AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 1, 1997.
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CAL DIVE INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
1389
MINNESOTA 1311 95-3409686
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION INDUSTRIAL IDENTIFICATION NUMBER)
OF INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
13430 NORTHWEST FREEWAY, SUITE 350
HOUSTON, TEXAS 77040
(713) 690-1818
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANTS PRINCIPAL EXECUTIVE OFFICES)
OWEN KRATZ
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CAL DIVE INTERNATIONAL, INC.
13430 NORTHWEST FREEWAY, SUITE 350
HOUSTON, TEXAS 77040
(713) 690-1818
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
KEVIN L. CRUDDEN ANDREW C. BECHER T. MARK KELLY
ROBINS, KAPLAN, MILLER & CIRESI L.L.P. SENIOR V.P. AND GENERAL COUNSEL VINSON & ELKINS L.L.P.
2800 LASALLE PLAZA CAL DIVE INTERNATIONAL, INC. 2300 FIRST CITY TOWER
800 LASALLE AVENUE 13430 NORTHWEST FREEWAY, SUITE 350 1001 FANNIN STREET
MINNEAPOLIS, MINNESOTA 55402 HOUSTON, TEXAS 77040 HOUSTON, TEXAS 77002
(612) 349-8500 (713) 690-1818 (713) 758-2222
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
================================================================================
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1)(2) REGISTRATION FEE
- --------------------------------------------------------------------------------
Common Stock, no par value...... $51,000,000 $15,470
================================================================================
(1) Calculated pursuant to Rule 457(o) under the Securities Act of 1933.
(2) Estimated solely for the purpose of calculating the registration fee.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO
SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE>
******************************************************************************
* *
* INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A *
* REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED *
* WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT *
* BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE *
* REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT *
* CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR *
* SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH *
* OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR *
* QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. *
* *
******************************************************************************
SUBJECT TO COMPLETION DATED MAY 1, 1997
SHARES
[LOGO] CAL DIVE INTERNATIONAL, INC.
COMMON STOCK
(WITHOUT PAR VALUE)
Of the shares of Common Stock, no par value per share (the
"Common Stock"), of Cal Dive International, Inc. (the "Company" or "Cal
Dive"), offered hereby, shares are being sold by the Company and
shares are being sold by the Selling Shareholders. See "Principal
and Selling Shareholders." It is currently estimated that the initial public
offering price will be between $ and $ per share. Prior to this
offering (this "Offering"), there has been no public market for the Common
Stock of the Company. See "Underwriting" for information relating to the
factors considered in determining the initial public offering price.
The Company has filed an application for quotation of its Common Stock on
the Nasdaq National Market under the symbol "CDIS."
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 8.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=================================================================================================================================
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share............................ $ $ $ $
- ---------------------------------------------------------------------------------------------------------------------------------
Total(3)............................. $ $ $ $
=================================================================================================================================
</TABLE>
(1) See "Underwriting" for indemnification arrangements.
(2) Before deducting expenses payable by the Company estimated to be $500,000.
(3) The Company and the Selling Shareholders have granted the Underwriters a
30-day option to purchase up to an additional and
shares of Common Stock, respectively, solely to cover over-allotments, if
any. If this option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions, Proceeds to Company and Proceeds to
Selling Shareholders will be $ , $ , $ and $ ,
respectively. The Company will not receive any proceeds from the shares of
Common Stock sold by the Selling Shareholders. See "Underwriting" and
"Principal and Selling Shareholders."
The shares of Common Stock offered hereby are offered by the several
Underwriters named herein, subject to prior sale and acceptance by the
Underwriters, and subject to their right to reject any order in whole or in
part. It is expected that the Common Stock will be available for delivery on or
about June , 1997 at the offices of Schroder Wertheim & Co. Incorporated, New
York, New York.
SCHRODER WERTHEIM & CO.
RAYMOND JAMES & ASSOCIATES, INC.
SIMMONS & COMPANY
INTERNATIONAL
June , 1997
<PAGE>
[GRAPHIC OMITTED]
The UNCLE JOHN is a twin hull DP 254-foot semi-submersible, multi-purpose
support vessel ("MSV") capable of providing well intervention services and
supporting full field development activities in the Deepwater Gulf of Mexico.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING,
AND MAY BID FOR, AND PURCHASE, SHARES OF THE COMMON STOCK IN THE OPEN MARKET.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE>
-------------------------------------
[Schematic depicting the expanse of services
provided by the Company at various water depths]
-------------------------------------
FREQUENTLY USED TERMS:
DEEPWATER. Water depths of greater than 1,000 feet.
DIVING SUPPORT VESSELS ("DSVS"). Subsea services are typically performed
with the use of specially constructed DSVs, which provide an above water
platform that functions as an operational base for divers, ROVs and specialized
equipment.
DYNAMIC POSITIONING ("DP"). A DP system allows a vessel to stay in
position without the use of anchors. Satellite based differential global
positioning systems ensure the proper counteraction to wind, current and wave
forces to maintain position.
REMOTELY OPERATED VEHICLES ("ROVS"). ROVs are robotic vehicles used to
complement, support and increase the efficiency of diving and subsea operations
and for tasks at depths where the use of divers is impossible.
SATURATION DIVING ("SAT DIVING"). SAT diving, required at water depths
greater than 300 feet, involves divers working from special chambers for
extended periods at a pressure equivalent to the depth of the work site.
<PAGE>
-------------------------------------
[Schematic Continued]
-------------------------------------
The BALMORAL SEA is a 259-foot dynamically positioned
DSV that has SAT diving and ROV capabilities for
subsea construction projects at any water depth.
VERMILION BLOCK 328 is one of 15 natural
gas and oil properties acquired by Energy Resource
Technology, Inc., providing a back- log of future
salvage projects for the Company.
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING
ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, THE INFORMATION IN
THIS PROSPECTUS ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION WILL NOT BE
EXERCISED AND HAS BEEN ADJUSTED TO GIVE EFFECT TO (I) A FOR-1 REVERSE
STOCK SPLIT OF THE COMPANY'S COMMON STOCK AND (II) THE ISSUANCE OF 528,541
SHARES TO COFLEXIP, A FRENCH CORPORATION ("COFLEXIP"). UNLESS THE CONTEXT
INDICATES OTHERWISE, ANY REFERENCE IN THIS PROSPECTUS TO "CAL DIVE" OR THE
"COMPANY" REFERS TO CAL DIVE INTERNATIONAL, INC. AND ITS PREDECESSORS,
TOGETHER WITH ITS WHOLLY OWNED SUBSIDIARY, ENERGY RESOURCE TECHNOLOGY, INC.
("ERT").
THE COMPANY
GENERAL
Cal Dive is a leading provider of subsea construction, maintenance and
salvage services to the offshore natural gas and oil industry in the U.S. Gulf
of Mexico (the "Gulf of Mexico" or the "Gulf"). Its services are primarily
performed in support of offshore infrastructure construction projects involving
pipelines, production platforms and risers and subsea production systems.
Through ERT, Cal Dive acquires, operates and produces natural gas and oil from
mature offshore properties, providing customers a cost effective alternative to
the decommissioning process. The Company's customers include major and
independent natural gas and oil producers, pipeline transmission companies and
offshore engineering and construction firms.
The Company owns a diversified fleet of nine vessels servicing the offshore
natural gas and oil industry, principally in the Gulf of Mexico. This market is
experiencing strong exploration and development activity levels, including rapid
growth for services in the Deepwater Gulf. Beginning in 1995, Cal Dive acted to
fill a market void by assembling a fleet of dynamically positioned vessels which
serve as work platforms for Deepwater projects. The vessels acquired include a
semi-submersible multi-service vessel (UNCLE JOHN) and two mono-hull DP vessels
(WITCH QUEEN and BALMORAL SEA). Management believes that the limited number of
competing DP vessels in the Gulf affords Cal Dive a key strategic advantage,
which has led to rising utilization for its vessels. In addition, interest in
the Cal Dive fleet has increased among potential customers and alliance partners
evaluating a "fast track" approach to field development.
In the last twelve months, the Company has positioned itself to work on
full field development projects by entering into a number of strategic
alliances. See "Business -- Strategic Alliances." As part of this strategy, in
April 1997, Cal Dive and certain shareholders sold 32% of its Common Stock to
Coflexip. The companies agreed to form a joint venture to pursue large Deepwater
construction projects in the Gulf (the "Business Cooperation Agreement"). Each
company expects to contribute its expertise to the alliance, with Coflexip
performing engineering, design, and manufacturing of flexible pipe and Cal Dive
providing subsea construction, installation, life of field well services,
abandonment and salvage services. See "-- Recent Developments."
The Company traces its origins to California Divers Inc., which pioneered
the use of mixed gas diving in the early 1960s when oilfield exploration off the
Santa Barbara coast moved to water depths beyond 250 feet. Cal Dive commenced
operations in the Gulf of Mexico in 1975. Since that time, the Company's growth
strategy has consisted of three basic elements: (i) identifying niche markets
that are underserviced or where no service exists, (ii) developing the technical
expertise to provide the service and (iii) acquiring assets or seeking business
alliances which fill the market gap.
1
<PAGE>
This growth strategy has frequently involved expanding beyond the Company's
main contracting base and developing innovative service capabilities to meet
customer needs, including the following significant milestones:
o 1984 -- SATURATION VESSELS: Custom designed the first DSVs with
moonpool deployed SAT diving systems dedicated for use in
the Gulf of Mexico.
o 1986 -- TURNKEY CONTRACTING: Began providing subsea construction
work on a fixed price basis enabling customers to better
control project costs.
o 1989 -- SALVAGE OPERATIONS: Chartered, and later acquired, the CAL
DIVE BARGE I ("BARGE I") for shallow water salvage
operations, a business synergistic with the Company's
traditional diving services.
o 1992 -- NATURAL GAS PRODUCTION: Formed a natural gas production
company, ERT, to expand customer options for decommissioning
and remediation of mature offshore properties and to expand
off-season salvage activity.
o 1993 -- WELL SERVICING: Added a new upstream service, well servicing
and plugging and abandoning ("P&A"), as a complement to
the Company's salvage services and to exploit the value of
ERT properties through enhanced recovery techniques.
o 1994 -- DYNAMIC POSITIONING: Chartered a DP DSV for use in the Gulf
of Mexico, enabling the Company to work through the winter
months and in deeper water. This vessel, the BALMORAL SEA,
was subsequently acquired in August 1996.
o 1995 -- DP DSV: Acquired and enhanced a DP DSV, the WITCH QUEEN, to
expand the Company's marine construction and subsea services
to include flexible pipelay, umbilical lay, coiled line pipe
installation, subsea P&A and ROV support.
o 1996 -- MULTI-SERVICE VESSEL: Acquired and enhanced a
semi-submersible MSV, the UNCLE JOHN, as the cornerstone of
the Company's Deepwater strategy, thereby expanding its
product line to include geotechnical investigation, J-lay of
infield flowlines, installation of flexible and hard
jumpers, platform risers, and turnkey field development.
o 1997 -- STRATEGIC ALLIANCES: Formed an alliance with Coflexip which
complements other formal alliance agreements with a team of
specialty contractors to provide the Company with access to
advanced resources and a full range of services for
Deepwater construction projects.
COMPANY STRENGTHS
DIVERSIFIED FLEET OF VESSELS
Cal Dive has focused on owning and operating a diversified fleet which
provides a full complement of subsea construction, maintenance, and salvage
project capabilities. This fleet enables the Company to operate in all Gulf of
Mexico water depths where development is currently contemplated. The services
provided by these vessels both overlap and are complementary in a number of
market segments, enabling the Company to deploy its DSVs to areas of highest
utility and margin potential.
2
<PAGE>
EXPERIENCED PERSONNEL AND TURNKEY CONTRACTING
The Company believes its highly qualified personnel enable it to compete
effectively in the Gulf's unique "spot market" for offshore construction in
which projects are generally of a short duration and of a turnkey nature. The
Company's personnel have the technical and operational experience to manage
turnkey projects and deliver bids which are priced to achieve targeted
profitability. The Company believes these factors position it well to capitalize
on the trend in the oil and gas industry towards outsourcing additional
responsibility to contractors.
DEEPWATER TECHNICAL SERVICES
The Company believes that it has established a unique niche by assembling
the specialized assets, technical personnel and exclusive alliance agreements
that provide a cost effective solution to the rising demand for Deepwater
services. As a result, the Company is able to meet the fast track requirements
of Deepwater development projects.
MAJOR PROVIDER OF SATURATION DIVING SERVICES
Cal Dive owns and operates over 50% of the U.S. based SAT DSVs currently
operating in the Gulf of Mexico. In recent years there has been an increasing
level of activity as development of recently discovered Deepwater fields
commences and new Deepwater production is tied into the existing Gulf
infrastructure. Management believes that this trend will result in increasing
demand for SAT diving services.
LEADER IN SHALLOW WATER SALVAGE OPERATIONS
Since 1989, the Company has established a leading position in the
decommissioning and remediation of facilities in the shallow water Gulf of
Mexico. The Company expects the demand for this service to increase due to the
significant number of platforms which must be removed in accordance with
government regulations.
MANAGEMENT OF MATURE NATURAL GAS AND OIL PROPERTIES
Management believes that Cal Dive is the only company acquiring mature
properties in the Gulf of Mexico with the combined attributes of financial
strength, reservoir engineering and operations expertise and the availability of
company-owned salvage assets, resulting in significant strategic and cost
advantages. The Company has personnel experienced in geology, reservoir and
production engineering and facilities management to support ERT operations,
exploit the value of acquired properties and oversee full field development
projects.
GROWTH STRATEGY
FOCUS ON THE GULF OF MEXICO
Cal Dive intends to maintain its current focus on the Gulf of Mexico where
the Company is well positioned to respond to rising market demand for services
in all water depths, including Deepwater. Recent Gulf of Mexico lease sales by
the Minerals Management Service of the Department of the Interior ("MMS")
attracted record bidding levels both in terms of the number of leases bid and
the amount of capital exposed, including a record level of interest in Deepwater
blocks. This has led to new market opportunities as well as increased demand for
the Company's traditional services, as reflected in both higher vessel
utilization rates and operating margins.
CAPTURE A SIGNIFICANT SHARE OF THE DEEPWATER MARKET
As Gulf of Mexico Deepwater developments have created a need for new
applications of subsea technology, there is a corresponding need for a new
generation of subsea contractor to develop and deploy that technology.
Management, through its Deepwater Technical Services Group, has targeted a
market niche in which the Company functions as a focal point in the
3
<PAGE>
assembly and delivery of the technology required for Deepwater projects. In
particular, the Company believes that well completion, subsea installation and
infield connection services have become more critical in an era of limited
availability of Deepwater drilling equipment and hardware. The Company's MSV has
the capacity to undertake certain well completion activities, thereby reducing
cost to the operator and freeing-up more expensive drilling rig time. Cal Dive
has also negotiated alliance agreements with a number of specialized contractors
to provide a full range of services necessary to Deepwater subsea construction
projects. The objective of this strategy is to increase the proportion of the
Deepwater field development expenditures captured by Cal Dive while reducing the
project duration and overall cost to the operator.
CAPITALIZE ON SYNERGIES WITH COFLEXIP
Cal Dive entered into a strategic alliance with Coflexip to strengthen its
position in the Deepwater Gulf and to respond to the trend toward full field
development services. Management believes that Coflexip and Cal Dive together
offer complementary products and services which significantly expand Cal Dive's
ability to provide full field development and life of field services. Coflexip
is a world leader in the design and manufacture of flexible pipe and umbilicals
and is one of the leading subsea construction contractors. Headquartered in
Paris, France, Coflexip employs approximately 3,500 employees spread over five
continents. In 1996, Coflexip had sales of $945 million and total assets of $1.1
billion at year-end.
OFFER FULL FIELD DEVELOPMENT SERVICES
Management believes that the significant number of new leases, the number
of Deepwater leases due to expire by 2000 and shortages of well completion
equipment, drilling rigs and production infrastructure will create demand for
fast track, full field development solutions. Cal Dive's recent asset
acquisitions and its personnel and technical expertise, combined with strategic
alliances, put the Company in a strong competitive position to respond to this
market need. In addition, the Company intends to apply the technologies and
capabilities developed for the Deepwater to the "midwater" Gulf (500 to 1,000
feet) as a cost effective alternative to fixed platforms.
EXPAND THE COMPANY'S NATURAL GAS AND OIL PRODUCTION
Management believes Cal Dive's reputation in the industry and its
experience in decommissioning and remediation work make the Company a preferred
buyer of mature natural gas and oil properties. The Company intends to exploit
its recent experience managing heavy lift salvage to expand the number of mature
offshore properties for which the Company will bid. In addition, the Company
will continue, on a selective basis, to acquire non-operated working interests
in fields where there is the potential of Cal Dive being awarded the salvage
work.
RECENT DEVELOPMENTS
PURCHASE OF STOCK BY COFLEXIP AND BUSINESS COOPERATION AGREEMENT
In April 1997, certain members of management, other shareholders and the
Company sold an equity interest of approximately 32% of Company Common Stock to
Coflexip for $35 million. As part of this transaction, the Company also acquired
two heavy work class construction ROVs manufactured by Coflexip's Perry Tritech
subsidiary, thereby re-establishing ROVs in Cal Dive's product line. Coflexip
and Cal Dive also entered into the Business Cooperation Agreement for combined
services to be offered on Gulf projects exceeding $25 million in value and
meeting certain other criteria. The entity contemplated by the Business
Cooperation Agreement is expected to be formed by June 30, 1997. See
"Business -- Coflexip Strategic Alliance."
4
<PAGE>
THE OFFERING
Common Stock offered:
By the Company.................. shares(1)
By the Selling Shareholders..... shares(1)
Total...................... shares(1)
Common Stock outstanding after the
Offering........................... shares(2)
Use of proceeds...................... To repay indebtedness incurred in
connection with the purchases of the
UNCLE JOHN and the BALMORAL SEA, to
fund capital improvements to the
UNCLE JOHN and other vessels and for
the purchase of natural gas and oil
properties. Any remaining proceeds
will be used for general corporate
purposes, including the possible pur-
chase of additional vessels. The
Company will not receive any proceeds
from the sale of Common Stock by the
Selling Shareholders. See "Use of
Proceeds."
Proposed Nasdaq National Market CDIS
symbol.............................
- ------------
(1) Does not include shares which may be sold by the Company and Selling
Shareholders pursuant to the Underwriters' over-allotment option. See
"Principal and Selling Shareholders" and "Underwriting."
(2) Does not include 911,500 shares issuable upon exercise of outstanding
options. See "Management -- Compensation Pursuant to Plans."
5
<PAGE>
SUMMARY HISTORICAL FINANCIAL AND OPERATING DATA
The following summary financial and operating data is qualified in its
entirety by the more detailed information appearing in "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
Financial Statements, including the notes thereto, appearing elsewhere in this
Prospectus.
YEAR ENDED DECEMBER 31,
----------------------------------
1994 1995 1996
---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
INCOME STATEMENT DATA:
Revenues:
Subsea and salvage............ $ 35,718 $ 32,748 $ 63,870
Natural gas and oil
production................. 2,314 4,777 12,252
Total revenue................. 38,032 37,525 76,122
Gross profit....................... 10,961 8,849 22,086
Operating income................... 6,304 3,917 13,795
Income before taxes................ 5,807 3,721 13,014
Net income......................... 4,034 2,674 8,435
========== ========== ==========
Net income per share............... $ 0.46 $ 0.24 $ 0.75
========== ========== ==========
OTHER DATA:
EBITDA(1).......................... $ 8,321 $ 6,712 $ 19,052
Depreciation and amortization...... 2,017 2,795 5,257
Capital expenditures............... 1,397 16,857 27,290
YEAR ENDED DECEMBER 31,
----------------------------------
1994 1995 1996
---------- ---------- ----------
OPERATING DATA:
Number of Vessels (at end of
period):
DP MSV........................ 0 0 1
DP DSVs....................... 1 1 2
DSVs.......................... 5 5 5
Derrick barge................. 1 1 1
---------- ---------- ----------
Total Vessels............ 7 7 9
Natural Gas and Oil Properties:
Producing properties
acquired................... 2 7 5
Total properties.............. 2 9 14
Natural Gas and Oil Production:
Gas (MMcf).................... 1,250 2,382 4,310
---------- ---------- ----------
Oil (MBbls)................... 29 31 38
---------- ---------- ----------
- ------------
(1) As used herein, EBITDA represents earnings before net interest expense,
taxes, depreciation and amortization. EBITDA is frequently used by security
analysts and is presented here to provide additional information about the
Company's operations. EBITDA should not be considered as an alternative to
net income as an indicator of the Company's operating performance or as an
alternative to cash flow as a better measure of liquidity.
6
<PAGE>
AS OF
DECEMBER 31, 1996
-------------------------
AS
ACTUAL ADJUSTED(1)
-------- ------------
(IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents.......... $ 204
Working capital.................... 13,409
Total assets....................... 82,358
Long-term debt..................... 25,000
Shareholders' equity............... 30,844
- ------------
(1) Adjusted to give effect to (i) the Coflexip transaction and (ii) the
issuance of the Common Stock offered hereby and the application of the net
proceeds to the Company therefrom. See "Use of Proceeds."
SUMMARY NATURAL GAS AND OIL RESERVE DATA
The following table sets forth summary data with respect to the Company's
estimated proved natural gas and oil reserves and related estimated future net
revenue at December 31, 1996, and is based upon the report of Miller & Lents,
Ltd. ("Miller & Lents"), independent petroleum engineers. For additional
information relating to the Company's natural gas and oil reserves, see "Risk
Factors -- Uncertainty of Estimates of Oil and Gas Reserves" and
"Business -- Natural Gas and Oil Operations" and the Supplemental Information
on Oil and Gas Exploration and Producing Activities included in Note 11 of the
notes to Financial Statements included elsewhere in this Prospectus.
TOTAL PROVED
----------------------
(DOLLARS IN THOUSANDS)
Estimated Proved Reserves:
Natural Gas (MMcf)................. 24,596
Oil and Condensate (MBbls)......... 124
Future net cash flows before income
taxes................................ $ 58,781
Present value of estimated future net
cash flows before income taxes....... $ 48,703
Standardized measure of discounted
future net cash flows (1)............ $ 33,805
- ------------
(1) The standardized measure of discounted future net cash flows attributable to
the Company's reserves was prepared using constant prices as of the
calculation date, discounted at 10% per annum.
7
RISK FACTORS
AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS.
INDUSTRY VOLATILITY
The Company's subsea and abandonment activities depend on offshore natural
gas and oil exploration, development and production expenditures, which are
dependent on natural gas and oil prices. The level of exploration and
development activity has traditionally been volatile as a result of fluctuations
in natural gas and oil prices and their uncertainty in the future. A significant
or prolonged reduction in natural gas or oil prices in the future would likely
depress offshore drilling and development activity, reduce the demand for the
Company's services and could have a material adverse effect on the Company's
financial condition and results of operations. See "Business -- The Industry"
and "Business -- Natural Gas and Oil Operations."
VESSEL OPERATING RISKS
Marine construction involves a high degree of operational risk. Hazards,
such as vessels sinking, grounding, colliding and sustaining damage from severe
weather conditions are inherent in marine operations. These hazards can cause
personal injury or loss of life, severe damage to and destruction of property
and equipment, pollution or environmental damage and suspension of operations.
Litigation arising from such an occurrence may result in lawsuits asserting
large claims. The Company maintains such insurance protection as it deems
prudent, including hull insurance on its vessels. There can be no assurance that
any such insurance will be sufficient or effective under all circumstances or
against all hazards to which the Company may be subject. A successful claim for
which the Company is not fully insured could have a material adverse effect on
the Company. Moreover, no assurance can be given that the Company will be able
to maintain adequate insurance in the future at rates that it considers
reasonable. See "Business -- Insurance and Litigation."
SEASONALITY
Marine operations conducted in the Gulf of Mexico are seasonal and depend,
in part, on weather conditions. Historically, Cal Dive has enjoyed its highest
vessel utilization rates during the third and fourth quarters of the year when
weather conditions are favorable for offshore exploration, development and
construction activities and has experienced its lowest utilization rates in the
first quarter. Accordingly, the results of any one quarter are not necessarily
indicative of annual results or continuing trends. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
CONTRACT BIDDING RISKS
A majority of the Company's projects are performed on a qualified turnkey
basis. The revenue, costs and gross profit realized on a contract can vary from
the estimated amount because of changes in offshore job conditions and
variations in labor and equipment productivity from the original estimates. In
addition, between April 15 and October 15, the Company typically bears the risk
of delays caused by adverse weather conditions other than those resulting from
named tropical storms. These variations and risks inherent in the marine
construction industry may result in the Company experiencing reduced
profitability or losses on projects.
UNCERTAINTY OF ESTIMATES OF NATURAL GAS AND OIL RESERVES
This Prospectus contains an estimate of the Company's proved natural gas
and oil reserves and the estimated future net cash flows therefrom based upon a
report prepared as of December 31, 1996 by Miller & Lents that relies upon
various assumptions, including assumptions
8
<PAGE>
required by the Securities and Exchange Commission (the "Commission") as to
natural gas and oil prices, drilling and operating expenses, capital
expenditures, taxes and availability of funds. The process of estimating natural
gas and oil reserves is complex, requiring significant decisions and assumptions
in the evaluation of available geological, geophysical, engineering and economic
data for each reservoir. As a result, such estimates are inherently imprecise.
Actual future production, cash flows, development expenditures, operating
expenses and quantities of recoverable natural gas and oil reserves may vary
substantially from those estimated in the report. Any significant variance in
these assumptions could materially affect the estimated quantity and value of
reserves set forth in this Prospectus. See "Business -- Natural Gas and Oil
Operations."
NATURAL GAS AND OIL OPERATING RISKS
The Company's natural gas and oil operations are subject to the usual risks
incident to the operation of natural gas and oil wells, including with respect
to offshore properties, the additional hazards relating to, or loss from, severe
weather. In accordance with industry practice, the Company maintains insurance
against some, but not all, of the risks described above. See
"Business -- Insurance and Litigation."
COMPETITION
The business in which the Company operates is highly competitive. Several
of the Company's competitors are companies that are substantially larger and
have greater financial and other resources than the Company. If other
international companies relocate vessels to the Gulf of Mexico, levels of
competition may increase and the Company's business could be adversely affected.
See "Business -- Competition."
CUSTOMER CONCENTRATION
The Company's customers consist primarily of major, well-established oil
and pipeline companies and independent oil and gas producers. During 1996, the
Company derived approximately 24% of its contract revenue from one customer.
While the Company currently has a good relationship with its customers, the loss
of any one of its largest customers, or a sustained decrease in demand, could
result in a substantial loss of revenues and could have a material adverse
effect on the Company's operating performance. See "Business -- Customers."
DEPENDENCE ON KEY PERSONNEL
The Company's success depends on the continued active participation of key
management personnel. The loss of key people could adversely affect the
Company's operations. The Company has two-year employment and non-compete
agreements with each of Messrs. Owen Kratz, Gerald G. Reuhl and S. James Nelson
and six of its senior officers. The Company has also obtained and is the sole
beneficiary under key person life insurance policies with Messrs. Kratz and
Reuhl, each in the amount of $6 million. The Company believes that its success
is also dependent upon its ability to employ and retain skilled personnel. See
"Management."
REGULATORY AND ENVIRONMENTAL MATTERS
The Company's subsea construction, inspection, maintenance, salvage, and
abandonment operations and its natural gas and oil production from offshore
properties are subject to and affected by various types of government
regulation, including numerous federal, state and local environmental protection
laws and regulations. These laws and regulations are becoming increasingly
complex, stringent and expensive and there can be no assurance that continued
compliance with existing or future laws or regulations will not adversely affect
the operations of the Company. Significant fines and penalties may be imposed
for non-compliance. See "Business -- Government Regulation" and
"Business -- Environmental Regulations."
9
<PAGE>
ABSENCE OF A PRIOR PUBLIC TRADING MARKET; POSSIBLE VOLATILITY OF MARKET PRICE;
DILUTION
Prior to this Offering, there has been no public market for the Common
Stock. Although the Company has applied for quotation of the shares of Common
Stock offered hereby on the Nasdaq National Market, there can be no assurance
that an active public market will develop or be maintained for the Common Stock.
The initial public offering price will be determined by negotiations among the
Company, the Selling Shareholders and the Underwriters. For the factors
considered in such negotiations, see "Underwriting." There can be no assurance
that future market prices will equal or exceed the initial public offering price
set forth on the cover page of this Prospectus. Following this Offering, the
market price of the Common Stock may fluctuate depending on various factors,
including the general economy, stock market conditions, general trends in the
oilfield services industry, announcements by the Company or its competitors and
variations in the Company's quarterly and annual operating results. Purchasers
of the Common Stock offered hereby will experience an immediate and substantial
dilution in the net tangible book value per share. In addition, to the extent
equity financing is pursued by the Company in connection with the acquisition or
building of additional vessels, dilution may occur to investors. See
"Dilution."
VOTING CONTROL BY PRINCIPAL SHAREHOLDERS
After giving effect to this Offering, the current shareholders of the
Company will own approximately % of the outstanding Common Stock ( % if
the Underwriters' over-allotment option is exercised in full). The current
shareholders are parties to a shareholders agreement which, among other things,
provides for the election of directors. As a result, the current shareholders
may be able to control the outcome of certain matters requiring a shareholder
vote, including the election of directors. See "Business -- Coflexip Strategic
Alliance," "Certain Relationships and Related Transactions" and "Principal
and Selling Shareholders."
ABSENCE OF DIVIDENDS
The Company has never paid cash dividends on its Common Stock and intends
for the foreseeable future to retain any earnings otherwise available for
dividends for the future operation and growth of the Company's business. In
addition, the Company's financing arrangements prohibit the payment of cash
dividends on its capital stock. See "Dividend Policy."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the current shareholders, directors and
officers of the Company will beneficially own shares of the Common
Stock, which will represent approximately % of the then issued and
outstanding shares ( % if the Underwriters' over-allotment option is
exercised in full). The Company, its officers and directors, the Selling
Shareholders, certain other shareholders of the Company and Coflexip have agreed
with the Underwriters not to offer, sell or otherwise dispose of any shares of
Common Stock for 180 days from the date of this Prospectus without the prior
consent of the Representatives of the Underwriters. After the expiration of such
agreement, however, such shareholders may sell shares pursuant to Rule 144 under
the Securities Act of 1933, as amended (the "Securities Act"), or otherwise.
In addition, the current shareholders, including Coflexip, have been granted
demand and "piggyback" registration rights by the Company with respect to all
of the shares of Common Stock owned by them. Although the Company cannot predict
the timing or amount of future sales of Common Stock or the effect that the
availability of such shares for sale will have on the market price prevailing
from time to time, sales of substantial amounts of Common Stock in the public
market following this Offering could adversely affect the market price of the
Common Stock. See "Principal and Selling Shareholders," "Description of
Capital Stock -- Registration Rights" and "Shares Eligible for Future Sale."
10
<PAGE>
ANTI-TAKEOVER CONSIDERATIONS
The Board of Directors of the Company has the authority, without any action
by the shareholders, to fix the rights and preferences on up to 5,000,000 shares
of undesignated preferred stock, including dividend, liquidation and voting
rights. In addition, the Company's Articles of Incorporation divide the
Company's Board of Directors into three classes. Except for a transaction
involving Coflexip (which is specifically excluded), the Company also is subject
to certain anti-takeover provisions of the Minnesota Business Corporations Act
("MBCA"). In addition, the Company is a party to a Shareholders Agreement that
provides Coflexip with a right of first refusal in connection with certain
acquisition proposals for the Company. Any or all of the provisions or factors
described above may have the effect of discouraging a takeover proposal or
tender offer not approved by management and the Board of Directors of the
Company, and could result in shareholders who may wish to participate in such a
proposal or tender offer receiving less for their shares than otherwise might be
available in the event of a takeover attempt. See "Description of Capital
Stock -- Certain Anti-Takeover Provisions" and "Certain Relationships and
Related Transactions."
11
<PAGE>
THE COMPANY
Cal Dive is a leading provider of subsea construction, maintenance and
salvage services to the offshore natural gas and oil industry in the Gulf of
Mexico. In July 1990, the Company was purchased by a group of investors
including current management and key employees. In September 1992, Cal Dive
formed ERT as a wholly owned subsidiary, to purchase producing offshore natural
gas and oil properties which are in the later stages of their economic lives. In
January 1995, First Reserve Corporation ("First Reserve"), on behalf of
certain of the investment funds it manages, acquired 50% of the Company's Common
Stock. In April 1997, Coflexip purchased approximately 32% of the Company's
Common Stock. Most of the Company's senior and middle operations management have
been actively involved with Cal Dive since the mid-1980s.
The Company was organized under the laws of Minnesota in June 1990. The
principal executive offices of the Company are located at 13430 Northwest
Freeway, Suite 350, Houston, Texas 77040, and its telephone number is (713)
690-1818.
USE OF PROCEEDS
The net proceeds from the sale of the shares of Common Stock offered by the
Company (assuming an initial public offering price of $ per share) will be
approximately $ million ($ million if the Underwriters' over-allotment
option is exercised in full). Of such net proceeds, the Company intends to repay
indebtedness incurred in connection with the purchase of the UNCLE JOHN and the
BALMORAL SEA, to fund capital improvements to the UNCLE JOHN and other vessels
and for the purchase of natural gas and oil properties. Any remaining net
proceeds will be used for other general corporate purposes and the possible
purchase of additional vessels. Pending such uses, the Company intends to invest
the net proceeds of this Offering in short-term investment grade, interest
bearing securities. As of December 31, 1996, borrowings under the Company's
Amended Loan and Security Agreement with Fleet Capital Corporation (the
"Revolving Credit Agreement") which matures in December 2000, had an aggregate
outstanding principal balance of $25 million, bearing interest at rates of 7.37%
($22 million) and 8.75% ($3 million). In April 1997, the Company and Fleet
Capital Corporation amended the Revolving Credit Agreement to, among other
things, (i) increase the credit line to $40 million, (ii) reduce the interest
rate, (iii) release liens on ERT properties and (iv) reduce the financial
covenants from four to two (a fixed charge coverage ratio and a $60 million debt
limitation). The Company will not receive any of the proceeds from the sale of
shares of Common Stock by the Selling Shareholders. See "Principal and Selling
Shareholders" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
DIVIDEND POLICY
The Company has never paid cash dividends on its Common Stock and does not
intend to pay cash dividends in the foreseeable future. The Company currently
intends to retain earnings, if any, for the future operation and growth of its
business. In addition, the Company's financing arrangements prohibit the payment
of cash dividends on its capital stock. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
12
<PAGE>
DILUTION
The net tangible book value of the Company at December 31, 1996, was
$ or $ per share of Common Stock. Net tangible book value per share
of Common Stock is determined by dividing the tangible net worth (total tangible
assets less total liabilities) of the Company by the shares of
Common Stock outstanding prior to the consummation of this Offering. After
giving effect to the sale of Common Stock by the Company in this Offering
(assuming no exercise of the Underwriters' over-allotment option and net
proceeds to the Company of $ ), the pro forma net tangible book value
of the Company at December 31, 1996, would have been approximately $ or
$ per share of Common Stock. This represents an immediate increase in net
tangible book value of $ per share of Common Stock to present holders of
Common Stock and an immediate dilution of approximately $ per share to new
investors purchasing shares in this Offering. The following table illustrates
this per share dilution to new investors:
Assumed initial public offering price
per share............................. $
Net tangible book value per share
before the Offering.............. $
Increase per share attributable to
new investors.................... $
Pro forma net tangible book value per
share after the Offering..............
Dilution per share to new investors..... $
=========
The following table sets forth, as of December 31, 1996, the number of
shares of Common Stock purchased from the Company, the total consideration paid
and the average price per share paid by the existing shareholders and by new
investors:
SHARES PURCHASED TOTAL CONTRIBUTION AVERAGE
------------------- -------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
-------- ------- --------- ------- ---------
Existing shareholders(1)..
New investors.............
Total................
- ------------
(1) Includes the issuance of 528,541 shares of Common Stock to Coflexip at a
value of $9.46 per share on April 11, 1997.
The above computations do not give effect to the 911,500 shares issuable
pursuant to outstanding stock options, all of which are exercisable at exercise
prices ranging from $ to $ per share. To the extent any options are
exercised in the future at an exercise price less than the initial public
offering price, there will be further dilution to new investors. See
"Management -- Compensation Pursuant to Plans."
13
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company (i) as of
December 31, 1996, and (ii) as adjusted to give effect to the sale by the
Company of the shares of Common Stock offered hereby at an assumed
offering price of $ per share and the application of the estimated net
proceeds to the Company therefrom as described in "Use of Proceeds." This
table should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the Company's Financial
Statements and notes thereto included elsewhere in this Prospectus.
DECEMBER 31, 1996
-----------------------
AS
ACTUAL ADJUSTED(1)
-------- -----------
(DOLLARS IN THOUSANDS)
Short-term debt:
Current maturities of long-term
debt.............................. $ -- $
======== ===========
Long-term debt.......................... 25,000
Shareholders' equity:
Common Stock, no par value,
20,000,000 shares authorized;
18,448,010 shares issued and
outstanding; shares
issued and outstanding, as
adjusted(1)....................... 9,093
Additional paid-in capital......... --
Retained earnings.................. 25,806
-------- -----------
Treasury Stock, 7,348,750 shares... (4,056)
-------- -----------
Total shareholders' equity.... 30,844
-------- -----------
Total capitalization.................... $ 55,844 $
======== ===========
Total debt to total capitalization
(%)................................... 45
- ------------
(1) Gives effect to the application of the net proceeds of this Offering, but
does not include an aggregate of 911,500 shares of Common Stock issuable
upon exercise of outstanding stock options. See "Management -- Compensation
Pursuant to Plans."
14
<PAGE>
SELECTED FINANCIAL DATA
The historical financial data presented in the table below for and at the
end of each of the years in the five-year period ended December 31, 1996 are
derived from the consolidated financial statements of the Company audited by
Arthur Andersen LLP, independent public accountants. The data should be read in
conjunction with the Company's Financial Statements and the notes thereto
included elsewhere in this Prospectus and "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1992 1993 1994 1995 1996
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Subsea and salvage................. $ 21,309 $ 35,365 $ 35,718 $ 32,748 $ 63,870
Natural gas and oil production..... -- 1,807 2,314 4,777 12,252
---------- ---------- ---------- ---------- ----------
Total revenue...................... 21,309 37,172 38,032 37,525 76,122
---------- ---------- ---------- ---------- ----------
Cost of sales:
Subsea and salvage................. 16,973 26,208 25,477 25,568 46,766
Natural gas and oil................ -- 586 1,594 3,107 7,270
---------- ---------- ---------- ---------- ----------
Gross profit............................ 4,336 10,377 10,961 8,849 22,086
Selling and administrative expenses..... 3,136 4,075 4,657 4,932 8,291
---------- ---------- ---------- ---------- ----------
Operating income........................ 1,200 6,302 6,304 3,917 13,795
Other income and expenses:
Interest expense, net.............. 344 395 428 135 745
Other (income) expense, net........ (159) 148 69 61 36
---------- ---------- ---------- ---------- ----------
Income before income taxes.............. 1,015 5,759 5,807 3,721 13,014
Provision for income taxes......... 324 1,811 1,773 1,047 4,579
---------- ---------- ---------- ---------- ----------
Net income.............................. $ 691 $ 3,948 $ 4,034 $ 2,674 $ 8,435
========== ========== ========== ========== ==========
Net income per share.................... $ 0.04 $ 0.30 $ 0.46 $ 0.24 $ 0.75
========== ========== ========== ========== ==========
Weighted average number of shares
outstanding........................... 16,603 13,014 8,836 11,016 11,286
OTHER FINANCIAL DATA:
EBITDA(1).......................... $ 2,438 $ 7,785 $ 8,321 $ 6,712 $ 19,052
Depreciation and amortization...... 1,238 1,483 2,017 2,795 5,257
Capital expenditures............... 460 1,203 1,397 16,857 27,290
AS OF DECEMBER 31,
----------------------------------------------------------
1992 1993 1994 1995 1996
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
BALANCE SHEET DATA:
Working capital.................... $ 4,178 $ 5,309 $ 6,052 $ 4,033 $ 13,409
Total assets....................... 17,051 20,023 26,731 43,648 82,358
Long-term debt..................... 2,922 5,141 3,766 5,300 25,000
Shareholders' equity............... 7,436 6,360 10,394 22,408 30,844
</TABLE>
- ------------
(1) As used herein, EBITDA represents earnings before net interest expense,
taxes, depreciation and amortization. EBITDA is frequently used by security
analysts and is presented here to provide additional information about the
Company's operations. EBITDA should not be considered as an alternative to
net income as an indicator of the Company's operating performance or as an
alternative to cash flow as a better measure of liquidity.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Natural gas and oil prices, the offshore mobile rig count and Gulf of
Mexico lease activity are three of the primary indicators management uses to
predict the level of the Company's business. Cal Dive's construction services
generally follow successful drilling activities by six to eighteen months. The
level of drilling activity is related to both short and long-term trends in
natural gas and oil prices. A decline in natural gas and oil prices generally
leads to a reduction in offshore drilling activity which can lower demand for
construction services. Recently, this relationship has been less pronounced due
to a number of industry trends, including advances in technology that have
increased drilling success rates and efficiency, and a worldwide growth in the
demand for both natural gas and oil. The number of offshore rigs working in the
Gulf of Mexico has averaged close to practical full utilization since mid-1995
which management expects will lead to increased construction activity over the
next several years. Given worldwide shortages of drilling rigs, subsea hardware
and experienced personnel, efforts to drill Gulf of Mexico leases on a timely
basis have accelerated demand for the Company's subsea services resulting in
improved pricing.
Product prices impact the Company's natural gas and oil operations in
several respects. The Company seeks to acquire producing natural gas and oil
properties that are generally in the later stages of their economic life. These
properties typically have few, if any, unexplored drilling locations, so the
potential abandonment liability is a significant consideration with respect to
the offshore properties which the Company has purchased to date. Although higher
natural gas prices tended to reduce the number of mature properties available
for sale, these higher prices contributed to improved operating results for the
Company in 1996.
Salvage operations consist of platform decommissioning, removal and
abandonment, P&A services performed by the Company's stiff-leg derrick barge and
well servicing equipment. In addition, salvage related support, such as debris
removal and preparation of platform legs for removal, is often provided by the
Company's surface diving vessels. In 1989, management targeted platform removal
and salvage operations as a regulatory driven activity which offers a partial
hedge against fluctuations in the commodity price of natural gas. In particular,
MMS regulations require removal of platforms within one year from the date
production ceases and also require remediation of the seabed at the well site to
its original state. In 1996, the Company contracted and managed, on a turnkey
basis, all aspects of the decommissioning and abandonment of certain fields for
two major oil companies using third party heavy lift derrick barges, a service
the Company intends to expand in the future.
16
<PAGE>
The following table sets forth for the periods presented (i) average U.S.
natural gas prices, (ii) the Company's natural gas production, (iii) the average
number of offshore rigs under contract in the Gulf of Mexico, (iv) the number of
platforms installed and removed in the Gulf of Mexico and (v) the vessel
utilization rates for each of the major categories of the Company's fleet.
<TABLE>
<CAPTION>
1994 1995
------------------------------------------ ------------------------------------------
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Natural Gas Prices(1)........... $ 2.42 $ 1.95 $ 1.70 $ 1.60 $ 1.51 $ 1.63 $ 1.54 $ 2.06
ERT Gas Production (MMcf)............ 132 323 380 415 267 410 765 940
Rigs Under Contract in the Gulf of
Mexico(2).......................... 125 129 134 140 119 133 421 147
Platform Installations(3)............ 12 23 39 50 12 17 26 22
Platform Removals(3)................. 18 28 43 31 15 37 24 10
Average Company Vessel Utilization
Rate(4)............................
Dynamic Positioned............... -- -- 80% 99% 77% -- -- 90%
Saturation DSV................... 37% 57% 82% 89% 38% 53% 88% 88%
Surface Diving................... 57% 68% 78% 66% 45% 63% 77% 74%
Derrick Barge.................... 14% 70% 60% 55% 21% 46% 63% 32%
</TABLE>
1996
------------------------------------------
Q1 Q2 Q3 Q4
--------- --------- --------- ---------
U.S. Natural Gas Prices(1)......... $ 3.44 $ 2.33 $ 2.18 $ 2.96
ERT Gas Production (MMcf).......... 899 966 1,168 1,277
Rigs Under Contract in the Gulf of
Mexico(2)........................ 150 157 161 164
Platform Installations(3).......... 12 35 31 29
Platform Removals(3)............... 14 11 25 30
Average Company Vessel Utilization
Rate(4)..........................
Dynamic Positioned............. 81% 71% 82% 92%
Saturation DSV................. 55% 73% 82% 88%
Surface Diving................. 62% 77% 84% 74%
Derrick Barge.................. 15% 58% 91% 65%
- ------------
(1) Average of the monthly Henry Hub cash prices in $ per MMBtu, as reported in
Natural Gas Week.
(2) Average weekly number of rigs contracted, as reported by Offshore Data
Services.
(3) Source: Offshore Data Services; installation and removal of platforms with
two or more piles in the Gulf of Mexico.
(4) Average vessel utilization rate is calculated by dividing the total number
of days the vessels in this category generated revenues by the total number
of days in each quarter.
Vessel utilization is historically lower during the first quarter due to
winter weather conditions in the Gulf of Mexico. Accordingly, the Company plans
its drydock inspections and other routine and preventive maintenance programs
during this period. During the first quarter, a substantial number of the
Company's customers finalize capital budgets and solicit bids for construction
projects. The bid and award process during the first two quarters leads to the
commencement of construction activities during the second and third quarters. As
a result, the Company has historically generated approximately 60 to 65% of its
consolidated revenues in the last six months of the year. The Company's
operations can also be severely impacted by weather during the fourth quarter.
The Company's salvage barge, which has a shallow draft, is particularly
sensitive to adverse weather conditions, and its utilization rate will be lower
during such periods. To minimize the impact of weather conditions on the
Company's operations and financial condition, Cal Dive began operating DP
vessels and expanded into the acquisition of mature offshore properties. The
unique station-keeping ability offered by dynamic positioning enables these
vessels to operate throughout the winter months and in rough seas. Operation of
natural gas and oil properties tends to offset the impact of weather since the
first and fourth quarters are typically periods of high demand for natural gas
and of strong natural gas prices.
17
<PAGE>
RESULTS OF OPERATIONS
COMPARISON OF YEAR ENDED DECEMBER 31, 1996 TO YEAR ENDED DECEMBER 31, 1995
REVENUES. Consolidated revenues of $76.1 million in 1996 were more than
double the $37.5 million reported in the prior year due primarily to the
addition of new DP vessels and to higher commodities prices and increased
production from natural gas and oil properties. A full year of operations from
the WITCH QUEEN (placed in service in November 1995) and the additions of the
BALMORAL SEA and UNCLE JOHN increased revenues from the DP vessels to 33% of
consolidated 1996 revenues compared to 10% in 1995. This trend is expected to
continue in 1997 because the Company will have full year operations from the
BALMORAL SEA and UNCLE JOHN, which were only in service for eight and two
months, respectively, in 1996. The establishment of a new management team
resulted in improved performance in the operation of the salvage assets (BARGE I
and well servicing equipment) which included the removal of four large
structures by subcontracting heavy lift barges. Natural gas and oil production
from 14 offshore blocks owned at year-end 1996 was $12.3 million compared to
$4.8 million in 1995. This increase of $7.5 million, or 156%, was a result of
natural gas prices increasing by approximately 58% and to production from the
five properties acquired in 1996 as well as the full year contributions of the
Company's other properties.
GROSS PROFIT. Gross profit increased by $13.2 million in 1996, from $8.8
million in 1995 to $22.1 million in 1996. Improved rates and performance on
turnkey contracts resulted in subsea and salvage margins increasing from 22% in
1995 to 27% in 1996. This increase reflects in part the benefit of operating
five specialized SAT vessels. Gross profit from salvage assets was $2.2 million
in 1996 or 13% of that generated by subsea and salvage operations in contrast to
"break-even" results for the prior year. Natural gas and oil production gross
profit was $5.0 million in 1996 compared to $1.7 million in the prior year, with
the $3.3 million increase resulting from higher natural gas prices and greater
production levels.
SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative expenses
increased 68% in 1996 to $8.3 million from $4.9 million in 1995. Payments of
$2.3 million were made to 223 offshore, supervisory and management personnel
under 1996 incentive plans (an increase of $2.0 million over 1995). The balance
of the increase reflects higher sales and administrative costs necessary to
support the 103% increase in 1996 revenues.
NET INTEREST. Net interest expense increased by $610,000 (from $135,000 in
1995 to $745,000 in 1996) due to the borrowings incurred in conjunction with the
acquisition of the BALMORAL SEA and UNCLE JOHN. Borrowings under the Revolving
Credit Agreement averaged $13 million in 1996 compared to $6 million in 1995.
INCOME TAXES. Income taxes of $4.6 million compares to $1.0 million in
1995 as a result of significant increases in 1996 margins and profitability. The
effective tax rate increased significantly, from 28% to 35% because the Company
no longer qualified for the "Small Producer" tax benefit of percentage
depletion. Higher depreciation related to the new DP vessels had the result of
reducing the amount of cash taxes paid. In 1996, cash payments for Federal
income taxes were $2.2 million or 48% of the total $4.6 million tax provision.
NET INCOME. In 1996, net income of $8.4 million increased $5.8 million, or
215%, from 1995 as a result of the factors described above.
COMPARISON OF YEAR ENDED DECEMBER 31, 1995 TO YEAR ENDED DECEMBER 31, 1994
REVENUES. During 1995, the Company's revenues decreased $500,000 to $37.5
million compared to $38 million in 1994. A $2.5 million increase in natural gas
and oil revenues offset decreases in subsea services, particularly derrick barge
and well servicing revenues, which together decreased $1.3 million. The increase
in natural gas and oil revenues was due to the Company's acquisition of seven
offshore properties in 1995. The Company's subsea revenues in 1995 were
negatively impacted by Hurricanes ROXANNE and OPAL. While dealing with adverse
18
<PAGE>
weather in the Gulf of Mexico is an accepted risk in the marine contracting
business, these storms were unusual in that while little damage was incurred in
the Gulf of Mexico, the Company's vessels were unable to leave the dock for 20
days during what are generally the two busiest months of the year (September and
October). In addition, the number of platforms with two or more piles removed in
the Gulf of Mexico decreased by almost 30% for the year which included a 50%
reduction during the last six months, primarily as a result of contractors
shifting assets to higher margin construction projects. The Company's revenues
in 1995 were also negatively impacted by operating difficulties with the BARGE I
which have been resolved.
GROSS PROFIT. Gross profit decreased by $2.2 million in 1995 as compared
to 1994, from $11 million to $8.8 million. Approximately $1.0 million of the
decrease was due to vessel drydockings during 1995 with the balance related to
the down time caused by two hurricanes and operational difficulties with respect
to BARGE I. Three of the Company's vessels, CAL DIVER II, CAL DIVER V and BARGE
I, underwent major U.S. Coast Guard ("USCG") drydock inspections during 1995.
In addition to the work required to maintain the USCG Certificates of
Inspection, the Company completed a major capital upgrade program. As a result,
these three vessels were out of service for a combined aggregate of ten months
during 1995. Natural gas and oil operations contributed 19% of consolidated
gross profit in 1995 as compared to 7% for 1994 due to the increase in the
number of properties owned at December 31, 1995.
SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative expenses
increased 6% to $4.9 million in 1995 compared to $4.7 million in 1994. This
increase was due primarily to improved results in the Company's natural gas and
oil business resulting in an additional $200,000 of incentive compensation
earned by key ERT personnel.
NET INTEREST. During 1995, net interest expense declined 69% to $135,000
as compared to $428,000 in 1994. Interest income generated by the cash deposits
set aside to fund abandonment liabilities was $202,000 in 1995, an increase of
$100,000 from 1994.
INCOME TAXES. Income taxes of $1 million reflect an effective tax rate of
28.1% in 1995 compared to 30.5% in 1994. The decrease in tax rate was due to the
impact of percentage depletion of natural gas and oil operations comprising a
larger percentage of the Company's 1995 income.
NET INCOME. Net income decreased to $2.7 million from $4 million in 1994
as a result of the factors described above.
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES. The Company has historically funded its operating
activities principally from internally generated cash flow, even in an
industry-depressed year such as 1992. Management purchased the Company in July
1990, in a leveraged buyout funded with $10.7 million in debt and $1 million in
equity. By July 1993, cash flow from operating activities enabled the Company to
reduce total debt to $3.5 million while increasing equity to $9 million. In
August 1993, management acquired all of the Common Stock of the Company held by
the two financial institutions that financed the buyout, a transaction which
increased the Company's debt to $8.2 million and reduced equity to $5.1 million.
Internally generated cash flow (EBITDA divided by revenue) was 22%, 18% and 25%
of revenues in 1994, 1995 and 1996. This cash generation, when combined with the
1995 equity infusion from First Reserve and its investment funds, enabled the
Company to formulate and implement its expansion strategy.
Net cash provided by operating activities was $7.6 million in 1996 compared
to $12.0 million in 1995 with the decrease principally a result of $15.3 million
necessary to fund an increase in trade receivables. Trade receivables increased
140% over the prior year, a level greater than the 103% increase in revenues due
to the significant increase in offshore activity. Depreciation and amortization,
which is included in cost of subsea and salvage sales, also increased by $2.5
million as a result of the new vessel additions. However, as noted previously,
overall subsea and salvage
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<PAGE>
margins increased from 22% in 1995 to 27% in 1996 notwithstanding higher
depreciation charges. The additional depreciation increased the provision for
deferred income taxes which was $2.1 million in 1996 compared to $600,000 in the
prior year.
CAPITAL EXPENDITURES. Capital expenditures consisted principally of
strategic asset acquisitions including the WITCH QUEEN, BALMORAL SEA and UNCLE
JOHN, improvements to existing vessels and the acquisition of offshore natural
gas and oil properties. Since 1993, the Company has invested $17 million to
acquire 15 offshore natural gas and oil properties in seven separate
transactions. The Company records the amount of cash paid together with the
abandonment liability assumed at the time such properties are acquired. Only the
cash paid at closing is reflected in the Company's statement of cash flows
together with bond and escrow deposits required in connection with these
purchases. The MMS requires an operator bond, and certain of the purchase and
sale agreements have required the Company to fund portions of the estimated
decommissioning liability. Accordingly, the Company's balance sheet as of
December 31, 1996 includes $5.2 million of cash deposits restricted for
abandonment obligations which aggregated $6.0 million on that date. In addition
the Company had also issued letters of credit totaling $2.8 at December 31, 1996
in lieu of cash deposits in connection with property acquisitions.
FINANCING ACTIVITIES. The Company has financed seasonal operating
requirements and capital expenditures with internally generated funds,
borrowings under credit facilities, and the sale of Common Stock described
above. Since 1993, Fleet Capital Corporation has provided all debt funding
pursuant to a Revolving Credit Agreement which initially was $15 million and
which, as amended in April 1997, is currently $40 million. The Revolving Credit
Agreement, which terminates in December 2000, is secured by trade receivables
and mortgages on the Company's vessels. The Revolving Credit Agreement prohibits
the payment of dividends on the Company's capital stock and contains, among
other restrictions, certain financial covenants. During 1995 and 1996, those
covenants typically required the Company to (i) maintain income from operations
at specified levels, (ii) limit leverage, as defined, to no more than a
specified ratio of net worth, (iii) maintain certain interest coverage and debt
service ratios, as defined, and (iv) maintain a minimum ratio of current assets
to current liabilities. The Company was in compliance with, or obtained waivers
of default from, the covenants under the Revolving Credit Agreement during 1995
and 1996. The Revolving Credit Agreement, as amended, contains only two
financial covenants (a fixed charge coverage ratio and a limitation that debt
not exceed $60 million). The interest rate during 1996 was equal to the lender's
floating prime rate plus .5%, or the Eurodollar Base Rate plus 2.25% for
borrowings less than $10 million, and 2% if borrowings exceed $10 million.
Pursuant to these terms, borrowings at December 31, 1996 included $22 million at
7.37% (Eurodollar option) and $3 million at 8.75% (prime option). The Revolving
Credit Agreement, as amended, reduces these rates to LIBOR plus 1.75% in 1997
with incentive pricing thereafter pursuant to a formula based upon EBDIT (as
defined therein). Letters of credit are also available under the Revolving
Credit Agreement which the Company typically uses if performance bonds are
required or, in certain cases, in lieu of purchasing U.S. Treasury Bonds in
conjunction with gas and oil property acquisitions.
CAPITAL COMMITMENTS. In connection with its business strategy, management
expects the Company to acquire or build additional vessels, acquire other assets
such as the ROV purchase from Coflexip, as well as seeking to buy additional
natural gas and oil properties. Depending upon the size of any future
acquisitions, the Company may require additional debt financing, possibly in
excess of the Revolving Credit Agreement, as amended, or additional equity
financing. If the Company seeks equity financing in connection with such
acquisitions, investors in this Offering may experience dilution. Other than
potential asset acquisitions, management believes the net cash generated from
operations and available borrowing capacity under the Revolving Credit Agreement
will be adequate to meet funding requirements for the next year.
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BUSINESS
GENERAL
Cal Dive is a leading provider of subsea construction, maintenance and
salvage services to the offshore natural gas and oil industry in the Gulf of
Mexico. Its services are primarily performed in support of offshore
infrastructure construction projects involving pipelines, production platforms
and risers and subsea production systems. Through ERT, Cal Dive acquires,
operates and produces natural gas and oil from mature offshore properties,
providing customers a cost effective alternative to the decomissioning process.
The Company's customers include major and independent natural gas and oil
producers, pipeline transmission companies and offshore engineering and
construction firms. See Note 10 of the notes to Financial Statements for
financial information with respect to the Company's business segments.
The Company owns a diversified fleet of nine vessels servicing offshore
natural gas and oil industry, principally in the Gulf of Mexico. This market is
experiencing strong exploration and development activity levels, including rapid
growth in Deepwater. Beginning in 1995, the Company acted to fill a market void
by assembling a fleet of dynamically positioned vessels which serve as work
platforms for Deepwater projects. The vessels acquired include a
semi-submersible multi-service vessel (UNCLE JOHN) and two mono-hull DP vessels
(WITCH QUEEN and BALMORAL SEA). Management believes that the limited number of
competing DP vessels in the Gulf affords the Company a key strategic advantage
which has led to rising vessel utilization for its vessels. In addition,
interest in the Cal Dive fleet has increased among potential customers and
alliance partners evaluating a fast track approach to field development.
Management believes that strong worldwide demand for DP vessels will cause this
trend to continue.
In the last twelve months, the Company has positioned itself to work on
full field development projects by entering into a number of strategic
alliances. See "-- Strategic Alliances". As part of this strategy, in April
1997, certain shareholders and Cal Dive sold 32% of its Common Stock to Coflexip
and executed the Business Cooperation Agreement. Each company expects to
contribute its separate expertise to the alliance as follows:
COFLEXIP SERVICES CAL DIVE SERVICES
Flexible lay operations (including risers) ROV operation
Product sales, manufacture and supply of Diving
-- Umbilicals Coiled Tubing
-- Flex hose Flexible lay operations
-- Flex pipe with deck load requirements
ROV manufacture and sale up to 600 metric tons
EPIC project design and engineering and Riser installation
project management Well servicing
Reeled hard pipe lay (including risers DP DSV's and related
installed in connection with lay services
operations, excluding coiled tubing) 4 Point DSV's (when
DP construction vessels applicable)
The Company traces its origins to California Divers Inc., which pioneered
the use of mixed gas diving in the early 1960s when oilfield exploration off the
Santa Barbara coast moved to water depths beyond 250 feet. Cal Dive commenced
operations in the Gulf of Mexico in 1975. Since that time, the Company's growth
strategy has consisted of three basic elements: (i) identifying niche markets
that are underserviced or where no service exists, (ii) developing the technical
expertise to provide the service and (iii) acquiring assets or seeking business
alliances which fill the market gap.
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COMPANY STRENGTHS
DIVERSIFIED FLEET OF VESSELS
Cal Dive has focused on owning and operating a diversified fleet which
provides a full complement of subsea construction, maintenance, and salvage
project capabilities. The Company operates a fleet of one semi-submersible DP
MSV (the UNCLE JOHN), two DP DSV's (the WITCH QUEEN and BALMORAL SEA), two
four-point moored saturation DSVs (the CAL DIVER I and II), three other DSVs,
two work class ROVs and a salvage barge. This fleet enables the Company to
operate in all Gulf water depths where development is currently contemplated.
The services provided by these vessels both overlap and are complementary in a
number of market segments, enabling the Company to deploy its vessels to areas
of highest utility and margin potential. The vessels serve as work platforms for
activities performed by divers in water depths of less than 1,000 feet and by
ROVs for projects at all depths. The Company intends to continue to expand the
capabilities of its diversified fleet through the acquisition of additional
vessels and assets.
EXPERIENCED PERSONNEL AND TURNKEY CONTRACTING
The shortage of experienced personnel has resulted in a trend in the oil
and gas industry of transferring more responsibility to contractors and
suppliers. The Gulf of Mexico spot market is unique in the world in that
projects are typically of short duration and generally of a turnkey nature.
Management believes that a key element of its growth strategy and success has
been its pioneering role in providing turnkey contracting and its ability to
attract and retain experienced industry personnel. The Company personnel have
the technical expertise and operational experience to effectively manage turnkey
projects and thereby deliver bids which are priced to achieve targeted
profitability. Because of its experience with turnkey contracting and its
people, the Company believes it is well positioned as to capitalize on the trend
in the natural gas and oil industry towards outsourcing additional
responsibility to contractors.
DEEPWATER TECHNICAL SERVICES
The Company believes that it has established a unique niche in the
Deepwater Gulf by assembling the specialized assets, technical personnel and
exclusive alliance agreements that represent a cost effective solution to the
rising demand for Deepwater services. The Company's mono-hulled DP vessels
provide a flexible work platform to launch ROVs and support subsea construction
in most weather conditions. Likewise, the Company's MSV, the UNCLE JOHN, has
demonstrated its ability to perform certain well completion tasks previously
undertaken using more expensive drilling equipment. These vessels in combination
with the ROVs acquired from Coflexip allow the Company to control key assets
involved in Deepwater subsea construction and field development. Over the last
two years, the Company has employed personnel with experience in Deepwater
subsea construction and ROV operation. Further, the Company has entered into
alliance agreements with a team of specialized contractors that provide access
to necessary equipment, technology and services to meet the fast track
requirements of Deepwater development activities.
MAJOR PROVIDER OF SATURATION DIVING SERVICES
Cal Dive owns and operates over 50% of the U.S. based SAT DSVs currently
operating in the Gulf of Mexico. Saturation diving is required for subsea
operations in water depths beyond 300 feet. In recent years there has been an
increasing level of construction activity, a trend which is expected to
accelerate as development of recently discovered Deepwater fields commences and
new Deepwater production is tied into the existing Gulf infrastructure.
Management believes that this trend will result in increasing demand for SAT
diving services.
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LEADER IN SHALLOW WATER SALVAGE OPERATIONS
Since 1989, the Company has established a leading position in the
decommissioning and abandonment of facilities in the shallow water Gulf of
Mexico. The Company expects the demand for salvage and P&A services to increase.
Over 75% of the 3,800 platforms in the Gulf of Mexico are over ten years old and
there are approximately 15,000 wells that must ultimately be plugged and
abandoned in accordance with government regulations related to the
decommissioning of offshore production facilities. During 1996, the Company
contracted for and managed, on a turnkey basis, all aspects of the
decommissioning and abandonment of several fields for two major oil companies
utilizing third party heavy lift derrick barges. These projects involved larger
platforms than Cal Dive had historically decomissioned, and represent a service
that management expects to expand in the future.
MANAGEMENT OF MATURE NATURAL GAS AND OIL PROPERTIES
The Company formed ERT in 1992 to exploit a market opportunity to provide a
more efficient solution to the abandonment of offshore properties, to expand Cal
Dive's off season salvage and decommissioning activity and to support full field
development projects. The Company has assembled a management team of personnel
experienced in geology, reservoir and production engineering and facilities
management. The Company has acquired interests in 15 mature producing properties
in the last four years, one of which has been plugged and abandoned. Mature
properties are generally those properties where decommissioning and abandonment
costs are significant relative to the value of remaining natural gas and oil
reserves. Cal Dive seeks to acquire properties that it can operate to enhance
remaining production, control operating expenses and manage the cost and timing
of the decommissioning and abandonment of such properties. Management believes
that Cal Dive is the only company acquiring mature properties in the Gulf of
Mexico which combines financial strength, reservoir engineering and operations
expertise with the availability of company-owned salvage assets, resulting in
significant strategic and cost advantages. Since acquiring its initial property
in late 1992, the Company has increased estimated proved reserves to
approximately 24.6 Bcfe at December 31, 1996.
GROWTH STRATEGY
FOCUS ON THE GULF OF MEXICO
Cal Dive intends to maintain its primary focus on the Gulf of Mexico where
the Company is well positioned to respond to rising market demand for services
in all water depths, and increasingly to address Deepwater demand. Natural gas
and oil exploration, development and production activity levels in the Gulf of
Mexico have increased significantly as a result of several factors, including:
(i) improvements in exploration technologies such as computer aided exploration
and 3D seismic, which have enhanced reservoir mapping, increased drilling
success rates and led to entirely new prospects such as the "Subsalt" play;
(ii) improvements in subsea completion and production technologies, which have
resulted in increased Deepwater drilling and development; (iii) expansion of the
region's production infrastructure, which has improved the economics of
developing both Deepwater and smaller natural gas and oil fields; and (iv) the
short reserve life characteristic of Gulf of Mexico natural gas production,
which requires continuous drilling to replace reserves and maintain production.
Recent lease sales by the MMS of Gulf of Mexico properties attracted record
bidding levels both in terms of the number of leases bid and the amount of
capital exposed, including a record level of interest in Deepwater blocks. This
has led to new market opportunities as well as increased demand for the
Company's traditional marine services, as reflected in both higher vessel
utilization rates and operating margins.
CAPTURE A SIGNIFICANT SHARE OF THE DEEPWATER MARKET
As Gulf of Mexico Deepwater developments have created a need for new
applications of subsea technology, there is a corresponding need for a new
generation of subsea contractor to
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develop and deploy that technology. Management, through its Deepwater Technical
Services Group, has targeted a market niche in which the Company functions as a
focal point in the assembly and delivery of technology required for Deepwater
projects. In particular, well completions, subsea installation and infield
connection services are more critical in an era of limited availability of
Deepwater drilling equipment and hardware. The Company's MSV has the capacity to
undertake certain well completion activities, thereby reducing cost to the
operator and freeing-up more expensive drilling rig time for drilling
operations. Cal Dive has negotiated formal alliance agreements with a number of
specialized contractors to provide a full range of services necessary to
Deepwater construction projects. These strategic alliances include the recent
Coflexip transaction and agreements with Schlumberger, Shell Offshore, Inc.,
Reading & Bates Development Co., Fugro-McClelland Marine GeoSciences, Inc.,
Sonat, Inc. and Quality Tubing, Inc. 5Cal Dive is also a preferred installation
contractor to Total Offshore Productions Systems ("TOPS"), a company formed by
Reading & Bates Development Co. and Intec Engineering, Inc. to conduct Deepwater
full field development projects. The objective of Cal Dive's strategy is to
increase the proportion of Deepwater field development expenditures captured by
Cal Dive while reducing overall costs and project duration for the operator.
CAPITALIZE ON SYNERGIES WITH COFLEXIP
Cal Dive entered into a strategic alliance with Coflexip to strengthen its
position in the Deepwater Gulf and to respond to the trend toward full field
development services. Management believes that Coflexip and Cal Dive together
offer complementary products and services which significantly expand Cal Dive's
ability to provide full field development and life of field services. Coflexip
is a world leader in the design and manufacture of offshore flexible pipe and
umbilicals and is one of the leading subsea construction contractors.
Headquartered in Paris, France, Coflexip employs approximately 3,500 employees
spread over five continents. In 1996, Coflexip had sales of $945 million and
total assets of $1.1 billion at the end of the year.
OFFER FULL FIELD DEVELOPMENT SERVICES
Management believes the significant number of new leases, the number of
Deepwater leases due to expire by 2000 and shortages of well completion
equipment, drilling rigs and production infrastructure will create a demand for
fast track, full field development solutions. Cal Dive's recent acquisitions of
assets and its personnel and technical expertise, combined with strategic
alliances, put the Company in a strong competitive position to respond to this
market need. In addition, the Company intends to apply the technologies and
capabilities developed for Deepwater to "midwater" Gulf (500 to 1,000 feet) as
a cost effective alternative to fixed platforms.
EXPAND THE COMPANY'S NATURAL GAS AND OIL PRODUCTION
Management believes Cal Dive's reputation in the industry and its size and
experience in salvage and remediation work make the Company a preferred buyer of
mature natural gas and oil properties. Specifically, customers can sell an
offshore property at a reasonable price with the assurance that the offshore
property will be decommissioned and abandoned in accordance with regulatory
requirements. The Company intends to exploit its recent experience contracting
and managing heavy lift salvage to expand the number of mature offshore
properties for which the Company will bid. In addition, the Company will
continue, on a selective basis, to acquire non-operated working interests in
fields where there is the potential of Cal Dive being awarded decommissioning or
development work. These fields expand the universe of potential ERT property
acquisitions.
THE INDUSTRY
BACKGROUND
The subsea services industry in the Gulf of Mexico originated in the early
1960s to assist natural gas and oil companies with their offshore operations.
The industry has grown significantly
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since the early 1970s as these companies have increasingly relied upon offshore
fields for production. Subsea services are required throughout the economic life
of an offshore field and include at various phases the following services, among
others:
o EXPLORATION. Pre-installation survey; rig positioning and
installation assistance; drilling inspection; subsea equipment
maintenance; search and recovery operations.
o DEVELOPMENT. Installation of production platforms; installation of
subsea production systems; pipelay support including connecting
pipelines to risers and subsea assemblies; pipeline stabilization,
testing and inspection; cable and umbilical lay and connection.
o PRODUCTION. Inspection, maintenance and repair of production
structures, risers and pipelines and subsea equipment.
o DECOMMISSIONING. Decommissioning and remediation services; plugging
and abandonment services; platform salvage and removal; pipeline
abandonment; site inspections.
The industry has grown principally due to the economic benefits of new and
advanced technologies and custom designed equipment and recently has focused
more on Deepwater projects and the integrated "full field development" service
concept described below.
FULL FIELD DEVELOPMENT
The Company and its alliance partners can offer oil and gas companies a
range of services from subcontracting to complete field development solutions.
In offering field development services, Cal Dive and its partners intend to
provide a full range of subsea systems and services, from procurement and
installation of flowlines, wellheads, control systems, umbilicals and manifolds
to installation and commissioning of the complete production system.
Many oil and gas companies prefer to contract with a consortium capable of
undertaking major portions or all of an entire field development project.
Contracting for engineering, procurement, installation and commissioning
("EPIC") services can relieve a customer of substantially all of the burdens
of management of field development and thereby avoid many of the risks inherent
in traditional contracting strategies. Field development partnerships can also
allow oil and gas companies to increase outsourcing of development work. EPIC
contracting for field development projects requires that contractors offer a
full range of services to customers. The Company's strategic alliances provide
Cal Dive with the necessary capabilities to pursue field development contracts.
OPERATIONS AND EQUIPMENT
SUBSEA CONSTRUCTION VESSELS. Subsea services are typically performed with
the use of specialized subsea construction vessels which provide an above water
platform that functions as an operational base for divers in water depths up to
1,000 feet and ROVs at all water depths. Distinguishing characteristics of
subsea construction vessels include DP systems, SAT diving capabilities, deck
space, deck load, craneage and moonpool launching. Deck space, deck load and
craneage are important features of the vessel's ability to transport and
fabricate hardware, supplies and equipment necessary to complete subsea
projects. Vessels with greater deck space and load capacities have the
flexibility to service more complex projects in deeper water. A moonpool is a
structure built into the center of the vessel, which enables safe and efficient
launching of ROVs and SAT diving systems in harsh weather conditions. These
characteristics will generally dictate the types of jobs undertaken and the
conditions and water depths in which the vessel is capable of working.
DYNAMIC POSITIONING. DP systems allow a vessel to maintain position
without the use of anchors, and therefore enhance productivity in extreme
weather conditions and are preferred for Deepwater applications. Computer
controlled thrusters mounted on the vessel's hull ensure the proper
counteraction to wind, current and wave forces to maintain position. Since no
anchors are required, risks associated with objects snagging on pipelines or
other underwater structures are
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minimized. The capabilities provided by the Company's DP vessels have allowed
Cal Dive to penetrate new markets and provide additional services to the
Deepwater market such as flexible pipelay, well servicing, coring and general
field support.
REMOTELY OPERATED VEHICLES. ROVs are robotic vehicles used to complement,
support and increase the efficiency of diving and subsea operations and at
depths for tasks where the use of divers is uncompetitive or impossible. One of
the ROVs acquired from Coflexip will be permanently installed on the UNCLE JOHN.
The second ROV will be a mobile system working on the other Cal Dive vessels.
The Company believes that purchasing ROVs will enable it to better control the
quality and cost of its services, replacing the need to rely upon third party
equipment and personnel for critical path operations.
SATURATION DIVING. Subsea operations are conducted by manned or unmanned
intervention. SAT diving, required at water depths greater than 300 feet,
involves divers working from special chambers for extended periods at a pressure
equivalent to the depth of the work site. The divers are transferred from the
surface to the work site by a diving bell. After completion of the work, the
bell is lifted back to the DSV and the divers return to the chamber to be
replaced by a new group of divers who are lowered to the job site to continue
the work. SAT diving systems allow for continuous operations to be conducted 24
hours a day. The primary advantage of SAT diving is that divers can remain under
pressure and make repeated dives for extended periods before beginning
decompression. Overall productivity and safety is therefore enhanced due to
fewer decompressions, diver continuity and a lower likelihood of delays caused
by adverse weather conditions.
SURFACE DIVING. Surface diving is the primary diving technique performed
in water depths less than 300 feet. Divers are linked to the surface by a diving
umbilical containing compressed air lines and communications equipment. The
diver enters the water directly and descends to the work site, accomplishes the
prescribed tasks and begins to decompress in the water during a gradual ascent
to the surface. The length of time a diver is able to remain at the work site
depends upon, and is limited by, the water depth.
The following table summarizes the equipment and techniques primarily used
in providing subsea services by water depth:
EQUIPMENT/ WATER DEPTH
TECHNIQUE USED (IN FEET)
- ---------------------------------------- -----------------
Surface Diving.......................... 0 to 300
SAT Diving.............................. 300 to 1,000
ROVs.................................... All depths
DSVs.................................... 0 to 1,000
DP Vessels.............................. Greater than 300
MARINE VESSELS AND EQUIPMENT
The Company owns a fleet of nine vessels. The size of the Company's fleet
and its capabilities have increased in recent years with the addition of the
WITCH QUEEN, the BALMORAL SEA and the UNCLE JOHN.
Management believes that the Gulf of Mexico market increasingly will
require specially designed or equipped vessels to deliver the necessary subsea
construction services, especially in the Deepwater. Five of the Company's
vessels have been modified to provide saturation diving services. Three of these
vessels were specifically upgraded to respond to the emerging Deepwater market.
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The table set forth below provides information regarding the strategic
features of the Company's vessels.
<TABLE>
<CAPTION>
MOONPOOL
DATE CLEAR DECK LAUNCH/
PLACED IN LENGTH SPACE DECK LOAD ACCOM- SATURATION
VESSEL SERVICE (FEET) (SQ. FEET) (TONS) MODATIONS DIVING CRANE
- ------------------------------------- ----------- ------ ---------- --------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
DP MSV:
Uncle John........................... 11/96 254 25,000 500 102 3 2x 100-ton
DP DSVS:
Balmoral Sea(2)...................... 9/94 259 3,440 250 60 3 30-ton
Witch Queen.......................... 11/95 279 5,000 500 60 3 50-ton
DSVS:
Cal Diver I.......................... 7/84 196 2,400 220 42 3 20-ton
Cal Diver II......................... 7/85 166 1,920 200 36 3 A-Frame
Cal Diver III........................ 8/87 115 1,320 105 18
Cal Diver IV......................... 10/90 100 1,035 46 16
Cal Diver V.......................... 9/91 166 2,324 490 35 A-Frame
DERRICK BARGE:
Cal Dive Barge I..................... 8/90 150 NA 200 26 200-ton
</TABLE>
CLASSIFI-
VESSEL CATION(1)
- ------------------------------------- ------------
DP MSV:
Uncle John........................... DNV
DP DSVS:
Balmoral Sea(2)...................... DNV
Witch Queen.......................... DNV
DSVS:
Cal Diver I.......................... ABS
Cal Diver II......................... ABS
Cal Diver III........................ ABS
Cal Diver IV......................... ABS
Cal Diver V.......................... ABS
DERRICK BARGE:
Cal Dive Barge I..................... ABS
- ------------
(1) The Company's DSVs also meet standards for seaworthiness and safety set by
the USCG.
(2) This vessel has been operated by the Company under charters from September
1994 to February 1995 and from April 1996 to August 8, 1996, at which time
it was acquired by the Company.
Under government regulations and the Company's insurance policies, the
Company is required to maintain its vessels in accordance with standards of
seaworthiness and safety set by government regulations and classification
organizations. The Company maintains its fleet to the standards for
seaworthiness, safety and health set by both the American Bureau of Shipping
("ABS"), Det Norske Veritas ("DNV") and the USCG. The ABS is one of several
classification societies used by ship owners to certify that their vessels meet
certain structural, mechanical and safety equipment standards, including Lloyd's
Register, Bureau Veritas and DNV among others.
The Company incurs routine drydock inspection, maintenance and repair costs
under USCG Regulations and to maintain ABS or DNV classification for its
vessels. In addition to complying with these requirements, the Company has its
own vessel maintenance program which management believes permits Cal Dive to
continue to provide its customers with well maintained, reliable vessels. In
1995 and 1996, the Company incurred approximately $2.4 million and $3.7 million,
respectively, in drydocking, marine inspection and general repair and
maintenance costs. See "-- Government Regulation."
In the normal course of its operations, the Company also charters other
vessels on a short-term basis, such as tugboats, cargo barges, utility boats and
dive support vessels. All of the Company's vessels are subject to ship
mortgages. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."
COFLEXIP STRATEGIC ALLIANCE
BACKGROUND
As part of the Company's strategy to strengthen its position in the Gulf of
Mexico Deepwater and to respond to the growing trend towards integrated
contracting of packages of field development services, in April 1997 Cal Dive
entered into a strategic alliance with Coflexip. Coflexip is the worldwide
leader in the design and manufacture of flexible pipe and umbilicals and is a
leading integrated subsea contractor to the offshore oil and gas industry.
Deepwater field developments have shifted toward greater use of subsea and
floating production systems and away from conventional fixed production platform
development systems. As a result, the services and products offered by Companies
such as Cal Dive and Coflexip increasingly are required.
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The alliance consisted of Coflexip acquiring approximately 32% of the
Common Stock of the Company, pursuant to a purchase agreement dated as of April
11, 1997 (the "Purchase Agreement") and entering into the Business Cooperation
Agreement. See "Certain Relationships and Related Transactions." In connection
with the closing under the Purchase Agreement, Coflexip and the Company entered
into certain related agreements, including two-year employment agreements with
the Company's nine senior executives, a registration rights agreement,
shareholders agreement and amended the Company's Articles of Incorporation and
By-Laws. See "Management" and "Description of Capital Stock."
THE BUSINESS COOPERATION AGREEMENT
As part of the transaction, the companies entered into the Business
Cooperation Agreement which provides that the parties will form a new entity by
June 30, 1997 to which certain assets will be contributed by both parties. The
new entity will be governed by a Board of Directors consisting initially of two
members (one from each company). Cal Dive and Coflexip will bid each project as
a subcontractor to the venture for their respective services. In Cal Dive's case
the services will include ROV operations, diving, coiled line pipe installation,
umbilical and flexible flowline lay operations, riser installation, well
servicing and the provision of DP and other vessels. In Coflexip's case, the
services will include flexible flowline lay, product sales (umbilicals, flexible
pipe and ROVs), EPIC project design and engineering, reeled and rigid pipelay
and providing larger construction vessels. The joint venture will pursue Gulf of
Mexico and Caribbean EPIC projects that require at least one Cal Dive service
and one Coflexip service, where the aggregate contract value of the combined
services involved in the project is at least $25 million, and any such other
projects as the parties may agree as being within the intended scope of the
joint venture.
COMPLEMENTARY PRODUCTS AND SERVICES
Management believes that Coflexip and Cal Dive offer highly complementary
products and services and that the strategic alliance with Coflexip
significantly expands Cal Dive's ability to provide full field development and
life of field services. The table below illustrates some of the individual
strengths, products and services offered by Coflexip and Cal Dive that combined
permit them to offer a new approach for Deepwater Gulf Subsea contracting
activities:
CAL DIVE
o Significant Gulf market presence
o Deepwater position in the Gulf
o DP vessels
o Spot market turnkey expertise
o Flexible pipe installation
o ROV operation and marketing
o Engineering utilization and marketing
o Well servicing capability: alliance with Schlumberger in the Gulf
COFLEXIP
o Worldwide presence
o Deepwater expertise and credibility
o Large DP construction vessels
o Large project EPIC contractor
o Umbilical and flexible pipe manufacturer
o ROV manufacturer
o Significant subsea engineering group
o Well servicing capability: alliance with Schlumberger in the UK
INFORMATION ON COFLEXIP
Coflexip is a world leader in the design and manufacture of flexible pipe
and umbilicals, and one of the leading subsea contractors to the offshore oil
and gas industry, providing integrated subsea services on large subsea projects
throughout the world. Coflexip was established in 1971 to manufacture and market
flexible pipe designed by the Institute Francais du Petrole (the "IFP"), a
French research and development organization that holds a controlling interest
in one of Coflexip's principal shareholders. In December 1994, Coflexip acquired
Stena Offshore N.V., a contractor providing subsea services to the oil and gas
industry, from Stena International B.V. ("Stena International"), and Stena
International became a significant shareholder of Coflexip.
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<PAGE>
Coflexip targets the subsea production systems segment of the subsea
oilfield services industry involving the installation of a wellhead on the
seabed rather than on a platform. Subsea productions systems generally require
flowlines that are less than 12 inches in internal diameter and less than 20
kilometers in length. This segment corresponds with the Company's technological
capabilities and represents its key market.
Coflexip designs and manufactures offshore flexible pipe, a number of
products that apply similar technology including umbilicals, and ROVs. Coflexip
also performs project management and engineering services in connection with
large subsea contracts, installs rigid and flexible pipes, umbilicals and
provides a number of related services such as lifting, diving and testing. Its
fleet of vessels and equipment is one of the largest and most advanced
technologically in the industry.
Coflexip has manufacturing and assembly facilities in five countries and
markets its integrated services worldwide. Its principal markets are the North
Sea, (UK and Norwegian sectors), offshore Brazil, the Asia-Pacific region and
other markets including North America and North and West Africa. Coflexip
employs approximately 3,500 employees in five continents and has subsidiaries in
France, the United Kingdom, Brazil, Norway, the United States, Australia and
India.
STRATEGIC ALLIANCES
Cal Dive has entered into a number of strategic alliances in order to
enhance its ability to offer a full range of subsea services including those
described below.
<TABLE>
<CAPTION>
ALLIANCE TYPE OF AGREEMENT SCOPE OF PROJECT
- -------------------------------- ---------------------------- ----------------------------------
<S> <C> <C>
TOPS Preferred Provider Agreement Deepwater projects in the Gulf
Reading & Bates Alliance Agreement MSV technology and feasibility
Development Co. study of a new build MSV
Schlumberger Alliance Agreement Well servicing and testing
utilizing DP vessels
Fugro-McClelland Marine Performance Contract Geoscience services and coring
Geoscience, Inc. work
Quality Tubing, Inc. Preferred Provider Agreement Installation of coiled line pipe
Shell Offshore, Inc. Performance Contracts Subsea well intervention and
research and development of
J-lay procedures
Sonat, Inc. Preferred Provider Agreement Traditional marine services
</TABLE>
DEEPWATER TECHNICAL SERVICES GROUP
The Deepwater Technical Services Group was formed in early 1996 to serve
the emerging Deepwater market. It is intended to be a focal point to assemble
and deliver the varied technological disciplines required for Deepwater
projects. The limited availability of Deepwater rigs makes well completions,
subsea installations and infield connection services take on a more critical
role. Cal Dive acted to fill a market void by assembling a fleet of proven,
dynamically positioned vessels -- a key asset common to the application of
Deepwater technologies. The Company's alliances are managed through this group.
Services covered by Cal Dive's Deepwater Technical Services Group include
geotechnical investigation, turnkey field development, umbilical, controls and
flexible pipe installations, well servicing, P&A, subsea tree installation,
manifold systems, J-lay infield flowlines, ROV flexible and hard jumper
installation by ROVs, subsea piling, pipeline repair systems, catenary and
platform risers, and J-tubes.
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<PAGE>
NATURAL GAS AND OIL OPERATIONS
ERT was formed in 1992 in response to a market opportunity to provide a
more efficient solution to offshore abandonment liability and Cal Dive's desire
to expand its off-season salvage and decommissioning activity. Within ERT, the
Company has assembled experienced personnel with proven track records in
geology, reservoir and production engineering as well as offshore facilities
management. Cal Dive generates numerous opportunities to acquire mature
properties through its established contacts in the industry together with the
market's awareness of the Company's comprehensive abandonment management
capability. The Company's property analysis utilizes both the expertise of its
executives and Cal Dive's years of experience in performing turnkey contracts
for decommissioning work. Production is generally sold at prevailing spot market
prices in the Gulf of Mexico. In 1994, 1995 and 1996, revenue from natural gas
and oil production accounted for 6.1%, 12.7% and 16.1%, respectively, of the
Company's total revenues.
The Company's natural gas and oil business has also been successful because
of regulatory requirements imposed by the MMS which supervises abandonment of
offshore natural gas and oil fields in federal waters. Property owners are
required to bond and/or fund the MMS' estimate of the abandonment liability. The
Company believes its financial ability to meet the MMS' requirements and its
ownership of the required equipment provides it with a competitive advantage
over smaller competitors.
To maximize the economic value of its properties, Cal Dive uses its
operating expertise to reduce operating costs, maximize production from the
properties and minimize the costs of decommissioning and abandonment. This
technical expertise would enable Cal Dive to take an equity (reserve) position
in conjunction with turnkey field development projects. The Company has acquired
interests in 15 mature producing properties in the last five years, ten of which
are currently in production and one of which has been plugged and abandoned.
Based on the Miller & Lents report, the remaining average useful life of the
current properties is approximately 5.6 years based on 1996 production.
The table below sets forth information, as of December 31, 1996, with
respect to the Company's estimated net proved reserves and the present value of
estimated future net cash flows at such date, as estimated by Miller & Lents.
Also see "Risk Factors -- Uncertainty of Estimates of Natural Gas and Oil
Reserves."
TOTAL PROVED
------------
(DOLLARS IN
THOUSANDS)
Estimated Proved Reserves:
Natural Gas (MMcf)................. 24,596
------------
Oil and Condensate (Mbbls)......... 124
------------
Future net cash flows before income
taxes................................. $ 58,781
------------
Present value of future net cash flows
before income taxes................... $ 48,703
------------
Standardized measure of discounted
future net cash flows(1).............. $ 33,805
------------
- ------------
(1) The standardized measure of discounted future net cash flows attributable to
the Company's reserves was prepared using constant prices as of the
calculation date, discounted at 10% per annum.
As of December 31, 1996, the Company owned an interest in 48 gross (37.1
net) natural gas wells and one gross (0.5 net) oil well located in federal
offshore waters in the Gulf of Mexico. The Company is responsible for the
payment of abandonment costs on the natural gas and oil properties pro rata to
its working interest. The Company accrues its estimated share of the future
abandonment liabilities on the date the applicable property was purchased. As of
December 31,
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<PAGE>
1996, the recorded abandonment liability was approximately $6.0 million.
Estimates of abandonment costs and their timing may change due to many factors
including production results, inflation rates, and changes in environmental laws
and regulations.
CUSTOMERS
The Company's customers are primarily major and independent oil and gas
exploration, transportation and marine construction companies operating in the
Gulf of Mexico. The level of construction services required by any particular
customer depends on the size of that customer's capital expenditure budget
devoted to construction plans in a particular year. Consequently, customers that
account for a significant portion of contract revenues in one fiscal year may
represent an immaterial portion of contract revenues in subsequent fiscal years.
The Company estimates that in 1996 it provided subsea services to approximately
100 customers. For the years ended December 31, 1995 and 1996, approximately 21%
and 24%, respectively, of the Company's total revenues were attributable to J.
Ray McDermott, S.A. The Company's projects are typically of short duration and
are generally awarded shortly before remobilization. Accordingly, backlog is not
a meaningful indicator of future activities.
MARKETING
Contracts for work in the Gulf of Mexico are typically awarded on a
competitive bid basis with customers usually requesting bids on projects several
months prior to commencement. The Company maintains a focused marketing effort
through a 12-person direct sales force operating from Houston, Texas together
with sales offices in Lafayette and New Orleans, Louisiana. Most contracts are
awarded on a turnkey basis, but the Company also performs work on a cost-plus or
day rate basis, or on a combination of such bases.
The Company sells substantially all of its natural gas under short-term
contracts (maximum of one year in duration) at pricing based on spot market
indexes. Cal Dive has not engaged in hedging transactions.
COMPETITION
The subsea services industry is highly competitive. Competition for subsea
construction work in the Gulf of Mexico has historically been based on the
location and type of equipment available, ability to deploy such equipment, the
safety and quality of service in recent years and price. While price has been an
important factor in obtaining contracts, the ability to acquire specialized
vessels, to attract and retain skilled personnel, and to demonstrate a good
safety record have also been important competitive factors. The Company's
competitors for shallow water projects include American Oilfield Divers, Inc.
Subsea International, Global Industries Ltd., Oceaneering International, Inc. as
well as a number of smaller companies, some of which only operate a single
vessel, that often compete solely on price. For Deepwater projects, Cal Dive's
principal U.S. based competitors include Oceaneering International, Inc., Global
Industries, Ltd., Subsea International, and J. Ray McDermott, S.A. Other large
foreign based subsea contractors, including Stolt Comex Seaway, S.A. have
announced their intention to perform services in the Gulf. The Company generally
has fewer competitors in Deepwater projects given the more sophisticated vessels
and technology required. The Company believes that its ability to provide a full
range of services and advanced vessels will generally result in less price
competition, higher margins and will enable it to compete effectively,
particularly in water depths greater than 300 feet.
The Company also encounters significant competition for the acquisition of
producing natural gas and oil properties. Many of the Company's competitors are
well-established companies with substantially larger operating staffs and
greater capital resources than the Company which, in many instances, have been
engaged in the energy business for a much longer time than the Company. The
Company's ability to acquire additional properties will depend upon its ability
to
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<PAGE>
evaluate and select suitable properties and to consummate transactions in a
highly competitive environment.
TRAINING AND QUALITY ASSURANCE
The Company maintains a stringent safety and quality assurance program. In
1994, the Company devised and instituted a comprehensive revision to its safety
program which emphasizes team building by assembling a core group of personnel
specifically for each vessel to promote offshore efficiency and safety.
Assembling core groups of personnel specifically assigned to each vessel has
also reduced recorded incidents. As a result, management believes that the
Company's safety programs are among the best in the industry.
FACILITIES
Cal Dive is headquartered at 13430 Northwest Freeway in Houston, Texas. The
Company's subsea and marine services operations are based in Morgan City,
Louisiana. All of Cal Dive's facilities are leased.
PROPERTY AND FACILITIES SUMMARY
FUNCTION SIZE
-------- ----
Houston, Texas Corporate Headquarters 23,700 square feet
Project Engineering
Account Management
Sales Office
Morgan City, Louisiana Operations/Docking 3.5 acres
Warehouse/Offices 10,000 square feet
4,500 square feet
The Company expects shortly to move to a larger and more modern operating
facility near its current facility in Morgan City. The new facility will provide
many advantages when compared to the present location including, more room (28.5
acres), more office space (30,000 square feet), more bulkhead (over 1000 feet)
for vessel repair and maintenance, new warehouses and mechanics buildings and
more parking. This facility is important to enable Cal Dive to manage operations
effectively as it continues to grow. The Company also has sales offices in
Lafayette and New Orleans, Louisiana.
The Company also expects to move to a new and more modern headquarters in
Houston in July 1997. The facility will have over 30,000 square feet and parking
to house administrative, project engineering, account management, sales and ERT
personnel.
GOVERNMENT REGULATION
Many aspects of the offshore marine construction industry are subject to
extensive governmental regulation. The Company is subject to the jurisdiction of
the USCG, the Environmental Protection Agency, MMS and the U.S. Customs Service,
as well as private industry organizations such as the American Bureau of
Shipping.
The Company also supports and voluntarily complies with The Association of
American Diving Contractor Standards. The USCG sets safety standards and is
authorized to investigate vessel and during accidents and recommend improved
safety standards, and the U.S. Customs Service is authorized to inspect vessels
at will. As the Company expands its operations to foreign waters, it will also
be subject to regulation by other governments.
The Company is required by various governmental and quasi-governmental
agencies to obtain certain permits, licenses and certificates with respect to
its operations. The Company believes that it has obtained or can obtain all
permits, licenses and certificates necessary to the
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<PAGE>
conduct of its business. The Company is subject to regulation by the Maritime
Administration, USCG and U.S. Customs Services.
In addition, the Company depends on the demand for its services from the
oil and gas industry and, therefore, the Company's business is affected by laws
and regulations, as well as changing taxes and policies relating to the oil and
gas industry generally. In particular, the development and operation of natural
gas and oil properties located on the Outer Continental Shelf ("OCS") of the
United States is regulated primarily by the MMS.
The MMS requires lessees of OCS properties to post bonds in connection with
the plugging and abandonment of wells located offshore and the removal of all
production facilities. Operators in the OCS waters of the Gulf of Mexico are
currently required to post an area wide bond of $3 million or $500,000 per
producing lease. The Company currently has bonded its offshore leases as
required by the MMS. Under certain circumstances, the MMS has the authority to
suspend or terminate operations on federal leases for failure to comply with
applicable bonding requirements or other regulations applicable to plugging and
abandonment. Any such suspensions or terminations of the Company's operations
could have a material adverse effect on the Company's financial condition and
results of operations.
The Company acquires production rights to offshore mature oil and gas
properties under federal oil and gas leases, which the MMS administers. These
leases contain relatively standardized terms and require compliance with
detailed MMS regulations and orders pursuant to the Outer Continental Shelf
Lands Act ("OCSLA") (which are subject to change by the MMS). The MMS has
promulgated regulations requiring offshore production facilities located on the
OCS to meet stringent engineering and construction specifications, and proposed
additional safety-related regulations concerning the design and operating
procedures for OCS production platforms and pipelines. These latter regulations
were withdrawn pending further discussions among interested federal agencies.
The MMS also has issued regulations restricting the flaring or venting of
natural gas, and has recently proposed to amend such regulations to prohibit the
flaring of liquid hydrocarbons and oil without prior authorization. Similarly,
the MMS has promulgated other regulations governing the plugging and abandonment
of wells located offshore and the removal of all production facilities. Finally,
under certain circumstances, the MMS may require any operations on federal
leases to be suspended or terminated. Any such suspension or termination could
materially and adversely affect the Company's financial condition and
operations.
The MMS has also issued a notice of proposed rulemaking in which it
proposes to amend its regulations governing the calculation of royalties and the
valuation of crude oil produced from federal leases. The proposed rule would
modify the valuation procedures for both arm's length and non-arm's length crude
oil transactions to decrease reliance on oil posted prices and assign a value to
crude oil that better reflects market value, establish a new MMS form for
collecting value differential data, and amend the valuation procedure for the
sale of federal royalty oil. The Company cannot predict at this stage of the
rulemaking proceeding how it might be affected by this amendment to the MMS'
regulations.
In April 1997, after two years of study, the MMS withdrew proposed changes
to the way it values natural gas for royalty payments that would have
established an alternative market-based method to calculate royalties on certain
natural gas sold to affiliates or pursuant to non-arm's length sales contracts.
Historically, the transportation and sale for resale of natural gas in
interstate commerce have been regulated pursuant to the Natural Gas Act of 1938,
the Natural Gas Policy Act of 1978 (the "NGPA"), and the regulations
promulgated thereunder by the Federal Energy Regulatory Commission (the
"FERC"). In the past, the federal government has regulated the prices at which
gas and oil could be sold. While sales by producers of natural gas, and all
sales of crude oil, condensate, and natural gas liquids can currently be made at
uncontrolled market prices, Congress could reenact price controls in the future.
Deregulation of wellhead sales in the natural gas industry
33
<PAGE>
began with the enactment of the NGPA. In 1989, the Natural Gas Wellhead
Decontrol Act was enacted. This act amended the NGPA to remove both price and
non-price controls from natural gas sold in "first sales" as of January 1,
1993.
Commencing in April 1992, the FERC issued Order Nos. 636, 636-A, 636-B and
636-C (collectively, "Order No. 636"), which, among other things, require
interstate pipelines to "restructure" to provide open-access transportation
separate or "unbundled" from the pipelines' sales of gas. Order No. 636
further requires pipelines to provide open-access transportation on a basis that
is equal for all gas supplies. Order No. 636 could subject the Company to more
restrictive pipeline imbalance tolerances and greater penalties for violations
of those tolerances. The Company does not believe, however, that it will be
affected by Order No. 636 materially differently than other natural gas
producers, gatherers and marketers with which it competes.
In July 1996, the United States Court of Appeals for the District of
Columbia Circuit largely upheld Order No. 636. Certain issues as well as
individual pipeline restructuring proceedings are still subject to judicial
review, and upon judicial review, the FERC's orders may be remanded or reversed
in whole or part. Consequently, it is difficult to predict Order No. 636's
ultimate effects.
Additional proposals and proceedings that might affect the oil and gas
industry are pending before various federal and state regulatory agencies and
the courts. The Company cannot predict when or whether any such proposals may
become effective. In the past, the natural gas industry has been heavily
regulated. There is no assurance that the regulatory approach currently pursued
by the FERC will continue indefinitely. Notwithstanding the foregoing, the
Company does not anticipate that compliance with existing federal, state and
local laws, rules, and regulations will have a material effect upon the capital
expenditures, earnings, or competitive position of the Company.
ENVIRONMENTAL REGULATIONS
The Company's operations are subject to a variety of federal, state and
local laws and regulations governing the discharge of materials into the
environment or otherwise relating to environmental protection. Numerous
governmental departments issue rules and regulations to implement and enforce
such laws which are often difficult and costly to comply with and which carry
substantial penalties for failure to comply. For example, state and federal
agencies have issued rules and regulations pursuant to environmental laws that
regulate environmental and safety matters, including restrictions on the types,
quantities, and concentration of various substances that can be released into
the environment in connection with production and abandonment activities and
remedial measures to prevent pollution from current and former operations.
Federal environmental laws include, without limitation, the Clean Water Act, the
Resource Conservation and Recovery Act ("RCRA"), the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), OCSLA and
the Oil Pollution Act of 1990 ("OPA"). See "Risk Factors -- Government
Regulation."
The Clean Water Act imposes strict controls on the discharge of pollutants
into the navigable waters of the U.S., and imposes potential liability for the
costs of remediating releases of petroleum and other substances. The Clean Water
Act provides for civil, criminal and administrative penalties for any
unauthorized discharge of oil and other hazardous substances in reportable
quantities and imposes substantial potential liability for the costs of removal,
remediation and damages. Many states have laws which are analogous to the Clean
Water Act and also require remediation of accidental releases of petroleum in
reportable quantities in state waters. The Company's vessels routinely transport
diesel fuel to offshore rigs and platforms, and also carry diesel fuel for their
own use. The Company's supply boats transport bulk chemical materials used in
drilling activities, and also transport liquid mud which contains oil and oil
by-products. In addition, offshore facilities and vessels operated by the
Company have facility and vessel response plans to deal with potential spills of
oil or its derivatives.
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<PAGE>
RCRA regulates the generation, transportation, storage and disposal of
hazardous and non-hazardous wastes, and requires states to develop programs to
ensure the safe disposal of wastes. The Company generates non-hazardous wastes
and small quantities of hazardous wastes in connection with routine operations,
and while certain of its onshore waste handling practices may require upgrading,
management believes that the wastes it generates are generally handled in
substantial compliance with RCRA and analogous state statutes.
CERCLA contains provisions dealing with remediation of releases of
hazardous substances into the environment and imposes liability without regard
to fault or the legality of the original conduct, on certain classes of persons
including owners and operators of contaminated sites where the release occurred
and those companies who transport, dispose of or who arrange for disposal of
hazardous substances released at the sites. Under CERCLA, such persons may be
subject to joint and several liability for the costs of cleaning up the
hazardous substances that have been released into the environment, for damages
to natural resources and for the costs of certain health studies. In addition,
companies that incur CERCLA liability frequently also confront third party
claims because it is not uncommon for third parties to file claims for personal
injury and property damage allegedly caused by the release of hazardous
substances. Although the Company handles hazardous substances in the ordinary
course of business, the Company is not aware of any hazardous substance
contamination for which it may be liable.
OCSLA provides the federal government with broad discretion in regulating
the release of offshore resources of natural gas and oil production as well as
regulating safety and environmental protection applicable to lessees and
permittees operating in the OCS. Specific design and operational standards may
apply to OCS vessels, rigs, platforms, vehicles and structures. Violations of
lease conditions or regulations issued pursuant to OCSLA can result in
substantial civil and criminal penalties, as well as potential court injunctions
curtailing operations and cancellation of leases. Because the Company's
operations rely on offshore oil and gas exploration and production, if the
government were to exercise its authority under OCSLA to restrict the
availability of offshore oil and gas leases, such an action could have a
material adverse effect on the Company's financial condition and the results of
operations. As of this date, the Company is not the subject of any civil or
criminal enforcement actions under OCSLA.
OPA imposes a variety of requirements on "responsible parties" related to
the prevention of oil spills and liability for damages resulting from such
spills in waters of the United States. A "responsible party" includes the
owner or operator of a facility or vessel, or the lessee or permittee of the
area in which an offshore facility is located. OPA assigns liability to each
responsible party for oil spill removal costs and a variety of public and
private damages from oil spills. While liability limits apply in some
circumstances, a party cannot take advantage of liability limits if the spill is
caused by gross negligence or willful misconduct, if the spill resulted from
violation of a federal safety, construction, or operating regulation, or if a
party fails to report a spill or to cooperate fully in the cleanup. Few defenses
exist to the liability imposed under OPA for oil spills. The failure to comply
with these requirements or inadequate cooperation in a spill event may subject a
responsible party to civil or criminal enforcement actions. Management of the
Company is currently unaware of any oil spills for which the Company has been
designated as a responsible party under OPA and that will have a material
adverse impact on the Company or its operations. OPA also imposes ongoing
requirements on facility operators, such as the preparation of an oil spill
contingency plan. The Company is in the process of updating such plans.
OPA, as recently amended in 1996, requires the lessee or permittee of the
offshore area in which an oil or natural gas facility is located and which has a
"worst case" oil spill discharge potential of more than 1,000 barrels of oil
to establish and maintain evidence of financial responsibility in amounts
ranging from $10.0 million in specified state waters to $35.0 million in federal
OCS waters to cover liabilities related to an oil spill for which such person is
statutorily responsible. Higher amounts of financial responsibility, up to
$150.0 million, will be required in certain limited
35
<PAGE>
circumstances where the MMS believes such a level is justified by the risks
posed by the quantity or quality of oil that is handled by the facility. On
March 25, 1997, the MMS proposed regulations to implement these financial
responsibility requirements. Under the proposed regulations, the amount of
financial responsibility required for a facility would depend on the worst case
oil spill discharge volume calculated for the facility. For an offshore facility
in OCS waters, worst case discharge volumes of up to 35,000 barrels will require
a financial responsibility demonstration of $35.0 million, while worst case
discharge volumes in excess of 35,000 barrels will require demonstrations
ranging from $70.0 million to $150.0 million, depending on the worst case
volume. Similarly, for an offshore facility in specified state waters, volumes
of up to 10,000 barrels require a financial responsibility demonstration of
$10.0 million, while worst case discharge volumes in excess of 10,000 barrels
but not more than 35,000 barrels will require demonstrations of $35.0 million,
and worst case discharge volumes in excess of 35,000 barrels will require
demonstrations ranging from $70.0 million to $150.0 million, depending on the
worst case volume. The Company cannot predict whether these financial
responsibility requirements under the OPA amendment or proposed rule will result
in the imposition of substantial additional annual costs to the Company in the
future or otherwise materially adversely affect the Company, but the impact is
not expected to be any more burdensome to the Company than it will be to other
similar situated companies involved in oil and gas explorations and production
in the Gulf of Mexico.
OPA also requires owners and operators of vessels over 300 gross tons to
provide the U.S. Coast Guard with evidence of financial responsibility to cover
the cost of cleaning up oil spills from such vessels. The Company currently owns
and operates five vessels over 300 gross tons. Satisfactory evidence of
financial responsibility has been provided to the U.S. Coast Guard for all of
the Company's vessels.
While certain of its onshore waste handling practices may require
upgrading, management believes the Company is in compliance in all material
respects with all applicable environmental laws and regulations to which it is
subject. The Company does not anticipate that compliance with existing
environmental laws and regulations will have a material effect upon the capital
expenditures, earnings or competitive position of the Company.
INSURANCE AND LITIGATION
The Company's operations are subject to the inherent risks of offshore
marine activity including accidents resulting in personal injury and the loss of
life or property, environmental mishaps, mechanical failures and collisions. The
Company insures against these risks at levels consistent with industry
standards. The Company believes its insurance is adequate to protect it against,
among other things, the cost of replacing the total or constructive total loss
of its vessels. The Company also carries workers' compensation, maritime
employer's liability, general liability and other insurance customary in its
business. All insurance is carried at levels of coverage and deductibles that
the Company considers financially prudent.
The Company's services are provided in hazardous environments where
accidents involving catastrophic damage or loss of life could result, and
litigation arising from such an event may result in the Company being named a
defendant in lawsuits asserting large claims. To date, the Company has been
involved in no such catastrophic lawsuit. Although there can be no assurance
that the amount of insurance carried by Cal Dive is sufficient to protect it
fully in all events, management believes that its insurance protection is
adequate for the Company's business operations. A successful liability claim for
which the Company is underinsured or uninsured could have a material adverse
effect on the Company.
The Company is involved in various legal proceedings primarily involving
claims for personal injury under the General Maritime Laws of the United States
and the Jones Act as a result of alleged negligence. The Company believes that
the outcome of all such proceedings, even if
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<PAGE>
determined adversely, would not have a material adverse effect on its business
or financial condition.
EMPLOYEES
Cal Dive relies on the quality and skill of its workforce and has
successfully hired, trained, and retained highly skilled managers and divers. As
of March 31, 1997, the Company had 385 employees, 93 of which were salaried.
None of the Company's employees belong to a union or are employed pursuant to
any collective bargaining agreement or any similar arrangement. Management
believes that the Company's relationship with its employees is excellent. Of the
Company's employees, 19 persons own shares of the Company's Common Stock and 37
other employees hold options to acquire Common Stock under the Company's 1995
Long Term Incentive Plan.
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The following table sets forth certain information as of the date of this
Prospectus with respect to the executive officers, directors and certain other
senior officers of the Company:
NAME AGE POSITION WITH THE COMPANY
- --------------------------------- --- ----------------------------------------
Gerald G. Reuhl.................. 46 Chairman and Director
Owen Kratz....................... 44 President, Chief Executive Officer and
Director
S. James Nelson.................. 55 Executive Vice President, Chief
Financial Officer
and Director
Andrew C. Becher................. 51 Senior Vice President and General
Counsel
Louis L. Tapscott................ 58 Senior Vice President -- Business
Development
Jon M. Buck...................... 39 Vice President -- Sales
Randall W. Drewry................ 50 Vice President -- Bids and Proposals
Kenneth Duell.................... 46 Vice President -- Special Projects
Michael P. Middleton............. 40 Vice President -- Operations
Terrell W. (Jack) Reedy.......... 55 Vice President -- Safety
Lyle K. Kuntz.................... 45 President, ERT
Gordon F. Ahalt.................. 68 Director
Thomas M. Ehret.................. 45 Director
Jean-Bernard Fay................. 51 Director
Gerald M. Hage................... 49 Director
David H. Kennedy................. 47 Director
William E. Macaulay.............. 51 Director
Kevin L. Peterson................ 40 Director
EXECUTIVE AND OTHER SENIOR OFFICERS
GERALD G. REUHL has served as the Company's Chairman of the Board since
1990 and Chief Executive Officer from 1988 until April of 1997. From 1986 to
1988, Mr. Reuhl managed the Company's Domestic Diving Division, and from 1980 to
1986, he held a variety of management positions within both the domestic and
international divisions of the Company. Mr. Reuhl joined the Company as a diver
in 1975.
OWEN KRATZ has served as the Company's Chief Executive Officer since April
1997, President since 1993 and Chief Operating Officer and director since 1990.
He joined the Company in 1984 and has held various offshore positions, including
SAT diving supervisor, and management responsibility for client relations,
marketing and estimating. From 1982 to 1983, Mr. Kratz was the owner of an
independent marine construction company operating in the Bay of Campeche. Prior
to 1982, he was a supervisor for various international diving companies and a
SAT diver in the North Sea.
37
<PAGE>
S. JAMES NELSON, JR., has served as Executive Vice President, Chief
Financial Officer and a director of the Company since 1990. From 1985 to 1988,
Mr. Nelson was the Senior Vice President and Chief Financial Officer of
Diversified Energies, Inc., the former parent of Cal Dive, at which time he had
corporate responsibility for the Company. From 1980 to 1985, Mr. Nelson served
as Chief Financial Officer of Apache Corporation, an oil and gas exploration and
production company. From 1966 to 1980, Mr. Nelson was employed with Arthur
Andersen & Co., and from 1976 to 1980, he was a partner serving on the firm's
worldwide oil and gas industry team. Mr. Nelson received his undergraduate
degree from Holy Cross College (B.S.) in 1964 and a masters in business
administration (M.B.A.) from Harvard University in 1966.
ANDREW C. BECHER has served as Senior Vice President and General Counsel of
the Company since January 1996. Mr. Becher served as outside general counsel for
the Company from 1990 to 1996, while a partner with Robins, Kaplan, Miller &
Ciresi. From 1987 to 1990, Mr. Becher served as Senior Vice President of Dain
Bosworth, Inc., a Minneapolis-based investment banking firm. From 1976 to 1987,
he was a partner specializing in mergers and acquisitions with the law firm of
Briggs and Morgan. Mr. Becher received his undergraduate degree from Purdue
University (B.S.) in 1968 and his law degree from the University of Illinois in
1971.
LOUIS L. TAPSCOTT joined the Company as Senior Vice President of Business
Development in August 1996. From 1992 to 1996, he was a Senior Vice President
for Sonsub International, Inc., a company which operates a deepwater fleet of
ROVs. From 1984 to 1988, he was a director and Chief Operating Officer of
Oceaneering International, Inc. Mr. Tapscott has over thirty years of executive
management and operational experience working with subsea contractors and subsea
technology organizations in the United States and internationally.
JON M. BUCK has served as the Company's Vice President of Sales since
August 1996 and as Sales Coordinator since 1994. From 1987 to 1994, Mr. Buck
served as one of the Company's Account Managers. Prior to 1987, he held various
positions in the hyperbaric welding and sales groups of SubSea International,
Inc.
RANDALL W. DREWRY has served as the Company's Vice President of Bids and
Proposals since 1992. He has held a number of management positions since joining
the Company in 1980 and was responsible for custom designing the CAL DIVER I in
1984. Mr. Drewry has 24 years of experience in the industry as a diver, project
manager, marine manager and sales coordinator and is a specialist in pipeline
construction and saturation project specifications.
KENNETH DUELL joined Cal Dive in November of 1994 and was appointed Vice
President -- Special Projects in November 1996. From 1989 to 1994, he helped run
a modular refining systems business development in Central Asia. From 1974 to
1988, he held various positions with Santa Fe International, including the ROV
and diving division. Mr. Duell has over 22 years of worldwide experience in all
aspects of the onshore and offshore construction and diving industry.
MICHAEL P. MIDDLETON has served as the Company's Vice President of
Operations since 1991. Since joining the Company in 1981, Mr. Middleton has held
a number of offshore and management positions, including dive tender, diver,
diving superintendent, diving personnel manager, marine operations manager and
general manager.
TERRELL W. (JACK) REEDY has been the Company's Vice President of Safety
since 1991, becoming Vice President of Safety and Training in 1994. Prior to
joining the Company in 1990, Mr. Reedy worked for McDermott International, Inc.
as a diving supervisor and in offshore operations and the safety area. Prior
thereto, he served in the United States Navy as a SAT diver, a diving medical
technician and a member of the Experimental Diving Unit.
LYLE K. KUNTZ has served as President of the Company's subsidiary, Energy
Resource Technology, Inc., since its inception in 1992. Prior to forming ERT,
Mr. Kuntz spent 17 years with ARCO Oil and Gas Co. in a broad range of senior
engineering and management positions.
38
<PAGE>
GORDON F. AHALT has served on the Company's Board of Directors since July
1990 and has extensive experience in the oil and gas industry. Since 1982, Mr.
Ahalt has been the President of GFA, Inc., a petroleum industry management and
financial consulting firm. From 1979 to 1982, he served as Senior Vice President
and Chief Financial Officer of Ashland Oil Company. Prior thereto, Mr. Ahalt
spent a number of years in executive positions with Chase Manhattan Bank.
WILLIAM E. MACAULAY has served on the Company's Board of Directors since
January 1995. Since 1983, Mr. Macaulay has served as President and Chief
Executive Officer of First Reserve Corporation, a corporate manager of private
investments focusing on the energy and energy-related sectors. Mr. Macaulay
serves as a director of Weatherford Enterra, Inc., an oilfield service company,
Maverick Tube Corporation, a manufacturer of steel pipe and casing,
Transmontaigne Oil Company, an oil products distribution and refining company,
Hugoton Energy Corporation, an independent oil and gas exploration and product
company and National-Oilwell Inc., a manufacturer and distributor of oil field
equipment.
DAVID H. KENNEDY has served on the Company's Board of Directors since
January 1995 and has more than 20 years of experience in the oil and gas
industry. Since 1981, Mr. Kennedy has served as Managing Director of First
Reserve Corporation. From 1971 to 1981, he was with Price Waterhouse & Co. where
his responsibilities included tax and audit services for major energy companies.
Mr. Kennedy is a director of Maverick Tube Corporation, a manufacturer of steel
pipe and casing and of Berkley Petroleum Corporation, Pursuit Resources
Corporation and Burner Exploration Ltd., three Canadian exploration and
production companies.
GERALD M. HAGE has served on the Company's Board of Directors since January
1995. Since 1995, Mr. Hage has served as President and Chief Executive Officer
of Phoenix Energy Services, Inc., and from 1993 to 1994, he was President and
Chief Executive Officer of Total Energy Services, Inc., which was later merged
into Enterra Corporation. From 1991 to 1993, Mr. Hage served as President and
Chief Executive Officer of First Reserve Energy Services Co. From 1981 to 1991,
he held a number of senior management positions with Baker Hughes, Incorporated.
including President and Chief Executive Officer of Baker Oil Tools and
President, Chief Executive Officer, Vice President of Manufacturing and Vice
President of Operations for Baker Tubular Services.
THOMAS M. EHRET has served on the Company's Board of Directors since April
1997. Mr. Ehret has been the Senior Executive Vice President of Coflexip since
1996 and Chief Operating Officer and director since 1995. From 1989 through
1994, Mr. Ehret served as Chief Executive Officer with Stena Offshore Group
based in Aberdeen, Scotland.
JEAN-BERNARD FAY has served on the Company's Board of Directors since April
1997. Mr. Fay has been Chief Financial Officer of Coflexip since 1997, and from
1990 to 1996 was Group Vice President -- Finance and Administration. From 1986
to 1990, he was a Managing Director with SCOR, a French reinsurance group.
Kevin L. Peterson has served on the Company's Board of Directors since
April 1997. Mr. Peterson has been the President and Chief Executive Officer of
Coflexip Stena Offshore since January 1997. From 1990 to the present, Mr.
Peterson has served as the President and Chief Executive Officer of Perry
Tritech, Inc., a wholly-owned subsidiary of Coflexip.
The Company's Bylaws provide for the Board of Directors to be divided into
three classes of directors with each class to be as nearly equal in number of
directors as possible, serving staggered three-year terms. The terms of the
Class I directors, Owen Kratz, Gerald M. Hage and Thomas M. Ehret, will expire
in 1998. The terms of the Class II directors, William E. Macaulay, Gerald G.
Reuhl, Gordon F. Ahalt and Jean-Bernard Fay will expire in 1999. The terms of
the Class III directors, David H. Kennedy, S. James Nelson and Kevin L. Peterson
will expire in 2000. Each director serves until the end of his term or until his
successor is elected and qualified. See "Description of Capital
Stock -- Certain Anti-Takeover Provisions."
39
<PAGE>
COMMITTEES
As authorized by the Company's By-Laws (and as provided in the Shareholders
Agreement (defined below)) the Board has established the following four
committees: (i) a five-member Executive Committee comprised of one First Reserve
director, one Coflexip director, one independent director and two directors
appointed by management (one of whom shall be the Chairman of the Board) which,
when the Board is not in session, shall exercise such power and authority of the
Board in the management of the business of the Company pursuant to the unanimous
vote of such Committee as the Board may from time to time authorize, (ii) a
four-member Audit Committee comprised of one First Reserve director, one
Coflexip director and two independent directors, which shall consult with the
independent public auditors of the Company in connection with such auditors'
audit and review of the financial statements of the Company and shall consult
with the Company's Chief Financial Officer and staff in connection with the
preparation of the Company's financial statements, subject to such limitations
as the Board may from time to time impose; (iii) a five-member Compensation
Committee comprised of one First Reserve director, one Coflexip director, one
director appointed by management and two independent directors, which shall
administer awards under any Stock Option Plan and shall evaluate and make
recommendations with respect to the compensation arrangements of executive
officers of the Company, subject to such limitations as the Board may from time
to time impose; and (iv) a three-member Nominating Committee comprised of one
First Reserve director, one Coflexip director and one director appointed by
management, which shall be responsible for searching for and selecting nominees
to serve as independent directors from a list of acceptable potential nominees
prepared by the First Reserve director and Coflexip director with the advice of
the director appointed by management, from which list the director appointed by
management shall select a nominee.
COMPENSATION OF DIRECTORS
The Company has agreed to pay its independent directors each an annual
retainer which totals $20,000. All directors are reimbursed for reasonable
out-of-pocket expenses incurred to attend Board and committee meetings.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the cash compensation paid or accrued for
services rendered in all capacities to the Company in 1996, to the Chief
Executive Officer and each of the other four most highly compensated executive
officers of the Company (the "Named Executives").
40
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
1996 ANNUAL COMPENSATION COMPENSATION
------------------------------------------- AWARDS
OTHER ANNUAL ------------
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION (1) OPTIONS
- ---------------------------------------- ----------- ----------- ---------------- ------------
<S> <C> <C> <C>
Lyle K. Kuntz........................... $ 102,920 $ 408,586 $ 3,750 --
President, ERT
Gerald G. Reuhl......................... 146,000 146,000 3,650 --
Chairman and Chief Executive Officer,
Cal Dive
Owen Kratz (2).......................... 163,200 163,200 3,750 --
President and Chief Operating Officer,
Cal Dive
S. James Nelson......................... 128,300 128,300 3,208 --
Executive Vice President and Chief
Financial Officer, Cal Dive
Randall W. Drewry....................... 101,750 67,581 2,544 --
Vice President -- Bids and Proposals,
Cal Dive
</TABLE>
- ------------
(1) Represents the Company's matching contribution to the Company's 401(k) Plan.
(2) Owen Kratz became Chief Executive Officer in April 1997.
Except as indicated above, no stock options were granted to the Named
Executives during 1996 or 1997 and none of these individuals exercised a stock
option during 1996 or 1997.
