<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 29, 1997.
REGISTRATION NO. 333-31609
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
AMENDMENT NO. 2
TO
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..................... $51,796,000 $15,696(2)
==============================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) The Registrant paid $14,715 of this fee in connection with the original
filing of this Registration Statement on July 18, 1997.
---------------------
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 AUGUST 29, 1997
2,815,000 SHARES
UNIFAB INTERNATIONAL, INC.
[UNIFAB INTERNATIONAL LOGO] 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 $14.00 and
$16.00. See "Underwriting" for information relating to the factors to be
considered in determining the initial public offering price.
The Common Stock has been approved for listing 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 $400,000.
(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 September , 1997.
<PAGE> 3
No. 1: Deck fabricated by the Company pictured after loading onto a barge for
delivery to a platform offshore.
No. 2: Deck with complex piping fabricated by the Company and loaded onto skids
to be moved onto a barge for transportation to a platform offshore.
No. 3: Platform jacket and three decks fabricated by the Company. The decks each
feature complex piping and helipads.
No. 4: Aerial view of the Company's 150 acre yard and surrounding areas located
at the Port of Iberia, Louisiana.
No. 5: Deck fabricated by the Company pictured during transportation by a tug
and delivery barge to a platform offshore.
---------------------
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 exchange its shares of common stock of Universal Fabricators for
shares of the Company's Common Stock (the "Partners Share Exchange"), which will
be distributed to the shareholders of Universal Partners upon the dissolution of
Universal Partners which is expected to occur promptly after the completion of
the Offering. McDermott will also exchange its shares of common stock of
Universal Fabricators for shares of the Company's Common Stock (the "McDermott
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 Partners Share Exchange
and the McDermott 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, based on the number of
decks delivered, 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. The average number of active offshore rigs in the Gulf of Mexico has
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.
1
<PAGE> 5
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. A by-pass along one of these
waterways could provide access from the Company's facilities to the Gulf of
Mexico for structures weighing up to 6,000 tons, if it were to be reopened and
dredged to sufficient depth. Local port commissions have proposed the reopening
and dredging of this by-pass with state and local funds. The Company believes
that there is widespread support for this proposal and that the by-pass may be
reopened within the next two years. No assurance can be given as to whether or
when such project will be completed or whether the increased channel depth will
be maintained. If the project is not completed by state or local authorities,
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
2
<PAGE> 6
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 the 408 workers employed by the Company at July 31, 1997. 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. The summary financial data as of June 30, 1997 and for the three
months ended June 30, 1996 and 1997 are derived from the unaudited financial
statements of Universal Fabricators for such periods. In the opinion of
management, the unaudited financial statements of Universal Fabricators reflect
all adjustments (consisting of only normal recurring adjustments) necessary for
fair presentation of the financial condition and results of operations for these
periods. Results for interim periods are not necessarily indicative of results
for a full year. 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>
THREE MONTHS
YEAR ENDED MARCH 31, ENDED JUNE 30,
------------------------------------------------------- -------------------
1993(1) 1994 1995 1996 1997 1996 1997
---------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Revenue................................. $ 25,369 $ 29,926 $ 27,883 $ 51,807 $ 66,724 $ 18,419 $ 15,503
Cost of revenue......................... 21,239 27,211 23,174 40,362 58,589 16,295 13,314
---------- -------- -------- -------- -------- -------- --------
Gross profit............................ 4,130 2,715 4,709 11,445 8,135 2,124 2,189
General and administrative expense...... 1,207 1,228 1,326 1,419 1,637 342 409
---------- -------- -------- -------- -------- -------- --------
Operating income........................ 2,923 1,487 3,383 10,026 6,498 1,782 1,780
Other income (expense), net............. 84 21 38 315 82 26 24
---------- -------- -------- -------- -------- -------- --------
Income before income taxes.............. 3,007 1,508 3,421 10,341 6,580 1,808 1,804
Income tax expense...................... 1,112 555 1,286 3,888 2,555 709 660
---------- -------- -------- -------- -------- -------- --------
Net income.............................. $ 1,895 $ 953 $ 2,135 $ 6,453 $ 4,025 $ 1,099 $ 1,144
========== ======== ======== ======== ======== ======== ========
Pro forma net income per share
(unaudited)(2)........................ $ 0.54 $ 0.27 $ 0.61 $ 1.84 $ 1.02 $ 0.31 $ 0.29
========== ======== ======== ======== ======== ======== ========
Pro forma cash dividends declared per
common share(2)....................... -- -- $ 0.25 $ 0.55 $ 1.47 $ 1.66 $ 0.91
Pro forma weighted average common shares
(unaudited)(2)........................ 3,500 3,500 3,500 3,500 3,956 3,500 3,956
Other Financial Data:
Depreciation and amortization........... $ 125 $ 381 $ 424 $ 390 $ 471 96 124
Capital expenditures.................... $ 20 $ 110 $ 179 $ 402 $ 821 325 50
Net cash provided by (used in) operating
activities............................ (1,181) (480) 3,392 4,285 2,328 1,570 5,643
Net cash used in investing activities... 20 110 170 394 803 318 50
Net cash provided by (used in) financing
activities............................ 2,400 531 (1,389) (1,921) (5,807) (2,962) (3,622)
EBITDA(3)............................... $ 3,048 $ 1,868 $ 3,807 $ 10,416 $ 6,969 1,878 1,904
EBITDA margin(3)........................ 12.0% 6.2% 13.7% 20.1% 10.4% 10.2% 12.3%
Operating Data:
Direct labor hours worked............... 520,000(4) 484,000 436,000 656,000 902,000 218,000 260,000
Number of employees..................... 230 215 210 330 425 362 404
Backlog (at end of period).............. $ 6,976 $ 8,917 $ 31,994 $ 42,311 $ 30,221 $ 35,426 $ 21,142
</TABLE>
5
<PAGE> 9
<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(5)................................ 49.3% 76.5% 76.2% 76.2% 88.0%
Blocks leased(6)........................................ 204 336 560 835 1,508
Drilling rigs under contract(7)......................... 79 116 133 135 158
Offshore platforms installed(8)......................... 53 81 127 89 114
Worldwide:
Rig utilization rates(5)................................ 76.0% 81.9% 81.1% 83.9% 89.5%
Drilling rigs under contract(7)......................... 519 545 536 541 572
Offshore platforms installed(8)......................... 192 219 252 187 230
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
-----------------------------------------
PRO FORMA
ACTUAL PRO FORMA(2) AS ADJUSTED(9)
------- ------------ --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance Sheet Data:
Working capital........................................... $ 5,788 $ 5,789 $ 7,434
Property, plant and equipment, net........................ 5,267 5,267 12,267
Total assets.............................................. 22,412 22,413 31,058
Debt...................................................... -- -- --
Shareholders' equity...................................... 9,723 9,724 18,369
</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 Partners
Share Exchange and the McDermott Share Exchange. The unaudited pro forma
data for the year ended March 31, 1997 and the three months ended June 30,
1997 also give effect to 456,260 additional shares that would have been
required to be sold to fund the $6.3 million payment to McDermott to secure
the release of McDermott's rights under the Shareholders' Agreement and the
Put/Call Agreement. 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 margin is calculated by dividing EBITDA by
revenue. Neither EBITDA nor EBITDA margin should be considered as an
alternative to net income, or any other measure of operating performance in
accordance with generally accepted accounting principles. EBITDA and EBITDA
margin are widely used by financial analysts as a measure of financial
performance. The Company's measurements of EBITDA and EBITDA margin may not
be comparable to similarly titled measures reported by other companies.
(4) Reflects the number of direct labor hours worked for the year ended
December 31, 1992.
(5) 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.
(6) 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.
(7) 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.
(8) Represents the number of decks installed on 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.
(9) Assumes the public offering of 1,100,000 shares of Common Stock by the
Company at an assumed price of $15.00 per share resulting in net proceeds
of $14.9 million (after deducting the underwriting discount and estimated
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
will exchange its shares of common stock of Universal Fabricators for 1,785,000
shares of the Company's Common Stock, which will be distributed to the
shareholders of Universal Partners in connection with the dissolution of
Universal Partners,
7
<PAGE> 11
which is expected to occur promptly after the completion of the Offering.
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 McDermott 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 Abbeville Port Commission has proposed that the State of
Louisiana fund the reopening and 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. The Company believes that there is
widespread support for this proposal and that the by-pass may be reopened within
the next two years. There can be no assurance as to whether or when such project
will be completed or whether the increased channel depth will be maintained. 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
10
<PAGE> 14
operations. The failure of such structures during and after installation can
result in similar injuries and 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. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- General." 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), 64.4% (two customers) and 60.6% (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. See "Business -- Customers and Contracting."
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 workplace safety regulations
and numerous federal, state and local environmental protection laws and
regulations, compliance with which is becoming increasingly expensive. Such laws
and regulations are complex, stringent and are often changed. Sanctions for
noncompliance may include revocation of or suspension of permits, corrective
action orders, cease and desist orders, administrative or civil penalties and
criminal prosecution. There can be no assurance that the Company is or will be
at all times in full compliance with all applicable laws and regulations.
Failure to comply could have a material adverse effect on the Company.
Certain environmental laws provide for strict, joint and several liability,
without regard to fault or negligence, for remediation of spills and other
releases of hazardous substances. In addition, companies may be subject to
claims alleging personal injury, property damage or natural resource damage as a
result of the handling of hazardous substances. These 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
13
<PAGE> 17
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 upon completion of the Offering, the
Company will enter into an employment agreement with Dailey J. Berard (a form of
which has been filed as an exhibit to the Registration Statement of which this
Prospectus forms a part), which grants Mr. Berard the right to demand
registration of all of the shares of Common Stock owned by him (subject to a
minimum of 100,000 shares) if Mr. Berard's employment as President and Chief
Executive Officer of the Company is terminated for any reason except death,
disability or Cause (as defined therein). Although the Company cannot predict
the timing or amount of future sales of Common Stock or the effect that the
availability of such shares for sale will have on the market price prevailing
from time to time, sales of substantial amounts of Common Stock in the public
market following this Offering could adversely affect the market price of the
Common Stock. See "Principal and Selling Shareholders" 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, assuming an
initial public offering price of $15.00 per share, will incur immediate dilution
of $27.6 million ($9.82 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. See "Dividend Policy."
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 $14.9 million (assuming an initial
offering price of $15.00 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, $700,000 to purchase approximately 18 acres of land from
McDermott, including the land currently leased from McDermott, where the
Company's 12,000 square foot main office building is located, and $100,500 for
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.
Construction of the new slip will involve dredging to create a new slip at
the Company's facilities, building out a steel bulkhead around the new slip and
filling in the work area surrounding the new slip with limestone. The Company
will also install a new load-out system, consisting of rails and skidways, that
will be able to support structures weighing up to 6,000 tons. The pipe shop
improvements will involve the upgrade and automation of much of the pipe shop's
equipment, which management believes will increase its productivity and
capacity. Management believes that the new slip and surrounding work areas will
increase the Company's capacity for smaller structures. These improvements will
also enable the Company to bid on projects in excess of 3,500 tons that may be
priced at levels that warrant the expense of dredging the Freshwater Bayou
Channel privately, if not reopened with local or state funds. See "Risk
Factors -- Facility Limitations."
The purchase price for the land to be acquired from Universal Partners is
based upon an independent appraisal of the land, and the purchase price for the
land to be acquired from McDermott was determined through negotiations between
McDermott and the Company, who was represented by Mr. Berard, its President and
Chief Executive Officer. The Company's management believes that these prices
reflect the fair market value of such properties, if sold in arms' length
transactions.
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 Partners Share Exchange and the McDermott Share
Exchange, the pro forma net tangible book value of the Company at June 30, 1997
would have been $9.7 million, or $2.78 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 $15.00 per share and deducting the underwriting discount and offering
expenses estimated at $1.6 million), the pro forma net tangible book value of
the Company at June 30, 1997 would have been approximately $18.4 million or
$3.99 per share of Common Stock. This represents an immediate increase in net
tangible book value of $1.21 per share of Common Stock to current holders of
Common Stock and an immediate dilution of approximately $11.01 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................. $13.81
Pro forma net tangible book value per share at June 30,
1997 (without taking into account the Offering)(1)..... $2.78
Increase in pro forma net tangible book value per share
attributable to the sale of Common Stock in the
Offering............................................... $1.21
-----
Adjusted pro forma net tangible book value per share after
giving effect to the Offering(1).......................... $ 3.99
------
Dilution in pro forma net tangible book value per share to
the purchasers of Common Stock offered hereby(1).......... $ 9.82
======
</TABLE>
The following table summarizes, on a pro forma basis, at June 30, 1997, the
number of shares of Common Stock to be issued by the Company in connection with
the Partners Share Exchange, the McDermott 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 $15.00 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% $ 6,519,664 37% $ 1.86
New investors......................... 1,100,000 24% 16,500,000 63% $15.00
--------- ---- ----------- ---- ------
Total....................... 4,600,000 100% 23,019,664 100%
========= ==== =========== ====
</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 June
30, 1997; on a pro forma basis, as of June 30, 1997, giving effect to the
formation and capitalization of UNIFAB International, Inc., the Partners Share
Exchange and the McDermott Share Exchange; 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 $15.00 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 JUNE 30, 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 46
Additional paid-in capital................................ 6,485 15,119
Retained earnings......................................... 3,204 3,204
-------- --------
Total shareholders' equity........................ 9,724 18,369
-------- --------
Total capitalization........................................ $ 9,724 $ 18,369
======== ========
</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. The selected financial data as of June 30,
1997 and for the three month periods then ended are derived from the unaudited
consolidated statements of Universal Fabricators for such periods. In the
opinion of management, the unaudited financial statements of Universal
Fabricators reflect all adjustments (consisting only of normal recurring
adjustments) necessary for the fair presentation of the financial condition and
results of operations for these periods. Results for interim periods are not
necessarily indicative of results for a full year. 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>
THREE MONTHS
YEAR ENDED MARCH 31, ENDED JUNE 30,
------------------------------------------------ -----------------
1993(1) 1994 1995 1996 1997 1996 1997
------- ------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Revenue....................................... $25,369 $29,926 $27,883 $51,807 $66,724 $18,419 $15,503
Cost of revenue............................... 21,239 27,211 23,174 40,362 58,589 16,295 13,314
------- ------- ------- ------- ------- ------- -------
Gross profit.................................. 4,130 2,715 4,709 11,445 8,135 2,124 2,189
General and administrative expense............ 1,207 1,228 1,326 1,419 1,637 342 409
------- ------- ------- ------- ------- ------- -------
Operating income.............................. 2,923 1,487 3,383 10,026 6,498 1,782 1,780
Other income (expense), net................... 84 21 38 315 82 26 24
------- ------- ------- ------- ------- ------- -------
Income before income taxes.................... 3,007 1,508 3,421 10,341 6,580 1,808 1,804
Income tax expense............................ 1,112 555 1,286 3,888 2,555 709 660
------- ------- ------- ------- ------- ------- -------
Net income.................................... $ 1,895 $ 953 $ 2,135 $ 6,453 $ 4,025 $ 1,099 $ 1,144
======= ======= ======= ======= ======= ======= =======
Pro forma net income per share
(unaudited)(2).............................. $ 0.54 $ 0.27 $ 0.61 $ 1.84 $ 1.02 $ 0.31 $ 0.29
======= ======= ======= ======= ======= ======= =======
Pro forma cash dividends declared per common
share(2).................................... -- -- $ 0.25 $ 0.55 $ 1.47 $ 1.66 $ 0.91
Pro forma weighted average common shares
(unaudited)(2).............................. 3,500 3,500 3,500 3,500 3,956 3,500 3,956
Other Financial Data:
Depreciation and amortization................. $ 125 $ 381 $ 424 $ 390 $ 471 $ 96 $ 124
Capital expenditures.......................... $ 20 $ 110 $ 179 $ 402 $ 821 $ 325 $ 50
Net cash provided by (used in) operating
activities.................................. (1,181) (480) 3,392 4,285 2,328 1,570 5,643
Net cash used in investing activities......... 20 110 170 394 803 318 50
Net cash provided by (used in) financing
activities.................................. 2,400 531 (1,389) (1,921) (5,807) (2,962) (3,622)
EBITDA(3)..................................... $ 3,048 $ 1,868 $ 3,807 $10,416 $ 6,969 $ 1,878 $ 1,904
EBITDA margin(3).............................. 12.0% 6.2% 13.7% 20.1% 10.4% 10.2% 12.3%
Operating Data:
Direct labor hours worked..................... 520,000(4) 484,000 436,000 656,000 902,000 218,000 260,000
Number of employees........................... 230 215 210 330 425 362 404
Backlog (at end of period).................... $ 6,976 $ 8,917 $31,994 $42,311 $30,221 $35,426 $21,142
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31,
----------------------------------------------- JUNE 30,
1993 1994 1995 1996 1997 1997
------- ------- ------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital......................................... $ 3,181 $ 4,337 $ 5,877 $10,333 $ 8,192 5,788
Property, plant and equipment, net...................... 5,514 5,243 4,986 4,999 5,341 5,267
Total assets............................................ 13,043 14,318 16,173 23,714 26,154 22,412
Debt.................................................... -- 531 -- -- -- --
Shareholders' equity.................................... 7,222 8,175 9,452 13,984 12,201 9,723
</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 Partners
Share Exchange and the McDermott Share Exchange. The unaudited pro forma
data for the year ended March 31, 1997 and the three months ended June 30,
1997 also give effect to 456,260 additional shares that would have been
18
<PAGE> 22
required to be sold to fund a $6.3 million payment to McDermott to secure the
release of its rights under the Shareholders' Agreement and the Put/Call
Agreement. 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 margin is calculated by dividing EBITDA by revenue.
Neither EBITDA nor EBITDA margin should be considered as an alternative to
net income or any other measure of operating performance in accordance with
general accounting principles. EBITDA and EBITDA margin are widely used by
financial analysts as a measure of financial performance. The Company's
measurement of EBITDA and EBITDA margin may not be comparable to similarly
titled measures reported by other companies.
(4) 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.
The average number of active offshore rigs in the Gulf of Mexico has 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 following table sets forth for the periods presented the percentage of
the Company's revenue derived from each type of contract used by the Company:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED MARCH 31, ENDED JUNE 30,
--------------------------- ----------------
TYPE OF CONTRACT(1) 1995 1996 1997 1996 1997
------------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Fixed-Price...................... 80.0% 76.2% 81.0% 86.9% 73.1%
Time and Materials............... 19.6% 23.7% 18.9% 13.0% 26.6%
</TABLE>
- ---------------
(1) Remaining revenues were derived from storage fees.
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
21
<PAGE> 25
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 labor hours worked
(in thousands).......... 127 136 92 81 126 143 194 193 218 242 206 236
</TABLE>
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. Revenue from
time and materials contracts is recognized on the basis of direct labor hours
worked at fixed hourly rates and the cost of materials or sub-contract costs
incurred plus mark-up.
RESULTS OF OPERATIONS
Comparison of the Three Months Ended June 30, 1997 and 1996
Revenue for the three months ended June 30, 1997 decreased 15.8% to $15.5
million from the $18.4 million generated in the three months ended June 30,
1996. This decrease was primarily due to the large amount of contract materials
purchased in the 1996 period as compared to the 1997 period. Although the
Company's direct labor hours worked during the 1997 period increased 19.5% from
the number worked in the 1996 period and prices realized under fixed-price
contracts were slightly higher in the 1997 period, the decreases in the amount
of contract materials purchased offset these increases.
Cost of revenue was $13.3 million in the three months ended June 30, 1997
compared to $16.3 million in the three months ended June 30, 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 decreased as a
percentage of revenues to 85.8% in 1997 from 88.6% in 1996.
Gross profit for the three months ended June 30, 1997 increased to $2.2
million from $2.1 million in the 1996 period as improved margins on fixed price
contracts and a favorable mix of services and materials on the Company's time
and materials contracts offset the decrease in revenue.
General and administrative expense was $0.4 million in the three months
ended June 30, 1997 compared to $0.3 million in the three months ended June 30,
1996. This increase is due to increases in employee costs, primarily salaries
and benefits.
Interest income decreased to $27,000 in the three months ended June 30,
1997 from $48,000 in the three months ended June 30, 1996, as the weighted
average of invested funds was lower in 1997 as compared to 1996, due to larger
than average delays in collecting some international receivables in the quarter.
A large portion of these receivables were collected near the end of the quarter
and resulted in a decrease in receivables at June 30, 1997 compared to March 31,
1997 despite additional billings during the period. The collection period of
international receivables is generally longer than that for receivables from
projects installed in the U.S. Gulf of Mexico.
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
22
<PAGE> 26
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. 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.
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, and $5.6 million for the three months ended June 30, 1997. 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 Company spent $50,000 on capital expenditures in
the first quarter of fiscal 1998.
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
23
<PAGE> 27
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.
As of June 30, 1997, there were $2.0 million in outstanding Bank Letters of
Credit and no other borrowings under the Bank Credit Facility. Outstanding
amounts under the Existing Credit Facility, including Bank Letters of Credit,
are currently guaranteed by McDermott. As of March 31 and June 30, 1997, the
Company also had outstanding letters of credit of approximately $7.0 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 $7.0 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.
24
<PAGE> 28
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, based on the number of decks delivered, 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. The average number of active offshore rigs in the Gulf of Mexico has
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. A by-pass along one of these
waterways could provide access from the Company's facilities to the Gulf of
Mexico for structures weighing up to 6,000 tons, if it were to be reopened and
dredged to sufficient depth. Local port commissions have proposed the reopening
and dredging of this by-pass with state and local funds. The Company believes
that there is widespread support for this proposal and that the by-pass may be
reopened within the next two years. No assurance can be given as to whether or
when such project will be completed or whether the increased channel depth will
be maintained. If the project is not completed by state or local authorities,
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 equip-
25
<PAGE> 29
ment, 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. 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 the 408 workers employed by the Company at July 31, 1997. The
Company intends to continue its efforts to increase its skilled workforce
in order to increase the
26
<PAGE> 30
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.
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.
27
<PAGE> 31
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 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.
28
<PAGE> 32
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 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 Abbeville Port Commission has proposed that the State of Louisiana
fund the reopening and 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. The Company believes that there is
widespread support for this proposal and that the by-pass may be reopened within
the next two years. There can be no assurance however as to whether or when such
project will be completed or whether the increased channel depth will be
maintained. 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.
29
<PAGE> 33
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.
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. See "Risk Factors -- Facility
Limitations."
SAFETY AND QUALITY ASSURANCE
Management is concerned with the safety and health of the Company's
employees and maintains a safety assurance program to reduce the possibility of
costly accidents. The Company's safety department establishes guidelines for
compliance with all applicable state and federal safety regulations. Such laws
and regulations are complex, stringent and are often changed. Sanctions for
noncompliance may include revocation of or suspension of permits, corrective
action orders, cease and desist orders, administrative or civil penalties and
criminal prosecution. There can be no assurance that the Company is or will be
at all times in full compliance with all applicable laws and regulations.
Failure to comply could have a material adverse effect on the Company.
The Company 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 a significant effect on the demand for its services or
its ability to obtain fabrication work.
30
<PAGE> 34
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 Lummus 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. See "Risk Factors -- Dependence on
Significant Customers."
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,
31
<PAGE> 35
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. See "Risk
Factors -- Contract Bidding Risks."
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
32
<PAGE> 36
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. See "Risk Factors -- Backlog."
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, cease and desist orders, administrative or
civil penalties and criminal prosecution. Certain environmental laws provide for
strict, joint and several liability, without regard to fault or negligence, for
remediation of spills and other releases of hazardous substances. In addition,
the Company may be subject to claims alleging personal injury, property damage
or natural resource damage as a result of the handling of 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 requires the acquisition
of permits and other authorizations for certain activities and compliance with
various standards and procedural requirements.
33
<PAGE> 37
The Company is currently in the process of applying for certain permits
from the Louisiana Department of Environmental Quality for its facilities and
upgrading its general environmental compliance. These permits are necessary for
the operation of certain facilities in accordance with environmental
requirements. While there can be no assurance that the permits will be issued,
management believes that the Company will be able to obtain the required permits
and bring its facilities into substantial compliance with current regulatory
standards without material effect to its operations. The Company has budgeted
$150,000 for the costs of completing the necessary environmental permitting and
compliance matters.
In addition to the Company's operations, in the past other industrial
operations have been conducted by other entities on the properties now utilized
by the Company. Although the Company does not believe that there are any
material remediation requirements on its properties, it is possible that these
past operations may have caused unknown environmental conditions to exist that
might in the future require remediation.
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 miscellaneous 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 such miscellaneous permits, licenses and certificates that are
material to the conduct of its existing business.
The Company's efforts to comply with the laws and regulations discussed in
this section have 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, except for the amount budgeted for permitting
matters as discussed above, 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. See "Risk
Factors -- Regulatory and Environmental Matters."
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
34
<PAGE> 38
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 31, 1997, the Company had approximately 408 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.
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. See "Risk Factors -- Need for Skilled Workers."
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.
35
<PAGE> 39
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
Richard E. Roberson, Jr................... 60 Director
George C. Yax............................. 56 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 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.
36
<PAGE> 40
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.
Richard E. Roberson, Jr. joined the Company's Board of Directors in July
1997. He served as Vice President, Chief Financial Officer, Treasurer and a
director of Global Industries, Ltd. from December 1992 to May 1996, when he
retired. From March 1986 until September 1991, Mr. Roberson served as Vice
President -- Finance for Ocean Drilling & Exploration Company. Mr. Roberson has
over 30 years of experience in the oil and gas and oil service industry,
including over 20 years as an accounting and financial officer.
George C. Yax joined the Company's Board of Directors in July 1997. He is a
co-founder of American Oilfield Divers, Inc. ("AOD"), a publicly traded provider
of subsea products and services to the oil and gas industry, and has served as a
Chairman of the Board of AOD since its inception in 1981. Mr. Yax served as
President and Chief Executive Officer of AOD from its inception until December
1996. Mr. Yax has over 28 years of experience in the subsea services industry.
Mr. Yax is a director of the National Oceans Industries Association and has also
served in various officer capacities for the Association of Diving Contractors.
Mr. Yax holds a BBA degree and an MBA degree from Sam Houston University.
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. Segura and Roberson, will expire in 1998. The terms of the
Class II directors, Messrs. Broussard and Yax, 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 $12,000 plus $1,000 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 2,500 shares of Common Stock with an exercise price equal to
the Price to Public set forth on the cover page of this Prospectus and an annual
grant of options to purchase no more than 2,500 shares of Common Stock (with the
exact number to be set annually by the Compensation Committee) at an exercise
price equal to the market price of the Common Stock on the date of the annual
meeting of shareholders. 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. Roberson and Segura.
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 prescribed by the
Board of Directors. The current members of the Compensation Committee are
Messrs. Broussard and Yax.
37
<PAGE> 41
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 $50,015 $10,622
</TABLE>
- ---------------
(1) Includes amounts credited to Mr. Berard's account under the Company's 401(k)
Plan, interest earned by Mr. Berard on deferred compensation amounts and the
cost of Mr. Berard's membership in the Lafayette Petroleum Club which the
Company pays. The Company accrues interest on compensation deferred by Mr.
Berard at the prime rate as quoted by the Chase Manhattan Bank from time to
time. See "Certain Transactions."
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.
Upon completion of the Offering, the Company and Mr. Berard will enter into
a five-year employment and non-competition agreement (the "New Employment
Agreement"), a form of which has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. The terms of the New Employment
Agreement are the result of negotiations between Mr. Berard and the Company's
Board of Directors.
Pursuant to the New Employment Agreement, Mr. Berard will receive a yearly
salary of $180,000 and will receive, as a bonus, up to 100% of his annual salary
depending on the Company's net income return on capital. If, during the term of
the New Employment Agreement, Mr. Berard's status as an employee is terminated
for any reason other than death, disability or Cause (as defined therein) or Mr.
Berard terminates his employment for Good Reason (as defined therein), Mr.
Berard will be entitled (i) to receive compensation earned through the date of
his termination, compensation previously deferred by Mr. Berard and any accrued
vacation pay (in each case to the extent not previously paid), (ii) to receive
in a lump sum amounts due for the remainder of the employment term and (iii) to
demand that the Company register any shares of Common Stock held by him for sale
under the Securities Act (subject to a minimum of 100,000 shares) and pay all
expenses related thereto except underwriting fees, discounts and commissions,
legal fees of counsel for Mr. Berard and broker-dealer charges. See "Certain
Transactions" and "Shares Eligible for Future Resale." If, during the term of
the New Employment Agreement and following a change-in-control of the Company,
Mr. Berard's status as an employee is terminated for any reason other than
death, disability or Cause or Mr. Berard terminates his employment for Good
Reason, he will receive the amount described in clause (i) above plus the
greater of (x) the amount described in clause (ii) above and (y) two times his
annual salary. In addition, upon a change-in-control, all options granted to Mr.
Berard under the Company's long-term incentive plan will vest and become
exercisable. See "-- Compensation Pursuant to Plans -- Long-Term Incentive
Plan." These provisions could have a negative influence on any attempt to
acquire control of the Company, which could deprive shareholders of the
opportunity to sell their Common Stock at a premium in the market, and could
serve to entrench management.
38
<PAGE> 42
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, other stock-based 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 (unless otherwise determined
by the Compensation Committee), 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 200,000 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, each director who is not an employee of the
Company will receive options to purchase 2,500 shares upon consummation of the
Offering at the Price to Public set forth on the cover page of this Prospectus.
In addition, at each annual meeting of the Company's shareholders, each director
who is not an employee of the Company and continues to serve as a director will
receive options to purchase no more than 2,500 shares of Common Stock (with the
exact number to be set annually by the Compensation Committee) at an exercise
price equal to the market price of the Common Stock on the date of the annual
meeting of shareholders. These options will be immediately exercisable and will
expire ten years following the date of grant.
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) approval by the shareholders of the Company of a reorganization, merger
or consolidation of the Company or sale of all or substantially all of the
assets of the Company, unless (x) all or substantially all of the individuals
and entities who were the beneficial owners of the Company's outstanding Common
Stock and voting securities entitled to vote generally in the election of
directors immediately prior to such transaction have direct or indirect
beneficial ownership, respectively, of more than 50% of the then outstanding
shares of common stock, and more than 50% of the combined voting power of the
then outstanding voting securities entitled to vote generally in the election of
directors of the resulting entity; (y) except to the extent that such ownership
existed prior to the transaction, no person (excluding any corporation resulting
from the transaction or any employee benefit plan or related trust of the
Company or the resulting corporation) beneficially owns, directly or indirectly,
30% or more of the then outstanding shares of common stock of the resulting
corporation or 30% or more of the combined voting power of the then outstanding
voting securities of the resulting entity; or (z) a majority of the board of
directors of the resulting entity were members of the Company's board of
directors at the time of the execution of the initial agreement or of the action
of the Board providing for the transaction; (ii) approval by the shareholders of
the Company of a complete liquidation or dissolution of the Company; (iii) a
person or group of persons becoming the beneficial owner of more than 30% of the
Company's voting stock (subject to certain exceptions); or (iv) 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
39
<PAGE> 43
been entitled in connection with the Significant Transaction if the options had
been exercised. These provisions could have a negative influence on any attempt
to acquire control of the Company, which could deprive shareholders of the
opportunity to sell their Common Stock at a premium in the market, and could
serve to entrench management.
As of the date of this Prospectus, options to purchase 133,500 shares of
Common Stock have been granted under the 1997 Plan to directors and key
employees of the Company, including options to purchase 65,000, 8,000, 8,000,
8,000, 4,000 and 4,000 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 and an
exercise price equal to the initial public offering price. These grants will be
effective only upon consummation of the Offering. One-third of these options
granted to the Company's employees will become exercisable upon completion of
the Offering, with the remainder becoming exercisable in equal installments on
the first and second anniversaries of the completion of the Offering.
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.
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
40
<PAGE> 44
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.
41
<PAGE> 45
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth, as of the date of this Prospectus, certain
information regarding beneficial ownership of the Common Stock (assuming the
Partners Share Exchange (and dissolution of Universal Partners) and the
McDermott 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)......................... 436,312(2) -- 11.8% 9.4%
Charles E. Broussard(3)..................... 408,934(2) -- 11.6% 8.8%
Perry Segura(4)............................. 437,672(2) -- 12.4% 9.5%
Larry L. Clement............................ 43,721(2) -- 1.2% *
Dennis LaFleur.............................. 43,721(2) -- 1.2% *
David J. Berard............................. 43,721(2) -- 1.2% *
Louis C. Peltier............................ 42,387(2) -- 1.2% *
Peter J. Roman.............................. 1,333(2) -- * *
Richard E. Roberson, Jr..................... 2,500(2) -- * *
George C. Yax............................... 2,500(2) -- * *
All directors and executive officers as a
group (10 persons)........................ 1,462,801(5) -- 40.6% 31.5%
</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 the following number of shares issuable upon the exercise of
options held by each of the following that will become exercisable upon
completion of the Offering: Mr. Dailey Berard, 21,667; Mr. Broussard, 2,500;
Mr. Segura, 2,500; Mr. Clement, 2,667; Mr. LaFleur, 2,667; Mr. David Berard,
2,667; Mr. Peltier, 1,333; Mr. Roman, 1,333; Mr. Roberson, 2,500 and Mr.
Yax, 2,500.
(3) Includes 151,900 shares owned by a company controlled by Mr. Broussard. His
address is 23604 S. Louisiana Highway 82, Kaplan, Louisiana 70548.
(4) Includes 373,591 shares owned by a company controlled by Mr. Segura. His
address is P.O. Box 13410, New Iberia, Louisiana 70562.
(5) Includes 42,334 shares issuable upon exercise of options held by the
Company's directors and executive officers that will become exercisable upon
completion of the Offering.
42
<PAGE> 46
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. The purchase price for this land was
determined by negotiations between McDermott and the Company, who was
represented by Mr. Berard, its President and Chief Executive Officer. 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 upon completion of the Offering for $100,500.
The proceeds of this sale (or interests therein through a liquidating trust)
will be distributed to the shareholders of Universal Partners in connection with
the dissolution of Universal Partners, which is expected to occur promptly after
completion of the Offering. Shareholders of Universal Partners who are also
directors and officers of the Company will receive, in the aggregate,
approximately $80,000 (or trust interests therein) 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 "The Company" and "Use of Proceeds."
The Company has from time to time provided fabrication services as a
subcontractor to McDermott-ETPM West, Inc., which is an offshore construction
company and an affiliate of McDermott. The Company provides fabrication services
to this joint venture on the same basis as it does for other offshore
construction companies and believes that it obtained the contracts for these
services because of the quality of its bids and not because of its relationship
with McDermott. In fiscal 1997, the Company generated approximately $17.4
million in revenue from such projects. As of July 31, 1997, the Company had an
account receivable from McDermott-ETPM West, Inc. in the amount of $1.1 million,
which the Company expects to collect in full. The Company continues to bid as a
subcontractor for fabrication projects from McDermott-ETPM West, Inc., and
expects that its bids will continue to be considered on the same basis after the
Offering. 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.
Pursuant to the New Employment Agreement, the Company has granted Mr.
Dailey Berard the right to demand registration for sale under the Securities Act
of any shares of Common Stock that he owns (subject to a minimum of 100,000
shares), if, during the term of the New Employment Agreement, he is removed as
the Company's President and Chief Executive Officer for any reason other than
death, disability or Cause (as defined therein) or he terminates his employment
with the Company for Good Reason (as defined therein). The Company has agreed to
pay all the expenses of such registration, other than underwriting fees,
discounts and commissions, legal fees of counsel for Mr. Berard and
broker-dealer charges. See "Risk Factors -- Sales Eligible for Future Resale"
and "Management -- Compensation Committee Interlocks and Insider Participation."
In 1997, Universal Fabricators distributed $370,000 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.
43
<PAGE> 47
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 Partners Share Exchange and the McDermott 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
44
<PAGE> 48
price under prescribed circumstances related to a change of control or (vi) to
exercise other rights designated 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,
45
<PAGE> 49
(ii) amendments to the By-laws, (iii) the Company's election not to be governed
by certain Louisiana laws 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. The Louisiana Control Share
Acquisition Statute provides that any shares acquired by a person or group (an
"Acquiror") in an acquisition that causes such person or group to have the power
to direct the exercise of voting power in the election of directors in excess of
20%, 33 1/3% or 50% thresholds shall have only such voting power as shall be
accorded by the holders of all shares other than "interested shares," as defined
below, at a meeting called for the purpose of considering the voting power to be
accorded to such shares. "Interested shares" include all shares as to which the
Acquiror, any officer of a company and any director of a company who is also an
employee of a company may exercise or direct the exercise of voting power. If a
meeting of shareholders is held to consider the voting rights to be accorded to
any Acquiror and the shareholders do not vote to accord voting rights to such
shares, a company may have the right to redeem the shares held by the Acquiror
for their fair value. The statute permits the articles of incorporation or
by-laws of a company to exclude from the statute's application acquisitions
occurring after the adoption of the exclusion. The Company's By-laws do contain
such an exclusion; however, 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 Harris Trust and
Savings Bank.
46
<PAGE> 50
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.
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.
47
<PAGE> 51
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 1,585,963 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.
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 RESALE
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
48
<PAGE> 52
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.
Pursuant to the New Employment Agreement, the Company has granted Mr.
Dailey J. Berard the right to demand registration of the shares the Common Stock
held by him upon the occurrence of certain events. The exercise of such
registration rights is subject to the contractual "lock-up" restrictions
described below. See "Management -- Compensation Committee Interlocks and
Insider Participation" and "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 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.
49
<PAGE> 53
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.
50
<PAGE> 54
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>
51
<PAGE> 55
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
UNIFAB INTERNATIONAL, INC.
Report of Independent Auditors.............................. F-2
Balance Sheet -- July 17, 1997.............................. F-3
Notes to Balance Sheet...................................... F-4
UNIVERSAL FABRICATORS INCORPORATED
Report of Independent Auditors.............................. F-5
Balance Sheets -- March 31, 1996 and 1997 and June 30, 1997
(Unaudited)............................................... F-6
Statements of Income -- Years Ended March 31, 1995, 1996 and
1997 and Three Months Ended June 30, 1996 (Unaudited) and
1997 (Unaudited).......................................... F-7
Statements of Shareholders' Equity -- Years Ended March 31,
1995, 1996 and 1997 and Three Months Ended June 30, 1996
(Unaudited) and 1997 (Unaudited).......................... F-8
Statements of Cash Flows -- Years Ended March 31, 1995, 1996
and 1997 and Three Months Ended June 30, 1996 (Unaudited)
and 1997 (Unaudited)...................................... F-9
Notes to Financial Statements............................... F-10
UNAUDITED PRO FORMA FINANCIAL STATEMENTS OF UNIFAB
INTERNATIONAL, INC.
Pro Forma Balance Sheet (Unaudited) -- June 30, 1997........ F-16
Pro Forma Statement of Income (Unaudited) -- Year Ended
March 31, 1997 and the three months ended June 30, 1997... F-17
Notes to Pro Forma Financial Statements (Unaudited)......... F-19
</TABLE>
F-1
<PAGE> 56
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.
ERNST & YOUNG LLP
New Orleans, Louisiana
July 17, 1997, except for Notes 2 and 3,
as to which the date is August 28, 1997
F-2
<PAGE> 57
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-3
<PAGE> 58
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. INITIAL PUBLIC OFFERING AND RELATED MATTERS
On August 26, 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
will exchange the shares of Universal Fabricators common stock owned by it for
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.
On August 28, 1997, an agreement was entered into, subject to completion of
the Offering of the Company's common stock, which would: (1) terminate and
release Universal Partners and McDermott from the other's obligations under the
Shareholders' Agreement, including the requirement (in the absence of consent by
directors appointed by both Universal Partners and McDermott) to distribute 90%
of the net income for the prior fiscal year to shareholders, and (2) terminate
the Put/Call Agreement, including the cancellation of an option held by
McDermott which allowed it to acquire the other 51% of Universal Fabricators'
common stock. To terminate this option and to secure McDermott's release of its
rights under these agreements, the Company agreed to pay $6,300,000 to McDermott
upon completion of the Offering.
3. STOCK OPTION PLAN
In August, 1997, the board of directors adopted and its shareholders
approved a stock option plan to provide long-term incentives 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 aggregated amount of 460,000
shares. No more than 200,000 shares of stock may be granted through the plan to
a single participant in a calendar year. 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 key employees of the Company at the
initial public offering price per share. Such options have a ten year term and
one-third are exercisable at the grant date (which will be the date of the
Offering for the options already granted), one-third on the first anniversary
thereof and the remaining one-third on the second anniversary.
F-4
<PAGE> 59
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.
ERNST & YOUNG LLP
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 28, 1997
F-5
<PAGE> 60
UNIVERSAL FABRICATORS INCORPORATED
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
MARCH 31
------------------------- JUNE 30,
1996 1997 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents............................. $ 4,942,775 $ 659,626 $ 2,630,154
Accounts receivable................................... 9,969,508 19,368,473 13,898,217
Costs and estimated earnings in excess of billings on
uncompleted contracts.............................. 3,356,396 239,097 105,745
Prepaid expenses...................................... 263,678 444,045 404,613
Other assets.......................................... 182,481 102,062 105,428
----------- ----------- -----------
Total current assets.......................... 18,714,838 20,813,303 17,144,157
Property, plant and equipment, net...................... 4,998,858 5,341,122 5,267,408
----------- ----------- -----------
Total assets.................................. $23,713,696 $26,154,425 $22,411,565
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank overdraft........................................ $ 715,576 $ 763,010 1,204,559
Accounts payable...................................... 2,729,321 6,210,166 4,743,198
Billings in excess of costs and estimated earnings on
uncompleted contracts.............................. 3,373,695 4,317,837 3,602,749
Accrued liabilities................................... 804,671 813,762 872,768
Income tax payable.................................... 758,786 516,462 933,244
----------- ----------- -----------
Total current liabilities..................... 8,382,049 12,621,237 11,356,518
Deferred income taxes................................... 1,347,863 1,332,168 1,332,168
Shareholders' equity:
Common stock, $1 par value:
Class A, 510 shares authorized and issued.......... 510 510 510
Class B, 490 shares authorized and issued.......... 490 490 490
Additional paid-in capital............................ 6,517,664 6,517,664 6,517,664
Retained earnings..................................... 7,465,120 5,682,356 3,204,215
----------- ----------- -----------
Total shareholders' equity.................... 13,983,784 12,201,020 9,722,879
----------- ----------- -----------
Total liabilities and shareholders' equity.... $23,713,696 $26,154,425 $22,411,565
=========== =========== ===========
</TABLE>
See accompanying notes.
