<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
COMMISSION FILE NUMBER 0-5567
SEAL FLEET, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
Nevada 74-1670096
(State of Incorporation) (IRS Employer ID No.)
125 WORTH AVENUE, SUITE 314
PALM BEACH, FLORIDA 33480-4466
(address of principal executive offices) (zip code)
(561) 833-5111
(issuer's telephone number)
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act: Class A Common
Stock, par value $.10
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained herein, and no disclosure will be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB [X]
<TABLE>
<CAPTION>
<S> <C>
State issuer's revenues for its most recent fiscal year:......... $4,657,000
State the aggregate market value of the voting stock held by
non-affiliates of the Registrant as of February 21, 1997:........ $ 835,486
</TABLE>
State the number of shares outstanding of the issuer's classes of
common stock as of February 21, 1997:
<TABLE>
<CAPTION>
<S> <C>
Class A common stock, $.10 par value 2,262,405 shares
Class B common stock, $.10 per value 50,000 shares
</TABLE>
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for its Annual Meeting of
Stockholders, which will be filed within 120 days from the end of the fiscal
year covered by this Annual Report on Form 10-KSB, are incorporated by reference
into Part III hereof.
Transitional Small Business Disclosure Format (check one):
Yes No X
------ ------
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
BUSINESS DEVELOPMENT - The History of Seal Fleet, Inc.
Seal Fleet, Inc. ("Seal Fleet" or "the Company") is a corporation organized in
November 1969 under the laws of the state of Nevada. As used in this report, the
terms "Seal Fleet" and "the Company" refer to Seal Fleet, Inc. and its
subsidiaries unless the context indicates otherwise.
Seal Fleet is currently seeking to make one or more acquisitions of operating
businesses. The business objective of the Company is to acquire one or more
operating businesses with growth potential. The Company intends to utilize
cash, equity, debt or a combination thereof in effecting acquisitions. There
can be no assurance that the Company will succeed in acquiring any businesses or
in operating any business which it may acquire.
Prior to 1979, Seal Fleet's primary business was life insurance with the Company
operating under the name "First National Corporation." In 1979, the Company
went through a quasi-reorganization. It sold its insurance business, had a
simultaneous reverse and forward stock split, purchased an offshore service boat
company, and amended its Articles of Incorporation to change its name from First
National Corporation to Seal Fleet, Inc. to describe the nature of its business.
Several factors led the Company to sell its marine assets to Hvide Marine
Incorporated ("Hvide") and leave the offshore supply business on August 14,
1996. The Company was in default on its debt of over $7 million and had a
negative net worth. If the holders of the debt, the Three R Trusts, were to
enforce the Company's debt, the Company would have been liquidated with no
return to its stockholders. Furthermore, the Company managed other boats owned
by the Three R Trusts. In that the Three R Trusts had already agreed to sell
their vessels to Hvide Marine Incorporated, if the Company did not sell its
vessels following the sale of the Trusts' vessels, the Company would have
operated too small a fleet to generate sufficient revenues to remain in
business. Although the health of the offshore supply industry had improved, the
Company was in competition with large marine companies capable of significant
investment making it difficult for small companies, such as Seal Fleet, to
compete. Because of the overall health of the industry, however, the prices for
the Company's supply boats reached levels where it made sense to sell the boats
and leave the business.
In this report, frequent reference is made to the "discontinued operations."
This term refers to the business of the Company prior to August 14, 1996, which
consisted of owning, operating, managing, and brokering offshore supply boats;
and operating a small travel agency. The travel agency historically had been
only marginally profitable, with most of its business consisting of providing
services to affiliates of the Three R Trusts. These former affiliates of the
Company ceased doing business with the travel agency following the sale of most
of the Company's business to Hvide. The Company had closed the travel agency
business by September 15, 1996.
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Prior to the sale of the discontinued operations, virtually all of the Company's
business was carried on through subsidiaries. Currently, Seal Fleet, Inc.
serves as the Company's only operating entity.
BUSINESS OF COMPANY
Principal Products and Services - Following Disposition of Principal Assets on
August 14, 1996:
Following the sale of substantially all of the Company's assets to Hvide on
August 14, 1996, the Company paid off its debts. A new Board of Directors and
new executive officers were elected. The Company is now effectively controlled
by First Magnum Corporation ("Magnum") which owns all of the class B Common
Stock and is entitled to elect a majority of the directors of the Company. The
sole shareholder of Magnum is Thomas M. Ferguson ("Ferguson"), the Company's
Chairman, President and Chief Executive Officer. Subsequent to the sale of
substantially all of its assets, the Company closed its office in Galveston,
Texas, and established corporate headquarters in Palm Beach, Florida.
In connection with the transaction, the Company stated that its initial
significant acquisition would be submitted to the Company's stockholders for
their approval, even if the nature of the acquisition is such as would not
ordinarily require stockholder approval under applicable state law. At its next
annual meeting of stockholders, the Company expects to request that its
stockholders authorize the directors to cause the Company to conclude an initial
acquisition without further stockholder approval, to the extent possible under
applicable law.
Principal Products and Services - Prior to August 14, 1996:
The primary business of the Company prior to August 14, 1996 was the ownership
and operation of offshore supply ships. The Company's ships ranged in size from
176 to 250 feet in length and were capable of carrying equipment and supplies to
offshore drilling rigs and seismic operations. Additionally, the Company owned
and operated a travel agency.
Seal Fleet's wholly-owned subsidiary, Sealcraft Operators, Inc. ("Sealcraft"),
managed a fleet of ten vessels. Three of the ten ships were owned by
subsidiaries of the Company, and five ships were owned by individual limited
partnerships of which the Three R Trusts were the general partners. One ship
owned by National Boat Corporation and one ship owned by Hornbeck Offshore
Services, Inc. were operated under bare boat charters.
Sealcraft-operated ships were chartered principally to oil and geophysical
companies under typical offshore oil charters. Sealcraft-operated ships were
hired primarily by United States customers for use throughout the world. At
August 14, 1996, two ships were working in foreign waters.
Seal Marine Management Company ("SMMCO"), a wholly-owned subsidiary of the
Company, managed a vessel brokerage business for vessels owned by unrelated
companies.
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Caribe Company, a wholly-owned subsidiary of the Company, operated a small
travel agency which began business in February 1990, and ceased operation in the
third quarter of 1996.
Significant Customers.
The Company currently has no customers. Prior to the sale of the discontinued
operations, Seal Fleet's ships were hired principally by oil and gas producers
and independent seismic exploration concerns. Western Geophysical Company and
Kilgore Offshore each accounted for 29% of total charter revenues for 1996.
Competitive Conditions.
The Company faces intense competition in its efforts to acquire operating
businesses. Many other companies seeking to acquire businesses have greater
resources than does the Company.
Prior to the sale of discontinued operations, the Company competed with numerous
other operators of offshore service vessels in its operating areas which
included the Gulf of Mexico and various foreign waters. Some of these
competitors owned many more vessels and had much greater financial resources
than the Company.
Governmental Regulations.
It is possible that the Company will make one or more acquisitions in areas
which might subject the Company to significant governmental regulation in the
operation of its business.
Prior to the sale of substantially all of its assets to Hvide on August 14,
1996, the Company was engaged in the offshore supply business. Many aspects of
that business are subject to direct governmental regulation, including the
jurisdiction of the United States Coast Guard, the National Transportation
Safety Board and the United States Customs Service, as well as private industry
organizations such as the American Bureau of Shipping. All of the ships operated
by the Company were United States flag vessels, and their operation and
maintenance were subject to federal statutes and regulations. In addition, the
Company's business was also influenced by laws, regulations and policies which
impacted its customers and the oil and gas industry as a whole.
Environmental Disclosure.
Should the Company acquire one or more active businesses in accordance with its
plan, it is possible that laws and governmental regulations regarding
environmental quality control may have a significant effect upon the Company.
Prior to the sale of its offshore supply business on August 14, 1996, the
Company was subject to numerous federal, state and local laws relating to
environmental quality control, the most significant of which included the Oil
Pollution Act of 1990, imposing responsibility for
4
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cleanup of any spill on the owner of the product spilled, and regulations
promulgated by the United States Coast Guard.
Number of Employees.
Currently, the Company employs two people (the Chairman, President and Chief
Executive Officer, and the Vice President, Chief Financial Officer, Treasurer
and Secretary). The Company obtains accounting and secretarial services from
outside contractors. Prior to the sale of assets, the Company employed
approximately 150 persons, most of whom were members of ships' crews who
subsequently became employees of Hvide Marine Incorporated following the sale.
None of these employees was represented by a labor union, and employee relations
were considered to be satisfactory.
ITEM 2. DESCRIPTION OF PROPERTY
The principal assets of Seal Fleet were its three ships and related property,
which were sold to Hvide Marine Incorporated on August 14, 1996. The Company
also owned leasehold improvements which were written off at the end of the
office lease in October, 1996, office equipment which was moved to the Company's
offices in Florida, and some remaining office equipment which was sold.
The corporate and general offices of the Company are temporarily located at the
offices of First Magnum Corporation in Palm Beach, Florida. First Magnum
Corporation charges nominal rent for this space. The Company has leased
permanent space to which it will move in the near future.
The Company also rents public warehouse space in West Palm Beach for storage of
Company records. This rental agreement is "month to month."
The Company owns a 516-acre tract of unimproved land in Brazoria County, Texas
with an estimated fair market value, based on a recent appraisal and purchase
offer, of $155,000. This land is considered to be "wet lands" not subject to
commercial development. As a result of the Company's inability to develop the
land commercially, a sale agreement at a price equal to fair market value has
been reached with the US Department of the Interior's Fish and Wildlife Service
for use as a wildlife sanctuary. It is anticipated that this sale will be
consummated by the end of the second quarter of 1997.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved only in litigation which it deems to be in the ordinary
course of the business which it conducted prior to August 14, 1996, and
immaterial in relation to its assets or business. Most of this litigation has
to do with boat employee injury claims which are insured.
5
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth quarter
of 1996 through the solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
There is no public market for the class B common stock, all of which is owned by
First Magnum Corporation, an entity wholly owned by Mr. Thomas M. Ferguson, the
Company's Chairman, President and Chief Executive Officer.
The class A common stock (2,432,248 shares outstanding, including 169,843 shares
held in treasury, as of January 31, 1997) is publicly traded in the over-the-
counter market under the symbol SEALA. Through November 1987, the Company's
shares were listed on the National Association of Securities Dealers Automated
Quotation ("NASDAQ") under the symbol SEALA. At that time, NASDAQ dropped the
listing because the Company no longer maintained the required equity level.
Since November 1987, the stock has been listed on the National Daily Quotation
Service ("Pink Sheets"). The following table provides information regarding the
bid prices for class A common stock during the periods indicated.