Each of the Company's three principal executive officers, Gerald G. Reuhl,
Owen Kratz and S. James Nelson has entered into a two-year employment agreements
with the Company. These agreements provide, among other things, that until the
later of April 11, 2002 or the first or second anniversary date of termination
of the executive's employment with the Company (depending on the event of
termination), the executive shall not, directly or indirectly either for himself
or any other individual or entity, participate in any business which engages or
which proposes to engage in the business of providing diving services in the
Gulf of Mexico or any other business actively engaged in by the Company on the
date of termination of employment, so long as the Company continues to make
payments to such executive, including his base salary and insurance benefits
received by senior executives of the Company. In connection with the Coflexip
transaction, the Company also entered into employment agreements with six of the
Company's other senior officers substantially similar to the above agreements.
COMPENSATION PURSUANT TO PLANS
BONUS PLAN
Cal Dive has established three types of bonus compensation plans, each of
which is based on the Company's performance. The first bonus plan applies to the
three principal executive officers and is determined by the Compensation
Committee. The second bonus plan applies to subsea operating and administrative
personnel. This plan affords covered project management and sales personnel the
ability to participate in a bonus pool division if gross profits exceeds
specified targets and allows operating and administrative personnel to earn up
to 50% of their base salaries. The third plan is applicable to the three
principal employees of ERT and provides for a bonus of between 1% to 10% of net
income before taxes of ERT up to a maximum total of 15% of such net income.
PROFIT SHARING AND RETIREMENT PLAN
The Company's Retirement Plan (the "Retirement Plan") is a 401(k) savings
plan. The Retirement Plan permits each employee to become a participant in the
savings plan feature on
41
<PAGE>
January 1, April 1, July 1, or October 1 following the employee's completion of
90 consecutive days of employment.
Under the Retirement Plan, each active participant may elect, subject to
certain limitations required by law, to defer payment of from 1% to 15% of his
or her compensation. Upon such an election, the Company contributes such
deferred amounts to the Retirement Plan on behalf of such participant. Such
contributions to the 401(k) savings plan are invested according to the
instructions of the participant in investment funds designated by the plan
administrator. Subject to reduction or elimination based on its financial
performance and needs as described in the Plan, the Company's contributions are
determined annually as 50% of each employee's contribution (up to a maximum of
5% of the employee's annual salary).
Employee contributions to the 401(k) savings plan and earnings thereon are
100% vested at all times. Contributions by the Company to the profit sharing
feature, and earnings thereon, vest based on the participant's years of service
with the Company, vesting 20% after two years of service, increasing to 50% with
three years of service, and becoming 100% vested following four years of
service. All contributions vest, regardless of years of service, upon
termination of employment by reason of death or disability, attainment of age 65
or the termination or discontinuance of the Retirement Plan. After termination
of employment, an employee is entitled to receive a lump-sum distribution of his
or her entire vested interest in the Retirement Plan.
STOCK OPTION PLAN
The Company's 1995 Long Term Incentive Plan, as amended (the "Stock Option
Plan") is administered by the Board and provides for grants of incentive and
nonqualified options as defined by the Internal Revenue Code of 1986, as
amended, to employees as determined by the Compensation Committee. The Stock
Option Plan provides that options for a maximum of 10% of the total shares of
Common Stock issued and outstanding may be granted. No options may be granted
under the Stock Option Plan after October 2005. Options granted to employees
under the Stock Option Plan have a maximum term of five years and, subject to
certain exceptions, are not transferable.
The number and exercise price of options granted to employees will be
determined by the Compensation Committee; provided, however, that (i) the
exercise price of an incentive option may not be less than the fair market value
of the shares subject to the option on the date of the grant, and (ii) the
exercise price of a non-qualified option may not be less than 85% of the fair
market value of the shares subject to the option on the date of the grant. The
Stock Option Plan provides that, upon a change of control, the options
immediately vest and become exercisable.
To date, options to purchase approximately 911,500 shares of Common Stock
at exercise prices ranging from $4.50 to $9.50 have been granted to 34
employees.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the period from 1991 to 1994, the Company loaned $150,000 to each of
S. James Nelson and Owen Kratz. These loans bore an interest rate of 1.5% above
the prime rate per annum and were repaid in full in July 1995. The Company
believes the terms of the loans with Messrs. Nelson and Kratz were at least as
favorable as could have been obtained from unaffiliated third parties.
DESCRIBED BELOW ARE CERTAIN RELATED AGREEMENTS. THE FOLLOWING DESCRIPTIONS
ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE COMPLETE TEXT OF THE
RELEVANT AGREEMENTS, COPIES OF WHICH ARE FILED AS EXHIBITS TO THE REGISTRATION
STATEMENT OF WHICH THIS PROSPECTUS IS A PART AND ARE INCORPORATED BY REFERENCE
HEREIN.
42
<PAGE>
PURCHASE AGREEMENT
On April 11, 1997, the Company, the Selling Shareholders, Messrs. Reuhl,
Kratz and Nelson and certain other shareholders of the Company entered into an
agreement with Coflexip pursuant to which (i) the Company sold to Coflexip
528,541 shares of Common Stock and (ii) certain shareholders of the Company,
including Messrs. Reuhl, Kratz and Nelson, sold to Coflexip 3,171,247 shares of
Common Stock, all at a purchase price of $9.46 per share for an aggregate price
of $35 million (the "Purchase Agreement"). For issuing Common Stock to
Coflexip, the Company received $5 million in consideration, consisting of two
heavy work class construction ROVs. Among other terms of the Purchase Agreement,
the Company was required to make a number of specific representations,
warranties and covenants about its business, capital structure, assets and
liabilities. Individual selling shareholders were required to make separate
representations. The Company and Coflexip also agreed to indemnify each other
against certain claims and liabilities arising in connection with the
transaction for a minimum of three years for up to the amount of consideration
transferred for shares, in the case of the Company, or for value assets
transferred, in the case of Coflexip.
SHAREHOLDERS AGREEMENT
COMPOSITION OF THE BOARD
Pursuant to the Shareholders Agreement, the Board will consist of 11
members. The Company will include, as nominees for the Board, nine directors,
three from Coflexip, three from First Reserve and three from the Company's
senior management. In addition, the Board will nominate two additional directors
by a majority vote of the entire Board, to serve in separate classes. The
Shareholders Agreement provides that the Company will nominate and use its best
efforts to take all necessary action to elect to the Board the individuals
required to be nominated for election as directors.
RIGHT OF FIRST OFFER
The Shareholders Agreement provides that the Company will not enter into
any agreement (i) to sell the Company (ii) to retain an advisor to sell the
Company or (iii) to pursue any acquisition in excess of 50% of the Company's
market capitalization (based on the 30-day average trading value of the Common
Stock) without first notifying Coflexip in writing and providing Coflexip with
the right to acquire the Company without first notifying Coflexip in writing and
providing Coflexip (including its affiliates) the opportunity to consummate an
acquisition on terms substantially equivalent to any proposal. If Coflexip does
not notify the Company of its intent to pursue a transaction within 15 days of
the notice (the "Notice Period"), the Board will have the right to pursue the
transaction.
If Coflexip elects to pursue an acquisition of the Company, the Company
will take no further action with respect thereto for 120 days from the date of
Coflexip's notice. If Coflexip does not pursue an acquisition of the Company,
Coflexip has the right to acquire the Company's interest in the joint venture
formed pursuant to the Business Cooperation Agreement by providing notice within
the Notice Period. The purchase price for the joint venture shall be based on a
valuation prepared by an independent appraiser appointed by the Board. Coflexip
retains the foregoing rights to acquire the Company or the joint venture so long
as it owns at least five percent of the Company's Common Stock.
LIMITED PREEMPTIVE RIGHTS
The Shareholders Agreement provides that, except under limited
circumstances (including issuances of securities under stock option plans or in
connection with acquisitions), the Company shall provide preemptive rights to
acquire the Company's securities to each of Coflexip, First Reserve and the
Executive Directors. In the event of any public offering (other than this
Offering),
43
<PAGE>
Coflexip and First Reserve shall have the opportunity to acquire their pro rata
share unless the managing underwriters for such offering believe it would affect
the marketability of such offering.
LIMITATIONS ON TRANSFERS
The Shareholders Agreement contains certain customary transfer restrictions
that prohibit the parties from transferring any Common Stock, except for certain
permitted transfers.
BUSINESS COOPERATION AGREEMENT
In connection with the Purchase Agreement, the Company and Coflexip entered
into a Business Cooperation Agreement pursuant to which, by June 30, 1997, the
parties intend to form an entity to pursue opportunities with the offshore oil
and gas industry in the Gulf and the Caribbean exceeding $25 million in value
and meeting certain other criteria. For further information, see
"Business -- Coflexip Strategic Alliance."
REGISTRATION RIGHTS AGREEMENTS
In January 1995, the Company entered into an agreement pursuant to which it
sold an aggregate of 3,795,393 shares of Common Stock to the Selling
Shareholders at a purchase price of $4.50 per share. In connection with the
purchases of such shares of Common Stock, each of the Selling Shareholders
entered into a registration rights agreement with the Company and Gerald G.
Reuhl, Owen Kratz, S. James Nelson and the other shareholders of the Company
providing for demand and "piggyback" registration rights with respect to such
shares.
In connection with the Purchase Agreement, the Company and Coflexip entered
into a Registration Rights Agreement providing for demand and "piggyback"
registration rights with respect to such shares.
44
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information as of April 30, 1997,
with respect to the beneficial ownership of Common Stock by (i) each shareholder
of the Company who owns more than 5% of the outstanding stock, (ii) each
director of the Company, (iii) each of the Named Executives, (iv) all directors
and executive officers as a group and (v) each Selling Shareholder.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING(1) SHARES OFFERING(1)(2)
---------------------- BEING ----------------------
NAME NUMBER PERCENT OFFERED NUMBER PERCENT
- --------------------------- ------------ ------- ------- ------------ -------
<S> <C> <C> <C>
Gerald G. Reuhl(3)(4)...... 1,054,001 9.1% 1,054,001
Owen Kratz(3)(4)........... 1,440,929 12.4 1,440,929
S. James Nelson(3)......... 367,393 3.2 367,393
Lyle K. Kuntz.............. -- * --
Randall W. Drewry.......... 65,773 * 65,773
Gordon F. Ahalt(5)......... 35,000 * 35,000
First Reserve
Corporation(6)............. 4,492,548 38.6
William E. Macaulay(7)..... -- *
Gerald M. Hage(8).......... 22,000 * 22,000
Thomas M. Ehret............ -- *
Jean-Bernard Fay........... -- *
Kevin L. Peterson.......... -- *
First Reserve Fund VI(9)... 2,156,421 18.5
First Reserve Fund V(9).... 1,527,472 13.1
First Reserve Fund
V-2(9)................... 449,252 3.9
First Reserve Secured
Energy Assets Fund(9).... 359,403 3.1
Coflexip(10)............... 3,699,788 31.8 3,699,788
All directors and executive
officers as a group (18
persons)(11)............. 7,477,644 67.2
</TABLE>
- ------------
* Less than 1%.
(1) Unless otherwise indicated, the persons listed in the table have sole
voting and investment power with respect to all shares shown as
beneficially owned by them.
(2) The number of shares of Common Stock deemed outstanding after this Offering
includes million shares of Common Stock being offered for sale by
the Company in this Offering.
(3) The address of each executive officer is 13430 Northwest Freeway, Suite
350, Houston, Texas 77040.
(4) Messrs. Reuhl and Kratz are parties to an option agreement pursuant to
which Mr. Kratz can purchase up to 168,350 shares of Common Stock from Mr.
Reuhl. If such option were exercised in full, Messrs. Reuhl and Kratz would
own and shares of Common Stock, respectively, after
the Offering.
(5) Does not include 22,000 shares issuable upon exercise of options held by
Mr. Ahalt.
(6) The address of First Reserve Corporation is 475 Steamboat Rd., Greenwich,
Connecticut 06830. The 4,492,548 shares indicated as beneficially owned by
First Reserve Corporation are owned of record by First Reserve Fund VI
Limited Partnership, First Reserve Fund V, Limited Partnership, First
Reserve Fund V-2 Limited Partnership and First Reserve Energy Assets Fund,
Limited Partnership, of which First Reserve Corporation is the sole general
partner and as to which it possesses sole voting and investment power.
Through their ownership of common stock of First Reserve Corporation,
Messrs. Macaulay and John A. Hill may be deemed to share beneficial
ownership of the shares shown as beneficially owned by First Reserve
Corporation. Messrs. Macalulay and Hill disclaim beneficial ownership of
such shares of Common Stock.
(7) Does not include any shares of Common Stock beneficially owned by First
Reserve Corporation.
(8) Includes 22,000 shares issuable upon exercise of options held by Mr. Hage.
(9) The address of First Reserve Fund VI, First Reserve Fund V, First Reserve
Fund V-2 and First Reserve Secured Energy Assets Fund is c/o First Reserve
Corporation, 475 Steamboat Road, Greenwich, Connecticut 06830.
(10) The address of Coflexip is 23 Avenue de Neuilly, 75116 Paris, France.
(11) Includes shares issuable upon exercise of options to directors and
executive officers.
45
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Cal Dive's Amended and Restated Articles of Incorporation (the "Articles
of Incorporation") provide for authorized capital stock of 60,000,000 shares of
Common Stock, no par value per share, of which shares will be
outstanding upon completion of this Offering, and 5,000,000 shares of Preferred
Stock, $.01 par value per share ("Preferred Stock"), of which no shares will
be outstanding upon completion of this Offering. The following summary
description of the capital stock of the Company is qualified in its entirety by
reference to the Amended and Restated Articles of Incorporation and the
Company's Amended and Restated Bylaws (the "Bylaws"), a copy of each of which
is filed as an exhibit to the Registration Statement of which this Prospectus
forms a part.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share on all
matters voted on by shareholders, and except as otherwise required by law or as
provided in any resolution adopted by the Board of Directors with respect to any
series of Preferred Stock, the holders of shares of Common Stock exclusively
possess all voting power.
Subject to any preferential rights of any outstanding series of Preferred
Stock created by the Board of Directors from time to time, the holders of Common
Stock are entitled to such dividends as may be declared from time to time by the
Board of Directors from funds available therefor, and upon liquidation will be
entitled to receive pro rata all assets of the Company available for
distribution to such holders. The Common Stock is not convertible or redeemable
and there are no sinking fund provisions therefor. Holders of the Common Stock
are not entitled to any preemptive rights except under the Shareholders
Agreement. See "Certain Relationships and Related Transactions."
PREFERRED STOCK
The Board of Directors of the Company, without any action by the
shareholders of the Company, is authorized to issue up to 5,000,000 shares of
Preferred Stock, in one or more series and to determine the voting rights,
preferences as to dividends and in liquidation and the conversion and other
rights of each such series. There are no shares of Preferred Stock outstanding.
See "-- Certain Anti-Takeover Provisions" with regard to the effect that the
issuance of Preferred Stock might have on attempts to take over the Company.
REGISTRATION RIGHTS
The Company has entered into a Registration Rights Agreement with certain
of its current shareholders, including Gerald G. Reuhl, Owen Kratz, S. James
Nelson and the Selling Shareholders, pursuant to which the holders are entitled
to certain demand and "piggyback" rights with respect to the registration of
such shares under the Securities Act. This Registration Rights Agreement
provides that if the Company proposes to register any of its securities under
the Securities Act, the holder is entitled to include shares of Common Stock
owned by such holder in such offering provided, among other conditions, that the
underwriters of any offering have the right to limit the number of such shares
included in such registration. Such registration rights agreements further
provide for registration upon the request of holders of at least 10% of the
shares of Common Stock subject to the agreement. The Selling Shareholders, which
collectively hold 4,492,548 shares of Common Stock, are exercising their
respective registration rights with respect to a portion of the shares held by
them in connection with this Offering. The other shareholders, with the
exception of the Selling Shareholders, have waived their right to include shares
of Common Stock owned by each of them in this Offering. The Company and Coflexip
have entered into a Registration Rights Agreement substantially similar to the
agreement described above.
CERTAIN ANTI-TAKEOVER PROVISIONS
The Articles of Incorporation and Bylaws contain a number of provisions
that could make the acquisition of the Company by means of a tender or exchange
offer, a proxy contest or otherwise more difficult. The description of such
provisions set forth below is intended to be only a summary
46
<PAGE>
and is qualified in its entirety by reference to the pertinent sections of the
Articles of Incorporation and the Bylaws, copies of which are filed as exhibits
to the Registration Statement of which this Prospectus forms a part.
CLASSIFIED BOARD OF DIRECTORS; REMOVAL OF DIRECTORS. The classification of
directors will have the effect of making it more difficult for shareholders to
change the composition of the Board of Directors. At least two annual meetings
of shareholders generally will be required to effect a change in a majority of
the Board of Directors. Such a delay may help ensure that the Company's
directors, if confronted by a shareholder attempting to force a proxy contest, a
tender or exchange offer or an extraordinary corporate transaction, would have
sufficient time to review the proposal as well as any available alternatives to
the proposal and to act in what they believe to be the best interest of the
shareholders. The classification provisions will apply to every election of
directors, however, regardless of whether a change in the composition of the
Board of Directors would be beneficial to the Company and its shareholders and
whether a majority of the Company's shareholders believes that such a change
would be desirable.
The Articles of Incorporation provide that directors of the Company may
only be removed for cause by the affirmative vote of the holders of 68% of the
voting power of all of the then outstanding shares of stock entitled to vote
generally in the election of directors (the "Voting Stock").
The classification provisions could also have the effect of discouraging a
third party from initiating a proxy contest, making a tender or exchange offer
or otherwise attempting to obtain control of the Company, even though such an
attempt might be beneficial to the Company and its shareholders. These
provisions could thus increase the likelihood that incumbent directors will
retain their positions. In addition, the classification provisions may
discourage accumulations of large blocks of the Common Stock that are effected
for purposes of changing the composition of the Board of Directors. Accordingly,
shareholders could be deprived of certain opportunities to sell their shares of
Common Stock at a higher market price than might otherwise be the case.
PREFERRED STOCK. The Articles of Incorporation authorize the Board of
Directors to establish one or more series of Preferred Stock and to determine,
with respect to any series of Preferred Stock, the terms and rights of such
series, including (i) the designation of the series, (ii) the number of shares
of the series, which number the Board may thereafter (except where otherwise
provided in the certificate of designation) increase or decrease (but not below
the number of shares thereof then outstanding), (iii) whether dividends, if any,
will be cumulative or noncumulative and the dividend rate of the series, (iv)
the dates at which dividends, if any, will be payable, (v) the redemption rights
and price or prices, if any, for shares of the series, (vi) the terms and
amounts of any sinking fund provided for the purchase or redemption of shares of
the series, (vii) the amounts payable on shares of the series in the event of
any voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Company, (viii) whether the shares of the series will be
convertible into shares of any other class or series, or any other security, of
the Company or any other corporation, and, if so, the specification of such
other class or series or such other security, the conversion price or prices or
rate or rates, any adjustments thereof, the date or dates as of which such
shares shall be convertible and all other terms and conditions upon which such
conversion may be made, (ix) restrictions, if any, on the issuance of shares of
the same series or of any other class or series, and (x) voting rights, if any,
of the shareholders of such series, which may include the right of such
shareholders to vote separately as a class on any matter.
The Company believes that the ability of the Board of Directors to issue
one or more series of Preferred Stock will provide the Company with flexibility
in structuring possible future financing and acquisitions and in meeting other
corporate needs which might arise. The authorized shares of Preferred Stock, as
well as shares of Common Stock, will be available for issuance without further
action by the Company's shareholders, unless such action is required by
applicable law or the rules of any stock exchange or automated quotation system
on which the Company's securities may be listed or traded.
47
<PAGE>
Although the Board of Directors has no intention at the present time of
doing so, it could issue a series of Preferred Stock that, depending on the
terms of such series, might impede the completion of a merger, tender offer or
other takeover attempt. The Board of Directors will make any determination to
issue such shares based on its judgment as to the best interests of the Company
and its shareholders. The Board of Directors, in so acting, could issue
Preferred Stock having terms that could discourage an acquisition attempt
through which an acquiror may be otherwise able to change the composition of the
Board of Directors, including a tender or exchange offer or other transaction
that some, or a majority, of the Company's shareholders might believe to be in
their best interests or in which shareholders might receive a premium for their
stock over the then current market price of such stock.
NO SHAREHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS. The Bylaws
provide that shareholder action can be taken only at an annual or special
meeting of shareholders and prohibit shareholder action by written consent in
lieu of a meeting. The Bylaws provide that special meetings of shareholders can
be called only upon a written request stating the purpose of such meeting
delivered to the Chairman of the Board, the President or the Secretary, and
signed by a member of the Board of Directors. Shareholders are not permitted to
call a special meeting or to require that the Board call a special meeting.
Moreover, the business permitted to be conducted at any special meeting of
shareholders is limited to the business brought before the meeting pursuant to
the notice of meeting given by the Company.
The provisions of the Articles of Incorporation and the Bylaws prohibiting
shareholder action by written consent may have the effect of delaying
consideration of a shareholder proposal, including a shareholder proposal that a
majority of shareholders believes to be in the best interest of the Company,
until the next annual meeting unless a special meeting is called at the request
of a majority of the Board of Directors or by resolution of the Board or the
Executive Committee thereof. These provisions would also prevent the holders of
a majority of the voting stock from unilaterally using the written consent
procedure to take shareholder action. Moreover, a shareholder could not force
shareholder consideration of a proposal over the opposition of the Board by
calling a special meeting of shareholders prior to the time a majority of the
Board believes such consideration to be appropriate.
Amendment of Certain Provisions of the Articles of Incorporation and
Bylaws. Under the MBCA, the shareholders have the right to adopt, amend or
repeal the Bylaws and, with the approval of the Board of Directors, the Articles
of Incorporation. The Articles of Incorporation provide that the affirmative
vote of the holders of at least 80% of the voting power of the then outstanding
shares of Voting Stock, voting together as a single class, and in addition to
any other vote required by the Articles of Incorporation or Bylaws, is required
to amend provisions of the Articles of Incorporation or Bylaws relating to: (i)
the prohibition of shareholder action without a meeting; (ii) the prohibition of
shareholders calling a special meeting; (iii) the number, election and term of
the Company's directors; or (iv) the removal of directors. The vote of the
holders of a majority of the voting power of the then outstanding shares of
Voting Stock is required to amend all other provisions of the Articles of
Incorporation. The Bylaws further provide that the Bylaws may be amended by the
Board of Directors or by the affirmative vote of the holders of at least a
majority of the voting power of the then outstanding shares of Voting Stock,
voting together as a single class. These super-majority voting requirements will
have the effect of making more difficult any amendment by shareholders of the
Bylaws or of any of the provisions of the Articles of Incorporation described
above, even if a majority of the Company's shareholders believes that such
amendment would be in their best interests.
ANTI-TAKEOVER LEGISLATION. As a public corporation, the Company will be
governed by the provisions of Section 302A.673 of the MBCA. This anti-takeover
provision may eventually operate to deny shareholders the receipt of a premium
on their Common Stock and may also have a depressive effect on the market price
of the Company's Common Stock. Section 302A.673 prohibits a public corporation
from engaging in a "business combination" with an "interested
48
<PAGE>
shareholder" for a period of four years after the date of the transaction in
which the person became an interested shareholder, unless the business
combination is approved in a prescribed manner. A "business combination"
includes mergers, asset sales and other transactions. An "interested
shareholder" is a person who is the beneficial owner of 10% or more of the
corporation's Voting Stock. Reference is made to the detailed terms of Section
302A.673 of the MBCA.
LIMITATION ON DIRECTORS' LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Articles of Incorporation and Bylaws each contain a provision that
eliminates, to the extent currently allowed under the MBCA, the personal
monetary liability of a director to the Company and its shareholders for breach
of his fiduciary duty of care as a director. If a director were to breach the
duty of care in performing his duties as a director, neither the Company nor its
shareholders could recover monetary damages from the director, and the only
course of action available to the Company's shareholders would be equitable
remedies, such as an action to enjoin or rescind a transaction involving a
breach of the fiduciary duty of care. To the extent certain claims against
directors are limited to equitable remedies, this provision of the Articles of
Incorporation may reduce the likelihood of derivative litigation and may
discourage shareholders or management from initiating litigation against
directors for breach of their duty of care. Additionally, equitable remedies may
not be effective in many situations. If a shareholder's only remedy is to enjoin
the completion of the Board of Directors's action, this remedy would be
ineffective if the shareholder does not become aware of a transaction or event
until after it has been completed. In such a situation, such shareholder would
have not effective remedy against the directors.
All of the foregoing indemnification provisions include statements that
such provisions are not to be deemed exclusive of any other right to indemnity
to which a director or officer may be entitled under any by-law, agreement, vote
of shareholders or disinterested directors or otherwise.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have shares of Common
Stock outstanding. The shares sold in this Offering (plus any additional shares
sold upon exercise of the Underwriters' over-allotment option) will be freely
tradeable in the public market without restriction or further registration under
the Securities Act, except for any shares purchased by "affiliates" of the
Company, as that term is defined in Rule 144 promulgated under the Securities
Act. The remaining outstanding shares of Common Stock (the "Restricted Shares"),
are deemed to be "restricted securities" within the meaning of Rule 144 and may
be publicly resold only if registered under the Securities Act or sold in
accordance with an eligible exemption from registration, such as Rule 144. Of
the Restricted Shares, approximately shares will be eligible for resale in the
public market immediately, and shares will be eligible for resale commencing in
July 1997, subject in each case to certain volume and other restrictions under
Rule 144.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are required to be aggregated), including an affiliate of the
Company, who beneficially owns "restricted securities" acquired from the
Company or an affiliate of the Company at least one year prior to the sale is
entitled to sell within any three-month period a number of shares that does not
exceed the greater of (i) one percent of the then outstanding shares of Common
Stock ( shares based on the number of shares outstanding immediately
after completion of this Offering, assuming no exercise of the Underwriters'
over-allotment option), and (ii) the average weekly reported trading volume of
the Common Stock during the four calendar weeks immediately preceding the date
on which notice of such sale is filed with the Commission, provided certain
manner of sale and notice requirements and requirements as to the availability
of current public information concerning the Company are satisfied (which
requirements as to the availability of current public information are expected
to be satisfied commencing 90 days after the date of this Prospectus). Under
Rule
49
<PAGE>
144(k), a person who has not been an affiliate of the Company for a period of
three months preceding a sale of securities by him, and who beneficially owns
such "restricted securities" acquired from the Company or an affiliate of the
Company at least two years prior to such sale, would be entitled to sell shares
without regard to volume limitations, manner of sale provisions, notification
requirements or requirements as to the availability of current public
information concerning the Company. Shares held by persons who are deemed to be
affiliates of the Company, including any shares acquired by affiliates in this
Offering, are subject to such volume limitations, manner of sale provisions,
notification requirements and requirements as to availability of current public
information concerning the Company, regardless of how long the shares have been
owned or how they were acquired, and, in addition, the sale of any "restricted
securities" beneficially owned by affiliates is subject to the one-year holding
period requirement. As defined in Rule 144, an "affiliate" of an issuer is a
person that directly or indirectly through the use of one or more intermediaries
controls, or is controlled by, or is under common control with, such issuer.
The Company, its executive officers and directors, the Selling
Shareholders, certain other shareholders of the Company and Coflexip have agreed
that, for a period of 180 days after the date of this Prospectus, they will not,
directly or indirectly, offer, sell, contract to sell, grant any option to sell
or otherwise dispose of, directly or indirectly, any shares of Common Stock (or
securities convertible into or exchangeable for, or any rights to purchase or
acquire, Common Stock, other than options under the Stock Option Plan and upon
exercise of options granted under the Stock Option Plan) without prior written
consent of the Representatives of the Underwriters.
In connection with the purchase of Common Stock by First Reserve in January
1995 and the purchase of Common Stock by Coflexip in April 1997, the Company
entered into Registration Rights Agreements which include certain demand and
"piggyback" registration rights, on customary terms and conditions, to the
Company's existing shareholders who currently hold an aggregate of
shares of Common Stock. Such registration rights are subject to certain notice
requirements, timing restrictions and volume limitations. See "Certain
Relationships and Related Transactions" and "Description of Capital
Stock -- Registration Rights."
The Company has granted options to purchase an aggregate of 911,500 shares
of Common Stock under the Stock Option Plan. See "Management -- Compensation
Pursuant to Plans." The Company intends to register under the Securities Act
the shares issuable upon exercise of options granted under the Stock Option Plan
and, upon such registration, such shares will be eligible for resale in the
public market, except that any such shares issued to affiliates are subject to
the volume limitations and other restrictions of Rule 144.
Prior to this Offering, there has been no public market for the Common
Stock, and no prediction can be made as to the effect, if any, that the sale of
shares or the availability of shares for sale will have on the market price of
the Common Stock prevailing from time to time. Nevertheless, sales of
substantial amounts of the Common Stock in the public market could adversely
affect prevailing market prices and the ability of the Company to raise equity
capital in the future. See "Underwriting."
50
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, each of
the Underwriters named below, and each of the Underwriters for whom Schroder
Wertheim & Co. Incorporated, Raymond James & Associates, Inc. and Simmons &
Company International are acting as Representatives (the "Representatives")
has severally agreed to purchase from the Company and the Selling Shareholders
an aggregate of shares of Common Stock at the price to public less the
underwriting discounts set forth on the cover page of this Prospectus, in the
amounts set forth below opposite their respective names.
NUMBER OF
SHARES TO
UNDERWRITERS BE PURCHASED
- ---------------------------------------- ------------
Schroder Wertheim & Co. Incorporated....
Raymond James & Associates, Inc.........
Simmons & Company International.........
------------
Total..............................
============
The Underwriting Agreement provides that the Underwriters' obligation to
pay for and accept delivery of the shares of Common Stock offered hereby is
subject to certain conditions precedent and that the Underwriters will be
obligated to purchase all such shares, excluding shares covered by the
over-allotment option, if any are purchased. The Underwriters have informed the
Company that no sales of Common Stock will be confirmed to discretionary
accounts.
The Company has been advised by the Underwriters that they propose
initially to offer the Common Stock to the public at the public offering price
set forth on the cover page of this Prospectus and to certain dealers at such
price, less a concession not in excess of $ per share. The Underwriters
may allow and such dealers may reallow a concession not in excess of $ per
share to certain other brokers and dealers. After the Offering, the public
offering price, the concession and reallowances to dealers and other selling
terms may be changed by the Underwriters.
The Company and the Selling Shareholders have granted to the Underwriters
an option exercisable for 30 days after the date of this Prospectus to purchase
up to an aggregate of additional shares of Common Stock to cover
over-allotments, if any, at the same price per share to be paid by the
Underwriters for the other shares of Common Stock offered hereby. If the
Underwriters purchase any such additional shares pursuant to the over-allotment
option, each Underwriter will be committed, subject to certain conditions, to
purchase a number of the additional shares of Common Stock proportionate to such
Underwriter's initial commitment.
The Company, its directors and executive officers, certain shareholders who
will beneficially own an aggregate of shares of the
Common Stock outstanding after the Offering and Coflexip have agreed with the
Representatives, for a period of 180 days after the date of this Prospectus, not
to issue, sell, offer to sell, grant any options for the sale of, or otherwise
dispose of any shares of Common Stock or any rights to purchase shares of Common
Stock (other than stock issued or options granted pursuant to the Company's
stock incentive plans), without the prior written consent of the
Representatives. See "Shares Eligible for Future Sale."
51
<PAGE>
The Company and the Selling Shareholders have severally agreed to indemnify
the Underwriters against certain liabilities that may be incurred in connection
with the sale of the Common Stock, including liabilities arising under the
Securities Act, and to contribute to payments that the Underwriters may be
required to make with respect thereto.
Prior to this Offering, there has been no public market for the Common
Stock. The initial public offering price for the Common Stock will be determined
by negotiation between the Company and the Representatives. Among other factors
considered in determining the public offering price will be prevailing market
and economic conditions, revenues and earnings of the Company, the state of the
Company's business operations, an assessment of the Company's management and
consideration of the above factors in relation to market valuation of companies
in related businesses and other factors deemed relevant. There can be no
assurance, however, that the prices at which the Common Stock will sell in the
public market after the Offering will not be lower than the public offering
price.
In order to facilitate the Offering of the Common Stock, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Common Stock. Specifically, the Underwriters may overallot in
connection with the Offering, creating a short position in the Common Stock for
their own account. In addition, to cover overallotments or to stabilize the
price of the Common Stock, the Underwriters may bid for, and purchase, shares of
Common Stock in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to an underwriter or a dealer for distributing the
Common Stock in the Offering, if the syndicate repurchases previously
distributed Common Stock in transactions to cover syndicate short positions, in
stabilization or otherwise. Any of these activities may stabilize or maintain
the market price of the Common Stock above independent market levels. The
Underwriters are not required to engage in these activities, and may end any of
these activities at any time.
In connection with the Coflexip transaction, Schroder Wertheim & Co.
Incorporated provided advisory services to Coflexip for which it has received
customary compensation. From time to time, Simmons & Company International has
provided advisory services to the Company and First Reserve for which it has
received customary compensation.
The Company has filed an application for quotation of its Common Stock on
the Nasdaq National Market under the symbol "CDIS."
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company and the Selling Shareholders by Robins, Kaplan, Miller & Ciresi L.L.P.,
Minneapolis, Minnesota. Vinson & Elkins L.L.P., Houston, Texas will pass upon
certain legal matters for the Underwriters.
EXPERTS
The consolidated balance sheets as of December 31, 1996 and 1995, and the
consolidated statements of operations, cash flows and shareholders' equity for
the three years in the period ended December 31, 1996 included in this
Prospectus and elsewhere in the Registration Statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
report. The estimated reserve evaluations and related calculations of Miller &
Lents, Ltd. set forth in this Registration Statement have been included herein
in reliance upon the authority of said firm as an expert in petroleum
engineering.
52
<PAGE>
ADDITIONAL INFORMATION
The Company has not previously been subject to the reporting requirements
of the Securities Exchange Act of 1934, as amended. The Company has filed with
the Commission a Registration Statement on Form S-1 under the Securities Act
with respect to the shares of Common Stock offered by this Prospectus. This
Prospectus does not contain all the information set forth in the Registration
Statement and the exhibits and schedules thereto. The Registration Statement and
the exhibits and schedules thereto filed with the Commission may be inspected,
without charge, and copies may be obtained at prescribed rates, at the public
reference facilities maintained by the Commission at its principal office at 450
Fifth Street, N.W., Washington, D.C. 20549 and the Commission's regional offices
or public reference facilities of the Commission located at 7 World Trade
Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. The Registration
Statement and other information filed by the Company with the Commission are
also available at the web site of the Commission at http:www.sec.gov. For
further information pertaining to the Company and to the shares of Common Stock
offered hereby, reference is made to the Registration Statement including the
exhibits and schedules thereto. Any statements contained herein concerning
provisions of any document filed as an exhibit to the Registration Statement or
otherwise filed with the Commission are not necessarily complete, and in each
instance reference is made to the copy of such document so filed. Each statement
is qualified in its entirety by such reference.
REPORTS TO SHAREHOLDERS
The Company intends to furnish its shareholders with annual reports
containing audited consolidated financial statements certified by independent
public accountants following the end of each fiscal year, and quarterly reports
containing unaudited consolidated financial statements for the first three
quarters of each fiscal year following the end of each such fiscal quarter.
53
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Report of Independent Public
Accountants........................ F-2
Consolidated Balance
Sheets -- December 31, 1996 and
1995............................... F-3
Consolidated Statements of Operations
for the years ended December 31,
1996, 1995 and 1994................ F-4
Consolidated Statements of
Shareholders' Equity for the years
ended December 31, 1996, 1995 and
1994............................... F-5
Consolidated Statements of Cash Flows
for the years ended December 31,
1996, 1995 and 1994................ F-6
Notes to Consolidated Financial
Statements........................... F-7
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Cal Dive International, Inc.:
We have audited the accompanying consolidated balance sheets of Cal Dive
International, Inc. (a Minnesota corporation), and subsidiary as of December 31,
1996 and 1995, and the related consolidated statements of operations,
shareholders' equity and cash flows for the three years in the period ended
December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Cal Dive
International, Inc., and subsidiary as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for the three years in the
period ended December 31, 1996, in conformity with generally accepted accounting
principles.
Houston, Texas
March 7, 1997 (except with respect
to the matters discussed in Note 12,
as to which the date is
April 30, 1997)
F-2
<PAGE>
CAL DIVE INTERNATIONAL, INC., AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS -- DECEMBER 31, 1996 AND 1995
1996 1995
--------------- ---------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......... $ 203,663 $ 159,310
Accounts receivable --
Trade, net of reserve for
potential uncollectible
amounts of $1,021,000 and
$402,000................... 18,848,837 5,143,247
Unbilled revenue.............. 7,363,631 5,782,410
Other current assets............... 2,056,123 1,050,254
--------------- ---------------
Total current assets..... 28,472,254 12,135,221
--------------- ---------------
PROPERTY AND EQUIPMENT.................. 61,466,303 34,584,088
Less- Accumulated depreciation..... (13,259,914) (8,411,353)
--------------- ---------------
48,206,389 26,172,735
--------------- ---------------
OTHER ASSETS:
Cash deposits restricted for
salvage operations............... 5,233,509 4,978,720
Loan acquisition costs and other
assets, net...................... 445,673 361,537
--------------- ---------------
$ 82,357,825 $ 43,648,213
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................... $ 9,909,349 $ 5,219,215
Accrued liabilities................ 5,059,407 2,883,044
Income taxes payable............... 94,280 --
--------------- ---------------
Total current
liabilities........... 15,063,036 8,102,259
LONG-TERM DEBT.......................... 25,000,000 5,300,000
DEFERRED INCOME TAXES................... 5,417,188 2,915,555
DECOMMISSIONING LIABILITIES............. 6,033,831 4,921,900
COMMITMENTS AND CONTINGENCIES...........
SHAREHOLDERS' EQUITY:
Common stock, no par, 20,000,000
shares authorized, 18,448,010
shares issued and outstanding.... 9,093,040 9,093,040
Retained earnings.................. 25,806,261 17,370,990
Treasury stock, 7,348,750 shares,
at cost.......................... (4,055,531) (4,055,531)
--------------- ---------------
Total shareholders'
equity................ 30,843,770 22,408,499
--------------- ---------------
$ 82,357,825 $ 43,648,213
=============== ===============
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
CAL DIVE INTERNATIONAL, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
--------------- --------------- ---------------
REVENUES:
<S> <C> <C> <C>
Subsea and salvage revenues..... $ 63,870,190 $ 32,747,484 $ 35,717,882
Natural gas and oil
production...................... 12,252,187 4,777,122 2,314,219
--------------- --------------- ---------------
76,122,377 37,524,606 38,032,101
COST OF SALES:
Subsea and salvage.............. 46,765,933 25,568,063 25,476,808
Natural gas and oil
production.................... 7,269,966 3,107,203 1,594,450
--------------- --------------- ---------------
Gross profit............... 22,086,478 8,849,340 10,960,843
--------------- --------------- ---------------
SELLING AND ADMINISTRATIVE EXPENSES:
Selling expenses................ 1,157,807 938,883 1,006,754
Administrative expenses......... 7,133,663 3,993,018 3,649,619
--------------- --------------- ---------------
Total selling and
administrative
expenses................ 8,291,470 4,931,901 4,656,373
--------------- --------------- ---------------
INCOME FROM OPERATIONS............... 13,795,008 3,917,439 6,304,470
OTHER INCOME AND EXPENSE:
Interest expense, net........... 745,182 134,743 428,324
Other (income) expense, net..... 35,608 61,525 69,399
--------------- --------------- ---------------
INCOME BEFORE INCOME TAXES........... 13,014,218 3,721,171 5,806,747
PROVISION FOR INCOME TAXES........... 4,578,947 1,047,428 1,773,090
--------------- --------------- ---------------
NET INCOME........................... $ 8,435,271 $ 2,673,743 $ 4,033,657
=============== =============== ===============
NET INCOME PER SHARE................. $ .75 $ .24 $ .46
=============== =============== ===============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING........................ 11,286,117 11,015,953 8,836,077
=============== =============== ===============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
CAL DIVE INTERNATIONAL, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK TOTAL
-------------------------- RETAINED ---------------------------- SHAREHOLDERS'
SHARES AMOUNT EARNINGS SHARES AMOUNT EQUITY
----------- ----------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1993.............. 18,388,010 $ 1,178,340 $ 10,663,590 (10,068,600) $ (5,481,945) $ 6,359,985
NET INCOME.............................. -- -- 4,033,657 -- -- 4,033,657
----------- ----------- ------------ ------------ ------------ -------------
BALANCE, December 31, 1994.............. 18,388,010 1,178,340 14,697,247 (10,068,600) (5,481,945) 10,393,642
NET INCOME.............................. -- -- 2,673,743 -- -- 2,673,743
EXERCISE OF WARRANTS AND STOCK
OPTIONS............................... 60,000 121,500 -- 500,000 150,000 271,500
SALE OF TREASURY STOCK.................. -- 8,723,586 -- 2,219,850 1,276,414 10,000,000
COSTS ASSOCIATED WITH SALE OF TREASURY
STOCK................................. -- (930,386) -- -- -- (930,386)
----------- ----------- ------------ ------------ ------------ -------------
BALANCE, December 31, 1995.............. 18,448,010 9,093,040 17,370,990 (7,348,750) (4,055,531) 22,408,499
NET INCOME.............................. -- -- 8,435,271 -- -- 8,435,271
----------- ----------- ------------ ------------ ------------ -------------
BALANCE, December 31, 1996.............. 18,448,010 $ 9,093,040 $ 25,806,261 (7,348,750) $ (4,055,531) $ 30,843,770
=========== =========== ============ ============ ============ =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
CAL DIVE INTERNATIONAL, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---------------- ---------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................... $ 8,435,271 $ 2,673,743 $ 4,033,657
Adjustments to reconcile net income
to net cash provided by operating
activities --
Depreciation and
amortization............... 5,257,255 2,794,506 2,017,015
Provision for deferred income
taxes...................... 2,122,094 634,729 203,378
Other changes in assets and
liabilities, net........... (8,169,928) 5,892,495 (5,397,054)
---------------- ---------------- --------------
Net cash provided by
operating
activities............ 7,644,692 11,995,473 856,996
---------------- ---------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............... (27,289,754) (16,857,354) (1,396,995)
Purchase of deposits restricted for
salvage operations............... (254,789) (2,726,463) (1,652,257)
Proceeds from sale of property..... 244,204 -- --
---------------- ---------------- --------------
Net cash used in
investing
activities............ (27,300,339) (19,583,817) (3,049,252)
---------------- ---------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of treasury stock............. -- 10,000,000 --
Borrowings under term loan
facility......................... 25,000,000 8,252,919 --
Exercise of stock warrants and
options.......................... -- 271,500 --
Increase (decrease) in short-term
borrowing........................ -- (1,900,000) 1,900,000
Repayments of long-term debt....... (5,300,000) (8,218,919) (1,609,000)
Costs associated with sale of
treasury stock................... -- (930,386) --
---------------- ---------------- --------------
Net cash provided by
financing
activities............ 19,700,000 7,475,114 291,000
---------------- ---------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................... 44,353 (113,230) (1,901,256)
CASH AND CASH EQUIVALENTS:
Balance, beginning of year......... 159,310 272,540 2,173,796
---------------- ---------------- --------------
Balance, end of year............... $ 203,663 $ 159,310 $ 272,540
================ ================ ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
CAL DIVE INTERNATIONAL, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION:
Cal Dive International, Inc. (Cal Dive or the Company), headquartered in
Houston, Texas, owns, staffs and operates eight marine construction vessels and
a derrick barge in the Gulf of Mexico. The Company provides a full range of
services to offshore oil and gas exploration and production and pipeline
companies, including underwater construction, maintenance and repair of
pipelines and platforms, and salvage operations. The Company was purchased for
approximately $10.7 million by a group of investors including current management
and key employees in a transaction which was effective July 27, 1990. This
transaction was accounted for using the purchase method of accounting.
In September 1992, Cal Dive formed a wholly owned subsidiary, Energy
Resource Technology, Inc. (ERT), to purchase producing offshore oil and gas
properties which are in the later stages of their economic lives. ERT is a fully
bonded offshore operator and, in conjunction with the acquisition of properties,
assumes the responsibility to abandon the property in full compliance with all
governmental regulations.
During 1995, First Reserve Corporation, on behalf of certain of the
investment funds it manages, acquired a 50 percent ownership position in the
Company by purchasing shares held by the employees and treasury shares held by
the Company (see Note 9).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
the Company and its subsidiary. All significant intercompany accounts and
transactions have been eliminated.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is provided
primarily on the straight-line method over the estimated useful lives of the
assets.
ERT offshore property acquisitions are recorded at the value exchanged at
closing together with an estimate of its proportionate share of the
decommissioning liability assumed in the purchase based upon its working
interest ownership percentage. These costs, together with any associated capital
expenditures, are then amortized on a unit-of-production basis (UOP) based on
the estimated remaining oil and gas reserves.
The following is a summary of the components of property and equipment:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE 1996 1995
----------- --------------- ---------------
<S> <C> <C> <C>
Vessels.............................. 15 $ 40,403,400 $ 21,066,687
Offshore leases and equipment........ UOP 14,766,670 8,030,826
Machinery and equipment.............. 5 5,125,500 4,466,514
Furniture, software and computer
equipment............................ 5 1,060,510 885,325
Automobiles and trucks............... 3 110,223 134,736
--------------- ---------------
Total property and equipment.... $ 61,466,303 $ 34,584,088
=============== ===============
</TABLE>
The cost of repairs and maintenance of vessels and equipment is charged to
operations as incurred, while the cost of improvements is capitalized.
Drydocking costs (exclusive of the cost of new steel and new equipment added to
a vessel) are also charged to operations as incurred. Total repair and
maintenance charges were $3,655,000, $2,368,000 and $1,518,000 for the years
ended December 31, 1996, 1995 and 1994, respectively. Upon the disposition of
property and equipment,
F-7
<PAGE>
CAL DIVE INTERNATIONAL, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the related cost and accumulated depreciation accounts are relieved, and the
resulting gain or loss is included in other income (expense).
In March 1995, Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of," was issued. SFAS No. 121, which becomes effective for
fiscal years beginning after December 15, 1995, requires that certain long-lived
assets be reviewed for impairment whenever events indicate that the carrying
amount of an asset may not be recoverable and that an impairment loss be
recognized under certain circumstances in the amount by which the carrying value
exceeds the fair value of the asset. The Company adopted SFAS No. 121 in January
1996, as required, and the adoption had no effect on the Company's results of
operations or financial position.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION
The Company earns the majority of its service revenues during the summer
and fall months. Revenues are derived from billings under contracts (which are
typically of short duration) that provide for either lump-sum turnkey charges or
specific time, material and equipment charges which are billed in accordance
with the terms of such contracts. The Company recognizes revenue as it is earned
at estimated collectible amounts. Revenue on significant turnkey contracts is
recognized on the percentage-of-completion method based on the ratio of costs
incurred to total estimated costs at completion. Contract price and cost
estimates are reviewed periodically as work progresses and adjustments are
reflected in the period in which such estimates are revised. Provisions for
estimated losses on such contracts are made in the period such losses are
determined. Unbilled revenue represents revenue attributable to work completed
prior to year-end which has not yet been invoiced and work in process at the
balance sheet date which will be billed at the conclusion of the project. All
amounts included in unbilled revenue at December 31, 1996 and 1995, are expected
to be billed and collected within one year.
MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK
The market for the Company's services is the offshore oil and gas industry,
and the Company's customers consist primarily of major, well-established oil and
pipeline companies and independent oil and gas producers. The Company performs
ongoing credit evaluations of its customers and provides allowances for possible
credit losses when necessary; however, such losses have historically been
insignificant.
Two customers which represented 26 percent and 10 percent, respectively, of
1994 revenues merged during 1995 and accounted for 21 percent and 24 percent of
consolidated revenues in the years 1995 and 1996, respectively.
INCOME TAXES
Deferred taxes are recognized for revenues and expenses reported in
different years for financial statement purposes and income tax purposes in
accordance with SFAS No. 109, "Accounting for Income Taxes." The statement
requires, among other things, the use of the liability
F-8
<PAGE>
CAL DIVE INTERNATIONAL, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
method of computing deferred income taxes. The liability method is based on the
amount of current and future taxes payable using tax rates and laws in effect at
the balance sheet date.
STATEMENT OF CASH FLOW INFORMATION
The cash flow provided (used) by the various components of assets and
liabilities, excluding cash and cash equivalents and the effects of investing
and financing activities, is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------------- --------------- ---------------
<S> <C> <C> <C>
Trade receivables, net............... $ (15,286,811) $ 2,591,866 $ (5,161,776)
Other current assets................. (811,630) 374,672 (254,184)
Restricted cash...................... -- 508,000 (508,000)
Accounts payable..................... 4,690,134 1,116,521 1,547,780
Accrued liabilities.................. 2,176,363 1,214,332 28,599
Income taxes payable/receivable...... 279,580 (327,042) 37,712
Other changes in noncurrent assets
and liabilities, net............... 782,436 414,146 (1,087,185)
----------------- --------------- ---------------
Other changes in assets and
liabilities, net................... $ (8,169,928) $ 5,892,495 $ (5,397,054)
================= =============== ===============
</TABLE>
The Company defines cash and cash equivalents as cash and all highly liquid
financial instruments with original maturities of less than three months. During
the years ended December 31, 1996, 1995 and 1994, the Company's cash payments
for interest were approximately $1,069,000, $526,000 and $559,000, respectively,
and cash payments for federal income taxes were approximately $2,200,000,
$663,000 and $1,633,000, respectively. In connection with 1996 and 1995 offshore
property acquisitions, ERT assumed net abandonment liabilities estimated at
approximately $1,200,000 and $3,800,000, respectively (see Note 3).
The Company follows SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." Under SFAS No. 115, debt securities, including
treasury bills and notes, that the Company has both the intent and ability to
hold to maturity, are carried at amortized cost and are included in cash
deposits restricted for salvage operations in the accompanying consolidated
balance sheets. As all of these securities as of December 31, 1996, are U.S.
Treasury securities and notes, the majority of which mature beyond one year, the
Company believes the recorded balance of these securities approximates their
fair market value.
RECLASSIFICATIONS
Certain reclassifications were made to previously reported amounts in the
consolidated financial statements and notes to make them consistent with the
current presentation format.
3. OFFSHORE PROPERTY ACQUISITIONS:
In 1992 and 1994, ERT acquired a 100 percent net working interest in three
offshore properties for value exchanged and for ERT assuming the liability to
plug the wells, abandon the platform and remediate the site. Upon depletion
during 1994, the property purchased in 1992 was salvaged and abandoned in full
compliance with all regulatory requirements and included a transaction
structured as a Section 1031 "Like Kind" exchange for tax purposes.
Accordingly, the cash received ($508,000) plus accrued interest at December 31,
1994, was restricted and used for the acquisition of ERT properties during 1995.
During 1995, net working interests of 50 percent to 100 percent in seven
offshore blocks were acquired in exchange for cash of $1,780,000 and ERT
assuming the related abandonment liabilities. The 1996 property acquisitions
included net working
F-9
<PAGE>
CAL DIVE INTERNATIONAL, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
interests of 33 percent to 100 percent in four offshore blocks which were
acquired for cash of $3,600,000 and assumption of a pro rata share of the
decommissioning liability.
ERT production activities are regulated by the federal government and
require a significant amount of third-party involvement, such as refinery
processing and pipeline transportation. The Company records revenue from its
offshore properties net of royalties paid to the Minerals Management Service.
Royalty fees paid totaled approximately $1,996,000, $875,000 and $460,000 for
the years ended 1996, 1995 and 1994, respectively. In accordance with federal
regulations that require operators in the Gulf of Mexico to post an areawide
bond of $3,000,000, cash deposits restricted for salvage operations include U.S.
Treasury bonds of $3,300,000 at December 31, 1996 and 1995, respectively (see
Note 2). In addition, the terms of certain of the 1992 and 1993 purchase and
sale agreements require that ERT deposit a portion of a property's net
production revenue into an interest-bearing escrow account until such time as a
specified level of funding has been set aside for salvaging and abandoning the
properties. As of December 31, 1996, such deposits totaled $1,900,000 and are
included in cash deposits restricted for salvage operations in the accompanying
balance sheet.
4. ACCRUED LIABILITIES:
Accrued liabilities consisted of the following:
1996 1995
-------------- --------------
Accrued payroll and related
benefits............................. $ 2,960,710 $ 1,093,614
Accrued insurance.................... 998,925 1,213,861
Other................................ 1,099,772 575,569
-------------- --------------
Total accrued liabilities....... $ 5,059,407 $ 2,883,044
============== ==============
5. REVOLVING CREDIT FACILITY:
During 1995, the Company entered into a $30 million revolving credit
facility, maturing in May 2000, which is secured by property and equipment and
trade receivables. At the Company's option, interest is at a rate equal to 2.00
percent above a Eurodollar base rate (2.25 on borrowings less than $10 million)
or .5 percent above prime. Pursuant to these terms, borrowings at December 31,
1996, included $22 million at 7.37 percent (Eurodollar option) and $3 million at
8.75 percent. 1995 year-end borrowings were comprised of $4.5 million at 8.2
percent (Eurodollar option) and $800,000 at 9 percent. The Company drew upon the
revolving credit facility throughout 1996 and for a total of 238 days during
1995 with maximum borrowings of $25,000,000 and $8,000,000 in those years. At
March 7, 1997, $5.9 million was available under the revolving credit facility.
Under this credit facility, letters of credit (LOC) are also available
which the Company typically uses if performance bonds are required and, in
certain cases, in lieu of purchasing U.S. Treasury bonds in conjunction with ERT
property acquisitions. At December 31, 1996, LOC totaling $4.25 million were
outstanding pursuant to these terms.
The revolving credit facility contains, among other restrictions, financial
covenants which require the Company to (a) maintain income from operations at
specified levels, (b) limit leverage, as defined, to no more than a specified
ratio of net worth, (c) maintain certain interest coverage and debt service
ratios, as defined, and (d) maintain a minimum ratio of current assets to
current liabilities. The Company was in compliance with, or obtained waivers of
default from the bank for, these debt covenants at December 31, 1996.
F-10
<PAGE>
CAL DIVE INTERNATIONAL, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Borrowings during 1994 bore interest at prime plus 1 percent pursuant to a
revolving credit and term loan facility in place during those years. During
1994, the Company drew upon this facility for 151 days with a maximum borrowing
of $2,377,000. The amount outstanding on the term loan was converted to the new
revolving credit facility in May of 1995.
6. FEDERAL INCOME TAXES:
Federal income taxes have been provided based on the statutory rate of 34
percent adjusted for items which are allowed as deductions for federal income
tax reporting purposes, but not for book purposes. The primary differences
between the statutory rate and the Company's effective rate are as follows:
1996 1995 1994
----------- ----------- -----------
Statutory rate.......................... 34% 34% 34%
Percentage depletion related to the
natural gas production
of ERT properties..................... -- (7) (3)
Other................................... 1 1 --
-- -- --
Effective rate.......................... 35% 28% 31%
== == ==
Components of the provision for income taxes reflected in the statements of
operations consist of the following:
1996 1995 1994
-------------- -------------- --------------
Current............... $ 2,456,853 $ 412,699 $ 1,569,712
Deferred.............. 2,122,094 634,729 203,378
-------------- -------------- --------------
$ 4,578,947 $ 1,047,428 $ 1,773,090
============== ============== ==============
Deferred income taxes result from those transactions which affect financial
and taxable income in different years. The nature of these transactions and the
income tax effect of each as of December 31, 1996 and 1995, is as follows:
1996 1995
-------------- --------------
Deferred tax liabilities --
Depreciation.......................... $ 5,417,188 $ 2,915,555
-------------- --------------
Total deferred tax liabilities..... 5,417,188 2,915,555
-------------- --------------
Deferred tax assets --
Tax carryforward...................... -- (67,893)
Reserves, accrued liabilities and
other.............................. (552,577) (105,145)
-------------- --------------
Total deferred tax assets (included
in other current assets)......... (552,577) (173,038)
-------------- --------------
Net deferred tax liability......... $ 4,864,611 $ 2,742,517
============== ==============
Internal Revenue Service (IRS) conducted an examination of the Company's
federal income tax returns for the period from inception (July 27, 1990) through
December 1991. In connection with this examination, the IRS proposed additional
taxes due based upon its interpretation of the recording of certain transactions
at the date the Company was acquired. This matter was settled during 1996 with
insignificant impact upon the Company's consolidated financial position or
results of operations.
F-11
<PAGE>
CAL DIVE INTERNATIONAL, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. COMMITMENTS AND CONTINGENCIES:
LEASE COMMITMENTS
The Company occupies several facilities under noncancelable operating
leases, with the more significant leases expiring in 1997. Future minimum
rentals under these leases are $223,000 at December 31, 1996, with $164,000 in
1997 and the balance thereafter. Total rental expense under operating leases was
$262,000, $240,000 and $226,000 for the years ended December 31, 1996, 1995 and
1994, respectively.
INSURANCE
The Company carries hull protection on vessels, indemnity insurance and a
general umbrella policy. All onshore employees are covered by workers'
compensation, and all offshore employees, including divers and tenders, are
covered by Jones Act employee coverage, the maritime equivalent of workers'
compensation. The Company is exposed to deductible limits on its insurance
policies, which vary from $5,000 to a maximum of $50,000 per accident
occurrence. Effective August 1, 1992, the Company adopted a self-insured (within
specified limits) medical and health benefits program for its employees whereby
the Company is exposed to a maximum of $15,000 per claim.
LITIGATION
Various actions and claims are pending against the Company which management
believes are covered by insurance. In the opinion of management, the ultimate
liability to the Company, if any, which may result from these actions and claims
will not materially affect the Company's consolidated financial position,
results of operations or cash flows.
8. EMPLOYEE BENEFIT PLANS:
DEFINED CONTRIBUTION PLAN
The Company sponsors a defined contribution 401(k) retirement plan covering
substantially all of its employees. The Company's contributions and cost are
determined annually as 50 percent of each employee's contribution up to 5
percent of the employee's salary. The Company's costs related to this plan
totaled $197,000, $168,000 and $150,000 for the years ended December 31, 1996,
1995 and 1994, respectively.
INCENTIVE AND STOCK OPTION PLAN
During 1995, the board of directors and shareholders approved the 1995
Long-Term Incentive Plan (the Incentive Plan). Under the Incentive Plan, a total
of 600,000 shares of common stock is available for awards to key executives and
selected employees who are likely to make a significant positive impact on the
reported net income of the Company. The Incentive Plan is administered by a
committee which determines, subject to board approval, the type of award to be
made to each participant and sets forth in the related award agreement the
terms, conditions and limitations applicable to each award. The committee may
grant stock options, stock appreciation rights, or stock and cash awards.
The stock option plan is accounted for using APB Opinion No. 25, and
therefore no compensation expense is recorded. If SFAS Statement No. 123 had
been used for the accounting of these plans, the Company's pro forma net income
for 1996, 1995 and 1994 would have been $8,330,000, $2,607,000 and $4,034,000,
respectively, and the Company's pro forma earnings per share would have been
$.74, $.24 and $.46, respectively. These pro forma results exclude
F-12
<PAGE>
CAL DIVE INTERNATIONAL, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
consideration of options granted prior to January 1, 1995, and therefore may not
be representative of that to be expected in future years.
Options outstanding are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------------------- ---------------------- ---------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
---------- -------- ----------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding, beginning of
year............................... 447,500 $ 4.50 560,000 $ .35 560,000 $.35
Granted.............................. 135,000 4.50 447,500 4.50 -- --
Exercised............................ -- -- (560,000) .35 -- --
Terminated........................... (38,000) 4.50 -- -- -- --
---------- ----------- ----------
Options outstanding,
December 31........................ 544,500 4.50 447,500 4.50 560,000 .35
Options exercisable,
December 31........................ 124,700 4.50 44,000 4.50 560,000 .35
</TABLE>
All of the options outstanding at December 31, 1996, have an exercise price
of $4.50 and a weighted average remaining contractual life of 3.9 years.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted average
assumptions used for grants in 1996 and 1995: risk-free interest rates of 5.9
percent; expected dividend yields of 0 percent; expected lives of five years;
and expected volatility of 0 percent.
9. COMMON STOCK:
During 1991, certain key employees were granted options to purchase 60,000
shares at a price of $.75 per share. In addition, a member of the management
group sold 1,000,000 shares to the Company during 1992 at a price established by
the board of directors and was granted an option to repurchase 500,000 of those
shares at the same price. All of these options were exercised in 1995 in
conjunction with the sale of stock to First Reserve Corporation as discussed
below.
During 1995, the board of directors and shareholders approved an amendment
to the Articles of Incorporation increasing the number of authorized shares from
2,000,000 to 20,000,000. In connection with this measure, a 10-for-1 stock split
was also approved. Accordingly, all of the share and per share information
included in the financial statements and notes thereto has been restated
retroactively to reflect the 10-for-1 stock split.
During 1995, First Reserve Corporation, on behalf of certain of the
investment funds it manages, acquired a 50 percent ownership position in the
Company by purchasing 3,329,780 shares held by employees and 2,219,850 treasury
shares held by the Company, increasing shareholders' equity by $10,000,000.
In conjunction with this transaction, the Company entered into an Amended
and Restated Shareholders' Agreement which increased the board of directors from
five to seven members and which provides that First Reserve Corporation can
cause a sale of the Company in certain circumstances (as defined) subsequent to
December 31, 1999.
F-13
<PAGE>
CAL DIVE INTERNATIONAL, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. BUSINESS SEGMENT INFORMATION:
The following summarizes certain financial data by business segment:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
-------------------------------------------------
1996 1995 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
Revenues --
Subsea and salvage revenues........ $ 63,870,190 $ 32,747,484 $ 35,717,882
Natural gas and oil production..... 12,252,187 4,777,122 2,314,219
--------------- --------------- ---------------
Total......................... $ 76,122,377 $ 37,524,606 $ 38,032,101
=============== =============== ===============
Income from operations --
Subsea and salvage revenues........ $ 10,502,576 $ 3,184,801 $ 6,261,082
Natural gas and oil production..... 3,292,432 732,638 43,388
--------------- --------------- ---------------
Total......................... $ 13,795,008 $ 3,917,439 $ 6,304,470
=============== =============== ===============
Identifiable assets --
Subsea and salvage revenues........ $ 62,519,348 $ 30,261,736 $ 22,024,877
Natural gas and oil production..... 19,838,477 13,386,477 4,705,701
--------------- --------------- ---------------
Total......................... $ 82,357,825 $ 43,648,213 $ 26,730,578
=============== =============== ===============
Capital expenditures --
Subsea and salvage revenues........ $ 20,037,911 $ 14,260,225 $ 917,893
Natural gas and oil production..... 7,251,843 2,597,129 479,102
--------------- --------------- ---------------
Total......................... $ 27,289,754 $ 16,857,354 $ 1,396,995
=============== =============== ===============
Depreciation and amortization
expenses --
Subsea and salvage revenues........ $ 2,525,300 $ 1,658,588 $ 1,548,575
Natural gas and oil production..... 2,731,955 1,135,918 468,440
--------------- --------------- ---------------
Total......................... $ 5,257,255 $ 2,794,506 $ 2,017,015
=============== =============== ===============
</TABLE>
11. SUPPLEMENTAL OIL AND GAS DISCLOSURES (UNAUDITED):
The following information regarding the Company's oil and gas producing
activities is presented pursuant to SFAS No. 69, "Disclosures About Oil and Gas
Producing Activities."
CAPITALIZED COSTS
Aggregate amounts of capitalized costs relating to the Company's oil and
gas producing activities and the aggregate amount of related accumulated
depletion, depreciation and amortization as of the dates indicated are presented
below. The Company has no capitalized costs related to unproved properties.
AS OF DECEMBER 31
-------------------------------
1995 1996
-------------- ---------------
Proved properties being amortized.... $ 8,030,826 $ 14,766,670
Less -- Accumulated depletion,
depreciation and amortization...... (1,596,042) (3,997,715)
-------------- ---------------
Net capitalized costs........... $ 6,434,784 $ 10,768,955
============== ===============
F-14
<PAGE>
CAL DIVE INTERNATIONAL, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
COSTS INCURRED IN OIL AND GAS PRODUCING ACTIVITIES
The following table reflects the costs incurred in oil and gas property
acquisition and development activities during the dates indicated:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
----------------------------------------------
1994 1995 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Proved property acquisition costs....... $ 1,629,101 $ 6,091,869 $ 4,688,003
Development costs....................... -- 309,856 2,047,841
-------------- -------------- --------------
Total costs incurred............... $ 1,629,101 $ 6,401,725 $ 6,735,844
============== ============== ==============
</TABLE>
RESULTS OF OPERATIONS FOR OIL AND GAS PRODUCING ACTIVITIES
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
-----------------------------------------------
1994 1995 1996
-------------- -------------- ---------------
<S> <C> <C> <C>
Revenues................................ $ 2,314,219 $ 4,777,122 $ 12,252,187
Production (lifting) costs.............. 1,126,010 1,971,284 5,153,670
Depreciation, depletion and
amortization.......................... 468,440 1,135,918 2,731,955
-------------- -------------- ---------------
Pretax income from producing
activities............................ 719,769 1,669,920 4,366,562
Income tax expenses..................... 244,721 567,773 1,528,297
-------------- -------------- ---------------
Results of oil and gas producing
activities............................ $ 475,048 $ 1,102,147 $ 2,838,265
============== ============== ===============
</TABLE>
ESTIMATED QUANTITIES OF PROVED OIL AND GAS RESERVES
Proved oil and gas reserve quantities are based on estimates prepared by
Company engineers in accordance with guidelines established by the Securities
and Exchange Commission. The Company's estimates of reserves at December 31,
1996, have been reviewed by Miller and Lents, Ltd., independent petroleum
engineers. All of the Company's reserves are located in the United States.
Proved reserves cannot be measured exactly because the estimation of reserves
involves numerous judgmental determinations. Accordingly, reserve estimates must
be continually revised as a result of new information obtained from drilling and
production history, new geological and geophysical data and changes in economic
conditions.
RESERVE QUANTITY INFORMATION
(UNAUDITED)
OIL (BBLS.) GAS (MCF.)
----------- --------------
Total proved reserves at December 31,
1993.................................. 3,247 133,967
Production......................... (29,234) (1,249,899)
Purchases of reserves in place..... 119,163 3,400,229
----------- --------------
Total proved reserves at December 31,
1994.................................. 93,176 2,284,297
Production......................... (31,219) (2,382,343)
Purchases of reserves in place..... 91,755 20,131,154
----------- --------------
Total proved reserves at December 31,
1995.................................. 153,712 20,033,108
Production......................... (38,417) (4,310,328)
Purchases of reserves in place..... 8,505 8,873,620
----------- --------------
Total proved reserves at December 31,
1996.................................... 123,800 24,596,400
=========== ==============
F-15
<PAGE>
CAL DIVE INTERNATIONAL, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As of December 31, 1995, 1994 and 1993, all of the Company's proved
reserves were developed. As of December 31, 1996, 4,500 Bbls. of oil and
6,325,700 Mcf. of gas of the Company's proved reserves were undeveloped.
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO
PROVED OIL AND GAS RESERVES
The following table reflects the standardized measure of discounted future
net cash flows relating to the Company's interest in proved oil and gas reserves
as of December 31:
1995 1996
--------------- -----------------
Future cash inflows..................... $ 44,127,379 $ 92,392,900
Future costs --
Production.................... (23,989,944) (26,246,500)
Development and abandonment... (6,167,903) (7,365,000)
--------------- -----------------
Future net cash flows before income
taxes................................. 13,969,532 58,781,400
Future income taxes................ (5,071,878) (17,980,165)
--------------- -----------------
Future net cash flows................... 8,897,654 40,801,235
Discount at 10% annual rate........ (1,252,573) (6,995,808)
--------------- -----------------
Standardized measure of discounted
future net cash flows................. $ 7,645,081 $ 33,805,427
=============== =================
CHANGES IN STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
Principal changes in the standardized measure of discounted future net cash
flows attributable to the Company's proved oil and gas reserves are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Standardized measure, beginning of
year.................................. $ 122,446 $ 604,104 $ 7,645,081
Sales, net of production costs.......... (1,188,209) (2,805,838) (9,881,548)
Net change in prices, net of production
costs................................. (59,282) 1,217,360 22,200,743
Changes in future development costs..... -- -- (555,205)
Development costs incurred.............. -- -- 2,007,016
Accretion of discount................... 13,092 60,410 1,200,286
Net change in income taxes.............. 8,471 (4,357,882) (10,539,391)
Purchases of reserves in place.......... 1,719,149 13,067,712 21,729,868
Changes in production rates (timing) and
other................................. (11,563) (140,785) (1,423)
--------------- --------------- ---------------
Standardized measures, end of year...... $ 604,104 $ 7,645,081 $ 33,805,427
=============== =============== ===============
</TABLE>
12. SUBSEQUENT EVENTS
INITIAL PUBLIC OFFERING
In April 1997, the Company announced its intention to file a Form S-1
Registration Statement under the Securities Act of 1933. The net proceeds to the
Company from the Offering are estimated to be approximately $26 million. The
Company intends to use these proceeds to repay indebtedness incurred in
connection with the purchase of, and enhancement to, the UNCLE JOHN and other
vessels and for the purchase of natural gas and oil properties.
F-16
<PAGE>
CAL DIVE INTERNATIONAL, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
STOCK SALE TO COFLEXIP
On April 11, 1997 Coflexip purchased approximately 32% of the Company's
Common Stock at a price of $9.46 per share. Coflexip acquired approximately
3,700,000 shares of the Company's stock, consisting of approximately 2.1 million
shares sold by management of the Company, 1.1 million shares sold by First
Reserve Funds and approximately 500,000 shares sold by the Company. Coflexip and
the Company have formed a strategic alliance to jointly pursue deepwater
opportunities in the Gulf of Mexico.
F-17
<PAGE>
================================================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, THE SELLING SHAREHOLDERS OR THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR SOLICITATION OF AN OFFER TO BUY, THE
COMMON STOCK IN ANY JURISDICTION WHERE, OR TO MAKE ANY PERSON TO WHOM, IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS
PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
PAGE
----
Prospectus Summary................... 1
Risk Factors......................... 8
The Company.......................... 12
Use of Proceeds...................... 12
Dividend Policy...................... 12
Dilution............................. 13
Capitalization....................... 14
Selected Financial Data.............. 15
Management's Discussion and Analysis
Of Financial Condition and Results
of Operations...................... 16
Business............................. 21
Management........................... 37
Certain Relationships and Related
Transactions....................... 42
Principal and Selling Shareholders... 45
Description of Capital Stock......... 46
Shares Eligible for Future Sale...... 49
Underwriting......................... 51
Legal Matters........................ 52
Experts.............................. 52
Additional Information............... 53
Reports to Shareholders.............. 53
Index to Financial Statements........ F-1
------------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
SHARES
[COMPANY LOGO]
CAL DIVE INTERNATIONAL, INC.
COMMON STOCK
(WITHOUT PAR VALUE)
SCHRODER WERTHEIM & CO.
RAYMOND JAMES
& ASSOCIATES, INC.
SIMMONS & COMPANY
INTERNATIONAL
JUNE , 1997
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated costs and expenses of the
Registrant in connection with the offering described in the Registration
Statement. All of the amounts shown are estimates except the SEC registration
fee and the NASD filing fee.
SEC Filing Fee....................... $ 15,470
NASD Filing Fee...................... 6,100
NASDAQ Listing Fee................... (1)
Legal Fees and Expenses.............. (1)
Accounting Fees and Expenses......... (1)
Printing Expenses.................... (1)
Blue Sky Fees and Expenses........... (1)
Miscellaneous Expenses............... (1)
----------
Total........................... $ (1)(2)
==========
- ------------
(1) To be provided by amendment.
(2) All of the issuance and distribution expenses will be borne by the
Registrant.
14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Minnesota Statutes Section 302A.521 provides that a corporation organized
under Minnesota law shall indemnify any director, officer, employee or agent of
the corporation made or threatened to be made a party to a proceeding, by reason
of the former or present official capacity (as defined) of the person, against
judgments, penalties, fines, settlements and reasonable expenses incurred by the
person in connection with the proceedings if certain statutory standards are
met. "Proceeding" means a threatened, pending or completed civil, criminal,
administrative, arbitration or investigative proceeding, including one by or in
the right of the corporation. Section 302A.521 contains detailed terms regarding
such rights of indemnification and reference is made thereto for a complete
statement of such indemnification rights.
Reference is made to the Underwriting Agreement filed as Exhibit 1 to this
Registration Statement for a description of indemnification arrangements related
to this Offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that, in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-1
<PAGE>
15. RECENT SALES OF UNREGISTERED SECURITIES.
During the last three years, the Company has sold the following securities
(as adjusted for a -for-1 reverse stock split effective ,
1997) that were not registered under the Act.
1. On January 12, 1995, the Company issued an aggregate of 3,795,393
shares of Common Stock to First Reserve Secured Energy Assets, First Reserve
Fund V, First Reserve Fund V-2 and First Reserve Fund VI at a price of $4.50 per
share for an aggregate consideration of $10 million.
2. From November 1995 through May 1996, pursuant to the provisions of the
1995 Long Term Incentive Plan, the Company granted options to purchase an
aggregate of 476,500 shares of Common Stock at an exercise price of $4.50 per
share to certain employees, including officers and directors.
3. In January 1995, the Company granted options to purchase 15,046 shares
of Common Stock at an exercise price of $4.50 per share to Gerald G. Hage.
4. In April 1997, the Company granted options to employees to purchase an
aggregate of 435,000 shares at an exercise price of $9.50 per share.
5. On April 11, 1997, the Company issued an aggregate of 528,541 shares of
Common Stock to Coflexip at a per share price equal to $9.46 per share in
consideration for the purchase of certain assets valued at an aggregate of $5
millon and in entering into a Business Cooperation Agreement pursuant to which
the Company and Coflexip intend to form a joint venture for combined services on
Gulf of Mexico projects.
No underwriting commissions or discounts were paid with respect to the
sales of unregistered securities described herein.
Except as otherwise noted, all of the above sales were made in reliance on
Section 4(2) of the Act for transactions not involving a public offering. With
regard to the reliance by the Company upon such exemption for registration,
certain inquiries were made by the Company to establish that such sales
qualified for such exemption from the registration requirements. In particular,
the Company confirmed that (i) each purchaser provided the Company with written
assurance of investment intent, and the certificates for the shares sold
accordingly bear restrictive legends and (ii) sales were made to a limited
number of persons.
16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS
EXHIBIT NO. DESCRIPTION MANNER OF FILING
----------- ----------- ----------------
1.1 -- Form of Underwriting Agreement Filed Herewith
3.1 -- Amended and Restated Articles of Filed Herewith
Incorporation
3.2 -- By-laws Filed Herewith
4.1 -- Amended and Restated Loan and Filed Herewith
Security Agreement by and among the
Company, ERT and Fleet Capital
Corporation (f/n/a Shawmut Capital
Corporation) dated as of May 23, 1995
4.2 -- Amendment No. 5 to Loan Filed Herewith
4.3 -- Specimen of Common Stock certificate (1)
4.4 -- Shareholders Agreement by and among Filed Herewith
the Company, First Reserve Secured
Energy Assets Fund, First Reserve
Fund V, First Reserve Fund V-2, First
Reserve fund (collectively, the
"Selling Shareholders"), Messrs.
Reuhl, Kratz and Nelson and other
shareholders of the Company and
Coflexip
4.5 -- Registration Rights Agreement by and Filed Herewith
among the Company, the Selling
Shareholders, Messrs. Reuhl, Kratz,
Nelson and other shareholders of the
Company
4.6 -- Registration Rights Agreement by and Filed Herewith
between the Company and Coflexip
5 -- Opinion of Robins, Kaplan, Miller & (1)
Ciresi L.L.P.
II-2
<PAGE>
10.1 -- Purchase Agreement dated April 11, Filed Herewith
1997 by and between Coflexip and the
Company
10.2 -- Business Cooperation Agreement dated Filed Herewith
April 11, 1997 by and between
Coflexip and the Company
10.3 -- 1995 Long Term Incentive Plan, as Filed Herewith
amended
10.4 -- Employment Agreement by and between Filed Herewith
Gerald G. Reuhl and the Company
10.5 -- Employment Agreement by and between Filed Herewith
Owen E. Kratz and the Company
10.6 -- Employment Agreement by and between Filed Herewith
S. James Nelson and the Company
10.7 -- 1997 Annual Incentive Compensation Filed Herewith
Program
21 -- Subsidiaries of the Registrant. The
Company has one subsidiary, Energy
Resource Technology, Inc.
23.1 -- Consent of Robins, Kaplan, Miller & (1)
Ciresi L.L.P. (included in Exhibit 5)
23.2 -- Consent of Arthur Andersen LLP Filed Herewith
23.3 -- Consent of Miller & Lents, Ltd. Filed Herewith
24 -- Power of Attorney (included on Filed Herewith
signature page)
- ------------
(1) To be filed by amendment
(b) FINANCIAL STATEMENT SCHEDULES
None
17. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Act") may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(b) The Registrant hereby undertakes to provide of the Underwriter at the
closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriter to
permit prompt delivery to each purchaser.
(c) The undersigned registrant hereby undertakes that:
i. For purposes of determining liability under the Securities Act of 1933,
the information omitted from the form of prospectus filed as part of a
registration statement filed pursuant to Rule 430A and contained in the form of
a prospectus filed by the registrant pursuant to Rule 424(b)(1) or Rule 497(h)
under the Securities Act of 1933 shall be deemed to be part of the Registration
Statement as of the time it was declared effective.
ii. For the purpose of determining liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL
OF THE REQUIREMENTS FOR FILING ON FORM S-1 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF HOUSTON, STATE OF TEXAS, ON MAY 1, 1997.
CAL DIVE INTERNATIONAL, INC.
By /s/ OWEN KRATZ
OWEN KRATZ
CHIEF EXECUTIVE OFFICER
Each person whose signature appears below constitutes and appoints GERALD
G. REUHL and ANDREW C. BECHER, his true and lawful attorneys-in-fact and agents,
each acting alone, with full power of substitution and resubstitution, for him
and in his name, place and stead, in any and all capacities, to sign any or all
amendments (including post-effective amendments) to the Registration Statement
on Form S-1 and any additional Registration Statement pursuant to Rule 462(b),
and to file the same, with all exhibits hereto, and all documents in connection
herewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, each acting alone, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATES INDICATED ON MAY 1, 1997.
SIGNATURE TITLE
--------- -----
/s/GERALD G. REUHL Chairman of the Board
GERALD G. REUHL
/s/OWEN KRATZ President, Chief Executive Officer,
OWEN KRATZ Chief Operating Officer and Director
(principal executive officer)
/s/S. JAMES NELSON Executive Vice President, Chief
S. JAMES NELSON Financial Officer and Director
(principal financial and accounting
officer)
/s/ANDREW C. BECHER Senior Vice President and General
ANDREW C. BECHER Counsel
/s/WILLIAM E. MACAULAY Director
WILLIAM E. MACAULAY
/s/GORDON F. AHALT Director
GORDON F. AHALT
/s/DAVID H. KENNEDY Director
DAVID H. KENNEDY
/s/GERALD M. HAGE Director
GERALD M. HAGE
____________________________ Director
THOMAS M. EHRET
Director
____________________________
JEAN-BERNARD FAY
/s/KEVIN L. PETERSON Director
KEVIN L. PETERSON
II-4
EXHIBIT 1.1
CAL DIVE INTERNATIONAL, INC.
__________ Shares
Common Stock
(No Par Value Per Share)
---------------
UNDERWRITING AGREEMENT
New York, New York
__________ ___, 1997
SCHRODER WERTHEIM & CO. INCORPORATED
RAYMOND JAMES & ASSOCIATES, INC.
SIMMONS & COMPANY INTERNATIONAL
As Representatives of the several
Underwriters named in Schedule I hereto
c/o Schroder Wertheim & Co. Incorporated
Equitable Center
787 Seventh Avenue
New York, New York 10019-6016
Dear Sirs:
Cal Dive International, Inc., a Minnesota corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell,
and certain shareholders of the Company (named in Schedule II attached hereto
the "Selling Shareholders") propose to sell, to the Underwriters named in
Schedule I hereto (the "Underwriters"), an aggregate of _______ shares of Common
Stock, no par value per share (the "Common Stock"). The ________ shares of
Common Stock to be sold by the Company and the ________ shares to be sold by the
Selling Shareholders are herein referred to as the "Firm Securities." In
addition, the Company proposes to grant to the Underwriters an option to
purchase up to an additional ________ shares of Common Stock (the "Option
Securities"), on the terms and for the purposes set forth in Section 2 hereof.
The Firm Securities and the Option Securities are herein collectively referred
to as the "Securities." Except as may be expressly set forth below, any
reference to you in this Agreement shall be solely in your capacity as the
Representatives of the several Underwriters (the "Representatives").
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
-1-
<PAGE>
i. The Company represents and warrants to, and agrees with,
each of the Underwriters that:
(i) A registration statement on Form S-l (File No. 333-_____)
as amended by Amendment No.___ filed (the "Initial Registration
_____________________________Statement") in respect of the Shares
has been filed with the Securities and Exchange Commission (the
"Commission"); the Initial Registration Statement and any
post-effective amendment thereto, each in the form heretofore
delivered to you, and, excluding exhibits thereto, to you for each
of the other Underwriters, have been declared effective by the
Commission in such form; other than a registration statement, if
any, increasing the size of the offering (a "Rule 462(b)
Registration Statement"), filed pursuant to Rule 462(b) under the
Securities Act of 1933, as amended (the "Act"), which became
effective upon filing, no other document with respect to the Initial
Registration Statement has heretofore been filed with the
Commission; and no stop order suspending the effectiveness of the
Initial Registration Statement, any post-effective amendment thereto
or the Rule 462(b) Registration Statement, if any, has been issued
and no proceeding for that purpose has been initiated or threatened
by the Commission (any preliminary prospectus included in the
Initial Registration Statement or filed with the Commission pursuant
to Rule 424(a) of the Rules and Regulations of the Commission under
the Act (the "Rules and Regulations"), is hereinafter called a
"Preliminary Prospectus;" the various parts of the Initial
Registration Statement and the Rule 462(b) Registration Statement,
if any, including all exhibits thereto and including the information
contained in the form of final prospectus filed with the Commission
pursuant to Rule 424(b) under the Act in accordance with Section
5(a) hereof and deemed by virtue of Rule 430A under the Act to be
part of the Initial Registration Statement at the time it was
declared effective or such part of the Rule 462(b) Registration
Statement, if any, became or hereafter becomes effective, each as
amended at the time such part of the registration statement became
effective, is hereinafter collectively called the "Registration
Statement"; such final prospectus, in the form first filed pursuant
to
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
-2-
<PAGE>
Rule 424(b) under the Act, is hereinafter called the "Prospectus");
(ii) No order preventing or suspending the use of any
Preliminary Prospectus has been issued by the Commission, and each
Preliminary Prospectus, at the time of filing thereof, conformed in
all material respects to the requirements of the Act and the Rules
and Regulations of the Commission thereunder, and did not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were
made, not misleading; PROVIDED, HOWEVER, that this representation
and warranty shall not apply to any statements or omissions made in
reliance upon and in conformity with information furnished in
writing to the Company by an Underwriter through Schroder Wertheim &
Co. Incorporated ("Schroder Wertheim") expressly for use therein;
(iii) The Registration Statement conforms, and the Prospectus
and any further amendments or supplements to the Registration
Statement or Prospectus will conform in all material respects to the
requirements of the Act and the Rules and Regulations of the
Commission thereunder, and did not and will not, as of the
applicable effective date as to the Registration Statement and any
amendment thereto, and as of the applicable filing date as to the
Prospectus and any amendment or supplement thereto, contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading; PROVIDED, HOWEVER, that this representation
and warranty shall not apply to any statements or omissions made in
reliance upon and in conformity with information furnished in
writing to the Company by an Underwriter through Schroder Wertheim
expressly for use therein;
(iv) The Company has been duly incorporated and is validly
existing as a corporation in good standing
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
-3-
<PAGE>
under the laws of the state of Minnesota, with power and authority
(corporate and other) to own its properties and to conduct its
business as described in the Prospectus, and has been duly qualified
as a foreign corporation for the transaction of business and is in
good standing under the laws of each other jurisdiction in which it
owns or leases property, or conducts any business, so as to require
such qualification, or is subject to no material liability or
disability by reason of the failure to be so qualified in any such
jurisdiction, except where the failure to so qualify would not have
a material adverse effect on the condition, financial or otherwise,
or the business affairs or prospects of the Company and its
subsidiaries taken as a whole, (such adverse effect to be
hereinafter referred to as a "Material Adverse Effect"); and each of
the Company's subsidiaries has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, with power and authority (corporate
and other) to own its properties and to conduct its business as
described in the Prospectus, and has been duly qualified as a
foreign corporation for the transaction of business and is in good
standing under the laws of each other jurisdiction in which it owns
or leases property, or conducts any business, so as to require such
qualification, or is subject to no material liability or disability
by reason of the failure to be so qualified in any such
jurisdiction, (except where the failure to so qualify would not have
a Material Adverse Effect);
(v) All of the issued shares of capital stock of each
subsidiary of the Company have been duly and validly authorized and
issued, are fully paid and non- assessable and are owned by the
Company free and clear of all liens, encumbrances, equities,
security interests, or claims; and there are no outstanding options,
warrants or other rights calling for the issuance of, and there are
no commitments, plans or arrangements to issue, any shares of
capital stock of any subsidiary or any security convertible or
exchangeable or exercisable for capital stock of any
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
-4-
<PAGE>
subsidiary; except for the shares of stock of each subsidiary owned
by the Company, neither the Company nor any subsidiary owns,
directly or indirectly, any shares of capital stock of any
corporation or has any equity interest in any firm, partnership,
joint venture or other entity;
(vi) The Company has all corporate power and authority to
execute, deliver and perform its obligations under this Agreement;
the execution, delivery and performance by the Company of its
obligations under this Agreement have been duly and validly
authorized by all requisite corporate action of the Company; and
this Agreement constitutes the legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with
its terms except as enforcement may be limited by bankruptcy,
insolvency, reorganization or other similar laws relating to or
affecting the rights of creditors generally;
(vii) Neither the Company nor any of its subsidiaries has
sustained since the date of the latest audited financial statements
included in the Prospectus, any loss or interference with its
business from fire, explosion, flood or other calamity, whether or
not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, which loss or interference is
material to the Company and its subsidiaries, taken as a whole; and,
since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there has not been, and
prior to the Time of Delivery (as defined in Section 4 hereof) there
will not be, any change in the capital stock (other than shares
issued pursuant to the exercise of employee stock options that the
Prospectus indicates are outstanding (the "Employee Option
Shares")), or any material adverse change, or any development
involving a prospective material adverse change, in or affecting the
general affairs, management, financial position, stockholders'
equity or results of operations of the Company and its
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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<PAGE>
subsidiaries, taken as a whole, otherwise than as set forth or
contemplated in the Prospectus;
(viii) The Company and its subsidiaries have good and
marketable title in fee simple to all real property and good and
marketable title to all personal property owned by them, in each
case free and clear of all liens, encumbrances and defects except
such as are described or contemplated by the Prospectus, or such as
do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property
by the Company and its subsidiaries, and any real property and
buildings held under lease by the Company and its subsidiaries are
held by them under valid, subsisting and enforceable leases with
such exceptions as are not material and do not interfere with the
use made and proposed to be made of such real property and buildings
by the Company and its subsidiaries;
(ix) The Company has an authorized, issued and outstanding
capitalization as set forth in the Registration Statement, and all
of the issued shares of capital stock of the Company have been duly
and validly authorized and issued, are fully paid and non-
assessable, are free of any preemptive rights, rights of first
refusal or similar rights, were issued and sold in compliance with
the applicable Federal and state securities laws and conform in all
material respects to the description in the Prospectus; except as
described in the Prospectus, there are no outstanding options
warrants or other rights calling for the issuance of, and there are
no commitments, plans or arrangements to issue, any shares of
capital stock of the Company or any security convertible or
exchangeable or exercisable for capital stock of the Company;
(x) The Securities to be issued and sold by the Company to
the Underwriters hereunder have been duly and validly authorized
and, when issued and delivered against payment therefor as provided
herein, will be duly and validly issued, fully paid and
non-assessable, and will conform in all material respects to
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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<PAGE>
the description thereof in the Prospectus and will be quoted on the
Nasdaq National Market as of the Effective Date;
(xi) The performance of this Agreement, the consummation of
the transactions herein contemplated and the issue and sale of the
Securities and the compliance by the Company with all the provisions
of this Agreement will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any lien,
charge, claim, or encumbrance upon, any of the property or assets of
the Company or any of its subsidiaries pursuant to, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries is bound or
to which any of the property or assets of the Company or any of its
subsidiaries is subject, nor will such action result in any
violation of the provisions of the Amended and Restated Articles of
Incorporation (the "Articles of Incorporation") or the By-Laws, in
each case as amended to the date hereof, of the Company or any of
its subsidiaries or any statute or any order, rule or regulation of
any court or governmental agency or body having jurisdiction over
the Company or any of its subsidiaries or any of their properties;
and no consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body is
required for the issue and sale of the Securities or the
consummation of the other transactions contemplated by this
Agreement, except the registration under the Act of the Securities,
and such consents, approvals, authorizations, registrations or
qualifications as may be required under state or foreign securities
or Blue Sky laws in connection with the purchase and distribution of
the Securities by the Underwriters;
(xii) There are no legal or governmental proceedings pending
to which the Company or any of its subsidiaries or any of their
respective officers or
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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<PAGE>
directors is a party or of which any property of the Company or any
of its subsidiaries is the subject, other than litigation or
proceedings incident to the business conducted by the Company and
its subsidiaries which will not individually or in the aggregate
have a Material Adverse Effect; and, to the best of the Company's
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened or contemplated by others;
(xiii) The Company and its subsidiaries have such licenses,
permits and other approvals or authorizations of and from
governmental or regulatory authorities ("Permits") as are necessary
under applicable law to own their respective properties and to
conduct their respective businesses in the manner now being
conducted and as described in the Prospectus; and the Company and
its subsidiaries have fulfilled and performed all of their
respective obligations with respect to such Permits, and no event
has occurred which allows, or after notice or lapse of time or both
would allow, revocation or termination thereof or result in any
other impairment of the rights of the holder of any such permits
where such revocation, termination or impairment would have a
Material Adverse Effect;
(xiv) Arthur Andersen LLP who have certified certain financial
statements of the Company and its consolidated subsidiaries and
delivered their report with respect to the audited consolidated
financial statements and schedules included in the Registration
Statement and the Prospectus, are independent public accountants as
required by the Act and the Rules and Regulations of the Commission
thereunder;
(xv) The historical information underlying the estimates of
the reserves of the Company supplied by the Company to Miller &
Lents, Ltd. ("Miller & Lents"), independent petroleum engineers, for
the purposes of preparing the reserve reports of the Company
referenced in the Prospectus (the "Reserve
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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<PAGE>
Report"), including, without limitation, production volumes, sales
prices for production, contractual pricing provisions under oil or
gas sales or marketing contracts or under hedging arrangements,
costs of operations and development, and working interest and net
revenue information relating to the Company's ownership interests in
properties, was true and correct in all material respects on the
date of such Reserve Report; the estimates of future capital
expenditures and other future exploration and development costs
supplied to Miller & Lents were prepared in good faith and with a
reasonable basis; the information provided by Miller & Lents for
purposes of preparing the Reserve Report was prepared in accordance
with customary industry practices; to the best of the Company's
knowledge, Miller & Lents was, as of the date of the Reserve Report
prepared by it, and are, as of the date hereof, independent
petroleum engineers with respect to the Company; other than normal
production of reserves and intervening spot market product price
fluctuations, and except as disclosed in the Registration Statement
and the Prospectus, the Company is not aware of any facts or
circumstances that would result in a materially adverse change in
the reserves in the aggregate, or the aggregate present value of
future net cash flows therefrom, as described in the Prospectus and
as reflected in the Reserve Report; estimates of such reserves and
the present value of the future net cash flows therefrom as
described in the Prospectus and reflected in the Reserve Report
comply in all material respects to the applicable requirements of
the Rules and Regulations;
(xvi) The Company (A) is in compliance with any and all
applicable federal, state and local laws and regulations relating to
the protection of human health and safety, the environment or
hazardous or toxic substances or waste, pollutants or contaminants
("Environmental Laws"), (B) has received all permits, licenses or
other approvals required of it under applicable Environmental Laws
to conduct its business and (C) is in compliance with all terms and
conditions of any such permit, license or approval,
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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<PAGE>
except for such noncompliance with Environmental Laws, failure to
receive required permits, licenses or other approvals or failure to
comply with the terms and conditions of such permits, licenses or
approvals that would not, singularly or in the aggregate, have a
Material Adverse Effect. There has been no storage, disposal,
generation, transportation, handling or treatment of hazardous
substances or solid wastes by the Company (or to the knowledge of
the Company, any of its predecessors in interest) at, upon or from
any of the property now or previously owned or leased by the Company
in violation of any applicable law, ordinance, rule, regulation,
order, judgment, decree or permit or which would require remedial
action by the Company under any applicable law, ordinance, rule,
regulation, order, judgment, decree or permit, except for any
violation or remedial action which would not result in, or which
would not be reasonably likely to result in, singularly or in the
aggregate with all such violations and remedial actions, a Material
Adverse Effect; there has been no spill, discharge, leak, emission,
injection, escape, dumping or release of any kind onto such property
or into the environment surrounding such property of any solid
wastes or hazardous substances due to or caused by the Company,
except for any such spill, discharge, leak, emission, injection,
escape, dumping or release which would not result in or would not be
reasonably likely to result in, singularly or in the aggregate with
all such spills, discharges, leaks, emissions, injections, escapes,
dumpings and releases, a Material Adverse Effect; and the terms
"hazardous substances" and "solid wastes" shall have the meanings
specified in any applicable local, state and federal laws or
regulations with respect to environmental protection;
(xvii) The consolidated financial statements and schedules of
the Company and its subsidiaries included in the Registration
Statement and the Prospectus present fairly the financial condition,
the results of operations and the cash flows of the Company and its
subsidiaries as of the dates and for the periods therein specified
in conformity with
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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<PAGE>
generally accepted accounting principles consistently applied
throughout the periods involved, except as otherwise stated therein;
and the other financial and statistical information and data set
forth in the Registration Statement and the Prospectus is accurately
presented and, to the extent such information and data is derived
from the financial statements and books and records of the Company
and its subsidiaries, is prepared on a basis consistent with such
financial statements and the books and records of the Company and
its subsidiaries; no other financial statements or schedules are
required to be included in the Registration Statement and the
Prospectus;
(xviii) There are no statutes or governmental regulations, or
any contracts or other documents that are required to be described
in or filed as exhibits to the Registration Statement which are not
described therein or filed as exhibits thereto; and all such
contracts to which the Company or any subsidiary is a party have
been duly authorized, executed and delivered by the Company or such
subsidiary, constitute valid and binding agreements of the Company
or such subsidiary and are enforceable against the Company or such
subsidiary in accordance with the terms thereof;
(xix) The Company and its subsidiaries own or possess adequate
patent rights or licenses or other rights to use patent rights,
inventions, trademarks, service marks, trade names, copyrights,
technology and know-how necessary to conduct the general business
now or proposed to be operated by them as described in the
Prospectus; neither the Company nor any of its subsidiaries has
received any notice of infringement of or conflict with asserted
rights of others with respect to any patent, patent rights,
inventions, trademarks, service marks, trade names, copyrights,
technology or know-how which, singularly or in the aggregate, would
have a Material Adverse Effect;
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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<PAGE>
(xx) Neither the Company nor any of its subsidiaries are in
violation of any term or provision of its Articles of Incorporation
or By-Laws (or similar corporate constituent documents), in each
case as amended to the date hereof; nor are the Company or any of
its subsidiaries in violation of any law, ordinance, administrative
or governmental rule or regulation applicable to the Company or any
of its subsidiaries, or of any decree of any court or governmental
agency or body having jurisdiction over the Company or any of its
subsidiaries where such violation would have a Material Adverse
Effect;
(xxi) No default exists, and no event has occurred which with
notice or lapse of time, or both, would constitute a default in the
due performance and observance of any term, covenant or condition of
any indenture, mortgage, deed of trust, bank loan or credit
agreement, lease or other agreement or instrument to which the
Company or any of its subsidiaries is a party or by which any of
them or their respective properties is bound or may be affected
where such default would have a Material Adverse Effect;
(xxii) The Company and its subsidiaries have timely filed all
necessary tax returns and notices and have paid all federal, state,
county, local and foreign taxes of any nature whatsoever for all tax
years through December 31, 1995, to the extent such taxes have
become due. The Company has no knowledge, or any reasonable grounds
to know, of any tax deficiencies which would have a Material Adverse
Effect; the Company and its subsidiaries have paid all taxes which
have become due, whether pursuant to any assessments, or otherwise,
and there is no further liability (whether or not disclosed on such
returns) or assessments for any such taxes, and no interest or
penalties accrued or accruing with respect thereto, except as may be
set forth or adequately reserved for in the financial statements
included in the Registration Statement; the amounts currently set up
as provisions for taxes or otherwise by the Company and its
subsidiaries on their books and records are sufficient
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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<PAGE>
for the payment of all their unpaid federal, foreign, state, county
and local taxes accrued through the dates as of which they speak,
and for which the Company and its subsidiaries may be liable in
their own right, or as a transferee of the assets of, or as
successor to any other corporation, association, partnership, joint
venture or other entity;
(xxiii) The Company will not, during the period of 180 days
after the date hereof except pursuant to this Agreement, offer,
sell, contract to sell or otherwise dispose of any capital stock of
the Company (or securities convertible into, or exchangeable for,
capital stock of the Company), directly or indirectly, without the
prior written consent of the Representatives of the Underwriters
except for grants under the Company's stock option plan and the
issuance of stock upon the exercise of any options granted
thereunder;
(xxiv) The Company and its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions
are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (iii) access
to assets is permitted only in accordance with management's general
or specific authorization; and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences;
(xxv) Neither the Company nor any of its subsidiaries is in
violation of any foreign, federal, state or local law or regulation
relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants
or contaminants, nor any federal or state law relating to
discrimination in the hiring, promotion or paying of employees nor
any applicable
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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<PAGE>
federal or state wages and hours laws, nor any provisions of the
Employee Retirement Income Security Act of 1974, as amended, or the
Rules and Regulations promulgated thereunder, where such violation
would have a Material Adverse Effect;
(xxvi) None of the Company or its subsidiaries, or its
officers, directors, employees or agents has used any corporate
funds for any unlawful contribution, gift, entertainment or other
unlawful expense relating to political activity, or made any
unlawful payment of funds of the Company or any subsidiary or
received or retained any funds in violation of any law, rule or
regulation;
(xxvii) The Company is not and, after giving effect to the
offering and sale of the Securities, will not be an "investment
company" or an entity "controlled" by an "investment company," as
such terms are defined in the Investment Company Act of 1940, as
amended;
(xxviii) Neither the Company nor any of its subsidiaries is
party to any union or collective bargaining agreements, and no labor
disturbance, strike or slowdown exists, or, to the Company's
knowledge, is threatened, by or involving any employees of the
Company or its subsidiaries, in any such case that is or would be
reasonably likely to have a Material Adverse Effect;
(xxix) The statements set forth in the Prospectus under the
caption "Description of Capital Stock," insofar as they purport to
constitute a summary of the terms of the Common Stock, are, in all
material respects, accurate and complete;
(xxx) The Company and any of its subsidiaries that owns the
marine vessels described in the Prospectus (the "Vessels"), which
operate in United States coastwise trade, are and at all times have
been citizens of the United States within the meaning of Section 2
of the Shipping Act of 1916, as amended,
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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<PAGE>
46 U.S.C. ss.802 (the "Shipping Act"), and qualified to engage in
coastwise trade. At no time during the Company or any subsidiary's
ownership of the Vessels have any of the Vessels been sold,
chartered or otherwise transferred to any person or entity in
violation of any applicable laws, rules or regulations. Except as
set forth of Schedule III, each Vessel has a clean certificate of
inspection from the United States Coast Guard and an American Bureau
of Shipping load line certificate where applicable, in each case
free of reported or reportable exceptions or notations of record;
(xxxi) The Company and each of its subsidiaries are insured by
insurers of recognized financial responsibility against such losses
and risks and in such amounts as are prudent and customary in the
businesses in which they are engaged; neither the Company nor any
such subsidiary has been refused any insurance coverage sought or
applied for; and except as described in the Prospectus neither the
Company nor any such subsidiary has any reason to believe that it
will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a
cost that would not have a Material Adverse Effect;
(xxxii) There are no holders of securities of the Company,
who, by reason of the filing of the Registration Statement, have the
right (and have not waived such right) to require the Company to
register under the Act, or to include in the Registration Statement,
securities held by them; and
(xxxiii) The Company has not distributed and, prior to the
later of (i) any Option Securities Delivery Date and (ii) the
completion of the distribution of the Securities, will not
distribute any offering material in connection with the offering and
sale of the Securities other than the Registration Statement or any
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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<PAGE>
amendment thereto, any Preliminary Prospectus or the Prospectus or
any amendment or supplement thereto, or other materials, if any,
permitted by the Act.
1.A. Each of the Selling Shareholders severally and not jointly represents
and warrants to, and agrees with, each of the Underwriters that:
(a) Such Selling Shareholder has all requisite power, authority,
authorizations, approvals, orders and consents to enter into this
Agreement and to carry out the provisions and conditions hereof and in the
event that such Selling Shareholder is a corporation, such Selling
Shareholder has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation; in the event that such Selling Shareholder is a limited
partnership, such Selling Shareholder has been duly formed and is validly
existing as a limited partnership in good standing under the laws of the
jurisdiction of its formation;
(b) Each of this Agreement, the Custody Agreement (a form of which
is attached hereto as Exhibit A) and the Power of Attorney (a form of
which is attached hereto as Exhibit B) has been duly authorized, executed
and delivered by or on behalf of such Selling Shareholder and constitutes
a legal, valid and binding agreement of such Selling Shareholder and is
enforceable in accordance with its terms, except as enforcement thereof
may be limited by bankruptcy, insolvency, reorganization or other similar
laws relating to or affecting the rights of creditors generally;
(c) On the closing date for the Securities, all stock transfer or
other taxes (other than income taxes) which are required to be paid in
connection with the sale and transfer of the Securities to be sold by such
Selling Shareholder to the Underwriters will have been fully paid or
provided for by such Selling Shareholder and all laws imposing such taxes
will have been fully complied with;
(d) The performance of this Agreement and the consummation of the
transactions contemplated hereby will not result in the creation or
imposition of any lien, charge or encumbrance upon any of the assets of
such Selling Shareholder pursuant to the terms or provisions of, or result
in a breach of any of the terms or provisions of, or constitute a default
under, or result in the acceleration of any obligation under the articles
of association or charter or By-laws of such Selling Shareholder, if
applicable, or any contract or other agreement to which such Selling
Shareholder is a party or bound, or under any law, order, statute,
regulation, consent or memorandum of understanding applicable to such
Selling Shareholder of any court, regulatory body, administrative agency,
governmental body or arbitrator having
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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<PAGE>
jurisdiction over such Selling Shareholder or the property of such Selling
Shareholder;
(e) No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation by the
Selling Shareholder of the transactions on its part contemplated hereby,
except such as have been obtained under the Act and such as may be
required under the blue sky laws of any jurisdiction in connection with
the purchase and distribution by the Underwriters of the Shares to be sold
by the Selling Shareholder or such as may be required by the National
Association of Securities Dealers, Inc. (the "NASD");
(f) To the best of such Selling Shareholder's knowledge, as of the
date hereof, and as of each of the Time of Delivery and the Option
Securities Delivery Date (as defined in Section 4 hereof), the
Registration Statement and the Prospectus did not and will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading;
(g) The Selling Shareholder has not distributed and, prior to the
later to occur of (i) the Time of Delivery, (ii) the Option Securities
Delivery Date or (iii) completion of the distribution of the Securities,
will not distribute without your prior written consent any offering
material in connection with the offering and sale of the Securities other
than as permitted by the Act; and
(h) The Selling Shareholder now has, and at each of the Time of
Delivery and the Option Securities Delivery Date will have, good and valid
title to the Securities to be sold by such Selling Shareholder hereto,
free and clear of all security interests, liens, encumbrances, equities or
other claims, and, upon delivery of and payment for such Securities, the
Selling Shareholder will deliver to the Underwriter, good and valid title
to such Securities, free and clear of all security interests, liens,
encumbrances, equities or other claims.
ii. Subject to the terms and conditions herein set forth,
the Company agrees to issue and sell, and the Selling
Shareholders agree to sell, to the several Underwriters an
aggregate of ______ Firm Securities (_______ shares of such
Firm Securities will be sold by the Company and ________
shares of such Firm Securities will be sold by the Selling
Shareholders), and each of the Underwriters agrees to purchase
from the Company and the Selling Shareholders, at a purchase
price of $_____ per share, the respective aggregate number of
Firm Securities determined in the manner set forth below. The
obligation of each Underwriter to the Company and the Selling
Shareholders shall be to purchase that portion of the number
of shares of Common Stock to be sold by the Company and the
Selling Shareholders pursuant to this Agreement as the number
of Firm Securities set forth
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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<PAGE>
opposite the name of such Underwriter on Schedule I bears to
the total number of Firm Securities to be purchased by the
Underwriters pursuant to this Agreement, in each case adjusted
by you such that no Underwriter shall be obligated to purchase
Firm Securities other than in 100 share amounts. In making
this Agreement, each Underwriter is contracting severally and
not jointly.
In addition, subject to the terms and conditions herein set forth, the
Company and the Selling Shareholders agree to issue and sell to the
Underwriters, as required (for the sole purpose of covering over-allotments in
the sale of the Firm Securities), up to ________ Option Securities at the
purchase price per share of the Firm Securities being sold by the Company and
Selling Shareholders as stated in the preceding paragraph (with any Option
Securities sold to the Underwriters pursuant to this paragraph being sold on a
pro rata basis by the Company, on the one hand, and the Selling Shareholders
collectively, on the other based on the number of shares of Firm Securities sold
by the Company and the Selling Shareholders, respectively). The right to
purchase the Option Securities may be exercised by your giving 48 hours' prior
written or telephonic notice (subsequently confirmed in writing) to the Company
of your determination to purchase all or a portion of the Option Securities.
Such notice may be given at any time within a period of 30 days following the
date of this Agreement. Option Securities shall be purchased severally for the
account of each Underwriter in proportion to the number of Firm Securities set
forth opposite the name of such Underwriter in Schedule I hereto. No Option
Securities shall be delivered to or for the accounts of the Underwriters unless
the Firm Securities shall be simultaneously delivered or shall theretofore have
been delivered as herein provided. The respective purchase obligations of each
Underwriter shall be adjusted by you so that no Underwriter shall be obligated
to purchase Option Securities other than in 100 share amounts. The Underwriters
may cancel any purchase of Option Securities at any time prior to the Option
Securities Delivery Date by giving written notice of such cancellation to the
Company.
iii. Upon the authorization by you to release the Firm
Shares, the several Underwriters propose to offer the Firm
Securities for sale upon the terms and conditions set forth in
the Prospectus.
iv. Certificates in definitive form for the Firm Securities
to be purchased by each Underwriter hereunder shall be
delivered by or on behalf of the Company and the Selling
Shareholders to you for the account of such Underwriter,
against payment by such Underwriter or on its behalf of the
purchase price therefor by wire transfer, payable in same-day
funds to the order of the Company and the Selling
Shareholders, as appropriate, for the purchase price of the
Firm Securities being sold by the Company and the Selling
Shareholders at the office of Schroder Wertheim & Co.
Incorporated, Equitable Center, 787 Seventh Avenue, New York,
New York, at 9:30 a.m., New York City time, on __________ ___,
1997, or at such other time, date and place as you and the
Company may agree upon in writing, such time and date being
herein called the "Time of Delivery."
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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<PAGE>
Certificates in definitive form for the Option Securities to be purchased
by each Underwriter hereunder shall be delivered by or on behalf of the Company
and the Selling Shareholders to you for the account of such Underwriter, against
payment by such Underwriter or on its behalf of the purchase price thereof by
certified or official bank check or checks, payable in New York Clearing House
funds, to the order of the Company, for the purchase price of the Option
Securities, in New York, New York, at such time and on such date (not earlier
than the Time of Delivery nor later than ten business days after giving of the
notice delivered by you to the Company with reference thereto) and in such
denominations and registered in such names as shall be specified in the notice
delivered by you to the Company with respect to the purchase of such Option
Securities. The date and time of such delivery and payment are herein sometimes
referred to as the "Option Securities Delivery Date." The obligations of the
Underwriters shall be subject, in their discretion, to the condition that there
shall be delivered to the Underwriters on the Option Securities Delivery Date
opinions and certificates, dated such Option Securities Delivery Date, referring
to the Option Securities, instead of the Firm Securities, but otherwise to the
same effect as those required to be delivered at the Time of Delivery pursuant
to Sections 7(d), 7(e), 7(f), 7(g), 7(h) and 7(k).
Certificates for the Firm Securities and the Option Securities so to be
delivered will be in good delivery form, and in such denominations and
registered in such names as you may request not less than 48 hours prior to the
Time of Delivery and the Option Securities Delivery Date, respectively. Such
certificates will be made available for checking and packaging in New York, New
York, at least 24 hours prior to the Time of Delivery and the Option Securities
Delivery Date.
v. The Company covenants and agrees with each of the
Underwriters:
(i) To prepare the Prospectus in a form approved by you
and to file such Prospectus pursuant to Rule 424(b) under the
Act not later than the Commission's close of business on the
second business day following the execution and delivery of
this Agreement, or, if applicable, such earlier time as may be
required by Rule 430A(a)(3) under the Act; to make no further
amendment or any supplement to the Registration Statement or
Prospectus which shall be disapproved by you promptly after
reasonable notice thereof; to advise you, promptly after it
receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or
any supplement to the Prospectus or any amended Prospectus has
been filed and to furnish you with copies thereof; to advise
you, promptly after it receives notice thereof, of the
issuance by the Commission of any stop order or of any order
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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preventing or suspending the use of any Preliminary Prospectus
or prospectus, of the suspension of the qualification of the
Shares for offering or sale in any jurisdiction, of the
initiation or threatening of any proceeding for any such
purpose, or of any request by the Commission for the amending
or supplementing of the Registration Statement or Prospectus
or for additional information; and, in the event of the
issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or prospectus
or suspending any such qualification, promptly to use its best
efforts to obtain the withdrawal of such order;
(ii) Promptly from time to time to take such action as you
may request to qualify the Securities for offering and sale
under the securities laws of such jurisdictions as you may
request and to comply with such laws so as to permit the
continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the
distribution, PROVIDED that in connection therewith the
Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process
in any jurisdiction;
(iii) Prior to 10:00 a.m., New York City time, on the
New York Business Day next succeeding the date of this
Agreement and from time to time, to furnish the Underwriters
with copies of the Prospectus in New York City in such
quantities as you may reasonably request, and, if the delivery
of a prospectus is required at any time prior to the
expiration of nine months after the time of issue of the
Prospectus in connection with the offering or sale of the
Shares and if at such time any event shall have occurred as a
result of which the Prospectus as then amended or supplemented
would include an untrue statement of a material fact or omit
to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under
which they were made when such Prospectus is delivered, not
misleading, or, if for any other reason it shall be
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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necessary during such period to amend or supplement the
Prospectus in order to comply with the Act to notify you and
upon your request to prepare and furnish without charge to
each Underwriter and to any dealer in securities as many
copies as you may from time to time reasonably request of an
amended Prospectus or a supplement to the Prospectus which
will correct such statement or omission or effect such
compliance, and in case any Underwriter is required to deliver
a prospectus in connection with sales of any of the Shares at
any time nine months or more after the time of issue of the
Prospectus, upon your request but at the expense of such
Underwriter, to prepare and deliver to such Underwriter as
many copies as you may request of an amended or supplemented
Prospectus complying with Section 10(a)(3) of the Act;
(iv) That it has caused the Securities to be included
for quotation on the Nasdaq National Market as of the
Effective Date; and
(v) To file with the Commission such reports on Form SR
as may be required pursuant to Rule 463 under the Act.
5.A. Each of the Selling Shareholders covenants with each of the
Underwriters as follows:
(a) Such Selling Shareholder will not at any time, directly or
indirectly, take any action intended, or which might reasonably be
expected, to cause or result in, or which will cause, stabilization of the
price of the shares of Common Stock to facilitate the sale or resale of
any of the Securities in connection with the Offering.
(b) As soon as such Selling Shareholder is advised thereof, such
Selling Shareholder will advise the Underwriters and confirm such advice
in writing, (1) of receipt by such Selling Shareholder, or by any
representative of the Selling Shareholder, of any communication from the
Commission relating to the Registration Statement, the Prospectus or any
Preliminary Prospectus, or any notice or order of the Commission relating
to the Company or such Selling Shareholder in connection with the
transactions contemplated by this Agreement and (2) of the happening of
any event during the period from and after the Effective Date that in the
judgment of such Selling Shareholder makes any statement made in the
Registration Statement or the Prospectus untrue or that requires the
making of any changes in the Registration
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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Statement or the Prospectus in order to make the statements therein, in
light of the circumstances in which they were made, not misleading.
(c) Such Selling Shareholder will not, for a period of 180 days
following the date of the Prospectus, without prior written consent of the
Underwriters, offer, sell or contract to sell, or otherwise dispose of,
directly or indirectly, any other shares of Common Stock or any securities
convertible into, or exchangeable for, shares of Common Stock.
vi. The Company covenants and agrees with the several
Underwriters that the Company will pay or cause to be paid:
the fees, disbursements and expenses of counsel and
accountants for the Company, and all other expenses, in
connection with the preparation, printing and filing of the
Registration Statement and the Prospectus and amendments and
supplements thereto and the furnishing of copies thereof,
including charges for mailing, air freight and delivery and
counting and packaging thereof and of any Preliminary
Prospectus and related offering documents to the Underwriters
and dealers; the cost of copying and distributing this
Agreement, the Agreement Among Underwriters, the Selling
Agreement, communications with the Underwriters and selling
group and the Preliminary and Supplemental Blue Sky Memoranda
and any other documents in connection with the offering,
purchase, sale and delivery of the Securities; all expenses in
connection with the qualification of the Securities for
offering and sale under securities laws as provided in Section
5(b) hereof, including filing and registration fees and the
fees, reasonable disbursements and expenses for counsel for
the Underwriters in connection with such qualification and in
connection with Blue Sky surveys or similar advice with
respect to sales; the filing fees incident to securing any
required review by the NASD of the terms of the sale of the
Securities; all fees and expenses in connection with quotation
of the Securities on the Nasdaq National Market; and all other
costs and expenses incident to the performance of their
obligations hereunder which are not otherwise specifically
provided for in this Section 6, including the fees of the
Company's Transfer Agent and Registrar, the cost of any stock
issue or transfer taxes on the sale of the Securities to the
Underwriters, the cost of the Company's personnel and other
internal costs, the cost of printing and engraving the
certificates representing the Securities and all expenses and
taxes incident to the sale and delivery of the Securities to
be sold by the Company to the Underwriters hereunder. It is
understood, however, that, except as provided in this Section
6, Section 8 and Section 11 hereof, the Underwriters will pay
all their own costs and expenses, including the fees of their
counsel, stock transfer taxes on resale of any of the
Securities by them, and any advertising expenses connected
with any offers they may make.
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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vii. The obligations of the Underwriters hereunder shall be
subject, in their discretion, to the condition that all
representations and warranties and other statements of the
Company and the Selling Shareholders herein are, at and as of
the Time of Delivery, true and correct, the condition that the
Company and the Selling Shareholders shall have performed all
their obligations hereunder theretofore to be performed, and
the following additional conditions:
(i) The Registration Statement shall have become
effective, and you shall have received notice thereof not
later than 10:00 p.m., New York City time, on the date of
execution of this Agreement, or at such other time as you and
the Company may agree; if required, the Prospectus shall have
been filed with the Commission in the manner and within the
time period required by Rule 424(b); no stop order suspending
the effectiveness of the Registration Statement shall have
been issued and no proceeding for that purpose shall have been
initiated or threatened by the Commission; and all requests
for additional information on the part of the Commission shall
have been complied with to your reasonable satisfaction;
(ii) All corporate proceedings and related legal and
other matters in connection with the organization of the
Company and the registration, authorization, issue, sale and
delivery of the Securities shall have been reasonably
satisfactory to Vinson & Elkins L.L.P., counsel to the
Underwriters, and Vinson & Elkins L.L.P. shall have been
timely furnished with such papers and information as they may
reasonably have requested to enable them to pass upon the
matters referred to in this subsection;
(iii) You shall not have advised the Company that the
Registration Statement or Prospectus, or any amendment or
supplement thereto, contains an untrue statement of fact or
omits to state a fact which in your judgment is in either case
material and in the case of an omission is required to be
stated therein or is necessary to make the statements therein,
in light of the circumstances under which they were made, not
misleading;
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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(iv) Robins Kaplan Miller & Ciresi L.L.P. ("Robins
Kaplan"), counsel to the Company, shall have furnished to you
their written opinion, dated the Time of Delivery, in form and
substance satisfactory to you, to the effect that:
1) The Company has been duly and validly incorporated
and is validly existing as a corporation in good standing
under the laws of the state of Minnesota, and is qualified to
do business and is in good standing in each jurisdiction in
which its ownership or leasing of properties requires such
qualification or the conduct of its business requires such
qualification (except where the failure to so qualify would
not have a Material Adverse Effect); and the Company has all
necessary corporate power and all material governmental
authorizations, permits and approvals required to own, lease
and operate its properties and conduct its business as
described in the Prospectus;
2) Each of the Company's subsidiaries has been duly and
validly incorporated and is validly existing as a corporation
in good standing under the laws of the jurisdiction of its
incorporation, and is qualified to do business and is in good
standing in each jurisdiction in which its ownership or
leasing of properties requires such qualification or the
conduct of its business requires such qualification (except
where the failure to so qualify would not have a Material
Adverse Effect); and each such subsidiary has all necessary
corporate power and all material governmental authorizations,
permits and approvals required to own, lease and operate its
properties and to conduct its business as described in the
Prospectus;
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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3) All the outstanding shares of capital stock of each
of the Company's subsidiaries have been duly authorized and
are validly issued and outstanding, are fully paid and
non-assessable, are owned by the Company of record and to the
best knowledge of such counsel, (A) beneficially and (B) free
and clear of all liens, encumbrances, equities, security
interests or claims of any nature whatsoever; and neither the
Company nor any of its subsidiaries has granted any
outstanding options, warrants or commitments with respect to
any shares of its capital stock, whether issued or unissued,
except as otherwise described in the Prospectus;
4) The Company has an authorized capitalization as set
forth in the Registration Statement and all of the issued
shares of capital stock of the Company have been duly and
validly authorized and issued and are fully paid and
non-assessable; are free of any preemptive rights, and were
issued and sold in compliance with all applicable Federal and
state securities laws; except as described in the Prospectus,
to the knowledge of such counsel, there are no outstanding
options, warrants or other rights calling for the issuance of,
and there are no commitments, plans or arrangements to issue,
any shares of capital stock of the Company; the Securities
being sold by the Company have been duly and validly
authorized and, when duly countersigned by the Company's
Transfer Agent and Registrar and issued, delivered and paid
for in accordance with the provisions of the Registration
Statement and this Agreement, will be duly and validly issued,
fully paid and non-assessable; the Securities conform to the
description thereof in the Prospectus; the Securities have
been duly authorized for quotation on the Nasdaq National
Market, as of the Effective Date; and
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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the certificates for the Securities are in valid and
sufficient form and comply with all applicable statutory
requirements, all applicable requirements of the Articles of
Incorporation and By-laws of the Company and the requirements
of the Nasdaq National Market;
5) To the best of such counsel's knowledge, there are no
legal or governmental proceedings pending or threatened to
which the Company or any of its subsidiaries or any of their
respective officers or directors is a party or of which any
property of the Company or any of its subsidiaries is the
subject which, if resolved against the Company or any of its
subsidiaries or any of their respective officers or directors,
individually, or to the extent involving related claims or
issues, in the aggregate, is of a character required to be
disclosed in the Prospectus;
6) This Agreement has been duly authorized, executed and
delivered by the Company and is a legal, valid and binding
agreement of the Company enforceable in accordance with its
terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization or other similar laws
relating to or affecting the rights of creditors generally and
by general principles of equity and, with respect to Section 8
of this Agreement, by public policy under federal and state
securities laws;
7) The Company has full corporate power and authority to
execute, deliver and perform this Agreement, and the
execution, delivery and performance of this Agreement, the
consummation of the transactions herein contemplated and the
issue and sale of the Securities and the compliance by the
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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Company with all the provisions of this Agreement will not
conflict with, or result in a breach of any of the terms or
provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge, claim or
encumbrance upon, any of the property or assets of the Company
or any of its subsidiaries pursuant to, the terms of any
indenture, mortgage, deed of trust, loan agreement or other
material agreement or instrument known to such counsel to
which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound or to
which any of the property or assets of the Company or any of
its subsidiaries is subject, nor will such action result in
any violation of the provisions of the Articles of
Incorporation or the By-Laws, in each case as amended, of the
Company or any of its subsidiaries, or any statute or any
order, rule or regulation known to such counsel of any court
or governmental agency or body having jurisdiction over the
Company or any of its subsidiaries or any of their properties;
8) No consent, approval, authorization, order,
registration or qualification of or with any court or any
regulatory authority or other governmental body is required
for the issue and sale of the Securities or the consummation
of the other transactions contemplated by this Agreement,
except such as have been obtained under the Act and such
consents, approvals, authorizations, registrations or
qualifications as may be required under state or foreign
securities or Blue Sky laws in connection with the purchase
and distribution of the Securities by the Underwriters;
9) To the best of such counsel's knowledge, neither the
Company nor any of its subsidiaries is currently in violation
of its Articles of Incorporation or By-Laws or in
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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default under, any indenture, mortgage, deed of trust, lease,
bank loan or credit agreement or any other agreement or
instrument of which such counsel has knowledge to which the
Company or any of its subsidiaries is a party or by which any
of them or any of their property may be bound or affected (in
any respect that is material in light of the financial
condition of the Company and its subsidiaries, taken as a
whole);
10) There are no preemptive or other rights to subscribe
for or to purchase, nor any restriction upon the voting or
transfer of, any Securities pursuant to the Company's Articles
of Incorporation or By-Laws (except as provided in the
Company's Articles of Incorporation with respect to ownership
of Common Stock by non-U.S. citizens), in each case as amended
to the date hereof, or any agreement or other instrument known
to such counsel; and no holders of securities of the Company
have rights to the registration thereof under the Registration
Statement or, if any such holders have such rights, such
holders have waived such rights;
11) To the extent summarized therein, all contracts and
agreements summarized in the Registration Statement and the
Prospectus are fairly summarized therein, conform in all
material respects to the descriptions thereof contained
therein, and, to the extent such contracts or agreements or
any other material agreements are required under the Act or
the Rules and Regulations thereunder to be filed, as exhibits
to the Registration Statement, they are so filed; and such
counsel does not know of any contracts or other documents
required to be summarized or disclosed in the Prospectus or to
be so filed as an exhibit to the Registration Statement, which
have not been so summarized or disclosed, or so filed;
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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12) All descriptions in the Prospectus of statutes,
regulations or legal or governmental proceedings are fair
summaries thereof and fairly present the information required
to be shown with respect to such matters; and
13) The Registration Statement has become effective
under the Act, the Prospectus has been filed in accordance
with Rule 424(b) of the Rules and Regulations of the
Commission under the Act, including the applicable time
periods set forth therein, or such filing is not required and,
to the best knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement has
been issued and no proceedings for that purpose have been
instituted or are pending or threatened under the Act, and the
Registration Statement, the Prospectus and each amendment or
supplement thereto, as of their respective effective or issue
dates, complied as to form in all material respects with the
requirements of the Act and the Rules and Regulations
thereunder; it being understood that such counsel need express
no opinion as to the financial statements and schedules or
other financial data contained in the Registration Statement
or the Prospectus.
