MCDERMOTT J RAY SA, PREM14C, 1999-06-23

MCDERMOTT J RAY SA
PREM14C, 1999-06-23
WATER, SEWER, PIPELINE, COMM & POWER LINE CONSTRUCTION

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<PAGE>

SCHEDULE 14C INFORMATION

Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934

Check the appropriate box:

[X] Preliminary Information Statement

[ ] Confidential, for use of the Commission only (as permitted by Rule 14c-
5(d)(2))

[ ] Definitive Information Statement

J. Ray McDermott, S.A.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)

Payment of Filing Fee (Check the appropriate box):

[_] No fee required.

[X] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.

(1) Title of each class of securities to which transaction applies:
Common Stock, par value $0.01 per share
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(2) Aggregate number of securities to which transaction applies:
907,041*
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

$35.62 per share of Common Stock*
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(4) Proposed maximum aggregate value of transaction:
$32,308,801*
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(5) Total fee paid:
$6,462*
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[_] Fee paid previously with preliminary materials.

[X] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a) (2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:
$105,084*
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(2) Form, Schedule or Registration Statement No.:
Schedule 14D-1
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(3) Filing Party:
McDermott International, Inc. and McDermott Acquisition Company, Inc.
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(4) Date Filed:
May 13, 1999
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* The sum of the number of shares of common stock outstanding that would receive
the cash payment in the merger that is the subject of this Information Statement
plus the number of shares of common stock subject to options that are expected
to be vested and exercisable at the effective time of the merger. The unit
price is based on the per share cash payment to be made to the holders of the
common stock pursuant to the merger. The aggregate value of the transaction
equals the $35.62 per share price multiplied by the aggregate number of
securities. Based upon such value, the fee due upon the filing of the
preliminary information statement is $6,462, which amount is completely offset
by the $105,084 fee previously paid in connection with the filing of the
Schedule 14D-1 by McDermott International, Inc. and McDermott Acquisition
Company, Inc. in connection with the first step of the transaction of which the
merger is a part.
<PAGE>

[LOGO] J. Ray McDermott, S.A.
----------------------------------------------------------------------

1450 Poydras Street
P. O. Box 61829
New Orleans, Louisiana 70161-1829
(504) 587-5300

_________ __, 1999

Dear Shareholder:

The attached Notice of Special Meeting of Shareholders and Information
Statement are being furnished to you in connection with a special meeting of
shareholders of J. Ray McDermott, S.A. (the "Company"), which will be held on
_______, 1999 at ________ at 9:00 a.m. local time.

We are holding this meeting to obtain shareholder approval of (1) a merger
agreement dated May 7, 1999 between the Company and McDermott International,
Inc. ("Parent") and the related merger of the Company with a subsidiary of
Parent and (2) amendments to the Company's Certificate of Incorporation as
provided in the merger agreement. As a result of the merger, each of your shares
of the Company's common stock (the "Shares") will be exchanged for $35.62 in
cash, and the Company will become a wholly owned subsidiary of Parent. The
merger is the second and final step of the acquisition of the Company by Parent.
The first step was a tender offer for the Company's outstanding Shares at $35.62
per Share in cash. A subsidiary of Parent acquired 14,353,490 Shares pursuant to
the tender offer, which expired at 12:00 midnight on June 10, 1999.

Parent currently beneficially owns approximately 99% of the outstanding
Shares. Because Parent will vote all the Shares and preferred shares it
beneficially owns in favor of the merger agreement and the merger and the
amendments to the Company's Certificate of Incorporation as provided in the
merger agreement, approval is assured and we are not soliciting your proxy.

After the merger is completed, you will receive instructions regarding the
surrender of your Share certificates in exchange for the merger consideration.

Sincerely,

Roger E. Tetrault
Chairman of the Board of Directors and Chief
Executive Officer

<PAGE>

J. Ray McDermott, S.A.
1450 Poydras Street
P. O. Box 61829
New Orleans, Louisiana 70161-1829
____________

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON _____ __, 1999

To the Shareholders of
J. Ray McDermott, S.A.:

NOTICE IS HEREBY GIVEN that a Special Meeting of the Shareholders of J. Ray
McDermott, S.A., a Panama corporation (the "Company"), will be held on _______,
1999 at ________ at 9:00 a.m. local time, for the following purpose:

(1) To consider and vote on a proposal to approve and adopt an Agreement
and Plan of Merger and the merger of the Company with a subsidiary of
McDermott International, Inc.

(2) To consider and vote on a proposal to adopt amendments to the
Company's Certificate of Incorporation as provided in the Agreement
and Plan of Merger.

(3) To transact such other business as may properly come before the
meeting or any adjournment(s) thereof.

The Board of Directors has fixed the close of business on ____, 1999 as the
record date for the determination of shareholders entitled to notice of, and to
vote at, the meeting and at any adjournment(s) thereof.

By Order of the Board of Directors,

___________________________________
S. WAYNE MURPHY
Secretary

Dated: _______ __, 1999

<PAGE>

J. Ray McDermott, S.A.
1450 Poydras Street
P. O. Box 61829
New Orleans, Louisiana 70161-1829
(504) 587-5300

INFORMATION STATEMENT

FOR SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ____________ ___, 1999

___________

This Information Statement is being furnished to holders of shares of
common stock (the "Shares") of J. Ray McDermott, S.A. (the "Company") in
connection with a Special Meeting of Shareholders to be held on ________, 1999
at _________ at 9:00 a.m. local time. At the Special Meeting, shareholders will
consider and vote on a proposal to approve and adopt an Agreement and Plan of
Merger dated as of May 7, 1999 (the "Merger Agreement") between the Company and
McDermott International, Inc. ("Parent"), providing for, among other things, the
merger (the "Merger") of McDermott Acquisition Company, Inc. ("Acquisition Sub")
into the Company. As a result of the Merger, you will receive $35.62 in cash for
each Share you own, and the Company will become a wholly owned subsidiary of
Parent. Shareholders will also consider and vote on a proposal to adopt
amendments to the Company's Certificate of Incorporation (the "Charter
Amendments") as provided in the Merger Agreement.

The Merger is the second and final step of the acquisition of the Company
by Parent pursuant to the Merger Agreement. The first step was a tender offer
(the "Offer") commenced by Acquisition Sub on May 13, 1999 for all of the
outstanding Shares (other than Shares beneficially owned by Parent) at a
purchase price of $35.62 per Share, net to the seller in cash. Pursuant to the
Offer, which expired at 12:00 midnight, New York city time, on June 10, 1999,
Acquisition Sub accepted for payment 14,353,490 Shares.

Parent currently beneficially owns 99% of the outstanding Shares and 100%
of the Company's Series A $2.25 Cumulative Convertible Preferred Stock (the
"Preferred Shares"). Because Parent will vote all Shares and Preferred Shares it
beneficially owns in favor of the Merger Agreement, the Merger and the Charter
Amendments, approval is assured, and the Company's board of directors (the
"Company Board") is not soliciting your proxy.

WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.

The date of this Information Statement is ____________ ___, 1999, and it
will be first mailed to shareholders on ____________ ___, 1999.

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<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
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<S> <C>
Information Statement Summary.................................................................... 3
The Parties.................................................................................... 3
The Special Meeting............................................................................ 3
The Merger..................................................................................... 4
Recommendation of the Independent Committee and the Company Board; Opinion of
Financial Advisor to the Independent Committee.............................................. 4
Financial Information.......................................................................... 5
Price Range of Shares; Dividends............................................................... 6
The Special Meeting.............................................................................. 7
The Merger....................................................................................... 7
Background of the Merger; Recommendation of the Independent Committee and the Company Board.... 8
Recommendation of the Independent Committee and the Company Board.............................. 14
Opinion of Financial Advisor to the Independent Committee...................................... 17
Procedures for Exchange of Certificates........................................................ 22
No Appraisal Rights............................................................................ 23
Interests of Certain Persons in the Offer and the Merger....................................... 23
Certain Transactions Between the Company and Parent............................................ 25
Accounting Treatment........................................................................... 26
United States Federal Income Tax Consequences.................................................. 26
Regulatory Approvals........................................................................... 27
Certain Litigation............................................................................. 27
Financing of the Offer and the Merger.......................................................... 28
The Merger Agreement............................................................................. 29
The Offer...................................................................................... 29
The Merger..................................................................................... 29
Representations and Warranties................................................................. 31
Covenants...................................................................................... 31
Conditions to the Merger....................................................................... 33
Termination.................................................................................... 34
Fees and Expenses.............................................................................. 34
Amendments and Waivers......................................................................... 34
Confidentiality Agreement...................................................................... 35
Security Ownership of Directors and Executive Officers of the Company............................ 35
Security Ownership of Certain Beneficial Owners.................................................. 37
Independent Accountants.......................................................................... 37
Where You Can Find More Information.............................................................. 37
Incorporation of Documents by Reference.......................................................... 37
Forward-looking Statements and Information....................................................... 38
</TABLE>

ANNEXES

Annex A - Agreement and Plan of Merger dated as of May 7, 1999
Annex B - Opinion of Simmons & Company International
Annex C - Proposed Amendments to the Certificate of Incorporation of J. Ray
McDermott, S.A.

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<PAGE>

INFORMATION STATEMENT SUMMARY

The Parties

J. Ray McDermott, S.A. The Company supplies worldwide services for the
offshore oil and gas exploration and production and hydrocarbon processing
industries, and to other marine construction companies. Principal activities
include the design, engineering, fabrication and installation of offshore
drilling and production platforms and other specialized structures, modular
facilities, marine pipelines and subsea production systems. The Company is
currently a 99% owned subsidiary of Parent. Its principal executive offices are
located at 1450 Poydras Street, New Orleans, Louisiana, 70112, and its telephone
number is (504) 587-5300.

McDermott International, Inc. Parent is a leading worldwide energy services
company. In addition to the marine construction services provided through the
Company, Parent and its other subsidiaries manufacture steam-generating
equipment, environmental equipment, and products for the U.S. government. They
also provide engineering and construction services for industrial, utility, and
hydrocarbon processing facilities and to the offshore oil and natural gas
industry. Parent's principal executive offices are located at 1450 Poydras
Street, New Orleans, Louisiana, 70112, and its telephone number is (504) 587-
5400.

McDermott Acquisition Company, Inc. Acquisition Sub is a wholly owned
subsidiary of Parent. Acquisition Sub was organized on May 10, 1999 and has not
carried on any activities other than in connection with the Merger Agreement.
Its principal executive offices are located at 1450 Poydras Street, New Orleans,
Louisiana, 70112, and its telephone number is (504) 587-5400.

Surviving Corporation. The Company will be the surviving corporation in
the Merger (the "Surviving Corporation"). Pursuant to the Merger Agreement, the
directors of Acquisition Sub will be the directors of the Surviving Corporation,
and the officers of the Company will be the officers of the Surviving
Corporation.

The Special Meeting

Place, Date and Time. The Special Meeting will be held on ________________,
1999 at ______ at 9:00 a.m. local time.

Purpose of the Special Meeting. The purpose of the Special Meeting is to
consider and vote on:

. a proposal to approve and adopt the Merger Agreement and the Merger

. a proposal to adopt the Charter Amendments

. any other business that properly comes before the Special Meeting

The Merger Agreement is attached as Annex A to this Information Statement and
the Charter Amendments are attached as Annex C to this Information Statement.

Record Date, Shares Entitled to Vote, Majority Owner. Holders of record of
Shares and Preferred Shares at the close of business on ____________, 1999 (the
"Record Date") are entitled to notice of and to vote at the Special Meeting. On
the Record Date, there were 39,241,669 Shares outstanding, each of which will be
entitled to one vote at the Special Meeting, and 3,200,000 Preferred Shares
outstanding, each of which will be entitled to one vote at the Special Meeting.

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<PAGE>

and (2) the adoption of the Charter Amendments. As a result, the Merger
Agreement, the Merger and the Charter Amendments will be approved and adopted at
the Special Meeting even if no shareholder other than Parent votes in favor of
these proposals.

The Merger

Effect of the Merger; Effective Time. The Merger will become effective at
the time a certificate of merger is recorded by the Public Registry Office of
the Republic of Panama (the "Effective Time"). At the Effective Time, pursuant
to the Merger Agreement, the Company will become a wholly owned subsidiary of
Parent and each issued and outstanding Share (other than Shares held by Parent
and its subsidiaries) will be converted into the right to receive $35.62 in
cash, without interest. Promptly after the Effective Time, Parent or
_________________ as the exchange agent (the "Exchange Agent") will send to
shareholders a letter of transmittal containing instructions for the surrender
of certificates previously representing Shares. In order to receive the payment
to which you are entitled, you must surrender your Share certificate(s) together
with a duly executed and properly completed letter of transmittal (and any other
documents that may be required) to the Exchange Agent. Do not send your Share
certificates at this time; wait for instructions from Parent or the Exchange
Agent following the Effective Time. Following the Effective Time, the holders of
Shares prior to the Effective Time will cease to have ownership interests in the
Company or rights as shareholders.

No Appraisal Rights. Under Panama law, holders of Shares have no appraisal
or similar rights.

U.S. Tax Treatment. Your receipt of cash in exchange for your Shares
pursuant to the Merger will be a taxable transaction for United States federal
income tax purposes and may also be taxable under state, local or other tax
laws. You should consult with your tax advisor regarding the tax treatment of
any gain or loss on your Shares.

Accounting Treatment. The Merger will be treated as a purchase for
accounting purposes.

Recommendation of the Independent Committee and the Company Board; Opinion of
Financial Advisor to the Independent Committee

Independent Committee. The Independent Committee of the Company Board (the
"Independent Committee"), none of whose members are officers or employees of the
Company, Parent or Acquisition Sub, negotiated the Merger Agreement with the
Finance Committee (the "Finance Committee") of Parent's Board of Directors (the
"Parent Board"). In doing so, they were advised by independent legal and
financial advisors. After receiving the written opinion of Simmons & Company
International ("Simmons"), independent financial advisors, that as of the date
thereof and based on and subject to certain matters stated in the opinion, the
consideration to be paid in the Offer and the Merger is fair from a financial
point of view to the holders of Shares (other than Parent), the Independent
Committee unanimously determined that the terms of the Offer and Merger are fair
to and in the best interests of the Company's shareholders (other than Parent)
and unanimously voted to recommend that the Company Board approve the Merger
Agreement and the transactions contemplated thereby, including the Offer and the
Merger.

Recommendation of the Company Board. The Company Board, after a full
discussion, accepted the recommendation of the Independent Committee, determined
that the terms of the Offer and Merger are fair to and in the best interests of
the Company's shareholders (other than Parent), approved the Merger Agreement
and determined to recommend that the shareholders of the Company tender their
Shares pursuant to the Offer and approve the Merger Agreement and the
transactions contemplated thereby at the Special Meeting.

Opinion of Simmons & Company International. Simmons was retained by the
Independent Committee to assist in the negotiation of the Merger Agreement and
to deliver a fairness opinion. Simmons delivered its written opinion dated May
6, 1999 to the Independent Committee to the effect that, as of that date, the
consideration to be received for the Shares in the Offer and Merger is fair,
from a financial point of view, to the holders of the Shares(other than Parent).
A copy of Simmons' opinion, which sets forth the assumptions made, matters
considered and limits of its review, is attached to this

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<PAGE>

Information Statement as Annex B and should be read in its entirety.

Financial Information

Set forth below is selected financial information relating to the Company
which has been excerpted or derived from the audited financial statements
contained in the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1999 and Annual Reports on Form 10-K for prior fiscal years (the
"Annual Reports"). The financial information that follows is qualified in its
entirety by reference to the Annual Reports. The Annual Reports and other
documents may be examined and copies may be obtained from the offices of the
Securities and Exchange Commission (the "SEC") as described under "Where You Can
Find More Information."

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
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1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenues..................... $1,279,570 $1,855,486 $1,408,469 $1,259,451 $1,155,583
Operating Income............. 142,351 124,175 15,397 36,554 81,512
Income before Income Taxes... 134,167 123,811 (1,168) 4,397 66,020
Net Income................... 124,159 88,960 (12,900) (1,280) 56,971
Earnings per Share:
Basic...................... 2.95 2.00 (0.50) (0.23) -
Diluted.................... 2.72 1.89 (0.50) (0.23) -
At end of period:
Working capital............ (42,391) 7,173 119,438 166,214 (14,257)
Total assets............... 1,181,973 1,548,720 1,506,792 1,615,011 1,527,080
Long-term debt............. 1,782 245,822 275,487 117,574 100,650
Shareholders' equity....... 686,833 616,562 550,979 570,570 573,767
Additional data:
Book value per Share....... 16.65 14.99 13.57 14.19 14.85
</TABLE>

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Price Range of Shares; Dividends

Prior to June 11, 1999, the Shares traded on the New York Stock Exchange
("NYSE") under the symbol "JRM". The NYSE suspended trading of the Shares on
June 11, 1999 because the number of publicly traded Shares fell below the NYSE's
continued listing criteria as a result of Acquisition Sub's acquisition of
Shares pursuant to the Offer. The following table indicates the high and low
sale prices for Shares as reported on the NYSE Composite Tape for the calendar
periods indicated below. Since its organization in 1995, the Company has not
declared or paid any dividends with respect to the Shares and does not
anticipate doing so before the Effective Time.

<TABLE>
<CAPTION>
MARKET PRICE
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HIGH LOW
----------- ------------
<S> <C> <C>
1997
First Quarter................................. $ 26 1/8 $ 21 3/4
Second Quarter................................ 27 7/8 16 1/4
Third Quarter................................. 49 27
Fourth Quarter................................ 52 1/4 34 3/16
1998
First Quarter................................. $ 45 5/16 $ 31 7/8
Second Quarter................................ 47 3/8 37 1/8
Third Quarter................................. 43 7/8 25 1/2
Fourth Quarter................................ 35 5/8 22 1/4
1999
First Quarter................................. $ 31 1/2 $ 20 3/16
Second Quarter (through June 10, 1999)........ 35 11/16 28 11/16
</TABLE>

On June 15, 1999 there were 486 holders of record of Shares and
39,241,669 outstanding Shares.

On March 9, the last full day of trading before Parent announced its
proposal to acquire all of the publicly held Shares, the closing price of the
Shares on the NYSE Composite Tape was $24 3/8 per Share and the high and low
sales prices for the Shares were $25 and $24 3/8, respectively. On May 6, 1999,
the last full day of trading before the public announcement of the execution of
the Merger Agreement, the closing price of the Shares on the NYSE Composite Tape
was $30 1/2 per Share and the high and low sales prices for the Shares were $30
3/4 and $30 1/4, respectively. On May 12, 1999, the last full day of trading
before the commencement of the Offer, the closing price of the Shares on the
NYSE Composite Tape was $35 5/16 per Share.

_________________________

The preceding summary highlights some information from this Information
Statement but may not contain all the information that is important to you.
Please read the entire Information Statement and the annexes, as well as the
information we have incorporated by reference.

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THE SPECIAL MEETING

Place, Date and Time. The Special Meeting will be held on __________ at
__________________, at 9:00 a.m. local time.

Purpose of the Special Meeting. The purpose of the Special Meeting is to
consider and vote on:

. a proposal to approve and adopt the Merger Agreement and the
Merger

. a proposal to adopt the Charter Amendments

. any other business that properly comes before the Special Meeting

Record Date, Shares Entitled to Vote. Holders of record of Shares and
Preferred Shares at the close of business on ____________, 1999 (the Record Date
for the Special Meeting) are entitled to notice of and to vote at the Special
Meeting. On the Record Date, there were 39,241,669 Shares outstanding, each of
which will be entitled to one vote at the Special Meeting, and 3,200,000
Preferred Shares outstanding, each of which will be entitled to one vote at the
Special Meeting. Holders of the Shares and Preferred Shares will each vote as a
separate class at the Special Meeting.

Quorum. A majority of the voting power of the outstanding Shares and
Preferred Shares present in person or by proxy will constitute a quorum at the
Special Meeting.

Vote Required. The approval and adoption of the Merger Agreement and the
Merger and the adoption of the Charter Amendments will each require the
affirmative vote of the holders of two-thirds of the outstanding Shares and
Preferred Shares, each voting as a separate class. Accordingly, abstentions and
broker "non-votes" will have the effect of a vote against these proposals. The
term broker "non-votes" refers to shares held by brokers and other nominees or
fiduciaries that are present at the Special Meeting but are not voted on a
particular matter because those persons are precluded from exercising their
voting authority because of the matter's "non-routine" nature.

Approval Assured. As of the Record Date, Parent, directly or indirectly,
owned 100% of the Preferred Shares and approximately 99% of the Shares.
Therefore, Parent has sufficient voting power to constitute a quorum and to
approve all matters to be considered at the Special Meeting, regardless of the
vote of any other shareholder. Parent will vote all Shares and Preferred Shares
it beneficially owns in favor of (1) the approval and adoption of the Merger
Agreement and the Merger and (2) the adoption of the Charter Amendments. As a
result, the Merger Agreement, the Merger and the Charter Amendments will be
approved and adopted at the Special Meeting even if no shareholder other than
Parent votes in favor of these proposals.

THE MERGER

On May 7, 1999, the Company and Parent entered into the Merger Agreement.
Pursuant to the Merger Agreement, Acquisition Sub commenced the Offer to
purchase all outstanding Shares (other than Shares beneficially owned by Parent)
at a price of $35.62 per Share, net to the seller in cash (the "Offer Price").
The Offer expired at 12:00 midnight, New York City time, on June 10, 1999, and
Acquisition Sub accepted for payment 14,353,490 Shares tendered in the Offer.
The Merger Agreement provides that as promptly as practicable after the purchase
of Shares pursuant to the Offer and the satisfaction (or waiver, to the extent
permissible under the Merger Agreement) of the conditions to the Merger,
Acquisition Sub shall, in accordance with the laws of the Republic of Panama
("Panama Law"), be merged into the Company, whereupon the separate existence of
the Acquisition Sub shall cease, and the Company shall continue as the Surviving
Corporation. Pursuant to the Merger, each Share outstanding immediately prior
to the Effective Time of the Merger (other than Shares beneficially owned by
Parent) shall be converted into the right to receive $35.62 per Share in cash
(the same price paid in the Offer), without interest (the "Merger
Consideration"). The Merger Agreement is more fully described in "The Merger
Agreement."

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<PAGE>

Background of the Merger; Recommendation of the Independent Committee and the
Company Board

On January 31, 1995, Parent and Offshore Pipelines, Inc. ("OPI")
consummated a transaction (the "OPI Merger") pursuant to which Parent
contributed its worldwide marine construction businesses to the Company, a
newly-formed Panama corporation, and OPI was merged into a wholly owned
subsidiary of the Company. As a result of the OPI Merger, the shareholders of
OPI acquired approximately 36% of the outstanding Shares, and Parent retained
the remaining 64% of the outstanding Shares and all of the Preferred Shares.

In connection with the OPI Merger, the Company Board established the
Independent Committee, comprised of directors who were not present or former
officers or employees of Parent or the Company as an oversight committee to
review the fairness to the Company and its public shareholders of certain
transactions between the Company and Parent. At the same time, Parent and the
Company agreed that the Company would not take certain actions without the
approval of the Independent Committee or the affirmative vote of the holders of
a majority of the outstanding voting stock of the Company owned by persons other
than Parent and its subsidiaries. Although this agreement expired in January
1998, the Independent Committee continued to review and approve all significant
transactions between the Company and Parent.

Over the last four years, representatives of the Company, the Independent
Committee and Parent have had general conversations from time to time concerning
the Company's strategic alternatives and Parent's investment in the Company.

At a meeting of the Company Board on November 11, 1998, Mr. Roger E.
Tetrault, Chairman and Chief Executive Officer of Parent and the Company,
advised the Company Board that Parent was considering various strategic
alternatives, including the possible acquisition of the publicly held Shares.
No terms were discussed. Mr. Tetrault identified possible benefits that could
result from a combination of the two companies. He also indicated that if
Parent decided to make such a proposal, it would likely be made in late February
or early March 1999 and that Parent would advise the Company Board upon
completion of its review. The Company Board determined that any such proposal
would be considered by the Independent Committee. The Independent Committee
consisted of Messrs. William J. (Bill) Johnson (Chairman), Rick L. Burdick, Sean
C. O'Keefe, Cedric E. Ritchie and Robert L. Howard. It was determined that Mr.
Howard would recuse himself from participation on the Independent Committee in
connection with its consideration of any proposal made by Parent because of his
position as a member of the Parent Board. None of the four members of the
Independent Committee who participated in the consideration of the proposals
from Parent were present or former employees, officers or directors of Parent or
employees or officers of the Company.

On November 13, 1998, Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch") made a presentation to the Parent Board about various
strategic alternatives, including a possible acquisition by Parent of the
publicly held Shares. Merrill Lynch suggested that Parent could acquire the
publicly held Shares of the Company using either cash or common stock of Parent
("Parent Stock") as consideration. Merrill Lynch indicated that combining
Parent and the Company would be beneficial because the combined entity would
eliminate expenses associated with the separate management of two publicly
traded companies, receive greater coverage by equity research analysts and
create a more efficient organizational structure. During the meeting, the
Parent Board empaneled a Finance Committee, consisting of Messrs. John W.
Johnstone, Jr. (Chairman), Philip J. Burguieres, William McCollam, Jr. and Bruce
DeMars.

On November 25, 1998, the Finance Committee discussed several strategic
initiatives of Parent. The Finance Committee reaffirmed its commitment to
complete its review of all of the strategic initiatives currently under
consideration by the Finance Committee, prior to making a decision whether or
not to seek to acquire the publicly held Shares of the Company. Each member of
the Finance Committee confirmed that he did not own any Shares.

In December 1998, Parent engaged Davis Polk & Wardwell ("Davis Polk") as
its legal advisor with respect to the strategic initiatives under review.

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<PAGE>

In early December 1998, Mr. Tetrault suggested that the Independent
Committee should consider engaging financial and legal advisors in anticipation
of a possible proposal from Parent.

The Independent Committee engaged Baker & Botts, L.L.P. ("Baker & Botts")
as its legal advisor on December 17, 1998 and Simmons as its financial advisor
on January 5, 1999.

On January 4, 1999, the Finance Committee concluded that it should analyze
and develop alternatives for acquiring the publicly held Shares. On January 20,
1999, the Finance Committee engaged Merrill Lynch as its financial advisor.

The Independent Committee met with its legal and financial advisors in
Houston, Texas, on January 12, 1999. At that meeting, Baker & Botts addressed
the Independent Committee concerning their duties and responsibilities under
applicable law. The members of the Independent Committee acknowledged that in
considering and negotiating any transaction with Parent their responsibility was
to act in the best interests of the Company's public shareholders. The members
of the Independent Committee determined that consideration of any business
combination between the Company and Parent was within the Independent
Committee's scope of authority, but indicated that the Company Board should
consider a resolution confirming the Independent Committee's authority to act on
any such transaction. During this meeting, Simmons outlined the scope of their
anticipated activities in advising the Independent Committee, including
providing a financial analysis of any proposals which may be received from
Parent and an evaluation of possible alternative transactions, providing, if
requested, a fairness opinion as to a business combination between the Company
and Parent and assisting the Independent Committee in negotiating with Parent.
The Independent Committee decided to wait until it received a proposal from
Parent before beginning discussions with Parent.