<TABLE>
<CAPTION>
1996 1995
HIGH LOW HIGH LOW
<S> <C> <C> <C> <C>
First Quarter $.31 $.19 $.50 $.39
Second Quarter .44 .25 .39 .25
Third Quarter .56 .25 .25 .19
Fourth Quarter .69 .38 .25 .19
</TABLE>
The high and low bid information set forth above was taken from the CompuServe-
provided database of historical stock pricing. These bid prices are inter-
dealer price quotations, which do not include retail mark-ups, mark-downs or
commissions and may not represent actual transactions.
HOLDERS
The number of stockholders of record as of February 21, 1997, were 5,040 for
class A common stock and one for class B common stock.
6
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DIVIDENDS
The Company's borrowing agreements in force up through August 14, 1996,
prohibited the payment of cash dividends on common shares. The Company has never
declared or paid cash dividends. Although there are no current restrictions on
the payment of dividends, the Company has no plans to declare or pay dividends
in the foreseeable future. The Company has never had any redeemable preferred
stock.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company incurred a profit in 1996 due to selling most of its assets,
partially offset by losses from operating and winding down the discontinued
operations.
FINANCIAL CONDITION
Seal Fleet satisfies its working capital needs with funds generated from
interest or dividend income on short-term investments. When working capital
needs exceed interest or dividend income, short term investments are liquidated
as necessary. Working capital requirements include salaries, office expenses
and travel associated with evaluating possible business combinations. Capital
expenditures planned for 1997 include leasehold improvements on proposed rented
space along with minor purchases of furniture and office equipment. Under the
terms of a recently signed office lease, most of the Company's requirements for
furniture will be supplied by the landlord. The Company brought most required
office equipment from its offices in Galveston, Texas.
All debt was paid off from the proceeds from selling the boats on August 14,
1996.
RESULTS OF OPERATIONS
The Company earned a profit of $6,153,000 in 1996 resulting from a gain of
$7,320,000 due to selling the discontinued operations, offset by a loss of
($1,167,000) from operating and winding down the discontinued operations.
RISK FACTORS
The future viability and success of the Company are subject to numerous risks
and uncertainties, several of which are described below:
No Agreement for Business Combination or Other Transaction. The Company
has no arrangement, agreement or understanding with respect to a merger with, or
acquisition of, any business or entity. A large number of established and well
financed entities, including venture capital firms, are active in mergers and
acquisitions of private companies which may be desirable target candidates for
the Company. Many of such entities have significantly greater financial
7
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resources, technical expertise and managerial capabilities than the Company, and
consequently, the Company will be at a competitive disadvantage in identifying
possible merger or acquisition candidates. There can be no assurance the
Company will be successful in concluding a merger or acquisition or that any
such transaction will prove beneficial to the Company.
No Operating History. The Company has no operating history in any other
line of business which it is likely to select for its future operations. There
can be no assurance that the Company's activities will be profitable.
Limited Financial Resources. The Company's only assets are cash, short-
term investments, minor furniture, equipment and some real estate which it has
arranged to sell. The Company's long-term ability to meet its operating
expenses will be dependent on its ability to raise additional capital or to
complete a business combination successfully with an entity with sufficient cash
flow to meet the Company's ongoing obligations. Any business activity that the
Company eventually undertakes may require substantial capital, which may be
difficult to obtain or may not be available. The success of the Company will
depend upon its ability to acquire additional capital.
Speculative Nature of the Company. The success of the Company will depend
to a great extent on the operations, financial condition and management of the
company or companies with which the Company may merge or which it may acquire.
While the Company intends to merge with or acquire one or more privately held
entities with established operating histories, there can be no assurance that
the Company will be successful in locating an acquisition candidate meeting such
criteria.
Possible Dilution or Change in Control. The Company's business strategy is
based upon a merger with or acquisition of a private concern, which could result
in the Company issuing securities to stockholders of any such target concern.
The issuance of previously authorized and unissued or newly authorized Common
Stock of the Company or the authorization and issuance of preferred stock could
result in substantial dilution to present stockholders of the Company, which may
result in a change in control or management of the Company.
Dependence on Inexperienced Management. The success of the Company will
largely be dependent upon the active participation of Ferguson, who may not have
any experience or background in any business in which the Company may undertake
to engage. Opportunities available to the Company for mergers or acquisitions
may be lost or delayed as a result of the limited amount of time devoted to the
Company by the Company's management. Once the Company acquires a business
opportunity, the Company's current management may resign. In order to
supplement the business experience of management, the Company may employ
accountants, technical experts, appraisers, attorneys or other consultants or
advisors. The selection of any such advisors will be made by management and
without any control from stockholders. Additionally, it is anticipated that
such persons may be engaged by the Company on an independent basis without a
continuing fiduciary or other obligation to the Company.
8
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Risks of any Acquired Business. It is possible that the Company may enter
into one or more lines of business in which the success of the Company would be
subject to various risks which cannot be identified at this time. The Company
may be unable to diversify its business activities and, as a consequence, may
suffer a total loss to the Company and the stockholders should an acquisition by
the Company prove to be unprofitable. The Company's failure or inability to
diversify its activities into a number of areas may subject the Company to
economic fluctuations within a particular business or industry and, therefore,
increase the risks associated with the Company's operations.
Conflicts of Interest. All of the directors and officers of the Company are
associated with other firms or occupations involving other business activities.
Because of these affiliations and because these individuals may not devote full
time to the affairs of the Company, there are potential inherent conflicts
of interest in their acting as directors and officers of the Company and of
other entities. All of the Company's directors and officers may be directors or
controlling stockholders of other entities engaged in a variety of businesses
which may in the future have various transactions with the Company. Additional
conflicts of interest and non-arm's length transactions may also arise in the
future in the event the Company's officers or directors are involved in the
management of any firms with which the Company transacts business. The Company
may pay finder's fees or other fees to its officers, directors or affiliates in
connection with any potential business combination involving the Company.
Control by Single Stockholder. Magnum owns all of the class B Stock and is
able to select a majority of the Board of Directors of the Company and thus
control the direction of the Company.
No Dividends Anticipated. At the present time, the Company does not
anticipate that it will pay dividends, cash or otherwise, on its Common Stock in
the foreseeable future. Future dividends will depend on earnings, if any, of
the Company, its financial requirements and other factors.
Regulation. Although the Company is subject to regulation under the
Securities Act of 1933 and the Securities Exchange Act of 1934, the Company
believes it is not subject to regulation under the Investment Company Act of
1940 insofar as the Company is not engaged in the business of investing or
trading in securities. In the event the Company engages in business combinations
which result in the Company holding passive investment interests in a number of
entities, the Company could be subject to regulation under the Investment
Company Act of 1940. In such event, the Company would be required to register as
an investment company and could be expected to incur significant registration
and compliance costs. The Company has obtained no formal determination from the
Securities and Exchange Commission as to its status under the Investment Company
Act of 1940, and consequently, any violation of such Act would subject the
Company to material adverse consequences.
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ITEM 7. FINANCIAL STATEMENTS
SEAL FLEET, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Independent Auditors' Report 11
Consolidated Balance Sheets--
December 31, 1996 and 1995 12
Consolidated Statements of Operations--
Years ended December 31, 1996 and 1995 14
Consolidated Statements of Shareholders' Equity--
Years ended December 31, 1996 and 1995 15
Consolidated Statements of Cash Flows--
Years ended December 31, 1996 and 1995 16
Notes to Consolidated Financial Statements 17
</TABLE>
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INDEPENDENT AUDITORS' REPORT
Shareholders and Board of Directors
Seal Fleet, Inc.
We have audited the consolidated balance sheets of Seal Fleet, Inc. and
subsidiaries as of December 31, 1996 and 1995 and the related consolidated
statements of operations, shareholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Seal Fleet, Inc.
and subsidiaries at December 31, 1996 and 1995, and the consolidated results of
their operations and their cash flows for the years then ended, in conformity
with generally accepted accounting principles.
PANNELL KERR FORSTER OF TEXAS, P.C.
/s/ Pannell Kerr Forster of Texas, P.C.
- ---------------------------------------
Houston, Texas
February 4, 1997, except for Note K as to
which the date is March 21, 1997
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Seal Fleet, Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in Thousands)
<TABLE>
<CAPTION>
December 31,
----------------
1996 1995
------ ------
<S> <C> <C>
ASSETS
Current assets
Cash, includes $2,171 and $96 of short-term
investments in 1996 and 1995, respectively (Note A) $2,437 $1,055
Other receivables 14 3
Prepaid expenses 8 -
Net assets of discontinued operations (Note B) 64 -
------ ------
Total current assets 2,523 1,058
------ ------
Property and equipment
Furniture and equipment 58 55
Less accumulated depreciation (53) (51)
------ ------
Property and equipment, net 5 4
------ ------
Other assets
Assets held for resale (Note C) 154 154
Other assets 4 8
------ ------
Total assets $2,686 $1,224
------ ------
</TABLE>
See notes to consolidated financial statements
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Seal Fleet, Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in Thousands)
<TABLE>
<CAPTION>
December 31,
------------------
1996 1995
------- -------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts payable and accrued expenses $ 54 $ -
Net liabilities of discontinued operations (Note B) - 4,845
------- -------
Total current liabilities 54 4,845
------- -------
Total liabilities 54 4,845
------- -------
Contingencies (Note A)
Shareholders' equity
Class A common stock, $.10 par value; 3,700,000 shares
authorized; 2,432,248 shares issued and outstanding 243 243
Class B common stock, $.10 par value; 50,000 shares
authorized, issued and outstanding 5 5
Additional paid-in capital 4,475 4,456
Retained deficit (2,042) (8,195)
Treasury stock, at cost, 169,843 and 447,621 shares in
1996 and 1995, respectively (49) (130)
------- -------
2,632 (3,621)
------- -------
Total liabilities and shareholders' equity $ 2,686 $ 1,224
------- -------
</TABLE>
See notes to consolidated financial statements
13
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Seal Fleet, Inc. and Subsidiaries
Consolidated Statements of Operations
(Dollars in Thousands, except Per Share Amounts)
<TABLE>
<CAPTION>
December 31,
-------------------------
1996 1995
----------- -----------
<S> <C> <C>
Income from continuing operations $ - $ -
Discontinued operations (Note B)
Net loss from discontinued operations (less
applicable income tax benefit of $38 in 1996) (1,167) (116)
Gain on sale of discontinued operations (less applicable
income tax of $223 in 1996) 6,836 -
---------- ----------
Net income (loss) before extraordinary item 5,669 (116)
Extraordinary item - gain on extinguishment of debt
(less applicable income taxes of $16 in 1996) 484 -
---------- ----------
Net income (loss) $ 6,153 $ (116)
---------- ----------
Net income (loss) per share
From continuing operations $ - $ -
From discontinued operations 2.59 (0.06)
From extraordinary item 0.22 -
---------- ----------
$ 2.81 $ (0.06)
---------- ----------
Weighted average shares outstanding (Note A) 2,190,122 2,034,627
---------- ----------
</TABLE>
See notes to consolidated financial statements
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Seal Fleet, Inc. and Subsidiaries
Consolidated Statements of Shareholders' Equity
(Dollars in Thousands)
<TABLE>
<CAPTION>
Common Stock
---------------------- Additional
Par Paid-In Retained Treasury
Shares Value Capital Deficit Stock Total
--------- ---------- ---------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 2,482,248 $248 $4,456 $(8,079) $(130) $(3,505)
Net loss - 1995 - - - (116) - (116)
--------- ---- ------ ------- ----- -------
Balance at December 31, 1995 2,482,248 248 4,456 (8,195) (130) (3,621)
Net income - 1996 - - - 6,153 - 6,153
Treasury stock sold - - 19 - 81 100
--------- ---- ------ ------- ----- -------
Balance at December 31, 1996 2,482,248 $248 $4,475 $(2,042) $ (49) $ 2,632
--------- ---- ------ ------- ----- -------
</TABLE>
See notes to consolidated financial statements
15
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Seal Fleet, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars in Thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1996 1995
-------- -------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ 6,153 $ (116)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities
Depreciation and amortization 1,040 883
Loss (gain) on disposition of assets (7,059) 2
Gain on extinguishment of debt (500) -
Changes in net assets of discontinued operations 971 798
------- ------
Net cash provided by operating activities 605 1,567
------- ------
Cash flows from investing activities
Decrease in notes receivable 3 3
Purchases of property and equipment (5) (58)
Proceeds from sale of discontinued operations 10,082 13
Discontinued operations:
Deferred drydocking additions (611) (660)
Decrease (increase) in other assets 31 (4)
------- ------
Net cash provided (required) by investing activities 9,500 (706)
------- ------
Cash flows from financing activities
Proceeds from sale of treasury stock 100 -
Decrease in long-term debt of discontinued operations (8,823) (367)
------- ------
Net cash required by financing activities (8,723) (367)
------- ------
Increase in cash and cash equivalents 1,382 494
Cash and cash equivalents at beginning of year 1,055 561
------- ------
Cash and cash equivalents at end of year $ 2,437 $1,055
------- ------
Interest paid to related parties $ 1,359 $ 685
------- ------
Income tax paid $ 195 $ 5
------- ------
</TABLE>
See notes to consolidated financial statements
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Seal Fleet, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
-------------
The accompanying financial statements include the accounts of Seal Fleet,
Inc. and all of its subsidiaries (collectively "Seal Fleet" or the
"Company"). All significant intercompany accounts and transactions are
eliminated in consolidation.
