION 4.3 PROCEDURES.
Subject to any limitations in the laws of the State of Nevada, the
Articles of Incorporation or any amendment thereto, or these Bylaws regarding
the conduct of business by the Board of Directors and its appointed committees,
any committee created under this Article may use any procedures for conducting
its business and exercising its powers, including but not limited to, actions by
the unanimous written consent of its members in the manner set forth in Section
2.14. A majority constitutes a quorum unless the Committee consists of one or
two directors, then the one or two directors, respectively, constitute a quorum.
Notices of meetings may be sent to a committee's members in any reasonable
manner and may be waived as for meetings of directors.
ARTICLE V
CORPORATE RECORDS AND REPORTS - INSPECTION
SECTION 5.1 RECORDS.
The Corporation shall maintain adequate and correct accounts, books and
records of its business and properties. All of such books, records and accounts
shall be kept at its Principal Office as fixed by the Board of Directors from
time to time.
SECTION 5.2 ARTICLES, BYLAWS AND STOCK LEDGER.
The Corporation shall maintain and keep the following documents at the
office of its resident agent in the State of Nevada: (i) a certified copy of the
Articles of Incorporation and all amendments thereto; (ii) a certified copy of
the Bylaws and all amendments thereto; and (iii) a statement setting forth the
following: "The Corporation's transfer agent, whose address is ,
is the custodian of the duplicate stock ledger of the Corporation."
SECTION 5.3 INSPECTION.
Any person who has been a stockholder of record for at least six months
immediately before such stockholder's demand, or any person holding, or
thereunto authorized in writing by the holders of, at least five percent of all
of the Corporation's outstanding stock, upon at least five days' written demand,
or any judgment creditor without prior demand, has the right to inspect in
person or by agent or attorney, during usual business hours, the duplicate stock
ledger of the Corporation and to make extracts therefrom. However, such
inspection may be denied to any stockholder or other person upon his or her
refusal to furnish to the Corporation an affidavit that such inspection is not
desired for a purpose which is in the interest of a business or object other
than the business of the Corporation and that he or she has not at any time sold
or offered for sale any list of stockholders of any corporation or aided or
abetted any person in procuring any such record of stockholders for any such
purpose.
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SECTION 5.4 CHECKS, DRAFTS, ETC.
All checks, drafts or other orders for payment of money, notes or other
evidences of indebtedness, issued in the name of, or payable to, the
Corporation, shall be signed or endorsed by such person or persons, and in such
manner as shall be determined from time to time by resolution of the Board of
Directors.
ARTICLE VI
OTHER AUTHORIZATIONS
SECTION 6.1 EXECUTION OF CONTRACTS.
The Board of Directors, except as these Bylaws otherwise provide, may
authorize any officer or officers or agent or agents to enter into any contract
or execute any instrument in the name of and on behalf of the Corporation. Such
authority may be general, or confined to specific instances. Unless so
authorized by the Board of Directors, no officer, agent or employee shall have
any power or authority, except in the ordinary course of business, to bind the
Corporation by any contract or engagement or to pledge its credit, or to render
it liable for any purpose or in any amount.
SECTION 6.2 REPRESENTATION OF OTHER CORPORATIONS.
All stock of any other corporation, standing in the name of the
Corporation, shall be voted, represented and all right incidental thereto
exercised as directed by written consent or resolution of the Board of Directors
expressly referring thereto. In general, such rights shall be delegated by the
Board of Directors under express instructions from time to time as to each
exercise thereof to the Chief Executive Officer, the President, any Executive
Vice President, any Senior Vice President, and Vice President, the Treasurer or
the Secretary of this Corporation, or any other person expressly appointed by
the Board of Directors. Such authority may be exercised by the designated
officers in person, or by any other person authorized so to do by proxy, or
power of attorney, duly executed by such officers.
SECTION 6.3 DIVIDENDS.
The Board of Directors may from time to time declare, and the
Corporation may pay, dividends on its outstanding stock in the manner and on the
terms and conditions provided by the laws of the State of Nevada, and the
Articles of Incorporation or any amendment thereto, subject to any contractual
restrictions to which the Corporation is then subject.
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ARTICLE VII
CERTIFICATES FOR TRANSFER OF STOCK
SECTION 7.1 CERTIFICATES FOR STOCK.
7.1.1 Certificates for stock shall be of such form and device as the
Board of Directors may designate and shall be numbered and registered as they
are issued. Each shall state the name of the record holder of the stock
represented thereby; its number and date of issuance; the number of shares of
stock for which it is issued; the par value; a statement of the rights,
privileges, preferences and restrictions, if any; a statement as to rights of
redemption or conversion, if any; and a statement of liens or restrictions upon
transfer or voting, if any, or, alternatively, a statement upon certificates
specifying such matters may be obtained from the Secretary of the Corporation.
7.1.2 Every certificate for stock must be signed by the Chief Executive
Officer, the President and the Secretary or an Assistant Secretary, or must be
authenticated by facsimile signatures of the Chief Executive Officer, the
President and the Secretary or an Assistant Secretary. Before it becomes
effective, every certificate for stock authenticated by a facsimile or a
signature must be countersigned by a transfer agent or transfer clerk, and must
be registered by an incorporated bank or trust company, either domestic or
foreign, as registrar of transfers.
7.1.3 Even though an officer who signed, or whose facsimile signature
has been written, printed or stamped on a certificate for stock ceases, by
death, resignation or otherwise, to be an officer of the Corporation before the
certificate is delivered by the Corporation, the certificate shall be as valid
as though signed by a duly elected, qualified and authorized officer, if it is
countersigned by the signature or facsimile signature of a transfer agent or
transfer clerk and registered by an incorporated bank or trust company, as
registrar of transfers.
7.1.4 Even though a person whose signature as, or on behalf of, the
transfer agent or transfer clerk has been written, printed or stamped on a
certificate for stock ceases, by death, resignation or otherwise, to be a person
authorized to so sign such certificate before the certificate is delivered by
the Corporation, the certificate shall be deemed countersigned by the signature
of a transfer agent or transfer clerk for purposes of meeting the requirements
of this section.
SECTION 7.2 TRANSFER ON THE BOOKS.
Upon surrender to the Secretary of the Corporation or transfer agent of
the Corporation of a certificate for stock duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall be
the duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
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SECTION 7.3 LOST OR DESTROYED CERTIFICATES.
The Board of Directors may direct, or may authorize the Secretary of the
Corporation to direct, a new certificate or certificates to be issued in place
of any certificate or certificates theretofore issued by the Corporation alleged
to have been lost or destroyed, upon the making of an affidavit of that fact by
the person claiming the certificate for stock so lost or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors or Secretary may in its or his or her discretion, and as a condition
precedent to the issuance thereof, require the owner of such lost or destroyed
certificate or certificates, or his or her legal representative, to advertise
the same in such manner as it shall require and/or give the Corporation a bond
in such sum as it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost or destroyed.
SECTION 7.4 TRANSFER AGENTS AND REGISTRARS.
The Board of Directors may appoint one or more transfer agents or
transfer clerks, and one or more registrars, who may be the same person, and may
be the Secretary of the Corporation, or an incorporated bank or trust company,
either domestic or foreign, who shall be appointed at such times and places as
the requirements of the corporation may necessitate and the Board of Directors
may designate.
SECTION 7.5 FIXING RECORD DATE FOR DIVIDENDS, ETC.
The Board of Directors may fix a time, not exceeding 60 days before the
date fixed for the payment of any dividend or distribution, or for the allotment
of rights, or when any change or conversion or exchange of stock shall go into
effect, as a record date for determining the stockholders entitled to receive
any such dividend or distribution, or any such allotment of rights, or to
exercise the rights with respect to any such change, conversion, or exchange of
stock, and, in such case, only stockholders of record on the date so fixed are
entitled to receive such dividend, distribution or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares of stock on the books of the Corporation after any record date fixed as
provided in this Section 7.5.
SECTION 7.6 RECORD OWNERSHIP.
The Corporation is entitled to recognize the exclusive right of a person
registered as such on the books of the Corporation as the owner of shares of the
Corporation's stock to receive dividends, and to vote as such owner, and is not
bound to recognize any equitable or other claim to or interest in such shares on
the part of any other person, whether or not the Corporation has express or
other notice thereof, except as otherwise provided by law.
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ARTICLE VIII
AMENDMENTS TO BYLAWS
SECTION 8.1 SUPERMAJORITY REQUIRED FOR CERTAIN AMENDMENTS.
The affirmative vote of 66-2/3% of the voting power of the Common Stock
or the affirmative vote of a majority of the Board of Directors shall be
necessary to amend or repeal Sections 1.3, 1.5, 1.7, 1.10, 1.11, 1.12, 2.2, 2.4,
2.5, 2.10 of these Bylaws.
SECTION 8.2 BY STOCKHOLDERS.
Except as otherwise required by the provisions of Section 8.1 above, the
Articles of Incorporation or any amendments thereto and subject to the right of
the Board of Directors to amend or repeal bylaws as provided in Section 8.3,
these Bylaws may be repealed or amended at the annual stockholders' meeting or
at any other meeting of the stockholders called for that purpose, by a vote of
stockholders entitled to exercise a majority of the voting power of the
Corporation.
SECTION 8.3 BY DIRECTORS.
Except as otherwise required by the provisions of Section 8.1 above, the
Articles of Incorporation and subject to the right of the stockholders to adopt,
amend, or repeal bylaws as provided in Section 8.2, the Board of Directors may
adopt, amend or repeal any of these Bylaws by the affirmative vote of a majority
of the directors present at any organizational, regular or special meeting of
the Board of Directors. This power may not be delegated to any committee
appointed in accordance with these Bylaws.
SECTION 8.4 RECORD OF AMENDMENTS.
Whenever an amendment or a new Bylaw is adopted, it shall be copied in
the book of minutes with the original Bylaws, in the appropriate place. If any
Bylaw is repealed, the fact of repeal, with the date of the meeting at which the
repeal was enacted, or written assent was filed, shall be stated in the book of
minutes.
ARTICLE IX
INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 9.1 INDEMNIFICATION FOR EXPENSES IN PROCEEDINGS.
Each person who was or is a party or is threatened to be made a party to
or is involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by reason of the
fact that such person, or a person of whom such person is the legal
representative, is or was a director or officer of the Corporation or is or was
serving at the request of the Corporation as a director
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<PAGE>
employee, fiduciary or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, whether the basis of such proceeding is alleged action or
inaction in an official capacity or in any other capacity while serving as a
director, officer, employee, fiduciary or agent, shall be indemnified and held
harmless by the Corporation to the fullest extent permitted by the laws of
Nevada, as the same exist or may hereafter be amended, against all costs,
charges, expenses, liabilities and losses (including attorneys' fees, judgments,
fines, employee benefit plan excise taxes or penalties and amounts paid or to be
paid in settlement) reasonably incurred or suffered by such person in connection
therewith, and such indemnification shall continue as to a person who has ceased
to be a director, officer, employee, fiduciary or agent and shall inure to the
benefit of such person's heirs, executors and administrators. However, except as
provided in Section 9.2, the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was authorized by the
Board of Directors. The right to indemnification conferred in this Article IX
shall include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that, if so required by Chapter 78 of the Nevada Revised Statutes, the
payment of such expenses incurred by a director or officer in such person's
capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such person while a director or officer (and not
in any other capacity in which service was or is rendered by such person while a
director or officer, including, without limitation, service to any employee
benefit plan) in advance of the final disposition of a proceeding shall be made
only upon delivery to the Corporation of an undertaking, by or on behalf of such
director or officer, to repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be indemnified under
this Section 9.1 or otherwise. The Corporation may, by action of the Board,
provide indemnification to employees and agents of the Corporation with the same
scope and effect as the foregoing indemnification of directors and officers.
SECTION 9.2 RIGHT TO BRING SUIT FOR UNPAID CLAIMS.
If a claim under Section 9.1 is not paid in full by the Corporation
within thirty days after a written claim has been received by the Corporation,
the claimant may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim and, if successful in whole or in part,
the Corporation shall also pay the expense of prosecuting such claim. It is a
defense to any such action (other than an action brought to enforce a claim for
expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any is required, has been
tendered to the Corporation) that the claimant has failed to meet a standard of
conduct which makes it permissible under Nevada law for the Corporation to
indemnify the claimant for the amount claimed. Neither the failure of the
Corporation (including the Board of Directors, independent legal counsel, or its
stockholders) to have made a determination before the commencement of such
action that indemnification of the claimant is permissible in the circumstances
because he or she has met such standard of conduct, nor an actual determination
by the Corporation (including the Board of Directors, independent legal counsel,
or its stockholders) that the claimant has not met such standard of conduct,
shall be a defense
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<PAGE>
to the action or create a presumption that the claimant has failed to meet such
standard of conduct.
SECTION 9.3 ADVANCEMENT OF EXPENSES.
The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
Article IX is not exclusive of any other right which any person may have or
hereafter acquire under any provision of law, the Articles of Incorporation or
any amendment thereto, or these By-Laws, or of any agreement or vote of
stockholders or disinterested directors, or otherwise.
SECTION 9.4 INDEMNIFICATION INSURANCE.
The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee, fiduciary or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprises against any such expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under Nevada law.
SECTION 9.5 INDEMNIFICATION EXPENSES OF WITNESSES.
To the extent that any director, officer, employee, fiduciary or agent
of the Corporation is by reason of such position, or a position with another
entity at the request of the Corporation, a witness in any action, suit or
proceeding, the Corporation shall indemnify such person against all costs and
expenses actually and reasonably incurred by such person or on such person's
behalf in connection thereto.
SECTION 9.6 INDEMNIFICATION AGREEMENTS.
The Corporation may enter into agreements with any director, officer,
employee, fiduciary or agent of the Corporation providing for indemnification to
the full extent permitted by Nevada law.
SECTION 9.7 SEVERABILITY.
If any provision of this Article IX shall for any reason be determined
to be invalid, the remaining provisions hereof shall not be affected thereby but
shall remain in full force and effect.
ARTICLE X
INTERPRETATION
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Reference in these Bylaws to any provision of Chapter 78 of the Nevada
Revised Statutes shall be deemed to include all amendments thereto and the
effect of the construction and determination of validity thereof by the Nevada
Supreme Court.
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<PAGE>
TEMPORARY CERTIFICATE -- EXCHANGEABLE FOR DEFINITIVE ENGRAVED CERTIFICATE WHEN
READY FOR DELIVERY.
(CITIZEN SHARE CERTIFICATE)
NUMBER [LOGO] SHARES
OMEGA PROTEIN CORPORATION
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
THIS CERTIFICATE IS TRANSFERABLE IN NEW YORK, NY
SEE REVERSE FOR CERTAIN
COMMON STOCK DEFINITIONS AND RESTRICTIVE LEGEND
CUSIP 68210P 10 7
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE PAR VALUE, $.01 PER SHARE OF THE
COMMON STOCK OF
OMEGA PROTEIN CORPORATION
(hereinafter called the "Corporation") transferable on the books of the
Corporation by said holder in person or by duly authorized attorney upon
surrender of this certificate properly endorsed. This certificate and the shares
represented hereby are issued and shall be held subject to all the provisions of
the By-Laws and Articles of Incorporation and all amendments thereto, copies of
which are on file at the office of the Transfer Agent, and the holder hereof, by
acceptance of this certificate, consents to and agrees to be bound by all of
said provisions. This certificate is not valid until countersigned by the
Transfer Agent and registered by the Registrar.
In Witness Whereof, the Corporation has caused this certificate to be signed
by the facsimile signatures of its duly authorized officers and to be sealed
with the facsimile seal of the Corporation.
DATED
<TABLE>
<S> <C> <C>
[Signature] [SEAL] [Signature]
SECRETARY PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
(NEW YORK, NY) TRANSFER AGENT
AND REGISTRAR
BY
AUTHORIZED SIGNATURE
<PAGE>
<PAGE>
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT-____________ Custodian______________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right
of survivorship and not as tenants under Uniform Gifts to Minors
in common
Act ___________________
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ______________________ HEREBY SELL, ASSIGN AND TRANSFER UNTO
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
____________________________________________
| |
| |
| |
| |
____________________________________________
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________ SHARES
OF THE CAPITAL STOCK REPRESENTED BY THE WITHIN CERTIFICATE, AND DO HEREBY
IRREVOCABLY CONSTITUTE AND APPOINT
_______________________________________________________________________ ATTORNEY
TO TRANSFER THE SAID STOCK ON THE BOOKS OF THE WITHIN NAMED CORPORATION WITH
FULL POWER OF SUBSTITUTION IN THE PREMISES.
DATED ___________________________________
X
_________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT
OR ANY CHANGE WHATEVER.
<PAGE>
<PAGE>
X
--------------------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH
THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN
EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR
ANY CHANGE WHATEVER.
OMEGA PROTEIN CORPORATION
READ CAREFULLY
Omega Protein Corporation (the "Corporation") will furnish to any
stockholder, upon request and without charge, a full statement of the
designation, relative rights, preferences and limitations of the shares of each
class of stock authorized to be issued and the designation, relative rights,
preferences and limitations of each series of Preferred Stock so far as the same
have been fixed, and the authority of the Board of Directors to designate and
fix the relative rights, preferences and limitations of other series. Any such
request may be addressed to the Corporation or to the Transfer Agent.
Because the Corporation's vessels conduct fishing operations in U.S.
territorial waters and the U.S. Economic Exclusive Zone, United States law
requires that said vessels must be documented under United States law with a
fishery endorsement pursuant to 46 U.S.C. Sections 12102 and 12108. In order to
remain eligible for such documentation purposes, no more than fifty percent
(50%) of the Corporation's stock may be owned or controlled by Non-Citizens as
defined in the Application for Transfer of Shares printed below on this
Certificate. If this certificate is a CITIZEN SHARE CERTIFICATE, it has been
issued on the representation by the registered owned thereof that it is held by
or for the account of a Citizen as defined below. If the holder of a CITIZEN
SHARE CERTIFICATE is a Non-Citizen, or holds for the account of a Non-Citizen,
the certificate must be exchanged immediately for a NON-CITIZEN SHARE
CERTIFICATE, subject to the limitations set forth below. Similarly, where the
beneficial interest is transferred from a Citizen to a Non-Citizen, the record
holder must likewise exchange the certificate. Should such certificate be sold
to a Citizen holding for himself or another Citizen, the transferee should
exchange it for a CITIZEN SHARE CERTIFICATE. Under the Corporation's Articles of
Incorporation, the minimum percentage of the total outstanding shares of the
Corporation that may be owned by Non-Citizens is 49.99%. Any purported sale,
transfer or other disposition to Non-Citizens of shares evidenced by CITIZEN
SHARE CERTIFICATES, which at the time of presentation to the Transfer Agent of
the Corporation would result in increasing the ownership of shares by
Non-Citizens above such minimum permitted percentage, shall be ineffective as
against the Corporation to transfer the shares or any voting or other rights in
respect thereof, and such transfer shall not be recorded on the books of the
Corporation in any such case, and neither the Corporation nor the Transfer Agent
shall be required to recognize the transferee or purported transferee thereof as
a stockholder of the Corporation for any purpose whatsoever except to the extent
necessary to effect any remedy available to the Corporation. Any shares
represented by CITIZEN SHARE CERTIFICATES held in the names of or for the
account of Non-Citizens will have no rights, and the Corporation may regard this
Certificate, whether or not validly issued, as having been invalidly issued. The
Corporation will furnish to any stockholder, upon written request and without
charge, copies of the applicable provisions of the Corporation's Articles of
Incorporation. Any such request may be addressed to the Corporation or to the
Transfer Agent. The shares represented by this Certificate will be transferred
on the books of the Corporation only if the Application for Transfer of Shares
set forth below has been executed by the transferee.
For purposes of this Certificate:
A "Citizen" is:
(i) any individual who is a citizen of the United States, by birth,
naturalization or as otherwise authorized by law; and
(ii) any corporation, partnership or trust which is a citizen of the United
States as determined by the Corporation's Board of Directors consistent with the
definition of a United States citizen as used in 46 C.F.R. 67.35, 67.36 and
67.39 and any successor regulation or statute thereto as interpreted by the
agencies of the United States Government charged with the administration of the
Shipping Act, 1916, as amended, including the Maritime Administration and the
Coast Guard.
These regulations provide that:
(A) a corporation is a citizen if (1) it is incorporated under the laws
of the United States or of a state; (2) its chief executive officer, by whatever
title, is a citizen; (3) its chairman of the board of directors is a citizen;
and no more of its directors are non-citizens than a minority of the necessary
to constitute a quorum; and more than 50% of the stock interest in the
corporation, including a majority of voting shares in the corporation is owned
by citizens.
(B) a partnership is a citizen if (1) it is organized under the laws of
the United States or of a state, territory, district or possession thereof, (2)
all general partners of which are citizens and (3) more than 50% of the equity
interest in the partnership is owned by citizens; and
(C) a trust is a citizen if (1) it is domiciled in and existing under
the laws of the United States or of a state, territory, district or possession
thereof, (2) the trustee of which is a citizen, (3) each beneficiary with an
enforceable interest in the trust is a citizen and (4) more than 50% of the
equity interest in the trust is owned by citizens.
The foregoing definition is applicable at all tiers of ownership and in
both form and substance of each tier of ownership.
A "Non-Citizen" is any Person other than a Citizen.
A "Person" is an individual, corporation, partnership, association, trust,
joint venture, limited liability company or other entity.
A Person shall be deemed to be the "Beneficial Owner" of, or to
"Beneficially Own" shares of Common Stock to the extent such Person would be
deemed to be the beneficial owner thereof pursuant to Rule 13d-3 promulgated by
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as such rule may be amended from time to time.
APPLICATION FOR TRANSFER OF COMMON STOCK
The undersigned (the "Applicant") makes application for the transfer to the
name of the Applicant of the number of shares of common stock indicated below
and hereby certifies to Omega Protein Corporation (the "Corporation") that:
(answer (a), (b) and/or (c) as applicable)
(a) The Applicant will be the beneficial owner of _______________ shares of
the common stock of the Corporation and is ________ is not ______ a "Citizen"
(check one).
(b) The Applicant will hold ____________ shares of the common stock of the
Corporation for the benefit of one or more "Persons" who ARE "Citizens."
(c) The Applicant will hold ____________ shares of the common stock of the
Corporation for the benefit of one or more "Persons" who ARE NOT "Citizens."
The Applicant agrees that, on the request of the Corporation, he will
furnish proof in support of this certificate. The Applicant understands that he
has an ongoing obligation to provide the information set forth herein and agrees
to provide a new Citizenship Certificate at any time as the facts affecting his
citizenship or the citizenship of the beneficial owner(s) for whom he holds the
Corporation's common stock change. The Corporation will provide a blank
Citizenship Certificate to the Applicant upon request.
IMPORTANT NOTICE
THIS APPLICATION CONSTITUTES A BASIS FOR OMEGA PROTEIN CORPORATION'S
REPRESENTATION TO THE UNITED STATES GOVERNMENT THAT IT IS ELIGIBLE TO DOCUMENT
THE VESSELS WITH A FISHING ENDORSEMENT UNDER UNITED STATES LAW.
This Certificate is dated _____________. _________________________________
Signature of Applicant
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, MUTILATED OR
DESTROYED THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO THE
ISSUANCE OF A REPLACEMENT CERTIFICATE.
<PAGE>
<PAGE>
TEMPORARY CERTIFICATE -- EXCHANGEABLE FOR DEFINITIVE ENGRAVED CERTIFICATE WHEN
READY FOR DELIVERY.
(NON-CITIZEN SHARE CERTIFICATE)
NUMBER [LOGO] SHARES
OMEGA PROTEIN CORPORATION
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
THIS CERTIFICATE IS TRANSFERABLE IN NEW YORK, NY
SEE REVERSE FOR CERTAIN
COMMON STOCK DEFINITIONS AND RESTRICTIVE LEGEND
CUSIP 68210P 10 7
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE PAR VALUE, $.01 PER SHARE OF THE
COMMON STOCK OF
OMEGA PROTEIN CORPORATION
(hereinafter called the "Corporation") transferable on the books of the
Corporation by said holder in person or by duly authorized attorney upon
surrender of this certificate properly endorsed. This certificate and the shares
represented hereby are issued and shall be held subject to all the provisions of
the By-Laws and Articles of Incorporation and all amendments thereto, copies of
which are on file at the office of the Transfer Agent, and the holder hereof, by
acceptance of this certificate, consents to and agrees to be bound by all of
said provisions. This certificate is not valid until countersigned by the
Transfer Agent and registered by the Registrar.
In Witness Whereof, the Corporation has caused this certificate to be signed
by the facsimile signatures of its duly authorized officers and to be sealed
with the facsimile seal of the Corporation.
DATED
<TABLE>
<S> <C> <C>
[Signature] [SEAL] [Signature]
SECRETARY PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
(NEW YORK, NY) TRANSFER AGENT
AND REGISTRAR
BY
AUTHORIZED SIGNATURE
<PAGE>
<PAGE>
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT-____________ Custodian______________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right
of survivorship and not as tenants under Uniform Gifts to Minors
in common
Act ___________________
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ______________________ HEREBY SELL, ASSIGN AND TRANSFER UNTO
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
____________________________________________
| |
| |
| |
| |
____________________________________________
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________ SHARES
OF THE CAPITAL STOCK REPRESENTED BY THE WITHIN CERTIFICATE, AND DO HEREBY
IRREVOCABLY CONSTITUTE AND APPOINT
_______________________________________________________________________ ATTORNEY
TO TRANSFER THE SAID STOCK ON THE BOOKS OF THE WITHIN NAMED CORPORATION WITH
FULL POWER OF SUBSTITUTION IN THE PREMISES.
DATED ___________________________________
X
_________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT
OR ANY CHANGE WHATEVER.
<PAGE>
<PAGE>
X
--------------------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH
THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN
EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR
ANY CHANGE WHATEVER.
OMEGA PROTEIN CORPORATION
READ CAREFULLY
Omega Protein Corporation (the "Corporation") will furnish to any
stockholder, upon request and without charge, a full statement of the
designation, relative rights, preferences and limitations of the shares of each
class of stock authorized to be issued and the designation, relative rights,
preferences and limitations of each series of Preferred Stock so far as the same
have been fixed, and the authority of the Board of Directors to designate and
fix the relative rights, preferences and limitations of other series. Any such
request may be addressed to the Corporation or to the Transfer Agent.
Because the Corporation's vessels conduct fishing operations in U.S.
territorial waters and the U.S. Economic Exclusive Zone, United States law
requires that said vessels must be documented under United States law with a
fishery endorsement pursuant to 46 U.S.C. Sections 12102 and 12108. In order to
remain eligible for such documentation purposes, no more than fifty percent
(50%) of the Corporation's stock may be owned or controlled by Non-Citizens as
defined in the Application for Transfer of Shares printed below on this
Certificate. If this certificate is a CITIZEN SHARE CERTIFICATE, it has been
issued on the representation by the registered owned thereof that it is held by
or for the account of a Citizen as defined below. If the holder of a CITIZEN
SHARE CERTIFICATE is a Non-Citizen, or holds for the account of a Non-Citizen,
the certificate must be exchanged immediately for a NON-CITIZEN SHARE
CERTIFICATE, subject to the limitations set forth below. Similarly, where the
beneficial interest is transferred from a Citizen to a Non-Citizen, the record
holder must likewise exchange the certificate. Should such certificate be sold
to a Citizen holding for himself or another Citizen, the transferee should
exchange it for a CITIZEN SHARE CERTIFICATE. Under the Corporation's Articles of
Incorporation, the minimum percentage of the total outstanding shares of the
Corporation that may be owned by Non-Citizens is 49.99%. Any purported sale,
transfer or other disposition to Non-Citizens of shares evidenced by CITIZEN
SHARE CERTIFICATES, which at the time of presentation to the Transfer Agent of
the Corporation would result in increasing the ownership of shares by
Non-Citizens above such minimum permitted percentage, shall be ineffective as
against the Corporation to transfer the shares or any voting or other rights in
respect thereof, and such transfer shall not be recorded on the books of the
Corporation in any such case, and neither the Corporation nor the Transfer Agent
shall be required to recognize the transferee or purported transferee thereof as
a stockholder of the Corporation for any purpose whatsoever except to the extent
necessary to effect any remedy available to the Corporation. Any shares
represented by CITIZEN SHARE CERTIFICATES held in the names of or for the
account of Non-Citizens will have no rights, and the Corporation may regard this
Certificate, whether or not validly issued, as having been invalidly issued. The
Corporation will furnish to any stockholder, upon written request and without
charge, copies of the applicable provisions of the Corporation's Articles of
Incorporation. Any such request may be addressed to the Corporation or to the
Transfer Agent. The shares represented by this Certificate will be transferred
on the books of the Corporation only if the Application for Transfer of Shares
set forth below has been executed by the transferee.
For purposes of this Certificate:
A "Citizen" is:
(i) any individual who is a citizen of the United States, by birth,
naturalization or as otherwise authorized by law; and
(ii) any corporation, partnership or trust which is a citizen of the United
States as determined by the Corporation's Board of Directors consistent with the
definition of a United States citizen as used in 46 C.F.R. 67.35, 67.36 and
67.39 and any successor regulation or statute thereto as interpreted by the
agencies of the United States Government charged with the administration of the
Shipping Act, 1916, as amended, including the Maritime Administration and the
Coast Guard.
These regulations provide that:
(A) a corporation is a citizen if (1) it is incorporated under the laws
of the United States or of a state; (2) its chief executive officer, by whatever
title, is a citizen; (3) its chairman of the board of directors is a citizen;
and no more of its directors are non-citizens than a minority of the necessary
to constitute a quorum; and more than 50% of the stock interest in the
corporation, including a majority of voting shares in the corporation is owned
by citizens.
(B) a partnership is a citizen if (1) it is organized under the laws of
the United States or of a state, territory, district or possession thereof, (2)
all general partners of which are citizens and (3) more than 50% of the equity
interest in the partnership is owned by citizens; and
(C) a trust is a citizen if (1) it is domiciled in and existing under
the laws of the United States or of a state, territory, district or possession
thereof, (2) the trustee of which is a citizen, (3) each beneficiary with an
enforceable interest in the trust is a citizen and (4) more than 50% of the
equity interest in the trust is owned by citizens.
The foregoing definition is applicable at all tiers of ownership and in
both form and substance of each tier of ownership.
A "Non-Citizen" is any Person other than a Citizen.
A "Person" is an individual, corporation, partnership, association, trust,
joint venture, limited liability company or other entity.
