<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 18, 1997.
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
UNIFAB INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
LOUISIANA 3441 72-1382998
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation) Classification Code Number) Identification No.)
</TABLE>
5007 PORT ROAD
NEW IBERIA, LOUISIANA 70562
(318) 367-8291
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
DAILEY J. BERARD
PRESIDENT AND CHIEF EXECUTIVE OFFICER
UNIFAB INTERNATIONAL, INC.
5007 PORT ROAD
NEW IBERIA, LOUISIANA 70562
(318) 367-8291
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
<TABLE>
<S> <C>
CARL C. HANEMANN THOMAS P. MASON
JONES, WALKER, WAECHTER, POITEVENT, ANDREWS & KURTH L.L.P.
CARRERE & DENEGRE, L.L.P. 4200 TEXAS COMMERCE TOWER
201 ST. CHARLES AVENUE 600 TRAVIS, SUITE 4200
NEW ORLEANS, LOUISIANA 70170 HOUSTON, TEXAS 77002
(504) 582-8000 (713) 220-4200
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
---------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===============================================================================================================
PROPOSED
MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $0.01 par value per share..................... $48,558,750 $14,715
===============================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO
SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JULY 18, 1997
2,815,000 SHARES
[LOGO] UNIFAB INTERNATIONAL, INC.
COMMON STOCK
Of the 2,815,000 shares of common stock, $0.01 par value per share (the
"Common Stock"), of UNIFAB International, Inc. (the "Company") offered hereby,
1,100,000 shares are being sold by the Company and 1,715,000 shares are being
sold by McDermott Incorporated ("McDermott" or the "Selling Shareholder"). See
"Principal and Selling Shareholders." Prior to this offering (the "Offering"),
there has been no public market for the Common Stock. It is currently estimated
that the initial public offering price per share will be between $ and
$ . See "Underwriting" for information relating to the factors to be
considered in determining the initial public offering price.
Application has been made to list the Common Stock on the Nasdaq National
Market under the symbol "UFAB."
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.
THESE SECURITIES 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 PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
==============================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) SHAREHOLDER
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share................. $ $ $ $
- --------------------------------------------------------------------------------------------------------------
Total(3).................. $ $ $ $
==============================================================================================================
</TABLE>
(1) The Company and the Selling Shareholder have agreed separately to indemnify
the several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company has granted to the several Underwriters an option for 30 days to
purchase up to an additional 422,250 shares of Common Stock at the Price to
Public, less Underwriting Discount, solely to cover over-allotments, if any.
If such option is exercised in full, the Price to Public, Underwriting
Discount, Proceeds to Company and Proceeds to Selling Shareholder will be
$ , $ , $ and $ , respectively. See
"Underwriting."
---------------------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if issued to and accepted by them, and subject to
certain other conditions. The Underwriters reserve the right to withdraw, cancel
or modify such offer and to reject orders in whole or in part. It is expected
that delivery of the shares of Common Stock will be made on or about
, 1997.
---------------------
MORGAN KEEGAN & COMPANY, INC. STEPHENS INC.
The date of this Prospectus is , 1997.
<PAGE> 3
[PHOTOGRAPHS TO APPEAR HERE:
No. 1: Aerial view of the Company's facilities
Nos. 2-4: Photographs of Structures Fabricated by the Company]
---------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT AND OTHER STABILIZING TRANSACTIONS. FOR A DESCRIPTION
OF THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and the notes thereto included elsewhere in
this Prospectus. UNIFAB International, Inc. (the "Company") was recently formed
to serve, upon completion of the Offering, as the parent corporation of
Universal Fabricators Incorporated ("Universal Fabricators"), 51% of the
outstanding common stock of which is currently owned by Universal Partners, Inc.
("Universal Partners") and 49% of such stock is owned by McDermott Incorporated
("McDermott"). Immediately prior to the completion of the Offering, Universal
Partners will merge into the Company (the "Merger"), and McDermott will exchange
its shares of common stock of Universal Fabricators for shares of the Company's
Common Stock (the "Share Exchange"), all of which will be sold in the Offering.
Unless otherwise indicated, the information in this Prospectus assumes that the
Underwriters' over-allotment option will not be exercised and that the Merger
and the Share Exchange each have been completed. As used herein, unless the
context requires otherwise, references to the "Company" include Universal
Fabricators and its predecessor. Certain technical terms are defined in the
"Glossary of Certain Technical Terms" appearing immediately before the Index to
Financial Statements.
THE COMPANY
GENERAL. UNIFAB International, Inc. is an industry leader in the custom
fabrication of decks and modules of drilling and production equipment weighing
up to 3,500 tons for offshore oil and gas platforms and has special expertise in
the fabrication of decks with complex piping requirements. Decks and modules
fabricated by the Company can be installed on fixed and floating platforms
regardless of water depth. The Company also fabricates jackets for fixed
platforms; pilings and other rolled tubular steel sections; compressor and
generator packages; platform living quarters; subsea templates; bridges for
connecting offshore platforms; wellhead protectors; and modules for the onshore
petrochemical and refining industries. In addition, the Company refurbishes and
retrofits existing jackets and decks and performs offshore piping hook-up and
platform maintenance services. Structures fabricated by the Company are
installed in oil and gas producing waters around the world, primarily the U.S.
Gulf of Mexico (the "Gulf of Mexico") and offshore West Africa.
The Company, founded in 1980, has been profitable for each of the last five
years largely as a result of management's ability to control costs, provide high
quality, reliable services, and expand successfully into international markets.
The Company's revenue increased 139% from $27.9 million in its fiscal year ended
March 31, 1995 to $66.7 million in the fiscal year ended March 31, 1997. During
the same period, both the Company's workforce and direct labor hours worked
increased by approximately 105%.
Demand for the Company's services is primarily a function of worldwide
offshore oil and gas activity. Over the past four years, improvements in
production techniques and seismic and drilling technology, together with
relatively stable oil and gas prices, have resulted in accelerated drilling
activity in the Gulf of Mexico and continued strong activity levels worldwide.
The number of active offshore drilling rigs worldwide is at its highest point
since 1986, with the average number of active offshore rigs in the Gulf of
Mexico, in particular, having increased from approximately 80 for the year ended
December 31, 1992 to more than 155 for the year ended December 31, 1996.
Due to the time required to drill an exploratory offshore well, formulate a
development plan and design offshore platforms, the fabrication and installation
of such platforms usually lag exploratory drilling by one to three years. As a
result, high levels of drilling activity worldwide, particularly in the Gulf of
Mexico, have only recently impacted the demand for the Company's custom
fabrication services. The Company believes its strong presence in both overseas
markets and the Gulf of Mexico market, coupled with continued strong oil and gas
activity in these markets, has enabled it to selectively obtain high margin
fabrication work and benefit from increased pricing levels.
The Company's operations are conducted on approximately 140 acres of land
and 225,000 square feet of covered fabrication area at the Port of Iberia,
approximately 20 miles southeast of Lafayette, Louisiana and 30 miles north of
the Gulf of Mexico. Current access routes to the Gulf of Mexico permit the
transporting of jackets for use in waters up to 300 feet deep and decks and
other structures weighing up to 3,500 tons. The
1
<PAGE> 5
Port of Iberia Commission has proposed the reopening and dredging of a by-pass
along one of these waterways that would provide access from the Company's
facilities to the Gulf of Mexico for structures weighing up to 6,000 tons.
Although the Louisiana Legislature has allocated funding to complete the initial
portion of this project, no assurance can be given as to whether such project
will be completed or whether the increased channel depths will be maintained. If
the Louisiana Legislature does not provide this funding, the Company could pay
to have this bypass reopened and dredged, which expense may be economically
justifiable in connection with the large revenue amounts typically derived from
fabrication of large structures.
1992 EXPANSION TRANSACTION. The Company's predecessor, Universal Partners,
was organized in 1980 by its founder, Dailey J. Berard. In 1992, in order to
expand its capabilities at the Port of Iberia and meet increasing demand for its
services, Universal Partners entered into an agreement with McDermott, a
subsidiary of McDermott International, Inc. Universal Partners contributed as a
going concern to the then newly-formed Universal Fabricators approximately 50
acres of leased land, its buildings and fabrication equipment, and $2.4 million
in cash. McDermott contributed an inactive fabrication yard directly across a
canal from the land leased by Universal Partners, which included approximately
85 acres of land, 200,000 square feet of covered fabrication space and various
equipment. This transaction (the "Expansion Transaction") substantially enlarged
the Company's yard space and increased covered fabrication area from 25,000
square feet to approximately 225,000 square feet. Both before and after the
Expansion Transaction, the day-to-day operations of the Company have been
conducted by Dailey J. Berard and the other members of the Company's management
team.
In the Expansion Transaction, McDermott received 49% of the outstanding
stock of Universal Fabricators. McDermott will sell all of its shares of Common
Stock as part of the Offering in connection with a previously announced strategy
of returning to core businesses by disposing of certain assets, including
certain financial investments. The Company will use a portion of the proceeds of
the Offering to secure McDermott's release of its rights under certain
agreements entered into in connection with the Expansion Transaction.
GROWTH AND PROFITABILITY STRATEGY
The Company's growth and profitability strategy is to capitalize on the
positive trends and current opportunities in heavy marine fabrication for the
oil and gas industry. Key elements of the Company's strategy are to:
- PURSUE EXPANDING MARKETS. The Company intends to continue to pursue
high-margin fabrication work in both domestic and international offshore
oil and gas producing areas where demand for its services has
substantially increased over the last five years. In fiscal 1997, the
Company derived 36% of its revenue from projects designed for
installation in the Gulf of Mexico and believes that an increasing
portion of its capacity will be used to satisfy demand for such projects.
In addition, a series of large oil and gas projects are being developed
for offshore Nigeria, Mexico, Brazil and Venezuela. The Company believes
that these projects, as well as projects in the Gulf of Mexico, will
provide it with significant opportunities to obtain high-margin
fabrication work in both the current fiscal year and thereafter.
- EXPAND FACILITIES. The Company intends to use a portion of the proceeds
of the Offering to construct a new slip and bulkhead and develop the
adjacent yard space that will enable the Company to construct and load
out projects weighing up to 6,000 tons. In addition, the Company intends
to acquire and install a new four-inch rolling mill which will enable the
Company to satisfy all of its rolled good requirements in-house,
including larger diameter pipe not currently rolled by the Company. The
Company believes that the enhanced capabilities provided by the new
facilities will provide the Company with opportunities to satisfy its
customers' increasing needs for structures usable in deep waters
throughout the world.
- MANAGE BACKLOG. The Company has historically attempted to manage its
backlog in order to benefit from pricing trends. In periods of rising
prices, the Company intentionally avoids building high levels of
2
<PAGE> 6
backlog in order to maximize its ability to pursue higher margin
projects. The Company believes that, as a low-cost fabricator, it is well
positioned to benefit from this strategy.
- IMPROVE WORKFORCE EFFICIENCY. The Company believes that its success has
been founded on its well motivated workforce, efficient management and
low overhead costs. To take advantage of the increased demand for its
services, the Company will continue to emphasize its low cost structure
and will seek to increase the productivity of its workforce by using a
portion of the proceeds of the Offering to purchase additional automated,
labor-saving equipment and to expand and upgrade its existing buildings
and equipment. The Company also intends to expand its investment in
employee education and training in order to upgrade employee skill levels
and productive capacity.
- INCREASE EMPLOYEE POOL. In fiscal 1997, the Company added approximately
95 full-time production employees to its workforce. The Company estimates
that its current facility could accommodate a workforce of more than
double its current size of approximately 425 employees. The Company
intends to continue its efforts to increase its skilled workforce in
order to increase the Company's production capacity. To address the
current shortage of skilled workers in south Louisiana, the Company has
been cooperating with local and regional associations and government
authorities to foster the training of skilled workers. The Company
believes that there is a large number of trainable employees residing in
reasonable proximity to its facility. The Company further believes that
companies whose products and services are complementary to those of the
Company are available for acquisition and that its capital structure
after the Offering will enable it to pursue such acquisition
opportunities as a means of expanding its skilled workforce.
The Company is incorporated under the laws of the State of Louisiana, its
principal executive offices are located at 5007 Port Road, New Iberia, Louisiana
70562, its mailing address is P.O. Box 11308, New Iberia, Louisiana 70560 and
its telephone number is (318) 367-8291.
3
<PAGE> 7
THE OFFERING
Common Stock offered:
By the Company........... 1,100,000
By the Selling
Shareholder............ 1,715,000
---------
Total.................... 2,815,000
Common Stock to be
outstanding after the
Offering................. 4,600,000 shares(1)
Use of Proceeds............ To fund (i) approximately $7.0 million of capital
expenditures for certain new equipment, slips,
bulkheads and load out systems and for the upgrade
and purchase of yard space, land, buildings and
equipment and (ii) a $6.3 million payment to
McDermott for the surrender of its rights under the
Shareholders' Agreement and the Put/Call Agreement.
See "The Company" and "Certain Transactions." The
balance of the proceeds will be used to provide
working capital and for general corporate purposes.
See "Use of Proceeds."
The Company will not receive any proceeds from the
sale of Common Stock by the Selling Shareholder.
Nasdaq National Market
Symbol................... UFAB
- ---------------
(1) Excludes 133,500 shares issuable upon exercise of outstanding options. See
"Management -- Compensation Pursuant to Plans -- Long-Term Incentive Plan."
RISK FACTORS
An investment in the Common Stock offered hereby involves a high degree of
risk. In particular, prospective investors should be aware of the effect on the
Company of the risks presented by the factors listed under "Risk Factors."
4
<PAGE> 8
SUMMARY FINANCIAL AND OPERATING DATA
The following table sets forth summary historical financial and operating
data as of the dates and for the periods indicated. The historical financial
data for each year in the three-year period ended March 31, 1997, and as of
March 31, 1997, are derived from the audited financial statements of Universal
Fabricators. Immediately prior to completion of the Offering, Universal
Fabricators will become a wholly owned subsidiary of UNIFAB International, Inc.,
which will have no other significant operations or assets. The following data
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the financial statements and
notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------------------------------
1993(1) 1994 1995 1996 1997
---------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Revenue.............................. $ 25,369 $ 29,926 $ 27,883 $ 51,807 $ 66,724
Cost of revenue...................... 21,239 27,211 23,174 40,362 58,589
---------- -------- -------- -------- --------
Gross profit......................... 4,130 2,715 4,709 11,445 8,135
General and administrative expense... 1,207 1,228 1,326 1,419 1,637
---------- -------- -------- -------- --------
Operating income..................... 2,923 1,487 3,383 10,026 6,498
Other income (expense), net.......... 84 21 38 315 82
---------- -------- -------- -------- --------
Income before income taxes........... 3,007 1,508 3,421 10,341 6,580
Income tax expense................... 1,112 555 1,286 3,888 2,555
---------- -------- -------- -------- --------
Net income........................... $ 1,895 $ 953 $ 2,135 $ 6,453 $ 4,025
========== ======== ======== ======== ========
Pro forma net income per share
(unaudited)(2).................... $ 0.54 $ 0.27 $ 0.61 $ 1.84 $ 1.15
========== ======== ======== ======== ========
Pro forma weighted average common
shares (unaudited)(2)............. 3,500 3,500 3,500 3,500 3,500
Other Financial Data:
Depreciation and amortization........ $ 125 $ 381 $ 424 $ 390 $ 471
Capital expenditures................. $ 6 $ 110 $ 179 $ 402 $ 821
EBITDA(3)............................ $ 3,048 $ 1,868 $ 3,807 $ 10,416 $ 6,969
EBITDA margin(4)..................... 14.4% 6.2% 13.7% 20.1% 10.4%
Operating Data:
Direct labor hours worked............ 520,000(5) 484,000 436,000 656,000 902,000
Number of employees.................. 230 215 210 330 425
Backlog (at end of period)........... $ 6,976 $ 8,917 $ 31,994 $ 42,311 $ 30,221
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C>
Industry Data:
U.S. Gulf of Mexico:
Rig utilization rates(6)............................ 49.3% 76.5% 76.2% 76.2% 88.0%
Blocks leased(7).................................... 204 336 560 835 1,508
Drilling rigs under contract(8)..................... 79 116 133 135 158
Offshore platforms installed(9)..................... 53 81 127 89 114
Worldwide:
Rig utilization rates(6)............................ 76.0% 81.9% 81.1% 83.9% 89.5%
Drilling rigs under contract(9)..................... 519 545 536 541 572
Offshore platforms installed(6)..................... 192 219 252 187 230
</TABLE>
5
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<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
-------------------------------
PRO FORMA
PRO FORMA(2) AS ADJUSTED(10)
------------ ---------------
(IN THOUSANDS)
<S> <C> <C>
Balance Sheet Data:
Working capital........................................... $ 4,571 $
Property, plant and equipment, net........................ 5,341
Total assets.............................................. 26,155
Debt...................................................... --
Shareholders' equity...................................... 8,580
</TABLE>
- ---------------
(1) The income statement data, other financial data and operating data include
the results of Universal Partners for the period from April 1, 1992 through
November 30, 1992 and Universal Fabricators for the period from December 1,
1992 through March 31, 1993.
(2) The unaudited pro forma data give effect to the completion of the merger of
Universal Partners into UNIFAB International, Inc. and the exchange by
McDermott of its shares of Universal Fabricators for shares of UNIFAB
International, Inc. See "The Company."
(3) The Company calculates EBITDA (earnings before interest expense, income
taxes, depreciation and amortization) as operating income plus depreciation
and amortization. EBITDA should not be considered as an alternative to net
income, or any other measure of operating performance in accordance with
generally accepted accounting principles. EBITDA is widely used by
financial analysts as a measure of financial performance. The Company's
measurement of EBITDA may not be comparable to similarly titled measures
reported by other companies.
(4) EBITDA margin is calculated by dividing EBITDA by revenue.
(5) Reflects the number of direct labor hours worked for the year ended
December 31, 1992.
(6) Represents the average utilization rate for drilling rigs located in the
U.S. Gulf of Mexico and worldwide, respectively, during the period
indicated. Data obtained from Offshore Data Services.
(7) Represents the number of 5,000 acre tracts leased by the Minerals
Management Service (United States Department of the Interior) ("MMS") to
oil and gas companies in the U.S. Gulf of Mexico. Data obtained from the
MMS.
(8) Represents the average number of drilling rigs under contract in the U.S.
Gulf of Mexico and throughout the world, respectively, for the period
presented. Data obtained from Offshore Data Services.
(9) Represents the number of fixed development drilling and production
platforms installed in the U.S. Gulf of Mexico and worldwide, respectively,
in the period presented. Data obtained from Offshore Data Services.
(10) Assumes the public offering of 1,100,000 shares of Common Stock by the
Company at an assumed price of $ per share resulting in net
proceeds of $ million (after deducting the underwriting discount and
expenses of the Offering) and the application thereof as described herein.
See "Use of Proceeds."
6
<PAGE> 10
THE COMPANY
UNIFAB International, Inc., was formed as a Louisiana corporation in July
1997 to serve as the parent corporation for Universal Fabricators, a Delaware
corporation established in 1992. Universal Fabricators' predecessor, Universal
Partners, was organized as a Louisiana corporation in 1980 by its founder,
Dailey J. Berard.
In 1992, in order to expand its capabilities at the Port of Iberia and meet
increasing demand for its services, Universal Partners entered into an agreement
with McDermott, pursuant to which (i) Universal Partners contributed as a going
concern to the then newly-founded Universal Fabricators approximately 50 acres
of leased land, its buildings and fabrication equipment, and $2.4 million cash,
and (ii) McDermott contributed an inactive fabrication yard directly across a
canal from the land leased by Universal Partners, which included approximately
85 acres of land, 200,000 square feet of covered fabrication space and various
equipment. In exchange, Universal Partners received 51% and McDermott received
49% of the common stock of Universal Fabricators. The Expansion Transaction
became effective December 1, 1992 and substantially enlarged the Company's yard
space and increased its covered fabrication space from 25,000 square feet to
225,000 square feet. Both before and after the Expansion Transaction, the
day-to-day operations of the Company have been conducted by Dailey J. Berard and
the other members of the Company's management team. Although McDermott
representatives have occupied two of five seats on Universal Fabricators' board
of directors, McDermott has remained essentially a passive investor.
In connection with the Expansion Transaction, Universal Partners and
McDermott entered into several agreements which set forth their respective
rights and obligations with respect to Universal Fabricators and the shares of
common stock of Universal Fabricators owned by each of them, all of which will
be terminated in connection with the Offering:
Shareholders' Agreement: Pursuant to the shareholders' agreement (the
"Shareholders' Agreement") between Universal Partners and McDermott, each
party has a right of first refusal with respect to sales of common stock of
Universal Fabricators by the other. In addition, no transfer of such common
stock is allowed until December 1999, and public offerings of the common
stock are prohibited, unless the parties agree otherwise. The Shareholders'
Agreement also provides for a five-member board of directors, three of whom
are to be elected by Universal Partners and two by McDermott. Most major
transactions and changes in corporate governance must be approved by either
the unanimous vote of the shareholders or a majority vote of the board of
directors, which majority includes at least one director elected by each
party. The Shareholders' Agreement also provides that, unless determined
otherwise by a majority of directors including at least one director
elected by each party, 90% of Universal Fabricators' net income for each
year, less reserves, must be distributed to shareholders as dividends.
Put/Call Agreement: Pursuant to an agreement entered into between
Universal Partners and McDermott (the "Put/Call Agreement"), Universal
Partners has the right to require McDermott to purchase all of its shares
of common stock in Universal Fabricators at a purchase price equal to 51%
of the product of (i) 4.5 and (ii) Universal Fabricators' average net
income for the two years prior to the exercise of the put option. Universal
Partners may exercise its right at any time from April 1, 1998 to June 30,
1998 and from April 1, 1999 to June 30, 1999. McDermott, on the other hand,
from April 1, 1999 to June 30, 1999, has the right to purchase Universal
Partners' shares of common stock in Universal Fabricators at the same
purchase price.
Other Agreements: McDermott and Universal Fabricators also entered
into a lease covering Universal Fabricators' administrative office and five
acres of surrounding land. McDermott is also the guarantor of Universal
Fabricators' revolving line of credit with a commercial lender (the
"Existing Credit Facility") and has guaranteed certain letters of credit
issued under the Existing Credit Facility and by certain other banks in
connection with certain foreign contracts.
Immediately prior to the completion of the Offering, Universal Partners,
after paying all of its liabilities and distributing to its shareholders all the
assets it then owns except the common stock of Universal Fabricators owned by
it, will merge into the Company, and the shareholders of Universal Partners will
receive
7
<PAGE> 11
1,785,000 shares of Common Stock of the Company in connection with the Merger.
Concurrently, McDermott will exchange all of the shares of Universal Fabricators
common stock owned by it for 1,715,000 shares of Common Stock of the Company.
McDermott has agreed that in the Offering it will sell all of the shares of
Common Stock of the Company it receives pursuant to the Share Exchange, and that
upon consummation of the Offering, it will (i) sell to the Company approximately
18 acres of land, including the land and building currently leased by the
Company from McDermott, for $700,000 and (ii) surrender all of its rights under
the Shareholders' Agreement and the Put/Call Agreement for $6.3 million. See
"Certain Transactions" and "Use of Proceeds." In addition, McDermott will no
longer guarantee borrowings under the Existing Credit Facility or provide credit
support for any of the letters of credit issued on behalf of the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
8
<PAGE> 12
RISK FACTORS
Prospective purchasers of the Common Stock should carefully consider the
investment considerations set forth below, as well as the other information
contained in this Prospectus.
CYCLICALITY; DEPENDENCE ON ACTIVITY IN THE OIL AND GAS INDUSTRY
The demand for the Company's services has traditionally been cyclical,
depending on the condition of the oil and gas industry and, in particular, the
level of capital expenditures of oil and gas companies that operate in offshore
oil and gas producing areas throughout the world. These capital expenditures
have been influenced by prevailing oil and natural gas prices; exploration and
production companies' expectations about future demand and prices; the cost of
exploring for, producing and delivering oil and gas; the sale and expiration
dates of offshore leases in the United States and overseas; the discovery rate
of new oil and gas reserves in offshore areas; local and international political
and economic conditions; and the ability of oil and gas companies to access or
generate capital sufficient to fund capital expenditures for offshore
exploration, development and production activities. Historically, oil and
natural gas prices and the level of offshore drilling and exploration activity
have fluctuated substantially, resulting in significant fluctuations in demand
for the Company's services. A significant decline in worldwide demand or
prolonged reduction in oil or natural gas prices in the future would likely
depress offshore drilling and development activity. A substantial reduction of
such activity would reduce demand for the Company's services and could have a
material adverse effect on the Company's financial condition and results of
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- General."
NEED FOR SKILLED WORKERS
The Company's ability to remain productive and profitable depends
substantially on its ability to retain and attract skilled construction workers,
primarily welders, fitters and equipment operators. The Company's ability to
expand its operations depends primarily on its ability to increase its skilled
workforce. The demand for skilled workers in south Louisiana is high and the
supply of skilled workers is extremely limited, and no assurance can be given
that the Company will succeed in increasing the size of its workforce through
acquisitions, training, new hiring programs or otherwise. Although the Company
believes that there are a large number of trainable workers residing in
reasonable proximity to its facilities, there can be no assurances that the
Company will be successful in recruiting and training such workers due to a
variety of factors, including the current skill levels of such workers, the
potential inability or lack of desire by such workers to either commute to the
Company's facilities or relocate to areas closer to the Company's facilities,
and competition for workers from other industries. While the Company believes
that its wage rates are competitive and that its relationship with its skilled
workforce is good, a significant increase in the wages paid by competing
employers could result in a reduction in the Company's skilled workforce,
increases in the wage rates paid by the Company, or both. If either of these
events occur, in the near term, the profits realized by the Company from work in
progress would be reduced or eliminated and, in the long term, the production
capacity and profitability of the Company could be diminished and the growth
potential of the Company could be impaired. As another part of its strategy to
increase its employee pool, the Company plans to pursue acquisitions of
companies whose services are complementary to those of the Company. There can be
no assurance, however, that the Company will be able to identify and acquire
acceptable acquisition candidates on terms favorable to the Company or that the
Company will be able to integrate such acquisitions successfully. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- General" and "Business -- Employees."
FACILITY LIMITATIONS
The Company owns one two-inch rolling mill, which currently supplies
approximately 80% of the rolled goods necessary to complete the Company's
projects. Although the rolling mill has not caused any substantial downtime for
the Company, it is an older piece of equipment that requires constant
maintenance. If the rolling mill were to become inoperable for a material amount
of time, the Company would be forced to purchase rolled goods from other
suppliers. There can be no assurance as to the Company's ability to purchase
such
9
<PAGE> 13
goods in the quantities desired and there can be no assurance that the prices at
which these products may be purchased would not be materially higher than the
internal costs that the Company would otherwise bear in producing such rolled
goods. The loss of the rolling mill for a significant period would have a
material adverse effect on the Company's results of operations. The Company
obtains the remainder of its rolled goods from various regional suppliers. As
demand for fabricated services increases, the Company's ability to obtain the
rolled steel that it needs at acceptable prices decreases. If the Company were
not able to obtain such products or if prices for such goods became
prohibitively expensive, the Company's profitability and results of operations
could be materially adversely affected. See "Business -- Facilities and
Equipment -- Equipment" and "-- Materials."
Due to the limitations of the various access routes from the Company's
facilities at the Port of Iberia to the Gulf of Mexico, the Company is currently
unable to deliver structures weighing over 3,500 tons. One main route to the
Gulf of Mexico, the Freshwater Bayou Channel, provides 12 feet of water depth to
the Gulf of Mexico, but the dimensions of locks on this channel prevent the
transport of structures more than 80 feet in width. There is a by-pass channel
around these locks that, if usable, would permit continuous passage to the Gulf
of Mexico with at least 12 feet of water depth at all points and without any
material width restrictions. This water depth would generally permit the
transportation of structures weighing up to 6,000 tons, which the Company will
be able to fabricate once the new slip and bulkhead is constructed (to be funded
with a portion of the proceeds of this Offering). Due to the silt that has built
up on both sides of the by-pass, however, the by-pass is currently impassable
without extensive dredging. On the basis of amounts spent in the past by
contractors other than the Company in order to facilitate the transportation of
certain structures, it is estimated that the cost of dredging the silt from the
by-pass and opening the by-pass channel would be approximately $400,000 to
$500,000. Recently, the Louisiana Legislature appropriated funds for the initial
dredging of the by-pass, a project that would open the by-pass for at least one
year and possibly longer, depending upon the extent of future traffic through
the by-pass. There can be no assurance, however, that the appropriated funds
will actually be spent or that the by-pass, once opened, will remain usable by
the Company for structures exceeding 3,500 tons. If this project is not
completed by the state, the Company would remain unable to deliver structures
weighing over 3,500 tons unless it determined to incur the additional dredging
costs described above.
BACKLOG
The Company's backlog is based on management's estimate of the remaining
labor, material and subcontracting costs to be incurred with respect to those
projects on which a customer has authorized the Company to begin work or
purchase materials pursuant to written contracts, letters of intent, or other
forms of authorization. Most projects currently included in the Company's
backlog are subject to change and/or termination at the option of the customer,
either of which could substantially change the amount of backlog currently
reported. In the case of a termination, the customer is generally required to
pay the Company for work performed and materials purchased through the date of
termination, and in some cases, pay the Company termination fees; however, due
to the large dollar amounts of backlog estimated for each of a small number of
projects, amounts included in the Company's backlog could decrease substantially
if one or more of these projects were to be terminated by the Company's
customers. Approximately 57% of the Company's backlog at June 30, 1997 was
attributable to two projects. Termination of one or more of these large projects
could have a material adverse effect on the Company's revenue, net income and
cash flow for fiscal 1998. While the Company has restrained the growth of its
backlog in order to improve the prices it obtains for its services, such a
strategy in times of decreasing demand or increasing lead times for purchases of
materials could accelerate a decline in the Company's profitability. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- General" and "Business -- Backlog."
OPERATING RISKS
The Company's fabrication of large steel structures involves certain
operating hazards that can cause personal injury or loss of life, severe damage
to and destruction of property and equipment and suspension of operations. The
failure of such structures during and after installation can result in similar
injuries and
10
<PAGE> 14
damages. The Company also has employees engaged in offshore operations that are
covered by provisions of the Jones Act, the Death on the High Seas Act and
general maritime law, which laws operate to make the liability limits
established by state workers' compensation laws (which cover the Company's other
employees) inapplicable to these employees and, instead, permit them or their
representatives to pursue actions against the Company for damages for
job-related injuries, with generally no limitations on the Company's potential
liability. In addition, due to their proximity to the Gulf of Mexico, the
Company's facilities are subject to the possibility of physical damage caused by
hurricanes or flooding. Although the Company maintains such insurance protection
as it considers economically prudent, there can be no assurance that its
insurance will be sufficient or effective under all circumstances or against all
claims or hazards to which the Company may be subject, nor does the Company
carry insurance for the loss of profits that may result from such hazards. A
successful claim or damage resulting from a hazard for which the Company is not
fully insured could have a material adverse effect on the Company. Moreover, no
assurance can be given that the Company will be able to maintain adequate
insurance in the future at rates that it considers economically prudent. See
"Business -- Insurance."
A majority of the Company's revenue in recent years has resulted from
projects constructed for overseas installation. Although the Company delivers
the structures that it fabricates at its Port of Iberia facility and has
historically received payment only in United States dollars, the Company is
nevertheless subject to delays in collecting receivables from contractors and
oil and gas companies with respect to projects installed overseas. Oil and gas
operations in overseas locations in which the Company's products have been
installed are subject to a number of risks inherent in business operations in
foreign countries, including political, social and economic instability;
nullification, modification or renegotiation of contracts; import-export quotas;
and other forms of public and governmental regulation, all of which are beyond
the control of the Company. Additionally, the ability of the Company to compete
in international markets may be adversely affected by import duties and fees, by
foreign taxes, by foreign governmental regulations that favor or require the
awarding of contracts to local contractors, or by regulations requiring foreign
contractors to employ citizens of, or purchase supplies from, a particular
jurisdiction.
CONTRACT BIDDING RISKS
Due to the nature of the marine construction industry, most of the
Company's projects are performed pursuant to fixed-price contracts, although
some projects are performed on a time and materials basis. Under fixed-price
contracts, the Company receives the price fixed in the contract, subject to
adjustment only for change orders placed by the customer. As a result, with
respect to fixed-price contracts, the Company is responsible for all cost
overruns. Under time and materials arrangements, the Company receives a
specified hourly rate for direct labor hours (which exceeds its direct labor
costs) and a specified percentage mark-up over its cost for materials. As a
result, with respect to time and materials contracts, the Company is protected
against cost overruns but does not benefit directly from cost savings. The
revenue, costs and gross profit realized on a contract will often vary from the
estimated amounts on which such contracts were originally based for various
reasons, including errors in estimates or bidding, changes in the availability
and cost of labor and material and variations in productivity from the original
estimates. These variations and the risks inherent in the marine construction
industry may result in revenue and gross profits different from those originally
estimated and reduced profitability or losses on projects. Depending on the size
of a project, variations from estimated contract performance can have a
significant impact on the Company's operating results for any particular fiscal
quarter or year.
Most of the Company's fixed price contracts also provide for incentive
payments for early delivery of projects and liquidated damages for late
delivery. If the Company were to miss the delivery date specified by any of its
contracts, whether due to problems with its rolling mill, labor shortages,
adverse weather conditions or other causes, and such delay was not excused under
the terms of such contract or by the customer, the Company could be subject to
liquidated damages which could materially adversely affect the Company's
profitability and results of operations.
11
<PAGE> 15
PERCENTAGE-OF-COMPLETION ACCOUNTING
Most of the Company's revenue and income is recognized on a
percentage-of-completion basis based on the ratio which labor and subcontracting
costs incurred bears to the total estimated labor and subcontracting costs
required for completion. Accordingly, expected labor hours, costs and profits
are reviewed monthly as the work progresses, and adjustments proportionate to
the percentage of completion are reflected in revenue for the period when such
estimates are revised. To the extent that these adjustments result in a
reduction or elimination of previously reported profits, the Company would have
to recognize a charge against current earnings, which may be significant
depending on the size of the project or the adjustment. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- General."
SEASONALITY AND WEATHER RISKS
The Company's operations are subject to seasonal variations in weather
conditions and daylight hours. Since most of the Company's construction
activities take place outdoors, the average number of direct labor hours worked
per day generally declines by approximately one and one-half hours in the winter
months as compared to the summer months due to an increase in rainy and cold
conditions and a decrease in daylight hours. Operations may also be affected by
the rainy weather, hurricanes and other storms prevalent along the Gulf Coast
throughout the year. As a result, the Company's revenue and gross profit during
the third and fourth quarters of each fiscal year are subject to being
disproportionately low as compared to the first and second quarters, although,
in recent years, that has not been the case. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- General."
DEPENDENCE ON SIGNIFICANT CUSTOMERS
A large portion of the Company's revenue has historically been generated by
a few customers, although not necessarily the same customers from year to year.
For example, the Company's largest customers (those which individually accounted
for more than 10% of revenue in a given year) collectively accounted for 39.3%
(two customers), 64.5% (two customers) and 60.7% (two customers) of revenue for
fiscal 1995, 1996 and 1997, respectively. At June 30, 1997, 57% of the Company's
backlog was attributable to two projects.
Although the Company's direct customers on many projects are installation
contractors, each project is ultimately fabricated for use by an oil and gas
company. The Company, from time to time, contracts with multiple installation
contractors who may be supplying structures to the same oil and gas company and,
in some instances, contracts directly with the oil and gas companies. Thus,
concentration among the Company's customers may be greater when the customer is
viewed as the oil and gas company rather than the installation contractor. For
example, at June 30, 1997, the Company estimates that approximately 89% of its
backlog was for projects to be built for three oil and gas companies.
Because the level of fabrication that the Company may provide, directly or
indirectly, to any particular oil and gas company depends, among other things,
on the size of that company's capital expenditure budget devoted to platform
construction in a particular year and the Company's ability to meet the
customer's delivery schedule, companies that account for a significant portion
of the Company's revenue in one fiscal year, whether as a direct customer or
through subcontracted projects, may represent an immaterial portion of revenue
in subsequent years. The level of fabrication that the Company may provide as a
subcontractor to an offshore construction company depends, among other things,
on the ability of that company to successfully obtain prime contracts with oil
and gas companies and the ability of the Company to meet the delivery schedule
of the prime contractor. Thus, the prime contractors who account for a
significant portion of revenue in one fiscal year may represent an immaterial
portion of revenue in subsequent years. However, the loss of any significant
customer (whether an oil and gas company with which the Company directly
contracts or a prime contractor for which the Company has provided services on a
subcontract basis) for any reason, including a sustained decline in an oil and
gas company's capital expenditure budget or the prime contractor's inability to
successfully obtain contracts, or other competitive factors, could result in a
substantial loss of revenue and have a material adverse effect on the Company's
operating performance.
12
<PAGE> 16
COMPETITION
Marine construction companies servicing the oil and gas industry compete
intensely for available projects. Contracts for the Company's services are
generally awarded on a competitive bid basis. Price and the contractor's ability
to meet a customer's delivery schedule are the principal factors in determining
which qualified contractor is awarded the job. Customers may also consider,
among other things, the availability and capabilities of equipment, as well as
the reputation, experience and safety record of the contractor. The Company
competes with both large and small companies, and certain of these competitors
have greater financial and other resources than the Company. In addition,
because of subsidies, import duties and fees, taxes imposed on foreign operators
and lower wage rates in foreign countries, along with fluctuations in the value
of the U.S. dollar and other factors, the Company may not be able to remain
competitive with foreign contractors for projects designed for use in
international locations. See "Business -- Competition."
REGULATORY AND ENVIRONMENTAL MATTERS
The Company's operations and properties are subject to and affected by
various types of governmental regulation, including numerous federal, state and
local environmental protection laws and regulations, compliance with which is
becoming increasingly complex, stringent and expensive. These laws may provide
for "strict liability" for damages to natural resources or threats to public
health and safety, rendering a party liable for environmental damage without
regard to its negligence or fault. Sanctions for noncompliance may include
revocation of permits, corrective action orders, administrative or civil
penalties and criminal prosecution. Certain environmental laws provide for
strict, joint and several liability for remediation of spills and other releases
of hazardous substances. In addition, companies may be subject to claims
alleging personal injury or property damage as a result of alleged exposure to
hazardous substances. Such laws and regulations may also expose the Company to
liability for the conduct of or conditions caused by others, or for acts of the
Company that were in compliance with all applicable laws at the time such acts
were performed. In addition, the Company depends on the demand for its services
from the oil and gas industry and is affected by changing taxes, price controls
and other laws and regulations relating to the oil and gas industry generally.
The adoption of laws and regulations curtailing exploration and development
drilling for oil and gas for economic, environmental and other policy reasons
would adversely affect the Company's operations by limiting demand for its
services. The Company cannot determine to what extent future operations and
earnings of the Company may be affected by new legislation, new regulations or
changes in existing regulations. See "Business -- Government and Environmental
Regulation."
DEPENDENCE ON KEY PERSONNEL
The Company's success depends on, among other things, the continued active
participation of Dailey J. Berard, President and Chief Executive Officer of the
Company, and certain of the Company's other officers and key operating
personnel. The loss of the services of any one of these persons could have a
material adverse effect on the Company. See "Management."
SHARES ELIGIBLE FOR FUTURE RESALE
Upon completion of the Offering, the Company will have outstanding
4,600,000 shares of Common Stock (excluding 133,500 shares issuable upon the
exercise of outstanding options). All of the 2,815,000 shares of Common Stock
offered hereby will be eligible for sale in the public market without
restriction upon completion of the Offering. All of the remaining 1,785,000
shares of Common Stock are "restricted securities" as that term is defined in
Rule 144 under the Securities Act of 1933, as amended (the "Securities Act").
The Company, each of the Company's directors and executive officers and certain
shareholders have agreed not to offer, sell or otherwise dispose of any shares
of Common Stock in the public market for 180 days from the date of this
Prospectus without the prior consent of the Underwriters. See "Underwriting."
Subject to this agreement, after the completion of the Offering, the Company's
existing shareholders may sell shares of Common Stock pursuant to Rule 144 under
the Securities Act or otherwise. In addition, each of Messrs. Dailey J. Berard,
Broussard and Segura has been granted certain demand and "piggyback"
registration rights by the Company with respect to all of the shares of Common
Stock owned by him. Although the Company
13
<PAGE> 17
cannot predict the timing or amount of future sales of Common Stock or the
effect that the availability of such shares for sale will have on the market
price prevailing from time to time, sales of substantial amounts of Common Stock
in the public market following this Offering could adversely affect the market
price of the Common Stock. See "Principal and Selling Shareholders" and "Shares
Eligible for Future Resale."
NO PRIOR MARKET; POSSIBLE VOLATILITY OF MARKET PRICE; DILUTION
Prior to the Offering, there has been no public market for the Common
Stock. Although application has been made to list the Common Stock offered
hereby on the Nasdaq National Market, there can be no assurance that a market
for the Common Stock will develop or, if developed, will be sustained. The
initial public offering price of the Common Stock will be determined by
negotiations between the Company, the Selling Shareholder and the Underwriters.
For the factors considered in such negotiations, see "Underwriting." There can
be no assurance that future market prices at which the Common Stock will sell in
the public market after the Offering will not be lower than the initial public
offering price. Following the Offering, the market price of the Common Stock may
fluctuate depending on various factors, including the general economy, stock
market conditions, general trends in the marine construction business,
fluctuations in oil and gas prices, announcements by the Company or its
competitors and variations in the Company's quarterly and annual operating
results. In addition, purchasers of the Common Stock offered hereby will incur
immediate dilution of $ ($ per share) in the pro forma net
tangible book value of their investment. See "Dilution."
DIVIDENDS
The Company currently intends to retain earnings, if any, to meet its
working capital requirements and to finance the future operation and growth of
the Company's business and, therefore, does not plan to pay cash dividends to
holders of its Common Stock in the foreseeable future.
14
<PAGE> 18
USE OF PROCEEDS
The estimated net proceeds to the Company from the sale of the shares of
Common Stock offered hereby, after deducting the underwriting discount and
offering expenses, will be approximately $ million (assuming an initial
offering price of $ per share). The Company intends to use
approximately $7.0 million of its net proceeds to fund capital expenditures
anticipated to be made within 12 months of the completion of the Offering to
improve the Company's facilities and the productivity of its workforce,
including approximately $4.0 million to acquire and install a four-inch rolling
mill, approximately $1.7 million to construct a new slip and bulkhead and to
build a new load out system for use with the new slip, approximately $500,000 to
expand and improve the Company's pipe shop and $800,000 to purchase land
currently leased from McDermott, including the Company's 12,000 square foot main
office building, and an additional 10 acres from Universal Partners. The Company
will use $6.3 million of the net proceeds to secure the release by McDermott of
its rights under the Shareholders' Agreement and the Put/Call Agreement. See
"The Company" and "Certain Transactions." Any remaining proceeds will be used
for working capital and general corporate purposes. Until used, the Company
intends to invest the net proceeds in money market funds, certificates of
deposit or short-term, interest bearing securities.
The Company will not receive any proceeds from the sale of Common Stock by
the Selling Shareholder.
DIVIDEND POLICY
After the Offering, the Company intends to retain earnings, if any, to meet
its working capital requirements and to finance the future operation and growth
of its business and, therefore, does not plan to pay cash dividends to holders
of its Common Stock in the foreseeable future. The Shareholders' Agreement,
which will be terminated in connection with the Offering, requires that, unless
determined otherwise by a majority of directors of Universal Fabricators,
including at least one director elected by each of McDermott and Universal
Partners, 90% of Universal Fabricators' net income for the previous fiscal year,
less reserves, for each fiscal year be distributed to McDermott and Universal
Partners as dividends. For the fiscal years ending March 31, 1995, 1996 and
1997, Universal Fabricators paid dividends of approximately 90% of its net
income, totaling $1.9 million, $5.8 million and $3.6 million, respectively. See
"Risk Factors -- Dividends."
15
<PAGE> 19
DILUTION
After giving effect to the formation and capitalization of UNIFAB
International, Inc., the Merger, the Share Exchange and the $3.6 million
dividend paid by the Company on June 19, 1997, the pro forma net tangible book
value of the Company at March 31, 1997 would have been $8.6 million, or $2.45
per share of Common Stock. On a pro forma basis, net tangible book value per
share of Common Stock represents the amount of the Company's tangible net worth
(total tangible assets less total liabilities) divided by the total number of
shares of Common Stock outstanding. After giving effect to the Offering
(assuming an initial public offering price of $ per share and deducting
the underwriting discount and offering expenses estimated at $ million), the
pro forma net tangible book value of the Company at March 31, 1997 would have
been approximately $ million or $ per share of Common Stock. This
represents an immediate increase in net tangible book value of $ per
share of Common Stock to current holders of Common Stock and an immediate
dilution of approximately $ per share to the new investors purchasing
shares in the Offering.
The following table illustrates this per share dilution to new investors:
<TABLE>
<S> <C> <C>
Initial net public offering price per share................. $
Pro forma net tangible book value per share at March 31,
1997 (without taking into account the Offering)(1)..... $2.45
Increase in pro forma net tangible book value per share
attributable to the sale of Common Stock in the
Offering............................................... $
-----
Adjusted pro forma net tangible book value per share after
giving effect to the Offering(1).......................... $
-----
Dilution in pro forma net tangible book value per share to
the purchasers of Common Stock offered hereby(1).......... $
=====
</TABLE>
The following table summarizes, on a pro forma basis, at March 31, 1997,
the number of shares of Common Stock to be issued by the Company in connection
with the Merger, the Share Exchange and the Offering, the total consideration
received by the Company and the average price per share of Common Stock paid by
existing shareholders and by investors in the Offering (assuming an initial
public offering price of $ per share) before deducting the estimated
underwriting discount and offering expenses.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------- --------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders(1)............... 3,500,000 76% $8,579,831 % $2.45
New investors.......................... 1,100,000 24% % $
--------- ---- ---------- ---- -----
Total........................ 4,600,000 100% 100%
========= ==== ========== ====
</TABLE>
- ---------------
(1) Excludes 133,500 shares issuable upon the exercise of outstanding options.
See "Management -- Compensation Pursuant to Plans -- Long-Term Incentive
Plan."
16
<PAGE> 20
CAPITALIZATION
The following table sets forth the capitalization of the Company at March
31, 1997; on a pro forma basis, as of March 31, 1997, giving effect to the
formation and capitalization of UNIFAB International, Inc., the Merger, the
Share Exchange and the $3.6 million dividend paid by the Company on June 19,
1997; and on a pro forma basis as adjusted to reflect the sale by the Company of
1,100,000 of the shares of Common Stock offered hereby at an assumed initial
public offering price of $ per share and the application of the
estimated net proceeds thereof as described in "Use of Proceeds." The Company
was formed on July 17, 1997 with an initial capitalization of $1,000. The table
set forth below should be read in conjunction with the financial statements and
the notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
------------------------
PRO FORMA
PRO FORMA AS ADJUSTED
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt, less current maturities..................... $ -- $ --
-------- --------
Shareholders' equity:
Preferred Stock, no par value per share, 5,000,000 shares
authorized; none issued or outstanding................. -- --
Common Stock, $0.01 par value per share, 20,000,000 shares
authorized; 3,500,000 million shares issued and
outstanding; 4,600,000 million shares issued and
outstanding as adjusted(1)............................. 35
Additional paid-in capital................................ 8,545
Retained earnings......................................... --
-------- --------
Total shareholders' equity........................ 8,580
-------- --------
Total capitalization........................................ $ 8,580 $
======== ========
</TABLE>
- ---------------
(1) Excludes 133,500 shares issuable upon exercise of outstanding options. See
"Management -- Compensation Pursuant to Plans -- Long-Term Incentive Plan."
17
<PAGE> 21
SELECTED FINANCIAL AND OPERATING DATA
The income statement data for each of the years in the three years ended
March 31, 1997 and the balance sheet data as of March 31, 1995, 1996 and 1997
are derived from the financial statements of Universal Fabricators which have
been audited by Ernst & Young LLP. Immediately prior to completion of the
Offering, Universal Fabricators will become a wholly owned subsidiary of UNIFAB
International, Inc., which will have no other significant operations or assets.
The following information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
financial statements and notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------------------------
1993(1) 1994 1995 1996 1997
------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Revenue................................... $25,369 $29,926 $27,883 $51,807 $66,724
Cost of revenue........................... 21,239 27,211 23,174 40,362 58,589
------- ------- ------- ------- -------
Gross profit.............................. 4,130 2,715 4,709 11,445 8,135
General and administrative expense........ 1,207 1,228 1,326 1,419 1,637
------- ------- ------- ------- -------
Operating income.......................... 2,923 1,487 3,383 10,026 6,498
Other income (expense), net............... 84 21 38 315 82
------- ------- ------- ------- -------
Income before income taxes................ 3,007 1,508 3,421 10,341 6,580
Income tax expense........................ 1,112 555 1,286 3,888 2,555
------- ------- ------- ------- -------
Net income................................ $ 1,895 $ 953 $ 2,135 $ 6,453 $ 4,025
======= ======= ======= ======= =======
Pro forma net income per share
(unaudited)(2)......................... $ 0.54 $ 0.27 $ 0.61 $ 1.84 $ 1.15
======= ======= ======= ======= =======
Pro forma weighted average common shares
(unaudited)(2)......................... 3,500 3,500 3,500 3,500 3,500
Other Financial Data:
Depreciation and amortization............. $ 125 $ 381 $ 424 $ 390 $ 471
Capital expenditures...................... $ 6 $ 110 $ 179 $ 402 $ 821
EBITDA(3)................................. $ 3,048 $ 1,868 $ 3,807 $10,416 $ 6,969
EBITDA margin(4).......................... 14.4% 6.2% 13.7% 20.1% 10.4%
Operating Data:
Direct labor hours worked................. 520,000(5) 484,000 436,000 656,000 902,000
Number of employees....................... 230 215 210 330 425
Backlog................................... $ 6,976 $ 8,917 $31,994 $42,311 $30,221
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31,
-----------------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital............................ $ 3,181 $ 4,337 $ 5,877 $10,333 $ 8,192
Property, plant and equipment, net......... 5,514 5,243 4,986 4,999 5,341
Total assets............................... 13,043 14,318 16,173 23,714 26,154
Debt....................................... -- -- -- -- --
Shareholders' equity....................... 7,222 8,175 9,452 13,984 12,201
</TABLE>
- ---------------
(1) The income statement data, other financial data and operating data include
the results of Universal Partners for the period from April 1, 1992 through
November 30, 1992 and Universal Fabricators for the period from December 1,
1992 through March 31, 1993.
(2) Gives effect to the completion of the merger of Universal Partners into
UNIFAB International, Inc. and the exchange by McDermott of its shares of
Universal Fabricators for shares of UNIFAB International, Inc. See "The
Company."
18
<PAGE> 22
(3) The Company calculates EBITDA (earnings before interest expense, income
taxes, depreciation and amortization) as operating income plus depreciation
and amortization. EBITDA should not be considered as an alternative to net
income or any other measure of operating performance in accordance with
general accounting principles. EBITDA is widely used by financial analysts
as a measure of financial performance. The Company's measurement of EBITDA
may not be comparable to similarly titled measures reported by other
companies.
(4) EBITDA margin is calculated by dividing EBITDA by revenue.
(5) Reflects the number of direct labor hours worked for the year ended December
31, 1992.
19
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's results of operations depend primarily on (i) the level of
oil and gas exploration and development activity of oil and gas companies in the
Gulf of Mexico and offshore West Africa; (ii) the Company's ability to win
contracts through competitive bidding; and (iii) the Company's ability to manage
those contracts to successful completion. The level of exploration and
development activity is related to several factors, including trends of oil and
gas prices, exploration and production companies' expectations of future oil and
gas prices and changes in technology which reduce costs and improve expected
returns on investment. Over the past four years, favorable trends in these
factors have led to increased offshore exploration and development activity.
