UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
Commission File Number: 2-56600
Global Industries, Ltd.
(Exact name of registrant as specified in its charter)
Louisiana 72-1212563
(State or other jurisdiction of incorporation or organization)(I.R.S.
Employer Identification No.)
107 Global Circle
P.O. Box 61936, Lafayette, LA 70596-1936
(Address of principal executive offices) (Zip Code)
(318) 989-0000
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. x Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares of the Registrant's Common Stock outstanding
as of July 31, 1999 was 91,057,245.
Global Industries, Ltd.
Index - Form 10-Q
Part I
Item 1. Financial Statements - Unaudited
Independent Accountants' Report 3
Consolidated Statements of Operations 4
Consolidated Balance Sheets 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 21
Part II
Item 1. Legal Proceedings 21
Item 4. Submission of Matters to a Vote of Security
Holder 22
Item 6. Exhibits and Reports on Form 8-K 22
Signature 23
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Shareholders of
Global Industries, Ltd.
We have reviewed the condensed consolidated financial statements
of Global Industries, Ltd. and subsidiaries, as listed in the
accompanying index, as of June 30, 1999 and for the quarter and
six-month periods ended June 30, 1999 and 1998. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established
by the American Institute of Certified Public Accountants. A
review of interim financial information consists principally of
applying analytical procedures to financial data and of making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to such condensed consolidated
financial statements for them to be in conformity with generally
accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of Global
Industries, Ltd. and subsidiaries as of December 31, 1998, and
the related consolidated statements of operations, shareholders'
equity, cash flows, and comprehensive income for the nine months
then ended (not presented herein); and in our report dated
February 12, 1999, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated
balance sheet as of December 31, 1998 is fairly stated, in all
material respects, in relation to the consolidated balance sheet
from which it has been derived.
DELOITTE & TOUCHE LLP
August 3, 1999
New Orleans, Louisiana
Global Industries, Ltd.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
Quarter Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
Revenues $ 92,343 $ 92,158 $171,635 $179,676
Cost of Revenues 83,232 61,571 152,770 125,346
---------- ---------- ---------- ----------
Gross Profit 9,111 30,587 18,865 54,330
Equity in Net Earnings
(Loss) of Unconsolidated
Affiliate (3,000) (1,562) (5,000) (2,362)
Selling, General and
Administrative Expenses 6,952 5,475 12,682 11,060
---------- ---------- ---------- ----------
Operating Income (Loss) (841) 23,550 1,183 40,908
---------- ---------- ---------- ----------
Other Income (Expense):
Interest Expense (2,647) (1,151) (5,636) (1,937)
Other 1,793 415 3,074 817
---------- ---------- ---------- ----------
(854) (736) (2,562) (1,120)
---------- ---------- ---------- ----------
Income (Loss) Before
Income Taxes (1,695) 22,814 (1,379) 39,788
Provision (Benefit) for
Income Taxes (601) 7,985 (483) 13,977
---------- ---------- ---------- ----------
Net Income (Loss) $ (1,094) $ 14,829 $ (896) $ 25,811
========== ========== ========== ==========
Weighted Average Common
Shares Outstanding:
Basic 90,723,000 91,769,000 90,787,000 91,622,000
Diluted 90,723,000 94,345,000 90,787,000 94,194,000
Net Income (Loss) Per
Share:
Basic $(0.01) $0.16 $(0.01) $0.28
Diluted $(0.01) $0.16 $(0.01) $0.27
See Notes to Consolidated Financial Statements.
Global Industries, Ltd.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
June 30, December 31,
1999 1998
-------------- --------------
ASSETS
Current Assets:
Cash $ 23,131 $ 25,368
Escrowed funds 202 2,447
Receivables 104,729 107,992
Advances to and receivables from
unconsolidated affiliate 23,861 8,190
Prepaid expenses and other 11,782 9,874
-------------- --------------
Total current assets 163,705 153,871
-------------- --------------
Escrowed Funds 7,064 9,143
-------------- --------------
Property and Equipment, net 535,981 535,386
-------------- --------------
Other Assets:
Deferred charges, net 18,575 18,467
Investment in and advances to
unconsolidated affiliate 5,655 10,655
Other 3,489 3,349
-------------- --------------
Total other assets 27,719 32,471
-------------- --------------
Total $734,469 $730,871
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt
and short-term debt $ 3,691 $ 2,190
Accounts payable 51,748 53,005
Employee-related liabilities 7,145 8,086
Other accrued liabilities 13,901 11,953
-------------- --------------
Total current liabilities 76,485 75,234
-------------- --------------
Long-Term Debt 209,152 208,607
-------------- --------------
Deferred Income Taxes 51,231 49,502
-------------- --------------
Commitments and Contingencies
Shareholders' Equity:
Preferred stock -- --
Common stock, 92,426,365 and
92,110,929 shares issued,
respectively 924 921
Additional paid-in capital 214,569 213,518
Treasury stock at cost, 1,429,500
shares (15,012) (15,012)
Accumulated other comprehensive
income (loss) (8,240) (8,155)
Retained earnings 205,360 206,256
-------------- --------------
Total shareholders' equity 397,601 397,528
-------------- --------------
Total $734,469 $730,871
============== ==============
See Notes to Consolidated Financial Statements.
Global Industries, Ltd.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended June 30,
---------------------------
1999 1998
------------ ------------
Cash Flows From Operating Activities:
Net income (loss) $ (896) $ 25,811
Adjustments to reconcile net income
(loss) to net cash provided
by (used in) operating activities:
Depreciation and amortization 24,481 17,437
Deferred income taxes 1,750 10,784
Equity in net (earnings) loss of
unconsolidated affiliate 5,000 2,362
Other 252 (461)
Changes in operating assets and
liabilities:
Receivables 2,554 741
Receivables from unconsolidated
affiliate (7,151) 431
Prepaid expenses and other (1,940) 1,839
Accounts payable and accrued
liabilities 116 (17,128)
------------ ------------
Net cash provided by operating
activities 24,166 41,816
------------ ------------
Cash Flows From Investing Activities:
Additions to property and equipment (20,357) (113,371)
Escrowed funds 4,324 3,906
Additions to deferred charges (4,476) (11,141)
Net (advances to) repayment of advances
to unconsolidated affiliate (8,523) 7,723
Other (190) (770)
------------ ------------
Net cash (used in) investing
activities (29,222) (113,653)
------------ ------------
Cash Flows From Financing Activities:
Proceeds from sale of common stock 873 2,790
Net proceeds of short-term debt 1,490 --
Net proceeds of long-term debt 556 53,958
------------ ------------
Net cash provided by financing
activities 2,919 56,748
------------ ------------
Effect of Exchange Rate Changes on Cash (100) (253)
Cash:
Decrease (2,237) (15,342)
Beginning of period 25,368 27,115
------------ ------------
End of period $ 23,131 $ 11,773
============ ============
See Notes to Consolidated Financial Statements.
Global Industries, Ltd.
Notes To Consolidated Financial Statements (Unaudited)
1. Basis of Presentation - The accompanying unaudited consolidated
financial statements include the accounts of Global Industries,
Ltd. and its wholly owned subsidiaries (the "Company"). The
Company also has a 49% ownership interest in CCC Fabricaciones y
Construcciones, S.A. de C.V. ("CCC"), which is accounted for by
the equity method. See Note 8-Subsequent Events. Effective
December 31, 1998, the Company changed its fiscal year-end from
March 31 to December 31 of each year.
In the opinion of management of the Company, all adjustments
(such adjustments consisting only of a normal recurring nature)
necessary for a fair presentation of the operating results for
the interim periods presented have been included in the unaudited
consolidated financial statements. Operating results for the
periods ended June 30, 1999, are not necessarily indicative of
the results that may be expected for the year ending December 31,
1999. These financial statements should be read in conjunction
with the Company's audited consolidated financial statements and
related notes thereto included in the Company's Transition Report
on Form 10-K for the nine months ended December 31, 1998.
The financial statements required by Rule 10-01 of Regulation S-X
have been reviewed by independent public accountants as stated in
their report included herein.
2. Recent Accounting Pronouncement - In June 1998, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standards No. 133 "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133
establishes accounting and reporting standards for derivative
instruments and hedging activities and requires, among other
things, that an entity recognize all derivatives as either assets
or liabilities in the balance sheet and measure those instruments
at fair value. As amended, SFAS 133 requires adoption of the new
accounting standard for fiscal years beginning after June 15,
2000. The Company is currently reviewing the implications of
SFAS 133 and the effect on its consolidated financial statements.
3. Financing Arrangements - During March 1999, the Company amended
the terms of its existing credit agreement with a syndicate of
commercial banks to, among other things, remove a provision that
reduced the amount available by borrowings outstanding under a
separate credit agreement between the banks and CCC.
4. Commitments and Contingencies - The Company is a party to
legal proceedings and potential claims arising in the ordinary
course of business. Management does not believe these matters
will materially effect the Company's consolidated financial
statements.
During August 1998, the Board of Directors authorized the
expenditure of up to $30.0 million to purchase shares of the
Company's outstanding common stock. No limit was placed on the
duration of the purchase program. No shares were purchased
during the six months ended June 30, 1999. The Company has
purchased 1,429,500 shares since the authorization at a total
cost of $15.0 million.
The Company has guaranteed approximately $58.1 million of CCC
indebtedness and commitments. As discussed under Note 8-
Subsequent Events, $32 million of this debt was assumed as part
of the acquisition of CCC's business. A $5.5 million letter of
credit issued on behalf of CCC was paid in July 1999 and recorded
as a receivable from CCC in that period. As a condition
precedent to the closing of the acquisition of CCC's offshore
operations, the remaining $20.6 million guaranty is to be
released.
In the normal course of its business activities, the Company
provides letters of credit to secure the performance and/or
payment of obligations, including the payment of worker's
compensation obligations. Additionally, the Company has issued a
letter of credit as collateral for $28.0 million of Port
Improvement Revenue Bonds. As of June 30, 1999, outstanding
letters of credit and bonds approximated $43.9 million including
the above-mentioned $5.5 million letter of credit issued on
behalf of CCC. Also in the normal course of its business
activities, the Company provides guarantees and performance, bid,
and payment bonds pursuant to agreements or obtaining such
agreements to perform construction services. Some of these
financial instruments are secured by parent guarantees. The
aggregate of these guarantees and bonds at June 30, 1999 was $4.4
million.
The Company estimates that the cost to complete capital
expenditure projects in progress at June 30, 1999 approximates
$20 million.
5. Investment in and Advances to Unconsolidated Affiliate - In March
1999, Global and its partner, restructured CCC, their joint
venture in Mexico. Under the restructuring, its partner, through
the assumption of CCC debt, contributed additional capital of
approximately $16.5 million to CCC. Global, through the
forgiveness of advances and receivables due from CCC, contributed
additional capital of approximately $15.8 million to CCC. During
the six months ended June 30, 1999, Global made net advances of
$8.5 million in interest bearing short-term advances to CCC. See
Note 8-Subsequent Events.
6. Industry Segment Information - The following tables present
information about the profit or loss of each of the Company's
reportable segments for the quarters and six months ended June
30, 1999 and 1998. The information contains certain allocations
of corporate expenses that the Company deems reasonable and
appropriate for the evaluation of results of operations.
Quarter Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
(in thousands)
Revenues from external
customers:
Gulf of Mexico Offshore
Construction $29,218 $27,788 $51,171 $68,476
Gulf of Mexico Diving 8,090 5,735 8,993 11,088
Gulf of Mexico Marine
Support 4,081 8,081 7,964 18,006
West Africa 21,721 20,302 51,237 36,237
Asia Pacific 20,314 7,633 40,604 12,635
Latin America 7,057 11,408 8,218 14,133
Intersegment revenues:
Gulf of Mexico Offshore
Construction $ 93 $ 783 $ 476 $ 899
Gulf of Mexico Diving 1,159 2,222 4,109 12,867
Gulf of Mexico Marine
Support 3,351 1,289 4,551 3,868
West Africa -- -- -- --
Asia Pacific -- -- -- --
Latin America -- -- -- --
Income (loss) before
income taxes:
Gulf of Mexico Offshore
Construction $ 1,005 $ 7,335 $ 1,315 $ 7,382
Gulf of Mexico Diving (360) 2,875 (1,947) 8,472
Gulf of Mexico Marine
Support (645) 3,794 (1,748) 7,947
West Africa 2,680 4,892 10,362 11,066
Asia Pacific (1,124) 1,132 (775) 1,713
Latin America (2,808) 2,315 (5,377) 1,927
The following table reconciles the reportable segments' revenues
and profit or loss presented above, to the Company's consolidated
totals.
Quarter Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
(in thousands)
Total revenues for
reportable segments $ 95,084 $ 85,241 $177,323 $178,209
Total revenues for
other segments 1,956 11,219 3,552 19,269
Elimination of
intersegment revenues (4,697) (4,302) (9,240) (17,802)
--------- --------- --------- ---------
Total consolidated
revenues $ 92,343 $ 92,158 $171,635 $179,676
========= ========= ========= =========
Total income (loss) for
reportable segments $ (1,252) $ 22,343 $ 1,830 $ 38,507
Total income (loss)
for other segments (1,112) 1,391 (4,242) 1,505
Unallocated corporate
income (loss) 669 (920) 1,033 (224)
--------- --------- --------- ---------
Total consolidated
income (loss)
before taxes $ (1,695) $ 22,814 $ (1,379) $ 39,788
========= ========= ========= =========
7. Comprehensive Income (Loss) - The Company adopted Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS 130"), effective April 1, 1998. SFAS 130
establishes standards for reporting and display of comprehensive
income (loss) and its major components. Comprehensive income
(loss) includes net income and other comprehensive income (loss)
which, in the case of the Company, currently includes only
foreign currency translation adjustments.
Following is a summary of the Company's comprehensive income
(loss) for the quarters and six months ended June 30, 1999 and
1998:
Quarter Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
(in thousands)
Net income (loss) $ (1,094) $ 14,829 $ (896) $ 25,811
Other comprehensive income(loss):
Foreign currency
translation adjustments 1,987 (2,438) (85) (2,288)
---------- ---------- ---------- ----------
Comprehensive income (loss) $ 893 $ 12,391 $ (981) $ 23,523
========== ========== ========== ==========
8. Subsequent Events - Subject to certain conditions precedent,
Global acquired the offshore marine construction business of CCC
and sold its interest in CCC to CCC's other principal
shareholder. Under the terms of the transaction, Global acquired
four marine vessels, a marine support base at Cuidad del Carmen,
Mexico, and existing contracts to perform approximately $72
million of offshore marine construction. As consideration for
the assets acquired, Global assumed approximately $32 million of
CCC indebtedness, which Global had previously guaranteed, and
other net accounts payable and liabilities of approximately $33
million related to CCC's offshore marine construction operations.
The acquisition will be accounted for as a purchase and,
accordingly, the acquisition cost will be allocated to the net
tangible assets acquired based on their fair market values with
the excess, estimated to approximate $45 million, recorded as
goodwill. The goodwill will be amortized on the straight-line
method over 15 years.
On August 3, 1999, Global entered into a definitive agreement to
acquire ETPM, SA ("ETPM"), a leading international offshore
construction company wholly owned by Groupe GTM of France. Under
the terms of the agreement, Global will pay Groupe GTM $265
million in cash for the outstanding stock of ETPM and enter into
a lease purchase of Groupe GTM's interest in two vessels
providing for annual fees and the purchase of such interest in
January 2002 for $25 million. This acquisition will be accounted
for as a purchase and, accordingly, the total acquisition cost
will be allocated to the net tangible assets acquired based on
their fair market values with the excess recorded as goodwill.
The goodwill will be amortized on the straight-line basis over 15
years. The transaction is expected to close in September 1999.
Global will finance the acquisition with a new senior credit
facility and a $200 million short-term bridge financing.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
General
The following discussion presents management's discussion and
analysis of the Company's financial condition and results of
operations. Certain of the statements included below, including
those regarding future financial performance or results or that
are not historical facts, are or contain "forward-looking"
information as that term is defined in the Securities Act of
1933, as amended. The words "expect," "believe," "anticipate,"
"project," "estimate," and similar expressions are intended to
identify forward-looking statements. The Company cautions
readers that any such statements are not guarantees of future
performance or events and such statements involve risks,
uncertainties, and assumptions. Factors that could cause actual
results to differ from those expected include, but are not
limited to, dependence on the oil and gas industry and industry
conditions, general economic conditions including interest rates
and inflation, competition, the ability of the Company to
continue its acquisition strategy, successfully manage its
growth, and obtain funds to finance its growth, operating risks,
contract bidding risks, the use of estimates for revenue
recognition, risks of international operations, risks of vessel
construction such as cost overruns, changes in government
regulations, and disputes with construction contractors,
dependence on key personnel and the availability of skilled
workers during periods of strong demand, the impact of regulatory
and environmental laws, the ability to obtain insurance, as well
as the other factors discussed below. Operating risks include
hazards such as vessel capsizing, sinking, grounding, colliding,
and sustaining damage in severe weather conditions. These hazards
can also cause personal injury, loss of life, severe damage to
and destruction of property and equipment, pollution and
environmental damage, and suspension of operations. The risks
inherent with international operations include political, social,
and economic instability, exchange rate fluctuations, currency
restrictions, nullification, modification, or renegotiations of
contracts, potential vessel seizure, nationalization of assets,
import-export quotas, and other forms of public and governmental
regulation. Should one or more of these risks or uncertainties
materialize or should the underlying assumptions prove incorrect,
actual results and outcomes may differ materially from those
indicated in the forward-looking statements.
The following discussion should be read in conjunction with the
Company's unaudited consolidated financial statements for the
periods ended June 30, 1999 and 1998, included elsewhere in this
report and the Company's audited consolidated financial
statements and Management's Discussion and Analysis of Financial
Condition and Results of Operations included in the Company's
Transition Report on Form 10-K for the nine months ended December
31, 1998.
As a result of the prolonged worldwide oil price weakness that
began in mid-1997 and continued into early 1999, oil and gas
companies reduced their capital expenditures. As a result, the
Company has experienced an overall decline in the demand for its
services and increased competition for availableprojects in the
periods ended June 30, 1999, particularly when compared to the
periods ended June 30, 1998. The increased competition, which
resulted from the lower oil price conditions, the greater
contribution to revenues from Asia Pacific, which historically
has had lower margins, larger equity losses from Global's
investment in CCC, and increased interest expense as a result of
the Company's higher debt levels have resulted in overall lower
net income for the six months ended June 30, 1999. Although
there has been recent improvement in oil and gas pricing, the
Company does not expect significant improvement in its industry
during the current year. See "Industry Outlook" below
Recent Developments
Subsequent to June 30, 1999, the Company acquired the offshore
marine construction business of its Mexico joint venture, CCC,
and entered into a definitive agreement to acquire ETPM SA
("ETPM"), a leading international offshore construction company.
Subject to certain conditions precedent, Global acquired the
offshore marine construction business of CCC and sold its
interest in CCC to CCC's other principal shareholder. Under the
terms of the transaction, Global acquired four marine vessels, a
marine support base at Cuidad del Carmen, Mexico, and existing
contracts to perform approximately $72 million of offshore marine
construction. As consideration for the assets acquired, Global
assumed approximately $32 million of CCC indebtedness, which
Global had previously guaranteed, and other net accounts payable
and liabilities of approximately $33 million related to CCC's
offshore marine construction operations. The acquisition will be
accounted for as a purchase and, accordingly, the acquisition
cost will be allocated to the net tangible assets acquired based
on their fair market values with the excess, estimated to
approximate $45 million, recorded as goodwill. The goodwill will
be amortized on the straight-line method over 15 years.
Beginning July 1, 1999, the offshore marine construction
operations in Mexico will be reported on a fully consolidated
basis. While the Company expects the results of operations in
Mexico to produce significant revenues, the net income from
operations in Mexico is not expected to have a material impact on
the Company's consolidated net income over the next twelve
months. Ultimately, the Company believes that operations in
Mexico can produce gross margins consistent with the Company's
historical U.S. Gulf of Mexico operations.
On August 3, 1999, Global entered into a definitive agreement to
acquire ETPM, SA ("ETPM"), a leading international offshore
construction company wholly owned by Groupe GTM of France. Under
the terms of the agreement, Global will pay Groupe GTM $265
million in cash for the outstanding stock of ETPM and enter into
a lease purchase of Groupe GTM's interest in two vessels
providing for annual fees and the purchase of such interest in
January 2002 for $25 million. This acquisition will be accounted
for as a purchase and, accordingly, the total acquisition cost
will be allocated to the net tangible assets acquired based on
their fair market values with the excess recorded as goodwill.
The goodwill will be amortized on the straight-line basis over 15
years. The transaction is expected to close in September 1999.
In connection with the acquisition of ETPM, the Company plans to
enter into a new $550 million credit facility, which will replace
its existing credit facility. The new credit facility is
expected to consist of (i) a $100 million interim term loan, (ii)
a $250 million term loan facility that is a combination of five
and six year term loans, and (iii) a $200 million five year
revolving credit facility. Stock of the Company's subsidiaries
and substantially all of the Company's assets will collateralize
the loans under the new credit facility.
In order to consummate the ETPM acquisition, the Company also
plans to enter into a $200 million bridge loan. The Company
expects to repay the bridge loan with proceeds from a Common
Stock offering.
Results of Operations
The following table sets forth, for the periods indicated, the
Company's statements of operations expressed as a percentage of
revenues.
Quarter Ended Six Months Ended
June 30, June 30,
---------------- -----------------
1999 1998 1999 1998
------ ------ ------ ------
Revenues 100.0 % 100.0 % 100.0 % 100.0 %
Cost of revenues (90.1) (66.8) (89.0) (69.7)
------ ------ ------ ------
Gross profit 9.9 33.2 11.0 30.3
Equity in net earnings
(loss) of uncon-
solidated affiliate (3.3) (1.7) (2.9) (1.3)
Selling, general and
administrative
expenses (7.5) (5.9) (7.4) (6.2)
------ ------ ------ ------
Operating income (loss) (0.9) 25.6 0.7 22.8
Interest expense (2.9) (1.3) (3.3) (1.1)
Other income
(expense), net 1.9 0.5 1.8 0.5
------ ------ ------ ------
Income (loss) before
income taxes (1.9) 24.8 (0.8) 22.2
(Provision) benefit
for income taxes 0.7 (8.7) 0.3 (7.8)
------ ------ ------ ------
Net income (loss) (1.2)% 16.1 % (0.5)% 14.4 %
====== ====== ====== ======
Quarter Ended June 30, 1999 Compared to Quarter Ended June 30,
1998
Revenues. Revenues for the quarter ended June 30, 1999 of $92.3
million were nearly the same as revenues for the quarter ended
June 30, 1998 of $92.2 million. Increased revenues in Asia
Pacific, West Africa and Gulf of Mexico Offshore Construction and
Diving offset decreased revenues in Latin America, Gulf of Mexico
Marine Support, and other international areas.
Gross Profit. For the quarter ended June 30, 1999, the Company
had gross profit of $9.1 million compared with $30.6 million for
the quarter ended June 30, 1998. The 70% decrease was largely
the result of lower pricing for the Company's services and a
higher fabrication and procurement content for certain projects
included in the most recent quarter. As a percentage of
revenues, gross profit for the quarter ended June 30, 1999 was
10% compared to 33% for the quarter ended June 30, 1998.
Selling, General, and Administrative Expenses. For the quarter
ended June 30, 1999, selling, general, and administrative
expenses of $7.0 million were 27% higher than the $5.5 million
reported during the quarter ended June 30, 1998. As a percentage
of revenues, such expenses increased to 7.5% during the quarter
ended June 30, 1999, compared to 5.9% during the quarter ended
June 30, 1998. The increase is principally attributable to a
higher level of offshore construction activity and bidding in
Asia Pacific as compared to last year and cost associated with
the Company's relocation of certain administrative functions to
Carlyss, Louisiana.
Depreciation and Amortization. Depreciation and amortization,
including amortization of drydocking costs, for the quarter ended
June 30, 1999 was $11.8 million compared to the $9.8 million
recorded in the quarter ended June 30, 1998. The 21% increase
was principally attributable to the employment of the Hercules
during the quarter ended June 30, 1999, which was not employed
during the quarter ended June 30, 1998. The Hercules is
depreciated on a units-of-production basis. Higher amounts of
drydock amortization also contributed to the increase. Lower
employment of other vessels that are also depreciated on a units-
of-production basis partially offset the increase.
Interest Expense. Interest expense was $2.6 million net of
capitalized interest for the quarter ended June 30, 1999,
compared to $1.2 million for the quarter ended June 30, 1998.
The increase was principally due to higher average long-term debt
outstanding. To a lesser extent, higher interest rates also
contributed to the increase.
Net Income (Loss). The Company had a net loss of $1.1 million
for the quarter ended June 30, 1999, as compared to net income of
$14.8 million recorded for the quarter ended June 30, 1998,
principally due to the overall decline in demand for its
services, pricing decreases, losses associated with CCC, and
increased interest expenses. Included in net loss for the
quarter ended June 30, 1999 is a $3.0 million loss associated
with the Company's 49% ownership interest in CCC. The loss
associated with the CCC ownership for the quarter ended June 30,
1998 was $1.6 million. The increase in CCC's loss was
attributable to lower operating activity and unabsorbed operating
cost. The company's effective tax rate for the quarter ended
June 30, 1999 was 36%, compared to 35% for the quarter ended June
30, 1998.
Segment Information. The Company has identified six reportable
segments as required by SFAS 131. The following discusses the
results of operations for each of those reportable segments.
Gulf of Mexico Offshore Construction - Increased derrick
installation and removal activity, including such activity by the
Hercules, was offset by decreased demand for pipelay services and
pricing decreases. This segment's gross revenues increased
slightly to $29.3 million (including $0.1 million intersegment
revenues) for the quarter ended June 30, 1999 compared to $28.6
million (including $0.8 million intersegment revenues) for the
quarter ended June 30, 1998. The reduced pipelay activity and
decreased pricing caused income before income taxes to decline to
$1.0 million during the quarter ended June 30, 1999 compared to
$7.3 million for the quarter ended June 30, 1998.
Gulf of Mexico Diving - Lower margin revenues related to the use
of the marine support vessel Pioneer and certain third-party
services helped total revenues increase despite a decline in
diving activity and reduced pricing. Gross revenues for the
quarter ended June 30, 1999 increased 16% to $9.2 million
(including $1.2 million intersegment revenues) compared to $8.0
million (including $2.2 million intersegment revenues) for the
same period in 1998. The overall lower activity levels and
resulting lower prices resulted in a loss before income taxes of
$0.4 million for the quarter ended June 30, 1999, compared to
income before income taxes of $2.9 million during the quarter
ended June 30, 1998.