Such counsel shall also state that nothing has come to such
counsel's attention that would lead such counsel to believe that
either the Registration Statement or any amendment or supplement
thereto, at the time such Registration Statement or amendment or
supplement became effective, or the Prospectus or any amendment or
supplement thereto, as of its date and as of the Time of Delivery,
contains or contained any untrue statement of material fact or
omitted or omits to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
In rendering their opinions set forth in Section 7(d) above,
such counsel may rely, to the extent deemed advisable by such
counsel, (a) as to factual matters, upon certificates of public
officials and officers of the Company, and (b) as to the laws of
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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any jurisdiction other than the United States, the state of New York
and the state of Minnesota, on opinions of counsel (PROVIDED,
HOWEVER, that you shall have received a copy of each of such
opinions which shall be dated the Time of Delivery, addressed to you
or otherwise authorizing you to rely thereon, and Robins Kaplan in
its opinion to you delivered pursuant to this subsection, shall
state that such counsel are satisfactory to them and Robins Kaplan
has no reason to believe that the Underwriters and they are not
justified to so rely);
(v) Robins Kaplan (or other law firm acceptable to the
Underwriters), shall have furnished to you their written opinion,
dated the Time of Delivery, in form and substance satisfactory to
you, to the effect that:
1) Each of this Agreement, the Power of Attorney and the
Custody Agreement has been duly authorized, executed and
delivered by or on behalf of each of the Selling
Shareholders and constitutes a legal, valid and binding
agreement of each Selling Shareholder.
2) No consent, approval, authorization or order of any
court or governmental agency or body is required for the
consummation by any Selling Shareholder of the
transactions on its part contemplated by this Agreement
in connection with the Securities to be sold by any
Selling Shareholder hereunder, except such as have been
obtained under the Act and such as may be required under
the blue sky laws of any jurisdiction in connection with
the purchase and distribution of such Securities by the
Underwriters; and
3) Upon purchase of the Securities to be sold by the
Selling Shareholders as provided in this Agreement, each
of the Underwriters (assuming that it is a bona fide
purchaser within the meaning of the Uniform Commercial
Code) will acquire good and valid title to such
Securities, free and clear of all security interests,
liens, encumbrances, equities or other claims.
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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Such counsel may rely upon certificates of the Selling
Shareholders. The opinions of such counsel relate solely
to, are based solely upon and are limited exclusively to
the laws of the state of Minnesota and the state of New
York and the laws of the United States of America, to
the extent applicable.
(vi) Miller & Lents, such firm constituting independent
petroleum engineering consultants (the "Engineering
Consultants"), shall have delivered to you on the date of this
Agreement a letter (the "Reserve Letter") and also on the
Closing Date a letter dated the Closing Date, in each case in
form and substance reasonably satisfactory to you and
substantially in the form attached hereto as Annex III,
stating, as of the date of such letter (or, with respect to
matters involving changes or developments since the respective
dates as of which specified information with respect to the
oil and gas reserves is given or incorporated in the
Prospectus as of the date not more than five days prior to the
date of such letter), the conclusions and findings of such
firm with respect to the oil and gas reserves of the Company;
(vii) Vinson & Elkins L.L.P., counsel to the Underwriters,
shall have furnished to you their written opinion or opinions,
dated the Time of Delivery, in form and substance satisfactory
to you, with respect to the incorporation of the Company, the
validity of the Securities, the Registration Statement, the
Prospectus and other related matters as you may reasonably
request, and such counsel shall have received such papers and
information as they may reasonably request to enable them to
pass upon such matters;
(viii) At the time this Agreement is executed and also at
the Time of Delivery, Arthur Andersen LLP shall have
furnished to you a letter or letters, dated the date of this
Agreement and the Time of Delivery, in form and substance
satisfactory to you, to the effect, that:
1) They are independent accountants with respect to the
Company and its subsidiaries within the meaning of the
Act and the
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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applicable published Rules and Regulations thereunder;
2) In their opinion the consolidated financial statements
of the Company and its subsidiaries (including the
related schedules and notes) included in the
Registration Statement and Prospectus and covered by
their reports included therein comply as to form in all
material respects with the applicable accounting
requirements of the Act and the published Rules and
Regulations thereunder;
3) On the basis of specified procedures as of a specified
date not more than five days prior to the date of their
letter (which procedures do not constitute an
examination made in accordance with generally accepted
auditing standards), consisting of a reading of the
latest available unaudited interim consolidated
financial statements of the Company and its
subsidiaries, a reading of the latest available minutes
of any meeting of the Board of Directors and
stockholders of the Company and its subsidiaries since
the date of the latest audited financial statements
included in the Prospectus, inquiries of officials of
the Company and its subsidiaries who have responsibility
for financial and accounting matters, and such other
procedures or inquiries as are specified in such letter,
nothing came to their attention that caused them to
believe that:
(A) The unaudited consolidated condensed financial
statements of the Company and its subsidiaries included in the
Prospectus do not comply in form in all material respects with
the applicable accounting requirements of the Act and the
Rules and Regulations promulgated thereunder or are not
presented in conformity with generally accepted accounting
principles applied on a basis substantially consistent with
that of the audited consolidated financial statements included
in the Registration Statement and the Prospectus;
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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(B) as of a specified date not more than five days prior
to the date of their letter, there was any change in the
capital stock, or the long-term debt or subordinated debt of
the Company and its subsidiaries on a consolidated basis, or
any decrease in total assets, total current assets or
stockholders' equity or other items specified by the
Representatives, of the Company and its subsidiaries on a
consolidated basis, each as compared with the amounts shown on
the __________ ___, 1997 balance sheet included in the
Registration Statement and the Prospectus, except in each case
for changes, increases or decreases which the Prospectus
discloses have occurred or may occur or such other changes,
decreases or increases which are described in their letter and
which do not, in the sole judgment of the Representatives,
make it impractical or inadvisable to proceed with the
purchase and delivery of the Securities as contemplated by the
Registration Statement; and
(C) for the period from ___________ ___, 1997 to a
specified date not more than five days prior to the date of
such letter, there was any decrease, as compared with the
corresponding period of the preceding fiscal year, in the
following consolidated amounts: total revenues, revenues less
direct operating expenses, income (loss) before income taxes,
net income (loss) or net income (loss) per average common
share outstanding, except in all instances for decreases which
the Registration Statement discloses have occurred or may
occur; or such other decreases which are described in their
letter and which do not, in the sole judgment of the
Representatives, make it impractical or inadvisable to proceed
with the purchase and delivery of the Securities as
contemplated by the Registration Statement; and
4) in addition to the examination referred to in their
reports included in the Registration Statement and the
Prospectus and the limited procedures referred to in
clause (iii) above, they have carried out certain
specified procedures, not constituting an audit, with
respect to certain amounts, percentages and financial
information specified by the Representatives, which are
derived from the general accounting records of the
Company and its subsidiaries which appear in the
Prospectus, or in Part II of, or in exhibits and
schedules to, the Registration Statement, and have
compared such amounts and financial information with the
accounting records of the Company and its subsidiaries,
and have found them to be in agreement and have proved
the
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UNDERWRITING AGREEMENT
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mathematical accuracy of certain specified percentages.
(ix) Neither the Company nor any of its sub
sidiaries shall have sustained since the date of the
latest audited financial statements included in the
Prospectus, any loss or interference with its business
from fire, explosion, flood or other calamity, whether
or not covered by insurance, or from any labor dispute
or court or governmental action, order or decree; and
since the respective dates as of which information is
given in the Prospectus, there shall not have been any
change in the capital stock (other than shares issued
pursuant to the exercise of Employee Option Shares) or
short-term debt or long-term debt (excluding changes in
the amount of indebtedness outstanding under the
Company's Revolving Credit Agreement (as defined in the
Registration Statement) incurred for working capital
purposes) of the Company or any of its subsidiaries nor
any change or any development involving a prospective
change, in or affecting the general affairs, management,
financial position, stockholders' equity or results of
operations of the Company and its subsidiaries,
otherwise than as set forth or contemplated in the
Prospectus, the effect of which, in any such case is in
your judgment so material and adverse as to make it
impracticable or inadvisable to proceed with the public
offering or the delivery of the Securities on the terms
and in the manner contemplated in the Prospectus;
(x) Between the date hereof and the Time of
Delivery there shall have been no declaration of war by
the Government of the United States; at the Time of
Delivery there shall not have occurred any material
adverse change in the financial or securities markets in
the United States or in political, financial or economic
conditions in the United States or any outbreak or
material escalation of hostilities or other calamity or
crisis, the effect of which is such as to make it, in
the judgment of the Representatives, impracticable to
market the Securities or to enforce contracts for the
resale of Securities and no event shall
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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have occurred resulting in (i) trading in securities
generally on the New York Stock Exchange or in the
Common Stock on the principal securities exchange or
market in which the Common Stock is listed or quoted
being suspended or limited or minimum or maximum prices
being generally established on such exchanges or market,
or (ii) additional material governmental restrictions,
not in force on the date of this Agreement, being
imposed upon trading in securities generally by the New
York Stock Exchange or in the Common Stock on the
principal securities exchange or market in which the
Common Stock is listed or quoted or by order of the
Commission or any court or other governmental authority,
or (iii) a general banking moratorium being declared by
either Federal or New York authorities;
(xi) The Company shall have furnished or caused to
be furnished to you at the Time of Delivery certificates
signed by the chief executive officer and the chief
financial officer, on behalf of the Company,
satisfactory to you as to such matters as you may
reasonably request and as to (i) the accuracy of the
Company's representations and warranties herein at and
as of the Time of Delivery and (ii) the performance by
the Company of all its obligations hereunder to be
performed at or prior to the Time of Delivery; (iii) the
fact that they have carefully examined the Registration
Statement and Prospectus and, (a) as of the Effective
Date, the statements contained in the Registration
Statement and the Prospectus were true and correct and
neither the Registration Statement nor the Prospectus
omitted to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading and (b) since the Effective Date, no event
has occurred that is required by the Act or the Rules
and Regulations of the Commission thereunder to be set
forth in an amendment of, or a supplement to, the
Prospectus that has not been set forth in such an
amendment or supplement; and (iv) the matters set forth
in subsection (a) of this Section 7;
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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(xii)Each director, officer and five percent
stockholder of the Company shall have delivered to you
an agreement not to sell, offer or agree to sell or
otherwise dispose of any capital stock of the Company
(or securities convertible into, or exchangeable for,
capital stock of the Company), directly or indirectly,
for a period of 180 days after the date hereof (other
than pursuant to this Agreement), without the prior
written consent of the Representatives, PROVIDED that
the foregoing restrictions shall not apply to grants
under the Company's stock option plan and the exercise
of options granted thereunder or to any gift of Common
Stock or any private sale of Common Stock not made on
the open market to a donee or purchaser, respectively,
that agrees in writing for the benefit of the
Representative to be bound by the same restrictions with
respect to such shares; and
(xiii)The Company shall have delivered to you
evidence that the Securities have been authorized for
quotation on the Nasdaq National Market as of the
Effective Date.
viii. The Company will indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities,
joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are
based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or
supplement thereto, or in any Blue Sky application or other document
executed by the Company specifically for that purpose or based upon
written information furnished by the Company filed in any state or
other jurisdiction in order to qualify any or all the Securities
under the security laws thereof or filed with the Commission or any
securities association or securities exchange (each, an
"Application"), or the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make
the statements made therein not misleading, or (ii) any untrue
statement or alleged untrue statement made by the Company in Section
1 of this Agreement, or (iii) the employment by the Company of any
device, scheme or artifice to defraud, or the engaging by the
Company in any act, practice or course of business which operates or
would operate as a fraud or deceit, or any conspiracy with respect
thereto, in which the Company shall participate, in connection with
the issuance and sale of
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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any of the Securities, and will reimburse each Underwriter for any
legal or other expenses reasonably incurred by such Underwriter in
connection with investigating, preparing to defend, defending or
appearing as a third-party witness in connection with any such
action or claim; PROVIDED, HOWEVER, that the Company shall not be
liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged
omission relating to an Underwriter made in any Preliminary
Prospectus, the Registration Statement, the Prospectus or such
amendment or supplement or any Application in reliance upon and in
conformity with written information furnished to the Company by such
Underwriter through you expressly for use therein.
(i) In addition to any obligations of the Company under
Section 8(a), the Company agrees that it shall perform its
indemnification obligations under Section 8(a) (as modified by
the last paragraph of this Section 8(b)) with respect to
counsel fees and expenses and other expenses reasonably
incurred by making payments within 45 days to the Underwriter
in the amount of the statements of the Underwriter's counsel
or other statements which shall be forwarded by the
Underwriter, and that they shall make such payments
notwithstanding the absence of a judicial determination as to
the propriety and enforceability of the obligation to
reimburse the Underwriters for such expenses and the
possibility that such payments might later be held to have
been improper by a court and a court orders return of such
payments.
The indemnity agreement in Section 8(a) shall be in addition to any
liability which the Company may otherwise have and shall extend upon the
same terms and conditions to each person, if any, who controls any
Underwriter within the meaning of the Act or the Exchange Act.
(ii) Each Selling Shareholder will indemnify and hold
harmless each Underwriter or the Company, as the case may be,
against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter or the Company, as the case
may be, may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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(i) any untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or
supplement thereto, or in any Blue Sky application or other
document executed by the Company specifically for that purpose
or based upon written information furnished to the Company by
the Selling Shareholder filed in any state or other
jurisdiction in order to qualify any or all the Securities
under the security laws thereof or filed with the Commission
or any securities association or securities exchange (each, an
"Application"), or the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements made therein not misleading
in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission was
made in reliance upon and in conformity with written
information furnished to the Company by such Selling
Shareholder specifically for use therein or (ii) any untrue
statement or alleged untrue statement made by the Selling
Shareholder in Section 1.A of this Agreement; PROVIDED,
HOWEVER, that the Selling Shareholder shall not be liable in
any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged
omission relating to an Underwriter made in any Preliminary
Prospectus, the Registration Statement, the Prospectus or such
amendment or supplement or any Application in reliance upon
and in conformity with written information furnished to the
Company by such Underwriter through you expressly for use
therein. In addition, in no event shall the liability of any
Selling Shareholder for indemnification in this Section 8(c)
exceed the proceeds received by such Selling Shareholder in
the Offering.
(iii)In addition to any obligations of each of the
Selling Shareholders under Section 8(c), each of the Selling
Shareholders agrees that it shall perform its indemnification
obligations under Section 8(c) (as
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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modified by the last paragraph of this Section 8(d)) with
respect to counsel fees and expenses and other expenses
reasonably incurred by making payments within 45 days to the
Underwriter in the amount of the statements of the
Underwriter's counsel or other statements which shall be
forwarded by the Underwriter, and that they shall make such
payments notwithstanding the absence of a judicial
determination as to the propriety and enforceability of the
obligation to reimburse the Underwriters for such expenses and
the possibility that such payments might later be held to have
been improper by a court and a court orders return of such
payments.
The indemnity agreement in Section 8(c) shall be in addition to any
liability which the Company may otherwise have and shall extend upon the
same terms and conditions to each person, if any, who controls any
Underwriter within the meaning of the Act or the Exchange Act.
(iv) Each Underwriter will indemnify and hold harmless
the Company or the Selling Shareholders, as the case may be,
against any losses, claims, damages or liabilities to which
the Company or any of the Selling Shareholders may become
subject, under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or any
Application, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement
or omission or alleged omission was made in any Preliminary
Prospectus, the Registration Statement, the Prospectus or such
amendment or supplement or any Application in reliance upon
and in conformity with written information furnished to the
Company or the Selling Shareholder by such Underwriter
relating to such Underwriter through you
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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<PAGE>
expressly for use therein, and will reimburse the Company or
the Selling Shareholder for any legal or other expenses
reasonably incurred by the Company or the Selling Shareholder
in connection with investigating or defending any such action
or claim.
The indemnity agreement in this Section 8(e) shall be in addition to
any liability which the respective Underwriters may otherwise have and
shall extend, upon the same terms and conditions, to each officer and
director of the Company and to each person, if any, who controls the
Company within the meaning of the Act or the Exchange Act.
(v) Promptly after receipt by an indemnified party under
Section 8(a), 8(c) or 8(e) of notice of the commencement of
any action (including any governmental investigation), such
indemnified party shall, if a claim in respect thereof is to
be made against the indemnifying party under such subsection,
notify the indemnifying party in writing of the commencement
thereof; but the omission so to notify the indemnifying party
shall not relieve it from any liability which it may have to
any indemnified party under Section 8(a), 8(c) or 8(e) except
to the extent it was unaware of such action and has been
prejudiced in any material respect by such failure or from any
liability which it may have to any indemnified party otherwise
than under such Section 8(a), 8(c) or 8(e). In case any such
action shall be brought against any indemnified party and it
shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish,
jointly with any other indemnifying party similarly notified,
to assume the defense thereof, with counsel satisfactory to
such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any
legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other
than reasonable costs of investigation. If, however, (i) the
indemnifying party has authorized the employment of counsel
for the indemnified party
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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<PAGE>
at the expense of the indemnifying party or (ii) an
indemnified party shall have reasonably concluded that
representation of such indemnified party and the indemnifying
party by the same counsel would be inappropriate under
applicable standards of professional conduct due to actual or
potential differing interests between them and the indemnified
party so notifies the indemnifying party, then the indemnified
party shall be entitled to employ counsel different from
counsel for the indemnifying party at the expense of the
indemnifying party and the indemnifying party shall not have
the right to assume the defense of such indemnified party. In
no event shall the indemnifying parties be liable for fees and
expenses of more than one counsel (in addition to local
counsel) for all indemnified parties in connection with any
one action or separate but similar or related actions in the
same jurisdiction arising out of the same set of allegations
or circumstances. The counsel with respect to which fees and
expenses shall be so reimbursed shall be designated in writing
by Schroder Wertheim in the case of parties indemnified
pursuant to Section 8(a) and 8(c) and by the Company and the
Selling Shareholders in the case of parties indemnified
pursuant to Section 8(e).
No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been
a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter
of such proceeding.
(vi) In order to provide for just and equitable
contribution under the Act in any case in which (i) any
Underwriter (or any person who controls any Underwriter within
the meaning of the Act or the Exchange Act) makes claim for
indemnification pursuant to Section 8(a) or 8(c) hereof, but
is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal)
that such indemnification may not be
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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<PAGE>
enforced in such case notwithstanding the fact that Section
8(a) or 8(c) provides for indemnification in such case or (ii)
contribution under the Act may be required on the part of any
Underwriter or any such controlling person in circumstances
for which indemnification is provided under Section 8(e),
then, and in each such case, each indemnifying party shall
contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject as an indemnifying
party hereunder (after contribution from others) in such
proportion as is appropriate to reflect the relative benefits
received by the Company or any of the Selling Shareholders on
the one hand and the Underwriters on the other from the
offering of the Securities. If, however, the allocation
provided by the immediately preceding sentence is not
permitted by applicable law or if the indemnified party failed
to give the notice required under Section 8(d) above, then
each indemnifying party shall contribute to such amount paid
or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but
also the relative fault of the Company on the one hand and the
Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits
received by the Company or any of the Selling Shareholders on
the one hand and the Underwriters on the other shall be deemed
to be in the same proportion as the total net proceeds from
the offering of the Securities purchased under this Agreement
(before deducting expenses) received by the Company or any of
the Selling Shareholders bear to the total underwriting
discounts and commissions received by the Underwriters with
respect to the Securities purchased under this Agreement, in
each case as set forth in the table on the cover page of the
Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to
information supplied by the Company or any
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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<PAGE>
of the Selling Shareholders on the one hand or the
Underwriters on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company, each of the
Selling Shareholders and the Underwriters agree that it would
not be just and equitable if contributions pursuant to this
Section 8(g) were determined by PRO RATA allocation (even if
the Underwriters were treated as one entity for such purpose)
or by any other method of allocation which does not take
account of the equitable considerations referred to above in
this Section 8(g). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages
or liabilities (or actions in respect thereof) referred to
above in this Section 8(g) shall be deemed to include any
legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the
provisions of this Section 8(g), no Underwriter shall be
required to contribute any amount in excess of the amount by
which the total price at which the Securities underwritten by
it and distributed to the public were offered to the public
exceeds the amount of any damages which such Underwriter has
otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission and
no Selling Shareholder shall be required to contribute any
amount in excess of the proceeds received by such Selling
Shareholder in the Offering. No person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The
Underwriters' obligations in this Section 8(e) to contribute
are several in proportion to their respective underwriting
obligations and not joint.
(vii)Promptly after receipt by any party to this
Agreement of notice of the commencement of any action, suit or
proceeding, such party will, if a claim for contribution in
respect thereof is to be made
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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<PAGE>
against another party (the "contributing party"), notify the
contributing party of the commencement thereof; but the
omission so to notify the contributing party will not relieve
it from any liability which it may have to any other party for
contribution under the Act except to the extent it was unaware
of such action and has been prejudiced in any material respect
by such failure or from any liability which it may have to any
other party other than for contribution under the Act. In case
any such action, suit or proceeding is brought against any
party, and such party notifies a contributing party of the
commencement thereof, the contributing party will be entitled
to participate therein with the notifying party and any other
contributing party similarly notified.
ix. If any Underwriter shall default in its obligation to purchase
the Firm Securities which it has agreed to purchase hereunder, you may in
your discretion arrange for you or another party or other parties to
purchase such Firm Securities on the terms contained herein. If the
aggregate number of Firm Securities as to which Underwriters default is
more than one-eleventh of the aggregate number of all the Firm Securities
and within 36 hours after such default by any Underwriter you do not
arrange for the purchase of such Firm Securities, then the Company shall
be entitled to a further period of 36 hours within which to procure
another party or other parties satisfactory to you to purchase such Firm
Securities on such terms. In the event that, within the respective
prescribed periods, you notify the Company that you have so arranged for
the purchase of such Firm Securities, or the Company notifies you that it
has so arranged for the purchase of such Firm Securities, you or the
Company shall have the right to postpone the Time of Delivery for a period
of not more than seven days, in order to effect whatever changes may
thereby be made necessary in the Registration Statement or the Prospectus
or in any other documents or arrangements, and the Company agrees to file
promptly any amendments to the Registration Statement or the Prospectus
which in your opinion may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any person
substituted under this Section with like effect as if such person had
originally been a party to this Agreement with respect to such Firm
Securities.
(i) If, after giving effect to any arrangements for the
purchase of the Firm Securities of such defaulting Underwriter or
Underwriters by you or the Company or both as provided in subsection
(a) above, the
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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<PAGE>
aggregate number of such Firm Securities which remain unpurchased
does not exceed one-eleventh of the aggregate number of all the Firm
Securities, then the Company shall have the right to require each
non-defaulting Underwriter to purchase the number of the Firm
Securities which such Underwriter agreed to purchase hereunder and,
in addition, to require each non-defaulting Underwriter to purchase
its pro rata share (based on the number of Firm Securities which
such Underwriter agreed to purchase hereunder) of the Firm
Securities of such defaulting Underwriter or Underwriters for which
such arrangements have not been made; but nothing shall relieve a
defaulting Underwriter from liability for its default.
(ii) If, after giving effect to any arrangements for the
purchase of the Firm Securities of a defaulting Underwriter or
Underwriters by you or the Company as provided in subsection (a)
above, the aggregate number of such Firm Securities which remain
unpurchased exceeds one-eleventh of the aggregate number of all the
Firm Securities, or if the Company shall not exercise the right
described in subsection (b) above to require non-defaulting
Underwriters to purchase Firm Securities of a defaulting Underwriter
or Underwriters, then this Agreement shall thereupon terminate
without liability on the part of any non- defaulting Underwriter or
the Company, except for the expenses to be borne by the Company and
the Underwriters as provided in Section 6 hereof and the indemnity
agreement in Section 8 hereof; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
x. The respective indemnities, agreements, representations,
warranties and other statements of the Company, the Selling Shareholders
and the several Underwriters, as set forth in this Agreement or made by or
on behalf of them, respectively, pursuant to this Agreement, shall remain
in full force and effect, regardless of any investigation (or any
statement as to the results thereof) made by or on behalf of any
Underwriter or any controlling person of any Underwriter, or the Company,
or an officer or director or controlling person of the Company, or any
Selling Shareholder, or an officer or director
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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<PAGE>
or controlling person of the Selling Shareholder, and shall survive
delivery of and payment for the Securities.
xi. This Agreement shall become effective (a) if the Registration
Statement has not heretofore become effective, at the earlier of 12:00
Noon, New York City time, on the first full business day after the
Registration Statement becomes effective, or at such time after the
Registration Statement becomes effective as you may authorize the sale of
the Securities to the public by Underwriters or other securities dealers,
or (b) if the Registration Statement has heretofore become effective, at
the earlier of 24 hours after the filing of the Prospectus with the
Commission or at such time as you may authorize the sale of the Securities
to the public by Underwriters or securities dealers, unless, prior to any
such time you shall have received notice from the Company that it elects
that this Agreement shall not become effective, or you, or through you
such of the Underwriters as have agreed to purchase in the aggregate fifty
percent or more of the Firm Securities hereunder, shall have given notice
to the Company that you or such Underwriters elect that this Agreement
shall not become effective; PROVIDED, HOWEVER, that the provisions of this
Section and Section 6 and Section 8 hereof shall at all times be
effective.
If this Agreement shall be terminated pursuant to Section 9 hereof, or if
this Agreement, by election of you or the Underwriters, shall not become
effective pursuant to the provisions of this Section, the Company shall not then
be under any liability to any Underwriter except as provided in Section 6 and
Section 8 hereof, but if this Agreement becomes effective and is not so
terminated but the Securities are not delivered by or on behalf of the Company
as provided herein because the Company has been unable for any reason beyond its
control and not due to any default by it to comply with the terms and conditions
hereof, the Company will reimburse the Underwriters through you for all
out-of-pocket expenses approved in writing by you, including fees and
disbursements of counsel, reasonably incurred by the Underwriters in making
preparations for the purchase, sale and delivery of the Securities, but the
Company shall then be under no further liability to any Underwriter except as
provided in Section 6 and Section 8 hereof.
xii. The statements set forth in the last paragraph on the front
cover page of the Prospectus, the paragraph on the inside front cover of
the Prospectus containing stabilization language and the third and eighth
paragraphs under the caption "Underwriting" in the Prospectus constitute
the only information furnished by any Underwriter through the
Representatives to the Company for purposes of Sections 1(b), 1(c) and 8
hereof.
xiii. In all dealings hereunder, you shall act on behalf of each of
the Underwriters, and the parties hereto shall be entitled to act and rely
upon any statement, request, notice or agreement on behalf of any
Underwriter made
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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<PAGE>
or given by you jointly or by Schroder Wertheim on behalf of you as the
Representatives.
All statements, requests, notices and agreements hereunder, unless
otherwise specified in this Agreement, shall be in writing and, if to the
Underwriters, shall be delivered or sent by mail, telex or facsimile
transmission (subsequently confirmed by delivery or by letter sent by mail) to
you as the Representatives in care of Schroder Wertheim & Co. Incorporated,
Equitable Center, 787 Seventh Avenue, New York, New York 10019, Attention:
Syndicate Department; and if to the Company, shall be delivered or sent by mail,
telex or facsimile transmission (subsequently confirmed by delivery or by letter
sent by mail) to the address of the Company set forth in the Registration
Statement, Attention: S. James Nelson, Executive Vice President; PROVIDED,
HOWEVER, that any notice to any Underwriter pursuant to Section 8(d) hereof
shall be delivered or sent by mail, telex or facsimile transmission
(subsequently confirmed by delivery or by letter sent by mail) to such
Underwriter at its address set forth in its Underwriters' Questionnaire, or
telex constituting such Questionnaire, which address will be supplied to the
Company by you upon request. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof.
xiv. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, the Company, the Selling Shareholders and,
to the extent provided in Section 8 and Section 10 hereof, the officers
and directors of the Company and each person who controls the Company or
any Underwriter, and their respective heirs, executors, administrators,
successors and assigns, and no other person shall acquire or have any
right under or by virtue of this Agreement. No purchaser of any of the
Securities from any Underwriter shall be deemed a successor or assign by
reason merely of such purchase.
xv. Time shall be of the essence of this Agreement. As used herein,
the term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
XVI. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS
PRINCIPLES THEREOF.
xvii. This Agreement may be executed by any one or more of the
parties hereto in any number of counterparts, each of which shall be
deemed to be an original, but all such counterparts shall together
constitute one and the same instrument.
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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<PAGE>
If the foregoing is in accordance with your understanding, please sign and
return to us two counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof shall
constitute a binding agreement among each of the Underwriters and the Company.
It is understood that your acceptance of this letter on behalf of each of the
Underwriters is pursuant to the authority set forth in a form of Agreement Among
Underwriters, manually or facsimile executed counterparts of which, to the
extent practicable and upon request, shall be submitted to the Company for
examination, but without warranty on your part as to the authority of the
signers thereof.
Very truly yours,
CAL DIVE INTERNATIONAL, INC.
By:_________________________
Name:
Title:
SELLING SHAREHOLDERS
By:_________________________
As Attorney-in-Fact for each of the
several Selling Shareholders named
in Schedule II
Accepted as of the date hereof:
SCHRODER WERTHEIM & CO.
INCORPORATED
RAYMOND JAMES & ASSOCIATES, INC.
SIMMONS & COMPANY INTERNATIONAL
as Representatives of the several Underwriters
By: SCHRODER WERTHEIM & CO.
INCORPORATED
By:_________________________
Managing Director
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
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<PAGE>
SCHEDULE I
UNDERWRITER NUMBER OF FIRM SECURITIES
Schroder Wertheim & Co. Incorporated..................
Raymond James & Associates, Inc.......................
Simmons & Company International.......................
Total................................................. ============
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
SCHEDULE I
<PAGE>
SCHEDULE II
SELLING SHAREHOLDERS NUMBER OF FIRM SECURITIES
CAL DIVE INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
SCHEDULE II
EXHIBIT 3.1
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
CAL DIVE INTERNATIONAL, INC.
I, Gerald G. Reuhl, the Chairman of Cal Dive International, Inc., a
Minnesota corporation, do hereby certify that by resolutions in lieu of a
special meeting of the shareholders of said Corporation, effective as of April
11, 1997, the following resolutions were unanimously adopted in writing by the
shareholders:
RESOLVED:
The Articles of Incorporation of this Corporation shall be amended and
restated to read as follows:
"1997 AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
CAL DIVE INTERNATIONAL, INC."
ARTICLE I
The name of this Corporation shall be Cal Dive International, Inc.
ARTICLE II
The Corporation shall have general business purposes and shall have
authority to engage in and do any act necessary or incidental to the conduct of
any business for which corporations may be organized under the provisions of
Minnesota Statutes Chapter 302A.
ARTICLE III
The Corporation shall have perpetual existence.
ARTICLE IV
REGISTERED OFFICE
The registered office of this Corporation is located at 2800 LaSalle
Plaza, 800 LaSalle Avenue, Minneapolis, Minnesota 55402.
<PAGE>
ARTICLE V
CAPITAL
A. The total authorized capital stock of the Corporation is sixty million
(60,000,000) shares of Common Stock, without par value, and five million
(5,000,000) shares of Preferred Stock with $0.01 par value.
B. Shares of Preferred Stock may be divided into and issued from time to
time in one or more series. In addition to, and not by way of limitation of, the
power granted to the Board of Directors of this Corporation by Minnesota
Statutes, Chapter 302A, the Board of Directors of the Corporation shall have the
power and authority to fix by resolution the preferences, limitations and
relative rights of the Preferred Stock of each series. The Board of Directors is
hereby authorized to fix and determine such variations in the designations,
preferences, and relative participating, optional or other special rights
(including, without limitation, special voting rights, preferential rights to
receive dividends or assets upon liquidation, rights of conversion into Common
Stock or other securities, redemption provisions or sinking fund provisions) as
between series and as between the Preferred Stock or any series thereof and the
Common Stock, and the qualifications, limitations or restrictions of such
rights, and the shares of Preferred Stock or any series thereof may have full or
limited voting powers. Upon adoption of such resolution, a statement shall be
filed with the Secretary of State in compliance with Minnesota Statutes Section
302A.401, before the issuance of any shares for which the resolution creates
rights or preferences not set forth in these Articles of Incorporation;
provided, however, where the shareholders have received notice of the creation
of shares with rights or preferences not set forth in these Articles of
Incorporation before the issuance of the shares, the statement may be filed any
time within one year after the issuance of the shares.
C. Except in respect of characteristics of a particular series fixed by
the Board of Directors, all shares of Preferred Stock shall be of equal rank and
shall be identical. All shares of any one series of Preferred Stock so
designated by the Board of Directors shall be alike in every particular, except
that the shares of any one series issued at different times may differ as to the
dates from which dividends thereon shall be cumulative.
D. Subject to the preferences of any series of Preferred Stock, the Board
of Directors may, in its discretion, out of funds legally available for the
payment of dividends and at such times and in such manner as determined by the
Board of Directors, declare and pay dividends on the Common Stock of the
Corporation. No dividend (other than a dividend in capital stock ranking on a
parity with the Common Stock or cash in lieu of fractional shares with respect
to such stock dividend) shall be declared or paid on any share or shares of any
class of stock or series thereof ranking on a parity with the Common Stock in
respect of payment of dividends for any period unless there shall have been
declared, for the same dividend period, like proportionate dividends on all
shares of Common Stock then outstanding.
E. In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary after payment or provision for
payment of the debts and other liabilities of the Corporation and payment or
setting aside for payment of any preferential amount due to the holders of any
other class or series of stock, the holders of the Common Stock shall be
entitled to receive ratably any or all assets remaining to be paid or
distributed.
F. The holders of the Common Stock of the Corporation shall be entitled to
one vote for each share of such stock held by them.
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G. Whenever reference is made in this Article V to shares "ranking prior
to" another class of stock or "on a parity with" another class of stock, such
reference shall mean and include all other shares of the Corporation in respect
of which the rights of the holders thereof as to the payment of dividends or as
to distributions in the event of a voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation are given preference
over, or rank on an equal basis with, as the case may be, the rights of the
holders of such other class of stock. Whenever reference is made to shares
"ranking junior to" another class of stock, such reference shall mean and
include all shares of the Corporation in respect of which the rights of the
holders thereof as to the payment of dividends and as to distributions in the
event of a voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Corporation are junior and subordinate to the rights of the
holders of such class of stock. Except as otherwise provided in these Articles
of Incorporation, or in the statement filed with the Secretary of State in
compliance with Minnesota Statutes Section 306A.401, each series of Preferred
Stock ranks on a parity with each other and each ranks prior to the Common
Stock. Common Stock ranks junior to Preferred Stock.
H. The Corporation shall at all times reserve and keep available, out of
its authorized but unissued shares of Common Stock or out of shares of Common
Stock held in its treasury, the full number of shares of Common Stock into which
all shares of any series of Preferred Stock having conversion privileges from
time to time outstanding are convertible. Unless otherwise provided in these
Articles of Incorporation or in the statement filed with the Secretary of State
in compliance with, Minnesota Statutes Section 306A.401, with respect to a
particular series of Preferred Stock, all shares of Preferred Stock, redeemed or
acquired (as a result of conversion or otherwise) shall be retired and restored
to the status of authorized but unissued shares.
ARTICLE VI
DIRECTORS
A. The number of directors of the Corporation shall be fixed as specified
or provided for in the By-Laws of the Corporation. Election of directors need
not be by written ballot unless the By-Laws shall so provide.
B. Any director or the entire Board of Directors may be removed, but only
by a 68% vote of the holders of the shares then entitled to vote at an election
of directors.
C. Any director absent from a meeting of the Board of Directors or any
committee thereof may be represented by any other Director, who may cast the
vote of the absent director according to the written instructions, general or
special, of the absent director (except that the same person may not be
designated to act as proxy for more than one (1) director at any meeting of the
Board of Directors or any committee thereof).
D. The Board of Directors, when evaluating a tender offer or an offer to
make a tender or exchange offer or to effect a merger, consolidation or share
exchange or sale of all or substantially all of the assets of the Corporation,
may, in exercising its judgment in determining what is in the best interests of
the Corporation and its shareholders, consider the following factors and any
other factors that it deems relevant: (1) not only the consideration being
offered in the proposed transaction, in relation to the then current market
price for the outstanding capital stock of the Corporation, but also the market
price for the
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capital stock of the Corporation over a period of years, the estimated price
that might be achieved in a negotiated sale of the Corporation as a whole or in
part or through orderly liquidation, the premiums over market price for the
securities of other corporations in similar transactions, current political,
economic and other factors bearing on securities prices and the Corporation's
financial condition and future prospects; (2) the social and economic effects of
such transaction on the Corporation, its subsidiaries, or their employees,
customers, creditors and the communities in which the Corporation and its
subsidiaries do business; (3) the business and financial condition and earnings
prospects of the acquiring party or parties; including, but not limited to, debt
service and other existing or likely financial obligations of the acquiring
party or parties, and the possible effect of such condition upon the Corporation
and its subsidiaries and the communities in which the Corporation and its
subsidiaries do business; and (4) the competence, experience, and integrity of
the acquiring party or parties and its or their management. Notwithstanding any
provision of this Article VI(D), this Article is not intended to confer any
rights on any subsidiary of the Corporation, or on any of the Corporation's or
its subsidiaries' employees, customers, creditors or other members of the
communities in which it or they do business.
ARTICLE VII
SHAREHOLDER VOTING
No shareholder of this Corporation shall be entitled to any cumulative
voting rights. Action shall not be taken by written consent of the Shareholders,
but, in all cases, shall be taken at a meeting of the Shareholders as described
in the By-Laws of the Corporation.
ARTICLE VIII
PREEMPTIVE RIGHTS
Except as provided in that certain 1997 Amended and Restated Shareholders
Agreement dated as of April 11, 1997 (as amended pursuant thereto from time to
time), no shareholder of this Corporation shall have any preferential,
preemptive, or other rights of subscription to any shares of any class or series
of stock of this Corporation allotted or sold or to be allotted or sold, whether
now or hereafter authorized, or to any obligations or securities convertible
into any class or series of stock of this Corporation.
ARTICLE IX
DIRECTOR LIABILITY
A director of this Corporation shall not be personally liable to the
Corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for (i) liability based on a breach of the duty of
loyalty to the Corporation or the shareholders; (ii) liability for acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law; (iii) liability based on the payment of an improper dividend
or an improper repurchase of the Corporation's stock under Minnesota Statutes,
Section 302A.559, or on material violations of federal or state securities laws;
(iv) liability for any transaction from which the director derived a material
improper personal benefit; or (v) liability for any act or omission occurring
prior to the date this Article IX becomes effective. If Minnesota Statutes,
Chapter 302A, hereafter is amended to authorize the further elimination or
limitation of the liability of directors, then the liability of a director of
the Corporation in addition to the limitation on personal liability
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provided herein, shall be limited to the fullest extent permitted by the amended
Chapter 302A. Any repeal of this provision as a matter of law or any
modification of this Article IX by the shareholders of the Corporation shall be
prospective only, and shall not adversely affect any limitation on the personal
liability of a director of the Corporation existing at the time of such repeal
or modification.
ARTICLE X
BOARD ACTION WITHOUT A MEETING
Any action required or permitted to be taken at any meeting of the Board
of Directors may be taken without a meeting by written action signed by all of
the Directors then in office.
ARTICLE XI
AMENDMENT TO ARTICLES OF INCORPORATION OR BYLAWS
In furtherance of, and not in limitation of, the powers conferred by
statute, the Board of Directors is expressly authorized to adopt, amend or
repeal the By-Laws of the Corporation or adopt new By-Laws, without any action
on the part of the shareholders; provided, however, that no such adoption,
amendment, or repeal shall be valid with respect to By-Law provisions which have
been adopted, amended, or repealed by the shareholders; and further provided,
that By-Laws adopted or amended by the Board of Directors and any powers thereby
conferred may be amended, altered, or repealed by the shareholders. In addition,
the affirmative vote of the holders of at least (a) 80% of the voting power of
the then outstanding shares of voting stock, voting together as a single class,
and in addition to any other vote required by these Articles of Incorporation or
the By-Laws, is required to amend provisions of these Articles of Incorporation
or the By-Laws relating to: (i) the taking of shareholder action without a
meeting; (ii) the right of shareholders to call a special meeting; (iii) the
number, election and term of the Corporations's Directors; (iv) the removal of
Directors; and (v) fixing a quorum for meetings of shareholders; and (b) at
least 90% of the voting power of the then outstanding shares of voting stock,
voting together as a single class, and in addition to any other vote required by
these Articles of Incorporation or the By-Laws, is required to amend the
provisions of these Articles of Incorporation relating to the Minnesota Control
Share Acquisition Act or the Minnesota Business Combinations Act contained in
Article XII hereof.
ARTICLE XII
MINNESOTA STATUTES SS.SS. 302A.671 AND 302A.673
(CONTROL SHARE ACQUISITIONS AND BUSINESS COMBINATIONS)
The Corporation and its shareholders hereby expressly elect to not have
the provisions of Minnesota Statues ss. 302A.671, as now in effect or as
hereafter amended from time to time, the Control Share Acquisition Act, apply to
any Control Share Acquisition (as in such statute defined) involving the
Corporation. The Corporation and its shareholders also hereby expressly elect
that Minnesota Statutes ss. 302A.673, as now in effect or as hereafter amended
from time to time, the Business Combinations Act, shall not apply to any
Business Combination (as in such statute defined) involving Coflexip, a French
corporation, Coflexip Stena Offshore USA Holdings Inc., a Delaware corporation,
or any company affiliated with either of them.
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RESOLVED FURTHER:
The Chairman of this Corporation is hereby authorized and directed to
make, execute and acknowledge the 1997 Amended and Restated Articles of
Incorporation embracing the foregoing resolution and to cause such 1997 Amended
and Restated Articles of Incorporation to be filed for record in the manner
required by law.
------------------------------------
IN WITNESS WHEREOF, I have hereto set my hand this 10th day of April,
1997.
Gerald G. Reuhl
Chairman
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EXHIBIT 3.2
AMENDED AND RESTATED
BY-LAWS
OF
CAL DIVE INTERNATIONAL, INC.
PREAMBLE
The Corporation, Coflexip, a French Corporation ("Coflexip"), First
Reserve Secured Energy Assets Fund, Limited Partnership, First Reserve Fund V,
Limited Partnership, First Reserve Fund V-2, Limited Partnership and First
Reserve Fund VI, Limited Partnership , Gerald G. Reuhl, Owen E. Kratz, S. James
Nelson, Gordon F. Ahalt and the other Shareholders of the Company, have entered
into that certain 1997 Amended and Restated Shareholders Agreement dated as of
April 11, 1997 (the "Shareholders Agreement"). The Shareholders Agreement
regulates certain aspects of corporate governance of the Corporation, including,
without limitation, the composition of the Corporation's Board of Directors. In
conjunction with the Shareholders Agreement, the Corporation agreed to amend and
restate these By-Laws. Accordingly, to the extent any provision of these By-Laws
conflicts with any provision of the Shareholders Agreement, the provisions of
the Shareholders Agreement shall prevail.
ARTICLE 1.
OFFICES
The registered office of the Corporation in Minnesota shall be as stated
in the Articles of Incorporation, as from time to time amended. The Corporation
may also have offices in Texas and at such other places as the Board of
Directors shall from time to time determine.
ARTICLE 2.
CORPORATE SEAL
The Corporation shall have no corporate seal.
<PAGE>
ARTICLE 3.
SHAREHOLDERS MEETINGS
SECTION 3.01. REGULAR MEETINGS
(1) Regular meetings of the Shareholders of the Corporation for the
purpose of election of Directors and transaction of such other business as may
properly come before the regular meetings may be held annually at the principal
executive office of the Corporation or at such other place within or without the
State of Minnesota or Texas as may be designated by the Board of Directors.
Regular meetings of Shareholders, when held, shall be held on the second Tuesday
in May of each year at 10:00 a.m., or at such date and time as the Board of
Directors may from time to time designate. Regular meetings of the Shareholders
(but not special meetings) may also be called by the Shareholders in accordance
with the provisions of Minnesota Statutes Chapter 302A. Regular meetings of the
Shareholders shall be known as "annual meetings."
(2) At the annual meeting of the Shareholders, only such business shall be
conducted as shall have been properly brought before the annual meeting. To be
properly brought before the annual meeting of Shareholders, business must be (i)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors, (ii) otherwise brought before the
meeting by or at the direction of the Board of Directors, or (iii) otherwise
properly brought before the meeting by a Shareholder of the Corporation who is a
Shareholder of record at the time of giving of notice provided for in this
Section 3.01 of Article 3, who shall be entitled to vote at such meeting and who
complies with the notice procedures set forth in this Section 3.01 of Article 3.
For business to be properly brought before an annual meeting by a Shareholder,
the Shareholder, in addition to the requirements set forth above, must have
given timely notice thereof in writing to the Secretary of the Corporation. To
be timely, a Shareholder's notice must be delivered to or mailed and received at
the principal executive offices of the Corporation not less than ninety (90)
days prior to the anniversary date of the immediately preceding annual meeting
of Shareholders of the Corporation. A Shareholder's notice to the Secretary
shall set forth as to each matter the Shareholder proposes to bring before the
annual meeting: (a) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, (b) the name and address, as they appear on the Corporation's
books, of the Shareholder proposing such business, (c) the class and number of
shares of voting stock of the Corporation which are
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beneficially owned by the Shareholder, (d) a representation that the Shareholder
intends to appear in person or by proxy at the meeting to bring the proposed
business before the annual meeting, and (e) a description of any material
interest of the Shareholder in such business. Notwithstanding anything in these
By-Laws to the contrary, no business shall be conducted at an annual meeting
except in accordance with the procedures set forth in this Article 3. The
presiding officer of an annual meeting shall, if the facts warrant, determine
and declare to the meeting that business was not properly brought before the
meeting in accordance with the provisions of this Article 3, and if he should so
determine, he shall so declare to the meeting and any such business not properly
brought before the meeting shall not be transacted.
SECTION 3.02. SPECIAL MEETINGS. Special meetings of the Shareholders may
be called for any purpose at any time by the Chief Executive Officer or a
majority of the Board of Directors. The Board of Directors or the Chief
Executive Officer shall within thirty (30) days of receipt of such written
request cause a special meeting of Shareholders to be called, said meeting to be
held no later than ninety (90) days after receipt of the written request.
SECTION 3.03. NOTICE OF SHAREHOLDER MEETINGS. Written notice of
Shareholders' meetings, whether regular or special, shall be mailed to all
Shareholders entitled to vote at any such meeting at least ten (10) days, and
not more than sixty (60) days, before the date of the meeting. The written
notice shall contain the date, time and place of the meeting and, in the case of
a special meeting, the purpose or purposes thereof.
SECTION 3.04. WAIVER OF NOTICE. Failure to receive notice of the time,
place and purpose of any meeting of Shareholders may be waived by any
Shareholder in writing or orally before, at, or after the meeting. Attendance by
a Shareholder at a meeting is a waiver of notice of that meeting, except where
the Shareholder objects at the beginning of the meeting to the transaction of
business because the meeting is not lawfully called or convened, or objects
before a vote on an item of business because the item may not lawfully be
considered at that meeting and does not participate in the consideration of the
item at that meeting.
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SECTION 3.05. RECORD DATE. The Board of Directors may fix in advance a
date not more than sixty (60) days prior to the date of any meeting of
Shareholders as the record date for the determination of Shareholders entitled
to vote at the meeting.
SECTION 3.06. QUORUM. The presence, in person or by proxy, of the holders
of a majority of the outstanding shares entitled to vote thereat shall
constitute a quorum for the transaction of business at all meetings of
Shareholders. If, however, a quorum is not present or represented at any meeting
of Shareholders, the Shareholders entitled to vote at the meeting, either
present in person or represented by proxy, shall have the power to adjourn the
meeting to a future date. The time and place to which an adjournment is taken
shall be publicly announced at the meeting, and no further notice thereof shall
be necessary.
Provided that a quorum is present or represented at an adjourned meeting,
any business may be transacted which might have been transacted at the original
meeting. If a quorum is present when a duly called or held meeting of
Shareholders is convened, the Shareholders present may continue to transact
business until adjournment, even though the withdrawal of a number of
Shareholders originally present leaves less than the proportion or number
otherwise required for a quorum.
SECTION 3.07. VOTING. A Shareholder entitled to vote at a meeting of
Shareholders may vote in person or by proxy. Except as otherwise provided by law
or the Articles of Incorporation, every Shareholder shall be entitled to one
vote for each share outstanding in his name on the record of Shareholders of the
Corporation. The votes of a corporate Shareholder may be cast in person or by
proxy, and shall be executed by any duly elected officer of a corporate
Shareholder.
SECTION 3.08. PROXIES. Every appointment of a proxy must be in writing and
must be dated and signed by the Shareholder and filed with an officer of the
Corporation at or before the Shareholders' meeting at which the appointment is
to be effective. No appointment of a proxy shall be valid after the expiration
of eleven (11) months from the date of its execution, unless a longer period is
expressly provided in the appointment.
SECTION 3.09. NOMINATION FOR ELECTION AS A DIRECTOR. Except as provided in
the Shareholders Agreement, only persons who are nominated in accordance with
the procedures set forth in these ByLaws
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shall be eligible for election as, and to serve as, directors. Nominations of
persons for election to the Board of Directors of the Corporation may be made at
a meeting of Shareholders (a) by or at the direction of the Board of Directors
or (b) by any Shareholder of the Corporation who is a Shareholder of record at
the time of giving of notice provided for in this Section 3.09, who shall be
entitled to vote for the election of directors at the meeting and who complies
with the notice procedures set forth in this Section 3.09. Such nominations,
other than those made by or at the direction of the Board of Directors, shall be
made pursuant to timely notice in writing to the Secretary of the Corporation.
To be timely, a Shareholder's notice shall be delivered to or mailed and
received at the principal executive offices of the Corporation (i) with respect
to an election to be held at the annual meeting of the Shareholders of the
Corporation, not less than ninety (90) days prior to the anniversary date of the
immediately preceding annual meeting of Shareholders of the Corporation; and
(ii) with respect to an election to be held at a special meeting of Shareholders
of the Corporation, not later than the close of business on the tenth (10th) day
following the date on which notice of the date of the special meeting (whether
or not such notice of the date of the special meeting constitutes the "notice of
special meeting" required by Section 3.02 of Article 3 of these By-Laws) was
mailed to Shareholders or public disclosure of the date of the special meeting
was made, whichever first occurs. Such Shareholder's notice to the Secretary
shall set forth (i) as to each person whom the Shareholder proposes to nominate
for election or re-election as a director, all information relating to such
person that is required to be disclosed in solicitations of proxies for election
of directors, or is otherwise required, pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (including such person's written
consent to being named in the proxy statement as a nominee and to serve as a
director if elected); and (ii) as to the Shareholder giving the notice (a) the
name and address, as they appear on the Corporation's books, of such Shareholder
and (b) the class and number of shares of voting stock of the Corporation which
are beneficially owned by such Shareholder. At the request of the Board of
Directors, any person nominated by the Board of Directors for election as a
director shall furnish to the Secretary of the Corporation that information
required to be set forth in a Shareholder's notice of nomination which pertains
to the nominee. In the event that a person is validly designated as a nominee to
the Board of Directors in accordance with the procedures set forth in this
Section 3.09 and shall thereafter become unable or unwilling to stand for
election to the Board of Directors, the Board of Directors or the Shareholder
who proposed such nominee, as the case may be, may designate a substitute
nominee. Other than directors chosen pursuant to this Section 3.09, no person
shall be eligible to serve as a director of the Corporation unless nominated in
accordance with the procedures set forth in this Section 3.09 of Article 3.
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The presiding officer of the meeting of Shareholders shall, if the facts
warrant, determine and declare to the meeting that a nomination was not made in
accordance with the procedures prescribed by these By-Laws, and if he should so
determine, he shall so declare to the meeting and the defective nomination shall
be disregarded. Notwithstanding the foregoing provisions of this Section 3.09, a
Shareholder shall also comply with all applicable requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder with
respect to the matters set forth in this Section 3.09.
SECTION 3.10. NO SHAREHOLDER ACTION BY WRITTEN CONSENT. Action shall not
be taken by written consent of the Shareholders but, in all cases, shall be
taken at a meeting of the Shareholders as described in this Article 3.
ARTICLE 4.
DIRECTORS
SECTION 4.01. DUTIES AND POWERS. The business and affairs of the
Corporation shall be managed by or under the direction of the Board of Directors
(hereinafter, the "Board of Directors" or "Board"), subject to any Shareholder
control agreement entered into in accordance with Minnesota Statutes Chapter
302A, including, without limitation, the Shareholders Agreement. The Board shall
take action by the affirmative vote of a majority of the Directors present at a
meeting, except as otherwise provided by law, or the Shareholders Agreement, or
the Articles of Incorporation; provided a quorum is present. The Board may adopt
such rules and regulations for the conduct of its meetings and the management of
the Corporation as it deems appropriate, consistent with law, the Shareholders
Agreement, these By-Laws and the Articles of Incorporation.
SECTION 4.02. ELECTION OF DIRECTORS. Directors need not be U.S. citizens
or Shareholders of the Corporation. The number of directors of the Corporation
shall be fixed as provided in the Shareholders Agreement or when such agreement
is no longer in effect, from time to time by the Directors or Shareholders
pursuant to these By-laws. The Directors shall be classified, with respect to
the time for which they severally hold office, into three classes, as nearly
equal in number as possible, as shall be provided in the manner specified in the
Shareholders Agreement and these By-laws, one class to be originally elected for
a term expiring at the annual meeting of Shareholders to be
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held in 1997, another class to be originally elected for a term expiring at the
annual meeting of Shareholders to be held in 1998, and another class to be
originally elected for a term expiring at the annual meeting of Shareholders to
be held in 1999, with the members of each class to hold office until their
successors are elected and qualified. At each annual meeting of Shareholders of
the Corporation, the successors of the class of directors whose term expires at
the meeting shall be elected to hold office for a term expiring at the annual
meeting of Shareholders held in the third year following the year of their
election.
SECTION 4.03. TERM OF OFFICE. Subject to the Shareholders Agreement, newly
created directorships resulting from any increase in the number of directors and
any vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other cause shall be filled by the affirmative vote
of a majority of the remaining directors then in office, even though less than a
quorum of the Board of Directors. Any Director elected in accordance with the
preceding sentence shall hold office for the remainder of the full term of the
class of Directors in which the new directorship was created or the vacancy
occurred and until such Director's successor shall have been elected and
qualified. No decrease in the number of Directors constituting the Board of
Directors shall shorten the term of any incumbent Director.
SECTION 4.04. REGULAR MEETINGS. The Board of Directors may, pursuant to a
standing resolution of the Board, provide for Board meetings to be held at
regular intervals. Such meetings shall be known as "regular meetings" and may be
held at such place or places, within or without the State of Texas or Minnesota,
as the Board shall designate from time to time. No notice of the purpose of
regular meetings of the Board shall be required.
SECTION 4.05. SPECIAL MEETINGS. Special meetings of the Board of Directors
of the Corporation may be called BY ANY TWO (2) Directors by giving ten (10)
days notice to all Directors of the date, time, place and purpose of the
meeting. Such notice shall be given to each Director by registered mail or by
facsimile or by a notice in writing delivered to the Director personally or to
his usual place of business.
SECTION 4.06. PREVIOUSLY SCHEDULED MEETINGS. If the day or date, time and
place of a Board meeting have been provided in these By-Laws or announced at a
previous meeting of the Board, no notice
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is required. Notice of an adjourned meeting need not be given other than by
announcement at the meeting at which adjournment is taken.
SECTION 4.07. WAIVER OF NOTICE AND ASSENT TO ACTION. Failure to receive
notice of any meeting of the Board may be waived by any Director before, at or
after the meeting in writing or orally. Attendance by a Director at a meeting is
a waiver of notice of that meeting, except where the Director objects at the
beginning of the meeting to the transaction of business because the meeting is
not lawfully called or convened and does not participate thereafter in the
meeting.
SECTION 4.08. QUORUM. The presence of a majority of the Directors shall
constitute a quorum for the transaction of business. In the absence of a quorum,
a majority of the Directors present may adjourn a meeting of the Board from time
to time until a quorum is present. If a quorum is present when a duly called or
held Board meeting is convened, the Directors present may continue to transact
business until adjournment, even though the withdrawal of a number of Directors
originally present leaves less than the proportion or number otherwise required
for a quorum.
SECTION 4.09. ABSENT DIRECTORS. A Director may give advance written
consent or opposition to a proposal to be acted on at a Board meeting. If the
Director is not present at the meeting, consent or opposition to a proposal does
not constitute presence for purposes of determining the existence of a quorum,
but consent or opposition shall be counted as a vote in favor of or against the
proposal and shall be entered in the minutes or other record of action at the
meeting, if the proposal acted on at the meeting is substantially the same or
has substantially the same effect as the proposal to which the Director has
consented or objected.
SECTION 4.10. VOTING. At all meetings of the Board of Directors, each
Director shall have one (1) vote irrespective of the number of shares that he
may hold. The Board of Directors shall take action by the affirmative vote of a
majority of Directors present at a duly held meeting at which a quorum is
present or voting pursuant to Section 4.08 of these By-Laws, except where the
affirmative vote of a larger proportion or number is required by law or the
Articles of Incorporation or the Shareholders Agreement.
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SECTION 4.11. COMPENSATION. The compensation of Directors shall be as
fixed from time to time by the Board of Directors.
SECTION 4.12. VACANCIES. Subject to the Shareholders Agreement, vacancies
on the Board of Directors resulting from the death, resignation, removal, or
disqualification of a Director may be filled by the affirmative vote of a
majority of the remaining Directors, even though less than a quorum. Each
Director elected under this section to fill a vacancy shall hold office until a
qualified successor is elected by the Shareholders.
SECTION 4.13. REMOVAL. Subject to the Shareholders Agreement, a Director
may be removed only by the Shareholders as provided in the Corporation's
Articles of Incorporation.
SECTION 4.14. RESIGNATION. A Director may resign at any time by giving
written notice to the Corporation. The resignation is effective without
acceptance when the notice is given to the Corporation, unless a later effective
time is specified in the notice.
SECTION 4.15. ELECTRONIC COMMUNICATIONS. A conference among Directors by
any means of communication through which the Directors may simultaneously hear
each other during the conference constitutes a Board meeting, if the same notice
is given of the conference as would be required under these By-Laws for a Board
meeting, and if the number of Directors participating in the conference would be
sufficient to constitute a quorum at a meeting. A Director may participate in a
Board meeting at which he is not personally present by any means of
communication through which the Director, other Directors so participating, and
all Directors physically present at the meeting may simultaneously hear each
other during the meeting. Participation in a Board meeting by any of the
foregoing means constitutes presence in person at the meeting.
SECTION 4.16. WRITTEN ACTIONS. Any action required or permitted to be
taken at a Board meeting may be taken by a written action signed collectively,
or individually in counterparts, by all Directors. Any such written action shall
be effective when signed by all the Directors, unless a different effective time
is provided in the written action.
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SECTION 4.17. COMMITTEES. The Board of Directors may from time to time, by
resolution, adopted by the affirmative vote of a majority of the Directors
present at a duly called Board Meeting, establish one or more committees having
the authority of the Board in the management of the business of the Corporation
to the extent provided in the resolution. Any committee so established shall
consist of one (1) or more natural persons and shall be subject at all times to
the direction and control of the Board of Directors. At any meeting of any such
committee the presence of a majority of the members of the committee shall be
necessary to constitute a quorum for the transaction of business. Unless a
larger or smaller proportion or number is provided for in the resolution
establishing a committee, such committee shall take action by the affirmative
vote of a majority of committee members present at a duly held meeting.
SECTION 4.18. POWER TO AMEND BY-LAWS. In furtherance and not in limitation
of the powers conferred by statute, the Board of Directors is expressly
authorized to make, alter or repeal from time to time the By-Laws of the
Corporation in any manner not inconsistent with the laws of the State of
Minnesota or the Articles of Incorporation of the Corporation or the
Shareholders Agreement.
ARTICLE 5.
OFFICERS
SECTION 5.01. OFFICERS AND QUALIFICATIONS. The officers of the Corporation
may consist of positions and titles as the Board of Directors may from time to
time designate. Any corporate officer may hold more than one office or any
number of offices.
SECTION 5.02. ELECTION. The officers of the Corporation shall be elected
or appointed periodically by the Board of Directors.
SECTION 5.03. TERM OF OFFICE. Each officer of the Corporation shall hold
office until their respective successors are elected and have qualified, or
until their earlier death, resignation, or removal.
SECTION 5.04. REMOVAL. Subject to limitations in the Shareholders
Agreement, any officer of the Corporation may be removed at any time, with or
without cause, by the affirmative vote of a majority of
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the Directors present at a duly called Board meeting. All officers, agents and
employees, other than those elected or appointed by the Board of Directors, may
be removed by the officer appointing them.
SECTION 5.06. VACANCIES. All vacancies in any office of the Corporation
may be filled by the Board of Directors.
SECTION 5.07. DUTIES. The officers of the Corporation including, without
limitation, the Chairman, Vice Chairman, Chief Executive Officer, President,
Chief Operating Officer, Executive and Senior Vice Presidents, Vice Presidents,
the Secretary, Treasurer and Assistant Secretary and Treasurer, if any, shall
perform such duties as are from time to time prescribed by the Board of
Directors or the Chief Executive Officer (excepting the Chairman or Vice
Chairman who shall report directly to the Board of Directors) .
SECTION 5.08. COMPENSATION. The Compensation of all officers of the
Corporation shall be fixed by the Board of Directors or by such committee or
person as the Board may from time to time designate.
ARTICLE 6.
SHARES
SECTION 6.01. CERTIFICATES. The shares of the Corporation shall be
represented by certificates approved by the Board of Directors and signed by any
two (2) of the Chairman, President or Chief Financial Officer. Each certificate
shall state the name of the Corporation, that the Corporation is incorporated in
Minnesota, the name of the person to whom it is issued, the number and class or
series of shares represented thereby, the date of issue, the par value of such
shares, if any, and may contain such other provisions as the Board or the
Shareholders Agreement may designate.
SECTION 6.02. SIGNATURE. For the purpose of facilitating the execution of
stock certificates, the Board of Directors may appoint one or more additional
persons, having power to sign stock certificates, or to execute any instrument
on behalf of the Corporation which shall have been approved by the Board of
Directors.
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SECTION 6.03. TRANSFER OF SHARES. The shares of the Corporation shall be
assignable and transferable only on the books and records of the Corporation on
behalf of the registered owner, or his duly authorized attorney, upon surrender
of the certificate duly and properly endorsed together with proper evidence of
authority to transfer. The Corporation shall issue a new certificate for the
shares surrendered to the person or persons entitled thereto.
SECTION 6.04. LOST OR DESTROYED CERTIFICATES. If a certificate is lost or
destroyed, another may be issued in its stead upon proof of such loss or
destruction and upon giving such security as is deemed necessary by the Board of
Directors to indemnify the Corporation against loss therefrom.
ARTICLE 7.
INDEMNIFICATION
SECTION 7.01. DEFINITIONS. For purposes of this Article 7, the terms
defined in this Section 7.01 have the meanings given them herein.
SECTION 7.1.1 OFFICIAL CAPACITY. "Official capacity" means (a) with
respect to a director, the position of director in the Corporation, (b) with
respect to a person other than a director, the elective or appointive office or
position held by an officer or member of a committee of the Board of Directors
and (c) with respect to a director or officer of the Corporation who, while a
director or officer of the Corporation, is or was serving at the request of the
Corporation or whose duties in that position involve or involved service as a
director, officer or trustee of another organization, the position of that
person as a director, officer or trustee, as the case may be, of the other
organization.
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SECTION 7.1.2. PROCEEDING. "Proceeding" means a threatened, pending, or
completed civil, criminal, administrative, arbitration, or investigative
proceeding, including a proceeding by or in the right of the Corporation.
SECTION 7.02. INDEMNIFICATION REQUIRED. The Corporation shall defend and
indemnify a person made or threatened to be made a party to a proceeding by
reason of the former or present official capacity of the person with the
Corporation against judgments, penalties, fines (including, without limitation,
excise taxes assessed against the person with respect to an employee benefit
plan), settlements, and reasonable expenses (including, without limitation,
attorneys' fees and disbursements), incurred by the person in connection with
the proceeding, if, with respect to the acts or omissions of the person
complained of in the proceeding, the person:
(a) Has not, pursuant to the provisions of Section 7.1.1 (c) of these
By-Laws, been indemnified by another organization or employee
benefit plan for the same judgments, penalties, fines (including,
without limitation, excise taxes assessed against the person with
respect to an employee benefit plan), settlements, and reasonable
expenses (including attorneys' fees and disbursements), incurred by
the person in connection with the proceeding with respect to the
same acts or omissions;
(b) Acted in good faith;
(c) Received no improper personal benefit and the provisions of
Minnesota Statutes Chapter 302A relating to director conflicts of
interest, if applicable, have been satisfied;
(d) In the case of a criminal proceeding, had no reasonable cause to
believe the conduct was unlawful; and
(e) In the case of acts or omissions undertaken while acting in the
official capacity described in Section 7.1.1, clause (a) or (b),
reasonably believed that the conduct was in the best interests of
the Corporation, or in the case of acts or omissions undertaken
while acting in the official capacity described in Section 7.1.1,
clause (c), reasonably believed that the conduct was not opposed to
the best interests of the Corporation. If the person's acts or
omissions complained of in the proceeding relate to conduct as a
director, officer or trustee, the conduct is not considered to be
opposed to the best interests of the Corporation if the person
reasonably believed that the conduct was in the best interests of
the participants or beneficiaries of the employee benefit plan.
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Nothing in this Section 7.02 shall be interpreted to prohibit the Board,
in its discretion, from extending indemnification hereunder to other persons.
SECTION 7.03. ADVANCES. If a person is made or threatened to be made a
party to a proceeding, the person is entitled, upon written request to the
Corporation, to payment or reimbursement by the Corporation of reasonable
expenses (including, without limitation, attorneys' fees and disbursements),
incurred by the person in advance of the final disposition of the proceeding,
(a) upon receipt by the Corporation of a written affirmation by the person of a
good faith belief that the criteria for indemnification set forth in Section
7.02 have been satisfied and a written undertaking by the person to repay all
amounts so paid or reimbursed by the Corporation, if it is ultimately determined
that the criteria for indemnification set forth in Section 7.02 have not been
satisfied, and (b) after a determination that the facts then known to those
making the determination pursuant to Section 7.05 would not preclude
indemnification under this Article 7. The written undertaking required by clause
(a) is an unlimited general obligation of the person making it, but need not be
secured and shall be accepted without reference to financial ability to make the
repayment.
SECTION 7.04. REIMBURSEMENT TO WITNESSES. This Article 7 does not require,
or limit the ability of, the Corporation to reimburse expenses (including
attorneys' fees and disbursements), incurred by a person in connection with an
appearance as a witness in a proceeding at a time when the person has not been
made or threatened to be made a party to a proceeding.
SECTION 7.05. DETERMINATION OF ELIGIBILITY.
7.5.1. PROCEDURE GENERALLY. All determinations whether
indemnification of a person is required because the criteria set forth in
Section 7.02 have been satisfied and whether a person is entitled to
payment or reimbursement of expenses in advance of the final disposition
of a proceeding as provided in Section 7.03 shall be made:
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(a) By a majority of the Board of Directors who are not at the
time parties to the proceeding (Board members who are part of
the proceeding shall not be counted for determining either a
majority or the presence of a quorum); or
(b) If a quorum under Clause (a) cannot be obtained, in accordance
with Minnesota Statutes Chapter 302A; or
(c) If an adverse determination is made or if no determination is
made within 60 (sixty) days after the termination of a
proceeding or after a request for an advance of expenses, as
the case may be, by a court in this state, which may be the
same court in which the proceeding concerning the person's
liability took place, upon application of the person and any
notice the court requires.
7.5.2. ALTERNATIVE PROCEDURE FOR NON-MANAGEMENT. With respect to a
person who is not, and was not at the time of the acts or omissions
complained of in the proceedings, a director, officer, or person
possessing, directly or indirectly, the power to direct or cause the
direction of the management or policies of the Corporation, the
determination whether indemnification of this person is required because
the criteria set forth in Section 7.02 have been satisfied and whether
this person is entitled to payment or reimbursement or expenses in advance
of the final disposition of a proceeding as provided in Section 7.03 may
be made by an annually appointed committee of the Board, having at least
one member who is a director. The committee shall report at least annually
to the Board concerning its actions.
7.06. DISCLOSURE. If the Corporation indemnifies or advances expenses to a
person in accordance with this Article 7 in connection with a proceeding by or
on behalf of the Corporation, it shall report the amount of the indemnification
or advance and to whom and on whose behalf it was made as part of the annual
financial statements furnished to Shareholders pursuant to Minnesota Statutes
Chapter 302A covering the period when the indemnification or advance was paid or
accrued under the accounting method of the Corporation reflected in the
financial statements.
7.07. INSURANCE. The Corporation may maintain insurance, at its expense,
to protect itself and any person who is or was serving as a director, officer,
senior management employee or agent of the
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Corporation or is or was serving at the request of the Corporation as a
director, officer, senior management, employee or agent of another corporation,
partnership, limited liability company, joint venture, trust or other enterprise
or employee benefit plan against any expense, liability or loss, whether or not
the Corporation would have the power to indemnify such person against such
expense, liability or loss under the Minnesota Business Corporation Act.
7.08. SAVINGS CLAUSE. If this Article 7 or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify and hold harmless each director and
officer of the Corporation, as to costs, charges and expenses (including,
without limitation, attorney's fees and disbursements), judgments, fines, and
amounts paid in settlement with respect to any action, suit or proceeding,
whether civil, criminal, administrative or investigative to the full extent
permitted by any applicable portion of this Article 7 that shall not have been
invalidated and to the fullest extent permitted by applicable law.
ARTICLE 8.
AMENDMENTS
Except as provided in the Articles of Incorporation, the power to adopt,
amend, or repeal the By-Laws of the Corporation is vested in the Board of
Directors. The power of the Board is subject to the power of the Shareholders,
exercisable in the manner provided by statute, to adopt, amend, or repeal
By-Laws adopted, amended or repealed by the Board. The Board shall not amend or
repeal a By-Law fixing a quorum for meetings of Shareholders, prohibiting the
taking of Shareholder action without a meeting, prohibiting Shareholders from
calling a special meeting, fixing the number, election and term of Directors, or
providing for the removal of Directors, or removing the provisions relating to
the Corporation electing not to be governed by the provisions of Minnesota
Statutes Section 302A.671 (Control Share Acquisition Act) or Minnesota Statutes
Section 302A.673 (the Business Combinations Act) as such latter Section relates
to Coflexip, Coflexip Stena Offshore USA Holdings Inc., a Delaware corporation,
or any company affiliated with either of them, contained in Article XII of the
Articles of Incorporation of the Corporation, as amended.
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ARTICLE 9.
DISTRIBUTIONS
Subject to the Shareholders Agreement, the Board of Directors may declare
or authorize and the Corporation may make distributions to the extent provided
by law. Such distributions may, but need not, be in the form of a dividend or a
distribution in liquidation, or as consideration for the purchase, redemption or
other acquisition of shares of the Corporation. The Board may at any time set
apart out of any funds of the Corporation available for distribution any reserve
or reserves for any proper purpose and may alter or abolish any reserve or
reserves so established.
ARTICLE 10.
FISCAL YEAR
The last day of the Corporation's fiscal year shall be December 31 or such
other day as is designated by the Board of Directors from time to time.
CERTIFICATION
The undersigned, the General Counsel of the Corporation, hereby certifies
that the foregoing Amended and Restated By-Laws were adopted pursuant to a 1997
Written Action of the Board of Directors and Shareholders, effective as of April
11, 1997.
Andrew C. Becher
Senior Vice President/General Counsel
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Amended and Restated By-laws
18
EXHIBIT 4.1
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
BY AND AMONG
CAL DIVE INTERNATIONAL, INC.
AND
ENERGY RESOURCE TECHNOLOGY, INC.
COLLECTIVELY, AS BORROWER
AND
SHAWMUT CAPITAL CORPORATION
AS LENDER
DATED AS OF MAY 23, 1995
TABLE OF CONTENTS
PAGE
SECTION 1. GENERAL DEFINITIONS
1.1. Defined Terms................................................ 2
1.2. Accounting Terms.............................................19
1.3. Other Terms..................................................19
1.4. Certain Matters of Construction..............................19
1.5. The Term "Borrower" or "Borrowers"...........................20
1.6. Cal Dive Obligations.........................................20
SECTION 2. CREDIT FACILITY
2.1. Revolving Credit Loans.......................................20
2.2. Equipment Loans..............................................21
2.3. Manner of Borrowing Revolving Credit Loans...................22
and Equipment Loans........................................23
2.4. Letters of Credit; LC Guaranties.............................23
2.5. All Loans to Constitute One Obligation.......................23
2.6. Loan Account.................................................23
2.7. Joint and Several Liability; Rights
of Contribution..............................................23
SECTION 3. INTEREST, FEES, TERM, REDUCTION AND REPAYMENT
3.1. Interest, Fees and Charges...................................24
3.2. Additional Provisions Regarding Eurodollar Loans.............27
3.3. Term of Agreement............................................29
3.4 Early Termination or Permanent Reduction by Borrower.........29
3.5. Effect of Termination........................................29
3.6. Payments.....................................................30
3.7. Application of Payments and Collections......................30
3.8. Statements of Account........................................31
SECTION 4. COLLATERAL: GENERAL TERMS
4.1. Security Interest in Collateral..............................31
4.2. Lien on Marine Vessels.......................................32
4.3. Lien on Oil and Gas Properties...............................32
4.4. Representations, Warranties and Covenants....................33
4.5. Lien Perfection..............................................33
4.6. Real Property Lien Documentation.............................34
4.7. Location of Collateral.......................................34
4.8. Insurance of Collateral......................................34
4.9. Protection of Collateral.....................................35
SECTION 5. PROVISIONS RELATING TO ACCOUNTS
5.1. Representations, Warranties and Covenants....................35
5.2. Assignments, Records and Schedules of Accounts...............36
5.3. Administration of Accounts...................................37
5.4. Collection of Accounts.......................................37
SECTION 6. PROVISIONS RELATING TO EQUIPMENT
6.1. Representations, Warranties and Covenants....................38
6.2. Evidence of Ownership of Equipment...........................38
6.3. Records and Schedules of Equipment...........................38
6.4. Dispositions.................................................38
SECTION 7. REPRESENTATIONS AND WARRANTIES
7.1. General Representations and Warranties.......................39
7.2. Reaffirmation................................................45
7.3. Survival of Representations and Warranties...................45
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS
8.1. Affirmative Covenants........................................45
8.2. Negative Covenants...........................................52
8.3. Specific Financial Covenants.................................56
SECTION 9. CONDITIONS PRECEDENT
9.1. Documentation................................................57
9.2. Other Conditions.............................................59
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
10.1. Events of Default............................................60
10.2. Acceleration of the Obligations..............................63
10.3. Remedies.....................................................63
10.4. Remedies Cumulative; No Waiver...............................64
SECTION 11. MISCELLANEOUS
11.1. Power of Attorney............................................64
11.2. Indemnity....................................................65
11.3. Modification of Agreement....................................66
11.4. Reimbursement of Expenses....................................66
11.5. Indulgences Not Waivers......................................67
11.6. Severability.................................................67
11.7. Successors and Assigns.......................................67
11.8. Cumulative Effect; Conflict of Terms.........................68
11.9. Execution in Counterparts....................................68
11.10. Notice.......................................................68
11.11. Lender's Consent.............................................69
11.12. Time of Essence..............................................69
11.13. Entire Agreement.............................................69
11.14. Interpretation...............................................69
11.15. No Fiduciary Relationship or Joint Venture...................69
11.16. Publicity....................................................69
11.17. Destruction of Borrower's Documents..........................70
11.18. Nonapplicability of Article 5069-15.01 et seq................70
11.19. No Preservation or Marshaling................................70
11.20. Governing Law; Consent to Forum..............................70
11.21. WAIVERS BY BORROWER..........................................71
11.22. DTPA WAIVER..................................................72
11.23. ORAL AGREEMENTS INEFFECTIVE..................................72
11.24. RELEASE......................................................72
11.25. Amendment and Restatement....................................73
EXHIBITS:
A - Borrowing Notice
B - Form of Equipment Note
C - Contingency Reserve Terms
D - Business Locations
E - Jurisdictions
F - Corporate Names
G - Patents, Trademarks, Copyrights and Licenses
H - Capital Structure
I - Shareholder Agreement
J - Contracts Restricting Debts
K - Litigation
L - Pension Plans
M - Tax Liability
N - Taxing Authorities
O - Labor Relations
P - Existing Environmental Violations
Q - Surety Obligations
R - Capitalized Leases
S - Operating Leases
T - Compliance Certificate
U - Form of Tax Certificate
V - Guarantees
W - Permitted Liens
X - Borrowing Base Certificate
Y - Amortization Amount Calculation
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is made this 23rd
day of May, 1995, by and among SHAWMUT CAPITAL CORPORATION ("LENDER"), a
Connecticut corporation, successor in interest by assignment to Barclays
Business Credit, Inc. ("BARCLAYS"), with an office at 2711 North Haskell, Suite
2100, LB21, Dallas, Texas 75204; CAL DIVE INTERNATIONAL, INC. ("CAL DIVE"), a
Minnesota corporation, and ENERGY RESOURCE TECHNOLOGY, INC. ("ERT"), a Delaware
corporation (Cal Dive and ERT being referred to individually and collectively as
"BORROWER"), each Borrower having its chief executive office at 13430 Northwest
Expressway, Suite 350, Houston, Texas 77040-6013.
PRELIMINARY STATEMENTS
A. On August 3, 1993, Barclays and Cal Dive entered into that certain
Loan and Security Agreement, as amended by (i) that certain First Amendment to
Loan and Security Agreement, dated as of August 31, 1994, executed by Barclays
and Cal Dive, and (ii) that certain Letter Agreement, dated as of December 30,
1994 by Barclays (as amended, the "ORIGINAL LOAN AGREEMENT"), pursuant to which
Barclays agreed to make loans and advances (collectively, the "LOANS") to Cal
Dive in accordance with the terms thereof.
B. The Loan Agreement and any other documents evidencing, governing,
securing or otherwise pertaining to the Loans are hereinafter referred to as the
"ORIGINAL LOAN DOCUMENTS".
C. Cal Dive has requested Lender to extend its relationship with Cal
Dive in connection with the Original Loan Documents and to make loans and
advances to ERT, and Lender, as the legal and equitable owner and holder of the
Original Loan Documents is willing to do so, subject to certain terms and
conditions expressed herein.
D. In connection with the extension of the relationship between Lender
and Cal Dive and the formation of a relationship between Lender and ERT, Lender,
Cal Dive and ERT wish to completely amend, restate and modify (but not
extinguish) the Original Loan Agreement and the other Original Loan Documents,
each through the execution of this Agreement, which will supersede all prior
agreements between Lender and Cal Dive, including without limitation the
Original Loan Documents, and Cal Dive, ERT and Lender have agreed that the
agreements contained herein represent an arms-length transaction among Lender,
Cal Dive and ERT.
NOW, THEREFORE, for and in consideration of the mutual covenants and
conditions contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Lender, Cal Dive and
ERT covenant and agree as follows:
AGREEMENT
SECTION 1. GENERAL DEFINITIONS
1.1. DEFINED TERMS. When used herein, the following terms shall have the
following meanings (terms defined in the singular to have the same meaning when
used in the plural and vice versa):
ACCOUNTS - all accounts, contract rights, chattel paper, instruments and
documents, whether now owned or hereafter created or acquired by Borrower or in
which Borrower now has or hereafter acquires any interest.
ACCOUNT DEBTOR - any Person who is or may become obligated under or on
account of an Account.
ADJUSTED NET EARNINGS FROM OPERATIONS - with respect to any fiscal year,
means the Consolidated net earnings (or loss) after provision for income taxes
for such fiscal year of Borrower, all as reflected on the Consolidated Financial
Statements, but excluding:
(a) except for transactions of ERT as set forth in the last sentence of
this definition, any gain or loss arising from the sale of capital assets which
is not in the ordinary course of business;
(b) any gain or loss arising from any write-up or write down of assets;
(c) earnings of any Subsidiary accrued prior to the date it became a
Subsidiary;
(d) earnings of any corporation, substantially all the assets of which
have been acquired in any manner by Borrower, realized by such corporation prior
to the date of such acquisition, unless such earnings are combined with the
earnings of Borrower pursuant to a Qualified Pooling of Interests;
(e) net earnings of any business entity (except for a Subsidiary) in
which Borrower has an ownership interest, unless such earnings are combined with
the earnings of Borrower pursuant to a Qualified Pooling of Interests;
(f) any portion of the net earnings of any Subsidiary which for any
reason is unavailable for payment of dividends to Borrower;
(g) the earnings of any Person to which any assets of Borrower shall
have been sold, transferred or disposed of, or into which Borrower shall have
merged, or been a party to any consolidation or other form of reorganization,
prior to the date of such transaction;
(h) any gain or loss arising from the acquisition of any Securities of
Borrower other than in the ordinary course of business; and
(i) any gain or loss arising from extraordinary or non-recurring items
as reflected in the income statement.
Lender acknowledges that ERT sells Offshore Platforms and related Equipment in
the ordinary course of business and gains and losses therefrom shall be reported
according to GAAP and included in the Consolidated Financial Statements.
ADJUSTED TANGIBLE ASSETS - all assets of Borrower, all as reflected on
the Consolidated Financial Statements and other financial reports of Borrower
supplied to Lender, but excluding: (a) any surplus resulting from any write-up
of assets subsequent to July 27, 1990; (b) deferred assets, other than Cash
Deposits for Salvage Operations, Accounts due from Ivory Production Co. and
guaranteed by Blue Dolphin Energy Company prepaid insurance and prepaid taxes;
(c) patents, copyrights, trademarks, trade names, non-compete agreements,
franchises and other similar intangibles; (d) goodwill, including any amounts,
however designated on a Consolidated balance sheet of a Person and its
Subsidiaries, representing the excess of the purchase price paid for assets or
stock over the value assigned thereto on the books of such Person subsequent to
July 27, 1990; (e) Restricted Investments; (f) unamortized debt discount and
expense; (g) certain assets located and notes and receivables due from obligors
outside of the United States of America as determined by Lender in its
discretion, which discretion shall be exercised in good faith; and (h) Accounts,
notes and other receivables due from Affiliates or employees; PROVIDED, HOWEVER,
for purposes of this CLAUSE (H), the term "Affiliate" shall not include any
Person deemed to be an Affiliate hereunder because such Person is an affiliate
of First Reserve.
ADJUSTED TANGIBLE NET WORTH - at any date means a sum equal to: (a) the
Adjusted Tangible Assets shown on a balance sheet at such date in accordance
with GAAP; MINUS (b) the amount at which such Person's liabilities (other than
capital stock and surplus) are shown on such balance sheet in accordance with
GAAP, and including as liabilities all reserves for contingencies and other
potential liabilities.
AFFILIATE - a Person (other than ERT, First Reserve (but not affiliates
of First Reserve) or a Subsidiary): (a) which directly or indirectly through one
or more intermediaries controls, or is controlled by, or is under common control
with, Borrower; (b) which beneficially owns or holds ten percent (10%) or more
of any class of the Voting Stock of Borrower; (c) ten percent (10%) or more of
the Voting Stock (or in the case of a Person which is not a corporation, ten
percent (10%) or more of the equity interest) of which is beneficially owned or
held by Borrower or a Subsidiary of Borrower; (d) ten percent (10%) or more of
whose Voting Stock (or in the case of a Person which is not a corporation, 10%
or more of the equity interest) is beneficially owned or held by a Person
referred to in CLAUSES (A), (B) or (C) above; or (E) in the case of a natural
Person, is a director or officer of any of the foregoing. For purposes hereof,
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of Voting Stock, by contract or otherwise.
AMORTIZATION AMOUNT - (a) for Equipment owned by Borrower on the Closing
Date, an amount equal to the aggregate amount of monthly reductions, each in an
amount equal to the quotient of (i) the Orderly Liquidation Value of such
Equipment determined by Lender on the Closing Date, DIVIDED BY (ii) ninety-six
(96), to be made on the first day of each calendar month during the term hereof,
commencing on June 1, 1995 and continuing for each month thereafter, and (b) for
Equipment purchased by Borrower after the Closing Date, an amount equal to the
aggregate amount of monthly reductions, each in an amount equal to the quotient
of (i) the cost to Borrower to purchase such Equipment as calculated in
accordance with GAAP (exclusive of capitalized interest), DIVIDED BY (ii)
ninety-six (96), to be made on the first day of each calendar month during the
term hereof, commencing on the first day of the first month succeeding the date
of purchase and continuing for each month thereafter. An example of the
calculation of the Amortization Amount is attached hereto as EXHIBIT Y.
AGREEMENT - this Amended and Restated Loan and Security Agreement,
including all Exhibits hereto, as amended, modified, extended or supplemented
from time to time.
APPLICABLE ANNUAL RATE - as defined in SECTION 3.1(A).
AUTHORITY - as defined in SECTION 8.1(V).
BANK - Shawmut Bank Connecticut, N.A.
BARCLAYS - as defined in the preamble of this Agreement.
BASE RATE - the rate of interest generally announced or quoted by Bank
from time to time as its base rate for commercial loans, whether or not such
rate is the lowest rate charged by Bank to its most preferred borrowers; and, if
such base rate for commercial loans is discontinued by Bank as a standard, a
comparable reference rate designated by Bank as a substitute therefor shall be
the Base Rate.
BORROWER - as defined in the preamble of this Agreement.
BASE RATE LOAN - a Loan which bears interest at a Base Rate.
BORROWING BASE - as at any date of determination thereof, an amount
equal to the lesser of:
(a) the Revolving Credit Commitment then in effect; or
(b) an amount equal to:
(i) eighty-five percent (85%) (or after an Event of Default, such lesser
percentage as Lender may in its discretion determine from time to time after
providing Borrower with written notice of such reduction, which discretion shall
be exercised in good faith) of the net amount of Eligible Accounts outstanding
at such date;
PLUS
(ii) the lesser of (A) Two Million Dollars ($2,000,000) or (B)
seventy-five percent (75%) (or after an Event of Default, such lesser percentage
as Lender may in its discretion determine from time to time after providing
Borrower with written notice of such reduction, which discretion shall be
exercised in good faith) of the amount of Unbilled Accounts outstanding at such
date;
MINUS
(iii) an amount equal to the sum of (A) the face amount of all Credit
Enhancements outstanding at such date, (B) any amounts which Lender may pay
pursuant to any of the Loan Documents for the account of Borrower, and (C) the
Contingency Reserve, if any.
For purposes hereof, the net amount of Eligible Accounts at any time shall be
the face amount of such Eligible Accounts LESS (1) any and all returns, rebates,
discounts, (which may, at Lender's option, be calculated on shortest terms),
credits, allowances or sales, excise or other taxes of any nature at any time
granted, issued, owing, or claimed by Account Debtors, outstanding or payable in
connection with such Accounts at such time and (2) any interest, late fees, and
services charges that may have accrued on such Accounts by reason of the Account
Debtors not having paid the Accounts as they became due.
BORROWING NOTICE - as defined in SECTION 2.3(A).
BUSINESS DAY - any day excluding Saturday, Sunday and any day which is a
legal holiday under the laws of the States of Texas or Illinois or is a day on
which banking institutions located in such state are closed or, with respect to
Eurodollar Interest Periods, a day on which dealings in U.S. dollars are carried
out in the interbank eurodollar market selected by Lender or Bank.
BUY-SELL AGREEMENTS - agreements for the purchase and sale of assets,
including, without limitation, federal offshore leases or interests therein,
together with all real and personal property held or used in connection
therewith, which assets are held or used in connection with the ownership of, or
operations involving, Hydrocarbons.
CAL DIVE OBLIGATIONS - as defined in SECTION 1.6.
CAPITALIZED LEASE OBLIGATION - any Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP.
CASH DEPOSITS FOR SALVAGE OPERATIONS - collectively, (a) cash deposits
held in an account of Borrower's for salvage operations that are pledged to the
MMS, and (b) cash deposits for salvage operations paid into a money market fund
of Borrower until such time as a specified level of funding has been set aside
for salvaging and abandoning oil and gas Properties, as set forth on the
Consolidated Financial Statements.
CLOSING DATE - the date on which all of the conditions precedent in
SECTION 9 are satisfied and the initial Loan is made hereunder.
CODE - the Uniform Commercial Code as adopted and in force in the State
of Texas, as from time to time in effect.
COLLATERAL - all of the Property and interests in Property described in
SECTIONS 4.1, 4.2 AND 4.3 and all other Property and interests in Property that
now or hereafter secure the payment and performance of any of the Obligations.
CONSOLIDATED - the consolidation in accordance with GAAP of the accounts
or other items as to which such term applies.
CONSOLIDATED FINANCIAL STATEMENTS - the Consolidated financial
statements of Cal Dive, ERT and their Subsidiaries, if any, delivered to Lender
pursuant to SECTION 8.1(J).
CONTINGENCY RESERVE - the reserve established by Lender in accordance
with the terms set forth on EXHIBIT C attached hereto if at any time Excess
Availability is less than Two Million Dollars ($2,000,000). The Contingency
Reserve shall be in addition to and not in lieu of any other reserve Lender may
establish.
CREDIT ENHANCEMENTS - LC Guaranties and Letters of Credit issued by Bank
or Lender from time to time for Borrower's account in accordance with SECTION
2.4.
CURRENT ASSETS - at any date means the amount at which all of the
current assets of a Person are classified as current assets on a balance sheet
at such date in accordance with GAAP.
CURRENT LIABILITIES - at any date means the amount at which all of the
current liabilities of a Person are classified as current liabilities on a
balance sheet at such date in accordance with GAAP.
DATED ASSETS - as defined in SECTION 2.7.
DATED LIABILITIES - as defined in SECTION 2.7.
DEFAULT - an event or condition the occurrence of which would, with the
lapse of time or the giving of notice, or both, become an Event of Default.
DEFAULT RATE - as defined in SECTION 3.1(B).
DISTRIBUTION - in respect of any corporation means and includes: (a) the
payment of any dividends or other distributions on capital stock of the
corporation (except distributions in such stock) and (b) the redemption or
acquisition of its Securities unless made contemporaneously from the net
proceeds of the sale of Securities.
DOMINION ACCOUNT - a special account of Lender established by Borrower
pursuant to this Agreement at a bank selected by Borrower, but acceptable to
Lender, and over which Lender shall have sole and exclusive access and control
for withdrawal purposes.
ELIGIBLE ACCOUNT - an Account arising in the ordinary course of
Borrower's business from the sale of goods or rendition of services which
Lender, in its credit judgment, deems to be an Eligible Account. Without
limiting the generality of the foregoing, no Account shall be an Eligible
Account if:
(a) it is an Unbilled Account; or
(b) the services giving rise to such Account require performance bonds,
except for those Accounts where the services giving rise to such Account require
Cash Deposits for Salvage Operations or have been completed and there is no
continuing obligation of Borrower; or
(c) the services giving rise to such Account require retention withheld
to the extent of such retention; or
(d) it is an Account arising out of a contract requiring acknowledgment
of assignment from the Account Debtor and Lender has notified Borrower that
obtaining such acknowledgment of assignment is necessary, unless the Account
Debtor has acknowledged such assignment in a form and substance satisfactory to
Lender; or
(e) it arises out of a sale made by or services rendered by Borrower to
(i) another Borrower, (ii) a Subsidiary of Borrower, (iii) an Affiliate of
Borrower, (iv) a Person controlled by an Affiliate of Borrower, or (v) an
officer, director, employee or agent of Borrower, a Subsidiary of Borrower or an
Affiliate of Borrower; PROVIDED, HOWEVER, for purposes of this CLAUSE (E), the
term "Affiliate" shall not include any other Person deemed to be an Affiliate
hereunder by reason of such Person's association with First Reserve; or
(f) it is due or unpaid from an Account Debtor (other than Ivory
Production Co. (if it is guaranteed by Blue Dolphin Energy Company), J. Ray
McDermott or Walter Oil & Gas Corp.) for more than ninety (90) days after the
original invoice date; or
(g) it is due or unpaid from J. Ray McDermott or Walter Oil & Gas Corp.
for more than one hundred-twenty (120) days after the original invoice date; or
(h) Accounts, or a portion thereof, unpaid from Walter Oil & Gas Corp.
for less than one hundred twenty (120) days from the original invoice date that
exceed more than Seven Hundred Fifty Thousand Dollars ($750,000) in the
aggregate; or
(i) thirty-five percent (35%) or more of the Accounts from the Account
Debtor (other than J. Ray McDermott or Walter Oil & Gas Corp.) are not deemed
Eligible Accounts hereunder; or
(j) any covenant, representation or warranty contained in this Agreement
with respect to such Account has been breached; or
(k) the Account Debtor is also Borrower's creditor or supplier, or has
disputed liability with respect to such Account, or has made any claim with
respect to any other Account due from such Account Debtor to Borrower, or the
Account otherwise is or may become subject to any right of setoff by the Account
Debtor, to the extent of any offset, dispute or claim; or
(l) the Account Debtor has commenced a voluntary case under the federal
bankruptcy laws, as now constituted or hereafter amended, or made an assignment
for the benefit of creditors, or a decree or order for relief has been entered
by a court having jurisdiction in the premises in respect of the Account Debtor
in an involuntary case under the federal bankruptcy laws, as now constituted or
hereafter amended, or any other petition or other application for relief under
the federal bankruptcy laws has been filed against the Account Debtor, or if the
Account Debtor has failed, suspended business, ceased to be Solvent, or
consented to or suffered a receiver, trustee, liquidator or custodian to be
appointed for it or for all or a significant portion of its assets or affairs;
or
(m) it arises from the rendition of services or a sale to an Account
Debtor outside the United States, unless the sale or services are to a Major
Domestic Energy Company and the invoice and payment are in U.S. Dollars, or the
sale or services are on letter of credit, guaranty or acceptance terms, in each
case acceptable to Lender; or
(n) it arises from a sale to the Account Debtor on a bill-and-hold,
guaranteed sale, sale-or-return, sale-on-approval, consignment or any other
repurchase or return basis; or
(o) the Account Debtor is the United States of America or any
department, agency or instrumentality thereof, unless Borrower assigns its right
to payment of such Account to Lender, in form and substance satisfactory to
Lender, so as to comply with the Assignment of Claims Act of l940, as amended
(3l U.S.C. Sub-Section 203 et seq.); or
(p) the Account Debtor is located in the States of New Jersey, Minnesota
or Indiana, unless Borrower has filed a Notice of Business Activities Report
with the appropriate officials in each applicable state for the then current
year; or
(q) the Account is subject to a Lien other than a Permitted Lien; or
(r) the goods giving rise to such Account have not been delivered to and
accepted by the Account Debtor or the services giving rise to such Account have
not been performed by Borrower and accepted by the Account Debtor or the Account
otherwise does not represent a final sale, except for Accounts which arise from
(i) Long Day Rate Contracts or (ii) Turnkey Contracts where the Account Debtor
has approved the basic work completed and an invoice for such work has been
issued; or
(s) the Account arises from a progress billing or an invoice for
deposit, except for Accounts which arise from (i) Long Day Rate Contracts or
(ii) Turnkey Contracts where the Account Debtor has approved the basic work
completed and an invoice for such work has been issued; or
(t) the Account arises from a sale which is an installment sale or lease
or is otherwise a sale on an extended payment basis; or
(u) the Account is evidenced by chattel paper or an instrument of any
kind, or has been reduced to judgment; or
(v) Borrower has made any agreement with the Account Debtor for any
deduction therefrom, except for discounts or allowances made in the ordinary
course of business and which discounts or allowances are disclosed to Lender; or
(w) Borrower has made an agreement with the Account Debtor to extend the
time of payment thereof, other than Accounts due from Ivory Production Co. and
guaranteed by Blue Dolphin Energy Company that are being paid in accordance with
the extended payment terms in effect on the Closing Date; or
(x) the Account arises from a retail sale of goods to a Person who is
purchasing same primarily for personal, family or household purposes; or
(y) Lender in good faith believes that collection of such Account is
insecure or that payment thereof is doubtful or will be delayed by reason of the
Account Debtor's financial condition.
In determining whether an Account is an Eligible Account, Lender may from time
to time in its credit judgment, which will be exercised in good faith, establish
credit limits for certain Account Debtors after providing Borrower with written
notice thereof. Borrower may request from time to time that Lender remove a
credit limit for an Account Debtor and Lender may or may not do so in its credit
judgment, which will be exercised in good faith.
ENVIRONMENTAL COMPLAINT - as defined in SECTION 8.1(U).
ENVIRONMENTAL LAWS - all federal, state and local laws, rules,
regulations, ordinances, programs, permits, guidances, orders and consent
decrees relating to health, safety and environmental matters, including, but not
limited to, the Resource Conservation and Recovery Act; the Comprehensive
Environmental Response, Compensation and Liability Act of 1980; the Clean Air
Act; the Toxic Substances Control Act, as amended; the Clean Water Act; the
River and Harbor Act; Water Pollution Control Act; the Marine Protection
Research and Sanctuaries Act; the Deep-Water Port Act; the Safe Drinking Water
Act; the Superfund Amendments and Reauthorization Act of 1986; the Federal
Insecticide, Fungicide and Rodenticide Act; the Mineral Lands and Leasing Act;
the Surface Mining Control and Reclamation Act; state and federal superlien and
environmental cleanup programs and laws; and U.S. Department of Transportation
regulations.
EQUIPMENT - all machinery, apparatus, equipment, fittings, furniture,
fixtures, motor vehicles, marine vessels and other tangible personal Property
(other than Inventory and Offshore Platforms) of every kind and description used
in Borrower's operations or owned by Borrower or in which Borrower has an
interest, whether now owned or hereafter acquired and wherever located, and all
parts, accessories and special tools and all increases and accessions thereto
and substitutions and replacements therefor.
EQUIPMENT BORROWING BASE - at any date of determination thereof, an
amount equal to the lesser of:
(a) the Equipment Commitment then in effect; or
(b) an amount equal to:
(i) the difference of (A) one hundred percent (100%) (or after an
Event of Default, such lesser percentage as Lender may in its discretion
determine from time to time after providing Borrower with written notice of such
reduction, which discretion shall be exercised in good faith) of the aggregate
Orderly Liquidation Value (as determined by Lender on the Closing Date) of
Equipment owned by a Borrower on the Closing Date and on the date of
determination in which Lender has a perfected first priority lien, MINUS (B) the
aggregate Amortization Amount of such Equipment;
PLUS
(ii) the difference of (A) one hundred percent (100%) (or after
an Event of Default, such lesser percentage as Lender may in its discretion
determine from time to time after providing Borrower with written notice of such
reduction, which discretion shall be exercised in good faith) of the cost to
Borrower to purchase Equipment as calculated in accordance with GAAP (exclusive
of capitalized interest) after the Closing Date, which Equipment is owned by
Borrower on the date of determination and in which Lender has a perfected first
priority Lien, MINUS (B) the aggregate Amortization Amount of such Equipment.
The Equipment Borrowing Base shall not include the Offshore Platforms, whether
or not Lender has a perfected Lien therein.
EQUIPMENT COMMITMENT - as at any date of determination thereof, an
amount equal to (a) Twenty-One Million Dollars ($21,000,000), MINUS (b) the
aggregate amount of all monthly reductions, each in an amount of Two Hundred
Eighteen Thousand Seven Hundred Fifty Dollars ($218,750), to occur on the first
day of each calendar month during the term hereof, commencing on June 1, 1995
and continuing for each month thereafter.
EQUIPMENT LOAN - the Loans to be made by Lender to Borrower pursuant to
SECTION 2.2(A).
EQUIPMENT NOTE - the Revolving Promissory Note to be executed by
Borrower in favor of Lender to evidence the Equipment Loans, which shall be in
the form of EXHIBIT B attached hereto.
ERISA - the Employee Retirement Income Security Act of 1974 and all
rules and regulations promulgated thereunder.
ERISA AFFILIATE - Borrower and each Person under common control with
Borrower or otherwise treated as a single employer with Borrower under ERISA or
IRC Section 414.
EURODOLLAR BASE RATE - with respect to a Eurodollar Loan for the
relevant Eurodollar Interest Period, a rate per annum equal to the quotient of
the following: (a) the rate at which deposits in U.S. dollars in immediately
available funds are offered by Lender or Bank to first-class banks in the London
interbank market at approximately 11:00 a.m. (London time) two (2) Business Days
prior to the first day of such Eurodollar Interest Period, in the approximate
amount of the Eurodollar Loan and having a maturity approximately equal to the
Eurodollar Interest Period, DIVIDED BY (b) the difference of one (1.00) MINUS
the Eurodollar Reserve Requirement.
EURODOLLAR INTEREST PERIOD - with respect to a Eurodollar Loan, a period
of one (1), two (2), three (3) or six (6) months commencing on a Business Day
selected by Borrowers pursuant to this Agreement. Such Eurodollar Interest
Period shall end on (but exclude) the day which corresponds numerically to such
date one (1), two (2), three (3) or six (6) months thereafter; PROVIDED,
HOWEVER, that if there is no such numerically corresponding day in such first,
second, third or sixth succeeding month, such Eurodollar Interest Period shall
end on the last Business Day of such first, second, third or sixth succeeding
month. If a Eurodollar Interest Period would otherwise end on a day which is not
a Business Day, such Eurodollar Interest Period shall end on the next succeeding
Business Day; PROVIDED, HOWEVER, that if said next succeeding Business Day falls
in a new month, such Eurodollar Interest Period shall end on the immediately
preceding Business Day.
EURODOLLAR LOAN - a Loan which bears interest at a Eurodollar Base Rate.
EURODOLLAR RESERVE REQUIREMENT - at any date of determination, that
percentage (expressed as a decimal fraction) which is in effect on such day, as
provided by the Board of Governors of the Federal Reserve System (or any
successor governmental body) applied for determining the maximum reserve
requirements (including without limitation, basic, supplemental, marginal and
emergency reserves) under Regulation D with respect to "eurocurrency
liabilities" as currently defined in Regulation D, or under any similar or
successor regulation with respect to eurocurrency liabilities or eurocurrency
funding. Each determination by Lender of the Eurodollar Reserve Requirement
shall be provided to Borrower and, in the absence of manifest error, be
conclusive and binding. Any Eurodollar Reserve Requirement shall be determined
in accordance with Lender's customary practice and applied on a consistent
basis.
EXCESS - as defined in SECTION 3.1(D).
EXCESS AVAILABILITY - As at any date of determination thereof, an amount
equal to the difference of (a) the Borrowing Base PLUS the Equipment Borrowing
Base, MINUS (b) the aggregate principle balance of Revolving Credit Loans and
Equipment Loans then outstanding.
EXISTING ENVIRONMENTAL VIOLATIONS - as defined in SECTION 7.1(S).
EVENT OF DEFAULT - as defined in SECTION 10.1.
FIRST RESERVE - collectively, First Reserve Corporation, a Delaware
corporation, and the investment funds it manages that are or become shareholders
of Cal Dive.
FIXED CHARGED RATIO - for any twelve (12) month period means the ratio
of (a) an amount equal to the sum of (i) Adjusted Net Earnings From Operations,
PLUS (ii) depreciation, amortization and other non-cash charges deducted in
arriving at Adjusted Net Earnings From Operations, PLUS (iii) Interest Expense,
to (b) an amount equal to the sum of (i) Interest Expense, PLUS (ii) the
aggregate amount of payments made on Capitalized Lease Obligations.
GAAP - with respect to any date of determination, generally accepted
accounting principles as used by the Financial Accounting Standards Board and/or
the American Institute of Certified Public Accountants consistently applied and
maintained throughout the periods indicated.
GENERAL INTANGIBLES - all general intangibles of Borrower, whether now
owned or hereafter created or acquired by Borrower, including, without
limitation, all choses in action, causes of action, corporate or other business
records, deposit accounts, inventions, designs, patents, patent applications,
trademarks, trade names, trade secrets, goodwill, copyrights, registrations,
licenses, franchises, rights to royalties, blueprints, drawings, confidential
information, catalogs, sales literature, video tapes, consulting agreements,
employment agreements, customer lists, tax refund claims, computer programs,
insurance policies, deposits with insurers, all claims under guaranties,
security interests or other security held by or granted to a Borrower to secure
payment of any of the Accounts by an Account Debtor, all rights to
indemnification and all other intangible property of every kind and nature
(other than Accounts and Cash Deposits for Salvage Operations).
GUARANTY AGREEMENT - the Guaranty Agreement which is to be executed by
ERT in favor of Lender on or about the Closing Date, pursuant to which ERT shall
guaranty the Cal Dive Obligations, in form and substance satisfactory to Lender.
HAZARDOUS DISCHARGE - as defined in SECTION 8.1(U).
HAZARDOUS SUBSTANCE - without limitation, any flammable explosives,
radon, radioactive materials, asbestos, urea formaldehyde foam insulation,
polychlorinated byphenyls, petroleum and petroleum products, methane, hazardous
materials, hazardous wastes, hazardous or toxic substances or related materials
as defined in the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Resource Conservation and Recovery Act, applicable
state or local law, or any other applicable federal and state Environmental Laws
now in force or hereafter enacted.
HYDROCARBONS - all oil, gas, hydrocarbons (including, distillate,
condensate, residue gas and liquified petroleum gas) and all other substances
that may be found in, associated with, or produced from a well, together with
all components thereof, and substances that may be executed therefrom.
INCOME FROM OPERATIONS - with respect to any fiscal period, means the
Consolidated income (or loss) from operations before provision for income taxes,
Interest Expense and other nonoperating income and nonoperating expense items
for such fiscal period of Borrower, all as reflected on the Consolidated
Financial Statements.
INDEBTEDNESS - as applied to a Person means, without duplication (a) all
items which in accordance with GAAP would be included in determining total
liabilities as shown on the liability side of a balance sheet of such Person as
at the date as of which Indebtedness is to be determined, including, without
limitation, Capitalized Lease Obligations, (b) all obligations of other Persons
which such Person has guaranteed and (c) in the case of Borrower (without
duplication), the Obligations.
INDEMNIFIED PERSONS - as defined in SECTION 11.2.
INTEREST EXPENSE - for any fiscal period, the amount equal to interest
charges paid or accrued during such fiscal period (including imputed interest on
Capitalized Lease Obligations, but excluding amortization of debt discount and
expense) on the Indebtedness, LESS interest income received during such fiscal
period.
INVENTORY - all of Borrower's inventory, whether now owned or hereafter
acquired and wherever located, including, but not limited to, all goods intended
for sale or lease by Borrower, or for display or demonstration; all work in
process; all raw materials and other materials and supplies of every nature and
description used or which might be used in connection with the manufacture,
printing, packing, shipping, advertising, selling, leasing or furnishing of such
goods or otherwise used or consumed in Borrower's business; and all documents
evidencing and General Intangibles relating to any of the foregoing.
IRC - the United States Internal Revenue Code of 1986, as amended, and
all rules and regulations promulgated thereunder.
LC GUARANTY - a guaranty executed by Lender at Borrower's request in
favor of a Person who has issued a Letter of Credit for the account of Borrower.
LAWFUL SUBSTANCES - as defined in SECTION 7.1(AA)(III).
LENDER - as defined in the preamble to this Agreement and includes all
successors and assigns of Shawmut Capital Corporation.
LETTER OF CREDIT - a standby letter of credit at any time issued by
Lender, Bank or another Person for the account of Borrower.
LIEN - any interest in Property securing an obligation owed to, or a
claim by, a Person other than the owner of the Property, whether such interest
is based on the common law, statute or contract, and including, but not limited
to, the security interest, security title or lien arising from a security
agreement, mortgage, deed of trust, preferred ship mortgage, deed to secure
debt, encumbrance, pledge, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes. The term "Lien" shall include
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
affecting Property. For the purpose of this Agreement, Borrower shall be deemed
to be the owner of any Property which it has acquired or holds subject to a
conditional sale agreement or other arrangement pursuant to which title to the
Property has been retained by or vested in some other Person.
LOAN ACCOUNT - the loan account established on the books of Lender
pursuant to SECTION_2.6.
LOAN DOCUMENTS - this Agreement, the Other Agreements and the Security
Documents.
LOANS - all loans and advances made by Lender pursuant to this
Agreement, including, without limitation, all Revolving Credit Loans, all
Equipment Loans and each payment made pursuant to a Credit Enhancement.
LONG DAY RATE CONTRACTS - contracts for services performed on a time and
materials basis for which: (a) services continue for more than one billing cycle
of Borrower, (b) the Account Debtor is willing to accept for payment an invoice
appropriate for that billing cycle, and (c) payment of such invoice is due and
owing, not being contingent on further provision of such services.
LOSSES - as defined in SECTION 11.2.
MAJOR DOMESTIC ENERGY COMPANY - a multinational energy company (or
subsidiary thereof) with substantial corporate representation in the United
States that Lender, in its sole discretion, deems to be an acceptable credit
risk.
MANAGEMENT GROUP - collectively, Gerald G. Reuhl, Owen E. Kratz and S.
James Nelson.
MAXIMUM LEGAL RATE - as defined in SECTION 3.1(C).
MMS - the Department of Interior Mineral Management Services and any
successor thereto.
MONEY BORROWED - as applied to Indebtedness, means (a) Indebtedness for
borrowed money; (b) Indebtedness, whether or not in any such case the same was
for borrowed money, (i) which is represented by notes payable or drafts accepted
that evidence extensions of credit, (ii) which constitutes obligations evidenced
by bonds, debentures, notes or similar instruments, or (iii) upon which interest
charges are customarily paid (other than accounts payable) or that was issued or
assumed as full or partial payment for Property; (c) Indebtedness that
constitutes a Capitalized Lease Obligation; and (d) Indebtedness under any
guaranty of obligations that would constitute Indebtedness for Money Borrowed
under CLAUSES (A) through (C).
NEW MORTGAGES - as defined in SECTION 4.3.
MULTIEMPLOYER PLAN - a multiemployer plan as defined in Section 3(37) of
ERISA to which any ERISA Affiliate contributes, has contributed to in the last
six years or is required to contribute to.
NEGATIVE PLEDGE AGREEMENT - an agreement executed by a Borrower and
Lender pursuant to which such Borrower agrees that for so long as any
Obligations remain outstanding, that it will not, without the prior written
consent of Lender, create or permit any Lien (other than Permitted Liens) on its
interest in the Offshore Platforms and the other oil and gas Properties
described therein, in form and substance satisfactory to Lender and its counsel.
NEW SHIP MORTGAGES - as defined in SECTION 4.2.
1989 ACT - comprehensive legislation dealing with maritime commercial
instruments and liens enacted by Congress on November 23, 1988.
OBLIGATIONS - all Loans and all other advances, debts, liabilities,
obligations, covenants and duties owing, arising, due or payable from Borrower
to Lender of any kind or nature, present or future, whether or not evidenced by
any note, guaranty or other instrument, whether arising under this Agreement or
any of the other Loan Documents or otherwise, whether direct or indirect
(including those acquired by assignment), absolute or contingent, primary or
secondary, due or to become due, now existing or hereafter arising and however
acquired. The term includes, without limitation, all interest, charges,
expenses, fees, attorneys' fees and any other sums chargeable to Borrower under
any of the Loan Documents.
OFFSHORE PLATFORMS - any structure located in the Gulf of Mexico,
together with all equipment, facilities or structures affixed thereto utilized
in connection with, or related to, drilling or work with respect to wells, or
the production, processing, treating, gathering, storing, measuring or
transportation of Hydrocarbons.
ORDERLY LIQUIDATION VALUE - for Equipment, the value which is attainable
through an orderly liquidation of such Equipment within a time frame of six (6)
to twelve (12) months, the balance being sold at public auction.
ORIGINAL DOCUMENTS - as defined in the preamble of this Agreement.
ORIGINAL TERM - as defined in SECTION 3.3.
OSHA - the Occupational Safety and Health Act and all rules and
regulations from time to time promulgated thereunder.
OTHER AGREEMENTS - any and all agreements, instruments and documents
(other than this Agreement and the Security Documents), heretofore, now or
hereafter executed by Borrower and delivered to Lender in respect to the
transactions contemplated by this Agreement.
PBGC - the Pension Benefit Guaranty Corporation.
PENSION PLAN - an employee pension benefit plan as defined in Section
3(2) of ERISA, which is maintained or contributed to by an ERISA Affiliate or
for which contributions are required from an ERISA Affiliate, and which is
subject to Title IV of ERISA.
PERMITTED LIENS - any Lien of a kind specified in CLAUSES (I) through
(X) of SECTION 8.2(H).
PERMITTED PURCHASE MONEY INDEBTEDNESS - Purchase Money Indebtedness of
Borrower incurred after the date hereof which is secured by a Purchase Money
Lien and which, when aggregated with the Consolidated principal amount of all
other such Purchase Money Indebtedness and Capitalized Lease Obligations of
Borrower at the time outstanding, does not exceed (a) Two Hundred Fifty Thousand
Dollars ($250,000) for the purchase of fixed assets other than marine vessels
and (b) One Million Dollars ($1,000,000) for the purchase of marine vessels. For
the purposes of this definition, the principal amount of any Purchase Money
Indebtedness consisting of capitalized leases shall be computed as a Capitalized
Lease Obligation.
PERSON - an individual, partnership, corporation, joint stock company,
land trust, business trust or unincorporated organization, or a government or
agency or political subdivision thereof.
PLAN - an employee benefit plan as defined in Section 3(3) of ERISA that
is maintained or contributed to or for which contributions are required by an
ERISA Affiliate.
PROHIBITED TRANSACTION - a transaction described in Section 406 of ERISA
or Section 4975 of the IRC which would subject any Plan or ERISA Affiliate to
any taxes, fines, penalties or other liabilities, directly or through any
indemnification agreements.
PROJECTIONS - Borrower's Consolidated and consolidating forecasted (a)
balance sheets, (b) profit and loss statements, and (c) cash flow statements,
all prepared on a consistent basis with Borrower's historical Consolidated
Financial Statements, together with appropriate supporting details and a
statement of underlying assumptions.
PROPERTY - any interest of Borrower in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
PURCHASE MONEY INDEBTEDNESS - means and includes (a) Indebtedness (other
than the Obligations) for the payment of all or any part of the purchase price
of any fixed assets, (b) any Indebtedness (other than the Obligations) incurred
at the time of or within ten days prior to or after the acquisition of any fixed
assets for the purpose of financing all or any part of the purchase price
thereof, and (c) any renewals, extensions or refinancings thereof, but not any
increases in the principal amounts thereof outstanding at the time.
PURCHASE MONEY LIEN - a Lien upon fixed assets which secure Purchase
Money Indebtedness, but only if such Lien shall at all times be confined solely
to the fixed assets the purchase price of which was financed through the
incurrence of the Purchase Money Indebtedness secured by such Lien.
QUALIFIED POOLING OF INTERESTS - a financial accounting method for the
combination of one or more business entities with Borrower which qualifies for
the pooling-of-interests method of accounting for business combinations under
GAAP and is so accounted for by Borrower.
REAL PROPERTY - as defined in SECTION 8.1(U).
RELEASE - as defined in SECTION 7.1(AA).
RENTALS - as at any date of determination thereof, the amount of all
payments which the lessee is required to make by the terms of any lease, but
excluding those payments for which lessee is directly or indirectly compensated
as a result of services provided.
RENEWAL TERM - as defined in SECTION 3.3.
REPORTABLE EVENT - any of the events set forth in Section 4043(b) of
ERISA and the regulations thereunder, excluding any event not subject to the
provision for 30 days notice to the PBGC under such regulations.
RESTRICTED INVESTMENT - any investment in cash or by delivery of
Property to any Person, whether by acquisition of stock, Indebtedness or other
obligation or Security, or by loan, advance or capital contribution, or
otherwise, or in any Property except the following: (a) investments in one or
more Subsidiaries of Borrower to the extent existing on the Closing Date; (b)
Property to be used in the ordinary course of business; (c) Current Assets
arising from the sale of goods and services in the ordinary course of business
of Borrower and its Subsidiaries; (d) investments in direct obligations of the
United States of America, or any agency thereof or obligations guaranteed by the
United States of America, PROVIDED, THAT, such obligations mature within five
(5) years from the date of acquisition thereof; and (e) investments pursuant to
agreements by and between Borrower and Southwest Bank of Texas, N.A.
satisfactory to Lender.