In addition to higher oil and gas prices, improvements in three-dimensional
seismic, directional drilling, production techniques and other advances in
technology have increased drilling success rates and reduced costs. The number
of active offshore drilling rigs worldwide is at its highest point since 1986,
with the average number of active offshore rigs in the Gulf of Mexico, in
particular, having increased from approximately 80 for the year ended December
31, 1992 to more than 155 for the year ended December 31, 1996. In addition, the
number of leases of exploratory tracts in the Gulf of Mexico sold to oil and gas
companies by the MMS also has been at record levels.
Lease sales and awards of offshore concessions generally serve as
precursors to drilling and exploration activity and, in turn, increased levels
of offshore drilling and exploration activity generally serve as precursors to
increased demand for platform construction. Due to the time required to drill an
exploratory offshore well, formulate a comprehensive development plan and design
offshore platforms, the fabrication and installation of such platforms usually
lag exploratory drilling by one to three years. As a result, the high levels of
drilling activity worldwide, particularly in the Gulf of Mexico, have only
recently impacted the demand for the Company's custom fabrication services, with
revenue increasing 85.8% to $51.8 million in fiscal 1996 and 28.8% to $66.7
million in fiscal 1997, in each case as compared to the prior fiscal year. There
can be no assurance, however, that drilling activity will continue at such
levels or that oil and gas companies will actively explore and develop the
fields recently leased. Whether these trends continue and the resulting increase
in demand for the Company's services actually occurs is dependent in large part
on the factors listed above.
During the fiscal years ended March 31, 1995, 1996 and 1997, 47%, 58% and
64%, respectively, of the Company's revenue was derived from structures
fabricated for installation in international areas, with the remainder designed
for installation in the Gulf of Mexico. The Company believes that its strong
presence in both overseas markets and the Gulf of Mexico market, coupled with
continued strong oil and gas activity in these markets, has enabled it to
selectively obtain high-margin fabrication work and to benefit from increased
pricing levels. The Company further believes that the increased activity level
in the Gulf of Mexico will lead to an increasing percentage of the Company's
revenue coming from projects intended for installation in the Gulf of Mexico.
The Company has historically attempted to manage its backlog in order to benefit
from pricing trends. In periods of rising prices, the Company intentionally
avoids building high levels of backlog in order to maximize its ability to
pursue higher margin projects. The Company believes that, as a low-cost
fabricator, it is well positioned to benefit from this strategy.
Barges loaded with completed structures weighing up to 3,500 tons can
travel through any of several currently available water routes from the
Company's facilities at the Port of Iberia to the Gulf of Mexico. Special
efforts, including dredging, would be needed to permit barges carrying
structures from 3,500 to 6,000 tons to travel from the Port of Iberia facility
to the Gulf of Mexico, which would add costs to the project that the customer
may not be willing to bear. In addition, the Company needs to construct the new
slip and bulkhead which it intends to fund through a portion of the proceeds of
the Offering to accommodate structures of this size. See "Risk
Factors -- Facility Limitations." Although the Company is not able to produce
jackets designed for water depths over 300 feet as they are too heavy or too
wide to be transported from the Company's facilities, the increased activity in
the deepwater areas of the Gulf of Mexico has benefitted the
20
<PAGE> 24
Company's pricing levels as the Company is able to fabricate decks and modules
weighing up to 3,500 tons for installation on platforms regardless of water
depth.
Most of the Company's fabrication work is performed pursuant to fixed-price
contracts, although some projects are performed on a time and materials basis.
Under fixed-price contracts, the Company receives the price fixed in the
contract, subject to adjustment only for change orders placed by the customer.
As a result, with respect to fixed-price contracts, the Company retains all cost
savings but is also responsible for all cost overruns. Under time and materials
arrangements, the Company receives a specified hourly rate for direct labor
hours worked (which exceeds its direct labor costs) and a specified percentage
mark-up over its cost for materials. As a result, under time and materials
contracts, the Company is protected against cost overruns but does not benefit
directly from cost savings. As the Company is typically able to obtain prices
for materials in excess of its costs, the cost and productivity of the Company's
labor force are the key factors affecting the Company's operating profits.
Consequently, it is essential that the Company control its labor costs and the
productivity of its workforce. See "Business -- Customers and Contracting."
The ability of the Company to operate profitably and to expand its
operations depends substantially on its ability to attract skilled production
workers, primarily welders, fitters and equipment operators. The Company was
able to add 95 full-time production employees to its workforce in fiscal 1997.
While the supply of production workers is limited, the demand for their services
has increased as oil and gas development and production activity has increased.
As a result, during 1997 the Company increased the average hourly wages of its
employees, instituted a 401(k) Plan and improved several other benefit packages
available to its employees. The Company has also been very active in the
movement to create a more business-oriented educational system in Louisiana,
which lead to the passage of a recent bill that aims to give industry more input
in the teaching at vocational-technical schools. Although there can be no
assurance that such initiatives will be carried out to successful completion,
management believes that, in the long-term, initiatives like these are the best
methods for increasing the pool of well-trained workers in Louisiana. See
"Business -- Employees."
After the Offering, the Company expects to incur additional ongoing general
and administrative costs as a result of (i) the increased costs of being a
public company, including the hiring of additional personnel such as a Chief
Financial Officer, and (ii) an increase in compensation to several employees to
offset the loss of dividend income these employees historically received from
Universal Partners. It is estimated that the increase will be approximately
$650,000 in the first year after the Offering.
The Company's operations are subject to seasonal variations in weather
conditions and daylight hours. Because most of the Company's construction
activities take place outdoors, the number of direct labor hours worked
generally declines in winter months due to an increase in rainy and cold
conditions and a decrease in daylight hours. Operations may also be affected by
the rainy weather, hurricanes and other storms prevalent along the U.S. Gulf
Coast throughout the year. As a result, the Company's revenue, gross profit and
net income during the fourth quarter of each fiscal year are subject to being
disproportionately low as compared to the first and second quarters, and full
year results may not in all cases be a direct multiple of any particular quarter
or combination of quarters. The Company's results for the last three years do
not dramatically reflect this effect due to (i) the large amount of revenue and
income recognized in the third and fourth quarters of 1996 on one particular
project and (ii) the substantial increase in production volume that began in the
third quarter of 1996. The table below indicates for each quarter of the
Company's last three fiscal years the percentage of annual revenue and net
income earned and the number of direct labor hours worked in each quarter.
<TABLE>
<CAPTION>
1995 1996 1997
------------------------- ------------------------- -------------------------
1ST. 2ND 3RD 4TH 1ST. 2ND 3RD 4TH 1ST. 2ND 3RD 4TH
QTR. QTR. QTR. QTR. QTR. QTR. QTR. QTR. QTR. QTR. QTR. QTR.
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................... 27% 29% 22% 22% 17% 26% 27% 30% 28% 27% 22% 23%
Net income................ 31% 31% 25% 13% 6% 15% 32% 47% 27% 28% 21% 24%
Direct hours
(in thousands).......... 127 136 92 81 126 143 194 193 218 242 206 236
</TABLE>
21
<PAGE> 25
Most of the Company's revenue and expenses are recognized on a
percentage-of-completion basis determined by the ratio that labor and
subcontracting costs incurred bear to the total estimated labor and
subcontracting costs required for completion. Accordingly, expected labor and
subcontracting costs are reviewed monthly as the work progresses, and
adjustments proportionate to the percentage of completion are reflected in
revenue for the period when such estimates are revised. To the extent that these
adjustments result in a reduction of previously reported profits, the Company
would have to recognize a charge against current earnings, which may be
significant depending on the size of the project or the adjustment. Bonus
payments under fixed-price contracts are included in revenue when their
realization is reasonably assured. Revenue from time and materials contracts is
recognized on the basis of costs incurred during the period plus the fee earned.
RESULTS OF OPERATIONS
Comparison of the Years Ended March 31, 1997 and 1996
During the year ended March 31, 1997, the Company's revenue was $66.7
million, a 28.8% increase from the $51.8 million generated in the year ended
March 31, 1996. This increase was primarily caused by an increase in direct
labor hours worked and, to a lesser extent, prices realized under fixed-price
contracts. Although direct labor hours worked increased 37.5% in fiscal 1997
over fiscal 1996, this increase did not result in a proportionate increase in
revenue due to the lower productivity of employees newly hired in fiscal 1997
compared to the productivity of the Company's longer term employees.
Cost of revenue was $58.6 million in fiscal 1997 compared to $40.4 million
in fiscal 1996. Cost of revenue consists of costs associated with the
fabrication process, including direct costs (such as direct labor costs and raw
materials) and indirect costs (such as supervisory labor, utilities, welding
supplies and equipment costs) that can be specifically allocated to projects.
These costs increased as a percentage of revenues to 87.8% in 1997 from 77.9% in
fiscal 1996. In fiscal 1996, a major contract obtained on a fixed-price basis
was completed at a materials cost substantially lower than that estimated in
connection with the bid, which the Company had prepared on the basis of the
customer's designs. Had the contract been completed at the materials cost
originally estimated, cost of revenue during fiscal 1996 would have been
increased by approximately $5.5 million.
General and administrative expense was $1.6 million in fiscal 1997 compared
to $1.4 million in fiscal 1996. The Company's general and administrative expense
as a percentage of revenue decreased to 2.5% in 1997 as compared to 2.7% in
fiscal 1996 as the increase in the Company's revenue did not require a
proportionate increase in such expenses.
Interest income decreased to $145,000 in fiscal 1997 from $318,000 in
fiscal 1996, as the weighted average of invested funds was lower in fiscal 1997
as compared to fiscal 1996, due to longer than average delays in collecting some
international receivables in 1997.
Receivables increased in fiscal 1997 primarily because of delays in
collection of receivables from contractors on projects installed in overseas
locations.
Comparison of the Years Ended March 31, 1996 and 1995
During the year ended March 31, 1996, the Company had revenue of $51.8
million as compared to $27.9 million in fiscal 1995, an 85.8% increase. This
increase was primarily due to a 50.5% increase in direct labor hours worked over
1995, and the fact that in connection with a single fixed-price contract
performed in fiscal 1995, the customer, rather than the Company, supplied the
materials.
Cost of revenue was $40.4 million in fiscal 1996 compared to $23.2 million
in 1995. This cost decreased as a percentage of revenue to 77.9% in fiscal 1996
from 83.1% in 1995. This decrease was primarily the result of the Company's
performance during fiscal 1996 on the major contract described above.
General and administrative expense remained relatively constant at $1.4
million in 1996 compared to $1.3 million in fiscal 1995.
22
<PAGE> 26
Interest income was $318,000 in fiscal 1996 compared to $45,000 in fiscal
1995, as the weighted average of invested funds was higher in fiscal 1996
compared to fiscal 1995, due primarily to higher profits in fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has funded its business activities through funds
generated from its operations. Net cash provided by operations was $3.4 million,
$4.3 million and $2.3 million for the years ended March 31, 1995, 1996 and 1997,
respectively. The Company's capital requirements historically have been for
improvements to its facilities and equipment to increase the productivity of its
labor force. During fiscal 1996 and fiscal 1997, the Company had capital
expenditures of $402,000 and $821,000, respectively.
The Shareholders' Agreement requires that, unless determined otherwise by a
majority of directors of Universal Fabricators, including at least one director
elected by each of McDermott and Universal Partners, 90% of Universal
Fabricators' net income for the previous fiscal year, less reserves, for each
fiscal year be distributed to McDermott and Universal Partners as dividends. For
fiscal 1995, 1996 and 1997, Universal Fabricators paid dividends of
approximately 90% of its net income, totaling $1.9 million, $5.8 million and
$3.6 million, respectively. As a result of this practice, the Company has
limited capital expenditures and restrained potential growth. In connection with
the Offering, the Shareholders' Agreement will be terminated. After the
Offering, the Company intends to retain its earnings, if any, for use as working
capital and to fund capital expenditures. The Company's past capital
expenditures are not indicative of its intended capital expenditures after the
Offering.
The Company has a $10.0 million revolving line of credit with a commercial
lender. The Existing Credit Facility bears interest at a floating rate 50 basis
points above the prime commercial lending rate as quoted from time to time by
The Chase Manhattan National Bank and is secured by the Company's accounts
receivable. At June 30, 1997, the interest rate on the Existing Credit Facility
was approximately 9.0%. The Existing Credit Facility also provides for the
issuance of letters of credit on behalf of the Company (the "Bank Letters of
Credit"). The amount of outstanding Bank Letters of Credit reduces the Company's
borrowing limit on a dollar-for-dollar basis. As of March 31, 1996 and 1997,
there were $2.5 million and $2.0 million, respectively, in Bank Letters of
Credit outstanding and no other borrowings under the Existing Credit Facility.
Outstanding amounts under the Existing Credit Facility, including Bank Letters
of Credit, are currently guaranteed by McDermott. As of March 31, 1997, the
Company also had outstanding letters of credit of approximately $7.9 million
that were obtained on behalf of the Company by McDermott (the "McDermott Letters
of Credit"). Immediately prior to the Offering, the Company expects that
approximately $6.3 million of McDermott Letters of Credit will be outstanding.
Upon completion of the Offering, the Company expects to enter into a new
$20.0 million revolving credit facility with a commercial lender, which will
provide for up to $10.0 million in borrowings for general corporate purposes and
for letters of credit up to $10.0 million (the "New Credit Facility"). McDermott
will not guarantee any amounts outstanding under the New Credit Facility, and
McDermott will be released from its obligations under the Existing Credit
Facility, all Bank Letters of Credit and McDermott Letters of Credit. The
McDermott Letters of Credit will be replaced by letters of credit issued as part
of an additional $6.3 million available to the Company for letters of credit
under the New Credit Facility. This additional $6.3 million is available to the
Company solely to replace the McDermott Letters of Credit and will be reduced
upon the respective expiration dates of the letters of credit issued to replace
the McDermott Letters of Credit, the last of which is scheduled to expire in
January of 2000.
Capital expenditures for the 12 months following the Offering are estimated
to be approximately $7.0 million, which primarily include the purchase and
installation of a four-inch rolling mill, the dredging and construction of a new
slip and loadout facilities for the slip, the purchase of the Company's
administrative office and surrounding land from McDermott, the expansion of the
Company's pipe shop and the purchase of 10 acres of land across the road from
the Company's facility from Universal Partners. See "Use of Proceeds" and
"Certain Transactions." Management believes that the net proceeds of the
Offering, its available funds, cash generated by operating activities and funds
available under the New Credit Facility will be sufficient to fund these capital
expenditures and its working capital needs; however, any expansion of the
Company's operations through future acquisitions may require additional equity
or debt financing.
23
<PAGE> 27
BUSINESS
GENERAL
The Company is an industry leader in the custom fabrication of decks and
modules of drilling and production equipment weighing up to 3,500 tons for
offshore oil and gas platforms and has special expertise in the fabrication of
decks with complex piping requirements. Decks and modules fabricated by the
Company can be installed on fixed and floating platforms regardless of water
depth. The Company also fabricates jackets for fixed platforms; pilings and
other rolled tubular steel sections; compressor and generator packages; platform
living quarters; subsea templates; bridges for connecting offshore platforms;
wellhead protectors; and modules for the onshore petrochemical and refining
industries. In addition, the Company refurbishes and retrofits existing jackets
and decks and performs offshore piping hook-up and platform maintenance
services. Structures fabricated by the Company are installed in oil and gas
producing waters around the world, primarily the Gulf of Mexico and offshore
West Africa.
The Company, founded in 1980, has been profitable for each of the last five
years largely as a result of management's ability to control costs, provide high
quality, reliable services and expand successfully into international markets.
The Company's revenue increased 139% from $27.9 million in its fiscal year ended
March 31, 1995 to $66.7 million in the fiscal year ended March 31, 1997. During
the same period, the Company's workforce and direct labor hours worked increased
by approximately 105%.
Demand for the Company's services is primarily a function of worldwide
offshore oil and gas activity. Over the past four years, improvements in
production techniques and seismic and drilling technology, together with
relatively stable oil and gas prices, have resulted in accelerated drilling
activity in the Gulf of Mexico and continued strong activity levels worldwide.
The number of active offshore drilling rigs worldwide is at its highest point
since 1986, with the average number of active offshore rigs in the Gulf of
Mexico, in particular, having increased from approximately 80 for the year ended
December 31, 1992 to more than 155 for the year ended December 31, 1996.
Due to the time required to drill an exploratory offshore well, formulate a
development plan and design offshore platforms, the fabrication and installation
of such platforms usually lag exploratory drilling by one to three years. As a
result, high levels of drilling activity worldwide, particularly in the Gulf of
Mexico, have only recently impacted the demand for the Company's custom
fabrication services. The Company believes its strong presence in both overseas
markets and the Gulf of Mexico market, coupled with continued strong oil and gas
activity in these markets, has enabled it to selectively obtain high margin
fabrication work and benefit from increased pricing levels.
The Company's operations are conducted on approximately 140 acres of land
and 225,000 square feet of covered fabrication area at the Port of Iberia,
approximately 20 miles southeast of Lafayette, Louisiana and 30 miles north of
the Gulf of Mexico. Current access routes to the Gulf of Mexico permit the
transporting of jackets for use in waters up to 300 feet deep and decks and
other structures weighing up to 3,500 tons. The Port of Iberia Commission has
proposed the reopening and dredging of a by-pass along one of these waterways
that would provide access from the Company's facilities to the Gulf of Mexico
for structures weighing up to 6,000 tons. Although the Louisiana Legislature has
allocated funding to complete the initial portion of this project, no assurance
can be given as to whether such project will be completed or whether the
increased channel depths will be maintained. If the Louisiana Legislature does
not provide this funding, the Company could pay to have this bypass reopened and
dredged, which expense may be economically justifiable in connection with the
large revenue amounts typically derived from fabrication of large structures.
1992 EXPANSION TRANSACTION. The Company's predecessor, Universal Partners,
was organized in 1980 by its founder, Dailey J. Berard. In 1992, in order to
expand its capabilities at the Port of Iberia and meet increasing demand for its
services, Universal Partners entered into an agreement with McDermott, a
subsidiary of McDermott International, Inc. Universal Partners contributed as a
going concern to the then newly-formed Universal Fabricators approximately 50
acres of leased land, its buildings, fabrication equipment, and $2.4 million in
cash. McDermott contributed an inactive fabrication yard directly across a canal
from the land leased by Universal Partners, which included approximately 85
acres of land, 200,000 square
24
<PAGE> 28
feet of covered fabrication space and various equipment. The Expansion
Transaction substantially enlarged the Company's yard space and increased
covered fabrication area from 25,000 square feet to approximately 225,000 square
feet. Both before and after the Expansion Transaction, the day-to-day operations
of the Company have been conducted by Dailey J. Berard and the other members of
the Company's management team.
In the Expansion Transaction, McDermott received 49% of the outstanding
stock of Universal Fabricators. McDermott will sell all of its shares of Common
Stock as part of the Offering in connection with a previously announced strategy
of returning to core businesses by disposing of certain assets, including
certain financial investments. The Company will use a portion of the proceeds of
the Offering to secure McDermott's release of its rights under certain
agreements entered into in connection with the Expansion Transaction.
GROWTH AND PROFITABILITY STRATEGY
The Company's growth and profitability strategy is to capitalize on the
positive trends and current opportunities in heavy marine fabrication for the
oil and gas industry. Key elements of the Company's strategy are to:
- PURSUE EXPANDING MARKETS. The Company intends to continue to pursue
high-margin fabrication work in both domestic and international offshore
oil and gas producing areas where demand for its services has
substantially increased over the last five years. In fiscal 1997, the
Company derived 36% of its revenue from projects designed for
installation in the Gulf of Mexico and believes that an increasing
portion of its capacity will be used to satisfy demand for such projects.
In addition, a series of large oil and gas projects are being developed
for offshore Nigeria, Mexico, Brazil and Venezuela. The Company believes
that these projects as well as projects in the Gulf of Mexico will
provide it with significant opportunities to obtain high-margin
fabrication work in both the current fiscal year and thereafter.
- EXPAND FACILITIES. The Company intends to use a portion of the proceeds
of the Offering to construct a new slip and bulkhead and develop the
adjacent yard space that will enable the Company to construct and load
out projects weighing up to 6,000 tons. In addition, the Company intends
to acquire and install a four-inch rolling mill which will enable the
Company to satisfy all of its rolled good requirements in-house,
including larger diameter pipe not currently rolled by the Company. The
Company believes that the enhanced capabilities provided by the new
facilities will provide the Company with opportunities to satisfy its
customers' increasing needs for structures usable in deep waters
throughout the world.
- MANAGE BACKLOG. The Company has historically attempted to manage its
backlog in order to benefit from pricing trends. In periods of rising
prices, the Company intentionally avoids building high levels of backlog
in order to maximize its ability to pursue higher margin projects. The
Company believes that, as a low-cost fabricator, it is well positioned to
benefit from this strategy.
- IMPROVE WORKFORCE EFFICIENCY. The Company believes that its success has
been founded on its well motivated workforce, efficient management and
low overhead costs. To take advantage of the increased demand for its
services, the Company will continue to emphasize its low cost structure
and will seek to increase the productivity of its workforce by using a
portion of the proceeds of the Offering to purchase additional automated,
labor-saving equipment and to expand and upgrade its existing buildings
and equipment. The Company also intends to expand its investment in
employee education and training in order to upgrade employee skill levels
and productive capacity.
- INCREASE EMPLOYEE POOL. In fiscal 1997, the Company added approximately
95 full-time production employees to its workforce. The Company estimates
that its current facility could accommodate a workforce of more than
double its current size of approximately 425 employees. The Company
intends to continue its efforts to increase its skilled workforce in
order to increase the Company's production capacity. To address the
current shortage of skilled workers in south Louisiana, the Company has
been cooperating with local and regional associations and government
authorities to foster the training of
25
<PAGE> 29
skilled workers. The Company believes that there is a large number of
trainable employees residing in reasonable proximity to its facility. The
Company further believes that companies whose products and services are
complementary to those of the Company are available for acquisition and
that its capital structure after the Offering will enable it to pursue
such acquisition opportunities as a means of expanding its skilled
workforce.
DESCRIPTION OF OPERATIONS
The Company's primary activity is the fabrication of decks and modules for
offshore oil and gas drilling and production platforms. The Company has
extensive experience in the fabrication of decks and modules with complex piping
requirements and believes that its reputation for efficient, timely and high
quality production of these structures gives it a competitive advantage in
obtaining projects of this type. The decks and modules built by the Company may
weigh up to 3,500 tons and can be installed on platforms regardless of water
depth. The Company also fabricates jackets for fixed production platforms for
use in up to 300 feet of water. Other structures fabricated by the Company
include pilings and other rolled tubular steel sections; modules of drilling and
production equipment; compressor and generator packages; platform living
quarters; subsea templates; bridges for connecting offshore platforms; wellhead
protectors; other structures used in production and development activities; and
modules for the onshore petrochemical and refining industries. The Company can
construct and has in the past constructed platform drilling rigs, posted
drilling rigs and barges.
FABRICATION OF DECKS AND OTHER OFFSHORE PLATFORM COMPONENTS. The Company
fabricates decks and modules for fixed and floating offshore platforms as well
as jackets for fixed offshore platforms. A fixed platform is the traditional
type of platform used for the offshore drilling and production of oil and gas.
Most fixed platforms currently in use are of the traditional jacket-type design.
Recently there has been an increase in the use of floating platforms as a result
of increased drilling and production activities in deeper waters. Floating
platforms are of three basic types: tension-leg platforms, spar platforms and
floating production facilities. See "Glossary of Certain Technical Terms." Fixed
platforms are generally better suited for shallower water depths, whereas
floating platforms, although they can be used in any water depth, are primarily
used in water depths greater than 1,000 feet. Because they are mobile (and can
therefore be reused), floating platforms are sometimes used in water depths that
could accommodate fixed platforms, particularly where the petroleum reservoir
has a relatively short production life.
The Company also fabricates subsea templates which often form a part of a
subsea production system. Subsea production systems, which are systems that
contain primary well control equipment and rest directly on the ocean floor, are
becoming more prevalent in very deep water, in areas subject to severe weather
conditions and in smaller fields with relatively short production lives that are
located near existing infrastructures. These systems are generally connected to
existing surface facilities, which augment subsea hydrocarbon processing and
transportation operations.
The most common type of fixed platform consists of a deck structure located
above the level of the storm waves and supported by a jacket. A jacket is a
tubular steel, braced structure extending from the mudline on the seabed to a
point above the water surface which is in turn supported on tubular steel
pilings driven deep into the seabed. The deck structure is designed to
accommodate multiple functions, including drilling, production, separating,
gathering, piping, compression, well support and crew quartering. Most fixed
platforms built today can accommodate both drilling and production operations.
These combination platforms are generally larger and more costly than
single-purpose structures. However, because directional drilling techniques
permit a number of wells to be drilled from a single platform and because
drilling and production can take place simultaneously, combination platforms are
often more cost effective.
Decks are built as either a single structure or in modular units. The
composition and quantity of petroleum in the well stream generally determine the
design of the production deck on a processing platform. Typical deck production
equipment includes crude oil pumps, gas and oil separators, gas compressors and
electricity generators. Much of this equipment involves the use of complex
piping and electrical components. The equipment, piping and controls associated
with major process subsystems are often joined together in modules which can
then be installed on the deck as a unit either on land or offshore. Platforms
can be joined
26
<PAGE> 30
by bridges to form complexes of platforms to service very large projects and to
improve safety by dividing functions among specialized platforms. Floating
platforms, like fixed platforms, support decks or modules with equipment to
perform oil and gas processing and may support drilling operations as well.
Most of the structural steel used in the Company's operations arrives at
the Company's fabrication yards as standard steel shapes and steel plate. The
standard shapes and plate are cut to appropriate sizes or shapes and, in some
cases, rolled into tubular sections by the Company's rolling mill. These
sections are welded together into structures that become part of decks, modules,
jackets and other platform structures.
While the structural portion of a deck or module is being assembled,
process piping is fabricated in the Company's pipe shop. Piping is made into
spools by fitting and welding together pipe and pipe fittings. To the extent
possible, pipe supports and pipe spools are installed onto the various
structural subassemblies of a deck or module before final assembly. The
completed structural subassemblies are then lifted, positioned and welded
together. Finally, the oil and gas process equipment along with the remaining
pipe supports and pipe spools, valves and electrical and instrumentation
components are installed and connected. The Company has installed both carbon
and alloy steel piping in accordance with accepted industry codes and has also
installed process piping for sour gas service, which requires adherence to more
stringent industry code requirements.
The Company typically performs a wide range of testing and commissioning
activities. Virtually every contract requires as a minimum non-destructive
testing of structural and piping welds, piping hydrostatic pressure testing, and
loop testing of instrumentation and electrical systems. Commissioning of certain
process subsystems is also commonly performed by the Company. A series of
protective coatings is applied to the critical areas of the deck or module to
resist the extremely corrosive conditions in an offshore environment. The
Company generally subcontracts certain parts of the work to qualified
subcontractors, particularly electrical, instrumentation and painting.
The Company generally purchases equipment and pressure vessels to customer
specifications from qualified vendors. However, some or all of the equipment and
pressure vessels may be supplied by the customer. The Company typically procures
most of the piping, pipe fittings, valves, instrumentation and electrical
materials in accordance with the customer's specifications as part of its
contract.
Jackets are generally built in sections so that, to the extent possible,
much of their fabrication is done on the ground. As each section of legs and
bracing is completed it is lifted by a crawler crane and then joined to another
up righted section. When a deck, module or jacket is complete and ready for load
out, it is moved along a skidway and loaded onto a cargo barge. Using
ocean-going tugs, the barge and its cargo are transported to the offshore site
for installation by a marine construction contractor.
REFURBISHMENT. The Company is also active in the market for the
refurbishment of existing jackets and decks. Platform operators occasionally
remove platforms previously installed in the Gulf of Mexico and return the
platforms to a fabricator for refurbishment, which usually consists of general
repairs and maintenance work and, in some cases, modification. Approximately
18.7% of the Company's backlog at June 30, 1997, consisted of refurbishment
work. In addition to structures included in backlog, there are a substantial
number of structures stored by customers on Company premises, pending
instructions from the customer to commence refurbishment. Because refurbishment
is generally not time-critical, the Company is able to use this work as a means
of keeping employees productively occupied between other more time-critical
projects. Refurbishment work is most often conducted on a time and materials
basis.
OFFSHORE SERVICES. The Company also has a number of employees (ranging from
approximately 25 to 50) whom it contracts to send offshore in crews to perform
piping interconnect and general maintenance and repair services on offshore
platforms. Oil and gas companies, which have traditionally performed this type
of work using their own employees, have recently been outsourcing this work and
the Company believes that this trend is likely to continue.
FACILITIES AND EQUIPMENT
FACILITIES. The Company's corporate headquarters and main fabrication yard
are located on the Port of Iberia in New Iberia, Louisiana, approximately 20
miles southeast of Lafayette, Louisiana and 30 miles north
27
<PAGE> 31
of the Gulf of Mexico. This facility includes approximately 105 acres developed
for fabrication, one 12,000 square-foot office building that houses
administrative staff, approximately 225,000 square feet of covered fabrication
area, and approximately 25,000 square feet of warehouse storage area. The yard
also has approximately 8,000 linear feet of water frontage, of which 1,200 feet
is steel bulkhead which permits outloading of heavy structures. The Company
currently leases approximately 55 acres of the Port of Iberia facility,
including the Company's office building and five surrounding acres which are
currently leased from McDermott and will be purchased with proceeds of the
Offering. With a portion of the proceeds of the Offering, the Company also
intends to purchase approximately 13 additional acres from McDermott and 10
acres from Universal Partners.
The structures that the Company fabricates are transported from the
Company's facilities by barge to the Gulf of Mexico by offshore construction
companies. Due to the water depths of these waterways (9 to 11 feet), these
barges are currently unable to transport structures weighing over 3,500 tons.
One main route to the Gulf of Mexico, the Freshwater Bayou Channel, provides 12
feet of water depth to the Gulf of Mexico, but the dimensions of locks on this
channel prevent the transport of structures more than 80 feet in width. There is
a by-pass channel around these locks that, if usable, would permit continuous
passage to the Gulf of Mexico with at least 12 feet of water depth at all points
and without any material width restrictions. This water depth would generally
permit the transportation of structures weighing up to 6,000 tons, which the
Company will be able to fabricate once the new slip and bulkhead is constructed
(to be funded with a portion of the proceeds of this Offering). Due to the silt
that has built up on both sides of the by-pass, the by-pass is currently
impassable without extensive dredging. On the basis of amounts spent in the past
by contractors other than the Company in order to facilitate the transportation
of certain structures, it is estimated that the cost of dredging the silt from
the by-pass and opening the by-pass channel would be $400,000 to $500,000.
Recently, the Louisiana Legislature appropriated funds for the initial dredging
of the by-pass, a project that would open the by-pass for at least one year and
possibly longer, depending upon the extent of future traffic through the
by-pass. There can be no assurance, however, that the funds will actually be
spent or that the by-pass, once opened, will remain usable by the Company for
structures exceeding 3,500 tons. If this project is not completed by the State,
the Company would remain unable to deliver structures weighing over 3,500 tons
unless it determined to incur the additional costs described above.
EQUIPMENT. The Company's main yard houses its two-inch plate roll, a
Wheelabrator grit blast system, a hydraulic press brake, and various other
equipment needed to build offshore structures and fabricate steel components.
The Company also has an automatic plate cutting machine used for cutting steel
in complex geometric sections and various other equipment used in the Company's
fabrication business. The Company also currently uses nine crawler cranes, which
range in tonnage capacity from 50 to 230 tons. Of these cranes, five are owned
by the Company and four are leased. The Company performs routine maintenance on
all of its equipment.
The Company's plate rolling mill allows it to roll approximately 6,000 tons
of pipe per year. The Company's current rolling mill satisfies approximately 80%
of the Company's current needs, with the Company using outside suppliers or
other fabricators for the rest of its rolled goods. The Company intends to use a
portion of the proceeds of the Offering to purchase a four-inch rolling mill
which would enable the Company to do all of its plate rolling at its fabrication
facility. This should enable the Company to coordinate all aspects of platform
construction, which can reduce the risk of cost overruns, delays in project
completion and labor costs. In addition, the four-inch rolling mill may also be
used to roll steel for other fabricators on a subcontracting basis. The
Company's grit blast system can blast steel at a rate approximately ten times
faster than conventional sandblasting. This greatly reduces labor costs and also
decreases the Company's use of conventional sandblasting, which is considered to
be a more hazardous and slower method of preparing steel for painting.
MATERIALS
The principal materials used by the Company in its fabrication
business -- standard steel shapes, steel plate, piping, pipe fittings, valves,
welding gases, fuel oil, gasoline and paint -- are currently available in
adequate supply from many sources. The Company does not depend upon any single
supplier or source.
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<PAGE> 32
Although the Company's rolling mill has not caused any substantial downtime
for the Company, it is an older piece of equipment that requires constant
maintenance. If the rolling mill were to become inoperable for a material amount
of time, the Company would be forced to purchase rolled goods from other
suppliers. There can be no assurance as to the Company's ability to purchase
such goods in the quantities desired and there can be no assurance that prices
at which these products may be purchased would not be materially higher than the
internal costs that the Company would otherwise bear in producing such rolled
goods. Loss of the rolling mill for a significant period of time would have a
material adverse effect on the Company's results of operations. The Company
obtains the remainder of its rolled goods from various regional suppliers. As
demand for fabricated structures increases, the Company's ability to obtain the
rolled steel that it needs at acceptable prices decreases. If the Company were
not able to obtain such products or if prices for such goods became
prohibitively expensive, the Company's profitability and results of operations
could be materially adversely affected.
SAFETY AND QUALITY ASSURANCE
Management is concerned with the safety and health of the Company's
employees and maintains a stringent safety assurance program to reduce the
possibility of costly accidents. The Company's safety department establishes
guidelines to ensure compliance with all applicable state and federal safety
regulations and provides training and safety education through orientations for
new employees and subcontractors, daily crew safety meetings and first aid and
CPR training. The Company also employs several safety engineers. The Company has
a comprehensive drug testing program and conducts periodic employee health
screenings. A safety committee, whose members consist of management
representatives and peer elected field representatives, meets monthly to discuss
safety concerns and suggestions that could prevent future accidents. The Company
has at times contracted with a third-party safety consultant to provide training
and suggestions and a licensed emergency medical technician in its ongoing
commitment to a safe and healthy work environment. The Company believes that its
safety program and commitment to quality are vital to attracting and retaining
customers and employees.
The Company fabricates to the standards of the American Petroleum
Institute, the American Welding Society, the American Society of Mechanical
Engineers and specific customer specifications. The Company uses welding and
fabrication procedures in accordance with the latest technology and industry
requirements. Training programs are conducted to upgrade skilled personnel and
maintain high quality standards. In addition, the Company maintains on-site
facilities for the x-ray of all pipe welds, which process is performed by an
independent contractor. Management believes that these programs generally
enhance the quality of its products and reduce their repair rate.
CUSTOMERS AND CONTRACTING
The Company's customers are primarily major and independent oil and gas
companies and offshore marine construction contractors. The Company's structures
are used primarily offshore West Africa and in the Gulf of Mexico. The Company
does not anticipate that the sale of McDermott's interest in the Company as part
of the Offering will have any significant effect on the demand for its services
or its ability to obtain fabrication work.
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<PAGE> 33
A large portion of the Company's revenue has historically been generated by
a few customers, although not necessarily the same customers from year-to-year.
At June 30, 1997, 57% of the Company's backlog was attributable to two projects.
The following table provides information with respect to customers who accounted
for more than 10% of the Company's revenue for each of the four fiscal years
ending March 31, 1997:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, CUSTOMER % OF REVENUE
- -------------------- -------- ------------
<C> <C> <C>
1997 Bouygues Offshore 35
McDermott-ETPM West, Inc.* 26
1996 Mobil Producing Nigeria Unlimited 53
Shell Offshore Inc. 11
1995 Overseas Bechtel Inc. 29
Shell Offshore Inc. 10
1994 British Gas Tunisia, Ltd. 16
ABB Lumus Crest, Inc. 14
Pennzoil Exploration & Production Co., Inc. 12
</TABLE>
- ---------------
* McDermott-ETPM West, Inc. is a joint venture between an affiliate of McDermott
and a third party. Neither McDermott nor its affiliate exercises day-to-day
control over the joint venture.
Although the Company's direct customers on many projects are installation
contractors, each project is ultimately fabricated for use by an oil and gas
company. The Company, from time to time, contracts with multiple installation
contractors who may be supplying structures to the same oil and gas company and,
in some instances, contracts directly with the oil and gas companies. Thus,
concentration among the Company's customers may be greater when the customer is
viewed as the oil and gas company rather than the installation contractor. For
example, at June 30, 1997, the Company estimates that approximately 89% of its
backlog was for projects to be built for three oil and gas companies.
Because the level of fabrication that the Company may provide, directly or
indirectly, to any particular oil and gas company depends, among other things,
on the size of that company's capital expenditure budget devoted to platform
construction in a particular year and the Company's ability to meet the
customer's delivery schedule, companies that account for a significant portion
of the Company's revenue in one fiscal year may represent an immaterial portion
of revenue in subsequent years. The level of fabrication that the Company may
provide as a subcontractor to an offshore construction company depends, among
other things, on the ability of that company to successfully obtain prime
contracts with oil and gas companies and the ability of the Company to meet the
delivery schedule of the prime contractor. Thus, the prime contractors who
account for a significant portion of revenue in one fiscal year may represent an
immaterial portion of revenue in subsequent years. However, the loss of any
significant customer (whether an oil and gas company with which the Company
directly contracts or a prime contractor for which the Company has provided
services on a subcontract basis) for any reason, including a sustained decline
in an oil and gas company's capital expenditure budget or the prime contractor's
inability to successfully obtain contracts, or other competitive factors, could
result in a substantial loss of revenue and have a material adverse effect on
the Company's operating performance.
Most of the Company's projects are awarded on a fixed-price basis, and
while customers may consider other factors, including the availability,
capability, reputation and safety record of a contractor, price and the ability
to meet a customer's delivery schedule are the principal factors on which the
Company is awarded contracts. The Company's contracts generally vary in length
from one month to eighteen months depending on the size and complexity of the
project.
Under fixed-price contracts, the Company receives the price fixed in the
contract, subject to adjustment only for change orders placed by the customer.
As a result, with respect to fixed-price contracts, the Company retains all cost
savings but is also responsible for all cost overruns. Under time and materials
arrangements, the Company receives a specified hourly rate for direct labor
hours worked (which exceeds its direct labor costs) and a specified percentage
mark-up over its cost for materials. As a result, under time and materials
contracts,
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<PAGE> 34
the Company is protected against cost overruns but does not benefit directly
from cost savings. As the Company is typically able to obtain prices for
materials in excess of its costs, the cost and productivity of the Company's
labor force are the key factors affecting the Company's operating profits.
Consequently, it is essential that the Company control its labor costs and the
productivity of its workforce. Each project is reviewed on at least a weekly
basis by the Company's top management to insure that difficulties and cost
overruns can be identified early in the project and corrected. Although no
assurance can be given that the Company will realize profits on its current or
future contracts, the Company believes that the active involvement of its top
management reduces the likelihood of significant cost overruns.
COMPETITION
The offshore platform fabrication industry is highly competitive and
influenced by events largely outside of the control of offshore platform
fabrication companies. Since 1992, there has been a consolidation in the
industry as several marine construction companies have combined with other
companies or ceased operations altogether. As a result of this consolidation,
there are approximately eight remaining domestic competitors for custom
fabrication projects, several of which are substantially larger and have greater
resources and capabilities than the Company. These companies compete intensely
for available projects, which are generally awarded on a competitive bid basis
with customers usually requesting bids on projects one to three months prior to
commencement. For international projects, the Company competes with many of the
same domestic fabricators, as well as with several foreign fabricators, some of
which are substantially larger and have greater financial resources and
capabilities than the Company.
The Company's marketing staff contacts offshore construction contractors
and oil and gas companies to obtain information as to upcoming projects so that
the Company will be well positioned to bid for the projects. Although price and
the contractor's ability to meet a customer's delivery schedule are the
principal factors in determining which qualified fabricator is awarded a
contract for a project, customers also consider, among other things, the
availability of technically capable personnel and facility space, a fabricator's
efficiency, condition of equipment, reputation, safety record and customer
relations. The Company believes that the limited availability of experienced
supervisory and management personnel, as well as skilled laborers, presents the
greatest barrier to entry to new companies trying to enter the fabrication
industry.
The Company believes that its competitive pricing, expertise in fabricating
offshore marine structures and its long-term relationships with international
customers will enable it to continue to compete effectively for projects
destined for international waters. The Company recognizes, however, that foreign
governments often use subsidies and incentives to create jobs where oil and gas
production is being developed. The additional transportation costs that will be
incurred when exporting structures from the U.S. to foreign locations may hinder
the Company's ability to successfully bid for projects against foreign
competitors. Because of subsidies, import duties and fees, taxes on foreign
operators and lower wage rates in foreign countries along with fluctuations in
the value of the U.S. dollar and other factors, the Company may find it
increasingly difficult to remain competitive with foreign contractors for
projects designed for use in international waters.
BACKLOG
As of June 30, 1997, the Company's backlog was approximately $21.1 million,
all of which management expects to be performed by June 30, 1998. Of the
Company's backlog at June 30, 1997, 57% was attributable to two projects.
The Company's backlog is based on management's estimate of the remaining
labor, material and subcontracting costs to be incurred with respect to those
projects as to which a customer has authorized the Company to begin work or
purchase materials pursuant to written contracts, letters of intent or other
forms of authorization. Often, however, original contract prices are based on
incomplete engineering and design specifications. As engineering and design
plans are finalized or changes to existing plans are made, the total contract
price to complete such projects is likely to change. In addition, most projects
currently included in the Company's backlog are subject to termination at the
option of the customer, although the customer in that
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<PAGE> 35
case is generally required to pay the Company for work performed and materials
purchased through the date of termination and, in some instances, pay the
Company termination fees.
GOVERNMENT AND ENVIRONMENTAL REGULATION
Many aspects of the Company's operations and properties are materially
affected by federal, state and local regulation, as well as certain
international conventions and private industry organizations. The exploration
and development of oil and gas properties located on the outer continental shelf
of the United States is regulated primarily by the MMS. The MMS has promulgated
federal regulations under the Outer Continental Shelf Lands Act requiring the
construction of offshore structures located on the outer continental shelf to
meet stringent engineering and construction specifications. The Company is not
directly affected by regulations applicable to offshore construction operations
as are its customers which install and operate the structures fabricated by the
Company, but the Company is required to construct these structures in accordance
with customer design which must comply with applicable regulations; to the
extent such regulations detrimentally affect customer activities, the operations
of the Company may be adversely affected. Violations of the laws and related
regulations directly affecting the Company's operations can result in
substantial civil and criminal penalties as well as injunctions curtailing
operations. The Company believes that its operations are in compliance with
these and all other laws and related regulations affecting the fabrication of
structures for delivery to the outer continental shelf of the United States and
the laws and related regulations governing other areas of the world. In
addition, the Company depends on the demand for its services from the oil and
gas industry and, therefore, is affected by changing taxes, price controls and
other laws and regulations relating to the oil and gas industry. In addition,
offshore construction and drilling in certain areas have been opposed by
environmental groups and, in certain areas, has been restricted or prohibited.
To the extent laws or regulations are enacted or other governmental actions are
taken that prohibit or restrict offshore construction and drilling or impose
environmental protection requirements that result in increased costs to the oil
and gas industry in general and the offshore construction industry in
particular, the business and prospects of the Company could be adversely
affected, although such restrictions in the areas where the Company's products
are used have not been substantial. The Company cannot determine to what extent
future operations and earnings of the Company may be affected by new
legislation, new regulations or changes in existing laws or regulations.
The Company's operations and properties are subject to a wide variety of
increasingly complex and stringent federal, state and local environmental laws
and regulations, including those governing discharges into the air and water,
the handling and disposal of solid and hazardous wastes, the remediation of soil
and groundwater contaminated by hazardous substances and the health and safety
of employees. These laws may provide for "strict liability" for damages to
natural resources and threats to public health and safety, rendering a party
liable for environmental damage without regard to negligence or fault on the
part of such party. Sanctions for noncompliance may include revocation of
permits, corrective action orders, administrative or civil penalties and
criminal prosecution. Certain environmental laws provide for strict, joint and
several liability for remediation of spills and other releases of hazardous
substances, as well as damage to natural resources. In addition, the Company may
be subject to claims alleging personal injury or property damage as a result of
alleged exposure to hazardous substances. Such laws and regulations may also
expose the Company to liability for the conduct of or conditions caused by
others, or for acts of the Company that were in compliance with all applicable
laws at the time such acts were performed.
The Comprehensive Environmental Response, Compensation, and Liability Act
of 1980, as amended, and similar laws provide for responses to and liability for
releases of hazardous substances into the environment. Additionally, the Clean
Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, the
Safe Drinking Water Act, the Emergency Planning and Community Right to Know Act,
each as amended, and similar state or local counterparts to these federal laws,
regulate air emissions, water discharges, hazardous substances and wastes, and
require public disclosure related to the use of various hazardous substances.
Compliance with such environmental laws and regulations may require the
acquisition of permits or other authorizations for certain activities and
compliance with various standards or procedural require-
32
<PAGE> 36
ments. The Company believes that its facilities are in substantial compliance
with current regulatory standards.
The Company's operations are also governed by laws and regulations relating
to workplace safety and worker health, primarily the Occupational Safety and
Health Act and regulations promulgated thereunder. In addition, various other
governmental and quasi-governmental agencies require the Company to obtain
certain permits, licenses and certificates with respect to its operations. The
kind of permits, licenses and certificates required in the Company's operations
depend upon a number of factors. The Company believes that it has all material
permits, licenses and certificates necessary to the conduct of its existing
business.
The Company's compliance with these laws and regulations has entailed
certain additional expenses and changes in operating procedures. These expenses
have not been substantial over the past ten years, and the Company believes that
compliance with these laws and regulations will not have a material adverse
effect on the Company's business or financial condition for the foreseeable
future. However, future events, such as changes in existing laws and regulations
or their interpretation, more vigorous enforcement policies of regulatory
agencies, stricter or different interpretations of existing laws and regulations
or adoption of new laws and regulations, may require additional expenditures by
the Company, which expenditures may be material.
The Company also has employees engaged in offshore operations which are
covered by provisions of the Jones Act, the Death on the High Seas Act and
general maritime law, which laws operate to make the liability limits
established under state workers' compensation laws (which are applicable to the
Company's other employees) inapplicable to these employees and, instead, permit
them or their representatives to pursue actions against the Company for damages
or job related injuries, with generally no limitations on the Company's
potential liability.
In addition to government regulation, various private industry
organizations, such as the American Petroleum Institute, the American Society of
Mechanical Engineers and the American Welding Society, promulgate technical
standards that must be adhered to in the fabrication process.
INSURANCE
The Company maintains insurance against property damage caused by fire,
flood, explosion and similar catastrophic events that may result in physical
damage or destruction to the Company's facilities. The Company also maintains
general liability insurance, workers' compensation liability and maritime
employer's liability insurance. All policies are subject to deductibles and
other coverage limitations. Although management believes that the Company's
insurance is adequate, there can be no assurance that the Company will be able
to maintain adequate insurance at rates which management considers commercially
reasonable, nor can there be any assurance such coverage will be adequate to
cover all claims that may arise.
LEGAL PROCEEDINGS
The Company is a party to various routine legal proceedings primarily
involving commercial claims, workers' compensation claims, and claims for
personal injury under the General Maritime Laws of the United States and the
Jones Act. While the outcome of these lawsuits, legal proceedings and claims
cannot be predicted with certainty, management believes that the outcome of all
such proceedings, even if determined adversely, would not have a material
adverse effect on the Company's business or financial condition.
EMPLOYEES
During the fiscal year ended March 31, 1997, the number of Company
employees increased by 95 full-time production employees to 425 at year-end. As
of July 1, 1997, the Company also had approximately 425 employees. The Company
also engages the services of subcontractors. Management estimates that these
subcontractors provide from time to time approximately 50 to 125 workers to
perform certain tasks in connection with the Company's projects. None of the
Company's employees is employed pursuant to a collective bargaining agreement,
and the Company believes that its relationship with its employees is good.
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<PAGE> 37
The Company's ability to remain productive and profitable depends
substantially on its ability to attract and retain skilled construction workers,
primarily welders, fitters and equipment operators. In addition, the Company's
ability to expand its operations depends primarily on its ability to increase
its workforce. The demand for such workers is high, and the supply is extremely
limited. While the Company believes its relationship with its skilled labor
force is good, a significant increase in the wages paid by competing employers
could result in a reduction in the Company's skilled labor force, increases in
the wage rates paid by the Company, or both. If either of these occurs, in the
near-term, the profits expected by the Company from work in progress could be
reduced or eliminated and, in the long-term, to the extent such wage increases
could not be passed on to the Company's customers, the production capacity of
the Company could be diminished and the growth potential of the Company could be
impaired.
The Company has taken an active role in the movement to create a more
business-oriented educational system in Louisiana. For example, Dailey J.
Berard, the Company's President, Chief Executive Officer and Chairman of the
Board, has recently been appointed by Louisiana Governor Mike Foster to the
Louisiana Workforce Commission, a group consisting of 25 members, 11 of whom are
representatives of business and industry. This Commission, which was established
by recent Louisiana legislation, will oversee the spending of $400 million in
job training funds appropriated by the legislature. The Commission will
coordinate federal worker training programs, exercise authority over policy and
funding decisions for worker training programs, oversee an occupational
information system and create regional employer-oriented workforce boards.
Although there can be no assurance that such initiatives will enable the Company
to meet its hiring needs, management believes that, in the long-term,
initiatives like these are the best methods for increasing the pool of skilled
workers from which it can draw employees.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of the date of this Prospectus, certain
information with respect to the Company's directors and executive officers.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Dailey J. Berard.......................... 68 President, Chief Executive Officer and
Chairman of the Board
Larry L. Clement.......................... 53 Vice President -- Operations
Dennis W. LaFleur......................... 51 Vice President -- International Sales
David J. Berard........................... 51 Vice President -- Domestic Sales
Louis C. Peltier.......................... 67 Vice President -- Power and Equipment
Peter J. Roman............................ 46 Vice President and Chief Financial Officer
Charles E. Broussard...................... 72 Director
Perry Segura.............................. 67 Director
</TABLE>
Dailey J. Berard has served as President, Chief Executive Officer and
Chairman of the Board of the Company since its founding in 1980. He was trained
as a civil engineer and has over 45 years of experience in the oil service
industry, working with several different companies, including Houston-New
Orleans, Inc., Houston Systems Manufacturing Company and Norman Offshore
Pipelines, Inc. Mr. Berard and David J. Berard are brothers.
Larry L. Clement has been employed by the Company since 1980, and has
served as the Company's Vice President -- Operations since 1992. From 1976 to
1980, Mr. Clement served as Yard Superintendent for Houston Systems
Manufacturing Company and has over 25 years of experience in the fabrication
industry.
Dennis W. LaFleur has been employed by the Company since 1981, and has
served as the Company's Vice President -- International Sales since 1995 and as
Vice President - Sales since 1992. From 1977 to
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<PAGE> 38
1981, he served as Chief Engineer for Houston Systems Manufacturing Company, and
from 1974 to 1977 served as a project engineer for Houston Construction Company.
David J. Berard has been employed by the Company since 1981, and has served
as the Company's Vice President -- Domestic Sales since 1995. Mr. Berard held
various positions with the Company since he joined the Company in 1981,
including Corporate Secretary from 1992 to 1995. From 1978 to 1981, he served as
the district manager for the fabrication yard of Waukesha Pearce Industries, and
from 1973 to 1978 served as the General Superintendent of Fabrication for
Houston Systems Manufacturing Company. Mr. Berard and Dailey J. Berard are
brothers.
Louis C. Peltier has been employed by the Company since 1981, and has
served as the Company's Vice President-Power and Equipment since 1992. Prior to
joining the Company, from 1947 to 1981, Mr. Peltier was employed by Waukesha
Pearce Industries in various positions, including District Manager.
Peter J. Roman was appointed Vice President and Chief Financial Officer on
June 30, 1997. Since June 1984, Mr. Roman has been a certified public accountant
with the international accounting firm of Ernst & Young LLP, most recently as a
senior manager. Mr. Roman graduated from Louisiana State University in 1984 with
a B.S. in Accounting and is a member of the Louisiana State Society of Certified
Public Accountants and the American Institute of Certified Public Accountants.