Gulf of Mexico Marine Support - Decreased demand and resulting
pricing decreases for the Company's liftboat services were
partially offset by higher activity for the Pioneer. The
Pioneer's revenues were derived almost entirely in support of the
other Gulf of Mexico segments. Gross revenues from Gulf of
Mexico marine support services declined 21% to $7.4 million
(including $3.4 million intersegment revenues) for the quarter
ended June 30, 1999, compared to $9.4 million (including $1.3
million intersegment revenues) for the same period ended June 30,
1998. The lower activity and resulting pricing decreases for
liftboat services resulted in a loss before income taxes of $0.6
million for the quarter ended June 30, 1999, compared to income
before income taxes of $3.8 million during the quarter ended June
30, 1998.
West Africa - Projects with higher levels of fabrication and
procurement content helped increase revenues from West Africa.
For the quarter ended June 30, 1999, gross revenues increased 7%
to $21.7 million compared to $20.3 million for the quarter ended
June 30, 1998. However, the higher level of fabrication and
procurement resulted in reduced margins. Income before income
taxes decreased 45% to $2.7 million during the quarter ended June
30, 1999 compared to $4.9 million for the quarter ended June 30,
1998.
Asia Pacific - Asia Pacific revenues continued to benefit from
the acquisition and placement of construction barges in that
region. For the quarter ended June 30, 1999, gross revenues
increased 166% to $20.3 million from $7.6 million for the quarter
ended June 30, 1998. However, the segment had a loss before
income taxes of $1.1 million during the quarter ended June 30,
1999 compared to income before income taxes of $1.1 million for
the quarter ended June 30, 1998. The decline in profits was
attributable to lower pricing for offshore construction services,
cost overruns on those projects, and decreased demand for other
offshore diving and support services.
Latin America - A decline in services and equipment provided to
CCC was partially offset by construction activity in Venezuela.
For the quarter ended June 30, 1999, gross revenues from Latin
America decreased 38% to $7.1 million compared to $11.4 million
for the quarter ended June 30, 1998. Losses before income taxes
and equity in CCC were $2.8 million for the quarter ended June
30, 1999, compared to income before income taxes and equity in
CCC of $2.3 million during the quarter ended June 30, 1998.
Equity in CCC losses were $3.0 million for the quarter ended June
30, 1999 and $1.6 for the quarter ended June 30, 1998. The
increase in CCC's loss was attributable to lower activities and
unabsorbed operating costs.
Six Months Ended June 30, 1999 Compared to Six Months Ended June
30, 1998
Revenues. Revenues for the six months ended June 30, 1999 of
$171.6 million were 5% lower than revenues for the six months
ended June 30, 1998 of $179.7 million. The decrease in revenues
resulted largely from decreased activity in certain areas
including Gulf of Mexico and Latin America, and was partially
offset by increased West Africa and Asia Pacific marine
construction activity and revenues. The decrease is also
attributable to lower pricing for the Company's services
resulting from declining demand and increased competition for
available projects.
Gross Profit. For the six months ended June 30, 1999, the
Company had gross profit of $18.9 million compared with $54.3
million for the six months ended June 30, 1998. The 65% decrease
was largely the result of decreased activity in certain areas
including Gulf of Mexico and Latin America, lower pricing for the
Company's services, and a higher fabrication and procurement
content for certain projects. As a percentage of revenues, gross
profit for the six months ended June 30, 1999 was 11% compared to
the gross profit percentage earned for the six months ended June
30, 1998 of 30%.
Selling, General, and Administrative Expenses. For the six
months ended June 30, 1999, selling, general, and administrative
expenses of $12.7 million were 14% higher than the $11.1 million
reported during the six months ended June 30, 1998. As a
percentage of revenues, they increased to 7.4% during the six
months ended June 30, 1999, compared to 6.2% during the six
months ended June 30, 1998. The increase is principally
attributable to a higher level of offshore construction activity
and bidding in Asia Pacific as compared to last year and cost
associated with the Company's relocation of certain
administrative functions to Carlyss, Louisiana. The income as a
percentage of revenues is also partially attributable to the
decrease in revenues.
Depreciation and Amortization. Depreciation and amortization,
including amortization of drydocking costs, for the six months
ended June 30, 1999 was $24.5 million compared to the $17.4
million recorded in the six months ended June 30, 1998. The 40%
increase was principally attributable to employment of the
Hercules during the six months ended June 30, 1999, which was not
employed during the six months ended June 30, 1998. The Hercules
is depreciated on a units-of-production basis. Higher amounts of
drydock amortization also contributed to the increase. Lower
employment of other vessels that are also depreciated on a units-
of-production basis partially offset the increase.
Interest Expense. Interest expense was $5.6 million net of
capitalized interest for the six months ended June 30, 1999,
compared to $1.9 million for the six months ended June 30, 1998.
The increase was principally due to higher average long-term debt
outstanding. To a lesser extent, higher interest rates also
contributed to the increase.
Net Income (Loss). Net loss for the six months ended June 30,
1999 was $0.9 million, compared to net income of $25.8 million
recorded for the six months ended June 30, 1998, principally due
to the overall decline in demand for its services, pricing,
decreases, losses associated with CCC and increased interest
expense. Included in net income for the six months ended June
30, 1999 is a $5.0 million loss associated with the Company's 49%
ownership interest in CCC. The loss associated with the CCC
ownership for the six months ended June 30, 1998 was $2.4
million. The increase in CCC's loss was attributable to lower
operating activity, unabsorbed operating expenses, and
adjustments to prior period provisions. The Company's effective
tax rate for the six months ended June 30, 1999 and 1998 was 35%.
Segment Information. The Company has identified six reportable
segments as required by SFAS 131. The following discusses the
results of operations for each of those reportable segments.
Gulf of Mexico Offshore Construction - During the six months
ended June 30, 1999, increased activity by the Hercules was more
than offset by decreased demand for offshore construction
services in the Gulf of Mexico and resulting pricing decreases.
This segment's gross revenues declined 26% to $51.6 million
(including $0.5 million intersegment revenues) for the six months
ended June 30, 1999 compared to $69.4 million (including $0.9
million intersegment revenues) for the six months ended June 30,
1998. Income before income taxes decreased to $1.3 million
during the six months ended June 30, 1999 compared to income
before income taxes of $7.4 million for the six months ended June
30, 1998. The employment of Hercules, which was out of service
during the six months ended June 30, 1998, helped partially
offset the decline in income before taxes.
Gulf of Mexico Diving - Gross revenues and income before income
taxes from diving-related services in the Gulf of Mexico declined
due to decreased demand, particularly, demand from Gulf of Mexico
Offshore Construction. The decrease in revenues was partially
offset by lower margin revenues related to the use of the marine
support vessel Pioneer and certain third-party services. Gross
revenues for the six months ended June 30, 1999 declined 45% to
$13.1 million (including $4.1 million intersegment revenues)
compared to $24.0 million (including $12.9 million intersegment
revenues) for the same period of 1998. The overall lower
activity levels and lower prices resulted in a loss before income
taxes of $1.9 million for the six months ended June 30, 1999
compared to income before income taxes of $8.5 million during the
six months ended June 30, 1998.
Gulf of Mexico Marine Support - Decreased demand and resulting
price decreases also affected the Gulf of Mexico marine support
services. Gross revenues from Gulf of Mexico marine support
services declined 43% to $12.5 million (including $4.6 million
intersegment revenues) for the six months ended June 30, 1999,
compared to $21.9 million (including $3.9 million intersegment
revenues) for the same period of 1998. The overall lower activity
levels and lower prices resulted in a loss before income taxes of
$1.7 million for the six months ended June 30, 1999 compared to
income before income taxes of $7.9 million during the six months
ended June 30, 1998.
West Africa - Increased activity and projects with higher levels
of fabrication and procurement content helped increase revenues
from West Africa for the first six months of 1999. For the six
months ended June 30, 1999, gross revenues increased 41% to $51.2
million compared to $36.2 million for the six months ended June
30, 1998. The higher level of fabrication and procurement
content, however, caused income before income taxes to decrease 6
% to $10.4 million during the six months ended June 30, 1999
compared to $11.1 million for the six months ended June 30, 1998.
Asia Pacific - Asia Pacific construction results benefited from
the acquisition and placement of construction barges in that
region. For the six months ended June 30, 1999, gross revenues
increased to $40.6 million compared to $12.6 million for the six
months ended June 30, 1998. However, the segment had a loss
before income taxes of $0.8 million during the six months ended
June 30, 1999 compared to income before income taxes of $1.7
million for the six months ended June 30, 1998. The decline in
profits was attributable to lower pricing for offshore
construction services, cost overruns on certain of those
projects, and decreased demand for other offshore diving and
support services.
Latin America - A decline in services and equipment provided to
CCC was partially offset by construction activity in Venezuela.
For the six months ended June 30, 1999, revenues decreased 42% to
$8.2 million from $14.1 million for the six months ended June 30,
1998. The decrease was attributable to CCC's decline in offshore
construction activity. Losses before income taxes and equity in
CCC were $5.4 million for the six months ended June 30, 1999,
compared to income before income taxes and equity in CCC losses
netting to $1.9 million during the six months ended June 30,
1998. Equity in CCC losses were $5.0 million for the six months
ended June 30, 1999 and $2.4 for the six months ended June 30,
1998. The increase in CCC's loss was attributable to lower
activities, unabsorbed operating expenses, and adjustments to
prior period provisions.
Liquidity and Capital Resources
The Company's operations generated net cash flow of $24.2 million
during the six months ended June 30, 1999. Cash from operations
and available cash along with $2.9 million provided by financing
activities were used to fund investing activities of $29.2
million. Investing activities consisted principally of (i)
capital expenditures, (ii) dry-docking costs, (iii) the release
from escrow of Lake Charles Harbor and Terminal District Port
Improvement Revenue Bonds proceeds, and (iv) advances to CCC.
Working capital increased $8.6 million during the six months
ended June 30, 1999 from $78.6 million at December 31, 1998 to
$87.2 million at June 30, 1999.
Capital expenditures during the six months ended June 30, 1999
aggregated $20.4 million, including $3.6 million for continued
conversion and upgrade of the Hercules, $5.3 million for
continued construction of the Carlyss, Louisiana, deepwater
support facility and pipebase, and $7.0 million for the
construction of a shorebase facility in Batam, Indonesia.
The Company estimates that the cost to complete capital
expenditure projects in progress at June 30, 1999, will be
approximately $20 million all of which is expected to be incurred
during the next twelve months. The scheduled completion of the
addition of reel pipelay capability to the Hercules prior to the
and of the first quarter of 2000. The estimated remaining costs
to complete the Hercules upgrades are approximately $5 million.
The Company is constructing a deepwater support facility and
pipebase near Carlyss, Louisiana. The Company plans to replace
its existing facilities in Houma and Amelia, Louisiana with the
Carlyss Facility. Estimated completion is in the fourth quarter
of the year ending December 31, 1999 at a total cost of
approximately $37 million, including approximately $34.7 million
incurred through June 30, 1999. Tax exempt revenue bonds issued
by the Lake Charles Harbor and Terminal District financed
approximately $28 million of the construction costs. The bonds
bear interest at a variable rate, which was 3.55% at June 30,
1999, and mature on November 1, 2027.
In August 1998, the Board of Directors authorized the expenditure
of up to $30.0 million to purchase shares of the Company's
outstanding common stock. The Board of Directors placed no limit
on the duration of the program. No shares were purchased during
the six months ended June 30, 1999.
Long-term debt outstanding at June 30, 1999, (including current
maturities), includes $38 million of Title XI bonds, the $28.0
million of Lake Charles Harbor and Terminal District bonds, and
$144 million drawn against the Company's revolving line of
credit.
The Company's Title XI bonds mature in 2003, 2005, 2020, and
2022. The bonds carry interest rates of 9.15%, 8.75%, 8.30% and
7.25% per annum, respectively, and require aggregate semi-annual
payments of $0.9 million, plus interest. The agreements pursuant
to which the Title XI bonds were issued contain certain
covenants, including the maintenance of minimum working capital
and net worth requirements. If not met, additional covenants
result that restrict the operations of the Company and its
ability to pay cash dividends. At June 30, 1999 the Company was
in compliance with these covenants.
The Company maintains a $250.0 million revolving line of credit
under a loan agreement ("Restated Credit Agreement") with a
syndicate of commercial banks. The revolving credit facility
reduces to $150.0 million on July 1, 2000, and to $100.0 million
on July 1, 2001. Borrowings under the facility bear interest at
fluctuating rates, are payable on June 30, 2002, and have
subsidiary guarantees and stock pledges as collateral. The
amount of available credit decreases by borrowings outstanding
($144 million at June 30, 1999), and outstanding letters of
credit issued under the Restated Credit Agreement ($43.9 million
at June 30, 1999). Effective March 30, 1999, an amendment to the
Restated Credit Agreement, among other things, removed a
provision that reduced the amount available by borrowings
outstanding under a separate credit agreement between the banks
and CCC. For continuing access to the revolving line of credit,
the Company must remain in compliance with the covenants of the
Restated Credit Agreement, including covenants relating to the
maintenance of certain financial ratios. At June 30, 1999, the
Company was in compliance with these covenants. Additionally,
the Restated Credit Agreement contains cross-default provisions
that specify that default by CCC under a separate loan agreement
constitutes default under the Company's Restated Credit
Agreement. As previously described, the Company expects to
replace this facility in connection with its acquisition of ETPM.
The Company also has short-term credit facilities at its foreign
locations that aggregate $2.8 million and are secured by parent
company guarantees. Additionally, in the normal course of
business, the Company provides guarantees and performance, bid,
and payment bonds pursuant to agreements, or in connection with
bidding to obtain such agreements, to perform construction
services. Some of these guarantees are secured by parent
guarantees. The aggregate of these guarantees and bonds at June
30, 1999 was $4.4 million.
The Company has guaranteed approximately $58.1 million of CCC
indebtedness and commitments as discussed under Note 8-Subsequent
Events, $32 million of this debt was assumed as part of the
acquisition of CCC's business. A $5.5 million letter of credit
issued on behalf of CCC was paid in July 1999 and recorded as a
receivable from CCC in that period. As a condition precedent to
the closing of the acquisition of CCC's offshore operations, the
remaining $20.6 million guaranty is to be released.
In March 1999, Global and its partner restructured their joint
venture in Mexico, CCC. Under the restructuring, its partner,
through the assumption of certain CCC debt, contributed
additional capital of approximately $16.5 million to CCC.
Global, through the forgiveness of advances and receivables due
from CCC, contributed additional capital of approximately $15.8
million to CCC.
The Company expects funds available under its proposed new credit
facility, the bridge loan, proceeds from the tax exempt revenue
bonds issued by the Lake Charles Harbor and Terminal District,
available cash, and cash generated from operations to be
sufficient to fund the Company's proposed ETPM assumption,
existing operations, scheduled debt retirement, and planned
capital expenditures for the next twelve months.
Facilities Relocation
The Company is constructing a deepwater support facility and
pipebase near Carlyss, Louisiana, to accommodate deeper draft
vessels such as the Hercules and the Pioneer. To gain
anticipated efficiencies, the Company plans to replace the
existing facilities in Houma and Amelia, Louisiana with the
Carlyss Facility. Certain of the Company's administrative
functions will also relocate from its Lafayette, Louisiana and
Houston, Texas offices. As a result of the relocation, the
Company expects to incur certain employment costs, equipment and
material relocation costs, and costs to close the replaced
facilities.
The total employment costs, equipment and material relocation
costs, and costs to close the replaced facilities expended during
the six months ended June 30, 1999 were $1.1 million of which
$0.4 million had been provided for in the results of operations
during the nine months ended December 31, 1998. The Company
expects to expend $3.1 million for facility relocation costs
during the remainder of the year ending December 31, 1999 of
which $0.3 million were also provided for in the results of
operations during the nine months ended December 31, 1998.
Industry Outlook
Recent improvements in oil and gas prices have given the Company
cautious optimism regarding the economics of its industry.
However, most oil and gas companies based their 1999 capital
expenditure budgets on lower oil and gas prices. Thus, the
Company expects that any appreciable benefit from higher oil and
gas prices is unlikely to occur until 2000, and then, only if
current commodity pricing holds or improves. The Company expects
revenues and margins for the remainder of 1999 to be lower than
in 1998. The Company also expects the current competitive
environment to continue for the remainder of the year, which will
cause the Company to continue to adjust its pricing to bid
competitively for available projects, and which will result in
the Company's results of operations for the current year being
materially lower than the results for last year.
Ultimately, the Company feels that eventual economic recovery of
developing nations, which will spur demand growth, and depletion
of petroleum reserves currently in production will result in
sustained favorable prices for petroleum resources. However, the
Company cannot predict when such sustained recovery might occur.
The Company projects that considering the industry expectations,
its capital expenditures in 1999 will be smaller than recent
fiscal periods. However, the Company is committed to completing
the conversion of the Hercules, the construction of the Carlyss,
Louisiana, deepwater support facility and pipebase, and the
construction of a shorebase facility in Batam, Indonesia. Also,
as the Company has historically done, it will continue to
evaluate the merits of any opportunities that may arise for
acquisitions of equipment or businesses.
Recent Accounting Pronouncement
In June 1998, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities"
("SFAS 133"). SFAS 133 establishes accounting and reporting
standards for derivative instruments and hedging activities and
requires, among other things, that an entity recognize all
derivatives as either assets or liabilities in the statement of
financial position and measure the instruments at fair value. As
amended, SFAS 133 requires adoption of the new accounting
standard for fiscal years beginning after June 15, 2000. The
Company is currently reviewing the implications of SFAS 133 and
the effect on its consolidated financial statements. The Company
will adopt this accounting standard, effective January 1, 2001,
as required.
Year 2000
The Year 2000 problem results from the use in computer hardware
and software of two digits rather than four digits to define the
applicable year. The use of two digits was a common practice for
decades when computer storage and processing was much more
expensive than today. When computer systems must process dates
both before and after January 1, 2000, two-digit year "fields"
may create processing ambiguities that can cause errors and
system failures. For example, computer programs that have date-
sensitive features may recognize a date represented by "00" as
the year 1900, instead of 2000. These errors or failures may
have limited effects, or the effects may be widespread, depending
on the computer chip, system or software, and its location and
function.
The effects of the Year 2000 problem are exacerbated because of
the interdependence of computer and telecommunications systems in
the United States and throughout the world. This interdependence
certainly is true for Global and Global's suppliers, and
customers, as well as for governments of countries around the
world where Global does business.
The Company makes use of computers in its gathering,
manipulating, calculating, and reporting of accounting,
financial, administrative, and management information. We also
rely on computers to undertake certain operational procedures and
to more efficiently produce documents and financial instruments.
Additionally, the Company uses computers as a communication tool
for its employees to communicate among themselves and with other
persons outside the organization. Finally, certain of the
Company's equipment (including the dynamic positioning systems on
certain of the Company's vessels) makes use of embedded computer
technology.
Readiness - The Company has prepared a Year 2000 Project Plan
(the "Y2K Plan") to identify and assess its risks associated with
Year 2000 issues and to take reasonable steps to prevent Global's
critical functions from being impaired. Global is currently
implementing its Y2K Plan, which will be modified as events
require. Under the plan, the Company continues to (i) assess its
critical information and computing systems and (ii) inventory its
systems using embedded technology, including our fleet of
offshore vessels and related systems; assess the effects of Year
2000 problems on the critical functions of Global's business
units; remedy systems, software and embedded chips in an effort
to avoid material disruptions or other material adverse effects
on critical functions, processes and systems; verify and test the
critical systems to which remediation efforts have been applied;
and attempt to mitigate those critical aspects of the Year 2000
problem that are not remediated by January 1, 2000, including the
development of contingency plans to cope with the mission
critical consequences of Year 2000 problems that have not been
identified or remediated by that date. Implementation of our Y2K
Plan is supervised by a Vice President and the Company has
contracted with firms specializing in the assessment and
remediation of embedded technology for additional assistance. As
a result of the assessments, non-compliant embedded technology
has been found on certain of the Company's vessels. The Company
has completed the identification and assessment of mission
critical systems. Remediation or replacement of mission critical
systems is nearing completion and is expected to be completed
prior to December 31, 1999.
The Y2K Plan recognizes that the computer, telecommunications,
and other systems ("Outside Systems") of outside entities
("Outside Entities") have the potential for major, mission
critical, adverse effects on the conduct of Global's business.
Global does not have control of these Outside Entities or Outside
Systems. In some cases, Outside Entities are foreign governments
or businesses located in foreign countries. However, Global's
Y2K Plan includes an ongoing process of identifying and
contacting Outside Entities whose systems, in Global's judgment,
have or may have a substantial effect on our ability to continue
to conduct the mission critical aspects of our business without
disruption from Year 2000 problems. The Company has contacted
its key vendors and customers to assess their progress with their
own Year 2000 issues and to anticipate potential risks associated
with its key vendors and customers. Global will work prudently
with Outside Entities in a reasonable attempt to inventory,
assess, analyze, convert (where necessary), test, and develop
contingency plans for Global's connections to these mission
critical Outside Systems and to ascertain the extent to which
they are, or can be made to be, Year 2000 ready and compatible
with Global's mission critical systems.
Despite efforts to address all material Year 2000 issues in
advance, the Company could potentially experience disruptions to
some aspects of its activities or operations. Thus, the Company
is developing business contingency plans for mitigating the
effect of potential disruptions.
Costs - Total amounts spent to date on Year 2000 awareness,
inventory, assessment, analysis, conversion, testing or
contingency planning efforts were approximately $145,000.
Additional costs to carry out the Y2K Plan, including
implementation of Year 2000 contingency plan, based on
assessments to date, are not expected to be material to the
Company's financial condition. Although management believes that
its estimates are reasonable, there can be no assurance that the
actual costs of implementing the Y2K Plan will not differ
materially from the estimated costs or that Global will not be
materially adversely affected by Year 2000 issues. Moreover, the
estimated costs of implementing the Y2K Plan do not take into
account the costs, if any, that might be incurred as a result of
Year 2000-related failures that occur despite Global's
implementation of the Y2K Plan.
Worst Case Scenario - The Securities and Exchange Commission
requires that public companies forecast the most reasonably
likely worst case Year 2000 scenario. In doing so, Global is
assuming that the Company's Y2K Plan will not be effective.
Analysis of the most reasonably likely worst case Year 2000
scenarios Global may face leads to contemplation of the following
possibilities which, though unlikely in some or many cases, must
be included in any consideration of worst cases: widespread
failure of electrical, gas, and similar supplies by utilities
serving Global domestically and internationally; widespread
disruption of the services of communications common carriers
domestically and internationally; similar disruption to means and
modes of transportation for Global and its employees,
contractors, suppliers, and customers; significant disruption to
Global's ability to gain access to, and remain working in, office
buildings and other facilities; the failure of substantial
numbers of Global's critical information (computer) hardware and
software systems; and the failure, domestically and
internationally, of Outside Systems, the effects of which would
have a cumulative material adverse impact on Global's critical
systems. Among other things, Global could face substantial
claims by customers or loss of revenues due to inability to
fulfill contractual obligations, inability to account for certain
revenues or obligations or to bill customers accurately and on a
timely basis, and increased expenses associated with litigation,
stabilization of operations following critical failures, and the
execution of contingency plans. Global could also experience an
inability by customers to pay, on a timely basis or at all,
obligations owed to Global. Under these circumstances, the
adverse effect on Global, and the diminution of Global's
revenues, would be material, although not quantifiable at this
time.
Summary - Global has a plan to deal with the Year 2000 challenge
and believes that it will be able to achieve substantial Year
2000 readiness with respect to the mission critical systems that
it controls. However, from a forward-looking perspective, the
extent and magnitude of the Year 2000 problem as it will affect
Global, both before and for some period after January 1, 2000,
are difficult to predict or quantify for a number of reasons.
Among these are: the difficulty of locating "embedded" chips that
may be in a great variety of mission critical systems; the
difficulty of inventorying, assessing, remediating, verifying and
testing Outside Systems; the difficulty in locating all mission
critical software (computer code) internal to Global that is not
Year 2000 compatible; and the unavailability of certain necessary
internal or external resources, including but not limited to
trained hardware and software engineers, technicians, and other
personnel to perform adequate remediation, verification and
testing of mission critical Global systems or Outside Systems.
Accordingly, there can be no assurance that all of Global's
Systems and all Outside Systems will be adequately remediated so
that they are Year 2000 ready by January 1, 2000, or by some
earlier date, so as not to create a material disruption to
Global's business. If despite Global's efforts, there are
mission critical Year 2000-related failures that create
substantial disruptions to our business, the adverse impact on
Global's business could be material. Additionally, Year 2000
costs are difficult to estimate accurately because of
unanticipated vendor delays, technical difficulties, the impact
of tests of Outside Systems and similar events.
Item 3. Quantitative and Qualitative Disclosures about Market
Risk
During the six months ended June 30, 1999, the Company did not
enter into any transactions involving financial derivative
instruments. Quantitative and qualitative disclosures about
market risk are in Item 7A of the Company's 10K for the
transition period ended December 31, 1998.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in various routine legal proceedings
primarily involving claims for personal injury under the General
Maritime Laws of the United States and Jones Act as a result of
alleged negligence. The Company believes that the outcome of all
such proceedings, even if determined adversely, would not have a
material adverse effect on its consolidated financial statements.
Item 4. Submission of Matters to a Vote of Security Holders
The 1999 Annual Meeting of Shareholders of the Company was held
on May 12, 1999. At such meeting, each of the following persons
listed below were elected to the Board of Directors of the
Company for a term ending at the Company's 2000 Annual Meeting of
Shareholders. The number of votes cast with respect to the
election of each such person is set forth opposite such person's
name. The persons listed below constitute the entire Board of
Directors of the Company.
Name of Director Number of Votes Cast
- ---------------------------------------------------------------------
Broker
For Withhold Non-Vote Abstain
---------------------------------------------
William J. Dore' 79,419,351 2,581,335 0 0
James C. Day 79,419,273 2,581,413 0 0
Edward P. Djerejian 79,419,273 2,581,413 0 0
Edgar G. Hotard 79,417,903 2,582,783 0 0
Michael J. Pollock 79,418,233 2,582,453 0 0
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
2.1 CCC Transaction Agreement
2.2 Share Purchase Agreement for ETPM, S.A.
15.1 Letter regarding unaudited interim financial information.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K - None
Signature
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
GLOBAL INDUSTRIES, LTD.
By: /s/ PETER S. ATKINSON
_______________________________________
Peter S. Atkinson
Vice President, Chief Financial Officer
(Principal Financial and Accounting Officer)
August 16, 1999
Exhibit 2.2 Share Purchase Agreement for ETPM, S.A.
