Form 10-K/A
(Amendment No. 1)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-29416
UNIFAB International, Inc.
-------------------------------
(Exact name of registrant as specified in its charter)
Louisiana 72-1382998
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5007 Port Road, New Iberia, La. 70560
- ------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (337) 367-8291
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common stock, $0.01 par value per share
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act)
Yes [ ] No [X]
The aggregate market value of the voting common equity held by nonaffiliates of
the registrant as of June 28, 2002 was approximately $2.2 million based on the
closing price of the registrant's common stock on the Nasdaq Small Cap Market on
such date of $0.28 per share.
The number of shares outstanding of the registrant's common stock, $0.01 par
value per share, as of March 18, 2003 was 8,189,972.
This Form 10-K/A is being filed by the Registrant solely for the
purpose of completing Items 10, 11, 12 and 13 in Part III of the Registrant's
Annual Report on Form 10-K. At the time that the Registrant filed its Annual
Report, the Registrant intended to incorporate by reference the information
required by these Items of Part III from its proxy statement for its 2003 annual
meeting of shareholders, which the Registrant intended to file with the
Securities and Exchange Commission prior to April 30, 2003. In view of the fact
that the Registrant will not file its 2003 proxy statement on or before April
30, 2003, the Registrant is required to file this amendment supplementing its
Annual Report on Form 10-K by including the information required by Items 10,
11, 12 and 13.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
DIRECTORS
The following table sets forth for each director of our company, his
age, position, principal occupation and employment during the past five years
and his directorships in other public corporations, as of April 15, 2003, and
the year that he was first elected a director of our company or its predecessor.
Each director has been elected to serve until the 2003 annual meeting of
shareholders and until his successor is elected and qualified.
PRINCIPAL OCCUPATION AND DIRECTORSHIPS IN DIRECTOR
NAME AND AGE OTHER PUBLIC CORPORATION SINCE
------------ ------------------------ -----
Frank J. Cangelosi, Jr., 49........ Mr. Cangelosi, a certified public accountant, has served as 2002
the Vice President of Finance of Nassau Holding Corporation,
the parent company of several oilfield-related companies,
since June 1985.
William A. Downey, 56.............. Mr. Downey serves as our Executive Vice President and Chief 2002
Operating Officer, as well as a director. Mr. Downey is also
the President of Universal Fabricators, LLC, a wholly owned
subsidiary of our company. Mr. Downey previously served as
Vice President of Operations for Gulf Island Fabrication,
Inc., a publicly traded company engaged in the fabrication of
platforms and structures used in the development and
production of oil and gas, from May 1985 through January 2000.
Mr. Downey was also the President of Gulf Island, LLC, a
subsidiary of Gulf Island Fabrication, Inc., from January 2000
through June 2000.
PRINCIPAL OCCUPATION AND DIRECTORSHIPS IN DIRECTOR
NAME AND AGE OTHER PUBLIC CORPORATION SINCE
------------ ------------------------ -----
Daniel R. Gaubert, 54.............. Mr. Gaubert served as the Chief Financial Officer of 2002
McDermott International, Inc. from 1996 until his retirement
in 2001, and has served as a consultant to McDermott
International, Inc. since 2001. In February 2000, The Babcock
& Wilcox Company, a subsidiary of McDermott International,
Inc., filed a petition to reorganize under Chapter 11 of the
U.S. Bankruptcy Code in order to determine and resolve its
asbestos-related liabilities; at the time this petition was
filed, Mr. Gaubert was serving as the Chief Financial Officer
of The Babcock & Wilcox Company.
William A. Hines, 66............... Mr. Hines serves as our Chairman of the Board. Mr. Hines is 2002
also the Chairman of the Board and President of Nassau Holding
Corporation, the parent company of several oilfield-related
companies, including Midland, and a director of Whitney
Holding Corporation, a publicly traded regional bank holding
company. Mr. Hines previously served as a director of our
company from July 1998 through March 2001.
Donald L. Moore, 64................ Mr. Moore, a certified public accountant, was the managing 2002
partner of the New Orleans office of the national accounting
firm of Ernst & Young LLP for over 20 years prior to his
retirement in September 1998. Mr. Moore serves on the boards
of directors of several charitable organizations, including
the Louisiana Chapter of the Salvation Army and the New
Orleans Opera Association.
PRINCIPAL OCCUPATION AND DIRECTORSHIPS IN DIRECTOR
NAME AND AGE OTHER PUBLIC CORPORATION SINCE
------------ ------------------------ -----
Allen C. Porter, Jr., 70........... Mr. Porter serves as our President and Chief Executive 2002
Officer as well as a member of our board of directors. Mr.