A Person shall be deemed to be the "Beneficial Owner" of, or to
"Beneficially Own" shares of Common Stock to the extent such Person would be
deemed to be the beneficial owner thereof pursuant to Rule 13d-3 promulgated by
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as such rule may be amended from time to time.
APPLICATION FOR TRANSFER OF COMMON STOCK
The undersigned (the "Applicant") makes application for the transfer to the
name of the Applicant of the number of shares of common stock indicated below
and hereby certifies to Omega Protein Corporation (the "Corporation") that:
(answer (a), (b) and/or (c) as applicable)
(a) The Applicant will be the beneficial owner of _______________ shares of
the common stock of the Corporation and is ________ is not ______ a "Citizen"
(check one).
(b) The Applicant will hold ____________ shares of the common stock of the
Corporation for the benefit of one or more "Persons" who ARE "Citizens."
(c) The Applicant will hold ____________ shares of the common stock of the
Corporation for the benefit of one or more "Persons" who ARE NOT "Citizens."
The Applicant agrees that, on the request of the Corporation, he will
furnish proof in support of this certificate. The Applicant understands that he
has an ongoing obligation to provide the information set forth herein and agrees
to provide a new Citizenship Certificate at any time as the facts affecting his
citizenship or the citizenship of the beneficial owner(s) for whom he holds the
Corporation's common stock change. The Corporation will provide a blank
Citizenship Certificate to the Applicant upon request.
IMPORTANT NOTICE
THIS APPLICATION CONSTITUTES A BASIS FOR OMEGA PROTEIN CORPORATION'S
REPRESENTATION TO THE UNITED STATES GOVERNMENT THAT IT IS ELIGIBLE TO DOCUMENT
THE VESSELS WITH A FISHING ENDORSEMENT UNDER UNITED STATES LAW.
This Certificate is dated _____________. _________________________________
Signature of Applicant
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, MUTILATED OR
DESTROYED THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO THE
ISSUANCE OF A REPLACEMENT CERTIFICATE.
<PAGE>
<PAGE>
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement"), dated September 16,
1997, is made by and among Perdue Farms Incorporated, a Maryland corporation
("Buyer"), Venture Milling Company, a Delaware corporation ("Seller"), and
Zapata Protein, Inc., a Delaware corporation and the sole stockholder of the
Seller ("Stockholder").
W I T N E S S E T H:
Seller is engaged in the production, marketing and sale of blended
proteins for feed ingredients (the "Business").
Seller and Buyer wish to enter into this Agreement which sets forth the
terms and conditions upon which Buyer agrees to purchase from Seller and Seller
agrees to sell to Buyer for the consideration stated herein substantially all of
the operating assets used or useful in the conduct of the Business.
In consideration of the direct and indirect benefits accruing to the
Stockholder as the stockholder of the Seller, the Stockholder has agreed to be a
party to this Agreement and confirm the Seller's representations and warranties
hereunder to the extent set forth herein in order to induce the Buyer to enter
into this Agreement, without which inducement the Buyer would not have entered
into this Agreement.
In consideration of the foregoing and of the covenants, agreements,
conditions, representations and warranties hereinafter contained, and intending
to be legally bound, Buyer, Seller and Stockholder hereby agree as follows:
1. PURCHASE AND SALE OF ASSETS.
1.1 Assets Included. On the terms and subject to the conditions set
forth in this Agreement and in reliance on the representations and warranties of
Seller and the Stockholder, at the Closing (as defined in Section 3.1 hereof)
Buyer shall purchase from Seller, and Seller shall sell, assign, transfer and
deliver to Buyer, free and clear of any and all liabilities, judgments, pledges,
liens, tax liens, claims, charges, security interests, exceptions or
encumbrances whatsoever, except as disclosed in and permitted by this Agreement
(collectively, "Liens"), all right, title and interest of Seller in and to all
of the operating assets, rights and properties of Seller related to or used in
the Business, of every nature, kind and description, tangible and intangible,
wherever located, as of the date of this Agreement and as they exist on the
Closing Date (except properties and assets disposed of and accounts receivable
and notes receivable paid to Seller in full, each in the ordinary course of
business between the date of this Agreement and the Closing
-1-
<PAGE>
<PAGE>
Date), including without limitation, the assets, rights and properties specified
below (collectively, the "Assets"):
(a) the parcel of real property consisting of approximately 10
acres in Bridgeville, Sussex County, Delaware and described in SCHEDULE 5.10
hereto (the "Bridgeville Property")
(b) all of Seller's leasehold improvements, furniture,
furnishings and fixtures, equipment, inventory, spare parts and supplies,
computer and other electronic systems, wherever the same are located, including,
without limitation, the equipment and other items listed on SCHEDULE 5.5 hereto;
(c) all of Seller's rights and interests in, to and under all
leases, contracts and other agreements, whether oral or written, to which the
Seller is a party and which are related to the Business and/or the Assets,
including, the agreements listed in SCHEDULE 5.8 hereto and any other agreements
of Seller existing on the Closing Date, except for any agreements that are
completed or terminated in the ordinary course of Seller's business between the
date hereof and the Closing Date (collectively, the "Assumed Contracts");
(d) all of Seller's trademarks, trade names and service marks,
including, without limitation, technology, all of Seller's rights and interests
to the name "Venture Milling Co., Ltd." and all variations thereon, and all
logos, designs, color patterns and schemes, phrases and other identifications of
or relating to the Business and/or the Business and the goodwill associated
therewith, and any and all licenses or other agreements relating to the use of
any of the foregoing, and all of Seller's trade secrets, patents, know-how,
including, feed formulations, proprietary computer software, telephone numbers
of each location, and any other intellectual property or proprietary
information, including, without limitation, the intellectual property or
proprietary information listed on SCHEDULE 5.13 hereto and any manuals,
applications, licenses or other agreements for any of the foregoing
(collectively, the "Intellectual Property");
(e) all of Seller's business records and files, customer lists,
correspondence, inventory and supply records, accounting records, computer
software, databases, vendor lists, sales records, personnel records,
advertising/marketing literature, materials and records, and all other books and
records relating to the Business and/or the Assets (but not including the
corporate records of Seller), that are located at the Company's facility in
Seaford, DE;
(f) all of Seller's unpaid accounts receivable as at the Closing
Date arising out of the operation of the Business by Seller in the ordinary
course, together with all other receivables of Seller, accrued and unpaid as at
the Closing Date (the "Accounts Receivable");
(g) all cash and cash equivalents,
(h) all of Seller's licenses, permits, franchises, consents,
approvals, qualifications and orders of governmental authorities and other
public or private authorizations
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<PAGE>
<PAGE>
relating to the Business and/or the Assets, to the extent transferable,
including, without limitation, the permits and other items set forth on SCHEDULE
5.9 hereto;
(i) all of Seller's outstanding prepaid expenses (to the extent
transferable and excluding insurance) and other prepaid items relating to any of
the Assets and/or the Business, and all other prepaid expenses paid by Seller
through the Closing Date.
1.2 Names Following the Closing. Immediately following the Closing,
Seller will file an amendment to its Articles of Incorporation changing Seller's
corporate name to a name that is not likely to cause confusion with the name
"Venture Milling Co., Ltd."
1.3 Assumption of Liabilities.
(a) Except and solely to the extent provided in Section 1.3(b)
below (the "Assumed Liabilities"), Buyer shall not assume, and shall not be
deemed by anything contained in this Agreement to have assumed, any Liens,
liabilities or obligations (contingent or otherwise) of any nature whatsoever,
warranties and/or guarantees of Seller (all such Liens, liabilities or
obligations, warranties and/or guarantees, the "Excluded Liabilities").
(b) On and subject to the terms of this Agreement, the Buyer
agrees to and shall only assume and become responsible for the following
liabilities and obligations of Seller on the Closing Date; provided, such
liabilities are not Excluded Liabilities (collectively, the "Assumed
Liabilities"):
(i) all liabilities of Seller relating to the Business to
the extent (and in the amount) specifically accrued for or reserved against in
the Most Recent Financial Statement (excluding any liabilities of Seller to
Stockholder and/or its affiliates under any lines of credit or notes payable);
and
(ii) all liabilities of Seller relating to the Business
which have arisen after the date of the Most Recent Financial Statement in the
normal and ordinary course of the Business (excluding any liabilities of Seller
to Stockholder and/or its affiliates under any lines of credit or notes payable,
and other than any liability resulting from, arising out of, relating to, in the
nature of, or caused by any breach of contract, tort, infringement, or other
violation of law); and
(iii) all obligations of Seller accruing under the Assumed
Contracts after the Closing Date; provided, however, it is specifically
understood and agreed that Buyer shall not assume nor become responsible for any
liability or obligation of Seller under the Assumed Contracts that arose or
otherwise accrued on or prior the Closing Date unless such liability is
specifically accrued for or reserved against in the Most Recent Financial
Statement; provided further, however, it is also specifically understood and
agreed that the lease with Southern States (the "Southern States Lease")
pursuant to which the Seller leases certain real property located in Seaford, DE
(the "Seaford Leased Property") is not an Assumed Contract and Buyer shall
assume no liabilities or obligations thereunder.
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<PAGE>
<PAGE>
2. PURCHASE PRICE
2.1 Purchase Price. In reliance on the representations, warranties and
covenants set forth herein and in consideration of sale of the Assets, the Buyer
shall pay the following consideration (the items provided for in (a) and (b)
below are collectively referred to as the "Purchase Price"):
(a) Pay to the Seller the purchase price of One Hundred and
Eighty Thousand Dollars ($180,000), as adjusted in accordance with the
provisions of Section 2.2 below (the "Cash Purchase Price"); such amount shall
be wire transferred in immediately available funds to an account designated in
writing by Seller at Closing; and
(b) Assume the Assumed Liabilities.
2.2 Determination of Net Book Value Purchased; Post-Closing Purchase Price
Adjustment.
(a) Notwithstanding the above, it is understood that the Cash
Purchase Price is based on a Net Book Value Purchased as of July 31, 1997 (as
determined pursuant to and otherwise defined in Schedule 2.2 attached hereto) of
$347,344 which specifically excludes the amount of $180,000 which is claimed by
Buyer for undelivered product, which amount is not reflected on the Most Recent
Financial Statements. As promptly as practicable following the Closing, and in
any event not later than fifteen (15) days after the Closing Date, the Seller
shall close the books of the Seller as of the Closing Date, and shall prepare
and deliver to the Buyer a summary, with supporting calculations and detail, of
the Net Book Value Purchased as of the Closing Date (the "Closing Net Book Value
Purchased"). The Closing Net Book Value Purchased shall be calculated in the
manner of the Net Book Value Purchased calculation as at July 31, 1997 attached
hereto. If the Closing Net Book Value Purchased is less than $347,344, the
Seller shall promptly pay to the Buyer an amount in cash equal to such negative
difference (to be treated as a reduction in the Cash Purchase Price). If the
Closing Net Book Value Purchased is more than $347,344, the Buyer shall promptly
pay to the Seller an amount in cash equal to such positive difference (to be
treated as additional Cash Purchase Price). No payments shall be required
hereunder if the Closing Net Book Value Purchased is equal to $347,344. Any
dispute with respect to the calculation of the Closing Net Book Value Purchased
shall be conducted in the manner described in subsection (b) below.
(b) (i) The Buyer may dispute the Closing Net Book Value
Purchased by notifying the Seller in writing setting forth, in reasonable detail
to the extent possible, the amount(s) in dispute and the basis for such dispute,
within 10 business days of the Buyer's receipt of the Closing Net Book Value
Purchased. In the event of such a dispute, the Buyer and the Seller shall
attempt in good faith to resolve such dispute, and any resolution by them as to
any disputed amount(s) shall be final, binding and conclusive on the Buyer and
the Seller.
(ii) If the Seller and the Buyer do not resolve any such
dispute within 10 business days of the date of receipt by the Seller of the
Buyer's written notice of dispute, the
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<PAGE>
<PAGE>
Buyer and the Seller shall, within 3 additional business days, submit any such
unresolved dispute to an independent accounting firm of national reputation
appointed jointly by the Buyer and the Seller (neither of which may unreasonably
withhold or delay such appointment) (the "Independent Accounting Firm"), which
firm shall, within 30 business days of each such submission, resolve such
remaining dispute, and such resolution shall be binding and conclusive on the
Buyer and the Seller. The fees and disbursements of the Independent Accounting
Firm shall be borne by the Seller and the Buyer in the proportion that the
aggregate amount of disputed item submitted to the Independent Accounting Firm
that is unsuccessfully disputed by each such party (as finally determined by the
Independent Accounting Firm) bears to the total amount of such remaining
disputed item so submitted.
(iii) The Closing Net Book Value Purchased, adjusted for
the resolution of any and all disputes pursuant to subsection (i) or (ii) above,
will be deemed to be the Closing Net Book Value Purchased for purposes of (a)
above upon the later of (A) the lapse of the 20 day period referred to in
subsection (b)(i) above, (B) to the extent any amount is still in dispute, the
lapse of the 10 day period referred to in subsection (b)(ii) above or (C) such
later date upon which all disputes submitted to the Independent Accounting Firm
pursuant to subsection (b)(ii) above have been resolved.
2.3 Allocation of the Purchase Price. The Purchase Price shall be
allocated by the Buyer in its sole discretion; such allocation to be delivered
to the Seller within ninety (90) days after the Closing Date. The parties agree
to make consistent use of the Buyer's allocation. Also, to the extent required
by law, the Seller and the Buyer shall each complete, execute and timely file
with the Internal Revenue Service with its respective income tax return for the
taxable year that includes the Closing Date, an Internal Revenue Service Form
8594 (or such other Internal Revenue Service Form as may then be prescribed for
use by applicable Income Tax Regulations) to comply with the applicable asset
acquisition reporting requirements of Section 1060 of the Code and the Income
Tax Regulations thereunder. Form 8594 shall be completed by the Seller and the
Buyer based on, and shall in all events be consistent with, the allocation of
the Purchase Price among the Assets as determined by the Buyer.
3. CLOSING.
3.1 Time and Place. Subject to earlier termination of this Agreement
pursuant to Section 11 below, the closing of the transactions contemplated
hereunder (the "Closing") shall take place on September 16, 1997 at 9:00 a.m.,
or such other date as the parties may agree, at the offices of Piper & Marbury
L.L.P., 36 South Charles Street, Baltimore, Maryland 21201. The time and date of
the Closing are herein referred to as the "Closing Date," and the term "Closing
Date" shall include the date on which the transactions contemplated hereunder
are consummated.
3.2 Deliveries by the Buyer. At the Closing, the Buyer shall deliver or
cause to be delivered to the Seller, or to such other person or persons as
required by this Agreement, the following:
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<PAGE>
<PAGE>
(a) the Purchase Price in the manner provided under Section
2.1(a) hereof;
(b) a General Assignment and Bill of Sale in a form' reasonably
acceptable to the parties (the "Bill of Sale");
(c) an Assignment and Assumption Agreement in a form reasonably acceptable
to the parties (the "Assignment Agreement");
(d) certificate of the Secretary of the Buyer showing the
signatures of those officers of the Buyer authorized to sign this Agreement and
other agreements and instruments provided for herein on behalf of the Buyer and
certifying that said signatures are the signatures of said authorized officers;
(e) a certificate, dated as of the Closing Date, executed by a
duly authorized officer of the Buyer, certifying that (i) all of the
representations and warranties made by the Buyer under this Agreement and the
Schedules hereto and under all other documents given or delivered by the Buyer
pursuant hereto are accurate, true and complete, and (ii) all of the covenants,
obligations and conditions to be performed as of the Closing Date on the Buyer's
part have been duly performed;
(f) a certificate of Good Standing of the Buyer issued by the
appropriate authority in Maryland as of a date recently preceding the Closing
Date; and
(g) all other documents reasonably necessary or appropriate to
effectuate the purchase and sale of the Assets and the assumption of the Assumed
Liabilities as of the Closing Date.
3.3 Deliveries by Seller. At the Closing, the Seller shall deliver or
cause to be delivered to the Buyer (unless previously delivered) the following:
(a) the Bill of Sale;
(b) the Assignment Agreement;
(c) consents to the assignment and assumption of the Assumed
Contracts set forth in SCHEDULE 5.8 hereto;
(d) UCC-3 termination statements, together with any other
releases or consents to the transfer of the Assets reasonably deemed necessary
by the Buyer, executed by the respective creditors of the Seller, terminating
any Liens on the Assets;
(e) certificates of the Secretary of each of the Stockholder and
the Seller showing the signatures of those officers authorized to sign this
Agreement and other agreements and instruments provided for herein on behalf of
the Stockholder and the Seller, as the case may be, and certifying that said
signatures are the signatures of said authorized officers;
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<PAGE>
<PAGE>
(f) a copy of the resolutions adopted by the Stockholder and
directors of the Seller, certified by the Secretary of the Stockholder and the
Seller, as the case may be, as having been duly and validly adopted and as being
in full force and effect on the date hereof, authorizing the execution and
delivery by the Stockholder and the Seller, as the case may be, of this
Agreement and other agreements and instruments executed and delivered by the
Stockholder and the Seller, as the case may be, as provided for herein, and the
performance by the Stockholder and the Seller, as the case may be, of the
transactions contemplated hereby and thereby;
(g) a certificate, dated as of the Closing Date, executed by a
duly authorized officer of the Seller, certifying that (i) all of the
representations and warranties made by the Seller (with the Stockholder) under
this Agreement and the Schedules hereto and under all other documents given or
delivered by the Seller pursuant hereto are accurate, true and complete, and
(ii) all of the covenants, obligations and conditions to be performed as of the
Closing Date on the Seller's part have been duly performed;
(h) a certificate, dated as of the Closing Date, executed by a
duly authorized officer of the Stockholder, certifying that (i) all of the
representations and warranties made by the Stockholder (with the Seller) under
this Agreement and the Schedules hereto and under all other documents given or
delivered by the Stockholder pursuant hereto are accurate, true and complete,
and (ii) all of the covenants, obligations and conditions to be performed as of
the Closing Date on the Stockholder's part have been duly performed;
(i) a Certificate of Good Standing of Seller issued by the
Secretary of State of Delaware as of a date recently preceding the Closing Date;
(j) a certificate, dated as of the Closing Date, executed by a
duly authorized officer of the Seller, certifying that the information
referenced in SCHEDULE 2.2 hereto is accurate, true and complete; and
(k) all other documents reasonably necessary or appropriate to
effectuate the purchase and sale of the Assets and the assumption of the Assumed
Liabilities as of the Closing Date, including, without limitation, a special
warranty deed for the transfer of the Owned Real Property.
3.4 Other Deliveries and Actions. At the Closing, the
Seller shall pay any transfer, registration, recording or other taxes payable in
connection with the transfer of the Assets hereunder.
4. REPRESENTATIONS AND WARRANTIES OF BUYER.
The Buyer represents and warrants to the Seller that the statements
contained in this Section 4 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 4).
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4.1 Organization and Good Standing. The Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Maryland.
4.2 Authority. The Buyer has the full right, power and authority to (a)
own, lease or operate all of its properties and assets and to carry on its
business as and where it is now being conducted, and (b) execute, deliver and
perform this Agreement and each other transaction document to which it is a
party. The Buyer has the corporate power and authority and has taken all
necessary corporate action, to execute, deliver and perform this Agreement and
each other transaction document to which it is a party. This Agreement has been,
and when executed and delivered by the Buyer at the Closing shall be, duly
executed and delivered by the Buyer and, assuming the due execution and delivery
by the Seller and the Stockholder, constitutes its legal, valid and binding
obligation, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws affecting the
rights of creditors generally and the exercise of judicial discretion in
accordance with general principles of equity.
4.3 Validity of Contemplated Transactions; Consents and Approvals. The
execution, delivery and performance by the Buyer of this Agreement and each
other transaction document to which it is a party, and the transactions
contemplated hereby and thereby, will not (a) contravene or violate the Articles
of Incorporation or Bylaws of the Buyer or any applicable judgment, decree,
order, regulation or law that is binding on or applicable to the Buyer; (b)
result in a violation or default under, termination or modification of, or
conflict with, or permit the acceleration of any obligation under, or require
the consent or approval of any party to, any material contract or other
instrument to which the Buyer is a party; or (c) require the Buyer to give
notice to, make any filing with, or obtain any permit, authorization, consent or
approval from, any federal, state, local or other governmental court, agency or
body or other public authority, or third party.
4.4 Broker's and Finder's Fees. Neither the Buyer nor any of its
directors, stockholders, employees or affiliates has, on behalf of Buyer,
employed any broker, finder, or financial advisor or incurred any liability for
any brokerage fee or commission, finder's fee or financial advisory fee, in
connection with the transactions contemplated hereby, nor is there any basis
known to the Buyer for any such fee or commission to be claimed by any person or
entity. The Buyer agrees to indemnify and hold harmless the Seller and the
Stockholder from any and all fees due to any broker, finder, or consultant,
retained by or claiming through or under the Buyer or any of the Buyer's
directors, stockholders, employees or affiliates with respect to the transaction
contemplated hereby.
5. REPRESENTATIONS AND WARRANTIES OF SELLER.
The Seller and the Stockholder, jointly and severally, represent and
warrant to the Buyer that the statements contained in this Section 5 are correct
and complete as of the date of this Agreement and will be correct and complete
as of the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement through this Section 5).
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5.1 Organization and Good Standing. The Seller is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware.
5.2 Authority. (a) The Seller has the full right, power and authority to
(i) own or lease all of the properties and assets owned or leased by it and to
conduct the Business as the same is now being conducted and has been conducted
for all periods prior to the Closing Date, and (ii) execute, deliver and perform
this Agreement and each other transaction document to which it is a party. This
Agreement has been duly executed and delivered by the Seller and, assuming the
due execution and delivery by the Stockholder and the Buyer, constitutes its
legal, valid and binding obligation, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws affecting the rights of creditors generally and the exercise of
judicial discretion in accordance with general principles of equity.
(b) The Stockholder also has the full right, power and authority to
execute, deliver and perform this Agreement and each other transaction document
to which it is a party. This Agreement has been duly executed and delivered by
the Stockholder and, assuming the due execution and delivery by the Seller and
the Buyer, constitutes its legal, valid and binding obligation, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws affecting the rights of creditors
generally and the exercise of judicial discretion in accordance with general
principles of equity.
5.3 Validity of Contemplated Transactions; Consents and Approvals. The
execution, delivery and performance by the Seller of this Agreement and each
other transaction document to which it is a party, and the transactions
contemplated hereby and thereby, will not contravene or violate the Articles of
Incorporation or Bylaws of the Seller or any applicable judgment, decree, order,
regulation or law that is binding on or applicable to the Seller, the Business
and/or any of the Assets or, except as set forth in SCHEDULE 5.3 and except
where such default, termination modification, conflict, acceleration, consent,
failure to give notice or to file or obtain any consent to the imposition of any
Lien would not, either individually or in the aggregate, have a material adverse
effect on the Business or any of the Assets or on the ability of the parties to
consummate the transactions contemplated by this Agreement, (a) result in a
violation or default under, termination or modification of, or conflict with, or
permit the acceleration of any obligation under, or require the consent or
approval of any party to, any Assumed Contract; (b) require the Seller to give
notice to, make any filing with, or obtain any permit, authorization, consent or
approval from, any federal, state, local or other governmental court, agency or
body or other public authority, or third party; or (c) result in the creation or
imposition of any Liens upon the Business or any of the Assets (except Liens
imposed by or through the Buyer). The Seller has made all material filings and
notifications required to be made by it under such laws, ordinances and
regulations.
(b) The execution, delivery and performance by the Stockholder of this
Agreement and each other transaction document to which it is a party, and the
transactions contemplated hereby and thereby, will not contravene or violate the
Articles of Incorporation or Bylaws of the
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Stockholder or any applicable judgment, decree, order, regulation or law that is
binding on or applicable to the Stockholder.
5.4 Compliance with Regulations and Court Orders. To the best of
Seller's knowledge, the Seller, and the ownership, use and operation by the
Seller, or any other person or entity, of the Business or any of the Assets, is
in material compliance with all, and is not in material violation of any, (i)
applicable Federal, state, local and foreign laws, ordinances and regulations,
or (ii) applicable court order or other legal restriction binding upon the
Business or any of the Assets.
5.5 All Assets; Title to and Condition of Personal Property; Third-Party
Rights.
(a) SCHEDULE 5.5 sets forth a summary of all material assets of
Seller of the type described in Section 1.1(a) as of September 15, 1997
identified by location.
(b) The Assets constitute substantially all of the assets used in
the conduct of the Business, and no affiliate of the Seller or any other person
or entity owns or has any other interest in the Assets. The Seller is the owner
of and has good and marketable title to all of the Assets, free and clear of all
Liens, except (i) to the extent reflected in the Most Recent Financial
Statements (as defined below), as applicable, (ii) for Liens set forth on
SCHEDULE 5.5, and (iii) for mechanics', carriers', workmen's, repairmen's or
other similar Liens arising from or incurred in the ordinary course of business
consistent with past practices (the Liens described in clauses (i) through (iii)
above are hereinafter referred to collectively as, "Permitted Liens"). There are
no existing contracts or agreements with, or rights in, any third party to
acquire any of the Assets or any interest therein.
5.6 Litigation and Claims. (a) To the best of Seller's knowledge, and
except for the litigation titled "Papillon Agricultural Products v. Venture
Milling Company, Ltd.," which is not an Assumed Liability hereunder, there are
no claims, litigation or other action, at law or in equity, arbitration
proceeding, governmental proceeding or investigation, pending or, to the best of
the Seller's knowledge, threatened, against the Business or any of the Assets or
the transfer of the Assets hereunder; and the Seller is not, with respect to the
Business and/or any of the Assets, subject to any order of any court, regulatory
commission, board or administrative body entered in any proceeding to which it
is or was a party and which is binding upon the Business or any of the Assets as
of the date hereof.
(b) To the best of Seller's knowledge, the transfer of the Assets
hereunder and the operation and maintenance of the Business and/or any of the
Assets by the Seller do not materially contravene or violate any ordinance or
other administrative regulation or any provision of applicable law or rule,
regulation, order or direction of any judicial, administrative or other
governmental authority having jurisdiction which is now in effect or which has
been enacted, issued or adopted and is binding upon the Business or any of the
Assets as of the date hereof.
5.7 Financial Statements; Undisclosed Liabilities. Attached hereto as
SCHEDULE 5.7 are the unaudited balance sheet and statement of income or loss for
the period ended July 31, 1997
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(the "Most Recent Financial Statements"). The Most Recent Financial Statements
consistently and fairly present the financial position and results of operations
of the Business in all material respects as at the dates and for the periods
covered. Except as set forth on SCHEDULE 5.7, the Seller does not have any
liabilities or obligations, except for (i) liabilities or obligations set forth
on the face of the Most Recent Financial Statements, and (ii) liabilities or
obligations incurred in the ordinary course of business which have risen after
the Most Recent Financial Statements. The Accounts Receivable represent valid
obligations arising from sales actually made or services actually performed by
Seller in the ordinary course of business, with appropriate evidence of sales
made and services performed maintained by Seller, and are collectible in the
amounts set forth on the Financial Statements.
5.8 Contracts. (a) SCHEDULE 5.8 hereto lists with respect to the
Business and/or any of the Assets, the following written or oral agreements to
which the Business or any of the Assets is party or subject: (i) contracts,
agreements or obligations that are (A) for a term of more than 30 days and
cannot be terminated within 30 days, or (B) entered into outside the ordinary
course of business; (ii) real property leases; (iii) personal property leases;
(iv) employment contracts with any consultant or employee; (v) instruments
creating any Liens or evidencing or relating to indebtedness for borrowed money;
(vi) contracts containing covenants not to enter into or consummate the
transactions contemplated hereby; (vii) contracts restricting the Seller's
ability to compete in any geographic region in any line of business; (viii)
confidentiality or similar agreements, pursuant to which the Seller or employee
thereof is restricted from using or disclosing any information; (ix) franchise,
manufacturer's representative, distributorship or similar agreements (including
with Buyer or an affiliate of Buyer); or (x) contracts, agreements or
obligations that involve or would involve annual payments by the Seller or
receipts by the Seller of more than $25,000. All of the contracts, agreements
and obligations that are material to the Business and/or any of the Assets are
listed in SCHEDULE 5.8.
(b) Except as disclosed on SCHEDULE 5.8, each Assumed Contract
has been entered into in the ordinary course of business, is legal, valid,
binding and enforceable in accordance with its terms, is in full force and
effect, and will continue to be legal, valid, binding and enforceable and in
full force and effect on identical terms following the consummation of the
transactions contemplated herein. The Seller is not in default in any material
respect under any Assumed Contract. Except as noted on SCHEDULE 5.8, and to the
knowledge of Seller, all parties to the Assumed Contracts have complied in all
material respects with the provisions thereof, no party is in default, or has
received notice of default, thereunder, or no event has occurred that, but for
the passage of time or the giving of notice or both, would constitute a default
thereunder, and the Seller has neither given nor received any notice of
cancellation or termination thereunder.
5.9 Licenses. SCHEDULE 5.9 sets forth a list of all of the Seller's
licenses, permits, franchises, consents, approvals, authorizations,
qualifications and orders of governmental authorities relating to the Business
and/or any of the Assets (the "Permits"), and such Permits constitute all
material licenses, permits, franchises, consents, approvals, authorizations,
qualifications and orders of governmental authorities necessary to conduct the
Business and to operate and/or use the Assets as such is now being conducted,
operated and used. The Seller has
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paid all fees and charges due in connection with the Permits, and all such
Permits are in full force and effect in all material respects. The Seller is in
substantial compliance with, and has not received notice of any noncompliance
with respect to, the terms and conditions of any such Permit in any case where
noncompliance could have a material adverse effect on the Business and/or any of
the Assets, and no proceeding is pending or, to the knowledge of Seller,
threatened to revoke or limit any such Permit.
5.10 Real Property. (a) The Bridgeville Property is the only real
property and/or interest in real property owned in fee by the Seller (for
purposes of this Section 5.17, the "Owned Real Property"). The Seaford Leased
Property is the only real property and/or interest in real property leased by
the Seller (for purposes of this Section 5.11, the "Leased Real Property";
collectively, with the Owned Real Property, the "Real Properties"). SCHEDULE
5.10 hereto sets forth the address and legal description of the Real Properties
and identifies any consents required in connection with the consummation of the
transactions contemplated by this Agreement. True and correct copies of (i) the
deeds for the Owned Real Property and (ii) the Southern States Lease, as the
same have been amended, modified or supplemented, have been delivered to the
Buyer by the Seller. All of the real property used in, held for use by or
related to the Business is set forth in SCHEDULE 5.10 hereto.