SHARE PURCHASE AGREEMENT
BETWEEN:
GROUPE GTM, a French societe anonyme, with a capital of
122,333,384 Euros, having its registered office at Nanterre
(92000), France - 61, avenue Jules Quentin, registered with the
Registry of Trade and Companies of Nanterre under n B 562 011 890
(hereinafter referred to as the "Seller"), represented by Jean-
Luc POMMIER, Director Corporate Development of Groupe GTM;
AND:
GLOBAL INDUSTRIES, LTD., a company incorporated under the
laws of the State of Louisiana, having its principal office at
107 Global Circle, Lafayette, LA 70503 (hereinafter referred to
as the "Purchaser"), represented by William J. DORE', President
and Chief Executive Officer.
PREAMBLE:
E.T.P.M. S.A. (the "Company") is a French societe anonyme
with a capital of 17,600,000 Euros, having its registered office
at Nanterre (92000) - 32 avenue Pablo Picasso, registered with
the Registry of Trade and Companies of Nanterre under n B 692 007
495.
The Seller owns 100% of the share capital of the Company,
which is divided into 1,100,000 shares, par value E16.00 per
share (hereinafter referred to as the "Shares").
In addition, the Seller owns, directly or indirectly (other
than through the Company), equity interests in certain
Subsidiaries of the Company (all such equity interests, as
further described herein, the "Related Equity Interests").
In addition, the Group Companies (as defined herein) own
certain assets that the Purchaser wishes to purchase (all such
assets, as further described herein, the "Related Assets").
The Seller wishes to sell, and the Purchaser wishes to
purchase, the Shares and the Related Equity Interests.
NOW, THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS:
ARTICLE 1
SALE AND PURCHASE OF THE SHARES,
THE RELATED EQUITY INTERESTS AND THE RELATED ASSETS
1.1 Sale and Purchase of the Shares and the Related Equity
Interests
Subject to the terms and conditions of this Agreement, the
Seller agrees to sell to the Purchaser, and the Purchaser
agrees to purchase from the Seller, the Shares and the
Related Equity Interests, free and clear of all liens,
charges, encumbrances or other restrictions or limitations of
any nature whatsoever, as well as all rights attaching to the
Shares and the Related Equity Interests.
1.2 Purchase Price
The purchase price to be paid for the Shares and the Related
Equity Interests is US$265 million (the "Purchase Price"),
adjusted, if applicable, in accordance with the provisions of
Section 1.4 and 1.3, payable in cash in accordance with
Section 2.3(b).
1.3 Payment of Purchase Price
On the Closing Date, the Purchaser shall pay the Purchase
Price to the Seller in cash by wire transfer of immediately
available funds to an account designated by the Seller in
writing, as that amount may be adjusted pursuant to Section
1.4 and 2.3(b) and (c), except to the extent described in
Section 1.4(e). Any remaining Purchase Price Adjustment
pursuant to Section 1.4 shall be settled in the manner set
forth in Section 1.4(e).
1.4 Purchase Price Adjustment
(a) General
In the event that the Final June 30 Net Worth is less
than US$41,264,000, the Purchase Price shall be reduced
by an amount equal to such deficiency, U.S. dollar for
U.S. dollar, as further set forth below (the "Purchase
Price Adjustment").
(b) Certain Definitions
Certain capitalized terms used in this Section 1.4 shall
have the meanings specified below:
(i)"Exchange Rate" means (i) for purposes of translating
euro amounts into U.S. dollars, the noon buying rate
in New York City for cable transfers in euros as
certified for customs purposes by the Federal Reserve
Bank of New York on the date of determination, and
(ii) for purposes of translating French franc amounts
into U.S. dollars, the relevant French franc amount
translated into euros at the rate of FF 6.55957 = E1,
further translated into U.S. dollars at the rate
determined pursuant to clause (i) above.
(ii) "Final June 30 Balance Sheet" means the
consolidated balance sheet of the Company and its
consolidated subsidiaries as of June 30, 1999,
prepared in accordance with French GAAP, reviewed by
the Company's external auditors, Barbier Frinault &
Autres (Arthur Andersen), as described in an
unqualified letter in a form customary for delivery
by internationally recognized auditors that have
conducted limited review procedures on interim
financial statements (the "Auditor Review Letter").
The Final June 30 Balance Sheet shall be based on the
unaudited estimated consolidated June 30 French GAAP
balance sheet attached hereto as Annex I (the
"Estimated June 30 Balance Sheet"), adjusted only as
required by such auditors to permit them to issue the
Auditor Review Letter.
(iii) "Final June 30 Net Worth" means the consolidated
shareholders equity of the Company and its
consolidated subsidiaries as of June 30, 1999, as
determined on the basis of the Final June 30 Balance
Sheet and expressed in U.S. dollars (on the basis of
the exchange rate of E0.9699 = US$1).
(c) Review of the Final June 30 Balance Sheet by Purchaser:
(i) the Seller shall deliver to the Purchaser the
Final June 30 Balance Sheet, together with the
Auditor Review Letter, as soon as practicable, and in
any event shall do so no later than August 31, 1999.
(ii) The Purchaser shall have a period of ten (10)
Paris business days from the date of receipt of the
Final June 30 Balance Sheet (the "Examination
Period") to review the Final June 30 Balance Sheet
and indicate to the Seller whether it believes that
the Final June 30 Balance Sheet was not properly
prepared in accordance with French GAAP, applied on a
basis consistent with the accounting principles set
forth in the French Financial Statements as of and
for the year ended December 31, 1998; provided,
however, that the amounts in the Final June 30
Balance Sheet in respect of the Excluded Elements
shall not be subject to the review of the Purchaser
and shall be final and binding on the parties. The
"Excluded Elements" are the revenue, cost and
provision items relating to each of the long-term
contracts derived from the Company's Quarterly
Project Status Reports for June 1999 (the "QPSRs"),
which the Purchaser acknowledges having reviewed
prior to the date of this Agreement.
(iii) In the event of such a belief (other than with
respect to the Excluded Elements), the Purchaser
shall send a notice of objection (the "Notice of
Objection") to the Seller, no later than on the last
day of the Examination Period. Any failure by the
Purchaser to send a Notice of Objection to the Seller
by such date shall conclusively mean that the
Purchaser has accepted, without reservations, all of
the terms of the Final June 30 Balance Sheet and the
amount of the Purchase Price Adjustment as calculated
by the Seller, and such Final June 30 Balance Sheet,
and such amount shall then become final and binding
on the parties.
(iv) The Notice of Objection, if any, shall
specifically mention each of the corrections to be
made to the Final June 30 Balance Sheet and the
resulting impact on the Purchase Price Adjustment,
and shall state the reasons therefor. All items of
the Final June 30 Balance Sheet not objected to by
the Purchaser in the Notice of Objection shall be
deemed to have been accepted by the Purchaser and
shall be final and binding on the parties.
(v)In the event that a Notice of Objection is sent to
the Seller, the Seller and the Purchaser shall use
reasonable efforts to reach an agreement on the
element(s) of the Final June 30 Balance Sheet
objected to by the Purchaser and the resulting impact
on the Purchase Price Adjustment. If such agreement
is reached, then the agreement shall be final and
binding on the parties.
(d) Independent Determination of the Purchase Price
Adjustment:
(i) In the event that no agreement has been reached
between the parties thirty (30) days after the date
of receipt by the Seller of the Notice of Objection,
those points on which there is a disagreement shall
be submitted to an independent auditor agreed upon by
the parties (or, failing such agreement, an
internationally recognized accounting firm appointed
by the President of the Commercial Court of Paris)
(the "Independent Auditor"), who shall act as an
expert in accordance with the provisions of Article
1592 of the French Civil Code.
(ii) The Independent Auditor shall perform such
procedures as it considers appropriate to form an
independent opinion on the components of the Final
June 30 Balance Sheet that were not agreed upon
between the parties. In making its determinations,
the Independent Auditor shall apply French GAAP
applied on a basis consistent with the accounting
principles set forth in the French Financial
Statements as of and for the year ended December 31,
1998. The review by the Independent Auditor of the
Final June 30 Balance Sheet shall in no event include
the Excluded Elements.
The parties shall use their best efforts to cause the
Independent Auditor to issue a report setting forth
its determination with respect to the disputed items
within thirty (30) days from the date of the
appointment of the Independent Auditor. The
Independent Auditor's calculation of the Final June
30 Net Worth (adjusting only for the items in
dispute, which shall in no event include the Excluded
Elements) and the resulting impact on the Purchase
Price Adjustment shall be calculated in accordance
with Section 1.4(a), and shall be final and binding
on the parties.
(iii) Each of the Seller and the Purchaser shall, and
shall use its respective best efforts to ensure that
their respective auditors, fully cooperate with the
Independent Auditor and with each other. The Seller
(prior to Closing) and the Purchaser (after Closing)
shall further ensure the full cooperation of the
Group Companies with the Independent Auditor and
shall, in particular, cause the Group Companies to
give the Independent Auditor access to all documents,
books, records, data and other information of the
Group Companies.
(iv) The Independent Auditor's fees and disbursements
shall be borne equally by the Seller and the
Purchaser.
(e) Payment of the Purchase Price Adjustment
If the Purchase Price Adjustment is finally determined
prior to the Closing Date, it shall be applied as an
adjustment to the amount payable by the Purchaser
pursuant to Section 1.3 and 2.3(b). Otherwise, the
Purchase Price Adjustment shall be paid by the Seller to
the Purchaser within five (5) days after the Purchase
Price Adjustment is finally determined as provided above,
by transfer of immediately available funds in U.S.
dollars to an account designated by the Purchaser. If
the Purchase Price Adjustment is not paid when due, then
the Purchase Price Adjustment shall be payable together
with interest thereon at one-month USD LIBOR plus 2.75%
per annum, calculated from the date on which payment is
due hereunder to the date of payment.
ARTICLE 2
CLOSING
2.1 Date and Place of Closing
The closing of the sale and purchase of the Shares and the
Related Equity Interests (the "Closing") shall take place on
the later of:
(i) the date (no later than November 1, 1999) designated
by the Purchaser to the Seller in writing at least
three Paris business days (for a Closing prior to
September 15, 1999) or twenty Paris business days
(for a Closing on or after September 15, 1999) prior
to the designated date, and
(ii) the satisfaction or waiver of all of the
conditions precedent set forth in Section 8.1.
The Closing shall take place at the offices of Cleary,
Gottlieb, Steen & Hamilton, 41, avenue de Friedland, 75008
Paris. The date of the Closing is herein referred to as the
"Closing Date".
2.2 Pre-Closing Operations
(a) Prior to the Closing Date, the Company shall repurchase
from the Seller and cancel 83,019 Shares, for a purchase
price in cash of FF 123,400,000.
(b) On the Closing Date, prior to the consummation of the
closing operations described in Section 2.3:
(i)the Purchaser shall pay to the Company in cash the US
dollar equivalent of FF 123,400,000, translated on
the basis of the Exchange Rate as of the Paris
business day preceding the Closing Date; and
(ii) the Seller shall cause the Company (or the
relevant Group Companies) to transfer to the
Purchaser or its designee the assets listed in Annex
II hereto (the "Related Assets"), and to execute such
documents or instruments as may be necessary in the
reasonable judgment of Purchaser under the laws of
the relevant jurisdictions to transfer full ownership
of all of the Related Assets to the Purchaser or its
designee.
2.3 Closing Operations
(a) The Seller shall transfer and deliver to the Purchaser:
(i) duly completed and signed transfer orders providing
for the transfer of the ownership of all of the
Shares (other than those repurchased pursuant to
Section 2.2) to the Purchaser;
(ii) unconditional resignation letters (including a
waiver of all claims against any of the Group
Companies), effective on the Closing Date, from the
legal representatives of each of the Group Companies,
including the members of their boards of directors or
other similar governing bodies, with the exception of
those persons notified by the Purchaser to the Seller
in writing at least thirty days prior to the Closing
Date;
(iii) such documents and other instruments as may be
necessary in the reasonable judgment of Purchaser
under the laws of the relevant jurisdictions to
transfer full ownership of all of the Related Equity
Interests to the Purchaser; and
(iv) a certified copy of the resolution of the
Company's board of directors, approving, under the
"clause d'agrement" provided in Article 13 of the by-
laws of the Company, the transfer to the Purchaser of
the Shares.
(b) The Purchaser shall pay to the Seller in cash an amount
in U.S. dollars equal to the Purchase Price, as modified
in accordance with Section 1.3 hereof, and as further
adjusted downward by the U.S. dollar equivalent of FF
123,400,000, translated on the basis of the Exchange Rate
as of the second Paris business day preceding the Closing
Date.
(c) The Seller shall have transferred to the Purchaser all of
its rights, and the Purchaser shall have assumed all of
the Seller's obligations, in respect of any advances made
by the Company to the Seller or by the Seller to the
Company, as the case may be (the amount of such advances
outstanding as of the Closing Date to be set forth in a
list delivered by the Seller to the Purchaser no later
than three Paris business days preceding the Closing
Date). The amount of such advances shall be added to the
Purchase Price (in the case of advances owing by the
Company to the Seller) or subtracted from the Purchase
Price (in the case of advances owing by the Seller to the
Company).
(d) The Seller, the Purchaser and Serimer Dasa SNC shall sign
a research and development cooperation agreement in the
form attached hereto as Annex III (the "Cooperation
Agreement").
(e) The Seller and the Company (or any other affiliate of the
Purchaser designated in writing by the Purchaser at least
three Paris business days prior to the Closing Date)
shall sign a Charter Party in respect of the Polaris and
801 Derrick Pipelay Barges in the form attached hereto as
Annex IV (the "Charter Party").
(f) The Seller shall procure a Board meeting and a
shareholders meeting of the Group Companies to be held on
or before the Closing Date to effect any changes to
directors of the Group Companies (subject to the
occurrence of the Closing) which shall have been notified
by the Purchaser to the Seller in sufficient time to
permit the relevant nominations to be made within the
periods legally required for notices in respect of such
meetings.
2.4 Termination
(a) Either party may terminate this Agreement by notice in
writing to the other in the event that the Closing Date
has not occurred on or before November 1, 1999, so long
as the failure to consummate the transactions on or
before such date did not result from the failure by the
party seeking termination of this Agreement to fulfill
any undertaking or commitment provided for herein that is
required to be fulfilled by such party or its affiliates
at or prior to the Closing.
(b) Upon the delivery of a termination notice in accordance
with subsection (a) above, this Agreement shall be of no
further force or effect, and the parties shall have no
further liability hereunder, except for (i) liability
arising from a prior breach of the Agreement or as set
forth in subsection (c) and (ii) the ongoing
confidentiality obligation set forth in Section 9.2(a).
(c) In the event that either party fails to consummate the
transactions contemplated hereby to be consummated at the
Closing by the date set forth in paragraph (a), other
than as a result of the non-satisfaction of a condition
set forth in Section 8.1, then the party failing to
consummate such transactions shall pay to the other party
US$25 million, as liquidated damages, by wire transfer of
immediately available funds to an account specified by
such other party, no later than five (5) Paris business
days after the termination of this Agreement.
ARTICLE 3
REPRESENTATIONS OF THE SELLER
The Seller hereby makes the following representations and
warranties for the benefit of the Purchaser as of the date of
this Agreement and, as qualified by the Update Exhibit, as of (i)
the Closing Date (if on or prior to September 15, 1999), or (ii)
the later of September 15, 1999, or the Update Delivery Date (if
the Closing Date is after September 15, 1999):
3.1 Organization; Authority and Validity
(a) The Seller is a societe anonyme duly organized and
validly existing under the laws of France. The Seller
has the corporate power and authority to enter into this
Agreement and the other Seller Documents to which it is a
party and to carry out its obligations hereunder and
thereunder. The affiliates of the Seller owning the
Related Equity Interests (the "Participating Affiliates")
have the corporate power and authority to execute the
documents and instruments referred in Section
2.3(a)(iii). "Seller Documents" shall mean this
Agreement, the Charter Party, the Cooperation Agreement
and the documents and instruments referred to in Section
2.3(a)(iii) with respect to the Related Equity Interests.
(b) The execution of this Agreement and the other Seller
Documents and the consummation of the transactions
contemplated herein and therein have been duly authorized
by all necessary corporate action on the part of the
Seller and the Participating Affiliates.
(c) This Agreement has been, and each of the other Seller
Documents when executed will be, duly executed and
delivered by the Seller or the Participating Affiliates,
as the case may be, and constitutes, or in the case of
each of the other Seller Documents will constitute, a
legal, valid and binding obligation of the Seller or the
Participating Affiliates, enforceable against them in
accordance with its terms.
3.2 No Breach
Neither the execution by the Seller of this Agreement or by
the Seller or the Participating Affiliates of the other
Seller Documents nor the consummation of the transactions
contemplated herein and therein does or will:
(i) conflict with or violate any provision of the by-laws
or corporate governance documents of the Seller or
the Participating Affiliates or any of the Group
Companies;
(ii) violate, conflict with or result in the breach
of any contract, including any loan, guarantee or
other agreement, to which the Seller or the
Participating Affiliates or any of the Group
Companies is a party (except for the credit facility
entered into by the Group Companies and guaranteed by
the Seller, described in paragraph 3 of Exhibit
3.12(a)); or
(iii) constitute a violation by the Seller or the
Participating Affiliates or any of the Group
Companies of any laws or regulations or orders,
judgments or decrees applicable to them or their
properties; except for any such matters that would
not, either individually or in the aggregate, prevent
or delay in any material respect the ability of the
Seller or the Participating Affiliates to perform its
obligations under this Agreement or the other Seller
Documents, or be reasonably likely to have a Material
Adverse Effect on the Group Companies, taken as a
whole. "Material Adverse Effect" shall mean any
change or effect that would be material and adverse
to the consolidated business, condition (financial or
otherwise), results of operations, properties or
prospects of specified persons or entities.
3.3 Consents
No consent or authorization of, or registration or filing
with, any person or entity or any governmental or regulatory
body or any court or administrative tribunal is required to
be obtained by the Seller, the Participating Affiliates or
any of the Group Companies in connection with the execution
of this Agreement and the other Seller Documents or the
consummation of any of the transactions contemplated herein
or therein.
3.4 Incorporation, Existence and Authority of the Group Companies
(a) The Seller is the record and beneficial owner of 100% of
the share capital of the Company, free and clear from any
liens, charges, encumbrances and restrictions, escrow
arrangements, preemptive rights, call options or other
rights of third parties, or limitations of any kind,
other than those set forth in the by-laws of the Company.
(b) Set forth in Exhibit 3.4 hereof is a list of all
companies, partnerships or other entities in which the
Company or any of its subsidiaries owns an equity
interest, specifying the Company's or any of its
subsidiaries' ownership percentages, the name and
percentage interest of any other equity holder and the
jurisdiction of organization of each such entity. The
companies listed in Exhibit 3.4 are referred to herein as
the "Subsidiaries" and, together with the Company, as the
"Group Companies". None of the Company or any of the
other Group Companies has any current or contingent
obligation to acquire any interest in any entity or any
additional interest in any of the Subsidiaries (except
such contingent obligations that may arise in the case of
certain Subsidiaries in Africa where the local government
or one of its agencies holding an interest in such
Subsidiary has a put right thereon in certain
circumstances).
(c) Each of the Group Companies is duly organized, and
validly existing under the laws of the jurisdiction of
its incorporation. Each of the Group Companies is duly
qualified or registered to do business as a foreign
corporation in the jurisdictions where it is required to
qualify or register in order to conduct its business as
presently conducted, except where the failure to be so
qualified would not have a Material Adverse Effect.
(d) Each of the Group Companies has the corporate power and
authority to own, lease and operate the assets held or
used by it, and carry out its activities in the manner in
which they are currently carried out.
(e) Except as set forth on Exhibit 3.4(e), during the last
two years the business of the Company has been conducted
only through the Group Companies.
(f) Seller has made available to the Purchaser true and
correct copies of the charter, by-laws or other
organizational or constituent documents of each the Group
Companies.
3.5 Capital Structure
(a) The Shares and all of the shares of the Subsidiaries are
duly authorized, validly issued and fully paid. Except
as set forth in Exhibit 3.5(a), the shares of the
Subsidiaries held by the Company or one of the other
Group Companies, or with respect to the Related Equity
Interests only, by the Seller or any of its affiliates,
are free and clear of all liens, charges, encumbrances
and restrictions, escrow arrangements, preemptive rights,
call options or other rights of third parties or
limitations of any kind.
(b) The corporate capital of each of the Group Companies is
set forth in Exhibit 3.4, which also sets forth the total
number of shares, warrants or securities issued by each
of them. Except for such shares, warrants or securities,
the Group Companies have not issued, nor approved the
issuance of, any shares, warrants or securities of any
nature whatsoever; and there are no options, promises,
warrants or other agreements or undertakings pursuant to
which any of the Group Companies is or may become
obligated to issue or purchase or acquire any shares,
warrants or other securities of any nature whatsoever.
3.6 Transfer of the Shares and the Related Equity Interests
The Shares represent 100% of the capital and the voting
rights of the Company. The Seller has the power under the
Company's by-laws to sell the Shares to the Purchaser in
accordance with this Agreement. The Seller has the power,
subject to obtaining certain shareholder consents, which the
Seller undertakes to obtain prior to Closing, under the
constitutive documents of the Subsidiaries in respect of
which there are Related Equity Interests, to sell, or to
cause its Participating Affiliates to sell, the Related
Equity Interests in accordance with this Agreement.
3.7 Accounts
(a) The Seller has delivered to the Purchaser (i) the French
GAAP balance sheet and income statement, and the related
notes, of each of the Group Companies listed in Exhibit
3.7(a), audited to the extent an audit is required by
applicable law or regulation, (ii) the audited French
GAAP consolidated balance sheet and income statement and
related notes of the Company and its consolidated
subsidiaries, in each case for the years ended December
31, 1996, 1997 and 1998, together with the report thereon
of Barbier Frinault & Autres (Arthur Andersen), statutory
auditors, and (iii) the Estimated June 30 Balance Sheet
and income statement of the Company and its consolidated
subsidiaries for the six months ended June 30, 1999
(collectively (i), (ii) and (iii), the "French Financial
Statements"). The French Financial Statements present
fairly the financial position and results of operations
of each Group Company or the Group Companies taken as a
whole, as the case may be, as of and for the periods
ended on their respective dates, and were prepared in
accordance with French generally accepted accounting
principles ("French GAAP"), applied on a consistent
basis, except as set forth in the notes included in the
French Financial Statements. The Seller has delivered to
the Purchaser the audited US GAAP consolidated balance
sheet, statement of cash flow and income statement, and
related notes, of the Company and its consolidated
subsidiaries for the years ended December 31, 1996 (in
the case of the income statement and statement of cash
flow), 1997 and 1998, together with the report thereon of
Barbier Frinault & Autres (Arthur Andersen), statutory
auditors, (the "US Financial Statements"). The US
Financial Statements present fairly the financial
position and results of operations of the Group Companies
taken as a whole, as of and for the periods ended on
their respective dates, and were prepared in accordance
with US generally accepted accounting principles("US
GAAP"), applied on a consistent basis except as set forth
in the notes thereto.
(b) Except as set forth in Exhibit 3.7(b), since June 30,
1999, no event (other than any event that is of a general
application to all or a substantial portion of the
Company's industry) has, to the knowledge of Seller,
occurred that, individually or together with other
similar events, could reasonably be expected to
constitute or cause a Material Adverse Effect on the
Group Companies, taken as a whole.
(c) As of June 30, 1999, the Group Companies did not have any
material liability or obligation (including without
limitation in respect of any borrowings), whether known
or unknown, absolute, accrued, contingent or otherwise,
that is not disclosed in the French Financial Statements
or in Exhibit 3.7(c).
(d) During the period from June 30, 1999 to the date hereof,
except as set forth in Exhibit 3.7(d) and except for
current liabilities for trade or business obligations
incurred since such date in connection with the purchase
of goods or services in the ordinary course of the
business and consistent with past practices, no Group
Company has incurred any material liability or
obligation, whether known or unknown, absolute, accrued,
contingent or otherwise and none of the Group Companies
have taken any actions or agreed to take any actions
since that date that are prohibited after the date hereof
by Section 5.1 (other than subsection (r) thereof).
(e) The French Financial Statements and the US Financial
Statements utilize principles of revenue and cost
recognition for long term projects and include provisions
for operational risks and charges with respect to the
Group Companies, which have been established in
accordance with French GAAP applied on a consistent basis
except as set forth therein (in the case of the French
Financial Statements) or US GAAP applied on a consistent
basis except as set forth therein (in the case of the US
Financial Statements). The Excluded Elements have been
reflected in the Estimated June 30 Balance Sheet, and
will be reflected in the Final June 30 Balance Sheet, on
the basis of the QPSRs for June 30, 1999. The other
provisions for operational risks and charges of the Group
Companies have been determined taking into account the
items listed in Exhibit 3.7(c).
(f) The Purchaser acknowledges that (i) it has been given
access to the long term Material Contracts of the Group
Companies set forth on Exhibit 3.12(a) and (ii) it
recognizes the subjective nature of financial projections
and provisioning policies on long term contracts.
Accordingly, notwithstanding anything to the contrary set
forth in this Agreement, the Seller makes no
representation and gives no warranty with respect to
revenue and cost recognition and provisions in respect of
long-term contracts, other than that they have been
established in accordance with French GAAP applied on a
consistent basis (with respect to the French Financial
Statements) or in accordance with US GAAP applied on a
consistent basis except as set forth therein (with
respect to the US Financial Statements).
(g) All accounts receivable included in the French Financial
Statements are properly reflected in the books and
records of the Group Companies.
(h) There are no material differences between the carrying
value of the investment in each unconsolidated subsidiary
included in the Group Companies and the Group Companies'
proportionate share of underlying equity of such entity.
3.8 Movable Property and Businesses ("Fonds de Commerce")
(a) All property, installations, equipment and assets
(whether real, personal or mixed and whether tangible or
intangible) purported to be owned and used by the Group
Companies to conduct their business, including the
vessels described in Exhibit 3.8(a) (the "Vessels"), are
either fully owned by the Group Companies and are not the
subject of material liens, pledges, charges, encumbrances
or other third-party rights or agreements, or are used by
the Group Companies under the terms of a valid lease or
finance lease ("credit bail") agreement. To the best of
the Seller's knowledge, except for the Vessels (which are
separately covered below), all movable property,
installations, equipment and buildings and structures are
usable for their intended purpose. Except as set forth
on Exhibit 3.8(a), the owned and leased property and
assets of the Group Companies constitute all of the
property and assets used in the conduct of the Group
Companies business during the last 12 months (except for
any property or assets acquired or sold during that
period in the ordinary course of business) and as now
conducted and the consummation of the transactions
contemplated by this Agreement will not result in the
loss of the use of any property or assets owned or leased
by the Group Companies (other than as a result of changes
in commercial relationships that may result from the
change in ownership of the Company).