F-6
<PAGE> 61
UNIVERSAL FABRICATORS INCORPORATED
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31 THREE MONTHS ENDED JUNE 30
--------------------------------------- ---------------------------
1995 1996 1997 1996 1997
----------- ----------- ----------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue......................... $27,882,808 $51,807,144 $66,724,504 $18,419,238 $15,503,153
Cost of revenue................. 23,174,004 40,361,724 58,589,197 16,295,480 13,313,942
----------- ----------- ----------- ----------- -----------
Gross profit.................... 4,708,804 11,445,420 8,135,307 2,123,758 2,189,211
General and administrative
expense....................... 1,325,689 1,419,668 1,637,563 342,136 408,902
----------- ----------- ----------- ----------- -----------
Income from operations.......... 3,383,115 10,025,752 6,497,744 1,781,622 1,780,309
Other income (expense):
Interest expense.............. (6,935) (3,092) (63,304) (21,696) (3,359)
Interest income............... 45,059 318,185 145,155 47,598 27,016
----------- ----------- ----------- ----------- -----------
Income before income taxes...... 3,421,239 10,340,845 6,579,595 1,807,524 1,803,966
Income tax provision............ 1,286,386 3,888,158 2,554,941 708,908 659,918
----------- ----------- ----------- ----------- -----------
Net income...................... $ 2,134,853 $ 6,452,687 $ 4,024,654 $ 1,098,616 $ 1,144,048
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
F-7
<PAGE> 62
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
----- ------ ---------- ----------- -----------
Dividends paid (unaudited)................ -- -- -- (3,622,189) (3,622,189)
Net income (unaudited).................... -- -- -- 1,144,048 1,144,048
----- ------ ---------- ----------- -----------
Balance at June 30, 1997 (unaudited)........ 1,000 $1,000 $6,517,664 $ 3,204,215 $ 9,722,879
===== ====== ========== =========== ===========
</TABLE>
See accompanying notes.
F-8
<PAGE> 63
UNIVERSAL FABRICATORS INCORPORATED
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31 THREE MONTHS ENDED JUNE 30
------------------------------------ --------------------------
1995 1996 1997 1996 1997
---------- ---------- ---------- ------------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income.................................. $2,134,853 $6,452,687 $4,024,654 $ 1,098,616 $ 1,144,048
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation.............................. 423,949 389,711 471,305 95,832 123,638
(Gain) loss from sale of equipment........ 3,028 (8,000) (10,125) (7,375) 282
Deferred income taxes..................... 4,620 (72,919) (20,208) 742 (3,364)
Changes in operating assets and
liabilities:
Accounts receivable..................... 209,626 (2,871,872) (9,398,965) (10,975,253) 5,470,256
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 4,215,181 (581,736)
Prepaid expenses and other assets....... (544,191) 658,534 (95,435) (553,397) 39,430
Bank overdraft.......................... -- 715,576 47,434 131,512 441,549
Accounts payable and accrued
liabilities.......................... (406,788) 792,983 3,489,936 6,855,421 (1,407,962)
Income taxes payable.................... -- 758,786 (242,324) 708,908 416,782
---------- ---------- ---------- ------------ -----------
Net cash provided by operating activities..... 3,391,590 4,285,020 2,327,713 1,570,187 5,642,923
Cash flows from investing activities:
Proceeds from sale of equipment............. 9,500 8,000 17,175 7,375 --
Purchases of equipment...................... (179,351) (402,405) (820,619) (325,152) (50,206)
---------- ---------- ---------- ------------ -----------
Net cash used in investing activities....... (169,851) (394,405) (803,444) (317,777) (50,206)
Cash flows from financing activities:
Dividends paid.............................. (857,822) (1,921,368) (5,807,418) (2,961,783) (3,622,189)
Net change in short-term borrowings......... (531,141) -- -- -- --
---------- ---------- ---------- ------------ -----------
Net cash used in financing activities....... (1,388,963) (1,921,368) (5,807,418) (2,961,783) (3,622,189)
---------- ---------- ---------- ------------ -----------
Net change in cash and cash equivalents..... 1,832,776 1,969,247 (4,283,149) (1,709,373) 1,970,528
Cash and cash equivalents at beginning of
period.................................... 1,140,752 2,973,528 4,942,775 4,942,775 659,626
---------- ---------- ---------- ------------ -----------
Cash and cash equivalents at end of
period.................................... $2,973,528 $4,942,775 $ 659,626 $ 3,233,402 $ 2,630,154
========== ========== ========== ============ ===========
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Income taxes................................ $1,370,700 $3,173,014 $2,817,473 -- $ 243,136
========== ========== ========== ============ ===========
</TABLE>
See accompanying notes.
F-9
<PAGE> 64
UNIVERSAL FABRICATORS INCORPORATED
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1995, 1996 AND 1997
1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
INTERIM FINANCIAL STATEMENTS
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments, consisting only of normal recurring adjustments,
considered necessary for a fair presentation have been included. Operating
results for the three-month period ended June 30, 1997 are not necessarily
indicative of the results that may be expected for the fiscal year ending March
31, 1998.
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 contracts is 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.
Revenue from time and materials contracts is recognized on the basis of direct
labor hours worked at fixed hourly rates and the cost of materials or
subcontract costs incurred plus mark-up.
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.
F-10
<PAGE> 65
UNIVERSAL FABRICATORS INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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.
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.
DESCRIPTION OF CAPITAL STOCK
The Company has two classes of common stock, Class A and Class B, and no
class of preferred stock outstanding. The Class A common stock, all of which is
owned by Universal Partners, Inc. and the Class B common stock, all of which is
owned by McDermott Incorporated, are identical in all respects, except that the
holder of the Class A common stock has the right to elect three-fifths of the
Company's Board of Directors and the holder of the Class B common stock has the
right to elect two-fifths of the Company's Board of Directors. In addition, any
shares of common stock issued by the Company must be issued on a 51%/49% basis
between Class A shares and Class B shares, respectively, and the holder of each
class of stock has preemptive rights with respect to any shares of common stock
of its class to be issued.
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.
F-11
<PAGE> 66
UNIVERSAL FABRICATORS INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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>
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 -- primarily excess of income
tax basis over financial statement basis of
contracts......................................... 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>
F-12
<PAGE> 67
UNIVERSAL FABRICATORS INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The reconciliation of income tax computed at the federal statutory rates to
income tax expense is:
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Tax at federal statutory rates........... $1,163,221 $3,519,296 $2,237,062
Other, primarily state income taxes...... 123,165 368,862 317,879
---------- ---------- ----------
$1,286,386 $3,888,158 $2,554,941
========== ========== ==========
</TABLE>
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 $9,065,837 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.
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 and McDermott will exchange their respective shares of common
stock of the Company for shares of International's common stock (the Share
Exchange). 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 August 28, 1997, an agreement was entered into, subject to completion of
the Offering of International's common stock, which would: (1) terminate and
release Universal Partners and McDermott from the other's obligations under the
Shareholders' Agreement, including the requirement (in the absence of consent by
directors appointed by both Universal Partners and McDermott) to distribute 90%
of the net income for the prior fiscal year to shareholders, and (2) terminate
the Put/Call Agreement, including the cancellation of 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
these agreements, the Company agreed to pay $6,300,000 to McDermott upon
completion of the Offering.
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 $17,397,179 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
F-13
<PAGE> 68
UNIVERSAL FABRICATORS INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
March 31, 1996 and 1997, respectively. In addition, the Company rents an office
building from the shareholder for $100 per year.
Included in cost of revenue in fiscal year 1997 is a $370,000 reimbursement
to a shareholder for the costs of settling an uninsured workers' compensation
claim related to the operating activities of the Company's predecessor.
The deferred bonus arrangement with Mr. Berard allows for deferral of
compensation with deferred amounts payable in cash upon demand, retirement or
termination and amounts deferred are included in general and administrative
expense in the amount of $31,065, $50,015 and $50,015 for fiscal years 1995,
1996 and 1997, respectively. Included in interest expense for fiscal years 1995,
1996 and 1997, is $0, $2,582 and $6,757, respectively, associated with this
deferred bonus arrangement.
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.
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. SALES TO FOREIGN ENTITIES
The Company considers all sales to be domestic sales. However, the Company
contracts with customers who are foreign entities. Sales to foreign entities
represented 47%, 58%, and 64% of revenues for fiscal years 1995, 1996, and 1997,
respectively.
12. 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-14
<PAGE> 69
UNIFAB INTERNATIONAL, INC.
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
BASIS OF PRESENTATION
The accompanying pro forma balance sheet as of June 30, 1997 and the
related pro forma statements of income for the year ended March 31, 1997 and for
the three months ended June 30, 1997 give effect to the proposed exchange of
shares of Universal Fabricators Incorporated (Universal Fabricators) owned by
McDermott Incorporated (McDermott) and Universal Partners, Inc. (Universal
Partners) for shares of UNIFAB International, Inc. (the Company), which will
result in Universal Fabricators being a 100%-owned subsidiary of the Company.
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 June 30, 1997 for
the pro forma balance sheet and as of April 1, 1996 for the pro forma statements
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> 70
UNIFAB INTERNATIONAL, INC.
PRO FORMA BALANCE SHEET (UNAUDITED)
JUNE 30, 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 $ 2,630,154 $ 6,300,000(2) $ 2,631,154
(6,300,000)(2)
Accounts receivable..................... -- 13,898,217 -- 13,898,217
Costs and estimated earnings in excess
of billings on uncompleted
contracts............................ -- 105,745 -- 105,745
Prepaid expenses........................ -- 404,613 -- 404,613
Other assets............................ -- 105,428 -- 105,428
------ ----------- ----------- -----------
Total current assets............ 1,000 17,144,157 -- 17,145,158
Property, plant and equipment, net........ -- 5,267,408 -- 5,267,408
------ ----------- ----------- -----------
Total assets.................... $1,000 $22,411,565 $ -- $22,412,565
====== =========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Bank overdraft.......................... $ -- $ 1,204,559 $ -- $ 1,204,559
Accounts payable........................ -- 4,743,198 -- 4,743,198
Billings in excess of costs and
estimated earnings on uncompleted
contracts............................ -- 3,602,749 -- 3,602,749
Accrued liabilities..................... -- 872,768 -- 872,768
Income tax payable...................... -- 933,244 -- 933,244
------ ----------- ----------- -----------
Total current liabilities....... -- 11,356,518 -- 11,356,518
Deferred income taxes..................... -- 1,332,168 -- 1,332,168
Shareholders' equity:
Common stock............................ 10 1,000 33,990(1) 39,563
4,563(2)
Additional paid-in capital.............. 990 6,517,664 (33,990)(1) 6,480,101
6,295,437(2)
(6,300,000)(2)
Retained earnings....................... -- 3,204,215 -- 3,204,215
------ ----------- ----------- -----------
Total shareholders' equity...... 1,000 9,722,879 -- 9,723,879
------ ----------- ----------- -----------
Total liabilities and
shareholders' equity.......... $1,000 $22,411,565 $ -- $22,412,565
====== =========== =========== ===========
</TABLE>
See accompanying notes to pro forma financial statements (unaudited).
F-16
<PAGE> 71
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.... $ 1.02(3)
===========
Average common stock outstanding...... 3,956,260
===========
</TABLE>
See accompanying notes to pro forma financial statements (unaudited).
F-17
<PAGE> 72
UNIFAB INTERNATIONAL, INC.
PRO FORMA STATEMENT OF INCOME (UNAUDITED)
THREE MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
UNIFAB UNIVERSAL
INTERNATIONAL, FABRICATORS
INC. INCORPORATED ADJUSTMENTS PRO FORMA
-------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Revenue............................... $ -- $15,503,153 $ -- $15,503,153
Cost of revenue....................... -- 13,313,942 -- 13,313,942
----------- ----------- ----------- -----------
Gross profit.......................... -- 2,189,211 -- 2,189,211
General and administrative expense.... -- 408,902 -- 408,902
----------- ----------- ----------- -----------
Income from operations................ -- 1,780,309 -- 1,780,309
Other income (expense):
Interest expense.................... -- (3,359) -- (3,359)
Interest income..................... -- 27,016 -- 27,016
----------- ----------- ----------- -----------
Income before income taxes............ -- 1,803,966 -- 1,803,966
Income tax provision.................. -- 659,918 -- 659,918
----------- ----------- ----------- -----------
Net income............................ $ -- $ 1,144,048 $ -- $ 1,144,048
=========== =========== =========== ===========
Earnings per share of common stock.... $ .29(3)
===========
Average common stock outstanding...... 3,956,260
===========
</TABLE>
See accompanying notes to pro forma financial statements (unaudited).
F-18
<PAGE> 73
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 June 30, 1997 and the results of its
operations for the year ended March 31, 1997 and for the three months ended June
30, 1997. 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 June
30, 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) Immediately prior to the completion of the Offering, Universal
Partners will exchange the shares of Universal Fabrications common stock
owned by it for 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. The common stock account is adjusted to reflect the resulting
3,500,000 shares of $0.01 par value common stock which will be outstanding
after these share exchanges. These share exchanges will be accounted for
similar to a pooling of interests with the transferred assets and
liabilities accounted for at existing carrying amounts.
(2) The pro forma balance sheet gives effect to 456,260 additional
shares at an assumed offering price of $15 per share, net of offering
expenses, that would have been required to be sold to fund the $6.3 million
payment to McDermott to secure the release of McDermott's rights under the
Shareholders' Agreement and Put/Call Agreement. This payment has been
accounted for as a charge to equity.
(3) Pro forma net income per share is calculated by dividing the pro
forma net income for the period by the average common stock outstanding
which reflects the exchange described in Note (1) above and the issuance of
additional shares described in Note (2) above.
F-19
<PAGE> 74
================================================================================
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..................... 1
The Company............................ 7
Risk Factors........................... 9
Use of Proceeds........................ 15
Dividend Policy........................ 15
Dilution............................... 16
Capitalization......................... 17
Selected Financial and Operating
Data................................. 18
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 20
Business............................... 25
Management............................. 36
Principal and Selling Shareholders..... 42
Certain Transactions................... 43
Description of Capital Stock........... 44
Underwriting........................... 47
Shares Eligible for Future Resale...... 48
Legal Matters.......................... 49
Experts................................ 49
Other Information...................... 50
Glossary of Certain Technical Terms.... 51
Index to 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
[UNIFAB INTERNATIONAL LOGO]
UNIFAB INTERNATIONAL, INC.
COMMON STOCK
---------------------
PROSPECTUS
---------------------
MORGAN KEEGAN & COMPANY, INC.
STEPHENS INC.
, 1997
================================================================================
<PAGE> 75
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........................................ $ 15,696
NASD filing fee............................................. 5,356
Listing Fee................................................. 28,000
Printing expenses........................................... 70,000
Legal fees and expenses..................................... 150,000
Accounting fees and expenses................................ 125,000
Transfer agent fees and expenses............................ 5,000
Miscellaneous expenses...................................... 948
--------
Total expenses............................................ $400,000
========
</TABLE>
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 connection with any claim involving a director
or executive officer by reason of his position as director or
II-1
<PAGE> 76
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 Partners Share Exchange, the Company will issue
1,785,000 shares of Common Stock to Universal Partners, which will be
distributed to the shareholders of Universal Partners upon its dissolution which
is expected to occur promptly thereafter. 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>
<S> <C>
1.1 -- Form of Underwriting Agreement.
2.1 -- Transition Agreement among the Company, McDermott,
Universal Partners, Universal Fabricators and Dailey J.
Berard.
2.2 -- Form of Agreement and Plan of Share Exchange between the
Company and Universal Partners.
2.3 -- Form of Share Exchange between the Company and McDermott.
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 -- Form of Credit Agreement between the Company and Hibernia
National Bank.**
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 -- Contribution Agreement dated November 30, 1992, between
McDermott and Universal Partners, Inc.*
10.6 -- Shareholders' Agreement dated November 30, 1992, between
McDermott and Universal Partners, Inc.*
10.7 -- Put/Call Agreement dated November 30, 1992, between
McDermott and Universal Partners, Inc.*
10.8 -- Employment Agreement dated November 30, 1992 between
Universal Fabricators Incorporated and Dailey J. Berard.*
10.9 -- Form of Employment Agreement between the Company and
Dailey J. Berard.
21.1 -- Subsidiaries of the Company.
</TABLE>
II-2
<PAGE> 77
<TABLE>
<CAPTION>
<C> <S>
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 -- Powers of Attorney pursuant to which certain directors
have signed this Amendment.
27.1 -- Financial Data Schedule.
</TABLE>
- ---------------
* Previously filed.
** To be filed by amendment.
(b) Financial Statements Schedules
No schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are required under the
related instructions, as they are inapplicable or not material, or the
information called for thereby is otherwise included in the financial statements
and therefore has been omitted.
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> 78
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 2 to its Registration Statement on Form S-1
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New Iberia, State of Louisiana, on August 29, 1997.
UNIFAB INTERNATIONAL, INC.
By: /s/ DAILEY J. BERARD
----------------------------------
Dailey J. Berard
President, Chief Executive Officer
and Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registrant's Registration Statement on Form S-1 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 August 29, 1997
- ----------------------------------------------------- Officer and Chairman of the
Dailey J. Berard Board (Principal Executive
Officer)
* Vice President and Chief August 29, 1997
- ----------------------------------------------------- Financial Officer (Principal
Peter J. Roman Financial and Accounting
Officer)
* Director August 29, 1997
- -----------------------------------------------------
Charles E. Broussard
* Director August 29, 1997
- -----------------------------------------------------
Perry Segura
* Director August 29, 1997
- -----------------------------------------------------
Richard E. Roberson, Jr.
* Director August 29, 1997
- -----------------------------------------------------
George C. Yax
*By: /s/ DAILEY J. BERARD
------------------------------------------------
Dailey J. Berard
</TABLE>
II-4
<PAGE> 79
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS
-------------- -----------------------
<C> <S>
1.1 -- Form of Underwriting Agreement
2.1 -- Transition Agreement among the Company, McDermott,
Universal Partners, Universal Fabrications and Dailey J.
Berard
2.2 -- Form of Agreement and Plan of Share Exchange between the
Company and Universal Partners
2.3 -- Form of Share Exchange Agreement between the Company and
McDermott
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 -- Form of Credit Agreement between the Company and Hibernia
National Bank**
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 -- Contribution Agreement dated November 30, 1992, between
McDermott and Universal Partners, Inc.*
10.6 -- Shareholders' Agreement dated November 30, 1992, between
McDermott and Universal Partners, Inc.*
10.7 -- Put/Call Agreement dated November 30, 1992, between
McDermott and Universal Partners, Inc.*
10.8 -- Employment Agreement dated November 30, 1992 between
Universal Fabricators Incorporated and Dailey J. Berard*
10.9 -- Form of Employment Agreement between the Company and
Dailey J. Berard
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 pursuant to which certain directors
have signed this Amendment
27.1 -- Financial Data Schedule
</TABLE>
- ---------------
* Previously filed.
** To be filed by amendment.
<PAGE> 1
DRAFT OF 8-27-97
UNIFAB INTERNATIONAL, INC.
(A LOUISIANA CORPORATION)
COMMON STOCK
UNDERWRITING AGREEMENT
DATED: SEPTEMBER __, 1997
<PAGE> 2
UNIFAB INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
September __, 1997
MORGAN KEEGAN & COMPANY, INC.
STEPHENS INC.
As Representatives of the Several
Underwriters Named in Schedule A hereto
c/o Morgan Keegan & Company, Inc.
50 Front Street
Memphis, Tennessee 38103
Dear Sirs:
UNIFAB International, Inc., a Louisiana corporation (the "Company"), proposes
to issue and sell to the underwriters named in Schedule A (collectively, the
"Underwriters") an aggregate of 1,100,000 shares of Common Stock, $0.01 par
value per share (the "Common Stock"), of the Company (the "Firm Company
Shares"), and McDermott Incorporated, a Delaware corporation (the "Selling
Shareholder") proposes to sell to the Underwriters an aggregate of 1,715,000
shares of Common Stock (the "Firm Selling Shareholder Shares" and, together
with the Firm Company Shares, the "Firm Shares"). The Firm Shares are to be
sold to each Underwriter, acting severally and not jointly, in such amounts as
are set forth in Schedule A opposite the name of such Underwriter.
The Company also grants to the Underwriters, severally and not jointly, the
option described in Section 4 to purchase, on the same terms as the Firm
Shares, up to 422,250 additional shares of Common Stock (the "Option Shares")
solely to cover over-allotments. The Firm Shares, together with all or any
part of the Option Shares, are collectively herein called the "Shares."
Section 1. Representations and Warranties of the Sellers. The
Company and Universal Fabricators Incorporated, a Delaware corporation
("Universal Fabricators" and, together with the Company, the "Sellers"),
represent and warrant to and agree with each of the Underwriters that:
a. A registration statement on Form S-1 (File No. 333-31609)
with respect to the Shares, including a preliminary form of prospectus,
has been prepared by the Company in conformity with the requirements of
the Securities Act of 1933, as amended (the "1933 Act"), and the
applicable rules and regulations (the "1933 Act Regulations") of the
Securities and Exchange Commission (the "Commission"), and has been filed
with the Commission; and such amendments to such registration statement
as may have been required prior to the date hereof have been filed with
the Commission, and such amendments have been similarly prepared. Copies
of such registration statement and amendment or amendments and of each
related preliminary prospectus, and the exhibits, financial statements
and schedules, as finally
<PAGE> 3
amended and revised, have been delivered to you. The Company has
prepared in the same manner, and proposes so to file with the Commission,
one of the following: (i) prior to effectiveness of such registration
statement, a further amendment thereto, including the form of final
prospectus, (ii) if the Company does not rely on Rule 434 of the 1933 Act
Regulations, a final prospectus in accordance with Rules 430A and 424(b)
of the 1933 Act Regulations, or (iii) if the Company relies on Rule 434
of the 1933 Act Regulations, a term sheet relating to the Shares that
shall identify the preliminary prospectus that it supplements containing
such information as is required or permitted by Rules 434, 430A and
424(b) of the 1933 Act Regulations. The Company also may file a related
registration statement with the Commission pursuant to Rule 462(b) of the
1933 Act Regulations for the purpose of registering certain additional
shares of Common Stock, which registration statement will be effective
upon filing with the Commission. As filed, such amendment, any
registration statement filed pursuant to Rule 462(b) of the 1933 Act
Regulations and any term sheet and form of final prospectus, or such
final prospectus, shall include all Rule 430A Information (as defined
below) and, except to the extent that you shall agree in writing to a
modification, shall be in all respects in the form furnished to you prior
to the date and time that this Agreement was executed and delivered by
the parties hereto, or, to the extent not completed at such date and
time, shall contain only such specific additional information and other
changes (beyond that contained in the latest preliminary prospectus and
in addition to the Rule 430A Information) as the Company shall have
previously advised you in writing would be included or made therein.
The term "Registration Statement" as used in this Agreement shall
mean such registration statement at the time such registration statement
becomes effective and, in the event any post-effective amendment thereto
becomes effective prior to the Closing Time (as hereinafter defined),
shall also mean such registration statement as so amended; provided,
however, that such term shall also include all Rule 430A Information
contained in any Prospectus and any Term Sheet (as hereinafter defined)
and deemed to be included in such registration statement at the time such
registration statement becomes effective as provided by Rule 430A of the
1933 Act Regulations. The term "Preliminary Prospectus" shall mean any
preliminary prospectus referred to in the preceding paragraph and any
preliminary prospectus included in the Registration Statement at the time
it becomes effective that omits Rule 430A Information. The term
"Prospectus" as used in this Agreement shall mean (a) if the Company
relies on Rule 434 of the 1933 Act Regulations, the Term Sheet relating
to the Shares that is first filed pursuant to Rule 424(b)(7) of the 1933
Act Regulations, together with the Preliminary Prospectus identified
therein that such Term Sheet supplements or (b) if the Company does not
rely on Rule 434 of the 1933 Act Regulations, the prospectus relating to
the Shares in the form in which it is first filed with the Commission
pursuant to Rule 424(b) of the 1933 Act Regulations or, if no filing
pursuant to Rule 424(b) of the 1933 Act Regulations is required, shall
mean the form of final prospectus included in the Registration Statement
at the time such Registration Statement becomes effective. The term
"Rule 430A Information" means information with respect to the Shares and
the offering thereof permitted pursuant to Rule 430A of the 1933 Act
Regulations to be omitted from the Registration Statement when it becomes
effective. The term "462(b) Registration Statement" means any
-2-
<PAGE> 4
registration statement filed with the Commission pursuant to Rule 462(b)
of the 1933 Act Regulations (including the Registration Statement and any
Preliminary Prospectus or Prospectus incorporated therein at the time
such registration statement becomes effective). The term "Term Sheet"
means any term sheet that satisfies the requirements of Rule 434 of the
1933 Act Regulations. Any reference to the "date" of a Prospectus that
includes a Term Sheet shall mean the date of such Term Sheet.
b. No order preventing or suspending the use of any
Preliminary Prospectus has been issued by the Commission, and no
proceedings for that purpose have been instituted or threatened by the
Commission or the state securities or blue sky authority of any
jurisdiction, and each Preliminary Prospectus and any amendment or
supplement thereto, at the time of filing thereof, conformed in all
material respects to the requirements of the 1933 Act and the 1933 Act
Regulations, and did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading; provided, however, that this
representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with information
furnished in writing to the Company by an Underwriter or the Selling
Shareholder expressly for use in the Registration Statement or any 462(b)
Registration Statement.
c. When the Registration Statement and any 462(b)
Registration Statement shall become effective, or any Term Sheet that is
part of the Prospectus is filed with the Commission pursuant to Rule 434,
when the Prospectus is first filed pursuant to Rule 424(b) of the 1933
Act Regulations, when any amendment to the Registration Statement or any
462(b) Registration Statement becomes effective, and when any supplement
to the Prospectus or any Term Sheet is filed with the Commission and at
the Closing Time and Date of Delivery (as hereinafter defined), (i) the
Registration Statement, the 462(b) Registration Statement, the
Prospectus, the Term Sheet and any amendments thereof and supplements
thereto will conform in all material respects with the applicable
requirements of the 1933 Act and the 1933 Act Regulations, and (ii)
neither the Registration Statement, the 462(b) Registration Statement,
the Prospectus, any Term Sheet nor any amendment or supplement thereto
will contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make
the statements therein not misleading; provided, however, that this
representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with information
furnished in writing to the Company by an Underwriter or the Selling
Shareholder expressly for use in the Registration Statement or any 462(b)
Registration Statement.
d. The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the state of
Louisiana with all requisite corporate power and authority to own, lease
and operate its properties and to conduct its business as described in
the Registration Statement and the Prospectus, in each case after giving
effect to the transactions contemplated by that certain Transition
Agreement dated
-3-
<PAGE> 5
August ______, 1997 by and among the Company, Universal Partners, Inc.,
Universal Fabricators Incorporated, the Selling Shareholder and Dailey J.
Berard (the "Transition Agreement"). The Company is duly qualified to
transact business as a foreign corporation and is in good standing in
each of the jurisdictions in which the ownership or leasing of its
properties or the nature or conduct of its business as described in the
Registration Statement and the Prospectus, after giving effect to the
transactions contemplated by the Registration Statement and the
Prospectus, requires such qualification, except where the failure to do
so would not have a material adverse effect on the condition (financial
or other), business, properties, net worth or results of operations of
the Company and the Subsidiaries (as hereinafter defined) taken as a
whole.
e. All of the Company's subsidiaries, including the
corporations that will become subsidiaries upon consummation of the
transactions contemplated by the Transition Agreement, are named on an
exhibit to the Registration Statement (each a "Subsidiary" and
collectively the "Subsidiaries"). Each of the Subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the state of its incorporation with all requisite
corporate power and authority to own, lease and operate its properties
and conduct its business as described in the Registration Statement and
the Prospectus. Each such entity is duly qualified to do business and is
in good standing as a foreign corporation in each other jurisdiction in
which the ownership or leasing of its properties or the nature or conduct
of its business as described in the Registration Statement and the
Prospectus conducted requires such qualification, except where the
failure to do so would not have a material adverse effect on the
condition (financial or other), business, properties, net worth or
results of operations of such Subsidiaries.
f. The Sellers have full corporate right, power and authority
to enter into this Agreement and the Transition Agreement and to
consummate the transactions contemplated by this Agreement and the
Transition Agreement, and the Company has full corporate right, power and
authority to issue, sell and deliver the Shares as provided herein. This
Agreement has been duly authorized, executed and delivered by the Sellers
and constitutes a valid and binding agreement of the Sellers, enforceable
in accordance with its terms, except to the extent that enforceability
may be limited by bankruptcy, insolvency, moratorium, reorganization or
other laws of general applicability relating to or affecting creditors'
rights, or by general principles of equity whether considered at law or
at equity and except to the extent enforcement of the indemnification
provisions set forth in Section 8 of this Agreement may be limited by
federal or state securities laws or the public policy underlying such
laws. The Transition Agreement has been duly authorized, executed and
delivered by the Sellers and constitutes a valid and binding agreement of
each of the Sellers, enforceable in accordance with its terms, except to
the extent that enforceability may be limited by bankruptcy, insolvency,
moratorium, reorganization or other laws of general applicability
relating to or affecting creditors' rights, or by general principles of
equity whether considered at law or at equity.
-4-
<PAGE> 6
g. Each consent, approval, authorization, order, license,
certificate, permit, registration, designation or filing by or with any
governmental agency or body necessary for the valid authorization,
issuance, sale and delivery of the Shares, the execution, delivery and
performance of this Agreement and the Transition Agreement and the
consummation by the Sellers of the transactions contemplated hereby and
thereby has been made or obtained and is in full force and effect,
except, with respect to this Agreement, as may be required under
applicable state securities laws.
h. Neither the issuance, sale and delivery by the Company of
the Shares, nor the execution, delivery and performance of this Agreement
or the Transition Agreement, nor the consummation of the transactions
contemplated hereby or thereby will conflict with or result in a breach
or violation of any of the terms and provisions of, or (with or without
the giving of notice or the passage of time or both) constitute a default
under the charter or bylaws of the Sellers or the Subsidiaries,
respectively, or under any indenture, mortgage, deed of trust, loan
agreement, note, lease or other agreement or instrument to which the
Sellers or the Subsidiaries, respectively, is a party or to which any of
the respective properties or other assets of the Sellers or the
Subsidiaries, respectively, is subject, or any applicable statute,
judgment, decree, order, rule or regulation of any court or governmental
agency or body applicable to any of the foregoing or any of their
respective properties, or result in the creation or imposition of any
lien, charge, claim or encumbrance upon any property or asset of the
Sellers or the Subsidiaries, respectively.Each consent, approval,
authorization, order, license, certificate, permit, registration,
designation or filing by or with any governmental agency or body
necessary for the valid authorization, issuance, sale and delivery of the
Shares, the execution, delivery and performance of this Agreement and the
Transition Agreement and the consummation by the Sellers of the
transactions contemplated hereby and thereby has been made or obtained
and is in full force and effect, except, with respect to this Agreement,
as may be required under applicable state securities laws.
i. The Shares to be issued and sold to the Underwriters
hereunder have been validly authorized by the Company. When issued and
delivered against payment therefor as provided in this Agreement, the
Shares will be duly and validly issued, fully paid and nonassessable. No
preemptive rights of shareholders exist with respect to any of the Shares
which have not been satisfied or waived. No person or entity holds a
right to require or participate in the registration under the 1933 Act of
the Shares pursuant to the Registration Statement which has not been
satisfied or waived; and, except as set forth in the Prospectus, no
person holds a right to require registration under the 1933 Act of any
shares of Common Stock of the Company or shares of capital stock of any
of the Subsidiaries at any other time which has not been satisfied or
waived.
j. Upon consummation of the transactions contemplated by the
Transition Agreement (the "Transactions"), the Company's authorized,
issued and outstanding capital stock will be as disclosed in the
Prospectus. All of the issued shares of capital stock of the Company
have been and all such shares to be issued in connection with the
Transactions will
-5-
<PAGE> 7
be, when issued in accordance with the terms of the Transition Agreement,
the Agreement and Plan of Stock Exchange and the Share Exchange Agreement
provided for therein (the "Transaction Agreements"), duly authorized and
validly issued, fully paid and nonassessable and conform to the
description of the Company's capital stock contained in the Prospectus.
k. All of the issued shares of capital stock of each of the
Subsidiaries have been duly authorized and validly issued, are fully paid
and nonassessable and, upon consummation of the Transactions, will be
owned directly or indirectly through another Subsidiary by the Company
free and clear of all liens, security interests, pledges, charges,
encumbrances, defects, shareholders' agreements, voting trusts, equities
or claims of any nature whatsoever. Other than the Subsidiaries, the
Company does not own, directly or indirectly, any capital stock or other
equity securities of any other corporation or any ownership interest in
any partnership, joint venture or other association.
l. Except as disclosed in the Prospectus and except for
rights that will terminate upon the consummation of the Transactions as
contemplated by the Transition Agreement, there are no outstanding (i)
securities or obligations of the Company or any of its Subsidiaries
convertible into or exchangeable for any capital stock of the Company or
any such Subsidiary, (ii) warrants, rights or options to subscribe for or
purchase from the Company or any such Subsidiary any such capital stock
or any such convertible or exchangeable securities or obligations, or
(iii) obligations of the Company or any such Subsidiary to issue any
shares of capital stock, any such convertible or exchangeable securities
or obligation, or any such warrants, rights or options.
m. The Company and its Subsidiaries have good and marketable
title, or a valid and renewable leasehold interest to all real property,
if any, and good title to all personal property owned by it, in each case
free and clear of all liens, security interests, pledges, charges,
encumbrances, mortgages and defects, except such as are disclosed in the
Prospectus or such as do not materially and adversely affect the value of
such property and do not interfere with the use made or proposed to be
made of such property by the Company and its Subsidiaries; and any real
property and buildings held under lease by the Company or any
Subsidiaries are held under valid, existing and enforceable leases, with
such exceptions as are disclosed in the Prospectus or are not material
and do not interfere with the use made or proposed to be made of such
property and buildings by the Company or such Subsidiary.
n. The financial statements of the Company, Universal
Fabricators and the consolidated Subsidiaries of Universal Fabricators
included in the Registration Statement and Prospectus present fairly the
financial position of the Company, Universal Fabricators and the
consolidated Subsidiaries of Universal Fabricators as of the dates
indicated and the results of operations and cash flows for the Company
and its consolidated Subsidiaries for the periods specified, all in
conformity with generally accepted accounting principles applied on a
consistent basis. The financial statement schedules included in the
Registration Statement and the amounts in the Prospectus under the
captions "Prospectus Summary -- Summary Financial
-6-
<PAGE> 8
and Operating Data" and "Selected Financial and Operating Data" fairly
present the information shown therein and have been compiled on a basis
consistent with the financial statements included in the Registration
Statement and the Prospectus. The unaudited pro forma financial
information (including the related notes) included in the Prospectus or
any Preliminary Prospectus complies as to form in all material respects
to the applicable accounting requirements of the 1933 Act and the 1933
Act Regulations, and management of the Company believes that the
assumptions underlying the pro forma adjustments are reasonable. Such pro
forma adjustments have been properly applied to the historical amounts in
the compilation of the information and such information fairly presents,
with respect to the Company, Universal Fabricators and the consolidated
Subsidiaries of Universal Fabricators, the financial position, results of
operations and other information purported to be shown therein at the
respective dates and for the respective periods specified.
o. Ernst & Young LLP, who have examined and are reporting
upon the audited financial statements and schedules included in the
Registration Statement, are, and were during the periods covered by their
reports included in the Registration Statement and the Prospectus,
independent public accountants within the meaning of the 1933 Act and the
1933 Act Regulations.
p. Neither the Company nor any of its Subsidiaries has
sustained, since March 31, 1997, any material loss or interference with
its business from fire, explosion, flood, hurricane, accident or other
calamity, whether or not covered by insurance, or from any labor dispute
or arbitrators' or court or governmental action, order or decree; and,
since the respective dates as of which information is given in the
Registration Statement and the Prospectus, and except as otherwise stated
in the Registration Statement and Prospectus, there has not been (i) any
material change in the capital stock, long-term debt, obligations under
capital leases or short-term borrowings of the Company or its
Subsidiaries, or (ii) any material adverse change, or any development
which could reasonably be seen as involving a prospective material
adverse change, in or affecting the business, prospects, properties,
assets, results of operations or condition (financial or other) of the
Company or its Subsidiaries.
q. Neither the Company nor any of its Subsidiaries is in
violation of its charter, or by-laws, and no default exists, and no event
has occurred, nor state of facts exists, which, with notice or after the
lapse of time to cure or both, would constitute a default in the due
performance and observance of any obligation, agreement, term, covenant,
consideration or condition contained in any indenture, mortgage, deed of
trust, loan agreement, note, lease or other agreement or instrument to
which any such entity is a party or to which any such entity or any of
its properties is subject. Neither the Company nor any of its
Subsidiaries is in violation of, or in default with respect to, any
statute, rule, regulation, order, judgment or decree, except as may be
properly described in the Prospectus or such as in the aggregate do not
now have and will not in the future have a material adverse effect on the
financial position, results of operations or business of each such
entity, respectively.
-7-
<PAGE> 9
r. There is not pending or threatened, any action, suit,
proceeding, inquiry or investigation against the Company, its
Subsidiaries or any of the officers and directors of the Company or its
Subsidiaries or to which the properties, assets or rights of the Company
or its Subsidiaries are subject, before or brought by any court or
governmental agency or body or board of arbitrators that is required to
be described in the Registration Statement or the Prospectus but is not
described as required.
s. The descriptions in the Registration Statement and the
Prospectus of the contracts, leases and other legal documents therein
described present fairly the information required to be shown, and there
are no contracts, leases, or other documents of a character required to
be described in the Registration Statement or the Prospectus or to be
filed as exhibits to the Registration Statement which are not described
or filed as required.
t. Except as disclosed in the Prospectus, the Company and
each of its Subsidiaries own, possess or have obtained all material
permits, licenses, franchises, certificates, consents, orders, approvals
and other authorizations of governmental or regulatory authorities or
other entities as are necessary to own or lease, as the case may be, and
to operate its properties and to carry on its business as presently
conducted, or as contemplated in the Prospectus to be conducted, and
neither the Company nor any of its Subsidiaries has received any notice
of proceedings relating to revocation or modification of any such
licenses, permits, franchises, certificates, consents, orders, approvals
or authorizations.
u. The Company and each of its Subsidiaries owns or possesses
adequate license or other rights to use all patents, trademarks, service
marks, trade names, copyrights, software and design licenses, trade
secrets, manufacturing processes, other intangible property rights and
know-how (collectively "Intangibles") necessary to entitle the Company
and each of its Subsidiaries to conduct its business as described in the
Prospectus, and neither the Company nor any of its Subsidiaries has
received notice of infringement of or conflict with (and knows of no such
infringement of or conflict with) asserted rights of others with respect
to any Intangibles which could materially and adversely affect the
business, prospects, properties, assets, results of operations or
condition (financial or otherwise) of the Company or any of its
Subsidiaries.
v. The Company's and the Subsidiaries' respective systems of
internal accounting controls are sufficient to meet the broad objectives
of internal accounting control insofar as those objectives pertain to the
prevention or detection of errors or irregularities in amounts that would
be material in relation to the Company's or the Subsidiaries' financial
statements; and neither the Company, the Subsidiaries, nor any employee
or agent thereof has made any payment of funds of the Company or the
Subsidiaries nor received or retained any funds, and no funds of the
Company or the Subsidiaries have been set aside to be used for any
payment, in each case in violation of any law, rule or regulation.
-8-
<PAGE> 10
w. The Company and the Subsidiaries have filed on a timely
basis all necessary federal, state, local and foreign income and
franchise tax returns required to be filed through the date hereof and
have paid all taxes shown as due thereon; and no tax deficiency has been
asserted against the Company, nor does any such entity know of any tax
deficiency which is likely to be asserted against any such entity which
if determined adversely to any such entity, could materially adversely
affect the business, prospects, properties, assets, results of operations
or condition (financial or otherwise) of the Company. All tax liabilities
are adequately provided for on the respective books of the Company.
x. The Company and its Subsidiaries maintain insurance
(issued by insurers of recognized financial responsibility) of the types
and in the amounts generally deemed adequate for its business and,
consistent with insurance coverage maintained by similar companies in
similar businesses, including, but not limited to, insurance covering
real and personal property owned or leased by the Company and its
Subsidiaries against theft, damage, destruction, acts of vandalism and
all other risks customarily insured against, all of which insurance is in
full force and effect.
y. Neither the Sellers, the Subsidiaries, nor their officers,
directors or affiliates have taken, nor will take, directly or
indirectly, any action that is designed to, or that might reasonably be
expected to, cause or result in or constitute the stabilization or
manipulation of any security of the Company or to facilitate the sale or
resale of the Shares.
z. Neither the Company nor any of its Subsidiaries is, will
become as a result of the transactions contemplated hereby, or will
conduct its business in a manner which would cause it to become, "an
investment company,"or a company "controlled" by an "investment
company,"within the meaning of the Investment Company Act of 1940, as
amended.
aa. Each of the Sellers has full corporate power and authority
to enter into the Transition Agreement. The Transition Agreement has
been duly authorized, executed and delivered by the Sellers and
constitutes a valid and binding agreement of the Sellers, enforceable in
accordance with its terms, except to the extent that enforceability may
be limited by bankruptcy, insolvency, moratorium, reorganization or other
laws of general applicability relating to or affecting creditors' rights,
or by general principles of equity whether considered at law or at
equity. Neither the execution, delivery and performance of the
Transition Agreement by the any of the Sellers, nor the consummation of
the transactions contemplated thereby, will conflict with or result in a
breach or violation of any of the terms and provisions of, or (with or
without the giving of notice or the passage of time or both) constitute a
default under the charter or bylaws of the Sellers or under any
indenture, mortgage, deed of trust, loan agreement, note, lease or other
agreement or instrument to which any of the Sellers is a party or to
which any of the respective properties or other assets of the Sellers is
subject; or any applicable statute, judgment, decree, order, rule or
regulation of any court or governmental agency or body applicable to any
of the foregoing or any of their
-9-
<PAGE> 11
respective properties; or result in the creation or imposition of any
lien, charge, claim or encumbrance upon any property or asset of any of
the Sellers.
Section 2. Representations and Warranties of Universal Partners,
Inc.Universal Partners, Inc., a Louisiana coporation ("Universal Partners"),
represents and warrants to, and agrees with, each of the several Underwriters
that:
a. Universal Partners has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
state of Louisiana with all requisite corporate power and authority to
own, lease and operate its properties and to conduct its business.
b. Universal Partners has full corporate right, power and
authority to enter into this Agreement, the Transition Agreement and the
Agreement and Plan of Share Exchange Agreement and to consummate the
transactions contemplated by this Agreement, the Transition Agreement and
the Agreement and Plan of Stock Exchange. This Agreement has been duly
authorized, executed and delivered by Universal Partners and constitutes
a valid and binding agreement of Universal Partners, enforceable in
accordance with its terms, except to the extent that enforceability may
be limited by bankruptcy, insolvency, moratorium, reorganization or other
laws of general applicability relating to or affecting creditors' rights,
or by general principles of equity whether considered at law or at equity
and except to the extent enforcement of the indemnification provisions
set forth in Section 9 of this Agreement may be limited by federal or
state securities laws or the public policy underlying such laws. The
Transition Agreement has been duly authorized, executed and delivered by
Universal Partners and constitutes a valid and binding agreement of
Universal Partners, enforceable in accordance with its terms, except to
the extent that enforceability may be limited by bankruptcy, insolvency,
moratorium, reorganization or other laws of general applicability
relating to or affecting creditors' rights, or by general principles of
equity whether considered at law or at equity. The Agreement and Plan of
Stock Exchange has been duly authorized, executed and delivered by
Universal Partners and constitutes a valid and binding agreement of
Universal Partners, enforceable in accordance with its terms, except to
the extent that enforceability may be limited by bankruptcy, insolvency,
moratorium, reorganization or other laws of general applicability
relating to or affecting creditors' rights, or by general principles of
equity whether considered at law or at equity.
c. Each consent, approval, authorization, order, license,
certificate, permit, registration, designation or filing by or with any
governmental agency or body necessary for the valid execution, delivery
and performance of this Agreement , the Transition Agreement and the
Agreement and Plan of Stock Exchange and the consummation by Universal
Partners of the transactions contemplated hereby and thereby has been
made or obtained and is in full force and effect, except, with respect to
this Agreement, as may be required under applicable state securities
laws.
