AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 16, 1996
REGISTRATION NO. 333-00221
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
TIDEWATER INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 4499
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL
JURISDICTION OF INCORPORATION CLASSIFICATION CODE NUMBER)
OR ORGANIZATION)
72-0487776
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
1440 CANAL STREET
NEW ORLEANS, LOUISIANA 70112
(504) 568-1010
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
COPY TO: CLIFFE F. LABORDE
CURTIS R. HEARN SENIOR VICE PRESIDENT,
JONES, WALKER, WAECHTER, GENERAL COUNSEL
POITEVENT, CARRERE & DENEGRE, L.L.P. AND SECRETARY
201 ST. CHARLES AVENUE, 51ST FLOOR TIDEWATER INC.
NEW ORLEANS, LOUISIANA 70170-5100 1440 CANAL STREET
(504) 582-8000 NEW ORLEANS, LOUISIANA 70112
(504) 568-1010
COPY TO:
R. CLYDE PARKER, JR.
KECK, MAHIN & CATE
FIRST CITY TOWER
1001 FANNIN STREET, SUITE 1200
HOUSTON, TEXAS 77002-6708
(713) 650-1500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO
THE PUBLIC: Upon the effective date of the merger described in this
registration statement.
------------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [ ]
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Commission, acting
pursuant to Section 8(a), may determine.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
TIDEWATER INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM NUMBER
ITEM PROSPECTUS CAPTION OR PAGE
- -------------------- -------------------------------------------------------- ---------------------------------------------
<S> <C> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus........................ Facing Page; Cross-Reference Sheet; Outside
Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus............................................ Table of Contents; Available Information;
Incorporation of Certain Documents by
Reference
3. Risk Factors, Ratio of Earnings to Fixed Charges and
Other Information..................................... Summary; The Merger; Selected Financial Data;
Business of the Companies
4. Terms of the Transaction................................ Summary; The Merger; Description of Tidewater
Securities; Comparative Rights of
Stockholders; Appendix A: Agreement and Plan
of Merger; Appendix B: Fairness Opinion
5. Pro Forma Financial Information......................... Tidewater Unaudited Pro Forma Condensed
Combined Financial Statements
6. Material Contacts with the Company Being
Acquired.............................................. *
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to Be Underwriters......... *
8. Interests of Named Experts and Counsel.................. The Merger -- Opinion of Investment Banking
Firm
9. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities............................ *
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants............. *
11. Incorporation of Certain Information by Reference....... *
12. Information with Respect to S-2 or S-3 Registrants...... Summary; Business of the Companies --
Business of Tidewater; Selected Financial
Data -- Tidewater; Tidewater Unaudited Pro
Forma Condensed Combined Financial
Information; Tidewater Management's
Discussion and Analysis of Financial
Condition and Results of Operations; Market
Price Information -- Tidewater Common Stock;
Consolidated Financial Statements of
Tidewater
13. Incorporation of Certain Information By Reference....... Incorporation of Certain Documents by
Reference
14. Information with Respect to Registrants Other Than S-3
or S-2 Registrants.................................... *
<PAGE>
ITEM NUMBER
ITEM PROSPECTUS CAPTION OR PAGE
- -------------------- -------------------------------------------------------- ---------------------------------------------
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3 Companies............... *
16. Information with Respect to S-2 or S-3 Companies........ Summary; Business of the Companies --
Business of Hornbeck; Selected Financial
Data -- Hornbeck; Hornbeck Management's
Discussion and Analysis of Financial
Condition and Results of Operations; Market
Price Information -- Hornbeck Common Stock;
Consolidated Financial Statements of Hornbeck
17. Information with Respect to Companies Other Than S-3 or
S-2 Companies......................................... *
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or Authorizations are
to be Solicited....................................... Outside Front Cover Page; Summary; The
Special Meeting; The Merger; Management of
Tidewater; Comparative Rights of
Stockholders; Other Matters
19. Information if Proxies, Consents or Authorizations are
not to be Solicited or in an Exchange Offer........... *
</TABLE>
------------
* Item is omitted from the Prospectus because it is not applicable or the
answer thereto is in the negative.
<PAGE>
LOGO
HORNBECK OFFSHORE SERVICES, INC.
7707 HARBORSIDE DRIVE
GALVESTON, TEXAS 77554
February 8, 1996
To our Stockholders:
You are cordially invited to attend a Special Meeting of Stockholders of
Hornbeck Offshore Services, Inc. ("Hornbeck") to be held at the Hotel Galvez,
2024 Seawall Boulevard, Galveston, Texas, on Wednesday, March 13, 1996, at
11:00 a.m. Galveston time.
At the meeting, you will be asked to adopt an Agreement and Plan of
Merger (the "Merger Agreement") pursuant to which Hornbeck would be acquired
by Tidewater Inc. ("Tidewater"). The terms of the Merger Agreement provide
that, upon consummation of the merger, each issued and outstanding share of
Hornbeck common stock would be converted into the right to receive .667 of a
share of Tidewater common stock (subject to adjustment as described in the
enclosed Proxy Statement/Prospectus) and Hornbeck would become a wholly owned
subsidiary of Tidewater. In addition, Larry D. Hornbeck, currently Chairman of
the Board, President and Chief Executive Officer of Hornbeck, would become a
Tidewater director.
The attached Notice of Special Meeting and Proxy Statement/Prospectus
contains a description of the formal business to be conducted at the meeting.
During the meeting, Hornbeck management will also report on Hornbeck
operations and the proposed merger and, along with Tidewater representatives,
will be available to respond to questions.
YOUR BOARD OF DIRECTORS BELIEVES THAT THE MERGER AGREEMENT, WHICH WAS
APPROVED UNANIMOUSLY BY THE BOARD, IS IN THE BEST INTERESTS OF HORNBECK AND
ITS STOCKHOLDERS AND RECOMMENDS THAT YOU VOTE FOR THE ADOPTION OF THE MERGER
AGREEMENT.
You are urged to read carefully the Proxy Statement/Prospectus in its
entirety for a complete description of the proposed merger. Please sign, date
and return the enclosed proxy card promptly. It is important to vote. If you
fail to return your proxy card, the effect of such failure will be as if you
voted your shares against adoption of the Merger Agreement. If you attend the
meeting, which we hope that you will, you may vote in person even if you have
previously mailed a proxy card. We look forward to meeting with you at the
Special Meeting of Stockholders.
Sincerely,
LARRY D. HORNBECK
CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
<PAGE>
HORNBECK OFFSHORE SERVICES, INC.
GALVESTON, TEXAS
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
WEDNESDAY, MARCH 13, 1996
To the Stockholders:
A Special Meeting of Stockholders (the "Special Meeting") of Hornbeck
Offshore Services, Inc. ("Hornbeck") will be held at the Hotel Galvez, 2024
Seawall Boulevard, Galveston, Texas, on Wednesday, March 13, 1996, at 11:00
a.m., Galveston time, to consider and act upon a proposal to adopt an Agreement
and Plan of Merger (the "Merger Agreement") among Hornbeck, on the one hand, and
Tidewater Inc. ("Tidewater") and Tidewater Expansion, Inc., a wholly owned
subsidiary of Tidewater ("Newco"), on the other hand, a copy of which is
attached as Appendix A to the Proxy Statement/Prospectus, pursuant to which,
among other things (a) Newco would merge with and into Hornbeck, (b) Hornbeck
would become a wholly owned subsidiary of Tidewater, and (c) each issued and
outstanding share of common stock of Hornbeck would be converted into the right
to receive .667 of a share of Tidewater common stock, subject to adjustment as
described in the enclosed Proxy Statement/Prospectus.
The close of business on January 31, 1996 has been fixed as the record
date for the determination of stockholders entitled to receive notice of and
to vote at the Special Meeting or any adjournment(s) thereof. The affirmative
vote of the holders of not less than 66 2/3% of the shares of Hornbeck common
stock outstanding is required to adopt the Merger Agreement.
You are cordially invited to the Special Meeting. YOUR VOTE IS IMPORTANT
REGARDLESS OF THE NUMBER OF SHARES YOU OWN. WHETHER OR NOT YOU PLAN TO ATTEND
THE SPECIAL MEETING, WE ASK THAT YOU MARK, SIGN, DATE AND RETURN THE ENCLOSED
PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED PRE-ADDRESSED, POSTPAID
ENVELOPE. YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE ITS EXERCISE BY VOTING
IN PERSON AT THE SPECIAL MEETING OR BY DELIVERING A WRITTEN REVOCATION OR
LATER DATED PROXY TO THE SECRETARY AT OR BEFORE THE MEETING.
STOCKHOLDERS SHOULD NOT DELIVER ANY STOCK CERTIFICATES WITH THEIR PROXY
CARDS.
By order of the Board of Directors,
Richard R. Ellison
VICE PRESIDENT AND SECRETARY
Galveston, Texas
February 8, 1996
<PAGE>
HORNBECK LOGO TIDEWATER LOGO
HORNBECK OFFSHORE TIDEWATER
SERVICES, INC. INC.
9,997,649 SHARES OF COMMON STOCK,
$.10 PAR VALUE
PROXY STATEMENT PROSPECTUS
------------------------
This Proxy Statement/Prospectus, which together with the accompanying form
of proxy is first being mailed on or about February 8, 1996, is being furnished
to holders of common stock, $.10 par value per share ("Hornbeck Common Stock"),
of Hornbeck Offshore Services, Inc., a Delaware corporation ("Hornbeck"), in
connection with the solicitation of proxies by its Board of Directors for use at
a special meeting of holders of Hornbeck Common Stock (the "Special Meeting") to
be held at 11:00 a.m., local time, on Wednesday, March 13, 1996, at the Hotel
Galvez, 2024 Seawall Boulevard, Galveston, Texas, and at any adjournments or
postponements thereof, for the purposes set forth herein and in the accompanying
Notice of Special Meeting of Stockholders of Hornbeck. At the Special Meeting,
the holders of Hornbeck Common Stock will consider and vote upon a proposal to
adopt an Agreement and Plan of Merger dated December 21, 1995 (the "Merger
Agreement"), among Tidewater Inc., a Delaware corporation ("Tidewater"), and
Tidewater Expansion, Inc., a Delaware corporation and wholly owned subsidiary of
Tidewater ("Newco"), on the one hand, and Hornbeck, on the other hand, a copy of
which is attached hereto as Appendix A. Pursuant to the Merger Agreement, among
other things, (i) Newco will merge into Hornbeck (the "Merger"), (ii) Hornbeck
will become a wholly owned subsidiary of Tidewater, and (iii) each outstanding
share of Hornbeck Common Stock will be converted into .667 of a share of the
common stock, $.10 par value per share, of Tidewater (the "Tidewater Common
Stock"), subject to adjustment in certain circumstances, together with certain
associated rights under Tidewater's Restated Rights Agreement dated as of
December 17, 1993, by and between Tidewater and the First National Bank of
Boston, as rights agent. Tidewater Common Stock is traded on the New York Stock
Exchange and the Pacific Stock Exchange under the symbol "TDW." See "Description
of Tidewater Securities."
Tidewater has filed a registration statement on Form S-4 (herein,
together with all amendments and exhibits thereto, the "Registration
Statement") pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), to register up to 9,997,649 shares of Tidewater Common
Stock (and the associated rights) which may be issued to the holders of
Hornbeck Common Stock in connection with the Merger. This document constitutes
a Proxy Statement of Hornbeck in connection with the Special Meeting and a
Prospectus of Tidewater with respect to the shares of Tidewater Common Stock
to be issued upon consummation of the Merger. The information contained herein
with respect to Tidewater and its subsidiaries has been supplied by Tidewater
and the information contained herein with respect to Hornbeck and its
subsidiaries has been supplied by Hornbeck.
------------------------
THE SECURITIES TO BE ISSUED PURSUANT TO THIS PROXY STATEMENT/PROSPECTUS
HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS FEBRUARY 6, 1996.
<PAGE>
AVAILABLE INFORMATION
This Proxy Statement/Prospectus constitutes a part of a Registration
Statement on Form S-4 filed by Tidewater with the Securities and Exchange
Commission (the "Commission") under the Securities Act. This Proxy
Statement/Prospectus does not contain all of the information contained in the
Registration Statement, certain portions of which are omitted as permitted by
the rules and regulations of the Commission. For further information with
respect to Tidewater and the Tidewater Common Stock, reference is made to the
Registration Statement, including the exhibits thereto, which may be inspected
at the Commission's offices, without charge, or copies of which may be
obtained from the Commission upon payment of prescribed fees. Statements
contained in this Proxy Statement/Prospectus as to the contents of any
document filed as an exhibit to the Registration Statement are not necessarily
complete, and in each instance reference is hereby made to the copy of such
document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference.
Tidewater and Hornbeck are each subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
in accordance therewith file reports, proxy statements and other information
with the Commission. Such reports, proxy statements and other information
filed by Tidewater and Hornbeck with the Commission may be inspected and
copied at the Public Reference Section of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and the
Regional Offices of the Commission at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511, and Seven World Trade
Center, 13th Floor, New York, New York 10048. Copies of such material may also
be obtained from the Public Reference Section of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. In addition, the Tidewater Common Stock is listed on the New York Stock
Exchange ("NYSE") and Pacific Stock Exchange ("PSE"). Copies of reports, proxy
statements and other information filed by Tidewater with the NYSE and the PSE
may be inspected at the offices of the NYSE, 20 Broad Street, New York, NY
10005 and at the offices of the PSE at 301 Pine Street, San Francisco, CA
94104.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Tidewater with the Commission pursuant
to the Exchange Act are incorporated by reference in this Proxy
Statement/Prospectus.
1. Tidewater's Annual Report on Form 10-K for the fiscal year ended
March 31, 1995;
2. Tidewater's Quarterly Report on Form 10-Q for the quarter ended June
30, 1995;
3. Tidewater's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995; and
4. The description of Tidewater's capital stock set forth in its
amendments to its Registration Statement under the Exchange Act
(Forms 8-A/A) filed with the Commission on May 24, 1993.
The following documents filed by Hornbeck with the Commission pursuant to
the Exchange Act are incorporated by reference in this Proxy
Statement/Prospectus.
1. Hornbeck's Annual Report on Form 10-K for the year ended December
31, 1994;
2. Hornbeck's Quarterly Report on Form 10-Q for the quarter ended March
31, 1995;
3. Hornbeck's Quarterly Report on Form 10-Q for the quarter ended June
30, 1995;
4. Hornbeck's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995;
5. Hornbeck's Form 8-K-A dated January 27, 1995 amending its Current
Report on Form 8-K dated November 21, 1994;
6. Hornbeck's Form 8-K dated June 21, 1995;
2
<PAGE>
7. The description of Hornbeck's Common Stock included in Hornbeck's
Form 8-A/A Amendment No. 2 dated June 21, 1995;
8. The description of Hornbeck's preferred stock purchase rights
included in Hornbeck's Form 8-A dated June 21, 1995;
9. Hornbeck's Form 8-K dated December 4, 1995; and
10. Hornbeck's Form 8-K dated December 28, 1995.
All documents filed by Tidewater and Hornbeck pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act between the date of this Proxy
Statement/Prospectus and the date of the Special Meeting shall be deemed to be
incorporated by reference in this Proxy Statement/Prospectus and to be a part
hereof from their respective dates of filing. Any statement contained in this
Proxy Statement/Prospectus or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement/Prospectus to the extent that a statement
contained herein or in any subsequently filed document that also is, or is
deemed to be, incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Proxy
Statement/Prospectus.
CERTAIN INFORMATION WITH RESPECT TO TIDEWATER AND HORNBECK HAS BEEN
INCORPORATED BY REFERENCE INTO THIS PROXY STATEMENT/PROSPECTUS. TIDEWATER AND
HORNBECK HEREBY UNDERTAKE TO PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM A
COPY OF THIS PROXY STATEMENT/PROSPECTUS HAS BEEN DELIVERED, UPON THE WRITTEN
OR ORAL REQUEST OF SUCH PERSON, A COPY OF ANY OR ALL OF THE INFORMATION OR
DOCUMENTS WHICH HAVE BEEN INCORPORATED BY REFERENCE HEREIN, OTHER THAN
EXHIBITS TO SUCH DOCUMENTS. REQUESTS FOR TIDEWATER DOCUMENTS SHOULD BE
DIRECTED TO TIDEWATER INC., TIDEWATER PLACE, 1440 CANAL STREET, SUITE 2100,
NEW ORLEANS, LOUISIANA 70112-2780, ATTENTION: CORPORATE SECRETARY (TELEPHONE
504/568-1010). REQUESTS FOR HORNBECK DOCUMENTS SHOULD BE DIRECTED TO HORNBECK
OFFSHORE SERVICES, INC., 7707 HARBORSIDE DRIVE, GALVESTON, TEXAS 77554,
ATTENTION: CORPORATE SECRETARY (TELEPHONE 409/744-9500). IN ORDER TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY FEBRUARY 29,
1996.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN
THIS PROXY STATEMENT/PROSPECTUS IN CONNECTION WITH THE MATTERS REFERRED TO
HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MAY NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY TIDEWATER OR HORNBECK. THIS PROXY
STATEMENT/PROSPECTUS SHALL NOT CONSTITUTE AN OFFER BY TIDEWATER TO SELL, OR A
SOLICITATION OF AN OFFER TO PURCHASE, THE SECURITIES OFFERED BY THIS PROXY
STATEMENT/PROSPECTUS, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION IN
WHICH, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION OF AN OFFER OR PROXY SOLICITATION. NEITHER THE DELIVERY OF THIS
PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF THE SECURITIES OFFERED
HEREBY SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF TIDEWATER OR HORNBECK SINCE THE DATE HEREOF.
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
SUMMARY.................................................................................................... 6
The Special Meeting................................................................................... 6
Purpose of the Special Meeting........................................................................ 6
Quorum; Vote Required................................................................................. 6
Structure of the Merger and Merger Consideration...................................................... 6
Board Recommendation.................................................................................. 7
Exchange of Certificates.............................................................................. 7
The Companies......................................................................................... 8
Effective Time; Effective Date of the Merger.......................................................... 8
Reasons for the Merger................................................................................ 8
Opinion of Investment Banking Firm.................................................................... 9
Other Terms and Conditions of the Merger.............................................................. 9
Appraisal Rights...................................................................................... 12
Notice to Non-U.S. Citizens........................................................................... 12
Market Price Information.............................................................................. 13
Comparative Per Share Data............................................................................ 14
Recent Developments................................................................................... 15
THE SPECIAL MEETING........................................................................................ 16
Solicitation, Voting and Revocability of Proxies; Date and Place of the Special Meeting............... 16
Purpose of the Special Meeting........................................................................ 16
Record Date; Stockholders Entitled to Vote............................................................ 17
Quorum; Vote Required................................................................................. 17
THE MERGER................................................................................................. 18
The Merger Agreement.................................................................................. 18
Structure and Terms of the Merger..................................................................... 18
Background of the Merger.............................................................................. 18
Reasons for the Merger................................................................................ 20
Recommendation of the Hornbeck Board.................................................................. 22
Opinion of Investment Banking Firm.................................................................... 22
Effective Time of the Merger.......................................................................... 24
Hart-Scott-Rodino Clearance........................................................................... 24
Other Conditions to the Merger........................................................................ 25
Interests of Certain Persons in the Merger............................................................ 26
Resales of Tidewater Common Stock..................................................................... 27
Exchange of Certificates.............................................................................. 28
Conduct of Business by Hornbeck and Tidewater Pending the Merger...................................... 29
Conduct of Business by Hornbeck Pending the Merger.................................................... 29
No Solicitation of Transactions; Termination Fee...................................................... 30
Amendment; Waiver; Termination........................................................................ 30
Fees and Expenses..................................................................................... 31
Certain Federal Income Tax Consequences............................................................... 31
Accounting Treatment.................................................................................. 32
Appraisal Rights...................................................................................... 32
BUSINESS OF THE COMPANIES.................................................................................. 33
Business of Tidewater................................................................................. 33
Tidewater Marine................................................................................ 33
Tidewater Compression........................................................................... 33
Business of Hornbeck.................................................................................. 34
General......................................................................................... 34
North Sea Group................................................................................. 34
4
<PAGE>
PAGE
-----
SELECTED FINANCIAL DATA.................................................................................... 35
Tidewater Selected Historical Consolidated Financial Data............................................. 35
Hornbeck Selected Historical Consolidated Financial Data.............................................. 36
TIDEWATER UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION..................................... 37
Pro Forma Condensed Combined Balance Sheet September 30, 1995 -- Unaudited............................ 37
Pro Forma Condensed Combined Statements of Earnings -- Unaudited...................................... 39
Notes to Unaudited Pro Forma Condensed Combined Financial Information................................. 40
TIDEWATER MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS............ 42
Six Months Ended September 30, 1994 and 1995.......................................................... 42
Liquidity and Capital Resources................................................................. 42
Results of Operations........................................................................... 43
Tidewater Marine Segment........................................................................ 44
Tidewater Compression Segment................................................................... 47
Currency Fluctuations and Inflation............................................................. 49
Environmental Matters........................................................................... 49
Years Ended March 31, 1993, 1994 and 1995............................................................. 49
Liquidity and Capital Resources................................................................. 49
Results of Operations........................................................................... 52
Tidewater Marine Segment........................................................................ 54
Tidewater Compression Segment................................................................... 58
Currency Fluctuations and Inflation............................................................. 60
Environmental Matters........................................................................... 60
HORNBECK MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS............. 62
General............................................................................................... 62
Liquidity and Capital Resources....................................................................... 62
Results of Operations................................................................................. 64
MARKET PRICE INFORMATION................................................................................... 66
Tidewater Common Stock................................................................................ 66
Hornbeck Common Stock................................................................................. 67
DESCRIPTION OF TIDEWATER SECURITIES........................................................................ 68
Common Stock.......................................................................................... 68
Preferred Stock....................................................................................... 70
MANAGEMENT OF TIDEWATER.................................................................................... 71
Board of Directors.................................................................................... 71
Executive Officers.................................................................................... 72
COMPARATIVE RIGHTS OF STOCKHOLDERS......................................................................... 73
Approval of Extraordinary Transactions................................................................ 73
Vacancies on the Board of Directors................................................................... 74
Other Provisions with Possible Anti-Takeover Effects.................................................. 74
Restrictions on Transfer.............................................................................. 75
LEGAL MATTERS.............................................................................................. 75
EXPERTS.................................................................................................... 75
OTHER MATTERS.............................................................................................. 76
FINANCIAL INFORMATION...................................................................................... F-1
APPENDIX A: AGREEMENT AND PLAN OF MERGER................................................................... A-1
APPENDIX B: FAIRNESS OPINION............................................................................... B-1
</TABLE>
5
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS NECESSARILY INCOMPLETE AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE MORE DETAILED INFORMATION AND FINANCIAL
STATEMENTS, INCLUDING THE NOTES THERETO, CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS AND THE APPENDICES HERETO.
STOCKHOLDERS ARE URGED TO READ CAREFULLY ALL OF SUCH MATERIAL. ALL REFERENCES
IN THIS PROXY STATEMENT/PROSPECTUS TO THE "GULF OF MEXICO" OR THE "GULF" REFER
TO THE UNITED STATES GULF OF MEXICO. UNLESS OTHERWISE DEFINED HEREIN,
CAPITALIZED TERMS USED IN THIS PROXY STATEMENT/PROSPECTUS HAVE THE MEANINGS
ASCRIBED IN THIS SUMMARY. CERTAIN KEY TERMS HAVE BEEN DEFINED IN MULTIPLE
LOCATIONS.
THE SPECIAL MEETING
A special meeting of Hornbeck Offshore Services, Inc., a Delaware
corporation ("Hornbeck"), will be held on Wednesday, March 13, 1996, at 11:00
a.m. local time at the Hotel Galvez, 2024 Seawall Boulevard, Galveston, Texas
(the "Special Meeting"). Only holders of record of Hornbeck common stock, $.10
par value per share ("Hornbeck Common Stock"), at the close of business on
January 31, 1996 (the "Record Date") are entitled to notice of and to vote at
the Special Meeting. On the Record Date, there were 13,234,728 shares of
Hornbeck Common Stock outstanding, with each share of Hornbeck Common Stock
entitled to cast one vote with respect to each matter properly presented at the
Special Meeting. See "The Special Meeting."
PURPOSE OF THE SPECIAL MEETING
At the Special Meeting, holders of Hornbeck Common Stock will be asked to
adopt the Agreement and Plan of Merger dated December 21, 1995 (the "Merger
Agreement") among Hornbeck, Tidewater Inc., a Delaware corporation
("Tidewater"), and Tidewater Expansion, Inc., a Delaware corporation and
wholly owned subsidiary of Tidewater ("Newco"), pursuant to which, among other
things, Newco will be merged with and into Hornbeck (the "Merger") and
Hornbeck will become a wholly owned subsidiary of Tidewater. See "The Special
Meeting -- Purpose of the Special Meeting" and "The Merger."
QUORUM; VOTE REQUIRED
Hornbeck's bylaws provide that the holders of a majority of the issued
and outstanding Hornbeck Common Stock must be in attendance at the Special
Meeting in person or by proxy in order for a quorum to be properly
constituted.
Under Hornbeck's Certificate of Incorporation, the affirmative vote of
holders of not less than 66 2/3% of the total issued and outstanding shares of
Hornbeck Common Stock is required to adopt the Merger Agreement. See "The
Special Meeting -- Quorum; Vote Required."
As of the Record Date, the directors and executive officers of Hornbeck
as a group had the power to vote approximately 2,008,477 shares of Hornbeck
Common Stock, or 15.2% of the outstanding shares of Hornbeck Common Stock
entitled to vote at the Special Meeting.
STRUCTURE OF THE MERGER AND MERGER CONSIDERATION
Pursuant to the Merger Agreement, upon consummation of the Merger, Newco
will merge into Hornbeck and each share of Hornbeck Common Stock that is
issued and outstanding at the Effective Time (as defined below) will be
converted, subject to the adjustment discussed in the following sentence, into
the right to receive .667 of a share of common stock, $.10 par value per
share, of Tidewater (the "Tidewater Common Stock"), together with certain
associated rights under the Tidewater Restated Rights Agreement dated as of
December 17, 1993, by and between Tidewater and the First National Bank of
Boston, as rights agent (the "Tidewater Stockholder Rights Plan"). The Merger
Agreement provides that if the Average Market Price (as defined below) of a
share of Tidewater Common Stock is less than $24.50 or exceeds $32.50, then
the conversion ratio will be
6
<PAGE>
adjusted, provided that the conversion ratio, as so adjusted, will not be less
than .60 (if the Average Market Price is more than $32.50) or greater than .74
(if the Average Market Price is less than $24.50) (as so adjusted, the
"Conversion Ratio"). The Merger Agreement further provides that either Hornbeck
or Tidewater may terminate the Merger Agreement if the Conversion Ratio at the
date of closing of the Merger would be less than .60 or greater than .74, by
virtue of the Average Market Price being greater than $36.13 or less than
$22.08. The term "Average Market Price" is defined as the average of the daily
closing sale prices of a share of Tidewater Common Stock on the New York Stock
Exchange as reported in THE WALL STREET JOURNAL for the ten consecutive trading
days that end on the second trading day immediately prior to the date of the
closing of the Merger. Each holder of Hornbeck Common Stock entitled upon
conversion to a fractional share of Tidewater Common Stock will, in lieu
thereof, receive a cash payment (without interest) equal to the product of the
Average Market Price and such fraction. See "The Merger -- Structure and Terms
of the Merger."
The following table sets forth examples of the shares of Tidewater Common
Stock into which each share of Hornbeck Common Stock would be converted on the
Effective Date, and the aggregate dollar value of the shares of Tidewater
Common Stock that would be issued in the Merger, assuming that on such date
the Average Market Price for Tidewater Common Stock is as specified below and
that the maximum of 13,510,336 shares of Hornbeck Common Stock were converted
in the Merger.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF TIDEWATER COMMON
ASSUMED AVERAGE MARKET PRICE OF STOCK PER SHARE OF HORNBECK COMMON
TIDEWATER COMMON STOCK STOCK AGGREGATE DOLLAR VALUE
- ---------------------------------- ------------------------------------- ----------------------------------
<S> <C> <C>
$22.08 .74 $220.8 million
$24.50 .667 $220.8 million
$28.50 .667 $256.8 million
$32.50 .667 $292.9 million
$36.13 .60 $292.9 million
</TABLE>
On February 1, 1996, the closing sale price for a share of Tidewater Common
Stock was $35.00, and if such date had been the date of closing of the Merger,
the Average Market Price would have been $31.90. If the Average Market Price
exceeds $36.13, the Conversion Ratio would be less than .60 and either Hornbeck
or Tidewater would have the right to terminate the Merger Agreement.
Tidewater and Hornbeck each have received an opinion of their respective
tax advisors that the Merger will qualify as a tax-free reorganization under
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code"). In addition, Tidewater has received an opinion of KPMG Peat
Marwick LLP, the independent public accountants for Tidewater, that Tidewater is
eligible to be a party to a merger accounted for as a pooling of interests, and
such accounting firm is not aware of any matters that would preclude the use of
pooling-of-interests accounting in connection with the Merger. Additionally,
Hornbeck has received a letter from Price Waterhouse LLP, the independent
accountants for Hornbeck, that as a result of specified procedures, no matters
came to the attention of such firm that would preclude Tidewater from accounting
for the Merger as a pooling of interests. The tax and pooling opinions or
letters will be confirmed by such tax advisors and accountants immediately
before the date of closing of the Merger. See "The Merger -- Certain Federal
Income Tax Consequences" and " -- Accounting Treatment."
BOARD RECOMMENDATION
THE HORNBECK BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE IN FAVOR OF THE MERGER
AGREEMENT. SEE "THE MERGER -- RECOMMENDATION OF THE HORNBECK BOARD."
EXCHANGE OF CERTIFICATES
Promptly following consummation of the Merger, each person who is a
stockholder of record of Hornbeck at the Effective Time will receive a letter
of transmittal containing written instructions with respect to the manner by
which certificates representing shares of Hornbeck Common Stock will be
7
<PAGE>
exchanged for certificates representing Tidewater Common Stock. STOCKHOLDERS
ARE REQUESTED NOT TO MAIL OR DELIVER THEIR HORNBECK COMMON STOCK CERTIFICATES
UNTIL THEY HAVE RECEIVED THE LETTER OF TRANSMITTAL. See "The
Merger -- Exchange of Certificates."
THE COMPANIES
TIDEWATER. Tidewater serves the international oil and gas industry
through its two principal divisions, Tidewater Marine and Tidewater
Compression. Currently, Tidewater Marine and Tidewater Compression account for
approximately 80% and 20%, respectively, of Tidewater's revenues. Through its
Tidewater Marine division, Tidewater is the world's largest provider of
offshore supply vessels and marine support services. With a fleet of
approximately 570 vessels, Tidewater Marine operates, and has a leading market
share, in most of the world's significant offshore oil and gas exploration and
production markets. Tidewater Compression provides natural gas and air
compression equipment and services to the oil and gas industry, primarily in
the United States. With a fleet of approximately 2,900 compressors, Tidewater
Compression operates the largest rental fleet of gas compressors in the United
States, which it rents to oil and gas producers and processors.
At December 31, 1995, Tidewater had approximately 6,900 employees.
Tidewater's executive offices are located at 1440 Canal Street, New Orleans,
Louisiana 70112 and its telephone number is (504) 568-1010. See "Business of
the Companies -- Business of Tidewater."
HORNBECK. Hornbeck is engaged in the offshore marine services business,
serving the oil and gas industry primarily in the Gulf of Mexico through its
operation and management of a diversified fleet of 61 vessels, consisting of
supply, tug-supply, crew and specialty service vessels. Hornbeck also owns a
49.9% equity interest in each of Ravensworth Investments Limited, an Isle of
Man-based company ("Ravensworth"), and Seaboard Holdings Limited, an Aberdeen,
Scotland-based company ("Seaboard," together with Hornbeck Offshore Limited, the
subsidiaries of Ravensworth and the subsidiaries of Seabord, the "North Sea
Group"), which have a combined total of 29 additional vessels, constituting one
of the largest safety standby fleets operating in the North Sea.
At December 31, 1995, Hornbeck had approximately 560 employees.
Hornbeck's executive offices are located at 7707 Harborside Drive, Galveston,
Texas 77554 and its telephone number is (409) 744-9500. See "Business of the
Companies -- Business of Hornbeck."
EFFECTIVE TIME; EFFECTIVE DATE OF THE MERGER
The Merger will become effective at the time (the "Effective Time") and
on the date (the "Effective Date") the Certificate of Merger is filed with the
Secretary of State of Delaware. Unless Tidewater and Hornbeck otherwise agree,
the Merger will be consummated as soon as practicable following receipt of
Hornbeck stockholder and necessary regulatory approvals and satisfaction or
waiver of the other conditions to the Merger. Tidewater and Hornbeck
anticipate that the Merger will be consummated as soon as practicable
following the Special Meeting. See "The Merger -- Hart-Scott-Rodino Clearance"
and " -- Other Conditions to the Merger."
REASONS FOR THE MERGER
TIDEWATER. Recognizing that the average age of its own worldwide fleet
of vessels, as well as the vessel fleets of its competitors, is continuing to
increase, and that the construction of new vessels is not yet economically
justifiable in view of the prevailing level of vessel day rates and the
continuing volatility in oil and gas prices, Tidewater has, from time to time,
sought to identify suitable vessel acquisition opportunities to strengthen and
better manage the attrition of its fleet and to continue to respond to
customer demands. The Board of Directors of Tidewater (the "Tidewater Board")
believes that there are several benefits that should accrue to Tidewater and
its stockholders following the Merger, including (i) Tidewater's increased
ability to service the Gulf of Mexico market, which many
8
<PAGE>
industry analysts believe has a very positive outlook for the foreseeable
future, through the combination of the respective Gulf of Mexico operations of
Tidewater and Hornbeck; (ii) the ability of Tidewater to mitigate the effects
of the aging of the Tidewater fleet in the Gulf of Mexico through the
replacement of older Tidewater vessels with those Hornbeck vessels having
longer remaining useful lives; and (iii) the ability to achieve cost savings
and other operational benefits through the consolidation of overlapping
facilities as well as the elimination of duplicative corporate and
administrative functions.
HORNBECK. The Hornbeck Board believes that Tidewater is a strong and
growing energy services company and that the proposed transaction provides an
opportunity for the holders of Hornbeck Common Stock to participate in a
combined enterprise that has significantly greater business and financial
resources than Hornbeck would have if the Merger did not take place and to
receive, on a tax-deferred basis, a premium for their Hornbeck Common Stock
based on the market prices of the Hornbeck Common Stock prior to the November
20, 1995 announcement of the proposed Merger. The Hornbeck Board believes that
among the benefits of the Merger to the holders of the Hornbeck Common Stock are
(i) the geographical distribution of the combined entity's marine assets, with a
consequent reduction in exposure to industry business cycles in the Gulf of
Mexico, (ii) the complementary nature of the Tidewater and Hornbeck fleets,
which would add strength and depth to the combined entity's fleet, (iii) the
enhanced growth opportunities for the combined entity from expanded geographic
presence and greater resources, (iv) Tidewater's position as one of the larger
participants in the U.S. gas compression business and (v) the potential cost
savings achieved through consolidation. In evaluating the fairness of the
proposed merger consideration to the Hornbeck stockholders, the Hornbeck Board
considered, among other things, (i) Tidewater's recent historical increases in
financial performance, including earnings per share, in combination with a
relatively unleveraged balance sheet, (ii) the premium being offered with
respect to the Hornbeck Common Stock as compared to comparable transactions and
public market valuation of comparable companies, (iii) the structure of the
transaction as a tax-free reorganization, (iv) the greater liquidity of
Tidewater Common Stock, (v) recent and historical market prices and valuation
ratios of Hornbeck Common Stock and Tidewater Common Stock, (vi) analysis of the
background and experience of Tidewater management and (vii) the opinion of
Simmons & Company International, as financial advisor to Hornbeck, that is
described below.
OPINION OF INVESTMENT BANKING FIRM
The investment banking firm of Simmons & Company International
("Simmons") has acted as financial advisor to Hornbeck in connection with the
proposed Merger and has delivered a letter to the Hornbeck Board stating that,
in its opinion, the consideration to be paid by Tidewater, as expressed by the
Conversion Ratio, is fair to Hornbeck and the holders of Hornbeck Common Stock
from a financial point of view. Hornbeck has agreed to pay Simmons for its
services in assisting the Hornbeck Board in analyzing the proposed Merger and
in rendering the opinion referred to above a fee equal to 0.9% of the
aggregate market value of the shares of Hornbeck Common Stock outstanding at
the Effective Time of the Merger. In addition, Hornbeck has agreed to
reimburse Simmons for its out-of-pocket expenses and to indemnify Simmons
against certain liabilities that may be incurred in connection with providing
such services. The full text of the Simmons letter is attached to this Proxy
Statement/Prospectus as Appendix B. See "The Merger -- Opinion of Investment
Banking Firm."
OTHER TERMS AND CONDITIONS OF THE MERGER
In addition to the foregoing matters, the Merger Agreement contains
certain other terms and conditions, including:
HART-SCOTT-RODINO CLEARANCE. The obligations of Hornbeck and Tidewater
to consummate the Merger are subject to the expiration or earlier termination
of the requisite waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"). In addition, it
9
<PAGE>
is a condition to Tidewater's obligation to consummate the Merger that such
expiration or earlier termination be accomplished without the imposition of a
condition on Hornbeck or Tidewater that would require the divestiture by either
Hornbeck or Tidewater of any asset of either party or that would otherwise have
a material adverse effect on Tidewater or Hornbeck. On January 2, 1996 Hornbeck
and Tidewater each made their required initial filings under the HSR Act. The
waiting period expired on February 1, 1996, without any further request for
additional information. See "The Merger -- Hart-Scott-Rodino Clearance."
OTHER CONDITIONS TO THE MERGER. In addition to Hornbeck stockholder
approval and HSR Act clearance, the consummation of the Merger is conditioned
upon the satisfaction of certain conditions set forth in the Merger Agreement,
including the receipt by each party of customary legal opinions, certificates,
consents, resolutions and reports from the other and from third parties and
confirmation of the tax opinions and accountants' opinions or letters
described above. Tidewater and Hornbeck intend to consummate the Merger as
soon as practicable following satisfaction or waiver of the conditions
thereto. See "The Merger -- Other Conditions to the Merger," "-- Certain
Federal Income Tax Consequences" and "-- Accounting Treatment."
APPOINTMENT TO TIDEWATER BOARD; CONSULTING AGREEMENT. Effective on the
second day following the Effective Date, Larry D. Hornbeck, Chairman of the
Board, President and Chief Executive Officer of Hornbeck, will be appointed to
the class of the Tidewater Board with a term expiring at the annual meeting of
Tidewater's stockholders that next follows the Effective Date. Mr. Hornbeck
will also enter into a consulting agreement with Tidewater effective as of the
Effective Date which provides that he will be recommended by the Tidewater
Board for reelection at such annual meeting to a full three-year term. See
"The Merger -- Interests of Certain Persons in the Merger."
CERTAIN EMPLOYEE MATTERS. At the time of execution of the Merger
Agreement, there were approximately 317,654 unissued shares of Hornbeck Common
Stock subject to unexercised stock options that were previously granted to
officers and employees of Hornbeck under its 1989 and 1993 Employee Incentive
Plans. Under the terms of the agreements pursuant to which such options were
granted, any options not previously vested that were granted under the 1989
Employee Incentive Plan became fully vested and exercisable upon approval of
the Merger by the Hornbeck Board and any options not previously vested that
were granted under the 1993 Employee Incentive Plan will become fully vested
and exercisable upon consummation of the Merger. Holders of any options that
are not exercised for Hornbeck Common Stock by the Effective Time will have
the right, upon exercise of such options in accordance with their terms, to
acquire that number of shares of Tidewater Common Stock that the holder of
such unexercised options would have been entitled to receive upon consummation
of the Merger if such holder had exercised such options for shares of Hornbeck
Common Stock prior to or coincident with the Merger. See "The
Merger -- Interests of Certain Persons in the Merger."
Under the terms of the Merger Agreement, Hornbeck may make cash payments
of up to $350,000 in the aggregate (the "1995 Incentive Cash Payments") and
issue an aggregate of up to 19,310 shares of restricted Hornbeck Common Stock
to its directors, officers and employees as semi-annual director fees and
incentive payments for 1995 performance. In addition, the Merger Agreement
provides that, if the Merger has not been consummated by April 30, 1996,
Hornbeck may make additional cash payments to its officers and employees as
incentive payments for 1996 performance through the Effective Date in amounts
to be pro rated and based on the total 1995 Incentive Cash Payments. See "The
Merger -- Interests of Certain Persons in the Merger."
The Hornbeck Board has adopted a severance policy for Hornbeck's
employees and Tidewater has agreed to honor the terms thereof. Pursuant to
such policy, Hornbeck employees who are not parties to the change in control
agreements discussed below will be entitled to receive certain
10
<PAGE>
severance payments and continuation, for a limited time, of certain employee
benefits. See "The Merger -- Interests of Certain Persons in the Merger."
CHANGE IN CONTROL AGREEMENTS. Four executive officers of Hornbeck entered
into change of control agreements in June 1995. On December 29, 1995, Hornbeck
made certain advance payments to three executive officers of a portion of the
amounts to which such officers would have otherwise become entitled following
consummation of the Merger under the terms of change in control agreements
between Hornbeck and such executive officers. For additional information on such
payments, which were made by Hornbeck to minimize certain income tax costs to
Hornbeck and such individuals, see "The Merger -- Interests of Certain Persons
in the Merger."
INDEMNIFICATION COVENANTS. The Merger Agreement provides that Tidewater
will indemnify and hold harmless each person who was an officer or director of
Hornbeck or any of its subsidiaries on December 21, 1995 or who previously
served as such at any time after January 1, 1993, from and against all
damages, liabilities, judgments and claims based upon or arising out of such
person's service in such capacity to the same extent as he or she would have
been indemnified under the Restated Certificate of Incorporation or Restated
Bylaws of Hornbeck as they were in effect on the date the Merger Agreement was
executed. With certain exceptions, the aggregate amount of indemnification
payments required to be made by Tidewater to such persons is limited to $50
million. Tidewater has also agreed to pay the insurance premiums required for
any extension of Hornbeck's director's and officer's insurance policy
following the Effective Date for a period of six years or to provide
comparable coverage under a Tidewater policy. See "The Merger -- Interests of
Certain Persons in the Merger."
NO SOLICITATION OF TRANSACTIONS; TERMINATION FEE. The Merger Agreement
prohibits Hornbeck and its subsidiaries and the affiliated entities in the
North Sea Group from, directly or indirectly, soliciting or encouraging the
initiation or submission of any inquiries, proposals or other offers regarding
any acquisition, merger, takeover bid, sale of all or substantially all of its
assets, or sales of shares of capital stock of Hornbeck or similar
transactions involving Hornbeck. The Merger Agreement provides that if the
Hornbeck Board decides after considering advice of outside counsel and
financial advisors that it would be consistent with its fiduciary
responsibilities to approve or recommend another transaction in lieu of the
Merger and therefore withdraws or modifies its recommendation that the Merger
Agreement be adopted, Hornbeck may not enter into any agreement for such other
takeover proposal until the Merger Agreement is terminated and a termination
fee of $6 million in cash (the "Termination Fee") is paid to Tidewater.
Hornbeck's obligation to pay the Termination Fee is not incurred if Hornbeck
or Tidewater otherwise terminates the Merger Agreement in accordance with its
terms. See "The Merger -- No Solicitation of Transactions; Termination Fee."
AMENDMENT, WAIVER AND TERMINATION. Hornbeck and Tidewater may mutually
agree to amend the Merger Agreement at any time before or after Hornbeck
stockholder approval, provided that no amendment is permissible following
Hornbeck stockholder approval if the amendment would by law require further
stockholder approval, unless such further stockholder approval is obtained.
Either party may waive compliance with any of the agreements or conditions
contained in the Merger Agreement other than the satisfaction of all
requirements prescribed by law for consummation of the Merger.
The Merger Agreement may be terminated at any time before the Effective
Time (i) by the mutual consent of the Hornbeck Board and the Tidewater Board
or (ii) by the board of directors of either party if (a) the required approval
by Hornbeck's stockholders is not obtained at the Special Meeting, (b) there
has been a material breach by the other party of any representation, warranty
or covenant in the Merger Agreement which is not cured within 15 days after
notice of such breach is given to the breaching party, (c) all conditions to
closing have not been met by, or the Merger has not been consummated on or
before, November 20, 1996 unless the party seeking to terminate the Merger
Agreement is, at such time, in willful and material violation of its
representations, warranties or covenants under the Merger Agreement, (d) any
governmental entity shall have issued an order,
11
<PAGE>
decree, or ruling or taken any other action permanently enjoining, restraining
or otherwise prohibiting the Merger and such order, decree, ruling or other
action shall have become final and nonappealable, or (e) at the date of closing
of the Merger, the Conversion Ratio would be less than .60 or greater than .74.
Also, Hornbeck may terminate the Merger if the Hornbeck Board withdraws its
recommendation of the Merger to the holders of Hornbeck Common Stock in
connection with its approval or recommendation to the holders of Hornbeck Common
Stock of any alternate proposal and pays the Termination Fee to Tidewater. See
"The Merger -- No Solicitation of Transactions; Termination Fee" and "--
Amendment; Waiver; Termination."
APPRAISAL RIGHTS
Under Delaware law, Hornbeck stockholders are not entitled to any
appraisal or dissenters' rights in connection with the Merger.
NOTICE TO NON-U.S. CITIZENS
Under federal maritime laws, neither Hornbeck nor Tidewater are permitted
to continue to engage in the United States coastwise trade if persons other
than United States citizens own more than 25% of their respective shares of
outstanding common stock. Tidewater's Certificate of Incorporation and Bylaws
contain provisions designed to enable Tidewater to establish the citizenship
of its stockholders in a manner satisfactory under the maritime laws and to
assure that non-citizens will not own more than 25% of the outstanding
Tidewater Common Stock. Under these provisions, if the number of shares of
Tidewater Common Stock owned by non-citizens were to exceed 24%, Tidewater may
deny voting rights and withhold dividends with respect to the excess shares
and may redeem the excess shares. Moreover, any transfer or purported transfer
of shares of Tidewater Common Stock that would result in the ownership by
non-citizens of more than 24% of the then outstanding Tidewater Common Stock
will not be effective against Tidewater except for the purposes of effecting
the remedies described above.
Upon consummation of the Merger, a letter of transmittal to be used in
connection with the exchange of certificates representing shares of Hornbeck
Common Stock for certificates representing Tidewater Common Stock will be
mailed to each holder of Hornbeck Common Stock as of the Effective Date. The
letter of transmittal will contain a citizenship certificate that must be
completed and returned by such holders before certificates representing
Tidewater Common Stock will be issued and delivered.
12
<PAGE>
MARKET PRICE INFORMATION
TIDEWATER COMMON STOCK. Tidewater Common Stock is traded on the New York
Stock Exchange and the Pacific Stock Exchange under the symbol "TDW." At
December 31, 1995 there were approximately 2,150 holders of record of the
Tidewater Common Stock, based upon the list of recordholders maintained by
Tidewater's transfer agent. The following table sets forth the high and low
closing sale prices of the Tidewater Common Stock as reported on the New York
Stock Exchange Composite Tape and the amount of cash dividends per share
declared on the outstanding Tidewater Common Stock for the periods indicated.
FISCAL YEAR ENDED MARCH 31,
HIGH LOW DIVIDEND
------ ------ --------
1994
June 30, 1993........................ $26 3/8 $21 1/8 $ --
September 30, 1993................... 23 1/4 19 .10
December 31, 1993.................... 25 3/4 19 1/2 .10
March 31, 1994....................... 23 1/8 19 1/2 .10
1995
June 30, 1994........................ $23 1/4 $19 1/4 $ .10
September 30, 1994................... 24 7/8 21 1/4 .10
December 31, 1994.................... 23 3/8 18 1/4 .10
March 31, 1995....................... 20 3/8 16 3/4 .10
1996
June 30, 1995........................ $26 1/4 $19 3/4 $ .10
September 30, 1995................... 29 1/2 23 1/4 .125
December 31, 1995.................... 31 5/8 24 3/4 .125
March 31, 1996 (through February 1,
1996).............................. 35 29 1/2 .125
The payment of dividends on Tidewater Common Stock and its preferred
stock are subject to limitations under Tidewater's revolving credit and term
loan agreement, although no preferred stock is currently outstanding. None of
such limitations are currently expected to restrict Tidewater's continued
payment of dividends at current levels. A further discussion of this matter is
contained in Note 7 of the Notes to Tidewater's Consolidated Financial
Statements included elsewhere herein. As a result of the timing of the fiscal
1994 Tidewater Board meetings, only three quarterly dividends were declared
during fiscal 1994 with respect to Tidewater Common Stock.
On November 17, 1995, the last trading day before the date that Tidewater
and Hornbeck publicly announced the proposed Merger, the closing sale price
for a share of Tidewater Common Stock on the New York Stock Exchange was
$28 3/4. No assurance can be given as to the Average Market Price or the
market price of Tidewater Common Stock at the Effective Time.
13
<PAGE>
HORNBECK COMMON STOCK. The Hornbeck Common Stock trades in the
over-the-counter market and sales are reported on the Nasdaq National Market
under the symbol "HOSS." The following table sets forth the range of high and
low closing sale prices of the Hornbeck Common Stock as reported by the Nasdaq
National Market for the periods indicated.
1993 HIGH LOW
------- -------
March 31, 1993....................... $10 1/2 $ 6
June 30, 1993........................ 18 1/8 9 7/8
September 30, 1993................... 20 3/4 14 5/8
December 31, 1993.................... 24 3/4 12 1/2
1994
March 31, 1994....................... $18 5/8 $13 1/2
June 30, 1994........................ 17 3/8 12 7/8
September 30, 1994................... 15 7/8 11 1/2
December 31, 1994.................... 15 1/2 12 1/4
1995
March 31, 1995....................... $12 7/8 $ 8 7/8
June 30, 1995........................ 16 5/8 11 1/4
September 30, 1995................... 16 3/8 12 5/8
December 31, 1995.................... 20 1/8 13 1/2
1996
March 31, 1996 (through February 1,
1996)................................ $21 3/8 $19
Hornbeck has never paid cash dividends on the Hornbeck Common Stock, and
Hornbeck's ability to pay cash dividends in the future is limited by its
current debt arrangements.
On November 17, 1995, the last trading day before the date that Tidewater
and Hornbeck publicly announced the proposed Merger, the closing sale price
for a share of Hornbeck Common Stock on the Nasdaq National Market was
$15 3/8. No assurance can be given as to the market price of Hornbeck Common
Stock at the Effective Time.
COMPARATIVE PER SHARE DATA
Set forth below are earnings from continuing operations, cash dividends
declared and book value per common share data of Tidewater and Hornbeck on
both historical and pro forma combined bases and on a per share equivalent pro
forma basis for Hornbeck. Pro forma combined earnings from continuing
operations per share is derived from the pro forma combined information
presented elsewhere herein, which gives effect to the Merger under the
pooling-of-interests accounting method as if the Merger had occurred at
September 30, 1995, and after certain adjustments necessary to conform the
basis of presentation of the Tidewater and Hornbeck information. Pro forma
combined cash dividends declared per share reflect Tidewater's cash dividends
declared in the periods indicated. The equivalent pro forma combined data per
share of Hornbeck Common Stock are based upon a conversion ratio of .667 of a
share of Tidewater Common Stock for each share of Hornbeck Common Stock
pursuant to the Merger Agreement and do not take into account the possible
effects of any adjustment to such conversion ratio as provided in the Merger
Agreement. See "The Merger -- Structure and Terms of the Merger." Book value
per share for the pro forma combined presentation is based upon outstanding
shares of Tidewater Common Stock, adjusted to include the shares of Tidewater
Common Stock to be issued in the Merger. The information set forth below
should be read in conjunction with the respective audited and unaudited
consolidated financial statements of Tidewater and Hornbeck
14
<PAGE>
included elsewhere in this Proxy Statement/Prospectus. See also "Tidewater
Unaudited Pro Forma Condensed Combined Financial Information."
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
------------------------------- --------------------
1993 1994 1995 1994 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Tidewater -- Historical:
Earnings from continuing
operations................... $ .53 $ .67 $ .80 $ .48 $ .70
Cash dividends declared(1)...... .325 .30 .40 .20 .225
Book value...................... 10.90 11.38
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
1992 1993 1994 1994 1995
--------- --------- --------- --------- ---------
Hornbeck -- Historical:
Earnings from continuing
operations................... $ .01 $ .92 $ .60 $ .41 $ .32
Cash dividends declared......... -- -- -- -- --
Book value...................... 8.07 8.31
SIX MONTHS ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
------------------------------- --------------------
1993 1994 1995 1994 1995
--------- --------- --------- --------- ---------
Pro Forma Combined:
Earnings from continuing
operations................... $ .45 $ .72 $ .82 $ .47 $ .64
Cash dividends declared(1)...... .325 .30 .40 .20 .225
Book value...................... 11.03 11.46
SIX MONTHS ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
------------------------------- --------------------
1993 1994 1995 1994 1995
--------- --------- --------- --------- ---------
Equivalent Pro Forma Combined Per
Hornbeck Common Share:
Earnings from continuing
operations................... $ .30 $ .48 $ .55 $ .31 $ .43
Cash dividends declared(1)...... .22 .20 .27 .13 .15
Book value...................... 7.36 7.64
</TABLE>
- ------------
(1) As a result of the timing of the fiscal 1994 Tidewater Board meetings,
only three quarterly dividends were declared during fiscal 1994 with
respect to Tidewater Common Stock.
RECENT DEVELOPMENTS. Tidewater reported its third quarter fiscal 1996
results on January 25, 1996. Net earnings for the quarter were $21.5 million, or
$0.40 per share, on revenues of $148.8 million, compared to net earnings of
$11.7 million, or $0.22 per share, on revenues of $136.0 million for the third
quarter of fiscal 1995. For the nine months ended December 31, 1995, Tidewater's
net earnings were $59.3 million, or $1.10 per share, on revenues of $435.9
million, compared to net earnings of $37.5 million, or $0.70 per share, on
revenues of $400.5 million for the nine months ended December 31, 1994.
15
<PAGE>
THE SPECIAL MEETING
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES; DATE AND PLACE OF THE
SPECIAL MEETING
This Proxy Statement/Prospectus is being furnished to holders of common
stock, $.10 par value per share (the "Hornbeck Common Stock") of Hornbeck
Offshore Services, Inc., a Delaware corporation ("Hornbeck"), in connection with
the solicitation of proxies by and on behalf of the board of directors of
Hornbeck (the "Hornbeck Board") for use at a special meeting of stockholders to
be held at the Hotel Galvez, 2024 Seawall Boulevard, Galveston, Texas, on
Wednesday, March 13, 1996, at 11:00 a.m., Galveston time (the "Special
Meeting"). In addition to solicitation by mail, proxies may be solicited by
directors, officers and employees of Hornbeck in person or by telephone,
telegram or other means of communication. Such directors, officers and employees
will not receive any compensation in addition to their regular salary, but may
be reimbursed for reasonable out-of-pocket expenses in connection with the
solicitation. Hornbeck has also retained D.F. King & Co., Inc., 77 Water Street,
New York, New York 10005, to assist Hornbeck in the solicitation of proxies in
connection with the Special Meeting at a cost of approximately $4,000, plus
out-of-pocket expenses. Arrangements will also be made with custodians, nominees
and fiduciaries for forwarding proxy solicitation materials to beneficial owners
of Hornbeck Common Stock held of record by such custodians, nominees and
fiduciaries, all of whom will be reimbursed for reasonable expenses incurred in
connection therewith. This Proxy Statement/Prospectus and the accompanying proxy
card were first mailed to holders of Hornbeck Common Stock on or about
February 8, 1996.
All shares of Hornbeck Common Stock that are represented at the Special
Meeting by duly executed proxies will be voted in accordance with the
instructions indicated thereon. If a duly executed proxy is submitted and no
voting instructions are indicated thereon, such proxy will be voted "FOR"
adoption of the Agreement and Plan of Merger dated December 21, 1995 (the
"Merger Agreement") among Hornbeck, Tidewater Inc., a Delaware corporation
("Tidewater"), and Tidewater Expansion, Inc., a Delaware corporation and
wholly owned subsidiary of Tidewater ("Newco").
The Hornbeck Board knows of no other matter to be presented at the
Special Meeting, but if any other matter is properly presented for
consideration at the Special Meeting (or any adjournments or postponements
thereof), the persons named in the enclosed form of proxy will have discretion
to vote on such matters in accordance with their best judgment.
A holder of Hornbeck Common Stock may revoke a previously submitted proxy
at any time prior to its exercise at the Special Meeting by: (i) filing with
the Corporate Secretary of Hornbeck at or prior to the Special Meeting a
written revocation bearing a later date or a duly executed later-dated proxy
relating to the same shares; or (ii) attending the Special Meeting and voting
in person. Attendance at the Special Meeting will not in and of itself
constitute a revocation of a proxy. Any written revocation or later-dated
proxy should be delivered at the Special Meeting to the Corporate Secretary of
Hornbeck or before the Special Meeting to Hornbeck at 7707 Harborside Drive,
Galveston, Texas 77554, Attention: Corporate Secretary.
Holders of Hornbeck Common Stock are requested to mark, date and sign the
enclosed proxy and return it promptly to Hornbeck in the enclosed stamped,
pre-addressed envelope. Stockholders may vote in person at the Special Meeting
even if they have previously mailed a proxy. STOCKHOLDERS SHOULD NOT SEND ANY
HORNBECK STOCK CERTIFICATES WITH THEIR PROXY CARDS.
PURPOSE OF THE SPECIAL MEETING
At the Special Meeting, the holders of Hornbeck Common Stock will
consider and vote upon a proposal to adopt the Merger Agreement and to
transact such other business as may properly come before the Special Meeting
or any adjournments or postponements thereof.
16
<PAGE>
RECORD DATE; STOCKHOLDERS ENTITLED TO VOTE
The Hornbeck Board has fixed January 31, 1996 as the Record Date for the
determination of the stockholders of Hornbeck entitled to notice of and to vote
at the Special Meeting. Only holders of record of Hornbeck Common Stock at the
close of business on the Record Date will be entitled to notice of and to vote
at the Special Meeting. As of the Record Date, there were 13,234,728 shares of
Hornbeck Common Stock outstanding and entitled to vote. Each record holder of
Hornbeck Common Stock on the Record Date is entitled to cast one vote per share,
exercisable in person or by properly executed proxy, on the proposal to adopt
the Merger Agreement and on each other matter properly submitted to a vote of
the stockholders at the Special Meeting.
As of the Record Date, directors and executive officers of Hornbeck and
their affiliates had the power to vote approximately 2,008,477 shares of
Hornbeck Common Stock, or 15.2% of the outstanding shares of Hornbeck Common
Stock.
QUORUM; VOTE REQUIRED
The presence at the Special Meeting, in person or by proxy, of the
holders of a majority of the outstanding shares of Hornbeck Common Stock as of
the Record Date is necessary to constitute a quorum. The affirmative vote of
the holders of not less than 66 2/3% of the shares of Hornbeck Common Stock
outstanding as of the Record Date is required to adopt the Merger Agreement.
Abstentions and broker nonvotes will be counted for purposes of establishing a
quorum but will be deemed to be a vote "AGAINST" adoption of the Merger
Agreement.
Tidewater's stockholders are not required to adopt the Merger Agreement
or approve the issuance of shares of Tidewater Common Stock upon consummation
of the Merger.
17
<PAGE>
THE MERGER
THE MERGER AGREEMENT
The Merger is to be effected in accordance with the terms and conditions
set forth in the Merger Agreement, a copy of which is attached hereto as
Appendix A and incorporated herein by reference. The following brief
description is necessarily incomplete and is qualified in its entirety by
reference to the Merger Agreement.
STRUCTURE AND TERMS OF THE MERGER
On December 21, 1995, the Merger Agreement was executed by and among
Tidewater and Newco, on the one hand, and Hornbeck, on the other hand.
Pursuant to the Merger Agreement, at the Effective Time, Newco will merge into
Hornbeck, Hornbeck will become a wholly owned subsidiary of Tidewater, and
each share of Hornbeck Common Stock that is then outstanding will be converted
into the right to receive .667 of a share of the common stock, $.10 par value
per share, of Tidewater (the "Tidewater Common Stock"), together with
associated rights under Tidewater's Restated Rights Agreement dated as of
December 17, 1993 by and between Tidewater and the First National Bank of
Boston, as rights agent (the "Tidewater Stockholder Rights Plan") subject to
adjustment as described below (as so adjusted, the "Conversion Ratio").
The Merger Agreement provides that if the Average Market Price of a share
of Tidewater Common Stock is (a) less than $24.50, then the Conversion Ratio
shall equal that number obtained by dividing $16.34 by the Average Market Price,
or (b) greater than $32.50, then the Conversion Ratio shall equal that number
obtained by dividing $21.68 by the Average Market Price; provided that in no
event shall the Conversion Ratio, as so adjusted, be less than .60 or greater
than .74, by virtue of the Average Market Price being greater than $36.13 or
less than $22.08. The "Average Market Price" is defined as the average of the
daily closing sale prices of a share of Tidewater Common Stock on the New York
Stock Exchange as reported in THE WALL STREET JOURNAL for the ten consecutive
trading days that end on the second trading day before the date of closing of
the Merger. Holders of Hornbeck Common Stock who, upon conversion, would be
entitled to a fractional share of Tidewater Common Stock will, in lieu thereof,
receive a cash payment equal to the product of such fraction and the Average
Market Price.
The following table sets forth examples of the shares of Tidewater Common
Stock into which each share of Hornbeck Common Stock would be converted on the
Effective Date, and the aggregate dollar value of the shares of Tidewater
Common Stock that would be issued in the Merger, assuming that on such date
the Average Market Price for Tidewater Common Stock is as specified below and
that the maximum of 13,510,336 shares of Hornbeck Common Stock were converted
in the Merger.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF TIDEWATER
ASSUMED AVERAGE MARKET PRICE OF TIDEWATER COMMON STOCK PER SHARE OF
COMMON STOCK HORNBECK COMMON STOCK AGGREGATE DOLLAR VALUE
- ----------------------------------------- ----------------------------- ----------------------
<S> <C> <C>
$ 22.08 .74 $220.8 million
$ 24.50 .667 $220.8 million
$ 28.50 .667 $256.8 million
$ 32.50 .667 $292.9 million
$ 36.13 .60 $292.9 million
</TABLE>
On February 1, 1996, the closing sale price for a share of Tidewater Common
Stock was $35.00, and if such date had been the date of closing of the Merger,
the Average Market Price would have been $31.90. If the Average Market Price
exceeds $36.13, the Conversion Ratio would be less than .60 and either Hornbeck
or Tidewater would have the right to terminate the Merger Agreement.
BACKGROUND OF THE MERGER
Tidewater has from time to time evaluated various opportunities to expand
the size of its marine fleet and recently identified Hornbeck as an attractive
candidate for a business combination for the reasons described in "-- Reasons
for the Merger."