On February 1, 1999, the Finance Committee met with Merrill Lynch to
discuss alternatives for acquiring the publicly held Shares of the Company.
Merrill Lynch reviewed with the Finance Committee its study and evaluation of
the Company, Parent and several proposed transactions, which included analyses
of comparable companies, comparable transactions, the values of the Company and
Parent, the relative values of the two companies, premiums in a stock for stock
transaction and premiums in similar public transactions. The methodologies used
in conducting these analyses were substantially the same as the methodologies
set forth under "Opinion of Financial Advisor to the Finance Committee" in
Acquisition Sub's Schedule 14D-1, as amended, filed with the SEC in connection
with the Offer (the "Schedule 14D-1"). Merrill Lynch's presentations were based
primarily on an assumed stock for stock transaction and an assumed offer price
of $27.31 per publicly-traded Share. Such a transaction would have required
Parent to issue approximately 19.3 million new shares of Parent Stock and
represented approximately a 15% premium to the Share price as of February 1,
1999. Merrill Lynch also provided an analysis of the pro forma effect on
Parent's projected earnings per share of an acquisition of the publicly held
Shares in a stock for stock transaction. Assuming that the goodwill associated
with combining Parent and the Company would be amortized over 15 or 30 years,
this analysis indicated that a stock for stock transaction with an assumed
$27.31 offer price would dilute Parent's fiscal year 2000 earnings per share by
16.8% and 12.5%, respectively. This information was presented on the following
day to the Parent Board.

On February 17, 1999, Parent and the Company executed a confidentiality
agreement (the "Confidentiality Agreement"), under which Parent agreed to
provide to the Company certain confidential information relating to its
operations and the Company agreed to keep all nonpublic information received
from Parent in confidence, subject to certain exceptions.

On March 4, 1999, Simmons met with Messrs. Johnson and O'Keefe to discuss
their analysis to date, which included analyses of the Company, Parent, a
potential business combination of the two companies and possible alternative
transactions. The analysis of each of the Company and Parent included a review
of its history, its financial and operating performance and the financial
performance of comparable companies, its assets and liabilities (including
contingent liabilities) and its operating markets. The methodologies used in
conducting an analysis of a potential combination of the two companies were
substantially the same methodologies used in connection with the fairness
opinion delivered by Simmons to the Independent Committee on May 6, 1999, which
are set forth below under "Opinion of Financial Advisor to the Independent
Committee." Because the Initial

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<PAGE>

Proposal involved the receipt of Parent Stock as consideration, Simmons used
similar methodologies to value Parent and Parent Stock. Finally, Simmons
described its preliminary views of the positive and negative aspects of
alternative transactions, including continued ownership by the public
shareholders combined with the implementation of a strategic acquisition program
funded by the Company's cash reserves, a private sale of the Company, a private
sale of the publicly held Shares, a repurchase by the Company of the publicly
held Shares, a repurchase by the Company of the Shares held by Parent, a spin-
off of the Company and a secondary offering of Shares. Simmons noted that,
because of Parent's controlling ownership interest in the Company, any such
alternative transaction would be dependent on Parent's concurrence in the
Company's decision to pursue an alternative transaction. On March 9, 1999,
Simmons met with Mr. Burdick to review the foregoing preliminary analysis.

At a meeting on March 9, 1999, the Finance Committee considered various
alternatives for acquiring the publicly held Shares and determined to make a
specific proposal to the Independent Committee.

On March 10, 1999, the Finance Committee delivered its initial proposal to
the Independent Committee. The proposal involved a merger of a newly-formed
subsidiary of Parent into the Company, whereby each Share not owned by Parent
would become 1.15 shares of Parent Stock and the Company would become a wholly
owned subsidiary of Parent (the "Initial Proposal"). The Initial Proposal was
disclosed to the public on March 10, 1999. In response, the Independent
Committee announced that it would consider the Initial Proposal.

On March 11, 1999, the Company Board adopted resolutions confirming the
Independent Committee's authority to act with respect to any proposal for a
business combination between Parent and the Company.

On March 15, 1999, representatives of Merrill Lynch and Simmons met to
discuss the Initial Proposal. During this meeting, Merrill Lynch presented an
overview of the merits of the Initial Proposal. Merrill Lynch and Simmons
discussed, among other things, the small public float in the Shares, the
confusion in the market perception of Parent and the rationale for the
combination (including cost savings and increased analyst and institutional
interest in Parent). Merrill Lynch noted that the 1.15 shares of Parent Stock
that would be received in the Initial Proposal by the Company's minority
shareholders represented a 8.5% premium to the closing Share price on the day
preceding the Initial Proposal and a 16.2% premium to the closing Share price at
the time of the announcement of the Initial Proposal. Merrill Lynch also
presented the results of its comparable company trading analysis, which
suggested that the Shares were overvalued in the market in relation to other
comparable companies. Merrill Lynch also discussed with Simmons recent third-
party forecasts, which indicated a greater decline in both Parent's and the
Company's earnings per share for fiscal years 2000 and 2001 than had been
previously forecasted.

Because the Initial Proposal involved an exchange of stock, both companies
and their advisors requested and undertook due diligence. On March 17, 1999,
management of Parent made a presentation and answered questions posed by the
Company's advisors. On March 22, 1999, the Company's management made a similar
presentation. Further due diligence was conducted during the following weeks.

The Independent Committee met with its advisors on April 1, 1999. At that
meeting, representatives of Baker & Botts discussed the duties and
responsibilities of the members of the Independent Committee in connection with
their consideration of a business combination with Parent, stressing the
importance of actively and independently representing the interests of the
minority shareholders of the Company. Representatives of Simmons began a
discussion of the Initial Proposal by indicating that a valuation of Parent was
complicated because of Parent's contingent liabilities. Simmons indicated that
these contingent liabilities were not easily quantified, but should be
considered in any evaluation of Parent. Simmons then reviewed with the
Independent Committee its study and evaluation of the Company, Parent and the
Initial Proposal, which included an update of their March 4, 1999 analysis
provided to the members of the Independent Committee. Simmons also discussed
the potential positive aspects (including a premium to the current market price,
improved investor profile, improved profile in capital markets and the benefits
from the elimination of duplicative costs) and negative aspects (including
potential dilution of any future recovery in the oilfield service industry, the
uncertainty of Parent's contingent liabilities and less access to excess cash)
to the Company's minority shareholders of completing a business combination with
Parent, assuming the receipt of Parent Stock as consideration. Simmons
calculated the premium implied by the

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<PAGE>

Initial Proposal based on stock prices over time periods of one day, one week
and four weeks prior to the announcement of the Initial Proposal and concluded
that (1) the nominal premium ranged from 8.5% to 29.7%, (2) after adjustment for
the recovery of oilfield service company stock prices and elimination of the
effect of the announcement of the Initial Proposal, the premium ranged from 7.8%
to 9.9% and (3) after such adjustment and if no premium was attached to the
Company's substantial cash reserves, the premium ranged from 14.8% to 19.2%.
Simmons also indicated that they received an analysis prepared by Merrill Lynch
in support of the Initial Proposal. In Simmons' view, that analysis did not
appropriately value the Company's substantial cash reserves or take into
consideration the recent recovery in the market for oilfield service company
stocks. After an extensive discussion of the Simmons analysis and the terms of
the Initial Proposal, the Independent Committee determined that the Initial
Proposal was inadequate because of, among other things, the substantial increase
in the market price for oil service stocks since the date the Initial Proposal
was delivered and the Independent Committee's belief that sufficient value had
not been given to the Company's substantial excess cash. The Independent
Committee authorized Mr. Bill Johnson (Chairman of the Independent Committee) to
contact Mr. John Johnstone (Chairman of the Finance Committee) to arrange a
meeting between the financial advisors of each Committee.

Unable to reach Mr. Johnstone, Mr. Johnson contacted Mr. Philip Burguieres,
another member of the Finance Committee, on April 1, 1999 to inform him that the
Independent Committee had determined that the Initial Proposal was inadequate
and to suggest that Simmons and Merrill Lynch meet to discuss their valuations.
Mr. Burguieres agreed to authorize Merrill Lynch to meet with Simmons, and Mr.
Johnson instructed Simmons to arrange the meeting.

On April 6, 1999, Simmons and Merrill Lynch met to discuss their respective
valuations of the Company and Parent. They discussed the Initial Proposal and
alternatives, including combinations that would involve cash and stock or all
cash as consideration. Simmons indicated that it could not recommend the
Initial Proposal. Merrill Lynch left the meeting with the impression that
Simmons would be willing to recommend to the Independent Committee an offer of
1.15 shares of Parent Stock plus $4 in cash for each Share.

On April 8, 1999, the Finance Committee met with Merrill Lynch to review
the results of the April 6 meeting between Merrill Lynch and Simmons. The
Finance Committee also discussed with Merrill Lynch the increase in oilfield
service company stock prices since the announcement of the Initial Proposal.
Merrill Lynch attributed the increase primarily to OPEC's March 10, 1999
announcement to decrease oil production. Merrill Lynch also updated the
analyses contained in its February 1, 1999 presentation to the Finance Committee
using current market information. Merrill Lynch's revised dilution analysis
indicated that a part-stock, part-cash transaction would be less dilutive to
Parent's projected earnings per share than an all-stock transaction and that an
all-cash transaction would be significantly less dilutive to Parent's projected
earnings per share than either of the other two alternatives. Based on Merrill
Lynch's understanding of the position of the Independent Committee and the
Finance Committee's discussions with its financial advisor, the Finance
Committee decided to increase its offer to 1.15 shares of Parent Stock plus
$1.50 in cash for each Share.

On April 9, 1999, Merrill Lynch informed Simmons that the Finance Committee
had increased its offer to 1.15 shares of Parent Stock plus $1.50 in cash per
Share. Merrill Lynch also told Simmons that the Finance Committee was very
concerned about the possibility that any transaction with the Company might
cause dilution to Parent's per share earnings. Simmons communicated this to the
Independent Committee, which instructed Simmons to develop an analysis of the
dilution to Parent's per share earnings assuming that the Company's excess cash
was invested at a rate of return greater than money market rates of return.

On April 9, 1999, Baker & Botts and the Independent Committee received from
Davis Polk an initial draft of a proposed merger agreement.

Concerned that the valuations of the two committees may still be too far
apart for a transaction to materialize, the Independent Committee instructed
Simmons to contact Merrill Lynch to determine if Parent would consider selling
its Shares and, if so, at what price. Simmons was informed that Parent was not
interested in soliciting offers to purchase its Shares.

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<PAGE>

On April 13, 1999, members of the Independent Committee met by telephone
with their advisors. Simmons' dilution analysis was reviewed and discussed. The
dilution analysis indicated that under certain rate of return assumptions,
Parent could significantly reduce its pro forma projected earnings per share
dilution by investing the Company's excess cash in capital projects or
acquisitions rather than continuing to earn money market rates of return.
Simmons also presented an analysis of a transaction whereby the Company would
repurchase the Shares from its public shareholders. This analysis showed that
such a transaction could be accretive to Parent's earnings per share and cash
flow per share. Simmons stated that this analysis could reduce the Finance
Committee's concerns regarding the impact of an acquisition by Parent of the
publicly held Shares on Parent's earnings per share. Members of the
Independent Committee discussed their concern about the proper valuation of
Parent's contingent liabilities. After this discussion, members of the
Independent Committee decided to present to the Finance Committee a counteroffer
of 1.15 shares of Parent Stock and $5 in cash per Share. They also instructed
Baker & Botts on several points to be included in the Independent Committee's
comments on the proposed merger agreement, including the Independent Committee's
position that the proposed transaction should be conditioned on the affirmative
vote of holders of a majority of the outstanding Shares other than Shares
beneficially owned by Parent.

On April 14, 1999, Simmons met with Merrill Lynch to review its dilution
analysis and present the Independent Committee's counteroffer. Merrill Lynch
expressed its concern that the proposed counteroffer would substantially dilute
the Parent's future earnings. Simmons suggested that members of the two
committees and their financial advisors meet to discuss their differences and
try to reach a resolution.

On April 15, 1999, the Independent Committee's comments on the initial
draft of the merger agreement were delivered to Davis Polk.

On April 16, 1999, the Finance Committee met to discuss the counteroffer
from the Independent Committee. At the end of the meeting, the Finance
Committee asked its advisors to seek clarification of the terms of the
counteroffer from the advisors to the Independent Committee.

On April 16, 1999, Merrill Lynch and Simmons discussed the terms of the
counteroffer.

On April 19, 1999, the Finance Committee reconvened to hear the report from
its advisors concerning their discussions with the advisors to the Independent
Committee. Merrill Lynch reported that Simmons was no longer prepared to
recommend to the Independent Committee an offer of 1.15 shares of Parent Stock
plus $4 in cash for each Share. After extended discussions, the Finance
Committee unanimously determined to terminate discussions with the Independent
Committee.

Promptly after the meeting, Davis Polk informed Baker & Botts that the
Finance Committee had decided to terminate the merger discussions with the
Independent Committee because of a failure to reach agreement on the financial
terms of the transaction. A press release to that effect was issued the
following day.

After discussions with individual members of the Independent Committee and
with its legal and financial advisors, Mr. Bill Johnson contacted Mr. Philip
Burguieres on April 22, 1999 in an attempt to restart discussions between the
two committees.

On April 29, 1999 Mr. Johnson met with Simmons to discuss Simmons'
comparison of the accretion/dilution to Parent's earnings per share based on
various transaction values and structures, including various combinations of
stock, cash and warrants to purchase stock This analysis indicated that
alternative transactions could reduce dilution to Parent's earnings per share.

On April 30, the Finance Committee convened and decided to authorize Mr.
Burguieres to meet with Mr. Johnson.

On May 1, 1999, Mr. Burguieres and Merrill Lynch met to discuss Merrill
Lynch's analysis of the pro forma effect on Parent's projected earnings per
share of an all cash acquisition of the publicly held Shares at various

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<PAGE>

consideration values. This analysis showed the dilutive effect to Parent's
fiscal year 2000 earnings increasing from 12.7% to 18.6% using consideration
values ranging from $31 per Share to $36 per Share. Merrill Lynch also provided
an analysis of premiums paid in minority interest transactions. In the
aggregate, this analysis indicated relevant merger premiums of between 15.0% and
25.0%.

Messrs. Johnson and Burguieres met on May 4, 1999. They discussed the
recent increase in the price of the Shares, the valuation of the Company's
excess cash and the opportunity to earn higher returns, the possible dilution to
Parent's earnings per share and other factors relating to value. After further
discussion, Messrs. Johnson and Burguieres agreed to recommend to their
respective committees an all cash transaction at $35.62 per Share.

Later that day, the Finance Committee met to review the report and
recommendation from Mr. Burguieres. Merrill Lynch advised the Finance Committee
that they were of the opinion that the consideration proposed to be paid to the
holders of Shares (other than Parent) was fair from a financial point of view to
Parent. Merrill Lynch's analyses were substantially the same as the analyses
set forth under "Opinion of Financial Advisor to the Finance Committee" in the
Schedule 14D-1. Based on the foregoing, the Finance Committee voted unanimously
to recommend the $35.62 all cash proposal to the full Board of Parent.

The Independent Committee met by telephone during the afternoon of May 4,
1999 with its legal and financial advisors. Mr. Johnson presented the proposal
to the Independent Committee, and Simmons provided certain updated analyses of
the Company and the terms of the proposed transaction. Simmons' analyses were
substantially the same as the analyses set forth below under "Opinion of
Financial Advisor to the Independent Committee." Simmons informed the
Independent Committee that it was prepared to deliver a fairness opinion with
respect to a transaction priced at $35.62 per Share. Members of the Independent
Committee noted that an all cash transaction removed the risk associated with
Parent's contingent liabilities, a major concern raised by the Initial Proposal.
Representatives of Baker & Botts informed the Independent Committee of
discussions with Davis Polk regarding the revised terms of the proposed merger.
The Independent Committee instructed Baker & Botts regarding its comments on the
revised merger agreement, including that the proposed transaction should be
structured as a two step transaction with a tender offer followed by a merger
and that the tender offer should be conditioned upon there being validly
tendered and not withdrawn prior to the expiration of the tender offer a number
of Shares equal to at least a majority of the outstanding Shares other than
Shares beneficially owned by Parent. After further discussion, the Independent
Committee decided to defer action to a later date allowing the Independent
Committee members an additional opportunity to consider the proposal and further
review the extensive materials provided by Simmons during the negotiation
process.

On May 5, 1999, the full Board of Parent met to consider the $35.62 all
cash proposal, the recommendation of the Finance Committee and the advice of
Merrill Lynch and Davis Polk. A detailed summary underlying Merrill Lynch's
opinion to the Parent Board is set forth under "Opinion of Financial Advisor to
the Finance Committee" in the Schedule 14D-1. After a full discussion, the
Board of Parent approved the proposal subject to Mr. Tetrault being satisfied
that the financing necessary to consummate the transaction was available. Three
directors who were also directors of the Company (Messrs. Tetrault, Woolbert and
Howard) indicated that they were in favor of the proposal but, on advice of
counsel, abstained from voting.

Promptly thereafter, Parent commenced discussions with Citibank about
providing a $525 million facility to finance the transaction. On May 7, 1999,
Citibank issued to Parent a commitment letter for the financing. Mr. Tetrault
determined that he was now satisfied that the necessary financing was available.

On May 5, 1999, the Independent Committee met to again consider the
proposed transaction. Members of the Independent Committee discussed the terms
of the Merger Agreement, and representatives of Simmons reviewed and updated
their analysis of the fairness of the proposal. A detailed summary of the
analyses performed by Simmons is set forth below under "Opinion of Financial
Advisor to the Independent Committee." Simmons then rendered an oral opinion
(subsequently confirmed by delivery of a written opinion dated May 6, 1999) to
the effect that, as of such date and based upon and subject to certain matters
stated in such opinion, the consideration to be paid in the Offer and the Merger
was fair to the holders of Shares (other than Parent) from a financial point of
view. The Independent Committee then unanimously determined that the terms of
the Offer and the Merger are fair

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<PAGE>

to and in the best interests of the Company's shareholders (other than Parent),
and unanimously voted to recommend that the Company Board approve the Merger
Agreement and the transactions contemplated thereby, including the Offer and the
Merger. At the meeting, the Independent Committee requested that Simmons update
its analysis for purposes of a summary presentation and confirmation of its oral
opinion at a meeting of the Company Board to be held on the following day.

On May 6, 1999, the Company Board met to consider the Merger Agreement and
the transactions contemplated thereby. Mr. Johnson described the terms of the
Merger Agreement and indicated that the Independent Committee had unanimously
approved the Merger Agreement and recommended that the Company Board approve the
Merger Agreement. Representatives of Simmons described their review and
analysis of the transaction and confirmed its oral fairness opinion provided to
the Independent Committee on May 5, 1999. Representatives of Baker & Botts then
described the principal terms of the Merger Agreement. After a full discussion,
the Company Board accepted the recommendation of the Independent Committee and
(i) determined that the terms of the Offer and the Merger were fair to and in
the best interests of the Company's shareholders (other than Parent), (ii)
approved the Merger Agreement and authorized the execution and delivery thereof
and (iii) determined to recommend that the shareholders of the Company tender
their Shares pursuant to the Offer and approve the Merger Agreement. Prior to
participating in the determinations and recommendations of the Company Board,
the members of the Company Board who were also directors or officers of Parent
identified their affiliations with Parent and noted that as a result of such
affiliations they had a potential conflict of interest. As a result, Roger E.
Tetrault, Robert L. Howard and Richard E. Woolbert elected to abstain

On May 13, 1999, Acquisition Sub commenced the Offer, which expired at
12:00 midnight, New York City time, on June 10, 1999. On June 11, 1999,
Acquisition Sub announced that it had accepted for payment and would promptly
pay for all Shares validly tendered pursuant to the Offer. Acquisition Sub has
subsequently paid for such Shares.

Recommendation of the Independent Committee and the Company Board

Independent Committee. In reaching its determinations referred to above,
the Independent Committee considered the factors listed below, which, in the
view of the Independent Committee, supported such determinations. The following
discussion of the factors considered by the Independent Committee is not
intended to be exhaustive but summarizes the material factors considered.

(i) The fact that the per Share price ($35.62) to be paid in the Offer
and the Merger represents (a) a premium of approximately 12.6% over the
closing price of the Shares ($31.63) on the NYSE on May 4, 1999 (the day
prior to the Independent Committee's recommendation to the Company Board)
and an effective premium of 21.4% over such price per Share if no premium
were attributed to the Company's excess cash, estimated by Simmons at
$12.95 per share (Simmons determined the effective premium by subtracting
the excess cash per share from both the $35.62 Offer Price and from the
closing price of the Shares on May 4, 1999 and calculating the premium of
the adjusted Offer Price to the adjusted price on May 4, 1999), (b) a
premium of approximately 19.2% over the per Share price estimated by
Simmons ($29.89) that would have prevailed on May 4, 1999, recognizing the
recent significant recovery in oil and gas service industry equities but
excluding any speculative activity occasioned by the recent negotiations
between Parent and the Company concerning the possible acquisition of the
publicly held Shares by Parent and the effective premium (calculated in a
similar manner as above) of 33.8% over such price if no premium were
attributed to the Company's excess cash, and (c) a premium of 58.8% over
the 20-day average trading price of the Shares through March 9, 1999
($22.43) (the day before the announcement of the Initial Proposal before
oil service stocks began their general uptrend associated with improved
crude prices) and the effective premium (calculated in a similar manner as
above) of 139.1% over such price if no premium were attributed to the
Company's excess cash. The Independent Committee believed that the
historical trading price of the Shares over the past few months was within
a range of the going concern value of the Company and that the premiums
discussed above were attractive in comparison to premiums received in
comparable transactions.

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<PAGE>

(ii) The fact that the per Share price to be received in the Offer
and the Merger is payable in cash, thereby eliminating any uncertainties in
valuing the consideration.

(iii) The Company's shareholder profile, the percentage of the
outstanding Shares owned by Parent, the absence of contractual restrictions
on the acquisition of additional Shares by Parent, and Parent's stated
unwillingness to solicit offers to purchase its Shares from a third party,
all of which led the Independent Committee to conclude that exploration of
a business combination with a third party was not practicable.

(iv) The Independent Committee's belief, based upon Company
management and Simmons presentations, that the per Share price to be paid
in the Offer and the Merger was fair in light of the financial condition,
results of operations, business and prospects of the Company as a separate
company.

(v) The knowledge of the members of the Independent Committee of
various risks and uncertainties associated with a decision to continue to
operate the Company as an independent entity, including, but not limited
to, trends in the offshore construction industry and the declining backlog
at the Company, which led the members of the Independent Committee to
believe that there was a substantial risk that the market price for the
Shares could remain at levels experienced in the past few months for a
prolonged period of time or decline from those levels. As a result, the
Independent Committee believed that the Share price to be paid in the Offer
and the Merger was superior to the anticipated Share price if the Company
remained a separate company.

(vi) The arm's-length negotiations between the Independent Committee
and its representatives and the Finance Committee and its representatives,
including that the negotiations resulted in (a) an increase in the price at
which Parent was prepared to acquire the Shares and a change in the
structure of the transaction and the form of consideration to be received
by the Company's shareholders, and (b) the Independent Committee's belief
that $35.62 per Share was the highest price that could be obtained from
Parent under the circumstances.

(vii) The opinion of Simmons, dated May 6, 1999, that, as of the date
of the opinion and based on and subject to certain matters stated in the
opinion, the consideration to be paid in the Offer and the Merger is fair
to holders of the Shares (other than Parent) from a financial point of
view, and the analyses presented to the Independent Committee by Simmons
with respect thereto. See "Opinion of Financial Advisor to the Independent
Committee."

(viii) The fact that the Offer was conditioned upon, among other
things, there being validly tendered and not withdrawn prior to the
expiration of the Offer a number of Shares equal to at least a majority of
the outstanding Shares other than Shares beneficially owned by Parent (the
"Minimum Condition").

(ix) The terms and conditions of the Offer, the Merger and the
Merger Agreement, including provisions that no change may be made that,
without the consent of the Company, (a) waives the Minimum Condition, (b)
changes the form of consideration to be paid, (c) decreases the per Share
price or the number of Shares sought in the Offer or (d) adds conditions.

(x) The fact that the Merger Agreement does not preclude the
Independent Committee from withdrawing or modifying its recommendation to
shareholders if failure to do so would be inconsistent with its fiduciary
duties provides the Independent Committee with a degree of flexibility to
respond to changed circumstances.

(xi) The provision of the Merger Agreement permitting the Company to
negotiate with third parties that make unsolicited Acquisition Proposals
(as defined in the Merger Agreement) if there is a reasonable likelihood
that the directors' fiduciary duties would otherwise be breached provides
the Independent Committee with a degree of flexibility in the event that a
superior offer is received.

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<PAGE>

(xii) The possibility that the timing of the transaction is at a down
cycle in the offshore construction and oil service industry and that
shareholders might not be able to participate fully in the recovery (unless
they took the proceeds and reinvested in the industry), which the
Independent Committee viewed as a risk that did not outweigh the benefits
of the Offer and the Merger.

(xiii) The fact that other transaction structures, including a
transaction that would be predominately stock for stock, would be generally
nontaxable, but would expose the Company's shareholders to the market and
other risks inherent in owning Parent Stock, which the Independent
Committee viewed as less preferable than the terms of the Offer and the
Merger.

(xiv) The issues associated with the fact that the Company has
significant excess cash, including the following:

(1) after taking into account the excess cash (for which a
purchaser is unlikely to pay more than dollar for dollar), the
actual premium paid for the underlying business is
substantially higher than the premium on the whole transaction;

(2) the risks associated with deploying substantial excess cash in
the oil service industry in a period of cyclical downtrend or
diversifying into new lines of business in which the Company
does not have experience; and

(3) the possibility that Acquisition Sub might be deemed to be
paying for the purchase with the Company's own assets.

The Independent Committee believed the issues referred to in clauses (1)
and (2) supported its determination that the Share price to be paid in the
Offer and the Merger was fair, and that viewing the transaction in the
manner referred to in clause (3) was not appropriate.

(xv) The likelihood that the Offer and the Merger will be
consummated in light of the facts that the Offer and the Merger are not
subject to any financing condition, that Parent has represented that the
funds necessary to consummate the Offer and Merger will be available and
the limited nature of the other conditions to the Offer and the Merger.

(xvi) The fact that during calendar year 1998, the Shares had traded
at prices higher than, and certain Share repurchases by the Company were
made at prices higher than, the Share price to be paid in the Offer and the
Merger did not significantly impact the Independent Committee's
determination as to the fairness of the Offer and the Merger, because of
the Independent Committee's belief that conditions in the offshore
construction and oilfield services industry had changed since those dates
to such an extent that those transactions had limited relevance for
determining the current value of the Company and the fairness of the Offer
and the Merger.