-10-
<PAGE> 12
d. Neither the execution, delivery and performance of this
Agreement, the Transition Agreement or the Agreement and Plan of Stock
Exchange, nor the consummation of the transactions contemplated hereby or
thereby will conflict with or result in a breach or violation of any of
the terms and provisions of, or (with or without the giving of notice or
the passage of time or both) constitute a default under the charter or
bylaws of Universal Partners or under any indenture, mortgage, deed of
trust, loan agreement, note, lease or other agreement or instrument to
which Universal Partners is a party or to which any of the properties or
other assets of Universal Partners is subject, or any applicable statute,
judgment, decree, order, rule or regulation of any court or governmental
agency or body applicable to any of the foregoing or any of its
properties, or result in the creation or imposition of any lien, charge,
claim or encumbrance upon any property or asset of Universal Partners.
Each consent, approval, authorization, order, license, certificate,
permit, registration, designation or filing by or with any governmental
agency or body necessary for the valid execution, delivery and
performance of this Agreement, the Transition Agreement and the Agreement
and Plan of Share Exchange and the consummation by Universal Partners of
the transactions contemplated hereby and thereby has been made or
obtained and is in full force and effect, except, with respect to this
Agreement, as may be required under applicable state securities laws.
Section 3. Representations and Warranties of the Selling Shareholder.
The Selling Shareholder represents and warrants to, and agrees with, each of
the several Underwriters and the Company that:
a. The Selling Shareholder has full right, power and
authority to enter into this Agreement and the Transition Agreement and
to sell, assign, transfer and deliver to the Underwriters the Firm
Selling Shareholder Shares to be sold by the Selling Shareholder
hereunder; and the execution and delivery of this Agreement and the
Transition Agreement have been duly authorized by all necessary action of
the Selling Shareholder.
b. The Selling Shareholder has duly executed and delivered
this Agreement and the Transition Agreement, and each constitutes the
valid and binding agreement of the Selling Shareholder enforceable
against the Selling Shareholder in accordance with its terms, subject, as
to enforcement, to applicable bankruptcy, insolvency, reorganization and
moratorium laws and other laws relating to or affecting the enforcement
of creditors' rights generally and to general equitable principles.
c. No consent, approval, authorization, order or declaration
of or from, or registration, qualification or filing with, any court or
governmental agency or body is required for the sale of the Firm Selling
Shareholder Shares to be sold by the Selling Shareholder or the
consummation of the Transactions contemplated by this Agreement or the
Transition Agreement, except the registration of such Firm Selling
Shareholder Shares under the 1933 Act (which, if the Registration
Statement is not effective as of the time of execution hereof, shall be
obtained as provided in this Agreement) and such as may be required under
state
-11-
<PAGE> 13
securities or blue sky laws in connection with the offer, sale and
distribution of such Firm Selling Shareholder Shares by the
Underwriters.
d. The sale of the Firm Selling Shareholder Shares to be
sold by the Selling Shareholder and the performance of this Agreement and
the Transition Agreement and the consummation of the transactions herein
and therein contemplated will not conflict with, or (with or without the
giving of notice or the passage of time or both) result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement, lease or
other agreement or instrument to which the Selling Shareholder is a party
or to which any of its properties or assets is subject, nor will such
action conflict with or violate any provision of the charter or bylaws or
other governing instruments of the Selling Shareholder, if any, or any
statute, rule or regulation or any order, judgment or decree of any court
or governmental agency or body having jurisdiction over the Selling
Shareholder or any of the Selling Shareholder's properties or assets.
e. The Selling Shareholder has good and valid title to the
shares of common stock of Universal Fabricators to be exchanged for the
Firm Selling Shareholder Shares pursuant to the Transition Agreement, and
at the Closing Time (as defined in Section 3 hereof) the Selling
Shareholder will have, good and valid title to the Firm Selling
Shareholder Shares, free and clear of all liens, security interests,
pledges, charges, encumbrances, defects, shareholders' agreements, voting
trusts, equities or claims of any nature whatsoever; and, upon delivery
of such Firm Selling Shareholder Shares against payment therefor as
provided herein, good and valid title to such Firm Selling Shareholder
Shares, free and clear of all liens, security interests, pledges,
charges, encumbrances, defects, shareholders' agreements, voting trusts,
equities or claims of any nature whatsoever, will pass to the several
Underwriters.
f. The Selling Shareholder has not taken, and will not take,
directly or indirectly, any action that is designed to, or that might
reasonably be expected to, cause or result in or constitute the
stabilization or manipulation of any security of the Company or to
facilitate the sale or resale of the Shares.
In order to document the Underwriters' compliance with the reporting and
withholding provisions of the Internal Revenue Code of 1986, as amended, with
respect to the transactions herein contemplated, the Selling Shareholder agrees
to deliver to you prior to or at the Closing Time (as hereinafter defined) a
properly completed and executed United States Treasury Department form W-9 (or
other applicable form or statement specified by Treasury Department regulations
in lieu thereof).
Section 4. Sale and Delivery of the Shares to the Underwriters;
Closing.
On the basis of the representations and warranties herein contained, and
subject to the terms and conditions herein set forth, the Company agrees to
issue and sell to each of the Underwriters the Firm Company Shares, and the
Selling Shareholder agrees to sell to each of the Underwriters the
-12-
<PAGE> 14
Firm Selling Shareholder Shares, and each Underwriter agrees, severally and not
jointly, to purchase from the Company and the Selling Shareholder the number of
Firm Shares set forth opposite the name of such Underwriter in Schedule A (the
proportion which each Underwriter's share of the total number of the Firm
Shares bears to the total number of Firm Shares is hereinafter referred to as
such Underwriter's "underwriting obligation proportion"), at a purchase price
of $__________ per share.
a. In addition, on the basis of the representations and
warranties herein contained, and subject to the terms and conditions
herein set forth, the Company hereby grants an option to the Underwriters
to purchase, severally and not jointly, up to an additional 422,250
Option Shares at the same purchase price as shall be applicable to the
Firm Shares. The option hereby granted will expire if not exercised
within the thirty (30) day period after the date of the Prospectus by
giving written notice to the Company. The option granted hereby may be
exercised in whole or in part (but not more than once) by you, as
representatives of the Underwriters, only for the purpose of covering
over-allotments that may be made in connection with the offering and
distribution of the Firm Shares. The notice of exercise shall set forth
the number of Option Shares as to which the several Underwriters are
exercising the option, and the time and date of payment and delivery
thereof. Such time and date of delivery (the "Date of Delivery") shall be
determined by you but shall not be later than three full business days
after the exercise of such option, nor in any event prior to the Closing
Time. If the option is exercised as to all or any portion of the Option
Shares, the Option Shares as to which the option is exercised shall be
purchased by the Underwriters, severally and not jointly, in their
respective underwriting obligation proportions.
b. Payment of the purchase price for and delivery of
certificates in definitive form representing the Firm Shares shall be
made at the offices of Morgan Keegan & Company, Inc., 50 Front Street,
Memphis, Tennessee 38103, or at such other place as shall be agreed upon
by the Company, the Selling Shareholder and you, at 10:00 a.m., either
(i) on the third full business day after the execution of this Agreement,
or (ii) at such other time not more than ten full business days
thereafter as you, the Selling Shareholder and the Company shall
determine (unless, in either case, postponed pursuant to the term
hereof), (such date and time of payment and delivery being herein called
the "Closing Time"). In addition, in the event that any or all of the
Option Shares are purchased by the Underwriters, payment of the purchase
price for and delivery of certificates in definitive form representing
the Option Shares shall be made at the offices of Morgan Keegan &
Company, Inc. in the manner set forth above, or at such other place as
the Company and you shall determine, on the Date of Delivery as specified
in the notice from you to the Company. Payment for the Firm Company
Shares and the Option Shares shall be made to the Company and payment
shall be made to the Selling Shareholder for the Firm Selling Shareholder
Shares by wire transfer in same-day funds to the accounts designated to
the Underwriters in writing by the Company and the Selling Shareholder,
as appropriate (or in such other manner as you, the Company and the
Selling Shareholder shall agree) against delivery to you for the
respective accounts of the Underwriters of the Shares to be purchased by
them.
-13-
<PAGE> 15
c. The certificates representing the Shares to be purchased
by the Underwriters shall be in such denominations and registered in such
names as you may request in writing at least two full business days
before the Closing Time or the Date of Delivery, as the case may be. The
certificates representing the Shares will be made available at the
offices of Morgan Keegan & Company, Inc. or at such other place as Morgan
Keegan & Company, Inc. may designate for examination and packaging not
later than 10:00 a.m. at least one full business day prior to the Closing
Time or the Date of Delivery as the case may be.
d. After the Registration Statement becomes effective, you
intend to offer the Shares to the public as set forth in the Prospectus,
but after the initial public offering of such Shares you may in your
discretion vary the public offering price.
Section 5. Certain Covenants of the Company. The Company covenants
and agrees with the Selling Shareholder and each Underwriter as follows:
a. The Company will use its best efforts to cause the
Registration Statement to become effective (if not yet effective at the
date and time that this Agreement is executed and delivered by the
parties hereto). If the Company elects to rely upon Rule 430A of the 1933
Act Regulations or the filing of the Prospectus is otherwise required
under Rule 424(b) of the 1933 Act Regulations, the Company will comply
with the requirements of Rule 430A and will file the Prospectus, properly
completed, pursuant to the applicable provisions of Rule 424(b), or a
Term Sheet pursuant to and in accordance with Rule 434, within the time
period prescribed. If the Company elects to rely upon Rule 462(b) of the
1933 Act Regulations, the Company shall file a 462(b) Registration
Statement with the Commission in compliance with Rule 462(b) by 10:00
p.m., Washington, D.C. time on the date of this Agreement, and the
Company shall at the time of filing either pay to the Commission the
filing fee for the Rule 462(b) Registration Statement or give irrevocable
instructions for the payment of such fee. The Company will notify you
immediately, and confirm the notice in writing, (i) when the Registration
Statement, 462(b) Registration Statement or any post-effective amendment
to the Registration Statement, shall have become effective, or any
supplement to the Prospectus or any amended Prospectus shall have been
filed, (ii) of the receipt of any comments from the Commission, (iii) of
any request by the Commission to amend the Registration Statement or
462(b) Registration Statement or amend or supplement the Prospectus or
for additional information, and (iv) of the issuance by the Commission of
any stop order suspending the effectiveness of the Registration Statement
or any 462(b) Registration Statement or of any order preventing or
suspending the use of any Preliminary Prospectus or the suspension of the
qualification of the Shares for offering or sale in any jurisdiction, or
of the institution or threatening of any proceeding for any such
purposes. The Company will use every reasonable effort to prevent the
issuance of any such stop order or of any order preventing or suspending
such use and, if any such order is issued, to obtain the withdrawal
thereof at the earliest possible moment.
-14-
<PAGE> 16
b. The Company will not at any time file or make any
amendment to the Registration Statement, or any amendment or supplement
(i) to the Prospectus, if the Company has not elected to rely upon Rule
430A, (ii) if the Company has elected to rely upon Rule 430A, to either
the Prospectus included in the Registration Statement at the time it
becomes effective or to the Prospectus filed in accordance with Rule
424(b) or any Term Sheet filed in accordance with Rule 434, or (iii) if
the Company has elected to rely upon Rule 462(b), to any 462(b)
Registration Statement in any case if you shall not have previously been
advised and furnished a copy thereof a reasonable time prior to the
proposed filing, or if you or counsel for the Underwriters shall object
to such amendment or supplement.
c. The Company has furnished or will furnish to you, at its
expense, as soon as available, three copies of the Registration Statement
as originally filed and of all amendments thereto, whether filed before
or after the Registration Statement becomes effective, copies of all
exhibits and documents filed therewith and signed copies of all consents
and certificates of experts, as you may reasonably request, and has
furnished or will furnish to each Underwriter, one conformed copy of the
Registration Statement as originally filed and of each amendment thereto.
d. The Company will deliver to each Underwriter, at the
Company's expense, from time to time, as many copies of each Preliminary
Prospectus as such Underwriter may reasonably request, and the Company
hereby consents to the use of such copies for purposes permitted by the
1933 Act. The Company will deliver to each Underwriter, at the Company's
expense, as soon as the Registration Statement shall have become
effective and thereafter from time to time as requested during the period
when the Prospectus is required to be delivered under the 1933 Act, such
number of copies of the Prospectus (as supplemented or amended) as each
Underwriter may reasonably request. The Company will comply to the best
of its ability with the 1933 Act and the 1933 Act Regulations so as to
permit the completion of the distribution of the Shares as contemplated
in this Agreement and in the Prospectus. If the delivery of a prospectus
is required at any time prior to the expiration of nine months after the
time of issue of the Prospectus or any Term Sheet in connection with the
offering or sale of the Shares and if at such time any events shall have
occurred as a result of which the Prospectus or any Term Sheet as then
amended or supplemented would include an untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were
made when such Prospectus or any Term Sheet is delivered not misleading,
or, if for any reason it shall be necessary during such same period to
amend or supplement the Prospectus or any Term Sheet in order to comply
with the 1933 Act or the 1933 Act Regulations, the Company will notify
you and upon your request prepare and furnish without charge to each
Underwriter and to any dealer in securities as many copies as you may
from time to time reasonably request of an amended Prospectus or any Term
Sheet or a supplement to the Prospectus or any Term Sheet or an amendment
or supplement to any such incorporated document which will correct such
statement or omission or effect such compliance, and in case any
Underwriter is required to deliver a prospectus in connection with sales
of any of the Shares at any time nine months or
-15-
<PAGE> 17
more after the time of issue of the Prospectus or any Term Sheet, upon
your request but at the expense of such Underwriter, the Company will
prepare and deliver to such Underwriter as many copies as you may request
of an amended or supplemented Prospectus or any Term Sheet complying with
Section 10(a)(3) of the 1933 Act.
e. The Company will use its best efforts to qualify the
Shares for offering and sale under the applicable securities laws of such
states and other jurisdictions as you may designate and to maintain such
qualifications in effect for as long as may be necessary to complete the
distribution of the Shares; provided, however, that the Company shall not
be obligated to file any general consent to service of process or to
qualify as a foreign corporation in any jurisdiction in which it is not
so qualified or to make any undertakings in respect of doing business in
any jurisdiction in which it is not otherwise so subject. The Company
will file such statements and reports as may be required by the laws of
each jurisdiction in which the Shares have been qualified as above
provided.
f. The Company will make generally available to its security
holders as soon as practicable, but in any event not later than the end
of the fiscal quarter first occurring after the first anniversary of the
"effective date of the Registration Statement" (as defined in Rule 158(c)
of the 1933 Act Regulations), an earnings statement (in reasonable detail
but which need not be audited) complying with the provisions of Section
11(a) of the 1933 Act and Rule 158 thereunder and covering a period of at
least 12 months beginning after the effective date of the Registration
Statement.
g. The Company will use the net proceeds received by it from
the sale of the Shares in the manner specified in the Prospectus under
the caption "Use of Proceeds."
h. During a period of five years after the date hereof, the
Company will furnish to you: (i) if and at the time it furnishes such
reports to its securityholders, statements of operations of the Company
for each of the first three quarters of each fiscal year in the form
furnished to the Company's securityholders; (ii) concurrently with
furnishing to its securityholders, a balance sheet of the Company as of
the end of such fiscal year, together with statements of operations, of
cash flows and of securityholders' equity of the Company for such fiscal
year, accompanied by a copy of the certificate or report thereon of
independent public accountants; (iii) as soon as they are available,
copies of all reports (financial or otherwise) mailed to securityholders;
(iv) as soon as they are available, copies of all reports and financial
statements furnished to or filed with the Commission, any securities
exchange or the National Association of Securities Dealers, Inc. (the
"NASD"); (v) every material press release in respect of the Company or
its affairs which is released by the Company; and (vi) any additional
information of a public nature concerning the Company or its business
that you may reasonably request. During such five-year period, the
foregoing financial statements shall be on a consolidated basis to the
extent that the accounts of the Company are consolidated with any
subsidiaries, and shall be accompanied by similar financial statements
for any significant subsidiary that is not so consolidated.
-16-
<PAGE> 18
i. During the period beginning from the date hereof and
continuing to and including the date 180 days after the date of the
Prospectus, the Company will not, without the prior written consent of
Morgan Keegan & Company, Inc., offer, pledge, issue, sell, contract to
sell, grant any option for the sale of, or otherwise dispose of, or
announce any offer, pledge, sale, grant of any option to purchase or
otherwise acquire, directly or indirectly, any shares of Common Stock or
securities convertible into, exercisable for or exchangeable for, shares
of Common Stock, except as provided in the Transition Agreement, Section
3 of this Agreement or pursuant to the Company's Long-Term Incentive Plan
(as specified in the Prospectus under the caption "Management") or in
connection with the acquisition of businesses or assets by the Company or
a subsidiary of the Company.
j. The Company will maintain a transfer agent and, if
necessary under the jurisdiction of incorporation of the Company, a
registrar (which may be the same entity as the transfer agent) for its
Common Stock.
k. The Company will cause the Shares to be listed, subject to
notice of issuance, on the Nasdaq National Market and will use its best
efforts to maintain the listing of the Shares on the Nasdaq National
Market.
l. The Company is familiar with the Investment Company Act of
1940, as amended, and the rules and regulations thereunder, and has in
the past conducted its affairs, and will in the future conduct its
affairs, in such a manner so as to ensure that the Company was not and
will not be an "investment company" or an entity "controlled" by an
"investment company" within the meaning of the Investment Company Act of
1940, as amended.
m. The Company will not, and will use its best efforts to
cause its officers, directors and affiliates not to, in violation of
Regulation M of the 1934 Act Regulations (i) take, directly or indirectly
prior to termination of the underwriting syndicate contemplated by this
Agreement, any action designed to stabilize or manipulate the price of
any security of the Company, or which may cause or result in, or which
might in the future reasonably be expected to cause or result in, the
stabilization or manipulation of the price of any security of the
Company, to facilitate the sale or resale of any of the Shares, (ii)
sell, bid for, purchase or pay anyone any compensation for soliciting
purchases of the Shares or (iii) pay or agree to pay to any person any
compensation for soliciting any order to purchase any other securities of
the Company.
n. If at any time during the 30-day period after the
Registration Statement becomes effective, any rumor, publication or event
relating to or affecting the Company shall occur as a result of which in
your reasonable opinion the market price of the Common Stock has been or
is likely to be materially affected (regardless of whether such rumor,
publication or event necessitates a supplement to or amendment of the
Prospectus) and after written notice from you advising the Company to the
effect set forth above, the Company agrees to consult
-17-
<PAGE> 19
with you concerning the substance and dissemination of a press release or
other public statement responding to or commenting on such rumor,
publication or event.
Section 6. Covenants of the Selling Shareholder. The Selling
Shareholder covenants and agrees with each of the Underwriters that the Selling
Shareholder will not, in violation of Regulation M of the 1934 Act Regulations,
(i) take, directly or indirectly, prior to the termination of the underwriting
syndicate contemplated by this Agreement, any action designed to cause or to
result in, or that might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Shares, (ii) sell, bid for,
purchase or pay anyone any compensation for soliciting purchases of, the Shares
or (iii) pay to or agree to pay any person any compensation for soliciting
another to purchase any other securities of the Company.
Section 7. Payment of Expenses. The Sellers will pay and bear all
costs, fees and expenses incident to the performance of its obligations under
this Agreement (excluding fees and expenses of counsel for the Underwriters,
except as specifically set forth below), including (a) the preparation,
printing and filing of the Registration Statement (including financial
statements and exhibits), as originally filed and as amended, the Preliminary
Prospectuses, the Prospectus and any Term Sheet and any amendments or
supplements thereto, and the cost of furnishing copies thereof to the
Underwriters, (b) the preparation, printing and distribution of this Agreement,
the certificates representing the Shares, the Blue Sky Memoranda and any
instruments relating to any of the foregoing, (c) the issuance and delivery of
the Shares to the Underwriters, including any transfer taxes payable upon the
sale of the Shares to the Underwriters (other than transfer taxes on resales by
the Underwriters), (d) the fees and disbursements of the Sellers' counsel and
accountants, (e) the qualification of the Shares under the applicable
securities laws in accordance with the terms of this Agreement, including
filing fees and fees and disbursements of counsel for the Underwriters in
connection therewith and in connection with the preparation of the Blue Sky
Memoranda, (f) all costs, fees and expenses in connection with the notification
to the Nasdaq National Market of the proposed issuance of the Shares, (g)
filing fees relating to the review of the offering by the NASD, (h) the
transfer agent's and registrar's fees and all miscellaneous expenses referred
to in Part II of the Registration Statement, (i) costs related to travel and
lodging incurred by the Sellers and their representatives relating to meetings
with and presentations to prospective purchasers of the Shares reasonably
determined by the Underwriters to be necessary or desirable to effect the sale
of the Shares to the public, and (j) all other costs and expenses incident to
the performance of the Sellers' obligations hereunder (including costs incurred
in closing the purchase of the Option Shares, if any) that are not otherwise
specifically provided for in this section. The Sellers, upon your request, will
provide funds in advance for filing fees in connection with "blue sky"
qualifications.
If the sale of the Shares provided for herein is not consummated because
any condition to the obligations of the Underwriters set forth in Section 7
hereof is not satisfied, because of any termination pursuant to Section 10
hereof or because of any refusal, inability or failure on the part of the
Company to perform any agreement herein or comply with any provision hereof
other than by reason of default by any of the Underwriters, the Sellers will
reimburse the Underwriters severally
-18-
<PAGE> 20
on demand for all reasonable out-of-pocket expenses, including fees and
disbursements of Underwriters' counsel, reasonably incurred by the Underwriters
in reviewing the Registration Statement and the Prospectus, and in
investigating and making preparations for the marketing of the Shares, provided
that the Sellers will not be required to pay more than $150,000 in the
aggregate pursuant to this paragraph.
Section 8. Conditions of Underwriters' Obligations. The obligations
of the Underwriters to purchase and pay for (i) the Firm Shares that they have
respectively agreed to purchase pursuant to this Agreement (and any Option
Shares as to which the option granted in Section 4 has been exercised and the
Date of Delivery determined by you is the same as the Closing Time) at the
Closing Time and (ii) the Option Shares at the Date of Delivery of the Option
Shares, are subject to the accuracy of the representations and warranties of
the Sellers and the Selling Shareholder contained herein as of the Closing Time
or the Date of Delivery, as the case may be, and to the accuracy of the
representations and warranties of the Sellers and the Selling Shareholder
contained in certificates of any officer of the Company and the Selling
Shareholder delivered pursuant to the provisions hereof, to the performance by
the Sellers and the Selling Shareholder of their obligations hereunder, and to
the following further conditions:
a. The Registration Statement shall have become effective not
later than 5:30 p.m. on the date of this Agreement or, with your consent,
at a later time and date not later, however, than 5:30 p.m. on the first
business day following the date hereof, or at such later time or on such
later date as you may agree to in writing; if the Company has elected to
rely upon Rule 462(b), the 462(b) Registration Statement shall have
become effective by 10:00 p.m., Washington, D.C. time, on the date of
this Agreement; and at the Closing Time, no stop order suspending the
effectiveness of the Registration Statement or any 462(b) Registration
Statement shall have been issued under the 1933 Act, and no proceedings
for that purpose shall have been instituted or shall be pending or, to
your knowledge or the knowledge of the Company, shall be contemplated by
the Commission, and any request on the part of the Commission for
additional information shall have been complied with to the satisfaction
of counsel for the Underwriters. If the Company has elected to rely upon
Rule 430A, a Prospectus or a Term Sheet containing the Rule 430A
Information shall have been filed with the Commission in accordance with
Rule 424(b) (or a post- effective amendment providing such information
shall have been filed and declared effective in accordance with the
requirements of Rule 430A).
b. At the Closing Time, you shall have received a favorable
opinion of Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P.,
counsel for the Company, dated as of the Closing Time, together with
signed or reproduced copies of such opinion for each of the other
Underwriters, in form and substance satisfactory to counsel for the
Underwriters, to the effect that:
i. The Company has been duly incorporated and is
validly existing as a corporation in good standing
under the laws of the State of
-19-
<PAGE> 21
Louisiana with the corporate power and authority to
own, lease and operate its properties and to
conduct its business as described in the
Registration Statement and the Prospectus. The
Company is qualified to transact business as a
foreign corporation and is in good standing in each
of the jurisdictions in which the ownership or
leasing of the Company's properties or the nature
or conduct of its business requires such
qualification, except where the failure to do so
would not have a material adverse effect on the
condition (financial or other), business,
properties, net worth or results of operations of
the Company and the Subsidiaries taken as a whole.
ii. Each of the Subsidiaries has been duly incorporated
and is validly existing as a corporation in good
standing under the laws of the state of its
incorporation. Each such entity has all requisite
corporate power and authority to own, lease and
operate its properties and conduct its business as
described in the Registration Statement and the
Prospectus. Each such entity is duly qualified to
do business and is in good standing as a foreign
corporation in each other jurisdiction in which the
ownership or leasing of its properties or the
nature or conduct of its business requires such
qualification, except where the failure to do so
would not have a material adverse effect on the
condition (financial or other), business,
properties, net worth or results of operations of
the Company and the Subsidiaries taken as a whole.
iii. The Company has the corporate power and authority
to enter into this Agreement, to issue, sell and
deliver the Shares as provided herein and to
consummate the transactions contemplated herein.
This Agreement has been duly authorized, executed
and delivered by the Company and, assuming due
authorization, execution and delivery by the
Underwriters, constitutes a valid and binding
agreement of the Company, enforceable in accordance
with its terms, except to the extent enforceability
may be limited by bankruptcy, insolvency,
moratorium, reorganization or other laws affecting
creditors' rights or by general principles of
equity whether considered at law or in equity and
except to the extent that enforcement of the
indemnification provisions set forth in Section 8
of this Agreement may be limited by federal or
state securities laws or the public policy
underlying such laws and except that no opinion
need be expressed as to the effect of the first
sentence of Section 15 of this Agreement as to the
laws of the State of Tennessee.
-20-
<PAGE> 22
iv. Each of the Company, Universal Partners and
Universal Fabricators has the corporate power and
authority to enter into the Transition Agreement
and to consummate the transactions contemplated
therein. The Transition Agreement has been duly
authorized, executed and delivered by each of the
Company, Universal Partners and Universal
Fabricators and, assuming due authorization,
execution and delivery by the Selling Shareholder
and Dailey J. Berard, constitutes a valid and
binding agreement of the Company, Universal
Partners and Universal Fabricators, enforceable in
accordance with its terms, except to the extent
enforceability may be limited by bankruptcy,
insolvency, moratorium, reorganization or other
laws affecting creditors' rights or by general
principles of equity whether considered at law or
in equity.
v. Each consent, approval, authorization, order,
license, certificate, permit, registration,
designation or filing by or with any governmental
agency or body necessary for the valid
authorization, issuance, sale and delivery of the
Shares, the execution, delivery and performance of
this Agreement and the Transition Agreement and the
consummation by the Company of the transactions
contemplated hereby and thereby, has been made or
obtained and is in full force and effect, except
such as may be necessary under state securities
laws or required by the NASD in connection with the
purchase and distribution of the Shares by the
Underwriters, as to which such counsel need express
no opinion.
vi. Neither the issuance, sale and delivery by the
Company of the Shares, nor the execution, delivery
and performance of this Agreement or the Transition
Agreement, nor the consummation of the transactions
contemplated hereby or thereby did or will conflict
with or result in a breach or violation of any of
the terms and provisions of, or (with or without
the giving of notice or the passage of time or
both) constitute a default under, the charter or
by-laws of the Company or the Subsidiaries,
respectively, or, under any indenture, mortgage,
deed of trust, loan agreement, note, lease or other
agreement or instrument to which the Company,
Universal Partners or the Subsidiaries,
respectively, is a party or to which the Company,
Universal Partners or the Subsidiaries,
respectively, or any of its respective properties
or other assets, is subject; or, to such counsel's
knowledge, any applicable statute, judgment,
decree, order, rule or regulation of any court or
governmental agency or body; or to such counsel's
knowledge, result in the creation or imposition of
any lien,
-21-
<PAGE> 23
charge, claim or encumbrance upon any property or
asset of the Company, Universal Partners or the
Subsidiaries, respectively.
vii. The Common Stock conforms in all material respects
as to legal matters to the description thereof
contained in the Registration Statement and the
Prospectus under the heading "Description of
Capital Stock."
viii. The Shares to be issued and sold to the
Underwriters hereunder have been validly authorized
by the Company. When issued and delivered against
payment therefor as provided in this Agreement,
such shares will be validly issued, fully paid and
nonassessable. To such counsel's knowledge, no
preemptive rights of shareholders exist with
respect to any of the Shares which have not been
satisfied or waived. To such counsel's knowledge,
no person or entity holds a right to require or
participate in the registration under the 1933 Act
of the Shares pursuant to the Registration
Statement which has not been satisfied or waived;
and, except as set forth in the Prospectus, no
person holds a right to require registration under
the 1933 Act of any shares of Common Stock of the
Company at any other time which has not been
satisfied or waived. The form of certificates
evidencing the Shares complies with all applicable
requirements of Louisiana law.
ix. The Company has an authorized capitalization as set
forth in the Prospectus under the caption
"Capitalization."All of the issued shares of
capital stock of the Company have been duly
authorized and validly issued, are fully paid and
nonassessable. None of the issued shares of
capital stock of the Company has been issued or is
owned or held in violation of any preemptive rights
of shareholders. All offers and sales of capital
stock by the Company and Universal Fabricators in
connection with the transactions contemplated by
the Transition Agreement were duly registered under
the 1933 Act or were exempt from the registration
requirements of the 1933 Act by reason of Sections
3(b), 4(2) or 4(6) thereof and were duly registered
or the subject of an available exemption from the
registration requirements of the applicable state
securities or blue sky laws, provided, however,
that such counsel need not express any opinion with
respect to the registration or availability of an
exemption under applicable state securities or blue
sky laws for shares of Common Stock issued pursuant
to an underwritten public offering.
x. All of the issued shares of capital stock of each
of the Subsidiaries have been duly authorized and
validly issued, are fully paid and
-22-
<PAGE> 24
nonassessable and, to such counsel's knowledge
after due inquiry, are owned directly, or
indirectly through another Subsidiary, by the
Company free and clear of all liens, security
interests, pledges, charges encumbrances, defects,
shareholders' agreements, voting trusts, equities
or claims of any nature whatsoever. To such
counsel's knowledge after due inquiry, other than
the Subsidiaries, the Company does not own,
directly or indirectly, any capital stock or other
equity securities of any other corporation or any
ownership interest in any partnership, joint
venture or other association.
xi. Except as disclosed in the Prospectus, to such
counsel's knowledge after due inquiry, there are no
outstanding (i) securities or obligations of the
Company or any of its Subsidiaries convertible into
or exchangeable for any capital stock of the
Company or any such Subsidiary, (ii) warrants,
rights or options to subscribe for or purchase from
the Company or any such Subsidiary any such capital
stock or any such convertible or exchangeable
securities or obligations, or (iii) obligations of
the Company or any such Subsidiary to issue any
shares of capital stock, any such convertible or
exchangeable securities or obligation, or any such
warrants, rights or options.
xii. Any real property and buildings held under lease by
the Company or any Subsidiary are held under valid,
existing and enforceable leases, with such
exceptions as are disclosed in the Prospectus or
are not material and do not interfere with the use
made or proposed to be made of such property and
buildings by the Company or such Subsidiary.
xiii. Neither the Company nor any of its Subsidiaries is
in violation of its charter or by-laws, and, to
such counsel's knowledge after due inquiry, no
material default exists, and no event has occurred
nor state of facts exist which, with notice or
after the lapse of time to cure or both, would
constitute a material default in the due
performance and observance of any obligation,
agreement, term, covenant, or condition contained
in any indenture, mortgage, deed of trust, loan
agreement, note, lease or other agreement or
instrument to which the Company is a party or to
which the Company or any of its properties is
subject.
xiv. To such counsel's knowledge, there is not pending
or threatened any action, suit, proceeding, inquiry
or investigation against the Company, the
Subsidiaries or any of the officers and directors
of the Company or the Subsidiaries or to which the
properties, assets or
-23-
<PAGE> 25
rights of the Company or the Subsidiaries are
subject, before or brought by any court or
governmental agency or body or board of
arbitrators, that are required to be described in
the Registration Statement or the Prospectus but
are not described as required.
xv. The descriptions in the Registration Statement and
the Prospectus of the contracts, leases and other
legal documents therein described present fairly
the information required to be shown and there are
no contracts, leases or other documents known to
such counsel of a character required to be
described in the Registration Statement or the
Prospectus or to be filed as exhibits to the
Registration Statement which are not described or
filed as required.
xvi. The Common Stock has been approved for trading on
the Nasdaq National Market.
xvii. The Registration Statement and any 462(b)
Registration Statement have become effective under
the 1933 Act and, to the knowledge of such counsel,
no stop order suspending the effectiveness of the
Registration Statement or any 462(b) Registration
Statement has been issued and no proceeding for
that purpose has been instituted or is pending or
contemplated under the 1933 Act. Other than
financial statements and other financial and
operating data and schedules contained therein, as
to which counsel need express no opinion, the
Registration Statement, any 462(b) Registration
Statement, all Preliminary Prospectuses, the
Prospectus and any amendment or supplement thereto,
appear on their face to conform as to form in all
material respects with the requirements of the 1933
Act and the rules and regulations thereunder.
xviii. The Company is not, or solely as a result of the
consummation of the transactions contemplated
hereby will not become, an "investment company,"or
a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of
1940, as amended.
xix. The descriptions in the Prospectus of statutes,
regulations, legal or governmental proceedings are
accurate and present fairly a summary of the
information required to be shown under the 1933 Act
and the 1933 Act Regulations. The information in
the Prospectus under the caption "Shares Available
for Future Sale," to the extent that it constitutes
matters of law or legal conclusions, has been
reviewed by such counsel, is correct and presents
fairly the information required to be disclosed
therein under the 1933 Act and the 1933 Act
Regulations.
-24-
<PAGE> 26
Such counsel also shall state that they have no reason to
believe that the Registration Statement, any 462(b) Registration
Statement or any further amendment thereto made prior to the
Closing Time or the Date of Delivery, as the case may be, on its
effective date and as of the Closing Time or the Date of
Delivery, as the case may be, contained or contains any untrue
statement of a material fact or omitted or omits to state any
material fact required to be stated therein or necessary to make
the statements therein not misleading, or that the Prospectus, or
any amendment or supplement thereto made prior to the Closing
Time or the Date of Delivery, as the case may be, as of its issue
date and as of the Closing Time or the Date of Delivery, as the
case may be, contained or contains any untrue statement of a
material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading
(provided that such counsel need express no belief regarding the
financial statements and related schedules and other financial
data contained in the Registration Statement, any 462(b)
Registration Statement, any amendment thereto, or the Prospectus,
or any amendment or supplement thereto).
c. You shall have received an opinion, dated the Closing
Time, of Jack M. Arnold, Assistant General Counsel - Transactions, of
McDermott Incorporated, counsel for the Selling Shareholder, in form and
substance satisfactory to you and your counsel, to the effect that:
i. This Agreement and the Transition Agreement have
been duly executed and delivered by or on behalf of
the Selling Shareholder; the sale of the Firm
Selling Shareholder Shares to be sold by the
Selling Shareholder at such Closing Time and the
performance of this Agreement and the Transition
Agreement and the consummation of the Transactions
herein and therein contemplated will not conflict
with or (with or without the giving of notice or
the passage of time or both) result in a breach or
violation of any of the terms or provisions of, or
constitute a default under, any indenture,
mortgage, deed of trust, loan agreement, lease or
other agreement or instrument to which the Selling
Shareholder is a party or to which any of its
properties or assets is subject, nor will such
action conflict with or violate any provision of
the charter or bylaws or other governing
instruments of the Selling Shareholder or any
statute, rule or regulation or any order, judgment
or decree of any court or governmental agency or
body having jurisdiction over the Selling
Shareholder or any of the Selling Shareholder's
properties or assets.
-25-
<PAGE> 27
ii. No consent, approval, authorization, order or
declaration of or from, or registration,
qualification or filing with, any court or
governmental agency or body is required for the
issue and sale of the Firm Selling Shareholder
Shares being sold by the Selling Shareholder or the
consummation of the Transactions contemplated by
this Agreement or the Transition Agreement, except
the registration of such Firm Selling Shareholder
Shares under the Act and such as may be required
under state securities or blue sky laws in
connection with the offer, sale and distribution of
such Shares by the Underwriters.
iii. The Selling Shareholder has good and valid title to
the shares of common stock of Universal Fabricators
to be exchanged for the Firm Selling Shareholder
Shares pursuant to the Transition Agreement, and
immediately prior to such Closing Time will have,
good and valid title to the Firm Selling
Shareholder Shares, free and clear of all liens,
security interests, pledges, charges, encumbrances,
defects, shareholders' agreements, voting trusts,
equities or claims of any nature whatsoever; and,
upon delivery of such Firm Selling Shareholder
Shares against payment therefor as provided herein,
good and valid title to such Firm Selling
Shareholder Shares, free and clear of all liens,
security interests, pledges, charges, encumbrances,
defects, shareholders' agreements, voting trusts,
equities or claims of any nature whatsoever, will
pass to the several Underwriters.
In rendering the opinions set forth in Sections 7(b) and
(c), such counsel may rely on the following:
(1) as to matters involving the
application of laws other than the laws of the
United States and jurisdictions in which they are
admitted, to the extent such counsel deems proper
and to the extent specified in such opinion, upon
an opinion or opinions (in form and substance
reasonably satisfactory to Underwriters' counsel)
of other counsel familiar with the applicable laws,
and
(2) as to matters of fact, to the extent
they deem proper, on certificates of responsible
officers of the Company or the Selling Shareholder,
as appropriate, and certificates or other written
statements of officers or departments of various
jurisdictions having custody of documents
respecting the existence or good standing of the
Company or the Selling Shareholder, as appropriate,
provided that copies of all such opinions,
statements or certificates shall be delivered to
Underwriters' counsel. The opinion of counsel for
the Company or the Selling Shareholder, as
appropriate, shall state that
-26-
<PAGE> 28
the opinion of any other counsel, or certificate or
written statement, on which such counsel is relying
is in form satisfactory to such counsel and that
you and they are justified in relying thereon.
d. At the Closing Time, you shall have received a favorable
opinion from Andrews & Kurth L.L.P., counsel for the Underwriters, dated
as of the Closing Time, with respect to the incorporation of the Company,
the issuance and sale of the Shares, the Registration Statement, the
Prospectus and other related matters as the Underwriters may reasonably
require, and the Company shall have furnished to such counsel such
documents as they may reasonably request for the purpose of enabling them
to pass on such matters.
e. At the Closing Time, (i) the Registration Statement, any
462(b) Registration Statement, and the Prospectus, as they may then be
amended or supplemented, shall contain all statements that are required
to be stated therein under the 1933 Act and the 1933 Act Regulations and
in all material respects shall conform to the requirements of the 1933
Act and the 1933 Act Regulations; the Company shall have complied in all
material respects with Rule 430A (if it shall have elected to rely
thereon), and neither the Registration Statement, any 462(b) Registration
Statement, nor the Prospectus, as they may then be amended or
supplemented, shall contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading, (ii) there shall not have
been, since the respective dates as of which information is given in the
Registration Statement, any material adverse change in the business,
prospects, properties, assets, results of operations or condition
(financial or otherwise) of the Company, whether or not arising in the
ordinary course of business, (iii) no action, suit or proceeding at law
or in equity shall be pending or, to the best of the Company's knowledge,
threatened against the Company that would be required to be set forth in
the Prospectus other than as set forth therein and no proceedings shall
be pending or, to the best knowledge of the Company, threatened against
the Company before or by any federal, state or other commission, board or
administrative agency wherein an unfavorable decision, ruling or finding
could materially adversely affect the business, prospects, assets,
results of operations or condition (financial or otherwise) of the
Company, other than as set forth in the Prospectus, (iv) the Company
shall have complied with all agreements and satisfied all conditions on
their part to be performed or satisfied at or prior to the Closing Time,
and (v) the representations and warranties of the Company set forth in
Section 1 shall be accurate as though expressly made at and as of the
Closing Time. At the Closing Time, you shall have received a certificate
executed by the President and Chief Financial Officer of the Company
dated as of the Closing Time, to such effect and with respect to the
following additional matters: (A) the Registration Statement has become
effective under the 1933 Act, and no stop order suspending the
effectiveness of the Registration Statement or preventing or suspending
the use of the Prospectus has been issued, and no proceedings for that
purpose have been instituted or are pending or, to the best of their
knowledge, threatened under the 1933 Act; and (B) they have reviewed the
Registration Statement and the Prospectus and, when the Registration
Statement and any 462(b) Registration Statement became effective and at
all times subsequent thereto up to the delivery
-27-
<PAGE> 29
of such certificate, the Registration Statement, any 462(b) Registration
Statement and the Prospectus and any amendments or supplements thereto
contained all statements and information required to be included therein
or necessary to make the statements therein not misleading and neither
the Registration Statement, any 462(b) Registration Statement, nor the
Prospectus nor any amendment or supplement thereto included any untrue
statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading, and, since the effective date of the Registration
Statement, there has occurred no event required to be set forth in an
amended or supplemented Prospectus that has not been so set forth. The
representations and warranties of the Selling Shareholder set forth
herein shall be accurate as though expressly made at and as of the
Closing Time. At the Closing Time, you shall have received a certificate
executed on behalf of the Selling Shareholder to such effect.
f. You shall have received from Ernst & Young LLP letters
dated, respectively, the date hereof (or, if the Registration Statement
has been declared effective prior to the execution and delivery of this
Agreement, dated such effective date and the date of this Agreement) and
the Closing Time and the Date of Delivery, in form and substance
satisfactory to you, to the effect set forth in Annex I hereto. In the
event that the letters referred to in this subsection set forth any
changes, decreases or increases in the items specified in paragraphs iii
and iv of Annex I, it shall be a further condition to the obligations of
the Underwriters that (i) such letters shall be accompanied by a written
explanation by the Company as to the significance thereof, unless the
Underwriters deem such explanation unnecessary, and (ii) such changes,
decreases or increases do not, in your sole judgment, make it
impracticable or inadvisable to proceed with the purchase, sale and
delivery of the Shares as contemplated by the Registration Statement, as
amended as of the date of such letter.
g. At the Closing Time, you shall have received from Ernst &
Young LLP a letter, in form and substance satisfactory to you and dated
as of the Closing Time, to the effect that they reaffirm the statements
made in the letter furnished pursuant to subsection (f) above, except
that the specified date referred to shall be a date not more than five
days prior to the Closing Time.
h. At the Closing Time, counsel for the Underwriters shall
have been furnished with all such documents, certificates and opinions as
they may request for the purpose of enabling them to pass upon the
issuance and sale of the Shares as contemplated in this Agreement and the
matters referred to in Section 7(d) and in order to evidence the accuracy
and completeness of any of the representations, warranties or statements
of the Company, the performance of any of the covenants of the Company,
or the fulfillment of any of the conditions herein contained; and all
proceedings taken by the Company at or prior to the Closing Time in
connection with the authorization, issuance and sale of the Shares as
contemplated in this Agreement shall be reasonably satisfactory in form
and substance to you and to counsel for the Underwriters. The Company
will furnish you with such number of conformed copies of such opinions,
certificates, letters and documents as you shall reasonably request.