REVOLVING CREDIT COMMITMENT - as at any date of determination thereof,
an amount equal to (a) Thirty Million Dollars ($30,000,000) MINUS (b) the
aggregate principal amount of Equipment Loans outstanding at such date, MINUS
(c) the face amount of all Credit Enhancements outstanding at such
date.
REVOLVING CREDIT LOAN - a Loan made by Lender as provided in SECTION
2.1.
SCHEDULE OF ACCOUNTS - as defined in SECTION 5.2.
SECURITY - shall have the same meaning as in Section 2(1) of the
Securities Act of l933, as amended.
SECURITY DOCUMENTS - the Ship Mortgage, each New Ship Mortgage, each New
Mortgage, each Negative Pledge Agreement and all other instruments and
agreements now or at any time hereafter securing the whole or any part of the
Obligations.
SHAREHOLDERS AGREEMENT - that certain Amended and Restated Shareholders
Agreement, dated as of January 12, 1995, among Cal Dive, First Reserve, on
behalf of certain investment funds it manages, the Management Group and the
other parties thereto, which is attached hereto as EXHIBIT I.
SHIP MORTGAGE - the First Preferred Fleet Mortgage executed by Cal Dive
on August 3, 1993 pursuant to which Cal Dive granted and conveyed for the
benefit of Lender, as successor in interest by assignment to Barclays, as
security for the Obligations, Liens upon all the marine vessels owned by Cal
Dive, as amended, modified or supplemented from time to time.
SOLVENT - as to any Person, such Person (a) owns Property whose fair
salable value is greater than the amount required to pay all of such Person's
Indebtedness (including contingent debts), (b) is able to pay all of its
Indebtedness as such Indebtedness matures and (c) has capital sufficient to
carry on its business and transactions and all business and transactions in
which it is about to engage.
STATUTORY LIENS - as defined in SECTION 8.2(H).
SUBSIDIARY - any corporation of which a Person owns, directly or
indirectly through one or more intermediaries, more than fifty percent (50%) of
the Voting Stock at the time of determination; PROVIDED, HOWEVER, with respect
to Cal Dive, the term "Subsidiary" as used in this Agreement shall not include
ERT.
TERMINATION AMOUNT - at any date of determination thereof, an amount
equal to the sum of (a) the Revolving Credit Commitment, PLUS (b) the Equipment
Commitment, then in effect.
TIME CHARTER - A Time Charter Agreement (or similar agreement) pursuant
to which Cal Dive shall lease a derrick barge.
TURN KEY CONTRACTS - contracts entered into in the ordinary course of
business to perform a specific scope of work for a set price, subject at times
to additional charges resulting from changes to the agreed upon scope of work.
UNBILLED ACCOUNT - an Account arising in the ordinary course of
Borrower's business for the rendition of services that represent completed
services of Borrower not yet invoiced to the Account Debtor (except for Long Day
Rate Contracts), but which shall be invoiced within 90 days from the date such
services were completed, and which Account is otherwise an Eligible Account.
VOTING STOCK - Securities of any class or classes of a corporation the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the corporate directors (or Persons performing similar
functions).
1.2. ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP consistent with that applied
in preparation of the Consolidated Financial Statements, and all financial data
pursuant to this Agreement shall be prepared in accordance with such principles.
In the event that changes in GAAP shall be mandated by the Financial Accounting
Standards Board and/or the American Institute of Certified Public Accountants or
any similar accounting body of comparable standing, and shall be recommended by
Borrower's certified public accountants, to the extent that such changes would
modify such accounting terms or the interpretation or computation thereof as
contemplated by this Agreement at the time of execution hereof, then in such
event such changes shall be followed in defining such accounting terms only
after Lender and Borrower amend this Agreement to reflect the original intent of
such terms in light of such changes, and such terms shall continue to be applied
and interpreted without such change until such agreement.
1.3. OTHER TERMS. All other terms contained in this Agreement shall
have, when the context so indicates, the meanings provided for by the Code to
the extent the same are used or defined therein.
1.4. CERTAIN MATTERS OF CONSTRUCTION. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. The section titles, table of contents and
list of exhibits appear as a matter of convenience only and shall not affect the
interpretation of this Agreement. All references to statutes and related
regulations shall include any amendments of same and any successor statutes and
regulations. All references to any instruments or agreements, including, without
limitation, references to any of the Loan Documents, shall include any and all
modifications or amendments thereto and any and all extensions or renewals
thereof.
1.5 THE TERM "BORROWER" OR BORROWERS". All references to "Borrower" or
"Borrowers" herein shall refer to and include each Borrower separately and all
representations contained herein shall be deemed to be separately made by each
of them, and each of the covenants, agreements and obligations set forth herein
shall be deemed to be the joint and several covenants, agreements and
obligations of them. Any notice, request, consent, report or other information
or agreement delivered to Lender by any Borrower shall be deemed to be ratified
by, consented to and also delivered by the other Borrower. Each Borrower
recognizes and agrees that each covenant and agreement of "Borrower" or
"Borrowers" under this Agreement and the Other Agreements shall create a joint
and several obligation of the Borrowers, which may be enforced against
Borrowers, jointly, or against each Borrower separately. Without limiting the
terms of this Agreement and the Other Agreements, security interests granted
under this Agreement and Other Agreements in properties, interests, assets and
collateral shall extend to the properties, interests, assets and collateral of
each Borrower. Similarly, the term "Obligations" shall include, without
limitation, all obligations, liabilities and indebtedness of such corporations,
or any one of them, to Lender, whether such obligations, liabilities and
indebtedness shall be joint, several, joint and several or individual.
1.6 CAL DIVE OBLIGATIONS. Notwithstanding any other provision of the
Equipment Note or this Agreement to the contrary, it is hereby agreed that ERT
is not assuming payment of the unpaid principal balance of the Obligations which
was incurred by Cal Dive prior to the Closing Date pursuant to the Original Loan
Documents (the "CAL DIVE OBLIGATIONS"). However, the parties hereto agree and
acknowledge that the preceding sentence shall not (A) limit any contingent
liability of ERT for payment of any of the Cal Dive Obligations which arises
pursuant to the Guaranty Agreement, or (B) limit the Liens in favor of Lender
granted by ERT against the assets of ERT as a result of ERT becoming an
additional named "Borrower", which Liens shall secure payment of all Obligations
arising in connection with this Agreement, whether currently existing or
hereafter arising. For purposes of determining on or after the date hereof which
Obligations outstanding constitute Cal Dive Obligations, all payments received
by Lender on account of the Obligations shall be deemed to be applied first in
payment of the Cal Dive Obligations until such time as the Cal Dive Obligations
shall have been reduced to zero, and thereafter to the other Obligations as
hereinafter set forth.
SECTION 2. CREDIT FACILITY
Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, Lender agrees to make a total credit facility of up to Thirty Million
Dollars ($30,000,000.00) available upon Borrower's request therefor, as follows:
2.1. REVOLVING CREDIT LOANS.
(A) Subject to all of the terms and conditions of this Agreement, Lender
agrees, for so long as no Event of Default exists, to make Revolving Credit
Loans to Borrower from time to time, as requested by Borrower in accordance with
the terms of SECTION 2.3, up to a maximum principal amount at any time
outstanding equal to the Borrowing Base at such time. It is expressly understood
and agreed that Lender shall use the Borrowing Base as a maximum ceiling on
Revolving Credit Loans outstanding to Borrower at any time. If the unpaid
balance of the Revolving Credit Loans should exceed the Borrowing Base or any
other limitation set forth in this Agreement, such Revolving Credit Loans shall
nevertheless constitute Obligations that are secured by the Collateral and
entitled to all the benefits thereof; PROVIDED, HOWEVER, if such an overadvance
occurs, Borrower shall immediately repay, without premium or penalty, Revolving
Credit Loans in an amount equal to such excess, along with accrued unpaid
interest on the amount so repaid to the date of such repayment. In no event
shall Borrower be authorized to request a Revolving Credit Loan at any time that
there exists an Event of Default.
(B) Notwithstanding the foregoing provisions of SECTION 2.1(A), Lender
shall have the right to establish reserves (in addition to the Contingency
Reserve) in such amounts, and with respect to such matters, as Lender shall deem
necessary or appropriate, against the amount of Revolving Credit Loans which
Borrower may otherwise request under SECTION 2.1(A), including, without
limitation, with respect to (i) price adjustments, damages, unearned discounts,
returned products or other matters for which credit memoranda are issued in the
ordinary course of Borrower's business; (ii) other sums chargeable against
Borrower's Loan Account as Revolving Credit Loans under any section of this
Agreement; (iii) sales tax liabilities; (iv) price adjustments, damages,
returned products or other matters related to contractual obligations of
Borrower; (v) offset exposure relating to contractual obligations of Borrower;
and (vi) such other matters, events, conditions or contingencies as to which
Lender, in its credit judgment, determines reserves should be established from
time to time hereunder.
(C) The Revolving Credit Loans shall be used solely for (i) the payment
of costs, expenses and fees relating to the Loans to be made under this
Agreement, (ii) the payment of principal and interest under the Equipment Loans,
(iii) the purchase of the capital stock of Borrower, and (iv) Borrower's general
operating capital needs, to the extent not inconsistent with the provisions of
this Agreement.
2.2. EQUIPMENT LOANS.
(A) Subject to all of the terms and conditions of this Agreement, Lender
agrees, for so long as no Event of Default exists, to make Equipment Loans to
Borrower, from time to time, in accordance with the terms of SECTION 2.3, up to
a maximum principal amount which, the aggregate of, shall not exceed the
Equipment Borrowing Base at such time. It is expressly understood and agreed
that Lender shall use the Equipment Borrowing Base as a maximum ceiling on
Equipment Loans outstanding to Borrower at any time. If the unpaid balance of
the Equipment Loans should exceed the Equipment Borrowing Base or any other
limitation set forth in this Agreement, such Equipment Loans shall nevertheless
constitute Obligations that are secured by the Collateral and entitled to the
benefits thereof; PROVIDED, HOWEVER, if such an overadvance occurs, (i) a
request for a Revolving Credit Loan shall be deemed to be made by Borrower in an
amount equal to such excess PLUS accrued unpaid interest on the amount of such
excess, to repay such overadvance, provided there is sufficient availability
under the Borrowing Base for such Revolving Credit Loan or (ii) if there is
insufficient availability under the Borrowing Base for such Revolving Credit
Loan, then Borrower shall immediately repay, without premium or penalty,
Equipment Loans in an amount equal to such excess, along with accrued unpaid
interest on the amount so repaid to the date of such repayment. The Equipment
Commitment will mature simultaneously with the termination of the Revolving
Credit Commitment. In no event shall a Borrower be authorized to request an
Equipment Loan at any time there exists an Event of Default.
(B) If Borrower sells any of the Equipment, or any Offshore Platform, or
if any of the Collateral is taken by condemnation, Borrower shall pay to Lender,
unless otherwise agreed by Lender, as and when received by Borrower and as a
mandatory payment of the Loans (or, at Lender's option, such of the other
Obligations as Lender may elect), a sum equal to the proceeds received by
Borrower from such sale or condemnation.
(C) The Equipment Loans shall be used solely by Borrower for purposes
for which the proceeds of the Revolving Credit Loans are authorized to be used,
and to finance Borrower's purchase of Equipment and oil and gas Properties.
2.3. MANNER OF BORROWING REVOLVING CREDIT LOANS AND EQUIPMENT LOANS.
Borrowings under the Revolving Credit Commitment and Equipment Commitment shall
be as follows:
(A) A request for a Eurodollar Loan shall be made, or shall be deemed to
be made, if Borrower gives Lender notice of its intention to borrow in the form
of EXHIBIT A (a "BORROWING NOTICE"), in which notice Borrower shall specify (i)
the aggregate amount of such Eurodollar Loan, (ii) the requested date of such
Eurodollar Loan, (iii) the Applicable Annual Rate selected in accordance with
SECTION 3.1, and (iv) the Eurodollar Interest Period applicable thereto. If
Borrower selects a Eurodollar Loan, Borrower shall give Lender the Borrowing
Notice at least two (2) Business Days prior to the requested date of the
Eurodollar Loan.
(B) A request for a Base Rate Loan shall be made, or shall be deemed to
be made, if (i) Borrower sends by facsimile transmission to (214) 828-6531, or
such other number as Lender may designate, a request for a Base Rate Loan prior
to 12:00 p.m. Central Standard Time on the Business Day on which Borrower is
requesting such Base Rate Loan (if a request is received after such time on a
Business Day, Lender, in its sole discretion, may make the requested Base Rate
Loan on the day of such notice or on the next following Business Day); (ii)
Borrower fails to pay any interest accruing under this Agreement or the
Equipment Note on the date such interest becomes due and payable, or (iii)
Borrower fails to pay any other Obligations under this Agreement on the date
such Obligations become due and payable. The amount of Base Rate Loans advanced
according to clause (i) shall be for the amount requested. The amount of Base
Rate Loans advanced according to clauses (ii) and (iii) shall be deemed to be an
amount equal to the amount of interest that was not actually paid by Borrower or
the amount of funds actually disbursed, respectively.
(C) Borrower hereby irrevocably authorizes Lender to disburse the
proceeds of each Loan requested, or deemed to be requested, pursuant to this
SECTION 2.3 as follows: (i) the proceeds of each Loan requested under SECTIONS
2.3(A) or 2.3(B)(I) shall be disbursed by Lender in lawful money of the United
States of America in immediately available funds, in the case of the initial
borrowing, in accordance with the terms of the written disbursement letter from
Borrower, and in the case of each subsequent borrowing, by wire transfer to such
bank account as may be agreed upon by Borrower and Lender from time to time; and
(ii) the proceeds of each Revolving Credit Loan requested under SECTION
2.3(B)(II) or (III) shall be disbursed by Lender by way of direct payment of the
relevant Obligation.
2.4. LETTERS OF CREDIT; LC GUARANTIES. If requested to do so by Borrower
and subject to the terms of this Agreement and any documents executed in
connection with any Letter of Credit or LC Guaranty, Lender may attempt to cause
Bank to issue, in its good faith discretion, Letters of Credit for the account
of Borrower or execute LC Guaranties; PROVIDED, THAT, no Event of Default then
exists. The aggregate face amount of all Letters of Credit issued by Lender or
Bank and LC Guaranties outstanding at any time shall not exceed Five Million
Dollars ($5,000,000.00). No Letter of Credit issued by Lender or Bank and no LC
Guaranty shall have a term exceeding one year and shall, upon expiration, be
renewable for an additional period. Notwithstanding the foregoing, no Letter of
Credit issued by Lender or Bank and no LC Guaranty may have an expiration date
that is after the last day of the Original Term, or, if this Agreement remains
in effect after the Original Term, after the last day of any Renewal Term then
in effect. Any amounts paid by Lender under any LC Guaranty or in connection
with any Letter of Credit shall be deemed to be advances of Revolving Credit
Loans and Obligations under this Agreement.
2.5. ALL LOANS TO CONSTITUTE ONE OBLIGATION. All Loans shall constitute
one general joint and several obligation of Borrowers, and shall be secured by
Lender's security interest in and Lien upon all of the Collateral, and by all
other security interests and Liens heretofore, now or at any time or times
hereafter granted by Borrower to Lender.
2.6. LOAN ACCOUNT. Lender shall enter all Loans as debits to the Loan
Account and shall also record in the Loan Account all payments made by Borrowers
on each Loan and all proceeds of Collateral which are finally paid to Lender,
and may record therein, in accordance with customary accounting practices, all
charges and expenses properly chargeable to Borrower hereunder.
2.7 JOINT AND SEVERAL LIABILITY; RIGHTS OF CONTRIBUTION.
(A) Each Borrower states and acknowledges that: (i) pursuant to this
Agreement, Borrowers desire to utilize their borrowing potential on a
consolidated basis to the same extent possible if they were merged into a single
corporate entity; (ii) it has determined that it will benefit specifically and
materially from the advances of credit contemplated by this Agreement; (iii) it
is both a condition precedent to the obligations of Lender hereunder and a
desire of the Borrowers that each Borrower execute and deliver to Lender this
Agreement; and (iv) Borrowers have requested and bargained for the structure and
terms of and security for the advances contemplated by this Agreement.
(B) Each Borrower hereby irrevocably and unconditionally: (i) agrees
that it is jointly and severally liable to Lender for the full and prompt
payment of the Obligations and the performance by each Borrower of its
obligations hereunder in accordance with the terms hereof; (ii) agrees to fully
and promptly perform all of its obligations hereunder with respect to each
advance of credit hereunder as if such advance had been made directly to it; and
(iii) agrees as a primary obligation to indemnify Lender on demand for and
against any loss incurred by Lender as a result of any of the obligations of any
Borrower being or becoming void, voidable, unenforceable or ineffective for any
reason whatsoever, whether or not known to Lender or any Person, the amount of
such loss being the amount which Lender would otherwise have been entitled to
recover from Borrower.
(C) It is the intent of each Borrower that the indebtedness, obligations
and liability hereunder of no one of them be subject to challenge on any basis.
Accordingly, as of the date hereof, the liability of each Borrower under this
SECTION 2.7, together with all of its other liabilities to all Persons as of the
date hereof and as of any other date on which a transfer is deemed to occur by
virtue of this Agreement, calculated in amount sufficient to pay its probable
net liabilities on its existing Indebtedness as the same become absolute and
matured ("DATED LIABILITIES ") is, and is to be, less than the amount of the
aggregate of a fair valuation of its property as of such corresponding date
("DATED ASSETS"). To this end, each Borrower under this SECTION 2.7, (i) grants
to and recognizes in each other Borrower, ratably, rights of subrogation and
contribution in the amount, if any, by which the Dated Assets of such Borrower,
but for the aggregate of subrogation and contribution in its favor recognized
herein, would exceed the Dated Liabilities of such Borrower or, as the case may
be, (ii) acknowledges receipt of and recognizes its right to subrogation and
contribution ratably from the other Borrower in the amount, if any, by which the
Dated Liabilities of such Borrower, but for the aggregate of subrogation and
contribution in its favor recognized herein, would exceed the Dated Assets of
such Borrower under this SECTION 2.7. In recognizing the value of the Dated
Assets and the Dated Liabilities, it is understood that Borrowers will
recognize, to at least the same extent of their aggregate recognition of
liabilities hereunder, their rights to subrogation and contribution hereunder.
It is a material objective of this SECTION 2.7 that each Borrower recognizes
rights to subrogation and contribution rather than be deemed to be insolvent (or
in contemplation thereof) by reason of an arbitrary interpretation of its joint
and several obligations hereunder.
SECTION 3. INTEREST, FEES, TERM, REDUCTION AND REPAYMENT
3.1. INTEREST, FEES AND CHARGES.
(A) INTEREST. Outstanding principal on the Loans shall bear interest at
the option of Borrower (subject to the terms and conditions herein) at either
the Base Rate or Eurodollar Base Rate, calculated daily, at the following rates
per annum (individually called, as applicable, an "APPLICABLE ANNUAL RATE"): (i)
each Eurodollar Loan shall bear interest at a rate per annum equal to two and
one quarter percent (2.25%) above the Eurodollar Base Rate for the Eurodollar
Interest Period applicable thereto if the principal aggregate amount of Loans
outstanding is less than Ten Million Dollars ($10,000,000) on the date of the
Borrowing Notice for such Eurodollar Loan, (ii) each Eurodollar Loan shall bear
interest at a rate per annum equal to two percent (2.00%) above the Eurodollar
Base Rate for the Eurodollar Interest Period applicable thereto if the aggregate
principal amount of Loans outstanding is Ten Million Dollars ($10,000,000) or
more on the date of the Borrowing Notice for such Eurodollar Loan, and (iii) the
Base Rate Loans shall bear interest at a fluctuating rate per annum equal to
one-half of one percent (0.50%) above the Base Rate. The interest rate
applicable to Base Rate Loans shall be increased or decreased, as the case may
be, by an amount equal to any increase or decrease in the Base Rate, with such
adjustments to be effective as of the opening of business on the day that any
such change in the Base Rate becomes effective. The Base Rate in effect on the
date hereof shall be the Base Rate effective as of the opening of business on
the date hereof, but if this Agreement is executed on a day that is not a
Business Day, the Base Rate in effect on the date hereof shall be the Base Rate
effective as of the opening of business on the last Business Day immediately
preceding the date hereof. Interest on the Loans shall be calculated daily,
based on the actual days elapsed over a three hundred-sixty (360) day year.
Further, for the purpose of computing interest, all items of payment received by
Lender shall be applied by Lender (subject to final payment of all drafts and
other items received in form other than immediately available funds) against the
Obligations on the day of receipt. The determination of when a payment is
received by Lender will be made in accordance with SECTION 3.6.
(B) DEFAULT RATE OF INTEREST. Upon and after the occurrence of an Event
of Default, and during the continuation thereof, the principal amount of the
Loans and other Obligations shall bear interest, calculated daily (computed on
the actual days elapsed over a three hundred-sixty (360) day year), at two
percent (2.00%) above the Applicable Annual Rate or other applicable rate of
interest (a "DEFAULT RATE").
(C) MAXIMUM RATE OF INTEREST. Notwithstanding anything to the contrary
in this Agreement or otherwise, (i) if at any time the amount of interest
computed on the basis of an Applicable Annual Rate or a Default Rate would
exceed the amount of such interest computed upon the basis of the maximum rate
of interest permitted by applicable state or federal law in effect from time to
time hereafter (the "MAXIMUM LEGAL RATE"), the interest payable under this
Agreement shall be computed upon the basis of the Maximum Legal Rate, but any
subsequent reduction in such Applicable Annual Rate or Default Rate, as
applicable, shall not reduce such interest thereafter payable hereunder below
the amount computed on the basis of the Maximum Legal Rate until the aggregate
amount of such interest accrued and payable under this Agreement equals the
total amount of interest which would have accrued if such interest had been at
all times computed solely on the basis of an Applicable Annual Rate or Default
Rate, as applicable; and (ii) unless preempted by federal law, an Applicable
Annual Rate or Default Rate, as applicable, from time to time in effect
hereunder may not exceed the "indicated ceiling rate" from time to time in
effect under Tex. Rev. Civ. Stat. Ann. art 5069-1.04(c) (Vernon 1987). If the
applicable state or federal law is amended in the future to allow a greater rate
of interest to be charged under this Agreement than is presently allowed by
applicable state or federal law, then the limitation of interest hereunder shall
be increased to the maximum rate of interest allowed by applicable state or
federal law as amended, which increase shall be effective hereunder on the
effective date of such amendment, and all interest charges owing to Lender by
reason thereof shall be payable upon demand.
(D) EXCESS INTEREST. No agreements, conditions, provisions or
stipulations contained in this Agreement or any other instrument, document or
agreement between Borrower and Lender or default of Borrower, or the exercise by
Lender of the right to accelerate the payment of the maturity of principal and
interest, or to exercise any option whatsoever contained in this Agreement or
any other Loan Document, or the arising of any contingency whatsoever, shall
entitle Lender to contract for, charge, or receive, in any event, interest
exceeding the Maximum Legal Rate. In no event shall Borrower be obligated to pay
interest exceeding such Maximum Legal Rate and all agreements, conditions or
stipulations, if any, which may in any event or contingency whatsoever operate
to bind, obligate or compel Borrower to pay a rate of interest exceeding the
Maximum Legal Rate, shall be without binding force or effect, at law or in
equity, to the extent only of the excess of interest over such Maximum Legal
Rate. In the event any interest is contracted for, charged or received in excess
of the Maximum Legal Rate ("EXCESS"), Borrower acknowledges and stipulates that
any such contract, charge, or receipt shall be the result of an accident and
bona fide error, and that any Excess received by Lender shall be applied, first,
to reduce the principal then unpaid hereunder; second, to reduce the other
Obligations; and third, returned to Borrower, it being the intention of the
parties hereto not to enter at any time into a usurious or otherwise illegal
relationship. Borrower recognizes that, with fluctuations in the Base Rate and
the Maximum Legal Rate, such a result could inadvertently occur. By the
execution of this Agreement, Borrower covenants that (i) the credit or return of
any Excess shall constitute the acceptance by Borrower of such Excess, and (ii)
Borrower shall not seek or pursue any other remedy, legal or equitable, against
Lender, based in whole or in part upon contracting for, charging or receiving of
any interest in excess of the maximum authorized by applicable law. For the
purpose of determining whether or not any Excess has been contracted for,
charged or received by Lender, all interest at any time contracted for, charged
or received by Lender in connection with this Agreement shall be amortized,
prorated, allocated and spread in equal parts during the entire term of this
Agreement.
(E) INCORPORATION BY THIS REFERENCE. The provisions of SECTION 3.1(D)
shall be deemed to be incorporated into every document or communication relating
to the Obligations which sets forth or prescribes any account, right or claim or
alleged account, right or claim of Lender with respect to Borrower (or any other
obligor in respect of Obligations), whether or not any provision of this SECTION
3.1 is referred to therein. All such documents and communications and all
figures set forth therein shall, for the sole purpose of computing the extent of
the Obligations and obligations of the Borrowers (or other obligor) asserted by
Lender thereunder, be automatically re-computed by any Borrower or obligor, and
by any court considering the same, to give effect to the adjustments or credits
required by SECTION 3.1(D).
(F) UNUSED COMMITMENT FEE. From the date hereof, Borrower agrees to pay
to Lender an annual unused commitment fee of Ten Thousand Dollars ($10,000.00).
Such unused commitment fee shall be payable (i) on the Closing Date, and (ii) on
each anniversary date of the Closing Date during the term of this Agreement.
(G) CAPITAL ADEQUACY CHARGE. In the event that Lender shall have
determined in good faith that the adoption of any law, rule or regulation
regarding capital adequacy, or any change therein or in the interpretation or
application thereof or compliance by Lender with any request or directive
regarding capital adequacy (whether or not having the force of law) from any
central bank or governmental authority, does or shall have the effect of
reducing the rate of return on Lender's capital as a consequence of its
obligations hereunder to a level below that which Lender could have achieved but
for such adoption, change or compliance (taking into consideration Lender's
policies with respect to capital adequacy) by an amount deemed by Lender, in its
sole discretion, to be material, then from time to time, after submission by
Lender to Borrower of a certificate certifying the amount by which such rate of
return is actually reduced with respect to this transaction, together with the
calculation and a written demand therefor, Borrower shall promptly pay to Lender
such additional amount or amounts as will compensate Lender for such reduction;
PROVIDED, THAT, Lender's other debtors are required to reimburse Lender for the
same type of reduction. The certificate of Lender claiming entitlement to
payment as set forth above shall be conclusive in the absence of manifest error.
Such certificate shall set forth the nature of the occurrence giving rise to
such payment, the additional amount or amounts to be paid to Lender, and the
method by which such amounts were determined. In determining such amount, Lender
may use any reasonable averaging and attribution method, so long as it
accurately reflects the reduction. Lender agrees to provide Borrower such
additional information with respect thereto upon request.
(H) LETTER OF CREDIT; LC GUARANTY FEES. As additional consideration for
Lender's issuing its, or causing Bank to issue its Letters of Credit for
Borrower's account or for issuing its LC Guaranties at Borrower's request
pursuant to SECTION 2.4, Borrower agrees to pay to Lender, in addition to
Lender's costs and expenses incurred in issuing such Letters of Credit and LC
Guaranties, fees equal to two percent (2.00%) per annum of the face amount of
each Letter of Credit and LC Guaranty, which fee shall be deemed fully earned
upon issuance of each such Letter of Credit or LC Guaranty, and shall be due and
payable in equal monthly installments beginning on the first Business Day of the
month following the date of issuance of such Letter of Credit or LC Guaranty and
continuing on the first Business Day of each month thereafter during the term
thereof. No fee payable by Borrower to Lender under this SECTION 3.2(H) shall be
subject to rebate or proration upon the termination of this Agreement for any
reason.
3.2. ADDITIONAL PROVISIONS REGARDING EURODOLLAR LOANS.
(A) Borrower may select a Eurodollar Base Rate with respect to all or
any portion of the Loans as provided in this SECTION 3.2; PROVIDED, HOWEVER,
that (i) each Eurodollar Loan shall be in a principal amount of not less than
One Million Dollars ($1,000,000) (and, if greater than One Million Dollars
($1,000,000), in integral multiples of One Hundred Thousand Dollars ($100,000)),
(ii) no more than five (5) Eurodollar Interest Periods may be in existence at
any one time, and (iii) Borrower may not select a Eurodollar Base Rate for a
Loan if there exists a Default or Event of Default. Borrower shall select
Eurodollar Interest Periods with respect to Eurodollar Loans so that no
Eurodollar Interest Period expires after the end of the Original Term, or if
extended pursuant to SECTION 3.3, any Renewal Term. With respect to a Eurodollar
Loan, the Borrowing Notice shall be delivered to Lender not later than two (2)
Business Days before the proposed borrowing date referenced therein. An
outstanding Base Rate Loan may be converted to a Eurodollar Loan at any time
subject to the provisions of this SECTION_3.2.
(B) Each Eurodollar Loan shall bear interest from and including the
first day of the Eurodollar Interest Period applicable thereto (but not
including the last day of such Eurodollar Interest Period) at the interest rate
determined as applicable to such Eurodollar Loan, but interest on such
Eurodollar Loan shall be payable as provided in SECTION 3.6. If at the end of an
Eurodollar Interest Period for an outstanding Eurodollar Loan, Borrower has
failed to deliver to Lender a new Borrowing Notice with respect to such
Eurodollar Loan or to pay such Eurodollar Loan, then such Eurodollar Loan shall
be converted to a Base Rate Loan on and after the last day of such Eurodollar
Interest Period and shall remain a Base Rate Loan until paid or until the
effective date of a new Borrowing Notice with respect thereto.
(C) If Lender determines that maintenance of any of its Eurodollar Loans
would violate any applicable law, rule, regulation or directive, whether or not
having the force of law, Lender shall suspend the availability of Eurodollar
Loans and require any Eurodollar Loans outstanding to be repaid; or if Lender
determines that (i) deposits of a type or maturity appropriate to match fund
Eurodollar Loans are not available, or (ii) the Eurodollar Base Rate does not
accurately reflect the cost of making a Eurodollar Loan, then Lender shall
promptly provide notice to Borrower of its decision to suspend Borrower's
ability to make Eurodollar Loans and/or require Borrower to repay all Eurodollar
Loans and shall suspend the availability of Eurodollar Loans after the date of
any such determination.
(D) If any payment of a Eurodollar Loan occurs on a date which is not
the last day of the applicable Eurodollar Interest Period, whether because of
acceleration, prepayment or otherwise, or a Eurodollar Loan is not made on the
date specified by Borrower because Borrower has not satisfied the conditions
precedent to such Eurodollar Loan contained in this Agreement or a Default or
Event of Default has occurred and is continuing, Borrower will indemnify Lender
for any loss or cost incurred by it resulting therefrom, including without
limitation any loss or cost in liquidating or employing deposits required to
fund or maintain the Eurodollar Loan.
(E) Lender shall deliver a written statement as to the amount due, if
any, under SECTIONS 3.2(C) or (D). Such written statement shall set forth in
reasonable detail the calculations upon which Lender determined such amount and
shall be final, conclusive and binding on Borrower in the absence of manifest
error. Determination of amounts payable under such Sections in connection with a
Eurodollar Loan shall be calculated as though Lender funded its Eurodollar Loan
through the purchase of a deposit of the type and maturity corresponding to the
deposit used as a reference in determining the Eurodollar Base Rate applicable
to such Loan whether in fact that is the case or not. Unless otherwise provided
herein, the amount specified in the written statement shall be payable on demand
after receipt by Borrower of the written statement.
3.3. TERM OF AGREEMENT. Subject to Lender's right to cease making Loans
to Borrower at any time upon or after the occurrence of an Event of Default,
this Agreement shall be in effect for (a) a period of five (5) years from the
date hereof, through and including May 22, 2000 (the " ORIGINAL TERM"), and (b)
an additional one year period, through and including May 22, 2001 unless
terminated by either Lender or Borrower by giving written notice of such
termination to the other party no less than ninety (90) days prior to the end of
the Original Term (the "RENEWAL TERM"). Upon written request by Borrower, Lender
may, in its sole and absolute discretion, renew this Agreement for any number of
successive one year periods thereafter (each such successive one year period, a
"Renewal Term"), but Lender shall have no obligation to do so. Notwithstanding
anything contained herein to the contrary, Lender may terminate this Agreement
without notice upon or after the occurrence of an Event of Default.
3.4. EARLY TERMINATION BY BORROWER.
(A) Borrower may prepay the Loans at any time during the term of this
Agreement, in whole or in part, without premium, penalty or liquidated damages.
However, if Borrower chooses to terminate the Revolving Credit Commitment, the
Equipment Commitment and this Agreement (which all must terminate
simultaneously) in its entirety, Borrower shall give Lender at least ninety (90)
days prior written notice thereof if such termination occurs during the first
twelve-month period of the Original Term, and at least six (6) months prior
written notice thereof if such termination occurs during any other time, and, on
the designated termination date, all of the Obligations shall become due and
payable, in immediately available funds, and all Credit Enhancements issued by
Lender or Bank shall have expired or otherwise been terminated.
(B) At the effective date of any termination by Borrower under SECTION
3.4(A) of the entire Revolving Credit Commitment, the Equipment Commitment and
this Agreement, Borrower shall pay to Lender (in addition to the then
outstanding principal, accrued interest and other charges owing under the terms
of this Agreement and any of the other Loan Documents, as liquidated damages for
the loss of the bargain and not as a penalty, an amount equal to 1.50% of the
Termination Amount if such termination occurs during the first twelve-month
period of the Original Term (May 23, 1995 through May 22, 1996). If termination
occurs at any other time during the Original Term, during any Renewal Term, or
within one hundred-eighty (180) days from the date Lender submits a certificate
to Borrower certifying a reduction in Lender's rate of return pursuant to
SECTION 3.1(G), no liquidated damages shall be payable.
3.5 EFFECT OF TERMINATION. All of the Obligations shall be forthwith due
and payable upon any termination of this Agreement in accordance with SECTION
3.4. Except as otherwise expressly provided for in this Agreement or the other
Loan Documents, no termination or cancellation (regardless of cause or
procedure) of this Agreement or any of the other Loan Documents shall in any way
affect or impair the rights, powers or privileges of Lender or the obligations,
duties or liabilities of Borrower or Lender in any way relating to (A) any
transaction or event occurring prior to such termination or cancellation or (B)
any of the undertakings, agreements, covenants, warranties or representations of
Borrower contained in this Agreement or any of the other Loan Documents. All
such undertakings, agreements, covenants, warranties and representations of
Borrower shall survive such termination or cancellation and Lender shall retain
its Liens in the Collateral and all of its rights and remedies under this
Agreement and the other Loan Documents notwithstanding such termination or
cancellation until all of the Obligations known existing, threatened or claimed
which can be given a monetary value have been paid in full, in immediately
available funds.
3.6. PAYMENTS. Principal and interest on the Equipment Loans shall be
payable as provided in the Equipment Note. Except where evidenced by notes or
other instruments issued or made by Borrower to Lender specifically containing
payment provisions which are in conflict with this SECTION 3.6 (in which event
the conflicting provisions of said notes or other instruments shall govern and
control), the Obligations shall be payable as follows:
(A) principal payable on account of Revolving Credit Loans made by
Lender to Borrower pursuant to SECTION 2.1 of this Agreement shall be payable by
Borrower to Lender immediately upon the earliest of (i) the receipt by Lender or
Borrower of any proceeds of any of the Collateral, to the extent of said
proceeds, (ii) the occurrence of an Event of Default in consequence of which
Lender elects to accelerate the maturity and payment of such Loans, or (iii)
termination of this Agreement.
(B) interest accrued on the Revolving Credit Loans shall be due on the
earliest of (i) the first day of each month (for the immediately preceding
month), computed through the last calendar day of the preceding month, (ii) the
occurrence of an Event of Default in consequence of which Lender elects to
accelerate the maturity and payment of the Obligations, or (iii) termination of
this Agreement.
(C) reasonable and itemized costs, fees and expenses payable pursuant to
this Agreement shall be promptly payable by Borrower to Lender or to any other
Person designated by Lender in writing.
(D) the balance of the Obligations requiring the payment of money, if
any, shall be payable by Borrower to Lender as and when provided in this
Agreement, the Other Agreements or the Security Documents, or, if not otherwise
provided, then on demand.
Borrower hereby irrevocably authorizes Lender, in Lender's good faith
discretion, to advance to Borrower and to charge to the Loan Account as a
Revolving Credit Loan, sums sufficient to pay all amounts due and payable under
SECTIONS 3.6(B), (C) and (D) above and under the Equipment Note, whether or not
any such advance would cause the outstanding Revolving Credit Loans to exceed
the Borrowing Base.
3.7. APPLICATION OF PAYMENTS AND COLLECTIONS. Except as otherwise
provided in this SECTION 3.7, Borrower irrevocably waives the right to direct
the application of any and all payments and collections at any time or times
hereafter received by Lender from or on behalf of Borrower, and Borrower does
hereby irrevocably agree that Lender shall have the continuing exclusive right
to apply and reapply any and all such payments and collections received at any
time or times hereafter by Lender or its agent against the Obligations, in such
manner as Lender may deem advisable, notwithstanding any entry by Lender upon
any of its books and records. If as the result of collections of Accounts as
authorized by SECTION 5.2 a credit balance exists in the Loan Account with
respect to the Revolving Credit Commitment, such credit balance shall not accrue
interest in favor of Borrower, but shall be returned to Borrower within one (1)
Business Day for so long as no Default or Event of Default exists. In no event
shall such credit balance be applied or be deemed to have been applied as a
payment of the Equipment Loans unless so requested by Borrower, but Lender may
offset such credit balance against the Obligations upon or after the occurrence
of an Event of Default. Payments and collections received by Lender from the
Dominion Account or otherwise in Chicago, Illinois (A) before 2:00 p.m. Central
Standard Time on a Business Day shall be deemed received on such Business Day,
and (B) after 2:00 p.m. Central Standard Time on a Business Day shall be deemed
received on the next succeeding Business Day, in each case for purposes of
determining the amount of Revolving Credit Loans and Equipment Loans available
for borrowing hereunder and for purposes of computing interest on the Loans
(subject in each case to final payment of all items and collections received in
form other than immediately available funds). For so long as no Event of Default
has occurred, all payments and collections deposited into the Dominion Account
shall be transferred to a bank account specified by Borrower, and upon the
occurrence of an Event of Default, Lender may, in its sole discretion, direct
all such payments and collections to be transferred to a bank account specified
by Lender. Borrower hereby agrees that it shall not (on a Consolidated basis)
maintain more than One Million Dollars ($1,000,000) in its bank operating
account.
3.8. STATEMENTS OF ACCOUNT. Lender will account to Borrower monthly with
a statement of Loans, charges and payments made pursuant to this Agreement, and
such account rendered by Lender, absent manifest error, shall be deemed final,
binding and conclusive upon Borrower unless Lender is notified by Borrower in
writing to the contrary within seventy-five (75) days after the date each
account is mailed to Borrower. Such notice shall only be deemed an objection to
those items specifically objected to therein.
SECTION 4. COLLATERAL: GENERAL TERMS
4.1. SECURITY INTEREST IN COLLATERAL. To secure the prompt payment and
performance to Lender of the Obligations, Borrower hereby grants to Lender a
continuing security interest in and Lien upon all the following Property and
interests in Property of Borrower, whether now owned or existing or hereafter
created, acquired or arising and wheresoever located:
(A) Accounts;
(B) Inventory;
(C) Equipment (other than Equipment leased by Borrower);
(D) General Intangibles;
(E) all monies and other Property of any kind, now or at any time or
times hereafter, in the possession or under the control of Lender or a bailee of
Lender;
(F) all accessions to, substitutions for and all replacements, products
and cash and non-cash proceeds of CLAUSES (A), (B), (C), (D) and (E) above,
including, without limitation, proceeds of and unearned premiums with respect to
insurance policies insuring any of the Collateral; ----------- --- --- --- ---
and
(G) all books and records (including, without limitation, customer
lists, credit files, computer programs, print-outs, and other computer materials
and records) of Borrower pertaining to any of CLAUSES (A), (B), (C), (D), (E) or
(F) above.
The Collateral shall not include the monies held at Southwest Bank of Texas,
N.A. for the benefit of the Management Group and certain other employees of Cal
Dive pursuant to that certain Collateral Security Agreement, dated as of January
12, 1995 among Cal Dive, Southwest Bank of Texas, N.A., the Management Group and
the other parties named therein.
The security interests in the Collateral granted to Lender by Cal Dive are given
in renewal, extension and modification of the security interests previously
granted to Lender by Cal Dive in the Original Loan Documents; such prior
security interests are not extinguished hereby; and the making, perfection and
priority of such prior security interests shall continue in full force and
effect.
4.2. LIEN ON MARINE VESSELS. The due and punctual payment and
performance of the Obligations shall be secured by the Lien created by the Ship
Mortgage upon all marine vessels owned by Cal Dive described therein. Except as
otherwise permitted herein, if Borrower shall acquire at any time or times
hereafter any interest in other marine vessels, Borrower hereby agrees to
promptly execute and deliver to Lender, as additional security and Collateral
for the Obligations, Ship Mortgages or other collateral assignments satisfactory
in form and substance to Lender and its counsel (herein collectively referred to
as "NEW SHIP MORTGAGES") covering such marine vessels. The Ship Mortgage and
each New Ship Mortgage shall be duly recorded in each port where such recording
is required to constitute a valid Lien on the marine vessels. Borrower shall
deliver to Lender such other documents as Lender and its counsel may reasonably
request relating to the Property subject to the Ship Mortgage and any New Ship
Mortgages.
4.3. LIEN ON OIL AND GAS PROPERTIES. Upon the request of Lender, the due
and punctual payment and performance of the Obligations shall also be secured by
a Lien upon any interest of Borrower in the Offshore Platforms and all other oil
and gas Properties of Borrower. Borrower agrees that upon the request of Lender
such Borrower shall promptly execute and deliver to Lender, as additional
security and Collateral for the Obligations, deeds of trust, security deeds,
mortgages or other collateral assignments satisfactory in form and substance to
Lender and its counsel (herein collectively referred to as "NEW MORTGAGES")
covering such interests in the Offshore Platforms and other oil and gas
Properties. Each New Mortgage shall be duly recorded in each office where such
recording is required to constitute a valid Lien on Borrower's interest in the
Offshore Platforms and other oil and gas Properties covered thereby. Borrower
further agrees that until such time as Lender requests that a New Mortgage be
executed, such Borrower shall promptly execute and deliver to Lender a Negative
Pledge Agreement covering such Borrower's interest in the Offshore Platforms and
other oil and gas Properties. Each Negative Pledge Agreement shall be duly
recorded in each office where a New Mortgage covering such interest in the
Offshore Platforms and other oil and gas Properties would be required to be
filed. Upon request, Borrower shall deliver to Lender agreements, documents,
opinions, certificates and such other information as Lender and its legal
counsel may reasonably request, relating to Borrower's interest in the Offshore
Platforms and other oil and gas Properties subject to any Negative Pledge
Agreement or any New Mortgage.
4.4. REPRESENTATIONS, WARRANTIES AND COVENANTS. To induce Lender to
enter into this Agreement, Borrower represents, warrants, and covenants to
Lender:
(A) Subject to the statutory right of the MMS to approve the
acquisition of an Offshore Platform and related oil and gas Properties and the
provisions of the Buy-Sell Agreements, the Collateral is now and, so long as any
of the Obligations are outstanding, will continue to be owned solely by
Borrower, and no other Person has or will have any right, title, interest,
claim, or Lien therein, thereon or thereto other than a Permitted Lien.
(B) Except for Permitted Liens or as specifically consented to in
writing by Lender, the Liens granted to Lender shall be first and prior on the
Collateral and as to the Accounts and proceeds, including insurance proceeds,
resulting from the sale, disposition, or loss thereof. No further action need be
taken to perfect the Liens granted to Lender, other than the filing of
continuation statements under the Code or other applicable law, continued
possession by Lender of that portion of the Collateral constituting instruments
or documents, the recording of the Ship Mortgage and each New Ship Mortgage
under the 1989 Act, and the recording of each New Mortgage with the applicable
filing offices.
(C) All goods evidenced by the Collateral constituting chattel
paper, documents or instruments, the possession of which has been given to
Lender, are owned by Borrower and the same are free and clear of any prior Lien,
except for Statutory Liens contested by Borrower as required by SECTION 8.2(H).
Borrower further warrants and guarantees the value, quantities, adequate
condition, grades and qualities of the goods and services described therein.
Borrower shall pay and discharge when due all taxes, levies, and other charges
upon said Collateral and upon the goods evidenced by any documents constituting
Collateral, except and to the extent only that such taxes, levies and other
charges are being actively contested in good faith and by appropriate lawful
proceedings, and Borrower has established adequate reserves therefor, which are
properly reflected on the Consolidated Financial Statements, and the nonpayment
of such taxes, levies and charges does not result in a lien upon any Collateral
other than a Permitted Lien. Borrower shall defend Lender against and save it
harmless from all claims of any Person with respect to the Collateral. This
indemnity shall include reasonable attorneys' fees and legal expenses.
4.5. LIEN PERFECTION. Borrower agrees to execute the UCC-1 financing
statements provided for by the Code or otherwise together with any and all other
instruments, assignments or documents and shall take such other action as may be
required to perfect or to continue the perfection of Lender's security interest
in the Collateral. Unless prohibited by applicable law, Borrower hereby
authorizes Lender to execute and file any such financing statement on Borrower's
behalf. The parties agree that a carbon, photographic or other reproduction of
this Agreement shall be sufficient as a financing statement and may be filed in
any appropriate office in lieu thereof.
4.6. REAL PROPERTY LIEN DOCUMENTATION. Borrower agrees to execute for
Lender's benefit the leasehold mortgages, deeds of trust or other documents
evidencing a collateral assignment of Borrower's interest in certain real
Property owned or leased by Borrower and any additional real Property owned or
leased by Borrower as Lender may request. Such documents shall be recorded, at
the expense of Borrower, with such filing offices as may be required to evidence
Lender's Lien upon the real Property owned or leased or hereafter acquired by
Borrower.
4.7. LOCATION OF COLLATERAL. All Collateral, other than Inventory in
transit, motor vehicles, marine vessels and diving equipment, will at all times
be kept by Borrower at one or more of the business locations set forth in
EXHIBIT D attached hereto and shall not, without the prior written approval of
Lender, be moved therefrom except, prior to an Event of Default, for (A) sales
of Inventory and the providing of services in the ordinary course of business;
(B) the storage of Inventory at locations within the continental United States
other than those shown on EXHIBIT D attached hereto if (i) Borrower gives Lender
written notice of the new storage location at least sixty (60) days prior to
storing Inventory at such location, (ii) except for Statutory Liens contested by
Borrower as required by SECTION 8.2(H), Lender's security interest in such
Inventory is and continues to be a duly perfected, first priority Lien thereon,
(iii) neither Borrower's nor Lender's right of entry upon the premises where
such Inventory is stored, or its right to remove the Inventory therefrom, is in
any way restricted, (iv) the owner of such premises agrees with Lender not to
assert any landlord's, bailee's or other Lien in respect of the Inventory for
unpaid rent or storage charges, and (v) all negotiable documents and receipts in
respect of any Collateral maintained at such premises are promptly delivered to
Lender; (C) temporary transfers (for period not to exceed three months in any
event) of Equipment from a location set forth on EXHIBIT D attached hereto to
another location if done for the limited purpose of repairing, refurbishing or
overhauling such Equipment in the ordinary course of Borrower's business; and
(D) removals in connection with dispositions of Equipment that are authorized by
SECTION 6.4.
4.8. INSURANCE OF COLLATERAL. Borrower agrees to maintain and pay for
insurance upon all Collateral (other than Offshore Platforms) wherever located,
in storage or in transit, including goods evidenced by documents, covering
casualty, hazard, public liability and such other risks and in such amounts and
with insurance companies acceptable to Lender. Borrower shall deliver to Lender
certificates regarding such insurance and the originals of such policies when
available, with satisfactory endorsements naming Lender as loss payee or
co-insured and as mortgagee pursuant to a standard mortgagee clause. Each policy
of insurance or endorsement shall contain a clause requiring the insurer to give
not less than thirty (30) days prior written notice to Lender in the event of
cancellation of the policy for any reason whatsoever and a clause that the
interest of Lender shall not be impaired or invalidated by any act or neglect of
Borrower or owner of the Property nor by the occupation of the premises for
purposes more hazardous than are permitted by said policy. If Borrower fails to
provide and pay for such insurance, Lender may, at Borrower's expense, procure
the same, but shall not be required to do so. Borrower agrees to deliver to
Lender, promptly as rendered, true copies of all reports made in any reporting
forms to insurance companies. Borrower will maintain, with financially sound and
reputable insurers, insurance with respect to its Properties and business
against such casualties and contingencies of such type (including public
liability, product liability, larceny, embezzlement, or other criminal
misappropriation insurance) and in such amounts as is customary in the business
or as otherwise required by Lender.
4.9. PROTECTION OF COLLATERAL. All insurance expenses and all expenses
of protecting, storing, warehousing, insuring, handling, maintaining and
shipping the Collateral, any and all excise, property, sales, and use taxes
imposed by any state, federal, or local authority on any of the Collateral or in
respect of the sale thereof shall be borne and paid by Borrower. If Borrower
fails to promptly pay any portion thereof when due or is not actively contesting
such taxes in good faith and by appropriate proceedings and has not established
adequate reserves, which are properly reflected on the Consolidated Financial
Statements, Lender may, at its option, but shall not be required to, pay the
same and charge the Loan Account therefor. Borrower agrees to reimburse Lender
promptly therefor with interest accruing thereon daily at the Applicable Annual
Rate for Base Rate Loans. All sums so paid or incurred by Lender for any of the
foregoing and all costs and expenses (including reasonable attorneys' fees,
legal expenses, and court costs) which Lender may incur in enforcing or
protecting its Lien on or rights and interest in the Collateral or any of its
rights or remedies under any Loan Document or in respect of any of the
transactions to be had hereunto, together with interest at the Default Rate
applicable to Base Rate Loans, shall be considered Obligations hereunder secured
by all Collateral. Lender shall not be liable or responsible in any way for the
safekeeping of any of the Collateral or for any loss or damage thereto (except
for reasonable care in the custody thereof while any Collateral is in Lender's
actual possession) or for any diminution in the value thereof, or for any act or
default of any warehouseman, carrier, forwarding agency, or other person
whomsoever, but the same shall be at Borrower's sole risk.
SECTION 5. PROVISIONS RELATING TO ACCOUNTS
5.1. REPRESENTATIONS, WARRANTIES AND COVENANTS. With respect to all
Accounts, Borrower represents and warrants to Lender that Lender may rely, in
determining which Accounts are Eligible Accounts, on all statements and
representations made by Borrower with respect to any Account or Accounts, and,
unless otherwise indicated in writing to Lender, that with respect to each
Account:
(A) it is genuine and in all respects what it purports to be,
and it is not evidenced by a judgment;
(B) it arises out of a completed, bona fide sale and delivery of
goods or rendition of services by Borrower in the ordinary course of its
business and in accordance with the terms and conditions of all purchase orders,
contracts or other documents relating thereto and forming a part of the contract
between Borrower and the Account Debtor;
(C) except for the long-term Accounts due from Ivory Production
Co. and guaranteed by Blue Dolphin Energy Corporation outstanding as of the
Closing Date, it has been generated in compliance with Borrower's normal credit
policies as historically in effect (or as modified from time to time on prior
written notice to Lender) or on such other reasonable terms disclosed in writing
to Lender in advance of the creation of such Account, and such terms are
expressly set forth on the face of the invoice covering such sale or rendition
of services;
(D) it is for a liquidated amount maturing as stated in the
duplicate invoice covering such sale or rendition of services, a copy of which
has been furnished or is available to Lender;
(E) Borrower has made no agreement with any Account Debtor
thereunder for any deduction therefrom, except discounts or allowances which are
granted by Borrower in the ordinary course of its business and which are
disclosed to Lender;
(F) to the best of Borrower's knowledge, there are no facts,
events or occurrences which have not been disclosed to Lender which in any way
impair the validity or enforceability thereof or tend to reduce the amount
payable thereunder from the face amount of the invoice and statements delivered
to Lender with respect thereto;
(G) to the best of Borrower's knowledge, the Account Debtor
thereunder (i) is Solvent and (ii) had the capacity to contract at the time any
contract or other document giving rise to the Account was executed; and
(H) Borrower has no knowledge of any fact or circumstance which
would impair the validity or collectability of the Account, and to the best of
Borrower's knowledge there are no proceedings or actions which are threatened or
pending against any Account Debtor thereunder which might result in any material
adverse change in such Account Debtor's financial condition or the
collectability of such Account.
5.2. ASSIGNMENTS, RECORDS AND SCHEDULES OF ACCOUNTS. If so requested by
Lender, Borrower shall execute and deliver to Lender formal written assignments
of all of its Accounts on a monthly or more frequent basis, which shall include
all Accounts that have been created since the date of the last assignment,
together with copies of invoices or invoice registers related thereto. Borrower
shall keep accurate and complete records of its Accounts and all payments and
collections thereon and shall submit to Lender on a monthly basis, unless
requested on a more frequent basis by Lender, a sales and collections report for
the preceding month, in form satisfactory to Lender. On or before the last day
of each month from and after the date hereof, Borrower shall deliver to Lender,
in form satisfactory to Lender, a detailed listing of all Unbilled Accounts
existing as of the last day of the preceding month, a detailed aged trial
balance of all Accounts existing as of the last day of the preceding month,
specifying the names, face value, dates of invoices and due dates for each
Account Debtor obligated on an Account so listed and a listing of all disputed
amounts due and owing (a "SCHEDULE OF ACCOUNTS"), and upon Lender's request
therefor, the reason for any disputed amounts, all claims related thereto and
the amount in controversy, and addresses, copies of proof of delivery and the
original copy of all documents, including, without limitation, repayment
histories and present status reports relating to the Accounts so scheduled, and
such other matters and information relating to the status of then existing
Accounts as Lender shall reasonably request.
5.3. ADMINISTRATION OF ACCOUNTS.
(A) Borrower shall report discounts, allowances or credits
granted by Borrower that are not shown on the face of the invoice for the
Account involved to Lender at the time of its submission to Lender of the next
Schedule of Accounts as provided in SECTION 5.2 or more frequently upon the
request of Lender. Upon and after the occurrence of an Event of Default, Lender
shall have the right to settle or adjust all disputes and claims directly with
the Account Debtor and to compromise the amount or extend the time for payment
of the Accounts upon such terms and conditions as Lender may deem advisable, and
to charge the deficiencies, costs and expenses thereof, including reasonable
attorney's fees, to Borrower.
(B) If an Account includes a charge for any tax payable to any
governmental taxing authority, Lender is authorized, in its sole discretion, to
pay the amount thereof to the proper taxing authority for the account of
Borrower and to charge the Loan Account therefor. Borrower shall notify Lender
if any Account includes any tax due to any governmental taxing authority and, in
the absence of such notice, Lender shall have the right to retain the full
proceeds of the Account and shall not be liable for any taxes to any
governmental taxing authority that may be due by Borrower by reason of the sale
and delivery creating the Account.
(C) Whether or not an Event of Default has occurred, any of
Lender's officers, employees or agents shall have the right, at any time or
times hereafter, in the name of Lender, any designee of Lender or Borrower, to
verify the validity, amount or any other matter relating to any Accounts by
mail, telephone, telegraph or otherwise. Borrower shall cooperate fully with
Lender in an effort to facilitate and promptly conclude any such verification
process.
5.4. COLLECTION OF ACCOUNTS.
(A) To expedite collection, Borrower shall endeavor in the first
instance to make collection of its Accounts for Lender. All remittances received
by Borrower on account of Accounts shall be held as Lender's property by
Borrower as trustee of an express trust for Lender's benefit and Borrower shall
immediately deposit same in the Dominion Account. Lender shall have the right at
any time after the occurrence of an Event of Default to notify Account Debtors
that Accounts have been assigned to Lender and to collect Accounts directly in
its own name and to charge the collection costs and expenses, including
reasonable attorneys' fees, to Borrower. Lender has no duty to protect, insure,
collect or realize upon the Accounts or preserve rights in them.
(B) Borrower shall deposit all proceeds of the Collateral or
cause the same to be deposited in kind in a Dominion Account pursuant to a
lockbox arrangement with such banks as may be selected by Borrower and be
acceptable to Lender. Borrower shall issue to any such bank, an irrevocable
letter of instruction directing such banks to deposit all payments or other
remittances received in the lockbox to the Dominion Account for application on
account of the Obligations. All funds deposited in the Dominion Account shall
immediately become the property of Lender and Borrower shall obtain the
agreement by such banks to waive any offset rights against the funds so
deposited. Lender assumes no responsibility for such lockbox arrangement,
including, without limitation, any claim of accord and satisfaction or release
with respect to deposits accepted by any bank thereunder.
SECTION 6. PROVISIONS RELATING TO EQUIPMENT AND OFFSHORE PLATFORMS
6.1. REPRESENTATIONS, WARRANTIES AND COVENANTS. With respect to
the Equipment and the Offshore Platforms, Borrower represents, warrants and
covenants to and with Lender that:
(A) substantially all of the Equipment is in adequate operating
condition and repair, and all necessary replacements of and repairs thereto
shall be made so that the value and operating efficiency of the Equipment shall
be maintained and preserved, reasonable wear and tear excepted; and
(B) except for Equipment affixed to Offshore Platforms in the
ordinary course of ERT's business (which Equipment shall not be included in the
Equipment Borrowing Base), Borrower will not permit any of the Equipment to
become affixed to any real Property leased to Borrower so that an interest
arises therein under the real estate laws of the applicable jurisdiction unless
the landlord of such real Property has executed a landlord waiver or leasehold
mortgage in favor of Lender, and Borrower will not permit any of the Equipment
to become an accession to any personal Property other than Equipment subject to
first priority Liens in favor of Lender or subject to Permitted Liens.
6.2. EVIDENCE OF OWNERSHIP OF EQUIPMENT. Immediately on request therefor
by Lender, Borrower shall deliver to Lender any and all evidence of ownership,
if any, of any of the Equipment.
6.3. RECORDS AND SCHEDULES OF EQUIPMENT. Borrower shall maintain
accurate records itemizing and describing the kind, type, quality, quantity and
value of its Equipment and all dispositions made in accordance with SECTION 6.4,
and shall furnish Lender with a current schedule, in form and substance
satisfactory to Lender, containing the foregoing information on at least an
annual basis and more often if requested by Lender.
6.4. DISPOSITIONS. Borrower will not sell, lease or otherwise dispose of
or transfer any of the Equipment, any Offshore Platform or any oil and gas
Properties, or any part thereof without the prior written consent of Lender;
PROVIDED, HOWEVER, that the foregoing restriction shall not apply to
dispositions required by the United States government, or, for so long as no
Event of Default exists, to (A) (i) dispositions of Offshore Platforms, oil and
gas Properties and related Equipment by ERT in the ordinary course of business,
or (ii) dispositions of any other Equipment which, in the aggregate during any
consecutive twelve-month period, has a fair market value or book value,
whichever is less, of One Hundred Fifty Thousand Dollars ($150,000) or less;
PROVIDED, THAT, all proceeds thereof are turned over to Lender, or (B)
replacements of Equipment that is substantially worn, damaged or obsolete with
Equipment of like kind, function and value; PROVIDED, THAT, (i) the replacement
Equipment shall be acquired prior to or concurrently with any disposition of the
Equipment that is to be replaced, (ii) the replacement Equipment shall be free
and clear of Liens other than Permitted Liens, (iii) Borrower shall give Lender
at least five (5) days prior written notice of such disposition and (iv)
Borrower shall turn over to Lender all proceeds realized from any such
disposition.
SECTION 7. REPRESENTATIONS AND WARRANTIES
7.1. GENERAL REPRESENTATIONS AND WARRANTIES. To induce Lender to enter
into this Agreement and to make advances hereunder, Borrower warrants,
represents and covenants to Lender as follows:
(A) ORGANIZATION AND QUALIFICATION. Borrower is a corporation
duly organized, validly existing and in good standing under the laws of the
state of its incorporation. Borrower has duly qualified and is authorized to do
business and is in good standing as a foreign corporation in each state or
jurisdiction listed on EXHIBIT E attached hereto and made a part hereof and in
all other states and jurisdictions where the character of its Properties or the
nature of its activities make such qualification necessary.
(B) CORPORATE NAMES. Since July 27, 1990, Cal Dive, and since
September 30, 1992, ERT, have not been known as or used any corporate,
fictitious or trade names except as disclosed on EXHIBIT F attached hereto and
made a part hereof. Except as set forth on EXHIBIT F attached hereto, Borrower
has not, during the preceding three years, been the surviving corporation of a
merger or consolidation or acquired all or substantially all of the assets of
any Person.
(C) CORPORATE POWER AND AUTHORITY. Borrower has the right and
power and is duly authorized and empowered to enter into, execute, deliver and
perform this Agreement and each of the other Loan Documents to which it is a
party. The execution, delivery and performance of this Agreement and each of the
other Loan Documents have been duly authorized by all necessary corporate action
and do not and will not (i) require any consent or approval of the shareholders
of Borrower; (ii) contravene Borrower's charter, articles of incorporation or
by-laws; (iii) violate, or cause Borrower to be in default under, any provision
of any law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award in effect having applicability to Borrower; (iv) result
in a breach of or constitute a default under any indenture or loan or credit
agreement or any other agreement, lease or instrument to which Borrower is a
party or by which it or its Properties may be bound or affected; or (v) result
in, or require, the creation or imposition of any Lien (other than Permitted
Liens) upon or with respect to any of the Properties now owned or hereafter
acquired by Borrower.
(D) LEGALLY ENFORCEABLE AGREEMENT. This Agreement is, and each of
the other Loan Documents when delivered under this Agreement will be, a legal,
valid and binding obligation of Borrower enforceable against it in accordance
with their respective terms, except to the extent that such enforcement may be
limited by applicable bankruptcy, insolvency and other similar laws affecting
creditors' rights generally or by principles of equity pertaining to the
availability of equitable remedies.
(E) USE OF PROCEEDS. Borrower's uses of the proceeds of any Loans
pursuant to this Agreement are, and will continue to be, legal and proper
corporate uses, duly authorized by its Board of Directors, and such uses will
not violate any applicable laws, including, without limitation, the Foreign
Assets Control Regulations, the Foreign Funds Control Regulations and the
Transaction Control Regulations of the United States Treasury Department (31
CFR, Subtitle B, Chapter V, as amended), where the failure to do so would have a
material adverse effect on its business, condition (financial or otherwise),
operations, prospects, or Properties.
(F) MARGIN STOCK. Borrower is not engaged principally, or as one
of its important activities, in the business of purchasing or carrying "margin
stock" (within the meaning of Regulation G or U of the Board of Governors of the
Federal Reserve System), and no part of the proceeds of any Loans to Borrower
will be used to purchase or carry any margin stock or to extend credit to others
for the purpose of purchasing or carrying any margin stock or be used for any
purpose which violates or is inconsistent with the provisions of Regulation G,
T, U or X of said Board of Governors.
(G) GOVERNMENTAL CONSENTS. Except where failure to do so would
have a material adverse effect on its business, condition (financial or
otherwise), operations, prospects, or Properties, Borrower has, and is in good
standing with respect to, all governmental consents, approvals, authorizations,
permits, certificates, inspections, and franchises necessary to continue to
conduct its business as heretofore or proposed to be conducted by it and to own
or lease and operate its Properties as now owned or leased by it.
(H) PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES. Borrower owns
or possesses all the patents, trademarks, service marks, trade names, copyrights
and licenses necessary for the present and planned future conduct of its
business without any known conflict with the rights of others. All such patents,
trademarks, service marks, trade names, copyrights, licenses and other similar
rights are listed on EXHIBIT G attached hereto and made a part hereof. ---------
(I) CAPITAL STRUCTURE. EXHIBIT H attached hereto and made a part
hereof states (i) the correct name of each of the Subsidiaries of Borrower, the
jurisdiction of incorporation and the percentage of its Voting Stock owned by
Borrower, (ii) the name of each of Borrower's corporate or joint venture
Affiliates and the nature of the affiliation, (iii) the number, nature and
holder of all outstanding Securities of Borrower and each Subsidiary of
Borrower, and (iv) the number of authorized, issued and treasury shares of
Borrower and each Subsidiary of Borrower. Borrower has good title to all of the
shares of stock it purports to own of each Subsidiary, free and clear in each
case of any Lien other than Permitted Liens. All such shares have been duly
issued and are fully paid and nonassessable. Except as provided in EXHIBITS H
and I attached hereto, there are not outstanding any options to purchase, or any
rights or warrants to subscribe for, or any commitments or agreements to issue
or sell, or any Securities or obligations convertible into, or any powers of
attorney relating to, shares of the capital stock of Borrower. Except as
provided in EXHIBITS H and I attached hereto, there are not outstanding any
agreements or instruments binding upon any of Borrower's shareholders relating
to the ownership of its shares of capital stock.
(J) SOLVENT FINANCIAL CONDITION. Borrower is now and, after
giving effect to initial Loans to be made hereunder, at all times will be,
Solvent.
(K) RESTRICTIONS. Borrower is not a party or subject to any
contract, agreement, or charter or other corporate restriction, which materially
and adversely affects its business or the use or ownership of any of its
Properties other than as set forth on EXHIBIT J attached hereto. Borrower is not
a party or subject to any contract or agreement which restricts its right or
ability to incur Indebtedness, other than as set forth on EXHIBIT J attached
hereto, none of which prohibit the execution of or compliance with this
Agreement by Borrower. Neither Borrower nor any of its Subsidiaries has agreed
or consented to cause or permit in the future (upon the happening of a
contingency or otherwise) any of its Property, whether now owned or hereafter
acquired, to be subject to a Lien that is not a Permitted Lien.
(L) LITIGATION. Except as set forth on EXHIBIT K attached hereto
and made a part hereof, there are no actions, suits, proceedings or
investigations pending, or to the knowledge of Borrower, threatened, against or
affecting Borrower or any of its Subsidiaries, or the business, operations,
Properties, prospects, profits or condition of Borrower or any of its
Subsidiaries, in any court or before any governmental authority or arbitration
board or tribunal, and no action, suit, proceeding or investigation shown on
EXHIBIT K attached hereto, except as indicated on such EXHIBIT K, involves the
possibility of materially and adversely affecting the Properties, business,
prospects, profits or condition (financial or otherwise) of Borrower or the
ability of Borrower to perform this Agreement. Neither Borrower nor any of its
Subsidiaries is in default with respect to any order, writ, injunction,
judgment, decree or rule of any court, governmental authority or arbitration
board or tribunal.
(M) TITLE TO PROPERTIES. Subject to the statutory right of the
MMS to approve the acquisition of an Offshore Platform and related oil and gas
Properties and the provisions of the Buy-Sell Agreements, Borrower and its
Subsidiaries each has good, indefeasible and marketable title to and fee simple
ownership of, or valid and subsisting leasehold interests in, all of its oil and
gas Properties and real Property, and good title to all of its other Property,
in each case, free and clear of all Liens except Permitted Liens. EXHIBITS D and
S attached hereto identifies all of the Offshore Platforms, other oil and gas
Properties and real Property leased or owned by Borrower and its Subsidiaries
and, if leased, identifies the lessor thereof.
(N) FINANCIAL STATEMENTS; FISCAL YEAR. The Consolidated balance
sheet of Borrower and such other Persons described therein (including the
accounts of all Subsidiaries for the respective periods during which a
Subsidiary relationship existed) as of December 31, 1994, and the related
statements of income, changes in stockholder's equity, and changes in cash flow
for the periods ended on such dates, have been prepared in accordance with GAAP
(except for changes in application in which Borrower's independent certified
public accountants concur), and present fairly the financial positions of
Borrower and its Subsidiaries at such dates and the results of Borrower's
operations for such periods. Since December 31, 1994 there has been no material
change in the condition, financial or otherwise, of Borrower, its Subsidiaries
and such other Persons as shown on the Consolidated balance sheet as of such
date and no change in the aggregate value of Equipment and other Property owned
by Borrower or its Subsidiaries or such other Persons, except as otherwise
disclosed in the footnotes to such financial statements and changes in the
ordinary course of business, which individually or in the aggregate has not been
materially adverse. The fiscal year of Borrower and each of its Subsidiaries
ends on December 31 of each year.
(O) FULL DISCLOSURE. The financial statements referred to in
SECTION 7.1(N), do not, nor does this Agreement or any other written statement
of Borrower to Lender (including, without limitation, Borrower's filings, if
any, with the Securities and Exchange Commission), contain any untrue statement
of a material fact or omit a material fact necessary to make the statements
contained therein or herein not misleading. There is no fact which Borrower has
failed to disclose to Lender in writing which materially affects adversely or,
so far as Borrower can now foresee, will materially affect adversely the
Properties, business, prospects, profits, or condition (financial or otherwise)
of Borrower or any of its Subsidiaries or the ability of Borrower or its
Subsidiaries to perform this Agreement.
(P) ERISA. Except as disclosed in EXHIBIT L attached hereto,
there are no Pension Plans or Multiemployer Plans and no fact exists that could
result in any material liability (other than as disclosed on Borrower's
financial statements) to Borrower relating to any former Plan. No Reportable
Event has occurred with respect to any Pension Plan that is not a Multiemployer
Plan. No Prohibited Transaction has occurred. The PBGC has not instituted
proceedings to terminate any Pension Plan. No ERISA Affiliate nor any duly
appointed administrator of a Pension Plan has (i) incurred any liability to the
PBGC with respect to a Pension Plan other than for premiums not yet due and
payable, or (ii) instituted or intends to institute proceedings under Section
4041(c) of ERISA to terminate any Pension Plan, or (iii) instituted proceedings
to withdraw from any Pension Plan that is a Multiemployer Plan. No "accumulated
funding deficiency" within the meaning of Section 302(a)(2) of ERISA exists with
respect to any Pension Plan. No liability has been incurred by any ERISA
Affiliate which remains unsatisfied for any taxes or penalties, with respect to
any Plan that is not a Multiemployer Plan or, to the best of Borrower's
knowledge and belief, with respect to any Multiemployer Plan. No litigation is
pending or threatened concerning or involving any Plan. No amendment to any
Pension Plan has been adopted such that security is required to be given
pursuant to IRC Section 401(a)(29) and no lien exists under IRC Section 412(n)
with respect to any Plan. Except as shown on EXHIBIT L attached hereto with
respect to the date and using the assumptions described thereon, and to the best
of Borrower's knowledge and belief, no unfunded or unreserved liability exists
for benefits under any Plan that would have a material adverse effect. No ERISA
Affiliate contributes to, has contributed to, or is or has been obligated to
contribute to, any Multiemployer Plan. No ERISA Affiliate maintains any Plan
which provides benefits to an employee or the employee's dependents after the
employee terminates employment other than as required by law and no written or
oral representations have been made to any employee or former employee promising
or guaranteeing any employer payment or funding for the continuation of medical,
dental, or disability coverage beyond that legally required.
(Q) TAXES. The federal tax identification numbers for Cal Dive
and ERT are 95-3409686 and 76-0413713, respectively. Borrower and its
Subsidiaries each has filed all federal, state and local tax returns and other
reports it is required by law to file and has paid, or made provision for the
payment of, all taxes, assessments, fees and other governmental charges that are
due and payable. The provision for taxes on the books of Borrower and its
Subsidiaries are adequate for all years not closed by applicable statutes, and
for its current fiscal year. There are no material unresolved questions or
claims concerning any tax liability of Borrower except as described in EXHIBIT M
attached hereto. None of the transactions contemplated hereby or under any
agreements referred to hereunder will result in any material tax liability for
Borrower or result in any other material adverse tax consequence for Borrower.
EXHIBIT N attached hereto contains an accurate list of all taxing authorities to
which Borrower and its Subsidiaries and their respective Properties are subject.
No Properties of Borrower or its Subsidiaries are or could become subject to any
Lien in favor of any such taxing authorities for nonpayment of taxes, except as
specified on EXHIBIT N attached hereto.
(R) LABOR RELATIONS. Except as described on EXHIBIT O attached
hereto, neither Borrower nor any of its Subsidiaries is a party to any
collective bargaining agreement, and there are no material grievances, disputes
or controversies with any union or any other organization of Borrower's
employees, or threats of strikes, work stoppages or any asserted pending demands
for collective bargaining by any union or organization.
(S) COMPLIANCE WITH LAWS. Except as disclosed on EXHIBIT P
attached hereto as to existing violations of Environmental Laws (the "EXISTING
ENVIRONMENTAL VIOLATIONS"), Borrower has duly complied with, and its Property,
business operations and leaseholds are in compliance in all material respects
with, the provisions of all federal, state and local laws, rules, regulations
orders, citations and notices applicable to Borrower, its Properties or the
conduct of its business, including, without limitation, OSHA, Environmental
Laws, the Securities Act of 1933, the Securities Exchange Act of 1934, the Fair
Labor Standards Act, laws relating to income, unemployment, payroll or social
security taxes and Plans under ERISA, the Flood Disaster Protection Act of 1973,
the Consumer Credit Protection Act, the Federal Trade Commission Act, statutes
creating and governing the Bureau of Alcohol, Tobacco and Firearms, and any and
all state statutes or pronouncements addressing, or related to, subjects the
same as or comparable to those covered by such enumerated federal statutes, and
there have been no citations, notices or orders of noncompliance issued to
Borrower or any of its Subsidiaries under any such law, rule or regulation.
(T) SURETY OBLIGATIONS. Except as described in EXHIBIT Q attached
hereto, Borrower is not obligated as surety or indemnitor under any surety or
similar bond or other contract issued or entered into any agreement to assure
payment, performance or completion of performance of any undertaking or
obligation of any Person.
(U) NO DEFAULTS. No event has occurred and no condition exists
which would, upon the execution and delivery of this Agreement or Borrower's
performance hereunder, constitute a Default or an Event of Default. Neither
Borrower nor any of its Subsidiaries is in default, and no event has occurred
and no condition exists which constitutes, or which with the passage of time or
the giving of notice or both would constitute, a default in the payment of any
Indebtedness to any Person for Money Borrowed.
(V) BROKERS. There are no claims for brokerage commissions,
finder's fees or investment banking fees in connection with the transactions
contemplated by this Agreement.
(W) BUSINESS LOCATIONS; AGENT FOR PROCESS. During the preceding
three year period, Borrower has had no office, place of business or agent for
service of process located in any state or county other than as shown on EXHIBIT
D attached hereto.
(X) TRADE RELATIONS. There exists no actual or threatened
termination, cancellation or limitation of, or any modification or change in,
the business relationship between Borrower and any customer or any group of
customers whose purchases individually or in the aggregate are material to the
business of Borrower, or with any material supplier, and there exists no present
condition or state of facts or circumstances which would materially affect
adversely Borrower or prevent Borrower from conducting such business after the
consummation of the transaction contemplated by this Agreement in substantially
the same manner in which it has heretofore been conducted.
(Y) LEASES. EXHIBIT R attached hereto is a complete listing of
all capitalized leases of Borrower and EXHIBIT S attached hereto is a complete
listing of all operating leases of Borrower.
(Z) INVESTMENT COMPANY ACT. Borrower is not an "investment
company" or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
(AA) OSHA AND ENVIRONMENTAL COMPLIANCE.
(i) Except for the Existing Environmental Violations, Borrower is
in compliance with, and its facilities, business, operations, assets, Property,
leaseholds, Offshore Platforms and Equipment are in compliance in all material
respects with, the provisions of OSHA, the Resource Conservation and Recovery
Act, all Environmental Laws and all permits issued to Borrower under any
Environmental Laws; there have been no and are not now any outstanding
citations, notices or orders of non-compliance issued to Borrower, nor is
Borrower aware of any potential or threatening citations, notices or orders of
noncompliance that may be issued to Borrower or relating to its business,
assets, Property, leaseholds, Offshore Platforms or Equipment under such laws,
rules or regulations.
(ii) Borrower has been issued all required federal, state
and local licenses, certificates or permits relating to all applicable
Environmental Laws.
(iii) Except for the Existing Environmental Violations,
(a) there are no visible signs of material releases, spills, discharges, leaks
or disposal (collectively referred to as "RELEASES") of Hazardous Substances at,
upon, under or within any Real Property in violation of any
Environmental Law, nor is Borrower aware of the existence of any nonvisible
Releases; (b) there are no underground storage tanks or polychlorinated
biphenyls on the Real Property; (c) the Real Property has never been used as a
treatment, storage or disposal facility of Hazardous Substance (except for the
storage of fuels, Hydrocarbons, lubricants, solvents, paints and coatings,
compressed gases, explosives, anti-oxidants, rust inhibitors, surfactants, CO2
scavengers, soap and chemical dispersants, batteries and similar or substitute
items, substances or chemicals used or useful in the ordinary course of business
by Borrower (collectively the "LAWFUL SUBSTANCES")); and (d) no Hazardous
Substances are present on the Real Property in violation of any Environmental
Laws.
7.2. REAFFIRMATION. Each request for a Loan made by Borrower pursuant to
this Agreement or any of the other Loan Documents shall constitute (i) an
automatic representation and warranty by Borrower to Lender that there does not
then exist any Default or Event of Default unless otherwise disclosed to Lender
in writing and (ii) a reaffirmation as of the date of said request that all of
the representations and warranties of Borrower contained in this Agreement and
the other Loan Documents are true in all material respects except for any
changes in the nature of Borrower's business or operations that would render the
information contained in any exhibit attached hereto either inaccurate or
incomplete, so long as Lender has consented to such changes in writing or such
changes are expressly permitted by this Agreement.
7.3. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower covenants,
warrants and represents to Lender that all representations and warranties of
Borrower contained in this Agreement or any of the other Loan Documents shall be
true at the time of Borrower's execution of this Agreement and the other Loan
Documents, and shall survive the execution, delivery and acceptance thereof by
Lender and the parties thereto and the closing of the transactions described
therein or related thereto until four (4) years and one (1) day after all of the
Obligations have been paid in full.
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS
8.1. AFFIRMATIVE COVENANTS. During the term of this Agreement,
and thereafter for so long as there are any Obligations to Lender, Borrower
covenants that, unless otherwise consented to by Lender in writing, it shall:
(A) TAXES AND LIENS. Pay and discharge, and cause each Subsidiary
to pay and discharge, all taxes, assessments and governmental charges upon it,
its income and Properties as and when such taxes, assessments and charges are
due and payable (and, if requested by Lender, provide Lender with proof that
Borrower or such Subsidiary has done so), except and to the extent only that
such taxes, assessments and charges are being actively contested in good faith
and by appropriate proceedings, Borrower maintains adequate reserves on its
books therefor and the nonpayment of such taxes, assessments and charges does
not result in a Lien upon any Properties or Borrower other than a Permitted
Lien. Borrower shall also pay and discharge any lawful claims which, if unpaid,
might become a Lien against any of Borrower's Properties, except for Permitted
Liens. Borrower shall also make timely payment or deposit of all FICA payments
and withholding taxes required of it by the applicable laws, and will, upon
request, furnish Lender with proof satisfactory of it that Borrower has made
such payments or deposits.
(B) TAX RETURNS. File, and cause each Subsidiary to file, all
federal, state and local tax returns and other reports Borrower or such
Subsidiary is required by law to file and maintain adequate reserves for the
payment of all taxes, assessments, governmental charges, and levies imposed upon
it, its income, or its profits, or upon any Property belonging to it.
(C) PAYMENT OF BANK CHARGES. Pay to Lender, on demand, any and
all reasonable and customary fees, costs or expenses which Lender pays to a bank
or other similar institution arising out of or in connection with (i) the
forwarding to Borrower or any other Person on behalf of Borrower, by Lender
proceeds of loans made by Lender to Borrower pursuant to this Agreement and (ii)
the depositing for collection, by Lender of any check or item of payment
received or delivered to Lender on account of the Obligations.
(D) BUSINESS AND EXISTENCE. Preserve and maintain, and cause each
Subsidiary to preserve and maintain, its separate corporate existence and all
rights, privileges, and franchises in connection therewith, and maintain, and
cause each Subsidiary to maintain, its qualification and good standing in all
states in which such qualification is necessary.
(E) MAINTAIN PROPERTIES. Maintain, and cause each Subsidiary to
maintain, its Properties in adequate operating condition and make, and cause
each Subsidiary to make, all necessary renewals, repairs, replacements,
additions and improvements thereto.
(F) COMPLIANCE WITH LAWS AND REMEDIATION OF EXISTING
ENVIRONMENTAL VIOLATIONS. (i) Except for the Existing Environmental Violations
and the storage of the Lawful Substances, comply, and cause each Subsidiary to
comply, with all laws, ordinances, governmental rules and regulations to which
it is subject, including, without limitation, all Environmental Laws, and obtain
and keep in force any and all licenses, permits, franchises, or other
governmental authorizations necessary to the ownership or lease of its
Properties or to the conduct and operation of its business, which violation or
failure to obtain might materially and adversely affect the business, prospects,
profits, Properties, or condition (financial or otherwise) of Borrower.
(G) ERISA COMPLIANCE. Each ERISA Affiliate will (i) make prompt
payment of all contributions it is obligated to make under all Plans or are
required to meet the minimum funding standard set forth in ERISA, (ii) within
thirty (30) days after the filing thereof, furnish to Lender each annual
report/return (Form 5500 Series), as well as all schedules and attachments
required to be filed with the Department of Labor and/or the Internal Revenue
Service pursuant to ERISA, and the regulations promulgated thereunder, in
connection with each of its Plans that is not a Multiemployer Plan for each Plan
year, (iii) notify Lender prior to any request for a waiver of the funding
requirements of IRC Section 412 or the commencement of any distress termination
pursuant to ERISA Section 4041(c), (iv) notify Lender immediately of any
Reportable Event, Prohibited Transaction, and of any fact arising in connection
with any of its Plans that is not a Multiemployer Plan, which might constitute
grounds for termination thereof by the PBGC or for the appointment by the
appropriate United States District Court of a trustee to administer such Plan,
together with a statement, if requested by Lender, as to the reason therefor and
the action, if any, proposed to be taken with respect thereto, (v) notify Lender
immediately of any event which is likely to give rise to an assertion of
withdrawal liability in connection with a Multiemployer Plan, and (vi) furnish
to Lender, promptly upon Lender's request therefor, such additional information
concerning any Plan as may be reasonably requested.
(H) BUSINESS RECORDS. Keep, and cause each Subsidiary to keep,
adequate records and books of account with respect to its business activities in
which proper entries are made in accordance with GAAP reflecting all its
financial transactions.
(I) VISITS AND INSPECTIONS. Upon two (2) Business Days notice to
Borrower, permit representatives of Lender, from time to time, as often as may
be reasonably requested, but only during normal business hours, to visit and
inspect the Properties of Borrower, inspect and make extracts from its books and
records, and discuss with its officers, its employees and its independent
accountants, Borrower's business, assets, liabilities, financial condition,
business prospects and results of operations; PROVIDED, HOWEVER, if a Default or
Event of Default exists, Lender shall not be required to give notice to Borrower
prior to inspection or visitation by Lender of Borrower's Properties.
(J) FINANCIAL STATEMENTS. Cause to be prepared and furnished to
Lender the following (all to be kept and prepared in accordance with GAAP
applied on a consistent basis, unless Borrower's certified public accountants
concur in any change therein and such change is disclosed to Lender and is
consistent with GAAP):
(i) as soon as possible, but not later than ninety (90)
days after the close of each fiscal year of Borrower, unqualified audited
financial statements of Borrower and its Subsidiaries as of the end of such
year, on a Consolidated basis, certified by a firm of independent certified
public accountants of recognized national standing or otherwise acceptable to
Lender (except for a qualification for a change in accounting principles with
which the independent public accountant concurs);
(ii) as soon as possible, but not later than thirty (30)
days after the end of each month (except for the month of January) hereafter,
unaudited interim financial statements of Borrower and its Subsidiaries as of
the end of such month and of the portion of Borrower's fiscal year then elapsed,
on a consolidating basis certified by the principal financial officer of
Borrower as prepared in accordance with GAAP and fairly presenting the
consolidated financial position and results of operations of Borrower and its
Subsidiaries for such month and period subject only to changes from audit and
year-end adjustments and except that such statements need not contain notes;
(iii) promptly after the sending or filing thereof, as
the case may be, copies of any proxy statements, financial statements or reports
which Borrower has made available to its shareholders and copies of any regular,
periodic and special reports or registration statements which Borrower files
with the Securities and Exchange Commission or any governmental authority which
may be substituted therefor, or any national securities exchange; and
(iv) such other data and information (financial and
otherwise) as Lender, from time to time, may reasonably request, bearing upon or
related to the Collateral, Borrower's financial condition or results of
operations, including, without limitation, federal income tax returns of
Borrower, accounts payable ledgers, vendor listings and bank statements.
Upon receipt, Borrower shall forward to Lender a copy of the
accountants' letter to Borrower's management that is prepared in connection with
the financial statements described in CLAUSE (I) above and also shall cause to
be prepared and shall furnish to Lender a certificate of the aforesaid certified
public accountants certifying to Lender that, based upon their examination of
the financial statements of Borrower and its Subsidiaries performed in
connection with their examination of said financial statements, they are not
aware of any Default or Event of Default, or, if they are aware of such Default
or Event of Default, specifying the nature thereof. Concurrently with the
delivery of the financial statements described in CLAUSE (I) above and the
financial statements for the months ending on March 30, June 30, September 30
and December 31 of each calendar year delivered pursuant to CLAUSE (II) above,
Borrower shall cause to be prepared and furnished to Lender a Compliance
Certificate in the form of EXHIBIT T attached hereto.
(K) NOTICES TO LENDER. Notify Lender in writing: (i) promptly
after Borrower's learning thereof, of the commencement of any litigation
affecting Borrower or any of its Properties, whether or not the claim is
considered by Borrower to be covered by insurance, and of the institution of any
administrative proceeding, and of the receipt of any order or citation from any
federal, state or local agency which may materially and adversely affect
Borrower's operations, financial condition, Properties or business or Lender's
Lien upon any of the Collateral; (ii) at least sixty (60) days prior thereto, of
Borrower's opening of any new office or place of business or Borrower's closing
of any existing office or place of business; (iii) promptly after Borrower's
learning thereof, of any labor dispute to which Borrower may become a party, any
strikes or walkouts relating to any of its plants or other facilities, and the
expiration of any labor contract to which it is a party or by which it is bound;
(iv) promptly after Borrower's learning thereof, of any material default by
Borrower under any note, indenture, loan agreement, mortgage, lease, deed,
guaranty or other similar agreement relating to any Indebtedness of Borrower
exceeding Five Thousand Dollars ($5,000); (v) promptly after the occurrence
thereof, of any Default or Event of Default; (vi) promptly after the occurrence
thereof, of any default by any obligor under any note or other evidence of
Indebtedness payable to Borrower; and (vii) promptly after the rendition
thereof, of any judgment rendered against Borrower or any of its Subsidiaries.
(L) LANDLORD AND STORAGE AGREEMENTS. Provide Lender with copies
of all agreements between Borrower and any landlord or warehouseman which owns
any premises at which any Collateral may, from time to time, be kept.
(M) SUBORDINATIONS. Except for Permitted Purchase Money
Indebtedness, provide Lender with a debt subordination agreement, in form and
substance satisfactory to Lender, executed by Borrower and any Person who is an
officer, director or Affiliate of Borrower to whom Borrower is or hereafter
becomes indebted for Money Borrowed, subordinating in right of payment and claim
all of such Indebtedness and any future advances thereon to the full and final
payment and performance of the Obligations. For purposes of this SECTION 8.1(M),
the term "Affiliate" shall include First Reserve.
(N) FURTHER ASSURANCES. At Lender's request, promptly execute or
cause to be executed and deliver to Lender any and all documents, instruments
and agreements deemed necessary by Lender to give effect to or carry out the
terms or intent of this Agreement or any of the other Loan Documents. Without
limiting the generality of the foregoing, if any of the Accounts, the face value
of which exceeds One Thousand Dollars ($1,000), arises out of a contract with
the United States of America, or any department, agency, subdivision or
instrumentality thereof, Borrower shall promptly notify Lender thereof in
writing and shall execute any instruments and take any other action required or
requested by Lender to comply with the provisions of the Federal Assignment of
Claims Act.
(O) TAX CERTIFICATE. Within ninety (90) days after the end of
each fiscal year of Borrower, or more frequently if requested by Lender, cause
the chief financial officer of Borrower to prepare and deliver to Lender a tax
certificate in the form of EXHIBIT U attached hereto, with appropriate
insertions.
(P) MARINE VESSEL APPRAISALS. Lender shall prepare an appraisal
of the marine vessels owned by Borrower no less than semi-annually from the
Closing Date at Borrower's expense.
(Q) MARINE VESSEL CERTIFICATIONS. As soon as available, and in
any event no later than thirty (30) days after receipt by Borrower, deliver to
Lender copies of Coast Guard Certificates of Inspection and ABS Load Line
Certifications (or similar certificates issued for foreign registered marine
vessels) for each marine vessel owned by Borrower.
(R) MARINE VESSEL MAINTENANCE. Keep adequate records with respect
to maintenance of marine vessels which detail drydocking, machinery overhauls
and maintenance history for each marine vessel owned by Borrower.
(S) PROJECTIONS. As soon as available, and in any event no later
than thirty (30) days after the end of each fiscal year of Borrower, deliver to
Lender Projections of Borrower for the forthcoming fiscal year, on a month by
month basis.
(T) SYSTEMS. Maintain any system reasonably requested by Lender
for creating backup data on computer hardware, software or firmware, such as
Accounts and customer lists, and deliver and pledge to Lender such tapes or
discs with respect thereto as may be required by Lender.
(U) ENVIRONMENTAL MATTERS.
(i) Ensure that the Real Property remains in compliance
with all Environmental Laws where the failure to do so would have a material
adverse effect on its business, condition (financial or otherwise), operations,
prospects or Properties, and it will not place or permit to be placed any
Hazardous Substance on any Real Property except as not prohibited by applicable
law or appropriate governmental authorities. Notwithstanding the foregoing,
Lender and Borrower recognize the Existing Environmental Violations and the
storing of the Lawful Substances and Borrower hereby agrees to ensure that all
Existing Environmental Violations are remediated in a diligent and timely
manner.
(ii) Establish and maintain an adequate system to assure
and monitor continued compliance with all applicable Environmental Laws
appropriate to the nature of Borrower's business.
(iii) (a) employ in connection with its use of the Real
Property appropriate technology necessary to maintain compliance with any
applicable Environmental Laws, and (b) dispose of any and all Hazardous
Substance generated at the Real Property only at facilities and with carriers
that maintain valid permits under the Resource Conservation and Recovery Act and
any other applicable Environmental Laws. Borrower shall obtain certificates of
disposal, such as hazardous waste manifest receipts, from all treatment,
transport, storage or disposal facilities or operators in connection with the
transport or disposal of any Hazardous Substance generated at the Real Property.
(iv) In the event the Borrower obtains, gives or receives
notice of any Release or threat of Release of a reportable quantity of any
Hazardous Substances at the Real Property (any such event being hereinafter
referred to as a "HAZARDOUS DISCHARGE") or receives any notice of violation,
request for information or notification that it is potentially responsible for
investigation or cleanup of environmental conditions, demand letter or
complaint, order, citation, or other written notice with regard to any Hazardous
Discharge or violation of Environmental Laws (any of the foregoing is referred
to herein as an "ENVIRONMENTAL COMPLAINT") from any Person or entity, including
any state or local agency responsible in whole or in part for environmental
matters in the state in which the Real Property is located or the United States
Environmental Protection Agency (any such person or entity hereinafter the
"AUTHORITY"), then the Borrower shall, within five (5) Business Days, give
written notice of same to the Lender setting forth facts and circumstances
giving rise to the Hazardous Discharge or Environmental Complaint. Such notice
is not intended to create nor shall it create any obligation upon Lender with
respect thereto.
(v) Promptly forward to Lender copies of any request for
information, notification of potential liability, demand letter relating to
potential responsibility with respect to the investigation or cleanup of
Hazardous Substances at any other site owned, operated or used by Borrower to
dispose of Hazardous Substances and shall continue to forward copies of
correspondence between Borrower and the Authority regarding such claims to the
Lender until the claim is settled. The Borrower shall promptly forward to the
Lender copies of all documents and reports concerning a Hazardous Discharge that
the Borrower is required to file under any Environmental Laws. Such information
is to be provided solely to allow the Lender to protect Lender's security
interest in the Collateral and is not intended to create nor shall it create any
obligation upon Lender with respect thereto.
(vi) Respond promptly to any Hazardous Discharge or
Environmental Complaint and take all necessary action in order to safeguard the
health of any Person and to avoid subjecting the Collateral or Real Property to
any Lien. Borrower shall be deemed to be taking all necessary action only if,
and for so long as, the execution or enforcement of an Environmental Complaint
is, and continues to be, effectively stayed and the Borrower maintains adequate
reserves therefore, which are properly reflected on Borrower's Consolidated
Financial Statements, the validity and amount of the claims secured thereby are
being actively contested in good faith and by appropriate lawful proceedings,
and such Liens do not, in the aggregate, materially detract from the value of
the Property of Borrower or materially impair the use thereof in the operation
of Borrower's business. If Borrower shall fail to so respond to any Hazardous
Discharge or Environmental Complaint or Borrower shall fail to comply with any
of the requirements of any Environmental Laws where the failure to do so would
have a material adverse effect on its business, condition (financial or
otherwise), operations, prospects or Properties, Lender may, but without the
obligation to do so, for the sole purpose of protecting Lender's interest in
Collateral: (a) give such notices or (b) enter onto the Real Property (or
authorize third parties to enter onto the Real Property) and take such actions
as Lender (or such third parties as directed by the Lender) deem reasonably
necessary or advisable, to clean up, remove, mitigate or otherwise deal with any
such Hazardous Discharge or Environmental Complaint. All reasonable costs and
expenses incurred by Lender (or such third parties) in the exercise of any such
rights, including any sums paid in connection with any judicial or
administrative investigation or proceedings, fines and penalties, together with
interest thereon from the date expended at the Applicable Annual Rate for Base
Rate Loans shall be paid upon demand by the Borrower, and until paid shall be
added to and become a part of the Obligations secured by the Liens created by
the terms of this Agreement or any other agreement between Lender and Borrower.
(vii) Promptly upon the written request of the Lender, in
connection with any Hazardous Discharge or Environmental Complaint as described
in CLAUSE (VI) immediately preceding, provide to Lender, at the Borrower's
expense, with an environmental site assessment or environmental
audit report prepared by an environmental engineering firm acceptable to Lender
to assess with a reasonable degree of certainty the existence of a Hazardous
Discharge and the potential costs in connection with abatement, cleanup and
removal of any Hazardous Substances found on, under, at or within the Real
Property. Any report or investigation of such Hazardous Discharge proposed and
acceptable to an appropriate Authority that is charged to oversee the clean-up
of such Hazardous Discharge shall be acceptable to the Lender.
(viii) Defend and indemnify Lender and hold Lender, and
its respective employees, agents, directors and officers harmless from and
against all loss, liability, damage and expense, claims, costs, fines and
penalties, including attorney's fees, suffered or incurred by Lender under or on
account of any Environmental Laws, including, without limitation, the assertion
of any Lien thereunder, with respect to any Hazardous Discharge, the presence of
any Hazardous Substances affecting its business and operations or the Real
Property, whether or not the same originates or emerges from the Real Property
or any contiguous real estate, including any loss of value of the Real Property
as a result of the foregoing. Borrower's obligations under this SECTION 8.1(U)
shall arise upon the discovery of the presence of any Hazardous Substances at
the Real Property or Borrower's use of Hazardous Substances in its business and
operations, whether or not any federal, state, or local environmental agency has
taken or threatened any action in connection with the presence of any Hazardous
Substances. Borrower's obligation and the indemnifications hereunder shall
survive the termination of this Agreement.
(ix) For purposes of SECTION 7.1(AA), 8.1(U) and 8.2(AA),
all references to "REAL PROPERTY" shall be deemed to be all of Borrower's right,
title and interest in and to all leased and owned premises, including, without
limitation, the Offshore Platforms.
(V) KEY MAN LIFE INSURANCE. Maintain and pay for life insurance
on each of Gerald G. Reuhl and Owen E. Kratz in a minimum amount of Six Million
Dollars ($6,000,000) per insured with insurance companies acceptable to Lender,
which life insurance policies shall be assigned to Lender within sixty (60) days
from the Closing Date pursuant to an assignment agreement in form and substance
satisfactory to Lender and the insurance company issuing such life insurance
policy.
(W) EXCESS AVAILABILITY. Maintain Excess Availability of (i) no
less than Two Million Dollars ($2,000,000) immediately prior to and after giving
effect to the acquisition of any oil and gas Properties by ERT, and (ii) no less
than Four Million Dollars ($4,000,000) immediately prior to and after giving
effect to the acquisition (excluding a lease arrangement) and deployment of both
a barge and a dive support vessel by Cal Dive.
8.2. NEGATIVE COVENANTS. During the term of this
Agreement, and thereafter for so long as there are any Obligations to Lender,
Borrower covenants that, unless Lender has first consented thereto in writing,
it will not:
(A) MERGERS; CONSOLIDATIONS; ACQUISITIONS. Merge or
consolidate, or permit any Subsidiary to merge or consolidate, with any Person,
except a consolidation or merger between both Borrowers, or a Borrower and one
or more wholly owned Subsidiaries; nor acquire all or any substantial part of
the Properties of any Person.
(B) LOANS. Make, or permit any Subsidiary to make, any
loans or other advances of money (other than for salary, travel advances,
advances against commissions and other similar advances in the ordinary course
of business) to any Person, including, without limitation, any of Borrower's
Subsidiaries, Affiliates, officers or employees and First Reserve.
(C) TOTAL INDEBTEDNESS. Create, incur, assume, or suffer
to exist any Indebtedness, except: (i) Obligations owing to Lender; (ii)
unsecured accounts payable to trade creditors which are not aged more than
ninety (90) days from billing date and current operating expenses (other than
for Money Borrowed) which are not more than sixty (60) days past due, in each
case incurred in the ordinary course of business and paid within such time
period, unless the same are actively being contested in good faith and by
appropriate and lawful proceedings and Borrower shall have set aside such
reserves, if any, with respect thereto as are required by GAAP and deemed
adequate by Borrower and its independent public accountants; (iii) Obligations
to pay Rentals permitted by SECTION 8.2(U); (iv) Permitted Purchase Money
Indebtedness; (v) contingent liabilities arising out of endorsements of checks
and other negotiable instruments for deposit or collection in the ordinary
course of business; and (vi) Indebtedness not included in CLAUSES (I) through
(V) above which does not exceed at any time, in the aggregate, the sum of Fifty
Thousand Dollars ($50,000).
(D) AFFILIATE TRANSACTIONS. Enter into, or be a party to,
or permit any Subsidiary to enter into or be a party to, any transaction with
any Affiliate or First Reserve, except (i) transactions in the ordinary course
of and pursuant to the reasonable requirements of Borrower's or such
Subsidiary's business and upon fair and reasonable terms which are fully
disclosed to Lender and are no less favorable to Borrower than would obtain in a
comparable arm's length transaction with a Person not an Affiliate or
stockholder of Borrower or such Subsidiary, (ii) transactions contemplated by
the Shareholders Agreement, in effect on the Closing Date, and (iii) equity
contributions to Borrower by First Reserve on terms and conditions acceptable to
Lender.
(E) PARTNERSHIPS OR JOINT VENTURES. Become or agree to
become a general or limited partner in any general or limited partnership or a
joint venturer in any joint venture.
(F) ADVERSE TRANSACTIONS. Except for Turn Key Contracts,
enter into any transaction, or permit any Subsidiary to enter into any
transaction, which materially and adversely affects or may materially and
adversely affect the Collateral or Borrower's ability to repay the Obligations
or permit or agree to any material extension, compromise or settlement or make
any change or modification of any kind or nature with respect to any Account,
including any of the terms relating thereto, other than discounts and allowances
in the ordinary course of business, all of which shall be reflected in the
Schedules of Accounts submitted to Lender pursuant to SECTION 5.2.
(G) GUARANTIES. Except as described on EXHIBIT V attached
hereto guarantee, assume, endorse or otherwise, in any way, become directly or
contingently liable with respect to the Indebtedness of any Person (other than a
guarantee by Cal Dive on behalf of ERT), except by endorsement of instruments or
items of payment for deposit or collection.
(H) LIMITATION ON LIENS. Create or suffer to exist any
Lien upon any of its Property, income or profits, whether now owned or hereafter
acquired, except: (i) Liens at any time granted in favor of Lender; (ii) Liens
for taxes (excluding any Lien imposed pursuant to any of the provisions of
ERISA) not yet due or being contested as permitted by SECTION 8.1(A), but only
if in Lender's sole discretion and judgment such Lien does not affect adversely
Lender's rights or the priority of Lender's Lien in the Collateral; (iii) Liens
securing the claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords, operators and other like Persons or common law maritime
liens or liens under the Federal Maritime Lien Act or similar state statutes
(collectively, the "STATUTORY LIENS") for labor, materials, supplies, injuries
or rentals incurred in the ordinary course of Borrower's business, but only if
the payment thereof is not at the time required and only if such Liens are
junior to the Liens in favor of Lender, or if, and for so long as, the execution
or other enforcement of such Liens is, and continues to be, effectively stayed,
the validity and amount of the claims secured thereby are being actively
contested in good faith and by appropriate lawful proceedings, and such Liens do
not, in the aggregate, materially detract from the value of the Property of
Borrower or materially impair the use thereof in the operation of Borrower's
business; (iv) Liens resulting from deposits made in the ordinary course of
business in connection with workmen's compensation, unemployment insurance,
social security and other like laws; (v) attachment, judgment and other similar
non-tax Liens arising in connection with court proceedings, but only if and for
so long as the execution or other enforcement of such Liens is and continues to
be effectively stayed and bonded on appeal in a manner satisfactory to Lender
for the full amount thereof, the validity and amount of the claims secured
thereby are being actively contested in good faith and by appropriate lawful
proceedings and such Liens do not, in the aggregate, materially detract from the
value of the Property of Borrower or materially impair the use thereof in the
operation of Borrower's business; (vi) Purchase Money Liens securing Permitted
Purchase Money Indebtedness which is not incurred in violation of SECTION
8.2(C); (vii) reservations, exceptions, easements, rights of way, and other
similar encumbrances affecting real Property other than as described in EXHIBIT
W attached hereto; PROVIDED, THAT, in Lender's judgment, which will be exercised
in good faith, they do not in the aggregate materially detract from the value of
said Properties or materially interfere with their use in the ordinary conduct
of Borrower's business and, if said real Property constitutes Collateral, Lender
has consented thereto; (viii) Liens securing Indebtedness of a Subsidiary to
Borrower or another Subsidiary; (ix) such other Liens as described on EXHIBIT W
attached hereto; and (x) such other Liens as Lender may hereafter approve in
writing.
(I) DISTRIBUTIONS. Without the prior written consent of
Lender, declare or make, or permit any Subsidiary to declare or make, any
Distributions except for the repurchase of its Securities from employees.
(J) SUBSIDIARIES. Hereafter create any Subsidiary or
divest itself of any material assets by transferring them to any Subsidiary to
whose existence Lender has consented.
(K) BUSINESS LOCATIONS. Transfer its principal place of
business or chief executive office, or maintain warehouses or records with
respect to Accounts, Equipment or Inventory, to or at any locations other than
those at which the same are presently kept or maintained, as set forth on
EXHIBIT D attached hereto, except upon at least 60 days prior written notice to
Lender and after the delivery to Lender of financing statements, if required by
Lender, in form satisfactory to Lender to perfect or continue the perfection of
Lender's Lien and security interest hereunder.
(L) CHANGE OF BUSINESS. Enter into any new business or
make any material change in any of Borrower's business objectives, purposes and
operations.
(M) DISPOSITION OF ASSETS. Sell, lease or otherwise
dispose of any of its Properties, including any disposition of Property as part
of a sale and leaseback transaction, to or in favor of any Person, except (i)
sales of Inventory in the ordinary course of Borrower's business for so long as
no Event of Default exists hereunder, (ii) a transfer of Property to Borrower by
a Subsidiary, or (iii) dispositions expressly authorized by SECTION 6.4.
(N) NAME OF BORROWER. Use any corporate name (other than
its own) or any fictitious name, tradestyle or "d/b/a" except for the names
disclosed on EXHIBIT F attached hereto.
(O) BILL-AND-HOLD SALES, ETC. Make a sale to any customer
on a bill-and-hold, guaranteed sale, sale and return, sale on approval or
consignment basis, or any sale on a repurchase or return basis.
(P) USE OF LENDER'S NAME. Without the prior written
consent of Lender, use the name or trademark of Lender or the name or trademark
of any affiliates of Lender in connection with any of Borrower's business or
activities, except in connection with internal business matters, as required in
dealings with governmental agencies and financial institutions and to trade
creditors of Borrower solely for credit reference purposes.
(Q) MARGIN SECURITIES. Own, purchase or acquire (or enter
into any contract to purchase or acquire) any "margin security" as defined by
any regulation of the Federal Reserve Board as now in effect or as the same may
hereafter be in effect unless, prior to any such purchase or acquisition or
entering into any such contract, Lender shall have received an opinion of
counsel satisfactory to Lender to the effect that such purchase or acquisition
will not cause this Agreement to violate Regulations G, T, U or X or any other
regulation of the Federal Reserve Board then in effect.
(R) RESTRICTED INVESTMENT. Make or have, or permit any
Subsidiary to make or have, any Restricted Investment.
(S) FISCAL YEAR. Change, or permit any Subsidiary to
change, its fiscal year, or permit any Subsidiary to have a fiscal year
different from that of Borrower.
(T) STOCK OF SUBSIDIARY, ETC. Sell or otherwise dispose
of any Security of any Subsidiary, except in connection with a transaction
permitted under SECTION 8.2(A), or permit any Subsidiary to issue any additional
shares of its capital stock except director's qualifying shares.
(U) LEASES. Become a lessee under (i) any operating lease
(other than a lease under which Borrower is lessor) of Property if the aggregate
Rentals payable during any current or future period of twelve consecutive months
under the lease in question and all other leases under which Borrower is then
lessee (other than the Time Charter) would exceed $350,000, or (ii) the Time
Charter unless the terms and conditions thereof are approved by Borrower's Board
of Directors and acceptable to Lender.
(V) TAX CONSOLIDATION. File or consent to the filing of
any consolidated income tax return with any Person other than a Subsidiary.
(W) PREPAYMENTS. Make, or permit any Subsidiary to make,
any prepayment of any part or all of any Money Borrowed, except that (i)
Borrower and its Subsidiaries may prepay outstanding Money Borrowed in
connection with a Purchase Money Lien from the proceeds of the sale of property
subject to such Lien, and (ii) Borrower may prepay Lender as provided in this
Agreement or any of the Other Agreements.
(X) COMPLIANCE WITH ENVIRONMENTAL LAWS. (i) Use any of
the Real Property or any portion thereof for the handling, processing, storage
or disposal of Hazardous Substances (other than the Lawful Substances), (ii)
cause or permit to be located on any of the Real Property any underground tank
or other underground storage receptacle for Hazardous Substances, (iii) generate
any Hazardous Substances on any of the Real Property, (iv) conduct any activity
at any Real Property or any other location or use any Real Property in any
manner so as to cause a Release or threatened Release of Hazardous Substances
on, upon or into the Real Property, or (v) otherwise conduct any activity at any
Real Property or any other location or use any Real Property or any other
location in any manner that would violate any Environmental Law or bring such
Real Property in violation of any Environmental Law.
(Y) AMEND ANY PENSION PLAN. Amend any Pension Plan so as
to require security to be provided pursuant to IRC Section 401(a)(29).
8.3. SPECIFIC FINANCIAL COVENANTS. During the term of this Agreement,
and thereafter for so long as there are any Obligations to Lender, Borrower
covenants that, unless otherwise consented to by Lender in writing, it shall:
(A) MAINTAIN INCOME FROM OPERATIONS. As calculated on the last
day of each quarter for the twelve (12) consecutive months then ended, maintain,
on a Consolidated basis, Income from Operations of not less than Five Million
Dollars ($5,000,000).
(B) MAXIMUM LEVERAGE RATIO. Maintain, on a Consolidated basis, a
ratio of (i) total Indebtedness to (ii) Adjusted Tangible Net Worth of not more
than the ratio shown below as calculated on the last day of each quarter during
the periods corresponding thereto:
PERIOD RATIO
Closing Date through September 30, 1995 1.30 to 1.0
October 1, 1995 through September 30, 1996 1.25 to 1.0
October 1, 1996 and thereafter 1.15 to 1.0
(C) FIXED CHARGE COVERAGE RATIO. As calculated on the last day of
each quarter for the twelve (12) consecutive months then ended, maintain, on a
Consolidated basis, a Fixed Charge Coverage Ratio of not less than the ratio
shown below during the periods corresponding thereto:
PERIOD RATIO
Closing Date through December 31, 1995 10.0 to 1.0
Thereafter 7.0 to 1.0
(D) CURRENT RATIO. As calculated on the last day of each quarter,
maintain, on a Consolidated basis, a ratio of (i) Current Assets to (ii) Current
Liabilities (excluding the Revolving Credit Loans), of not less than 1.5 to 1.0.
SECTION 9. CONDITIONS PRECEDENT
Notwithstanding any other provision of this Agreement or any of the
other Loan Documents, and without affecting in any manner the rights of Lender
under the other Sections of this Agreement, it is understood and agreed that
Lender will not make any Loan under SECTION 2 unless and until each of the
following conditions has been and continues to be satisfied, all in form and
substance satisfactory to Lender and its legal counsel:
9.1. DOCUMENTATION. Lender shall have received the following
documents, each to be in form and substance satisfactory to Lender and its
counsel:
(A) certificates evidencing Borrower's casualty insurance
policies, together with endorsements naming Lender as loss payee and as
mortgagee pursuant to a standard mortgagee clause, and certificates evidencing
Borrower's liability insurance policies, together with endorsements naming
Lender as a co-insured;
(B) copies of all filing receipts or acknowledgments issued by
any governmental authority to evidence any filing or recordation necessary to
perfect the Liens of Lender in the Collateral and evidence to Lender that such
Liens constitute valid and perfected security interests and Liens, having the
Lien priority specified in SECTION 4.3(B);
(C) on or prior to the Closing Date, landlord or warehouseman
agreements with respect to all premises leased by Borrower, other than the
premises located at 1028 Jackson, Morgan City, Louisiana and prior to sixty (60)
days after the Closing Date, a landlord agreement for the premises located at
1028 Jackson, Morgan City, Louisiana;
(D) a copy of the Articles of Incorporation of Borrower, and all
amendments thereto, certified within fifteen (15) days before the Closing Date
by the Secretary of State or other appropriate official of its jurisdiction of
incorporation;
(E) a copy of the bylaws of Borrower, and all amendments thereto,
certified as of the Closing Date by the Secretary of Borrower;
(F) good standing certificates for Borrower, issued within
fifteen (15) days before the Closing Date by the Secretary of State or other
appropriate official of Borrower's jurisdiction of incorporation and each
jurisdiction where the conduct of Borrower's business activities or the
ownership of its Properties necessitates qualification;
(G) a Closing Certificate signed by two (2) duly authorized
senior officers of Borrower dated as of the Closing Date, stating that (i) the
representations and warranties set forth in SECTION 7 are true and correct on
and as of such date, (ii) Borrower is on such date in compliance with all the
terms and provisions set forth in this Agreement, and (iii) on such date no
Default or Event of Default has occurred or is continuing;
(H) the Security Documents and the Guaranty duly executed,
accepted and acknowledged by or on behalf of each of the signatories thereto;
(I) the Other Agreements duly executed and delivered by Borrower;
(J) the favorable, written opinion of Robins, Kaplan, Miller &
Ciresi, counsel to Borrower, regarding Borrower, the Loan Documents and the
transactions contemplated by the Loan Documents, in form and substance
satisfactory to Lender and its legal counsel;
(K) duly executed agreement establishing the Dominion Account
with a financial institution acceptable to Lender for the collection or
servicing of the Accounts;
(L) documents delivered by Cal Dive to Lender which set forth the
status of its remediation efforts with respect to the Amelia, Louisiana
facility;
(M) Such documents, instruments and agreements as Lender shall
require, in its sole discretion, in connection with the remediation of the
Existing Environmental Violations;
(N) a Borrowing Base Certificate in the form of EXHIBIT X
attached hereto, reflecting that Borrower has Eligible Accounts and Equipment,
in which Lender has a perfected first priority Lien, in amounts sufficient in
value and amount to support the initial Revolving Credit Loan and Equipment Loan
in the amount requested by Borrower;
(O) a certificate regarding Equipment signed by a duly authorized
senior officer of Borrower dated the date hereof, reflecting the type, value and
location of Borrower's Equipment; and
(P) such other documents, instruments and agreements as Lender
shall reasonably request in connection with the foregoing matters, including,
without limitation, any items identified in the closing checklist delivered by
Lender to Borrower immediately prior to the Closing Date.
9.2. OTHER CONDITIONS. The following conditions have been and
shall continue to be satisfied:
(A) no Default or Event of Default shall exist;
(B) each of the conditions precedent set forth in the other Loan
Documents shall have been satisfied;
(C) since December 31, 1994, except for changes which are
reflected on the financial statements and notes through March 31, 1995 prepared
by management and submitted to Lender, there shall not have occurred any
material adverse change in the business, financial condition or results of
operations of Borrower or its Subsidiaries, or the existence or value of any
Collateral, or any event, condition or state of facts which would reasonably be
expected materially and adversely to affect the business, financial condition or
results of operations of Borrower or its Subsidiaries;
(D) no action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain or prohibit, or to
obtain damages in respect of, or which is related to or arises out of this
Agreement or the consummation of the transactions contemplated hereby or which,
in Lender's discretion, would make it inadvisable to consummate the transactions
contemplated by this Agreement or any of the other Loan Documents;
(E) Borrower shall have paid all expenses of Lender pursuant to
any invoices presented to Borrower relating to the negotiation, preparation and
execution of the Loan Documents, including, without limitation, reasonable
attorneys' fees;
(F) all representations and warranties made by Borrower to Lender
in the Loan Documents shall be true and correct;
(G) Borrower shall have paid to Lender all fees required by
SECTION 3 to be paid on the Closing Date; ---------
(H) Lender's servicing requirements for the Loans shall have been
approved by Lender's division credit officer; and
(I) all covenants in this Agreement shall have been approved by
Lender's division credit officer.
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
10.1. EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an "EVENT OF DEFAULT":
(A) PAYMENT OF EQUIPMENT NOTE. Borrower shall fail to pay any
installment of principal, interest or premium, if any, owing on the Equipment
Note on the due date of such installment.
(B) PAYMENT OF OTHER OBLIGATIONS. Borrower shall fail to pay any
of the Obligations that are not evidenced by the Equipment Note on the due date
thereof (whether due at stated maturity, on demand, upon acceleration or
otherwise) and such failure to pay is not remedied within ten (10) days.
(C) MISREPRESENTATIONS. Any warranty, representation, or other
statement made or furnished to Lender by or on behalf of Borrower or in any
instrument, certificate or financial statement furnished in compliance with or
in reference to this Agreement or any of the other Loan Documents proves to have
been false or misleading in any material respect when made or furnished.
(D) BREACH OF COVENANTS. Borrower shall fail or neglect to
perform, keep or observe (i) any covenant contained in SECTIONS 4.2, 4.3, 4.5,
4.6, 5.4(B), 6.4, 8.1(A), 8.1(F), 8.1(I), 8.1(J), 8.1(O), 8.2 or 8.3 of this
Agreement or (ii) any other covenant contained in this Agreement (other than a
covenant of default of which the performance or observance is dealt with
specifically elsewhere in this SECTION 10.1) and the breach of such other
covenant is not cured to Lender's satisfaction within thirty (30) days after the
sooner to occur of Borrower's receipt of notice of such breach from Lender or
the date on which such failure or neglect becomes known to any officer of
Borrower.
(E) DEFAULT UNDER OTHER AGREEMENTS. Any event of default shall
occur under, or Borrower shall default in the performance or observance of any
term, covenant, condition or agreement contained in, any of the Other Agreements
and such default shall continue beyond any applicable period of grace.
(F) DEFAULT UNDER SECURITY DOCUMENTS. Any event of default shall
occur under, or Borrower shall default in the performance or observance of any
term, covenant, condition or agreement contained in, any of the Security
Documents and such default shall continue beyond any applicable period of grace.
(G) OTHER DEFAULTS. There shall occur an event of default on the
part of Borrower (including specifically, but without limitation, due to
nonpayment) under any agreement, document or instrument to which Borrower is a
party or by which Borrower or any of its Property is bound, creating or relating
to any Indebtedness greater than One Hundred Thousand Dollars ($100,000) (other
than the Obligations) if the payment or maturity of such Indebtedness is
accelerated in consequence of such event of default or demand for payment of
such Indebtedness is made.
(H) UNINSURED LOSSES; UNAUTHORIZED DISPOSITIONS. Any material
loss, theft, damage or destruction not fully covered by insurance (as required
by this Agreement and subject to deductibles), or sale, lease or encumbrance of
any of the Collateral or the making of any levy, seizure, or attachment thereof
or thereon except in all cases as may be specifically permitted by other
provisions of this Agreement.
(I) ADVERSE CHANGES. There shall occur any material adverse
change in the financial condition or business prospects of Borrower or a
material impairment of the prospect of repayment of all or any portion of the
Obligations.
(J) INSOLVENCY, ETC. Borrower shall cease to be Solvent or shall
suffer the appointment of a receiver, trustee, custodian or similar fiduciary,
or shall make an assignment for the benefit of creditors, or any petition for an
order for relief shall be filed by or against Borrower under the Bankruptcy Code
(if against Borrower, the continuation of such proceeding for more than thirty
(30) days), or Borrower shall make any offer of settlement, extension or
composition to their respective unsecured creditors generally.
(K) BUSINESS DISRUPTION; CONDEMNATION. There shall occur a
cessation of a substantial part of the business of Borrower for a period which
significantly affects Borrower's capacity to continue its business, on a
profitable basis; or Borrower shall suffer the loss or revocation of any license
or permit now held or hereafter acquired by Borrower which is necessary to the
continued or lawful operation of its business; or Borrower shall be enjoined,
restrained or in any way prevented by court, governmental or administrative
order from conducting all or any material part of its business affairs; or any
material lease or agreement pursuant to which Borrower leases, uses or occupies
any Property shall be cancelled or terminated prior to the expiration of its
stated term; or all or any material part of the Collateral shall be taken
through condemnation or the value of such Property shall be impaired through
condemnation.
(L) CHANGE OF MANAGEMENT OR OWNERSHIP. (i) Two (2) or more
members of the Management Group shall cease to be employed by Borrower in a
management capacity or (ii) the Management Group shall cease to control more
than thirty-three percent (33%) of the issued and outstanding capital stock of
Cal Dive, or Cal Dive shall cease to own and control, beneficially and of record
eighty percent (80%) of the issued and outstanding capital stock of ERT.
(M) ERISA. (i) Both events described in CLAUSES (A) and (B)
following shall occur: (a) either (w) proceedings have been instituted to
terminate, or a notice of termination has been filed with respect to, any
Pension Plan (other than a Multiemployer Plan) by any ERISA Affiliate, the PBGC
or any representative of either, or any such Pension Plan shall be terminated
under Section 4041 or Section 4042 of ERISA, (x) a Reportable Event has occurred
with respect to any Pension Plan (other than a Multiemployer Plan) and continues
for a period of sixty (60) days, (y) a Prohibited Transaction has occurred, or
(z) any other event or condition which constitutes grounds under Section 4042 of
ERISA for the termination of, or appointment of a trustee to administer, a
Pension Plan has occurred, and (b) the sum of any liability to PBGC under
Section 4062 of ERISA, PLUS the currently payable obligations of any ERISA
Affiliate to fund liabilities under all Pension Plans (when aggregated with the
liabilities related to the events described in CLAUSE (A) above), shall have a
material adverse effect;
(ii) Any of the events described in CLAUSES (A), (B), or (C)
following shall occur with respect to any Multiemployer Plan: (a) any ERISA
Affiliate incurs a withdrawal liability under Section 4201 of ERISA, or (b) any
Multiemployer Plan is "in reorganization" as that term is defined in Section
4241 of ERISA, or (c) any such Multiemployer Plan is terminated under Section
4041A of ERISA; and the aggregate liability likely to be incurred by any ERISA
Affiliate as a result of all or any of the events occurring that are specified
in CLAUSES (A), (B) and (C) above when aggregated with any liabilities arising
pursuant to any event described in the preceding CLAUSE (I), shall have a
material adverse effect.