Porter is also the President of Allen Process Systems, LLC, a
wholly owned subsidiary of our company, and was the founder
and President of Allen Tank, Inc., the predecessor of Allen
Process Systems, LLC. From 1998 to 2000, Mr. Porter was a
construction manager for Versatruss Americas LLC, a designer
and manufacturer of offshore heavy lift systems. From 2000
through his joining our company in August 2002, Mr. Porter was
the Executive Vice President of Yarbrough Cable Co., a
Versabar company.
Perry Segura, 73................... Mr. Segura served as our Chairman of the board from April 1980
2002 to August 2002. Mr. Segura is an architect and real
estate developer. Mr. Segura is a member of the Board of
Supervisors of Louisiana State University and was its Chairman
from 1997 to 1998 and its Vice Chairman from 1996 to 1997.
George C. Yax, 62.................. Mr. Yax is currently a rancher and was a co-founder of Ceanic 1997
Corporation (formerly, American Oilfield Divers, Inc.), a
publicly traded provider of subsea products and services to
the offshore oil and gas industry. Mr. Yax served as Chairman
of the Board of Cenaic Corporation until its sale in August
1998.
EXECUTIVE OFFICERS
For information regarding executive officers of the Company, see "Executive
Officers of the Registrant" in Part I of this report.
ITEM 11. EXECUTIVE COMPENSATION.
DIRECTOR COMPENSATION
Each director who is not also an employee of the company receives an
annual fee of $12,000 for his services as a director. We reimburse all directors
for reasonable out-of-pocket expenses incurred in attending board and committee
meetings.
In addition, in each year during which our long-term incentive plan is
in effect and a sufficient number of shares are available under the plan, on the
day of each annual
meeting of shareholders, each non-employee director will receive an option to
purchase up to 2,500 shares of common stock at an exercise price equal to the
fair market value of our common stock on such date. The compensation committee
determines the exact date of the grant and the number of shares subject to the
option. Each stock option shall be fully exercisable on the date of its grant
and will expire ten years from the date of grant, unless the non-employee
director ceases to be a director. In that case, the exercise period will be
shortened. In accordance with this arrangement, on January 2, 2003, we granted
each non-employee director an option to buy 2,500 shares of our common stock at
an exercise price of $0.25, the fair market value of our common stock on that
date.
COMPENSATION OF EXECUTIVE OFFICERS
The following table provides you with information about the
compensation we paid in 2002 (January 1, 2002 to December 31, 2002), 2001
(January 1, 2001 to December 31, 2001), transition 2000 (April 1, 2000 to
December 31, 2000) and fiscal 2000 (April 1, 1999 to March 31, 2000), to our
chief executive officers and each of our other executive officers whose
individual salary and bonus for the calendar year 2002 exceeded $100,000 in the
aggregate (collectively, the "Named Executive Officers"). The information below
does not include the amount of perquisites provided to the Named Executive
Officers because the threshold for disclosure under the SEC rules was not met.
SUMMARY COMPENSATION TABLE
ANNUAL LONG TERM
COMPENSATION COMPENSATION
RESTRICTED SECURITIES
FISCAL STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARD OPTIONS(#) COMPENSATION(1)
--------------------------- ---- ------ ----- ----- ---------- --------------
Jerome E. Chojnacki ................... 2002 $100,000 $ 0 $ 0 $ 0 $ 78,240(2)(4)
President and Chief Executive Officer 2001 75,000 50,000 55,500(3) 150,000 1,944(4)
Allen C. Porter, Jr ................... 2002 95,139 0 0 250,000 64,800(7)
President and Chief Executive
Officer(5)
William A. Downey ..................... 2002 75,323 0 0 250,000 62,200(7)
Executive Vice President (6)
Peter J. Roman ........................ 2002 140,000 0 0 0 0
Vice President 2001 104,770 0 - 0 0
2000* 67,500 0 - 30,000 113(1)
2000** 90,000 37,800 - 0 1,575(1)
Glenn D. Gros ......................... 2002 135,708 0 0 0 0
Vice President (8) 2001 94,615 0 0 10,000 0
Martin K. Bech ........................ 2002 118,739 0 0 0 0
Vice President and Secretary (9) 2001 77,917 0 0 10,000 0
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* Transition 2000 (April 1, 2000 to December 31, 2000).
** Fiscal 2000 (April 1, 1999 to March 31, 2000).
(1) Comprised of our contributions to our 401(k) Plan.
(2) Mr. Chojnacki served as our chairman of the board, president and chief
executive officer from October 2001 until his resignation in April
2002, at which time Mr. Chojnacki
received a one-time payment of $75,000 in connection with the
termination of the consulting agreement pursuant to which Mr. Chojnacki
served our company (see "-Agreements with Named Executive Officers").