Company Board. In reaching its determinations referred to above, the
Company Board considered the following factors: (i) the determinations and
recommendations of the Independent Committee; (ii) the Independent Committee's
analysis of the factors referred to above, which the Company Board adopted; and
(iii) the fact that the price to be paid in the Offer and the Merger and the
terms and conditions of the Merger Agreement were the result of arm's-length
negotiations between the Independent Committee and the Finance Committee.

The description set forth above of the factors considered by the Company
Board, including members of the Independent Committee, is not intended to be
exhaustive, but summarizes the primary factors considered. The members of the
Company Board, including the members of the Independent Committee, evaluated the
Offer and the Merger in light of their knowledge of the business, financial
condition and prospects of the Company, and based upon the advice of financial
and legal advisors. In light of the number and variety of factors that the
Company Board and the Independent Committee considered in connection with their
evaluation of the Offer and the Merger, neither the Company Board nor the
Independent Committee found it practicable to assign relative or specific

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<PAGE>

weights to the foregoing factors, and, accordingly, neither the Company Board
nor the Independent Committee did so. Individual members of the Company Board
and the Independent Committee may have given differing weights to different
factors and may have viewed certain factors more positively or negatively than
others. Neither the Company Board nor the Independent Committee considered the
net book value or liquidation value of the Company in connection with their
determinations referred to above because of their belief that these measures of
value are not relevant for purposes of valuing a company actively engaged in the
offshore construction and oilfield service industry due to (1) in the case of
net book value, the significant asset writedowns incurred by many of such
companies and (2) in the case of liquidation value, the relatively low valuation
that would result as compared to other methods of valuation due to the nature of
the Company's business and assets.

The Company's purpose in entering into the Merger Agreement was to maximize
the value received by holders of the publicly held Shares as a result of such
Share ownership, in light of available alternatives. Alternative means to
accomplish this purpose were considered by the Company but were not pursued
because the Company considered the terms of the Offer and the Merger to be
superior to any practical alternative. The Company determined to undertake the
transactions contemplated by the Merger Agreement at this time due to its
receipt of a proposal by Parent to engage in a business combination and its
determination that the Offer and the Merger are in the best interests of its
shareholders (other than Parent).

The Company Board, including the members of the Independent Committee,
believes that the Offer and the Merger are procedurally fair because, among
other things: (i) the Independent Committee consisted entirely of directors who
were neither employees or officers of the Company nor employees, officers or
directors of Parent and were appointed to represent the interests of the
minority shareholders of the Company; (ii) the Independent Committee retained
and was advised by independent legal counsel; (iii) the Independent Committee
retained Simmons as its independent financial advisor to assist it in evaluating
a potential transaction with Parent and received advice from Simmons; (iv) the
Minimum Condition which may not be waived by Acquisition Sub without the consent
of the Company and which has the effect of requiring that in order for the Offer
to be successful, a majority of the publicly held Shares must be tendered and
not withdrawn; (v) the Independent Committee engaged in extensive deliberations
in evaluating the Offer and the Merger and alternatives thereto; and (vi) the
fact that the $35.62 per Share price and the other terms and conditions of the
Merger Agreement resulted from active arm's-length bargaining between the
Independent Committee and its representatives, on the one hand, and the Finance
Committee and its representatives, on the other hand.

The Company's executive officers have not been asked to make a
recommendation as to the Offer or the Merger.

Opinion of Financial Advisor to the Independent Committee

The Independent Committee engaged Simmons to act as its financial advisor
in connection with the proposed Merger Agreement and the transactions
contemplated thereby (including the Offer and the Merger). On May 5, 1999, at a
meeting of the Independent Committee held to evaluate the proposed Offer and
Merger, Simmons rendered to the Independent Committee an oral opinion
(subsequently confirmed by delivery of a written opinion dated May 6, 1999) to
the effect that, as of such date and based upon and subject to certain matters
stated in such opinion, the consideration to be paid in the Offer and the Merger
is fair to the holders of Shares (other than Parent) from a financial point of
view. As indicated above, the oral opinion of Simmons as of May 5, 1999 was
only one of many factors taken into consideration by the Independent Committee
in making its determination to approve the Merger Agreement.

The full text of Simmons' written opinion dated as of May 6, 1999, which
sets forth, among other things, assumptions made, matters considered, and scope
and limitations on the review undertaken (the "Opinion"), is attached as Annex B
and is incorporated herein by reference. Holders of Shares are urged to, and
should, read the Opinion carefully and in its entirety. The Opinion is directed
to the Independent Committee, is limited to the fairness, from a financial point
of view, of the cash consideration to be received in the Offer and the Merger by
the Company's shareholders (other than Parent) and is not a recommendation to
such shareholders as regards to the Offer and the Merger. The opinion does not
address the underlying

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decision of the Company to engage in the transactions contemplated by the Merger
Agreement. The summary of the Opinion set forth herein is qualified in its
entirety by reference to the full text of such opinion.

In connection with its Opinion, Simmons has, among other things, (1)
reviewed and analyzed certain publicly available business and financial
information relating to the Company that it deemed relevant, including estimates
of the future operating performance of the Company prepared by industry analysts
unaffiliated with either the Company or Parent; (2) reviewed certain business
and financial information provided to Simmons by the Company, including certain
limited financial forecasts prepared by management of the Company, relating to
its business, earnings, cash flow, assets, liabilities and prospects; (3)
reviewed certain publicly available information concerning the trading of, and
the trading market for, the Shares, including trading multiples, and compared
such information with that of certain other publicly-traded companies that it
deemed to be relevant; (4) compared the proposed financial terms of the
transactions contemplated by the Merger Agreement with the financial terms of
other transactions that it deemed to be relevant; (5) participated in certain
discussions and negotiations among representatives of the Company and Parent;
(6) reviewed the Merger Agreement; and (7) reviewed such other financial studies
and analyses and took into account such other matters as it deemed necessary,
including its assessment of general economic, market and monetary conditions.

In arriving at its Opinion, Simmons, with the consent of the Independent
Committee, assumed and relied upon the accuracy and completeness of all the
foregoing information (other than the limited financial forecasts) and did not
independently verify any of such information. With respect to such financial
forecasts, Simmons utilized certain information set forth therein and assumed
that such information was reasonably prepared on bases reflecting the best
currently available estimates and judgments of the management of the Company as
to the future financial performance of the Company. Simmons did not conduct a
physical inspection of any of the assets, operations or facilities of the
Company and did not make or receive any independent evaluation or appraisal of
any assets or liabilities (contingent or otherwise) of the Company. Simmons
noted in its Opinion that the Company is subject to the governmental
investigations and litigation described in note (6) (the "HeereMac Litigation")
to the interim financial statements of the Company included in its Quarterly
Report on Form 10-Q for the quarter ended December 31, 1998, and that, upon
consummation of the Merger, the shareholders of the Company (other than Parent)
will be relieved of the exposure to the potential risk that the Company will be
forced to pay damages in connection with the HeereMac Litigation in excess of
any current accruals therefor. Simmons expressed no opinion with respect to any
matter relating to any of such litigation. Simmons was not requested to
approach and did not approach any unaffiliated persons or entities with respect
to the acquisition of the Company or any of its subsidiaries or any of their
assets. Simmons' Opinion is necessarily based upon market, economic and other
conditions as they existed and could be evaluated on, and the information made
available to it as of, the date of its Opinion.

In preparing its Opinion for the Independent Committee, Simmons performed a
variety of financial and comparative analyses, including those described below.
The summary of the analyses performed by Simmons as set forth below does not
purport to be a complete description of the analyses underlying the Opinion.
The presentation of a fairness opinion is a complex analytic process involving
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of those methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
partial or summary description. No company or transaction used in such analyses
as a comparison is identical to the Company or the transactions contemplated by
the Merger Agreement, nor is an evaluation of the results of such analyses
entirely mathematical; rather, it involves complex considerations and judgments
concerning financial and operational characteristics and other factors that
could affect the acquisitions, public trading or other values of the companies
or transactions being analyzed. The estimates contained in such analyses and
the ranges of valuations resulting from any particular analysis are not
necessarily indicative of actual values or predictive of future results or
values, which may be significantly more or less favorable than those suggested
by such analyses. In addition, analyses relating to the value of the business
or securities do not purport to be appraisals or to reflect the prices at which
businesses, companies or securities actually may be sold. Accordingly, such
analyses and estimates are inherently subject to substantial uncertainty.

In arriving at its Opinion, Simmons made qualitative judgments as to the
significance and relevance of each analysis and factor it considered.
Accordingly, Simmons believes that its analyses must be considered as a

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whole and that selecting portions of its analyses and factors, without
considering all analyses and factors, could create an incomplete view of the
processes underlying such analyses and its Opinion. In its analyses, Simmons
made numerous assumptions with respect to general business, economic, market and
financial conditions, as well as other matters, many of which are beyond the
control of the Company and involve the application of complex methodologies and
experienced and educated judgment.

The following is a summary of the material analyses performed by Simmons in
connection with its Opinion.

Premium Analyses

In order to determine the magnitude of the premium implicit in the Offer
Price, Simmons compared the Offer Price to three different per share prices of
the Shares: (i) the closing sales price of the Shares on the NYSE on May 6,
1999, the day next preceding public announcement of the Merger Agreement (the
"May 6 Closing Price"), of $30.50; (ii) the estimated Share price on May 6,
1999, estimated in the manner described below, in the absence of any
announcement regarding a proposed transaction (the "Estimated May 6 Price") of
$29.38; and (iii) the average of the closing sales prices for the Shares for the
20 trading days ending on March 9, 1999 (the "Pre-announcement Date"), the day
preceding Parent's public announcement of its offer to acquire the Company for
Parent Stock (the "Pre-announcement Price") of $22.43. Simmons found that the
Offer Price implied a premium of 16.8% over the May 6 Closing Price, 21.2% over
the Estimated May 6 Price and 58.8% over the Pre-announcement Price.

In addition, Simmons compared the Offer Price to the May 6 Closing Price,
the Estimated May 6 Price and the Pre-announcement Price, in each case as
adjusted to eliminate any premium on the Company's excess cash. Simmons made
this adjustment as a result of its determination that any purchaser would be
unwilling to pay a premium for the Company's excess cash and that, as a result,
any premium should be solely attributable to the Company's operating business.
It was Simmons' judgment that the Company's cash and cash equivalents and
investments in debt securities exceeded the Company's cash needs at May 6 by an
amount equal to $12.95 per Share. Simmons calculated this amount by subtracting
an amount equal to 5% of the Company's fiscal 1999 revenues (which in Simmons'
judgment is an amount that approximates cash typically needed for operations by
companies engaged in the offshore construction and oilfield services industry)
from the Company's cash and cash equivalents and dividing that amount by the
outstanding Shares. In order to gauge the premium implied by the Offer Price
over the May 6 Closing Price as adjusted to eliminate any premium on excess
cash, Simmons subtracted the per share amount of the excess cash ($12.95) from
each of the May 6 Closing Price (to yield an adjusted price per Share of $17.55)
and the Offer Price (to yield $22.67 per Share) and compared the adjusted Offer
Price to the adjusted May 6 Closing Price. This calculation resulted in a 29.2%
premium. In like fashion, Simmons adjusted both the Estimated May 6 Price and
the Pre-announcement Price to exclude the excess cash and determined that the
premium so implied with respect to the adjusted Estimated May 6 Price was 38.0%
and the premium so implied with respect to the adjusted Pre-announcement Price
was 139.1%.

Simmons utilized the Estimated May 6 Price in order include a measure for
comparison purposes that was not influenced by the announcement of Parent's
offer to acquire the Company but did recognize the recent significant recovery
in the value of oil and gas service industry equities. In order to derive this
price, Simmons calculated the average increase during various periods ending on
May 6, 1999 for three separate indices consisting of comparable companies, i.e.,
the OSX Index (an index of 15 large oil service companies used to price options
on the Philadelphia Exchange); an index of "Offshore Construction Comparable
Companies" (as defined below); and an index of "Oil Service Comparables" (as
defined below). For each index, Simmons calculated the average increase
(derived from changes in stock prices of the companies comprising each index)
through May 6, 1999 based on (i) the closing prices on the Pre-announcement Date
(the "One Day Price"), (ii) the average closing prices for the 20 trading day
period ending on the Pre-announcement Date (the "20 Day Price") and (iii) the
average closing prices for the three months ending on the Pre-announcement Date
(the "Three Month Price"). Simmons then averaged the increase in each index and
found that the average increases were 47.3% (One Day Price), 59.1% (20 Day
Price) and 53.7% (Three Month Price). Simmons then subtracted the amount of the
excess cash ($12.95 per Share) from the One Day Price, the 20 Day Price and the
Three Month Price for the Shares yielding net prices of

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$11.43, $9.48 and $11.31, respectively. Simmons then increased each such net
price for the Shares by the average industry percentage price recovery indicated
above applicable to each price determination period, added back the excess cash
($12.95), yielding estimated Share prices, reflecting the recovery in oil
service industry equities but unaffected by Parent's public announcement, of
$29.78 (One Day Price), $28.04 (20 Day Price) and $30.33 (Three Month Price).
Based on that range, Simmons determined the Estimated May 6 Price of $29.38.

The "Offshore Construction Comparable Companies" are: Bouygues Offshore
S.A., Cal Dive International, Inc., Coflexip S.A., Global Industries, Ltd.,
Horizon Offshore, Inc., Gulf Island Fabrication, Inc., Oceaneering
International, Inc., and Stolt Comex Seaway S.A. The "Oil Service Comparables"
are BJ Services Company, Cooper Cameron Corporation, National-Oilwell, Inc.,
Smith International, Inc., and Tidewater, Inc.

Based on the foregoing, Simmons determined that the premium implied by the
Offer Price ranged from 16.8% to 58.8% in the cases of the unadjusted prices and
from 29.2% to 139.1% in the cases of the adjusted prices.

Analysis of Comparable Transactions

Simmons reviewed publicly available information with respect to various
transactions in which minority stock holdings of publicly held corporations were
acquired for cash by a controlling shareholder. In particular, Simmons examined
thirteen such transactions that have occurred since January 1, 1994 that were in
the range of $100 million to $1 billion. The source of the data was Securities
Data Corporation and the specific transactions ranged in size from $107.6
million to $462.3 million. Simmons determined that the median transaction value
was $190.7 million, the median percentage of the outstanding common stock
acquired was 29.9% and that the median closing valuation premium relative to the
pre-announcement price of the common stock in each such transaction was 26.3%
(one day prior to announcement), 23.6% (one week prior to announcement) and
26.8% (four weeks prior to announcement) and the mean closing valuation premium
relative to the pre-announcement price of the common stock in each such
transaction was 32.6% (one day prior to announcement), 31.3% (one week prior to
announcement) and 32.3% (four weeks prior to announcement).

Simmons compared these transaction values and premiums to the transactions
contemplated by the Merger Agreement. In their analysis, Simmons calculated the
premiums implied by the Offer Price on a basis where no premium was attributed
to the Company's excess cash, as described above. It found a transaction value
of $520.3 million, that the percentage of outstanding Shares to be acquired was
37.2% and that the implied premiums were as follows: based on one day prior to
announcement of the all cash offer of $35.62 per Share (May 6, 1999), the
premium was 29.2%; based on one week prior to announcement (April 29, 1999), the
premium was 22.2%; and based on four weeks prior to announcement (April 8,
1999), the premium was 41.8%. Simmons then calculated the premium implied in
the Offer Price relative to the prices for the Shares one day prior to the first
announcement by Parent of an offer to acquire the Shares (other than Shares
owned by Parent) on March 10, 1999 (March 9, 1999), one week prior (March 3,
1999) and four weeks prior (February 10, 1999) adjusted in the same fashion as
described above for the Estimated May 6 Price. The implied premiums so
calculated were 34.7% (March 9, 1999), 64.9% (March 3, 1999) and 27.0% (February
10, 1999).

Simmons compared the premiums implied by the Offer Price on an unadjusted
basis (ranging from 22.2% to 41.8%) and on an adjusted basis (ranging from 27.0%
to 64.9%) to the premiums implied by the median of the comparable transactions
(ranging from 23.6% to 26.8%) and the mean of the comparable transactions
(ranging from 31.3% to 32.6%).

Analysis of Selected Publicly-traded Comparable Companies

Using publicly available information, Simmons compared selected valuation
multiples for the Company calculated using the Offer Price with respective
corresponding multiples of certain similar publicly-traded companies. Simmons
selected a group of companies from the universe of possible companies based on
its views as to the comparability of the financial and operating characteristics
of offshore construction and oil field service companies to the Company. With
respect to each such analysis, Simmons made such comparisons with the following
companies (the "Comparable Companies"): Aker Maritime Corporation, Coflexip
S.A., Cooper Cameron

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Corporation, Dril-Quip, Inc., Det Sndenfjelds - Norske Dampskibsselskab, IHC
Caland N.V., Global Industries, Ltd., Oceaneering International, Inc., Saipem
S.p.A. and Stolt Comex Seaway, S.A.

The two primary multiples derived by Simmons were (i) an enterprise value,
calculated as the sum of the aggregate market value of the outstanding common
stock of an enterprise plus its debt and preferred stock (the "Enterprise
Value") divided by its earnings before depreciation, interest and taxes
("EBDIT") and (ii) the price per share of common stock divided by the earnings
per share of common stock. Simmons made these determinations for the Company
for the years ending March 31, 2000 and March 31, 2001 based on limited
financial forecasts prepared by the Company and provided to Simmons, and for the
Comparable Companies for similar fiscal periods using financial projections from
publicly-available sources, including First Call.

EBDIT. Simmons determined that the Enterprise Value of the Company implied
by the Offer Price represented a multiple of 16.9 times the Company's forecast
EBDIT of $82.8 million for fiscal year 2000 and a multiple of 13.1 times the
Company's forecast EBDIT of $107.3 million for fiscal year 2001. Simmons made
further determinations after adjusting to exclude the value of the Company's
excess cash, as estimated by Simmons, from the Enterprise Value implied by the
Offer Price to calculate an adjusted Enterprise Value. Simmons then calculated
that the adjusted Enterprise Value of the Company represented a multiple of
EBDIT for fiscal years 2000 and 2001 of 10.8x and 8.3x, respectively.

Simmons then derived the multiples of EBDIT for each of the Comparable
Companies by dividing the adjusted Enterprise Value for each company by its
respective projected EBDIT for the calendar years ending December 31, 1999 and
December 31, 2000. Simmons concluded that the average EBDIT multiples of the
Comparable Companies for calendar years 1999 and 2000 were 8.9x and 7.8x,
respectively.

Simmons compared the EBDIT multiples for the Company implied by the Offer
Price on an unadjusted basis for the fiscal years ending March 31, 2000 (16.9x)
and March 31, 2001 (13.1x) and on an adjusted basis for such years (10.8x and
8.3x, respectively) with the EBDIT multiples for the Comparable Companies for
the calendar years ending December 31, 1999 (8.9x) and December 31, 2000 (7.8x).

P/E RATIO. Simmons determined that, based on nominal earnings per share of
the Company's common stock forecast by the Company for the fiscal years ending
March 31, 2000 and March 31, 2001 of $1.10 and $1.82, respectively, the Offer
Price implied price/earnings ratios for those years of 32.4x and 19.6x,
respectively. Simmons made further determinations after adjusting to exclude
from the earnings per share forecast by the Company the interest income earned
on the Company's excess cash as estimated by Simmons. To do so, Simmons
subtracted such interest income from the forecast earnings per share to obtain
an adjusted earnings per share of the Company's common stock and subtracted the
excess cash ($12.95 per Share) from the Offer Price to obtain an adjusted per
share price. Simmons thereby estimated that the price/earnings ratios
calculated using the adjusted per share price and the adjusted earnings per
share for fiscal years 2000 and 2001 were 39.7x and 17.6x, respectively.

Simmons then derived the price/earnings ratios for each of the Comparable
Companies by dividing the share price for each company by its respective
projected earnings per share for the calendar years 1999 and 2000. Simmons
determined that the average price/earnings ratios for the Comparable Companies
for calendar years 1999 and 2000 were 21.6x and 16.7x, respectively.

Simmons then compared the unadjusted price/earnings ratios for the Shares
implied by the Offer Price for fiscal years 2000 (32.4x) and 2001 (19.6x) and on
an adjusted basis for such fiscal years (39.7x and 17.6x, respectively) with the
price/earnings ratios for the Comparable Companies for the calendar years 1999
and 2000 (21.6x and 16.7x, respectively).

Other Factors and Analyses

In the course of preparing its Opinion, Simmons performed other analyses
and reviewed other matters, including the trading characteristics of the Shares
and the shares of comparable companies and the history and outlook for energy
markets, the oilfield services industry and the Company's markets. Simmons
observed that the

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Company's stock performance (1) reflected the general decline in other oilfield
services company stocks from late 1997 through early 1999, driven by declining
energy prices and activity levels in the oilfield services industry, and (2)
more recently reflected the recovery in the market for oilfield services company
stocks, driven by a recovery in energy prices and an improving outlook for
oilfield services companies. Simmons also reviewed the assumptions underlying
projections for the Company and for comparable companies and observed that such
assumptions were generally consistent with its analysis of historical and
current conditions in the oilfield services industry. Simmons then considered
the potential for further recovery in the oilfield services industry, observing
that the Company's public shareholders could, if they wish, retain their
exposure to any future recovery in the oilfield services industry by reinvesting
the proceeds of the transaction contemplated by the Merger Agreement in oilfield
services company securities. Simmons also reviewed the ownership interests of
the Company's principal shareholders (other than Parent) and the possible
effects of Parent's significant ownership interests, and noted that, because of
Parent's controlling ownership interest in the Company, any alternative
transaction to the Offer and the Merger would be dependent on Parent's
concurrence in the Company's decision to pursue an alternative transaction.
Simmons also reviewed the Company's contingent liabilities and observed that the
transaction contemplated by the Merger Agreement would eliminate any future
impact of those liabilities on the holders of the publicly held Shares. In
addition, Simmons analyzed the pro forma effects of the Offer and the Merger on
Parent (after giving effect to potential cost savings following the transaction)
and concluded that the transaction is significantly dilutive to Parent's
projected earnings per share, making it unlikely that Parent would complete the
transaction at a higher price than the per Share price to be paid in the Offer
and the Merger.

Simmons is an internationally recognized investment banking firm and, as
part of its investment banking business, is regularly engaged in the valuation
of businesses and securities in connection with mergers and acquisitions. The
Independent Committee selected Simmons as its financial advisor because of
Simmons' experience and expertise.

Pursuant to the terms of the engagement of Simmons by the Independent
Committee, the Company has agreed to pay Simmons for its financial advisory
services in connection with the transactions contemplated by the Merger
Agreement: (i) a retainer of $250,000 payable on the date of the engagement;
(ii) a fee of $500,000 payable upon delivery of Simmons' initial study and
opinion to the Independent Committee; and (iii) a fee, contingent upon the
closing of the transactions contemplated by the Merger Agreement, equal to 2% of
any improvement in value of the minority stock calculated at the time of closing
over the 20 trading day moving average pre-announcement price. The Initial
Proposal was publicly announced by Parent on March 10, 1999. Following the
announcement of the transactions contemplated by the Merger Agreement on May 7,
1999, Simmons agreed to cap the contingent portion of its fee at $3.5 million.
In addition, the Company has agreed to reimburse Simmons for its reasonable out-
of-pocket expenses, including the fees and expenses of its legal counsel,
incurred in connection with the engagement, and to indemnify Simmons against
certain liabilities, including certain liabilities under the federal securities
laws, relating to, or arising out of its engagement, or to contribute to
payments Simmons may be required to make in respect thereof.

In 1995, Simmons was retained by Parent to perform a strategic consulting
assignment for which it received customary compensation. Simmons has also been
retained from time to time by the Company to perform investment banking services
for which it has received customary fees.

Procedures for Exchange of Certificates

Parent will make available to the Exchange Agent, as needed, the Merger
Consideration to be paid in respect of the Shares. Promptly after the Effective
Time, Parent will send, or will cause the Exchange Agent to send, to each holder
of Shares (other than Parent and its subsidiaries) at the Effective Time a
letter of transmittal and related instruments for use in such exchange.
Shareholders should not return Share certificates until they receive a letter of
transmittal.

Each holder of Shares that have been converted into the right to receive
the Merger Consideration will be entitled to receive, upon surrender to the
Exchange Agent of a certificate representing such Shares, together with a
properly completed letter of transmittal, the Merger Consideration payable for
each Share represented by such

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certificate. Until so surrendered, each such certificate will represent after
the Effective Time for all purposes only the right to receive such Merger
Consideration, without interest thereon.

After the Effective Time, there will be no further registration of
transfers of Shares. If, after the Effective Time, certificates are presented
to the Surviving Corporation, they will be canceled and exchanged for the Merger
Consideration provided for, and in accordance with the procedures set forth, in
the Merger Agreement. If any portion of the Merger Consideration is to be paid
to a person other than the person in whose name the surrendered certificate is
registered, it will be a condition to such payment that the certificate so
surrendered is properly endorsed or otherwise in proper form for transfer and
that the person requesting such payment pays to the Exchange Agent any transfer
or other taxes required as a result of such payment to a person other than the
registered holder of such certificate or establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable.

Any portion of the Merger Consideration made available to the Exchange
Agent that remains unclaimed by the holders of Shares six months after the
Effective Time will be returned to Parent, upon demand, and any such holder who
has not exchanged them for the Merger Consideration prior to that time will
thereafter look only to Parent for payment of the Merger Consideration in
respect of such Shares. Notwithstanding the foregoing, Parent will not be
liable to any holder of Shares for any amounts paid to a public official
pursuant to applicable abandoned property, escheat or similar laws.

If any certificate has been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming such certificate to be lost,
stolen or destroyed and, if required by the Surviving Corporation, the posting
by such person of a bond, in such reasonable amount as the Surviving Corporation
may direct, as indemnity against any claim that may be made against it with
respect to such certificate, the Exchange Agent will issue, in exchange for such
lost, stolen or destroyed certificate, the Merger Consideration to be paid in
respect of the Shares represented by such certificate, as contemplated by the
Merger Agreement.

No Appraisal Rights

Under Panama law, shareholders do not have appraisal rights as a result of
the Merger. If the Merger is completed, each outstanding Share (other than
Shares beneficially owned by Parent) will be converted into $35.62 in cash.

Interests of Certain Persons in the Offer and the Merger

In considering the recommendation of the Company Board, shareholders of the
Company should be aware that certain officers of the Company and members of the
Company Board have certain interests that present actual or potential conflicts
of interest in connection with the Offer and the Merger. The Independent
Committee and the Company Board were aware of these actual or potential
conflicts of interest and considered them in connection with such
recommendation.

Independent Committee Fees

At a meeting of the Company Board held on March 11, 1999, the Company Board
considered a proposal to pay the Chairman of the Independent Committee a fee of
$20,000 and the other members of the Independent Committee a fee of $10,000 for
their services as members on the Independent Committee in evaluating any
proposed business combination between Parent and the Company, in addition to any
other fees payable to them as directors of the Company or as members of the
Independent Committee. The Company Board determined to postpone its action on
this proposal, pending confirmation from the Company's General Counsel that the
proposed fees were within the range of fees paid to members of independent or
special committees involved in similar transactions. The General Counsel of the
Company subsequently confirmed that the fee proposal was within such range. The
Company Board considered the fee proposal at its meeting held on June 4, 1999,
but the fee proposal was not approved.