(b) The Seller has good and marketable fee simple title to the
Owned Real Property. The Owned Real Property is free and clear of all Liens of
any nature except (A) Liens set forth on Buyer's title policy, (B) Liens for
taxes, special assessments or governmental charges or levies if the same shall
not yet be due and payable, (C) Liens to secure indebtedness reflected on the
Financial Statements; and (D) mechanic's, materialmen's and other similar Liens
that have arisen in the ordinary course of business in respect of obligations
which are not delinquent or material in amount (collectively, "Permitted
Liens"). The Seller has not entered into any contract, arrangement or
understanding with respect to the future ownership, development, use, occupancy
or operation of any of the Real Property. The Seller has the right to use and
operate each Real Property in the manner currently being used and operated. To
the best of Sellers' knowledge, no facts exist which affect, or will affect
after Closing, such rights of use and operation.
(c) To the best of Seller's knowledge, each Real Property and the
operation of the Business thereon as currently being operated complies in all
material respects with all Laws (including, without limitation, zoning laws).
(d) No notice of violation of Law has been received by the Seller
or, to the best of the Seller's knowledge, has been issued by any Governmental
Authority with respect to any Real Property.
5.11 Environmental Matters. (a) To the best of Seller's knowledge, and
except as set forth on SCHEDULE 5.11 hereto, the Seller is in compliance in all
material respects with all applicable Environmental Laws, which compliance
includes, but is not limited to, the possession by the Seller of all permits and
other governmental authorizations necessary to operate the Seller
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as it is currently being operated or as required under applicable Environmental
Laws, and material compliance with the terms and conditions thereof. The Seller
has not received any communication (written or oral), whether from an applicable
authority, citizens group, employee or otherwise, that alleges that the Seller
is not in such compliance in all material respects.
(b) To the best of Seller's knowledge, there are no private
agreements or administrative or judicial judgments, orders, or decrees against
the Seller that relate to violations of or liability under Environmental Law
with respect to the Business or to the Release, discharge, emission or disposal
of Hazardous Materials on or under Real Properties.
(c) To the best of Seller's knowledge, there have been no
Releases, discharges, emissions or disposal of Hazardous Materials by the Seller
on or under the Real Property that have not been remediated to the satisfaction
of the applicable authority with jurisdiction over said Release, discharge,
emission or disposal. To the best of Seller's knowledge, neither the business of
the Seller nor the Real Property is nor contains a treatment, storage, or
disposal facility as defined by the federal Resource Conservation and Recovery
Act, 42 U.S.C. 'SS' 6901 et seq. or the analogous state law. No notice has been
given to the Seller or Seller that the Seller, the Seller or the Buyer, will be
required to conduct closure, post closure, or corrective action with respect to
the Real Property or the Business pursuant to the Resource Conservation and
Recovery Act or the analogous state law, as a result of activities at the Real
Property or the Business prior to the Closing Date.
(d) To the best of Seller's knowledge, (i) all on-site locations
where Hazardous Materials have been disposed of or released by the Seller are
identified in SCHEDULE 5.11 hereto, (ii) all underground storage tanks, and the
capacity and contents of such tanks, located or formerly located on the Real
Property, are identified in SCHEDULE 5.11 hereto, and (iii) except as set forth
in SCHEDULE 5.11 hereto, no polychlorinated biphenyls are used or stored on the
Real Property.
(e) For purposes of this Agreement, (i) "Environmental Law" means
all applicable current federal, state and local statutes, laws, ordinances,
rules, regulations, decrees, judgments, orders and common law decisions relating
to pollution or protection of the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata, or
natural resources) including, without limitation, laws and regulations relating
to emissions, discharges, releases or threatened releases of Hazardous Materials
(including, but not limited to, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, 42 U.S.C. 'SS''SS' 9601 et seq.; the
Solid Waste Disposal Act, 42 U.S.C. 'SS''SS' 6901 et seq.; the Emergency
Planning and Community Right-To-Know Act of 1986, 42 U.S.C. 'SS''SS' 11001 et
seq.; the Toxic Substances Control Act, 15 U.S.C. 'SS''SS' 2601 et seq. the
Federal Water Pollution Control act, 33 U.S.C. 'SS''SS' 1251 et seq.; the
Hazardous Materials Transportation Act, 49 U.S.C. 'SS''SS' 1801 et seq.; and
the Clean Air Act, 42 U.S.C. 'SS''SS' 7401 et seq.; (ii) "Hazardous
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Materials" shall mean any waste (including solid wastes), toxic substance,
hazardous substance, pollutant, contaminant, oil, asbestos, polychlorinated
biphenyl, and non-indigenous radioactive material, as defined and within the
context used under any Environmental Law; and (iii) "Release" means any release,
spill, emission, discharge, leaking, pumping, pouring, emptying, escaping,
injection, deposit or disposal into the environment (including, without
limitation, ambient air, surface water, groundwater, and surface or subsurface
strata) or into or out of any property, including the movement of Hazardous
Materials through or in the air, soil, surface water, groundwater or property.
5.12 Inventory. The Inventory is in good condition and consists of items
of quantity, valued at cost and quality usable and salable in the ordinary
course of business.
5.13 Intellectual Property.
(a) SCHEDULE 5.13 lists: (i) all trademarks, trade names,
trademark license agreements, logos, trade styles, service marks, and other
sources of business identifiers of the Business , including for each such
registered mark, name, etc., the application or registration number, country,
filing or registration and expiration date; (ii) all other intellectual
property, whether owned by or licensed to the Seller, used in the Business; and
(iii) all licenses and other contracts to which the Seller is a party (either as
licensor, licensee, sublicensor or sublicensee) and which affects the validity
of or right to use the Marks, trade secrets or other proprietary information
used in or relating to the Business.
(b) The Seller has good, valid, subsisting, unexpired and
enforceable title to, or otherwise possesses adequate rights to use, all
Intellectual Property listed in SCHEDULE 5.13. To the knowledge of the Seller,
no governmental authority has rendered any holding, decision or judgment that
would limit, cancel or question the validity of any of the Intellectual
Property, and there has not been any administrative, judicial, arbitration or
other adversary proceedings concerning the Intellectual Property. The Seller is
not a party to any license or agreement whether as licensee, licensor or
otherwise, with respect to any of the Intellectual Property.
(c) To the knowledge of the Seller, no assets, properties or
rights of the Seller or used in the Business have infringed upon any patent,
trademark, trade name, copyright, or other intellectual property, or
misappropriated or misused any invention, trade secret or other proprietary
information of another person entitled to legal protection. Except as set forth
in SCHEDULE 5.13, to the knowledge of the Seller, no person has asserted any
claim regarding the use of, or challenging or questioning the Seller's right or
title in, any Intellectual Property, or challenging or questioning the validity
or effectiveness of any license, contract or commitment relating thereto, and
the Seller does not know of any valid basis for any such claim.
5.14 Brokers. Neither the Seller, nor any of its directors,
stockholders, employees or affiliates has, on behalf of the Seller, has employed
any broker, finder, or financial advisor or incurred any liability for any
brokerage fee or commission, finder's fee or financial advisory fee, in
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connection with the transactions contemplated hereby, nor is there any basis
known to the Seller for any such fee or commission to be claimed by any person
or entity.
5.15 Disclaimer. EXCEPT AS SPECIFICALLY SET FORTH HEREIN, SELLER MAKES
NO OTHER WARRANTIES OR REPRESENTATIONS, WHETHER EXPRESS OR IMPLIED, INCLUDING
ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE OR MERCHANTABILITY, WHICH
WARRANTIES ARE HEREBY DISCLAIMED.
5.16 Knowledge of Seller. For purposes of this Section 5, the Seller or
the Stockholder will be deemed to have "knowledge" of a particular fact or other
matter if such fact or matter is set forth in a written letter, agreement or
other document provided to or in the possession of either the Seller or the
Stockholder, or if any executive or officer of either the Seller or the
Stockholder (excluding George G. Betton, Jr.), after due inquiry with respect to
each such executive or officer's areas of responsibility, had actual knowledge
of such particular fact or other matter.
6. COVENANTS.
6.1 Access to Information.
(a) Following the execution of this Agreement and prior to the
Closing Date, the Buyer and its counsel, accountants and representatives will
have full access during normal business hours to all of the offices, books,
records, employees and customers of the Seller, and the Seller will promptly
furnish to the Buyer copies of or access to all documents and information
concerning the properties and affairs of the Business that the Buyer may
reasonably request. The Seller will provide reasonable access for the Buyer to
key employees of the Seller and to other employees provided that confidentiality
regarding the transactions contemplated hereby is maintained. The Buyer will use
its best efforts to conduct its review of information with minimal disruption to
the Seller's operations.
(b) After the Closing, both the Buyer and the Seller will
cooperate with the other to provide the other, upon written request, with access
to books and records pertaining to the Business, the Assets and the Seller prior
to the Closing Date to the extent such information is reasonably required by the
other party in the conduct of the Business (including for the preparation of tax
information), in connection with the ownership and use of the Assets or
otherwise, at no cost to the party providing the information.
6.2 Conduct of Business. Following the execution of this Agreement and
prior to the Closing Date, the Seller will operate the Business only in
accordance with its usual and customary business practices. Seller agrees that
it will not enter into any contract or commitment, increase any expenditures,
waive any rights or enter into any other transaction affecting the Business
other than in the ordinary course of business and in conformity with past
practices.
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6.3 Consents and Conditions. Following the execution of this Agreement
and prior to the Closing Date, the parties agree to use their best efforts to
cause all of the conditions to the consummation of this Agreement to be
fulfilled, including obtaining all necessary consents to the assignment of the
Assumed Contracts. Buyer agrees to reasonably cooperate with Seller in respect
of the such consents.
6.4 Use of Best Efforts. Each of Seller and Buyer will use its
reasonable best efforts to take all action and to do all things necessary in
order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the conditions to Closing
set forth in Sections 9 and 10).
6.5 Accounts Receivable Obligors. The Seller shall cooperate with the
Buyer in making all necessary or desirable arrangements so that, at no cost to
the Sellers, checks and other payments on Accounts Receivable may be deposited
into the Buyer's bank accounts after Closing without endorsement by the Seller.
6.6 Insurance. The Seller shall continue insurance coverage on the
Assets in full force and effect to and including the Closing Date.
6.7 Other Covenants.
(a) On and after the Closing Date, Buyer agrees to perform and
comply with all the terms, provisions, covenants and conditions of the Assumed
Liabilities.
(b) On and after the Closing Date, Seller agrees to perform and
comply with all the terms, provisions, covenants and conditions of the Excluded
Liabilities.
6.8 Payment of Taxes. The Buyer shall pay all taxes incurred in
connection with the transfer of the Assets from the Seller to the Buyer.
7. INDEMNIFICATION AND SURVIVAL.
7.1 Indemnification by Seller and the Stockholder. Subject to the
limitations set forth in this Section 7.1, the Seller and the Stockholder,
jointly and severally, hereby agree to indemnify the Buyer against, and agree to
protect, save and keep harmless the Buyer from, and hereby assumes liability
for, the payment of all liabilities, obligations, losses, damages, penalties,
claims, actions, suits, judgments, settlements, out-of-pocket costs, expenses
and disbursements (including reasonable costs of investigation, and reasonable
attorney's and accountant's fees) of whatever kind and nature arising in any
manner or under any circumstances that may be imposed on or incurred by the
Buyer as a consequence of or in connection with the following:
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(a) any breach by the Seller and/or the Stockholder of their
representations or warranties contained in this Agreement (except
representations or warranties relating to Excluded Liabilities, which are
covered by (d) below);
(b) any failure by the Seller and/or the Stockholder to perform
their respective covenants or agreements contained in this Agreement (except
covenants or agreements relating to Excluded Liabilities, which are covered by
(d) below);
(c) the failure of the parties to comply with any applicable bulk
sales or transfer laws, except as to liabilities and obligations specifically
assumed by the Buyer under this Agreement; or
(d) the Excluded Liabilities.
The indemnification and defense obligations of the Seller and the
Stockholder set forth in Sections 7.1(a) and 7.1(b), as well as the related
representations, warranties, covenants and agreements, shall survive the Closing
hereunder for a period of two years, except that the representations and
warranties with regard to taxes (as well as the related indemnification and
defense obligations of the Buyer) shall survive for the period of the applicable
statute of limitations and the representations and warranties with regard to the
Seller's title to the Assets (as well as the related indemnification and defense
obligations of the Buyer) shall survive the Closing indefinitely. In addition,
the Seller's and the Stockholder's aggregate and collective indemnification
obligations under Sections 7.1(a) and 7.1(b) shall be limited to the Purchase
Price. Notwithstanding anything contained herein to the contrary, (i) the
expiration of the period referred to above shall not serve to terminate or
otherwise affect any pending claim against the Seller or the Stockholder for
indemnification, or the Seller's indemnity obligation with respect to such
claim; and (ii) the indemnification and defense obligations of the Seller and
the Stockholder set forth in Sections 7.1(c) and 7.1(d), as well as the related
representations, warranties, covenants and agreements, including the agreements
of the Seller set forth in Section 1.3(a), shall survive the Closing
indefinitely.
7.2 Indemnification by Buyer. Subject to the limitations set forth in
this Section 7.2, the Buyer agrees to indemnify the Seller and the Stockholder
against, and agrees to protect, save and keep harmless the Seller and the
Stockholder from, and hereby assumes liability for, the payment of all
liabilities, obligations, losses, damages, penalties, claims, actions, suits,
judgments, settlements, out-of-pocket costs, expenses and disbursements
(including reasonable costs of investigation, and reasonable attorney's and
accountant's fees) of whatever kind and nature arising in any manner or under
any circumstances that may be imposed on or incurred by the Seller as a
consequence of or in connection with:
(a) any breach by the Buyer of any representation or warranty
contained in this Agreement (except representations or warranties relating to
Assumed Liabilities, which are covered by (c) below);
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s
(b) any failure by the Buyer to perform any covenant or agreement
contained in this Agreement (except covenants or agreements relating to Assumed
Liabilities, which are covered by (c) below); or
(c) any of the Assumed Liabilities.
The indemnification and defense obligations of the Buyer set forth in
Sections 7.2(a) and 7.2(b), as well as the representations, warranties,
covenants and agreements contained in this Agreement, shall survive the Closing
hereunder for the period set forth in Section 7.1 in respect of the Seller.
Notwithstanding anything contained herein to the contrary, (i) the expiration of
the period referred to above shall not serve to terminate or otherwise affect
any pending claim against the Buyer for indemnification, or the Buyer's
indemnity obligation with respect to such claim; and (ii) the indemnification
and defense obligations of the Buyer set forth in Section 7.2(c), as well as the
related representations, warranties, covenants and agreements, including the
agreements of the Buyer set forth in Section 1.3(b), shall survive the Closing
indefinitely.
7.3 Procedure for Indemnification - Non-Third Party Claims.
(a) If at any time a party asserts that it is entitled to
indemnification under Section 7.1 or 7.2 above in respect of a loss not
involving a Third-Party Claim (as defined in Section 7.4) (such party being
referred to as an "Indemnitee" and such assertion being referred to as a
"Claim"), the Indemnitee shall promptly give to the party obligated to provide
indemnification (the "Indemnitor") written notice of its claim setting forth (i)
a full description of the nature of the Claim, and (ii) the total anticipated
amount of the Claim, including any costs or expenses which have been incurred in
connection therewith (a "Notice of Claim").
(b) If the events or circumstances giving rise to the Claim have
continued without dispute (as contemplated by (c) below) or cure for (30) days
from the date the Notice of Claim is given, then the Indemnitor shall pay the
Indemnitee the amount of the Claim as set forth in the Notice of Claim (unless
the provisions of Section 7.4 are applicable thereto), provided that such
payment shall not release the Indemnitor from liability for any other or further
amounts claimed by the Indemnitee in connection with the Claim to the extent
that the Indemnitee is entitled to indemnification therefor under Section 7.1 or
7.2 above. The Indemnitee's failure to give prompt notice, to provide copies of
documents or to furnish relevant data to Indemnitor shall not constitute a
defense (in whole or in part) to any claim by the Indemnitee against the
Indemnitor for indemnification, except and only to the extent that such failure
shall have adversely affected the ability of the Indemnitor to defend against or
reduce the Claim or the Indemnitor is otherwise prejudiced thereby.
(c) The Indemnitor may dispute any Claim asserted by the
Indemnitee by giving written notice to the Indemnitee setting forth the basis of
the dispute within thirty (30) days after the date of the Notice of Claim, at
which time the parties shall attempt to resolve the disputed Claim through good
faith negotiation.
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7.4 Procedure for Indemnification - Matters Involving Third
Party Claims
(a) If any third party shall notify an Indemnitee with
respect to any matter (a "Third Party Claim") which may give rise to a claim for
indemnification against the Indemnitor under Sections 7.1 or 7.2, then the
Indemnitee shall promptly notify the Indemnitor thereof in writing, provided
that no delay on the part of the Indemnitee in notifying the Indemnitor shall
relieve the Indemnitee from any obligation hereunder unless (and then solely to
the extent) the Indemnitor is prejudiced thereby.
(b) The Indemnitor will have the right to defend the
Indemnitee against the Third Party Claim with counsel of its choice satisfactory
to the Indemnitee so long as (i) the Indemnitor notifies the Indemnitee in
writing within 10 business days after the Indemnitee has given notice of the
Third Party Claim that the Indemnitor will indemnify the Indemnitee from and
against any loss that the Indemnitee may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the Third Party Claim, (ii) the
Third Party Claim involves only money damages and does not seek an injunction or
other equitable relief, (iii) if the Indemnitor is the Buyer, the Third Party
Claim does not involve the Southern States Lease, (iv) settlement of, or an
adverse judgment with respect to, the Third Party Claim is not, in the good
faith and reasonable judgment of the Indemnitee, likely to establish a
precedental custom or practice adverse to the continuing business interests of
the Indemnitee, and (v) the Indemnitor conducts the defense of the Third Party
Claim actively and diligently.
(c) So long as the Indemnitor is conducting the defense of
the Third Party Claim in accordance with paragraph (b) of this Section 7.4, (i)
the Indemnitee may retain separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim, (ii) the Indemnitee will
not consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of the
Indemnitor (not to be withheld unreasonably), and (iii) the Indemnitor will not
consent to the entry of any judgment or enter into any settlement with respect
to the Third Party Claim without the prior written consent of the Indemnitee
Party (not to be withheld unreasonably).
(d) In the event any of the conditions in paragraph (b) of
this Section 7.4 is or becomes unsatisfied, however, (i) the Indemnitee may
defend against, and consent to the entry of any judgment or enter into any
settlement with respect to, the Third Party Claim in any manner it reasonably
may deem appropriate (and the Indemnitee need not consult with, or obtain any
consent from, the Indemnitor in connection therewith), (ii) the Indemnitor will
reimburse the Indemnitee promptly and periodically for the costs and defending
against the Third Party Claim (including reasonable attorneys' fees and
expenses), and (iii) the Indemnitor will remain responsible for any losses that
the Indemnitee may suffer resulting from arising out of, relating to, in the
nature of, or caused by the Third Party Claim to the fullest extent provided in
this Section 8.
(e) After the Closing, to the fullest extent permitted by
law, the indemnities set forth in this Section shall be the exclusive remedies
of the Buyer, the Seller and the Stockholder for any misrepresentation or breach
of warranty or representation contained in this
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Agreement or closing certificates delivered pursuant to Sections 9 and 10, and
the parties shall not be entitled to a rescission of this Agreement or to any
further indemnification rights or statutory, equitable or common law claims of
any nature, kind or character whatsoever in respect thereof, all of which the
Buyer, the Seller and the Stockholder hereby waive, provided that nothing in
this clause (e) shall be construed to limit in any way the rights and benefits
of, or the remedies available to, the Buyer, the Seller or the Stockholder under
or in respect of any other instrument or agreement to which such party may be a
party or for fraud.
(f) The Indemnitee shall cooperate with the Indemnitor in
the defense of any Third-Party Claim assumed by the Indemnitor.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER.
The obligations of the Buyer under this Agreement are subject, at the
option of the Buyer, to the fulfillment at or prior to the Closing Date, of each
of the following conditions:
8.1 Representations and Warranties. Each of the representations and
warranties of the Seller and the Stockholder contained herein shall have been
true and correct in all respects as of the Closing Date as though made on and as
of such date.
8.2 Covenants. The Seller shall have performed and complied with, in all
material respects, all obligations and agreements and covenants and conditions
contained in this Agreement to be performed or complied with by it at or prior
to the Closing.
8.3 No Adverse Proceedings. No material action or proceeding against the
Seller or the Business and/or any of the Assets, or relating to the consummation
of the transactions contemplated by this Agreement, shall have been instituted
nor any material governmental investigation undertaken which might result in any
such action or proceeding, or any order of a court entered which has the effect
of enjoining or preventing the consummation of this transaction. No claim,
action, suit, investigation or other court proceeding shall be pending or
threatened before any court or governmental agency which threatens to prohibit
the transactions contemplated by this Agreement or which seeks material monetary
damages from or other relief against the Seller, the Business and/or any of the
Assets.
8.4 Closing Documents. The Seller shall have delivered to the Buyer
the documents to be delivered at Closing under Section 3.3 hereof in form
satisfactory to counsel to the Buyer.
8.5 Consents, Permits and Approvals. Consents to the assignment of any
Permits and the Assumed Contracts identified in the SCHEDULES hereto shall have
been obtained (and copies provided to Buyer), in written instruments reasonably
satisfactory to the Buyer.
8.6 Discharge of Liens and Indebtedness. The Seller shall, at or
prior to the Closing, discharge all Liens on any of the Assets.
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8.7 Due Diligence. The Buyer shall, at or prior to the Closing, have
completed its due diligence examination of the Seller, the Business and the
Assets, and shall have been satisfied with the results thereof.
8.8 New Lease. At or prior to the Closing, Buyer shall enter into
a lease with Southern States in respect of the Seaford Leased Property.
8.9 Title and Other Assurances. The Buyer's title to or interest in the
Real Property shall be fully insurable as of the Closing Date by a nationally
recognized title company (the "Title Company"), at normal premiums, free of all
Liens or other title defects except standard exceptions appearing in the form of
commitment used by the Title Company and Permitted Liens or those acceptable to
the Buyer in the reasonable exercise of its discretion, and the officers of the
Seller shall have executed such affidavits or statements regarding their lack of
knowledge of any Liens or other matters adversely affecting the Buyer's title to
the Real Property, as may be reasonably required by such title insurance company
to issue an ALTA Form-B owner's title insurance policy for the Real Property as
of the Closing Date with a "non-imputation" endorsement.
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9. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLER.
The obligations of the Seller under this Agreement are subject, at the
option of the Seller, to the fulfillment at or prior to the Closing Date of each
of the following conditions:
9.1 Representations and Warranties. The representations and warranties
of the Buyer herein contained shall be true and correct in all respects as of
the Closing Date.
9.2 Covenants. The Buyer shall have performed all obligations and
complied in all material respects with all covenants required by this Agreement
to be performed or complied with on or prior to the Closing.
9.3 No Adverse Proceedings. No material action or proceeding against the
Buyer relating to the consummation of the transactions contemplated by this
Agreement, shall have been instituted nor any material governmental
investigation undertaken which might result in any such action or proceeding, or
any order of a court entered which has the effect of enjoining or preventing the
consummation of this transaction. No claim, action, suit, investigation or other
court proceeding shall be pending or threatened before any court or governmental
agency which threatens to prohibit the transactions contemplated by this
Agreement or which seeks material monetary damages from or other relief against
the Buyer.
9.4 Closing Documents. The Buyer shall have delivered to the Seller
the documents to be delivered at Closing under Section 3.2 hereof in form
satisfactory to counsel to the Seller.
9.5 New Lease. At or prior to the Closing, Buyer shall enter into a
lease with Southern States in respect of the Seaford Leased Property, which new
lease shall be in a form reasonably satisfactory to Seller.
10. TERMINATION.
10.1 Methods of Termination. This Agreement may be terminated and the
purchase of the Assets as contemplated by this Agreement may be abandoned at any
time, but not later than the Closing Date:
(a) by mutual written consent of the Buyer and the Seller; or
(b) by the Buyer by written notice to Seller after September 30,
1997 if any of the conditions to the Buyer's obligations provided in Section 9
of this Agreement shall not have been met by the Seller or waived in writing by
the Buyer on or prior to such date (unless the failure results primarily from
the Buyer breaching any representation, warranty or covenant contained in this
Agreement); or
(d) by the Seller by written notice to Buyer after September 30,
1997 if any of the conditions to the Seller's obligations provided in Section 10
of this Agreement shall not have been met by the Buyer or waived in writing by
the Seller on or prior to such date (unless the
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failure results primarily from the Seller breaching any representation, warranty
or covenant contained in this Agreement).
10.2 Procedure Upon Termination. In the event of termination by the
Buyer or the Seller or both pursuant to Section 10.1 above, written notice
thereof shall be promptly given by the terminating party to the other party, and
this Agreement shall terminate, and the purchase of the Assets hereunder shall
be abandoned without further action by the Buyer or the Sellers. If this
Agreement is terminated as provided herein, each party shall redeliver all
documents, work papers and other material of any other party relating to the
transactions contemplated hereby, whether so obtained before or after the
execution hereof, to the party furnishing the same.
10.3 Effect of Termination. If this Agreement is validly terminated in
accordance with Sections 10.1 and 10.2 above, then each of the parties shall be
relieved of their duties and obligations arising under this Agreement after the
date of such termination and such termination shall be without liability to the
Buyer or the Seller; provided, however, that nothing in this Section 10.3 shall
relieve the Buyer or the Seller of any liability for a material breach of this
Agreement occurring prior to termination.
11. CONFIDENTIALITY
11.1 Confidential Information. From and after the Closing Date, the
Seller and the Stockholder (and their affiliates) jointly and severally covenant
and agree that it and they will not divulge or disclose to any third party
(other than the Buyer or any agent or employee of the Buyer) any information of
a proprietary, secret or confidential nature related to the Business, except as
contemplated by this Agreement.
11.2 Remedies. It is recognized that damages in the event of breach of
this Section 11 would be difficult, if not impossible, to ascertain and it is
therefore agreed that the Buyer, in addition to and without limiting any other
remedy or right any of them may have, shall have the right to an injunction or
other equitable relief in any court of competent jurisdiction, enjoining any
such breach; the Seller and the Stockholder hereby consent to the jurisdiction
of any court located in the jurisdiction where the event giving rise to such
breach shall have occurred or is occurring. The existence of this right shall
not preclude any other rights and remedies at law or in equity which the Buyer
may have.
12. MISCELLANEOUS.
12.1 Expenses. Except as otherwise specifically provided herein, each
party hereto shall be solely responsible for all fees, costs and expenses
incurred by it or on its behalf in connection with the preparation, negotiation
and execution of this Agreement and the Schedules hereto, and the consummation
of the transactions contemplated hereby and thereby, including, without
limitation, the fees, costs and expenses of its counsel, accountants, brokers,
funders, investment bankers, financial advisors and other representatives.
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12.2 No Solicitation. At no time prior to the termination of this
Agreement shall Seller or the Stockholder solicit or entertain any offer to
purchase the Assets made by any person, firm or corporation other than Buyer.
12.3 Notices. All notices and other communications hereunder or in
connection herewith shall be in writing and delivered as follows:
If to the Buyer, to:
Richard L. Willey
Vice President and General Manager
Grain & Oilseed Division
Perdue Farms Incorporated
P.O. Box 1537
Salisbury, MD 21802-1537
With copies to:
Herbert D. Frerichs, Jr.
Piper & Marbury L.L.P.
Charles Center South
36 South Charles Street
Baltimore, MD 21201-3018
If to the Seller or the Stockholder, to:
Zapata Corporation
1717 Saint James Place, Suite 550
Houston, TX 77056
Attention: Eric T. Furey
All notices, requests, demands or other communications hereunder shall
be given to or made upon the respective parties hereto at their addresses set
forth above, or, as to any party, at such other address as may be designated by
it in a written notice to the other party. All notices, requests, consents and
demands hereunder shall be effective when personally delivered or upon delivery
when sent by United States registered or certified mail, postage prepaid, or
when sent by confirmed facsimile, or when delivered by overnight courier.
12.4 Entire Agreement. This Agreement and the other agreements
contemplated herein, including the Schedules hereto, constitutes the entire
agreement among the parties and supersedes all prior agreements, correspondence,
conversations and negotiations with respect to the subject matter hereof.
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12.5 Severability. If any provision of this Agreement shall be declared
by any court of competent jurisdiction illegal, void or unenforceable, the other
provisions shall not be effected, but shall remain in full force and effect.
12.6 Modification and Amendment. This Agreement may not be modified or
amended except by an instrument in writing duly executed by the parties hereto,
and no waiver of compliance of any provision or condition hereof and no consent
provided for herein shall be effective unless evidenced by an instrument in
writing duly executed by the party hereto seeking to be charged with such waiver
or consent.
12.7 Time of the Essence. Time is of the essence in every provision of
this Agreement where time is a factor.
12.8 Governing Law and Jurisdiction. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware.
12.9 Specific Performance. Notwithstanding anything in this Agreement to
the contrary if, on the Closing Date, either party (i) has complied with all the
conditions to the obligations of the other party contained in Section 8 or 9, as
the case may be, and (ii) has notified the other party of its intention to
consummate the transactions contemplated under this Agreement and has furnished
evidence of its willingness and ability to do so, and if the Closing does not
then occur due to the refusal of the other party to so consummate the
transactions contemplated under this Agreement, the non-refusing party will be
entitled to specifically enforce the terms of this Agreement in a court of
competent jurisdiction, it being acknowledged that monetary damages due the
other party in such case cannot be adequately determined at law. An action for
specific performance by a party hereunder shall be deemed to be a waiver of any
unfulfilled condition required of the other party, if any, under Sections 8 or
9, as the case may be. The existence of this right shall not preclude any other
rights and remedies at law or in equity, including, without limitation, monetary
damages, which the Buyer, the Seller or the Stockholder may have.
12.10 Binding Effect; Assignment. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective heirs,
legatees, beneficiaries, personal representatives and other legal
representatives and assigns, as the case may be. This Agreement may not be
assigned by either party hereto without prior written consent of the other.