Reclassification
----------------
During 1996, the Company sold all marine assets and ceased all activities
which were related to ownership, management, brokerage, and operation of
offshore supply ships (see Note B). All related activities for 1996 have
been presented in the accompanying financial statements as discontinued
operations and amounts reported for 1995 have been reclassified to conform
with the 1996 presentation. As a result of this reclassification, 1995
amounts reported for total assets and total liabilities and for gross
revenues decreased $9,170,000 and $6,543,000, respectively, from amounts
previously reported. In addition, certain other reclassifications have
been made in the accompanying consolidated financial statements in order
to conform with the 1996 presentation.
Statement of cash flows
-----------------------
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
Short-term investments
----------------------
Short-term investments consist of certificates of deposit, U.S. treasury
bills, and other government securities. All investments have a maturity
of three months or less.
Concentration of credit risk
----------------------------
Financial instruments which subject the Company to concentrations of
credit risk consist principally of cash and short-term investments. The
cash in U.S. banks exceeds the insured limit of $100,000 from time to
time. The terms of these deposits are on demand or mature within three
months to minimize risk. The Company has not incurred losses related to
these deposits.
17
<PAGE>
Seal Fleet, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Drydocking costs
----------------
Drydocking costs of $650,000 at December 31, 1995 were capitalized and
were to have been amortized over the period benefited, which was estimated
to be from eighteen months to four years. In connection with the August
14, 1996 sale, capitalized drydocking costs of $502,000 were charged to
discontinued operations.
Property and equipment
----------------------
Property and equipment are stated at cost. For financial reporting
purposes, the Company records depreciation and amortization expense on a
straight-line method over the estimated useful lives of the related assets
(ships and related equipment, 18-25 years; leasehold improvements, 6-25
years; furniture and equipment, 3-8 years). For tax purposes,
depreciation and amortization expense are computed using straight-line and
accelerated methods.
The cost and accumulated depreciation and amortization of assets sold or
otherwise disposed of are removed from the accounts and any gain or loss
thereon is reflected in operations. On August 14, 1996, a gain of
$6,836,000 was realized due to the sale of substantially all of the
Company's assets.
Income taxes
------------
The Company uses Statement of Financial Accounting Standards No. 109,
which requires the use of an asset and liability approach for financial
accounting and reporting for income taxes.
Deferred income taxes are provided for differences in timing of reporting
certain expenses for financial statement and tax purposes. Deferred tax
assets relate to tax credit carryforwards remaining at December 31, 1996.
If it is more likely than not that some portion or all of a deferred tax
asset will not be realized, a valuation allowance is recognized (see
Note F).
18
<PAGE>
Seal Fleet, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Net income or loss per common share
-----------------------------------
Net income or loss per common share is based on the weighted average
number of shares outstanding (2,190,122 in 1996 and 2,034,627 in 1995).
Average common stock equivalent shares (stock options) outstanding have
not been included, as they would not be dilutive.
Operating leases
----------------
Operating leases include those for office space and automobiles at
December 31, 1995. At December 31, 1996, no significant operating leases
existed (see Notes E and I).
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 at
the date of the financial statements and the reported amount of revenues
and expenses during the reported period. Actual results could differ from
those estimates.
NOTE B - DISCONTINUED OPERATIONS
On August 14, 1996, the Company sold its marine assets to Hvide Marine
Incorporated ("Hvide") for $10,075,000, resulting in a gain of $6,836,000.
In connection with the sale, all long-term debts of the Company were
extinguished and a gain of $484,000 was realized on the extinguishment.
Simultaneously, Hvide purchased five boats which had been owned by the
Three R Trusts and managed by the Company, and terminated the Company's
management of the boats. As a result of these events, the Company ceased
its business activities which were related to the ownership, management,
brokerage, and operation of offshore supply ships. Virtually all 1996
activities of the Company were related to marine operations prior to the
sale, or winding them down thereafter. Accordingly, all 1996 activities
have been presented in the accompanying financial statements as
discontinued operations.
19
<PAGE>
Seal Fleet, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
NOTE B - DISCONTINUED OPERATIONS (CONTINUED)
The following summarizes net losses from discontinued operations during
1996 and 1995 (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Revenues
Charter revenue $ 4,048 $5,949
Other revenue 609 594
------- ------
4,657 6,543
Costs and expenses
Direct operating costs 1,757 2,890
Selling, general and administrative 2,595 2,107
Depreciation and amortization 892 883
------- ------
5,244 5,880
------- ------
Income from operations (587) 663
Other - primarily interest expense (618) (779)
------- ------
Loss before Federal income taxes (1,205) (116)
Federal income tax benefit 38 -
------- ------
Net loss from discontinued operations $(1,167) $ (116)
------- ------
</TABLE>
The following summarizes assets and liabilities of discontinued operations
as of December 31 (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Current net assets (liabilities) of discontinued operations
Accounts receivable $ 26 $ 4,694
Accounts receivable - related party - 758
Other assets 195 603
Accounts payable and accrued expenses (157) (3,816)
Accrued interest payable - (877)
Notes payable to related party (Note E) - (6,655)
Current portion of long-term debt (Note D) - (905)
----- -------
Total current net assets (liabilities) of discontinued
operations 64 (6,198)
----- -------
</TABLE>
20
<PAGE>
Seal Fleet, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
NOTE B - DISCONTINUED OPERATIONS (CONTINUED)
<TABLE>
<S> <C> <C>
Non-current net assets (liabilities) of discontinued operations
Property and equipment, primarily vessels - 10,214
Accumulated depreciation - (7,482)
Deferred drydocking and other assets - 384
Long-term debt, net of current portion (Note D) - (1,763)
------- -------
Total non-current net assets of discontinued operations - 1,353
------- -------
Total net assets (liabilities) of discontinued operations $ 64 $(4,845)
------- -------
</TABLE>
NOTE C - LAND
The Company owns a 516-acre tract of unimproved land in Brazoria County,
Texas which is recorded at its estimated fair market value of $154,000.
The Company has committed to sell this tract of land to the United States
Department of the Interior's Fish and Wildlife Service. The Fish and
Wildlife Service's acceptance of the Company's offer is subject to their
receiving funding which is expected in 1997. This tract of land is
classified as "wet lands" and has no possibility of commercial development
in the foreseeable future. Land bordering the Company's tract has largely
been purchased by the Fish and Wildlife Service for a bird sanctuary.
21
<PAGE>
Seal Fleet, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
NOTE D - LONG-TERM DEBT
At December 31, 1995, long-term debt consisted of the following (dollars
in thousands):
<TABLE>
<CAPTION>
<S> <C>
Note payable to related party $2,168
Unsecured debentures payable to related party 500
------
Total debt including current portion 2,668
Less current portion of long-term debt (905)
------
Long-term debt net of current portion $1,763
------
</TABLE>
All long-term debt was extinguished in 1996.
Note payable to National Western Life Insurance Company ("NWLIC"), a
related party, in the face amount of $3,450,000 was entered into in May
1990 with a maturity date of May 2000 and interest of 12%. The note was
collateralized primarily by first preferred ship mortgages on the
Company's three ships, and was retired on August 14, 1996 when the Company
sold its boats.
NOTE E - RELATED PARTY TRANSACTIONS
At December 31, 1995, Three R Trusts ("Trusts") owned approximately 9% of
the Class A common stock and all of the Class B common stock of the
Company. The Trusts, as the owner of the Class B stock, had the right to
elect 51% of the board of directors. The four children of Robert L.
Moody, Sr. are the beneficiaries of the Trusts. Mr. Moody owned no Class
A common stock at December 31, 1995. All Class A and Class B common stock
of the Company held by the Trusts was sold to Hvide Marine Incorporated
and subsequently to First Magnum Corporation on August 14, 1996.
Transactions with the Trusts, Mr. Moody, and other related parties in 1996
and 1995 were as follows:
Management income and receivables
---------------------------------
The Company managed and operated various ships owned by the Trusts. The
Company earned fees based on 6% of the ships' revenues. Fees earned on
the Trusts' ships totaled $248,000 and $325,000 during 1996 and 1995,
respectively.