-28-
<PAGE> 30
i. The NASD, upon review of the terms of the public offering
of the Shares, shall not have objected to such offering, such terms or
the Underwriters' participation in the same.
j. Subsequent to the date hereof, there shall not have
occurred any of the following: (i) there has occurred or accelerated any
outbreak of hostilities or other national or international calamity or
crisis or change in economic or political conditions the effect of which
on the financial markets of the United States is such as to make it, in
your judgment, impracticable to market the Shares or enforce contracts
for the sale of the Shares, or (ii) trading in any securities of the
Company has been suspended by the Commission or by the Nasdaq National
Market, or if trading generally on the New York Stock Exchange or in the
over-the-counter market has been suspended, or limitations on prices for
trading (other than limitations on hours or numbers of days of trading)
have been fixed, or maximum ranges for prices for securities have been
required, by such exchange or the NASD or by order of the Commission or
any other governmental authority, or (iii) there has been any downgrading
in the rating of any of the Company's debt securities or preferred stock
by any "nationally recognized statistical rating organization" (as
defined for purposes of Rule 436(g) under the 1933 Act), or (iv) a
banking moratorium has been declared by federal or New York or Tennessee
authorities, or (v) any federal or state statute, regulation, rule or
order of any court or other governmental authority has been enacted,
published, decreed or otherwise promulgated which in your reasonable
opinion materially adversely affects or will materially adversely affect
the business or operations of the Company, or (vi) any action has been
taken by any federal, state or local government or agency in respect of
its monetary or fiscal affairs which in your reasonable opinion has a
material adverse effect on the securities markets in the United States.
k. All of the Transactions contemplated by the Transition
Agreement shall have occurred as of the Closing Time relating to the Firm
Shares.
If any of the conditions specified in this Section 8 shall not have been
fulfilled when and as required by this Agreement to be fulfilled, this
Agreement may be terminated by you on notice to the Company at any time at or
prior to the Closing Time, and such termination shall be without liability of
any party to any other party, except as provided in Section 7. Notwithstanding
any such termination, the provisions of Section 9 shall remain in effect.
The several obligations of the Underwriters to purchase Option Shares
hereunder are subject to the satisfaction on and as of any Date of Delivery for
Option Shares of the conditions set forth in this Section 8, except that, if
any Date of Delivery for Option Shares is other than the Closing Time, the
certificates, opinions and letters referred to in paragraphs (b), (c) and (d)
shall be revised to reflect the sale of Option Shares.
-29-
<PAGE> 31
Section 9. Indemnification and Contribution.
a. The Sellers will jointly and severally indemnify and hold
harmless the Selling Shareholder and each Underwriter against any losses,
claims, damages or liabilities, joint or several, to which the Selling
Shareholder or any such Underwriter may become subject under the 1933
Act, or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) (i) arise out of or are based upon any
breach of any warranty or covenant of the Sellers herein contained, (ii)
arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in (A) any Preliminary Prospectus,
the Registration Statement, any 462(b) Registration Statement or the
Prospectus, or any amendment or supplement thereto, or (B) any
application or other document, or any amendment or supplement thereto,
executed by the Company or based upon written information furnished by or
on behalf of the Company filed in any jurisdiction in order to qualify
the Shares under the securities or blue sky laws thereof or filed with
the Commission or any securities association or securities exchange (each
an "Application"), or (iii) arise out of or are based upon the omission
or alleged omission to state in any Preliminary Prospectus, the
Registration Statement, any 462(b) Registration Statement, the
Prospectus, or any amendment or supplement thereto, or any Application a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Selling
Shareholder and each Underwriter for any legal or other expenses
reasonably incurred by the Selling Shareholder or any such Underwriter in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Sellers shall not be
liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any
Preliminary Prospectus, the Registration Statement, any 462(b)
Registration Statement or the Prospectus, or any such amendment or
supplement, in reliance upon and in conformity with written information
furnished to the Company by the Selling Shareholder or any Underwriter
expressly for use therein; provided, however, that such indemnity with
respect to any Preliminary Prospectus shall not inure to the benefit of
an Underwriter (or any person controlling an Underwriter) from whom the
person asserting any such loss, claim, damage or liability purchased
shares of the Common Stock if such person did not receive a copy of the
Prospectus (or of the Prospectus, as amended or supplemented) at or prior
to the written confirmation of the sale of such shares to such person
where such delivery is required by the 1933 Act, unless such failure to
deliver was a result of the Company's failure to deliver the Prospectus
in accordance with Section 5(d) of this Agreement, and if the untrue
statement or omission of a material fact contained in such Preliminary
Prospectus was corrected in the Prospectus (or in the Prospectus, as
amended or supplemented). In addition to their other obligations under
this Section 9(a), the Sellers agree that, as an interim measure during
the pendency of any such claim, action, investigation, inquiry or other
proceeding arising out of or based upon any statement or omission, or any
alleged statement or omission, described in this Section 9(a), they will
reimburse the Selling Shareholder and the Underwriters on a monthly basis
for all reasonable legal and other expenses incurred in connection with
investigating or defending any such claim, action, investigation, inquiry
or
-30-
<PAGE> 32
other proceeding, notwithstanding the absence of a judicial determination
as to the propriety and enforceability of the Sellers' obligations to
reimburse either the Selling Shareholder or the Underwriters, or both,
for such expenses and the possibility that such payments might later be
held to have been improper by a court of competent jurisdiction;
provided, however, that the obligation of the Sellers to make any such
reimbursements shall be subject to receipt from the Selling Shareholder
and the Underwriters, as the case may be, of an undertaking to return any
such reimbursements to the extent that it is determined by a court of
competent jurisdiction that such indemnification of either the Selling
Shareholder or the Underwriters, or both, by the Sellers is not
permitted. Any such interim reimbursement payments that are not made to
the Selling Shareholder or any Underwriter within 30 days of receipt of a
request for reimbursement, and all appropriate supporting documentation,
shall bear interest at the prime rate (or reference rate or other
commercial lending rate for borrowers of the highest credit standing)
published from time to time by The Wall Street Journal (the "Prime Rate")
from the date of such request. This indemnity agreement shall be in
addition to any liabilities that the Sellers may otherwise have. The
Sellers will not, without the prior written consent of the Selling
Shareholder and each Underwriter, settle or compromise or consent to the
entry of any judgment in any pending or threatened action or claim or
related cause of action or portion of such cause of action in respect of
which indemnification may be sought hereunder (whether or not the Selling
Shareholder or any Underwriter is a party to such action or claim),
unless such settlement, compromise or consent includes an unconditional
release of the Selling Shareholder and each Underwriter from all
liability arising out of such action or claim (or related cause of action
or portion thereof).
The indemnity agreement in this Section 9(a) shall extend upon
the same terms and conditions to, and shall inure to the benefit of, each
of the officers and directors of the Selling Shareholder and each
Underwriter and each person, if any, who controls the Selling Shareholder
or any Underwriter within the meaning of the 1933 Act to the same extent
such indemnity agreement applies to the Selling Shareholder and the
Underwriters.
b. The Selling Shareholder will indemnify and hold harmless
the Sellers and each Underwriter against any losses, claims, damages or
liabilities, joint or several, to which the Sellers or any Underwriter
may become subject under the 1933 Act, or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
(i) arise out of or are based upon any breach of any warranty or covenant
of the Selling Shareholder herein contained, (ii) arise out of or are
based upon any untrue statement or alleged untrue statement of a material
fact contained in (A) any Preliminary Prospectus, the Registration
Statement, any 462(b) Registration Statement or the Prospectus, or any
amendment or supplement thereto, or (B) any Application, or (iii) arise
out of or are based upon the omission or alleged omission to state in any
Preliminary Prospectus, the Registration Statement, any 462(b)
Registration Statement, the Prospectus, or any amendment or supplement
thereto, or any Application a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will
reimburse the Sellers and each Underwriter for any legal or other
expenses reasonably incurred by either the Sellers or such Underwriter,
or both, in connection
-31-
<PAGE> 33
with investigating or defending any such loss, claim, damage, liability
or action; provided, however, that the Selling Shareholder shall not be
liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any
Preliminary Prospectus, the Registration Statement, any 462(b)
Registration Statement, or the Prospectus, or any such amendment or
supplement, in reliance upon and in conformity with written information
furnished to the Sellers by any Underwriter expressly for use therein;
provided, further, however, that the Selling Shareholder shall be liable
hereunder in any case only to the extent of the total net proceeds from
the offering (before deducting expenses) received by the Selling
Shareholder from the Underwriters for the Firm Selling Shareholder Shares
sold by the Selling Shareholder hereunder, unless any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Registration Statement, any 462(b) Registration Statement or any
amendment or supplement thereto, any Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto or any Application in
reliance upon and in conformity with written information furnished to any
of the Sellers by the Selling Shareholder expressly for use therein, in
which case such limitation of the liability of the Selling Shareholder
shall not apply. In addition to its other obligations under this
Section 9(b), the Selling Shareholder agrees that, as an interim measure
during the pendency of any such claim, action, investigation, inquiry or
other proceeding arising out of or based upon any statement or omission,
or any alleged statement or omission, described in this Section 9(b), the
Selling Shareholder will reimburse the Sellers and the Underwriters on a
monthly basis for all reasonable legal and other expenses incurred in
connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence
of a judicial determination as to the propriety and enforceability of the
Selling Shareholder's obligation to reimburse the Sellers or the
Underwriters for such expenses and the possibility that such payments
might later be held to have been improper by a court of competent
jurisdiction; provided, however, that the obligation of the Selling
Shareholder to make any such reimbursements shall be subject to receipt
from the Sellers and the Underwriters of an undertaking to return any
such reimbursements to the extent that it is determined by a court of
competent jurisdiction that such indemnification of the Sellers and the
Underwriters by the Selling Shareholder is not permitted. Any such
interim reimbursement payments that are not made to the Sellers or an
Underwriter within 30 days of receipt of a request for reimbursement, and
all appropriate supporting documentation, shall bear interest at the
Prime Rate from the date of such request. This indemnity agreement shall
be in addition to any liabilities that such Selling Shareholder may
otherwise have. The Selling Shareholder will not, without the prior
written consent of the Sellers and Morgan Keegan & Company, Inc., as
representative of the Underwriters, settle or compromise or consent to
the entry of any judgment in any pending or threatened action or claim or
related cause of action or portion of such cause of action in respect of
which indemnification may be sought hereunder (whether or not any of the
Sellers or any Underwriter is a party to such action or claim), unless
such settlement, compromise or consent includes an unconditional release
of the Sellers and each Underwriter from all liability arising out of
such action or claim (or related cause of action or portion thereof).
-32-
<PAGE> 34
The indemnity agreement in this Section 9(b) shall extend upon
the same terms and conditions to, and shall inure to the benefit of, each
of the officers and directors of the Sellers and each Underwriter and
each person, if any, who controls the Sellers and any Underwriter within
the meaning of the 1933 Act to the same extent such indemnity agreement
applies to the Sellers and the Underwriters.
c. Each Underwriter, severally but not jointly, will
indemnify and hold harmless the Sellers and the Selling Shareholder
against any losses, claims, damages or liabilities to which the Sellers
or the Selling Shareholder may become subject, under the 1933 Act, or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any breach of
any warranty or covenant by such Underwriter herein contained or any
untrue statement or alleged untrue statement of a material fact contained
in any Preliminary Prospectus, the Registration Statement, any 462(b)
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in any
Preliminary Prospectus, the Registration Statement or the Prospectus or
any such amendment or supplement thereto in reliance upon and in
conformity with written information furnished to the Sellers by such
Underwriter expressly for use therein; and will reimburse the Sellers and
the Selling Shareholder for any legal or other expenses reasonably
incurred by either the Sellers or the Selling Shareholder, or both, in
connection with investigating or defending any such loss, claim, damage,
liability or action. In addition to its other obligations under this
Section 9(c), the Underwriters agree that, as an interim measure during
the pendency of any such claim, action, investigation, inquiry or other
proceeding arising out of or based upon any statement or omission, or any
alleged statement or omission, described in this Section 9(c), they will
reimburse the Sellers or the Selling Shareholder, or both, on a monthly
basis for all reasonable legal and other expenses incurred in connection
with investigating or defending any such claim, action, investigation,
inquiry or other proceeding, notwithstanding the absence of a judicial
determination as to the propriety and enforceability of their obligation
to reimburse either the Sellers or the Selling Shareholder, or both, for
such expenses and the possibility that such payments might later be held
to have been improper by a court of competent jurisdiction. Any such
interim reimbursement payments that are not made to the Sellers or the
Selling Shareholder within 30 days of receipt of a request for
reimbursement, and all appropriate documentation, shall bear interest at
the Prime Rate from the date of such request. This indemnity agreement
shall be in addition to any liabilities that the Underwriters may
otherwise have. No Underwriter will, without the prior written consent of
the Sellers and the Selling Shareholder, settle or compromise or consent
to the entry of judgment in any pending or threatened action or claim or
related cause of action or portion of such cause of action in respect of
which indemnification may be sought hereunder (whether or not the Sellers
or the Selling Shareholder is a party to such action or claim), unless
such settlement, compromise
-33-
<PAGE> 35
or consent includes an unconditional release of the Sellers and the
Selling Shareholder from all liability arising out of such action or
claim (or related cause of action or portion thereof).
The indemnity agreement in this Section 9(c) shall extend upon
the same terms and conditions to, and shall inure to the benefit of, each
of the officers and directors of the Sellers and the Selling Shareholder
and each person, if any, who controls the Sellers and the Selling
Shareholder within the meaning of the 1933 Act to the same extent such
indemnity agreement applies to the Sellers and the Selling Shareholder.
d. Promptly after receipt by an indemnified party under
subsection (a), (b) or (c) above of notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is to
be made against the indemnifying party under such subsection, notify the
indemnifying party in writing of the commencement thereof; no
indemnification provided for in subsection (a), (b) or (c) shall be
available to any party who shall fail to give notice as provided in this
subsection (d) if the party to whom notice was not given was unaware of
the proceeding to which such notice would have related and was prejudiced
by the failure to give such notice, but the omission so to notify the
indemnifying party will not relieve the indemnifying party from any
liability that it may have to any indemnified party otherwise than under
Section 8. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with
any other indemnifying party similarly notified, to assume the defense
thereof with counsel satisfactory to such indemnified party (who shall
not, except with the consent of the indemnified party (which consent
shall not be unreasonably withheld), be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the indemnifying
party shall not be liable to such indemnified party under such subsection
for any legal or other expenses subsequently incurred by such indemnified
party in connection with the defense thereof other than reasonable costs
of investigation, except that if the indemnified party has been advised
by counsel in writing that there are one or more defenses available to
the indemnified party which are different from or additional to those
available to the indemnifying party, then the indemnified party shall
have the right to employ separate counsel and in that event the
reasonable fees and expenses of such separate counsel for the indemnified
party shall be paid by the indemnifying party; provided, however, that if
the indemnifying party is the Company or the Selling Shareholder, then
the Company or the Selling Shareholder shall only be obligated to pay the
reasonable fees and expenses of a single law firm (and any reasonably
necessary local counsel) employed by all of the indemnified parties. The
indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment.
-34-
<PAGE> 36
e. It is agreed that any controversy arising out of the
operation of the interim reimbursement arrangements set forth in Section
9(a), (b) and (c) hereof, including the amounts of any requested
reimbursement payments, the method of determining such amounts and the
basis on which such amounts shall be apportioned among the indemnifying
parties, shall be settled by arbitration conducted pursuant to the Code
of Arbitration Procedure of the National Association of Securities
Dealers, Inc. Any such arbitration must be commenced by service of a
written demand for arbitration or a written notice of intention to
arbitrate, therein electing the arbitration tribunal. In the event the
party demanding arbitration does not make such designation of an
arbitration tribunal in such demand or notice, then the party responding
to said demand or notice is authorized to do so. Any such arbitration
will be limited to the operation of the interim reimbursement provisions
contained in Sections 9(a), (b) and (c) hereof and will not resolve the
ultimate propriety or enforceability of the obligation to indemnify for
expenses that is created by the provisions of Sections 9(a), (b) and (c).
f. In order to provide for just and equitable contribution in
circumstances under which the indemnity provided for in this Section 9 is
for any reason judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to
appeal or the denial of the right of appeal) to be unenforceable by the
indemnified parties although applicable in accordance with its terms, the
Sellers, the Selling Shareholder, and the Underwriters shall contribute
to the aggregate losses, liabilities, claims, damages and expenses of the
nature contemplated by such indemnity incurred by the Sellers, the
Selling Shareholder, and one or more of the Underwriters, as incurred, in
such proportions that (a) the Underwriters are responsible pro rata for
that portion represented by the percentage that the underwriting discount
appearing on the cover page of the Prospectus bears to the aggregate
public offering price (before deducting expenses) relating to all of the
Firm Shares appearing thereon, (b) the Sellers are responsible for that
portion represented by the percentage that the proceeds received by the
Sellers from the sale of the Firm Company Shares appearing on the cover
page of the Prospectus bears to the aggregate public offering price
(before deducting expenses) relating to all of the Firm Shares appearing
thereon and (c) the Selling Shareholder is responsible for that portion
represented by the percentage that the proceeds received by the Selling
Shareholder from the sale of the Firm Selling Shareholder Shares
appearing on the cover page of the Prospectus bears to the aggregate
public offering price (before deducting expenses) relating to all of the
Firm Shares appearing thereon, provided, however, that no person guilty
of fraudulent misrepresentations (within the meaning of Section 11(f) of
the 1933 Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation; provided, further, that
if the allocation provided above is not permitted by applicable law, the
Sellers, the Selling Shareholder and the Underwriters shall contribute to
the aggregate losses in such proportion as is appropriate to reflect not
only the relative benefits referred to above but also the relative fault
of the Sellers, the Selling Shareholder and the Underwriters in
connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. Relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of
a material fact or the omission to state a material fact
-35-
<PAGE> 37
relates to information supplied by the Sellers, the Selling Shareholder
or the Underwriters and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or
omission. The Sellers, the Selling Shareholder and the Underwriters
agree that it would not be just and equitable if contributions pursuant
to this Section 9(f) were determined by pro rata allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable
considerations referred to above in this Section 9(f). The amount paid
or payable by a party as a result of the losses, claims, damages or
liabilities referred to above shall be deemed to include any legal or
other fees or expenses reasonably incurred by such party in connection
with investigating or defending such action or claim. Notwithstanding
the provisions of this Section 9(f), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at
which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission. The
obligations of the Sellers and the Selling Shareholder in this Section
9(f) to contribute are several, in proportion to the amount of the net
offering proceeds received by each, and not joint. The Underwriters'
obligations in this Section 9(f) to contribute are several in proportion
to their respective underwriting obligations and not joint. For purposes
of this Section 9(f), each person, if any, who controls an Underwriter
within the meaning of Section 15 of the 1933 Act shall have the same
rights to contribution as such Underwriter, and each officer and director
of the Selling Shareholder and the Sellers, each officer of the Company
who signed the Registration Statement, and each person, if any, who
controls the Company, the Sellers or the Selling Shareholder, within the
meaning of Section 15 of the 1933 Act shall have the same rights to
contribution as the Company, the Sellers or the Selling Shareholder.
Section 10. Representations, Warranties and Agreements to Survive
Delivery. The representations, warranties, indemnities, agreements and other
statements of the Company, the Sellers and the Selling Shareholder, or their
respective officers set forth in or made pursuant to this Agreement will remain
operative and in full force and effect regardless of any investigation made by
or on behalf of the Sellers, the Selling Shareholder, or any Underwriter or
controlling person, and with respect to an Underwriter or the Sellers and the
Selling Shareholder, will survive delivery of and payment for the Shares or
termination of this Agreement.
Section 11. Effective Date of Agreement and Termination.
a. This Agreement shall become effective immediately as to
Sections 7 and 9 and, as to all other provisions, (i) if at the time of
execution of this Agreement the Registration Statement has not become
effective, at 10:00 a.m. New York, New York time, on the first full
business day following the effectiveness of the Registration Statement,
or (ii) if at the time of execution of this Agreement the Registration
Statement has been declared effective, at 10:00 a.m. New York, New York
time on the first full business day following the date of execution of
this Agreement; but this Agreement shall nevertheless become effective at
such earlier time
-36-
<PAGE> 38
after the Registration Statement becomes effective as you may determine
on and by notice to the Company or by release of any of the Shares for
sale to the public. For the purposes of this Section 11, the Shares
shall be deemed to have been so released upon the release of publication
of any newspaper advertisement relating to the Shares or upon the release
by you of telegrams (i) advising the Underwriters that the Shares are
released for public offering, or (ii) offering the Shares for sale to
securities dealers, whichever may occur first. By giving notice before
the time this Agreement becomes effective, you, as representative of the
several Underwriters, or the Company, may prevent this Agreement from
becoming effective, without liability of any party to any other party,
except that the Company shall remain obligated to pay costs and expenses
to the extent provided in Section 7 hereof.
b. You may terminate this Agreement, by notice to the
Company, at any time at or prior to the Closing Time (i) in accordance
with the penultimate paragraph of Section 8 of this Agreement, or (ii) if
there has been since the respective dates as of which information is
given in the Registration Statement, any material adverse change, or any
development involving a prospective material adverse change, in or
affecting the business, prospects, management, properties, assets,
results of operations or condition (financial or otherwise) of the
Company, whether or not arising in the ordinary course of business, or
(iii) if there has occurred or accelerated any outbreak of hostilities or
other national or international calamity or crisis or change in economic
or political conditions the effect of which on the financial markets of
the United States is such as to make it, in your judgment, impracticable
to market the Shares or enforce contracts for the sale of the Shares, or
(iv) if trading in any securities of the Company has been suspended by
the Commission or by the Nasdaq National Market or if trading generally
on the New York Stock Exchange or in the over-the-counter market has been
suspended, or limitations on prices for trading (other than limitations
on hours or numbers of days of trading) have been fixed, or maximum
ranges for prices for securities have been required, by such exchange or
the NASD or by order of the Commission or any other governmental
authority, or (v) if there has been any downgrading in the rating of any
of the Company's debt securities or preferred stock by any "nationally
recognized statistical rating organization" (as defined for purposes of
Rule 436(g) of the 1933 Act Regulations), or (vi) if a banking moratorium
has been declared by federal or New York or Tennessee authorities, or
(vii) any federal or state statute, regulation, rule or order of any
court or other governmental authority has been enacted, published,
decreed or otherwise promulgated which in your reasonable opinion
materially adversely affects or will materially adversely affect the
business or operations of the Company, or (viii) any action has been
taken by any federal, state or local government or agency in respect of
its monetary or fiscal affairs which in your reasonable opinion has a
material adverse effect on the securities markets in the United States.
c. If this Agreement is terminated pursuant to this Section
11, such termination shall be without liability of any party to any other
party, except to the extent provided in Section 7. Notwithstanding any
such termination, the provisions of Section 9 shall remain in effect.
-37-
<PAGE> 39
Section 12. Default by One or More of the Underwriters. If one or
more of the Underwriters shall fail at the Closing Time to purchase the Shares
that it or they are obligated to purchase pursuant to this Agreement (the
"Defaulted Securities"), you shall have the right, within 36 hours thereafter,
to make arrangements for one or more of the non- defaulting Underwriters, or
any other underwriters, to purchase all, but not less than all, of the
Defaulted Securities in such amounts as may be agreed upon and upon the terms
set forth in this Agreement; if, however, you have not completed such
arrangements within such 36-hour period, then:
a. If the aggregate number of Firm Shares which are Defaulted
Securities does not exceed 10% of the aggregate number of Firm Shares to
be purchased pursuant to this Agreement, the non-defaulting Underwriters
shall be obligated to purchase the full amount thereof in the proportions
that their respective underwriting obligation proportions bear to the
underwriting obligations of all non-defaulting Underwriters; and
b. If the aggregate number of Firm Shares which are Defaulted
Securities exceeds 10% of the aggregate number of Firm Shares to be
purchased pursuant to this Agreement, this Agreement shall terminate
without liability on the part of any non-defaulting Underwriter.
No action taken pursuant to this Section 12 shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default that does not result in a termination of
this Agreement, either you or the Company shall have the right to postpone the
Closing Time for a period not exceeding seven days in order to effect any
required changes in the Registration Statement or Prospectus or in any other
documents or arrangements, and the Company agrees promptly to file any
amendments to the Registration Statement or supplements to the Prospectus that
may thereby be made necessary. As used in this Agreement, the term
"Underwriter" includes any person substituted for an Underwriter under this
Section 12.
Section 13. Default by the Company. If the Company or the Selling
Shareholder shall fail at the Closing Time to sell and deliver the aggregate
number of Firm Shares that it is obligated to sell, then this Agreement shall
terminate without any liability on the part of any non-defaulting party, except
to the extent provided in Section 7 and except that the provisions of Section 9
shall remain in effect.
No action taken pursuant to this Section shall relieve the Company or the
Selling Shareholder from liability, if any, in respect to such default.
Section 14. Notices. All notices and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given if
delivered, mailed or transmitted by any standard form of telecommunication.
Notices to the Underwriters shall be directed c/o Morgan Keegan & Company,
Inc., 50 Front Street, Memphis, Tennessee 38103, Attention: Mike Harris (with
-38-
<PAGE> 40
a copy sent in the same manner to Andrews & Kurth L.L.P., 4200 Texas Commerce
Tower, 600 Travis, Suite 4200, Houston, Texas 77002, Attention: Thomas P.
Mason); and notices to the Company and the Selling Shareholder shall be
directed to them at, respectively, Jones, Walker, Waechter, Poitevent, Carrere
& Denegre, L.L.P., 201 St. Charles Avenue, New Orleans, Louisiana 70170,
Attention: Carl C. Hanemann and McDermott Incorporated, 1450 Poydras Street,
New Orleans, Louisiana 70160, attn: Jack M. Arnold (with a copy sent in the
same manner to Andrews & Kurth L.L.P., 4200 Texas Commerce Tower, 600 Travis,
Suite 4200, Houston, Texas 77002 Attention: Thomas P. Mason).
Section 15. Parties. This Agreement is made solely for the benefit of
and is binding upon the Underwriters, the Company and the Selling Shareholder,
to the extent provided in Section 9, any person controlling the Company or the
Selling Shareholder, or any of the Underwriters, the officers and directors of
the Company and the Selling Shareholder, and their respective executors,
administrators, successors and assigns and subject to the provisions of Section
9, no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include any purchaser,
as such purchaser, from any of the several Underwriters of the Shares.
All of the obligations of the Underwriters hereunder are several and not
joint.
Section 16. Governing Law and Time. This Agreement shall be governed
by the laws of the State of Tennessee. Specified time of the day refers to
United States Eastern Time. Time shall be of the essence of this Agreement.
Section 17. Counterparts. This Agreement may be executed in one or
more counterparts and when a counterpart has been executed by each party, all
such counterparts taken together shall constitute one and the same agreement.
-39-
<PAGE> 41
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, and upon the
acceptance hereof by Morgan Keegan & Company, Inc., on behalf of each of the
Underwriters, this instrument will become a binding agreement among the
Company, the Selling Shareholder, and the several Underwriters in accordance
with its terms. It is understood that your acceptance of this letter on behalf
of each of the Underwriters is pursuant to the authority set forth in the
Master Agreement among Underwriters, a copy of which shall be submitted to the
Company or the Selling Shareholder for examination, upon request, but without
warranty on your part as to the authority of the signers thereof.
Very truly yours,
UNIFAB INTERNATIONAL, INC.
By:
-------------------------------------
Name:
Title:
MCDERMOTT INCORPORATED
By:
-------------------------------------
Name:
Title:
UNIVERSAL FABRICATORS
INCORPORATED
By:
-------------------------------------
Name:
Title:
UNIVERSAL PARTNERS, INC.
By:
-------------------------------------
Name:
Title:
-40-
<PAGE> 42
The foregoing Agreement is hereby
confirmed and accepted as of the
date first written above:
MORGAN KEEGAN & COMPANY, INC.
STEPHENS INC.
By: Morgan Keegan & Company, Inc.
By:
-----------------------------------
(Authorized Representative)
On behalf of each of the Underwriters
-41-
<PAGE> 43
SCHEDULE A
Number of
Firm Shares
Underwriter to be Purchased
- ----------- ---------------
Morgan Keegan & Company, Inc.
Stephens Inc.
-----------
TOTAL 2,815,000
===========
<PAGE> 44
SCHEDULE B
SELLING SHAREHOLDER
<TABLE>
Number of
Firm Selling
Name Shareholder Shares
- ---- ------------------
<S> <C>
McDermott Incorporated 1,715,000
-----------------
TOTAL 1,715,000
=================
</TABLE>
<PAGE> 45
ANNEX I
Pursuant to Section 7(f) of the Underwriting Agreement, Ernst & Young
LLP shall furnish letters to the Underwriters to the effect that:
(i) they are independent public accountants with respect
to the Company and its consolidated subsidiaries within the meaning
the 1933 Act and the applicable published rules and regulations
thereunder;
(ii) in their opinion, the consolidated financial
statements and schedules audited by them and included in the
Prospectus, the Registration Statement and any 462(b) Registration
Statement comply as to form in all material respects with the
applicable accounting requirements of the 1933 Act and the related
published rules and regulations thereunder;
(iii) On the basis of limited procedures, not constituting
an audit in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and
other information referred to below, a reading of the latest available
interim financial statements of the Company and its subsidiaries,
inspection of the minute books of the Company and its subsidiaries
since the date of the latest audited financial statements included in
the Prospectus, inquiries of officials of the Company and its
subsidiaries responsible for financial accounting matters and such
other inquiries and procedures as may be specified in such letter,
nothing came to their attention that caused them to believe that:
(A) as of a specified date not more than 5 days
prior to the date of such letter, there were any changes in
the capital stock (other than the issuance of capital stock
upon exercise of options which were outstanding on the date of
the latest balance sheet included in the Prospectus) or any
increase in inventories or the long-term debt or short-term
debt of the Company and its Subsidiaries, or any decreases in
net current assets or net assets or other items specified by
the Underwriters, or any increases in any items specified by
the Underwriters, in each case as compared with amounts shown
in the latest balance sheet included in the Prospectus, except
in each case for changes, increases or decreases which the
Prospectus discloses have occurred or may occur or which are
described in such letter; and
(B) for the period from the date of the latest
financial statements included in the Prospectus to the
specified date referred to in Clause (C) there were any
decreases in net sales or operating income or the total or per
share amounts of net income or other items specified by the
Underwriters, or any increases in any items specified by the
Underwriters, in each case as compared with the comparable
period of the preceding year and with any other period of
corresponding length specified by the Underwriters, except in
each case for increases or decreases which the Prospectus
discloses have occurred or may occur which are described in
such letter; and
<PAGE> 46
(iv) In addition to the audit referred to in their
report(s) included in the Prospectus and the limited procedures,
inspection of minute books, inquiries and other procedures referred to
in paragraph (iii) above, they have carried out certain specified
procedures, not constituting an audit in accordance with generally
accepted auditing standards, with respect to certain amounts,
percentages and financial information specified by the Underwriters
which are derived from the general accounting records of the Company
and its subsidiaries, included in the Registration Statement and the
Prospectus, or which appear in Part II of, or in exhibits and
schedules to, the Registration Statement specified by the
Underwriters, and have compared certain of such amounts, percentages
and financial information with the accounting records of the Company
and its subsidiaries and have found them to be in agreement; and
(v) On the basis of a reading of the unaudited pro forma
consolidated condensed financial statements included in the
Registration Statement and the Prospectus, carrying out certain
specified procedures that would not necessarily reveal matters of
significance with respect to the comments set forth in this paragraph
(v), inquiries of certain officials of the Company and its
consolidated Subsidiaries who have responsibility for financial and
accounting matters and proving the arithmetic accuracy of the
application of the pro forma adjustments to the historical amounts in
the unaudited pro forma consolidated condensed financial statements,
nothing came to their attention that caused them to believe that the
unaudited pro forma consolidated condensed financial statements do not
comply as to form in all material respects with the applicable
accounting requirements of Rule 11-02 of Regulation S-X or that the
pro forma adjustments have not been properly applied to the historical
amounts in the compilation of such statements.
References to the Registration Statement and the Prospectus in
this Annex I shall include any amendment or supplement thereto at the
date of such letter.
-2-
<PAGE> 1
EXHIBIT 2.1
================================================================================
TRANSITION AGREEMENT
BY AND AMONG
UNIFAB INTERNATIONAL, INC.
UNIVERSAL PARTNERS, INC.
UNIVERSAL FABRICATORS INCORPORATED
MCDERMOTT INCORPORATED
AND
DAILEY J. BERARD
Dated as of August 28, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1 TERMINATION OF AGREEMENTS . . . . . . . . . . . . . . . . . . 2
1.01 Shareholders' and Put/Call Agreements . . . . . . . . . . . . 2
1.02 Termination Payment . . . . . . . . . . . . . . . . . . . . . 2
1.03 Borrowed Servants' Agreement . . . . . . . . . . . . . . . . . 2
1.04 Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.05 Employment Agreement . . . . . . . . . . . . . . . . . . . . . 2
1.06 Release and Waiver . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2 OTHER SIMULTANEOUS TRANSACTIONS . . . . . . . . . . . . . . . 3
2.01 Partners/International Share Exchange . . . . . . . . . . . . 3
2.02 Purchase of Real Estate from Partners . . . . . . . . . . . . 3
2.03 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.04 Share Exchange Agreement . . . . . . . . . . . . . . . . . . . 4
2.05 Purchase of Real Estate from McDermott . . . . . . . . . . . . 4
2.06 Amendment to Certificate of Incorporation of Fabricators . . . 4
SECTION 3 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . 5
3.01 Representations and Warranties of Each Party . . . . . . . . . 5
3.02 Representations and Warranties of Partners and McDermott . . . 6
3.03 No Other Representations or Warranties . . . . . . . . . . . . 7
SECTION 4 OFFERING PROCESS . . . . . . . . . . . . . . . . . . . . . . . 7
4.01 The Offering . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.02 Actions of International . . . . . . . . . . . . . . . . . . . 7
4.03 Simultaneous Closing; Order of Closing . . . . . . . . . . . . 8
SECTION 5 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.01 Termination . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.02 Effect of Termination . . . . . . . . . . . . . . . . . . . . 8
SECTION 6 GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . 8
6.01 Survival of Representations, Warranties and Agreements . . . . 8
6.02 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.03 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . 9
6.04 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.05 Entire Agreement; No Third Party Beneficiaries . . . . . . . . 9
6.06 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 9
6.07 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.08 Specific Performance . . . . . . . . . . . . . . . . . . . . . 10
6.09 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 10
6.10 Limitation of Liability . . . . . . . . . . . . . . . . . . . 10
</TABLE>
- i -
<PAGE> 3
LIST OF EXHIBITS
----------------
EXHIBIT A - Form of Plan and Agreement of Share Exchange
EXHIBIT B - Form of Act of Sale of Partners Real Estate
EXHIBIT C - Form of Share Exchange Agreement
EXHIBIT D - Form of Act of Sale of McDermott Real Estate
- ii -
<PAGE> 4
TRANSITION AGREEMENT
This TRANSITION AGREEMENT (this "Agreement"), dated as of August 28,
1997, is by and among UNIFAB International, Inc., a Louisiana corporation
("International"), Universal Partners, Inc., a Louisiana corporation
("Partners"), Universal Fabricators Incorporated, a Delaware close corporation
("Fabricators"), McDermott Incorporated, a Delaware corporation ("McDermott"),
and Dailey J. Berard ("Berard").
WITNESSETH:
WHEREAS, pursuant to that certain Contribution Agreement dated November
30, 1992, by and among Partners, Fabricators and McDermott (the "Contribution
Agreement"), each of Partners and McDermott contributed certain assets to
Fabricators, a then newly formed close corporation, in exchange for 51% and
49%, respectively, of the outstanding common stock of Fabricators (the
"Expansion Transaction");
WHEREAS, Partners currently owns 510 shares of Class A common stock,
$1.00 par value per share, of Fabricators, and McDermott currently owns 490
shares of Class B common stock, $1.00 par value per share, of Fabricators,
which collectively represent all of the authorized, issued and outstanding
capital stock of Fabricators;
WHEREAS, in connection with the Expansion Transaction, McDermott and
Partners entered into several written agreements (collectively, the "1992
Agreements") governing their rights with respect to the common stock of
Fabricators, including the Contribution Agreement, a Shareholders' Agreement
dated November 30, 1992 (the "Shareholders' Agreement") and a Put/Call
Agreement dated November 30, 1992 (the "Put/Call Agreement"); McDermott and
Fabricators entered into a Lease dated November 30, 1992 with respect to
certain immovable property (including the building and improvements located
thereon) owned by McDermott in Iberia Parish, Louisiana (the "Lease"); and
Berard entered into an employment agreement with Fabricators dated November 30,
1992 (the "Employment Agreement");
WHEREAS, Fabricators has engaged the investment banking firms of Morgan
Keegan & Company, Inc. ("Morgan Keegan") and Stephens Inc. ("Stephens") to
advise Fabricators, Partners and McDermott with respect to an initial public
offering of the common stock of Fabricators and to participate in such offering
as underwriters;
WHEREAS, in order to effect such an offering, Partners, Fabricators and
McDermott have agreed to the incorporation of International as a new
corporation under the laws of Louisiana, shares of which will be offered to the
public pursuant to an underwriting agreement to be entered into by and among
International, Fabricators, Partners, McDermott, Morgan Keegan and Stephens
(the "Underwriting Agreement");
WHEREAS, in order to facilitate the public offering of shares of common
stock, $0.01 par value per share ("International Common Stock"), of
International (the "Offering), Partners desires, subject to the terms of this
Agreement, to exchange its common stock of Fabricators for shares of
<PAGE> 5
International Common Stock, and McDermott desires, subject to the terms of this
Agreement, to exchange its shares of common stock of Fabricators for shares of
International Common Stock; and
WHEREAS, McDermott and Partners desire, subject to the terms and
conditions set forth herein, to terminate the 1992 Agreements simultaneously
with the Closing Time (as defined herein);
NOW, THEREFORE, in consideration of the mutual provisions, covenants and
agreements set forth herein and in reliance upon the undertakings,
representations and warranties contained herein, the parties hereto agree as
follows:
SECTION 1
TERMINATION OF AGREEMENTS
1.01 Shareholders' and Put/Call Agreements. At the Closing Time,
Partners and McDermott will terminate and release each other from the other's
obligations under the Shareholders' Agreement and the Put/Call Agreement. For
purposes of this Agreement, the term "Closing Time" means the time of the sale
by International of 1,100,000 shares of International Common Stock (plus up to
422,250 additional shares to be sold if the over-allotment option to be granted
pursuant to the Underwriting Agreement is exercised at such time) and by
McDermott of 1,715,000 shares of such stock and the receipt of cash funds in
exchange for such shares in accordance with the Underwriting Agreement and will
occur simultaneously with the Closing Time as defined in the Underwriting
Agreement.
1.02 Termination Payment. At the Closing Time and in exchange for the
surrender of its rights under the Shareholders' Agreement and the Put/Call
Agreement, International will pay, or cause to be paid, by wire transfer, $6.3
million in cash to McDermott c/o CitiBank, N.A., 399 Park Avenue, New York, New
York, 10043 for deposit in Account No. 39000067.
1.03 Borrowed Servants' Agreement. At the Closing Time, McDermott and
Fabricators will terminate and release each other from the other's obligations
under that certain Borrowed Servants' Agreement dated November 30, 1992, by and
between McDermott and Fabricators.
1.04 Lease. At the Closing Time McDermott and Fabricators will
terminate and release each other from the other's obligations under the Lease.
1.05 Employment Agreement. At the Closing Time, Berard and
Fabricators will terminate and release each other from the other's obligations
under the Employment Agreement.
1.06 Release and Waiver. Partners, Berard, Fabricators and McDermott
do hereby waive and release each other from any claim that any action taken by
any of them pursuant to and in accordance with this Agreement constitutes a
breach of any provision of any of the 1992 Agreements or the Certificate of
Incorporation of Fabricators or the Delaware General Corporation Law including,
without limitation, any claim with respect to the application of the
restrictions on transfer of shares of common stock of Fabricators set forth in
the Certificate of Incorporation of Fabricators and in the
2
<PAGE> 6
Shareholders' Agreement to the McDermott Share Exchange and the Partners Share
Exchange referred to in Section 2 hereof and any claim by Berard or Fabricators
that any such action constitutes a breach of the Employment Agreement.
SECTION 2
OTHER SIMULTANEOUS TRANSACTIONS
2.01 Partners/International Share Exchange. Subject to the terms of
this Agreement, International and Partners will enter into an Agreement and
Plan of Share Exchange, substantially in the form attached hereto as Exhibit A
(the "Agreement and Plan of Share Exchange"), pursuant to which Partners will
at the Closing Time exchange all of its 510 shares of Class A common stock of
Fabricators for 1,785,000 shares of International Common Stock (the "Partners
Share Exchange"). The obligation of each of Partners and International to
enter into the Agreement and Plan of Share Exchange is conditioned upon receipt
by Partners and International of an opinion of Jones, Walker, Waechter,
Poitevent, Carrere & Denegre, L.L.P. to the effect that the Partners Share
Exchange qualifies as a tax-free reorganization under Section 368 of the
Internal Revenue Code of 1986, as amended.
2.02 Purchase of Real Estate from Partners. Subject to the terms of
this Agreement and at the Closing Time, Fabricators shall purchase from
Partners, for $100,500 in cash (the "Partners Purchase Price"), that certain
tract of land more particularly described on Exhibit B hereto, together with
all improvements situated thereon and all rights of Partners pertaining to such
land and improvements, including any right, title and interest of Partners in
and to adjacent streets, alleys or rights-of-way, easements and servitudes
pertaining thereto (collectively, the "Partners Property"). Following
execution of this Agreement and at its cost, Fabricators may order a survey of
and title commitment for the Partners Property and may conduct such inspections
and investigations of the Partners Property as Fabricators desires; provided,
however, that Partners shall have the right to observe any such inspections and
investigations, take split samples for independent analysis, if deemed
necessary, and receive copies of any reports to Fabricators. The survey, the
title commitment, and the results of the inspection and investigations, if any,
must be satisfactory to Fabricators. At the closing of Fabricators' purchase
of the Partners Property: (a) Partners shall deliver to Fabricators a duly
executed and acknowledged act of cash sale in the form attached hereto as
Exhibit B, (b) Fabricators shall pay to Partners the Partners Purchase Price in
cash by wire transfer or bank cashier's or certified check, (c) general real
estate taxes for the then current year relating to the Partners Property shall
be prorated as of the Closing Time based on the Partners Property's 1996 tax
assessment, (d) any insurance coverage maintained by Partners on the Partners
Property shall be terminated as of the Closing Time (and there shall be no
proration of insurance premiums), (e) possession of the Partners Property shall
be given to Fabricators, subject to no tenants or parties in possession other
than Fabricators, (f) in such act of cash sale Partners will make no
representations or warranties with respect to the condition of the Partners
Property and each of Partners and Fabricators, effective at the Closing Time,
do hereby waive and release any and all rights to bring any claim that it may
have against the other under any federal, state or local environmental laws and
regulations with respect to the environmental condition of the Partners
Property, (g) Partners shall deliver to Fabricators a "non-foreign affidavit"
in the customary form attesting that Partners is not
3
<PAGE> 7
a "foreign person" within the meaning of Section 1445 of the Internal Revenue
Code, and (h) Partners shall deliver a seller's affidavit to Fabricators's
title insurer in a form satisfactory to such title insurer.