(b) To the best of Seller's knowledge, all of the Vessels are
in all respects seaworthy and have been properly
maintained. The portion of the Vessels DLB 801 and DLB
Polaris that are owned by Seller are fully owned by the
Seller, and are not the subject of any liens, pledges,
charges, encumbrances or other third-party rights or
agreements (other than the existing lease to the Company,
which the Seller covenants and promises to terminate
prior to the Closing Date). The Seller and the Company
together fully own the "Polaris" and the "DLB 801" and
all of the related equipment, inventory of supplies,
stores and spare parts.
(c) Each of the Vessels is registered under the classes and
with the port of registries and classification societies
set forth in Exhibit 3.8(a). All fees of the registries
in question have been paid in full up to and including
the date hereof and there are no outstanding amounts
payable nor has anything been done whereby such
registration may be forfeited or imperiled. No
applications have been made to change the name of any
Vessel.
(d) To the best of Seller's knowledge, the Vessels are (i) in
material compliance with all rules, regulations,
requirements, recommendations and notations of the
classification society with which they are registered
affecting their classification and (ii) equipped in
accordance with the applicable regulations of their
country of registration.
(e) Except as set forth in Exhibit 3.8(e), the Group
Companies' businesses ("fonds de commerce") have in all
material respects been operated in accordance with
applicable laws, regulations, orders, injunctions and
decrees. Except as set forth in Exhibit 3.8(e) the Group
Companies have full ownership of such businesses, and
such businesses are not the subject of any liens,
pledges, charges, encumbrances, third-party rights or
agreements whatsoever, nor of any claims or actions of
any nature whatsoever.
3.9 Intellectual or Industrial Property
Except as set forth in Exhibit 3.9:
(a) All (i) patents, patent applications, trademarks, service
marks and registrations therefor, trade names,
copyrights, copyright registrations, logos, proprietary
computer software, proprietary technology, slogans and
all other proprietary rights of any kind or character,
wherever located, which are used or being developed in
connection with the business of any of the Group
Companies and the confidential information owned by or
licensed to and used by any of the Group Companies in
connection with the know-how, processes or assets or in
the conduct of the business of any of the Group
Companies, and (ii) engineering, tooling patterns,
manuals, catalogs, brochures, sales literature,
promotional and other selling materials, nonproprietary
computer software, microfilm records, drawings,
specifications, nonproprietary technology, and all other
nonproprietary rights of any kind or character and
wherever located which are used or being developed in
connection with the business of any of the Group
Companies, and other industrial or intellectual property
rights ("IP Rights") which are used by the Group
Companies in carrying out their activities are either
owned by the Group Companies or are used pursuant to a
valid license or similar agreement, none of which are
terminable as a result of the consummation of the
transactions contemplated by this Agreement.
(b) A complete and up-to-date list of all IP Rights
registered or for which registration is pending in the
name of any of the Group Companies is attached hereto as
Exhibit 3.9. The aforesaid IP Rights are not the subject
of any liens, pledges, charges, encumbrances or third-
party rights, restrictions or agreements whatsoever, nor
to the best of the Seller's knowledge, of any claims or
actions by any third party seeking to invalidate or place
restrictions on such rights. The Group Companies have
paid all fees and have carried out all formalities
necessary to ensure that all IP Rights are validly
registered in the jurisdictions set forth on Exhibit 3.9.
(c) None of the Group Companies has asserted any claims or
actions against any third party for infringement of any
of the IP Rights listed in Exhibit 3.9 during the two
year period preceding the date of this Agreement, and to
the best knowledge of Seller, no person is infringing or
has infringed within the two years prior to the date
hereof, any of the IP Rights, or has misappropriated or
improperly disclosed any trade secret, confidential
information or know-how related to the business of the
Group Companies.
(d) None of the Group Companies has, to the best knowledge of
the Seller, participated in any infringement of any
industrial or intellectual property rights owned by any
third party during the two year period preceding the date
of this Agreement, and to the best knowledge of Seller,
no person has asserted that any of the Group Companies is
infringing or has infringed within the two years prior to
the date hereof, any IP Right of such person, or has
misappropriated or improperly used or disclosed any trade
secret, confidential information or know-how.
(e) A listing of all agreements relating to IP Rights to
which any of the Group Companies is a party (i) under
which royalties presently are payable or may in the
future become payable by or to any of the Group Companies
or (ii) that materially restrict the use of the IP Rights
by the Group Companies, is set forth on Exhibit 3.9.
3.10 Tax and Social Security
(a) Except as set forth in Exhibit 3.10(a):
(i) the Group Companies have filed by their deadlines
correctly completed tax and social security reports
and returns with the competent authorities;
(ii) the Group Companies are not delinquent in the
payment of any Taxes, duties and contributions payable
by them (other than amounts that the Group Companies
are contesting in good faith and are properly reserved
in the June 30 Balance Sheet in accordance with French
GAAP);
(iii) the reserves and provisions for accrued Tax and
social security liabilities set forth in the Estimated
June 30 Balance Sheet are adequate.
When used in this Agreement, "Taxes" shall mean any federal,
state, local or foreign income, profit, franchise (including
without limitation those that are based on net worth,
capitalization, income or total assets), sales, use,
transfer, real property transfer, recording, value added,
fringe benefits tax, real or personal property or other
taxes, assessments, fees, levies, duties (including without
limitation customs duties and similar charges), deductions or
other charges of any nature whatsoever (including without
limitation interest and penalties) imposed by any law, rule
or regulation.
(b) Except as set forth in Exhibit 3.10(b), none of the Group
Companies is the subject of any tax or social security
audit or control, or has received any request for
information from the tax or social security authorities.
(c) The Seller has made available to the Purchaser complete
and accurate copies of all material tax and social
security reports and returns filed by any of the Group
Companies since January 1, 1997.
3.11 Insurance
(a) Seller has made available to Purchaser (as summarized in
Exhibit 3.11(a)): (i) true and complete copies of all
cover note summaries of all material policies of
insurance to which any of the Group Companies is a party
or under which any of the Group Companies or their assets
or the "Polaris" or "DLB 801" is or has been covered at
any time within the two (2) years preceding the date of
this Agreement (other than policies of insurance of third
parties, including J. Ray McDermott S.A. and its
affiliates and customers of the Group Companies,
providing coverage for the Group Companies); (ii) true
and complete copies of all pending applications for
policies of insurance for which summary cover notes have
not yet been issued; and (iii) any written statement by
the auditor of any of the Group Companies' financial
statements for the period beginning January 1, 1996 with
regard to the adequacy of such entity's coverage or of
the reserves for claims.
(b) Exhibit 3.11(b) describes: (i) any self-insurance
arrangement by or affecting any of the Group Companies,
including any reserves established thereunder; (ii) any
contract or arrangement, other than a policy of
insurance, for the transfer or sharing of any risk by any
of the Group Companies; and (iii) all obligations of the
Group Companies to third parties with respect to
insurance under customer contracts and lease agreements
and identifies the policy under which such coverage is
provided.
(c) Exhibit 3.11(c) sets forth, by year, for the current
policy year and as of year-end for each of the two
preceding policy years: (i) a summary of the loss
experience under each policy covered by Section
3.11(a)(i); (ii) a statement describing each claim under
each such insurance policy for an amount in excess of
$250,000, which sets forth: (A) the name of the
claimant; (B) a description of the policy by type of
insurance; (C) the amount and a brief description of the
claim; and (D) the amount of the claim still outstanding;
and (iii) the amount of any deductibles thereunder not
yet met.
(d) Except as set forth on Exhibit 3.11(d): (i) all policies
to which any Group Company is a party or that provide
coverage to any of the Group Companies covered by Section
3.11(a): (A) are valid, outstanding, and enforceable;
(B) are issued by an insurer that is financially sound
and reputable; (C) taken together, provide customary and
reasonable insurance coverage for all risks normally
insured against by a person carrying on the same business
or businesses as the Group Companies; (D) are sufficient
for compliance with all legal requirements and contracts
to which any of the Group Companies is a party or by
which any of them is bound; (E) will continue in full
force and effect following the consummation of the
transactions contemplated by this Agreement; and (F) do
not provide for any retrospective premium adjustment or
other experienced-based liability on the part of any of
the Group Companies; (ii) neither Seller nor any of the
Group Companies has received during the last two years
(A) any refusal of coverage or any notice that a defense
will be afforded with reservation of rights, or (B) 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; (iii) the Group Companies have paid all
premiums invoiced and due (subject to normal
administrative processing delays), and have otherwise
performed all of their respective obligations, under each
policy to which any of the Group Companies is a party or
that provides coverage to Seller in respect of the
Polaris or the DLB 801 or to any of the Group Companies
or director thereof; and (iv) the Group Companies have
given notice to the insurer of all claims that the
Company's risk management department is currently aware
of that may be insured thereby.
3.12 Contracts
(a) Set forth in Exhibit 3.12(a) is a list of all of the
following, including amendments and supplements thereto
(collectively, "Material Contracts"):
(i)leases or other contracts involving obligations on
the part of any of the Group Companies to pay amounts
to any party other than another Group Company in
excess of US$1 million in the aggregate (it being
understood that individual purchase orders placed in
the ordinary course of business shall not be
considered "contracts" for this purpose, although
master agreements covering multiple purchase orders
shall be considered "Contracts");
(ii) contracts or agreements under which the Group
Companies are expected to receive revenues in any
years (other than prepaid revenues) that represent
more than one percent (1%) of the forecasted
consolidated revenues of the Group Companies for
1999;
(iii) loans, guarantees or credit, finance, lease or
security agreements to which any of the Group
Companies is a party (with any party other than
another Group Company);
(iv) contracts or other agreements between any of the
Group Companies and any of its officers (which term
shall, in this Agreement, refer in particular to
President-directeur general, President du Directoire,
Gerant, Directeur General, Directeur General Adjoint,
Secretaire General, Directeur Financier, Directeur
Commercial, Directeur Technique and other individuals
having the same level of responsibility) or directors
(which term shall, in this Agreement, refer in
particular to any administrateur, or membre du
Conseil de surveillance or membre Directoire), or
members of their respective families, or any
shareholder of any of the Group Companies (other than
the constitutive documents of the entities listed in
Exhibit 3.4) or its or their officers or directors,
or members of their respective families;
(v) joint venture or joint bidding agreements or other
contracts involving the sharing of profits, losses,
costs or liabilities (other than the constitutive
documents of the entities listed in Exhibit 3.4);
(vi) any contracts terminable by the other party upon
a change of control of any of the Group Companies;
(vii) any agreements containing covenants that purport
to restrict the business activity of any of the Group
Companies (other than the constitutive documents of
the entities listed in Exhibit 3.4) or limit the
freedom of any of the Group Companies or any of their
employees to engage in any line of business or to
compete with any Person;
(viii) any collective bargaining or similar agreement
to or with any labor union or other employee
representative of a group of employees of any of the
Group Companies;
(ix) any power of attorney currently effective (other
than powers of attorney held by employees of the
Group Companies); and
(x)any sales representative, foreign agent's agency or
distribution agreement or agreement providing for the
payment to or by any person based on sales, purchases
or profits (other than direct payments for goods).
(b) Except as set forth in Exhibit 3.12(b), none of the Group
Companies is in default under any of the Material
Contracts as a result of which another party thereto has
the right to terminate any such Material Contract before
the stated expiration of its term or which could
reasonably be expected to result in material damages, and
no Group Company has notified the other party to any
Material Contract in writing of a material breach of such
other party's obligations thereunder and, to the best of
Seller's knowledge, (i) there are no defaults under any
Material Contract by any other party thereto and (ii) no
events have occurred that solely as a result of the lapse
of time or the giving of notice would result in any
defaults thereunder. Each Material Contract is in full
force and effect, and true and correct copies thereof
have been made available to the Purchaser.
(c) Except as expressly set forth above, the Seller makes no
representation and gives no warranty with respect to the
Material Contracts. Without limiting the generality of
the foregoing, the Seller makes no representation and
gives no warranty as to the profitability (present or
future) of any of the contracts described in subsection
(a)(ii).
(d) Except as contemplated with the Purchaser under the terms
of this Agreement, neither the Seller nor any of the
Seller's affiliates are bound under or a party to any
contract or other agreement (i) regarding the
consolidation or merger of any of the Group Companies
with or into any such person or persons (ii) regarding
the sale, conveyance or disposition of all or
substantially all or a large portion of the assets of any
of the Group Companies or a transaction or series of
related transactions in which any voting securities of
any the Group Companies would be issued, transferred or
disposed of, or (iii) regarding any other form of
acquisition, liquidation, dissolution or winding up of
any of the Group Companies.
3.13 No Legal Proceedings
Except as indicated in Exhibit 3.13, there are no judicial,
administrative, investigative or arbitration proceedings,
whether civil or criminal, pending or, to the best of the
Seller's knowledge, threatened against any of the Group
Companies or current or former employees in connection with
their employment, which, if determined adversely with respect
to such Group Company, would result in a liability in an
amount exceeding 10 million French francs, or the equivalent
in any other currency.
3.14 Compliance with Law
Except as indicated in Exhibit 3.14, the Group Companies'
activities are in all material respects carried out in
compliance with the permits and consents required for the
performance of their activities and with all laws,
legislation and regulations which are presently applicable to
them. Neither Seller nor any of the Group Companies is
subject to any outstanding order, writ, injunction or decree
that would have a Material Adverse Effect on the business of
the Group Companies, taken as a whole, as conducted during
the last 12 months or as currently conducted or would prevent
or delay in any material respect the consummation of the
transactions contemplated hereby. The provisions of the 1997
OECD Convention on combating bribery of foreign public
officials in international business transactions have been
incorporated into the standard form of agent agreement used
by the Group Companies.
3.15 Licenses
(a) The Group Companies (i) own, or hold rights lawfully to
use in the operation of their businesses, all licenses,
permits, concessions, franchises, consents, orders or
authorizations or registrations of governmental or
administrative bodies (collectively, "Licenses") which
are necessary for the Group Companies to conduct their
businesses as now conducted and (ii) all such Licenses
are in full force and effect, and the Group Companies are
in compliance with their obligations under such Licenses
in all material respects.
(b) Except as set forth in Exhibit 3.8(e) with respect to the
Warri yard property, there are no proceedings of any
nature pending or, to the best knowledge of Seller,
threatened against any of the Group Companies which are
reasonably likely to result in the withdrawal, suspension
or modification of any of the Licenses owned or used by
the Group Companies.
3.16 Environment
Except as indicated in Exhibit 3.16, the Group Companies have
carried out their activities in compliance in all materials
respects with environmental legislation and regulations
applicable to them, their assets and their operations. The
Group Companies have obtained and currently hold all
environmental Licenses or, where applicable, have filed the
necessary declarations with the relevant authorities,
required for the performance of their activities, and the
Group Companies are complying in all material respects with
such Licenses. Except as disclosed on Exhibit 3.16, (i)
there is no physical condition existing on any property now
or previously owned or operated by any of the Group Companies
(nor are there any physical conditions existing on any other
property that may have been impacted by the operations of the
Group Companies) and (ii) the Group Companies have not
handled or disposed of any substance, arranged for disposal
of any substance, exposed any employee or other person to any
substance or condition or operated any facility in any manner
in any case which could reasonably be expected to give rise
to any remedial obligation under environmental, health or
safety laws or which could result in any liability for the
Group Companies to any third person claiming damage to
persons, property or natural resources.
3.17 Labor Matters
(a) Except as described in Exhibit 3.17(a), no Group Company
maintains or participates or permits employees to
participate in any compensation, bonus, profit-sharing,
pension, retirement, stock option or purchase, severance
pay, life, health, medical, disability or accident
insurance, vacation or other employee benefit plan or
program in excess of the employee profit participations
required by applicable law in the jurisdictions in which
the Group Companies operate (a "Plan"). The Group
Companies are in compliance in all material respects with
all of the Plans.
(b) Except as indicated in Exhibit 3.17(b), none of the Group
Companies has entered into any contracts with any of its
employees which provide, in the event of termination, for
a notice period or payment of an indemnity which exceeds
that provided for by applicable legislation, regulations
and collective bargaining agreements.
(c) Except as set forth in Exhibit 3.17(c), there have not
occurred, or to the best knowledge of Seller been
threatened, any strikes, work stoppages or other similar
labor actions by any group of employees of any of the
Group Companies during the two-year period preceding the
date of this Agreement.
(d) Except as set forth in Exhibit 3.17(d), no breach of
contract and/or denial of fair representation (delit
d'entrave) claim has been filed or is pending against any
of the Group Companies and/or any labor organization
representing employees of any of the Group Companies; no
citation has been issued by any labor inspector or other
authority responsible for the supervision of compliance
with labor related rules against any of the Group
Companies and no notice of contest or enforcement
proceeding involving any of the Group Companies has been
filed or is pending.
(e) Except as set forth in Exhibit 3.17(e), no employees of
the Group Companies or persons representing the interests
of such employees have ever made claims to any
administrative (including the social security office) or
judicial authorities, to be compensated for the harm they
suffered as a result of an asbestos-related illness
recognized as an occupational illness within the meaning
of the French Social Security Code and no allegation of
inexcusable fault which may allegedly have been committed
by the Group Companies has either been made by such
employees (or persons representing their interests) or
upheld by the competent administrative or judicial
authorities (including the social security tribunal).
(f) The Company has notified its Comite d'Entreprise and, to
the extent required, other employee representatives of
the Group Companies of the transactions contemplated
hereby in accordance with applicable law.
3.18 Intermediaries
Neither the Seller nor any of the Group Companies has entered
into any agreements with any intermediaries or advisors
whatsoever which would bind one of the Group Companies to
pay, either directly or indirectly, any remuneration,
commissions or fees as a result of the signature of this
Agreement or the performance of the obligations contemplated
herein or in the other Seller Documents.
3.19 Disclosure
All documents and other papers included in the data room
documents provided to the Purchaser by or on behalf of the
Seller or the Seller's affiliates in connection with this
Agreement and the transactions contemplated herein are
accurate and authentic. The representations and warranties
of Seller in this Agreement and in the other Seller Documents
do not contain any untrue statement of a material fact or
omit to state any material fact necessary to make the
statements made therein, in the context in which they are
made, not false or misleading. To the best knowledge of
Seller, there are no facts or circumstances that are
reasonably likely to have a Material Adverse Effect on the
Group Companies taken as a whole that have not been disclosed
to Purchaser in this Agreement, in the exhibits hereto or in
the other documents provided to the Purchaser in connection
with the transactions contemplated hereby. The Seller's
representations in this Section 3.19 are made exclusively in
connection with the transactions contemplated hereby, and the
Seller makes no representation in relation to the use by the
Purchaser of any information provided by the Seller or any of
the Group Companies for any other purpose.
3.20 Year 2000 Compliance
The Seller has disclosed to the Purchaser the Group
Companies' plans designed to address the operational issues
of the computers and computer systems used in connection with
the Group Companies' business (including software and
hardware, referred to in this case as the "IT System") which
are expected to arise in connection with the change in year
from 1999 to 2000, including any related change in the field
configuration containing date information within the IT
System and the estimated cost of implementing any required
upgrades and/or amendments.
3.21 Interpretation
The Seller acknowledges that it is the owner of 100% of the
outstanding share capital of the Company, and that it is a
member of the Board of Directors of (and controls) the
Company. In connection with the transactions in this
Agreement, the Seller has made such preparations and
participated in such discussions with management of the
Company as is normal and appropriate for a party in the
position of the Seller. Accordingly, where any statement is
qualified in this Article 3 by the expression "so far as the
Seller is aware" or "to the best of the Seller's knowledge"
or any similar expression, that statement shall mean
information actually known to (i) the Seller or any officer
or director of Seller or the Company or entity that controls
either of such corporations or entities and (ii) information
that Seller or any officer or director of Seller or the
Company should reasonably be expected to have obtained as a
result of their position as an officer, director or
shareholder.
3.22 Update Exhibit
(a) On the tenth Paris business day prior to the Closing Date
(the "Update Delivery Date"), the Seller may deliver to
the Purchaser an Exhibit (the "Update Exhibit") setting
forth events occurring between the date hereof and the
Update Delivery Date that, in the absence of the Update
Exhibit, would render any of the representations and
warranties of the Seller untrue as of the Update Delivery
Date. The Update Exhibit shall include, with respect to
each item mentioned therein, the date on which the Seller
believes that the relevant event occurred.
(b) The Seller hereby warrants to the Purchaser that the
representations and warranties set forth in Article 3
hereof will be true and correct as of (i) the Closing
Date (if on or prior to September 15, 1999), or (ii) the
later of September 15, 1999 or the Update Delivery Date
(if the Closing Date is after September 15, 1999), in any
such case as though made on such date, except as to any
matters that occur between the date of signature of this
Agreement and the Update Delivery Date that are set forth
on the Update Exhibit.
(c) The Update Exhibit shall be deemed to update and amend
the representations and warranties provided for in this
Article 3 as of the Update Delivery Date. Except as set
forth in Section 3.22(d), the Seller shall not be deemed
to be in breach of any of its representations and
warranties with respect to any matters disclosed in the
Update Exhibit, and the Update Exhibit shall, subject to
Section 3.22(d), discharge the Seller from its
indemnification obligation under Article 7 in connection
with disclosures made therein. The delivery of the
Update Exhibit shall not, however, limit the Purchaser's
right not to consummate the transactions contemplated
herein, if the conditions precedent to the Closing
contemplated by Section 8.1(b) have not been satisfied.
(d) Notwithstanding the foregoing, the Seller shall not be
discharged from its indemnification obligation under
Article 7 with respect to any matter disclosed in the
Update Exhibit that arises out of an event occurring
prior to September 15, 1999, except for:
(i) any event arising from any acts taken or omitted to
be taken in accordance with the instructions of the
Purchaser given pursuant to Article 5, or which the
Purchaser has been deemed to have approved pursuant
to Article 5, or
(ii) any event that would, if reflected in a
consolidated balance sheet of the Seller as of
September 15, 1999, constitute an Excluded Element
(determined as if the QPSRs were prepared as of
September 15, 1999 rather than June 30, 1999).
(e) In addition, notwithstanding the foregoing, the Seller
shall not be discharged from its indemnification
obligation under Article 7 with respect to the matters
described on Annex V.
ARTICLE 4
REPRESENTATIONS OF THE PURCHASER
The Purchaser hereby makes the following representations and
warranties for the benefit of the Seller as of the date of this
Agreement and as of the Closing Date:
4.1 Organization; Authority and Validity
(a) The Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State
of Louisiana. The Purchaser has the corporate power and
authority to enter into this Agreement and the other
Purchaser Documents and to carry out its obligations
hereunder and thereunder. "Purchaser Documents" shall
mean this Agreement, the Charter Party (if the Purchaser
is a party thereto) and the Cooperation Agreement.
(b) The execution of this Agreement and the other Purchaser
Documents and the consummation of the transactions
contemplated herein and therein have been duly authorized
by all necessary corporate action on the part of the
Purchaser.
(c)This Agreement has been, and each of the other Purchaser
Documents when executed will be, duly executed and
delivered by the Purchaser and constitutes, or in the
case of each of the other Purchaser Documents will
constitute, a legal, valid and binding obligation of the
Purchaser, enforceable against it in accordance with its
terms.
4.2 No Breach
Neither the execution by the Purchaser of this Agreement or
the other Purchaser Documents nor the consummation of the
transactions contemplated herein or therein does or will:
(i)conflict with or violate any provision of the
certificate of incorporation or by-laws of the
Purchaser;
(ii) violate, conflict with or result in the breach of
any contract to which the Purchaser is a party; or
(iii) constitutes a violation by the Purchaser of any
laws or regulations applicable to it or its
properties;
except for any such matters that would not, either
individually or in the aggregate, prevent or delay in any
material respect the ability of the Purchaser to perform its
obligations under this Agreement or the other Purchaser
Documents.
4.3 Consents
Except for filings under the U.S. securities laws, no consent
or authorization of, or registration or filing with, any
governmental or regulatory body or any court or
administrative tribunal is required to be obtained by the
Purchaser in connection with the execution of this Agreement
and the other Purchaser Documents or the consummation of any
of the transactions contemplated herein or therein.
ARTICLE 5
COVENANTS OF THE SELLER
5.1 Management Between the Date Hereof and the Closing Date
Between the date hereof and the Closing Date, except as
provided herein or as otherwise agreed in writing by the
Purchaser, the Seller shall (x) cause the Group Companies not
to undertake any actions that are intended to result in a
breach of the representations and warranties set forth in
Article 3 and (y) cause each of the Group Companies:
(a) to carry out its activities solely within the normal and
ordinary course of business consistent with past
practices, with reasonable diligence and as a prudent
manager (bon pere de famille);
(b) to preserve its present relationships with customers,
suppliers and other persons with which it has significant
business relations, except for changes in such
relationships that are made in the ordinary course of
business;
(c) in the case of the Company not to decide upon, or make,
any distribution of profit or reserves, except as
expressly contemplated herein;
(d) not to be a party to any merger, split or consolidation,
or to sell all or a substantial part of its assets or
businesses, and not to make any change to its capital, or
issue securities of any nature whatsoever, including
without limitation shares, convertible securities,
preferred instruments or warrants or options to acquire
shares; and
(e) not to modify its by-laws;
(f) not to redeem, purchase or otherwise acquire or offer to
acquire any of its shares;
(g) not to acquire (by merger, consolidation or acquisition
of stock or assets) any interest in any corporation,
partnership or other business organization or division
thereof nor enter into any joint venture, partnership
and/or exclusivity arrangement with any third party nor
any arrangement which could restrict the ability of any
Group Company to undertake any form of business;
(h) not to pledge, charge, mortgage, grant any security
interest in, or otherwise encumber any of its assets,
except in the ordinary course of business and in a manner
consistent with past practices;
(i) not to enter into, amend and/or terminate any contract or
agreement under which revenue is expected to be earned or
payments are expected to be made in excess of
US$7,500,000 (or its equivalent in any other currency),
except that this restriction shall not apply to any
contract entered into in response to any bid in which
both a Group Company and a the Purchaser or one of its
affiliates is or is likely to be invited to bid, or the
entry into any contract in respect of which a binding bid
has been made prior to the date hereof;
(j) not to authorize any capital expenditure in an amount in
excess of US$1,000,000 (or its equivalent in any other
currency) or capital expenditures in excess of
US$10,000,000 (or its equivalent in any other currency)
in the aggregate;
(k) not to increase compensation of any officer, director or
employee or grant any severance or termination pay,
except in the ordinary course of business and in a manner
consistent with past practice, or as required by
applicable law;
(l) not to make any payment under any employee benefit plan,
except in the ordinary course of business and in a manner
consistent with past practice or as otherwise required by
such plan as in effect at the date hereof;
(m) not to loan or advance money to any person (other than
another Group Company) under any circumstance whatsoever
except for credit transactions with customers on terms
consistent with past practice and in the aggregate not
exceeding US$10,000,000;
(n) not to do any act or omit to do any act which would
reasonably be expected to cause a material breach of any
contract commitment or obligation;
(o) to maintain all existing insurance policies relating to
the Group Companies in full force and effect;
(p) not dispose of or grant or agree to dispose of or grant
any option in respect of any assets valued in excess of
US$500,000 (or its equivalent in any other currency)
except in the ordinary course of business and in the
aggregate not exceeding US$5,000,000;
(q) not to change any Group Company's accounting reference
date or methods (except as required by changes in local
accounting regulations);
(r) not initiate, compromise, waive or settle any litigation,
arbitration or mediation proceedings or claims in an
amount over US$1,000,000;
(s) not create any new financial debt in an amount over
$250,000, other than short-term indebtedness under
working capital lines incurred in the ordinary course of
business, or any debt incurred to refinance or in
substitution for debt existing on June 30, 1999, or any
replacement therefor, on terms no less favorable to the
Group Companies than the existing debt being replaced;
(t) not to enter into any transaction with the Seller or any
of its affiliates (other than another Group Company),
except in the ordinary course of business consistent with
past practice, on arm's length terms; and
(u) not make any commitment to do any of the foregoing.