Charles E. Broussard has been a director of the Company and its
predecessors since 1980. Mr. Broussard is currently the owner of Flying J.
Ranch, Inc., a cattle and rice farm in southern Louisiana. Mr. Broussard has
over 40 years of experience in the real estate and import/export businesses.
Perry Segura has been a director of the Company and its predecessors since
1980. Mr. Segura is an architect in New Iberia, Louisiana and is also active in
real estate development in south Louisiana. Mr. Segura was Vice Chairman of the
Board of Supervisors of Louisiana State University for the 1996-97 year and is
Chairman for the current year. Mr. Segura graduated from Louisiana State
University with a B.S. in Architectural Engineering in 1954.
The Company's Articles of Incorporation ("Articles") and By-laws provides
for the Board of Directors to be divided into three classes of directors with
each class to be as nearly equal in number of directors as possible, with
directors serving staggered three-year terms. The terms of the Class I
directors, Messrs. and , will expire in 1998. The terms of
the Class II directors, Messrs. and , will expire in 1999,
and the term of the Class III director, Mr. Berard, will expire in 2000. Each
director serves until the end of his term or until his successor is elected and
qualified. See "Description of Capital Stock -- Certain Charter and By-law
Provisions."
DIRECTOR COMPENSATION
Each director who is not an employee of the Company is paid an annual
director's fee of $ plus $ for each board or committee meeting
attended. All directors are reimbursed for reasonable out-of-pocket expenses
incurred in attending board and committee meetings. Each director who is not an
employee of the Company, upon consummation of the Offering, will also receive
options to purchase shares of Common Stock with an exercise price
equal to the Price to Public set forth on the cover page of this Prospectus.
These options will be immediately exercisable.
COMMITTEES
The Company's Board of Directors has established an Audit Committee and a
Compensation Committee. The Audit Committee reviews the Company's annual audit
and meets with the Company's independent public accountants to review the
Company's internal controls and financial management practices. The current
members of the Audit Committee are Messrs. , and .
The Compensation Committee recommends to the Board of Directors
compensation for the Company's key employees, administers the Company's stock
incentive plan and performs such other functions as may be
35
<PAGE> 39
prescribed by the Board of Directors. The current members of the Compensation
Committee are Messrs. and .
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid to its Chief Executive
Officer for the year ended March 31, 1997. No other employee of the Company
earned more than $100,000 in fiscal year 1997.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1)
--------------------------- ---- -------- ------- ---------------
<S> <C> <C> <C> <C>
Dailey J. Berard, President and Chief Executive
Officer....................................... 1997 $125,449 $50,000 $4,100
</TABLE>
- ---------------
(1) Includes amounts credited to Mr. Berard's account under the Company's 401(k)
Plan and the cost of Mr. Berard's membership in the Lafayette Petroleum Club
which the Company pays.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to July 1997, the Company did not have a compensation committee. Mr.
Dailey J. Berard participated in deliberations of the Company's Board of
Directors concerning executive officer compensation.
In connection with the Expansion Transaction, the Company and Mr. Dailey J.
Berard entered into an employment agreement that was negotiated between Mr.
Berard and McDermott. Pursuant to this agreement, Mr. Berard agreed to serve as
President and Chief Executive Officer of the Company so long as he remained a
shareholder of Universal Partners. Mr. Berard receives an annual salary set by
the Board of Directors and a cash bonus, the amount of which is dependent on the
Company's return on capital. This agreement will be terminated upon completion
of the Offering. It is anticipated that Mr. Berard will enter into a new
employment agreement in connection with the Offering.
COMPENSATION PURSUANT TO PLANS
Long-Term Incentive Plan. In July 1997, the Company adopted and its
shareholder approved the Long-Term Incentive Plan (the "1997 Plan") to provide
long-term incentives to its key employees, including officers and directors who
are employees of the Company (the "Eligible Employees"). Under the 1997 Plan,
which is administered by the Compensation Committee of the Board of Directors,
the Company may grant incentive stock options, non-qualified stock options,
restricted stock, stock awards or any combination thereof (the "Incentives") to
Eligible Employees. The Compensation Committee will establish the exercise price
of any stock options granted under the Incentive Plan, provided that the
exercise price may not be less than the fair market value of the Common Stock on
the date of grant. The option exercise price may be paid in cash, in Common
Stock held for at least six months, in a combination of cash and Common Stock,
or through a broker-assisted exercise arrangement approved by the Compensation
Committee.
A total of 460,000 shares of Common Stock are available for issuance under
the 1997 Plan. Incentives with respect to no more than shares of
Common Stock may be granted to any single Eligible Employee in one calendar
year. Proportionate adjustments will be made to the number of shares subject to
the 1997 Plan, including the shares subject to outstanding Incentives, in the
event of any recapitalization, stock dividend, stock split, combination of
shares or other change in the Common Stock. In the event of such adjustments,
the purchase price of any outstanding option will be adjusted as and to the
extent appropriate, in the reasonable discretion of the Compensation Committee,
to provide participants with the same relative rights before and after such
adjustment.
Pursuant to the 1997 Plan, at each annual meeting of the Company's
shareholders at which a director who is not an employee of the Company is in
office or is elected, he or she will receive options to purchase
shares of Common Stock at an exercise price equal to the market price of the
Common Stock on the date of the grant. These options will be immediately
exercisable.
36
<PAGE> 40
All outstanding Incentives will automatically become exercisable and fully
vested and all performance criteria will be deemed to be waived by the Company
upon (i) a reorganization, merger or consolidation of the Company in which the
Company is not the surviving entity, (ii) the sale of all or substantially all
of the assets of the Company, (iii) a liquidation or dissolution of the Company,
(iv) a person or group of persons becoming the beneficial owner of 30% or more
of the Company's voting stock or (v) the replacement of a majority of the Board
in a contested election (a "Significant Transaction"). The Compensation
Committee also has the authority to take several actions regarding outstanding
Incentives upon the occurrence of a Significant Transaction, including requiring
that outstanding options remain exercisable only for a limited time, providing
for mandatory conversion of outstanding options in exchange for either a cash
payment or Common Stock, making equitable adjustments to Incentives or providing
that outstanding options will become options relating to securities to which a
participant would have been entitled in connection with the Significant
Transaction if the options had been exercised.
As of the date of this Prospectus, options to purchase 133,500 shares of
Common Stock have been granted under the 1997 Plan to employees of the Company,
including options to purchase , , , ,
and shares to Messrs. Dailey J. Berard, Clement, LaFleur,
David J. Berard, Peltier and Roman, respectively. All of the options granted as
of the date of this Prospectus under the 1997 Plan have a ten-year term, an
exercise price equal to the initial public offering price per share and will
become exercisable in three years.
LIMITATION OF DIRECTORS' AND OFFICERS' LIABILITY AND INDEMNIFICATION
As permitted by Louisiana Law, the Company's Articles contain certain
provisions eliminating the personal liability of the directors and officers to
the Company and its shareholders for monetary damages for breaches of their
fiduciary duties as directors or officers, except for (i) a breach of a
director's or officer's duty of loyalty to the Company or to its shareholders,
(ii) acts or omissions not in good faith or that involve intentional misconduct
or a knowing violation of law, (iii) dividends or stock repurchases or
redemptions that are illegal under Louisiana law and (iv) any transaction from
which he or she receives an improper personal benefit. In addition, the Articles
provide that if Louisiana law is amended to authorize the further elimination or
limitation of the liability of a director, then the liability of the directors
shall be eliminated or limited to the fullest extent permitted by Louisiana law,
as amended. These provisions pertain only to breaches of duty by directors as
directors and not in any other corporate capacity, such as officers, and limit
liability only for breaches of fiduciary duties under Louisiana corporate law
and not for violations of other laws such as the federal securities laws.
As a result of the inclusion of such provisions, shareholders may be unable
to recover monetary damages against directors or officers for actions taken by
them that constitute negligence or gross negligence or that are in violation of
their fiduciary duties, although it may be possible to obtain injunctive or
other equitable relief with respect to such actions. If equitable remedies are
found not to be available to shareholders in any particular case, shareholders
may not have any effective remedy against the challenged conduct. These
provisions may have the effect of reducing the likelihood of derivative
litigation against directors or officers that might have benefitted the Company.
The Company believes that such provisions are necessary to attract and
retain qualified individuals to serve as directors and officers. In addition,
such provisions will allow directors and officers to perform their duties in
good faith without undue concern about personal liability if a court finds their
conduct to have been negligent or grossly negligent. On the other hand, the
potential remedies available to a Company shareholder will be limited, and it is
possible, although unlikely, that directors and officers protected by these
provisions may not demonstrate the same level of diligence or care that they
would otherwise demonstrate.
The Company's Bylaws require the Company to indemnify its directors and
officers against certain expenses and costs, judgments, settlements and fines
incurred in the defense of any claim, including any claim brought by or in the
right of the Company, to which they were made parties by reason of being or
having been directors and officers, subject to certain conditions and
limitations.
37
<PAGE> 41
In addition, each of the Company's directors and executive officers has
entered into an indemnity agreement with the Company, pursuant to which the
Company has agreed under certain circumstances to purchase and maintain
directors' and officers' liability insurance. The agreements also provide that
the Company will indemnify the directors and executive officers against any
costs and expenses, judgments, settlements and fines incurred in connection with
any claim involving a director or executive officer by reason of his position as
a director or executive officer that are in excess of the coverage provided by
such insurance; provided that the director or executive officer meets certain
standards of conduct. A form of indemnity agreement containing such standards of
conduct is included as an exhibit to the Registration Statement of which this
Prospectus forms a part. Under the indemnity agreements, the Company is not
required to purchase and maintain directors' and officers' liability insurance
if it is not reasonably available or, in the reasonable judgment of the Board of
Directors, there is insufficient benefit to the Company from the insurance.
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth, as of August 1, 1997, certain information
regarding beneficial ownership of the Common Stock (assuming the Merger and the
Share Exchange had occurred on such date) by (i) the Selling Shareholder, (ii)
each shareholder known by the Company to be the beneficial owner of more than 5%
of the outstanding Common Stock, (iii) each director of the Company, (iv) each
of the Company's executive officers, and (v) all of the Company's directors and
executive officers as a group. Unless otherwise indicated, the Company believes
that the shareholders listed below have sole investment and voting power with
respect to their shares based on information furnished to the Company by such
shareholders.
<TABLE>
<CAPTION>
PERCENT OF
OUTSTANDING
COMMON STOCK
-------------------
NUMBER OF SHARES SHARES TO BE SOLD BEFORE AFTER
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED IN THE OFFERING OFFERING OFFERING
------------------------ ------------------ ----------------- -------- --------
<S> <C> <C> <C> <C>
McDermott Incorporated(1)................... 1,715,000 1,715,000 49.0% --
Dailey J. Berard(1)......................... 414,645 -- 11.8% 9.0%
Charles E. Broussard(2)..................... 406,434 -- 11.6% 8.8%
Perry Segura(3)............................. 435,172 -- 12.4% 9.5%
Larry L. Clement............................ 41,054 -- 1.2% *
Dennis LaFleur.............................. 41,054 -- 1.2% *
David J. Berard............................. 41,054 -- 1.2% *
Louis C. Peltier............................ 41,054 -- 1.2% *
All directors and executive officers as a
group (8 persons)......................... 1,420,467 -- 40.6% 30.9%
</TABLE>
- ---------------
* Less than one percent.
(1) The address of McDermott Incorporated is 1450 Poydras Street, New Orleans,
Louisiana 70112. The address of Mr. Dailey J. Berard is c/o Universal
Fabricators Incorporated, 5007 Port Road, New Iberia, Louisiana 70562.
(2) Includes 151,900 shares owned by a company controlled by Mr. Broussard. His
address is 23604 S. Louisiana Highway 82, Kaplan, Louisiana 70548.
(3) Includes 373,591 shares owned by a company controlled by Mr. Segura. His
address is P.O. Box 13410, New Iberia, Louisiana 70562.
38
<PAGE> 42
CERTAIN TRANSACTIONS
Since December 1992, the Company has leased its main administrative offices
and five acres of surrounding land from McDermott for a nominal fee. Upon
completion of the Offering, the Company will purchase the building and the land,
together with approximately 13 additional acres, from McDermott for $700,000,
which management believes is the fair market value of the land and building, if
sold in an arms' length transaction. In addition, the Company will pay $6.3
million to McDermott for the release of its rights under the Shareholders'
Agreement and the Put/Call Agreement. See "Formation of the Company" and "Use of
Proceeds."
The Company has agreed to purchase 10 acres of land adjacent to its
facilities from Universal Partners immediately prior to the Merger for $100,500.
The proceeds of this sale will be distributed to the shareholders of Universal
Partners prior to the Merger. Shareholders of Universal Partners who are also
directors and officers of the Company will receive, in the aggregate,
approximately $80,000 pursuant to this distribution. Based upon an independent
appraisal, the Company believes the purchase price for the land represents its
fair market value, if sold in an arms' length transaction. See "Formation of the
Company" and "Use of Proceeds."
The Company has from time to time provided services as a subcontractor to
McDermott-ETPM West, Inc., an affiliate of McDermott. In fiscal 1997, the
Company generated approximately $16.8 million in revenue from such projects. In
addition, the Company has from time to time purchased rolled goods from J. Ray
McDermott, Inc., also an affiliate of McDermott, and in fiscal 1997, the cost of
such purchases was approximately $330,000. The Company believes that all of
these transactions were performed on an arm's length basis at prices that are
typical for similar transactions between unrelated parties. The Company does not
anticipate that the sale of McDermott's interest in the Company as part of the
Offering will have any significant adverse effect on the Company.
The Company has entered into a registration rights agreement with Messrs.
Dailey J. Berard, Broussard and Segura, pursuant to which Messrs. Berard,
Broussard and Segura have limited rights to require the Company to register
shares of Common Stock owned by them under the Securities Act. Under this
agreement, after the consummation of the Offering, each of Messrs. Berard,
Broussard and Segura will be entitled to one demand registration. If any of the
three makes such a demand, the other two are entitled to include their shares in
such registration. If the Company proposes to register any shares of Common
Stock under the Securities Act in connection with a public offering (after the
completion of the Offering), each of Messrs. Berard, Broussard and Segura may
require the Company to include all or a portion of the shares of Common Stock
held by such shareholder. The Company has agreed to pay all the expenses of
registrations under this agreement, other than underwriting discounts and
commissions. See "Risk Factors -- Sales Eligible for Future Resale; Registration
Rights."
In 1997, Universal Fabricators distributed approximately $375,000 to
Universal Partners to reimburse Universal Partners for the costs of settling an
uninsured worker's compensation claim which arose prior to the Expansion
Transaction. Certain officers and directors of the Company collectively own
approximately 80% of the stock of Universal Partners.
Mr. Dailey J. Berard has deferred the receipt of all bonus payments due him
since the Expansion Transaction. The Company accrues interest on such sums at
the prime rate as quoted by the Chase Manhattan Bank from time to time and, as
of March 31, 1997, the Company owed Mr. Berard approximately $133,000.
39
<PAGE> 43
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 20,000,000 shares
of Common Stock, $0.01 par value per share, and 5,000,000 shares of preferred
stock, no par value per share, issuable in series (the "Preferred Stock"). Upon
completion of the Merger and the Share Exchange immediately prior to the
consummation of the Offering, the Company will have 3,500,000 shares of Common
Stock outstanding, which will be held of record by approximately 33 persons, and
no shares of Preferred Stock will be outstanding. Prior to the Offering, there
has been no public market for the Common Stock. Although application has been
made to have the Common Stock listed on the Nasdaq National Market, there can be
no assurance that a market for the Common Stock will develop or, if developed,
will be sustained. See "Risk Factors -- No Prior Market; Possible Volatility of
Market Price; Dilution." The following summary description of the capital stock
of the Company is qualified in its entirety by reference to the Company's
Certificate and By-laws, copies of which are filed as exhibits to the
Registration Statement of which this Prospectus forms a part.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share in the election
of directors and on all other matters submitted to a vote of shareholders;
shareholders may not cumulate votes for the election of directors. Subject to
any preferences accorded to the holders of the Preferred Stock, if and when
issued by the Board of Directors, holders of Common Stock are entitled to
dividends at such times and in such amounts as the Board of Directors may
determine. The Company currently does not intend to pay dividends for the
foreseeable future. Upon the dissolution, liquidation or winding up of the
Company, after payment of debts, expenses and the liquidation preference plus
any accrued dividends on any outstanding shares of Preferred Stock, the holders
of Common Stock will be entitled to receive all remaining assets of the Company
ratably in proportion to the number of shares held by them. Holders of Common
Stock have no preemptive, subscription or conversion rights and are not subject
to further calls or assessments, or rights of redemption by the Company. The
outstanding shares of Common Stock are, and the shares of Common Stock being
sold in the Offering will be, validly issued, fully paid and nonassessable.
PREFERRED STOCK
The Company's Board of Directors has the authority, without approval of the
shareholders, to issue shares of Preferred Stock in one or more series and to
fix the number of shares and rights, preferences and limitations of each series.
Among the specific matters with respect to the Preferred Stock that may be
determined by the Board of Directors are the dividend rights, the redemption
price, if any, the terms of a sinking fund, if any, the amount payable in the
event of any voluntary liquidation, dissolution or winding up of the affairs of
the Company, conversion rights, if any, and voting powers, if any.
One of the effects of the existence of authorized but unissued Common Stock
and undesignated Preferred Stock may be to enable the Board of Directors to make
more difficult or to discourage an attempt to obtain control of the Company by
means of a merger, tender offer, proxy contest or otherwise, and thereby to
protect the continuity of the Company's management. If, in the exercise of its
fiduciary obligations, the Board of Directors were to determine that a takeover
proposal was not in the Company's best interest, such shares could be issued by
the Board of Directors without shareholder 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
acquiror or insurgent shareholder group, by creating a substantial voting block
in institutional or other hands that might undertake to support the position of
the incumbent Board of Directors, by effecting an acquisition that might
complicate or preclude the takeover, or otherwise. In this regard, the Company's
Articles grant the Board of Directors broad power to establish the rights and
preferences of the authorized and unissued Preferred Stock, one or more series
of which could be issued that would entitle holders (i) to vote separately as a
class on any proposed merger or consolidation, (ii) to cast a proportionately
larger vote together with the Common Stock on any such transaction or for all
purposes, (iii) to elect directors having terms of office or voting rights
greater than those of other directors, (iv) to convert Preferred Stock into a
greater number of shares of Common Stock or other securities, (v) to demand
redemption at a specified price under prescribed circumstances related to a
change of control or (vi) to exercise other rights designated
40
<PAGE> 44
to impede a takeover. The issuance of shares of Preferred Stock pursuant to the
Board of Directors' authority described above may adversely effect the rights of
holders of the Common Stock.
In addition, certain other charter provisions that are described below may
have the effect of, either alone or in combination with each other or with the
existence of authorized but unissued capital stock, of making more difficult or
discouraging an acquisition of the Company deemed undesirable by the Board of
Directors.
CERTAIN CHARTER AND BY-LAW PROVISIONS
Classified Board of Directors. The Articles and By-laws divide the members
of the Board of Directors who are elected by the holders of the Common Stock
into three classes serving three-year staggered terms.
Advance Notice of Intention to Nominate a Director. The Articles and
By-laws permit a shareholder to nominate a person for election as a director
only if written notice of such shareholder's intent to make a nomination has
been given to the Secretary of the Company not less than 45 days or more than 90
days prior to an annual meeting, unless less than 55 days notice is given of the
meeting, in which case notice by the shareholder must be received on the 10th
day after notice of the meeting was given. This provision also requires that the
shareholder's notice set forth, among other things, a description of all
arrangements or understandings between the nominee and the shareholder pursuant
to which the nomination is to be made or the nominee is to be elected and such
other information regarding the nominee as would be required to be included in a
proxy statement filed pursuant to the proxy rules promulgated under the
Securities Exchange Act of 1934, as amended, had the nominee been nominated by
the Board of Directors of the Company. Any nomination that fails to comply with
these requirements may be disqualified.
Shareholders' Right to Call Special Meeting. The Articles and By-laws
provide that a special shareholders' meeting may be requested by a shareholder
or group of shareholders holding in the aggregate 50% or more of the Company's
total voting power.
Removal of Directors; Filling Vacancies on Board of Directors. The Articles
and By-laws provide that any director elected by holders of the Common Stock may
be removed at any time by a two-thirds vote of the entire Board of Directors,
unless there is a person who is the beneficial owner of more than 50% of the
outstanding shares of Common Stock, in which case the removal may only be for
cause. In addition, any director or the entire Board may be removed at any time
for cause by a vote of the holders of not less than two-thirds of the total
voting power held by all holders of voting stock present or represented at a
special stockholders' meeting called for that purpose. "Cause" is defined for
these purposes as conviction of a felony involving moral turpitude or
adjudication of gross negligence or misconduct in the performance of duties in a
matter of substantial importance to the Company. The Articles and By-laws also
provide that any vacancies on the Board of Directors (including any resulting
from an increase in the authorized number of directors) may be filled only by
the affirmative vote of two-thirds of the remaining directors or by the
shareholders, who have the right to fill the vacancy at any special meeting
called for that purpose prior to such action by the Board.
Adoption and Amendment of By-laws. The Articles provide that By-laws may be
(i) adopted only by a two-thirds vote of the entire Board of Directors and (ii)
amended or repealed by either a two-thirds vote of the entire Board of Directors
or the holders of 80% of the total voting power present or represented at any
shareholders' meeting. Any provisions amended or repealed by the shareholders
may be re-amended or re-adopted by the Board of Directors.
Consideration of Tender Offers and Other Extraordinary Transactions. Under
Louisiana law, the Board of Directors, when considering a tender offer, exchange
offer, merger or consolidation, may consider, among other factors, the social
and economic effects of the proposal on the Company, its subsidiaries and their
respective employees, customers, creditors and communities.
Amendment of Certain Provisions of the Articles; Other Corporate
Action. The Company's Articles require, unless the action has been approved by
two-thirds vote of the entire Board of Directors, the affirmative vote of not
less than 80% of the total voting power of the Company to amend, alter or repeal
the provisions of the Articles relating to (i) the classification, filling of
vacancies and removal of the Board of Directors, (ii) amendments to the By-laws,
(iii) the Company's election not to be governed by certain Louisiana laws
41
<PAGE> 45
relating to business combinations, (iv) limitation of liability and
indemnification of directors and officers, (v) amendments to the Articles and
(vi) the calling of meetings of shareholders. An amendment to the Articles not
affecting any of such provisions may be approved by vote of a majority of the
voting power present or represented at a meeting of shareholders. The Articles
also require the vote of 80% of the total voting power to approve an amendment
or a repeal of any provisions of the Articles in a way that would reduce the
limitation of liability or indemnification of any person or power of the Board
of Directors with respect thereto provided for in the Articles. Unless approved
by a vote of at least two-thirds of the Board of Directors, a merger,
consolidation, sale of all or substantially all of the assets or a voluntarily
dissolution of the Company may be authorized only by the affirmative vote of the
holders of 80% of the total voting power. If approved by two-thirds of the
entire Board of Directors, any such action may be authorized by vote of a
majority of the voting power present or represented at a meeting of
shareholders.
The provisions of the Company's Articles and By-laws summarized in the
preceding paragraphs may have antitakeover effects and may delay, defer or
prevent a tender offer or takeover attempt that a stockholder might consider in
such stockholder's best interest, including those attempts that might result in
the payment of a premium over the market price for the shares of Common Stock
held by such shareholder.
Louisiana Control Share Acquisition Statute. By virtue of a provision of
the By-laws, the Company has elected not to be governed by the Louisiana Control
Share Acquisition Statute. The Company's Board of Directors or shareholders, by
amendment to this provision of the By-laws, could reverse this election.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is
.
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement among the
Selling Shareholder, the Company and the Underwriters named below (the
"Underwriting Agreement"), the Company and the Selling Shareholder have agreed
to sell to each of such Underwriters named below, and each of such Underwriters,
for whom Morgan Keegan & Company, Inc. and Stephens Inc. are acting as
representatives (the "Representatives"), has severally agreed to purchase from
the Company and the Selling Shareholder, the respective number of shares of
Common Stock set forth opposite its name below.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF
UNDERWRITER COMMON STOCK
----------- ----------------
<S> <C>
Morgan Keegan & Company, Inc. ..............................
Stephens Inc. ..............................................
---------
Total............................................. 2,815,000
=========
</TABLE>
The Underwriting Agreement provides that the Underwriters' obligation to
pay for and accept delivery of the shares of Common Stock offered hereby is
subject to certain conditions precedent and that the Underwriters will be
obligated to purchase all such shares, excluding shares covered by the
over-allotment option, if any are purchased. The Underwriters have informed the
Company that no sales of Common Stock will be confirmed to discretionary
accounts.
The Company has been advised by the Underwriters that they propose
initially to offer the shares of Common Stock in part directly to the public at
the public offering price set forth on the cover page of this Prospectus, and in
part to certain securities dealers at such price less a concession of
$ per share. The Underwriters may allow, and such dealers may reallow,
a concession not in excess of $ per share to certain brokers and
dealers. After the shares of Common Stock are released for sale to the public,
the offering price and other selling terms may from time to time be varied by
the Representatives.
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<PAGE> 46
The Representatives are permitted to engage in certain transactions that
stabilize the price of the Common Stock. Such transactions consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of the
Common Stock.
If the Underwriters create a short position in the Common Stock in
connection with the Offering, i.e., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus, the Representatives may
reduce that short position by purchasing Common Stock in the open market. The
Representatives may also elect to reduce any short position by exercising all or
part of the over-allotment option described below.
The Representatives may also impose a penalty bid on certain Underwriters
and selling group members. This means that if the Representatives purchase
shares of Common Stock in the open market to reduce the Underwriters' short
position or to stabilize the price of the Common Stock, they may reclaim the
amount of the selling concession from the Underwriters and selling group members
who sold those shares as part of the Offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
Neither the Company, the Selling Shareholder nor any of the Underwriters
makes any representation or prediction as to the direction or magnitude of any
effect that the transactions described above may have on the price of the Common
Stock. In addition, neither the Company, the Selling Shareholder nor any of the
Underwriters makes any representation that the Representatives will engage in
such transactions or that such transactions, once commenced, will not be
discontinued without notice.
The Company has granted the Underwriters an option exercisable for 30 days
after the date of this Prospectus to purchase up to an aggregate of 422,250
additional shares of Common Stock solely to cover overallotments, if any. If the
Underwriters exercise their overallotment option, the Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of shares of Common Stock to be
purchased by each of them, as shown in the table above, bears to the 2,815,000
shares of Common Stock offered hereby.
The Company, all of the Company's directors and executive officers and
certain shareholders, who beneficially own an aggregate of 1,543,629 shares of
Common Stock, have agreed, during the period beginning from the date of this
Prospectus and continuing to and including the date 180 days after the date of
the Prospectus, not to offer, sell, contract to sell or otherwise dispose of any
securities of the Company (other than, with respect to the Company, pursuant to
employee stock option plans existing, or on the conversion or exchange of
convertible or exchangeable securities outstanding, on the date of this
Prospectus or in connection with acquisitions of businesses or assets by the
Company) which are substantially similar to the shares of the Common Stock or
which are convertible or exchangeable into securities which are substantially
similar to the shares of the Common Stock without the prior consent of the
Representatives.
Prior to this Offering, there has been no public market for the Common
Stock. The initial public offering price of the Common Stock will be negotiated
between the Company, the Selling Shareholder and the Representatives. Among the
factors to be considered in determining the initial public offering price of the
Common Stock will be prevailing market and economic conditions, revenues and
earnings of the Company, the state of the Company's business operations, an
assessment of the Company's management and consideration of the above factors in
relation to market valuation of companies in related businesses and other
factors deemed relevant. There can be no assurance, however, that the prices at
which the Common Stock will sell in the public market after the Offering will
not be lower than the initial public offering price.
The Company and the Selling Shareholder have agreed separately to indemnify
the several Underwriters against certain liabilities, including liabilities
under the Securities Act.
43
<PAGE> 47
Pursuant to an agreement between Stephens Inc., one of the Underwriters,
and First Commerce Corporation, Stephens Inc. has agreed to pay to First
National Bank of Lafayette, an affiliate of First Commerce Corporation, a
finder's fee in connection with the Offering in an amount anticipated not to
exceed $85,000.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have 4,600,000 shares of
Common Stock outstanding. The 2,815,000 shares of Common Stock sold in the
Offering (plus any additional shares sold upon the Underwriters' exercise of
their over-allotment option) will be freely transferable without restriction
under the Securities Act by persons who are not deemed to be affiliates of the
Company or acting as underwriters, as those terms are defined in the Securities
Act. The remaining 1,785,000 shares of Common Stock held by existing
shareholders were acquired in transactions not requiring registration under the
Securities Act and will be "restricted stock" within the meaning of Rule 144.
Consequently, such shares may not be resold unless they are registered under the
Securities Act or are sold pursuant to an applicable exemption from
registration, such as Rule 144 under the Securities Act.
In general, under Rule 144 as currently in effect, if at least one year has
elapsed since shares of Common Stock that constitute restricted stock were last
acquired from the Company or an affiliate of the Company, the holder is entitled
to sell within any three-month period a number of shares that does not exceed
the greater of one percent of the total shares of Common Stock then outstanding
or the average weekly trading volume of the Common Stock in the over-the-counter
market during the four calendar weeks preceding the date on which notice of the
sale is filed with the Securities and Exchange Commission. Sales under Rule 144
are subject to certain manner of sale provisions, notice requirements and the
availability of current public information about the Company. If at least two
years have elapsed since the shares were last acquired from the Company or an
affiliate, a person who has not been an affiliate of the Company at any time
during the three months preceding the sale is entitled to sell such shares under
Rule 144(k) without regard to volume limitations, manner of sale provisions,
notice requirements or the availability of current public information concerning
the Company. All of the 1,785,000 shares of restricted stock within the meaning
of Rule 144 held by existing shareholders of the Company will be eligible for
sale following the Offering in reliance on Rule 144, subject to volume
limitations with respect to an aggregate of 1,543,629 shares of Common Stock
held by affiliates and subject to the contractual "lock-up" restrictions
described below.
The Company has granted Messrs. Dailey J. Berard, Broussard and Segura
certain registration rights with respect to the Common Stock held by them and
has agreed, if requested to do so, to include shares of Common Stock held by
them in any registration of security proposed by the Company. The exercise of
such registration rights is subject to the contractual "lock-up" restrictions
described below. See "Certain Transactions."
The Company and each of its directors and its executive officers have
agreed that they will not, with certain limited exceptions, issue, offer for
sale, sell, transfer, grant options to purchase or otherwise dispose of any
shares of Common Stock (other than stock issued or options granted pursuant to
the Company's stock incentive plans) without the prior written consent of the
Representatives for a period of 180 days from the date of this Prospectus.
Prior to the Offering, there has been no public market for the Common
Stock, and there can be no assurance that a significant public market for the
Common Stock will develop or be sustained after the Offering. Any future sale of
substantial amounts of Common Stock in the open market may adversely affect the
market price of the Common Stock offered hereby.
LEGAL MATTERS
The legality of the shares of Common Stock offered hereby is being passed
upon for the Company by Jones, Walker, Waechter, Poitevent, Carrere & Denegre,
L.L.P., New Orleans, Louisiana. Certain legal
44
<PAGE> 48
matters in connection with the shares of Common Stock offered hereby are being
passed upon for the Underwriters by Andrews & Kurth L.L.P., Houston, Texas.
EXPERTS
The financial statements of Universal Fabricators Incorporated as of March
31, 1996 and 1997, and for each of the three years in the period ended March 31,
1997, and the balance sheet of UNIFAB International, Inc. as of July 17, 1997
appearing in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their reports thereon
appearing elsewhere herein, and are included in reliance upon such reports given
upon the authority of such firm as experts in accounting and auditing.
OTHER INFORMATION
The Company has filed with the Securities and Exchange Commission a
Registration Statement on Form S-1 under the Securities Act with respect to the
Common Stock being offered pursuant to this Prospectus. This Prospectus does not
contain all information set forth in the Registration Statement, certain parts
of which are omitted in accordance with the rules and regulations of the
Commission. Statements contained herein concerning the provisions of any
documents are not necessarily complete and, in each instance, reference is made
to the copy of such document filed or incorporated by reference as an exhibit to
the Registration Statement. The Registration Statement may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's regional
offices at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and
7 World Trade Center, Suite 1300, New York, New York 10048. Copies of such
material can be obtained at prescribed rates from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding issuers that file electronically with
the Commission (http://www.sec.gov). The Company intends to furnish its
shareholders with annual reports containing audited financial statements
certified by independent public accountants.
45
<PAGE> 49
GLOSSARY OF CERTAIN TECHNICAL TERMS
<TABLE>
<S> <C>
COMMISSIONING: Functional testing of equipment and systems without the
introduction of hydrocarbons.
DECK: The component of a platform on which development drilling,
production, separating, gathering, piping, compression, well
support, crew quartering and other functions related to
offshore oil and gas development are conducted.
DIRECT LABOR HOURS: Direct labor hours are hours worked by employees directly
involved in the production of the Company's products. These
hours do not include contractor labor hours and support
personnel hours such as maintenance, warehousing and
drafting.
FIXED PLATFORM: A platform consisting of a rigid jacket which rests on
tubular steel pilings driven into the seabed and which
supports a deck structure above the water surface.
FLOATING PRODUCTION FACILITY: Floating structure (e.g., ship or semi-submersible vessel)
upon which drilling and production equipment is mounted.
GRIT BLAST SYSTEM: System of preparing steel for coating by using steel grit
rather than sand as a blasting medium.
JACKET: A component of a fixed platform consisting of a tubular
steel, braced structure extending from the mudline of the
seabed to a point above the water surface. The jacket is
supported on tubular steel pilings driven into the seabed.
MODULES: Packaged equipment usually consisting of major production,
utility or compression equipment with associated piping and
control system.
OFFSHORE: In unprotected waters outside coastlines.
PILES: Rigid tubular pipes that are driven into the seabed to
support platforms.
PLATFORM: A structure from which offshore oil and gas drilling and
production are conducted.
PLATFORM DRILLING RIG: A drilling rig designed to be mounted atop a fixed platform.
POSTED DRILLING RIG: A drilling rig mounted on steel columns fixed to a barge
that is sunk upon reaching a desired drilling location.
SOUR GAS: Natural gas that contains sulphur compounds in excess of a
specified amount.
SPAR PLATFORM: Vertically floating, large-diameter cylindrical platform
supporting a relatively conventional offshore drilling and
production deck and positioned on site with lateral mooring
systems connected to piling or anchors.
SUBSEA TEMPLATES: Tubular frames which are placed on the seabed and anchored
with piles. Usually a series of oil and gas wells are
drilled through these underwater structures.
TENSION-LEG PLATFORM (TLP): A platform consisting of a deck situated atop four or more
separate column-shaped semi-submersible hulls, which are
positioned on-site by vertical tendons (pipes) that run from
the columns to the sea floor.
</TABLE>
46
<PAGE> 50
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
UNIVERSAL FABRICATORS INCORPORATED
Report of Independent Auditors.............................. F-
Balance Sheets -- March 31, 1996 and 1997................... F-
Statements of Income -- Years Ended March 31, 1995, 1996 and
1997...................................................... F-
Statements of Shareholders' Equity -- Years Ended March 31,
1995, 1996 and 1997....................................... F-
Statements of Cash Flows -- Years Ended March 31, 1995, 1996
and 1997.................................................. F-
Notes to Financial Statements............................... F-
UNIFAB INTERNATIONAL, INC.
Report of Independent Auditors.............................. F-
Balance Sheet -- July 17, 1997.............................. F-
Notes to Balance Sheet...................................... F-
UNAUDITED PRO FORMA FINANCIAL STATEMENTS OF UNIFAB
INTERNATIONAL, INC.
Pro Forma Balance Sheet (Unaudited) -- March 31, 1997....... F-
Pro Forma Statement of Income (Unaudited) -- Year Ended
March 31, 1997............................................ F-
Notes to Pro Forma Financial Statements (Unaudited)......... F-
</TABLE>
F-1
<PAGE> 51
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Universal Fabricators Incorporated
We have audited the accompanying balance sheets of Universal Fabricators
Incorporated as of March 31, 1996 and 1997 and the related statements of income,
shareholders' equity and cash flows for each of the three years in the period
ended March 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Universal Fabricators
Incorporated at March 31, 1996 and 1997, and the results of its operations and
its cash flows for each of the three years in the period ended March 31, 1997 in
conformity with generally accepted accounting principles.
New Orleans, Louisiana
April 17, 1997, except for Note 6, as to which
the date is June 19, 1997 and Note 7,
as to which the date is August 1, 1997
---------------------
THE FOREGOING REPORT IS IN THE FORM THAT WILL BE SIGNED UPON THE COMPLETION OF
THE AGREEMENTS DESCRIBED IN NOTE 7 TO THE FINANCIAL STATEMENTS.
New Orleans, Louisiana
July 17, 1997
F-2
<PAGE> 52
UNIVERSAL FABRICATORS INCORPORATED
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
MARCH 31
--------------------------
1996 1997
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 4,942,775 $ 659,626
Accounts receivable....................................... 9,969,508 19,368,473
Costs and estimated earnings in excess of billings on
uncompleted contracts.................................. 3,356,396 239,097
Prepaid expenses.......................................... 263,678 444,045
Other assets.............................................. 182,481 102,062
----------- -----------
Total current assets.............................. 18,714,838 20,813,303
Property, plant and equipment, net.......................... 4,998,858 5,341,122
----------- -----------
Total assets...................................... $23,713,696 $26,154,425
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank overdraft............................................ $ 715,576 $ 763,010
Accounts payable.......................................... 2,729,321 6,210,166
Billings in excess of costs and estimated earnings on
uncompleted contracts.................................. 3,373,695 4,317,837
Accrued liabilities....................................... 804,671 813,762
Income tax payable........................................ 758,786 516,462
----------- -----------
Total current liabilities......................... 8,382,049 12,621,237
Deferred income taxes....................................... 1,347,863 1,332,168
Shareholders' equity:
Common stock, $1 par value:
Class A, 510 shares authorized and issued.............. 510 510
Class B, 490 shares authorized and issued.............. 490 490
Additional paid-in capital................................ 6,517,664 6,517,664
Retained earnings......................................... 7,465,120 5,682,356
----------- -----------
Total shareholders' equity........................ 13,983,784 12,201,020
----------- -----------
Total liabilities and shareholders' equity........ $23,713,696 $26,154,425
=========== ===========
</TABLE>
See accompanying notes.
F-3
<PAGE> 53
UNIVERSAL FABRICATORS INCORPORATED
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31
-----------------------------------------
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Revenue............................................. $27,882,808 $51,807,144 $66,724,504
Cost of revenue..................................... 23,174,004 40,361,724 58,589,197
----------- ----------- -----------
Gross profit........................................ 4,708,804 11,445,420 8,135,307
General and administrative expense.................. 1,325,689 1,419,668 1,637,563
----------- ----------- -----------
Income from operations.............................. 3,383,115 10,025,752 6,497,744
Other income (expense):
Interest expense.................................. (6,935) (3,092) (63,304)
Interest income................................... 45,059 318,185 145,155
----------- ----------- -----------
Income before income taxes.......................... 3,421,239 10,340,845 6,579,595
Income tax provision................................ 1,286,386 3,888,158 2,554,941
----------- ----------- -----------
Net income.......................................... $ 2,134,853 $ 6,452,687 $ 4,024,654
=========== =========== ===========
</TABLE>
See accompanying notes.
F-4
<PAGE> 54
UNIVERSAL FABRICATORS INCORPORATED
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
--------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
------ ------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at April 1, 1994.................... 1,000 $1,000 $6,517,664 $ 1,656,770 $ 8,175,434
Dividends paid............................ -- -- -- (857,822) (857,822)
Net income................................ -- -- -- 2,134,853 2,134,853
----- ------ ---------- ----------- -----------
Balance at March 31, 1995................... 1,000 1,000 6,517,664 2,933,801 9,452,465
Dividends paid............................ -- -- -- (1,921,368) (1,921,368)
Net income................................ -- -- -- 6,452,687 6,452,687
----- ------ ---------- ----------- -----------
Balance at March 31, 1996................... 1,000 1,000 6,517,664 7,465,120 13,983,784
Dividends paid............................ -- -- -- (5,807,418) (5,807,418)
Net income................................ -- -- -- 4,024,654 4,024,654
----- ------ ---------- ----------- -----------
Balance at March 31, 1997................... 1,000 $1,000 $6,517,664 $ 5,682,356 $12,201,020
===== ====== ========== =========== ===========
</TABLE>
See accompanying notes.
F-5
<PAGE> 55
UNIVERSAL FABRICATORS INCORPORATED
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31
------------------------------------
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................. $2,134,853 $6,452,687 $4,024,654
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation........................................ 423,949 389,711 471,305
(Gain) loss from sale of equipment.................. 3,028 (8,000) (10,125)
Deferred income taxes............................... 4,620 (72,919) (20,208)
Changes in operating assets and liabilities:
Accounts receivable............................... 209,626 (2,871,872) (9,398,965)
Net costs and estimated earnings in excess of
billings and billings in excess of costs and
estimated earnings on uncompleted contracts.... 1,566,493 (2,530,466) 4,061,441
Prepaid expenses and other assets................. (544,191) 658,534 (95,435)
Bank overdraft.................................... -- 715,576 47,434
Accounts payable and accrued liabilities.......... (406,788) 792,983 3,489,936
Income taxes payable.............................. -- 758,786 (242,324)
---------- ---------- ----------
Net cash provided by operating activities................ 3,391,590 4,285,020 2,327,713
Cash flows from investing activities:
Proceeds from sale of equipment........................ 9,500 8,000 17,175
Purchases of equipment................................. (179,351) (402,405) (820,619)
---------- ---------- ----------
Net cash used in investing activities.................. (169,851) (394,405) (803,444)
Cash flows from financing activities:
Dividends paid......................................... (857,822) (1,921,368) (5,807,418)
Net change in short-term borrowings.................... (531,141) -- --
---------- ---------- ----------
Net cash used in financing activities.................. (1,388,963) (1,921,368) (5,807,418)
---------- ---------- ----------
Net change in cash and cash equivalents................ 1,832,776 1,969,247 (4,283,149)
Cash and cash equivalents at beginning of year......... 1,140,752 2,973,528 4,942,775
---------- ---------- ----------
Cash and cash equivalents at end of year............... $2,973,528 $4,942,775 $ 659,626
========== ========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Income taxes........................................... $1,370,700 $3,173,014 $2,817,473
========== ========== ==========
</TABLE>
See accompanying notes.
F-6
<PAGE> 56
UNIVERSAL FABRICATORS INCORPORATED
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1995, 1996 AND 1997
1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Universal Fabricators Incorporated (the Company) fabricates and assembles
jackets, decks, topside facilities, quarters buildings, drilling rigs and
equipment for installation and use offshore in the production, processing and
storage of oil and gas. The Company's main fabrication yard is located in the
Port of Iberia in New Iberia, Louisiana. The Company's customers are principally
in the oil and gas industry. Receivables are generally not collateralized.
Credit losses have been insignificant.
The operating cycle of the Company's contracts is typically less than one
year, although some large contracts may exceed one year's duration. Assets and
liabilities have been classified as current and noncurrent under the operating
cycle concept, whereby all contract-related items are regarded as current
regardless of whether cash will be received within a 12-month period. At March
31, 1997, it was anticipated that substantially all contracts in progress, and
receivables associated therewith, would be completed and collected within a
12-month period.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
REVENUE AND COST RECOGNITION
Revenue from fixed-price and modified fixed-price contracts are recognized
on the percentage-of-completion method, measured by the ratio which labor and
subcontract costs incurred to date bear to total estimated labor and subcontract
costs. In the case of long-term contracts extending over one or more fiscal
years, revisions of the cost and profit estimated during the course of the work
are reflected in the accounting period in which the facts which require revision
become known. At the time a loss on a contract becomes known, the entire amount
of the ultimate loss is accrued. Variations from estimated contract performance
could result in a material adjustment to operating results for any fiscal year.
Contract bonus payments under fixed price contracts are included in revenue when
their realization is reasonably assured. Revenue from cost-plus-fee contracts
are recognized on the basis of costs incurred during the period plus the fee
earned.
Contract costs include direct labor, material, subcontract costs and
allocated indirect costs related to contract performance. General and
administrative costs are charged to expense as incurred.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Depreciation is provided
principally by the straight-line and declining-balance methods over the
estimated lives of the assets, which range from 19 to 31 years for building and
bulkhead and 3 to 12 years for yard and other equipment.
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents. The carrying amounts
reported in the balance sheets for cash and cash equivalents approximate their
fair value.
F-7
<PAGE> 57
UNIVERSAL FABRICATORS INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
INCOME TAXES
Income taxes have been provided using the liability method in accordance
with Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the Company's financial instruments at March 31,
1997, including cash and cash equivalents and accounts receivable, closely
approximates fair value.
RECLASSIFICATIONS
Certain amounts previously reported have been reclassified to conform with
the presentation at March 31, 1997.
2. CONTRACTS IN PROGRESS
Information pertaining to contracts in progress at March 31 follows:
<TABLE>
<CAPTION>
1996 1997
------------ ------------
<S> <C> <C>
Costs incurred on uncompleted contracts........... $ 22,376,762 $ 37,077,023
Estimated earnings................................ 8,171,189 4,488,532
------------ ------------
30,547,951 41,565,555
Less billings to date............................. (30,565,250) (45,644,295)
------------ ------------
$ (17,299) $ (4,078,740)
============ ============
Included in the accompanying balance sheets under
the following captions:
Costs and estimated earnings in excess of
billings on uncompleted contracts.......... $ 3,356,396 $ 239,097
Billings in excess of costs and estimated
earnings on uncompleted contracts.......... (3,373,695) (4,317,837)
------------ ------------
$ (17,299) $ (4,078,740)
============ ============
</TABLE>
Accounts receivable includes retainages and unbilled receivables,
respectively, of $46,686 and $395,541 at March 31, 1996 and $10,035 and $478,452
at March 31, 1997.
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following at March 31, 1996
and 1997:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Land.................................................. $ 756,000 $ 756,000
Building and bulkhead, including leasehold
improvements........................................ 3,528,627 3,780,243
Yard equipment........................................ 2,839,118 3,319,830
Other equipment....................................... 448,166 505,545
---------- ----------
7,571,911 8,361,618
Less accumulated depreciation......................... 2,573,053 3,020,496
---------- ----------
$4,998,858 $5,341,122
========== ==========
</TABLE>
F-8
<PAGE> 58
UNIVERSAL FABRICATORS INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Company leases land upon which a portion of its facilities are located
under noncancelable operating leases. The leases expire in fiscal year 2004 and
have two ten-year renewal options. Future minimum payments under the leases are
as follows:
<TABLE>
<S> <C>
1998............................................. $ 174,759
1999............................................. 174,759
2000............................................. 174,759
2001............................................. 174,759
2002............................................. 153,089
2003 and after................................... 194,355
----------
$1,046,480
==========
</TABLE>
Rent expense during the years ended March 31, 1995, 1996 and 1997 was
$948,988, $920,619 and $1,455,679, respectively, which includes rent on
cancelable equipment leases.
4. INCOME TAXES
Significant components of the Company's deferred tax liabilities and assets
as of March 31 were as follows:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Deferred tax liabilities -- excess of financial
statement basis over income tax basis of property,
plant and equipment............................... $1,347,863 $1,332,168
Deferred tax assets................................. 28,949 33,462
---------- ----------
Net deferred tax liabilities........................ $1,318,914 $1,298,706
========== ==========
</TABLE>
The income tax provision is comprised of the following:
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Current................................ $1,281,766 $3,961,077 $2,575,149
Deferred............................... 4,620 (72,919) (20,208)
---------- ---------- ----------
$1,286,386 $3,888,158 $2,554,941
========== ========== ==========
</TABLE>
The effective income tax rate varies from the statutory federal income tax
rate due to the provision of state income taxes.
5. CREDIT ARRANGEMENT
At March 31, 1997, the Company had available a $10,000,000 short-term bank
line of credit which expires in September 1997. The Company was contingently
liable under standby letters of credit totaling $9,892,418 at March 31, 1997
related to retainage and performance guarantees on projects.
6. DIVIDENDS
Under the provisions of a shareholders' agreement, unless otherwise
approved by the board of directors, the Company shall distribute to the
shareholders 90% of its net income for the prior fiscal year. The annual
dividend for each fiscal year shall be paid within the first four months
following the end of each fiscal year. The dividend for the fiscal year ended
March 31, 1997 of $3,622,189 was declared and paid on June 19, 1997.
F-9
<PAGE> 59
UNIVERSAL FABRICATORS INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. INITIAL PUBLIC OFFERING AND RELATED MATTERS
On June 19, 1997, the Company's board of directors approved the filing of a
Form S-1 Registration Statement with the Securities and Exchange Commission
covering the proposed sale of common stock to the public.
UNIFAB International, Inc. (International) was formed on July 16, 1997 to
serve as the parent corporation of the Company, 51% of the outstanding common
stock of which is currently owned by Universal Partners, Inc. (Universal
Partners) and 49% of such stock is owned by McDermott Incorporated (McDermott).
Immediately prior to the completion of an initial public offering of 3,237,250
shares (422,250 of which represents Underwriters' overallotment) of
International's $.01 par value common stock (the Offering), it is expected that
Universal Partners will merge into International and McDermott will exchange its
shares of common stock of the Company for shares of International's common stock
(the Share Exchange).
Prior to the Share Exchange, it is expected that Universal Partners will
pay all of its liabilities and distribute to its shareholders all of its assets
except the common stock of the Company owned by it. The shareholders of
Universal Partners will receive 1,785,000 shares of common stock of
International and McDermott will receive 1,715,000 shares of common stock of
International in the Share Exchange.
On , 1997, the shareholders entered into an agreement, subject
to completion of the Offering of International's common stock, which would: (1)
cancel the requirement to distribute 90% of the net income for the prior fiscal
year to shareholders, and (2) cancel an option held by McDermott which allowed
it to acquire the other 51% of the Company's stock. To terminate this option and
to secure McDermott's release of its rights under agreements with the Company
and Universal Partners, the Company agreed to pay $6,300,000 to McDermott.
8. RELATED PARTY TRANSACTIONS
The Company purchased construction materials and subcontract fabrication
work from a shareholder in the amount of $257,165, $38,338 and $329,409 in
fiscal years 1995, 1996 and 1997, respectively, and performed subcontract work
for the shareholder or companies affiliated with the shareholder in the amount
of $144,813, $563,499 and $16,809,922 in fiscal years 1995, 1996 and 1997,
respectively. Included in accounts receivable is $2,028,845 and $2,104,653 from
the shareholder or companies affiliated with the shareholder at March 31, 1996
and 1997, respectively. In addition, the Company rents an office building from
the shareholder for $100 per year.
9. EMPLOYEE BENEFIT PLAN
Effective April 1, 1996, the Company began sponsoring an employees'
incentive savings plan which allows participants to make contributions by salary
reduction pursuant to Section 401(k) of the Internal Revenue Code. Under this
plan, employees with one year of service with the Company are eligible to
contribute up to 25% of their compensation into the plan, subject to a specified
maximum.
The Company contributes an amount equal to 50% of employee contributions up
to 3% of their base compensation. Matching contributions made by the Company
were approximately $136,000 in fiscal year 1997.
F-10
<PAGE> 60
UNIVERSAL FABRICATORS INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
10. MAJOR CUSTOMERS
The Company is not dependent on any one customer, and the contract revenue
earned from each customer varies from year to year based on the contracts
awarded. Contract revenue earned comprising 10% or more of the Company's total
contract revenue earned are summarized as follows:
<TABLE>
<CAPTION>
1995 1996 1997
---------- ----------- -----------
<S> <C> <C> <C>
Customer A........................... $8,190,972 $ -- $ --
Customer B........................... -- 27,417,331 --
Customer C........................... 2,772,657 5,936,911 --
Customer D........................... -- -- 23,066,101
Customer E........................... -- -- 17,402,106
</TABLE>
11. CONTINGENCIES
The Company is party to legal proceedings arising in the normal course of
business. It is the opinion of management that the outcome of these matters will
not have a material adverse effect on the Company's financial position or
results of operations.