18
<PAGE>
In late October 1995, Mr. William C. O'Malley, Chairman of the Board,
President and Chief Executive Officer of Tidewater, expressed an initial
interest in the possible acquisition of Hornbeck to a representative of Simmons
& Company International ("Simmons"), an investment banking firm regularly
retained by Hornbeck with respect to previous mergers and acquisitions
undertaken or evaluated by Hornbeck that had also on two occasions acted as
co-manager of an underwriting syndicate in a public securities offering of
Tidewater Common Stock involving a selling stockholder. Subsequently, Mr.
O'Malley had a preliminary discussion with Mr. Larry D. Hornbeck, Chairman of
the Board, President and Chief Executive Officer of Hornbeck, during which Mr.
O'Malley indicated an interest in exploring a possible transaction between
Tidewater and Hornbeck. Consistent with the role that Simmons has previously
performed in assisting with the evaluation of potential transactions involving
Hornbeck, Simmons was authorized by Mr. Hornbeck to explore with Tidewater
representatives the extent of Tidewater's interest and whether a Tidewater
proposal would merit Hornbeck Board consideration. After discussions with
representatives of Simmons in early November, Tidewater requested that Simmons
contact Mr. Hornbeck in order to obtain, subject to a confidentiality agreement,
confidential financial and operational information regarding Hornbeck for
purposes of confirming its interest. Tidewater spent several days in early
November evaluating the Hornbeck material supplied to it during which time
Tidewater also had several discussions with Simmons concerning pricing and other
terms of a possible letter of intent.
On Monday, November 13, Mr. O'Malley convened a special meeting of the
board of directors of Tidewater (the "Tidewater Board"). Mr. O'Malley advised
the Tidewater Board of the preliminary discussions with Mr. Hornbeck and
Simmons representatives, and sought the Tidewater Board's authority for Mr.
O'Malley, as Chief Executive Officer of Tidewater, to extend an offer to
Hornbeck to acquire Hornbeck in a stock for stock merger that would qualify as
a tax free reorganization as well as qualifying for pooling-of-interests
accounting treatment. At that same meeting, Simmons was invited to make a
presentation to the Tidewater Board. The presentation followed an explanation
by Mr. O'Malley to the Tidewater Board that Simmons had historically
represented Hornbeck as a financial advisor and would be representing Hornbeck
in connection with a possible transaction with Tidewater. Simmons had been
invited by Mr. O'Malley to make a presentation to the Tidewater Board, with
the permission of Mr. Hornbeck, because, in its preliminary consideration of a
possible transaction, Simmons had prepared certain substantive analyses of the
benefits of a combination of Tidewater and Hornbeck. After completing its
presentation, Simmons was excused from the meeting and the Tidewater Board
continued to discuss the potential transaction. At the conclusion of the
meeting, the Tidewater Board, based on the recommendation of management and
its own independent assessment, authorized Mr. O'Malley to make an offer to
Hornbeck consistent with the proposal discussed at the meeting. On Tuesday,
November 14, Tidewater delivered a draft letter of intent to Simmons for
consideration.
Discussions and negotiations were held on November 14 and 15 between
Tidewater and Simmons concerning the letter of intent and Simmons concluded
and so advised Mr. Hornbeck that the proposal embodied in the draft letter of
intent merited consideration by the Hornbeck Board. The terms of the proposal
were not made available to any member of the Hornbeck Board, including Mr.
Hornbeck, until the special Hornbeck Board meeting on November 16.
At the special Hornbeck Board meeting held on November 16, 1995, Simmons
made a detailed presentation covering the businesses, markets and operations
of Hornbeck and Tidewater, an analysis of potential combination benefits, an
analysis of the transaction value under the proposed acquisition structure,
and a comparative analysis of various public market trading multiples of
companies deemed comparable to Hornbeck, various acquisition multiples of
transactions deemed comparable and the proposed acquisition multiples for
Hornbeck. Simmons also presented an analysis of public market trading
multiples for Tidewater and various companies selected as comparable to
Tidewater. Further, Simmons presented to the Hornbeck Board a pro forma review
of Hornbeck and Tidewater on a combined basis. In addition, the Hornbeck Board
reviewed the progress made toward and the likelihood of other possible
acquisition opportunities for Hornbeck consistent with its previously
19
<PAGE>
announced business strategy of growth through acquisitions, including the
recent inability to generate suitable acquisition candidates on acceptable
terms and conditions.
Consistent with the Hornbeck Board's fiduciary duty, a committee of two
directors was appointed as a negotiating committee for the Hornbeck Board. The
Hornbeck Board and its financial advisors were also encouraged to consider any
further questions, to further analyze the advantages, disadvantages, options
and/or alternatives to the transaction and to raise such matters for
discussion at a second Hornbeck Board meeting to be held on November 19, 1995.
Following an exchange of views with respect to certain terms to be
incorporated in a letter of intent, Hornbeck invited Tidewater representatives
to a negotiating session in Houston on Friday, November 17. During the period
from November 17 through 19, 1995, the Hornbeck Board committee negotiated the
terms of a letter of intent with representatives of Tidewater. The full
Hornbeck Board convened again on November 19, 1995, and considered further the
advantages and disadvantages of a potential transaction; all directors were
given opportunities for comments, questions, and discussion of alternatives.
The Hornbeck Board received verbal assurances from Simmons that the proposed
Merger was fair to the holders of Hornbeck Common Stock from a financial point
of view subject to Simmons' review of the terms of a merger agreement to be
executed in connection with the proposed Merger and completion by Hornbeck of
its due diligence review. At the conclusion of the November 19, 1995 Hornbeck
Board meeting, the Hornbeck Board approved the execution of a letter of intent
and negotiation of a definitive agreement. On the evening of November 19,
1995, Hornbeck and Tidewater executed a letter of intent, and a press release
concerning the proposed Merger was released on the morning of November 20,
1995.
Between November 20, 1995 and December 21, 1995, Hornbeck and Tidewater
representatives negotiated the Merger Agreement. The Tidewater Board met on
December 13, 1995 and, after reviewing the terms of the Merger Agreement with
Tidewater's management, legal counsel and outside financial advisors, Merrill
Lynch & Co. ("Merrill Lynch"), approved the Merger Agreement and the
transactions contemplated thereby. The Hornbeck Board met again on December 14,
1995. After discussion of the terms of the Merger Agreement, consideration of
the reaction of analysts and the marketplace to the announcement of the Merger
and a verbal confirmation by Simmons that the proposed Merger was fair to the
holders of Hornbeck Common Stock, the Hornbeck Board approved the Merger
Agreement and the transactions contemplated thereby and unanimously recommended
the adoption of the Merger Agreement by the holders of the Hornbeck Common
Stock. Subsequently, Simmons confirmed its fairness opinion in writing effective
as of the date of execution of the Merger Agreement. See "-- Opinion of
Investment Banking Firm" and Appendix B hereto.
REASONS FOR THE MERGER
TIDEWATER. Recognizing that the average age of its own worldwide fleet
of vessels, as well as the vessel fleets of its competitors, is continuing to
increase, and that the construction of new vessels is not yet economically
justifiable in view of the prevailing level of vessel day rates and the
continuing volatility in oil and gas prices, Tidewater has sought, from time
to time, to identify suitable vessel acquisition opportunities to strengthen
and better manage the attrition of its fleet and to continue to respond to
customer demands. Tidewater's decision to pursue the acquisition of Hornbeck
is consistent with this overall strategy.
The Tidewater Board believes that there are several benefits that should
accrue to Tidewater and its stockholders following the Merger, including (i)
Tidewater's increased ability to service the Gulf of Mexico market, which many
industry analysts believe has a very positive outlook for the foreseeable
future, through the combination of the respective Gulf of Mexico operations of
Tidewater and Hornbeck; (ii) the ability of Tidewater to mitigate the effects
of the aging of the Tidewater fleet in the Gulf of Mexico through the
replacement of older Tidewater vessels with those Hornbeck vessels having
longer remaining useful lives; and (iii) the ability to achieve cost savings
and other operational
20
<PAGE>
benefits through the consolidation of overlapping facilities as well as the
elimination of duplicative corporate and administrative functions.
In reaching its decision to approve the Merger Agreement, the Tidewater
Board considered the following factors, among others: (i) the recent and
historical performance of the Tidewater Common Stock and Hornbeck Common
Stock, (ii) certain historical and prospective financial information of
Hornbeck, (iii) an analysis of recent acquisitions in comparable industries
and (iv) the terms of the Merger Agreement. Prior to taking action on the
Merger Agreement, the Tidewater Board received presentations from, and
reviewed the terms and conditions of the Merger Agreement with, Tidewater's
management, legal counsel, and Tidewater's outside financial advisors, Merrill
Lynch. The Tidewater Board considered a number of factors in addition to those
disclosed above, and did not quantify or otherwise attempt to assign relative
weights to the specific factors considered. THE TIDEWATER BOARD HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND BELIEVES THE MERGER AND OTHER
TRANSACTIONS CONTEMPLATED THEREIN TO BE IN THE BEST INTERESTS OF TIDEWATER AND
ITS STOCKHOLDERS.
HORNBECK. The Hornbeck Board believes that Tidewater is a strong and
growing energy service company and that the proposed transaction provides an
opportunity for Hornbeck's stockholders to participate in a combined
enterprise that has significantly greater business and financial resources
than Hornbeck would have if the Merger did not take place, and to receive, on
a tax-deferred basis, a premium for their Hornbeck Common Stock based on
recent market prices. In view of the inherent benefits of the proposed Merger
with Tidewater, together with the opportunity of the Hornbeck Board to
consider other unsolicited offers consistent with the terms of the Merger
Agreement, the Hornbeck Board approved the terms of the Merger.
The Hornbeck Board believes that among the benefits of the Merger to the
holders of the Hornbeck Common Stock are (i) the geographical distribution of
the combined entity's marine assets, with a consequent reduction in exposure to
industry business cycles in the Gulf of Mexico, (ii) the complementary nature of
the Tidewater and Hornbeck fleets, which would add strength and depth to the
combined entity's fleet, (iii) the enhanced growth opportunities for the
combined entity from expanded geographic presence and greater resources, (iv)
Tidewater's position as one of the larger participants in the U.S. gas
compression business and (v) the potential cost savings achieved through
consolidation.
In evaluating the fairness of the proposed merger consideration to the
Hornbeck stockholders, the Hornbeck Board consulted with management and
Simmons regarding Tidewater's business and with management, legal counsel, tax
advisors and Simmons regarding the terms and provisions of the Merger
Agreement. The Hornbeck Board considered a number of factors, many of the
detailed analyses with respect to which were prepared by Simmons, in reaching
its conclusions including: (i) an analysis of the financial performance,
operations, assets, business condition and business prospects of Tidewater and
Hornbeck, including each of Hornbeck's and Tidewater's projected performance
through 1996; (ii) a review of pro forma projections of the combined entity;
(iii) Tidewater's history over the past several years of increases in
financial performance, including earnings per share, while maintaining a
relatively unleveraged balance sheet; (iv) the premium offered with respect to
the Hornbeck Common Stock in the proposed Merger and a comparison of the
valuation multiples implied in the Conversion Ratio to that of other
comparable publicly traded energy service companies and comparable
transactions; (v) the benefits of a proposed tax-free reorganization
structure; (vi) the greater liquidity provided by Tidewater Common Stock with
over 60 million shares outstanding following the Merger, compared to over 13
million shares outstanding for Hornbeck before the Merger, together with
expanded analyst coverage and potentially greater investor interest; (vii) the
historical performance of the Tidewater Common Stock and the Hornbeck Common
Stock and various current and historical valuation multiples of the two
companies; (viii) an analysis of the background and experience of Tidewater's
management team; and (ix) other elements of the presentation and advice of and
other materials prepared by Simmons and the opinion of Simmons, as financial
advisor to Hornbeck, that the consideration to be received by the stockholders
of Hornbeck in the Merger was fair from a financial point of view to Hornbeck
stockholders.
21
<PAGE>
The Hornbeck Board also considered the terms of the Merger Agreement,
including provisions that permit the Hornbeck Board, consistent with the
exercise of its fiduciary duties and subject to certain conditions, to respond
to inquiries regarding other potential business combination transactions, to
provide information to, and negotiate with, third parties making an unsolicited
proposal to acquire Hornbeck in such a transaction and to terminate the Merger
Agreement if the Hornbeck Board determines to recommend an alternative business
combination as a Superior Proposal (as defined in "-- No Solicitation of
Transactions, Termination Fee" below). In that regard, the Hornbeck Board noted
that the Merger Agreement provides that if the Merger Agreement is terminated as
a result of a Superior Proposal, Hornbeck will be obligated to pay Tidewater a
Termination Fee of $6 million in cash. The Hornbeck Board did not view the
Termination Fee provision of the Merger Agreement as unreasonably impeding any
interested third party from proposing a Superior Proposal.
The Hornbeck Board believes that the terms of the Merger Agreement are
fair to and in the best interests of Hornbeck and the holders of the Hornbeck
Common Stock. In view of the variety of factors considered in connection with
its evaluation of the Merger, the Hornbeck Board did not quantify or otherwise
attempt to assign relative weights to the specific factors considered.
RECOMMENDATION OF THE HORNBECK BOARD
AFTER CAREFUL CONSIDERATION, THE HORNBECK BOARD HAS DETERMINED THAT THE
MERGER IS ADVISABLE AND IN THE BEST INTEREST OF THE HOLDERS OF HORNBECK COMMON
STOCK, HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE MERGER AND
RECOMMENDS THAT HOLDERS OF HORNBECK COMMON STOCK VOTE "FOR" ADOPTION OF THE
MERGER AGREEMENT.
OPINION OF INVESTMENT BANKING FIRM
The investment banking firm of Simmons & Company International
("Simmons") has acted as financial advisor to Hornbeck in connection with the
Merger and delivered its oral opinion to the Hornbeck Board at the Hornbeck
Board meetings on November 16 and December 14, 1995, which it subsequently
confirmed by its written opinion dated December 21, 1995, to the Hornbeck
Board to the effect that, as of such date, the consideration to be received by
the holders of shares of Hornbeck Common Stock is fair to such holders from a
financial point of view. Simmons was not asked to and did not recommend the
Conversion Ratio on which the amount of such consideration is based. The
Conversion Ratio was determined by the Tidewater Board and the Hornbeck Board
in arms-length negotiations. A copy of the opinion of Simmons is attached
hereto as Appendix B. Holders of Hornbeck Common Stock are urged to read the
opinion in its entirety for an explanation of the assumptions made, matters
considered and limits of the review undertaken by Simmons.
In connection with rendering its verbal advice and its subsequent written
opinion, Simmons reviewed and analyzed, among other things, the following: (i)
the letter of intent between Tidewater and Hornbeck in draft form and as
executed on November 19, 1995; (ii) the Merger Agreement; (iii) the financial
statements and other information concerning Hornbeck, including the Annual
Reports on Form 10-K for each of the years in the three-year period ended
December 31, 1994, the Quarterly Reports on Form 10-Q of Hornbeck for the
quarters ended March 31, 1995, June 30, 1995 and September 30, 1995, and the
Current Reports on Form 8-K of Hornbeck related to events occurring on
November 15, 1994, as amended, June 20, 1995, and November 19, 1995; (iv)
certain other internal information, primarily financial in nature, concerning
the business and operations of Hornbeck furnished by Hornbeck for purposes of
Simmons' analysis; (v) certain publicly available information concerning the
trading of, and the trading market for, Hornbeck Common Stock; (vi) certain
publicly available information concerning Tidewater, including the Annual
Reports on Form 10-K of Tidewater for each of the fiscal years in the
three-year period ended March 31, 1995, the Quarterly Reports on Form 10-Q of
Tidewater for the quarters ended June 30, 1995 and September 30, 1995, and the
Current Reports on Form 8-K related to events occurring on November 30, 1994,
as amended, and January 5, 1995; (vii) certain other internal information,
primarily financial in nature, concerning the business and operations of
Tidewater furnished by Tidewater for purposes of Simmons' analysis; (viii)
certain
22
<PAGE>
publicly available information concerning the trading of, and the trading
market for, Tidewater Common Stock; (ix) certain publicly available
information with respect to certain other companies that Simmons believes to
be comparable to Hornbeck or Tidewater and the trading markets for certain of
such other companies' securities; (x) certain publicly available information
concerning the estimates of the future operating and financial performance of
Hornbeck, Tidewater and the comparable companies prepared by industry experts
unaffiliated with either Hornbeck or Tidewater; and (xi) certain publicly
available information concerning the nature and terms of certain other
transactions considered relevant to the inquiry. Further, Simmons made such
other analyses and examinations as deemed necessary or appropriate. Simmons
also met with certain officers and employees of Hornbeck and Tidewater to
discuss the foregoing, as well as other matters believed relevant to the
inquiry.
In arriving at its opinion, Simmons assumed and relied upon the accuracy
and completeness of all of the financial and other information provided by
Hornbeck and Tidewater, or publicly available, including, without limitation,
information with respect to asset conditions, liability reserves and insurance
coverages, and did not attempt independently to verify any of such
information. Based on the terms set forth in the Merger Agreement, Simmons
also assumed that the proposed Merger would be treated for federal income tax
purposes as a reorganization within the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended, and would be treated as a "pooling of
interests" for accounting purposes. Simmons did not conduct a physical
inspection of any of the assets, properties or facilities of Hornbeck or
Tidewater, nor did Simmons make or obtain any independent evaluations or
appraisal of any of such assets, properties or facilities.
In conducting its analysis and arriving at its opinion, Simmons
considered such financial and other factors as it deemed appropriate under the
circumstances including, among others, the following: (i) the historical and
current financial position and results of operations of Hornbeck and
Tidewater; (ii) the business prospects of Hornbeck and Tidewater; (iii) the
historical and current market for Hornbeck Common Stock, for Tidewater Common
Stock and for the equity securities of certain other companies believed to be
comparable to Hornbeck or Tidewater; (iv) the respective contributions in
terms of various financial measures of Hornbeck and Tidewater to the combined
company, and the relative pro forma ownership of Tidewater after the proposed
Merger by the current holders of Hornbeck Common Stock and Tidewater Common
Stock; and (v) the nature and terms of certain other acquisition transactions
that Simmons believes to be relevant. Simmons also took into account its
assessment of general economic, market and financial conditions and its
experience in connection with similar transactions and securities' valuation
generally. Simmons' opinion necessarily was based upon conditions as they
existed and could be evaluated on, and on the information made available at, the
dates of its verbal advice and written opinion. Such opinion was confirmed in
writing by Simmons on February 5, 1996, based on conditions as they existed and
could be evaluated on such date.
The Hornbeck Board selected Simmons as its financial advisor because
Simmons is a nationally recognized investment banking firm specializing in
service to the energy services industry with substantial experience in
transactions similar to the Merger and is familiar with Hornbeck and its
business. As part of its investment banking business, Simmons is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes.
Pursuant to an engagement letter dated as of November 16, 1995, a fee of
0.9% of the aggregate market value of all shares of Hornbeck Common Stock
outstanding at the Effective Time (as defined below) will be payable to
Simmons upon consummation of the Merger for its services as financial advisor
to Hornbeck in connection with the Merger. Hornbeck has also agreed to
reimburse Simmons for its reasonable out-of-pocket expenses, including the
fees and expenses of its legal counsel, and to indemnify Simmons against
certain liabilities, including certain liabilities under the federal
securities laws, related to or arising out of its engagement as financial
advisor or its role in connection therewith.
Simmons has represented Hornbeck in several acquisitions in the past and
has recently been serving on a retainer basis in seeking out and evaluating
possible businesses to acquire. Simmons has
23
<PAGE>
in the past acted on two occasions as co-manager of an underwriting syndicate
in connection with a public securities offering of Tidewater Common Stock
involving a selling stockholder. For this investment banking work with
Hornbeck and Tidewater, Simmons has received customary compensation. Since
January 1, 1994 Hornbeck has paid Simmons an aggregate amount of approximately
$550,000 for services rendered to Hornbeck. Simmons and its partners own
approximately 122,000 shares of Hornbeck Common Stock. In addition, in the
ordinary course of business, Simmons may actively trade the securities of
Hornbeck and Tidewater 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.
Mr. L.E. Simmons, a director of Hornbeck, was an officer and director of
Simmons until September 1993 and continues to own approximately three percent
of the outstanding common stock of Simmons. Mr. Matthew R. Simmons, brother of
Mr. L.E. Simmons, is the president and principal shareholder of Simmons.
EFFECTIVE TIME OF THE MERGER
The Merger will become effective at the time (the "Effective Time") and
on the date (the "Effective Date") the Certificate of Merger is filed with the
Secretary of State of Delaware. Unless Tidewater and Hornbeck otherwise agree,
the Merger will be consummated as soon as practicable following receipt of
Hornbeck stockholder and necessary regulatory approvals and satisfaction or
waiver of the other conditions to the Merger. It is currently expected that
the Merger will become effective as soon as practicable following the Special
Meeting. See " -- Hart-Scott-Rodino Clearance" and " -- Other Conditions of
the Merger."
HART-SCOTT-RODINO CLEARANCE
The obligations of Hornbeck and Tidewater to consummate the Merger are
subject to the expiration or termination of the requisite waiting periods
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"). In addition, it is a condition to Tidewater's obligation to
consummate the Merger that such expiration or earlier termination be
accomplished without the imposition of any condition on Tidewater or Hornbeck
that would require the divestiture by either Hornbeck or Tidewater of any
asset of either party or that would otherwise have a material adverse effect
on Tidewater or Hornbeck. Under the HSR Act and the rules promulgated
thereunder by the Federal Trade Commission (the "FTC"), the Merger may not be
consummated until notifications have been given and certain information has
been furnished to the FTC and the Antitrust Division of the Department of
Justice (the "DOJ") and specific waiting period requirements have been
satisfied. Tidewater and Hornbeck each made the required initial filings under
the HSR Act on January 2, 1996 regarding the Merger. Under the HSR Act, the
required waiting periods are 30 days after the date of the filings, and 20 days
after the receipt of any additional information requested by the FTC or the DOJ.
The waiting period expired on February 1, 1996, without any further request for
additional information. As a practical matter, however, as discussed below, the
DOJ has the right to seek to enjoin the Merger at any time before its
consummation.
Before the consummation of the Merger, the DOJ or the FTC could take such
action under the antitrust laws as it deems necessary or desirable and in the
public interest, including seeking to enjoin the consummation of the Merger.
Additionally, the DOJ or the FTC could, in connection with its review under
the HSR Act or at any time following consummation of the Merger, seek the
divestiture of substantial assets of Tidewater or Hornbeck. At any time before
or after the consummation of the Merger, and notwithstanding that the HSR Act
waiting period has expired, any state could take such action under the
antitrust laws as it deems necessary or desirable in the public interest. Such
action could include seeking to enjoin the consummation of the Merger or
seeking divestiture of Hornbeck or businesses of Tidewater or Hornbeck.
Private parties may also seek to take legal action under the antitrust laws
under certain circumstances.
Based on information available to them, Tidewater and Hornbeck believe
that the Merger can be effected without the divestiture of assets or the
imposition of any other material condition on Tidewater or Hornbeck. There can
be no assurance, however, that a challenge to the consummation of the Merger
24
<PAGE>
on antitrust grounds will not be made or that, if such a challenge were made,
Tidewater and Hornbeck would prevail.
OTHER CONDITIONS TO THE MERGER
In addition to Hornbeck stockholder and regulatory approval, the respective
obligations of Tidewater and Hornbeck to consummate the Merger are subject to
the satisfaction of certain conditions, including the following: (i) the
representations and warranties of Tidewater, Newco and Hornbeck contained in the
Merger Agreement being true and correct in all material respects as of the date
of the closing of the Merger, and the covenants of each of the parties to the
Merger Agreement having been duly performed in all material respects or waived;
(ii) the shares of Tidewater Common Stock to be issued pursuant to the Merger
Agreement having been approved for listing on the New York Stock Exchange and
the Pacific Stock Exchange, subject to official notice of issuance; (iii) the
receipt by each of Tidewater and Hornbeck of customary legal opinions,
certificates, covenants, consents, approvals and reports from the other parties
and from third parties, as applicable; (iv) the absence of any event or
circumstance from the date of the respective parties' latest balance sheet to
the date of the closing of the Merger resulting in a Material Adverse Effect (as
defined below) with respect to Hornbeck or Tidewater; (v) the receipt by each of
Tidewater and Hornbeck, immediately before the date of closing of the Merger, of
confirmation of the letters from KPMG Peat Marwick LLP stating that Tidewater is
eligible to be a party to a merger accounted for as a pooling of interests and
that they are not aware of any matters that would preclude the use of
pooling-of-interests accounting in connection with the Merger and from Price
Waterhouse LLP stating that as a result of specified procedures no matters have
come to their attention that would preclude Tidewater from accounting for the
business combination as a pooling of interests; (vi) the filing by Hornbeck with
the Commission of its annual report on Form 10-K for the fiscal year ending
December 31, 1995; (vii) the execution and delivery by Tidewater of a Consulting
Agreement providing for certain consulting services to be performed by Larry D.
Hornbeck; (viii) the Tidewater Board having taken action to appoint Larry D.
Hornbeck to the Tidewater Board effective on the second day following the
Effective Date; (ix) the receipt by Tidewater and Hornbeck, immediately prior to
the date of closing of the Merger, of confirmation of the tax opinions that each
received in connection with the execution of the Merger Agreement; and (x) the
absence of any pending or threatened suit, action or proceeding seeking to
restrain, prevent or change the transactions contemplated in the Merger
Agreement. As defined in the Merger Agreement, a "Material Adverse Effect" with
respect to either party means a material adverse effect on the financial
condition, results of operations, business or prospects of such party and its
20% or more-owned subsidiaries, taken as a whole, provided that, with respect
only to acts, events or occurrences that result, or that are reasonably likely
to result, individually or in the aggregate, in a quantifiable loss, cost or
expense (a "Quantifiable Loss"): (i) with respect to Hornbeck, a Quantifiable
Loss that does not exceed $6 million and (ii) with respect to Tidewater, a
Quantifiable Loss that does not exceed $35 million, will not be deemed to
constitute a Material Adverse Effect, but a Quantifiable Loss that does exceed
$6 million (with respect to Hornbeck) or $35 million (with respect to Tidewater)
will be deemed to constitute a Material Adverse Effect. A general economic
decline or a decline experienced by the offshore marine service industry,
generally, will not constitute a Material Adverse Effect with respect to either
party. The Merger Agreement also provides that no party is precluded from
asserting that acts, events or occurrences, the effects or reasonably likely
effects of which are not susceptible of being measured or reduced to a
Quantifiable Loss, have caused or resulted in or are likely to cause or result
in a Material Adverse Effect.
No assurance can be given as to when all of the conditions to the Merger
can or will be satisfied or waived by the party permitted to do so, but
Tidewater and Hornbeck anticipate that such conditions will be satisfied as
soon as practicable following the Special Meeting.
25
<PAGE>
INTERESTS OF CERTAIN PERSONS IN THE MERGER
APPOINTMENT TO TIDEWATER BOARD; CONSULTING AGREEMENT. Effective on the
second day following the Effective Date, Larry D. Hornbeck, Chairman of the
Board, President and Chief Executive Officer of Hornbeck, will be appointed to
the class of the Tidewater Board with a term expiring at the annual meeting of
Tidewater's stockholders that next follows the Effective Date. In addition, as
a condition to the consummation of the Merger, Tidewater and Mr. Hornbeck will
execute a two-year consulting agreement which provides for Mr. Hornbeck to
render consulting and advisory services to Tidewater in return for payments
aggregating $350,000 and for Mr. Hornbeck to be recommended for reelection to
the Tidewater Board for a full three-year term at the next annual meeting of
Tidewater's stockholders. Also, under the terms of such consulting agreement,
Mr. Hornbeck will receive certain health insurance benefits, indemnification
with respect to activities undertaken in connection with services rendered
thereunder and an assignment of all right, title and interest in and to the
Hornbeck name and logo.
TREATMENT OF HORNBECK STOCK OPTIONS, INCENTIVE AWARDS AND CHANGE IN
CONTROL AGREEMENTS. At the time of execution of the Merger Agreement, there
were approximately 317,654 unissued shares of Hornbeck Common Stock subject to
unexercised stock options that were previously granted to officers and
employees of Hornbeck under its 1989 and 1993 Employee Incentive Plans. Under
the terms of the agreements pursuant to which such options were granted, any
options not previously vested that were granted under the 1989 Employee
Incentive Plan became fully vested and exercisable upon approval of the Merger
by the Hornbeck Board and any options not previously vested that were granted
under the 1993 Employee Incentive Plan will become fully vested and
exercisable upon consummation of the Merger. Holders of any options that are
not exercised for Hornbeck Common Stock by the Effective Time will have the
right, upon exercise of such options in accordance with their terms, to
acquire that number of shares of Tidewater Common Stock that the holder of
such unexercised options would have been entitled to receive upon consummation
of the Merger if such holder had exercised such options for shares of Hornbeck
Common Stock prior to or coincident with the Merger. Tidewater has agreed to
use its reasonable best efforts to cause a registration statement on Form S-8 to
be filed covering the shares of Tidewater Common Stock to be issued upon the
exercise of such options following the Effective Time or shall provide the
holders of such options with piggyback registration rights for such shares.
Pursuant to the Merger Agreement, Hornbeck may make cash payments of up to
$350,000 in the aggregate (the "1995 Incentive Cash Payments") and issue an
aggregate of up to 19,310 shares of restricted Hornbeck Common Stock to its
directors, officers and employees as semi-annual director fees and incentive
payments for performance during 1995. If the Effective Date has not occurred by
April 30, 1996, Hornbeck may make additional cash payments to its officers and
employees as incentive payments for 1996 performance through the Effective Date
in amounts to be pro rated and based on the total 1995 Incentive Cash Payments.
The Compensation Committee of the Hornbeck Board has not yet determined the
amount or the allocation of the 1995 Incentive Cash Payments or the restricted
shares of Hornbeck Common Stock among Hornbeck officers and employees.
Four executive officers of Hornbeck entered into change in control
agreements with Hornbeck in June 1995. If the Merger is consummated, and
subject to the arrangements described in the following paragraph, each such
officer will become entitled to a lump sum payment and certain continuing
benefits, including certain insurance coverage for a period of two years, as
provided in such officer's agreement, if such officer is terminated without
cause or terminates his employment for good reason as set forth in such
agreement within 24 months after the Effective Date. The aggregate amount of
the lump sum payments which such officers would become entitled to receive is
estimated to be approximately $2,872,000, of which $1,386,000 would be payable
to Larry D. Hornbeck and the remainder would be payable to the other three
executive officers with change in control agreements. The change in control
agreements further provide for a cashout of all unexercised options granted
more than six months prior to such officer's termination, but it is the
present intention of such executive officers to exercise all options prior to
or coincident with the Effective Time.
26
<PAGE>
Pursuant to agreements entered into on December 28, 1995, Hornbeck made
advance cash payments on such date in the aggregate amount of approximately
$2,500,000 to three of the four Hornbeck executive officers in connection with
the change in control agreements referred to above. Under the December 28
agreements, in order to minimize certain income tax costs to Hornbeck and such
officers, Hornbeck made lump sum cash advance payments on December 29 of 99% of
the amount to which Larry D. Hornbeck would have otherwise been entitled, and
90% of the amount to which the other two executive officers would have otherwise
been entitled, under such change in control agreements if the Merger were
consummated and certain other conditions set forth in such change in control
agreements were satisfied. If the Merger is consummated, each executive officer
will be paid the remaining cash payment due him under his change in control
agreement and will receive other benefits to the extent provided in such change
in control agreement. If the Merger is not consummated, each of the three
executive officers has agreed to remit to Hornbeck an aggregate of (i) cash in
an amount equal to 58.95% of the amount received by such executive officer in
1995, payable within five days of such event and (ii) an amount equal to any tax
benefit received because of such reimbursement, payable subsequently. If the
foregoing advance payments had not been made in 1995 by Hornbeck, then a
substantial portion of amounts paid to such individuals under their change in
control agreements may have been characterized as payments deemed not deductible
for federal income tax purposes. Neither these payments nor any tax gross up
payments made by Hornbeck under the change in control agreements would then be
deductible for income tax purposes by Hornbeck.
SEVERANCE AND EMPLOYEE BENEFITS. Hornbeck has agreed to comply with, and
Tidewater has agreed to honor, the terms of the severance policy adopted by
the Hornbeck Board for Hornbeck's employees having six or more months of
service who are not parties to the change in control agreements. The severance
policy provides, among other things, that each terminated employee of Hornbeck
will receive a termination payment based on the length of such employee's term
of service, but in no case to be less than twelve nor more than twenty-six
weeks of pay at such employee's current salary, and for continuation of health
insurance for such employee at no additional cost to such employee for twelve
weeks following termination, provided such employee elects and remains
eligible for COBRA coverage.
Tidewater has agreed that following consummation of the Merger, it will
offer to all persons who were employees of Hornbeck or its subsidiaries and
who become employees of Tidewater following the Merger, the same employee
benefits as are offered by Tidewater to its own employees, subject to certain
limitations.
CERTAIN INDEMNIFICATION COVENANTS. The Merger Agreement provides that
Tidewater will indemnify and hold harmless, and will cause the surviving
corporation in the Merger to honor its separate indemnification obligations to,
each person who was an officer or director of Hornbeck, or of any of its
subsidiaries or any member of the North Sea Group who were serving at the
request of Hornbeck on December 21, 1995, or who previously served as such at
any time since January 1, 1993, from and against all damages, liabilities,
judgments and claims based upon or arising out of such person's service in such
capacity to the same extent as he or she would have been indemnified under the
Restated Certificate of Incorporation or Restated Bylaws of Hornbeck as they
were in effect on the date the Merger Agreement was executed. With certain
exceptions the aggregate amount of indemnification payments required to be made
under the Merger Agreement by Tidewater and/or the surviving corporation to such
persons is limited to $50 million. Tidewater has also agreed to pay the
insurance premiums required for any extension of Hornbeck's director's and
officer's insurance policy following the Effective Date for a period of six
years or to provide comparable coverage under a Tidewater policy.
RESALES OF TIDEWATER COMMON STOCK
The shares of Tidewater Common Stock to be issued to the holders of
Hornbeck Common Stock pursuant to the Merger Agreement are being registered
under the Securities Act pursuant to a Registration Statement on Form S-4, of
which this Proxy Statement/Prospectus is a part. Holders of the Hornbeck
Common Stock who are affiliates of Hornbeck will not, however, be able to
resell the Tidewater Common Stock received by them in the Merger unless the
Tidewater Common Stock is registered for resale under the Securities Act, is
sold in compliance with Rule 145 under the Securities Act or is sold in
compliance with another exemption from the registration requirements of the
Securities Act.
27
<PAGE>
Pursuant to Rule 145 under the Securities Act, the sale of Tidewater
Common Stock held by former affiliates of Hornbeck will be subject to certain
restrictions. Such persons may sell Tidewater Common Stock under Rule 145 only
if (i) Tidewater has filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the preceding twelve months, (ii) such
Tidewater Common Stock is sold in a "broker's transaction," which is defined
in Rule 144 under the Securities Act as a sale in which (a) the seller does
not solicit or arrange for orders to buy the securities, (b) the seller does
not make any payment other than to the broker, (c) the broker does no more
than execute the order and receive a normal commission and (d) the broker does
not solicit customer orders to buy the securities, and (iii) such sale and all
other sales made by such person within the preceding three months do not
exceed the greater of (x) one percent of the outstanding shares of Tidewater
Common Stock or (y) the average weekly trading volume of Tidewater Common
Stock on the New York Stock Exchange during the four-week period preceding the
sale. Any affiliate of Hornbeck who is not an affiliate of Tidewater after the
Merger may sell Tidewater Common Stock without restriction following the
second anniversary of the Effective Date.
Holders of Hornbeck options who do not exercise such options at or before
the Effective Date will, upon subsequent exercise of such option, receive
unregistered Tidewater Common Stock and will be unable to sell such Tidewater
Common Stock unless and until an exemption from the registration requirements
of the Securities Act is available with respect to such Tidewater Common Stock
or such Tidewater Common Stock has been registered pursuant to the Securities
Act. Tidewater has agreed to use its reasonable best efforts to cause a
registration statement on Form S-8 to be filed covering such Tidewater Common
Stock to be issued upon the exercise of such options following the closing of
the Merger or to provide piggyback registration rights to the holders of
Tidewater Common Stock issued in connection with the exercise of such options.
EXCHANGE OF CERTIFICATES
At the Effective Time, each Hornbeck stockholder will cease to have any
rights as a stockholder of Hornbeck and his or her sole rights will pertain to
the shares of Tidewater Common Stock into which such holder's shares of
Hornbeck Common Stock shall have been converted pursuant to the Merger, except
for the right to receive cash for any fractional shares.
Upon consummation of the Merger, a letter of transmittal, including a
citizenship certificate and instructions for the exchange of certificates
representing shares of Hornbeck Common Stock for certificates representing
Tidewater Common Stock, will be mailed to each person who was a stockholder of
record of Hornbeck at the Effective Time. STOCKHOLDERS ARE REQUESTED NOT TO
SEND IN THEIR HORNBECK COMMON STOCK CERTIFICATES UNTIL THEY HAVE RECEIVED A
LETTER OF TRANSMITTAL AND FURTHER WRITTEN INSTRUCTIONS. Immediately following
receipt from a holder of Hornbeck Common Stock of the letter of transmittal
completed in accordance with its instructions, including the completed
certificate of citizenship and the certificates representing shares of
Hornbeck Common Stock, Tidewater will deliver a certificate representing that
number of whole shares of Tidewater Common Stock into which such holder's
shares of Hornbeck Common Stock have been converted pursuant to the Merger and
a check in payment for any fractional share of Tidewater Common Stock to which
such holder may be entitled.
After the Effective Date and until surrendered, certificates representing
Hornbeck Common Stock will be deemed for all purposes, other than the payment
of dividends or other distributions, if any, in respect of Tidewater Common
Stock, to represent the number of whole shares of Tidewater Common Stock into
which such shares of Hornbeck Common Stock have been converted. Tidewater, at
its option, may decline to pay former stockholders of Hornbeck who become
holders of Tidewater Common Stock pursuant to the Merger any dividends or
other distributions that may have become payable to holders of record of
Tidewater Common Stock following the Effective Date until they have
surrendered their certificates evidencing ownership of shares of Hornbeck
Common Stock along with a properly completed letter of transmittal and
citizenship certificate.
28
<PAGE>
Hornbeck stockholders who cannot locate their certificates are urged to
contact promptly the Corporate Secretary, Hornbeck Offshore Services, Inc.,
7707 Harborside Drive, Galveston, Texas, 77554, telephone number (409)
744-9500. A new certificate will be issued to replace the lost certificate(s)
only upon execution by the stockholder of an affidavit certifying that his or
her certificate(s) cannot be located and an agreement to indemnify Hornbeck
and Tidewater and their transfer agents and registrars against any claim that
may be made against Hornbeck or Tidewater by the owner of the certificate(s)
alleged to have been lost or destroyed. Hornbeck or Tidewater may also require
the stockholder to post a bond in such sum as is sufficient to support the
stockholder's agreement to indemnify Hornbeck and Tidewater.
CONDUCT OF BUSINESS BY HORNBECK AND TIDEWATER PENDING THE MERGER
The Merger Agreement provides that until the Effective Time each of
Tidewater and Hornbeck will use its reasonable best efforts to preserve the
goodwill of suppliers, customers, and others having business relations with it
and to do nothing knowingly to impair its ability to keep and preserve its
business as it existed on the date of the Merger Agreement.
In addition, the Merger Agreement provides that neither Tidewater nor
Hornbeck will, without the prior written consent of the other party, (i)
declare or pay any dividend or other distribution with respect to its
respective common stock or issue, deliver or sell any additional shares of its
capital stock or any securities convertible into or exchangeable for its
capital stock except in accordance with previous practice or as required under
existing agreements; (ii) amend its certificate of incorporation or bylaws or
adopt or amend any resolution or agreement concerning indemnification of its
directors, officers, employees or agents; (iii) pledge or otherwise encumber
any shares of its capital stock or other voting securities; (iv) breach any
covenant or cause any representation or warranty contained in the Merger
Agreement to become untrue; (v) violate any applicable law, statute, rule,
governmental regulation or order that would have a Material Adverse Effect on
such party; (vi) fail to maintain its books, accounts and records in the usual
manner; (vii) fail to pay, or provide for the payment of, all taxes, interest
payments and penalties due and payable; (viii) alter its prior practice with
respect to tax elections or settle or compromise any income tax liability for
an amount materially in excess of the liability therefor; (ix) take any action
that would prevent the accounting for the business combination to be effected
by the Merger as a pooling of interests; or (x) authorize, agree to do or
commit to do any of the foregoing actions.
CONDUCT OF BUSINESS BY HORNBECK PENDING THE MERGER
The Merger Agreement provides that until the Effective Time, in addition
to the covenants set forth above, Hornbeck shall use its best efforts to
preserve the possession and control of all of its assets other than those
permitted to be disposed of pursuant to the terms of the Merger Agreement,
shall conduct its business only in the ordinary course and, except as
otherwise provided in the Merger Agreement, shall not, without the prior
written consent of Tidewater: (i) enter into or modify any employment,
severance or similar agreement or arrangement with any director or employee,
or grant any increase in the rate of wages, salaries, bonuses or other
compensation or benefits of any executive officer or other employee; (ii)
enter into any new line of business; (iii) acquire or agree to acquire any
business or any assets that are material, individually or in the aggregate, to
Hornbeck and its subsidiaries taken as a whole, except for the right of
Hornbeck to exercise options to acquire additional equity interests in
Ravensworth in accordance with the terms and conditions contained in the
Merger Agreement; (iv) sell or otherwise dispose of or encumber any of its
properties or assets; (v) incur any indebtedness for borrowed money or
guarantee any such indebtedness of another person or otherwise enter into any
arrangement having similar economic effect; (vi) make or agree to make any new
capital expenditures from available cash (excluding the proceeds of
borrowings) other than those made in the ordinary course of business and
consistent with past practices; (vii) approve the declaration or payment of
any dividend or distribution by Ravensworth or Seaboard; (viii) except in the
ordinary course of business, permit any liens on its assets, or forgive any
material indebtedness or waive any rights with
29
<PAGE>
respect to any material noncurrent liability; (ix) acquire another business or
entity or sell or otherwise dispose of a material part of its assets, except
in the ordinary course of business consistent with past practices; (x) permit
any employee or former employee, officer or director to become entitled to
receive any award under any discretionary or other bonus plan; or (xi)
authorize, agree to do or commit to do any of, the foregoing actions.
Moreover, Hornbeck has agreed that it will consult with Tidewater with respect
to any action of the type described above proposed to be taken by a member of
the North Sea Group.
Hornbeck has options to acquire up to the remaining 50.1% equity interest
in Ravensworth (the "Ravensworth Options") as well as options to acquire the
remaining 50.1% equity interests in Seaboard and North Sea Manager (as defined
below). See "Business of Hornbeck -- North Sea Group." The Merger Agreement
provides that until February 29, 1996, Hornbeck will not exercise, modify or
cancel either of the Ravensworth Options without Tidewater's prior consent and
that after February 29, 1996 until the Effective Date, Hornbeck may exercise,
modify or cancel such Ravensworth Options after consulting with Tidewater but
will not issue Hornbeck Common Stock as consideration for the exercise of such
Ravensworth Options without Tidewater's prior consent.
NO SOLICITATION OF TRANSACTIONS; TERMINATION FEE
The Merger Agreement prohibits Hornbeck and its subsidiaries and the
North Sea Group from, directly or indirectly, through any officer, director,
employee, representative or agent, soliciting or encouraging the initiation of
any inquiries, proposals or offers regarding any acquisition, merger, takeover
bid, sale of all or substantially all of the assets of or sales of shares of
capital stock of Hornbeck or similar transactions involving Hornbeck.
If the Hornbeck Board, after duly considering advice of outside counsel
and financial advisors, determines in good faith that it is consistent with
its fiduciary responsibilities to approve or recommend (and in connection
therewith withdraw or modify its approval or recommendation of the Merger
Agreement and the transactions contemplated thereby) a Superior Proposal (as
defined below), then, notwithstanding any such approval or recommendation (i)
Hornbeck may not enter into any agreement with respect to the Superior
Proposal and (ii) any other obligation of Hornbeck under the Merger Agreement
shall not be affected unless the Merger Agreement is terminated in accordance
with its terms before or simultaneously with the grant of such approval or the
making of such recommendation and Hornbeck, within three business days
following such termination, pays Tidewater the Termination Fee of $6,000,000
in cash. A "Superior Proposal" is defined to mean a bona fide proposal made by
a third party to acquire Hornbeck pursuant to a tender or exchange offer, a
merger, a sale of all or substantially all of its assets or other proposal
that the Hornbeck Board determines in its good faith judgment to be more
favorable to the holders of Hornbeck Common Stock than the transactions
contemplated by the Merger Agreement, after considering advice of its
professional advisors. In making a determination of whether a Superior
Proposal is more favorable, the Hornbeck Board is required pursuant to the
Merger Agreement to consider not only the price offered by the third party as
compared to the total consideration set forth in the Merger Agreement, but
also to compare the market liquidity of the Tidewater Common Stock to the
liquidity of the consideration offered by the third party, to compare the tax
consequences of the Merger to the tax consequences of the transaction proposed
by the third party, to determine whether the transaction proposed by the third
party has any financing or other conditions or contingencies, and to make any
other meaningful comparison of the relative benefits offered to the Hornbeck
stockholders by the Merger as compared to the transaction proposed by the
third party.
AMENDMENT; WAIVER; TERMINATION
The Merger Agreement may be amended at any time before or after its
approval by the stockholders of Hornbeck by written agreement of Tidewater and
Hornbeck, except that no amendment may be made after Hornbeck stockholder
approval that by law would require further stockholder approval unless such
further stockholder approval is obtained.
30
<PAGE>
The Merger Agreement provides that either party may (i) extend the time
for the performance of any of the obligations or other acts of the other
parties, (ii) waive any inaccuracies in the representations and warranties
contained in the Merger Agreement or in any document delivered pursuant to the
Merger Agreement or (iii) waive compliance with any of the agreements or
conditions contained in the Merger Agreement other than the satisfaction of
all requirements prescribed by law for consummation of the Merger.
The Merger Agreement may be terminated at any time before the Effective
Time (i) by the mutual consent of the Tidewater Board and Hornbeck Board or
(ii) by the board of directors of either party if (a) there has been a
material breach by the other party of any representation, warranty or covenant
contained in the Merger Agreement which has not been cured within fifteen days
after written notice of such breach is given to the breaching party, (b) the
required Hornbeck stockholder approval shall not have been obtained at the
Special Meeting, (c) all conditions to closing have not been met or waived or
any condition is incapable of being met and has not been waived by each party
in favor of which such condition inures, or the Merger has not been
consummated, by November 20, 1996, unless the party seeking to terminate the
Merger Agreement is, at such time, in willful material violation of any of its
representations, warranties or covenants contained in the Merger Agreement,
(d) any governmental entity shall have issued an order, decree or ruling or
taken any other action permanently enjoining, restraining or otherwise
prohibiting the Merger and such order, decree, ruling or other action shall
have become final and nonappealable or (e) the Conversion Ratio would be less
than .60 or greater than .74. Also, Hornbeck may terminate the Merger if the
Hornbeck Board withdraws its recommendation of the Merger to the holders of
Hornbeck Common Stock in connection with its approval or recommendation to the
holders of Hornbeck Common Stock of a Superior Proposal and pays the
Termination Fee to Tidewater. See " -- No Solicitation of Transactions;
Termination Fee."
FEES AND EXPENSES
The Merger Agreement provides that whether or not the Merger is
consummated, all fees and expenses incurred in connection with the Merger
shall be paid by the party incurring them.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Tidewater has received an opinion of its counsel, Jones, Walker,
Waechter, Poitevent, Carrere & Denegre, L.L.P. and Hornbeck has received an
opinion of its independent accountants, Price Waterhouse LLP, to the effect
that for federal income tax purposes (i) the Merger will constitute a tax-free
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code and (ii) Tidewater, Hornbeck and Newco will each be a party to the
reorganization within the meaning of Section 368(b) of the Internal Revenue
Code. These opinions will be confirmed by such counsel and accountants
immediately before the Effective Time.
Assuming the above opinions are correct, (i) no gain or loss will be
recognized by Tidewater or its stockholders as a result of the Merger, (ii) no
gain or loss will be recognized by stockholders of Hornbeck who receive
Tidewater Common Stock in the Merger in exchange for their shares of Hornbeck
Common Stock except for any gain realized upon the receipt of cash by the
holders of Hornbeck Common Stock in lieu of receiving fractional shares of
Tidewater Common Stock, (iii) no gain or loss will be recognized by Hornbeck
as a result of the Merger, (iv) the basis of the shares of Tidewater Common
Stock to be received by the holders of Hornbeck Common Stock in the Merger
will be the same as the basis of the shares of Hornbeck Common Stock
surrendered in exchange therefor, (v) the holding period of the shares of
Tidewater Common Stock to be received by the holders of Hornbeck Common Stock
in the Merger will include the holding period of the respective shares of
Hornbeck Common Stock exchanged therefor, provided that the shares are held as
capital assets in the hands of the holders of the Hornbeck Common Stock at the
Effective Time, and (vi) the payment of cash to holders of Hornbeck Common
Stock in lieu of fractional shares of Tidewater Common Stock will be treated
as if the fractional shares were distributed as part of the exchange and then
redeemed by Tidewater.
31
<PAGE>
An opinion of counsel or independent accountants is not binding on the
Internal Revenue Service or the courts. Therefore, there can be no assurance
that the Merger will constitute a tax-free reorganization or that any of the
other favorable tax treatments listed above will be available to the holders
of Hornbeck Common Stock.
Because of the complexity of the tax laws and because the tax
consequences to any particular stockholder may be affected by matters not
discussed herein, it is recommended that each holder of Hornbeck Common Stock
consult a tax advisor concerning the applicable federal, state and local
income tax consequences of the Merger.
ACCOUNTING TREATMENT
Tidewater has received an opinion of KPMG Peat Marwick LLP, dated as of a
date within three business days of the date the Merger Agreement was signed,
to the effect that they are not aware of any matters that would preclude the
Merger from qualifying as a pooling of interests under the requirements of
Opinion No. 16 of the Accounting Principles Board of the American Institute of
Certified Public Accountants and the published rules and regulations of the
Commission for accounting and financial reporting purposes, and Hornbeck has
received a letter from Price Waterhouse LLP, dated as of a date within three
days of the date the Merger Agreement was signed, that as a result of
specified procedures, no matters came to their attention that would preclude
Tidewater from accounting for the business combination as a pooling of
interests under such requirements. It is a condition to each party's
obligation to consummate the Merger that the opinion and letter, respectively,
be confirmed by such accounting firms immediately before the Effective Time.
Under the pooling-of-interests method of accounting, after certain adjustments
necessary to conform the basis of presentation of the Tidewater and Hornbeck
information, the recorded assets and liabilities of Tidewater and Hornbeck
will be carried forward to Tidewater's consolidated financial statements at
their recorded amounts, the consolidated earnings of Tidewater will include
earnings of Tidewater and Hornbeck for the entire fiscal year in which the
Merger occurs and the reported earnings of Tidewater and Hornbeck for prior
periods will be combined and restated as consolidated earnings of Tidewater.
APPRAISAL RIGHTS
Under the DGCL, appraisal rights are not available to Hornbeck
stockholders with respect to the Merger Agreement.
32
<PAGE>
BUSINESS OF THE COMPANIES
INTRODUCTION
Both Tidewater and Hornbeck provide offshore supply vessels and marine
support services to the oil and gas industry. However, Hornbeck's operations
are concentrated in the Gulf of Mexico, with the exception of its safety
standby operations in the North Sea, while Tidewater's marine operations are
conducted worldwide. Additionally, Tidewater offers, through its compression
division, natural gas and air compression equipment and services to the oil
and gas industry, primarily in the United States.
BUSINESS OF TIDEWATER
Tidewater serves the international oil and gas industry through its two
principal divisions: Tidewater Marine and Tidewater Compression. Currently,
Tidewater Marine and Tidewater Compression account for approximately 80% and
20%, respectively, of Tidewater's revenues. The principal executive offices of
Tidewater are located at 1440 Canal Street, New Orleans, Louisiana 70112
(Telephone No. (504) 568-1010).
TIDEWATER MARINE. Through its Tidewater Marine division, Tidewater is
the world's largest provider of offshore supply vessels and marine support
services. With a fleet of approximately 570 vessels, Tidewater Marine
operates, and has a leading market share, in most of the world's significant
offshore oil and gas exploration and production markets. Tidewater Marine
provides services supporting all phases of offshore exploration, development
and production, including: towing and anchor handling of mobile drilling rigs
and equipment; transporting supplies and personnel to sustain drilling,
work-over and production activities; and supporting pipelaying and other
offshore construction activities.
Tidewater's fleet is deployed in the major offshore oil and gas areas of
the world. The principal areas of Tidewater's operations include the Gulf of
Mexico, offshore Australia, Brazil, Egypt, India, Indonesia, Malaysia, Mexico,
Trinidad, Venezuela, various countries of West Africa and the North Sea and
the Persian Gulf. Tidewater conducts its operations through wholly-owned
subsidiaries and joint ventures.
Tidewater's largest class of vessels consists of towing-supply and supply
vessels that are chartered to customers for use principally in transporting
supplies and equipment from shore bases to offshore drilling rigs, platforms
and other installations. In addition, vessels of the towing-supply type are
equipped for and are capable of towing drilling rigs and other marine
equipment and setting anchors for positioning and mooring drilling rigs.
Tidewater's other classes of vessels include crew and utility vessels
that are chartered to customers for use principally in transporting supplies
and personnel from shore bases to offshore drilling rigs, platforms and other
installations, and offshore tugs that tow floating drilling rigs, dock
tankers, tow barges, assist pipelaying and construction barges and are used in
a variety of other commercial towing operations, including towing barges
carrying a variety of bulk cargoes and containerized cargo.
Tidewater's vessels also include inshore tugs and both inshore and
offshore barges, production, line-handling and various special purpose
vessels. Inshore tugs, which are operated principally within inland waters,
tow drilling rigs to and from their locations and tow barges carrying
equipment and materials for use principally in inland water drilling and
production operations. Barges are either used in conjunction with Tidewater
tugs or bareboat chartered to others.
TIDEWATER COMPRESSION. Tidewater Compression provides natural gas and
air compression equipment and services principally to the energy industry in
the United States. With a fleet of approximately 2,900 compressors, Tidewater
Compression operates the largest rental fleet of gas compressors in the United
States, which it rents to oil and gas producers and processors. The
compressors are used primarily to boost the pressure of natural gas from the
wellhead into gas gathering systems, into nearby gas processing plants or into
high pressure pipelines. Gas compression equipment and services offered by
Tidewater are also used in the production of coalbed methane and in enhanced
recovery projects such as fire-flooding, gas lift, or gas injection, with the
objective of
33
<PAGE>
increasing the amount of oil or condensate that can be recovered from a
reservoir. Customers often rent compressors rather than purchase them because
the required compressor horsepower and stage configuration can change several
times during the lifetime of a project. Tidewater primarily serves the natural
gas production market in the United States, although Tidewater is actively
seeking to establish itself in markets outside the United States.
During fiscal 1995, Tidewater almost tripled the size of its gas
compression fleet through its acquisition of the natural gas compression
assets of Halliburton Company and one of its affiliated companies and Brazos
Gas Compressing Company, a subsidiary of Mitchell Energy & Development Corp.
BUSINESS OF HORNBECK
GENERAL. Hornbeck is engaged in the offshore marine services business,
serving the oil and gas industry primarily in the Gulf of Mexico through its
operation and management of a diversified fleet of 61 vessels, consisting of
supply, tug-supply, crew and specialty service vessels. Hornbeck currently
uses such vessels to provide a wide range of services, such as transporting
supplies necessary to sustain drilling, workover and production activities;
supporting offshore pipelaying and construction; and assisting geophysical
evaluation. Fifty-six of these vessels are owned, four are chartered and one
is managed by Hornbeck. Hornbeck operates the second largest fleet of supply
vessels both in the Gulf of Mexico and in the world. Hornbeck also has 49.9%
equity interests in Ravensworth and Seaboard, which have a combined total of
29 vessels, the largest safety standby fleet operating in the North Sea.
Founded in 1981, Hornbeck is headquartered in Galveston, Texas, and also
conducts its Gulf of Mexico operations from its office in Morgan City,
Louisiana. North Sea operations of Ravensworth and Seaboard are conducted from
offices in Douglas, Isle of Man, and Aberdeen, Scotland.
Hornbeck's fleet has an average age of approximately 15 years. Hornbeck's
vessels support the entire range of the offshore exploration and development
business, including transporting supplies necessary to sustain drilling,
workover and production activities, supporting offshore pipelaying and
construction activities, and assisting geophysical evaluation.
NORTH SEA GROUP. On July 23, 1993, Hornbeck acquired 49.9% of the
outstanding capital stock of Ravensworth from Ravensworth Holdings Limited
("RHL"), the sole beneficial holder of the outstanding capital stock of
Ravensworth, together with options to acquire the remaining 50.1% outstanding
equity interest in Ravensworth. See "Hornbeck Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" and see "The Merger -- Conduct of Business by Hornbeck
Pending the Merger" with respect to restrictions on the exercise of the
Ravensworth Options. Through its 49.9%-owned affiliate, Hornbeck owns all of
the outstanding capital stock of Seaboard Offshore Group Limited ("SOGL")
which owns six safety standby vessels in the North Sea. Hornbeck also
participated in the formation and holds 49.9% of the outstanding capital stock
of Hornbeck Offshore Limited (the "North Sea Manager") and owns the options to
purchase the remaining 50.1% equity interests in Seaboard and North Sea
Manager.
Ravensworth and Seaboard, through their subsidiaries, are engaged in the
offshore marine services business primarily serving the oil and gas industry
in the North Sea by providing safety standby vessels. Under the United
Kingdom's Offshore Installations (Emergency Procedures) Regulations 1976 and
Code for the Assessment of the Suitability of Standby Vessels, as revised in
1991 (collectively, the "Safety Code"), existing manned platforms and offshore
drilling rigs are subject to offshore marine safety requirements and offshore
operations and operators are required to engage and maintain the availability
of safety standby vessels. The Safety Code requires that a vessel "standby" to
provide a means of rescuing platform or rig personnel in the event of an
emergency at such an offshore facility. Through the combined fleet of 29
vessels, 23 owned and six chartered (with related purchase rights and
obligations), Ravensworth and Seaboard provide such safety standby services,
generally pursuant to long-term charters.
All of the Ravensworth vessels and all of the Seaboard vessels are
operated by the North Sea Manager. The crews and officers who work on the
vessels are employed by foreign subsidiaries of Ravensworth and Seaboard.
34
<PAGE>
SELECTED FINANCIAL DATA
TIDEWATER SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table contains selected consolidated financial data for
Tidewater and subsidiaries for each of the fiscal years in the five-year
period ended March 31, 1995 and for the six month periods ended September 30,
1994 and 1995. The data for each of the fiscal years in the five-year period
ended March 31, 1995 are derived from the consolidated financial statements of
Tidewater and subsidiaries, which financial statements have been audited by
KPMG Peat Marwick LLP, independent certified public accountants. The Tidewater
consolidated financial statements as of March 31, 1994 and 1995, and for each
of the years in the three-year period ended March 31, 1995, and the report of
KPMG Peat Marwick LLP thereon, are included elsewhere in this Proxy
Statement/Prospectus. The unaudited data for the six-month periods ended
September 30, 1994 and 1995 are derived from the unaudited condensed
consolidated financial statements of Tidewater for the related periods that
are included elsewhere in this Proxy Statement/Prospectus. The following
financial data should be read in conjunction with such financial statements,
including the notes thereto. Results of operations for the interim periods are
not necessarily indicative of results that may be expected for any other
interim period or for the year as a whole.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
----------------------------------------------------- --------------------
1991 1992 1993 1994 1995(5) 1994 1995
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT RATIO AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Marine operations..................... $ 394,325 $ 430,681 $ 413,439 $ 466,601 $ 455,284 $ 234,066 $ 232,120
Compression operations................ 61,479 54,561 62,099 55,471 83,490 30,512 55,073
--------- --------- --------- --------- --------- --------- ---------
$ 455,804 $ 485,242 $ 475,538 $ 522,072 $ 538,774 $ 264,578 $ 287,193
========= ========= ========= ========= ========= ========= =========
Earnings from continuing operations....... $ 36,904 $ 25,904 $ 27,809 $ 36,130 $ 42,628 $ 25,768 $ 37,741
Discontinued operations(1)................ (2,258) 357 3,099 -- -- -- --
Extraordinary loss on early debt
retirement(2)........................... -- -- -- (11,970) -- -- --
Accounting change(3)...................... -- -- (6,640) -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net earnings.............................. $ 34,646 $ 26,261 $ 24,268 $ 24,160 $ 42,628 $ 25,768 $ 37,741
========= ========= ========= ========= ========= ========= =========
Per common share:
Earnings from continuing operations... $ .70 $ .49 $ .53 $ .67 $ .80 $ .48 $ .70
Discontinued operations(1)............ (.04) .01 .06 -- -- -- --
Extraordinary loss on early debt
retirement(2)....................... -- -- -- (.22) -- -- --
Accounting change(3).................. -- -- (.13) -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net earnings.............................. $ .66 $ .50 $ .46 $ .45 $ .80 $ .48 $ .70
========= ========= ========= ========= ========= ========= =========
Total assets.............................. $ 896,420 $ 867,573 $ 838,748 $ 809,886 $ 902,185 $ 784,094 $ 872,643
========= ========= ========= ========= ========= ========= =========
Long-term debt............................ $ 181,622 $ 123,896 $ 95,722 $ -- $ 100,000 $ -- $ 48,000
========= ========= ========= ========= ========= ========= =========
Working capital........................... $ 140,066 $ 171,231 $ 201,399 $ 156,126 $ 99,693 $ 167,611 $ 110,215
========= ========= ========= ========= ========= ========= =========
Current ratio............................. 2.04 2.43 3.10 2.20 1.98 2.93 2.30
========= ========= ========= ========= ========= ========= =========
Cash dividends declared per common
share(4)................................ $ -- $ -- $ .325 $ .30 $ .40 $ .20 $ .225
========= ========= ========= ========= ========= ========= =========
</TABLE>
- ------------
(1) See Note (3) of Notes to Tidewater's Consolidated Financial Statements for
further information concerning the disposal of the Container Shipping
segment.
(2) For further information concerning the early debt retirement see Note (7)
of Notes to Tidewater's Consolidated Financial Statements.
(3) For further information concerning the accounting change see Note (8) of
Notes to Tidewater's Consolidated Financial Statements.
(4) As a result of the timing of the fiscal 1994 Board of Directors meetings,
only three quarterly dividends of $.10 per common share each were declared
during fiscal 1994.
(5) See Note (11) of Notes to Tidewater's Consolidated Financial Statements
for further information concerning a $5.9 million pre-tax charge to
earnings during fiscal 1995.
35
<PAGE>
HORNBECK SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data for Hornbeck as of and
for the years ended December 31, 1990 through December 31, 1994 were derived
from the audited consolidated financial statements of Hornbeck, and as of and
for the nine month periods ended September 30, 1994 and September 30, 1995
were derived from the unaudited consolidated financial statements of Hornbeck.