22
<PAGE>
Seal Fleet, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
NOTE E - RELATED PARTY TRANSACTIONS (CONTINUED)
Accounts receivable/payable
---------------------------
On behalf of related parties, the Company collected revenues and paid
expenses for the management of these ships. This activity resulted in a
receivable from the Trusts of $758,000 at December 31, 1995. The accounts
with the Trusts were settled in connection with the August 14, 1996
transaction.
Rents and leases
----------------
The Company leased its office space from a partnership in which Mr. Moody
participates. Rent expense was $20,000 in 1995 and $16,500 in 1996. The
Company was also responsible for repairs, insurance and taxes during the
life of the lease. The Company continued to lease the office space
through October 31, 1996, at which time the lease expired and the Company
moved its offices to Florida.
The Company leased hunting grounds from Robert L. Moody, Jr., a
beneficiary of the Trusts. Lease expense was $13,000 in 1996 and 1995,
respectively.
Consulting fee
--------------
Mr. Moody earned consulting fees from the Company of $29,000 and $50,000
in 1996 and 1995, respectively.
Notes payable
-------------
The Company had a note payable to the Trusts at December 31, 1995, face
amount of $5,925,000, stated interest at 7%, collateralized by the common
stock of six subsidiaries of the Company. Principal payments were due in
two equal installments on December 27, 1990 and 1991. The Company was
unable to make the principal payments to the Trusts putting the Company in
default. In 1993, the Company made a principal payment of $100,000. The
Trusts did not call the note and granted an indefinite extension. The
entire balance was classified as current at December 31, 1995. This note
payable was paid in full at August 14, 1996, with the proceeds of the sale
of virtually all of the Company's assets.
23
<PAGE>
Seal Fleet, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
NOTE E - RELATED PARTY TRANSACTIONS (CONTINUED)
During each of the years 1986 through 1989, the Company paid one-half of
the interest due to the Trusts during the year and gave a promissory note
for the remainder totaling $208,000 per year. The total of these notes
was $830,000 and they were due on December 27, 1991. Total interest
expense on these notes was $489,000 for the year ended December 31, 1995
and $284,000 through August 14, 1996. In connection with the 1996 sale of
its vessels, the Company paid $154,000 in additional interest and the
Trusts forgave $500,000 of debt of the Company.
Legal fees
----------
Greer Herz and Adams received legal fees of $1,600 and $1,700 in 1996 and
1995, respectively. Mr. Irwin M. Herz, Jr., a partner of the firm, is the
trustee of the Three R Trusts.
Cash deposits
-------------
The Company had $168,000 of cash on deposit at Moody National Bank at
December 31, 1995. Although Moody National Bank is no longer a related
party, the Company maintained a balance of $11,000 at December 31, 1996.
NOTE F - FEDERAL INCOME TAX
The Company files a consolidated Federal income tax return. At December
31, 1996 for Federal income tax purposes, the Company had investment tax
and jobs credit carryforwards totaling $792,000 expiring in various years
from 1997 to 2000.
Deferred taxes as of December 31 consist of the following (dollars in
thousands):
<TABLE>
<CAPTION>
1996 1995
------ --------
<S> <C> <C>
Deferred tax liabilities $ - $(1,092)
Deferred tax assets 792 3,583
Deferred tax asset valuation allowance (792) (2,491)
------ -------
$ - $ -
------ -------
</TABLE>
24
<PAGE>
Seal Fleet, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
NOTE F - FEDERAL INCOME TAX (CONTINUED)
Approximately $100,000 of the deferred tax liability and $24,000 of the
deferred tax asset were current at December 31, 1995. The Company had
recorded a valuation allowance to offset the deferred tax assets which
may not be realized. The valuation allowance decreased by $1,699,000 in
1996 due primarily to the utilization of net operating loss
carryforwards.
The following reconciles the 1996 expected tax provision obtained by
applying statutory rates to the 1996 pretax income:
<TABLE>
<CAPTION>
<S> <C>
Expected tax provision $ 2,160
Non-deductible expenses 14
Tax benefit of NOL carryforwards (2,174)
-------
$ -
-------
</TABLE>
The Company was subject to alternative minimum tax of $201,000 during
1996.
25
<PAGE>
Seal Fleet, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
NOTE G - INDUSTRY AND MAJOR CUSTOMERS
Prior to August 14, 1996, the major business of the Company was the
operation of offshore supply ships. Following is an analysis of
revenues derived from non-related customers which accounted for 10% or
more of revenues for 1996 and 1995 (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995
------------------- ------------------
Revenues Percent Revenues Percent
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Customer A $1,410 29% $2,190 35%
Customer B - - 1,094 17
Customer C 1,411 29 604 10
</TABLE>
NOTE H - SUPPLEMENTARY INCOME STATEMENT INFORMATION
Maintenance and repairs were $1,118,000 and $641,000 for 1996 and 1995,
respectively.
NOTE I - COMMITMENTS
At December 31, 1996, the Company had no commitments or leases other
than a minor lease on postage equipment. The Company recently signed a
60-month lease agreement with a monthly rental of approximately $4,000
for office space, to become effective in 1997.
NOTE J - 401(K) EMPLOYEE RETIREMENT PLAN
The Company adopted a 401(k) Employee Retirement Plan ("401(k) Plan")
effective January 1, 1985. The 401(k) Plan covers all eligible Company
employees and has been approved by the Internal Revenue Service.
Contributions can be made by an employee in amounts not to exceed the
maximum allowed by the Internal Revenue Service. The Company does not
contribute to the 401(k) Plan. It does, however, pay administrative
fees which are deemed to be immaterial. At December 31, 1996 there were
nine former employees and one active employee in the 401(k) Plan.
26
<PAGE>
Seal Fleet, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
NOTE K - STOCK OPTION PLAN
On August 14, 1996, the Board of Directors of the Company adopted a
Long-Term Incentive Plan (the "1996 Plan") for certain key employees,
officers, directors and outside consultants. The 1996 Plan shall be
administered by a Committee (the "Committee") of not less than two non-
employee directors of the Company. In the event that the Company does
not have two non-employee directors, the 1996 Plan shall then be
administered by the Board of Directors. The 1996 Plan authorized an
aggregate of 600,000 shares of the Company's common stock. The option
price shall be the fair market value of the common stock on the day the
option is granted. The 1996 Plan provides that shares awarded may not
be sold or otherwise transferred until restrictions as established by
the Committee have lapsed. Upon termination of employment, shares upon
which restrictions have not lapsed must be forfeited and returned to
the Company.
As of December 31, 1996, there were 400,000 stock options granted at an
option price of $.50 per share. In accordance with the resolution of
the Company's Board of Directors of March 21, 1997, the options became
exercisable on that date, a loan of $120,000 to the Company's Chief
Executive Officer was authorized to finance the exercise of his option
on 240,000 shares of the Company's common stock, and the 1996 Plan was
terminated, except as to those options which already had been granted.
Further, on March 21, 1997, subject to the approval of the stockholders
of the Company, the Board of Directors of the Company adopted the 1997
Incentive Option Plan (the "1997 Plan") which authorizes grant of
incentive stock options and non-statutory stock options covering an
aggregate of up to 1,200,000 shares of the Company's common stock.
27
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS OR ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The information appearing under the captions "Proposal Two," "Executive Officers
and Pre-Sale Directors" and "Section 16(a) Beneficial Ownership Reporting
Compliance" in the Company's Proxy Statement to be filed within 120 days from
the end of the fiscal year covered by this Annual Report on Form 10-KSB is
incorporated herein by reference.
ITEM 10. EXECUTIVE COMPENSATION
The information appearing under the caption "Executive Compensation" in the
Company's Proxy Statement to be filed within 120 days from the end of the fiscal
year covered by this Annual Report on Form 10-KSB is incorporated herein by
reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information appearing under the caption "Security Ownership Of Certain
Beneficial Owners And Management" in the Company's Proxy Statement to be filed
within 120 days from the end of the fiscal year covered by this Annual Report on
Form 10-KSB is incorporated herein by reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing under the caption "Certain Relationships And Related
Transactions" in the Company's Proxy Statement to be filed within 120 days from
the end of the fiscal year covered by this Annual Report on Form 10-KSB is
incorporated herein by reference.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
The Exhibits listed in the accompanying Index to Exhibits are filed as part
of, or incorporated by reference into, this Annual Report on Form 10-K. The
following is a list of such Exhibits:
28
<PAGE>
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
3.1 Articles of Incorporation of Seal Fleet, Inc., as amended,
filed as Exhibit 3(i) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1980, are hereby
incorporated by reference.
3.2 By-Laws of Seal Fleet, Inc., as amended, filed as Exhibit 3(ii)
to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1980, are hereby incorporated by reference.
10.1 Asset Purchase Agreement dated as of March 29, 1996, among
Hvide Marine Incorporated, Seal Fleet, Inc., Sealcraft
Operators, Inc., Seal GP, Inc., South Corporation and Thomas M.
Ferguson, filed as Exhibit 1 to the Company's Current Report on
Form 8-K for the period ended August 14, 1996, is hereby
incorporated by reference.
10.2 Amendment No. 1 to Asset Purchase Agreement, dated July 23,
1996, filed as Exhibit 2 to the Company's Current Report on
Form 8-K for the period ended August 14, 1996, is hereby
incorporated by reference.
10.3 Indemnity letter, dated July 23, 1996, from Hvide Marine
Incorporated to Seal Fleet, Inc.
10.4 Notice dated July 23, 1996, from Seal Fleet, Inc. Hvide Marine
Incorporated regarding waiver of paragraph 11(b) of Asset
Purchase Agreement.
10.5 Reconciliation Agreement dated August 14, 1996, among Seal
Fleet, Inc., Three R Trusts, Ross Seal Partners, Ltd., Bengal
Seal Partners, Ltd., Indian Seal Partners, Ltd., Baffin Seal
Partners, Ltd., and Baltic Seal Partners, Ltd.
*10.6 Seal Fleet, Inc. 1996 Long-Term Incentive Plan
*10.7 Seal Fleet, Inc. Bonus Plan, as amended, filed as Exhibit
10(viii) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1980, is hereby incorporated by
reference.
11 Statement Re: Computation of per share earnings.
21 Subsidiaries of the Registrant.
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
27 Financial Data Schedule.
</TABLE>
* Management contracts and compensatory plans or arrangements required to be
filed as an Exhibit to comply with item 14(a)(3).
The Company will furnish a copy of any Exhibit on request in payment of the
Company's reasonable expenses of furnishing such Exhibit.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the Fourth Quarter of the
Company's Fiscal Year Ended December 31, 1996.
30
<PAGE>
SIGNATURES
In accordance with Section 13 and 15(d) of the Exchange Act, the Company caused
this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SEAL FLEET, INC.