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Indemnification Agreements

On March 11, 1999, the Company entered into indemnification agreements with
each of its directors (the "Indemnification Agreements"). The Indemnification
Agreements provide that the Company will indemnify and hold harmless any
director of the Company to the fullest extent permitted by the Company's
Certificate of Incorporation or Bylaws, Panama Law or other applicable law, as
in effect as of the date of the agreement or to such greater extent as the
Company's Certificate of Incorporation or Bylaws, Panama Law or applicable law
may thereafter permit, from and against all losses, liabilities, claims,
damages, judgments, penalties, fines, amounts paid in settlement and expenses
(including attorneys' fees) arising out of a business combination transaction
between Parent and the Company. The Indemnification Agreements further provide
that, in the event of any threatened, or pending action, suit or proceeding
arising out of a business combination between Parent and the Company in which a
director is a party and that may give rise to a right of indemnification under
the Indemnification Agreements or in which a director is involved as a witness,
following written request by such person, the Company will promptly pay to such
person amounts to cover expenses reasonably incurred by such person in such
proceeding in advance of its final disposition upon the receipt by the Company
of (i) a written undertaking executed by or on behalf of such person providing
that such person will repay the advance if it is ultimately determined that such
person is not entitled to be indemnified by the Company as provided in the
Indemnification Agreements and (ii) satisfactory evidence as to the amount of
such expenses. The Indemnification Agreements also include provisions meant to
facilitate the indemnitee's receipt of benefits. These provisions cover, among
other things: (i) specification of the method of determining entitlement to
indemnification and the selection of independent counsel that will in some cases
make such determination, (ii) specification of certain time periods by which
certain payments or determinations must be made and actions must be taken and
(iii) the establishment of certain presumptions in favor of an indemnitee. The
benefits of certain of these provisions are available to an indemnitee only if
there has been a change in control of the Company (as defined in the
Indemnification Agreements). On May 6, 1999, the Company entered into
indemnification agreements with Messrs. Johnson, Burdick, O'Keefe and Ritchie
substantially the same as the agreements entered into on March 11, 1999, except
that rights to indemnification and advancement of expenses thereunder cover
losses, liabilities, claims, damages, judgments, penalties, fines, amounts paid
in settlement and expenses incurred by reason of their status as a director of
the Company and are not limited to those arising out of a business combination
between Parent and the Company.

Stock Options, Restricted Stock and Performance Shares

Certain Executive Officers and Directors hold awards of Company Stock
Options, Restricted Shares and Performance Shares (as defined under "The Merger
Agreement --The Merger"). The treatment of those awards is described below
under "The Merger Agreement--The Merger."

Consummation of Offer and Change of Control. The Company previously
granted to its directors (including members of the Independent Committee) and
executive officers (including Roger E. Tetrault, Daniel R. Gaubert and S. Wayne
Murphy, who are also executive officers of Parent) Company Stock Options,
Restricted Shares and Performance Shares under the Company's Restated 1994
Executive Long-Term Incentive Compensation Plan and Non-Employee Director Stock
Plan. Under these plans, a "change in control" of the Company results in all
Company Stock Options becoming fully exercisable, all transfer restrictions and
forfeiture provisions on the Restricted Shares lapsing and the conversion of all
Performance Shares into a pro-rata cash payout based upon the assumed
achievement of performance objectives at target levels (if not otherwise
exceeded) and the length of time elapsed during their two-year measurement
period through the Effective Time. The consummation of the Offer and Merger
will constitute an effective change in control of the Company. Under the Merger
Agreement, each Company Stock Option outstanding as of the Effective Time will
become an Adjusted Option (as defined under "The Merger Agreement --The
Merger"), and each person who holds Restricted Shares or Performance Shares has
been given the opportunity to receive replacement stock awards in Parent Stock,
in lieu of the cash payment that such person would otherwise be entitled to
receive at the Effective Time. See "The Merger Agreement--The Merger."

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Certain Transactions between the Company and Parent

Related Party Transactions. Parent, either directly or through its
subsidiaries and affiliates (other than the Company and its subsidiaries), has
provided and will continue to provide various services to the Company and its
subsidiaries in an effort to reduce duplicative costs, overhead and resources.

Services Agreement and Other Administrative Charges. Under the terms of a
services agreement between Parent and the Company, Parent provides certain
services to the Company, based primarily upon a predetermined annual fee for
each such service. Such services include accounting and financial reporting,
treasury and financing, tax administration and research, human resources, risk
management, public and investor relations, executive officer, legal and
corporate secretary, business planning and analysis, purchasing and procurement,
and project management services. For fiscal years 1996, 1997 and 1998, the
Company paid to Parent approximately $11.9 million, $11.9 million and $13.1
million, respectively, under the Services Agreement.

For fiscal years 1996, 1997 and 1998, Parent and other affiliated entities
also provided other administrative services, including investment portfolio
management, data processing development, telecommunication and lobbying
services, and shared office space to the Company for which the Company paid to
Parent approximately $6.6 million, $6.6 million and $5.2 million, respectively.

The Independent Committee has reviewed the services provided by Parent to
the Company and its subsidiaries on an annual basis. After consultation with
Parent and giving due consideration to the legal obligations of Parent, the
Company may seek the provision of any of the above described services from third
parties if the Company Board, after receiving the recommendation of the
Independent Committee, determines that obtaining such services from third
parties would be in the best interests of the Company.

Other Arrangements and Transactions. For fiscal years 1996, 1997 and 1998,
the Company and its subsidiaries purchased from Parent and other affiliated
entities approximately $24.3 million, $16.2 million and $8.9 million of other
services on an as requested basis, the costs of which were based on charges to
unrelated parties for similar work. Such services relate primarily to
technology development and research, and engineering, procurement and
construction services on a power plant project. For fiscal years 1996, 1997 and
1998, the Company and its subsidiaries provided marine construction and
engineering services to Parent and other affiliated entities, on the same basis,
for which the Company recognized revenue in the amount of approximately $45.2
million, $32 million and $22 million, respectively.

Parent, through wholly-owned insurance subsidiaries, reinsures
substantially all of the Company's employee liability exposure and insures
significant deductibles under the Company's other insurance programs. The
insurance premiums charged by such insurance subsidiaries of Parent are
primarily based on claims experience and forecasted future activities of the
Company and its subsidiaries. Management believes that this approach is more
cost-effective than other alternatives as there is generally no commercial
market for insurance on the same economic terms for these types of exposures.

The Company has acquired several businesses from Parent, including in
fiscal year 1998, the Parent's 60% interest in Tallares Navales del Golfo S.A.
de C.V., a shipbuilding and repair business in Vera Cruz, Mexico, for
approximately $19.7 million.

During fiscal year 1997, the Company paid a $231 million note payable to
Parent.

All of these transactions were negotiated at arm's-length by the parties
and, to the extent required, approved by the Independent Committee.

Series A Preferred Stock. During each of fiscal years 1996, 1997 and 1998,
Parent as the sole holder of all of the Preferred Shares received quarterly
dividend payments totaling $7.2 million from the Company.

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Accounting Treatment

The acquisition of the public Shares in the Offer and the Merger will be
treated as a "purchase" under generally accepted accounting principles.

United States Federal Income Tax Consequences

This summary of the material United States federal income tax consequences
of the Merger is for general information only and is based on the law as
currently in effect. This summary does not discuss all of the tax consequences
that may be relevant to a shareholder in light of its particular circumstances
or to shareholders subject to special rules, such as financial institutions,
broker-dealers, tax-exempt organizations, shareholders that hold their Shares as
part of a straddle or a hedging or conversion transaction and shareholders who
acquired their Shares through the exercise of an employee stock option or
otherwise as compensation.

Shareholders are urged to consult their own tax advisors as to the
particular tax consequences to them of the Merger, including the effect of
United States federal, state, local and foreign tax laws.

A United States holder refers to:

. a citizen or resident of the United States,

. a corporation or other entity created or organized in the United
States or under the laws of the United States or of any political
subdivision of the United States, or

. an estate or trust, the income of which is includible in gross income
for United States federal income tax purposes regardless of its
source.

A Non-United States holder refers to a shareholder that is not a United
States holder.

United States Holders

The receipt by a United States holder of cash for Shares pursuant to the
Merger will be a taxable transaction under the United States Internal Revenue
Code of 1986, as amended (the "Code"). A United States holder will generally
recognize gain or loss in an amount equal to the difference between the cash
received by the shareholder pursuant to the Merger and the shareholder's
adjusted tax basis in the Shares held at the time of the Merger. That gain or
loss will be a capital gain or loss if the Shares are a capital asset in the
hands of the shareholder. Shareholders are urged to consult their own tax
advisors as to the federal income tax treatment of a capital gain or loss
(including limitations on the deductibility of a capital loss).

A shareholder may be subject to backup withholding at a rate of 31% unless
at the time it surrenders its certificates it provides its taxpayer
identification number and certifies that the number is correct or properly
certifies that it is awaiting a taxpayer identification number, or unless an
exemption is demonstrated to apply. To prevent backup United States federal
income tax withholding with respect to payment to holders of the Merger
Consideration, each United States holder must provide the Exchange Agent with
such holder's correct taxpayer identification number or social security number
or certify that such holder is not subject to backup withholding by completing
the Substitute Form W-9 in the letter of transmittal. Backup withholding is not
an additional tax. Amounts so withheld can be refunded or credited against the
federal income tax liability of the shareholder, provided appropriate
information is forwarded to the IRS.

Non-United States Holders

A Non-United States holder will generally not be subject to United States
federal income tax on a gain realized on a disposition of Shares unless:

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. the gain is effectively connected with a trade or business in the
United States of that Non-United States holder,

. that Non-United States holder is a non-resident alien individual who
holds the Shares as a capital asset and who is present in the United
States for 183 or more days in 1999, or

. that Non-United States holder is subject to tax under the provisions
of the Code on the taxation of United States expatriates.

Non-United States holders are urged to consult their own tax advisors.

Information reporting and backup withholding imposed at a rate of 31% will
apply to cash payments received by a Non-United States holder pursuant to the
Merger if the disposition of Shares is effected by or through a United States
office of a broker, unless the Non-United States holder certifies as to its
foreign status or otherwise establishes an exemption. Generally, information
reporting and backup withholding would not apply to the payment received upon a
disposition of Shares where that disposition is effected outside the United
States through a non-United States office of a non-United States broker.
However, information reporting requirements would apply to a payment where a
disposition is effected outside the United States by or through an office
outside the United States of a broker that is:

. a United States person,

. a non-United States person that derives 50% or more of its gross
income for certain periods from the conduct of a trade or business in
the United States, or

. a "controlled foreign corporation" for United States federal income
tax purposes,

and, in each case, the broker fails to maintain documentary evidence that the
shareholder is a Non-United States holder and that certain conditions are met,
or that the shareholder otherwise is entitled to an exemption. To avoid backup
withholding, a Non-United States holder should complete a Form W-8BEN, which may
be obtained from the Exchange Agent. Backup withholding is not an additional
tax. Amounts so withheld can be refunded or credited against the United States
federal income tax liability of a Non-United States holder, provided appropriate
information is forwarded to the IRS.

Regulatory Approvals

Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR
Act"), certain acquisitions may not be consummated unless certain information
has been furnished to the Federal Trade Commission and the Antitrust Division of
the Department of Justice and certain waiting period requirements have been
satisfied. Because Parent already owns more than 50% of the equity of the
Company, the Company believes that the HSR Act is not applicable to the Merger.

The Company and its subsidiaries own property and conduct business in a
number of foreign countries. In connection with the Merger, the laws of certain
of these foreign countries may require the filing of information with, or the
obtaining of the approval of, governmental authorities therein. Parent and the
Company intend to take such action as such laws may require, but no assurance
can be given that such approvals will be obtained. If any action is taken prior
to completion of the Merger by any such government or governmental authority,
Parent and the Company may not be obligated to complete the Merger. See "The
Merger Agreement--Conditions to the Merger."

Certain Litigation

Two purported class actions have been filed in the Civil District Court for
the Parish of Orleans, State of Louisiana, by alleged public shareholders of the
Company, which challenge negotiations between the Company and Parent concerning
a potential transaction.

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On or around March 17, 1999, an action styled Pasternac, et al. v. William
J. Johnson, Robert H. Rawle, Roger E. Tetrault, Rick L. Burdick, Richard E.
Woolbert, Robert L. Howard, Sean C. O'Keefe, Cedric Ritchie, McDermott
International, Inc. and J. Ray McDermott, S.A., No. 99-4195, was filed in the
Parish of Orleans Civil District Court by certain alleged shareholders of the
Company. The complaint in the Pasternac action challenges Parent's Initial
Proposal in which each share of the Company not already owned by Parent would
have been exchanged for 1.15 shares of common stock of Parent. The Pasternac
complaint alleges that, as an approximately 63% shareholder of the Company,
Parent owed fiduciary duties to the public shareholders of the Company and that
the proposal breached those duties, allegedly because the proposal placed undue
pressure on the Company board of directors, Parent used confidential information
of the Company in formulating the proposal and the consideration offered by
Parent in the proposal was unfair and inadequate. The complaint also alleges
that the members of the Company board of directors are not independent of Parent
and are therefore incapable of representing the Company's public shareholders in
any negotiations with Parent. The complaint seeks to proceed as a class action,
seeks preliminary and permanent injunctive relief against the transaction
proposed by Parent, seeks compensatory and rescissory damages in an unspecified
amount and seeks plaintiffs' costs in bringing the action. By agreement with
plaintiffs' counsel, the time for a response to the complaint in the Pasternac
action has been adjourned, subject to reinstatement by plaintiffs on twenty-
days' notice.

On or around April 7, 1999, a second action styled Hill v. J. Ray
McDermott, S.A., McDermott International, Inc., Roger E. Tetrault, Rick L.
Burdick, Robert L. Howard, William J. Johnson, Sean Charles O'Keefe, Robert H.
Rawle, Cedric E. Ritchie, Richard E. Woolbert and John Doe, No. 99-5595, was
filed in the Parish of Orleans Civil District Court. The complaint in the Hill
action makes allegations similar to those of the Pasternac complaint, and also
alleges that certain members of the Company board of directors have conflicts of
interest in considering any transaction with Parent because of their alleged
shareholdings in Parent. As in the Pasternac action, the Hill complaint seeks
to proceed as a class action, seeks preliminary and permanent injunctive relief
against the transaction proposed by Parent, seeks compensatory and rescissory
damages in an unspecified amount and seeks plaintiffs' costs in bringing the
action. By agreement with plaintiffs' counsel, the time for a response to the
complaint in the Hill action has been adjourned, subject to reinstatement by
plaintiffs on twenty-one days' notice.

On May 7, 1999, the Court entered an order consolidating the two actions
under the caption In re J. Ray McDermott Shareholder Litigation. Parent and the
Company believe that the actions are without merit and intend to contest these
suits vigorously.

Financing of the Offer and the Merger

The total amount of funds required by Parent and Acquisition Sub to
consummate the Offer and the Merger and to pay related fees and expenses is
estimated to be approximately $560 million. The Offer was not and the Merger is
not conditioned on obtaining financing. Parent expects that it will obtain the
funds required to consummate the Merger and to pay remaining fees and expenses
from cash on hand and from a new senior secured term loan facility entered into
by Parent in connection with the Offer in the amount of $525 million (the
"Facility") with Citibank, N.A.

Citibank, N.A. may act either as sole lender under the Facility or
syndicate all or a portion of the Facility to a group of financial institutions.
The Facility contains customary representations, warranties, covenants and
events of default. The Facility also includes financial covenants that:

. require Parent to maintain a minimum consolidated tangible net worth
of not less than $250,000,000,

. limit Parent's ability to pay dividends, and

. require Parent, the Company and certain other subsidiaries of Parent
to maintain cash, cash equivalents and investments in debt securities
of at least $575,000,000 at all times.

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The Facility is secured by a first priority pledge of all capital stock of
Acquisition Sub and the Company and securities convertible into capital stock of
Acquisition Sub and the Company held or acquired by Parent or any of its
subsidiaries.

All borrowings under the Facility will mature no later than September 30,
1999. Upon consummation of the Merger, the commitments will terminate and
Parent will cause the Company to declare and distribute a dividend and/or
provide a loan to Parent in an aggregate amount that, together with the
available cash of Parent, is sufficient to repay all outstanding loans under the
Facility, and Parent will apply all such proceeds to such repayment.

THE MERGER AGREEMENT

The following is a summary of the material provisions of the Merger
Agreement, a copy of which is attached as Annex A. The summary is qualified by
reference to the Merger Agreement. We urge you to read the Merger Agreement in
its entirety.

The Offer

The Merger Agreement provided for the making of the Offer. The Offer
expired at 12:00 midnight, New York City time, on June 10, 1999, and Acquisition
Sub subsequently purchased all of the 14,353,490 Shares tendered. As a result,
Parent beneficially owns approximately 99% of the Shares as of the date of this
Information Statement.

The Merger

The Merger Agreement provides that as promptly as practicable after all
conditions to the Merger set forth therein have been satisfied or, to the extent
permitted thereunder, waived, Acquisition Sub will be merged into the Company
in accordance with Panama Law. As a result of the Merger, the separate
existence of Acquisition Sub will cease, and the Company will continue as the
Surviving Corporation. Pursuant to the Merger, each Share outstanding
immediately prior to the Effective Time (other than Shares beneficially owned by
Parent) will be converted into the right to receive the Merger Consideration.
Each Share and each Preferred Share held by the Company as treasury stock or
owned by Parent or any of its subsidiaries immediately prior to the Effective
Time will be canceled and retired, and no payment will be made with respect
thereto. Each share of common stock of Acquisition Sub outstanding immediately
prior to the Effective Time will be converted into and become one share of
common stock of the Surviving Corporation with the same rights, powers and
privileges as the shares so converted (all such shares so converted shall
constitute the only outstanding shares of capital stock of the Surviving
Corporation). Upon consummation of the Merger, the officers of the Company will
continue as the officers of the Surviving Company, and the directors of
Acquisition Sub will become directors of the Surviving Company.

Each of Acquisition Sub and Parent will be entitled to deduct and withhold
from the consideration otherwise payable to any person pursuant to the Merger
Agreement such amounts as it is required to deduct and withhold with respect to
the making of such payment under any provision of federal, state, local or
foreign tax law.

Stock Options

The Company has outstanding options to purchase Shares ("Company Stock
Options") under certain employee and director stock compensation plans,
including a Restated 1994 Executive Long-Term Incentive Compensation Plan (the
"1994 Plan") and a Non-Employee Director Stock Plan (the "Directors Plan").

Under the Merger Agreement, Company Stock Options, whether or not
exercisable or vested, will be adjusted as necessary so that, at the Effective
Time, each Company Stock Option outstanding immediately prior to the Effective
Time shall be deemed to constitute an option to purchase shares of Parent Stock,
on the same terms and conditions as were applicable under such Company Stock
Option, except as set forth below (each, as so adjusted, an "Adjusted Option").
Each Adjusted Option shall be fully vested and will entitle the holder to
purchase a number of shares of Parent Stock having an aggregate market value, as
of the Effective Time, equal to the product of the number of Shares purchasable
pursuant to the applicable Company Stock Option and the Merger Consideration.
The exercise price per share of Parent Stock under each Adjusted Option shall be
equal to (A) the aggregate exercise price for the Shares purchasable pursuant to
the applicable Company Stock Option divided by

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(B) the aggregate number of shares of Parent Stock deemed purchasable pursuant
to such Adjusted Stock Option. Any fractional share of Parent Stock resulting
from the foregoing adjustment of a Company Stock Option shall be rounded down to
the nearest whole share.

Restricted Shares

Under the 1994 Plan and Directors Plan, the Company granted to its officers
and directors Shares subject to transfer restrictions and forfeiture provisions
("Restricted Shares"). Restricted Shares granted to officers generally vest 50%
at the end of five years with the remaining 50% vesting between the third and
tenth anniversary of the date of grant based upon the Company's financial
performance. Restricted Shares granted to directors vest at the end of the
director's term. Officers and directors pay $1.00 for each Restricted Share and
receive dividends paid on and are entitled to vote such shares prior to vesting.

Under the Merger Agreement, the Company will provide, as soon as
practicable, each person who holds Restricted Shares the opportunity to make an
irrevocable election either to (i) receive a cash payment, as of the Effective
Time, in respect of such Restricted Shares (whether or not vested) or (ii)
receive a replacement award (a "Replacement Restricted Award"), as of the
Effective Time, of Parent Stock having an aggregate fair market value (as of the
Effective Time) equal to the product of (A) the number of Restricted Shares to
which such Replacement Restricted Award relates and (B) the Merger
Consideration. Each Replacement Restricted Award will be issued on the same
terms, and subject to identical restrictions, as applied to the Restricted
Shares to which such Replacement Restricted Award relates (without taking into
account any accelerated vesting as a result of the Merger).

Performance Shares

Under the 1994 Plan, the Company made notional grants of Restricted Shares,
which are subject to adjustment based upon future stock performance
("Performance Shares"), to its officers. No Restricted Shares are issued by the
Company at the time of the grant. The number of Restricted Shares actually
received by an officer, if any, is determined on the second anniversary of the
grant date by calculating the difference between the fair market value of a
Share (based upon the preceding 30 trading day average) and the fair market
value of the Shares on the grant date. The difference is multiplied by that
number of Restricted Shares in an officer's notional grant and the resulting
product is divided by the fair market value of a Share as of the second
anniversary of the grant date, calculated as described above. The resulting
number is added to (in the case of an increase in share price) or subtracted
from (in the case of a decrease in share price) the number of Restricted Shares
in an officer's notional grant. The notional grant, as adjusted (to the extent
not reduced to zero), is then issued to the officer as Restricted Shares on the
second anniversary of the grant date, for which the officer is required to pay
$1.00 per share. The Restricted Shares vest two years thereafter, during which
they are nontransferable and are subject to forfeiture prior to vesting.

Under the Merger Agreement, the Company will provide, as soon as
practicable, each person who holds Performance Shares the opportunity to make an
irrevocable election either to (i) receive a cash payment, as of the Effective
Time, in respect of such Performance Shares or (ii) receive a replacement award
(a "Replacement Performance Award"), as of the Effective Time, of Restricted
Shares of Parent Stock and having the following terms. Each Replacement
Performance Award will represent that number of shares of Parent Stock having an
aggregate fair market value, as of the Effective Time, equal to the product of
(A) the number of notional Performance Shares originally granted and (B) the
Merger Consideration. Each Replacement Performance Award will be subject to a
two-year vesting period upon terms identical to those that apply, under the 1994
Plan, to Performance Shares as of the end of the initial two-year measurement
period.

The Parent Board or the Compensation Committee of the Parent Board will at
or prior to the Effective Time adopt resolutions specifically approving, for
purposes of Rule 16b-3 under the 1934 Act, the receipt pursuant to the Merger
Agreement of Parent Stock and Adjusted Options by officers and directors of the
Company who will become officers or directors of the Parent subject to Rule 16b-
3.

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For purposes of the immediately preceding three sections ("The Merger
Agreement--The Merger--Stock Options", "--Restricted Shares" and "--Performance
Shares"), the market value of a share of Parent Stock as of the Effective Time
will be deemed to be the closing sale price of such share on the NYSE on the
trading day immediately preceding the Effective Time.

Representations and Warranties

The Merger Agreement contains various customary representations and
warranties of the parties thereto, including, without limitation,
representations (i) by the Company and Parent as to corporate status, the
authorization and the enforceability of the Merger Agreement against each such
party, and absence of contravention due to execution and performance under the
Merger Agreement, (ii) by the Company as to its governmental authorization,
capitalization, compliance with law, the accuracy of financial statements and
filings with the SEC, absence of undisclosed material liabilities or litigation
and the absence of certain changes or events concerning the Company's business
from December 31, 1998 and (iii) by Parent as to its governmental authorization,
the accuracy of the Offer to Purchase with respect to the Offer, and the
availability at the expiration of the Offer of cash sufficient to consummate the
Offer and the Merger and to pay all expenses in connection with the Offer and
Merger. The representations and warranties contained in the Merger Agreement
will not survive the Effective Time.

Covenants

The Merger Agreement contains various customary covenants of the parties
thereto. A description of certain of these covenants follows:

Conduct of Business. From the date of the Merger Agreement until the
Effective Time, the Company and its subsidiaries will conduct their
business in the ordinary course consistent with past practice and will use
their commercially reasonable efforts to preserve intact their business
organizations and relationships with third parties and to keep available
the services of their present officers and employees. Without limiting the
generality of the foregoing, from the date of the Merger Agreement until
the Effective Time, except as consented to in writing by Parent, the
Company has agreed that:

(a) the Company will not adopt or propose any change to its
certificate of incorporation or bylaws;

(b) the Company will not, and will not permit any of its subsidiaries
to, merge or consolidate with any other person or acquire a material amount
of stock or assets of any other person;

(c) the Company will not, and will not permit any of its subsidiaries
to, sell, lease, license or otherwise dispose of any significant subsidiary
or any material amount of assets or property except pursuant to existing
contracts or commitments and in the ordinary course consistent with past
practice;

(d) the Company will not, and will not permit any of its subsidiaries
to, take any action that would make any representation and warranty of the
Company under the Merger Agreement inaccurate in any respect at, or as of
any time prior to, the Effective Time; and

(e) the Company will not, and will not permit any of its subsidiaries
to, agree or commit to do any of the foregoing.

Shareholder Meeting. The Company will cause a meeting of its shareholders
(the "Company Shareholder Meeting") to be duly called and held as soon as
reasonably practicable after consummation of the Offer for the purpose of voting
on the approval and adoption of the Merger Agreement and the Merger. In
connection with such meeting, the Company will use its commercially reasonable
efforts to obtain the necessary approvals by its shareholders of the Merger
Agreement and the transactions contemplated thereby and otherwise comply with
all legal requirements applicable to such meeting.

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Except as provided in the next sentence, the Company Board will recommend
the Offer and the approval and adoption of the Merger Agreement and the Merger
by the Company's shareholders. The Independent Committee shall be permitted to
withdraw, or modify in a manner adverse to Parent, its recommendation to its
shareholders, if (i) the Company has complied with the terms of the "No
Solicitation" covenant below, (ii) the Independent Committee determines in good
faith (after consultation with independent legal counsel) that failure to take
such action would be reasonably likely to be inconsistent with its fiduciary
duties under applicable law and (iii) the Independent Committee shall have
delivered to Parent a prior written notice advising Parent that it intends to
take such action.