(3) On November 7, 2001, we granted 50,000 restricted shares of our common
stock to Mr. Chojnacki; the closing price of our common stock on the
Nasdaq National Market on the date of grant was $1.11 per share. As of
December 31, 2001, Mr. Chojnacki held an aggregate of 50,000 restricted
shares of our common stock having an aggregate value of $32,500, based
upon the $0.65 per share closing price of our common stock on the
Nasdaq National Market on such date. Any dividends declared by our
board of directors and paid with respect to unrestricted shares of our
common stock will be paid with respect to any restricted shares of our
common stock then held by Mr. Chojnacki.
(4) Includes premium payments of $3,240 in 2002 and $1,944 in 2001 for a
life insurance policy for the benefit of Mr. Chojnacki.
(5) Mr. Porter rejoined our company in April 2002 as a consultant and in
August 2002 he was named President and Chief Executive Officer. Mr.
Porter was the founder of Allen Tank, Inc., which was acquired by our
company in June 1998. Mr. Porter was not involved with the company
after the acquisition until his return in April 2002.
(6) Mr. Downey joined our company in April 2002 as a consultant and in
August 2002 he was named Executive Vice President and Chief Operating
Officer.
(7) Represents consulting fees paid to Mr. Porter and Mr. Downey prior to
their appointments as Chief Executive Officer and Chief Operating
Officer, respectively.
(8) Mr. Gros joined our company in March 2001.
(9) Mr. Bech joined our company in April 2001.
STOCK OPTION GRANTS
The following table provides you with information about the stock
options that we granted to Messrs. Porter and Downey in 2002. We did not grant
stock options to any of our other Named Executive Officers in 2002.
OPTION GRANTS IN 2002
GRANT DATE
INDIVIDUAL GRANTS VALUE
----------------------------------------------------------------------- ----------
NUMBER OF
SECURITIES
UNDERLYING % OF TOTAL OPTIONS GRANT DATE
OPTIONS GRANTED TO EXERCISE OR BASE PRESENT
NAME GRANTED (#)(1) EMPLOYEES IN 2002 PRICE ($/SH) EXPIRATION DATE VALUE (2)
- ------------------------- -------------- ------------------ ---------------- --------------- ----------
Allen C. Porter, Jr...... 250,000 50.0% $0.39 8/16/12 $52,500
William A. Downey ....... 250,000 50.0% $0.39 8/16/12 $52,500
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(1) Of the options granted to Messrs. Porter and Downey, each 250,000 share
grant was exercisable on the grant date.
(2) We used the Black-Scholes option pricing model to determine the grant
date present value of the stock options that we granted in 2002 to
Messrs. Porter and Downey. Under
the Black-Scholes option pricing model, the grant date present value of
each stock option referred to in the table was calculated to be $0.21.
We used the following facts and assumptions in making such calculation:
(a) an exercise price of $0.39 for each such stock option; (b) a fair
market value of $0.39 for one share of common stock on the date of
grant; (c) no dividend payments on our common stock; (d) a stock option
term of 10 years; (e) a stock volatility of 1.042, based on an analysis
of monthly closing stock prices of shares of our common stock during a
240-week period; and (f) an assumed risk-free interest rate of 2.22%,
which is equivalent to the yield on a 2-year treasury note on the grant
date. We applied no other discounts or restrictions related to vesting
or the likelihood of vesting of stock options. We multiplied the
resulting grant date present value of $0.21 for each stock option by
the total number of stock options granted to Messrs. Porter and Downey
to determine the total grant date present value of such stock options.
OUTSTANDING STOCK OPTIONS
The following table provides you with information about all outstanding
stock options held by each of the Named Executive Officers as of December 31,
2002. None of our Named Executive Officers exercised stock options in 2002.
AGGREGATED OPTIONS AS OF DECEMBER 31, 2002
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-
UNDERLYING UNEXERCISED THE-MONEY OPTIONS AT
OPTIONS AT 12/31/02(#) 12/31/02(1)
EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
------------------------- -------------------------
Allen C. Porter, Jr.................................. 250,000/0 0/0
William A. Downey.................................... 250,000/0 0/0
Peter J. Roman....................................... 52,000/0 0/0
Glenn D. Gros........................................ 6,666/3,334 0/0
Martin K. Bech....................................... 6,666/3,334 0/0
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(1) On December 31, 2002, the closing sales price of our common stock on
the Nasdaq SmallCap Market was $0.22 per share.
(2) Upon his resignation from our company in April 2002, Mr. Chojnacki
forfeited his 100,000 unexercisable options. Under our long-term
incentive plan, Mr. Chojnacki was allowed 30 days from the date of his
resignation in which to exercise his exercisable options. Mr. Chojnacki
did not exercise any of his exercisable options within such time and,
as a result, all such options were forfeited.