2.03 There is no Section 2.03.
2.04 Share Exchange Agreement. Subject to the terms of this Agreement
and at the Closing Time, McDermott and International will enter into a Share
Exchange Agreement, substantially in the form attached hereto as Exhibit C (the
"Share Exchange Agreement"), pursuant to which McDermott will at the Closing
Time exchange all of its 490 shares of Class B common stock of Fabricators for
1,715,000 shares of International Common Stock (the "McDermott Share
Exchange").
2.05 Purchase of Real Estate from McDermott. Subject to the terms of
this Agreement and at the Closing Time, Fabricators shall purchase from
McDermott, for $700,000 in cash (the "McDermott Purchase Price"), that certain
tract of land more particularly described on Exhibit D attached hereto,
together with all improvements situated thereon and all rights of McDermott
pertaining to such land and improvements, including any right, title and
interest of McDermott in and to adjacent streets, alleys or rights-of-way,
easements and servitudes pertaining thereto (collectively, the "McDermott
Property"). Following execution of this Agreement and at its cost, Fabricators
may order a survey of and title commitment for the McDermott Property and may
conduct such inspections and investigations of the McDermott Property as
Fabricators desires with notice to McDermott; provided, however, that McDermott
shall have the right to observe any such inspections and investigations, take
split samples, for independent analysis, if deemed necessary, and receive
copies of any reports to Fabricators. The survey, the title commitment, and
the results of the inspection and investigations, if any, must be satisfactory
to Fabricators. At the closing of Fabricators' purchase of the McDermott
Property: (a) McDermott shall deliver to Fabricators a duly executed and
acknowledged act of cash sale in the form attached hereto as Exhibit D, (b)
Fabricators shall pay to McDermott the McDermott Purchase Price in cash by wire
transfer to the bank and bank account provided for under Section 1.02 above,
(c) general real estate taxes for the then current year relating to the
McDermott Property (excluding the portion currently leased by Fabricators from
McDermott) shall be prorated as of such time based on the McDermott Property's
1996 tax assessment, (d) any insurance coverage maintained by McDermott on the
McDermott Property shall be terminated as of the Closing Time (and there shall
be no proration of insurance premiums), (e) possession of the McDermott
Property shall be given to Fabricators, subject to no tenants or parties in
possession other than Fabricators, (f) in such act of cash sale McDermott will
make no representations or warranties with respect to the condition of the
McDermott Property and each of McDermott and Fabricators, effective at the
Closing Time, do hereby waive and release any and all rights to bring any claim
that it may have against the other under any federal, state or local
environmental laws and regulations with respect to the environmental condition
of the McDermott Property, (g) McDermott shall deliver to Fabricators a
"non-foreign affidavit" in the customary form attesting that McDermott is not a
"foreign person" within the meaning of Section 1445 of the Internal Revenue
Code, and (h) McDermott shall deliver a seller's affidavit to Fabricators's
title insurer in a form satisfactory to such title insurer.
2.06 Amendment to Certificate of Incorporation of Fabricators.
Subject to the terms of this Agreement and at the Closing Time, the Certificate
of Incorporation of Fabricators will be amended
4
<PAGE> 8
to delete therefrom provisions relating to Fabricators' status as a close
corporation and to include such provisions as may be determined by
International (the "Fabricators Amendment"). Partners and McDermott hereby
acknowledge and agree that no "public offering" has been made within the
meaning of Section 342(3) of the Delaware General Corporation Law, Article
Eleventh of Fabricators' Certificate of Incorporation or Section 7.06 of the
Shareholders' Agreement and that no other actions taken by them or on behalf of
them prior hereto or to be taken in connection with the Offering and the other
transactions contemplated by this Agreement have disqualified or will prior to
the Closing Time disqualify Fabricators as a close corporation within the
meaning of Section 342 of the Delaware General Corporation Law, Article
Eleventh of Fabricators' Certificate of Incorporation or Section 7.06 of the
Shareholders' Agreement.
SECTION 3
REPRESENTATIONS AND WARRANTIES
3.01 Representations and Warranties of Each Party. Each party to this
Agreement, as to itself, hereby represents and warrants to each other party
hereto that as of the date hereof and as of the Closing Time:
(a) Existence and Power. Such party, if not a natural person,
is duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization, has all powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted, except as otherwise to be disclosed in the final
Prospectus to be used in connection with the Offering, and is duly qualified to
do business as a foreign corporation and is in good standing in each
jurisdiction where the character of the property owned or leased by it or the
nature of its activities make such qualification necessary, except for those
jurisdictions where failure to be so qualified would not, individually or in
the aggregate, result in a material adverse effect on the operations or
financial condition of such party, and such party, if a natural person, has
legal capacity to enter into and perform this Agreement and the other
agreements called for by this Agreement to which he is a party.
(b) Authorization. The execution, delivery and performance by
such party of this Agreement, the other agreements called for by this Agreement
(collectively, the "Transaction Agreements") to which it or he is a party and
all other documents, instruments and certificates executed and delivered by
such party in connection herewith or therewith, and the consummation by such
party of the transactions contemplated hereby and thereby, are within such
party's powers and have been or, prior to the Closing Time, will be duly
authorized by all necessary action on the part of such party. This Agreement
and each such Transaction Agreement have been, or when executed and delivered
in accordance with the terms hereof and their respective terms will be, duly
and validly executed and delivered by such party and each constitutes, or when
executed and delivered will constitute, a valid and binding agreement of such
party, enforceable in accordance with its terms, except as (a) enforceability
may be limited by applicable bankruptcy, insolvency, fraudulent transfer,
moratorium or similar laws from time to time in effect affecting creditors'
rights generally and (b) the availability of equitable remedies may be limited
by equitable principles of general applicability.
5
<PAGE> 9
(c) Governmental Authorization. The execution, delivery and
performance by such party of this Agreement, each Transaction Agreement to
which it or he is a party and all other documents, instruments and certificates
to be executed and delivered by such party in connection herewith or therewith,
require no action by or in respect of, or filing with, any governmental body,
agency, official or authority other than compliance with any applicable
requirements of the Securities Act of 1933, as amended, and any applicable
state securities laws, and the filing of an appropriate amendment to the
Certificate of Incorporation of Fabricators with the Secretary of State of the
State of Delaware.
(d) Non-Contravention. The execution, delivery and
performance by such party of this Agreement, each Transaction Agreement to
which it or he is a party and all other documents, instruments and certificates
executed or to be executed and delivered by such party in connection herewith
or therewith, do not and will not: (a) contravene or conflict with the
certificate or articles of incorporation or bylaws of such party, as the case
may be, other than those waived pursuant hereto; or (b) to any extent having a
material adverse effect upon such party or such party's power or ability to
enter into and perform its obligations hereunder or thereunder, (i) contravene
or conflict with or constitute a violation of any provision of any law,
regulation, judgment, injunction, order or decree binding upon or applicable to
such party; (ii) constitute a default under or give rise to any right of
termination, cancellation or acceleration of any right or obligation of such a
party, or cause or require the creation of any encumbrance on any asset under
any provision of any credit agreement, note, bond, mortgage, indenture, lease,
license, franchise, permit, agreement, contract or other instrument or
obligation binding upon such party or, if applicable, its subsidiaries, or any
person controlling such party or by which any of such party's, subsidiary's or
controlling person's assets is or may be bound; or (iii) result in the creation
or imposition of any lien on an asset of such party.
(e) Required Consents. No consent is required under any
agreement, contract or other instrument binding upon such party as a result of
the execution, delivery and performance of this Agreement, any of the
Transaction Agreements or any other document, instrument or certificate to be
executed or delivered by such party in connection herewith or therewith or the
consummation of the transactions contemplated hereby or thereby, including
without limitation any agreement, contract or instrument requiring the consent
of lenders to such party or any person controlling such party, except for the
approval of the Partners Share Exchange by the shareholders of Partners and
International and such other consents as are to be obtained at or prior to the
Closing Time.
3.02 Representations and Warranties of Partners and McDermott.
(a) Partners hereby represents and warrants to Fabricators
that (i) it is not conducting and has not conducted operations on the Partners
Property of any kind or nature different from that of the operations currently
conducted thereon and (ii) it has no knowledge of the presence on or under the
Partners Property of any hazardous substances, materials or underground storage
tanks or piping regulated under federal, state or local environmental laws or
regulations.
(b) McDermott hereby represents and warrants to Fabricators
that (i) it is not conducting and has not conducted operations on the McDermott
Property of any kind or nature different from that of the operations currently
conducted thereon by Fabricators, and (ii) it has no
6
<PAGE> 10
knowledge of the presence on or under the McDermott Property of any hazardous
substances, materials or underground storage tanks or piping regulated under
federal, state or local environmental laws or regulations.
(c) The representations and warranties in this Section 3.02
shall survive closing of the Act of Cash Sale for a period of ten (10) years.
3.03 No Other Representations or Warranties. Except as set forth
above in this Section 3, no other representations or warranties, express or
implied, are made in this Agreement by any party to any other party.
SECTION 4
OFFERING PROCESS
4.01 The Offering. All of the parties to this Agreement, in order to
facilitate the Offering, hereby agree to the following:
(i) No party will enter into the Underwriting Agreement unless
the Underwriting Agreement provides for the sale by McDermott of
1,715,000 shares of International Common Stock and the issuance and sale
of 1,100,000 shares of International Common Stock by International
(together with up to 422,250 additional shares to be offered by
International pursuant to an over-allotment option granted to the
underwriters thereunder);
(ii) No party will enter into the Underwriting Agreement unless
the Underwriting Agreement provides for the sale of International Common
Stock at an initial price to public and underwriting discount that are
mutually acceptable to McDermott and International, with each such
acceptance to be evidenced by such party's execution of the Underwriting
Agreement; and
(iii) Each party to this Agreement hereby agrees to keep each
other party fully informed as to developments relating to price and
other developments concerning the Offering and all other aspects of the
transactions contemplated by this Agreement and the Underwriting
Agreement and to provide each other party with an opportunity to review
and comment on all filings made with the Securities and Exchange
Commission (the "SEC") and on any comments that the SEC may have with
respect to such filings.
4.02 Actions of International. International and Fabricators agree
with McDermott that, prior to the Closing Time, (i) International will have no
paid employees, (ii) McDermott will be given the opportunity to review any
corporate action of International and will be informed of any corporate action
taken by International, (iii) International and Fabricators will notify
McDermott if they anticipate that expenses budgeted to be incurred by them in
connection with the Offering and prior to the Closing Time (not including any
expenses to be payable by the Company pursuant to the second paragraph of
Section 6 of the Underwriting Agreement) will exceed the budgeted amount of
7
<PAGE> 11
$350,000 in the aggregate, and will use their best efforts not to incur such
expenses exceeding that amount without McDermott's consent, and (iv) they will
keep McDermott, Morgan Keegan and Stephens informed of their proposals with
respect to incentive compensation plans, options awards, executive
compensation, registration rights and employment agreements and will not
implement any such proposals if either Morgan Keegan or Stephens is of the
opinion that such proposal could or would have an adverse effect on the
Offering price and, if approved, will not be effective until after the Closing
Time or will be cancelable in the event that the Closing Time does not occur.
4.03 Simultaneous Closing; Order of Closing. All of the parties to
this Agreement hereby agree that the closings of the Partners Share Exchange,
the McDermott Share Exchange and the transactions contemplated by Sections 1,
2.02, 2.05 and 2.06 will each happen simultaneously with the Closing Time and
that all of such transactions are contingent upon the occurrence of each other
such transaction, the execution and delivery of the Underwriting Agreement, and
the entering into by Fabricators of a revolving credit agreement with Hibernia
Bank, N.A. and the replacement of all letters of credit guaranteed by McDermott
or any affiliate thereof. For the purposes of this Agreement and the
Transaction Agreements, these simultaneous closings will be deemed to have
occurred in the following order:
(i) the transactions contemplated by Sections 1.01,
1.03, 1.04 and 1.05;
(ii) the Fabricators Amendment;
(iii) the Partners Share Exchange;
(iv) the McDermott Share Exchange;
(v) the Closing Time;
(vi) the transaction contemplated by Section 1.02;
(vii) the transaction contemplated by Section 2.02; and
(viii) the transaction contemplated by Section 2.05.
SECTION 5
TERMINATION
5.01 Termination. Unless all parties hereto agree otherwise, this
Agreement will terminate if the Closing Time has not occurred at or before five
o'clock p.m. New Orleans, Louisiana time on October 1, 1997.
5.02 Effect of Termination. If this Agreement is terminated in
accordance with Section 5.01 hereof, (i) this Agreement shall be null and void
and no longer have any effect and each party hereto shall be released from its
respective obligations and shall have no liabilities or obligations hereunder,
except to the extent that such termination results from the willful breach by a
party hereto of any of its representations, warranties, covenants or agreements
contained in this Agreement, (ii) International will be dissolved with
reasonable promptness, (iii) Partners and McDermott will retain ownership of
their respective shares of Fabricators, and (iv) each of the 1992 Agreements
and the current Certificate of Incorporation of Fabricators shall remain in
effect until terminated or amended in accordance with their provisions.
8
<PAGE> 12
SECTION 6
GENERAL PROVISIONS
6.01 Survival of Representations, Warranties and Agreements. The
representations, warranties, covenants and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the date of
this Agreement and the Closing Time.
6.02 Notices. All notices and other communications hereunder must be
in writing and shall be deemed to have given upon receipt of delivery by: (a)
personal delivery to the designated Person, (b) certified or registered mail,
postage prepaid, return receipt requested, (c) a nationally recognized
overnight courier service (against a receipt therefor) or (d) facsimile
transmission with confirmation of receipt. All such notices must be addressed
as follows or such other address as to which any party hereto may have notified
the other in writing:
If to International, Partners, Fabricators or Berard, to:
P. O. Box 11308
New Iberia, Louisiana 70562-1308
Attention: Dailey J. Berard
Facsimile: (318) 365-3711
If to McDermott, to:
1450 Poydras Street
New Orleans, Louisiana 70112
Attention: E. Allen Womack, Jr.
Senior Vice President and
Chief Technical Officer
Facsimile: (504) 587-5280
6.03 Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes," or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." Unless the context otherwise requires, "or" is
disjunctive but not necessarily exclusive, and words in the singular include
the plural and in the plural include the singular.
6.04 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each
of the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
9
<PAGE> 13
6.05 Entire Agreement; No Third Party Beneficiaries. This Agreement
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and is not intended to confer upon any person other than
the parties hereto any rights or remedies hereunder or thereunder.
6.06 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Louisiana, without giving effect to
the principles of conflicts of law thereof.
6.07 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by either of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other party.
6.08 Specific Performance. The parties hereto acknowledge that any
breach of this Agreement would cause immediate and irreparable harm to the
other parties hereto for which an adequate monetary remedy does not exist;
hence, each party hereto agrees that, in the event of a breach or threatened
breach by any party of this Agreement during or after the term of this
Agreement, the other parties hereto shall be entitled to injunctive relief
restraining such party from such violation without the necessity of proof of
actual damage or the posting of any bond, except as required by non-waivable,
applicable law. Nothing herein, however, shall be construed as prohibiting the
parties hereto from pursuing any other remedy at law or in equity to which such
parties may be entitled under applicable law in the event of a breach or
threatened breach of this Agreement by any other party, including without
limitation the recovery of damages and/or costs and expenses, such as
reasonable attorneys' fees, incurred by such parties as a result of any such
breach.
6.09 Confidentiality. McDermott has not and, following the Closing
Time, for a period of 24 months, will not use for its own purposes or disclose
to any third party, any confidential information relating to Fabricators
obtained by Jack M. Arnold, Terrell B. Chalker, James C. Conrad, Daniel R.
Gaubert, John D. Krueger or E. Allen Womack, Jr.; provided, that (i) McDermott
may use or disclose any such information which has been publicly disclosed
(other than by McDermott) and (ii) to the extent that McDermott may become
legally compelled to disclose any of such information, McDermott may disclose
such information if it has used its best efforts, and shall have afforded
Fabricators the opportunity, to obtain an appropriate protective order or other
satisfactory assurance of confidential treatment for the information required
to be disclosed.
6.10 Limitation of Liability. Notwithstanding any other provision of
this Agreement, in no event shall any party hereto be liable to any other party
hereto with respect to breach or violation of any provision in this Agreement,
whether based on contract, tort (including negligence), strict liability or
other theory of law or equity, for loss of anticipated profits or consequential
loss or damage of any nature arising at any time or from any cause whatsoever.
10
<PAGE> 14
IN WITNESS WHEREOF, each party has caused this Agreement to be signed by
its respective officers thereunto duly authorized, all as of the date first
written above.
UNIFAB INTERNATIONAL, INC.
By: /s/ Dailey J. Berard
-------------------------------------
Dailey J. Berard
President
UNIVERSAL PARTNERS, INC.
By: /s/ Dailey J. Berard
-------------------------------------
Dailey J. Berard
President
UNIVERSAL FABRICATORS INCORPORATED
By: /s/ Dailey J. Berard
-------------------------------------
Dailey J. Berard
President
By: /s/ Dailey J. Berard
-------------------------------------
Dailey J. Berard
MCDERMOTT INCORPORATED
By: /s/ E. Allen Womack, Jr.
-------------------------------------
Name:
Title:
11
<PAGE> 15
EXHIBIT A
AGREEMENT AND PLAN OF SHARE EXCHANGE
This AGREEMENT AND PLAN OF SHARE EXCHANGE, dated as of ______________,
1997 (the "Agreement"), is by and between UNIFAB International, Inc., a
Louisiana corporation ("International"), and Universal Partners, Inc., a
Louisiana corporation ("Partners").
WITNESSETH:
WHEREAS, Partners is the owner of 510 shares of Class A common stock,
$1.00 par value per share (the "Shares"), of Universal Fabricators
Incorporated, a Delaware close corporation ("Fabricators"), which represent all
of the issued and outstanding shares of Class A common stock of Fabricators;
WHEREAS, it is the parties mutual intent that the exchange of the Shares
contemplated by this Agreement be part of plan of reorganization of Partners
that constitutes a tax-free reorganization under Section 368 of the Internal
Revenue Code and that immediately following the Closing, Partners will enter
into a plan of liquidation pursuant to which it will pay or provide for the
payment of liabilities of Partners and distribute the New Shares (as defined
herein) and all remaining assets of Partners to the shareholders of Partners.
WHEREAS, Partners desires to exchange the Shares for shares of common
stock, $0.01 par value per share, of International ("International Common
Stock");
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements set forth herein and in reliance upon the undertakings,
representations, warranties and indemnities contained herein, International and
Partners hereby agree as follows:
ARTICLE 1
EXCHANGE OF SHARES; CLOSING
Section 1.1 Sale of Shares. Subject to the terms and conditions
herein stated, Partners agrees at the Closing to exchange with full title
guarantee, transfer, assign and deliver to International, and International
agrees to acquire from Partners, the Shares, free and clear of any and all
Liens.
Section 1.2 Consideration. In consideration for its acquisition of
the Shares, International agrees at the Closing to issue and deliver 1,785,000
shares of International Common Stock (the "New Shares") to Partners.
Section 1.3 Closing. The Closing shall take place simultaneously with
the Closing Time of the public offering of the shares of International Common
Stock pursuant to that certain Underwriting Agreement (the "Underwriting
Agreement"), by and among International, Fabricators,
- 1 -
<PAGE> 16
Partners, McDermott Incorporated ("McDermott") and Morgan Keegan & Company,
Inc. and Stephens Inc. (as representatives of the several underwriters named
therein) and the other transactions contemplated by that certain Transition
Agreement dated as of _________________, 1997 by and among Partners,
International, Fabricators, Universal Partners, Inc. and Dailey J. Berard.
Section 1.4 Deliveries at Closing. At the Closing (a) International
shall deliver to Partners one or more certificates representing the New Shares
and (b) Partners shall deliver to International one or more certificates
representing the Shares duly endorsed to International, which shall transfer to
International good title to the Shares free and clear of any adverse claim or
Lien.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF PARTNERS
Partners represents and warrants to International as of the date hereof
as follows:
Section 2.1 Ownership. Partners is the sole record and beneficial
owner of the Shares, which are represented by Certificate Number 1. Partners
has good and marketable title to the Shares and the absolute right to deliver
the Shares in accordance with the terms of this Agreement, free and clear of
all Liens. The transfer of the Shares to International in accordance with the
terms of this Agreement transfers good and marketable title to the Shares to
International free and clear of all Liens, restrictions, rights, options and
claims of every kind.
Section 2.2 Authority; Enforceability. Partners has full legal right,
power and authority to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby. This Agreement has been duly
executed and delivered by Partners and constitutes, and each other agreement,
instrument or documents executed or to be executed by Partners in connection
with the transactions contemplated hereby has been duly executed and delivered
by Partners and constitutes a valid and legally binding obligation of Partners
enforceable against Partners in accordance with their respective terms, except
as (a) enforceability may be limited by applicable bankruptcy, insolvency,
fraudulent transfer, moratorium or similar laws from time to time in effect
affecting creditors' rights generally and (b) the availability of equitable
remedies may be limited by equitable principles of general applicability.
Section 2.3 No Conflict. Neither the execution and the delivery of
this Agreement by Partners, nor the consummation of the transactions
contemplated hereby (a) violate, conflict with, or result in a breach of any
provisions of, (b) constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, (c) result in the
termination of or accelerate the performance required by, (d) result in the
creation of any Lien upon the Shares under any of the terms, conditions or
provisions of the Articles of Incorporation or Bylaws of Partners or, to any
material extent, under the terms and conditions of any note, bond, mortgage,
indenture, deed of trust, lease, license, loan agreement or other instrument or
obligation to or by which Partners or any of its assets are bound, or (e) to
any material extent, violate any Applicable Law binding upon Partners or any of
its assets.
- 2 -
<PAGE> 17
Section 2.4 No Other Representations or Warranties. Except as set
forth above in this Section 2, no other representations or warranties, express
or implied, are made in this Agreement by Partners to International.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF INTERNATIONAL
International represents and warrants to Partners as of the date hereof
as follows:
Section 3.1 Organization. International is a corporation duly
organized, validly existing and in good standing under the laws of Louisiana
and has all requisite corporate power and authority to own its properties and
carry on its business as now being conducted.
Section 3.2 Capitalization. As of the date of this Agreement, the
authorized capital stock of International consists of 20,000,000 shares of
common stock, $0.01 par value per share, one share of which is validly issued
and outstanding, and 5,000,000 shares of preferred stock, no par value, none of
which are outstanding.
Section 3.3 Authority; Enforceability. International has the
requisite corporate power and authority to execute and deliver this Agreement
and to carry out its obligations hereunder. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of International and no other corporate proceedings on the part of
International are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly executed and
delivered by International and constitutes a valid and binding obligation of
International, enforceable against International in accordance with its terms,
except as (a) enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent transfer, moratorium or similar laws from time to time
in effect affecting creditors' rights generally and (b) the availability of
equitable remedies may be limited by equitable principles of general
applicability.
Section 3.4 No Conflict. Neither the execution and delivery of this
Agreement by International, nor the consummation of the transactions
contemplated hereby, do or will (a) violate, conflict with, or result in a
breach of any provisions of, (b) constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, (c) result
in the termination of or accelerate the performance required by, (d) result in
the creation of a Lien upon the New Shares under any of the terms, conditions
or provisions of the Articles of Incorporation or Bylaws of International or
any note, bond, mortgage, indenture, deed of trust, lease, license, loan
agreement or other instrument or obligation to or by which International or any
of its assets are bound, or (e) violate any Applicable Law binding upon
International and on any of its assets.
- 3 -
<PAGE> 18
Section 3.5 International Common Stock. All shares of International
Common Stock to be issued pursuant to this Agreement will be, when issued, duly
authorized, validly issued, fully paid and non-assessable.
Section 3.6 No Other Representations or Warranties. Except as set
forth above in this Section 3, no other representations or warranties, express
or implied, are made in this Agreement by International to Partners.
ARTICLE 4
INDEMNIFICATION; REMEDIES
Section 4.1 Indemnification by Partners. Except as otherwise
expressly provided in this Article 4, Partners, as its sole obligation and the
exclusive remedy of International and each of International's officers,
directors, employees, Affiliates, successors and assigns (International and
such persons being collectively referred to herein as "International's
Indemnified Persons"), shall defend, indemnify and hold harmless
International's Indemnified Persons, and shall reimburse International's
Indemnified Persons, for, from and against, each and every demand, claim,
action, loss (which shall include any diminution in value), liability,
judgment, damage, cost and expense (including, without limitation, interest,
penalties, costs of preparation and investigation, and the reasonable fees,
disbursements and expenses of attorneys, accountants and other professional
advisors) (collectively, "Losses") imposed on or incurred by International's
Indemnified Persons, directly or indirectly, relating to, resulting from or
arising out of: (a) any inaccuracy in any representation or warranty of
Partners in this Agreement, whether or not International's Indemnified Persons
relied thereon or had knowledge thereof, or (b) any breach or nonperformance of
any covenant, agreement or other obligation of Partners under this Agreement or
any certificate, document or other instrument delivered or to be delivered
pursuant hereto.
Section 4.2 Indemnification by International. Except as otherwise
expressly provided in this Article 4, International, as its sole obligation and
the exclusive remedy of Partners and each of Partners' officers, directors,
employees, Affiliates, successors and assigns (Partners and such persons being
collectively referred to herein as "Partners' Indemnified Persons"), shall
defend, indemnify and hold harmless Partners' Indemnified Persons, and shall
reimburse Partners' Indemnified Persons for, from and against all Losses
imposed on or incurred by Partners' Indemnified Persons, directly or
indirectly, relating to, resulting from or arising out of: (a) any inaccuracy
in any representation or warranty of International in this Agreement, whether
or not Partners' Indemnified Persons relied thereon or had knowledge thereof or
(b) any breach or nonperformance of any covenant, agreement or other obligation
of International under this Agreement or any certificate, document or other
instrument delivered or to be delivered pursuant hereto.
Section 4.3 Notice and Defense of Third Party Claims. If any third
party demand, claim, action or proceeding shall be brought or asserted under
this Article 4 against an indemnified party or any successor thereto (the
"Indemnified Person") in respect of which indemnity may be sought under this
Article 4 from an indemnifying person or any successor thereto (the
"Indemnifying Person"), the Indemnified Person shall give prompt written notice
thereof to the Indemnifying
- 4 -
<PAGE> 19
Person who shall have the right to assume its defense, including the hiring of
counsel reasonably satisfactory to the Indemnified Person and the payment of
all expenses; except that any delay or failure to so notify the Indemnifying
Person shall relieve the Indemnifying Person of its obligations under this
Article 4 only to the extent, if at all, that it is prejudiced by reason of
such delay or failure. The Indemnified Person shall have the right to employ
separate counsel in any of the foregoing actions, claims or proceedings and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of the Indemnified Person unless both the Indemnified
Person and the Indemnifying Person are named as parties and the Indemnifying
Person and the Indemnified Person shall in good faith agree that representation
by the same counsel is inappropriate. In the event that the Indemnifying
Person, within ten days after notice of any such action or claim, does not
assume the defense thereof, the Indemnified Person shall have the right to
undertake the defense, compromise or settlement of such action, claim or
proceeding for the account of the Indemnifying Person, subject to the right of
the Indemnifying Person to assume the defense of such action, claim or
proceeding with counsel reasonably satisfactory to the Indemnified Person at
any time prior to the settlement, compromise or final determination thereof.
Anything in this Article 4 to the contrary notwithstanding, the Indemnifying
Person shall not, without the Indemnified Person's prior consent, settle or
compromise any action or claim or consent to the entry of any judgment with
respect to any action, claim or proceeding for anything other than money
damages paid by the Indemnifying Person. The Indemnifying Person may, without
the Indemnified Person's prior consent, settle or compromise any such action,
claim or proceeding or consent to entry of any judgment with respect to any
such action or claim that requires solely the payment of money damages by the
Indemnifying Person and that includes as an unconditional term thereof the
release by the claimant or the plaintiff of the Indemnified Person from all
liability in respect of such action, claim or proceeding.
ARTICLE 5
DEFINED TERMS
Section 5.1 Definitions. In addition to the other defined terms used
herein, as used in this Agreement, the following terms when capitalized have
the meanings indicated.
"Affiliate" shall have the meaning ascribed by Rule 12b-2 promulgated
under the Exchange Act.
"Applicable Law" shall mean any statute, law, rule or regulation or any
judgement, order, writ, injunction or decree of any Governmental Entity to
which a specified Person or its property is subject.
"Closing" means the consummation of the transactions contemplated by
this Agreement.
"Governmental Entity" shall mean any court or tribunal in any
jurisdiction or any public, governmental or regulatory body, agency,
department, commission, board, bureau or other authority or instrumentality.
- 5 -
<PAGE> 20
"Liens" shall mean pledges, liens, defects, leases, licenses, equities,
options, rights to buy, conditional sales contracts, charges, claims,
encumbrances, security interests, easements, restrictions, chattel mortgages,
mortgages or deeds of trust, of any kind or nature whatsoever.
ARTICLE 6
MISCELLANEOUS
Section 6.1 Survival of Representations, Warranties and Agreements.
The representations, warranties, covenants and agreements in this Agreement or
in any instrument delivered pursuant to this Agreement shall survive the
Closing and shall not be limited or affected by any investigation by or on
behalf of any party hereto.
Section 6.2 Notices. All notices hereunder must be in writing and
shall be deemed to have been given upon receipt of delivery by: (a) personal
delivery to the designated individual, (b) certified or registered mail,
postage prepaid, return receipt requested, (c) a nationally recognized
overnight courier service (against a receipt therefor) or (d) facsimile
transmission with confirmation of receipt. All such notices must be addressed
as follows or such other address as to which any party hereto may have notified
the other in writing:
If to International, to:
P. O. Box 11308
New Iberia, Louisiana 70562-1308
Attention: Dailey J. Berard
Facsimile transmission No.: (318) 365-3711
If to Partners, to:
P. O. Box 11308
New Iberia, Louisiana 70562-1308
Attention: Dailey J. Berard
Facsimile transmission No.: (318) 365-3711
Section 6.3 Headings; Gender. When a reference is made in this
Agreement to a section, exhibit or schedule, such reference shall be to a
section, exhibit or schedule of this Agreement unless otherwise indicated. The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. All personal pronouns used in this Agreement shall include the
other genders, whether used in the masculine, feminine or neuter gender, and
the singular shall include the plural and vice versa, whenever and as often as
may be appropriate.
Section 6.4 Entire Agreement; No Third Party Beneficiaries. This
Agreement (including the documents, exhibits and instruments referred to
herein) (a) constitutes the entire agreement and supersedes all prior
agreements, and understandings and communications, both written and oral,
- 6 -
<PAGE> 21
among the parties with respect to the subject matter hereof, and (b) is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
Section 6.5 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Louisiana without regard
to any applicable principles of conflicts of law.
Section 6.6 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other party.
Section 6.7 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by reason of any
rule of law or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any adverse manner to either party. Upon such determination that
any term or other provision is invalid, illegal or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible, and in any case such term or provision shall
be deemed amended to the extent necessary to make it no longer invalid, illegal
or unenforceable.
Section 6.8 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute one and the same document.
Section 6.9 Amendment and Modification. This Agreement may not be
amended or modified except by an instrument in writing signed by each of the
parties hereto.
Section 6.10 Limitation of Liability. Notwithstanding any other
provision of this Agreement, in no event shall any party hereto be liable to
any other party hereto with respect to breach or violation of any provision in
this Agreement, whether based on contract, tort (including negligence), strict
liability or other theory of law or equity, for loss of anticipated profits or
consequential loss or damage of any nature arising at any time or from any
cause whatsoever.
- 7 -
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed themselves or by their respective duly authorized officers as of the
date first written above.
UNIFAB INTERNATIONAL, INC.
By:
----------------------------------------------
Dailey J. Berard, President
UNIVERSAL PARTNERS, INC.
By:
----------------------------------------------
Dailey J. Berard, President
- 8 -
<PAGE> 23
EXHIBIT B
<TABLE>
<S> <C> <C>
ACT OF CASH SALE ) UNITED STATES OF AMERICA
)
BY ) STATE OF LOUISIANA
)
UNIVERSAL PARTNERS, INC. ) PARISH OF ________________
)
TO )
)
UNIVERSAL FABRICATORS )
INCORPORATED )
</TABLE>
BE IT KNOWN, that on this ____ day of __________, 1997;
BEFORE ME, the undersigned, Notary Public, duly commissioned and
qualified, in and for the Parish of ___________, State of Louisiana, and in the
presence of the undersigned competent witnesses:
PERSONALLY CAME AND APPEARED:
UNIVERSAL PARTNERS, INC., a Louisiana corporation, whose address is
5007 Port Road, New Iberia, Louisiana, 70560, appearing herein by and
through Dailey J. Berard, its President and duly authorized
representative pursuant to a resolution of its Board of Directors, a
certified copy of which is attached hereto, whose taxpayer
identification number is ___________ ("Seller"); and
UNIVERSAL FABRICATORS INCORPORATED, a Delaware corporation, whose
address is 5007 Port Road, New Iberia, Louisiana, 70560, appearing
herein by and through Dailey J. Berard, its President and duly
authorized representative pursuant to a resolution of its Board of
Directors, a certified copy of which is attached hereto, whose
taxpayer identification number is _____________ ("Purchaser"),
who declared as follows:
Seller does by these presents grant, bargain, sell, convey, transfer,
assign, set over, abandon and deliver without any warranty whatsoever of any
kind, nature or description other than Seller's warranty of good and
merchantable title, but with full substitution and subrogation in and to all
the rights and actions of warranty which said Seller has or may have against
all preceding owners and vendors, unto Purchaser, here present accepting, and
purchasing for itself, its heirs, successors and assigns, and acknowledging due
delivery and possession thereof, all and singular the real property
<PAGE> 24
located in the State of Louisiana, Parish of Iberia, described on Exhibit "B-1"
attached hereto (the "Property"), together with any buildings or improvements
located thereon, and all rights, ways, servitudes, easements and prescriptions,
both liberative and acquisitive, thereunto belonging or in anywise
appertaining.
To have and to hold the above described Property unto the said
Purchaser and its successors and assigns forever.
This sale is made and accepted for and in consideration of the price
and sum of ONE HUNDRED THOUSAND FIVE HUNDRED AND NO/100 ($100,500.00) DOLLARS
cash, all of which Purchaser has well and truly paid, in ready and current
money to Seller who hereby acknowledges the receipt thereof and grants full
acquittance and discharge therefor.
Waiver of Warranties
Seller hereby conveys to Purchaser all right, title and interest of
Seller in and to the Property, without any warranty or recourse whatsoever
other than pursuant to Seller's warranty of good and merchantable title, but
with full substitution and subrogation in and to all of the rights and actions
of warranty which Seller has or may have against all preceding owners or
vendors; it being understood that Purchaser takes the Property "AS IS" and
"WHERE IS", Purchaser hereby acknowledging reliance solely on its own
inspection of the Property, and not on any warranties or representations from
Seller other than Seller's warranty of good and merchantable title. All
implied warranties with respect to the Property (other than Seller's warranty
of good and merchantable title), including those related to fitness for a
particular purpose, are hereby disclaimed by Seller and expressly waived by
Purchaser. Other than pursuant to Seller's warranty of good and merchantable
title, Purchaser shall have no right or cause of action against Seller to
assert in any controversy, claim, demand, or litigation arising from or in
connection with the Property. Without limiting the generality of the
foregoing, Seller does not warrant that the Property is free from redhibitory
or latent defects or vices. Purchaser hereby expressly waives all rights in
redhibition pursuant to Louisiana Civil Code Article 2520, et seq., and the
warranty imposed by Louisiana Civil Code Article 2476, as well as its ability
to rescind the sale or seek a reduction in the purchase price for a redhibitory
defect. Purchaser hereby releases Seller from any liability for redhibitory or
latent defects or vices under Louisiana Civil Code Article 2520 through 2548
(1870). Purchaser's waiver of warranties under this paragraph does not affect
the representations and warranties expressly made by Seller in that certain
Transition Agreement dated ____________, 1997 to which Seller and Purchaser,
among others, are parties.
Miscellaneous
All real estate taxes, up to and including the taxes due and exigible
in 1996, have been or will be paid by Seller. Taxes for 1997 have been
prorated between the parties hereto as of the date hereof based upon the 1996
taxes. Seller and Purchaser hereby waive production of mortgage, chattel
mortgage, conveyance, accounts receivable, tax, paving and other certificates
and hereby agree to
- 2 -
<PAGE> 25
relieve and release the Notary before whom this Act of Cash Sale was passed
from all responsibilities and liabilities in connection therewith.
THUS DONE AND PASSED in _________ Parish, Louisiana, on the date first
written above in the presence of the undersigned competent witnesses, who
hereunto sign their names with the said appearer and me, Notary, after reading
of the whole.
<TABLE>
<S> <C>
WITNESSES TO SELLER:
BOTH SIGNATURES:
UNIVERSAL PARTNERS INC.
- -------------------------------------------
BY:
-------------------------------------------------------------------
DAILEY J. BERARD, PRESIDENT
PURCHASER:
UNIVERSAL FABRICATORS INCORPORATED
BY:
-------------------------------------------------------------------
DAILEY J. BERARD, PRESIDENT
---------------------------------
NOTARY PUBLIC
</TABLE>
- 3 -
<PAGE> 26
EXHIBIT B-1
That certain tract of land, together with all rights, ways, privileges
and servitudes thereunto appertaining, situated in Section 34, Township 12
South, Range 6 East, in the First Ward (formerly 9th Ward) of Iberia Parish,
Louisiana, containing and measuring 9.56 acres and being bounded northerly by
property of Philip Rodrigue, or assigns, southerly by Southern Pacific Railroad
right-of-way, easterly by Tract 2 of that plat of survey hereafter mentioned
and westerly in part by property of Ace Machine Works, Inc. (center of Rodere
Coulee) and in part by property of Paul Newton Bonin, or assigns. Being the
northeasterlymost 9.56 acres of Tract 1, Plat 2, Group A (12.3 acres) as shown
on a plat of survey attached to an Act of Partition recorded under Original
Conveyance Entry No. 78-7307 of the records of Iberia Parish, Louisiana.
<PAGE> 27
EXHIBIT C
SHARE EXCHANGE AGREEMENT
This SHARE EXCHANGE AGREEMENT, dated as of ______________, 1997 (the
"Agreement"), is by and between UNIFAB International, Inc., a Louisiana
corporation ("International"), and McDermott Incorporated, a Delaware
corporation ("McDermott").
WITNESSETH:
WHEREAS, McDermott is the owner of 490 shares of Class B common stock,
$1.00 par value per share (the "Shares"), of Universal Fabricators
Incorporated, a Delaware corporation ("Fabricators"), which represent all of
the issued and outstanding shares of Class B common stock of Fabricators; and
WHEREAS, McDermott desires to exchange the Shares for shares of common
stock, $0.01 par value per share, of International ("International Common
Stock"), and to sell such shares of International Common Stock pursuant to an
underwriting agreement dated September ___, 1997 (the "Underwriting
Agreement"), by and among International, Fabricators, Partners, McDermott and
Morgan Keegan & Company, Inc. and Stephens Inc. (as representatives of the
several underwriters named therein);
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements set forth herein and in reliance upon the undertakings,
representations, warranties and indemnities contained herein, International and
McDermott hereby agree as follows:
ARTICLE 1
EXCHANGE OF SHARES; CLOSING
Section 1.1 Sale of Shares. Subject to the terms and conditions
herein stated, McDermott agrees at the Closing to exchange with full title
guarantee, transfer, assign and deliver to International, and International
agrees to acquire from McDermott, the Shares, free and clear of any and all
Liens.
Section 1.2 Consideration. In consideration for its acquisition
of the Shares, International agrees at the Closing to issue and deliver
1,715,000 shares of International Common Stock (the "New Shares") to McDermott.
Section 1.3 Closing. The Closing shall take place simultaneously
with the Closing Time of the public offering of the New Shares and other shares
of International Common Stock pursuant to the Underwriting Agreement and the
other transactions contemplated by that certain Transition Agreement dated as
of _________________, 1997 by and among McDermott, International, Fabricators,
Universal Partners, Inc. and Dailey J. Berard.
- 1 -
<PAGE> 28
Section 1.4 Deliveries at Closing. At the Closing (a)
International shall deliver to McDermott one or more certificates representing
the New Shares and (b) McDermott shall deliver to International one or more
certificates representing the Shares duly endorsed to International, which
shall transfer to International good title to the Shares free and clear of any
Lien.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF MCDERMOTT
McDermott represents and warrants to International as of the date
hereof as follows:
Section 2.1 Ownership. McDermott is the sole record and
beneficial owner of the Shares, which are represented by Certificate Number 2.
McDermott has good and marketable title to the Shares and the absolute right to
deliver the Shares in accordance with the terms of this Agreement, free and
clear of all Liens. The transfer of the Shares to International in accordance
with the terms of this Agreement transfers good and marketable title to the
Shares to International free and clear of all Liens, restrictions, rights,
options and claims of every kind.
Section 2.2 Authority; Enforceability. McDermott has full legal
right, power and authority to execute, deliver and perform this Agreement and
to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by McDermott and constitutes, and each other
agreement, instrument or documents executed or to be executed by McDermott in
connection with the transactions contemplated hereby has been duly executed and
delivered by McDermott and constitutes a valid and legally binding obligation
of McDermott enforceable against McDermott in accordance with their respective
terms, except as (a) enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent transfer, moratorium or similar laws from time to time
in effect affecting creditors' rights generally and (b) the availability of
equitable remedies may be limited by equitable principles of general
applicability.
Section 2.3 No Conflict. Neither the execution and the delivery
of this Agreement by McDermott, nor the consummation of the transactions
contemplated hereby (a) violate, conflict with, or result in a breach of any
provisions of, (b) constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, (c) result in the
termination of or accelerate the performance required by, (d) result in the
creation of any Lien upon the Shares under any of the terms, conditions or
provisions of the Certificate of Incorporation or Bylaws of McDermott or, to
any material extent, under the terms and conditions of any note, bond,
mortgage, indenture, deed of trust, lease, license, loan agreement or other
instrument or obligation to or by which McDermott or any of its assets are
bound, or (e) to any material extent, violate any Applicable Law binding upon
McDermott or any of its assets.
Section 2.4 No Other Representations or Warranties. Except as
set forth above in this Section 2, no other representations or warranties,
express or implied, are made in this Agreement by McDermott to International.
- 2 -
<PAGE> 29
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF INTERNATIONAL
International represents and warrants to McDermott as of the date
hereof as follows:
Section 3.1 Organization. International is a corporation duly
organized, validly existing and in good standing under the laws of Louisiana
and has all requisite corporate power and authority to own its properties and
carry on its business as now being conducted.