In the event that the Seller or any Group Company requests
the approval of the Purchaser by notice in accordance with
Section 9.8 of any of the matters referred to above, the
Purchaser shall respond to such request within 72 hours, or
in the case of matters referred to in subsections (i) above
within 48 hours, failing which such request shall be deemed
to have been granted.
5.2 Access to Facilities
The Seller shall cause the Group Companies to permit the
Purchaser and its representatives to inspect the facilities
of the Group Companies and otherwise have full access during
normal business hours upon reasonable prior notice, to the
employees, statutory auditors, facilities and books and
records and documents of the Group Companies, permit
Purchaser or its agents to inspect and conduct nondestructive
testing of any of the facilities of the Group Companies, and
furnish to Purchaser's representatives all information
concerning the business as Purchaser may reasonably request,
in each case except to the extent that such access, testing,
inspection or furnishing of information would materially
interfere with the ability of the Group Companies to conduct
business in accordance with the requirements of Section 5.1.
5.3 Information for Financing
The Seller shall take reasonable measures, and cause the
Group Companies to take reasonable measures, to cooperate
with and assist the Purchaser (upon request by the Purchaser)
in the preparation of any information required by the
entities proposing to provide financing for the transactions
contemplated hereby or required to be included in any filings
made by Purchaser with the US Securities and Exchange
Commission (the "SEC"), including obtaining customary
consents and comfort letters from its statutory auditors and
customary legal opinions. The Purchaser acknowledges and
agrees that (i) neither the Seller nor the Group Companies
shall have any liability for the use made by the Purchaser of
any documents, materials or information provided to the
Purchaser pursuant to Section 5.3, (ii) the information
furnished by the Purchaser to its financiers and in its SEC
filings is the sole responsibility of the Purchaser, and the
Purchaser shall not represent to any party that such
information is the responsibility of the Seller or the Group
Companies, and (iii) the Purchaser shall indemnify and hold
harmless the Seller and the Group Companies against any
damages, losses, claims (including fines, judgments and
assessments), liabilities, actions, obligations and expenses
and costs (including reasonable attorneys' fees) arising from
the use by the Purchaser of any information or materials
furnished pursuant to this Section 5.3, including without
limitation any liability arising under the U.S. federal or
state securities laws.
5.4 US June 30 Financial Statements
As soon as reasonably practicable after the date hereof, and
in any event no later than August 31, 1999, the Seller shall
furnish, or cause the Company to furnish, to the Purchaser a
consolidated income statement, balance sheet and statement of
cash flow (excluding the related notes, which shall be
delivered as soon as reasonably practicable thereafter) for
the Company and its consolidated subsidiaries as of and for
the six months ended June 30, 1999, prepared in accordance
with U.S. GAAP applied on a consistent basis with the
accounting principles used in the US Financial Statements as
of and for the year ended December 31, 1998, except as stated
therein. Upon delivery of such financial statements to the
Purchaser, the Seller will be deemed to have made the
representations and warranties set forth in Section 3.7(a)
also with respect to such financial statements, with
references in Section 3.7(a) to the US Financial Statements
being deemed to include references to such June 30, 1999
financial statements.
ARTICLE 6
COVENANTS OF THE PURCHASER AND THE SELLER
6.1 Consents
The Seller agrees to obtain the shareholder consents referred
to in Section 3.6 on or prior to the Closing Date.
6.2 Performance Bonds and Guarantees
(a) The Purchaser agrees to obtain the release of the Seller,
effective no later than the Closing Date, from the
Seller's obligations under (i) the guarantees,
performance bonds and other instruments listed in Exhibit
6.2(a) with expiration dates (date d'echeance) after
December 31, 1999, and (ii) renewals of the credit
guarantees listed in Exhibit 6.2(a) (identified therein
by a blank under the column "affaire").
(b) The Purchaser shall reimburse the Seller promptly upon
first demand for any payments made by the Seller after
the Closing Date under the guarantees, performance bonds
and other instruments listed in Exhibit 6.2(a) with
expiration dates on or prior to December 31, 1999.
6.3 Further Actions
(a) Subject to the terms and conditions herein provided, each
of the parties hereto agrees to use its best efforts to
take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or
advisable under all applicable laws to consummate and
make effective the transactions contemplated by this
Agreement.
(b) At all times prior to the Closing, each party shall
promptly notify the other in writing of the occurrence of
any event which will or is reasonably likely to result in
this failure of any of the conditions contained in
Article 8 to be satisfied.
ARTICLE 7
INDEMNIFICATION
7.1 Principle
(a) Subject to the provisions of this Article 7, the Seller
hereby undertakes, from and after the Closing, to
indemnify the Purchaser and each of its affiliates and
each of the Group Companies (the "Purchaser Parties")
for, and to hold the Purchaser Parties harmless against,
all damages, losses, claims (including fines, judgments
and assessments), liabilities, actions, obligations and
expenses and costs (including reasonable attorneys'
fees), in each case in excess of the reserves for risks
of the relevant nature included in the Estimated June 30
Balance Sheet ("Losses") actually suffered by the
Purchaser Parties which arise out of, result from or are
based upon (i) any inaccuracy or breach (without giving
effect to any materiality qualification contained
therein) of the representations and warranties or
covenants of the Seller given in this Agreement or in any
of the other Seller Documents, (ii) any Taxes payable to
the Republic of France or any taxing authority therein,
for periods prior to June 30, 1999 or for transactions
prior to the Closing Date, (iii) any claim by an employee
or former employee of the Group Companies or other person
(or persons representing the interests of that employee
or person) seeking compensation for harm suffered as a
result of an asbestos related illness to the extent such
claim is based on exposure to asbestos prior to the
Closing Date, (iv) (a) any failure by J. Ray McDermott to
satisfy its obligations under the Master Termination and
Transfer Agreement dated April 3, 1998 (including its
schedules and exhibits) or other related agreements
entered into between J. Ray McDermott, S.A., Seller
and/or the Company in connection with the transactions
contemplated by the Master Termination and Transfer
Agreement, or (b) any claims by J. Ray McDermott or its
Affiliates against ETPM (as those terms are defined in
the Master Termination and Transfer Agreement dated April
3, 1998, including its schedules and exhibits) or other
related agreements entered into between J. Ray McDermott,
S.A., Seller and/or the Company in connection with the
transactions contemplated by the Master Termination and
Transfer Agreement, under the indemnification provisions
of Article V, Section 7(a) of the Master Termination and
Transfer Agreement, (v) any claims, investigations or
liabilities existing as of the Closing Date or arising
out of facts or circumstances existing at or prior to the
Closing Date relating to or based on any violation of
anti-trust, or similar laws prohibiting anti-competitive
behavior, and (vi) Losses (to the extent set forth in the
next sentence) occurring in respect of the matters set
forth in Annex V. The indemnification referred to in
clause (vi) shall be due (A) for the respective
percentages set forth in Annex V of the relevant Losses,
until the non-indemnified portions of such Losses reach
the respective amounts set forth in Annex V (if any), and
(B) thereafter, for 100% of such Losses.
For purposes of the foregoing, a reserve shall be for a
risk of the "relevant nature" if it relates to the type
of Loss incurred (such as doubtful account, tax, pension
or similar categories), without regard to whether it was
taken in respect of the specific item in respect of which
the Loss was incurred, except that, with respect to Tax
matters, a reserve shall be for a risk of the "relevant
nature" only if it relates to the jurisdiction where the
Loss occurs. On the earliest of (i) the date on which
any Tax matter for which a reserve is included in the
Estimated June 30 Financial Statements is finally
resolved, (ii) the date on which the statute of
limitations expires in respect of any such matter, and
(iii) the fifth anniversary of the Closing Date, the
amount of such reserve that is not applied in respect of
such resolution (or any prior interim resolution in
respect of the same matter) shall be paid by the
Purchaser to the Seller in cash in U.S. dollars, promptly
after such date.
(b) Subject to the provisions of this Article 7, the
Purchaser hereby undertakes, from and after the Closing,
to indemnify the Seller and its affiliates other than the
Group Companies (the "Seller Parties") for, and to hold
the Seller Parties harmless against, all Losses actually
suffered by the Seller Parties which arise out of, result
from or are based upon any inaccuracy or breach (without
giving effect to any materiality qualification contained
therein) of the representations and warranties or
covenants of Purchaser given in this Agreement or in any
of the other Purchaser Documents.
7.2 Claims
In order to be valid, any claims made under the terms of this
Article 7 (a "Claim") shall be made in writing as follows:
(a) each Claim shall state, with reasonable detail, the
specific grounds therefor and the amount claimed; and
(b) each Claim shall be made with reasonable promptness after
any of the Purchaser Parties or Seller Parties, as the
case may be, becomes aware of the circumstances giving
rise thereto; provided, however, that any failure to give
such notice will not waive any rights hereunder except to
the extent that the rights of the party entitled to
notice are actually prejudiced by the delay.
7.3 Deadlines for Claims
The representations and warranties set forth in Sections 3.1
through 3.6, Section 3.8(b) (other than the first sentence
thereof) and Article 4 shall survive the Closing and any
investigations by the parties and shall survive indefinitely.
The representations and warranties set forth in Sections
3.10, 3.14 and 3.16 shall survive the Closing, and any
investigations by the parties and shall survive until
expiration of the statute of limitations or other limitations
or the time within which claims relating to the underlying
matters covered by such representation and warranties shall
have expired and shall then expire, unless the period covered
by such statute of limitations or similar limitation shall
exceed five years (or, in the case of Section 3.14, three
years) or shall be of indefinite duration, in which event
such representations and warranties shall survive until
midnight Paris time on the fifth anniversary (or, in the case
of Section 3.14, the third anniversary) of the Closing Date
and shall then expire. All other representations and
warranties of the parties contained in this Agreement, or in
any Seller Document or Purchaser Document, and any Claims
under Section 7.1(a)(i) other than Claims based on breaches
of representation and warranties, shall survive the Closing
and any investigations by the parties, and shall survive
until midnight Paris time eighteen months after the Closing
Date, and shall then expire. Upon the expiration of any
representation and warranty pursuant to this Section 7.3,
unless written notice of a Claim based on such representation
and warranty for a Loss or an expected Loss shall have been
delivered prior to such expiration, no Claim may be brought
based on the breach of such representation and warranty.
7.4 Third-Party Claims
In the event that a Claim is made on the basis of a claim
made by a third party, the indemnifying party may retain
counsel reasonably acceptable to the claiming party at its
own expense to defend against such third-party claim. At the
request of the indemnifying party, the claiming party shall,
and if the claiming party is the Purchaser, shall cause the
Group Companies to, present all arguments, submit all
pleadings, take all actions, and file all counterclaims, in
each case consistent with applicable law, and more generally
cooperate with the indemnifying party and the counsel
appointed by it. The claiming party shall provide, and if
the claiming party is the Purchaser, shall cause the Group
Companies to provide, the indemnifying party with all
information and documents in relation to any such third-party
claim which the indemnifying party may reasonably request.
The claiming party shall not, and if the claiming party is
the Purchaser, shall cause the Group Companies not to,
settle, admit liability or withdraw any counterclaim in
connection with any such third-party claim without the prior
written consent of the indemnifying party. Unless the
indemnifying party shall have agreed in writing that all
Losses relating to a particular third-party claim are
indemnifiable in full pursuant to this Article 7, no such
third-party claim may be settled by the indemnifying party
without the consent of the claiming party, which consent
shall not be unreasonably withheld. The claiming party's
obligations under this Section 7.4 are conditional upon its
being indemnified to its reasonable satisfaction by the
indemnifying party against all reasonable out of pocket
expenses incurred by it or, if the claiming party is the
Purchaser, by any Group Company in connection with the
performance of such obligations (including the actual cost of
personnel of any Group Company that participates materially
in the defense of any third party claim at the request of the
Seller), such costs to be paid periodically as incurred. In
the event that (i) any third party claim is reasonably likely
to have a Material Adverse Effect on the Group Companies or
the Purchaser other than in the form of monetary damages, or
(ii) is related to matters covered by Sections 7.1(a)(iv) or
7.1(a)(v), the Purchaser shall have the right to participate
in the defense against such third party claim, and the Seller
shall reimburse the Purchaser for the reasonable fees and
expenses of one counsel in connection with the participation
of the Purchaser in such defense. The Purchaser shall
cooperate fully with the indemnifying party in defending
against any investigations, claims or liabilities asserted by
third parties, to the extent permitted by applicable law.
7.5 Effective Nature of the Loss
(a) Any indemnification due shall be calculated taking into
account the effect of any Tax savings realized by the
indemnified entity as a result of the deductibility of
the relevant Loss. For purposes of the foregoing, Tax
savings shall be considered "realized" if they result in
an actual cash savings to a Group Company, or if they are
recorded as tax benefits or deferred tax assets in the
consolidated financial statements of the Company (or any
successor in interest to the Company) and its
consolidated subsidiaries.
(b) If a Claim is based upon a liability which is contingent
only, no payment of indemnification shall be due unless
and until such liability becomes due and payable.
(c) The Seller shall not be held liable for indemnification
of any Loss sustained by a Group Company, to the extent
that such Loss is compensated by a gain received by
another Group Company arising out of the same facts and
circumstances, and as a result the Group Companies, taken
as a whole, do not suffer a Loss (or suffer a reduced
Loss) arising from such facts and circumstances.
7.6 Determination of the Indemnification
(a) Except in cases of fraud, knowing or willing
misrepresentation, neither the Purchaser Parties on the
one hand, nor the Seller Parties on the other hand, shall
be entitled to make any claim for indemnification under
Section 7.1(a)(i) or 7.1(b), respectively, unless and
until the aggregate amount of the Losses for which
indemnification owed (but for this subsection (a))
exceeds US$2,000,000, but in such event, such person
shall be entitled to indemnification for the full amount
of such Losses without regard to the US$2,000,000
threshold (but always subject to the de minimis
requirement for Claims set forth in subsection (b)
below).
(b) Neither the Purchaser Parties nor the Seller Parties
shall be entitled to indemnification for any individual
Claim in an amount less than US$40,000. Any Claim that
is less than this amount shall not be counted in
determining whether the threshold set forth in subsection
(a) has been met.
(c) The maximum aggregate amount of indemnification that the
Seller may be required to pay in respect of all Claims
under subsection (i) of Section 7.1(a) shall not exceed
US$50,000,000; provided that the maximum amount that the
Seller may be required to pay to the Purchaser with
respect to all Claims made under Section 7.1(a)(i) as a
result of a breach of any of Sections 3.1, 3.2, 3.3,
3.4(a), 3.5 (with respect to the Company and the Shares
and Related Equity Interests only), 3.6 or 3.8(b) (other
than the first sentence thereof) shall be $300,000,000.
(d) The maximum aggregate amount of indemnification that the
Seller may be required to pay in respect of all Claims
under subsection (v) of Section 7.1(a) shall be equal to
(i) in the case of any Claim pursuant to such subsection
for which the Company suffers or may suffer the relevant
Loss, $300,000,000, or (ii) in the case of any Claim
pursuant to such subsection for which only one or more
Group Companies other than the Company suffer or may
suffer the relevant Loss, the lesser of $300,000,000, or
the fair market value of such Group Companies, determined
without regard to the impact of the relevant
investigation or proceeding giving rise to such Claim.
7.7 Exonerating and Mitigating Factors
(a) The indemnifying party shall not be held liable for
indemnification to the extent the Loss for which
indemnification is claimed hereunder is caused by any
intentional action or omission on the part of the
claiming party after the Closing Date or, if the claiming
party is the Purchaser, by the Group Companies after the
Closing Date, or any change in accounting methods
(including consolidation methods) or policies of the
Group Companies after such date.
(b) If the Purchaser or the Group Companies modify their
insurance coverage after the Closing Date, any
indemnification due by the Seller in connection with any
Loss shall be reduced by the amount which would have been
covered by insurance if such modification had not
occurred.
(c) The indemnifying party shall not be held liable for
indemnification to the extent that (i) after the Closing
Date, the claiming party or, if the claiming party is the
Purchaser, the Group Companies had not, upon learning of
the situation giving rise or likely to give rise to a
Loss, used, or, in the case of the Purchaser, caused the
Group Companies to use, all reasonable efforts to
mitigate the amount of such Loss, and (ii) the amount of
such Loss is greater than it would have been if such
reasonable efforts had been used. The claiming party
and, if the claiming party is the Purchaser, the Group
Companies, shall not be required to undertake any actions
that would materially interfere with the conduct of their
business in the ordinary course, consistent with past
practice, in order to comply with its obligations under
this Section 7.7(c).
(d) In the event that a situation giving rise to a Claim is
curable, in whole or in part, the claiming party shall
give, and, if the claiming party is the Purchaser, shall
cause the Group Companies to give, the indemnifying party
a reasonable opportunity to implement such a cure.
(e) The indemnifying party shall not be held liable for
indemnification if the claiming party has not exercised,
or, if the claiming party is the Purchaser, has not
caused the Group Companies to exercise, any and all
rights they may have against insurers in connection with
the corresponding Loss. The claiming party shall, upon
payment of all Losses relating to any Claim, and upon
request by the indemnifying party, assign any and all
rights that the claiming party may have (and in the case
of the Purchaser, cause the Group Companies to assign any
rights that they may have) against third parties not
previously exercised in connection with that Claim to the
indemnifying party.
(f) Any deficiency assessed by the tax authorities whose sole
effect is to shift a tax liability from one fiscal year
to another shall give rise to indemnification by the
Seller only (i) insofar as a Group Company is required to
pay a penalty or interest charge in relation thereto or
(ii) to the extent that the net present value of the
amount of Tax paid by the Group Companies is greater than
it would have been had the Tax originally been paid in
respect of the fiscal year to which the liability is
shifted.
7.8 Exclusivity of Remedy
In the event the Closing occurs, the indemnification provided
in this Article 7 shall be the exclusive remedy of the
parties against each other in respect of any breach of any
representation, warranty, covenant or undertaking hereunder,
and each hereby waives any rights to rescission it may have.
7.9 No Other Representations
(a) Neither the Seller nor the Purchaser makes any
representation nor gives any warranty to the other party,
other than as specifically provided in this Agreement.
(b) Each of the parties acknowledges and agrees that none of
the directors, officers or employees of any of the Group
Companies shall have any personal liability or
responsibility in respect of (i) any documents or
information provided or made available to the Purchaser
in connection with the transaction contemplated hereby or
(ii) any representations or warranties made by Seller.
7.10 Response to Claims.
No later than 90 days after receipt of any Claim for
indemnification hereunder, the party receiving such Claim
shall notify the claiming party as to whether it objects to
such Claim or the amount thereof, setting forth in reasonable
detail the reasons for such objection (if any). In the
absence of a response within such 90 day period, the party
receiving such Claim shall be deemed to have accepted its
indemnification liability therefor. In the event that, as a
result of new information or circumstances, the receiving
party's response is modified, the receiving party shall
notify the claiming party as soon as practicable, including a
description in reasonable detail of the basis for any
continuing objection.
ARTICLE 8
CONDITIONS PRECEDENT
8.1 Conditions Precedent
The completion of the sale of the Shares and the Related
Equity Interests is subject to the fulfillment of the
following conditions:
(a) The obligations of each of the parties hereto to
consummate the transactions contemplated by this
Agreement shall be subject to fulfillment of the
following condition:
On the Closing Date, there shall be in effect no
injunction, order or decree of any nature issued, ordered
or granted by any governmental entity of competent
jurisdiction that restrains or prohibits in any material
respect, or would impose substantial damages in
connection with, the consummation of the transactions
contemplated hereby.
(b) The obligations of the Purchaser to consummate the
transactions contemplated by this Agreement to be
consummated at the Closing shall be subject to the
fulfillment of the following conditions, it being
understood that these conditions are included for the
exclusive benefit of the Purchaser and may be waived, in
whole or in part, at any time prior to the Closing, in
writing by the Purchaser:
(i)that the Seller shall not be in breach of any
representation or warranty made under Sections 3.1
through 3.6 or under Section 3.8(b) (other than the
first sentence thereof) (with references in these
sections to the date hereof to be read as references
to the Closing Date);
(ii) that the Seller shall have performed and
complied with its obligations under Articles 1 and 2
that are due to be performed by the Closing Date;
(iii) that the Seller shall have delivered to the
Purchaser, on or prior to the Closing Date, the U.S.
GAAP June 30, 1999 consolidated financial statements
(without notes) described in Section 5.4; and
(iv) that no event shall have occurred after the date
hereof and on or prior to the Closing Date that
constitutes a Material Adverse Change.
"Material Adverse Change" means (i) (A) an event that is
specific to the business of the Group Companies (i.e., an
event that does not concern their industry sector as a
whole), or (B) any breach of a representation or warranty
of the Seller hereunder (without regard to the Update
Exhibit), that in either case, (ii) results in damage,
loss, expense or liability (whether incurred or payable
currently or reasonably likely to be incurred or payable
in the future) to the Group Companies, taken as a whole,
in an amount at least equal to 8.5% of the Purchase
Price. If the Purchaser has notified the Seller pursuant
to Section 2.1(i) that the Closing Date is to take place
on a date on or prior to September 15, 1999, then all
events or breaches of the type referred to above shall be
taken together in determining whether the threshold in
clause (ii) is met in respect of the Group Companies,
taken as a whole. Otherwise, each such event or breach
shall be considered individually in making such
determination.
(c) The obligations of the Seller to consummate the
transactions contemplated by this Agreement to be
consummated at the Closing shall be subject to the
fulfillment of the following conditions, it being
understood that this condition is included for the
exclusive benefit of the Seller and may be waived at any
time prior to the Closing Date in writing by the Seller:
(i)that the Purchaser shall not be in material breach of
any representation or warranty hereunder (with
references therein to the date hereof to be read as
references to the Closing Date);
(ii) that the Seller shall have performed and
complied with its obligations under Articles 1 and 2
that are due to be performed by the Closing Date.
ARTICLE 9
GENERAL PROVISIONS
9.1 Cooperation
Each of the parties hereby undertakes to make every effort to
take all commercially reasonable measures or to ensure that
all commercially reasonable measures necessary or useful are
taken in a timely manner for the completion of the
transactions provided for in this Agreement. In the event
that after the Closing Date, any additional commercially
reasonable measures are necessary or desirable for the
completion of the transactions contemplated herein, the
parties shall take all such commercially reasonable measures,
or shall ensure that they are taken.
9.2 Confidentiality and Announcements
(a) Prior to the Closing, each party hereto agrees to
maintain in confidence, and not use in any manner other
than in connection with the consummation of the
transactions contemplated hereby, any written, oral or
other information obtained from the other party hereto or
the Group Companies in connection with this Agreement or
its review of the business and affairs of the Group
Companies hereunder, unless (i) such information is
already known to such party or becomes known to it from
others not bound by a duty of confidentiality or such
information becomes publicly available through no fault
of such party, (ii) the other party gives its prior
written consent, or (iii) the disclosure of such
information is required by applicable law or regulation
(in which case the party proposing to make such
disclosure shall consult with the other party prior to
such disclosure). If the transactions contemplated
hereby are not consummated, then each of the parties will
return to the other party all written information so
obtained and, in any event, continue to maintain all
information so obtained in confidence, provided, however,
that nothing shall prohibit Purchaser from providing any
information obtained from Seller or the Group Companies
to the entities proposing to provide financing of the
transactions contemplated hereby to the Purchaser or from
including in any filing made by Purchaser with the SEC
such information, including financial statements, as may
be required to be included therein under the U.S. federal
securities laws and the rules and regulations promulgated
thereunder.
(b) Neither party shall make any public announcement relating
to this Agreement or the transactions contemplated herein
without the consent of the other party (which shall not
be unreasonably withheld), except to the extent that such
announcement is required by applicable law or regulation
or stock exchange or trading facility rule or regulation,
in which case the other party shall be given a reasonable
opportunity to review and comment on such announcement
before it is made. For purposes of this subsection (b),
the filing of any registration statement, prospectus or
periodic report with the SEC, and the delivery of any
such document in accordance with applicable law, will not
be considered a public announcement.
9.3 Absence of Third-Party Rights; Assignment
This Agreement is for the sole benefit of the parties hereto,
and shall not benefit or create any rights whatsoever in
favor of any individual or entity other than the parties
hereto. This Agreement shall not be assigned by either party
without the prior written consent of the other party, except
that the rights and obligations of Purchaser may be assigned
and delegated to any wholly-owned affiliate of Purchaser
without the consent of the other party hereto; provided,
however, that no such assignment or delegation shall relieve
Purchaser of liability therefor.
9.4 Entire Agreement
This Agreement (including its Exhibits and Annexes)
represents the entire agreement existing between the parties
relating to the subject matter hereof and supersedes all
prior understandings and agreements of the parties with
respect to the subject matter hereof. The Purchaser
acknowledges that it has conducted its own independent review
and analysis of the Group Companies and their businesses.
9.5 Waivers and Amendments
No modification of or amendment to this Agreement shall be
valid unless set forth in an instrument in writing signed by
each of the parties hereto. Any waiver of any term or
condition of this Agreement must be set forth in an
instrument in writing signed by the waiving party and must
refer specifically to the term or condition to be waived and
to the circumstances of such waiver. No such waiver shall be
deemed to constitute a waiver applicable either to other
circumstances involving the same term or condition or to any
other term or condition of this Agreement.
9.6 Severability
If any provision of this Agreement is held to be invalid in
whole or in part, the validity of the remaining provisions of
the Agreement shall not be affected. In such event, the
parties shall, if possible, substitute for such invalid
provision a valid provision corresponding to the spirit and
purpose thereof.
9.7 Section Headings
The section headings in this Agreement are for convenience of
reference only and shall not be deemed in themselves to have
any contractual value or particular interpretation. Except
as indicated otherwise, references made in this Agreement to
articles, sections, subsections and exhibits are made to
articles, sections, subsections and exhibits of this
Agreement.