Dated: March 21, 1997 /s/ Thomas M. Ferguson
----------------------------------
By: Thomas M. Ferguson,
Chairman of the Board, President and
Chief Executive Officer
In Accordance with the Securities Exchange Act of 1934, this Report has been
signed below by the following persons on behalf of the Company and in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Thomas M. Ferguson Chairman of the Board, March 21, 1997
- ------------------------ President, Chief Executive
Thomas M. Ferguson Officer and Director
/s/ James S. Goodner Vice President, March 21, 1997
- ------------------------ Chief Financial Officer,
James S. Goodner Treasurer and Secretary
/s/ J. Erik Hvide Director March 21, 1997
- ------------------------
J. Erik Hvide
/s/ Donald L. Caldera Director March 21, 1997
- ------------------------
Donald L. Caldera
</TABLE>
31
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page
Number Description Number
- ------- ---------------------------------------- ------
<S> <C> <C>
3.1 Articles of Incorporation of Seal
Fleet, Inc., as amended, filed as
Exhibit 3(i) to the Company's Annual
Report on Form 10-K for the fiscal year
ended December 31, 1980, are hereby
incorporated by reference.
3.2 By-Laws of Seal Fleet, Inc., as
amended, filed as Exhibit 3(ii) to the
Company's Annual Report on Form 10-K
for the fiscal year ended December 31,
1980, are hereby incorporated by
reference.
10.1 Asset Purchase Agreement dated as of
March 29, 1996, among Hvide Marine
Incorporated, Seal Fleet, Inc.,
Sealcraft Operators, Inc., Seal GP,
Inc., South Corporation and Thomas M.
Ferguson, filed as Exhibit 1 to the
Company's Current Report on Form 8-K
for the period ended August 14, 1996,
is hereby incorporated by reference.
10.2 Amendment No. 1 to Asset Purchase
Agreement, dated July 23, 1996, filed
as Exhibit 2 to the Company's Current
Report on Form 8-K for the period ended
August 14, 1996, is hereby incorporated
by reference.
10.3 Indemnity letter, dated July 23, 1996,
from Hvide Marine Incorporated to Seal
Fleet, Inc.
10.4 Notice dated July 23, 1996, from Seal
Fleet, Inc. Hvide Marine Incorporated
regarding waiver of paragraph 11(b) of
Asset Purchase Agreement.
10.5 Reconciliation Agreement dated August
14, 1996, among Seal Fleet, Inc., Three
R Trusts, Ross Seal Partners, Ltd.,
Bengal Seal Partners, Ltd., Indian Seal
Partners, Ltd., Baffin Seal Partners,
Ltd., and Baltic Seal Partners, Ltd.
*10.6 Seal Fleet, Inc. 1996 Long-Term
Incentive Plan
*10.7 Seal Fleet, Inc. Bonus Plan, as
amended, filed as Exhibit 10(viii) to
the Company's Annual Report on Form
10-K for the fiscal year ended December
31, 1980, is hereby incorporated by
reference.
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Exhibit Page
Number Description Number
- ------- ---------------------------------------- ------
<S> <C> <C>
11 Statement Re: Computation of per share
earnings.
21 Subsidiaries of the Registrant.
27 Financial Data Schedule.
</TABLE>
* Management contracts and compensatory plans or arrangements required to be
filed as an Exhibit to comply with item 14(a)(3).
ii
<PAGE>
EXHIBIT 10.3
Hvide Marine Incorporated
2200 Eller Drive P.O. Box 13038 Fort Lauderdale, Florida 33316
Donald L. Caldera Phone: (303) 523-2200
Executive Vice President Development Telefax: (303) 527-1772
Direct Line:
524-4200 EXT. 400
July 23, 1996
Board of Directors
Seal Fleet, Inc.
P.O. Box 1168
Galveston, TX 77553
Ladies and Gentlemen:
We understand that the Board of Directors of Seal Fleet, Inc. (the
"Company") is considering authorizing the Company to waive that portion of the
condition set forth in paragraph 11(b) of the Asset Purchase Agreement between
Hvide Marine Incorporated ("Hvide Marine"), the Company and certain of its
affiliates, and Thomas M. Ferguson entered into as of March 29, 1996 (the
"Agreement") that requires the exclusion of those shares of Class A Common Stock
owned by Three R Trusts in determining whether the transactions contemplated by
the Agreement have been approved by a majority of the outstanding shares of the
Company's Class A Common Stock (the "Three R Trusts Exclusion").
In reaching a decision regarding the waiver, we understand that the Board
will consider that the Agreement has been amended, subject to the approval of
the Board, to increase the total consideration to the Company by $3.775 million
by (1) increasing the purchase price of the vessels being sold to Hvide Marine
from $2.1 million per vessel to $3.2 million per vessel, with the additional
proceeds applied to the debt reduction described in the Company's proxy
statement related to the meeting of stockholders scheduled for July 17, 1996
(the "Proxy Statement"), and (2) funding of $475,000 by Hvide Marine to be
utilized by the Company to assist in downsizing its operations, as appropriate,
and in mitigating any dislocation associated with such downsizing. We
understand further that the Board will also consider, in light of the fact that
the Proxy Statement disclosed that the Company reserved the right to amend the
Agreement before or after approval of the transaction by stockholders and the
fact that the transaction contemplated by the amended Agreement would result in
terms more favorable to the Company and its stockholders than those contemplated
by the transaction described in the Proxy Statement, whether the Company should
resolicit proxies from stockholders by an amended proxy statement prior to
consummation of the transaction contemplated by the amended Agreement.
In consideration of (i) the Company's adjournment of the 1996 Annual
Meeting of Stockholders ("Meeting") scheduled for July 17, 1996 and (ii) the
Board of Directors' consideration of whether or not to waive the Three R Trusts
Exclusion, Hvide Marine agrees to indemnify, defend, and hold Seal Fleet, Inc.
and each of its Directors and officers who is a party or is threatened to be
made a party to any threatened, pending or completed action, suit, proceeding,
whether criminal, civil, administrative, arbitrative or investigative, any
appeal in such action, suit or proceeding, and any inquiry or investigation that
could lead to such an action suit or proceeding, harmless of and from any and
all claims, actions, demands, losses, costs,
<PAGE>
Seal Fleet, Inc. Indemnification Letter
July 23, 1996
Page Two
liabilities, penalties, fines, damages and expenses (including, but not limited
to, all court costs and expenses, and reasonable attorneys' fees, whether
incurred in the defense of such claims, suits, actions and demands, or in
enforcing this indemnification provision, whether or not a lawsuit is filed)
(collectively "Costs") arising from or related to (a) the Board of Directors'
consideration, reconsideration and determination whether or not to waive the
Three R Trusts Exclusion, (b) any violation of (i) Section 14 of the Securities
Exchange Act of 1934, (ii) the laws of the State of Nevada, or (iii) any other
applicable federal or state laws, rules or regulations, by Hvide Marine or
Thomas J. Ferguson or any of their respective employees, agents, or
representatives in connection with or in any way related to (x) the solicitation
of proxies for the Meeting and/or (y) the purchase by Hvide Marine, Thomas M.
Ferguson or any of their respective affiliates, agents or representatives of
Company shares; and (c) the Board of Directors' decision not to, and the
Company's not undertaking to, resolicit proxies from the Company's stockholders
by means of an amended proxy statement. Hvide Marine, at its option, will either
assume the defense of any indemnified party at the commencement of any claim,
suit, action or demand with counsel reasonably satisfactory to the indemnified
party or reimburse the indemnified party for all Costs within ten (10) days of
presentation of an invoice for Costs, and any indemnified party will have the
right to invoice the Costs as incurred and need not wait until resolution of the
claim, suit, action or demand.
This agreement supersedes and replaces in its entirety that certain letter
of indemnity dated July 18, 1996 from Hvide Marine to the Board of Directors of
Seal Fleet, Inc.
Sincerely,
Hvide Marine Incorporated
By: /s/ Donald L. Caldera
------------------------------
Donald L. Caldera
Executive Vice President
<PAGE>
EXHIBIT 10.4
SEAL FLEET, INC.
P.O. BOX 1168
Galveston, Texas 77553
(409) 763-8878
July 23, 1996
Hvide Marine Incorporated
2200 Eller Drive
Ft. Lauderdale, Florida 33316
Dear Sirs:
This is to advise you that Seal Fleet, Inc. has waived that portion of the
condition set forth in paragraph 11(b) of the Asset Purchase Agreement among
Hvide Marine Incorporated, Seal Fleet, Inc. and certain of its subsidiaries, and
Thomas M. Ferguson entered into as of March 29, 1996 (the "Agreement") that
requires the exclusion of those shares of Class A Common Stock owned by Three R
Trusts in determining whether the transactions contemplated by the Agreement has
been approved by a majority of the outstanding shares of the Company's Class A
Common Stock.
Very truly yours,
Seal Fleet, Inc.
By: /s/ John W. Bissell
-----------------------------
<PAGE>
EXHIBIT 10.5
RECONCILIATION AGREEMENT
This Reconciliation Agreement made and entered into as of the 14th day of
August, 1996 by and between Seal Fleet, Inc., a Nevada corporation ("Seal
Fleet"), Three R Trusts ("Three R Trusts"), Ross Seal Partners, Ltd., Bengal
Seal Partners, Ltd., Indian Seal Partners, Ltd., Baffin Seal Partners, Ltd.,
Baltic Seal Partners, Ltd., each a Texas limited partnership (collectively the
"Partnerships").
Whereas, Seal Fleet, the Partnerships and Three R Trusts have entered into
Asset Purchase Agreements (the "Asset Purchase Agreements") with Hvide Marine
Incorporated of even date herewith;
Whereas Seal Fleet and/or its wholly owned subsidiaries serve as vessel
manager of certain vessels (the "Trust Vessels") owned by the Partnerships on
behalf of the Three R Trusts;
Whereas Seal Fleet, the Partnerships and Three R Trusts desire to provide
for reconciliation of certain intercompany accounts relating to the operation of
the Trust Vessels.
Now, therefore, in consideration of the premises and mutual covenants
contained herein, and for other good and valuable consideration, the parties
agree as follows:
1. Reconciliation of Accounts.
--------------------------
(a) On the closing date of the Asset Purchase Agreements (the "Closing
Date"), Seal Fleet, the Partnership and Three R Trusts shall reconcile their
intercompany accounts by payment of an amount based upon: (i) the amount Seal
Fleet has billed customers for services rendered by the Trust Vessels, and has
either not collected or has collected and has not been applied to Trust Vessel
expenses or disbursed to the Partnerships or Three R Trusts, and (ii) the amount
of expenses of the Trust Vessels (including Seal Fleet's management fees) paid
out by Seal Fleet (carried on Seal Fleet's books as Notes and Accounts
Receivable: Related Party) that has not been reimbursed by the Partnerships or
Three R Trusts. If (i) is greater than (ii), Seal Fleet shall pay the
Partnership or Three R Trusts the difference on the Closing Date. If (i) is less
than (ii), the Partnerships or Three R Trusts shall pay Seal Fleet the
difference on the Closing Date.