F-11
<PAGE> 61
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
UNIFAB International, Inc.
We have audited the accompanying balance sheet of UNIFAB International,
Inc. as of July 17, 1997. This balance sheet is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit of the balance sheet provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of UNIFAB International, Inc. at July
17, 1997, in conformity with generally accepted accounting principles.
New Orleans, Louisiana
July 17, 1997, except for Notes 2 and 3,
as to which the date is August 1, 1997
---------------------
THE FOREGOING REPORT IS IN THE FORM THAT WILL BE SIGNED UPON THE COMPLETION OF
THE AGREEMENTS AS DESCRIBED IN NOTES 2 AND 3 TO THE FINANCIAL STATEMENTS.
New Orleans, Louisiana
July 17, 1997
F-12
<PAGE> 62
UNIFAB INTERNATIONAL, INC.
BALANCE SHEET
JULY 17, 1997
ASSETS
<TABLE>
<S> <C>
Cash........................................................ $1,000
======
SHAREHOLDER'S EQUITY
Preferred stock -- authorized 5,000,000 shares; no shares
outstanding; no par value................................. $ --
Common stock -- authorized 20,000,000 shares; 1,000 shares
outstanding; $.01 par value............................... 10
Additional paid-in capital.................................. 990
------
Total shareholder's equity........................ $1,000
======
</TABLE>
See accompanying notes.
F-13
<PAGE> 63
UNIFAB INTERNATIONAL, INC.
NOTES TO BALANCE SHEET
JULY 17, 1997
1. DESCRIPTION OF BUSINESS
UNIFAB International, Inc. (the Company) was formed on July 16, 1997 to
serve as the parent corporation of Universal Fabricators Incorporated (Universal
Fabricators), 51% of the outstanding common stock of which is currently owned by
Universal Partners, Inc. (Universal Partners) and 49% of such stock is owned by
McDermott Incorporated (McDermott).
Other than the initial capitalization of the Company with $1,000 on July
16, 1997, the Company had no operations or transactions as of July 17, 1997.
2. SHARE EXCHANGE
On , 1997, the board of directors and shareholders of the
Company authorized agreements whereby immediately prior to the completion of an
initial public offering of 3,237,250 shares (422,250 of which represents
Underwriters' overallotment) of the Company's $.01 par value common stock,
Universal Partners, after paying all of its liabilities and distributing to its
shareholders all of its assets except the common stock of Universal Fabricators
owned by it, will merge into the Company and the shareholders of Universal
Partners will receive 1,785,000 shares of common stock of the Company.
Concurrently, McDermott will exchange the shares of Universal Fabricators'
common stock owned by it for 1,715,000 shares of common stock in the Company.
3. STOCK OPTION PLAN
On , 1997, the board of directors adopted and its shareholders
approved a stock option plan to provide long-term incentive to its key
employees, including officers and directors who are employees of the Company.
Under the terms of this plan, the Company may grant incentive stock options,
nonqualified stock options, restricted stock and stock awards. The number of
shares granted under this plan is limited to an aggregate amount of 460,000
shares. The options will have an exercise price of not less than the fair market
value of the stock on the date of grant. Subject to the completion of the
Offering, the Company has granted options to purchase 133,500 shares to
directors and officers of the Company at the initial public offering price per
share. Such options have a ten-year term and will become exercisable in three
years.
F-14
<PAGE> 64
UNIFAB INTERNATIONAL, INC.
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
BASIS OF PRESENTATION
The accompanying pro forma balance sheet as of March 31, 1997 and the
related pro forma statement of income for the year ended March 31, 1997 gives
effect to (i) the proposed merger of UNIFAB International, Inc. (the Company)
and Universal Partners Inc. (Universal Partners) and the proposed exchange of
shares of Universal Fabricators Incorporated (Universal Fabricators) owned by
McDermott Incorporated (McDermott) for shares of the Company, which will result
in Universal Fabricators being a 100%-owned subsidiary of the Company, and (ii)
a dividend to the shareholders of Universal Fabricators declared and paid on
June 19, 1997. The pro forma financial statements are based on the historical
financial statements of the Company and Universal Fabricators, giving effect to
the assumptions and adjustments in the accompanying note to the pro forma
financial statements.
The pro forma financial statements have been prepared by the Company's
management and include such adjustments to reflect the pro forma financial
statements as if the events described above had occurred as of March 31, 1997
for the pro forma balance sheet and as of April 1, 1996 for the pro forma
statement of income. The pro forma financial statements may not be indicative of
the results that would have occurred if the events described above had taken
place on the dates indicated or which may be obtained in the future. The pro
forma financial statements should be read in conjunction with the historical
financial statements and notes thereto included elsewhere in this Prospectus.
F-15
<PAGE> 65
UNIFAB INTERNATIONAL, INC.
PRO FORMA BALANCE SHEET (UNAUDITED)
MARCH 31, 1997
<TABLE>
<CAPTION>
UNIFAB UNIVERSAL
INTERNATIONAL, FABRICATORS
INC. INCORPORATED ADJUSTMENTS PRO FORMA
-------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............... $1,000 $ 659,626 $ -- $ 660,626
Accounts receivable..................... -- 19,368,473 -- 19,368,473
Costs and estimated earnings in excess
of billings on uncompleted
contracts............................ -- 239,097 -- 239,097
Prepaid expenses........................ -- 444,045 -- 444,045
Other assets............................ -- 102,062 -- 102,062
------ ----------- ----------- -----------
Total current assets............ 1,000 20,813,303 -- 20,814,303
Property, plant and equipment, net........ -- 5,341,122 -- 5,341,122
------ ----------- ----------- -----------
Total assets.................... $1,000 $26,154,425 $ -- $26,155,425
====== =========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Bank overdraft.......................... $ -- $ 763,010 $ 3,622,189(1) $ 4,385,199
Accounts payable........................ -- 6,210,166 -- 6,210,166
Billings in excess of costs and
estimated earnings on uncompleted
contracts............................ -- 4,317,837 -- 4,317,837
Accrued liabilities..................... -- 813,762 -- 813,762
Income tax payable...................... -- 516,462 -- 516,462
------ ----------- ----------- -----------
Total current liabilities....... -- 12,621,237 3,622,189 16,243,426
Deferred income taxes..................... -- 1,332,168 -- 1,332,168
Shareholders' equity:
Common stock............................ 10 1,000 34,990(2) 35,000
(1,000)(3)
Additional paid-in capital.............. 990 6,517,664 (34,990)(2) 8,544,831
2,061,167(3)
Retained earnings....................... -- 5,682,356 (3,622,189)(1) --
(2,060,167)(3)
------ ----------- ----------- -----------
Total shareholders' equity...... 1,000 12,201,020 (3,622,189) 8,579,831
------ ----------- ----------- -----------
Total liabilities and
shareholders' equity.......... $1,000 $26,154,425 $ -- $26,155,425
====== =========== =========== ===========
</TABLE>
See accompanying notes to pro forma financial statements (unaudited).
F-16
<PAGE> 66
UNIFAB INTERNATIONAL, INC.
PRO FORMA STATEMENT OF INCOME (UNAUDITED)
YEAR ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
UNIFAB UNIVERSAL
INTERNATIONAL, FABRICATORS
INC. INCORPORATED ADJUSTMENTS PRO FORMA
-------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Revenue............................... $ -- $66,724,504 $ -- $66,724,504
Cost of revenue....................... -- 58,589,197 -- 58,589,197
----------- ----------- ----------- -----------
Gross profit.......................... -- 8,135,307 -- 8,135,307
General and administrative expense.... -- 1,637,563 -- 1,637,563
----------- ----------- ----------- -----------
Income from operations................ -- 6,497,744 -- 6,497,744
Other income (expense):
Interest expense.................... -- (63,304) -- (63,304)
Interest income..................... -- 145,155 -- 145,155
----------- ----------- ----------- -----------
Income before income taxes............ -- 6,579,595 -- 6,579,595
Income tax provision.................. -- 2,554,941 -- 2,554,941
----------- ----------- ----------- -----------
Net income............................ $ -- $ 4,024,654 $ -- $ 4,024,654
=========== =========== =========== ===========
Earnings per share of common stock.... $ 1.15
===========
Average common stock outstanding...... 3,500,000
===========
</TABLE>
See accompanying notes to pro forma financial statements (unaudited).
F-17
<PAGE> 67
UNIFAB INTERNATIONAL, INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
The accompanying pro forma financial statements present the pro forma
financial position of the Company as of March 31, 1997 and the results of its
operations for the year then ended. The Company was incorporated on July 16,
1997 and had no operations prior to that date. The financial position of the
Company presented as of March 31, 1997 represents its initial capitalization.
The pro forma financial statements also include the historical financial
position and results of operations of Universal Fabricators.
The adjustments reflected in the pro forma financial statements are as
follows:
(1) The distribution to shareholders of 90% of the net income of
Universal Fabricators for the fiscal year ended March 31, 1997 under the
provisions of a shareholders' agreement. The dividend for the fiscal year
ended March 31, 1997 of $3,622,189 was declared and paid on June 19, 1997.
(2) Immediately prior to the completion of the Offering, Universal
Partners, after paying all of its liabilities and distributing to its
shareholders all of its assets except the common stock in Universal
Fabricators owned by it, will merge into the Company, and the shareholders
of Universal Partners will receive 1,785,000 shares of common stock of the
Company. Concurrently, McDermott will exchange the shares of Universal
Fabricators common stock owned by it for 1,715,000 shares of common stock
in the Company.
(3) Elimination of the equity accounts of Universal Fabricators which
becomes a 100%-owned subsidiary of the Company as a result of the Share
Exchange described above.
F-18
<PAGE> 68
======================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SHARES OF COMMON STOCK OFFERED
HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
SOLICITATION OR OFFER. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.....................
Risk Factors...........................
Use of Proceeds........................
Dividend Policy........................
Dilution...............................
Capitalization.........................
Selected Financial and Operating Data
Management's Discussion and Analysis
of Financial Condition and Results of
Operations...........................
Business...............................
Management.............................
Principal Shareholders.................
Certain Transactions...................
Description of Capital Stock...........
Underwriting...........................
Shares Eligible for Future Sale........
Legal Matters..........................
Experts................................
Other Information......................
Glossary of Certain Technical Terms....
Index to Consolidated Financial
Statements........................... F-1
</TABLE>
---------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF THE DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
======================================================
======================================================
2,815,000 SHARES
[LOGO]
UNIFAB INTERNATIONAL, INC.
COMMON STOCK
---------------------
PROSPECTUS
---------------------
MORGAN KEEGAN &
COMPANY, INC.
STEPHENS INC.
, 1997
======================================================
<PAGE> 69
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Estimated expenses payable in connection with the proposed sale of Common
Stock covered hereby are as follows:
<TABLE>
<S> <C>
SEC registration fee........................................ $14,715
NASD filing fee............................................. 5,356
Printing expenses........................................... *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Transfer agent fees and expenses............................ *
Miscellaneous expenses...................................... *
-------
Total expenses............................................ $ *
=======
</TABLE>
- ---------------
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Louisiana Business Corporation Law (the "LBCL"), Section 83, (i) gives
Louisiana corporations broad powers to indemnify their present and former
directors and officers and those of affiliated corporations against expenses
incurred in the defense of any lawsuit to which they are made parties by reason
of being or having been such directors or officers; (ii) subject to specific
conditions and exclusions, gives a director or officer who successfully defends
such an action the right to be so indemnified; and (iii) authorizes Louisiana
corporations to buy directors' and officers' liability insurance. Such
indemnification is not exclusive of any other rights to which those indemnified
may be entitled under any by-law, agreement, authorization of shareholders or
otherwise.
The Company's By-laws make mandatory the indemnification of directors and
officers permitted by the LBCL. The standard to be applied in evaluating any
claim for indemnification (excluding claims for expenses incurred in connection
with the successful defense of any proceeding or matter therein for which
indemnification is mandatory without reference to any such standard) is whether
the claimant acted in good faith and in a manner he reasonably believed to be
in, or not opposed to, the best interests of the Company. With respect to any
criminal action or proceeding, the standard is that the claimant had no
reasonable cause to believe the conduct was unlawful. No indemnification is
permitted in respect of any claim, issue or matter as to which a director or
officer shall have been adjudged by a court of competent jurisdiction to be
liable for willful or intentional misconduct or to have obtained an improper
personal benefit, unless, and only to the extent that the court shall determine
upon application that, in view of all the circumstances of the case, he is
fairly and reasonably entitled to indemnity for such expenses that the court
shall deem proper.
The Company maintains liability policies to indemnify its officers and
directors against loss arising from claims by reason of their legal liability
for acts as officers and directors, subject to limitations and conditions to be
set forth in the policies.
The Underwriters have also agreed to indemnify the directors and certain of
the Company's officers against certain liabilities, including liabilities under
the Securities Act of 1933, as amended (the "Securities Act"), or to contribute
to payments that such directors and officers may be required to make in respect
thereof.
Each of the Company's directors and executive officers has entered into an
indemnity agreement with the Company, pursuant to which the Company has agreed
under certain circumstances to purchase and maintain directors' and officers'
liability insurance. The agreements also provide that the Company will indemnify
the directors and executive officers against any costs and expenses, judgments,
settlements and fines incurred in
II-1
<PAGE> 70
connection with any claim involving a director or executive officer by reason of
his position as director or officer that are in excess of the coverage provided
by any such insurance, provided that the director or officer meets certain
standards of conduct. A form of indemnity agreement containing such standards of
conduct is included as an exhibit to this Registration Statement. Under the
indemnity agreements, the Company is not required to purchase and maintain
directors' and officers' liability insurance if it is not reasonably available
or, in the reasonable judgment of the Board of Directors, there is insufficient
benefit to the Company from the insurance.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In connection with the merger of the Company and Universal Partners, Inc.,
the Company will issue 1,785,000 shares of Common Stock to the shareholders of
Universal Partners, Inc. The Company will also issue 1,715,000 shares of Common
Stock to McDermott Incorporated in exchange for its shares in Universal
Fabricators Incorporated. All of these securities will be offered and sold
immediately prior to the completion of the Offering and without registration
under the Securities Act inasmuch as they are deemed not subject to registration
pursuant to the exemption provided in Section 4(2) of the Securities Act as
securities sold in transactions not involving any public offering.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<CAPTION>
<C> <S>
1.1 -- Form of Underwriting Agreement.*
2.1 -- Form of Merger Agreement between the Company and
Universal Partners, Inc.*
3.1 -- Articles of Incorporation of the Company.
3.2 -- By-laws of the Company.
4.1 -- See Exhibits 3.1 and 3.2 for provisions of the Company's
Articles of Incorporation and By-laws defining the rights
of holders of Common Stock.
4.2 -- Specimen Common Stock certificate.*
5.1 -- Opinion of Jones, Walker, Waechter, Poitevent, Carrere &
Denegre, L.L.P.*
10.1 -- Form of Indemnity Agreement by and between the Company
and each of its directors and executive officers.
10.2 -- Credit Agreement dated October 7, 1993, between the
Company and the First National Bank of Lafayette, as
amended.*
10.3 -- The Company's Long-Term Incentive Plan.*
10.4 -- Form of Stock Option Agreement under the Company's
Long-Term Incentive Plan.*
10.5 -- Form of Stock Exchange Agreement between the Company and
McDermott.*
10.6 -- Contribution Agreement dated November 30, 1992, between
McDermott and Universal Partners, Inc.
10.7 -- Shareholders' Agreement dated November 30, 1992, between
McDermott and Universal Partners, Inc.
10.8 -- Put/Call Agreement dated November 30, 1992, between
McDermott and Universal Partners, Inc.
10.9 -- Employment Agreement dated November 30, 1992 between
Universal Fabricators Incorporated and Dailey J. Berard.
10.10 -- Form of Employment Agreement between the Company and
Dailey J. Berard.*
10.11 -- Form of Transition Agreement among the Company,
McDermott, Universal Partners, Inc. and Universal
Fabricators Incorporated.*
</TABLE>
II-2
<PAGE> 71
<TABLE>
<CAPTION>
<C> <S>
21.1 -- Subsidiaries of the Company.*
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of Jones, Walker, Waechter, Poitevent, Carrere &
Denegre L.L.P. (included in Exhibit 5.1).*
24.1 -- Power of Attorney (included in the Signature Page to this
Registration Statement).
27.1 -- Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and
contained in the form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities
Act shall be deemed to be part of this Registration Statement as
of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 14 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 Securities 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
Securities Act and will be governed by the final adjudication of such issue.
II-3
<PAGE> 72
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New Iberia, State of
Louisiana, on July 18, 1997.
UNIFAB INTERNATIONAL, INC.
By: /s/ DAILEY J. BERARD
----------------------------------
Dailey J. Berard
President, Chief Executive Officer
and Chairman of the Board
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Dailey J. Berard and Peter J. Roman, or
either one of them, his true and lawful attorney-in-fact and agent, with full
power of substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and ratifying
and confirming all that said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DAILEY J. BERARD President, Chief Executive July 18, 1997
- ----------------------------------------------------- Officer and Chairman of the
Dailey J. Berard Board (Principal Executive
Officer)
/s/ PETER J. ROMAN Vice President and Chief July 18, 1997
- ----------------------------------------------------- Financial Officer (Principal
Peter J. Roman Financial and Accounting
Officer)
/s/ CHARLES E. BROUSSARD Director July 18, 1997
- -----------------------------------------------------
Charles E. Broussard
/s/ PERRY SEGURA Director July 18, 1997
- -----------------------------------------------------
Perry Segura
</TABLE>
II-4
<PAGE> 73
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS
-------------- -----------------------
<C> <S>
1.1 -- Form of Underwriting Agreement*
2.1 -- Form of Merger Agreement between the Company and
Universal Partners, Inc.*
3.1 -- Articles of Incorporation of the Company
3.2 -- By-laws of the Company
4.1 -- See Exhibits 3.1 and 3.2 for provisions of the Company's
Articles of Incorporation and By-laws defining the rights
of holders of Common Stock
4.2 -- Specimen Common Stock certificate*
5.1 -- Opinion of Jones, Walker, Waechter, Poitevent, Carrere &
Denegre, L.L.P.*
10.1 -- Form of Indemnity Agreement by and between the Company
and each of its directors and executive officers
10.2 -- Credit Agreement dated October 7, 1993, between the
Company and the First National Bank of Lafayette, as
amended*
10.3 -- The Company's Long-Term Incentive Plan*
10.4 -- Form of Stock Option Agreement under the Company's
Long-Term Incentive Plan*
10.5 -- Form of Stock Exchange Agreement between the Company and
McDermott*
10.6 -- Contribution Agreement dated November 30, 1992, between
McDermott and Universal Partners, Inc.
10.7 -- Shareholders' Agreement dated November 30, 1992, between
McDermott and Universal Partners, Inc.
10.8 -- Put/Call Agreement dated November 30, 1992, between
McDermott and Universal Partners, Inc.
10.9 -- Employment Agreement dated November 30, 1992 between
Universal Fabricators Incorporated and Dailey J. Berard
10.10 -- Form of Employment Agreement between the Company and
Dailey J. Berard.*
10.11 -- Form of Transition Agreement among the Company,
McDermott, Universal Partners, Inc. and Universal
Fabricators Incorporated.*
21.1 -- Subsidiaries of the Company*
23.1 -- Consent of Ernst & Young LLP
23.2 -- Consent of Jones, Walker, Waechter, Poitevent, Carrere &
Denegre, L.L.P. (included in Exhibit 5.1)*
24.1 -- Power of Attorney (included in the Signature Page to this
Registration Statement)
27.1 -- Financial Data Schedule
</TABLE>
- ---------------
* To be filed by amendment
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
UNIFAB INTERNATIONAL, INC.
The undersigned, acting pursuant to the Business Corporation Law of
Louisiana, adopts the following articles of incorporation.
ARTICLE I
NAME
The name of the corporation is UNIFAB International, Inc.
ARTICLE II
PURPOSE
The purpose of the Corporation is to engage in any lawful activity for
which corporations may be formed under the Business Corporation Law of
Louisiana.
ARTICLE III
CAPITAL
A. Authorized Stock. The Corporation shall have the authority to
issue an aggregate of 25,000,000 shares of capital stock, of which 20,000,000
shares shall be Common Stock, $0.01 par value per share, and 5,000,000 shares
shall be Preferred Stock, no par value per share.
B. Preferred Stock. Shares of Preferred Stock may be issued from
time to time in one or more series. Authority is hereby vested in the Board of
Directors of the Corporation to amend these Articles of Incorporation from time
to time to fix the preferences, limitations and relative rights as between the
Preferred Stock and the Common Stock, and to fix variations in the preferences,
limitations and relative rights as between different series of Preferred Stock.
ARTICLE IV
DIRECTORS
A. Number of Directors. The Board of Directors shall consist of
such number of persons as shall be designated from time to time in the by-laws
of the Corporation, or, if not so designated, as may be designated from time to
time by resolution of the Board of Directors, provided that no decrease in the
number of directors shall shorten the term of any incumbent director.
B. Classification. The Board of Directors, other than those who
may be elected by the holders of any class or series of stock having preference
over the Common Stock as to dividends or upon liquidation (whose terms of
office may be determined by the Board of Directors pursuant to Article III(B)),
shall be divided, with respect to the time during which they shall bold office,
into
<PAGE> 2
three classes as nearly equal in number as possible, with the initial term of
office of the Class I directors expiring at the annual meeting of shareholders
to be held in 1998, the initial term of office of the Class II directors
expiring at the next succeeding annual meeting of shareholders, and the initial
term of office of the Class III directors expiring at the second succeeding
annual meeting, all such directors to hold office until their successors are
elected and qualified. At each subsequent annual meeting of shareholders,
directors chosen to succeed those whose terms then expire shall be elected to
hold office for a term expiring at the annual meeting of shareholders held in
the third year following the year of their election and until their successors
are duly elected and qualified. If the Board of Directors shall appoint any
director to fill a vacancy on the Board, whether resulting from an increase in
the number of directors or otherwise, such Director shall be assigned to a
class by the Board of Directors so that all classes of directors shall be as
nearly equal in number as possible. In the event of a resignation or other
decrease in the number of directors, the Board of Directors may reassign the
remaining directors to classes so that all classes of directors shall be as
nearly equal in number as possible.
C. Vacancies. Except as provided in or pursuant to Article IV(F)
hereof, any vacancy on the Board (including any vacancy resulting from an
increase in the authorized number of directors or from a failure of the
shareholders to elect the full number of authorized directors) may,
notwithstanding any resulting absence of a quorum of directors, be filled by a
vote of at least two-thirds of the directors remaining in office, provided that
the shareholders shall have the right to fill the vacancy at any special
meeting called for such purpose prior to any such action by the Board.
Vacancies on the Board may be filled only as provided in this Article IV(C).
D. Removal. Except as provided in or pursuant to Article IV(F)
hereof, any one or more directors may be removed at any time, (1) only for
cause, by the holders of not less than two-thirds of the Total Voting Power (as
defined in Article VII(C) hereof) that is present or represented at a special
meeting of shareholders called for such purpose, voting together as a single
class or (2) with or without cause, by the affirmative vote of at least
two-thirds of all of the directors then constituting the Board of Directors;
provided, however, that, if at any time after the Corporation has sold shares
of Common Stock in a transaction registered under the Securities Act of 1933,
as amended, a person is, directly or indirectly, the beneficial owner of more
than 50% of the outstanding shares of Common Stock of the Corporation, a
director may not be removed without cause. For purposes of this Article IV(D),
(1) "cause" shall mean (a) a conviction of a director by a court of competent
jurisdiction of a felony involving moral turpitude if such conviction is no
longer subject to direct appeal or (b) an adjudication by a court of competent
jurisdiction of liability for gross negligence or gross misconduct in the
performance of the director's duty to the Corporation in a matter of
substantial importance to the Corporation if such adjudication is no longer
subject to direct appeal and (2) "beneficial owner" has the meaning assigned to
that term in Article IV(E)(1). At the same meeting at which the directors or
shareholders remove one or more directors, a successor or successors may be
elected for the unexpired term of the director or directors removed. Except as
set forth in this Article IV(D), or in any provision of these Articles of
Incorporation relating to removal of directors elected by holders of Preferred
Stock, directors shall not be subject to removal.
<PAGE> 3
E. Board Nominations. Except as provided in or pursuant to
Article IV(F) hereof, only persons who are nominated in accordance with the
procedures set forth in this Article IV(E) shall be eligible for election as
directors. Nominations of persons for election to the Board of Directors of
the Corporation may be made at a meeting of shareholders by or at the direction
of the Board of Directors or by any shareholder of record of the Corporation
entitled to vote at such meeting for the election of directors who complies
with the notice procedures set forth in this Article IV(E). Such nominations,
other than those made by or at the direction of the Board of Directors, shall
be made pursuant to timely notice in writing to the Secretary of the
Corporation. To be timely, a shareholder's notice shall be delivered to or
mailed and received at the principal office of the Corporation not less than 45
days nor more than 90 days prior to the meeting; provided, however, that in the
event that less than 55 days notice or prior public disclosure of the date of
the meeting is given or made to shareholders, notice by the shareholder to be
timely must be so received at the principal executive offices of the
Corporation no later than the close of business on the tenth day following the
day on which such notice of the date of the meeting was mailed or such public
disclosure was made. Such shareholder's notice shall set forth or include the
following:
1. as to each person whom the shareholder proposes to
nominate for election or re-election as a director, (a) the name, age,
business address and residential address of such person, (b) the
principal occupation or employment of such person, (c) the class and
number of shares of capital stock of the Corporation of which such
person is the beneficial owner (as defined in Rule 13d-3 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange
"Act")), (d) such person's written consent to being named in the proxy
statement as a nominee and to serve as a director if elected and (e)
any other information relating to such person that would be required
to be disclosed in solicitations of proxies for the election of
directors, or would be otherwise required, in each case pursuant to
Regulation 14A promulgated under the Exchange Act; and
2. as to the shareholder of record giving the notice,
(a) the name and address of such shareholder and (b) the class and
number of shares of capital stock of the Corporation of which such
shareholder is the beneficial owner (as defined in Rule 13d-3
promulgated under the Exchange Act). If requested in writing by the
Secretary of the Corporation at least 15 days in advance of the
meeting, such shareholder shall disclose to the Secretary, within ten
days of such request, whether such person is the sole beneficial owner
of the shares held of record by him, and, if not, the name and address
of each other person known by the shareholder of record to claim or
have a beneficial interest in such shares.
At the request of the Board of Directors, any person nominated by the Board of
Directors for election as a director shall furnish to the Secretary of the
Corporation that information required to be set forth in a shareholder's notice
of nomination which pertains to the nominee. If a shareholder seeks to
nominate one or more directors, the Secretary shall appoint two inspectors, who
shall not be affiliated with the Corporation, to determine whether the
shareholder has complied with this Article IV(E). If the inspectors shall
determine that the shareholder has not complied with this Article IV(E), the
defective nomination shall be disregarded and the inspectors shall direct the
Chairman
<PAGE> 4
of the meeting to declare at the meeting that such nomination was not made in
accordance with the procedures prescribed by the Articles of Incorporation.
F. Directors Elected by Preferred Shareholders. Notwithstanding
anything in these Articles of Incorporation to the contrary, whenever the
holders of any one or more classes or series of stock having a preference over
the Common Stock as to dividends or upon liquidation shall have the right,
voting separately as a class, to elect one or more directors of the
Corporation, the provisions of these Articles of Incorporation (as they may be
duly amended from time to time) fixing the rights and preferences of such
preferred stock shall govern with respect to the nomination, election, term,
removal, vacancies or other related matters with respect to such directors.
ARTICLE V
BY-LAWS
A. Adoption, Amendment and Repeal. The By-laws of the
Corporation and of any provision thereof may be adopted only by two-thirds vote
of all directors who constitute the Board of Directors. The By-laws and any
provision thereof may be amended or repealed only by (1) a two-thirds vote of
all directors who constitute the Board of Directors, or (2) the affirmative
vote of the holders of at least eighty percent of that portion of the Total
Voting Power, as defined in Article VII(C) hereof, voting together as a single
class, that is present or represented at any regular or special meeting of
shareholders, the notice of which meeting of shareholders expressly states that
the proposed amendment or repeal is to be considered at the meeting.
B. New Matters. Any purported amendment to the By-laws which
would add thereto a matter not expressly covered in the By-laws prior to such
purported amendment shall be deemed to constitute the adoption of a By-law
provision and not an amendment to the By-laws.
ARTICLE VI
APPLICATION OF CERTAIN LAWS
The Corporation hereby elects not to be governed by Sections 132, 133
and 134 of the Louisiana Business Corporation Law (La.R.S. 12:132, La.R.S.
12:133 and La.R.S. 12:134).
ARTICLE VII
SPECIAL SHAREHOLDER VOTING REQUIREMENTS
A. Amendments. Unless approved by vote of at least two-thirds of
all directors constituting the Board of Directors, Articles IV, V, VI, VII,
VIII and X of the Articles of Incorporation may be amended only by the
affirmative vote of not less than eighty percent of the Total Voting Power of
the Corporation. Shareholders may, by the affirmative vote of a majority of
the voting power present or represented at a meeting of shareholders, adopt any
amendment to the Articles of Incorporation that does not affect any of such
articles; provided, that shareholder approval shall not be required for any
amendment authorized by Article III(B).
<PAGE> 5
B. Other Corporate Actions. If a vote of shareholders is
required to authorize an agreement of merger or consolidation of the
Corporation, the sale of all or substantially all of the assets of the
Corporation or the voluntary dissolution of the Corporation, then (1) unless
such action has been approved by vote of at least two-thirds of all directors
constituting the Board of Directors, such action may be authorized only by the
affirmative vote of eighty percent of the Total Voting Power of the Corporation
and (2) if any such action has been approved by vote of at least two-thirds of
all directors who constitute the Board of Directors, such action may be
authorized by the affirmative vote of a majority of the voting power present or
represented at a meeting of shareholders.
C. Total Voting Power. The term "Total Voting Power" means the
total number of votes that shareholders, and holders of any bonds, debentures
or other obligations granted voting rights by the Corporation pursuant to
La.R.S. 12:75(H), are generally entitled to cast with respect to the election
of directors or, if such term is used with reference to any other particular
matter properly brought before the shareholders or such other holders for their
consideration and vote, means the total number of such votes that are entitled
to be cast with respect to such matter.
ARTICLE VIII
LIMITATION OF LIABILITY AND INDEMNIFICATION
A. Limitation of Liability. No director or officer of the
Corporation shall be liable to the Corporation or to its shareholders for
monetary damages for breach of his fiduciary duty as a director or officer,
provided that the foregoing provision shall not eliminate or limit the
liability of a director or officer for (1) any breach of his duty of loyalty to
the Corporation or its shareholders; (2) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (3)
liability for unlawful distributions of the Corporation's assets to, or
redemptions or repurchases of the Corporation's shares from shareholders of the
Corporation, under and to the extent provided in La.R.S. 12:92(D); or (4) any
transaction from which he derived an improper personal benefit. If, after the
date hereof, the Louisiana Business Corporation Law is amended to authorize
further elimination or limitation the personal liability of directors or
officers, then the liability of a director or an officer of the Corporation
shall be eliminated or limited to the fullest extent permitted by the Louisiana
Business Corporation Law, as so amended.
B. Indemnification. Subject to such limitations as may be
determined by the Board of Directors (provided that no change in such
limitations may adversely affect any claim to indemnification that arises prior
to such change), the Corporation shall indemnify each of its directors to the
full extent from time to time permitted by law, and may so indemnify each of
its officers, against any expenses or costs, including attorney's fees,
actually or reasonably incurred by him in connection with any threatened,
pending or completed claim action, suit or proceeding, whether criminal, civil,
administrative or investigative against such person or as to which he is
involved solely as a witness or person required to give evidence
<PAGE> 6
C. Authorization of Further Actions. The Board of Directors may
(1) cause the Corporation to enter into contracts with its directors and
officers providing for the limitation of liability set forth in this Article to
the fullest extent permitted by law, (2) adopt By-laws or resolutions, or cause
the Corporation to enter into contracts, providing for indemnification of
directors and officers of the Corporation and other persons (including but not
limited to directors and officers of the Corporation's direct and indirect
subsidiaries) to the fullest extent permitted by law and (3) cause the
Corporation to exercise the powers set forth in La.R.S. 12:83F, notwithstanding
that some or all of the members of the Board of Directors acting with respect
to the foregoing may be parties to such contracts or beneficiaries of such
By-laws or resolutions or the exercise of such powers. No repeal or amendment
of any such By-laws or resolutions limiting the right to indemnification
thereunder shall affect the entitlement of any person to indemnification whose
claim thereto results from conduct occurring prior to the date of such repeal
or amendment.
D. Subsidiaries. The Board of Directors may cause the
Corporation to approve for its direct and indirect subsidiaries limitation of
liability and indemnification provisions comparable to the foregoing.
E. Amendment. In addition to any other votes required by law or
these Articles of Incorporation (and notwithstanding the fact that a lesser
percentage may be specified by law or these Articles of Incorporation), the
affirmative vote of the holders of at least 80% of the Total Voting Power shall
be required to repeal this Article or to amend this Article so as to reduce the
limitation of liability set forth herein or the rights to indemnification of
any person or the powers of the Board of Directors provided in this Article,
and any amendment or repeal of this Article shall not adversely affect any
indemnification or limitation of liability of a director or officer of the
Corporation under this Article with respect to any action or inaction occurring
prior to the time of such amendment or repeal.
ARTICLE IX
REVERSION
Cash, property or share dividends, shares issuable to shareholders in
connection with a reclassification of stock, and the redemption price of
redeemed shares, that are not claimed by the shareholders entitled thereto
within one year after the dividend or redemption price became payable or the
shares became issuable, despite reasonable efforts by the Corporation to pay
the dividend or redemption price or deliver the certificates for the shares to
such shareholders within such time, shall at the expiration of such time,
revert in full ownership to the Corporation, and the Corporation's obligation
to pay such dividend or redemption price or issue such shares, as the case may
be, shall thereupon cease; provided, however, that the Board of Directors may,
at any time, for any reason satisfactory to it, but need not, authorize (1)
payment of the amount of any cash or property dividend or redemption price or
(2) issuance of any shares, ownership of which has reverted to the Corporation
pursuant to this Article, to the person or entity who or which would be
entitled thereto had such reversion not occurred.
<PAGE> 7
ARTICLE X
SPECIAL MEETINGS OF SHAREHOLDERS
A. Special meetings of shareholders, for any purpose or purposes,
may be called in any manner set forth in the By-laws, provided that the power
of shareholders as such to call or cause to be called special meetings shall be
governed exclusively by paragraph B of this Article.
B. At any time, upon the written request of any shareholder or
group of shareholders holding in the aggregate at least a majority of the Total
Voting Power, the Secretary of the Corporation shall call a special meeting of
shareholders to be held at the registered office of the Corporation at such
time as the Secretary may fix not less than 15 nor more than 60 days after the
receipt of said request, and if the Secretary shall neglect or refuse to fix
such time or to give notice of the meeting, the shareholder or shareholders
making the request may do so. Such requests must state the specific purpose or
purposes of the proposed special meeting, and the business to be conducted
thereat shall be limited to such purpose or purposes.
These Articles of Incorporation are dated July 16, 1997.
WITNESSES: UNIFAB INTERNATIONAL, INC.
/s/ MICHAEL JOHNSON /s/ DAILEY J. BERARD
- ------------------------------------ --------------------------------------
Dailey J. Berard
Incorporator
/s/ JACQUELYN D. MARKEY
- -----------------------------------
<PAGE> 1
EXHIBIT 3.2
BY-LAWS
OF
UNIFAB INTERNATIONAL, INC.
SECTION 1
OFFICES
1.1 PRINCIPAL OFFICE. The principal office of the Corporation shall
be located at 5007 Port Road, New Iberia, Louisiana 70562.
1.2 ADDITIONAL OFFICES. The Corporation may have such offices at
such other places as the Board of Directors may from time to time determine or
the business of the Corporation may require.
SECTION 2
SHAREHOLDER MEETINGS
2.1 PLACE OF MEETINGS. Unless otherwise required by law or these By-
laws, all meetings of the shareholders shall be held at the principal office of
the Corporation or at such other place, within or without the State of
Louisiana, as may be designated by the board of Directors.
2.2 ANNUAL MEETINGS; NOTICE THEREOF. An annual meeting of the
shareholders shall be held each year on the date and at the time as the Board
of Directors shall designate, for the purpose of electing directors and of the
transaction of such other business as may be properly brought before the
meeting. If no annual shareholders' meeting is held for a period of eighteen
months, any shareholder may call such meeting to be held at the registered
office of the Corporation as shown on the records of the Secretary of State of
the State of Louisiana.
2.3 SPECIAL MEETINGS. Special meetings of the shareholders, for any
purpose or purposes, may be called by or at the direction of the Board of
Directors. Shareholders may call a special meeting of shareholders in
accordance with the applicable provisions of the Articles of Incorporation.
2.4 NOTICE OF MEETINGS. Except as otherwise provided by law or the
Articles of Incorporation, the authorized person or persons calling a
shareholders' meeting shall cause written notice of the time, place and purpose
of the meeting to be given to all shareholders entitled to vote at such
meeting, at least 10 days and not more than 75 days prior to the day fixed for
the meeting. Notice of the annual meeting need not state the purpose or
purposes thereof, unless action is to be taken at the meeting as to which
notice is required by law, the Articles of Incorporation or the By-
<PAGE> 2
laws. Notice of a special meeting shall state the purpose or purposes thereof,
and the business conducted at any special meeting shall be limited to the
purpose or purposes stated in the notice.
2.5 LIST OF SHAREHOLDERS. At every meeting of shareholders, a list
of shareholders entitled to vote, arranged alphabetically and certified by the
Secretary or by the agent of the Corporation having charge of transfers of
shares, showing the number and class of shares held by each such shareholder on
the record date for the meeting and confirming the number of votes per share as
to which each such shareholder is entitled, shall be produced on the request of
any shareholder.
2.6 QUORUM. At all meetings of shareholders, the holders of a
majority of the total voting power shall constitute a quorum; provided,
however, that this subsection shall not have the effect of reducing the vote
required to approve any matter that may be established by law, the Articles of
Incorporation or these By-laws.
2.7 VOTING. When a quorum is present at any shareholders' meeting,
the vote of the holders of a majority of the votes actually cast shall decide
each question brought before such meeting, unless the resolution of the
question requires, by express provision of law, the Articles of Incorporation
or these By-laws, a different vote or one or more separate votes by the holders
of a class or series of capital stock, in which case such express provision
shall apply and control the decision of such question. Directors shall be
elected by plurality vote.
2.8 PROXIES. At any meeting of the shareholders, every shareholder
having the right to vote shall be entitled to vote in person or by proxy
appointed by an instrument in writing executed by such shareholder and bearing
a date not more than eleven months prior to the meeting, unless the instrument
provides for a longer period, but in no case will an outstanding proxy be valid
for longer than three years from the date of its execution. The person
appointed as proxy need not be a shareholder of the Corporation.
2.9 ADJOURNMENTS. Adjournments of any annual or special meeting of
shareholders may be taken without new notice being given unless a new record
date is fixed for the adjourned meeting, but any meeting at which directors are
to be elected shall be adjourned only from day to day until such directors
shall have been elected.
2.10 WITHDRAWAL. If a quorum is present or represented at a duly
organized shareholders' meeting, such meeting may continue to do business until
adjournment, notwithstanding the withdrawal of enough shareholders to leave
less than a quorum as fixed in Section 2.6 of these By-laws, or the refusal of
any shareholders to vote.
2.11 LACK OF QUORUM. If a meeting cannot be organized because a
quorum has not attended, the shareholders present may, by vote of the holders
of a majority of the votes actually cast, adjourn the meeting to such time and
place as they may determine, subject, however, to the provisions of Section 2.9
hereof. In the case of any meeting called for the election of directors, those
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<PAGE> 3
who attend the second of such adjourned meetings, although less than a quorum
as fixed in Section 2.6 hereof, shall nevertheless be deemed to constitute a
quorum for the purpose of electing directors.
2.12 PRESIDING OFFICER. The Chairman of the Board or a person
designated by the Chairman of the Board, or in their absence a person
designated by the Board of Directors, shall preside at all shareholders'
meetings.
2.13 DEFINITION OF SHAREHOLDER. As used in these By-laws, and unless
the context otherwise requires, the term shareholder shall mean a person who is
(i) the record holder of shares of the Corporation's common stock or any other
capital stock of the Corporation granted voting rights, or (ii) a registered
holder of any bonds, debentures or similar obligations granted voting rights by
the Corporation pursuant to La.R.S. 12:75(H).
SECTION 3
DIRECTORS
3.1 NUMBER. All of the corporate powers shall be vested in, and the
business and affairs of the Corporation shall be managed by, a Board of
Directors. Except as otherwise fixed by or pursuant to Article III(B) of the
Articles of Incorporation (as it may be duly amended from time to time)
relating to the rights of the holders of any class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation to elect
additional directors by class vote, the Board of Directors shall consist of
five natural persons; provided that, if after the last action of the Board of
Directors with respect to nomination of directors prior to the mailing to
shareholder of proxy materials for any meeting of shareholders at which
directors are to be elected, any person or persons named therein to be
nominated at the direction of the Board of Directors becomes unable or
unwilling to serve, the foregoing number of authorized directors shall be
automatically reduced by a number equal to the number of such persons unless
the Board of Directors selects a replacement nominee or nominees. No director
need be a shareholder. The Secretary shall have the power to certify at any
time as to the number of directors authorized and as to the class to which each
director has been elected or assigned.
3.2 POWERS. The Board may exercise all such powers of the
Corporation and do all such lawful acts and things which are not by law, the
Articles of Incorporation or these By-laws directed or required to be done by
the shareholders.
3.3 CLASSES. The Board of Directors, other than those directors who
may be elected by the holders of any class or series of stock having preference
over the Common Stock as to dividends or upon liquidation (whose term of office
may be determined by the Board of Directors pursuant to Section 3.3), shall be
divided, with respect to the time during which they shall hold office, into
three classes as nearly equal in number as possible, with the initial term of
office of Class I directors expiring at the annual meeting of shareholders to
be held in 1998, of Class II Directors expiring at the next succeeding annual
meeting of shareholders and of Class III directors expiring at the second
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<PAGE> 4
succeeding annual meeting of shareholders, with all such directors to hold
office until their successors are elected and qualified. At each annual
meeting of shareholders, directors chosen to succeed those whose terms then
expire shall be elected to hold office for a term expiring at the annual
meeting of shareholders held in the third year following the year of their
election and until their successors are duly elected and qualified. If the
Board of Directors shall appoint any person to fill a vacancy on the Board,
whether resulting from an increase in the number of directors or otherwise,
such person shall be assigned to a class by the Board of Directors so that all
classes of directors shall be as nearly equal in number as possible. In the
event of a decrease in the number of directors, the Board of Directors may
reassign the remaining directors to classes so that all classes of directors
shall be as nearly equal in number as possible; provided, however, that there
shall be no such reassignment without the consent of the person being
reassigned.
3.4 GENERAL ELECTION. At each annual meeting of shareholders,
directors shall be elected to succeed those directors whose terms then expire.
No decrease in the number of directors constituting the Board of Directors
shall shorten the term of any incumbent director.
3.5 VACANCIES. Except as otherwise provided in the Articles of
Incorporation or these By-laws, the office of a director shall become vacant if
he dies, resigns or is duly removed from office.
3.6 FILLING VACANCIES. Except as otherwise provided in the Articles
of Incorporation or Section 3.8 of these By-laws, any vacancy on the board
(including any vacancy resulting from an increase in the authorized number of
directors or from failure of the shareholders to elect the full number of
authorized directors) may, notwithstanding any resulting absence of a quorum of
directors, be filled by a majority vote of the Board of Directors remaining in
office, provided that the shareholders shall have the right, at any special
meeting called for such purpose prior to such action by the Board, to fill the
vacancy. A director elected pursuant to this section shall serve until the
next shareholders' meeting held for the election of directors of the class to
which he shall have been appointed and until his successor is elected and
qualified.
3.7 NOTICE OF SHAREHOLDER NOMINEES. Except as otherwise provided in
or pursuant to Section 3.8 of these By-laws, only persons who are nominated in
accordance with the procedures set forth in Article IV(E) of the Articles of
Incorporation shall be eligible for election as directors.
3.8 DIRECTORS ELECTED BY PREFERRED SHAREHOLDERS. Notwithstanding
anything in these By-laws to the contrary, whenever the holders of any one or
more classes or series of stock having a preference over the Common Stock as to
dividends or upon liquidation shall have the right, voting separately as a
class, to elect one or more directors of the Corporation, the provisions of the
Articles of Incorporation (as they may be duly amended from time to time)
fixing the rights and preferences of such preferred stock shall govern with
respect to the nomination, election, term, removal, vacancies or other related
matters with respect to such directors.
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<PAGE> 5
3.9 COMPENSATION OF DIRECTORS. Directors shall receive such
compensation for their services, in their capacity as directors, as may be
fixed by resolution of the Board of Directors; provided, however, that nothing
herein contained shall be construed to preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
SECTION 4
MEETINGS OF THE BOARD
4.1 PLACE OF MEETINGS. The meetings of the Board of Directors may be
held at such place within or without the State of Louisiana as a majority of
the directors may from time to time appoint.
4.2 INITIAL MEETINGS. Except as otherwise determined by the Board of
Directors, the first meeting of each newly elected Board shall be held
immediately following the shareholders' meeting at which the Board, or any
class thereof, is elected and at the same place as such meeting, and no notice
of such first meeting shall be necessary for the newly elected directors in
order legally to constitute the meeting.
4.3 REGULAR MEETINGS; NOTICE. Regular meetings of the Board may be
held at such times as the Board may from time to time determine. Notice of
regular meetings of the Board of Directors may be given, but no special form of
notice or time of notice shall be necessary.
4.4 SPECIAL MEETINGS; NOTICE. Special meetings of the Board may be
called by or at the direction of the Chairman of the Board or the President on
reasonable notice given to each director, either personally or by mail,
reputable courier service, telephone, telex, telecopy or any other comparable
form of facsimile communication. Special meetings shall be called by the
Secretary in like manner and on like notice on the written request of a
majority of the directors and if such officer refuses, or fails or is unable
within 24 hours to call a meeting when requested, then the directors making the
request may call the meeting on two days' written notice given to each
director. Except as otherwise required by law, the Articles of Incorporation
or these By-laws, the notice of a special meeting of directors need not state
its purpose or purposes, but if the notice states a purpose or purposes and
does not state a further purpose to consider such other business as may
properly come before the meeting, the business to be conducted at the special
meeting shall be limited to the purpose or purposes stated in the notice.
4.5 WAIVER OF NOTICE. Directors present at any regular or special
meeting shall be deemed to have received, or to have waived, due notice
thereof, provided that a director who participates in a meeting by telephone
(as permitted by Section 4.9 hereof) shall not be deemed to have received or
waived due notice if, at the beginning of the meeting, he objects to the
transaction of any business because the meeting is not lawfully called.
4.6 QUORUM. A majority of the Board shall be necessary to constitute
a quorum for the transaction of business, and except as otherwise provided by
law, the Articles of Incorporation or
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these By-laws, the acts of a majority of the directors present at a duly called
meeting at which a quorum is present shall be the acts of the Board. If a
quorum is not present at any meeting of the Board of Directors, the directors
present may adjourn the meeting from time to time without notice other than
announcement at the meeting, until a quorum is present.
4.7 WITHDRAWAL. If a quorum was present when the meeting convened,
the directors present may continue to do business, taking action by vote of a
majority of a quorum as fixed in Section 4.6 hereof, until adjournment,
notwithstanding the withdrawal of enough directors to leave less than a quorum
as fixed in Section 4.6 hereof or the refusal of any director present to vote.
4.8 ACTION BY CONSENT. Any action that may be taken at a meeting of
the Board, or any committee thereof, may be taken by a consent in writing
signed by all of the directors or by all members of the committee, as the case
may be, and filed with the records of proceedings of the Board or committee.
4.9 MEETINGS BY TELEPHONE OR SIMILAR COMMUNICATION. Members of the
Board may participate at and be present at any meeting of the Board or any
committee thereof by means of conference telephone or similar communications
equipment if all persons participating in such meeting can hear and communicate
with each other.
SECTION 5
COMMITTEES OF THE BOARD
5.1 GENERAL. The Board may designate one or more committees, each
committee to consist of two or more of the directors of the Corporation (and
one or more directors may be named as alternate members to replace any absent
or disqualified regular members), which, to the extent provided by resolution
of the Board or these By-laws, shall have and may exercise the powers of the
Board in the management of the business and affairs of the Corporation, and may
have power to authorize the seal of the Corporation to be affixed to documents,
but no such committee shall have power or authority to amend the Articles of
Incorporation, adopt an agreement of merger, consolidation or share exchange,
recommend to the shareholders the sale, lease or exchange of all or
substantially all of the Corporation's assets, a dissolution of the Corporation
or a revocation of dissolution, remove directors, or amend these By-laws; and
unless the resolution expressly so provides, no such committee shall have the
power or authority to declare a dividend or authorize the issuance of stock.
Such committee or committees shall have such name or names as may be stated in
these By-laws, or as may be determined, from time to time, by the Board. Any
vacancy occurring in any such committee shall be filled by the Board, but the
President may designate another director to serve on the committee pending
action by the Board. Each such member of a committee shall hold office during
the term designated by the Board.
5.2 COMPENSATION COMMITTEE. The Board shall establish and maintain a
Compensation Committee consisting of two or more directors, each of whom (i)
shall be qualified to the extent
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appropriate as a "non-employee director" under Rule 16b-3 of the Securities
Exchange Commission and as an "outside director" under Section 162(m) of the
Internal Revenue Code and (ii) shall meet any further qualifications designated
by the Board. The Compensation Committee shall review and analyze the
compensation of the Corporation's executive officers; review and provide
general guidance as to compensation of the Corporation's other managers;
evaluate the performance of the Corporation's executive officers; administer
the Corporation's incentive compensation plan or plans, including grants
thereunder; and perform such other services as may be designated by the Board.
5.3 AUDIT COMMITTEE. The Board shall establish an Audit Committee
consisting of at least two directors, a majority of whom are not officers or
employees of the Corporation or of any of its affiliates. The Audit Committee
shall (i) facilitate communication among the Corporation's directors,
management, independent accountants and internal auditing personnel regarding
matters relating to financial accounting, reporting and controls, (ii) assist
the Board of Directors in fulfilling its fiduciary responsibilities as to
accounting policies and reporting practices of the Corporation and all
subsidiaries and the sufficiency of auditing practices with respect thereto by,
among other things, reviewing the scope of audit coverage, including
consideration of the Corporation's accounting practices and procedures and
system of internal accounting controls and reporting to the Board with respect
thereto, (iii) operate as the Board's principal agent in ensuring the
independence of the Corporation's independent accountants, the integrity of
management and the adequacy of disclosure to shareholders, and (iv) perform
such other services as may be designated by the Board.
SECTION 6
REMOVAL OF BOARD MEMBERS
Directors may be removed in accordance with the applicable provisions of
the Articles of Incorporation.
SECTION 7
NOTICES
7.1 FORM OF DELIVERY. Whenever under the provisions of law, the
Articles of Incorporation or these By-laws notice is required to be given to
any shareholder or director, it shall not be construed to mean personal notice
unless otherwise specifically provided in the Articles of Incorporation or
these By-laws, but such notice may be given by mail, addressed to such
shareholder or director at his address as it appears on the records of the
Corporation, with postage thereon prepaid, or in such other manner as may be
specified in these By-laws. Notices given by mail shall be deemed to have been
given at the time they are deposited in the United States mail, and all other
notices shall be deemed to have been given upon delivery or transmission to the
appropriate address.
7.2 WAIVER. Whenever any notice is required to be given by law, the
Articles of Incorporation or these By-laws, a waiver thereof in writing signed
by the person or persons entitled
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to such notice, whether before or after the time stated therein, shall be
deemed equivalent thereto. Notice shall be deemed to have been given to, or
waived by, any shareholder who attends a meeting of shareholders in person, or
is represented at such meeting by proxy, without protesting at the commencement
of the meeting the transaction of any business because the meeting is not
lawfully called or convened.