12.11 Further Assurances. In addition to the actions, documents and
instruments specifically required to be taken or delivered hereby, prior to and
after the Closing and without further consideration, the Seller and the Buyer
shall execute, acknowledge and deliver such other assignments, transfers,
consents and other documents and instruments and take such other actions as
either party, or their counsel, may reasonably request in order to complete and
perfect the transactions contemplated by this Agreement.
12.12 Enumerations and Headings. The enumerations and headings contained
in this Agreement are for convenience of reference only and shall in no way be
held or deemed to define,
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limit, describe, explain, modify, amplify or add to the interpretation,
construction or meaning of any provision or the scope or intent of this
Agreement, or in any way effect this Agreement.
12.13 Counterparts. This Agreement may be signed in two or more
counterparts, all of which, taken together, shall be deemed to constitute one
original Agreement.
12.14 Publicity. Except as may otherwise be required by law, each party
hereby agrees that, on or prior to the Closing Date, it shall not issue any
press release or make any public statements, whether written or oral, with
respect to this Agreement or the transactions contemplated hereby without the
prior written consent of the other parties hereto, which consent shall not be
unreasonably withheld.
12.15 Employee Matters. As of the Closing Date, the Buyer shall offer
employment to the employees of the Seller. In respect of each such employee of
the Seller who accepts the Buyer's offer of employment on or prior to the
Closing Date, such hired employee shall be deemed terminated by Seller and newly
hired by Buyer.
12.16 No Third-Party Beneficiaries. This Agreement, including, without
limitation, Section 12.15 above, shall not confer any rights or remedies upon
any person other than the Buyer, the Seller, the Stockholder and their
respective successors and permitted assigns.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the date first above written.
PERDUE FARMS INCORPORATED
By:....................................
Richard L. Willey
Vice President and General Manager
Grain & Oilseed Division
ZAPATA PROTEIN, INC.
By:....................................
Clyde Gilbert
Senior Vice President-Operations
VENTURE MILLING COMPANY
By:....................................
Clyde Gilbert
Senior Vice President-Operations
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SCHEDULES TO ASSET PURCHASE AGREEMENT
SCHEDULES ARE ATTACHED HERETO
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ASSET PURCHASE AGREEMENT
DATED AS OF NOVEMBER 3, 1997
BY AND AMONG
PROTEIN (USA) COMPANY,
AMERICAN PROTEINS, INC.
AND
CHESAPEAKE BAY FISHING CO., L.C.
<PAGE>
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made as of
November 3, 1997 by and among Protein (USA) Company, a Delaware corporation
("Purchaser"), American Proteins, Inc., a Georgia corporation (the "Company"),
and Chesapeake Bay Fishing Co., L.C., a Virginia limited liability company of
which 98% of the membership interests are owned by the Company ("Vessel Sub").
PRELIMINARY STATEMENT
The Company, directly through its Ampro Fisheries Company
division (the "Ampro Division") and indirectly through Vessel Sub, is engaged in
menhaden fishing and the production and sale of fish meal, fish oil and fish
solubles (collectively, the "Business"). On the terms and subject to the
conditions set forth herein, the Company and Vessel Sub desire to sell, and
Purchaser desires to purchase, the properties and assets of the Business by
means of asset purchases (such asset purchases being the "Acquisition").
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, representations and undertakings contained herein, the parties
hereto hereby agree as follows:
Paragraph 1. Certain Defined Terms. As used in this Agreement,
the following terms have the meanings assigned to them below in this Paragraph
1. Capitalized terms used in this Agreement and not defined below in this
Paragraph 1 have the meanings assigned to them in the Preliminary Statement or
Article IX of the Standard Provisions, as the case may be.
"Acquired Business" means the Business.
"Acquisition Consideration" has the meaning specified in
Paragraph 2.
"Closing" has the meaning specified in Paragraph 3.
"Closing Date" means November 3, 1997 or such later date as to
which Purchaser and the Company may agree in writing.
"Company" means American Proteins, Inc., a Georgia corporation.
"Company Transfer Documents" has the meaning specified in
Paragraph 2.
"Current Balance Sheets" means the balance sheets of the Ampro
Division and Vessel Sub, respectively, as of October 5, 1997.
"Current Balance Sheet Date" means October 5, 1997.
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"Effective Date" means the Closing Date.
"Financial Statements" means the respective balance sheets of the
Ampro Division and Vessel Sub as of October 5, 1997 and the related
statements of operations for the period commencing January 1, 1997
through the Current Balance Sheet Date, which the Company has delivered
to Purchaser.
"Retained Assets" has the meaning specified in Paragraph 2.
"Retained Liabilities" has the meaning specified in Paragraph 2.
"Standard Provisions" has the meaning specified in Paragraph 4.
Paragraph 2. (A) The Asset Purchase. At the Closing, on the terms
and subject to the conditions set forth herein, the Company and Vessel Sub will
sell, convey, assign and transfer to Purchaser, and Purchaser will purchase and
acquire from the Company and Vessel Sub, all the properties, rights and assets
of the Company and Vessel Sub, wherever situated, of every kind, nature and
description, tangible and intangible, which are used or held for use in
connection with the Acquired Business, whether arising by contract, law or
otherwise, including any such properties, rights or assets as have been written
off and not included on the books of the Company or Vessel Sub, except for the
Retained Assets, all as the same shall exist on the Closing Date (such
properties, rights and assets (other than the Retained Assets) being the
"Assets"), in each case free of all Liens except for Permitted Liens. The Assets
will include (i) all the foregoing (other than the Retained Assets) to the
extent used or held for use primarily in connection with the Acquired Business
and (ii) the following:
(a) all customer lists, sales records, credit data and other
information relating to present and past customers of the Acquired
Business;
(b) all maritime vessels used or held for use by the Company or
Vessel Sub in the Business, together with the related purse boats, nets,
machinery equipment and supplies, including those identified in Schedule
2(A)(ii)(b);
(c) all land, buildings and wharves used or held for use by the
Company in the Acquired Business, including those identified in Schedule
2(A)(ii)(c);
(d) all vehicles and other transportation equipment used or held
for use by the Company or Vessel Sub in the Acquired Business, including
those identified in Schedule 2(A)(ii)(d);
(e) all the equipment, machinery, tools, appliances, telephone
systems, copy machines, fax machines, implements, spare parts, supplies,
furniture and all other tangible personal property of every kind and
description used or held for use by the Company or Vessel Sub in the
Acquired Business, together with any rights or claims of the Company
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or Vessel Sub arising out of the breach of any express or implied
warranty by the manufacturers or sellers of any of such assets;
(f) all inventories consisting of purchased parts, factory and
yard stores, fuel in the vessels (but not in storage), oil, shipping
containers and supplies used or held for use by the Company or Vessel
Sub in the Acquired Business, whether in the possession of the Company
or Vessel Sub, in the possession of third parties or in transit to or
from the Company or Vessel Sub;
(g) all operating data and operating records relating to or used
or held for use in the Acquired Business, including all records, notes,
sales and sales promotional data, advertising materials, credit
Information, cost and pricing Information, equipment maintenance data,
purchasing records and Information, supplier lists, business plans,
reference catalogs, payroll and personnel records, stationery, purchase
orders, sales forms, labels, catalogs, brochures, artwork, photographs,
product display and other similar property, rights and Information;
(h) all Proprietary Rights and all engineering, production and
other designs, drawings, specifications, formulas, technology,
inventions, processes and know-how used or held for use in connection
with the Acquired Business;
(i) any and all goodwill and going concern value of the Acquired
Business;
(j) all rights in, to and under all Governmental Approvals and
other rights under any Governmental Requirement relating to the Acquired
Business, including those listed in Schedule 2(A)(ii)(j);
(k) all other or additional privileges, rights, interests,
properties and assets of every kind and description and wherever located
(other than the Retained Assets) that are used or intended for use in
connection with, or that are necessary to the continued conduct of, the
Acquired Business as presently being conducted.
Without limiting the generality of the foregoing, the Assets will include those
assets reflected on the Current Balance Sheet, other than (i) those that have
been disposed of in the ordinary course of business since the Current Balance
Sheet Date and (ii) the Retained Assets.
(B) Retained Assets and Retained Liabilities. (i) The Assets will
not include, and Purchaser acknowledges that there shall be excluded from the
Assets, all the following of the Company and Vessel Sub (collectively, the
"Retained Assets"):
(a) the corporate seal, Charter Documents and minute books, stock
books and other corporate or similar records of the Company and Vessel
Sub;
(b) all product inventories consisting of fish meal, fish oil and
fish solubles;
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(c) all bank accounts, including cash on deposit and uncleared
deposits, all petty cash, temporary cash investments and instruments
representing the same, marketable securities and other cash and cash
equivalents;
(d) all accounts receivable, notes receivable, loans receivable
and advances, together with all instruments and all documents of title
representing any of the foregoing and all guaranties and security in
favor of the Company or Vessel Sub with respect to any of the foregoing;
(e) all rights to use the name "Ampro";
(f) all assets of the Company not located at or near Reedville,
Virginia that are not used in or held for use in the Acquired Business
and are not classified on the Company's books as part of its Ampro
Division;
(g) all deposits and prepaid insurance of the character included
in "Prepaids" on the respective Current Balance Sheets of the Company
and Vessel Sub;
(h) all land, buildings and wharves owned by Vessel Sub in the
Acquired Business.
(i) the rights that accrue or will accrue to the Company and
Vessel Sub under this Agreement.
(j) pledges or deposits by Company and Vessel Sub under workers'
compensation laws, including, without limitation, unemployment insurance
laws, social security laws, or similar legislation, or good faith
deposits in connection with debts, tenders, contracts (other than for
the payment of indebtedness of Company or Vessel Sub) or leases to which
Company or Vessel Sub are a party, or deposits to secure public or
statutory obligations of Company or Vessel Sub or deposits of cash or
United States government bonds to secure surety, appeal, performance or
other similar bonds to which Company or Vessel Sub are a party, or
deposits as security for contested taxes or import duties or for the
payment for rent;
(k) any and all rights of Company or Vessel Sub under any lease,
executory contract, or other agreement of Company or Vessel Sub relating
to the Acquired Business or the Assets;
(j) any and all rights, causes of action, claims and demands of
Company or Vessel Sub against third parties arising out of Seller's or
its Affiliates' conduct of the Acquired Business prior to the Closing
other than rights or claims of the Company or Vessel Sub arising out of
the breach of any express or implied warranty by the manufacturers or
sellers of any of the Assets;
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(m) all licenses, permits and authorizations from governmental
authorities to conduct the Acquired Business that may not, as a matter
of law, be transferred to Purchaser (and for which Purchaser must make
independent application);
(n) all financial and accounting data and records relating to or
used or held for use in the Acquired Business, including all Returns,
schedules, work papers, books, records, notes, and related information;
(o) all computer and electronic data processing programs and
software;
(p) all insurance policies, insurance proceeds and insurance
claims relating to all or any part of the Acquired Business and, to the
extent transferable, the benefit of and the right to enforce the
covenants and warranties, if any, that the Company or Vessel Sub is
entitled to enforce against the insurer under such policies with respect
to the Acquired Business;
(q) fuel in storage and held for use in the Business;
(r) the 31 ft. Bertram powerboat and related equipment owned by
the Company; and
(s) all equipment, tools, parts and materials used for the
construction, maintenance and repair of vessels.
(ii) Purchaser is not assuming and will not be obligated by this
Agreement or any other Transaction Document to pay, perform, discharge or
otherwise be responsible for any debts, liabilities or obligations of the
Company or of Vessel Sub, whether accrued, absolute, contingent or otherwise,
oral or written, disclosed or undisclosed and all such debts, liabilities and
obligations (the "Retained Liabilities") will remain the responsibility and
obligation of the Company and Vessel Sub, as applicable. Without limiting the
generality of the foregoing, it is expressly agreed that neither Purchaser nor
any Affiliate thereof will assume or incur any liabilities or obligations based
on, arising out of or in connection with:
(a) any Litigation, warranty claim, claim based on violation of
any Environmental Law or any other claim associated with or relating to
the Assets or the Acquired Business arising out of actions or omissions
occurring prior to the Effective Date;
(b) any obligations under any contract or other agreement with
customers, suppliers or any other party;
(c) any Taxes accruing prior to the Effective Date;
(d) except as provided herein any liabilities with respect to any
Plan,
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Employment Agreement or Employee Policies and Procedures or any
claims for wages or other compensation, vacation pay, holiday pay or for
severance arising out of alleged or actual employment loss (other than
any liabilities for wages and benefits related to WARN notices described
in Section 6:04(f) hereof);
(e) any Indebtedness of the Company or of Vessel Sub;
(f) any liabilities, obligations or expenses of the Company or of
Vessel Sub for any broker's or finder's commission relating to this
Agreement or any of the transactions contemplated hereby;
(g) any liabilities or obligations of the Company or of Vessel
Sub arising from or incurred in connection with the negotiation,
preparation or execution of this Agreement or the transactions
contemplated hereby, including fees and expenses of counsel; or
(h) any liabilities, debts or obligations arising out of actions
taken or work done by the Company or by Vessel Sub prior to the
Effective Date, including liabilities or obligations arising out of any
failure by the Company to perform any contract, commitment or
arrangement, including those set forth in any contract with customers,
in accordance with its terms prior to the Effective Date.
(C) Acquisition Consideration. In consideration of the sale,
conveyance, assignment and transfer of the Assets by the Company and by Vessel
Sub to Purchaser and in reliance on the representations and warranties made
herein by the Company and by Vessel Sub, Purchaser agrees on the Closing Date to
pay to the Company (for its account and for the account of Vessel Sub),
immediately available funds in the amount of $14,400,000 (the "Assets
Consideration"). In consideration of the non-competition covenant set forth in
Article VIII of the Standard Provisions, Purchaser agrees on the Closing Date to
pay to the Selling Parties and the individual named in Article VIII of the
Standard Provisions, and aggregate immediately available funds in the amount of
$100,000 (together with the Assets Consideration, the "Acquisition
Consideration").
(D) Delivery of Documents. (ii) At the Closing, the Company and
Vessel Sub will each execute and deliver to Purchaser a general conveyance and
assignment agreement substantially in the form agreed to by the parties and any
other instruments of transfer deemed necessary or appropriate by Purchaser
(collectively, the "Company Transfer Documents").
(ii) At the Closing, the Company will execute and deliver to
Purchaser an Agreement for Right of First Refusal on Peruvian Production in the
form attached hereto as Schedule 2(E)(ii).
(F) The Effective Time. The effective time of the Acquisition
(the "Effective Time") will be 12:01 a.m., Reedville, Virginia time, on the
Effective Date.
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Paragraph 3. The Closing. On or before the Closing Date, the
parties hereto will take all actions necessary to (A) effect the Acquisition and
(B) satisfy the document delivery requirements on which the obligations of the
parties to effect the Acquisition and the other transactions contemplated hereby
are conditioned by the provisions of Article V (all those actions collectively
being the "Closing"). The Closing will take place at the offices of Long
Aldridge & Norman, LLP at 10:30 a.m., Atlanta time, or at such later time on the
Closing Date as Purchaser shall specify.
Paragraph 4. Incorporation of Standard Provisions. The Standard
Provisions for Asset Purchases attached hereto as Annex 1 (the "Standard
Provisions"), hereby are incorporated in this Agreement by this reference and
constitute a part of this Agreement with the same force and effect as if set
forth at length herein.
Paragraph 5. Special Provisions respecting Employment
Obligations. Without limiting the generality of the definition of Retained
Liabilities, the Company shall be responsible for, and shall pay and discharge
when due;
(a) all end-of-season bonuses for employees of Vessel Sub with
respect to the current fishing season (ending in or about December 1997)
with no proration based on the period between the Effective Date and the
end of such season; and
(b) all severance and vacation benefits, if any, attributable to
work by employees of the Company and Vessel Sub through the Effective
Date, based on the Company's Employee Policies and Procedures with no
proration based on the period between the Effective Date and the date of
such closing.
Liabilities included in clauses (a) and (b) of this Paragraph 5
shall, notwithstanding any provision to the contrary, be considered as Retained
Liabilities.
Paragraph 6. Counterparts. This Agreement may be executed in
multiple counterparts, each of which will be an original, but all of which
together will constitute one and the same instrument.
Paragraph 7. Notices. For purposes of Section 10.06, notices
shall be addressed to the Company as follows:
American Proteins, Inc.
4705 Leland Drive
Cumming, GA 30131
Attn: Tommy Bagwell
Fax: (770) 886-2296
with copies (which shall not constitute notice for purposes of this
Agreement) to:
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Long Aldridge & Norman, LLP
One Peachtree Center
303 Peachtree Street, #5300
Atlanta, GA 30308
Attn: Briggs Tobin
Fax: (404) 527-4198
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
(Signatures on following page)
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
PROTEIN (USA) COMPANY
By:
--------------------------------
Robert W. Stockton
Senior Vice President and
Chief Financial Officer
AMERICAN PROTEIN, INC.
By:
--------------------------------
Thomas N. Bagwell
President and Chief Executive Officer
CHESAPEAKE BAY FISHING CO., L.C.
By:
---------------------------------
Thomas N. Bagwell
President and Chief Executive Officer
---------------------------------
Thomas N. Bagwell, individually for purposes
of the Noncompetition Agreement in
Article VIII of Annex 1
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Annex 1
ARTICLE I
[RESERVED]
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF
THE COMPANY AND VESSEL SUB
The Company and Vessel Sub (each, a "Selling Party") jointly
and severally represent and warrant to, and agree with, Purchaser that all the
following representations and warranties in this Article II are as of the date
of this Agreement, and will be, on the Closing Date and immediately prior to the
Effective Time, true and correct. Except for the representations contained in
Sections 2.01, 2.03, 2.07, 2.08, 2.12 and 2.23, all representations made herein
by Company and Vessel Sub are made only to the extent of the actual knowledge
(as opposed to constructive or other form of imputed knowledge) of Tommy
Bagwell, Bob Smith and Bill Burke, and for all purposes of this Agreement,
"knowledge" of Seller or one of its Affiliates shall mean the actual knowledge
(as opposed to constructive or other form of imputed knowledge) of Tommy
Bagwell, Bob Smith and Bill Burke:
Section 2.01. Organization. Schedule 2.01 sets forth the
Organization State of each Selling Party. Each Selling Party (a) is a
corporation or limited liability company, as applicable, duly organized, validly
existing and in good standing under the laws of its Organization State, (b) has
all requisite corporate or other power and authority under those laws and its
Charter Documents to own or lease and to operate its properties and to carry on
its business as now conducted and (c) is duly qualified and in good standing as
a foreign corporation or limited liability company, as applicable, in all
jurisdictions in which it owns or leases property or in which the carrying on of
its business as now conducted so requires except where the failure to be so
qualified, singly or in the aggregate, would not have a Material Adverse Effect.
Section 2.02. [Reserved.]
Section 2.03. Authorization; Enforceability; Absence of
Conflicts; Required Consents. (a) The execution, delivery and performance by
each Selling Party of this Agreement and each other Transaction Document to
which it is a party, and the carrying into effect of the Acquisition and the
other transactions contemplated hereby and thereby, are within its corporate or
other power under its Charter Documents and the applicable Governmental
Requirements of its Organization State and have been duly authorized by all
proceedings, including actions permitted to be taken in lieu of proceedings,
required under its Charter Documents and those Governmental Requirements.
(b) This Agreement has been, and each of the other Transaction
Documents to
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which each Selling Party is a party, when executed and delivered to Purchaser,
will have been, duly executed and delivered by such Selling Party and is,
or when so executed and delivered will be, the legal, valid and binding
obligation of the such Selling Party, enforceable against such Selling Party in
accordance with its terms, except as that enforceability may be (i) limited by
any applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally and (ii) subject
to general principles of equity (regardless of whether that enforceability is
considered in a proceeding in equity or at law).
(c) The execution, delivery and performance in accordance with
their respective terms by each Selling Party of the Transaction Documents to
which it is a party have not and will not (i) violate, breach or constitute a
default under (A) the Charter Documents of such Selling Party, (B) any Material
Governmental Requirement applicable to such Selling Party or (C) any Material
Agreement of such Selling Party or the Acquired Business, (ii) result in the
acceleration or mandatory prepayment of any Indebtedness, or any Guaranty not
constituting Indebtedness, of such Selling Party or afford any holder of any of
that Indebtedness, or any beneficiary of any of those Guaranties, the right to
require such Selling Party to redeem, purchase or otherwise acquire, reacquire
or repay any of that Indebtedness, or to perform any of those Guaranties, (iii)
cause or result in the imposition of, or afford any Person the right to obtain,
any Lien upon any of the Assets (or upon any revenues, income or profits of the
Acquired Business therefrom).
Section 2.04. [Reserved.]
Section 2.05. [Reserved.]
Section 2.06. [Reserved.]
Section 2.07. Title to the Assets. The Selling Parties have
and are transferring to Purchaser good, valid and marketable title to all the
Assets, free and clear of all Liens except for Permitted Liens.
Section 2.08. Company Transfer Documents. The Company Transfer
Documents are effective to vest in Purchaser good title to all the Assets, free
and clear of all Liens except for Permitted Liens.
Section 2.09. Sufficiency of the Assets. Except for the
Retained Assets, the Assets comprise all the properties, rights and assets of
every type and description, real, personal and mixed, tangible and intangible,
which have been used or employed or held for use by the Selling Parties
primarily in operating the Acquired Business during the past 12 months.
Section 2.10. [Reserved.]
Section 2.11. Litigation. Except as disclosed in Schedule
2.11, no Litigation is pending or, to the knowledge of any Selling Party,
threatened which relates to the Assets or the
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Acquired Business.
Section 2.12. Financial Statements; Disclosure. (a) Financial
Statements. (i) The Financial Statements (including in each case the related
schedules and notes, if any) delivered to Purchaser present fairly, in all
material respects, the financial position of the Acquired Business at the
respective dates of the balance sheets included therein and the results of
operations and cash flows of the Acquired Business for the respective periods
set forth therein and have been prepared in accordance with the past practices
of the Selling Parties (subject, in the case of interim financial statements, to
normal and recurring year-end adjustments and the absence of footnote
disclosure). As of the date of any balance sheet of each Selling Party included
in the Financial Statements delivered to Purchaser, such Selling Party then had
no outstanding Indebtedness to any Person and no liabilities of any kind
(including contingent obligations, tax assessments or unusual forward or
long-term commitments), or any unrealized or anticipated loss, which in the
aggregate then were Material to the Acquired Business and required to be
reflected in those Financial Statements or in the notes related thereto in
accordance with GAAP which were not so reflected.
(ii) Since the Current Balance Sheet Date, no change has
occurred in the business, operations, properties or assets, liabilities,
condition (financial or other) or results of operations of the Acquired Business
that could reasonably be expected, either alone or together with all other such
changes, to have a Material Adverse Effect.
(b) Disclosure. As of the date hereof, all Information that
has been made available to Purchaser by or on behalf of the Company prior to the
date of this Agreement in connection with the transactions contemplated hereby
is, taken together, true and correct in all material respects and does not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained therein not Materially
misleading in light of the circumstances under which those statements were made.
Section 2.13. [Reserved.]
Section 2.14. [Reserved.]
Section 2.15. [Reserved.]
Section 2.16. [Reserved.]
Section 2.17. Real Properties. (a) Schedule 2.17 lists and
correctly describes in all material respects: (i) all real properties owned by
either Selling Party and included in the Assets and, for each of those
properties, the address thereof and the use thereof in the Acquired Business,
and (ii) all real properties of which either Selling Party is the lessee under a
lease included in the Assets and, for each of those properties, the address
thereof and the lease (including its expiration date and any renewal options)
relating thereto.
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(b) The Company has provided Purchaser with true, complete and
correct copies of all title reports and insurance policies owned or in the
possession of any of the Selling Parties and relating to any of the real
properties listed as being owned in Schedule 2.17. Except as set forth in
Schedule 2.17 or those reports and policies, and except for Permitted Liens, the
Selling Party designated in Schedule 2.17 owns in fee, and has good, valid and
marketable title to, free and clear of all Liens, each property listed in
Schedule 2.17 as being owned.
(c) The Company has provided Purchaser with true, correct and
complete copies of all leases under which a Selling Party is leasing any of the
properties listed in Schedule 2.17 as being leased and, except as set forth in
Schedule 2.17, (i) each of those leases is, to the knowledge of such Selling
Party, valid and binding on the lessor party thereto, and (ii) such Selling
Party has not sublet any of the leased space to any Person.
(d) The fixed assets of the Company which are included in the
Assets are affixed only to one or more of the real properties listed in Schedule
2.17 and EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS
AGREEMENT OR THE COMPANY TRANSFER AGREEMENTS, SELLERS MAKE NO WARRANTIES,
EXPRESS OR IMPLIED, AND EXPRESSLY DISCLAIM ANY SUCH WARRANTIES WITH RESPECT TO
THE CONDITION, MERCHANTABILITY OR FITNESS GENERALLY OR FOR A PARTICULAR PURPOSE,
OF THE FIXED ASSETS. PURCHASER HAS BEEN AND WILL BE AFFORDED AN OPPORTUNITY TO
SATISFY ITSELF WITH RESPECT TO THE FOREGOING. PURCHASER ACCEPTS THE FIXED ASSETS
"AS-IS, WHERE-IS".
Section 2.18. Other Tangible Assets. EXCEPT FOR THE
REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS AGREEMENT OR THE COMPANY
TRANSFER AGREEMENTS, SELLERS MAKE NO WARRANTIES, EXPRESS OR IMPLIED, AND
EXPRESSLY DISCLAIM ANY SUCH WARRANTIES WITH RESPECT TO THE CONDITION,
MERCHANTABILITY OR FITNESS GENERALLY OR FOR A PARTICULAR PURPOSE, OF THE ASSETS
COMPRISED OF PROPERTY, PLANT AND EQUIPMENT. PURCHASER HAS BEEN AND WILL BE
AFFORDED AN OPPORTUNITY TO SATISFY ITSELF WITH RESPECT TO THE FOREGOING.
PURCHASER ACCEPTS THE ASSETS "AS-IS, WHERE-IS", EXCEPT THAT THE VESSELS SHALL BE
DELIVERED AT THE PORT OF Reedville, Virginia.
Section 2.19. Proprietary Rights. Except as set forth in
Schedule 2.19, the Selling Parties own, free and clear of all Liens other than
Permitted Liens, or have the legal right to use, all Proprietary Rights that are
necessary to the conduct of the Acquired Business as now conducted, in each case
free, to their knowledge, of any claims or infringements, and these Proprietary
Rights are included in the Assets. Schedule 2.19 (a) lists these Proprietary
Rights and (b) indicates those owned by a Selling Party and, for those not
listed as so owned, the agreement or other arrangement pursuant to which they
are possessed. Except as set forth in Schedule 2.19, (a) no consent of any
Person will be required for the use of any of these Proprietary Rights by
Purchaser or any Subsidiary of Purchaser following the Effective Time and (b)
no governmental registration of any of these Proprietary Rights has lapsed or
expired or been
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canceled, abandoned, opposed or the subject of any reexamination request.
Section 2.20. [Reserved.]
Section 2.21. [Reserved.]
Section 2.22. [Reserved.]
Section 2.23. Employee Matters. (a) Cash Compensation.
Schedule 2.23 sets forth a complete written list of the names, titles and rates
of annual salary at the Current Balance Sheet Date and at the date hereof of all
employees of the Selling Parties who are actively employed in the Business
(other than employees employed in the shipyard and diesel operations)
(hereinafter, the "Transferred Employees").
Section 2.24. [Reserved.]
Section 2.25. [Reserved.]
Section 2.26. [Reserved.]
Section 2.27. Absence of Changes. Since the Current Balance
Sheet Date, except as set forth in Schedule 2.27, none of the following has
occurred with respect to the Acquired Business:
(a) any circumstance, condition, event or state of facts
(either singly or in the aggregate), which has caused, is causing or
will cause a Material Adverse Effect;
(b) any increase in, or any commitment or promise to increase,
the rates of cash compensation as of the date hereof, except for
ordinary and customary bonuses and salary increases for employees at
the times and in the amounts consistent with its past practice;
(c) any work interruptions, labor grievances or claims filed
that will have a Material Adverse Effect following the Effective Time;
(d) any distribution, sale or transfer of, or any commitment
to distribute, sell or transfer, any of the Assets of any kind which
singly is or in the aggregate are Material to the Acquired Business;
(e) any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any interest in any of the
Assets or requiring consent of any Person to the transfer and
assignment of any of the Assets;
(f) any purchase or acquisition of, or agreement, plan or
arrangement to
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purchase or acquire, any property, rights or assets outside of the
ordinary course of operating the Acquired Business consistent with
its past practices;
(g) any waiver of any of any Selling Party's rights or claims
that singly is or in the aggregate are Material to the Acquired
Business; or
(h) any transaction by a Selling Party outside the ordinary
course of operating the Acquired Business or not consistent with the
past practices of the Acquired Business.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to each Selling Party that
all the following representations and warranties in this Article III are as of
the date of this Agreement, and will be on the Closing Date and immediately
prior to the Effective Time, true and correct:
Section 3.01. Organization; Power. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Purchaser has all requisite corporate power and authority
under the laws of its Organization State and its Charter Documents to own or
lease and to operate its properties presently and following the Effective Time
and to carry on its business as now conducted and as proposed to be conducted
following the Effective Time.
Section 3.02. Authorization; Enforceability; Absence of
Conflicts; Required Consents. (a) The execution, delivery and performance by
Purchaser of this Agreement and each other Transaction Document to which it is a
party, and the effectuation of the Acquisition and the other transactions
contemplated hereby and thereby, are within its corporate power under its
Charter Documents and the applicable Governmental Requirements of its
Organization State and have been duly authorized by all proceedings, including
actions permitted to be taken in lieu of proceedings, required under its Charter
Documents and the applicable Governmental Requirements of its Organization
State.
(b) This Agreement has been, and each of the other Transaction
Documents to which Purchaser is a party, when executed and delivered to the
other parties thereto, will have been, duly executed and delivered by it and is,
or when so executed and delivered will be, its legal, valid and binding
obligation, enforceable against it in accordance with its terms, except as that
enforceability may be (i) limited by any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and (ii) subject to general principles of equity
(regardless of whether that enforceability is considered in a proceeding in
equity or at law).
(c) The execution, delivery and performance in accordance with
their
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respective terms by Purchaser of the Transaction Documents to which it is
a party have not and will not violate, breach or constitute a default under (i)
its Charter Documents, (ii) any Governmental Requirement applicable to it or
(iii) any of its Material Agreements.