(iii) Borrower adopts or amends any Plan so as to create or
result in a liability or funding obligation that has a material adverse effect,
or when aggregated with all other liabilities described in this SECTION 10.1(N),
has a material adverse effect.
(N) LITIGATION. Borrower, First Reserve, or any Affiliate, shall
challenge or contest in any action, suit or proceeding the validity or
enforceability of this Agreement or any of the other Loan Documents, the
legality or enforceability of any of the Obligations or the perfection or
priority of any Lien granted to Lender.
(O) REPUDIATION OF OR DEFAULT UNDER GUARANTY AGREEMENT. ERT shall
revoke or attempt to revoke the Guaranty Agreement signed by ERT, or shall
repudiate its liability thereunder or shall fail to observe or comply with the
terms thereof.
(P) CRIMINAL FORFEITURE. Borrower shall be criminally indicted or
convicted under any law that could lead to a forfeiture of any material Property
of Borrower.
(Q) JUDGMENTS. Any money judgment, writ of attachment or similar
process is entered or filed against Borrower or any of its Property and results
in the creation or imposition of any Lien that is not a Permitted Lien.
(R) ENVIRONMENTAL MATTERS. Borrower shall (i) (a) become
obligated to pay in excess of Two Hundred Fifty Thousand Dollars ($250,000) for
uninsured damages, costs or remedial actions arising from the Existing
Environmental Violations, and (b) fail to pay or secure adequate financing from
Persons other than Lender to pay for all such excess damages, costs or remedial
actions, or (ii) fail to comply in any material respect with any order, decree,
ruling, or plan issued by the Environmental Protection Agency or any other
federal, state or local governmental authority regarding any investigation,
remediation or clean-up of the Existing Environmental Violations or any other
Environmental Violation arising subsequent to the Closing Date.
10.2. ACCELERATION OF THE OBLIGATIONS. Without in any way limiting the
right of Lender to demand payment of any portion of the Obligations payable on
demand in accordance with SECTION 3.6 hereof, upon or at any time after the
occurrence of an Event of Default as above provided, all or any portion of the
Obligations due or to become due from Borrower to Lender (whether under this
Agreement, or any of the other Loan Documents or otherwise) shall, at Lender's
option (or, in the case of an Event of Default under SECTION 10.1(J) hereof,
immediately upon the occurrence thereof), become at once due and payable without
presentment, demand, protest, notice of dishonor, notice of default, notice of
intent to accelerate, notice of acceleration, or any other notice whatsoever,
and Borrower shall forthwith pay to Lender, in addition to any and all sums and
charges due, the entire principal of and interest accrued on the Obligations.
10.3. REMEDIES. Upon and after the occurrence of an Event of
Default, Lender shall have and may exercise from time to time the following
rights and remedies:
(A) All of the rights and remedies of a secured party under the
Code, the 1989 Act or under other applicable law, and all other legal and
equitable rights to which Lender may be entitled, all of which rights and
remedies shall be cumulative, and none of which shall be exclusive, and shall be
in addition to any other rights or remedies contained in this Agreement or any
of the other Loan Documents.
(B) The right to take immediate possession of the Collateral, and
(i) to require Borrower to assemble the Collateral, at Borrower's expense, and
make it available to Lender at a place designated by Lender which is reasonably
convenient to both parties, and (ii) to enter any of the premises of Borrower or
wherever any of the Collateral shall be located, and to keep and store the same
on said premises until sold (and if said premises be the Property of Borrower,
Borrower agrees not to charge Lender for storage thereof).
(C) The right to sell or otherwise dispose of all or any
Inventory or Equipment in its then condition, or after any further manufacturing
or processing thereof, at public or private sale or sales, with such notice as
may be required by law, in lots or in bulk, for cash or on credit, all as
Lender, in its discretion, may deem advisable. Borrower agrees that ten days
written notice to Borrower of any public or private sale or other disposition of
such Collateral shall be reasonable notice thereof, and such sale shall be at
such locations as Lender may designate in said notice. Lender shall have the
right to conduct such sales on Borrower's premises, without charge therefor, and
such sales may be adjourned from time to time in accordance with applicable law.
Lender shall have the right to sell, lease or otherwise dispose of such
Collateral, or any part thereof, for cash, credit or any combination thereof,
and Lender may purchase all or any part of such Collateral at public or, if
permitted by law, private sale and, in lieu of actual payment of such purchase
price, may set off the amount of such price against the Obligations.
(D) Lender is hereby granted a license or other right to use,
without charge, Borrower's labels, patents, copyrights, rights of use of any
name, trade secrets, trade names, trademarks and advertising matter, or any
Property of a similar nature, as it pertains to the Collateral, in advertising
for sale and selling any Collateral and Borrower's rights under all licenses and
all franchise agreements shall inure to Lender's benefit.
(E) The proceeds realized from the sale of any Collateral may be
applied, after allowing two Business Days for collection, first to the costs,
expenses and reasonable attorneys' fees incurred by Lender in collecting the
Obligations, in enforcing the rights of Lender under the Loan Documents and in
collecting, retaking, completing, protecting, removing, storing, advertising for
sale, selling and delivery any of the Collateral; secondly, to interest due upon
any of the Obligations; and thirdly, to the principal of the Obligations.
(F) With respect to the face amount of all LC Guaranties and
Letters of Credit issued by Lender or Bank Lender may, at its option, require
Borrower to deposit with Lender funds equal to such face amount, and if Borrower
fails to promptly make such deposit, Lender may advance such amount as a
Revolving Credit Loan (whether or not such advance would cause the outstanding
balance of Revolving Credit Loans to exceed the Borrowing Base). Any such
deposit or advance shall be held by Lender as a reserve to fund future payments
on such LC Guaranties and future drawings against such Letters of Credit. At
such time as all LC Guaranties have been paid or terminated and all Letters of
Credit issued by Lender or Bank have been drawn upon or expired, any amounts
remaining in such reserve shall be applied against any outstanding Obligations,
or to the extent all Obligations have been indefeasibly paid in full, returned
to Borrower.
10.4. REMEDIES CUMULATIVE; NO WAIVER. All covenants, conditions,
provisions, warranties, guaranties, indemnities, and other undertakings of
Borrower contained in this Agreement and the other Loan Documents, or in any
document referred to herein or contained in any agreement supplementary hereto
or in any schedule or in any Guaranty Agreement given to Lender or contained in
any other agreement between Lender and Borrower, heretofore, concurrently, or
hereafter entered into, shall be deemed cumulative to and not in derogation or
substitution of any of the terms, covenants, conditions, or agreements of
Borrower herein contained or of any of the other rights or remedies of Lender as
provided by any applicable law or in equity. The failure or delay of Lender to
exercise or enforce any rights, Liens, powers, or remedies hereunder or under
any of the aforesaid agreements or other documents or security or Collateral or
other rights or remedies shall not operate as a waiver of such Liens, rights,
powers and remedies, but all such Liens, rights, powers, and remedies shall
continue in full force and effect until all Loans and all other Obligations
owing or to become owing from Borrower to Lender shall have been fully
satisfied, and all Liens, rights, powers, and remedies herein provided for are
cumulative and none are exclusive.
SECTION 11. MISCELLANEOUS
11.1. POWER OF ATTORNEY. Borrower hereby irrevocably designates, makes,
constitutes and appoints Lender (and all Persons designated by Lender) as
Borrower's true and lawful attorney (and agent-in-fact) and Lender, or Lender's
agent, may, in either Borrower's or Lender's name, but at the cost and expense
of Borrower:
(A) At such time or times hereafter as Lender or said agent may
determine and after notice to Borrower, endorse Borrower's name on any checks,
notes, acceptances, drafts, money orders or any other evidence of payment or
proceeds of the Collateral which come into the possession of Lender or under
Lender's control; and
(B) At such time or times upon or after the occurrence of an
Event of Default as Lender or its agent may determine: (i) demand payment of the
Accounts from the Account Debtors, enforce payment of the Accounts by legal
proceedings or otherwise, and generally exercise all of Borrower's rights and
remedies with respect to the collection of the Accounts; (ii) settle, adjust,
compromise, discharge or release any of the Accounts or other Collateral or any
legal proceedings brought to collect any of the Accounts or other Collateral;
(iii) sell or assign any of the Accounts and other Collateral upon such terms,
for such amounts and at such time or times as Lender deems advisable; (iv) take
control, in any manner, of any item of payment or proceeds relating to any
Collateral; (v) prepare, file and sign Borrower's name to a proof of claim in
bankruptcy or similar document against any Account Debtor or to any notice of
lien, assignment or satisfaction of lien or similar document in connection with
any of the Collateral; (vi) receive, open and dispose of all mail addressed to
Borrower and to notify postal authorities to change the address for delivery
thereof to such address as Lender may designate; (vii) endorse the name of
Borrower upon any of the items of payment or proceeds relating to any Collateral
and deposit the same to the account of Lender on account of the Obligations;
(viii) endorse the name of Borrower upon any chattel paper, document,
instrument, invoice, freight bill, bill of lading or similar document or
agreement relating to the Accounts, Inventory and any other Collateral; (ix) use
Borrower's stationery and sign the name of Borrower to verifications of the
Accounts and notices thereof to Account Debtors; (x) use the information
recorded on or contained in any data processing equipment and computer hardware
and software relating to the Accounts, Inventory, Equipment and any other
Collateral and to which Borrower has access; (xi) make and adjust claims under
policies of insurance; and (xii) do all other acts and things necessary, in
Lender's determination, to fulfill Borrower's obligations under this Agreement.
11.2. INDEMNITY. Borrower hereby indemnifies, holds harmless, and shall
defend Lender and its directors, officers, agents, counsel and employees
("INDEMNIFIED PERSONS") from and against any and all losses, liabilities,
damages, costs, expenses, suits, actions and proceedings ("LOSSES") ever
suffered or incurred by any Indemnified Person arising out of or relating to
this Agreement or any other transaction contemplated hereby, including, without
limitation, any Losses caused by the negligence of such Indemnified Person, but
not including any Losses caused by the gross negligence or willful misconduct of
such Indemnified Person, and Borrower shall reimburse Lender and each other
Indemnified Person for any expenses (including in connection with the
investigation of, preparation for or defense of any actual or threatened claim,
action or proceeding arising therefrom, including any such costs of responding
to discovery requests or subpoenas, regardless of whether Lender or such other
Indemnified Person is a party thereto). Without limiting the generality of the
foregoing, this indemnity shall extend to any claims asserted against Lender or
any other Indemnified Person by any Person under any Environmental Laws or
similar laws by reason of Borrower's or any other Person's failure to comply
with laws applicable to solid or hazardous waste materials or other toxic
substances. Borrower may select counsel with respect to any Losses; PROVIDED,
HOWEVER, each Indemnified Person shall have the right to monitor the progress of
any claims, suits and administrative proceedings defended by Borrower hereunder
with counsel of such Indemnified Person's choice, or conduct its defense through
counsel of such Indemnified Person's choice, in the event that (i) such
Indemnified Person determines in good faith that the conduct of its defense by
Borrower could be materially prejudicial to such Indemnified Person's interests
or that other reasonable grounds exist which demonstrate a lack of effectiveness
or high level of quality in the conduct of such defense by Borrower, and (ii)
prior to retaining such counsel for such purpose, such Indemnified Person shall
consult with Borrower and shall attempt in good faith to agree upon counsel to
conduct the defense on behalf of Borrower and such Indemnified Person, and in
each case the fees and disbursements of such counsel shall be paid by Borrower;
PROVIDED, HOWEVER, that if such mutual agreement is not reached within a
reasonable time on selecting counsel, then such Indemnified Person may retain
its own counsel at Borrower's expense. Notwithstanding any contrary provision of
this Agreement, the obligation of Borrower under this SECTION 11.2 shall survive
the payment in full of the Obligations and the termination of this Agreement.
11.3. MODIFICATION OF AGREEMENT. This Agreement and the other Loan
Documents may not be modified, altered or amended, except by an agreement in
writing signed by Borrower and Lender.
11.4. REIMBURSEMENT OF EXPENSES. Without limiting Borrower's obligations
for payment of expenses as provided elsewhere in this Agreement or in any other
Loan Document, if, at any time or times prior or subsequent to the date hereof,
regardless of whether or not an Event of Default then exists or any of the
transactions contemplated hereunder are concluded, Lender incurs any
out-of-pocket expenses (including, without limitation, the fees and expenses of
Lender's attorneys if Lender retains legal counsel) in connection with: (A) the
negotiation and preparation of the Loan Documents, any amendment or modification
of any Loan Documents; or (B) the administration of the Loan Documents and the
transactions contemplated thereby; (C) any litigation, contest, dispute, suit,
proceeding or action (whether instituted by Lender, Borrower or any other
Person) in any way relating to the Collateral, any Loan Documents, Lender's and
Borrower's relationship, or Borrower's affairs; (D) any attempt to enforce any
rights of Lender against Borrower or any other Person which may be obligated to
Lender by virtue of any Loan Documents, including, without limitation, the
Account Debtors; (E) the exercise or enforcement of any rights, remedies or
privileges of Lender under the Loan Documents or applicable law; (F) the
analysis of information received in connection with any Loan Documents; (G) the
audit or appraisal of any Collateral or Borrower's books and records; (H) the
granting of any consents or waivers requested in connection with the Loan
Documents; (I) the collection of any Obligations; or (J) any attempt to inspect,
verify, protect, preserve, restore, collect, sell, liquidate or otherwise
dispose of or realize upon the Collateral; then, in any such event, all
expenses, costs, charges and other fees incurred by Lender or its attorneys or
relating to any of the events or actions described in this SECTION 11.4 shall be
payable, on demand, by Borrower to Lender, and shall be additional Obligations
hereunder secured by the Collateral. Without limiting the generality of the
foregoing, such expenses, costs, charges and fees may include: recording costs;
appraisal costs; accountants' fees, costs and expenses; court costs and
expenses; photocopying and duplicating expenses; court reporter fees, costs and
expenses; attorney and paralegal fees, costs and expenses; long distance
telephone charges; air express charges; telegram and facsimile charges; wire
transfer fees; secretarial overtime charges; and expenses for travel, lodging
and food. Additionally, if any taxes (excluding taxes imposed upon or measured
by the net income of Lender) shall be payable on account of the execution or
delivery of any of the Loan Documents, or the creation of any of the Obligations
hereunder, by reason of any existing or hereafter enacted federal or state
statute, Borrower will pay all such taxes, including, but not limited to, any
interest and penalties thereon, and will indemnify and hold Lender harmless from
and against liability in connection therewith.
11.5. INDULGENCES NOT WAIVERS. Lender's failure, at any time or times
hereafter, to require strict performance by Borrower of any provision of this
Agreement shall not waive, affect or diminish any right of Lender thereafter to
demand strict compliance and performance therewith. Any suspension or waiver by
Lender of an Event of Default by Borrower under this Agreement or any of the
other Loan Documents shall not suspend, waive or affect any other Event of
Default by Borrower under this Agreement or any of the other Loan Documents,
whether the same is prior or subsequent thereto and whether of the same or of a
different type. None of the undertakings, agreements, warranties, covenants and
representations of Borrower contained in this Agreement or any of the other Loan
Documents and no Event of Default by Borrower under this Agreement or any of the
other Loan Documents shall be deemed to have been suspended or waived by Lender,
unless such suspension or waiver is by an instrument in writing specifying such
suspension or waiver and is signed by a duly authorized representative of Lender
and directed to Borrower.
11.6. SEVERABILITY. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
11.7. SUCCESSORS AND ASSIGNS. This Agreement and the other Loan
Documents shall be binding upon and inure to the benefit of the successors and
assigns of Borrower and Lender; PROVIDED, HOWEVER, that Borrower may not sell,
assign or transfer any interest in this Agreement or any other Loan Document, or
any portion thereof, including, without limitation, Borrower's rights, title,
interests, remedies, powers and duties hereunder or thereunder. Any purported
assignment by Borrower in violation of this SECTION 11.7 shall be void, without
Lender's prior written consent. Borrower hereby consents to Lender's sale,
assignment, transfer or of the disposition, at any time or times hereafter, of
this Agreement, any other Loan Document, or any other Obligations, or of any
portion hereof or thereof, including, without limitation, Lender's rights,
title, interests, remedies, powers, and duties hereunder or thereunder,
PROVIDED, HOWEVER, (a) no such sale, assignment, transfer or disposition may be
made to any supplier, customer or competitor of Borrower unless such Person is
an institutional investor or investment firm, and (b) Lender shall not sell any
participation in this Agreement, any other Loan Documents or any of the
Obligations without Borrower's prior written consent. In the case of an
assignment, the assignee shall have, to the extent of such assignment, the same
rights, benefits and obligations as it would have if it were the original
"Lender" hereunder and Lender shall be relieved of all obligations hereunder
upon any such assignment. In the case of a participation, Lender shall remain
solely responsible to Borrower for the performance of its obligations hereunder
and Borrower shall continue to deal solely and directly with Lender in
connection with Lender's rights and obligations under this Agreement. Without
limiting the foregoing, Borrower hereby consents to Lender's sale and assignment
of this Agreement, the other Loan Documents and the Obligations, including,
without limitation, Lender's rights, title, interests, remedies, powers and
duties hereunder, to Fleet Financial Group, or a Subsidiary thereof, and agrees
and acknowledges that such assignee shall have all rights, benefits and
obligations as its would have if it were the original "Lender" hereunder.
11.8. CUMULATIVE EFFECT; CONFLICT OF TERMS. The provisions of the Other
Agreements and the Security Documents are hereby made cumulative with the
provisions of this Agreement. Except as otherwise provided in SECTION 3.6 and
except as otherwise provided in any of the other Loan Documents by specific
reference to the applicable provision of this Agreement, if any provision
contained in this Agreement is in direct conflict with, or inconsistent with,
any provision in any of the other Loan Documents, the provision contained in
this Agreement shall govern and control.
11.9. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which counterparts taken together shall constitute but one and the
same instrument.
11.10. NOTICE. Except as otherwise provided herein, all notices,
requests and demands to or upon a party hereto shall be in writing and shall be
sent by certified or registered mail return receipt requested, by personal
delivery against receipt, or by telegraph or telex and, unless otherwise
expressly provided herein, shall be deemed to have been validly served, given or
delivered when delivered against receipt or one Business Day after deposit in
the U.S. mail postage prepaid, or, in the case of telegraphic notice, when
delivered to the telegraph company, or, in the case of telex notice, when sent,
answerback received, addressed as follows:
(A) If to Lender: Shawmut Capital Corporation
2711 North Haskell Avenue
Suite 2100
Dallas, Texas 75204
Attn.: Loan Administration Manager
With a copy to: Hughes & Luce, L.L.P.
1717 Main Street, Suite 2800
Dallas, Texas 75201
Attn.: Larry A. Makel, Esq.
(B) If to Borrower: Cal Dive International, Inc.
13430 Northwest Freeway,
Suite 350
Houston, Texas 77040-6013
Attn.: S. James Nelson, Jr.
With a copy to: Robins, Kaplan, Miller & Ciresi
800 LaSalle Avenue
Minneapolis, Minnesota 55402-2015
Attn.: Andrew C. Becher, Esq.
or to such other address as each party may designate for itself by like notice
given in accordance with this SECTION 11.10; PROVIDED, HOWEVER, that any notice,
request or demand to or upon Lender pursuant to SECTIONS 2.3 or 3.4 shall not be
effective until received by Lender. Any written notice that is not sent in
conformity with the provisions hereof shall nevertheless be effective on the
date that such notice is actually received by the noticed party.
11.11. LENDER'S CONSENT. Whenever Lender's consent is required to be
obtained under this Agreement, any of the Other Agreements or any of the
Security Documents as a condition to any action, inaction, condition or event,
Lender shall be authorized to give or withhold such consent in its good faith
discretion (unless otherwise specifically provided herein) and to condition its
consent upon the giving of additional collateral security for the Obligations,
the payment of money or any other matter.
11.12. TIME OF ESSENCE. Time is of the essence of this Agreement, the
Other Agreements and the Security Documents.
11.13. ENTIRE AGREEMENT. This Agreement and the other Loan Documents,
together with all other instruments, agreements and certificates executed by the
parties in connection therewith or with reference thereto, embody the entire
understanding and agreement between the parties hereto and thereto with respect
to the subject matter hereof and thereof and supersede all prior agreements,
understandings and inducements, whether express or implied, oral or written.
11.14. INTERPRETATION. No provision of this Agreement or any of the
other Loan Documents shall be construed against or interpreted to the
disadvantage of any party hereto by any court or other governmental or judicial
authority by reason of such party having or being deemed to have structured,
drafted or dictated such provision.
11.15. NO FIDUCIARY RELATIONSHIP OR JOINT VENTURE. No provision herein
or in any of the other Loan Documents and no course of dealing between the
parties hereto shall be deemed to create any fiduciary relationship between
Lender and Borrower or to create any partnership or joint venture between Lender
and Borrower.
11.16. PUBLICITY. Borrower hereby consents to the issuance of or
dissemination by Lender to the public of information describing the credit
accommodations entered into pursuant to this Agreement including, without
limitation, the names and addresses of Borrower, a general description of
Borrower's business and the use of Borrower's name and logo in connection
therewith.
11.17. DESTRUCTION OF BORROWER'S DOCUMENTS. Any documents, schedules,
invoices or other papers delivered to Lender may be destroyed or otherwise
disposed of by Lender one (1) month after they are delivered to or received by
Lender, unless Borrower requests, in writing, the return of the said documents,
schedules, invoices or other papers and makes arrangements, at Borrower's
expense, for their return; provided, that in no event shall Lender be liable to
Borrower for any failure to retain Borrower's records for any period of time or
to return such records to Borrower.
11.18. NONAPPLICABILITY OF ARTICLE 5069-15.01 ET SEQ. Borrower and
Lender hereby agree that, except for Section 15.10(b) thereof, the provisions of
Tex. Rev. Civ. Stat. Ann. art. 5069-15.01 et seq. (Vernon 1987) (regulating
certain revolving credit loans and revolving tri-party accounts) shall not apply
to this Agreement or any of the other Loan Documents.
11.19. NO PRESERVATION OR MARSHALING. Borrower agrees that Lender has no
obligation to preserve rights to the Collateral against prior parties or to
marshal any Collateral for the benefit of any Person.
11.20. GOVERNING LAW; CONSENT TO FORUM. THIS AGREEMENT HAS BEEN
NEGOTIATED, EXECUTED AND DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN
DALLAS, TEXAS. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TEXAS; PROVIDED, HOWEVER, THAT IF ANY OF THE
COLLATERAL SHALL BE LOCATED IN ANY JURISDICTION OTHER THAN TEXAS, THE LAWS OF
SUCH JURISDICTION SHALL GOVERN THE METHOD, MANNER AND PROCEDURE FOR FORECLOSURE
OF LENDER'S LIEN UPON SUCH COLLATERAL AND THE ENFORCEMENT OF LENDER'S OTHER
REMEDIES IN RESPECT OF SUCH COLLATERAL TO THE EXTENT THAT THE LAWS OF SUCH
JURISDICTION ARE DIFFERENT FROM OR INCONSISTENT WITH THE LAWS OF TEXAS. AS PART
OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS OF ANY PRESENT OR
FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF BORROWER OR LENDER, BORROWER
HEREBY CONSENTS AND AGREES THAT THE DISTRICT COURT OF DALLAS COUNTY, TEXAS, OR,
AT LENDER'S OPTION, THE UNITED STATES DISTRICT COURT FOR THE U.S. DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS, DALLAS DIVISION, SHALL HAVE EXCLUSIVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN BORROWER AND
LENDER PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATED
TO THIS AGREEMENT. BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND BORROWER
HEREBY WAIVES ANY OBJECTION WHICH BORROWER MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE
GRANTING FOR SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH
COURT. BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND
OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH
SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO BORROWER AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND THAT
SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF BORROWER'S ACTUAL
RECEIPT THEREOF OR THREE DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE
PREPAID. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE
RIGHT OF LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR
TO PRECLUDE THE ENFORCEMENT BY LENDER OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH
FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY
OTHER APPROPRIATE FORM OR JURISDICTION.
11.21. WAIVERS BY BORROWER. BORROWER WAIVES (A) THE RIGHT TO TRIAL BY
JURY (WHICH LENDER HEREBY ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR
COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN DOCUMENTS,
THE OBLIGATIONS OR THE COLLATERAL; (B) PRESENTMENT, DEMAND AND PROTEST AND
NOTICE OF PRESENTMENT, PROTEST, DEFAULT, NON-PAYMENT, INTENT TO ACCELERATE,
ACCELERATION, MATURITY, RELEASE, COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF
ANY OR ALL COMMERCIAL PAPER, ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS,
CHATTEL PAPER AND GUARANTIES AT ANY TIME HELD BY LENDER ON WHICH BORROWER MAY IN
ANY WAY BE LIABLE AND HEREBY RATIFIES AND CONFIRMS WHATEVER LENDER MAY DO IN
THIS REGARD; (C) NOTICE PRIOR TO TAKING POSSESSION OR CONTROL OF THE COLLATERAL
OR ANY BOND OR SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING
LENDER TO EXERCISE ANY OF LENDER'S REMEDIES; (D) THE BENEFIT OF ALL VALUATION,
APPRAISEMENT AND EXEMPTION LAWS; AND (E) NOTICE OF ACCEPTANCE HEREOF. BORROWER
ACKNOWLEDGES THAT THE FOREGOING WAIVERS ARE A MATERIAL INDUCEMENT TO LENDER'S
ENTERING INTO THIS AGREEMENT AND THAT LENDER IS RELYING UPON THE FOREGOING
WAIVERS IN ITS FUTURE DEALINGS WITH BORROWER. BORROWER WARRANTS AND REPRESENTS
THAT IT HAS REVIEWED THE FOREGOING WAIVERS WITH ITS LEGAL COUNSEL AND HAS
KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT. BORROWER HEREBY AGREES THAT IT SHALL
HAVE NO RIGHT TO REQUIRE LENDER TO TERMINATE LENDER'S SECURITY INTEREST IN THE
COLLATERAL OR IN ANY OF THE PROPERTY OF BORROWER UNTIL THE OCCURRENCE OF EACH OF
THE FOLLOWING: (I) PAYMENT IN FULL IN IMMEDIATELY AVAILABLE FUNDS OF ALL
OBLIGATIONS KNOWN EXISTING, THREATENED OR CLAIMED WHICH CAN BE GIVEN A MONETARY
VALUE; (II) TERMINATION OF THIS AGREEMENT IN ACCORDANCE WITH SECTION 3.3 OR 3.4;
AND (III) EXECUTION BY BORROWER AND BY ANY PERSON WHOSE LOANS TO BORROWER ARE
USED IN WHOLE OR IN PART TO SATISFY THE OBLIGATIONS OF AN AGREEMENT INDEMNIFYING
LENDER FROM ANY LOSS OR DAMAGE LENDER MAY INCUR AS THE RESULT OF DISHONORED
CHECKS OR OTHER ITEMS OF PAYMENT RECEIVED BY LENDER FROM BORROWER OR ANY ACCOUNT
DEBTOR AND APPLIED TO THE OBLIGATIONS, AND BORROWER HEREBY WAIVES ANY RIGHT TO
REQUIRE A TERMINATION OF LENDER'S SECURITY INTEREST PRIOR TO THE OCCURRENCE OF
EACH OF THE ABOVE-DESCRIBED EVENTS.
11.22. DTPA WAIVER. BORROWER HEREBY WAIVES ALL PROVISIONS OF THE
DECEPTIVE TRADE PRACTICES - CONSUMER PROTECTION ACT (TEX. BUS. & COM. CODE ANN.
SS.17.01 ET SEQ. (VERNON SUPP. 1987)), OTHER THAN SECTION 17.555 THEREOF
PERTAINING TO CONTRIBUTION AND INDEMNITY, AND EXPRESSLY WARRANTS AND REPRESENTS
THAT BORROWER (A) HAS ASSETS OF $5,000,000 OR MORE, (B) HAS KNOWLEDGE AND
EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT ENABLE BORROWER TO EVALUATE
THE MERITS AND RISKS OF THIS TRANSACTION, (C) IS NOT IN A SIGNIFICANTLY
DISPARATE BARGAINING POSITION RELATIVE TO LENDER, AND (D) HAS BEEN REPRESENTED
BY LEGAL COUNSEL IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT.
11.23. ORAL AGREEMENTS INEFFECTIVE. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES, AND THE SAME MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
11.24. RELEASE. CAL DIVE ACKNOWLEDGES AND AGREES THAT (A) IT HAS NO
CLAIMS, COUNTERCLAIMS, OFFSETS, CREDITS OR DEFENSES TO THE ORIGINAL LOAN
DOCUMENTS AND THE PERFORMANCE OF ITS OBLIGATIONS THEREUNDER, OR (B) IF IT HAS
ANY SUCH CLAIMS, COUNTERCLAIMS, OFFSETS, CREDITS OR DEFENSES TO THE ORIGINAL
LOAN DOCUMENTS AND/OR ANY TRANSACTION RELATED TO THE ORIGINAL LOAN DOCUMENTS,
SAME ARE HEREBY WAIVED, RELINQUISHED AND RELEASED IN CONSIDERATION OF LENDER'S
EXECUTION AND DELIVERY OF THIS AGREEMENT.
11.25. AMENDMENT AND RESTATEMENT. This Agreement and the Equipment Note
are given in amendment, restatement, renewal and extension (and not in
extinguishment or satisfaction) of the Original Loan Documents. With respect to
matters relating to the period prior to the date hereof, all the provisions of
the Original Loan Documents are hereby ratified and confirmed and shall remain
in full force and effect.
IN WITNESS WHEREOF, this Agreement has been duly executed in Dallas,
Texas, on the day and year specified at the beginning hereof.
BORROWER:
CAL DIVE INTERNATIONAL, INC.
By:
S. James Nelson, Jr.,
Executive Vice President and
Chief Financial Officer
ENERGY RESOURCE TECHNOLOGY, INC.
By:
Gerald G. Reuhl, Vice President
LENDER:
SHAWMUT CAPITAL CORPORATION
By:
Terri K. Lins, Vice President
EXHIBIT A
BORROWING NOTICE
(See Attached)
EXHIBIT B
FORM OF EQUIPMENT NOTE
(See Attached)
EXHIBIT C
CONTINGENCY RESERVE TERMS
Calculation of the Contingency Reserve
PURPOSE: A Contingency Reserve will be established on the A/R ("01")
line at any time Excess Availability is less than $2,000,000 to serve as a guard
against potential priming liens on the Collateral. The approval of the loan
transaction with Cal Dive and ERT was subject to the establishment of "triggers"
signaling the evaluation and adjustment of the Contingency Reserve.
ACCOUNTS RECEIVABLE: - The calculation of the exposure is quite involved,
therefore triggers have been approved whereby potentially diluting items are to
be reviewed against benchmarks monthly:
a) should Excess Availability exceed or equal $2,000,000 during any given month,
no Contingency Reserve will be required; and
b) should Excess Availability be less than $2,000,000 during any given month,
then the Contingency Reserve shall be determined as follows:
[Rental & third party + vessel rental + surveying] x ACCTS. PAYABLE TURNOVER
DAYS
30
TERM LOAN EXPOSURE - There exists the risk of potential priming liens on the
Collateral as the result of the Jones Act. As of the Closing Date, no additional
reserves are considered necessary. For so long as Excess Availability exceeds
$2,000,000, no further reserves in connection with the Jones Act will be
established. If however, Excess Availability drops below $2,000,000, the
Contingency Reserve shall be adjusted in accordance with the following formula:
a) = unpaid offshore salary/wages + vessel crew salary/wages
b) = materials + fuel + diving gases + catering + gear rental
c) = b x ACCTS. PAYABLE TURNOVER DAYS
30
The specific calculation will be as follows:
In Year one: a + c + equip. loan - 110% of OLV = incremental reserve
Thereafter: a + c + equip. loan - 100% of OLV = incremental reserve
EXHIBIT D
BUSINESS LOCATIONS
EXHIBIT A - Page 1
EXHIBIT E
JURISDICTIONS
EXHIBIT B - Page 1
EXHIBIT F
CORPORATE NAMES
EXHIBIT C - Page 1
EXHIBIT G
PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES
EXHIBIT D - Page 1
EXHIBIT H
CAPITAL STRUCTURE
(1) The number of authorized shares of common stock of Cal Dive is
2,000,000. The number of issued shares of common stock of Cal Dive is 1,894,801.
Cal Dive has 784,875 shares held in the treasury. Options to purchase a total of
approximately 20,900 shares are outstanding and a Stock Option Plan for
non-executive employees has been approved involving up to three (3%) percent of
Cal Dive's outstanding shares.
(2) There are no authorized shares of preferred stock.
(3) All of the issued shares of Cal Dive are fully paid and
nonassessable and are owned by the following persons:
See attached as to Cal Dive as to ERT, it has 1,000 shares authorized all of
which is issued to Cal Dive
(4) Borrower has no Subsidiaries, except the following:
State of Percent of Voting
NAME INCORPORATION STOCK BORROWER OWNS
Energy Resource Technology, Inc. Delaware 100%
EXHIBIT E - Page 1
EXHIBIT I
SHAREHOLDER AGREEMENTS
(See Attached)
EXHIBIT F - Page 1
EXHIBIT J
CONTRACTS RESTRICTING DEBTS
EXHIBIT G - Page 1
EXHIBIT K
LITIGATION
EXHIBIT H - Page 1
EXHIBIT L
PENSION PLANS
EXHIBIT I - Page 1
EXHIBIT M
TAX LIABILITY
EXHIBIT J - Page 1
EXHIBIT N
TAXING AUTHORITIES
EXHIBIT K - Page 1
EXHIBIT O
LABOR RELATIONS
EXHIBIT L - Page 1
EXHIBIT P
EXISTING ENVIRONMENTAL VIOLATIONS
Borrower has duly complied with, and its Property, business operations
and leaseholds are in compliance in all material respects with, the provisions
of all Environmental Laws applicable to Borrower, its Properties or the conduct
of its business, except for the following:
CAL DIVE INTERNATIONAL, INC.
Since August, 1993, Cal Dive has been required pursuant to Section 8.1(U) to
ensure that all Real Property remains in compliance with all Environmental Laws
and to promptly notify Lender upon the receipt of any written notice with regard
to any Hazardous Discharge or violation of Environmental Laws. Reference is made
to the monthly Compliance Certificate for the reporting of any such violations,
all of which have been satisfactorily resolved as of April 30, 1995.
ENERGY RESOURCE TECHNOLOGY
Since commencing offshore operations there have been minor oil spills (less than
10 gallons) required to be reported to either the MMS and/or EPA (see enclosed).
Both of these matters have been satisfactorily resolved as of April 30, 1995.
OPA 90
Borrower is not in compliance with the financial responsibility requirement of
the Offshore Pollution Act of 1990 ("OPA") and the interim regulations currently
in effect related thereto, which requires Borrower to establish and maintain
evidence of financial responsibility of $150,000,000 to meet the amount of
liability to which Borrower could be subjected under Section 2704(a) of OPA
because insurance for such amount is not available at a reasonable cost. Since
the situation affects a substantial majority of offshore operators and property
owners, the MMS has conducted public hearings to consider how this Section of
the law should be implemented. It is our understanding that a bill before the
U.S. House of Representatives would return the financial responsibility
threshold to a $35,000,000 requirement which existed prior to the enactment of
OPA.. Borrower agrees to use its best efforts to inform Lender of any changes to
the financial responsibility reqirement of OPA and its compliance therewith.
EXHIBIT M - Page 1
EXHIBIT Q
SURETY OBLIGATIONS
EXHIBIT N - Page 1
EXHIBIT R
CAPITALIZED LEASES
EXHIBIT O - Page 1
EXHIBIT S
OPERATING LEASES
EXHIBIT P - Page 1
EXHIBIT T
COMPLIANCE CERTIFICATE
(See Attached)
EXHIBIT Q - Page 1
EXHIBIT U
FORM OF TAX CERTIFICATE
(See Attached)
EXHIBIT R - Page 1
EXHIBIT V
GUARANTEES
EXHIBIT S - Page 1
EXHIBIT W
PERMITTED LIENS
1. any Liens reserved in leases for rent and for compliance with the terms
of the leases, with the U.S. government and others, for Hydrocarbons and
related properties and leased equipment, to the extent that any such
Lien does not materially impair the use of such Property covered by such
Lien for the purposes for which such Property is held by Borrower or
materially impair the value of such Property subject thereto.
2. Liens contained in joint operating, transportation, production handling
and other similar agreements necessary or desirable in the operation and
production of the Hydrocarbons from the Properties entered into by
Borrower or a predecessor in the ordinary course of business securing
amounts (other than for Money Borrowed) not yet due and payable or which
are being contested in good faith by appropriate proceedings diligently
conducted by Borrower and for which adequate reserves have been made
pursuant to GAAP.
EXHIBIT T - Page 1
EXHIBIT X
BORROWING BASE CERTIFICATE
(See Attached)
EXHIBIT U - Page 1
EXHIBIT Y
AMORTIZATION AMOUNT CALCULATION
(See Attached)
EXHIBIT V - Page 1
EXHIBIT W - Page 1
EXHIBIT W - Page 2
EXHIBIT 4.2
FIFTH AMENDMENT
TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS FIFTH AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
(this "AMENDMENT") is made and entered into this __ day of April, 1997, by and
among CAL DIVE INTERNATIONAL, INC., a Minnesota corporation ("CAL DIVE"), ENERGY
RESOURCE TECHNOLOGY, INC., a Delaware corporation ("ERT") (Cal Dive and ERT are
collectively referred to as the "BORROWERS"), and FLEET CAPITAL CORPORATION, a
Rhode Island corporation ("LENDER"), successor-in-interest by merger to Fleet
Capital Corporation, a Connecticut corporation, formerly known as Shawmut
Capital Corporation ("SHAWMUT").
RECITALS
A. Borrowers and Shawmut entered into that certain Amended and Restated
Loan and Security Agreement (as amended, modified and supplemented from time to
time, the "LOAN AGREEMENT"), dated as of May 23, 1995, as amended by the
following:
(i) that certain First Amendment to Amended and Restated Loan and
Security Agreement, dated as of September 29, 1995;
(ii) that certain Second Amendment to Loan Documents, dated as of
March 8, 1996;
(iii) that certain Third Amendment to Loan Agreement, dated October
2, 1996, but effective as of August 12, 1996; and
(iv) that certain Third Amendment to Amended and Restated Loan and
Security Agreement, dated January 7, 1997, but effective as of November
22, 1996, which amendment was in fact the fourth amendment to the Amended
and Restated Loan Agreement.
B. Borrowers have requested Lender to amend the Loan Agreement to, among
other things:
(i) increase the maximum amount of the revolving credit facility
from $30,000,000 to $40,000,000,
(ii) increase the maximum amount of the sub-limit under the
equipment term loan facility to $30,000,000,
FIFTH AMENDMENT -Page 1
April 29, 1997
<PAGE>
(iii) extend the term of the revolving credit and equipment term
loan facilities from May 22, 2000 to December 31, 2000,
(iv) modify the interest rate provisions by reducing the rate
applicable to Base Rate Loans from the Base Rate plus 0.5% to the Base
Rate and by reducing the rate applicable to Eurodollar Loans according to
the specific provisions set forth in this Amendment, and
(v) modify the financial covenants by revising the covenant
pertaining to the Fixed Charge Coverage Ratio, deleting the covenants
pertaining to the Current Ratio and minimum Income, and replacing the
covenant pertaining to the Leverage Ratio with a covenant pertaining to
maximum Indebtedness.
C. Borrowers have requested that Lender consent to, and waive any Default
(as defined in the Loan Agreement) or Event of Default (as defined in the Loan
Agreement) which may occur as a result of, the following transactions:
(i) The sale by Cal Dive, First Reserve (as defined in the Loan
Agreement) and the Management Group (as defined in the Loan Agreement) to
Coflexip, a French corporation or an affiliated company ("COFLEXIP"), and
Coflexip is to purchase from Cal Dive, First Reserve and the Management
Group, thirty-two percent (32%), in the aggregate, of the common stock of
Cal Dive (the "STOCK SALE"); and
(ii) The entry by Cal Dive into a joint venture (the "JOINT
VENTURE") with Coflexip, pursuant to which Cal Dive shall (a) own at least
fifty-one percent (51%) of the joint venture interest in the Joint
Venture, and (b) not contribute any Property to the Joint Venture, except
as approved in writing in advance by Lender.
Borrowers and Lender acknowledge that the Business Cooperation Agreement dated
April 11, 1997 between Cal Dive and Coflexip requires that the venturers of the
Joint Venture contribute capital and/or property to the Joint Venture free and
clear of all liens other than, in the case of Cal Dive, liens in favor of Lender
in connection with the Loan Agreement. Notwithstanding the requirement of the
Business Cooperation Agreement, Cal Dive agrees that it will not contribute
Property to the Joint Venture except as approved in writing in advance by
Lender.
D. Lender has agreed to release various properties of ERT that are subject
to existing negative pledge agreements, subject to, among other things, the
condition that upon the occurrence of a Default or Event of Default under the
Loan Agreement and the request of Lender, ERT shall promptly execute new
negative pledge agreements.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties, intending to be legally bound, agree as
follows:
FIFTH AMENDMENT -Page 2
April 29, 1997
<PAGE>
ARTICLE I
DEFINITIONS
1.01 Capitalized terms used in this Amendment are defined in the Loan
Agreement, as amended hereby, unless otherwise stated.
ARTICLE II
AMENDMENTS
2.01 DELETION OF CERTAIN DEFINITIONS. The definitions of "Current
Liabilities" and "Adjusted Tangible Net Worth" set forth in SECTION 1.1 of the
Loan Agreement are hereby deleted in their entirety.
2.02 ADDITION OF CERTAIN DEFINITIONS. SECTION 1.1 of the Loan Agreement is
hereby amended by adding thereto in alphabetical order the following
definitions:
"AVERAGE MONTHLY LOAN BALANCE - an amount equal to the quotient of
(i) the sum of the unpaid balance of all Loans owing by Borrower to Lender
at the end of each day for each calendar day during the month in question,
DIVIDED BY (ii) the number of days in such month."
"COFLEXIP ACCOUNT - An Account as to which the Account Debtor is
Coflexip, a French corporation, or an affiliated company; PROVIDED,
HOWEVER, that no such Account of Borrower shall be a Coflexip Account if
such Account is described in any of the lettered clauses of the definition
of an 'Eligible Account' contained in this Agreement (other than CLAUSES
(B), (E), (K), and (M) of such definition)."
"EBITDA - at any date of determination thereof, means Income From
Operations for the previous twelve (12) month period, PLUS depreciation,
amortization and other non-cash changes deducted in calculating Income
From Operations, and MINUS the Expected Maintenance Expenditures."
"EBITDA MULTIPLE - as calculated on the last day of each quarter, an
amount equal to the quotient of (i) the Total Commitment, DIVIDED BY (ii)
EBITDA."
"EXISTING APPLICABLE ANNUAL RATE - shall mean the 'Applicable Annual
Rate' as such term is defined by that certain Amended and Restated Loan
and Security Agreement, dated as of May 23, 1995, by and between Borrower
and Lender, as amended by (i) that certain First Amendment to Amended and
Restated Loan and Security Agreement, dated as of September 29, 1995, by
and between Borrower and Lender, (ii) that certain Second Amendment to
Loan Documents, dated as of March 8, 1996, by and between Borrower and
Lender, (iii) that certain Third Amendment to Loan Agreement, dated
October 2, 1996, but effective as of August 12, 1996, by and between
Borrower and Lender, and (iv) that certain Third Amendment to Amended and
Restated Loan and
FIFTH AMENDMENT -Page 3
April 29, 1997
<PAGE>
Security Agreement, dated January 7, 1997, but effective as of November
22, 1996, by and between Borrower and Lender."
"EXPECTED MAINTENANCE EXPENDITURES - shall mean (i) Two Million and
No/100 Dollars ($2,000,000) or (ii) such other higher amount as reasonably
determined by Lender based on (a) the Annual Maintenance Capital
Expenditure Report (excluding any extraordinary capital expenditures
[i.e., those over One Hundred Thousand and No/100 Dollars ($100,000) for
which the Shareholder Agreement requires preparation of an appropriation
for capital expenditures] submitted for board approval which are described
in the Annual Maintenance Capital Expenditure Report), and (b) changes
that may occur to Borrower's marine vessels (e.g., changes in numbers,
changes in configuration, etc.), applicable maritime rules and
regulations, or any other factor affecting the maritime industry or
Borrower's business."
"FIFTH AMENDMENT - the Fifth Amendment to Amended and Restated Loan
and Security Agreement, dated April __, 1997, by and between Borrower and
Lender."
"INITIAL PUBLIC OFFERING - shall mean an underwritten public
offering of Borrower's capital stock pursuant to a registration statement
filed under the Securities Act of 1933, as amended."
"MAINTENANCE CAPITAL EXPENDITURES - means expenditures made and
liabilities incurred for the maintenance (including, without limitation,
dry docking and machinery overhauls), but not the acquisition, of any
marine vessel owned or leased by Borrower, together with the related
Equipment and including Offshore Platforms."
"TOTAL COMMITMENT - shall mean Forty Million and No/100 Dollars
($40,000,000)."
2.03 AMENDMENT TO BORROWING BASE. The definition of "Borrowing Base" set
forth in SECTION 1.1 of the Loan Agreement is hereby amended and restated to
read as follows:
"BORROWING BASE - as at any date of determination thereof, an amount
equal to the lesser of:
(a) the Revolving Credit Commitment then in effect; or
(b) an amount equal to:
(i) (A) eighty-five percent (85%) (or after an Event of
Default, such lesser percentage as Lender may in its discretion
determine from time to time after providing Borrower with written
notice of such reduction, which discretion shall be exercised in
good faith) of the net amount of Eligible Accounts outstanding at
such date, PLUS (B) the lesser of Three Million Dollars ($3,000,000)
or 85% (or after an Event of Default, such lesser percentage as
Lender may in its discretion determine from time to time after
providing
FIFTH AMENDMENT -Page 4
April 29, 1997
<PAGE>
Borrower with written notice of such reduction, which discretion
shall be exercised in good faith) of the net amount of Coflexip
Accounts outstanding at such date;
PLUS
(ii) the lesser of (A) Four Million Dollars ($4,000,000)
or (B) eighty-five percent (85%) (or after an Event of Default, such
lesser percentage as Lender may in its discretion determine from
time to time after providing Borrower with written notice of such
reduction, which discretion shall be exercised in good faith) of the
amount of Unbilled Accounts outstanding at such date;
MINUS
(iii) an amount equal to the sum of (A) the face amount
of all Credit Enhancements outstanding at such date, (B) any amounts
which Lender may pay pursuant to any of the Loan Documents for the
account of Borrower, and (C) the Contingency Reserve, if any.
For purposes hereof, the net amount of Eligible Accounts at any time shall
be the face amount of such Eligible Accounts less (1) any and all returns,
rebates, discounts, (which may, at Lender's option, be calculated on
shortest terms), credits, allowances or sales, excise or other taxes of
any nature at any time granted, issued, owing, or claimed by Account
Debtors, outstanding or payable in connection with such Accounts at such
time, and (2) any interest, late fees, and services charges that may have
accrued on such Accounts by reason of the Account Debtors not having paid
the Accounts as they became due."
2.04 AMENDMENT TO CONTINGENCY RESERVE. The definition of "Contingency
Reserve" set forth in SECTION 1.1 of the Loan Agreement is hereby amended and
restated to read as follows:
"CONTINGENCY RESERVE - the reserve established by Lender in
accordance with the terms set forth on EXHIBIT C attached hereto. The
Contingency Reserve shall be in addition to and not in lieu of any other
reserve Lender may establish."
2.05 AMENDMENT TO ELIGIBLE ACCOUNTS. SUBSECTIONS (F), through (H) of the
definition of "Eligible Accounts" set forth in SECTION 1.1 of the Loan Agreement
are hereby amended and restated to read as follows:
"(f) it is due or unpaid from an Account Debtor (other than Ivory
Production Co. (if such Account is guaranteed by Blue Dolphin Energy
Borrower), J. Ray McDermott, Walter Oil & Gas Corp. or Zilkha Energy
Company) for more than ninety (90) days after the original invoice date;
or
FIFTH AMENDMENT -Page 5
April 29, 1997
<PAGE>
(g) it is due or unpaid from J. Ray McDermott, Walter Oil & Gas
Corp. or Zilkha Energy Company for more than one hundred-twenty (120) days
after the original invoice date; or
(h) [Intentionally Omitted]."
2.06 AMENDMENT TO EQUIPMENT COMMITMENT. The definition of "Equipment
Commitment" set forth in SECTION 1.1 of the Loan Agreement is hereby amended and
restated to read in its entirety as followings:
"EQUIPMENT COMMITMENT - as at any date of determination thereof, an
amount equal to (a) Thirty Million Dollars ($30,000,000), MINUS (b) the
aggregate amount of all monthly reductions that have been scheduled to
occur from the date of the Fifth Amendment through the date of
determination of the Equipment Commitment, each in an amount of Three
Hundred Twelve Thousand Five Hundred Dollars ($312,500), and each to occur
on the first day of each calendar month during the term hereof, commencing
on May 1, 1998 and continuing for each month thereafter."
2.07 AMENDMENT TO EURODOLLAR LOAN. The definition of "EURODOLLAR LOAN" set
forth in SECTION 1.1 of the Loan Agreement is hereby amended and restated in its
entirety to read as follows:
"EURODOLLAR LOAN - a Loan which bears interest at a rate that is
determined by reference to the Eurodollar Base Rate."
2.08 AMENDMENT TO REVOLVING CREDIT COMMITMENT. The definition of
"Revolving Credit Commitment" set forth in SECTION 1.1 of the Loan Agreement is
hereby amended and restated in its entirety to read as follows:
"REVOLVING CREDIT COMMITMENT - as at any date of determination
thereof, an amount equal to (a) Forty Million Dollars ($40,000,000), MINUS
(b) the aggregate principal amount of Equipment Loans outstanding at such
date, MINUS (c) the face amount of all Credit Enhancements outstanding at
such date."
2.09 AMENDMENT TO TOTAL CREDIT FACILITY. The preamble of SECTION 2 of the
Loan Agreement is hereby amended and restated to read as follows:
"Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, Lender agrees to make a total credit facility of up to Forty
Million Dollars ($40,000,000.00) available upon Borrower's request
therefor, as follows:"
2.10 AMENDMENT TO APPLICABLE ANNUAL RATE. SECTION 3.1(A) of the Loan
Agreement is hereby amended and restated to read as follows:
FIFTH AMENDMENT -Page 6
April 29, 1997
<PAGE>
"(A) INTEREST. Outstanding principal on the Loans shall bear
interest at the option of Borrower (subject to the terms and conditions
herein) at a rate based on either the Base Rate or Eurodollar Base Rate,
calculated daily, at the following rates per annum (individually called,
as applicable, an "APPLICABLE ANNUAL RATE").
(i) EXISTING EURODOLLAR LOANS. Each Eurodollar Loan
outstanding on the date of the Fifth Amendment shall continue to
bear interest at the Existing Applicable Annual Rate.
(ii) NEW EURODOLLAR LOANS. Subject to the limitations set
forth in clauses (A) and (B) of this SECTION 3.1(A)(II), each
Eurodollar Loan requested by Borrower pursuant to a Borrowing Notice
delivered to Lender after the date of the Fifth Amendment shall bear
interest, during the Eurodollar Interest Period selected by Borrower
for such Eurodollar Loan, at the Eurodollar Base Rate plus the
percentage indicated below that corresponds to the respective EBITDA
Multiple indicated below, as reported to Lender in the Compliance
Certificate most recently required to be delivered to Lender in
accordance with SECTION 8.1.J of this Agreement:
EBITDA MULTIPLE PERCENTAGE
less than 2.00 1.25%
equal to or greater than 2.00, and 1.50%
equal to or less than 2.25
equal to or greater than 2.26, and 1.75%
equal to or less than 2.75
equal to or greater than 2.76, and 2.25%
equal to or less than 3.00
greater than 3.00 2.50%
(a) Notwithstanding the foregoing, during the period
beginning the date of the Fifth Amendment and ending December
31, 1997, no Eurodollar Loan shall bear interest at a rate per
annum in excess of one and three-quarters percent (1.75%)
above the Eurodollar Base Rate for the Eurodollar Interest
Period applicable thereto.
(b) Notwithstanding the foregoing, if the Average
Monthly Loan Balance for any month is less than $15,000,000,
then no Eurodollar Loan requested by Borrower pursuant to a
Borrowing Notice delivered to Lender during the next
immediately following calendar month (and only during such
calendar month) shall bear interest during such next
FIFTH AMENDMENT -Page 7
April 29, 1997
<PAGE>
immediately following calendar month at a rate per annum in
excess of one and one-half percent (1.50%) above the
Eurodollar Base Rate for the Eurodollar Interest Period
applicable thereto.
(iii) BASE RATE LOANS. The Base Rate Loans shall bear interest
at a fluctuating rate per annum equal to the Base Rate.
The interest rate applicable to Base Rate Loans shall be increased
or decreased, as the case may be, by an amount equal to any increase
or decrease in the Base Rate, with such adjustments to be effective
as of the opening of business on the day that any such change in the
Base Rate becomes effective. The Base Rate in effect on the date
hereof shall be the Base Rate effective as of the opening of
business on the date hereof, but if this Agreement is executed on a
day that is not a Business Day, the Base Rate in effect on the date
hereof shall be the Base Rate effective as of the opening of
business on the last Business Day immediately preceding the date
hereof. Interest on the Loans shall be calculated daily, based on
the actual days elapsed over a three hundred sixty (360) day year.
Further, for the purpose of computing interest, all items of payment
received by Lender shall be applied by Lender (subject to final
payment of all drafts and other items received in form other than
immediately available funds) against the Obligations on the day of
receipt. The determination of when a payment is received by Lender
will be made in accordance with SECTION 3.6."
2.11 AMENDMENT TO DEFAULT RATE. SECTION 3.1(B) of the Loan Agreement,
which governs the Default Rate, is hereby amended by deleting the reference to
"two percent (2.00%)" therein and substituting "one percent (1.00%)" in lieu
therefor.
2.12 AMENDMENT TO UNUSED COMMITMENT FEE. SECTION 3.1(F) of the Loan
Agreement, which sets forth the unused commitment fee, is hereby amended and
restated in its entirety to read as follows:
"(F) UNUSED COMMITMENT FEE. Borrower shall pay to Lender a monthly
fee equal to three-eighths of one percent (0.375%) per annum of the amount
by which the Total Commitment exceeds the Average Monthly Loan Balance.
The unused commitment fee shall be payable monthly in arrears on the first
day of each calendar month, commencing on May 1, 1997 and continuing for
each month thereafter."
2.13 AMENDMENT TO LETTER OF CREDIT FEES. SECTION 3.1(H) of the Loan
Agreement, which sets forth the fees for Letters of Credit and LC Guaranties, is
hereby amended by deleting the reference to "two percent (2.00%)" therein and
substituting "one and one-quarter of one percent (1.25%)" in lieu therefor.
2.14 AMENDMENT TO ORIGINAL AND RENEWAL TERMS. SECTION 3.3 of the Loan
Agreement, which specifies the Original and Renewal Terms of the Agreement, is
hereby amended by (i) deleting the reference to "May 22, 2000" therein and
substituting "December 31,
FIFTH AMENDMENT -Page 8
April 29, 1997
<PAGE>
2000" in lieu therefor, and (ii) deleting the reference to "May 22, 2001"
therein and substituting "December 31, 2001" in lieu therefor.
2.15 AMENDMENT TO EARLY TERMINATION FEE. SECTION 3.4 of the Loan Agreement
is hereby amended and restated to read in its entirety as follows:
"3.4. EARLY TERMINATION BY BORROWER. Borrower may prepay the Loans
at any time during the term of this Agreement, in whole or in part,
without premium, penalty or liquidated damages. However, if Borrower
chooses to terminate the Revolving Credit Commitment, the Equipment
Commitment and this Agreement (all of which Borrower must terminate
simultaneously) in their entirety, Borrower shall give Lender at least
three (3) months prior written notice thereof, and, on the designated
termination date, all of the Obligations shall become due and payable, in
immediately available funds, and all Credit Enhancements issued by Lender
or Bank shall have expired or otherwise been terminated; PROVIDED,
HOWEVER, that, notwithstanding the foregoing, if Borrower terminates the
Revolving Credit Commitment, the Equipment Commitment and this Agreement
(all of which Borrower must terminate simultaneously) in their entirety
without giving Lender at least three (3) months prior written notice
thereof, Borrower shall pay Lender (in addition to the then outstanding
principal, accrued interest and other charges owing under the terms of
this Agreement and any of the other Loan Documents), as liquidated damages
for the loss of the bargain and not as a penalty, an amount equal to
one-half of one percent (.50%) of the Average Monthly Loan Balance."
2.16 AMENDMENT TO COVENANT REGARDING LIEN ON OIL AND GAS PROPERTIES. The
fourth sentence of SECTION 4.3 of the Loan Agreement, which pertains to liens on
oil and gas Properties, is hereby deleted in its entirety and replaced with the
following:
"Borrower further agrees that upon the request of Lender and after the
occurrence of an Event of Default, Borrower shall promptly execute and
deliver to Lender a Negative Pledge Agreement covering Borrower's interest
in the Offshore Platforms and other oil and gas Properties."
2.17 AMENDMENT TO COVENANT REGARDING DISPOSITIONS OF EQUIPMENT. SECTION
6.4 of the Loan Agreement is hereby deleted in its entirety and replaced with
the following:
"6.4. DISPOSITIONS. Borrower will not sell, lease or otherwise
dispose of or transfer any of the Equipment, any Offshore Platform or any
oil and gas Properties, or any part thereof without the prior written
consent of Lender; PROVIDED, HOWEVER, that the foregoing restriction shall
not apply to dispositions required by the United States government, or,
for so long as no Event of Default exists, to the following:
(A) dispositions of Offshore Platforms, oil and gas Properties
and related Equipment by ERT in the ordinary course of business;
PROVIDED, THAT, all proceeds thereof are delivered to Lender for
application to the Obligations in accordance with the terms of this
Agreement; or
FIFTH AMENDMENT -Page 9
April 29, 1997
<PAGE>
(B) replacement of Equipment that is substantially worn,
damaged or obsolete with Equipment of like kind, function and value;
PROVIDED, THAT, (i) the replacement Equipment shall be acquired
prior to or concurrently with any disposition of the Equipment that
is to be replaced, (ii) the replacement Equipment shall be free and
clear of Liens other than Permitted Liens, (iii) Borrower shall give
Lender at least five (5) days prior written notice of such
disposition, and (iv) Borrower shall deliver to Lender all proceeds
realized from any such disposition for application to the
Obligations.
None of the provisos or other exceptions to the restriction against
dispositions of Equipment or Offshore Platforms set forth in this SECTION
6.4 shall be construed to allow any disposition, whether by ERT or
otherwise, of a marine vessel on which Lender has been granted a Lien,
without the prior written consent of Lender."
2.18 AMENDMENT TO COVENANT REGARDING ENVIRONMENTAL LAWS. SECTION
8.1(U)(II) of the Loan Agreement, which pertains to maintenance of a system to
monitor compliance with Environmental Laws, is hereby amended and restated in
its entirety to read as follows:
"(ii) Establish and maintain a system to assure and monitor
continued compliance with all applicable Environmental Laws appropriate to
the nature of Borrower's business, and prepare a report that reviews the
adequacy and effectiveness of such system on an annual basis."
2.19 AMENDMENT TO COVENANT REGARDING EXCESS AVAILABILITY. SECTION 8.1(W)
of the Loan Agreement, which pertains to Excess Availability after giving effect
to certain acquisitions, is hereby amended and restated in its entirety to read
as follows:
"(W) EXCESS AVAILABILITY. After the occurrence of any Default or
Event of Default, maintain Excess Availability of (i) no less than Two
Million Dollars ($2,000,000) immediately prior to and after giving effect
to the acquisition of any oil and gas Properties by ERT, and (ii) no less
than Four Million Dollars ($4,000,000) immediately prior to and after
giving effect to the acquisition (excluding a lease arrangement) and
deployment of both a barge and a dive support vessel by Cal Dive."
2.20 ADDITION OF COVENANT REGARDING ANNUAL MAINTENANCE CAPITAL EXPENDITURE
REPORT. SECTION 8.1 of the Loan Agreement is hereby amended by adding thereto a
new SUBSECTION 8.1(X) which shall read as follows:
"(X) ANNUAL MAINTENANCE CAPITAL EXPENDITURE REPORT. As soon as
available, and in any event no later than January 31 of each year during
the Original Term and Renewal Term, if applicable, deliver to Lender an
annual report (the "ANNUAL MAINTENANCE CAPITAL EXPENDITURE REPORT")
estimating the amount and nature of Maintenance Capital Expenditures
needed to be incurred by Borrower during the next
FIFTH AMENDMENT -Page 10
April 29, 1997
<PAGE>
calendar year to maintain Borrower's fleet of marine vessels in good
operating condition."
2.21 ADDITION OF COVENANT REGARDING REPORTING OF LOCATIONS OF MARINE
VESSELS. SECTION 8.1 of the Loan Agreement is hereby amended by adding thereto a
new SUBSECTION 8.1(Y) which shall read as follows:
"(Y) REPORTING OF LOCATIONS OF MARINE VESSELS. Concurrently with the
delivery of the monthly unaudited interim financial statements of Borrower
and its Subsidiaries, as required by Section 8.1(J)(ii), deliver to Lender
a report identifying by name and location, the marine vessels of Borrower
and its Subsidiaries that, as of the end of the month covered by the
monthly unaudited financial statements then delivered to Lender, are
operating in waters outside of the territorial jurisdiction of the United
States."
2.22 AMENDMENT TO COVENANT REGARDING OPERATING LEASES AND TIME CHARTER.
SECTION 8.2(U) of the Loan Agreement is hereby amended and restated in its
entirety to read as follows:
"(U) LEASES. Become a lessee under (i) any operating lease (other
than a lease under which Borrower is lessor) of Property if the aggregate
Rentals payable during any current or future period of twelve consecutive
months under the lease in question and all other leases under which
Borrower is then lessee (other than the Time Charter) would exceed
$750,000; or (ii) the Time Charter, unless the terms and conditions
thereof are approved by Borrower's Board of Directors and acceptable to
Lender."
2.23 AMENDMENT TO FINANCIAL COVENANTS. SECTION 8.3 of the Loan Agreement
is hereby amended and restated in its entirety to read as follows:
"8.3. SPECIFIC FINANCIAL COVENANTS. During the term of this
Agreement, and thereafter for so long as there are any Obligations to
Lender, Borrower covenants that, unless otherwise consented to by Lender
in writing, it shall:
(A) MAXIMUM INDEBTEDNESS. Not incur or allow to exist
Indebtedness, as calculated at any time and from time to time, on a
Consolidated basis, in excess of Sixty Million Dollars ($60,000,000).
(B) FIXED CHARGE RATIO. As calculated on the last day of each
quarter for the twelve (12) consecutive months then ended, maintain, on a
Consolidated basis, a Fixed Charge Ratio of not less than 4.00 to 1.00."
2.24 AMENDMENT TO COVENANT REGARDING CHANGES IN MANAGEMENT AND OWNERSHIP.
SECTION 10.1(L) of the Loan Agreement is hereby amended and restated in its
entirety to read as follows:
FIFTH AMENDMENT -Page 11
April 29, 1997
<PAGE>
"(L) CHANGE OF MANAGEMENT OR OWNERSHIP. (i) Two (2) or more members
of the Management Group shall cease to be employed by Borrower in a
management capacity or (ii) the Management Group shall cease to control
more than twenty percent (20%) of the issued and outstanding capital stock
of Cal Dive, or (iii) Cal Dive shall cease to own and control,
beneficially and of record eighty percent (80%) of the issued and
outstanding capital stock of ERT. Notwithstanding the foregoing, at any
time after an Initial Public Offering the occurrence of the events
described in CLAUSES (I) and (II) above shall no longer constitute an
Event of Default under this Agreement."
2.25 AMENDMENT TO FORM OF EQUIPMENT NOTE. EXHIBIT B of the Loan Agreement,
the form of Equipment Note, is hereby deleted in its entirety and replaced with
EXHIBIT B attached hereto.
2.26 AMENDMENT TO CONTINGENCY RESERVE TERMS. EXHIBIT C of the Loan
Agreement, the Contingency Reserve Terms, is hereby deleted in its entirety and
replaced with EXHIBIT C attached hereto.
2.27 AMENDMENT TO BUSINESS LOCATIONS. EXHIBIT D of the Loan Agreement,
which lists all of the Borrower's business locations, is hereby deleted in its
entirety and replaced with EXHIBIT D attached hereto.
2.28 AMENDMENT TO CAPITAL STRUCTURE. EXHIBIT H of the Loan Agreement, the
capital structure of the Borrower, is hereby deleted in its entirety and
replaced with EXHIBIT H attached hereto.
2.29 AMENDMENT TO SHAREHOLDERS AGREEMENTS. EXHIBIT I of the Loan
Agreement, which describes all agreements and instruments binding on any of the
Borrower's shareholders relating to their ownership of shares of capital stock,
is hereby deleted in its entirety and replaced with EXHIBIT I attached hereto.
2.30 AMENDMENT TO PENSION PLANS. EXHIBIT L of the Loan Agreement, which
describes all of the Borrower's pension plans, is hereby deleted in its entirety
and replaced with EXHIBIT L attached hereto.
2.31 AMENDMENT TO TAX LIABILITIES. EXHIBIT M of the Loan Agreement, which
describes all material claims or questions concerning the Borrower's tax
liability, is hereby deleted in its entirety and replaced with EXHIBIT M
attached hereto.
2.32 AMENDMENT TO ENVIRONMENTAL LAWS. EXHIBIT P of the Loan Agreement,
which describes all existing violations of the Environmental Laws by the
Borrower, is hereby deleted in its entirety and replaced with EXHIBIT P attached
hereto.
2.33 AMENDMENT TO SECURITY OBLIGATIONS. EXHIBIT Q of the Loan Agreement,
which describes the Borrower's surety obligations, is hereby deleted in its
entirety and replaced with EXHIBIT Q attached hereto.
FIFTH AMENDMENT -Page 12
April 29, 1997
<PAGE>
2.34 AMENDMENT TO FORM OF COMPLIANCE CERTIFICATE. EXHIBIT T of the Loan
Agreement, the form of Compliance Certificate, is hereby deleted in its entirety
and replaced with EXHIBIT T attached hereto.
ARTICLE III
CONDITIONS PRECEDENT
3.01 CONDITIONS TO EFFECTIVENESS. The effectiveness of this Amendment is
subject to the satisfaction of the following conditions precedent, unless
specifically waived in writing by Lender:
(a) Lender shall have received this Amendment, duly executed by each
Borrower;
(b) Lender shall have received the Equipment Note in the form of
EXHIBIT B attached hereto, duly executed by each Borrower;
(c) Lender shall have received the Supplement No. 2 to First
Preferred Fleet Mortgage in the form of EXHIBIT V attached hereto, duly
executed by Cal Dive;
(d) a company general certificate certified by the Secretary or
Assistant Secretary of Cal Dive acknowledging (A) that Cal Dive's Board of
Directors has adopted, approved, consented to and ratified resolutions
which authorize the execution, delivery and performance by Cal Dive of
this Amendment and all other documents, agreements and promissory notes
contemplated herein, and (B) the names of the officers of the Cal Dive
authorized to sign this Amendment and all other documents, agreements and
promissory notes contemplated herein (including the certificates
contemplated herein) together with specimen signatures of such officers,
(e) a company general certificate certified by the Secretary or
Assistant Secretary of ERT acknowledging (A) that ERT's Board of Directors
has adopted, approved, consented to and ratified resolutions which
authorize the execution, delivery and performance by the Borrower of this
Amendment and all other documents, agreements and promissory notes
contemplated herein, and (B) the names of the officers of ERT authorized
to sign this Amendment and all other documents, agreements and promissory
notes contemplated herein (including the certificates contemplated herein)
together with specimen signatures of such officers,
(f) The representations and warranties contained herein and in the
Loan Agreement and the other Loan Documents shall be true and correct as
of the date hereof, as if made on the date hereof;
FIFTH AMENDMENT -Page 13
April 29, 1997
<PAGE>
(g) No Default or Event of Default shall have occurred and be
continuing, unless such Default or Event of Default has been specifically
waived in writing by Lender; and
(h) All corporate proceedings taken in connection with the
transactions contemplated by this Amendment and all documents, instruments
and other legal matters incident thereto shall be satisfactory to Lender
and its legal counsel.
ARTICLE IV
LIMITED WAIVER
4.01 LIMITED WAIVER. By execution of this Amendment and upon satisfaction
of the conditions set forth in SECTION 3.01 of this Amendment, Lender hereby
waives any Default or Event of Default arising under the Loan Agreement solely
by reason of: (i) the Borrower's violation of SECTION 8.2(E) of the Loan
Agreement resulting from the Borrower entering into the Joint Venture in
accordance with the terms described in RECITAL C(II) above; and (ii) the
Borrower's violation of SECTION 8.2(I) of the Loan Agreement resulting from the
Stock Sale in accordance with the terms described in RECITAL C(I) above. Except
as specifically provided in this SECTION 4.01, nothing contained in this
Amendment shall be construed as a waiver by Lender of any other covenant or
provision of the Loan Agreement, this Amendment or of any other Loan Document,
and the failure of Lender at any time or times hereafter to require strict
performance by Borrower of any provision thereof shall not waive, affect or
diminish any right of Lender to thereafter demand strict compliance therewith.
Lender hereby reserves all rights granted under the Loan Agreement, this
Amendment and any other Loan Document.
ARTICLE V
RATIFICATIONS, REPRESENTATIONS AND WARRANTIES
5.01 RATIFICATIONS. The terms and provisions set forth in this Amendment
shall modify and supersede all inconsistent terms and provisions set forth in
the Loan Agreement and the other Loan Documents, and, except as expressly
modified and superseded by this Amendment, the terms and provisions of the Loan
Agreement and the other Loan Documents are ratified and confirmed and shall
continue in full force and effect. Borrowers and Lender agree that the Loan
Agreement and the other Loan Documents, as amended hereby, shall continue to be
legal, valid, binding and enforceable in accordance with their respective terms.
5.02 REPRESENTATIONS AND WARRANTIES. Each Borrower hereby represents and
warrants to Lender that (a) the execution, delivery and performance of this
Amendment and any and all other Loan Documents executed and/or delivered in
connection herewith have been authorized by all requisite corporate action on
the part of Borrowers and will not violate the Articles or Certificate of
Incorporation or Bylaws of either Borrower; (b) presently effective resolutions
of such Borrower's Board of Directors authorize the execution, delivery and
performance of this Amendment and any and all other Loan Documents executed
and/or delivered in connection herewith; (c) the representations and warranties
contained in the Loan Agreement, as amended hereby, and any other Loan Document
are true and correct on and as of
FIFTH AMENDMENT -Page 14
April 29, 1997
<PAGE>
the date hereof and on and as of the date of execution hereof as though made on
and as of each such date; (d) no Default or Event of Default under the Loan
Agreement, as amended hereby, has occurred and is continuing, unless such
Default or Event of Default has been specifically waived in writing by Lender;
(e) each Borrower is in full compliance with all covenants and agreements
contained in the Loan Agreement and the other Loan Documents, as amended hereby;
and (f) each Borrower has not amended its Articles or Certificate of
Incorporation or its Bylaws since the date of the Loan Agreement, except for
such amendments, if any, which are attached hereto as EXHIBIT U.
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made in the Loan Agreement or any other Loan Document, including,
without limitation, any document furnished in connection with this Amendment,
shall survive the execution and delivery of this Amendment and the other Loan
Documents in accordance with SECTION 7.3 of the Loan Agreement, and no
investigation by Lender or any closing shall affect the representations and
warranties or the right of Lender to rely upon them.
6.02 REFERENCE TO LOAN DOCUMENTS. Each of the Loan Agreement and the other
Loan Documents, and any and all other agreements, documents or instruments now
or hereafter executed and delivered pursuant to the terms hereof or pursuant to
the terms of the Loan Documents, as amended hereby, are hereby amended so that
any reference in the Loan Agreement and such other Loan Documents to any other
Loan Document shall mean a reference to the Loan Documents as amended hereby.
6.03 EXPENSES OF LENDER. As provided in the Loan Agreement, Borrowers
agree to pay on demand all costs and expenses incurred by Lender in connection
with the preparation, negotiation, and execution of this Amendment and the other
Loan Documents executed pursuant hereto and any and all amendments,
modifications, and supplements thereto, including, without limitation, the costs
and fees of Lender's legal counsel, and all costs and expenses incurred by
Lender in connection with the enforcement or preservation of any rights under
the Loan Agreement, as amended hereby, or any other Loan Document, including,
without limitation, the costs and fees of Lender's legal counsel.
6.04 SEVERABILITY. Any provision of this Amendment held by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
6.05 SUCCESSORS AND ASSIGNS. This Amendment is binding upon and shall
inure to the benefit of Lender and Borrowers and their respective successors and
assigns, except that Borrowers may not assign or transfer any of their rights or
obligations hereunder without the prior written consent of Lender.
FIFTH AMENDMENT -Page 15
April 29, 1997
<PAGE>
6.06 COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an original,
but all of which when taken together shall constitute one and the same
instrument.
6.07 EFFECT OF WAIVER. No consent or waiver, express or implied, by Lender
to or for any breach of or deviation from any covenant or condition by Borrowers
shall be deemed a consent to or waiver of any other breach of the same or any
other covenant, condition or duty.
6.08 HEADINGS. The headings, captions, and arrangements used in this
Amendment are for convenience only and shall not affect the interpretation of
this Amendment.
6.09 APPLICABLE LAW. THIS AMENDMENT AND ALL OTHER LOAN DOCUMENTS (OTHER
THAN (I) THAT CERTAIN DEED OF COVENANTS, DATED NOVEMBER 29, 1996, EXECUTED BY
CAL DIVE IN FAVOR OF LENDER, (II) THAT CERTAIN MORTGAGE, DATED SEPTEMBER 16,
1996, EXECUTED BY CAL DIVE IN FAVOR OF LENDER AND RECORDED WITH THE REGISTRAR OF
BARBADIAN SHIPS LONDON, PURSUANT TO WHICH CAL DIVE GRANTED LENDER A LIEN ON THE
"BALMORAL SEA", (III) THAT CERTAIN MORTGAGE, DATED SEPTEMBER 16, 1996, EXECUTED
BY CAL DIVE IN FAVOR OF LENDER AND RECORDED WITH THE REGISTRAR OF BAHAMIAN SHIPS
LONDON, PURSUANT TO WHICH CAL DIVE GRANTED LENDER A LIEN ON THE "UNCLE JOHN",
AND (IV) THAT CERTAIN MORTGAGE, DATED OCTOBER 19, 1995, EXECUTED BY CAL DIVE IN
FAVOR OF LENDER AND RECORDED WITH THE REGISTRAR OF BAHAMIAN SHIPS LONDON,
PURSUANT TO WHICH CAL DIVE GRANTED LENDER A LIEN ON THE "WITCH QUEEN"), EXECUTED
PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE PERFORMABLE IN AND
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS.
6.10 FINAL AGREEMENT. THE LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS,
EACH AS AMENDED HEREBY, REPRESENT THE ENTIRE EXPRESSION OF THE PARTIES WITH
RESPECT TO THE SUBJECT MATTER HEREOF ON THE DATE THIS AMENDMENT IS EXECUTED. THE
LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS AMENDED HEREBY, MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NO
MODIFICATION, RESCISSION, WAIVER, RELEASE OR AMENDMENT OF ANY PROVISION OF THIS
AMENDMENT SHALL BE MADE, EXCEPT BY A WRITTEN AGREEMENT SIGNED BY BORROWERS AND
LENDER.
6.11 RELEASE. EACH BORROWER HEREBY ACKNOWLEDGES THAT AS OF THE DATE HEREOF
IT HAS NO DEFENSE, COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY
KIND OR NATURE WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY
PART OF ITS LIABILITY TO REPAY THE "OBLIGATIONS" OR TO SEEK
FIFTH AMENDMENT -Page 16
April 29, 1997
<PAGE>
AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR NATURE FROM LENDER. BORROWERS
HEREBY VOLUNTARILY AND KNOWINGLY RELEASE AND FOREVER DISCHARGE LENDER, ITS
PREDECESSORS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, SUCCESSORS AND ASSIGNS,
FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS,
EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR
UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT
LAW OR IN EQUITY (EXCEPT FOR POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF
ACTION, DAMAGES, COSTS, EXPENSES AND LIABILITIES CAUSED BY THE GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT OF LENDER, ITS PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS
AND ASSIGNS), ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS
AMENDMENT IS EXECUTED, WHICH SUCH BORROWER MAY NOW OR HEREAFTER HAVE AGAINST
LENDER, ITS PREDECESSORS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, SUCCESSORS AND
ASSIGNS), IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF
CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM
ANY "LOANS", INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING,
TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST
LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE LOAN
AGREEMENT OR OTHER LOAN DOCUMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS
AMENDMENT.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
FIFTH AMENDMENT -Page 17
April 29, 1997
<PAGE>
IN WITNESS WHEREOF, this Amendment has been executed as of April __, 1997.
BORROWERS:
CAL DIVE INTERNATIONAL, INC.
By: _____________________________________
S. James Nelson, Jr.,
Executive Vice President and Chief
Financial Officer
ENERGY RESOURCE TECHNOLOGY, INC.
By: _____________________________________
S. James Nelson, Jr., Treasurer
LENDER:
FLEET CAPITAL CORPORATION, formerly
known as Shawmut Capital Corporation
By: _____________________________________
Hance VanBeber, Vice President
EXHIBITS:
B - Form of Equipment Note
C - Contingency Reserve Terms
D - Business Locations
H - Capital Structure
I - Shareholder Agreements
L - Pension Plans
M - Tax Liability
P - Existing Environmental Liability
Q - Surety Obligations
T - Form of Compliance Certificate
U - Amendments to Articles/Certificate of Incorporation and Bylaws
V - Supplement No. 2 to First Preferred Fleet Mortgage
FIFTH AMENDMENT -Page 18
April 29, 1997
EXHIBIT 4.4
1997 AMENDED AND RESTATED SHAREHOLDERS AGREEMENT
This 1997 AMENDED AND RESTATED SHAREHOLDERS AGREEMENT, dated as of April
11, 1997 (this "Agreement"), among Cal Dive International, Inc., a Minnesota
corporation (the "Company"), Coflexip, a French corporation ("CSO"), First
Reserve Secured Energy Assets Fund, Limited Partnership, a Delaware limited
partnership ("SEA"), First Reserve Fund V, Limited Partnership, a Delaware
limited partnership ("Fund V"), First Reserve Fund V-2, Limited Partnership, a
Delaware limited partnership ("Fund V-2"), First Reserve Fund VI, Limited
Partnership, a Delaware limited partnership ("Fund VI"; together with SEA, Fund
V and Fund V-2, the "Fund Shareholders"), Gerald G. Reuhl, Owen E. Kratz and S.
James Nelson (the foregoing three individuals, the "Executives"), Gordon F.
Ahalt ("Ahalt") and each of the Other Company Shareholders (as herein defined).
RECITALS
The Company and CSO are parties to a Purchase Agreement, dated as of April
11, 1997 (the "Purchase Agreement"), which has been approved by the CDI
Shareholders and the Fund Shareholders, pursuant to which CSO will purchase
3,699,788 shares of the common stock of the Company without par value ("Common
Stock") as described in the Purchase Agreement.
CSO and the Company are parties to a 1997 Registration Rights Agreement,
dated as of April 11, 1997 (the "1997 Registration Rights Agreement").
The Fund Shareholders, the Executives, the Other Company Shareholders and
the Company are parties to an Amended and Restated Shareholders Agreement, dated
as of January 12, 1995 (the "Existing Shareholders Agreement"), which will be
terminated and be restated pursuant to this Agreement upon closing under the
Purchase Agreement.
CSO, the Fund Shareholders, the Executives, and other Company Shareholders
(collectively, the "Shareholders") desire to enter into this 1997 Amended and
Restated Shareholders Agreement for the purpose of (i) regulating certain
aspects of their relationship as holders of shares of Common Stock and (ii)
addressing certain corporate governance issues of the Company, including the
composition of the Board of Directors of the Company.
The execution and delivery of this Agreement is a condition precedent to
the closing pursuant to the Purchase Agreement.
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, receipt of which is
hereby acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
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<PAGE>
AGREEMENT
ARTICLE 1.
DEFINITIONS
1.1 DEFINED TERMS. For purposes of this Agreement, the following
terms shall have the following meanings:
"AFFILIATE" means, with respect to any Person, (i) any Person that
directly or indirectly controls, is controlled by or is under common
control with, such Person, or (ii) any director (other than an Independent
Director as described in Section 2.1(b)), officer, 5% or greater
shareholder or general partner of such Person or any Person specified in
clause (i) above, or (iii) any Immediate Family Member of any Person
specified in clause (i) or (ii) above.
"AGREEMENT" means this 1997 Amended and Restated Shareholders
Agreement, as the same may be amended, supplemented or otherwise modified
from time to time.
"BENEFICIALLY OWNED" has the meaning set forth in Rule 13d-3 of the
U.S. Securities and Exchange Commission.
"BOARD" means the Board of Directors of the Company.
"CAUSE" means (i) the commission of an act by a Director
constituting fraud, embezzlement or a felony, (ii) willful malfeasance or
willful misconduct by a Director involving a matter which could reasonably
be expected to have a material adverse effect on the Company or any of its
Subsidiaries in connection with the performance of his duties as such,
(iii) a final determination by a court of competent jurisdiction in the
United States that such Director, as such or in any other capacity
(whether or not relating to the Company), breached a fiduciary duty owed
by him to another Person, or (iv) any act involving moral turpitude which
causes material harm to the customer relations, operations or business
prospects of the Company or any of its Subsidiaries.
"CDI SHAREHOLDERS" means the collective reference to the Executives
and the Other Company Shareholders.
"COMMON STOCK" means the common stock without par value of the
Company.
"COMPETITOR" means any Person which competes (or has a Competitive
Investment in), directly or indirectly, in any material respect with the
Company or any of its Subsidiaries, including, without limitation,
American Oilfield Divers, Inc., SubSea International, Inc., Oceaneering
International, Inc., Global Industries, Ltd., and Stolt Comex Seaway SA,
but
- 2 -
<PAGE>
specifically SHALL NOT include CSO and/or its Affiliates; PROVIDED that an
institutional lender or investor or an investment fund, including any of
the Fund Shareholders or any other fund for which First Reserve
Corporation acts as advisor or general partner, which has or in the future
acquires or makes Competitive Investments in such business or other
investments of the equity of other businesses competing with the Company
or any of its Subsidiaries shall not be deemed a Competitor.
"COMPETITIVE INVESTMENTS" means an investment of more than 10% of the
common stock or other equity interest of any Competitor.
"CSO SHARES" means the Common Stock held by CSO or any other CSO
Shareholder.
"CSO SHAREHOLDERS" means CSO or any of its successors and/or assigns
under the terms hereof in their capacity as shareholders only.
"DIRECTOR" means a director on the Board appointed in accordance with
the provisions of this Agreement.
"EMPLOYEE STOCK AGREEMENTS" means the employee stock agreements
entered into from time to time between the Company and Employee
Shareholders relating to the purchase by such Employee Shareholders of
Shares.
"EXECUTIVE SHAREHOLDERS" means the Executives in their capacity as
shareholders only.
"EXECUTIVE SHARES" means the Common Stock held by any Executive.
"FUND SHAREHOLDER" means any Fund which is the beneficial owner of
Shares.
"FUND SHARES" means the Common Stock held by the Fund Shareholders.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or
other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"IMMEDIATE FAMILY MEMBER" means, with respect to any Person, a
spouse, parent, child or sibling (whether natural or adopted) of such
Person and any trust or other mechanism established for estate or tax
planning purposes solely for the benefit of any such Person's Immediate
Family Members.
- 3 -
<PAGE>
"1995 REGISTRATION RIGHTS AGREEMENT" means that certain Registration
Rights Agreement dated as of January 12, 1995, by and among the Company,
the Fund Shareholders and the Executives, individually and as Trustees, as
the same shall be amended pursuant to that certain letter agreement dated
April 11, 1997 among the Company, the Funds and CSO.
"1997 REGISTRATION RIGHTS AGREEMENT" means that certain Registration
Rights Agreement dated as of April 11, 1997 by and between the Company and
CSO.
"OTHER COMPANY SHAREHOLDERS" means employee and director shareholders
of the Company who individually own less than 125,000 shares.
"PERSON" means an individual, partnership, corporation, limited
liability company business trust, joint stock company, trust,
unincorporated association, joint venture, Governmental Authority or other
entity of whatever nature.
"PREFERRED STOCK" means preferred stock of the Company issued
pursuant to its Articles of Incorporation.
"PROXY" means, in the case of a proxy running from any Executive
Shareholder, CSO Shareholder or Fund Shareholder, any person designated by
them or any of them.
"PUBLIC OFFERING" means a public offering of the Common Stock of the
Company pursuant to an effective registration statement under the
Securities Act.
"QUALIFIED PUBLIC OFFERING" means an underwritten Public Offering
pursuant to which the Company receives proceeds, net of underwriting
discounts and commissions, of at least $35,000,000.
"SALE OF THE COMPANY" means (i) the sale (in a transaction or series
of related transactions (directly or indirectly to the same Person or an
Affiliate of such Person) involving the transfer, assignment or other
disposal of the Company's capital stock for value) of more than 50% of the
outstanding voting stock of, or equity interests in, the Company to any
Person or "group" of Persons (as such term is defined in the Securities
Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder) other than any Immediate Family Member of such
Shareholder; (ii) a liquidation of the Company or a sale of all or
substantially all of the Company's assets on a consolidated basis; or
(iii) a merger, consolidation or other business combination involving the
Company and another entity, whether or not the Company is the surviving
corporation, except where following such merger, consolidation or other
business combination, the existing shareholders of the Company immediately
prior to such merger, consolidation or other business combination will own
50% or more of the outstanding voting stock
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<PAGE>
of, or equity interests in, the surviving entity immediately following
such merger, consolidation or other business combination.
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time.
"SHAREHOLDERS" means all holders of Shares.
"SHARES" means (i) any Common Stock held by any Shareholder, now or
hereafter acquired, (ii) any other shares of any class or series of
capital stock of the Company, or options or warrants exercisable for or
convertible securities convertible or exchangeable for any class or series
of capital stock of the Company, now or hereafter acquired, and (iii) any
equity securities issued or issuable directly or indirectly with respect
to the capital stock referred to in clauses (i) and (ii) above by way of
stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization.
"STOCK OPTION PLAN" means any plan adopted by the Board from time to
time granting to employees or Directors rights to purchase, in the
aggregate, when combined with all other outstanding options or other
rights to purchase Common Stock from the Company, up to 10% (as adjusted
for any subsequent stock splits, stock dividends, recapitalizations or
similar events) of the issued and outstanding Common Stock.
"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership, limited liability company, business trust, joint stock
company, trust, unincorporated association , joint venture or other
business entity of which fifty percent (50%) or more of the total voting
power of shares of capital stock or other equity interest entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof, or fifty percent
(50%) or more of the capital stock or other equity interest therein, is at
the time owned or controlled, directly or indirectly, by any Person or one
or more of the other Subsidiaries of such Person or a combination thereof.
"SUBSIDIARY BOARD" means the board of directors of any Subsidiary of
the Company.
"SUPERMAJORITY VOTE" means, with respect to a vote of the Board ,
approval by sixty-two percent (62%) of the Directors then constituting the
entire Board, and with respect to a vote of the Shareholders, approval by
the holders of eighty percent (80%) or more of the issued and outstanding
Common Stock.
"THIRD PARTY" means any Person other than the Shareholders, the
Company or any of their respective Affiliates.
- 5 -
<PAGE>
"TRANSFER" means any transfer, sale, assignment, distribution,
exchange, mortgage, pledge, hypothecation or other disposition of or
encumbrance on Shares.
"VOTING TRUST" AND "VOTING TRUST CERTIFICATES" means that certain
Voting Trust Agreement dated July 27, 1990 and Voting Trust Certificates
issued pursuant thereto.
1.2 OTHER DEFINITIONAL PROVISIONS; INTERPRETATION.
(a) The words "hereof", "herein", and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section and
Schedule references are to this Agreement unless otherwise specified.
(b) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
ARTICLE 2.
BOARD OF DIRECTORS
2.1 ELECTION OF DIRECTORS. Each Shareholder hereby agrees that during
the term of this Agreement, such Shareholder will vote all of his Shares and any
other voting securities of the Company over which such Shareholder has voting
control and shall take all other necessary or desirable actions within his
control (whether in his capacity as a shareholder, Director, member of a Board
committee or officer of the Company or otherwise), and the Company shall take
all necessary and desirable actions within its control, in order to cause the
following:
(a) subject to the provisos set forth in Section 2.1(b) below, the
Board to consist of eleven (11) Directors;
(b) the election to the Board of
(i) two (2) designees of Fund V and V-2, who shall initially
be William E. Macaulay and David Kennedy and one (1) designee
of Fund V-1, who shall initially be Gerald M. Hage ( the
designees of the Fund Shareholders are collectively referred
to as the "Fund Directors:);
(ii) three (3) designees of CSO, who shall initially be
Jean-Bernard Fay, Tom Ehret and Kevin Peterson (the designees
of CSO are collectively referred to as the "CSO Directors");
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<PAGE>
(iii) three (3) designees of the holders of a majority of the
Executive Shares, who shall initially be Gerald G. Reuhl, Owen
E. Kratz, and S. James Nelson (the designees of the holders of
Executive Shares are collectively referred to as the
"Executive Directors"); and
(iv) two (2) designees to be chosen by a majority vote of the
Board, who are independent of and not Affiliates of any of the
Company, the CSO Shareholders and the Fund Shareholders (the
"Independent Directors"), who shall initially be Ahalt and a
second designee to be chosen by a majority of the Board based
on the recommendation of the Nominating Committee of the Board
established pursuant to Section 2.2 as promptly as practicable
after the date of this Agreement.
PROVIDED, FURTHER that if, at any time the Fund Shareholders cease to
own, in the aggregate (i) at least 15% of the outstanding capital
stock of the Company, the number of Fund Directors shall immediately
decrease to two (2) (and one (1) Fund Director shall resign) and the
Board shall immediately thereafter take all necessary and desirable
action to cause the aggregate number of Directors of the Company
under paragraph (a) of this Section 2.1 to decrease by one (1)
Director, (ii) at least 10% of the outstanding capital stock of the
Company, the number of Fund Directors shall immediately decrease to
one (1) (and one or two Fund Directors, as then necessary, shall
resign) and the Board shall immediately thereafter take all necessary
and desirable action to cause the aggregate number of Directors of
the Company under paragraph (a) of this Section 2.1 to decrease by
such number of Fund Directors as then resign or (iii) if the Fund
Shareholders cease to own at least 5% of the outstanding capital
stock of the Company, all the Fund Directors shall immediately resign
and the Board shall immediately thereafter take all necessary and
desirable action to cause the aggregate number of Directors of the
Company under paragraph (a) of this Section 2.1 to decrease by the
number of Fund Directors as then resign;
PROVIDED, FURTHER that if, at any time the CSO Shareholders cease to
own, in the aggregate (i) at least 15% of the outstanding capital
stock of the Company, the number of CSO Directors shall immediately
decrease to two (2) (and one (1) CSO Director shall resign) and the
Board shall immediately thereafter all necessary and desirable
action to cause the aggregate number of Directors of the Company
under paragraph (a) of this Section 2.1 to decrease by one (1)
Director, (ii) at least 10% of the outstanding capital stock of the
Company, the number of CSO Directors shall immediately decrease to
one (1) (and one or two CSO Directors, as then necessary, shall
resign) and the Board shall immediately thereafter take all
necessary and desirable action to cause the aggregate number of
Directors of the Company under paragraph (a) of this Section 2.1 to
decrease by such number of CSO Directors as then resign or (iii) if
the CSO Shareholders cease to own at least 5% of the outstanding
capital stock of the Company, all the CSO Directors shall
immediately resign and the Board shall
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<PAGE>
immediately thereafter take all necessary and desirable action to
cause the aggregate number of Directors of the Company under
paragraph (a) of this Section 2.1 to decrease by the number of CSO
Directors as then resign; PROVIDED, FURTHER that if, at any time the
CDI Shareholders cease to own, in the aggregate (i) at least 15% of
the outstanding capital stock of the Company, the number of
Executive Directors shall immediately decrease to two (2) (and one
(1) Executive Director shall resign) and the Board shall immediately
thereafter take all necessary and desirable action to cause the
aggregate number of Directors of the Company under paragraph (a) of
this Section 2.1 to decrease by one (1) Director, (ii) at least 10%
of the outstanding capital stock of the Company, the number of
Executive Directors shall immediately decrease to one (1) (and one
or two Executive Directors, as then necessary, shall resign) and the
Board shall immediately thereafter take all necessary and desirable
action to cause the aggregate number of Directors of the Company
under paragraph (a) of this Section 2.1 to decrease by such number
of Executive Directors as then resign or (iii) if the CDI
Shareholders cease to own at least 5% of the outstanding capital
stock of the Company, all the Executive Directors shall immediately
resign and the Board shall immediately thereafter take all necessary
and desirable action to cause the aggregate number of Directors of
the Company under paragraph (a) of this Section 2.1 to decrease by
the number of Executive Directors as then resign;
PROVIDED, FURTHER, that in the event the Company issues or sells any
shares of its capital stock or any securities that, directly or
indirectly, are exercisable, convertible or exchangeable into or for
shares of its capital stock in a Public Offering, the percentage
ownership threshold amounts of outstanding capital stock of the
Company contained in the provisos set forth above in this paragraph
(b) shall, to the extent each Shareholder group continues to own at
least 5% of the issued and outstanding capital stock of the Company
immediately prior to such Public Offering, be proportionately
decreased by multiplying each such percentage ownership threshold
amount by a fraction the numerator of which shall be the total number
of shares of capital stock of the Company outstanding immediately
prior to such Public Offering and the denominator of which shall be
the total number of shares of capital stock of the Company
outstanding immediately after the completion of such Public Offering
(including any over-allotment option relating thereto);
(c) the removal from the Board or a Subsidiary Board, subject to
applicable law, of (i) any Director designated hereunder at the
written request, with or without Cause, of the Person or Persons who
previously designated such Director pursuant to paragraph 2.1(b)
above or (ii) any Director for Cause at the written request of the
Board, following a Supermajority Vote of the Board, but only upon
such written request and under no other circumstances; PROVIDED
that, notwithstanding clause 2.1(b)(iii) above, if any Executive
Director elected pursuant to clause 2.1(b)(iii) above ceases to be
an employee of the Company or any of its Subsidiaries or a
shareholder of at least 5% of the issued and outstanding Shares,
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such Director shall be removed as a Director promptly upon the later
of the termination of his employment or cessation of ownership of at
least 5% of the issued and outstanding Shares;
(d) in the event that any Director designated hereunder for any
reason ceases to serve as a member of the Board or a Subsidiary
Board during his term of office, the Person or Persons who
previously designated such Director pursuant to paragraph 2.1(b)
above shall be entitled to designate a successor Director to fill
the vacancy created thereby on the terms and subject to the
conditions of this Section 2.1.
(e) so long as the CSO Shareholders or the Fund Shareholders or the
CDI Shareholders have the right to designate more than one (1)
Director pursuant to paragraph 2.1(b) above, the Company shall cause
the Directors designated by such Shareholder group then serving on
the Board to be apportioned among the various classes of Directors
in order to ensure that their respective terms expire in consecutive
years.
2.2 COMMITTEES OF THE BOARD. The Board shall in accordance with the
By-laws of the Company establish the following committees of the Board: (I) a
five-member Executive Committee comprised, subject to the provisions of Section
2.1 (b), of one Fund Director, one CSO Director, one Independent Director and
two Executive Directors (one of whom shall be the Chairman of the Board) which,
when the Board is not in session, shall exercise such power and authority of the
Board in the management of the business of the Company pursuant to the unanimous
vote of such Committee as the Board may from time to time authorize, (ii) a
four-member Audit Committee comprised of, subject to the provisions of Section
2.1(b), one Fund Director, one CSO Director and two Independent Directors, which
shall consult with the independent public auditors of the Company in connection
with such auditors' audit and review of the financial statements of the Company
and shall consult with the Company's Chief Financial Officer and staff in
connection with the preparation of the Company's financial statements, subject
to such limitations as the Board may from time to time impose; (iii) a
five-member Compensation Committee comprised of, subject to the provisions of
Section 2.1(b), one Fund Director, one CSO Director, one Executive Director and
two Independent Directors, which shall administer awards under any Stock Option
Plan and shall evaluate and make recommendations with respect to the
compensation arrangements of executive officers of the Company, subject to such
limitations as the Board may from time to time impose; and (iv) a three-member
Nominating Committee comprised of, subject to the provisions of Section 2.1(b),
one Fund Director, one CSO Director and one Executive Director, which shall be
responsible for searching for and selecting nominees to serve as Independent
Directors from a list of acceptable potential nominees prepared by the Fund
Director and CSO Director with the advice of the Executive Director, from which
list the Executive Director shall select a nominee.
2.3 EXPENSES, FEES AND D & O INSURANCE. The Company shall pay the
reasonable out-of-pocket expenses incurred by each Director in connection with
attending the meetings of the Board, any Subsidiary Board and any committee
thereof. In addition, the Company shall pay to each Independent
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Director a fee of $12,000 per year plus $2,000 for attending each of four (4)
regularly scheduled quarterly meetings, in each case payable in quarterly
installments on March 31, June 30, September 30 and December 31 of each year.
Furthermore, the independent Director will receive a fee of $250 for each
committee meeting he attends. The Company shall also maintain D&O insurance
coverage (including initial public offering and public company securities law
coverage) in such amounts and with such insurance carriers as determined by the
Board at all times during the term of this Agreement. The Board may amend this
Section 2.2 by a Supermajority Vote.
2.4 COMPETITORS AS DIRECTORS. Notwithstanding anything to the
contrary contained in this Article 2, no Shareholder shall vote or be required
to vote to elect any officer, director, employee, consultant, advisor, Affiliate
or partner of a Competitor (or Affiliate thereof), to the Board or any
Subsidiary Board; PROVIDED that the Person who designated such proposed Director
pursuant to paragraph 2.1 (b) hereof shall be entitled to designate a
substitute.
2.5 COMPANY INFORMATION. The Company shall deliver to the Directors
any and all financial and other information relating to the Company and its
Subsidiaries which may be reasonably requested from time to time, and the
Directors shall have access, during normal business hours and upon reasonable
notice, to such facilities and operations of the Company and its Subsidiaries as
may be reasonably requested from time to time.
ARTICLE 3.
IRREVOCABLE PROXY
In order to effectuate the provisions of Section 2.1(a), (b), (c),
(d) and (e), the CDI Shareholders, the Fund Shareholders and the CSO
Shareholders each hereby appoint the appropriate Proxy as his or its true and
lawful proxy and attorney-in fact, with full power of substitution, to vote at
any annual or special meeting of shareholders of the Company, or, if permitted
by law and the Company's Articles of Incorporation or By-Laws, to take action by
written consent in lieu of such meeting with respect to, or to otherwise take
action in respect of, all of the Shares owned or held of record by them in
connection with the matters set forth in Section 2.1(a),(b),(c),(d) and (e). The
Proxy may exercise the irrevocable proxy granted hereby at any time if the CSO
Shareholders, the CDI Shareholders or Fund Shareholders, as the case may be,
fail to comply with the provisions of Section 2.1(a),(b),(c), (d) and (e). Each
proxy granted hereby is irrevocable and is coupled with an interest. To
effectuate the provisions of Section 2.1(a), (b), (c), (d) and (e), the
Secretary of each of the Company and its Subsidiaries, or if there is no
Secretary, such other officer of the Company or its Subsidiary, as the case may
be, as the Board of the Company or its Subsidiary, as the case may be, may
appoint to fulfill the duties of the Secretary (the "Secretary"), shall not
record any vote or consent or other action contrary to the terms of Section
2.1(a), (b), (c), (d) or (e).
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ARTICLE 4.
RESTRICTIONS ON TRANSFER OF SHARES
4.1 LIMITATIONS ON TRANSFER OF SHARES. (a) Except as provided in this
Agreement and except for transfers contemplated or permitted by the Purchase
Agreement, each Shareholder hereby agrees that such Shareholder will not,
directly or indirectly, Transfer any Shares or Voting Trust Certificates (or any
interest therein).
(b) Each Shareholder hereby agrees that: (i) any Transfer in
violation of this Agreement shall not be recognized on the books of the Company
and shall be void and (ii) no Transfer shall occur unless the transferee shall
agree pursuant to Article 7 to become a party to and be bound by the terms of
this Agreement, and, with respect to Employee Shareholders, the Voting Trust
Agreement and an Employee Stock Agreement.
4.2 RIGHTS OF FIRST REFUSAL. (a) Subject to the provisions of this
Article 4 and Section 2 of the Employee Stock Agreement, at least 60 days prior
to making any Transfer of any interest in any Shares or Voting Trust
Certificates (other than pursuant to Rule 144 promulgated under the Securities
Act ("Rule 144") or an underwritten Public Offering or as provided in the
proviso in paragraph 4.2 (c) below), the transferring Shareholder (the
"Transferring Shareholder") shall deliver a written notice (the "Offer Notice")
to the Company and the other Shareholders. The Offer Notice shall set forth in
reasonable detail the name of the Transferring Shareholder, the number of Shares
or Voting Trust Certificates proposed to be so Transferred (the "Offered
Securities"), the name and address of the proposed transferee (in the case of a
Transfer other than pursuant to a Public Offering which is not underwritten),
the proposed amount of consideration (which shall be payable solely in cash and
which, in the case of a Transfer pursuant to a Public Offering which is not
underwritten, shall be based on the average daily trading price of the Common
Stock over the 30-day period ending on the business day immediately preceding
the date of the Offer Notice) and the other terms and conditions of payment
offered by the proposed transferee.
(b) If the Transferring Shareholders (in whole or in part) consist of
any Executive Shareholder, Ahalt or any Other Company Shareholder (the "Employee
Group"), the non-selling members of the Employee Group may elect to purchase all
(but not less than all) of their Pro Rata Share (as defined below) of the
Offered Securities being sold by members of the Employee Group at the price and
on the other terms specified in the Offer Notice by delivering written notice of
such election to the Transferring Shareholder and the other members of the
Employee Group (or the Company's Secretary) as soon as practicable but in no
event later than 10 days after the delivery of the Offer Notice. If any members
of the Employee Group did not elect to purchase their Pro Rata Share of the
Offered Securities within such 10-day period, each of the other members of the
Employee Group who has so elected may elect to purchase all or part of the
remaining Offered Securities at the price and on the other terms specified in
the Offer Notice by delivering written notice of such election to the
transferring Shareholder and the other members of the Employee Group (or the
Company's secretary) as soon as practicable but in no event later than 20 days
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after initial delivery of the Offer Notice; PROVIDED, that, in case there are
more elections than there are Offered Securities, such additional Shares shall
be allocated to such members of the Employee Group in accordance with their Pro
Rata Share; it being the intention of the parties that the Offered Securities
that are proposed to be Transferred by the members of the Employee Group be
offered first to non-selling members of the Employee Group.
(c) If the Transferring Shareholders consist of one or more of the
Fund Shareholders (the "Fund Group") and the proposed transferee is not another
Fund Shareholder, or an Affiliate of any of the Fund Shareholders, such Transfer
is subject to this Article 4; PROVIDED, HOWEVER, that the rights of first
refusal provided in this Section 4.2 shall not apply to a Transfer by any member
of the Fund Group or any Permitted Transferee thereof (as defined in Section
4.6) to a financial or other similar institutional investor or investment fund
which is not a Competitor and which, in connection with such Transfer, is
expressly not assigned, and is expressly prohibited from succeeding to, any of
the rights of the Fund Shareholders or their Permitted Transferees to designate
Directors under Article 2.
(d) If the Transferring Shareholders consist of CSO or a CSO
Affiliate (the "CSO Group") and the proposed transferee is not another CSO
Affiliate, such transfer is subject to this Article 4.
(e) If the Employee Group as a whole, in the case of paragraph 4.2
(b), has not elected to purchase all of the Offered Securities within the
first-offer periods specified therein, or if the Fund Group or CSO Group
proposes a Transfer that is subject to this Article 4, any Offered Securities
shall be offered during the following 10-day period to the Company. If the
Company does not elect to purchase all of the Offered Securities within such
10-day period pursuant to a Supermajority Vote of the Board in accordance with
Article 8, any remaining Offered Securities shall then be offered during the
following 10-day period to all other Shareholders in accordance with their Pro
Rata Share. If any such other Shareholders do not elect to purchase all of their
respective Pro Rata Share of such Offered Securities within such 10-day period,
any remaining Offered Securities shall then be offered to all those Shareholders
electing to purchase Offered Securities during the next succeeding 10-day
period, in accordance with their respective Pro Rata Share or as the
Shareholders electing to purchase at that time may otherwise agree. The offering
periods referred to in this Section 4.2 are collectively referred to as the
"Election Period". Each Shareholder agrees not to consummate any Transfer until
expiration of the Election Period unless the parties to the Transfer have been
finally determined pursuant to this Section at any time prior to the expiration
of such Election Period.
(f) If, but only if, the other Shareholders and/or the Company, as
the case may be, have elected to purchase all of the Offered Securities from the
Transferring Shareholder, the Transfer of such Offered Securities shall be
consummated as soon as practicable after the delivery of the election notices,
but in no event later than 30 days after the expiration of the Election Period.
(g) If the other Shareholders and/or the Company, as the case may be,
have not elected to purchase all of the Offered Securities, the Transferring
Shareholder may, within 90 days after the
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expiration of the Election Period and subject to the provisions of Section 4.3,
Transfer such Offered Securities to the Person(s) named in the Offer Notice at a
price not less than the price per Share specified in the Offer Notice and on
other terms no more favorable to the transferee than offered to the Company and
the other Shareholders in the Offer Notice. If such Transfer does not occur
within such 90-day period, this Section 4.2 shall be applicable with respect to
all future Transfers of such Offered Securities.
(h) The purchase price specified in any Offer Notice shall be payable
solely in cash at the closing of the transaction; PROVIDED, that, with respect
solely to Transfers among Shareholders of the Company pursuant to the provisions
of this Section 4.2, other bona fide arrangements and terms which are acceptable
to the Transferring Shareholder can be considered. For purposes hereof, each
Shareholder's "Pro Rata Share" shall be based upon such Shareholder's percentage
ownership of Shares on a fully-diluted basis relative to other Shareholders to
whom an offer has been made pursuant to this Section 4.2.
4.3 TAG-ALONG RIGHTS. (a) Subject to the provisions of Article 5 and
limitations in Section 4.1 and the procedures of Section 4.2, at least 10 days
prior to a Transfer by a Shareholder that is subject to this Article 4 (other
than pursuant to a Public Offering or Rule 144), the Shareholder desiring to
make such Transfer shall deliver a written notice (the "Sale Notice") to the
Company and the other Shareholders, setting forth the name of the Transferring
Shareholder, the number of Shares proposed to be so Transferred, the name and
address of the proposed transferee, the proposed amount and form of
consideration and other terms and conditions of payment offered by the proposed
transferee, and a representation that the proposed transferee has been informed
of the tag-along rights provided for in this Section 4.3 and has agreed to
purchase Shares in accordance with the terms hereof.
(b) The other Shareholders may elect to participate in the
contemplated Transfer by delivering written notice indicating their desire to
exercise their rights pursuant to this Section to the Transferring Shareholder
at any time within 10 days after delivery of the Sale Notice. If any other
Shareholder has elected to participate in such Transfer (a "Tagging
Shareholder"), the Transferring Shareholders and the Tagging Shareholders shall
be entitled to sell in the contemplated Transfer, at the same price and on the
same terms, a number which is the product of (i) the quotient determined by
dividing the percentage of Shares beneficially owned on a fully diluted basis by
such Person by the aggregate percentage of Shares owned by the Transferring
Shareholders and the Tagging Shareholders participating in such Transfer and
(ii) the number of shares to be sold in the contemplated Transfer.
FOR EXAMPLE, if the Sale Notice contemplated a sale of 10,000 Shares
by the Transferring Shareholder, and if the Transferring Shareholder
at such time beneficially owns 20% of all Shares and if one other
Shareholder elects to participate and beneficially owns 5% of all
Shares, the Transferring Shareholder would be entitled to sell 8,000
shares (20% divided by 25% x 10,000 shares) and the Tagging
Shareholder would be entitled to sell 2,000 shares (5% divided by
25% x 10,000 shares).
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(c) In order to be entitled to exercise its right to sell Shares to
the proposed transferee pursuant to Section 4.3(b), a Tagging Shareholder must
agree to make to the transferee substantially the same representations,
warranties, covenants, indemnities and agreements as the Transferring
Shareholder agrees to make in connection with the proposed Transfer (except that
in the case of representations and warranties pertaining specifically to the
Transferring Shareholder, a Tagging Shareholder shall make the comparable
representations and warranties pertaining specifically to itself); PROVIDED that
all representations and warranties shall be made by Tagging Shareholders
severally and not jointly and that the liability of the Transferring
Shareholders and the Tagging Shareholders (whether pursuant to a representation,
warranty, covenant, indemnification provision or agreement) for liabilities in
respect of the Company shall be evidenced in writings executed by them and the
transferee and shall be borne by each of them on a pro rata basis.
(d) If the proposed transferee fails to purchase Shares from any
Tagging Shareholder that has properly exercised its tag-along rights pursuant to
this Section 4.3, then the Transferring Shareholder shall not be permitted to
make the proposed Transfer, and any such attempted Transfer shall be void and of
no effect, as provided in Article 7.
(e) Each Transferring Shareholder agrees not to consummate any such
Transfer until 10 days after delivery to the other Shareholders of the Sale
Notice, unless the parties to the Transfer have been finally determined pursuant
to this Agreement prior to the expiration of such period. If any of the Tagging
Shareholders exercise their rights under this Section 4.3, the closing of the
sale of the Shares or Voting Certificates, as the case may be, by such Tagging
Shareholder with respect to which such rights have been exercised shall take
place concurrently with the closing of the sale of the Shares or Voting Trust
Certificates, as the case may be, by the Transferring Shareholder with respect
to which the Sale Notice was given. No Transfer shall occur pursuant to this
Section 4.3 unless the transferee shall agree to become a party to, and be bound
to the same extent as its transferor by the terms of, this Agreement pursuant to
the provisions of Article 7.
4.4 DRAG-ALONG RIGHTS. Subject to the provisions of Section 5.3 and
notwithstanding, in the case of the CSO Shareholders, the provisions of Section
10.2, each Shareholder hereby agrees that, in connection with any Sale of the
Company in accordance with Article 5 or, in the case of all Shareholders other
than the CSO Shareholders, in accordance with, Section 10.1 it will Transfer all
of its Shares to such Third Party Purchaser or to CSO and/or its Affiliate(s),
as applicable, in any such transaction; PROVIDED that the terms of such offer
applicable to any Shares owned by the Transferring Shareholder or CSO
Shareholders, as applicable, and its Permitted Transferees are not more
favorable than the terms of such offer applicable to the Shares owned by the
other Shareholders (including, without limitation, with respect to the amount
and nature of consideration and the time of receipt thereof).
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4.5 TRANSFER TO COMPETITORS. No Shareholder shall, directly or
indirectly, Transfer in any transaction or series of transactions (related or
not) any Shares or Voting Trust Certificates to any Competitor other than
pursuant to a Sale of the Company or a Public Offering.
4.6 PERMITTED TRANSFERS. The restrictions and procedures contained in
this Article 4 shall not apply with respect to any Transfer of Shares or Voting
Trust Certificates by any Shareholder (i) in the case of the Executives, Ahalt
and the Other Company Shareholders, pursuant to applicable laws of descent and
distribution or to an Immediate Family Member or to the Company pursuant to the
Employee Stock Agreement or to any Other Company Shareholder or Executive
Shareholder, (ii) in the case of the Fund Shareholders, to any other Fund
Shareholder or to any Affiliate thereof, or (iii) in the case of any CSO
Shareholder, to any Affiliate of CSO; provided that the restrictions contained
in this Article 4 shall continue to be applicable to the Shares after any such
Transfer; and PROVIDED, FURTHER that the transferees of such Shares (each such
permitted transferee in accordance with this Section 4.6 being referred to as a
"Permitted Transferee"), shall, prior to any such Transfer, agree to become a
party to, and be bound to the same extent as its transferor by the terms of,
this Agreement pursuant to the provisions of Article 7.
ARTICLE 5.
RIGHTS TO CAUSE A SALE OF THE COMPANY
5.1 RIGHTS OF THE CSO OR FUND SHAREHOLDERS. In the event that no Sale
of the Company or Public Offering has occurred prior to December 31, 1999,
either the Fund Shareholders holding a majority of the Fund Shares or the
holders of a majority of the CSO Shares shall have the right to cause a Sale of
the Company pursuant to the provisions of Section 5.3.
5.2 RIGHTS OF THE EXECUTIVE SHAREHOLDERS. If no Sale of the Company
or Public Offering has occurred prior to December 31, 1999, the holders of
two-thirds (66-2/3%) of the Executive Shares shall have the right to cause a
Sale of the Company pursuant to the provisions of Section 5.3; PROVIDED, at such
time, all holders of Executive Shares own at least 10% of the total outstanding
shares of Common Stock of the Company; and, PROVIDED, FURTHER, that such Third
Party Transaction (as defined below) does not provide for or contemplate, and
does not result in, any Executive Shareholder receiving compensation or other
consideration at any time within two years thereafter, whether as an employee,
director, consultant or agent or in any other capacity other than as a
shareholder, materially in excess of such Executive's then current per annum
compensation from the Company.
5.3 PROCEDURES FOR SALE OF THE COMPANY. (a) Notwithstanding anything
to the contrary contained in any Employee Stock Agreement, if the Fund
Shareholders, the CSO Shareholders or the Executive Shareholders shall have the
right to cause a Sale of the Company pursuant to Section 5.1 or 5.2, such
Shareholder group (collectively, the "Proposing Shareholder") shall request the
Company to take all steps necessary or desirable to consummate a Sale of the
Company within 180 days following the date
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such request was delivered by the Proposing Shareholder to the Company. Promptly
after receipt of such request, the Company will give written notice of such
requested Sale to all other Shareholders and will, as expeditiously as possible,
use its best efforts to (i) retain a nationally recognized investment banking
firm to assist in such Sale of the Company and to render an opinion as to the
fairness, from a financial point of view, of the consideration to be received by
the Shareholders in any Sale of the Company (a "Fairness Opinion"); (ii) seek
and produce a Third Party (a "Third Party Purchaser") to acquire (x) all of the
issued and outstanding capital stock of the Company (whether by merger,
consolidation or sale or transfer of the Company's capital stock) or (y) all or
substantially all of the Company's assets on a consolidated basis (a transaction
of the type referred to in clause (x) or (y) above shall be referred to herein
as a "Third Party Transaction"); and (iii) negotiate the terms of such Third
Party Transaction with a view to reaching an agreement in principle documented
in a writing between such parties as soon as practicable. Except as required by
law, the Company shall not be obligated to seek the consent of the Shareholders
prior to commencing any of the foregoing actions in connection with a Sale of
the Company.
(b) If the Company identifies and reaches an agreement in principle
with a potential Third Party Purchaser, then the Company shall deliver written
notice to the Shareholders setting forth in reasonable detail the terms of the
proposed Third Party Transaction (the "Company Sale Notice"), together with the
Fairness Opinion. Within 30 days following receipt of the Company Sale Notice
(the "Sale Election Period"), any of the Shareholders shall deliver to the
Company and the other Shareholders written notice setting forth such holders'
election, if any, to deliver a written offer (a "Shareholder Offer"), upon
substantially the same terms as described in the Company Sale Notice, to acquire
the Company (a "Shareholder Transaction"). In addition, upon receipt of the
Company Sale Notice, the CSO Shareholders shall have the rights provided in
Section 10.2.
(c) If the Fund Shareholders, the CSO Shareholders or and the
Executive Shareholders have not delivered a Shareholder Offer within the Sale
Election Period, the Company shall consummate the Third Party Transaction on the
terms specified in the Company Sale Notice as soon as practicable following such
Sale Election Period and in any event within 45 days thereafter. If for any
reason the Third Party Transaction is not consummated within such 45 day period,
or the Company does not take steps to or is otherwise unable to effect a Sale of
the Company in accordance with Section 5.3, the Proposing Shareholders shall
have the right to take all steps which the Company was required to take to
effect a Sale of the Company in accordance with the provisions of this Section
5.3 (including the requirement to obtain a Fairness Opinion). If any of the
Shareholders has delivered a Shareholder Offer within the Sale Election Period,
the Company and the other Shareholders shall consummate the Shareholder
Transaction within 90 days of receipt by the Proposing Shareholder of the
Shareholder Offer. If the Shareholder Transaction is not consummated within such
90 day period, the other Shareholders must again comply with the provisions of
this Section 5.3. Subject to the provisions of Sections 4.4 and 5.3(d) and, in
the case of the CSO Shareholders, the provisions of Section 10.2, (i) in the
case of a Third Party Transaction, the Proposing Shareholders and all other
Shareholders shall be required to sell all of their Shares in such transaction
and (ii) in the case of a Shareholder Transaction, the Proposing Shareholder
shall and all other Shareholders
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other than the Shareholder that made the Shareholder Offer shall be required to
sell all of their Shares in such transaction.
(d) The other Shareholders or the Proposing Shareholder, as the case
may be, shall not be obligated to participate in a Third Party Transaction or a
Shareholder Transaction, respectively, if upon consummation of the Third Party
Transaction, all holders of Common Stock do not receive the same form and amount
of consideration per share of Common Stock (including for this purpose amounts
allocated to noncompetition, consulting and other arrangements), or if certain
holders of Common Stock are given an option as to the form and consideration to
be received, and the other holders of Common Stock have not been given the same
option.
ARTICLE 6.
LEGEND
Each certificate evidencing Shares and each certificate issued after
the date hereof in exchange for or upon the Transfer of any Shares (if such
shares remain Shares as defined herein after such Transfer) shall bear the
following legend on the face thereof:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, EXCHANGED, MORTGAGED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF OR ENCUMBERED WITHOUT
COMPLIANCE WITH THE PROVISIONS OF THE SECURITIES ACT OF 1933, AS
AMENDED, THE RULES AND REGULATIONS THEREUNDER AND THAT CERTAIN 1997
AMENDED AND RESTATED SHAREHOLDERS AGREEMENT, DATED AS OF APRIL 11,
1997, AMONG THE ISSUER OF SUCH SECURITIES (THE "COMPANY") AND THE
COMPANY'S SHAREHOLDERS. A COPY OF SUCH SHAREHOLDERS AGREEMENT SHALL
BE FURNISHED WITHOUT CHARGE BY THE COMPANY UPON WRITTEN REQUEST."
The Company shall imprint such legend on certificates evidencing Shares
outstanding prior to the date hereof. The legend set forth above shall be
removed from the certificates evidencing any securities which cease to be
Shares.
ARTICLE 7.
TRANSFERS
In the event of any purported Transfer of any Shares in violation of
the provisions of this Agreement, such purported Transfer shall be void and of
no effect and the Company will give no effect to such Transfer. As a condition
to any Transfer of Shares permitted pursuant to Article 4 (other than
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pursuant to Rule 144 or a Public Offering), the Transferring Shareholder shall
cause the prospective transferee to execute and deliver to the Company and to
the Shareholders a counterpart of this Agreement in form reasonably acceptable
to the Company pursuant to which such transferee shall be bound by all the terms
and provisions hereof to the same extent as the Transferring Party except, in
the case of a Transfer pursuant to the proviso in paragraph 4.2 (c), the terms
and provisions of Article 2 hereof shall be excluded therefrom.