SECTION 8
OFFICERS
8.1 DESIGNATIONS. The officers of the Corporation shall be elected
by the directors and shall be the President, Secretary and Treasurer. The
Board of Directors may appoint one or more vice presidents, a chief executive
officer, a chief operating officer, a chief financial or accounting officer and
such other officers as it shall deem necessary. Officers shall hold their
offices for such terms and shall exercise such powers and perform such duties
as shall be determined from time to time by the Board. To the extent permitted
by law, more than one office may be held by a single person.
8.2 TERM OF OFFICE. The officers of the Corporation shall hold
office at the pleasure of the Board of Directors. Except as otherwise provided
in the resolution of the Board of Directors electing any officer, each officer
shall hold office until the first meeting of the Board of Directors after the
annual meeting of shareholders next succeeding his or her election and until
his or her successor is elected and qualified or until his, or her earlier
resignation or removal. Any officer may resign at any time upon written notice
to the Board, Chairman of the Board, President or Secretary of the Corporation.
Such resignation shall take effect at the time specified therein and acceptance
of such resignation shall not be necessary to make it effective. The Board may
remove any officer with or without cause at any time. Any such removal shall
be without prejudice to the contractual rights of such officers, if any, with
the Corporation, but the election of an officer shall not in and of itself
create contractual rights. Any vacancy occurring in any office of the
Corporation by death, resignation, removal or otherwise may be filled for the
unexpired position of the term by the Board at any regular or special meeting.
8.3 THE CHAIRMAN OF THE BOARD. The Board may appoint a Chairman of
the Board who shall preside at meetings of the Board of Directors and the
shareholders and perform such other duties as may be designated by the Board of
Directors or these By-laws. The Chairman of the Board shall not, solely by
virtue of such position, be an officer of the Corporation but may be designated
an officer by the Board of Directors.
8.4 THE PRESIDENT. The President shall, unless otherwise provided by
the Board, have general and active responsibility for the management of the
business of the Corporation, shall be the chief executive and chief operating
officer of the Corporation, shall supervise the daily operations of the
business of the Corporation and shall ensure that all orders, policies and
resolutions of the Board are carried out.
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8.5 THE VICE PRESIDENTS. The Vice Presidents (if any) shall have
such designations and perform such duties as the President or the Board of
Directors shall prescribe.
8.6 THE SECRETARY. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the shareholders and record all votes
and the minutes of all proceedings in a book to be kept for that purpose. He
shall give, or cause to be given, notice of all meetings of the shareholders
and regular and special meetings of the Board, and shall perform such other
duties as may be prescribed by the Board or President. He shall keep in safe
custody the seal of the Corporation, if any, and affix such seal to any
instrument requiring it.
8.7 THE TREASURER. The Treasurer shall have the custody of the
corporate funds and shall keep or cause to be kept full and accurate accounts
of receipts and disbursements in books belonging to the Corporation and shall
deposit all monies and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. He shall keep a proper accounting of all receipts and disbursements
and shall disburse the funds of the Corporation only for proper corporate
purposes or as may be ordered by the Board and shall render to the President
and the Board at the regular meetings of the Board, or whenever they may
require it, an account of all his transactions as Treasurer and of the
financial condition and results of operations of the Corporation.
SECTION 9
STOCK
9.1 CERTIFICATES. Every holder of stock in the Corporation shall be
entitled to have a certificate signed by the President or a Vice President and
the Secretary or an Assistant Secretary evidencing the number and class (and
series, if any) of shares owned by him, containing such information as required
by law and bearing the seal of the Corporation. If any stock certificate is
manually signed by a transfer agent or registrar other than the Corporation
itself or an employee of the Corporation, the signature of any such officer may
be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be an officer, transfer agent or registrar of the Corporation
before such certificate is issued, it may be issued by the Corporation with the
same effect as if such person or entity were an officer, transfer agent or
registrar of the Corporation on the date of issue.
9.2 MISSING CERTIFICATES. The President or any Vice President may
direct a new certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed, upon the Corporation's receipt of an
affidavit of that fact from the person claiming the certificate of stock to be
lost, stolen or destroyed. As a condition precedent to the issuance of a new
certificate or certificates, the officers of the Corporation shall, unless
otherwise determined by the President, require the owner of such lost, stolen
or destroyed certificate or certificates, or his legal representative, to (i)
give the Corporation a bond or (ii) enter into a written indemnity agreement,
in each case in an amount appropriate to
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indemnify the Corporation against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost, stolen
or destroyed.
9.3 TRANSFERS. The shares of stock of the Corporation shall be
transferable only on the books of the Corporation by the holders thereof in
person or by their duly authorized attorneys or legal representatives upon
surrender and cancellation of certificates for a like number of shares. Except
as otherwise required by law, upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
SECTION 10
DETERMINATION OF SHAREHOLDERS
For the purpose of determining shareholders entitled to notice of and to
vote at a meeting, or to receive a dividend, or to receive or exercise
subscription or other rights, or to participate in a reclassification of stock,
or in order to make a determination of shareholders for any other proper
purpose, the Board of Directors may fix in advance a record date for
determination of shareholders for such purpose, such date to be not more than
60 days and, if fixed for the purpose of determining shareholders entitled to
notice of and to vote at a meeting, not less than 10 days, prior to the date on
which the action requiring the determination of shareholders is to be taken.
SECTION 11
INDEMNIFICATION
11.1 DEFINITIONS. As used in this section the following terms shall
have the meanings set forth below:
(a) "Board" - the Board of Directors of the Corporation.
(b) "Claim" - any threatened, pending or completed claim,
action, suit, or proceeding, whether civil, criminal, administrative or
investigative and whether made judicially or extra-judicially, or any separate
issue or matter therein, as the context requires.
(c) "Determining Body" - (i) those members of the Board who
are not named as parties to the Claim for which indemnification is being sought
("Impartial Directors"), if there are at least three Impartial Directors, (ii)
a committee of at least three Impartial Directors appointed by the Board
(regardless whether the members of the Board of Directors voting on such
appointment are Impartial Directors) or (iii) if there are fewer than three
Impartial Directors or if the Board of Directors or the committee appointed
pursuant to clause (ii) of this paragraph so directs (regardless
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whether the members thereof are Impartial Directors), independent legal
counsel, which may be the regular outside counsel of the Corporation.
(d) "Disbursing Officer" - the President of the Corporation
or, if the President is a party to the Claim for which indemnification is being
sought, any officer not a party to such Claim who is designated by the
President to be the Disbursing Officer with respect to indemnification requests
related to the Claim, which designation shall be made promptly after receipt of
the initial request for indemnification with respect to such Claim.
(e) "Expenses" - any expenses or costs, including, without
limitation, attorney's fees, judgments, punitive or exemplary damages, fines
and amounts paid in settlement.
(f) "Indemnitee" - each person who is or was a director or
officer of the Corporation.
11.2 INDEMNITY.
(a) To the extent such Expenses exceed the amounts reimbursed
or paid pursuant to policies of liability insurance maintained by the
Corporation, the Corporation shall indemnify each Indemnitee against any
Expenses actually and reasonably incurred by him (as they are incurred) in
connection with any Claim either against him or as to which he is involved
solely as a witness or person required to give evidence, by reason of his
position (i) as a director or officer of the Corporation, (ii) as a director or
officer of any subsidiary of the Corporation, (iii) as a fiduciary with respect
to any employee benefit plan of the Corporation, or (iv) as a director,
officer, partner, employee or agent of another corporation, partnership, joint
venture, trust or other for-profit or not-for-profit entity or enterprise, if
such position is or was held at the request of the Corporation, whether
relating to service in such position before or after the effective date of this
Section, if he (i) is successful in his defense of the claim on the merits or
otherwise or (ii) has been found by the Determining Body (acting in good faith)
to have met the Standard of Conduct (defined below); provided that (A) the
amount otherwise payable by the Corporation may be reduced by the Determining
Body to such amount as it deems proper if it determines that the Claim involved
the receipt of a personal benefit by Indemnitee, and (B) no indemnification
shall be made in respect of any Claim as to which Indemnitee shall have been
adjudged by a court of competent jurisdiction, after exhaustion of all appeals
therefrom, to be liable for willful or intentional misconduct in the
performance of his duty to the Corporation or to have obtained an improper
personal benefit, unless, and only to the extent that, a court shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, Indemnitee is fairly and reasonably entitled to
indemnity for such Expenses as the court deems proper.
(b) For purposes of this Section 11, the Standard of Conduct
is met when the conduct by an Indemnitee with respect to which a Claim is
asserted was conduct that was in good faith and that he reasonably believed to
be in, or not opposed to, the best interest of the Corporation, and, in the
case of a criminal action or proceeding, that he had no reasonable cause to
believe was
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unlawful. The termination of any Claim by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that Indemnitee did not meet the Standard of
Conduct.
(c) Promptly upon becoming aware of the existence of any Claim
as to which he may be indemnified hereunder, Indemnitee shall notify the
President of the Corporation of the Claim and whether he intends to seek
indemnification hereunder. If such notice indicates that Indemnitee does so
intend, the President shall promptly advise the Board thereof and notify the
Board that the establishment of the Determining Body with respect to the Claim
will be a matter presented at the next regularly scheduled meeting of the
Board, or if a meeting of the Board of Directors is not regularly scheduled
within 90 calendar days of such request, the President shall cause a meeting of
the Board of Directors to be called within such period in accordance with these
By-laws. After the Determining Body has been established the President shall
inform the Indemnitee thereof and Indemnitee shall immediately provide the
Determining Body with all facts relevant to the Claim known to him. No later
than the 45th day (the "Determination Date") after its receipt of such
information, together with such additional information as the Determining Body
may request of Indemnitee, the Determining Body shall determine, and shall
advise Indemnitee of its determination, whether Indemnitee has met the Standard
of Conduct.
(d) During such 45-day period, Indemnitee shall promptly
inform the Determining Body upon his becoming aware of any relevant facts not
theretofore provided by him to the Determining Body, unless the Determining
Body has obtained such facts by other means. The providing of such facts to
the Determining Body shall not begin a new 45-day period.
(e) The Determining Body shall have no authority to revoke a
determination that Indemnitee met the Standard of Conduct unless Indemnitee (i)
submits fraudulent information to the Determining Body at any time during the
45 days prior to the Determination Date or (ii) fails to comply with the
provisions of subsections (c) or (d) hereof, including without limitation
Indemnitee's obligation to submit information or documents relevant to the
Claim reasonably requested by the Determining Body prior to the Determination
Date.
(f) In the case of any Claim not involving a proposed,
threatened or pending criminal proceeding,
(i) if Indemnitee has, in the good faith judgment of
the Determining Body, met the Standard of Conduct, the Corporation may, in its
sole discretion after notice to Indemnitee, assume all responsibility for the
defense of the Claim, and, in any event, the Corporation and the Indemnitee
each shall keep the other informed as to the progress of the defense, including
prompt disclosure of any proposals for settlement; provided that if the
Corporation is a party to the Claim and Indemnitee reasonably determines that
there is a conflict between the positions of the Corporation and Indemnitee
with respect to the Claim, then Indemnitee shall be entitled to conduct his
defense, with counsel of his choice; and provided further that Indemnitee shall
in any event be
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entitled at his expense to employ counsel chosen by him to participate in the
defense of the Claim; and
(ii) the Corporation shall fairly consider any proposals
by Indemnitee for settlement of the Claim. If the Corporation (A) proposes a
settlement acceptable to the person asserting the Claim, or (B) believes a
settlement proposed by the person asserting the Claim should be accepted, it
shall inform Indemnitee of the terms thereof and shall fix a reasonable date by
which Indemnitee shall respond. If Indemnitee agrees to such terms, he shall
execute such documents as shall be necessary to effect the settlement. If he
does not agree he may proceed with the defense of the Claim in any manner he
chooses, but if he is not successful on the merits or otherwise, the
Corporation's obligation to indemnify him for any Expenses incurred following
his disagreement shall be limited to the lesser of (A) the total Expenses
incurred by him following his decision not to agree to such proposed settlement
or (B) the amount the Corporation would have paid pursuant to the terms of the
proposed settlement. If, however, the proposed settlement would impose upon
Indemnitee any requirement to act or refrain from acting that would materially
interfere with the conduct of his affairs, Indemnitee may refuse such
settlement and proceed with the defense of the Claim, if he so desires, at the
Corporation's expense without regard to the limitations imposed by the
preceding sentence. In no event, however, shall the Corporation be obligated
to indemnify Indemnitee for any amount paid in a settlement that the
Corporation has not approved.
(g) In the case of a Claim involving a proposed, threatened or
pending criminal proceeding, Indemnitee shall be entitled to conduct the
defense of the claim, and to make all decisions with respect thereto, with
counsel of his choice; provided, however, that the Corporation shall not be
obligated to indemnify Indemnitee for an amount paid in settlement that the
Corporation has not approved.
(h) After notifying the Corporation of the existence of a
Claim, Indemnitee may from time to time request the Corporation to pay the
Expenses (other than judgments, fines, penalties or amounts paid in settlement)
that he incurs in pursuing a defense of the Claim prior to the time that the
Determining Body determines whether the Standard of Conduct has been met. If
the Disbursing Officer believes the amount requested to be reasonable, he shall
pay to Indemnitee the amount requested (regardless of Indemnitee's apparent
ability to repay such amount) upon receipt of an undertaking by or on behalf of
Indemnitee to repay such amount if it shall ultimately be determined that he is
not entitled to be indemnified by the Corporation under the circumstances. If
the disbursing Officer does not believe such amount to be reasonable, the
Corporation shall pay the amount deemed by him to be reasonable and Indemnitee
may apply directly to the Determining Body for the remainder of the amount
requested.
(i) After the Determining Body has determined that the
Standard of Conduct was met, for so long as and to the extent that the
Corporation is required to indemnify Indemnitee under this Agreement, the
provisions of paragraph (h) shall continue to apply with respect to Expenses
incurred after such time except that (i) no undertaking shall be required of
Indemnitee and (ii) the
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Disbursing Officer shall pay to Indemnitee such amount of any fines, penalties
or judgments against him which have become final as the Corporation is
obligated to indemnify him.
(j) Any determination by the Corporation with respect to
settlements of a Claim shall be made by the Determining Body.
(k) The Corporation and Indemnitee shall keep confidential, to
the extent permitted by law and their fiduciary obligations, all facts and
determinations provided or made pursuant to or arising out of the operation of
this Section, and the Corporation and Indemnitee shall instruct its or his
agents and employees to do likewise.
11.3 ENFORCEMENT.
(a) The rights provided by this Section shall be enforceable
by Indemnitee in any court of competent jurisdiction.
(b) If Indemnitee seeks a judicial adjudication of his rights
under this Section, Indemnitee shall be entitled to recover from the
Corporation, and shall be indemnified by the Corporation against, any and all
Expenses actually and reasonably incurred by him in connection with such
proceeding but only if he prevails therein. If it shall be determined that
Indemnitee is entitled to receive part but not all of the relief sought, then
the Indemnitee shall be entitled to be reimbursed for all Expenses incurred by
him in connection with such judicial adjudication if the amount to which he is
determined to be entitled exceeds 50% of the amount of his claim. Otherwise,
the Expenses incurred by Indemnitee in connection with such judicial
adjudication shall be appropriately prorated.
(c) In any judicial proceeding described in this subsection,
the Corporation shall bear the burden of proving that Indemnitee is not
entitled to any Expenses sought with respect to any Claim.
11.4 SAVING CLAUSE. If any provision of this Section is determined by
a court having jurisdiction over the matter to require the Corporation to do or
refrain from doing any act that is in violation of applicable law, the court
shall be empowered to modify or reform such provision so that, as modified or
reformed, such provision provides the maximum indemnification permitted by law,
and such provision, as so modified or reformed, and the balance of this
Section, shall be applied in accordance with their terms. Without limiting the
generality of the foregoing, if any portion of this Section shall be
invalidated on any ground, the Corporation shall nevertheless indemnify an
Indemnitee to the full extent permitted by any applicable portion of this
Section that shall not have been invalidated and to the full extent permitted
by law with respect to that portion that has been invalidated.
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11.5 NON-EXCLUSIVITY.
(a) The indemnification and advancement of Expenses provided
by or granted pursuant to this Section shall not be deemed exclusive of any
other rights to which Indemnitee is or may become entitled under any statute,
article of incorporation, by-law, authorization of shareholders or directors,
agreement, or otherwise.
(b) It is the intent of the Corporation by this Section to
indemnify and hold harmless Indemnitee to the fullest extent permitted by law,
so that if applicable law would permit the Corporation to provide broader
indemnification rights than are currently permitted, the Corporation shall
indemnify and hold harmless Indemnitee to the fullest extent permitted by
applicable law notwithstanding that the other terms of this Section would
provide for lesser indemnification.
11.6 SUCCESSORS AND ASSIGNS. This Section shall be binding upon the
Corporation, its successors and assigns, and shall inure to the benefit of the
Indemnitee's heirs, personal representatives, and assigns and to the benefit of
the Corporation, its successors and assigns.
11.7 INDEMNIFICATION OF OTHER PERSONS. The Corporation may indemnify
any person not covered by Sections 11.1 through 11.6 to the extent provided in
a resolution of the Board or a separate section of these By-laws.
SECTION 12
ADOPTION AND AMENDMENT OF BY-LAWS
By-laws of the Corporation may be adopted and amended as provided in the
Articles of Incorporation.
SECTION 13
MISCELLANEOUS
13.1 DIVIDENDS. Except as otherwise provided by law, the Articles of
Incorporation or these By-laws, dividends upon the stock of the Corporation may
be declared by the Board of Directors at any regular or special meeting.
Dividends may be paid in cash, property, or shares of stock, subject to the
limitations specified by law and in the Articles of Incorporation.
13.2 VOTING OF SHARES OWNED BY CORPORATION. Unless otherwise directed
by the Board, any shares of capital stock issued by a wholly-owned subsidiary
of the Corporation may be voted by the President of the Corporation, or by any
person authorized to do so by the President, at any shareholders' meeting of
the subsidiary (or in connection with any written consent in lieu thereof).
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13.3 FISCAL YEAR. Until otherwise determined by the Board of
Directors, the Corporation shall have a fiscal year ending March 31.
13.4 SEAL. The Board of Directors may adopt a corporate seal, which
shall have inscribed thereon the name of the Corporation. The seal may be used
by causing it or a facsimile thereof to be impressed or affixed or reproduced
or otherwise. Failure to affix the seal shall not, however, affect the
validity of any instrument.
13.5 GENDER. All pronouns and variations thereof used in these By-
laws shall be deemed to refer to the masculine, feminine or neuter gender,
singular or plural, as the identity of the person, persons, entity or entities
referred to may require.
13.6 CONTROL SHARE ACQUISITIONS. The provisions of Sections 135
through 140.2 of the Louisiana Business Corporation Law (La.R.S. 12:135 through
140.2) do not apply to control share acquisitions of shares of the Corporation.
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EXHIBIT 10.1
INDEMNITY AGREEMENT
This Agreement is made as of ________________, 1997, by and between
UNIFAB International, Inc., a Louisiana corporation (the "Corporation"), and
_______________ ("Indemnitee").
In consideration of Indemnitee's continued service after the date
hereof, the Corporation and Indemnitee do hereby agree as follows:
1. AGREEMENT TO SERVE. Indemnitee agrees to serve as a
[DIRECTOR/OFFICER] of the Corporation for so long as he is elected or appointed
or until such earlier time as he tenders his resignation in writing.
2. DEFINITIONS. As used in this Agreement:
(a) The term "Expenses" shall mean any expenses or costs
(including, without limitation, attorney's fees, judgments, punitive or
exemplary damages, fines and amounts paid in settlement). If any of the
foregoing amounts paid on behalf of Indemnitee are not deductible by Indemnitee
for federal or state income tax purposes, the Corporation will reimburse
Indemnitee for tax liability with respect thereto by paying to Indemnitee an
amount which, after taking into account taxes on such amount, equals
Indemnitee's incremental tax liability.
(b) The term "Claim" shall mean any threatened, pending
or completed claim, action, suit, or proceeding, whether civil, criminal,
administrative or investigative and whether made judicially or
extra-judicially, or any separate issue or matter therein, as the context
requires.
(c) The term "Determining Body" shall mean (i) those
members of the Board of Directors who are not named as parties to the Claim for
which indemnification is being sought ("Impartial Directors"), if there are at
least three Impartial Directors, or (ii) a committee of at least three
directors appointed by the Board of Directors (regardless whether the members
of the Board of Directors voting on such appointment are Impartial Directors)
and composed of Impartial Directors or (iii) if there are fewer than three
Impartial Directors or if the Board of Directors or a committee appointed
thereby so directs (regardless whether the members thereof are Impartial
Directors), independent legal counsel, which may be the regular outside counsel
of the Corporation.
3. LIMITATION OF LIABILITY.
To the fullest extent permitted by Article VIII of the
Articles of Incorporation of the Corporation in effect on the date hereof and,
if and to the extent such Article VIII is amended to permit further
limitations, in effect at any time prior to the determination of liability that
would exist but for the provisions of this Agreement, Indemnitee shall not be
liable for breach of his fiduciary duty as a director or officer.
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<PAGE> 2
4. MAINTENANCE OF INSURANCE AND SELF-INSURANCE.
(a) The Corporation represents that it presently
maintains in force and effect the following directors and officers liability
insurance ("D&O Insurance") policies (the "Insurance Policies"):
<TABLE>
<CAPTION>
Insurer Policy No. Coverage
------- ---------- --------
<S> <C> <C>
</TABLE>
Subject only to the provisions of Section 4(b) hereof, the Corporation hereby
agrees that, so long as Indemnitee shall continue to serve as a [DIRECTOR OR
OFFICER] (or shall continue at the request of the Corporation to serve in any
capacity referred to in Section 5(a) hereof) and thereafter so long as
Indemnitee shall be subject to any possible Claim, the Corporation shall use
its best efforts to purchase and maintain in effect for the benefit of
Indemnitee one or more valid and enforceable policy or policies of D&O
Insurance providing, in all respects, coverage at least comparable to that
currently provided pursuant to the Insurance Policies, provided that the
Corporation shall have no obligation to provide primary coverage in excess of
$_____ million or excess coverage in excess of $_____ million.
(b) The Corporation shall not be required to purchase and
maintain the Insurance Policies in effect if D&O Insurance is not reasonably
available or if, in the reasonable business judgment of the then directors of
the Corporation, either (i) the premium cost for such insurance is excessive in
light of the amount of coverage or (ii) the coverage provided by such insurance
is so limited by exclusions, retentions, deductibles or otherwise that there is
insufficient benefit from such insurance.
(c) If the Corporation does not purchase and maintain in
effect the Insurance Policies pursuant to the provisions of Section 4(b)
hereof, the Corporation agrees to hold harmless and indemnify Indemnitee to the
full extent of the coverage that would otherwise have been provided for the
benefit of Indemnitee pursuant to the Insurance Policies.
5. ADDITIONAL INDEMNITY.
(a) To the extent any Expenses incurred by Indemnitee are
in excess of the amounts reimbursed or indemnified pursuant to the provisions
of Section 4 hereof, the Corporation shall indemnify and hold harmless
Indemnitee against any such Expenses actually and reasonably incurred, as they
are incurred, in connection with any Claim against Indemnitee (whether as a
subject of or party to, or a proposed or threatened subject of or party to, the
Claim) or in which Indemnitee is involved solely as a witness or person
required to give evidence, by reason of his position
(i) as a director or officer of the Corporation
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<PAGE> 3
(ii) as a director or officer of any subsidiary of
the Corporation or as a fiduciary with respect to any employee benefit plan of
the Corporation or
(iii) as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other for profit or
not for profit entity or enterprise, if such position is or was held at the
request of the Corporation, whether relating to service in such position before
or after the effective date of this Agreement, if (i) the Indemnitee is
successful in his defense of the Claim on the merits or otherwise or (ii) the
Indemnitee has been found by the Determining Body (acting in good faith) to
have met the Standard of Conduct; provided that (a) the amount of Expenses for
which the Corporation shall indemnify Indemnitee may be reduced by the
Determining Body to such amount as it deems proper if it determines in good
faith that the Claim involved the receipt of a personal benefit by Indemnitee
and (b) no indemnification shall be made in respect of any Claim as to which
Indemnitee shall have been adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable for willful or intentional
misconduct in the performance of his duty to the Corporation or to have
obtained an improper personal benefit, unless, and only to the extent that, a
court shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, Indemnitee is
fairly and reasonably entitled to indemnity for such Expenses as the court
shall deem proper; and provided further that, if the Claim involves Indemnitee
by reason of his position with an entity or enterprise described in clause (ii)
or (iii) of this Section 5(a) and if Indemnitee may be entitled to
indemnification with respect to such Claim from such entity or enterprise,
Indemnitee shall be entitled to indemnification hereunder only (x) if he has
applied to such entity or enterprise for indemnification with respect to the
Claim and (y) to the extent that indemnification to which he would be entitled
hereunder but for this proviso exceeds the indemnification paid by such other
entity or enterprise.
(b) For purposes of this Agreement, the Standard of
Conduct is met when conduct by an Indemnitee with respect to which a Claim is
asserted was conduct that he reasonably believed to be in, or not opposed to,
the best interest of the Corporation, and, in the case of a Claim which is a
criminal action or proceeding, conduct that the Indemnitee had no reasonable
cause to believe was unlawful. The termination of any Claim by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that Indemnitee did not
meet the Standard of Conduct.
(c) Promptly upon becoming aware of the existence of any
Claim, Indemnitee shall notify the Chief Executive Officer of the existence of
the Claim, who shall promptly advise the members of the Board of Directors and
that establishing the Determining Body will be a matter presented at the next
regularly scheduled meeting of the Board of Directors. After the Determining
Body has been established the Chief Executive Officer shall inform Indemnitee
thereof and Indemnitee shall immediately notify the Determining Body of all
facts relevant to the Claim known to such Indemnitee. Within 60 days of the
receipt of such notice and information, together with such additional
information as the Determining Body may request of Indemnitee, the Determining
Body shall report to Indemnitee of its determination whether Indemnitee has met
the Standard of Conduct. The Determining Body may extend the period of time
for determining
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<PAGE> 4
whether the Standard of Conduct has been met, but in no event shall such period
of time be extended beyond an additional sixty days.
(d) If, after determining that the Standard of Conduct
has been met, the Determining Body obtains facts of which it was not aware at
the time it made such determination, the Determining Body on its own motion,
after notifying Indemnitee and providing him an opportunity to be heard, may,
on the basis of such facts, revoke such determination, provided that, in the
absence of actual fraud by Indemnitee, no such revocation may be made later
than thirty days after final disposition of the Claim.
(e) Indemnitee shall promptly inform the Determining Body
upon his becoming aware of any relevant facts not theretofore provided by him
to the Determining Body, unless the Determining Body has obtained such facts by
other means.
(f) In the case of any Claim not involving a proposed,
threatened or pending criminal proceeding,
(i) if Indemnitee has, in the good faith judgment
of the Determining Body, met the Standard of Conduct, the Corporation may, in
its sole discretion, assume all responsibility for the defense of the Claim,
and, in any event, the Corporation and Indemnitee each shall keep the other
informed as to the progress of the defense of the Claim, including prompt
disclosure of any proposals for settlement; provided that if the Corporation is
a party to the Claim and Indemnitee reasonably determines that there is a
conflict between the positions of the Corporation and Indemnitee with respect
to the Claim, then Indemnitee shall be entitled to conduct his defense with
counsel of his choice; and provided further that Indemnitee shall in any event
be entitled at his expense to employ counsel chosen by him to participate in
the defense of the Claim; and
(ii) the Corporation shall fairly consider any
proposals by Indemnitee for settlement of the Claim. If the Corporation
proposes a settlement of the Claim and such settlement is acceptable to the
person asserting the Claim or the Corporation believes a settlement proposed by
the person asserting the Claim should be accepted, it shall inform Indemnitee
of the terms of such proposed settlement and shall fix a reasonable date by
which Indemnitee shall respond. If Indemnitee agrees to such terms, he shall
execute such documents as shall be necessary to make final the settlement. If
Indemnitee does not agree with such terms, Indemnitee may proceed with the
defense of the Claim in any manner he chooses, provided that if Indemnitee is
not successful on the merits or otherwise, the Corporation's obligation to
indemnify such Indemnitee as to any Expenses incurred following his
disagreement shall be limited to the lesser of (A) the total Expenses incurred
by Indemnitee following his decision not to agree to such proposed settlement
or (B) the amount that the Corporation would have paid pursuant to the terms of
the proposed settlement. If, however, the proposed settlement would impose
upon Indemnitee any requirement to act or refrain from acting that would
materially interfere with the conduct of Indemnitee's affairs, Indemnitee shall
be permitted to refuse such settlement and proceed with the defense of the
Claim, if he so desires, at the Corporation's expense in accordance with the
terms and conditions of this Agreement without regard to the limitations
imposed by the
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<PAGE> 5
immediately preceding sentence. In any event, the Corporation shall not be
obligated to indemnify Indemnitee for an amount paid in a settlement that the
Corporation has not approved.
(g) In the case of a Claim involving a proposed,
threatened or pending criminal proceeding, Indemnitee shall be entitled to
conduct the defense of the Claim and to make all decisions with respect
thereto, with counsel of his choice; provided that the Corporation shall not be
obligated to indemnify Indemnitee for an amount paid in settlement that the
Corporation has not approved.
(h) After notification to the Corporation of the
existence of a Claim, Indemnitee may from time to time request of the Chief
Executive Officer or, if the Chief Executive Officer is a party to the Claim as
to which indemnification is being sought, any officer who is not a party to the
Claim and who is designated by the Chief Executive Officer (the "Disbursing
Officer"), which designation shall be made promptly after receipt of the
initial request, that the Corporation advance to Indemnitee the Expenses (other
than fines, penalties, judgments or amounts paid in settlement) that he incurs
in pursuing a defense of the Claim prior to the time that the Determining Body
determines whether the Standard of Conduct has been met. The Disbursing
Officer shall pay to Indemnitee the amount requested (regardless of
Indemnitee's apparent ability to repay the funds) upon receipt of an
undertaking by or on behalf of Indemnitee to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
Corporation under the circumstances, provided that if the Disbursing Officer
does not believe such amount to be reasonable, he shall advance the amount
deemed by him to be reasonable and Indemnitee may apply directly to the
Determining Body for the remainder of the amount requested.
(i) After a determination that the Standard of Conduct
has been met, for so long as and to the extent that the Corporation is required
to indemnify Indemnitee under this Agreement, the provisions of Paragraph (h)
shall continue to apply with respect to Expenses incurred after such time
except that (i) no undertaking shall be required of Indemnitee and (ii) the
Disbursing Officer shall pay to Indemnitee the amount of any fines, penalties
or judgments against him which have become final for which the Corporation is
obligated to indemnify him or any amount of indemnification ordered to be paid
to him by a court.
(j) Any determination by the Corporation with respect to
settlement of a Claim shall be made by the Determining Body.
(k) The Corporation and Indemnitee shall keep
confidential to the extent permitted by law and their fiduciary obligations all
facts and determinations provided pursuant to or arising out of the operation
of this Agreement and the Corporation and Indemnitee shall instruct its or his
agents and employees to do likewise.
6. ENFORCEMENT.
(a) The rights provided by this Agreement shall be
enforceable by Indemnitee in any court of competent jurisdiction.
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<PAGE> 6
(b) If Indemnitee seeks a judicial adjudication of his
rights under, or to recover damages for breach of, this Agreement, Indemnitee
shall be entitled to recover from the Corporation, and shall be indemnified by
the Corporation against, any and all Expenses actually and reasonably incurred
by him in connection with such proceeding, but only if he prevails therein. If
it shall be determined that Indemnitee is entitled to receive part but not all
of the relief sought, then Indemnitee shall be entitled to be reimbursed for
all Expenses incurred by him in connection with such proceeding if the
indemnification amount to which he is determined to be entitled exceeds 50% of
the amount of his claim. Otherwise, the Expenses incurred by Indemnitee in
connection with such judicial adjudication shall be appropriately prorated.
(c) In any judicial proceeding described in this Section
6, the Corporation shall bear the burden of proving that Indemnitee is not
entitled to Expenses sought with respect to any Claim.
7. SAVING CLAUSE. If any provision of this Agreement is
determined by a court having jurisdiction over the matter to require the
Corporation to do or refrain from doing any act that is in violation of
applicable law, the court shall be empowered to modify or reform such provision
so that, as modified or reformed, such provision provides the maximum
indemnification permitted by law and such provision, as so modified or
reformed, and the balance of this Agreement, shall be applied in accordance
with their terms. Without limiting the generality of the foregoing, if any
portion of this Agreement shall be invalidated on any ground, the Corporation
shall nevertheless indemnify Indemnitee to the full extent permitted by any
applicable portion of this Agreement that shall not have been invalidated and
to the full extent permitted by law with respect to that portion that has been
invalidated.
8. NON-EXCLUSIVITY.
(a) The indemnification and payment of Expenses provided
by or granted pursuant to this Agreement shall not be deemed exclusive of any
other rights to which Indemnitee is or may become entitled under any statute,
article of incorporation, by-law, authorization of shareholders or directors,
agreement or otherwise.
(b) It is the intent of the Corporation by this Agreement
to indemnify and hold harmless Indemnitee to the fullest extent permitted by
law, so that if applicable law would permit the Corporation to provide broader
indemnification rights than are currently permitted, the Corporation shall
indemnify and hold harmless Indemnitee to the fullest extent permitted by
applicable law notwithstanding that the other terms of this Agreement would
provide for lesser indemnification.
9. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall constitute the original.
10. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Louisiana.
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<PAGE> 7
11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
Indemnitee and upon the Corporation, its successors and assigns, and shall
inure to the benefit of Indemnitee's heirs, personal representatives, and
assigns and to the benefit of the Corporation, its successors and assigns.
12. AMENDMENT. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless made in writing signed
by the Corporation and Indemnitee. Notwithstanding any amendment or
modification to or termination or cancellation of this Agreement or any portion
hereof, Indemnitee shall be entitled to indemnification in accordance with the
provisions hereof with respect to any acts or omissions of Indemnitee which
occur prior to such amendment, modification, termination or cancellation.
13. GENDER. All pronouns and variations thereof used in this
Agreement shall be deemed to refer to the masculine, feminine or neuter gender,
singular or plural, as the identity of the person, persons, entity or entities
refer to may require.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and signed as of the date and year first above written.
UNIFAB INTERNATIONAL, INC.
By:
--------------------------------------
Name:
Office:
-----------------------------------------
Name:
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<PAGE> 1
EXHIBIT 10.6
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (this "Agreement") is made and entered
into as of the 1st day of December, 1992, by and among Universal Partners,
Inc., a Louisiana corporation ("Universal"), McDermott Incorporated, a Delaware
corporation ("McDermott"), and Universal Fabricators Incorporated, a Delaware
close corporation (the "Company").
W I T N E S E T H:
WHEREAS, Universal and McDermott are or have both been engaged in the
fabrication and assembly of jackets, decks, topside facilities, quarters
buildings, drilling rigs, and equipment for installation and use off-shore in
the production, processing and storage of oil and gas and boats and barges at
their respective facilities in New Iberia, Louisiana;
WHEREAS, on November 6, 1992, Universal and McDermott caused the
incorporation of the Company in the State of Delaware as a close corporation
and have subscribed to fifty-one (51%) and forty-nine (49%) percent,
respectively, of the total authorized and to be issued share capital of the
Company;
WHEREAS, upon the terms and subject to the conditions set forth
herein, Universal and McDermott desire to contribute the Universal Contributed
Assets and the McDermott Contributed Assets in exchange for the issuance by the
Company of share certificates representing fifty-one (51%) and forty-nine (49%)
percent, respectively, of the total authorized and issued share capital of the
Company; and
<PAGE> 2
WHEREAS, upon the terms and subject to the conditions set forth
herein, the Company has agreed to issue share certificates at the Closing
representing fifty- one (51%) and forty-nine (49%) percent, respectively, of
the total authorized and issued share capital of the Company to Universal and
McDermott, respectively, in exchange for the contribution of the Universal
Contributed Assets and the McDermott Contributed Assets;
NOW, THEREFORE, in consideration of the premises and promises herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally bound
hereby, the parties represent, warrant, covenant and agree as follows:
ARTICLE I
Contribution of Assets
1.1 Universal Contribution. Upon the terms and subject to the
conditions set forth herein, at the Closing, Universal agrees to assign,
convey, transfer and deliver to the Company all of its right, title and
interest in, to or arising from the Universal Contributed Assets free and clear
of all Liens except for Permitted Liens in exchange for Five Hundred Ten (510)
of the Company's Class "A" common shares of par value $1.00 each.
1.2 Universal Contributed Assets. As used herein, the term
"Universal Contributed Assets" shall mean all of the assets, properties, rights
and claims of Universal used in, relating to or arising from the operation of
its New Iberia, Louisiana facility as the same shall exist as of the Effective
Time including the following:
<PAGE> 3
(a) Cash in the amount of One Million Two Hundred Thousand
($1,200,000.00) Dollars and a Promissory Note due not later
than One Hundred Twenty (120) days after the Closing Date in
the amount of One Million Two Hundred ($1,200,000.00) Dollars;
(b) All plant, property and equipment, whether owned or leased,
including all land, buildings, structures, easements,
appurtenances and privileges relating thereto, and all
leaseholds, leasehold improvements, fixtures and other
appurtenances and options, including options to purchase and
renew or other rights thereunder, all vehicles, machinery,
tools, furniture, equipment and other tangible personal
property;
(c) All customer files, all lists of customers, suppliers and
vendors, all rights under sales contracts, customer orders,
service agreements, purchase orders, agency and sales
representatives agreements and other similar commitments;
(d) All rights in, to and under any other contract, agreement,
instrument or other documents, including specifically without
limitation all insurance policies applicable to the operation
of the New Iberia, Louisiana facility and the business
conducted by Universal thereat, and all leases of real or
personal property;
(e) All documents and records relating to the Universal
Contributed Assets or the operations, products and services of
the New Iberia
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<PAGE> 4
facility and employment and personnel records for all
employees of the New Iberia facility;
(f) All accounting books, records, ledgers and electronic data
processing materials;
(g) All rights under agreements with employees of the New Iberia
facility concerning non-competition, confidentiality or the
assignment of inventions;
(h) All permits, licenses, franchises, product registrations,
filings, authorizations, approvals and indicia of authority
(and pending applications for any thereof) (i) to conduct the
operations of Universal's New Iberia facility and to own,
manufacture, construct, operate and maintain any product,
fixture, facility, equipment, vehicle, machinery or
installation of the New Iberia facility or (ii) to store,
transport, dispose of, market or sell any goods or any
substance (including, without limitation, material classified
as "hazardous materials" or "hazardous substances" or
"hazardous waste") used, handled, produced, disposed of,
marketed or sold in the operation of the New Iberia facility,
as issued by any governmental agency or instrumentality;
(i) All rights arising under any claim or potential claim against
any Person, whether arising under contract rights, subrogation
rights or at law or equity, including, without limitation, all
claims against customers and suppliers;
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<PAGE> 5
(j) All insurance contracts and/or trusts and the assets held
therein, associated with any of the employee benefit plans,
programs, policies or arrangements listed on Schedule 4.19
hereto;
(k) All technical, processing, manufacturing or marketing
information, including new developments, inventions, know-how,
processes, ideas and trade secrets and documentation thereof
and all claims and rights related thereto;
(l) All performance and other bonds, security and other deposits,
and advances maintained for use in the operation of the New
Iberia facility;
(m) All patents, trademarks, copyrights, trade styles, logos and
service marks and all applications and registrations therefor
and licenses thereof, whether foreign or domestic (including
all of Universal's right and interest under transferable
licenses), information systems, programs, software and
documentation thereof and all rights to the tradename
"Universal Fabricators Incorporated " or any variant thereof
and the "goodwill" associated with all of the foregoing; and
(n) All other assets, properties, rights and claims related to the
operation of the New Iberia facility or which arise in or from
the conduct thereof, whether or not carried at value on the
books and financial statements of Universal, and whether in
the possession of Universal or any other Person;
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<PAGE> 6
provided, however, that, notwithstanding the foregoing, the definition of
Universal Contributed Assets shall not include any items defined as Universal
Excluded Assets in Section 1.3 below.
1.3 Universal Excluded Assets. The following Universal Assets
(the "Universal Excluded Assets") shall not be assigned, conveyed, transferred
and delivered to the Company:
(a) Cash in excess of the amount described in Section 1.2(a) and
all accounts and notes receivable;
(b) Universal's shares in Uniscape Inc. and Unisep Inc.;
(c) All claims, rights and causes of action relating to or arising
from Universal Excluded Assets, Excluded Liabilities or
Universal's share of the Shared Liabilities;
(d) All rights, properties and assets of Universal's New Iberia
facility that are transferred or disposed of by Universal
prior to the Effective Time in transaction conducted in the
ordinary course of business;
(e) The real property owned by Universal situated in the Port of
New Iberia, Iberia Parish, Louisiana consisting of 10 acres,
more or less, and all easements, licenses, rights-of-way or
other interests relating to said property;
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<PAGE> 7
(f) The existing Universal insurance loss fund; and
(g) All assets, whether or not used by Universal in the operation
of the New Iberia facility, which are identified in Schedule
1.3(e) hereto, if any.
1.4 McDermott Contribution. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing, McDermott agrees to
assign, convey, transfer and deliver to the Company all of its right, title and
interest in, to or arising from the McDermott Contributed Assets free and clear
of all Liens except for Permitted Liens in exchange for Four Hundred Ninety
(490) of the Company's Class "B" common shares of par value $1.00 each.
1.5 McDermott Contributed Assets. As used herein, the term
"McDermott Contributed Assets" shall mean the following:
(a) The real property owned by McDermott situated in the Port of
New Iberia, Iberia Parish, Louisiana set forth on Schedule
5.6, all of McDermott's right, title and interest in and to
any improvements or fixtures located thereon, and all
easements, licenses, rights-of-way or other interests relating
to said real property;
(b) The vehicles, machinery, tools, furniture, equipment and other
tangible personal property listed on Schedule 5.5 hereto; and
(c) All permits, licenses, franchises, products, registrations,
filings, authorizations, approvals and indicia of authority
(and pending
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<PAGE> 8
applications for any thereof) (i) to conduct the operations of
McDermott's New Iberia facility and to own, manufacture, construct,
operate and maintain any product, fixture, facility, equipment,
vehicle, machinery or installation of the New Iberia facility or (ii)
to store, transport, dispose of, market or sell any goods or any
substance (including, without limitation, material classified as
"hazardous materials" or "hazardous substances" or "hazardous waste")
used, handled, produced, disposed of, marketed or sold in the
operation of the New Iberia facility, as issued by any governmental
agency or instrumentality;
provided, however, that notwithstanding the foregoing, the definition of
McDermott Contributed Assets shall not include any items defined as McDermott
Excluded Assets in Section 1.6 below.
1.6 McDermott Excluded Assets. The following McDermott Assets
(the "McDermott Excluded Assets") shall not be assigned, conveyed, transferred
and delivered to the Company:
(a) All of McDermott's right, title and interest in and to any
properties and assets, tangible or intangible, used in or
relating to any of its facilities other than the New Iberia
facility;
(b) McDermott's shares or interests in any subsidiaries,
Affiliates, partnership or joint ventures;
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<PAGE> 9
(c) All claims, rights and causes of action relating to or arising
from the McDermott Excluded Assets, Excluded Liabilities or
McDermott's share of the Shared Liabilities;
(d) All of McDermott's right, title and interest in and to any
real property owned by McDermott situated in the Port of New
Iberia, Iberia Parish, Louisiana not set forth on Schedule
1.5(a), any improvements or fixtures located thereon and all
easements, licenses, rights-of-way or other interests relating
to said real property;
(e) All rights, properties and assets of McDermott's New Iberia
facility that are transferred or disposed of by McDermott
prior to the Effective Time;
(f) All rights to prepaid insurance premiums and rights arising
under or related to insurance policies of McDermott or its
Affiliates covering the New Iberia facility, the McDermott
Contributed Assets or the Assumed Liabilities;
(g) The business records of McDermott associated with or related
to the New Iberia facility to the extent not located thereat
as of the Effective Time;
(h) All of McDermott's right, title and interest in and to any
inventory located at the New Iberia facility; and
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<PAGE> 10
(i) All assets, whether or not used by McDermott in the operation
of the New Iberia facility, which are identified in Schedule
1.6(i) hereto, if any.
ARTICLE II
Assumption of Liabilities and Obligations
2.1 Assumed Liabilities and Obligations. Upon the Closing, the
Company will assume and undertake to pay, perform, and discharge, in accordance
with and subject to their respective terms, the following liabilities and
obligations of Universal and McDermott, as applicable, to the extent, and only
to the extent, incurred or relating to the New Iberia facilities (the "Assumed
Liabilities"):
(a) Subject to Section 8.5 hereof, all liabilities and obligations
under contracts, customer orders, leases, licenses, purchase
orders and other commitments but only to the extent that such
contracts, customer orders, leases, licenses, purchase orders
and other commitments were entered into in the ordinary course
of business and only to the extent of any performance required
thereunder after the Effective Time;
(b) The indebtedness of Universal as owed on the Degeyter lease in
the principal amount outstanding as of October 31, 1992 of
Fourteen Thousand, Five Hundred Seventy-Four and 40/100
($14,574.40) Dollars;
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<PAGE> 11
(c) Subject to reimbursement by Universal as provided in that
certain Letter Agreement between Universal and McDermott of
even date December 1, 1992 which is by reference incorporated
herein, the liability and obligation of Universal to the
employees listed on Schedule 9.1 for accrued but not yet taken
vacation (including the funding thereof); and
(d) All liabilities and obligations that arise out of or are
related to the Company's operation of the New Iberia
facilities or any other event, act or occurrence that occurs
after the Effective Time.
2.2 Shared Liabilities and Obligations. Upon the Closing, the
following liabilities and obligations relating to the New Iberia facilities, or
the Contributed Assets, shall be shared pro rata between the Company and
Universal or McDermott, as applicable (the "Shared Liabilities"):
(a) With respect to utility charges that relate to billing periods
beginning before the Effective Time and ending after the
Effective Time, the responsibility for payment shall be
prorated between the parties on the basis of the proportional
number of calendar days in the relevant billing period that
the Company, Universal or McDermott, as applicable, owns or
operates the New Iberia facilities;
(b) With respect to rentals payable on leased property included as
part of the Contributed Assets that relate to lease periods
beginning before and ending after the Effective Time the
responsibility for
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<PAGE> 12
payment will be allocated between the parties on the basis of
the proportional number of calendar days that the Company,
Universal or McDermott, as applicable, occupied or used such
leased property during the relevant lease period; and
(c) With respect to ad valorem, property and similar type taxes
for the applicable tax year, the responsibility for payment
will be prorated between the parties on the basis of the
proportional number of calendar days that the Company,
Universal or McDermott, as applicable, owns or operates the
Contributed Assets during the relevant tax year; and
(d) With respect to all sales, use or transfer taxes, and all
similar taxes and charges, relating to or arising out of the
transfers contemplated hereby, Universal and McDermott shall
each pay half.
Subject to the terms above, if a party pays any of the Shared Liabilities for
which another party is entirely or partially responsible hereunder, then the
responsible party will promptly (but in no event later than thirty (30) days
after demand by the paying party) reimburse the paying party for that portion
of the Shared Liabilities for which the responsible party is responsible,
provided that any demand for reimbursement shall be accompanied by appropriate
evidence of payment thereof.
2.3 Excluded Liabilities and Obligations. Except as expressly set
forth in Sections 2.1 and 2.2 above, the Company shall not assume and shall not
be liable or responsible for any debt, obligation or liability of Universal or
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McDermott, as applicable, or any claims against either of them, of any kind,
whether know or unknown, contingent, absolute or otherwise (the "Excluded
Liabilities"), including without limitation the following liabilities and
obligations:
(a) Subject to Section 2.1(a) hereof, related to or arising from
transactions of or with any other business or division of
either Universal or McDermott, as applicable, including
interdivision, intracompany or intercompany payables,
obligations or agreements incurred in connection with the
operation of the New Iberia facilities prior to the Effective
Time;
(b) For taxes of any kind incurred in connection with the
operation of the New Iberia facilities prior to the Effective
Time (except for the Company's share of the taxes referred to
in Section 2.2(c) above), including Federal, state and local
taxes on income, sales and use, worker's compensation taxes,
FICA contributions and profit sharing deductions and all taxes
and charges related to or arising from the transfers
contemplated hereby;
(c) For damage or injury (real or alleged) to person or property
arising from the ownership, possession or use of any product
manufactured, assembled, processed, treated, distributed, sold
or serviced or any service rendered prior to the Effective
Time;
(d) Any liabilities and obligations for any benefit, cost,
expense, penalty or tax arising out of, resulting from, or
relating to (i)
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any employee benefit plan (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA")), or any employment agreements or contracts or any
pension, medical or life insurance or other employee plan,
program or agreement to which either Universal or McDermott is
or was a party or sponsor covering employees of the New Iberia
facilities before or after the Effective Time, or any breach
or default by either Universal or McDermott under any of the
foregoing; (ii) any violation before or after the Effective
Time of the provisions of ERISA by either Universal or
McDermott or any of their employees; or (iii) the employment
relationship between either Universal or McDermott and any of
their present or former employees or the termination of any
such employment relationship, including without limitation
severance pay and other similar benefits, if any, and any
claim filed by any employee or former employee of either
Universal or McDermott relating to the employment or
termination of employment of any such employee by Universal or
McDermott, including any claim for wrongful discharge, breach
of contract, unfair labor practice, employment discrimination
or unemployment compensation;
(e) Except as otherwise expressly provided herein, for expenses or
fees incurred by either Universal or McDermott incidental to
the preparation of this Agreement, preparation or delivery of
materials or information requested by either of them or the
Company, and the consummation of the transactions contemplated
hereby, including all counsel and accounting fees;
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<PAGE> 15
(f) Arising out of, resulting from or relating to any violation by
Universal or McDermott, as applicable, prior to the Effective
Time of any regulation, administrative ruling or other order
or decree of any Federal, state or local agency, or any
Federal, state or local act, statute, rule or regulation,
decree or ordinance, whether applicable to the New Iberia
facilities or otherwise;
(g) Except as otherwise expressly provided herein, relating to
indebtedness for borrowed money or accounts payable of
Universal or McDermott, as applicable, or guarantees of the
obligations or liabilities of any other Persons;
(h) Arising from or relating to any contract, customer order,
lease, license, purchase order, permit or other commitment for
which assignment to the Company is provided herein which is
not assignable to the Company without the consent of another
party and to which assignment such other party's consent is
not obtained and no other arrangements have been made to
provide to the Company the benefits intended to be assigned to
the Company under such contract, customer order, lease,
license, purchase order, permit or other commitment;
(i) All liabilities and obligations for workers' compensation
claims, whether pending as of the Effective Time or not,
regardless of when made, that are based on injuries or
conditions that first occurred or existed, or otherwise arose
out of or are attributable in whole or in part to employment
with Universal or McDermott, as applicable, prior to the
Effective Time;
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<PAGE> 16
(j) Subject to Section 2.1(a) hereof, all costs, expenses,
liabilities or obligations due to products sold or services
rendered by Universal or McDermott, as applicable, or any
predecessors prior to the Effective Time resulting from any
litigation, whether threatened or actual, or pending at the
Effective Time or not;
(k) Arising out of, resulting from or relating to (i) the shipment
from the New Iberia facilities for off- site disposal,
treatment, burial or reclamation of radioactive materials,
incinerator residue, sewage, chemical wastes, solid waste,
garbage or other hazardous materials, hazardous substances or
hazardous waste prior to the Effective Time; (ii) the
discharge, emission or release of any hazardous materials,
hazardous substances or hazardous wastes at or from either of
the New Iberia facilities prior to the Effective Time; (iii)
the generation, treatment and storage of hazardous materials,
hazardous substances or hazardous wastes at or from the New
Iberia facilities prior to the Effective Time, and (iv) all
other liabilities and obligations under any Federal, state or
local rule or environmental act, statute, regulation, decree
or ordinance that arose out of or are related to any act or
omission of Universal or McDermott, as applicable, prior to
the Effective Time; and
(l) All liabilities and obligations arising out of, resulting
from, or relating to claims for infringement or other
misappropriation of the intellectual property of any Person by
Universal or McDermott, as applicable, to the Effective Time.