(d) Except as may be required by the HSR Act or the applicable
state securities or blue sky laws, no Governmental Approvals are required to be
obtained, and no reports or notices to or filings with any Governmental
Authority are required to be made, by Purchaser for the execution, delivery or
performance by Purchaser of the Transaction Documents to which it is a party,
the enforcement against Purchaser, of its obligations thereunder or the
effectuation of the Acquisition and the other transactions contemplated thereby.
Section 3.03. [Reserved.]
Section 3.04. [Reserved.]
ARTICLE IV
[RESERVED]
ARTICLE V
CONDITIONS TO CLOSING AND CONSUMMATION
Section 5.01. Conditions to the Obligations of Each Party
The obligation of each party hereto to take the actions contemplated to be
taken by that party at the Closing is subject to the satisfaction on or before
the Closing Date of each of the following conditions or waiver pursuant to
Section 10.04:
(a) No Litigation. No Litigation shall be pending on the
Closing Date to restrain, prohibit or otherwise interfere with, or to
obtain material damages or other relief from Purchaser or any
Subsidiary of Purchaser in connection with, the consummation of the
Acquisition.
Section 5.02. Conditions to the Obligations of the Selling
Parties. The obligations of each Selling Party with respect to actions to be
taken by them at or before the Closing Date and the actions to be taken on the
Closing Date are subject to the satisfaction, or the waiver by such
Selling Party pursuant to Section 10.04 on or before the Closing Date, of (a)
all the conditions set forth in Schedule 5.02, if any, and (b) the condition
that all the representations and warranties of Purchaser in Article III shall be
true and correct as of the Closing Date as though made at that time.
Section 5.03. Conditions to the Obligations of Purchaser. The
obligations of Purchaser with respect to actions to be taken by it at or before
the Closing Date are subject to the
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satisfaction, or the waiver by Purchaser pursuant to Section 10.04, on or
before the Closing Date of (a) all the conditions set forth in Schedule 5.03,
if any, and (b) all the following conditions:
(1) Representations and Warranties. All the representations
and warranties of the Selling Parties in Article II shall be true and
correct as of the Closing as though made at that time;
(2) Delivery of Documents. The Selling Parties shall have
delivered to Purchaser a secretary's certificate, in substantially the
form agreed to by Purchaser signed by the Secretary of each Selling
Party, respecting the Charter Documents of such Selling Party,
resolutions of the Board of Directors and stockholders of such Selling
Party and the incumbency and signatures of certain officers of such
Selling Party.
ARTICLE VI
COVENANTS FOLLOWING THE EFFECTIVE TIME
Section 6.01. [Reserved.]
Section 6.02. [Reserved.]
Section 6.03. [Reserved.]
Section 6.04. Transferred Employees. (a) As of the Effective
Time, Purchaser will hire each Transferred Employee shown on Schedule 2.23, and
the terms of any such employment for each such employee, including cash
compensation and benefits, will be substantially the same in the aggregate as
the compensation and benefits received by each such employee prior to the
Closing. Purchaser agrees to continue employment for any Transferred Employees
who normally work on the vessels operated in the Business at least through the
end of the 1997 fishing season and as long as Purchaser continues to run its own
vessels in the 1997 season, and to continue the employment of all other
Transferred Employees through at least December 31, 1997, subject in any case to
the right to terminate any such Transferred Employee for cause.
(b) Without the prior written consent of Purchaser, no Selling
Party will make, or permit any of its Affiliates to make, at any time after the
date hereof any representations or promises, written or oral, to any employee of
any Selling Party concerning that employee's employment by Purchaser or any
Subsidiary of Purchaser or any compensation payable by Purchaser or any
Subsidiary of Purchaser to that employee following the Effective Time. At
reasonable times after the date hereof, Purchaser will be entitled to (i)
interview such of the employees of the Selling Parties who are involved in the
Acquired Business as it wishes and (ii) review and retain copies of the
Company's personnel records and performance evaluations of
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those employees. At the request of Purchaser, each Selling Party will make its
employees available to provide reasonable assistance to Purchaser in such
interview process.
(c) No Transfer of Plans. No portion of the assets of any
ERISA Employee Benefit Plan, or Employee Policies and Procedures, heretofore
sponsored or maintained by either Selling Party or any Selling Party Subsidiary
(and no amount attributable to any such ERISA Employee Benefit Plan or Employee
Policies and Procedures) shall be transferred to Purchaser, and Purchaser shall
not be required to continue any such Plan or Employee Policies and Procedures
after the Effective Time. All amounts payable by either Selling Party under any
such Plan or Employment Policies and Procedures directly to any employees of the
Selling Party who become employees of Purchaser or any Subsidiary of Purchaser
shall be paid or caused to be paid by the Company within 30 days after the
Effective Time to the extent that such payment is not inconsistent with the
terms of such ERISA Employee Benefit Plan or Employee Policies and Procedures.
(d) Transferred Employee Bonuses. Pursuant to provisions of
certain collective bargaining agreements, employment arrangements or other
agreements with the Selling Parties, certain of the Transferred Employees may be
eligible for bonuses upon the completion of the 1997 fishing season. Pursuant to
those agreements and the Selling Parties' desire to accommodate the transfer of
these employees, the Selling Parties agree to pay (or to reimburse the Purchaser
for payment of) 100 percent of such bonuses for the 1997 fishing season. Because
portions of the bonuses payable may be earned after the Closing Date and will be
based on volumes of fish caught and/or processed after the Closing Date, the
Purchaser agrees to make its books and records regarding volumes caught and/or
processed by the Acquired Business from the Closing Date through the end of the
1997 fishing season available to the Selling Parties for the necessary
calculation of such bonuses.
(e) Insurance Coverages for Transferred Employees. Purchaser
agrees to provide immediate coverage for the Transferred Employees as of the
Effective Time under a group health insurance plan sponsored by the Purchaser or
a substantially similar plan. The group health insurance coverage will provide
major medical and catastrophic coverages similar to those provided by the
Selling Parties' plan. The Purchaser agrees to waive all waiting or elimination
periods and preexisting condition limitations of such plan for the Transferred
Employees and to equalize deductibles for the year for the Transferred
Employees.
(f) Worker Adjustment and Retraining Notification Act. The
Selling Parties will terminate the employment of the Transferred Employees as of
the Effective Time. Purchaser agrees to provide, on or before the Effective
Time, notice to the Transferred Employees, appropriate union representatives and
appropriate local government officials of its acquisition of the Acquired
Business and the resulting impact on the employment of the Transferred
Employees, as required by the Worker Adjustment and Retraining Notification Act,
29 U.S.C. 'SS''SS'2101-2109 (the "WARN Act"), including any anticipated dates of
plant shutdown or mass layoffs. Purchaser agrees to indemnify and hold harmless
the Selling Parties from and against any liability arising under the WARN Act
with respect to the employees of the Selling Parties
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whose termination of employment occurs on the Closing Date. This indemnification
provision shall survive the Closing and shall remain effective concurrent with
the legal limitations period applicable to such WARN Act liability.
Section 6.05. Tax Matters. (a) Ad valorem or other property
Taxes respecting the Assets will be allocated between the portion of any taxable
period that is prior to the Effective Date and the portion of that period
extending from and including the Effective Date on a daily basis. The Selling
Parties will be liable for the payment of (i) all ad valorem or other property
Taxes respecting the Assets which are allocable to the portion of the taxable
period that is prior to the Effective Date and (ii) all ad valorem or other
property Taxes respecting the Retained Assets for all taxable periods. Purchaser
will be liable for the payment of all ad valorem or other property Taxes
respecting the Assets which are allocable to the portion of the taxable period
from and including the Effective Date. Purchaser will provide to the Company a
copy of each ad valorem or other property Tax assessment on, or notice of
assessed value and ad valorem or other property Taxes due respecting, the Assets
Purchaser receives for each taxable period in which the Effective Date occurs,
whereupon the applicable Selling Party promptly will pay to Purchaser its
portion of those ad valorem or other Property Taxes, determined as provided
above; thereafter, Purchaser will pay that amount when due to the appropriate
Taxing Authority. Except as provided in this Section 6.05(a), Purchaser will not
have any liability for Taxes payable by the Company (including income, sales or
transfer taxes) with respect to the operations or assets of the Company or the
Acquired Business or the consummation of the Acquisition or the other
transactions contemplated hereby.
(b) Purchaser and the Company will allocate the Acquisition
Consideration in accordance with Section 1060 of the Code.
(c) Notwithstanding anything in this Agreement to the
contrary, the Purchaser shall, upon reasonable request, promptly cause to be
made available to the Company (or its agent), in the form and manner of such
request, any and all operating information, including (without limitation) all
data, records, and reports, any of which were included within the Assets, which
are the subject of this Agreement.
Section 6.06. [Reserved.]
Section 6.07. Compliance With Bulk Sales Laws. The parties
hereby waive compliance by the parties with any applicable bulk sales laws and
any other similar laws in any applicable jurisdiction in respect of the
transactions contemplated by this Agreement. The Selling Parties jointly and
severally will indemnify Purchaser from, and hold them harmless against, any
Damages or Damage Claims relating from or arising out of the parties' failure to
comply with any of such laws in respect of the transactions contemplated by this
Agreement.
Section 6.08. [Reserved.]
Section 6.09. Certain Transfers Requiring Consents. In the
event that an attempted conveyance, assignment, transfer or delivery of any
claim, contract, license, lease,
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sales order, purchase order, commitment, consent, franchise, privilege or any
other asset, claim, right or benefit to be assigned to Purchaser as provided in
this Agreement (collectively, the "Rights") would be ineffective without the
consent of a third party or any other Person or would affect the rights of
Purchaser thereunder so that Purchaser would not receive all the Rights, the
Selling Parties shall make commercially reasonable efforts cause the benefits of
the Rights (or the economic equivalent thereof) to be provided to Purchaser as
appropriate, and will cooperate with Purchaser in any commercially reasonable
arrangement required to provide Purchaser with the benefits of all such Rights,
including (i) maintenance by a Selling Party of a Right in its name in trust for
the benefit of Purchaser, (ii) at the sole option of Purchaser, enforcement for
the benefit of Purchaser of any and all such Rights against a third party.
Section 6.10. Further Assurances. The Selling Parties on
request by Purchaser from time to time after the Effective Date, will execute,
acknowledge and deliver to Purchaser such other instruments of conveyance and
transfer and will take such other actions as Purchaser may reasonably require in
order to vest more effectively in Purchaser, or to put Purchaser more fully in
possession of, any of the Assets. From and after the Effective Date, the Selling
Parties will promptly refer all inquiries with respect to ownership of the
Assets or the Acquired Business to Purchaser.
Section 6.11. [Reserved.]
Section 6.12. [Reserved.]
ARTICLE VII
INDEMNIFICATION
Section 7.01. Survival of Representations and Warranties. All
the provisions of this Agreement will survive the Closing and Effective Time
indefinitely notwithstanding any investigation at any time made by or on behalf
of any party hereto, provided that the representations and warranties set forth
in (or deemed by any of the Special Provisions to be set forth in) Articles II
and III and in any certificate delivered in connection herewith with respect to
any of those representations and warranties will terminate and expire on the
first anniversary of the Effective Date, except that the representations and
warranties of the Selling Parties in Section 2.07 will survive forever. After a
representation and warranty has terminated and expired, no indemnification will
or may be sought pursuant to this Article VII on the basis of that
representation and warranty by any Person who would have been entitled pursuant
to this Article VII to indemnification on the basis of that representation and
warranty prior to its termination and expiration, provided that in the case of
each representation and warranty that will terminate and expire as provided in
this Section 7.01, no claim presented in writing for indemnification pursuant to
this Article VII on the basis of that representation and warranty prior to its
termination and expiration will be affected in any way by that termination and
expiration.
Section 7.02. Indemnification of Purchaser Indemnified
Parties. Subject to the
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applicable provisions of Sections 7.01 and 7.06, the Selling Parties covenant
and agree that they, jointly and severally, will indemnify each Purchaser
Indemnified Party against, and hold each Purchaser Indemnified Party harmless
from and in respect of, all Damage Claims that arise from, are based on or
relate or otherwise are attributable to (i) any breach of the representations
and warranties of the Selling Parties set forth herein or in certificates
delivered in connection herewith, or (ii) any nonfulfillment of any covenant or
agreement on the part of the Selling Parties under this Agreement (each such
Damage Claim and each Damage Claim described in Section 7.02(b) being an
"Purchaser Indemnified Loss"); provided, however, that in no event shall the
Selling Parties be obligated to indemnify any Purchaser Indemnified Party for
any Damages incurred pursuant to clauses (i) or (ii) above if such Purchaser
Indemnified Party had actual knowledge of such breach of the representations and
warranties of the Selling Parties set forth herein or any non-fulfillment of any
covenant or agreement on the part of the Selling Parties under this Agreement
and failed to notify the Selling Parties of such knowledge prior to Closing. Any
indemnification provided to any Purchaser Indemnified Party by the Selling
Parties hereunder for Damages shall be determined net of (x) any Tax benefit
actually recognized which reduced, or will reduce when a Tax return is filed,
the Tax liability of such Purchaser Indemnified Party, or (y) any insurance
coverage with respect thereto which reduces Damages of such Purchaser
Indemnified Party that would otherwise be sustained.
Section 7.03. Indemnification of Seller Indemnified Parties.
Purchaser covenants and agrees that it will indemnify each Seller Indemnified
Party against, and hold each Seller Indemnified Party harmless from and in
respect of, all Damage Claims that arise from, are based on or relate or
otherwise are attributable to (a) any breach by Purchaser of its representations
and warranties set forth herein or in its certificates, if any, delivered to the
Selling Parties in connection herewith or (b) any nonfulfillment of any covenant
or agreement on the part of Purchaser in this Agreement (each such Damage Claim
being a "Seller Indemnified Loss").
Section 7.04. Indemnification of Purchaser Indemnified Parties
for Certain Environmental Matters.
(a) The Selling Parties agree to indemnify, reimburse, defend
and hold harmless the Purchaser Indemnified Parties from and against Damages
arising from Environmental Claims relating to the real property Assets (but not
the fixed or other Tangible Assets). Upon demand by the Purchaser Indemnified
Parties, the Selling Parties shall diligently defend any such Environmental
Claim commenced against the Purchaser Indemnified Parties, at the Selling
Parties' own cost and expense and by counsel chosen by the Selling Parties.
(b) In no event shall the Selling Parties be obligated to
indemnify, reimburse, defend or hold harmless any Purchaser Indemnified Party in
relation to any investigation, cleanup, removal, containment, or remedial action
(referred to individually or collectively as "Response Action") to the extent
any such Response Action is not required by applicable Environmental Law
assuming use of the property that does not differ materially from use of the
property as of the Closing Date.
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(c) The Selling Parties shall have no obligation to indemnify,
reimburse, defend, or hold harmless any Purchaser Indemnified Party for any
Environmental Claim described in Section 7.04(a) above that arises as a result
of any Purchaser Indemnified Party providing notice to a Governmental Authority
or any party not affiliated with any Selling Party of any act or omission of any
Selling Party or any environmental condition on any site that is part of the
Assets, where such Purchasing Party was not required by law to provide such
notice.
(d) The provisions of this Section shall be subject to the
conditions on indemnification contained in Section 7.05 of this Agreement, and
shall be the exclusive remedy available to the Purchaser Indemnified Parties
relating to any Environmental Claim or other environmental matter.
(e) As to any Environmental Claim for which any Purchaser
Indemnified Party seeks indemnification, such Purchaser Indemnified Party shall
promptly (and prior to the performance of any Response Action) provide the
Selling Parties with all information known to the Purchaser Indemnified Parties
relating to such Environmental Claim, report regularly to the Selling Parties
regarding the performance of any Response Action and make available to the
Selling Parties all documents pertaining to such Environmental Claim.
(f) The obligations of the Selling Parties under this Section
shall terminate on the second anniversary of the Closing Date except with
respect to Environmental Claim of which a Purchaser Indemnified Party gave
notice to the Company prior to such date.
Section 7.05. Conditions of Indemnification. (a) All claims
for indemnification under this Agreement shall be asserted and resolved as
follows in this Section 7.05.
(b) A party claiming indemnification under this Agreement (an
"Indemnified Party") shall within thirty calendar days of learning of the
existence of a claim for which indemnification could be sought (i) notify the
party from whom indemnification is sought (the "Indemnifying Party") of any
third-party claim or claims asserted against the Indemnified Party ("Third Party
Claim") that could give rise to a right of indemnification under this Agreement
and (ii) transmit to the Indemnifying Party a written notice ("Claim Notice")
describing in reasonable detail the nature of the Third Party Claim, a copy of
all papers served with respect or relating to that claim (if any), an estimate
of the amount of damages attributable to the Third Party Claim to the extent
feasible (which estimate shall not be conclusive of the final amount of that
claim) and the basis for the Indemnified Party's request for indemnification
under this Agreement. The failure to deliver a Claim Notice shall not within
thirty calendar days, as specified herein shall not relieve the Indemnifying
Party of its obligations to the Indemnified Party with respect to the related
Third Party Claim except to the extent that the resulting delay is materially
prejudicial to the defense of that claim. Within 15 days after receipt of any
Claim Notice (the "Election Period"), the Indemnifying Party shall notify the
Indemnified Party (i) whether the Indemnifying Party disputes its potential
liability to the Indemnified Party under this Article VII with respect to that
Third Party Claim and (ii) if the Indemnifying Party does not dispute its
potential liability to the Indemnified Party with respect to that Third Party
Claim, whether the Indemnifying Party
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desires, at the sole cost and expense of the Indemnifying Party, to defend the
Indemnified Party against that Third Party Claim.
(c) If the Indemnifying Party does not dispute its potential
liability to the Indemnified Party and notifies the Indemnified Party within the
Election Period that the Indemnifying Party elects to assume the defense of the
Third Party Claim, then the Indemnifying Party shall have the right to defend,
at its sole cost and expense, that Third Party Claim by all appropriate
proceedings, which proceedings shall be prosecuted diligently by the
Indemnifying Party to a final conclusion or settled at the discretion of the
Indemnifying Party in accordance with this Section 7.05(c), and the Indemnified
Party will furnish the Indemnifying Party with all information in its possession
with respect to that Third Party Claim and otherwise fully cooperate with the
Indemnifying Party in the defense of that Third Party Claim; provided, however,
that the Indemnifying Party shall not enter into any settlement with respect to
any Third Party Claim that purports to limit the lawful activities of any
Indemnified Party or any Affiliate of any Indemnified Party without the prior
consent of that Indemnified Party (which consent may be withheld in the sole
discretion of that Indemnified Party). The Indemnified Party is hereby
authorized, at the sole cost and expense of the Indemnifying Party, to file,
during the Election Period, any motion, answer or other pleadings that the
Indemnified Party shall deem essential to protect its interests or those of the
Indemnifying Party, and to preserve any and all applicable claims and defenses;
provided that the Indemnified Party shall make no admission of liability during
such Election Period. Should Indemnified Party make such an admission of
liability, the obligation to indemnify under this Agreement shall end. The
Indemnified Party may participate in, but not control, any defense or settlement
of any Third Party Claim controlled by the Indemnifying Party pursuant to this
Section 7.05(c) and will bear its own costs and expenses with respect to that
participation; provided, however, that if the named parties to any such action
(including any impleaded parties) include both the Indemnifying Party and the
Indemnified Party, and the Indemnified Party has been advised by counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the Indemnifying Party, then the Indemnified
Party may employ separate counsel at its own expense.
(d) If the Indemnifying Party has delivered a written notice
to the Indemnified Party to the effect that the Indemnifying Party disputes its
liability to the Indemnified Party under this Article VII, and if that dispute
is resolved by a court of competent jurisdiction or by agreement in favor of the
Indemnifying Party, the Indemnified Party shall bear the costs and expenses of
its own defense of a Third Party Claim, as well as all fees and expenses
incurred by the Indemnifying Party in connection with such litigation and in
connection with defending the claim for indemnification. If the Indemnifying
Party has delivered a written notice to the Indemnified Party to the effect that
the Indemnifying Party disputes its liability to the Indemnified Party under
this Article VII and if that dispute is resolved by a court of competent
jurisdiction or by agreement in favor of the Indemnified Party, the Indemnifying
Party shall bear the costs and expenses of its owndefense of a Third Party
Claim, as well as all fees and expenses incurred by the Indemnified Party in
connection with such litigation and in connection with pursuing the claim for
indemnification.
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(e) In the event any Indemnified Party should have a claim
against any Indemnifying Party hereunder that does not involve a Third Party
Claim, the Indemnified Party shall transmit to the Indemnifying Party within
thirty business days of first learning of such claim a written notice (the
"Indemnity Notice") describing in reasonable detail the nature of the claim, an
estimate of the amount of Damages attributable to that claim to the extent
feasible (which estimate shall not be conclusive of the final amount of that
claim) and the basis of the Indemnified Party's request for indemnification
under this Agreement. If the Indemnifying Party does not notify the Indemnified
Party within 15 days from its receipt of the Indemnity Notice that the
Indemnifying Party disputes the claim specified by the Indemnified Party in the
Indemnity Notice, that claim shall be deemed a liability of the Indemnifying
Party hereunder. If the Indemnifying Party has timely disputed that claim, as
provided above, that dispute shall be resolved by proceedings in an appropriate
court of competent jurisdiction if the parties do not reach a settlement of that
dispute within 30 days after notice of that dispute is given.
(f) Payments of all amounts owing by an Indemnifying Party
pursuant to this Article VII relating to a Third Party Claim shall be made
within 30 days after the latest of (i) the settlement of that Third Party Claim,
(ii) the expiration of the period for appeal of a final adjudication of that
Third Party Claim or (iii) the expiration of the period for appeal of a final
adjudication of the Indemnifying Party's liability to the Indemnified Party
under this Agreement in respect of that Third Party Claim. Payments of all
amounts owing by an Indemnifying Party pursuant to Section 7.04(e) shall be made
within 30 days after the later of (i) the expiration of the 30-day Indemnity
Notice period or (ii) the expiration of the period for appeal of a final
adjudication of the Indemnifying Party's liability to the Indemnified Party
under this Agreement.
Section 7.06. Exclusive Remedy. Except as otherwise provided
in Sections 8.02 or 10.01 hereof or pursuant to the terms of any Company
Transfer Document, the indemnification provided to any Purchaser Indemnified
Party by the Selling Parties hereunder shall be the sole and exclusive remedy of
such Purchaser Indemnified Party for Damages arising out of the breach of this
Agreement or any of the transactions contemplated herein by the Selling Parties.
ARTICLE VIII
LIMITATIONS ON COMPETITION
Section 8.01. Prohibited Activities. Each Selling Party and
Tommy Bagwell, individually agrees, severally and not jointly with any other
Person, that it will not, during the period beginning on the date hereof and
ending on the second anniversary of the Closing Date, directly or indirectly,
for any reason, for his own account or on behalf of or together with any other
Person:
(i) engage as a director, officer or in any similar executive
capacity or as an owner, co-owner, financier or other investor of or in
any business engaged in menhaden
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fishing and the production of fish meal and fish oil and fish solubles
from such fishing (collectively, the "Restricted Business") in the
area from Rhode Island to South Carolina and in the area from
Mississippi to Texas and the territorial waters of the United States
adjacent thereto (the "Territory"). For purposes hereof the Restricted
Business does not include the blending of fish meal purchased from
Persons not affiliated with any of the Selling Parties and the sale of
such fish meal products;
(ii) call on any natural person who is at that time employed
by the Acquired Business or Purchaser in any managerial capacity with
the purpose or intent of attracting that person from the employ of the
Acquired Business or Purchaser;
(iii) call on, or solicit, either directly or indirectly, any
Person that at that time is, or at any time within one year prior to
that time was, a customer of the Acquired Business or Purchaser or any
prospective customer that had or, to the knowledge of the Selling
Parties, was about to receive a business proposal from Purchaser, in
any case within any Territory (A) for the purpose of engaging in the
Restricted Business in that Territory and (B) with the knowledge of
that customer relationship; or
(iv) call on any Entity which to Selling Party's knowledge has
been called on by Purchaser in connection with a possible acquisition
by Purchaser, with the knowledge of that Entity's status as such an
acquisition candidate, for the purpose of acquiring that Entity or
arranging the acquisition of that Entity by any Person other than
Purchaser.
Notwithstanding the foregoing, the Selling Parties may own and hold as a passive
investment up to 5% of the outstanding capital stock of a competing Entity if
that class of capital stock is listed on a national stock exchange or included
in the Nasdaq National Market.
Section 8.02. Damages. Because of the difficulty of measuring
economic losses to Purchaser as a result of any breach by the Selling Parties of
their covenants in Section 8.01, and because of the immediate and irreparable
damage that could be caused to Purchaser for which it would have no other
adequate remedy, the Company and each Selling Party agree that Purchaser may
enforce the provisions of Section 8.01 by injunctions and restraining orders
against any Selling Party or above-identified individual if it or he breaches
any of those provisions.
Section 8.03. Reasonable Restraint. The parties hereto each
agree that Sections 8.01 and 8.02 impose reasonable restraints in light of the
activities and business of Purchaser on the date hereof and the current business
plans of Purchaser.
Section 8.04. Severability; Reformation. The covenants in this
Article VIII are severable and separate, and the unenforceability of any
specific covenant in this Article VIII is not intended by any party hereto to,
and shall not, affect the provisions of any other covenant in this Article VIII.
If any court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth in Section 8.01 are unreasonable as applied
to any Selling Party or
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the above identified individual, acknowledge their mutual intention and
agreement that those restrictions be enforced to the fullest extent the court
deems reasonable, and thereby shall be reformed to that extent as applied to the
Company or that Selling Party or other Person, as the case may be.
Section 8.05. Independent Covenant. All the covenants in this
Article VIII are intended by each party hereto to, and shall, be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of any Selling Party against
Purchaser, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Purchaser of any covenant in this
Article VIII. It is specifically agreed that the period specified in Section
8.01 shall be computed in the case of the Selling Parties by excluding from that
computation any time during which a Selling Party [or other Person], as the case
may be, is in violation of any provision of Section 8.01. The covenants
contained in this Article VIII shall not be affected by any breach of any other
provision hereof by any party hereto.
Section 8.06. Materiality. Each Selling Party, severally and
not jointly with any other Person, hereby agree that this Article VIII is a
material and substantial part of the transactions contemplated hereby.
ARTICLE IX
DEFINITIONS AND DEFINITIONAL PROVISIONS
Section 9.01. Defined Terms. As used in this Agreement, the
following terms have the meanings assigned to them below:
"Acquired Business" has the meaning specified in Paragraph 1.
"Acquisition" has the meaning specified in the Preliminary
Statement.
"Acquisition Consideration" has the meaning specified in
Paragraph 2.
"Agreement" means this Agreement, including all attached
Schedules, Annexes, Addenda and Exhibits, as each of the same may be
amended, modified or supplemented from time to time pursuant to the
provisions hereof or thereof.
"Affiliate" means, as to any specified Person, any other
Person that, directly or indirectly through one or more intermediaries
or otherwise, controls, is controlled by or is under common control
with the specified Person. As used in this definition, "control" means
the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of a Person (whether
through ownership of Capital Stock of that Person, by contract or
otherwise).
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"Assets" has the meaning specified in Paragraph 2 of the
Preliminary Statement.
"Asset Purchase" means a transaction in which the Company or
Vessel Sub sells, and Purchaser purchases, assets constituting the
Acquired Business.
"Capital Stock" means, with respect to: (a) any corporation,
any share, or any depositary receipt or other certificate representing
any share, of an equity ownership interest in that corporation; and (b)
any other Entity, any share, membership or other percentage interest,
unit of participation or other equivalent (however designated) of an
equity interest in that Entity.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980.
"Charter Documents" means, with respect to any Entity at any
time, in each case as amended, modified and supplemented at that time,
the articles or certificate of formation, incorporation or organization
(or the equivalent organizational documents) of that Entity, (b) the
bylaws or limited liability company agreement or regulations (or the
equivalent governing documents) of that Entity and (c) each document
setting forth the designation, amount and relative rights, limitations
and preferences of any class or series of that Entity's Capital Stock
or of any rights in respect of that Entity's Capital Stock.
"Claim Notice" has the meaning specified in Section 7.05.
"Closing" has the meaning specified in Paragraph 3.
"Closing Date" has the meaning specified in Paragraph 1.
"Code" means the Internal Revenue Code of 1986.
"Company" has the meaning specified in Paragraph 1.
"Company Transfer Documents" has the meaning specified in
Paragraph 2.
"Confidential Information" means, with respect to any Person,
all trade secrets and other confidential, nonpublic and/or proprietary
information of that Person, including information derived from reports,
investigations, research, work in progress, codes, marketing and sales
programs, capital expenditure projects, cost summaries, pricing
formulae, contract analyses, financial information, projections,
confidential filings with any Governmental Authority and all other
confidential, nonpublic concepts, methods of doing business, ideas,
materials or information prepared or performed for, by or on behalf of
that Person.
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"Current Balance Sheet" has the meaning specified in
Paragraph 1.
"Current Balance Sheet Date" has the meaning specified in
Paragraph 1.
"Damage" to any specified Person means any cost, damage
(including any consequential, exemplary, punitive or treble damage) or
expense (including reasonable fees and actual disbursements by
attorneys, consultants, experts or other Representatives and Litigation
costs) to, any fine of or penalty on or any liability (including loss
of earnings or profits) of any other nature of that Person; provided,
that if any Indemnified Party should have a claim against any
Indemnifying Party that does not involve a Third Party Claim and for
which the Indemnified Party seeks indemnification pursuant to Section
7.05(e), the amount of Damages attributable to that claim will not
include any amount representing consequential, exemplary, punitive or
treble damage.
"Damage Claim" means, as asserted (a) against any specified
Person, any claim, demand or Litigation made or pending against the
specified Person for Damages to any other Person, or (b) by the
specified Person, any claim or demand of the specified Person against
any other Person for Damages to the specified Person.
"Effective Date" has the meaning specified in Paragraph 1.
"Effective Time" has the meaning specified in Paragraph 2.
"Election Period" has the meaning specified in Section 7.05.
"Employee Policies and Procedures" means at any time all
employee manuals and all material written policies, procedures and
work-related rules that apply at that time to any employee, nonemployee
director or officer of, or any other natural person performing
consulting or other independent contractor services for, a Selling
Party or any Selling Party Subsidiary.