No Solicitation. From the date of the Merger Agreement until the
termination thereof, the Company will not, and will cause its subsidiaries and
the officers, directors, employees and other agents and advisors of the Company
and its subsidiaries not to, directly or indirectly, (i) take any action to
solicit, initiate or encourage the submission of any Acquisition Proposal or
(ii) disclose any nonpublic information relating to, or afford access to the
properties, books or records of, the Company or any of its subsidiaries to, or
engage in any discussions or negotiations with, any person who is considering
making or has made an Acquisition Proposal; provided that the Company may
furnish nonpublic information or afford access to properties, books and records
to any person who is considering making or has made an Acquisition Proposal and
may negotiate or otherwise engage in substantive discussions with any person who
has made an Acquisition Proposal if (w) the Company has complied with the
foregoing terms of this covenant, (x) the Independent Committee determines in
good faith (after consultation with independent legal counsel) that failure to
take such action would be reasonably likely to be inconsistent with its
fiduciary duties under applicable law, (y) such person executes a
confidentiality agreement on terms no less favorable to the Company than those
contained in the Merger Agreement and (z) the Company shall have delivered to
Parent a prior written notice advising Parent that it intends to take such
action. Nothing contained in the Merger Agreement shall prevent the Company
Board from complying with Rule 14e-2 under the 1934 Act with respect to any
Acquisition Proposal. "Acquisition Proposal" means any offer or proposal for a
merger, consolidation, share exchange, business combination or other similar
transaction involving the Company or any of its subsidiaries or the acquisition
of any substantial equity interest in or substantial portion of the assets of
the Company or any of its subsidiaries, other than the transactions contemplated
by the Merger Agreement.

The Company will notify Parent promptly (but in no event later than 24
hours) after receipt by the Company, or any of its advisors, of any Acquisition
Proposal or any request for nonpublic information relating to, or access to the
properties, books or records of, the Company or any of its subsidiaries by any
person who is considering making or has made an Acquisition Proposal. The
Company shall identify the person making, and the terms and conditions of, any
such Acquisition Proposal or request. The Company shall keep Parent fully
informed, on a current basis, of the status and details of any such Acquisition
Proposal or request.

Director and Officer Liability. After the Effective Time, the Surviving
Corporation will indemnify and hold harmless the present and former officers and
directors of the Company (each an "Indemnified Person") in respect of acts or
omissions occurring at or prior to the Effective Time to the extent required
under Panama Law or provided under the Company's certificate of incorporation
and bylaws or any agreement any Indemnified Person may have with the Company, in
each case, as in effect on the date of the Merger Agreement; provided that such
indemnification will be subject to any limitation imposed from time to time
under applicable law.

For six years after the Effective Time, the Surviving Corporation will
provide officers' and directors' liability insurance in respect of acts or
omissions occurring prior to the Effective Time covering each such Indemnified
Person currently covered by the Company's officers' and directors' liability
insurance policy on terms with respect to coverage and amount no less favorable
than those of such policy in effect on the date of the Merger Agreement;
provided that, in satisfying its obligation under this covenant, the Surviving
Corporation will not be obligated to pay premiums in excess of 200% of the
amount per annum the Company paid in its last full fiscal year.

The rights of each Indemnified Person under this covenant shall be in
addition to any rights such person may have under the certificate of
incorporation or bylaws of the Company or any of its subsidiaries, under Panama
Law or under any agreement any Indemnified Person may have with the Company.
These rights shall survive consummation of the Merger and are intended to
benefit, and shall be enforceable by, each Indemnified Person.

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Best Efforts. Pursuant to the terms and conditions of the Merger Agreement,
the Company and Parent shall use their 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 applicable laws and regulations to consummate the
transactions contemplated by the Merger Agreement.

Public Announcements. The Merger Agreement provides that Parent and the
Company will consult with each other before issuing any press release or making
any public statement with respect to the Merger Agreement and the transactions
contemplated thereby and, except as may be required by applicable law or any
listing agreement with any national securities exchange, will not issue any such
press release or make any such public statement prior to such consultation.

Other

Parent will not, and will cause its subsidiaries not to, directly or
indirectly, take any action to knowingly cause the Company to violate its
representations, warranties or covenants under the Merger Agreement.

The Merger Agreement provides that Parent is entitled to designate a number
of directors (rounded to the nearest whole number) to the Board of Directors of
the Company that equals the product of (i) the total number of directors on the
Company Board and (ii) the percentage that the number of Shares beneficially
owned by Parent bears to the total number of outstanding Shares, and the Company
shall take all action necessary to cause Parent's designees to be elected or
appointed to the Board, including, without limitation, increasing the number of
directors, and seeking and accepting resignations of incumbent directors. Parent
has indicated to the Company that it has no present intention to replace or
elect any new director to the Board during the period between the consummation
of the Offer and the consummation of the Merger, although Parent could change
its intention at any time, subject to compliance with applicable legal
requirements including Rule 14(f) of the Securities Exchange Act and the rules
and regulations promulgated thereunder.

Until the Merger is completed or abandoned, Parent has agreed to take all
actions necessary to permit the Independent Committee to continue in existence
without diminution of its powers or duties and to continue to keep as its
members only those directors serving on the Independent Committee on May 7,
1999, or any successors selected (with the written consent of a majority of the
other members of the Independent Committee) by the Company Board who are not
otherwise employed by Parent or its affiliates.

Conditions to the Merger

The Merger Agreement provides that the obligations of the Company, Parent
and Acquisition Sub to consummate the Merger are subject to the satisfaction of
the following conditions:

(a) the Merger Agreement shall have been approved and adopted by the
shareholders of the Company in accordance with Panama Law and applicable
listing requirements;

(b) Acquisition Sub shall have purchased Shares pursuant to the
Offer;

(c) no preliminary or permanent injunction or other order, decree or
ruling by any court or governmental body or regulatory authority in the
United States or the Republic of Panama, which prevents consummation of the
Merger or the payment of the Merger Consideration, will have been issued
and remain in effect (each party agreeing to use its reasonable efforts to
have any such injunction, order, decree or ruling lifted); and

(d) no statute, rule or regulation of any government or governmental
agency in the United States or the Republic of Panama will prevent the
consummation of the Merger or the payment of the Merger Consideration or
make the consummation of the Merger or the payment of the Merger
Consideration illegal.

-33-
<PAGE>

Termination

The Merger Agreement provides that it may be terminated and the Merger may
be abandoned at any time prior to the Effective Time (notwithstanding any
approval of the Merger Agreement by the shareholders of the Company):

(a) by mutual written agreement of the Company and Parent;

(b) by either the Company or Parent, if:

(i) the Offer has not been consummated on or before July 31,
1999, provided that the right to terminate the Merger Agreement under
this subparagraph will not be available to any party whose breach of
any provision of the Merger Agreement results in the failure of the
Offer to be consummated by such time; or

(ii) there shall be any law or regulation that makes acceptance
for payment of, and payment for, the Shares pursuant to the Offer or
consummation of the Merger illegal or otherwise prohibited or any
judgment, injunction, order or decree of any court or governmental
body having competent jurisdiction enjoining Acquisition Sub from
accepting for payment of, and paying for, the Shares pursuant to the
Offer or Company or Parent from consummating the Merger and such
judgment, injunction, order or decree shall have become final and
nonappealable; provided, however, that the party seeking to terminate
the Merger Agreement under this subparagraph will have used
commercially reasonable best efforts to remove any such judgment,
injunction, order or decree; or

(c) by Parent, if prior to the acceptance for payment of Shares under
the Offer, (i) the Company Board will have failed to recommend, or will
have withdrawn or modified in a manner adverse to Parent its approval or
recommendation of the Offer or the Merger or (ii) the Company will have
failed to perform in all material respects its obligations hereunder.

The Merger Agreement provides that if it is terminated, it will become void
and of no effect with no liability on the part of any party (or any shareholder,
director, officer, employee or other agent or advisor of such party) to the
other party thereto, except that, if such termination is the result from the
willful failure of either party to fulfill a condition to the performance of the
obligations of the other party or the failure of either party to perform a
covenant under the Merger Agreement, such party shall be fully liable for any
and all liabilities and damages incurred or suffered by the other party as a
result of such failure.

Fees and Expenses

Except as provided in the following sentence, all costs and expenses
incurred in connection with the Merger Agreement shall be paid by the party
incurring such cost or expense.

The Merger Agreement provides that the Company will pay Parent a fee in
immediately available funds equal to $10 million promptly, but in no event later
than two business days, after a termination of the Merger Agreement by Parent
pursuant to subparagraph (c) above under "Termination".

Amendments and Waivers

Any provision of the Merger Agreement may be amended or waived prior to the
Effective Time if, but only if, such amendment or waiver is in writing and is
signed, in the case of an amendment, by each party to the Merger Agreement or,
in the case of a waiver, by each party against whom the waiver is to be
effective; provided that, after the adoption of the Merger Agreement by the
Company's shareholders and without their further approval, no such amendment or
waiver shall reduce the amount or change the kind of consideration to be
received in exchange for any Shares.

-34-
<PAGE>

No failure or delay by any party in exercising any right, power or
privilege under the Merger Agreement will operate as a waiver thereof nor will
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies provided in the Merger Agreement shall be cumulative and not exclusive
of any rights or remedies provided by law.

Confidentiality Agreement

On February 17, 1999, Parent and the Company entered into a confidentiality
agreement (the "Confidentiality Agreement"), under which Parent agreed to
provide to the Company certain confidential information. Pursuant to the
Confidentiality Agreement, the Company agreed that it and its representatives
would treat all nonpublic information received from Parent under the
Confidentiality Agreement in confidence, except to the extent that disclosure
would be required in connection with a transaction under applicable securities
laws and as would be consistent with applicable fiduciary duties. A copy of the
Confidentiality Agreement is filed as an exhibit to the Schedule 14D-1 and
incorporated herein by reference, and the foregoing summary of the
Confidentiality Agreement is qualified in its entirety by reference thereto.

SECURITY OWNERSHIP OF DIRECTORS AND
EXECUTIVE OFFICERS OF THE COMPANY

The following table sets forth information as to beneficial ownership of
Shares of each director and executive officer of the Company as of June 15,
1999. The business address of each director and executive officer of the Company
is 1450 Poydras Street, New Orleans, Louisiana 70112. Pursuant to the Offer,
each of these directors and executive officers tendered all of their Shares,
other than those beneficially owned as a result of certain stock options or as
described in the notes to this table. The treatment of Company Stock Options,
Restricted Shares and Performance Shares in the Merger is described under "The
Merger Agreement--The Merger." No director or executive officer of the Company
beneficially owns more than 1% of the outstanding Shares.

<TABLE>
<CAPTION>
Beneficial
Ownership
of
Name Shares (1)
-------------------- -------------
<S> <C>
Rick L. Burdick....................... 700 (2)
Gary W. Drinkwater.................... 30,400 (3)
Daniel R. Gaubert..................... 18,840 (4)
Robert L. Howard...................... 1,200 (5)
William J. Johnson.................... 1,100 (6)
S. Wayne Murphy....................... 12,140 (7)
Kurt S. Nelson........................ 35,460 (8)
Fred R. Oehrlein...................... 32,827 (9)
Sean C. O'Keefe....................... 300 (10)
Robert H. Rawle....................... 60,383 (11)
Cedric E. Ritchie..................... 1,600 (12)
Roger E. Tetrault..................... 80,493 (13)
Richard E. Woolbert................... 30,550 (14)
J. Rod Woolsey........................ --
All directors and executive officers
as a group (14 persons)............. 305,993
</TABLE>

(1) Shares beneficially owned include all stock options (including those that
will become exercisable in connection with the Merger).

(2) Shares owned by Mr. Burdick include 200 Shares that may be acquired upon
the exercise of stock options as described in footnote (1) above, and 500
restricted Shares as to which he has sole voting power but no dispositive
power.

-35-
<PAGE>

(3) All 30,400 Shares owned by Mr. Drinkwater relate to Shares that may be
acquired upon the exercise of stock options as described in footnote (1)
above.

(4) Shares owned by Mr. Gaubert include 16,800 Shares that may be acquired
upon the exercise of stock options as described in footnote (1) above, and
2,040 restricted shares of Common Stock as to which he has sole voting
power but no dispositive power.

(5) Shares owned by Mr. Howard include 800 Shares that may be acquired upon
the exercise of stock options as described in footnote (1) above, and 400
restricted Shares as to which he has sole voting power but no dispositive
power.

(6) Shares owned by Mr. Johnson include 800 Shares that may be acquired upon
the exercise of stock options as described in footnote (1) above, and 300
restricted Shares as to which he has sole voting power but no dispositive
power.

(7) Shares owned by Mr. Murphy include 11,390 Shares that may be acquired upon
the exercise of stock options as described in footnote (1) above, and 750
restricted shares of Common Stock as to which he has sole voting power but
no dispositive power.

(8) Shares owned by Mr. Nelson include 31,260 Shares that may be acquired upon
the exercise of stock options as described in footnote (1) above, and
4,200 restricted Shares as to which he has sole voting power but no
dispositive power.

(9) Shares owned by Mr. Oehrlein include 26,317 Shares that may be acquired
upon the exercise of stock options as described in footnote (1) above, and
6,510 restricted Shares as to which he has sole voting power but no
dispositive power.

(10) Shares owned by Mr. O'Keefe include 200 Shares that may be acquired upon
the exercise of stock options as described in footnote (1) above, and 100
restricted Shares as to which he has sole voting power but no dispositive
power.

(11) Shares owned by Mr. Rawle include 50,083 Shares that may be acquired upon
the exercise of stock options as described in footnote (1) above, and
5,300 restricted Shares as to which he has sole voting power but no
dispositive power.

(12) Shares owned by Mr. Ritchie include 1,200 Shares that may be acquired upon
the exercise of stock options as described in footnote (1) above, and 400
restricted Shares as to which he has sole voting power but no dispositive
power.

(13) Shares owned by Mr. Tetrault include 72,393 Shares that may be acquired
upon the exercise of stock options as described in footnote (1) above, and
8,100 Restricted Shares as to which he has sole voting power but no
dispositive power.

(14) All 30,550 Shares owned by Mr. Woolbert relate to Shares that may be
acquired upon the exercise of stock options as described in footnote (1)
above.

-36-
<PAGE>

SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS

The following table furnishes information concerning all persons known to
the Company to beneficially own 5% or more of any class of voting stock of the
Company as of June 15, 1999.

<TABLE>
<CAPTION>
Title of Class Name and Address of Beneficial Owner Shares Owned Percent of Class
- -------------- ------------------------------------ ------------ ----------------
<S> <C> <C> <C>
Common Stock McDermott International, Inc. 39,021,787 99%
McDermott Acquisition Company, Inc.
1450 Poydras Street
New Orleans, LA 70112-6050

Series A $2.25 McDermott International, Inc. 3,200,000 100%
Cumulative 1450 Poydras Street
Convertible New Orleans, LA 70112-6050
Preferred Stock
</TABLE>

INDEPENDENT ACCOUNTANTS

PricewaterhouseCoopers LLP ("PricewaterhouseCoopers") served as the
Company's independent accountants for the fiscal year ended March 31, 1999 and
serves as the Company's independent accountants for the current fiscal year.
Representatives of PricewaterhouseCoopers are expected to be present at the
Special Meeting and will have an opportunity to make a statement if they desire
to do so and to respond to appropriate questions.

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You can read and copy any materials that we file with
the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549; the SEC's regional offices located at Seven World Trade
Center, New York, New York 10048, and at 500 West Madison Street, Chicago,
Illinois 60661. You can obtain information about the operation of the SEC's
Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also
maintains a Web site that contains information we file electronically with the
SEC, which you can access over the Internet at http://www.sec.gov. Copies of
these materials may also be obtained by mail from the Public Reference Section
of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates.

INCORPORATION OF DOCUMENTS BY REFERENCE

The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you without
re-printing the information in this Information Statement by referring you to
prior and future filings with the SEC. The information we incorporate by
reference is an important part of this Information Statement, and later
information that we file with the SEC will automatically update and supersede
this information. We incorporate by reference our annual report on Form 10-K for
the fiscal year ended March 31, 1999, and any future filings we make with the
SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act.

You may request a copy of these filings (other than an exhibit to any of
these filings unless we have specifically incorporated that exhibit by reference
into the filing), at no cost, by writing or telephoning us at the following
address:

-37-
<PAGE>

J. Ray McDermott, S.A.
P.O. Box 61961
New Orleans, Louisiana 70161-1961
Attention: Corporate Secretary
Telephone: (504) 587-5300

You should rely only on the information we have provided or incorporated by
reference in this Information Statement or any supplement. We have not
authorized any person to provide information other than that provided here. We
have not authorized anyone to provide you with different information. You should
not assume that the information in this Information Statement or any supplement
is accurate as of any date other than the date on the front of the document.

FORWARD-LOOKING STATEMENTS AND INFORMATION

This Information Statement, including the information we incorporate by
reference, includes forward-looking statements within the meaning of Section 27A
of the Securities Act and Section 21E of the Securities Exchange Act. You can
identify our forward-looking statements by the words "expects," "projects,"
"estimates," "believes," "anticipates," "intends," "plans," "budgets,"
"predicts," "estimates" and similar expressions.

We have based the forward-looking statements relating to our operations on
our current expectations, estimates and projections about the Company and the
offshore oil and natural gas service and marine pipeline and construction
industry in general. We caution you that these statements are not guarantees of
future performance and involve risks, uncertainties and assumptions that we
cannot predict. In addition, we have based many of these forward-looking
statements on assumptions about future events that may prove to be inaccurate.
Accordingly, our actual outcomes and results may differ materially from what we
have expressed or forecast in the forward-looking statements.

By Order of the Board of Directors,

/s/ S. Wayne Murphy
-------------------
S. Wayne Murphy
Secretary

Dated: ________ ___, 1999

-38-
<PAGE>

ANNEX A

AGREEMENT AND PLAN OF MERGER

dated as of

May 7, 1999

between

J. RAY MCDERMOTT, S.A.

and

MCDERMOTT INTERNATIONAL, INC.
<PAGE>

TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1 THE OFFER.............................................................................. A-1
SECTION 1.01. The Offer........................................................................ A-1
SECTION 1.02. Company Action................................................................... A-1
SECTION 1.03. Directors........................................................................ A-2

ARTICLE 2 THE MERGER............................................................................. A-2
SECTION 2.01. The Merger....................................................................... A-2
SECTION 2.02. Conversion of Shares............................................................. A-3
SECTION 2.03. Surrender and Payment............................................................ A-3
SECTION 2.04. Stock Options.................................................................... A-4
SECTION 2.05. Restricted Shares and Performance Shares......................................... A-4
SECTION 2.06. Board Approval................................................................... A-5
SECTION 2.07. Withholding Rights............................................................... A-5

ARTICLE 3 THE SURVIVING CORPORATION.............................................................. A-5
SECTION 3.01. Certificate of Incorporation..................................................... A-5
SECTION 3.02. Bylaws........................................................................... A-6
SECTION 3.03. Directors and Officers........................................................... A-6

ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................................... A-6
SECTION 4.01. Corporate Existence and Power.................................................... A-6
SECTION 4.02. Corporate Authorization.......................................................... A-6
SECTION 4.03. Governmental Authorization....................................................... A-6
SECTION 4.04. Non-Contravention................................................................ A-6
SECTION 4.05. Capitalization................................................................... A-7
SECTION 4.06. Subsidiaries..................................................................... A-7
SECTION 4.07. SEC Filings...................................................................... A-7
SECTION 4.08. Financial Statements............................................................. A-8
SECTION 4.09. Disclosure Documents............................................................. A-8
SECTION 4.10. Absence of Certain Changes....................................................... A-8
SECTION 4.11. No Undisclosed Material Liabilities.............................................. A-10
SECTION 4.12. Compliance with Laws and Court Orders............................................ A-10
SECTION 4.13. Litigation....................................................................... A-10
SECTION 4.14. Finders' Fees.................................................................... A-10
SECTION 4.15. Opinion of Financial Advisor..................................................... A-10

ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PARENT............................................... A-10
SECTION 5.01. Corporate Existence and Power.................................................... A-10
SECTION 5.02. Corporate Authorization.......................................................... A-11
SECTION 5.03. Governmental Authorization....................................................... A-11
SECTION 5.04. Non-Contravention................................................................ A-11
SECTION 5.05. Disclosure Documents............................................................. A-11
SECTION 5.06. Finders' Fees.................................................................... A-11
SECTION 5.07. Financing........................................................................ A-12
</TABLE>

A-i
<PAGE>

<TABLE>
<S> <C>
ARTICLE 6 COVENANTS OF THE COMPANY................................................................... A-12
SECTION 6.01. Conduct of the Company.............................................................. A-12
SECTION 6.02. Stockholder Meeting; Proxy Material................................................. A-12
SECTION 6.03. No Solicitation..................................................................... A-13

ARTICLE 7 COVENANTS OF PARENT........................................................................ A-13
SECTION 7.01. Certain Obligations of Parent....................................................... A-13
SECTION 7.02. Voting of Shares.................................................................... A-13
SECTION 7.03. Director and Officer Liability...................................................... A-13

ARTICLE 8 COVENANTS OF PARENT AND THE COMPANY........................................................ A-14
SECTION 8.01. Best Efforts........................................................................ A-14
SECTION 8.02. Certain Filings..................................................................... A-14
SECTION 8.03. Public Announcements................................................................ A-14
SECTION 8.04. Further Assurances.................................................................. A-15
SECTION 8.05. Access to Information............................................................... A-15
SECTION 8.06. Notices of Certain Events........................................................... A-15
SECTION 8.07. Confidentiality..................................................................... A-15

ARTICLE 9 CONDITIONS TO THE MERGER................................................................... A-16
SECTION 9.01. Conditions to Obligations of Each Party............................................. A-16

ARTICLE 10 TERMINATION................................................................................ A-16
SECTION 10.01. Termination......................................................................... A-16
SECTION 10.02. Effect of Termination............................................................... A-17

ARTICLE 11 MISCELLANEOUS.............................................................................. A-17
SECTION 11.01. Notices............................................................................. A-18
SECTION 11.02. Survival of Representations and Warranties.......................................... A-18
SECTION 11.03. Amendments; No Waivers.............................................................. A-18
SECTION 11.04. Expenses............................................................................ A-18
SECTION 11.05. Successors and Assigns.............................................................. A-18
SECTION 11.06. Governing Law....................................................................... A-18
SECTION 11.07. Jurisdiction........................................................................ A-18
SECTION 11.08. WAIVER OF JURY TRIAL................................................................ A-19
SECTION 11.09. Counterparts; Effectiveness......................................................... A-19
SECTION 11.10. Entire Agreement.................................................................... A-19
SECTION 11.11. Captions............................................................................ A-19
SECTION 11.12. Severability........................................................................ A-19
SECTION 11.13. Specific Performance................................................................ A-19
SECTION 11.14. Definitions and Usage............................................................... A-19
</TABLE>

A-ii

<PAGE>

AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER dated as of May 7, 1999 between J. Ray
McDermott, S.A., a corporation organized under the laws of the Republic of
Panama (the "Company"), and McDermott International, Inc., a corporation
organized under the laws of the Republic of Panama ("Parent").

The parties hereto agree as follows:

ARTICLE 1
The Offer

Section 1.01. The Offer. (a) Provided that nothing shall have occurred that
would result in a failure to satisfy any of the conditions set forth in Annex I
hereto, as promptly as practicable after the date hereof, but in no event later
than five business days following the public announcement of the terms of this
Agreement, a wholly-owned subsidiary of Parent to be organized under the laws of
the Republic of Panama ("Merger Subsidiary") shall commence an offer (the
"Offer") to purchase all of the outstanding shares of Common Stock (other than
shares beneficially owned by Parent) at a price of $35.62 per share of Common
Stock ("Common Share Price"), net to the seller in cash. The Offer shall be
subject to the condition that there shall be validly tendered in accordance with
the terms of the Offer, prior to the expiration date of the Offer and not
withdrawn, a number of shares of Common Stock that represents at least a
majority of the outstanding shares of Common Stock (other than shares
beneficially owned by Parent) (the "Minimum Condition") and to the other
conditions set forth in Annex I hereto. Merger Subsidiary expressly reserves the
right to waive any of the conditions to the Offer and to make any change in the
terms or conditions of the Offer, provided that no change may be made that,
without the prior written consent of the Company, waives the Minimum Condition,
changes the form of consideration to be paid, decreases the price per share of
Common Stock or the number of shares of Common Stock sought in the Offer or
imposes conditions to the Offer in addition to those set forth in Annex I.
"Common Stock" means the common stock, par value $0.01 per share, of the
Company.

(b) As soon as practicable on the date of commencement of the Offer, Merger
Subsidiary shall file with the Securities and Exchange Commission ("SEC") a
Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") with respect to
the Offer, which will contain the offer to purchase and form of the related
letter of transmittal and summary advertisement (such Schedule 14D-1 and the
documents included therein pursuant to which the Offer will be made, together
with any supplements or amendments thereto, the "Offer Documents") and shall, as
and to the extent required by applicable federal securities laws, disseminate
the Offer Documents to the holders of Common Stock. Parent and the Company each
agrees promptly to correct any information provided by it for use in the Offer
Documents if and to the extent that such information shall have become false or
misleading in any material respect. Merger Subsidiary agrees to take all steps
necessary to cause the Schedule 14D-1 as so corrected to be filed with the SEC
and the Offer Documents as so corrected to be disseminated to holders of Common
Stock, in each case as and to the extent required by applicable federal
securities laws.

Section 1.02. Company Action. (a) The Company hereby consents to the Offer
and represents that its Board of Directors, at a meeting duly called and held
has (i) determined that this Agreement and the transactions contemplated hereby,
including the Offer and the Merger, are fair to and in the best interests of the
Company's stockholders (other than Parent), (ii) approved and adopted this
Agreement and the transactions contemplated hereby, including the Offer and the
Merger, in accordance with the laws of the Republic of Panama ("Panama Law") and
(iii) resolved (subject to Section 6.02(b)) to recommend acceptance of the Offer
--------
and approval and adoption of this Agreement and the Merger by its stockholders.
The Company further represents that Simmons & Company International has
delivered to the Company's Board of Directors its opinion that the consideration
to be paid in the Offer and the Merger is fair to the holders of Common Stock
(other than Parent) from a financial point of view. The Company will promptly
furnish Parent with a list of its stockholders, mailing labels and any available
listing or computer file containing the names and addresses of all record
holders of Common Stock and lists of securities positions of Common Stock held
in stock depositories, in each case true and correct as of the most recent
practicable date, and will provide to Parent such additional information
(including, without limitation, updated lists of stockholders, mailing labels
and lists of securities
<PAGE>

positions) and such other assistance as Parent may reasonably request in
connection with the Offer. Subject to the requirements of applicable law, and
except for such steps as are necessary to disseminate the Offer Documents and
any other documents necessary to consummate the Merger, Parent and Merger
Subsidiary and each of their affiliates, associates, employees, agents and
advisors shall hold in confidence the information contained in any such lists,
labels, listings or files, shall use such information only in connection with
the Offer and the Merger and, if this Agreement shall be terminated and if the
Company so requests, shall deliver, and shall use their reasonable efforts to
cause their affiliates, associates, employees, agents and advisors to deliver,
to the Company all copies and any extracts or summaries from such information
then in their possession or control.

(b) As soon as practicable after the time that the Offer is commenced, the
Company shall file with the SEC and disseminate to holders of shares of Common
Stock, in each case as and to the extent required by applicable federal
securities laws, a Solicitation/Recommendation Statement on Schedule 14D-9
(together with any amendments or supplements thereto, the "Schedule 14D-9") that
shall reflect the recommendations of the Company's Board of Directors referred
to above. The Company and Parent each agree promptly to correct any information
provided by it for use in the Schedule 14D-9 if and to the extent that it shall
have become false or misleading in any material respect. The Company agrees to
take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed
with the SEC and to be disseminated to holders of shares of Common Stock, in
each case as and to the extent required by applicable federal securities laws.