Section 3.2 Capitalization. As of the date of this Agreement,
the authorized capital stock of International consists of 20,000,000 shares of
common stock, $0.01 par value per share, one share of which is validly issued
and outstanding, and 5,000,000 shares of preferred stock, no par value, none of
which are outstanding.
Section 3.3 Authority; Enforceability. International has the
requisite corporate power and authority to execute and deliver this Agreement
and to carry out its obligations hereunder. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of International and no other corporate proceedings on the part of
International are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly executed and
delivered by International and constitutes a valid and binding obligation of
International, enforceable against International in accordance with its terms,
except as (a) enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent transfer, moratorium or similar laws from time to time
in effect affecting creditors' rights generally and (b) the availability of
equitable remedies may be limited by equitable principles of general
applicability.
Section 3.4 No Conflict. Neither the execution and delivery of
this Agreement by International, nor the consummation of the transactions
contemplated hereby, do or will (a) violate, conflict with, or result in a
breach of any provisions of, (b) constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, (c) result
in the termination of or accelerate the performance required by, (d) result in
the creation of a Lien upon the New Shares under any of the terms, conditions
or provisions of the Articles of Incorporation or Bylaws of International or
any note, bond, mortgage, indenture, deed of trust, lease, license, loan
agreement or other instrument or obligation to or by which International or any
of its assets are bound, or (e) violate any Applicable Law binding upon
International and on any of its assets.
Section 3.5 International Common Stock. All shares of
International Common Stock to be issued pursuant to this Agreement will be,
when issued, duly authorized, validly issued, fully paid and non-assessable.
- 3 -
<PAGE> 30
Section 3.6 No Other Representations or Warranties. Except as
set forth above in this Section 3, no other representations or warranties,
express or implied, are made in this Agreement by International to McDermott.
ARTICLE 4
INDEMNIFICATION; REMEDIES
Section 4.1 Indemnification by McDermott. Except as otherwise
expressly provided in this Article 4, McDermott, as its sole obligation and the
exclusive remedy of International and each of International's officers,
directors, employees, Affiliates, successors and assigns (International and
such persons being collectively referred to herein as "International's
Indemnified Persons"), shall defend, indemnify and hold harmless
International's Indemnified Persons, and shall reimburse International's
Indemnified Persons, for, from and against, each and every demand, claim,
action, loss, liability, judgment, damage, cost and expense (including, without
limitation, interest, penalties, costs of preparation and investigation, and
the reasonable fees, disbursements and expenses of attorneys, accountants and
other professional advisors) (collectively, "Losses") imposed on or incurred by
International's Indemnified Persons, directly or indirectly, relating to,
resulting from or arising out of: (a) any inaccuracy in any representation or
warranty of McDermott in this Agreement, whether or not International's
Indemnified Persons relied thereon or had knowledge thereof, or (b) any breach
or nonperformance of any covenant, agreement or other obligation of McDermott
under this Agreement or any certificate, document or other instrument delivered
or to be delivered pursuant hereto.
Section 4.2 Indemnification by International. Except as
otherwise expressly provided in this Article 4, International, as its sole
obligation and the exclusive remedy of McDermott and each of McDermott's
officers, directors, employees, Affiliates, successors and assigns (McDermott
and such persons being collectively referred to herein as "McDermott's
Indemnified Persons"), shall defend, indemnify and hold harmless McDermott's
Indemnified Persons, and shall reimburse McDermott's Indemnified Persons for,
from and against all Losses imposed on or incurred by McDermott's Indemnified
Persons, directly or indirectly, relating to, resulting from or arising out of:
(a) any inaccuracy in any representation or warranty of International in this
Agreement, whether or not McDermott's Indemnified Persons relied thereon or had
knowledge thereof, or (b) any breach or nonperformance of any covenant,
agreement or other obligation of International under this Agreement or any
certificate, document or other instrument delivered or to be delivered pursuant
hereto.
Section 4.3 Notice and Defense of Third Party Claims. If any
third party demand, claim, action or proceeding shall be brought or asserted
under this Article 4 against an indemnified party or any successor thereto (the
"Indemnified Person") in respect of which indemnity may be sought under this
Article 4 from an indemnifying person or any successor thereto (the
"Indemnifying Person"), the Indemnified Person shall give prompt written notice
thereof to the Indemnifying Person who shall have the right to assume its
defense, including the hiring of counsel reasonably satisfactory to the
Indemnified Person and the payment of all expenses; except that any delay or
- 4 -
<PAGE> 31
failure to so notify the Indemnifying Person shall relieve the Indemnifying
Person of its obligations under this Article 4 only to the extent, if at all,
that it is prejudiced by reason of such delay or failure. The Indemnified
Person shall have the right to employ separate counsel in any of the foregoing
actions, claims or proceedings and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of the
Indemnified Person unless both the Indemnified Person and the Indemnifying
Person are named as parties and the Indemnifying Person and the Indemnified
Person shall in good faith agree that representation by the same counsel is
inappropriate. In the event that the Indemnifying Person, within ten days
after notice of any such action or claim, does not assume the defense thereof,
the Indemnified Person shall have the right to undertake the defense,
compromise or settlement of such action, claim or proceeding for the account of
the Indemnifying Person, subject to the right of the Indemnifying Person to
assume the defense of such action, claim or proceeding with counsel reasonably
satisfactory to the Indemnified Person at any time prior to the settlement,
compromise or final determination thereof. Anything in this Article 4 to the
contrary notwithstanding, the Indemnifying Person shall not, without the
Indemnified Person's prior consent, settle or compromise any action or claim or
consent to the entry of any judgment with respect to any action, claim or
proceeding for anything other than money damages paid by the Indemnifying
Person. The Indemnifying Person may, without the Indemnified Person's prior
consent, settle or compromise any such action, claim or proceeding or consent
to entry of any judgment with respect to any such action or claim that requires
solely the payment of money damages by the Indemnifying Person and that
includes as an unconditional term thereof the release by the claimant or the
plaintiff of the Indemnified Person from all liability in respect of such
action, claim or proceeding.
ARTICLE 5
DEFINED TERMS
Section 5.1 Definitions. In addition to the other defined terms
used herein, as used in this Agreement, the following terms when capitalized
have the meanings indicated.
"Affiliate" shall have the meaning ascribed by Rule 12b-2 promulgated
under the Exchange Act.
"Applicable Law" shall mean any statute, law, rule or regulation or
any judgement, order, writ, injunction or decree of any Governmental Entity to
which a specified Person or its property is subject.
"Closing" means the consummation of the transactions contemplated by
this Agreement.
"Governmental Entity" shall mean any court or tribunal in any
jurisdiction or any public, governmental or regulatory body, agency,
department, commission, board, bureau or other authority or instrumentality.
"Liens" shall mean pledges, liens, defects, leases, licenses,
equities, options, rights to buy, conditional sales contracts, charges, claims,
encumbrances, security interests, easements, restrictions, chattel mortgages,
mortgages or deeds of trust, of any kind or nature whatsoever.
- 5 -
<PAGE> 32
ARTICLE 6
MISCELLANEOUS
Section 6.1 Survival of Representations, Warranties and
Agreements. The representations, warranties, covenants and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Closing and shall not be limited or affected by any investigation
by or on behalf of any party hereto.
Section 6.2 Notices. All notices hereunder must be in writing
and shall be deemed to have been given upon receipt of delivery by: (a)
personal delivery to the designated individual, (b) certified or registered
mail, postage prepaid, return receipt requested, (c) a nationally recognized
overnight courier service (against a receipt therefor) or (d) facsimile
transmission with confirmation of receipt. All such notices must be addressed
as follows or such other address as to which any party hereto may have notified
the other in writing:
If to International, to:
P. O. Box 11308
New Iberia, Louisiana 70562-1308
Attention: Dailey J. Berard
Facsimile transmission No.: (318) 365-3711
If to McDermott, to:
1450 Poydras Street
P. O. Box 60035
New Orleans, Louisiana 70160
Attention: E. Allen Womack, Jr.
Senior Vice President and
Chief Technical Officer
Facsimile transmission No.: (504) 587-5280
Section 6.3 Headings; Gender. When a reference is made in this
Agreement to a section, exhibit or schedule, such reference shall be to a
section, exhibit or schedule of this Agreement unless otherwise indicated. The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. All personal pronouns used in this Agreement shall include the
other genders, whether used in the masculine, feminine or neuter gender, and
the singular shall include the plural and vice versa, whenever and as often as
may be appropriate.
Section 6.4 Entire Agreement; No Third Party Beneficiaries. This
Agreement (including the documents, exhibits and instruments referred to
herein) (a) constitutes the entire agreement and supersedes all prior
agreements, and understandings and communications, both written and oral, among
the parties with respect to the subject matter hereof, and (b) is not intended
to confer upon any person other than the parties hereto any rights or remedies
hereunder.
- 6 -
<PAGE> 33
Section 6.5 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Louisiana without regard
to any applicable principles of conflicts of law.
Section 6.6 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other party.
Section 6.7 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by reason of any
rule of law or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any adverse manner to either party. Upon such determination that
any term or other provision is invalid, illegal or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible, and in any case such term or provision shall
be deemed amended to the extent necessary to make it no longer invalid, illegal
or unenforceable.
Section 6.8 Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original and all of
which taken together shall constitute one and the same document.
Section 6.9 Amendment and Modification. This Agreement may not
be amended or modified except by an instrument in writing signed by each of the
parties hereto.
Section 6.10 Limitation of Liability. Notwithstanding any other
provision of this Agreement, in no event shall any party hereto be liable to
any other party hereto with respect to breach or violation of any provision in
this Agreement, whether based on contract, tort (including negligence), strict
liability or other theory of law or equity, for loss of anticipated profits or
consequential loss or damage of any nature arising at any time or from any
cause whatsoever.
- 7 -
<PAGE> 34
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed themselves or by their respective duly authorized officers as of the
date first written above.
UNIFAB INTERNATIONAL, INC.
By:
------------------------------
Dailey J. Berard, President
MCDERMOTT INCORPORATED
By:
------------------------------
Name:
Title:
- 8 -
<PAGE> 35
EXHIBIT D
<TABLE>
<S> <C> <C>
ACT OF CASH SALE ) UNITED STATES OF AMERICA
)
BY ) STATE OF LOUISIANA
)
MCDERMOTT INCORPORATED ) PARISH OF ________________
)
TO )
)
UNIVERSAL FABRICATORS )
INCORPORATED )
</TABLE>
BE IT KNOWN, that on this ____ day of __________, 1997;
BEFORE ME, the undersigned, Notary Public, duly commissioned and
qualified, in and for the Parish of ___________, State of Louisiana, and in the
presence of the undersigned competent witnesses:
PERSONALLY CAME AND APPEARED:
MCDERMOTT INCORPORATED, a Delaware corporation, whose address is 1450
Poydras Street, New Orleans, Louisiana, 70112, appearing herein by and
through _______________________, its _____________ and duly authorized
representative pursuant to a resolution of its Board of Directors, a
certified copy of which is attached hereto, whose taxpayer
identification number is ___________ ("Seller"); and
UNIVERSAL FABRICATORS INCORPORATED, a Delaware corporation, whose
address is 5007 Port Road, New Iberia, Louisiana, 70560, appearing
herein by and through Dailey J. Berard, its President and duly
authorized representative pursuant to a resolution of its Board of
Directors, a certified copy of which is attached hereto, whose
taxpayer identification number is _____________ ("Purchaser"),
who declared as follows:
Seller does by these presents grant, bargain, sell, convey, transfer,
assign, set over, abandon and deliver without any warranty whatsoever of any
kind, nature or description other than Seller's warranty of good and
merchantable title, but with full substitution and subrogation in and to all
the rights and actions of warranty which said Seller has or may have against
all preceding owners and vendors, unto Purchaser, here present accepting, and
purchasing for itself, its heirs, successors and
<PAGE> 36
assigns, and acknowledging due delivery and possession thereof, all and
singular the real property located in the State of Louisiana, Parish of Iberia,
including any and all buildings or improvements thereon, described on Exhibit
"D-1" attached hereto (the "Property"), and all rights, ways, servitudes,
easements and prescriptions, both liberative and acquisitive, thereunto
belonging or in anywise appertaining.
To have and to hold the above described Property unto the said
Purchaser and its successors and assigns forever.
This sale is made and accepted for and in consideration of the price
and sum of SEVEN HUNDRED THOUSAND AND NO/100 ($700,000.00) DOLLARS cash, all of
which Purchaser has well and truly paid, in ready and current money to Seller
who hereby acknowledges the receipt thereof and grants full acquittance and
discharge therefor.
Waiver of Warranties
Seller hereby conveys to Purchaser all right, title and interest of
Seller in and to the Property, without any warranty or recourse whatsoever
other than pursuant to Seller's warranty of good and merchantable title, but
with full substitution and subrogation in and to all of the rights and actions
of warranty which Seller has or may have against all preceding owners or
vendors; it being understood that Purchaser takes the Property "AS IS" and
"WHERE IS", Purchaser hereby acknowledging reliance solely on its own
inspection of the Property, and not on any warranties or representations from
Seller other than Seller's warranty of good and merchantable title. All
implied warranties with respect to the Property (other than Seller's warranty
of good and merchantable title), including those related to fitness for a
particular purpose, are hereby disclaimed by Seller and expressly waived by
Purchaser. Other than pursuant to Seller's warranty of good and merchantable
title, Purchaser shall have no right or cause of action against Seller to
assert in any controversy, claim, demand, or litigation arising from or in
connection with the Property. Without limiting the generality of the
foregoing, Seller does not warrant that the Property is free from redhibitory
or latent defects or vices. Purchaser hereby expressly waives all rights in
redhibition pursuant to Louisiana Civil Code Article 2520, et seq., and the
warranty imposed by Louisiana Civil Code Article 2476, as well as its ability
to rescind the sale or seek a reduction in the purchase price for a redhibitory
defect. Purchaser hereby releases Seller from any liability for redhibitory or
latent defects or vices under Louisiana Civil Code Article 2520 through 2548
(1870). Purchaser's waiver of warranties under this paragraph does not affect
the representations and warranties expressly made by Seller in Section 3.02(b)
of that certain Transition Agreement dated ____________, 1997 to which Seller
and Purchaser, among others, are parties.
Miscellaneous
All real estate taxes applicable to the Property (other than that
portion of the Property which immediately prior hereto was the subject of a
lease by Seller in favor of Purchaser), up to and including the taxes due and
exigible in 1996, have been or will be paid by Seller. Such taxes for 1997
have been prorated between the parties hereto as of the date hereof based upon
the 1996 taxes.
- 2 -
<PAGE> 37
Seller and Purchaser hereby waive production of mortgage, chattel mortgage,
conveyance, accounts receivable, tax, paving and other certificates and hereby
agree to relieve and release the Notary before whom this Act of Cash Sale was
passed from all responsibilities and liabilities in connection therewith.
THUS DONE AND PASSED in _________ Parish, Louisiana, on the date first
written above in the presence of the undersigned competent witnesses, who
hereunto sign their names with the said appearer and me, Notary, after reading
of the whole.
<TABLE>
<S> <C>
WITNESSES TO SELLER:
BOTH SIGNATURES:
MCDERMOTT INCORPORATED
- -------------------------------------------
BY:
-------------------------------------------------------------------
NAME:
-----------------------------------------------------------------
TITLE:
- ------------------------------------------- ----------------------------------------------------------------
PURCHASER:
UNIVERSAL FABRICATORS INCORPORATED
BY:
-------------------------------------------------------------------
DAILEY J. BERARD, PRESIDENT
-------------------------------------
NOTARY PUBLIC
</TABLE>
- 3 -
<PAGE> 38
EXHIBIT D-1
That certain tract or parcel of land identified as "Plot B" on that
plat of survey entitled "Plat Showing Survey of Lease Property," dated December
1, 1992, revised November 20, 1996, prepared by John B. Benoit, Registered
Professional Land Surveyor, a copy of which said plat is attached hereto and
made a part hereof, said Plot B having such dimensions and boundaries as are
shown on the attached plat of survey, together with all improvements situated
thereon.
That certain tract or parcel of land known and identified as "Plot
C-2" on that plat of survey entitled "Plat Showing Survey of Lease Property,"
dated December 1, 1992, revised November 20, 1996, prepared by John B. Benoit,
Registered Professional Land Surveyor, a copy of which said plat is attached
hereto and made a part hereof, said Plot C-2 having such dimensions and
boundaries as are shown on the attached plat of survey, together with all
improvements situated thereon.
It is the intention of vendors to convey and vendees to purchase all
rights of vendors in and to the beds of any public roads crossing or adjacent
to the property herein conveyed, if the bed of any such road should fall within
the area encompassed on the attached plat of survey.
<PAGE> 1
EXHIBIT 2.2
AGREEMENT AND PLAN OF SHARE EXCHANGE
This AGREEMENT AND PLAN OF SHARE EXCHANGE, dated as of ______________,
1997 (the "Agreement"), is by and between UNIFAB International, Inc., a
Louisiana corporation ("International"), and Universal Partners, Inc., a
Louisiana corporation ("Partners").
WITNESSETH:
WHEREAS, Partners is the owner of 510 shares of Class A common stock,
$1.00 par value per share (the "Shares"), of Universal Fabricators
Incorporated, a Delaware close corporation ("Fabricators"), which represent all
of the issued and outstanding shares of Class A common stock of Fabricators;
WHEREAS, it is the parties mutual intent that the exchange of the Shares
contemplated by this Agreement be part of plan of reorganization of Partners
that constitutes a tax-free reorganization under Section 368 of the Internal
Revenue Code and that immediately following the Closing, Partners will enter
into a plan of liquidation pursuant to which it will pay or provide for the
payment of liabilities of Partners and distribute the New Shares (as defined
herein) and all remaining assets of Partners to the shareholders of Partners.
WHEREAS, Partners desires to exchange the Shares for shares of common
stock, $0.01 par value per share, of International ("International Common
Stock");
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements set forth herein and in reliance upon the undertakings,
representations, warranties and indemnities contained herein, International and
Partners hereby agree as follows:
ARTICLE 1
EXCHANGE OF SHARES; CLOSING
Section 1.1 Sale of Shares. Subject to the terms and conditions
herein stated, Partners agrees at the Closing to exchange with full title
guarantee, transfer, assign and deliver to International, and International
agrees to acquire from Partners, the Shares, free and clear of any and all
Liens.
Section 1.2 Consideration. In consideration for its acquisition of
the Shares, International agrees at the Closing to issue and deliver 1,785,000
shares of International Common Stock (the "New Shares") to Partners.
Section 1.3 Closing. The Closing shall take place simultaneously with
the Closing Time of the public offering of the shares of International Common
Stock pursuant to that certain Underwriting Agreement (the "Underwriting
Agreement"), by and among International, Fabricators,
- 1 -
<PAGE> 2
Partners, McDermott Incorporated ("McDermott") and Morgan Keegan & Company,
Inc. and Stephens Inc. (as representatives of the several underwriters named
therein) and the other transactions contemplated by that certain Transition
Agreement dated as of _________________, 1997 by and among Partners,
International, Fabricators, Universal Partners, Inc. and Dailey J. Berard.
Section 1.4 Deliveries at Closing. At the Closing (a) International
shall deliver to Partners one or more certificates representing the New Shares
and (b) Partners shall deliver to International one or more certificates
representing the Shares duly endorsed to International, which shall transfer to
International good title to the Shares free and clear of any adverse claim or
Lien.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF PARTNERS
Partners represents and warrants to International as of the date hereof
as follows:
Section 2.1 Ownership. Partners is the sole record and beneficial
owner of the Shares, which are represented by Certificate Number 1. Partners
has good and marketable title to the Shares and the absolute right to deliver
the Shares in accordance with the terms of this Agreement, free and clear of
all Liens. The transfer of the Shares to International in accordance with the
terms of this Agreement transfers good and marketable title to the Shares to
International free and clear of all Liens, restrictions, rights, options and
claims of every kind.
Section 2.2 Authority; Enforceability. Partners has full legal right,
power and authority to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby. This Agreement has been duly
executed and delivered by Partners and constitutes, and each other agreement,
instrument or documents executed or to be executed by Partners in connection
with the transactions contemplated hereby has been duly executed and delivered
by Partners and constitutes a valid and legally binding obligation of Partners
enforceable against Partners in accordance with their respective terms, except
as (a) enforceability may be limited by applicable bankruptcy, insolvency,
fraudulent transfer, moratorium or similar laws from time to time in effect
affecting creditors' rights generally and (b) the availability of equitable
remedies may be limited by equitable principles of general applicability.
Section 2.3 No Conflict. Neither the execution and the delivery of
this Agreement by Partners, nor the consummation of the transactions
contemplated hereby (a) violate, conflict with, or result in a breach of any
provisions of, (b) constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, (c) result in the
termination of or accelerate the performance required by, (d) result in the
creation of any Lien upon the Shares under any of the terms, conditions or
provisions of the Articles of Incorporation or Bylaws of Partners or, to any
material extent, under the terms and conditions of any note, bond, mortgage,
indenture, deed of trust, lease, license, loan agreement or other instrument or
obligation to or by which Partners or any of its assets are bound, or (e) to
any material extent, violate any Applicable Law binding upon Partners or any of
its assets.
- 2 -
<PAGE> 3
Section 2.4 No Other Representations or Warranties. Except as set
forth above in this Section 2, no other representations or warranties, express
or implied, are made in this Agreement by Partners to International.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF INTERNATIONAL
International represents and warrants to Partners as of the date hereof
as follows:
Section 3.1 Organization. International is a corporation duly
organized, validly existing and in good standing under the laws of Louisiana
and has all requisite corporate power and authority to own its properties and
carry on its business as now being conducted.
Section 3.2 Capitalization. As of the date of this Agreement, the
authorized capital stock of International consists of 20,000,000 shares of
common stock, $0.01 par value per share, one share of which is validly issued
and outstanding, and 5,000,000 shares of preferred stock, no par value, none of
which are outstanding.
Section 3.3 Authority; Enforceability. International has the
requisite corporate power and authority to execute and deliver this Agreement
and to carry out its obligations hereunder. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of International and no other corporate proceedings on the part of
International are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly executed and
delivered by International and constitutes a valid and binding obligation of
International, enforceable against International in accordance with its terms,
except as (a) enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent transfer, moratorium or similar laws from time to time
in effect affecting creditors' rights generally and (b) the availability of
equitable remedies may be limited by equitable principles of general
applicability.
Section 3.4 No Conflict. Neither the execution and delivery of this
Agreement by International, nor the consummation of the transactions
contemplated hereby, do or will (a) violate, conflict with, or result in a
breach of any provisions of, (b) constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, (c) result
in the termination of or accelerate the performance required by, (d) result in
the creation of a Lien upon the New Shares under any of the terms, conditions
or provisions of the Articles of Incorporation or Bylaws of International or
any note, bond, mortgage, indenture, deed of trust, lease, license, loan
agreement or other instrument or obligation to or by which International or any
of its assets are bound, or (e) violate any Applicable Law binding upon
International and on any of its assets.
- 3 -
<PAGE> 4
Section 3.5 International Common Stock. All shares of International
Common Stock to be issued pursuant to this Agreement will be, when issued, duly
authorized, validly issued, fully paid and non-assessable.
Section 3.6 No Other Representations or Warranties. Except as set
forth above in this Section 3, no other representations or warranties, express
or implied, are made in this Agreement by International to Partners.
ARTICLE 4
INDEMNIFICATION; REMEDIES
Section 4.1 Indemnification by Partners. Except as otherwise
expressly provided in this Article 4, Partners, as its sole obligation and the
exclusive remedy of International and each of International's officers,
directors, employees, Affiliates, successors and assigns (International and
such persons being collectively referred to herein as "International's
Indemnified Persons"), shall defend, indemnify and hold harmless
International's Indemnified Persons, and shall reimburse International's
Indemnified Persons, for, from and against, each and every demand, claim,
action, loss (which shall include any diminution in value), liability,
judgment, damage, cost and expense (including, without limitation, interest,
penalties, costs of preparation and investigation, and the reasonable fees,
disbursements and expenses of attorneys, accountants and other professional
advisors) (collectively, "Losses") imposed on or incurred by International's
Indemnified Persons, directly or indirectly, relating to, resulting from or
arising out of: (a) any inaccuracy in any representation or warranty of
Partners in this Agreement, whether or not International's Indemnified Persons
relied thereon or had knowledge thereof, or (b) any breach or nonperformance of
any covenant, agreement or other obligation of Partners under this Agreement or
any certificate, document or other instrument delivered or to be delivered
pursuant hereto.
Section 4.2 Indemnification by International. Except as otherwise
expressly provided in this Article 4, International, as its sole obligation and
the exclusive remedy of Partners and each of Partners' officers, directors,
employees, Affiliates, successors and assigns (Partners and such persons being
collectively referred to herein as "Partners' Indemnified Persons"), shall
defend, indemnify and hold harmless Partners' Indemnified Persons, and shall
reimburse Partners' Indemnified Persons for, from and against all Losses
imposed on or incurred by Partners' Indemnified Persons, directly or
indirectly, relating to, resulting from or arising out of: (a) any inaccuracy
in any representation or warranty of International in this Agreement, whether
or not Partners' Indemnified Persons relied thereon or had knowledge thereof or
(b) any breach or nonperformance of any covenant, agreement or other obligation
of International under this Agreement or any certificate, document or other
instrument delivered or to be delivered pursuant hereto.
Section 4.3 Notice and Defense of Third Party Claims. If any third
party demand, claim, action or proceeding shall be brought or asserted under
this Article 4 against an indemnified party or any successor thereto (the
"Indemnified Person") in respect of which indemnity may be sought under this
Article 4 from an indemnifying person or any successor thereto (the
"Indemnifying Person"), the Indemnified Person shall give prompt written notice
thereof to the Indemnifying
- 4 -
<PAGE> 5
Person who shall have the right to assume its defense, including the hiring of
counsel reasonably satisfactory to the Indemnified Person and the payment of
all expenses; except that any delay or failure to so notify the Indemnifying
Person shall relieve the Indemnifying Person of its obligations under this
Article 4 only to the extent, if at all, that it is prejudiced by reason of
such delay or failure. The Indemnified Person shall have the right to employ
separate counsel in any of the foregoing actions, claims or proceedings and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of the Indemnified Person unless both the Indemnified
Person and the Indemnifying Person are named as parties and the Indemnifying
Person and the Indemnified Person shall in good faith agree that representation
by the same counsel is inappropriate. In the event that the Indemnifying
Person, within ten days after notice of any such action or claim, does not
assume the defense thereof, the Indemnified Person shall have the right to
undertake the defense, compromise or settlement of such action, claim or
proceeding for the account of the Indemnifying Person, subject to the right of
the Indemnifying Person to assume the defense of such action, claim or
proceeding with counsel reasonably satisfactory to the Indemnified Person at
any time prior to the settlement, compromise or final determination thereof.
Anything in this Article 4 to the contrary notwithstanding, the Indemnifying
Person shall not, without the Indemnified Person's prior consent, settle or
compromise any action or claim or consent to the entry of any judgment with
respect to any action, claim or proceeding for anything other than money
damages paid by the Indemnifying Person. The Indemnifying Person may, without
the Indemnified Person's prior consent, settle or compromise any such action,
claim or proceeding or consent to entry of any judgment with respect to any
such action or claim that requires solely the payment of money damages by the
Indemnifying Person and that includes as an unconditional term thereof the
release by the claimant or the plaintiff of the Indemnified Person from all
liability in respect of such action, claim or proceeding.
ARTICLE 5
DEFINED TERMS
Section 5.1 Definitions. In addition to the other defined terms used
herein, as used in this Agreement, the following terms when capitalized have
the meanings indicated.
"Affiliate" shall have the meaning ascribed by Rule 12b-2 promulgated
under the Exchange Act.
"Applicable Law" shall mean any statute, law, rule or regulation or any
judgement, order, writ, injunction or decree of any Governmental Entity to
which a specified Person or its property is subject.
"Closing" means the consummation of the transactions contemplated by
this Agreement.
"Governmental Entity" shall mean any court or tribunal in any
jurisdiction or any public, governmental or regulatory body, agency,
department, commission, board, bureau or other authority or instrumentality.
- 5 -
<PAGE> 6
"Liens" shall mean pledges, liens, defects, leases, licenses, equities,
options, rights to buy, conditional sales contracts, charges, claims,
encumbrances, security interests, easements, restrictions, chattel mortgages,
mortgages or deeds of trust, of any kind or nature whatsoever.
ARTICLE 6
MISCELLANEOUS
Section 6.1 Survival of Representations, Warranties and Agreements.
The representations, warranties, covenants and agreements in this Agreement or
in any instrument delivered pursuant to this Agreement shall survive the
Closing and shall not be limited or affected by any investigation by or on
behalf of any party hereto.
Section 6.2 Notices. All notices hereunder must be in writing and
shall be deemed to have been given upon receipt of delivery by: (a) personal
delivery to the designated individual, (b) certified or registered mail,
postage prepaid, return receipt requested, (c) a nationally recognized
overnight courier service (against a receipt therefor) or (d) facsimile
transmission with confirmation of receipt. All such notices must be addressed
as follows or such other address as to which any party hereto may have notified
the other in writing:
If to International, to:
P. O. Box 11308
New Iberia, Louisiana 70562-1308
Attention: Dailey J. Berard
Facsimile transmission No.: (318) 365-3711
If to Partners, to:
P. O. Box 11308
New Iberia, Louisiana 70562-1308
Attention: Dailey J. Berard
Facsimile transmission No.: (318) 365-3711
Section 6.3 Headings; Gender. When a reference is made in this
Agreement to a section, exhibit or schedule, such reference shall be to a
section, exhibit or schedule of this Agreement unless otherwise indicated. The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. All personal pronouns used in this Agreement shall include the
other genders, whether used in the masculine, feminine or neuter gender, and
the singular shall include the plural and vice versa, whenever and as often as
may be appropriate.
Section 6.4 Entire Agreement; No Third Party Beneficiaries. This
Agreement (including the documents, exhibits and instruments referred to
herein) (a) constitutes the entire agreement and supersedes all prior
agreements, and understandings and communications, both written and oral,
- 6 -
<PAGE> 7
among the parties with respect to the subject matter hereof, and (b) is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
Section 6.5 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Louisiana without regard
to any applicable principles of conflicts of law.
Section 6.6 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other party.
Section 6.7 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by reason of any
rule of law or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any adverse manner to either party. Upon such determination that
any term or other provision is invalid, illegal or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible, and in any case such term or provision shall
be deemed amended to the extent necessary to make it no longer invalid, illegal
or unenforceable.
Section 6.8 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute one and the same document.
Section 6.9 Amendment and Modification. This Agreement may not be
amended or modified except by an instrument in writing signed by each of the
parties hereto.
Section 6.10 Limitation of Liability. Notwithstanding any other
provision of this Agreement, in no event shall any party hereto be liable to
any other party hereto with respect to breach or violation of any provision in
this Agreement, whether based on contract, tort (including negligence), strict
liability or other theory of law or equity, for loss of anticipated profits or
consequential loss or damage of any nature arising at any time or from any
cause whatsoever.
- 7 -
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed themselves or by their respective duly authorized officers as of the
date first written above.
UNIFAB INTERNATIONAL, INC.
By:
---------------------------------------------
Dailey J. Berard, President
UNIVERSAL PARTNERS, INC.
By:
---------------------------------------------
Dailey J. Berard, President
- 8 -
<PAGE> 1
EXHIBIT 2.3
SHARE EXCHANGE AGREEMENT
This SHARE EXCHANGE AGREEMENT, dated as of ______________, 1997 (the
"Agreement"), is by and between UNIFAB International, Inc., a Louisiana
corporation ("International"), and McDermott Incorporated, a Delaware
corporation ("McDermott").
WITNESSETH:
WHEREAS, McDermott is the owner of 490 shares of Class B common stock,
$1.00 par value per share (the "Shares"), of Universal Fabricators
Incorporated, a Delaware corporation ("Fabricators"), which represent all of
the issued and outstanding shares of Class B common stock of Fabricators; and
WHEREAS, McDermott desires to exchange the Shares for shares of common
stock, $0.01 par value per share, of International ("International Common
Stock"), and to sell such shares of International Common Stock pursuant to an
underwriting agreement dated September ___, 1997 (the "Underwriting
Agreement"), by and among International, Fabricators, Partners, McDermott and
Morgan Keegan & Company, Inc. and Stephens Inc. (as representatives of the
several underwriters named therein);
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements set forth herein and in reliance upon the undertakings,
representations, warranties and indemnities contained herein, International and
McDermott hereby agree as follows:
ARTICLE 1
EXCHANGE OF SHARES; CLOSING
Section 1.1 Sale of Shares. Subject to the terms and conditions
herein stated, McDermott agrees at the Closing to exchange with full title
guarantee, transfer, assign and deliver to International, and International
agrees to acquire from McDermott, the Shares, free and clear of any and all
Liens.
Section 1.2 Consideration. In consideration for its acquisition of
the Shares, International agrees at the Closing to issue and deliver 1,715,000
shares of International Common Stock (the "New Shares") to McDermott.
Section 1.3 Closing. The Closing shall take place simultaneously with
the Closing Time of the public offering of the New Shares and other shares of
International Common Stock pursuant to the Underwriting Agreement and the other
transactions contemplated by that certain Transition Agreement dated as of
_________________, 1997 by and among McDermott, International, Fabricators,
Universal Partners, Inc. and Dailey J. Berard.
- 1 -
<PAGE> 2
Section 1.4 Deliveries at Closing. At the Closing (a) International
shall deliver to McDermott one or more certificates representing the New Shares
and (b) McDermott shall deliver to International one or more certificates
representing the Shares duly endorsed to International, which shall transfer to
International good title to the Shares free and clear of any Lien.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF MCDERMOTT
McDermott represents and warrants to International as of the date hereof
as follows:
Section 2.1 Ownership. McDermott is the sole record and beneficial
owner of the Shares, which are represented by Certificate Number 2. McDermott
has good and marketable title to the Shares and the absolute right to deliver
the Shares in accordance with the terms of this Agreement, free and clear of
all Liens. The transfer of the Shares to International in accordance with the
terms of this Agreement transfers good and marketable title to the Shares to
International free and clear of all Liens, restrictions, rights, options and
claims of every kind.
Section 2.2 Authority; Enforceability. McDermott has full legal
right, power and authority to execute, deliver and perform this Agreement and
to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by McDermott and constitutes, and each other
agreement, instrument or documents executed or to be executed by McDermott in
connection with the transactions contemplated hereby has been duly executed and
delivered by McDermott and constitutes a valid and legally binding obligation
of McDermott enforceable against McDermott in accordance with their respective
terms, except as (a) enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent transfer, moratorium or similar laws from time to time
in effect affecting creditors' rights generally and (b) the availability of
equitable remedies may be limited by equitable principles of general
applicability.
Section 2.3 No Conflict. Neither the execution and the delivery of
this Agreement by McDermott, nor the consummation of the transactions
contemplated hereby (a) violate, conflict with, or result in a breach of any
provisions of, (b) constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, (c) result in the
termination of or accelerate the performance required by, (d) result in the
creation of any Lien upon the Shares under any of the terms, conditions or
provisions of the Certificate of Incorporation or Bylaws of McDermott or, to
any material extent, under the terms and conditions of any note, bond,
mortgage, indenture, deed of trust, lease, license, loan agreement or other
instrument or obligation to or by which McDermott or any of its assets are
bound, or (e) to any material extent, violate any Applicable Law binding upon
McDermott or any of its assets.
Section 2.4 No Other Representations or Warranties. Except as set
forth above in this Section 2, no other representations or warranties, express
or implied, are made in this Agreement by McDermott to International.
- 2 -
<PAGE> 3
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF INTERNATIONAL
International represents and warrants to McDermott as of the date hereof
as follows:
Section 3.1 Organization. International is a corporation duly
organized, validly existing and in good standing under the laws of Louisiana
and has all requisite corporate power and authority to own its properties and
carry on its business as now being conducted.
Section 3.2 Capitalization. As of the date of this Agreement, the
authorized capital stock of International consists of 20,000,000 shares of
common stock, $0.01 par value per share, one share of which is validly issued
and outstanding, and 5,000,000 shares of preferred stock, no par value, none of
which are outstanding.
Section 3.3 Authority; Enforceability. International has the
requisite corporate power and authority to execute and deliver this Agreement
and to carry out its obligations hereunder. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of International and no other corporate proceedings on the part of
International are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly executed and
delivered by International and constitutes a valid and binding obligation of
International, enforceable against International in accordance with its terms,
except as (a) enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent transfer, moratorium or similar laws from time to time
in effect affecting creditors' rights generally and (b) the availability of
equitable remedies may be limited by equitable principles of general
applicability.
Section 3.4 No Conflict. Neither the execution and delivery of this
Agreement by International, nor the consummation of the transactions
contemplated hereby, do or will (a) violate, conflict with, or result in a
breach of any provisions of, (b) constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, (c) result
in the termination of or accelerate the performance required by, (d) result in
the creation of a Lien upon the New Shares under any of the terms, conditions
or provisions of the Articles of Incorporation or Bylaws of International or
any note, bond, mortgage, indenture, deed of trust, lease, license, loan
agreement or other instrument or obligation to or by which International or any
of its assets are bound, or (e) violate any Applicable Law binding upon
International and on any of its assets.
Section 3.5 International Common Stock. All shares of International
Common Stock to be issued pursuant to this Agreement will be, when issued, duly
authorized, validly issued, fully paid and non-assessable.
- 3 -
<PAGE> 4
Section 3.6 No Other Representations or Warranties. Except as set
forth above in this Section 3, no other representations or warranties, express
or implied, are made in this Agreement by International to McDermott.
ARTICLE 4
INDEMNIFICATION; REMEDIES
Section 4.1 Indemnification by McDermott. Except as otherwise
expressly provided in this Article 4, McDermott, as its sole obligation and the
exclusive remedy of International and each of International's officers,
directors, employees, Affiliates, successors and assigns (International and
such persons being collectively referred to herein as "International's
Indemnified Persons"), shall defend, indemnify and hold harmless
International's Indemnified Persons, and shall reimburse International's
Indemnified Persons, for, from and against, each and every demand, claim,
action, loss, liability, judgment, damage, cost and expense (including, without
limitation, interest, penalties, costs of preparation and investigation, and
the reasonable fees, disbursements and expenses of attorneys, accountants and
other professional advisors) (collectively, "Losses") imposed on or incurred by
International's Indemnified Persons, directly or indirectly, relating to,
resulting from or arising out of: (a) any inaccuracy in any representation or
warranty of McDermott in this Agreement, whether or not International's
Indemnified Persons relied thereon or had knowledge thereof, or (b) any breach
or nonperformance of any covenant, agreement or other obligation of McDermott
under this Agreement or any certificate, document or other instrument delivered
or to be delivered pursuant hereto.
Section 4.2 Indemnification by International. Except as otherwise
expressly provided in this Article 4, International, as its sole obligation and
the exclusive remedy of McDermott and each of McDermott's officers, directors,
employees, Affiliates, successors and assigns (McDermott and such persons being
collectively referred to herein as "McDermott's Indemnified Persons"), shall
defend, indemnify and hold harmless McDermott's Indemnified Persons, and shall
reimburse McDermott's Indemnified Persons for, from and against all Losses
imposed on or incurred by McDermott's Indemnified Persons, directly or
indirectly, relating to, resulting from or arising out of: (a) any inaccuracy
in any representation or warranty of International in this Agreement, whether
or not McDermott's Indemnified Persons relied thereon or had knowledge thereof,
or (b) any breach or nonperformance of any covenant, agreement or other
obligation of International under this Agreement or any certificate, document
or other instrument delivered or to be delivered pursuant hereto.
Section 4.3 Notice and Defense of Third Party Claims. If any third
party demand, claim, action or proceeding shall be brought or asserted under
this Article 4 against an indemnified party or any successor thereto (the
"Indemnified Person") in respect of which indemnity may be sought under this
Article 4 from an indemnifying person or any successor thereto (the
"Indemnifying Person"), the Indemnified Person shall give prompt written notice
thereof to the Indemnifying Person who shall have the right to assume its
defense, including the hiring of counsel reasonably satisfactory to the
Indemnified Person and the payment of all expenses; except that any delay or
- 4 -
<PAGE> 5
failure to so notify the Indemnifying Person shall relieve the Indemnifying
Person of its obligations under this Article 4 only to the extent, if at all,
that it is prejudiced by reason of such delay or failure. The Indemnified
Person shall have the right to employ separate counsel in any of the foregoing
actions, claims or proceedings and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of the
Indemnified Person unless both the Indemnified Person and the Indemnifying
Person are named as parties and the Indemnifying Person and the Indemnified
Person shall in good faith agree that representation by the same counsel is
inappropriate. In the event that the Indemnifying Person, within ten days
after notice of any such action or claim, does not assume the defense thereof,
the Indemnified Person shall have the right to undertake the defense,
compromise or settlement of such action, claim or proceeding for the account of
the Indemnifying Person, subject to the right of the Indemnifying Person to
assume the defense of such action, claim or proceeding with counsel reasonably
satisfactory to the Indemnified Person at any time prior to the settlement,
compromise or final determination thereof. Anything in this Article 4 to the
contrary notwithstanding, the Indemnifying Person shall not, without the
Indemnified Person's prior consent, settle or compromise any action or claim or
consent to the entry of any judgment with respect to any action, claim or
proceeding for anything other than money damages paid by the Indemnifying
Person. The Indemnifying Person may, without the Indemnified Person's prior
consent, settle or compromise any such action, claim or proceeding or consent
to entry of any judgment with respect to any such action or claim that requires
solely the payment of money damages by the Indemnifying Person and that
includes as an unconditional term thereof the release by the claimant or the
plaintiff of the Indemnified Person from all liability in respect of such
action, claim or proceeding.
ARTICLE 5
DEFINED TERMS
Section 5.1 Definitions. In addition to the other defined terms used
herein, as used in this Agreement, the following terms when capitalized have
the meanings indicated.
"Affiliate" shall have the meaning ascribed by Rule 12b-2 promulgated
under the Exchange Act.
"Applicable Law" shall mean any statute, law, rule or regulation or any
judgement, order, writ, injunction or decree of any Governmental Entity to
which a specified Person or its property is subject.
"Closing" means the consummation of the transactions contemplated by
this Agreement.
"Governmental Entity" shall mean any court or tribunal in any
jurisdiction or any public, governmental or regulatory body, agency,
department, commission, board, bureau or other authority or instrumentality.
"Liens" shall mean pledges, liens, defects, leases, licenses, equities,
options, rights to buy, conditional sales contracts, charges, claims,
encumbrances, security interests, easements, restrictions, chattel mortgages,
mortgages or deeds of trust, of any kind or nature whatsoever.
- 5 -
<PAGE> 6
ARTICLE 6
MISCELLANEOUS
Section 6.1 Survival of Representations, Warranties and Agreements.
The representations, warranties, covenants and agreements in this Agreement or
in any instrument delivered pursuant to this Agreement shall survive the
Closing and shall not be limited or affected by any investigation by or on
behalf of any party hereto.