9.8 Notices and Communications
All notices and communications provided for herein shall be
deemed to have been duly given if delivered to the following
addresses:
If to the Purchaser, to:
Global Industries, Ltd. and Global Industries, Ltd.
5151 San Felipe, Suite 900 107 Global Circle
Houston, TX 77056-USA Lafayette, LA 70503-USA
Facsimile: (001)713.479.7990 Facsimile:(001)318.989.5780
To the attention of To the attention of
Mr. William J. Dore Mr. Peter Atkinson
If to the Seller, to:
Groupe GTM
61, avenue Jules Quentin
92000 Nanterre - France
Facsimile: (33) 1.46.95.74.90
To the attention of Mr. Jean-Luc Pommier
or to such other addresses as the addressees shall indicate
in accordance with the provisions of this Section. All
notices or communications shall be hand delivered against a
receipt signed and dated by the addressee, or sent by
registered mail with return receipt requested, or by
facsimile transmission, and shall be deemed to have been
received on the date stated on the receipt by the addressee
for hand delivery, or three (3) days after the date of the
postmark on the receipt of mailing, for registered mail, or
on the date of transmission, for facsimile transmission.
9.9 Costs
The Purchaser and the Seller shall each be responsible for
payment of all their own fees and costs incurred in
connection with this Agreement and the operations
contemplated herein, including the fees and disbursements of
their respective financial advisors, accountants and
attorneys; provided that no fees or costs of Seller shall be
borne or paid by any of the Group Companies.
9.10 Governing Law
This Agreement shall be governed by the laws of France.
9.11 Disputes
All disputes arising in connection with this Agreement,
including its interpretation or performance, shall be
submitted to the sole jurisdiction of the Commercial Court of
Paris and, as to appeals, to the Cour d'Appel of Paris.
Made in Paris, on August 2nd, 1999, in two (2) original
counterparts.
GROUPE GTM GLOBAL INDUSTRIES, LTD.
By: ______________________ By: ______________________
Jean-Luc Pommier William J. Dore
Director of Corporate President / Chief
Development Executive Officer
Exhibit 2.1 -- CCC Transaction Agreement
TRANSACTION AGREEMENT
THIS AGREEMENT ("Agreement") dated as of July ___, 1999, is
made and entered into by and among Global Industries Offshore,
Inc., a corporation organized under the laws of the State of
Delaware in the United States of America ("Purchaser"), CCC
Fabricaciones y Construcciones, S.A. de C.V., a sociedad anonima
de capital variable organized under the laws of the United
Mexican States ("Seller"), and Grupo Consorcio de Fabricaciones
y Construcciones, S.A. de C.V., a sociedad anonima de capital
variable organized under the laws of the United Mexican States
("CFC").
R E C I T A L S:
Purchaser and CFC and its Affiliates are the sole owners of
Seller;
Seller is, among other things, engaged in the business of
providing marine construction services to the oil and gas
industry in connection with the construction, installation,
repair and maintenance of marine pipeline systems and
installation and maintenance of offshore drilling and production
platforms and other offshore structures and facilities, and all
other business and activities related or incidental thereto in
the United Mexican States and the waters offshore the United
Mexican States (hereinafter the "Business");
CFC and Global Industries, Ltd. ("Global") have entered
into a Heads of Agreement providing for the termination of their
joint ownership of Seller and in connection therewith Seller
desires to sell and Purchaser desires to purchase all of the
assets, tangible and intangible of the Business upon the terms
and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises, the
mutual benefits to be derived from this Agreement and the
representations, warranties, covenants and conditions herein
contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. Unless otherwise defined herein or
unless the context otherwise requires, capitalized terms used in
this Agreement shall have the following meanings:
"Accounts Receivable" shall mean all accounts, notes,
accounts receivable, contract rights, drafts, and other forms of
claims, demands, instruments, receivables and rights to the
payment of money or other forms of consideration related to the
Business, whether for goods sold or leased, services performed
or to be performed, or otherwise, directly or indirectly owned
by the Seller or in which the Seller has any direct or indirect
interest, together with all guarantees, security agreements and
rights and interests securing the same.
"Action" shall mean any action, suit, arbitration, inquiry,
proceeding or investigation by or before any Governmental
Entity.
"Affiliate" shall mean with respect to any Person (a)
Persons directly or indirectly controlling, controlled by, or
under common control with such Person; (b) a Person owning or
controlling 10% or more of the outstanding voting securities or
interests of such Person; or (c) an officer, director or partner
of such Person. For these purposes, control means the
possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract
or otherwise.
"Support Agreement" shall mean the agreement in the form
attached hereto as Appendix V.
"Assumed Contracts" shall have the meaning ascribed thereto
in the definition of Purchased Assets.
"Assumed Liabilities" shall have the meaning ascribed
thereto in Section 2.4.
"Bank One Debt" shall mean all obligations and amounts due
under that certain Credit Agreement dated March 31, 1999,
between Seller and Bank One, as agent for the banks a party
thereto.
"Business" shall have the meaning ascribed thereto in the
Recitals to this Agreement.
"Business Day" shall mean each Monday, Tuesday, Wednesday,
Thursday and Friday other than days on which banking
institutions in the State of Texas or Mexico are authorized or
obligated by law or executive order to close.
"Closing" shall mean the consummation of the transactions
between Purchaser and Seller contemplated hereby.
"Closing Date" shall mean the date on which the
transactions between Purchaser and Seller contemplated by this
Agreement shall be consummated, which shall be the first
Business Day following the day on which the last of the
conditions to the obligations of the parties contained in
Article VII hereto is fulfilled or waived or such other date as
agreed to by the parties hereto.
"Effective Time" shall mean 12:01 a.m., Central Standard
Time, on the Closing Date.
"Environmental Laws" shall mean any and all Laws, orders or
determinations of any Governmental Entity (including
"jurisprudencia") pertaining to pollution or the protection of
human health and safety, employee health and safety or the
environment including Laws relating to emissions, discharges,
releases, or threatened releases of pollutants, contaminants, or
chemical, industrial, hazardous, or toxic materials or wastes
into ambient air, surface water, ground water, or lands or
otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, or chemical, industrial, hazardous, or
toxic materials or wastes, in effect on the date of this
Agreement in any jurisdiction, federal, state or local, in which
the Business is operated.
"Governmental Entity" shall mean any court or any federal,
state or local legislative body or governmental department,
commission, board, bureau, agency or authority.
"Heller Debt" shall mean all obligations and amounts due
under that certain Credit Agreement dated March 31, 1998,
between Seller and Heller Financial, Inc.
"Improvements" shall have the meaning ascribed thereto in
the definition of Purchased Assets.
"Indemnitee" shall have the meaning ascribed thereto in
Section 8.3 herein.
"Indemnitor" shall have the meaning ascribed thereto in
Section 8.3 herein.
"Intellectual Property" shall mean all patents, patent
applications, inventions, disclosures, trademarks, service marks
and registrations therefor, trade names, copyrights, copyright
registrations, trade secrets, knowhow, processes, logos,
proprietary computer software, proprietary technology, slogans,
research and development projects and all other proprietary
rights of any kind or character, wherever located, which are
used in connection with the Business and the confidential
information owned by or licensed to and used by Seller or any of
Seller's Affiliates in connection with the knowhow, processes or
Purchased Assets or in the conduct of the Business.
"Known" or "Knowledge" shall mean, when used in a statement
regarding the existence or absence of facts in this Agreement
that is qualified by a phrase such as "to such Person's
knowledge" or "known to such Person," (i) information actually
known to (a) the Person in a case of an individual, or (b) in
the case of a corporation or other entity, an officer or
director of such corporation or other entity or of any
corporation or entity that controls such corporation or entity,
and (ii) information that such Persons should reasonably be
expected to have obtained as a result of their position as an
officer, director or shareholder.
"Law" shall mean any law, statute, rule, regulation,
ordinance, requirement, announcement or other binding action or
requirement of a Governmental Entity.
"Liens" shall mean all mortgages, deeds of trust, liens,
security interests, pledges, conditional sale contracts, claims,
rights of first refusal, options, charges, liabilities,
obligations, easements, rights-of-way, limitations,
reservations, restrictions and other encumbrances of any kind.
"Losses" shall mean all damages, awards, judgments,
payments, debts, liabilities, obligations, and other losses
however suffered or characterized, all interest thereon, all
costs and expenses, including without limitation the cost of
investigation, causes of action, proceedings or arbitration
judgments, assessments and any appeal therefrom, all reasonable
attorneys' fees incurred in connection therewith, whether or not
such claim, lawsuit or arbitration is ultimately defeated and,
all amounts paid incident to any compromise or settlement of any
such claim, lawsuit or arbitration.
"Material Adverse Effect" shall mean (a) with respect to
Purchaser, Seller or the Business, any change in the Business,
results of operations, financial condition or liabilities
(whether or not the result thereof would be covered by
insurance) thereof that (individually or in the aggregate) is
material and adverse to the Purchaser and its subsidiaries,
taken as a whole, Seller or the Business, taken as a whole, as
the case may be, or (b) with respect to the Purchased Assets, a
change in the condition or permissible use thereof that
(individually or in the aggregate) is material and adverse to
the Purchased Assets, taken as a whole.
"Permits" shall mean all permits, licenses, registrations,
franchises, concessions, orders, certificates, consents,
authorizations and approvals of any Governmental Entity.
"Person" shall mean an individual, partnership, joint
venture, corporation, bank, trust, unincorporated organization
or a Governmental Entity.
"Personalty" shall have the meaning ascribed thereto in the
definition of Purchased Assets.
Promissory Notes" shall mean the promissory notes of Seller
in the aggregate principal amount of US$24,500,000.00, in the
form attached hereto as Appendix I.
"Purchased Assets" shall mean all right, title and interest
in and to the assets and rights, tangible and intangible,
franchises and properties relating to or used or held for use in
connection with the Business by Seller, including without
limitation the assets and rights described below:
(a) The parcel of real property described on
Schedule 1.1(a) to Seller's Disclosure Letter (the "Real
Property") and the Vessels;
(b) All warehouses, storage facilities, laboratories,
buildings, works, structures, fixtures, landings,
construction in progress, improvements, betterments,
installations and additions constructed, erected or located
on or attached or affixed to the Real Property, together
with such additions, deletions and changes thereto as may
be permitted by this Agreement prior to the Closing Date
(the "Improvements");
(c) All equipment (including without limitation all
computer equipment and hardware), machinery, tools,
furniture, spare and replacement parts, supplies and all
other tangible personal property of every kind and
description (other than the Improvements and Inventories)
listed or described on Schedule 1.1(c) to Seller's
Disclosure Letter, together with such additions, deletions
and changes thereto as may be permitted by this Agreement
prior to the Closing Date (the "Personalty");
(d) All the contracts, agreements, and arrangements,
including purchase orders, related to the Business that are
listed on Schedule 1.1(d) to Seller's Disclosure Letter
(the "Assumed Contracts");
(e) All raw materials and work-in-process inventories
of the Business on the date of this Agreement, plus all raw
materials and work-in-process acquired or initiated in the
ordinary course of the Business during the period between
the date of this Agreement and the Closing Date, less all
raw materials and work-in-process used or completed during
said period in the ordinary course of the Business;
(f) Original or copies of all books, records,
accounts, correspondence, production records, customer
lists, employment records and any other information
pertaining to the Business, plus copies (at Purchaser's
expense) of any applicable portions of the books and
records of Seller and Seller's Affiliates that are
necessary or desirable in order for Purchaser to conduct
the Business from and after the Closing Date in the manner
in which it is presently being conducted, all as the same
may exist on the Closing Date;
(g) [intentionally omitted];
(h) The Accounts Receivable, prepaid rentals, other
prepaid expenses and advance payments, bonds, deposits,
refunds and financial assurance requirements, and other
current assets relating to the Business in each case set
forth on Schedule 1.1(h) to Seller's Disclosure Letter, all
as the same may exist on the Closing Date; and
(i) The engineering, tooling patterns, manuals,
catalogs, brochures, sales literature, promotional and
other selling materials, nonproprietary computer software,
microfilm records, drawings, specifications, nonproprietary
technology, and all other nonproprietary rights of any kind
or character and wherever located which are used or being
developed in connection with the Business (the "Intangible
Assets"), together with such additions, deletions and
changes to the Intangible Assets as may be permitted by
this Agreement prior to the Closing Date; and
(j) All insurance proceeds or claims therefor arising
out of any loss, damage or injury to any Purchased Assets,
all as the same may exist on the Closing Date.
"Purchaser Documents" shall mean this Agreement and all
other agreements, instruments and certificates to be executed
and delivered by Purchaser in connection with this Agreement,
all of which shall be considered a part of this Agreement.
"Purchaser Indemnitees" shall have the meaning ascribed
thereto in Section 8.2(a) herein.
"Purchaser's Disclosure Letter" shall mean a letter of even
date with this Agreement addressed by Purchaser to Seller and
setting forth information relating to Purchaser's
representations and warranties contained in Article V of this
Agreement.
"Real Property" shall have the meaning ascribed thereto in
the definition of Purchased Assets.
"Restricted Period" shall mean from the Closing Date until
the Support Agreement has been terminated.
"Seller Documents" shall mean this Agreement and all other
agreements, instruments and certificates to be executed by the
Seller or CFC in connection with this Agreement, all of which
shall be considered a part of this Agreement.
"Seller Indemnitees" shall have the meaning ascribed
thereto in Section 8.2(b) herein.
"Seller's Disclosure Letter" shall mean a letter of even
date with this Agreement addressed by Seller to Purchaser
setting forth information regarding Seller's representations and
warranties contained in Article IV of this Agreement.
"Share Purchase Agreement" shall mean the agreement in the
form attached hereto as Appendix VI pursuant to which Global
Industries Offshore, Inc., a Delaware corporation shall sell all
of its ownership interest in Seller to CFC.
"Taxes" shall mean any federal, state, local or foreign
income, profit, franchise (including without limitation those
that are based on net worth, capitalization, income or total
assets), sales, use, transfer, real property transfer,
recording, value added, fringe benefits tax, real or personal
property or other taxes, assessments, fees, levies, duties
(including without limitation customs duties and similar
charges), deductions or other charges of any nature whatsoever
(including without limitation interest and penalties) imposed by
any law, rule or regulation.
"Tax Returns" shall mean all returns and reports (including
without limitation information and withholding returns and
reports) of or relating to any Taxes.
"Third Party Claim" shall have the meaning ascribed thereto
in Section 8.2 herein.
"Tuxpan Mortgage" shall mean any mortgage on the real
property in Tuxpan known as the Tuxpan Fabrication Yard in favor
of Purchaser or any of its affiliates.
"Vessels" shall mean those certain vessels known as the
"Atlas del Mar" (official No. 3001008035-3, hull No. 624, the
"El Ingeniero" (official No. 0401014135-2, hull No. 136), the
"Ingeniero II" (official No. 04-1014235-7, hull No. 113), and
the "Sara Maria" (official No. 3001007935-4, hull No. 381),
including without limitation in each case all blue prints and
construction drawings related to such vessels in the possession
of Seller or any of its Affiliates and all equipment, inventory
of supplies, stores, spare parts, galley inventory and
consumables included on the vessel during its operations and on
the vessel on the Closing Date or stored at the Tuxpan Yard.
ARTICLE II
PURCHASE AND SALE
2.1 Assets to be Conveyed. Subject to the terms and
conditions of this Agreement, at the Closing, Seller shall sell,
convey, transfer, assign and deliver to Purchaser, free and
clear of all Liens except those in favor of Heller Financial to
secure the Heller Debt or Global, and Purchaser will purchase,
the Purchased Assets for the consideration specified in Section
2.3.
2.2 Excluded Assets. Seller shall be obligated hereunder
to sell only the Purchased Assets and Purchaser shall be
obligated hereunder to purchase only the Purchased Assets.
2.3 Purchase Price and Payment. The consideration for the
Purchased Assets (the "Purchase Price") shall be the assumption
of the Assumed Liabilities by Purchaser as provided in Section
2.4 hereof. The Purchase Price shall be allocated in accordance
with Section 6.8 herein.
2.4 Assumption of Liabilities - Completion of Certain
Contracts.
(a) Purchaser agrees to assume and be responsible for
all of the Assumed Liabilities at the Closing but is not
assuming and will not assume, either hereunder or
otherwise, any other liabilities or obligations whatsoever
of Seller or Seller's Affiliates whether or not relating to
the Business or the Purchased Assets. Specifically and
without limiting the generality of the foregoing, Purchaser
is not assuming and will not assume any liabilities or
obligations of Seller or Seller's Affiliates for any Taxes
imposed in connection with the transactions contemplated by
this Agreement, except for Mexican Property Transfer Taxes
which shall be paid by Purchaser.
(b) Subject to the terms and conditions contained
herein, Purchaser agrees on the Closing Date to assume (i)
the Assumed Contracts on the Closing Date and, thereafter,
to pay, perform and discharge when due, or to cause an
Affiliate of Purchaser to pay, perform and discharge when
due, the obligations of Seller under any of the Assumed
Contracts, (ii) 49% of any warranty or other claims made by
Pemex Exploracion y Produccion ("PEP") in relation to any
contract of the Business that was entered into or work that
had final acceptance by PEP between June 30, 1998 and the
Closing Date, (iii) the Heller Debt and the Bank One Debt
and (iv) all fees for periods after the Closing Date for
bid bonds and performance bonds relating to work performed
by the Business for PEP and set forth on Exhibit 2.4(iv),
(v) to assume all accounts payable and other liabilities of
the Business set forth in Exhibit 2.4(i) hereof, and (y) if
and when Global's guarantee of the Seller's obligations to
Nissho Iwai have been fully released and any amounts paid
under such guarantee have been refunded to Global, to
assume CFC's accounts payable set forth in Exhibit 2.4(i)
hereof (together (x) (i), (ii), (iii), (iv) and (v), and to
the extent the conditions to such assumption have been met,
(y) shall constitute the "Assumed Liabilities") and none
other.
2.5 Instruments of Conveyance and Transfer. Seller agrees
that it will execute, acknowledge and deliver to the Purchaser,
at the Closing, such good and sufficient instruments of sale,
conveyance, transfer and assignment (including invoices or other
types of conveyance instruments that comply with Mexican tax
laws) as shall be effective to vest in Purchaser all of Seller's
right, title and interest in and to the Purchased Assets, all as
provided in this Agreement, and, simultaneously with such
delivery, Seller will take such steps as may be requisite to put
the Purchaser in actual possession and operating control of the
Purchased Assets. Seller agrees at and from time to time after
the Closing, they will, at the request of the Purchaser and
without further consideration, execute and deliver such
supplemental and additional instruments of sale, conveyance,
transfer and assignment and take such other action as the
Purchaser reasonably may require more effectively to sell,
convey, transfer and assign to Purchaser, and to put it in
possession of, the Purchased Assets and to protect Purchaser's
right, title and interest in and enjoyment of the Purchased
Assets.
ARTICLE III
CLOSING
3.1 The Closing. The Closing shall take place at the
Mexico City offices of Barrera, Siqueiros y Torres Landa, S.C.
at 11:00 a.m. local time on the Closing Date to be effective as
of the Effective Time. At the Closing the transactions
contemplated hereby shall be consummated and in connection
therewith Purchaser shall pay to Seller US$750,000 as an advance
payment on the US$1.1 million included in Exhibit 2.4(i) as the
Businesses' share of certain expenses related to the head office
of the Seller prior to the Closing Date.
3.2 Documents to be Delivered to Purchaser. Subject to the
terms and conditions of this Agreement, at the Closing to
effect, or to promise to effect, the sale, assignment, transfer,
conveyance and delivery to Purchaser of the Purchased Assets,
Seller will deliver, or cause to be delivered, to Purchaser:
(a) general indentures of conveyance, transfer and
assignment with respect to all of the Purchased Assets;
(b) general warranty deeds, in recordable form, with
respect to all Real Property and Improvements and the
Vessels included in the Purchased Assets or in each case in
lieu thereof, appropriate contracts of transfer by promise
to sell and appropriate powers of attorney granting
representatives of Purchaser the authority to make all
filings required to complete, such sale and transfer;
(c) bills of sale conveying good title to all
Personalty included in the Purchased Assets;
(d) certificates of title or other title documents in
recordable form conveying good title to all vehicles and
other transportation equipment included in the Purchased
Assets;
(e) assignments, in recordable form where
appropriate, conveying all right, title and interest of
Seller in the Assumed Contracts (subject to the assumption
thereof by Purchaser) and the Accounts Receivable that are
not owed by PEP; and
(f) such other documents of conveyance, sale,
assignment and transfer;
all as Purchaser may reasonably request.
In addition, Seller will, at the Closing, deliver or cause to be
delivered, to Purchaser:
(g) a certified copy of the resolutions of the
shareholders meeting of Seller properly authorizing and
approving this Agreement and the transactions contemplated
hereby;
(h) all documents required pursuant to Section 7.2
herein;
(i) such other documents and instruments as are
customary under such circumstances or as may be reasonably
requested by Purchaser; and
(j) possession of the Purchased Assets.
3.3 Documents to be Delivered to Seller. Subject to the
terms and conditions of this Agreement, and against delivery to
Purchaser of the documents as provided herein, Purchaser shall
deliver to Seller at the Closing on the Closing Date:
(a) instruments evidencing Purchaser's agreement to
assume and perform after the Closing Date the Assumed
Liabilities and the Assumed Contracts;
(b) a certified copy of the Board of Directors
resolutions of Purchaser properly authorizing and approving
this Agreement and the transactions contemplated hereby;
(c) all documents required pursuant to Section 7.1
herein;
(d) original stock certificates representing all of
the shares of Seller owned by Purchaser, duly endorsed for
transfer in accordance with the terms of the Share Purchase
Agreement referenced in Section 7.1; and
(e) such other documents and instruments as are
customary under such circumstances or as may be reasonably
requested by Seller.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
The Seller represents and warrants to Purchaser as follows:
4.1 Organization and Good Standing, Ownership and
Operation of the Business. Each of Seller and CFC is a sociedad
anonima de capital variable duly incorporated, validly existing
and in good standing under the Laws of the United Mexican
States.
4.2 Consents, Authorizations and Binding Effect. Each of
Seller and CFC and each of their respective officers or
representatives executing this Agreement and the other Seller
Documents on their behalf, has full power and authority to
execute and deliver this Agreement and the Sellers Documents to
which they are a party and to carry out and perform its
undertakings and obligations as provided herein and therein.
This Agreement has been, and as of the Closing Date each of the
Sellers Documents will be, duly executed and delivered by Seller
and CFC and constitutes the legal, valid and binding obligation
of Seller and CFC enforceable against them in accordance with
its terms except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization and similar laws
affecting creditor's rights and remedies generally and general
principles of equity (regardless of whether enforcement is
sought in a proceeding at law or equity). Except as set forth
on Schedule 4.2 to Seller's Disclosure Letter, the execution,
delivery and performance of this Agreement and each of the
Sellers Documents by Seller and CFC and consummation of the
transactions contemplated hereby and thereby, (a) have been duly
and validly authorized by all proper and requisite corporate
actions; (b) will not conflict with or breach any provision of
the certificate of incorporation, charter or bylaws or similar
organizational documents of Seller or CFC; (c) will not conflict
with or breach or constitute any default under any contract,
agreement or arrangement to which Seller or CFC is a party or by
which Seller or CFC is bound or otherwise confer upon any party
a right to terminate any such contract, agreement or
arrangement; (d) will not require any filing with, notification
of or consent, approval or authorization of any Governmental
Entity or constitute a violation of any judgment, order or
decree of any Governmental Entity except for the filing with the
Mexican Federal Competition Commission; or (e) will not violate
any Law, federal, state, foreign or local applicable to Seller
or CFC or any of their assets except where such conflict, breach
or failure to file, notify or obtain consent, approval or
authorization would not have a material adverse effect on the
ability of the parties to consummate the transactions
contemplated hereby or thereby.
4.3 Title to Assets.
(a) Quality of Title. Seller has good title to, or a
valid leasehold interest in, the Purchased Assets in each
case free and clear of all Liens other than as disclosed in
Schedule 4.3 to Seller's Disclosure Letter. The Purchased
Assets are owned legally and beneficially by Seller and
constitute all of the material assets owned or leased by
the Seller and used regularly in the Business.
(b) IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT SELLER
HAS NOT MADE AND WILL NOT BE DEEMED TO HAVE MADE HEREIN ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, REGARDING
THE FITNESS, FITNESS FOR A PARTICULAR PURPOSE, OR THE
MERCHANTABILITY OF THE PURCHASED ASSETS, AND THAT PURCHASER
IS BUYING THE PURCHASED ASSETS "AS-IS" AND "WHERE-IS"
EXCEPT TO THE EXTENT EXPRESSLY SET FORTH HEREIN. PURCHASER
ACKNOWLEDGES THAT NO WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR ANY PARTICULAR PURPOSE ARE MADE OR IMPLIED IN
THE TRANSACTIONS CONTEMPLATED HEREIN.
(c) All Accounts Receivable included in the Purchased
Assets are valid receivables subject to no set-offs or
counterclaims, are current and collectible. Schedule
4.3(c) to Seller's Disclosure Letter sets forth a complete
and accurate schedule of the Accounts Receivable as of the
date of this Agreement, together with an accurate aging of
the same.
(d) CFC has conducted the Business only through
Seller and not through any other entity and no part of the
Business is operated by any entity other than the Seller.
The Purchased Assets constitute all the assets, rights and
properties that were used for the conduct of the Business
as conducted during the twelve months prior to the date
hereof and as now conducted by Seller.
(e) Purchaser acknowledges that its has conducted its
own investigation regarding the subject matter of this
Agreement and is not relying on any representation or
warranty of Seller or its officers or directors except for
those representations and warranties included herein or in
the other agreements and instruments executed in connection
with the transactions contemplated by this Agreement.
4.4 Contracts and Commitments. All of the Assumed
Contracts are set forth on Schedule 1.1(d) to Seller's
Disclosure Letter and true and correct copies thereof have been
provided to Purchaser. All the Assumed Contracts are valid,
binding and in full force and effect, have not been amended or
supplemented in any material manner or respect except as
disclosed on Schedule 4.4 to Seller's Disclosure Letter, and
upon assignment and assumption, with applicable consents if
necessary, will be enforceable by Purchaser in accordance with
their respective terms except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization and similar
laws affecting creditor's rights and remedies generally and
general principles of equity (regardless of whether enforcement
is sought in a proceeding at law or equity). Except as
disclosed on Schedule 4.4 to Seller's Disclosure Letter, there
are no defaults by Seller under any Assumed Contract, and, to
Seller's Knowledge, (a) there are no defaults under any of the
Assumed Contract by any other party thereto and (b) no events
have occurred that with the lapse of time or action or inaction
by any party thereto would result in any violations thereof or
any defaults thereunder. Except as disclosed in Schedule 4.4 to
Seller's Disclosure Letter, the Assumed Contracts may be
assigned to Purchaser without any authorization, consent,
approval, permission or license of, or filing with, any other
Person. Except as contemplated with the Purchaser under the
terms of this Agreement, neither CFC, the Seller nor any of the
Seller's Affiliates are bound under or a party to any contract
or other agreement (i) regarding the consolidation or merger of
any of the Seller or Seller's Affiliates with or into any such
Person or Persons, (ii) regarding the sale, conveyance or
disposition of all or substantially all or a large portion of
the assets of any of the Seller or Seller's Affiliates or a
transaction or series of related transactions in which any
voting securities of any of the Seller or Seller's Affiliates
would be issued, transferred or disposed of, or (iii) regarding
any other form of acquisition, liquidation, dissolution or
winding up of any of the Seller or Seller's Affiliates. Exhibit
2.4(iv) lists, as of the date hereof, all bid bonds and
performance bonds relating to the Business.