Historical amounts reflect the effects of the Seaboard Acquisition after
November 30, 1994, the Oil & Gas Vessel Acquisition after November 15, 1994,
the Ravensworth Acquisition after July 23, 1993, the Petrol Acquisition after
November 19, 1992 and the Point Marine Acquisition after January 30, 1990, and
therefore are not necessarily indicative of future results or trends.(1) The
historical data should be read in conjunction with "Hornbeck Management's
Discussion and Analysis of Financial Condition and Results of Operations," the
Consolidated Financial Statements of Hornbeck, and the notes related thereto,
included or incorporated by reference herein.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------- --------------------
1990 1991 1992 1993 1994 1994 1995
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues............................. $ 22,681 $ 20,419 $ 18,435 $ 47,291 $ 45,834 $ 31,731 $ 41,331
Depreciation and amortization........ 3,427 4,229 4,749 7,394 10,007 7,144 9,977
Operating profit..................... 7,270 2,933 567 16,371 8,767 5,241 6,806
Income before income taxes, equity in
earnings (loss) of affiliates and
extraordinary charge............... 6,616 2,919 57 14,657 9,824 6,364 6,716
Income taxes......................... (2,103) (989) -- (4,530) (3,209) (2,213) (2,176)
Equity in earnings (loss) of
affiliates......................... 5 818 1,408 1,362 (335)
Income before extraordinary charge... 4,513 1,930 62 10,945 8,023 5,513 4,205
Extraordinary charge for early
extinguishment of debt, net of
income tax effect.................. -- -- -- 280 -- -- --
Net income........................... 4,513 1,930 62 10,665 8,023 5,513 4,205
Earnings per share before
extraordinary charge .............. .51 .18 .01 .92 .60 .41 .32
Loss per share from extraordinary
charge for early extinguishment of
debt, net of income tax effect..... -- -- -- (.02) -- -- --
Net income per share................. .51 .18 .01 .90 .60 .41 .32
BALANCE SHEET DATA:
Working capital...................... $ 17,227 $ 10,135 $ 6,607 $ 40,987 $ 14,747 $ 41,952 $ 23,881
Property and equipment, net.......... 38,862 44,138 58,783 55,396 101,563 55,103 94,584
Investments in affiliates............ -- -- -- 15,223 16,851 16,681 14,584
Total assets......................... 64,183 62,740 73,112 124,672 147,882 126,131 151,518
Long-term debt (less current
portion)........................... 12,618 13,663 14,659 7,833 21,023 4,199 17,878
Stockholders' equity................. 40,375 37,450 46,064 99,590 106,907 104,333 109,464
</TABLE>
(1) The following terms have the meanings set forth opposite such term
below:
POINT MARINE ACQUISITION: the acquisition by Hornbeck in January 1990 of
Point Marine, Inc. and an affiliated entity.
PETROL ACQUISITION: the acquisition by Hornbeck in November 1992 of 21
offshore service vessels from Portal Energy Corporation, Pentad Offshore
Corporation and Petrol Marine Corporation.
RAVENSWORTH ACQUISITION: the acquisition by Hornbeck in July 1993 of
49.9% of the outstanding capital stock of Ravensworth Investments Limited.
OIL & GAS VESSEL ACQUISITION: the acquisition by Hornbeck in November
1994 of thirteen offshore supply vessels from Oil & Gas Rental Services, Inc.
SEABOARD ACQUISITION: the acquisition by Hornbeck's newly formed 49.9%
owned affiliate Seaboard Holdings Limited in November 1994 of Seaboard
Offshore Group Limited.
36
<PAGE>
TIDEWATER UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial
information should be read in conjunction with the consolidated financial
statements and notes thereto of Tidewater and subsidiaries and Hornbeck and
subsidiaries, which are included elsewhere in this Registration Statement. The
pro forma information is presented for illustrative purposes only and is not
necessarily indicative of the operating results or financial position that
would have occurred if the Merger had been consummated in accordance with the
assumptions set forth under "Notes to Tidewater Unaudited Pro Forma Condensed
Combined Financial Information," nor is it necessarily indicative of future
operating results or financial position.
The unaudited pro forma condensed combined balance sheet at September 30,
1995 set forth below has been compiled from the Tidewater unaudited balance
sheet and the Hornbeck unaudited balance sheet, both dated September 30, 1995,
and gives effect to the Merger under the pooling-of-interests accounting
method as if the Merger had occurred on September 30, 1995.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER 30, 1995 -- UNAUDITED
<TABLE>
<CAPTION>
PRO FORMA
-------------------------
TIDEWATER HORNBECK ADJUSTMENTS COMBINED
----------- --------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash, including temporary cash
investments.................... $ 13,761 $ 19,625 $-- $ 33,386
Trade and other receivables...... 140,295 11,477 -- 151,772
Inventories...................... 34,957 -- -- 34,957
Other current assets............. 5,805 2,236 -- 8,041
----------- --------- --------- -----------
Total current assets........ 194,818 33,338 -- 228,156
----------- --------- --------- -----------
Investment in and advances to
unconsolidated companies........... 23,323 14,584 -- 37,907
Properties and equipment............. 1,451,686 120,070 -- 1,571,756
Less accumulated depreciation.... 874,279 25,486 -- 899,765
----------- --------- --------- -----------
Net properties and
equipment................. 577,407 94,584 -- 671,991
Other assets......................... 77,095 9,012 (6,955)(a) 79,152
----------- --------- --------- -----------
$ 872,643 $ 151,518 $(6,955) $ 1,017,206
=========== ========= ========= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term
debt........................... $ -- $ 4,299 $-- $ 4,299
Accounts payable and accrued
expenses....................... 72,887 4,992 -- 77,879
Income taxes..................... 11,716 166 -- 11,882
----------- --------- --------- -----------
Total current liabilities... 84,603 9,457 -- 94,060
----------- --------- --------- -----------
Deferred income taxes................ 55,642 14,719 (2,434)(b) 67,927
Long-term debt....................... 48,000 17,878 -- 65,878
Accrued property and liability
losses............................. 35,636 -- -- 35,636
Other liabilities and deferred
credits............................ 41,892 -- -- 41,892
Stockholders' equity:
Common stock..................... 5,333 1,317 (437)(c) 6,213
Additional paid-in capital....... 335,534 81,998 437 (c) 417,969
Retained earnings................ 278,128 26,149 (4,521)(d) 299,756
----------- --------- --------- -----------
618,995 109,464 (4,521) 723,938
----------- --------- --------- -----------
Less:
Cumulative foreign currency
translation adjustment......... 10,691 -- -- 10,691
Deferred
compensation -- restricted
stock.......................... 1,434 -- -- 1,434
----------- --------- --------- -----------
Total stockholders'
equity.................... 606,870 109,464 (4,521) 711,813
----------- --------- --------- -----------
$ 872,643 $ 151,518 $(6,955) $ 1,017,206
=========== ========= ========= ===========
</TABLE>
See accompanying Notes to Tidewater Unaudited Pro Forma Condensed Combined
Financial Information.
37
<PAGE>
The unaudited pro forma condensed combined statements of earnings set
forth below have been compiled from the following:
(1) Tidewater audited statements of earnings for each of the years
in the three-year period ended March 31, 1995.
(2) Tidewater unaudited statements of earnings for the six months
ended September 30, 1994 and 1995.
(3) Hornbeck audited statements of earnings for each of the years
in the three-year period ended December 31, 1994.
(4) Hornbeck unaudited statements of earnings for the six months
ended September 30, 1994 and 1995.
Hornbeck's fiscal year end is December 31 and Tidewater's fiscal year end
is March 31. The March 31, 1993, 1994 and 1995 Tidewater statements of
earnings are combined with the Hornbeck statements of operations for the years
ended December 31, 1992, 1993 and 1994, respectively. The Unaudited Pro Forma
Condensed Combined Statements of Earnings for the six months ended September
30, 1994 and 1995 include results of each entity for the six months ended
September 30, 1994 and 1995. See Note (e) of "Notes to Tidewater Unaudited Pro
Forma Condensed Combined Financial Information" for the Hornbeck unaudited
statements of earnings for the six months ended September 30, 1994 and 1995.
Additionally, retained earnings of the combined entities were adjusted by
$433,000 as of the beginning of Tidewater's fiscal 1996 year to include the
unaudited net earnings of Hornbeck, including adjustments to conform
accounting policies to those of Tidewater, for the period from January 1, 1995
to March 31, 1995. During this period, Hornbeck's revenues were $12,671,000.
The following unaudited pro forma condensed combined statements of
earnings give effect to the Merger under the pooling-of-interests accounting
method as if Tidewater and Hornbeck had been combined since inception.
38
<PAGE>
PRO FORMA CONDENSED COMBINED STATEMENTS OF EARNINGS -- UNAUDITED
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED MARCH 31, ENDED SEPTEMBER 30,
------------------------------------------- ----------------------------
1993 1994 1995 1994 1995
------------- ------------- ------------- ------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues:
Marine operations............... $ 431,874 $ 513,892 $ 501,118 $ 254,292 $ 260,780
Compression operations.......... 62,099 55,471 83,490 30,512 55,073
------------- ------------- ------------- ------------- -------------
493,973 569,363 584,608 284,804 315,853
------------- ------------- ------------- ------------- -------------
Costs and expenses:
Marine operations (Note (a)).... 264,880 315,349 311,949 157,790 161,818
Compression operations.......... 36,283 30,338 45,886 17,509 28,777
Depreciation (Note (a))......... 83,814 88,936 92,865 43,710 41,379
General and administrative...... 60,368 66,034 63,919 31,650 28,755
------------- ------------- ------------- ------------- -------------
445,345 500,657 514,619 250,659 260,729
------------- ------------- ------------- ------------- -------------
48,628 68,706 69,989 34,145 55,124
Other income (expenses):
Foreign exchange loss........... (1,788) (557) (611) (516) (210)
Gain on sales of assets......... 3,415 4,588 14,207 5,160 4,552
Equity in net earnings of
unconsolidated companies...... 2,530 3,504 4,555 3,038 3,036
Minority interests.............. (2,544) (2,022) (1,488) (692) (765)
Interest and miscellaneous
income........................ 7,676 6,908 6,920 5,106 1,894
Other expense................... (3,941) (2,452) (8,499) (78) (12)
Interest expense................ (13,710) (9,262) (5,608) (953) (4,244)
------------- ------------- ------------- ------------- -------------
(8,362) 707 9,476 11,065 4,251
------------- ------------- ------------- ------------- -------------
Earnings from continuing operations
before income taxes................ 40,266 69,413 79,465 45,210 59,375
Income taxes (Note (b)).............. 12,376 24,753 28,278 16,155 19,517
Earnings from continuing
operations......................... 27,890 44,660 51,187 29,055 39,858
Discontinued operations.............. 3,099 -- -- -- --
------------- ------------- ------------- ------------- -------------
Earnings before extraordinary item
and cumulative effect of accounting
change............................. 30,989 44,660 51,187 29,055 39,858
Extraordinary loss on early debt
retirement......................... -- (12,250) -- -- --
Cumulative effect of accounting
change............................. (6,640) -- -- -- --
------------- ------------- ------------- ------------- -------------
Net earnings......................... $ 24,349 $ 32,410 $ 51,187 $ 29,055 $ 39,858
============= ============= ============= ============= =============
Primary and fully-diluted earnings
per common share:
Continuing operations........... $ .45 $ .72 $ .82 $ .47 $ .64
Discontinued operations......... .05 -- -- -- --
------------- ------------- ------------- ------------- -------------
Earnings before extraordinary
item and cumulative effect of
accounting change............. .50 .72 .82 .47 .64
Extraordinary loss on early debt
retirement.................... -- (.20) -- -- --
Cumulative effect of accounting
change........................ (.11) -- -- -- --
------------- ------------- ------------- ------------- -------------
Net earnings.................... $ .39 $ .52 $ .82 $ .47 $ .64
============= ============= ============= ============= =============
Weighted average common shares and
equivalents........................ 61,873,573 62,117,501 62,206,014 62,204,653 62,476,201
============= ============= ============= ============= =============
</TABLE>
39
<PAGE>
NOTES TO TIDEWATER UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
INFORMATION:
(a) To conform accounting policies regarding certain drydocking costs which
have been capitalized and amortized over periods of 24 to 36 months in
Hornbeck's historical financial statements but are expensed as incurred
by Tidewater. To conform Hornbeck's historical amounts to Tidewater's
policy, other assets have been reduced at September 30, 1995 by
$6,955,000. Marine equipment operating expenses have been increased by
$1,223,000, $5,825,000 and $2,915,000 for the years ended March 31,
1993, 1994 and 1995, respectively, and $2,435,000 and $4,505,000 for the
six-month periods ended September 30, 1994 and 1995, respectively.
Depreciation expense has been reduced by $1,252,000, $2,110,000 and
$3,740,000 for the years ended March 31, 1993, 1994 and 1995,
respectively, and $1,936,000 and $2,041,000 for the six-month periods
ended September 30, 1994 and 1995, respectively.
(b) To reflect the income tax expense effect of the pro-forma adjustments
discussed in note (a) above, income tax expense has been increased
(decreased) by $10,000, ($1,300,000) and $289,000 for the years ended
March 31, 1993, 1994 and 1995, respectively, and ($175,000) and
($863,000) for the six-month periods ended September 30, 1994 and 1995,
respectively. The deferred income tax liability account has been reduced
at September 30, 1995 by $2,434,000 for the net effect of the adjustments
described above.
(c) To give effect to the issuance of 8,800,000 shares (assuming a
Conversion Ratio of .667 shares and prior to giving effect to the exercise
of 317,654 Hornbeck stock options) of Tidewater Common Stock in exchange
for 13,240,000 shares of Hornbeck Stock. The excess of par value of the
13,240,000 shares of Hornbeck Stock surrendered upon consummation of the
Merger over par value of the 8,800,000 shares of Tidewater Common Stock
issued upon consummation of the Merger is credited to additional paid-in
capital.
(d) The retained earnings adjustment of $4,521,000 reflects the combined
effect of the adjustments referenced under notes (a) and (b).
(NOTES CONTINUED ON FOLLOWING PAGE)
40
<PAGE>
(e) The Hornbeck unaudited statements of earnings for the six months ended
September 30, 1994 and 1995 are as follows:
SIX MONTHS ENDED
SEPTEMBER 30,
----------------------------
1994 1995
------------- -------------
(IN THOUSANDS EXCEPT PER
SHARE DATA)
Marine operating revenues............ $ 20,226 $ 28,660
------------- -------------
Marine operating costs............... 10,979 14,508
Depreciation expense................. 4,871 6,695
General and administrative
expenses........................... 1,668 2,027
------------- -------------
17,518 23,230
------------- -------------
2,708 5,430
Other income (expense):
Foreign exchange loss........... -- (53)
Gain on sales of assets......... 689 425
Equity in net earnings (loss) of
unconsolidated companies..... 1,094 (4)
Interest and miscellaneous
income....................... 853 605
Other expense................... (78) (12)
Interest expense................ (305) (881)
------------- -------------
2,253 80
------------- -------------
Earnings before income taxes......... 4,961 5,510
Income taxes......................... 1,350 1,792
------------- -------------
Net earnings......................... $ 3,611 $ 3,718
============= =============
Primary and full-diluted earnings per
common share....................... $ .27 $ .28
============= =============
Weighted average common shares and
equivalents........................ 13,474,000 13,341,500
============= =============
(f) No provision has been reflected in the unaudited pro forma condensed
combined financial information for direct expenses related to the
Merger, which are expected to approximate $8.5 million.
<PAGE>
TIDEWATER MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This discussion and analysis of financial condition and results of
operations of Tidewater should be read in conjunction with the consolidated
financial statements, the related disclosures and the selected financial data
of Tidewater included elsewhere herein.
SIX MONTHS ENDED SEPTEMBER 30, 1994 AND 1995
Fiscal 1996 six-month net earnings rose significantly above prior year
levels due to better market conditions for offshore Tidewater Marine services
and a considerably larger Tidewater Compression rental fleet.
LIQUIDITY AND CAPITAL RESOURCES
Fiscal 1996 six-month operating activities generated higher cash than
fiscal 1995's corresponding period. The increase is attributable to a
significantly larger natural gas compressor fleet and higher utilization and
day rates for the Tidewater Marine vessel fleet. Operating activities continue
to generate cash in excess of normal operating requirements. Anticipated
utilization levels for the Tidewater Marine vessel fleet and Tidewater
Compression rental fleet for the remainder of fiscal 1996 should maintain this
condition.
Cash used in investing activities for the six-month period ended
September 30, 1995 was significantly lower than the amount for the
corresponding period of fiscal 1995. Investing activities for the six-month
period ended September 30, 1994 include the purchase of the assets of Brazos
Gas Compressing Company, a subsidiary of Mitchell Energy & Development
Corporation, for $35 million in cash on September 30, 1994. Excluding
acquisitions, additions to properties and equipment and proceeds from asset
sales determine the overall amount of cash used in investing activities. The
following tables compare these two items, by business segment, for the
six-month periods ended September 30, 1994 and 1995:
SIX MONTHS ENDED
SEPTEMBER 30,
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)
ADDITIONS TO PROPERTIES AND
EQUIPMENT:
Tidewater Marine................ $ 17,654 $ 14,768
Tidewater Compression........... 2,428 1,156
General corporate............... 218 14
--------- ---------
$ 20,300 $ 15,938
========= =========
PROCEEDS FROM SALES OF ASSETS:
Tidewater Marine equipment...... $ 7,212 $ 6,645
Tidewater Compression
equipment.................... 1,306 3,808
--------- ---------
$ 8,518 $ 10,453
========= =========
Tidewater Marine additions for the current six-month period include the
$6.1 million purchase of five offshore tugs and a utility vessel previously
operated under long-term lease. Current economic conditions generally do not
favor the construction of Tidewater Marine vessels; therefore, future
expansion of the Tidewater Marine fleet will continue to come primarily from
existing industry supplies provided appropriate rates of return can be
achieved.
Cash used in fiscal 1996 six-month financing activities was significantly
higher than fiscal 1995's six-month period because of $58 million of
prepayments on long-term debt borrowed in connection with the purchase of
Halliburton's natural gas compression assets on November 30, 1994. As of
September 30, 1995 existing long-term debt of $48 million was borrowed under
the revolving credit
42
<PAGE>
facility of Tidewater's revolving credit and term loan agreement. Principal
payments on long-term debt for the six months ended September 30, 1994 include
the redemption of 7% convertible subordinated debentures for $46.0 million.
Continued dividend payments are subject to declaration by the Board of
Directors and are limited by Tidewater's revolving credit and term loan
agreement.
RESULTS OF OPERATIONS
Revenues and operating profits, by Tidewater business segment, for the
six-month periods ended September 30, 1994 and 1995 are as follows:
SIX MONTHS ENDED
SEPTEMBER 30,
------------------------
1994 1995
----------- -----------
(IN THOUSANDS)
REVENUES:
Tidewater Marine................ $ 234,066 $ 232,120
Tidewater Compression........... 30,512 55,073
----------- -----------
$ 264,578 $ 287,193
=========== ===========
OPERATING PROFIT (LOSS):
Tidewater Marine................ $ 39,248 $ 53,358
Tidewater Compression........... 4,439 8,067
Other income.................... 2,634 2,647
Corporate expenses.............. (4,925) (4,380)
Interest expense................ (648) (3,363)
Income tax expense.............. (14,980) (18,588)
----------- -----------
Net earnings.................... $ 25,768 $ 37,741
=========== ===========
Fiscal 1996 six-month consolidated revenues and pre-tax earnings rose
8.5% and 38.2%, respectively, above fiscal 1995's corresponding six-month
amounts. The increase in pre-tax earnings for the current six-month period is
because of higher Tidewater Marine and Tidewater Compression operating profits
partially offset by higher interest expense. Higher Tidewater Marine operating
profit is due to higher utilization and day rates for the vessel fleet, the
net positive effect of lower depreciation expense due to the increase in
vessel useful lives effective April 1, 1995, and lower general and
administrative expenses as a result of Tidewater's restructuring of worldwide
Tidewater Marine operations in fiscal 1995's fourth quarter. Fiscal 1995's
six-month Tidewater Marine operating profit also includes $1.7 million of
refunds received from the settlement of prior years' property tax disputes.
Higher Tidewater Compression operating profit and higher interest expense are
the result of the expansion of the natural gas compressor rental fleet and
associated debt borrowings during the second half of fiscal 1995.
General and administrative expenses by type for the six-month periods
ended September 30, 1994 and 1995 are as follows:
SIX MONTHS ENDED
SEPTEMBER 30,
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)
Personnel............................ $ 18,493 $ 15,543
Office and property.................. 4,579 4,631
Sales and marketing.................. 1,938 1,515
Professional services................ 1,559 1,846
Other................................ 3,413 3,193
--------- ---------
$ 29,982 $ 26,728
========= =========
43
<PAGE>
TIDEWATER MARINE SEGMENT
The Tidewater Marine segment provides a diverse range of services and
equipment to the offshore oil and gas industry. Fleet size, utilization and
vessel day rates primarily determine the amount of revenues and operating
profit because operating costs and depreciation do not change proportionally
with changes in revenues. Operating costs principally consist of crew costs,
repair and maintenance, insurance, fuel/lube and supplies. Fleet size and
utilization are the major factors which affect crew costs. The timing and
amount of repair and maintenance costs are influenced by vessel age and
scheduled drydockings to satisfy safety and inspection requirements dictated
by regulatory agencies. Whenever possible, vessel drydockings are done during
seasonally slow periods to minimize any impact on vessel operations and are
only done if economically justified given the vessel's age, and physical
condition. The following tables compare revenues, operating expenses
(excluding general and administrative expense and depreciation expense) and
operating margins of the Tidewater Marine segment and provide a breakdown of
Tidewater Marine operating profit for the six-month periods ended September
30, 1994 and 1995:
SIX MONTHS ENDED
SEPTEMBER 30,
------------------------
1994 1995
----------- -----------
(IN THOUSANDS)
REVENUES:
Owned and chartered vessels:
United States............. $ 90,741 $ 87,858
Foreign................... 126,514 129,727
----------- -----------
217,255 217,585
Shipyard and other........ 10,671 7,219
Brokered vessels.......... 6,140 7,316
----------- -----------
234,066 232,120
----------- -----------
EXPENSES:
Owned and chartered vessels:
Crew costs................ 64,557 64,636
Repair and maintenance.... 30,892 34,260
Insurance................. 14,954 13,575
Fuel, lube and supplies... 9,966 11,056
Other..................... 8,677 7,777
----------- -----------
129,046 131,304
Shipyard and other.............. 9,718 4,748
Brokered vessels................ 5,612 6,753
----------- -----------
144,376 142,805
----------- -----------
Operating margins......... $ 89,690 $ 89,315
=========== ===========
FOR OWNED AND CHARTERED VESSELS:
Operating margins as a percent
of revenues.................. 40.6% 39.7%
=========== ===========
Percentage rise (drop) in
operating costs compared to
same period of prior fiscal
year......................... (6.9)% 1.8%
=========== ===========
(TABLE CONTINUED ON FOLLOWING PAGE)
44
<PAGE>
SIX MONTHS ENDED
SEPTEMBER 30,
------------------------
1994 1995
----------- -----------
(IN THOUSANDS)
TIDEWATER MARINE OPERATING PROFIT:
Owned and chartered vessels:
United States............. $ 16,808 $ 17,876
Foreign................... 17,088 28,820
----------- -----------
33,896 46,696
Gains from asset sales.......... 3,794 3,801
Brokered vessels................ 528 564
Shipyard and other.............. 1,030 2,297
----------- -----------
$ 39,248 $ 53,358
=========== ===========
Fiscal 1996 six-month operating margin was consistent with the prior year
six-month period as slightly higher utilization and higher average day rates
for the fleet were offset by higher repair and maintenance expense. The
increase in repair and maintenance is partially due to the increase in vessel
useful lives which became effective at the beginning of the current fiscal
year and had the effect of expensing drydocking costs, which under the old
vessel useful lives, would have been capitalized.
Tidewater Marine fleet utilization is determined primarily by market
conditions and to a lesser extent by drydockings to satisfy safety and
inspection requirements. The following table compares day-based Tidewater
Marine fleet utilization percentages by vessel class and in total for the
six-month periods ended September 30, 1994 and 1995:
SIX MONTHS ENDED
SEPTEMBER 30,
--------------------
1994 1995
--------- ---------
UTILIZATION:
DOMESTIC-BASED FLEET:
Towing Supply/Supply...... 85.5% 88.3%
Crew/Utility.............. 92.0% 80.4%
Offshore Tugs............. 64.9% 56.2%
Other..................... 51.2% 54.7%
Total..................... 79.9% 77.1%
FOREIGN-BASED FLEET:
Towing Supply/Supply...... 81.9% 87.4%
Crew/Utility.............. 74.0% 85.8%
Offshore Tugs............. 76.0% 71.7%
Other..................... 49.0% 42.9%
Total..................... 74.0% 77.2%
WORLDWIDE FLEET:
Towing Supply/Supply...... 83.1% 87.8%
Crew/Utility.............. 83.8% 82.6%
Offshore Tugs............. 70.5% 64.6%
Other..................... 49.4% 45.3%
Total..................... 76.3% 77.2%
The domestic fleet consists of vessels operating in U.S. waters while the
foreign fleet consists of vessels operating outside U.S. waters.
45
<PAGE>
Utilization presented reflects demand trends for offshore marine
services. Fiscal 1996 six-month fleet utilization rose slightly above fiscal
1995's six-month level as higher demand for towing supply/supply and
crew/utility marine services in foreign markets outweighed the drop in demand
for marine services provided by crew/utility vessels and offshore tugs in the
Gulf of Mexico due to uncertainties affecting the price of U.S. natural gas.
Tidewater Marine vessel day rates are primarily determined by the demand
created through the level of offshore exploration, development and production
spending by energy exploration and production companies. Suitability of
equipment, the degree of service provided and the overall supply of marine
service vessels also influence vessel day rates. The following table provides
a comparison of average vessel day rates by class and in total for the
six-month periods ended September 30, 1994 and 1995:
SIX MONTHS ENDED
SEPTEMBER 30,
--------------------
1994 1995
--------- ---------
AVERAGE VESSEL DAY RATES:
DOMESTIC-BASED FLEET:
Towing Supply/Supply...... $ 3,599 $ 3,570
Crew/Utility.............. 1,261 1,350
Offshore Tugs............. 4,310 4,859
Other..................... 2,946 2,969
Total..................... $ 3,062 $ 3,160
FOREIGN-BASED FLEET:
Towing Supply/Supply...... $ 3,611 $ 3,658
Crew/Utility.............. 1,752 1,825
Offshore Tugs............. 2,606 2,671
Other..................... 738 828
Total..................... $ 2,879 $ 3,013
WORLDWIDE FLEET:
Towing Supply/Supply...... $ 3,607 $ 3,627
Crew/Utility.............. 1,459 1,552
Offshore Tugs............. 3,385 3,549
Other..................... 1,178 1,355
Total..................... $ 2,953 $ 3,071
The domestic fleet consists of vessels operating in U.S. waters while the
foreign fleet consists of vessels operating outside U.S. waters.
Higher average day rates in the current six-month period compared to the
prior year's corresponding six-month period is attributed to a more favorable
supply/demand relationship for offshore marine services in foreign markets and
to the mix of vessels working in the domestic-based vessel fleet.
46
<PAGE>
The following tables compare the average number of vessels by class and
by geographic location during the six-month period ended September 30 and the
actual September 30, 1995 vessel count:
AVERAGE NUMBER OF
VESSELS DURING SIX ACTUAL VESSEL
MONTHS ENDED COUNT AT
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------
1994 1995 1995
--------- --------- --------------
DOMESTIC-BASED FLEET:
Towing Supply/Supply............ 94 91 91
Crew/Utility.................... 48 50 49
Offshore Tugs................... 47 43 41
Other........................... 14 13 12
--------- --------- -----
Total..................... 203 197 193
--------- --------- -----
FOREIGN-BASED FLEET:
Towing Supply/Supply............ 176 169 171
Crew/Utility.................... 41 35 35
Offshore Tugs................... 48 50 54
Other........................... 59 51 50
--------- --------- -----
Total..................... 324 305 310
--------- --------- -----
Owned or chartered vessels
included in marine
revenues..................... 527 502 503
Vessels withdrawn from active
service...................... 18 17 15
Joint venture owned vessels..... 43 47 47
--------- --------- -----
Total..................... 588 566 565
========= ========= =====
WORLDWIDE FLEET:
Towing Supply/Supply............ 309 297 299
Crew/Utility.................... 94 94 93
Offshore Tugs................... 99 97 98
Other........................... 86 78 75
--------- --------- -----
Total..................... 588 566 565
========= ========= =====
The drop in the average number of vessels in the foreign-based vessel
fleet from 324 for the six-month period ended September 30, 1994 to 305 for
the six-month period ended September 30, 1995 is due to older vessels being
withdrawn from active service due to age and high repair and maintenance
costs. Vessels will continue to be withdrawn from active service as they
become uneconomical to operate.
TIDEWATER COMPRESSION SEGMENT
The Tidewater Compression segment provides natural gas compression
services and equipment for a variety of applications primarily in the energy
industry. Rental revenues are determined, for the most part, by utilization
and fleet size. Utilization is affected by natural gas storage levels and by
the number and age of producing oil and gas wells which, in turn, are
dependent upon the price levels of oil and natural gas. Quality of service,
availability and rental rates for equipment are also major factors which
affect utilization. Operating expenses are generally consistent from
period-to-period and usually vary in the short-term due to fluctuations in the
amount of repair and maintenance expense. Long-term growth in operating
expenses will occur primarily as a result of increased fleet size and general
inflationary factors. Tidewater Compression segment operating profit is
primarily determined by operating margins from rental gas compression
operations. The following tables compare revenues,
47
<PAGE>
operating expenses (excluding general and administrative expense and
depreciation expense), operating margins and related statistics for gas
compression operations for the six-month periods ended September 30, 1994 and
1995:
SIX MONTHS ENDED
SEPTEMBER 30,
--------------------
1994 1995
--------- ---------
(IN THOUSANDS,
EXCEPT STATISTICS)
REVENUES:
Rentals......................... $ 16,176 $ 36,685
Repair, service and other....... 2,841 3,205
--------- ---------
19,017 39,890
--------- ---------
EXPENSES:
Wages and benefits.............. 3,202 6,095
Repairs and maintenance......... 3,116 6,391
Other........................... 1,790 4,130
--------- ---------
8,108 16,616
--------- ---------
Operating margins............... $ 10,909 $ 23,274
========= =========
OPERATING MARGINS AS A PERCENT OF
REVENUES........................... 57.4% 58.3%
========= =========
HORSEPOWER BASED STATISTICS:
Utilization..................... 86.4% 72.1%
========= =========
Average monthly rental rate..... $ 16.73 $ 17.86
========= =========
Average fleet size.............. 186,464 474,853
========= =========
Higher revenues and operating margins for the six-month period ended
September 30, 1995 compared to the corresponding amounts for the same period
of fiscal 1995 are the result of the considerable expansion of the gas
compression rental fleet which occurred during the second half of fiscal 1995.
Fiscal 1996 six-month utilization fell below the level for the corresponding
period of fiscal 1995 due to a combination of the expansion of the rental
fleet noted above and to lower demand for compression services. The natural
gas compressor fleets which were purchased during fiscal 1995 historically
experienced lower levels of utilization than the original Tidewater fleet.
Lower demand for compression services in the current six-month period is the
result of lower U.S. natural gas prices.
The Tidewater Compression segment also designs, fabricates and installs
engineered compressor systems and sells, primarily to its customers, related
parts and equipment. The following table compares revenues, costs of sales and
sales margins for equipment and parts sales for the six-month periods ended
September 30, 1994 and 1995:
SIX MONTHS ENDED
SEPTEMBER 30,
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)
Revenues............................. $ 11,495 $ 15,183
Costs of sales....................... 9,401 12,161
--------- ---------
Operating margins.................. $ 2,094 $ 3,022
========= =========
Operating margins as a percent of
revenues........................... 18.2% 19.9%
========= =========
Fluctuations in the level of equipment and parts sales for the periods
presented are due to the timing of sales of engineered products. Fluctuations
in operating margin percentages are the result of
48
<PAGE>
competitive market forces. Costs of sales consist primarily of wages and
benefits and material costs associated with the design, fabrication and
installation of packaged compressor systems.
Gains from sales of assets have contributed nominally to segment profits
for the six-month periods ended September 30, 1995 and 1994.
CURRENCY FLUCTUATIONS AND INFLATION
Because of its significant foreign operations, Tidewater is exposed to
currency fluctuations and exchange risks. To minimize the financial impact of
these items Tidewater attempts to contract a majority of its services in
United States dollars.
Day-to-day operating costs are generally affected by inflation. However,
because the energy services industry requires specialized goods and services,
general economic inflationary trends may not affect Tidewater's operating
costs. The major impact on operating costs is the level of offshore
exploration and development spending by energy exploration and production
companies. As this spending increases, prices of goods and services used by
the oil and gas industry and the energy services industry will increase.
Future improvements in vessel day rates and compressor rental rates may buffer
Tidewater from the inflationary effects on operating costs.
ENVIRONMENTAL MATTERS
During the ordinary course of business Tidewater's operations are subject
to a wide variety of environmental laws and regulations. Tidewater attempts to
comply with these laws and regulations in order to avoid costly accidents and
related environmental damage. Tidewater is currently involved in litigation
with the Environmental Protection Agency concerning the disposal of oilfield
wastes. In the opinion of management, the ultimate liability with respect to
the litigation will not have a material adverse effect on Tidewater's
financial position.
------------------------
YEARS ENDED MARCH 31, 1993, 1994 AND 1995
Fiscal 1995 pre-tax earnings rose approximately 17% principally due to
the significant expansion of Tidewater's natural gas compressor fleet and
higher gains from asset sales. Fiscal 1995 results also include certain
charges related to Tidewater's restructuring of its headquarters and worldwide
marine operations and increased reserves to cover possible losses due to the
potential insolvency of certain of Tidewater's insurers. Demand for
Tidewater's services weakened during fiscal 1995 as a result of lower U.S.
natural gas prices and the instability of the price of oil.
LIQUIDITY AND CAPITAL RESOURCES
Fiscal 1995 operating activities generated a consistent level of cash
compared with the corresponding amount for fiscal 1994. Tidewater Marine
operating margins primarily determine the overall level of cash generated from
operating activities. The following table compares operating margins for
Tidewater's business segments.
1993 1994 1995
----------- ----------- -----------
(IN THOUSANDS)
Tidewater Marine..................... $ 161,012 $ 177,665 $ 169,734
Tidewater Compression................ 25,816 25,133 37,604
----------- ----------- -----------
$ 186,828 $ 202,798 $ 207,338
=========== =========== ===========
Operating margins are defined as revenues less operating expenses,
excluding depreciation.
Fluctuations in the level of Tidewater Marine operating margins over the
past three fiscal years were attributable primarily to decreased levels of
utilization for a smaller worldwide vessel fleet from fiscal 1994 to fiscal
1995 and higher utilization and average day rates for the domestic-based
vessel
49
<PAGE>
fleet from fiscal 1993 to fiscal 1994. Fiscal 1995 Tidewater Compression
operating margins surpassed the prior year level principally due to a
substantial increase in the size of the natural gas compressor fleet. Fiscal
1994 Tidewater Compression operating margins were down slightly from fiscal
1993 due to an anticipated drop in sales of engineered products. For the past
several years operating activities have generated cash in excess of the amount
required to satisfy current obligations. Anticipated fiscal 1996 utilization
levels and day/rental rates for the Tidewater Marine vessel fleet and
Tidewater Compression rental equipment should maintain this condition.
Investing activities for fiscal 1995 consumed a significantly larger
amount of cash compared with fiscal 1994. The principal reason for the
increase over the prior year level is the acquisition of the natural gas
compression assets of Halliburton Company in the third quarter of fiscal 1995
for approximately $205 million and the acquisition of the assets of Brazos Gas
Compressing Company for approximately $35 million at the end of the second
quarter of fiscal 1995. Additions to properties and equipment, excluding the
Brazos and Halliburton Compression acquisitions, and proceeds from asset sales
are compared by business segment in the following tables for the years ended
March 31:
1993 1994 1995
--------- --------- ---------
(IN THOUSANDS)
ADDITIONS TO PROPERTIES AND
EQUIPMENT:
Tidewater Marine:
Additional equipment............ $ 27,055 $ 11,761 $ 18,285
Modifications/additions to
existing fleet............... 17,518 18,936 20,053
Other........................... 1,530 1,697 1,824
--------- --------- ---------
46,103 32,394 40,162
--------- --------- ---------
Tidewater Compression:
Additional equipment............ $ 3,579 $ 15,976 $ 7,213
Modifications/additions to
existing fleet............... 1,177 3,729 5,962
Other........................... 869 840 1,330
--------- --------- ---------
5,625 20,545 14,505
General Corporate.................... 638 380 327
--------- --------- ---------
$ 52,366 $ 53,319 $ 54,994
========= ========= =========
PROCEEDS FROM SALES OF ASSETS:
Tidewater Marine fleet.......... $ 3,890 $ 8,107 $ 18,661
Tidewater Compression fleet..... 4,215 3,376 4,358
--------- --------- ---------
$ 8,105 $ 11,483 $ 23,019
========= ========= =========
Fiscal 1995 financing activities provided cash of $42.3 million primarily
due to borrowing $150 million to finance the Halliburton Compression
acquisition. The borrowing was under a $250 million amended and restated
Revolving Credit and Term Loan Agreement with several banks and bears interest
at fluctuating rates subject to certain options chosen in advance by
Tidewater. In addition to normal scheduled debt repayments, fiscal 1995
payments on long-term debt include $35.0 million of prepayments on debt
borrowed to finance the Halliburton Compression acquisition and approximately
$46.0 million for the early retirement of the 7% convertible subordinated
debentures called for redemption on March 16, 1994. Fiscal 1994 financing
activities include approximately $57.6 million to retire, prior to maturity,
$51.1 million of notes bearing interest rates ranging from 9.17% to 10%. The
remainder of the cash used to retire the notes was for associated prepayment
penalties. Fiscal 1994 principal payments also include approximately $9.0
million for termination of capitalized lease obligations and the related
purchase of five marine vessels. Fiscal 1993 cash used in financing activities
includes approximately $38.0 million for long-term debt retired prior to
maturity.
50
<PAGE>
On March 16, 1994, Tidewater called for redemption the approximately
$47.2 million of 7% convertible subordinated debentures due 2010. Holders
converted $1,113,000 of debentures into 44,520 shares of Tidewater's common
stock at a conversion price of $25.00 per share. The remainder of the
debentures were redeemed at 101.4% of par value plus accrued interest on April
18, 1995. An extraordinary charge to earnings of approximately $7.5 million
(net of income taxes), or $.14 per common share, was recorded in the fourth
quarter of fiscal 1994. The extraordinary charge consisted of $.6 million of
prepayment premium and $11.0 million of unamortized original issue discount
and deferred financing costs, less $4.1 million of income tax benefits.
During fiscal 1993, dividends of $.075 per common share were declared and
paid in each of the first three quarters and a $.10 per common share dividend
was declared in the fourth quarter. Due to the timing of the meetings of the
Tidewater Board, three quarterly dividends were declared in fiscal 1994, each
at $.10 per common share. During fiscal 1995 dividends of $.10 per common
share were declared and paid in each quarter. Continued dividend payments are
subject to declaration by the Tidewater Board and are subject to limitation by
Tidewater's revolving credit and term loan agreement.
51
<PAGE>
RESULTS OF OPERATIONS
Revenues, operating profits and certain other information by business
segment and geographic distribution for the years ended March 31 are:
1993 1994 1995
----------- ----------- -----------
(IN THOUSANDS)
Revenue(A):
Tidewater Marine:
United States................... $ 131,229 $ 197,262 $ 207,547
Foreign(B)...................... 282,210 269,339 247,737
----------- ----------- -----------
413,439 466,601 455,284
Tidewater Compression.............. 62,099 55,471 83,490
----------- ----------- -----------
$ 475,538 $ 522,072 $ 538,774
=========== =========== ===========
Operating profit:
Tidewater Marine:
United States................... $ 912 $ 35,018 $ 47,080
Foreign(B)...................... 52,085 30,765 25,090
----------- ----------- -----------
52,997 65,783 72,170
----------- ----------- -----------
Tidewater Compression.............. 10,177 6,895 14,436
Equity in net earnings of
unconsolidated companies........ 2,525 2,686 3,147
Other income....................... 367 1,034 1,034
Other expense...................... (3,771) -- (8,350)
General corporate expenses......... (9,797) (10,806) (10,285)
Interest expense................... (12,323) (7,939) (4,744)
----------- ----------- -----------
Earnings from continuing operations
before income taxes................ $ 40,175 $ 57,653 $ 67,408
=========== =========== ===========
Identifiable assets:
Tidewater Marine:
United States................... $ 295,008 $ 271,040 $ 229,971
Foreign(B)...................... 348,767 327,975 314,532
----------- ----------- -----------
643,775 599,015 544,503
Tidewater Compression.............. 57,143 68,285 308,339
----------- ----------- -----------
Total operating
segments................ 700,918 667,300 852,842
Investments in and advances to
unconsolidated Marine
companies(A).................... 24,424 21,843 21,527
Disposed businesses and
discontinued segments........... 2,258 284 --
Corporate.......................... 111,148 120,459 27,816
----------- ----------- -----------
Total................... $ 838,748 $ 809,886 $ 902,185
=========== =========== ===========
Depreciation:
Tidewater Marine................... $ 71,673 $ 74,343 $ 70,736
Tidewater Compression.............. 8,352 9,144 15,472
----------- ----------- -----------
Total operating
segments................ 80,025 83,487 86,208
Corporate.......................... 292 165 390
----------- ----------- -----------
Total................... $ 80,317 $ 83,652 $ 86,598
=========== =========== ===========
(FOOTNOTES ON FOLLOWING PAGE)
52
<PAGE>
- ------------
(A) For fiscal 1995 one Tidewater Marine customer accounted for approximately
11% of consolidated revenues.
(B) Tidewater Marine equipment operations are conducted worldwide with assets
that are highly mobile. Revenues and identifiable assets attributable to
these operations in any one country are not "significant" as that term is
defined by Financial Accounting Standards No. 14. Further, most
identifiable assets in each country are comprised of offshore service
vessels, which regularly and routinely move from one operating area to
another, often to and from offshore operating areas of different
continents. Equity in net assets of foreign subsidiaries is $224,905,000,
$192,038,000 and $164,175,000 at March 31, 1993, 1994 and 1995,
respectively. Other foreign identifiable assets include accounts
receivable and other balances denominated in foreign currencies
aggregating approximately $8,837,000, $7,295,000 and $7,062,000 at March
31, 1993, 1994 and 1995, respectively. These amounts are subject to the
usual risks of fluctuating exchange rates and government-imposed exchange
controls.
Fiscal 1995 consolidated revenues and pre-tax earnings rose 3.2% and
16.9%, respectively, above the corresponding amounts for the prior fiscal year
primarily due to significantly higher Tidewater Compression revenues and
operating profits and higher Tidewater Marine operating profits. The 109%
increase in fiscal 1995 Tidewater Compression operating profits over the prior
fiscal year is a result of the substantial expansion of the natural gas
compressor rental fleet during the second half of fiscal 1995. Higher fiscal
1995 Tidewater Marine operating profits were principally the result of higher
gains from sales of assets and shipyard profits partially offset by lower
operating profits for a smaller foreign-based vessel fleet. Shipyard profits
rose substantially above prior year levels due to the construction of vessels
for third-parties. Fiscal 1995 pre-tax earnings were adversely affected by
$8.4 million of other expense which consisted of a $5.9 million charge
resulting from the restructuring of Tidewater's worldwide marine operations
and its headquarters office and a $2.5 million provision for possible losses
due to the potential insolvency of certain of Tidewater's insurers.
Substantially all of the costs associated with the restructuring program were
paid before March 31, 1995. The primary effect of the restructuring on future
levels of costs and expenses will be to reduce annual payroll and related
costs by approximately $6.6 million. During fiscal 1995, the estimated salvage
value used to determine depreciation expense for natural gas compressors was
increased. Please see Note 1 of Notes to Consolidated Financial Statements for
further discussion of this matter.
Fiscal 1994 consolidated revenues and earnings from continuing operations
before income taxes rose 9.7% and 43.5%, respectively, above the corresponding
amounts for the prior fiscal year primarily because of higher utilization and
substantially higher average vessel day rates for the domestic-based vessel
fleet. Fiscal 1994 revenues and operating profits for the foreign-based vessel
fleet reflect weaker demand in certain foreign markets resulting from
uncertainties associated with the then future supply and price of oil. Fiscal
1994 foreign operating profits also include a higher level of repair and
maintenance costs resulting from the timing of vessel drydockings. Lower
fiscal 1994 Tidewater Compression revenues and operating profits compared with
the corresponding amounts for the prior fiscal year are primarily the result
of a lower level of engineered product sales. Fiscal 1994 Tidewater Marine and
Tidewater Compression operating profits also include approximately $.3 million
and $1.0 million, respectively, of severance costs associated with the early
retirement of several employees.
Fiscal 1993 non-recurring charges totaling $3.8 million relate to an
amendment of an employment and consulting agreement with Tidewater's then
chairman of the board, president and chief executive officer. For its benefit,
Tidewater elected to amend the agreement in view of the possible changes to
tax laws then under consideration by the Clinton administration and Congress.
The amendment accelerated the vesting of all outstanding shares of restricted
stock such that these shares became fully vested and freely transferable
immediately. The original terms of the restricted stock shares included
restrictions during the employment term of the agreement. Due to the
acceleration of the vesting of the restricted stock shares on March 31, 1993,
the remaining deferred compensation associated with the restricted stock of
$2,850,000 was charged to other expense in the Consolidated Statements of
Earnings in fiscal 1993.
53
<PAGE>
The amendment also provided for an immediate lump-sum distribution of the
present value of benefits under Tidewater's supplemental retirement plan,
including the additional benefits that would have accrued assuming he remained
employed by Tidewater through September 24, 1994. The lump sum distribution
amounted to $2,212,000 and included $921,000 for unaccrued benefits which was
charged to other expense in the Consolidated Statements of Earnings in fiscal
1993.
Consolidated general and administrative expenses for the years ended
March 31 consist of the following components:
1993 1994 1995
--------- --------- ---------
(IN THOUSANDS)
TYPE:
Personnel....................... $ 36,058 $ 37,518 $ 36,152
Office and property............. 9,947 10,363 9,577
Sales and marketing............. 4,254 4,190 3,951
Professional services........... 3,741 4,580 3,468
Insurance....................... 1,197 1,750 2,010
Other........................... 3,282 4,695 5,185
--------- --------- ---------
$ 58,479 $ 63,096 $ 60,343
========= ========= =========
TIDEWATER MARINE SEGMENT
The Tidewater Marine segment provides a diverse range of services and
equipment to the offshore oil and gas industry. Because operating costs and
depreciation do not change proportionally with changes in revenues, the amount
of operating profit for the Tidewater Marine segment primarily is determined
by vessel fleet utilization and day rates.
Tidewater Marine segment revenues for the years ended March 31 consist of
the following:
1993 1994 1995
----------- ----------- -----------
(IN THOUSANDS)
Owned or chartered vessels:
Domestic........................ $ 132,496 $ 178,726 $ 177,109
Foreign......................... 281,983 269,169 246,967
----------- ----------- -----------
414,479 447,895 424,076
Brokered vessels..................... 7,081 10,083 10,639
Shipyard sales....................... 3,014 8,623 20,569
Intercompany eliminations(A)......... (11,135) -- --
----------- ----------- -----------
$ 413,439 $ 466,601 $ 455,284
=========== =========== ===========
- ------------
(A) Revenues earned from the charter of equipment to the discontinued
Tidewater Container Shipping segment.
54
<PAGE>
Tidewater Marine fleet utilization is affected primarily by market
conditions. It is also influenced to a lesser degree by drydockings to satisfy
safety and inspection requirements because Tidewater Marine vessels must
undergo periodic inspections to remain properly classified and certified.
These inspections, whenever possible, are done during seasonally slow periods
to minimize the impact on vessel operations and are only done if the vessel is
considered to have continuing economic viability. The following table compares
day-based Tidewater Marine fleet utilization percentages by vessel class and
in total for the years ended March 31:
1993 1994 1995
--------- --------- ---------
UTILIZATION:
DOMESTIC-BASED FLEET:
Towing Supply/Supply......... 83.8% 90.2% 85.8%
Crew/Utility................. 88.3% 92.0% 89.4%
Offshore Tugs................ 69.3% 64.4% 58.1%
Other........................ 69.8% 67.4% 47.2%
Total........................ 79.6% 82.2% 77.4%
FOREIGN-BASED FLEET:
Towing Supply/Supply......... 82.9% 77.7% 80.8%
Crew/Utility................. 81.9% 72.6% 79.0%
Offshore Tugs................ 80.3% 78.7% 76.3%
Other........................ 86.9% 72.2% 46.4%
Total........................ 83.2% 76.2% 73.8%
WORLDWIDE FLEET:
Towing Supply/Supply......... 83.1% 81.6% 82.6%
Crew/Utility................. 85.2% 82.5% 84.8%
Offshore Tugs................ 74.5% 71.6% 67.2%
Other........................ 82.1% 71.0% 46.5%
Total........................ 81.9% 78.4% 75.2%
The domestic fleet consists of vessels operating in U.S. waters while the
foreign fleet consists of vessels operating outside U.S. waters.
Tidewater Marine vessel utilization for all periods presented reflects
demand trends for offshore marine services. Lower utilization of the worldwide
vessel fleet in fiscal 1995 compared with fiscal 1994 is the result of
decreased demand for offshore marine services resulting from lower U.S.
natural gas prices which negatively affected utilization of the domestic-based
vessel fleet. Instability in the price of oil weakened demand for offshore
marine services in foreign markets and, in turn, adversely affected
utilization of the foreign-based vessel fleet. Higher fiscal 1994 utilization
compared with fiscal 1993 of the domestic-based vessel fleet reflects
increased demand for offshore marine services in the U.S. Gulf of Mexico.
Higher demand resulted from increased natural gas exploration and drilling
activity which began late in the third quarter and continued through the
fourth quarter of fiscal 1993 and throughout most of fiscal 1994. Toward the
end of the fourth quarter of fiscal 1994, the normal seasonal slowdown of
offshore activity caused a slight drop in utilization. Fiscal 1994 utilization
of the foreign-based vessel fleet below the fiscal 1993 level results
primarily from softening demand for offshore marine services in certain
foreign markets, principally the West African market.
55
<PAGE>
Tidewater Marine vessel day rates are determined by the demand created
through the level of offshore exploration, development and production spending
by energy exploration and production companies. Suitability of equipment, the
degree of service provided and the overall supply of marine service vessels
also influence vessel day rates. The following table provides a comparison of
average day rates by vessel class and in total for the years ended March 31:
1993 1994 1995
--------- --------- ---------
AVERAGE VESSEL DAY RATES:
DOMESTIC-BASED FLEET:
Towing Supply/Supply............ $ 2,696 $ 3,551 $ 3,569
Crew/Utility.................... 1,121 1,230 1,274
Offshore Tugs................... 3,850 4,259 4,607
Other........................... 1,598 1,826 3,045
Total........................... $ 2,412 $ 2,934 $ 3,087
FOREIGN-BASED FLEET:
Towing Supply/Supply............ $ 3,592 $ 3,660 $ 3,569
Crew/Utility.................... 1,610 1,727 1,723
Offshore Tugs................... 2,906 2,923 2,591
Other........................... 572 567 932
Total........................... $ 2,701 $ 2,793 $ 2,882
WORLDWIDE FLEET:
Towing Supply/Supply............ $ 3,339 $ 3,622 $ 3,569
Crew/Utility.................... 1,349 1,445 1,459
Offshore Tugs................... 3,365 3,516 3,465
Other........................... 816 875 1,363
Total........................... $ 2,601 $ 2,848 $ 2,964
The domestic fleet consists of vessels operating in U.S. waters while the
foreign fleet consists of vessels operating outside U.S. waters.
Fiscal 1995 average day rates for the worldwide vessel fleet rose 4%
above the prior year level and was due primarily to the mix of vessels
working. Fiscal 1995 average vessel day rates for the foreign-based vessel
fleet were higher due to a much lower level of activity for the inshore towing
fleet in Nigeria. Because these vessels have much lower average day rates,
they positively affect the overall average day rate of the fleet as
utilization and the number of these vessels in the fleet declines. In fiscal
1994, a higher average day rate for a larger domestic-based vessel fleet was
the principal factor contributing to the growth in Tidewater Marine revenues
and operating profits. During fiscal 1994 average day rates for the
domestic-based vessel fleet rose steadily in contrast to fiscal 1993, when
average day rates for a smaller vessel fleet declined. The average day rate
for the foreign-based vessel fleet for fiscal 1994, although higher than the
fiscal 1993 average day rate, did not significantly change compared with the
ending fiscal 1993 level. The fiscal 1994 increase in the average day rate for
the foreign-based vessel fleet primarily is a result of a favorable shift in
the mix of vessels working in certain foreign locations.
As the global supply of marine service vessels continues to decline,
prospects for higher average vessel day rates improve. However, given the
volatile nature of demand for offshore marine services, any sustained
improvement in vessel day rates is not assured.
56
<PAGE>
The following table compares the average number of vessels by class and
geographic distribution during the years ended March 31 and the actual March
31, 1995 vessel count:
ACTUAL
AVERAGE NUMBER OF VESSEL
VESSELS DURING YEAR COUNT AT
ENDED MARCH 31, MARCH 31,
---------------------- ---------
1993 1994 1995 1995
---- ---- ---- ---------
DOMESTIC-BASED FLEET:
Towing Supply/Supply............ 78 88 92 93
Crew/Utility.................... 42 47 49 49
Offshore Tugs................... 44 47 48 43
Other........................... 25 21 14 14
---- ---- ---- ---------
Total........................... 189 203 203 199
---- ---- ---- ---------
FOREIGN-BASED FLEET:
Towing Supply/Supply............ 200 191 175 169
Crew/Utility.................... 40 45 39 37
Offshore Tugs................... 40 49 47 48
Other........................... 64 61 57 50
---- ---- ---- ---------
Total........................... 344 346 318 304
---- ---- ---- ---------
Owned or chartered vessels
included in marine
revenues..................... 533 549 521 503
Vessels withdrawn from active
service...................... 13 15 18 21
Joint venture owned vessels..... 43 43 43 43
---- ---- ---- ---------
Total........................... 589 607 582 567
==== ==== ==== =========
WORLDWIDE FLEET:
Towing Supply/Supply............ 308 313 306 304
Crew/Utility.................... 92 99 94 92
Offshore Tugs................... 87 98 98 94
Other........................... 102 97 84 77
---- ---- ---- ---------
Total........................... 589 607 582 567
==== ==== ==== =========
The drop in average size of the foreign-based vessel fleet from 346 for
fiscal 1994 to 318 for fiscal 1995 is due to several vessels being withdrawn
from active service due to age and anticipated high repair and maintenance
costs, the transfer of vessels to the domestic-based vessel fleet and the
return of vessels to their owners that could not be operated profitably under
current market conditions. Additional vessels in the Tidewater Marine fleet
may be withdrawn in the future as they become uneconomical to operate.
57
<PAGE>
The following table compares major components of Tidewater Marine
operating costs and compares selected statistics for owned and chartered
vessels:
1993 1994 1995
----------- ----------- -----------
(IN THOUSANDS)
Crew costs........................... $ 122,244 $ 135,374 $ 127,589
Repair and maintenance............... 63,440 68,625 62,662
Vessel insurance..................... 24,969 24,918 30,551
Fuel, lube and supplies.............. 20,631 22,296 20,715
Charter fees,
mobilization/demobilization........ 8,835 8,113 6,877
Other................................ 14,910 12,094 10,260
----------- ----------- -----------
Total operating costs of owned
and chartered vessels........ 255,029 271,420 258,654
Brokered vessels' costs.............. 6,248 9,274 9,814
Shipyard costs....................... 2,116 8,242 17,082
Intercompany eliminations(A)......... (10,966) -- --
----------- ----------- -----------
$ 252,427 $ 288,936 $ 285,550
=========== =========== ===========
FOR OWNED AND CHARTERED VESSELS:
Overall percentage increase
(decrease) in operating
costs........................ 3.7% 6.4% (4.7%)
=========== =========== ===========
Operating costs as a percentage
of related revenues.......... 61.5% 60.6% 60.9%
=========== =========== ===========
- ------------
(A) Costs incurred from the charter of equipment to the discontinued Tidewater
Container Shipping segment.
Changes in fleet size and utilization are the principal factors which
cause fluctuations in the amount of crew costs. The drop in fiscal 1995 crew
costs from fiscal 1994 is primarily the result of lower activity for a smaller
worldwide fleet. Higher fiscal 1994 crew costs compared with fiscal 1993
principally are the result of the higher activity level of the domestic-based
vessel fleet, which generally has higher crewing costs than the foreign-based
vessel fleet, and the addition of 19 vessels purchased on March 15, 1993. The
absence of significant new vessel construction within the energy services
industry over the past 10 to 12 years has caused the average age of Tidewater
Marine's vessel fleet to rise. Currently the average age of the Tidewater
Marine's vessel fleet is approximately 16 years. The increase in average age
of the fleet combined with normal inflationary effects has, in turn, resulted
in higher levels of repair and maintenance costs. Though primarily dictated by
regulatory agencies, the scheduling of vessel drydockings affects the amount
of repair and maintenance expense in any year. Vessel drydockings, whenever
possible, are also done to minimize any impact on vessel revenues. Higher
fiscal 1995 insurance costs compared with the prior periods are primarily the
result of general insurance market conditions. Other vessel costs for fiscal
1993 include approximately $2.0 million of write-offs which resulted from a
comprehensive review of marine inventories and a significantly higher amount
of broker commissions.
Gains on asset sales contributed $2.9 million, $3.3 million and $12.4
million for the fiscal years ended March 31, 1993, 1994 and 1995,
respectively. Operating margins from brokered vessel activity generally
contribute nominally to Tidewater Marine operating profits.
TIDEWATER COMPRESSION SEGMENT
The Tidewater Compression segment provides natural gas compression
services and equipment for a variety of applications primarily in the energy
industry. It also designs, fabricates and installs engineered compressor
systems. Tidewater Compression operating profit primarily is determined by
operating margins from natural gas compressor operations.
58
<PAGE>
During the second half of fiscal 1995, Tidewater purchased the natural
gas compression assets of Halliburton Company for approximately $205 million
and on September 30, 1994 purchased the assets of Brazos Gas Compressing
Company, a subsidiary of Mitchell Energy & Development Corporation, for
approximately $35 million. The Halliburton Compression fleet consisted of
approximately 1,550 units aggregating approximately 237,000 horsepower. The
Brazos fleet consisted of approximately 325 units aggregating approximately
58,000 horsepower. These acquisitions have made the Tidewater Compression
segment the leader in the domestic gas compression industry and improve its
ability to service the needs of its customers.
Tidewater Compression segment revenues for the years ended March 31
consist of the following:
1993 1994 1995
--------- --------- ---------
(IN THOUSANDS)
Gas compressor rentals............... $ 26,653 $ 30,868 $ 49,235
Equipment and parts sales............ 28,662 18,385 27,920
Repair, service and other............ 6,784 6,218 6,335
--------- --------- ---------
$ 62,099 $ 55,471 $ 83,490
========= ========= =========
Gas compressor utilization is affected primarily by natural gas storage
levels and by the number and age of producing oil and gas wells which, in
turn, are dependent upon the price levels of oil and natural gas. Quality of
service, availability and rental rates for gas compression equipment also are
major factors which affect utilization. The following table compares
horsepower-based utilization, average rental rates and average fleet size for
natural gas compressors for the years ended March 31 and the actual fleet size
at March 31 of the respective years:
1993 1994 1995
----------- ----------- -----------
Utilization.......................... 78% 86% 82%
=========== =========== ===========
Average monthly rental rate.......... $ 16.49 $ 16.74 $ 17.41
=========== =========== ===========
Average fleet size in
horsepower......................... 172,711 179,725 286,352
=========== =========== ===========
Actual fleet size at March 31 in
horsepower......................... 172,750 185,036 479,740
=========== =========== ===========
For the first six months of fiscal 1995, utilization rose above the level
experienced for the corresponding fiscal 1994 period as demand for natural gas
compression services remained firm primarily due to the then favorable
long-term outlook for U.S. natural gas prices. As U.S. natural gas prices
continued to decline during the third and fourth quarters of fiscal 1995,
demand for gas compression services weakened and, in turn, utilization was
adversely affected. The integration of the Brazos and Halliburton natural gas
compressor fleets during the second half of fiscal 1995, which fleets had
historically experienced lower levels of utilization than the pre-acquisition
Tidewater natural gas compressor fleet, further reduced overall fiscal 1995
utilization. Higher fiscal 1995 average rental rates compared with fiscal 1994
primarily are attributable to the composition of equipment in the combined
fleet. Higher fiscal 1994 utilization and higher average monthly rental rates
compared with fiscal 1993 are a direct result of greater demand for natural
gas compressor services as a result of higher U.S. natural gas prices. Fiscal
1994 gas compressor rental revenues also rose as a result of a larger
compression fleet.
Fluctuations in the level of revenues generated from equipment and parts
sales over the past three fiscal years primarily are the result of changes in
the sales volume of engineered products. For fiscal 1995 the increase is also
attributable to higher parts sales in Canada.
59
<PAGE>
Operating costs of the Tidewater Compression segment for the years ended
March 31 consist of the following:
1993 1994 1995
--------- --------- ---------
(IN THOUSANDS)
Field operating expenses:
Wages and benefits.............. $ 5,672 $ 6,209 $ 8,702
Repairs and maintenance......... 5,833 6,043 8,124
Other........................... 2,635 3,109 5,165
--------- --------- ---------
14,140 15,361 21,991
Costs of sales....................... 22,143 14,977 23,895
--------- --------- ---------
$ 36,283 $ 30,338 $ 45,886
========= ========= =========
Field operating expenses as a
percentage of rental, repair,
service and other revenues......... 42% 41% 40%
========= ========= =========
Costs of sales as a percentage of
related revenues................... 77% 81% 86%
========= ========= =========
Field operating expenses relate primarily to gas compressor rental,
repair and service operations. Field operating expenses generally are
consistent from period-to-period and usually vary in the short-term due to
fluctuations in the level of repairs and maintenance expense. Long-term growth
in field operating expenses will occur primarily as a result of increased
fleet size and general inflationary factors. Higher fiscal 1995 field
operating expenses are a direct result of the substantial expansion of the
natural gas compressor fleet. Costs of sales consist primarily of wages and
benefits and material costs associated with the design, fabrication and
installation of packaged compressor systems. Fluctuations in costs of sales as
a percentage of the related revenues over the past three years generally are
due to competitive forces and the type of equipment sold.
Gains on sales of equipment over the past three years contributed $1.4
million, $1.3 million and $1.1 million for the fiscal years ended March 31,
1993, 1994 and 1995, respectively.