(b) On the day 60 days following the Closing Date (the "Final
Reconciliation Date"), Seal Fleet, the Partnerships and Three R Trusts shall
reconcile their intercompany accounts by payment of an amount based upon: (i)
the amount Seal Fleet has collected during the period from the Closing Date to
the Final Reconciliation Date from customers for services rendered by the Trust
Vessels prior to the Closing Date but were not billed as of the Closing Date;
(ii) the amount of expenses of the Trust Vessels (including Seal Fleet's
management fees) paid out by Seal Fleet during the period from the Closing Date
to the Final Reconciliation Date; and (iii) the amount that Seal Fleet had
billed customers as of the Closing Date for services rendered by the Trust
Vessels that remains uncollected as of the Final Reconciliation Date. If (i) is
greater than (ii) plus (iii), Seal Fleet shall pay the Partnerships or Three R
Trusts the
<PAGE>
difference on the Final Reconciliation Date. If (ii) plus (iii) is greater than
(i), the Partnerships or Three R Trusts shall pay Seal Fleet the difference on
the Final Reconciliation Date.
(c) On the Final Reconciliation Date, Seal Fleet shall assign to the
Partnerships or Three R Trusts any accounts receivable from customers for
services rendered by the Trust Vessels prior to the Closing Date and uncollected
by the Final Reconciliation Date. Following the Final Reconciliation Date, the
Partnerships or Three R Trusts shall be solely responsible for collection and
payment of accounts relating to the operation of the Trust Vessels, and there
shall be no further payments between Seal Fleet and Three R Trusts and/or the
Partnerships relating to such accounts; provided, however, that Seal Fleet shall
cooperate with the Partnerships and Three R Trusts in connection with the
collection and payment of such accounts.
2. Collections. Prior to the Final Reconciliation Date, Seal Fleet shall
-----------
use its reasonable efforts to collect accounts receivable resulting from
services rendered by the Trust Vessels.
3. Notices. All notices that may be given under any provision of this
-------
Agreement shall be deemed to have been given, and duly given, when:
(a) Served by: (i) facsimile or telex to be confirmed by certified,
first class mail, (ii) personal delivery, (iii) mailed by certified, first class
mail, return receipt requested, postage prepaid, or (iv) forwarded by Federal
Express, Airborne Express, United Parcel Service or other established and
reputable courier service; and
(b) Properly addressed to Seal Fleet, Three R Trusts, or the
Partnerships, as the case may be, as follows:
(i) In case of notice to Seal Fleet:
c/o Seal Fleet, Inc.
3305 Avenue S
Galveston, Texas 77550
Attn: John Bissell
Fax: (409) 763-8892
(ii) In case of notice to Three R Trusts:
Three R Trusts
c/o Irwin M. Herz, Jr., Trustee
Greer, Herz & Adams, L.L.P.
One Moody Plaza, 18th Floor
Galveston, Texas 77550
2
<PAGE>
(iii) In the case of notice to the Partnership:
Three R Markets, Inc.
702 Moody National Bank Building
2302 Postoffice
Galveston, Texas 77550
4. Severability. If any provision of this Agreement is held to be
------------
invalid or unenforceable, in any respect, such invalidity or unenforceability
shall not affect or impair the validity or enforceability of the remaining
provisions of this Agreement, but, to the contrary, this Agreement shall be
construed as if such invalid or unenforceable provision had never been contained
herein.
5. Modification; Amendment. This Agreement may only be modified or
-----------------------
amended only in writing by an instrument executed by each party hereto.
6. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original, but all which
together shall constitute but one in the same instrument.
7. Assignment; Survival. This Agreement may not be assigned by either
--------------------
party except upon the prior written consent of the other party.
8. Governing Law. This Agreement shall be governed by the laws of the
-------------
State of Texas and, when applicable, the general maritime law of the United
States.
9. Incorporation; Entire Agreement. This Agreement constitutes the
-------------------------------
entire understanding of the parties and supersedes any and all other
understandings or agreements, written or oral, with respect to the subject
matter hereof.
10. No Third-Party Beneficiaries. This Agreement is for the sole benefit
----------------------------
of the parties hereto and their permitted assigns, and nothing herein expressed
or implied shall give or be construed to give to any person or entity, other
than the parties hereto and such assigns, any legal or equitable rights
hereunder.
11. Non-Liability. The trustee of the Three R Trusts shall not be charged
-------------
personally or held individually contractually liable under any term or provision
of this Agreement, or of any supplement, modification or amendment to this
Agreement.
3
<PAGE>
In Witness Whereof, the parties have executed this Agreement on the date
first hereinabove written.
Seal Fleet, Inc.:
By: /s/ John W. Bissell
--------------------------------
John W. Bissell
President
Three R Trusts:
By: /s/ Irwin M. Herz, Jr.
--------------------------------
Irwin M. Herz, Jr.
Trustee
Ross Seal Partners, Ltd.:
By: /s/ Drew Hollinger
--------------------------------
General Partner
Bengal Seal Partners, Ltd.:
By: /s/ Drew Hollinger
--------------------------------
General Partner
Indian Seal Partners, Ltd.:
By: /s/ Drew Hollinger
--------------------------------
General Partner
Baffin Seal Partners, Ltd.:
By: /s/ Drew Hollinger
--------------------------------
General Partner
4
<PAGE>
Baltic Seal Partners, Ltd.:
By: /s/ Drew Hollinger
--------------------------------
General Partner
Three R Trusts:
By:
--------------------------------
Irwin M. Herz, Jr.
Trustee
Ross Seal Partners, Ltd.:
By: Three R Markets, Inc.
General Partner
By: /s/ Drew Hollinger
--------------------------------
Drew Hollinger,
President
Bengal Seal Partners, Ltd.:
By: Three R Markets, Inc.
General Partner
By: /s/ Drew Hollinger
--------------------------------
Drew Hollinger,
President
Indian Seal Partners, Ltd.:
By: Three R Markets, Inc.
General Partner
By: /s/ Drew Hollinger
--------------------------------
Drew Hollinger,
President
5
<PAGE>
Baffin Seal Partners, Ltd.:
By: Three R Markets, Inc.
General Partner
By: /s/ Drew Hollinger
--------------------------------
Drew Hollinger,
President
Baltic Seal Partners, Ltd.:
By: Three R Markets, Inc.
General Partner
By: /s/ Drew Hollinger
--------------------------------
Drew Hollinger,
President
6
<PAGE>
EXHIBIT 10.6
SEAL FLEET, INC.
AMENDED 1996 LONG-TERM INCENTIVE PLAN
Adopted by the Board of Directors on August 14, 1996
Amended March 21, 1997
1. PURPOSE
The 1996 Long-Term Incentive Plan (the "Plan") is intended to promote
the interests of Seal Fleet, Inc. ("Seal Fleet") by offering those directors,
executive officers, key employees and outside consultants of Seal Fleet who are
primarily responsible for the management, growth and success of the business of
Seal Fleet, the opportunity to participate in a long-term incentive plan
designed to reward them for their services and to encourage them to continue in
the employ of or to provide services to Seal Fleet.
2. DEFINITIONS
For all purposes of this Plan, the following terms shall have the
following meanings:
"Common Stock" means Seal Fleet common stock, $.10 par value.
"Non-Statutory Options" means stock options not qualified under Section
422 of the Internal Revenue Code of 1986, as amended.
"Restricted Shares" means shares of Common Stock which have not been
registered under federal securities law.
"Retirement" means a Participant's termination of employment or
association after attaining age 62.
"Subsidiary" means any company which Seal Fleet owns, directly or
indirectly, the majority of the combined voting power of all classes of stock.
3. ADMINISTRATION
The Plan shall be administered by a Committee (the "Committee") of not
less than two non-employee directors of Seal Fleet selected by, and serving at
the pleasure of, Seal Fleet's Board of Directors (the "Seal Fleet Board"). To
qualify as a "non-employee director," a person must be a member of the Seal
Fleet Board who (i) is not currently an officer or employee of Seal Fleet or any
Subsidiary, (ii) has not received compensation for serving as a consultant or in
any other non-director capacity or had an interest in any transaction with Seal
Fleet or any Subsidiary that exceeds $60,000, or (iii) has not been engaged
through another party in a business
1
<PAGE>
relationship with Seal Fleet (such as that of a lawyer or investment banker).
Non-employee directors shall qualify as such as provided under Rule 16b-3(b)(3)
of the Securities Exchange Act of 1934 ("Exchange Act"). In the event that Seal
Fleet does not have two non-employee directors, the Plan shall be administered
by the Seal Fleet Board.
Initially, the Company or Subsidiary will recommend to the Committee
persons to whom awards may be granted. The Committee then shall have the
authority, subject to the terms of the Plan, to determine, based upon
recommendations, the persons to whom awards shall be granted ("Participants"),
the number of shares covered by each award, the time or times at which awards
shall be granted, the timing of when awards shall vest, and the terms and
provisions of the instruments by which awards shall be evidenced, and to
interpret the Plan and make all determinations necessary or advisable for its
administration. The Committee shall notify the Seal Fleet Board of all decisions
concerning awards granted to Participants under the Plan, the interpretation
thereof, and determinations concerning its administration.
Notwithstanding the foregoing, (i) the initial awards of Non-Statutory
Options under this Plan and the terms of such awards shall be as set forth in
"Schedule A" attached hereto and incorporated herein by this reference, and such
awards shall not be modified or amended except in accordance with Section 9 or
with the consent of the respective Participants, and (ii) other than the initial
awards, any additional awards to members of the committee must also be approved
in advance by a majority of the disinterested members of the Seal Fleet Board.
4. ELIGIBILITY
Only persons who are employees, outside consultants, officers or
directors of Seal Fleet or of any Subsidiary shall be granted awards.
5. STOCK SUBJECT TO THE PLAN
The stock from which awards may be granted shall be shares of Common
Stock. When Restricted Shares are vested or when options are exercised, Seal
Fleet may either issue authorized but unissued Common Stock or Seal Fleet may
transfer issued Common Stock held in its treasury. Each of the respective boards
of Seal Fleet and Subsidiaries will fund the Plan to the extent so required to
provide Common Stock for the benefit of Participants. The total number of shares
of Common Stock which may be granted as Restricted Shares or stock options shall
not exceed, in the aggregate, 600,000 shares in total. Any Restricted Shares
awarded and later forfeited are again subject to award under the Plan. If an
option expires, or is otherwise terminated prior to its exercise, the shares of
Common Stock covered by such an option immediately prior to such expiration or
other termination shall continue to be available for grant under the Plan.
6. GRANTING OF oPTIONS
The date of grant of options to Participants under the Plan will be the
date on which the options are awarded by the Committee. The grant of any option
to any Participant shall neither entitle nor disqualify such Participant from
participating in any subsequent grant of options.