4.5 Licenses and Permits. The Permits listed in Schedule
4.5 to Seller's Disclosure Letter constitute all the Permits
held by Seller and Seller's Affiliates in connection with the
Business and constitute all material Permits necessary under
Law, including Environmental Laws or otherwise for Seller and
Seller's Affiliates to conduct the Business as now being
conducted and to own, operate, maintain and use the Purchased
Assets in the manner in which they are now, and during the
preceding twelve months have been, operated, maintained and
used. Seller or Seller's Affiliates (depending on the holder
thereof) is now and has at all times in the past three years
been in compliance in all material respects with the terms of
such Permits. None of such Permits has been or, to the
Knowledge of Seller, is threatened to be revoked, canceled,
suspended or modified.
4.6 Compliance with Law.
(a) Seller has in all material respects complied
with, and are now in compliance with, all Laws, federal,
state or local, and any rules or regulations or any orders,
writs, injunctions and decrees of any Governmental Entity
to which it may be subject which violation might have a
Material Adverse Effect on the Business or the Purchased
Assets, including without limitation, Environmental Laws,.
To the Knowledge of the Seller, neither Seller nor any of
Seller's Affiliates, nor any officer, employee or agent
thereof has made, in connection with the Business, an
offer, payment, promise to pay, or authorization of the
payment of any money, or offer, gift, promise to give, or
authorization of the giving of anything of value, directly
or indirectly (i) to or for the use or benefit of any
official or employee of any Governmental or instrumentality
thereof or the agencies of such Government, or (ii) to any
other person or entity, the payment of which would violate
the laws or policies of the United Mexican States in order
to affect or influence any act or decision of such official
or employee and none of the any Assumed Contracts or
Permit included in the Purchased Assets nor the revenues of
the Business is dependent on any such payment, contribution
or gift.
(b) Except as disclosed on Schedule 4.6 to Seller's
Disclosure Letter (i) there is no physical condition
existing on any property now or previously owned or
operated by Seller or any of the Seller's Affiliates in
connection with the Business (nor are there any physical
conditions existing on any other property that may have
been impacted by the operations of Seller or any of the
Seller's Affiliates in connection with the Business) and
(ii) Seller and Seller's Affiliates have not handled or
disposed of any substance, arranged for disposal of any
substance, exposed any employee or other person to any
substance or condition or operated any facility in any
manner which in the case of clause (i) or (ii) could give
rise to any remedial obligation under Environmental Laws or
which could result in any liability to any third Person
claiming damage to Persons, property or natural resources
as a result of the consequences of said physical
conditions.
4.7 Litigation. There is no material Action pending or,
to the Knowledge of Seller, threatened against or relating to
CFC or Seller which relates to the Business or the Purchased
Assets. Neither Seller nor CFC is subject to any outstanding
order, writ, injunction or decree that would have a Material
Adverse Effect on the Business or the Purchased Assets or would
prevent or delay in any material respect the consummation of the
transactions contemplated hereby.
4.8 Solvency. After giving effect to the transactions
contemplated by this Agreement, (i) the fair saleable value of
the assets of the Seller will exceed its existing liabilities,
including known contingent liabilities, (ii) the assets of the
Seller will not be unreasonably small to conduct the business of
the Seller or to liquidate and wind up its affairs, and (iii)
the Seller has not and does not intend to incur debts beyond its
ability to pay such debts as they mature. For purposes of this
Section 4.8, "debt" means any liability on a claim, and "claim"
means (i) right to payment, whether or not such right is reduced
to judgment, liquidated, unliquidated, fixed, contingent,
mature, unmatured, disputed, undisputed, legal, equitable,
secured or unsecured, or (ii) right to an equitable remedy for
breach of performance if such breach gives rise to a right to
payment, whether or not such right to an equitable remedy is
reduced to judgment, fixed, contingent, matured, unmatured,
disputed, undisputed, secured or unsecured.
4.9 Brokers. Neither CFC nor Seller nor any of its or
their officers, directors or employees has employed any
financial advisor, broker or lender or incurred any liability
for any financial advisory, brokerage or finder's fee or
commission in connection with the transactions contemplated
hereby.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Seller as follows:
5.1 Organization and Good Standing of Purchaser and
Purchaser's Affiliates. Purchaser is corporation duly
organized, validly existing and in good standing under the Laws
of the State of Louisiana.
5.2 Consents, Authorizations and Binding Effect.
Purchaser has full corporate power and authority to execute and
deliver this Agreement and carry out and perform its
undertakings and obligations as provided herein. This Agreement
has been duly executed and delivered by Purchaser and
constitutes the legal, valid and binding obligation of Purchaser
enforceable against Purchaser in accordance with its terms
except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization and similar laws
affecting creditor's rights and remedies generally and general
principles of equity (regardless of whether enforcement is
sought in a proceeding at law or equity). Except as set forth
in Schedule 5.2 of Purchaser's Disclosure Letter the execution,
delivery and performance by Purchaser of this Agreement and
consummation of the transaction contemplated hereby (a) have
been duly and validly authorized by all proper and requisite
corporate actions of Purchaser, (b) will not conflict with or
breach any provision of the charter or bylaws of Purchaser, (c)
will not conflict with or breach or constitute any default under
any contract, agreement or arrangement to which it is a party or
by which it is bound other than any such conflict, breach or
default that would not prevent or delay in any material respect
the consummation of the transactions contemplated hereby or
thereby, (d) will not require any filing with, notification of
or consent, approval or authorization of any Governmental Entity
or constitute a violation or breach of any judgment, order or
decree of any Governmental Entity except for the filing with the
Mexican Federal Competition Commission, and (e) will not violate
any Law, federal, state, foreign or local, or any rule or
regulation of any Governmental Entity applicable to Purchaser or
any of its assets, except for any violation which would not
prevent or delay in any material respect the consummation of the
transactions contemplated hereby or thereby.
5.3 Litigation. There is no material Action pending or,
to the knowledge of Purchaser, threatened against or relating to
Purchaser by or before any Governmental Entity which, if
determined adversely to the interest of Purchaser would prevent
or delay in any material respect the consummation of the
transactions contemplated hereby. Purchaser is not subject to
any outstanding order, writ, injunction or decree that would
prevent or delay in any material respect the consummation of the
transactions contemplated hereby.
5.6 Brokers. Neither Purchaser nor any of its officers,
directors or employees has employed any financial advisor,
broker or finder or incurred any liability for any financial
advisory, brokerage or finder?s fee or commission in connection
with the transactions contemplated hereby.
ARTICLE VI
COVENANTS
6.1 Conduct of the Business. With respect to the Business
and the Purchased Assets, Seller and CFC agree that, from and
after the date of this Agreement until the Closing Date:
(a) Seller will conduct the Business only in the
ordinary course of business, consistent with past practice,
and will use reasonable commercial efforts to maintain and
preserve the Business and the Purchased Assets.
(b) Without the prior written consent of Purchaser,
Seller will not:
(i) sell, transfer or otherwise dispose of any
of the Purchased Assets other than consumption of
supplies in the ordinary course of the Business at
levels not exceeding past practice;
(ii) remove any Improvements from the Real
Property on which they are located or alter any
Improvements other than in the process of maintenance
and repair in the ordinary course of the Business
consistent with past practice;
(iii) remove any Personalty from the Vessels
or the Real Property on which they are located or
alter any Equipment other than in the process of
maintenance and repair in the ordinary course of the
Business consistent with past practice;
(iv) amend or (except through performance)
terminate any Assumed Contract;
(v) subject any of the Purchased Assets to any
Liens; or
(vi) waive any claims, rights, Accounts
Receivable of the Business;
(vii) make any change in the rate of
compensation, commission, bonus or other direct or
indirect remuneration payable, or paid or agree or
promise to pay, conditionally or otherwise, any bonus,
extra compensation, pension or severance or vacation
pay, to any shareholders, director, officer, employee,
salesman, distributor or agent;
(viii) loan any monies to any Person or
guarantee any obligations of any Person;
(ix) enter into any transaction, contract or
commitment other than in the ordinary course of the
Business and consistent with past practices or pay or
agree to pay any legal, accounting, brokerage,
finder's fee, taxes or other expenses in connection
with, or incur any severance pay obligations by reason
of, this Agreement or the transactions contemplated
herein;
(x) enter into any agreement or make any
commitment to take any of the types of actions
described in paragraphs (i) through (ix) above.
(d) Seller will maintain and keep all the tangible
Purchased Assets in their present condition, subject to
ordinary wear and tear;
(e) Seller will perform all of its material
obligations under all Assumed Contracts in accordance with
the provisions thereof; and
(f) Seller will (i) give Purchaser's representatives
full access at all reasonable times to all of the assets,
properties, books, records, agreements and commitments of
Seller concerning the Business, the Purchased Assets and to
Seller's employees, independent auditors (and the audit
work papers of such auditors) and representatives to answer
relevant inquiries of Purchaser regarding the Business and
the Purchased Assets, and (ii) permit Purchaser or its
agents to inspect and conduct nondestructive testing of any
of the Purchased Assets; and
(g) Seller shall promptly notify Purchaser of the
occurrence of any matter, event, circumstance or condition
that is material to the Business, the Purchased Assets or
that would render inaccurate any of the representations or
warranties of Seller contained in Article IV or constitute
a violation or breach of this Agreement.
6.2 Actions of the Parties.
(a) CFC, Seller and Purchaser will use commercially
reasonable best efforts to take all action and do all
things that may be reasonably necessary, proper or
advisable in order to consummate and to make effective as
promptly as practicable the transactions contemplated by
this Agreement (including satisfaction but not waiver of
the conditions set forth in Article VII) and will not
undertake or fail to undertake any action if such action or
failure would render any of the representations and
warranties under this Agreement untrue as of the Closing
Date or cause any of the conditions precedent that are
within its control not to be fulfilled. CFC and Seller
will give any notices to third parties, and will use its
commercially reasonable best efforts to obtain any third
party consents, that Purchaser reasonably may request. In
addition, CFC, Seller and Purchaser agree to cooperate
fully and take all commercially reasonable actions
necessary to obtain all consents, approvals and
authorizations from other Persons and to effect all
filings, applications, registrations and notifications that
the parties hereto deem necessary or desirable in order to
fulfill all conditions precedent contained herein or to
consummation of the transactions contemplated hereby.
(b) (i) Seller covenants and agrees to grant in favor
of Purchaser or any of Purchaser's Affiliates, an
additional Tuxpan Mortgage (the "Third Tuxpan Mortgage")
within three business days after the Closing Date, which
Third Tuxpan Mortgage shall secure payment of the
Promissory Notes. The Third Tuxpan Mortgage shall be
executed in the form attached hereto as Appendix IX. Seller
further agrees to execute a public deed before a Notary
Public in Mexico selected by Purchaser in order to include
in such public deed the agreements, covenants and
undertakings set forth in the first and second amendments
to the Second Tuxpan Mortgage previously executed by Seller
to secure the obligations under that certain Reimbursement
Agreement dated April 28, 1997, as amended (the
"Reimbursement Agreement") and to include within the scope
of such Second Tuxpan Mortgage the additional obligations
added to the Reimbursement Agreement pursuant to the Third
Amendment to the Reimbursement Agreement, (ii) Seller
covenants and agrees within 5 business days of the Closing
Date to (A) authorize and request PEP to pay all amounts
owing under any of the projects and/or claims included in
Exhibit 6.13 that are owed by PEP to the account designated
by Purchaser for work completed prior to the Closing Date,
(B) grant powers of attorney to an escrow agent so
appointed by Seller and Purchaser to have control upon the
bank account in which PEP is currently making payments to
Seller related to the projects and /or claims included in
Exhibit 6.13 until such time PEP agrees to the request
mentioned under 6.2(b)(ii)(A), and (C) use its best efforts
to amend the EPC 36 Trust with Bancomer in order to have
Purchaser or Purchaser's affiliates as the beneficiary in
first place of the EPC 36 Trust with Bancomer.
(c) The parties hereto agree that the obligations of
Seller to reimburse Purchaser or any or Purchaser's
Affiliates in connection with all obligations of CCC to
Nissho Iwai and Nuevo Pignone shall be included in the
obligations that are subject to the terms of that certain
Reimbursement Agreement and CFC and Seller covenant and
agree to take all actions as shall be necessary to cause
each of the other shareholders of CCC to executed the Third
Amendment to the Reimbursement Agreement in the form
attached hereto as Appendix XI.
(d) Upon the request of Seller, Purchaser agrees to
cancel and terminate that certain Reimbursement Agreement,
at such time as Purchaser and its affiliates have been
released from all further obligations in respect of all
obligations of CCC to Nissho Iwai and Nuevo Pignone and all
amounts paid by Global to such entities, if any, have been
repaid to Global by CFC or its affiliates pursuant to the
Reimbursement Agreement or otherwise.
(e) Purchaser covenants and agrees to remit to the
proper tax authorities for the benefit of Seller (with
proof of remittance provided to Seller) or, at the election
of Purchaser to the account of Seller designated by Seller
in either case within 3 business days of receipt thereof
the full amount of the IVA tax payments included with any
payments received on the Accounts Receivable that remain in
the name of CCC after the Closing, without set-off or
deduction of any kind. Until such time as all amounts
payable on the Accounts Receivables from PEP shall be
included in the EPC 36 Trust or a similar trust that
provides for the direct payment of the IVA tax payments
amounts, in the event that Purchaser has failed to remit in
accordance with the first sentence of this Section 6.2(e)
such IVA tax payment amounts within 180 days of the date of
their receipt, two times the amount of such IVA tax (plus
any monetary corrections, fines and penalties resulting
from Purchaser's failure to timely pay over such the IVA
tax payment amounts) shall be automatically credited as a
payment on the principal amount of the Promissory Notes
with application in each case to the Promissory Note with
the highest interest rate.
(f) Seller covenants and agrees to give Purchaser
full power, control and diminution over the bank accounts
to which Seller shall request PEP to make payments pursuant
to Section 6.2(b)(ii)(A). In the interim, Seller shall
grant powers of attorney to an escrow agent so appointed by
the parties pursuant to Section 6.2(b)(ii)(B) to in
connection with the bank account established in Schedule
6.2(f).
(g) Seller and CFC covenant and agree, that in the
event that Global has not been fully released from its
guarantee of the Seller's obligations to Nissho Iwai and
any amounts it has paid under such guarantee have not been
refunded to Global on or prior to the 45th day after the
Closing Date, Seller and CFC shall repay US$750,000 by wire
transfer of immediately available US Dollars to the account
designated by Purchaser.
6.3 Litigation. From the date hereof through the
Effective Time, each of the parties hereto shall promptly notify
the other parties of any Actions which after the date hereof are
threatened or commenced against the Purchaser, CFC, Seller, any
Affiliate, officer, director, employee, consultant or agent or
shareholder thereof, in their capacities as such, the Business
or the Purchased Assets which, (i) challenges the consummation
of the transaction contemplated by this Agreement, or (ii) if
decided adversely, could reasonably be expected to have a
Material Adverse Effect upon the Business, the Purchased Assets,
or the ability of the parties to consummate the transactions
contemplated herein.
6.4 Protection of Value of Purchased Assets. Because of
CFC's and Seller's access to the Business' confidential
information and trade secrets, CFC and Seller would be in a
unique position to divert business from the Business and to
commit irreparable damage to the Business were CFC or Seller to
be allowed to compete with the Business or to commit any of the
other acts prohibited below; the enforcement of said restrictive
covenants against CFC and Seller will not impose any undue
burden upon them; none of said restrictive covenants is
unreasonable as to period or geographic area; and the ability to
enforce said restrictive covenants against CFC and Seller is a
material inducement to the decision of Purchaser to consummate
the transactions contemplated in this Agreement. CFC and Seller
acknowledge that Purchaser would not purchase the Purchased
Assets but for the agreements and covenants of CFC and Seller
contained in this Section 6.4. Accordingly, CFC and Seller
covenant and agree as follows:
(a) Covenant. CFC and Seller shall not at any time
within the Restricted Period, directly or indirectly,
perform activities in the Business in Mexico and the waters
offshore of Mexico (the "Geographic Area") except on behalf
of Purchaser or its Affiliates provided, however, that
specifically excluded from this covenant are all activities
of CFC or Seller or their Affiliates conducted anywhere in
the world outside of the Geographic Area.
(b) Solicitation of Business. During the Restricted
Period, CFC and Seller shall not, directly or indirectly,
solicit or assist any other Person to solicit any business
in competition with the services of the Business in the
Geographic Area (other than for the Purchaser or its
Affiliates) from any present, past or future customer of
the Business.
(c) Confidential Information. From and after the
Closing Date, CFC and Seller shall keep secret and retain
in strictest confidence, and shall not, directly or
indirectly, use for the benefit of CFC or Seller or any
Person other than the Purchaser and its Affiliates all
confidential matters and trade secrets known relating to
the Business, including, without limitation, customer
lists, pricing policies, operational methods, marketing
plans or strategies, product development techniques or
plans, business acquisition plans, new personnel
acquisition plans, methods of manufacture, technical
processes, designs and design projects, invention and
research projects and other business affairs relating to
the services of the Business learned by CFC or Seller
heretofore or hereafter, and shall not divulge, disclose or
make assessable to any Person outside of the Purchaser and
its Affiliates any such information except upon the
Purchaser's express prior written consent.
(d) Rights and Remedies upon Breach. If CFC or
Seller breach, or threatens to commit a breach of, any of
the provisions of this Section 6.4, the Purchaser shall
have the following rights and remedies:
(i) The right and remedy to have the restrictive
covenants in this Section 6.4 specifically enforced by
any court having equity jurisdiction and CFC and
Seller acknowledge and agree that any such breach or
threatened breach will cause irreparable injury to the
Purchaser and that monetary damages will not provide
an adequate remedy to the Purchaser; and
(ii) The right and remedy to require CFC and
Seller to indemnify the Purchaser against any losses,
damages, costs and expenses, including reasonable
attorneys fees and court costs, which may be incurred
by it and which result from or arise out of or relate
to any such breach or threatened breach of the
restrictive covenants in this Section6.4.
(e) Severability of Covenants. If any court of
competent jurisdiction determines that any of the
restrictive covenants in this Section 6.4, or any part
thereof, is invalid or unenforceable with respect to CFC or
Seller, the remainder of the restrictive covenants in this
Section 6.4 shall not thereby be affected and shall be
given full effect, without regard to the invalid portions.
If any court of competent jurisdiction determines that any
of the restrictive covenants in this Section 6.4, or any
part thereof, is unenforceable because of the duration of
such provision or the area covered thereby, such court
shall have the power to reduce the duration or area of such
provision and, in its reduced form, such provision shall
then be enforceable and shall be enforced. CFC and Seller
hereby waive any and all right to attack the validity of
the restrictive covenants in this Section 6.4 on the
grounds of the breadth of their geographic scope or the
length of their term.
(f) Enforceability in Jurisdictions. Each of CFC,
Seller and Purchaser intend to and do hereby confer non-
exclusive jurisdiction to enforce the restrictive covenants
in this Section 6.4 upon the courts of any jurisdiction
within the geographical scope of such covenants. If the
courts of any one or more of such jurisdictions hold the
restrictive covenants in this Section 6.4 wholly
unenforceable by reason of the breadth of such scope or
otherwise, it is the intention of Purchaser, CFC and Seller
that such determination not bar or in any way affect the
right of the Purchaser to the relief provided above in the
courts of any other jurisdiction within the geographical
scope of such covenants, as to breaches of such covenants
in such other respective jurisdictions, such covenants as
they relate to each jurisdiction being, for this purpose,
severable into diverse and independent covenants.
6.5 Assignment of Contracts; Transfer of Purchased Assets;
Assistance in Contract Compliance. To the extent that the
assignment of any Assumed Contract shall require the consent of
any other Person, this Agreement shall not constitute an
agreement to assign the same if the attempted assignment would
constitute a breach thereof. CFC, Seller and Purchaser agree
each to use commercially reasonable best efforts in each case to
obtain consent to the assignment to Purchaser. If any required
consent to assign to Purchaser any of the Purchased Assets or
the benefits under any Assumed Contract is not obtained, the
parties will cooperate in any reasonable arrangement designed to
provide for Purchaser the benefit of such Purchased Assets or
such Assumed Contract which Purchaser is denied or deprived as a
result of the failure to obtain such consent or approval. Such
"reasonable arrangement" will include Purchaser or its
Affiliates subcontracting with Seller to perform its obligations
under the Assumed Contract on terms substantially similar to the
Assumed Contract pursuant to a "Contracto de Associacion en
Participation" or otherwise. If CFC or Seller requests,
Purchaser shall contact each vendor or supplier to whom any of
the Assumed Liabilities that are listed in CFC's or Seller's and
use commercially reasonable efforts to obtain from such vendors
or suppliers a full release of CFC, Seller and Sellers
Affiliates from any liabilities included in the Assumed
Liabilities; provided however that Purchaser shall not be
required to make any special, advance or additional payments or
other forms of remuneration to such vendors or suppliers in
order to obtain such releases.
6.6 Taxes and Expenses.
(a) Seller shall pay all Taxes arising out of or in
connection with the transactions effected pursuant to this
Agreement, except for Mexican Property Transfer Taxes which
shall be paid by Purchaser. Seller and Purchaser shall
cooperate in filing all necessary documentation and returns
with respect to such Taxes.
(b) Seller shall pay all Taxes with respect to the
Business and the Purchased Assets that are payable or
become payable after the date hereof with respect to
periods ending on or prior to the transfer thereof on the
Closing Date, provided that Purchaser shall reimburse
Seller for all such Taxes paid to the extent such Taxes
constitute Assumed Liabilities. Purchaser shall pay all
Taxes with respect to the Business and Purchased Assets
that are payable or become payable with respect to periods
commencing after the transfer thereof on the Closing Date.
(c) Except as may otherwise be specifically provided
herein, each party shall be responsible for its own
expenses, including without limitation the fees of
accountants and attorneys, which are incurred in connection
with the negotiation and execution of this Agreement and
the consummation of the transactions herein contemplated.
6.7 Access to Records After Closing Date. Seller and
Purchaser agree that, so long as the books and records retained
by Seller relating to the Business or the Purchased Assets or
the books and records delivered to Purchaser hereunder remain in
existence and available, each party shall have the right to
inspect and, at its expense, to make copies of the same at any
time during business hours for any proper purpose. For a period
of five (5) years following the Closing Date, the parties hereto
will not, without first having offered to deliver the same to
the other party, destroy or permit the destruction of any of
such books and records or any schedules, work papers and any
other documents relating to any Tax Returns in its or its
Affiliates? possession. Each party agrees that it will make
available, and it will cause its Affiliates to make available,
to the other and to any accountants or attorneys or tax agents
authorized by such other party, at the expense of the party
requesting the same, any such records or information needed in
connection with any Tax matters, litigation or similar matters.
6.8 Allocation of Purchase Price. Purchaser and Seller
agree to allocate the Purchase Price and all other capitalized
costs among the Purchased Assets prior to the Closing Date.
Purchaser shall prepare a further allocation of the Purchase
Price among the Purchased Assets and shall submit such
allocation to Seller no later than three days prior to the
Closing Date. Purchaser and Seller shall not take any position
on any federal or state Tax Return or other filing that is
inconsistent with the Purchase Price Allocation. Purchaser and
Seller shall duly prepare and timely file such reports and
information returns as may be required to report the allocation
of the Purchase Price among the Purchased Assets in accordance
with the Purchase Price Allocation.
6.9 Agreement to Defend. In the event any claim or Action
or other proceeding by any Governmental Entity or other Person
or other legal or administrative proceeding is commenced that
questions the validity or legality of the transactions
contemplated hereby or seeks damages in connection therewith,
whether before or after the Effective Time, Seller, CFC and
Purchaser agree to cooperate and use reasonable efforts to
defend against and respond thereto. The parties hereto each
severally agree and covenant not to institute, commence, assist
or participate in any Action or other proceeding seeking to
challenge or restrain the transactions contemplated herein.
6.10 Payment of Liabilities. Seller shall pay or otherwise
satisfy in the ordinary course all claims and liabilities
relating to the Purchased Assets or the Business incurred
through the Closing Date other than the CFC Assumed Liabilities
(which in accordance with Section 2.4 shall not include the
Accounts Payable on Exhibit 2.4(i) until the conditions to
Purchaser's assumption have been met) and liabilities to
Purchaser or its Affiliates represented by the Promissory Notes
(which shall be paid in accordance with its terms); provided,
however, that Seller shall have the right to dispute any such
claims or liabilities in good faith.
6.11 Dispute Assistance. CFC and Seller agree that in the
event of any dispute with respect to the Business arising out of
or relating to events which occurred at or prior to the Closing,
they shall cooperate with Purchaser, at no cost to Purchaser, in
the resolution of such dispute, including, without limitation,
making appearances in any litigation which may result therefrom;
provided, however, that CFC's or Seller's agreement so to
cooperate shall not be deemed an acceptance by CFC or Seller of
any liability arising from such dispute, as to which the other
provisions of this Agreement shall control.
6.12 Certain Employee Matters.
(a) From the date hereof until the Effective Time,
the Seller and CFC shall permit Purchaser to approach and
negotiate with the employees and agents of CFC, Seller or
their Affiliates that work in the Business and are set
forth on Exhibit 6.12(a) in an effort to persuade them to
continue with the Business pending the Closing and
thereafter accept employment or agency with the Purchaser
or its Affiliates.
(b) CFC and Seller agree that Purchaser or its
Affiliates may offer employment to each of persons listed
on Exhibit 6.12(a), effective on the Closing Date. Each
such person who accepts such employment offer from
Purchaser or its Affiliates shall be referred to herein as
a "Continuing Employee." CFC and Seller shall have no
liability for, and Purchaser agrees to indemnify CFC and
Seller in accordance with Section 8.2 hereof against, any
claims brought by each of the Continuing Employees relating
to any termination of their employment by Purchaser or its
Affiliates after the Closing Date.