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2.4 Non-Assignable Contracts. In the case of any contract,
customer orders, lease, license, purchase orders, permit or other commitment of
Universal or McDermott, respectively, applicable to the New Iberia facilities
included in Assumed Liabilities or Shared Liabilities which are by their terms,
by virtue of their subject matter or by operation of law not assignable to the
Company without the consent of a Third Party (the "Non-Assignable Contracts"),
Universal and McDermott agree, if they are a party to a Non-Assignable
Contract, to use their best efforts as soon as reasonably practicable after the
execution and delivery of this Agreement to obtain any consents necessary to
convey to the Company such Non-Assignable Contracts or the benefits thereof.
With respect to any such consent that has not been obtained by the Closing
Date, Universal and McDermott agree, if they are a party to a Non-Assignable
Contract, to cooperate in good faith with the Company to enter into any
reasonable arrangement designed to provide the Company with the same economic
and other benefits of any such Non-Assignable Contract as if it had been
assigned on the Closing Date. Such cooperation shall include the enforcement
for the benefit and at the expense of the Company of all rights previously
enjoyed by Universal or McDermott, as applicable, in connection with such
Non-Assignable Contract. Nothing in this Agreement shall be construed as an
attempt or an agreement to assign or cause the assignment of any Non-
Assignable Contract, unless such consent shall have been given, or as to which
all the remedies for the enforcement thereof enjoyed by Universal and
McDermott, as applicable, would not, as a matter of law, pass to the Company as
an incident of the assignments contemplated by this Agreement.
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ARTICLE III
The Closing and Contribution of Assets
3.1 Closing. The contribution of assets and assumption of
liabilities and obligations contemplated by this Agreement (the "Closing")
shall occur at the offices of McDermott, 1010 Common Street, Suite 2700, New
Orleans, Louisiana at 10:00 A.M. on December 1, 1992 or at such other time or
place as may be mutually agreed upon by the parties (the "Closing Date"). Upon
consummation, the Closing shall be deemed to take place as of the close of
business on November 29, 1992 (the Effective Time"). Title to the Contributed
Assets and the risk of loss or damage thereto shall pass to the Company at the
Effective Time.
3.2 Deliveries by Universal and McDermott. At the Closing,
Universal and McDermott shall deliver, as applicable, the following:
(a) A Tradename and Trademark Assignment in substantially the form
attached hereto as Attachment I;
(b) A Trade Secrets and Know-How Assignment in substantially the
form attached hereto as Attachment II;
(c) Vehicles titles and valid assignments thereof for each owned
vehicle included in the Contributed Assets;
(d) A Survey for each parcel of owned or leased real property
included in the Contributed Assets;
(e) A Title Opinion for each parcel of owned or leased real
property included in the Contributed Assets, issued by
Milling, Benson,
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Woodward, Hillyer, Pierson & Miller, Attorneys at Law,
addressed to the Company and dated as of the date hereof;
(f) Lease Assignments in substantially the form attached hereto as
Attachment III from each lessor or sublessor of property used
in the conduct of the New Iberia facilities;
(g) Payoff and release letters from creditors of Universal or
McDermott, as applicable, together with UCC-3 termination
statements with respect to financing statements previously
filed against any of the Contributed Assets (other than in
respect of leased personal property as to which the Company is
assuming the obligation to make lease payments after the
Effective Time);
(h) Copies of all consents of Third Parties identified on Schedule
3.2(h) (the "Indispensable Consents") and, to the extent any
Contributed Assets cannot be transferred or assigned to the
Company as of the Effective Time due to failure to obtain any
required Third Party consent or approval, such agreements
designed to secure for the Company the benefit of any such
Contributed Asset as contemplated by Section 2.4;
(i) An environmental site assessment conducted by Furgo-McClelland
(Southeast), Inc., showing no conditions affecting the
Contributed Assets, which would require material expenditures
for purpose of compliance with applicable federal, state, and
local statutes, laws, ordinances, orders, codes, rule, and
regulations relating to
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pollution or the protection of the environment, except such
conditions as Universal or McDermott, as applicable, shall
have cured; and
(j) Such other instruments or documents as may be necessary or
appropriate for Universal and McDermott to carry out the
transactions contemplated hereby.
3.3 Deliveries by the Company. At the Closing, the Company shall
deliver the following:
(a) Share certificates in substantially the form attached hereto
as Attachment IV; and
(b) Such other instruments or documents as may be necessary or
appropriate for the Company to carry out the transactions
contemplated hereby.
3.4 Closing Agreements. At the Closing, the parties shall
execute, acknowledge, and deliver, as appropriate, the following:
(a) A Shareholders' Agreement in substantially the form attached
hereto as Attachment V;
(b) A General Assignment, Bill of Sale and Assumption of
Liabilities in substantially the form attached hereto as
Attachment VI;
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<PAGE> 21
(c) Acts of Sale in substantially the form attached hereto as
Attach- ment VII;
(d) A Lease Agreement in substantially the form attached hereto as
Attachment VIII;
(e) An Employment Agreement in substantially the form attached
hereto as Attachment IX;
(f) A Put/Call Agreement in substantially the form attached hereto
as Attachment X;
(g) A Borrowed Servants' Agreement in substantially the form
attached hereto as Attachment XI; and
(h) Such other instruments or documents as may be necessary or
appropriate to carry out the transactions contemplated by this
Agreement.
3.5 Actions Deemed Simultaneous. At the Closing, the transactions
contemplated by this Agreement will be deemed to have occurred simultaneously,
notwithstanding any different order in the execution and delivery of any of the
documents or agreements executed and delivered in connection herewith.
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<PAGE> 22
ARTICLE IV
Representations and Warranties of Universal
Universal represents and warrants to McDermott and the Company as
follows:
4.1 Authority. Universal has full legal right, power and
authority, without the consent of any other Person, to execute and deliver this
Agreement and to carry out the transactions contemplated hereby. All
corporate, shareholder and other acts or proceedings required to be taken by
Universal to authorize the execution, delivery and performance of this
Agreement and the transactions contemplated hereby or thereby have been duly
and properly taken.
4.2 Validity. This Agreement has been, and the documents to be
delivered at Closing will be, duly executed and delivered and constitute
lawful, valid and legally binding obligations of Universal, enforceable in
accordance with their respective terms except to the extent that such
enforceability may be limited by bankruptcy, insolvency, or other similar laws
relating to creditors' rights generally and is subject to general principles of
equity, including the discretion of a court in granting equitable remedies.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not result in the creation of any Lien on
any of the Universal Contributed Assets or the acceleration of any indebtedness
or other obligation applicable to Universal and are not prohibited by, do not
violate or conflict with any provision of, and do not constitute a default
under or a breach of (a) the Charter or By-laws of Universal, (b) any contract,
agreement or other instrument to which Universal is a party or by which
Universal or any of the Universal Contributed Assets are bound, (c) any order,
writ, injunction, decree or judgment of any court or governmental agency, or
(d) any law, rule or regulation applicable to Universal, except for violations,
conflicts or defaults that would not, in the aggregate or individually, have a
material adverse effect on the
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<PAGE> 23
Universal Contributed Assets, in the case of clauses (b), (c) and (d) above.
No approval, authorization, consent or other order or action of or filing with
any court, administrative agency or other governmental authority is required
for the execution and deliver by Universal of this Agreement or such other
agreements and instruments or the consummation by Universal of the transactions
contemplated hereby or thereby.
4.3 Due Organization. Universal is a corporation duly organized,
validly existing and in good standing under the laws of the State of Louisiana,
and has full power and authority and all requisite licenses, permits and
franchises to own, lease and operate the Universal Contributed Assets and to
carry on the business of its New Iberia facility as currently conducted.
Universal is duly qualified to do business as a foreign corporation and is in
good standing in all jurisdictions, domestic and foreign, where failure to be
so licensed or qualified would have a material adverse effect upon the
operation of its New Iberia facility. Schedule 4.3 sets forth an accurate,
correct and complete list of all jurisdictions in which Universal is qualified
to do business in relation to the business of its New Iberia facility.
4.4 Subsidiaries. Universal does not, in relation to the business
of its New Iberia facility, own stock or have any other equity interest in, and
does not control, directly or indirectly, any corporation, association,
partnership, joint venture or other entity and has not had such an ownership or
control relationship with any such entity related to the business of its New
Iberia facility other than as set forth on Schedule 4.4. Schedule 4.4 sets
forth an accurate, correct and complete list of all entities, if any, acquired
by Universal and incorporated in the operations of its New Iberia facility, as
well as businesses previously
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<PAGE> 24
incorporated in the operations of its New Iberia facility which have been
liquidated, sold or otherwise transferred.
4.5 Financial Statements. The financial statements applicable to
the business of Universal's New Iberia facility for the fiscal years ended
March 31, 1991 and March 31, 1992 attached hereto as Schedule 4.5 are in all
material respects (a) in accordance with the books of account and records of
the New Iberia facility, (b) fair presentations of the financial condition and
results of operations of the New Iberia facility as of the dates and for the
periods indicated and (c) prepared in accordance with those accounting
principles used in the operation of the New Iberia facility and applied on a
consistent basis throughout the periods covered thereby.
4.6 Interim Change. Since March 31, 1992 with respect to the
business of the New Iberia facility, there has not been (a) any adverse change
in the financial condition, assets, liabilities, personnel or business of the
New Iberia facility or in its relationships with suppliers, customers, agents,
sales representatives, lessors or others, except changes in the ordinary course
of business; (b) any damage, destruction or loss, whether or not covered by
insurance, adversely affecting the business or assets of the New Iberia
facility; (c) any forgiveness or cancellation of debts or claims, or waiver of
any rights, except in the ordinary course of business; (d) any increase in the
compensation payable by Universal to any of its salaried employees, except in
the ordinary course of business; (e) any work stoppage or labor dispute, except
in the ordinary course of business; (f) any advances to or investments in or
transfers of assets to any other divisions or Affiliates of Universal, except
in the ordinary course of business; (g) any event or condition of any character
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<PAGE> 25
materially adversely affecting the business or assets of the New Iberia
facility; (h) any discharge, satisfaction or payment of any Lien, other than in
the ordinary course of business; or (i) any material change in the credit
practices of the New Iberia facility or in its methods of maintaining books,
accounts or business records, except, in each instance, as disclosed on
Schedule 4.6. Universal has not, in connection with the New Iberia facility,
incurred or become subject to, or agreed to incur or become subject to, any
liability or obligation, contingent or otherwise since March 31, 1992, except
liabilities and obligations in the ordinary course of business or as disclosed
on Schedule 4.5. Since March 31, 1992, Universal has not made any material
decisions affecting the New Iberia facility including (i) changes in agency or
sales representation relationships, inventory levels, management organization
or personnel arrangements with advertising agencies, market research projects,
advertising and promotion budgets or the content of advertisements or working
capital levels (payables, receivables and inventory); (ii) changes in
discretionary costs such as advertising, maintenance and repairs, research and
contracts; (iv) the commencement, conduct or settlement of any litigation; (v)
any capital expenditures or deferral of capital expenditures; (vi) deviation
from plans on sales and profitability; (vii) financial transactions, such as
borrowings, dividends and any intercompany transactions; or (viii) any other
matters affecting the operation of the New Iberia facility, except in the
ordinary course of business or as disclosed on Schedule 4.6.
4.7 Accounts Receivable. All outstanding accounts and notes
receivable included in the Financial Statements attached hereto as part of
Schedule 4.5 or acquired since March 31, 1992 are due and valid claims against
account debtors for goods or services delivered or rendered by the business of
the New Iberia
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<PAGE> 26
facility subject to no defenses, offsets or counterclaims, except as reserved
against on the March 31, 1992 Balance Sheet attached hereto as part of Schedule
4.5 or otherwise reserved against in the ordinary course of business since
March 31, 1992 in a manner consistent with prior practice. All such
receivables arose in the ordinary course of business. No such receivables are
subject to prior Lien except for Liens which will be released of record prior
to the Closing. Universal has not incurred any liabilities to customers for
promotional allowances or otherwise, except as will be discharged in the
ordinary course of business. Schedule 4.7 contains an accurate, correct and
complete accounts receivable aging as of September 30, 1992.
4.8 Inventory. All inventories reflected on the March 31, 1992
Balance Sheet included in the Financial Statements attached hereto as part of
Schedule 4.5 or acquired since March 31, 1992 included in the Universal
Contributed Assets are (i) properly valued at the lower of cost or market value
in accordance with accounting principles used in the business of the New Iberia
facility consistently applied; (ii) of good and merchantable quality and
contain no material amounts that are not salable and unusable for the purposes
intended in the ordinary course of the business of the New Iberia facility; and
(iii) at levels adequate and not excessive in relation to the current
circumstances of the business of the New Iberia facility and in accordance with
past inventory stocking practices. All inventories disposed of subsequent to
March 31, 1992 have been disposed of only in the ordinary course of business
and at prices and under terms that are normal and consistent with past
practice.
4.9 Motor Vehicles. Schedule 4.9 contains an accurate, correct
and complete list of all motor vehicles, including boats or aircraft, used in
the
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business of the New Iberia facility, whether owned or leased. All such
vehicles are properly licensed and registered based on their current use in the
business of the New Iberia facility in accordance with applicable law.
4.10 Insurance. Schedule 4.10 contains an accurate, correct and
complete list and summary description (including the name of the insurer,
coverage, and expiration date) of all binders, policies of insurance or
fidelity bonds maintained by Universal or in which Universal is a named insured
with respect to the New Iberia facility. With respect to the New Iberia
facility (i) all insurance has been issued under valid and enforceable policies
or binders for the benefit of Universal, (ii) all such policies or binders are
in full force and effect, (iii) there are no pending or asserted material
claims against such insurance by Universal, to which the insurers have denied
liability, and (iv) there exist no material claims under such insurance that
have not been properly filed by Universal, except, in each instance, as
disclosed on Schedule 4.10. Schedule 4.10 also sets forth the claims
experience for the last two (2) full fiscal years and the interim period
through the date hereof with respect to the New Iberia facility (both insured
and self-insured).
4.11 Title to Universal Contributed Assets. Universal is the sole
and exclusive legal and equitable owner of all right, title and interest in and
has good and marketable title to all of the Universal Contributed Assets which
Universal purports to own. Except as disclosed on Schedule 4.11, none of the
Universal Contributed Assets which Universal purports to own are subject to (i)
any contract of lease, license or sale, (ii) any Lien, or (iii) any royalty or
commission arrangements, except, in each instance for Permitted Liens.
Attached hereto as Schedule 4.11 is a list as of September 30, 1992, of all
fixed assets
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<PAGE> 28
included in the Universal Contributed Assets which list is accurate, correct
and complete in all material respects.
4.12 Universal Real Property. (a) Schedule 4.12 sets forth an
accurate, correct and complete list of each parcel of real property, owned or
leased, included in the Universal Contributed Assets, including a list of all
written (and to the best of Universal's knowledge all unwritten) contracts and
agreements relating to or affecting such real property or any interest
therein. Universal has delivered to McDermott and the Company accurate,
correct and complete copies, in the case of written contracts and agreements,
or summaries, in the case of unwritten contracts and agreements, as applicable.
Universal is the sole and exclusive legal and equitable owner of all right,
title and interest in and has good, marketable and insurable title in fee
simple absolute to, the real property shown on Schedule 4.12 as owned by it and
has valid insurable leasehold estates in the real property shown on Schedule
4.12 as leased by it, and is in possession of said real property, including the
buildings, structures, sidetracks, and improvements situated thereon and
appurtenances thereto, in each case free and clear of all Liens, other than
Permitted Liens. All rents, royalties, and other charges accruing under the
leases of the real property shown on Schedule 4.12 as leased by Universal
through the date of this Agreement have been duly paid other than amounts being
disputed in good faith and Universal enjoys peaceable and undisturbed
possession under all such leases. The leases of the real property shown on
Schedule 4.12 are in full force and effect and are valid, binding and
enforceable in accordance with the respective terms as to Universal and, to the
best of Universal's knowledge, the other parties to any such lease. Universal
is not in default under any such lease and, to the best of Universal's
knowledge, no default or event of default by the other parties to any such
lease, and no
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<PAGE> 29
event that with the giving of notice or passage of time or both, would
constitute a default by any other party to any such lease, has occurred and is
continuing under the terms of any such lease. The consummation of the
transactions contemplated hereby will not constitute a default under any such
lease.
(b) Neither the whole nor any portion of the real property has
been condemned, requisitioned or otherwise taken by any public authority, and
no written notice of any such condemnation, requisition or taking has been
received. To the best of Universal's knowledge, no such condemnation,
requisition or taking is threatened or contemplated. Universal has no
knowledge of any public improvements which may result in special assessments
against or otherwise affecting the real property.
(c) The Universal Contributed Assets are in compliance with all
applicable zoning, building, health, fire, water, use or similar statutes,
ordinances, laws, regulations or codes, except where failure to comply will not
have a material adverse effect on the operations of Universal's New Iberia
facility or the Universal Contributed Assets. The zoning of each parcel of
real property permits the existing improvements and the operation of
Universal's New Iberia facility as presently conducted thereon. Universal has
all easements and rights, including easements for all utilities, services,
roadways, railways and other means of ingress and egress, necessary to operate
its New Iberia facility as presently conducted. The real property as conveyed
and the leases assigned pursuant to this Agreement shall include all rights to
any off-site facilities necessary to ensure compliance in all material respects
with all zoning, building, health, fire, water, use or similar statutes,
ordinances, laws, regulations or codes. To the best of Universal's knowledge,
no fact or condition
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<PAGE> 30
exists which would result in the termination or impairment of access to the
real property included in the Universal Contributed Assets or discontinuation
of necessary sewer, water, electric, gas, telephone or other utilities or
services.
(d) At the Closing, Universal will deliver to the Company any
consents or approvals of any parties required in connection with the assignment
of the leases of the real property shown on Schedule 4.12 to the Company that
are Indispensable Consents.
4.13 Personal Property Leases. Schedule 4.13 contains an accurate,
correct and complete list of all leases of personal property used in the
operation of Universal's New Iberia facility (the "Personal Property Leases").
Universal has delivered to McDermott and the Company an accurate, correct and
complete copy of each such Personal Property Lease. With respect to such
Personal Property Leases:
(a) The Personal Property Leases are in full force and effect and
are valid, binding and enforceable in accordance with their
respective terms as to Universal and, to the best of
Universal's knowledge, the other parties thereto;
(b) No amounts payable under any Personal Property Lease are past
due other than amounts being disputed in good faith;
(c) Universal and, to the best of Universal's knowledge, each
other party thereto has complied with all commitments and
obligations on
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its part to be performed or observed under each Personal
Property Lease;
(d) Universal has not received any notice of a default, offset or
counterclaim under any Personal Property Lease, or any other
communication calling upon it to comply with any provision of
any Personal Property Lease or asserting noncompliance, and no
event or condition had happened or presently exists as to
Universal or, to the best of Universal's knowledge, any other
party thereto, which constitutes a default or, after notice or
lapse of time or both, would constitute a default under any
Personal Property Lease has occurred and is continuing; and
(e) Universal has good and marketable title to each Personal
Property Lease and there does not now exist any Lien created
or suffered to exist on the leasehold interest created under
any Personal Property Lease other than UCC-1 forms filed by
the Lessor of leased personal property for public notice
purposes. The consummation of the transactions contemplated
hereby will not constitute a default under any Personal
Property Lease; and
(f) At the Closing, Universal will deliver to the Company any
consents or approvals of any parties required in connection
with the assignment of the Personal Property Leases to the
Company that are Indispensable Consents.
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<PAGE> 32
4.14 Condition of Assets. The assets and properties utilized in
the Universal Contributed Assets, whether owned or leased, are in all material
respects in good operating condition and repair (reasonable wear and tear
excepted) and are suitable for the purposes for which they are presently being
used. Such assets and properties conform to all applicable statutes,
ordinances, laws, regulations and codes, except for such variations as do not
impair or interfere with the use of such property and assets for the purposes
for which they are employed, and Universal has not received any written notice
to the contrary. The Universal Contributed Assets include all properties and
assets the ownership, holding or use of which is necessary for the operation of
Universal's New Iberia facility as presently operated.
4.15 Intellectual Property. Schedule 4.15 contains an accurate,
correct and complete list of all patents, trademarks, trademark rights, service
marks, copyrights and applications for any of the foregoing utilized by
Universal in the operation of its New Iberia facility (the "Intellectual
Property"). During the preceding five (5) years, Universal, in its operation
of its New Iberia facility, has not been known by or done business under any
name other than those listed on Schedule 4.15. Schedule 4.15 also contains an
accurate, correct and complete list of all licenses and other agreements
relating to any Intellectual Property. Except as set forth on Schedule 4.15,
none of the Intellectual Property is subject to any extensions, renewals, taxes
or fees due within ninety (90) days after Closing. Except as set forth on
Schedule 4.15, with respect to the Intellectual Property, (a) Universal is the
sole and exclusive owner and has the sole and exclusive right to use the
Intellectual Property; (b) no action, suit, arbitration, or legal,
administrative or other proceeding, or governmental investigation is pending,
or, to the best of Universal's knowledge, threatened,
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which involves any Intellectual Property; (c) none of the Intellectual Property
infringes upon, conflicts with or otherwise violates the rights of others or is
being infringed upon by others, and none is subject to any outstanding order,
decree, judgment, stipulation or change; (d) there are no royalty, commission
or similar arrangements, and no licenses, sublicenses or agreements pertaining
to any of the Intellectual Property; (e) Universal has not received any charge
of interference or infringement of or by the Intellectual Property; (f)
Universal has not agreed to indemnify any person or entity for or against any
infringement of or by the Intellectual Property; (g) Universal has no knowledge
of any patent, invention or application therefor or similar property which
would infringe upon any of the Intellectual Property or adversely affect the
manufacture, distribution or sale of products or services registered under
applicable law; and (h) the Intellectual Property constitutes all such assets,
properties and rights which are necessary to operate Universal's New Iberia
facility as it is presently operated. The conduct of the business of the New
Iberia facility by the Company after the Closing in the manner and geographic
area in which the business of Universal's New Iberia facility is currently
conducted by Universal will not infringe upon any asserted rights of others
with respect to the current trade dress or packaging of any products relating
to the products sold or serviced rendered by Universal at its New Iberia
facility. Universal is not subject to any judgment, order, writ, injunction or
decree of any court or any Federal, state, local or other governmental
department, commission, board, bureau, agency of instrumentality, domestic or
foreign, or any arbitrator, or has entered into or is a party to any contract
which restricts or impairs the use of any Intellectual Property rights.
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4.16 Software and Information Systems. Except as set forth on
Schedule 4.16, Universal has the sole and exclusive right, title and interest
to all electronic data processing systems, information systems, computer
software, programs, program specifications and narrative descriptions, flow
charts and other related material used by Universal at its New Iberia facility
other than any of the foregoing used at Universal's New Iberia facility
pursuant to a commercially available non-exclusive end-user lease or license
agreement (collectively the "Software"). Schedule 4.16 contains an accurate,
correct and complete list of all Software and identifies (i) Software which is
owned by Universal ("Owned Software"); (ii) Software which is licensed to
Universal ("Licensed Software") and (iii) any other Software in which Universal
has any use, possessory or proprietary rights applicable to its New Iberia
facility. Except as set forth on Schedule 4.15, all of the Owned Software and
all related source codes and other documentation pertaining to such Owned
Software is owned solely by Universal and has not been disclosed to any
unaffiliated Person. Except as set forth on Schedule 4.16, all Software and
all related source code and any other documentation pertaining to such Software
owned by or licensed to Universal and all copies thereof are and at the Closing
Date shall be located at Universal's New Iberia facility. Universal has no
knowledge of any violation of trade secret rights or copyrights with respect to
the Software. All pending software systems development projects relating
primarily to Universal's New Iberia facility are described in Schedule 4.16,
together with an identification of the Persons undertaking such projects.
4.17 Customers and Suppliers. Except as disclosed in Schedule
4.17, all sales contracts and orders with customers and suppliers of
Universal's New Iberia facility were entered into by or on behalf of Universal
and were entered into in
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the ordinary course of business for usual quantities and at normal prices. Set
forth on Schedule 4.17 is a list of the ten (10) largest customers and
suppliers of Universal's New Iberia facility, determined on the basis of
revenues from items sold (with respect to customers) or costs or items
purchased (with respect to suppliers) for the fiscal year ended March 31, 1992.
Except as disclosed on such Schedule, Universal does not know and has no reason
to believe that any such customer or supplier will cease to do business with
the Company after, or as a result of, the consummation of the transactions
contemplated hereby. Except as disclosed in Schedule 4.17, Universal does not
know of any fact, condition or event which would adversely affect its
relationship with any customer.
4.18 Employees. (a) Schedule 4.18 contains an accurate, correct
and complete list of all of the current employees of Universal employed by it
in the business conducted at its New Iberia facility, showing current rate of
cash compensation (including bonuses and commissions), date of employment,
summary job descriptions, any employment contracts currently in effect with any
such employees, and any interests of such employees in any incentive
compensation plan of Universal. Except as noted thereon, none of the employees
listed on Schedule 4.18 is eligible for payments that would constitute
"parachute payments" under Section 280G of the Internal Revenue Code of 1986,
as amended (the "Code"). There are no controversies or work stoppages pending,
or to the best of Universal's knowledge, threatened involving any employee or
group of employees. No union organizing or election activities involving any
non-union employees of Universal are in progress or, to the best of Universal's
knowledge threatened.
(b) Universal is in substantial compliance and has not received
notice of noncompliance with any laws relating to the employment of labor,
including
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laws relating to occupational safety and health, workers' compensation,
unemployment insurance, affirmative action, wage payment, wrongful termination,
labor relations, and the payment of social security and other taxes. To the
best of Universal's knowledge, except as disclosed in the Schedules hereto,
there is not and will not be any liability of the Company arising out of claims
made or suits brought by employees of Universal, including workers'
compensation claims and any claims or suits under the Worker Adjustment and
Retraining Notification Act ("WARN ACT"), occupational health and safety,
environmental, consumer protection, equal employment, wage and hour, collective
bargaining, arbitration, unemployment insurance, affirmative action, wage
payment, wrongful termination, labor relations matters, claims or suits for
contribution to, or indemnification of, Third Parties for harm, injury,
sickness, disease, death or termination of employment of any person (including
any employee or former employee or any contractor or subcontractor of Universal
or any agent or distributor of Universal, to the extent attributable to an
event occurring or a state of facts existing prior to the Effective Time.
(c) There are no collective bargaining agreements currently in
effect relating to the employees of Universal employed by it in the business
conducted at its New Iberia facility.
4.19 Employee Benefits Plan. Schedule 4.19 lists each "employee
pension benefit plan" as defined in Section 3(2) of ERISA and each "employee
welfare plan" as defined in Section 3(l) of ERISA, under which any current
employee of Universal employed by it in the business conducted at its New
Iberia facility participates. Schedule 4.19 also lists each plan, policy,
arrangement or practice which provides bonus, deferred compensation, incentive
or other
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compensation, and any other fringe benefits to any current employee of
Universal employed by it in the business conducted at its New Iberia facility.
Universal has previously delivered to McDermott and the Company true and
complete copies of all documents and instruments establishing or constituting
any plan, arrangement, policy or practice listed on Schedule 4.19.
4.20 No Fraudulent Conveyance. Universal is solvent, having assets
which at a fair valuation exceed its liabilities, and Universal is able to meet
its debts as they mature and will not become insolvent as a result of the
transactions contemplated hereby. Universal is not entering into the
transactions contemplated by this Agreement with the intent to hinder, delay or
defraud any Person to which it is indebted. Following consummation of the
transactions contemplated by this Agreement, Universal will have sufficient
capital and property remaining to conduct the businesses in which it will
thereafter be engaged.
4.21 Material Contracts. (a) Schedule 4.21 contains an accurate,
correct and complete list of all contracts, customer orders, lease, licenses,
purchase order and other commitments related to Universal's New Iberia facility
to which Universal is a party or bound, or by which any of the Universal
Contributed Assets are subject or bound, meeting any of the descriptions set
forth below (the "Material Contracts"):
(i) Personal Property Leases, insurance, licenses of Intellectual
Property, employment contracts, employee benefit plans,
Licenses and Permits;
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(ii) Any contract, purchase order or other commitment for capital
expenditures for the purchase of any materials, parts,
supplies or services in excess of $10,000.00 except those
incurred in the ordinary course of business and having a term
of one year or less;
(iii) Any contract, purchase order or other commitment for the
purchase of machinery, equipment or fixtures or any
construction or other similar agreement involving any
expenditure in excess of $10,000;
(iv) Any contract, customer order or other commitment obligating
Universal to sell or deliver any product or service at a price
which does not cover the cost (including labor, materials and
production overhead) plus the customary profit margin
associated with such product or service;
(v) Any instrument evidencing or relating to indebtedness,
obligation or liability for borrowed money, or liability for
the deferred purchase price of property in excess of
$10,000.00 (excluding normal trade payables), or any
instrument guaranteeing or in effect guaranteeing any
indebtedness, obligation or liability, or any obligation to
incur any indebtedness, obligation or liability and all
outstanding standby letters of credit or performance bonds;
(vi) Any joint venture, partnership or other cooperative
arrangement or any other agreement involving a sharing of
profits or involving the business conducted at Universal's New
Iberia facility;
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(vii) Distributor, dealer, sales representative, agency, franchise
or advertising contract not terminable without payment or
penalty on sixty (60) days (or less) notice;
(viii) Any deed, lease, agreement or other instrument affecting any
right, title and interest in or to real property;
(ix) Any contract, lease, license, permit or other commitment with
any governmental or any agency or instrumentality thereof;
(x) Any contract, lease, license, purchase order or other
commitment with respect to the discharge or removal of
hazardous materials, hazardous substances, or hazardous
wastes of any nature;
(xi) Licenses, confidentiality or royalty agreements;
(xii) Powers of attorney; and
(xiii) Any other contract, customer order, lease, license, purchase
order or other commitment related to Universal's New Iberia
facility (other than contracts excluded by an express
exception from the descriptions set forth in subsections (i)
through (xii) above) which (A) provides for payment or
performance by either party thereto having an aggregate value
of $25,000.00 or more, (B) is not terminable without payment
or penalty on sixty (60) days (or less) notice, (C) is between
an Affiliate and Universal, or (D) was
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entered into outside of the ordinary course of business
conducted at Universal's New Iberia facility.
All Material Contracts are in full force and effect and, as to Universal and,
to best of Universal's knowledge, the other parties thereto, are valid, binding
and enforceable in accordance with their terms and as to Universal and, to be
best of Universal's knowledge, the other parties thereto, there are no
defaults, offsets, counterclaims or defenses thereunder, and Universal has
received no notice of default, offset counterclaim or defense under any such
Material Contracts. Neither Universal, nor, to the best of Universal's
knowledge, the other party to any Material Contract is in breach of any
provision of, in violation of, or in default under the terms of any Material
Contract, except where such breach, violation or default will not have a
material adverse effect on the business conducted at Universal's New Iberia
facility. No event has occurred, as to Universal and, to the best of
Universal's knowledge, the other party thereto, which is or after the giving of
notice or passage of time or both, will constitute a default under or result in
the breach of any Material Contract by Universal, or, to the best of
Universal's knowledge, by any other party, except where such breach, violation
or default will not have a material adverse effect. Accurate, correct and
complete copies or summaries, as applicable, of each Material Contract have
been delivered or made available to McDermott and the Company. Universal has
not received notice that any party to any Material Contract intends to cancel
or terminate such Material Contract or to exercise or not exercise options or
rights under such Material Contract. All liabilities and obligations of
Universal to be paid or performed on or before the Effective Time under each
Material Contract have been, or will have been on the Effective Time, fully
paid or performed.
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(b) Except as listed on Schedule 4.21, there are neither any
completed or in-process contracts, customer orders or other commitments of the
type described in Section 4.21(a)(iv) hereof nor related insurance policies
that are subject to further financial adjustment as a result of contractual
audit rights or other rights of any Person, including any government or any
department, branch or agency thereof.
(c) With respect to all current or previously entered into
contracts, customers orders, leases, licenses, purchase orders or other
commitments imposing an obligation of confidentiality upon Universal, neither
Universal nor any of its officers, employees or agents:
(i) have knowingly disclosed confidential information in
circumstances which could result in a claim from a Third
Party; or
(ii) know of any facts which might result in such a claim; or
(iii) are presently involved in a dispute arising out of such a
claim.
(d) Except as disclosed on Schedule 4.21 hereto, in relation to
backlog or in-process contracts, customer orders, or other commitments with
customers of Universal, each of them:
(i) has a period of less than twelve (12) months of performance
from the Effective Time until its expiration or termination;
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(ii) is capable of being fulfilled or performed on time without
undue or unusual expenditures of money or effort;
(iii) accurately reflects the value of an arms-length basis of the
services or goods in consideration of which any payment or
receipt of funds has been or is to be made; and
(iv) does not involve nor is likely to involve obligations or
liabilities which by reason of that nature or magnitude ought
reasonably to be made known to any intended purchaser of
Universal's New Iberia facility.
4.22 Taxes. (a) Universal has filed, been included in or sent, or
will file, be included in or send, all returns, declarations and reports and
all information returns and statements required to be filed or sent by or with
respect to it in respect of taxes of any kind (including income, excise,
franchise, property, value added, employment, sales and use taxes) and shall be
responsible for all audits, examinations, proceedings and determinations for
any period ending on or before the Effective Time and all taxes due and payable
on or prior to the Effective Time have been or will be paid in full or
adequately reserved for on the books of Universal. There are no tax liens on
any of the Universal Contributed Assets and no basis exists for the imposition
of any such liens except for ad valorem property, real estate and similar type
taxes which are not yet due and payable.
(b) The Company shall be responsible for the payment of all taxes
due and payable after the Effective Time and the filing of all returns,
declarations and
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reports and all information returns and statements required to be filed or sent
by or with respect to it in respect of taxes of any kind and shall be
responsible for all audits, examinations, proceedings and determinations for
any period ending after the Effective Time to the extent applicable to the
Universal Contributed Assets.
4.23 Product and Service Warranties. Except as described in
Schedule 4.23, since 1980, no product or service warranty or similar claims
have been made against Universal in connection with the business conducted at
its New Iberia facility.
4.24 Product Liability Claims. Except as set forth in Schedule
4.24, since 1980, Universal has not received notice or information as to any
claim or allegation of personal death or personal injury, property, or economic
damages, any claim for punitive or exemplary damages, any material claim for
contribution or indemnification, or any claim for injunction relief in
connection with any product manufactured, sold or distributed or any service
provided in connection with the business conducted at its New Iberia facility.
4.25 Litigation. Except as set forth in Schedule 4.25, Universal is
not engaged in or a party or, to the best of Universal's knowledge, threatened
with any complaint, charge, suit, action, proceeding, hearing, investigation or
legal, administrative, arbitration or other method of settling disputes or
disagreements or governmental investigation, in connection with the operation
of its New Iberia facility. Universal has not received written notice of any
investigation in connection with the operation of its New Iberia facility
threatened or contemplated by any foreign, Federal, state or local governmental
or regulatory
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authority, which remains unresolved, including those involving the safety of
products, the safe working conditions of employees, employment practices or
policies. Except as set forth in Schedule 4.25, neither Universal, in
connection with the operations of its New Iberia facility, nor any of the
Universal Contributed Assets is subject to any judgment, order, writ,
injunction, stipulation or decree of any court or any Federal, state, local or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or any arbitrator.
4.26 Licenses and Permits. Schedule 4.26 contains an accurate,
correct and complete list of each license, certificate, approval, exemption,
franchise, registration, variance, accreditation, authorization and permit
(collectively the "Licenses and Permits") held by Universal in connection with
the operation of its New Iberia facility, as well as the trade association or
the foreign, Federal, state or local jurisdiction issuing such Licenses and
Permits, and the type and number of such License or Permit, including all
Licenses and Permits held by Universal which pertain to the manufacture,
storage, sale, taxation, transport, export or import of products or any
services provided and which relate to its New Iberia facility. Such Licenses
and Permits are valid and in full force and effect and there are no pending,
or, to the best of Universal's knowledge, threatened proceedings which could
result in the termination, revocation, limitation or impairment of any License
or Permit. Universal has all certificates, licenses, permits, approvals,
franchises, registrations, accreditations and other authorizations as are
necessary or appropriate in order to own and operate its New Iberia facility
and to own, occupy and lease its property, as the New Iberia facility is
currently operated. Universal has not received any written notice from any
governmental authority to the effect that
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any additional licenses or permits are required. Universal has not breached or
defaulted under, nor, to the best of Universal's knowledge is alleged to have
breached or defaulted under, any of the Licenses or Permits, except where such
breach or default will not have a material adverse effect on the business
conducted at its New Iberia facility. Except as discussed in Schedule 4.26, no
violations have been recorded in respect of any such Licenses and Permits.
4.27 Compliance with Law. The Universal Contributed Assets conform
in all respect with all applicable laws, ordinances, codes, licensing
requirements, rules and regulations, except for such variations as do not
materially impair or interfere with the use for which such Universal
Contributed Assets are employed, and Universal has not received any written
notice to the contrary. Universal has complied in all respects with all laws,
ordinances, regulations, licensing requirements, rules, decrees, awards or
orders applicable to the operation of its New Iberia facility, except where
failure to comply will not have a material adverse affect, including those
related to wages, hours, hiring, promotions, retirement, working conditions,
use and occupancy of improvements, non-discrimination, health, safety,
pensions, employee benefits, the production, marketing, sale and distribution
of products, labeling of products, trade regulation, antitrust, warranties and
control of foreign exchange; and there is not and will not be any liability as
of the Effective Time arising from or relating to any violations thereof,
except where such liability will not have a material adverse effect. Universal
has not received any written notice from any Person of any violation of any
law, ordinance, code, rule or regulation or requiring or calling attention to
the necessity of any work, repairs, new construction, installation or
alteration in connection with the Universal Contributed Assets.
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4.28 Environmental Matters. (a) The Universal Contributed Assets
comply in all respects with all federal, state, and local statutes, laws,
ordinances, orders, codes, rules, and regulations relating to pollution or the
protection of the environment, including, without limitation, all laws and
regulations governing the generation, use, collection, treatment, storage,
transportation, recovery, removal, release, discharge or disposal of hazardous
materials, hazardous substances, or hazardous wastes, except for such
variations as do not materially impair or interfere with the use of which
Universal's New Iberia facility and such Universal Contributed Assets are
employed and Universal has not received any notice to the contrary. The
Universal Contributed Assets have not been used by any previous owners and/or
operators or by Universal to treat, store, handle, transfer, process,
transport, discharge, dispose of or otherwise release hazardous materials,
hazardous substances, or hazardous wastes which has caused, is causing or could
by the acts or omissions of Universal or its Affiliates cause contamination to
Universal's New Iberia facility and the Universal Contributed Assets or the
environment. For purposes of this Agreement the terms "hazardous materials",
"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 as in effect on the date hereof; (ii) the Resource Conservation and
Recovery Act of 1976, 42 U.S.C. Sections 6901-6991, as amended by the Hazardous
and Solid Waste Amendments of 1984, and any amendments thereto and regulations
thereunder as in effect as of the date hereof; or (iii) to the extent not
inconsistent with the definitions contained in the acts and regulations listed
in (i) and (ii) above, any other federal, state or local
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environmental law or regulation. For purposes of this Agreement, the term
"contamination" shall mean the uncontained presence of hazardous materials,
hazardous substances or hazardous wastes which may require remediation under
any applicable statutes, ordinances, laws, regulations or codes.
(b) The Universal Contributed Assets have not been subject to any
administrative or judicial proceedings pursuant to, and Universal has not
received any notice of any violations by the Universal Contributed Assets of,
any of the statutes, ordinances, laws, regulations or codes described in
Section 4.28(a), and Universal has no knowledge of any facts or circumstances
that could reasonably form the basis of a claim or citation against Universal's
New Iberia facility and the Universal Contributed Assets for a violation of any
such statutes, ordinances, laws, regulations or codes. Universal has no
knowledge of any notification having been filed with regard to a release of
hazardous materials, hazardous substances or hazardous wastes at, from or into
its New Iberia facility.
(c) None of the storage tanks located at Universal's New Iberia
facility (including any such storage tanks previously abandoned or removed)
containing hazardous materials, hazardous wastes, hazardous substances, or
petroleum (including crude oil or any fraction thereof) currently leak or have
in the past leaked. There are no asbestos- containing materials that have been
exposed in or at Universal's New Iberia facility through demolition, renovation
or otherwise. None of the electrical transformers, fluorescent light fixtures
or other equipment included in the Universal Contributed Assets contain
polychlorinated biphenyls.
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4.29 Brokers. Universal has not retained any broker or finder
pursuant to any contract or arrangement in connection with the transactions
contemplated hereby under which such broker or finder could be entitled to a
fee or commission from McDermott or the Company.
4.30 Full Disclosure. No representation or warranty of Universal
contained herein or made hereunder and no certificate, schedule, or other
agreement, instrument or document furnished or to be furnished by Universal in
connection with the transactions contemplated hereby contains or will contain
misstatement of material fact, or omits or will omit to state a material fact
required to be stated herein or therein in order to make the statements
contained herein or therein in light of the circumstances under which they were
made not misleading.
ARTICLE V
Representations and Warranties of McDermott
McDermott represents and warrants to Universal and the Company as
follows:
5.1 Authority. McDermott has full legal right, power and
authority, without the consent of any other Person, to execute and deliver this
Agreement and to carry out the transactions contemplated hereby. All corporate
and other acts or proceedings required to be taken by McDermott to authorize
the execution, delivery and performance of this Agreement and all transactions
contemplated hereby have been duly and properly taken.
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5.2 Validity. This Agreement has been, and the documents to be
delivered at Closing will be, duly executed and delivered and constitute
lawful, valid and legally binding obligations of McDermott, enforceable in
accordance with their respective terms except to the extent that such
enforceability may be limited by bankruptcy, insolvency, or other similar laws
relating to creditors' rights generally and is subject to general principles of
equity, including the discretion of a court in granting equitable remedies.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not result in the creation of any Lien on
any of the McDermott Contributed Assets or the acceleration of any indebtedness
or other obligation applicable to McDermott and are not prohibited by, do not
violate or conflict with any provision of, and do not constitute a default
under or a breach of (a) the Charter or By-laws of McDermott, (b) any contract,
agreement or other instrument to which McDermott is a party or by which
McDermott or any of the McDermott Contributed Assets is bound, (c) any order,
writ, injunction, decree or judgment of any court or governmental agency, or
(d) any law, rule or regulation applicable to McDermott, except for violations,
conflicts or defaults that would not, in the aggregate or individually, have a
material adverse effect on the McDermott Contributed Assets, in the case of
clauses (b), (c) and (d) above. No approval, authorization, consent or other
order or action of or filing with any court, administrative agency or other
governmental authority is required for the execution and deliver by McDermott
of this Agreement or such other agreements and instruments or the consummation
by McDermott of the transactions contemplated hereby or thereby.
5.3 Due Organization. McDermott is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and has
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full power and authority and all requisite licenses, permits and franchises to
own, lease and operate the McDermott Contributed Assets and to carry on the
operations of its facility in New Iberia facility as conducted prior to its
recent shutdown. McDermott is duly qualified to do business as a foreign
corporation and is in good standing in all jurisdictions, domestics or foreign,
where failure to be so licensed or qualified would have a material adverse
effect upon the McDermott Contributed Assets.
5.4 Subsidiaries. McDermott does not, in connection with the
business of its New Iberia facility, own stock or have any other equity
interest in, and does not control, directly or indirectly, any corporation,
association, partnership, joint venture or other entity and has not had such an
ownership or control relationship with any such entity related to the business
of its New Iberia facility other than as set forth on Schedule 5.4. Schedule
5.4 sets forth an accurate, correct and complete list of all entities, if any,
acquired by McDermott and incorporated in the operations of its New Iberia
facility, as well as businesses previously incorporated in the operations of
its New Iberia facility which have been liquidated, sold or otherwise
transferred.
5.5 Title to McDermott Contributed Assets. McDermott is the sole
and exclusive legal and equitable owner of all right, title and interest in and
has good and marketable title to all of the McDermott Contributed Assets which
McDermott purports to own. Except as disclosed on Schedule 5.5, none of the
McDermott Contributed Assets which McDermott purports to own are subject to (i)
any contract of lease, license or sale, (ii) any Lien, or (iii) any royalty or
commission arrangements, except, in each instance for Permitted Liens.
Attached hereto as Schedule 5.5 is a list as of September 30, 1992, of all
fixed assets
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included in the McDermott Contributed Assets which list is accurate, correct
and complete in all material respects.
5.6 McDermott Real Property. (a) Schedule 5.6 sets forth an
accurate, correct and complete list of each parcel of real property included in
the McDermott Contributed Assets, including a list of all written (and to the
best of McDermott's knowledge all unwritten) contracts and agreements relating
to or affecting such real property or any interest therein. McDermott has
delivered to Universal and the Company accurate, correct and complete copies,
in the case of written contracts and agreements, or summaries, in the case of
unwritten contracts and agreements. McDermott is the sole and exclusive legal
and equitable owner of all right, title and interest in and has good,
marketable and insurable title in fee simple absolute to the real property
shown on Schedule 5.6 and is in possession of said real property, including the
buildings, structures, sidetracks, and improvements situated thereon and
appurtenances thereto, in each case free and clear of all Liens, other than
Permitted Liens.
(b) Neither the whole nor any portion of the real property has
been condemned, requisitioned or otherwise taken by any public authority, and
no written notice of any such condemnation, requisition or taking has been
received. To the best of McDermott's knowledge, no such condemnation,
requisition or taking is threatened or contemplated. McDermott has no
knowledge of any public improvements which may result in special assessments
against or otherwise affecting the real property.
(c) The McDermott Contributed Assets are in compliance with all
applicable zoning, building, health, fire, water, use or similar statutes,
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ordinances, laws, regulations or codes, except where failure to comply will not
have a material adverse effect on the operations of McDermott's New Iberia
facility or the McDermott Contributed Assets. The zoning of each parcel of
real property permits the existing improvements and the operation of
McDermott's New Iberia facility as conducted thereon prior to its recent
shutdowns. McDermott has all easements and rights, including easements for all
utilities, services, roadways, railways and other means of ingress and egress,
necessary to operate its New Iberia facility as conducted prior to its recent
shutdown. The real property as conveyed shall include all rights to any
off-site facilities necessary to ensure compliance in all material respects
with all zoning, building, health, fire, water, use or similar statutes,
ordinances, laws, regulations, and codes. To the best of McDermott's
knowledge, no fact or condition exists which would result in the termination or
impairment of access to the real property included in the McDermott Contributed
Assets or discontinuation of necessary sewer, water, electric, gas, telephone
or other utilities or services.
5.7 Condition of Assets. The assets and properties included in
the McDermott Contributed Assets, whether owned or leased, are in all material
respects in good operating condition and repair (reasonable wear and tear and
damage from Hurricane "Andrew" excepted) and are suitable for the purposes for
which they are presently being used. Such assets and properties conform to all
applicable statutes, ordinances, laws, regulations and codes, except for such
variations as do not impair or interfere with the use of such property and
assets for the purposes for which they were employed prior to their recent
shutdown, and McDermott has not received any written notice to the contrary.
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5.8 No Fraudulent Conveyance. McDermott is solvent, having assets
which at a fair valuation exceed its liabilities, and McDermott is able to meet
its debts as they mature and will not become insolvent as a result of the
transactions contemplated hereby. McDermott is not entering into the
transactions contemplated by this Agreement with the intent to hinder, delay or
defraud any Person to which it is indebted. Following consummation of the
transactions contemplated by this Agreement, McDermott will have sufficient
capital and property remaining to conduct the businesses in which it will
thereafter be engaged.
5.9 Taxes. (a) McDermott has filed, been included in or sent, or
will file, be included in or send, all returns, declarations and reports and
all information returns and statements required to be filed or sent by or with
respect to it in respect of taxes of any kind (including income, excise,
franchise, property, value added, employment, sales and use taxes) and shall be
responsible for all audits, examinations, proceedings and determinations for
any period ending on or before the Effective Time and all taxes due and payable
on or prior to the Effective Time have been or will be paid in full or
adequately reserved for on the books of McDermott. There are no tax liens on
any of the McDermott Contributed Assets and no basis exists for the imposition
of any such liens except for ad valorem property, real estate and similar type
taxes which are not yet due and payable.
(b) The Company shall be responsible for the payment of all taxes
due and payable after the Effective Time and the filing of all returns,
declarations and reports and all information returns and statements required to
be filed or sent by or with respect to it in respect of taxes of any kind and
shall be responsible
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for all audits, examinations, proceedings and determinations for any period
ending after the Effective Time to the extent applicable to the McDermott
Contributed Assets.
5.10 Litigation. Except as set forth in Schedule 5.10, McDermott is
not engaged in or a party or, to the best of McDermott's knowledge, threatened
with any complaint, charge, suit, action, proceeding, hearing, investigation or
legal, administrative, arbitration or other method of settling disputes or
disagreements or governmental investigation, in connection with its New Iberia
facility. McDermott has not received written notice of any investigation in
connection with the operation of the business conducted at the New Iberia
facility prior to its recent shutdown threatened or contemplated by any
foreign, Federal, state or local governmental or regulatory authority, which
remains unresolved, including those involving the safety of products, the safe
working conditions of employees, employment practices or policies. Except as
set forth in Schedule 5.10, neither McDermott, in connection with its New
Iberia facility, nor any of the McDermott Contributed Assets is subject to any
judgment, order, writ, injunction, stipulation or decree of any court or any
Federal, state, local or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, or any arbitrator.
5.11 Licenses and Permits. Schedule 5.11 contains an accurate,
correct and complete list of the Licenses and Permits held by McDermott
applicable to the operation of its New Iberia facility, as well as the trade
association or the foreign, Federal, state or local jurisdiction issuing such
Licenses and Permits, and the type and number of such License or Permit,
including all Licenses and Permits held by McDermott which pertain to the
manufacture, storage, sale,
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taxation, transport, export or import of products or any services provided and
which relate primarily to the business conducted at its New Iberia facility
prior to its recent shutdown. Such Licenses and Permits are valid and in full
force and effect and there are no pending, or, to the best of McDermott's
knowledge, threatened proceedings which could result in the termination,
revocation, limitation or impairment of any License or Permit. McDermott has
all certificates, licenses, permits, approvals, franchises, registrations,
accreditations and other authorizations as are necessary or appropriate to
operate the New Iberia facility in the manner operated prior to its recent
shutdown. McDermott has not received any written notice from any governmental
authority to the effect that any additional licenses or permits are required.
McDermott has not breached or defaulted under, nor, to the best of McDermott's
knowledge is alleged to have breached or defaulted under, any of the Licenses
or Permits, except where such breach or default would not have a material
adverse effect on the business conducted at the New Iberia facility prior to
its recent shutdown. Except as discussed in Schedule 5.11, no violations have
been recorded in respect of any such Licenses and Permits.
5.12 Compliance with Law. The McDermott Contributed Assets conform
in all respect with all applicable laws, ordinances, codes, licensing
requirements, rules and regulations, except for such variations as do not
materially impair or interfere with the use for which such McDermott
Contributed Assets are employed, and McDermott has not received any written
notice to the contrary. McDermott complied in all respects with all laws,
ordinances, regulations, licensing requirements, rules, decrees, awards or
orders applicable to the business or operations of its New Iberia facility
prior to its recent shutdown, except where failure to comply would not have a
material adverse affect, including those
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related to wages, hours, hiring, promotions, retirement, working conditions,
use and occupancy of improvements, non- discrimination, health, safety,
pensions, employee benefits, the production, marketing, sale and distribution
of products, labeling of products, trade regulation, antitrust, warranties and
control of foreign exchange; and there is not and will not be any liability as
of the Effective Time arising from or relating to any violations thereof,
except where such liability will not have a material adverse effect. McDermott
has not received any written notice from any Person of any violation of any
law, ordinance, code, rule or regulation or requiring or calling attention to
the necessity of any work, repairs, new construction, installation or
alteration in connection with the McDermott Contributed Assets.