Section 1.03. Directors. (a) Effective upon the acceptance for payment of
shares of Common Stock pursuant to the Offer, Parent shall be entitled to
designate the number of directors, rounded to the nearest whole number, on the
Company's Board of Directors that equals the product of (i) the total number of
directors on the Company's Board of Directors and (ii) the percentage that the
number of shares of Common Stock beneficially owned by Parent bears to the total
number of outstanding shares of Common Stock and the Company shall take all
action necessary to cause Parent's designees to be elected or appointed to the
Company's Board of Directors, including, without limitation, increasing the
number of directors, and seeking and accepting resignations of incumbent
directors. At such time, the Company will also use its best efforts to cause
individuals designated by Parent to constitute the number of members, rounded to
the nearest whole number, on (i) each committee of the Board of Directors of the
Company (other than the Independent Committee) and (ii) each board of directors
of each subsidiary of the Company (and each committee thereof) that represents
the same percentage as such individuals represent on the Board of Directors of
the Company.

(b) The Company's obligations to appoint Parent's designees to the
Company's Board of Directors shall be subject to Section 14(f) of the 1934 Act
and Rule 14f-1 promulgated thereunder. The Company shall promptly take all
actions, and shall include in the Schedule 14D-9 such information with respect
to the Company and its officers and directors, as Section 14(f) and Rule 14f-1
require in order to fulfill its obligations under this Section. Parent shall
supply to the Company in writing and be solely responsible for any information
with respect to itself and its nominees, officers, directors and affiliates
required by Section 14(f) and Rule 14f-1.

(c) During the term of this Agreement, Parent will, and will cause all of
its subsidiaries to, take all actions necessary to permit the Independent
Committee to continue in existence without diminution of its powers or duties
and its members to consist solely of the members thereof on the date hereof, or
any successors selected (with the written consent of a majority of the members
of the Independent Committee) by the Board of Directors of the Company who are
not otherwise employed by Parent or its affiliates. Any amendment, waiver or
extension of time by the Company hereunder, and any action taken by the Company
or its Board of Directors in connection therewith, shall require the concurrence
or consent of a majority of the members of the Independent Committee.

ARTICLE 2
The Merger

Section 2.01. The Merger. (a) Upon the terms and subject to the conditions
set forth in this Agreement, at the Effective Time, Merger Subsidiary shall be
merged (the "Merger") with and into the Company in accordance with

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Panama Law, whereupon the separate existence of Merger Subsidiary shall cease,
and the Company shall continue as the surviving corporation (the "Surviving
Corporation").

(b) As soon as practicable after satisfaction or, to the extent permitted
hereunder, waiver of all conditions to the Merger set forth herein, the Company
and Merger Subsidiary will file a certificate of merger, in a form mutually
acceptable to the Company and Parent and prepared and executed in accordance
with the relevant provisions of Panama Law (the "Certificate of Merger"), with
the Public Registry Office of the Republic of Panama and make all other filings
or recordings required in connection with the Merger. The Merger shall become
effective at such time (the "Effective Time") as the Company's Certificate of
Merger is recorded by the Public Registry Office of the Republic of Panama.

(c) From and after the Effective Time, the Surviving Corporation shall
possess all the rights, powers, privileges and franchises and be subject to all
of the obligations, liabilities, restrictions and disabilities of the Company
and Merger Subsidiary, all as provided under Panama Law.

Section 2.02. Conversion of Shares. At the Effective Time:

(a) except as otherwise provided in Section 2.02(b), each share of Common
-------
Stock outstanding immediately prior to the Effective Time shall be converted
into the right to receive $35.62 in cash or any higher price paid for each share
of Common Stock pursuant to the Offer, without interest (the "Merger
Consideration");

(b) each share of Common Stock and each share of Series A $2.25 Cumulative
Convertible Preferred Stock, $.01 par value, of the Company held by the Company
as treasury stock or owned by Parent or any of its subsidiaries immediately
prior to the Effective Time shall be canceled and retired, and no payment shall
be made with respect thereto; and

(c) each share of common stock of Merger Subsidiary outstanding immediately
prior to the Effective Time shall be converted into and become one share of
common stock of the Surviving Corporation with the same rights, powers and
privileges as the shares so converted (all such shares so converted shall
constitute the only outstanding shares of capital stock of the Surviving
Corporation).

Section 2.03. Surrender and Payment. (a) Prior to the Effective Time,
Parent shall appoint an agent reasonably acceptable to the Company (the
"Exchange Agent") for the purpose of exchanging certificates representing shares
of Common Stock (the "Certificates") for the Merger Consideration. Parent will
make available to the Exchange Agent, as needed, the Merger Consideration to be
paid in respect of the shares of Common Stock. Promptly after the Effective
Time, Parent will send, or will cause the Exchange Agent to send, to each holder
of shares of Common Stock at the Effective Time a letter of transmittal and
related instructions (which shall specify that the delivery shall be effected,
and risk of loss and title shall pass, only upon proper delivery of the
Certificates to the Exchange Agent) for use in such exchange.

(b) Each holder of shares of Common Stock that have been converted into the
right to receive the Merger Consideration will be entitled to receive, upon
surrender to the Exchange Agent of a Certificate, together with a properly
completed letter of transmittal if applicable, the Merger Consideration payable
for each share of Common Stock represented by such Certificate. Until so
surrendered, each such Certificate shall represent after the Effective Time for
all purposes only the right to receive such Merger Consideration, without
interest thereon.

(c) If any portion of the Merger Consideration is to be paid to a person
other than the person in whose name the surrendered Certificate is registered,
it shall be a condition to such payment that the Certificate so surrendered
shall be properly endorsed or otherwise be in proper form for transfer and that
the person requesting such payment shall pay to the Exchange Agent any transfer
or other taxes required as a result of such payment to a person other than the
registered holder of such Certificate or establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable.

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(d) After the Effective Time, there shall be no further registration of
transfers of shares of Common Stock. If, after the Effective Time, Certificates
are presented to the Surviving Corporation, they shall be canceled and exchanged
for the Merger Consideration provided for, and in accordance with the procedures
set forth, in this Article.

(e) Any portion of the Merger Consideration made available to the Exchange
Agent pursuant to Section 2.03(a) that remains unclaimed by the holders of
-------
shares of Common Stock six months after the Effective Time shall be returned to
Parent, upon demand, and any such holder who has not exchanged them for the
Merger Consideration in accordance with this Section prior to that time shall
thereafter look only to Parent for payment of the Merger Consideration in
respect of such shares of Common Stock. Notwithstanding the foregoing, Parent
shall not be liable to any holder of shares of Common Stock for any amounts paid
to a public official pursuant to applicable abandoned property, escheat or
similar laws.

(f) If any Certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such Certificate to
be lost, stolen or destroyed and, if required by the Surviving Corporation, the
posting by such person of a bond, in such reasonable amount as the Surviving
Corporation may direct, as indemnity against any claim that may be made against
it with respect to such Certificate, the Exchange Agent will issue, in exchange
for such lost, stolen or destroyed Certificate, the Merger Consideration to be
paid in respect of the shares of Common Stock represented by such Certificate,
as contemplated by this Article.

Section 2.04. Stock Options. (a) The terms of each outstanding option to
purchase shares of Common Stock under any employee or director stock option or
compensation plan or arrangement of the Company (a "Company Stock Option"),
whether or not exercisable or vested, shall be adjusted as necessary so that, at
the Effective Time, each Company Stock Option outstanding immediately prior to
the Effective Time shall be deemed to constitute an option to purchase shares of
common stock, $1.00 par value, of Parent ("Parent Stock"), on the same terms and
conditions as were applicable under such Company Stock Option, except as set
forth below (each, as so adjusted, an "Adjusted Option"). Each Adjusted Option
shall be fully vested and shall entitle the holder to purchase a number of
shares of Parent Stock having an aggregate market value, as of the Effective
Time, equal to the aggregate market value of the shares of Common Stock
purchasable pursuant to the applicable Company Stock Option. The exercise price
per share of Parent Stock under each Adjusted Option shall be equal to (A) the
aggregate exercise price for the shares of Common Stock purchasable pursuant to
the applicable Company Stock Option divided by (B) the aggregate number of
shares of Parent Stock deemed purchasable pursuant to such Adjusted Stock
Option. Notwithstanding the foregoing, any fractional share of Parent Stock
resulting from the foregoing adjustment of a Company Stock Option shall be
rounded down to the nearest whole share. For purposes of this Section 2.04, the
market value of a share of Parent Stock as of the Effective Time shall be deemed
to be the closing sale price of such share on the New York Stock Exchange on the
trading day immediately preceding the Effective Time. The market value of a
share of Common Stock as of the Effective Time shall be deemed the Merger
Consideration.

(b) Prior to the Effective Time, the Company shall (i) make any amendments
to the terms of such stock option or compensation plans or arrangements that are
necessary to give effect to the transactions contemplated by this Section 2.04
----
and (ii) to the extent required, use its best efforts to obtain any consents
from holders of Company Stock Options. At the Effective Time, except to the
extent otherwise required by the existing stock option agreements, all
references to the Company in the stock option agreements covering outstanding
options to purchase Common Stock will be deemed to refer to Parent. Parent will
assume all the Company's obligations with respect to those options as so amended
and will, from and after the Effective Time, make available for issuance on
exercise of those options all shares of Parent Stock covered thereby and
maintain an effective registration statement under the Securities Act of 1933
(the "1933 Act") which covers those shares.

Section 2.05. Restricted Shares and Performance Shares. (a) As soon as
practicable after the date hereof, the Company shall provide each person who
holds restricted shares of Common Stock ("Restricted Shares") under the J. Ray
McDermott, S.A. Restated 1994 Executive Long-Term Incentive Compensation Plan
(the "1994 Plan") or the J. Ray McDermott, S.A. Non-Employee Director Stock Plan
the opportunity to make an irrevocable election either to: (i) receive a cash
payment, as of the Effective Time, in respect of such Restricted Shares (whether
or not then vested);

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or (ii) receive a replacement award (a "Replacement Restricted Award"), as of
the Effective Time, of Parent Stock having an aggregate fair market value (as of
the Effective Time) equal to the product of (A) the number of Restricted Shares
to which such Replacement Restricted Award relates and (B) the Merger
Consideration. Each Replacement Restricted Award shall be issued on the same
terms, and subject to identical restrictions, as applied to the Restricted
Shares to which such Replacement Restricted Award relates (without taking into
account any accelerated vesting as a result of the Merger).

(b) As soon as practicable after the date hereof, the Company shall provide
each person who holds performance restricted shares ("Performance Shares") under
the 1994 Plan the opportunity to make an irrevocable election either to: (i)
receive a cash payment, as of the Effective Time, in respect of such Performance
Shares in accordance with the terms of Section 12.1 of the 1994 Plan; or (ii)
receive a replacement award (a "Replacement Performance Award"), as of the
Effective Time, of performance shares denominated in shares of Parent Stock and
having the following terms. Each Replacement Performance Award shall represent
the notional grant of a number of shares of Parent Stock having an aggregate
fair market value, as of the Effective Time, equal to the product of (A) the
number of notional shares of Common Stock originally granted pursuant to the
Performance Shares to which such Replacement Restricted Award relates and (B)
the Merger Consideration. Each Replacement Restricted Award shall be subject to
a two-year vesting period upon terms identical to those that apply, under the
1994 Plan, to Performance Shares as of the end of the initial two-year
measurement period.

(c) Prior to the Effective Time, the Company shall make any amendments to
the terms of such compensation plans or arrangements that are necessary to give
effect to the transactions contemplated by this Section 2.05. At the Effective
----
Time, except to the extent otherwise required by the existing restricted stock
and performance share agreements, all references to the Company in the
agreements covering Restricted Shares and Performance Shares will be deemed to
refer to Parent. Parent will assume all the Company's obligations with respect
to Restricted Shares and Performance Shares and will, from and after the
Effective Time, make available for issuance as necessary all shares of Parent
Stock covered by the Replacement Restricted Awards and Replacement Performance
Awards and maintain an effective registration statement under the 1933 Act which
covers those shares.

(d) For purposes of this Section 2.05, the market value of a share of
----
Parent Stock as of the Effective Time shall be deemed to be the closing sale
price of such share on the New York Stock Exchange on the trading day
immediately preceding the Effective Time.

Section 2.06. Board Approval. Parent agrees that the Parent Board of
Directors or the Compensation Committee of the Parent Board of Directors shall
at or prior to the Effective Time adopt resolutions specifically approving, for
purposes of Rule 16b-3 under the Exchange Act of 1934 (the "1934 Act"), the
receipt pursuant to Sections 2.04 and 2.05 of Adjusted Options and Parent Stock
---- ----
by officers and directors of the Company who will become officers or directors
of the Parent subject to Rule 16b-3.

Section 2.07. Withholding Rights. Each of the Surviving Corporation and
Parent shall be entitled to deduct and withhold from the consideration otherwise
payable to any person pursuant to this Article such amounts as it is required to
deduct and withhold with respect to the making of such payment under any
provision of federal, state, local or foreign tax law. If the Surviving
Corporation or Parent, as the case may be, so withholds amounts, such amounts
shall be treated for all purposes of this Agreement as having been paid to the
holder of the shares of Common Stock or options or other rights in respect of
which the Surviving Corporation or Parent, as the case may be, made such
deduction and withholding.

ARTICLE 3
The Surviving Corporation

Section 3.01. Certificate of Incorporation. The certificate of
incorporation of Merger Subsidiary in effect at the Effective Time shall be the
certificate of incorporation of the Surviving Corporation until amended in
accordance

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with its terms and applicable law, provided that, at the Effective Time, such
certificate of incorporation shall be amended to provide that the name of the
corporation shall be J. Ray McDermott, S.A.

Section 3.02. Bylaws. The bylaws of Merger Subsidiary in effect at the
Effective Time shall be the bylaws of the Surviving Corporation until amended in
accordance with its terms, the certificate of incorporation of the Surviving
Corporation and applicable law.

Section 3.03. Directors and Officers. From and after the Effective Time,
until successors are duly elected or appointed and qualified in accordance with
applicable law, (i) the directors of Merger Subsidiary at the Effective Time
shall be the directors of the Surviving Corporation and (ii) the officers of the
Company at the Effective Time shall be the officers of the Surviving
Corporation.

ARTICLE 4
Representations and Warranties of the Company

Except as disclosed to Parent in writing prior to the date hereof, the
Company represents and warrants to Parent that:

Section 4.01. Corporate Existence and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
Republic of Panama and has all corporate powers and all governmental licenses,
authorizations, permits, consents and approvals required to carry on its
business as now conducted, except for such matters as would not have,
individually or in the aggregate, a material adverse effect on the Company. The
Company is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction where such qualification is necessary, except for
those jurisdictions where the failure to be so qualified would not have,
individually or in the aggregate, a material adverse effect on the Company. The
Company has heretofore delivered to Parent true and complete copies of the
certificate of incorporation and bylaws of the Company as currently in effect.

Section 4.02. Corporate Authorization. (a) The execution, delivery and
performance by the Company of this Agreement and the consummation by the Company
of the transactions contemplated hereby are within the Company's corporate
powers and, except for the required approval of the Company's stockholders in
connection with the Merger, have been duly authorized by all necessary corporate
action on the part of the Company. The affirmative vote of (i) the holders of
two-thirds of the outstanding shares of the Series A $2.25 Cumulative
Convertible Preferred Stock, $.01 par value, of the Company ("Preferred Stock"),
voting separately as a class and (ii) the holders of two-thirds of the
outstanding shares of Common Stock, voting separately as a class, are the only
votes of the holders of any of the Company's capital stock necessary in
connection with the consummation of the Merger. This Agreement constitutes a
valid and binding agreement of the Company.

Section 4.03. Governmental Authorization. The execution, delivery and
performance by the Company of this Agreement and the consummation by the Company
of the transactions contemplated hereby require no action by or in respect of,
or filing with, any governmental body, agency, official or authority, domestic
or foreign, other than (i) the filing and recordation in the Public Registry
Office of the Republic of Panama of the Certificate of Merger, (ii) compliance
with any applicable requirements of the 1934 Act or any other securities laws
(whether state or foreign) or any applicable provisions of Panama Law (including
Executive Decree No. 18 of March 14, 1994 of the Republic of Panama), and (iii)
any actions or filings the absence of which would not reasonably be expected to
have, individually or in the aggregate, a material adverse effect on the Company
or materially to impair the ability of the Company to consummate the
transactions contemplated by this Agreement.

Section 4.04. Non-Contravention. The execution, delivery and performance by
the Company of this Agreement and the consummation of the transactions
contemplated hereby do not and will not (i) contravene, conflict with, or result
in any violation or breach of any provision of the certificate of incorporation
or bylaws of the Company, (ii) assuming compliance with the matters referred to
in Section 4.03, contravene, conflict with or result in a violation
----

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or breach of any provision of any applicable law, rule, regulation, judgment,
injunction, order or decree, (iii) require any consent or other action by any
person under, constitute a default under, or cause or permit the termination,
cancellation, acceleration or other change of any right or obligation or the
loss of any benefit to which the Company or any of its subsidiaries is entitled
under any provision of any agreement or other instrument binding upon the
Company or any of its subsidiaries or any license, franchise, permit,
certificate, approval or other similar authorization affecting, or relating in
any way to, the assets or business of the Company and its subsidiaries or (iv)
result in the creation or imposition of any Lien on any asset of the Company or
any of its subsidiaries except, in the case of clauses (ii), (iii) and (iv), for
such matters as would not reasonably be expected to have, individually or in the
aggregate, a material adverse effect on the Company or materially to impair the
ability of the Company to consummate the transactions contemplated by this
Agreement. "Lien" means, with respect to any property or asset, any mortgage,
lien, pledge, charge, security interest, encumbrance or other adverse claim of
any kind in respect of such property or asset.
Section 4.05. Capitalization. (a) The authorized capital stock of the
Company consists of 60,000,000 shares of common stock, $.01 par value, and
10,000,000 shares of preferred stock, $.01 par value, of which 3,200,000 shares
are designated as Series A $2.25 Cumulative Convertible Preferred Stock. As of
March 31, 1999, there were outstanding (i) 39,060,814 shares of Common Stock and
employee and director options to purchase an aggregate of 839,471 shares of
Common Stock (of which options to purchase an aggregate of 405,934 shares of
Common Stock were exercisable) and (ii) 3,200,000 shares of Preferred Stock. All
outstanding shares of capital stock of the Company have been duly authorized and
validly issued and are fully paid and nonassessable.

(b) Except as set forth in this Section 4.05 and for changes since March
----
31, 1999 resulting from the exercise of employee or director stock options or
the conversion of Preferred Stock outstanding on such date, there are no
outstanding (i) shares of capital stock or voting securities of the Company,
(ii) securities of the Company convertible into or exchangeable for shares of
capital stock or voting securities of the Company or (iii) options or other
rights to acquire from the Company or other obligation of the Company to issue
any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the Company. There are no
outstanding obligations of the Company or any of its subsidiaries to repurchase,
redeem or otherwise acquire any of the securities referred to in clauses (i),
(ii) or (iii) above.

Section 4.06. Subsidiaries. (a) Each significant subsidiary of the
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation, has all corporate
powers and all governmental licenses, authorizations, permits, consents and
approvals required to carry on its business as now conducted, except for such
matters as would not have, individually or in the aggregate, a material adverse
effect on the Company. Each such significant subsidiary is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where such qualification is necessary, except for such matters as would not
have, individually or in the aggregate, a material adverse effect on the
Company. All significant subsidiaries of the Company and their respective
jurisdictions of incorporation are identified in the Company's annual report on
Form 10-K for the fiscal year ended March 31, 1998 (the "Company 10-K").

(b) Except as set forth in the Company SEC Documents filed prior to the
date hereof, all of the outstanding capital stock of, or other voting securities
or ownership interests in, each subsidiary of the Company, is owned by the
Company, directly or indirectly, free and clear of any Lien and free of any
other limitation or restriction (including any restriction on the right to vote,
sell or otherwise dispose of such capital stock or other voting securities or
ownership interests). There are no outstanding (i) securities of the Company or
any of its subsidiaries convertible into or exchangeable for shares of capital
stock or other voting securities or ownership interests in any subsidiary of the
Company or (ii) options or other rights to acquire from the Company or any of
its subsidiaries, or other obligation of the Company or any of its subsidiaries
to issue, any capital stock or other voting securities or ownership interests
in, or any securities convertible into or exchangeable for any capital stock or
other voting securities or ownership interests in, any subsidiary of the
Company. There are no outstanding obligations of the Company or any of its
subsidiaries to repurchase, redeem or otherwise acquire any of the securities
referred to in clauses (i) or (ii) above.

Section 4.07. SEC Filings. (a) The Company has delivered to Parent (i) the
Company's annual report on Form 10-K for its fiscal year ended March 31, 1998,
(ii) its quarterly reports on Form 10-Q for its fiscal quarters ended

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June 30, 1998, September 30, 1998 and December 31, 1998, (iii) its proxy or
information statements relating to meetings of, or actions taken without a
meeting by, the stockholders of the Company held since March 31, 1998 and (iv)
all of its other reports, statements, schedules and registration statements
filed with the SEC pursuant to the 1933 Act or the 1934 Act, as the case may be,
since March 31, 1998 (the documents referred to in this Section 4.07(a),
-------
collectively, the "Company SEC Documents"). The Company's quarterly report on
Form 10-Q for its fiscal quarter ended December 31, 1998 is referred to herein
as the "Company 10-Q".

(b) As of its filing date, each Company SEC Document complied as to form in
all material respects with the applicable requirements of the 1933 Act or the
1934 Act, as the case may be. Each Company SEC Document filed pursuant to the
1934 Act did not, as of its filing date, and each Company SEC Document filed
pursuant to the 1933 Act did not, as of the date it became effective, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.

Section 4.08. Financial Statements. The audited consolidated financial
statements and unaudited consolidated interim financial statements of the
Company included in the Company SEC Documents fairly present in all material
respects, in conformity with generally accepted accounting principles ("GAAP")
applied on a consistent basis (except as may be indicated in the notes thereto),
the consolidated financial position of the Company and its consolidated
subsidiaries as of the dates thereof and their consolidated results of
operations and cash flows for the periods then ended (subject to normal year-end
adjustments in the case of any unaudited interim financial statements). For
purposes of this Agreement, "Company Balance Sheet" means the consolidated
balance sheet of the Company and its consolidated subsidiaries as of December
31, 1998 as set forth in the Company 10-Q and "Company Balance Sheet Date" means
December 31, 1998.

Section 4.09. Disclosure Documents. (a) Each document required to be filed
by the Company with the SEC or required to be distributed or otherwise
disseminated by the Company to the Company's stockholders in connection with the
transactions contemplated by this Agreement (the "Company Disclosure
Documents"), including, without limitation, the Schedule 14D-9, the proxy or
information statement of the Company (the "Company Proxy Statement"), if any, to
be filed with the SEC in connection with the Merger, and any amendments or
supplements thereto, when filed, distributed or disseminated, as applicable,
will comply as to form in all material respects with the applicable requirements
of the 1934 Act.

(b) (i) The Company Proxy Statement, as supplemented or amended, if
applicable, at the time such Company Proxy Statement or any amendment or
supplement thereto is first mailed to stockholders of the Company and at the
time such stockholders vote on adoption of this Agreement and at the Effective
Time, and (ii) any Company Disclosure Document (other than the Company Proxy
Statement), at the time of the filing of such Company Disclosure Document or any
supplement or amendment thereto and at the time of any distribution or
dissemination thereof, will not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
made therein, in the light of the circumstances under which they were made, not
misleading. The representations and warranties contained in this Section will
not apply to statements or omissions included in the Company Disclosure
Documents based upon information furnished to the Company in writing by Parent
specifically for use therein.

(c) The information with respect to the Company or any of its subsidiaries
that the Company furnishes to Parent in writing specifically for use in the
Offer Documents, at the time of the filing thereof, at the time of any
distribution or dissemination thereof and at the time of the consummation of the
Offer, will not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.

Section 4.10. Absence of Certain Changes. Since the Company Balance Sheet
Date, (i) the business of the Company and its subsidiaries has been conducted in
the ordinary course consistent with past practices and (ii) except as disclosed
in the Company SEC Documents filed prior to the date hereof and except for
developments relating to

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matters described under Part 1, Item 3 (Legal Proceedings) (other than the last
paragraph thereof) of the Company 10-K, there has not been:

(a) any event, occurrence, development or state of circumstances or facts
that has had or would reasonably be expected to have, individually or in the
aggregate, a material adverse effect on the Company;

(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company, or any
repurchase, redemption or other acquisition by the Company or any of its
subsidiaries of any outstanding shares of capital stock or other securities of,
or other ownership interests in, the Company or any of its subsidiaries, except
in the administration of its stock option plans consistent with past practice;

(d) any incurrence, assumption or guarantee by the Company or any of its
subsidiaries of any material indebtedness for borrowed money other than in the
ordinary course of business and in amounts and on terms consistent with past
practices;

(e) any creation or other incurrence by the Company or any of its
subsidiaries of any Lien on any material asset other than in the ordinary course
of business consistent with past practices;

(f) any making of any material loan, advance or capital contributions to or
investment in any person other than loans, advances or capital contributions to
or investments in its wholly-owned subsidiaries in the ordinary course of
business consistent with past practices;

(g) any damage, destruction or other casualty loss (whether or not covered
by insurance) affecting the business or assets of the Company or any of its
subsidiaries that would have, individually or in the aggregate, a material
adverse effect on the Company;

(h) any transaction or commitment made, or any contract or agreement
entered into, by the Company or any of its subsidiaries relating to its assets
or business (including the acquisition or disposition of any assets) or any
relinquishment by the Company or any of its subsidiaries of any contract or
other right, in either case, material to the Company and its subsidiaries, taken
as a whole, other than transactions and commitments in the ordinary course of
business consistent with past practices and those contemplated by this
Agreement;

(i) any material change in any method of accounting or accounting
principles or practice by the Company or any of its subsidiaries, except for any
such change required by reason of a concurrent change in GAAP or Regulation S-X
under the 1934 Act;

(j) any (i) grant of any severance or termination pay to (or amendment to
any existing arrangement with) any director or officer of the Company or any of
its significant subsidiaries, (ii) increase in benefits payable under any
existing severance or termination pay policies or employment agreements, (iii)
entering into any employment, deferred compensation or other similar agreement
(or any amendment to any such existing agreement) with any director or officer
of the Company or any of its significant subsidiaries, (iv) establishment,
adoption or amendment (except as required by applicable law) of any collective
bargaining, bonus, profit-sharing, thrift, pension, retirement, deferred
compensation, compensation, stock option, restricted stock or other benefit plan
or arrangement covering any director or officer of the Company or any of its
significant subsidiaries or (v) increase in compensation, bonus or other
benefits payable to any director or officer of the Company or any of its
significant subsidiaries, other than in the ordinary course of business
consistent with past practice; or

(k) any material labor dispute, other than routine individual grievances,
or any activity or proceeding by a labor union or representative thereof to
organize any employees of the Company or any of its subsidiaries, which
employees were not subject to a collective bargaining agreement at the Company
Balance Sheet Date, or any material lockouts, strikes, slowdowns, work stoppages
or threats thereof by or with respect to such employees.