Section 6.2 Notices. All notices hereunder must be in writing and
shall be deemed to have been given upon receipt of delivery by: (a) personal
delivery to the designated individual, (b) certified or registered mail,
postage prepaid, return receipt requested, (c) a nationally recognized
overnight courier service (against a receipt therefor) or (d) facsimile
transmission with confirmation of receipt. All such notices must be addressed
as follows or such other address as to which any party hereto may have notified
the other in writing:
If to International, to:
P. O. Box 11308
New Iberia, Louisiana 70562-1308
Attention: Dailey J. Berard
Facsimile transmission No.: (318) 365-3711
If to McDermott, to:
1450 Poydras Street
P. O. Box 60035
New Orleans, Louisiana 70160
Attention: E. Allen Womack, Jr.
Senior Vice President and Chief Technical Officer
Facsimile transmission No.: (504) 587-5280
Section 6.3 Headings; Gender. When a reference is made in this
Agreement to a section, exhibit or schedule, such reference shall be to a
section, exhibit or schedule of this Agreement unless otherwise indicated. The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. All personal pronouns used in this Agreement shall include the
other genders, whether used in the masculine, feminine or neuter gender, and
the singular shall include the plural and vice versa, whenever and as often as
may be appropriate.
Section 6.4 Entire Agreement; No Third Party Beneficiaries. This
Agreement (including the documents, exhibits and instruments referred to
herein) (a) constitutes the entire agreement and supersedes all prior
agreements, and understandings and communications, both written and oral, among
the parties with respect to the subject matter hereof, and (b) is not intended
to confer upon any person other than the parties hereto any rights or remedies
hereunder.
- 6 -
<PAGE> 7
Section 6.5 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Louisiana without regard
to any applicable principles of conflicts of law.
Section 6.6 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other party.
Section 6.7 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by reason of any
rule of law or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any adverse manner to either party. Upon such determination that
any term or other provision is invalid, illegal or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible, and in any case such term or provision shall
be deemed amended to the extent necessary to make it no longer invalid, illegal
or unenforceable.
Section 6.8 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute one and the same document.
Section 6.9 Amendment and Modification. This Agreement may not be
amended or modified except by an instrument in writing signed by each of the
parties hereto.
Section 6.10 Limitation of Liability. Notwithstanding any other
provision of this Agreement, in no event shall any party hereto be liable to
any other party hereto with respect to breach or violation of any provision in
this Agreement, whether based on contract, tort (including negligence), strict
liability or other theory of law or equity, for loss of anticipated profits or
consequential loss or damage of any nature arising at any time or from any
cause whatsoever.
- 7 -
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed themselves or by their respective duly authorized officers as of the
date first written above.
UNIFAB INTERNATIONAL, INC.
By:
------------------------------------
Dailey J. Berard, President
MCDERMOTT INCORPORATED
By:
------------------------------------
Name:
Title:
- 8 -
<PAGE> 1
EXHIBIT 4.2
LOGO
UNIFAB INTERNATIONAL, INC.
COMMON STOCK
NUMBER
C
INCORPORATED UNDER THE LAWS
OF THE STATE OF LOUISIANA
COMMON STOCK
SHARES
CUSIP 90467L 10 0
SEE REVERSE FOR CERTAIN DEFINITIONS
This Certifies that
SPECIMEN
is the record holder of
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, NO PAR VALUE PER SHARE, OF
UNIFAB INTERNATIONAL, INC.
transferable on the books of the Corporation in person, or by duly authorized
attorney, upon surrender of this Certificate properly endorsed. This
Certificate is not valid until countersigned by the Transfer Agent and
registered by the Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
CORPORATE SEAL
SPECIMEN
SECRETARY
SPECIMEN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
COUNTERSIGNED AND REGISTERED:
HARRIS TRUST AND SAVINGS BANK
(DALLAS, TX)
TRANSFER AGENT AND REGISTRAR
AUTHORIZED SIGNATURE
The following abbreviations, when used in the inscription of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- ....Custodian....
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right of under Uniform
survivorship and not as tenants Gifts to Minors
in common Act..............
(State)
Additional abbreviations may also be used though not in the above list.
For value received, hereby sell, assign and transfer unto
----------------------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
of the Shares of Common Stock represented by the within Certificate, and do
hereby irrevocably constitute and appoint
Attorney
- -------------------------------------------------------------------
to transfer the said stock on the books of the within named Company with full
power of substitution in the premises.
Dated
-----------
--------------------------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH
THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE
IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed:
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
<PAGE> 1
EXHIBIT 5.1
[JONES, WALKER, WAECHTER, POITEVENT,
CARRERE & DENEGRE, L.L.P. LETTERHEAD]
August 29, 1997
UNIFAB International, Inc.
5007 Port Road
New Iberia, Louisiana 70562
RE: UNIFAB International, Inc.
Registration Statement on Form S-1
$51,796,000 of Common Stock
Gentlemen:
We have acted as your counsel in connection with the preparation of a
registration statement on Form S-1 (Registration Statement No. 333-31609), as
amended by Amendments No. 1 and 2 thereto (as amended, the "Registration
Statement"), filed by UNIFAB International, Inc. (the "Company") with the
Securities and Exchange Commission, relating to the registration of the sale of
up to $51,796,000 of shares of Common Stock, $.01 par value per share (the
"Shares"), of the Company.
In so acting, we have examined originals, or photostatic or certified
copies, of such records of the Company, certificates of officers of the Company
and of public officials, and such other documents as we have deemed relevant.
In such examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified or photostatic
copies and the authenticity of the originals of such documents.
Based upon the foregoing, we are of the opinion that the Shares, when
issued and sold upon the terms described in the Registration Statement, will be
legally issued and outstanding, fully paid and non-assessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us in the prospectus included
therein under the caption "Legal Matters." In giving this consent, we do not
admit that we are within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended, or the general rules
and regulations of the Commission promulgated thereunder.
Very truly yours,
/s/ JONES, WALKER, WAECHTER, POITEVENT,
CARRERE & DENEGRE, L.L.P.
JONES, WALKER, WAECHTER, POITEVENT,
CARRERE & DENEGRE, L.L.P.
<PAGE> 1
EXHIBIT 10.3
UNIFAB INTERNATIONAL, INC.
LONG-TERM INCENTIVE PLAN
1. PURPOSE. The purpose of the Long-Term Incentive Plan (the "Plan") of
UNIFAB International, Inc. ("UNIFAB") is to increase shareholder value and to
advance the interests of UNIFAB and its subsidiaries (collectively, the
"Company") by furnishing a variety of economic incentives (the "Incentives")
designed to attract, retain and motivate key employees, officers and directors
and to strengthen the mutuality of interests between such employees, officers
and directors and UNIFAB's shareholders. Incentives consist of opportunities to
purchase or receive shares of common stock, $.01 par value per share, of UNIFAB
(the "Common Stock"), on terms determined under the Plan. As used in the Plan,
the term "subsidiary" means any corporation of which UNIFAB owns (directly or
indirectly) within the meaning of Section 425(f) of the Internal Revenue Code
of 1986, as amended (the "Code"), 50% or more of the total combined voting
power of all classes of stock.
2. ADMINISTRATION.
2.1. COMPOSITION. The Plan shall be administered by the Compensation
Committee of the Board of Directors of UNIFAB or by a subcommittee thereof
(the "Committee"). The Committee shall consist of not fewer than two
members of the Board of Directors, each of whom shall (a) qualify as a
"non-employee director" under Rule 16b-3 under the Securities Exchange Act
of 1934 (the "1934 Act") or any successor rule, and (b) qualify as an
"outside director" under Section 162(m) of the Code.
2.2. AUTHORITY. The Committee shall have plenary authority to award
Incentives under the Plan, to interpret the Plan, to establish any rules
or regulations relating to the Plan that it determines to be appropriate,
to enter into agreements with participants as to the terms of the
Incentives (the "Incentive Agreements") and to make any other
determination that it believes necessary or advisable for the proper
administration of the Plan. Its decisions in matters relating to the Plan
shall be final and conclusive on the Company and participants. The
Committee may delegate its authority hereunder to the extent provided in
Section 3 hereof. The Committee shall not have authority to award
Incentives under the Plan to directors who are not also employees of the
Company ("Outside Directors"). Outside Directors may receive awards under
the Plan only as specifically provided in Section 9 hereof.
3. ELIGIBLE PARTICIPANTS. Key employees, officers, consultants and
advisors of the Company (including officers who also serve as directors of the
Company) shall become eligible to receive Incentives under the Plan when
designated by the Committee. Employees may be designated individually or by
groups or categories, as the Committee deems appropriate. With respect to
participants not subject to Section 16 of the 1934 Act or Section 162(m) of the
Code, the Committee may delegate to appropriate personnel of the Company its
authority to designate participants, to determine the size and type of
Incentives to be received by those participants and to determine or
-1-
<PAGE> 2
modify performance objectives for those participants. Outside Directors may
participate in the Plan only as specifically provided in Section 9 hereof.
4. TYPES OF INCENTIVES. Incentives may be granted under the Plan to
eligible participants in any of the following forms, either individually or in
combination, (a) incentive stock options and non-qualified stock options; (b)
restricted stock; and (c) other stock-based awards ("Other Stock-Based
Awards").
5. SHARES SUBJECT TO THE PLAN.
5.1. NUMBER OF SHARES. Subject to adjustment as provided in Section
10.5, a total of 460,000 shares of Common Stock are authorized to be
issued under the Plan. Incentives with respect to no more than 200,000
shares of Common Stock may be granted through the Plan to a single
participant in one calendar year. In the event that an Incentive granted
hereunder expires or is terminated or cancelled prior to exercise or
payment, any shares of Common Stock that were issuable thereunder may
again be issued under the Plan. In the event that shares of Common Stock
are issued as Incentives under the Plan and thereafter are forfeited or
reacquired by the Company pursuant to rights reserved upon issuance
thereof, such forfeited and reacquired shares may again be issued under
the Plan. If an Other Stock-Based Award is to be paid in cash by its
terms, the Committee need not make a deduction from the shares of Common
Stock issuable under the Plan with respect thereto. If and to the extent
that an Other Stock-Based Award may be paid in cash or shares of Common
Stock, the total number of shares available for issuance hereunder shall
be debited by the number of shares payable under such Incentive, provided
that upon any payment of all or part of such Incentive in cash, the total
number of shares available for issuance hereunder shall be credited with
the appropriate number of shares represented by the cash payment, as
determined in the sole discretion of the Committee. Additional rules for
determining the number of shares granted under the Plan may be made by the
Committee, as it deems necessary or appropriate.
5.2. TYPE OF COMMON STOCK. Common Stock issued under the Plan may be
authorized and unissued shares or issued shares held as treasury shares.
6. STOCK OPTIONS. A stock option is a right to purchase shares of Common
Stock from UNIFAB. Stock options granted under this Plan may be incentive stock
options or non-qualified stock options. Any option that is designated as a
non-qualified stock option shall not be treated as an incentive stock option.
Each stock option granted by the Committee under this Plan shall be subject to
the following terms and conditions:
6.1. PRICE. The exercise price per share shall be determined by the
Committee, subject to adjustment under Section 10.5; provided that in no
event shall the exercise price be less than the Fair Market Value of a
share of Common Stock on the date of grant, except that in connection with
an acquisition, consolidation, merger or other extraordinary transaction,
options may be granted at less than the then Fair Market Value in order to
-2-
<PAGE> 3
replace options previously granted by one or more parties to such
transaction (or their affiliates) so long as the aggregate spread on such
replacement options for any recipient of such options is equal to or less
than the aggregate spread on the options being replaced.
6.2. NUMBER. The number of shares of Common Stock subject to the
option shall be determined by the Committee, subject to Section 5.1 and
subject to adjustment as provided in Section 10.5.
6.3. DURATION AND TIME FOR EXERCISE. The term of each stock option
shall be determined by the Committee. Each stock option shall become
exercisable at such time or times during its term as shall be determined
by the Committee. Notwithstanding the foregoing, the Committee may
accelerate the exercisability of any stock option at any time, in addition
to the automatic acceleration of stock options under Section 10.11.
6.4. MANNER OF EXERCISE. A stock option may be exercised, in whole or
in part, by giving written notice to the Company, specifying the number of
shares of Common Stock to be purchased. The exercise notice shall be
accompanied by the full purchase price for such shares. The option price
shall be payable in United States dollars and may be paid by (a) cash; (b)
uncertified or certified check; (c) unless otherwise determined by the
Committee, by delivery of shares of Common Stock held by the optionee for
at least six months, which shares shall be valued for this purpose at the
Fair Market Value on the business day immediately preceding the date such
option is exercised; (d) unless otherwise determined by the Committee, by
delivering a properly executed exercise notice together with irrevocable
instructions to a broker approved by UNIFAB (with a copy to UNIFAB) to
promptly deliver to UNIFAB the amount of sale or loan proceeds to pay the
exercise price; or (e) in such other manner as may be authorized from time
to time by the Committee.
6.5. INCENTIVE STOCK OPTIONS. Notwithstanding anything in the Plan to
the contrary, the following additional provisions shall apply to the grant
of stock options that are intended to qualify as Incentive Stock Options
(as such term is defined in Section 422 of the Code):
A. Any Incentive Stock Option agreement authorized under the
Plan shall contain such other provisions as the Committee shall deem
advisable, but shall in all events be consistent with and contain or
be deemed to contain all provisions required in order to qualify the
options as Incentive Stock Options.
B. All Incentive Stock Options must be granted within ten years
from the date on which this Plan is adopted by the Board of
Directors.
C. Unless sooner exercised, all Incentive Stock Options shall
expire no later than ten years after the date of grant.
-3-
<PAGE> 4
D. No Incentive Stock Options shall be granted to any
participant who, at the time such option is granted, would own
(within the meaning of Section 422 of the Code) stock possessing more
than 10% of the total combined voting power of all classes of stock
of the employer corporation or of its parent or subsidiary
corporation.
E. The aggregate Fair Market Value (determined with respect to
each Incentive Stock Option as of the time such Incentive Stock
Option is granted) of the Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by a
participant during any calendar year (under the Plan or any other
plan of UNIFAB or any of its subsidiaries) shall not exceed $100,000.
To the extent that such limitation is exceeded, such options shall
not be treated, for federal income tax purposes, as Incentive Stock
Options.
7. RESTRICTED STOCK.
7.1. GRANT OF RESTRICTED STOCK. The Committee may award shares of
restricted stock to such officers and key employees as the Committee
determines pursuant to the terms of Section 3. An award of restricted
stock shall be subject to such restrictions on transfer and forfeitability
provisions and such other terms and conditions as the Committee may
determine, subject to the provisions of the Plan. An award of restricted
stock may also be subject to the attainment of specified performance goals
or targets. To the extent restricted stock is intended to qualify as
performance-based compensation under Section 162(m) of the Code, it must
be granted subject to the attainment of performance goals as described in
Section 7.2 below and meet the additional requirements imposed by Section
162(m).
7.2 PERFORMANCE-BASED RESTRICTED STOCK. To the extent that restricted
stock granted under the Plan is intended to vest based upon the
achievement of pre-established performance goals rather than solely upon
continued employment over a period of time, the performance goals pursuant
to which the restricted stock shall vest shall be any or a combination of
the following performance measures: earnings per share, return on assets,
an economic value added measure, shareholder return, earnings, stock
price, return on equity, return on total capital, safety performance,
reduction of expenses or increase in cash flow of UNIFAB, a division of
UNIFAB or a subsidiary. For any performance period, such performance
objectives may be measured on an absolute basis or relative to a group of
peer companies selected by the Committee, relative to internal goals or
relative to levels attained in prior years. The Committee may not waive
any of the pre-established performance goal objectives, except that such
objectives shall be waived as provided in Section 10.11 hereof, or as may
be provided by the Committee in the event of death, disability or
retirement.
7.3. THE RESTRICTED PERIOD. At the time an award of restricted stock
is made, the Committee shall establish a period of time during which the
transfer of the shares of restricted stock shall be restricted (the
"Restricted Period"). The Restricted Period shall be a minimum of three
years, except that if the vesting of the shares of restricted stock is
based upon the attainment of performance goals, a minimum Restricted
Period of one year is
-4-
<PAGE> 5
permitted. Each award of restricted stock may have a different Restricted
Period. The expiration of the Restricted Period shall also occur as
provided under Section 10.3 and under the conditions described in Section
10.11 hereof.
7.4. ESCROW. The participant receiving restricted stock shall enter
into an Incentive Agreement with the Company setting forth the conditions
of the grant. Certificates representing shares of restricted stock shall
be registered in the name of the participant and deposited with the
Company, together with a stock power endorsed in blank by the participant.
Each such certificate shall bear a legend in substantially the following
form:
The transferability of this certificate and the shares of Common
Stock represented by it are subject to the terms and conditions
(including conditions of forfeiture) contained in the UNIFAB
International, Inc. Long-Term Incentive Plan (the "Plan"), and an
agreement entered into between the registered owner and UNIFAB
International, Inc. thereunder. Copies of the Plan and the agreement
are on file at the principal office of UNIFAB International, Inc.
7.5. DIVIDENDS ON RESTRICTED STOCK. Any and all cash and stock
dividends paid with respect to the shares of restricted stock shall be
subject to any restrictions on transfer, forfeitability provisions or
reinvestment requirements as the Committee may, in its discretion,
prescribe in the Incentive Agreement.
7.6. FORFEITURE. In the event of the forfeiture of any shares of
restricted stock under the terms provided in the Incentive Agreement
(including any additional shares of restricted stock that may result from
the reinvestment of cash and stock dividends, if so provided in the
Incentive Agreement), such forfeited shares shall be surrendered and the
certificates cancelled. The participants shall have the same rights and
privileges, and be subject to the same forfeiture provisions, with respect
to any additional shares received pursuant to Section 10.5 due to a
recapitalization, merger or other change in capitalization.
7.7. EXPIRATION OF RESTRICTED PERIOD. Upon the expiration or
termination of the Restricted Period and the satisfaction of any other
conditions prescribed by the Committee, the restrictions applicable to the
restricted stock shall lapse and a stock certificate for the number of
shares of restricted stock with respect to which the restrictions have
lapsed shall be delivered, free of all such restrictions and legends,
except any that may be imposed by law, to the participant or the
participant's estate, as the case may be.
7.8. RIGHTS AS A SHAREHOLDER. Subject to the terms and conditions of
the Plan and subject to any restrictions on the receipt of dividends that
may be imposed in the Incentive Agreement, each participant receiving
restricted stock shall have all the rights of a shareholder with respect
to shares of stock during the Restricted Period, including without
limitation, the right to vote any shares of Common Stock.
-5-
<PAGE> 6
8. OTHER STOCK-BASED AWARDS.
8.1 TERMS OF OTHER STOCK-BASED AWARDS. The Committee is hereby
authorized to grant to eligible employees an "Other Stock-Based Award",
which shall consist of an award, the value of which is based in whole or
in part on the value of shares of Common Stock, that is not an instrument
or Award specified in Sections 6 or 7 of the Plan. Other Stock-Based
Awards may be awards of shares of Common Stock or may be denominated or
payable in, valued in whole or in part by reference to, or otherwise based
on or related to, shares of Common Stock (including, without limitation,
securities convertible or exchangeable into or exercisable for shares of
Common Stock), as deemed by the Committee consistent with the purposes of
the Plan. The Committee shall determine the terms and conditions of any
such Other Stock-Based Award and may provide that such awards would be
payable in whole or in part in cash. Except in the case of an Other
Stock-Based Award granted in assumption of or in substitution for an
outstanding award of a company acquired by the Company or with which the
Company combines, the price at which securities may be purchased pursuant
to any Other Stock-Based Award granted under this Plan, or the provision,
if any, of any such award that is analogous to the purchase or exercise
price, shall not be less than 100% of the fair market value of the
securities to which such award relates on the date of grant.
8.2 DIVIDEND EQUIVALENTS. In the sole and complete discretion of the
Committee, an Other Stock-Based Award under this Section 8 may provide the
holder thereof with dividends or dividend equivalents, payable in cash or
shares of Common Stock on a current or deferred basis.
8.3 PERFORMANCE GOALS. Other Stock-Based Awards intended to qualify
as "performance-based compensation" under Section 162(m) of the Code shall
be paid based upon the achievement of pre-established performance goals.
The performance goals pursuant to which Other Stock-Based Awards granted
under the Plan shall be earned shall be any or a combination of the
following performance measures: earnings per share, return on assets, an
economic value added measure, shareholder return, earnings, stock price,
return on equity, return on total capital, safety performance, reduction
of expenses or increase in cash flow of the Company, a division of the
Company or a subsidiary. For any performance period, such performance
goals may be measured on an absolute basis or relative to a group of peer
companies selected by the Committee, relative to internal goals or
relative to levels attained in prior years. The Committee may not waive
any of the pre-established performance goal objectives if such Other
Stock-Based Award is intended to constitute "performance-based
compensation" under Section 162(m), except that such objectives shall be
waived as provided in Section 10.11 hereof, or as may be provided by the
Committee in the event of death, disability or retirement.
8.4. NOT A SHAREHOLDER. The grant of an Other Stock-Based Award to a
participant shall not create any rights in such participant as a
shareholder of the Company,
-6-
<PAGE> 7
until the issuance of shares of Common Stock with respect to an award, at
which time such stock shall be considered issued and outstanding.
9. STOCK OPTIONS FOR OUTSIDE DIRECTORS.
9.1 GRANT OF OPTIONS. Upon consummation of the Company's initial
public offering (the "IPO") of its Common Stock, each Outside Directors
shall be granted non-qualified options to purchase 2,500 shares of Common
Stock. In addition, beginning with the 1998 annual meeting of shareholders
and for as long as the Plan remains in effect and shares of Common Stock
remain available for issuance hereunder, each Outside Director shall be
automatically granted a non-qualified stock option on the day of the
annual meeting of stockholders of UNIFAB, provided such Outside Director
continues to serve as a director after such annual meeting. An option to
purchase no more than 2,500 shares shall be automatically granted to each
Outside Director on the date of each annual meeting, the exact number of
which shall be set by the Committee.
9.2 EXERCISABILITY OF STOCK OPTIONS. The stock options granted to
Outside Directors under this Section 9 shall become exercisable
immediately and shall expire ten years following the date of grant.
9.3 EXERCISE PRICE. The exercise price of the options granted upon
consummation of the IPO shall be equal to the IPO price. The exercise
price of the options granted to Outside Directors on the date of each
annual meeting shall be equal to the Fair Market Value, as defined in the
Plan, of a share of Common Stock on the date of grant. The exercise price
may be paid as provided in Section 6.4 hereof.
9.4 EXERCISE AFTER TERMINATION OF BOARD SERVICE. In the event an
Outside Director ceases to serve on the Board, the stock options granted
hereunder must be exercised, to the extent otherwise exercisable at the
time of termination of Board service, within one year from termination of
Board service; provided, however, that in the event of termination of
Board service as a result of retirement on or after reaching age 65, the
stock options must be exercised within five years from the date of
retirement; and further provided, that no stock options may be exercised
later than ten years after the date of grant.
10. GENERAL.
10.1. DURATION. Subject to Section 10.10, the Plan shall remain in
effect until all Incentives granted under the Plan have either been
satisfied by the issuance of shares of Common Stock or the payment of cash
or been terminated under the terms of the Plan and all restrictions
imposed on shares of Common Stock in connection with their issuance under
the Plan have lapsed.
10.2. TRANSFERABILITY. No Incentives granted hereunder may be
transferred, pledged, assigned or otherwise encumbered by a participant
except: (a) by will; (b) by the
-7-
<PAGE> 8
laws of descent and distribution; (c) pursuant to a domestic relations
order, as defined in the Code, if permitted by the Committee and so
provided in the Incentive Agreement or an amendment thereto; or (d) as to
options only, if permitted by the Committee and so provided in the
Incentive Agreement or an amendment thereto, (i) to Immediate Family
Members, (ii) to a partnership in which Immediate Family Members, or
entities in which Immediate Family Members are the sole owners, members or
beneficiaries, as appropriate, are the sole partners, (iii) to a limited
liability company in which Immediate Family Members, or entities in which
Immediate Family Members are the sole owners, members or beneficiaries, as
appropriate, are the sole members, or (iv) to a trust for the sole benefit
of Immediate Family Members. "Immediate Family Members" shall be defined
as the spouse and natural or adopted children or grandchildren of the
participant and their spouses. To the extent that an Incentive Stock
Option is permitted to be transferred during the lifetime of the
participant, it shall be treated thereafter as a nonqualified stock
option. Any attempted assignment, transfer, pledge, hypothecation or other
disposition of Incentives, or levy of attachment or similar process upon
Incentives not specifically permitted herein, shall be null and void and
without effect.
10.3. EFFECT OF TERMINATION OF EMPLOYMENT OR DEATH. Except as
provided in Section 9.4 with respect to Outside Directors, in the event
that a participant ceases to be an employee of the Company for any reason,
including death, disability, early retirement or normal retirement, any
Incentives may be exercised, shall vest or shall expire at such times as
may be determined by the Committee in the Incentive Agreement. The
Committee has complete authority to modify the treatment of an Incentive
in the event of termination of employment of a participant by means of an
amendment to the Incentive Agreement. Consent of the participant to the
modification is required only if the modification materially impairs the
rights previously provided to the participant in the Incentive Agreement.
10.4. ADDITIONAL CONDITION. Anything in this Plan to the contrary
notwithstanding: (a) the Company may, if it shall determine it necessary
or desirable for any reason, at the time of award of any Incentive or the
issuance of any shares of Common Stock pursuant to any Incentive, require
the recipient of the Incentive, as a condition to the receipt thereof or
to the receipt of shares of Common Stock issued pursuant thereto, to
deliver to the Company a written representation of present intention to
acquire the Incentive or the shares of Common Stock issued pursuant
thereto for his own account for investment and not for distribution; and
(b) if at any time the Company further determines, in its sole discretion,
that the listing, registration or qualification (or any updating of any
such document) of any Incen tive or the shares of Common Stock issuable
pursuant thereto is necessary on any securities exchange or under any
federal or state securities or blue sky law, or that the consent or
approval of any governmental regulatory body is necessary or desirable as
a condition of, or in connection with the award of any Incentive, the
issuance of shares of Common Stock pursuant thereto, or the removal of any
restrictions imposed on such shares, such Incentive shall not be awarded
or such shares of Common Stock shall not be issued or such restrictions
shall not be removed, as the case may be, in whole or in part, unless such
listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Company.
-8-
<PAGE> 9
10.5. ADJUSTMENT. In the event of any merger, consolidation or
reorganization of the Company with any other corporation or corporations,
there shall be substituted for each of the shares of Common Stock then
subject to the Plan, including shares subject to restrictions, options or
achievement of performance objectives, the number and kind of shares of
stock or other securities to which the holders of the shares of Common
Stock will be entitled pursuant to the transaction. In the event of any
recapitalization, stock dividend, stock split, combination of shares or
other change in the Common Stock, the number of shares of Common Stock
then subject to the Plan, including shares subject to outstanding
Incentives, shall be adjusted in proportion to the change in outstanding
shares of Common Stock. In the event of any such adjustments, the purchase
price of any option, the performance objectives of any Incentive, and the
shares of Common Stock issuable pursuant to any Incentive shall be
adjusted as and to the extent appropriate, in the reasonable discretion of
the Committee, to provide participants with the same relative rights
before and after such adjustment. No substitution or adjustment shall
require the Company to issue a fractional share under this Plan and the
substitution or adjustment shall be limited by deleting any fractional
share.
10.6. INCENTIVE AGREEMENTS. The terms of each Incentive shall be
stated in an agreement approved by the Committee.
10.7. WITHHOLDING.
A. The Company shall have the right to withhold from any
payments made under the Plan or to collect as a condition of payment,
any taxes required by law to be withheld. At any time that a
participant is required to pay to the Company an amount required to
be withheld under applicable income tax laws in connection with the
issuance of Common Stock, the lapse of restrictions on Common Stock
or the exercise of an option, the participant may, subject to
disapproval by the Committee, satisfy this obligation in whole or in
part by electing (the "Election") to have the Company withhold shares
of Common Stock having a value equal to the amount required to be
withheld. The value of the shares to be withheld shall be based on
the Fair Market Value of the Common Stock on the date that the amount
of tax to be withheld shall be determined ("Tax Date").
B. Each Election must be made prior to the Tax Date. The
Committee may disapprove of any Election, may suspend or terminate
the right to make Elections, or may provide with respect to any
Incentive that the right to make Elections shall not apply to such
Incentive. If a participant makes an election under Section 83(b) of
the Internal Revenue Code with respect to shares of restricted stock,
an Election is not permitted to be made.
10.8. NO CONTINUED EMPLOYMENT. No participant under the Plan shall
have any right, because of his or her participation, to continue in the
employ of the Company for any
-9-
<PAGE> 10
period of time or to any right to continue his or her present or any other
rate of compensation.
10.9. DEFERRAL PERMITTED. Payment of cash or distribution of any
shares of Common Stock to which a participant is entitled under any
Incentive shall be made as provided in the Incentive Agreement. Payment
may be deferred at the option of the participant if provided in the
Incentive Agreement.
10.10. AMENDMENTS TO OR TERMINATION OF THE PLAN.
A. The Board may amend, suspend or terminate the Plan or any
portion thereof at any time, provided that no amendment shall be made
without stockholder approval if such approval is necessary to comply
with any tax or regulatory requirement, including any approval
necessary to qualify Incentives as "performance-based" compensation
under Section 162(m) or any successor provision, if such
qualification is deemed necessary or advisable by the Committee.
B. Any provision of this Plan or any Incentive Agreement to the
contrary notwithstanding, the Committee may cause any Incentive
granted hereunder to be cancelled in consideration of a cash payment
or alternative Incentive made to the holder of such cancelled
Incentive equal in value to such cancelled Incentive. The
determinations of value under this subparagraph shall be made by the
Committee in its sole discretion.
10.11. CHANGE OF CONTROL.
A. "Change of Control" shall mean:
1. the acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the 1934
Act of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the 1934 Act) of more than 30% of the
outstanding shares of the Common Stock; provided, however, that
for purposes of this subsection 1., the following shall not
constitute a Change of Control:
(a) any acquisition of Common Stock directly from
UNIFAB,
(b) any acquisition of Common Stock by UNIFAB,
(c) any acquisition of Common Stock by any employee
benefit plan (or related trust) sponsored or maintained by
UNIFAB or any corporation controlled by UNIFAB, or
-10-
<PAGE> 11
(d) any acquisition of Common Stock by any corporation
pursuant to a transaction that complies with clauses (a),
(b) and (c) of subsection (A)(3) of this Section 10.11; or
2. individuals who, as of the date of adoption of the Plan
by the Board of Directors of UNIFAB (the "Adoption Date"),
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to
the Adoption Date whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
shall be considered a member of the Incumbent Board, unless such
individual's initial assumption of office occurs as a result of
an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a person
other than the Incumbent Board; or
3. approval by the stockholders of UNIFAB of a
reorganization, merger or consolidation, or sale or other
disposition of all of substantially all of the assets of the
Company (a "Business Combination"), in each case, unless,
following such Business Combination,
(a) all or substantially all of the individuals and
entities who were the beneficial owners of UNIFAB's
outstanding common stock and UNIFAB's voting securities
entitled to vote generally in the election of directors
immediately prior to such Business Combination have direct
or indirect beneficial ownership, respectively, of more
than 50% of the then outstanding shares of common stock,
and more than 50% of the combined voting power of the then
outstanding voting securities entitled to vote generally in
the election of directors, of the corporation resulting
from such Business Combination (which, for purposes of this
paragraph (a) and paragraphs (b) and (c), shall include a
corporation which as a result of such transaction controls
the Company or all or substantially all of the Company's
assets either directly or through one or more
subsidiaries), and
(b) except to the extent that such ownership existed
prior to the Business Combination, no person (excluding any
corporation resulting from such Business Combination or any
employee benefit plan or related trust of the Company or
such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 30% or more of
the then outstanding shares of common stock of the
corporation resulting from such Business Combination
-11-
<PAGE> 12
or 30% or more of the combined voting power of the then
outstanding voting securities of such corporation, and
(c) at least a majority of the members of the board of
directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action
of the Board, providing for such Business Combination; or
4. approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
B. Upon a Change of Control, all outstanding options shall
automatically become fully exercisable, all restrictions or
limitations on any Incentives shall lapse and all performance
criteria and other conditions relating to the payment of Incentives
shall be deemed to be achieved or waived by the Company, without the
necessity of any action by any person.
C. No later than 30 days after the approval by the Board of a
Change of Control of the types described in Subsections A.3 and A.4
of this Section 10.11, and no later than 30 days after a Change of
Control of the type described in Subsections A.1 and A.2 of this
Section 10.11 of the Plan, the Committee (as the Committee was
composed immediately prior to such Change of Control and
notwithstanding any removal or attempted removal of some or all of
the members thereof as directors or Committee members), acting in its
sole discretion without the consent or approval of any participant,
may act to effect one or more of the alternatives listed below and
such act by the Committee may not be revoked or rescinded by persons
not members of the Committee immediately prior to the Change of
Control:
1. require that all outstanding options be exercised on or
before a specified date (before or after such Change of Control)
fixed by the Committee, after which specified date all
unexercised options shall terminate,
2. provide for mandatory conversion of some or all of the
outstanding options held by some or all participants as of a
date, before or after such Change of Control, specified by the
Committee, in which event such options shall be deemed
automatically cancelled and UNIFAB shall pay, or cause to be
paid, to each such participant an amount of cash per share equal
to the excess, if any, of the Change of Control Value of the
shares subject to such option, as defined and calculated below,
over the exercise price(s) of such options, or, in lieu of such
cash payment, the issuance of Common Stock or securities of an
acquiring entity having a Fair Market Value equal to such
excess,
-12-
<PAGE> 13
3. make such equitable adjustments to Incentives then
outstanding as the Committee deems appropriate to reflect such
Change of Control (provided, however, that the Committee may
determine in its sole discretion that no adjustment is
necessary), or
4. provide that thereafter upon any exercise of an option
the participant shall be entitled to purchase under such option,
in lieu of the number of shares of Common Stock then covered by
such option, the number and class of shares of stock or other
securities or property (including, without limitation, cash) to
which the participant would have been entitled pursuant to the
terms of the agreement providing for the merger, consolidation,
asset sale, dissolution or other Change of Control of the type
described in Sections 10.11.A.3 and A.4 of the Plan, if,
immediately prior to such Change of Control, the participant had
been the holder of record of the number of shares of Common
Stock then covered by such options.
D. For the purposes of paragraph 2. of Section 10.11.C. the
"Change of Control Value" shall equal the amount determined by
whichever of the following items is applicable:
1. the per share price to be paid to shareholders of UNIFAB
in any such merger, consolidation or other reorganization,
2. the price per share offered to shareholders of UNIFAB in
any tender offer or exchange offer whereby a Change of Control
takes place, or
3. in all other events, the Fair Market Value per share of
Common Stock into which such options being converted are
exercisable, as determined by the Committee as of the date
determined by the Committee to be the date of conversion of such
options.
4. in the event that the consideration offered to
shareholders of UNIFAB in any transaction described in this
Section 10.11 consists of anything other than cash, the
Committee shall determine the fair cash equivalent of the
portion of the consideration offered that is other than cash.
10.12. DEFINITION OF FAIR MARKET VALUE. Whenever "Fair Market Value"
of Common Stock shall be determined for purposes of this Plan, it shall be
determined as follows: (i) if the Common Stock is listed on an established
stock exchange or any automated quotation system that provides sale
quotations, the closing sale price for a share of the Common Stock on such
exchange or quotation system on the applicable date; (ii) if the Common
Stock is not listed on any exchange or quotation system, but bid and asked
prices are quoted and published, the mean between the quoted bid and asked
prices on the applicable date, and if bid and asked prices are not
available on such day, on the next
-13-
<PAGE> 14
preceding day on which such prices were available; and (iii) if the Common
Stock is not regularly quoted, the fair market value of a share of Common
Stock on the applicable date as established by the Committee in good
faith.
10.13 LOANS. In order to assist a participant in acquiring shares of
Common Stock pursuant to an Incentive granted under the Plan, the
Committee may authorize, subject to the provisions of Regulation G of the
Board of Governors of the Federal Reserve System, at either the time of
the grant of the Incentive, at the time of the acquisition of Common Stock
pursuant to the Incentive, or at the time of the lapse of restrictions on
shares of restricted stock granted under the Plan, the extension of a loan
to the participant by the Company. The terms of any loans, including the
interest rate, collateral and terms of repayment, will be subject to the
discretion of the Committee. The maximum credit available hereunder shall
be equal to the aggregate purchase price of the shares of Common Stock to
be acquired pursuant to the Incentive plus the maximum tax liability that
may be incurred in connection with the Incentive.
-14-
<PAGE> 1
EXHIBIT 10.4
OFFICER AND
EMPLOYEE
AGREEMENT
STOCK OPTION AGREEMENT
FOR THE GRANT OF
NON-QUALIFIED STOCK OPTIONS UNDER THE
UNIFAB INTERNATIONAL, INC.
LONG-TERM INCENTIVE PLAN
THIS AGREEMENT is entered into and effective as of __________, 1997, by
and between UNIFAB International, Inc., a Louisiana corporation (the
"Company"), and ________________ (the "Optionee").
WHEREAS Optionee is a key employee of the Company and the Company
considers it desirable and in its best interest that Optionee be given an
inducement to acquire a proprietary interest in the Company and an incentive to
advance the interests of the Company by possessing an option to purchase shares
of the common stock of the Company, $.01 par value per share (the "Common
Stock") in accordance with the UNIFAB International, Inc. Long-Term Incentive
Plan (the "Plan").
NOW, THEREFORE, in consideration of the premises, it is agreed by and
between the parties as follows:
I.
Grant of Option
The Company hereby grants to Optionee the right, privilege and option to
purchase _______ shares of Common Stock (the "Option") at an exercise price
equal to the initial public offering price of the Common Stock (the "Exercise
Price"). The grant of the Option is subject to the issuance and sale of Common
Stock registered with the Securities and Exchange Commission on Form S-1 (Reg.
No. 333-31609) in connection with the Company's initial public offering of the
Common Stock and such grant shall be effective as of the Closing Time referred
to in that certain Transition Agreement dated ________, 1997 to which the
Company is a party. The date on which the Closing Time occurs shall hereinafter
be referred to as the "Date of Grant." The Option shall be exercisable at the
time specified in Section II below. The Option is a non-qualified stock option
and shall not be treated as an incentive stock option under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").
II.
Time of Exercise
2.1 Subject to the provisions of the Plan and the other provisions of this
Section II, the Optionee shall be entitled to exercise the Option as follows:
With respect to one-third of the shares of Common Stock subject to the
Option, beginning on the Date of Grant;
-1-
<PAGE> 2
With respect to two-thirds of the shares of Common Stock subject to the
Option, less any shares previously issued, beginning one year following
the Date of Grant; and
With respect to all of the shares of Common Stock subject to the Option,
less any shares previously issued, beginning two years following the Date
of Grant.
The Option shall expire and may not be exercised later than ten years
following the Date of Grant.
2.2 During Optionee's lifetime, the Option may be exercised only by him or
his guardian if he has been declared incompetent. In the event of death, the
Option may be exercised as provided herein by the Optionee's estate or by the
person to whom such right devolves as a result of the Optionee's death.
2.3 If an Optionee ceases to be an employee because of death, disability
within the meaning of Section 22(e)(3) of the Code ("Disability") or
retirement, the Option must be exercised, to the extent otherwise exercisable
at the time of termination of employment, within one year from the date on
which the Optionee ceases to be an employee, but in no event later than ten
years following the Date of Grant.
2.4 If Optionee's employment is terminated, other than as a result of
death, disability or retirement, the Option must be exercised, to the extent
otherwise exercisable at the time of termination of employment, within 30 days
from the date on which Optionee ceases to be an employee, but in no event later
than ten years following the date of grant.
III.
Method of Exercise of Option
3.1 Optionee may exercise all or a portion of the Option by delivering to
the Company a signed written notice of his intention to exercise the Option,
specifying therein the number of shares to be purchased. Upon receiving such
notice, and after the Company has received full payment of the Exercise Price,
the appropriate officer of the Company shall cause the transfer of title of the
shares purchased to Optionee on the Company's stock records and cause to be
issued to Optionee a stock certificate for the number of shares being acquired.
Optionee shall not have any rights as a shareholder until the stock certificate
is issued to him.
3.2 The Option may be exercised by the payment of the Exercise Price in
cash, in shares of Common Stock held for six months or in a combination of cash
and shares of Common Stock held for six months. The Optionee may also pay the
Exercise Price by delivering a properly executed exercise notice together with
irrevocable instructions to a broker approved by the Compensation Committee
(with a copy to the Company) to promptly deliver to the Company the amount of
sale or loan proceeds to pay the Exercise Price.
-2-
<PAGE> 3
IV.
No Contract of Employment Intended
Nothing in this Agreement shall confer upon Optionee any right to continue
in the employment of the Company or any of its subsidiaries, or to interfere in
any way with the right of the Company or any of its subsidiaries to terminate
Optionee's employment relationship with the Company or any of its subsidiaries
at any time.
V.
Binding Effect
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators and
successors.
VI.
Non-Transferability
The Option granted hereby may not be transferred, assigned, pledged or
hypothecated in any manner, by operation of law or otherwise, other than by
will, by the laws of descent and distribution or pursuant to a domestic
relations order, as defined in the Code, and shall not be subject to execution,
attachment or similar process.
VII.
Inconsistent Provisions
The Option granted hereby is subject to the provisions of the Plan as in
effect on the date hereof and as it may be amended. In the event any provision
of this Agreement conflicts with such a provision of the Plan, the Plan
provision shall control.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed on the day and year first above written.
UNIFAB INTERNATIONAL, INC.
By:
------------------------------------
Member
Compensation Committee
------------------------------------
Optionee
-3-
<PAGE> 1
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") between UNIFAB International,
Inc., a Louisiana corporation ("Company"), and Dailey J. Berard ("Employee") is
dated as of ___________________, 1997 (the "Agreement Date").
The Company and the Employee agree as follows:
1. EMPLOYMENT CAPACITY AND TERM.
(a) CAPACITY AND TERM. The Employee will serve as the
President and Chief Executive Officer of the Company and the chief executive
officer of all of the Company's significant subsidiaries, for the period
beginning on the Agreement Date through the fifth anniversary of the Agreement
Date (the "Employment Term"), subject to any earlier termination of Employee's
status as an employee pursuant to this Agreement. Following the term of this
Agreement, each party shall have the right to enforce all rights, and shall be
bound by all obligations, of such party that are continuing rights and
obligations under the terms of this Agreement.
(b) DUTIES. As the President and Chief Executive Officer, the
Employee shall perform such duties, consistent with the Employee's job title,
including serving as the chief executive officer of all of the Company's
significant subsidiaries, as may be prescribed from time to time by the Board
of Directors of the Company (the "Board") and shall perform such duties as are
described in the Company's Bylaws.
(c) CHAIRMAN. For as long as the Employee is President and
Chief Executive Officer of the Company, the Board shall nominate the Employee
for re-election as a director upon the end of his term as a director and shall
appoint the Employee, for as long as he remains a director, as the Chairman of
the Board of Directors. If the Employee ceases for any reason to be the
President and Chief Executive Officer of the Company, the Employee will, if
requested by the Company, resign as the Chairman of the Board of Directors of
the Company and as a director of the Company and as director and officer of all
of the Company's subsidiaries.