CURRENCY FLUCTUATIONS AND INFLATION
Because of its significant foreign operations, Tidewater is exposed to
currency fluctuations and exchange risks. To minimize the financial impact of
these items Tidewater attempts to contract a majority of its services in
United States dollars. Day-to-day operating costs generally are affected by
inflation. However, because the energy services industry requires specialized
goods and services, general economic inflationary trends may not affect
Tidewater's operating costs. The major impact on operating costs is the level
of offshore exploration and development spending by energy exploration and
production companies. As this spending increases, prices of goods and services
used by the oil and gas industry and the energy services industry will
increase. Future improvements in vessel day rates and compressor rental rates
may buffer Tidewater from the inflationary effects on operating costs.
ENVIRONMENTAL MATTERS
During the ordinary course of business Tidewater's operations are subject
to a wide variety of environmental laws and regulations. Tidewater attempts to
comply with these laws and regulations in order to avoid costly accidents and
related environmental damage. Tidewater currently is involved in litigation
with the Environmental Protection Agency (EPA) concerning the legal disposal
of oilfield wastes from drilling sites it previously operated, as well as from
the disposal of other fluids used in the marine operations.
In 1983, the United States Environmental Protection Agency (the "EPA")
notified two subsidiaries of Tidewater, Zapata Gulf Marine Operators, Inc.
("Zapata Gulf") and Gulf Fleet Supply
60
<PAGE>
Vessels, Inc. ("Gulf Fleet") that they were potentially responsible parties
("PRPs") for cleanup costs at the Western Sand and Gravel site in Rhode
Island. Zapata Gulf and Gulf Fleet are among 53 PRPs.
In August of 1989, the EPA notified a subsidiary of Tidewater, Hilliard
Oil & Gas, Inc. ("Hilliard"), that it was a PRP for cleanup costs at a
National Priorities List site. EPA later nominated Hilliard a de minimis
participant for this site, i.e. EPA determined that Hilliard's involvement in
the site was minimal, and that the toxicity and amount of substance
contributed by Hilliard was minimal in comparison to the other hazardous
substances found at the site. EPA alleges that residue from trucks
transporting Hilliard's saltwater (a non-hazardous substance) to a third party
site subsequently was washed out of the trucks' tanks at the subject site,
thus making Hilliard a PRP for cleanup of the subject site. Hilliard believes
that this is an insufficient nexus to establish liability, and has chosen to
challenge EPA on this theory.
Based on its evaluation of the potential total clean-up costs, its estimate
of its potential exposure, and the viability of other PRPs, management believes
that any costs ultimately required to be borne by Tidewater at these sites will
not have a material adverse effect on its results of operations, cash flow or
financial position.
61
<PAGE>
HORNBECK MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of the financial condition and results of
operations of Hornbeck. This discussion should be read in conjunction with the
information contained in the consolidated financial statements of Hornbeck and
the related notes included herein.
GENERAL
Hornbeck's operating revenue is directly affected by average day rates
and fleet utilization, which are closely aligned with the offshore oil and gas
exploration and development industry. The level of exploration and development
of offshore areas is affected by both short-term and long-term trends in oil
and gas prices which, in turn, are related to the demand for petroleum
products and the current availability of oil and gas resources. Although
different geographic markets were affected at different times and to varying
degrees, the level of activity in the oil and gas exploration and development
industry and, therefore, the offshore marine services industry, was depressed
in the Gulf during the middle and late 1980s. In the period from 1988 through
the first half of 1995, the Gulf of Mexico's market experienced several
periods of increased offshore activity as well as periods, both seasonal and
otherwise, where demand for offshore marine services decreased. Many industry
experts anticipate that increased natural gas demand will increase drilling
and workover activity in the Gulf. On the other hand, a reduced level of oil
and gas prices could lead to less exploration and development of offshore
areas, reduced activity for the offshore marine services industry, and an
adverse effect on Hornbeck's financial condition and results of operations. In
the North Sea, following Hornbeck's 1993 acquisition of Ravensworth, safety
standby vessel demand declined due to lower drilling activity caused by oil
price declines and certain tax law changes affecting that area. In 1995, the
industry has experienced increased drilling activity in the North Sea;
however, there is a relatively small oversupply of safety standby vessels
available for charter which is causing a weakness in that market. Recently,
advances in technology used in exploring for and developing oil and gas
reserves has increased drilling success rates and efficiency contributing to
higher offshore drilling activity levels. Oil and gas exploration and
production companies can develop reserves in a lower energy price environment
because of this improved technology which has led to lower finding costs.
Hornbeck cannot predict future demand levels for its markets.
The offshore marine services industry is cyclical, with periods of
increased demand for services resulting in higher utilization and day rates
and periods of lower demand resulting in lower utilization and day rates. An
upward or downward movement in day rates has little direct impact on operating
costs and expenses for a vessel. An increase or decrease in utilization of a
vessel will incrementally increase or decrease certain operating costs and
expenses but generally not in proportion to the associated revenue change.
Hornbeck's results of operations have not been significantly affected by
inflation during the past five years. Since Hornbeck's investment in
Ravensworth in mid-1993, it has become exposed to potential foreign exchange
gains or losses. Through September 30, 1995, Hornbeck has not recorded any
significant foreign exchange gains or losses.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided from operating activities totaled $17,584,000 for the first
nine months of 1995, compared to $17,105,000 in the same period of the prior
year. Hornbeck had cash and equivalents of $19,625,000 at September 30, 1995.
The change in operating cash flow occurred primarily as a result of an
increase in average fleet size offset significantly because of lower day rates
which resulted in lower revenues and cash receipts on a per vessel basis.
At December 31, 1994, Hornbeck had cash and equivalents of approximately
$8,572,000. For the year ended December 31, 1994, a period of downturn in the
offshore marine services business, cash provided by operating activities
totaled approximately $19,148,000, an increase of $2,919,000 versus the amount
reported for 1993.
62
<PAGE>
In connection with the Oil & Gas Vessel Acquisition, Hornbeck entered
into a loan agreement (the "Loan Agreement") with a bank (for itself and as
agent for any future lenders who may participate in the loans under the Loan
Agreement) to provide a portion of the funds for the Oil & Gas Vessel
Acquisition and a revolving credit facility. Under the Loan Agreement,
Hornbeck obtained a term loan in the amount of $20 million, payable over a
five-year period in quarterly installments of $714,284 which began March 31,
1995, with the balance due November 15, 1999. The term loan is secured by the
13 vessels acquired in the Oil & Gas Vessel Acquisition. The Loan Agreement
also provides for a revolving credit facility of up to $10 million based on a
Borrowing Base (as defined in the Loan Agreement) comprised of eligible
accounts receivable of Hornbeck and its subsidiaries. The loans bear interest
at the bank's prime rate or, at the election of Hornbeck, at LIBOR plus 1%.
If the Merger is not consummated, Hornbeck anticipates it will be able to
generate sufficient cash flow from operations to meet its debt repayment and
capital expenditure requirements and be in a position to invest a portion of
its cash flow in other acquisitions in the offshore marine services industry.
Planned growth will be funded through future cash flow and/or additional debt
or equity financing. Hornbeck believes that it possesses sufficient
unencumbered assets (recognizing that only 22 of the 56 U.S. flag vessels in
which Hornbeck has an ownership interest constitute collateral for outstanding
debt) to support future debt financing. At September 30, 1995, Hornbeck had
long-term debt totalling approximately $18 million.
Pursuant to an option agreement entered into in connection with the
Ravensworth Acquisition, Hornbeck may acquire the remaining 50.1% of
Ravensworth equity that it does not presently own between the date of this
Proxy Statement/Prospectus and March 31, 1997. The option price will bear
interest from the original acquisition date and the option prices are subject
to upward or downward adjustment based on actual Ravensworth EBDIT
performance. Performance of the North Sea Manager and of Seaboard is combined
with that of Ravensworth for purposes of making such EBDIT calculations. Based
on Ravensworth's EBDIT performance in 1994, the option price for the 9.9%
option exercised effective July 23, 1993 as part of the Ravensworth
Acquisition was adjusted downward by approximately $1,800,000, resulting in
the surrender and cancellation of approximately 106,000 shares of Hornbeck's
common stock originally issued as partial consideration for such option
exercise. Calculations based on existing 1995 EBDIT figures indicate that
there will be a reduction in the option price. Without taking into account any
performance adjustment and assuming the exercise of two equal annual options
to purchase the remaining Ravensworth equity on or before March 31, 1996 and
March 31, 1997, respectively, the total future purchase price, including
interest, would result in a payment of approximately $5.7 million in cash
together with $11.4 million of Common Stock. See "The Merger -- Conduct of
Business of Hornbeck Pending the Merger" with respect to restrictions on the
exercise of the Ravensworth Options. Pursuant to option agreements entered
into in connection with the Seaboard Acquisition and the formation of North
Sea Manager, Hornbeck may acquire the remaining 50.1% of North Sea Manager and
Seaboard that it does not presently own. In connection with the exercise of
its options to acquire the remaining outstanding capital stock of Ravensworth,
Hornbeck will be entitled to receive for no additional consideration a
corresponding amount of the remaining equity interests in North Sea Manager.
If Hornbeck has exercised its options to acquire the remainder of the capital
stock of Ravensworth, Hornbeck may exercise an option to acquire the remaining
outstanding capital stock of Seaboard for nominal consideration through June
30, 1999, and thereafter at the appraised value of the Seaboard fleet and
associated assets less the outstanding debt and a provision for contingent
liabilities of Seaboard and its subsidiaries.
Hornbeck's commitments for future capital expenditures are not material.
Hornbeck is subject to regulations which require supply vessels to be
drydocked twice in a five-year period and, therefore, each year a portion of
Hornbeck's vessels undergo routine drydocking for maintenance and repairs.
63
<PAGE>
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1995 VERSUS NINE MONTHS ENDED SEPTEMBER
30, 1994: Revenues increased by $9,600,000 or 30% from $31,731,000 in the
first nine months of 1994 to $41,331,000 in the first nine months of 1995.
Relevant fleet statistics affecting Hornbeck's revenues are as follows:
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------
1994 1995
------- -------
Average supply vessel dayrate........ $ 3,332 $ 3,108
Average fleet utilization............ 75% 80%
Number of vessels in fleet at end of
period............................. 53 61
Revenues increased due to the increased fleet utilization and the larger
number of vessels in the fleet. This increase was partially offset by the
impact of lower day rates. Direct labor and other operating expenses increased
from $16,744,000 in the first nine months of 1994 to $21,550,000 in the first
nine months of 1995, an increase of $4,806,000 or 29%. This increase is due to
the increased fleet utilization and the increased number of vessels in the
fleet in 1995. Depreciation and amortization also increased because of the
acquisition of vessels since September of 1994. Average depreciation on a per
vessel basis increased in 1995 because vessels acquired since September of
1994 cost more than the average vessel in the existing fleet. General and
administrative expenses increased $396,000 or 15% from $2,602,000 in the first
nine months of 1994 to $2,998,000 in the first nine months of 1995 primarily
because of the increase in shore-based staff to support the increased fleet
size and higher legal fees.
Hornbeck reported a gain on the sale of assets totaling $427,000 for the
first nine months of 1995 which is primarily attributable to the sale of a
vessel in June 1995 compared to a gain of $694,000 reported in the first nine
months of 1994, a decrease of $267,000. Hornbeck also reported a loss of
$335,000 representing its share of losses of certain affiliates for the nine
months ended September 30, 1995 as compared to income of $1,362,000 in the
same period of the prior year. The North Sea Group recognized losses because
of lower revenues due primarily to decreased utilization and day rates.
Interest expense increased $810,000 or 151% because of the additional
borrowings made in November 1994 in connection with the Oil & Gas Vessel
Acquisition.
Income taxes represent a lower or higher percentage of pretax income than
an expected "statutory" rate of approximately 35% due primarily to the fact
that no income tax effect is recognized for Hornbeck's equity in earnings of
foreign affiliates. Additionally, in 1995, certain property taxes paid on
vessels generate state income tax credits which lower effective state tax
rates.
YEAR ENDED DECEMBER 31, 1994 VERSUS YEAR ENDED DECEMBER 31,
1993. Revenues declined by $1,457,000 or 3% in 1994 compared to 1993. The
primary cause for this reduction was the decline in overall fleet utilization
in 1994 to 80% compared to 85% in the prior year. Relevant fleet statistics
affecting Hornbeck's revenues are as follows:
YEAR ENDED
DECEMBER 31,
------------------
1993 1994
------- -------
Average supply vessel dayrate........ $ 3,284 $ 3,272
Average fleet utilization............ 85% 80%
Number of vessels in fleet at end of
period............................. 51 63(1)
- ------------
(1) Includes 13 vessels acquired on November 15, 1994.
Although day rates averaged approximately the same in 1993 and 1994,
market conditions differed significantly. Day rates increased during 1993,
reaching approximately $4,000 per day for average supply vessel rates by the
end of 1993. Day rates declined in 1994 through the middle of the year to
approximately $3,000 per day, remained steady in much of the third quarter and
increased in
64
<PAGE>
the fourth quarter of 1994 to slightly over $3,200 on average. Utilization
declined in the first half of 1994, then increased in the second half of the
year.
Direct labor and other operating expenses increased by $2,896,000 or 14%
in 1994 compared to 1993. Most of this increase was attributable to higher
insurance premiums and insurance deductibles paid by Hornbeck in 1994.
Additionally, labor increased by 8.5% due to crewmembers' wage rate
adjustments and payroll taxes related thereto. Generally, operating costs and
expenses do not change in direct proportion to revenues.
Depreciation and amortization increased 35% because of increased
depreciation in 1994 on vessels purchased and because of a $1,630,000 increase
in amortization of deferred drydocking costs compared to 1993 due to a larger
fleet size that caused higher levels of deferred drydocking.
General and administrative expenses increased 22% because of an increased
number of shore-based employees required to support Hornbeck's increased
fleet, both domestically and overseas, and because of higher insurance,
travel, franchise tax and stockholder-related expenses associated with a
larger company.
Equity in earnings of affiliates increased due to the inclusion in 1994 of
such earnings for all of 1994 compared to inclusion in 1993 from only the July
1993 Ravensworth Acquisition date. Full-year operating income of affiliates was
actually down in 1994 compared to 1993 due to lower day rates in 1994.
Utilization and day rates averaged approximately 84% and pounds sterling 3,637,
respectively, during the period subsequent to the Ravensworth Acquisition in
1993 and 71% and pounds sterling 3,607, respectively, during calendar year 1994.
The gain on sale of assets relates to three vessels sold during the second
quarter of 1994. Interest and other income increased primarily because of higher
levels of investment and interest rates in 1994. Interest expense declined
because of debt repayments in early 1994.
YEAR ENDED DECEMBER 31, 1993 VERSUS YEAR ENDED DECEMBER 31,
1992. Revenues and expenses increased substantially in 1993 compared to 1992.
These increases are primarily the result of increases in the number of vessels
in Hornbeck's fleet due to the November 1992 Petrol Acquisition, increases in
the average supply vessel dayrate and increases in the average fleet
utilization as reflected in the following table:
YEAR ENDED
DECEMBER 31,
------------------
1992 1993
------- -------
Average supply vessel dayrate........ $ 1,995 $ 3,284
Average fleet utilization............ 80% 85%
Number of vessels in fleet at end of
period............................. 52 51
The increased day rates and utilization were caused primarily by
increased drilling activity in the Gulf of Mexico. The range of average day
rates in 1993 for Hornbeck increased from approximately $2,800 per day at the
beginning of the year to approximately $4,100 per day by the end of the year.
Revenues increased $28,856,000 or 157% from $18,435,000 in 1992 to
$47,291,000 in 1993. The significant increase was primarily attributable to
higher utilization and day rates and the increase in the average number of
vessels in Hornbeck's fleet.
Direct labor and other operating expenses increased $9,358,000 or 83% in
1993 compared to 1992 primarily because of the significantly larger number of
vessels in the fleet and higher utilization. Generally, operating costs and
expenses do not change in direct proportion to revenues.
Depreciation and amortization increased by 56% in 1993 compared to 1992
because of additional vessels purchased in late 1992 and higher drydocking
amortization.
General and administrative expenses increased 56% from $1,889,000 in 1992
to $2,938,000 in 1993 primarily because of the addition of personnel resulting
from the Petrol Acquisition in late 1992.
Net income increased $10,603,000 from net income of $62,000 ($.01 per
share) in 1992 to a net income of $10,665,000 ($.90 per share) in 1993
primarily because of the larger fleet size and the higher day rates and
utilization discussed above. The increase in net income was partially offset
by nonrecurring salvage expense of $945,000 recorded in 1993.
65
<PAGE>
MARKET PRICE INFORMATION
TIDEWATER COMMON STOCK
Tidewater Common Stock is traded on the New York Stock Exchange and the
Pacific Stock Exchange under the symbol "TDW." At December 31, 1995 there were
approximately 2,150 holders of record of Tidewater Common Stock, based on the
list of recordholders maintained by Tidewater's transfer agent. The following
table sets forth the high and low closing sale prices of the Tidewater Common
Stock as reported on the New York Stock Exchange Composite Tape and the amount
of cash dividends paid per share declared on the outstanding Tidewater Common
Stock for the periods indicated.
FISCAL YEAR ENDED MARCH 31,
HIGH LOW DIVIDEND
---- ------- --------
1994
June 30, 1993........................ $26 3/8 $21 1/8 $ --
September 30, 1993................... 23 1/4 19 .10
December 31, 1993.................... 25 3/4 19 1/2 .10
March 31, 1994....................... 23 1/8 19 1/2 .10
1995
June 30, 1994........................ $23 1/4 $19 1/4 $.10
September 30, 1994................... 24 7/8 21 1/4 .10
December 31, 1994.................... 23 3/8 18 1/4 .10
March 31, 1995....................... 20 3/8 16 3/4 .10
1996
June 30, 1995........................ $26 1/4 $19 3/4 $.10
September 30, 1995................... 29 1/2 23 1/4 .125
December 31, 1995.................... 31 5/8 24 3/4 .125
March 31, 1996 (through February 1,
1996).............................. 35 29 1/2 .125
The payment of dividends on Tidewater Common Stock and its preferred
stock are subject to limitations under Tidewater's revolving credit and term
loan agreement, although no preferred stock is currently outstanding. None of
such limitations are currently expected to restrict Tidewater's continued
payment of dividends at current levels. A further discussion of this matter is
contained in Note 7 of the Notes to Tidewater's Consolidated Financial
Statements included elsewhere herein. As a result of the timing of the fiscal
1994 Tidewater Board meetings, only three quarterly dividends were declared
during fiscal 1994 with respect to Tidewater Common Stock.
On November 17, 1995, the last trading day before the date that Tidewater
and Hornbeck publicly announced the proposed Merger, the closing sale price
for a share of Tidewater Common Stock on the New York Stock Exchange was
$28 3/4. No assurance can be given as to the Average Market Price or the
market price of Tidewater Common Stock at the Effective Time.
66
<PAGE>
HORNBECK COMMON STOCK
Hornbeck Common Stock trades in the over-the-counter market and sales are
reported on the Nasdaq National Market under the symbol "HOSS." The following
table sets forth the range of high and low closing sale prices of the Hornbeck
Common Stock as reported by the Nasdaq National Market for the periods
indicated.
HIGH LOW
---- -------
1993
March 31, 1993....................... $10 1/2 $ 6
June 30, 1993........................ 18 1/8 9 7/8
September 30, 1993................... 20 3/4 14 5/8
December 31, 1993.................... 24 3/4 12 1/2
1994
March 31, 1994....................... $18 5/8 $13 1/2
June 30, 1994........................ 17 3/8 12 7/8
September 30, 1994................... 15 7/8 11 1/2
December 31, 1994.................... 15 1/2 12 1/4
1995
March 31, 1995....................... $12 7/8 $ 8 7/8
June 30, 1995........................ 16 5/8 11 1/4
September 30, 1995................... 16 3/8 12 5/8
December 31, 1995.................... 20 1/8 13 1/2
1996
March 31, 1996 (through February 1,
1996)................................ 21 3/8 19
Hornbeck has never paid cash dividends on the Hornbeck Common Stock, and
Hornbeck's ability to pay cash dividends in the future is limited by its
current debt arrangements.
On November 17, 1995, the last trading day before the date that Tidewater
and Hornbeck publicly announced the proposed Merger, the closing sale price
for a share of Hornbeck Common Stock on the Nasdaq National Market was
$15 3/8. No assurance can be given as to the market price of Hornbeck Common
Stock at the Effective Time.
67
<PAGE>
DESCRIPTION OF TIDEWATER SECURITIES
The following description of the Tidewater Common Stock should be read
carefully by Hornbeck stockholders.
COMMON STOCK
GENERAL. Tidewater is currently authorized to issue 125,000,000 shares
of Tidewater Common Stock, $.10 par value per share. At December 31, 1995,
Tidewater had outstanding 53,337,457 shares of Tidewater Common Stock and no
shares were held in its treasury. At December 31, 1995, approximately
2,690,581 shares of Tidewater Common Stock were reserved for issuance upon
exercise of outstanding stock options under Tidewater's stock option and
restricted stock plans.
Tidewater has a dual stock certificate system which distinguishes between
U.S. citizen holders of Tidewater Common Stock and non-U.S. citizen holders of
Tidewater Common Stock. If on any date, the number of shares of Tidewater
Common Stock that is beneficially owned by non-U.S. citizens is in excess of
24%, Tidewater shall identify and designate those shares, in excess of 24% of
the outstanding shares of Tidewater Common Stock, that are owned by non-U.S.
citizens (the "Excess Shares"). The Excess Shares shall not be accorded any
voting rights and shall not be deemed outstanding for purposes of determining
the vote required on any matter properly brought before the Tidewater
stockholders for a vote thereon. Tidewater shall (as long as such excess
exists) withhold the payment of dividends and the sharing in any other
distribution (upon liquidation or otherwise) with respect to the Excess
Shares. Only at such time as the non-U.S. citizen beneficial ownership returns
to a percentage below 24% shall full voting rights be restored to those Excess
Shares and any dividend or distribution with respect thereto that has been
withheld shall be due and paid. In addition, Tidewater has the power, but not
the obligation, to redeem the Excess Shares, subject to certain terms and
conditions contained in its Certificate of Incorporation.
DIVIDEND RIGHTS. Subject to the restrictions contained in the
Certificate of Incorporation, the holders of Tidewater Common Stock are
entitled to receive, when and as declared by the Tidewater Board, out of the
assets of Tidewater which are by law available therefor, dividends payable
either in cash, in property, or in shares of stock, provided that no dividends
other than dividends payable only in shares of Tidewater Common Stock shall be
paid on the Tidewater Common Stock if cash dividends accrued on any shares of
preferred stock shall not have been fully paid or declared and set apart for
payment.
VOTING RIGHTS. Subject to the restrictions contained in Tidewater's
Certificate of Incorporation, at every meeting of the stockholders, every
holder of Tidewater Common Stock shall be entitled to one vote, in person or
by proxy, for each share of Tidewater Common Stock standing in his name on the
books of the corporation. Holders of shares of Tidewater Common Stock have
noncumulative voting rights, which means that the holders of more than 50% of
the shares voting for the election of directors can elect 100% of the
directors, and, in such event, the holders of the remaining shares voting for
the election of directors will not be able to elect any directors. In
addition, the vote of 80% of the outstanding shares of Tidewater Common Stock
entitled to vote on the following matters is required to authorize (i) the
adoption of any agreement for the merger or consolidation of Tidewater with or
into any other corporation, and (ii) the sale or lease of all or a substantial
part of the assets of Tidewater to, or any sale or lease to Tidewater or any
subsidiary of Tidewater or any subsidiary thereof, in exchange for securities
of Tidewater, of any assets (except assets having an aggregate fair market
value of less than $5,000,000) of any other corporation, person or entity
(either of such events, a "change in control") if in either case such
corporation, person or entity is the beneficial owner, directly or indirectly,
of more than 10% of the outstanding shares of Tidewater Common Stock entitled
to vote in the election of directors. Such affirmative vote or consent is in
addition to any vote or consent of the holders of Tidewater Common Stock that
is otherwise required by law or by agreement between Tidewater and any
national securities exchange.
68
<PAGE>
RIGHTS UPON LIQUIDATION. In the event of any dissolution, liquidation or
winding up of the affairs of Tidewater, either voluntarily or involuntarily, the
holders of the Tidewater Common Stock shall be entitled, after payment or
provision for payment of the debts and other liabilities of Tidewater and the
amounts to which the holders of any preferred stock shall be entitled, to share
ratably in the remaining assets of Tidewater. Neither the merger nor
consolidation of Tidewater, nor the sale, lease or conveyance of all or part of
its assets, shall be deemed to be a liquidation, dissolution or winding up of
the affairs of Tidewater.
MISCELLANEOUS. The issued and outstanding shares of Tidewater Common
Stock are fully paid and nonassessable. Holders of the shares of Tidewater
Common Stock are not entitled to preemptive rights. Shares of Tidewater Common
Stock are not convertible into the shares of any other class of capital stock.
TIDEWATER RIGHTS. Tidewater has adopted the Tidewater Stockholder Rights
Plan which is intended to protect stockholders in the event of unsolicited
offers or attempts to acquire Tidewater, including offers that do not treat
all stockholders equally, acquisitions in the open market of shares
constituting control without offering fair value to all stockholders and other
coercive or unfair takeover tactics that could impair the Tidewater Board's
ability to represent stockholders' interests fully. Pursuant to the Tidewater
Stockholder Rights Plan, the Tidewater Board declared a dividend distribution
of one Tidewater Right for each outstanding share of Tidewater Common Stock to
stockholders of record at the close of business on May 7, 1990, and authorized
the issuance of one Tidewater Right (as adjusted pursuant to the Tidewater
Stockholder Rights Plan) for each share of Tidewater Common Stock issued
between the Record Date and the Distribution Date (as defined below). Each
Tidewater Right entitles the registered holder to purchase from Tidewater one
two-hundredths of a share of Tidewater's Series A Participating Preferred
Stock at a price of $50, subject to adjustment (the "Purchase Price"). The
Rights are exercisable, and separate from the Tidewater Common Stock, only if
(i) a person acquires beneficial ownership of 16% or more of the outstanding
shares of Tidewater Common Stock (an "Acquiring Person"), or (ii) a person
commences a tender or exchange offer that, upon its consummation, would result
in such person beneficially owning 16% or more of the outstanding shares of
Tidewater Common Stock (the date of the occurrence of either of the foregoing
events will be termed the "Distribution Date"). Under certain circumstances
Tidewater may substitute an equivalent value of other securities of Tidewater,
property, cash, or any combination thereof in lieu of the Series A
Participating Preferred Stock. The Rights expire on May 1, 2000.
If any person becomes the beneficial owner of 16% or more of the
outstanding shares of Tidewater Common Stock, except pursuant to an offer for
all outstanding shares of Tidewater Common Stock that is deemed by the
Tidewater Board to be fair and otherwise in the best interests of Tidewater
and its stockholders, then each Right not owned by the Acquiring Person (or
certain of its transferees) will enable the holder to purchase, at the then
current Purchase Price of the Right, Tidewater Common Stock (or, in certain
circumstances, a combination of Tidewater Common Stock, other securities, cash
or other property) having a calculated value of twice the Purchase Price of
the Right. In addition, if, after someone becomes an Acquiring Person,
Tidewater is acquired in a merger or other business combination transaction or
more than 50% of its assets, cash flow or earning power is sold, each Right will
entitle its holder to purchase, at the then current Purchase Price of the Right,
common stock of the acquiring company having a calculated value of twice the
applicable Purchase Price. The events referred to in this paragraph are
hereinafter referred to as "Triggering Events."
The Tidewater Board may redeem the Rights at $.01 per Right at any time
before the tenth day following a public announcement that a 16% position has
been acquired. This right of redemption will be reinstated if, before the
occurrence of a Triggering Event, an Acquiring Person reduces its beneficial
ownership to less than 10% of the outstanding Tidewater Common Stock (other
than in a transaction with Tidewater) and there are no other Acquiring
Persons.
The terms of the Rights, other than the principal economic terms, may be
amended by the Tidewater Board in any manner before the Rights are
distributed. Before such time the Tidewater
69
<PAGE>
Board may also amend the terms and conditions of the Series A Participating
Preferred Stock or change the series or class of preferred stock which shall
constitute the preferred stock for purposes of the Tidewater Stockholder
Rights Plan. Thereafter, the Tidewater Stockholder Rights Plan may be amended
by the Tidewater Board in order to cure any ambiguity, to make changes that do
not adversely affect the interests of holders of Rights, or to shorten or
lengthen any time period under the Tidewater Stockholder Rights Plan;
provided, however, that no amendment to adjust the time period governing
redemption shall be made at such time as the Rights are not redeemable.
PREFERRED STOCK
Tidewater is authorized to issue 3,000,000 shares of preferred stock, no
par value. Tidewater has no preferred stock outstanding at present, but has
designated and reserved 200,000 shares of Series A Participating Preferred
Stock to cover its obligations under the Tidewater Stockholder Rights Plan.
See "Description of Tidewater Securities -- Common Stock."
The Tidewater Board is authorized to fix for each class or series of
preferred stock issued such voting powers, full or limited, or no voting
powers, and such distinctive designations, preferences and relative,
participating, optional or other special rights and such qualifications,
limitations or restrictions thereof, as shall be stated and expressed in the
resolution or resolutions adopted by the Tidewater Board providing for the
issuance of such class or series and as may be permitted by the DGCL,
including, without limitation, the authority to provide that any such class or
series may be (i) subject to redemption at such time or times and at such
price or prices; (ii) entitled to receive dividends (which may be cumulative
or non-cumulative) at such rates, on such conditions, and at such times, and
payable in preference to, or in such relation to, the dividends payable on any
other class or classes or any other series; (iii) entitled to such rights upon
the dissolution of, or upon any distribution of the assets of, Tidewater; or
(iv) convertible into, or exchangeable for, shares of any other class or
classes of stock, or of any other series of the same or any other class or
classes of stock, of Tidewater at such price or prices or at such rates or
exchanges and with such adjustments; all as may be stated in such resolution
or resolutions issuing the class or series of preferred stock.
70
<PAGE>
MANAGEMENT OF TIDEWATER
BOARD OF DIRECTORS
The current members of Tidewater's Board of Directors are as follows:
<TABLE>
<CAPTION>
DIRECTOR TERM
DIRECTOR'S NAME AGE PRINCIPAL OCCUPATION OR EMPLOYMENT SINCE EXPIRES
- --------------- --- ---------------------------------- --------- --------
<S> <C> <C> <C> <C>
Robert H. Boh........................ 65 Chairman and Former President and Chief 1978 1996
Executive Officer of Boh Bros.
Construction Co. (general construction
contractor); Chairman of Hibernia
Corporation and Hibernia National Bank,
and Director of BellSouth
Telecommunications, Inc.
Donald T. Bollinger.................. 46 Chairman of Bollinger Machine Shop & 1990 1996
Shipyard, Inc. since 1989 and its Chief
Executive Officer since 1985; Director
of Premier Bancorp, Inc. and Premier
Bank N.A. -- South Louisiana
Arthur R. Carlson.................... 55 Managing Director, Trust Company of the 1982 1997
West (investment advisor) since 1982
Hugh J. Kelly........................ 70 Oil and gas consultant since 1989; 1990 1996
former Chief Executive Officer of Ocean
Drilling and Exploration Company,
1977-1989; Director of Hibernia
Corporation, Chieftain International,
Inc. and Central Louisiana Electric Co.
John P. Laborde...................... 72 Former Chairman, President and Chief 1956 1997
Executive Officer of Tidewater from 1956
to 1994; Director of Stolt Comex Seaway,
S.A., Stone Energy Corporation, American
Bureau of Shipping, and Stewart
Enterprises, Inc.
Paul W. Murrill...................... 61 Professional Engineer; Chairman of 1981 1998
Piccadilly Cafeterias since 1994. Served
as Special Advisor to the Chairman of
the Board of Gulf States Utilities Co.
(public utility), 1987-1989, its
Chairman 1982-1987, and its Chief
Executive Officer, 1982-1986; Director
of Entergy Corporation, Howell
Corporation, Piccadilly Cafeterias,
Inc., ZYGO Corp., First Mississippi
Corporation, and FirstMiss Gold Inc.
71
<PAGE>
DIRECTOR TERM
DIRECTOR'S NAME AGE PRINCIPAL OCCUPATION OR EMPLOYMENT SINCE EXPIRES
- --------------- --- ---------------------------------- --------- --------
William C. O'Malley.................. 58 Chairman, President and Chief Executive 1994 1997
Officer of Tidewater since 1994; prior
thereto, served as Chairman of the Board
and Chief Executive Officer of Sonat
Offshore Drilling, Inc.; Director of
American Oilfield Divers, Inc. and
Hibernia Corporation
Lester Pollack....................... 62 Senior Managing Director of Corporate 1992 1998
Advisors, L.P. since 1988, Managing
Director of Lazard Freres & Co., LLC
since 1995 (prior thereto a general
partner) and Chief Executive Officer of
Centre Partners, L.P. since 1986;
Director of Continental Cablevision,
Inc., Kaufman & Broad Home Corporation,
La Salle Re Limited, Parlex Corporation,
Polaroid Corporation, Sphere Drake
Holdings, Ltd., and SunAmerica, Inc.
J. Hugh Roff, Jr..................... 64 Chairman of the Board of PetroUnited 1986 1998
Terminals, Inc. (petrochemical
terminals) since 1986; Director of Texas
Commerce Bank, N.A.
EXECUTIVE OFFICERS
In addition to Mr. O'Malley, who is also on the Board of Directors, the
executive officers of Tidewater are as follows:
NAME AGE POSITION
---- --- --------
Richard M. Currence.................. 57 Executive Vice President since 1992. Senior Vice
President from 1986 to 1992. Employed 1966 with a
break in service from 1973 to 1985.
Ken C. Tamblyn....................... 52 Executive Vice President since 1992. Senior Vice
President from 1986 to 1992. Employed 1986.
Cliffe F. Laborde.................... 44 Senior Vice President and General Counsel since
1992. Employed 1992. Shareholder in Gelpi, Sullivan,
Carroll & Laborde, a professional law corporation,
from 1979 to 1992.
Stephen A. Snider.................... 48 Senior Vice President since 1991. Employed 1975 with
a break in service from 1983 to 1991 during which
Mr. Snider owned and operated Learning Associates,
Inc.
</TABLE>
72
<PAGE>
There are no family relationships between the directors of Tidewater.
Tidewater's officers are elected annually by the Tidewater Board and serve for
one-year terms or until their successors are elected.
COMPARATIVE RIGHTS OF STOCKHOLDERS
If the Merger is consummated, all holders of Hornbeck Common Stock will
become holders of Tidewater Common Stock. The rights of the stockholders of
both Tidewater and Hornbeck are governed by and subject to the provisions of
the Delaware General Corporation Law ("DGCL"); however, the rights of holders
of Hornbeck Common Stock and holders of Tidewater Common Stock following the
Merger will be governed by the Certificate of Incorporation and Bylaws of
Tidewater, rather than the provisions of the Certificate of Incorporation and
Bylaws of Hornbeck. The following is a brief summary of certain differences
between the rights of stockholders of Tidewater and the rights of stockholders
of Hornbeck and is qualified in its entirety by reference to the relevant
provisions of (i) the DGCL, (ii) the Restated Certificate of Incorporation of
Tidewater, as amended (the "Tidewater Certificate"), (iii) the Bylaws of
Tidewater (the "Tidewater Bylaws"), (iv) the Restated Certificate of
Incorporation of Hornbeck, as amended (the "Hornbeck Certificate"), and (v)
the Restated Bylaws of Hornbeck (the "Hornbeck Bylaws").
APPROVAL OF EXTRAORDINARY TRANSACTIONS
The Tidewater Certificate requires the affirmative vote or consent of the
holders of 80% of all classes of stock of Tidewater entitled to vote in the
election of directors, voting as one class, to authorize (i) the adoption of
any agreement for the merger or consolidation of Tidewater with or into any
other corporation, and (ii) any sale or lease of all or any substantial part
of the assets of Tidewater to, or any sale or lease to Tidewater or any
subsidiary of Tidewater or any subsidiary thereof, in exchange for securities
of Tidewater, of any assets (except assets having an aggregate fair market
value of less than $5,000,000) of any other corporation, person or entity
(either of such events, a "change in control") if in either case such
corporation, person or entity is the beneficial owner, directly or indirectly,
of more than 10% of the outstanding shares of stock of Tidewater entitled to
vote in the election of directors. Such affirmative vote or consent is in
addition to any vote or consent of the holders of the stock of Tidewater that
is otherwise required by law or by agreement between Tidewater and any
national securities exchange.
Tidewater has a sufficient number of unissued shares available to, and it
therefore may, within the limits imposed by applicable law and the rules of
any applicable stock exchange, issue sufficient shares of Tidewater Common
Stock to a holder so that such holder, together with the shares already held
by such holder, would have the number of shares of Tidewater's capital stock
required to prevent an acquirer from receiving the requisite supermajority
vote to effect a change in control.
The foregoing supermajority provisions are not applicable to (i) any
change in control if the Tidewater Board has approved a memorandum of
understanding with the acquiring corporation, person or entity with respect to
the change in control before such corporation, person or entity becomes a
holder of more than 10% of the outstanding shares of stock entitled to vote in
elections of directors or (ii) any merger or consolidation of Tidewater with,
or any sale or lease to Tidewater or any subsidiary thereof of any of the
assets of, any corporation of which a majority of the outstanding shares of
all classes of stock entitled to vote in the election of directors is owned of
record or beneficially by Tidewater and its subsidiaries. The foregoing
provisions of the Tidewater Certificate may not be amended or repealed without
the affirmative vote or consent of the holders of 80% of all classes of
capital stock entitled to vote in the election of directors voting as one
class.
The Hornbeck Certificate provides that the affirmative vote of the
holders of not less than 66 2/3% of the issued and outstanding shares of
Hornbeck Common Stock, voting as a single class, is required for stockholder
approval of (i) the merger of Hornbeck into, or with, one or more other
corporations; and (ii) the liquidation of Hornbeck.
73
<PAGE>
VACANCIES ON THE BOARD OF DIRECTORS
The Tidewater Bylaws provide that any vacancy on the Tidewater Board that
results from an increase in the number of directors may be filled by a
majority of the Tidewater Board then in office, provided that a quorum is
present. Any other vacancy occurring in the Tidewater Board may be filled by a
majority of the directors then in office, even if less than a quorum, or by a
sole remaining director.
The Hornbeck Bylaws provide that any vacancy occurring in the Hornbeck
Board that results from an increase in the number of directors may be filled
by a majority of the directors then in office, although less than a quorum, or
by a sole remaining director. Any vacancy occurring when one or more directors
resign from the Hornbeck Board may be filled by a majority of the directors
then in office, including directors whose resignation will take effect
subsequent to the meeting in which any vacancies are filled.
OTHER PROVISIONS WITH POSSIBLE ANTI-TAKEOVER EFFECTS
UNISSUED STOCK. The Tidewater Board is authorized, without action of its
stockholders, to issue authorized but unissued common and preferred stock; see
"-- Approval of Extraordinary Transactions" above. The existence of
undesignated preferred stock and authorized but unissued common stock enables
the Tidewater Board to make more difficult or to discourage an attempt to
obtain control of Tidewater by means of a merger, tender offer, proxy contest
or otherwise, and thereby to protect the continuity of Tidewater's management.
If, in the due exercise of its fiduciary obligations, the Tidewater Board were
to determine that a takeover proposal was not in Tidewater's best interest,
such shares could be issued by the Tidewater Board without stockholder
approval in one or more transactions that might prevent or make more difficult
or costly the completion of the takeover transaction by diluting the voting or
other rights of the proposed acquirer or insurgent stockholder group, by
creating a substantial voting block in institutional or other hands that might
undertake to support the position of the incumbent Tidewater Board, by
effecting an acquisition that might complicate or preclude the takeover, or
otherwise. With respect to undesignated preferred stock, the Tidewater
Certificate grants the Tidewater Board broad power to establish the rights and
preferences of the authorized and unissued preferred stock, one or more series
of which could be issued (i) entitling holders to vote separately as a class
on any proposed merger or consolidation; (ii) to elect directors having terms
of office or voting rights greater than those of other directors; (iii) to
convert preferred stock into a greater number of shares of Tidewater Common
Stock or other security; (iv) to demand redemption at a specified price under
prescribed circumstances related to a change of control; or (v) to exercise
other rights designed to impede a takeover. The terms of any such preferred
stock would be subject to certain limitations imposed by the New York Stock
Exchange. The issuance of shares of preferred stock pursuant to the authority
of the Tidewater Board described above may adversely affect the rights of the
holders of Tidewater Common Stock.
PREFERRED STOCK PURCHASE RIGHTS. As discussed above under "Description
of Tidewater Securities," Tidewater has issued Rights entitling the registered
holder to purchase shares of Series A Participating Preferred Stock. The
Rights will cause substantial dilution to a person or group that attempts to
acquire Tidewater without conditioning the offer on a substantial number of
Rights being redeemed. The Rights should not interfere with any merger or
other business combination approved by the Tidewater Board since the Tidewater
Board may, at its option, redeem the Rights for a redemption price of $.01 per
Right or amend the Tidewater Stockholder Rights Plan at any time before the
tenth day following a public announcement that an Acquiring Person has
acquired beneficial ownership of 16% or more of the Tidewater Common Stock.
CLASSIFIED BOARD OF DIRECTORS. The Tidewater Bylaws provide that
directors are elected for three-year terms, with approximately one-third of
the Tidewater Board standing for election each year. The Tidewater Bylaws
further provide that for the Tidewater stockholders to alter or repeal this
Bylaw the affirmative vote of the holders of not less than 80% of the votes
entitled to be cast by the holders of all stock entitled to vote in the
election of directors is required. In addition, Tidewater directors may
74
<PAGE>
only be removed for cause. The Hornbeck Certificate and the Hornbeck Bylaws do
not provide for staggered terms of directors. Directors of Hornbeck may be
removed by its stockholders with or without cause.
RESTRICTIONS ON TAKING STOCKHOLDER ACTION. The Tidewater Bylaws provide
that a stockholder must notify Tidewater in advance of such holder's intent to
bring up items of business or nominate directors at any annual meeting of
stockholders. Under these provisions, a stockholder's notice must generally be
received by Tidewater not less than 75 days nor more than 100 days before the
anniversary date of the immediately preceding annual meeting of stockholders
of Tidewater. As permitted by the DGCL, the Tidewater Bylaws also eliminate
the ability of stockholders to call a special meeting of stockholders. In
addition, the Tidewater Certificate provides that any action required or
permitted to be taken by stockholders of Tidewater must be effected at a duly
called annual or special meeting of such stockholders and may not be effected
by any consent in writing by such stockholders.
Hornbeck's charter documents do not limit the ability of stockholders to
submit items of business at annual meetings of stockholders or to act by
written consent as permitted by the DGCL. In addition, a special meeting of
Hornbeck stockholders may be called by the holders of not less than one
quarter of the stock entitled to vote at such meeting.
RESTRICTIONS ON TRANSFER
The Tidewater Certificate and the Hornbeck Certificate each contain
similar provisions restricting the ownership of the common stock of each
company by persons who are not citizens of the United States. Aside from such
restrictions on foreign-owned shares, neither the Tidewater Certificate nor
Tidewater Bylaws contain any other restrictions on transfer of the Tidewater
Common Stock.
LEGAL MATTERS
Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P., New
Orleans, Louisiana has rendered an opinion that the shares of Tidewater Common
Stock to be issued in connection with the Merger have been duly authorized
and, if and when issued pursuant to the terms of the Merger Agreement, will be
validly issued, fully paid and non-assessable.
EXPERTS
The consolidated financial statements and schedule of Tidewater and
subsidiaries as of March 31, 1994 and 1995, and for each of the years in the
three-year period ended March 31, 1995 have been included herein and in the
registration statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing. The report
of KPMG Peat Marwick LLP covering the March 31, 1995 consolidated financial
statements refers to a change in the method of accounting for postretirement
benefits other than pensions in fiscal year 1993.
With respect to the unaudited interim financial information of Tidewater
Inc. and subsidiaries for the periods ended June 30, 1994 and 1995 and
September 30, 1994 and 1995, included or incorporated by reference herein, the
independent certified public accountants have reported that they applied
limited procedures in accordance with professional standards for a review of
such information. However, their separate reports included in the June 30,
1995 Form 10-Q and the September 30, 1995 Form 10-Q, and incorporated by
reference herein, state that they did not audit and they do not express an
opinion on that interim financial information. Accordingly, the degree of
reliance on their reports on such information should be restricted in light of
the limited nature of the review procedures applied. The accountants are not
subject to the liability provisions of Section 11 of the Securities Act of
1933 for their reports on the unaudited interim financial information because
those reports are not a "report" or a "part" of the registration statement
prepared or certified by the accountants within the meaning of Sections 7 and
11 of the Securities Act.
75
<PAGE>
The consolidated financial statements of Hornbeck and subsidiaries as of
December 31, 1993 and 1994 and for each of the three years in the period ended
December 31, 1994 included in this Proxy Statement/Prospectus have been so
included in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
OTHER MATTERS
The Hornbeck Board knows of no business, other than that described above,
that will be presented at the Special Meeting but if any other matters
properly arise before the Special Meeting, the persons named in the enclosed
proxies will vote the proxies in accordance with their best judgment.
76
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
----
CONSOLIDATED FINANCIAL STATEMENTS OF
I. TIDEWATER
Independent Auditor's Report......... F-2
Consolidated Balance Sheets at March
31, 1994 and 1995 and
September 30, 1995 (unaudited)....... F-3
Consolidated Statements of Earnings
for the Years Ended March 31, 1993,
1994 and 1995 and the Six Months
Ended September 30, 1994 and 1995
(unaudited).......................... F-4
Consolidated Statements of
Stockholders' Equity for the Years
Ended March 31, 1993, 1994 and 1995
and the Six Months Ended September
30, 1995 (unaudited)................. F-5
Consolidated Statements of Cash Flows
for the Years Ended March 31, 1993,
1994 and 1995 and the Six Months
Ended September 30, 1994 and 1995
(unaudited).......................... F-6
Notes to Consolidated Financial
Statements........................... F-7
Financial Statement Schedule......... F-21
CONSOLIDATED FINANCIAL STATEMENTS OF
II. HORNBECK
Report of Independent Accountants.... F-22
Consolidated Balance Sheet at
December 31, 1993 and 1994 and
September 30, 1995 (unaudited)....... F-23
Consolidated Statement of Income for
the Years Ended December 31, 1992,
1993 and 1994 and the Nine Months
Ended September 30, 1994 and 1995
(unaudited).......................... F-24
Consolidated Statement of Cash Flows
for the Years Ended December 31,
1992, 1993 and 1994 and the Nine
Months Ended September 30, 1994 and
1995 (unaudited)..................... F-25
Consolidated Statement of
Stockholders' Equity for the Years
Ended December 31, 1992, 1993 and
1994 and the Nine Months Ended
September 30, 1995 (unaudited)....... F-26
Notes to Consolidated Financial
Statements (includes unaudited
September 30, 1994 and 1995
information)......................... F-27
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Shareholders of Tidewater Inc.:
We have audited the accompanying consolidated financial statements of
Tidewater Inc. and subsidiaries as listed in the accompanying index. In
connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedule as listed in the accompanying
index. These consolidated financial statements and financial statement
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Tidewater
Inc. and subsidiaries as of March 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the years in the three-year period
ended March 31, 1995, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule,
when considered in relation to the basic consolidated financial statements
taken as a whole, present fairly, in all material respects, the information
set forth therein.
As discussed in Note 1 to the consolidated financial statements, the
Company changed its method of accounting for postretirement benefits other
than pensions in fiscal 1993.
KPMG PEAT MARWICK LLP
New Orleans, Louisiana
May 1, 1995
F-2
<PAGE>
TIDEWATER INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
MARCH 31, SEPTEMBER 30,
-------------------------- -------------
1994 1995 1995
------------ ------------ -------------
(UNAUDITED)
ASSETS
Current assets:
Cash, including temporary cash
investments..................... $ 106,788 $ 14,702 $ 13,761
Trade and other receivables, less
allowance for doubtful accounts
of $6,744, $9,611 and $9,999,
respectively.................... 140,627 145,805 140,295
Inventories........................ 34,561 36,311 34,957
Other current assets............... 4,440 4,355 5,805
------------ ------------ -------------
Total current assets......... 286,416 201,173 194,818
------------ ------------ -------------
Investments in, at equity, and
advances to unconsolidated
companies.......................... 21,843 21,527 23,323
Properties and equipment:
Marine equipment................... 1,122,617 1,092,955 1,088,640
Compression equipment.............. 122,314 326,300 322,776
Other.............................. 41,314 44,941 40,270
------------ ------------ -------------
1,286,245 1,464,196 1,451,686
Less accumulated depreciation...... 838,067 858,297 874,279
------------ ------------ -------------
Net properties and
equipment................. 448,178 605,899 577,407
Other assets......................... 53,449 73,586 77,095
------------ ------------ -------------
$ 809,886 $ 902,185 $ 872,643
============ ============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Convertible subordinated debentures
redeemed on
April 18, 1994.................. $ 47,526 $ -- $ --
Current maturities of long-term
debt............................ -- 12,000 --
Accounts payable and accrued
expenses........................ 64,777 68,376 59,095
Accrued property and liability
losses.......................... 7,757 11,533 13,792
Income taxes....................... 10,230 9,571 11,716
------------ ------------ -------------
Total current liabilities.... 130,290 101,480 84,603
------------ ------------ -------------
Deferred income taxes................ 45,099 49,510 55,642
Long-term debt....................... -- 100,000 48,000
Accrued property and liability
losses............................. 36,163 28,921 35,636
Other liabilities and deferred
credits............................ 41,373 42,056 41,892
Stockholders' equity:
Common stock, par value $.10,
issued 53,022,955, 53,237,839
and 53,328,243 shares,
respectively.................... 5,302 5,324 5,333
Additional paid-in capital......... 331,690 334,809 335,534
Retained earnings.................. 231,001 252,374 278,128
------------ ------------ -------------
567,993 592,507 618,995
Less:
Cumulative foreign currency
translation adjustment.......... 11,032 10,745 10,691
Deferred compensation -- restricted
stock........................... -- 1,544 1,434
------------ ------------ -------------
Total stockholders' equity... 556,961 580,218 606,870
Commitments and other matters
------------ ------------ -------------
$ 809,886 $ 902,185 $ 872,643
============ ============ =============
See accompanying Notes to Consolidated Financial Statements.
F-3
<PAGE>
TIDEWATER INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
------------------------------------------- ----------------------------
1993 1994 1995 1994 1995
------------- ------------- ------------- ------------- -------------
(UNAUDITED)
Revenues:
<S> <C> <C> <C> <C> <C>
Marine operations............... $ 413,439 $ 466,601 $ 455,284 $ 234,066 $ 232,120
Compression operations.......... 62,099 55,471 83,490 30,512 55,073
------------- ------------- ------------- ------------- -------------
475,538 522,072 538,774 264,578 287,193
------------- ------------- ------------- ------------- -------------
Costs and expenses:
Marine operations............... 252,427 288,936 285,550 144,376 142,805
Compression operations.......... 36,283 30,338 45,886 17,509 28,777
Depreciation.................... 80,317 83,652 86,598 40,775 36,725
General and administrative...... 58,479 63,096 60,343 29,982 26,728
------------- ------------- ------------- ------------- -------------
427,506 466,022 478,377 232,642 235,035
------------- ------------- ------------- ------------- -------------
48,032 56,050 60,397 31,936 52,158
Other income (expenses):
Foreign exchange loss........... (1,788) (557) (506) (516) (157)
Gain on sales of assets......... 3,408 4,579 13,471 4,471 4,127
Equity in net earnings of
unconsolidated companies...... 2,525 2,686 3,147 1,944 3,040
Minority interests.............. (2,544) (2,022) (1,488) (692) (765)
Interest and miscellaneous
income........................ 6,636 6,109 5,481 4,253 1,289
Other expense................... (3,771) (1,253) (8,350) -- --
Interest expense................ (12,323) (7,939) (4,744) (648) (3,363)
------------- ------------- ------------- ------------- -------------
(7,857) 1,603 7,011 8,812 4,171
------------- ------------- ------------- ------------- -------------
Earnings from continuing operations
before income taxes................ 40,175 57,653 67,408 40,748 56,329
Income taxes......................... 12,366 21,523 24,780 14,980 18,588
------------- ------------- ------------- ------------- -------------
Earnings from continuing
operations......................... 27,809 36,130 42,628 25,768 37,741
Discontinued operations.............. 3,099 -- -- -- --
------------- ------------- ------------- ------------- -------------
Earnings before extraordinary item
and cumulative effect of accounting
change............................. 30,908 36,130 42,628 25,768 37,741
Extraordinary loss on early debt
retirement......................... -- (11,970) -- -- --
Cumulative effect of accounting
change............................. (6,640) -- -- -- --
------------- ------------- ------------- ------------- -------------
Net earnings......................... $ 24,268 $ 24,160 $ 42,628 $ 25,768 $ 37,741
============= ============= ============= ============= =============
Primary and fully-diluted earnings
per common share:
Continuing operations........... $ .53 $ .67 $ .80 $ .48 $ .70
Discontinued operations......... .06 -- -- -- --
------------- ------------- ------------- ------------- -------------
Earnings before extraordinary
item and cumulative effect of
accounting change............. .59 .67 .80 .48 .70
Extraordinary loss on early debt
retirement.................... -- (.22) -- -- --
Cumulative effect of accounting
change........................ (.13) -- -- -- --
------------- ------------- ------------- ------------- -------------
Net earnings.................... $ .46 $ .45 $ .80 $ .48 $ .70
============= ============= ============= ============= =============
Weighted average common shares and
equivalents........................ 53,073,573 53,317,501 53,406,014 53,404,653 53,676,201
============= ============= ============= ============= =============
Cash dividends declared per common
share.............................. $ .325 $ .30 $ .40 $ .20 $ .225
============= ============= ============= ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
TIDEWATER INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN DEFERRED
ADDITIONAL CURRENCY COMPENSATION-
COMMON PAID-IN RETAINED TRANSLATION RESTRICTED TREASURY
STOCK CAPITAL EARNINGS ADJUSTMENT STOCK STOCK
------- ----------- --------- ----------- -------------- ---------
1993
<S> <C> <C> <C> <C> <C> <C>
Amount at March 31, 1992............. $5,293 $ 332,597 $215,604 $ (10,478) $-- $ (6,692)
Net earnings......................... -- -- 24,268 -- -- --
Treasury stock additions............. -- -- -- -- -- (5,087)
Exercise of stock options and
issuance of restricted stock....... 57 7,440 -- -- -- --
Cash dividends declared.............. -- -- (17,142 ) -- -- --
Other................................ -- 1,513 -- (634) -- 935
------- ----------- --------- ----------- -------------- ---------
Amount at March 31, 1993............. 5,350 341,550 222,730 (11,112) -- (10,844)
------- ----------- --------- ----------- -------------- ---------
1994
Net earnings......................... -- -- 24,160 -- -- --
Treasury stock changes............... (63 ) (10,781) -- -- -- 10,844
Exercise of stock options............ 15 1,195 -- -- -- --
Cash dividends declared.............. -- -- (15,889 ) -- -- --
Other................................ -- (274) -- 80 -- --
------- ----------- --------- ----------- -------------- ---------
Amount at March 31, 1994............. 5,302 331,690 231,001 (11,032) -- --
------- ----------- --------- ----------- -------------- ---------
1995
Net earnings......................... -- -- 42,628 -- -- --
Exercise of stock options............ 11 732 -- -- -- --
Issuance of restricted stock......... 7 1,629 -- -- (1,636) --
Cash dividends declared.............. -- -- (21,255 ) -- -- --
Other................................ 4 758 -- 287 92 --
------- ----------- --------- ----------- -------------- ---------
Amount at March 31, 1995............. 5,324 334,809 252,374 (10,745) (1,544) --
------- ----------- --------- ----------- -------------- ---------
SIX MONTHS ENDED SEPTEMBER 30, 1995
(UNAUDITED)
Net earnings......................... -- -- 37,741 -- -- --
Exercise of stock options............ 9 961 -- -- -- --
Cash dividends declared.............. -- -- (11,987 ) -- -- --
Other................................ -- (236) -- 54 110 --
------- ----------- --------- ----------- -------------- ---------
Amount at September 30, 1995......... $5,333 $ 335,534 $278,128 $ (10,691) $ (1,434) $ --
======= =========== ========= =========== ============== =========
</TABLE>
TOTAL
---------
1993
Amount at March 31, 1992............. $ 536,324
Net earnings......................... 24,268
Treasury stock additions............. (5,087)
Exercise of stock options and
issuance of restricted stock....... 7,497
Cash dividends declared.............. (17,142)
Other................................ 1,814
---------
Amount at March 31, 1993............. 547,674
---------
1994
Net earnings......................... 24,160
Treasury stock changes............... --
Exercise of stock options............ 1,210
Cash dividends declared.............. (15,889)
Other................................ (194)
---------
Amount at March 31, 1994............. 556,961
---------
1995
Net earnings......................... 42,628
Exercise of stock options............ 743
Issuance of restricted stock......... --
Cash dividends declared.............. (21,255)
Other................................ 1,141
---------
Amount at March 31, 1995............. 580,218
---------
SIX MONTHS ENDED SEPTEMBER 30, 1995
(UNAUDITED)
Net earnings......................... 37,741
Exercise of stock options............ 970
Cash dividends declared.............. (11,987)
Other................................ (72)
---------
Amount at September 30, 1995......... $ 606,870
=========
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
TIDEWATER INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
-------------------------------- --------------------
1993 1994 1995 1994 1995
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings..................... $ 24,268 $ 24,160 $ 42,628 $ 25,768 $ 37,741
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Extraordinary loss on early
debt retirement........... -- 11,970 -- -- --
Earnings and gain on sale of
discontinued operations... (3,099) -- -- -- --
Cumulative effect of
accounting change......... 6,640 -- -- -- --
Depreciation................ 80,317 83,652 86,598 40,775 36,725
Provision for deferred
income taxes.............. 4,960 4,801 4,411 12,436 6,132
Gain on sales of assets..... (3,408) (4,579) (13,471) (4,471) (4,127)
Equity in net earnings of
unconsolidated
companies................. (2,525) (2,686) (3,147) (1,944) (3,040)
Minority interests.......... 2,544 2,022 1,488 692 765
Compensation
expense -- restricted
stock..................... 3,800 -- 92 -- 110
Decrease (increase) in trade
and other receivables..... (12,364) 8,383 2,152 612 4,691
Decrease (increase) in
inventories............... 1,824 (238) 4,977 (5,504) 1,334
Decrease (increase) in other
current assets............ 244 1,058 (3,768) (4,991) (1,450)
Increase (decrease) in
accounts payable and
accrued expenses.......... (11,190) (832) 9,487 2,499 (8,882)
Increase (decrease) in
accrued property and
liability losses.......... 3,360 (880) 3,776 3,005 2,259
Increase (decrease) in
income taxes.............. (4,054) 2,845 (659) (10,120) 2,145
Other, net.................. 4,631 5,994 4,685 3,291 2,817
--------- --------- --------- --------- ---------
Net cash provided by
operating
activities............ 95,948 135,670 139,249 62,048 77,220
--------- --------- --------- --------- ---------
Cash flows from investing activities:
Proceeds from sales of assets.... 8,105 11,483 23,019 8,518 10,453
Additions to properties and
equipment...................... (52,366) (53,319) (54,994) (20,300) (15,938)
Acquisition of compression
assets......................... -- -- (244,673) (35,000) --
Investments in unconsolidated
companies, net of dividends
received....................... 2,768 (877) 3,550 2,868 3,199
Investment from minority
interests, net of dividends
paid........................... (1,602) (3,094) (513) (1,655) (899)
--------- --------- --------- --------- ---------
Net cash used in investing
activities................ (43,095) (45,807) (273,611) (45,569) (3,185)
--------- --------- --------- --------- ---------
Cash flows from financing activities:
Principal payments on long-term
debt........................... (46,614) (65,328) (87,114) (47,904) (64,000)
Prepayment penalties on early
debt retirement................ -- (6,473) -- -- --
Proceeds from the issuance of
long-term debt................. -- -- 150,000 -- --
Cash dividends................... (11,853) (21,178) (21,255) (10,616) (11,987)
Other............................ 1,203 935 645 208 1,011
--------- --------- --------- --------- ---------
Net cash provided by (used
in) financing
activities................ (57,264) (92,044) 42,276 (58,312) (74,976)
--------- --------- --------- --------- ---------
Net decrease in cash, including
temporary cash investments......... (4,411) (2,181) (92,086) (41,833) (941)
--------- --------- --------- --------- ---------
Cash, including temporary cash
investments at beginning of
period............................. 113,380 108,969 106,788 106,788 14,702
--------- --------- --------- --------- ---------
Cash, including temporary cash
investments at end of period....... $ 108,969 $ 106,788 $ 14,702 $ 64,955 $ 13,761
========= ========= ========= ========= =========
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Interest.................... $ 11,635 $ 8,330 $ 4,540 $ 1,658 $ 3,736
Income taxes................ $ 10,733 $ 15,779 $ 21,566 $ 12,773 $ 10,831
========= ========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
TIDEWATER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION
The Consolidated Financial Statements include the accounts of Tidewater
Inc. and its subsidiaries. Significant intercompany balances and transactions
are eliminated in consolidation.
INVENTORIES
Inventories are stated at average cost for operating supplies and at the
lower of cost (FIFO) or market (net realizable value) for merchandise held for
resale.
PROPERTIES AND EQUIPMENT
Properties and equipment are carried at cost. Depreciation for financial
reporting purposes is computed primarily on the straight-line basis beginning
with the first charter/rental, with salvage values of 5%-10% for marine
equipment and 30% for compression equipment, using estimated useful lives of:
YEARS
------
Marine equipment (from date of
construction)........................ 10-20
Compression equipment................ 8-12
Other properties and equipment....... 3-30
Used equipment is depreciated in accordance with the above schedule;
however, no life less than six years is used for marine equipment regardless
of the date constructed.
Maintenance and repairs are charged to operations as incurred during the
asset's original estimated useful life. Major repair costs incurred after the
original estimated useful life that also have the effect of extending the
useful life of the asset are capitalized and amortized over three years. Major
modifications to equipment are capitalized and amortized over the remaining
life of the equipment.
Effective April 1, 1995 the estimated useful lives of the company's
Marine vessels were increased from 10-20 years to 15-25 years. For the
six-month period ended September 30, 1995, the effect of this change in
accounting estimate lowered depreciation expense by $12.6 million. Concurrent
with this change, $4.5 million of repair and maintenance costs, that would
have been capitalized had the previous estimated useful lives been used, was
expensed.
Effective with the third quarter of fiscal 1995 the Company increased
from 12 1/2% to 30% the estimated salvage value used to calculate depreciation
expense for its fleet of natural gas compressors. The increase in salvage
value was made in order to better reflect the estimated value of this
equipment at the end of its service life and resulted from an internal review
following the acquisition of a substantial number of natural gas compressors
during the third quarter of fiscal 1995. This change in accounting estimate
reduced depreciation expense by approximately $3 million and increased net
earnings by $1.9 million or $.04 per common share, for fiscal 1995. For fiscal
1996, the annual reduction in depreciation expense is estimated to be
approximately $7.3 million.