"Employment Agreement" means at any time any (a) agreement to
which a Selling Party or any Selling Party Subsidiary is a party which
then relates to the direct or indirect employment or engagement, or
arises from the past employment or engagement, of any natural person by
the Company or any Selling Party Subsidiary, whether as an employee, a
nonemployee officer or director, a consultant or other independent
contractor, a sales representative or a distributor of any kind,
including any employee leasing or service agreement and any
noncompetition agreement, and (b) agreement between a Selling Party or
any Selling Party Subsidiary and any Person which arises from the sale
of a business by that Person to the Selling Party or any Selling Party
Subsidiary and limits that Person's competition with a Selling Party or
any Selling Party Subsidiary.
"Entity" means any sole proprietorship, corporation,
partnership of any kind having a separate legal status, limited
liability company, business trust, unincorporated
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organization or association, mutual company, joint stock company or
joint venture.
"Environmental Claim" means a claim or demand for the costs or
Damages incurred in any investigative, enforcement, cleanup, removal,
containment, remedial or other private or governmental or regulatory
action threatened, instituted or completed by any Governmental
Authority or third party (which shall not include any Purchaser
Indemnified Party, any affiliate of any Purchaser Indemnified Party,
any party with whom any Purchaser Indemnified Party has a contractual
relationship, or any party that is in the chain of title for any site
that is part of the Assets) against any Purchaser Indemnified Party,
arising out of the acts or omissions of any Selling Party, relating to
the environment or natural resources. In addition, as to claims for
which demand for indemnification is made by any Purchaser Indemnified
Party within six (6) months of the Closing Date, "Environmental Claim"
also shall mean the cost of any investigation, cleanup, removal,
containment, or remediation relating to the environment or natural
resources, necessitated by facts or conditions discovered during
Purchaser's environmental investigation of the real property Assets.
"Environmental Laws" means any and all Governmental
Requirements relating to the environment, including ambient air,
surface water, land surface or subsurface strata, or to emissions,
discharges, releases or threatened releases of pollutants,
contaminants, chemicals or industrial, toxic or hazardous substances or
wastes (including Solid Wastes, Hazardous Wastes or Hazardous
Substances) or noxious noise or odor into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, recycling, removal, transport or handling of
pollutants, contaminants, chemicals or industrial, toxic or hazardous
substances or wastes (including petroleum, petroleum distillates,
asbestos or asbestos-containing material, polychlorinated biphenyl's,
chlorofluorocarbons (including chlorofluorocarbon-12) or
hydrochlorofluorocarbons) in effect as of the Effective Date.
"ERISA" means the Employee Retirement Income Security Act of
1974.
"ERISA Affiliate" means, with respect to any specified Person
at any time, any other Person, including an Affiliate of the specified
Person, that is, or at any time within six years of that time was, a
member of any ERISA Group of which the specified Person is or was a
member at the same time.
"ERISA Employee Benefit Plan" means any "employee benefit
plan" as defined in Section 3(3) of ERISA and includes any ERISA
Pension Benefit Plan.
"ERISA Pension Benefit Plan" means any "employee pension
benefit plan", as defined in Section 3(2) of ERISA, including any plan
that is covered by Title IV of ERISA or subject to the minimum funding
standards under Section 412 of the Code (excluding any Multiemployer
Plan).
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"Financial Statements" means the Initial Financial Statements.
"GAAP" means generally accepted accounting principles and
practices in the United States as in effect from time to time which
have been applied on a basis consistent with the most recent Financial
Statements delivered to Purchaser prior to the Effective Time.
"Governmental Approval" means at any time any authorization,
consent, approval, permit, franchise, certificate, license,
implementing order or exemption of, or registration or filing with, any
Governmental Authority, including any certification or licensing of a
natural person to engage in a profession or trade or a specific
regulated activity, at that time.
"Governmental Authority" means (a) any national, state,
county, municipal or other government, domestic or foreign, or any
agency, board, bureau, commission, court, department or other
instrumentality of any such government, or (b) any Person having the
authority under any applicable Governmental Requirement to assess and
collect Taxes for its own account.
"Governmental Requirement" means at any time (a) any law,
statute, code, ordinance, order, rule, regulation, judgment, decree,
injunction, writ, edict, award, authorization or other requirement of
any Governmental Authority in effect at that time or (b) any obligation
included in any certificate, certification, franchise, permit or
license issued by any Governmental Authority or resulting from binding
arbitration, including any requirement under common law, at that time.
"Guaranty" means, for any specified Person, without
duplication, any liability, contingent or otherwise, of that Person
guaranteeing or otherwise becoming liable for any obligation of any
other Person (the "primary obligor") in any manner, whether directly or
indirectly, and including any liability of the specified Person, direct
or indirect, (a) to purchase or pay (or advance or supply funds for the
purchase or payment of) that obligation or to purchase (or to advance
or supply funds for the purchase of) any security for the payment of
that obligation, (b) to purchase property, securities or services for
the purpose of assuring the owner of that obligation of its payment or
(c) to maintain working capital, equity capital or other financial
statement condition or liquidity of the primary obligor so as to enable
the primary obligor to pay that obligation; provided, that the term
"Guaranty" does not include endorsements for collection or deposit in
the ordinary course of the endorser's business.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976.
"Indebtedness" of any Person means, without duplication, (a)
any liability of that Person (i) for borrowed money or arising out of
any extension of credit to or for the account of that Person (including
reimbursement or payment obligations with respect to surety bonds,
letters of credit, banker's acceptances and similar instruments), for
the
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deferred purchase price of property or services or arising under
conditional sale or other title retention agreements, other than trade
payables arising in the ordinary course of business, (ii) evidenced by
notes, bonds, debentures or similar instruments, (iii) in respect of
capital leases or (iv) in respect of interest rate protection
agreements, (b) any liability secured by any Lien upon any property or
assets of that Person (or upon any revenues, income or profits of that
Person therefrom), whether or not that Person has assumed that
liability or otherwise become liable for the payment thereof or (c) any
liability of others of the type described in the preceding clause (a)
or (b) in respect of which that Person has incurred, assumed or
acquired a liability by means of a Guaranty.
"Indemnity Notice" has the meaning specified in Section 7.05.
"Indemnified Party" has the meaning specified in Section 7.05.
"Indemnifying Party" has the meaning specified in Section
7.05.
"Information" means written information, including (a) data,
certificates, reports and statements (excluding Financial Statements)
and (b) summaries of unwritten agreements, arrangements, contracts,
plans, policies, programs or practices or of unwritten amendments or
modifications of, supplements to or waivers under any of the foregoing
documents.
"IRS" means the Internal Revenue Service.
"Lien" means, with respect to any property or asset of any
Person (or any revenues, income or profits of that Person therefrom)
(in each case whether the same is consensual or nonconsensual or arises
by contract, operation of law, legal process or otherwise), (a) any
mortgage, lien, security interest, pledge, attachment, levy or other
charge or encumbrance of any kind thereupon or in respect thereof or
(b) any other arrangement under which the same is transferred,
sequestered or otherwise identified with the intention of subjecting
the same to, or making the same available for, the payment or
performance of any liability in priority to the payment of the
ordinary, unsecured creditors of that Person, including any "adverse
claim" (as defined in the applicable Uniform Commercial Code) in the
case of any Capital Stock. For purposes of this Agreement, a Person
shall be deemed to own subject to a Lien any asset that it has acquired
or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention
agreement relating to that asset.
"Litigation" means any action, case, proceeding, claim,
grievance, suit or investigation or other proceeding conducted by or
pending before any Governmental Authority or any arbitration
proceeding.
"Material" means, as applied to any Entity or the Acquired
Business, material to the business, operations, property or assets,
liabilities, financial condition or results of
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operations of that Entity and its Subsidiaries considered as a whole
or the Acquired Business, as the case may be.
"Material Adverse Effect" means, with respect to the
consequences of any fact or circumstance (including the occurrence or
non-occurrence of any event) to the Acquired Business, that such fact
or circumstance has caused, is causing or will cause, directly,
indirectly or consequentially, singly or in the aggregate with other
facts and circumstances, any Damages in excess of $250,000.
"Material Agreement" of any Entity means any contract or
agreement (a) to which that Entity or any of its Subsidiaries is a
party, or by which that Entity or any of its Subsidiaries is bound or
to which any property or assets of that Entity or any of its
Subsidiaries is subject and (b) which is Material to that Entity.
"Multiemployer Plan" means a "multiemployer" plan as defined
in Section 4001(a)(3) of ERISA, Section 414 of the Code or Section
3(37) of ERISA.
"Organization State" means, as applied to (a) any corporation,
its state or other jurisdiction of incorporation, (b) any limited
liability company or limited partnership, the state or other
jurisdiction under whose laws it is organized and existing in that
legal form, and (c) any other Entity, the state or other jurisdiction
whose laws govern that Entity's internal affairs.
"Other Compensation Plan" means any compensation arrangement,
plan, policy, practice or program established, maintained or sponsored
by a Selling Party or any Selling Party Subsidiary, or to which such
Selling Party or any Selling Party Subsidiary contributes, on behalf of
any of its employees, nonemployee directors or officers or other
natural persons performing consulting or other independent contractor
services for the Selling Party or any Selling Party Subsidiary, (a)
including all such arrangements, plans, policies, practices or programs
providing for severance pay, deferred compensation, incentive, bonus or
performance awards or the actual or phantom ownership of any Capital
Stock or options, warrants or rights to acquire Capital Stock of the
Company or any Company Subsidiary, but (b) excluding all Selling Party
ERISA Pension Plans and Employment Agreements.
"Permitted Liens" means, as applied to the property or assets
of any Person (or any revenues, income or profits of that Person
therefrom): (a) Liens for Taxes if the same are not at the time due and
delinquent; (b) Liens of carriers, warehousemen, mechanics, laborers
and materialmen for sums not yet due; (c) Liens incurred in the
ordinary course of that Person's business in connection with workmen's
compensation, unemployment insurance and other social security
legislation (other than pursuant to ERISA or Section 412(n) of the
Code); (d) Liens incurred in the ordinary course of that Person's
business in connection with deposit accounts or to secure the
performance of bids, tenders, trade contracts, statutory obligations,
surety and appeal bonds, performance and
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return-of-money bonds and other obligations of like nature; (e)
easements, rights-of-way, reservations, restrictions and other similar
encumbrances incurred in the ordinary course of that Person's business
or existing on property and not materially interfering with the
ordinary conduct of that Person's business or the use of that property;
(f) defects or irregularities in that Person's title to its real
properties which do not materially (i) diminish the value of the
surface estate or (ii) interfere with the ordinary conduct of that
Person's business or the use of any of such properties; (g) any
interest or title of a lessor of assets being leased by any Person
pursuant to any capital lease disclosed in Schedule 2.18 or any lease
that, pursuant to GAAP, would be accounted for as an operating lease;
and (h) Liens securing purchase money Indebtedness disclosed in
Schedule 2.17 or 2.18 so long as such Liens do not attach to any
property or assets other than the properties or assets purchased with
the proceeds of such Indebtedness.
"Person" means any natural person, Entity, estate, trust,
union or employee organization or Governmental Authority.
"Proprietary Rights" means (a) patents, applications for
patents and patent rights, (b) in each case, whether registered,
unregistered or under pending registration, trademark rights, trade
names, trade name rights, corporate names, business names, trade styles
or dress, service marks and logos and other trade designations and
copyrights and (c), in the case of a Selling Party, all agreements
relating to the technology, know-how or processes used in the Acquired
Business.
"Purchaser Indemnified Loss" has the meaning specified in
Section 7.02.
"Purchaser Indemnified Party" means Purchaser and its
Affiliates and each of their respective officers, directors, employees,
agents and counsel.
"Records" means all agreements, commitments, computer programs
and other software, contracts, books, records, files and other written
data relating to the Acquired Business.
"Representatives" means, with respect to any Person, the
directors, officers, employees, Affiliates, accountants (including
independent certified public accountants), advisors, attorneys,
consultants or other agents of that Person, or any other
representatives of that Person or of any of those directors, officers,
employees, Affiliates, accountants (including independent certified
public accountants), advisors, attorneys, consultants or other agents.
"RCRA" means the Resource Conservation and Recovery Act of
1976.
"Retained Assets" has the meaning specified in Paragraph 2 of
the Preliminary Statement.
"Retained Liabilities" has the meaning specified in Paragraph
2 of the Preliminary
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Statement.
"Returns" of any Person means the returns, reports or
statements (including any Information returns) any Governmental
Requirement requires to be filed by that Person for purposes of any
Tax.
"Seller Indemnified Loss" has the meaning specified in Section
7.03.
"Seller Indemnified Party" means (a) each Selling Party and
each of that Selling Party's Affiliates, officers, directors, agents
and counsel.
"Selling Party Subsidiary" means at any time any Entity that
is a Subsidiary of the Company at that time.
"Solid Wastes, Hazardous Wastes or Hazardous Substances" have
the meanings ascribed to those terms in CERCLA, RCRA or any other
Environmental Law applicable to the business or operations of the
Company or any Company Subsidiary which imparts a broader meaning to
any of those terms than does CERCLA or RCRA.
"Subsidiary" of any specified Person at any time, means any
Entity a majority of the Capital Stock of which is at that time owned
or controlled, directly or indirectly, by the specified Person.
"Supplemental Information" has the meaning specified in
Section 4.07.
"Tax" or "Taxes" means all net or gross income, gross
receipts, net proceeds, sales, use, ad valorem, value added, franchise,
bank shares, withholding, payroll, employment, excise, property, deed,
stamp, alternative or add-on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges or
assessments of any nature whatever imposed by any Governmental
Requirement, whether disputed or not, together with any interest,
penalties, additions to tax or additional amounts with respect thereto.
"Taxing Authority" means any Governmental Authority having or
purporting to exercise jurisdiction with respect to any Tax.
"Third Party Claim" has the meaning specified in Section 7.05.
"Transaction Document" means this Agreement and the other
written agreements, documents, instruments and certificates executed
pursuant to or in connection with this Agreement including those
specified or referred to in Article V to be delivered at or before the
Closing, all as amended, modified or supplemented from time to time.
Section 9.02. Other Defined Terms. Words and terms used in
these Standard
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Provisions which are defined elsewhere in this Agreement are used herein as
therein defined.
Section 9.03. Other Definitional Provisions. (a) Except as
otherwise specified herein, all references herein to any Governmental
Requirement defined or referred to herein, including the Code, CERCLA, ERISA,
the Exchange Act, RCRA and the Securities Act, shall be deemed references to
that Governmental Requirement or any successor Governmental Requirement, as the
same may have been amended or supplemented from time to time, and any rules or
regulations promulgated thereunder.
(b) When used in this Agreement, the words "herein," "hereof"
and "hereunder" and words of similar import shall refer to this Agreement as a
whole and not to any provision of this Agreement, and the words "Article,"
"Paragraph," "Section," "Annex," "Addendum," "Schedule" and "Exhibit" refer to
Articles, Paragraphs and Sections of, and Annexes, Addenda, Schedules and
Exhibits to, this Agreement unless otherwise specified.
(c) Whenever the context so requires, the singular number
includes the plural and vice versa, and a reference to one gender includes the
other gender and the neuter.
(d) The word "including" (and, with correlative meaning, the
word "include") means including, without limiting the generality of any
description preceding such word, and the words "shall" and "will" are used
interchangeably and have the same meaning.
Section 9.04. Captions. Captions to Articles, Paragraphs,
Sections and subsections of, and Annexes, Addenda, Schedules and Exhibits to,
this Agreement or any other Transaction Document are included for convenience of
reference only, and such captions shall not constitute a part of this Agreement
or any other Transaction Document for any other purpose or in any way affect the
meaning or construction of any provision of this Agreement or any other
Transaction Document.
ARTICLE X
GENERAL PROVISIONS
Section 10.01. Treatment of Confidential Information. (a) Each
Selling Party acknowledges that it has or may have had in the past, currently
has and in the future may have access to Confidential Information of the Selling
Parties relating to the Acquired Business and/or Confidential Information of
Purchaser and its Subsidiaries. Each Selling Party agrees that it will keep
confidential all such Confidential Information furnished to it and, except with
the specific prior written consent of Purchaser, will not disclose such
Confidential Information to any Person except (a) Representatives of Purchaser
and (b) its own Representatives, provided that these Representatives (other than
counsel) agree to the confidentiality provisions of this Section 10.01;
provided, however, that Confidential Information shall not include such
information as (i) becomes known to the public generally through no fault of any
Selling Party, (ii) is required to be
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disclosed by law or the order of any Governmental Authority under color of law,
provided, that prior to disclosing any information pursuant to this clause (ii),
each Selling Party shall, if possible, give prior written notice thereof to
Purchaser and provide Purchaser with the opportunity to contest such disclosure,
or (iii) the disclosing party reasonably believes is required to be disclosed in
connection with the defense of a lawsuit against the disclosing party. In the
event of a breach or threatened breach by any Selling Party of the provisions of
this Section 10.01 with respect to any Confidential Information, Purchaser shall
be entitled to seek an injunction restraining such Selling Party from
disclosing, in whole or in part, that Confidential Information. Nothing herein
shall be construed as prohibiting Purchaser from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
(b) Because of the difficulty of measuring economic losses as
a result of the breach of the foregoing covenants in Section 10.01(a), and
because of the immediate and irreparable damage that would be caused to
Purchaser for which it would have no other adequate remedy, each Selling Party
agrees that Purchaser may seek to enforce the provisions of Section 10.01(a) by
injunctions and restraining orders against each of them who breaches any of
those provisions.
(c) The obligations of the parties under this Section 10.01
shall survive the termination of this Agreement.
Section 10.02. Brokers and Agents. Each Selling Party
represents and warrants to Purchaser that such Selling Party has not directly or
indirectly employed or become obligated to pay any broker or similar agent in
connection with the transactions contemplated hereby and agrees to indemnify
Purchaser against all Damage Claims arising out of claims for any and all fees
and commissions of brokers or similar agents employed or promised payment by
such Selling Party.
Section 10.03. Assignment; No Third Party Beneficiaries. This
Agreement and the rights of the parties hereunder may not be assigned (except by
operation of law) and shall be binding on and inure to the benefit of the
parties hereto, the successors of Purchaser. Neither this Agreement nor any
other Transaction Document is intended, or shall be construed, deemed or
interpreted, to confer on any Person not a party hereto or thereto any rights or
remedies hereunder or thereunder, except as provided in Article VII or as
otherwise provided expressly herein or therein.
Section 10.04. Entire Agreement; Amendment; Waivers. This
Agreement and the documents delivered pursuant hereto constitute the entire
agreement and understanding among the Selling Parties, Purchaser and Purchaser
and supersede all prior agreements and understandings, both written and oral,
relating to the subject matter of this Agreement. This Agreement may be amended,
modified or supplemented, and any right hereunder may be waived, if, but only
if, that amendment, modification, supplement or waiver is in writing and signed
by Selling Parties and Purchaser. The waiver of any of the terms and conditions
hereof shall not be construed or interpreted as, or deemed to be, a waiver of
any other term or condition hereof.
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Section 10.05. Expenses. Whether or not the transactions
contemplated hereby are consummated, (a) Purchaser will pay the fees, expenses
and disbursements of Purchaser and its Representatives which are incurred in
connection with the subject matter of this Agreement and any amendments thereto,
including all costs and expenses incurred in the performance of and compliance
with all conditions to be performed by Purchaser under this Agreement, and (b)
the Selling Parties will pay all sales, use, transfer and other similar taxes
and fees incurred in connection with the transactions contemplated hereby
including the fees, expenses and disbursements of counsel for the Selling
Parties incurred in connection with the subject matter of this Agreement. The
Selling Parties will file all necessary documentation and Returns with respect
to all sales, use, transfer and other similar taxes and fees it is required by
this Section 10.05 to pay. In addition, the Selling Parties, and not Purchaser,
will pay all Taxes due upon receipt of the consideration payable to the Company
pursuant to the transactions contemplated by this Agreement.
Section 10.06. Notices. All notices required or permitted
hereunder shall be in writing, and shall be deemed to be delivered and received
(a) if personally delivered or if delivered by telex, telegram, facsimile or
courier service, when actually received by the party to whom notice is sent or
(b) if delivered by mail (whether actually received or not), at the close of
business on the third Houston, Texas business day next following the day when
placed in the mail, postage prepaid, certified or registered, addressed to the
appropriate party or parties, at the address of such party set forth below (or
at such other address as such party may designate by written notice to all other
parties in accordance herewith):
(i) if to Purchaser, addressed to it at:
Zapata Corporation
1717 St. James Place
Suite 550
Houston, Texas 77056
; and
(ii) if to a Selling Party, addressed to such Person as set
forth in Paragraph 7.
Section 10.07. Governing Law. THIS AGREEMENT AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE COMMONWEALTH OF VIRGINIA
WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF.
Section 10.08. Exercise of Rights and Remedies. Except as
otherwise provided herein, no delay or omission in the exercise of any right,
power or remedy accruing to any party hereto as a result of any breach or
default hereunder by any other party hereto shall impair any such right, power
or remedy, nor shall it be construed, deemed or interpreted as a waiver of or
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acquiescence in any such breach or default, or of any similar breach or default
occurring later; nor shall any waiver of any single breach or default be
construed, deemed or interpreted as a waiver of any other breach or default
hereunder occurring before or after that waiver.
Section 10.09. Time. Time is of the essence in the performance
of this Agreement in all respects.
Section 10.10. Reformation and Severability. If any provision
of this Agreement is invalid, illegal or unenforceable, that provision shall, to
the extent possible, be modified in such manner as to be valid, legal and
enforceable but so as to most nearly retain the intent of the parties hereto as
expressed herein, and if such a modification is not possible, that provision
shall be severed from this Agreement, and in either case the validity, legality
and enforceability of the remaining provisions of this Agreement shall not in
any way be affected or impaired thereby.
Section 10.11. [Reserved.]
Section 10.12. [Reserved.]
Section 10.13. Risk of Loss. Legal title, equitable title and
risk of loss respecting the Assets will not pass to Purchaser until the Assets
are sold, conveyed, assigned and transferred to Purchaser on the Closing Date.
ARTICLE XI
[RESERVED]
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EXECUTION COPY
ASSET PURCHASE AGREEMENT
DATED AS OF NOVEMBER 25, 1997
BY AND AMONG
PROTEIN SECURITIES COMPANY
AND
GULF PROTEIN, INC.
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made as of
November 25, 1997 by and among Protein Securities Company, a Delaware
corporation ("Purchaser"), and Gulf Protein, Inc., a Louisiana corporation (the
"Company").
PRELIMINARY STATEMENT
The Company is engaged in menhaden fishing and the production
and sale of fish meal, fish oil and fish solubles (collectively, the
"Business"). On the terms and subject to the conditions set forth herein, the
Company desires to sell, and Purchaser desires to purchase, the properties and
assets of the Business by means of asset purchases (such asset purchases being
the "Acquisition").
NOW, THEREFORE, in consideration of the premises and the
mutual agreements, representations and undertakings contained herein, the
parties hereto hereby agree as follows:
Paragraph 1. Certain Defined Terms. As used in this Agreement,
the following terms have the meanings assigned to them below in this Paragraph
1. Capitalized terms used in this Agreement and not defined below in this
Paragraph 1 have the meanings assigned to them in the Preliminary Statement or
Article IX of the Standard Provisions, as the case may be.
"Acquired Business" means the Business.
"Acquisition Consideration" has the meaning specified in
Paragraph 2.
"Assumed Liabilities" has the meaning specified in
Paragraph 2.
"Closing" has the meaning specified in Paragraph 3.
"Closing Date" means November 25, 1997 or such later date as
to which Purchaser and the Company may agree in writing.
"Company" means Gulf Protein, Inc., a Louisiana corporation.
"Company Transfer Documents" has the meaning specified in
Paragraph 2.
"Current Balance Sheet" means the balance sheet of the
Company, as of March 31, 1997.
"Current Balance Sheet Date" means March 31, 1997.
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"Effective Date" means the Closing Date.
"Financial Statements" means the balance sheet of the Company
as of March 31, 1997 and the related statement of operations.
"Retained Assets" has the meaning specified in Paragraph 2.
"Retained Liabilities" has the meaning specified in
Paragraph 2.
"Standard Provisions" has the meaning specified in
Paragraph 4.
Paragraph 2. (A) The Asset Purchase. At the Closing, on the
terms and subject to the conditions set forth herein, the Company will sell,
convey, assign and transfer to Purchaser, and Purchaser will purchase and
acquire from the Company, all the properties, rights and assets of the Company,
wherever situated, of every kind, nature and description, tangible and
intangible, which are owned and used in connection with the Acquired Business,
whether arising by contract, law or otherwise, including any such properties,
rights or assets as have been written off and not included on the books of the
Company, except for the Retained Assets, all as the same shall exist on the
Closing Date (such properties, rights and assets (other than the Retained
Assets) being the "Assets"), in each case free of all Liens except for Permitted
Liens. The Assets will include (i) all the foregoing (other than the Retained
Assets) to the extent used or held for use primarily in connection with the
Acquired Business and (ii) the following:
(a) all customer lists, sales contracts, credit data and other
information relating to present and past customers of the Acquired
Business;
(b) all maritime vessels used or held for use by the Company
in the Business, together with the related purse boats, nets, machinery
equipment and supplies, including those identified in Schedule
2(A)(ii)(b);
(c) all vehicles and other transportation equipment owned by
the Company and used or held for use in the Acquired Business,
including those identified in Schedule 2(A)(ii)(c);
(d) all aircraft owned by the Company and used or held for use
in the Acquired Business, including those identified in Schedule
2(A)(ii)(d) but specifically excluding the aircraft identified as
Retained Assets.
(e) all the equipment, machinery, tools, appliances, telephone
systems, copy machines, fax machines, implements, spare parts,
supplies, furniture and all other tangible personal property of every
kind and description owned by the Company and used or held for use in
the Acquired Business, together with any rights or claims of the
Company arising out
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of the breach of any express or implied warranty by the manufacturers
or sellers of any of such assets;
(f) all inventories consisting of purchased parts, factory and
yard stores, fuel, oil, shipping containers and supplies owned by the
Company and used or held for use in the Acquired Business, whether in
the possession of the Company, in the possession of third parties or in
transit to or from the Company;
(g) all sales and sales promotional data, advertising
materials, credit Information, cost and pricing Information, equipment
maintenance data, purchasing records and Information, supplier lists,
business plans, reference catalogs, purchase orders, sales forms,
labels, catalogs, brochures, product display and other similar
property, rights and Information;
(h) all Proprietary Rights and all engineering, production and
other designs, drawings, specifications, formulas, technology, computer
and electronic data processing programs and software, inventions,
processes and know-how used or held for use in connection with the
Acquired Business;
(i) any and all goodwill and going concern value of the
Acquired Business;
(j) all rights to use the name "Gulf Protein"; provided that
the Company may retain the use of "Gulf Protein" in connection with the
winding up and dissolution of the Company's business to occur following
the Closing currently planned to occur by the fourth anniversary of the
Closing Date;
(k) all rights in, to and under all Governmental Approvals and
other rights under any Governmental Requirement held by the Company
relating to the Acquired Business, including those listed in Schedule
2(A)(ii)(k) to the extent they can be assigned;
(l) excluding protection and indemnity insurance proceeds on
employees of the Company to be paid by or to the Company, all insurance
policies, insurance proceeds and insurance claims relating to all or
any part of the Acquired Business, if any, and, to the extent
transferable, the benefit of and the right to enforce the covenants and
warranties, if any, that the Company is entitled to enforce against the
insurer under such policies with respect to the Acquired Business;
provided, however, that the Company may cancel all insurance as of the
Effective Date and any refunds due shall not be considered Assets;
(m) the Commercial Lease dated July 7, 1997 among
Roger D. Thompson, Roberta Thompson and the Company; and
(n) the Lease for Class C Encroachment dated February 12, 1993
between the State of Louisiana and the Company.
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Without limiting the generality of the foregoing, the Assets will include those
assets reflected on the Current Balance Sheet, other than (i) those that have
been disposed of in the ordinary course of business since the Current Balance
Sheet Date and (ii) the Retained Assets.
(B) Assumed Liabilities. On the Closing Date, Purchaser shall
(1) pay the principal amounts due on those promissory notes of the Company
listed on Schedule 2(B)(1) hereto and (2) shall assume the principal amounts due
on those promissory notes of the Company listed on Schedule 2(B)(2) and cause
the Company and the guarantors of such notes and their respective collateral to
be released from any further obligations with respect to such principal amounts
(the obligations in respect of such principal amounts on the notes identified in
Paragraphs 2(B)(1) and 2(B)(2), and only these obligations, being the "Assumed
Liabilities").
(C) Retained Assets and Retained Liabilities.
(i) The Assets will not include, and Purchaser acknowledges that there shall be
excluded from the Assets, all the following of the Company (collectively, the
"Retained Assets"):
(a) the corporate seal, Charter Documents and minute
books, stock books and other corporate or similar records of the
Company;
(b) all product inventories consisting of fish meal, fish
oil and fish solubles;
(c) all bank accounts, including cash on deposit and uncleared
deposits, all petty cash, temporary cash investments and instruments
representing the same, marketable securities and other cash and cash
equivalents;
(d) all accounts receivable, notes receivable, loans
receivable and advances, together with all instruments and all
documents of title representing any of the foregoing and all guaranties
and security in favor of the Company with respect to any of the
foregoing;
(e) the aircraft identified on Schedule 2(C)(i)(e);
(f) all deposits, prepaid insurance and refunds from
cancellation thereof;
(g) the rights that accrue or will accrue to the Company
under this Agreement;
(h) the fishing nets ordered from and not yet delivered
by Zapata Nets;
(i) the two oil centrifuges ordered but not yet delivered;
(j) Company employees pension plans and all sums therein;
and
(k) the items listed on Schedule 2.09.
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(ii) Purchaser is not assuming and will not be obligated by
this Agreement or any other Transaction Document to pay, perform, discharge or
otherwise be responsible for any debts, liabilities or obligations of the
Company, whether accrued, absolute, contingent or otherwise, oral or written,
disclosed or undisclosed, except the Assumed Liabilities, and all such debts,
liabilities and obligations other than the Assumed Liabilities (the "Retained
Liabilities") will remain the responsibility and obligation of the Company.