AGREEMENTS WITH NAMED EXECUTIVE OFFICERS
Agreement with Mr. Chojnacki
Upon the resignation of Mr. Berard, we entered into a consulting
agreement with Mr. Chojnacki in October 2001 pursuant to which Mr. Chojnacki
served as our chairman of the board, president, and chief executive officer Mr.
Chojnacki entered into the consulting agreement through Varix, Ltd. ("Varix"), a
limited partnership which he controlled; at the time of entering into the
agreement, the sole general partner of Varix
was a limited liability company in which Mr. Chojnacki held a 100% membership
interest.
The consulting agreement, which was to remain effective through the end
of 2002, provided for an annual fee of $375,000 payable in monthly installments,
and an annual bonus equal to the greater of $50,000 or 10% of our annual EBITDA
(earnings before income tax, depreciation and amortization). Pursuant to the
agreement, we granted to Mr. Chojnacki 50,000 restricted shares of our common
stock, and an option to purchase 150,000 shares of our common stock at an
exercise price of $1.11 per share.
The Midland agreement required us to terminate Mr. Chojnacki's
employment agreement effective April 2002, make a one-time cash payment of
$75,000 to Mr. Chojnacki in exchange for the termination of his employment
agreement, and cause Mr. Chojnacki to resign as a director of our company.
Accordingly, we, Mr. Chojnacki and Varix entered into an agreement, effective
April 2002, terminating the consulting agreement and all obligations of the
parties thereunder, releasing us from any claims of Mr. Chojnacki or Varix
arising out of the consulting agreement, providing for the required cash payment
to Mr. Chojnacki, and providing for the resignation of Mr. Chojnacki as our
chairman of the board, president and chief executive officer.
Agreement with Mr. Downey
On August 19, 2002, the Company entered into a two-year agreement with
William A. Downey pursuant to which Mr. Downey will serve as a full-time
consultant to the company for one year, and will consult with the company on a
project-by-project basis in the second year. Under the agreement, Mr. Downey
receives a monthly salary of $5,000 and all benefits to which executive officers
of the company are entitled, and he received immediately exercisable options to
acquire 250,000 shares of common stock of the Company for $0.39 per share. If
Midland Fabricators and Process Systems, L.L.C. and/or William A. Hines and his
family cease to own a controlling interest in the company, then Mr. Downey would
be relieved of his obligations to perform services for the company and would
have the option to continue to receive $5,000 per month during the remaining
term of the agreement or to receive all amounts due under the agreement in one
lump sum.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2002, Messrs. Broussard, Cangelosi, Moore and Yax comprised our
compensation committee. Mr. Gaubert was added as a member to the compensation
committee in March 2003. Other than Mr. Cangelosi, none of the members of our
compensation committee have ever served as an officer or employee of our company
or any of our subsidiaries or affiliates. Because Mr. Cangelosi is the Vice
President of Finance of Nassau Holding Corporation, the parent company of
Midland, which is the beneficial owner of approximately 93% of the company's
outstanding common stock (see "Stock Ownership"), he does not meet independence
requirements. Mr. Cangelosi is a certified public accountant with over 17 years
of experience in the oilfield services industry, and the company's board of
directors determined, in accordance with The
Nasdaq Stock Market's listing standards, that his membership on our compensation
committee was required by the best interests of the company and its
shareholders. In 2002, none of our executive officers served as a director or
member of the compensation committee of any other entity of whom an executive
officer served on our board of directors or on our compensation committee.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Our compensation committee has the authority, among other things, to
review, analyze, and recommend compensation programs to the company's board of
directors and to administer and grant awards under the company's employee
benefit plans.
The company's executive compensation consists primarily of (1)
salaries, (2) annual cash incentive bonuses and (3) long-term incentive
compensation in the form of stock options granted under the company's long-term
incentive plan. In February 2002, our compensation committee approved an
increase in the annual salary of Glenn D. Gros, the then vice president of
operations of the company, to $135,000, and approved an increase in the annual
salary of Martin K. Bech, the company's vice president, secretary and general
counsel, to $118,000. The salaries of the company's other executive officers are
based on their levels of responsibility and the board of directors and our
committee's subjective assessments of their performance.
The amount of the annual bonus payable to Jerome E. Chojnacki, who
served as the company's president and chief executive officer from October 2001
until his resignation from the company in April 2002, was determined in
accordance with the terms of his consulting agreement, under which he was
entitled to receive, as an annual incentive bonus, the greater of ten percent of
the company's EBITDA (earnings before income tax, depreciation and amortization)
or $50,000. The Midland agreement, however, required us to terminate Mr.
Chojnacki's employment agreement effective April 2002 and make a one-time cash
payment of $75,000 to Mr. Chojnacki in exchange for the termination of his
employment agreement, and cause Mr. Chojnacki to resign as a director of our
company. As a result of the termination of the consulting agreement, Mr.
Chojnacki was not eligible to receive a bonus for 2002.