(c) On or before, but effective as of, the Closing
Date, Seller shall take such actions as may be necessary to
terminate the employment of each of the employees set forth
on Exhibit 6.12(c) and all severance benefits due to such
employees shall be paid 51% by CFC and 49% by Purchaser in
accordance with the terms of that certain letter of even
date herewith and attached hereto as Appendix VIII;
provided, however, that in the event that CFC or any of its
affiliates shall re-employ any of the persons set forth on
Exhibit 6.12(c) within 180 days of their date of
termination, CFC shall pay to Purchaser in U.S. Dollars its
part of the costs of the severance benefits provided to
such former employee upon their termination pursuant to
this Section 6.12(c).
(d) Purchaser shall have no liability for, and Seller
and CFC agree to indemnify Purchaser and its Affiliates in
accordance with Section 8.2 hereof against, any liabilities
or obligations, or claims brought by employees other than
the Continuing Employees relating to Seller's termination
of their employment with it or Seller's Affiliates.
Without limiting the scope of the preceding sentence,
Seller shall take any and all actions necessary to ensure
that Purchaser and its Affiliates shall not be required to
provide benefit coverage with respect to any such former
employee under applicable laws.
6.13 Credit For Certain Collections. The Promissory Notes
shall provide and Purchaser hereby covenants to give Seller full
credit against amounts owed under the Promissory Notes for all
amounts actually received by Seller or its Affiliates from PEP
in payment of the claims, rights, Accounts Receivables, and work
earned but not billed listed on Exhibit 6.13 hereto.
6.14 Accounts Receivable. Seller will use its best efforts
to cause all of the Accounts Receivable to be collected in
accordance with their terms and will not agree to any reduction
or discount of any Accounts Receivable without the written
consent of Purchaser.
6.15 Right of First Refusal on Carmen Property. Prior to
Purchaser or any affiliate of Purchaser consummating any sale
(other than to an affiliate of Purchaser) of the real estate on
which the Carmen Property is located on the date hereof,
Purchaser shall deliver to Seller a written offer (the "Offer
Letter") to sell such property to Seller on the terms and
conditions, including the sales price and closing date, set
forth in the Offer Letter and under which Purchaser proposes to
sell such property. The Seller shall have, for 10 days
following delivery of the Offer Letter, the option and
preferential right to purchase the property on the terms and
conditions contained in the Offer Letter. The Seller's right
shall be exercisable by written notice to Purchaser ("Purchase
Notice"). If the Seller shall fail to deliver the Purchase
Notice before expiration of the 10 day option period, shall
decline to exercise its purchase option or shall fail to close
the purchase in accordance with the terms and conditions
contained in the Offer Letter, Purchaser shall be free to sell
and transfer the property substantially in accordance with the
terms on the Offer Letter.
ARTICLE VII
CONDITIONS
7.1 Conditions Precedent to Seller's Obligations. The
obligation of Seller to consummate the transactions provided for
in this Agreement is, at the option of Seller, subject to
satisfaction of the following conditions at or before the
Closing Date:
(a) The representations and warranties made by
Purchaser in this Agreement and in each of the Purchaser
Documents delivered pursuant hereto on or before the
Closing Date shall be true and correct in all material
respects with the same force and effect as though such
representations and warranties had been made at and as of
the Closing Date except as set forth in the Purchaser's
Disclosure Letter. All of the covenants, terms and
conditions of this Agreement and the Purchaser Documents to
be complied with or performed by Purchaser or its
Affiliates at or before the Closing Date shall have been
complied with and performed in all material respects.
Purchaser shall have delivered to Seller a certificate to
the foregoing effect dated the Closing Date and signed by
the President or other authorized officer of Purchaser;
(b) All material consents and approvals, if any,
which are required from any Government Entity in order to
permit Seller to consummate the transactions contemplated
by this Agreement shall have been duly given and the filing
with the Mexican Federal Competition Commission shall have
been made;
(c) On the Closing Date, there shall be in effect no
injunction, order or decree of any nature issued, ordered
or granted by any Governmental Entity of competent
jurisdiction that restrains or prohibits in any material
respect, or would award substantial damages in connection
with, the consummation of the transactions contemplated
hereby;
(d) Purchaser shall have executed and delivered to
Seller the documents referred to in Section 3.3 herein;
(e) Purchaser shall have delivered to Seller:
(i) the Services Agreement executed by Purchaser
or its Affiliate in the form attached hereto
as Appendix II;
(ii) the "Contracto de Associacion en
Participacion executed by Purchaser or its
Affiliate in the form attached hereto as
Appendix III for each of the Assumed
Contract with PEP;
(iii) the Support Agreement executed by
Purchaser in the form attached hereto as
Appendix V, including Schedule A thereto for
each of the Assumed Contracts with customers
of the Business other than PEP;
(iv) the Share Purchase Agreement executed by
Purchaser in the form attached hereto as
Appendix VI; and
(f) Seller and Purchaser shall have agreed to the
allocation of the Purchase Price as contemplated by the
first sentence of Section 6.8.
7.2 Conditions Precedent to Purchaser's Obligations. The
obligation of Purchaser to consummate the transactions provided
for in this Agreement is, at the option of Purchaser, subject to
satisfaction of the following conditions at or before the
Closing Date:
(a) The representations and warranties made by Seller
or CFC in this Agreement and in each of the Seller
Documents delivered pursuant hereto on or before the
Closing Date shall be true and correct in all material
respects with the same force and effect as though such
representations and warranties had been made at and as of
the Closing Date except as set forth in Seller's Disclosure
Letter. All of the covenants, terms and conditions of this
Agreement to be complied with and performed by Seller, CFC
or their Affiliates at or before the Closing Date shall
have been complied with and performed in all material
respects. Seller shall have delivered to Purchaser a
certificate to the foregoing effect dated the Closing Date
and signed by the President or other authorized officer of
CFC;
(b) From the date of this Agreement to the Closing
Date, there shall not have occurred any change in the
Purchased Assets that has had or is reasonably expected to
have a Material Adverse Effect (other than by any change
caused by an action of Purchaser or its Affiliates with the
intent that such action would cause a Material Adverse
Effect on the Purchased Assets);
(c) Seller shall have delivered to Purchaser:
(i) the Promissory Notes executed by Seller and
CFC in the form attached hereto as
Appendix I;
(ii) the Services Agreement executed by CFC in
the form attached hereto as Appendix II;
(iii) the "Contracto de Associacion en
Participacion executed by Seller in the form
attached hereto as Appendix III for each of
the Assumed Contract with PEP;
(iv) the amendment to the Tuxpan Mortgage in the
form attached hereto as Appendix IV to
include the Promissory Notes in the
obligations secured thereby;
(v) the Support Agreement executed by Seller in
the form attached hereto as Appendix V;
(vi) the Share Purchase Agreement executed by CFC
in the form attached hereto as Appendix VI;
(vii) a fully paid, royalty free license for
certain of the Intellectual Property of the
Business in the form of Appendix VII;
(viii) the form of side letter regarding
certain employee payments in the form of
Appendix VIII;
(ix) the Third Tuxpan Mortgage in the form
attached hereto as Appendix IX;
(x) the Powers of Attorney in the form attached
hereto as Appendix X;
(xi) the Third Amendment to the Reimbursement
Agreement in the form attached hereto as
Appendix XI; and
(xii) the Notices of Assignment to Customers
(other than PEP) owing the Accounts
Receivable in the form attached hereto as
Appendix XII;
(xiii) the Amendment to the EPC 36 Trust in
the form attached hereto as Appendix XIII;
and
(xiv) the agreements terminating the existing
barge charters between Seller and any
Affiliate of Purchaser; and
(d) On the Closing Date, there shall be in effect no
injunction, order or decree of any nature issued, ordered
or granted by any Governmental Entity of competent
jurisdiction that restrains or prohibits in any material
respect or would award substantial damages in connection
with, the consummation of the transactions contemplated
hereby;
(e) All material consents and approvals, if any,
which are required from any Government Entity or other
Persons in order to permit Purchaser to consummate the
transactions contemplated by this Agreement shall have been
duly given and the filing with the Mexican Federal
Competition Commission shall have been made;
(f) Seller shall have executed and delivered to
Purchaser the documents referred to in Section 3.2 herein;
(g) Seller shall have delivered to Purchaser releases
of all Liens set forth on Schedule 4.3 to Seller's
Disclosure Letter except for Liens in favor of Global and
in favor of Heller Financial securing the Heller Debt; and
(h) Seller and Purchaser shall have agreed to the
allocation of the Purchase Price as contemplated by the
first sentence of Section 6.8.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
8.1 Survival of Representations. The representations and
warranties set forth in Sections 4.2, 4.3(a) and 5.2 shall
survive the Closing indefinitely subject to any applicable
statutes of limitations. All other representations and
warranties of the parties contained in this Agreement, or in any
Seller Document or Purchaser Document shall survive the Closing
and shall survive until midnight Houston time on the second
anniversary of the Closing Date, and shall then expire. Upon
the expiration of any representation and warranty pursuant to
this Section 8.1, unless written notice of a claim based on such
representation and warranty shall have been delivered to the
party from whom indemnification is sought prior to such
expiration, no claim may be brought based on the breach of such
representation and warranty.
8.2 Indemnity.
(a) Subject to the provisions of this Article VIII,
Seller and CFC, jointly and severally, shall indemnify and
hold Purchaser and its Affiliates ("Purchaser Indemnitees")
harmless from and against any Losses of any kind or nature
whatsoever, which may be incurred or suffered by any of the
Purchaser Indemnitees and which may arise out of, result
from or be based upon:
(i) any breach of or inaccuracy in any
representation or warranty of Seller made in this
Agreement or any Seller Documents;
(ii) the ownership, management, operation or use
by Seller or its Affiliates of the Purchased Assets or
the conduct of the Business on or prior to the Closing
Date, other than the Assumed Liabilities;
(iii) any debts, liabilities or obligations
of, or claims, direct or indirect, fixed, contingent
or otherwise, known or unknown, existing as of or
prior to the Closing Date or arising out of facts or
circumstances existing at or prior to the Closing
Date, in each case which are not Assumed Liabilities;
and
(iv) the failure of Seller or CFC to perform the
covenants and obligations imposed on it by this
Agreement or any of the Seller Documents.
(b) Subject to the provisions of this Article VIII,
Purchaser shall indemnify and hold Seller and its Affiliates
("Seller Indemnitees") harmless from and against, any Losses
of any kind or nature whatsoever, which may be incurred or
suffered by any of the Seller Indemnitees and which may
arise out of, result from or be based upon:
(i) any breach of or inaccuracy in any
representation or warranty of Purchaser made in this
Agreement or in any Purchaser Documents;
(ii) the ownership, management, operation or use
by Purchaser or its Affiliates of the Purchased Assets
or the conduct of the Business following the Closing
Date;
(iii) the failure of Purchaser or its
Affiliates to pay, perform or discharge when due
obligations arising after the Closing Date under the
Assumed Contracts or the Assumed Liabilities; and
(iv) the failure of Purchaser to perform the
covenants and obligations imposed on it by this
Agreement or any of the Purchaser Documents.
8.3 Notice and Participation..
(a) If a claim, demand or Action is asserted by a
third Person against a Person indemnified pursuant to this
Article VIII ("Indemnitee"), and if such Indemnitee intends
to seek indemnity with respect thereto under this Article
VIII (which claim, demand or Action is herein called an
"Third Party Claim"), the Indemnitee shall promptly, and in
any event within 30 days of the assertion of such Third
Party Claim, notify the Person from whom indemnification is
sought ("Indemnitor") of such Third Party Claim which
notice shall state with reasonable particularity the
circumstances giving rise to such notice. Failure to
notify the Indemnitor timely shall not relieve the
Indemnitor of any liability which the Indemnitor might have
to the Indemnitee except to the extent (and only to the
extent) such failure materially prejudices the Indemnitor's
position. In the event of the assertion of any Third Party
Claim, Indemnitor, at its option, may assume (with legal
counsel reasonably acceptable to the Indemnitee) at its
sole cost and expense the defense of any Third Party Claim
if it acknowledges to the Indemnitees in writing its
obligations to indemnify the Indemnitee with respect to all
elements of such Third Party Claim, and may assert any
defense of Indemnitee or Indemnitor; provided that
Indemnitee shall have the right at its own expense to
participate jointly with Indemnitor in the defense of any
such Third Party Claim; provided, however, that if the
Indemnitee, in its discretion, determines that there exists
a conflict of interest between the Indemnitor (or any
constituent party thereof) and the Indemnitee or that
different defenses may be available, the Indemnitee (or any
constituent party thereof) shall have the right to engage
separate counsel, the reasonable costs and expenses of
which shall be paid by the Indemnitor, but in no event
shall the Indemnitor be liable for the costs and expenses
of more than one such separate counsel. Counsel
representing both the Indemnitor and the Indemnitee must
acknowledge in writing its obligation to act as counsel for
all parties being represented and must acknowledge and
respect separate attorney client privileges with respect to
each party represented. If Indemnitor elects to undertake
the defense of any Third Party Claim hereunder, Indemnitee
shall cooperate with Indemnitor in the defense or
settlement of the Third Party Claim.
(b) If the Indemnitor, by the thirtieth day after
receipt of notice of any Third Party Claim (or, if earlier,
by the tenth day preceding the day on which an answer or
other pleading must be served in order to prevent judgment
by default in favor of the person asserting the Third Party
Claim) does not assume actively and in good faith the
defense of any such Third Party Claim or Action resulting
therefrom, the Indemnitee may defend against such claim or
litigation, after giving notice of the same to the
Indemnitor, on such terms as the Indemnitee may deem
appropriate, and the Indemnitor shall be entitled to
participate in (but not control) the defense of such
action, with its counsel and at its own expense. The
Indemnitee shall not settle or compromise any Third Party
Claim for which it is entitled to indemnification
hereunder, without the prior written consent of the
Indemnitor (which shall not be unreasonably withheld or
delayed) unless suit shall have been instituted against
Indemnitee and the Indemnitor shall not have taken control
of such suit. The Indemnitor shall not, without the
written consent of the Indemnitee (which shall not be
unreasonably withheld or delayed), settle or compromise any
Third Party Claim or consent to the entry of any judgment
which does not include as an unconditional term thereof the
giving by the claimant or the plaintiff to the Indemnitee
of an unconditional release from all liability in respect
of such Third Party Claim. Notwithstanding anything in
this Article XIII to the contrary (i) Purchaser shall in
all cases be entitled to control of the defense of any
action if it (x) may adversely effect the Purchaser or its
Affiliates other than as a result of money damages; or (y)
may have an adverse impact on the Business or the financial
condition of Purchaser or its Affiliates (including an
effect on the Tax liabilities, earnings or ongoing business
relationships of Purchaser or its Affiliates) even if the
Indemnitor pay all indemnification amounts in full, and
(ii) the Indemnitor shall not, without the written consent
of the Indemnitee (which shall not be unreasonably withheld
or delayed), settle or compromise any Third Party Claim or
consent to the entry of any judgment which does not include
as an unconditional term thereof the giving by the claimant
or the plaintiff to the Indemnitee of an unconditional
release from all liability in respect of such Third Party
Claim.
(c) If any Indemnitee believes there exists any claim
(other than Third Party Claims) with respect to which any
Indemnitor is obligated to provide indemnification pursuant
to Sections 8.2(a) or 8.2(b), or pursuant to any other
specific indemnification covenant contained in this
Agreement, the Indemnitee shall give the Indemnitor written
notice thereof which notice shall state with reasonable
particularity the circumstances giving rise to such Claim
and shall specify, if known, the amount of the Losses for
which indemnification is sought.
8.4 Indemnification Threshold. Neither the Purchaser
Indemnitees on the one hand, nor the Seller Indemnitees on the
other hand shall be entitled to make any claim for
indemnification under Section 8.2(a)(i) or 8.2(b)(i),
respectively, (a) unless and until the aggregate of all Losses
suffered by them and for which indemnification under such
provision is sought shall exceed US$100,000, but in such event,
such Person shall be entitled to indemnification for the full
amount of such Losses without regard to the US$100,000
threshold.
8.5 Indemnification of Negligence of Indemnitee. The
indemnification provided in this Article VIII shall be
applicable whether or not the Losses are contributed to by the
negligence or fault of the Indemnitee.
8.6 Payment. Any claim, other than a Third Party Claim,
shall be conclusively established against the Indemnitor in all
respects 30 days after receipt by the Indemnitor of notice
thereof in accordance with Section 8.3(c), unless within such
period the Indemnitor sends the Indemnitee a notice disputing
the propriety of the claim. Such notice of dispute shall
described the basis for such objection and the amount of the
claim as to which the Indemnifying Party does not believe should
be subject to indemnification. If it is finally determined that
all or a portion of such claim amount is owed to the Indemnitee,
the Indemnitor shall, within 5 Business Days of such
determination, pay the Indemnitee such amount owed in cash,
together with interest from the date that the Indemnitee
initially requested such payment until the date of actual
payment, at an annual rate equal to the prime interest rate then
generally in effect on the date of payment as set forth in The
Wall Street Journal. All such payments shall be in US Dollars.
ARTICLE IX
[OMITTED]
ARTICLE X
MISCELLANEOUS
10.1 Waivers and Amendments. Any waiver of any term or
condition of this Agreement, or any amendment or modification of
this Agreement, shall be effective only if set forth in a
written document executed by a duly authorized officer of each
of the parties. A waiver of any breach or failure to enforce
any of the terms or conditions of this Agreement shall not in
any way affect, limit or waive a party's other rights hereunder
at any time to enforce strict compliance thereafter with every
term or condition of this Agreement.
10.2 Notices. Any notice, request, instruction, demand or
other communication to be given hereunder by either party hereto
to the other shall be given in writing and shall be delivered
either by hand, by telegram, telex, telecopy or similar
facsimile means, or by registered or certified mail, postage
prepaid, return receipt requested, as follows:
(a) If to Purchaser, addressed to:
Global Industries Offshore, Inc.
c/o Global Industries, Ltd.
900 Haliburton Centre
5151 San Felipe
Houston, Texas 77056
Attention: William J. Dore'
Telecopy No: 713/624-2299
(b) If to Seller or CFC, addressed to:
CCC Fabricaciones Y Construcciones, S.A. De C.V.
Blvd. M. De Cervantes Saavedra N? 157-7 Piso
Col. Ampliacion Granada 11520,
Mexico, D. F.
Attention: Randall S. Nelson
Telecopy No.: 5254-51-84
or to such other address or number as either party shall have
previously designated by written notice given to the other party
in the manner hereinabove set forth. Notices shall be deemed
given when received, if sent by telegram, telex, telecopy or
similar facsimile means, and when delivered and receipted for,
if mailed or hand delivered.
10.3 Headings. The Article and Section headings herein are
for convenience only and shall not affect the construction
hereof.
10.4 Entire Agreement. This Agreement, Seller's Disclosure
Letter, Purchaser's Disclosure Letter, the Appendices and
Exhibits hereto, Seller Documents and Purchaser Documents
constitute the entire agreement between the parties pertaining
to the subject matter hereof and supersede all other prior and
contemporaneous agreements and understandings, both oral and
written, of the parties in connection therewith. No covenant or
condition not expressed in this Agreement shall affect or be
effective to interpret, change or restrict this Agreement.
10.5 Severability. If any term, provision, covenant or
condition of this Agreement is held by any court of competent
jurisdiction to be invalid, void or unenforceable in any
respect, the remainder of such term, provision, covenant or
condition in every other respect and the remainder of the terms,
provisions, covenants or conditions of this Agreement shall
continue in full force and effect and shall in no way be
affected, impaired or invalidated.
10.6 Public Announcements. Neither of the parties hereto,
except as required by any law, Governmental Entity or stock
exchange rule, shall release to the public any information
concerning this Agreement or the transactions contemplated
hereby, without having first obtained the approval of the other
parties hereto, which approval may not be unreasonably withheld.
10.7 Governing Law and Jurisdiction.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT
REFERENCE TO THE CHOICE OF LAW PRINCIPLES THEREOF.
(b) The Parties hereby irrevocably:
(i) submit to the non-exclusive jurisdiction of
the state courts of and the federal courts in the
State of Texas in respect of any legal proceedings in
connection with this Agreement, any of the Seller
Documents and any of the Purchaser Documents;
(ii) consents to the service of process out of
any such courts in such legal proceedings by the
mailing of a copy or notice thereof by prepaid mail to
their address as set forth in Section 10.2 and
confirms that the failure to receive such copy of
notice shall not prejudice due service;
(iii) waives any objection it may have to the
laying of venue of any such legal proceedings in any
of the said courts, and waives any claim that it may
have that any such legal proceedings have been brought
in an inconvenient forum; and
(iv) agrees that nothing herein shall affect the
right to service of process in any other manner
permitted by law or preclude the right to bring
proceedings in any other court or courts of competent
jurisdiction.
(c) Seller and CFC agree (i) to maintain Gabriel de
la Torre, whose address is at the principal address of the
Seller, as a duly appointed agent in Mexico and CT
Corporation, as duly appointed registered agent in the
State of Texas for service of process out of state and
federal courts in the State of Texas and (ii) to keep
Purchaser informed of the names and addresses of such
agents.
10.8 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns. This
Agreement shall not be assigned without the express prior
written consent of the parties hereto except that the rights and
obligations of Purchaser may be assigned and delegated to any
wholly-owned Affiliate of Purchaser without the consent of the
other parties hereto, provided, however, that no such assignment
or delegation shall relieve Purchaser of liability therefor.
10.9 Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall
be deemed an original, but all of which together shall
constitute one and the same instrument.
10.10 Risk of Loss. The risk of any loss, damage,
impairment, confiscation or condemnation of the Purchased
Assets, or any part thereof, shall be upon the Seller (as
constituted prior to the transactions contemplated by this
Agreement) and its Affiliates at all times prior to the Closing
Date. In any such event, the proceeds of, or any claim for any
loss payable under any insurance policy, judgment or award with
respect thereto shall be payable to Seller. In such event,
Seller shall, at the election of the Purchaser, either: (i)
repair, replace or restore any such property as soon as possible
after its loss, impairment, confiscation or condemnation; or
(ii) if insurance proceeds are sufficient to repair, replace or
restore the property, pay such proceeds to Purchaser on the
Closing Date; provided that in the event of damage that would
have a Material Adverse Effect on the Business or the Purchased
Assets, Purchaser may terminate this Agreement.
10.11 Transfer of Certain Assets. Purchaser may cause
Seller to transfer to one or more of Purchaser's Affiliates on
the Closing Date all or any portion of the Purchased Assets to
be sold, conveyed, transferred, assigned and delivered to
Purchaser hereunder. Any such transfers shall be to Purchaser's
Affiliates designated by Purchaser, provided that such
designation shall not relieve Purchaser from any of its
obligations under this Agreement.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement as of the date first above written.
PURCHASER: SELLER:
Global Industries Offshore, Inc. CCC Fabricaciones y
Construcciones,
S.A. de C.V.
By: By:
Name: R. Clay Etheridge Name: Efrain Lopez de Rivera
Title: Vice President Title: Attorney in fact
Internatinal Operations
CFC:
Grupo Consorcio de Fabricaciones y
Construcciones, S.A. de C.V.,
By:
Name: Gabriel de la Torre
Title: Attorney in fact
Appendices:
Appendix I - Form of Promissory Notes
Appendix II - Form of Services Agreement
Appendix III - Form of A en P Agreement
Appendix IV - Form of Amendment to Mortgage on Tuxpan
Appendix V - Form of Support Agreement
Appendix VI - Form of Share Purchase Agreement
Appendix VII - Form of License Agreement
Appendix VIII - Form of Side letter regarding payment
of Employee Termination Costs
Appendix IX - Form of Third Tuxpan Mortgage
Appendix X - Form of Powers of Attorney
Appendix XI - Form of Third Amendment to
Reimbursement Agreement
Appendix XII - Notices to Non-PEP customers
Appendix XIII - Form of Amendment to EPC 36 Trust
Exhibits:
Exhibit 2.4(i) - Accounts Payable of Business included
in Assumed Liabilities
Exhibit 2.4(iv) - Bid and Performance Bonds
indemnified by Purchaser
Exhibit 6.12(a) - Employees Who Purchaser may solicit for
Employment
Exhibit 6.12(c) - Employees to be terminated by Seller
Exhibit 6.13 - Claims, Rights, Accounts
Receivables, and Work Earned but not Billed,
Collections of which are Credited to
Obligations under the Promissory Notes
Schedules
[Seller's]
Schedule 1.1(a) - list of Real Property included in the
Purchased Assets
Schedule 1.1(c) - list of Personalty included in the
Purchased Assets
Schedule 1.1(d) - list of Assumed Contracts
Schedule 1.1(h) - list of Accounts Receivable, prepaid
rentals, other prepaid expenses and advance
payments, bonds, deposits, refunds and
financial assurance requirements, and other
current assets relating to the Business
Schedule 4.2 - list of excepts to no conflicts
representation
Schedule 4.3 - list of Liens on Purchased Assets
Schedule 4.3(c) - list of the Accounts Receivable,
together with an accurate aging of the same
Schedule 4.4 - list of exceptions to
representation about Assumed Contracts,
including defaults and consents necessary to
assignment
Schedule 4.5 - list of all Permits
Schedule 4.6 - list of existing conditions on real
property that could cause remediation
Schedule 6.2(f) - list of bank accounts that have any
Marine Business receipts pending or that
have been used for any Accounts Receivable
or to which any Marine Business customer
has been directed to make payment
[Purchaser's]
Schedule 5.2 - list of exceptions to no conflicts
representation
EXHIBIT 15.1
August 12, 1999
Global Industries, Ltd.
107 Global Circle
Lafayette, Louisiana 70503
We have made a review, in accordance with standards established
by the American Institute of Certified Public Accountants, of the
unaudited interim financial information of Global Industries,
Ltd. and subsidiaries for the periods ended June 30, 1999 and
1998, as indicated in our report dated August 3, 1999; because we
did not perform an audit, we expressed no opinion on that
information.
We are aware that our report referred to above, which is included
in your Quarterly Report on Form 10-Q for the quarter ended June
30, 1999, is incorporated by reference in Registration Statement
Nos. 33-58048, 33-89778, and 333-69949 on Form S-8.
We also are aware that the aforementioned report, pursuant to
Rule 436(c) under the Securities Act of 1933, is not considered a
part of the Registration Statement prepared or certified by an
accountant or a report prepared or certified by an accountant
within the meaning of Sections 7 and 11 of that Act.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GLOBAL
INDUSTRIES, LTD.'S FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10Q.
</LEGEND>
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 23,131
<SECURITIES> 0
<RECEIVABLES> 104,729
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0
0
<COMMON> 924
<OTHER-SE> 396,677
<TOTAL-LIABILITY-AND-EQUITY> 734,469
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<INCOME-PRETAX> (1,379)
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