ARTICLE 8.
SUPERMAJORITY VOTE ON BOARD LEVEL DECISION
(a) The parties agree that, unless such action is approved by a
Supermajority Vote of the Board or, in the case of clause 8(a)(iii) below,
a unanimous vote of the Board, or this Agreement is amended by a
Supermajority Vote of Shareholders, the Company shall not:
(i) subject to 8(a)(iii) hereof, pursue or effect a Sale of the
Company or similar transaction with respect to any of its
Subsidiaries;
(ii) except as provided in 8(a)(x) hereof, acquire in any
transaction or series of related transactions any one asset of any
other Person and/or securities of any other Person or the Company
(whether debt, equity or convertible, other than investment of cash
in the ordinary course of business) for an individual or aggregate
purchase price in excess of $3 million in any year;
(iii) voluntarily dissolve, wind up, or liquidate the Company or any
of its Subsidiaries;
(iv) sell, lease, exchange or otherwise dispose of in any
transaction or series of related transactions a significant portion
(defined as $5 million or more of book value at the time) of the
assets of the Company or any of its Subsidiaries, other than in the
ordinary course of business (such as sales of assets or properties
by the Company's Subsidiary, Energy Resource Technology Inc.);
(v) change the compensation payable to or amend the employment
agreement or, except as provided in clause (xii) below, enter into
any other agreement with, Messrs, Reuhl, Kratz or Nelson;
(vi) except as provided in this Agreement, (a) commence any Public
Offering (other than pursuant to the 1995 or 1997 Registration
Rights Agreements), (b) authorize any increase in the capital of the
Company or any of its Subsidiaries, (c) issue any capital stock,
notes or other securities (including, without limitation, options,
warrants, preferred stock or convertible securities) of the Company
or any of its Subsidiaries, except pursuant to a Stock
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Option Plan existing from time to time and approved by the Board, or
(d) increase the number of shares of capital stock of the Company
available for issuance under any Stock Option Plan or similar stock
related compensation arrangement;
(vii) enter into any new credit facility or financing arrangement or
amend, supplement or modify in any material respect the Company's
Loan and Amended and Restated Security Loan Agreement dated as of
May 23, 1995 with Fleet Capital Corporation (formerly known as
Shawmut Capital Corporation), except for Amendment No. 5 thereto
which the Company expects to enter into within a reasonable period
of time after the date hereof;
(viii) change the scope or nature of the business of the Company
outside of the oil and gas service and oil and gas exploration and
production industries;
(ix) adopt or change a dividend policy or declare any dividend or
distribution in respect thereof;
(x) except as provided in Section 8 (a) (ii) hereof, make any
capital expenditure in any transaction or series of related
transactions in any year (except such expenditures on vessels during
dry dockings which are mandated by governmental or industry
standards OR regulations) of more than $3 million in the aggregate;
(xi) approve a Shareholders Rights Plan, "poison pill" or similar
plan designed to provide take-over defense under U.S. law
(collective, a "Shareholder Rights Plan"); and
(xii) approve any transaction between the Company and any Affiliate
outside the ordinary course of business involving the commitment or
payment in excess of $50,000.
(b) The parties agree that the Company shall not adopt a Shareholder
Rights Plan unless provision, reasonably satisfactory to the CSO
Shareholders, is made in such Shareholder Rights Plan to exempt the CSO
Shareholders and their Affiliates and their respective acquisition,
holding, voting and beneficial ownership of, and any exercise of power
derived from their ownership, of Shares and securities exercisable,
convertible or exchangeable into or for such Shares from triggering
provisions of such Shareholders Rights Plan (e.g., CSO Shareholders and
their Affiliates would be exempted from the definition of "acquiring
person" customarily contained in a Shareholder Rights Plan).
ARTICLE 9.
9.1 LIMITED PREEMPTIVE RIGHTS. (a) Except for issuances of capital
stock of the Company (i) in accordance with any Stock Option Plan, (ii) solely
to the extent provided in to the last sentence of this
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Section 9.1(a), pursuant to a Public Offering, or (iii) in connection with an
acquisition of another Person (subject to the provisions of Section 10.1) by the
Company or any of its Subsidiaries, or in settlement of indebtedness of the
Company or any of its Subsidiaries or in settlement of a lawsuit or other claim
involving the Company or any of its Subsidiaries, if at any time the Company
authorizes the issuance or sale of any shares of capital stock of the Company or
any securities that, directly or indirectly, are convertible into or
exchangeable for capital stock of the Company or any securities containing
options, rights or warrants to acquire any shares of capital stock of the
Company or any securities that, directly or indirectly, are convertible into or
exchangeable for capital stock of the Company (other than as a dividend on the
outstanding Common Stock) the Company shall first offer to sell, on a pro rata
basis, to the Fund Shareholders and the CSO Shareholders (collectively, the
"Purchaser Parties") and the Executive Shareholders a portion of such stock or
securities equal to the quotient determined by dividing (1) in the case of the
Fund Shareholders or the CSO Shareholders, the number of shares of Common Stock
Beneficially Owned by the Fund Shareholders or the CSO Shareholders, as
applicable (collectively the "Purchaser Common Stock") and (2) in the case of
Executive Shareholders, the number of shares of Common Stock held by the
Executive Shareholders ("Employee Stock") divided by the total number of shares
of Common Stock outstanding. Each holder of Purchaser Common Stock and Employee
Stock shall be entitled to purchase such stock or securities at the most
favorable price and on the most favorable terms as such stock or securities are
to be offered to any other Person. The purchase price for all stock and
securities offered to the holders of the Purchaser Common Stock or Employee
Stock shall be payable in cash unless other suitable terms are offered to such
Shareholders. In addition to the foregoing, the Company shall afford the
Purchaser Parties the opportunity to purchase their pro rata portion of any
stock or securities (as determined above) to be offered by the Company pursuant
to a Public Offering (other than the initial Public Offering of the Company),
unless the managing underwriter(s) for such offering state in writing that, in
their opinion, such set-aside would materially adversely affect the
marketability of such offering.
(b) In order to exercise its purchase rights hereunder, a holder of
Purchaser Common Stock or Employee Stock must within 15 days after receipt of
written notice from the Company describing in reasonable detail the stock or
securities being offered, the purchase price thereof, the payment terms and such
holder's percentage allotment, deliver a written notice to the Company
describing its election hereunder. If all of the stock and securities offered to
the holders of Purchaser Common Stock or Employee Stock is not fully subscribed
by such holders, the remaining stock and securities shall be reoffered by the
Company to the holders purchasing their full allotment upon the terms set forth
in this paragraph, except that such holders must exercise their purchase rights
within five days after receipt of such re-offer. This Section 9.1 shall not be
applicable to any transactions to be consummated under any other provision of
this Agreement.
(c) Upon the expiration of the offering periods described above, the
Company shall be entitled to sell such stock or securities which the holders of
Purchaser Common Stock or Employee Stock have not elected to purchase, during
the 90 days following such expiration on terms and conditions no more
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favorable to the purchaser thereof than those offered to such holders. Any stock
or securities offered or sold by the Company after such 90-day period must be
re-offered to the holders of Purchaser Common Stock or Employee Stock pursuant
to the terms of this Section 9.1.
ARTICLE 10
CERTAIN RIGHTS OF CSO
10.1 CSO RIGHTS TO PURCHASE COMPANY. Except as otherwise provided in
Article 5 with respect to the rights of the Fund, CSO and Executive Shareholders
to cause a Sale of the Company, in the event that the CSO Shareholders own at
least 5% of the total outstanding shares of Common Stock of the Company and the
Board approves by Supermajority Vote in accordance with the provisions of
Article 8 and without the approval of any of the CSO Directors: (a) a bona fide
agreement in principle for a Sale of the Company (an "Agreed Sale of the
Company"), the CSO Shareholders and/or their Affiliates shall have the right to
acquire the Company upon substantially the same terms as set forth in such
agreement by delivering written notice of such election to the Company within 15
days after the date of such Board approval; or (b) (i) the commencement of
efforts to seek or solicit in any manner a Sale of the Company with or without
the assistance of an investment banking firm or other financial advisor through
a Third Party Transaction or pursuant to a transaction with any one or more
Shareholders and/or their Affiliates (a "Solicited Sale of the Company") or (ii)
a bona fide agreement in principle for an acquisition by the Company of any
other Person or assets or group of assets which at the time of such acquisition
has a market value (based on the purchase price to be paid by the Company) in
excess of 50% of the market value of the Company (based on the average daily
trading price of the Common Stock over the 30 day period immediately preceding
such transaction, if the initial Public Offering of the Company shall then have
been completed or, if such initial Public Offering shall not have then been
completed, based on the valuation of the Company prepared by an Independent
Appraiser (as defined below)) (a "Significant Acquisition"), the CSO
Shareholders and/or their Affiliates shall have the right to acquire the Company
subject to applicable law at a purchase price equivalent to the fair market
value thereof based on a valuation of the Company prepared by a nationally
recognized investment banking firm with expertise in the oil and gas service and
oil and gas exploration and production industries who has not been previously
retained by the Company (or any of its Affiliates) or any of the Shareholders
(or any of their Affiliates) and is selected by a majority of the Independent
Directors or as otherwise mutually agreed by the Fund Directors, the CSO
Directors and the Executive Directors (an "Independent Appraiser") by delivering
written notice of such election to the Company within 15 days after the date of
such Board approval and, in the case of any election by the CSO Shareholders
and/or their Affiliates to acquire the Company pursuant to clause (a) or clause
(b), each Shareholder (other than the CSO Shareholders) agrees to Transfer all
of his or its Shares to the CSO Shareholders and/or their Affiliates (regardless
of whether or not the acquisition of the Company by the CSO Shareholders and/or
their Affiliates shall have been approved by the requisite shareholders of the
Company) and provide its or their approvals as a shareholder of the Company as
may be required in connection with any acquisition of the Company by the CSO
Shareholders and/or their Affiliates pursuant to this Section 10.1. In the event
the CSO Shareholders and/or their
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Affiliates shall have notified the Company of its or their election to acquire
the Company pursuant to this Section 10.1, the Company shall not complete or
take any further action with respect to any Agreed Sale of the Company,
Solicited Sale of the Company or Significant Acquisition, referred to in such
election notice for one hundred twenty (120) days after delivery of such notice.
10.2 CSO RIGHTS TO PURCHASE JOINT VENTURE. At the sole election of the CSO
Shareholders, in lieu of the rights of the CSO Shareholders to acquire the
Company pursuant to the provisions of Section 10.1 or in a Shareholder
Transaction pursuant to the provisions of Section 5.3, in the event that the
Board approves by Supermajority Vote in accordance with the provisions of
Article 8 and without the approval of any of the CSO Directors an Agreed Sale of
the Company, a Solicited Sale of the Company or a Significant Acquisition, or in
the event that the Fund Shareholders or the Executive Shareholders elect to
cause a Sale of the Company pursuant to Section 5.3, the CSO Shareholders and/or
their Affiliates shall have the right to acquire all of the Company's ownership
interest in the joint venture entity formed by the Company and Coflexip Stena
Offshore, Inc., an Affiliate of CSO ("CSO, Inc."), pursuant to that certain
Business Cooperation Agreement dated as of the date hereof between the Company
and CSO, Inc., as the same may be amended, supplemented or otherwise modified
from time to time (the "Joint Venture"), at a purchase price equivalent to the
fair market value of the Company's interest in the Joint Venture based on a
valuation prepared by an Independent Appraiser in which the fair market value of
the Joint Venture is defined as the fair market value of the Company (including
the fair market value of the Joint Venture) less the fair market value of the
Company without the fair market value of Joint Venture, by delivering written
notice of such election to the Company within 15 days after the date of such
Board approval or the date of the Company Sale Notice, as applicable, provided
that at such time the CSO Shareholders own in the aggregate at least 5% of the
total outstanding shares of Common Stock of the Company.
10.3 CSO ANTI-DILUTION PROTECTION. It is currently the Company's
expectation (without any obligation) that it may, subject to and in the
discretion of its Board, undertake to effect an initial Public Offering of its
Common Stock under the Securities Act pursuant to which the Company will raise
capital to be used for future company development. Notwithstanding the
foregoing, in the event of any such initial Public Offering, the CSO
Shareholders shall not be diluted to less than 24% of the issued and outstanding
Common Stock on a fully diluted basis as a result of such initial Public
Offering (including any over-allotment option relating thereto).
ARTICLE 11
MISCELLANEOUS
11.1 TERM. The term of this Agreement shall run until the effective
date of an initial Qualified Public Offering, after which time all provisions
hereof except Articles 1 (to the extent
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<PAGE>
applicable), 2, 3, 6, 7, 8, 9, 10 and 11 (other than Section 11.4) and Sections
4.1, 4.2, and 4.6 shall be void and of no further effect. Articles 1 (to the
extent applicable), 2, 3, 6, 7, 8, 9, 10 and 11 (other than Section 11.4) and
Sections 4.1, 4.2 and 4.6 shall thereafter only continue to be effective as to
holders of the Fund Shares, CSO Shares and/or Executive Shares, respectively, so
long as each such group of Shareholders continue to own as a group at least 5%
of the outstanding Common Stock (after which this Agreement shall no longer
apply to any such Shareholder group which does not own as a group at least 5% of
the outstanding Common Stock but shall continue to apply to each such other
Shareholder group which does own as a group at least 5% of the outstanding
Common Stock).
11.2 ADDITIONAL SECURITIES SUBJECT TO AGREEMENT. Each Shareholder
agrees that any other equity securities of the Company which it shall hereafter
acquire by means of a stock split, stock dividend, distribution, purchase,
exercise of an option or otherwise (other than pursuant to a Public Offering)
shall be subject to the provisions of this Agreement to the same extent as if
held on the date hereof.
11.3 INJUNCTIVE RELIEF. Each Shareholder acknowledges and agrees that
a violation of any of the terms of this Agreement will cause the other
Shareholders irreparable injury for which adequate remedy at law is not
available. Accordingly, it is agreed that holders of seventy percent (70%) of
the Fund Shares and/or the holders of seventy percent (70%) of the Executive
Shares and/or the holders of seventy percent (70%) of the CSO Shares together
(so long as the Executive Shareholders, the Fund Shareholders, or the CSO
Shareholders, as the case may be, owns more than 5%, in the aggregate, of the
outstanding shares of Common Stock of the Company), shall be entitled to an
injunction, restraining order or other equitable relief to prevent breaches of
the provisions of this Agreement and to enforce specifically the terms and
provisions hereof in any court of competent jurisdiction in the United States or
any state thereof, in addition to any other remedy to which they may be entitled
at law or equity.
11.4 NO OTHER SHAREHOLDERS AGREEMENTS. Except for the Purchase
Agreement, Company Stock Option agreements from time to time outstanding, the
Voting Trust Agreement, the 1995 Registration Agreement and the 1997
Registration Agreement, none of the Shareholders shall enter into any other
stockholder agreement or other arrangement of any kind with any Person with
respect to the Shares or any other securities of the Company, unless otherwise
provided for herein or permitted hereby.
11.5 AMENDMENT AND WAIVER. Except as otherwise provided herein, no
modification, amendment or waiver or any provision of this Agreement shall be
effective against the Company or the Shareholders unless such modification,
amendment or waiver is approved in writing by the holders of eighty percent
(80%) of the combined number of shares of Common Stock held by each of the Fund
Shareholders, Executive Shareholders and CSO Shareholders. The failure of any
party to enforce any of the provisions of this Agreement shall not affect the
right of such party thereafter to enforce each and every provision of this
Agreement in accordance with its terms.
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<PAGE>
11.6 SUCCESSORS, ASSIGNS AND TRANSFEREES. The provisions of this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns; PROVIDED that no Shareholder
may assign to any transferee any of its rights hereunder other than in
connection with a Transfer to such transferee of Shares in accordance with the
provisions of this Agreement.
11.7 NOTICES. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing and shall be
either personally delivered or sent by reputable overnight courier service
(charges prepaid) or by confirmed facsimile transmission to the recipient at the
address indicated on Schedule 1 attached hereto and to any subsequent holder of
Shares subject to this Agreement at such address as indicated by the Company's
records or at such address or to the attention of such other Person as the
recipient party has specified by prior written notice to the sending party.
Notices shall be deemed to have been given hereunder when delivered personally
or by confirmed facsimile transmission and one day after deposit with a
reputable overnight courier service.
11.8 INTEGRATION. This Agreement and the documents referred to herein
or delivered pursuant hereto contain the entire understanding of the parties
with respect to the subject matter hereof and thereof. There are no agreements,
representations, warranties, covenants or undertakings with respect to the
subject matter hereof and thereof other than those expressly set forth herein
and therein. This Agreement supersedes and preempts all prior agreements,
understandings and representations, written or oral, between the parties with
respect to such subject matter.
11.9 SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provisions in any other jurisdiction.
11.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, and by different parties on separate counterparts, each of which
shall be deemed an original, but all of which shall constitute one and the same
agreement.
11.11 REPORTING. The Company shall send copies of all documents
filed by it with the Securities and Exchange Commission and any applicable stock
exchange and all minutes of any director' or shareholders' meetings (including
Board committees), or any consent in lieu of meeting to Coflexip, 23 Avenue de
Neuilly 75116, Paris, France, Attention: General Counsel.
11.12 INTERPRETATION. The parties acknowledge and agree that: (i)
each party and its counsel reviewed and negotiated the terms and provisions of
this Agreement and have contributed to its
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<PAGE>
revision; (ii) the rule of construction to the effect that any ambiguities are
resolved against the drafting party shall not be employed in the interpretation
of this Agreement; and (iii) the terms and provisions of this Agreement shall be
construed fairly as to all parties hereto, regardless of which party was
generally responsible for the preparation of this Agreement.
11.13 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF MINNESOTA
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF.
11.14 SECTION HEADINGS. The Section headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first above written.
CAL DIVE INTERNATIONAL, INC.
By:
Name: Gerald G. Reuhl
Title: Chief Executive Officer
COFLEXIP
By:
Name: Pierre Marie Valentin
Title: Chairman and Chief Executive Officer
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<PAGE>
FIRST RESERVE SECURED ENERGY ASSETS FUND, LIMITED PARTNERSHIP
By: FIRST RESERVE CORPORATION, as General Partner
By:
Name: David H. Kennedy
Title: Managing Director
FIRST RESERVE FUND V, LIMITED PARTNERSHIP
By: FIRST RESERVE CORPORATION, as General Partner
By:
Name: William E. Macaulay
Title: President
FIRST RESERVE FUND V- 2, LIMITED PARTNERSHIP
By: FIRST RESERVE CORPORATION, as General Partner
By:
Name: William E. Macaulay
Title: President
FIRST RESERVE FUND VI, LIMITED PARTNERSHIP
By: FIRST RESERVE CORPORATION, as General Partner
By:
Name: William E. Macaulay
Title: President
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<PAGE>
Gordon Ahalt
EXECUTIVES
Gerald Reuhl
Owen Kratz
S. James Nelson
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EXHIBIT 4.5
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of January 12, 1995 (this
"Agreement"), among Cal Dive International, Inc., a Minnesota corporation (the
"Company"), First Reserve Secured Energy Assets Fund, Limited Partnership, a
Delaware limited partnership ("SEA"), First Reserve Fund V, Limited Partnership,
Delaware limited partnership ("Fund V"), First Reserve Fund V-2, Limited
Partnership, a Delaware limited partnership ("Fund V-2"). First Reserve Fund VI,
Limited Partnership, a Delaware limited partnership ("Fund VI"; together with
SEA, Fund V and Fund V-2, the "Funds"), Gerald G. Reuhl, Owen Kratz and S. James
Nelson, individually (collectively, the "Executives") and as Trustees of the Cal
Dive International, Inc. Voting Trust (the "Trust").
RECITALS
The Funds, the Executives and the Company are parties to a Purchase
Agreement, dated as of the date hereof (the "Purchase Agreement"), pursuant to
which the Funds are purchasing 221,985 shares of the common stock of the Company
without par value ("Common Stock") from the Company's treasury and an aggregate
of 332,978 shares of Common Stock from the CDI Shareholders (as defined in the
Shareholders Agreement (as defined below)). In order to induce the Funds and the
Executives to enter into the Purchase Agreement, the Company has agreed to
provide the registration rights set forth in this Agreement.
The Funds, the CDI Shareholders and the Company are parties to an
Amended and Restated Shareholders Agreement, dated as of the date hereof (the
"Shareholders Agreement").
The execution and delivery of this Agreement is a condition precedent to
the obligation of the Funds to purchase Common Stock from the Company and the
CDI Shareholders pursuant to the Purchase Agreement and to enter into the
Shareholders Agreement.
AGREEMENT
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, receipt of which is
hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS. (a) Unless otherwise defined herein, terms
defined in the Shareholders Agreement are used herein as defined therein.
For purposes of this Agreement, the following terms have the meanings set
forth below:
1
"Executive Registrable Securities" means (i) any Common Stock issued to
the Executives (or their Permitted Transferees (as defined in the Shareholders
Agreement)) and/or issued in the future to other employee shareholders of the
Company and held by the Trust, (ii) any common Stock issued or issuable with
respect to the Common Stock referred to in clause (i) above by way of stock
dividend or stock split, or in connection with a combination of shares,
recapitalization, merger, consolidation, or other reorganization. and (iii) any
other shares of Common Stock held by the Executives (or their Permitted
Transferees) or by the Trust.
"Funds' Registrable Securities" means (i) any Common Stock purchased by
the Funds pursuant to the Purchase Agreement, (ii) any Common Stock issued or
issuable with respect to the Common Stock referred to in clause (i) above by way
of stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation, or other reorganization, and (iii) any
other shares of Common Stock held by the Funds.
"Registrable Securities" means the Executive Registrable Securities and
the Funds' Registrable Securities. As to any particular Registrable Securities,
such securities shall cease to be Executive Registrable Securities or Funds'
Registrable Securities, as the case may be, when they have been distributed to
the public pursuant to an offering registered under the Securities Act or sold
to the public through a broker, dealer or market maker in compliance with Rule
144 under the Securities Act (or any similar rule then in force). For purposes
of this Agreement, a holder shall be deemed to be a holder of Registrable
Securities whenever such Person has the right to acquire directly or indirectly
such Registrable Securities (upon conversion or exercise in connection with a
transfer of securities or otherwise, but disregarding any restrictions or
limitations upon the exercise of such right), whether or not such acquisition
has actually been effected.
2. DEMAND REGISTRATIONS.
(a) REQUEST FOR REGISTRATION. At any time after the earlier of (i) the
fifth anniversary of the date hereof or (ii) a Public Offering, the holders of
(x) the Funds' Registrable Securities or (y) the holders of Executive
Registrable Securities, in each case who own, in the aggregate, not less than
10% of the total outstanding shares of Common Stock, as the case may be, may
request registration under the Securities Act of all or part of their Funds'
Registrable Securities or Executive Registrable Securities, respectively. Within
ten days after receipt of any such request (which shall specify the amount of
Registrable Securities to be registered), the Company shall give written notice
of such requested registration to all other holders of Registrable Securities
and shall include in such registration all Registrable Securities with respect
to which the Company has received written requests for inclusion therein
2
within 15 days after the receipt of the Company's notice. All registrations
requested pursuant to this Section 2(a) are referred to herein as -Demand
Registrations."
(b) DEMAND REGISTRATIONS. The holders of Funds' Registrable Securities
and Executive Registrable Securities will each be entitled to request two Demand
Registrations; PROVIDED, that, at the time of such request, the holders making
such request own, in the aggregate, not less than 10% of the total outstanding
shares of Common Stock. A registration will not count as one of the permitted
Demand Registrations until it has become effective, and a registration initiated
as a Demand Registration will not count as one of the permitted Demand
Registrations unless the holders of the Funds' Registrable Securities or the
Executive Registrable Securities, as the case may be, initiating such Demand
Registration are able to register and sell at least 50% of the Registrable
Securities requested by such holder to be included in such registration;
PROVIDED that in any event the Company shall pay all Registration Expenses in
connection with any registration initiated as a Demand Registration. All Demand
Registrations shall be underwritten registrations. The Company and each holder
will pay a pro rata portion of the Registration Expenses in accordance with
Section 6(c).
(c) PRIORITY ON DEMAND REGISTRATIONS. The Company shall not include in
any Demand Registration any securities which are not Registrable Securities
without the prior written consent of the holders of a majority of the
Registrable Securities initially requesting such registration. If in connection
with a Demand Registration the managing underwriters advise the Company in
writing that in their opinion the number of Registrable Securities and, if
permitted hereunder, other securities requested to be included in such offering,
exceeds the number of Registrable Securities and other securities, if any, which
can be sold in an orderly manner in such offering within a price range
acceptable to the holders of a majority of the Registrable Securities initially
requesting registration, the Company shall include in such registration (i)
first, up to 50% of the Registrable Securities requested to be included in such
registration, pro rata among the holders of such securities on the basis of the
number of Shares owned by the Funds (with respect to those Registrable
Securities requested to be included which are held by the Funds), on the one
hand, and the Executives (with respect to those Registrable Securities requested
to be included which are held by the Executives), on the other, (ii) second, all
remaining Fund Registrable Securities and any Executive Registrable Securities
requested to be included in such registration, pro rata among the holder of such
securities on the basis of the number of Shares owned by the Funds, on the one
hand, and the Executives, on the other (excluding the Funds' Registrable
Securities and the Executive Registrable Securities included pursuant to (i)
above) and (iii) third, other securities requested to be included in such
registration.
3
(d) RESTRICTIONS ON DEMAND REGISTRATION. The Company shall not be
obligated to effect any Demand Registration within six months after the
effective date of a previous Demand Registration or a registration in which the
holders of Registrable Securities were given piggyback rights pursuant to
Section 3 and in which there was no reduction in the number of Registrable
Securities requested to be included. The Company may postpone for up to six
months the filing or the effectiveness of a registration statement for a Demand
Registration if the Company and the holders of a majority of each of the Funds'
Registrable Securities and the Executive Registrable Securities agree that such
Demand Registration would reasonably be expected to have an adverse effect on
any proposal or plan by the Company or any of its Subsidiaries to engage in any
acquisition of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or similar transaction; PROVIDED that in
such event, the holders of the Funds' Registrable Securities or the Executive
Registrable Securities requesting such Demand Registration shall be entitled to
withdraw such request and, if such request is withdrawn, such Demand
Registration shall not count as a Demand Registration.
(e) SELECTION OF UNDERWRITERS. The holders of a majority of the
Registrable Securities included in any Demand Registration shall have the right
to recommend the investment banker(s) and manager(s) to administer the offering,
subject to the approval of a majority of the Board which shall not be
unreasonably withheld; PROVIDED, that if any of the Funds' Registrable
Securities are to be included in such Demand Registration, such underwriter
shall be acceptable to the Funds.
(f) OTHER REGISTRATION RIGHTS. Except as provided in this Agreement, the
Company shall not grant to any Person the right to request the Company to
register any equity securities of the Company, or any securities convertible or
exchangeable into or exercisable for such securities, without the prior written
consent of the holders of a majority of each of the Funds' Registrable
Securities and the Executive Registrable Securities; PROVIDED that the Company
may grant rights to other Persons to (i) participate in Piggyback Registrations
so long as such rights are subordinate to the rights of the holders of
Registrable Securities with respect to such Piggyback Registrations and (ii)
request registrations so long as the holders of Registrable Securities are
entitled to participate in any such registrations with such Persons pro rata on
the basis of the number of Shares owned by such Persons and such participating
holders of Registrable Securities (assuming for this purpose that all Shares
owned by all Funds are aggregated, on the one hand, and all Shares owned by all
Executives are aggregated, on the other hand).
(g) REGISTRATION STATEMENT FORM. If any registration requested
pursuant to this Section 2 which is proposed by the Company to be effected
by the filing of a registration statement on Form S-3 (or any successor or
similar short-form registration statement) shall be in connection with an
4
underwritten public offering, and if the managing underwriter shall advise the
Company in writing that, in its opinion, the use of another form of registration
statement is of material importance to the success of such proposed offering,
then such registration shall be effected on such other form.
(h) EFFECTIVE REGISTRATION STATEMENT. A registration requested pursuant
to this Section 2 will not be deemed to have been effected unless it has become
effective; PROVIDED that if within 180 days after it has become effective, the
offering of Registrable Securities pursuant to such registration is interfered
with by any stop order, injunction or other order or requirement of the
Securities and Exchange Commission or other governmental agency or court, such
registration will be deemed not to have been effected.
3. PIGGYBACK REGISTRATIONS.
(a) RIGHT TO PIGGYBACK. Whenever the Company proposes to register any of
its securities under the Securities Act (other than pursuant to a Demand
Registration) and the registration form to be used may be used for the
registration of Registrable Securities (a "Piggyback Registration"}, the Company
shall give prompt written notice (in any event within three business days after
its receipt of notice of any exercise of demand registration rights other than
under this Agreement) to all holders of Registrable Securities (and to other
holders of such securities) of its intention to effect such a registration and
shall include in such registration all Registrable Securities with respect to
which the Company has received written requests for inclusion therein within 15
days after such holder's receipt of the Company's notice.
(b) PIGGYBACK EXPENSES. The Registration Expenses of the holders
of Registrable Securities shall be paid by the Company in all Piggyback
Registrations.
(c) PRIORITY ON PRIMARY REGISTRATIONS. If a Piggyback Registration is an
underwritten primary registration on behalf of the Company, and the managing
underwriters advise the Company in writing that in their opinion the number of
securities requested to be included in such registration exceeds the number
which can be sold in an orderly manner in such offering within a price range
acceptable to the holders of a majority of the Registrable Securities initially
requested to be included in such registration, the Company shall include in such
registration (i) first, the securities the Company proposes to sell, (ii)
second, the Funds' Registrable Securities and the Executive Registrable
Securities requested to be included in such registration, pro rata among the
holders of such securities on the basis of the number of shares owned by each
such holder (assuming for this purpose that all Shares owned by all Funds are
aggregated, on the one hand, and all Shares owned by all Executives are
5
aggregated, on the other hand) and (iii) third, other securities requested to be
included in such registration.
(d) PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback Registration is
an underwritten secondary registration on behalf of holders of the Company's
securities, and the managing underwriters advise the Company in writing that in
their opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in an orderly manner in such
offering within a price range acceptable to the holders of a majority of the
securities initially requesting such registration, the Company shall include in
such registration (i) first, the securities requested to be included therein by
the holders requesting such registration and the Funds' Registrable Securities
and the Executive Registrable Securities requested to be included in such
registration, pro rata among the holders of such securities on the basis of the
number of shares owned by each such holder (assuming for this purpose that
securities owned by all Funds, on the one hand, and all Executives, on the other
hand, are aggregated) and (ii) second, other securities requested to be included
in such registration.
(e) OTHER REGISTRATIONS. If the Company has previously filed a
registration statement with respect to Registrable Securities pursuant to
Section 2 or pursuant to this Section 3, and if such previous registration has
not been withdrawn or abandoned, the Company shall not file or cause to be
effected any other registration of any of its equity securities or securities
convertible or exchangeable into or exercisable for its equity securities under
the Securities Act (except on Form S-8 or any successor form), whether on its
own behalf or at the request of any holder or holders of such securities, until
a period of at least six months has elapsed from the effective date of such
previous registration.
4. HOLDBACK AGREEMENTS.
(a) Each holder of Registrable Securities agrees not to effect any
public sale or distribution (including sales pursuant to Rule 144) of equity
securities of the Company, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and the 90-day
period beginning on the effective date of any underwritten Demand Registration
or any underwritten Piggyback Registration in which Registrable Securities are
included (except as part of such underwritten registration), unless the
underwriters managing the registered public offering otherwise agree.
(b) The Company agrees (i) not to effect any public sale or distribution
of its equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and during the
90-day period beginning on the effective date of any underwritten Demand
Registration or any underwritten Piggyback
6
Registration (except as part of such underwritten registration or pursuant to
registrations on Form S-8 or any successor form), unless the underwriters
managing the registered public offering otherwise agree, and (ii) to cause each
holder of at least 2% (on a fully-diluted basis) of its equity securities, or
any securities convertible into or exchangeable or exercisable for such
securities, purchased from the Company at any time after the date hereof (other
than in a registered public offering) to agree not to effect any public sale or
distribution (including sales pursuant to Rule 144) of any such securities
during such period (except as part of such underwritten registration, if
permitted herein), unless the underwriters managing the registered public
offering otherwise agree.
5. REGISTRATION PROCEDURES.
(a) Whenever the holders of Registrable Securities have requested that
any Registrable Securities be registered pursuant to this Agreement, the Company
shall use its best efforts to effect the registration and the sale of such
Registrable Securities in accordance with the intended method of disposition
thereof, and pursuant thereto the Company shall as expeditiously as possible:
(i) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such Registrable Securities and
use its best efforts to cause such registration statement to become
effective (provided that before filing a registration statement or
prospectus or any amendments or supplements thereto, the Company shall
furnish to the counsel selected by the holders of a majority of the
Funds' Registrable Securities covered by such registration statement
copies of all such documents proposed to be filed, which documents shall
be subject to the review and approval of such counsel);
(ii) prepare and file with the Securities and Exchange Commission
such amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such
registration statement effective for a period of not less than six
months and comply with the provisions of the Securities Act, the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
the rules and regulations promulgated thereunder with respect to the
disposition of all securities covered by such registration statement
during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such registration
statement;
(iii) furnish to each seller of Registrable Securities such number
of copies of such registration statement, each amendment and supplement
thereto (in each case including all exhibits), the
7
prospectus included in such registration statement (including each
preliminary prospectus and summary prospectus) in conformity with the
requirements of the Securities Act, and such other documents as such
seller may reasonably request in order to facilitate the disposition of
the Registrable Securities owned by such seller;
(iv) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such
jurisdictions as any seller and the managing underwriter or underwriters
may reasonably request and do any and all other acts and things which
may be reasonably necessary or advisable to enable such seller to
consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller; PROVIDED that the Company shall not be
required to (i) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this
subsection, (ii) subject itself to taxation in any such jurisdiction or
(iii) consent to general service of process in any such jurisdiction;
(v) notify each seller of such Registrable Securities and the
managing underwriter or underwriters, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act,
of the happening of any event as a result of which the prospectus
included in such registration statement contains an untrue statement of
a material fact or omits to state any fact required to be stated therein
to make the statements therein not misleading in the light of the
circumstances then existing, and, at the request of any such seller, the
Company shall prepare a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus shall not contain an untrue statement of a
material fact or omit to state any fact required to be stated therein to
make the statements therein not misleading in the light of the
circumstances then existing;
(vi) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company
are then listed and, if not so listed, to be listed on the NASD
automated quotation system;
(vii) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such
registration statement;
(viii) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the
holders of a majority of the Registrable Securities being sold or the
underwriters, if any, reasonably request in order
8
to expedite or facilitate the disposition of such Registrable
Securities (including effecting a stock split or a combination of
shares);
(ix) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to
such registration statement and any attorney, accountant or other agent
retained by any such seller or underwriter, all financial and other
records, pertinent corporate documents and properties of the Company,
and cause the Company's officers, directors, employees and independent
accountants to supply all information reasonably requested by any such
seller, underwriter, attorney, accountant or agent in connection with
such registration statement;
(x) otherwise use its best efforts to comply with all applicable
rules and regulations of the Securities and Exchange Commission, and
make available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at least
twelve months beginning with the first day of the Company's first full
calendar quarter after the effective date of the registration statement,
which earnings statement shall satisfy the provisions of Section 11(a)
of the Securities Act and the rules and regulations promulgated
thereunder;
(xi) obtain a cold comfort letter from the Company's independent
public accountants in customary form and covering such matters of the
type customarily covered by cold comfort letters as the holders of a
majority of the Registrable Securities being sold reasonably request
(provided that such Registrable Securities constitute at least 10% of
the securities covered by such registration statement); and
(xii) if any such registration or comparable statement refers to
any holder of Funds' Registrable Securities by name or otherwise as the
holder of any securities of the Company and if in its sole and exclusive
judgment, such holder is or might be deemed to be a controlling person
of the Company, such holder shall have the right to require (i) the
insertion therein of language, in form and substance satisfactory to
such holder and presented to the Company in writing, to the effect that
the holding by such holder of such securities is not to be construed as
a recommendation by such holder of the investment quality of the
Company's securities covered thereby and that such holding does not
imply that such holder shall assist in meeting any future financial
requirements of the Company or (ii) in the event that such reference to
such holder by name or otherwise is not required by the Securities Act
or any similar federal statute then in force, the deletion of the
reference to such holder; PROVIDED
9
that with respect to this clause (ii) such holder shall furnish to the
Company an opinion of counsel to such effect, which opinion and counsel
shall be reasonably satisfactory to the Company.
(b) Each seller of Registrable Securities agrees that, upon receipt of
any notice from the Company of the happening of any event of the type described
in clause (v) of Section 5(a) hereof, such seller shall forthwith discontinue
disposition of such Registrable Securities covered by such registration
statement or related prospectus until such seller's receipt of the copies of the
supplemental or amended prospectus contemplated by clause (v) of Section 5(a)
hereof, and, if so directed by the Company, such seller will deliver to the
Company (at the Company's expense) all copies, other than permanent file copies
then in such seller's possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice. In the event the
Company shall give any such notice, the period mentioned in clause (ii) of
Section 5(a) hereof shall be extended by the number of days during the period
from and including the date of the giving of such notice pursuant to clause (v)
of Section 5(a) hereof and including the date when each seller of Registrable
Securities shall have received the copies of the supplemental or amended
prospectus contemplated by clause (v) of Section 5(a) hereof.
(c) Each seller of Registrable Securities agrees to provide the Company,
upon receipt of its request, with such information about such seller to enable
the Company to comply with the requirements of the Securities Act and to execute
such certificates as the Company may reasonably request in connection with such
information and otherwise to satisfy any requirements of law.
6. REGISTRATION EXPENSES.
(a) All expenses incident to the Company's performance of or compliance
with this Agreement, including all registration and filing fees, fees and
expenses of compliance with securities or blue sky laws, printing expenses,
messenger and delivery expenses, and fees and disbursements of counsel for the
Company and all independent certified public accountants, underwriters
(excluding discounts and commissions) and other Persons retained by the Company
(all such expenses being herein called "Registration Expenses"), shall be borne
as provided in this Agreement, except that the Company shall, in any event, pay
its internal expenses (including all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit or quarterly review, the expense of any liability insurance and the
expenses and fees for listing the securities to be registered on each securities
exchange on which similar securities issued by the Company are then listed or,
if not so listed, on the NASD automated quotation system.
10
(b) In connection with each Demand Registration and each Piggyback
Registration, the Company shall reimburse the holders of Registrable Securities
covered by such registration for the reasonable fees (not exceeding, in the
aggregate, $25,000 for each registration) and disbursements of one counsel
chosen by the holders of a majority of the Funds' Registrable Securities.
(c) To the extent Registration Expenses are not required to be paid by
the Company, each holder of securities included in any registration hereunder
shall pay those Registration Expenses allocable to the registration of such
holder's securities so included, and any Registration Expenses not so allocable
shall be borne by all sellers of securities included in such registration in
proportion to the aggregate selling price of the securities to be so registered.
7. INDEMNIFICATION.
(a) The Company agrees to indemnify, to the extent permitted by law,
each holder of Registrable Securities, its officers and directors or general and
limited partners and each Person who controls such holder (within the meaning of
the Securities Act) against any and all losses, claims, damages, liabilities and
expenses arising out of or based upon (i) any untrue or alleged untrue statement
of material fact contained in any registration statement, prospectus or
preliminary prospectus or any amendment thereof or supplement thereto or (ii)
any omission or alleged omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances then existing, and the Company will reimburse such Persons
for any legal or any other expenses reasonably incurred by it in connection with
investigating or defending any such loss, claim, liability, action or
proceeding; PROVIDED, that the Company shall not be liable to any Person in any
such case to the extent that any such loss, claim, damage, liability (or action
or proceeding in respect thereof) or expense arises out of or is based upon any
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement or amendment or supplement thereto or in any
such preliminary, final or summary prospectus in reliance upon and in conformity
with written information with respect to such seller furnished to the Company by
such seller for use in the preparation thereof. In connection with an
underwritten offering, the Company shall indemnify such underwriters, their
officers and directors and each Person who controls such underwriters (within
the meaning of the Securities Act) to the same extent as provided above with
respect to the indemnification of the holders of Registrable Securities.
(b) In connection with any registration statement in which a holder of
Registrable Securities is participating, each such holder shall furnish to the
Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration
11
statement or prospectus and, to the extent permitted by law, shall indemnify the
Company, its directors and officers and each Person who controls the Company
(within the meaning of the Securities Act) against any losses, claims, damages,
liabilities and expenses resulting from any untrue or alleged untrue statement
of material fact contained in the registration statement, prospectus or
preliminary prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only to the extent
that such untrue statement or omission is contained in any information or
affidavit so furnished in writing by such holder; PROVIDED that the obligation
to indemnify shall be individual to each holder and shall be limited to the net
amount of proceeds received by such holder from the sale of Registrable
Securities pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder shall (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification; PROVIDED, that the failure of the indemnified
party to give notice as provided herein shall not relieve the indemnifying party
of its obligations under the preceding subsections of this Section 7, except to
the extent that the indemnifying party is actually prejudiced by such failure to
give notice and (ii) unless in such indemnified party's reasonable judgment a
conflict of interest between such indemnified and indemnifying parties may exist
with respect to such claim, permit such indemnifying party to assume the defense
of such claim with counsel reasonably satisfactory to the indemnified party. If
such defense is assumed, the indemnifying party shall not be subject to any
liability for any settlement made by the indemnified party without its consent
(but such consent shall not be unreasonably withheld). An indemnifying party who
is not entitled to, or elects not to, assume the defense of a claim shall not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless in the
reasonable judgment of any indemnified party, a conflict of interest may exist
between such indemnified party and any other of such indemnified parties With
respect to such claim.
(d) The indemnification provided for under this Agreement shall remain
in full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling Person of such
indemnified party and shall survive the transfer of securities. The Company also
agrees to make such provisions, as are reasonably requested by any indemnified
party, for contribution to such party in the event the Company's indemnification
is unavailable for any reason.
(e) Indemnification similar to that specified in the preceding
subsections of this Section 7 (with appropriate modifications) shall be given by
the Company and each seller of Registrable Securities with respect
12
to any required registration or other qualification of securities under any
federal or state law or regulation or governmental authority other than the
Securities Act.
(f) The obligations of the parties under this Section 7 shall be in
addition to any liability which any party may otherwise have to any other party.
8. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may
participate in any registration hereunder which is underwritten unless such
Person (a) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements and (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements; PROVIDED that no
holder of Registrable Securities included in any underwritten registration shall
be required to make any representations or warranties to the Company or the
underwriters other than representations and warranties regarding such holder and
such holder's intended method of distribution.
9. RULE 144. If the Company shall have filed a registration statement
pursuant to the requirements of Section 12 of the Exchange Act or a registration
statement pursuant to the requirements of the Securities Act, the Company
covenants that it will file the reports required to be filed by it under the
Securities Act and the Exchange Act and the rules and regulations promulgated
thereunder (or, if the Company is not required to file such reports, it will,
upon the request of any holder of Shares, make publicly available such
information), and it will take such further action as any holder may reasonably
request, all to the extent required from time to time to enable such holder to
sell Registrable Securities without registration under the Securities Act within
the limitation of the exemptions provided by (a) Rule 144 under the Securities
Act, as such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Securities and Exchange Commission. Upon the
request of any holder of Shares, the Company will deliver to such holder a
written statement as to whether it has complied with such requirements.
Notwithstanding anything contained in this Section 9, the Company may deregister
under Section 12 of the Exchange Act if it then is permitted to do so pursuant
to the Exchange Act and the rules and regulations promulgated thereunder.
10. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. The Company shall not hereafter enter
into any agreement with respect to its securities which is inconsistent with or
violates the rights granted to the holders of Registrable Securities under this
Agreement.
13
(b) ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company shall not
take any action, or permit any change to occur, with respect to its securities
which would materially and adversely affect the ability of the holders of
Registrable Securities to include such Registrable Securities in a registration
undertaken pursuant to this Agreement or which would materially and adversely
affect the marketability of such Registrable Securities in any such registration
(including effecting a stock split or a combination of shares).
(c) REMEDIES. Any Person having any rights under any provision of this
Agreement shall be entitled to enforce such rights specifically, to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or other security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provisions of this
Agreement.
(d) CONSENT TO AMENDMENTS. Except as otherwise expressly provided
herein, no modification, amendment or waiver or any provision of this Agreement
shall be effective against the Company or the holders of the Registrable
Securities unless such modification, amendment or waiver is approved in writing
by the Company, the holders of a majority of the Funds' Registrable Securities,
and with respect to any amendment materially and adversely affecting the rights
of the holders of the Executive Registrable Securities, the holders of a
majority of the Executive Registrable Securities. The failure of any party to
enforce any of the provisions of this Agreement shall not affect the right of
such party thereafter to enforce each and every provision of this Agreement in
accordance with its terms.
(e) SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns; provided that the rights granted under this
Agreement to the holders of Registrable Securities may not be assigned by them
except as permitted by Section 4.6 of the Shareholders Agreement. In addition,
whether or not any express assignment has been made, the provisions of this
Agreement which are for the benefit of purchasers or holders of Registrable
Securities are also for the benefit of, and enforceable by, any subsequent
holder of Registrable Securities.
(f) SEVERABILITY. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not
14
invalidate or render unenforceable such provisions in any other jurisdiction.
(g) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, and by different parties on separate counterparts, each of which
shall be deemed an original, but all of which shall constitute one and the same
agreement.
(H) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF MINNESOTA WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
(i) SECTION HEADINGS. The Section headings of this Agreement are
inserted for convenience only and do not constitute a part of this
Agreement.
(j) NOTICES. All notices, requests and demands to or upon the respective
parties hereto to be effective shall be in writing and shall be either
personally delivered or sent by reputable overnight courier service (charges
prepaid) or by confirmed facsimile transmission to the recipient at the address
for such recipient provided in the Purchase Agreement and to any subsequent
holder of Registrable Securities subject to this Agreement at such address as
indicated by the Company's records, or at such address or to the attention of
such other Person as the recipient party has specified by prior written notice
to the sending party. Notices shall be deemed to have been given hereunder when
delivered personally or by confirmed facsimile transmission and one day after
deposit with a reputable overnight courier service.
15
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
CAL DIVE INTERNATIONAL, INC.
By:
Name:
Title:
FIRST RESERVE SECURED ENERGY ASSETS
FUND, LIMITED PARTNERSHIP
By: FIRST RESERVE CORPORATION, as
General Partner
By:
Name:
Title:
FIRST RESERVE FUND V-2, LIMITED
PARTNERSHIP
By: FIRST RESERVE CORPORATION,
as General Partner
By:
Name:
Title:
16
FIRST RESERVE FUND VI, LIMITED
PARTNERSHIP
By: FIRST RESERVE CORPORATION, as
General Partner
By:
Name:
Title:
EXECUTIVES
Gerald G. Reuhl
Owen Kratz
S. James Nelson
CAL DIVE INTERNATIONAL, INC.
VOTING TRUST
By:
Name:
Title:
By:
Name:
Title:
17
1997 REGISTRATION RIGHTS AGREEMENT
This 1997 REGISTRATION RIGHTS AGREEMENT, dated as of April 11, 1997 (this
"Agreement"), is between Cal Dive International, Inc., a Minnesota corporation
(the "Company"), and Coflexip, a French corporation ("CSO").
RECITALS
CSO and the Company are parties to a Purchase Agreement, dated as of April
11, 1997 (the "Purchase Agreement"), pursuant to which CSO is purchasing
3,699,788 shares of the common stock of the Company, without par value the
("Common Stock"), as described in the Purchase Agreement. In order to induce CSO
to enter into the Purchase Agreement, the Company has agreed to provide the
registration rights set forth in this Agreement.
The execution and delivery of this Agreement is a condition precedent to
the obligation of CSO to accept Common Stock from the Company and the Selling
Shareholders pursuant to the Purchase Agreement and to enter into the 1997
Shareholders Agreement.
AGREEMENT
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, receipt of which is
hereby acknowledged, the parties hereto agree as follows:
1. Definitions. (a) Unless otherwise defined herein, terms defined in the
Purchase Agreement are used herein as defined therein. For purposes of this
Agreement, the following terms have the meanings set forth below:
"CSO Registrable Securities" means (i) any Common Stock issued by the
Company or purchased by CSO from the Selling Securityholders under the Purchase
Agreement, and (ii) any other Common Stock acquired by CSO, including, without
limitation, any Common Stock issued or issuable with respect to the Common Stock
referred to in clause (i) above by way of a stock dividend or stock split, or in
connection with a combination of shares, recapitalization, merger,
consolidation, reorganization or similar event.
"Public Offering" means any sale of capital stock of the Company to the
public pursuant to an effective registration statement filed under the
Securities Act.
"Registrable Securities" means the CSO Registrable Securities, Executive
Registrable Securities and the Funds' Registrable Securities (as the latter two
terms are defined in the Registration Rights Agreement dated January 12, 1995
between, among others, the Company, the Funds and the Executives (the "1995
Registration Agreement")). As to any particular Registrable Securities, such
securities shall cease to be Registrable Securities when they have been
distributed to the public pursuant to an offering registered under the
Securities Act or sold to the public through a broker, dealer, or market maker
in compliance with Rule 144 under the Securities Act (or any similar rule then
in force).
"Shareholders Agreement" means the 1997 Shareholders Agreement among CSO,
the Company, the Executives and the Funds dated as of the date hereof.
-1-
<PAGE>
2. DEMAND REGISTRATIONS.
(a) REQUEST FOR REGISTRATION. At any time, and from time to time, after
the earlier of (i) January 12, 2000 or (ii) a Public Offering, CSO or the
holders of the CSO Registrable Securities owning at least 25% of the CSO
Registrable Securities then outstanding may request registration under the
Securities Act of all or part of the CSO Registrable Securities. Within ten days
after receipt of any such request (which shall specify the amount of CSO
Registrable Securities to be registered), the Company shall give written notice
of such requested registration to all other holders of Registrable Securities
and shall include in such registration all Registrable Securities with respect
to which the Company has received written requests for inclusion therein within
15 days after the receipt of the Company's notice. All registrations requested
pursuant to this Section 2(a) are referred to herein as "Demand Registrations."
(b) DEMAND REGISTRATIONS. The holders of the CSO Registrable Securities
are entitled to request and have effected up to three (3) Demand Registrations,
PROVIDED, that at the time of such request the holders of CSO Registrable
Securities own, in the aggregate, not less than 5% of the total outstanding
shares of Common Stock. A registration will not count as one of the permitted
Demand Registrations until it has become effective, and a registration initiated
as one of the Demand Registrations will not count as one of the permitted Demand
Registrations unless the holders of the CSO Registrable Securities are able to
register and sell at least 50% of the CSO Registrable Securities requested by
such holders to be included in such registration. All Demand Registrations shall
be underwritten registrations.
(c) PRIORITY ON DEMAND REGISTRATIONS. The Company shall not include in any
Demand Registration any securities which are not Registrable Securities without
the prior written consent of the holders of a majority of the CSO Registrable
Securities. If in connection with a Demand Registration the managing
underwriters advise the Company and the holders of Registrable Securities in
writing that in their opinion the number of Registrable Securities and, if
permitted hereunder, other securities requested to be included in such offering,
exceeds the number of Registrable Securities and other securities, if any, which
can be sold in an orderly manner in such offering within a price range
acceptable to the holders of a majority of the CSO Registrable Securities, the
Company shall include in such registration (i) first, the Registrable Securities
requested to be included in such registration, allocated pro rata among the
Funds, the holders of CSO Registrable Securities and the Executives based on the
number Registrable Securities owned, in the aggregate, by the Funds, the holders
of CSO Registrable Securities and the Executives, respectively (with the
Registrable Securities which are included in the registration for the Funds, the
holders of CSO Registrable Securities and the Executives being allocated among
the holders within each such group pro rata based on the number of Registrable
Securities owned by each holder within the group or in such other manner as the
holders within each group shall otherwise agree), and (ii) second, other
securities requested to be included in such registration.
(d) RESTRICTIONS ON DEMAND REGISTRATIONS. The Company shall not be
obligated to effect any Demand Registration within six months after (i) the
effective date of a previous Demand Registration, (ii) the effective date of an
S-3 Registration (as defined in Section 4(a) hereof), or (iii) a registration in
which the holders of CSO Registrable Securities were given piggyback rights
pursuant to Section 3 and in which there was no reduction in the number of CSO
Registrable Securities requested to be included. The Company may postpone for up
to 90 days the filing or the effectiveness of a registration statement for a
Demand Registration if the Company and the holders of a majority of the CSO
Registrable Securities agree that such Demand Registration would reasonably be
expected to have a material adverse effect on any proposal or plan by the
Company or any of its Subsidiaries to engage in any acquisition of assets (other
than in the ordinary course of business) or any merger, consolidation, tender
offer or similar transaction; PROVIDED, that in such event, the holders of the
CSO Registrable Securities requesting such
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Demand Registration shall be entitled to withdraw such request and, if such
request is withdrawn, such Demand Registration shall not count as a Demand
Registration.
(e) SELECTION OF UNDERWRITERS. The holders of a majority of the CSO
Registrable Securities included in any Demand Registration shall have the right
to recommend the investment banker(s) and manager(s) to administer the offering,
subject to the approval of the Company, which shall not be unreasonably
withheld, delayed or conditioned.
(f) OTHER REGISTRATION RIGHTS. Except as provided in this Agreement and
the 1995 Registration Agreement, the Company shall not grant to any Person the
right to require the Company to register any equity securities of the Company,
or any securities convertible or exchangeable into or exercisable for such
securities, without the prior written consent of the holders of a majority of
the CSO Registrable Securities; PROVIDED, that the Company may grant rights to
other Persons who agree to be bound by the provisions of Section 8(d) of this
Agreement or enter into a comparable agreement with the Company of which the
holders of CSO Registrable Shares are a third-party beneficiary to (i)
participate in Piggyback Registrations so long as such rights are subordinate to
the rights of the holders of CSO Registrable Securities with respect to such
Piggyback Registrations and (ii) request registrations so long as the holders of
CSO Registrable Securities are entitled to participate in any such registrations
with such Persons pro rata on the basis of the number of shares owned by such
Persons and such participating holders of CSO Registrable Securities (assuming
for this purpose that all shares owned by all participating holders of CSO
Registrable Securities are aggregated, on the one hand, and all shares owned by
all other Persons participating in such Registration are aggregated, on the
other hand).
(g) REGISTRATION STATEMENT FORM. If any Demand Registration which is
proposed by the Company to be effected by the filing of a registration statement
on Form S-3 (or any successor or similar short-form registration statement)
shall be in connection with an underwritten public offering, and if the managing
underwriter shall advise the Company in writing that, in its opinion, the use of
another form of registration statement is of material importance to the success
of such proposed offering, then such registration shall be effected on such
other form.
(h) EFFECTIVE REGISTRATION STATEMENT. A Demand Registration will not be
deemed to have been effected unless it has become effective; PROVIDED that if
within 180 days after it has become effective, the offering of CSO Registrable
Securities pursuant to such registration is interfered with by any stop order,
injunction or other order or requirement of the Securities and Exchange
Commission or other governmental agency or court, such registration will be
deemed not to have been effected.
3. PIGGYBACK REGISTRATIONS.
(a) RIGHT TO PIGGYBACK. Whenever the Company proposes to register any of
its securities under the Securities Act (other than pursuant to a Demand
Registration or S-3 Registration requested by holders of CSO Registrable
Securities) and the registration form to be used may be used for the
registration of CSO Registrable Securities (a "Piggyback Registration"), the
Company shall give prompt written notice (in any event within three business
days after its receipt of notice of any exercise of demand registration rights
other than under this Agreement) to all holders of CSO Registrable Securities of
its intention to effect such a registration and shall include in such
registration all CSO Registrable Securities with respect to which the Company
has received written requests for inclusion therein within 15 days after such
holder's receipt of the Company's notice.
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(b) PIGGYBACK NOT A DEMAND REGISTRATION. The exercise by holders of CSO
Registrable Securities of their rights under this Section 3 shall not constitute
a Demand Registration under Section 2 hereof.
(c) PRIORITY ON PRIMARY REGISTRATIONS. If a Piggyback Registration is an
underwritten primary registration on behalf of the Company, and the managing
underwriters advise the Company and the holders of Registrable Securities in
writing that in their opinion the number of securities requested to be included
in such registration exceeds the number which can be sold in an orderly manner
in such offering within a price range acceptable to the Company, the Company
shall include in such registration (i) first, the securities the Company
proposes to sell, (ii) second, the Registrable Securities requested to be
included in such registration, allocated pro rata among the Funds, the holders
of CSO Registrable Securities and the Executives based on the number Registrable
Securities owned, in the aggregate, by the Funds, the holders of CSO Registrable
Securities and the Executives, respectively (with the Registrable Securities
which are included in the registration for the Funds, the holders of CSO
Registrable Securities and the Executives being allocated among the holders
within each such group pro rata based on the number of Registrable Securities
owned by each holder within the group or in such other manner as the holders
within each group shall otherwise agree), and (iii) third, other securities
requested to be included in such registration.
(d) PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback Registration is an
underwritten secondary registration on behalf of holders of the Company's
securities, and the managing underwriters advise the Company and the holders of
Registrable Securities in writing that in their opinion the number of securities
requested to be included in such registration exceeds the number which can be
sold in an orderly manner in such offering within a price range acceptable to
the holders of a majority of the securities initially requesting such
registration, the Company shall include in such registration (i) first, the
securities requested to be included therein by the holders requesting such
registration and the Registrable Securities requested to be included in such
registration, allocated pro rata among holders requesting the registration, the
Funds, the holders of CSO Registrable Securities and the Executives based on the
number Registrable Securities owned, in the aggregate, by the holders requesting
the registration, the Funds, the holders of CSO Registrable Securities and the
Executives, respectively (with the Registrable Securities which are included in
the registration for the holders requesting the registration, the Funds, the
holders of CSO Registrable Securities and the Executives being allocated among
the holders within each such group pro rata based on the number of Registrable
Securities owned by each holder within the group or in such other manner as the
holders within each group shall otherwise agree) and (ii) second, other
securities requested to be included in such registration.
(e) OTHER REGISTRATIONS. If the Company has filed a registration statement
with respect to Registrable Securities pursuant to Section 2 or 4 or subject to
this Section 3, and if such registration statement has not been withdrawn or
abandoned, the Company shall not file or cause to be effected any other
registration of any of its equity securities or securities convertible or
exchangeable into or exercisable for its equity securities under the Securities
Act (except on Form S-8 or any successor form), whether on its own behalf or at
the request of any holder or holders of such securities, until a period of at
least six months has elapsed from the effective date of such previous
registration statement.
4. FORM S-3 REGISTRATIONS.
(a) If the Company becomes eligible to use Form S-3 under the Securities
Act or a comparable successor form, the Company shall use its reasonable best
efforts to continue to qualify at all times for registration of its capital
stock on Form S-3 or such successor form. In such event, CSO or the
holders of CSO Registrable Securities owning at least 25% of the CSO Registrable
Securities then
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outstanding shall have the right, from time to time, to request and have
effected up to three (3) registrations of shares of CSO Registrable Securities
on Form S-3 or such successor form (which request shall specify the amount of
CSO Registrable Securities to be registered), PROVIDED, that, at the time of
such request, the holders of CSO Registrable Securities own, in the aggregate,
not less than 5% of the total outstanding shares of Common Stock. All
registrations requested pursuant to this Section 4(a) are referred to herein as
"S-3 Registrations." A registration will not count as one of the permitted S-3
Registrations until it has become effective. If so requested by any holder of
CSO Registrable Securities in connection with an S-3 Registration, the Company
shall take such steps as are required to register such holder's CSO Registrable
Securities for sale on a delayed or continuous basis under Rule 415 and shall
take such steps as are required to keep such registration effective until all of
such holder's CSO Registrable Securities registered thereunder are sold. S-3
Registrations need not be underwritten unless either the Company (if it includes
shares in the S-3 Registration pursuant to Section 4(b) hereof) or the holders
of a majority of the CSO Registrable Securities demanding the registration
request that it be underwritten.
(b) USE OF ALTERNATE REGISTRATION STATEMENTS; PRIORITY IN S-3
REGISTRATIONS. At the Company's option, the Company may elect to include in an
S-3 Registration, Common Stock to be issued by the Company and, if required in
order to effect the registration of such securities, cause the registration to
be made pursuant to a registration statement on Form S-1 or S-2, which shall
count as one of the five S-3 Registrations. If in connection with an
underwritten S-3 Registration the managing underwriters advise the Company and
the holders of Registrable Securities in writing that in their opinion the
number of Registrable Securities and, if permitted hereunder, other securities
requested to be included in such offering, exceeds the number of Registrable
Securities and other securities, if any, which can be sold in an orderly manner
in such offering within a price range acceptable to the holders of a majority of
the CSO Registrable Securities, the Company shall include in such registration
(i) first, the Registrable Securities requested to be included in such
registration, allocated pro rata among the Funds, the holders of CSO Registrable
Securities and the Executives based on the number Registrable Securities owned,
in the aggregate, by the Funds, the holders of CSO Registrable Securities and
the Executives, respectively (with the Registrable Securities which are included
in the registration for the Funds, the holders of CSO Registrable Securities and
the Executives being allocated among the holders within each such group pro rata
based on the number of Registrable Securities owned by each holder within the
group or in such other manner as the holders within each group shall otherwise
agree), and (ii) second, other securities requested to be included in such
registration.
(c) RESTRICTIONS ON S-3 REGISTRATIONS. The Company shall not be obligated
to effect any S-3 Registration within six months after (i) the effective date of
a previous Demand Registration, (ii) the effective date of a previous S-3
Registration hereof, or (iii) a registration in which the holders of CSO
Registrable Securities were given piggyback rights pursuant to Section 3 and in
which there was no reduction in the number of CSO Registrable Securities
requested to be included. The Company may postpone for up to 90 days the filing
or the effectiveness of a registration statement for an S-3 Registration if the
Company and the holders of a majority of the CSO Registrable Securities agree
that such S-3 Registration would reasonably be expected to have a material
adverse effect on any proposal or plan by the Company or any of its Subsidiaries
to engage in any acquisition of assets (other than in the ordinary course of
business) or any merger, consolidation, tender offer or similar transaction;
PROVIDED, that in such event, the holders of the CSO Registrable Securities
requesting such S-3 Registration shall be entitled to withdraw such request and,
if such request is withdrawn, such S-3 Registration shall not count as an S-3
Registration.
(d) SELECTION OF UNDERWRITERS. In an underwriter is requested pursuant
to Section 4(a) hereof, the holders of a majority of the CSO Registrable
Securities included in the S-3 Registration shall have the
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right to recommend the investment banker(s) and manager(s) to administer the
offering, subject to the approval of the Company which shall not be unreasonably
withheld, delayed or conditioned.
(e) EFFECTIVE REGISTRATION STATEMENT. An S-3 Registration will not be
deemed to have been effected unless it has become effective; PROVIDED that if
within 180 days after it has become effective, the offering of CSO Registrable
Securities pursuant to such registration is interfered with by any stop order,
injunction or other order or requirement of the Securities and Exchange
Commission or other governmental agency or court, such registration will be
deemed not to have been effected.
5. HOLDBACK AGREEMENTS. Each holder of CSO Registrable Securities agrees
not to effect any public sale or distribution of equity securities of the
Company, or any securities convertible into or exchangeable or exercisable for
such securities, during the seven days prior to and the 90-day period beginning
on the effective date of the first registration statement of the Company
declared effective under the Securities Act unless the underwriters managing the
related offering otherwise agree; PROVIDED, that the holders of the CSO
Registrable Securities shall not be so restricted unless comparable agreements
are entered into by each executive officer and director of the Company and each
holder of at least 2% (on a fully-diluted basis) of its equity securities, or
any securities convertible into or exchangeable or exercisable for such
securities, purchased from the Company at any time after the date hereof.
6. REGISTRATION PROCEDURES.
(a) Whenever the holders of CSO Registrable Securities have requested that
any CSO Registrable Securities be registered pursuant to this Agreement, the
Company shall use its best efforts to effect the registration and the sale of
such CSO Registrable Securities in accordance with the intended method or
disposition thereof, and pursuant thereto the Company shall as expeditiously as
possible:
(i) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such CSO Registrable Securities and use
its best efforts to cause such registration statement to become effective
(provided that before filing a registration statement or prospectus or any
amendments or supplements thereto, the Company shall furnish to one counsel
selected by the holders of CSO Registrable Securities covered by such
registration statement copies of all such documents proposed to be filed, which
documents shall be subject to the review and approval of such counsel);
(ii) prepare and file with the Securities and Exchange Commission
such amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such
registration statement effective for a period of not less than six months and
comply with the provisions of the Securities Act, the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the rules and regulations promulgated
thereunder with respect to the disposition of all securities covered by such
registration statement during such period in accordance with the intended
methods of disposition by the sellers thereof disclosed to the Company by such
sellers or set forth in such registration statement;
(iii) furnish to each seller of CSO Registrable Securities such
number of copies of such registration statement, each amendment and supplement
thereto (in each case including all exhibits), the prospectus included in such
registration statement (including each preliminary prospectus and summary
prospectus) in conformity with the requirements of the Securities Act, and such
other documents as such seller may reasonably request in order to facilitate the
disposition of the CSO Registrable Securities owned by such seller;
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(iv) use its best efforts to register or qualify such CSO
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as any seller and the managing underwriter or underwriters may
reasonably request and do any and all other acts and things which may be
reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the CSO Registrable Securities owned by
such seller; PROVIDED that the Company shall not be required to (i) qualify
generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this subsection, or (ii) subject itself to taxation
in any such jurisdiction;
(v) notify each seller of such CSO Registrable Securities and the
managing underwriter or underwriters, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the happening
of any event as a result of which the prospectus included in such registration
statement contains an untrue statement of a material fact or omits to state any
fact required to be stated therein to make the statements therein not misleading
in the light of the circumstances then existing, and, at the request of any such
seller, the Company shall prepare a supplement or amendment to such prospectus
so that, as thereafter delivered to the purchaser of such CSO Registrable
Securities, such prospectus shall not contain an untrue statement of a material
fact or omit to state any fact required to be stated therein to make the
statements therein not misleading in the light of the circumstances then
existing;
(vi) cause all such CSO Registrable Securities to be listed on each
securities exchange (including the NASDAQ National Market) on which similar
securities issued by the Company are then listed and, if not so listed, to be
listed on the NASD automated quotation system;
(vii) provide a transfer agent and registrar for all such CSO
Registrable Securities not later than the effective date of such registration
statement;
(viii)enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the holders of
a majority of the CSO Registrable Securities being sold or the underwriters, if
any, reasonably request in order to expedite or facilitate the disposition of
such CSO Registrable Securities (including effecting a stock split or a
combination of shares);
(ix) make available for inspection by any seller of CSO Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees, attorneys and independent accountants to supply
all information reasonably requested (and not privileged in the case of
information from attorneys) by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;
(x) otherwise use its best efforts to comply with all applicable
rules and regulations of the Securities and Exchange Commission, and make
available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months beginning with
the first day of the Company's first full calendar quarter after the effective
date of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and the rules and regulations
promulgated thereunder;
(xi) obtain for the benefit of the holders of CSO Registrable
Securities included in the registration a cold comfort letter from the Company's
independent public accountants in customary form
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and covering such matters of the type customarily covered by cold comfort
letters as the holders of a majority of the CSO Registrable Securities being
sold reasonably request;
(xii) obtain for the benefit of the holders of CSO Registrable
Securities included in the registration an opinion of counsel in customary form
and covering such matters of the type customarily covered by underwriters in an
underwritten public offering; and
(xiii)if any such registration or comparable statement refers to any
holder of CSO Registrable Securities by name or otherwise as the holder of any
securities of the Company and if in its sole and exclusive judgment, such holder
is or might be deemed to be a controlling Person of the Company, such holder
shall have the right to require (A) the insertion therein of language, in form
and substance satisfactory to such holder and presented to the Company in
writing, to the effect that the holding by such holder of such securities is not
to be construed as a recommendation by such holder of the investment quality of
the Company's securities covered thereby and that such holding does not imply
that such holder shall assist in meeting any future financial requirements of
the Company or (B) in the event that such reference to such holder by name or
otherwise is not required by the Securities Act or any similar federal statute
then in force, the deletion of the reference to such holder; PROVIDED that with
respect to this clause (B) such holder shall furnish to the Company an opinion
of counsel to such effect, which opinion of counsel shall be reasonably
satisfactory to the Company.
(b) Each seller of CSO Registrable Securities agrees that, upon receipt of
any notice from the Company of the happening of any event of the type described
in clause (v) of Section 6(a) hereof, such seller shall forthwith discontinue
disposition of such CSO Registrable Securities covered by such registration
statement or related prospectus until such seller's receipt of the copies of the
supplemental or amended prospectus contemplated by clause (v) of Section 6(a)
hereof, and, if so directed by the Company, such seller will deliver to the
Company (at the Company's expense) all copies, other than permanent file copies
then in such seller's possession, of the prospectus covering such CSO
Registrable Securities current at the time of receipt of such notice. In the
event the Company shall give any such notice, the period mentioned in clause
(ii) of Section 6(a) hereof shall be extended by the number of days during the
period from and including the date of the giving of such notice pursuant to
clause (v) of Section 6(a) hereof and including the date when each seller of CSO
Registrable Securities shall have received the copies of the supplemental or
amended prospectus contemplated by clause (v) of Section 6(a) hereof.
(c) Each seller of CSO Registrable Securities agrees to provide the
Company, upon receipt of its request, with such information about such seller as
is necessary to enable the Company to comply with the requirements of the
Securities Act and to execute such certificates as the Company may reasonably
request in connection with such information and otherwise to satisfy any
requirements of law.
7. REGISTRATION EXPENSES.
(a) PAYMENT OF REGISTRATION EXPENSES. All expenses incident to the
Company's performance of or compliance with this Agreement, including all
registration and filing fees, fees and expenses of compliance with securities or
blue sky laws, printing expenses, messenger and delivery expenses, fees and
disbursements of counsel for the Company and all independent certified public
accountants, underwriters (excluding discounts and commissions) and other
Persons retained by the Company, internal expenses, liability insurance and the
expenses and fees for listing the securities to be registered on each securities
exchange (including the NASDAQ National Market) on which similar securities
issued by the Company are then listed or, if not so listed, on the NASD
automated quotation system (all such expenses being herein called "Registration
Expenses"), shall be borne by the Company or such holders of Registrable
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Securities or other securities included in the registration (other than holders
of CSO Registrable Securities) with whom the Company has agreements regarding
the payment of such Registration Expenses.
(b) COUNSEL OF CSO HOLDERS. In connection with each Demand Registration,
S-3 Registration and each Piggyback Registration in which only the Company and
holders of CSO Registrable Securities participate, the Company shall reimburse
the holders of CSO Registrable Securities covered by such registration for the
reasonable fees and disbursements of one counsel chosen by the holders of a
majority of the CSO Registrable Securities requested to be included in such
registration; PROVIDED, such counsel shall agree to represent the other holders
of Registrable Securities or other securities included in such registration if
requested by such other holders. In connection with each Piggyback Registration
in which holders of CSO Registrable Securities participate which is not subject
to the preceding sentence, the Company shall arrange for the holders of CSO
Registrable Securities covered by such registration to be represented, jointly
with holders of other securities included in such registration and without
expense to the holders of the CSO Registrable Securities included in such
registration, by counsel acceptable to the holders of a majority of the CSO
Registrable Securities requested to be included in such registration, which
acceptance shall not be unreasonably withheld.
8. INDEMNIFICATION
(a) The Company agrees to indemnify, to the extent permitted by law, each
holder of CSO Registrable Securities, its officers and directors, general and
limited partners, employees and agents and each Person who controls such holder
(within the meaning of the Securities Act or the Exchange Act) against any and
all losses, claims, damages, liabilities and expenses (including any amount paid
in settlement of any action, suit or proceeding or any claim asserted subject to
Section 8(c) below) arising out of or based upon (i) any untrue or alleged
untrue statement of material fact contained in any registration statement,
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto, (ii) any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing or (iii) any violation by the Company
of the Securities Act or any rule or regulation thereunder in connection with
such registration, and the Company will reimburse such Persons for any legal or
any other expenses reasonably incurred by it in connection with investigating or
defending any such loss, claim, liability, action or proceeding or enforcing its
rights under this Section 8; PROVIDED, that the Company shall not be liable to
any Person in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out of
or is based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement or amendment or supplement
thereto or in any such preliminary, final or summary prospectus in reliance upon
and in conformity with written information with respect to such seller furnished
to the Company by such seller expressly for use in the preparation thereof. In
connection with an underwritten offering, the Company shall indemnify such
underwriters, their officers and directors, general and limited partners,
employees and agents and each Person who controls such underwriters (within the
meaning of the Securities Act or the Exchange Act) to the same extent as
provided above with respect to the indemnification of the holders of CSO
Registrable Securities.
(b) In connection with any registration statement in which a holder of CSO
Registrable Securities is participating, each such holder shall furnish to the
Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, shall indemnify the Company, its
directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against any losses, claims, damages, liabilities
and expenses resulting from any untrue or alleged untrue statement of material
fact contained in the registration statement, prospectus or preliminary
prospectus or any amendment
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thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, but only to the extent that such untrue statement or omission is
contained in any information or affidavit so furnished in writing by such holder
expressly for use in such Registration Statement, PROVIDED that the obligation
to indemnify shall be individual to each holder and shall be limited to the net
amount of proceeds received by such holder from the sale of CSO Registrable
Securities pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder shall (i) give prompt
written notice to the indemnifying party of any claim with respect to which it
seeks indemnification; PROVIDED, that the failure of the indemnified party to
give notice as provided herein shall not relieve the indemnifying party of its
obligations under the preceding subsections of this Section 8, except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice and (ii) unless in such indemnified party's reasonable judgment a
conflict of interest between such indemnified and indemnifying parties may exist
with respect to such claim, permit such indemnifying party to assume the defense
of such claim with counsel reasonably satisfactory to the indemnified party. If
such defense is assumed, the indemnifying party shall not be subject to any
liability for any settlement made by the indemnified party without its consent
(but such consent shall not be unreasonably withheld). An indemnifying party who
is not entitled to, or elects not, to assume the defense of a claim shall not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless in the
reasonable judgment of any indemnifying party, a conflict of interest may exist
between such indemnified party and any other of such indemnified parties with
respect to such claim.
(d) The indemnification provided for under this Agreement shall remain in
full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling Person of such
indemnified party and shall survive the transfer of securities. If the
indemnification provided for in this Section 8 for any reason is held by a court
of competent jurisdiction to be unavailable to an indemnified party in respect
of any losses, claims, damages, expenses or liabilities referred to therein,
then each indemnifying party under this Section 8, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages, expenses or
liabilities in such proportion as is appropriate to reflect (i) the relative
benefits received by the Company, the holders of Registrable Securities or other
securities sold in an offering (the "Selling Holders") and the underwriters from
the offering, (ii) the relative fault of the Company, the Selling Holders and
the underwriters in connection with the statements or omissions which resulted
in such losses, claims, damages, expenses or liabilities, and (iii) any other
relevant equitable considerations. The relative benefits received by the
Company, the Selling Holders and the underwriters shall be deemed to be in the
same respective proportions as the net proceeds from the offering (before
deducting expenses) received by the Company and the Selling Holders and the
underwriting discount received by the underwriters, in each case as set forth in
the table on the cover page of the applicable prospectus, bear to the aggregate
public offering price of the securities sold in the offering. The relative fault
of the Company, the Selling Holders and the underwriters shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, the Selling Holders or the
underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company
and the holders of the CSO Registrable Securities agree that it would not be
just and equitable if contribution pursuant to this Section 8 were determined by
pro rata or per capita allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in this
subsection. In no event, however, shall a Selling Holder be required to
contribute any amount under this Section 8 in excess of the net amount of
proceeds received by such Selling Holder from its sale of securities under such
registration statement. No Person found guilty of fraudulent misrepresentation
(within the meaning of Section 11(f)
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of the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
(e) Indemnification similar to that specified in the preceding subsections
of this Section 8 (with appropriate modifications) shall be given by the Company
and each seller of CSO Registrable Securities with respect to any required
registration or other qualification of securities under any federal or state law
or regulation or governmental authority other than the Securities Act.
(f) The obligations of the parties under this Section 8 shall be in
addition to any liability which any party may otherwise have to any other party.
9. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may participate
in any registration hereunder which is underwritten unless such Person (a)
agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements and (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements; PROVIDED that no
holder of CSO Registrable Securities included in any underwritten registration
shall be required to make any representations or warranties to the Company or
the underwriters other than representations and warranties regarding such holder
and such holder's intended method of distribution.
10. RULES 144 AND 144A.
(a) RULE 144. The Company covenants that it will file the reports required
to be filed by it under the Securities Act and the Exchange Act and the rules
and regulations promulgated thereunder (or, if the Company is not required to
file such reports, it will, upon the request of any holder of CSO Registrable
Securities, make publicly available such information), and it will take such
further action as any holder may reasonably request, all to the extent required
from time to time to enable such holder to sell CSO Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (i) Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or (ii) any similar rule or regulation hereafter
adopted by the Securities and Exchange Commission. Upon the request of any
holder of CSO Registrable Securities from time to time, the Company will deliver
to any such holder (i) a written statement as to whether it has complied with
such requirements, and (ii) at the Company's expense, an opinion of the
Company's counsel as to the availability of an exemption from registration in
connection with a proposed transfer of CSO Registrable Securities by such
holder. Notwithstanding anything contained in this Section 10, the Company may
deregister under Section 12 of the Exchange Act if it then is permitted to do so
pursuant to the Exchange Act and the rules and regulations promulgated
thereunder.
(b) RULE 144A. The Company shall, at all times during which it is neither
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, nor exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange
Act, promptly upon the written request of any holder of CSO Registrable
Securities, provide in writing to such holder and to any prospective transferee
of any of the CSO Registrable Securities of such holder the information
concerning the Company described in Rule 144A(d)(4) under the Securities Act
("Rule 144A Information"). The Company also shall, upon the written request of
any such holder, cooperate with and assist such holder or any member of the
National Association of Securities Dealers, Inc. PORTAL system in applying to
designate and thereafter maintain the eligibility of the Common Stock for
trading through PORTAL. The Company's obligations under this Section 10(b) shall
at all times be contingent upon receipt from the prospective transferees of CSO
Registrable Securities of a written agreement to take all reasonable precautions
to safeguard the Rule 144A
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<PAGE>
Information from disclosure to anyone other than Persons who will assist such
transferee in evaluation the purchase of the CSO Registrable Securities.
11. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. The Company shall not hereafter enter into
any agreement with respect to its securities which is inconsistent with or
violates the rights granted to the holders of CSO Registrable Securities under
this Agreement.
(b) ADJUSTMENTS AFFECTING CSO REGISTRABLE SECURITIES. The Company shall
not take any action, or permit any change to occur, with respect to its
securities which would materially and adversely affect the ability of the
holders of CSO Registrable Securities to include such CSO Registrable Securities
in a registration undertaken pursuant to this Agreement or which would
materially and adversely affect the marketability of such CSO Registrable
Securities in any such registration (including affecting a stock split or a
combination of shares).
(c) REMEDIES. Any Person having any rights under any provision of this
Agreement shall be entitled to enforce such rights specifically, to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or other security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provisions of this
Agreement.
(d) CONSENT TO AMENDMENTS. Except as otherwise expressly provided herein,
no modification, amendment or waiver of any provision of this Agreement shall be
effective against the Company or the holders of the CSO Registrable Securities
unless such modification, amendment or waiver is approved in writing by the
Company and the holders of a majority of the CSO Registrable Securities. The
failure of any party to enforce any of the provisions of this Agreement shall
not affect the right of such party thereafter to enforce each and every
provision of this Agreement in accordance with its terms.
(e) SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns. In addition, whether or not any express
assignment has been made, the provisions of this Agreement which are for the
benefit of purchasers or holders of CSO Registrable Securities are also for the
benefit of, and enforceable by, any subsequent holder of CSO Registrable
Securities; PROVIDED, that subsequent holders of CSO Registrable Securities
shall be permitted to have their shares registered pursuant to this Agreement
only if they agree in writing to be bound by the terms of this Agreement
(including without limitation Section 8(b) hereof) if requested by the Company.
(f) SEVERABILITY. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provisions in any
other jurisdiction.
(g) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, and by different parties on separate counterparts, each of which
shall be deemed an original, and all of which shall constitute one and the same
agreement.
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<PAGE>
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF.
(i) SECTION HEADINGS. The Section headings of this Agreement are inserted
for convenience only and do not constitute a part of this Agreement.
(j) NOTICES. All notices, requests and demands to or upon the respective
parties hereto to be effective shall be in writing and shall be either
personally delivered or sent by reputable overnight courier service (charges
prepaid) or by confirmed facsimile transmission to the recipient at the address
for such recipient set forth in the 1995 Registration Agreement or below and to
any subsequent holder of CSO Registrable Securities subject to this Agreement at
such address as indicated by the Company's records, or at such address or to the
attention of such other Person as the recipient party has specified by prior
written notice to the sending party. Notices shall be deemed to have been given
hereunder when delivered personally or by confirmed facsimile transmission and
one day after deposit with a reputable overnight courier service.
If to CSO:
Coflexip
23 avenue de Neuilly
75116 Paris, France
Attention: General Counsel
Facsimile No: 33 1 40 67 6007
With a copy (which shall not constitute notice) to:
Nixon, Hargrave, Devans & Doyle LLP
437 Madison Avenue
New York, New York 10022
Attn: Richard F. Langan, Jr., Esq.
Facsimile No: 212-940-3111
If to the Company:
Cal Dive International, Inc.
13430 Northwest Freeway
Suite 350
Houston, Texas 77040
Attn: Mr. Owen Kratz, President
Facsimile No: 713-690-2204
or to such other address or to the attention of such other Person as the
recipient party has specified by prior written notice to the sending
party.
12. JOINDER CONSENT AND WAIVER OF THE EXECUTIVES AND THE FUNDS. By their
execution of this Agreement, each of the Executives and each of the Funds hereby
(i) consent, pursuant to Section 2(f) of the 1995 Registration Agreement, and
(ii) waive the application of Sections 10(a) and 10(b) of the 1995
Registration Agreement, evidencing his or its consent, as required pursuant to
Section 2(f), 10(a) and 10(b)
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<PAGE>
of the 1995 Registration Agreement, to the Company's entering into this
Agreement and granting to CSO the registration rights described herein, and
agrees to be bound by the terms of this Section 12. The parties agree that this
Agreement and the 1995 Registration agreement are to be interpreted together so
as to provide holders of CSO Registrable Securities, the Executives and the
Funds with comparable registration rights with respect to all registrations of
Registrable Securities by the Company, except as expressly provided otherwise
herein or therein. Without limiting the generality of the foregoing, each of the
Executives and each of the Funds agree that in any demand registration under
Section 2 of the 1995 Registration Agreement or in any registration in which any
of the Executives or the Funds exercise their rights under Section 3 of the 1995
Registration Agreement, in each case where holders of CSO Registrable Securities
participate in such registration pursuant to Section 3 of this Agreement,
Section 2(c), 3(c) or 3(d) of this Agreement, as applicable, shall govern the
determination of the Registrable Securities to be included in such registration
so that the Funds, the Executives and the holders of CSO Registrable Securities
have the same priority in such registrations. Furthermore, the Funds and the
Executives agree to be bound by the provisions of Section 8(d) hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
CAL DIVE INTERNATIONAL, INC.
By: OWEN KRATZ, PRESIDENT
Owen Kratz, President
COFLEXIP
By: PIERRE MARIE VALENTIN
Pierre Marie Valentin, Chairman
and Chief Executive Officer
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<PAGE>
FOR PURPOSES OF THE CONSENT IN SECTION 12 HEREOF:
FIRST RESERVE SECURED ENERGY ASSETS FUND, LIMITED PARTNERSHIP
By: FIRST RESERVE CORPORATION, as General Partner
By: DAVID H. KENNEDY
David H. Kennedy, Managing Director
FIRST RESERVE FUND V, LIMITED PARTNERSHIP
By: FIRST RESERVE CORPORATION, as General Partner
By: DAVID H. KENNEDY
David H. Kennedy, Managing Director
FIRST RESERVE FUND V-2, LIMITED PARTNERSHIP
By: FIRST RESERVE CORPORATION, as General Partner
By: DAVID H. KENNEDY
David H. Kennedy, Managing Director
FIRST RESERVE FUND VI, LIMITED PARTNERSHIP
By: FIRST RESERVE CORPORATION, as General Partner
By: DAVID H. KENNEDY
David H. Kennedy, Managing Director
EXECUTIVES
GERALD G. REUHL
OWEN KRATZ
S. JAMES NELSON
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EXHIBIT 10.1
PURCHASE AGREEMENT
AMONG
CAL DIVE INTERNATIONAL, INC.
COFLEXIP
AND
CERTAIN SHAREHOLDERS OF
CAL DIVE INTERNATIONAL, INC.
Dated as of April 11, 1997
<PAGE>
TABLE OF CONTENTS
Page
1. Authorization and Closing............................................ 1
1A. Purchase and Sale of Common Stock.............................. 1
1B. The Closing.................................................... 2
2. Conditions to the Purchaser's Obligation at the Closing.............. 2
2A. Representations and Warranties................................. 2
2B. Compliance..................................................... 2
2C. Bring-Down Certificate......................................... 2
2D. Material Adverse Change....................................... 3
2E. Third Party Consents........................................... 3
2F. HSR Act........................................................ 3
2G. Exon-Florio Filing............................................. 3
2H. Registration Rights Agreement................................. 3
2I. Shareholders Agreement ........................................ 3
2J. Business Cooperation Agreement................................. 3
2K. Corporate Governance Documents................................. 3
2L. Employment Agreements.......................................... 4
2M. Legal Opinions................................................. 4
2N. Closing Documents.............................................. 4
2O Proceedings.................................................... 5
3. Conditions to the Company's and Shareholders' Obligation
at the Closing..................................................... 5
3A. Representations and Warranties................................. 5
3B. Compliance..................................................... 5
3C. Bring-Down Certificate......................................... 5
3D. ROV Agreement.................................................. 5
3E. HSR Act........................................................ 5
3F. Business Cooperation Agreement................................. 5
3G. Third Party Consents........................................... 5
3H. Registration Rights Agreement.................................. 5
3I. Shareholders Agreement......................................... 6
3J. Legal Opinions................................................. 6
3K. Closing Documents.............................................. 6
3L. Proceedings.................................................... 6
4. Appointment of Representative........................................ 6
5. Covenants............................................................ 7
5A. Financial Statements and Other Information..................... 7
5B. Inspection of Property......................................... 8
5C. Affirmative Covenants.......................................... 8
5D. Compliance with Agreements..................................... 9
5E. Vessels........................................................ 9
5F. Access to Information; Confidentiality......................... 9
5G. Conduct of the Business Pending the Closing.................... 9
5H. Financial Statements........................................... 11
5I. Purchaser Covenant............................................. 12
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5J. Other Actions.................................................. 12
6. Representations and Warranties of the Company........................ 12
6A. Organization and Corporate Power............................... 12
6B. Capital Stock and Related Matters.............................. 13
6C. Authorization; No Breach....................................... 14
6D. Financial Statements........................................... 14
6E. Absence of Undisclosed Liabilities............................. 14
6F. Absence of Certain Developments................................ 15
6G. Tax Matters.................................................... 16
6H. Litigation..................................................... 16
6I. Real Property.................................................. 17
6J. Vessels........................................................ 18
6K. Tangible Personal Property..................................... 19
6L. Intangible Property............................................ 20
6M. Material Contracts............................................. 20
6N. Employee Benefits.............................................. 21
6O. Labor.......................................................... 23
6P. Compliance with Laws; Permits.................................. 23
6Q. Environmental Matters.......................................... 24
6R. Investment Company Act......................................... 24
6S. Insurance...................................................... 25
6T. Customers and Suppliers........................................ 25
6U. Related Party Transactions..................................... 25
6V. Entire Business................................................ 25
6W. No Finder's Fee................................................ 26
6X. Disclosure..................................................... 26
7. Representations and Warranties of the Shareholders................... 26
7A. Title to Shares................................................ 26
7B. Authority Relative to this Agreement........................... 26
8. Purchaser's Representations and Warranties........................... 27
8A. Organization and Corporate Power............................... 27
8B. Authorization; No Breach....................................... 28
8C. Restricted Securities.......................................... 28
8D. No Finder's Fee................................................ 28
8E. Purchaser Inquiry.............................................. 28
8F. Qualification as an Accredited Investor........................ 28
9. Public Disclosure.................................................... 28
10. Definitions.......................................................... 29
11. Post-Closing Activities.............................................. 35
12. Miscellaneous........................................................ 35
12A. Expenses....................................................... 35
12B. Remedies....................................................... 35
12C. Entire Agreement; Amendments and Waivers....................... 35
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12D. Survival of Representation and Warranties; Indemnification..... 36
12E. Successors and Assigns......................................... 39
12F. Severability................................................... 39
12G. Counterparts................................................... 39
12H. Table of Contents and Section Headings; Interpretation......... 39
12I. Governing Law; Submission to Jurisdiction;
Consent to Service of Process................................ 40
12J. Arbitration.................................................... 40
12K. Notices........................................................ 42
12L. Further Assurances............................................. 43
12M. Interpretation................................................. 43
13. Consent to Sale...................................................... 43
14. Termination of Agreement............................................. 43
15. Survival After Termination........................................... 44
LIST OF EXHIBITS AND SCHEDULES
Exhibit A - List of Shareholders of the Company
Exhibit B - Form of ROV Agreement
Exhibit C - Form of Registration Rights Agreement
Exhibit D - Form of Shareholders Agreement
Exhibit E - Form of Business Cooperation Agreement
Exhibit F - Form of Articles of Incorporation and By-Laws
Exhibit G-1 - Form of Employment Agreement - Gerald G. Reuhl
Exhibit G-2 - Form of Employment Agreement - Owen E. Kratz
Exhibit G-3 - Form of Employment Agreement - S. James Nelson
Exhibit G-4 - Form of Employment Agreement - Andrew C. Becher
Exhibit G-5 - Form of Employment Agreement - Randall W. Drewry
Exhibit G-6 - Form of Employment Agreement - Michael P. Middleton
Exhibit G-7 - Form of Employment Agreement - Lou Tapscott
Exhibit G-8 - Form of Employment Agreement - Ken Duell
Exhibit H-1 - Form of Opinion of the General Counsel of
the Company
Exhibit H-2 - Form of Opinion of Special Counsel to the Company and
Certain Selling Shareholders (other than the Funds)
Exhibit H-3 - Form of Opinion of Counsel to the Funds
Exhibit I - Form of FIRPTA Certificate
Exhibit J-1 - Form of Opinion of French Counsel to the Purchaser
Exhibit J-2 - Form of Opinion of Special U.S. Counsel to the Purchaser
Exhibit K - Reserves Report
Exhibit L - Ruling Letter and Customs Commissioner Response thereto
Schedule 6A - List of Foreign Jurisdictions
Schedule 6B - Capital Stock and Options
Schedule 6C - Consents and Waivers
Schedule 6D - Financial Statements
Schedule 6E - Material Adverse Changes
Schedule 6F - Certain Developments
Schedule 6G - Tax Matters
Schedule 6H - Legal Proceedings
iii
<PAGE>
Schedule 6I - Real Property
Schedule 6J - Vessels
Schedule 6K - Tangible Personal Property
Schedule 6L - Intangible Property
Schedule 6M - Material Contracts
Schedule 6N - Employee Benefits
Schedule 6P - Compliance with Laws; Permits
Schedule 6Q - Environmental Matters
Schedule 6S - Insurance
Schedule 6T - Customers and Suppliers
Schedule 6U - Related Party Transactions
Schedule 7A - Shareholder Restrictions
Schedule 8B - Purchaser Consents and Approvals
iv
<PAGE>
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (the "AGREEMENT"), dated as of April 11, 1997, is
among Cal Dive International, Inc., a Minnesota corporation (the "COMPANY"),
Coflexip, a French corporation (the "PURCHASER"), and the shareholders of the
Company listed on EXHIBIT A (individually, a "SHAREHOLDER" and, collectively,
the "SHAREHOLDERS"). Except as otherwise defined herein, capitalized terms used
in this Agreement are defined in Section 10.
This Agreement is being executed in connection with the acquisition of
thirty-one and eight-tenths percent (31.8%) of the issued and outstanding
capital stock (after giving effect to the transactions contemplated by this
Agreement) of the Company by the Purchaser. This acquisition will be
accomplished through the (i) issuance and sale by the Company of 528,541 shares
of Common Stock, no par value, of the Company (the "COMPANY SHARES") for an
aggregate purchase price of Four Million Nine Hundred Ninety-Nine Thousand Nine
Hundred Ninety-Seven and 86/100 Dollars ($4,999,997.86), and (ii) the sale by
the Shareholders of 3,171,247 shares of Common Stock, no par value, of the
Company (the "SHAREHOLDER SHARES") for an aggregate purchase price of
Twenty-Nine Million Nine Hundred Ninety-Nine Thousand Nine Hundred Ninety-Seven
Dollars ($29,999,997.00), all as hereinafter described.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto, intending to be
legally bound, agree as follows:
1. AUTHORIZATION AND CLOSING.
1A. PURCHASE AND SALE OF COMMON STOCK. At the Closing, subject to the
terms and conditions of this Agreement, the Company shall sell the Company
Shares and the Shareholders shall sell the Shareholder Shares to the Purchaser
or its designee for an aggregate purchase price of Thirty-Four Million Nine
Hundred Ninety-Nine Thousand Nine Hundred Ninety-Four and 86/100 Dollars
($34,999,994.86), as follows:
(i) The Company shall sell to the Purchaser, and the Purchaser
shall purchase from the Company, the Company Shares at a price
of $9.46 per share, for an aggregate purchase price of Four
Million Nine Hundred Ninety-Nine Thousand Nine Hundred
Ninety-Seven and 86/100 Dollars ($4,999,997.86).
(ii) At the Closing, the Company shall deliver to the Purchaser
stock certificates evidencing the Company Shares with all
applicable stock transfer Taxes paid and stamps affixed, duly
registered in the Purchaser's name free and clear of all
Liens, upon payment by the Purchaser of $4,999,997.86 by
Purchaser's execution of the agreement, in substantially the
form of EXHIBIT B hereto (the "ROV AGREEMENT"), for the
delivery by the Purchaser to the Company of certain assets
free and clear of all Liens, including two remotely operated
vehicles, as described therein. The parties agree that such
assets have an aggregate value of $4,999,997.86.
(iii) At the Closing, the Shareholders shall sell to the Purchaser,
and the Purchaser shall purchase from the Shareholders, the
Shareholder Shares free and clear of all Liens at a price of
$9.46 per share, for an aggregate purchase price of Twenty
Nine Million Nine Hundred Ninety-Nine Thousand Nine Hundred
Ninety-Seven Dollars
1
<PAGE>
($29,999,997.00), which purchase price shall be paid at the
time of the Closing by wire transfer of immediately available
funds or by cashiers check to the Shareholders' accounts as
designated by the Shareholders at least four (4) business days
prior to the Closing. The number of Shareholder Shares to be
sold to the Purchaser by each of the Shareholders is set forth
on EXHIBIT A hereto opposite the name of each of such
Shareholders.
(iv) At the Closing, the Shareholders shall deliver to the
Purchaser stock certificates evidencing the Shareholder
Shares, in each case duly endorsed for transfer or accompanied
by stock transfer powers duly endorsed in blank with all
requisite stock transfer Taxes paid and stamps affixed, free
and clear of all Liens.
Purchaser shall have no obligation to complete the Closing or the
transactions contemplated hereby unless there shall have been transferred and
conveyed to Purchaser good, valid and marketable title to all of the Company
Shares and the Shareholder Shares, in each case free and clear of all Liens.
1B. THE CLOSING. The closing of the purchase and sale of the Company
Shares and the Shareholder Shares pursuant to Section 1A (the "CLOSING") shall
take place at the offices of Nixon, Hargrave, Devans & Doyle LLP, 437 Madison
Avenue, New York, New York, at 10:00 a.m. on the date of this Agreement, or at
such other place or on such other date as may be mutually agreeable to the
Company, the Purchaser, the Funds and the Representative . The date on which the
Closing is held is referred to in this Agreement as the "CLOSING DATE."
2. CONDITIONS TO THE PURCHASER'S OBLIGATION AT THE CLOSING. The
obligations of the Purchaser to consummate the transactions contemplated by this
Agreement are subject to the fulfillment, on or prior to the Closing Date, of
each of the following conditions (any or all of which may be waived by the
Purchaser in whole or in part to the extent permitted by applicable Law):
2A. REPRESENTATIONS AND WARRANTIES. All representations and warranties of
the Company and the Shareholders to the Purchaser contained herein shall be true
and correct at and as of the Closing Date with the same effect as though those
representations and warranties had been made again at and as of that time.
2B. COMPLIANCE. The Company and the Shareholders shall have performed and
complied in all material respects with all obligations and covenants required by
this Agreement and the Seller Documents to be performed or complied with by any
one or more of them on or prior to the Closing Date.
2C. BRING-DOWN CERTIFICATE. The Purchaser shall have been furnished with
certificates (dated the Closing Date and in form and substance reasonably
satisfactory to the Purchaser) executed by the Company, the Funds, the
Executives and the Representative, certifying as to the fulfillment of the
conditions specified in this Section 2.
2D. MATERIAL ADVERSE CHANGE. Since September 1, 1996, there shall not have
been or occurred (i) any change, destruction or loss, whether or not covered by
insurance, which would result in the loss of a material part of the properties
or assets of the Company or any of its Subsidiaries, (ii) any Legal Proceedings
instituted or threatened against the Company, any of the Shareholders or the
Purchaser seeking to restrain or prohibit or to obtain substantial damages with
respect to the consummation of the transactions contemplated hereby, or which
might, in the reasonable opinion of the Purchaser, result in a Material Adverse
Change, (iii) any Order by a Governmental Body of competent jurisdiction
restraining, enjoining or otherwise prohibiting
2
<PAGE>
the consummation of the transactions contemplated hereby, or (iv) any other
event or occurrence which could reasonably be expected to result in a Material
Adverse Change.
2E. THIRD PARTY CONSENTS. The Company and the Shareholders shall have
obtained the consents and waivers, in a form reasonably satisfactory to the
Purchaser, with respect to the transactions contemplated by this Agreement and
the other Seller Documents set forth on SCHEDULE 6C; PROVIDED, HOWEVER, that
neither the Company, the Shareholders nor the Purchaser shall be obligated to
pay any consideration therefor to any third party from whom consent or approval
is requested (other than the payment of filing fees, recording fees and other
similar administrative fees).
2F. HSR ACT. Any Person required in connection with the transactions
contemplated by this Agreement to file a notification and report form in
compliance with the HSR Act shall have filed such form and the applicable
waiting period with respect to each such form (including any extension thereof
by reason of a request for additional information) shall have expired or been
terminated.
2G. EXON-FLORIO FILING. All filings made by the Purchaser to comply with
the notification procedure under EXFA shall have been made and neither the
Company, any one or more of the Shareholders nor the Purchaser shall have
received any notification from or on behalf of the Committee on Foreign
Investment in the United States (the "COMMITTEE") within a 30-day period after
the date of such filings to the effect that the Committee intends to investigate
or otherwise review any of the transactions contemplated by this Agreement.
2H. REGISTRATION RIGHTS AGREEMENT. The Company, certain Shareholders, and
other Shareholders which are signatories thereof shall have entered into a
registration rights agreement, in substantially the form of EXHIBIT C attached
hereto (the "REGISTRATION RIGHTS AGREEMENT"), and the Registration Rights
Agreement shall be in full force and effect as of the Closing.
2I. SHAREHOLDERS AGREEMENT. The Company, the Funds, the Employee
Shareholders, Gordon F. Ahalt and the Executives shall have entered into a
shareholders agreement, in substantially the form of EXHIBIT D attached hereto
(the "SHAREHOLDERS AGREEMENT"), and the Shareholders Agreement shall be in full
force and effect as of the Closing.
2J. BUSINESS COOPERATION AGREEMENT. The Purchaser (or an Affiliate of the
Purchaser) and the Company shall have entered into a business cooperation
agreement, in substantially the form of EXHIBIT E attached hereto (the "BUSINESS
COOPERATION AGREEMENT"), and the Business Cooperation Agreement shall be in full
force and effect as of the Closing.
2K. CORPORATE GOVERNANCE DOCUMENTS. The Company's Articles of
Incorporation, By-laws and other agreements, instruments and indentures relating
to the corporate governance of the Company (including, without limitation,
voting trust agreements) shall be in substantially the form attached hereto as
EXHIBIT F.
2L. EMPLOYMENT AGREEMENTS. The Company and each of the Executives ,
Andrew C. Becher, Senior Vice President and General Counsel of the Company,
Randall W. Drewry, Vice President-Bids and Proposals, Lou Tapscott, Senior Vice
President - Business Development, Michael P. Middleton, Vice President -
Operations, Ken Duell, Vice President Special Projects, and Jon Buck, Vice
President Sales, shall have entered into employment and non-competition
agreements in substantially the forms of Exhibits G-1, G-2, G-3, G-4, G-5, G-6,
G-7 AND G-8 attached hereto, respectively.
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2M. LEGAL OPINIONS. The Purchaser shall have received from the Company's
General Counsel, from Robins, Kaplan, Miller & Ciresi L.L.P., special counsel to
the Company and certain Shareholders other than the Funds, and from Simpson
Thacher & Bartlett, counsel to the Funds, opinions with respect to the matters
set forth in EXHIBITS H-1, H-2 and H-3 attached hereto, respectively, which
shall be addressed to the Purchaser, dated the Closing Date and in form and
substance reasonably satisfactory to the Purchaser.
2N. CLOSING DOCUMENTS. The Company and the Shareholders shall have
delivered to the Purchaser each of the following documents:
(i) certified copies of the resolutions duly adopted by the
Company's shareholders and board of directors authorizing the
execution, delivery and performance of this Agreement and each of
the Seller Documents and the other agreements contemplated hereby,
the issuance and sale of the Company Shares and the consummation of
all other transactions contemplated by this Agreement and the other
Seller Documents;
(ii) certified copies of the Company's Articles of Incorporation and
By-laws, each as in effect at the Closing;
(iii) certified copies of the resolutions duly adopted by the
requisite equity owners and governing bodies of any Shareholder
which is not an individual authorizing the execution, delivery and
performance of this Agreement and each of the Seller Documents and
the other agreements contemplated hereby to which such Shareholder
is a party and the sale of such Shareholder's Shares;
(iv) copy of the consent of Fleet Capital Corporation and any other
necessary third party consents;
(v) such affidavit and certificate, in substantially the form
attached hereto as EXHIBIT I, to the effect that the Company was NOT
prior to or at Closing a "United States real property holding
corporation" as defined in Section 897 of the Code; and
(vi) such other documents, instruments and certificates relating to
the transactions contemplated by this Agreement or any of the other
Seller Documents as the Purchaser or its counsel may reasonably
request or are otherwise required by this Agreement.
2O. PROCEEDINGS. All corporate and other proceedings taken or required to
be taken in connection with the transactions contemplated hereby to be
consummated at or prior to the Closing and all documents, instruments and
certificates incident thereto shall be satisfactory in form and substance to the
Purchaser and its counsel.
3. CONDITIONS TO THE COMPANY'S AND SHAREHOLDERS' OBLIGATION AT THE
CLOSING. The obligations of the Company and the Shareholders to consummate the
transactions contemplated by this Agreement are subject to the fulfillment,
prior to or on the Closing Date, of each of the following conditions (any or all
of which may be waived by the Company, the Funds and the Representative, in
whole or in part to the extent permitted by applicable Law):
3A. REPRESENTATIONS AND WARRANTIES. All representations and warranties of
the Purchaser contained herein shall be true and correct in all material
respects at and as of the Closing Date with the same
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effect as though those representations and warranties had been made again at and
as of that date.
3B. COMPLIANCE. The Purchaser shall have performed and complied in all
material respects with all obligations and covenants required by this Agreement
to be performed or complied with by the Purchaser on or prior to the Closing
Date.
3C. BRING-DOWN CERTIFICATE. The Company and the Shareholders shall have
been furnished with a certificate (dated the Closing Date and in form and
substance reasonably satisfactory to the Company, the Funds and the
Representative) executed by the Purchaser certifying as to the fulfillment of
the conditions specified in Sections 3A and 3B.
3D. ROV AGREEMENT. Purchaser shall have executed and delivered the ROV
Agreement to the Company, and the ROV Agreement shall be in full force and
effect as of the Closing.
3E. HSR ACT. Any Person required in connection with the transactions
contemplated by this Agreement to file a notification and report form in
compliance with the HSR Act shall have filed such form and the applicable
waiting period with respect to each such form (including any extension thereof
by reason of a request for additional information) shall have expired or been
terminated.
3F. BUSINESS COOPERATION AGREEMENT. The Purchaser (or an Affiliate of the
Purchaser) shall have entered into the Business Cooperation Agreement, and the
Business Cooperation Agreement shall be in full force and effect as of the
Closing.
3G. THIRD PARTY CONSENTS. The Purchaser shall have obtained the consents
and waivers, in a form reasonably satisfactory to the Company, with respect to
the transactions contemplated by this Agreement set forth in SCHEDULE 8B;
provided, however that the Purchaser shall not be obligated to pay any
consideration therefor to any third party from whom consent or approval is
requested (other than the payment of filing fees, recording fees and other
similar administrative fees).
3H. REGISTRATION RIGHTS AGREEMENT. The Purchaser shall have entered into
the Registration Rights Agreement, and the Registration Rights Agreement shall
be in full force and effect as of the Closing.
3I. SHAREHOLDERS AGREEMENT. The Purchaser shall have entered into the
Shareholders Agreement, and the Shareholders Agreement shall be in full force
and effect as of the Closing.
3J. LEGAL OPINIONS. The Company and the Shareholders shall have received
from Falque Carpentier Barbe & Associes, the Purchaser's French counsel, and
from Nixon, Hargrave, Devans & Doyle LLP, special U.S. counsel to the Purchaser,
opinions with respect to the matters set forth in Exhibits J-1 AND J-2 attached
hereto, respectively, which shall be addressed to the Company and the
Shareholders, dated the Closing Date and in form and substance reasonably
satisfactory to the Company.
3K. CLOSING DOCUMENTS. The Purchaser shall have delivered to the Company
and the Shareholders each of the following documents:
(i) certified copies of the resolutions duly adopted by the
Purchaser's board of directors authorizing the execution,
delivery and performance of this Agreement and each of the
Seller Documents and the other agreements contemplated hereby
and the consummation of all other transactions contemplated by
this Agreement; and
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(ii) such other documents, instruments and certificates
contemplated by this Agreement as the Company, the
Representative or their counsel may reasonably request.
3L. PROCEEDINGS. All corporate and other proceedings taken or required to
be taken in connection with the transactions contemplated hereby to be
consummated at or prior to the Closing and all documents, instruments and
certificates incident thereto shall be satisfactory in form and substance to the
Company, the Shareholders and their counsel.
4. APPOINTMENT OF REPRESENTATIVE. Subject to the successorship provisions
of this Section 4, each Employee Shareholder hereby irrevocably appoints Owen
Kratz as the representative of such Shareholder's interests (the
"REPRESENTATIVE") for all purposes of this Agreement. Without giving notice to
the Employee Shareholders, the Representative shall have full, exclusive and
irrevocable authority on behalf of the Employee Shareholders to: (a) accept and
give notices and other communications relating to this Agreement; (b) waive any
condition, which is of general applicability to all the Employee Shareholders,
to the obligations of the Employee Shareholders under this Agreement; (c)
modify, amend or supplement this Agreement, unless such modification, amendment
or supplement could reasonably be expected to have a material adverse effect on
any Employee Shareholder; (d) take any other action in connection with this
Agreement and the transactions contemplated hereby, unless such action would
have a material adverse effect on any Employee Shareholder; and/or (e) execute
and deliver any instrument or document required pursuant to this Agreement or
that the Representative deems necessary or desirable in the exercise of his
authority under this Section 4.
The Company and each of the Employee Shareholders hereby severally agrees
to indemnify the Representative and to hold him harmless from any loss,
liability and expense incurred without willful malfeasance or bad faith on the
part of the Representative based upon, arising out of or in connection with the
acceptance or exercise by the Representative of his powers and authorities
granted pursuant to this Section 4, including, without limitation, the
reasonable fees, costs and expenses of defending himself in respect of any Legal
Proceedings based upon, arising out of or in connection with his acting as the
Representative pursuant to this Section 4.
In the event of the inability to serve, death or incapacity of the
Representative, S. James Nelson shall become his successor, with all the powers
and authority of the Representative. Those who currently are the holders of a
majority of the Employee Shareholders' Shares may, at any time and by written
action delivered to the Purchaser, remove the Representative or any successor
thereto, but such removal shall be effective only upon the replacement of such
Representative or successor by a new Representative designated, by written
action delivered to the Purchaser, by those who currently are the holders of a
majority of the Employee Shareholders' Shares. If Owen Kratz, S. James Nelson
and any successor thereto shall have died, resigned, or become incapacitated or
unable to serve, the holders of a majority of the Employee Shareholders' Shares
shall promptly designate, by written action delivered to the Purchaser, a
replacement Representative.
The foregoing authorization is granted and conferred by each of the
Employee Shareholders in consideration of the grant of such authorization by
each of the other Employee Shareholders and in consideration for the agreements
and covenants of the Purchaser contained herein. In consideration of the
foregoing, and subject to the removal and successorship provisions of this
Section 4, this authorization granted to the Representative shall be irrevocable
and shall not be terminated by any act of any of the Employee Shareholders or by
operation of law, whether by death or incompetency of any Employee Shareholder
or by the occurrence of any other event except the termination of this
Agreement. If after the
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execution hereof any such Employee Shareholder shall die or become incompetent,
the Representative is nevertheless authorized and directed to exercise the
authority granted in this Section 4 as if such death or incompetence had not
occurred and regardless of notice thereof.
5. COVENANTS
5A. FINANCIAL STATEMENTS AND OTHER INFORMATION. Until the Company has
completed its initial Qualified Public Offering, the Company shall deliver to
the Purchaser (so long as the Purchaser and/or its Affiliates Beneficially Owns
at least 100,000 shares (subject to adjustment for any stock splits, stock
dividends, recapitalizations or similar events) of Common Stock of the Company):
(i) As soon as practicable, and in any event within 40 days after
the close of each monthly accounting period, unaudited consolidated
statements of income, shareholders' equity and cash flows of the
Company and its Subsidiaries for such monthly period and an
unaudited consolidated balance sheet of the Company and its
Subsidiaries as of the close of such monthly period, setting forth
in comparative form, the corresponding figures for the corresponding
period of the preceding fiscal year, all in reasonable detail, and
prepared in accordance with GAAP consistently applied (excluding
footnote disclosures and subject to normal year-end audit
adjustments).
(ii) As soon as practicable, and in any event within 45 days after
the close of each quarterly accounting period, unaudited
consolidated statements of income, shareholders' equity and cash
flows of the Company and its Subsidiaries for such quarterly period
and an unaudited consolidated balance sheet of the Company and its
Subsidiaries as of the close of such quarterly period, setting forth
in comparative form, the corresponding figures for the corresponding
period of the preceding fiscal year, all in reasonable detail, and
prepared in accordance with GAAP consistently applied (excluding
footnote disclosures and subject to normal year-end audit
adjustments).
(iii) As soon as practicable and in any event within 90 days after
the close of each fiscal year, consolidated statements of income,
cash flow and shareholders equity of the Company and its
Subsidiaries for such fiscal year and a consolidated balance sheet
of the Company and its Subsidiaries as of the close of such fiscal
year setting forth in comparative form, the corresponding figures
for the preceding fiscal year, all in reasonable detail and
certified by Arthur Andersen & Co.,or another independent certified
public accountant of recognized standing selected by the Company and
reasonably satisfactory to the Purchaser.
(iv) As soon as practicable, copies of all financial statements,
proxy materials or reports sent to the shareholders of the Company
and all reports and registration statements, including accompanying
prospectuses, filed with the Securities and Exchange Commission.
(v) Such other financial information as the Purchaser may reasonably
request, including, without limitation, certificates of the
principal financial officer of the Company concerning compliance
with the covenants of the Company under this Section 5.
5B. INSPECTION OF PROPERTY. Until the Company has completed its initial
Qualified Public Offering, the Company shall permit any representatives
designated by the Purchaser (so long as the Purchaser and/or its Affiliates
Beneficially Owns any Common Stock of the Company), upon reasonable notice and
during
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normal business hours and such other times as any the Purchaser may reasonably
request, to (i) visit and inspect any of the properties of the Company and its
Subsidiaries, (ii) examine the corporate and financial records of the Company
and its Subsidiaries and make copies thereof or extracts therefrom and (iii)
discuss the affairs, finances and accounts of the Company and its Subsidiaries
with the directors, officers, key employees and independent accountants of the
Company and its Subsidiaries.
5C. AFFIRMATIVE COVENANTS. So long as the Purchaser and/or its Affiliates
Beneficially Owns any Common Stock of the Company, the Company shall, and shall
cause each of its Subsidiaries to:
(i) Pay and discharge all taxes, assessments and governmental charges
or levies imposed upon it or upon its income or properties prior to
the date on which any penalty is attached thereto or the same shall
otherwise become in default; provided that the Company shall not be
required to pay any such tax, assessment, charge or levy which is
being contested in good faith and by proper proceedings and for which
such reserves or other provisions as may be required by GAAP shall
have been made and recorded.
(ii)Maintain a comparative system of accounts in accordance with
GAAP, consistently applied, and keep full and complete financial
records and books of account, in which complete entries shall be made
in accordance with GAAP, consistently applied, reflecting all
financial transactions of the Company.
(iii) Comply with the applicable requirements of all laws, rules,
regulations, treaties and orders of any governmental authority
(including, without limitation, federal and state securities laws,
ERISA and Environmental Laws), the violation of which might
reasonably be expected to have a Material Adverse Effect.
5D. COMPLIANCE WITH AGREEMENTS. The Company shall perform and observe all
of its material obligations to the Purchaser set forth in the (i) Company's
Articles of Incorporation and By-laws, (ii) Registration Rights Agreement, and
(iii) Shareholders Agreement.
5E. VESSELS. At all times on and after the Closing Date, the Company and
each of its Subsidiaries:
(a) so long as it owns U.S. documented vessels, shall be a corporation
qualified to document a vessel under 46 U.S.C ss. 12102(a)(4); and
(b) shall not operate any of the Vessels or any other vessels owned by the
Company or any of its Subsidiaries to perform any of the services described in
Part I.E. of the Ruling Letter or otherwise so as to cause the Company, any of
its Subsidiaries or any of their respective assets to be liable for any material
penalties for breach of the Coastwise Laws.
5F. ACCESS TO INFORMATION; CONFIDENTIALITY. (a) Prior to the Closing
Date, the Purchaser shall be entitled, through its officers, employees and
representatives (including, without limitation, its legal advisors and
accountants), to make such investigation of the properties, businesses and
operations of the Company and its Subsidiaries and such examination of the
books, records and financial condition of Company and its Subsidiaries as the
Purchaser reasonably requests and to make extracts and copies of such books and
records. Any such investigation and examination shall be conducted during
regular business hours and under reasonable circumstances, and the Company shall
cooperate, and shall cause its Subsidiaries to cooperate, fully therein. No
investigation by the Purchaser prior to or after the date of this Agreement
shall diminish,
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impair, discharge or obviate any of the representations, warranties, covenants
or agreements of the Company or the Shareholders contained in this Agreement or
any of the Seller Documents.
(b) Information obtained by each of the Purchaser and the Company pursuant
to this Agreement shall be subject to the provisions of the Confidentiality
Agreement, dated as of September 20, 1996, between the Purchaser and the
Company.
5G. CONDUCT OF THE BUSINESS PENDING THE CLOSING. Except as otherwise
expressly contemplated by this Agreement or with the prior written consent of
the Purchaser (which shall not be unreasonably withheld, conditioned or
delayed), until the Closing Date the Company shall and shall cause its
Subsidiaries to:
(i) conduct the respective businesses of the Company and its
Subsidiaries only in the ordinary course of business consistent with past
practice;
(ii)not declare, set aside, make or pay any dividend or other
distribution in respect of the capital stock of the Company or repurchase,
redeem or otherwise acquire any outstanding shares of the capital stock or other
securities of, or other profit participations or proprietary or equity interests
in, the Company or any of its Subsidiaries; not transfer, issue, sell or dispose
of any shares of capital stock or profit participations or other proprietary or
equity interests in, or other securities of the Company or any of its
Subsidiaries or grant options, warrants, calls or other rights to directly or
indirectly purchase or otherwise acquire profit participations or proprietary or
equity interests in the Company or any of its Subsidiaries or shares of capital
stock of the Company or any of its Subsidiaries or other securities (except as
to any of the foregoing as set forth on SCHEDULE 6F);
(iii) not effect any recapitalization, reclassification, stock split
or like change in the capital ization of the Company or its Subsidiaries;
(iv) not amend the Articles of Incorporation or By-laws of the
Company or its Subsidiaries;
(v) use its best efforts to (A) preserve its present business
operations, organization (including, without limitation, management) and
goodwill of the Company and its Subsidiaries and (B) preserve its present
relationship with Persons having business dealings with the Company and its
Subsidiaries;
(vi) maintain insurance upon all of the properties and assets of the
Company and its Subsidiaries in such amounts and of such kinds comparable to
that in effect on the date of this Agreement (with insurers of substantially the
same or better financial condition);
(vii) (A) maintain the books, accounts and records of the Company
and its Subsidiaries in the ordinary course of business consistent with past
practices, (B) continue to collect accounts receivable and pay accounts payable
utilizing historical procedures and without discounting or accelerating payment
of such accounts, and (C) comply with all contractual and other obligations
applicable to the operations of the Company and its Subsidiaries;
(viii) not, other than in the ordinary course of business consistent
with past practice and without materially increasing the benefits or the costs
thereof (except as described on SCHEDULE 6F) (A) increase the compensation
payable or to become payable by the Company or any of its Subsidiaries to any of
their respective directors, officers, employees, agents or representatives, (B)
increase the coverage or benefits
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available under any (or create any new) severance pay, termination pay, vacation
pay, company awards, salary continuation for disability, sick leave, deferred
compensation, bonus or other incentive compensation, insurance, pension or other
employee benefit plan, payment or arrangement made to, for, or with any of the
directors, officers, employees, agents or representatives of the Company or any
of its Subsidiaries or (C) enter into any employment, deferred compensation,
severance, consulting, non-competition or similar agreement (or amend any such
agreement) to which the Company or any of its Subsidiaries is a party or
involving a director, officer or employee of the Company or any of its
Subsidiaries in his or her capacity as a director, officer or employee of the
Company or any of its Subsidiaries;
(ix) not introduce any material change with respect to the
operations of the Company or any of its Subsidiaries;
(x) except as set forth on SCHEDULE 6F, not permit the Company or
any of its Subsidiaries to enter into any transaction or to make or enter into
any Contract which by reason of its size, subject matter or otherwise is not in
the ordinary course of business ;
(xi) promptly notify the Purchaser of (A) any one or more or
Extraordinary Losses suffered by the Company or any of its Subsidiaries, (B) any
casualty losses or damages suffered by the Company or any of its Subsidiaries
with respect to property and assets having an individual replacement cost of
more than $100,000 or aggregate replacement cost of more than $500,000 or which
could cause a Material Adverse Change, whether or not such losses or damages are
covered by insurance, and (C) (i) any material Legal Proceeding commenced by or
against the Company or any of its Subsidiaries or (ii) any Legal Proceeding
commenced or threatened against the Company, any of its Subsidiaries or the
Shareholders relating to the transactions contemplated by this Agreement;
(xii) not permit the Company or any of its Subsidiaries to make any
investments in or loans to, or pay any fees or expenses (except in the Ordinary
Course of Business) to, or enter into or modify any Contract with, the
Shareholders or any of their respective Affiliates;
(xiii) promptly and accurately record in the appropriate records and
books of account of the Company and its Subsidiaries, as applicable, all
material corporate action taken on or after the date hereof by the shareholders
or the boards of directors (including committees thereof) of the Company and its
Subsidiaries and promptly following such recordation deliver true, correct and
complete copies thereof to Purchaser;
(xv) not permit any of their respective directors, officers,
employees, Affiliates, representatives or agents to, directly or indirectly, (A)
discuss, negotiate, undertake, authorize, recommend, propose or enter into any
transaction involving a merger, consolidation, business combination, purchase or
disposition of any amount of the assets (other than in the ordinary course of
business consistent with past practice), partnership interests or capital stock
or other proprietary or equity interest in the Company or any of its
Subsidiaries other than the transactions contemplated by this Agreement (an
"ACQUISITION TRANSACTION"), (B) facilitate knowingly, encourage, solicit or
initiate discussions, negotiations or submissions of proposals or offers in
respect of an Acquisition Transaction, (C) furnish or cause to be furnished, to
any Person any information concerning the business, operations, properties or
assets of the Company or any of its Subsidiaries in connection with an
Acquisition Transaction, or (D) otherwise cooperate in any way with, or assist
or participate in, facilitate knowingly or encourage, any effort or attempt by
any other Person to do or seek any of the foregoing; and
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(xvi) not agree to do anything prohibited by this Section 5G or
anything which would make any of the representations and warranties of the
Company or the Shareholders in this Agreement or the Seller Documents untrue or
incorrect in any material respect.