2
<PAGE>
7. TERMS AND CONDITIONS OF OPTIONS
Options shall be designated Non-Statutory Options and shall be
evidenced by written instruments approved by the Committee. Such instruments
shall conform to the following terms and conditions:
7.1 OPTION PRICE
The option price per share for an option shall be the fair market value
of the Common Stock underlying the option on the day the option is granted. Fair
market value shall be an amount equal to the average closing bid price of the
Common Stock for the five trading days immediately preceding the day of grant as
reported on the National Daily Quotation Service ("Pink Sheets") or the last
reported sale price of the Common Stock on the day of grant on any stock
exchange on which the Common Stock may be listed from time to time, or if there
was no such sale price on the day of grant, on the day next preceding the day of
grant on which there was such a sale. The option price shall be paid (i) in
cash, or (ii) in Common Stock, including Common Stock underlying the option
being exercised, having a fair market value equal to such option price or (iii)
in a combination of cash and Common Stock, including Common Stock underlying the
option being exercised. The fair market value of Common Stock delivered to Seal
Fleet pursuant to the immediately preceding sentence shall be determined on the
average closing bid price of the Common Stock for the five trading days
immediately preceding the day of exercise as reported on the Pink Sheets or the
last reported sale price of the Common Stock on the day of exercise on any stock
exchange on which the Common Stock may be listed from time to time, or, if there
was no such sale price on the day of exercise, on the day next preceding the day
of exercise on which there was such a sale.
7.2 TERM AND EXERCISE OF OPTIONS
Except in special circumstances, each option shall expire on the tenth
anniversary of the date of its grant and shall be exercisable according to a
vesting schedule to be determined by the Committee. However the Committee may
include in any option instrument, initially or by amendment at any time, a
provision making any installment or installments exercisable at a date earlier
than initially established, if the Committee deems such provision to be in the
interests of Seal Fleet or necessary to realize the reasonable expectation of
the optionee.
After becoming exercisable, each installment shall remain exercisable
until expiration or termination of the option. After becoming exercisable an
option may be exercised by the optionee from time to time, in whole or part, up
to the total number of shares with respect to which it is then exercisable. The
Committee may provide that payment of the option exercise price may be made
following delivery of the certificate for the exercised shares.
Upon the exercise of a stock option, the purchase price will be payable
in full in cash or Common Stock, or a combination thereof, as provided in
Paragraph 7.1. Any shares of
3
<PAGE>
Common Stock so assigned and delivered to Seal Fleet or the Subsidiary, as
applicable, in payment or partial payment of the purchase price will be valued
at fair market value on the exercise date. Upon the exercise of an option, Seal
Fleet or a Subsidiary, as applicable, shall withhold from the shares of Common
Stock to be issued to the Participant the number of shares necessary to satisfy
Seal Fleet's or the Subsidiary's, as applicable, obligation to withhold federal
taxes, such determination to be based on the shares' fair market value on the
date of exercise.
7.3 TERMINATION OF EMPLOYMENT OR ASSOCIATION
If an optionee ceases, other than by reason of death or Retirement, to
be employed or associated with Seal Fleet, all options granted to such optionee
and exercisable on the date of termination of employment or association shall
expire on the earlier of (i) the tenth anniversary after the date of grant, or
(ii) three months after the day such optionee's employment or association ends.
In the event of optionee's Retirement, all options granted to such
optionee, and exercisable on the date of such optionee's Retirement shall expire
on the earlier of (i) the tenth anniversary after the date of grant, or (ii) the
second anniversary of the day of such optionee's Retirement.
Any installment not exercisable on the date of such termination or
Retirement shall expire and be thenceforth unexercisable. Whether authorized
leave of absence or absence in military or governmental service may constitute
employment for the purposes of the Plan shall be conclusively determined by the
Committee.
Any award under this Plan to a Participant who suffers a termination of
employment or association may be accelerated, paid or continued if the
Committee, in the exercise of its absolute discretion, determines that such
action is in the best interests of Seal Fleet and equitable to the Participant.
The portion of any award exercisable in the event of continuation or the amount
of any payment due under a continued award may be adjusted by the Committee to
reflect the Participant's period of service from the date of grant through the
date of the Participant's termination of employment or such other factors as the
Committee determines are relevant to its decision to continue the award.
7.4 EXERCISE UPON DEATH OF OPTIONEE
If an optionee dies, the option may be exercised, to the extent of the
number of shares that the optionee could have exercised on the date of such
death, by the optionee's estate, personal representative or beneficiary who
acquires the option by will or by the laws of descent and distribution. Such
exercise may be made at any time prior to the earlier of (i) the tenth
anniversary after the date of grant, or (ii) the first anniversary of such
optionee's death. On the earlier of such dates, the option shall terminate.
4
<PAGE>
7.5 ASSIGNABILITY
No option shall be assignable or transferable by the optionee except by
will or by the laws of descent and distribution and during the lifetime of the
optionee the option shall be exercisable only by such optionee; provided,
however, that an optionee may assign the option to another Participant with the
prior written consent of the Seal Fleet Board.
8. RESTRICTED SHARE AWARDS
8.1 GRANT OF RESTRICTED SHARE AWARDS
The Committee will determine for each Participant the time or times
when Restricted Shares shall be awarded and the number of shares of Common Stock
to be covered by each Restricted Share award.
8.2 RESTRICTIONS
Shares of Common Stock issued to a Participant as a Restricted Share
award will be subject to the following restrictions ("Share Restrictions"):
(a) Except as set forth in Paragraphs 8.4 and 8.5, upon
the termination of employment or association of a participant, all of
the Restricted Shares subject to a Restricted Share award will be
forfeited and returned to Seal Fleet or, in the event such Restricted
Shares were provided to the Participant from shares of Common Stock
purchased by the Subsidiary, then the Restricted Shares will be
forfeited and returned to the Subsidiary. In either case, all rights of
the Participant to such Restricted Shares will terminate without any
payment of consideration by Seal Fleet or the Subsidiary with which the
Participant is employed or associated, unless the Participant maintains
his or her employment or association (including membership on the Seal
Fleet Board or consulting arrangements) with Seal Fleet or a Subsidiary
for a period of time determined by the Committee.
(b) During the longer of the restriction period
("Restriction Period") relating to a Restricted Share award or a period
of six months and one day from the date of the award, none of the
Restricted Shares subject to such award may be sold, assigned,
bequeathed, transferred, pledged, hypothecated or otherwise disposed of
in any way by the Participant.
(c) The Committee may require the Participant to enter
into an escrow agreement providing that the certificates representing
Restricted Shares sold or granted pursuant to the Plan will remain in
the physical custody of Seal Fleet or the employing Subsidiary or an
escrow holder during the Restriction Period.
(d) Each certificate representing a Restricted Share
sold or granted pursuant to the Plan will bear a legend making
appropriate reference to the restrictions imposed on the Restricted
Share.
5
<PAGE>
(e) The Committee may impose other restrictions on any
Restricted Shares sold pursuant to the Plan as it may deem advisable,
including without limitation, restrictions under the Securities Act of
1933, as amended, under the requirements of any stock exchange upon
which such share or shares of the same class are then listed and under
any state securities laws or other securities laws applicable to such
shares.
8.3 RIGHTS AS A STOCKHOLDER
Except as set forth in Paragraph 8.2(b), the recipient of a Restricted
Share award will have all of the rights of a stockholder of Seal Fleet with
respect to the Restricted Shares, including the right to vote the Restricted
Shares and to receive all dividends or other distributions made with respect to
the Restricted Shares.
8.4 LAPSE OF RESTRICTIONS AT TERMINATION OF EMPLOYMENT
In the event of the termination of employment or association of a
Participant during the Restriction Period by reason of death, total and
permanent disability, Retirement, or discharge from employment or association
other than a discharge for cause, the Committee may, at its discretion, remove
Share Restrictions on Restricted Shares subject to a Restricted Share award.
Restricted Shares to which the Share Restrictions have not so lapsed
will be forfeited and returned to Seal Fleet as provided in Paragraph 8.2(a).
8.5 LAPSE OF RESTRICTIONS AT DISCRETION OF THE COMMITTEE
The Committee may shorten the Restriction Period or remove any or all
Share Restrictions if, in the exercise of its absolute discretion, it determines
that such action is in the best interests of Seal Fleet and equitable to the
Participant.
8.6 LISTING AND REGISTRATION OF SHARES
Seal Fleet may, in its reasonable discretion, postpone the issuance
and/or delivery of Restricted Shares until completion of stock exchange listing,
or registration, or other qualification of such Restricted Shares under any law,
rule or regulation.
8.7 DESIGNATION OF BENEFICIARY
A Participant may, with the consent of the Committee, designate a
person or persons to receive, in the event of death, any Restricted Shares to
which such Participant would then be entitled. Such designation will be made
upon forms supplied by and delivered to the Committee and may be revoked in
writing by the Participant. If a Participant fails effectively to designate a
beneficiary, then such Participant's estate will be deemed to be the
beneficiary.
8.8 WITHHOLDING OF TAXES FOR RESTRICTED SHARES
When the Participant, as holder of the Restricted Shares, recognizes
income, either on the date of grant or the date the restrictions lapse, Seal
Fleet or a Subsidiary, as applicable, shall
6
<PAGE>
withhold from the shares of Common Stock, the number of shares necessary to
satisfy Seal Fleet's or the Subsidiary's, as applicable, obligation to withhold
federal taxes, such determination to be based on the shares' fair market value
as of the date income is recognized.
9. CAPITAL ADJUSTMENTS
The number and price of Common Stock covered by each award of options
and/or Restricted Shares and the total number of shares that may be granted or
sold under the Plan shall be proportionally adjusted to reflect, subject to any
required action by stockholders, any stock dividend or split, recapitalization,
merger, consolidation, spin-off, reorganization, combination or exchange of
shares or other similar corporate change.
10. CHANGE OF CONTROL
Notwithstanding the provisions of Section 9, in the event of a change
of control, all share restrictions on all Restricted Shares will lapse and
vesting on all unexercised stock options will accelerate to the change of
control date. For purposes of this plan, a "change of control" of Seal Fleet
shall be deemed to have occurred at such time as (a) any "person" (as that term
is used in Section 13(d) and 14(d) of the Exchange Act), becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of Seal Fleet representing 25.0% or more of the
combined voting power of Seal Fleet's outstanding securities ordinarily having
the right to vote at the election of directors; or (b) individuals who
constitute the Seal Fleet Board on the date hereof (the "Incumbent Board") cease
for any reason to constitute at least a majority thereof, provided that any
person becoming a director subsequent to the date hereof whose election was
approved by at least a majority of the directors comprising the Incumbent Board,
or whose nomination or election was approved by a majority of the Seal Fleet
Board serving under an Incumbent Board, shall be, for purposes of this clause
(b), considered as if he or she were a member of the Incumbent Board; or (c)
merger, consolidation or sale of all or substantially all the assets of Seal
Fleet occurs, unless such merger or consolidation shall have been affirmatively
recommended to Seal Fleet's stockholders by a majority of the Incumbent Board;
or (d) a proxy statement soliciting proxies from stockholders of Seal Fleet, by
someone other than the current management of Seal Fleet seeking stockholder
approval of a plan of reorganization, merger or consolidation of Seal Fleet with
one or more corporations as a result of which the outstanding shares of Seal
Fleet's securities are actually exchanged for or converted into cash or property
or securities not issued by Seal Fleet unless the reorganization, merger or
consolidation shall have been affirmatively recommended to Seal Fleet's
stockholders by a majority of the Incumbent Board.