ACCRUED PROPERTY AND LIABILITY LOSSES
The Company's insurance subsidiary establishes case basis reserves for
estimates of reported losses on direct business written, estimates received
from ceding reinsurers, and reserves based on past experience of unreported
losses. Such losses principally relate to the Company's marine operations and
are included as a component of costs of marine operations in the Consolidated
Statements of Earnings. The liability for such losses and the related
reimbursement receivable from reinsurance companies are
F-7
<PAGE>
TIDEWATER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
classified in the Consolidated Balance Sheet into current and noncurrent
amounts based upon estimates of when the liabilities will be settled and when
the receivables will be collected.
PENSION AND OTHER POSTRETIREMENT BENEFITS
Pension costs are accounted for in accordance with the provisions of
Statement of Financial Accounting Standards No. 87 and are funded as required
by law. Prior service costs are amortized on the straight-line basis over the
average remaining service period of employees expected to receive pension
benefits. Effective April 1, 1992, postretirement benefits other than pensions
are accounted for in accordance with Statement of Financial Accounting
Standards No. 106. The estimated cost of postretirement benefits other than
pensions are accrued during the employees' active service period.
Postemployment and postretirement benefits other than pensions are funded as
claims are submitted.
INCOME TAXES
Income taxes are accounted for in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
EARNINGS PER SHARE
Primary earnings per share are computed based on the weighted average
number of shares and dilutive equivalent shares of common stock (stock
options, restricted stock grants and shares issuable on conversion of the
convertible subordinated debentures) outstanding during each year using the
treasury stock method.
FOREIGN CURRENCY TRANSLATION
The functional currency for certain foreign subsidiaries and
unconsolidated companies is the applicable local currency. The translation of
the applicable local currencies into U.S. dollars is performed for balance
sheet accounts using current exchange rates in effect at the balance sheet
date and for revenue and expense accounts using weighted average exchange
rates during the period. The gains and losses resulting from the balance sheet
account translations, net of deferred income taxes, are included in
stockholders' equity.
Some transactions of the Company and its subsidiaries are made in
currencies different from their own. Gains and losses from these transactions
are included in the Consolidated Statements of Earnings as they occur and
relate primarily to the revenue generating and purchasing activities in
Brazil, Venezuela, United Kingdom, Singapore, Trinidad and Nigeria.
CASH FLOWS
For purposes of the Consolidated Statements of Cash Flows, all highly
liquid investments purchased with original maturities of approximately three
months or less are considered to be cash equivalents. Some items of
compression equipment are acquired and placed in inventories for subsequent
sale or rent to others. Acquisitions of these assets are considered operating
activities in the Consolidated Statements of Cash Flows, although they later
may be transferred to the compression equipment rental fleet.
F-8
<PAGE>
TIDEWATER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
RECLASSIFICATIONS
Certain reclassifications have been made in the 1994 amounts to conform
with the 1995 presentations.
INTERIM FINANCIAL STATEMENTS
The consolidated financial information for the six-month period ended
September 30, 1994 and 1995 has not been audited by independent accountants,
but in the opinion of the management of Tidewater, all adjustments (consisting
only of normal recurring adjustments) necessary for a fair presentation of the
consolidated balance sheet, consolidated statement of earnings, consolidated
statement of stockholders' equity and consolidated statement of cash flows at
the dates and for the periods indicated have been made. Results of operations
for interim periods are not necessarily indicative of results of operations
for the respective full years.
(2) ACQUISITION OF COMPRESSION ASSETS
On September 30, 1994, the Company purchased for $35 million in cash the
assets of Brazos Gas Compressing Company, a subsidiary of Mitchell Energy &
Development Corporation. On November 30, 1994, the Company purchased the
natural gas compression assets of Halliburton Company using $55 million of
available cash and borrowings of $150 million. The costs of these acquisitions
were allocated under the purchase method of accounting based on the fair value
of the assets acquired. In connection with the purchase of the natural gas
compression assets of Halliburton Company, goodwill of approximately $25
million was recorded as other assets in the Consolidated Balance Sheet and is
being amortized in equal charges to earnings over a 15-year period.
The results of Brazos' and Halliburton's operations have been
consolidated with the Company's effective October 1, 1994, and December 1,
1994, respectively. Pro forma combined results of operations of the Company
and of Brazos and Halliburton, including appropriate purchase accounting
adjustments for the years ended March 31, 1994 and 1995 and the six months
ended September 30, 1994, as though the acquisition had taken place on April 1
of the respective periods, are as follows:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
------------------------ SIX MONTHS ENDED
1994 1995 SEPTEMBER 30, 1994
----------- ----------- ------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Revenues............................. $ 579,121 $ 579,943 $294,952
=========== =========== ==================
Earnings before extraordinary item... $ 30,951 $ 35,947 $ 21,056
=========== =========== ==================
Net earnings......................... $ 18,981 $ 35,947 $ 21,056
=========== =========== ==================
Primary and fully diluted earnings
per common share................... $ .36 $ .67 $ .40
=========== =========== ==================
</TABLE>
The $150 million of debt incurred to finance the Halliburton acquisition
was borrowed pursuant to the $250 million revolving credit and term loan
agreement discussed in Note 7.
(3) SALE OF CONTAINER SHIPPING SEGMENT
In March 1993, the Company sold its 70% interest in the net assets of the
Container Shipping segment to the minority-interest owner. The Consolidated
Statement of Earnings for the year ended March 31, 1993 reports separately the
results of continuing operations and the discontinued Container Shipping
segment. The results of the discontinued Container Shipping segment for the
year ended March 31, 1993, which are presented as a net amount in the
Consolidated Statements of Earnings, consist of revenues of $66.6 million,
operating expenses of $60.2 million, general and administrative
F-9
<PAGE>
TIDEWATER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
expenses of $6.5 million and a gain on sale of the segment of $3.2 million
(net of $.9 million of income tax benefits).
(4) INVENTORIES
A summary of inventories at March 31 follows:
1994 1995
--------- ---------
(IN THOUSANDS)
Marine operating supplies............ $ 27,476 $ 25,764
Compression supplies and merchandise
held for sale...................... 7,085 10,547
--------- ---------
$ 34,561 $ 36,311
========= =========
(5) UNCONSOLIDATED COMPANIES
Investments in, at equity, and advances to unconsolidated marine
joint-venture companies at March 31 were as follows:
PERCENTAGE
OWNERSHIP 1994 1995
------- --------- ---------
(IN THOUSANDS)
National Marine Service (Abu
Dhabi-UAE)......................... 40% $ 11,506 $ 10,886
Tidewater Port Jackson (Australia)... 50% 6,805 6,972
Provident Marine, Ltd. (Mexico)...... 50% 2,135 2,322
Others............................... 20%-50% 1,397 1,347
--------- ---------
$ 21,843 $ 21,527
========= =========
The aggregate amount of undistributed earnings of all unconsolidated
joint-venture companies included in consolidated stockholders' equity at March
31, 1995 is approximately $12,246,000.
(6) INCOME TAXES
Earnings (loss) from continuing operations before income taxes derived
from United States and foreign operations for the years ended March 31 are as
follows:
1993 1994 1995
----------- --------- ---------
(IN THOUSANDS)
United States........................ $ (13,238) $ 26,083 $ 42,681
Foreign.............................. 53,413 31,570 24,727
----------- --------- ---------
$ 40,175 $ 57,653 $ 67,408
=========== ========= =========
Total income tax expense for the years ended March 31 was allocated as
follows:
1993 1994 1995
--------- --------- ---------
(IN THOUSANDS)
Income from continuing operations.... $ 12,366 $ 21,523 $ 24,780
Gain on sale of Container Shipping
segment.............................. (869) -- --
Extraordinary loss on early debt
retirement........................... -- (6,470) --
Cumulative effect of accounting
change............................... (3,421) -- --
Stockholder's equity (for
compensation expense for income tax
purposes in excess of amounts
recognized for financial reporting
purposes........................... (1,356) -- --
--------- --------- ---------
$ 6,720 $ 15,053 $ 24,780
========= ========= =========
F-10
<PAGE>
TIDEWATER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income tax expense attributable to income from continuing operations for
the years ended March 31 consists of the following:
U.S.
--------------------
FEDERAL STATE FOREIGN TOTAL
--------- --------- ------- ---------
(IN THOUSANDS)
1993
Current.............................. $ 1,081 $ 680 $ 5,645 $ 7,406
Deferred............................. 4,960 -- -- 4,960
--------- --------- ------- ---------
$ 6,041 $ 680 $ 5,645 $ 12,366
========= ========= ======= =========
1994
Current.............................. $ 8,290 $ 1,248 $ 7,184 $ 16,722
Deferred............................. 4,801 -- -- 4,801
--------- --------- ------- ---------
$ 13,091 $ 1,248 $ 7,184 $ 21,523
========= ========= ======= =========
1995
Current.............................. $ 12,678 $ 772 $ 6,919 $ 20,369
Deferred............................. 4,411 -- -- 4,411
--------- --------- ------- ---------
$ 17,089 $ 772 $ 6,919 $ 24,780
========= ========= ======= =========
The actual income tax expense attributable to earnings from continuing
operations for the years ended March 31, 1993, 1994 and 1995 differed from the
amounts computed by applying the U.S. federal tax rate of 34% in fiscal 1993
and 35% in fiscal 1994 and 1995 to pre-tax earnings from continuing operations
as a result of the following:
1993 1994 1995
----------- ----------- -----------
(IN THOUSANDS)
Computed "expected" tax expense...... $ 13,659 $ 20,179 $ 23,593
Increase (reduction) resulting from:
Effect of 1993 tax law change... -- 1,921 --
Foreign earnings not includable
in U.S. tax return.............. (463) (24) (817)
Foreign taxes not creditable
against U.S. taxes.............. -- -- 1,039
Utilization of net operating loss
carryforwards........................ (782) (183) --
Expenses which are not
deductible for tax
purposes..................... 60 248 177
Other, net...................... (108) (618) 788
----------- ----------- -----------
$ 12,366 $ 21,523 $ 24,780
=========== =========== ===========
F-11
<PAGE>
TIDEWATER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The significant components of deferred income tax expense for the years
ended March 31 are as follows:
1993 1994 1995
--------- --------- ---------
(IN THOUSANDS)
Deferred income tax expense (benefit)
(exclusive of
the effects of other components
listed below)...................... $ (9,265) $ 528 $ (1,894)
Application of net operating loss
carryforwards...................... 18,330 1,478 --
Investment and foreign tax credits... (4,105) 874 6,305
Effect of 1993 tax law change........ -- (1,921) --
--------- --------- ---------
Subtotal........................ 4,960 4,801 4,411
--------- --------- ---------
Extraordinary loss on early debt
retirement......................... -- (3,747) --
Accounting change.................... (3,421) -- --
--------- --------- ---------
$ 1,539 $ 1,054 $ 4,411
========= ========= =========
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at March 31,
1994 and 1995 are as follows:
1994 1995
----------- -----------
(IN THOUSANDS)
Deferred tax assets:
Financial provisions not
deducted for tax purposes.... $ 12,410 $ 13,375
Unrepatriated foreign
earnings..................... -- 5,220
Foreign net operating loss
carryforwards................ 4,171 7,187
Foreign tax credit
carryforwards................ 3,231 2,996
Investment tax credit
carryforwards................ 11,911 5,842
Alternative minimum tax credit
carryforwards................ 2,206 3,007
Other........................... 1,745 1,616
----------- -----------
Gross deferred tax
assets.................. 35,674 39,243
Less valuation
allowance............... 4,171 7,187
----------- -----------
31,503 32,056
----------- -----------
Deferred tax liabilities:
Depreciation differences on
properties and equipment..... (73,431) (81,005)
Undistributed income of
unconsolidated joint-venture
companies.................... (3,171) (561)
----------- -----------
Gross deferred tax
liabilities............. (76,602) (81,566)
----------- -----------
Net deferred tax
liability............... $ (45,099) $ (49,510)
=========== ===========
The net changes in the valuation allowance for the years ended March 31,
1994 and 1995 were increases of $184,000 and $3,016,000, respectively. These
changes were made to provide for uncertainties surrounding the realization of
certain foreign net operating loss carryforwards. The remaining balance of the
deferred tax assets should be realized through future operating results and
the reversal of taxable temporary differences.
At March 31, 1995, the Company had investment tax credit carryforwards
for federal income tax purposes of approximately $5,842,000, which are
available to reduce future federal income tax through 2002. In addition, the
Company has alternative minimum tax credit carryforwards of approximately
$3,007,000, which are available to reduce future federal regular income taxes
over an indefinite period.
F-12
<PAGE>
TIDEWATER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company has not recognized a deferred tax liability of approximately
$30,100,000 for the undistributed earnings of certain foreign subsidiaries
that arose in prior years because the Company currently does not expect those
unremitted earnings to reverse and become taxable to the Company in the
foreseeable future. A deferred tax liability will be recognized when the
Company expects that it will realize those undistributed earnings in a taxable
manner, such as through receipt of dividends or sale of investments. As of
March 31, 1995 the undistributed earnings of these subsidiaries were
approximately $86,000,000.
(7) LONG-TERM DEBT
A summary of long-term debt at March 31 follows:
1994 1995
--------- -----------
(IN THOUSANDS)
Variable rate revolving credit and
term loan agreement
with banks......................... $ -- $ 112,000
7% convertible subordinated
debentures due 2010................ 47,526 --
--------- -----------
Total long-term debt................. 47,526 112,000
Less current maturities of
long-term debt.................. 47,526 12,000
--------- -----------
Net long-term debt................... $ -- $ 100,000
========= ===========
The Company's revolving credit and term loan agreement (the "agreement")
consists of a $130 million revolving credit facility and a $120 million term
loan facility. At March 31, 1995 there were $12 million of borrowings
outstanding under the revolving credit facility and $100 million of borrowings
outstanding under the term loan facility.
The agreement bears interest, at the Company's option, at prime rates
plus .375% or LIBO rates plus 1.25% or 1.50% (7.74% at March 31, 1995). The
lower LIBO rate is available as long as the Company maintains an investment
grade senior debt rating from Moody's Investor Services, Inc. and Standard &
Poor's. Effective April 10, 1995, the interest rate was reduced to prime or
LIBO plus .875%.
The revolving credit commitment of $130 million expires on September 30,
1996, at which time the then outstanding balance may be converted to a term
loan repayable in 16 quarterly installments beginning December 31, 1996.
Borrowings under the term loan facility are payable in 27 quarterly
installments of $3 million commencing March 31, 1995, with the remaining loan
balance due December 31, 2001. All of the borrowings under the agreement are
unsecured and the Company pays an annual fee of from .250% to .375% on the
unused portion of the revolving credit facility.
Under the terms of the agreement, the Company has agreed to certain
requirements and limitations, including: limitations on the payment of
dividends on common stock, investments and aggregate indebtedness; a minimum
level of tangible net worth of $425 million plus 30% of cumulative net
earnings, as defined, after March 31, 1993 (total $445,300,000 at March 31,
1995); and a minimum ratio of current assets to current liabilities of 1.5 to
1. The agreement also prohibits the Company from encumbering its assets, other
than assets already encumbered at November 30, 1994, for the benefit of
others.
During the second quarter of fiscal 1994 approximately $51 million of
notes were retired prior to maturity using available cash. The retirement
resulted in an after-tax extraordinary charge to earnings of approximately
$4,450,000, or $.08 per common share. The extraordinary charge to earnings
consisted of a $6,500,000 prepayment penalty and the write-off of deferred
finance costs of $370,000, less $2,420,000 of income tax benefits associated
with the retired debt.
F-13
<PAGE>
TIDEWATER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On March 16, 1994, the Company called for redemption of its 7%
convertible subordinated debentures due 2010. Holders converted $1,113,000 of
debentures into 44,520 shares of the Company's common stock at a conversion
price of $25.00 per share. The remainder of the debentures were redeemed at
101.4% of par value plus accrued interest on April 18, 1994. The debentures,
along with the prepayment premium, are included in current liabilities at
March 31, 1994. The redemption resulted in an after-tax extraordinary charge
to earnings of approximately $7,520,000, or $.14 per common share in the
fourth quarter of fiscal 1994. The extraordinary charge to earnings consisted
of a $644,000 prepayment premium and the write-off of unamortized original
issue discount and deferred finance costs of $10,926,000, less $4,050,000 of
income tax benefits.
Based on current interest rates offered to the Company for borrowings
with maturities similar to the remainder of its long-term debt, total
long-term debt at March 31, 1995 approximates the fair value of the debt.
(8) BENEFIT PLANS
Upon meeting various citizenship, age and service requirements, employees
are eligible to participate in a defined contribution savings plan. The plan
held 537,525 shares and 536,804 shares of the Company's common stock at March
31, 1994 and 1995, respectively. Amounts charged to expense for the plan for
1993, 1994 and 1995 were $1,193,000, $1,282,000, and $951,000, respectively.
A defined benefit pension plan covers substantially all U.S. citizen
employees and employees who are permanent residents of the United States.
Benefits are based on years of service and employee compensation. The Company
also has a supplemental retirement plan (Supplemental Plan) that provides
pension benefits to certain employees in excess of those allowed under the
Company's tax qualified pension plan. Certain benefits programs are maintained
in several other countries which provide retirement income for covered
employees.
Net periodic pension cost for the U.S. defined benefit pension plan and
the Supplemental Plan for 1993, 1994 and 1995 include the following
components:
1993 1994 1995
--------- --------- ---------
(IN THOUSANDS)
Service cost-benefit earned during
the period......................... $ 1,723 $ 2,118 $ 1,962
Interest cost on projected benefit
obligation......................... 1,617 1,715 1,954
Actual return on assets.............. (726) (1,398) (503)
Net amortization and deferral........ 219 590 (1,463)
--------- --------- ---------
Net periodic pension cost............ $ 2,833 $ 3,025 $ 2,956
========= ========= =========
Assumptions used in the accounting
are:
Discount rates.................. 8.5% 7.25% 8.5%
Rates of annual increase in
compensation levels.......... 5% 5% 5%
Expected long-term rate of
return on assets............. 9.5% 9.5% 9.5%
F-14
<PAGE>
TIDEWATER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth the assets and liabilities of the U.S.
defined benefit pension plan and the Supplemental Plan and the amount of the
net pension asset or liability in the Consolidated Balance Sheets at March 31:
PLAN WITH PLAN WITH
ACCUMULATED ACCUMULATED
BENEFIT OBLIGATIONS BENEFIT OBLIGATIONS
LESS THAN ASSETS IN EXCESS OF ASSETS
-------------------- --------------------
1994 1995 1994 1995
--------- --------- --------- ---------
(IN THOUSANDS)
Actuarial present value of vested
benefit obligation................ $ 14,429 $ 14,971 $ 1,657 $ 1,724
========= ========= ========= =========
Accumulated benefit obligation...... $ 16,221 $ 16,615 $ 1,779 $ 1,815
========= ========= ========= =========
Projected benefit obligation........ $ 23,344 $ 23,635 $ 2,879 $ 2,817
Plan assets at fair value, primarily
bonds and common stock............ 17,946 18,691 -- --
--------- --------- --------- ---------
Projected benefit obligation in
excess of plan assets............. 5,398 4,944 2,879 2,817
Unrecognized net transitional
obligation amortized
over 15 years..................... (728) (615) -- --
Unrecognized actuarial gain (loss).. (3,422) (2,089) (1,626) (1,228)
Unrecognized prior service cost..... (1,665) (2,165) (871) (1,104)
Adjustment required to recognize
minimum liability................. -- -- 1,397 1,330
--------- --------- --------- ---------
Net accrued pension (asset)
liability......................... $ (417) $ 75 $ 1,779 $ 1,815
========= ========= ========= =========
Qualified retired employees currently are covered by a program which
provides limited health care and life insurance benefits. Costs of the program
are based on actuarially determined amounts and are accrued over the period
from the date of hire to the full eligibility date of employees who are
expected to qualify for these benefits.
Pursuant to the April 1, 1992 adoption of Statement of Financial
Accounting Standards No. 106, "Employers Accounting for Postretirement
Benefits Other Than Pensions," the Company recognized during fiscal 1993 the
full amount of its accumulated postretirement benefit obligation of
$10,061,000 less income tax benefits of $3,421,000, which amounts are included
in the fiscal 1993 Consolidated Statement of Earnings as the cumulative effect
of an accounting change. The accumulated postretirement benefit obligation
amount represents the present value at April 1, 1992 of the estimated future
benefits payable to current retirees and a pro rata portion of the estimated
benefits payable to active employees after retirement.
Net periodic postretirement health care and life insurance costs for
1993, 1994 and 1995 include the following components:
1993 1994 1995
--------- --------- ---------
(IN THOUSANDS)
Service cost -- benefit earned during
the period......................... $ 691 $ 801 $ 924
Interest cost on accumulated
postretirement benefit
obligation......................... 847 964 732
Other amortization and deferral...... -- (28) (129)
--------- --------- ---------
Net periodic postretirement benefit
cost............................... $ 1,538 $ 1,737 $ 1,527
========= ========= =========
F-15
<PAGE>
TIDEWATER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The unfunded actuarially-determined liabilities for postretirement
benefits at March 31 are as follows:
1994 1995
--------- ---------
(IN THOUSANDS)
Actuarial present value of
accumulated postretirement benefit
obligation:
Current retirees................ $ 1,967 $ 2,573
Current employees eligible for
benefits..................... 634 930
Current employees not yet
eligible for benefits........ 5,854 6,016
--------- ---------
Total accumulated postretirement
benefit obligation................. 8,455 9,519
Unrecognized prior service cost...... 290 1,523
Unrecognized net gain (loss)......... 4,228 3,288
--------- ---------
Accrued postretirement benefit
cost............................... $ 12,973 $ 14,330
========= =========
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation will be 13% in 1996, gradually declining to
6.5% in the year 2002 and thereafter. A 1% change in the assumed health care
cost trend rates for each year would change the accumulated postretirement
benefit obligation by approximately $1,500,000 at March 31, 1995 and change
the cost for the year ended March 31, 1995 by $392,000. The assumed discount
rates used in determining the accumulated postretirement benefit obligation
were 7.25% in 1994 and 8.5% in 1995.
(9) OTHER ASSETS AND OTHER LIABILITIES AND DEFERRED CREDITS
A summary of other assets at March 31 follows:
1994 1995
--------- ---------
(IN THOUSANDS)
Recoverable insurance losses......... $ 36,163 $ 28,921
Goodwill............................. 646 24,958
Assets held for sale................. 5,797 9,582
Other................................ 10,843 10,125
--------- ---------
$ 53,449 $ 73,586
========= =========
A summary of other liabilities and deferred credits at March 31 follows:
1994 1995
--------- ---------
(IN THOUSANDS)
Postretirement benefit liability..... $ 12,973 $ 14,330
Minority interests in net assets of
subsidiaries....................... 10,678 8,628
Noncurrent foreign and domestic
taxes.............................. 6,957 6,957
Other................................ 10,765 12,141
--------- ---------
$ 41,373 $ 42,056
========= =========
(10) CAPITAL STOCK
Under the Company's stock option and restricted stock plans, the
Compensation Committee of the Board of Directors has authority to grant stock
options and restricted shares of the Company's stock to officers and other key
employees. At March 31, 1995, 2,814,623 shares of common stock are reserved
for issuance under the plans. The stock option price and exercise period are
set by the grant, with the price equal to the market price of the stock on the
date of grant.
F-16
<PAGE>
TIDEWATER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Transactions in the stock option plans during 1993, 1994 and 1995 were as
follows:
PRICE RANGE
PER SHARE SHARES
------------ -----------
Outstanding March 31, 1992........... $ 4.38-21.50 1,103,344
Options granted...................... 15.00-19.00 177,200
Options exercised.................... 4.38-13.25 (367,638)
Options expired or cancelled......... 4.38-15.00 (19,917)
------------ -----------
Outstanding March 31, 1993........... 4.38-21.50 892,989
Options granted...................... 19.63-20.13 198,900
Options exercised.................... 4.38-15.00 (160,323)
Options expired or cancelled......... 4.38-19.63 (35,830)
------------ -----------
Outstanding March 31, 1994........... 4.38-21.50 895,736
Options granted...................... 19.00-23.38 901,875
Options exercised.................... 4.38-20.13 (131,783)
Options expired or cancelled......... 4.38-22.25 (72,530)
------------ -----------
Outstanding March 31, 1995........... $ 4.38-23.38 1,593,298
============ ===========
At March 31, 1994 and 1995, 522,205 shares and 531,403 shares,
respectively, were exercisable under the stock option plans.
The restricted stock plan permits the grant of Company shares restricted
as to transferability and subject to a substantial risk of forfeiture. The
vesting restrictions and period during which the transferability restrictions
are applicable are determined on a case-by-case basis. During the restricted
period, the restricted shares may not be transferred or encumbered but the
recipient has the right to vote and receive dividends on the restricted
shares. At March 31, 1995, contingent awards totalling 36,498 restricted
Company shares were outstanding, to be issued in conjunction with and as a
result of the exercise of certain stock options. None of these restricted
shares were issued as of March 31, 1995. Once these restricted shares are
issued, they would be forfeited if, during the five years after issuance, a
disposition was made of the option shares, except for dispositions
specifically permitted by the grant. The ownership of these restricted shares
will vest at the end of the five year period in which they are subject to
forfeiture.
In accordance with an employment agreement with the Company's chairman of
the board, 70,000 shares of restricted common stock of the Company were
granted to him on October 20, 1994. These restricted shares vest at varying
intervals when the average sales price of the common stock reaches certain
predetermined levels. The fair market value of the stock at the time of the
grant was classified in stockholders' equity as deferred
compensation-restricted stock and will be amortized by equal monthly charges
to earnings over approximately seven years.
During fiscal 1994, all then-existing treasury shares were cancelled and,
accordingly, the amount of treasury shares were reclassified to common stock
and additional paid-in capital.
At March 31, 1994 and 1995, 3,000,000 shares of no par value preferred
stock were authorized and unissued.
Under a Shareholder Rights Plan, one preferred stock purchase right has
been distributed as a dividend for each outstanding common share. Each right
entitles the holder to purchase, under certain conditions, one two-hundredth
of a share of Series A Participating Preferred Stock at an exercise price of
$50, subject to adjustment. The rights will not be exercisable unless a person
(as defined in the plan) acquires beneficial ownership of 16% or more of the
outstanding common shares, or a person
F-17
<PAGE>
TIDEWATER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
commences a tender offer or exchange offer, which upon its consummation such
person would beneficially own 16% or more of the outstanding common shares.
If after the rights become exercisable a person becomes the beneficial
owner of 16% or more of the outstanding common shares (except pursuant to an
offer for all shares approved by the Board of Directors), each holder (other
than the acquirer) will be entitled to receive, upon exercise, common shares
having a market value of twice the exercise price. In addition, if the Company
is involved in a merger (other than a merger which follows an offer for all
shares approved by the Board of Directors), major sale of assets or other
business combination, each holder of a right (other than the acquirer) will be
entitled to receive, upon exercise, common stock of the acquiring company
having a market value of twice the exercise price.
The rights may be redeemed for $.01 per right at any time prior to ten
days following the acquisition by a person of 16% or more of the outstanding
common shares. The rights expire on May 1, 2000.
(11) COMMITMENTS AND OTHER MATTERS
An employment agreement exists with the Company's chairman of the board,
president and chief executive officer whereby he will serve in such capacity
through December 31, 1997. The terms of the employment agreement provide for
an annual base salary and certain other benefits. Compensation continuation
agreements exist with all other officers and certain other key employees of
Tidewater Inc. whereby each receives compensation and benefits in the event
that his or her employment is terminated following certain events relating to
a change in control of the Company. The maximum amount of compensation that
could be paid under the agreements, based on present salary levels, is
approximately $5,400,000. The amount that could be paid for certain benefits
is not presently determinable.
In March 1993 the Company requested that the Company's then chairman of
the board, president and chief executive officer amend his then existing
employment and consulting agreement. For its benefit, the Company elected to
amend the agreement in view of possible changes to tax laws then under
consideration by the Clinton administration and Congress. The amendment
accelerated the vesting of all outstanding shares of restricted stock such
that these shares became fully vested and freely transferable immediately. The
original terms of the restricted stock shares included restrictions during the
employment term of the agreement. Due to the acceleration of the vesting of
the restricted stock shares on March 31, 1993, the then remaining deferred
compensation of $2,850,000 was charged to other expenses in the Consolidated
Statement of Earnings for fiscal 1993. The amendment also provided for an
immediate lump-sum distribution of the present value of benefits under the
Company's supplemental retirement plan, including the additional benefits that
would have accrued assuming he remained employed by the Company through
September 24, 1994. The lump-sum distribution amounted to $2,212,000 and
included $921,000 for unaccrued benefits which was charged to other expenses
in the Consolidated Statement of Earnings for fiscal 1993.
During the fourth quarter of fiscal 1995, the Company recorded as "other
expense" $5.9 million ($3.7 million after tax, or $.07 per common share) for
the cost of a restructuring program of its corporate headquarters and
worldwide marine operations which was designed to reduce costs and improve
operating efficiencies. Substantially all of the costs associated with the
restructuring program were paid before March 31, 1995. The restructuring
resulted in the elimination of approximately 150 positions, realignment of
duties and responsibilities and streamlining of administrative functions. The
charge reflects the costs associated with staff reductions, relocations and
related transition expenses.
During the third quarter of fiscal 1995, the Company recorded as "other
expense" a charge of $2.5 million ($1.6 million after tax, or $.03 per common
share) for reserves to cover possible losses due to the potential insolvency
of certain of the Company's insurers.
F-18
<PAGE>
TIDEWATER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In 1983, the Environmental Protection Agency (EPA) notified two
subsidiaries of the Company that they were among 53 potentially responsible
parties (PRP's) for cleanup costs at the Western Sand and Gravel site in Rhode
Island. In 1989, the EPA notified another subsidiary of the Company that it
was a PRP for cleanup costs at a National Priorities List site. EPA later
nominated the subsidiary a de minimis participant for this site. Based on its
evaluation of potential total clean-up costs, its estimate of its potential
exposure, and the viability of other PRP's, management believes that any costs
ultimately required to be borne by the Company at these sites will not have a
material adverse effect on its results of operations, cash flow or financial
position.
Various other legal proceedings and claims are outstanding which arose in
the ordinary course of business. In the opinion of management, the amount of
ultimate liability, if any, with respect to these actions will not have a
materially adverse effect on the Company's financial position.
(12) BUSINESS SEGMENTS AND GEOGRAPHIC DISTRIBUTION OF OPERATIONS
The Company operates principally in two business segments. Tidewater
Marine provides support services to the offshore oil and gas industry, and
Tidewater Compression provides the energy industry with engineered products
and services used primarily in oil and gas production, enhanced recovery,
natural gas transmission and natural gas processing. Please refer to Tidewater
Management's Discussion and Analysis of Financial Condition and Results of
Operations for disclosures of additions to properties and equipment,
identifiable assets, revenues, operating profit and depreciation for each
business segment.
F-19
<PAGE>
TIDEWATER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(13) SUPPLEMENTARY INFORMATION -- QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31, 1994 AND 1995
----------------------------------------------
FIRST SECOND THIRD FOURTH
---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
1994
Revenues:
Marine operations............... $ 116,225 $ 119,750 $ 118,971 $ 111,655
Compression operations.......... 12,932 14,419 14,002 14,118
---------- ---------- ---------- ----------
$ 129,157 $ 134,169 $ 132,973 $ 125,773
========== ========== ========== ==========
Operating profit:
Marine operations............... $ 15,334 $ 18,718 $ 21,886 $ 9,845
Compression operations.......... 1,132 2,366 1,951 1,446
---------- ---------- ---------- ----------
$ 16,466 $ 21,084 $ 23,837 $ 11,291
========== ========== ========== ==========
Earnings before extraordinary item... $ 8,214 $ 9,142 $ 13,542 $ 5,232
========== ========== ========== ==========
Net earnings (loss).................. $ 8,214 $ 4,692 $ 13,542 $ (2,288)
========== ========== ========== ==========
Primary and fully diluted earnings
per common share:
Earnings before extraordinary
item............................ $ 0.15 $ 0.17 $ 0.25 $ .10
========== ========== ========== ==========
Net earnings (loss)............. $ 0.15 $ 0.09 $ 0.25 $ (.04)
========== ========== ========== ==========
1995
Revenues:
Marine operations............... $ 118,418 $ 115,648 $ 114,382 $ 106,836
Compression operations.......... 14,913 15,599 21,559 31,419
---------- ---------- ---------- ----------
$ 133,331 $ 131,247 $ 135,941 $ 138,255
========== ========== ========== ==========
Operating profit:
Marine operations............... $ 21,187 $ 18,061 $ 20,129 $ 12,793
Compression operations.......... 1,782 2,657 4,207 5,790
---------- ---------- ---------- ----------
$ 22,969 $ 20,718 $ 24,336 $ 18,583
========== ========== ========== ==========
Net earnings......................... $ 13,441 $ 12,327 $ 11,698 $ 5,162
========== ========== ========== ==========
Primary and fully diluted earnings
per common share................... $ .25 $ .23 $ .22 $ .10
========== ========== ========== ==========
</TABLE>
Operating profit consists of revenues less operating costs and expenses,
depreciation, general and administrative expenses and other income and
expenses of the Marine and Compression segments.
See notes 2, 7 and 11 for detailed information regarding transactions
which affect fiscal 1994 and 1995 quarterly amounts.
F-20
<PAGE>
SCHEDULE II
TIDEWATER INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED MARCH 31, 1993, 1994, AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
================================================================================================
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ------------------------------------------------------------------------------------------------
BALANCE AT BALANCE AT
BEGINNING ADDITIONS END OF
DESCRIPTION OF PERIOD AT COST DEDUCTIONS PERIOD
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1993
Deducted in balance sheet from
trade accounts receivable:
Allowance for doubtful
accounts..................... $7,442 $ 533 $1,757(A,C) $6,218
====== ====== ====== ======
Deducted in balance sheet from
other assets:
Amortization of goodwill and
debt issuance costs.......... $1,055 $ 424 $ -- $1,479
====== ====== ====== ======
1994
Deducted in balance sheet from
trade accounts receivables:
Allowance for doubtful
accounts..................... $6,218 $1,741 $1,215(A) $6,744
====== ====== ====== ======
Deducted in balance sheet from
other assets:
Amortization of goodwill and
debt issuance costs.......... $1,479 $ 321 $ 860(B) $ 940
====== ====== ====== ======
1995
Deducted in balance sheet from
trade accounts receivables:
Allowance for doubtful
accounts..................... $6,744 $3,950 $1,083(A) $9,611
====== ====== ====== ======
Deducted in balance sheet from
other assets:
Amortization of goodwill and
debt issuance costs.......... $ 940 $1,196 $ -- $2,136
====== ====== ====== ======
</TABLE>
- ------------
(A) Accounts receivable amounts considered uncollectible and removed from
accounts receivable by reducing allowance for doubtful accounts.
(B) Write-off of patent, deferred debt costs and underwriting commissions.
(C) Includes reclass of Sea-Barge balance of $1,388,000 to other current
assets due to sale of the Container Shipping segment.
F-21
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Hornbeck Offshore Services, Inc.
In our opinion, the consolidated financial statements of Hornbeck
Offshore Services, Inc. listed in the index appearing on page F-1 present
fairly, in all material respects, the financial position of Hornbeck Offshore
Services, Inc. and its subsidiaries at December 31, 1993 and 1994, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1994, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
the Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Houston, Texas
February 10, 1995
F-22
<PAGE>
HORNBECK OFFSHORE SERVICES, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
--------------------- -------------
1993 1994 1995
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents............ $ 7,013 $ 8,572 $ 19,625
Marketable securities........... 27,310 -- --
Accounts receivable, net of
allowance for doubtful
accounts of $98, $25 and $88,
respectively................. 9,412 11,747 11,477
Prepaid and other current
assets....................... 3,945 1,121 1,348
Current portion of note
receivable from affiliate.... -- 880 888
-------- -------- --------
Total current assets...... 47,680 22,320 33,338
-------- -------- --------
Property and equipment, net.......... 55,396 101,563 94,584
Investment in affiliates............. 15,223 16,851 14,584
Note receivable from affiliate....... -- 1,394 666
Reserve funds and restricted cash.... 814 1,280 1,185
Drydocking and other assets, net..... 5,559 4,474 7,161
-------- -------- --------
$124,672 $147,882 $151,518
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................ $ 1,861 $ 1,570 $ 2,083
Accrued interest................ 126 86 414
Income taxes payable............ 440 358 166
Accrued labor costs............. 420 643 810
Accrued medical costs........... 278 521 354
Other liabilities............... 347 928 1,331
Current portion of long-term
debt......................... 3,221 3,467 4,299
-------- -------- --------
Total current
liabilities............. 6,693 7,573 9,457
-------- -------- --------
Long-term debt....................... 7,833 21,023 17,878
-------- -------- --------
Deferred income taxes................ 10,556 12,379 14,719
-------- -------- --------
Commitments and contingencies
(Note 11)
Stockholders' equity:
Series 1 preferred stock -- 71
shares authorized, issued and
outstanding.................. 205 -- --
Common stock, $.10 par value,
25,000,000 shares authorized,
12,745,474, 13,240,698 and
13,166,332 shares issued and
outstanding, respectively.... 1,275 1,324 1,317
Additional paid-in capital...... 83,804 83,639 81,998
Common stock purchase
warrants..................... 385 -- --
Retained earnings............... 13,921 21,944 26,149
-------- -------- --------
Total stockholders' equity........... 99,590 106,907 109,464
-------- -------- --------
$124,672 $147,882 $151,518
======== ======== ========
</TABLE>
The accompanying notes are an integral part of this statement.
F-23
<PAGE>
HORNBECK OFFSHORE SERVICES, INC.
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------- --------------------
1992 1993 1994 1994 1995
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues............................. $ 18,435 $ 47,291 $ 45,834 $ 31,731 $ 41,331
-------- -------- -------- -------- --------
Costs and expenses:
Direct labor and other operating
expenses..................... 11,230 20,588 23,484 16,744 21,550
Depreciation and amortization... 4,749 7,394 10,007 7,144 9,977
General and administrative
expenses..................... 1,889 2,938 3,576 2,602 2,998
-------- -------- -------- -------- --------
17,868 30,920 37,067 26,490 34,525
-------- -------- -------- -------- --------
Other income (expense):
Foreign exchange gain (loss).... -- -- (105) -- 19
Gain on sale of assets.......... 7 9 736 694 427
Equity in earnings (loss) of
affiliates................... 5 818 1,408 1,362 (335)
Unsuccessful salvage expense.... -- (945) -- -- --
Other costs and expenses........ (170) (254) (149) (116) (25)
Interest and other income....... 1,040 799 1,439 1,083 837
Interest expense................ (1,387) (1,323) (864) (538) (1,348)
-------- -------- -------- -------- --------
(505) (896) 2,465 2,485 (425)
-------- -------- -------- -------- --------
Income before income taxes and
extraordinary charge............... 62 15,475 11,232 7,726 6,381
Income taxes......................... -- (4,530) (3,209) (2,213) (2,176)
-------- -------- -------- -------- --------
Income before extraordinary charge... 62 10,945 8,023 5,513 4,205
Extraordinary charge for early
extinguishment of debt, net of
income tax benefit of $145......... -- (280) -- -- --
-------- -------- -------- -------- --------
Net income........................... $ 62 $ 10,665 $ 8,023 $ 5,513 $ 4,205
======== ======== ======== ======== ========
Earnings per share before
extraordinary charge............... $ .01 $ .92 $ .60 $ .41 $ .32
Extraordinary charge................. -- (.02) -- -- --
-------- -------- -------- -------- --------
Earnings per share................... $ .01 $ .90 $ .60 $ .41 $ .32
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of this statement.
F-24
<PAGE>
HORNBECK OFFSHORE SERVICES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (NOTE 12)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------- --------------------
1992 1993 1994 1994 1995
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers and
affiliates................... $ 16,458 $ 43,185 $ 43,498 $ 33,488 $ 41,602
Cash paid to suppliers and
employees.................. (12,170) (25,936) (23,429) (15,879) (23,521)
Cash paid for income taxes...... (58) (1,847) (1,512) (1,212) (256)
Interest and other income
received..................... 606 753 1,428 1,211 780
Interest paid................... (1,165) (1,230) (837) (503) (1,021)
Refund of income taxes.......... -- 1,266 -- -- --
Distribution from partnership... -- 38 -- -- --
-------- -------- -------- -------- --------
Net cash provided by
operating
activities.............. 3,671 16,229 19,148 17,105 17,584
-------- -------- -------- -------- --------
Cash flows from investing activities:
Capital and drydocking
expenditures................. (7,596) (9,209) (57,973) (9,133) (6,205)
Purchase of marketable
securities................... (3,512) (24,007) -- -- --
Sale of marketable securities... -- 500 27,310 27,310 --
Increase in other assets........ -- (134) (45) (45) (167)
Decrease (increase) in reserve
funds........................ (310) 312 (890) (890) (253)
Investment in affiliates........ -- (11,677) (195) (72) 123
Loan to affiliate............... -- -- (2,351) -- --
Repayment of loan by
affiliate.................... -- -- 72 -- 738
Sale of property and
equipment.................... -- 1,300 3,491 3,046 1,087
Salvage expenditures............ -- (945) -- -- --
-------- -------- -------- -------- --------
Net cash provided (used)
by investing
activities.............. (11,418) (43,860) (30,581) 20,216 (4,677)
-------- -------- -------- -------- --------
Cash flows from financing activities:
New borrowings.................. -- -- 23,000 -- --
Repayment of borrowings......... (1,695) (5,917) (9,158) (5,991) (1,907)
Issuance of common stock and
warrants..................... 2 39,959 36 44 53
Repurchase of Series 1 preferred
stock and warrants........... -- -- (886) (881) --
-------- -------- -------- -------- --------
Net cash provided (used)
by financing
activities.............. (1,693) 34,042 12,992 (6,828) (1,854)
-------- -------- -------- -------- --------
Net increase (decrease) in cash and
equivalents........................ (9,440) 6,411 1,559 30,493 11,053
Cash and equivalents at beginning of
period............................. 10,042 602 7,013 7,013 8,572
-------- -------- -------- -------- --------
Cash and equivalents at end of
period............................. $ 602 $ 7,013 $ 8,572 $ 37,506 $ 19,625
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of this statement.
F-25
<PAGE>
HORNBECK OFFSHORE SERVICES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL COMMON
PREFERRED ---------------- PAID-IN STOCK RETAINED
STOCK SHARES AMOUNT CAPITAL WARRANTS EARNINGS
--------- ------ ------ ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance -- January 1, 1992...... $ 205 8,636 $ 864 $32,802 $ 385 $ 3,194
1992
Issuance of common stock for stock
options exercised and shares issued
for directors' and employees'
benefit plans...................... 6 1 12
Tax benefit of stock sold by
employees.......................... 39
Issuance of common stock for
acquisition of vessels............. 1,365 136 8,364
Net income........................... 62
----- ------ ------ ------- ----- -------
Balance -- December 31, 1992.... 205 10,007 1,001 41,217 385 3,256
1993
Sale of common stock for cash, net of
expenses........................... 2,500 250 39,538
Issuance of common stock for stock
options exercised and shares issued
for directors' and employees'
benefit plans and other............ 79 8 213
Issuance of Stock for Ravensworth
acquisition........................ 159 16 2,707
Tax benefit of stock sold by
employees.......................... 129
Net income........................... 10,665
----- ------ ------ ------- ----- -------
Balance -- December 31, 1993.... 205 12,745 1,275 83,804 385 13,921
1994
Purchase of Series 1 preferred
stock.............................. (205) (313)
Warrants exercised or repurchased.... 481 48 (32) (385)
Issuance of common stock for stock
options exercised and shares issued
for directors' and employees'
benefit plans and other............ 15 1 144
Tax benefit of stock sold by
employees.......................... 36
Net income........................... 8,023
----- ------ ------ ------- ----- -------
Balance -- December 31, 1994.... -- 13,241 1,324 83,639 -- 21,944
NINE MONTHS ENDED SEPTEMBER 30, 1995
(UNAUDITED)
Issuance of common stock for stock
options exercised and shares issued
for directors' and employees'
benefit plans and other............ 31 4 158
Return of shares from escrow -- Note
4.................................. (106) (11) (1,799)
Net income........................... 4,205
----- ------ ------ ------- ----- -------
Balance -- September 30, 1995
(unaudited).................. $ -- 13,166 $1,317 $81,998 $ -- $26,149
===== ====== ====== ======= ===== =======
</TABLE>
The accompanying notes are an integral part of this statement.
F-26
<PAGE>
HORNBECK OFFSHORE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- BUSINESS AND SUMMARY OF ACCOUNTING POLICIES:
ORGANIZATION AND HISTORY
Hornbeck Offshore Services, Inc. was incorporated under the laws of the
state of Delaware in January 1981. All references to the "Company" refer to
Hornbeck Offshore Services, Inc. and its subsidiaries unless the context
requires otherwise.
The Company is engaged in the worldwide offshore marine services
business, primarily serving the oil and gas industry through its operation and
management of a diversified fleet of 63 vessels (the "vessels"). The fleet
consists of supply, tug-supply, crew and specialty vessels; 57 of the vessels
are owned, 4 are chartered and 2 are managed for unrelated parties.
Additionally, the Company maintains a 49.9% equity interest in 3 entities
which operate and own or lease a combined fleet of 29 safety standby vessels.
CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. The equity method of accounting is used
when the Company has a 20%-50% interest in an affiliate. Under the equity
method, original investments are recorded at cost and are adjusted by the
Company's share of earnings or losses. All significant intercompany accounts
and transactions have been eliminated. Any difference between the Company's
share of book value of an equity affiliate and its investment amount is
amortized over the remaining useful life of the underlying assets.
MARKETABLE SECURITIES
Marketable securities are stated at market value which approximates cost
and consist of U.S. Government or Agency issues or mutual funds that invest in
the same type of securities. The cost of marketable securities at December 31,
1993 approximated $27,505,000.
REVENUE AND EXPENSE RECOGNITION
Charter revenue is earned and recognized on a daily rate basis. The
Company's accounts receivable are generally unsecured and are due primarily
from companies involved in exploration and production of oil and gas reserves.
Operating and other costs are expensed as incurred.
PROPERTY AND EQUIPMENT
For financial reporting purposes, the Company records depreciation
expense using the straight-line method over the estimated useful lives of the
related assets. For tax purposes, depreciation is computed using accelerated
methods.
The net book value of the Company's vessels is reviewed periodically to
determine that their recorded value does not exceed the estimated future
benefit from utilization of those vessels.
OTHER ASSETS
Other assets consist primarily of drydocking expenditures. Drydocking
expenditures are capitalized and amortized on a straight-line basis over the
period to be benefitted (generally 24 to 36 months).
DEFERRED INCOME TAXES
Deferred income taxes are determined utilizing a liability approach. This
method gives consideration to the future tax consequences associated with
differences between financial accounting and tax bases of assets and
liabilities. Such differences relate mainly to depreciable assets. This method
gives immediate effect to changes in income tax laws upon enactment. The
income statement effect is derived from changes in deferred income taxes on
the balance sheet. Adoption of Statement of
F-27
<PAGE>
HORNBECK OFFSHORE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Financial Accounting Standard No. 109, "Accounting for Income Taxes," in 1993
did not have a significant impact on the Company's financial statements.
EARNINGS PER SHARE
Earnings per share is calculated using the weighted-average number of
shares outstanding assuming exercise of dilutive stock options and conversion
of preferred stock. The weighted-average number of primary shares, which
includes common shares and equivalent common shares outstanding, during the
years ended December 31, 1992, 1993 and 1994 was 8,842,000, 11,901,000 and
13,460,000, respectively and, during the nine-month periods ended September
30, 1994 and 1995 were 13,479,000 and 13,352,000, respectively. Fully diluted
shares are the same as primary shares.
CASH AND EQUIVALENTS
For purposes of the consolidated statement of cash flows, the Company
considers all deposits readily convertible to known amounts of cash with
original maturities of three months or less to be cash and equivalents. For
the year ended December 31, 1994, included in "Interest and other income," is
interest income of $1,173,000 from such deposits.
RECLASSIFICATIONS
Certain 1992 and 1993 amounts were reclassified to conform to the 1994
presentation.
UNAUDITED INTERIM FINANCIAL INFORMATION
The unaudited consolidated balance sheet as of September 30, 1995, the
consolidated statements of income for the nine months ended September 30, 1994
and September 30, 1995 and the consolidated statements of cash flows for the
nine months ended September 30, 1994 and September 30, 1995 have been prepared
by the Company, without audit. In the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to present fairly
the financial position, results of operations and cash flows at September 30,
1995 and for all periods presented have been made.
NOTE 2 -- ACQUISITIONS AND DISPOSITIONS OF BUSINESSES AND VESSELS:
On November 30, 1994, the Company acquired an equity interest in Seaboard
Holdings Limited (Note 4). On November 15, 1994, the Company completed the
acquisition of 13 supply vessels from Oil and Gas Rental Services, Inc. ("Oil
& Gas") for cash consideration of $46 million. The Company borrowed $23
million in connection with this acquisition (Note 5).
On July 23, 1993, the Company acquired an equity interest in Ravensworth
Investments Limited ("Ravensworth"), and the Company's share of earnings of
this affiliate has been included in the Company's results of operations since
that date (Note 4). On April 29, 1993, the Company sold two vessels previously
being operated in the North Sea to an unrelated entity for approximately $1.3
million, which approximated the carrying value of the vessels. On June 17,
1993, the Company purchased a supply vessel for cash payment of $1,175,000.
On November 19, 1992, the Company completed the acquisition of 20
offshore supply vessels and one utility vessel from Petrol Marine Corporation,
Portal Energy Corporation and Pentad Offshore Corporation (collectively, the
"Sellers" or "Petrol") for aggregate consideration of $18,500,000. The
aggregate consideration paid to the Sellers consisted of $4,750,000 in cash,
$5,250,000 of unsecured notes issued by the Company and 1,365,462 restricted
shares of the Company's $.10 par value common stock valued at $8,500,000. As a
condition of the transaction, $2,000,000 of the cash consideration was
escrowed for purposes of refurbishing and recertifying seven of the acquired
vessels which were not in service on the acquisition date. These vessels have
been repaired and refurbished utilizing all of the escrow funds. Since
escrowed funds were insufficient to pay for the required work
F-28
<PAGE>
HORNBECK OFFSHORE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
on the seven vessels, the future debt service owed to the Sellers was reduced
by $1,794,000. The remaining acquisition debt has been repaid.
The results of operations of the acquired vessels are included in the
consolidated financial statements from the respective acquisition dates of
November 19, 1992 for the Petrol acquisition and from November 15, 1994 for
the Oil & Gas acquisition. Substantially all of the purchase price was
allocated to vessels acquired based on their fair market values and the
transactions have been accounted for using the purchase method. The acquired
vessels were employed prior to the acquisitions and continue to be employed by
the Company after the closing of the acquisitions in the offshore marine
service business, primarily serving the oil and gas industry.
Assuming the Oil & Gas transaction occurred at the beginning of each year
presented and the Ravensworth transaction occurred at the beginning of 1993,
condensed unaudited pro forma combined results of operations are as follows:
YEAR ENDED DECEMBER 31,
------------------------------
1993 1994
-------------- --------------
Revenues............................. $ 62,109,000 $ 60,379,000
Income before extraordinary charge... $ 13,464,000 $ 9,391,000
Earnings per share before
extraordinary charge................. $ 1.12 $ .70
From January through September 1994, the Company sold four vessels for
$3.1 million and realized a gain of $736,000. During the same period, three
vessels were acquired for cash consideration of $5.2 million.
From January through September 1995, the Company sold one vessel for
approximately $1,000,000 and realized a gain of $441,000.
In March 1992, the Company initiated the liquidation of two limited
partnerships in which the Company was the general partner. The partnerships'
three vessels were taken out of service and held for sale beginning in May
1992. The Company wrote off substantially all the remaining partnership
assets, which included vessels and reserve funds in the amount of $2,518,000,
and reduced debt by $2,563,000. The partnerships' debt was nonrecourse with
respect to the Company. No significant gain or loss was recognized by the
Company as a result of these transactions and no significant partnership
assets existed at December 31, 1992.
NOTE 3 -- PROPERTY AND EQUIPMENT:
Property and equipment consisted of the following at December 31:
ESTIMATED
USEFUL LIVES 1993 1994
------------- --------- -----------
(IN THOUSANDS)
Vessels.............................. 25 $ 67,796 $ 119,622
Building............................. 25 771 771
Land................................. 182 182
Vehicles............................. 3 to 4 356 420
Furniture, fixtures and other........ 3 to 10 358 332
--------- -----------
69,463 121,327
Less -- accumulated depreciation..... 14,067 19,764
--------- -----------
Property and equipment, net.......... $ 55,396 $ 101,563
========= ===========
F-29
<PAGE>
HORNBECK OFFSHORE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Depreciation expense related to property and equipment for 1992, 1993 and
1994 was $3,660,000, $5,221,000 and $6,267,000, respectively. A portion of
property and equipment is pledged to secure long-term debt (Note 5).
Drydocking expenditures included in other assets for the periods
indicated are as follows (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
1992 1993 1994 1994 1995
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Balance -- beginning of year......... $ 1,548 $ 1,519 $ 5,234 $ 5,234 $ 4,409
Additions............................ 1,223 5,825 2,915 2,858 5,539
Amortization......................... (1,252) (2,110) (3,740) (2,805) (2,993)
--------- --------- --------- --------- ---------
Balance -- end of year............... $ 1,519 $ 5,234 $ 4,409 $ 5,287 $ 6,955
========= ========= ========= ========= =========
</TABLE>
NOTE 4 -- INVESTMENTS IN AFFILIATES:
On November 30, 1994, the Company acquired 49.9% of the equity interests
of Seaboard Offshore Group Limited, a Scottish corporation ("Seaboard"). The
transaction was accounted for using the purchase method of accounting. At the
time of the transaction, Seaboard owned a fleet of six safety standby vessels
operating in the North Sea. Consideration in the form of a guarantee of
approximately $483,000 of certain Seaboard indebtedness was given. Further,
the Company funded a loan totaling 1.5 million ($2.35 million) to Seaboard for
operational purposes and has recorded a note receivable from affiliate which
bears interest at LIBOR plus 1 3/4% and is payable in 32 equal monthly
installments. This note receivable is unsecured, but 50% of the balance is
guaranteed by Ravensworth Holdings Limited ("RHL"), the owner of a 50.1%
interest in Seaboard and Ravensworth. The Company accounts for its investment
in Seaboard using the equity method of accounting.
In connection with the Seaboard acquisition, the Company was granted an
option by RHL to acquire the remaining outstanding equity interest in
Seaboard. Exercise of the option is contingent upon the Company's exercise, in
full, of the options to acquire the remaining capital stock of Ravensworth, as
discussed below.
On July 23, 1993, the Company acquired 49.9% of the outstanding capital
stock of Ravensworth from RHL, the owner of the outstanding capital stock of
Ravensworth, for a purchase price of $11 million in cash and approximately
$2.7 million in the form of 158,978 shares of restricted Common Stock
("Ravensworth Acquisition"). Ravensworth owned or chartered a fleet of
twenty-two (22) safety standby vessels operating in the North Sea at the time
of the acquisition. The Company accounts for its investment in Ravensworth
using the equity method of accounting. The difference between the Company's
investment in Ravensworth and its proportionate share of Ravensworth's book
equity totaled $9,012,000 at December 31, 1994 and this difference is being
depreciated over the remaining useful life of the Ravensworth fleet. The
Company used the purchase method of accounting for this transaction.
In connection with the Ravensworth Acquisition, the Company acquired
options to purchase the remaining outstanding capital stock of Ravensworth,
exercisable after January 1, 1995 in two equal annual installments, with the
first option exercisable on or before March 31, 1996 (the "1995 Option") and
the second option exercisable on or before March 31, 1997 (the "1996 Option").
The Company may, at its election, accelerate the exercise of the 1996 Option
to any date on or after January 1, 1995. The 1996 Option will expire unless
the 1995 Option is exercised in full. The consideration payable upon exercise
of the 1995 Option and the 1996 Option is to be paid one-third in cash and
two-thirds in
F-30
<PAGE>
HORNBECK OFFSHORE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
common stock of the Company valued at market price, as defined in the
applicable agreements. The Company may elect to pay in U.S. dollars any
payments that would otherwise be made to RHL in the Company's common stock.
The per share consideration to be paid for the remainder of Ravensworth
(subject to the adjustment described below) will be equal to the per share
price paid by the Company for the initial 49.9% investment, plus simple
interest at 7% (compounded annually) from the closing of the initial
acquisition to the date of payment. The consideration for Ravensworth will be
adjusted by 50% of any difference in actual Ravensworth and Seaboard earnings
before depreciation, interest and taxes ("EBDIT") versus a target EBDIT for
1994 and 1995, and by 25% of such difference for 1996. The maximum adjustment
to the consideration paid or payable for Ravensworth with respect to any year
for which EBDIT is measured against a specified target is limited to $4
million. In the event the Company does not exercise either of the options to
acquire additional interests in Ravensworth, the agreement calls for certain
purchase/sale arrangements between the parties with respect to Ravensworth.
In connection with the Company's initial purchase of 49.9% at
Ravensworth, approximately 106,000 shares of the Company's common stock placed
in escrow at the time of acquisition were returned to the Company based on
Ravensworth's actual EBDIT for 1994 compared to targeted EBDIT as described
under the agreement. Such shares, valued at approximately $1.8 million, were
cancelled and stockholders' equity and Ravensworth's investment accounts were
reduced accordingly.
Summarized historical, combined financial information for the affiliated
investees, which includes Ravensworth as of and for the years ended December
31, 1993 and 1994 and Seaboard as of and for the one month ended December 31,
1994, is as follows (in thousands):
DECEMBER 31, SEPTEMBER 30,
1993 1994 1995
--------- --------- -------------
(UNAUDITED)
Current assets....................... $ 8,962 $ 11,773 $11,578
Property and equipment, net.......... 53,002 73,389 68,968
Other noncurrent assets.............. 788 861 1,110
--------- --------- -------------
Total assets.................... $ 62,752 $ 86,023 $81,656
========= ========= =============
Current liabilities.................. $ 11,163 $ 17,869 $15,114
Long-term debt....................... 37,801 50,328(1) 49,585
Other noncurrent liabilities......... 1,985 1,574 1,123
Stockholders' equity................. 11,803 16,252 15,834
--------- --------- -------------
Total liabilities and equity.... $ 62,752 $ 86,023 $81,656
========= ========= =============
Revenues............................. $ 40,653 $ 37,870 $36,066
Operating income..................... 6,459 5,823 2,390
Foreign exchange loss
(gain)(recognized in affiliates'
accounts but not in the Company's
accounts due to purchase accounting
adjustments)....................... 3,509 (684) --
Net income (loss).................... 2,053 3,765 (616)
- ------------
(1) A total of approximately $29,000,000 of this debt is owed by subsidiaries
of Ravensworth and Seaboard whose equity represents approximately $500,000
of the total consolidated Company equity, and such debt is nonrecourse to
both the Company and Ravensworth, except for a 300,000 guarantee by
Hornbeck Offshore Services, Inc.
F-31
<PAGE>
HORNBECK OFFSHORE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5 -- LONG-TERM DEBT:
Long-term debt consisted of the following (in thousands):
DECEMBER 31, SEPTEMBER 30,
-------------------- -------------
1993 1994 1995
--------- --------- -------------
(UNAUDITED)
Bank note payable; principal payable
in quarterly installments of
$714.4, plus accrued interest at
LIBOR plus 1% (6 13/16% at December
31, 1994); secured by thirteen
vessels; matures November 15,
1999............................... $ -- $ 20,000 $18,571
Bank note payable; principal payable
in quarterly installments of $62.5,
plus accrued interest at the Bank's
prime rate plus 3/4% (6 3/4% at
December 31, 1993), payable
quarterly; secured by three
vessels; matured December 1994..... 1,955 -- --
Unsecured notes payable issued in the
Petrol acquisition; principal
payable in quarterly installments
of $164.25, plus accrued interest
at prime rate plus 1% (7% at
December 31, 1993) payable
quarterly.......................... 3,594 -- --
U.S. Government Guaranteed Ship
Financing Bonds payable in
semiannual installments of
principal and interest as described
below; secured by mortgages on nine
vessels and guaranteed by the
United States Maritime
Administration ("MARAD")........... 5,572 4,490 3,606
Unamortized debt discount recorded in
connection with the acquisition of
Point Marine, Inc.................. (67) -- --
--------- --------- -------------
11,054 24,490 22,177
Less -- current portion.............. 3,221 3,467 4,299
--------- --------- -------------
Long-term debt....................... $ 7,833 $ 21,023 $ 17,878
========= ========= =============
Maturities of long-term debt outstanding at December 31, 1994 are as
follows: 1995 -- $3,467,000; 1996 -- $3,703,000; 1997 -- $3,561,000;
1998 -- $3,433,000 and 1999 -- $9,081,000.
Concurrent with the November 15, 1994 Oil & Gas vessel acquisition, the
Company entered into a $20 million term loan and a $10 million revolving
credit facility with a bank. Any borrowings under the revolving credit
facility will be due and payable on November 15, 1997. The availability of the
revolving credit facility is based on specified trade receivables levels and
will be reduced by outstanding letters of credit. At December 31, 1994 and
September 30, 1995, there were no outstanding balances under the revolving
credit facility.
At the Company's option, interest with respect to any amounts outstanding
under the revolving credit facility and the bank term loan accrues at a rate
equal to the lender's prime rate, or the LIBOR rate plus 1%, and is payable
quarterly. The indebtedness is collateralized by 13 vessels owned by
subsidiaries of the Company. The indebtedness also contains covenants which,
among other things, provide limitations on the sale of such vessels and
require the Company to maintain certain financial ratios and minimum net
worth.
The U.S. Government Guaranteed Ship Financing Bonds represent several
series of bonds which are guaranteed by MARAD. These bonds mature from
2000-2002 and bear interest at rates ranging from 8.75% to 10.75%. Through
December 31, 1994, the Company had deposited $1,280,000 into the reserve. The
Company expects to deposit approximately $250,000 in 1995.
F-32
<PAGE>
HORNBECK OFFSHORE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6 -- INCOME TAXES:
The components of the provision for income taxes for the years ended
December 31 are as follows (in thousands):
1992 1993 1994
--------- --------- ---------
Current provision (benefit):
U.S. federal income tax......... $ -- $ 2,480 $ 2,383
Alternative minimum and other
taxes........................ 582 619 161
State income tax................ 58 104 25
Foreign taxes................... -- -- 62
Utilization of net operating
loss carryforwards and
carrybacks................... (1,164) (1,245) (864)
Utilization of investment tax
credit carryforward.......... -- -- (381)
--------- --------- ---------
(524) 1,958 1,386
--------- --------- ---------
Deferred provision (benefit):
U.S. federal income tax......... 1,106 1,946 739
Alternative minimum tax and
other credits................ (582) (619) 220
Utilization of net operating
loss carryforwards........... -- 1,245 864
--------- --------- ---------
524 2,572 1,823
--------- --------- ---------
Total provision for income
taxes........................ $ -- $ 4,530 $ 3,209
========= ========= =========
The difference between the effective income tax rate and the amount which
would be determined by applying the statutory U.S. income tax to income before
taxes is as follows:
DECEMBER 31,
--------------
1993 1994
---- ----
Provision for income taxes at U.S.
statutory rates.................... 34 % 34 %
Foreign earnings not includable in
U.S. tax return.................... (2 ) (4 )
Tax restructuring benefit............ (4 ) (1 )
State taxes.......................... 1 --
---- ----
29 % 29 %
==== ====
The Company's effective tax rate approximated the statutory rate to which
it was subject in 1992. The deferred income tax liability is primarily
comprised of differences in the tax and book basis of the Company's vessels
and benefits from the carryforward tax attributes as described below.