5H. FINANCIAL STATEMENTS. The Company (i) shall (if the request is
timely) deliver to Purchaser as promptly as practicable after Purchaser's
request therefor and, in any event at least 15 days prior to the applicable
filing deadline therefor under the Securities Act, the Securities Exchange Act
or the regulations promulgated thereunder, such financial statements, financial
statement schedules and other financial information relating to the Company and
its Subsidiaries which Purchaser may require in order to prepare any
registration statement, report, proxy statement or other filing under any such
securities law or regulation and shall direct its independent public accountants
to cooperate with Purchaser in connection therewith and (ii) shall use its best
efforts to obtain promptly for Purchaser, upon Purchaser's request (and at
Purchaser's sole cost), any consent, report, opinion or letter of such
accountants required to be filed by Purchaser under such law or regulations.
5I. PURCHASER COVENANT. Except as otherwise expressly contemplated by
this Agreement or with the prior written consent of the Company, which shall not
be unreasonably withheld, conditioned or delayed, until the Closing Date, the
Purchaser shall not enter into any negotiations or discussions relating to the
acquisition of or the making of an investment in, or any acquisitions of or
investments in (other than the acquisition of less than 2% of the outstanding
common stock of any publicly held corporation) any Person performing subsea
construction, maintenance, repair and salvage services to the offshore natural
gas and oil industry in the Gulf of Mexico substantially similar in scope,
methodology, cost and quality to those provided by the Company in the Gulf of
Mexico in the form of a merger, consolidation, purchase of stock or acquisition
of assets.
5J. OTHER ACTIONS. Each of the Company, the Shareholders and the
Purchaser shall use its best efforts to (i) take all actions necessary or
appropriate to consummate the transactions contemplated by this Agreement and
(ii) cause the fulfillment at the earliest practicable date of all of the
conditions to their respective obligations to consummate the transactions
contemplated by this Agreement set forth in Sections 2 and 3.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. As a material inducement
to the Purchaser to enter into this Agreement and purchase the Company Shares
and the Shareholder Shares, the Company hereby represents and warrants at the
time of execution hereof that:
6A. ORGANIZATION AND CORPORATE POWER. The Company is a corporation duly
incorporated validly existing and in good standing under the laws of the State
of Minnesota and is duly qualified or authorized to do business as a foreign
corporation and is in good standing in each of the jurisdictions listed on
SCHEDULE 6A, which listing includes every jurisdiction in which the Company's
ownership or lease of property or conduct of business requires it to so qualify,
except for those jurisdictions where the failure to be so qualified or
authorized would not have a Material Adverse Effect. The Company has all
requisite legal and corporate power and authority and all Permits necessary to
own, lease and operate its properties, to carry on its businesses as now
conducted , to execute and deliver this Agreement and each other Seller
Document, to consummate the transactions contemplated hereby and thereby and to
duly perform its obligations hereunder and thereunder, including but not limited
to all Permits necessary to operate the vessels and diving bells used in the
Company's business, except for such Permits which, if not obtained, would not
have a Material Adverse Effect. The Company is not an "issuing public
corporation" within the meaning of Subdivision 39 of Section 302A.011 of the
Minnesota Business Corporation Act. ERT is a corporation duly
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incorporated, validly existing and in good standing under the laws of the State
of Delaware and is duly qualified or authorized to do business as a foreign
corporation and is in good standing in each of the jurisdictions listed on
SCHEDULE 6A, which listing includes every jurisdiction in which its ownership or
lease of property or conduct of business requires it to so qualify, except for
those jurisdictions where the failure to be so qualified or authorized would not
have a Material Adverse Effect. ERT has all requisite legal and corporate power
and authority and all material Permits necessary to own, lease and operate its
properties, to carry on its business as now conducted . Copies of the Company's
and each of its Subsidiaries' Articles of Incorporation, By-laws or other
organizational documents have been delivered to the Purchaser and its counsel,
which reflect all amendments made thereto and are correct and complete.
6B. CAPITAL STOCK AND RELATED MATTERS.
(i) The authorized capital stock of the Company consists solely of
(A) 60,000,000 shares of Common Stock, no par value, of which 11,099,260
shares of Common Stock are issued and outstanding and, as of the Closing
Date, 11,627,801 shares of Common Stock shall be issued and outstanding
and (B) 5,000,000 shares of Preferred Stock, par value $.01 per share,
none of which are issued and outstanding. Neither the Company nor any of
its Subsidiaries has outstanding any capital stock or securities directly
or indirectly convertible into or exchangeable for any shares of its
capital stock or any profit participation (other than a cash bonus program
based upon earnings as described in SCHEDULE 6N) or proprietary or equity
interests, nor shall it have outstanding any options, warrants or other
rights (except as expressly set forth on SCHEDULE 6B) to acquire,
subscribe for or purchase its capital stock or any other profit
participation (other than a cash bonus program based on earnings described
in SCHEDULE 6N) or proprietary or equity interest in the Company or any of
its Subsidiaries or any stock or securities directly or indirectly
convertible into or exchangeable for its capital stock or any other profit
participation or proprietary or equity interest in the Company or any of
its Subsidiaries nor is the Company or any of its Subsidiaries committed
to do any of the foregoing, except as expressly set forth on SCHEDULE 6B.
Neither the Company nor any of its Subsidiaries is subject to: (i) any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital stock, any stock or securities directly
or indirectly convertible into or exchangeable for its capital stock or
any other profit participation (other than a cash bonus program based on
earnings described in SCHEDULE 6N) or proprietary or equity interest in
the Company or any of its Subsidiaries, or (ii) any options, warrants or
other rights to directly or indirectly acquire its capital stock or any
other profit participation (other than a cash bonus program based on
earnings described in SCHEDULE 6N) or proprietary or equity interest in
the Company or any of its Subsidiaries except to the Purchaser under this
Agreement or as expressly set forth on SCHEDULE 6B. All of the outstanding
shares of the Company's capital stock (including, without limitation, the
Company Shares and the Shareholder Shares) and of each of its Subsidiaries
are, and as of the Closing, shall have been duly authorized, validly
issued, fully paid and nonassessable. Immediately upon completion of the
Closing, Purchaser will own, and have good, valid and marketable title to,
the Company Shares free and clear of all Liens.
(ii)There are no statutory or contractual shareholders preemptive
rights, rights of first offer, rights of refusal, co-sale rights or
similar rights with respect to any capital stock, securities or other
profit participations (other than a cash bonus program based on earnings
described in SCHEDULE 6N) or proprietary or equity interests in the
Company, including, without limitation, the issuance of the
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Purchaser Common Stock hereunder, except as expressly set forth on
SCHEDULE 6B. No capital stock or other securities of the Company or any of
its Subsidiaries have been issued in violation of any such right. To the
best of the Company's knowledge, there are no agreements with respect to
the issuance, sale, redemption, transfer, disposition or voting of capital
stock of the Company or any of its Subsidiaries or any other profit
participation (other than a cash bonus program based on earnings described
in SCHEDULE 6N) or proprietary or equity interest in the Company or any of
its Subsidiaries or with respect to any other aspect of the Company's or
any of its Subsidiaries affairs, except as expressly set forth on SCHEDULE
6B. Neither the Articles of Incorporation, By-laws or other organizational
documents of the Company or any of its Subsidiaries contains any
restriction or limitation on the direct or indirect ownership of any
capital stock, securities or any other profit participation (other than a
cash bonus program based on earnings described in SCHEDULE 6N) or
proprietary or equity interest in the Company or any of its Subsidiaries
by any Person who is not a U.S. citizen, resident or domiciliary.
(iii) The Company owns 100% of the issued and outstanding capital
stock of ERT and such capital stock is duly authorized, validly issued,
fully paid and nonassessable. Other than the ownership by the Company of
the capital stock of ERT, neither the Company nor ERT (i) Beneficially
Owns or owns of record any capital stock, security or other profit
participation or proprietary or equity interest of or in any other Person
or (ii) has any other investment in any other Person.
6C. AUTHORIZATION; NO BREACH. The execution, delivery and performance of
this Agreement and the other Seller Documents to which the Company is a party
have been duly authorized by all necessary corporate, including shareholder,
action on the part of the Company. This Agreement and each other Seller Document
have been duly and validly executed and delivered by, and constitute a valid and
binding obligation of, the Company and each Executive which is a party thereto
enforceable against such Person in accordance with its respective terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting creditor's rights generally (regardless of whether such
enforceability is considered in a proceeding at law or in equity). The execution
and delivery by the Company and each Executive of this Agreement and each other
Seller Document to which such Person is a party, the offering, sale and issuance
by the Company or any Shareholder of the Purchaser Common Stock, and the
fulfillment of and compliance with the respective terms of this Agreement and
the other Seller Documents to which such Person is a party by any such Person,
do not and shall not (a)(i) conflict with or result in a breach of the terms,
conditions or provisions of, (ii) constitute a default or any event which with
the giving of notice, passage of time or both would constitute a default under,
(iii) give rise to any right or right of termination, cancellation or
acceleration or right to increase in any material respect the obligations or
otherwise modify in any material respect the terms of, (iv) result in a
violation of, or (v) require any consent, approval, waiver, Order, Permit or
exemption or other action by or notice, declaration or filing to or with any
Governmental Body pursuant to, the Articles of Incorporation, By-laws or other
organizational documents of the Company or any of its Subsidiaries or any Law,
Contract, Permit or Order, to which the Company, any of its Subsidiaries,
Executive or any of their respective assets is subject, except for waivers or
consents set forth on SCHEDULE 6C, or (b) result in the creation or imposition
of any Lien upon the capital stock, property or assets of the Company or any of
its Subsidiaries, Shareholders or Executive .
6D. FINANCIAL STATEMENTS. Attached hereto on SCHEDULE 6D are the audited
consolidated balance sheets of the Company and its Subsidiaries as of December
31, 1994, 1995 and 1996, and the related statements of income, shareholders'
equity and cash flows for the respective twelve month periods then ended
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(the "FINANCIAL STATEMENTS"). Each of the Financial Statements (including in all
cases the notes thereto, if any) is accurate and complete in all material
respects, is consistent with the books and records of the Company (which, in
turn, are accurate and complete in all material respects) has been prepared in
accordance with GAAP consistently applied, and presents fairly the financial
condition and results of operations of the Company and its Subsidiaries in
accordance with GAAP consistently applied through the periods covered thereby.
6E. ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth on SCHEDULE
6E, the Company and its Subsidiaries do not have any obligation or liability
(whether accrued, absolute, contingent, unliquidated or otherwise, whether due
or to become due and regardless of when asserted) arising out of transactions
entered into at or prior to the Closing, or any action or inaction at or prior
to the Closing, or any state of facts existing at or prior to the Closing
(regardless of when any such obligation or liability is asserted, including
Taxes, with respect to or based upon transactions or events occurring on or
before the Closing, other than (i) liabilities set forth on the audited
consolidated balance sheet of the Company and its Subsidiaries as of December
31, 1996 (including any notes thereto) (the "LATEST BALANCE SHEET,"), (ii)
liabilities and obligations which have arisen after the date of the Latest
Balance Sheet in the ordinary course of business, (iii) as set forth in the
footnotes to the Financial Statements, or (iv) liabilities and obligations which
would not, either individually or in the aggregate, have a Material Adverse
Effect. The McDermott Agreements and the transactions contemplated thereby have
been terminated without any further material obligation or liability on the part
of the Company, any Shareholder or any Affiliate of the Company on or after the
Closing Date.
6F. ABSENCE OF CERTAIN DEVELOPMENTS. Except as set forth on SCHEDULE 6F or
as expressly contemplated by this Agreement, since September 1, 1996 up to and
including the Closing Date:
(i) there has not occurred any Material Adverse Change nor has any
event occurred which could reasonably be expected to result in
any Material Adverse Change;
(ii) there has not been any damage, destruction or loss, whether or
not covered by insurance, with respect to the property and
assets of the Company or any of its Subsidiaries at a
replacement cost of more than $100,000 for any single loss or
$500,000 for all such losses;
(iii) there has not been any declaration, setting aside or payment
of any dividend or other distribution in respect of any shares
of capital stock of the Company or any of its Subsidiaries or
any repurchase, redemption or other acquisition by the Company
or any of its subsidiaries of any outstanding shares of the
capital stock or other securities of, or other profit
participation (other than a cash bonus program based on
earnings described in SCHEDULE 6N) or proprietary or equity
interest in, the Company or any of its Subsidiaries;
(iv) there has not been any transfer, issue, sale or disposition of
any sales of capital stock, securities or profit
participations (other than a cash bonus program based on
earnings described in SCHEDULE 6N) or other proprietary or
equity interests in the Company or any of its Subsidiaries or
any grant of options, warrants, calls or other rights to
directly or indirectly purchase or otherwise acquire profit
participations (other than a cash bonus program based on
earnings described in SCHEDULE 6N) or proprietary or equity
interests in the Company or any of its Subsidiaries or shares
of capital stock or securities of the Company or any of its
Subsidiaries;
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(v) neither the Company nor any of its Subsidiaries has awarded or
paid any bonuses to employees of the Company or any of its
Subsidiaries except to the extent appearing on the Latest
Balance Sheet or has entered into any employment, deferred
compensation, severance or similar agreement (nor amended any
such agreement) or agreed to increase the compensation payable
or to become payable by the Company or any of its Subsidiaries
to any directors, officers, employees, agents or
representatives of the Company or any of its Subsidiaries or
agreed to increase the coverage or benefits available under
any severance pay, termination pay, vacation pay, company
awards, salary continuation for disability, sick leave,
deferred compensation, bonus or other incentive compensation,
insurance, pension, or other employee benefit plan, payment or
arrangement made to, or with such directors, officers,
employees, agents or representatives;
(vi) there has not been any change by the Company or any of its
Subsidiaries in accounting principles, methods or policies;
(vii) neither the Company nor any of its Subsidiaries has introduced
any material change with respect to the operations of the
Company or any of its Subsidiaries which is not in the
Ordinary Course of Business;
(viii) neither the Company nor any of its Subsidiaries has entered
into any transaction or made or entered into any Contract
which by reason of its size, subject matter or otherwise is
not in the Ordinary Course of Business ;
(ix) neither the Company nor any of its Subsidiaries has suffered
one or more Extraordinary Losses;
(x) neither the Company nor any of its Subsidiaries has made any
investments in or loans to, or paid any material fees or
expenses to, or entered into or modified any Contract with any
of the Shareholders or any other respective Affiliates other
than inter-company arrangements between the Company and its
Subsidiaries; and
(xi) neither the Company nor any of its Subsidiaries has agreed or
committed to do anything set forth in this Section 6F.
6G. TAX MATTERS. The Company and each of its Subsidiaries have filed in a
timely manner all tax returns which they are required to file other than those
which, individually or in the aggregate, would not have a Material Adverse
Effect; and such returns are true and correct in all material respects. The
Company and each of its Subsidiaries have timely paid all taxes owed by them (or
have made provision for the payment thereof on the Latest Balance Sheet) and
have withheld and paid over all Taxes which they are obligated to withhold from
amounts owing to any employee, creditor or other Person. No unresolved
deficiencies or additions to Taxes have been proposed, asserted or assessed
against the Company or any of its Subsidiaries, and the assessment of any
additional Taxes for periods for which returns have been filed is not expected
to exceed the recorded liability therefor on the Latest Balance Sheet. Neither
the Company nor any of its Subsidiaries have incurred any liability for Taxes
from the date of the Latest Balance Sheet except for Taxes incurred in the
ordinary course of business consistent with past practice. The federal income
tax returns of the Company and its Subsidiaries have been audited for all tax
years through 1991; there are no pending
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federal or state tax audits being conducted with respect to the Company or any
of its Subsidiaries; and there are no material unresolved questions or claims
concerning the Company's or any of its Subsidiaries' tax liability, except as
described on SCHEDULE 6G.
6H. LITIGATION. There are no Legal Proceedings pending or, to the best of
the Company's knowledge, threatened against or affecting the Company or any of
its Subsidiaries or the business or assets of the Company or any of its
Subsidiaries, that if adversely determined, could reasonably be expected to have
a material adverse effect on the Company's ability to perform its obligations
under this Agreement or any of the Seller Documents or any action taken or to be
taken by the Company or any of its Subsidiaries in connection with the
consummation of the transactions contemplated hereby or thereby. SCHEDULE 6H
sets forth a list of all Legal Proceedings pending or, to the knowledge of the
Company, threatened against or involving the Company or any of its Subsidiaries
or any business or assets of the Company or any of its Subsidiaries, at law, in
equity or admiralty, or otherwise which, if determined adversely to the Company
or any of its Subsidiaries, could reasonably be expected to result in a
liability to the Company or any of its Subsidiaries in excess of $100,000. There
is no outstanding or, to the knowledge of the Company, threatened Order of any
Governmental Body against, involving or naming the Company or any of its
Subsidiaries or involving any of their respective businesses or assets. SCHEDULE
6H sets forth a list of all Legal Proceedings pending or contemplated in which
the Company or any of its Subsidiaries is the plaintiff or claimant. Some of the
Legal Proceedings identified in SCHEDULE 6H against the Company or its
Subsidiaries may be subject to punitive damage awards . Since punitive damage
awards are uninsured exposures, an adverse result in any of the cases listed on
SCHEDULE 6H could have a Material Adverse Effect on the Company.
6I. REAL PROPERTY. (a) Neither the Company nor any of its Subsidiaries
owns any real property. SCHEDULE 6I contains a correct and complete schedule of
the documents comprising all leases, subleases, licenses, rights of way or other
Contracts for the use or occupancy of any real property ("ONSHORE REAL PROPERTY
LEASES") or the exploration, development or exploitation of oil or gas
properties by the Company or any of its Subsidiaries ("OFFSHORE REAL PROPERTY
LEASES"). Neither the Company nor any of its Subsidiaries is a party to any
lease, sublease, license or other agreement for the use or occupancy of any
onshore or offshore real property other than the Onshore or Offshore Real
Property Leases. There exists no material reciprocal easement or operating
Contracts relating to the Offshore Real Property Leases between the Company
and/or any of its Subsidiaries and any third party. Except as set forth on
SCHEDULE 6I, neither the Company nor any of its Subsidiaries has assigned,
sublet, mortgaged or otherwise encumbered in any respect whatsoever its
leasehold estate under the Onshore or Offshore Real Property Leases. Except as
set forth on SCHEDULE 6I, neither the Company nor any of its Subsidiaries owns
or holds, or is obligated under or a party to, any option, right of first
refusal or other contractual right to purchase, acquire, sell, assign or dispose
of any real estate or any portion thereof or interest therein.
(b) Each of the Onshore and Offshore Real Property Leases is a valid and
binding obligation enforceable against the Company and/or any of its
Subsidiaries which is a party thereto and, to the knowledge of the Company,
against each other party thereto in accordance with its terms, and there is no
default under any of the Onshore and Offshore Real Property Leases by the
Company, any of its Subsidiaries or, to the knowledge of the Company, by any
other party thereto and, to the knowledge of the Company, no event has occurred
that with the lapse of time or the giving of notice or both would constitute a
default thereunder, except for such defaults or events which would not have a
Material Adverse Effect. No previous or current party to the Onshore or Offshore
Real Property Leases has given written notice of or made a claim against the
Company or any of its Subsidiaries with respect to any breach or default
thereunder which remains uncured or otherwise in existence as of the date
hereof. To the knowledge of the Company, each of the Onshore or Offshore Real
Property Leases covers the entire estate it purports to cover and, entitles the
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Company and its Subsidiaries to the use, occupancy and possession of the real
property or the exploration, development or exploitation of the oil or gas
properties, as applicable, specified in the Onshore or Offshore Real Property
Leases and for the purposes such property is now being used by the Company and
its Subsidiaries. To the knowledge of the Company, neither the Company nor any
of its Subsidiaries is engaged in any "slant drilling" across the properties of
any other Person or otherwise engaged in any activities which violate the
property rights of any other Person. Complete and correct copies of the Onshore
or Offshore Real Property Leases, together with all amendments, modifications,
supplements or side letters affecting the obligations of any party thereunder
have been delivered to the Purchaser. To the knowledge of the Company, the
property which is subject to the Onshore and Offshore Real Property Leases
complies with all applicable Laws, except for such failure to comply which would
not have a Material Adverse Effect. No notice of violation of any such Law has
been received by the Company or any of its Subsidiaries and, to the knowledge of
the Company, no such notice has been issued by any Governmental Body with
respect to such property.
(c) No portion of property covered by an Onshore Real Property Lease
("Onshore Property") is dependent for its access, operation or utility on any
land, building or other improvement not part of the Onshore Property. The
Onshore Property has direct, unobstructed access, both pedestrian and vehicular,
to public rights of way. All material utility systems required in connection
with use, occupancy and operation of the Onshore Property are supplied directly
to the Onshore Property by facilities of public utilities, are sufficient for
their present purposes, are fully operational and in working order, and are
benefitted by customary utility easements providing for the continued use and
maintenance of such systems.
(d) EXHIBIT K contains a true and correct copy of the estimate dated
December 31,1995, prepared by Miller & Lents, Ltd., independent petroleum
engineers ("MILLER & LENTS"), of the proved developed reserves and future net
revenue attributable to interests in properties located offshore Texas and
offshore Louisiana of ERT (the "RESERVES REPORT"). The historical information
underlying the estimates of the reserves of ERT supplied by the Company to
Miller & Lents, for the purposes of preparing the Reserve Report, including,
without limitation, production volumes, sales prices for production, contractual
pricing provisions under oil or gas sales or marketing contracts or under
hedging arrangements, costs of operations and development, and working interest
and revenue information relating to ERT's ownership interests in properties, was
true and correct in all material respects on the date of such Reserve Report;
the estimates of future capital expenditures and other future exploration and
development costs supplied to Miller & Lents were prepared in good faith and
with a reasonable basis; the information provided by Miller & Lents for purposes
of preparing the Reserve Report was prepared in accordance with customary
industry practices; to the best of the Company's knowledge, Miller & Lents was,
as of the date of the Reserve Report prepared by it, and are, as of the date
hereof, independent petroleum engineers with respect to the Company; and other
than normal production of reserves and intervening spot market product price
fluctuations, the Company is not aware of any facts or circumstances that would
result in a materially adverse change in the reserves in the aggregate, or the
aggregate present value of future net cash flows therefrom, as reflected in the
Reserve Report except as indicated in EXHIBIT K .
6J. VESSELS. (a) The Company and its Subsidiaries do not own or operate
any vessels other than those listed on SCHEDULE 6J (collectively, the
"VESSELS"). Each of the Vessels listed on SCHEDULE 6J is duly documented in the
sole ownership of the Company under the Law and flag of the jurisdiction
indicated for such vessel on SCHEDULE 6J, is in compliance with all applicable
Laws of such jurisdiction and of the United States of America, except for any
such noncompliance as would not have a Material Adverse Effect, and, at no time
during the Company's or any of its Subsidiaries' ownership of the Vessels, have
any of the Vessels been sold, chartered or otherwise transferred to any Person
in violation of Law.
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(b) The Company has good, valid and marketable title to each of the
Vessels, free and clear of any Liens, other than those Liens described on
SCHEDULE 6J.
(c) Each of the Vessels listed on SCHEDULE 6J maintains the class
indicated on SCHEDULE 6J with the classification society indicated on SCHEDULE
6J, free of recommendations that would have a Material Adverse Effect.
(d) Except as indicated on Schedule 6J, each of the Vessels is in
adequate running order and repair, and, insofar as due diligence can make such
vessel so, tight, staunch, strong and well and sufficiently tackled, apparelled,
furnished equipped and in all material respects seaworthy and in adequate
operating condition to perform its functions as currently contemplated. Each of
the Vessels that is documented under U.S. flag has a clean certificate of
inspection from the United States Coast Guard free of reported or reportable
exceptions or notations of record.
(e) The Company and its Subsidiaries have filed with each appropriate
Governmental Body all evidence of financial responsibility to the extent
required under all applicable Laws, including the Oil Pollution Act of 1990, 33
U.S.C. ss.ss. 2710 ET SEQ., and the rules and regulations promulgated
thereunder, except for such failure to file as would not have a Material Adverse
Effect.
(f) The description of services to be performed by non-coastwise
qualified vessels set forth in the Ruling Letter, completely and correctly
describes in all material respects the manner in which the Company and its
Subsidiaries currently operate the Vessels, except that any Vessel documented
under the law and flag of the United States of America with a Certificate of
Documentation issued with a coastwise endorsement currently may be operated by
the Company to perform services described in Part I.F of the Ruling Letter. A
true, complete and correct copy of the Ruling Letter and the response thereto of
the Customs Commissioner is set forth in EXHIBIT L. Each of the Company and each
of its Subsidiaries that owns Vessels is and at all times prior to Closing will
have been a citizen of the United States of America within the meaning of
Section 2 of the Shipping Act of 1916, as amended (46 U.S.C. ss. 802), and
qualified to operate vessels in coastwise trade.
(g) In respect of each Vessel documented under the law and flag of
the United States of America with a Certificate of Documentation issued with a
coastwise endorsement, the Company has provided to the Purchaser a true and
complete copy of the duly completed application for exchange of such Certificate
of Documentation with a new Certificate of Documentation issued with a registry
endorsement.
6K. TANGIBLE PERSONAL PROPERTY. (a) SCHEDULE 6K sets forth all leases of
personal property ("PERSONAL PROPERTY LEASES") involving annual payments in
excess of $100,000 relating to personal property, other than Vessels, used in
the business of the Company and its Subsidiaries or to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or any of their respective properties or assets is bound, the
parties thereto, the amount of annual payments in respect thereof and the
termination date and the conditions of renewal thereof. Complete and correct
copies of the Personal Property Leases, together with all amendments,
modifications, supplements or side letters affecting the obligations of any
party thereunder, have been delivered or otherwise made available to Purchaser.
(b) Each of the Personal Property Leases is valid and enforceable against
the Company and/or any of its Subsidiaries which is party thereto and, to the
knowledge of the Company, against each other party thereto in accordance with
its terms, and there is no default under any Personal Property Lease either by
the
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Company or any of its Subsidiaries or, to the knowledge of the Company, by any
other party thereto which could reasonably be expected to have a Material
Adverse Effect, and, to the knowledge of the Company, no event has occurred that
with the lapse of time or the giving of notice or both would constitute a
default thereunder which could reasonably be expected to have a Material Adverse
Effect.
(c) Except for such items of personal property that are not material to
the operation of the business of the Company and the Subsidiaries, taken as a
whole, the Company and its Subsidiaries have good and marketable title to all of
the items of tangible personal property reflected on the Latest Balance Sheet,
free and clear of any and all Liens, other than as set forth on SCHEDULE 6K. In
the reasonable judgment of the Company, such items of tangible personal property
which are material to and are currently used in the operation of the business of
the Company and its Subsidiaries , taken as a whole, are in operating condition
and in a state of adequate maintenance and repair (ordinary wear and tear
excepted) and are generally suitable for the purposes used for the operation of
the business of the Company and its Subsidiaries as currently conducted.
6L. INTANGIBLE PROPERTY. (a) SCHEDULE 6L sets forth a complete and correct
list of each patent, trademark, trade name, service mark, brand mark, brand
name, Software and copyright owned or used in the business of the Company and
its Subsidiaries as well as all registrations thereof and pending applications
therefor, and each material license or other material Contract relating thereto
(collectively, the "INTANGIBLE PROPERTY") and indicates, with respect to each
item of Intangible Property, the owner thereof and, if applicable, the name of
the licensor and licensee thereof and the basic terms of such license or other
Contract relating thereto. Except as set forth on SCHEDULE 6L, each of the
foregoing is owned by the Company or one of its Subsidiaries free and clear of
any and all Liens and is in good standing and no other Person has any claim of
ownership with respect thereto. The use of the foregoing by the Company or any
of its Subsidiaries does not conflict with, infringe upon, violate or interfere
with or constitute an appropriation of any right, title, interest or goodwill,
including, without limitation, any intellectual property right, patent,
trademark, trade name, service mark, brand mark, brand name, computer program,
database, industrial design, copyright or any pending application therefor of
any other Person, which, in any such case, could have a Material Adverse Effect.
There have been no Legal Proceedings initiated or, to the knowledge of the
Company, threatened with respect to Intangible Property and neither the Company
nor any of its Subsidiaries has received any notice or otherwise knows that any
of the foregoing is invalid or conflicts with the asserted rights of other
Persons or have failed to be used or enforced in a manner that would result in
the abandonment, cancellation or unenforceability of the Intangible Property
that could have a Material Adverse Effect.
(b) The Company and its Subsidiaries own or license all Intangible
Property, know-how, formulae and other proprietary and trade rights necessary
for the conduct of their respective businesses as now conducted .
6M. MATERIAL CONTRACTS. (a) Except as set forth on SCHEDULES 6B, 6I, 6J,
6K AND 6L or as set forth on SCHEDULE 6M, neither the Company nor any of its
Subsidiaries nor any of their respective properties or assets is a party to or
bound by any (i) Contract not made in the ordinary course of business, the
performance of which will extend over a period greater than thirty (30) days;
(ii) employment, consulting, non-competition, severance, golden parachute or
employee, officer, or director indemnification Contract (including, without
limitation, in each case any material Contract to which the Company or any of
its Subsidiaries is a party involving employees of the Company or any of its
Subsidiaries), which is not terminable by the Company or any of its
Subsidiaries, as
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the case may be, within thirty (30) days after written notice thereof and
without liability to the Company or any of its Subsidiaries; (iii)
distributorship, sales representative or sales agency Contract, which is not
terminable by the Company or any of its Subsidiaries, as the case may be, within
thirty (30) days after written notice thereof and without liability to the
Company or any of its Subsidiaries; (iv) Contract (including, without
limitation, purchase orders issued by customers or to suppliers of the Company
or any of its Subsidiaries which remain open as of the date of this Agreement)
involving the commitment or payment reasonably expected to be in excess of
$1,000,000 for the future purchase of services or equipment; (v) Contract among
stockholders or granting a right of first refusal or for a partnership or a
joint venture or for the acquisition, sale or lease of any assets individually
or in the aggregate in excess of $100,000, partnership interests or capital
stock of the Company or any of its Subsidiaries or any other Person or involving
a sharing of profits which could, individually or in the aggregate, reasonably
be expected to be in excess of $100,000; (vi) mortgage, pledge, conditional
sales contract, security agreement, factoring agreement or other similar
Contract with respect to any real or tangible personal property of the Company
or any of its Subsidiaries involving annual payments or liabilities in excess of
$100,000; (vii) loan agreement, credit agreement, promissory note, guarantee,
subordination agreement, letter of credit or any other similar type of Contract
involving liabilities, individually or in the aggregate, in excess of $100,000;
(viii) material Contract relating to the exploration, development, exploitation,
extraction or transportation of oil or gas, (ix) Contract with any Governmental
Body; or (x) Contract for the charter of any vessels. There has been delivered
or otherwise made available to Purchaser complete and correct copies of the
Contracts listed on SCHEDULE 6M 6B, 6I, 6J, 6K AND 6L, together with all
amendments, modifications, supplements or side letters affecting the obligations
of any party thereunder.
(b) Each of the Contracts listed on SCHEDULE 6M is a valid and binding
obligation enforceable against the Company and/or any of its Subsidiaries which
is a party thereto and, to the knowledge of the Company, against each other
party thereto in accordance with its terms, and there is no default under any
Contract listed or described on SCHEDULE 6M either by the Company or any of its
Subsidiaries or, to the knowledge of the Company, by any other party thereto,
and no event has occurred that with the lapse of time or the giving of notice or
both would constitute a default thereunder, which could result in a Material
Adverse Effect. No party to any Contract set forth on SCHEDULE 6M has given
notice of or initiated a material Legal Proceeding with respect to any breach or
default thereunder.
6N. EMPLOYEE BENEFITS. (a) SCHEDULE 6N AND 6B sets forth a complete and
correct list of all "employee benefit plans", as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and any
other pension plans or employee benefit arrangements or payroll practices
(including, without limitation, severance pay, vacation pay, company awards,
salary continuation for disability, sick leave, deferred compensation, bonus or
other incentive compensation, stock purchase arrangements or policies)
maintained by the Company or any of its Subsidiaries or any trade or business
(whether or not incorporated) which is under common control with the Company or
any of its Shareholders or is treated with the Company as a single employer
under Section 414(b), (c), (m) or (o) of the Code ("ERISA AFFILIATE") or to
which the Company or any of its Subsidiaries contributes or is obligated to
contribute thereunder with respect to employees of the Company or any of its
Subsidiaries ("EMPLOYEE BENEFIT PLANS").
(b) Neither the Company nor any ERISA Affiliate has now or has ever
sponsored or contributed to any Employee Benefit Plans that are (i) subject to
Section 4063 and 4064 of ERISA (multiple employer plans), (ii) multiemployer
plans as defined in Section 4001(a)(3) of ERISA, (iii) welfare plans providing
continuing benefits after the termination of employment (other than COBRA
benefits required by Section 4980B of the Code and paid for by the former
employer), or (iv) defined benefit pension plans subject to Title IV of ERISA or
the funding requirements of Section 412 of the Code.
(c) The Employee Benefit Plan intended to qualify under Section 401(a) of
the Code ("QUALIFIED PLANS") so qualifies, and, except as disclosed on SCHEDULE
6N, nothing has occurred with respect to the
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operation of any such plan which, either individually or in the aggregate, would
cause the loss of such qualification or the imposition of any liability, penalty
or tax under ERISA or the Code.
(d) All contributions and premiums required by law or by the terms of any
Employee Benefit Plan or any agreement relating thereto have been timely made or
provided for (without regard to any waivers granted with respect thereto).
(e) The liabilities of each Employee Benefit Plan that has been terminated
or otherwise wound up, have been fully discharged in compliance with applicable
Law.
(f) There has been no violation of ERISA with respect to the filing of
applicable returns, reports, documents and notices regarding any of the Employee
Benefit Plans with the Secretary of Labor or the Secretary of the Treasury or
the furnishing of such notices or documents to the participants or beneficiaries
of the Employee Benefit Plans which, either individually or in the aggregate,
could result in material liability to the Company or any ERISA Affiliate.
(g) Complete and correct copies of the following documents, with respect
to each of the Employee Benefit Plans (as applicable), have been delivered to
Purchaser: (i) any plan documents and related trust documents, and all
amendments thereto; (ii) the most recent Forms 5500 and schedules thereto; (iii)
the most recent IRS determination letters; (iv) the most recent summary plan
descriptions.
(h) There are no pending Legal Proceedings which have been asserted or
instituted against any of the Employee Benefit Plans, the assets of any such
plans or the Partnership or any of the Corporations or the plan administrator or
any fiduciary of the Employee Benefit Plans with respect to the operation of
such plans (other than routine, uncontested benefit claims) which, either
individually or in the aggregate, could result in a Material Adverse Change.
(i) Each of the Employee Benefit Plans has been maintained, in all
material respects, in accordance with its terms and all provisions of applicable
Law. All amendments and actions required to bring each of the Employee Benefit
Plans into conformity in all material respects with all of the applicable
provisions of ERISA, the Code and other applicable Laws have been made or taken
except to the extent that such amendments or actions are not required by Law to
be made or taken until a date after the Closing Date.
(j) None of the Company, the Subsidiaries or any ERISA Affiliate maintains
a welfare benefit plan providing continuing benefits after the termination of
employment (other than as required by Section 4980B of the Code and at the
former employee's own expense) except as provided on SCHEDULE 6N and the
Company, its Subsidiaries and each of the ERISA Affiliates have complied in all
material respects with the notice and continuation requirements of Section 4980B
of the Code and the regulations thereunder.
(k) No Employee Benefit Plan will require the payment of severance
benefits, separation pay or any similar pay as a result of the consummation of
the transactions contemplated by this Agreement.
(l) The Company does not maintain or contribute to a trust under Sections
501(a) and 501(c)(9) of the Code.
6O. LABOR. (a) Neither the Company nor any of its Subsidiaries is party to
any labor or collective bargaining agreement and there are no labor or
collective bargaining agreements which pertain to employees of the Company or
any of its Subsidiaries.
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(b) No employees of the Company or any of its Subsidiaries are represented
by any labor organization. No labor organization or group of employees of the
Company or any of its Subsidiaries has made a pending demand for recognition,
and there are no representation proceedings or petitions seeking a
representation proceeding presently pending or, to the knowledge of the Company,
threatened to be brought or filed, with the National Labor Relations Board or
other labor relations tribunal. There is no organizing activity involving the
Company or any of its Subsidiaries pending or, to the knowledge of the Company,
threatened by any labor organization or group of employees of the Company or any
of its Subsidiaries.
(c) Except as described in Schedule 6H ,there are no labor or employment
related (i) strikes, work stoppages, slowdowns, lockouts or arbitrations or (ii)
material grievances or other material labor disputes pending or, to the
knowledge of the Company, threatened against or involving the Company or any of
its Subsidiaries. There are no unfair labor practice charges or grievances
pending or, to the knowledge of the Company, threatened by or on behalf of any
employee or group of employees of the Company or any of its Subsidiaries.
(d) There are no complaints, charges or claims against the Company or any
of its Subsidiaries pending or, to the knowledge of the Company, threatened to
be brought or filed with any Governmental Body based on, arising out of, in
connection with, or otherwise relating to the employment by the Company or any
of its Subsidiaries of any individual, including any claim for workers'
compensation (except as described in Section 6H), which could reasonably be
expected to result in a Material Adverse Change . To the knowledge of the
Company , the Company and its Subsidiaries are in compliance with all Laws and
Orders relating to the employment of labor, including all such Laws and Orders
relating to wages, hours, collective bargaining, discrimination, civil rights,
workers' compensation, pay equity and the collection and payment of withholding
and/or Social Security Taxes and similar Taxes, noncompliance with which could
result in a Material Adverse Charge.
6P. COMPLIANCE WITH LAWS; PERMITS. (a) Except as set forth on SCHEDULE 6P,
the Company and its Subsidiaries are in compliance in all material respects with
all Laws and Orders promulgated by any Governmental Body (including, without
limitation, the Commissioner of Customs and the U.S. Coast Guard) applicable to
the Company or any of its Subsidiaries or to the conduct of the business or
operations of the Company or any of its Subsidiaries or the use of any of their
properties (including any leased properties) and assets, noncompliance with
which could result in a Material Adverse Change. Except as set forth on SCHEDULE
6P, neither the Company nor any of its Subsidiaries has received, or knows of
the issuance of, any notices of any violation or alleged violation of any such
Law or Order of any Governmental Body. Except as set forth on SCHEDULE 6P, there
are no pending or, to the knowledge of the Company, threatened investigations by
any Governmental Body with respect to such business or operations of the Company
or any of its Subsidiaries which, either individually or in the aggregate, could
result in a Material Adverse Change.
(b) SCHEDULE 6P lists all Permits of the Company and its Subsidiaries
issued or granted by any Governmental Body, indicating, in each case, the
expiration date thereof, which are material to the business and operations of
the Company or any of its Subsidiaries. The Company and its Subsidiaries have
all Permits that are required to be obtained by each of them to permit the
operations of their respective businesses in the manner in which such operations
are currently and heretofore conducted, except to the extent that the failure to
have any such Permit could not, either individually or in the aggregate, cause a
Material Adverse Change. The Company and its Subsidiaries have complied with all
conditions of such Permits applicable to it, non-compliance with which could
result in a Material Adverse Effect. No default or violation, or event, that
with the lapse of time or giving of notice or both would become a default or
violation, has occurred in the due observance of any such Permit which could
reasonably be expected to have a Material Adverse Effect. To the
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knowledge of the Company, all such Permits are in full force and effect without
further consent or approval of any Person except for such as would not have a
Material Adverse Effect.
6Q. ENVIRONMENTAL MATTERS. Except as would not have a Material Adverse
Effect, (i) the operations of the Company and its Subsidiaries are in compliance
with all Environmental Laws ; (ii) the Company and its Subsidiaries have all
Environmental Permits required for their operations ; all such Environmental
Permits are in full force and effect and in good standing, there are no Legal
Proceedings pending or, to the knowledge of the Company, threatened WITH RESPECT
TO any such Environmental Permit; the Company and its Subsidiaries are in
compliance with such Environmental Permits; (iii) the Company and its
Subsidiaries are not (x) subject to any outstanding written Order or, except as
set forth on SCHEDULE 6M, material Contract, including Environmental Liens, with
or in favor of any Governmental Body or Person relating to Environmental Laws,
Environmental Permits or Hazardous Materials or (y) to the knowledge of the
Company, subject to any federal, state or local investigation concerning any
Environ mental Laws or Environmental Claims; (iv) neither the Company nor any of
its Subsidiaries is subject to any Legal Proceeding alleging the violation of
any Environmental Law or Environmental Permit; (v) neither the Company nor any
of its Subsidiaries has received (nor, to the knowledge of the Company, has
there been issued) any written communication that alleges that either the
Company or any of its Subsidiaries is not in compliance with any Environmental
Law or Environmental Permit ; (vi) except as set forth on SCHEDULE 6Q, neither
the Company nor any of its Subsidiaries has caused or, to the best knowledge of
the Company after due inquiry, permitted any Hazardous Materials to remain or be
disposed of, either on or under real property owned or operated by the Company
or any of its Subsidiaries or on any real property not permitted to accept,
store or dispose of such Hazardous Materials; (vii) to the knowledge of the
Company, except as set forth on SCHEDULE 6Q, there is not now on or in the
Leased Property (A) any underground storage tanks or surface tanks, dikes or
impoundments; (B) any friable asbestos containing materials or (C) any
polychlorinated biphenyls.
6R. INVESTMENT COMPANY ACT. Neither the Company nor any of its
Subsidiaries is an investment company within the meaning of the Investment
Company Act of 1940, as amended.
6S. INSURANCE. SCHEDULE 6S sets forth a list of all policies of insurance
of any kind or nature covering the Company or any of its Subsidiaries or any of
their employees, properties or assets, including, without limitation, policies
of life, disability, fire, theft, workers compensation, employee fidelity and
other casualty and liability insurance. Except as set forth on Schedule 6S, all
such policies are in full force and effect. SCHEDULE 6S also sets forth, for
each such policy, the type of coverage, name of the insured (other than third
parties), the insurer, the expiration date of each policy, the amount of
coverage per occurrence and in the aggregate, and any deductible amount or other
form of self-insured retention. Such policies of insurance are valid,
enforceable and in full force and effect (and will continue to be valid,
enforceable and in full force and effect following the Closing) and, taken
together, provide the Company, its Subsidiaries, directors and officers with, in
the reasonable judgment of the Company, adequate coverage for all risks normally
insured against a Person carrying on the same businesses as the Company and its
Subsidiaries. Except as set forth on SCHEDULE 6S , neither the Company nor any
of its Subsidiaries has received any refusal of coverage or any notice that a
defense will be afforded with a reservation of rights or any notice of
cancellation or any other indication that any insurance policy is no longer in
full force or effect or will not be renewed or that the issuer of any policy is
not willing or able to perform its obligations thereunder. The Company has
delivered or otherwise made available to Purchaser complete and correct copies
of each policy listed on SCHEDULE 6S, together with all amendments,
modifications, supplements or side letters affecting the obligations of any
party thereunder.
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6T. CUSTOMERS AND SUPPLIERS. SCHEDULE 6T lists the ten (10) largest
customers in terms of revenues and the ten (10) largest suppliers in terms of
purchases of the Company and its Subsidiaries taken as a whole during the year
ended December 31, 1996 and the approximate amount of sales to each such
customer and purchases from each such supplier during such year. Except as
expressly set forth on SCHEDULE 6T, (i) taken as a whole, the relationships of
the Company and its Subsidiaries with customers and suppliers have been entered
into and are conducted pursuant to arms' length transactions, and (ii) no
customer or supplier of the Company or any of its Subsidiaries has canceled,
otherwise terminated, altered, or threatened in writing to cancel, otherwise
terminate or alter, its relationship with the Company or any of its Subsidiaries
or withheld or delayed payment for, or shipment or provision of, any products or
services or threatened in writing to do so which, either individually or in the
aggregate, could result in a Material Adverse Effect.
6U. RELATED PARTY TRANSACTIONS. Except as set forth on SCHEDULE 6U, since
December 31, 1994 and as of the date hereof, neither the Company nor any of its
Subsidiaries has entered into any transaction with or is a party to any Contract
with any Affiliate of the Company. None of the Company's shareholders or any of
their respective Affiliates owns any direct or indirect interest of any kind in,
or controls or is a director, officer, employee or partner of, or consultant to,
or lender to or borrower from or has the right to participate in the profits of,
any Person which is a competitor, supplier, customer, landlord, tenant, creditor
or debtor of the Company or any of its Subsidiaries excluding ownership of
shares of publicly traded companies.
6V. ENTIRE BUSINESS. Except for the unavailability from time to time of
vessels or oil services machinery and equipment for charter or lease on the spot
market, the assets, properties and rights which will be owned, leased or
licensed by the Company and its Subsidiaries as of the Closing Date will
constitute all of the tangible and intangible property used by and necessary to
the Company and its Subsidiaries in connection with the conduct of their
businesses as now conducted .
6W. NO FINDER'S FEE. Other than fees payable by the Company to Simmons &
Company International, its financial adviser, there are no claims for brokerage
commissions, finders' fees or similar compensation payable by the Company and/or
its Affiliates in connection with the transactions contemplated by this
Agreement. The Company shall be solely responsible for the payment of such fees
to Simmons & Company International.
6X. DISCLOSURE. Neither this Agreement nor any of the exhibits,
schedules, attachments, documents, certificates supplied to the Purchaser by or
on behalf of the Company with respect to the transactions contemplated hereby
nor any of the Seller Documents contains any untrue statement of a material fact
or omit a material fact necessary to make each statement contained herein or
therein not misleading under the circumstances. There is no fact which the
Company has not disclosed to the Purchaser and of which any of its officers,
directors or key employees is aware and which has had or would reasonably be
anticipated to have a Material Adverse Effect.
7. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS. As a material
inducement to the Purchaser to enter into this Agreement and purchase the
Company Shares and the Shareholder Shares, each of the Shareholders, severally,
hereby represents and warrants at the time of execution hereof that:
7A. TITLE TO SHARES. Such Shareholder has, and on the Closing Date will
have, good, valid and marketable title to all of such Shareholder's Shareholder
Shares to be sold to the Purchaser pursuant to this Agreement free and clear of
any Liens. Immediately upon completion of the Closing, the Purchaser will own,
and will have, good, valid and marketable title to, the Shareholder Shares free
and clear of any Liens. There are no Legal Proceedings pending or, to the
knowledge of such Shareholder, threatened against such
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Shareholder or such Shareholder's businesses or assets that if adversely
determined, could reasonably be expected to have a material adverse effect on
such Shareholder's ability to perform its obligations under this Agreement or
the Seller Documents to which such Shareholder is a party or any action taken or
to be taken by such Shareholder in connection with the consummation of the
transactions contemplated hereby or thereby. No other Person has any direct or
indirect record or beneficial title or interest in or claim of any nature
whatsoever to any of such Shareholder's Shareholder Shares, and there are no
Contracts, commitments, undertakings, understandings or other restrictions to
which such Shareholder is a party which directly or indirectly restricts or
otherwise limits in any manner the voting, sale, transfer or other disposition
of such Shares except as set forth on SCHEDULE 7A.
7B. AUTHORITY RELATIVE TO THIS AGREEMENT. Such Shareholder has full legal
and, if applicable, corporate, partnership, trust or other organizational right,
power and authority to execute and deliver this Agreement and the other Seller
Documents to which such Shareholder is a party, to consummate the transactions
contemplated hereby and thereby, and to sell such Shareholder's Shareholder
Shares to Purchaser hereunder. The execution, delivery and performance of this
Agreement and the other Seller Documents to which such Shareholder is a party
have been duly authorized by all necessary corporate (including shareholder),
partnership, trust or other organizational action on the part of such
Shareholder. This Agreement and each other Seller Document to which such
Shareholder is a party have been duly and validly executed and delivered by, and
each such agreement constitutes a valid and binding obligation of such
Shareholder, enforceable against such Shareholder in accordance with its terms
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting creditor's rights generally (regardless of whether such
enforceability is considered in a proceeding at law or in equity). Each
Shareholder which is not an individual has delivered to the Purchaser true and
complete copies of such Shareholder's organizational documents. The execution
and delivery by such Shareholder of this Agreement and each other Seller
Document to which such Shareholder is a party, the offering and sale by such
Shareholder of Shareholder Shares, and the fulfillment of and compliance with
the terms of this Agreement and the other Seller Documents to which such
Shareholder is a party by such Shareholder, do not and shall not (a)(i) conflict
with or result in a breach of the terms, conditions or provisions of, (ii)
constitute a default or an event which with the giving of notice, passage of
time or both would constitute a default under, (iii) give rise to any right of
termination, cancellation or acceleration, (iv) result in a violation of, or (v)
require any consent, approval, waiver, Order, Permit or exemption or other
action by or notice, declaration or filing to or with any Governmental Body
pursuant to, the organizational documents of such Shareholder, if applicable, or
to the extent such conflict, breach, default, termination, cancellation,
acceleration, violation or failure to obtain such consent, approval, waiver,
order, permit or exemption could reasonably be expected to have a material
adverse effect on such Shareholder, any Law, Contract, Permit or Order, to which
such Shareholder, or any of such Shareholder's assets is subject, or (b) result
in the creation or imposition of any Lien upon the capital stock, property or
assets of such Shareholder.
8. PURCHASER'S REPRESENTATIONS AND WARRANTIES. As a material inducement to
the Company and the Shareholders to enter into this Agreement and sell the
Company Shares and Shareholder Shares, the Purchaser hereby represents and
warrants at the time of execution hereof that:
8A. ORGANIZATION AND CORPORATE POWER. The Purchaser is duly organized,
validly existing and in good standing under the laws of France and is duly
qualified or authorized to do business as a foreign corporation and is in good
standing in each of the jurisdictions where the Purchaser's ownership or lease
of property or conduct of business requires it to so qualify, except for those
jurisdictions where the failure to be so qualified or authorized would not have
a material adverse effect on the business, properties, results of
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operations, prospects, operations, condition (financial or otherwise) of the
Purchaser and its Subsidiaries taken as a whole. The Purchaser has all requisite
corporate power and authority to execute and deliver this Agreement and each
other Seller Document to which it is a party, to consummate the transactions
contemplated hereby and thereby and to duly perform its obligations hereunder
and thereunder.
8B. AUTHORIZATION; NO BREACH. The execution, delivery and performance of
this Agreement and the other Seller Documents to which the Purchaser is a party
have been duly authorized by all necessary corporate action on the part of the
Purchaser. This Agreement and each other Seller Document to which the Purchaser
is a party has been duly and validly executed and delivered by, and constitutes
or, at the Closing, will constitute, a valid and binding obligation of, the
Purchaser enforceable against the Purchaser in accordance with its respective
terms except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to or affecting creditor's rights generally (regardless of
whether such enforceability is considered in a proceeding at law or in equity).
The execution and delivery by the Purchaser of this Agreement and each other
Seller Document to which the Purchaser is a party and the fulfillment of, and
the compliance with, the respective terms of this Agreement and the other Seller
Documents to which the Purchaser is a party by the Purchaser, do not and shall
not (i) conflict with, or result in a breach of, the terms, conditions or
provisions of, (ii) constitute a default under or any event which with the
giving of notice, passage of time or both would constitute a default under, or
(iii) assuming compliance with the applicable requirements of the HSR Act and
EXFA, result in a violation of, require any consent, approval, waiver, Order,
Permit or exemption or other action by or notice, declaration or filing to or
with any Governmental Body pursuant to, the corporate organizational documents
of the Purchaser, or any Law to which the Purchaser is subject, or any Contract,
Permit or Order to which the Purchaser is a named party and subject, except for
consents or approvals set forth on SCHEDULE 8B.
8C. RESTRICTED SECURITIES. The Restricted Securities purchased hereunder
or acquired pursuant hereto are being acquired by the Purchaser for its own
account with the present intention of holding such securities for purposes of
investment, and that it has no present intention of selling or distributing such
securities in any transaction that would be in violation of the federal
securities laws or any applicable state securities laws; provided that nothing
contained herein shall prevent the Purchaser and subsequent holders of
Restricted Securities from transferring such securities in compliance with
applicable Law. The Purchaser understands that the Restricted Securities have
not been registered under the Securities Act or any state securities laws by
reason of their contemplated issuance hereunder in a transaction exempt from the
registration requirements of the Securities Act and applicable state securities
laws, and that the reliance of the Company and others upon these exemptions is
predicated in part upon this representation by the Purchaser. The Purchaser
further understands that the Restricted Securities may not be transferred or
resold without (i) registration thereof under the Securities Act and applicable
state securities laws, or (ii) the availability of an exemption from the
registration requirements of the Securities Act and applicable state securities
laws.
8D. NO FINDER'S FEE. Other than fees payable by the Purchaser to Schroder,
Wertheim & Co. Incorporated, its financial adviser, there are no claims for
brokerage commissions, finders' fees or similar compensation payable by the
Purchaser and/or its Affiliates in connection with the transactions contemplated
by this Agreement. The Purchaser shall be solely responsible for the payment of
such fees to Schroder, Wertheim &Co. Incorporated.
8E. PURCHASER INQUIRY. The Purchaser and its advisors have reviewed to
their satisfaction, solely for purposes of satisfying the exemption for the
issuance and sale of the Restricted Securities hereunder from the registration
requirements of the Secutities Act and applicable state securities laws,
business, management and financial information about the Company and have had an
opportunity to ask questions of, and receive
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answers from, the Company concerning the business, management and financial
affairs of the Company which questions, if any, have been answered to their
satisfaction, solely for purposes of satisfying the exemption for the issuance
and sale of the Restricted Securities hereunder from the registration
requirements of the Secutities Act and applicable state securities laws,
including, without limitation, all material contracts and related material
described in SCHEDULE 6M, and have had an opportunity to obtain, and have
received, any additional information deemed necessary by them in order to form a
decision concerning the Purchaser's investment in the Company contemplated
herein; provided, however, that none of the foregoing shall limit, diminish or
constitute a waiver of any representation, warranty or covenant made under this
Agreement by the Company or any Shareholder or impair any rights which the
Purchaser may have with respect thereto under Section 12B hereof.
8F. QUALIFICATION AS AN ACCREDITED INVESTOR. The Purchaser is an
accredited investor within the meaning of Rule 501(a) of Regulation D
promulgated under the Securities Act.
9. PUBLIC DISCLOSURE. No party shall disclose that the Purchaser is
acquiring an interest in the Company or the price or terms thereof in any press
release or any public announcement or in any document or material filed with any
Governmental Body or to any other Person, without the prior written consent of
the Company and the Purchaser (which consent shall not be unreasonably withheld,
delayed, or conditioned) unless such disclosure is required by applicable Law or
Rules of the Nasdaq Stock Market or by order of a court of competent
jurisdiction in which case prior to making such disclosure, the disclosing party
shall use its reasonable efforts to give written notice to the other party
describing in reasonable detail the proposed content of such disclosure and
shall use its reasonable efforts to permit the Company to review and comment
upon the form and substance of such disclosure. With respect to the transactions
contemplated by this Agreement, the Purchaser and the Company will coordinate
all communications, if any, to third parties.
10. DEFINITIONS. (a) For the purposes of this Agreement, the following
terms have the meanings set forth below:
"AFFILIATE" means, with respect to any Person, (i) any Person that
directly or indirectly controls, is controlled by or is under, common control
with, such Person, or (ii) any director, senior officer or partner of such
Person or any Person specified in Clause (i) above, or (iii) any Immediate
Family Member of any Person specified in clause (i) or (ii) above.
"BENEFICIAL OWNER" shall have the meaning set forth in Rule 13d-3 of the
U.S. Securities and Exchange Commission and "BENEFICIALLY OWNS" shall have a
correlative meaning.
"COASTWISE LAWS" means 46 U.S.C.ss.ss.289-883 and the rules and
regulations promulgated thereunder.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONTRACT" means any contract, agreement, indenture, note, bond, loan,
instrument, lease, conditional sale contract, mortgage, license, franchise,
insurance policy, commitment or other arrangement or agreement.
"CUSTOMS COMMISSIONER" means the U.S. Commissioner of Customs, Office of
Regulations and Rulings.
"EMPLOYEE STOCK AGREEMENTS" means the Employee Stock Agreements entered
into from time to time between the Company and certain employees which provide
that the Company shall have a repurchase-option on such employee's shares of
Common Stock if the employee ceases to be employed by the Company.
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"ENVIRONMENTAL CLAIM" means any notice of violation, pending or to the
knowledge of the Company, threatened court or administrative action, claim,
Lien, abatement, order or agency direction (conditional or otherwise) by any
Governmental Body or asserted by any Person pertaining to Environmental Matters.
"ENVIRONMENTAL LAW" means any Law, as existing as of the Closing Date,
concerning Releases into any part of the natural environment, or activities that
might result in damage to the natural environment, or any Law that is concerned
in whole or in part with the natural environment and with protecting or
improving the quality of the natural environment and includes, but is not
limited to, the Comprehensive Environmental Response, Compensation, and
Liability Act ("CERCLA") (42 U.S.C. ss.ss. 9601 ET SEQ.), the Hazardous
Materials Transportation Act (49 U.S.C. ss.ss. 1801 ET SEQ.), the Resource
Conservation and Recovery Act (42 U.S.C. ss.ss. 6901 ET SEQ.), the Clean Water
Act (33 U.S.C. ss.ss. 1251 ET SEQ.), the Clean Air Act (33 U.S.C. ss.ss. 7401 ET
SEQ.), the Toxic Substances Control Act (15 U.S.C. ss.ss. 2601 ET SEQ.), the
Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. ss.ss. 136 ET
SEQ.), the Oil Pollution Act (33 U.S.C.ss.ss. 2701-2719), and the Louisiana
spill law (La. Rev. Stat. ss.30:2025) as such laws have been amended or
supplemented, and the regulations promulgated pursuant thereto, and any and all
analogous state or local statutes, and the regulations promulgated pursuant
thereto. "Environmental Laws" does not include the Occupational Safety and
Health Act or any other law related to worker safety or workplace conditions
which, for purposes of this Agreement, shall nevertheless still constitute a
Law.
"ENVIRONMENTAL MATTERS" means any matter arising out of or relating to the
production, storage, transportation, disposal or Release of any Hazardous
Material which could give rise to liability or require the expenditure of money
to address, and shall include, without limitation, the costs of investigating
and remediating any of the foregoing matters, any fines and penalties arising in
connection therewith, and any claim in respect thereof for damages for alleged
personal injury, property damage or damage to natural resources or injunctive
relief under common law or other Environmental Law.
"ENVIRONMENTAL PERMIT" means any Permit, approval, authorization, license
variance, registration, or permission required under any applicable
Environmental Laws and all supporting documents associated therewith.
"ERISA" means the Employee Retirement Income Security of 1974, as amended.
"ERT" means Energy Resource Technology, Inc., a direct wholly-owned
Subsidiary of the Company.
"EMPLOYEE SHAREHOLDERS" means employees who are shareholders of the
Company.
"EXFA" means the Exon-Florio Amendment to the Defense Production Act of
1950 and the rules and regulations promulgated thereunder.
"EXECUTIVES" means Gerald G. Reuhl, Owen Kratz and S. James Nelson.
"EXTRAORDINARY LOSS" means any extraordinary loss (as defined in Opinion
No. 30 of the Accounting Principles Board of the American Institute of Certified
Public Accountants and any amendments thereto).
"FACILITIES" means real property now or heretofore owned, leased or
operated by the Company or any of its Subsidiaries.
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"FUNDS" means First Reserve Secured Energy Assets Fund, Limited
Partnership, First Reserve Fund V, Limited Partnership, First Reserve Fund V-2,
Limited Partnership, and First Reserve Fund VI, Limited Partnership.
"GAAP" means generally accepted accounting principles as in effect in the
United States of America from time to time.
"GOVERNMENTAL BODY" means any government or governmental or regulatory
body thereof, or political subdivision thereof, whether federal, state, local or
foreign, or any agency, instrumentality or authority thereof, or any court or
arbitrator (public or private).
"HAZARDOUS MATERIALS" means any substance, material or waste which is
defined as a "hazardous waste," "hazardous material," "hazardous substance,"
"extremely hazardous waste" or "restricted hazardous waste," "subject waste,"
"contaminant," "toxic waste" or "toxic substance" under any provision of
Environmental Law, including but not limited to, petroleum, petroleum products,
asbestos and polychlorinated biphenyls.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations thereunder.
"IMMEDIATE FAMILY MEMBER" means, with respect to any Person, a spouse,
parent, child or sibling (whether natural or adopted) of such Person and any
trust or other mechanism established for estate or tax planning purposes solely
for the benefit of any such Person's Immediate Family Members.
"LAW" means any federal, state, local, foreign or supranational statute,
treaty, code, ordinance, rule, regulation or other requirement.
"LEGAL PROCEEDING" means any judicial, civil, criminal, equitable,
administrative or arbitral actions, suits, charges, complaints, demands,
proceedings (public or private), claims or governmental proceedings.
"LIEN" means any lien, pledge, mortgage, deed of trust, security interest,
claim, lease, charge, option, right of first refusal, easement, servitude,
transfer restriction under any shareholder or similar agreement, encumbrance,
litigation or any other restriction or limitation whatsoever.
"MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means any action,
event, circumstance, condition, change or effect which, individually or in the
aggregate, has resulted in, or could reasonably be expected to, result in a
material adverse change in and/or effect on the business, properties, results of
operations, prospects, operations, condition (financial or otherwise) of the
Company and its Subsidiaries taken as a whole.
"MCDERMOTT AGREEMENTS" means the Asset Purchase Agreements dated August
30, 1996 between the Company and J. Ray McDermott S.A. and between the Company
and J. Ray McDermott Inc. and all Contracts relating thereto.
"OFFICER'S CERTIFICATE" means, with respect to the Company or Purchaser, a
certificate signed by a chairman, president or its chief financial officer of
such Person, stating, among other things, that (i) the officer signing such
certificate has made or has caused to be made such investigations as are
necessary in order to permit him to verify the accuracy of the information set
forth in such certificate and (ii) to the best of such officer's knowledge, such
certificate does not misstate any material fact and does not omit to state any
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fact necessary to make the certificate not misleading.
"ORDER" means any order, injunction, judgment, decree, ruling, writ,
assessment or arbitration award.
"ORDINARY COURSE OF BUSINESS" shall mean either action consistent with
historical Company practice or consistent with oil service industry practice of
competitors or reasonably foreseeable trends therein.
"PERMITS" means any approvals, authorizations, consents, filings,
licenses, permits, registrations, qualifications or certificates, other than
Environmental Permits..
"PERSON"means an individual, a partnership, a corporation, an association,
a limited liability company, a joint stock company, a trust, a joint venture, an
unincorporated organization, Governmental Body or any other entity, agency or
political subdivision thereof.
"PURCHASER COMMON STOCK" means (i) the Common Stock (a) issued to the
Purchaser pursuant to this Agreement by the Company and (b) sold to the
Purchaser by the Shareholders pursuant to this Agreement, and (ii) any
additional shares of Common Stock issued with respect to the Common Stock
referred to in clause (i) above by way of a stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other similar event.
"QUALIFIED PUBLIC OFFERING" means an underwritten public offering of
Common Stock of the Company under the Securities Act pursuant to which the
Company receives proceeds, net of underwriting discounts and commissions, of at
least $35,000,000.
"RELEASE" means any release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching, or migration of a Hazardous
Material into the indoor or outdoor environment, or into or out of any property
owned, operated or leased by the Company or any of its Subsidiaries.
"REMEDIAL ACTION" means all actions, including, without limitation, any
capital expenditures, required by applicable Environmental Laws to (i) clean up,
remove or treat, Hazardous Material ; (ii) prevent the Release or threat of
Release, or minimize the further Release of any Hazardous Material ; (iii)
perform preremedial studies and investigations or post-remedial monitoring and
care; or (iv) bring any Facility into compliance with all Environmental Laws and
Environmental Permits.
"RESTRICTED SECURITIES" means (i) the Purchaser Common Stock issued
hereunder, and (ii) any securities issued with respect to the securities
referred to in clause (i) above, by way of a stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization. As to any particular Restricted Securities, such
securities shall cease to be Restricted Securities when they have (a) been
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering them, (b) become eligible for sale
pursuant to Rule 144 or Rule 144A (or any similar provision or provisions then
in force) under the Securities Act or (c) been otherwise transferred in
compliance with applicable securities laws and new certificates for them not
bearing a Securities Act restrictive legend set forth have been delivered by the
Company. Whenever any particular securities cease to be Restricted Securities,
the holder thereof shall be entitled to receive from the Company, without
expense, new securities of like tenor not bearing a Securities Act restrictive
legend.
"RULING LETTER" means the letter dated February 10, 1997 of Robins,
Kaplan, Miller & Ciresi, L.L.P., special counsel to the Company, to the Customs
Commissioner, a copy of which, together with the response thereto from the
Customs Commissioner, is set forth in EXHIBIT L..
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"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, or any similar federal law then in force.
"SELLER DOCUMENTS" means this Agreement and each other Contract, document
or certificate contemplated by this Agreement in connection with the
consummation of the transactions contemplated by this Agreement.
"1995 SHAREHOLDERS AGREEMENT" means that certain Amended and Restated
Shareholders Agreement dated January 12, 1995 among the Company, the Funds, the
Executives, Gordon F. Ahalt and the Employee Shareholders.
"SOFTWARE" means any computer software program (exclusive of off-the-shelf
computer software available in the open market and related applications
thereof), program specification chart, procedure, source code, object code,
input data, routine, database, report layout, format, record file layout,
diagram, functional specification, narrative description, flow chart or other
related material which is material to the operations of the Company and its
subsidiaries.
"STOCK OPTION PLAN" means that certain 1995 Long Term Incentive Plan of
the Company.
"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership, association or other business entity of which fifty percent or more
of the total voting power of shares of capital stock entitled (without regard to
the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof, or fifty percent or more of the equity interest
therein is at the time owned or controlled by any Person or one or more of the
Subsidiaries of such Person or a combination thereof.
"TAX RETURNS" means all returns, declarations, reports, estimates,
information returns and statements required to be filed in respect of any Taxes.
"TAXES" means all taxes, charges, fees, imposts, levies or other
assessments, including, without limitation, all net income, gross receipts,
capital, sales, use, ad valorem, value added, transfer, franchise, profits,
inventory, capital stock, license, withholding, payroll, employment, social
security, unemployment, excise, severance, stamp, occupation, property and
estimated taxes, customs duties, fees, assessments and charges of any kind
whatsoever, together with any interest and any penalties, fines, additions to
tax or additional amounts imposed by any taxing authority (domestic or foreign)
and shall include any transferee liability in respect of Taxes.
"TRANSFER" means any transfer, sale, assignment, distribution, exchange,
mortgage, pledge, hypothecation or other disposition.
"TRUSTEES" means Gerald G. Reuhl, Owen Kratz and S. James Nelson acting in
their capacity as trustees of the Voting Trust Agreement.
"VOTING TRUST AGREEMENT" means that certain Voting Trust Agreement dated
as of July 27, 1990 by and among the Executives and certain employees of the
Company.
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(b) The following capitalized terms are defined in the following Sections
of this Agreement:
TERM SECTION
Acquisition Transaction 5G
Agreement Preamble
Arbitration Notice 12J
Award 12J
Basket 12D
Business Cooperation Agreement 2J
Cap 12D
Closing 1B
Closing Date 1B
Committee 2G
Company Preamble
Company Shares Preamble
Discovery 12J
Dispute 12J
Employee Benefit Plans 6N
ERISA 6N
ERISA Affiliate 6N
Expenses 12D
Financial Statements 6D
Independent Arbitrator 12J
Intangible Property 6L
Intangible Property Licenses 6L
Latest Balance Sheet 6E
Lease Property 6I
Losses 12D
Multi Employer Plans 6N
PBGC 6N
Personal Property Leases 6K
Purchaser Preamble
Purchaser Indemnified Parties 12D
Qualified Plans 6N
Real Property Leases 6I
Registration Rights Agreement 2H
Registration Statement 12D
Representative 4
Reserves Report 6I
ROV Agreement 1A
Securities Act 12D
Seller Indemnifying Parties 12D
Shareholder Preamble
Shareholders Preamble
Shareholder Shares Premable
Shareholders Agreement 2I
Vessels 6J
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(c) As used in this Agreement, all references to "Dollars" or "$" are to
U.S. dollars. As used in this Agreement, unless the context otherwise requires:
(1) an accounting term not otherwise defined has the meaning assigned to it in
accordance with GAAP; (2) "or" is not exclusive; and (3) words in the singular
include the plural, and in the plural include the singular.
11. POST-CLOSING ACTIVITIES. After the Closing, the parties shall execute
and deliver such other and further instruments and perform such other and
further acts as may be reasonably necessary or desirable for the implementation
of this Agreement or the consummation of the transactions contemplated hereby.
12. MISCELLANEOUS.
12A. EXPENSES. The Company will pay all of its expenses, including
attorneys' fees and the fees of Simmons & Company International, incurred in
connection with the negotiation of this Agreement, the performance of its
obligations hereunder and the consummation of the transactions contemplated
hereby. Except as otherwise provided in this paragraph relating to HSR Act
filing fees, Purchaser will pay all of its own expenses, including fees of
Schroder Wertheim & Co. Incorporated, incurred in connection with the
negotiation of this Agreement, the performance of its obligations hereunder and
the consummation of the transactions contemplated hereby. Purchaser and the
Company shall each pay one-half of the filing fees required in connection with
compliance with the HSR Act.
12B. REMEDIES. The Purchaser shall have all rights and remedies set forth
in this Agreement (including, without limitation, Section 12D) and the Company's
Articles of Incorporation and all rights and remedies which such holders may
have under any Law or Contract. Any Person having any rights under any provision
of this Agreement shall be entitled to enforce such rights specifically (without
the requirement of posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.
12C. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Agreement (including
the exhibits hereto) represents the entire understanding and agreement between
the parties hereto with respect to the subject matter hereof and can be amended,
supplemented or changed, and any provision hereof can be waived, only by written
instrument making specific reference to this Agreement signed by the party
against whom enforcement of any such amendment, supplement, modification or
waiver is sought. No action taken pursuant to this Agreement, including without
limitation, any investigation by or on behalf of any party, shall be deemed to
constitute a waiver by the party taking such action of compliance with any
representation, warranty, covenant or agreement contained herein. The waiver by
any party hereto of a breach of any provision of this Agreement shall not
operate or be construed as a further or continuing waiver of such breach or as a
waiver of any other or subsequent breach. No failure on the part of any party to
exercise, and no delay in exercising, any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of such
right, power or remedy by such party preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. All remedies
hereunder are cumulative and are not exclusive of any other remedies provided by
law.
12D. SURVIVAL OF REPRESENTATION AND WARRANTIES; INDEMNIFICATION. (a) The
representations and warranties contained in this Agreement or any of the
documents delivered at Closing pursuant to Sections 2C, 2N, 3C or 3K shall
survive the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and continue in full force and effect,
regardless of any investigation made by the Purchaser or on its behalf, for a
period of three (3) years after the Closing Date ; PROVIDED, HOWEVER,
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that (i) the representations and warranties of the Company contained in the
first and second sentences of Section 6C, the last sentence of Section 6E,
Section 6G, paragraph (b) of Section 6J, the first sentence of paragraph (c) of
Section 6K, the second sentence of Section 6L and Section 6N shall continue in
full force and effect until 60 days after any applicable statute of limitations
(taking into account any waiver or tolling thereof) with respect to any Legal
Proceeding which may arise thereunder or relate thereto shall have run; (ii) the
representations and warranties of the Company contained in Section 6Q shall
continue in full force and effect for a period of five (5) years after Closing
Date; (iii) the representations and warranties of the Shareholders contained in
the first sentence of Section 7A and the first, second and third sentences of
Section 7B and (iv) the representations and warranties of the Purchaser
contained in the first and second sentences of Section 8B and in Section 5 of
the ROV Agreement shall continue in full force and effect until 60 days after
any applicable statute of limitations (taking into account any waiver or tolling
thereof) with respect to any Legal Proceeding which may arise thereunder or
relate thereto shall have run. To the extent the survival periods specified
herein exceed an applicable statute of limitations, the provisions of this
Section 12D(a) shall constitute a waiver by the Company, the Shareholders or the
Purchaser, as applicable, of each such statute of limitations.
(b) The Company hereby agrees to indemnify and hold harmless the Purchaser
and its directors, officers, employees, Affiliates, agents, successors and
assigns (collectively, the "PURCHASER INDEMNIFIED PARTIES") from and against:
(i) subject to paragraph (a) of this Section 12D, any and all
losses, liabilities, obligations, damages, deficiencies, costs and expenses
("LOSSES") based upon, attributable to or resulting from any inaccuracy in or
breach of any representation or warranty on the part of the Company under this
Agreement or in any of the documents delivered by the Company at Closing
pursuant to Sections 2C or 2N;
(ii) any and all Losses based upon, attributable to or resulting
from (A) the breach of any covenant or agreement on the part of the Company
under this Agreement or (B) the enforcement of this Agreement (including,
without limitation, this Section 12D); and
(iii) any and all notices, actions, suits, proceedings, demands,
assessments, judgments, costs, penalties and expenses, including attorneys' and
other professionals, fees and disbursements (collectively, "EXPENSES") incident
to the foregoing;
PROVIDED, HOWEVER, that (x) the Company shall not have any liability for
indemnity hereunder until the aggregate amount of Losses and Expenses for which
the Purchaser Indemnified Parties would otherwise be entitled to receive
indemnification hereunder exceeds $350,000 (the "BASKET"), in which event the
Company shall be obligated to pay to the Purchaser Indemnified Parties the full
amount of such Losses and Expenses, inclusive of the Basket, and (y) the Company
shall not have any liability for indemnity hereunder in an aggregate amount in
excess of $35,000,000; provided, further, however, that notwithstanding clause
(x) above, the Basket shall not apply to restrict, reduce or limit any liability
of the Company for indemnity hereunder for any Losses and Expenses of the
Purchaser Indemnified Parties, based upon, attributable to or resulting from any
willful failures ("willful" to be defined as after having been given reasonable
notice and a 60 day period to cure such failure), to fully discharge any
covenant or agreement on the part of the Company under this Agreement which by
its terms are to be performed after the Closing Date.
(c) Each of the Shareholders hereby severally agrees to indemnify and hold
harmless the Purchaser Indemnified Parties from and against:
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(i) subject to paragraph (a) of this Section 12D, any and all Losses
based upon, attributable to or resulting from any inaccuracy in or breach of any
representation or warranty by such Shareholder under Section 7 of this Agreement
or by such Shareholder in any of the documents delivered at Closing pursuant to
Section 2C or 2N of this Agreement; provided, however, that no Shareholder shall
be required to indemnify or hold harmless any Purchaser Indemnified Party under
paragraph (c) of this Section 12D for any inaccuracy or breach of representation
or warranty by any other Shareholder or the Company;
(ii) any and all Losses based upon, attributable to or resulting
from the enforcement of this Agreement against such Shareholder (including,
without limitation, paragraph (c) of this Section 12D); and
(iii) any and all Expenses incident to the foregoing;
PROVIDED, HOWEVER, that in no event shall the aggregate liability of any of the
Shareholders for indemnity under paragraph (c) of this Section 12D exceed the
product of (x) the aggregate number of shares of Common Stock sold by such
Shareholder hereunder multiplied by (y) $9.46.
(d) The Purchaser hereby agrees to indemnify and hold harmless the Company
and its directors, officers, employees, Affiliates, agents, successors and
assigns and the Shareholders (collectively, the "Seller Indemnified Parties")
from and against:
(i) subject to paragraph (a) of this Section 12D, any and all
"Losses" based upon, attributable to or resulting from any inaccuracy in or
breach of any representation or warranty on the part of the Purchaser under this
Agreement, the ROV Agreeement or in any of the documents delivered by the
Purchaser at Closing pursuant to Sections 3C or 3K;
(ii) any and all Losses based upon, attributable to or resulting
from (A) the breach of any covenant or agreement on the part of the Purchaser
under this Agreement or the ROV Agreement or (B) the enforcement of this
Agreement (including, without limitation , this Section 12D) or the ROV
Agreement; and
(iii) any and all "Expenses" incident to the foregoing.
PROVIDED, HOWEVER, that (x) the Purchaser shall not have any liability for
indemnity hereunder until the aggregate amount of Losses and Expenses for which
the Seller Indemnified Parties would otherwise be entitled to receive
indemnification hereunder exceeds the Basket, in which event the Purchaser shall
be obligated to pay to the Seller Indemnified Parties the full amount of such
Losses and Expenses inclusive of the Basket, and (y) the Seller shall not have
any liability for indemnity hereunder (A) to the Company or its directors,
officers, employees, Affiliates, agents, successors and assigns in an aggregate
amount in excess of $4,999,997.86 or (B) to any of the Shareholders in an
aggregate amount in excess of the product of (1) the aggregate number of shares
of Common Stock sold by such Shareholder hereunder multiplied by (2) $9.46;
provided, further, however, that notwithstanding clause (x) above, the Basket
shall not apply to restrict, reduce or limit any liability of the Purchaser for
indemnity hereunder for any Losses and Expenses of the Seller Indemnified
Parties, based upon, attributable to or resulting from any willful failures
("willful" to be defined as after having been given reasonable notice and a 60
day period to cure such failure), to fully discharge any covenant or agreement
on the part of the Purchaser under this Agreement which by its terms are to be
performed after the Closing Date.
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(e) Subject to the limits on Losses and Expenses contained in Section 12D
(b) , (c) and (d) above, the Company, the Shareholders and the Purchaser agree
that any indemnification payment made hereunder will be treated by the parties
on their respective Tax Returns as an adjustment to the aggregate consideration
for the shares of Common Stock of the Company acquired by the Purchaser. If,
notwithstanding such treatment by the parties, any such indemnification payment
is determined to be taxable to the indemnified party by any taxing authority,
the indemnifying party shall also indemnify the indemnified party for any Taxes
and Related Costs payable by the indemnified party by reason of the receipt of
such indemnification payment.
(f) In the event that any Legal Proceedings shall be instituted or
asserted by any Person in respect of which payment may be sought under this
Section 12D, the indemnified party shall reasonably and promptly cause written
notice of the assertion of any Legal Proceeding of which it has knowledge which
is covered by the indemnities under this Section 12D to be forwarded to the
indemnifying party; provided, however, that the failure of the indemnified party
to give such reasonable and prompt notice shall not release, waive or otherwise
offset the indemnifying party's obligations hereunder with respect thereto
except to the extent that the indemnifying party can demonstrate actual loss and
prejudice as a result of such failure. The indemnifying party shall have the
right, at its sole option and expense, to be represented by counsel of its
choice, which must be reasonably satisfactory to the indemnified party which
consent shall not be unreasonably withheld, conditioned or delayed, and to
defend against, negotiate, settle or otherwise deal with any Legal Proceeding
which relates to any Losses or Expenses indemnified against hereunder; PROVIDED,
however, that (i) prior to assuming control of such defense, the indemnifying
party shall verify in writing to the indemnified party that the indemnifying
party will be fully responsible (with no reservation of any rights) for all
Liabilities and obligations relating to such claim for indemnification and that
it will provide full indemnification with respect thereto and (ii) no settlement
shall be made without the prior written consent of the indemnified party, which
consent shall not be unreasonably withheld, conditioned or delayed. If the
indemnifying party elects to defend against, negotiate, settle or otherwise deal
with any Legal Proceeding which relates to any Losses indemnified against
hereunder, it shall within thirty (30) days (or sooner, if the nature of the
Legal Proceeding so requires) notify the indemnified party of its intent to do
so. If the indemnifying party elects not to defend against, negotiate, settle or
otherwise deal with any Legal Proceeding which relates to any Losses and
Expenses indemnified against hereunder, fails to notify the indemnified party of
its election as herein provided or contests its obligation to indemnify the
indemnified party for such Losses and Expenses under this Agreement, the
indemnified party may defend against, negotiate, settle or otherwise deal with
such Legal Proceeding. If the indemnified party defends any Legal Proceeding,
then the indemnifying party shall reimburse the indemnified party for the
reasonable Expenses of defending such Legal Proceeding upon submission of
periodic bills. The indemnified party may not settle any Legal Proceeding
without the prior written consent of the indemnifying party, which consent shall
not be unreasonably withheld, conditioned or delayed. If the indemnifying party
shall assume the defense of any Legal Proceeding, the indemnified party may
participate, at its own expense, in the defense of such Legal Proceeding;
PROVIDED, HOWEVER, such indemnified party shall be entitled to participate in
any such defense with separate counsel (other than the Nixon, Hargrave, Devans &
Doyle, LLP law firm) at the expense of the Indemnifying Party if (i) so
requested by the indemnifying party to participate or (ii) in the reasonable
opinion of counsel to the indemnified party, a conflict or potential conflict
exists between the indemnified party and the indemnifying party that would make
such separate representation advisable. The parties hereto agree to cooperate
fully with each other in connection with the defense, negotiation or settlement
of any such Legal Proceeding.
After any final judgment or award shall have been rendered by a court,
arbitration board or administrative agency of competent jurisdiction and the
expiration of the time in which to appeal therefrom,
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or a settlement shall have been consummated, or the indemnified party and the
indemnifying party shall have arrived at a mutually binding agreement with
respect to a Legal Proceeding hereunder, the indemnified party shall forward to
the indemnifying party notice of any sums due and owing by the indemnifying
party pursuant to this Agreement with respect to such matter and the
indemnifying party shall be required to pay all of the sums so due and owing to
the indemnified party by wire transfer of immediately available funds within
five business days after the date of such notice.
12E. SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or
not. In addition, and whether or not any express assignment has been made, the
provisions of this Agreement which are for the Purchaser's benefit as a
purchaser or holder of Common Stock are also for the benefit of, and enforceable
by, any Purchaser Party, including any subsequent holder of such Common Stock.
12F. SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
12G. COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, any one of which need not contain the signatures of more than
one party, and all such counterparts taken together shall constitute one and the
same Agreement.
12H. TABLE OF CONTENTS AND SECTION HEADINGS; INTERPRETATION. The table of
contents and section headings of this Agreement are inserted for convenience
only, do not constitute a part of this Agreement and are to be given no effect
in the construction or interpretation of this Agreement. The use of the word
"including" in this Agreement shall be by way of example rather than by
limitation.
12I. GOVERNING LAW; SUBMISSION TO JURISDICTION; CONSENT TO SERVICE OF
PROCESS. (a) Except as expressly provided in Section 12J, the internal law, and
not the conflict of laws principles, of the State of New York shall govern this
Agreement as well as the construction, validity and interpretation of this
Agreement and the exhibits and schedules hereto.
(b) Solely to the extent permitted by Section 12J hereof, each of
the parties hereto hereby irrevocably submit for itself or himself and its or
his property to the non-exclusive jurisdiction of any federal or state court
located within the State of New York over any Dispute (as hereinafter defined)
and each party hereby irrevocably agrees that all claims in respect of such
Dispute or any action, suit or proceeding related thereto, solely to the extent
expressly permitted by Section 12J hereof, may be heard and determined in such
courts. The parties hereby irrevocably waive, to the fullest extent permitted by
applicable law, any objection which they may now or hereafter have to the laying
of venue of any Dispute brought in such court or any defense of inconvenient
forum for the maintenance of such Dispute, provided that relief sought in any
action, suit or proceeding relating thereto is of the nature expressly permitted
by Section 12J hereof to be sought in such court. Each of the parties hereto
agrees that an Award or a judgment in any such Dispute may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
(c) Each of the parties hereto hereby consents to process being
served by any party to this Agreement in any suit, action or proceeding of the
nature expressly permitted by Section 12J hereof by the delivery or mailing of a
copy thereof; in accordance with the provisions of Section 12K.
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(d) Nothing in this Section 12I shall affect the rights of the
parties to commence any action, suit or proceeding of the nature expressly
permitted by Section 12J hereof in any other forum or to serve process in any
such action, suit or proceeding in any other manner permitted by law.
12J. ARBITRATION. (a) Any claim, dispute or other disagreement (each, a
"DISPUTE") between a Purchaser Indemnified Party, on the one hand, and the
Company or any of the Shareholders, on the other hand, arising out of or
relating to this Agreement or any of the transactions contemplated hereby shall
be finally settled by arbitration in accordance with the terms of this Section
12J; provided that any party shall in any event have the right to seek and
obtain equitable relief during the pendency of such Dispute pursuant to Section
12J(b) hereof. In the event of any Dispute, any party may serve written notice
of such Dispute on any other party and each party to such Dispute shall
undertake in good faith to resolve such Dispute. If the parties cannot agree to
resolve such Dispute within 15 days after such written notice, any party to such
Dispute may, by further written notice (the "ARBITRATION NOTICE") to the other
party, commence an arbitration proceeding by bringing the Dispute to an
arbitration panel selected as provided below. The Arbitration Notice shall be
filed simultaneously with the International Chamber of Commerce in New York, New
York, and shall contain a description of the amount in controversy, the nature
of the Dispute and the paragraph(s) of this Agreement to which such Dispute
relates. Disputes shall be decided by an arbitration panel comprised of three
arbitrators (each of whom shall be a practicing lawyer knowledgeable and
experienced in matters of corporate, mergers and acquisitions and securities
law), one arbitrator to be selected by the Purchaser Indemnified Party, a second
arbitrator to be selected by the Company, and the third arbitrator (the
"INDEPENDENT ARBITRATOR"), who will be the Chairman of the arbitration panel, to
be appointed by the first two arbitrators. In the event the first two
arbitrators fail to agree on the appointment of the Independent Arbitrator
within 15 days, the Independent Arbitrator shall be appointed by the
International Chamber of Commerce in New York, New York. In the event that any
arbitrator shall resign, be unable or otherwise fail to perform his or her
duties, each party shall immediately notify the other parties of such
resignation, inability or failure, and a replacement shall immediately be
selected by the party who selected such arbitrator in the first instance, or, if
the arbitrator to be replaced is the Independent Arbitrator, then the parties
shall attempt in good faith to appoint a mutually agreeable replacement
Independent Arbitrator. If the parties fail to agree on such replacement within
15 days, either party may request that the International Chamber of Commerce in
New York, New York appoint such replacement Independent Arbitrator. The
arbitration panel shall conduct the arbitration in accordance with the Rules of
Arbitration of the International Chamber of Commerce then in effect, except to
the extent such rules are inconsistent with the provisions of this Section 12J.
The parties shall prepare in writing a statement of their positions, together
with counterclaims, with supporting facts, data, and affidavits, if any, for the
arbitration panel and shall submit such statement to the arbitration panel
within 15 days after it is selected, but, in any event, within 60 days after
service of the Arbitration Notice. The arbitration panel shall give all parties
the opportunity to make an oral presentation to the arbitration panel in the
presence of the other party if either party so requests. The parties shall have,
for a period of 180 days after service of the Arbitration Notice (the "DISCOVERY
PERIOD"), all rights of discovery provided by the New York Civil Practice Law
and Rules then obtaining, except, unless otherwise agreed, that all responses to
discovery requests shall be served within 10 days of such discovery request, and
no discovery request may be served after the date 10 days before the termination
of the Discovery Period. Subject to the proviso in the first sentence of this
Section 12J(a) and to Section 12J(b) hereof, the arbitration panel shall assume
exclusive jurisdiction over the Dispute, may order interim equitable relief
(which shall be specifically enforceable as if it were a final Award, as
hereinafter defined), and shall be required to make a final binding
determination (the "AWARD"). The Award shall not be subject to appeal to or
review by any court or administrative body except as set forth in Section 10(a)
of the Federal Arbitration Act, codified as 9 U.S.C.A. ss.10(a) (West Supp.
1997). The Award shall determine (i) whether each party's obligations under this
Agreement were met and
38
<PAGE>
(ii) what damages or remedies (which may include final equitable relief) are due
to the Purchaser Indemnified Party, on the one hand, or the Company or
Shareholder on the other hand, under the terms of this Agreement. The agreement
to arbitrate contained in this Section 12J shall be specifically enforceable
under the prevailing arbitration law, and shall survive termination of this
Agreement. Judgment upon the Award rendered by the arbitration panel may be
entered in accordance with applicable law in any court having jurisdiction
therefor. Each party shall bear its own costs and expenses for arbitration,
subject to reimbursement as determined by the arbitration panel in the Award.
Arbitration shall, unless the parties otherwise agree in writing, take place in
New York, New York.
(b) Nothing contained in this Section 12J shall preclude, or be
deemed, construed or interpreted to preclude, any party from seeking interim
equitable relief from a court of competent jurisdiction against the other party,
where circumstances so require, except that no party shall be entitled to seek a
stay of any arbitration proceeding brought hereunder. The parties agree that,
upon the application of any of the parties, and whether or not an arbitration
proceeding has yet been initiated pursuant to this Section 12J, all courts
having jurisdiction are hereby authorized to (i) issue and enforce in any lawful
manner such temporary restraining orders, preliminary injunctions and other
interim measures of relief as may be necessary to prevent harm to a party's
interests or as otherwise may be appropriate pending the conclusion of
arbitration proceedings pursuant to this Section 12J, and/or (ii) enter into and
enforce in any lawful manner such judgments for permanent equitable relief as
may be necessary to prevent harm to a party's interests or as otherwise may be
appropriate following the issuance of the Award.
12K. NOTICES. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when delivered personally
to the recipient, sent to the recipient by reputable express courier service
(charges prepaid) or mailed to the recipient by certified or registered mail,
return receipt requested and postage prepaid. Such notices, demands and other
communications shall be sent to the Purchaser and to the Company at the
addresses indicated below:
If to the Purchaser:
Coflexip
23 Avenue de Neuilly
75116 Paris, France
Attention: Chairman
Facsimile No.: 33 1 40 67 60 03
with a copy to:
Coflexip
23 Avenue de Neuilly
75116 Paris, France
Attention: General Counsel
Facsimile No.: 33 1 40 67 60 07
and to:
Nixon, Hargrave, Devans & Doyle LLP
39
<PAGE>
437 Madison Avenue
New York, New York 10021
Attention: Richard F. Langan, Jr.
Facsimile No.: (212) 940-3111
If to the Company:
Cal Dive International, Inc.
13430 Northwest Freeway
Suite 350
Houston, Texas 77040
Attention: Mr. Owen Kratz, President
Facsimile No: (713) 690-2204
with a copy to:
Cal Dive International, Inc.
13430 Northwest Freeway
Suite 350
Houston, Texas 77040
Attention: Mr. Andrew C. Becher, General Counsel
Facsimile No.: (713) 690-2204
If to the Shareholders:
Mr. Owen Kratz
c/o Cal Dive International, Inc.
13430 Northwest Freeway
Suite 350
Houston, Texas 77040
Facsimile No: (713) 690-2204
and
First Reserve Partnerships
475 Steamboat Road
Greenwich, Connecticut 06830
Attn: William E. Macaulay
Facsimile No: (203) 661-6729
with a copy to:
Simpson, Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attn: Robert L. Friedman
Facsimile No: (212) 455-2502
or to such other address or to the attention of such other Person as the
recipient party has specified by prior
40
<PAGE>
written notice to the sending party.
12L. FURTHER ASSURANCES. The Company, the Shareholders and the Purchaser
each agree to execute and deliver such other documents or agreements as may be
reasonably necessary or desirable for the implementation of this Agreement and
the consummation of the transactions contemplated hereby.
12M. INTERPRETATION. The parties acknowledge and agree that: (i) each
party and its counsel reviewed and negotiated the terms and provisions of this
Agreement and have contributed to its revision; (ii) the rule of construction to
the effect that any ambiguities are resolved against the drafting party shall
not be employed in the interpretation of this Agreement; and (iii) the terms and
provisions of this Agreement shall be construed fairly as to all parties hereto,
regardless of which party was generally responsible for the preparation of this
Agreement.
13. CONSENT TO SALE. The Executives, individually and as Trustees, Gordon
Ahalt and the Funds hereby consent to the sale of Common Stock provided for
herein, and hereby waive any prior rights they may have under all documents to
purchase such Common Stock.
14. TERMINATION OF AGREEMENT. This Agreement may be terminated prior to
the Closing without liability of any party as follows:
(a) At the election of either Purchaser, the Company or Shareholders, on
or after April 10, 1997 if the Closing shall not have occurred by the close of
business on such date;
(b) by mutual written consent of the Purchaser, the Company and the
Shareholders;
(c) by either the Purchaser, the Company or the Shareholders, if there
shall be in effect a final nonappealable Order of a Governmental Body of
competent jurisdiction restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated hereby;
(d) by the Purchaser if any of the conditions set forth in Section 2
hereof becomes incapable of fulfillment and is not waived by the Purchaser; and
(e) by the Company and the Shareholders, if any of the conditions set
forth in Section 3 hereof becomes incapable of fulfillment and is not waived by
the Company and the Shareholders, on behalf of the Shareholders.
15. SURVIVAL AFTER TERMINATION. If this Agreement is terminated in
accordance with Section 14 and the transactions contemplated hereby are not
consummated, this Agreement shall become null and void and of no further force
and effect, except (i) for this Section 15, (ii) for the provisions of Section 9
and (iii) that the termination of this Agreement for any cause shall not relieve
any party hereto from any liability the benefit of which at the time of
termination had already accrued to any other party hereto or which thereafter
may accrue in respect of any act or omission of such party prior to such
termination it being acknowledged by all parties hereto that for all purposes at
the Closing, all documents (including this Agreement) will be deemed to have
been executed simultaneously.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
first written above.
COFLEXIP CAL DIVE INTERNATIONAL, INC.
41
<PAGE>
By: ________________________________ By: ________________________________
Pierre Marie Valentin, Chairman and Owen Kratz, President
Chief Executive Officer
____________________________________
Gordon F. Ahalt
EXECUTIVES
____________________________________
Gerald G. Reuhl
____________________________________
Owen Kratz
____________________________________
S. James Nelson
42
<PAGE>
SHAREHOLDERS
____________________________________
Jon Buck
____________________________________
Rodd Cairns
____________________________________
Randy Drewry
____________________________________
Mike Middleton
____________________________________
Shane Diffley
____________________________________
Scott Naughton
____________________________________
Jimmy Nichols
____________________________________
Hypolite Leger
____________________________________
Jeffrey Davis
____________________________________
Jack Harbin
____________________________________
Jack Lounsbury
43
<PAGE>
____________________________________
Jon Regh
____________________________________
Marty Schwab
____________________________________
Jerald Lowrimore
____________________________________
Michael Ehlers
____________________________________
Keith Freeman
44
<PAGE>
FIRST RESERVE SECURED ENERGY
ASSETS FUND, LIMITED PARTNERSHIP
By: FIRST RESERVE CORPORATION,
as General Partner
By: ________________________________
David H. Kennedy, Managing Director
FIRST RESERVE FUND V, LIMITED
PARTNERSHIP
By: FIRST RESERVE CORPORATION,
as General Partner
By: ________________________________
David H. Kennedy, Managing Director
FIRST RESERVE FUND V-2, LIMITED
PARTNERSHIP
By: FIRST RESERVE CORPORATION,
as General Partner
By: ________________________________
David H. Kennedy, Managing Director
FIRST RESERVE FUND VI, LIMITED
PARTNERSHIP
By: FIRST RESERVE CORPORATION,
as General Partner
By: ________________________________
David H. Kennedy, Managing Director
45
EXHIBIT 10.2
BUSINESS COOPERATION AGREEMENT
This Business Cooperation Agreement, dated as of April 11, 1997 (this
"Agreement"), is between Cal Dive International, Inc., a Minnesota corporation
having its principal office at 13430 Northwest Freeway, Suite 350, Houston,
Texas 77040-6013 ("Cal Dive"), and Coflexip Stena Offshore Inc., a Texas
corporation having its principal office at 7660 Woodway, Suite 390, Houston,
Texas 77063 ("CSO").
Whereas Cal Dive and CSO desire to form a joint venture entity to combine
the parties' respective abilities to enable the parties, through such entity, to
pursue opportunities in the offshore oil and gas industry in the Gulf of Mexico
and Caribbean in connection with EPIC Projects (as hereinafter defined) for
which the parties would not be able to effectively compete in their individual
capacities; and
Whereas the parties wish to set out the terms, conditions, and provisions
pursuant to which they will establish and interface with the joint venture
entity and each other;
Now, therefore, in consideration of the various covenants and agreements of
the parties to and with each other set forth herein, Cal Dive and CSO, intending
to be legally bound, agree as follows:
1. DEFINITIONS. The following capitalized terms shall have the meanings ascribed
to them below:
"Affiliate" of a Person means any Person who directly or indirectly
controls, is under common control with, or is controlled by, such Person, where
"control" means the power and ability to direct the management and policies of
the controlled Person through ownership of voting shares of the controlled
Person or by contract or otherwise.
"Bankruptcy" shall mean (a)the affected Person makes an assignment for the
benefit of creditors, commences (as the debtor) a case in bankruptcy, or
commences (as the debtor) any proceeding under any other insolvency law; (b) a
case in bankruptcy or any proceeding under any other insolvency law is commenced
against such Person (as the debtor) and a court having jurisdiction in the
premises enters a decree or order for relief against such Person as the debtor
in such case or proceeding, and such case or proceeding is continued for sixty
(60) days, or such Person consents to or admits the material allegations against
it in any such case or proceeding; (e) a trustee, receiver or agent (however
named) is appointed or authorized to take charge of substantially all of the
property of such Person for the purpose of enforcing a lien against such
property or for the purpose of general administration of such property for the
benefit of creditors, and such appointment or authorization continues without
being stayed or dismissed for a period of sixty (60) days; or (d) any "event of
bankruptcy" described in Section 18-304 of the Delaware Limited Liability
Company Act, 6 DEL. C. ss. 18-101, ET SEQ., as amended from time to time.
"Board" means the Board of Managers or a comparable body of the Joint
Venture Entity or, if the Joint Venture Entity is formed as a limited
partnership pursuant to paragraph 2(a) of this Agreement, the Board of Managers
of the general partner of the Joint Venture Entity.
"Cal Dive Services" means those services described on Schedule A-1 attached
hereto which are to be provided to the Joint Venture Entity by Cal Dive and/or
its Affiliates.
"Controlling Interest" means an interest conferring on the Person holding
such interest the power and ability to direct the management and policies of the
controlled enterprise through ownership of voting shares of
<PAGE>
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the controlled enterprise or by contract or otherwise. For purposes hereof, no
such interest of 5% or less shall be deemed to be a Controlling Interest.
"CSO Services" means those services described on Schedule A-2 attached
hereto which are to be provided to the Joint Venture Entity by CSO and/or its
Affiliates.
"EPIC Projects" means projects, generally but not necessarily involving
engineering, procurement, installation and commissioning, that require at least
one Cal Dive Service and one CSO Service where the aggregate contract value of
the combined Cal Dive Services and CSO Services involved in the project is at
least $25 million, and any such other projects as the parties may agree as being
within the intended scope of the Joint Venture Entity.
"Expenses" means any and all notices, actions, suits, proceedings, demands,
assessments, judgments, costs, penalties and expenses, including attorneys' and
other professionals' fees and disbursements.
"Formation Documents" means a Certificate of Formation, Limited Liability
Company Agreement and such other certificates, affidavits, agreements or other
documents which are necessary to cause the Joint Venture Entity to be duly
formed and qualified to do business in such jurisdictions in which qualification
is required based on the business expected to be conducted by the Joint Venture
Entity. If the Joint Venture Entity is formed as a limited partnership pursuant
to paragraph 2(a) of this Agreement, the Formation Documents shall include a
Certificate of Limited Partnership and Limited Partnership Agreement.
"Joint Venture Entity" means the Delaware limited liability company or
limited partnership to be formed pursuant to Section 2 of this Agreement.
"Legal Proceeding" means any judicial, civil, criminal, equitable,
administrative or arbitral actions, suits, charges, complaints, demands,
proceedings (public or private), claims or governmental proceedings.
"Lien" means, with respect to any property or asset, any mortgage, lien,
pledge, deed of trust, charge, security interest, encumbrance or other adverse
claim of any kind with respect to such property or asset.
"Losses" means any and all losses, liabilities, obligations, damages,
deficiencies, costs, expenses and amounts paid in settlement.
"Member" means Cal Dive, CSO and any other holder of equity interests in the
Joint Venture Entity.
"Percentage Interest" means the respective percentage ownership interest of
each Member in the Joint Venture Entity and shall initially mean with respect to
Cal Dive and CSO the Percentage Interests set forth on Schedule B attached
hereto.
"Person" means any individual, corporation, partnership, firm, joint
venture, association, limited liability company, trust, unincorporated
organization or other entity.
"Restricted Period" means the period commencing on the earlier of the
formation of the Joint Venture Entity or June 30, 1997 and ending on the date
this Agreement terminates.
"Services" means the Cal Dive Services and the CSO Services, collectively.
<PAGE>
- 3 -
"Technology" means the proprietary processes, improvements, trade secrets,
designs, data, plans, specifications, know-how, computer software, operating
experience and other information, whether patented or unpatented, copyrighted or
uncopyrighted that is presently owned by Cal Dive or CSO or may be developed by
Cal Dive, CSO or the Joint Venture Entity in connection with the transactions
contemplated by this Agreement.
"Territory" means the Gulf of Mexico (from both the United States and
Mexican territory including adjacent territorial waters and the continental
shelf), the Caribbean and such additional geographic areas as Cal Dive and CSO
shall mutually agree in writing.
"Transfer" means to encumber, hypothecate or transfer (including a transfer
pursuant to a foreclosure sale of any of the assets of a Member or in connection
with a liquidation of the assets of a Member in connection with a Bankruptcy),
by sale, gift, assignment, pledge, operation of law or otherwise.
2. THE JOINT VENTURE ENTITY.
(a) FORMATION. As soon as practicable after the execution of this Agreement
but in any event no later than June 30, 1997, Cal Dive and CSO shall cause the
Joint Venture Entity to be formed as a Delaware limited liability company under
a name mutually agreed to by the parties and shall cause the Formation Documents
to be duly executed and filed as necessary. The Formation Documents shall be
governed by Delaware Law without regard to its conflicts of laws principles. The
provisions of this Agreement shall be incorporated into the Formation Documents
to the extent necessary to make such provisions enforceable. To the extent that
it is necessary to form the Joint Venture Entity as a partnership for state or
foreign income tax purposes, the parties agree that the Joint Venture Entity
will be formed as a Delaware limited partnership in which each of the parties
will be limited partners and a newly-formed Delaware limited liability company
will be the general partner owning a 1% interest in the Joint Venture Entity. In
such event, the governance provisions in this Agreement shall be incorporated
into the organizational documents of the general partner and shall control the
general partner's management of the Joint Venture Entity.
(b) CAPITAL CONTRIBUTIONS. Cal Dive and CSO shall each contribute to the
Joint Venture Entity such capital and/or property as shall be mutually agreed by
the parties and described in the Formation Documents, and in consideration
therefor the parties shall receive the respective Percentage Interests set forth
on Schedule B. The value of the capital and/or property contributed to the Joint
Venture Entity by each of Cal Dive and CSO shall have a fair market value (net
of any liabilities to which such capital or property is subject which are
assumed by the Joint Venture Entity) equal to their respective Percentage
Interests multiplied by the fair market value of all capital and/or property
contributed to the Joint Venture Entity by Cal Dive and CSO collectively. Except
as mutually agreed by the parties and disclosed in the Formation Documents, Cal
Dive and CSO shall have good and marketable title to the capital and/or property
contributed by each of them to the Joint Venture Entity, and such capital and/or
property shall be contributed to the Joint Venture Entity free and clear of all
Liens other than, in the case of Cal Dive, Liens in favor of Fleet Capital
Corporation ("Fleet") in connection with that certain Loan and Amended and
Restated Security Loan Agreement dated as of May 23, 1995 between Cal Dive and
Fleet, as the same may hereafter be amended, modified or supplemented from time
to time. Cal Dive and CSO may make future contributions to the Joint Venture
Entity to the extent agreed in writing between the parties. In the event that
the Board determines that additional capital is necessary to operate the Joint
Venture Entity and one party contributes additional capital but the other does
not, the Percentage Interests of the parties shall be adjusted proportionately
based on the additional amount contributed by the party and the agreed value of
the capital and property contributed to the Joint Venture Entity prior to such
additional contribution.
<PAGE>
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(c) GOVERNANCE. The Joint Venture Entity shall be governed by the Board. The
Board shall initially consist of two members, with one member being appointed by
each of Cal Dive and CSO. The Board may increase or decrease its size at any
time; provided, the Board shall at all times consist of an even number of
members and each of Cal Dive and CSO shall at all times be entitled to appoint
an equal number of members to the Board. The Persons appointed as members of the
Board shall be officers or employees of Cal Dive, CSO or their Affiliates. A
majority of the Board shall constitute a quorum for the conduct of business and
the affirmative vote of a majority of the Board members present at a meeting at
which a quorum is present shall be required to take action by the Board except
as provided below:
(i) A majority of the members of the Board appointed by Cal Dive or CSO
shall have the power to authorize and take such actions as are necessary to
cause the Joint Venture Entity to enforce any rights it has against CSO or Cal
Dive, respectively; and
(ii) Contracts between the Joint Venture Entity and a Person relating to Cal
Dive Services and contracts between the Joint Venture Entity and a Person
relating to CSO Services, in each case after complying with paragraph 3(c) of
this Agreement, may be authorized by a majority of the members of the Board
appointed by CSO or Cal Dive, respectively.
(d) TAX TREATMENT. Cal Dive and CSO agree to take all actions, including but
not limited to making such elections and including appropriate provisions in the
Formation Documents, which are necessary to cause the Joint Venture Entity to be
taxed as a partnership for federal, state (where possible) and foreign income
tax purposes.
(e) DISTRIBUTION. The Formation Documents shall require that, unless
otherwise unanimously agreed by the Members, the Joint Venture Entity must make
distributions at such times and in such amounts as shall permit the Members to
satisfy their respective tax obligations resulting from income or gain of the
Joint Venture Entity allocated to them. The Joint Venture Entity shall make such
other distributions as shall be determined from time to time by the Board. All
distributions shall be allocated between or among the Members based on the
respective Percentage Interests of the Members.
(f) FISCAL YEAR. Cal Dive and CSO agree to take all actions necessary to
cause the fiscal year end of the Joint Venture Entity to be December 31st of
each year.
(g) DURATION. The duration of the Joint Venture Entity shall be perpetual or
for such limited period as the parties may mutually agree; provided, that upon
the expiration or termination of this Agreement pursuant to Section 5 hereof and
after such period of time as may be required for the Joint Venture Entity to
perform or complete contracts entered into or undertaken prior to the expiration
or termination of this Agreement, Cal Dive and CSO each agree to execute and
file or cause to be filed such documents as are necessary to dissolve the Joint
Venture Entity and its general partner, if applicable.
(h) DISSOLUTION. Upon the dissolution of the Joint Venture Entity its assets
shall be liquidated and distributed to the Members as provided in the Formation
Documents. The Formation Documents shall provide for the distribution in-kind to
Cal Dive or CSO, upon their request and provided sufficient assets are
available, of any assets contributed to the Joint Venture Entity by Cal Dive or
CSO, respectively, as described in the Formation Documents. Assets distributed
in-kind shall be treated as a distribution equal to the fair market value of the
asset on the date of distribution as determined by an independent appraiser
selected the Board having expertise in valuing the type of asset being
distributed (an "Independent Appraiser"). If there are not sufficient assets of
the Joint Venture Entity to distribute assets in-kind as provided by this
paragraph, Cal Dive and CSO
<PAGE>
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shall each have the option to purchase any assets contributed by them to the
Joint Venture Entity pursuant to this Agreement for the fair market value of
such assets as of the date of purchase as determined by an Independent
Appraiser.
(i) TRANSFER RESTRICTIONS. The parties agree that the purpose for using the
Joint Venture Entity to carry out the activities contemplated by this Agreement
is to limit the liability of the parties in connection with such activities and
to provide the parties with favorable tax treatment for income resulting from
such activities. Because of the personal nature of the Services to be provided
to the Joint Venture Entity by the parties and the importance to the Joint
Venture Entity of its relationship with each of the parties, the parties agree
to cause the Formation Documents to contain prohibitions on transfer of
interests in the Joint Venture Entity and the general partner, if applicable
(collectively, the "Interests"), except in accordance with the following
provisions: (i) an option provision pursuant to which the Joint Venture Entity
and the non-transferring Member have an option to purchase any Interests for the
book value of such Interests upon the Bankruptcy of the holder of such Interests
or the occurrence of any event which could result in an involuntary Transfer of
such Interests; (ii) a provision granting Coflexip, a French corporation which
is an Affiliate of CSO ("Coflexip"), and/or its Affiliates the right to purchase
Cal Dive's Interests under certain circumstances as provided in Section 10.2 of
that certain Shareholders Agreement dated as of the date hereof among Cal Dive,
Coflexip and the other shareholders of Cal Dive; or (iii) a provision permitting
a party to Transfer its Interests after complying with the following procedures:
(A) a party proposing to Transfer its Interests (the "Transferring Party") must
give the other party (the "Non-Transferring Party") written notice of such
intention and the price at which it proposes to Transfer its Interests and such
other material terms regarding such Transfer as may then be in the possession of
the Transferring Party; (B) the parties will negotiate in good faith for a
period of up to one year to reach agreement on the terms and conditions of the
proposed Transfer (including, without limitation, if necessary, the survival
following the Transfer of certain obligations of the Transferring Party under
this Agreement) while using their reasonable best efforts during such
negotiations to maintain the value of the Joint Venture Entity; (C) if the
parties cannot reach agreement within such one-year period, either party may,
within ten (10) days following the end of such period, offer to sell such
party's Interests to the other party, which offer shall be in writing and shall
specifically reference this clause (iii) of this paragraph (2)(i); (D) if such
offer is not accepted by the other party within ten (10) days, the offering
party shall have the right, exercisable in writing for a period of ten (10)
days, to purchase the other party's Interests at the price for which it offered
to sell its Interests to the other party (adjusted to take into account the
different Percentage Interests of the respective parties); (E) if an offer to
sell is accepted or the offering party exercises its right to purchase pursuant
to this paragraph, the transaction shall be completed within thirty (30) days of
such acceptance or exercise; (F) if no offer to sell is accepted and no party
exercises its right to buy, the Non-Transferring Party shall have the right, for
a period of ten (10) days following the last applicable time period above (i.e.,
ten (10) days after the end of the one-year period if no offer is made or thirty
(30) days after the end of the one-year period if an offer is made), to
terminate this Agreement pursuant to paragraph 5(b); and (G) if this Agreement
is not terminated by the Non-Transferring Party pursuant to clause (iii)(F)
above, the Transferring Party may Transfer its Interests at a price no less than
the price specified in the notice given pursuant to clause (iii)(A) above. The
Formation Documents shall require that a party's interest in the general partner
of the Joint Venture Entity, if applicable, be Transferred simultaneously with a
party's interest in the Joint Venture. Upon a Transfer by a party of its
Interests, such party's rights and obligations under this Agreement and the
Formation Documents shall cease except for the obligations of such party under
the paragraphs referenced in paragraph 5(c) of this Agreement. The Person to
whom a party assigns its Interests shall have no rights (i) under this Agreement
except to the extent that such rights are assigned to such assignee in
compliance with paragraph 6(f) hereof, or (ii) under the Formation Documents,
other than to share in profits and losses, receive distributions and receive
allocations of income, gain, loss, deduction or credit to the extent assigned,
unless such Person is admitted as a Member with the prior written consent of the
other Member or Members of the Joint Venture Entity.
<PAGE>
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(j) DEADLOCK. If the Board has been unable to act for a period of at least
six (6) months as a result of a dispute concerning the management of the Joint
Venture Entity which has not been resolved pursuant to subparagraph 4(j)(i)
hereof, either party may offer to sell such party's Interests to the other
party. Any such offer shall be in writing and shall specifically reference this
paragraph 2(j). If such offer is not accepted by the other party within fifteen
(15) days, the offering party shall have the right, exercisable in writing for a
period of fifteen (15) days, to purchase the other party's Interests at the
price for which it offered to sell its Interests to the other party (adjusted to
take into account the different Percentage Interests of the respective parties).
If an offer to sell is accepted or the offering party exercises its right to
purchase pursuant to this paragraph, the transaction shall be completed within
thirty (30) days of such acceptance or exercise. Upon a Transfer by a party of
its Interests pursuant to this paragraph 2(j), such party's rights and
obligations under this Agreement and the Formation Documents shall cease except
for the obligations of such party under the paragraphs referenced in paragraph
5(c) of this Agreement.
3. OPERATION OF THE JOINT VENTURE ENTITY.
(a) EPIC PROJECTS. The primary purpose of the Joint Venture Entity is to
procure contracts to undertake EPIC Projects in the Territory. Unless otherwise
negotiated and mutually agreed on a projectby-project basis, the Joint Venture
Entity shall bid as the prime contractor for such EPIC Projects and, subject to
paragraph 3(c) below, Cal Dive and CSO shall subcontract with the Joint Venture
Entity to provide, respectively, the Cal Dive Services and CSO Services required
in connection with such EPIC Projects. With respect to each EPIC Project for
which the Joint Venture Entity desires to compete, the Joint Venture Entity
shall request a bid from Cal Dive for the performance of the Cal Dive Services
required by such EPIC Project and shall request a bid from CSO for the
performance of the CSO Services required by such EPIC Project. Cal Dive and CSO
shall prepare and submit to the Joint Venture Entity bids for the Services based
on the amounts regularly charged by them for comparable Services which they
provide to their other customers, taking into account the geographic area in
which the Services are to be performed, the scope of the Services to be
performed and such other relevant pricing factors. Each party shall, upon the
written request of the Joint Venture Entity, provide the Joint Venture Entity
with information documenting that the amounts included in the bids submitted to
the Joint Venture Entity are prepared on the basis set forth above. The Joint
Venture Entity may accept such bids or may contract with other Persons pursuant
to paragraph 3(c) below.
(b) OTHER PROJECTS. When commercially practicable, the Joint Venture Entity
may decide from time to time to seek to enter into contracts to provide Services
or engage in other business activities in geographic areas outside the Territory
or may seek to enter into contracts for projects within the Territory which are
not EPIC Projects. With respect to such projects, Cal Dive shall have the
option, but shall not be obligated, to provide the Cal Dive Services required by
such projects and CSO shall have the option, but shall not be obligated, to
provide the CSO Services required by such projects. The parties contemplate that
subcontracts between the Joint Venture Entity and the parties will be entered
into in the same manner as provided in paragraph 3(a) above except that the
parties are not required to bid for such subcontracts. The Board shall, no less
frequently than once every six (6) months, consider opportunities presented by
projects outside the Territory having a scope comparable to EPIC Projects and
shall solicit input from Cal Dive and CSO regarding any such opportunities. The
Joint Venture Entity shall not enter into any projects outside the Territory
unless specifically approved by the Board.
(c) CONTRACTING WITH OTHERS. The Joint Venture Entity shall be free to
contract with Persons other than Cal Dive and CSO for the performance of
Services in connection with EPIC Projects or other projects if either Cal Dive
or CSO, as applicable, is not willing to provide the Services on terms and
conditions which are as favorable to the Joint Venture Entity as those offered
by such other Persons. Prior to contracting with a
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Person other than Cal Dive or CSO for the performance of Services, the Joint
Venture Entity shall provide Cal Dive or CSO, as the case may be, with the terms
and conditions which the Joint Venture Entity is proposing to accept from a
third Person (the "Proposed Terms"). The Proposed Terms shall relate only to the
Services or the Services shall be separately valued in the Proposed Terms. Cal
Dive or CSO shall have the option of performing the Services on the same terms
and conditions as the Proposed Terms or upon such other arm's-length terms and
conditions as may be mutually agreed to in writing by the Joint Venture Entity
and Cal Dive or CSO. If Cal Dive or CSO does not exercise its right to perform
the Services in writing within ten (10) days after receiving the Proposed Terms
from the Joint Venture Entity, the Joint Venture Entity shall be free to obtain
the Services from another Person on terms and conditions which are no more
favorable to the Person providing such Services than the Proposed Terms.
(d) INTERNAL CONTRACTING. Notwithstanding paragraph 3(c), the Joint Venture
Entity shall not contract with CSO to perform Cal Dive Services and shall not
contract with Cal Dive to perform CSO Services. Notwithstanding any provision of
this Agreement, the Joint Venture Entity shall have no obligation to contract
with Cal Dive or CSO for any Services which it is capable of performing itself.
Notwithstanding anything in this Agreement to the contrary, all transactions
between the Joint Venture Entity and either party or an Affiliate of either
party shall be no less favorable to the Joint Venture Entity than would be the
case with unrelated entities in arm's-length transactions. Transactions between
the Joint Venture Entity and a party or an Affiliate of a party shall be
presumed to be in compliance with the foregoing if such transaction or contract
was approved by the Board in accordance with paragraph 2(c) after disclosure of
all material facts as to the interest of the party or Affiliate in such
transaction.
(e) SERVICES AGREEMENTS. Each of Cal Dive and CSO shall enter into a service
agreement with the Joint Venture Entity to provide management, administrative,
support and other services to the Joint Venture Entity, in each case covering
such services and for the compensation as the parties shall agree. The parties
may provide the Joint Venture Entity with additional services at the Joint
Venture Entity's request on such terms and conditions as a third party would be
willing to provide such services to the Joint Venture Entity.
(f) TERMS OF CONTRACTS. The subcontracts between each of Cal Dive and CSO
and the Joint Venture Entity which relate to the performance of Services by Cal
Dive or CSO for the Joint Venture Entity shall be governed by the terms and
conditions of the prime contract between the Joint Venture Entity and the
customer of the Joint Venture Entity (including the terms regarding
indemnification and governing law); provided, that if Cal Dive or CSO contracts
with the Joint Venture Entity pursuant to paragraph 3(c) hereof, Cal Dive or
CSO, as the case may be, may elect to have the subcontract governed by the terms
and conditions of the Proposed Terms to the extent that they differ from the
terms and conditions of the prime contract.
(g) INSURANCE OF JOINT VENTURE ENTITY. The Joint Venture Entity shall carry,
with a reasonably satisfactory insurance company or companies, insurance
coverage at its expense with such limits as are customary in the industry in
which it conducts business.
4. COVENANTS OF CAL DIVE AND CSO.
(a) RESTRICTION ON THE PERFORMANCE OF SERVICES. Each of Cal Dive and CSO
acknowledges that the following restrictions are essential to permit the Joint
Venture Entity to function as intended by the parties and to prevent the parties
from usurping opportunities intended to be pursued by the Joint Venture Entity.