5.13 Environmental Matters. (a) The McDermott Contributed Assets
comply in all respects with all federal, state, and local statutes, laws,
ordinances, orders, codes, rules, and regulations relating to pollution or the
protection of the environment, including, without limitation, all laws and
regulations governing the generation, use, collection, treatment, storage,
transportation, recovery, removal, release, discharge or disposal of hazardous
materials, hazardous substances, or hazardous wastes, except for such
variations as do not materially impair or interfere with the use of which such
McDermott Contributed Assets were employed prior to their recent shutdown and
McDermott has not received any written notice to the contrary. The McDermott
Contributed Assets have not been used by any previous owners and/or operators
or by McDermott to treat, store, handle, transfer, process, transport,
discharge, dispose of or otherwise release hazardous materials, hazardous
substances, or hazardous wastes which has caused, is causing or could by the
acts or omissions of McDermott or
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its Affiliates cause contamination to the McDermott Contributed Assets or the
environment.
(b) The McDermott Contributed Assets have not been subject to any
administrative or judicial proceedings pursuant to, and McDermott has not
received any notice of any violations by the McDermott Contributed Assets of,
any of the statutes, ordinances, laws, regulations or codes described in
Section 5.13(a), and McDermott has no knowledge of any facts or circumstances
that could reasonably form the basis of a claim or citation against the
McDermott Contributed Assets for a violation of any such statutes, laws,
ordinances, regulations or codes. McDermott has no knowledge of any
notification having been filed with regard to a release of hazardous materials,
hazardous substances or hazardous wastes, at, from or into its New Iberia
facility.
(c) None of the storage tanks located at McDermott's New Iberia
facility (including any such storage tanks previously abandoned or removed)
containing hazardous materials, hazardous wastes, hazardous substances, or
petroleum (including crude oil or any fraction thereof) currently leak or have
in the past leaked. There are no asbestos- containing materials that have been
exposed in or at McDermott's New Iberia facility through demolition, renovation
or otherwise. None of the electrical transformers, fluorescent light fixtures
or other equipment included in the McDermott Contributed Assets contain
polychlorinated biphenyls.
5.14 Brokers. McDermott has not retained any broker or finder
pursuant to any contract or arrangement in connection with the transactions
contemplated
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hereby under which such broker or finder could be entitled to a fee or
commission from Universal or the Company.
5.15 Full Disclosure. No representation or warranty of McDermott
contained herein or made hereunder and no certificate, schedule, or other
agreement, instrument or document furnished by McDermott or to be furnished in
connection with the transactions contemplated hereby contains or will contain
misstatement of material fact, or omits or will omit to state a material fact
required to be stated herein or therein in order to make the statements
contained herein or therein in light of the circumstances under which they were
made not misleading.
ARTICLE VI
Representations and Warranties of the Company
The Company hereby represents and warrants to Universal and McDermott
as following:
6.1 Authority. The Company has full legal right, power and
authority, without the consent of any other Person, to execute and deliver this
Agreement and to carry out the transactions contemplated hereby. All corporate
and other acts or proceedings required to be taken by the Company to authorize
the execution, delivery and performance of this Agreement and all transactions
contemplated hereby have been duly and properly taken.
6.2 Validity. This Agreement has been, and the documents to be
delivered at Closing will be, duly executed and delivered by the Company and
constitute
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lawful, valid and legally binding obligations of the Company, enforceable in
accordance with their respective terms except to the extent that such
enforceability may be limited by bankruptcy, insolvency, or other similar laws
relating to creditors' rights generally and is subject to general principles of
equity, including the discretion of a court in granting equitable remedies.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not result in the creation of any Lien or
the acceleration of any indebtedness or other obligation applicable to the
Company and not prohibited by, do not violate or conflict with any provision
of, and do not constitute a default under or a breach of (a) the Company's
Charter or By-laws, (b) any contract, agreement or other instrument to which
the Company is a party or by which the Company is bound, (c) any order, writ,
injunction, decree or judgment of any court or governmental agency, or (d) any
law, rule or regulation applicable to the Company, except for violations,
conflicts or defaults that would not, in the aggregate or individually, have a
material adverse effect, in the case of clauses of (b), (c) and (d) above. No
approval, authorization, consent or other order or action of or filing with any
court, administrative agency or other governmental authority is required for
the execution and delivery by the Company of this Agreement or such other
agreements and instruments or the consummation by the Company of the
transactions contemplated hereby or thereby.
6.3 Due Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has full power and authority and all requisite licenses, permits
and franchises to own, lease its properties and to carry on the business in
which it is engaged. The Company is duly qualified to do business as a foreign
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corporation and is in good standing in all jurisdictions, domestic or foreign,
where failure to be so licensed or qualified would have a material adverse
effect upon its business or assets.
6.4 Brokers. The Company has not retained any broker or finder
pursuant to any contract or arrangement in connection with the transactions
contemplated hereby under which such broker or finder could be entitled to a
fee or commission from Universal or McDermott.
6.5 Litigation. There is no complaint, charge, suit, action,
proceeding, hearing, investigation or legal, administrative, arbitration or
other method of settling disputes or disagreements or governmental
investigation pending or, to the best of the Company's knowledge, threatened
against the Company which, if adversely determined against the Company, might
have an adverse effect upon the Company's ability to execute and deliver this
Agreement or such other agreements and instruments or the consummation by the
Company of the transactions contemplated hereby or thereby.
6.6 Resale Certification. The inventories included in the
Contributed Assets (including raw materials, work-in-progress and finished
goods) will be resold by the Company and not used or consumed (except to the
extent that raw materials and work-in-progress inventory is physically
incorporated as a part of finished goods for resale) by the Company.
6.7 No Activities by the Company. Other than those activities in
connection with its organization and in connection with the execution and
delivery of this Agreement and such other agreements and instruments and the
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consummation of the transactions contemplated hereby and thereby, the Company
has not engaged in any activities or entered into any agreements or incurred
any liabilities or obligations.
ARTICLE VII
Covenants of Universal and McDermott
Universal and McDermott hereby agrees to keep, perform and fully
discharge the following covenants and agreements.
7.1 Continued Assistance. Following the Closing, Universal and
McDermott shall refer to the Company as promptly as practicable any telephone
calls, letters, orders, notices, requests, inquiries and other communications
received by either of them relating to the Contributed Assets. Universal and
McDermott shall cooperate in an orderly transfer of the Contributed Assets and
the continuation of the business conducted at the New Iberia facilities by the
Company. From time to time, at the Company's request and without further
consideration, Universal and McDermott, as appropriate, shall execute,
acknowledge and deliver such documents, instruments or assurances and take such
other action as the Company may reasonably request to more effectively assign,
convey and transfer any of the Contributed Assets or the Assumed Liabilities
and will assist the Company in the vesting, collection or reduction to
possession of such Contributed Assets or the Assumed Liabilities. Universal
and McDermott hereby authorizes the Company from and after the Effective Time
to receive and open all mail and other communications to either of them
received by the Company and to act with respect to such communications in such
manner as the Company may
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elect if such mail and other communications relate to the Contributed Assets,
or, if such mail and other communications do not so relate, to forward the same
promptly to Universal of McDermott, as applicable.
7.2 Certain Payments. Following Closing, Universal and McDermott
shall pay and fully discharge all amounts owed to employees, all taxes or
amounts withheld from employees, and all sales taxes collected in the operation
of their New Iberia facilities and all liabilities and obligations to customers
and suppliers of their New Iberia facilities which are not Assumed Liabilities
as and when due, and shall otherwise pay, discharge or make adequate provision
for all Excluded Liabilities. Universal shall forward to the Company promptly
after receipt all funds received under accounts and notes receivable to the
extent included in Universal Contributed Assets without offset or counterclaim.
Universal and McDermott shall promptly pay and fully discharge any income,
excise or employment taxes arising as a result of the sale, transfer,
conveyance or assignment of the Contributed Assets. Universal and McDermott
shall retain responsibility after the Closing Date for all litigation related
to the Contributed Assets pending through the Effective Time. Universal and
McDermott shall keep the Company and each other apprised of the status of all
aspects of such litigation which might affect the Contributed Assets or the New
Iberia facilities, either directly or indirectly and shall comply with all
court orders relating directly or indirectly to such litigation. The Company
shall provide reasonable cooperation to Universal and McDermott, as applicable,
in handling such litigation, provided, that Universal and McDermott, as
appropriate, shall reimburse the Company for its out-of-pocket expenses
incurred in connection with such cooperation. Universal and McDermott, as
applicable, shall retain all
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rights to recover moneys due or damages being sought by them under any such
litigation.
7.3 Records and Documents. For five (5) years following the
Closing Date, Universal and McDermott shall grant to the Company and its
representatives, at the Company's request upon reasonable notice and during
normal business hours, access to and the right to make copies of those records
and documents related to the New Iberia facilities, possession of which is
retained by either of them as may be necessary or useful in connection with the
Company's conduct of business at the New Iberia facilities after the Closing.
If during such period either of Universal or McDermott, elects to dispose of
such records, Universal or McDermott, as appropriate, shall first give the
Company sixty (60) days' written notice, during which period the Company shall
have the right to take such records without further consideration.
7.4 Consents. Universal and McDermott, as appropriate, shall use
their best efforts to obtain before the Closing all Indispensable Consents and
at the earliest practicable date thereafter all other consents, governmental
authorizations, approvals, estoppel certificates and filings required to be
obtained by them or which may be reasonable necessary to the consummation of
the transactions contemplated by this Agreement or which are reasonably
requested by the Company.
7.5 Transfer of Licenses and Permits and Intellectual Property.
Universal and McDermott, as applicable, shall cooperate with the Company, and
shall use its best efforts to transfer, assign and pass to the Company all of
its
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rights under each of the Licenses and Permits and Intellectual Property,
including:
(a) Executing all assignments and other documents that are
necessary to effect transfer or assignment of the Licenses and
Permits and Intellectual Property (except that neither
Universal nor McDermott shall not be required to execute any
documents requiring or involving any guarantee or indemnity by
either of them of or in respect to the performance by the
Company of its obligations under or in connection with any of
the Licenses and Permits or the activities so licensed or
permitted after the Closing Date);
(b) Providing the governmental authorities responsible for the
Licenses and Permits and Intellectual Property and the Company
with whatever information and documentation that may be
required in connection with the transfer of the Licenses and
Permits and Intellectual Property;
(c) Complying with its obligations under the Licenses and Permits
and Intellectual Property, and under applicable law relating
thereto prior to the date of transfer, including paying any
renewal, annuity or other fees for maintaining the Licenses
and Permits and Intellectual Property that first become due
and payable prior to the Effective Time;
(d) On, prior to, or subsequent to the Effective Time, remedying
any non-compliance with any of the Licenses and Permits and
Intellectual
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Property, or with applicable law relating thereto, that has
occurred before the Effective Time, where such non-compliance
would have a material adverse effect on the conduct of the
Company's business at the New Iberia facilities or the
Contributed Assets; and
(e) Taking such further actions relating to the Licenses and
Permits and Intellectual Property as the governmental
authorities or the Company may reasonable require.
All internal costs of Universal's and McDermott's compliance with the
obligations imposed under this Section 7.5 shall be borne by Universal or
McDermott, as applicable. All license, issuance or transfer fees and similar
fees or charges and all Third Party costs and expenses payable in connection
with the transfer or reissuance of the Licenses and Permits and Intellectual
Property shall be paid by the Company. In the event that any of the Licenses
and Permits and the Intellectual Property have not been approved for transfer
by the Closing Date, the Company may, at its sole option, postpone Closing
until such time as all Licenses and Permits are transferred or reissued in form
and substance acceptable to the Company or until such time as the Company,
Universal and McDermott enter into reasonable satisfactory arrangements to
allow the Company to operate the New Iberia facilities in the interim under the
Universal's or McDermott's, as applicable, Licenses and Permits, whichever
first occurs.
7.6 Confidentiality. Following the Closing, Universal and
McDermott will not use or disclose to any Third Parties, any trade or business
secrets relating to the New Iberia facilities, provided that, (i) Universal and
McDermott may use or disclose any such information which has been publicly
disclosed (other than
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by Universal or McDermott, as applicable,) after the Effective Time and (ii) to
the extent that Universal or McDermott may become legally compelled to disclose
any of such information, may disclose such information if they have used their
best efforts, and shall have afforded the Company the opportunity, to obtain an
appropriate protective order, or other satisfactory assurance of confidential
treatment, for the information required to be disclosed.
7.7 Tax Returns. After the Closing, Universal and McDermott, as
applicable, shall cooperate with the Company in connection with the
preparation, execution and filing with the Internal Revenue Service of all
information returns required by Section 1060 of the Code relating to the
allocation of consideration for the Contributed Assets.
7.8 Internal Revenue Code Section 1445. Universal and McDermott,
as applicable, shall furnish the Company at the Closing a certificate of
non-foreign status signed by an authorized representative of each of them and
sufficient in form and substance to relieve the Company of all withholding
obligations under Code Section 1445 (26 U.S.C Section 1445).
ARTICLE VIII
Covenants of The Company
The Company hereby agrees to keep, perform and fully discharge the
following covenants and agreements.
8.1 Records and Documents. For five (5) years following the
Closing Date, the Company shall grant to Universal and McDermott and their
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representatives, as applicable, at their request upon reasonable notice and
during normal business hours, access to and the right to make copies of those
records and documents related to the New Iberia facilities, possession of which
is transferred to the Company, as may be necessary or useful in connection with
the their business and affairs after the Closing. During such period,
Universal and McDermott and their representatives shall be entitled to conduct
interviews with the Company's employees relative to such records and documents.
The Company will, upon the reasonable request of McDermott, provide such
information as may be necessary for McDermott to comply with applicable
financial reporting requirements of the U.S. Securities and Exchange Commission
and other governmental authorities or agencies and make available such records
and documents acquired hereunder as are necessary to Universal and McDermott
and their accountants and other representatives to prepare any tax schedules
and related documents required for the filling by either of them of tax returns
or reports and shall furnish such information in connection therewith or with
any tax examinations or audits as either of them may reasonably request from
time to time. If during such period of thereafter, the Company elects to
dispose of such records, the Company shall first give Universal and McDermott,
as applicable, sixty (60) days' written notice during which period Universal
and McDermott, as applicable, shall have the right to take such records.
8.2 Continued Assistance. Following the Closing, the Company
shall refer to Universal and McDermott, as applicable, as promptly as practical
any telephone calls, letters, orders, notices, requests, inquiries and other
communications received by the Company not relating to the New Iberia
facilities and otherwise relating to Universal and McDermott, as applicable.
The Company shall cooperate with Universal or McDermott, as applicable, and
provide such assistance as
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Universal or McDermott, as applicable, may reasonably request, at Universal's
or McDermott's, as applicable, expenses, in connection with the defense or
prosecution of any claims, actions or investigations arising out of or related
to the operation of the New Iberia facilities prior to the Closing which are
Excluded Liabilities.
8.3 Consents. The Company will cooperate with Universal and
McDermott, as applicable, in obtaining the consents, waivers, approvals,
authorizations, and estoppel certificates referred to in Section 7.4 above,
including providing such assurances of future performance by the Company of
obligations and liabilities to be included in the Assumed Liabilities as may be
reasonably requested by the parties entitled to the benefit of such future
performance.
8.4 Certain Payments. Following Closing, the Company shall pay
and fully discharge all of the Assumed Liabilities and the Company's share of
the Shared Liabilities as and when due.
8.5 Warranties. From and after the Effective Time, the Company
agrees to perform the contractual warranty obligations of Universal or
McDermott, as applicable, with respect to products and services provided to
customers of the New Iberia facilities prior to the Effective Time, and
Universal or McDermott, as applicable, agrees to reimburse Company for the
costs and expenses incurred by Company in such undertaking upon receipt from
Company of a report detailing the warranty work performed and the costs and
expenses associated therewith.
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ARTICLE IX
Employees
9.1 Employment. The Company shall offer comparable positions to
all employees of Universal who are listed on Schedule 9.1. Universal shall use
its best efforts to encourage the employees listed on Schedule 9.1 to continue
their employment until Closing and thereupon to accept and retain employment
with the Company.
9.2 Employee Benefit Plans. With respect to all employee benefit
plans, programs, policies or arrangements of Universal listed on Schedule 4.19,
including any related trusts and the assets held therein, Universal shall,
effective as of the Closing Date, by amendment or otherwise transfer
sponsorship to the Company, who shall adopt and assume and thereafter exercise
all of the rights and obligations of a sponsoring employer of such plans,
programs, policies or arrangements. Employees of Universal listed on Schedule
9.1 shall continue to participate in such plans, policies, programs or
arrangements after the Closing Date, without any interruption in service after
the Closing Date on the same basis as prior to the Closing Date.
ARTICLE X
Survival; Indemnification
10.1 Survival. All covenants, agreements, representations and
warranties made herein by the parties shall survive the Closing and any
investigation made at any time with respect thereto.
10.2 Indemnification by Universal and McDermott. Universal and
McDermott, as applicable, shall indemnify, defend and hold the Company and any
director, officer, employee or agent thereof, harmless against and in respect
of any Losses
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arising out of, relating to, or resulting from (i) any breach by either of them
of any representation, warranty, covenant or agreement made by either of them
in this Agreement or in connection with the transactions contemplated hereby;
(ii) their failure to pay or satisfy or cause to be paid or satisfied any of
the Assumed Liabilities or their share of the Shared Liabilities when due and
payable; or (iii) the non-performance of any obligation to be performed by
either of them or their Affiliates under this Agreement or in any agreement,
document or instrument executed and delivered pursuant hereto or in connection
with the transactions contemplated hereby.
10.3 Indemnification by the Company . The Company shall indemnify,
defend and hold Universal and McDermott, as applicable, and any director,
officer, employee or agent thereof, harmless against and in respect of any
Losses arising out of, relating to, or resulting from (i) any breach by the
Company of any representation, warranty, covenant or agreement made by it in
this Agreement or in connection with the transactions contemplated hereby; (ii)
the Company's failure to pay or satisfy or cause to be paid or satisfied any of
the Assumed Liabilities or Company's share of the Shared Liabilities when due
and payable; (iii) the non-performance of any obligation to be performed by the
Company under this Agreement or in any agreement, document or instrument
executed and delivered pursuant hereto or in connection with the transactions
contemplated hereby; and (iv) drawings and demands against those standby
letters of credit and bonds listed on Schedule 4.21 to the extent that such
drawings are based on acts or omissions of the Company.
10.4 Defense Against Asserted Claims. If any claim is made or
asserted by a Third Party against a party indemnified pursuant to this Article
X (the
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"Indemnified Party"), the Indemnified Party shall, with reasonable promptness
and, in any event, no later than ten (10) days prior to the time the response
to such claim or assertion of liability must be given, given to the other party
or parties, as applicable (the "Indemnifying Party") written notice of the
claim or assertion of liability and request the Indemnifying Party to defend
against the claim. Failure so to notify the Indemnifying Party shall not
relieve the Indemnifying Party unless such failure materially prejudices the
Indemnifying Party's position. The Indemnifying Party shall have the right to
defend against the claim, in which event the Indemnifying Party shall give
written notice to the Indemnified Party of acceptance of the defense of such
claim and the identify of counsel selected by the Indemnifying Party with
respect to such matters. In the event the Indemnifying Party does not accept
the defense of the claim as provided above or in the event that the
Indemnifying Party or its counsel fails to use reasonable care in maintaining
such defense or such defense is having a materially adverse effect on the
Indemnified Party's business, the Indemnified Party, upon written notice to the
Indemnifying Party, shall have the right to employ counsel for such defense at
the expense of the Indemnifying Party. The parties will cooperate with each
other in the defense of any such action and the relevant records and personnel
of each shall be available to the other with respect to such defense. Provided
the Indemnifying Party accepts the defense of the matter, it shall not be
liable for any settlement of any claim or action made without its consent,
which consent shall not be unreasonably withheld.
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ARTICLE XI
Certain Definitions
For purposes of this Agreement, the following terms shall have the
respective meanings as herein set forth:
(a) "Affiliate" shall have the meaning set forth in Rule 12B-2
promulgated under the Securities Exchange Act of 1934, as
amended.
(b) "Best of Knowledge" (or words of similar import) shall mean
that after having conducted a due diligence review in
anticipation of the transactions contemplated by this
Agreement and in reliance on such due diligence review, the
management of a party believe the statement to be true,
accurate and correct in all material respects.
(c) "Contributed Assets" shall mean the Universal Contributed
Assets and the McDermott Contributed Assets.
(d) "Liens" shall mean all mortgages, claims, covenants, charges,
liens, encumbrances, easements, rights- of-way, encroachments,
restrictions, options, subscriptions, warrants, pledges,
calls, commitments, security interests, conditional sales
agreements, title retention agreements, leases and other
restrictions of any kind or character, direct or indirect,
whether accrued, absolute, contingent or otherwise.
(e) "Permitted Liens" shall mean (i) liens for current ad valorem
property, real estate and similar type taxes not yet due and
payable and (ii) those Liens set forth on a Schedule hereto.
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(f) "Person" shall mean an individual, a corporation, a
partnership, an association, a joint venture, a trust or other
entity of any kind, including a governmental or political
subdivision or agency or instrumentality thereof.
(g) "Survey" shall mean a plat of survey of each parcel of real
property included in Contributed Assets prepared by John E.
Chance & Associates, dated as of the Closing Date and
certified to the parties hereto.
(h) "Third Party" shall mean any Person other than a party to this
Agreement or an Affiliate thereof.
ARTICLE XII
General Provisions
12.1 Amendments and Waiver. No amendment, waiver or consent with
respect to any provision of this Agreement shall in any event be effective,
unless the same shall be in writing and signed by the parties hereto, and then
such amendment, waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
12.2 Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be delivered in person
or sent by registered or certified mail, postage prepaid, or by telecopy as
follows:
(a) If to Universal: Universal Partners, Inc.
P.O. Box 11308
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<PAGE> 74
Port Road, Port of New Iberia
New Iberia, Louisiana 70562
Attention: President
Telecopy: (318) 365-3711
With a copy to: Roy, Forrest & Lopresto
Main Mall, Suite 10
110 French Street
New Iberia, Louisiana 70562
Attention: Leon E. Roy, III
Telecopy: (318) 364-6702
(b) If to the McDermott: McDermott Incorporated
1010 Common Street
P.O. Box 60035
New Orleans, Louisiana 70160
Attention: Senior Vice President &
Chief Financial Officer
Telecopy: (504) 587-5234
With a copy to: McDermott Incorporated
1010 Common Street
P.O. Box 60035
New Orleans, Louisiana 70160
Attention: Vice President, Secretary &
General Counsel
Telecopy: (504) 587-5237
If to the Company: Universal Fabricators
Incorporated
P.O. Box 11308
Port Road, Port of New Iberia
New Iberia, Louisiana 70562
Attention: President
Telecopy: (318) 365-3711
Any party may change its address for receiving notice by written notice given
to the others named above.
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<PAGE> 75
12.3 Expenses. Except as otherwise expressly provided herein, each
party to this Agreement shall pay its own costs and expenses in connection with
the transactions contemplated hereby. McDermott shall pay the costs and
expenses in connection with the Survey and the site assessment of the New
Iberia facilities conducted prior to the date hereof by Furgo-McClelland
(Southeast), Inc. Universal agrees to reimburse Three Thousand Five Hundred
($3,500.00) Dollars of McDermott's costs and expenses in connection with the
site assessment. If any action is brought by either party to enforce any
provision of this Agreement, the prevailing party shall be entitled to recover
court costs and reasonable attorneys' fees. The provisions of this Section
shall survive any termination of this Agreement.
12.4 Counterparts. This Agreement may be executed simultaneously
in three (3) or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument.
12.5 Successors and Assigns. This Agreement shall bind and inure
to the benefit of the parties named herein and their respective successors and
permitted assigns.
12.6 Entire Transaction. This Agreement and the documents referred
to herein contain the entire understanding among the parties with respect to
the transactions contemplated hereby and supersedes all other agreements,
understandings and undertakings among the parties or their Affiliates on the
subject matter hereof except for that certain Letter Agreement dated December
1, 1992 between McDermott and Universal which is by reference incorporated
herein.
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<PAGE> 76
12.7 Applicable Law. This Agreement shall be governed by and
construed in accordance with the internal substantive laws of the State of
Louisiana, and the parties hereby irrevocably and unconditionally consent and
submit to the in personam jurisdiction of any court located in Lafayette,
Louisiana having jurisdiction over all matters relating to this Agreement.
Each party agrees that service of process in any action or proceeding hereunder
may be made upon such party by certified mail, return receipt requested to the
address for notice set forth herein. Each party irrevocably waives any
objection it may have to the venue of any action, suit or proceeding brought in
such courts or to the convenience of the forum and each party irrevocably
waives the right to proceed in any other jurisdiction. Final judgment in any
such action, suit or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment, a certified or true copy of which
shall be conclusive evidence of the fact and the amount of any indebtedness or
liability of any party therein described.
12.8 Rules of Construction. References in this Agreement to
sections, schedules and exhibits are to sections of, and schedules and exhibits
to, this Agreement unless otherwise indicated. Words in the singular include
the plural and in the plural include the singular. The word "or" is not
exclusive. The word "including" shall mean including, without limitation. The
section and other headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
12.9 Announcements. No announcement of this Agreement or the
transactions contemplated hereby shall be made by any party prior to the
Closing without the written approval of the other parties hereto (which
approval shall not be
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<PAGE> 77
unreasonably withheld), except as required by law or the regulations of any
securities exchange. Each party shall use its best efforts to maintain the
confidentiality of the terms of the transactions contemplated hereby, except as
required by law or as necessary to protect the interest of such party
hereunder.
12.10 Partial Invalidity. In the event that any provision of this
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, such holding shall not invalidate or render unenforceable any
other provision hereof.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by a duly authorized officer all as of the date first
written above.
UNIVERSAL PARTNERS, INC.
By: /s/ Dailey J. Berard
------------------------------------
Its: President
------------------------------------
McDERMOTT INCORPORATED
By: /s/ Brock A. Hattox
------------------------------------
Its: Senior Vice-President and
------------------------------------
Chief Financial Officer
------------------------------------
UNIVERSAL FABRICATORS INCORPORATED
By: /s/ Dailey J. Berard
------------------------------------
Its: President
------------------------------------
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<PAGE> 78
SCHEDULES INTENTIONALLY OMITTED
REGISTRANT WILL PROVIDE COPIES UPON REQUEST
- 78 -
<PAGE> 1
EXHIBIT 10.7
SHAREHOLDERS' AGREEMENT
THIS SHAREHOLDERS' AGREEMENT is made and entered into this 30th day of
November, 1992 by and among Universal Partners, Inc., a corporation duly
organized and existing under the laws of the State of Louisiana ("Universal"),
McDermott Incorporated, a corporation duly organized and existing under the
laws of the State of Delaware ("McDermott"), and Universal Fabricators
Incorporated, a close corporation duly organized and existing under the laws of
the State of Delaware (the "Company").
WITNESSETH:
WHEREAS, on November 6, 1992, Universal and McDermott caused the
incorporation of the Company in the State of Delaware as a close corporation
and subscribed to fifty-one (51%) and forty-nine (49%) percent, respectively,
of the total authorized and to be issued share capital of the Company;
WHEREAS, Universal, McDermott and the Company are parties to a
Contribution Agreement of even date herewith (the "Contribution Agreement")
governing the assignment, conveyance, transfer and delivery to the Company of
all of their right, title and interest in, to or arising from the Contributed
Assets; and
WHEREAS, Universal, McDermott and the Company are entering into this
Shareholders' Agreement to govern certain aspects of their relationship and the
relationship of their successors in title as Shareholders of the Company and
their respective rights and obligations each towards the other.
<PAGE> 2
NOW, THEREFORE, in consideration of the premises and promises herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally bound
hereby, the Parties hereby represent, warrant, covenant and agree as follows:
ARTICLE I
DEFINITIONS; INTERPRETATION
1.01 DEFINITIONS. In addition to the terms defined elsewhere in this
Shareholders' Agreement, unless otherwise clearly required by the
context of this Shareholders' Agreement, the terms listed herein
shall have the following meanings:
(a) "Act" shall mean the Delaware General Corporation Law, as
amended.
(b) "Affiliate" shall have the meaning set forth in Rule 12b-2
promulgated under the Securities Exchange Act of 1934, as
amended.
(c) "Business Day" shall mean any day other than a Saturday, Sunday
or other day on which banks in the City of Lafayette, Louisiana
are authorized or required by law to close.
(d) "By-Laws" shall mean the document attached hereto as Annex "B".
(e) "Certificate of Incorporation" shall mean the document attached
hereto as Annex "A".
(f) "Control" shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management or
policies of any Person, whether through the ownership of voting
securities, by contract or otherwise.
<PAGE> 3
(g) "Party/Parties" shall mean Universal, McDermott or the Company or
all of them collectively, as the case may be, and shall include
their respective successors in interest hereunder.
(h) "Person" shall mean an individual, a corporation, a partnership,
an association, a joint venture, a trust or other entity of any
kind, including a government or political subdivision or agency
or instrumentality thereof.
(i) "Securities Act" shall mean the Securities Act of 1933, as
amended and the rules and regulations promulgated thereunder.
(j) "Shareholder/Shareholders" shall mean either or both of Universal
and McDermott collectively, as the case may be, and shall include
their respective successors in interest hereunder.
(k) "Third Party" shall mean any Person other than a Party or an
Affiliate of a Party.
1.02 INTERPRETATION. For purposes of this Shareholders' Agreement,
the following Rules of Interpretation shall apply.
(a) Unless the context clearly indicates otherwise, words importing
the singular number include the plural number and vise versa.
(b) Words of any gender include the correlative words of the other,
or neuter, gender.
(c) In the event of any inconsistency between the rights or
obligations of Universal and McDermott under the Certificate of
Incorporation and/or By-Laws of the Company and under this
Shareholders' Agreement, the provisions of this Shareholders'
Agreement shall prevail as between Universal and McDermott hereto
and as between them as Shareholders of the Company and as between
their respective appointees as Directors of the Company.
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<PAGE> 4
(d) The captions, headings and table of contents in this
Shareholders' Agreement are solely for convenience of reference
and in no way define or limit the scope of intent of any
Articles, Sections, Subsections, Paragraphs, Subparagraphs or
clauses hereof.
ARTICLE II
PURPOSE OF THE COMPANY; DURATION
2.01 PURPOSE. The purpose of the Company shall be the fabrication and
assembly at the Port of New Iberia, Iberia Parish, Louisiana of
jackets, decks, topside facilities, quarters buildings, drilling
rigs and equipment for installation and use offshore in the
production, processing and storage of oil and gas and boats and
barges, unless and until the purpose is changed in accordance
with the Certificate of Incorporation.
2.02 POWERS. To facilitate the achievement of its purpose, the
Company shall have the power to engage in any and all activities
related, necessary, proper, convenient or incidental to the
accomplishment thereof.
2.03 DURATION. The duration of the Company shall be perpetual
commencing as of the date of the filing of its Certificate of
Incorporation with the Secretary of State of the State of
Delaware.
ARTICLE III
LAWS AND REGULATIONS
3.01 ASSURANCES OF THE PARTIES. Each Party to this Shareholders'
Agreement gives its assurance to the other Parties that it will
perform all of its responsibilities under this Shareholders'
Agreement and will conduct all activities relating to the Company
in such a manner as not to violate or cause the other Parties to
be in
- 4 -
<PAGE> 5
violation of any applicable laws or regulations of any government
or political subdivision or any agency or instrumentality
thereof.
3.02 COMPLIANCE WITH LAWS AND REGULATIONS. Compliance with all
applicable laws and regulations relating to the Company shall be
a continuing obligation of the Parties to this Shareholders'
Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF UNIVERSAL
Universal represents and warrants to McDermott and the Company as
follows:
4.01 ORGANIZATION; AUTHORITY. Universal is a corporation duly
organized and existing under the laws of the State of Louisiana
and has full legal right, power and authority, without the
consent of any other Person, to execute, deliver and perform this
Shareholders' Agreement. All corporate, shareholder and other
acts or proceedings required to be taken by Universal to
authorize the execution, delivery and performance of this
Shareholders' Agreement have been duly and properly taken.
4.02 VALIDITY. This Shareholders' Agreement has been duly executed
and delivered and constitutes a lawful, valid and legally binding
obligation of Universal, enforceable in accordance with its terms
except to the extent that such enforceability may be limited by
bankruptcy, insolvency, or other similar laws relating to
creditors' rights generally and is subject to general principles
of equity, including the discretion of a court in granting
equitable remedies. The execution, delivery and performance of
this Shareholders' Agreement will not result in the creation of
any lien, charge or encumbrance on any of Universal's assets or
the acceleration of any indebtedness or other obligation
applicable to Universal and is not
- 5 -
<PAGE> 6
prohibited by, does not violate or conflict with any provision
of, and does not constitute a default under or a breach of (a)
the Charter or By-Laws of Universal, (b) any contract, agreement
or other instrument to which Universal is a party or by which
Universal or any of its assets are bound, (c) any order, writ,
injunction, decree or judgment of any court or governmental
agency, or (d) any law, rule or regulation applicable to
Universal, except for violations, conflicts or defaults that
would not, in the aggregate or individually, have a material
adverse effect on the execution, delivery and performance of this
Shareholders' Agreement, in the case of clauses (b), (c) and (d)
above. No approval, authorization, consent or other order or
action of or filing with any court, administrative agency or
other governmental authority is required for the execution,
delivery and performance by Universal of this Shareholders'
Agreement.
4.03 INVESTMENT REPRESENTATION. The shares acquired by Universal
under the terms of the Contribution Agreement were acquired by it
for its own account and for the purpose of investment, and not
with the view to, or for resale in connection with, any
distribution or public offering thereof in violation of the
Securities Act and other applicable federal or state securities
laws and the rules and regulations promulgated thereunder.
Universal understands that the shares have not been registered
under the Securities Act or other applicable federal or state
securities laws and the rules and regulations promulgated
thereunder by reason of the issuance of the shares in a
transaction exempt from the registration and prospectus delivery
requirements of the Securities Act and state securities laws and
the rules and regulations promulgated thereunder. Universal
further represents that it is fully informed as to the applicable
limitations upon any distribution or resale of the shares under
the Securities Act and other applicable federal or state
securities laws and the rules and regulations promulgated
thereunder. Universal agrees that it will refrain from
acquiring, transferring or otherwise disposing of the shares, or
any interest
- 6 -
<PAGE> 7
therein, in such manner as to violate any registration
requirements of the Securities Act or of any applicable federal
or state securities law, and the rules and regulations
promulgated thereunder regulating the disposition thereof. The
State in which Universal's principal office or principal
residence is located is the State of Louisiana. Universal is an
"accredited investor" as defined in Rule 501(a) of Regulation D
promulgated under the Securities Act.
4.04 DUE DILIGENCE Without waiving or limiting in any way its right
to rely on the representations and warranties contained in this
Shareholders' Agreement, Universal has performed its own
independent investigation, with due diligence, of the investment
represented by the investment in the Company and has formed its
own independent assessment of the risks and potential returns of
the Company.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF MCDERMOTT
McDermott represents and warrants to Universal and the Company as
follows:
5.01 ORGANIZATION; AUTHORITY. McDermott is a corporation duly
organized and existing under the laws of the State of Delaware
and has full legal right, power and authority, without the
consent of any other Person, to execute, deliver and perform this
Shareholders' Agreement. All corporate, shareholder and other
acts or proceedings required to be taken by McDermott to
authorize the execution, delivery and performance of this
Shareholders' Agreement have been duly and properly taken.
5.02 VALIDITY. This Shareholders' Agreement has been duly executed
and delivered and constitutes a lawful, valid and legally binding
obligation of McDermott, enforceable in accordance with its terms
except to the extent that such enforceability may be limited by
- 7 -
<PAGE> 8
bankruptcy, insolvency, or other similar laws relating to
creditors' rights generally and is subject to general principles
of equity, including the discretion of a court in granting
equitable remedies. The execution, delivery and performance of
this Shareholders' Agreement will not result in the creation of
any lien, charge or encumbrance on any of McDermott's assets or
the acceleration of any indebtedness or other obligation
applicable to McDermott and is not prohibited by, does not
violate or conflict with any provision of, and does not
constitute a default under or a breach of (a) the Charter or
By-Laws of McDermott, (b) any contract, agreement or other
instrument to which McDermott is a party or by which McDermott or
any of its assets are bound, (c) any order, writ, injunction,
decree or judgment of any court or governmental agency, or (d)
any law, rule or regulation applicable to McDermott, except for
violations, conflicts or defaults that would not, in the
aggregate or individually, have a material adverse effect on the
execution, delivery and performance of this Shareholders'
Agreement, in the case of clauses (b), (c) and (d) above. No
approval, authorization, consent or other order or action of or
filing with any court, administrative agency or other
governmental authority is required for the execution, delivery
and performance by McDermott of this Shareholders' Agreement.
5.03 INVESTMENT REPRESENTATION. The shares acquired by McDermott
under the terms of the Contribution Agreement were acquired by it
for its own account and for the purpose of investment, and not
with the view to, or for resale in connection with, any
distribution or public offering thereof in violation of the
Securities Act and other applicable federal or state securities
laws and the rules and regulations promulgated thereunder.
McDermott understands that the shares have not been registered
under the Securities Act or other applicable federal or state
securities laws and the rules and regulations promulgated
thereunder by reason of the issuance of the shares in a
transaction exempt from the registration and prospectus delivery
requirements of the Securities Act and state securities
- 8 -
<PAGE> 9
laws and the rules and regulations promulgated thereunder.
McDermott further represents that it is fully informed as to the
applicable limitations upon any distribution or resale of the
shares under the Securities Act and other applicable federal or
state securities laws and the rules and regulations promulgated
thereunder. McDermott agrees that it will refrain from
acquiring, transferring or otherwise disposing of the shares, or
any interest therein, in such manner as to violate any
registration requirements of the Securities Act or of any
applicable federal or state securities law, and the rules and
regulations promulgated thereunder regulating the disposition
thereof. The State in which McDermott's principal office or
principal residence is located is the State of Louisiana.
McDermott is an "accredited investor" as defined in Rule 501(a)
of Regulation D promulgated under the Securities Act.
5.04 DUE DILIGENCE Without waiving or limiting in any way its right
to rely on the representations and warranties contained in this
Shareholders' Agreement, McDermott has performed its own
independent investigation, with due diligence, of the investment
represented by the investment in the Company and has formed its
own independent assessment of the risks and potential returns of
the Company.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF COMPANY
The Company represents and warrants to Universal and McDermott as
follows:
6.01 ORGANIZATION; AUTHORITY. The Company is a corporation duly
organized and existing under the laws of the State of Delaware
and has full legal right, power and authority, without the
consent of any other Person, to execute, deliver and perform this
Shareholders' Agreement. All corporate, shareholder and other
acts or proceedings required to be taken by the Company to
authorize the execution,
- 9 -
<PAGE> 10
delivery and performance of this Shareholders' Agreement have
been duly and properly taken.
6.02 VALIDITY. This Shareholders' Agreement has been duly executed
and delivered and constitutes a lawful, valid and legally binding
obligation of the Company, enforceable in accordance with its
terms except to the extent that such enforceability may be
limited by bankruptcy, insolvency, or other similar laws relating
to creditors' rights generally and is subject to general
principles of equity, including the discretion of a court in
granting equitable remedies. The execution, delivery and
performance of this Shareholders' Agreement will not result in
the creation of any lien, charge or encumbrance on any of the the
Company's assets or the acceleration of any indebtedness or other
obligation applicable to the Company and is not prohibited by,
does not violate or conflict with any provision of, and does not
constitute a default under or a breach of (a) the Charter or
By-Laws of the Company, (b) any contract, agreement or other
instrument to which the Company is a party or by which the
Company or any of its assets are bound, (c) any order, writ,
injunction, decree or judgment of any court or governmental
agency, or (d) any law, rule or regulation applicable to the
Company, except for violations, conflicts or defaults that would
not, in the aggregate or individually, have a material adverse
effect on the execution, delivery and performance of this
Shareholders' Agreement, in the case of clauses (b), (c) and (d)
above. No approval, authorization, consent or other order or
action of or filing with any court, administrative agency or
other governmental authority is required for the execution,
delivery and performance by the Company of this Shareholders'
Agreement.
- 10 -
<PAGE> 11
ARTICLE VII
CAPITAL
7.01 SHARE CAPITAL. On the date of this Shareholders' Agreement, the
Company has an authorized and issued share capital of One
Thousand (1,000.00) shares divided into Five Hundred Ten (510)
Class "A" common shares of par value $1.00 each and Four Hundred
Ninety (490) Class "B" common shares of par value $1.00 each.
Unless otherwise provided in this Shareholders' Agreement, Class
"A" common shares and Class "B" common shares shall at all times
have the same rights and privileges and shall be subject to the
same restrictions.
7.02 DISTRIBUTION OF SHARE CAPITAL. The share capital of the Company
referred to in Section 7.01 has been subscribed for and
distributed among the Shareholders as follows:
<TABLE>
<CAPTION>
Percentage of
Party No. of Shares Share Capital
--------- ------------- -------------
<S> <C> <C>
Universal 510 51%
McDermott 490 49%
</TABLE>
The shares issued to Universal have been designated Class "A" common
shares and the shares issued to McDermott have been designated Class "B"
common shares. Unless otherwise unanimously agreed between the
Shareholders, all subsequent issues of shares of the Company, whether
with or without par value, or securities of the Company convertible into
such shares shall be issued at or convertible into Class "A" and Class
"B" common shares on a 51/49% ratio. The holders of shares of Class "A"
common stock shall have the preemptive right, as a class, to subscribe
to any or all additional issues of Class "A" common stock of the Company
or to any securities of the Company convertible into such stock and the
holders of shares of Class "B" common stock shall have the preemptive
right, as a class, to subscribe to any or all additional issues of Class
"B" common stock of the Company or to any securities of the Company
convertible into such stock.
- 11 -
<PAGE> 12
7.03 CHANGES IN SHARE CAPITAL. The share capital of the Company may
be increased by the unanimous decision of the Shareholders, and
such shares shall be available to the Shareholders for
subscription thereto in proportion to their shares in the capital
of the Company as set forth in Section 7.02 above. The share
capital of the Company may be reduced by the unanimous decision
of the Shareholders, and, subject to the Act, the capital so
reduced shall be distributed to the Shareholders in proportion to
their respective shares in the capital of the Company as set
forth in Section 7.02 above.
7.04 CAPITAL REQUIREMENTS; GUARANTEES.
(a) All operating capital and capital expenditure funds for the
Company's operation shall be designated in budgets approved by
the Board of Directors as hereinafter set forth. Such funds
shall be contributed as paid-in capital or loaned by the
Shareholders in proportion to each Shareholders' share in the
capital of the Company, or as otherwise mutually agreed, except
to the extent such funds are obtained by internal financing or
the Company's borrowings within limits set by the Board of
Directors. Any loans from the Shareholders shall be on terms and
conditions mutually acceptable to the Shareholders and the
Company.
(b) Any guarantees at any time required from the Shareholders, or
their Affiliates, as determined by the Board of Directors, to
finance the Company or for any other purposes required by the
Company shall, with the mutual written consent of the
Shareholders, be provided by or obtained from the Shareholders,
or their Affiliates, in proportion to each Shareholder's share in
the share capital of the Company each within the restrictions of
any loan covenants to which a Shareholder, or their Affiliates,
may be bound. Each Shareholder shall also ensure than any
guarantees given by or obtained from them or their Affiliates are
not varied, revoked, withdrawn or allowed to lapse at any time
prior to such Shareholder ceasing to hold shares
- 12 -
<PAGE> 13
in the Company, without the prior written consent of the other
Shareholder, which consent shall not unreasonably be withheld.
(c) In order to satisfy the Company's capital needs on an ongoing
basis, the Company may require additional capital beyond that
established in the initial budget. The Shareholders agree that
the order of preference for meeting these additional requirements
is as follows:
i) Internal financing;
ii) Non-recourse Third Party debt;
iii) Third Party debt with recourse; and
iv) Such other means as may be agreed upon by the Board of
Directors.
7.05 RIGHT OF FIRST REFUSAL.
(a) No Party shall transfer, sell, pledge, encumber or in any way
dispose of any part of its shares in the Company (hereinafter
referred to as "Transfer(s)") except as provided for in this
Section 7.05.
(b) Universal shall be entitled to Transfer its shares to an
Affiliate with the written consent of McDermott, which consent
shall not be unreasonably withheld. McDermott shall be entitled
to Transfer its shares to an Affiliate with the written consent
of Universal, which shall not be unreasonably withheld.
(c) During the first seven (7) years commencing from the date of
incorporation of the Company, the Shareholders shall not transfer
their shares in the Company.
(d) This subsection (d) only applies to transfer occurring after the
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<PAGE> 14
first seven (7) years from the date of incorporation of the
Company and is subject to the terms of a Put/Call Agreement
entered into by and between Universal and McDermott of even date
herewith. If either Shareholder should receive a bona fide offer
from a Third Party to purchase its shares in the Company and is
desirous of accepting such offer, such Shareholder shall notify
the Company's Secretary utilizing one of the methods specified in
Section 14.03 hereof (hereinafter referred to as "Sale Notice").
The Sale Notice shall specify: the name and address of the Third
Party, the percentage of said Shareholder's shares in the Company
to be sold, and the terms of the bona fide offer. No such Sale
Notice shall be withdrawn (unless such Third Party shall revoke
same) except with the unanimous approval of the Board of
Directors. The Company shall act as selling agent for the
Shareholder giving said Sale Notice and shall give notice of said
bona fide offer to the other Shareholder hereto. The Shareholder
receiving this Sale Notice shall have an option for thirty (30)
days to purchase the shares subject to said Sale Notice at the
same price and upon the same terms and conditions as contained in
the Sale Notice. In the event the Shareholder receiving the Sale
Notice elects to exercise its option, the shares shall be sold to
it. If the option is not exercised, the Shareholder giving such
Sale Notice shall be free to sell its shares to the Third Party
at the price and upon the terms and conditions contained in the
Sale Notice. If the Shareholder giving such Sale Notice fails to
so sell the interest on the same basis as provided in the Sale
Notice, said Shareholder shall again become subject to the
restrictions of this Section 7.05(d).
(e) The closing of the purchase and sale of shares as provided above
shall be held at a mutually acceptable place on a mutually
acceptable date (the "Closing Date") not more than ninety (90)
days after receipt of Notice by the Party receiving the Sale
Notice as provided in subparagraph (d) of this Article VII;
provided, however, that the Closing Date may be postponed until
such time as any consent, approach, or authorization required of
any governmental or
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<PAGE> 15
regulatory authority has been obtained; and provided, further,
that the Shareholders agree to use their best efforts to obtain
such consents, approvals, or authorizations in a timely manner.
At such Closing, the Shareholder selling its shares shall
transfer such shares free and clear of all liens, claims, and
encumbrances, and shall execute all documents as may be necessary
to effectuate such sale. The applicable purchase price shall be
payable by wire transfer of immediately available federal funds
to an account designated by the Parties that are selling their
shares on the Closing Date.
(f) During the pendency of the transactions contemplated by this
Article VII, the business and affairs of the Company shall be
conducted as provided in this Shareholders' Agreement, unaffected
by the pendency of such transaction.
(g) A notation substantially in the following text shall be placed on
any and all share certificates issued by the Company:
"The transfer of this certificate and of the shares it relates to
and the voting of such shares is restricted by the provisions of
a Shareholders' Agreement. A copy of this Shareholders'
Agreement may be obtained by a shareholder on written request to
the Corporation".
(h) Any Shareholder who transfers its shares in the Company to any
Third Party shall include, as part of the transfer agreement,
provisions which require the Third Party to accept and agree to
be bound by the provisions of this Shareholders' Agreement. The
Selling Party shall continue to be responsible for obligations of
the Company which obligations accrued, or the events leading to
the accrual of an obligation accrued, prior to the transfer on
the basis provided in this Shareholders' Agreement unless
otherwise agreed between the Selling Party and the Third Party or
otherwise.
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7.06 NO PUBLIC OFFERINGS. The Company shall make no offering of any
of its stock of any class, or any securities convertible into
such stock, which would constitute a public offering within the
meaning of the Securities Act.
ARTICLE VIII
MANAGEMENT
8.01 BOARD OF DIRECTORS.
(a) The Board of Directors shall be composed of five (5) members,
three (3) of whom shall be appointed by and represent Universal,
and two (2) of whom shall be appointed by and represent McDermott
(hereinafter referred to as a "Director" and collectively, the
"Board of Directors"). The initial Board of Directors designated
in the Certificate of Incorporation shall serve until the first
annual meeting of the shareholders or until a successor is
elected and qualified. Directors appointed by Universal shall be
designated Class "A" Directors and Directors appointed by
McDermott shall be designated Class "B" Directors. The Directors
shall receive no remuneration for service in such office.
However, transportation and accommodation expenses during the
period when Board meetings are held shall be billed to and shall
be paid by the Company. Nothing in the foregoing two (2)
sentences shall prohibit the Company from paying a salary to a
Director in such Director's capacity as an officer or employee of
the Company.
(b) As vacancies occur on the Board of Directors, they shall be
filled in the same manner as the replaced Directors were
originally appointed. Except as provided in this Section 8.01,
appointments to the Board of Directors shall be without
restriction, and such appointees to the Board of Directors shall
be replaceable at any time, without notice or cause, by the
Shareholder which made the appointment. Directors may serve
concurrently as an officer or employee of the Company. The term
of office of each Director shall
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be one (1) year which may be renewed by the Shareholder who
appointed him or until his death or his resignation or removal
from the Board of Directors, if earlier. Upon the happening of
such Director's death, resignation or removal, the Shareholder
who appointed such Director shall appoint his successor. The
Shareholders agree to exercise their respective voting rights at
Shareholders' Meetings in order to cause the individuals so
appointed to be elected.
8.02 MEETINGS.
(a) The Board of Directors shall meet at least one (1) time a year.
Meetings shall be called by the Chairman of the Board of
Directors or upon the request of any Director and shall
normally take place in New Iberia, Louisiana, but may also take
place elsewhere. Notice of any meeting must be given by the
Secretary of the Company to the individual Directors in
writing. Notice is to be provided in accordance with Section
14.03 of this Shareholders' Agreement, at an address nominated
by each Director, so as to be received at least seventy-two
(72) hours prior to the time of the meeting. Said notice shall
contain a statement of the agenda to be considered at the
meeting and shall set forth the location and time (date and
hour) of the meeting. A call for Board of Directors' meeting
shall not be required if all of the Directors are present at
the meeting. Board of Directors' Meetings shall be entitled to
consider matter(s) not set forth in the call therefor. Board
of Directors' actions may be taken without, and in lieu of, a
meeting by unanimous written consent. At all meetings of the
Board of Directors, including any adjournments thereof, any one
or more Directors may participate by means of a conference
telephone or similar communications equipment by which all
persons participating in the meeting may simultaneously hear
each other. Participation by such means shall constitute
presence in person at a meeting. The presence of one (1)
Director elected by the Shareholders holding Class "A" common
shares and one (1) Director elected by the
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<PAGE> 18
Shareholders holding Class "B" common shares will be necessary
to constitute a quorum of the Board of Directors, including any
adjournments thereof. Each Director shall be entitled to one
vote. Except as specified in Section 8.03 below, resolutions
of the Board of Directors shall be valid if adopted by a
majority of the Directors.
(b) The annual meeting of the Shareholders shall be convened by the
Board of Directors within the first four (4) months of the
close of each fiscal year for the purpose of the election of
Directors and to transact such other business as may properly
come before the meeting or any or adjournments thereof. The
annual meeting and all special meetings may be held at such
place as shall be stated in the notice calling the meeting. At
all shareholders' meetings, including any adjournments thereof,
the presence in person or by proxy of holders of at least
fifty-two (52%) percent of the share capital of the Company
shall be necessary to constitute a quorum. Except as specified
in Section 8.04 below, resolutions of Shareholders' meetings
shall require the affirmative vote of 52% of the share capital
of the Company; each share of share capital, whether Class "A"
common shares or Class "B" common shares, having one (1) vote.