Without limiting the generality of the foregoing, it is expressly agreed that
neither Purchaser nor any Affiliate thereof will assume or incur any liabilities
or obligations based on, arising out of or in connection with:
(a) any Litigation, warranty claim, claim based on violation
of any Environmental Law or any other claim associated with or relating
to the Assets or the Acquired Business arising out of actions or
omissions occurring prior to the Effective Date;
(b) any obligations under any contract or other agreement
with customers, suppliers or any other party;
(c) any Taxes accruing prior to the Effective Date;
(d) except as provided herein any liabilities with respect to
any Plan, Employment Agreement or Employee Policies and Procedures or
any claims for wages or other compensation, vacation pay, holiday pay
or for severance arising out of alleged or actual employment loss
(other than any liabilities for wages and benefits related to WARN
notices described in Section 6.04(f) hereof);
(e) any Indebtedness of the Company;
(f) any liabilities, obligations or expenses of the
Company for any broker's or finder's commission relating to this
Agreement or any of the transactions contemplated hereby;
(g) any liabilities or obligations of the Company arising from
or incurred in connection with the negotiation, preparation or
execution of this Agreement or the transactions contemplated hereby,
including fees and expenses of the Company's counsel; or
(h) any liabilities, debts or obligations arising out of
actions taken or work done by the Company prior to the Effective Date,
including liabilities or obligations arising out of any failure by the
Company to perform any contract, commitment or arrangement, including
those set forth in any contract with customers, in accordance with its
terms prior to the Effective Date.
(C) Acquisition Consideration. In consideration of the
sale, conveyance, assignment and transfer of the Assets by the Company to
Purchaser and in reliance on the
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representations and warranties made herein by the Company, Purchaser agrees on
the Closing Date to pay or assume the Assumed Liabilities in accordance with
Paragraph 2(B) and to pay to the Company, immediately available funds in the
amount of $12,301,751.44 (the "Assets Consideration"). In consideration of the
non-competition covenant set forth in Article VIII of the Standard Provisions,
Purchaser agrees on the Closing Date to pay to the Company for the benefit of
the individuals named in Article VIII of the Standard Provisions, and aggregate
immediately available funds in the amount of $600,000 (together with the Assets
Consideration, the "Acquisition Consideration").
(D) Delivery of Documents. (i) At the Closing, the Company
will execute and deliver to Purchaser a general conveyance and assignment
agreement substantially in the form agreed to by the parties and any other
instruments of transfer deemed necessary or appropriate by Purchaser
(collectively, the "Company Transfer Documents").
(ii) At the Closing, Purchaser will execute and deliver to the
Company an assumption agreement substantially in the form agreed to by the
parties (the "Purchaser Assumption Agreement").
(F) The Effective Time. The effective time of the
Acquisition (the "Effective Time") will be when the Acquisition Consideration
is paid.
Paragraph 3. The Closing. On or before the Closing Date, the
parties hereto will take all actions necessary to (A) effect the Acquisition and
(B) satisfy the document delivery requirements on which the obligations of the
parties to effect the Acquisition and the other transactions contemplated hereby
are conditioned by the provisions of Article V (all those actions collectively
being the "Closing"). The Closing will take place at such time and place on the
Closing Date as the Purchaser shall specify.
Paragraph 4. Incorporation of Standard Provisions. The
Standard Provisions for Asset Purchases attached hereto as Annex 1 (the
"Standard Provisions"), hereby are incorporated in this Agreement by this
reference and constitute a part of this Agreement with the same force and effect
as if set forth at length herein.
Paragraph 5. Counterparts. This Agreement may be executed in
multiple counterparts, each of which will be an original, but all of which
together will constitute one and the same instrument.
Paragraph 6. Notices. For purposes of Section 10.06, notices
shall be addressed to the Company as follows:
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Gulf Protein, Inc.
P. O. Box 1230
Bridge City, Texas 77611
Attn: Jesse Wheeler
Fax: (409) 735-5200
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Moore, Landrey, Garth, Jones,
Burmeister & Hulett
390 Park
Beaumont, TX 77701
Attn: Floyd Landrey
Fax: (409) 835-2707
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
(Signatures on following page)
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
PROTEIN SECURITIES COMPANY
By:----------------------------------
Eric T. Furey
Vice President
GULF PROTEIN, INC.
By:---------------------------------
Rachel Wheeler
President
------------------------------------
Jesse Wheeler, individually
for purposes of the noncompetition
agreement in Article VIII of Annex I and
for purposes of the Indemnification in
Article VII of Annex I
------------------------------------
Rachel Wheeler, individually for
purposes of the noncompetition
agreement in Article VIII
of Annex I and for purposes
of the Indemnification in
Article VII of Annex I
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Annex 1
ARTICLE I
[RESERVED]
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to, and agrees with,
Purchaser that all the following representations and warranties in this Article
II are as of the date of this Agreement, and will be on the Closing Date and
immediately prior to the Effective Time, true and correct:
Section 2.01. Organization. The Company (a) is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Louisiana, (b) has all requisite corporate or other power and authority
under the laws of its Organization State and its Charter Documents to own or
lease and to operate its properties and to carry on its business as now
conducted and (c) is duly qualified and in good standing as a foreign
corporation in all jurisdictions in which it owns or leases property or in which
the carrying on of its business as now conducted so requires except where the
failure to be so qualified, singly or in the aggregate, would not have a
Material Adverse Effect.
Section 2.02. [Reserved.]
Section 2.03. Authorization; Enforceability; Absence of
Conflicts; Required Consents. (a) The execution, delivery and performance by the
Company of this Agreement and each other Transaction Document to which it is a
party, and the carrying into effect of the Acquisition and the other
transactions contemplated hereby and thereby, are within its corporate or other
power under its Charter Documents and the applicable Governmental Requirements
of its Organization State and have been duly authorized by all proceedings,
including actions permitted to be taken in lieu of proceedings, required under
its Charter Documents and those Governmental Requirements.
(b) This Agreement has been, and each of the other Transaction
Documents to which the Company is a party, when executed and delivered to
Purchaser, will have been, duly executed and delivered by the Company and is, or
when so executed and delivered will be, the legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms,
except as that enforceability may be (i) limited by any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and (ii) subject to general principles of equity
(regardless of whether that enforceability is considered in a proceeding in
equity or at law).
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(c) Except as disclosed on Schedule 2.03(c), the execution,
delivery and performance in accordance with their respective terms by the
Company of the Transaction Documents to which it is a party have not and will
not (i) violate, breach or constitute a default under the Charter Documents of
the Company, (ii) cause or result in the imposition of, or afford any Person the
right to obtain, any Lien upon any of the Assets (or upon any revenues, income
or profits of the Acquired Business therefrom) or (iii) to the best knowledge of
the Company, result in the revocation, cancellation, suspension or material
modification, in any single case or in the aggregate, of any Governmental
Approval possessed by the Company at the date hereof and necessary for the
ownership or lease or the operation of the Assets or the carrying on of the
Acquired Business as now conducted, including any necessary Governmental
Approval under each applicable Environmental Law.
Section 2.04. [Reserved.]
Section 2.05. [Reserved.]
Section 2.06. [Reserved.]
Section 2.07. Title to the Assets. The Company has and is
transferring to Purchaser good, valid and marketable title to all the Assets,
free and clear of all Liens except for Permitted Liens.
Section 2.08. Company Transfer Documents. The Company
Transfer Documents are effective to vest in Purchaser good title to all the
Assets, free and clear of all Liens except for Permitted Liens.
Section 2.09. Sufficiency of the Assets. Except as set forth
on Schedule 2.09 and except for the Retained Assets, the Assets comprise all the
properties, rights and assets of every type and description, personal and mixed,
tangible and intangible, which have been used or employed or held for use by the
Company in operating the Acquired Business during the past 12 months.
Section 2.10. [Reserved.]
Section 2.11. Litigation. Except as disclosed in Schedule
2.11, no Litigation is pending or, to the knowledge of the Company, threatened
which relates to the Assets or the Acquired Business that will not be covered by
adequate insurance.
Section 2.12. Disclosure. To the best knowledge of the Company
and its officers, as of the date hereof, all Information that has been made
available to Purchaser by or on behalf of the Company prior to the date of this
Agreement in connection with the transactions contemplated hereby is, taken
together, true and correct in all material respects and does not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements
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<PAGE>
contained therein not Materially misleading in light of the circumstances under
which those statements were made.
Section 2.13. Compliance With Laws. To the best knowledge of
the Company and its officers, (a) except as disclosed in Schedule 2.13, the
Company possesses, if required by the applicable Environmental Laws, and is in
compliance in all material respects with the terms and conditions of all
Governmental Approvals necessary for the ownership or lease and the operation of
the Assets (including all the facilities and sites the Company owns or holds
under any leases which are included in the Assets) and the carrying on of the
Acquired Business as now conducted. Schedule 2.13 and Schedule 2(A)(ii)(k)
discloses all the Governmental Approvals so possessed. All the Governmental
Approvals so listed are valid and in full force and effect and, except as
disclosed in Schedule 2.13, the Company has not received, nor to the knowledge
of the Company, has any employee of the Company received, any notice from any
Governmental Authority of its intention to cancel, terminate or not renew any of
those Governmental Approvals.
(b) Except as disclosed in Schedule 2.13, the Company: (i) to
the knowledge of the Company, has been and continues to be in compliance in all
material respects with all Governmental Requirements applicable to the Acquired
Business or any of its presently owned or operated properties included in the
Assets (including all the facilities and sites now held by it under any lease
included in the Assets), including all applicable Governmental Requirements
under ERISA and Environmental Laws; and (ii)(A) the Company has not received,
nor to the knowledge of the Company and its officers has any employee of the
Company received, any notice from any Governmental Authority which asserts, or
raises the possibility of assertion of, any noncompliance with any of those
Governmental Requirements and (B) to the knowledge of the Company, no condition
or state of facts exists which would provide a valid basis for any such
assertion.
Section 2.14. Certain Environmental Matters. To the best
knowledge of the Company and its officers, except as disclosed in Schedule 2.14:
(a) the Company has complied in all material respects, and remains in compliance
in all material respects, with the provisions of all Environmental Laws
applicable to the Acquired Business or any of the Assets and which relate to the
reporting by the Company of all sites presently owned or operated by it and
included (or a lease of which is included) in the Assets where Solid Wastes,
Hazardous Wastes or Hazardous Substances have been treated, stored, disposed of
or otherwise handled; (b) no release (as defined in those Environmental Laws)
at, from, in or on any site owned or operated by the Company and included (or a
lease of which is included) in the Assets has occurred which, if all relevant
facts were known to the relevant Governmental Authorities, reasonably could be
expected to require remediation to avoid deed record notices, restrictions,
liabilities or other consequences that would not be applicable if that release
had not occurred; (c) neither the Company nor any agent or contractor of the
Company has transported or arranged for the transportation of any Solid Wastes,
Hazardous Wastes or Hazardous Substances to, or disposed or arranged for the
disposition of any Solid Wastes, Hazardous Wastes or Hazardous Substances at,
any off-site location that could lead to any claim against the Acquired
Business, Purchaser or any Subsidiary of Purchaser, as a potentially responsible
party or otherwise, for any clean-up costs, remedial work, damage to natural
resources, personal injury or
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<PAGE>
property damage, including any claim under CERCLA; and (d) no storage tanks
exist on or under any of the properties owned or operated by the Company and
included (or a lease of which is included) in the Assets from which any Solid
Wastes, Hazardous Wastes or Hazardous Substances have been released into the
surrounding environment. The Company has provided Purchaser with copies (or if
not available, accurate written summaries) of all environmental investigations,
studies, audits, reviews and other analyses conducted by or on behalf, or which
otherwise are in the possession, of the Company respecting any facility, site or
other property presently owned or operated by the Company and included (or a
lease of which is included) in the Assets.
Section 2.15. [Reserved.]
Section 2.16. [Reserved.]
Section 2.17. [Reserved.]
Section 2.18. [Reserved.]
Section 2.19. [Reserved.]
Section 2.20. [Reserved.]
Section 2.21. [Reserved.]
Section 2.22. [Reserved.]
Section 2.23. Employee Matters. (a) Cash Compensation.
Schedule 2.23 sets forth a complete written list of the names, titles and rates
of annual cash compensation (and the portions thereof attributable to salary or
the equivalent, fixed bonuses, discretionary bonuses and other cash
compensation, respectively) of all employees.
Section 2.24. [Reserved.]
Section 2.25. [Reserved.]
Section 2.26. [Reserved.]
Section 2.27. [Reserved.]
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Company that all the
following representations and warranties in this Article III are as of the date
of this Agreement, and will be on the Closing Date and immediately prior to the
Effective Time, true and correct:
Section 3.01. Organization; Power. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Purchaser has all requisite corporate power and authority
under the laws of its Organization State and its Charter Documents to own or
lease and to operate its properties presently and following the Effective Time
and to carry on its business as now conducted and as proposed to be conducted
following the Effective Time.
Section 3.02. Authorization; Enforceability; Absence of
Conflicts; Required Consents. (a) The execution, delivery and performance by
Purchaser of this Agreement and each other Transaction Document to which it is a
party, and the effectuation of the Acquisition and the other transactions
contemplated hereby and thereby, are within its corporate power under its
Charter Documents and the applicable Governmental Requirements of its
Organization State and have been duly authorized by all proceedings, including
actions permitted to be taken in lieu of proceedings, required under its Charter
Documents and the applicable Governmental Requirements of its Organization
State.
(b) This Agreement has been, and each of the other Transaction
Documents to which Purchaser is a party, when executed and delivered to the
other parties thereto, will have been, duly executed and delivered by it and is,
or when so executed and delivered will be, its legal, valid and binding
obligation, enforceable against it in accordance with its terms, except as that
enforceability may be (i) limited by any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and (ii) subject to general principles of equity
(regardless of whether that enforceability is considered in a proceeding in
equity or at law).
(c) The execution, delivery and performance in accordance with
their respective terms by Purchaser of the Transaction Documents to which it is
a party have not and will not violate, breach or constitute a default under (i)
its Charter Documents, (ii) any Governmental Requirement applicable to it or
(iii) any of its Material Agreements.
(d) Except as may be required by the HSR Act or the applicable
state securities or blue sky laws, no Governmental Approvals are required to be
obtained, and no reports or notices to or filings with any Governmental
Authority are required to be made, by Purchaser for the execution, delivery or
performance by Purchaser of the Transaction Documents to which it is a party,
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the enforcement against Purchaser, of its obligations thereunder or the
effectuation of the Acquisition and the other transactions contemplated thereby.
Section 3.03. Conduct of Phase I Site Assessment. Purchaser
has engaged an environmental consultant, who has conducted a Phase I Site
Assessment study on the properties currently leased by the Company that will be
leased or held under option to lease by the Purchaser after the Closing Date.
Purchaser has reviewed the assessment and is aware of the results contained
therein.
Section 3.04. [Reserved.]
ARTICLE IV
[RESERVED]
ARTICLE V
CONDITIONS TO CLOSING AND CONSUMMATION
Section 5.01. Conditions to the Obligations of Each Party
The obligation of each party hereto to take the actions contemplated to be taken
by that party at the Closing is subject to the satisfaction on or before the
Closing Date of each of the following conditions or waiver pursuant to
Section 10.04:
(a) No Litigation. No Litigation shall be pending on the
Closing Date to restrain, prohibit or otherwise interfere with, or to
obtain material damages or other relief from Purchaser or any
Subsidiary of Purchaser in connection with, the consummation of the
Acquisition; and
(b) Governmental Approvals. All Governmental Approvals
required to be obtained by the Company and Purchaser in connection with the
consummation of the Acquisition shall have been obtained.
Section 5.02. Conditions to the Obligations of the Company.
The obligations of the Company with respect to actions to be taken by them at or
before the Closing Date and the actions to be taken on the Closing Date are
subject to the satisfaction, or the waiver by the Company pursuant to Section
10.04 on or before the Closing Date, of (a) all the conditions set forth in
Schedule 5.02, if any, and (b) the condition that all the representations and
warranties of Purchaser in Article III shall be true and correct as of the
Closing Date as though made at that time.
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Section 5.03. Conditions to the Obligations of Purchaser. The
obligations of Purchaser with respect to actions to be taken by it at or before
the Closing Date are subject to the satisfaction, or the waiver by Purchaser
pursuant to Section 10.04, on or before the Closing Date of (a) all the
conditions set forth in Schedule 5.03, if any, and (b) all the following
conditions:
(1) Representations and Warranties. All the representations
and warranties of the Company in Article II shall be true and correct as of the
Closing as though made at that time;
(2) Delivery of Documents. The Company shall have delivered to
Purchaser a secretary's certificate, in substantially the form agreed
to by Purchaser signed by the Secretary of the Company, respecting the
Charter Documents of the Company, resolutions of the Board of Directors
and stockholders of the Company and the incumbency and signatures of
certain officers of the Company; and
(3) Lease Agreement. Purchaser shall have entered into a lease
agreement providing for the lease of certain real estate related to the Acquired
Business upon terms and conditions satisfactory to Purchaser.
ARTICLE VI
COVENANTS FOLLOWING THE EFFECTIVE TIME
Section 6.01. Permits and Governmental Approvals. Purchaser
acknowledges that the Company is not required to maintain or secure any permit
or other Governmental Approval necessary for the ownership or lease or the
operation of the Assets or the carrying on of the Acquired Business after the
Closing; provided, that, with respect to any such approval as may be necessary
to transfer title in or assign any of the Assets to Purchaser, Seller shall
provide such information and assistance to Purchaser as may be necessary to
complete such transfer or assignment.
Section 6.02. [Reserved.]
Section 6.03. [Reserved.]
Section 6.04. Company Employees. (a) Purchaser may extend
offers of employment to the employees of the Company who are involved in the
conduct of the Acquired Business, on such terms and conditions as it deems
appropriate in its sole discretion.
(b) Each employee of the Company who is employed by Purchaser
or any affiliate of Purchaser following the Effective Time will be a new
employee of that employer, and the prior employment of that employee by the
Company will not affect any compensation which Purchaser or any Subsidiary of
Purchaser may offer to its employees. Without the prior written consent of
Purchaser, the Company will not make, or permit any of its Affiliates to make,
at any time after the date hereof any representations or promises, written or
oral, to any employee of the Company
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concerning that employee's employment by Purchaser or any Subsidiary of
Purchaser or any compensation payable by Purchaser or any Subsidiary of
Purchaser to that employee following the Effective Time. At reasonable times
after the date hereof, Purchaser will be entitled to (i) interview such of the
employees of the Company who are involved in the Acquired Business as it wishes
and (ii) if permitted by applicable law, review and retain copies of the
Company's personnel records and performance evaluations of those employees. At
the request of Purchaser, the Company will use commercially reasonable efforts
to make its employees available to provide reasonable assistance to Purchaser in
such interview process.
(c) No portion of the assets of any Plan, or Employee Policies
and Procedures, heretofore sponsored or maintained by the Company or any Company
Subsidiary (and no amount attributable to any such Plan or Employee Policies and
Procedures) shall be transferred to Purchaser, and Purchaser shall not be
required to continue any such Plan or Employee Policies and Procedures after the
Effective Time. All amounts payable by the Company under any such Plan or
Employment Policies and Procedures directly to any employees of the Company who
become employees of Purchaser or any Subsidiary of Purchaser shall be paid or
caused to be paid by the Company within 30 days after the Effective Time to the
extent that such payment is not inconsistent with the terms of such Plan or
Employee Policies and Procedures.
Section 6.05. Tax Matters. (a) Property Taxes, if any,
respecting the Assets will be allocated between the portion of any taxable
period that is prior to the Effective Date and the portion of that period
extending from and including the Effective Date on a daily basis. The Company
will be liable for the payment of (i) property Taxes respecting the Assets which
are allocable to the portion of the taxable period that is prior to the
Effective Date and (ii) all property Taxes respecting the Retained Assets for
all taxable periods. Purchaser will be liable for the payment of all property
Taxes respecting the Assets which are allocable to the portion of the taxable
period from and including the Effective Date. Purchaser will provide to the
Company a copy of each property Tax assessment on, or notice of assessed value
and property Taxes due respecting, the Assets Purchaser receives for each
taxable period in which the Effective Date occurs, whereupon the Company
promptly will pay to Purchaser its portion of those Property Taxes, determined
as provided above; thereafter, Purchaser will pay that amount when due to the
appropriate Taxing Authority. Except as provided in this Section 6.05(a) and for
sales or transfer taxes with respect to the consummation of the Acquisition or
the other transactions contemplated hereby, Purchaser will not have any
liability for Taxes payable by the Company (including income, sales or transfer
taxes) with respect to the operations or assets of the Company or the Acquired
Business or the consummation of the Acquisition or the other transactions
contemplated hereby.
(b) Purchaser and the Company will allocate the Acquisition
Consideration and the Assumed Liabilities in accordance with Section 1060 of the
Code.
Section 6.06. [Reserved.]
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Section 6.07. Compliance With Bulk Sales Laws. The parties
hereby waive compliance by the parties with any applicable bulk sales laws and
any other similar laws in any applicable jurisdiction in respect of the
transactions contemplated by this Agreement. The Company will indemnify
Purchaser from, and hold it harmless against, any Damages or Damage Claims
relating from or arising out of the parties' failure to comply with any of such
laws in respect of the transactions contemplated by this Agreement.
Section 6.08. [Reserved.]
Section 6.09. [Reserved.]
Section 6.10. Further Assurances. The Company on request by
Purchaser from time to time after the Effective Date, will execute, acknowledge
and deliver to Purchaser such other instruments of conveyance and transfer and
will take such other actions as Purchaser may reasonably require in order to
vest more effectively in Purchaser, or to put Purchaser more fully in possession
of, any of the Assets. From and after the Effective Date, the Company will
promptly refer all inquiries with respect to ownership of the Assets or the
Acquired Business to Purchaser. The Company agrees that after the Effective Date
it will hold and will promptly transfer and deliver to Purchaser from time to
time as and when received by it, any cash, checks with appropriate endorsements
(using their best efforts not to convert such checks into cash) or other
property that it may receive on or after the Effective Date which properly
belongs to Purchaser pursuant hereto and will account to Purchaser for all such
receipts. From and after the Effective Date, Purchaser shall have the right and
authority to endorse without recourse the name of the Company on any check or
any other evidence of indebtedness received by Purchaser on account of the
Acquired Business and the Assets transferred to Purchaser hereunder.
Section 6.11. Records. The Company shall, upon request and
during normal business hours, provide Purchaser reasonable access to the books
and records of the Company that are reasonably necessary for the preparation of
financial statements, and shall provide Purchaser with, or permit Purchaser to
make, copies of any of such books and records as Purchaser may reasonably
request. The Company will use commercially reasonable efforts to make its
employees available to Purchaser to assist Purchaser in any manner reasonably
necessary to carry out the foregoing.
Section 6.12. [Reserved.]
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ARTICLE VII
INDEMNIFICATION
Section 7.01. Survival of Representations and Warranties;
Limitation on Actions. (a) All the provisions of this Agreement will survive the
Closing and Effective Time indefinitely notwithstanding any investigation at any
time made by or on behalf of any party hereto, provided that the representations
and warranties set forth in this Agreement and in any certificate delivered in
connection herewith with respect to any of those representations and warranties
will terminate and expire eighteen months after the Effective Date, except that
the representations and warranties of the Company in Section 2.07 will survive
forever. After a representation and warranty has terminated and expired, no
indemnification will or may be sought pursuant to this Article VII on the basis
of that representation and warranty by any Person who would have been entitled
pursuant to this Article VII to indemnification on the basis of that
representation and warranty prior to its termination and expiration, provided
that in the case of each representation and warranty that will terminate and
expire as provided in this Section 7.01, no claim presented in writing for
indemnification pursuant to this Article VII on the basis of that representation
and warranty prior to its termination and expiration will be affected in any way
by that termination and expiration.
(b) Notwithstanding anything to the contrary contained
elsewhere in this Agreement, except with respect to the representations and
warranties of the Company contained in Section 2.07, the Company, its officers,
directors and shareholders shall not be liable to indemnify Purchaser under this
Agreement (i) for Damages of Purchaser, its successors or assigns to the extent
the liability therefor exceeds, in the aggregate, the sum of $600,000.00; or
(ii) for Damages of Purchaser for the violation of any Environmental Law
resulting solely from the amendment of any law, rule or regulation or the
adoption of any law, rule or regulation after the Closing Date. With respect to
any Damages arising out a breach of the representations or warranties of the
Company contained in Section 2.07, the Company, its officers, directors and
shareholders shall not be liable to indemnify Purchaser, its successors or
assigns for aggregate Damages in excess of the Acquisition Consideration.
Section 7.02. Indemnification of Purchaser Indemnified
Parties. Subject to the applicable provisions of Sections 7.01(a) and (b), each
of the Company, Jesse Wheeler and Rachel Wheeler, jointly and severally,
covenants and agrees that he will indemnify each Purchaser Indemnified Party
against, and hold each Purchaser Indemnified Party harmless from and in respect
of, all Damage Claims that arise from, are based on or relate or otherwise are
attributable to (i) any breach of the representations and warranties of the
Company set forth herein or in certificates delivered in connection herewith, or
(ii) any nonfulfillment of any covenant or agreement on the part of the Company
under this Agreement (each such Damage Claim being a "Purchaser Indemnified
Loss").
Section 7.03. Indemnification of Company Indemnified Parties.
Purchaser covenants and agrees that it will indemnify each Company Indemnified
Party against, and hold each
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Company Indemnified Party harmless from and in respect of, all Damage Claims
that arise from, are based on or relate or otherwise are attributable to (a) any
breach by Purchaser of its representations and warranties set forth herein or in
its certificates, if any, delivered to the Company in connection herewith or (b)
any nonfulfillment of any covenant or agreement on the part of Purchaser in this
Agreement (each such Damage Claim being a "Company Indemnified Loss").
Section 7.04. Conditions of Indemnification. (a) All claims
for indemnification under this Agreement shall be asserted and resolved as
follows in this Section 7.04.
(b) A party claiming indemnification under this Agreement (an
"Indemnified Party") shall promptly (i) notify the party from whom
indemnification is sought (the "Indemnifying Party") of any third-party claim or
claims asserted against the Indemnified Party ("Third Party Claim") that could
give rise to a right of indemnification under this Agreement and (ii) transmit
to the Indemnifying Party a written notice ("Claim Notice") describing in
reasonable detail the nature of the Third Party Claim, a copy of all papers
served with respect to that claim (if any), an estimate of the amount of damages
attributable to the Third Party Claim to the extent feasible (which estimate
shall not be conclusive of the final amount of that claim) and the basis for the
Indemnified Party's request for indemnification under this Agreement. Except as
set forth in Section 7.01, the failure to promptly deliver a Claim Notice shall
not relieve the Indemnifying Party of its obligations to the Indemnified Party
with respect to the related Third Party Claim except to the extent that the
resulting delay is materially prejudicial to the defense of that claim. Within
15 days after receipt of any Claim Notice (the "Election Period"), the
Indemnifying Party shall notify the Indemnified Party (i) whether the
Indemnifying Party disputes its potential liability to the Indemnified Party
under this Article VII with respect to that Third Party Claim and (ii) if the
Indemnifying Party does not dispute its potential liability to the Indemnified
Party with respect to that Third Party Claim, whether the Indemnifying Party
desires, at the sole cost and expense of the Indemnifying Party, to defend the
Indemnified Party against that Third Party Claim.
(c) If the Indemnifying Party does not dispute its potential
liability to the Indemnified Party and notifies the Indemnified Party within the
Election Period that the Indemnifying Party elects to assume the defense of the
Third Party Claim, then the Indemnifying Party shall have the right to defend,
at its sole cost and expense, that Third Party Claim by all appropriate
proceedings, which proceedings shall be prosecuted diligently by the
Indemnifying Party to a final conclusion or settled at the discretion of the
Indemnifying Party in accordance with this Section 7.04(c), and the Indemnified
Party will furnish the Indemnifying Party with all information in its possession
with respect to that Third Party Claim and otherwise cooperate with the
Indemnifying Party in the defense of that Third Party Claim; provided, however,
that the Indemnifying Party shall not enter into any settlement with respect to
any Third Party Claim that purports to limit the activities of, or otherwise
restrict in any way, any Indemnified Party or any Affiliate of any Indemnified
Party without the prior consent of that Indemnified Party (which consent may be
withheld in the sole discretion of that Indemnified Party). The Indemnified
Party is hereby authorized, at the sole cost and expense of the Indemnifying
Party, to file, during the Election Period, any motion, answer or other
pleadings that the Indemnified Party shall deem
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necessary or appropriate to protect its interests or those of the Indemnifying
Party. The Indemnified Party may participate in, but not control, any defense or
settlement of any Third Party Claim controlled by the Indemnifying Party
pursuant to this Section 7.04(c) and will bear its own costs and expenses with
respect to that participation; provided, however, that if the named parties to
any such action (including any impleaded parties) include both the Indemnifying
Party and the Indemnified Party, and the Indemnified Party has been advised by
counsel that there may be one or more legal defenses available to it which are
different from or additional to those available to the Indemnifying Party, then
the Indemnified Party may employ separate counsel at the expense of the
Indemnifying Party, and, on its written notification of that employment, the
Indemnifying Party shall not have the right to assume or continue the defense of
such action on behalf of the Indemnified Party.
(d) If the Indemnifying Party (i) within the Election Period
(A) disputes its potential liability to the Indemnified Party under this Article
VII, (B) elects not to defend the Indemnified Party pursuant to Section 7.04(c)
or (C) fails to notify the Indemnified Party that the Indemnifying Party elects
to defend the Indemnified Party pursuant to Section 7.04(c) or (ii) elects to
defend the Indemnified Party pursuant to Section 7.04(c) but fails diligently
and promptly to prosecute or settle the Third Party Claim, then the Indemnified
Party shall have the right to defend, at the sole cost and expense of the
Indemnifying Party (if the Indemnified Party is entitled to indemnification
hereunder), the Third Party Claim by all appropriate proceedings, which
proceedings shall be promptly and vigorously prosecuted by the Indemnified Party
to a final conclusion or settled. The Indemnified Party shall have full control
of such defense and proceedings. Notwithstanding the foregoing, if the
Indemnifying Party has delivered a written notice to the Indemnified Party to
the effect that the Indemnifying Party disputes its potential liability to the
Indemnified Party under this Article VII and if that dispute is resolved in
favor of the Indemnifying Party, the Indemnifying Party shall not be required to
bear the costs and expenses of the Indemnified Party's defense pursuant to this
Section 7.04 or of the Indemnifying Party's participation therein at the
Indemnified Party's request, and the Indemnified Party shall reimburse the
Indemnifying Party in full for all reasonable costs and expenses of such
litigation. The Indemnifying Party may participate in, but not control, any
defense or settlement controlled by the Indemnified Party pursuant to this
Section 7.04(d), and the Indemnifying Party shall bear its own costs and
expenses with respect to that participation.