The company has adopted an executive compensation program for its
other executive officers that ties a portion of executive compensation to its
short-term performance. Under this program, executive officers and other key
employees of the company are entitled to receive, as an annual incentive bonus,
a percentage of their respective annual salary ranging from 22.5% to 70%,
depending on the percentage net income return on the company's capital. The
company must achieve a minimum 10% net income return on its capital for any of
these officers and employees to receive a minimum bonus of 22.5% of their
respective annual salary, and each of them may receive the maximum bonus of 70%
of their respective annual salary if the company achieves a 30% or greater net
income return on its capital. The company did not achieve a minimum 10% net
income return on its capital in 2002; accordingly, the company did not pay a
bonus for that period to any of its executive officers or key employees.
The company also provides long-term incentives to its executive
officers in the form of stock options granted under the company's long-term
incentive plan. The stock option awards are intended to reinforce the
relationship between compensation and increases in the market price of the
company's common stock and to align the executive officers' financial interests
with that of the company's shareholders. Generally, we base the size of these
awards on the position of each participating officer and a subjective assessment
of the officer's individual performance. Pursuant to the terms of his employment
agreement, Mr. Downey was granted options to acquire 250,000 shares of the
company's common stock for $0.39 per share in 2002. Mr. Porter was also granted
options to acquire 250,000 shares of the company's common stock for $0.39 per
share in 2002. No other named executive officers received a stock option grant
in 2002. The table entitled "Option Grants in 2002" in the section of this
annual report on Form 10-K entitled "Executive Compensation" sets forth certain
information about the stock options granted to Messrs. Porter and Downey in
2002. Also included in the "Summary Compensation Table" in the section of this
annual report on Form 10-K entitled "Executive Compensation" are the number of
securities underlying stock options granted to certain of our executive officers
in 2001, fiscal 2000 and transition 2000.
Section 162(m) of the Internal Revenue Code limits the tax deduction
to $1 million for compensation paid to certain highly compensated executive
officers. Qualified performance-based compensation is excluded from this
deduction limitation if certain requirements are met. None of the
company's executive officers reached the deductibility limitation for 2002. Our
compensation committee believes that the stock options granted to Messrs. Porter
and Downey, as discussed above, qualify for the exclusion from the deduction
limitation under Section 162(m). Our compensation committee anticipates that the
remaining components of individual executive compensation that do not qualify
for an exclusion from Section 162(m) should not exceed $1 million in any year
and therefore will continue to qualify for deductibility.
The Compensation Committee*
George C. Yax
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* Mr. Broussard resigned from our board of directors in August 2002, prior to
the filing of this report. Messrs. Cangelosi and Moore were appointed to our
compensation committee in August 2002 and Mr. Gaubert was appointed to our
compensation committee in March 2003, subsequent to the committee's
deliberations concerning our executive compensation for 2002.
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on
our common stock from March 31, 1998, through December 31, 2002, with the
cumulative total return of the Standard & Poor's 500 Stock Index and the
Standard & Poor's Oil & Gas Equipment & Services Index for the same period. The
returns are based on an assumed investment of $100 March 31, 1998 in our common
stock and in each of the indices, and on the assumption that dividends were
reinvested. The assumed $100.00 investment in our common stock was made at
$17.50 per share, the closing price on March 31, 1998.
COMPARISON OF CUMULATIVE TOTAL RETURN*
UNIFAB INTERNATIONAL, INC., S&P 500 INDEX &
S&P OIL & GAS EQUIPMENT & SERVICES INDEX
[PERFORMANCE GRAPH]
March 31, March 31, March 31, December 31, December 31, December 31,
1998 1999 2000 2000 2001 2002
--------- --------- --------- ------------ ------------ ------------
UNIFAB International, Inc. $100.00 $ 46.43 $ 45.71 $ 54.29 $ 3.71 $ 1.26
S&P 500 100.00 118.46 139.71 124.15 109.39 85.22
S&P Oil & Gas (Equipment & Services) 100.00 78.62 102.56 108.70 72.35 64.04
Index
ASSUMES $100 INVESTED ON SEPTEMBER 19, 1997 IN UNIFAB INTERNATIONAL, INC. COMMON
STOCK, S&P 500 INDEX AND S&P OIL & GAS (DRILLING & EQUIPMENT) INDEX
* TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
STOCK OWNERSHIP
The following table sets forth, as of April 30, 2003 and, to the extent
known by our company, certain information regarding beneficial ownership of our
common stock and series A preferred stock by (1) each of our directors, (2) each
of our executive officers for whom compensation information is disclosed in this
annual report, (3) all of our directors and executive officers as a group, and
(4) persons having beneficial ownership of more than 5% of our outstanding
common stock or series A preferred stock. Unless otherwise indicated, we believe
that the shareholders listed below have sole investment and voting power with
respect to their shares based on information furnished to us by them. Except as
otherwise noted, the address for the beneficial owners listed below is c/o
UNIFAB International, Inc., 5007 Port Road, New Iberia, Louisiana 70560.