Notice of the annual and any special Shareholders' meetings
shall be given by the Secretary of the Company to the
Shareholders and to each Party's Corporate Secretary in
writing. Notice is to be provided in accordance with Section
14.03 of this Agreement, so as to be received at least thirty
(30) days prior to the date of the meeting. Said notice shall
contain a statement of the agenda to be considered at the
meeting and shall set forth the location and time (date and
hour) of the meeting. A notice for a Shareholders' meeting
shall not be required if all of the Shareholders are present or
represented by proxy at the meeting. Shareholders' meetings
may consider matter(s) not set forth in the notice therefor.
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<PAGE> 19
8.03 CERTAIN ACTIONS OF THE BOARD OF DIRECTORS. The consent of at
least one (1) Director elected by the Shareholders holding
Class "A" common stock and one (1) Director elected by the
Shareholders holding Class "B" common stock shall be necessary
for approval of the following corporation actions:
(i) Amend or supplement the By-Laws of the Company.
(ii) To set the Company's policies relating to personnel and banking
from those previously in effect at Universal, entering into any
contracts with value of Ten Million ($10,000,000.00) Dollars or
greater or any amendments to contracts which would result in
the value thereof increasing to Ten Million ($10,000,000.00)
Dollars or greater, or any customer contract without a job
profit and the approval or amendment of the annual operating
plans and budgets.
(iii) To approve the withdrawal of a Sale Notice.
(iv) The election and any change in the title, duties, salary, or
other compensation of an officer of the Company and the removal
of any officer of the Company.
(v) Any corporate indebtedness, business transaction or financial
commitment involving amounts in excess of those levels
previously established by the Board of Directors or the giving
of any guarantees or indemnities to, or becoming surety for,
any other company, partnership, joint venture, trust or other
enterprise.
(vi) Selling, lease, exchange or other disposition of more than
twenty-five (25%) percent of the properties or other assets of
the Company whether in the regular course of business or other
than in the regular course of business, or an acquisition by
the Company of the share capital (or equivalent) or of the
assets of any other company, partnership, joint venture, trust
or other enterprise.
(vii) Any business transactions between a Shareholder, Director,
officer,
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<PAGE> 20
or any person performing the normal duties and responsibilities
assigned by applicable law to directors or officers and the
Company and a company, partnership, joint venture, trust or
other enterprise, or association in which one or more of the
Shareholders, Directors or officers, or any person performing
the normal duties and responsibilities assigned by applicable
law to directors or officers are shareholders, officers,
directors, employees or partners or have a material financial
interest, direct or indirect or affiliates of any such company,
partnership or association.
(viii) To request the provision of any guarantees from the
Shareholders or their Affiliates.
(ix) To appoint the Company's auditors to be chosen from among those
auditors duly licensed to practice in the State of Louisiana,
it being understood that, unless otherwise unanimously agreed,
the shareholders shall appoint as the Company's auditors the
firm of Ernst & Young.
(x) The formation of any subsidiaries, partnerships, joint
ventures, trusts or other enterprises by or with the Company.
(xi) Any change in the dividend policy set forth in Section 9.03
hereof.
8.04 CERTAIN ACTIONS OF THE SHAREHOLDERS. The unanimous consent of
all of the Shareholders of the Company shall be necessary for
approval of the following corporate actions:
(i) Amend or supplement the Certificate of Incorporation of the
Company.
(ii) Selling, lease, exchange or other disposition of more than
twenty-five (25%) percent of the properties or other assets of
the Company whether in the regular course of business or other
than in the
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<PAGE> 21
regular course of business, or the acquisition by the Company
of the share capital (or equivalent) or of the assets of any
other company, partnership, joint venture, trust or other
enterprise.
(iii) Dissolving the Company or its merger or consolidation with any
other company, partnership, joint venture, trust or other
enterprise.
(iv) To change the capital structure of the Company or the issue of
further shares or other securities or the creation of any
option to subscribe or acquire shares or other securities of
the Company.
(v) To change the purpose of the Company.
(vi) To increase and decrease the number of Directors.
(vii) To add, change or remove restrictions on the transfer of shares
of the Company as set forth in the Certificate of
Incorporation.
Subject to the foregoing, the convening of meetings of the Board of Directors
and the Shareholders and other corporate matters shall be handled in accordance
with the Certificate of Incorporation and By-Laws of the Company and the Act.
ARTICLE IX
FISCAL MATTERS
9.01 BOOKS OF ACCOUNT. Separate books of account shall be kept and
maintained by the Company for the entry of all transactions relating thereto.
Such books of account shall be maintained in accordance with generally accepted
accounting principles. The Company shall supply to the Directors, on
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<PAGE> 22
a monthly basis, financial statements prepared in accordance with generally
accepted accounting principles. The Company's books of account shall be
audited annually by those independent auditors appointed by the Shareholders as
provided in Section 8.03(ix) above. The Company's books of account shall be
kept at the Company's head office or such other place as the Board of Directors
may determine to be appropriate. Each Shareholder or its duly authorized
representative(s) shall have access to the general records and the complete
books of accounts of the Company and all supporting documentation at all
reasonable times. The Company shall provide the Directors copies of all tax
returns filed upon request.
9.02 FISCAL YEAR. The Company's fiscal year shall begin on April 1 of each
calendar year and terminate on March 31 of the following calendar year;
provided, however, that the period that has elapsed from the date of the
Company's incorporation until March 31, 1993 shall be referred to as a "stub
year".
9.03 DIVIDENDS. The Shareholders have agreed that the Directors shall not
declare any dividends during the stub year of the Company operations.
Thereafter, unless otherwise approved by at least one (1) Director elected by
the Shareholders holding Class "A" common stock and one (1) Director elected by
the Shareholders holding Class "B" common stock, the Company shall distribute
to the Shareholders in proportion to the share of each Shareholder in the
capital of the Company ninety (90%) percent of the net income for the prior
fiscal year as reflected on the audited Consolidated Statement of Income (Loss)
and Retained Earnings of the Company for such fisal year beginning with fiscal
year 1994. The annual dividend for each fiscal year shall be paid within the
first four (4) months following the end of each fiscal year.
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<PAGE> 23
ARTICLE X
DEFAULTS
10.01 EVENTS OF DEFAULT. In the event of -
(a) a default or breach of either of the Shareholders under this
Shareholders' Agreement or a failure by either of the
Shareholders to observe or perform any of the terms of this
Shareholders' Agreement on its part to be observed and
performed and not being so remedied within thirty (30) days, or
such longer period as required under the circumstances, after
written notice thereof to the Defaulting Party by the other
Shareholder (the "Non-Defaulting Party");
(b) a Shareholder shall (i) apply for or consent to the appointment
of a receiver, trustee or liquidator of such Shareholder or of
all or a substantial part of such Shareholder's assets, (ii) be
adjudicated a bankrupt or insolvent, or file a voluntary
petition in bankruptcy, or admit in writing its inability to
pay its debts as they come due, (iii) make a general assignment
for the benefit of creditors, (iv) file a petition or an answer
seeking reorganization or arrangement with creditors or to take
advantage of any insolvency law, or (v) file an answer
admitting the material allegations, or consents to, or default
in answering a petition filed against such Shareholder in any
bankruptcy, reorganization or insolvency proceeding;
(c) an order, judgment or decree shall be entered by any court of
competent jurisdiction approving a petition seeking
reorganization of a Shareholder or an arrangement with
creditors (or any class of creditors) of a Shareholder or
appointing a receiver, trustee or liquidator of a Shareholder
or of all or a substantial part of the assets of a Shareholder,
and such order, judgment or decree shall continue unstayed and
in effect for a period of ninety (90) consecutive days; or
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<PAGE> 24
(d) the shareholders of a Shareholder as of the date of this
Shareholders' Agreement cease to own or Control at least fifty
(50%) percent of the voting shares outstanding as of the date
hereof of such Shareholder;
then such event shall be an Event of Default in respect of such Shareholder
(the "Defaulting Party") for the purposes of this Shareholders' Agreement.
10.02 DEEMED OFFER UPON EVENT OF DEFAULT. Upon an Event of Default, the
Defaulting Party shall be deemed to have given a Sale of Notice in accordance
with the provisions of Section 7.05(d) hereof. The Per Share Value to be paid
in respect of the shares of a Defaulting Party shall be determined in
accordance with the provisions of Section 10.04 hereof. If the Shareholder
entitled to purchase said shares as a result of an Event of Default elects to
purchase said shares within the time period specified in Sections 7.05(d)
hereof then such shares shall be sold to it on the basis specified in Sections
7.05(e) and (f) hereof and at the Per Share Value. If the Shareholder entitled
to purchase said shares as a result of an Event of Default elects not to
purchase said shares within the time period specified in Section 7.05(d) hereof
then the Directors may offer such shares to a Third Party at the Per Share
Value or at any other price as such Directors shall determine to be reasonable
under the circumstances.
10.03 RIGHTS AND OBLIGATIONS UPON EVENT OF DEFAULT.
When an Event of Default occurs -
(a) the Directors may apply any dividends or interest payments
which accrue or are payable to the Defaulting Party towards any
moneys which the Defaulting Party is liable to pay or provide
to the Company and which have not been so paid or provided;
(b) the Directors may treat any amount due and payable to the
Company by a Defaulting Party as a debt, and the Directors may
charge the Defaulting Party interest on the amount of the debt
at the Prime
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<PAGE> 25
Rate at the time of the Event of Default which would be
applicable to the Company;
(c) the Defaulting Party shall not be entitled to vote in respect
of its shares at any shareholders' meetings during the period
from the date of the Event of Default to the date that it is
rectified and the Shareholders shall take all necessary steps
to ensure that the Defaulting Party is not entitled to vote;
(d) the Board of Directors shall be reduced to only those directors
appointed by the Non-Defaulting Party and the Shareholders
shall take all necessary steps to ensure that any Directors
appointed by the Defaulting Party resign;
(e) the Defaulting Party shall not be entitled to appoint any
Directors during the period between the date of the Event of
Default to the date that it is rectified; and
(f) the provisions of Section 8.03 and 8.04 hereof shall not be
effective.
10.04 GOING CONCERN VALUE. Upon an Event of Default the Directors appointed by
the Non-Defaulting Party shall engage Johnson Rice & Company or a comparable
investment banking firm having relevant expertise doing business in the City of
New Orleans, Louisiana (the "Investment Banker") to render its opinion of the
value of the Company on a "going concern" basis (the "Going Concern Value") as
of the date of the opinion. Prior to engaging the Investment Banker, the
Directors shall require such Investment Banker to certify to them in writing
that they are capable of establishing the Going Concern Value without bias. The
Investment Baker shall render its opinion of the Going Concern Value within
sixty (60) days of its appointment and the cost of such opinion shall be bourne
entirely by the Company. The Going Concern Value taken as a whole shall be
divided by the total number of issued and outstanding shares of capital in
order to determine the value of each such share (the "Per Share Value").
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<PAGE> 26
ARTICLE XI
FORCE MAJEURE
The non-performance or delay in performance by the Parties of any obligation
under this Shareholders' Agreement shall be excused if and to the extent that
such non-performance or delay is caused by Force Majeure. The period of any
such non- performance or delay, together with such period as may be necessary
for the restoration of any damage done during such delay, shall be added to the
time given under this Agreement for the performance of such obligation and for
the performance of any obligation dependent thereto.
"Force Majeure" within the meaning of this Article shall be any order,
regulation or direction of the Government of the United States, any other
government which in any way governs the activities of the Company and/or the
Shareholders, or a political subdivision or any agency or instrumentality
thereof, whether promulgated in the form of law or otherwise, or any act of
God, insurrection, riot, war, strike or other labor disturbance, fires, floods
or any other cause beyond the reasonable control of the Company or the Party
and/or Shareholders affected and whether similar or dissimilar to any cause
whatsoever herein specified or not.
ARTICLE XII
COVENANTS OF THE SHAREHOLDERS
Each Shareholder hereby covenants and agrees, from and after the date of this
Shareholders' Agreement and so long as this Shareholders' Agreement shall
remain in effect, unless the other Shareholder shall have otherwise consented
specifically in writing:
12.01 INFORMATION. (a) Each Shareholder shall provide to the other Shareholder
at the addresses specified in Section 14.03 hereof, annual audited consolidated
financial statements with respect to such Shareholder, together with all notes
thereto, within ninety (90) days after the end of each fiscal
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<PAGE> 27
year of such Shareholder such consolidated statements to contain a balance
sheet, a statement of income (loss) and retained earnings and a statement of
cash flows, and to be prepared in accordance with generally accepted accounting
principles, applied on a consistent basis. The Shareholders shall ensure that
such financial statements present fairly the financial position and results of
operations of the Shareholders and their subsidiaries as of the end of, and
for, the period then ended, in all respects in accordance with generally
accepted accounting principles, applied on a consistent basis. Each
Shareholder shall accompany each of such sets of financial statements with the
written certification of its Chief Financial Officer that such Shareholder has
complied with all of its obligations as set forth in this Shareholders'
Agreement.
(b) Each Shareholder shall promptly provide to the other
Shareholder at the address specified in Section 14.03 hereof, written notice of
the occurrence of any event of default which results in the acceleration of any
amounts due under any obligation for borrowed money or any indebtedness
constituting the deferred portion of the purchase price of any property or
assets of such Shareholder or any of its subsidiaries in excess of $100,000.00.
Accompanying said written notice shall be a certificate signed by such
Shareholder's Chief Financial Officer as to the actions the Shareholder or its
subsidiaries, as applicable, are taking or proposes to take with respect
thereto.
(c) From time to time each Shareholder shall provide to the other
Shareholder such additional information regarding the financial position,
business, properties or affairs of each Shareholder or its subsidiaries as the
other Shareholder may reasonably request.
Section 12.02 PAYMENT OF OBLIGATIONS. Each Shareholder will pay and discharge,
at or before maturity, all of its obligations and liabilities (including,
without limitation, tax liabilities), except those that may be contested in
good faith and by appropriate proceedings.
Section 12.03 CORPORATE EXISTENCE. Each Shareholder will maintain (a) its
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<PAGE> 28
corporate existence, its qualification to do business and its good standing in
each jurisdiction in which qualification is necessary for the proper conduct of
its businesses, and (b) all licenses, permits and other authorizations
necessary for the ownership and operation of its properties and business, and
(c) insurance on all of its property, assets, and businesses in at least such
amounts and against at least such risks as are usually insured against in the
same area by companies of established repute engaged in the same or a similar
business.
Section 12.04 COMPLIANCE WITH LAWS. Each Shareholder will comply, in all
material respects, with all applicable laws, ordinances, rules, regulations,
and requirements of governmental authorities (including, without limitation,
ERISA) except where the necessity of compliance therewith is being contested in
good faith and by appropriate proceedings.
ARTICLE XIII
COVENANTS OF UNIVERSAL
Section 13.01 ORDERLY WIND UP. Universal shall limits its business after the
date hereof to that of a Shareholder of the Company and will engage in no
further business other than that necessary for the orderly winding up of its
obligations under existing contracts, customer orders, leases, licenses,
purchase orders and other commitments to the extent not included in Assumed
Liabilities.
Section 13.02 LIMITATION OF DIVIDENDS. During the fiscal years ending March
31, 1993, 1994 and 1995, the Board of Directors of Universal will not declare
and Universal will not pay any dividends to its shareholders, in cash or other
property, on Universal's shares of capital stock or other securities held by
its shareholders in excess of the respective fiscal year's federal taxable
income less federal and state income taxes plus Two Hundred Thousand
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<PAGE> 29
($200,000.00) Dollars. During the period from the Effective Time until 180
calendar days subsequent to the Effective Time, Universal will not redeem,
retire, purchase or otherwise acquire from its shareholders any shares of its
capital stock now or hereafter authorized or outstanding. After 180 calendar
days subsequent to the Effective Time and through March 31, 1995, Universal
will not expend more than Five Hundred Thousand ($500,000.00) Dollars in any
fiscal year to redeem, retire, purchase or acquire from its shareholders any
shares of its capital stock now or hereafter authorized or outstanding during
such fiscal years.
ARTICLE XIV
GENERAL
14.01 SCOPE OF SHAREHOLDER'S AUTHORITY. Unless otherwise expressly provided in
this Shareholders' Agreement, no Shareholder shall, without the prior written
consent of the other Shareholder, in any manner use the name of, or commit, or
act or purport to act for or as representative of, or assume any obligations or
responsibilities on behalf of, the other Shareholder or the Company, whether
before or after incorporation thereof.
14.02 ASSIGNMENT. The Parties hereto shall not sell, assign, pledge or
otherwise transfer its interest in this Shareholders' Agreement or any part
thereof, without obtaining the prior written consent of the other Parties
hereto, which consent will not be unreasonably be withheld.
14.03 NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be delivered in person or sent by
registered or certified mail, postage prepaid, or by telecopy as follows:
(a) If to Universal: Universal Partners, Inc.
P.O. Box 11308
Port Road, Port of New Iberia
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<PAGE> 30
New Iberia, Louisiana 70562
Attention: President
Telecopy: (318) 365-3711
With a copy to: Roy, Forrest & Lopresto
Main Mall, Suite 10
110 French Street
New Iberia, Louisiana 70562
Attention: Leon E. Roy, III
Telecopy: (318) 364-6702
(b) If to McDermott: McDermott Incorporated
1010 Common Street
P.O. Box 60035
New Orleans, Louisiana 70160
Attention: Senior Vice President &
Chief Financial Officer
Telecopy: (504) 587-5234
With a copy to: McDermott Incorporated
1010 Common street
P.O. Box 60035
New Orleans, Louisiana 70160
Attention: Vice President, Secretary & General
Counsel
Telecopy: (504) 587-5237
If to the Company: Universal Fabricators Incorporated
P.O. Box 11308
Port Road, Port of New Iberia
New Iberia, Louisiana 70562
Attention: President
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<PAGE> 31
Telecopy: (318) 365-3711
Any party may change its address for receiving notice by written notice given
to the others named above.
14.04 GOVERNING LAW. This Shareholders' Agreement shall be governed by and
construed in accordance with the internal substantive laws of the State of
Delaware, and the Parties hereby irrevocably and unconditionally consent and
submit to the in personam jurisdiction of any court located in Lafayette,
Louisiana having jurisdiction over all matters relating to this Shareholders'
Agreement. Each Party agrees that service of process in any action or
proceeding hereunder may be made upon such party by certified mail, return
receipt requested to the address for notice set forth herein. Each Party
irrevocably waives any objection it may have to the venue of any action, suit
or proceeding brought in such courts or to the convenience of the forum and
each Party irrevocably waives the right to proceed in any other jurisdiction.
Final judgment in any such action, suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment, a certified or
true copy of which shall be conclusive evidence of the fact and the amount of
any indebtedness or liability of any Party therein described.
14.05 BINDING EFFECT. The terms and conditions of the within Shareholders
Shareholders' Agreement shall extend to, be binding upon, and inure to the
benefit of, the heirs, successors, administrators, legal representatives, and
permitted assigns of the Parties hereto.
14.06 EFFECTIVE DATE; TERM. The effective date of this Shareholders' Agreement
shall be the date of its execution by the Parties as written above, and, unless
sooner terminated as provided herein, it shall remain in effect for an initial
term of ten (10) years. Thereafter, at any time within two (2) years prior to
the expiration of such initial term or any renewal thereof, the Parties may
extend the duration of this Shareholders' Agreement for as many additional
periods, each not to exceed ten (10) years, as the Parties may agree.
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<PAGE> 32
14.07 ANNEXES. All Annexes to this Shareholders' Agreement are integral parts
of this Agreement and are incorporated into this Agreement as if herein fully
set out.
14.08 COUNTERPARTS. This Shareholders' Agreement is being executed in multiple
originals and each original shall have equal force.
14.09 MODIFICATIONS. Neither this Shareholders' Agreement nor any provision
hereof may be waived, modified, discharged or terminated except by an
instrument in writing signed by each of the Shareholders hereto.
14.10 CONFIDENTIALITY. (a) Each of the Parties hereto hereby agrees that it
shall hold in strict confidence all data and other information of any kind and
description received by said Party from the other Parties or an Affiliate of
the other Parties pursuant to, as a result of, or in connection with the
activities contemplated by this Shareholders' Agreement and shall disclose such
data and other information to Third Parties only when authorized in writing by
the other Parties or to the extent such disclosure is required by law.
(b) The confidentiality obligation of each Party under Section 14.10(a)
above shall not apply to data and other information which:
(i) is or becomes publicly known through no wrongful act of a
Party;
(ii) is received by a Party from a Third Party without breach of any
obligation of nondisclosure owed by said Third Party to an
other Party or an Affiliate of such other Party;
(iii) it or has been independently developed by a Party as shown to
the satisfaction of the other Parties by written records;
(iv) is contained in any published patent or published patent
application or which becomes published or otherwise generally
known
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<PAGE> 33
to a Party through no wrongful act form and after the date it
becomes published or generally known; or
(v) is published pursuant to governmental or judicial requirement.
(c) The confidentiality obligation of each Party under Section 14.10(b)
above shall terminate, in any event, seven (7) years from its receipt of
such data and such other information or three (3) years after
dissolution of the Company, whichever is longer; provided, however, that
such expiration shall not be a grant to a Party of the right to publish
or to disclose to others any such data and other information marked
"trade secret".
14.11 CRAWLER CRANE RENTALS; ROLLED PIPE SUBCONTRACTS. The Shareholders have
agreed that McDermott shall have a first right of refusal for crawler crane
rentals and rolled pipe subcontracts from the Company. Accordingly, the
Company shall include McDermott as a bidder for any such rentals or
subcontracts at anytime that the Company is soliciting bids or proposals
therefor from any Third Party. In the event that McDermott's offer in response
thereto is competitive as to price and delivery than the Company shall rent
such crawler cranes or subcontract such rolled pipe to McDermott.
14.12 PURPOSE OF AGREEMENT. The Shareholders agree that they shall vote at all
levels of Shareholders and/or Board of Directors meetings in respect of the
shares held by them in such a manner that the provisions of this Agreement are
complied with.
ENTIRE AGREEMENT
This Shareholders' Agreement constitutes the entire agreement between the
Parties hereto relating to the subject matter hereof except for those certain
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<PAGE> 34
Letter Agreements dated November 30, 1992 and December 1, 1992 between
McDermott and Universal which is by reference incorporated herein. There are
no terms, obligations, covenants, representations, statements or conditions
other than those contained herein and therein.
No variation or modification of this Shareholders' Agreement nor waiver of any
of the terms and provisions hereof shall be deemed valid unless in writing by
the Parties hereto.
IN WITNESS WHEREOF, the Parties hereto have caused this Shareholders' Agreement
to be executed as of the date first written above.
UNIVERSAL PARTNERS, INC.
By: /s/ Dailey J. Berard
--------------------------------
Name: Dailey J. Berard
------------------------------
Title: President
-----------------------------
McDERMOTT INCORPORATED
By: /s/ Brock A. Hattox
--------------------------------
Name: Brock A. Hattox
----------------------------
Title: Senior Vice-President and
----------------------------
Chief Financial Officer
----------------------------
UNIVERSAL FABRICATORS INCORPORATED
By: /s/ Dailey J. Berard
--------------------------------
Name: Dailey J. Berard
------------------------------
Title: President
-----------------------------
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<PAGE> 35
ANNEXES INTENTIONALLY OMITTED
REGISTRANT WILL PROVIDE COPIES UPON REQUEST
- 35 -
<PAGE> 1
EXHIBIT 10.8
PUT/CALL AGREEMENT
THIS PUT/CALL AGREEMENT made and entered into this 30th day of
November, 1992 by and between Universal Partners, Inc., a corporation duly
organized and existing under the laws of the State of Louisiana ("Universal")
and McDermott Incorporated, a corporation duly organized and existing under the
laws of the State of Delaware ("McDermott").
W I T N E S S E T H:
WHEREAS, the parties hereto are the only shareholders of Universal
Fabricators Incorporated, a Delaware close corporation (the "Company") with
Universal owning fifty-one (51%) percent of the Company's outstanding share
capital and McDermott owning forty-nine (49%) percent of the Company's
outstanding share capital; and
WHEREAS, Universal and McDermott wish to enter into this Put/Call
Agreement relating to the share capital of the Company held by Universal.
NOW, THEREFORE, in consideration of the premises and promises herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally bound
hereby, the parties represent, warrant, covenant and agree as follows:
<PAGE> 2
1. Put Option
(a) During the three (3) month periods ending on June 30,
1997, June 30, 1998 and June 30, 1999 (the "Put Option Period"), Universal
shall have an option (the "Universal Put Option") to require McDermott to
purchase from Universal, for an aggregate purchase price to be determined based
on the following formula: (Average of net income of the Company for the prior
two (2) fisal years x 4.5) x .51 (the "Put Purchase Price"), all, but not less
than all, of the 510 shares of Class "A" common stock, par value $1.00 per
share, of the Company which were acquired by Universal from the Company
pursuant to a Contribution Agreement (the "Contribution Agreement") of even
date herewith (the "510 Shares").
(b) Universal may exercise the Universal Put Option by
sending written notice to McDermott during the Put Option Period. The closing
for the exercise of the Put Option (the "Put Closing") shall be on such date as
the parties hereto may agree in writing. At the Put Closing, Universal shall
deliver to McDermott a certificate or certificates representing the 510 Shares,
with appropriate properly executed stock powers attached, against payment by
McDermott of the Put Purchase Price. At the Put Closing, McDermott shall pay
the Put Purchase Price to Universal by wire transfer of immediately available
funds to an account designated by Universal.
2. McDermott Call Option
(a) During the three (3) month period ending on June 30,
1999 (the "Call Option Period"), and if the Universal Put Option shall not have
been exercised, McDermott shall have an option (the "McDermott Call Option") to
purchase all, but not less than all, of the 510 Shares for an aggregate
purchase price to be determined based on the following formula: (Average of
net income
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<PAGE> 3
of the Company for the prior two (2) fiscal years x 4.5) x .51 (the "Call
Purchase Price").
(b) McDermott may exercise the McDermott Call Option by
sending written notice to Universal during the Call Option Period. The closing
for the exercise of the McDermott Call Option (the "Call Closing") shall take
place on such date as the parties hereto may agree in writing. At the Call
Closing, Universal shall deliver to McDermott, a certificate or certificates
representing the 510 Shares, with appropriate properly executed stock powers
attached, against payment by McDermott of the Call Purchase Price. At the Call
Closing, McDermott shall pay the Call Purchase Price to Universal by wire
transfer of immediately available funds to the account designated by Universal.
3. Successor Interests. If and to the extent that the 510 Shares
shall be converted or otherwise transformed, by operation of law, into any
other security, interest or property of any type or form, (collectively, "Other
Property"), Universal shall deliver such Other Property (or certificate(s) or
appropriate instruments of transfer therefor) to McDermott at the Put Closing
or Call Closing, as the case may be, and such delivery shall constitute
satisfaction in full of any requirement or condition that Universal deliver
certificate(s) for the 510 Shares at the Put Closing or Call Closing, as the
case may be.
4. Representations and Warranties of Universal. Universal hereby
represents and warrants to McDermott as follows:
(a) Authority. Universal has full legal right, power and
authority, without the consent of any other person, to execute and deliver this
Put/Call Agreement and to carry out the transactions contemplated hereby. All
corporate, shareholder and other acts or proceedings required to be taken by
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<PAGE> 4
Universal to authorize the execution, delivery and performance of this Put/Call
Agreement and the transactions contemplated hereby have been duly and properly
taken.
(b) Validity. This Put/Call Agreement has been, and the
documents to be delivered at the Put Closing or Call Closing, as the case may
be, will be, duly executed and delivered and constitute and will constitute
lawful, valid and legally binding obligations of Universal, enforceable in
accordance with their respective terms except to the extent that such
enforceability may be limited by bankruptcy, insolvency, or other similar laws
relating to creditors' rights generally and is subject to general principles of
equity, including the discretion of a court in granting equitable remedies.
The execution and delivery of this Put/Call Agreement and the consummation of
the transactions contemplated hereby does not and will not result in the
creation of any Lien (as hereinafter defined) on the 510 Shares or the
acceleration of any indebtedness or other obli- gation of Universal and are not
and will not be prohibited by, do not and will not violate or conflict with any
provision of, and do not and will not constitute a default under or a breach of
(a) the Charter or By-laws of Universal, (b) any contract, agreement or other
instrument to which Universal is a party or by which Universal will be a party
or by which Universal is or will be bound, (c) any order, write, injunction,
decree or judgment of any court or governmental agency, or (d) any law, rule or
regulation applicable to Universal, except for violations, conflicts or
defaults that would not, in the aggregate or individually, have a material
adverse effect on the execution and delivery of this Put/Call Agreement and the
consummation of the transactions contemplated hereby, in the case of clauses
(b), (c) and (d) above. No approval, authorization, consent or other order or
action of or filing with any court, administrative agency or other governmental
authority is or will be required for
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<PAGE> 5
the execution and deliver by Universal of this Put/Call Agreement or the
consummation by Universal of the transactions contemplated hereby.
(c) Good Title. If the Universal Put Option or the
McDermott Call Option is exercised, as the case may be, then at the Put Closing
or the Call Closing, as the case may be, Universal will transfer to McDermott
good and marketable title to the 510 Shares free and clear of all claims,
liens, pledges, security interests, charges, encumbrances or rights of third
parties of any kind (each, a "Lien"), except as any such Lien may be in favor
of McDermott.
5. Representations and Warranties of McDermott. McDermott hereby
represents and warrants to Universal as follows:
(a) Authority. McDermott has full legal right, power and
authority, without the consent of any other person, to execute and deliver this
Agreement and to carry out the transactions contemplated hereby. All corporate
and other acts or proceedings required to be taken by McDermott to authorize
the execution, delivery and performance of this Put/Call Agreement and the
transactions contemplated hereby have been duly and properly taken.
(b) Validity. This Put/Call Agreement has been, and the
documents to be delivered at the Put Closing or Call Closing, as the case may
be, will be, duly executed and delivered and constitute and will constitute
lawful, valid and legally binding obligations of McDermott, enforceable in
accordance with their respective terms except to the extent that such
enforceability may be limited by bankruptcy, insolvency, or other similar laws
relating to creditors' rights generally and is subject to general principles of
equity, including the discretion of a court in granting equitable remedies.
The execution and delivery of this Put/Call Agreement and the consummation of
the transactions contemplated
- 5 -
<PAGE> 6
hereby does not and will not result in the creation of any Lien of any kind or
the acceleration of any indebtedness or other obligation of McDermott and are
not and will not be prohibited by, do not and will not violate or conflict with
any provision of, and do not or will not constitute a default under or a breach
of (a) the Charter or By-laws of McDermott, (b) any contract, agreement or
other instrument to which McDermott is a party or by which McDermott is or will
be bound, (c) any order, write, injunction, decree or judgment of any court or
governmental agency, or (d) any law, rule or regulation applicable to
McDermott, except for violations, conflicts or defaults that would not, in the
aggregate or individually, have a material adverse effect on the execution and
delivery of this Put/Call Agreement and the consummation of the transaction
contemplated hereby, in the case of clauses (b), (c) and (d) above. No
approval, authorization, consent or other order or action of or filing with any
court, administrative agency or other governmental authority is required for
the execution and deliver by McDermott of this Put/Call Agreement or such other
agreements and instruments or the consummation by McDermott of the transactions
contemplated hereby or thereby.
6. Miscellaneous.
(a) Amendment; Waiver. This Put/Call Agreement may not
be modified or amended except by an instrument or instruments in writing signed
by all of the parties hereto.
(b) Governing Law. This Put/Call Agreement shall be
governed by and construed in accordance with the internal substantive laws of
the State of Louisiana, and the parties hereby irrevocably and unconditionally
consent and submit to the in personam jurisdiction of any court located in
Lafayette, Louisiana having jurisdiction over all matters relating to this
Put/Call
- 6 -
<PAGE> 7
Agreement. Each party agrees that service of process in any action or
proceeding hereunder may be made upon such party by certified mail, return
receipt requested to the address for notice set forth herein. Each party
irrevocably waives any objection it may have to the venue of any action, suit
or proceeding brought in such courts or to the convenience of the forum and
each party irrevocably waives the right to proceed in any other jurisdiction.
Final judgment in any such action, suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment, a certified or
true copy of which shall be conclusive evidence of the fact and the amount of
any indebtedness or liability of any party therein described.
(c) Headings. The paragraph and other headings contained
in this Put/Call Agreement are for reference purposes only and shall not be
deemed to be a part of this Put/Call Agreement or to affect the meaning or
interpretation of this Put/Call Agreement.
(d) Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be deemed to have
been duly given when delivered (i) in person, (ii) to the extent receipt is
confirmed, by telecopy, facsimile or other electronic transmission service,
(iii) by registered or certified mail (postage prepaid, return receipt
requested) or (iv) by a nationally recognized overnight courier service, to the
parties at the following addresses:
If to Universal, to:
Universal Partners, Inc.
P.O. Box 11308
Port Road, Port of New Iberia
New Iberia, Louisiana 70562
Attention: President
Telecopy: (318) 365-3711
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<PAGE> 8
If to McDermott, to:
McDermott Incorporated
1010 Common Street
P.O. Box 60035
New Orleans, Louisiana 70160-0035
Attention: Senior Vice President &
Chief Financial Officer
Telecopy: (504) 587-5234
Copy to:
McDermott Incorporated
1010 Common Street
P.O. Box 60035
New Orleans, Louisiana 70160-0035
Attention: Vice President, Secretary and General Counsel
Telecopy: (504) 587-5237
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
(e) Binding Effect; Assignment. This Put/Call Agreement
shall be binding upon and inure solely to the benefit of each party hereto and
their respective successors and permitted assigns. Except as otherwise
provided herein, no assignment of this Put/Call Agreement or of any rights or
obligations hereunder may be made by (by operation of law or otherwise) without
the prior written consent of McDermott and any attempted assignment without the
required consent shall be void.
(f) Counterparts. This Put/Call Agreement may be
executed by the parties hereto in counterparts, each of which shall be deemed
to be an original
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<PAGE> 9
instrument, but all of which together shall constitute one and the same
instrument.
(g) No Sale or Lien. During the period commencing on the
date hereof and ending on June 30, 1999 Universal shall not sell, transfer,
enter into any agreement to sell or transfer, or enter into any option
agreement or otherwise create or allow to be created any Lien relating to the
510 Shares.
(h) Enforcement of the Put/Call Agreement. The parties
hereto agree that irreparable damage would occur in the event that any of the
provisions of this Put/Call Agreement were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Put/Call Agreement and to enforce specifically the terms and
provisions hereof, this being in addition to any other remedy to which they are
entitled at law or in equity.
(i) Conditions Precedent. The obligation of McDermott to
purchase the 510 Shares at the Put Closing or Call Closing, as the case may be,
is subject to, inter alia, the negotiation of a definitive Stock Purchase
Agreement and a satisfactory due diligence review of the Company.
(j) Entire Agreement. This Put/Call Agreement contains
the entire agreement between the parties relating to the 510 shares and all
prior negotiations and agreements are merged into this Put/Call Agreement.
Whenever appropriate in this Put/Call Agreement personal pronouns shall be
deemed to include the other genders and the singular to include the plural.
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<PAGE> 10
(k) Defined Terms. All capitalized terms used herein but
not defined shall have the meaning attributed to them in the Contribution
Agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Put/Call Agreement as of the date first above written.
UNIVERSAL PARTNERS, INC.
By: /s/ Dailey J. Berard
-------------------------------------
Title: President
----------------------------------
McDERMOTT INCORPORATED
By: /s/ Brock A. Hattox
-------------------------------------
Title: Senior Vice-President and
----------------------------------
Chief Financial Officer
----------------------------------
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<PAGE> 1
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into this 30th day of November, 1992, by and
between Universal Fabricators Incorporated, a close corporation duly organized
and existing under the laws of the State of Delaware (the "Company"), and
Dailey J. Berard, (the "Employee").
WITNESSETH:
WHEREAS, prior to the date hereof, Employee was the President of Universal
Partners, Inc., a Louisiana corporation ("Universal");
WHEREAS, Universal and McDermott Incorporated, a Delaware corporation,
pursuant to the terms of a Contribution Agreement (the "Contribution
Agreement") of even date herewith, have contributed the Contributed Assets to
the Company in exchange for the issuance by the Company of share certificates
representing fifty-one (51%) and forty-nine (49%) percent, respectively, of the
total authorized and issued share capital of the Company; and
WHEREAS, the Company wishes to assure itself of the continued services of
Employee for the period provided for in this Employment Agreement, and Employee
desires to serve in the employ of the Company on a full-time basis for such
period, upon the terms and conditions hereinafter provided;
NOW, THEREFORE, in consideration of the premises and promises herein
contained, and for other good and valuable consideration, the receipt and
<PAGE> 2
sufficiency of which is hereby acknowledged, and intending to be legally bound
hereby, the parties represent, covenant and agree as follows:
1. Employment. The Company agrees to employ Employee, and Employee
agrees to enter the employ of the Company, upon the terms and conditions
provided herein.
2. Position and Responsibilities. During the period of his
employment hereunder, Employee shall be employed as President of the Company
and shall perform such services for the Company and for any Affiliate of the
Company when and as directed by the Company. The term "Company" as used in
Sections 11, 12, 13, 14 and 15 shall include the Company and its Affiliates.
3. Term. Employee's employment under this Agreement shall commence
on November 30, 1992 and shall end on the date that Employee is no longer a
shareholder in Universal. In the event that Employee continues in the employ
of the Company after the end of such period, such continued employment shall be
subject to the terms and conditions of this Employment Agreement but shall be
terminable at will by either party.
4. Duties. During the period of his employment hereunder, Employee
shall devote all his business time, attention, skill and efforts to the
faithful performance of his duties hereunder. Employee may not serve, or
continue to serve, on the board of directors of, or hold any other offices or
positions in, other companies or organizations, or engage in any other
employment or business activity except for Uniscape, Inc. and Unisep, Inc.,
except the management of his passive investments and except for the Board of
Directors of Universal without
<PAGE> 3
the express written approval of the Company's Board of Directors. Employee
shall be located at New Iberia, Louisiana and be available for such domestic or
international travel as the needs of the Company require.
5. Compensation. For all services to be rendered by Employee in any
capacity under this Employment Agreement the Company shall pay Employee as
compensation a salary at the annual rate of (see, attached Exhibit "A") payable
in equal (semi-monthly installments on the fifteenth and last day of each
month) unless a payment date falls on a holiday in which case the payment shall
be made on the next preceding business day. Nothing contained herein shall
preclude Employee from participating in the present or future employee benefit
plans of the Company if he meets the eligibility requirements therefor.
6. Reimbursement For Expenses. Employee shall be entitled to
reimbursement for all ordinary and necessary business expenses incurred by him
in the performance of his duties hereunder, provided no such expense shall be
reimbursed unless Employee shall have properly accounted for expenses to the
extent necessary to substantiate the Company's Federal income tax deductions
for such expenses under the Internal Revenue Code, as amended, and the
regulations thereunder or equivalent subsequent legislation.
7. Vacation. Employee shall be entitled each year, at a time
convenient to the Company, to a vacation of four (4) weeks during which time
his compensation shall be paid in full.
8. Termination.
A. Employee's employment shall terminate upon his death.
- 3 -
<PAGE> 4
B. In the event Employee becomes, in the good faith
opinion of the Board of Directors of the Company,
physically or mentally disabled so as to be unable,
for a period of more than ninety (90) consecutive
working days or for more than one hundred twenty
(120) working days in the aggregate during any
12-month period, to perform his duties hereunder on a
full-time basis, the Company may at its option
terminate his employment upon not less than thirty
(30) days' written notice.
C. Employee's employment hereunder may be immediately
terminated by the Company upon the occurrence of any
of the following:
1. Employee commits, is arrested or otherwise
officially charged with a felony or any crime
involving moral turpitude or any other
criminal activity or unethical conduct which,
in the good faith opinion of the Board of
Directors, would seriously impair Employee's
ability to perform his duties hereunder or
would impair the business reputation of the
Company.
2. Employee commits an act, or omits to take
action, in bad faith and to the detriment of
the Company.
3. In the good faith opinion of the Board of
Directors of the Company, Employee has failed
to fully or faithfully perform his
obligations under this Employment Agreement.
D. Employee's employment may also be terminated pursuant
to the provisions of Section 16B hereof.
- 4 -
<PAGE> 5
9. Wrongful Termination. In the event Employee is terminated in
violation of this Employment Agreement, the liability of the Company, if any,
arising out of such termination shall be offset by any unemployment
compensation received by Employee or any compensation for services rendered
which is paid to or accrued for the benefit of Employee as a result of other
employment during any unfulfilled portion of this Employment Agreement.
10. Representations and Warranties of Employee. Employee represents and
warrants to the Company that:
A. Employee is under no contractual or other restriction
or obligation compliance with which is inconsistent
with the execution of this Employment Agreement, the
performance of his obligations hereunder, or the
other rights of the Company hereunder;
B. Employee is under no physical or mental disability
that would hinder the performance of his obligation
under this Employment Agreement.
11. Discoveries and Inventions.
A. Employee hereby assigns and agrees to assign to the
Company all his right, title and interest in and to
any and all inventions, discoveries, developments,
modifications, improvements, ideas, know-how,
techniques, designs, data, programs, processes,
formulae and all other work products ("Work
Products") whether tangible or intangible, which
- 5 -
<PAGE> 6
Employee conceives, reduces to practice, reduces to
writing or other storage media or otherwise creates
either alone or jointly with others in the course of
his employment.
B. If any of such Work Product is created wholly or in
part by Employee during his hours of actual work for
the Company, or with the aid of the Company's
materials, equipment or personnel, or arises out of
or relates to the Company's business, then such
creation shall be deemed conclusively to have
occurred in the course of his employment. It is
recognized that Employee will perform the duties
assigned to him at times other than his actual
working hours and the Company's rights hereunder
shall not be diminished because Employee's Work
Product was created at such other times.
C. Employee agrees to perform all acts necessary to
enable the Company to learn of and protect the rights
it receives hereunder, including, but not limited to,
making full and immediate disclosure to the Company
and assisting in the preparation and execution of all
documents required to acquire and convey to the
Company patent and copyright protection in the United
States and elsewhere.
12. Confidential Information. Employee agrees that he will not
either during the period of his employment hereunder or at any time thereafter
disclose to any unauthorized person, firm or corporation customer lists or
information relating to customers, any trade secrets or confidential
information relating to the Company, or to any of the businesses operated by
the Company, and Employee confirms that such information constitutes the
exclusive property of the Company.
- 6 -
<PAGE> 7
For the purposes of this Employment Agreement, the term "confidential
information" shall mean information of any nature and in any form which at the
time or times concerned is not generally known to those persons engaged in
business similar to that conducted or contemplated by the Company. Employee
shall return all tangible evidence of such confidential information to the
Company prior to or at the termination of his employment.
13. Obligation of Loyalty to the Company. During the term of this
Employment Agreement and while employed by the Company, Employee agrees that he
will not:
A. Make any statement or perform any act intended to
advance an interest of any existing or prospective
competitor of the Company in any way that will or may
injure the Company in its relationship and dealings
with any existing or potential customer, supplier or
creditor or solicit or encourage any other employee
of the Company to do any act that is disloyal to the
Company or inconsistent with the Company's interest
or in violation of any provision of this Employment
Agreement;
B. Solicit any other employee to participate in or
assist with the formation or operations of any
business intended to compete with the Company or
with respect to the possible future employment of
such other employee by any such business;
C. Inform any existing or potential customer, supplier
or creditor of the Company that Employee intends to
resign, or make any statement or do any act intended
to cause any
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<PAGE> 8
existing or potential customer, supplier or creditor
of the Company to learn of Employee's intention to
resign; and
D. Discuss with any existing or potential customer,
supplier or creditor of the Company the present or
future availability of services or products provided
by a business which competes with or, where such
services or products are competitive, with services
or products which the Company provides.
14. Covenant Not to Compete. If the employment of Employee is
terminated by the Company pursuant to Section 8C hereof, then:
A. Employee will not, for a period of twelve (12) months
from such termination of employment in the Gulf of
Mexico or any other region of the world in which the
Company conducts business at the time of such
termination of employment, directly or indirectly,
own, manage, operate control, be employed by,
participate in, or be connected in any manner with
the ownership, management, operation or control of
any business in competition with the business
conducted by the Company at the time of such
termination, including the business of fabrication
and assembly of jackets, decks, topside facilities
and equipment for installation and use off-shore in
the production and processing of oil and gas; and
B. Employee will not call upon any customer of the
Company or any potential customer with whom the
customer has been negotiating or is expecting to
negotiate, for the purpose of soliciting,
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<PAGE> 9
diverting, enticing away the business of such person
or entity, or otherwise disrupting any previously
established relationship between such person or
entity and the Company.
15. Injunctive Relief. If there is a breach or threatened breach by
the Employee of the provisions of Sections 12, 13 or 14 of this Employment
Agreement during or after the term of this Employment Agreement, the Company
shall be entitled to an injunction restraining the Employee of the violation of
such section. Nothing herein shall be construed as prohibiting the Company
from pursuing any other remedy it may have in the event of the breach of this
Agreement by Employee.
16. Consolidation, Merger, or Sale of Assets. In the event of a
future disposition of (or including) the properties and business of the
Company, substantially as an entirety, by merger, consolidation, sale of
assets, joint venture or otherwise, then the Company may elect:
A. To assign this Employment Agreement and all of its
rights and obligations hereunder to the acquiring or
surviving person or entity; provided that such
corporation, person or entity shall assume in writing
all of the obligations of the Company hereunder; and
provided further that the Company (in the event and
so long as it remains in business as an independent
going enterprise) shall remain liable for the
performance of its obligations hereunder in the event
of an unjustified failure of the acquiring
corporation to perform its obligations under this
Employment Agreement; or
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<PAGE> 10
B. In addition to its other rights of termination, to
terminate this Agreement upon at least thirty (30)
days' written notice by paying Employee the
compensation at the rate provided in Section 5 to the
date on which such termination shall take effect.
17. Headings. Section and other headings contained in this
Employment Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Employment Agreement.
18. Jurisdiction and Venue. This Employment Agreement shall be
governed by and construed in accordance with the internal substantive laws of
the State of Louisiana, and the parties hereby irrevocably and unconditionally
consent and submit to the in personam jurisdiction of any court located in
Lafayette, Louisiana having jurisdiction over all matters relating to this
Employment Agreement. Each party agrees that service of process in any action
or proceeding hereunder may be made upon such party by certified mail, return
receipt requested to the address for notice set forth herein. Each party
irrevocably waives any objection it may have to the venue of any action, suit
or proceeding brought in such courts or to the convenience of the forum and
each party irrevocably waives the right to proceed in any other jurisdiction.
Final judgment in any such action, suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment, a certified or
true copy of which shall be conclusive evidence of the fact and the amount of
any indebtedness or liability of any party therein described.
19. Integrated Agreement. This Employment Agreement, the exhibits
hereto and all other documents and instruments delivered in accordance with the
terms hereof constitute the entire understanding and agreement among the
parties hereto
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<PAGE> 11
with respect to the subject matter hereof, and there are no agreements,
understandings, restrictions, representations or warranties among the parties
other than those set forth herein or therein provided for.
20. Severability. Each provision of this Employment Agreement is
intended to be severable. In the event that any one or more of the provisions
contained in this Employment Agreement shall for any reason be held to be
invalid, illegal or unenforceable, the same shall not affect the validity or
enforceability of any other provision of this Employment Agreement, but this
Employment Agreement shall be construed as if such invalid, illegal or
unenforceable provisions had never been contained therein, provided, however,
that no provision shall be severed if it is clearly apparent under the
circumstances that the parties would not have entered into the Agreement
without such provision.
21. Amendments. This Employment Agreement may be amended or modified
at any time in all respects, but only by an instrument in writing executed by
the parties hereto.
22. Notices. Any notice, communication, request, reply or advice
(hereinafter severally and collectively called "notice" in this Employment
Agreement provided or permitted to be given or made by any party to another
must be in writing and may be given or served by depositing same in the United
States mail, postage prepaid and registered or certified with return receipt
requested, or by delivering the same to the address of the person or entity to
be notified. Notice deposited in the mail in the manner hereinabove described
shall be effective 48 hours after such deposit, and notice delivered in person
shall be effective at the time of delivery. For purposes of notice, the
addresses of the parties shall, until changed as hereinafter provided, be as
follows:
- 11 -
<PAGE> 12
(a) If to the Company: Universal Fabricators Incorporated
P.O. Box 11308
Port Road, Port of New Iberia
New Iberia, Louisiana 70562
Attention: Controller
Telecopy: (318) 365-3711
or at such other address as the Company may have advised Employee in writing;
and
(b) If to Employee: Dailey J. Berard
P.O. Box 11308
Port Road, Port of New Iberia
New Iberia, Louisiana 70562
Telecopy: (318) 365-3711
or at such other address as Employee may have advised the Company in writing.
23. Waiver. The failure by any party to enforce any of its rights
hereunder shall not be deemed to be a waiver of such rights, unless such waiver
is an express written waiver which has been signed by the waiving party, and in
the case of the Company, expressly approved by its Board of Directors. Waiver
of any one breach shall not be deemed to be a waiver of any other breach of the
same or any other provision hereof.
24. Counterpart Execution. This Employment Agreement may be executed
in one or more counterparts and by different parties in separate counterparts,
with the same effect as if all parties hereto had signed the same documents.
All counterparts so executed and delivered shall be deemed to be an original,
shall be construed together and shall constitute one agreement.
- 12 -
<PAGE> 13
25. Defined Terms. All capitalized terms used herein but not defined
shall have the meaning attributed to them in the Contribution Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the day and year first above written.
COMPANY
UNIVERSAL FABRICATORS INCORPORATED
By: /s/ James C. Conrad
-------------------------------
Title: Controller
----------------------------
EMPLOYEE
/s/ Dailey J. Berard
----------------------------------
- 13 -
<PAGE> 14
SCHEDULES INTENTIONALLY OMITTED
REGISTRANT WILL PROVIDE COPIES UPON REQUEST
- 14 -
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected Financial
and Operating Data" and "Experts" and to the use of our report dated April 17,
1997 (except Note 6, as to which the date is June 19, 1997, and Note 7, as to
which the date is August 1, 1997) with respect to the financial statements of
Universal Fabricators Incorporated, and our report dated July 17, 1997 (except
for Notes 2 and 3, as to which the date is August 1, 1997), with respect to the
balance sheet of UNIFAB International, Inc., in the Registration Statement
(Form S-1) and related Prospectus of UNIFAB International, Inc. for the
registration of 3,237,250 shares of its common stock.
Ernst & Young LLP
New Orleans, Louisiana
- ------------------------------------------------------------------------------
The foregoing consent is in the form that will be signed upon completion of the
agreements described in Note 7 to the financial statements of Universal
Fabricators Incorporated and Notes 2 and 3 to the balance sheet of UNIFAB
International, Inc.
/s/ ERNST & YOUNG LLP
---------------------
Ernst & Young LLP
New Orleans, Louisiana
July 17, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNIVERSAL
FABRICATORS INCORPORATED'S MARCH 31, 1997 FINANCIAL STATEMENTS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 659,626
<SECURITIES> 0
<RECEIVABLES> 19,368,473
<ALLOWANCES> 0
<INVENTORY> 239,097
<CURRENT-ASSETS> 20,813,303
<PP&E> 8,361,618
<DEPRECIATION> 3,020,496
<TOTAL-ASSETS> 26,154,425
<CURRENT-LIABILITIES> 12,621,237
<BONDS> 0
0
0
<COMMON> 1,000
<OTHER-SE> 12,200,020
<TOTAL-LIABILITY-AND-EQUITY> 26,154,425
<SALES> 66,724,504
<TOTAL-REVENUES> 66,724,504
<CGS> 58,589,197
<TOTAL-COSTS> 60,226,760
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 63,304
<INCOME-PRETAX> 6,579,595
<INCOME-TAX> 2,554,951
<INCOME-CONTINUING> 4,024,654
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,024,654
<EPS-PRIMARY> 1.15
<EPS-DILUTED> 1.15
</TABLE>