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Section 4.11. No Undisclosed Material Liabilities. There are no liabilities
or obligations of the Company or any of its subsidiaries required to be
disclosed on a consolidated balance sheet of the Company and its consolidated
subsidiaries prepared in accordance with GAAP, other than:

(a) liabilities or obligations disclosed or provided for in the Company
Balance Sheet or in the notes thereto or in the Company SEC Documents filed
prior to the date hereof or in connection with developments relating to matters
described under Part 1, Item 3 (Legal Proceedings) (other than the last
paragraph thereof) of the Company 10-K;

(b) liabilities or obligations incurred in the ordinary course of business
since the Company Balance Sheet Date;

(c) liabilities or obligations that would not reasonably be expected to
have, individually or in the aggregate, a material adverse effect on the
Company; and

(d) liabilities or obligations under this Agreement or incurred in
connection with the transactions contemplated hereby.

Section 4.12. Compliance with Laws and Court Orders. Except as disclosed in
the Company SEC Documents filed prior to the date hereof, the Company and each
of its subsidiaries is and has been in compliance with all applicable laws,
rules, regulations, judgments, injunctions, orders or decrees, except for such
matters as would not reasonably be expected to have, individually or in the
aggregate, a material adverse effect on the Company.

Section 4.13. Litigation. Except as set forth in the Company SEC Documents
filed prior to the date hereof, there is no action, suit, investigation or
proceeding pending against, or, to the knowledge of the Company, threatened
against or affecting, the Company, any of its subsidiaries or any of their
respective properties before any court or arbitrator or before or by any
governmental body, agency or official, domestic or foreign, that would
reasonably be expected to have, individually or in the aggregate, a material
adverse effect on the Company.

Section 4.14. Finders' Fees. Except for Simmons & Company International, a
copy of whose engagement agreement has been provided to Parent, there is no
investment banker, broker, finder or other intermediary that has been retained
by or is authorized to act on behalf of the Company or any of its subsidiaries
who might be entitled to any fee or commission from the Company or any of its
affiliates in connection with the transactions contemplated by this Agreement.

Section 4.15. Opinion of Financial Advisor. The Company has received the
opinion of Simmons & Company International, financial advisor to the Company, to
the effect that, as of the date of this Agreement, the consideration to be paid
in the Offer and the Merger is fair to the Company's stockholders (other than
Parent) from a financial point of view; it being understood and acknowledged by
Parent that such opinion has been rendered for the benefit of the Board of
Directors of the Company, and is not intended to, and may not, be relied upon by
Parent or its stockholders.

ARTICLE 5

Representations and Warranties of Parent

Except as disclosed to Company in writing prior to the date hereof, Parent
represents and warrants to the Company that:

Section 5.01. Corporate Existence and Power. Parent is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all corporate powers and all governmental
licenses, authorizations, permits, consents and approvals required to carry on
its business as now conducted, except for such matters as would not have,
individually or in the aggregate, a material adverse effect on Parent. Parent is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction where such qualification is necessary, except for those
jurisdictions where the failure to be so qualified would not have,

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individually or in the aggregate, a material adverse effect on Parent. Parent
has heretofore delivered to the Company true and complete copies of the
certificate of incorporation and bylaws of Parent as currently in effect.

Section 5.02. Corporate Authorization. (a) The execution, delivery and
performance by Parent of this Agreement and the consummation by Parent of the
transactions contemplated hereby are within the corporate powers of Parent and
have been duly authorized by all necessary corporate action on the part of
Parent. This Agreement constitutes a valid and binding agreement of each of
Parent.

Section 5.03. Governmental Authorization. The execution, delivery and
performance by Parent and Merger Subsidiary of this Agreement and the
consummation by Parent and Merger Subsidiary of the transactions contemplated
hereby require no action by or in respect of, or filing with, any governmental
body, agency, official or authority, domestic or foreign, other than (i) the
filing and recordation in the Public Registry Office of the Republic of Panama
of the Certificate of Merger, (ii) compliance with any applicable requirements
of the 1934 Act or any other securities laws (whether state or foreign) or any
applicable provisions of Panama Law (including Executive Decree No. 18 of March
14, 1994 of the Republic of Panama), and (iii) any actions or filings the
absence of which would not reasonably be expected to have, individually or in
the aggregate, a material adverse effect on Parent or materially to impair the
ability of Parent and Merger Subsidiary to consummate the transactions
contemplated by this Agreement.

Section 5.04. Non-Contravention. The execution, delivery and performance by
Parent of this Agreement and the consummation by Parent of the transactions
contemplated hereby do not and will not (i) contravene, conflict with, or result
in any violation or breach of any provision of the certificate of incorporation
or bylaws of Parent, (ii) assuming compliance with the matters referred to in
Section 5.03, contravene, conflict with or result in a violation or breach of
----
any provision of any law, rule, regulation, judgment, injunction, order or
decree, (iii) require any consent or other action by any person under,
constitute a default under, or cause or permit the termination, cancellation,
acceleration or other change of any right or obligation or the loss of any
benefit to which Parent or any of its subsidiaries is entitled under any
provision of any agreement or other instrument binding upon Parent or any of its
subsidiaries or any license, franchise, permit, certificate, approval or other
similar authorization affecting, or relating in any way to, the assets or
business of the Parent and its subsidiaries or (iv) result in the creation or
imposition of any Lien on any asset of the Parent or any of its subsidiaries,
except, in the case of clauses (ii), (iii) and (iv), for such matters as would
not reasonably be expected to have, individually or in the aggregate, a material
adverse effect on Parent or materially to impair the ability of Parent and
Merger Subsidiary to consummate the transactions contemplated by this Agreement.

Section 5.05. Disclosure Documents. (a) The information with respect to
Parent and any of its subsidiaries that Parent furnishes to the Company in
writing specifically for use in any Company Disclosure Document will not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading (i) in the case of the
Company Proxy Statement, as supplemented or amended, if applicable, at the time
such Company Proxy Statement or any amendment or supplement thereto is first
mailed to stockholders of the Company and at the time such stockholders vote on
adoption of this Agreement, and (ii) in the case of any Company Disclosure
Document other than the Company Proxy Statement, at the time of the filing of
such Company Disclosure Document or any supplement or amendment thereto and at
the time of any distribution or dissemination thereof.

(b) The Offer Documents, when filed, distributed or disseminated, as
applicable, will comply as to form in all material respects with the applicable
requirements of the 1934 Act and, at the time of the filing thereof, at the time
of any distribution or dissemination thereof and at the time of consummation of
the Offer, will 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
light of the circumstances under which they were made, not misleading, provided
that this representation and warranty will not apply to statements or omissions
included in the Offer Documents based upon information furnished to Parent or
Merger Subsidiary in writing by the Company specifically for use therein.

Section 5.06. Finders' Fees. Except for Merrill Lynch, Pierce, Fenner &
Smith Incorporated, whose fee will be paid by Parent, there is no investment
banker, broker, finder or other intermediary that has been retained by or is

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authorized to act on behalf of Parent who might be entitled to any fee or
commission from Parent or any of its affiliates in connection with the
transactions contemplated by this Agreement.

Section 5.07. Financing. At the expiration of the Offer, the Merger
Subsidiary will have available cash sufficient to consummate the Offer and the
Merger and to pay all expenses in connection with the transactions contemplated
hereby.

ARTICLE 6

Covenants of the Company

The Company agrees that:

Section 6.01. Conduct of the Company. From the date hereof until the
Effective Time, the Company and its subsidiaries shall conduct their business in
the ordinary course consistent with past practice and shall use commercially
reasonable efforts to preserve intact their business organizations and
relationships with third parties and to keep available the services of their
present officers and employees. Without limiting the generality of the
foregoing, from the date hereof until the Effective Time, without the prior
written consent of Parent:

(a) the Company will not adopt or propose any change to its certificate of
incorporation or bylaws;

(b) the Company will not, and will not permit any of its subsidiaries to,
merge or consolidate with any other person or acquire a material amount of stock
or assets of any other person;

(c) the Company will not, and will not permit any of its subsidiaries to,
sell, lease, license or otherwise dispose of any significant subsidiary or any
material amount of assets or property except (i) pursuant to existing contracts
or commitments and (ii) in the ordinary course consistent with past practice;

(d) the Company will not, and will not permit any of its subsidiaries to,
take any action that would make any representation and warranty of the Company
hereunder inaccurate in any respect at, or as of any time prior to, the
Effective Time; and

(e) the Company will not, and will not permit any of its subsidiaries to,
agree or commit to do any of the foregoing.

Section 6.02. Stockholder Meeting; Proxy Material. (a) The Company shall
cause a meeting of its stockholders (the "Company Stockholder Meeting") to be
duly called and held as soon as reasonably practicable after consummation of the
Offer for the purpose of voting on the approval and adoption of this Agreement
and the Merger. In connection with such meeting, the Company will, if required
by law, (i) promptly prepare and file with the SEC, use its best efforts to have
cleared by the SEC and thereafter mail to its stockholders as promptly as
practicable the Company Proxy Statement and related proxy materials for such
meeting, (ii) use its commercially reasonable efforts to obtain the necessary
approvals by its stockholders of this Agreement and the transactions
contemplated hereby and (iii) otherwise comply with all legal requirements
applicable to such meeting.

(b) Except as provided in the next sentence, the Board of Directors of the
Company shall recommend the Offer and the approval and adoption of this
Agreement and the Merger by the Company's stockholders. The Independent
Committee of the Board of Directors of the Company (the "Independent Committee")
shall be permitted to withdraw, or modify in a manner adverse to Parent, its
recommendation to its stockholders, but only if (i) the Company has complied
with the terms of Section 6.03, (ii) the Independent Committee determines in
----
good faith (after consultation with independent legal counsel) that failure to
take such action would be reasonably likely to be inconsistent with its
fiduciary duties under applicable law and (iii) the Independent Committee shall
have delivered to Parent a prior written notice advising Parent that it intends
to take such action. Nothing contained in this Agreement shall prevent the Board
of Directors of the Company from complying with Rule 14e-2 under the 1934 Act
with respect

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to any Acquisition Proposal. "Acquisition Proposal" means any offer or proposal
for a merger, consolidation, share exchange, business combination or other
similar transaction involving the Company or any of its subsidiaries or the
acquisition of any substantial equity interest in or substantial portion of the
assets of the Company or any of its subsidiaries, other than the transactions
contemplated by this Agreement.

Section 6.03. No Solicitation. (a) From the date hereof until the
termination hereof, the Company will not, and will cause its subsidiaries and
the officers, directors, employees and other agents and advisors of the Company
and its subsidiaries not to, directly or indirectly, (i) take any action to
solicit, initiate or encourage the submission of any Acquisition Proposal or
(ii) disclose any nonpublic information relating to, or afford access to the
properties, books or records of, the Company or any of its subsidiaries to, or
engage in any discussions or negotiations with, any person who is considering
making or has made an Acquisition Proposal; provided that the Company may
furnish nonpublic information or afford access to properties, books and records
to any person who is considering making or has made an Acquisition Proposal and
may negotiate or otherwise engage in substantive discussions with any person who
has made an Acquisition Proposal if (w) the Company has complied with the
foregoing terms of this Section 6.03, (x) the Independent Committee determines
----
in good faith (after consultation with independent legal counsel) that failure
to take such action would be reasonably likely to be inconsistent with its
fiduciary duties under applicable law, (y) such person executes a
confidentiality agreement on terms no less favorable to the Company than those
contained in Section 8.07 and (z) the Company shall have delivered to Parent a
----
prior written notice advising Parent that it intends to take such action.

(b) The Company will notify Parent promptly (but in no event later than 24
hours) after receipt by the Company (or any of its advisors) of any Acquisition
Proposal or any request for nonpublic information relating to, or access to the
properties, books or records of, the Company or any of its subsidiaries by any
person who is considering making or has made an Acquisition Proposal. The
Company shall identify the person making, and the terms and conditions of, any
such Acquisition Proposal or request. The Company shall keep Parent fully
informed, on a current basis, of the status and details of any such Acquisition
Proposal or request. The Company shall, and shall cause its subsidiaries and the
officers, directors, employees and other agents and advisors of the Company and
its subsidiaries to, cease immediately and cause to be terminated all
activities, discussions or negotiations, if any, with any persons conducted
prior to the date hereof with respect to any Acquisition Proposal.

ARTICLE 7

Covenants of Parent

Parent agrees that:

Section 7.01. Certain Obligations of Parent. Parent will take all action
necessary to cause Merger Subsidiary to be organized and to become a party to
this Agreement as promptly as practicable and to perform its obligations under
this Agreement and to consummate the Offer and the Merger on the terms and
conditions set forth in this Agreement. The Parent will not, and will cause its
subsidiaries not to, directly or indirectly, take any action to knowingly cause
the Company to violate its representations, warranties or covenants under this
Agreement;

Section 7.02. Voting of Shares. Parent agrees to vote all shares of Common
Stock and Preferred Stock beneficially owned by it in favor of adoption of this
Agreement and the Merger at the Company Stockholder Meeting.

Section 7.03. Director and Officer Liability. Parent shall cause the
Surviving Corporation, and the Surviving Corporation hereby agrees, to do the
following :

(a) After the Effective Time, the Surviving Corporation shall indemnify
and hold harmless the present and former officers and directors of the Company
(each an "Indemnified Person") in respect of acts or omissions occurring at or
prior to the Effective Time to the extent required under Panama Law or provided
under the Company's certificate of incorporation and bylaws or any agreement any
Indemnified Person may have with the Company, in each

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case, as in effect on the date hereof; provided that such indemnification shall
be subject to any limitation imposed from time to time under applicable law.

(b) For six years after the Effective Time, the Surviving Corporation
shall provide officers' and directors' liability insurance in respect of acts or
omissions occurring prior to the Effective Time covering each such Indemnified
Person currently covered by the Company's officers' and directors' liability
insurance policy on terms with respect to coverage and amount no less favorable
than those of such policy in effect on the date hereof, provided that, in
satisfying its obligation under this Section 7.03(b), the Surviving Corporation
-------
shall not be obligated to pay premiums in excess of 200% of the amount per annum
the Company paid in its last full fiscal year, which amount Company has
disclosed to Parent prior to the date hereof.

(c) In the event the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other person and is not the
continuing or surviving corporation or entity of that consolidation or merger or
(ii) transfers all or substantially all its properties and assets to any person,
then and in each such case the Surviving Corporation will cause proper
provisions to be made so that the successors and assigns of the Surviving
Corporation assume the obligations set forth in this Section 7.03.
----

(d) The rights of each Indemnified Person under this Section 7.03 shall be
----
in addition to any rights such person may have under the certificate of
incorporation or bylaws of the Company or any of its subsidiaries, under Panama
Law or under any agreement any Indemnified Person may have with the Company.
These rights shall survive consummation of the Merger and are intended to
benefit, and shall be enforceable by, each Indemnified Person.

ARTICLE 8

Covenants of Parent and the Company

The parties hereto agree that:

Section 8.01. Best Efforts. Subject to the terms and conditions of this
Agreement, Company and Parent will use their 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 applicable laws and regulations to consummate the
transactions contemplated by this Agreement.

Section 8.02. Certain Filings. The Company and Parent shall cooperate with
one another (i) in connection with the preparation of the Company Disclosure
Documents and the Offer Documents, (ii) in determining whether any action by or
in respect of, or filing with, any governmental body, agency, official, or
authority is required, or any actions, consents, approvals or waivers are
required to be obtained from parties to any material contracts, in connection
with the consummation of the transactions contemplated by this Agreement and
(iii) in taking such actions or making any such filings, furnishing information
required in connection therewith or with the Company Disclosure Documents or the
Offer Documents and seeking timely to obtain any such actions, consents,
approvals or waivers.

In connection with such cooperation, Parent and the Company will (i) not
agree to participate in any meeting or discussion with any governmental
authority in respect of any filings, investigation or other inquiry concerning
this Agreement or the Offer or the Merger unless it consults with the other
party in advance and, to the extent permitted by such governmental authority,
gives representatives of the Independent Committee the opportunity to attend and
participate thereat and (ii) furnish the other party and representatives of the
Independent Committee with copies of all correspondence, filings and
communications between them and their affiliates and their respective
representatives, on the one hand, and any government or regulatory authority or
members or their respective staffs, on the other hand, with respect to this
Agreement or the Offer or the Merger.

Section 8.03. Public Announcements. Parent and the Company will consult
with each other before issuing any press release or making any public statement
with respect to this Agreement or the transactions contemplated hereby and,
except as may be required by applicable law or any listing agreement with any
national securities exchange, will not issue any such press release or make any
such public statement prior to such consultation.

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Section 8.04. Further Assurances. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or Merger
Subsidiary, any deeds, bills of sale, assignments or assurances and to take and
do, in the name and on behalf of the Company or Merger Subsidiary, any other
actions and things to vest, perfect or confirm of record or otherwise in the
Surviving Corporation any and all right, title and interest in, to and under any
of the rights, properties or assets of the Company acquired or to be acquired by
the Surviving Corporation as a result of, or in connection with, the Merger.

Section 8.05. Access to Information. From the date hereof until the
Effective Time and subject to the provisions of applicable law and Section 8.07,
----
the Company shall (i) give to Parent and its authorized representatives
reasonable access to the offices, properties, books and records of the Company
and such financial and other information as may reasonably be requested and (ii)
instruct its authorized representatives to cooperate with the other party in its
investigation. Any investigation pursuant to this Section 8.05 shall be
----
conducted in such manner as not to interfere unreasonably with the conduct of
the business of the other party. No information or knowledge obtained in any
investigation pursuant to this Section 8.05 shall affect or be deemed to modify
----
any representation or warranty made by any party hereunder.

Section 8.06. Notices of Certain Events. Each of the Company and Parent
shall promptly notify the other of:

(a) any notice or other communication from any person alleging that the
consent of such person is or may be required in connection with the transactions
contemplated by this Agreement;

(b) any notice or other communication from any governmental or regulatory
agency or authority in connection with the transactions contemplated by this
Agreement; and

(c) any actions, suits, claims, investigations or proceedings commenced
or, to its knowledge, threatened against, relating to or involving or otherwise
affecting the Company or any of its subsidiaries that, if pending on the date of
this Agreement, would have been required to have been disclosed pursuant to
Section 4.13 or that relate to the consummation of the transactions contemplated
by this Agreement.

Section 8.07. Confidentiality. Prior to the Effective Time and after any
termination of this Agreement, each of Parent and the Company will hold, and
will use its best efforts to cause its officers, directors, employees and other
agents or advisors to hold, in confidence, unless compelled to disclose by
judicial or administrative process or by other requirements of law, all
confidential documents and information concerning the other party furnished to
it or its affiliates or any of their agents or advisors in connection with the
transactions contemplated by this Agreement, except to the extent that such
information can be shown to have been (i) previously known on a nonconfidential
basis by such party, (ii) in the public domain through no fault of such party or
(iii) later lawfully acquired by such party on a nonconfidential basis from
sources other than the other party, provided that each of Parent and the Company
may disclose such information to its officers, directors, employees and other
agents or advisors in connection with the transactions contemplated by this
Agreement so long as such party informs such persons of the confidential nature
of such information and directs them to treat it confidentially. Each of Parent
and the Company shall satisfy its obligation to hold any such information in
confidence if it exercises the same care with respect to such information as it
would take to preserve the confidentiality of its own similar information. If
this Agreement is terminated, each of Parent and the Company will, and will use
its best efforts to cause its officers, directors, employees and other agents
and advisors to, destroy or deliver to the other party, upon request, all
documents and other materials, and all copies thereof, that it or its affiliates
or any of their agents or advisors obtained, or that were obtained on their
behalf, from the other party in connection with this Agreement and that are
subject to such confidence.

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ARTICLE 9
Conditions to the Merger

Section 9.01. Conditions to Obligations of Each Party. The respective
obligations of the Company, Parent and Merger Subsidiary to consummate the
Merger are subject to the satisfaction of the following conditions:

(a) this Agreement shall have been approved and adopted by the
stockholders of the Company in accordance with Panama Law and applicable listing
requirements;

(b) Merger Subsidiary shall have purchased shares of Common Stock pursuant
to the Offer;

(c) no preliminary or permanent injunction or other order, decree or
ruling by any court or governmental body or regulatory authority in the United
States or the Republic of Panama which prevents consummation of the Merger or
the payment of the Merger Consideration shall have been issued and remain in
effect (each party agreeing to use its reasonable efforts to have any such
injunction, order, decree or ruling lifted); and

(d) no statute, rule or regulation of any government or governmental
agency in the United States or the Republic of Panama shall prevent the
consummation of the Merger or the payment of the Merger Consideration or make
the consummation of the Merger or the payment of the Merger Consideration
illegal.

ARTICLE 10

Termination

Section 10.01. Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time (notwithstanding any
approval of this Agreement by the stockholders of the Company):

(a) by mutual written agreement of the Company and Parent;

(b) by either the Company or Parent, if:

(i) the Offer has not been consummated on or before July 31, 1999,
provided that the right to terminate this Agreement pursuant to this
Section 10.01(b)(i) shall not be available to any party whose breach of any
-----------
provision of this Agreement results in the failure of the Offer to be
consummated by such time; or

(ii) there shall be any law or regulation that makes acceptance for
payment of, and payment for, the shares of Common Stock pursuant to the
Offer or consummation of the Merger illegal or otherwise prohibited or any
judgment, injunction, order or decree of any court or governmental body
having competent jurisdiction enjoining Merger Subsidiary from accepting
for payment of, and paying for, the shares of Common Stock pursuant to the
Offer or Company or Parent from consummating the Merger and such judgment,
injunction, order or decree shall have become final and nonappealable;
provided, however, that the party seeking to terminate this Agreement
pursuant to this clause (ii) shall have used commercially reasonable best
efforts to remove any such judgment, injunction, order or decree; or

(c) by Parent, if prior to the acceptance for payment of shares of Common
Stock under the Offer, (i) the Board of Directors of the Company shall have
failed to recommend, or shall have withdrawn or modified in a manner adverse to
Parent its approval or recommendation of the Offer or the Merger or (ii) the
Company shall have failed to perform in all material respects its obligations
hereunder.

The party desiring to terminate this Agreement pursuant to this Section
10.01 (other than pursuant to Section 10.01(a)) shall give notice of such
- ---- --------
termination to the other party.

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Section 10.02. Effect of Termination. If this Agreement is terminated
pursuant to Section 10.01, this Agreement shall become void and of no effect
-----
without liability of any party (or any stockholder, director, officer, employee
or other agent or advisor of such party) to the other party hereto, provided
that, if such termination shall result from the willful (i) failure of either
party to fulfill a condition to the performance of the obligations of the other
party or (ii) failure of either party to perform a covenant hereof, such party
shall be fully liable for any and all liabilities and damages incurred or
suffered by the other party as a result of such failure. The provisions of
Sections 8.03, 8.06(c) and 8.07 and Article 11 shall survive any termination
---- ---- ---- --
hereof pursuant to Section 10.01.
-----
ARTICLE 11

Miscellaneous

Section 11.01. Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including facsimile transmission) and
shall be given,

if to Parent or Merger Subsidiary, to:

McDermott International Inc.
1450 Poydras Street
P.O. Box 61961 - 70112
New Orleans, LA 70161-1961
Attention: S. Wayne Murphy
Facsimile: (504) 587-6153

with a copy to:

Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Christopher Mayer
Fax: (212) 450-4800

if to the Company, to:

J. Ray McDermott, S.A.
801 North Eldridge Street
Houston, Texas 77079
Attention: R.H. "Bobby" Rawle
Facsimile: (281) 870-5125

with copies to:

c/o Wm. J. Johnson Associates
9545 Katy Freeway
Suite 470
Houston, Texas 77024
Attention: William J. Johnson
Facsimile: (713) 461-6195

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Baker & Botts, L.L.P.
One Shell Plaza
Houston, Texas 77002-4995
Attention: R. Joel Swanson, Esq.
Facsimile: (713) 229-1330

or such other address or facsimile number as such party may hereafter specify
for the purpose by notice to the other parties hereto. All such notices,
requests and other communications shall be deemed received on the date of
receipt by the recipient thereof if received prior to 5 p.m. on any business
day. Otherwise, any such notice, request or communication shall be deemed not to
have been received until the next succeeding business day.

Section 11.02. Survival of Representations and Warranties. The
representations and warranties and agreements contained herein shall not survive
the Effective Time, except for the agreements set forth in Sections 7.03 and
----
8.07 and Article 11.
- ---- --

Section 11.03. Amendments; No Waivers. (a) Any provision of this Agreement
may be amended or waived prior to the Effective Time if, but only if, such
amendment or waiver is in writing and is signed, in the case of an amendment, by
each party to this Agreement or, in the case of a waiver, by each party against
whom the waiver is to be effective, provided that, after the adoption of this
Agreement by the stockholders of the Company and without their further approval,
no such amendment or waiver shall reduce the amount or change the kind of
consideration to be received in exchange for any shares of capital stock of the
Company.

(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.

Section 11.04. Expenses. (a) Except as otherwise provided in this Section,
all costs and expenses incurred in connection with this Agreement shall be paid
by the party incurring such cost or expense.

(b) The Company agrees to pay Parent a fee in immediately available funds
equal to $10 million promptly, but in no event later than two business days,
after the termination of this Agreement by Parent pursuant to Section 10.01(c):
--------

Section 11.05. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the prior written consent of each other party hereto, except that Parent
or Merger Subsidiary may transfer or assign, in whole or from time to time in
part, to one or more of their affiliates, the right to enter into the
transactions contemplated by this Agreement, but any such transfer or assignment
will not relieve Parent or Merger Subsidiary of its obligations hereunder.

Section 11.06. Governing Law. Except to the extent that Panama Law is
mandatorily applicable to this Agreement, this Agreement shall be governed by
and construed in accordance with the laws of the State of New York (without
regard to the conflicts of law rules of such state).

Section 11.07. Jurisdiction. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions contemplated hereby may be brought in
any federal court located in the State of New York or any New York state court,
and each of the parties hereby consents to the jurisdiction of such courts (and
of the appropriate appellate courts therefrom) in any such suit, action or
proceeding and irrevocably waives, to the fullest extent permitted by law, any
objection that it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding in any such court or that any such suit, action
or proceeding brought in any such court has been brought in an inconvenient
form. Process in any such suit, action or proceeding may be served on any party
anywhere in the world, whether within or without the jurisdiction of any such

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court. Without limiting the foregoing, each party agrees that service of process
on such party as provided in Section 11.01 shall be deemed effective service of
process on such party.

SECTION 11.08. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.

SECTION 11.09. Counterparts; Effectiveness. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto. Except as
provided in Section 7.03, no provision of this Agreement is intended to confer
any rights, benefits, remedies, obligations or liabilities hereunder upon any
person other than the parties hereto and their respective successors and
assigns.