NUMBER OF
NUMBER OF PERCENT OF PREFERRED PERCENT OF
COMMON SHARES OUTSTANDING SHARES OUTSTANDING
BENEFICIALLY COMMON BENEFICIALLY PREFERRED
NAME OF BENEFICIAL OWNER OWNED(1) STOCK(2) OWNED STOCK(2)
- ------------------------ -------- -------- ----- --------
Martin K. Bech.................................... 11,400(3) * 0 -
Dailey J. Berard.................................. 430,386(4) 5.3 0 -
Charles E. Broussard.............................. 419,934(5) 5.1 0 -
Jerome E. Chojnacki............................... 50,000(6) * 0 -
Frank J. Cangelosi, Jr............................ 0 - 0 -
William A. Downey................................. 250,000 * 0 -
Daniel R. Gaubert................................. 2,500 * 0 -
Glenn D. Gros..................................... 18,000 * 0 -
William A. Hines (7).............................. 104,244,007 92.7 738 100
Donald L. Moore................................... 2,500 * 0 -
Allen C. Porter, Jr............................... 250,012 * 0 -
Peter J. Roman.................................... 58,041 * 0 -
Perry Segura...................................... 464,477(8) 5.6 0 -
George C. Yax..................................... 25,000 * 0 -
Midland Fabricators and Process Systems, L.L.C. .. 104,233,039(9) 92.7 738 100
All directors and executive officers
as a group (10 persons)(10).................. 105,307,937 93.9 738 100
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* Ownership is less than 1%
(1) Includes shares that could be acquired within sixty days after April
30, 2003, upon the exercise of options granted pursuant to our
long-term incentive plan, as follows: Mr. Bech, 10,000 shares; Mr.
Broussard, 12,500 shares; Mr. Downey, 250,000 shares; Mr. Gaubert,
2,500 shares; Mr. Gros, 10,000 shares; Mr. Moore, 2,500 shares; Mr.
Porter, 250,000 shares; Mr. Roman, 54,000 shares; Mr. Segura, 15,000
shares; Mr. Yax, 15,000 shares; and all directors and executive
officers as a group (10 persons), 599,000 shares.
(2) Based on 8,189,972 shares of our common stock and 738 shares of our
series A preferred stock outstanding as of April 30, 2003, except that
the percentage ownership of William A. Hines and Midland Fabricators
and Process Systems, L.L.C. and the directors and executive officers as
a group has been calculated assuming the conversion of Midland
Fabricators and Process Systems, L.L.C.'s 738 shares of series A
preferred stock and convertible debenture in the principal amount of
$10,651,564 (see "Transactions with Midland").
(3) Shares shown as beneficially owned by Mr. Bech include 400 shares held
by the custodian of an individual retirement account for the benefit of
Mr. Bech's spouse.
(4) Based in part on the Schedule 13G Amendment No. 3, dated February 7,
2001, filed with the SEC, and includes 15,700 shares owned by Mr.
Berard's spouse, with respect to which Mr. Berard shares investment and
voting power. Mr. Berard's address is 110 Mountainside Drive,
Lafayette, Louisiana 70503.
(5) Based in part on the Schedule 13G Amendment No. 3, dated February 7,
2001, filed with the SEC, and includes 151,900 shares owned by a
company controlled by Mr. Broussard, 254,534 shares owned by a limited
liability company controlled by Mr. Broussard and 500 shares owned by
his spouse, with respect to which Mr. Broussard shares investment and
voting power. Mr. Broussard, as a non-employee director of our company,
received options to purchase 12,500 shares of our common stock pursuant
to our long-term incentive plan. Mr. Broussard sold 4,500 shares of our
common stock in March 2002, and resigned from our board of directors on
August 12, 2002. Under our long-term incentive plan, Mr. Broussard is
allowed one year from the date of his resignation, or until August 12,
2003, to exercise his exercisable options. Mr. Broussard's address is
23604 South Louisiana Highway 82, Kaplan, Louisiana 70548.
(6) Mr. Chojnacki resigned as our chairman of the board, president and
chief executive officer in April 2002 (see " - Agreements with Named
Executive Officers"). Upon his resignation, the unexercisable options
held by Mr. Chojnacki were forfeited. Under our long-term incentive
plan, Mr. Chojnacki was allowed 30 days from the date of his
resignation in which to exercise his exercisable options. Mr. Chojnacki
did not exercise any of his exercisable options within such time and,
as a result, all such options were forfeited. Mr. Chojnacki's address
is 14550 Torrey Chase Boulevard, Suite 260, Houston, Texas 77014.