11. APPROVALS
The issuance of shares pursuant to this Plan is expressly conditioned
upon obtaining all necessary approvals from all regulatory agencies from which
approval is required, including gaming regulatory agencies.
7
<PAGE>
12. EFFECTIVE DATE OF PLAN
The effective date of the Plan is August 14, 1996.
13. TERM AND AMENDMENT OF PLAN
This Plan shall expire on August 14, 2006 (except to options and
Restricted Shares outstanding on that date). The Seal Fleet's Board may
terminate or amend the Plan in any respect at any time, except that, no change
may be made which would cause any award under the Plan not to comply with Rule
16b-3 of the Exchange Act. No action of the Seal Fleet Board or Seal Fleet's
stockholders, however, may, without the consent of an optionee or Restricted
Shares grantee, alter or impair such Participant's rights under any option or
Restricted Shares previously granted.
14. NO RIGHT OF EMPLOYMENT
Neither the action of Seal Fleet in establishing this Plan, nor any
action taken by any Board of Seal Fleet or any Subsidiary or the Committee, nor
any provision of the Plan itself, shall be construed to limit in any way the
right of Seal Fleet to terminate a Participant's employment or association at
any time; nor shall it be evidence of any agreement or understanding, expressed
or implied, that Seal Fleet will employ an employee in any particular position
nor ensure participation in any future compensation or stock purchase program.
15. WITHHOLDING TAXES
Seal Fleet or the Subsidiary, as applicable, shall have the right to
deduct withholding taxes from any payments made pursuant to the Plan or to make
such other provisions as it deems necessary or appropriate to satisfy its
obligations to withhold federal, state or local income or other taxes incurred
by reason of payments or the issuance of Common Stock under the Plan. Whenever
under the Plan, Common Stock is to be delivered upon vesting of Restricted
Shares or exercise of an option, the Committee shall be entitled to require as a
condition of delivery that the Participant remit or provide for the withholding
of an amount sufficient to satisfy all federal, state and other government
withholding tax requirements related thereto.
16. PLAN NOT A TRUST
Nothing contained in the Plan and no action taken pursuant to the Plan
shall create or be construed to create a trust of any kind, or a fiduciary
relationship, between Seal Fleet and any Participant, the executor,
administrator or other personal representative, or designated beneficiary of
such Participant, or any other persons. If and to the extent that any
Participant or such Participant's executor, administrator or other personal
representative, as the case may be, acquires a right to receive any payment from
Seal Fleet pursuant to the Plan, such right shall be no greater than the right
of an unsecured general creditor of Seal Fleet.
8
<PAGE>
17. NOTICES
Each Participant shall be responsible for furnishing the Committee with
the current and proper address for the mailing of notices and delivery of
agreements, Common Stock and cash pursuant to the Plan. Any notices required or
permitted to be given shall be deemed given if directed to the person to whom
addressed at such address and mailed by regular United States mail, first-class
and prepaid. If any item mailed to such address is returned as undeliverable to
the addressee, mailing will be suspended until the Participant furnishes the
proper address. This provision shall not be construed as requiring the mailing
of any notice or notification if such notice is not required under the terms of
the Plan or any applicable law.
18. SEVERABILITY OF PROVISIONS
If any provision of this Plan shall be held invalid or unenforceable,
such invalidity or unenforceability shall not affect any other provisions
hereof, and this Plan shall be construed and enforced as if such provisions had
not been included.
19. PAYMENT TO MINORS, ETC.
Any benefit payable to or for the benefit of a minor, an incompetent
person or other person incapable of receipting therefor shall be deemed paid
when paid to such person's guardian or to the party providing or reasonably
appearing to provide for the care of such person, and such payment shall fully
discharge the Committee, Seal Fleet and other parties with respect thereto.
20. HEADINGS AND CAPTIONS
The headings and captions herein are provided for reference and
convenience only, shall not be considered part of the Plan, and shall not be
employed in the construction of the Plan.
21. CONTROLLING LAW
This Plan shall be construed and enforced according to the laws of the
State of Nevada to the extent not preempted by federal law, which shall
otherwise control.
22. ENFORCEMENT OF RIGHTS
In the event Seal Fleet or a Participant is required to bring any
action to enforce the terms of this Plan, the prevailing party shall be
reimbursed by the non-prevailing party for all costs and fees, including actual
attorney fees, for bringing and pursuing such action.
9
<PAGE>
SCHEDULE A
SEAL FLEET, INC.
1996 LONG-TERM INCENTIVE PLAN
INITIAL OPTION GRANTS
Type of Options: Non-Statutory
Exercise Price
of Options: *
Vesting Schedule
of Options 100% on August 14, 1996
Grantee No. of Shares
------- -------------
J. Erik Hvide 40,000
Donald L. Caldera 40,000
James S. Goodner 80,000
Thomas M. Ferguson 240,000
-------
Total Shares 400,000
----------------------------
* The exercise price shall be calculated based upon the average closing
bid price of the Common Stock of Seal Fleet, Inc. for the five trading days
immediately preceding the day of grant or August 14, 1995.
10
<PAGE>
SCHEDULE B
SEAL FLEET, INC.
1996 LONG-TERM INCENTIVE PLAN ("1996 LTIP")
NON-STATUTORY STOCK OPTION GRANT
Participant: Date of Grant:
Grant No.: Option Exercise Price:
Type of Option: Non-Qualified Option Shares:
Subject to the terms of the 1996 LTIP and pursuant to this stock option
grant, Seal Fleet, Inc. (the "Company") hereby grants the option to purchase the
above described number of shares of Seal Fleet Class A Common Stock exercisable
at the Option Exercise Price stated above.
Options granted thereunder shall be exercisable only to the extent of
"vesting." Vesting occurs when the Participant remains continuously employed or
associated with the company or its subsidiaries on the date upon which options
are scheduled to vest in order to have any right to exercise such options which
are scheduled to vest thereafter. If the Participant has failed to remain
continuously employed or associated with the Company or its subsidiaries on a
date upon which options are scheduled to vest, the Participant shall have no
right to nor be entitled to exercise those options or any other options which
may be scheduled to vest thereafter. The stock options under this stock option
grant shall vest 100% as of the Date of Grant.
Except as may be otherwise provided in the 1996 LTIP, vested options
granted thereunder shall expire the earlier of either: (i) ten (10) years after
the Date of Grant; (ii) two (2) years after the Participant's retirement from
the Company or any of its subsidiaries after the Employee attains the age of 62
years; (iii) one (1) year after the date of the Participant's death; or (iv)
three (3) months after the Employee's termination from the Company or any of its
subsidiaries for reasons other than death or retirement after attaining the age
of 62 years.
This grant is made pursuant to the terms of conditions of the 1996
LTIP, a copy of which is attached hereto as Exhibit "A," and by this reference
made a part hereof.
In witness whereof, the undersigned executes this stock option grant as
of the first date set forth herein:
11
<PAGE>
SEAL FLEET, INC.
By:
----------------------------------------------
Its:
----------------------------------------------
Accepted and agreed to as of the Date of Grant:
Name: Social Security No.:
---------------------------- --------------------
Residence Address:
------------------------------------------------------------
12
<PAGE>
SCHEDULE C
ELECTION TO EXERCISE OPTION
To:
The undersigned hereby irrevocably elects to purchase ______ shares of
common stock ("Common Stock") of Seal Fleet, Inc. (the "Company") issuable upon
the exercise of the attached non-statutory stock option (the "Option"), and
requests that certificates for such shares be issued in the name of and
delivered to the address of the undersigned, at the address stated below and, if
said number of shares shall not be all the shares which may be purchased
pursuant to the Option, that a new option evidencing the right to purchase the
balance of such shares be registered in the name of, and delivered to, the
undersigned at the address stated below. [The undersigned hereby agrees with and
represents to the Company that said shares of Common Stock are acquired for
investment and not with a view to, or for sale in connection with, any
distribution or public offering thereof within the meaning of the Securities Act
of 1933.]
Payment enclosed in the amount of $______________
Dated: _________________________________________
Signature: _____________________________________
Address: _______________________________________
_______________________________________
13
<PAGE>
EXHIBIT 11
Seal Fleet, Inc. and Subsidiaries
Computation of Earnings Per Common Share
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
1996 1995
------------ -----------
<S> <C> <C>
Primary Earnings Per Share
Net income (loss) applicable to common stock $6,153,000 $ (116,000)
========== ==========
Common shares outstanding 2,312,405 2,034,627
Effect of using weighted average common and common
equivalent shares outstanding (122,283) -
Effect of shares issuable under stock options using the
treasury stock method * -
---------- ----------
Shares used in computing primary earnings per share 2,190,122 2,034,627
========== ==========
Primary earnings (loss) per common share $ 2.81 $ (0.06)
========== ==========
</TABLE>
_________________________
* Antidilutive
<PAGE>
EXHIBIT 21
LIST OF SUBSIDIARIES OF SEAL FLEET, INC.
A NEVADA CORPORATION
AS OF MARCH 20, 1997
Subsidiary State of Incorporation
- ---------- ----------------------
Sealcraft Operators, Inc. Texas
Caribe Company Delaware
Seal Properties, Inc. Texas
Corpus Company Delaware
South Corporation Delaware
Seal Offshore, Inc. Delaware
First Seal, Inc. Texas
Seal (GP), Inc. Delaware
Seal Marine Management Company Texas
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON
PAGES 12 THROUGH 14 OF THE COMPANY'S FORM 10-KSB FOR THE YEAR AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,437
<SECURITIES> 0
<RECEIVABLES> 8
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,523
<PP&E> 58
<DEPRECIATION> 53
<TOTAL-ASSETS> 2,686
<CURRENT-LIABILITIES> 54
<BONDS> 0
0
0
<COMMON> 248
<OTHER-SE> 2,384
<TOTAL-LIABILITY-AND-EQUITY> 2,686
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 5,669
<EXTRAORDINARY> 484
<CHANGES> 0
<NET-INCOME> 6,153
<EPS-PRIMARY> 2.81
<EPS-DILUTED> 2.81
</TABLE>