(e) In the event any Indemnified Party should have a claim
against any Indemnifying Party hereunder that does not involve a Third Party
Claim, the Indemnified Party shall transmit to the Indemnifying Party a written
notice (the "Indemnity Notice") describing in reasonable detail the nature of
the claim, an estimate of the amount of Damages attributable to that claim to
the extent feasible (which estimate shall not be conclusive of the final amount
of that claim) and the basis of the Indemnified Party's request for
indemnification under this Agreement. If the Indemnifying Party does not notify
the Indemnified Party within 15 days from its receipt of the Indemnity Notice
that the Indemnifying Party disputes the claim specified by the Indemnified
Party in the Indemnity Notice, that claim shall be deemed a liability of the
Indemnifying Party hereunder. If the Indemnifying Party has timely disputed that
claim, as provided above, that dispute shall be
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resolved by proceedings in an appropriate court of competent jurisdiction if the
parties do not reach a settlement of that dispute within 30 days after notice of
that dispute is given.
(f) Payments of all amounts owing by an Indemnifying Party
pursuant to this Article VII relating to a Third Party Claim shall be made
within 30 days after the latest of (i) the settlement of that Third Party Claim,
(ii) the expiration of the period for appeal of a final adjudication of that
Third Party Claim or (iii) the expiration of the period for appeal of a final
adjudication of the Indemnifying Party's liability to the Indemnified Party
under this Agreement in respect of that Third Party Claim. Payments of all
amounts owing by an Indemnifying Party pursuant to Section 7.04(e) shall be made
within 30 days after the later of (i) the expiration of the 30-day Indemnity
Notice period or (ii) the expiration of the period for appeal of a final
adjudication of the Indemnifying Party's liability to the Indemnified Party
under this Agreement.
Section 7.05. Remedies Not Exclusive. The remedies provided in
this Agreement shall not be exclusive of any other rights or remedies available
to any other party, either at law or in equity.
ARTICLE VIII
LIMITATIONS ON COMPETITION
Section 8.01. Prohibited Activities. The Company, Jesse
Wheeler and Rachel Wheeler agree, severally and not jointly with any other
Person, that they will not, during the period beginning on the date hereof and
ending on the fourth anniversary of the Closing Date, directly or indirectly,
for any reason, for their own account or on behalf of or together with any other
Person:
(i) engage as a director, officer or in any similar executive
capacity or as an owner, co-owner, financier or other investor of or in
any business engaged in menhaden fishing and the production of fish
meal and fish oil and fish solubles from such fishing (collectively,
the "Restricted Business") in the area from Mississippi to Texas and
the territorial waters of the United States adjacent thereto (the
"Territory"). For purposes hereof the Restricted Business does not
include the blending of fish meal purchased from Persons not affiliated
with the Company and the sale of such fish meal products;
(ii) call on any natural person who is at that time employed
by the Acquired Business or Purchaser in any managerial capacity with
the purpose or intent of attracting that person from the employ of the
Acquired Business or Purchaser;
(iii) call on or solicit, either directly or indirectly, any
Person that at that time is, or at any time within one year prior to
that time was, a customer of the Acquired Business or Purchaser or any
prospective customer that had or, to the knowledge of the Company, was
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about to receive a business proposal from Purchaser (A) for the purpose
of engaging in the Restricted Business and (B) with the knowledge of
that customer relationship; or
(iv) call on any Entity which to the Company's knowledge has
been called on by Purchaser in connection with a possible acquisition
by Purchaser, with the knowledge of that Entity's status as such an
acquisition candidate, for the purpose of acquiring that Entity or
arranging the acquisition of that Entity by any Person other than
Purchaser.
Notwithstanding the foregoing, the Company may own and hold as a passive
investment up to 5% of the outstanding capital stock of a competing Entity if
that class of capital stock is listed on a national stock exchange or included
in the Nasdaq National Market.
Section 8.02. Damages. Because of the difficulty of measuring
economic losses to Purchaser as a result of any breach by the Company of its
covenants in Section 8.01, and because of the immediate and irreparable damage
that could be caused to Purchaser for which it would have no other adequate
remedy, the Company agrees that Purchaser may enforce the provisions of Section
8.01 by injunctions and restraining orders against the Company or any
above-identified individual if it or he breaches any of those provisions.
Section 8.03. Reasonable Restraint. The parties hereto each
agree that Sections 8.01 and 8.02 impose reasonable restraints in light of the
activities and business of Purchaser on the date hereof and the current business
plans of Purchaser.
Section 8.04. Severability; Reformation. The covenants in this
Article VIII are severable and separate, and the unenforceability of any
specific covenant in this Article VIII is not intended by any party hereto to,
and shall not, affect the provisions of any other covenant in this Article VIII.
If any court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth in Section 8.01 are unreasonable as applied
to the Company or any above- identified individual, acknowledge their mutual
intention and agreement that those restrictions be enforced to the fullest
extent the court deems reasonable, and thereby shall be reformed to that extent
as applied to the Company or other Person, as the case may be.
Section 8.05. Independent Covenant. All the covenants in this
Article VIII are intended by each party hereto to, and shall, be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of the Company against Purchaser,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by Purchaser of any covenant in this Article VIII. It
is specifically agreed that the period specified in Section 8.01 shall be
computed in the case of the Company by excluding from that computation any time
during which the Company or other Person, as the case may be, is in violation of
any provision of Section 8.01. The covenants contained in this Article VIII
shall not be affected by any breach of any other provision hereof by any party
hereto.
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Section 8.06. Materiality. The Company, severally and not
jointly with any other Person, hereby agree that this Article VIII is a material
and substantial part of the transactions contemplated hereby.
ARTICLE IX
DEFINITIONS AND DEFINITIONAL PROVISIONS
Section 9.01. Defined Terms. As used in this Agreement, the
following terms have the meanings assigned to them below:
"Acquired Business" has the meaning specified in Paragraph 1
of the Preliminary Statement.
"Acquisition" has the meaning specified in the Preliminary
Statement.
"Acquisition Consideration" has the meaning specified in
Paragraph 2 of the Preliminary Statement.
"Agreement" means this Agreement, including all attached
Schedules, Annexes, Addenda and Exhibits, as each of the same may be amended,
modified or supplemented from time to time pursuant to the provisions hereof
or thereof.
"Affiliate" means, as to any specified Person, any other
Person that, directly or indirectly through one or more intermediaries or
otherwise, controls, is controlled by or is under common control with the
specified Person. As used in this definition, "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of a Person (whether through ownership of Capital Stock
of that Person, by contract or otherwise).
"Assets" has the meaning specified in Paragraph 2.
"Asset Purchase" means a transaction in which the Company
sells, and Purchaser purchases, assets constituting the Acquired Business.
"Capital Stock" means, with respect to: (a) any corporation,
any share, or any depositary receipt or other certificate representing any
share, of an equity ownership interest in that corporation; and (b) any other
Entity, any share, membership or other percentage interest, unit of
participation or other equivalent (however designated) of an equity interest
in that Entity.
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"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980.
"Charter Documents" means, with respect to any Entity at any
time, in each case as amended, modified and supplemented at that time, the
articles or certificate of formation, incorporation or organization (or the
equivalent organizational documents) of that Entity, (b) the bylaws or limited
liability company agreement or regulations (or the equivalent governing
documents) of that Entity and (c) each document setting forth the designation,
amount and relative rights, limitations and preferences of any class or series
of that Entity's Capital Stock or of any rights in respect of that Entity's
Capital Stock.
"Claim Notice" has the meaning specified in Section 7.04.
"Closing" has the meaning specified in Paragraph 3.
"Closing Date" has the meaning specified in Paragraph 1.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning specified in Paragraph 1.
"Company Indemnified Loss" has the meaning specified in
Section 7.03.
"Company Indemnified Party" means the Company and each of the
Company's Affiliates, officers, directors, agents and counsel.
"Company Subsidiary" means at any time any Entity that is a
Subsidiary of the Company at that time.
"Company Transfer Documents" has the meaning specified in
Paragraph 2.
"Confidential Information" means, with respect to any Person,
all trade secrets and other confidential, nonpublic and/or proprietary
information of that Person, including information derived from reports,
investigations, research, work in progress, codes, marketing and sales programs,
capital expenditure projects, cost summaries, pricing formulae, contract
analyses, financial information, projections, confidential filings with any
Governmental Authority and all other confidential, nonpublic concepts, methods
of doing business, ideas, materials or information prepared or performed for,
by or on behalf of that Person.
"Current Balance Sheet" has the meaning specified in Paragraph
1.
"Current Balance Sheet Date" has the meaning specified in
Paragraph 1.
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"Damage" to any specified Person means any cost, damage
(including any consequential, exemplary, punitive or treble damage) or expense
(including reasonable fees and actual disbursements by attorneys, consultants,
experts or other Representatives and Litigation costs) to, any fine of or
penalty on or any liability (including loss of earnings or profits) of any other
nature of that Person; provided, that if any Indemnified Party should have a
claim against any Indemnifying Party that does not involve a Third Party Claim
and for which the Indemnified Party seeks indemnification pursuant to Section
7.04(e), the amount of Damages attributable to that claim will not include any
amount representing consequential, exemplary, punitive or treble damage.
"Damage Claim" means, as asserted (a) against any specified
Person, any claim, demand or Litigation made or pending against the specified
Person for Damages to any other Person, or (b) by the specified Person, any
claim or demand of the specified Person against any other Person for Damages
to the specified Person.
"Effective Date" has the meaning specified in Paragraph 1.
"Effective Time" has the meaning specified in Paragraph 2.
"Election Period" has the meaning specified in Section 7.04.
"Employee Policies and Procedures" means at any time all
employee manuals and all material policies, procedures and work-related rules
that apply at that time to any employee, nonemployee director or officer of,
or any other natural person performing consulting or other independent
contractor services for, the Company or any Company Subsidiary.
"Employment Agreement" means at any time any (a) agreement to
which the Company or any Company Subsidiary is a party which then relates to the
direct or indirect employment or engagement, or arises from the past employment
or engagement, of any natural person by the Company or any Company Subsidiary,
whether as an employee, a nonemployee officer or director, a consultant or other
independent contractor, a sales representative or a distributor of any kind,
including any employee leasing or service agreement and any noncompetition
agreement, and (b) agreement between the Company or any Company Subsidiary and
any Person which arises from the sale of a business by that Person to the
Company or any Company Subsidiary and limits that Person's competition with
the Company or any Company Subsidiary.
"Entity" means any sole proprietorship, corporation,
partnership of any kind having a separate legal status, limited liability
company, business trust, unincorporated organization or association, mutual
company, joint stock company or joint venture.
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"Environmental Laws" means any and all Governmental
Requirements relating to the environment or worker health or safety, including
ambient air, surface water, land surface or subsurface strata, or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals or industrial, toxic or hazardous substances or wastes (including
Solid Wastes, Hazardous Wastes or Hazardous Substances) or noxious noise or odor
into the environment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, recycling, removal, transport
or handling of pollutants, contaminants, chemicals or industrial, toxic or
hazardous substances or wastes (including petroleum, petroleum distillates,
asbestos or asbestos-containing material, polychlorinated biphenyl's,
chlorofluorocarbons (including chlorofluorocarbon-12) or hydrochloro-
fluorocarbons) in effect as of the Effective Date.
"ERISA" means the Employee Retirement Income Security Act of
1974.
"ERISA Employee Benefit Plan" means any "employee benefit
plan" as defined in Section 3(3) of ERISA and includes any ERISA Pension
Benefit Plan.
"ERISA Pension Benefit Plan" means any "employee pension
benefit plan", as defined in Section 3(2) of ERISA, including any plan that is
covered by Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code (excluding any Multiemployer Plan).
"Financial Statements" means the Initial Financial Statements.
"GAAP" means generally accepted accounting principles and
practices in the United States as in effect from time to time which have been
applied on a basis consistent with the most recent Financial Statements
delivered to Purchaser prior to the Effective Time.
"Governmental Approval" means at any time any authorization,
consent, approval, permit, franchise, certificate, license, implementing order
or exemption of, or registration or filing with, any Governmental Authority,
including any certification or licensing of a natural person to engage in a
profession or trade or a specific regulated activity, at that time.
"Governmental Authority" means (a) any national, state,
county, municipal or other government, domestic or foreign, or any agency,
board, bureau, commission, court, department or other instrumentality of any
such government, or (b) any Person having the authority under any applicable
Governmental Requirement to assess and collect Taxes for its own account.
"Governmental Requirement" means at any time (a) any law,
statute, code, ordinance, order, rule, regulation, judgment, decree, injunction,
writ, edict, award, authorization or other requirement of any Governmental
Authority in effect at that time or (b) any obligation included in any
certificate, certification, franchise, permit or license issued by any
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Governmental Authority or resulting from binding arbitration, including any
requirement under common law, at that time.
"Guaranty" means, for any specified Person, without
duplication, any liability, contingent or otherwise, of that Person guaranteeing
or otherwise becoming liable for any obligation of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, and including
any liability of the specified Person, direct or indirect, (a) to purchase or
pay (or advance or supply funds for the purchase or payment of) that obligation
or to purchase (or to advance or supply funds for the purchase of) any security
for the payment of that obligation, (b) to purchase property, securities or
services for the purpose of assuring the owner of that obligation of its payment
or (c) to maintain working capital, equity capital or other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay that obligation; provided, that the term "Guaranty" does not
include endorsements for collection or deposit in the ordinary course of the
endorser's business.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Indebtedness" of any Person means, without duplication, (a)
any liability of that Person (i) for borrowed money or arising out of any
extension of credit to or for the account of that Person (including
reimbursement or payment obligations with respect to surety bonds, letters of
credit, banker's acceptances and similar instruments), for the deferred purchase
price of property or services or arising under conditional sale or other title
retention agreements, other than trade payables arising in the ordinary course
of business, (ii) evidenced by notes, bonds, debentures or similar instruments,
(iii) in respect of capital leases or (iv) in respect of interest rate
protection agreements, (b) any liability secured by any Lien upon any property
or assets of that Person (or upon any revenues, income or profits of that
Person therefrom), whether or not that Person has assumed that liability or
otherwise become liable for the payment thereof or (c) any liability of others
of the type described in the preceding clause (a) or (b) in respect of which
that Person has incurred, assumed or acquired a liability by means of a
Guaranty.
"Indemnity Notice" has the meaning specified in Section 7.04.
"Indemnified Party" has the meaning specified in Section 7.04.
"Indemnifying Party" has the meaning specified in Section 7.04.
"Information" means written information, including (a) data,
certificates, reports and statements (excluding Financial Statements) and
(b) summaries of unwritten agreements, arrangements, contracts, plans, policies,
programs or practices or of unwritten amendments or modifications of,
supplements to or waivers under any of the foregoing documents.
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"IRS" means the Internal Revenue Service.
"Lien" means, with respect to any property or asset of any
Person (or any revenues, income or profits of that Person therefrom) (in each
case whether the same is consensual or nonconsensual or arises by contract,
operation of law, legal process or otherwise), (a) any mortgage, lien, security
interest, pledge, attachment, levy or other charge or encumbrance of any kind
thereupon or in respect thereof or (b) any other arrangement under which the
same is transferred, sequestered or otherwise identified with the intention of
subjecting the same to, or making the same available for, the payment or
performance of any liability in priority to the payment of the ordinary,
unsecured creditors of that Person, including any "adverse claim" (as defined
in the applicable Uniform Commercial Code) in the case of any Capital Stock.
For purposes of this Agreement, a Person shall be deemed to own subject to a
Lien any asset that it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement relating to that asset.
"Litigation" means any action, case, proceeding, claim,
grievance, suit or investigation or other proceeding conducted by or pending
before any Governmental Authority or any arbitration proceeding.
"Material" means, as applied to any Entity or the Acquired
Business, material to the business, operations, property or assets, liabilities,
financial condition or results of operations of that Entity and its Subsidiaries
considered as a whole or the Acquired Business, as the case may be.
"Material Adverse Effect" means, with respect to the
consequences of any fact or circumstance (including the occurrence or
non-occurrence of any event) to the Acquired Business, that such fact or
circumstance has caused, is causing or will cause, directly, indirectly or
consequentially, singly or in the aggregate with other facts and
circumstances, any Damages in excess of $100,000.
"Material Agreement" of any Entity means any contract or
agreement (a) to which that Entity or any of its Subsidiaries is a party, or
by which that Entity or any of its Subsidiaries is bound or to which any
property or assets of that Entity or any of its Subsidiaries is subject and
(b) which is Material to that Entity.
"Organization State" means, as applied to (a) any corporation,
its state or other jurisdiction of incorporation, (b) any limited liability
company or limited partnership, the state or other jurisdiction under whose
laws it is organized and existing in that legal form, and (c) any other Entity,
the state or other jurisdiction whose laws govern that Entity's internal
affairs.
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"Other Compensation Plan" means any compensation arrangement,
plan, policy, practice or program established, maintained or sponsored by the
Company or any Company Subsidiary, or to which the Company or any Company
Subsidiary contributes, on behalf of any of its employees, nonemployee
directors or officers or other natural persons performing consulting or other
independent contractor services for the Company or any Company Subsidiary,
(a) including all such arrangements, plans, policies, practices or programs
providing for severance pay, deferred compensation, incentive, bonus or
performance awards or the actual or phantom ownership of any Capital Stock or
options, warrants or rights to acquire Capital Stock of the Company or any
Company Subsidiary, but (b) excluding all Company ERISA Pension Plans and
Employment Agreements.
"Permitted Liens" means, as applied to the property or assets
of any Person (or any revenues, income or profits of that Person therefrom):
(a) Liens for Taxes if the same are not at the time due and delinquent;
(b) Liens of carriers, warehousemen, mechanics, laborers and materialmen for
sums not yet due; (c) Liens incurred in the ordinary course of that Person's
business in connection with workmen's compensation, unemployment insurance and
other social security legislation (other than pursuant to ERISA or Section
412(n) of the Code); (d) Liens incurred in the ordinary course of that Person's
business in connection with deposit accounts or to secure the performance of
bids, tenders, trade contracts, statutory obligations, surety and appeal bonds,
performance and return-of-money bonds and other obligations of like nature;
(e) easements, rights-of-way, reservations, restrictions and other similar
encumbrances incurred in the ordinary course of that Person's business or
existing on property and not materially interfering with the ordinary conduct
of that Person's business or the use of that property; (f) defects or
irregularities in that Person's title to its real properties which do not
materially (i) diminish the value of the surface estate or (ii) interfere with
the ordinary conduct of that Person's business or the use of any of such
properties; and (g) Liens in favor of the National Marine Fisheries Service
securing the Company's obligations disclosed in Schedule 2(B)(2) under the
Assumed Liabilities.
"Person" means any natural person, Entity, estate, trust,
union or employee organization or Governmental Authority.
"Plan" means any Company ERISA Employee Benefit Plans and
Other Compensation Plans.
"Proprietary Rights" means (a) patents, applications for
patents and patent rights, (b) in each case, whether registered, unregistered
or under pending registration, trademark rights, trade names, trade name rights,
corporate names, business names, trade styles or dress, service marks and logos
and other trade designations and copyrights and (c), in the case of the Company,
all agreements relating to the technology, know-how or processes used in any
business of the Company.
"Purchaser Indemnified Loss" has the meaning specified in
Section 7.02.
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<PAGE>
"Purchaser Indemnified Party" means Purchaser and its
Affiliates and each of their respective officers, directors, employees, agents
and counsel.
"Representatives" means, with respect to any Person, the
directors, officers, employees, Affiliates, accountants (including independent
certified public accountants), advisors, attorneys, consultants or other agents
of that Person, or any other representatives of that Person or of any of those
directors, officers, employees, Affiliates, accountants (including independent
certified public accountants), advisors, attorneys, consultants or other agents.
"RCRA" means the Resource Conservation and Recovery Act of
1976.
"Retained Assets" has the meaning specified in Paragraph 2 of
the Preliminary Statement.
"Retained Liabilities" has the meaning specified in Paragraph
2 of the Preliminary Statement.
"Returns" of any Person means the returns, reports or
statements (including any Information returns) any Governmental Requirement
requires to be filed by that Person for purposes of any Tax.
"Solid Wastes, Hazardous Wastes or Hazardous Substances" have
the meanings ascribed to those terms in CERCLA, RCRA or any other Environmental
Law applicable to the business or operations of the Company or any Company
Subsidiary which imparts a broader meaning to any of those terms than does
CERCLA or RCRA.
"Subsidiary" of any specified Person at any time, means any
Entity a majority of the Capital Stock of which is at that time owned or
controlled, directly or indirectly, by the specified Person.
"Tax" or "Taxes" means all net or gross income, gross
receipts, net proceeds, sales, use, ad valorem, value added, franchise, bank
shares, withholding, payroll, employment, excise, property, deed, stamp,
alternative or add-on minimum, environmental or other taxes, assessments,
duties, fees, levies or other governmental charges or assessments of any
nature whatever imposed by any Governmental Requirement, whether disputed
or not, together with any interest, penalties, additions to tax or additional
amounts with respect thereto.
"Taxing Authority" means any Governmental Authority having or
purporting to exercise jurisdiction with respect to any Tax.
"Third Party Claim" has the meaning specified in Section 7.04.
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<PAGE>
<PAGE>
"Transaction Document" means this Agreement and the other
written agreements, documents, instruments and certificates executed pursuant
to or in connection with this Agreement including those specified or referred
to in Article V to be delivered at or before the Closing, all as amended,
modified or supplemented from time to time.
Section 9.02. Other Defined Terms. Words and terms used in
these Standard Provisions which are defined elsewhere in this Agreement are used
herein as therein defined.
Section 9.03. Other Definitional Provisions. (a) Except as
otherwise specified herein, all references herein to any Governmental
Requirement defined or referred to herein, including the Code, CERCLA, ERISA,
the Exchange Act, RCRA and the Securities Act, shall be deemed references to
that Governmental Requirement or any successor Governmental Requirement, as the
same may have been amended or supplemented from time to time, and any rules or
regulations promulgated thereunder.
(b) When used in this Agreement, the words "herein," "hereof"
and "hereunder" and words of similar import shall refer to this Agreement as a
whole and not to any provision of this Agreement, and the words "Article,"
"Paragraph," "Section," "Annex," "Addendum," "Schedule" and "Exhibit" refer to
Articles, Paragraphs and Sections of, and Annexes, Addenda, Schedules and
Exhibits to, this Agreement unless otherwise specified.
(c) Whenever the context so requires, the singular number
includes the plural and vice versa, and a reference to one gender includes the
other gender and the neuter.
(d) The word "including" (and, with correlative meaning, the
word "include") means including, without limiting the generality of any
description preceding such word, and the words "shall" and "will" are used
interchangeably and have the same meaning.
Section 9.04. Captions. Captions to Articles, Paragraphs,
Sections and subsections of, and Annexes, Addenda, Schedules and Exhibits to,
this Agreement or any other Transaction Document are included for convenience of
reference only, and such captions shall not constitute a part of this Agreement
or any other Transaction Document for any other purpose or in any way affect the
meaning or construction of any provision of this Agreement or any other
Transaction Document.
ARTICLE X
GENERAL PROVISIONS
Section 10.01. Treatment of Confidential Information. (a) Each
of the parties hereto acknowledges that it has or may have had in the past,
currently has and in the future may have access to Confidential Information of
the Company relating to the Acquired Business and/or Confidential Information of
Purchaser and its Subsidiaries. Each of the parties hereto agrees that it will
keep
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<PAGE>
<PAGE>
confidential all Confidential Information furnished to it by the other party
hereto and, except with the specific prior written consent of such other party
hereto, will not disclose such Confidential Information to any Person except (a)
Representatives of the other party hereto and (b) its own Representatives,
provided that these Representatives (other than counsel) agree to the
confidentiality provisions of this Section 10.01; provided, however, that
Confidential Information shall not include such information as (i) becomes known
to the public generally through no fault of such party, (ii) is required to be
disclosed by law or the order of any Governmental Authority under color of law,
provided, that prior to disclosing any information pursuant to this clause (ii),
such party shall, if possible, give prior written notice thereof to the
nondisclosing party and provide such nondisclosing party with the opportunity to
contest such disclosure, or (iii) the disclosing party reasonably believes is
required to be disclosed in connection with the defense of a lawsuit against the
disclosing party. In the event of a breach or threatened breach by a party
hereto of the provisions of this Section 10.01 with respect to any Confidential
Information, the nondisclosing party shall be entitled to seek an injunction
restraining such party from disclosing, in whole or in part, that Confidential
Information. Nothing herein shall be construed as prohibiting the nondisclosing
party from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages.
(b) Because of the difficulty of measuring economic losses as
a result of the breach of the foregoing covenants in Section 10.01(a), and
because of the immediate and irreparable damage that would be caused to the
nondisclosing party for which it would have no other adequate remedy, each of
the parties hereto agrees that the nondisclosing party may seek to enforce the
provisions of Section 10.01(a) by injunctions and restraining orders against
each of them who breaches any of those provisions.
(c) The obligations of the parties under this Section 10.01
shall survive the termination of this Agreement.
Section 10.02. Brokers and Agents. The Company represents and
warrants to Purchaser that the Company has not directly or indirectly employed
or become obligated to pay any broker or similar agent in connection with the
transactions contemplated hereby and agrees to indemnify Purchaser against all
Damage Claims arising out of claims for any and all fees and commissions of
brokers or similar agents employed or promised payment by the Company.
Section 10.03. Assignment; No Third Party Beneficiaries. This
Agreement and the rights of the parties hereunder may not be assigned (except by
operation of law) and shall be binding on and inure to the benefit of the
parties hereto, the successors of Purchaser. Neither this Agreement nor any
other Transaction Document is intended, or shall be construed, deemed or
interpreted, to confer on any Person not a party hereto or thereto any rights or
remedies hereunder or thereunder, except as provided in Article VII or as
otherwise provided expressly herein or therein.
Section 10.04. Entire Agreement; Amendment; Waivers. This
Agreement and the documents delivered pursuant hereto constitute the entire
agreement and understanding among the Company and Purchaser and supersede all
prior agreements and understandings, both written and
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<PAGE>
<PAGE>
oral, relating to the subject matter of this Agreement. This Agreement may be
amended, modified or supplemented, and any right hereunder may be waived, if,
but only if, that amendment, modification, supplement or waiver is in writing
and signed by the Company and Purchaser. The waiver of any of the terms and
conditions hereof shall not be construed or interpreted as, or deemed to be, a
waiver of any other term or condition hereof.
Section 10.05. Expenses. Whether or not the transactions
contemplated hereby are consummated, (a) Purchaser will pay any sales, use,
transfer and other similar taxes and the fees, expenses and disbursements of
Purchaser and its Representatives which are incurred in connection with the
subject matter of this Agreement and any amendments hereto, including all costs
and expenses incurred in the performance of and compliance with all conditions
to be performed by Purchaser under this Agreement, and (b) the Company will pay
fees incurred by it in connection with the transactions contemplated hereby
including the fees, expenses and disbursements of counsel for the Company
incurred in connection with the subject matter of this Agreement and any
amendments hereto, including all costs and expenses incurred in the performance
of and compliance with all conditions to be performed by the Company under this
Agreement. The Purchaser will file all necessary documentation and Returns with
respect to all sales, use, transfer and other similar taxes and fees it is
required by this Section 10.05 to pay. In addition, the Company, and not
Purchaser, will pay all Taxes (other than any sales taxes accruing as a result
of the consummation of the Acquisition) due upon receipt of the consideration
payable to the Company pursuant to the transactions contemplated by this
Agreement.
Section 10.06. Notices. All notices required or permitted
hereunder shall be in writing, and shall be deemed to be delivered and received
(a) if personally delivered or if delivered by telex, telegram, facsimile or
courier service, when actually received by the party to whom notice is sent or
(b) if delivered by mail (whether actually received or not), at the close of
business on the fifth Houston, Texas business day next following the day when
placed in the mail, postage prepaid, certified (return receipt request) or
registered (return receipt request), addressed to the appropriate party or
parties, at the address of such party set forth below (or at such other address
as such party may designate by written notice to all other parties in accordance
herewith):
(i) if to Purchaser, addressed to it at:
Zapata Corporation
1717 St. James Place
Suite 550
Houston, Texas 77056
; and
(ii) if to the Company, addressed to such Person as set forth
in Paragraph 7.
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<PAGE>
<PAGE>
Section 10.07. Governing Law. THIS AGREEMENT AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS WITHOUT
REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF AND THE VENUE FOR ANY ACTION
HEREUNDER SHALL BE IN ORANGE COUNTY, TEXAS.
Section 10.08. Exercise of Rights and Remedies. Except as
otherwise provided herein, no delay or omission in the exercise of any right,
power or remedy accruing to any party hereto as a result of any breach or
default hereunder by any other party hereto shall impair any such right, power
or remedy, nor shall it be construed, deemed or interpreted as a waiver of or
acquiescence in any such breach or default, or of any similar breach or default
occurring later; nor shall any waiver of any single breach or default be
construed, deemed or interpreted as a waiver of any other breach or default
hereunder occurring before or after that waiver.
Section 10.09. Time. Time is of the essence in the performance
of this Agreement in all respects.
Section 10.10. Reformation and Severability. If any provision
of this Agreement is invalid, illegal or unenforceable, that provision shall, to
the extent possible, be modified in such manner as to be valid, legal and
enforceable but so as to most nearly retain the intent of the parties hereto as
expressed herein, and if such a modification is not possible, that provision
shall be severed from this Agreement, and in either case the validity, legality
and enforceability of the remaining provisions of this Agreement shall not in
any way be affected or impaired thereby.
Section 10.11. Remedies Cumulative. No right, remedy or
election given by any term of this Agreement shall be deemed exclusive, but each
shall be cumulative with all other rights, remedies and elections available at
law or in equity.
Section 10.12. [Reserved.]
Section 10.13. Risk of Loss. Legal title, equitable title and
risk of loss respecting the Assets will not pass to Purchaser until the Assets
are sold, conveyed, assigned and transferred to Purchaser on the Closing Date.
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<PAGE>
Consent of Woods, Oviatt, Gilman, Sturman & Clarke, LLP
(Contained in Exhibit 5.1)
<PAGE>
<PAGE>
Consent of Marshall Hill Cassas & de Lipkau
(Contained in Exhibit 5.2)
<PAGE>
<PAGE>
Power of Attorney
(Contained on signature page to registration statement
(File No. 333-44967) filed on January 27, 1998.)
<PAGE>
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