(7) Mr. Hines is a manager and the owner of a 45.5% membership interest in
Midland and, accordingly, is deemed to be a beneficial owner of the
shares of our common stock and series A preferred stock deemed to be
beneficially owned by Midland. Mr. Hines is also the direct owner of
10,968 shares of our common stock.
(8) Includes 373,591 shares owned by a company controlled by Mr. Segura.
(9) Represents 73,800,000 shares of our common stock issuable upon
conversion of the 738 shares of our series A preferred stock held by
Midland, and 30,433,039 shares of our common stock issuable upon
conversion of the convertible debenture issued by our company in the
principal amount of $10,651,564 (see "Transactions with Midland").
(10) Includes only those persons who are directors and executive officers of
our company as of April 30, 2003.
Equity Compensation Plan Information
The following table provides information about shares of our common
stock that may be issued upon the exercise of options, warrants and rights under
all of our existing equity compensation plans as of December 31, 2002.
Number of securities
remaining available for future
Number of securities to be Weighted-average exercise issuance under equity
issued upon exercise of price of outstanding compensation plans
outstanding options, options, warrants and (excluding securities reflected
warrants and rights rights in column (a))
Plan Category (a) (b) (c)
- ---------------------------- -------------------------- ------------------------- -------------------------------
Equity compensation plans
approved by security
holders(1).................. 731,333 $2.93 1,768,667(3)
Equity compensation plans
not approved by security
holders(2).................. 93,600 $7.12 471,400(3)
------- ----- ---------
Total.............. 824,933 $3.42 2,240,067
------- ----- ---------
- -------------------
(1) Reflects options granted under our company's long-term incentive plan.
(2) Reflects options granted under our company's employee long-term
incentive plan.
(3) All of the referenced shares may be issued to participants through
incentive stock options, nonqualified stock options, restricted stock
or "other stock-based awards" (which are based in whole or in part on
the value of our Common Stock).
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In April 2002, we entered into a preferred stock purchase, debt
exchange and modification agreement with Midland (the "Midland agreement").
William A. Hines, who is now the chairman of our board of directors, is a
manager of, and the owner of a 45.5% membership interest in, Midland. The
remaining membership interest in Midland is owned by Mr. Hines' former spouse
and members of his immediate family. The terms of the Midland agreement were
determined by arm's length negotiation between our senior management team and
its representatives, and Mr. Hines and his representatives. Mr. Hines had been
the principal shareholder of Allen Tank, Inc., which we purchased in 1998. From
the time of that acquisition in 1998 until March 2001, Mr. Hines served as a
director of our company. At the time of entering into the Midland agreement, Mr.
Hines held no position with our company and his only relationship with our
company was his ownership of 10,968 shares of our common stock, which he
continues to own. Upon consummating the Midland agreement in August 2002, Mr.
Hines re-joined our board of directors and became its chairman.
Pursuant to the Midland agreement and prior to its consummation on
August 13, 2002:
- We consented to Midland's acquisition of the rights of the
lenders under our credit agreement dated November 30, 1999, as
amended, with Bank One, Louisiana, N.A. and three other
commercial banks. On May 1, 2002, Midland acquired the rights
of those lenders under the credit agreement for $13,870,000 in
cash, the source of which was capital contributions from its
members. On that date, the total amount of principal, accrued
interest and penalties owing under the credit agreement was
$21,331,564. Thereafter, and prior to the consummation of the
Midland agreement, Midland advanced to us $2,814,500, which we
used to meet our working capital needs and establish a cash
collateral account with Bank One to secure our obligations
under outstanding letters of credit.
- Midland acquired claims against us in the amount of $5,622,881
held by our unsecured creditors. Midland's acquisition cost
for these claims was an aggregate of $2,851,373, including
payments made to the unsecured creditors, fees paid to a
collection agent and attorneys' fees. Midland's source of
these payments was capital contributions from its members.
- Midland agreed to assist us in obtaining a $7 million line of
credit, and we and Midland subsequently agreed that this line
of credit would be in the amount of $8 million. We expect to
establish the line of credit with a commercial bank in the
near future, and we anticipate that Midland or an affiliate of
Midland will guarantee our obligations under it.
- We entered into agreements, effective April 2002, terminating
the employment agreement of Dailey J. Berard, who was then a
director of our company and was formerly chairman of the
board, president and chief executive officer of our company,
and the consulting agreement of Jerome E. Chojnacki, who was
then our chairman of the board, president and chief
executive officer; in exchange for the termination of their
agreements, we made one-time cash payments of $75,000 to each
of Messrs. Berard and Chojnacki (see "- Agreements with Named
Executive Officers"). Also effective April 2002, we obtained
the resignation of Mr. Berard as a director of our company,
and the resignation of Mr. Chojnacki as our chairman of the
board, president and chief executive officer.