SECTION 11.10. Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter of this
Agreement and supersedes all prior agreements and understandings, both oral and
written, between the parties with respect to the subject matter of this
Agreement.

SECTION 11.11. Captions. The captions herein are included for convenience
of reference only and shall be ignored in the construction or interpretation
hereof.

SECTION 11.12. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon such
a determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner so that the transactions contemplated hereby be
consummated as originally contemplated to the fullest extent possible.

SECTION 11.13. Specific Performance. The parties hereto agree that
irreparable damage would occur if any provision of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
or to enforce specifically the performance of the terms and provisions hereof in
any federal court located in the State of New York or any New York state court,
in addition to any other remedy to which they are entitled at law or in equity.

SECTION 11.14. Definitions and Usage. (a) For purposes of this Agreement:

"affiliate" means, with respect to any person, any other person directly or
indirectly controlling, controlled by, or under common control with such person.

"material adverse effect" means, with respect to any person means a
material adverse effect on the business, assets, financial condition or results
of operations of such person and its subsidiaries, taken as a whole, except any
such effect resulting from or arising in connection with (i) this Agreement or
the transactions contemplated hereby, (ii) changes in conditions affecting the
marine construction industries generally or (iii) changes in economic,
regulatory or political conditions generally.

"person" means an individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.

"significant subsidiary" means any subsidiary that constitutes a
"significant subsidiary" of any person within the meaning of Rule 1-02 of
Regulation S-X under the 1934 Act.

A-19
<PAGE>

"subsidiary" means, with respect to any person, any entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are at any time directly or indirectly owned by such person.

(b) A reference in this Agreement to any statute shall be to such statute
as amended from time to time, and to the rules and regulations promulgated
thereunder.

Term Section
---- -------
1933 Act..................................................... 2.04(b)
-------
1934 Act..................................................... 2.05(d)
-------
1994 Plan.................................................... 2.05(a)
-------
Acquisition Proposal......................................... 6.02(b)
-------
Adjusted Option.............................................. 2.04(a)
-------
affiliate.................................................... 11.14(a)
--------
Certificate of Merger........................................ 2.01(b)
-------
Certificates................................................. 2.03(a)
-------
Common Share Price........................................... 1.01(a)
-------
Common Stock................................................. 1.01(a)
-------
Company...................................................... Recitals

Company 10-K................................................. 4.06(a)
-------
Company 10-Q................................................. 4.07(a)
-------
Company Balance Sheet........................................ 4.08
----
Company Balance Sheet Date................................... 4.08
----
Company Disclosure documents................................. 4.09(a)
-------
Company Proxy Statement...................................... 4.09(a)
-------
Company SEC Documents........................................ 4.07(a)
-------
Company Stockholder Meeting.................................. 6.02(a)
-------
Company Stock Option......................................... 2.04(a)
-------
Effective Time............................................... 2.01(b)
-------
Exchange Agent............................................... 2.03(a)
-------
GAAP......................................................... 4.08
----
Indemnified Person........................................... 7.03(a)
-------
Independent Committee........................................ 6.02(b)
-------
Lien......................................................... 4.04
----
material adverse effect...................................... 11.14(a)
--------
Merger....................................................... 2.01(a)
-------
Merger Consideration......................................... 2.02(a)
-------
Merger Subsidiary............................................ 1.01(a)
-------
Minimum Condition............................................ 1.01(a)
-------
Offer........................................................ 1.01(a)
-------
Offer Documents.............................................. 1.01(a)
-------
Panama Law................................................... 1.02(a)
-------
Parent....................................................... Recitals

Parent Stock................................................. 2.04(a)

Performance Shares........................................... 2.05(b)
-------
person....................................................... 11.14(a)
--------
Preferred Stock.............................................. 4.02(a)

Replacement Performance Award................................ 2.05(b)
-------
Replacement Restricted Award................................. 2.05(a)
-------
Restricted Shares............................................ 2.05(a)
-------

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<PAGE>

Schedule 14D-1............................................... 1.01(b)
-------
Schedule 14D-9............................................... 1.02(b)
-------
SEC.......................................................... 1.01(b)
significant subsidiary....................................... 11.14(a)
--------
subsidiary................................................... 11.14(a)
--------
Surviving Corporation........................................ 2.01(a)
-------

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<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.

J. RAY MCDERMOTT, S.A.

By: /s/ R. H. Rawle
--------------------------------
Name: R. H. Rawle
Title: President and
Chief Operating Officer

MCDERMOTT INTERNATIONAL, INC.

By: /s/ Roger E. Tetrault
--------------------------------
Name: Roger E. Tetrault
Title: Chairman and
Chief Executive Officer

A-22
<PAGE>

ANNEX I
TO ANNEX A

Notwithstanding any other provision of the Offer, Merger Subsidiary shall
not be required to accept for payment or pay for any shares of Common Stock, and
may, subject to the terms of this Agreement, terminate the Offer, if (i) at the
expiration of the Offer, the Minimum Condition has not been satisfied or (ii) at
any time on or after May 7, 1999 and prior to the acceptance for payment of
shares of Common Stock, any of the following conditions exist:

(a) any injunction, judgment, order or decree of a court of competent
jurisdiction shall have been entered and not withdrawn or any law or regulation
shall exist that prohibits the consummation of the Offer or the Merger; or

(b) the Company shall have breached its representations and warranties set
forth in this Agreement or failed to perform any of its obligations, covenants
or agreements under this Agreement (other than any breaches or failures to
perform that, in the aggregate, do not have a material adverse effect on the
Company); or

Except for the Minimum Condition (which may be waived only with the consent
of the Company, Parent and Merger Subsidiary), the foregoing conditions are for
the sole benefit of Parent and Merger Subsidiary and may, subject to the terms
of this Agreement, be waived by Parent and Merger Subsidiary in whole or in part
at any time and from time to time in their discretion.

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<PAGE>

ASSUMPTION AGREEMENT

McDermott Acquisition Company, Inc., a Panama corporation
("AcquisitionCo."), hereby expressly assumes, and agrees to perform and
discharge, all of the obligations and liabilities of the Merger Subsidiary (as
defined in the Merger Agreement referred to below) under the Agreement and Plan
of Merger (the "Merger Agreement") dated as of May 7, 1999 between J. Ray
McDermott, S.A., a Panama corporation (the "Company"), and McDermott
International, Inc., a Panama corporation ("Parent"). All references in the
Merger Agreement to the "Merger Subsidiary" shall hereafter refer to
AcquisitionCo. and its successors.

Upon the terms and subject to the conditions set forth in the Merger
Agreement, at the Effective Time (as defined in the Merger Agreement),
AcquisitionCo. shall be merged with and into the Company in accordance with
Panama Law, whereupon the separate existence of AcquisitionCo. shall cease, and
the Company shall continue as the surviving corporation. Parent shall not be a
party to any merger pursuant to the Merger Agreement.

IN WITNESS WHEREOF, McDermott Acquisition Company, Inc. has caused its duly
authorized officer to execute and deliver this Assumption Agreement as of May
28, 1999.

MCDERMOTT ACQUISITION COMPANY, INC.

By: /s/ D. R. Gaubert
------------------------------
Name: D. R. Gaubert
Title: Treasurer

Agreed and accepted:

J. RAY MCDERMOTT, S.A.

By: /s/ S. W. Murphy
-----------------------------------
Name: S. W. Murphy
Title: Senior Vice President
and General Council
and Corporate Secretary

MCDERMOTT INTERNATIONAL, INC.

By: /s/ R. E. Tetrault
----------------------------------
Name: R. E. Tetrault
Title: Chairman of the Board and
Chief Executive Offficer

A-24
<PAGE>

ANNEX B

[SIMMONS & COMPANY INTERNATIONAL LETTERHEAD]

May 6, 1999

Independent Committee of the Board of Directors
J. Ray McDermott, S.A.
1450 Poydras Street
New Orleans, LA 70112-6050

Members of the Independent Committee:

You have requested the opinion of Simmons & Company International
("Simmons") as investment bankers as to the fairness, from a financial point of
view, to the holders (the "Public Stockholders") of common stock ("Company
Common Stock") of J. Ray McDermott, S.A. (the "Company"), other than McDermott
International, Inc. ("McDermott") or its affiliates, of the consideration to be
received by them pursuant to the terms of that certain Agreement and Plan of
Merger to be dated May 7, 1999 between the Company and McDermott (the "Merger
Agreement") which, among other things, (i) requires a wholly owned subsidiary
("Newco") of McDermott to offer to purchase all the outstanding shares of
Company Common Stock (other than shares owned by McDermott) at a net cash price
of $35.62 per share (the "Offer") and (ii) provides, following completion of the
Offer, for the merger (the "Merger") of Newco with and into the Company pursuant
to which each then outstanding share of Company Common Stock (other than shares
owned by McDermott and Newco) will be converted into the right to receive $35.62
in cash. Unless the context otherwise requires, references in this opinion to
the Company and McDermott include their respective subsidiaries.

Completion of the Offer is subject, among other things, to the condition
that a majority of the shares of Company Common Stock held by the Public
Stockholders shall have been tendered and not withdrawn (the "Minimum
Condition"). The conditions precedent to completion of the Merger include (i)
completion of the Offer, (ii) approval of the Merger Agreement and the Merger by
the holders (including McDermott and Newco) of two-thirds of the outstanding
shares of Company Common Stock at a meeting of the holders of the Company Common
Stock called for such purpose, (iii) the condition that the Offer shall be
completed on or before July 31, 1999 and (iv) fulfillment of the covenant that
there shall have been no waiver or modification of certain specified Offer
conditions, including no change that waives the Minimum Condition, decreases the
consideration to be paid per share of Company Common Stock or the number of
shares of Company Common Stock sought in the Offer.

Simmons is acting as financial adviser to the Independent Committee of the
Board of Directors of the Company in connection with the Merger Agreement.
Simmons, as a specialized, energy-related investment banking firm, is engaged,
among other things, in the valuation of businesses and their securities in
connection with mergers and acquisitions, in the management and underwriting of
sales of equity and debt to the public and in private placements of equity and
debt. In addition, in the ordinary course of business, Simmons may actively
trade the securities of the Company and McDermott for its own account and for
the accounts of customers and, accordingly, may at any time hold a long or short
position in such securities. Simmons has from time to time been engaged by the
Company and McDermott to provide general corporate financial advisory services.

Before rendering this opinion, Simmons reviewed and analyzed, among other
things, the following: (i) the most recent draft (dated May 5, 1999) of the
Merger Agreement and certain amendments thereto (dated May 6, 1999); (ii) the
financial statements and other information concerning the Company contained in
the Company's Annual Reports on Form 10-K for each of the three fiscal years
ended March 31, 1998, the Company's Quarterly Reports on Form 10-Q for the
quarters ended June 30, 1998, September 30, 1998 and December 31, 1998, the
Company's Current Report on Form 8-K dated July 30, 1998, and the Company's
Proxy Statement dated July 1, 1998; (iii) certain business and financial
information relating to the Company, including certain limited financial
forecasts prepared by management of the Company, provided to Simmons by the
Company; (iv) certain publicly available information concerning the trading of,
and the trading market for, the Company Common Stock; (v) certain publicly
available information with respect to certain other companies that we believe to
be comparable to the Company and the trading markets for certain

B-1
<PAGE>

of such other companies' securities; (vi) certain publicly available information
concerning estimates of the future operating performances of the Company and the
comparable companies prepared by industry analysts unaffiliated with either the
Company or McDermott; and (vii) certain publicly available information
concerning the nature and terms of certain other transactions we considered
relevant to the inquiry. We also met with certain officers and employees of the
Company and McDermott to discuss the foregoing, as well as other matters we
believed to be relevant to this opinion. We were not requested to approach and
we did not approach any unaffiliated persons or entities with respect to the
acquisition of the Company, any of its subsidiaries, any of their assets, or the
shares of Company Common Stock held by the Public Stockholders.

In arriving at this opinion, we, with your consent, assumed and relied upon
the accuracy and completeness of all the foregoing information (other than
financial forecasts) and did not independently verify any of such information.
With respect to the limited financial forecasts, we utilized certain information
set forth therein and assumed that such information was reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
management of the Company as to the future financial performance of the Company.
We did not conduct a physical inspection of any of the assets, operations or
facilities of the Company and did not make or receive any independent evaluation
or appraisal of any assets or liabilities (contingent or otherwise) of the
Company. Without limiting the foregoing, we note that the Company is subject to
the governmental investigations and litigation described in note (6) (the
"HeereMac Litigation") to the interim financial statements of the Company
included in its Quarterly Report on Form 10-Q for the quarter ended December 31,
1998, and that, upon completion of the Merger, the Public Stockholders will be
relieved of the exposure to the potential risk that the Company will be forced
to pay damages in connection with the HeereMac Litigation in excess of any
current accruals therefor. We express no opinion with respect to any matter
relating to any of such litigation.

In conducting our analysis and arriving at our opinion expressed herein, we
considered such financial and other factors as we deemed appropriate under the
circumstances including, without limitation, the following: (i) the historical
and current financial position and results of operations of the Company; (ii)
the business prospects of the Company; (iii) the historical and current market
for the Company Common Stock and for the equity securities of certain other
companies we believed to be comparable to the Company; and (iv) the nature and
terms of certain other acquisition transactions that we believe to be relevant.
In rendering our opinion, we took into account the fact that McDermott owns 63%
of the outstanding Company Common Stock. We also took into account our
assessment of general economic, market and financial conditions and our
experience in connection with similar transactions and securities' valuations
generally. The opinion expressed herein is necessarily based upon conditions as
they exist and can be evaluated on, and on the information made available at,
the date hereof.

In its capacity as financial adviser to the Independent Committee, Simmons
will receive a customary fee for its services which is in part contingent upon
effectuation of the transactions contemplated by the Merger Agreement. This
opinion is for the use and benefit of the Independent Committee. This opinion
does not address the merits of the underlying decision by the Company to enter
into the Merger Agreement and does not constitute a recommendation to any
stockholder as to how such stockholder should respond to the Offer or vote on
the Merger Agreement or Merger or on any matter related thereto. We are not
expressing any opinion herein as to the prices at which the Company Common Stock
will trade following announcement of the Tender Offer or the Merger.

Based upon and subject to the foregoing, we are of the opinion that the
consideration to be received by the Public Stockholders pursuant to the Tender
Offer and the Merger in accordance with the Merger Agreement is fair, from a
financial point of view, to the Public Stockholders.

Very truly yours,

SIMMONS & COMPANY INTERNATIONAL

/s/ Frederick W. Charlton
Frederick W. Charlton
Managing Director

B-2
<PAGE>

ANNEX C

PROPOSED AMENDMENTS
TO THE
CERTIFICATE OF INCORPORATION
OF
J. RAY MCDERMOTT, S.A.

The Certificate of Incorporation of J. Ray McDermott, S.A. is proposed
to be amended by deleting Articles 1 through 12 thereof and substituting in lieu
thereof the following Articles 1 through 14:

1. The name of the corporation is:

J. RAY MCDERMOTT, S.A.

2. The purposes for which the corporation is established are:

(a) To transact the business of investing on behalf of itself or
others, any part of its capital and such additional funds as it may obtain, or
any interest therein, either as tenant in common or otherwise, and selling or
otherwise disposing of the same, or any part thereof, or interest therein.

(b) To subscribe for, or cause to be subscribed for, buy, own, hold,
purchase, receive or acquire, and to sell, negotiate, guarantee, assign, deal
in, exchange, transfer, mortgage, hypothecate, or otherwise dispose of, shares
of the capital stock, scrip, notes, bonds, coupons, mortgages, debentures,
debenture stock, securities, acceptances, drafts, receipts evidencing interest
in any such securities and other evidences of indebtedness of any private,
public, quasi-public or municipal corporation, domestic or foreign, or of any
domestic or foreign state, government or governmental authority, or of any
political or administrative sub-division or department thereof, and while the
owner thereof, to possess and to exercise in respect thereof all the rights,
powers and privileges of ownership, including any right to vote thereon.

(c) To guarantee the payment of dividends on any shares of the
capital stock of any of the corporations, joint stock companies or associations
in which this corporation has or may at any time have any interest, and to
become surety in respect of, endorse or otherwise guarantee the payment of the
principal of or interest on any scrip, bonds, coupons, mortgages, debentures,
debenture stock, securities, notes, acceptances, drafts, bills of exchange or
evidences of indebtedness, issued or created by any such corporations, joint
stock companies or associations.

(d) To become surety for or guarantee the carrying out and
performance of any and all contracts, leases and obligations of every kind of
any corporation, joint stock company or associations, any of whose shares,
scrip, bonds, coupons, mortgages, debentures, debenture stock, securities,
notes, drafts, acceptances, bill of exchange or evidences of indebtedness are at
any time held by or for this corporation, and to do any act or things designed
to protect, preserve, improve or enhance the value of any such shares, scrip,
bonds, coupons, mortgages, debentures, debenture stock, securities, notes,
drafts, bills of exchange or evidences of indebtedness.

(e) To endorse, guarantee or become surety for the payment of the
bonds, coupons, debentures, obligations, promissory notes, bills of exchange,
drafts of and loans contracted by other corporations, and to secure such payment
by pledge or hypothecation of the securities of this corporation or any other
personal property or mortgage of any of its real estate.

(f) To apply for, obtain, register, purchase, lease or otherwise to
acquire and to hold, own, use, develop, operate and introduce and to sell,
assign, grant licenses or territorial rights in respect to, or otherwise to turn
to account or dispose of, any patents, patent rights, copyrights, trademarks,
trade names, brands, labels, inventions, improvements and processes, whether
used in connection with or secured under letters patent or otherwise.

C-1
<PAGE>

(g) To acquire and undertake the whole or any part of the business,
property and liabilities of any person or company carrying on any business which
this corporation is authorized to carry on, or possessed of property suitable
for the purposes of this corporation.

(h) To purchase, take on lease or in exchange, or otherwise acquire
and to hold, use, mortgage, lease, sell or otherwise dispose of any real or
personal property, and any rights or privileges therein which this corporation
may think necessary or convenient for the purpose of its business, or otherwise.

(i) To undertake the financing of other enterprises and, in general,
to organize, incorporate, reorganize, finance, and to aid and assist financially
or otherwise, companies, syndicates, partnerships, and associations of all
kinds, and to underwrite, subscribe for and endorse the bonds, stocks,
securities, debentures, notes or undertakings, of any such company, corporation,
joint stock company, syndicate, partnership or association, and to make any
guarantee in connection therewith or otherwise for the payment of money or for
the performance of any obligation or undertaking and to do any and all things
necessary or convenient to carry any of such purposes into effect.

(j) To issue shares of the capital stock, bonds, debentures,
debenture stock, notes and other obligations of this corporation for cash, for
labor done, for property, real or personal, or leases thereof, or for any
combination of any of the foregoing, or in exchange for the stock, debentures,
debenture stock, bonds, securities or obligations of any person, firm,
association, corporation or other organization.

(k) To purchase, hold, sell and transfer shares of its own capital
stock, bonds, or other obligations of this corporation from time to time, to
such extent and in such manner and upon such terms as its Board of Directors
shall determine; provided that this corporation shall not use any of its funds
or property for the purchase of its own shares of capital stock when such use
would cause any impairment of the capital of this corporation; and provided,
further, that shares of its own capital stock belonging to this corporation
shall not be voted upon directly or indirectly.

(l) To borrow money for any of the purposes of this corporation, and
to issue bonds, debentures, debenture stock, notes and other obligations
therefor, and to secure the same by pledge or mortgage of the whole or any part
of the property of this corporation, either real or personal, or to issue bonds,
debentures, debenture stock, notes, or other obligations without any such
security.

(m) To lend money to such persons and on such terms as may deem
expedient, and in particular to those having dealings with this corporation, and
to guarantee the performance of contracts by any such persons.

(n) To draw, make, accept, discount, endorse, guarantee, execute, and
issue promissory notes, bills of exchange, drafts, warrants, and all kinds of
obligations and certificates and negotiable or transferable instruments.

(o) To accept and vote a proxy or proxies from individuals,
partnerships or corporations.

(p) To do all or any of the above things in any part of the world,
and as principals, agents, contractors, or otherwise, and by or through agents
or otherwise, and either alone or in conjunction with others.

(q) To do all things necessary for the accomplishment of the objects
enumerated in these Articles of Incorporation or any amendment thereof or
necessary or incidental to the protection and benefit of this corporation.

(r) In general to carry on any other lawful business, not prohibited
to corporations, in any part of the world whether or not such business is
similar in nature to the objects set forth in this Certificate of Incorporation
or any amendment thereof.

It is hereby expressly declared that the objects specified in each
paragraph of this clause shall, except where otherwise expressed in such
paragraph, be in no way limited or restricted by reference to or inference from
the terms of any other paragraph.

3. The total number of shares which may be issued by the corporation is
FIVE HUNDRED (500), all of which shall be without nominal or par value. All
shares shall be common shares and each one shall have one vote.

C-2
<PAGE>

The capital of the corporation shall be at least equal to the
aggregate par value of all shares with par value, if any, plus the amount
received by the corporation for the issuance of shares without par value, plus
the amounts which from time to time may be transferred, thereto by resolution of
the Board of Directors.

Subject to the foregoing paragraph, this corporation may issue and
sell its authorized shares without par value from time to time for the
consideration which, in the opinion of the Board of Directors, is the fair value
of such shares, or for the consideration which may from time to time be fixed by
the Board of Directors, or for the consideration which may be agreed to or
approved by the holders of at least a majority of the shares with a right to
vote. Each and every share so issued shall be fully paid and non-assessable, and
the holders thereof shall not be liable to this corporation or its creditors in
respect thereto.

The liability of the stockholders is limited to the amount unpaid on
the shares subscribed.

Shares may be issued to bearer or as registered shares, as may be determined by
the Board of Directors, and the Board may permit certificates in bearer form to
be exchanged for certificates in the name of the owner and vice versa.

4. The Stock Register required by law shall be kept at the place fixed by
the By-laws or by the Board of Directors.

5. The domicile of the corporation is in the City of Panama, Republic of
Panama, but the corporation may engage in business and establish branches in any
part of the world.

6. The duration of the corporation shall be perpetual.

7. Meetings of Stockholders may be held in the Republic of Panama or in
any other country, and any stockholder may be represented and vote by proxy at
such meetings.

A general meeting of stockholders shall be held each year, at such
time and place as may be provided in the By-laws or by resolution of the Board
of Directors, for the election of Directors and the transaction of any other
business that may be properly brought before the meeting. Special meetings of
the stockholders shall be called by the Board of Directors; and must be called
by the President, or Vice-President, as the case may be, upon the request of
stockholders representing at least five per cent (5%) of the outstanding stock,
for the purpose or purposes stated in such request.

Any business that might be transacted at the annual meeting may be
acted upon at a special meeting, if so included in the notice.

8. The Board of Directors shall consist of no less than three (3) nor
more than seven (7) members. Within said maximum and minimum, the number shall
be fixed by resolution of the Board. However, at any meeting of the
stockholders, for the election of Directors, the stockholders may, by
resolution, determine the number of Directors to be elected thereat, and the
number so determined, then elected. The Directors shall be elected at the annual
meeting of the stockholders, and continue in office until their successors are
elected and qualified and may be reelected.

Meetings of the Directors may be held in the Republic of Panama or in
any other country, and any Director may be represented and vote by proxy, who
need not be a Director, at meetings of Directors.

Quorum. At all meetings of the Board the presence of a majority of the
total number of the Board shall be necessary and sufficient to constitute a
quorum for the transaction of business. In case of vacancies in the Board of
Directors, a majority of the Directors then in office, though less than a
quorum, may elect the Directors to fill such vacancies.

The powers of the corporation shall be exercised by the Board of
Directors, except such as are by law or by this Certificate of Incorporation or
by the By-laws conferred upon or reserved to the stockholders. The Board of
Directors, consequently, shall have absolute control and complete management of
the business of the corporation and may, without action by the stockholders,
grant in trust, pledge or mortgage the properties of this corporation to secure

C-3
<PAGE>

performance of its obligations, and sell or exchange the property of the
corporation, except when the transfer involves capital assets.

The Board of Directors shall have the power, in its discretion, to
provide for and to pay to Directors rendering unusual or exceptional services to
the corporation special compensation appropriate to the value of such services.

9. The Officers of the corporation shall be a President, a Vice-
President, a Treasurer and a Secretary. The Board of Directors may elect from
time to time one or more additional Vice-Presidents, Assistant-Treasurers,
Assistant-Secretaries and other officers, agents and employees as it may deem
proper. Any officer may hold more than one office.

Legal Representative. The President of the corporation shall be Legal
Representative and in his absence, the Vice-President, the Treasurer or the
Secretary.

10. The Registered Agent of the corporation in the Republic of Panama is
the law firm DURLING & DURLING, domiciled at Edificio Vallarino, top floor,
Calle 52 y Elvira Mendez, in the City of Panama, Republic of Panama.

11. No contract or other transaction between the corporation and any other
person, firm or corporation shall be affected or invalidated by the fact that
any one or more of the directors or officers of this corporation is or are
interested in, or is a member, stockholder, director or officer, or are members,
stockholders, directors or officers of such other firm or corporation, and any
director or directors, officer or officers, individually or jointly, may be a
party or parties to or may be interested in any contract or transaction of this
corporation or in which this corporation is interested, and no contract, act or
transaction of this corporation with any person or persons, firms or
corporations, shall be affected or invalidated by the fact that any director or
directors or officer or officers of this corporation is a party, or are parties
to, or are interested in, such contract, act or transaction, or in any way
connected with such person or persons, firm, association or corporation, and
each and every person who may become a director or officer of this corporation
is hereby relieved from any liability that might otherwise exist, from thus
contracting with the corporation for the benefit of himself or any firm, person,
association or corporation in which he may be in any way interested. Directors
so interested shall be counted when present at directors' meetings for the
purpose of determining the existence of a quorum and may vote at such meetings
as fully and with the same effect as if not so interested.

12. Indemnity. Any person made a party to any action, suit or proceeding
by reason of the fact that he, his testator or intestate, is or was a director,
officer or employee of this corporation or of any corporation which he serves as
such at the request of this corporation, shall be indemnified by this
corporation against the reasonable expenses, including attorney's fees, actually
and necessarily incurred by him in connection with the defense of such action,
suit or proceeding, or in connection with any appeal therein, except in relation
to matters as to which it shall be adjudged in such action, suit or proceeding
that such officer, director or employee is liable for negligence or misconduct
in the performance of his duties. Such right of indemnification shall not be
deemed exclusive of any other rights to which such director, officer or employee
may be entitled apart from statute.

13. Dissolution. In the event of dissolution of this corporation, whether
voluntary or otherwise, the provisions of Chapter IX of Law 32 of February 26,
1927 shall be always applicable and the Directors shall act as trustees with the
powers and faculties granted to them by Article 86 of said Law.

14. This Certificate of Incorporation may be amended by resolution setting
forth such amendment or amendments adopted by at least two-thirds (2/3) of the
outstanding shares at a special meeting called for such purpose, or at a regular
meeting if due notice has been given.

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