Undistributed earnings of the Company's foreign affiliates aggregated
$2,589,000 on December 31, 1994, which, under existing law, will not be
subject to U.S. tax until distributed as dividends. Since the earnings have
been and are intended to be indefinitely reinvested in foreign operations, no
provision has been made for any U.S. taxes that may be applicable thereto. The
amount of unrecognized deferred U.S. taxes on these undistributed earnings is
approximately $760,000. Furthermore, any taxes paid to foreign governments on
those earnings may be used in whole or in part, as credits against the U.S.
tax on any dividends distributed from such earnings.
As of December 31, 1994, the Company has net operating loss carryforwards
of $347,000 which will expire from 2004 to 2005 if not used to offset future
taxable income. As of December 31, 1994, the Company has investment tax credit
carryforwards of $1,006,000 which will expire in 1997, if not
F-33
<PAGE>
HORNBECK OFFSHORE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
used to offset future income. As of December 31, 1994, the Company also has
alternative minimum tax credit carryforwards of $1,758,000.
NOTE 7 -- COMMON STOCK, PREFERRED STOCK AND WARRANTS:
A total of 1,365,462 shares of common stock were issued in connection
with the Petrol acquisition on November 19, 1992 at a value of $8,500,000
based on the market price of the stock.
On July 21, 1993, the Company completed a public offering of 2,500,000
shares of common stock for aggregate proceeds of approximately $40,000,000,
after expenses. Proceeds have been and will be utilized for the Ravensworth
acquisition, to repay certain debt and for general corporate purposes. In
connection with the July 23 closing of the Ravensworth acquisition, 158,978
shares of common stock were issued at an aggregate value of $2,722,500.
In September 1994, the Company purchased the remaining 71 shares of
Series 1 Preferred Stock for $518,000 with the price determined in accordance
with the liquidation preference thereof.
In June 1994, 928,752 common stock purchase warrants were exercised.
Pursuant to the terms of the warrant agreement, the Company issued 480,588
shares of common stock in exchange for all of such warrants. In September
1994, the Company paid $368,896 to repurchase 71,428 warrants.
NOTE 8 -- RELATED PARTY TRANSACTIONS:
Bareboat charter fees are paid to an affiliate of a director of the
Company. Such fees totaled $600,000, $600,000 and $940,000 for the years ended
December 31, 1992, 1993 and 1994, respectively. Until September 1993, a
director of the Company was an affiliate of an investment banking firm
providing investment banking services related primarily to acquisitions made
by the Company. The Company paid fees totaling $245,000 and $301,000 in 1992
and 1993, respectively for such services.
NOTE 9 -- EMPLOYEE INCENTIVE PLANS:
Pursuant to the Company's Employee Incentive Plans of 1982, 1989 and
1993, the Board of Directors (or compensation committee thereof) has been
empowered to grant (over respective ten-year periods) stock options, stock
appreciation rights and stock bonuses with respect to an aggregate of 950,000
shares of Common Stock. There were 5,825, 466,770 and 458,712 shares available
for grant at December 31, 1992, 1993 and 1994, respectively.
The following is a summary of stock option activity for the periods
indicated:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------- -------------
1992 1993 1994 1995
------------- -------------- ---------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Options outstanding at beginning of
period............................. 295,934 311,559 287,619 283,593
Options granted...................... 19,125 20,160 7,250 59,841
Options exercised.................... (2,000) (44,100) (9,861) (11,758)
Options canceled..................... (1,500) -- (1,415) (6,947)
------------- -------------- ---------------- -------------
Options outstanding at end of
period............................. 311,559 287,619 283,593 324,729
============= ============== ================ =============
Price range of options granted....... $ 3.25-7.13 $ 6.31-13.00 $ 14.25-14.65 $ 9.88-11.50
Price range of options exercised..... $ .69-1.75 $ 2.63-5.84 $ 3.50-6.31 $ 3.50-13.00
Price range of options outstanding at
end of period...................... $ 2.63-7.38 $ 3.25-13.00 $ 3.25-14.65 $ 3.50-14.65
</TABLE>
F-34
<PAGE>
HORNBECK OFFSHORE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The stock options are exercisable over a five-year or ten-year period
which commences on the date of grant. The number of shares exercisable in each
year during the period is determined by the Company's Board of Directors (or
compensation committee) at the time of grant. At December 31, 1992, 1993 and
1994, options to purchase 264,300, 246,739 and 257,763 shares, respectively,
were exercisable. Because the exercise price of the options equaled the market
price of the Company's stock on the dates the options were granted, no
compensation costs have been recognized by the Company.
Effective January 1, 1993, a total of 13,975 shares were awarded to
employees which vest over two years. Compensation expense of approximately
$97,000 will be recorded for the stock awards over the vesting period. On
December 14, 1993, a total of 13,070 shares were awarded to employees which
vest over three years. Compensation expense of approximately $170,000 will be
recorded for the stock awards over the vesting period.
In November 1994, a total of 2,698 shares which vest over a period of
1 1/2-2 years were awarded to employees. Compensation expense of approximately
$37,845 will be recorded for the stock awards over the vesting period.
In 1992, 1993 and 1994, shares totaling 3,500, 3,500 and 4,200,
respectively, were awarded to the Company's Board of Directors.
No stock appreciation rights have been awarded under the Employee
Incentive Plans. The Company has no postretirement benefits that are required
to be accrued under Statement of Financial Accounting Standards ("SFAS") No.
106, "Accounting for Postretirement Benefits Other Than Pensions", nor does it
have postemployment benefits that are required to be accrued under SFAS No.
112, "Employer's Accounting for Postemployment Benefits".
NOTE 10 -- SEGMENT INFORMATION:
The Company's operations which are conducted in one segment, the offshore
service vessel industry. Charter fee revenues earned from customers in excess
of 10% of total revenues were as follows: 1992, one customer (16%); 1993 and
1994, none.
NOTE 11 -- COMMITMENTS AND CONTINGENCIES:
Hornbeck has received and is responding to a subpoena for documents from
the United States District Court for the Southern District of Texas, Houston
Division. The scope of the subpoena suggests an interest in Hornbeck's
compliance with certain environmental statutes and regulations, violations of
which could carry both civil and criminal liabilities. The subpoena seeks
information concerning Hornbeck's vessels since January 1, 1993 regarding
vessel operations as they relate to the purchase, use and disposition of
petroleum and related products.
It is Hornbeck's policy to comply with all applicable laws, including
laws designed to protect the environment. While management and the Hornbeck
Board do not believe that any outcome of the investigation would have a
material adverse effect on the financial position of Hornbeck, they cannot
predict the nature or ultimate outcome of the investigation or any proceeding
that might be based thereon.
The Company is not party to any legal proceedings the result of which
could, in the opinion of management, have a material adverse effect upon the
Company.
F-35
<PAGE>
HORNBECK OFFSHORE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12 -- CASH FLOW INFORMATION:
The following is a reconciliation of net income to net cash provided by
operating activities (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
1992 1993 1994 1994 1995
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net income........................... $ 62 $ 10,665 $ 8,023 $ 5,513 $ 4,205
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization...... 4,749 7,394 10,007 7,144 9,977
Amortization of noncompete
agreements...................... 234 291 150 -- --
Amortization of debt discount...... 251 200 67 -- --
Deferred income taxes.............. 524 2,846 1,823 1,476 2,340
Equity in net (income) loss of
unconsolidated affiliates....... (5) (822) (1,409) (1,362) 335
Cash distributions from
unconsolidated affiliate........ 280 38 -- -- --
Unrealized income on marketable
securities, net................. -- (291) -- -- --
Gain on sale of vessels and other
assets.......................... -- -- (736) (694) (427)
Salvage expense.................... -- 945 -- -- --
Extraordinary charge for early
retirement
of debt......................... -- 280 -- -- --
Other.............................. (186) (28) 100 371 59
Changes in current assets and
liabilities, net:
Accounts receivable -- trade.... (2,257) (3,813) (2,335) 2,337 270
Refundable income taxes......... (528) 663 -- -- --
Prepaid and other current
assets....................... 155 (3,309) 2,824 844 (227)
Accounts payable................ 638 715 (291) 1,163 513
Accrued interest................ (29) (107) (40) (16) 328
Income taxes payable............ -- 440 (82) (475) (192)
Other accrued liabilities(1).... (217) 122 1,047 804 403
--------- --------- --------- --------- ---------
Net cash provided by operating
activities................... $ 3,671 $ 16,229 $ 19,148 $ 17,105 $ 17,584
========= ========= ========= ========= =========
</TABLE>
- ------------
(1) Included in other accrued liabilities are net increases of $223 and $243
attributed to the change in accrued labor and accrued medical,
respectively, for the year ended 1994.
F-36
<PAGE>
HORNBECK OFFSHORE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following is a supplemental schedule of noncash investing and
financing activities for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
1992 1993 1994 1994 1995
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Issuance of common and preferred
stock:
Director's stock plan........... $ 11 $ 16 $ -- $ -- $ --
Acquisition of Petrol........... 8,500 -- -- -- --
Acquisition of Ravensworth...... -- 2,723 -- -- --
Debt issued for Petrol acquisition... 5,250 -- -- -- --
Reduction of limited partnership
debt............................... 2,563 -- -- -- --
Write-off of limited partnership
assets, net........................ 2,518 -- -- -- --
Tax benefit of stock sold by
employees.......................... 39 129 36 -- --
Exercise of warrants................. -- -- 358 358 --
Return of shares from escrow -- Note
4.................................. -- -- -- -- 1,810
</TABLE>
NOTE 13 -- QUARTERLY FINANCIAL DATA (UNAUDITED):
Summarized quarterly financial data for 1992, 1993, 1994 and 1995 are as
follows (in thousands, except per share data):
THREE MONTHS ENDED (1992)
------------------------------------------
MAR 31 JUNE 30 SEP 30 DEC 31
--------- --------- --------- ---------
Revenues.......................... $ 4,047 $ 4,108 $ 3,977 $ 6,303
Depreciation and amortization..... 1,264 1,204 1,178 1,103
Operating profit (loss)(1)........ (695) (401) (397) 2,060
Net income (loss)................. (573) (191) (337) 1,163
Net income (loss) per share....... (.07) (.02) (.04) .12
THREE MONTHS ENDED (1993)
------------------------------------------
MAR 31 JUNE 30 SEP 30 DEC 31
--------- --------- --------- ---------
Revenues.......................... $ 9,410 $ 10,601 $ 12,582 $ 14,698
Depreciation and amortization..... 1,620 1,698 2,016 2,060
Operating profit(1)............... 2,838 3,548 4,753 5,232
Net income........................ 1,779 2,774 3,427 2,685
Net income per share.............. .17 .26 .27 .20
F-37
<PAGE>
HORNBECK OFFSHORE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THREE MONTHS ENDED (1994)
------------------------------------------
MAR 31 JUNE 30 SEP 30 DEC 31
--------- --------- --------- ---------
Revenues.......................... $ 11,506 $ 9,807 $ 10,418 $ 14,103
Depreciation and amortization..... 2,312 2,479 2,469 2,747
Operating profit(1)............... 2,495 1,160 1,470 3,642
Net income........................ 1,902 1,476 2,135 2,510
Net income per share.............. .14 .11 .16 .19
THREE MONTHS ENDED (1995)
------------------------------------------
MAR 31 JUNE 30 SEP 30
--------- --------- ---------
Revenues.......................... $ 12,671 $ 14,057 $ 14,603
Depreciation and amortization..... 3,282 3,361 3,334
Operating profit(1)............... 468 2,543 2,977
Net income........................ 487 1,579 2,139
Net income per share.............. .04 .12 .16
- ------------
(1) Operating profit equals operating revenues minus direct labor and other
operating expenses, depreciation and amortization and general and
administrative expenses.
NOTE 14 -- SUBSEQUENT EVENTS (UNAUDITED):
On December 21, 1995, Hornbeck Offshore Services, Inc. ("Hornbeck")
entered into an Agreement and Plan of Merger with Tidewater Inc. ("Tidewater")
to merge a wholly owned subsidiary of Tidewater into Hornbeck with Hornbeck
becoming a wholly owned subsidiary of Tidewater. The merger will be structured
as a tax free exchange of approximately 8,780,000 Tidewater shares for all
Hornbeck shares (an exchange ratio of 0.667 Tidewater shares for each Hornbeck
share, subject to adjustment) and will be accounted for as a pooling of
interests.
The Board of Directors of both Hornbeck and Tidewater have approved the
combination subject to the approval of stockholders of Hornbeck holding at
least 66 2/3% of the outstanding Hornbeck common stock, certain regulatory
approvals and certain other conditions. The merger is expected to be completed
in early 1996. Upon consummation of the merger, Larry D. Hornbeck will join
the Board of Directors of Tidewater and will become a consultant to Tidewater.
On December 29, 1995, Hornbeck made advance payments in the approximate
aggregate amount of $2,500,000 to three executive officers, such payments
being a portion of the amounts to which such officers would become entitled
following consummation of the merger under the terms of change in control
agreements between Hornbeck and such executive officers.
F-38
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
Among
TIDEWATER INC.,
TIDEWATER EXPANSION, INC.
and
HORNBECK OFFSHORE SERVICES, INC.
Dated as of December 21, 1995
TABLE OF CONTENTS
Page
ARTICLE 1. DEFINITIONS......................................... 1
Section 1.1 Definitions.............................. 1
ARTICLE 2. THE CLOSING; THE MERGER; EFFECTS OF THE MERGER...... 5
Section 2.1 Closing. ............................... 5
Section 2.2 The Merger............................... 6
Section 2.3 Effects of the Merger; Certificate and
By-laws; Directors and Officers.......... 6
ARTICLE 3. MERGER CONSIDERATION; CONVERSION OF SHARES.......... 6
Section 3.1 Conversion of Shares..................... 6
Section 3.2 Exchange of Stock Certificates; Record
Date..................................... 8
Section 3.3 No Further Rights in Hornbeck Common
Stock.................................... 8
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF HORNBECK.......... 8
Section 4.1 Organization............................. 8
Section 4.2 Affiliated Entities...................... 9
Section 4.3 Capitalization........................... 9
Section 4.4 Authority; Enforceable Agreements........ 9
Section 4.5 No Conflicts or Consents................. 10
Section 4.6 Corporate Documents, Stockholder
Agreements and Board of Directors........ 11
Section 4.7 SEC Documents; Financial Statements;
Liabilities.............................. 11
Section 4.8 Accounts Receivable...................... 12
Section 4.9 Absence of Certain Changes or Events..... 12
Section 4.10 Contracts................................ 14
Section 4.11 Properties and Leases other than Vessels. 15
Section 4.12 Condition of Hornbeck's Assets Other
than Vessels............................. 16
Section 4.13 Vessels.................................. 16
Section 4.14 Voting Requirements...................... 17
Section 4.15 State Takeover Statutes; Hornbeck
Stockholder Rights Plan.................. 17
Section 4.16 Accounting Matters....................... 18
Section 4.17 Suppliers and Customers.................. 18
Section 4.18 Employee Matters......................... 18
Section 4.19 Employee Benefit Plans................... 19
Section 4.20 Tax Matters.............................. 21
Section 4.21 Litigation............................... 23
Section 4.22 Insurance................................ 23
Section 4.23 Environmental Compliance................. 24
Section 4.24 Compliance With Law; Permits............. 25
Section 4.25 Interests in Clients, Suppliers, Etc..... 25
Section 4.26 Transactions With Related Parties........ 26
Section 4.27 Statements are True and Correct.......... 26
Section 4.28 Citizenship.............................. 26
Section 4.29 Broker's and Finder's Fee................ 26
Section 4.30 Disclosure............................... 27
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF TIDEWATER AND SUB. 27
Section 5.1 Organization............................. 27
Section 5.2 Affiliated Entities...................... 27
Section 5.3 Capitalization........................... 27
Section 5.4 Authority; Enforceable Agreements........ 28
Section 5.5 No Conflicts or Consents................. 28
Section 5.6 Corporate Documents, Stockholder
Agreements and Board of Directors........ 29
Section 5.7 SEC Documents; Financial Statements;
Liabilities.............................. 29
Section 5.8 Absence of Certain Changes or Events..... 30
Section 5.9 Contracts................................ 31
Section 5.10 Vessels.................................. 31
Section 5.11 Environmental Compliance................. 32
Section 5.12 State Takeover Statutes.................. 32
Section 5.13 Accounting Matters....................... 32
Section 5.14 Litigation............................... 33
Section 5.15 Legality of Tidewater Common Stock....... 33
Section 5.16 Statements are True and Correct.......... 33
Section 5.17 No Stockholder Vote...................... 33
Section 5.18 Citizenship.............................. 33
Section 5.19 Broker's and Finder's Fee................ 33
Section 5.20 Disclosure............................... 34
ARTICLE 6. PRE-CLOSING COVENANTS................................ 34
Section 6.1 Hart-Scott-Rodino; Cooperation and
Best Efforts............................. 34
Section 6.2 Registration Statement and Proxy
Statement; Hornbeck Special Meeting...... 34
Section 6.3 Conduct of Business By Both Parties
Prior to the Closing Date................ 35
Section 6.4 Conduct of Business By Hornbeck Prior
to the Closing Date...................... 36
Section 6.5 No Solicitations......................... 38
Section 6.6 Press Releases........................... 39
Section 6.7 Access to Information and Confidentiality 40
Section 6.8 Consultation and Reporting............... 40
Section 6.9 Update Schedules......................... 40
Section 6.10 Hornbeck Stock Options................... 40
Section 6.11 Exercise of North Sea Options............ 41
Section 6.12 Hornbeck 1995 Form 10-K.................. 41
Section 6.13 Severance Policy......................... 41
Section 6.14 Sub Stockholder Approval................. 41
Section 6.15 Employee Indemnification................. 41
Section 6.16 Change in Control Agreements............. 41
ARTICLE 7. CLOSING CONDITIONS................................... 42
Section 7.1 Conditions Applicable to All Parties..... 42
Section 7.2 Conditions to Tidewater's Obligations.... 42
Section 7.3 Conditions to Hornbeck's Obligations..... 44
Section 7.4 Waiver of Conditions..................... 45
ARTICLE 8. POST-CLOSING COVENANTS............................... 45
Section 8.1 Use of Hornbeck Name..................... 45
Section 8.2 Indemnification of Directors and
Officers of Hornbeck..................... 46
Section 8.3 Publication of Post-Merger Results....... 47
Section 8.4 Employee Benefits........................ 47
Section 8.5 Registration Rights...................... 47
ARTICLE 9. TERMINATION.......................................... 47
Section 9.1 Termination.............................. 47
Section 9.2 Effect of Termination.................... 48
ARTICLE 10. MISCELLANEOUS....................................... 49
Section 10.1 Notices.................................. 49
Section 10.2 Governing Law............................ 49
Section 10.3 Counterparts............................. 50
Section 10.4 Interpretation; Schedules................ 50
Section 10.5 Entire Agreement; Severability........... 50
Section 10.6 Amendment and Modification............... 50
Section 10.7 Extension; Waiver........................ 50
Section 10.8 Binding Effect; Benefits................. 51
Section 10.9 Assignability............................ 51
Section 10.10 Expenses................................. 51
Section 10.11 Gender and Certain Definitions........... 51
Section 10.12 Non-Survival of Representations and
Warranties; Remedies..................... 51
LIST OF SCHEDULES
Schedule 4.2 Schedule 4.20(a)(vii)
Schedule 4.3 Schedule 4.20(a)(x)
Schedule 4.5(a) Schedule 4.20(a)(xiii)
Schedule 4.5(b) Schedule 4.21
Schedule 4.6 Schedule 4.22
Schedule 4.7(b) Schedule 4.23(b)
Schedule 4.7(f) Schedule 4.23(d)
Schedule 4.8 Schedule 4.25
Schedule 4.9 Schedule 4.26(a)
Schedule 4.10(a) Schedule 4.26(b)
Schedule 4.10(b) Schedule 4.29
Schedule 4.11(a) Schedule 5.7(e)
Schedule 4.11(d) Schedule 5.10
Schedule 4.13(a) Schedule 5.11(b)
Schedule 4.13(c) Schedule 5.11(c)
Schedule 4.18(a) Schedule 5.14
Schedule 4.19(a) Schedule 6.4(d)
Schedule 4.19(b) Schedule 6.4(e)
Schedule 4.19(j) Schedule 6.4(f)
Schedule 4.19(k) Schedule 6.13
Schedule 4.20(a)(ii) Schedule 8.4
Schedule 4.20(a)(v)
LIST OF EXHIBITS
Exhibit A Certificate of Merger
Exhibit B Letter of Transmittal
Exhibit C-1 Form of opinion of Keck, Mahin & Cate
Exhibit C-2 Form of opinion of Morris, Nichols, Arsht & Tunnell,
Hornbeck Delaware counsel
Exhibit D-1 Form of opinion of Cliffe F. Laborde
Exhibit D-2 Form of opinion of Jones, Walker, Waechter, Poitevent,
Carrere & Denegre, L.L.P.
Exhibit D-3 Form of opinion of Ashby & Geddes, Tidewater
Delaware counsel
Exhibit E Consulting Agreement with Larry Hornbeck
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER dated as of
December 21, 1995 is by and among Tidewater Inc., a
Delaware corporation ("Tidewater"), Tidewater Expansion,
Inc., a wholly owned subsidiary of Tidewater and a
Delaware corporation ("Sub"), and Hornbeck Offshore
Services, Inc., a Delaware corporation ("Hornbeck").
W I T N E S S E T H :
WHEREAS, the respective Boards of Directors of
Tidewater, Sub and Hornbeck deem it desirable to merge Sub
into Hornbeck (the "Merger") with the result that Hornbeck
shall become a wholly owned subsidiary of Tidewater
pursuant to the terms and conditions hereof;
WHEREAS, it is the parties' mutual intent that the
Merger constitute a reorganization under Section 368 of
the Internal Revenue Code of 1986, as amended (the "Code")
and that this Agreement constitute a plan of
reorganization thereunder;
WHEREAS, for accounting purposes, it is intended that
the Merger shall be accounted for as a pooling-of-
interests;
NOW, THEREFORE, in consideration of the
representations, warranties and covenants contained
herein, the parties agree as follows:
ARTICLE 1. DEFINITIONS
Section 1.1Definitions. As used in this Agreement,
the following terms when capitalized have the meanings
indicated.
"Affiliate" shall have the meaning ascribed by Rule
12b-2 promulgated under the Exchange Act.
"Agreement" shall mean this Agreement and Plan of
Merger, including the Schedules and Exhibits hereto, all
as amended or otherwise modified from time to time.
"Average Market Price" shall mean the average of the
daily closing sale prices of a share of Tidewater Common
Stock on the New York Stock Exchange as reported in The
Wall Street Journal for the 10 consecutive trading days
that end on the second trading day prior to the Closing
Date.
"Benefit Arrangement" means any employment, severance
or similar contract, or any other contract, plan, policy
or arrangement (whether or not written) providing for
compensation, bonus, profit-sharing, stock option or other
stock related rights or other forms of incentive or
deferred compensation, vacation benefits, insurance
coverage (including any self-insured arrangement), health
or medical benefits, disability benefits, severance
benefits and post-employment or retirement benefits
(including compensation, pension, health, medical or life
insurance benefits), other than the Employee Plans, that
(A) is maintained, administered or contributed to by the
employer and (B) covers any employee or former employee of
the employer.
"Business Day" shall mean a day other than a
Saturday, a Sunday or a day on which national banks or the
New York Stock Exchange is closed.
"Closing Date" shall have the meaning ascribed to it
in Section 2.1(a).
"Code" shall mean the Internal Revenue Code of 1986,
as amended.
"DGCL" shall mean the General Corporation Law of the
State of Delaware, as amended.
"Effective Date" shall have the meaning ascribed to
it in Section 2.1(b) hereof.
"Effective Time" shall have the meaning ascribed to
it in Section 2.1(b) hereof.
"Employee Plan" means a plan or arrangement as
defined in Section 3(3) of ERISA, that (A) is subject to
any provision of ERISA, (B) is maintained, administered or
contributed to by the employer and (C) covers any employee
or former employee of the employer.
"Environmental Laws" shall have the meaning ascribed
to it in Section 4.23.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended, and the rules and regulations
promulgated thereunder.
"Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
"Hornbeck Audited Financial Statements" shall mean
the audited balance sheets and related statements of
income, stockholders' equity and cash flows, and the
related notes thereto of Hornbeck as of and for the years
ended December 31, 1992, 1993 and 1994.
"Hornbeck Common Stock" means the shares of Hornbeck
common stock, $.10 par value per share.
"Hornbeck Consolidated Group" shall mean Hornbeck and
any entity in which Hornbeck directly or indirectly owns
at least 50% of its equity interest, provided that this
definition shall not include any of the entities in the
North Sea Group.
"Hornbeck Financial Statements" shall mean the
Hornbeck Audited Financial Statements and the Hornbeck
Interim Financial Statements, collectively.
"Hornbeck Group" shall mean the Hornbeck Consolidated
Group and the North Sea Group.
"Hornbeck Interim Financial Statements" shall mean
the unaudited balance sheet, and the related unaudited
statements of income and cash flows of Hornbeck as of and
for the nine-month period ended September 30, 1995.
"Hornbeck Latest Balance Sheet" shall mean the
balance sheet of Hornbeck included in the Hornbeck Interim
Financial Statements.
"Hornbeck Stockholder Rights Plan" shall mean the
Rights Agreement dated as of June 20, 1995, by and between
Hornbeck and First Interstate Bank of Texas, N.A., as
rights agent.
"Hornbeck Vessels" shall have the meaning ascribed in
Section 4.13 hereof.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"HSR Report" shall mean the premerger notification
and report form to be filed under the HSR Act.
"Knowledge of Hornbeck" shall mean the actual
knowledge of Larry D. Hornbeck, Bernie W. Stewart or
Robert W. Hampton, all being executive officers of
Hornbeck, without obligation to conduct further inquiry
outside the ordinary course of business.
"Knowledge of Tidewater" shall mean the actual
knowledge of William C. O'Malley, Ken C. Tamblyn, Richard
M. Currence, Stephen A. Snider or Cliffe F. Laborde, all
being executive officers of Tidewater, without obligation
to conduct further inquiry outside the ordinary course of
business.
"Liens" shall mean pledges, liens, defects, leases,
licenses, equities, conditional sales contracts, charges,
claims, encumbrances, security interests, easements,
restrictions, chattel mortgages, mortgages or deeds of
trust, of any kind or nature whatsoever.
"Material Adverse Effect" shall mean with respect to
any party, a material adverse effect on the financial
condition, results of operations, business or prospects of
such party and its 20% or more-owned direct and indirect
subsidiaries, taken as a whole; provided, however, that a
general economic decline or a decline experienced by the
offshore marine service industry, generally, shall not
constitute a Material Adverse Effect; and provided
further, that the parties agree that with respect only to
those acts, events or occurrences that result, or that are
reasonably likely to result, individually or in the
aggregate, in a quantifiable loss, cost or expense (a
"Quantifiable Loss"): (i) with respect to Hornbeck and
its 20% or more owned subsidiaries, a Quantifiable Loss
that does not exceed $6 million, and (ii) with respect to
Tidewater and its 20% or more owned subsidiaries, a
Quantifiable Loss that does not exceed $35 million, shall
not be deemed to constitute a Material Adverse Effect, but
a Quantifiable Loss that does exceed $6 million (with
respect to Hornbeck) or $35 million (with respect to
Tidewater), shall be deemed to constitute a Material
Adverse Effect. The parties acknowledge and agree that
acts, events or occurrences, the effects or reasonably
likely effects of which are not susceptible of being
measured or reduced to a Quantifiable Loss could
nevertheless constitute a Material Adverse Effect, and
that the second proviso of the foregoing sentence shall
not preclude either party from asserting that such acts or
events or occurrences have caused or resulted in, or are
reasonably likely to cause or result in, a Material
Adverse Effect.
"Multiemployer Plan" means a plan or arrangement as
defined in Section 4001(a)(3) and 3(37) of ERISA.
"North Sea Group" shall mean Ravensworth Investments
Limited ("Ravensworth"), Hornbeck Offshore Limited
("HOL"), Seaboard Holdings Limited ("Seaboard"), and any
of their respective subsidiaries.
"Permitted Liens" shall mean any mechanic's,
worker's, materialmen's, operator's, maritime or other
liens arising as a matter of law in the ordinary course of
business.
"Person" shall mean an individual, firm, corporation,
general or limited partnership, limited liability company,
limited liability partnership, joint venture, trust,
governmental authority or body, association,
unincorporated organization or other entity.
"Pre-Closing Periods" shall mean all Tax periods
ending at or before the Effective Time and, with respect
to any Tax period that includes but does not end at the
Effective Time, the portion of such period that ends at
and includes the Effective Time.
"Proxy Statement" shall mean the proxy statement of
Hornbeck to be included in the Registration Statement for
the purpose of obtaining the approval of the stockholders
of Hornbeck of this Agreement and the prospectus of
Tidewater to be included in the Registration Statement for
the purpose of offering the Tidewater Common Stock to the
Hornbeck stockholders upon consummation of the Merger.
"Ravensworth Options" shall mean the options granted
to Hornbeck, exercisable between January 1, 1995 and March
31, 1996 and between January 1, 1995 and March 31, 1997,
respectively, to acquire additional 25.1% and 25%
interests, respectively, in Ravensworth Investments
Limited pursuant to the Stock Option and Ancillary Rights
Agreement dated as of May 26, 1993 by and between
Ravensworth Holdings Limited and Hornbeck.
"Registration Statement" shall mean the registration
statement on Form S-4 to be filed by Tidewater with the
SEC for the purpose, among other things, of registering
the Tidewater Common Stock which will be issued to the
holders of Hornbeck Common Stock upon consummation of the
Merger.
"Returns" shall mean all returns, reports, estimates,
declarations and statements of any nature regarding Taxes
for any Pre-Closing Period required to be filed by the
taxpayer relating to its income, properties or operations.
"Rights" shall mean the rights associated with shares
of Tidewater Common Stock to purchase a unit consisting of
one two-hundredth of a share of Series A Participating
Preferred Stock, without par value, of Tidewater upon the
terms and subject to the conditions of the Tidewater
Stockholder Rights Plan.
"SEC" shall mean the Securities and Exchange
Commission of the United States.
"Securities Act" shall mean the Securities Act of
1933, as amended.
"Special Meeting" shall have the meaning ascribed in
Section 6.2(c) hereof.
"Surviving Corporation" shall mean Hornbeck following
the Effective Time.
"Taxes" shall mean any federal, state, local, foreign
or other taxes (including, without limitation, income,
alternative minimum, franchise, property, sales, use,
lease, excise, premium, payroll, wage, employment or
withholding taxes), fees, duties, assessments,
withholdings or governmental charges of any kind
whatsoever (including interest, penalties and additions to
tax).
"Tidewater Affiliated Group" shall mean Tidewater,
Sub, Tidewater Marine Inc., Tidewater Compression Service
Inc., Gulf Fleet Supply Vessels, Inc., Jackson Marine
Corporation, Jackson Marine, S.A., Seafarer Boat
Corporation, Southern Ocean Services PTE. Ltd., Tidewater
Nautico, Inc., Twenty Grand Marine Service, Inc., Twenty
Grand Offshore, Inc., Zapata Gulf Marine Operators, Inc.
and Zapata Gulf Marine International Limited.
"Tidewater Audited Financial Statements" shall mean
the audited balance sheets, and the related statements of
earnings, stockholders' equity and cash flows, and the
related notes thereto of Tidewater as of and for the years
ended March 31, 1993, 1994 and 1995.
"Tidewater Common Stock" shall mean shares of
Tidewater common stock, $.10 par value per share.
"Tidewater Financial Statements" shall mean the
Tidewater Audited Financial Statements and the Tidewater
Interim Financial Statements.
"Tidewater Interim Financial Statements" shall mean
the unaudited balance sheet, and the related unaudited
statements of earnings and cash flows as of and for the
six month period ended September 30, 1995.
"Tidewater Latest Balance Sheet" shall mean the
balance sheet included in the Tidewater Interim Financial
Statements.
"Tidewater Stockholder Rights Plan" shall mean the
Restated Rights Agreement dated as of December 17, 1993 by
and between Tidewater and the First National Bank of
Boston, as rights agent.
"Title IV Plan" means an Employee Plan, other than
any Multiemployer Plan, subject to Title IV of ERISA.
ARTICLE 2. THE CLOSING; THE MERGER; EFFECTS OF THE MERGER
Section 2.1 Closing. (a) The closing of the
transactions contemplated herein (the "Closing") will take
place, assuming satisfaction or waiver of each of the
conditions set forth in Article 7 hereof, at the offices
of Jones, Walker, Waechter, Poitevent, Carrere & Denegre,
L.L.P., 201 St. Charles Avenue, New Orleans, Louisiana, at
10:00 A.M. (Central Time) on a date to be mutually agreed
upon between the parties, which shall be no later than the
third Business Day after satisfaction of the latest to
occur of the conditions set forth in Sections 7.1, 7.2(c)
and 7.3(c), or if no date has been agreed to, on any date
specified by one party to the other upon five days' notice
following satisfaction of such conditions; provided, in
each case, that the other conditions set forth in Article
7 shall have been satisfied or waived as provided in
Article 7 at or prior to the Closing (the date of the
Closing being referred to herein as the "Closing Date").
(b) At the Closing, the parties shall (i)
deliver the documents, certificates and opinions required
to be delivered by Article 7 hereof, (ii) provide proof or
indication of the satisfaction or waiver of each of the
conditions set forth in Article 7 hereof, (iii) cause the
appropriate officers of Hornbeck to execute and deliver
the Certificate of Merger (the "Certificate of Merger") in
substantially the form attached as Exhibit A hereto and
(iv) consummate the Merger by causing to be filed the
properly executed Certificate of Merger with the Secretary
of State of the State of Delaware in accordance with the
provisions of the DGCL. The Merger shall be effective
upon filing of the Certificate of Merger with the
Secretary of State of Delaware (such date and time being
hereinafter referred to respectively as the "Effective
Date" and the "Effective Time").
Section 2.2 The Merger. Subject to the terms and
conditions of this Agreement, Sub shall be merged with and
into Hornbeck at the Effective Time. Following the
Merger, the separate corporate existence of Sub shall
cease and Hornbeck shall be the Surviving Corporation and
shall succeed to and assume all the rights and obligations
of Sub in accordance with the DGCL.
Section 2.3 Effects of the Merger; Certificate and
By-laws; Directors and Officers. (a) The Merger shall have
the effects specified in Section 259(a) of the DGCL.
(b) The Certificate of Incorporation of
Hornbeck, as amended and restated and attached to the
Certificate of Merger, shall be the Certificate of
Incorporation of the Surviving Corporation thereafter
unless and until amended in accordance with its terms and
as provided by law.
(c) The By-laws of Sub as in effect at the
Effective Time shall be the By-laws of the Surviving
Corporation thereafter unless and until amended in
accordance with their terms, the terms of the Certificate
of Incorporation of the Surviving Corporation and as
provided by law.
(d) The directors and officers of Sub at the
Effective Time shall be the directors and officers of the
Surviving Corporation thereafter, each to hold a
directorship or office in accordance with the Certificate
of Incorporation and By-laws of the Surviving Corporation
until their respective successors are duly elected and
qualified.
ARTICLE 3. MERGER CONSIDERATION; CONVERSION OF SHARES
Section 3.1 Conversion of Shares. (a) At the
Effective Time, by virtue of the Merger and without any
further action on the part of Tidewater, Sub, Hornbeck or
the Surviving Corporation, or any holder of any of the
following securities:
(i) each share of common stock of Sub
issued and outstanding at the
Effective Time shall be converted into
one share of the common stock, $.10
par value per share, of the Surviving
Corporation;
(ii) each issued share of Hornbeck Common
Stock that is held in treasury by
Hornbeck or held by any subsidiary of
Hornbeck shall be cancelled and no
stock of Tidewater or other
consideration shall be delivered in
exchange therefor;
(iii) each share of Hornbeck Common Stock
issued and outstanding at the
Effective Time shall be converted into
the right to receive .667 (as it may
be adjusted as provided herein, the
"Exchange Ratio") of a fully paid and
nonassessable share of Tidewater
Common Stock and associated Rights
(the "Merger Consideration"); provided
that, if the Average Market Price of a
share of Tidewater Common Stock is (a)
less than $24.50, then the Exchange
Ratio shall equal that number obtained
by dividing $16.34 by the Average
Market Price or (b) greater than
$32.50, then the Exchange Ratio shall
equal that number obtained by dividing
$21.68 by the Average Market Price;
provided further that in no event
shall the Exchange Ratio, as so
adjusted, be less than .60 or greater
than .74; provided further that,
except as may otherwise be agreed by
Tidewater pursuant to Section 6.11
hereof, in no event shall the
aggregate number of shares of Hornbeck
Common Stock to be converted at the
Effective Time exceed 13,510,336 less
the number of unissued shares of
Hornbeck Common Stock subject to
outstanding Hornbeck Disclosed
Employee Stock Options (as defined in
Section 4.3(a)) that remain
unexercised at the Effective Time.
(b) Upon conversion of the shares of Hornbeck
Common Stock into the Merger Consideration in the manner
described in paragraph 3.1(a)(iii) above, each record
holder of issued and outstanding Hornbeck Common Stock
immediately prior to the Effective Time shall have the
right to receive a certificate representing such whole
number of shares of Tidewater Common Stock (together with
the associated Rights) equal to the product of (A) the
Exchange Ratio and (B) the number of issued and
outstanding shares of Hornbeck Common Stock of which such
Person is the record holder immediately prior to the
Effective Time.
(c) In lieu of the issuance of fractional
shares of Tidewater Common Stock, each holder of record of
issued and outstanding shares of Hornbeck Common Stock as
of the Effective Time shall be entitled to receive a cash
payment (without interest) (each a "Fractional Payment"
and, collectively, the "Fractional Payments") equal to the
fair market value of a fraction of a share of Tidewater
Common Stock to which such holder would be entitled but
for this provision. For purposes of calculating such cash
payment, the fair market value of a fraction of a share of
Tidewater Common Stock shall be such fraction multiplied
by the Average Market Price.
Section 3.2 Exchange of Stock Certificates; Record
Date. (a) On or after the Effective Date, each holder of
record of a certificate or certificates that immediately
prior to the Effective Time represented issued and
outstanding shares of Hornbeck Common Stock whose shares
were converted into the Merger Consideration and, where
applicable, a right to Fractional Payments pursuant to
Section 3.1 hereof shall surrender such certificates for
cancellation to Tidewater, together with a letter of
transmittal in the form of Exhibit B hereto, duly
executed. Such letter of transmittal shall require each
former record holder of a certificate or certificates that
represented Hornbeck Common Stock to specify whether such
person is a citizen of the United States, within the
meaning of the Merchant Marine Act of 1936, as amended,
the Shipping Act of 1916, as amended, and the Merchant
Marine Act of 1920, as amended, and the regulations
thereunder (the "Federal Maritime Laws"). In exchange
therefor, Tidewater shall issue to each such holder who
has appropriately confirmed that he is a United States
citizen a "United States Citizen" certificate, and to each
other holder, a "Non-Citizen" certificate, representing in
each case the number of whole shares of Tidewater Common
Stock that such holder has the right to receive pursuant
to the provisions of Section 3.1(b), and pay such holder
any cash payment in lieu of any fractional share in
accordance with Section 3.1(c), and the certificates
representing shares of Hornbeck Common Stock so
surrendered shall forthwith be cancelled.
(b) Tidewater shall deliver the Merger
Consideration and the Fractional Payments required under
this Agreement to such Persons who were record owners of
the Hornbeck Common Stock as of the close of business on
the Closing Date.
Section 3.3 No Further Rights in Hornbeck Common
Stock. As of the Effective Time, all shares of Hornbeck
Common Stock shall no longer be outstanding and shall
automatically be cancelled and shall cease to exist, and
each holder of a certificate representing shares of
Hornbeck Common Stock as of the Effective Time shall cease
to have any rights with respect thereto, except the right
to receive the Merger Consideration and the Fractional
Payments upon surrender of such certificate as provided in
Section 3.2.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF HORNBECK
Hornbeck represents and warrants to Tidewater and
Sub, as of the date hereof that, except as set forth in
the Schedules numbered to correspond to the applicable
representation or warranty:
Section 4.1 Organization. (a) Hornbeck is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has
all corporate power and authority to carry on its business
as now being conducted and to own its properties. Each
other member of the Hornbeck Consolidated Group, and, to
the Knowledge of Hornbeck, each member of the North Sea
Group, is duly organized under the laws of the state or
foreign nation of its organization and has all the
requisite power and authority under the laws of such
jurisdiction to carry on its business as now being
conducted and to own its properties. Each member of the
Hornbeck Consolidated Group, and, to the Knowledge of
Hornbeck, each member of the North Sea Group, is duly
qualified to do business and is in good standing in each
state and foreign jurisdiction in which the character or
location of the properties owned or leased by it or the
nature of the business conducted by it makes such
qualification necessary, except where the failure to be so
qualified or in good standing would not have a Material
Adverse Effect on Hornbeck.
Section 4.2 Affiliated Entities. (a) Schedule 4.2
lists each member of the Hornbeck Group. All shares of
the outstanding capital stock or equity interests in each
member of the Hornbeck Consolidated Group have been duly
authorized and validly issued and are fully paid and
nonassessable and are not subject to preemptive rights
and, except as set forth in Schedule 4.2, are owned by
Hornbeck, by another member of the Hornbeck Consolidated
Group or by Hornbeck and another member of the Hornbeck
Consolidated Group, free and clear of all Liens. To the
Knowledge of Hornbeck, all shares of outstanding capital
stock or equity interests in each member of the North Sea
Group have been duly authorized and validly issued and are
fully paid and nonassessable and are not subject to
preemptive rights and, except as set forth on Schedule
4.2, are free and clear of all Liens. Except as set forth
on Schedule 4.2, the issued and outstanding shares of
Ravensworth Investments Limited, Hornbeck Offshore Limited
and Seaboard Holdings Limited that are owned by Hornbeck
North Sea Safety Inc. have been duly authorized and
validly issued and are fully paid and nonassessable and
are not subject to preemptive rights and, except as set
forth on Schedule 4.2, are owned by Hornbeck North Sea
Safety Inc. free and clear of all Liens.
(b) Except as listed on Schedule 4.2, Hornbeck
does not, directly or indirectly, own of record or
beneficially, or have the right or obligation to acquire,
any outstanding securities or other interest in any
corporation, partnership, joint venture or other entity.
Section 4.3 Capitalization. (a) The authorized
capital stock of Hornbeck consists exclusively of
25,000,000 shares of common stock, $.10 par value per
share (together with associated rights under the Hornbeck
Stockholder Rights Plan), of which 13,168,372 shares were
issued and outstanding and no shares were held in its
treasury as of November 19, 1995, and 5,000,000 shares of
preferred stock, $1.00 par value per share, of which none
were outstanding as of November 19, 1995, and no
additional shares of Hornbeck's capital stock have been
issued from such date to the date of this Agreement
(except for any shares issued upon exercise of the
Hornbeck Disclosed Employee Stock Options, as defined
below). All of such issued and outstanding shares have
been validly issued, are fully paid and nonassessable and
were issued free of preemptive rights, in compliance with
any rights of first refusal, and in compliance with all
legal requirements. No share of capital stock of Hornbeck
has been, or may be required to be, reacquired by Hornbeck
for any reason or is, or may be required to be, issued by
Hornbeck for any reason, including, without limitation, by
reason of any option, warrant, security or right
convertible into or exchangeable for such shares, or any
agreement to issue any of the foregoing, except (i) for
options granted under, and the 322,654 shares of Hornbeck
Common Stock issuable as of November 19, 1995 upon the
exercise of stock options granted under one of the
following plans: the Hornbeck 1982 Employee Incentive
Plan, the Hornbeck 1989 Employee Incentive Plan or the
Hornbeck 1993 Employee Incentive Plan, all as disclosed on
Schedule 4.3 hereto (the "Hornbeck Disclosed Employee
Stock Options"); (ii) upon exercise of rights associated
with the Hornbeck Common Stock under the circumstances
provided in the Hornbeck Stockholder Rights Plan; (iii)
19,310 shares of restricted Hornbeck Common Stock
permitted to be issued to Hornbeck employees under Section
6.4(j); and (iv) subject to Section 6.11 hereof, shares of
Hornbeck Common Stock that may be issuable in connection
with the exercise of the Ravensworth Options.
Section 4.4 Authority; Enforceable Agreements. (a)
Subject to obtaining approval of the holders of not less
than 66-2/3% of the outstanding Hornbeck Common Stock,
Hornbeck has the requisite corporate power and authority
to enter into this Agreement and to consummate the
transactions described herein. The execution and delivery
of this Agreement by Hornbeck and the consummation by
Hornbeck of the transactions described herein have been
duly authorized by all necessary corporate action on the
part of Hornbeck, except for the affirmative vote of the
holders of not less than 66-2/3% of the outstanding
Hornbeck Common Stock, which shall have been obtained
prior to the Effective Time.
(b) This Agreement has been duly executed and
delivered by Hornbeck, and (assuming due execution and
delivery by the other parties hereto) constitutes a valid
and binding obligation of Hornbeck, enforceable in
accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally and
provided that the Merger may not be effected without the
affirmative vote of the holders of not less than 66-2/3%
of the outstanding Hornbeck Common Stock. The other
agreements entered, or to be entered, into by Hornbeck in
connection with this Agreement have been, or will be, duly
executed and delivered by Hornbeck, and (assuming due
execution and delivery by the other parties thereto)
constitute, or will constitute, valid and binding
obligations of Hornbeck, enforceable in accordance with
their terms, except as such enforceability may be limited
by bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally.
Section 4.5 No Conflicts or Consents. (a) Except as
set forth on Schedule 4.5(a), neither the execution,
delivery or performance of this Agreement by Hornbeck nor
the consummation of the transactions contemplated hereby
will (i) violate, conflict with, or result in a breach of
any provision of, constitute a default (or an event that,
with notice or lapse of time or both, would constitute a
default) under, result in the termination of, or
accelerate the performance required by, or result in the
creation of any adverse claim against any of the
properties or assets of any member of the Hornbeck Group
under, (A) the certificates of incorporation, by-laws or
any other organizational documents of any member of the
Hornbeck Group, or (B) any note, bond, mortgage,
indenture, deed of trust, lease, license, agreement or
other instrument or obligation to which any member of the
Hornbeck Group is a party, or by which any member of the
Hornbeck Group or any of its assets are bound, or (ii)
subject to obtaining clearance under the HSR Act and
effectiveness of the Registration Statement, violate any
order, writ, injunction, decree, judgment, statute, rule
or regulation of any governmental body to which any member
of the Hornbeck Group is subject or by which any member of
the Hornbeck Group or any of the assets of the foregoing
are bound.
(b) Except as set forth on Schedule 4.5(b), no
consent, approval, order, permit or authorization of, or
registration, declaration or filing with, any Person or of
any government or any agency or political subdivision
thereof is required for the execution, delivery and
performance by Hornbeck of this Agreement and the
covenants and transactions contemplated hereby or for the
execution, delivery and performance by Hornbeck of any
other agreements entered, or to be entered, into by
Hornbeck in connection with this Agreement, except for (i)
the filing of the HSR Report by Hornbeck under the HSR Act
and the early termination or expiration of all applicable
waiting periods thereunder, (ii) the filing of the Proxy
Statement included in the Registration Statement described
in Section 6.2 hereof with the SEC and the declaration of
effectiveness thereof by the SEC, (iii) the affirmative
vote of the holders of not less than 66-2/3% of the
outstanding Hornbeck Common Stock, and (iv) the filing of
the Certificate of Merger as provided in Section 2.1(b)
hereof.
Section 4.6 Corporate Documents, Stockholder
Agreements and Board of Directors. Hornbeck has delivered
to Tidewater true and complete copies of its certificate
of incorporation and by-laws, as amended or restated
through the date of this Agreement and the organizational
documents governing each member of the Hornbeck Group
listed on Schedule 4.2. The minute books of each member
of the Hornbeck Consolidated Group, and to the Knowledge
of Hornbeck, the minute books of each member of the North
Sea Group, contain reasonably complete and accurate
records of all corporate actions of the equity owners of
the various entities and of the boards of directors or
other governing bodies, including committees of such
boards or governing bodies. The stock transfer records of
Hornbeck are maintained by its transfer agent and
registrar and, to the Knowledge of Hornbeck, contain
complete and accurate records of all issuances and
redemptions of stock by Hornbeck. Except as set forth on
Schedule 4.6, neither Hornbeck nor, to the Knowledge of
Hornbeck, any of its Affiliates, is a party to any
agreement with respect to the capital stock of Hornbeck
other than this Agreement.
Section 4.7 SEC Documents; Financial Statements;
Liabilities. (a) Hornbeck has filed all required
reports, schedules, forms, statements and other documents
with the SEC since January 1, 1992 (the "Hornbeck SEC
Documents"). The Hornbeck SEC Documents, and any such
reports, forms and documents filed by Hornbeck with the
SEC after the date hereof, as amended, complied, or will
comply, as to form in all material respects with the
requirements of the Securities Act or the Exchange Act, as
the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such Hornbeck SEC
Documents, and none of the Hornbeck SEC Documents
contained or will contain, any untrue statement of a
material fact or omitted to state a 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. Except to the
extent that information contained in any Hornbeck SEC
Document has been superseded by a later filed Hornbeck SEC
Document, none of the Hornbeck SEC Documents contains any
untrue statement of a material fact or omits 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.
(b) The Hornbeck Financial Statements included
in the Hornbeck SEC Documents have been audited by Price
Waterhouse LLP, independent accountants (in the case of
the Hornbeck Audited Financial Statements) in accordance
with generally accepted auditing standards, have been
prepared in accordance with United States generally
accepted accounting principles applied on a basis
consistent with prior periods, and present fairly the
financial position of Hornbeck at such dates and the
results of operations and cash flows for the periods then
ended, except, in the case of the Hornbeck Interim
Financial Statements, as permitted by Rule 10-01 of
Regulation S-X of the SEC. The Hornbeck Interim Financial
Statements reflect all adjustments (consisting only of
normal, recurring adjustments) that are necessary for a
fair statement of the results for the interim periods
presented therein. Except as set forth on Schedule
4.7(b), no member of the Hornbeck Consolidated Group has,
nor are any of their respective assets subject to, any
liability, commitment, debt or obligation (of any kind
whatsoever whether absolute or contingent, accrued, fixed,
known, unknown, matured or unmatured) ("Undisclosed
Liabilities"), except (i) as and to the extent reflected
on the Hornbeck Latest Balance Sheet, or (ii) as may have
been incurred or may have arisen since the date of the
Hornbeck Latest Balance Sheet in the ordinary course of
business and that are not material individually or in the
aggregate or are permitted by this Agreement.
(c) The Hornbeck Latest Balance Sheet includes
appropriate reserves for all Taxes and other liabilities
incurred as of such date but not yet payable.
(d) Since the date of the Hornbeck Latest
Balance Sheet, there has been no change that has had or is
likely to have a Material Adverse Effect on Hornbeck.
(e) The statements of income included in the
Hornbeck Financial Statements do not contain any income or
revenue realized from services that the Surviving
Corporation would be prohibited or restricted from
offering after the Effective Time pursuant to any covenant
or provision in any material contract to which any member
of the Hornbeck Consolidated Group is a party.
(f) Hornbeck's investment in the North Sea
Group is recorded on the Hornbeck Financial Statements
under the equity method of accounting. Attached hereto as
Schedule 4.7(f) is a balance sheet reflecting the combined
operations of the North Sea Group as of September 30, 1995
(the "North Sea Group Latest Balance Sheet"). To the
Knowledge of Hornbeck, except as reflected on the North
Sea Group Latest Balance Sheet, no member of the North Sea
Group has, nor are any of its respective assets subject
to, any indebtedness for borrowed money, except as may
have been incurred or may have arisen since the date of
the North Sea Group Latest Balance Sheet in the ordinary
course of business. Except as set forth on Schedule
4.7(f), there is no liability, commitment, debt or
obligation (of any kind whatsoever whether absolute or
contingent, accrued, fixed, known, unknown, matured or
unmatured) of the North Sea Group which is, or could
reasonably be expected to become, a liability, commitment,
debt or other obligation of the Hornbeck Consolidated
Group.
Section 4.8 Accounts Receivable. All of the accounts
receivable reflected on the Hornbeck Latest Balance Sheet
or created thereafter have arisen only from bona fide
transactions in the ordinary course of business, represent
valid obligations owing to Hornbeck or another member of
the Hornbeck Consolidated Group and have been accrued and
recorded in accordance with United States generally
accepted accounting principles. Except as set forth on
Schedule 4.8, such accounts receivable either have been
collected in full or will be collectible in full when due,
without any counterclaims, set-offs or other defenses and
without provision for any allowance for uncollectible
accounts other than such allowance as appears on the
Hornbeck Latest Balance Sheet.
Section 4.9 Absence of Certain Changes or Events.
Except as set forth on Schedule 4.9, since the date of the
Hornbeck Latest Balance Sheet, each member of the Hornbeck
Consolidated Group, and, to the Knowledge of Hornbeck,
each member of the North Sea Group, has conducted its
business only in the ordinary course, and has not:
(a) amended its certificate of incorporation,
by-laws or similar organizational documents;
(b) incurred any liability or obligation of
any nature (whether absolute or contingent, accrued,
fixed, known, unknown, matured or unmatured), except in
the ordinary course of business:
(c) suffered or permitted any of its assets to
be or remain subject to any mortgage or other encumbrance
other than those disclosed on Schedule 4.11 or 4.13(a) and
that collateralize indebtedness reflected on the Hornbeck
Latest Balance Sheet or on the North Sea Group Latest
Balance Sheet and Permitted Liens;
(d) merged or consolidated with another entity
or acquired or agreed to acquire any business or any
corporation, partnership or other business organization,
or sold, leased, transferred or otherwise disposed of any
assets except for fair value in the ordinary course of
business; provided that no Hornbeck Vessels (as defined in
Section 4.13) shall have been disposed of;
(e) made any capital expenditure or commitment
therefor, except in the ordinary course of business,
provided that any acquisitions of vessels, or acquisitions
of, or improvements to, real property, shall not be
considered to be in the ordinary course of business;
(f) declared or paid any dividend or made any
distribution with respect to any of its equity interests,
or redeemed, purchased or otherwise acquired any of its
equity interests, or issued, sold or granted any equity
interests or any option, warrant or other right to
purchase or acquire any such interest other than (i)
issuances of Hornbeck Common Stock upon the exercise of
any Hornbeck Disclosed Employee Stock Options, (ii) the
acceptance by Hornbeck of any shares of Hornbeck Common
Stock in consideration of the exercise of the Hornbeck
Disclosed Employee Stock Options or in satisfaction of any
tax or tax withholding obligations of the holders of such
Hornbeck Disclosed Employee Stock Options or restricted
stock awards of Hornbeck Common Stock, (iii) the issuance
of shares of restricted Hornbeck Common Stock pursuant to
Section 6.4(j), (iv) payments within the Hornbeck Group by
entities other than Hornbeck as part of its cash
management program that may be characterized as dividends
or distributions and (v) the issuance of shares of
Hornbeck Common Stock upon the exercise of the Ravensworth
Options in accordance with Section 6.11;
(g) adopted any employee benefit plan or made
any change in any existing employee benefit plans or made
any bonus or profit sharing distribution or payment of any
kind;
(h) increased indebtedness for borrowed money,
or made any loan to any Person, other than through the
issuance of standby or performance letters of credit
issued in the ordinary course of business;
(i) made any change affecting any banking,
safe deposit or power of attorney arrangements;
(j) written off as uncollectible any notes or
accounts receivable, except for notes or accounts
receivable in the ordinary course of business charged to
applicable allowances reflected in the Hornbeck Latest
Balance Sheet, and none of which individually or in the
aggregate is material to Hornbeck;
(k) except as contemplated in Section 4.19(m),
entered into or amended any employment, severance or
similar agreement or arrangement with any director or
employee, or granted any increase in the rate of wages,
salaries, bonuses or other compensation or benefits of any
executive officer or other employee, other than any such
increase that is both in the ordinary course of business
consistent with past practice and in an amount such that,
after giving effect thereto, aggregate employee
compensation expense (considered on an annualized basis)
does not exceed 105% of the aggregate employee
compensation expense for Hornbeck's fiscal year ending
December 31, 1995.
(l) cancelled, waived, released or otherwise
compromised any debt, claim or right, except as permitted
under clause (j);
(m) made any change in any method of
accounting principle or practice;
(n) suffered the termination, suspension or
revocation of any license or permit necessary for the
operation of its business;
(o) entered into any transaction other than on
an arm's-length basis;
(p) suffered any damage, destruction or loss
(whether or not covered by insurance) which has had or
could reasonably be anticipated to have (after giving
effect to any insurance benefit either (i) that has been
received or (ii) the payment obligation for which has been
acknowledged by the insurer) a Material Adverse Effect on
Hornbeck; or
(q) agreed, whether or not in writing, to do
any of the foregoing.
Section 4.10 Contracts. (a) Except as set forth on
Schedule 4.10(a) no member of the Hornbeck Consolidated
Group, and, to the Knowledge of Hornbeck, no member of the
North Sea Group, is a party to: (i) any collective
bargaining agreement; (ii) any written or oral employment
or other agreement or contract with or commitment to any
employee other than crew members of the North Sea Group;
(iii) any agreement, contract or commitment containing any
covenant limiting its freedom to engage in any line of
business or to compete with any Person; (iv) any oral or
written obligation of guaranty or indemnification arising
from any agreement, contract or commitment, except as
provided in its certificate of incorporation; (v) any
joint venture, partnership or similar contract involving a
sharing of profits or expenses; (vi) any non-disclosure
agreement, non-competition agreement, agreement with an
officer, director or employee of any member of the
Hornbeck Group, tax indemnity, tax sharing or tax
allocation agreement, or severance, bonus or commission
agreement; (vii) any agreement or contract under which any
member of the Hornbeck Group is the licensee of computer
software or other intellectual property with a per unit
cost greater than $2,500; (viii) any contract between any
member of the Hornbeck Group and any of their respective
Affiliates (other than other members of the Hornbeck
Group); (ix) any indenture, mortgage, loan, credit, sale-
leaseback or similar contract under which any member of
the Hornbeck Group has borrowed any money or issued any
note, bond or other evidence of indebtedness for borrowed
money or guaranteed indebtedness for money borrowed by
others; (x) any hedge, swap, exchange, futures or similar
agreements or contracts; or (xi) any other oral or written
agreement, contract or commitment that has had or may have
a Material Adverse Effect on Hornbeck.
(b) Schedule 4.10(b) contains a list and brief
description (including the names of the parties and the
date and nature of the agreement) of each material
agreement, contract or commitment to which any member of
the Hornbeck Consolidated Group or, to the Knowledge of
Hornbeck, any member of the North Sea Group, is a party
other than short-term or spot market charters of vessels
of not more than 30 days in duration or charters
cancelable without penalty upon notice of either party.
There is no existing breach by any member of the Hornbeck
Consolidated Group of, nor is there any pending or, to the
Knowledge of Hornbeck, threatened, claim that any member
of the Hornbeck Consolidated Group, or, to the Knowledge
of Hornbeck, any member of the North Sea Group, has
breached any of the terms or conditions of any of its
material agreements, contracts or commitments, and to the
Knowledge of Hornbeck, no other parties to such
agreements, contracts or commitments have breached any of
its terms or conditions. Tidewater has been provided with
a complete and accurate copy of each contract listed on
Schedule 4.10(b) other than North Sea charters with
remaining terms of less than six months.
Section 4.11 Properties and Leases other than
Vessels. (a) With respect to assets other than vessels,
a member of the Hornbeck Consolidated Group has, and, to
the Knowledge of Hornbeck, a member of the North Sea Group
has, except with respect to assets disposed of for
adequate consideration in the ordinary course of business
(none of which are material to the operations of its
business) or such assets as are no longer used or useful
in the conduct of its business, good and valid title to
all real property and all other properties and assets
reflected in the Hornbeck Latest Balance Sheet and the
North Sea Group Latest Balance Sheet free and clear of all
Liens, except for (i) Liens that secure indebtedness that
is properly reflected in the Hornbeck Latest Balance Sheet
or the North Sea Group Latest Balance Sheet; (ii) Liens
for Taxes accrued but not yet payable; (iii) Permitted
Liens, provided that the obligations collateralized by
such Permitted Liens are not delinquent or are being
contested in good faith and in no event shall the
obligations collateralized by any such contested Permitted
Liens in the aggregate exceed $150,000; (iv) such
imperfections of title and encumbrances, if any, as do not
materially detract from the value or materially interfere
with the present use of any such properties or assets or
the potential sale of any such properties and assets and
(v) capital leases and leases of such properties, if any,
to third parties for fair and adequate consideration.
Schedule 4.11(a) contains a list of all Liens (other than
Permitted Liens) on property other than vessels
collateralizing indebtedness on the Hornbeck Latest
Balance Sheet and any guaranty or other credit support
arrangement pursuant to which any member of the Hornbeck
Consolidated Group has guaranteed an obligation of any
other member of the Hornbeck Consolidated Group where
assets other than vessels are the collateral. There are
no guaranty or other credit support arrangements pursuant
to which any member of the Hornbeck Group has guaranteed
an obligation of any member of the North Sea Group where
assets other than vessels are collateral other than those
set forth on Schedule 4.11(a). A member of the Hornbeck
Consolidated Group and, to the Knowledge of Hornbeck, a
member of the North Sea Group, owns, or has valid
leasehold interests in, all properties and assets, other
than vessels, used in the conduct of its business.
(b) With respect to each lease of any real
property, or a material amount of other personal property
(other than vessels) to which a member of the Hornbeck
Consolidated Group is a party, (i) such member of the
Hornbeck Consolidated Group has a valid leasehold interest
in such real property or personal property; (ii) such
lease is in full force and effect in accordance with its
terms; (iii) all rents and other monetary amounts that
have become due and payable thereunder have been paid in
full; (iv) no waiver, indulgence or postponement of the
obligations thereunder has been granted by the other party
thereto; (v) there exists no material default (or an event
that, with notice or lapse of time or both would
constitute a material default) under such lease; (vi) such
member of the Hornbeck Consolidated Group has not violated
any of the terms or conditions under any such lease and to
the Knowledge of Hornbeck there has been no, (A) condition
or covenant to be observed or performed by any other party
under any such lease that has not been fully observed and
performed and (B) in the case of each prime lease
concerning demised premises subleased to any member of the
Hornbeck Consolidated Group, condition or covenant to be
observed or performed by each party thereto that has not
been fully observed and performed and there does not exist
any event of default or event, occurrence, condition or
act that, with the giving of notice, the lapse of time or
the happening of any further event or condition, would
become a default under any such prime lease; and (vii) the
transactions described in this Agreement will not
constitute a default under or cause for termination or
modification of such lease.