- We agreed to take all steps necessary to continue the listing
of our common stock on the Nasdaq Stock Market for a period of
at least two years following consummation of the Midland
agreement.
- Midland agreed to cause its designees to our board of
directors to approve the calling of a meeting of shareholders
for the purpose of voting on an increase in the authorized
number of shares of our common stock, as contemplated by
Proposal Five in this proxy statement, and to approve the
rights offering described in Proposal Five. Midland also
agreed to vote its shares in favor of the proposed increase in
the authorized number of our shares.
Upon consummation of the Midland agreement on August 13, 2002:
- $10,000,000 of the amount we owed Midland under the credit
agreement was cancelled in exchange for 738 shares of our
series A preferred stock. Each share of this preferred stock
has voting rights equal to 100,000 shares of our common stock,
and will convert into 100,000 shares of our common stock when
the authorized number of our unissued and unreserved common
shares is at least 100 million, as will occur if Proposal Five
is approved by our shareholders.
- $12,791,024 of the amount we owed Midland under the credit
agreement was converted into the following, which continue to
constitute secured indebtedness under the credit agreement:
(i) a convertible debenture in the principal amount of
$10,651,564 payable in five equal annual installments, bearing
interest at Wall Street Journal Prime (that is, the prime rate
of interest reported in the Wall Street Journal in its daily
table of "Money Rates") plus 2.5 percentage points and
convertible into shares of our common stock at $0.35 per share
(the closing price of our common stock on the Nasdaq National
Market on March 6, 2002, the date we concluded negotiations on
the terms of the convertible debenture and the rights offering
described in Proposal Five); and (ii) a promissory note in the
principal amount of $2,139,500 (the amount of the advances
made to us by Midland after we entered into the Midland
agreement), which is payable August 13, 2005 and bears
interest at the rate of Wall Street Journal Prime plus 3.0
percentage points.
- Midland transferred to us the claims it had acquired from our
unsecured creditors in the amount of $5,622,881. In exchange
for these claims, we delivered to Midland a promissory note in
the principal amount of $4,708,936, payable August 13, 2006,
and bearing interest at the rate of Wall Street
Journal Prime plus 3.0 percentage points. This promissory note
also constitutes secured indebtedness under our credit
agreement with Midland.
- $675,000 of the amount we owed Midland under the credit
agreement was cancelled in exchange for the assignment to
Midland of accounts receivable of our subsidiary, Superior
Derrick Services of Texas, L.L.C., in the amount of
$1,191,405, against which we had established reserves of
$516,405.
- $680,000 of the amount we owed Midland under the credit
agreement (substantially all of which consisted of penalties)
was forgiven by Midland, and Midland waived all of our
defaults under the credit agreement.
- Charles E. Broussard resigned from our board of directors, and
our remaining directors, Perry Segura and George C. Yax,
appointed Mr. Hines, Frank J. Cangelosi, Jr., William A.
Downey, Daniel R. Gaubert, Donald R. Moore and Allen C.
Porter, Jr., all designated by Midland, as members of our
board.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
UNIFAB INTERNATIONAL, INC.
By: /s/Allen C. Porter, Jr.,
President and Chief Executive Officer Date: April 30, 2003
PRINCIPAL EXECUTIVE OFFICER CERTIFICATION PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Allen C. Porter, Jr., certify that:
1. I have reviewed this amended annual report on Form 10-K/A of UNIFAB
International, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation Date");
and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: April 30, 2003
-----------------------------
/S/ Allen C. Porter, Jr.
- ------------------------------------
Allen C. Porter, Jr.
Chief Executive Officer
PRINCIPAL FINANCIAL OFFICER CERTIFICATION PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Peter J. Roman, certify that:
1. I have reviewed this amended annual report on Form 10-K/A of UNIFAB
International, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation Date");
and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: April 30, 2003
-------------------------------------
/S/ Peter J. Roman
- --------------------------------------------
Peter J. Roman
Chief Financial Officer
CERTIFICATION FURNISHED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the amended Annual Report on Form 10-K/A of Unifab
International, Inc. (the "Company") for the period ended December 31, 2002, as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), the undersigned, who are the Chief Executive Officer and the Chief
Financial Officer of the Company, certify pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
1. the Report fully complies with the requirements of Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934,
as amended; and
2. the information contained in the Report fairly presents, in
all material respects, the financial condition and results of
operations of the Company for the period covered by the
Report.
/s/ Allen C. Porter, Jr.
--------------------------------------
Name: Allen C. Porter, Jr.
Title: Chief Executive Officer
Date: April 30, 2003
/s/ Peter J. Roman
--------------------------------------
Name: Peter J. Roman
Title: Chief Financial Officer
Date: April 30, 2003