2. DEVOTION TO RESPONSIBILITIES.
During the Employment Term, the Employee will devote all of his
business time and attention to the business of the Company and its
subsidiaries, and he will not engage in or be employed by any other business
activity or business, whether or not such business activity or business is for
gain, profit or other pecuniary advantage; provided, however, that this
Agreement shall not prohibit the Employee from (i) serving as a member of the
board of directors, board of trustees or the like of any for profit or non-
profit entity, or performing services of any type for any civic or community
entity, whether or not the Employee receives compensation therefor, (ii)
investing his assets in such form or manner as will require no more than
nominal services on the part of the Employee in the operation of the business
of the entity in which such investment is made,
- 1 -
<PAGE> 2
or (iii) serving in various capacities with, and attending meetings of,
industry, trade or governmental groups and associations, including without
limitation the industry, trade or governmental groups and associations with
which the Employee is currently involved, as long as the Employee's engaging in
activities permitted by virtue of clauses (i), (ii) and (iii) above does not
materially and unreasonably interfere with the ability of the Employee to
perform the services and discharge the responsibilities required of him under
this Agreement. Notwithstanding clause (ii) above, during the Employment Term,
the Employee may not beneficially own more than 2% of the outstanding shares of
any class of equity security of a business organization, other than the
Company, that is required to file periodic reports with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). For purposes of this paragraph, "beneficially own" shall have
the same meaning ascribed to that term in Rule 13d-3 under the Exchange Act.
3. COMPENSATION AND BENEFITS. The Company will provide or will
cause to be provided to the Employee the compensation and benefits described
below:
(a) SALARY. An annual salary during the Employment Term of
$180,000 ("Annual Base Compensation"), payable to the Employee in equal semi-
monthly installments.
(b) BONUS. An annual incentive bonus, payable, if at all,
only with respect to services provided by the Employee during the Employment
Term. The annual incentive bonus will be determined, accrued and paid in
accordance with the schedule set forth in Appendix A hereto.
(c) STOCK OPTIONS. On the date hereof and pursuant to the
1997 Incentive Compensation Plan, the Employee will be granted nonqualified
options to purchase 65,000 shares of the Company's common stock, $0.01 par
value per share (the "Common Stock"). The per share exercise price of the
shares subject to such options will be equal to the initial public offering
price of the Company's Common Stock, and the Company and the Employee shall
execute a Stock Option Agreement substantially in the form of Appendix B
hereto. The Employee will also be eligible for additional stock incentive
compensation as determined by the Compensation Committee of the Company's Board
of Directors.
(d) OTHER BENEFITS. During the Employment Term, the Employee
shall be entitled to all benefits and perquisites provided to senior executive
employees of the Company, including but not limited to the benefits referred to
in Appendix C hereof.
4. TERMINATION OF EMPLOYMENT.
(a) DEATH OR DISABILITY. (i) The Employee's status as an
employee will terminate immediately and automatically upon the Employee's death
during the Employment Term.
(ii) (A) The Employee's status as an employee shall
terminate if the Employee has a disability that would entitle him to receive
benefits under the Company's long-term disability insurance policy in effect at
the time because he is totally or partially disabled thereunder. Any such
termination shall become effective on the first day on which the Employee is
eligible to
- 2 -
<PAGE> 3
receive payments under such policy (or on the first day that he would be so
eligible, if he had applied timely for such payments).
(B) If the Company has no long-term disability
plan in effect, if (1) the Employee is rendered incapable because of physical
or mental illness of satisfactorily discharging his duties and responsibilities
under this Agreement for a period of 90 consecutive days or for an aggregate of
120 days during any period of 365 days and (2) a duly qualified physician
chosen by the Company and acceptable to the Employee or his legal
representatives so certifies in writing, the Board shall have the power to
determine that the Employee has become disabled. If the Board makes such a
determination, the Company shall have the continuing right and option, during
the period that such disability continues, and by notice given in the manner
provided in this Agreement, to terminate the status of Employee as an employee.
Any such termination shall become effective 30 days after such notice of
termination is given, unless within such 30-day period, the Employee becomes
capable of rendering services of the character contemplated hereby (and a
physician chosen by the Company and acceptable to the Employee or his legal
representatives so certifies in writing) and the Employee in fact resumes such
services.
(C) The term "Disability Effective Date" shall
mean the date on which termination of employment becomes effective due to
Disability.
(iii) The Employee's death or the Employee's incapacity
due to physical or mental illness to discharge the responsibilities assigned by
this Agreement shall not constitute a breach of this Agreement by the Employee.
(b) CAUSE. The Company may terminate the Employee's status as
an employee for Cause. As used herein, termination by the Company of the
Employee's status as an employee for "Cause" shall mean termination as a result
of (i) the willful and continuing failure by the Employee to perform the
services contemplated by this Agreement (other than any such failure resulting
from the Employee's disability of the type specified in Section 4(a)), (ii) the
Employee's breach of or failure to comply with the covenants set forth in
Sections 6, 7 or 9 of this Agreement, or (iii) the willful engaging by the
Employee in gross misconduct injurious to the Company; provided that, no act,
or failure to act, on the Employee's part shall be considered "willful" for
purposes of this Agreement unless done, or omitted to be done, without a
reasonable belief that such action or omission was in, or not opposed to, the
best interests of the Company. Any act, or failure to act, by the Employee
that is based upon authority given pursuant to a resolution duly adopted by the
Board of Directors or based upon the advice of counsel for the Company shall be
presumed to be done, or omitted to be done, by the Employee in good faith and
in the best interests of the Company.
(c) GOOD REASON. The Employee may terminate his status as an
employee for Good Reason. The termination by the Employee of his status as an
employee for Good Reason shall be deemed to be a justifiable termination and
shall excuse the Employee from the obligation to render services under or
relating to this Agreement. As used herein, the term "Good Reason" shall mean:
- 3 -
<PAGE> 4
(i) The occurrence of any of the following during the
Employment Term:
(A) the assignment by the Board of Directors to
the Employee of any duties or responsibilities which are inconsistent with the
Employee's status, title and position as President and Chief Executive Officer
of the Company;
(B) any removal of the Employee from, or any
failure to reappoint or reelect the Employee to, the position of President and
Chief Executive Officer of the Company and as the chief executive officer of
all of its significant subsidiaries, except in connection with a termination by
the Company of the Employee's employment for Cause or on account of disability
or death of the Employee, or the termination by the Employee of his employment
other than for Good Reason;
(C) the Company's requiring the Employee to be
based anywhere other than in New Iberia, Louisiana, except for required travel
in the ordinary course of the Company's business;
(ii) a reduction in the Employee's annual salary or a
failure by the Company to pay to the Employee any installment of the annual
salary or to pay any other amounts required to be paid under this Agreement,
which failure continues for a period of ten days after written notice thereof
is given by the Employee to the Company;
(iii) the failure by the Company to obtain the assumption
of its obligations under this Agreement by any successor or assign as
contemplated in Paragraph 11 of the Agreement;
(iv) any purported termination by the Company of the
Employee's status as an employee which is not effected pursuant to a Notice of
Termination satisfying the requirements of Paragraph 4(d) hereof, or which is
not justified as a termination based on Cause; or
(v) any breach of this Agreement by the Company.
(d) NOTICE OF TERMINATION. Any purported notice of
termination of the Employee's status as an employee must be communicated in a
writing delivered to the other party as provided in Paragraph 12 hereof (a
notice of termination complying with this sentence is referred to in this
Agreement as a "Notice of Termination"). Any such Notice of Termination that
purports to terminate Employee's employment for Cause or for Good Reason shall
specify the provision or provisions of this Agreement relied upon by the party
giving such notice and shall set forth in reasonable detail the facts and
circumstances claimed by such party to provide a basis for termination of the
Employee's employment under the provision(s) so indicated.
(e) DATE OF TERMINATION. "Date of Termination" means (i) if
Employee's employment is terminated by the Company for Cause, or by Employee
for Good Reason, the date of delivery of the Notice of Termination or any later
date specified therein, as the case may be, (ii) if the Employee's employment
is terminated by the Company other than for Cause or disability, the
- 4 -
<PAGE> 5
Date of Termination shall be the date on which the Company notifies the
Employee of such termination and (iii) if Employee's employment is terminated
by reason of his death or disability, the Date of Termination shall be the date
of death of Employee or the Disability Effective Date, as the case may be.
5. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
(a) GOOD REASON, OTHER THAN FOR CAUSE, DEATH OR DISABILITY.
(i) If (A) the Company terminates the Employee's status as an employee other
than for Cause, death or disability, or (B) the Employee shall terminate his
employment for Good Reason, then the Company shall pay to the Employee in a
lump sum in cash within 30 days after the Date of Termination the aggregate of
the following amounts:
(1) the sum of (x) the amount of the
Employee's Annual Base Compensation earned through the Date of Termination, to
the extent not theretofore paid and (y) any compensation previously deferred by
the Employee (together with any accrued interest on earnings thereon) and any
accrued vacation pay, in each case to the extent not previously paid (the sum
of the amounts described in clauses (x) and (y) being hereinafter referred to
as the "Accrued Obligations").
(2) the aggregate amount of the
Employee's Annual Base Compensation for the period beginning on the Date of
Termination and continuing through the last day of the Employment Term (such
amount being referred to herein as the "Non-Accrued Compensation").
(3) to the extent not theretofore paid
or provided, the Company shall timely pay or provide to the Employee any other
amounts required to be paid or provided or which the Employee is eligible to
receive under any plan, program, policy or practice of the Company (such other
amounts being referred to herein as the "Other Benefits").
(ii) In the event that, during the term of this
Agreement, the Employee's status as an Employee is terminated under the
circumstances described in subsections 5(a)(i)(A) or (B) above following a
change of control of the Company, and such change of control occurs after the
third anniversary hereof, then, in lieu of any amount that Employee would
otherwise be entitled to receive by virtue of paragraph 5(a)(i)(2) above,
Employee shall be entitled to receive an amount equal to two times his Annual
Base Compensation.
(iii) As used in this Agreement, the phrase "change in
control of the Company" shall mean a change in control of the type that would
be required to be reported in response to Item 6(e) of Schedule 14A promulgated
under the Exchange Act, whether or not the Company is then subject to such
reporting requirement; provided that, without limitation, such a change of
control shall be deemed to have occurred if (A) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act), other than a trustee or
fiduciary holding securities under an employee benefit plan of the Company and
other than a person who is a director of the
- 5 -
<PAGE> 6
Company on the date hereof, is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act) directly or indirectly, of securities of the
Company representing 30% or more of the Company's combined voting power of the
Company's then outstanding securities, (B) at any time following the execution
of this Agreement, a majority of the Board of Directors is not comprised of (1)
individuals who on the Agreement Date were members of the Board plus (2) any
new directors whose nomination for election by the Board or the Company's
stockholders was approved by the vote of two-thirds of the directors then in
office who either were directors or whose nomination was previously so
approved.
(b) DEATH. If the Employee's status as an employee is
terminated by reason of the Employee's death, this Agreement shall terminate
without further obligations to the Employee's legal representatives under this
Agreement, other than for payment of (i) Accrued Obligations, (ii) 50% of the
Non-Accrued Compensation (the "Death Cash Payment") and (iii) the timely
payment or provision of Other Benefits. The sum of the Accrued Obligations and
the Death Cash Payment shall be paid to the Employee's estate or beneficiary,
as applicable, in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term Other Benefits as
used in this Section 5(b) shall include, without limitation, and the Employee's
estate and/or beneficiaries shall be entitled to receive, benefits at least
equal to the most favorable benefits provided by the Company to the estates and
beneficiaries of its senior executive officers under such plans, programs,
practices and policies relating to death benefits, if any, as in effect on the
date of Employee's death.
(c) DISABILITY. If Employee's status as an employee is
terminated by reason of Employee's disability, this Agreement will terminate
without further obligation to the Employee, other than the payment of (i)
Accrued Obligations, (ii) 50% of the Non-Accrued Compensation (the "Disability
Cash Payment") and (iii) the timely payment or provision of Other Benefits.
The sum of Accrued Obligations and the Disability Cash Payment will be paid to
the Employee in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term Other Benefits as
used in this Section 5(c) shall include, and the Employee will be entitled
after the Disability Effective Date to receive, disability and other benefits
at least equal to the most favorable of those generally provided by the Company
to disabled executive officers and their families in accordance with such
plans, programs, practices and policies related to disability that are in
effect on the Disability Effective Date.
(d) CAUSE, OTHER THAN FOR GOOD REASON. If the Employee's
status as an employee shall be terminated for Cause by Employer, or voluntarily
terminated by Employee other than for Good Reason, this Agreement shall
terminate without further obligation to the Employee other than for (i) Accrued
Obligations, which shall be paid in a lump sum in cash within 30 days of the
Date of Termination, and (ii) to the extent not theretofore paid or provided,
the Company shall timely pay or provide to the Employee his accrued, vested
benefits under any benefit plan or program of the Company.
(e) CHANGE OF CONTROL BENEFIT. If Employee is subjected to an
excise tax as a result of the golden parachute provisions of section 4999 of
the Internal Revenue Code of 1986, as
- 6 -
<PAGE> 7
amended, the Company shall pay to Employee such amounts as are necessary to
place Employee in the same after-tax position as he would have been had such
golden parachute provisions not been applicable to him. This tax gross-up
provision shall take into account any such applicable excise tax, any state or
federal interest and penalties and any state or federal income tax and excise
tax payable with respect to the additional payment provided by this Section
5(e).
6. REGISTRATION RIGHTS. (a) (i) In the event that, during the
term of this Agreement, the Employee's status as an Employee is terminated
under the circumstances described in subsections 5(a)(i)(A) or (B) above or
under any circumstances following a change of control of the Company, then
Employee may request in writing that the Company register all or any portion
(but not less than 100,000) of the Registrable Securities beneficially owned by
the Employee for sale in the manner specified in such request. Upon receipt of
such a request the Company will, at its sole cost and expense as provided in
Section 6(c) below, use its best efforts to register (on the appropriate form
reasonably acceptable to the Employee) the number of Registrable Securities
specified in the Employee's request.
(ii) The Company shall be obligated to effect one
registration of the Registrable Securities pursuant to this Section 6(a),
except as otherwise provided in paragraph (iv) below. The obligation of the
Company under this Section 6(a) shall be deemed satisfied only if a
Registration Statement registering all Registrable Securities specified in the
Employee's request received pursuant to subsection 6(a)(i) for sale in
accordance with the method of disposition specified by the Employee shall have
become effective and at least 80% of such Registrable Securities included
therein have been sold pursuant thereto.
(iii) The Company shall be entitled to include in any
Registration Statement referred to in this Section 6(a), for sale in accordance
with the methods of disposition specified by the Employee, securities to be
sold by the Company for its own account, except as and to the extent that, in
the opinion of the managing underwriter or underwriters (if the method of
disposition requested by the Employee is an underwritten public offering), such
inclusion would have a material adverse effect on the efforts to sell the
Registrable Securities included in the Registration Statement pursuant to
Section 6(a)(i).
(iv) If the managing underwriter shall (A) certify in
writing that the inclusion of some or all of the Registrable Securities would
materially and adversely affect the market for the Company's securities, (B)
state the basis of such opinion and (C) state the maximum number of Registrable
Securities, if any, that may be distributed without such adverse effect, then
the Company may, upon written notice to the Employee, reduce the amount of
Registrable Securities included in the Registration Statement; provided that,
if the number of Registrable Securities included in the Registration Statement
is reduced pursuant to this Section 6(a)(iv), the Employee will be granted the
right to one additional demand registration in connection with which the
Employee shall have all of the rights provided for in this Section 6, including
this paragraph (iv).
(v) If at the time of any request to register
Registrable Securities pursuant to this Section 6(a), the Company is engaged in
any other activity which, in the good faith
- 7 -
<PAGE> 8
determination of the Company's Board of Directors, would be adversely affected
by the requested registration to the material detriment of the Company, then
the Company may at its option direct that the filing of a Registration
Statement pursuant to such a request be delayed for a period not in excess of
120 days from the time of such request.
(vi) If requested by the underwriters for any
underwritten offering by the Employee pursuant to a registration requested
under this Section 6(a), the Company shall enter into an underwriting agreement
with such underwriters in a form reasonably satisfactory in substance and form
to the Employee and the underwriters that shall contain such representations
and warranties by the Company and such other terms as are generally prevailing
in an agreement of this type, including, without limitation, indemnities to the
effect and to the extent provided in Section 6(f) hereof. The Employee will
cooperate with the Company in the negotiation of the underwriting agreement and
shall give consideration to the reasonable suggestions of the Company regarding
the form thereof. The Employee shall be a party to such underwriting agreement
and may, in its discretion, require that any or all of the representations and
warranties by, and other agreements on the part of, the Company to and for the
benefit of such underwriters shall also be made to and for the benefit of the
Employee and that any or all of the conditions precedent to the obligations of
such underwriters under such underwriting agreement be conditions precedent to
the obligations of the Employee. In the case of a firm commitment public
offering pursuant to this Section 6(a), the Company shall choose the managing
underwriter or underwriters; provided that this selection shall be subject to
the approval of the Employee, which approval shall not be unreasonably
withheld.
(b) If and whenever the Company is required by the provisions
of this Agreement to use its best efforts to effect the registration of any of
the Registrable Securities under the Securities Act, the Company shall as
expeditiously as reasonably possible:
(i) Prepare and file with the SEC a Registration
Statement and otherwise comply with the provisions of the Securities Act with
respect to such Registrable Securities and use its best efforts to cause that
Registration Statement to become effective;
(ii) Prepare and file with the SEC any amendments and
supplements to the Registration Statement as may be necessary to keep the
Registration Statement effective until the earlier of (i) the date on which all
Registrable Securities included therein have been sold pursuant to the plan of
distribution included in such Registration Statement and (ii) the thirtieth day
from the effective date of the Registration Statement;
(iii) Furnish to the Employee such numbers of copies of
the prospectus, including preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as the Employee
may reasonably request in order to facilitate the public sale or other
disposition of the Registrable Securities;
(iv) Use its best efforts to register or qualify the
Registrable Securities covered by the Registration Statement under the
securities or blue sky laws of such jurisdictions as the Employee shall
reasonably request, and do any and all other acts and things that may be
- 8 -
<PAGE> 9
necessary or advisable to enable the Employee to consummate the public sale or
other disposition of such Registrable Securities in such jurisdictions;
provided, however, that the Company shall not be required to qualify to do
business as a foreign corporation or consent to general service of process in
any such jurisdiction;
(v) Before filing the Registration Statement or
prospectus or amendments or supplements thereto, furnish the Employee with
copies of all such documents proposed to be filed, which shall be subject to
reasonable approval of counsel designated by the Employee;
(vi) Furnish to the Employee a signed counterpart,
addressed to the Employee (and the underwriters, if any), of (i) an opinion of
the Company's legal counsel dated the effective date of such Registration
Statement (and, if such registration includes an underwritten public offering,
dated the date of the closing under the underwriting agreement), and (ii) a
"comfort" letter dated the effective date of such Registration Statement (and,
if such registration includes an underwritten public offering, dated the date
of the closing under the underwriting agreement), signed by the independent
public accountants who certified the Company's financial statements included in
such Registration Statement, covering substantially the same matters with
respect to such Registration Statement (and the prospectus included therein,
and in the case of the accountants' letter with respect to events subsequent to
the date of such financial statements), as are customarily included in opinions
of issuer's counsel and an accountant's letter delivered to the underwriters in
underwritten public offerings of securities, and in the case of the
accountant's letter, such other financial matters as the Employee (or the
underwriters, if any) may reasonably request; and
(vii) At any time when a prospectus relating to the
Registrable Securities is required to be delivered under the Securities Act,
notify the Employee upon discovery of, or upon the happening of any event as a
result of which, the prospectus included in such Registration Statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances under which
they were made.
(viii) If the Company has delivered preliminary or final
prospectuses to the Employee, and after having done so the prospectus is
amended to comply with the requirements of the Securities Act, notify the
Employee and, if requested, the Employee shall immediately cease making offers
of Registrable Securities and return all prospectuses to the Company. The
Company shall promptly provide the Employee with a revised prospectuses and
following receipt of the revised prospectuses the Employee shall be free to
resume making offers of the Registrable Securities.
(c) The costs and expenses incurred in connection with any
registration, qualification or compliance pursuant to this Agreement,
including, without limitation, all registration, qualification and filing fees,
printing expenses, fees and disbursements of counsel for the Company and the
expenses of any special accounting services and audits incidental to or
required by such registration, shall be paid by the Company; provided, however,
the Company shall not be required to pay legal fees of counsel for the
Employee, or underwriters' fees, discounts, commissions
- 9 -
<PAGE> 10
and broker-dealer charges relating to the Registrable Securities, all of which
expenses shall be paid by the Employee.
(d) The Employee will furnish the Company, upon the written
request of the Company, all information in its possession necessary to include
in the Registration Statement and to effect the registration and qualifications
under the Securities Act and the blue sky laws and will otherwise cooperate
with the Company in effecting such registration and qualifications.
(e) The Company shall:
(i) make and keep public information available, as
those terms are understood and defined in Rule 144 under the Securities Act;
(ii) use its best efforts to file with the SEC in a
timely manner all reports and other documents required of the Company under the
Securities Act and Exchange Act; and
(iii) furnish to the Employee upon request a written
statement by the Company as to its compliance with the reporting requirements
of Rule 144, the Securities Act and the Exchange Act, a copy of the most recent
annual or quarterly report of the Company and such other reports and documents
of the Company as the Employee may reasonably request to avail itself of any
similar rule or regulation of the SEC allowing itself any such securities
without registration.
(f) (i) In the event of any registration of any of the
Registrable Securities under the Securities Act pursuant to this Agreement, the
Company shall indemnify and hold harmless the Employee and each underwriter of
such Registrable Securities and each other Person, if any, who controls such
persons within the meaning of the Securities Act or the Exchange Act, against
any losses, claims, damages or liabilities (including reasonable legal and
other expenses incurred in investigating and defending against the same), joint
or several, to which the Employee or such underwriter or controlling person may
become subject under the Securities Act, the Exchange Act, state securities
laws or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon (1) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or (2) any untrue statement or alleged untrue statement
of a material fact contained in any preliminary prospectus, if used prior to
the effective date of the Registration Statement, or contained in the
prospectus (as amended or supplemented if the Company files any amendment
thereof or supplement thereto with the SEC), if used within the period during
which the Company is required to keep the Registration Statement to which such
prospectus relates current pursuant to the terms hereof, or the omission or
alleged omission to state therein (if so used) a material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading; provided, however, that (A) the Company will
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or omission
made in such Registration Statement, preliminary prospectus or prospectuses, or
any such amendment or supplement, in reliance upon and in conformity with
- 10 -
<PAGE> 11
information furnished to the Company, in writing, by or on behalf of the
Employee, underwriter or controlling person specifically for use in the
preparation thereof or (B) the Company shall not be required to indemnify any
underwriter from whom the Person asserting any such losses, claims, damages,
expenses or liabilities purchased the Registrable Securities that are the
subject thereof or to the benefit of any person controlling such underwriter,
if such underwriter failed to send or give a copy of the prospectus or any
amendment thereof or supplement thereto to such person at or prior to the
written confirmation of the sale of such Registrable Securities to such person.
(ii) In the event of any registration of any of the
Registrable Securities under the Securities Act pursuant to this Agreement, the
Employee shall indemnify and hold harmless the Company, each of its directors
and officers and each underwriter (if any) and each person who controls the
Company or any such underwriter within the meaning of the Securities Act or the
Exchange Act, if any, against any losses, claims, damages or liabilities, joint
or several, to which the Company, such directors and officers, underwriter or
controlling person may become subject under the Securities Act, the Exchange
Act, state securities or Blue Sky laws, or otherwise, insofar as such losses,
claims, damages, liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of material
fact contained in any Registration Statement under which such Registrable
Securities were registered under the Securities Act, any preliminary prospectus
or final prospectus or prospectuses contained in the Registration Statement, or
an amendment or supplement to the Registration Statement, or arise out of or
are based upon any omission or alleged omission to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, if the statement or omission was made in reliance upon and in
conformity with information furnished in writing to the Company by or on behalf
of the Employee specifically for use in connection with the preparation of such
Registration Statement, prospectus, amendment or supplement.
(iii) Each party entitled to indemnification under this
Section 6 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may
be sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or litigation resulting therefrom; provided, that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not be
unreasonably withheld); and, provided further, that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement. The Indemnified
Party may participate in such defense at such party's expense; provided,
however, that the Indemnifying Party shall pay such expenses if (1)
representation of such Indemnified Party by the counsel retained by the
Indemnifying Party would be inappropriate due to actual or potential different
interests between the Indemnified Party and any other party represented by such
counsel in such proceeding, (2) the employment of counsel by the Indemnified
Party has been authorized by the Indemnifying Party, or (3) the Indemnifying
Party has not, in fact, employed counsel to assume the defense of such action.
No Indemnifying Party, in the defense of any such claim or litigation shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement that does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a
- 11 -
<PAGE> 12
release from all liability in respect of such claim or litigation, and no
Indemnified Party shall consent to entry of any judgment or settle such claim
or litigation without the prior written consent of the Indemnifying Party.
(g) As used in this Section 6, the following terms shall have
the meanings indicated below:
"Person" means and includes natural persons, corporations,
limited partnerships, general partnerships, limited liability companies, joint
stock companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions
thereof.
"Register," "registered" and "registration" refer to a
registration effected by preparing and filing a Registration Statement with the
SEC in compliance with the Securities Act for the purpose of effecting a public
sale of securities.
"Registrable Securities" means (a) all shares of common
stock, $0.01 par value per share (the "Common Stock"), of the Company
beneficially owned by the Employee and (b) any other securities issued by the
Company after the date hereof with respect to such shares (and with respect to
the Common Stock generally) by means of exchange, reclassification, dividend,
distribution, split up, combination, subdivision, recapitalization, merger,
spin-off, reorganization or otherwise; provided, however, that as to any
Registrable Securities, such securities shall cease to constitute Registrable
Securities for the purposes of this Agreement if and when (i) a Registration
Statement with respect to the sale of such securities shall have been declared
effective by the SEC and such securities shall have been sold pursuant thereto
in accordance with the intended plan and method of distribution therefor set
forth in the final prospectus forming a part of such Registration Statement;
(ii) such securities shall have been sold in satisfaction of all applicable
resale provisions of Rule 144 under the Securities Act; (iii) such securities
cease to be beneficially owned by the Employee, or (iv) such securities cease
to be issued and outstanding for any reason.
"Registration Statement" means a registration statement
filed by the Company with the SEC pursuant to Section 6(a) hereof.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as
amended.
7. TRADE SECRETS, ETC. The Employee shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its subsidiaries or
corporate affiliates and their respective businesses and operations, which
shall have been obtained by the Employee during the Employee's employment
(whether prior to or after the Agreement Date) and which shall not have become
public knowledge (other than by acts of the Employee or any of his
representatives in violation of this Agreement). At the end of the Employment
Term, the Employee agrees (i) not, without the prior written consent of the
Company
- 12 -
<PAGE> 13
or as may be otherwise required by law or legal process, to communicate or
divulge any such information, knowledge or data to any party other than the
Company and (ii) to deliver promptly to the Company any confidential
information, knowledge or data in his possession, whether produced by the
Company or any of its subsidiaries and corporate affiliates or by the Employee,
that relates to the business of the Company or any of its subsidiaries and
joint ventures or any past, current or prospective activity of the Company or
any of its subsidiaries and joint ventures. The Employee shall be permitted to
retain copies of such data as are necessary in order to enable the Employee to
assert any rights under this Agreement, provided that such data shall be used
solely for such purpose.
8. CUSTOMER LISTS. The Employee recognizes and acknowledges that
any written list or lists of the customers of the Company or any of its
subsidiaries and joint ventures ("customer lists"), as such customer lists may
exist from time to time, are valuable, special and unique assets of the
Company. The Employee agrees that he will not use for his own personal benefit
or disclose such customer lists to any person, firm, corporation, association
or other entity for any reason or purpose whatsoever. Personal and social
contacts with past, present or future customers of the Company shall not be
prohibited hereby.
9. LIMITED COVENANT NOT TO COMPETE. (a) For a period of two years
commencing with the expiration of the term of this Agreement, the Employee will
not, 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 company or other business enterprise engaged in a
line or lines of business similar to that of the Company or any of its
subsidiaries or joint ventures, within each parish of the State of Louisiana or
any other jurisdiction, whether within or outside the United States (each such
parish and other jurisdiction being identified in Appendix D hereto) in which
the business of the Company or any of its subsidiaries or joint ventures is
carried on, so long as the Company or any of its subsidiaries or joint ventures
carries on a like line of business therein; provided, however, that nothing
contained herein shall prohibit the Employee from making investments in any
publicly held company which do not exceed in the aggregate two percent of the
equity interest of such company.
(b) Employee agrees that he will from time to time upon the
Company's request promptly execute any supplement, amendment, restatement or
other modification of Appendix D as may be necessary or appropriate to
correctly reflect the jurisdictions which, at the time of such modification,
should be covered by Appendix D and this Section 9. Furthermore, Employee
agrees that all references to Appendix D in this Agreement shall be deemed to
refer to Appendix D as so supplemented, amended, restated or otherwise modified
from time to time.
10. CERTAIN PROPRIETARY RIGHTS. The Employee agrees to and hereby
does assign to the Company all his right, title and interest in and to all
inventions, business plans, work models or procedures, whether or not
patentable, which are made or conceived solely or jointly by him:
(a) At any time during the term of his employment by the
Company, or
- 13 -
<PAGE> 14
(b) With the use of time or materials of the Company. The
Employee agrees to communicate to the Company or its representatives all facts
known to him concerning such matters, to sign all necessary instruments, make
all necessary oaths and generally, at the Company's expense, to do everything
reasonably practicable (without expense to the Employee) to aid the Company in
obtaining and enforcing proper legal protection for all such matters in all
countries and in vesting title to such matters in the Company. At the
Company's request (during or after the term of this Agreement) and expense, the
Employee will promptly execute a specific assignment of title to the Company,
and perform any other acts reasonably necessary to implement the foregoing
assignment.
11. INJUNCTIVE RELIEF. In the event of a breach or threatened breach
by the Employee of the provisions of Sections 7, 8, 9 or 10 of this Agreement
during or after the term of this Agreement, the Company shall be entitled to
injunctive relief restraining the Employee from violation of such paragraph.
Nothing herein shall be construed as prohibiting the Company from pursuing any
other remedy at law or in equity it may have in the event of breach or
threatened breach of this Agreement by the Employee.
12. BINDING EFFECT.
(a) This Agreement shall be binding upon and inure to the
benefit of the Company and any of its successors or assigns.
(b) This Agreement is personal to the Employee and shall not
be assignable by the Employee without the consent of the Company (there being
no obligation to give such consent) other than such rights or benefits as are
transferred by will or the laws of descent and distribution. The rights of the
Employee under Section 6 hereof may be transferred by will and testament of the
Employee.
(c) The Company will require any successor or assign (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the assets or businesses of the Company (i) to assume
unconditionally and expressly this Agreement and (ii) to agree to perform all
of the obligations under this Agreement in the same manner and to the same
extent as would have been required of the Company had no assignment or
succession occurred, such assumption to be set forth in a writing reasonably
satisfactory to the Employee. In the event of any such assignment or
succession, the term "Company" as used in this Agreement shall refer also to
such successor or assign.
13. NOTICES. Any notice or other communication required under this
Agreement shall be in writing, shall be deemed to have been given and received
when delivered in person, or, if mailed, shall be deemed to have been given
when deposited in the United States mail, first class, registered or certified,
return receipt requested, with proper postage prepaid, and shall be deemed to
have been received on the third business day thereafter, and shall be addressed
as follows:
- 14 -
<PAGE> 15
If to the Company, addressed to:
UNIFAB International, Inc.
5007 Port Road
New Iberia, Louisiana 70560
Attn: Peter J. Roman
Vice President and Chief Financial Officer
If to the Employee, addressed to:
Dailey J. Berard
110 Mountainside Drive
Lafayette, Louisiana 70503
or such other address as to which any party hereto may have notified the other
in writing.
14. GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Louisiana.
15. ENTIRE AGREEMENT. This Agreement, including Appendices A through
D, inclusive, all of which are herein incorporated by reference and made a part
hereof, and the documents referred to herein, contain or refer to the entire
arrangement or understanding between the Employee and the Company relating to
the employment of the Employee by the Company. No provision of the Agreement,
including the Appendices, may be modified or amended except by an instrument in
writing signed by or for both parties hereto.
16. SEVERABILITY. If any term or provision of this Agreement, or the
application thereof to any person or circumstance, shall at any time or to any
extent be invalid or unenforceable, the remainder of this Agreement, or the
application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be affected
thereby and each term and provision of this Agreement shall be valid and
enforced to the fullest extent permitted by law.
17. WAIVER OF BREACH. The waiver by either party of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach thereof.
18. REMEDIES NOT EXCLUSIVE. No remedy specified herein shall be
deemed to be such party's exclusive remedy, and accordingly, in addition to all
of the rights and remedies provided for in this Agreement, the parties shall
have all other rights and remedies provided to them by applicable law, rule or
regulation.
19. BENEFICIARIES. Whenever this Agreement provides for any payment
to be made to the Employee or his estate, such payment may be made instead to
such beneficiary or beneficiaries as the Employee may have designated in
writing and filed with the Company. The Employee shall
- 15 -
<PAGE> 16
have the right to revoke any such designation from time to time and to
redesignate any beneficiary or beneficiaries by written notice to the Company.
20. COMPANY'S RESERVATION OF RIGHTS. Employee acknowledges and
understands that the Employee serves at the pleasure of the Board of Directors
and that the Company has the right at any time to terminate Employee's status
as an employee of the Company, or to change or diminish his status as the
President and Chief Executive Officer during the Employment Term, subject to
the rights of the Employee to claim the benefits conferred by Sections 5(a) and
6 hereof if such action constitutes a termination by the Company without Cause
or a termination by the Employee for Good Reason.
21. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
UNIFAB INTERNATIONAL, INC.
By:
-------------------------------------
Charles E. Broussard
Director, Member of
Compensation Committee
EMPLOYEE:
---------------------------------------------
Dailey J. Berard
- 16 -
<PAGE> 17
APPENDIX A
SCHEDULE FOR EMPLOYEE BONUS DETERMINATION
Bonus as% of Salary Belowh 15% net income return on capital 0*
<TABLE>
<S> <C>
Achieve 15% minimum net income return on capital . . . . . . . . . . . . 50.0%
Achieve greater than minimum net income return on capital:
16% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53.3%
17% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56.7%
18% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60.0%
19% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63.3%
20% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66.7%
21% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70.0%
22% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73.3%
23% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76.7%
24% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80.0%
25% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83.3%
26% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86.7%
27% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90.0%
28% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93.3%
29% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96.7%
Achieve 30% or greater net income return on capital 100.0%
</TABLE>
*FY1998 only - guaranteed minimum of $50,000.
- 17 -
<PAGE> 18
APPENDIX B
FORM OF OPTION AGREEMENT UNDER THE COMPANY'S
1997 INCENTIVE COMPENSATION PLAN
OFFICER AND
EMPLOYEE
AGREEMENT
STOCK OPTION AGREEMENT
FOR THE GRANT OF
NON-QUALIFIED STOCK OPTIONS UNDER THE
UNIFAB INTERNATIONAL, INC.
LONG-TERM INCENTIVE PLAN
THIS AGREEMENT is entered into and effective as of __________, 1997, by
and between UNIFAB International, Inc., a Louisiana corporation (the
"Company"), and ________ ________ (the "Optionee").
WHEREAS Optionee is a key employee of the Company and the Company
considers it desirable and in its best interest that Optionee be given an
inducement to acquire a proprietary interest in the Company and an incentive to
advance the interests of the Company by possessing an option to purchase shares
of the common stock of the Company, $.01 par value per share (the "Common
Stock") in accordance with the UNIFAB International, Inc. Long-Term Incentive
Plan (the "Plan").
NOW, THEREFORE, in consideration of the premises, it is agreed by and
between the parties as follows:
I.
Grant of Option
The Company hereby grants to Optionee the right, privilege and option to
purchase _______ shares of Common Stock (the "Option") at an exercise price
equal to the initial public offering price of the Common Stock (the "Exercise
Price"). The grant of the Option is subject to the issuance and sale of Common
Stock registered with the Securities and Exchange Commission on Form S-1 (Reg.
No. 333-31609) in connection with the Company's initial public offering of the
Common Stock and such grant shall be effective as of the Closing Time referred
to in that certain Transition Agreement dated ________, 1997 to which the
Company is a party. The date on which the Closing Time occurs shall
hereinafter be referred to as the "Date of Grant." The Option shall be
exercisable at the time specified in Section II below. The Option is a non-
qualified stock option and shall not be treated as an incentive stock option
under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").
- 18 -
<PAGE> 19
II.
Time of Exercise
2.1 Subject to the provisions of the Plan and the other provisions of
this Section II, the Optionee shall be entitled to exercise the Option as
follows:
With respect to one-third of the shares of Common Stock subject to the
Option, beginning on the Date of Grant; With respect to two-thirds of
the shares of Common Stock subject to the Option, less any shares
previously issued, beginning one year following the Date of Grant; and
With respect to all of the shares of Common Stock subject to the Option,
less any shares previously issued, beginning two years following the
Date of Grant.
The Option shall expire and may not be exercised later than ten years
following the Date of Grant.
2.2 During Optionee's lifetime, the Option may be exercised only by
him or his guardian if he has been declared incompetent. In the event of
death, the Option may be exercised as provided herein by the Optionee's estate
or by the person to whom such right devolves as a result of the Optionee's
death.
2.3 If an Optionee ceases to be an employee because of death,
disability within the meaning of Section 22(e)(3) of the Code ("Disability") or
retirement, the Option must be exercised, to the extent otherwise exercisable
at the time of termination of employment, within one year from the date on
which the Optionee ceases to be an employee, but in no event later than ten
years following the Date of Grant.
2.4 If Optionee's employment is terminated, other than as a result of
death, disability or retirement, the Option must be exercised, to the extent
otherwise exercisable at the time of termination of employment, within 30 days
from the date on which Optionee ceases to be an employee, but in no event later
than ten years following the date of grant.
III.
Method of Exercise of Option
3.1 Optionee may exercise all or a portion of the Option by
delivering to the Company a signed written notice of his intention to exercise
the Option, specifying therein the number of shares to be purchased. Upon
receiving such notice, and after the Company has received full payment of the
Exercise Price, the appropriate officer of the Company shall cause the transfer
of title of the shares purchased to Optionee on the Company's stock records and
cause to be issued to Optionee a stock certificate for the number of shares
being acquired. Optionee shall not have any rights as a shareholder until the
stock certificate is issued to him.
3.2 The Option may be exercised by the payment of the Exercise Price
in cash, in shares of Common Stock held for six months or in a combination of
cash and shares of Common Stock held
- 19 -
<PAGE> 20
for six months. The Optionee may also pay the Exercise Price by delivering a
properly executed exercise notice together with irrevocable instructions to a
broker approved by the Compensation Committee (with a copy to the Company) to
promptly deliver to the Company the amount of sale or loan proceeds to pay the
Exercise Price.
IV.
No Contract of Employment Intended
Nothing in this Agreement shall confer upon Optionee any right to
continue in the employment of the Company or any of its subsidiaries, or to
interfere in any way with the right of the Company or any of its subsidiaries
to terminate Optionee's employment relationship with the Company or any of its
subsidiaries at any time.
V.
Binding Effect
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators and
successors.
VI.
Non-Transferability
The Option granted hereby may not be transferred, assigned, pledged or
hypothecated in any manner, by operation of law or otherwise, other than by
will, by the laws of descent and distribution or pursuant to a domestic
relations order, as defined in the Code, and shall not be subject to execution,
attachment or similar process.
VII.
Inconsistent Provisions
The Option granted hereby is subject to the provisions of the Plan as in
effect on the date hereof and as it may be amended. In the event any provision
of this Agreement conflicts with such a provision of the Plan, the Plan
provision shall control.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed on the day and year first above written.
UNIFAB INTERNATIONAL, INC.
By:
---------------------------------
Member
Compensation Committee
---------------------------------
Optionee
- 20 -
<PAGE> 21
APPENDIX C
OTHER BENEFITS AVAILABLE TO EMPLOYEES
- 21 -
<PAGE> 22
APPENDIX D
JURISDICTIONS IN WHICH COMPETITION IS RESTRICTED
AS PROVIDED IN SECTION 8 OF THE EMPLOYMENT AGREEMENT
BETWEEN INTERNATIONAL, INC. AND DAILEY J. BERARD
Louisiana - Parish of Iberia
- 22 -
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
The Registrant does not currently have any subsidiaries. Upon completion
of the Offering, the Registrant will have the following subsidiary:
Subsidiary State of Incorporation
- ------------------------------------ --------------------------
Universal Fabricators Incorporated Delaware
<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 28, 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 28, 1997), with respect to the
balance sheet of UNIFAB International, Inc., in Amendment No. 2 to 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
August 29, 1997
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
BE IT KNOWN, that the undersigned, in his capacity as a member of the
Board of Directors of UNIFAB International, Inc. (the "Company"), does hereby
make, constitute and appoint each of Dailey J. Berard and Peter J. Roman, or
either one of them, his true and lawful attorney-in-fact with power to act with
full power of substitution and resubstitution, for him and in his name, place
and stead, to sign any and all amendments (including post-effective amendments)
to the Company's Registration Statement on Form S-1 (Registration Statement No.
333-31609), 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.
/s/ Richard E. Roberson, Jr.
----------------------------
Richard E. Roberson, Jr.
<PAGE> 2
EXHIBIT 24.1
POWER OF ATTORNEY
BE IT KNOWN, that the undersigned, in his capacity as a member of the
Board of Directors of UNIFAB International, Inc. (the "Company"), does hereby
make, constitute and appoint each of Dailey J. Berard and Peter J. Roman, or
either one of them, his true and lawful attorney-in-fact with power to act with
full power of substitution and resubstitution, for him and in his name, place
and stead, to sign any and all amendments (including post-effective amendments)
to the Company's Registration Statement on Form S-1 (Registration Statement No.
333-31609), 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.
/s/ George C. Yax
---------------------------
George C. Yax
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A)
UNIVERSAL FABRICATORS INCORPORATED'S JUNE 30, 1997 FINANCIAL STATEMENTS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,630,154
<SECURITIES> 0
<RECEIVABLES> 13,898,217
<ALLOWANCES> 0
<INVENTORY> 105,745
<CURRENT-ASSETS> 17,144,157
<PP&E> 8,144,824
<DEPRECIATION> 3,144,416
<TOTAL-ASSETS> 22,411,565
<CURRENT-LIABILITIES> 11,356,518
<BONDS> 0
0
0
<COMMON> 1,000
<OTHER-SE> 9,721,879
<TOTAL-LIABILITY-AND-EQUITY> 22,411,565
<SALES> 15,503,153
<TOTAL-REVENUES> 15,503,153
<CGS> 13,313,942
<TOTAL-COSTS> 13,722,844
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,359
<INCOME-PRETAX> 1,803,966
<INCOME-TAX> 659,918
<INCOME-CONTINUING> 1,144,048
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,144,048
<EPS-PRIMARY> .33
<EPS-DILUTED> .33
</TABLE>