(c) The rent charged to any member of the
Hornbeck Group under any lease, other than with respect to
vessels, between any member of the Hornbeck Group and any
of its Affiliates (other than another member of the
Hornbeck Group) is at or below the market rate and any
such lease contains such other terms and conditions that
are no less favorable to Hornbeck than would be obtainable
in an arms-length transaction with an independent third
party lessor.
(d) Schedule 4.11(d) contains a list of all
real property owned by members of the Hornbeck Group and a
list of all leases, other than with respect to vessels, to
which the members of the Hornbeck Group are parties, which
list includes a reasonable description of the location and
approximate square footage of each property, whether owned
or leased, and the term of each such lease, including all
renewal options. Complete and correct copies of each
lease have been delivered to Tidewater.
Section 4.12 Condition of Hornbeck's Assets Other
than Vessels. All of the tangible assets of the Hornbeck
Consolidated Group (other than vessels) are currently in
good and usable condition, ordinary wear and tear
excepted, and are being used in the business of the
Hornbeck Consolidated Group. There are no defects in such
assets or other conditions that have or would be
reasonably likely to have, a Material Adverse Effect on
Hornbeck. Such assets and the other properties being
leased by a member of the Hornbeck Group pursuant to the
leases described on Schedule 4.11(d), together with the
vessels listed on Schedule 4.13, constitute all of the
operating assets being utilized by the Hornbeck Group in
the conduct of its business and such assets are sufficient
in quantity and otherwise adequate for the operations of
the Hornbeck Group as currently conducted.
Section 4.13 Vessels. (a) Schedule 4.13(a) hereto
sets forth a list of all vessels owned, leased, chartered
or managed by any member of the Hornbeck Group on the date
hereof and the name of the nation under which each such
vessel is documented and flagged, and indicates any such
vessels that are laid up or being held for sale on the
date hereof (such vessels (other than any such vessels
that are managed on the date hereof) being referred to
herein as "Hornbeck Vessels"). With respect to the owned
Hornbeck Vessels, a member of the Hornbeck Group has good
title to each such vessel free and clear of all Liens,
except for (i) Liens that collateralize indebtedness that
is properly reflected in the Hornbeck Latest Balance Sheet
or the North Sea Group Latest Balance Sheet; (ii) Liens
for Taxes accrued but not yet payable; (iii) Permitted
Liens provided that the obligations collateralized by such
Permitted Liens are not delinquent or are being contested
in good faith and in no event shall the obligations,
individually or in the aggregate, collateralized by such
contested Permitted Liens exceed $150,000 in the
aggregate. Schedule 4.13(a) contains a list of all Liens
(other than Permitted Liens) on vessels collateralizing
indebtedness on the Hornbeck Latest Balance Sheet or the
North Sea Group Latest Balance Sheet and any guaranty or
other credit support arrangement pursuant to which any
member of the Hornbeck Group has guaranteed an obligation
of any other member of the Hornbeck Group where vessels
are the collateral.
(b) With respect to each Hornbeck Vessel that is
operated by a member of the Hornbeck Group under lease or
charter, (i) such member of the Hornbeck Group has a valid
right to charter or a valid leasehold interest in such
vessel; (ii) such charter agreement or lease is in full
force and effect in accordance with its terms; (iii) all
rents, charter payments and other monetary amounts that
have become due and payable thereunder have been paid in
full; (iv) no waiver, indulgence or postponement of the
obligations thereunder has been granted by the other party
thereto; (v) there exists no material default (or an event
that, with notice or lapse of time or both would
constitute a material default) under such charter
agreement or lease; (vi) such member of the Hornbeck Group
has not violated any of the terms or conditions under any
such charter agreement or lease and to the Knowledge of
Hornbeck there is no condition or covenants to be observed
or performed by any other party under such charter
agreement or lease that has not been fully observed or
performed; and (viii) the transactions described in this
Agreement will not constitute a default under or cause for
termination or modification of such charter agreement or
lease.
(c) Schedule 4.13(c) contains a list of all leases
or charters providing for the use by a member of the
Hornbeck Group of a Hornbeck Vessel other than leases or
charters between members of the North Sea Group, which
list contains a description of the terms of such lease or
charter. Complete and correct copies of each lease or
charter have been delivered to Tidewater.
(d) With respect to each Hornbeck Vessel: (i) such
Hornbeck Vessel is lawfully documented under the flag of
the nation listed on Schedule 4.13 for such Hornbeck
Vessel, (ii) such Hornbeck Vessel is afloat and in
satisfactory operating condition for charter hire, (iii)
such Hornbeck Vessel holds in full force and effect all
certificates, licenses, permits and rights required for
operation in the manner vessels of its kind are being
operated in the geographical area in which such Hornbeck
Vessel is presently being operated and (iv) no event has
occurred and no condition exists that would endanger the
maintenance of the classification of such Hornbeck Vessel.
Section 4.14 Voting Requirements. The affirmative
vote of the holders of not less than 66-2/3% of the
outstanding shares of Hornbeck Common Stock entitled to
vote on the Merger is the only vote of the holders of any
class or series of Hornbeck's capital stock necessary to
approve this Agreement and the transactions described
herein.
Section 4.15 State Takeover Statutes; Hornbeck
Stockholder Rights Plan. (a) The Board of Directors of
Hornbeck has approved the Merger, this Agreement and the
transactions described in this Agreement, and the
provisions of Section 203 of the DGCL are inapplicable to
the Merger, this Agreement and the transactions described
in this Agreement; provided, however, that the foregoing
shall not be construed to mean that the Board of Directors
of Hornbeck has approved any stockholder of Hornbeck
becoming an "Interested Stockholder" for purposes of
Section 203 of the DGCL. No other state takeover statute
or similar statute or regulation applies or purports to
apply to Hornbeck in connection with the Merger, this
Agreement or any of the transactions described in this
Agreement.
(b) The Board of Directors of Hornbeck has taken all
action necessary to render the provisions of the Hornbeck
Stockholder Rights Plan inapplicable to Tidewater, the
Merger, this Agreement and the transactions described in
this Agreement.
Section 4.16 Accounting Matters. No member of the
Hornbeck Group, nor to the Knowledge of Hornbeck any of
its Affiliates, has taken or agreed to take any action
that (without giving effect to any action taken or agreed
to be taken by Tidewater or any of its Affiliates) would
prevent Tidewater from accounting for the business
combination to be effected by the Merger as a pooling-of-
interests. Within three business days of the execution of
this Agreement, Hornbeck will have received letters from
its independent public accountants and the Tidewater
independent public accountants to the effects that if the
Merger were to be consummated on the date of this
Agreement, it would qualify for pooling-of-interests
treatment under the generally accepted accounting
principles of the United States.
Section 4.17 Suppliers and Customers. To the
Knowledge of Hornbeck, (a) no supplier providing products,
materials or services to any member of the Hornbeck Group
intends to cease selling such products, materials or
services to any member of the Hornbeck Group or to limit
or reduce such sales to any member of the Hornbeck Group
or materially alter the terms or conditions of any such
sales and (b) no customer of any member of the Hornbeck
Group intends to terminate, limit or reduce its or their
business relations with any member of the Hornbeck Group.
Section 4.18 Employee Matters. (a) Schedule 4.18(a)
sets forth the name, title, current annual compensation
rate (including bonus and commissions), current base
salary rate, accrued bonus, accrued sick leave, accrued
severance pay and accrued vacation benefits of each
officer of each member of the Hornbeck Consolidated Group,
and a list of all employment, consulting, employee
confidentiality or similar agreements to which any member
of the Hornbeck Consolidated Group is a party. Copies of
organizational charts, any employee handbook(s), and any
reports and/or plans prepared or adopted pursuant to the
Equal Employment Opportunity Act of 1972, as amended, have
been provided to Tidewater.
(b) Each of the following is true with respect
to the Hornbeck Consolidated Group and, to the Knowledge
of Hornbeck, the North Sea Group:
(i) each such member is in compliance with
all applicable laws respecting employment and employment
practices, terms and conditions of employment, wages and
hours and occupational safety and health, and is not
engaged in any unfair labor practice within the meaning of
Section 8 of the National Labor Relations Act, and there
is no proceeding pending or threatened, or, any
investigation pending or threatened against it relating to
any thereof, and to the Knowledge of Hornbeck there is no
basis for any such proceeding or investigation;
(ii)none of the employees of any such
member is a member of, or represented by, any labor union
and there are no efforts being made to unionize any of
such employees; and
(iii)there are no charges of, formal,
informal or internal complaints of, or proceedings
involving, discrimination or harassment (including but not
limited to discrimination or harassment based upon sex,
age, marital status, race, religion, color, creed,
national origin, sexual preference, handicap or veteran
status) pending or threatened, nor is there any
investigation pending or threatened, including, but not
limited to, investigations before the Equal Employment
Opportunity Commission or any federal, state or local
agency or court, with respect to any such member.
Section 4.19 Employee Benefit Plans. With respect to
any member of the Hornbeck Consolidated Group:
(a) Schedule 4.19(a) lists each Employee Plan
that each member of the Hornbeck Consolidated Group
maintains, administers, contributes to, or has any
contingent liability with respect thereto. Hornbeck has
provided a true and complete copy of each such Employee
Plan, current summary plan description, (and, if
applicable, related trust documents) and all amendments
thereto and written interpretations thereof together with
(i) the three most recent annual reports prepared in
connection with each such Employee Plan (Form 5500
including, if applicable, Schedule B thereto); (ii) the
most recent actuarial report, if any, and trust reports
prepared in connection with each Employee Plan; (iii) all
material communications received from or sent to the
Internal Revenue Service ("IRS") or the Department of
Labor within the last two years (including a written
description of any material oral communications); (iv) the
most recent IRS determination letter with respect to each
Employee Plan and the most recent application for a
determination letter; (v) all insurance contracts or other
funding arrangements; and (vi) an actuarial study of any
post-employment life or medical benefits provided, if any.
(b) Schedule 4.19(b) identifies each Benefit
Arrangement that each member of the Hornbeck Consolidated
Group maintains, administers, contributes to, or has any
contingent liability with respect thereto. Hornbeck has
furnished to Tidewater copies or descriptions of each
Benefit Arrangement and any of the information set forth
in Section 4.19(a) applicable to any such Benefit
Arrangement. Each Benefit Arrangement has been maintained
and administered in substantial compliance with its terms
and with the requirements (including reporting
requirements) prescribed by any and all statutes, orders,
rules and regulations which are applicable to such Benefit
Arrangement.
(c) Benefits under any Employee Plan or
Benefit Arrangement are as represented in said documents
and have not been increased or modified (whether written
or not written) subsequent to the dates of such documents.
No member of the Hornbeck Consolidated Group has
communicated to any employee or former employee any
intention or commitment to modify any Employee Plan or
Benefit Arrangement or to establish or implement any other
employee or retiree benefit or compensation arrangement.
(d) No Employee Plan is (i) a Multiemployer
Plan, (ii) a Title IV Plan or (iii) is maintained in
connection with any trust described in Section 501(c)(9)
of the Code. No member of the Hornbeck Consolidated Group
has ever maintained or become obligated to contribute to
any employee benefit plan (i) that is subject to Title IV
of ERISA, (ii) to which Section 412 of the Code applies,
or (iii) that is a Multiemployer Plan. No member of the
Hornbeck Consolidated Group has within the last five years
engaged in, or is a successor corporation to an entity
that has engaged in, a transaction described in Section
4069 of ERISA.
(e) Each Employee Plan which is intended to be
qualified under Section 401(a) of the Code is so qualified
and has been so qualified during the period from its
adoption to date, and no event has occurred since such
adoption that would adversely affect such qualification
and each trust created in connection with each such
Employee Plan forming a part thereof is exempt from tax
pursuant to Section 501(a) of the Code. A favorable
determination letter has been issued by the IRS as to the
qualification of each such Employee Plan under the Code
and to the effect that each such trust is exempt from
taxation under Section 501(a) of the Code. Each Employee
Plan has been maintained and administered in compliance
with its terms and with the requirements (including
reporting requirements) prescribed by any and all
applicable statutes, orders, rules and regulations,
including but not limited to ERISA and the Code.
(f) Full payment has been made of all amounts
which any member of the Hornbeck Consolidated Group is or
has been required to have paid as contributions to or
benefits due under any Employee Plan or Benefit
Arrangement under applicable law or under the terms of any
such plan or any arrangement.
(g) No member of the Hornbeck Consolidated
Group, or any of their respective directors, officers or
employees has engaged in any transaction with respect to
an Employee Plan that could subject Hornbeck to a tax,
penalty or liability for a prohibited transaction, as
defined in Section 406 of ERISA or Section 4975 of the
Code. None of the assets of any Employee Plan are
invested in employer securities or employer real property.
(h) To the Knowledge of Hornbeck, there are no
facts or circumstances that might give rise to any
liability under Title I of ERISA.
(i) No member of the Hornbeck Consolidated
Group has any current or projected liability in respect of
post-retirement or post-employment welfare benefits for
retired, current or former employees, except as required
to avoid excise tax under Section 4980B of the Code.
(j) Except as disclosed on Schedule 4.19(j),
there is no litigation, administrative or arbitration
proceeding or other dispute pending or threatened that
involves any Employee Plan or Benefit Arrangement which
could reasonably be expected to result in a liability to
the Hornbeck Consolidated Group or Tidewater.
(k) No employee or former employee of any
member of the Hornbeck Consolidated Group will become
entitled to any bonus, retirement, severance, job security
or similar benefit or enhanced benefit (including
acceleration of an award, vesting or exercise of an
incentive award) or any fee or payment of any kind solely
as a result of any of the transactions contemplated
hereby, except as disclosed on Schedule 4.19(k) and no
such disclosed payment constitutes a parachute payment
described in Section 280G of the Code, except as disclosed
on Schedule 4.19(k).
(l) To the Knowledge of Hornbeck, all group
health plans (as defined in Code Section 5000(b)(1)) of
any member of the Hornbeck Consolidated Group have at all
times fully complied with all applicable notification and
continuation coverage requirements of Section 4980B(f) of
the Code and Section 601 of ERISA, and the regulations
promulgated thereunder. Further, no Employee Plan
provides health, medical, death or survivor benefits to
any stockholders or directors who are not employees,
former employees or beneficiaries thereof, except to the
extent otherwise required by the continuation requirements
of Section 4980B(f) of the Code and Section 601 of ERISA.
(m) No employee or former employee, officer or
director of any member of the Hornbeck Consolidated Group
is or will become entitled to receive any award under
Hornbeck's discretionary or other bonus plans except for
(i) cash payments pursuant to Section 6.4(j) of up to
$350,000 in 1995 Incentive Cash Payments (as defined in
Section 6.4(j)), (ii) the issuance pursuant to Section
6.4(j) of an aggregate of 19,310 shares of restricted
Hornbeck Common Stock for 1995 performance and (iii) if
the Closing Date has not occurred by April 30, 1996, cash
payments to officers and employees as incentive payments
for 1996 performance for the period from January 1, 1996
through the Closing Date, such amounts to be prorated and
based on the total 1995 Incentive Cash Payments and to
otherwise be consistent with past practice.
Section 4.20 Tax Matters.
(a) Each of the following is true with respect
to each member of the Hornbeck Group to the extent
applicable to such member:
(i) all Returns have been or will be
timely filed by each member of the Hornbeck Group when due
in accordance with all applicable laws; all Taxes shown on
the Returns have been or will be timely paid when due; the
Returns have been properly completed in compliance with
all applicable laws and regulations and completely and
accurately reflect the facts regarding the income,
expenses, properties, business and operations required to
be shown thereon; the Returns are not subject to penalties
under Section 6662 of the Code (or any corresponding
provision of state, local or foreign tax law);
(ii)except as set forth on Schedule
4.20(a)(ii), each member of the Hornbeck Group has paid
all Taxes required to be paid by it (whether or not shown
on a Return) or for which it could be liable, (provided
that it shall not be considered a breach of this
representation if it is ultimately determined that
additional tax payments are due but such assessment is
based on an adjustment to a return or position, if such
member has a reasonable basis for the position taken with
respect to such Taxes), whether to taxing authorities or
to other persons under tax allocation agreements or
otherwise, and the charges, accruals, and reserves for
Taxes due, or accrued but not yet due, relating to its
income, properties, transactions or operations for any
Pre-Closing Period as reflected on its books (including,
without limitation, the Hornbeck Latest Balance Sheet or
the North Sea Group Latest Balance Sheet) are adequate to
cover such Taxes;
(iii)there are no agreements or consents
currently in effect for the extension or waiver of the
time (A) to file any Return or (B) for assessment or
collection of any Taxes relating to the income, properties
or operations of any member of the Hornbeck Group for any
Pre-Closing Period, and no member the Hornbeck Group has
been requested to enter into any such agreement or
consent;
(iv)there are no Liens for Taxes (other
than for current Taxes not yet due and payable) upon the
assets of any member of the Hornbeck Group;
(v) all material elections with respect to
Taxes affecting any member of the Hornbeck Consolidated
Group are set forth in Schedule 4.20(a)(v);
(vi)all Taxes that the Hornbeck Group is
required by law to withhold or collect have been duly
withheld or collected, and have been timely paid over to
the appropriate governmental authorities to the extent due
and payable (provided that it shall not be considered a
breach of this representation if it is ultimately
determined that additional tax payments are due but such
assessment is based on an adjustment to a return or
position, if such member has a reasonable basis for the
position taken with respect to such withholding and
collection);
(vii)Schedule 4.20(a)(vii) hereto sets
forth (A) the taxable years of each member of the Hornbeck
Group as to which the respective statutes of limitations
with respect to Taxes have not expired, and (B) with
respect to such taxable years, those years for which
examinations have not been completed, those years for
which examinations are currently being conducted, those
years for which examinations have not been initiated, and
those years for which required Returns have not yet been
filed. Schedule 4.20(a)(vii) lists each state and foreign
jurisdiction in which any member of the Hornbeck Group
has, in the last three years, filed a Return.
(viii)all Tax Deficiencies which have been
claimed, proposed or asserted against any member of the
Hornbeck Group have been fully paid or finally settled,
and no issue has been raised in any examination which, by
application of similar principles, can be expected to
result in the proposal or assertion of a Tax Deficiency
for any other year not so examined;
(ix)to the Knowledge of Hornbeck, each
member of the Hornbeck Group has complied in all material
respects with all applicable Tax laws;
(x) except as set forth on Schedule
4.20(a)(x), no member of the Hornbeck Group is a party to
any agreement, contract, arrangement or plan that would
result, separately or in the aggregate, in the payment of
any "excess parachute payments" within the meaning of Code
Section 280G (or any comparable provision of state or
local law);
(xi)no member of the Hornbeck Group has
agreed, nor is it required, to make any adjustment under
Code Section 481(a) (or any comparable provision of state
or local law) by reason of a change in accounting method
or otherwise;
(xii)no member of the Hornbeck Group has
filed a consent pursuant to the collapsible corporation
provisions of Section 341(f) of the Code (or any
corresponding provision of state, local or foreign income
law) or agreed to have Section 341(f)(2) of the Code (or
any corresponding provision of state, local or foreign
income law) apply to any disposition of any asset owned by
it.
(xiii)except as set forth on Schedule
4.20(a)(xiii), none of the assets of any member of the
Hornbeck Group is property that such company is required
to treat as being owned by any other person pursuant to
the so-called "safe harbor lease" provisions of former
Section 168(f)(8) of the Code.
(xiv)none of the assets of any member of
the Hornbeck Group directly or indirectly secures any
debt, the interest on which is tax exempt under Section
103(a) of the Code.
(xv)none of the assets of any member of
the Hornbeck Group is "tax-exempt use property" within the
meaning of Section 168(h) of the Code.
(xvi)no member of the Hornbeck Group has
made a deemed dividend election under Section 1.1502-
32(f)(2) of the Treasury Regulations or a consent dividend
election under Section 565 of the Code.
(xvii) no member of the Hornbeck Group
has ever been a member of an affiliated group filing for
purposes of filing United States consolidated returns
other than a group of which Hornbeck is the parent
corporation.
(xviii) no member of the Hornbeck Group
is (or has ever been) a party to any tax sharing agreement
nor has any such member assumed the tax liability of any
other person under contract.
(b) Hornbeck has received an opinion of Price
Waterhouse LLP to the effect that the Merger will be
treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the
Code, and that Hornbeck and Tidewater will each be a party
to such reorganization within the meaning of Section
368(b) of the Code.
Section 4.21 Litigation. Except as disclosed on
Schedule 4.21, there are no actions, suits, proceedings,
arbitrations or investigations pending or, to the
Knowledge of Hornbeck, threatened before any court, any
governmental agency or instrumentality or any arbitration
panel, against or affecting any member of the Hornbeck
Consolidated Group or, to the Knowledge of Hornbeck, any
member of the North Sea Group, or any of the directors,
officers, or employees of the foregoing. To the Knowledge
of Hornbeck, no facts or circumstances exist that would be
likely to result in the filing of any such action that
would have a Material Adverse Effect on Hornbeck. Except
as disclosed on Schedule 4.21, no member of the Hornbeck
Group is subject to any currently pending judgment, order
or decree entered in any lawsuit or proceeding.
Section 4.22 Insurance. Schedule 4.22 contains a list
of the insurance policies that each member of the Hornbeck
Consolidated Group currently maintains with respect to its
business, vessels, properties and employees as well as a
list of all hull and machinery, protection and indemnity,
pollution, and comprehensive contractual liability
insurance policies that each member of the North Sea Group
maintains with respect to its vessels, as of the date
hereof, each of which is in full force and effect and a
complete and correct copy of each has been delivered to
Tidewater. All insurance premiums currently due with
respect to such policies have been paid and no member of
the Hornbeck Group is otherwise in default with respect to
any such policy, nor has any member of the Hornbeck Group
failed to give any notice or to present any claim under
any such policy in a due and timely manner. There are no
outstanding unpaid claims under any such policy other than
any pending claims under any of Hornbeck's marine
insurance policies, the amount of which claims have been
recorded as a receivable and all of which are fully
collectible. No member of the Hornbeck Group has received
notice of cancellation or non-renewal of any such policy.
In the opinion of management of Hornbeck, such policies
are sufficient for compliance with all requirements of law
and all agreements to which any member of the Hornbeck
Group is a party.
Section 4.23 Environmental Compliance. (a) Each
member of the Hornbeck Group possesses all necessary
licenses, permits and other approvals and authorizations
that are required under, and are, and to the Knowledge of
Hornbeck at all times in the past have been, in compliance
with, all federal, state, local and foreign laws, common
law duties, ordinances, codes and regulations relating to
pollution or the protection of the environment
(collectively, "Environmental Laws"), including without
limitation all Environmental Laws governing the
generation, use, collection, treatment, storage,
transportation, recovery, removal, discharge or disposal
of hazardous substances or wastes, and all Environmental
Laws imposing record-keeping, maintenance, testing,
inspection, notification and reporting requirements with
respect to hazardous substances or wastes. For purposes
of this Agreement, "hazardous substances" and "hazardous
wastes" are materials defined as "hazardous substances,"
"hazardous wastes," or "hazardous constituents" in (i) the
Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. Sections 9601-9675, as
amended by the Superfund Amendments and Reauthorization
Act of 1986, and any amendments thereto and regulations
thereunder; (ii) the Resource Conservation and Recovery
Act of 1976, 42 U.S.C. Sections 6901-6992, as amended by
the Hazardous and Solid Waste Amendments of 1984, and any
amendments thereto and regulations thereunder; (iii) the
Oil Pollution Act of 1990, 33 U.S.C. Sections 2701-2761,
and any amendments thereto and regulations thereunder; or
(iv) any other federal, state, local or foreign
environmental law or regulation.
(b) Except as set forth on Schedule 4.23(b) or
as otherwise disclosed to those executive officers of
Tidewater listed on Schedule 4.23(b), no member of the
Hornbeck Group is, nor has it been, subject to any
administrative or judicial proceeding pursuant to, or has
received any notice of any violation of, or claim alleging
liability under, any Environmental Laws, and, to the
Knowledge of Hornbeck, no facts or circumstances exist
that would be likely to result in a claim, citation or
allegation against any member of the Hornbeck Group for a
violation of, or alleging liability under, any
Environmental Laws that would have a Material Adverse
Effect on Hornbeck.
(c) There are no underground tanks of any type
(including tanks storing gasoline, diesel fuel, oil or
other petroleum products) or disposal sites for hazardous
substances, hazardous wastes or any other waste, located
on or under the real estate currently owned, leased or
used by any member of the Hornbeck Group and to the
Knowledge of Hornbeck there were no such disposal sites
located on or under the real estate previously owned,
leased or used by any member of the Hornbeck Group on the
date of the sale thereof by any member of the Hornbeck
Group or during the period of lease for use by any member
of the Hornbeck Group.
(d) Except in the ordinary course of business,
and in all cases in compliance with Environmental Laws,
and except as listed on Schedule 4.23(d), no member of the
Hornbeck Group has engaged any third party to handle,
transport or dispose of hazardous substances or wastes
(including for this purpose, gasoline, diesel fuel, oil or
other petroleum products, or bilge waste) on its behalf.
The disposal by each member of the Hornbeck Group of its
hazardous substances and wastes has been in compliance
with all Environmental Laws.
Tidewater shall not be entitled to assert as a
failure by Hornbeck to satisfy the condition set forth in
Section 7.2(a) a breach of the representations set forth
in this Section 4.23 resulting from any action related to
the disclosure in the first paragraph of Schedule 4.23(b).
Section 4.24 Compliance With Law; Permits. Other than
compliance with Environmental Laws which is covered in
Section 4.23: (a) the operations and activities of each
member of the Hornbeck Consolidated Group, and, to the
Knowledge of Hornbeck, each member of the North Sea Group,
comply with all applicable laws, regulations, ordinances,
rules or orders of any federal, state or local court or
any governmental authority except for any violation or
failure to comply that could not reasonably be expected to
result in a Material Adverse Effect on Hornbeck, and
(b) each member of the Hornbeck Consolidated
Group and, to the Knowledge of Hornbeck, each member of
the North Sea Group, possesses all governmental licenses,
permits and other governmental authorizations that are (i)
required under all federal, state and local laws and
regulations for the ownership, use and operation of its
assets or (ii) otherwise necessary to permit the conduct
of its business without interruption, and such licenses,
permits and authorizations are in full force and effect
and have been and are being fully complied with by it
except for any violation or failure to comply that could
not reasonably be expected to result in a Material Adverse
Effect on Hornbeck. No member of the Hornbeck
Consolidated Group, and to the Knowledge of Hornbeck, no
member of the North Sea Group, has received any notice of
any violation of any of the terms or conditions of any
such license, permit or authorization and, to the
Knowledge of Hornbeck, no facts or circumstances exist
that could form the basis of a revocation, claim, citation
or allegation against it for a violation of any such
license, permit or authorization. No such license, permit
or authorization or any renewal thereof will be
terminated, revoked, suspended, modified or limited in any
respect as a result of the transactions contemplated by
this Agreement except for any violation or failure to
comply that could not reasonably be expected to result in
a Material Adverse Effect on Hornbeck.
Section 4.25 Interests in Clients, Suppliers, Etc.
Except as set forth on Schedule 4.25, no officer or
director of any member of the Hornbeck Group possesses,
directly or indirectly, any financial interest in, or is a
director, officer or employee of, any corporation or
business organization that is a supplier, customer,
lessor, lessee, or competitor or potential competitor of
the Hornbeck Group or that has entered into any contract
with any member of the Hornbeck Group. Ownership of less
than 1% of any class of securities of a company whose
securities are registered under the Exchange Act will not
be deemed to be a financial interest for purposes of this
Section 4.25.
Section 4.26 Transactions With Related Parties. (a)
Schedule 4.26(a) lists all transactions between January 1,
1993 (except with respect to the North Sea Group: for
Ravensworth and its subsidiaries, since July 23, 1993, and
for HOL and Seaboard and their subsidiaries, since
November 30, 1994) and the date of this Agreement
involving or for the benefit of any member of the Hornbeck
Group, on the one hand, and any director or officer of any
member of the Hornbeck Group or Affiliate of such director
or officer, on the other hand, including (i) any debtor or
creditor relationship, (ii) any transfer or lease of real
or personal property, (iii) wages, salaries, commissions,
bonuses and agreements relating to employment (except that
with respect to the North Sea Group only such wages,
salaries, commissions, bonuses and agreements as are
currently in effect) and (iv) purchases or sales of
products or services.
(b) Schedule 4.26(b) lists (i) all agreements
and claims of any nature that any officer or director of
any member of the Hornbeck Group or any Affiliate (other
than another member of the Hornbeck Group) of such officer
or director has with or against any member of the Hornbeck
Group as of the date of this Agreement that are not
identified on the Hornbeck Latest Balance Sheet or the
North Sea Group Latest Balance Sheet and (ii) all
agreements and claims of any nature that any member of the
Hornbeck Group has with or against any officer or director
of any member of the Hornbeck Group or any Affiliate
(other than another member of the Hornbeck Group) of such
officer or director as of the date of this Agreement that
are not identified on the Hornbeck Latest Balance Sheet or
the North Sea Group Latest Balance Sheet.
Section 4.27 Statements are True and Correct. None of
the information included in (i) the Registration Statement
to be filed by Tidewater with the SEC in connection with
the Tidewater Common Stock to be issued in the Merger,
(ii) the Proxy Statement to be mailed to the stockholders
of Hornbeck in connection with its stockholders meeting,
and (iii) any other documents to be filed with the SEC or
any other regulatory authority in connection with the
transactions contemplated hereby that has been or will be
supplied by the Hornbeck Group, will, at the respective
times such documents are filed, and, in the case of the
Registration Statement, when it becomes effective and,
with respect to the Proxy Statement, when first mailed to
the stockholders of Hornbeck, be false or misleading with
respect to any material fact, or omit to state any
material fact necessary in order to make the statements
therein not misleading, or, in the case of the Proxy
Statement or any amendment thereof or supplement thereto,
at the time of the Hornbeck stockholders' meeting, be
false or misleading with respect to any material fact, or
omit to state any material fact necessary to make the
statements therein in light of the circumstances under
which they were made not misleading. All documents that
Hornbeck is responsible for filing with the SEC or any
other regulatory authority in connection with the
transactions contemplated hereby, will comply in all
material respects with the provisions of applicable law.
Section 4.28 Citizenship. Hornbeck is a U.S. citizen
and is authorized to conduct business in the United States
coastwise trade within the meaning of the Federal Maritime
Laws.
Section 4.29 Broker's and Finder's Fee. No agent,
broker, Person or firm acting on behalf of Hornbeck is or
will be entitled to any commission or broker's or finder's
fee from any of the parties hereto, or from any Affiliate
of the parties hereto, in connection with any of the
transactions contemplated herein, except fees to Simmons &
Company International to be paid by Hornbeck that are
disclosed in Schedule 4.29.
Section 4.30 Disclosure. (a) No representations or
warranties by Hornbeck in this Agreement and no statement
contained in the schedules or exhibits or in any
certificate to be delivered pursuant to this Agreement,
contains or will contain any untrue statement of material
fact or omits or will omit to state any material fact
necessary, in light of the circumstances under which it
was made, in order to make the statements herein or
therein not misleading.
(b) Tidewater has been furnished with complete
and correct copies of all agreements, instruments and
documents, together with any amendments or supplements
thereto, set forth on, or underlying a disclosure set
forth on, a Schedule provided by Hornbeck. Each of the
Schedules provided by Hornbeck is complete and correct.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF TIDEWATER
AND SUB
Tidewater and Sub represent and warrant to Hornbeck,
as of the date hereof that, except as set forth in the
Schedules numbered to correspond to the applicable
representation or warranty:
Section 5.1 Organization. Tidewater and Sub are
corporations duly organized, validly existing and in good
standing under the laws of the State of Delaware and have
all corporate power and authority to carry on their
business as now being conducted and to own their
properties. Each other member of the Tidewater Affiliated
Group is duly organized under the laws of the state or
foreign nation of its organization and has all the
requisite power and authority under the laws of such
jurisdiction to carry on its business as now being
conducted and to own its properties. Each member of the
Tidewater Affiliated Group is duly qualified to do
business and is in good standing in each state and foreign
jurisdiction in which the character or location of the
properties owned or leased by it or the nature of the
business conducted by it makes such qualification
necessary, except where the failure to be so qualified or
in good standing would not have a Material Adverse Effect
on Tidewater.
Section 5.2 Affiliated Entities. All shares of the
outstanding capital stock or equity interests in each such
member of the Tidewater Affiliated Group have been duly
authorized and validly issued and are fully paid and
nonassessable and are not subject to preemptive rights
and, are owned by Tidewater, by another member of the
Tidewater Affiliated Group or by Tidewater and another
member of the Tidewater Affiliated Group, free and clear
of all Liens.
Section 5.3 Capitalization. (a) The authorized
capital stock of Tidewater consists exclusively of
125,000,000 shares of common stock, $.10 par value per
share (together with associated Rights under the Tidewater
Stockholder Rights Plan), of which 53,336,082 shares were
issued and outstanding and no shares were held in its
treasury as of November 19, 1995, and 3,000,000 shares of
preferred stock, no par value, of which none are currently
outstanding, and no additional shares of Tidewater's
capital stock have been issued from such date to the date
of this Agreement (except for any shares issued upon
exercise of any options referred to in the second
following sentence). All of such issued and outstanding
shares have been validly issued, are fully paid and
nonassessable and were issued free of preemptive rights,
in compliance with any rights of first refusal, and in
compliance with all legal requirements. No share of
capital stock of Tidewater has been, or may be required to
be, reacquired by Tidewater for any reason or is, or may
be required to be, issued by Tidewater for any reason,
including, without limitation, by reason of any option,
warrant, security or right convertible into or
exchangeable for such shares, or any agreement to issue
any of the foregoing, except (i) for options granted
under, and the 1,497,892 shares of Tidewater Common Stock
issuable as of November 19, 1995 upon the exercise of
stock options granted under, the Tidewater 1992 Stock
Option and Restricted Stock Plan and the Tidewater Inc.
1975 Incentive Program and Stock Option Plan (the
"Tidewater Disclosed Plans") and (ii) upon exercise of the
Rights associated with Tidewater Common Stock under the
circumstances provided in the Tidewater Stockholder Rights
Plan.
(b) The authorized capital stock of Sub
consists of 100 shares of Common Stock, $.10 par value per
share, of which 100 shares are issued and outstanding and
owned by Tidewater and no shares are held in its treasury.
All of such issued and outstanding shares have been
validly issued, are fully paid and nonassessable and were
issued free of pre-emptive rights, in compliance with any
rights of first refusal, and in compliance with all legal
requirements. No share of capital stock of Sub has been,
or may be required to be, reacquired by Sub for any reason
or is, or may be required to be, issued by Sub for any
reason, including by reason of any option, warrant,
security or right convertible into or exchangeable for
such shares or any agreement to issue any of the
foregoing.
Section 5.4 Authority; Enforceable Agreements. (a)
Tidewater and Sub each has the requisite corporate power
and authority to enter into this Agreement and to
consummate the transactions described herein. The
execution and delivery of this Agreement by Tidewater and
Sub and the consummation by Tidewater and Sub of the
transactions described herein have been duly authorized by
all necessary corporate action on the part of Tidewater
and Sub.
(b) This Agreement has been duly executed and
delivered by Tidewater and Sub, and (assuming due
execution and delivery by the other parties thereto)
constitutes a valid and binding obligation of Tidewater
and Sub, enforceable in accordance with its terms, except
as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting
creditors' rights generally. The other agreements
entered, or to be entered, into by Tidewater and Sub in
connection with this Agreement have been, or will be, duly
executed and delivered by Tidewater and Sub, and (assuming
due execution and delivery by the other parties thereto)
constitute, or will constitute, valid and binding
obligations of Tidewater and Sub, enforceable in
accordance with their terms, except as such enforceability
may be limited by bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally.
Section 5.5 No Conflicts or Consents. (a) Neither
the execution, delivery or performance of this Agreement
by Tidewater or Sub nor the consummation of the
transactions contemplated hereby will (i) violate,
conflict with, or result in a breach of any provision of,
constitute a default (or an event that, with notice or
lapse of time or both, would constitute a default) under,
result in the termination of, or accelerate the
performance required by, or result in the creation of any
adverse claim against any of the properties or assets of
any member of the Tidewater Affiliated Group under, (A)
the certificates of incorporation, by-laws or other
organizational documents of any member of the Tidewater
Affiliated Group or (B) any note, bond, mortgage,
indenture, deed of trust, lease, license, agreement or
other instrument or obligation to which any member of the
Tidewater Affiliated Group is a party, or by which any
member of the Tidewater Affiliated Group or any of its
assets are bound, or (ii) subject to obtaining clearance
under the HSR Act and effectiveness of the Registration
Statement, violate any order, writ, injunction, decree,
judgment, statute, rule or regulation of any governmental
body to which any member of the Tidewater Affiliated Group
is subject or by which any member of the Tidewater
Affiliated Group or any of the assets of the foregoing are
bound.
(b) No consent, approval, order, permit or
authorization of, or registration, declaration or filing
with, any Person or of any government or any agency or
political subdivision thereof is required for the
execution, delivery and performance by Tidewater or Sub of
this Agreement and the covenants and transactions
contemplated hereby or for the execution, delivery and
performance by Tidewater or Sub of any other agreements
entered, or to be entered, into by Tidewater or Sub in
connection with this Agreement, except for (i) the filing
of the HSR Report by Tidewater under the HSR Act and the
early termination or expiration of applicable waiting
periods thereunder, (ii) the filing of the Registration
Statement on Form S-4 described in Section 6.2 hereof with
the SEC and the declaration of effectiveness thereof by
the SEC and (iii) the filing of the Certificate of Merger
as provided in Section 2.1(b) hereof.
Section 5.6 Corporate Documents, Stockholder
Agreements and Board of Directors. Tidewater has
delivered to Hornbeck true and complete copies of its
certificate of incorporation and by-laws, as amended or
restated through the date of this Agreement, and the
organizational documents governing each member of the
Tidewater Affiliated Group. The minute books of each
member of the Tidewater Affiliated Group contain
reasonably complete and accurate records of all corporate
actions of the equity owners of the various entities and
of the boards of directors or other governing bodies,
including committees of such boards or governing bodies.
The stock transfer records of Tidewater are maintained by
its transfer agent and registrar, and to the Knowledge of
Tidewater, contain complete and accurate records of all
issuances and redemptions of stock by Tidewater. Neither
Tidewater nor any of its Affiliates, is a party to any
agreement with respect to the capital stock of Tidewater
other than this Agreement, the Tidewater Stockholder
Rights Plan and Stock Option Agreements entered into
pursuant to the Tidewater Disclosed Plans.
Section 5.7 SEC Documents; Financial Statements;
Liabilities. (a) Tidewater has filed all required
reports, schedules, forms, statements and other documents
with the SEC since January 1, 1992 (the "Tidewater SEC
Documents"). As of their respective dates, the Tidewater
Documents, and any such reports, forms and documents filed
by Tidewater with the SEC after the date hereof, complied,
or will comply, as to form in all material respects with
the requirements of the Securities Act or the Exchange
Act, as the case may be, and the rules and regulations of
the SEC promulgated thereunder applicable to such
Tidewater SEC Documents, and none of the Tidewater SEC
Documents contained, or will contain, any untrue statement
of a material fact or omitted to state a 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. Except to the
extent that information contained in any Tidewater SEC
Document has been revised or superseded by a later filed
Tidewater SEC Document, none of the Tidewater SEC
Documents contains any untrue statement of a material fact
or omits 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.
(b) The Tidewater Financial Statements
included in the Tidewater SEC Documents have been audited
by KPMG Peat Marwick, L.L.P., certified public accountants
(in the case of the Tidewater Audited Financial
Statements) in accordance with generally accepted auditing
standards, have been prepared in accordance with United
States generally accepted accounting principles and,
except as disclosed therein, applied on a basis consistent
with prior periods, and present fairly the financial
position of Tidewater and its consolidated subsidiaries at
such dates and the results of operations and cash flows
for the periods then ended, except, in the case of the
Tidewater Interim Financial Statements, as permitted by
Rule 10-01 of Regulation S-X of the SEC. The Tidewater
Interim Financial Statements reflect all adjustments
(consisting only of normal recurring adjustments) that are
necessary for a fair statement of the results for the
interim periods presented therein. No member of the
Tidewater Affiliated Group has, nor are any of their
respective assets subject to, any liability, commitment,
debt or obligation (of any kind whatsoever whether
absolute or contingent, accrued, fixed, known, unknown,
matured or unmatured), except (i) as and to the extent
reflected on the Tidewater Latest Balance Sheet, or (ii)
as may have been incurred or may have arisen since the
date of the Tidewater Latest Balance Sheet in the ordinary
course of business and that are not material individually
or in the aggregate or are permitted by this Agreement.
(c) The Tidewater Latest Balance Sheet
includes appropriate reserves for all Taxes and other
liabilities incurred as of such date but not yet payable.
(d) Since the date of the Tidewater Latest
Balance Sheet, there has been no change that has had or is
likely to have a Material Adverse Effect on Tidewater.
(e) Except as set forth in Schedule 5.7(e),
the statements of earnings included in the Tidewater
Financial Statements do not contain any income or revenue
realized from services that the Surviving Corporation
would be prohibited or restricted from offering after the
Effective Time pursuant to any covenant or provision in
any material contract to which any member of the Tidewater
Affiliated Group is a party.
Section 5.8 Absence of Certain Changes or Events.
Since the date of the Tidewater Latest Balance Sheet, each
member of the Tidewater Affiliated Group has conducted its
business only in the ordinary course, and has not:
(a) amended its certificate of incorporation,
by-laws or similar organizational documents;
(b) merged or consolidated with another entity
(other than a subsidiary) or acquired or agreed to acquire
any business or any corporation, partnership or other
business organization, or sold, leased, transferred or
otherwise disposed of any material portion of its assets
except for fair value in the ordinary course of business;
(c) suffered any damage, destruction or loss
(whether or not covered by insurance) which has had or
could have a Material Adverse Effect on Tidewater; or
(d) suffered the termination, suspension or
revocation of any license or permit necessary for the
operation of its business;
(e) entered into any transaction other than on
an arm's-length basis;
(f) declared or paid any dividend or made any
distribution with respect to any of its equity interests,
or redeemed, purchased or otherwise acquired any of its
equity interests, or issued, sold or granted any equity
interests or any option, warrant or other right to
purchase or acquire any such interest other than (i) the
declaration and payment by Tidewater of its normal
quarterly cash dividend of $.125 per share of Tidewater
Common Stock, (ii) grants of, and issuances of shares of
Tidewater Common Stock upon the exercise of, stock options
issued under a Tidewater Disclosed Plan, provided that any
new options granted by Tidewater shall not have covered
more than 500,000 shares, (iii) the acceptance by
Tidewater of any shares in consideration of the exercise
of such Tidewater stock options or in satisfaction of any
tax or tax withholding obligations of the holders of such
options, and (iv) payments within the Tidewater Affiliated
Group by entities other than Tidewater as part of its cash
management program that may be characterized as dividends
or distributions; or
(g) agreed, whether or not in writing, to do
any of the foregoing.
Section 5.9 Contracts. Each material agreement,
contract or commitment to which any member of the
Tidewater Affiliated Group is a party that would be
required to be filed as an exhibit to a report, schedule,
form, statement or other document filed by Tidewater with
the SEC (each a "Material Contract") has been so filed,
and between the date of the filing of its most recent
Quarterly Report on Form 10-Q and the date of this
Agreement, Tidewater has not entered into any Material
Contract other than this Agreement. Tidewater will file
with the SEC any Material Contract required to be filed
that it enters into between the date of this Agreement and
the Closing Date and will furnish Hornbeck with a copy of
any such Material Contract. No member of the Tidewater
Affiliated Group has breached, nor is there any pending
or, to the Knowledge of Tidewater, threatened, claim that
it has breached, any of the terms or conditions of any of
its Material Contracts, and to the Knowledge of Tidewater,
no other parties to any such Material Contract have
breached any of its terms or conditions. Hornbeck has
been provided with a complete and accurate copy of each
Material Contract entered into prior to the date of this
Agreement.
Section 5.10 Vessels. With respect to each vessel
owned, leased or chartered by any member of the Tidewater
Affiliated Group (the "Tidewater Vessels"): (a) except as
listed on Schedule 5.10, such Tidewater Vessel is lawfully
documented under the flag of the nation or state for such
Tidewater Vessel, (b) such Tidewater Vessel is afloat and
in satisfactory operating condition for charter hire, (c)
such Tidewater Vessel holds in full force and effect all
certificates, licenses, permits and rights required for
operation in the manner vessels of its kind are being
operated in the geographical area in which such Tidewater
Vessel is presently being operated and (d) no event has
occurred and no condition exists that would endanger the
maintenance of the classification of such Tidewater
Vessel, except in each such case as to those Tidewater
Vessels that may be undergoing major repairs,
modifications, and/or document renewals, or are cold-
stacked or held for sale by Tidewater as of the date
hereof or between the date hereof and the Closing Date.
Section 5.11 Environmental Compliance. (a) Each
member of the Tidewater Affiliated Group possesses all
necessary licenses, permits and other approvals and
authorizations that are required under, and are, and to
the Knowledge of Tidewater at all times in the past have
been, in compliance with, all Environmental Laws,
including without limitation all Environmental Laws
governing the generation, use, collection, treatment,
storage, transportation, recovery, removal, discharge or
disposal of hazardous substances or wastes, and all
Environmental Laws imposing record-keeping, maintenance,
testing, inspection, notification and reporting
requirements with respect to hazardous substances or
wastes.
(b) Except as set forth on Schedule 5.11(b) or
as otherwise disclosed in a Tidewater SEC Document, no
member of the Tidewater Affiliated Group is, nor has it
been, subject to any administrative or judicial proceeding
pursuant to, or has received any notice of any violation
of, or claim alleging liability under, any Environmental
Laws, and, to the Knowledge of Tidewater, no facts or
circumstances exist that would be likely to result in a
claim, citation or allegation against any member of the
Tidewater Affiliated Group for a violation of, or alleging
liability under, any Environmental Laws that would have a
Material Adverse Effect on Tidewater.
(c) Except as listed on Schedule 5.11(c),
there are no underground tanks of any type (including
tanks storing gasoline, diesel fuel, oil or other
petroleum products) or disposal sites for hazardous
substances, hazardous wastes or any other waste, located
on or under the real estate currently owned, leased or
used by any member of the Tidewater Affiliated Group and
to the Knowledge of Tidewater there were no such disposal
sites located on or under the real estate previously
owned, leased or used by any member of the Tidewater
Affiliated Group on the date of the sale thereof by any
member of the Tidewater Affiliated Group or during the
period of lease for use by any member of the Tidewater
Affiliated Group.
(d) Except in the ordinary course of business,
and in all cases in compliance with Environmental Laws, no
member of the Tidewater Affiliated Group has engaged any
third party to handle, transport or dispose of hazardous
substances or wastes (including for this purpose,
gasoline, diesel fuel, oil or other petroleum products, or
bilge waste) on its behalf, and except as set forth on
Schedule 5.11(b), the disposal by each member of the
Tidewater Affiliated Group of its hazardous substances and
wastes has been in compliance with all Environmental Laws.
Section 5.12 State Takeover Statutes. Assuming
approval by the Hornbeck Board of Directors of this
Agreement referred to in Section 4.15, no state takeover
statute or similar statute or regulation applies or
purports to apply to Tidewater in connection with the
Merger, this Agreement or any of the transactions
described in this Agreement.
Section 5.13 Accounting Matters. No member of the
Tidewater Affiliated Group nor any of its Affiliates has
taken or agreed to take any action that (without giving
effect to any action taken or agreed to be taken by
Hornbeck or any of its Affiliates) would prevent Tidewater
from accounting for the business combination to be
effected by the Merger as a pooling-of-interests. Within
three business days of the execution of this Agreement,
Tidewater will have received letters from its independent
public accountants and the Hornbeck independent public
accountants to the effects that if the Merger were to be
consummated on the date of this Agreement, it would
qualify for pooling-of-interests treatment under the
generally accepted accounting principles of the United
States.
Section 5.14 Litigation. Except (i) as disclosed in
a Tidewater SEC Document, (ii) that are not material
individually or in the aggregate, or (iii) as listed on
Schedule 5.14, there are no actions, suits, proceedings,
arbitrations or investigations pending or, to the
Knowledge of Tidewater, threatened, before any court, any
governmental agency or instrumentality or any arbitration
panel, against or affecting any member of the Tidewater
Affiliated Group or any of the directors, officers, or
employees of the foregoing, and to the Knowledge of
Tidewater no facts or circumstances exist that would be
likely to result in the filing of any such action that
would have a Material Adverse Effect on Tidewater. No
member of the Tidewater Affiliated Group is subject to any
currently pending judgment, order or decree entered in any
lawsuit or proceeding.
Section 5.15 Legality of Tidewater Common Stock. The
Tidewater Common Stock to be issued in connection with the
Merger, when issued and delivered in accordance with the
terms hereof, will be duly authorized, validly issued,
fully paid and non-assessable, and free of pre-emptive
rights.
Section 5.16 Statements are True and Correct. None of
the information included in (i) the Registration Statement
to be filed by Tidewater with the SEC in connection with
the Tidewater Common Stock to be issued in the Merger,
(ii) the Proxy Statement to be mailed to the stockholders
of Hornbeck in connection with its stockholders meeting,
and (iii) any other documents to be filed with the SEC or
any other regulatory authority in connection with the
transactions contemplated hereby that has been or will be
supplied by the Tidewater Affiliated Group, will, at the
respective times such documents are filed, and, in the
case of the Registration Statement, when it becomes
effective and, with respect to the Proxy Statement, when
first mailed to the stockholders of Hornbeck, be false or
misleading with respect to any material fact, or omit to
state any material fact necessary in order to make the
statements therein not misleading, or, in the case of the
Proxy Statement or any amendment thereof or supplement
thereto, at the time of the Hornbeck stockholders'
meeting, be false or misleading with respect to any
material fact or omit to state any material fact necessary
to make the statements therein in light of the
circumstances under which they were made not misleading.
All documents that Tidewater is responsible for filing
with the SEC or any other regulatory authority in
connection with the transactions contemplated hereby, will
comply in all material respects with the provisions of
applicable law.
Section 5.17 No Stockholder Vote. No vote of any
class of stockholders of Tidewater is required to approve
this Agreement or the transactions contemplated hereby in
order to comply with the DGCL, Tidewater's Certificate of
Incorporation or By-laws, or the rules and regulations of
the New York Stock Exchange or Pacific Stock Exchange.
Section 5.18 Citizenship. Tidewater is a U.S.
citizen and is authorized to conduct business in the
United States coastwise trade within the meaning of the
Federal Maritime Laws.
Section 5.19 Broker's and Finder's Fee. No agent,
broker, Person or firm acting on behalf of Tidewater is or
will be entitled to any commission or broker's or finder's
fee from any of the parties hereto, or from any Affiliate
of the parties hereto, in connection with any of the
transactions contemplated herein.
Section 5.20 Disclosure. (a) No representations or
warranties by Tidewater or Sub in this Agreement and no
statement contained in the schedules or exhibits or in any
certificates to be delivered pursuant to this Agreement,
contains or will contain any untrue statement of material
fact or omits or will omit to state any material fact
necessary, in light of the circumstances under which it
was made, in order to make the statements herein or
therein not misleading.
(b) Hornbeck has been furnished with complete
and correct copies of all agreements, instruments and
documents, together with any amendments or supplements
thereto, set forth on, or underlying a disclosure set
forth on, a Schedule provided by Tidewater. Each of the
Schedules provided by Tidewater is complete and correct.
ARTICLE 6. PRE-CLOSING COVENANTS
Section 6.1 Hart-Scott-Rodino; Cooperation and Best
Efforts. (a) Hornbeck and Tidewater shall cooperate in
good faith and take all actions reasonably necessary or
appropriate to file, and expeditiously and diligently
prosecute to a favorable conclusion, the HSR Reports
required to be filed by each of them in connection
herewith with the Federal Trade Commission (the "FTC") and
the Department of Justice (the "DOJ") pursuant to the HSR
Act; provided that Tidewater shall not be required to
accept any conditions that may be imposed by the FTC or
the DOJ in connection with such filings that would require
the divestiture of any Tidewater or Hornbeck assets or
otherwise have a Material Adverse Effect on such party.
(b) Hornbeck and Tidewater agree that from the
date of this Agreement through the Effective Time, neither
party shall enter into any transaction with a third party
or recapitalization that would have the effect of impeding
the ability to obtain HSR Act clearance; provided that (i)
the exercise by Tidewater of options to acquire seven
vessels currently under lease and (ii) the exercise by
Hornbeck of either or both of the Ravensworth Options in
accordance with Section 6.11 shall not be considered a
breach of this covenant.
(c) Each party shall cooperate with the other
and use its reasonable best efforts to (i) receive all
necessary and appropriate consents of third parties to the
transactions contemplated hereunder, (ii) satisfy all
requirements prescribed by law for, and all conditions set
forth in this Agreement to, the consummation of the
Merger, and (iii) effect the Merger in accordance with
this Agreement at the earliest practicable date.
Section 6.2 Registration Statement and Proxy
Statement; Hornbeck Special Meeting. (a) Tidewater will
prepare and file the Registration Statement under the
Securities Act which will include the Proxy Statement
complying with all the requirements of the Securities Act
applicable thereto, for the purpose, among other things,
of registering the Tidewater Common Stock which will be
issued to the holders of Hornbeck Common Stock pursuant to
the Merger. Tidewater shall use its best efforts to cause
the Registration Statement to become effective as soon as
practicable, to qualify the Tidewater Common Stock under
the securities or blue sky laws of such jurisdictions as
may be required and to keep the Registration Statement and
such qualifications current and in effect for so long as
necessary to consummate the transactions contemplated
hereby. In addition, Tidewater shall use its best efforts
to cause the Tidewater Common Stock to be issued pursuant
to the Merger to be listed on the New York Stock Exchange
and Pacific Stock Exchange and be fully tradeable except
to the extent any shares of Tidewater Common Stock
received by stockholders of Hornbeck are subject to the
provisions of Rule 145 of the SEC or are restricted under
applicable rules related to tax-free reorganizations and
pooling-of-interest accounting rules.
(b) Each of the parties will cooperate in the
preparation of the Registration Statement and the Proxy
Statement. Each of the parties will as promptly as
practicable after the date hereof furnish all such data
and information relating to it as the other may reasonably
request for the purpose of including such data and
information in the Registration Statement and Proxy
Statement.
(c) Hornbeck shall, as soon as practicable
following effectiveness of the Registration Statement,
take all action necessary under the DGCL and its
Certificate of Incorporation and By-laws to convene a
special meeting of its stockholders (the "Special
Meeting") for the purpose of approving this Agreement.
Hornbeck will, through its Board of Directors, recommend
to its stockholders approval of this Agreement and the
transactions described herein, subject to the terms set
forth in Section 6.5 hereof.
Section 6.3 Conduct of Business By Both Parties Prior
to the Closing Date. During the period from the date of
this Agreement to the Effective Time, Hornbeck and
Tidewater shall each use its reasonable best efforts to
preserve the goodwill of suppliers, customers and others
having business relations with it and to do nothing
knowingly to impair its ability to keep and preserve its
business as it exists on the date of this Agreement.
Without limiting the generality of the foregoing, during
the period from the date of this Agreement to the
Effective Time of the Merger each of Hornbeck and
Tidewater shall not, without the prior written consent of
the other:
(a) declare, set aside, increase or pay any
dividend (including any stock dividends), or declare or
make any distribution on, or directly or indirectly
combine, redeem, reclassify, purchase, or otherwise
acquire, any shares of its capital stock or authorize the
creation or issuance of, or issue, deliver or sell any
additional shares of its capital stock or any securities
or obligations convertible into or exchangeable for its
capital stock or effect any stock split or reverse stock
split or other recapitalization, except (i) for the
declaration and payment by Tidewater of its normal
quarterly cash dividend of $.125 per share of Tidewater
Common Stock, (ii) the issuance of any shares of Tidewater
Common Stock or preferred stock upon the exercise of the
Rights in accordance with the terms of the Tidewater
Stockholder Rights Plan, (iii) the grant of, and the
issuance of any shares upon the exercise of, any stock
options issued pursuant to a Tidewater Disclosed Plan,
provided that any new options granted by Tidewater
pursuant to any such Plan shall not cover more than
500,000 shares; (iv) the acceptance by Tidewater of any
shares in consideration of the exercise of such Tidewater
stock options or in satisfaction of any tax or tax
withholding obligations of the holders of such options,
(v) the issuance of shares of Hornbeck Common Stock
pursuant to the exercise of the Ravensworth Options in
accordance with Section 6.11, (vi) the issuance of any
shares of Hornbeck Common Stock or preferred stock upon
exercise of the rights in accordance with the terms of the
Hornbeck Stockholder Rights Plan, (vii) the issuance of
any shares upon the exercise of the Hornbeck Disclosed
Employee Stock Options, (viii) the issuance of shares of
restricted Hornbeck Common Stock pursuant to Section
6.4(j) or (ix) the acceptance by Hornbeck of any shares of
Hornbeck Common Stock in consideration of the exercise of
the Hornbeck Disclosed Employee Stock Options or in
satisfaction of any tax or tax withholding obligations of
the holders of such Hornbeck Disclosed Employee Stock
Options or restricted stock awards of Hornbeck Common
Stock.
(b) amend its certificate of incorporation or
by-laws, or adopt or amend any resolution or agreement
concerning indemnification of its directors, officers,
employees or agents;
(c) pledge or otherwise encumber any shares of
its capital stock, any other voting securities or any
securities convertible into, or any rights, warrants or
options to acquire, any such shares, or any other voting
securities or convertible securities;
(d) commit or omit to do any act which act or
omission would cause a breach of any covenant contained in
this Agreement or would cause any representation or
warranty contained in this Agreement to become untrue, as
if each such representation and warranty were continuously
made from and after the date hereof;
(e) violate any applicable law, statute, rule,
governmental regulation or order that would have a
Material Adverse Effect on such party;
(f) fail to maintain its books, accounts and
records in the usual manner on a basis consistent with
that heretofore employed;
(g) fail to pay, or to make adequate provision
in all material respects for the payment of, all Taxes,
interest payments and penalties due and payable (for all
periods up to the Effective Date, including that portion
of its fiscal year to and including the Effective Date) to
any city, parish, state, the United States, foreign or any
other taxing authority, except those being contested in
good faith by appropriate proceedings and for which
sufficient reserves have been established, or make any
elections with respect to Taxes;
(h) make any material tax election that is
inconsistent with any corresponding election made on a
prior return or settle or compromise any income tax
liability for an amount materially in excess of the
liability therefor that is reflected on the Hornbeck
Financial Statements or Tidewater Financial Statements, as
the case may be;
(i) take any action that would prevent the
accounting for the business combination to be effected by
the Merger as a pooling-of-interests; or
(j) authorize any of, or agree or commit to do
any of, the foregoing actions.
Section 6.4 Conduct of Business By Hornbeck Prior to
the Closing Date. During the period from the date of this
Agreement to the Effective Time, in addition to its
covenants set forth in Section 6.3, each member of the
Hornbeck Consolidated Group shall use its best efforts to
preserve the possession and control of all of its assets
other than those permitted to be disposed of pursuant to
the terms of this Agreement, shall conduct its business
only in the ordinary course consistent with past practice,
and, except as otherwise provided herein, shall not,
without the prior written consent of Tidewater:
(a) except as contemplated by Section 4.19(m),
enter into or modify any employment, severance or similar
agreement or arrangement with any director or employee, or
grant any increase in the rate of wages, salaries, bonuses
or other compensation or benefits of any executive officer
or other employee, other than any such increase that is
both in the ordinary course of business consistent with
past practice and in an amount such that, after giving
effect thereto, aggregate employee compensation expense
(considered on an annualized basis) does not exceed 105%
of the aggregate employee compensation expense for
Hornbeck's fiscal year ending December 31 1995;
(b) enter into any new line of business;
(c) acquire or agree to acquire (i) by merging
or consolidating with, or by purchasing a substantial
portion of the assets of, or by any other manner, any
business or any corporation, partnership, joint venture,
association or other business organization or division
thereof or (ii) any assets that are material, individually
or in the aggregate, to such party and its subsidiaries
taken as a whole, except purchases of inventory in the
ordinary course of business consistent with past practice;
provided that the foregoing language of this Section
6.4(c) shall not be deemed to restrict the ability of
Hornbeck to exercise either or both of the Ravensworth
Options in accordance with Section 6.11;
(d) except as disclosed on Schedule 6.4(d),
sell or otherwise dispose of any Hornbeck Vessel, or,
except for dispositions made in the ordinary course of
business and consistent with past practices, sell, lease,
license, mortgage or otherwise encumber or subject to any
Lien or otherwise dispose of any of its other properties
or assets;
(e) (i) except as disclosed on Schedule
6.4(e), incur any indebtedness for borrowed money,
excluding the obtaining of letters of credit or surety
bonds in the ordinary course of business consistent with
past practices, but including any borrowings under the
existing Hornbeck credit facility with First Interstate
Bank of Texas N.A. (provided that, to the extent Hornbeck
applies cash to reduce any outstanding debt under the term
loan portion of such facility, it shall be permitted to
re-borrow such amount under the revolving line of credit
portion of such facility); or guarantee any such
indebtedness of another Person, issue or sell any debt
securities or warrants or other rights to acquire any debt
securities of such party or any of its subsidiaries,
guarantee any debt securities of another Person, enter
into any "keep well" or other agreement to maintain any
financial condition of another Person or enter into any
arrangement having the economic effect of any of the
foregoing, or (ii) make any loans, advances or capital
contributions to, or investments in, any other Person,
except for the exercise of either or both of the
Ravensworth Options in accordance with Section 6.11;
(f) except as disclosed on Schedule 6.4(f),
make or agree to make any new capital expenditures other
than those made in the ordinary course of business and
consistent with past practices out of available cash,
(excluding the proceeds of borrowings);
(g) approve the declaration or payment of any
dividend or distribution by Ravensworth or Seaboard;
(h) except in the ordinary course of business,
place or suffer to exist on any of its assets or
properties any Lien, other than Liens listed on Schedules
4.11(a) or 4.13 and Permitted Liens, or forgive any
material indebtedness owing to it or any claims which it
may have possessed, or waive any right of substantial
value or discharge or satisfy any material noncurrent
liability;
(i) acquire another business or entity, or
sell or otherwise dispose of a material part of its
assets, except in the ordinary course of business
consistent with past practices;
(j) permit any employee or former employee,
officer or director of any member of the Hornbeck
Consolidated Group to become entitled to receive any award
under Hornbeck's discretionary or other bonus plans except
for (i) cash payments up to $350,000 in the aggregate to
directors, officers and employees as semi-annual director
fees and incentive payments for 1995 performance
consistent with past practice (the "1995 Incentive Cash
Payments"), and (ii) the issuance of an aggregate of
19,310 shares of restricted Hornbeck Common Stock for 1995
performance, provided that, any cash payments or awards of
restricted stock under (i) or (ii) shall not be made prior
to January 2, 1996, and provided further that, if the
Closing Date has not occurred by April 30, 1996, cash
payments may be made to officers and employees as
incentive payments for 1996 performance for the period
from January 1, 1996 through the Closing Date, such
amounts to be prorated and based on the total 1995
Incentive Cash Payments and to otherwise be consistent
with past practice; or
(k) authorize any of, or agree or commit to do
any of, the foregoing actions.