During the Restricted Period, each of Cal Dive and CSO agrees that it will not
(i) perform Services within the
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Territory or contract to perform Services within the Territory, in each case in
connection with any EPIC Project, (ii) permit any of its Affiliates or Persons
in which it owns a Controlling Interest to perform such Services within the
territory in connection with any EPIC Project, or (iii) except for such
relationships as they exist as of the date hereof, become a shareholder,
partner, member, owner, principal, consultant or agent of any Person engaged in
performing any Services that are already performed by the other party within the
Territory (whether or not in connection with an EPIC Project); provided, that
(A) Cal Dive, its Affiliates and Persons in which it owns a Controlling Interest
are permitted to perform Cal Dive Services for the Joint Venture Entity in
connection with EPIC Projects, (B) CSO, its Affiliates and Persons in which it
owns a Controlling Interest are permitted to perform CSO Services for the Joint
Venture Entity in connection with EPIC Projects, (C) Cal Dive and CSO may
complete the performance of any Services within the Territory which they are
obligated to perform under contracts existing prior to the Restricted Period,
and (D) Cal Dive and CSO will not be prohibited from bidding for and performing
services within the Territory under subcontracting arrangements in connection
with any EPIC Project where the Joint Venture Entity, despite the reasonable
best efforts of the Joint Venture Entity and the parties, was unsuccessful in
obtaining a contract for such EPIC Project, did not have the opportunity to bid
for such EPIC Project, elected not to bid for such EPIC Project, or under such
other circumstances as the parties may agree, provided that in each such case
the party seeking to bid for such subcontracting arrangements first notifies the
other party of its intention to do so and such other party consents in writing
thereto within fifteen (15) days after receipt of such notice, which consent
shall not be unreasonably withheld, conditioned or delayed. The foregoing
restriction is specifically not intended to restrict the performance, or
contracting for the performance, of Services outside the Territory or to
restrict Cal Dive or CSO from performing or contracting to perform Services
within the Territory other than in connection with EPIC Projects.
(b) RESTRICTION ON ACTIVITIES IN THE NORTH SEA AND BRAZIL. Cal Dive agrees
that if it becomes aware of any activities involving Services in the North Sea
or Brazil that it will present such opportunities to and discuss such
opportunities with CSO prior to taking any actions in pursuit of such
opportunities.
(c) COOPERATION. When Cal Dive is engaged in any project where it is
required to provide CSO Services, Cal Dive shall offer CSO the opportunity to
provide such CSO Services in connection with such project. When CSO is engaged
in any project where it is required to provide Cal Dive Services, CSO shall
offer Cal Dive the opportunity to provide such Cal Dive Services in connection
with such project. When a party (the "Offeror") is required to provide the other
party (the "Offeree") with the opportunity to provide Services pursuant to this
paragraph 4(c). The Offeree shall provide the Services to the Offeror at
arm's-length rates determined as follows: the Offeror shall provide the Offeree
with the most favorable (to the Offeror) terms and conditions which the Offeror
is able to obtain from another provider (which terms and conditions relate only
to the Services to be offered to the Offeree or which separately value such
Services), and the Offeree shall have the option of providing the Services on
the same terms and conditions as those forwarded to the Offeree with the offer
or upon such other arm's-length terms and conditions as may be mutually agreed
to in writing by the Offeror and the Offeree. If the Offeree does not exercise
its right to provide the Services in writing within ten (10) days after
receiving the offer, the Offeror shall be free to obtain the Services from
another Person on terms and conditions which are no more favorable to the Person
providing such Services than the terms and conditions offered to the Offeree.
(D) TECHNOLOGY.
(i) Technology owned by a party prior to this Agreement or developed by a
party in connection with this Agreement shall remain the sole and exclusive
property of such party unless sold or otherwise transferred for consideration to
the Joint Venture Entity. Without limiting the generality of the foregoing, any
Technology developed by a party in connection with providing Services to the
Joint Venture Entity shall be the sole and exclusive property of such party, and
the Joint Venture Entity shall have no interest therein.
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(ii) Technology developed independently by the Joint Venture Entity shall be
the sole and exclusive property of the Joint Venture Entity and neither party
shall have any interest therein.
(iii) Technology developed in connection with this Agreement jointly by the
parties or by one or both parties and the Joint Venture shall, to the extent
possible, be assigned to the party making the most substantial contribution to
the development of such Technology; provided, however, the party to whom such
Technology is assigned shall grant a perpetual, royalty-free, non-exclusive
license to use such Technology to the Joint Venture Entity if it independently
made a material contribution to the development of the Technology and to the
other party if it made such a contribution. The parties and the Joint Venture
Entity shall make such assignments and execute and deliver such other documents
as. shall be necessary to implement the provisions of this subparagraph.
(iv) This paragraph 4(d) shall be subject to the terms of any License
Agreement or any other contract between the Joint Venture Entity and either
party or between the parties, and in the event of any conflict between the terms
of such License Agreement or other contract and this Agreement, the terms of
such License Agreement or other contract shall control.
(v) Upon the request by either party, the other party shall execute and
deliver, and shall cooperate to cause the Joint Venture Entity to execute and
deliver, a secrecy agreement restricting the release of Technology between
themselves and/or third parties in connection with the business activities
contemplated by this Agreement.
(e) CONFIDENTIALITY. Except as otherwise agreed by the parties in writing,
the parties agree that, at all times during the term of this Agreement and for a
five-year period following termination or expiration hereof, either party
receiving information (the "Receiving Party") from the other party shall keep
completely confidential, shall not publish or otherwise disclose and shall not
use, directly or indirectly, for any purpose any information furnished to it by
the other party (the "Disclosing Party") pursuant to this Agreement or otherwise
relating to any transaction contemplated hereby, except to the extent that the
Receiving Party can establish by competent proof that such information:
(i) was already known to the Receiving Party, other than under an obligation
of confidentiality, at the time of disclosure by the Disclosing Party;
(ii) was part of the public domain at the time of its disclosure by the
Disclosing Party;
(iii) became part of the public domain after its disclosure by the
Disclosing Party, other than through any act or omission of the Receiving Party
in breach of this Agreement;
(iv) was disclosed to the Receiving Party by a third party who had no
obligation not to disclose such information to others; or
(v) has been disclosed by the Disclosing Party to any third party without an
obligation not to disclose such information to others.
The parties agree to take such actions and execute such documents as are
necessary to cause the Joint Venture Entity to comply with this provision as a
Receiving Party. Each Receiving Party may disclose the Disclosing Party's
information to the extent that such disclosure is reasonably necessary in
pursuing or defending litigation, or complying with applicable law or
governmental or stock exchange (including The Nasdaq Stock Market)
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regulations; provided, however, that, if a Receiving Party intends to make any
such disclosure, it shall (i) give reasonable advance written notice to the
Disclosing Party of such intention so that the Disclosing Party may seek an
appropriate protective order, and (ii) not disclose any information pending
conclusion of any legal proceedings regarding such protective order. In the
event that disclosure is required after the conclusion of any proceedings, the
Receiving Party shall disclose only such Confidential Information as is
specifically required by the terms of such law, order, regulation or requirement
and shall use its best efforts to obtain from the party to whom the information
is disclosed written assurance that confidential treatment will be accorded to
such information. Furthermore, nothing in this paragraph shall be construed to
preclude either party or the Joint Venture Entity from disclosing such
information to third parties as may be necessary in connection with the
transactions contemplated by this Agreement; provided, however, that the
Receiving Party or the Joint Venture Entity shall in each case obtain from the
proposed third-party recipient a written confidentiality undertaking containing
confidentiality obligations no less onerous than those set forth in this
paragraph. The parties shall, when appropriate, cause their respective officers,
directors, employees, agents and other personnel to execute and deliver
confidentiality agreements to ensure compliance with the confidentiality
obligations contained herein.
(f) NON-SOLICITATION. During the term of this Agreement and for a three-year
period following termination or expiration hereof, neither party nor the Joint
Venture Entity shall, directly or indirectly, without the written consent of the
applicable party: (i) hire or solicit any employee of a party or encourage any
such employee to leave such employment, or (ii) solicit, induce or influence any
customer, supplier, lender, lessor or any other person or entity which has a
business relationship with a party to discontinue or reduce the extent of such
relationship with such party.
(g) INDEPENDENT CONTRACTOR. Each party shall be responsible for its
obligations under this Agreement and under any resulting contract to which it is
a party as contemplated by this Agreement, but shall not otherwise have any
obligation or liability with respect to unrelated business activities of the
other party, it being agreed that each party is an independent contractor and
that neither party, its agents, or employees are, or shall be, either actual or
constructive servants, agents or employees of the other party. This Agreement
shall not be deemed to create a partnership between Cal Dive and CSO.
(h) PRESS RELEASES. Neither party nor their Affiliates shall make publicly
available any press release, promotional material or similar public statement
naming or otherwise identifying the other party or any of its Affiliates without
such other party's prior consent, which consent will not be unreasonably
withheld, conditioned or delayed. Each party and any of their respective
Affiliates shall provide the other party, as early as reasonably practicable,
drafts of all press releases that include references to such other party or any
of its Affiliates, and shall consider and use reasonable efforts to incorporate
into all such press releases any comments provided by such other party in a
reasonably timely manner. The parties agree to take such actions as are
necessary to cause the Joint Venture Entity to comply with this paragraph.
(i) FORCE MAJEURE. THE failure or delay of either party hereto to perform
any obligation under this Agreement solely by reason of acts of God, acts of
government (except as otherwise enumerated herein), riots, wars, embargoes,
strikes, lockouts, accidents in transportation, port congestion or other causes
beyond its control ("FORCE MAJEURE") shall not be deemed to be a breach of this
Agreement; provided, however, that the Party so prevented from complying
herewith shall have used reasonable diligence to avoid such event of FORCE
MAJEURE and mitigate its effects, and shall continue to take all actions within
its power to comply as fully as possible with the terms of this Agreement.
Except where the nature of the event shall prevent it from doing so, the party
suffering such FORCE MAJEURE shall notify the other party in writing within
fourteen (14) days after the occurrence of such event of FORCE MAJEURE and shall
in every instance, to the extent reasonable and lawful under the circumstances,
use its best efforts to remove or remedy such cause with all reasonable
dispatch.
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In the event of any conflict between the terms of this paragraph 4(i) and
the terms of any "force majeure" provision contained in any contract to which
the Joint Venture Entity is a party, the terms of the "force majeure" provision
contained in such other contract shall control.
(j) DISPUTE RESOLUTION.
(i) The parties shall attempt in good faith to resolve any Dispute as
defined in paragraph 6(k) or any disagreement concerning the management of the
Joint Venture Entity (a "Management Disagreement") promptly by negotiation
between executives who have authority to settle the controversy and who are at a
higher level of management than the persons with direct responsibility for
administration of this Agreement. Any party may give the other party written
notice of any Dispute or Management Disagreement not resolved in the normal
course of business (the "Initial Notice"), which notice shall include (A) a
statement of such party's position and a summary of arguments supporting that
position; and (B) the name and title of the executive who will represent that
party and of any other person who will accompany the executive to a meeting to
discuss the matter. Within five (5) business days after delivery of the Initial
Notice, the receiving party shall provide the other party with a notice
containing comparable information. Within ten (10) days after delivery of the
Initial Notice, the executives of both parties shall meet at a mutually
acceptable time and place, and shall meet thereafter as often as they reasonably
deem necessary, to attempt to resolve the Dispute or Management Disagreement.
All reasonable requests for information made by one party to the other party
will be honored.
(ii) If a Dispute (but not a Management Disagreement) is not resolved within
thirty (30) days after the date of the Initial Notice, the executives will
select an independent Person (the "Mediator") who is not a present or former
officer, director, employee or agent of either party to act as a mediator to
resolve such Dispute. Within five (5) business days after the Mediator is
appointed, the executives and the Mediator shall meet at a mutually acceptable
time and place to discuss the Dispute, and both parties shall promptly provide
the Mediator with such information as the Mediator shall reasonably request. The
Mediator shall investigate the Dispute and submit a proposed solution to the
executives within thirty (30) days after being appointed as the Mediator. If
such proposed solution is not acceptable to either party, such party may
commence arbitration proceedings pursuant to paragraph 6(k) hereof.
(iii) All discussions, negotiations and information provided pursuant to
this paragraph 4(j) are confidential and shall be treated as compromise and
settlement negotiations for purposes of the Federal Rules of Evidence and State
Rules of Evidence.
(k) FURTHER ASSURANCES. Cal Dive and CSO each agree to execute and deliver
such other documents or agreements and take such other actions as may be
necessary or desirable for the implementation of this Agreement and the
consummation of the transactions contemplated hereby. Without limiting the
generality of the foregoing, each of Cal Dive and CSO agree to use commercially
reasonable efforts to promote the business of the Joint Venture Entity in
connection with EPIC Projects within the territory.
(1) WAIVER OF CONFLICTS. Each of the parties hereto, for itself, its
Affiliates and on behalf of the Joint Venture Entity, hereby waive any claim or
cause of action against the other party or its Affiliates and any member of the
Board appointed by the other party as a result of any breach of any duty to the
Joint Venture Entity by any such Person as a result of a conflict of interest
between the Joint Venture Entity and the party or its Affiliates other than the
breach of a duty expressly imposed pursuant to this Agreement or another
agreement between such party and the Joint Venture Entity. Except as provided in
paragraph 4(a), neither party nor their Affiliates shall be prohibited from
competing with the Joint Venture Entity in any respect or be obligated to
reserve any business opportunity for the Joint Venture Entity. The Formation
Documents shall contain provisions exculpating Board
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members from liability for any breach of a fiduciary duty other than for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law or for any transaction from which such member derived an
improper personal benefit.
5. TERM; TERMINATION; SURVIVAL; DEFAULT.
(a) TERM; EXTENSION. The initial term of this Agreement shall be for a
period of ten years from the date of the formation of the Joint Venture Entity.
Either Cal Dive or CSO may extend the term of this Agreement for successive five
year periods following the initial term or any subsequent extended term by
giving notice to the other party prior to the end of the initial or extended
term of its intention to extend the term of the Agreement for an additional five
years; provided, no party may extend the Agreement if the other party has given
written notice at least one year prior to the end of the initial or any extended
term that it objects to the extension of this Agreement.
(b) TERMINATION. This Agreement may be terminated in accordance with
paragraphs (2)(g) and 2(h) prior to the expiration of the initial or any
extended term:
(i) by mutual written consent of Cal Dive and CSO;
(ii)by either party upon the Bankruptcy of the other party or of any
Person directly or indirectly holding a Controlling Interest in the other party;
(iii) by either party if any Person (other than the parties hereto) who
does not have a Controlling Interest in the other party as of the date of this
Agreement acquires, directly or indirectly, a Controlling Interest in the other
party; provided, the party exercising this right must do so within three (3)
months after receiving notice of the occurrence of such event from the other
party;
(iv) by a Non-Transferring Party pursuant to clause (iii)(F) of paragraph
2(i);
(v) by either party if the Board has been unable to act for a period of
twelve (12) months as a result Of a dispute concerning the management of the
Joint Venture Entity which has not been resolved pursuant to subparagraph
4(j)(i) and neither party has acquired the Interests of the other pursuant to
paragraph 2(j); or
(vi) by either Cal Dive or CSO upon a default by the other party as
described in paragraph 5(d).
(c) SURVIVAL. The parties agree that this paragraph 5(c) and paragraphs
4(d), (e), (f), (i), (j), (k) and (m) and paragraphs 6(a), (e), (j) and (k)
shall survive the termination or expiration of this Agreement.
(d) DEFAULT. In the event that either party fails, other than as provided in
paragraph 4(i), for any reason to meet any of its obligations under this
Agreement or in connection with any contract to provide Services entered into
with the Joint Venture Entity or the non-defaulting party, the other party may
give written notice to the defaulting party of such default.
(i) Subject to the resolution thereof pursuant to subparagraph 4(j)(i) if
such default results in a dispute hereunder, if the defaulting party does not
cure any such default within sixty (60) days following the giving of notice as
provided in paragraph 5(d), then, until such default is cured or a good faith
effort to cure such fault has commenced, the other party shall have the
following rights:
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(A) to cure any such default without prejudice to its rights against the
defaulting party for full indemnification therefrom (including interest at a
rate equal to two percent (2%) above the prime rate in effect from time to time
during the duration of such default as reported in the Wall Street Journal); and
(B) to recover any and all monies to which the non-defaulting party is
entitled as provided above out of the defaulting party's share of profits from
any project or the Joint Venture Entity.
(ii) Subject to the resolution thereof pursuant to subparagraph 4(j)(i) if
such default results in a dispute hereunder, if such default is not cured within
sixty (60) days following the giving of notice as provided in paragraph 5(d) or,
if such default could not reasonably be cured within sixty (60) days the
defaulting party has not taken or is not continuing to take actions which are
reasonably necessary to cure the default as promptly as practicable, the
non-defaulting party shall have the right to terminate this Agreement, without
prejudice to its rights against the defaulting party under this Agreement or
otherwise at law.
6. MISCELLANEOUS.
(a) EXPENSES. Each of Cal Dive and CSO will pay all of their respective
expenses, including attorneys' fees and the fees of any consultants, incurred in
connection with the negotiation of this Agreement, the performance of their
respective obligations hereunder and the consummation of the transactions
contemplated hereby; provided, however, that the Joint Venture Entity shall be
responsible for all expenses incurred in connection with its formation and the
preparation of the Formation Documents.
(b) REMEDIES. Each of the parties hereto shall have all rights and
remedies set forth in this Agreement (including, without limitation, paragraph
6(e)). All remedies hereunder are cumulative and are not exclusive of any other
remedies provided by law or any other agreement or contract to which such person
is a party. Any Person having any rights under any provision of this Agreement
shall be entitled to enforce such rights specifically (without the requirement
of posting a bond or other security), to recover damages by reason of any breach
of any provision of this Agreement and to exercise all other rights granted by
law. Subject to paragraph 6(k) and without limiting the generality of the
foregoing, the parties specifically agree that any breach or threatened breach
of paragraphs 4(a) through 4(c) would cause irreparable injury to the
non-breaching party or the Joint Venture Entity and that money damages would not
provide an adequate remedy to the non-breaching party or the Joint Venture
Entity, and that the non-breaching party or the Joint Venture Entity, as the
case may be, shall accordingly have the right and remedy (i) to obtain an
injunction prohibiting the breaching party from violating or threatening to
violate such provisions, (ii) to have such provisions specifically enforced by
any court of competent jurisdiction, and (iii) to require the breaching party to
account for and pay over to the Joint Venture Entity or the non-breaching party
all compensation, profits, monies, accruals, increments or other benefits
derived or received by such party as the result of any transactions constituting
a breach of such provisions.
(c) ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Agreement (including the
schedules hereto) represents the entire understanding and agreement between the
parties hereto with respect to the subject matter hereof and can be amended,
supplemented or changed, and any provision hereof can be waived, only by written
instrument making specific reference to this Agreement signed by the party
against whom enforcement of any such amendment, supplement, modification or
waiver is sought. No action taken pursuant to this Agreement, including without
limitation, any investigation by or on behalf of any party, shall be deemed to
constitute a waiver by the party taking such action of compliance with any
covenant or agreement contained herein. The waiver by any party hereto of a
breach of any provision of this Agreement shall not operate or be construed as a
further or continuing waiver of such breach or as a waiver of any other or
subsequent breach. No failure on the part of any party to exercise, and no delay
in exercising, any right, power or remedy hereunder shall operate as a
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waiver thereof, nor shall any single or partial exercise of such right, power or
remedy by such party preclude any other or further exercise thereof or the
exercise of any other right, power or remedy.
(d) THIRD PARTY BENEFICIARY. The Joint Venture Entity is, upon its
formation, intended to be a third party beneficiary of this Agreement and shall
be entitled to enforce the obligations of the parties to this Agreement to the
same extent as if it were a party hereto.
(e) INDEMNIFICATION.
(i) Cal Dive hereby agrees to indemnify and hold harmless CSO and its
directors, officers, employees, Affiliates, agents, successors and assigns from
and against (A) any and all Losses based upon, attributable to or resulting from
the breach of any covenant or other agreement on the part of Cal Dive under this
Agreement or the enforcement of this Agreement (including, without limitation,
this paragraph 6(e)), and (B) any and all Expenses incident to the foregoing.
(ii) CSO agrees to indemnify and hold harmless Cal Dive and its directors,
officers, employees, Affiliates, agents, successors and assigns from and against
(A) any and all Losses based upon, attributable to or resulting from the breach
of any covenant or other agreement on the part of CSO under this Agreement or
the enforcement of this Agreement (including, without limitation, this paragraph
6(e)), and
(B) any and all Expenses incident to the foregoing.
(iii) In the event that any Legal Proceedings shall be instituted or
asserted by any Person in respect of which payment may be sought under this
paragraph 6(e), the indemnified party shall reasonably and promptly cause
written notice of the assertion of any Legal Proceeding of which it has
knowledge which is covered by the indemnities under this paragraph 6(e) to be
forwarded to the indemnifying party; provided, however, that the failure of the
indemnified party to give such reasonable and prompt notice shall not release,
waive or otherwise offset the indemnifying party's obligations hereunder with
respect thereto except to the extent that the indemnifying party can demonstrate
actual loss and prejudice as a result of such failure. The indemnifying party
shall have the right, at its sole option and expense, to be represented by
counsel of its choice, which must be reasonably satisfactory to the indemnified
party, and to defend against, negotiate, settle or otherwise deal with any Legal
Proceeding which relates to any Losses or Expenses indemnified against
hereunder; PROVIDED, HOWEVER, that (i) prior to assuming control of such
defense, the indemnifying party shall verify in writing to the indemnified party
that the indemnifying party will be fully responsible (with no reservation of
any rights) for all liabilities and obligations relating to such claim for
indemnification and that it will provide full indemnification with respect
thereto and (ii) no settlement shall be made without the prior written consent
of the indemnified party, which consent shall not be unreasonably withheld,
conditioned or delayed. If the indemnifying party elects to defend against,
negotiate, settle or otherwise deal with any Legal Proceeding which relates to
any Losses indemnified against hereunder, it shall within thirty (30) days (or
sooner, if the nature of the Legal Proceeding so requires) notify the
indemnified party of its intent to do so. If the indemnifying party elects not
to defend against, negotiate, settle or otherwise deal with any Legal Proceeding
which relates to any Losses and Expenses indemnified against hereunder, fails to
notify the indemnified party of its election as herein provided or contests its
obligation to indemnify the indemnified party for such Losses and Expenses under
this Agreement, the indemnified party may defend against, negotiate, settle or
otherwise deal with such Legal Proceeding. If the indemnified party defends any
Legal Proceeding, then the indemnifying party shall reimburse the indemnified
party for the Expenses of defending such Legal Proceeding upon submission of
periodic bills. The indemnified party may not settle any Legal Proceeding
without the prior written consent of the indemnifying party, which consent shall
not be unreasonably withheld, conditioned or delayed. If the indemnifying party
shall assume the defense of any Legal Proceeding, the indemnified party may
participate, at its own expense, in the defense of
<PAGE>
- 15 -
such Legal Proceeding; PROVIDED, HOWEVER, such indemnified party shall be
entitled to participate in any such defense with separate counsel at the expense
of the indemnifying party if (i) so requested by the indemnifying party to
participate or (ii) in the reasonable opinion of counsel to the indemnified
party, a conflict or potential conflict exists between the indemnified party and
the indemnifying party that would make such separate representation advisable.
The parties hereto agree to cooperate fully with each other in connection with
the defense, negotiation or settlement of any such Legal Proceeding.
After any final judgment or award shall have been rendered by a court,
arbitration board or administrative agency of competent jurisdiction and the
expiration of the time in which to appeal therefrom, or a settlement shall have
been consummated, or the indemnified party and the indemnifying party shall have
arrived at a mutually binding agreement with respect to a Legal Proceeding
hereunder, the indemnified party shall forward to the indemnifying party notice
of any sums due and owing by the indemnifying party pursuant to this Agreement
with respect to such matter and the indemnifying party shall be required to pay
all of the sums so due and owing to the indemnified party by wire transfer of
immediately available funds within five business days after the date of such
notice.
(f) SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein,
all covenants and agreements contained in this Agreement by or on behalf of any
of the parties hereto shall bind, and inure to the benefit of the respective
successors and permitted assigns of the parties hereto whether so expressed or
not. Neither party shall transfer or assign this Agreement or any of their
rights or obligations hereunder, whether by operation of law or otherwise,
without the prior written consent of the other party hereto. Any attempted
transfer or assignment of this Agreement or any rights or obligations hereunder
in violation of this provision shall be void AB INITIO.
(g) SEVERABILITY_. Whenever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
(h) COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, any one of which need not contain the signatures of more than
one party, but all such counterparts taken together shall constitute one and the
same Agreement.
(i) SECTION HEADINGS: INTERPRETATION. The section headings of this Agreement
are inserted for convenience only, do not constitute a part of this Agreement
and are to be given no effect in the construction or interpretation of this
Agreement. The use of the word "including" in this Agreement shall be by way of
example rather than by limitation.
(j) GOVERNING LAW: SUBMISSION TO JURISDICTION; CONSENT TO SERVICE OF
PROCESS.
(i) Except as expressly provided in paragraph 6(k), the internal law, and
not the conflicts of law principles, of the State of Delaware shall govern this
Agreement as well as the construction, validity and interpretation of this
Agreement and the exhibits and schedules hereto.
(ii) Solely to the extent permitted by paragraph 6(k) hereof, each of the
parties hereto hereby irrevocably submit for itself and its property to the
non-exclusive jurisdiction of any federal or state court located within the
State of New York over any Dispute and each party hereby irrevocably agrees that
all claims in respect of such Dispute or any action, suit or proceeding related
thereto, solely to the extent expressly permitted by
<PAGE>
- 16 -
paragraph 6(k) hereof, may be heard and determined in such courts. The parties
hereby irrevocably waive, to the fullest extent permitted by applicable law, any
objection which they may now or hereafter have to the laying of venue of any
Dispute brought in such court or any defense of inconvenient forum for the
maintenance of such Dispute, provided that relief sought in any action, suit or
proceeding relating thereto is of the nature expressly permitted by paragraph
6(k) hereof to be sought in such court. Each of the parties hereto agrees that
an Award or a judgment in any such Dispute may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
(iii) Each of the parties hereto hereby consents to process being served by
any party to this Agreement in any suit, action or proceeding of the nature
expressly permitted by paragraph 6(k) hereof by the delivery or mailing of a
copy thereof in accordance with the provisions of paragraph 6(1).
(iv) Nothing in this paragraph (6j) shall affect the rights of the parties
to commence any action, suit or proceeding of the nature expressly permitted by
paragraph 6(k) hereof in any other forum or to serve process in any such action,
suit or proceeding in any other manner permitted by law.
(k) ARBITRATION.
(i) Any claim, dispute or other disagreement other than a Management
Disagreement (each, a "Dispute") between Cal Dive and CSO or between Cal Dive or
CSO, on the one hand, and the Joint Venture Entity, on the other hand, arising
out of or relating to this Agreement, any contract between either party and the
Joint Venture Entity or the Formation Documents, or any of the transactions
contemplated hereby or thereby, shall be finally settled by arbitration in
accordance with the terms of this subparagraph 6(k)(i); provided that any party
shall in any event have the right to seek and obtain equitable relief during the
pendency of such Dispute pursuant to subparagraph 6(k)(ii) hereof. In the event
of any Dispute, any party may serve written notice of such Dispute on any other
party and each party to such Dispute shall undertake in good faith to resolve
such Dispute. If the parties cannot agree to resolve such Dispute within 15 days
after such written notice, any party to such Dispute may, by further written
notice (the "Arbitration Notice") to the other party, commence an arbitration
proceeding by bringing the Dispute to an arbitration panel selected as provided
below. The Arbitration Notice shall be filed simultaneously with the
International Chamber of Commerce in New York, New York, and shall contain a
description of the amount in controversy, the nature of the Dispute and the
paragraph(s) of this Agreement to which such Dispute relates. Disputes shall be
decided by an arbitration panel comprised of three arbitrators (each of whom
shall be a practicing lawyer knowledgeable and experienced in matters of
commercial and construction law), one arbitrator to be selected by Cal Dive, a
second arbitrator to be selected by CSO, and the third arbitrator (the
"Independent Arbitrator"), who will be the Chairman of the arbitration panel, to
be appointed by the first two arbitrators. In the event the first two
arbitrators fail to agree on the appointment of the Independent Arbitrator
within 15 days, the Independent Arbitrator shall be appointed by the
International Chamber of Commerce in New York, New York. In the event that any
arbitrator shall resign, be unable or otherwise fail to perform his or her
duties, each party shall immediately notify the other parties of such
resignation, inability or failure, and a replacement shall immediately be
selected by the party who selected such arbitrator in the first instance, or, if
the arbitrator to be replaced is the Independent Arbitrator, then the parties
shall attempt in good faith to appoint a mutually agreeable replacement
Independent Arbitrator. If the parties fail to agree on such replacement within
15 days, either party may request that the International Chamber of Commerce in
New York, New York appoint such replacement Independent Arbitrator. The
arbitration panel shall conduct the arbitration in accordance with the Rules of
Arbitration of the International Chamber of Commerce then in effect, except to
the extent such rules are inconsistent with the provisions of this subparagraph
6(k)(i). The parties shall prepare in writing a statement of their positions,
together with counterclaims, with supporting facts, data, and affidavits, if
any, for the arbitration panel and shall submit such statement to the
arbitration panel
<PAGE>
- 17 -
within 15 days after it is selected, but, in any event, within 60 days after
service of the Arbitration Notice. The arbitration panel shall give all parties
the opportunity to make an oral presentation to the arbitration panel in the
presence of the other party if either party so requests. The parties shall have,
for a period of 180 days after service of the Arbitration Notice (the "Discovery
Period"), all rights of discovery provided by the New York Civil Practice Law
and Rules then obtaining, except, unless otherwise agreed, that all responses to
discovery requests shall be served within 10 days of such discovery request, and
no discovery request may be served after the date 10 days before the termination
of the Discovery Period. Subject to the proviso in the first sentence of this
subparagraph 6(k)(i) and to subparagraph 6(k)(ii) hereof, the arbitration panel
shall assume exclusive jurisdiction over the Dispute, may order interim
equitable relief (which shall be specifically enforceable as if it were a final
Award, as hereinafter defined), and shall be required to make a final binding
determination (the "Award"). The Award shall not be subject to appeal to or
review by any court or administrative body except as set forth in Section 10(a)
of the Federal Arbitration Act, codified as 9 U.S.C.A. ss.10(a) (West Supp.
1997). The Award shall determine (A) whether each party's obligations under this
Agreement were met and (B) what damages or remedies (which may include final
equitable relief) are due to the respective parties under the terms of this
Agreement. The agreement to arbitrate contained in this paragraph 6(k) shall be
specifically enforceable under the prevailing arbitration law, and shall survive
termination of this Agreement. Judgment upon the Award rendered by the
arbitration panel may be entered in accordance with applicable law in any court
having jurisdiction therefor. Each party shall bear its own costs and expenses
for arbitration, subject to reimbursement as determined by the arbitration panel
in the Award. Arbitration shall, unless the parties otherwise agree in writing,
take place in New York, New York.
(ii) Nothing contained in this paragraph 6(k) shall preclude, or be deemed,
construed or interpreted to preclude, any party from seeking interim equitable
relief from a court of competent jurisdiction against the other party, where
circumstances so require, except that no party shall be entitled to seek a stay
of any arbitration proceeding brought hereunder. The parties agree that, upon
the application of any of the parties, and whether or not an arbitration
proceeding has yet been initiated pursuant to this paragraph 6(k), all courts
having jurisdiction are hereby authorized to (A) issue and enforce in any lawful
manner such temporary restraining orders, preliminary injunctions and other
interim measures of relief as may be necessary to prevent harm to a party's
interests or as otherwise may be appropriate pending the conclusion of
arbitration proceedings pursuant to this paragraph 6(k), and/or (B) enter into
and enforce in any lawful manner such judgments for permanent equitable relief
as may be necessary to prevent harm to a party's interests or as otherwise may
be appropriate following the issuance of the Award.
(1) NOTICES. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally to the
recipient, sent to the recipient by reputable express courier service (charges
prepaid) or mailed to the recipient by certified or registered mail, return
receipt requested and postage prepaid. Such notices, demands and other
communications shall be sent to Cal Dive or CSO at the addresses indicated
below:
If to Cal Dive:
Cal Dive International, Inc.
13430 Northwest Freeway
Suite 350
Houston, Texas 77040
Attention: Mr. Owen Kratz, President
Facsimile No: 713/690-2204
<PAGE>
- 18 -
with a copy to:
Cal Dive International, Inc.
13430 Northwest Freeway
Suite 350
Houston, Texas 77040
Attention: Andrew C. Becher, Esq., General Counsel
Facsimile No: 713/690-2204
If to CSO:
Coflexip Stena Offshore Inc.
7660 Woodway
Suite 390
Houston, Texas 77063
Attention: Kevin Peterson
Facsimile No.: 713/789-7367
with a copy to:
Coflexip
23 Avenue de Neuilly
75116 Paris, France
Attention: General Counsel
Facsimile No.: 33 1 40 67 60 07
and to:
Nixon, Hargrave, Devans & Doyle LLP
437 Madison Avenue
New York, New York 10021
Attention: Richard F. Langan, Jr.
Facsimile No.: (212) 940-3111
or to such other address or to the attention of such other Person as the
recipient party has specified by prior written notice to the sending party. Such
notices, demands and other communications shall be sent to the Joint Venture
Entity at the principal address of the Joint Venture Entity when it is formed or
to such other address or to the attention of such other Person as the Joint
Venture Entity has specified by prior written notice to the sending party. When
any notice, demand or other communication is sent by one party to the Joint
Venture Entity a copy of such notice, demand or other communication shall also
be sent to the other party in the manner required by this paragraph.
(m) "INTERPRETATION" The parties acknowledge and agree that: (i) each party
and its counsel reviewed and negotiated the terms and provisions of this
Agreement and have contributed to its revision; (ii) the rule of construction to
the effect that any ambiguities are resolved against the drafting party shall
not be employed in the interpretation of this Agreement; and (iii) the terms and
provisions of this Agreement shall be construed fairly as to all parties hereto,
regardless of which party was generally responsible for the preparation of this
Agreement.
<PAGE>
- 19 -
(N) "CONFLICT WITH FORMATION DOCUMENTS." In the event that there is a
conflict between the terms of this Agreement and the terms of any Formation
Document which has been executed by both parties hereto, the terms of such
Formation Document shall control; otherwise, the terms of this Agreement shall
control.
IN WITNESS WHEREOF each party has executed this Agreement as of the day
and year first above written.
COFLEXIP STENA OFFSHORE INC. By:
/s/ KEVIN PETERSON
Kevin Peterson, President
CAL DIVE INTERNATIONAL, INC.
/s/ OWEN KRATZ
Owen Kratz, President
<PAGE>
- 20 -
SCHEDULE A-1
CAL DIVE SERVICES
1. ROV operation
2. Diving
3. Coiled Tubing
4. Flexible lay operations with deck load requirements up to 600 MT
5. Riser installation
6. Well servicing
7. DP DSV's and related services
8. 4 Point DSV's (when applicable)
<PAGE>
- 21 -
SCHEDULE A-2
CSO SERVICES
1. Flexible lay operations in excess of Joint Venture Entity vessel
capabilities (including risers)
2. Product sales, manufacture and supply of
- Umbilicals
- Flex hose
- Flex pipe
3. ROV manufacture and sale
4. EPIC project design and engineering and project management
5. Reeled hard pipe lay (including risers installed in connection with
lay operations, excluding coiled tubing)
6. DP DSV in excess of Cal Dive and Joint Venture Entity capability to
provide
<PAGE>
- 22 -
SCHEDULE B
PERCENTAGE INTERESTS
If the Joint Venture Entity is a Limited Liability Company:
Cal Dive:
CSO: 49%
If the Joint Venture Entity is a Limited Partnership:
CAL DIVE: 50.49%
CSO: 48.51%
GENERAL PARTNER: 1%
Cal Dive's Interest in the General Partner: 51%
CSO's Interest in the General Partner: 49%
PROPOSED 1995
ANNUAL INCENTIVE COMPENSATION PROGRAM
===============================
By now, you should all be familiar with Cal Dive's MISSION TRIANGLE.
The concept inherent in the MISSION TRIANGLE is that our corporate goals of
Profitability and Client Satisfaction are attainable only through a team effort
and commitment to safety, planning, professionalism and quality. What also needs
to be understood is that in the long-term you cannot have profitability without
satisfied clients and conversely, you will not have the means of satisfying
those clients unless the company is generating sufficient levels of profit.
Cal Dive's 1995 Incentive Compensation Program is designed to provide financial
rewards to certain key individuals for their contribution towards achieving our
corporate goals of Profitability and Client Satisfaction. Every individual who
is eligible for Incentive Compensation should consider himself responsible for
insuring that the company achieve these goals. Anyone who does not fully
understand how they might contribute to this should visit with Jerry Reuhl about
this issue.
Page 1 of 8
<PAGE>
PROJECT ENGINEERING GROUP
The Project Engineering Group was formed in May 1992 to take a lead role in all
phases of a project's life, from bidding through planning and execution, on to
final invoice. The performance of this group is key to achieving our corporate
goals of Profitability and Client Satisfaction.
Each Project Engineer's incentive compensation opportunity will be based on the
following:
1) Attaining a "subsea division" gross profit level of $9,225,000 (the
goal) will result in an opportunity equal to 10% of the Project
Engineer's base salary.
2) A bonus pool will be established equal to (a) 5% of the first one
million dollars in excess of the goal, plus (b) 10% of any subsea
division gross profits in excess of the goal plus $1 million
dollars.
Discretionary bonuses may be paid to members of the Project Engineering staff at
the discretion of the V. P. of Project Engineering. The remainder of the bonus
pool will be available as an incentive compensation opportunity for the Project
Engineers, (the V. P. of Project Engineering will be considered a Project
Engineer for bonus calculation purposes, including Paragraph #1 above), in
direct proportion to the ratio of the participants base salaries.
Each participants opportunity will be awarded based as follows:
1) 50% of the total opportunity will be awarded based on achieving the
financial goals.
2) From 0 to 50% of the total opportunity will be awarded based on a
subjective evaluation by the Company's executive management on the
individual's efforts, contribution, and success in developing client
satisfaction.
Any portion of the opportunity that is not awarded will be accrued for and added
to the appropriate groups opportunity for the following years Incentive
Compensation Program.
If the company purchases or otherwise acquires new assets with the expectation
of increasing the gross profit of the subsea division, the gross profit levels
in 1, 2(a) and 2(b) above will be adjusted upward to allow for a reasonable
return to the company before the bonus opportunity kicks in. This adjustment
will be based on the economics presented to the Board of Directors as
justification for the new equipment or service, and will be made by the
executive management of the Company. As you will notice, this year's goal has
been increased by $1,225,000 over the 1994 goal to reflect the addition of our
new D.P. vessel for six months. (The 1996 plan will reflect a goal based on a
full year of operation.)
Page 2 of 8
<PAGE>
PROJECT ENGINEERING GROUP
For your information, we are providing the following select data on the subsea
division:
1995 Goal 1995 Budget
Year Gross Profit $9,225,000 $9,400,000
================ =====================
1994 $8,867,227
1993 $9,156,212
1992 $4,335,600
1991 $9,437,000
1990 $8,624,000
Page 3 of 8
<PAGE>
ACCOUNT MANAGER GROUP
The Account Manager Group was formed in 1986 to spearhead the Company's
marketing effort. Its current goal is to achieve the corporate goals of
Profitability and Client Satisfaction by implementing the strategies and
directions established by management. The efforts of this group are critical in
achieving our Corporate Goals.
Each Account Manager's incentive compensation opportunity will be based on the
following:
1) Attaining a "subsea division" gross profit level of $9,225,000 (the
goal) will result in an opportunity equal to 10% of the Account
Manager's base salary.
2) A bonus pool will be established equal to (a) 5% of the first one
million dollars in excess of the goal, plus (b) 10% of any subsea
division gross profits in excess of the goal plus $1 million
dollars.
Discretionary bonuses may be paid to members of the Account Manager staff at the
discretion of the Marketing and Sales Coordinator. The remainder of the bonus
pool will be available as an incentive compensation opportunity for the Account
Managers, (the Marketing and Sales Coordinator will be considered an Account
Manager for bonus calculation purposes, including Paragraph #1 above), in direct
proportion to the ratio of the participants base salaries.
Each participant's opportunity will be awarded based as follows:
1) 1/3 of the total opportunity will be awarded based on achieving the
financial goals.
2) From 0 to 1/3 of the total opportunity will be awarded based on a
subjective evaluation by the Company's executive management on the
individual's efforts, contribution, and success in developing client
satisfaction.
3) From 0 to 1/3 of the total opportunity will be awarded based on a
subjective evaluation by the Company's executive management on the
individual's efforts and success in following and implementing the
strategies and directions established by management.
Any portion of the opportunity that is not awarded will be accrued for and added
to the appropriate groups opportunity for the following years Incentive
Compensation Program.
If the company purchases or otherwise acquires new assets with the expectation
of increasing the gross profit of the subsea division, the gross profit levels
in 1, 2(a) and 2(b) above will be adjusted upward to allow for a reasonable
return to the company before the bonus opportunity kicks in. This adjustment
will be based on the economics presented to the Board of Directors as
justification for the new equipment or service, and will be made by the
Executive management of the Company. As you will notice, this year's goal has
been increased by $1,225,000 over the 1994 goal to reflect the addition of our
new D.P. vessel for six months. (The 1996 plan will reflect a goal based on a
full year of operation.)
Page 4 of 8
<PAGE>
ACCOUNT MANAGER GROUP
For your information, we are providing the following select data on the subsea
division:
1995 Goal 1995 Budget
Year Gross Profit $9,225,000 $9,400,000
================== =====================
1994 $8,867,227
1993 $9,156,212
1992 $4,335,600
1991 $9,437,000
1990 $8,624,000
Page 5 of 8
<PAGE>
OPERATIONS AND ADMINISTRATION
The operations and administrative staff perform functions that are critical to
every facet of accomplishing the Corporate goals of profitability and client
satisfaction.
Each participant in this plan will have an incentive compensation opportunity
expressed in terms of a percentage of his or her base salary as follows:
INCENTIVE
OPPORTUNITY
AS A % OF
BASE SALARY
Incentive Compensation for the
Three Senior Executives....................To be determined by the
Executive Compensation Committee
M. Middleton (will have same bonus opportunity as the V.P.
of Project Engineering)
P. Leger Controller 25%
B. Murray Executive V.P. Quality Management 25%
OPERATIONS:
G. Lowrimore Shop Manager 15%
K. Freeman Marine Manager 15%
B. Hamby Operations Manager 8%
E. Weber Operations Manager 8%
N. Offerdahl Operations Manager 8%
J. Reedy Safety Officer 8%
M. Ehlers Sr. Saturation Technician 12%
B. Partain Vessel 8%
ACCOUNTING:
K. Vincent Assistant Controller 15%
G. Quintanilla Staff Accountant 8%
J. Polito Billings 6%
A. Foreman Billings 6%
C. Stevens Purchasing Agent 6%
B. Verrett Purchasing Agent 6%
O. Basa Purchasing Agent 6%
This opportunity will commence once the company has achieved a Net Income After
Tax of $1,800,000 (50% of Incentive opportunity will be available) prorated to
$2,800,000 (100% of bonus opportunity will be available), excluding results of
Energy Resource Technology. (All Net Income After Tax determinations include
accrued charges for payouts under The 1995
Page 6 of 8
<PAGE>
Net Income After Tax determinations include accrued charges for payouts under
The 1995 Incentive Compensation Plan.)
Page 7 of 8
<PAGE>
OPERATIONS AND ADMINISTRATION
Each participant's opportunity will be awarded based as follows:
1) 50% of the available opportunity will be awarded based on achieving
the financial goals.
2) From 0 to 50% of the available opportunity will be awarded based on
a subjective evaluation by the Company's executive management on the
individual's efforts, contribution, and success in developing client
satisfaction.
Any portion of the opportunity that is not awarded will be accrued for and added
to the appropriate groups opportunity for the following years Incentive
Compensation Program.
Page 8 of 8
<PAGE>
GENERAL CONDITIONS TO ALL PLANS
ELIGIBILITY FOR PARTICIPATION
Participants must be on the payroll no later than June 30, 1995.
Participants who are not on the payroll as of January 1, 1995 will have
their opportunity pro-rated by their months of service.
Incentive compensation awards will be granted to those participants who
have met the performance criteria set forth in this policy and are on the
payroll December 31, 1995, for incentive compensation authorized under
this plan. This plan is not to be construed in any way as a guarantee of
employment or an employment contract.
METHOD OF PAYMENT
Earned incentive compensation will be paid in cash within two weeks of the
completed year end audit.
CLARIFICATION/INTERPRETATION/MODIFICATION OF THE PLAN
The Cal Dive Board of Directors shall have the right and the sole
authority at any time and without restriction to clarify, interpret,
and/or modify this plan by action of the Board.
Page 9 of 8
EMPLOYMENT AGREEMENT
This Agreement is made this 11th day of April, 1997, between Cal Dive
International, Inc., a Minnesota corporation (the "Company"), and Gerald G.
Reuhl (Employee), an individual residing at 10507 Laneview Drive, Houston, Texas
77070.
WHEREAS, Employee has extensive executive management skills and experience
in the oil service industry, including valuable marketing, financial, technical
and other experience, knowledge and ability and has been acting as the Chairman
and Chief Executive Officer for the Company; and
WHEREAS, the Company wishes to continue to employ Employee as Chairman and
Chief Executive Officer of the Company and Employee is willing to accept such
continued employment upon the terms and conditions set forth in this Agreement;
WHEREAS, the execution and delivery of this Agreement by the Company and
Employee is a condition to the purchase of shares of the Company's Common Stock
by Coflexip (the "Purchaser") from the Company and certain shareholders of the
Company, including, among others, Employee, pursuant to a Purchase Agreement
dated as of the date hereof among the Company, the Purchaser and such
shareholders;
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements set forth herein, the parties hereto agree as follows:
SECTION 1. TERM OF EMPLOYMENT AND EMPLOYMENT DUTIES.
(a) Employee agrees to be employed by the Company on the terms and
conditions contained herein, for a period commencing on the date hereof and
terminating on April 30, 1999 (the "Employment Term") subject to earlier
termination pursuant to the provisions of Section 7 hereof. During the
Employment Term, Employee shall devote all of his time, energy and skill during
regular business hours to the affairs of the Company and any of its affiliated
business entities and to the promotion of their interests.
(b) Employee's duties shall include acting as Chairman and Chief Executive
Officer for the Company with all responsibilities assigned to that office from
time to time by the Board of Directors (the "Board") and shall have the normal
duties, responsibilities and authority of such positions as consistent with the
Company's Amended and Restated By-Laws subject to the power of the Board to
expand or limit such duties. Employee shall also serve in various executive
positions with subsidiaries of the Company as requested by the Board from time
to time.
(c) During the Employment Term, (i) Employee services shall be rendered on
a full time basis, (ii) Employee shall have no other employment and no
substantial outside business activities and (iii) the headquarters for the
performance of Employee's services shall be the principal executive or operating
offices of the Company, subject to travel for such reasonable lengths of time as
the performance of his duties in the business of the Company may require.
SECTION 2. COMPENSATION.
(a) SALARY. During the Employment Term, as compensation for his services
and covenants and agreements hereunder, the Company agrees to pay Employee an
initial salary for the period from the date hereof to April 30, 1999 at the rate
of One Hundred Forty-Six Thousand Dollars ($146,000) per annum, payable in equal
semi-monthly installments in accordance with the Company's regular payroll
practices for its principal executives, prorated for any partial employment and
subject to normal increases as approved by the Board.
(b) INCENTIVE BONUS. During the Employment Term, in addition to the to
the annual salary payable
1
<PAGE>
to Employee pursuant to paragraph (a) above, Employee shall be entitled to an
annual incentive bonus (the "Incentive Bonus"), payable not later than three
months after the close of each fiscal year of the Company, commencing with the
fiscal year ending December 31, 1997, as established annually or from time to
time by the Board .
(c) REIMBURSEMENT OF EXPENSES. During the Employment Term, Employee will
be reimbursed by the Company for his reasonable business expenses incurred in
connection with the performance of his duties hereunder, including, without
limitation, a home fax line, car mileage, cell phone and business calls and
other expenses consistent with Company policy from time to time.
SECTION 3. BENEFITS.
During the Employment Term, Employee shall be entitled to participate in
any medical/dental, life insurance, accidental death, long term disability
insurance plan and 401(k) or other insurance and retirement plans which has been
or which may be adopted by the Company (as long as such plan is not
discontinued) for the general and overall benefit of executive employees of the
Company, according to the participation or eligibility requirements of each such
plan. During the Employment Term, Employee shall enjoy such vacation, holiday
and similar rights and privileges as are enjoyed generally by the Company's
principal executives.
SECTION 4. NONDISCLOSURE AND NONUSE OF CONFIDENTIAL INFORMATION
(a) During the period commencing with the date of this Agreement and
ending on (i) the fifth anniversary of the date of the termination of Employee's
employment with the Company if such termination arises as a result of voluntary
termination or retirement by the Employee or termination by the Company for
"Cause" (as defined in Section 7 (a) hereof) and (ii) the date which is 18
months following the date of termination of Employee's employment with the
Company if such termination arises for any reason other than as provided in
subparagraph 4 (a) (i) above, Employee covenants and agrees with the Company
that Employee shall not disclose or use any Confidential Information (as defined
below) of which Employee is or becomes aware, whether or not such information is
developed by him, except to the extent that such disclosure or use is directly
related to and required by Employee's performance of duties assigned to Employee
by the Company. Employee shall take all appropriate steps to safeguard
Confidential Information and to protect it against disclosure, misuse,
espionage, loss and theft.
(b) As used in this Agreement, the term "Confidential Information" means
information that is not generally known to the public and that is or has been
used, developed or obtained, either prior to or following the date of this
Agreement, by the Company in connection with its businesses, including but not
limited to (i) products or services, (ii) fees, costs and pricing structures,
(iii) designs, (iv) analysis, (v) drawings, photographs and reports, (vi)
computer software, including operating systems, applications and program
listings, (vii) flow charts, manuals and documentation, (viii) data bases, (ix)
accounting and business methods, (x) inventions, devices, new developments,
methods and processes, whether patentable or unpatentable and whether or not
reduced to practice, (xi) customers and clients and customer or client lists,
(xii) other copyrightable works, (xiii) all technology and trade secrets, and
(xiv) all similar and related information in whatever form. Confidential
Information shall not include any information that has been published in a form
generally available to the public prior to the date Employee proposes to
disclose or use such information other than as a result of disclosure by
Employee in violation of this Agreement. Information shall not be deemed to have
been published merely because individual portions of the information have been
separately published, but only if all material features comprising such
information have been published in combination.
SECTION 5. NON-COMPETITION AND NON-SOLICITATION.
(a) Employee acknowledges and agrees with the Company that his services to
the Company are unique in nature and that the Company would be irreparably
damaged if Employee were to provide similar services to any person or entity
competing with the Company or engaged in a similar business. Employee
accordingly covenants and agrees with the Company that during the period
commencing with the date of this Agreement and ending on the
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later to occur of:
(i) April 30, 2002 and (ii) (A) the second anniversary of the date of the
termination of Employee's employment with the Company if such termination
arises as a result of voluntary termination or retirement by the Employee
or termination by the Company for "Cause", or (B) the first anniversary of
the date of termination of the Employee's employment with the Company if
such termination arises for any reason other than as provided in the
preceding subparagraph 5(a) (ii) (A).
Employee shall not, directly or indirectly, either for himself or for any other
individual, corporation, partnership, joint venture of other entity, participate
in any business (including without limitation any division, group or franchise
of a larger organization) which engages or which proposes to engage in the
business of providing diving services in the Gulf of Mexico or any other
business actively engaged in by the Company on the date of termination of
Employee's employment in the area or areas where the Company is conducting such
business; PROVIDED that until such time as the Company waives in writing any
rights it may have to enforce the terms of this Section 5 (the "Waiver), during
the period commencing on the date of the termination of the Employee's
employment with the Company and ending on the date on which either the
noncompetition provisions contained in this Section 5 terminate or the Waiver is
delivered to Employee, whichever is earlier, the Company will pay to Employee an
amount equal to Employee's base salary as of the date his employment was
terminated (which will be paid over time in accordance with the salary payment
schedule in effect from time to time for senior executives of the Company) and
during such time period executive shall be entitled to all insurance benefits
received by other senior executives of the Company. For purposes of this
Agreement, the term "participate in" shall include without limitation having any
direct or indirect interest in any corporation, partnership, joint venture or
other entity, whether as a sole proprietor, owner, stockholder, partner, joint
venturer, creditor or otherwise, or rendering any direct or indirect service or
assistance to any individual, corporation, partnership, joint venture and other
business entity (whether as a director, officer, manager, supervisor, employee,
agent, consultant or otherwise) but not ownership of 2% or less of the capital
stock of a public company.
(b) Employee covenants and agrees with the Company that during the period
commencing with the date of this Agreement and ending on the later to occur of
(i) April 30, 2002 and (ii) (A) the second anniversary of the date of
termination of Employee's employment with the Company if such termination arises
as a result of voluntary termination by the Company or for "Cause", or (B) the
date which is 18 months following the termination of Employee's employment with
the Company if such termination arises for any reason other than as provided in
the preceding subparagraph 5(b) (ii) (A) above, Employee shall not, directly or
indirectly, for himself or for any other individual, corporation, partnership,
joint venture or other entity, (x) make any offer of employment, solicit or hire
any supervisor, employee of the Company or its affiliates or induce or attempt
to induce any employee of the Company or its affiliates to leave their employ or
in any way interfere with the relationship between the Company or its affiliates
and any of their employees or (y) induce or attempt to induce any supplier,
licensee, licensor, franchisee, or other business relation of the Company or its
affiliates to cease doing business with them or in any way interfere with the
relationship between the Company or its affiliates and any customer or business
relation.
(c) Employee's Confidentiality and Noncompete Agreement with the Company
dated July 27, 1990, as amended by Amendment No. 1 dated January 12, 1995, is
hereby canceled and replaced in its entirety by this Agreement.
SECTION 6. COMPANY'S OWNERSHIP OF INTELLECTUAL PROPERTY.
(a) In the event that Employee as part of his activities on behalf
of the Company generates, authors or contributes to any invention, design, new
development, device, product, method or process (whether or not patentable or
reduced to practice or comprising Confidential Information), any copyrightable
work (whether or not comprising Confidential Information) or any other form of
Confidential Information relating directly or indirectly to the Company's
business as prior hereto, now or hereinafter conducted (collectively,
"Intellectual Property"), Employee acknowledges that such Intellectual Property
is the exclusive property of the Company and hereby assigns all right, title and
interest in and to such Intellectual Property to the Company. Any copyrightable
work prepared in whole or in part by Employee shall be deemed "a work made for
hire" under Section 201(b) of the 1976
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Copyright Act, and the Company shall own all of the rights comprised in the
copyright therein. Employee shall promptly and fully disclose all Intellectual
Property to the Company and shall cooperate with the Company to protect the
Company's interest in and rights to such Intellectual Property, including
without limitation providing reasonable assistance in securing patent protection
and copyright registrations and executing all documents as reasonably requested
by the Company, whether such requests occur prior to or after termination of
Employee's employment with the Company.
(b) In accordance with Minnesota Statutes, Chapter 181, Section
181.78, Employee is hereby advised that no provision of this Agreement is
intended to assign any of Employee's rights in an invention for which no
equipment, supplies, facility or trade secret information of the Company was
used and which was developed entirely on the Employee's own time, and which does
not relate directly to the business of the Company or to the Company's actual or
demonstrably anticipated research or development, or which does not result from
any work performed by the Employee for the Company.
(c) As requested by the Company from time to time and upon the
termination of Employee's employment with the Company for any reason, Employee
shall promptly deliver to the Company all copies and embodiments, in whatever
form, of all Confidential Information or Intellectual Property in Employee's
possession or within his control (including, but not limited to, written
records, notes, photographs, manuals, notebooks, documentation, program
listings, flow charts, magnetic media, disks, diskettes, tapes and all other
materials containing any Confidential Information or Intellectual Property)
irrespective of the location or form of such material and, if requested by the
Company, shall provide the Company with written confirmation that all such
materials have been delivered to the Company.
SECTION 7. TERMINATION OF AGREEMENT.
(a) TERMINATION FOR "CAUSE". This Agreement may be terminated by the
Company at any time during the Employment Term for "Cause", in which event
Employee shall have no further rights under this Agreement. For purposes of the
preceding sentence, "Cause" shall mean: (i) any breach or threatened breach by
Employee of any of his agreements contained in Section 4, 5 or 6 hereof; (ii)
repeated or willful neglect by Employee in performing any duty or carrying out
any responsibility assigned or delegated to him pursuant to Section 1(b) hereof,
which neglect shall not have permanently ceased within ten (10) business days
after written notice to Employee thereof; or (iii) the commission by Employee of
any criminal act involving moral turpitude or a felony which results in an
arrest or indictment, or the commission by Employee, based on reasonable proof,
of any act of fraud or embezzlement involving the Company or its customers or
suppliers. In the event that the Company elects to terminate this Agreement for
Cause, it will give Employee written notice of such termination, and, at the
Company's discretion, Employee's employment will terminate sixty (60) days
thereafter.
(b) TERMINATION UPON DEATH. This Agreement shall terminate automatically
upon the death of Employee during the Employment Term. In such event, the
Company shall be obligated to pay to Employee's estate, or to such person or
persons as he may designate in writing to the Company, (i) through the last day
of the fiscal year in which Employee's death shall have occurred, the salary
(payable in the same manner as described in Section 2(a) hereof) to which
Employee would have been entitled under Section 2(a) hereof had such death not
occurred, and (ii) as soon as reasonably practicable after Employee's death, any
accrued but, as of the date of such death, unpaid Incentive Bonus (or, if such
death shall have occurred after the first three (3) months of the Company's
fiscal year, any prorated portion thereof).
(c) TERMINATION UPON DISABILITY. This Agreement may be terminated by the
Company at any time during the Employment Term in the event that Employee shall
have been unable, because of "Disability" (as hereinafter defined), to perform
his principal duties for the Company for a cumulative period of six (6) months
within any eighteen (18) month period. Prior to Employee's termination for
Disability as provided herein, he shall remain eligible to receive the
compensation and benefits set forth in Section 2 and Section 3 hereof. Upon such
termination, Employee shall be entitled to receive as soon as reasonably
practicable thereafter, any accrued, but as of the date of such termination,
unpaid Incentive Bonus (or, if such termination shall have occurred after the
first
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three (3) months of the Company's fiscal year, any prorated portion thereof).
For purposes of this Section 7(c), "Disability" shall mean any physical or
mental condition of Employee which shall substantially impair his ability to
perform his principal duties hereunder. In the event that the Company elects to
terminate this Agreement by reason of Disability under this Section 7(c), it
will give written notice of such termination, and, at the Company's discretion,
Employee's employment will terminate sixty (60) days thereafter.
(d) EFFECT OF TERMINATION. In the event that this Employee is terminated
pursuant to any paragraph of this Section 7, Employee shall thereafter have no
further rights under this Agreement, except for those explicitly set forth in
the particular paragraph of this Section 7 which served as the Company's basis
for such termination. Notwithstanding any such termination, the covenants and
agreements of Employee contained in Sections 4, 5 (a) (so long as payments under
Section 5(a) are continued as therein described), 5 (b) and 6 hereof shall
survive and remain in full force and effect.
SECTION 8. NOTICES.
All notices, requests, demands and other communications hereunder must be
in writing and shall be deemed to have been duly given if delivered by hand,
sent to the recipient by reputable express courier service (charge prepaid), or
mailed by first class, registered mail, return receipt requested, postage and
registry fees prepaid and addressed as follows:
If to the Employee:
At the address set forth on page 1 hereof.
If to the Company :
Cal Dive International, Inc.
13430 Northwest Freeway
Suite 350
Houston, Texas 77040
Attention: Andrew C. Becher, General Counsel
Addresses may be changed by notice in writing signed by the addressee.
SECTION 9. GENERAL PROVISIONS.
(a) COMPANY SUBSIDIARIES. For purposes of this Agreement, the
term "Company" shall all subsidiaries of the Company.
(b) SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provisions of any other jurisdiction, and this Agreement shall be
reformed, construed and enforced in such jurisdictions if such invalid, illegal
or unenforceable provision had never been contained herein. The parties agree
that a court of competent jurisdiction making a determination of the invalidity
or unenforceability of any term or provision of Sections 4, 5 and 6 of this
Agreement shall have the power to reduce the scope, duration or area of any such
term or provision, to delete specific words or phrases or to replace any invalid
or unenforceable term or provision in Sections 4, 5, 6 with a term or provision
that is valid and enforceable and that comes closest to expressing the intention
of the invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified.
(d) COMPLETE AGREEMENT. This Agreement, embodies the complete
agreement and understanding among the parties and supersedes and preempts any
prior understandings, agreements or representations
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by or among the parties, written or oral, which may have related to the subject
matter hereof in any way.
(e) COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
(f) SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
this Agreement shall bind and inure to the benefit of and be enforceable by the
Company and Employee and their respective successors and assigns; provided that
the rights and obligations of Employee under this Agreement shall not be
assignable without the prior written consent of the Company.
(g) GOVERNING LAW. All questions concerning the construction,
validity and interpretation of this Agreement and the exhibits hereto shall be
governed by the internal law, and not the law of conflicts, of the State of
Texas.
(h) REMEDIES. Each of the parties to this Agreement shall be
entitled to enforce its rights under this Agreement specifically, to recover
damages and costs (including reasonable attorneys fees) caused by any breach of
any provision of this Agreement and to exercise all other rights existing in its
favor. The parties hereto agree and acknowledge that Employee's breach of any
term or provision of this Agreement shall materially and irreparably harm the
Company, that money damages shall accordingly not be an adequate remedy for any
breach of the provisions of this Agreement and that any party in its sole
discretion and in addition to any other remedies it may have at law or in equity
may apply to any court of law or equity of competent jurisdiction (without
posting any bond or deposit) for specific performance and/or other injunctive
relief in order to enforce or prevent any violations of the provisions of this
Agreement.
(i) AMENDMENT AND WAIVER. The provisions of this Agreement may be
amended and waived only with the prior written consent of the Company and
Employee.
IN WITNESS, WHEREOF, the parties hereto have duly executed this Agreement as of
the date first above written.
CAL DIVE INTERNATIONAL, INC. EMPLOYEE
By______________________________ _____________________________
Title:
6
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This Agreement is made this 11th day of April, 1997, between Cal Dive
International, Inc., a Minnesota corporation (the "Company"), and Owen Kratz
(Employee) an individual residing at 2503 Crescent Shores, La Porte, Texas
77571.
WHEREAS, Employee has extensive executive management skills and experience
in the oil service industry, including valuable marketing, financial, technical
and other experience, knowledge and ability and has been acting as President for
the Company; and
WHEREAS, the Company wishes to continue to employ Employee as President
and Chief Operating Officer and Employee is willing to accept such employment
upon the terms and conditions set forth in this Agreement;
WHEREAS, the execution and delivery of this Agreement by the Company and
Employee is a condition to the purchase of shares of the Company's Common Stock
by Coflexip (the "Purchaser") from the Company and certain shareholders of the
Company, including, among others, Employee, pursuant to a Purchase Agreement
dated as of the date hereof among the Company, the Purchaser and such
shareholders;
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements set forth herein, the parties hereto agree as follows:
SECTION 1. TERM OF EMPLOYMENT AND EMPLOYMENT DUTIES.
(a) Employee agrees to be employed by the Company on the terms and
conditions contained herein, for a period commencing on the date hereof and
terminating on April 30, 1999 (the "Employment Term") subject to earlier
termination pursuant to the provisions of Section 7 hereof. During the
Employment Term, Employee shall devote all of his time, energy and skill during
regular business hours to the affairs of the Company and any of its affiliated
business entities and to the promotion of their interests.
(b) During the employment term, Employee's duties shall include acting as
President and Chief Operating Officer of the Company with all responsibilities
assigned to that office from time to time by the Board of Directors of the
Company (the "Board") and shall have the normal duties, responsibilities and
authority of such positions as consistent with the Company's Amended and
Restated By-Laws, subject to the power of the Board to expand or limit such
duties. Employee shall also serve in various senior executive positions with
subsidiaries of the Company as requested by the Board from time to time.
(c) During the Employment Term, (i) Employee services shall be rendered on
a full time basis, (ii) Employee shall have no other employment and no
substantial outside business activities and (iii) the headquarters for the
performance of Employee's services shall be the principal executive or operating
offices of the Company, subject to travel for such reasonable lengths of time as
the performance of his duties in the business of the Company may require.
SECTION 2. COMPENSATION.
(a) SALARY. During the Employment Term, as compensation for his services
and covenants and agreements hereunder, the Company agrees to pay Employee an
initial salary for the period from the date hereof to April 30, 1999 at the rate
of One Hundred Sixty-Three Thousand Two Hundred Dollars ($163,200) per annum,
payable in equal semi-monthly installments in accordance with the Company's
regular payroll practices for its
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principal executives, prorated for any partial employment and subject to normal
increases as approved by the Board.
(b) INCENTIVE BONUS. During the Employment Term, in addition to the annual
salary payable to Employee pursuant to paragraph (a) above, Employee shall be
entitled to an annual incentive bonus (the "Incentive Bonus"), payable not later
than three months after the close of each fiscal year of the Company, commencing
with the fiscal year ending December 31, 1997, as established annually or from
time to time by the Board.
(c) REIMBURSEMENT OF EXPENSES. During the Employment Term, Employee will
be reimbursed by the Company for his reasonable business expenses incurred in
connection with the performance of his duties hereunder, including, without
limitation, a home fax line, car mileage, cell phone and business calls and
other expenses consistent with Company policy from time to time.
(d) STOCK OPTIONS. The Company hereby agrees to grant to Employee a total
of 250,000 stock options, each of which shall entitle Employee to purchase one
share of Common Stock of the Company (the "Common Stock") at an exercise price
of $9.46 per share (the "Options"). Subject to Employee's continued employment
with the Company, one fifth of the Options shall vest and become exercisable on
the first anniversary of the date of his Agreement and on each of the four
succeeding anniversaries of such date. In addition, the Options shall be subject
to such further terms and conditions as may be contained in any stock option
plan hereafter adopted by the Board for the benefit of employees and/or
directors of the Company.
SECTION 3. BENEFITS.
During the Employment Term, Employee shall be entitled to participate in
any medical/dental, life insurance, accidental death, long term disability
insurance plan and 401(k) or other insurance and retirement plans which has been
or which may be adopted by the Company (as long as such plan is not
discontinued) for the general and overall benefit of executive employees of the
Company, according to the participation or eligibility requirements of each such
plan. During the Employment Term, Employee shall enjoy such vacation, holiday
and similar rights and privileges as are enjoyed generally by the Company's
principal executives.
SECTION 4. NONDISCLOSURE AND NONUSE OF CONFIDENTIAL INFORMATION
(a) During the period commencing with the date of this Agreement and
ending on (i) the fifth anniversary of the date of the termination of Employee's
employment with the Company if such termination arises as a result of voluntary
termination or retirement by the Employee or termination by the Company for
"Cause" (as defined in Section 7 (a) hereof) and (ii) the date which is 18
months following the date of termination of Employee's employment with the
Company if such termination arises for any reason other than as provided in
subparagraph 4 (a) (i) above, Employee covenants and agrees with the Company
that Employee shall not disclose or use any Confidential Information (as defined
below) of which Employee is or becomes aware, whether or not such information is
developed by him, except to the extent that such disclosure or use is directly
related to and required by Employee's performance of duties assigned to Employee
by the Company. Employee shall take all appropriate steps to safeguard
Confidential Information and to protect it against disclosure, misuse,
espionage, loss and theft.
(b) As used in this Agreement, the term "Confidential Information" means
information that is not generally known to the public and that is or has been
used, developed or obtained, either prior to or following the date of this
Agreement, by the Company in connection with its businesses, including but not
limited to (i) products or services, (ii) fees, costs and pricing structures,
(iii) designs, (iv) analysis, (v) drawings, photographs and reports, (vi)
computer software, including operating systems, applications and program
listings, (vii) flow charts, manuals and documentation, (viii) data bases, (ix)
accounting and business methods, (x) inventions, devices, new developments,
methods and processes, whether patentable or unpatentable and whether or not
reduced to practice,
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(xi) customers and clients and customer or client lists, (xii) other
copyrightable works, (xiii) all technology and trade secrets, and (xiv) all
similar and related information in whatever form. Confidential Information shall
not include any information that has been published in a form generally
available to the public prior to the date Employee proposes to disclose or use
such information other than as a result of disclosure by Employee in violation
of this Agreement. Information shall not be deemed to have been published merely
because individual portions of the information have been separately published,
but only if all material features comprising such information have been
published in combination.
SECTION 5. NON-COMPETITION, NON-SOLICITATION AND TERMINATION OF PRIOR
AGREEMENTS.
(a) Employee acknowledges and agrees with the Company that his services to
the Company are unique in nature and that the Company would be irreparably
damaged if Employee were to provide similar services to any person or entity
competing with the Company or engaged in a similar business. Employee
accordingly covenants and agrees with the Company that during the period
commencing with the date of this Agreement and ending on the later to occur of:
(i) April 30, 2002 and (ii) (A) the second anniversary of the date of the
termination of Employee's employment with the Company if such termination
arises as a result of voluntary termination or retirement by the Employee
or termination by the Company for "Cause", or (B) the first anniversary of
the date of termination of the Employee's employment with the Company if
such termination arises for any reason other than as provided in the
preceding subparagraph 5(a) (ii) (A).
Employee shall not, directly or indirectly, either for himself or for any other
individual, corporation, partnership, joint venture of other entity, participate
in any business (including without limitation any division, group or franchise
of a larger organization) which engages or which proposes to engage in the
business of providing diving services in the Gulf of Mexico or any other
business actively engaged in by the Company on the date of termination of
Employee's employment in the area or areas where the Company is conducting such
business; PROVIDED that until such time as the Company waives in writing any
rights it may have to enforce the terms of this Section 5 (the "Waiver), during
the period commencing on the date of the termination of the Employee's
employment with the Company and ending on the date on which either the
noncompetition provisions contained in this Section 5 terminate or the Waiver is
delivered to Employee, whichever is earlier, the Company will pay to Employee an
amount equal to Employee's base salary as of the date his employment was
terminated (which will be paid over time in accordance with the salary payment
schedule in effect from time to time for senior executives of the Company) and
during such time period executive shall be entitled to all insurance benefits
received by other senior executives of the Company. For purposes of this
Agreement, the term "participate in" shall include without limitation having any
direct or indirect interest in any corporation, partnership, joint venture or
other entity, whether as a sole proprietor, owner, stockholder, partner, joint
venturer, creditor or otherwise, or rendering any direct or indirect service or
assistance to any individual, corporation, partnership, joint venture and other
business entity (whether as a director, officer, manager, supervisor, employee,
agent, consultant or otherwise) but not ownership of 2% or less of the capital
stock of a public company.
(b) Employee covenants and agrees with the Company that during the period
commencing with the date of this Agreement and ending on the later to occur of
(i) April 30, 2002 and (ii) (A) the second anniversary of the date of
termination of Employee's employment with the Company if such termination arises
as a result of voluntary termination by the Company or for "Cause", or (B) the
date which is 18 months following the termination of Employee's employment with
the Company if such termination arises for any reason other than as provided in
the preceding subparagraph 5(b) (ii) (A) above, Employee shall not, directly or
indirectly, for himself or for any other individual, corporation, partnership,
joint venture or other entity, (x) make any offer of employment, solicit or hire
any supervisor, employee of the Company or its affiliates or induce or attempt
to induce any employee of the Company or its affiliates to leave their employ or
in any way interfere with the relationship between the Company or its affiliates
and any of their employees or (y) induce or attempt to induce any supplier,
licensee, licensor,
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franchisee, or other business relation of the Company or its affiliates to cease
doing business with them or in any way interfere with the relationship between
the Company or its affiliates and any customer or business relation.
(c) Each of (i) Employee's Confidentiality and Noncompete Agreement with
the Company dated July 27, 1990, as amended by Amendment No. 1 dated January 12,
1995 and Amendment No. 2 dated January 25, 1995, (ii) Employee's Side Agreement
dated as of January 12, 1995 (the "Side Agreement") with the Company, the Funds,
the Executives (each as defined in the Purchase Agreement) and certain other
employee shareholders of the Company, and (iii) Employee's Stock Purchase
Warrant dated January 12, 1995 granted to Employee by the Company and consented
to by the Funds pursuant to and in accordance with paragraph 2 of the Side
Agreement is hereby canceled and of no further force and effect and replaced in
its entirety by this Agreement.
SECTION 6. COMPANY'S OWNERSHIP OF INTELLECTUAL PROPERTY.
(a) In the event that Employee as part of his activities on behalf
of the Company generates, authors or contributes to any invention, design, new
development, device, product, method or process (whether or not patentable or
reduced to practice or comprising Confidential Information), any copyrightable
work (whether or not comprising Confidential Information) or any other form of
Confidential Information relating directly or indirectly to the Company's
business as prior hereto, now or hereinafter conducted (collectively,
"Intellectual Property"), Employee acknowledges that such Intellectual Property
is the exclusive property of the Company and hereby assigns all right, title and
interest in and to such Intellectual Property to the Company. Any copyrightable
work prepared in whole or in part by Employee shall be deemed "a work made for
hire" under Section 201(b) of the 1976 Copyright Act, and the Company shall own
all of the rights comprised in the copyright therein. Employee shall promptly
and fully disclose all Intellectual Property to the Company and shall cooperate
with the Company to protect the Company's interest in and rights to such
Intellectual Property, including without limitation providing reasonable
assistance in securing patent protection and copyright registrations and
executing all documents as reasonably requested by the Company, whether such
requests occur prior to or after termination of Employee's employment with the
Company.
(b) In accordance with Minnesota Statutes, Chapter 181, Section
181.78, Employee is hereby advised that no provision of this Agreement is
intended to assign any of Employee's rights in an invention for which no
equipment, supplies, facility or trade secret information of the Company was
used and which was developed entirely on the Employee's own time, and which does
not relate directly to the business of the Company or to the Company's actual or
demonstrably anticipated research or development, or which does not result from
any work performed by the Employee for the Company.
(c) As requested by the Company from time to time and upon the
termination of Employee's employment with the Company for any reason, Employee
shall promptly deliver to the Company all copies and embodiments, in whatever
form, of all Confidential Information or Intellectual Property in Employee's
possession or within his control (including, but not limited to, written
records, notes, photographs, manuals, notebooks, documentation, program
listings, flow charts, magnetic media, disks, diskettes, tapes and all other
materials containing any Confidential Information or Intellectual Property)
irrespective of the location or form of such material and, if requested by the
Company, shall provide the Company with written confirmation that all such
materials have been delivered to the Company.
SECTION 7. TERMINATION OF AGREEMENT.
(a) TERMINATION FOR "CAUSE". This Agreement may be terminated by the
Company at any time during the Employment Term for "Cause", in which event
Employee shall have no further rights under this Agreement. For purposes of the
preceding sentence, "Cause" shall mean: (i) any breach or threatened breach by
Employee of any of his agreements contained in Section 4, 5 or 6 hereof; (ii)
repeated or willful neglect by
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Employee in performing any duty or carrying out any responsibility assigned or
delegated to him pursuant to Section 1(b) hereof, which neglect shall not have
permanently ceased within ten (10) business days after written notice to
Employee thereof; or (iii) the commission by Employee of any criminal act
involving moral turpitude or a felony which results in an arrest or indictment,
or the commission by Employee, based on reasonable proof, of any act of fraud or
embezzlement involving the Company or its customers or suppliers. In the event
that the Company elects to terminate this Agreement for Cause, it will give
Employee written notice of such termination, and, at the Company's discretion,
Employee's employment will terminate sixty (60) days thereafter.
(b) TERMINATION UPON DEATH. This Agreement shall terminate automatically
upon the death of Employee during the Employment Term. In such event, the
Company shall be obligated to pay to Employee's estate, or to such person or
persons as he may designate in writing to the Company, (i) through the last day
of the fiscal year in which Employee's death shall have occurred, the salary
(payable in the same manner as described in Section 2(a) hereof) to which
Employee would have been entitled under Section 2(a) hereof had such death not
occurred, and (ii) as soon as reasonably practicable after Employee's death, any
accrued but, as of the date of such death, unpaid Incentive Bonus (or, if such
death shall have occurred after the first three (3) months of the Company's
fiscal year, any prorated portion thereof).
(c) TERMINATION UPON DISABILITY. This Agreement may be terminated by the
Company at any time during the Employment Term in the event that Employee shall
have been unable, because of "Disability" (as hereinafter defined), to perform
his principal duties for the Company for a cumulative period of six (6) months
within any eighteen (18) month period. Prior to Employee's termination for
Disability as provided herein, he shall remain eligible to receive the
compensation and benefits set forth in Section 2 and Section 3 hereof. Upon such
termination, Employee shall be entitled to receive as soon as reasonably
practicable thereafter, any accrued, but as of the date of such termination,
unpaid Incentive Bonus (or, if such termination shall have occurred after the
first three (3) months of the Company's fiscal year, any prorated portion
thereof). For purposes of this Section 7(c), "Disability" shall mean any
physical or mental condition of Employee which shall substantially impair his
ability to perform his principal duties hereunder. In the event that the Company
elects to terminate this Agreement by reason of Disability under this Section
7(c), it will give written notice of such termination, and, at the Company's
discretion, Employee's employment will terminate sixty (60) days thereafter.
(d) EFFECT OF TERMINATION. In the event that this Employee is terminated
pursuant to any paragraph of this Section 7, Employee shall thereafter have no
further rights under this Agreement, except for those explicitly set forth in
the particular paragraph of this Section 7 which served as the Company's basis
for such termination. In the event that during the Employment Term Employee (i)
is terminated by the Company without "Cause" or (ii) voluntary resigns from his
employment with the Company and as a director of the Company, the Company shall
be obligated to purchase as promptly as reasonably practicable after such
termination or resignation date, as applicable, up to a number of shares of
Common Stock owned by Employee having an aggregate fair market value (based on
the average daily trading price of the Common Stock over the thirty (30) day
period immediately preceding such termination or resignation date, as
applicable, if the initial public offering of the Company under the Securities
Act of 1993, as amended, shall then have been completed or, if such initial
public offering shall not then have been completed, based on a valuation of the
Common Stock by Simmons & Co. International) equal to $2.3 million.
Notwithstanding any termination of Employee's employment with the Company, the
covenants and agreements of Employee contained in Sections 4, 5 (a) (so long as
payments under Section 5(a) are continued as therein described), 5 (b) and 6
hereof shall survive and remain in full force and effect.
SECTION 8. NOTICES.
All notices, requests, demands and other communications hereunder must be
in writing and shall be deemed to have been duly given if delivered by hand,
sent to the recipient by reputable express courier service
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(charge prepaid), or mailed by first class, registered mail, return receipt
requested, postage and registry fees prepaid and addressed as follows:
If to the Employee:
At the address set forth on page 1 hereof.
If to the Company :
Cal Dive International, Inc.
13430 Northwest Freeway
Suite 350
Houston, Texas 77040
Attention: Andrew C. Becher, General Counsel
Addresses may be changed by notice in writing signed by the addressee.
SECTION 9. GENERAL PROVISIONS.
(a) COMPANY SUBSIDIARIES. For purposes of this Agreement, the term
"Company" shall include all subsidiaries of the Company.
(b) SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provisions of any other jurisdiction, and this Agreement shall be
reformed, construed and enforced in such jurisdictions if such invalid, illegal
or unenforceable provision had never been contained herein. The parties agree
that a court of competent jurisdiction making a determination of the invalidity
or unenforceability of any term or provision of Sections 4, 5 and 6 of this
Agreement shall have the power to reduce the scope, duration or area of any such
term or provision, to delete specific words or phrases or to replace any invalid
or unenforceable term or provision in Sections 4, 5, 6 with a term or provision
that is valid and enforceable and that comes closest to expressing the intention
of the invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified.
(d) COMPLETE AGREEMENT. This Agreement, embodies the complete
agreement and understanding among the parties and supersedes and preempts any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
(e) COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
(f) SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
this Agreement shall bind and inure to the benefit of and be enforceable by the
Company and Employee and their respective successors and assigns; provided that
the rights and obligations of Employee under this Agreement shall not be
assignable without the prior written consent of the Company.
(g) GOVERNING LAW. All questions concerning the construction,
validity and interpretation of this Agreement and the exhibits hereto shall be
governed by the internal law, and not the law of conflicts, of the State of
Texas.
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(h) REMEDIES. Each of the parties to this Agreement shall be
entitled to enforce its rights under this Agreement specifically, to recover
damages and costs (including reasonable attorneys fees) caused by any breach of
any provision of this Agreement and to exercise all other rights existing in its
favor. The parties hereto agree and acknowledge that Employee's breach of any
term or provision of this Agreement shall materially and irreparably harm the
Company, that money damages shall accordingly not be an adequate remedy for any
breach of the provisions of this Agreement and that any party in its sole
discretion and in addition to any other remedies it may have at law or in equity
may apply to any court of law or equity of competent jurisdiction (without
posting any bond or deposit) for specific performance and/or other injunctive
relief in order to enforce or prevent any violations of the provisions of this
Agreement.
(i) AMENDMENT AND WAIVER. The provisions of this Agreement may be
amended and waived only with the prior written consent of the Company and
Employee.
IN WITNESS, WHEREOF, the parties hereto have duly executed this Agreement as of
the date first above written.
CAL DIVE INTERNATIONAL, INC. EMPLOYEE
By
Title: Owen Kratz
7
EMPLOYMENT AGREEMENT
This Agreement is made this day of April, 1997, between Cal Dive
International, Inc., a Minnesota corporation (the "Company"), and S. James
Nelson (Employee), an individual residing at 1518 Washington Avenue, Unit A,
Houston, Texas 77007.
WHEREAS, Employee has extensive executive management skills and experience
in the oil service industry, including valuable marketing, financial, technical
and other experience, knowledge and ability and has been acting as Executive
Vice President Finance and Administration and Chief Financial Officer.
WHEREAS, the Company wishes to continue to employ Employee as Executive
Vice President Finance and Administration and Chief Financial Officer of the
Company and Employee is willing to accept such continued employment upon the
terms and conditions set forth in this Agreement;
WHEREAS, the execution and delivery of this Agreement by the Company and
Employee is a condition to the purchase of shares of the Company's Common Stock
by Coflexip (the "Purchaser") from the Company and certain shareholders of the
Company, including, among others, Employee, pursuant to a Purchase Agreement
dated as of the date hereof among the Company, the Purchaser and such
shareholders;
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements set forth herein, the parties hereto agree as follows:
SECTION 1. TERM OF EMPLOYMENT AND EMPLOYMENT DUTIES.
(a) Employee agrees to be employed by the Company on the terms and
conditions contained herein, for a period commencing on the date hereof and
terminating on April 30, 1999 (the "Employment Term") subject to earlier
termination pursuant to the provisions of Section 7 hereof. During the
Employment Term, Employee shall devote all of his time, energy and skill during
regular business hours to the affairs of the Company and any of its affiliated
business entities and to the promotion of their interests.
(b) Employee's duties shall include acting as Executive Vice President
Finance and Administration and Chief Financial Officer of the Company with all
responsibilities assigned to that office from time to time by the Chief
Executive Officer and the Board of Directors.
(c) During the Employment Term, (i) Employee services shall be rendered on
a full time basis, (ii) Employee shall have no other employment and no
substantial outside business activities and (iii) the headquarters for the
performance of Employee's services shall be the principal executive or operating
offices of the Company, subject to travel for such reasonable lengths of time as
the performance of his duties in the business of the Company may require.
SECTION 2. COMPENSATION.
(a) SALARY. During the Employment Term, as Compensation for his services
and covenants and agreements hereunder, the Company agrees to pay Employee an
initial salary for the period from the date hereof to April 30, 1999 at the rate
of One Hundred Twenty-Eight Thousand Three Hundred Dollars ($128,300) per annum,
payable in equal semi-monthly installments in accordance with the Company's
regular payroll practices for its principal executives, prorated for any partial
employment and subject to normal increases as approved by the Board of
Directors.
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(b) INCENTIVE BONUS. During the Employment Term, in addition to the to the
annual salary payable to Employee pursuant to paragraph (a) above, Employee
shall be entitled to an annual incentive bonus (the "Incentive Bonus"), payable
not later than three months after the close of each fiscal year of the Company,
commencing with the fiscal year ending December 31, 1997, as established
annually or from time to time by the Board .
(c) REIMBURSEMENT OF EXPENSES. During the Employment Term, Employee will
be reimbursed by the Company for his reasonable business expenses incurred in
connection with the performance of his duties hereunder, including, without
limitation, a home fax line, car mileage, cell phone and business calls and
other expenses consistent with Company policy from time to time.
SECTION 3. BENEFITS.
During the Employment Term, Employee shall be entitled to participate in
any medical/dental, life insurance, accidental death, long term disability
insurance plan and 401(k) or other insurance and retirement plans which has been
or which may be adopted by the Company (as long as such plan is not
discontinued) for the general and overall benefit of executive employees of the
Company, according to the participation or eligibility requirements of each such
plan. During the Employment Term, Employee shall enjoy such vacation, holiday
and similar rights and privileges as are enjoyed generally by the Company's
principal executives.
SECTION 4. NONDISCLOSURE AND NONUSE OF CONFIDENTIAL INFORMATION
(a) During the period commencing with the date of this Agreement and
ending on (i) the fifth anniversary of the date of the termination of Employee's
employment with the Company if such termination arises as a result of voluntary
termination or retirement by the Employee or termination by the Company for
"Cause" (as defined in Section 7 (a) hereof) and (ii) the date which is 18
months following the date of termination of Employee's employment with the
Company if such termination arises for any reason other than as provided in
subparagraph 4 (a) (i) above, Employee covenants and agrees with the Company
that Employee shall not disclose or use any Confidential Information (as defined
below) of which Employee is or becomes aware, whether or not such information is
developed by him, except to the extent that such disclosure or use is directly
related to and required by Employee's performance of duties assigned to Employee
by the Company. Employee shall take all appropriate steps to safeguard
Confidential Information and to protect it against disclosure, misuse,
espionage, loss and theft.
(b) As used in this Agreement, the term "Confidential Information" means
information that is not generally known to the public and that is or has been
used, developed or obtained, either prior to or following the date of this
Agreement, by the Company in connection with its businesses, including but not
limited to (i) products or services, (ii) fees, costs and pricing structures,
(iii) designs, (iv) analysis, (v) drawings, photographs and reports, (vi)
computer software, including operating systems, applications and program
listings, (vii) flow charts, manuals and documentation, (viii) data bases, (ix)
accounting and business methods, (x) inventions, devices, new developments,
methods and processes, whether patentable or unpatentable and whether or not
reduced to practice, (xi) customers and clients and customer or client lists,
(xii) other copyrightable works, (xiii) all technology and trade secrets, and
(xiv) all similar and related information in whatever form. Confidential
Information shall not include any information that has been published in a form
generally available to the public prior to the date Employee proposes to
disclose or use such information other than as a result of disclosure by
Employee in violation of this Agreement. Information shall not be deemed to have
been published merely because individual portions of the information have been
separately published, but only if all material features comprising such
information have been published in combination.
SECTION 5. NON-COMPETITION AND NON-SOLICITATION.
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<PAGE>
(a) Employee acknowledges and agrees with the Company that his services to
the Company are unique in nature and that the Company would be irreparably
damaged if Employee were to provide similar services to any person or entity
competing with the Company or engaged in a similar business. Employee
accordingly covenants and agrees with the Company that during the period
commencing with the date of this Agreement and ending on the later to occur of:
(i) April 30, 2002 and (ii) (A) the second anniversary of the date of the
termination of Employee's employment with the Company if such termination
arises as a result of voluntary termination or retirement by the Employee
or termination by the Company for "Cause", or (B) the first anniversary of
the date of termination of the Employee's employment with the Company if
such termination arises for any reason other than as provided in the
preceding subparagraph 5(a) (ii) (A).
Employee shall not, directly or indirectly, either for himself or for any other
individual, corporation, partnership, joint venture of other entity, participate
in any business (including without limitation any division, group or franchise
of a larger organization) which engages or which proposes to engage in the
business of providing diving services in the Gulf of Mexico or any other
business actively engaged in by the Company on the date of termination of
Employee's employment in the area or areas where the Company is conducting such
business; PROVIDED that until such time as the Company waives in writing any
rights it may have to enforce the terms of this Section 5 (the "Waiver), during
the period commencing on the date of the termination of the Employee's
employment with the Company and ending on the date on which either the
noncompetition provisions contained in this Section 5 terminate or the Waiver is
delivered to Employee, whichever is earlier, the Company will pay to Employee an
amount equal to Employee's base salary as of the date his employment was
terminated (which will be paid over time in accordance with the salary payment
schedule in effect from time to time for senior executives of the Company) and
during such time period executive shall be entitled to all insurance benefits
received by other senior executives of the Company. For purposes of this
Agreement, the term "participate in" shall include without limitation having any
direct or indirect interest in any corporation, partnership, joint venture or
other entity, whether as a sole proprietor, owner, stockholder, partner, joint
venturer, creditor or otherwise, or rendering any direct or indirect service or
assistance to any individual, corporation, partnership, joint venture and other
business entity (whether as a director, officer, manager, supervisor, employee,
agent, consultant or otherwise) but not ownership of 2% or less of the capital
stock of a public company.
(b) Employee covenants and agrees with the Company that during the period
commencing with the date of this Agreement and ending on the later to occur of
(i) April 30, 2002 and (ii) (A) the second anniversary of the date of
termination of Employee's employment with the Company if such termination arises
as a result of voluntary termination by the Company or for "Cause", or (B) the
date which is 18 months following the termination of Employee's employment with
the Company if such termination arises for any reason other than as provided in
the preceding subparagraph 5(b) (ii) (A) above, Employee shall not, directly or
indirectly, for himself or for any other individual, corporation, partnership,
joint venture or other entity, (x) make any offer of employment, solicit or hire
any supervisor, employee of the Company or its affiliates or induce or attempt
to induce any employee of the Company or its affiliates to leave their employ or
in any way interfere with the relationship between the Company or its affiliates
and any of their employees or (y) induce or attempt to induce any supplier,
licensee, licensor, franchisee, or other business relation of the Company or its
affiliates to cease doing business with them or in any way interfere with the
relationship between the Company or its affiliates and any customer or business
relation.
(c) Employee's Confidentiality and Noncompete Agreement with the Company
dated July 27, 1990, as amended by Amendment No. 1 dated January 12, 1995, is
hereby canceled and replaced in its entirety by this Agreement.
SECTION 6. COMPANY'S OWNERSHIP OF INTELLECTUAL PROPERTY.
(a) In the event that Employee as part of his activities on behalf
of the Company generates, authors or contributes to any invention, design, new
development, device, product, method or process (whether or
3
<PAGE>
not patentable or reduced to practice or comprising Confidential Information),
any copyrightable work (whether or not comprising Confidential Information) or
any other form of Confidential Information relating directly or indirectly to
the Company's business as prior hereto, now or hereinafter conducted
(collectively, "Intellectual Property"), Employee acknowledges that such
Intellectual Property is the exclusive property of the Company and hereby
assigns all right, title and interest in and to such Intellectual Property to
the Company. Any copyrightable work prepared in whole or in part by Employee
shall be deemed "a work made for hire" under Section 201(b) of the 1976
Copyright Act, and the Company shall own all of the rights comprised in the
copyright therein. Employee shall promptly and fully disclose all Intellectual
Property to the Company and shall cooperate with the Company to protect the
Company's interest in and rights to such Intellectual Property, including
without limitation providing reasonable assistance in securing patent protection
and copyright registrations and executing all documents as reasonably requested
by the Company, whether such requests occur prior to or after termination of
Employee's employment with the Company.
(b) In accordance with Minnesota Statutes, Chapter 181, Section
181.78, Employee is hereby advised that no provision of this Agreement is
intended to assign any of Employee's rights in an invention for which no
equipment, supplies, facility or trade secret information of the Company was
used and which was developed entirely on the Employee's own time, and which does
not relate directly to the business of the Company or to the Company's actual or
demonstrably anticipated research or development, or which does not result from
any work performed by the Employee for the Company.
(c) As requested by the Company from time to time and upon the
termination of Employee's employment with the Company for any reason, Employee
shall promptly deliver to the Company all copies and embodiments, in whatever
form, of all Confidential Information or Intellectual Property in Employee's
possession or within his control (including, but not limited to, written
records, notes, photographs, manuals, notebooks, documentation, program
listings, flow charts, magnetic media, disks, diskettes, tapes and all other
materials containing any Confidential Information or Intellectual Property)
irrespective of the location or form of such material and, if requested by the
Company, shall provide the Company with written confirmation that all such
materials have been delivered to the Company.
SECTION 7. TERMINATION OF AGREEMENT.
(a) TERMINATION FOR "CAUSE". This Agreement may be terminated by the
Company at any time during the Employment Term for "Cause", in which event
Employee shall have no further rights under this Agreement. For purposes of the
preceding sentence, "Cause" shall mean: (i) any breach or threatened breach by
Employee of any of his agreements contained in Section 4, 5 or 6 hereof; (ii)
repeated or willful neglect by Employee in performing any duty or carrying out
any responsibility assigned or delegated to him pursuant to Section 1(b) hereof,
which neglect shall not have permanently ceased within ten (10) business days
after written notice to Employee thereof; or (iii) the commission by Employee of
any criminal act involving moral turpitude or a felony which results in an
arrest or indictment, or the commission by Employee, based on reasonable proof,
of any act of fraud or embezzlement involving the Company or its customers or
suppliers. In the event that the Company elects to terminate this Agreement for
Cause, it will give Employee written notice of such termination, and, at the
Company's discretion, Employee's employment will terminate sixty (60) days
thereafter.
(b) TERMINATION UPON DEATH. This Agreement shall terminate automatically
upon the death of Employee during the Employment Term. In such event, the
Company shall be obligated to pay to Employee's estate, or to such person or
persons as he may designate in writing to the Company, (i) through the last day
of the fiscal year in which Employee's death shall have occurred, the salary
(payable in the same manner as described in Section 2(a) hereof) to which
Employee would have been entitled under Section 2(a) hereof had such death not
occurred, and (ii) as soon as reasonably practicable after Employee's death, any
accrued but, as of the date of such death, unpaid Incentive Bonus (or, if such
death shall have occurred after the first three (3) months of the Company's
fiscal year, any prorated portion thereof).
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<PAGE>
(c) TERMINATION UPON DISABILITY. This Agreement may be terminated by the
Company at any time during the Employment Term in the event that Employee shall
have been unable, because of "Disability" (as hereinafter defined), to perform
his principal duties for the Company for a cumulative period of six (6) months
within any eighteen (18) month period. Prior to Employee's termination for
Disability as provided herein, he shall remain eligible to receive the
compensation and benefits set forth in Section 2 and Section 3 hereof. Upon such
termination, Employee shall be entitled to receive as soon as reasonably
practicable thereafter, any accrued, but as of the date of such termination,
unpaid Incentive Bonus (or, if such termination shall have occurred after the
first three (3) months of the Company's fiscal year, any prorated portion
thereof). For purposes of this Section 7(c), "Disability" shall mean any
physical or mental condition of Employee which shall substantially impair his
ability to perform his principal duties hereunder. In the event that the Company
elects to terminate this Agreement by reason of Disability under this Section
7(c), it will give written notice of such termination, and, at the Company's
discretion, Employee's employment will terminate sixty (60) days thereafter.
(d) EFFECT OF TERMINATION. In the event that this Employee is terminated
pursuant to any paragraph of this Section 7, Employee shall thereafter have no
further rights under this Agreement, except for those explicitly set forth in
the particular paragraph of this Section 7 which served as the Company's basis
for such termination. Notwithstanding any such termination, the covenants and
agreements of Employee contained in Sections 4, 5 (a) (so long as payments under
Section 5(a) are continued as therein described), 5 (b) and 6 hereof shall
survive and remain in full force and effect.
SECTION 8. NOTICES.
All notices, requests, demands and other communications hereunder must be
in writing and shall be deemed to have been duly given if delivered by hand,
sent to the recipient by reputable express courier service (charge prepaid), or
mailed by first class, registered mail, return receipt requested, postage and
registry fees prepaid and addressed as follows:
If to the Employee:
At the address set forth on page 1 hereof.
If to the Company :
Cal Dive International, Inc.
13430 Northwest Freeway
Suite 350
Houston, Texas 77040
Attention: Andrew C. Becher, General Counsel
Addresses may be changed by notice in writing signed by the addressee.
SECTION 9. GENERAL PROVISIONS.
(a) COMPANY SUBSIDIARIES. For purposes of this Agreement, the term
"Company" shall all subsidiaries of the Company.
(b) SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity,
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<PAGE>
illegality or unenforceability shall not affect any other provisions of any
other jurisdiction, and this Agreement shall be reformed, construed and enforced
in such jurisdictions if such invalid, illegal or unenforceable provision had
never been contained herein. The parties agree that a court of competent
jurisdiction making a determination of the invalidity or unenforceability of any
term or provision of Sections 4, 5 and 6 of this Agreement shall have the power
to reduce the scope, duration or area of any such term or provision, to delete
specific words or phrases or to replace any invalid or unenforceable term or
provision in Sections 4, 5, 6 with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as so
modified.
(d) COMPLETE AGREEMENT. This Agreement, embodies the complete
agreement and among the parties and supersedes and preempts any prior
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter hereof in any way.
(e) COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
(f) SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
this Agreement shall bind and inure to the benefit of and be enforceable by the
Company and Employee and their respective successors and assigns; provided that
the rights and obligations of Employee under this Agreement shall not be
assignable without the prior written consent of the Company.
(g) GOVERNING LAW. All questions concerning the construction,
validity and interpretation of this Agreement and the exhibits hereto shall be
governed by the internal law, and not the law of conflicts, of the State of
Texas.
(h) REMEDIES. Each of the parties to this Agreement shall be
entitled to enforce its rights under this Agreement specifically, to recover
damages and costs (including reasonable attorneys fees) caused by any breach of
any provision of this Agreement and to exercise all other rights existing in its
favor. The parties hereto agree and acknowledge that Employee's breach of any
term or provision of this Agreement shall materially and irreparably harm the
Company, that money damages shall accordingly not be an adequate remedy for any
breach of the provisions of this Agreement and that any party in its sole
discretion and in addition to any other remedies it may have at law or in equity
may apply to any court of law or equity of competent jurisdiction (without
posting any bond or deposit) for specific performance and/or other injunctive
relief in order to enforce or prevent any violations of the provisions of this
Agreement.
(i) AMENDMENT AND WAIVER. The provisions of this Agreement may be
amended and waived only with the prior written consent of the Company and
Employee.
IN WITNESS, WHEREOF, the parties hereto have duly executed this Agreement as of
the date first above written.
CAL DIVE INTERNATIONAL, INC. EMPLOYEE
By___________________________ ____________________________
Title:
6
1997 LONG TERM INCENTIVE PLAN
OF
CAL DIVE INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
On November 2, 1995, the Cal Dive Board approved the 1995 LONG TERM
INCENTIVE PLAN OF CAL DIVE INTERNATIONAL, INC. (Attachment 1) which was
subsequently approved by the Shareholders of the Company.
The Plan provided for issuance of up to 600,000 shares of Common Stock of
the Company, representing approximately 5% of the then issued and outstanding
Common Stock of the Company.
As of this date, awards for 476,500 shares at a strike price of $4.50 per
share are issued (Attachment 2) pursuant to a standard "Award Agreement"
(Attachment 3).
Whereas the 1997 Amended and Restated Shareholders Agreement dated as of
April 10, 1997, contemplates a "Stock Option Plan" providing for the granting to
employees or Directors rights to purchase in the aggregate, when combined with
all other outstanding options or other rights to purchase Common Stock from the
Company, up to 10% (as adjusted for any subsequent stock splits, stock
dividends, recapitalizations or similar events) of the issued and outstanding
Common Stock of the Company; and
Whereas the 1995 Long Term Incentive Plan allows (pursuant to Article 10)
for the modification of the Plan by the Board (subject to subsequent Shareholder
approval);
Management hereby recommends the following changes to the Plan be adopted:
1) Amend "Participant" to read "means an employee OR DIRECTOR . . ."
2) Amend Article 4 to read:
COMMON STOCK AVAILABLE FOR AWARDS: There shall be available for
Awards granted wholly or partly in Common Stock (including rights or options
which may be exercised for or settled in Common Stock) during the term of this
Plan, up to (but not to exceed) 10% of the issued and outstanding Common Stock
(as adjusted for any subsequent stock splits, stock dividends,
recapitalizations, or similar events). This 10% will be calculated in the
aggregate, when combined with all other outstanding options or other rights to
purchase Common Stock. The Board of Directors and the appropriate officers of
the Company shall from time to time take whatever actions are necessary to file
required documents with governmental authorities and stock exchanges and
transaction reporting systems to make shares of Common Stock available for
issuance pursuant to Awards. Common Stock related to Awards that are forfeited
or terminated, expire unexercised or if settled in a manner such that all or
some of the shares covered by an Award are not issued to a Participant, or are
exchanged for Awards that do not involve Common Stock, shall immediately become
available for Awards hereunder. The Committee may from time to time adopt and
observe such procedures concerning the counting of shares against the Plan
maximum as it may deem appropriate under Rule 16b-3.
Page 1 of 2
<PAGE>
Furthermore, Management hereby recommends that Awards be made as follows,
using the Award Agreement (Attachment 4) based on an exercise price of $9.50 per
share, pro rata annual vesting for five (5) years:
Lou Tapscott......................................................70,000
Lynn Smith.........................................................5,000
Ken Duell.........................................................25,000
George Friedel....................................................25,000
Chris Hale........................................................15,000
Stanley Kellogg...................................................25,000
Jack Lounsbury....................................................10,000
John Odusch..................................................... 10,000
TOTAL 185,000
As a result of these awards, the Company responsibility under all Awards
will equal 661,500 shares with a total issued and outstanding 11,627,801 shares
or + 5.7%.
Page 2 of 2
<PAGE>
ATTACHMENT 1
1995 LONG TERM INCENTIVE PLAN
OF
CAL DIVE INTERNATIONAL, INC.
1. OBJECTIVES. The 1995 Long Term Incentive Plan of Cal Dive
International, Inc. (the "Plan") is designed to retain key executives and other
selected employees and reward them for making major contributions to the success
of Cal Dive International, Inc., a Minnesota corporation and its Subsidiaries
(the "Company"). These objectives are to be accomplished by making awards under
the Plan and thereby providing Participants (as hereinafter defined) with a
proprietary interest in the growth and performance of the Company and its
Subsidiaries.
2. DEFINITIONS. As used herein, the terms set forth below shall have the
following respective meanings:
"Award" means the grant of any form of stock option, stock appreciation
right, stock award or cash award, whether granted singly, in combination or in
tandem, to a Participant pursuant to any applicable terms, conditions and
limitations as the Committee or the Board may establish in order to fulfill the
objectives of the Plan.
"Award Agreement" means a written agreement between the Company and a
Participant that sets forth the terms, conditions and limitations applicable to
an Award.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means such Compensation Committee of the Board as is
designated by the Board to administer the Plan. The Committee shall be
constituted to permit the Plan to comply with Rule 16b-3.
"Common Stock" means the Common Stock of the Company.
"Director" means an individual serving as a member of the Board.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time.
"Fair Market Value" means, as of a particular date, but subject to the
provisions of other Company agreements binding the Participant from time to time
(such as the Company's Amended and Restated Shareholders Agreement) which shall
take precedence, (i) if the shares of Common Stock are listed on a national
securities exchange, the mean between the highest and lowest sales price per
share of Common Stock on the consolidated transaction reporting system for the
principal such national securities exchange on that date, or, if there shall
have been no such sale so reported on that date, on the last preceding date on
which such a sale was so reported, (ii) if the shares of Common Stock are not so
listed but are quoted on the Nasdaq National Market, the mean between the
highest and lowest sales price per share of Common Stock on the Nasdaq
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National Market on that date, or, if there shall have been no such sale so
reported on that date, on the last preceding date on which such a sale was so
reported (iii) if the Common Stock is not so listed or quoted, the mean between
the closing bid and asked price on that date, or if there are no quotations
available for such date, on the last preceding date on which such quotations
shall be available, as reported by Nasdaq, or, if not reported by Nasdaq, by the
National Quotation Bureau, Inc. or (iv) if none of the foregoing apply, as
determined in the discretion of the Company's Board from time to time.
"Participant" means an employee of the Company or any of its Subsidiaries
to whom an Award has been made under this Plan.
"Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act, or any
successor rule.
"Subsidiary" means any corporation of which the Company directly or
indirectly owns shares representing more than 50% of the voting power of all
classes or series of capital stock of such corporation which have the right to
vote generally on matters submitted to a vote of the stockholders of such
corporation.
3. ELIGIBILITY. Employees of the Company and its Subsidiaries eligible for
an Award under this Plan are those who hold positions of responsibility and
whose performance, in the judgment of the Committee, can have a significant
effect on the success of the Company and its Subsidiaries.
4. COMMON STOCK AVAILABLE FOR AWARDS. There shall be available for Awards
granted wholly or partly in Common Stock (including rights or options which may
be exercised for or settled in Common Stock) during the term of this Plan an
aggregate of 600,000 (representing approximately five percent (5% in November,
1995) of issued and outstanding shares after a ten for one stock split) shares
of Common Stock. The Board of Directors and the appropriate officers of the
Company shall from time to time take whatever actions are necessary to file
required documents with governmental authorities and stock exchanges and
transaction reporting systems to make shares of Common Stock available for
issuance pursuant to Awards. Common Stock related to Awards that are forfeited
or terminated, expire unexercised or if settled in a manner such that all or
some of the shares covered by an Award are not issued to a Participant, or are
exchanged for Awards that do not involve Common Stock, shall immediately become
available for Awards hereunder. The Committee may from time to time adopt and
observe such procedures concerning the counting of shares against the Plan
maximum as it may deem appropriate under Rule 16b-3.
5. ADMINISTRATION. Except for approval of Awards and Participants as
described in Section 6, this Plan shall be administered by the Committee, which
shall have full and exclusive power to interpret this Plan and to adopt such
rules, regulations and guidelines for carrying out this Plan as it may deem
necessary or proper, all of which powers shall be exercised in the best
interests of the Company and in keeping with the objectives of this Plan. The
Committee may, in its discretion, provide for the extension of the
exercisability of an Award, accelerate the vesting or exercisability of an
Award, eliminate or make less restrictive any restrictions contained in an
Award, waive any restriction or other provision of this Plan or an Award or
otherwise amend or modify an Award in any manner that is either (i) not adverse
to the Participant holding such
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Award or (ii) consented to by such Participant. The Committee may correct any
defect or supply any omission or reconcile any inconsistency in this Plan or in
any Award in the manner and to the extent the Committee deems necessary or
desirable to carry it into effect. Any decision of the Committee in the
interpretation and administration of this Plan shall lie within its sole and
absolute discretion and shall be final, conclusive and binding on all parties
concerned. No member of the Committee shall be liable for anything done or
omitted to be done by him or her, by any member of the Committee or by any
officer of the Company in connection with the performance of any duties under
this Plan, except for his or her own willful misconduct or as expressly provided
by statute.
6. AWARDS. The Committee shall determine, subject to Board approval of
each Participant, the type or types of Awards to be made to each Participant
under this Plan. Each Award made hereunder shall be embodied in an Award
Agreement, which shall contain terms, conditions and limitations as shall be
determined by the Committee in its sole discretion and shall be signed by the
Participant and by the Chief Executive Officer, or Chief Financial Officer for
and on behalf of the Company. Awards may consist of those listed in this
Paragraph 6 and may be granted singly, in combination or in tandem. Awards may
also be made in combination or in tandem with, in replacement of, or as
alternatives to, grants or rights (i) under this Plan or any other employee plan
of the Company or any of its Subsidiaries, including the plan of any acquired
entity, or (ii) made to any Company or Subsidiary employee by the Company or any
Subsidiary. An Award may provide for the granting or issuance of additional,
replacement or alternative Awards upon the occurrence of specified events,
including the exercise of the original Award.
(a) STOCK OPTION. An Award may consist of a right to purchase a specified
number of shares of Common Stock at a specified price that is not less than the
Fair Market Value of the Common Stock on the date of grant. A stock option may
be in the form of an incentive stock option ("ISO") which, in addition to being
subject to applicable terms, conditions and limitations established by the
Committee, complies with Section 422 of the Code and may, at the discretion of
the Committee, be converted at any time to a Stock Appreciation Right as
specified in the Participant's Stock Option Agreement.
(b) STOCK APPRECIATION RIGHT. An award may consist of a right to receive a
payment, in cash or Common Stock, equal to the excess of the Fair Market Value
or other specified valuation of a specified number of shares of Common Stock on
the date the stock appreciation right ("SAR") is exercised over a specified
"Exercise Price" as set forth in the applicable Award Agreement.
(c) STOCK AWARD. An Award may consist of Common Stock or may be
denominated in units of Common Stock. All or part of any stock award may be
subject to conditions established by the Committee, and set forth in the Award
Agreement, which may include, but are not limited to, continuous service with
the Company and its Subsidiaries, accelerated vesting based upon events such as
a change in control of the Company, achievement of specific business objectives,
increases in specified indices, attaining specified growth rates and other
comparable measurements of performance and the right of the Committee to convert
the Award to a Stock Appreciation Right. Such Awards may be based on Fair Market
Value or other specified valuations. The certificates evidencing shares of
Common Stock issued in connection with a stock award shall contain appropriate
legends and restrictions describing the terms and conditions of the restrictions
applicable thereto.
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(d) CASH AWARD. An award may be denominated in cash with the amount of the
eventual payment subject to future service and such other restrictions and
conditions as may be established by the Committee, and set forth in the Award
Agreement, including, but not limited to the same conditions for a Stock Award.
7. PAYMENT OF AWARDS.
(a) GENERAL. Payment of Awards may be made in the form of cash or Common
Stock or combinations thereof and may include such restrictions as the Committee
shall determine, including in the case of Common Stock, restrictions on transfer
and forfeiture provisions. As used herein, "Restricted Stock" means Common Stock
that is restricted or subject to forfeiture provisions.
(b) DEFERRAL. With the approval of the Committee, payments may be
deferred, either in the form of installments or a future lump sum payment. The
Committee may permit selected Participants to elect to defer payments of some or
all types of Awards in accordance with procedures established by the Committee.
Any deferred payment, whether elected by the Participant or specified by the
Award Agreement or by the Committee, may be forfeited if and to the extent that
the Award Agreement so provides.
(c) DIVIDENDS AND INTEREST. Dividends or dividend equivalent rights may be
extended to and made part of any Award denominated in Common Stock or units of
Common Stock, subject to such terms, conditions and restrictions as the
Committee may establish. The Committee may also establish rules and procedures
for the crediting of interest on deferred cash payments and dividend equivalents
for deferred payment denominated in Common Stock or units of Common Stock.
(d) SUBSTITUTION OF AWARDS. At the discretion of the Committee, a
Participant may be offered an election to substitute an Award for another Award
or Awards of the same or different type.
8. STOCK OPTION EXERCISE. The price at which shares of Common Stock may be
purchased under a stock option shall be paid in full at the time of exercise in
cash or, if permitted by the Committee, by means of tendering Common Stock or
surrendering another Award, including Restricted Stock, valued at Fair Market
Value on the date of exercise, or any combination thereof. The Committee shall
determine acceptable methods for tendering Common Stock or other Awards to
exercise a stock option as it deems appropriate. If permitted by the Committee,
payment may be made by successive exercises by the Participant. The Committee
may provide for loans from the Company to permit the exercise or purchase of
Awards and may provide for procedures to permit the exercise or purchase of
Awards by use of the proceeds to be received from the sale of Common Stock
issuable pursuant to an Award. Unless otherwise provided in the applicable Award
Agreement, in the event shares of Restricted Stock are tendered as consideration
for the exercise of a stock option, a number of the shares issued upon the
exercise of the stock option, equal to the number of shares of Restricted Stock
used as consideration therefor, shall be subject to the same restrictions as the
Restricted Stock so submitted as well as any additional restrictions that may be
imposed by the Committee.
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9. TAX WITHHOLDING. The Company shall have the right to deduct applicable
taxes from any Award payment and withhold, at the time of delivery or vesting of
cash or shares of Common Stock under this Plan, an appropriate amount of cash or
number of shares of Common Stock or a combination thereof for payment of taxes
required by law or to take such other action as may be necessary in the opinion
of the Company to satisfy all obligations for withholding of such taxes. The
Committee may also permit withholding to be satisfied by the transfer to the
Company of shares of Common Stock theretofore owned by the holder of the Award
with respect to which withholding is required. If shares of Common Stock are
used to satisfy tax withholding, such shares shall be valued based on the Fair
Market Value when the tax withholding is required to be made.
10. AMENDMENT, MODIFICATION, SUSPENSION OR TERMINATION. The Board may
amend, modify, suspend or terminate this Plan for the purpose of meeting or
addressing any changes in legal requirements or for any other purpose permitted
by law except that (i) no amendment or alteration that would impair the rights
of any participant under any Award previously granted to such Participant shall
be made without such Participant's consent and (ii) no amendment or alteration
shall be effective prior to approval by the Company's stockholders to the extent
such approval is then required pursuant to Rule 16b-3 in order to preserve the
applicability of any exemption provided by such rule to any Award then
outstanding (unless the holder of such Award consents) or to the extent
stockholder approval is otherwise required by applicable legal requirements.
11. TERMINATION OF EMPLOYMENT. Continuous employment shall be a condition
to exercise of all Awards granted under this Plan. All Awards shall
automatically be void on the termination of employment of a Participant (for any
reason including death or disability) and such Participant shall thereafter have
no rights relative to such Award.
12. ASSIGNABILITY. Unless otherwise determined by the Committee and
provided in the Award Agreement, no Award or any other benefit under this Plan
shall be assignable or otherwise transferable except by will or the laws of
descent and distribution or pursuant to a qualified domestic relations order as
defined by the Code or Title I of the Employee Retirement Income Security Act,
or the rules thereunder. The Committee may prescribe and include in applicable
Award Agreements other restrictions on transfer. Any attempted assignment of an
Award or any other benefit under this Plan in violation of this Paragraph 12
shall be null and void.
13. ADJUSTMENTS.
(a) The existence of outstanding Awards shall not affect in any manner the
right or power of the Company or its stockholders to make or authorize any or
all adjustments, recapitalizations, changes of control or other changes in the
capital stock of the Company or any merger or consolidation of the Company, or
any issue of bonds, debentures, preferred or prior preference stock (whether or
not such issue is prior to, on a parity with or junior to the Common Stock) or
the dissolution or liquidation of the Company, or any sale or transfer of all or
any part of its assets or business, or any other corporate act or proceeding of
any kind, whether or not of a character similar to that of the acts or
proceedings enumerated above.
(b) In the event of any subdivision or consolidation of outstanding shares
of Common Stock or declaration of a dividend payable in shares of Common Stock
or recapitalizations or
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reclassification or other transaction involving an increase or reduction in the
number of outstanding shares of Common Stock, the Committee may adjust
proportionally (i) the number of shares of Common Stock reserved under this Plan
and covered by outstanding Awards denominated in Common Stock or units of Common
Stock; (ii) the exercise or other price in respect of such Awards; and (iii) the
appropriate Fair Market Value and other price determinations for such Awards. In
the event of any consolidation or merger of the Company with another corporation
or entity or the adoption by the Company of a plan of exchange affecting the
Common Stock or any distribution to holders of Common Stock of securities or
property (other than normal cash dividends or dividends payable in Common
Stock), the Committee shall make such adjustments or other provisions as it may
deem equitable, including adjustments to avoid fractional shares, to give proper
effect to such event. In the event of a corporate merger, consolidation,
acquisition of property or stock, separation, change of control or liquidation,
the Committee shall be authorized to issue or assume stock options, regardless
of whether in a transaction to which Section 424(a) of the Code applies, by
means of substitution of new options for previously issued options or an
assumption of previously issued options, or to make provision for the
acceleration of the exercisability of, or lapse of restrictions with respect to,
Awards and the termination of unexercised options in connection with such
transaction.
14. RESTRICTIONS. No Common Stock or other form of payment shall be issued
with respect to any Award unless the Company shall be satisfied based on the
advice of its counsel that such issuance will be in compliance with applicable
federal and state securities laws. It is the intent of the Company that this
Plan comply with Rule 16b-3 with respect to persons subject to Section 16 of the
Exchange Act unless otherwise provided herein or in an Award Agreement, that any
ambiguities or inconsistencies in the construction of this Plan be interpreted
to give effect to such intention, and that if any provision of this Plan is
found not to be in compliance with rule 16b-3, such provision shall be null and
void to the extent required to permit this Plan to comply with Rule 16b-3.
Certificates evidencing shares of Common Stock delivered under this Plan may be
subject to such stop transfer orders and other restrictions as the Committee may
deem advisable under the rules, regulations and other requirements of the
Securities and Exchange Commission, any securities exchange or transaction
reporting system upon which the Common Stock is then listed and any applicable
federal and state securities law. The Committee may cause a legend or legends to
be placed upon any such certificates to make appropriate reference to such
restrictions.
15. UNFUNDED PLAN. Insofar as it provides for Awards of Common Stock, cash
or rights thereto, this Plan shall be unfunded. Although bookkeeping accounts
may be established with respect to Participants who are entitled to cash, Common
Stock or rights thereto under this Plan, any such accounts shall be used merely
as a bookkeeping convenience. The Company shall not be required to segregate any
assets that may at any time be represented by cash, Common Stock or rights
thereto, nor shall this Plan be construed as providing for such segregation, nor
shall the Company nor the Board nor the committee be deemed to be a trustee of
any cash, Common Stock or rights thereto to be granted under this Plan. Any
liability or obligation of the Company to any Participant with respect to a
grant of cash, Common Stock or rights thereto under this Plan shall be based
solely upon any contractual obligations that may be created by this Plan and any
Award Agreement, and no such liability or obligation of the Company shall be
deemed to be secured by any pledge or other encumbrance on any property of the
Company. Neither the Company nor the Board nor the Committee shall be required
to give any security or bond for the performance of any obligation that may be
created by this Plan.
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16. GOVERNING LAW. This Plan and all determinations made and actions taken
pursuant hereto, to the extent not otherwise governed by mandatory provisions of
the Code or the securities laws of the United States, shall be governed by and
construed in accordance with the laws of the State of Minnesota.
17. EFFECTIVE DATE OF PLAN. This Plan shall be effective as of the date
(the "Effective Date") it is approved by the Board of Directors of the Company.
Notwithstanding the foregoing, the adoption of this Plan is expressly
conditioned upon the approval by the holders of a majority of shares of Common
Stock present, or represented, and entitled to vote at a meeting of the
Company's stockholders held on or before November 3, 1995. If the stockholders
of the Company should fail to approve this Plan prior to such date, this Plan
shall terminate and cease to be of any further force or effect and all grants of
Awards hereunder shall be null and void.
Page 9 of 2
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report dated March 7, 1997 (except with respect to the matters discussed in Note
12, as to which the date is April 30, 1997) on our audits of the consolidated
balance sheets and statements of operations, shareholders' equity and cash flows
as of December 31, 1996 and 1995 and for each of the three years in the period
ended December 31, 1996 and to all references to our firm included in or made a
part of this registration statement.
/s/ ARTHUR ANDERSEN LLP
Houston, Texas
April 30, 1997
EXHIBIT 23.3
[MILLER AND LENTS,LTD. LETTERHEAD]
May 1, 1997
Cal Dive International, Inc.
13430 N.W. Freeway, Suite 350
Houston, TX 77040
Re: Cal Dive International, Inc.
Securities and Exchange Commission Form S-1
Gentlemen:
The firm of Miller and Lents, Ltd. consents to the naming of it as experts
and to the incorporation by reference of its report dated April 24, 1997
concerning the Oil and Gas Reserves and Future Net Revenues as of December 31,
1996 attributable to Energy Resource Technology, Inc. in the Registration
Statement of Cal Dive International Inc. on Securities and Exchange
Commission Form S-1 to be filed with the Securities and Exchange Commission.
Miller and Lents, Ltd. has no interests in Cal Dive International, Inc. or
in any of its affiliated companies or subsidiaries and is not to receive any
such interest as payment for such report and has no director, officer, or
employee employed or otherwise connected with Cal Dive International, Inc.
We are not employed by Cal Dive International, Inc. on a contingent basis.
Very truly yours,
MILLER AND LENTS, LTD.
By: /s/ MILLER AND LENTZ LTD