In addition, Hornbeck shall consult with Tidewater with
respect to any action of the type described above proposed
to be taken by a member of the North Sea Group.
Section 6.5 No Solicitations. (a) No member of the
Hornbeck Group shall directly or indirectly, through any
officer, director, employee, representative or agent of
any member of the Hornbeck Group, solicit or encourage the
initiation or submission of any inquiries, proposals or
offers regarding any acquisition, merger, take-over bid,
sale of all or substantially all of the assets of, or
sales of shares of capital stock of Hornbeck, whether or
not in writing and whether or not delivered to the
stockholders of Hornbeck generally (including without
limitation by way of a tender offer), or similar
transactions involving Hornbeck (any of the foregoing
inquiries or proposals being referred to herein as an
"Acquisition Proposal"); provided, however, that nothing
contained in this Agreement shall prevent the Board of
Directors of Hornbeck from referring any third party to
this Section 6.5. Nothing contained in this Section 6.5
or any other provision of this Agreement shall prevent the
Board of Directors of Hornbeck from considering or
negotiating an unsolicited bona fide written Acquisition
Proposal. If the Board of Directors of Hornbeck, after
duly considering advice, written or otherwise, of outside
counsel and financial advisors to Hornbeck, determines in
good faith that it would be consistent with its fiduciary
responsibilities to approve or recommend (and in
connection therewith withdraw or modify its approval or
recommendation of this Agreement, and the transactions
contemplated hereby or thereby) a Superior Proposal (as
defined below), then, notwithstanding any such approval or
recommendation (x) Hornbeck shall not enter into any
agreement with respect to the Superior Proposal and (y)
any other obligation of Hornbeck under this Agreement
shall not be affected, unless this Agreement is terminated
pursuant to Section 9.1(f) hereof prior to or
simultaneously with the grant of such approval or the
making of such recommendation and Hornbeck, within three
Business Days following such termination resulting from
such Superior Proposal, pays Tidewater the Termination Fee
(as defined in Section 9.1(f)). As used herein the term
"Superior Proposal" means a bona fide proposal made by a
third party to acquire Hornbeck pursuant to a tender or
exchange offer, a merger, a sale of all or substantially
all of its assets or otherwise that the Board of Directors
determines in its good faith judgment to be more favorable
to Hornbeck's stockholders than the transactions
contemplated by this Agreement (after considering the
advice, written or otherwise, of Hornbeck's professional
advisors). In making a determination of whether a
Superior Proposal is more favorable, the Hornbeck Board of
Directors shall consider not only the price offered by the
third party as compared to the total consideration set
forth in this Agreement, but shall also compare the market
liquidity of the Tidewater Common Stock to the liquidity
of the consideration offered by the third party, compare
the tax consequences of the Merger to the tax consequences
of the transaction proposed by the third party, determine
whether the transaction proposed by the third party has
any financing or other conditions or contingencies, and
make any other meaningful comparison of the relative
benefits offered to the Hornbeck stockholders by the
Merger as compared to the transaction proposed by the
third party.
(b) Hornbeck shall immediately notify
Tidewater after receipt of any Acquisition Proposal or any
request for nonpublic information relating to any member
of the Hornbeck Group in connection with an Acquisition
Proposal or for access to the properties, books or records
of any member of the Hornbeck Group that informs the Board
of Directors of any member of the Hornbeck Group that it
is considering making, or has made, an Acquisition
Proposal. To the extent not prohibited by confidentiality
provisions imposed by the offering party, such notice to
Tidewater shall be made orally and in writing and shall
indicate in reasonable detail the identity of the offeror
and the terms and conditions of such proposal, inquiry or
contact.
(c) If the Board of Directors of Hornbeck
receives a request for material nonpublic information by a
Person who makes, or who states in writing that it
intends, subject to satisfactory review of such nonpublic
information, to make, a bona fide Acquisition Proposal,
Hornbeck may, subject to the execution of a
confidentiality agreement substantially similar to that
then in effect between Hornbeck and Tidewater, provide
such Person with access to information regarding Hornbeck.
(d) Nothing contained in this Section 6.5
shall prevent Hornbeck from complying with Rule 14e-2(a)
or Rule 14d-9 promulgated under the Exchange Act, if
applicable, with regard to an Acquisition Proposal made in
the form of a tender offer by a third party.
Section 6.6 Press Releases. Hornbeck and Tidewater
will consult with each other before issuing, and provide
each other the opportunity to review and comment upon, any
press releases or other public statements with respect to
any transactions described in this Agreement, including
the Merger, and shall not issue any such press releases or
make any such public statement prior to such consultation,
except as may be required by applicable law, court process
or by obligations pursuant to a listing agreement with the
Nasdaq National Market or the New York Stock Exchange.
Section 6.7 Access to Information and Confidentiality.
(a) Prior to the Closing Date, each of Hornbeck and
Tidewater shall afford to the other party and to the
officers, employees, accountants, counsel, financial
advisors and other representatives of such other party,
reasonable access during normal business hours to their
respective premises, books and records and will furnish to
the other party (i) a copy of each report, schedule,
registration statement and other documents filed by it
during such period pursuant to the requirements of federal
or state securities laws, and (ii) such other information
with respect to its business and properties as such other
party reasonably requests.
(b) Each of Hornbeck and Tidewater will, and
will cause its officers, directors, employees, agents and
representatives to, (i) hold in confidence, unless
compelled to disclose by judicial or administrative
process, or, in the opinion of its counsel, by other
requirements of law, all nonpublic information concerning
the other party furnished in connection with the
transactions contemplated by this Agreement until such
time as such information becomes publicly available
(otherwise than through the wrongful act of such person),
(ii) not release or disclose such information to any other
person, except in connection with this Agreement to its
auditors, attorneys, financial advisors, other consultants
and advisors, and (iii) not use such information for any
competitive or other purpose other than with respect to
its consideration and evaluation of the transactions
contemplated by this Agreement. In the event of
termination of this Agreement for any reason, Hornbeck and
Tidewater will promptly return or destroy all documents
containing nonpublic information so obtained from the
other party and any copies made of such documents and any
summaries, analyses or compilations made therefrom.
Section 6.8 Consultation and Reporting. During the
period from the date of this Agreement to the Closing
Date, each of Hornbeck and Tidewater will, subject to any
applicable legal or contractual restrictions confer on a
regular and frequent basis with the other to report
material operational matters and to report on the general
status of ongoing operations. Each of Hornbeck and
Tidewater will notify the other of any unexpected
emergency or other change in the normal course of its
business or in the operation of its properties and of any
governmental complaints, investigations, adjudicatory
proceedings, or hearings (or communications indicating
that the same may be contemplated) and will keep the other
fully informed of such events and permit its
representatives prompt access to all materials prepared by
or on behalf of such party or served on them, in
connection therewith.
Section 6.9 Update Schedules. Each party hereto will
promptly disclose to the other any information contained
in its representations and warranties and on the related
schedules that, because of an event occurring after the
date hereof, is incomplete or no longer correct; provided,
however, that none of such disclosures will be deemed to
modify, amend or supplement the representations and
warranties of such party, unless the other party consents
to such modification, amendment or supplement in writing.
Section 6.10 Hornbeck Stock Options. The parties
acknowledge and agree that, pursuant to Article XIII of
the Hornbeck 1989 Employee Incentive Plan and Article XIII
of the Hornbeck 1993 Employee Incentive Plan, any of the
Hornbeck Disclosed Employee Stock Options issued under
such plans that remain unexercised as of the Closing Date
shall, in accordance with their terms, become options to
acquire such number of shares of Tidewater Common Stock
that the holder of such unexercised Hornbeck Disclosed
Employee Stock Options would have been entitled to receive
upon consummation of the Merger if such holder had
exercised such option immediately prior to, or coincident
with, the Merger. Tidewater agrees to honor the
obligations of Hornbeck under such plans effective as of
the Effective Time.
Section 6.11 Exercise of North Sea Options. The
parties agree and acknowledge that Hornbeck, as an equity
owner of Ravensworth, Seaboard and HOL, owns options to
acquire additional equity interests in Ravensworth,
Seaboard and HOL that expire on various dates. The
parties agree that Hornbeck shall not exercise, modify or
cancel such options without the prior written consent of
Tidewater, provided that Hornbeck shall have the right, on
or after February 29, 1996, to exercise, modify or cancel
either or both of the Ravensworth Options after consulting
with Tidewater, and provided further that from February
29, 1996 until the Closing Date, Hornbeck will not issue
Hornbeck Common Stock as consideration for the exercise of
such options without Tidewater's prior written consent.
In the event the Ravensworth Option that expires on March
31, 1996 is not exercised by such date, thereby triggering
mutual rights on behalf of Hornbeck and the 50.1% owner of
Ravensworth to initiate a sale of Ravensworth, the parties
agree that Hornbeck will not initiate such a sale without
the consent of Tidewater, or take any act with respect to
an offer for Ravensworth upon the initiation of a sale by
the other owner of Ravensworth without consulting with
Tidewater; provided that the failure by Hornbeck to
exercise such Ravensworth Option will not alone be
construed to be an initiation by Hornbeck of such a sale.
Section 6.12 Hornbeck 1995 Form 10-K. (a) Hornbeck
agrees to use its best efforts to prepare and file with
the SEC its annual report on Form 10-K for the fiscal year
ending December 31, 1995 before the Closing Date.
(b) Tidewater agrees to cooperate in such
filing of Hornbeck's Annual Report on Form 10-K.
Section 6.13 Severance Policy. Hornbeck agrees to
comply with, and Tidewater agrees to honor, the terms of
the severance policy for Hornbeck's employees that was
adopted by Hornbeck's Board of Directors on December 14,
1995, substantially in the form set forth on Schedule
6.13.
Section 6.14 Sub Stockholder Approval. Tidewater, as
the sole stockholder of Sub, shall take all action
necessary to effect the necessary stockholder approval by
Sub of this Agreement.
Section 6.15 Employee Indemnification. Hornbeck
shall, at its next Board of Directors meeting but not
later than January 31, 1996, amend that certain resolution
adopted by the Hornbeck Board of Directors on November 19,
1995 to limit its application to the matter disclosed in
the first paragraph of Schedule 4.23(b).
Section 6.16 Change in Control Agreements. Hornbeck
agrees that the four officers of Hornbeck entitled to
payments under those certain Change in Control Agreements
entered into on June 20, 1995, shall not be entitled to
payments under Section 9(b)(iii) of such agreements in
excess of the amounts listed opposite each such officer's
name on Schedule 6.16 provided however that the foregoing
does not limit in any way the obligations of Hornbeck
pursuant to the other provisions of the Change in Control
Agreements. Tidewater agrees to cause Surviving
Corporation to honor such agreements in accordance with
their terms.
ARTICLE 7. CLOSING CONDITIONS
Section 7.1 Conditions Applicable to All Parties. The
obligations of each of the parties hereto to effect the
Merger and the other transactions contemplated by this
Agreement are subject to the satisfaction or waiver of the
following conditions at or prior to the Closing:
(a) Registration and Listing Effectiveness;
Stockholder Approval. The Registration Statement shall
have become effective with the SEC (and no stop order
suspending the effectiveness of the Registration Statement
shall have been issued and no proceedings for that purpose
shall have been instituted by the SEC) and the Proxy
Statement included therein shall have been mailed to the
Hornbeck stockholders, the shares of Tidewater Common
Stock to be issued pursuant to the Merger shall have been
approved for listing on the New York Stock Exchange and
the Pacific Stock Exchange, subject to official notice of
issuance, and the required approval of the stockholders of
Hornbeck of this Agreement shall have been obtained at the
Special Meeting.
(b) No Restraining Action. No action, suit,
or proceeding before any court or governmental or
regulatory authority will be pending, no investigation by
any governmental or regulatory authority will have been
commenced, and no action, suit or proceeding by any
governmental or regulatory authority will have been
threatened, against Hornbeck, Tidewater or any of the
principals, officers or directors of any of them, seeking
to restrain, prevent or change the transactions
contemplated hereby or questioning the legality or
validity of any such transactions or seeking damages in
connection with any such transactions.
Section 7.2 Conditions to Tidewater's Obligations.
The obligations of Tidewater to effect the Merger and the
other transactions contemplated by this Agreement are also
subject to the satisfaction or waiver of the following
conditions at or prior to the Closing:
(a) Representations, Warranties and Covenants.
(i) The representations and warranties of Hornbeck in
this Agreement or in any certificate delivered to
Tidewater pursuant hereto as of the date hereof will be
deemed to have been made again at and as of the Closing
Date (without regard to any Schedule updates furnished by
Hornbeck after the date hereof unless consented to by
Tidewater) and will then be true and correct in all
material respects, except to the extent any such
representation or warranty is qualified by materiality or
by reference to the term "Material Adverse Effect" in
which case such representation or warranty shall be true
and correct, and (ii) Hornbeck will have performed and
complied in all material respects with all agreements and
conditions required by this Agreement to be performed or
complied with by Hornbeck prior to or on the Closing Date.
(b) No Material Adverse Change. There shall
not have occurred any event or circumstance resulting in a
Material Adverse Effect with respect to Hornbeck from the
date of the Hornbeck Latest Balance Sheet to the Closing
Date.
(c) HSR Act. The waiting periods (and any
extensions thereof) applicable to the Merger under the HSR
Act shall have been terminated or shall have expired and
no condition shall have been imposed on Hornbeck or
Tidewater to obtain such termination that would require
the divestiture of any of either of such party's assets or
otherwise have a Material Adverse Effect on such party.
(d) Consents and Approvals. All governmental
and other third-party consents and approvals, if any,
necessary to permit the consummation of the transactions
contemplated by this Agreement, or to permit the continued
operation of the business of Hornbeck in substantially the
same manner after the Closing Date as before, will have
been received.
(e) Closing Certificate. The receipt by
Tidewater of a certificate executed by the Chief Executive
Officer and Chief Financial Officer of Hornbeck dated the
Closing Date, certifying that the conditions specified in
Section 7.2(a) and (b) hereof have been fulfilled.
(f) Good Standing and Tax Certificates.
Hornbeck will have delivered to Tidewater, each dated as
of a date not earlier than five days prior to the Closing
Date, (i) copies of the certificates of incorporation or
other organizational documents, including all amendments
thereto, certified by the appropriate government official
of each member of the Hornbeck Group, (ii) to the extent
issued by such jurisdiction, certificates from the
appropriate governmental official to the effect that each
member of the Hornbeck Group is in good standing in such
jurisdiction and listing all organizational documents of
the members of the Hornbeck Group on file, (iii) to the
extent issued by such jurisdiction, a certificate from the
appropriate governmental official in each jurisdiction in
which each member of the Hornbeck Group is qualified to do
business to the effect that such member is in good
standing in such jurisdiction and (iv) to the extent
issued by such jurisdiction, certificates as to the tax
status of each member of the Hornbeck Group in its
jurisdiction of organization and each jurisdiction in
which such member is qualified to do business.
(g) Confirmation of Pooling-of-Interests
Availability. The receipt by Tidewater of an opinion or
confirmation thereof of its independent public accountants
and the Hornbeck independent public accountants that the
transactions contemplated hereby will qualify for
pooling-of-interests treatment under the generally
accepted accounting principles of the United States.
(h) Fairness Opinion. Tidewater shall have
received a letter from Merrill, Lynch & Co. dated within
five days prior to the date the Agreement is executed by
Tidewater, in form and substance satisfactory to
Tidewater, to the effect that the aggregate of the Merger
Consideration and Fractional Payments to be paid by
Tidewater is fair to Tidewater and to Tidewater's
stockholders from a financial point of view.
(i) Tax Opinion. Tidewater shall have
received from Jones, Walker, Waechter, Poitevent, Carrere
& Denegre, L.L.P. an opinion to the effect that the Merger
and the transactions contemplated hereby will constitute a
reorganization under Section 368 of the Code.
(j) Opinion of Counsel. Tidewater shall have
received from Keck, Mahin & Cate, counsel to Hornbeck, an
opinion, dated as of the Closing Date, to the effect set
forth in Exhibit C-1, and from Morris, Nichols, Arsht &
Tunnell, special Delaware counsel to Hornbeck, an opinion,
dated as of the Closing Date, to the effect set forth in
Exhibit C-2.
(k) Hornbeck 1995 Form 10-K. Hornbeck shall
have filed with the SEC its annual report on Form 10-K for
the fiscal year ending December 31, 1995.
Section 7.3 Conditions to Hornbeck's Obligations. The
obligations of Hornbeck to effect the Merger and the other
transactions contemplated by this Agreement are also
subject to the satisfaction or waiver of the following
conditions at or prior to the Closing:
(a) Representations, Warranties and Covenants.
(i) The representations and warranties of Tidewater in
this Agreement or in any certificate delivered to Hornbeck
pursuant hereto as of the date hereof will be deemed to
have been made again at and as of the Closing Date
(without regard to any Schedule updates furnished by
Tidewater after the date hereof unless consented to by
Hornbeck) and will then be true and correct in all
material respects, except to the extent any such
representation or warranty is qualified by materiality or
by reference to the term "Material Adverse Effect" in
which case such representation or warranty shall be true
and correct, and (ii) Tidewater will have performed and
complied in all material respects with all agreements and
conditions required by this Agreement to be performed or
complied with by Tidewater prior to or on the Closing
Date.
(b) No Material Adverse Change. There shall
not have occurred any event or circumstance resulting in a
Material Adverse Effect with respect to Tidewater from the
date of the Tidewater Latest Balance Sheet to the Closing
Date.
(c) HSR Act. The waiting periods (and any
extensions thereof) applicable to the Merger under the HSR
Act shall have been terminated or shall have expired.
(d) Consents and Approvals. All governmental
and other third-party consents and approvals, if any,
necessary to permit the consummation of the transactions
contemplated by this Agreement will have been received.
(e) Closing Certificate. The receipt by
Hornbeck of a certificate executed by the Chief Executive
Officer and Chief Financial Officer of Tidewater dated the
Closing Date, certifying that the conditions specified in
Section 7.3(a) and (b) hereof have been fulfilled.
(f) Good Standing and Tax Certificates.
Tidewater will have delivered to Hornbeck, each dated as
of a date not earlier than five days prior to the Closing
Date, (i) copies of the certificates of incorporation,
including all amendments thereto, certified by the
appropriate government official, of each member of the
Tidewater Affiliated Group, (ii) certificates from the
appropriate governmental official to the effect that each
member of the Tidewater Affiliated Group is in good
standing in such jurisdiction and listing all charter
documents of such members on file, (iii) a certificate
from the appropriate governmental official in each
jurisdiction in which each member of the Tidewater
Affiliated Group is qualified to do business to the effect
that such member is in good standing in such jurisdiction
and (iv) certificates as to the tax status of each member
of the Tidewater Affiliated Group in its jurisdiction of
organization and each jurisdiction in which such member is
qualified to do business.
(g) Confirmation of Pooling-of-Interests
Availability. The receipt by Hornbeck of an opinion or
confirmation thereof of its independent accountants and
the Tidewater independent accountants that the
transactions contemplated hereby will qualify for
pooling-of-interests treatment under the generally
accepted accounting principles of the United States.
(h) Fairness Opinion. Hornbeck shall have
received a letter from Simmons & Company International
dated within five days prior to the date this Agreement is
executed by Hornbeck and confirmed within five days prior
to the date the Proxy Statement is mailed to the Hornbeck
stockholders, in form and substance satisfactory to
Hornbeck, to the effect that the aggregate of the Merger
Consideration and Fractional Payments to be paid by
Tidewater is fair to Hornbeck's stockholders from a
financial point of view.
(i) Tax Opinion. The receipt by Hornbeck of
an opinion from Price Waterhouse LLP to the effect that
the Merger and the transactions contemplated hereby will
constitute a reorganization under Section 368 of the Code.
(j) Opinion of Counsel. The receipt by
Hornbeck of opinions from Cliffe F. Laborde, general
counsel to the Company, Jones, Walker, Waechter,
Poitevent, Carrere & Denegre, L.L.P., special counsel for
Tidewater, and Ashby & Geddes, special Delaware counsel
for Tidewater, dated as of the Closing Date, to the
effects set forth in Exhibits D-1, D-2 and D-3 hereto,
respectively.
(k) Consulting Agreement. Tidewater shall
have executed and delivered a Consulting Agreement in the
form attached hereto as Exhibit E, providing for certain
consulting services to be performed by Larry D. Hornbeck.
(l) Board Representation. Tidewater's Board
of Directors shall have taken such action as is necessary
to appoint Larry D. Hornbeck to that class of the
Tidewater Board of Directors with a term expiring at the
annual meeting of Tidewater's stockholders that next
follows the Closing Date, such appointment to be effective
within two days following the Closing Date.
Section 7.4 Waiver of Conditions. Any condition to a
party's obligation to effect the Merger hereunder may be
waived by that party in writing, other than the conditions
specified in Sections 7.1(a) or (b), the first two lines
of 7.2(c) or 7.3(c).
ARTICLE 8. POST-CLOSING COVENANTS
Section 8.1 Use of Hornbeck Name. Tidewater shall use
its reasonable best efforts (a) to remove the Hornbeck
name and any abbreviation thereof and any associated trade
or service marks from all vessels, real property, owned or
leased, and equipment upon consummation of the Merger
(provided that, to the extent any such vessels or
equipment are owned or operated by the North Sea Group,
Tidewater shall not be deemed to have breached this
covenant if it is prevented from effecting such removal)
and (b) to take all other steps reasonably necessary to
avoid any public use of the Hornbeck name in connection
with the operation of its business following the Closing,
including the removal of the Hornbeck name from the
corporate or other organizational name of the members of
the Hornbeck Group (provided that, with respect to members
of the North Sea Group, Tidewater shall not be deemed to
have breached this covenant if it is prevented from
effecting such removal), in each case as soon as
practicable but in no event later than 60 days after the
Closing Date.
Section 8.2 Indemnification of Directors and Officers
of Hornbeck.
(a) From and after the Effective Time of the
Merger, Tidewater agrees to indemnify and hold harmless,
and to cause Surviving Corporation to honor its separate
indemnification obligations to, each person who is an
officer or director of Hornbeck (or a member of the
Hornbeck Group serving at the request of Hornbeck) on the
date of this Agreement or has served as such an officer or
director at any time since January 1, 1993 (together with
those persons discussed in the last sentence of this
subsection, an "Indemnified Person") from and against all
damages, liabilities, judgments and claims (and related
expenses including, but not limited to, attorney's fees
and amounts paid in settlement) based upon or arising from
his or her capacity as an officer or director of Hornbeck
(or a member of the Hornbeck Group serving at the request
of Hornbeck), to the same extent he or she would have been
indemnified under the Certificate of Incorporation or By-
laws of Hornbeck as such documents were in effect on the
date of this Agreement. Tidewater further agrees to honor
the resolution regarding Hornbeck employee indemnification
that is referred to in Section 6.15 (but only to the
extent such resolution has been modified as required by
Section 6.15), to the extent the matter referred to in the
first paragraph of Schedule 4.23(b) has not been resolved
by the Closing Date.
(b) Tidewater shall pay for the insurance
premiums required for any extension of Hornbeck's D&O
insurance policy following the Closing Date for a
"discovery" period elected under such insurance policy
covering the officers and directors of Hornbeck (or a
member of the Hornbeck Group, serving at the request of
Hornbeck), for a period of six years or shall provide
comparable coverage for the same period under Tidewater's
D&O insurance policy for all directors and officers of
Hornbeck (or a member of the Hornbeck Group, serving at
the request of Hornbeck), covered by Hornbeck's policy.
(c) The rights granted to the Indemnified
Persons hereby shall be contractual rights inuring to the
benefit of all Indemnified Persons and shall survive this
Agreement and any merger, consolidation or reorganization
of Tidewater.
(d) The rights to indemnification granted by
this Section 8.2 are subject to the following limitations:
(i) the total aggregate indemnification to be provided by
Tidewater and/or Surviving Corporation pursuant to this
Section 8.2 will not exceed, as to all of the Indemnified
Persons described herein as a group, the sum of $50
million, and Tidewater shall have no responsibility to any
Indemnified Person for the manner in which such sum is
allocated among that group (but the Indemnified Persons
may seek reallocation among themselves); (ii) amounts
otherwise required to be paid by Tidewater to an
Indemnified Person pursuant to this Section 8.2 shall be
reduced by any amounts that such Indemnified Person has
recovered by virtue of the claim for which indemnification
is sought and Tidewater shall be reimbursed for any
amounts paid by Tidewater that such Indemnified Person
subsequently recovers by virtue of such claim; (iii) no
Indemnified Person shall be entitled to indemnification
for any claim made or threatened prior to the Closing Date
of which such Indemnified Person or Hornbeck was aware but
did not promptly disclose to Tidewater prior to the
execution of this Agreement, if the claim or threatened
claim was known on or before such time, or prior to the
Closing Date, if such claim became known after execution
of this Agreement, provided that all matters disclosed in
the Schedules to this Agreement shall be deemed to have
been disclosed to Tidewater by all of such Indemnified
Persons for purposes of this Section 8.2(d); (iv) any
claim for indemnification pursuant to this Section 8.2
must be submitted in writing to the Chief Executive
Officer of Tidewater promptly upon such Indemnified Person
becoming aware of such claim and, in no event, more than
ten years from the Effective Date, provided that any such
failure to advise promptly has a prejudicial effect on
Tidewater; and (v) an Indemnified Person shall not settle
any claim for which indemnification is provided herein
without the prior written consent of Tidewater.
(e) Tidewater agrees that the indemnification
limit set forth in subparagraph (d)(i) above shall not
apply to any damages, liabilities, judgments and claims
(and related expenses, including but not limited to
attorney's fees and amounts paid in settlement) insofar as
they arise out of or are based upon any misstatement by
Tidewater of a material fact in the Registration Statement
or are based upon an omission by Tidewater of a material
fact required to be stated therein, or necessary in order
to make a statement therein not misleading unless such
statement or omission was based upon information supplied
by Hornbeck for inclusion therein.
Section 8.3 Publication of Post-Merger Results.
Tidewater shall use its reasonable best efforts to cause
financial results covering at least thirty days of post-
Merger combined operations to be published as soon as
practicable after the passage of such thirty day period.
Section 8.4 Employee Benefits. Following the
consummation of the Merger, Tidewater shall arrange to
make generally available to the employees of Hornbeck the
benefits listed on Schedule 8.4 in accordance with the
terms of such benefit plans, policies or arrangements,
provided that this covenant shall not prohibit Tidewater
from modifying or rescinding such benefits thereafter to
the extent such modification or rescission is generally
applicable to Tidewater employees.
Section 8.5 Registration Rights. Tidewater shall use
its reasonable best efforts to cause a Registration
Statement on Form S-8 to be filed with the SEC covering
the shares of Tidewater Common Stock to be issued upon
exercise of the Hornbeck Disclosed Employee Stock Options
(provided that no representation is made by Tidewater that
any such Form S-8 Registration Statement will in all cases
be available to permit resales of Tidewater Common Stock),
or shall provide the holder of such options with piggyback
registration rights for such shares.
ARTICLE 9. TERMINATION
Section 9.1 Termination. This Agreement may be
terminated and the Merger contemplated herein abandoned at
any time before the Effective Time, whether before or
after approval by the stockholders of Hornbeck as follows:
(a) Mutual Consent. By the mutual consent of
the Boards of Directors of Hornbeck and Tidewater.
(b) Material Breach. By the Board of
Directors of either Hornbeck or Tidewater if there has
been a material breach by the other of any representation
or warranty contained in this Agreement or of any covenant
contained in this Agreement, which in either case cannot
be, or has not been, cured within 15 days after written
notice of such breach is given to the party committing
such breach, provided that the right to effect such cure
shall not extend beyond the date set forth in subparagraph
(c) below.
(c) Abandonment. By the Board of Directors of
either Hornbeck or Tidewater if (i) all conditions to
Closing required by Article 7 hereof have not been met by
or waived by November 20, 1996 (the "Termination Date"),
(ii) any such condition cannot be met by such date and has
not been waived by each party in whose favor such
condition inures, or (iii) the Merger has not occurred by
such date; provided, however, that neither Hornbeck nor
Tidewater shall be entitled to terminate this Agreement
pursuant to this subparagraph (c) if such party is in
willful and material violation of any of its
representations, warranties or covenants in this
Agreement.
(d) Lack of Approval. By the Board of
Directors of either Hornbeck or Tidewater, if any required
approval of the stockholders of Hornbeck shall not have
been obtained by reason of the failure to obtain the
required vote at the Special Meeting of Hornbeck
stockholders or at any adjournment thereof.
(e) Government Action. If any governmental
authority shall have issued an order, decree or ruling or
taken any other action permanently enjoining, restraining
or otherwise prohibiting the Merger and such order,
decree, ruling or other action shall have become final and
nonappealable.
(f) Termination Fee. Hornbeck's Board of
Directors may terminate this Agreement in accordance with
Section 6.5 hereof, provided that as a condition to
exercising its right to terminate this Agreement under
this Section 9.1(f), Hornbeck shall give prior written
confirmation to Tidewater of its obligation to pay cash in
the amount of $6 million (the "Termination Fee"), no later
than the third business day following termination, and
shall thereafter pay such amount within such period.
(g) Tidewater Stock Price. By the Board of
Directors of either Hornbeck or Tidewater if the Exchange
Ratio, as adjusted, would be less than .60 or greater than
.74.
Section 9.2 Effect of Termination. Upon termination
of this Agreement pursuant to this Article 9, this
Agreement shall be void and of no effect, other than the
obligation to pay the Termination Fee referred to in
Section 9.1(f), if applicable, and shall result in no
obligation of or liability to any party or their
respective directors, officers, employees, agents or
shareholders, unless such termination was the result of an
intentional breach of any representation, warranty or
covenant in this Agreement in which case the party who
breached the representation, warranty or covenant shall be
liable to the other party for damages, and all costs and
expenses incurred in connection with the preparation,
negotiation, execution and performance of this Agreement.
ARTICLE 10. MISCELLANEOUS
Section 10.1 Notices. All notices hereunder must be
in writing and will be deemed to have been duly given upon
receipt of hand delivery; certified or registered mail,
return receipt requested; or telecopy transmission with
confirmation of receipt:
(a) If to Tidewater:
Tidewater Inc.
Tidewater Place
1440 Canal Street, Suite 2100
New Orleans, Louisiana 70112-2780
Attention: William C. O'Malley
with a copy to: Cliffe F. Laborde
and to:
Jones, Walker, Waechter, Poitevent,
Carrere & Denegre, L.L.P.
201 St. Charles Avenue
Suite 5100
New Orleans, LA 70170
Attention: Curtis R. Hearn
(b) If to Hornbeck:
Hornbeck Offshore Services, Inc.
7707 Harborside Drive
Galveston, Texas 77554
Attention: Larry D. Hornbeck
with a copy to:
Keck, Mahin & Cate
First City Tower
1001 Fannin Street, Suite 1200
Houston, Texas 77002-6708
Attention: R. Clyde Parker, Jr.
Such names and addresses may be changed by written notice
to each person listed above.
Section 10.2 Governing Law. This Agreement shall be
governed by, construed and interpreted in accordance with
the laws of the State of Delaware, regardless of the laws
that might otherwise govern under applicable principles of
conflicts of laws thereof.
Section 10.3 Counterparts. This Agreement may be
executed in counterparts, each of which will be deemed an
original but all of which together will constitute one and
the same instrument.
Section 10.4 Interpretation; Schedules. (a) When a
reference is made in this Agreement to a Section, Exhibit
or Schedule, such reference shall be to a Section of, or
an Exhibit or Schedule to, this Agreement unless otherwise
indicated. The table of contents and headings contained
in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation
of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without
limitation."
(b) The information set forth in the Schedules
to this Agreement is qualified in its entirety by
reference to the specific provisions of this Agreement,
and is not intended to constitute, and shall not be
construed as constituting, separate representations or
warranties of the party to which such Schedules relate
except as and to the extent provided in this Agreement.
Inclusion of information in the Schedules shall not be
construed as an admission that such information is
material for purposes of the specific provisions of this
Agreement to which such information relates. Information
included in the Schedules that is not required to be so
included under the specific provisions of this Agreement
shall be deemed to be included for informational purposes
only and information of a similar nature need not be
included, at the discretion of the party providing such
information. Any information disclosed by a party in any
Schedule shall be deemed to be disclosed in all the
Schedules of such party and for all purposes under this
Agreement to the extent the specific provisions of this
Agreement require such disclosure.
Section 10.5 Entire Agreement; Severability. (a)
This Agreement, including the Exhibits and Schedules
hereto, embodies the entire agreement and understanding of
the parties hereto in respect of the subject matter
contained herein. This Agreement supersedes all prior
agreements and understandings (whether written or oral)
between the parties with respect to such subject matter.
(b) If any provision of this Agreement is
determined to be invalid or unenforceable, in whole or in
part, it is the parties' intention that such determination
will not be held to affect the validity or enforceability
of any other provision of this Agreement, which provisions
will otherwise remain in full force and effect.
Section 10.6 Amendment and Modification. This
Agreement may be amended or modified only by written
agreement of the parties hereto. This Agreement may be
amended by the parties at any time before or after any
required approval of matters presented in connection with
the Merger by the stockholders of Hornbeck; provided,
however, that after any such approval, there shall be made
no amendment that by law requires further approval by such
stockholders without the further approval of such
stockholders.
Section 10.7 Extension; Waiver. At any time prior to
the Effective Time of the Merger, the parties may (a)
extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive
any inaccuracies in the representations and warranties
contained in this Agreement or in any document delivered
pursuant to this Agreement or (c) waive compliance with
any of the agreements or conditions contained in this
Agreement except for Sections 7.1(a) or (b), the first two
lines of 7.2(c) and 7.3(c). The failure of a party to
insist upon strict adherence to any term of this Agreement
on any occasion shall not be considered a waiver or
deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this
Agreement. No waiver of any breach of this Agreement
shall be held to constitute a waiver of any other or
subsequent breach. Any waiver must be in writing.
Section 10.8 Binding Effect; Benefits. This Agreement
will inure to the benefit of and be binding upon the
parties hereto and their respective successors and
assigns. Nothing in this Agreement, express or implied,
is intended to confer on any Person other than the parties
hereto and their respective successors and assigns (and,
to the extent provided in Section 8.2, the Indemnified
Persons and their successors and assigns) any rights,
remedies, obligations or liabilities under or by reason of
this Agreement.
Section 10.9 Assignability. This Agreement is not
assignable by any party hereto without the prior written
consent of the other parties.
Section 10.10 Expenses. Each of the parties hereto
shall pay all of its own expenses relating to the
transactions contemplated by this Agreement, including
without limitation the fees and expenses of its own
financial, legal and tax advisors.
Section 10.11 Gender and Certain Definitions. All
words used herein, regardless of the number and gender
specifically used, shall be deemed and construed to
include any other number, singular or plural, and any
other gender, masculine, feminine or neuter, as the
context requires.
Section 10.12 Non-Survival of Representations and
Warranties; Remedies. None of the representations and
warranties in this Agreement or in any instrument
delivered pursuant hereto shall survive the consummation
of the Merger. Each party hereby agrees that its sole
right and remedy with respect to any breach of a
representation or a warranty by the other party shall be
to not consummate the transactions described herein if
such breach results in the nonsatisfaction of a condition
set forth in Section 7.2(a) or 7.3(a) hereof; provided,
however, that the foregoing shall not be deemed to be a
waiver of any claim for intentional breach of a
representation, warranty or covenant of this Agreement or
for fraud.
IN WITNESS WHEREOF, the parties hereto have duly
executed this Agreement as of the date first written
above.
TIDEWATER INC.
By: /s/ William C. O'Malley
________________________
William C. O'Malley
Chairman, President and
Chief Executive Officer
TIDEWATER EXPANSION, INC.
By: /s/ William C. O'Malley
_______________________
President
HORNBECK OFFSHORE SERVICES, INC.
By: /s/ Larry D. Hornbeck
_______________________
Larry D. Hornbeck
Chairman, President and
Chief Executive Officer
<PAGE>
APPENDIX B: FAIRNESS OPINION
SIMMONS & COMPANY
INTERNATIONAL
- ------------------------------------------------------------------------------
December 21, 1995
Board of Directors
Hornbeck Offshore Services, Inc.
7707 Harborside Drive
Galveston, Texas 77554
Members of the Board:
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 of shares of common stock, par value $0.10 per share
(the "Company Common Stock"), of Hornbeck Offshore Services, Inc. (the
"Company") of the consideration to be received by such stockholders in the
proposed merger of the Company with Tidewater Expansion, Inc. (the "Sub"), a
wholly owned subsidiary of Tidewater Inc. ("Tidewater"), pursuant to the
Agreement and Plan of Merger (the "Agreement") to be executed by Tidewater,
the Sub, and the Company (the "Proposed Merger").
As more specifically set forth in the Agreement, in the Proposed Merger
each issued and outstanding share of the Company Common Stock will be
converted into 0.667 (as it may be adjusted as provided herein, the "Exchange
Ratio") of a share of common stock, par value $0.10 per share, of Tidewater
(the "Tidewater Common Stock") provided that, if the Average Market Price (as
defined below) of a share of Tidewater Common Stock is less than $24.50 or
greater than $32.50, then the Exchange Ratio shall be equal to the Calculated
Ratio (as defined below), provided further that in no event shall the Exchange
Ratio be less than 0.60 or greater than 0.74. The Calculated Ratio is defined
as follows: (i) if the Average Market Price of a share of Tidewater Common
Stock is less than $24.50, the Calculated Ratio shall equal that number
obtained by dividing $16.34 by the Average Market Price; or (ii) if the
Average Market Price of a share of Tidewater Common Stock is greater than
$32.50, the Calculated Ratio shall equal that number obtained by dividing
$21.68 by the Average Market Price. If the Calculated Ratio is less than 0.60
or greater than 0.74, either the Company or Tidewater has the right to
terminate the Proposed Merger. The Average Market Price of the Tidewater
Common Stock is defined as the average of the daily closing sale prices of a
share of Tidewater Common Stock on the New York Stock Exchange as reported in
THE WALL STREET JOURNAL for the 10 consecutive trading days that end on the
second trading day prior to the closing of the Proposed Merger.
Simmons, as a specialized energy-related investment banking firm, is
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, the management and underwriting of sales of equity
and debt to the public, and private placements of equity and debt. Simmons has
previously rendered investment banking services to the Company and Tidewater
in connection with a number of transactions for which Simmons received
customary compensation. In addition, in the ordinary course of business,
Simmons may actively trade the securities of the Company and Tidewater 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.
In connection with rendering its opinion, Simmons has reviewed and
analyzed, among other things, the following: (i) the Letter of Intent between
Tidewater and the Company dated November 19,
B-1
<PAGE>
1995; (ii) the Agreement; (iii) the financial statements and other information
concerning the Company, including the Annual Reports on Form 10-K of the
Company for each of the years in the three-year period ended December 31,
1994, the Quarterly Reports on Form 10-Q of the Company for the quarters ended
March 31, 1995, June 30, 1995 and September 30, 1995, and the Current Reports
on Form 8-K of the Company related to events occurring on November 15, 1994,
as amended, June 20, 1995 and November 19, 1995; (iv) certain other internal
information, primarily financial in nature, concerning the business and
operations of the Company furnished by the Company for purposes of Simmons'
analysis; (v) certain publicly available information concerning the trading
of, and the trading market for, the Company Common Stock; (vi) certain
publicly available information concerning Tidewater, including the Annual
Reports on Form 10-K of Tidewater for each of the fiscal years in the
three-year period ended March 31, 1995, the Quarterly Reports on Form 10-Q of
Tidewater for the quarters ended June 30, 1995 and September 30, 1995, and the
Current Reports on Form 8-K related to events occurring on November 30, 1994,
as amended, and January 5, 1995; (vii) certain other internal information,
primarily financial in nature, concerning the business and operations of
Tidewater furnished by Tidewater for purposes of Simmons' analysis; (viii)
certain publicly available information concerning the trading of, and the
trading market for, Tidewater Common Stock; (ix) certain publicly available
information with respect to certain other companies that Simmons believes to
be comparable to the Company or Tidewater and the trading markets for certain
of such other companies' securities; (x) certain publicly available
information concerning the estimates of the future operating and financial
performance of the Company, Tidewater and the comparable companies prepared by
industry experts unaffiliated with either the Company or Tidewater; (xi)
certain publicly available information concerning the nature and terms of
certain other transactions considered relevant to the inquiry; and (xii) made
such other analyses and examinations as we have deemed necessary or
appropriate. Simmons has also met with certain officers and employees of the
Company and Tidewater to discuss the foregoing, as well as other matters
believed relevant to the inquiry.
In arriving at its opinion, Simmons has assumed and relied upon the
accuracy and completeness of all of the financial and other information
provided by the Company and Tidewater, or publicly available, including,
without limitation, information with respect to asset conditions, liability
reserves and insurance coverages, and has not attempted independently to
verify any of such information. Pursuant to the Agreement, Simmons has also
assumed that the Proposed Merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended, and will be treated as a "pooling of
interests" for accounting purposes. Simmons has not conducted a physical
inspection of any of the assets, properties or facilities of the Company or
Tidewater, nor has Simmons made or obtained any independent evaluations or
appraisal of any of such assets, properties or facilities.
In conducting its analysis and arriving at its opinion as expressed
herein, Simmons has considered such financial and other factors as it deemed
appropriate under the circumstances including, among others, the following:
(i) the historical and current financial position and results of operations of
the Company and Tidewater; (ii) the business prospects of the Company and
Tidewater; (iii) the historical and current market for the Company Common
Stock, for Tidewater Common Stock and for the equity securities of certain
other companies believed to be comparable to the Company or Tidewater; (iv)
the respective contributions in terms of various financial measures of the
Company and Tidewater to the combined company, and the relative pro forma
ownership of Tidewater after the Proposed Merger by the current holders of the
Company Common Stock and Tidewater Common Stock; and (v) the nature and terms
of certain other acquisition transactions that Simmons believes to be
relevant. Simmons has also taken into account its assessment of general
economic, market and financial conditions and its experience in connection
with similar transactions and securities' valuation generally. Simmons'
B-2
<PAGE>
opinion necessarily is based upon conditions as they exist and can be
evaluated on, and on the information made available at, the date hereof.
Simmons is acting as financial advisor to the Company in this transaction
and will receive a customary contingent fee for its services.
Based upon and subject to the foregoing, Simmons is of the opinion, as
investment bankers, that the consideration to be received by the holders of
the Company Common Stock in the Proposed Merger is fair to such holders from a
financial point of view.
Sincerely,
SIMMONS & COMPANY INTERNATIONAL
/s/ NICHOLAS L. SWYKA
Nicholas L. Swyka
Managing Director
B-3
<PAGE>
SIMMONS & COMPANY
INTERNATIONAL
------------------------------------------------
February 5, 1996
Board of Directors
Hornbeck Offshore Services, Inc.
7707 Harborside Drive
Galveston, Texas 77554
Members of the Board:
Reference is made to our letter dated December 21, 1995 with respect to the
fairness of the proposed merger of Hornbeck Offshore Services, Inc., with a
wholly owned subsidiary of Tidewater Inc., a copy of which is attached.
This is to advise you that since the date of such letter, nothing has come to
our attention that would cause us to change the opinion expressed in our letter
dated December 21, 1995.
Sincerely,
/s/ NICHOLAS L. SWYKA
Nicholas L. Swyka
Managing Director
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL") authorizes
a court to award, or a corporation's board of directors to grant, indemnity to
directors and officers under certain circumstances for liabilities incurred in
connection with their activities in such capacities (including reimbursement for
expenses incurred). Section 102(b)(7) of the DGCL permits a provision in the
certificate of incorporation of each corporation organized thereunder, including
Tidewater, eliminating or limiting, with certain exceptions, the personal
liability of a director to the corporation or its shareholders for monetary
damages for certain breaches of fiduciary duty as a director. Article VIII of
Tidewater's By-laws provides that Tidewater shall indemnify any directors,
directors emeriti, officers, employees and agents who were or are parties to or
threatened to be made parties to any threatened, pending or completed action,
suit or proceeding for liabilities and expenses incurred by reason of their
actions in such capacities on behalf of Tidewater, provided that the party
seeking indemnification acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful; provided, however, that in the case of an
action or suit by or in the right of the corporation to procure a judgment in
its favor, no indemnification shall be made in respect of any claim, issue or
matter as to which such party shall have been adjudged to be liable to the
corporation unless and only to the extent that an appropriate court shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such party is fairly and reasonably
entitled to indemnity for such expenses that the court shall deem proper.
Tidewater's By-laws also state, among other things, that it is the policy of
Tidewater to indemnify directors, directors emeriti, officers, agents and
employees of Tidewater to the fullest extent permitted by law. In addition,
Tidewater maintains an insurance policy designed to reimburse Tidewater for any
payments made by it pursuant to the foregoing indemnification. Such policy has
coverage of $15 million, subject to a $5 million self-insured retention.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<S> <C>
A) Exhibits
2 -- Agreement and Plan of Merger dated December 21, 1995 (included in the Registration
Statement as Appendix A).
4.1 -- Restated Certificate of Incorporation of Tidewater Inc. (filed with the Commission as
Exhibit 3(a) to the Registrant's quarterly report on Form 10-Q for the quarter ended
September 30, 1993 and incorporated herein by reference).
4.2 -- By-laws of Tidewater Inc. (filed with the Commission as Exhibit 3(b) to the Registrant's
quarterly report on Form 10-Q for the quarter ended September 30, 1993 and incorporated
herein by reference).
4.3 -- Restated Rights Agreement dated as of December 17, 1993 between Tidewater Inc. and The
First National Bank of Boston (filed with the Commission as Exhibit 4 to the Registrant's
quarterly report on Form 10-Q for the quarter ended December 31, 1993 and incorporated
herein by reference).
5 -- Opinion of Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P.
8.1 -- Opinion of Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P. concerning
certain tax matters.
8.2 -- Opinion of Price Waterhouse LLP concerning certain tax matters.
10.1 -- $130,000,000 Revolving Credit and Term Loan Agreement dated as of December 29, 1995.
II-1
<PAGE>
10.2 -- Tidewater Inc. 1975 Incentive Program Stock Option Plan, as amended in 1990 (filed with
the Commission as Exhibit 10(c) to the Registrant's annual report on Form 10-K for the
fiscal year ended March 31, 1991 and incorporated herein by reference).
10.3 -- Tidewater Inc. 1992 Stock Option and Restricted Stock Plan (filed with the Commission as
Exhibit 10(f) to the Registrant's annual report on Form 10-K for the fiscal year ended
March 31, 1993 and incorporated herein by reference).
10.4 -- Tidewater Inc. Amended and Restated Supplemental Executive Retirement Plan (filed with the
Commission as Exhibit 10(g) to the Registrant's annual report on Form 10-K for the fiscal
year ended March 31, 1993 and incorporated herein by reference).
10.5 -- Tidewater Inc. Amended and Restated Employee's Supplemental Savings Plan (filed with the
Commission as Exhibit 10(h) to the Registrant's annual report on Form 10-K for the fiscal
year ended March 31, 1993 and incorporated herein by reference).
10.6 -- Supplemental Health Plan for Executive Officers of Tidewater Inc. (filed with the
Commission as Exhibit 10(i) to the Registrant's Registration Statement (Registration No.
33-31016) on September 12, 1989 and incorporated herein by reference).
10.7 -- Tidewater Inc. Deferred Compensation Plan for Directors (filed with the Commission as
Exhibit 10(h) to the Registrant's annual report on Form 10-K for the fiscal year ended
March 31, 1994 and incorporated herein by reference).
10.8 -- Tidewater Inc. Retirement Plan for Directors as adopted on March 22, 1990 (filed with the
Commission as Exhibit 10(k) to the Registrant's annual report on Form 10-K for the fiscal
year ended March 31, 1990 and incorporated herein by reference).
10.9 -- Employment and Consulting Agreement dated as of March 31, 1993 between Tidewater Inc. and
John P. Laborde as amended (filed with the Commission as Exhibit 10(l) to the Registrant's
annual report on Form 10-K for the fiscal year ended March 31, 1993 and incorporated
herein by reference).
10.10 -- Form of Severance Agreement entered into as of August 1, 1985 with eleven executive
officers and key employees, as amended (filed with the Commission as Exhibit 10(j) to the
Registrant's annual report on Form 10-K for the fiscal year ended March 31, 1992 and
incorporated herein by reference).
10.11 -- Form of Severance Agreement entered into as of February 18, 1992 with three executive
officers, as amended (filed with the Commission as Exhibit 10(k) to the Registrant's
annual report on Form 10-K for the fiscal year ended March 31, 1992 and incorporated
herein by reference).
10.12 -- Standstill Agreement dated as of November 11, 1992 between Tidewater Inc. and Zapata
Corporation (filed with the Commission as Exhibit 10(o) to the Registrant's annual report
on Form 10-K for the fiscal year ended March 31, 1993 and incorporated herein by
reference).
10.13 -- First Amendment to Standstill Agreement dated January 24, 1994 between Tidewater Inc. and
Zapata Corporation (filed with the Commission as Exhibit 10(n) to the Registrant's annual
report on Form 10-K for the fiscal year ended March 31, 1994 and incorporated herein by
reference).
10.14 -- Agreement, dated August 11, 1989, by and among the Registrant and Irwin L. Jacobs, Daniel
T. Lindsay, Gerald A. Schwalbach, TR Holdings, Inc. and Minstar, Inc. (filed with the
Commission as Exhibit 1 to the Registrant's current report on Form 8-K for August 11, 1989
and incorporated herein by reference).
II-2
<PAGE>
10.15 -- Form of Stockholder Agreement entered into by and between the Registrant and each of the
stockholders of Zapata Gulf Marine Corporation (filed with the Commission as Exhibit 10(r)
to the Registrant's annual report on Form 10-K for the fiscal year ended March 31, 1992
and incorporated herein by reference).
10.16 -- Tidewater Inc. 1995 Annual Incentive Plan (filed with the Commission as Exhibit 10(q) to
the Registrant's annual report on Form 10-K for the fiscal year ended March 31, 1995 and
incorporated herein by reference).
10.17 -- Employment Agreement dated June 13, 1995 between Tidewater Inc. and William C. O'Malley
(filed with the Commission as Exhibit 10 to the Registrant's current report on Form 8-K
for June 13, 1995 and incorporated herein by reference).
11 -- Statement re computation of earnings per share.
15 -- Letter of KPMG Peat Marwick LLP concerning unaudited interim financial information.
21 -- List of Tidewater's subsidiaries.
*23.1 -- Consent of KPMG Peat Marwick LLP.
23.2 -- Consent of Price Waterhouse LLP.
23.3 -- Consent of Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P. (included in
Exhibits 5).
*23.4 -- Consent of Simmons & Company International.
*23.5 -- Consent of Larry D. Hornbeck.
24 -- Powers of Attorney (included on the signature page of this Registration Statement).
*99 -- Proxy Card of Hornbeck Offshore Services, Inc.
</TABLE>
--------------
* Filed herewith
B) Financial Statement Schedules
Schedule II -- Tidewater Inc. and Subsidiaries Valuation and Qualifying
Accounts (included on page F-21 of this Registration Statement).
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means. This
includes information contained in documents filed subsequent to the effective
date of the registration statement through the date of responding to the
request.
(2) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when it
became effective.
(3) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant
to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated
by reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(4)(a) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by
II-3
<PAGE>
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
(b) That every prospectus (i) that is filed pursuant to paragraph (a)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to the
registration statement and will not be used until such amendment is effective,
and that, for purposes of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions described under Item 20
above, or otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any
action, suit, or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of New
Orleans, State of Louisiana, on February 6, 1996.
TIDEWATER INC.
By: /s/ CLIFFE E. LABORDE
CLIFFE F. LABORDE
SENIOR VICE PRESIDENT AND
SECRETARY
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------------------------ ---------------------------------------- ------------------
<S> <C> <C>
/s/ WILLIAM C. O'MALLEY* Chairman of the Board of Directors, February ___, 1996
WILLIAM C. O'MALLEY President and Chief Executive Officer
/s/ KEN C. TAMBLYN* Executive Vice President and Chief February ___, 1996
KEN C. TAMBLYN Financial Officer (Principal Financial
and Accounting Officer)
/s/ ROBERT H. BOH* Director February ___, 1996
ROBERT H. BOH
/s/ DONALD T. BOLLINGER* Director February ___, 1996
DONALD T. BOLLINGER
/s/ ARTHUR R. CARLSON* Director February ___, 1996
ARTHUR R. CARLSON
/s/ HUGH J. KELLY* Director February ___, 1996
HUGH J. KELLY
/s/ JOHN P. LABORDE* Director February ___, 1996
JOHN P. LABORDE
/s/ PAUL W. MURRILL* Director February ___, 1996
PAUL W. MURRILL
/s/ LESTER POLLACK* Director February ___, 1996
LESTER POLLACK
/s/ J. HUGH ROFF, JR.* Director February ___, 1996
J. HUGH ROFF, JR.
*By: /s/ CLIFFE F. LABORDE
CLIFFE F. LABORDE
AGENT AND ATTORNEY-IN-FACT
</TABLE>
S-1
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description Pages
------- ----------- ------------
<S> <C>
2 -- Agreement and Plan of Merger dated December 21, 1995 (included in the Registration
Statement as Appendix A).
4.1 -- Restated Certificate of Incorporation of Tidewater Inc. (filed with the Commission as
Exhibit 3(a) to the Registrant's quarterly report on Form 10-Q for the quarter ended
September 30, 1993 and incorporated herein by reference).
4.2 -- By-laws of Tidewater Inc. (filed with the Commission as Exhibit 3(b) to the Registrant's
quarterly report on Form 10-Q for the quarter ended September 30, 1993 and incorporated
herein by reference).
4.3 -- Restated Rights Agreement dated as of December 17, 1993 between Tidewater Inc. and The
First National Bank of Boston (filed with the Commission as Exhibit 4 to the Registrant's
quarterly report on Form 10-Q for the quarter ended December 31, 1993 and incorporated
herein by reference).
5 -- Opinion of Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P.
8.1 -- Opinion of Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P. concerning
certain tax matters.
8.2 -- Opinion of Price Waterhouse LLP concerning certain tax matters.
10.1 -- $130,000,000 Revolving Credit and Term Loan Agreement dated as of December 29, 1995.
10.2 -- Tidewater Inc. 1975 Incentive Program Stock Option Plan, as amended in 1990 (filed with
the Commission as Exhibit 10(c) to the Registrant's annual report on Form 10-K for the
fiscal year ended March 31, 1991 and incorporated herein by reference).
10.3 -- Tidewater Inc. 1992 Stock Option and Restricted Stock Plan (filed with the Commission as
Exhibit 10(f) to the Registrant's annual report on Form 10-K for the fiscal year ended
March 31, 1993 and incorporated herein by reference).
10.4 -- Tidewater Inc. Amended and Restated Supplemental Executive Retirement Plan (filed with the
Commission as Exhibit 10(g) to the Registrant's annual report on Form 10-K for the fiscal
year ended March 31, 1993 and incorporated herein by reference).
10.5 -- Tidewater Inc. Amended and Restated Employee's Supplemental Savings Plan (filed with the
Commission as Exhibit 10(h) to the Registrant's annual report on Form 10-K for the fiscal
year ended March 31, 1993 and incorporated herein by reference).
10.6 -- Supplemental Health Plan for Executive Officers of Tidewater Inc. (filed with the
Commission as Exhibit 10(i) to the Registrant's Registration Statement (Registration No.
33-31016) on September 12, 1989 and incorporated herein by reference).
10.7 -- Tidewater Inc. Deferred Compensation Plan for Directors (filed with the Commission as
Exhibit 10(h) to the Registrant's annual report on Form 10-K for the fiscal year ended
March 31, 1994 and incorporated herein by reference).
10.8 -- Tidewater Inc. Retirement Plan for Directors as adopted on March 22, 1990 (filed with the
Commission as Exhibit 10(k) to the Registrant's annual report on Form 10-K for the fiscal
year ended March 31, 1990 and incorporated herein by reference).
10.9 -- Employment and Consulting Agreement dated as of March 31, 1993 between Tidewater Inc. and
John P. Laborde as amended (filed with the Commission as Exhibit 10(l) to the Registrant's
annual report on Form 10-K for the fiscal year ended March 31, 1993 and incorporated
herein by reference).
10.10 -- Form of Severance Agreement entered into as of August 1, 1985 with eleven executive
officers and key employees, as amended (filed with the Commission as Exhibit 10(j) to the
Registrant's annual report on Form 10-K for the fiscal year ended March 31, 1992 and
incorporated herein by reference).
10.11 -- Form of Severance Agreement entered into as of February 18, 1992 with three executive
officers, as amended (filed with the Commission as Exhibit 10(k) to the Registrant's
annual report on Form 10-K for the fiscal year ended March 31, 1992 and incorporated
herein by reference).
10.12 -- Standstill Agreement dated as of November 11, 1992 between Tidewater Inc. and Zapata
Corporation (filed with the Commission as Exhibit 10(o) to the Registrant's annual report
on Form 10-K for the fiscal year ended March 31, 1993 and incorporated herein by
reference).
10.13 -- First Amendment to Standstill Agreement dated January 24, 1994 between Tidewater Inc. and
Zapata Corporation (filed with the Commission as Exhibit 10(n) to the Registrant's annual
report on Form 10-K for the fiscal year ended March 31, 1994 and incorporated herein by
reference).
10.14 -- Agreement, dated August 11, 1989, by and among the Registrant and Irwin L. Jacobs, Daniel
T. Lindsay, Gerald A. Schwalbach, TR Holdings, Inc. and Minstar, Inc. (filed with the
Commission as Exhibit 1 to the Registrant's current report on Form 8-K for August 11, 1989
and incorporated herein by reference).
10.15 -- Form of Stockholder Agreement entered into by and between the Registrant and each of the
stockholders of Zapata Gulf Marine Corporation (filed with the Commission as Exhibit 10(r)
to the Registrant's annual report on Form 10-K for the fiscal year ended March 31, 1992
and incorporated herein by reference).
10.16 -- Tidewater Inc. 1995 Annual Incentive Plan (filed with the Commission as Exhibit 10(q) to
the Registrant's annual report on Form 10-K for the fiscal year ended March 31, 1995 and
incorporated herein by reference).
10.17 -- Employment Agreement dated June 13, 1995 between Tidewater Inc. and William C. O'Malley
(filed with the Commission as Exhibit 10 to the Registrant's current report on Form 8-K
for June 13, 1995 and incorporated herein by reference).
11 -- Statement re computation of earnings per share.
15 -- Letter of KPMG Peat Marwick LLP concerning unaudited interim financial information.
21 -- List of Tidewater's subsidiaries.
*23.1 -- Consent of KPMG Peat Marwick LLP.
23.2 -- Consent of Price Waterhouse LLP.
23.3 -- Consent of Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P. (included in
Exhibits 5).
*23.4 -- Consent of Simmons & Company International.
*23.5 -- Consent of Larry D. Hornbeck.
24 -- Powers of Attorney (included on the signature page of this Registration Statement).
*99 -- Proxy Card of Hornbeck Offshore Services, Inc.
</TABLE>
------------
* Filed herewith
EXHIBIT 23.1
ACCOUNTANTS' CONSENT
The Board of Directors and
Stockholders of Tidewater Inc.:
We consent to the use of our report dated May 1, 1995 on the consolidated
financial statements of Tidewater Inc. and subsidiaries as of March 31, 1995 and
1994, and for each of the years in the three-year period then ended included and
incorporated herein by reference and to the references to our firm under
the headings "Selected Financial Data" and "Experts" in the prospectus. Our
report refers to a change in the method of accounting for postretirement
benefits other than pensions in fiscal 1993.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
New Orleans, Louisiana
February 6, 1996
<PAGE>
EXHIBIT 23.4
SIMMONS & COMPANY
INTERNATIONAL
- ------------------------------------------------------------------------------
CONSENT OF SIMMONS & COMPANY INTERNATIONAL
Houston, Texas
February 5, 1996
We hereby consent to: (i) the inclusion as an Appendix to the Registration
Statement related to the merger of a wholly owned subsidiary of Tidewater Inc.
with Hornbeck Offshore Services, Inc. ("Hornbeck") on form S-4 (the "Tidewater
S-4") of our letter dated December 21, 1995 regarding our opinion as to the
fairness, from a financial point of view, to the holders of shares of common
stock of Hornbeck of the consideration to be received by such holders; and (ii)
the use of certain information from such letter in the Tidewater S-4; and (iii)
inclusion as an Appendix to such Registration Statement of our letter dated
February 5, 1996 regarding confirmation of our opinion.
SIMMONS & COMPANY INTERNATIONAL
/s/ NICHOLAS L. SWYKA
Nicholas L. Swyka
Managing Director
700 LOUISIANA, SUITE 5000 HOUSTON, TEXAS 77002-2753 (713) 236-9999
FAX: (713) 223-7800
EXHIBIT 23.5
CONSENT OF PERSON ABOUT TO BECOME A DIRECTOR
The undersigned hereby consents to being named in the Registration Statement on
Form S-4 of Tidewater, Inc. (the "Registrant") as a person about to become a
director of the Registrant.
Galveston, Texas
Date: February 6, 1996 /s/ LARRY D. HORNBECK
Larry D. Hornbeck
<PAGE>
EXHIBIT 99
PROXY
HORNBECK OFFSHORE SERVICES, INC.
SOLICITED BY THE BOARD OF DIRECTORS
FOR USE AT THE SPECIAL MEETING OF STOCKHOLDERS, MARCH 13, 1996
The undersigned hereby appoints Larry D. Hornbeck, Robert W. Hampton, and
Richard R. Ellison, and each or any of them, and any substitute or substitutes,
to be the attorneys and proxies of the undersigned at the Special Meeting of
Stockholders of Hornbeck Offshore Services, Inc., or at any adjournment thereof,
and to vote at such meeting the shares of Common Stock entitled to vote thereat,
held of record by the undersigned on January 31, 1996, on the items indicated on
the reverse side hereof as more fully described in the Proxy Statement/
Prospectus dated February 6, 1996 and in accordance with the directions given at
the Special Meeting.
This proxy, when properly executed, will be voted in the manner directed
by the undersigned stockholder. If no direction is given, the shares
represented by this proxy will be voted "FOR" Item 1.
(Continued, and to be dated and signed on the reverse side.)
HORNBECK OFFSHORE SERVICES, INC.
P.O. BOX 11799
NEW YORK, N.Y. 10203-0799
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEM 1.
Item 1. Adoption of Agreement and Item 2. In their discretion, the
Plan of Merger. Proxies are authorized to vote
upon such other business as may
properly come before the
meeting or any adjournment
thereof.
FOR AGAINST ABSTAIN CHANGE OF ADDRESS AND
OR COMMENTS MARK HERE
[ ] [ ] [ ] [ ]
Please mark, date and sign your name
exactly as it appears on your stock
certificate and return it in the
enclosed envelope. When signing as an
attorney, executor, administrator,
trustee, guardian, etc., please give
title as such. If such signer is a
corporation or partnership, please sign
in full corporate or partnership name
by authorized officer or person. If
shares are held jointly, each joint
owner should sign.
Dated: _______________________ , 1996
_____________________________________
Signature
_____________________________________
Signature, if held jointly
VOTES MUST BE INDICATED
[X] IN BLACK OR BLUE INK.
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
