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UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D. C.
20549
Form 10-K/A-1
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(Mark One)
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þ
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2005
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OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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FOR THE TRANSITION PERIOD
FROM
TO
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Commission file number 1-2199
ALLIS-CHALMERS ENERGY
INC.
(Exact name of registrant as
specified in its charter)
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Delaware
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39-0126090
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(State or other jurisdiction
of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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5075 WESTHEIMER,
SUITE 890,
HOUSTON, TEXAS
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77056
(Zip code)
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(Address of principal executive
offices)
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(713) 369-0550
Registrants telephone
number, including area code
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE
ACT:
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Title of Security:
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Name of Exchange:
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Common Stock, par value
$0.01 per share
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American Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE
ACT:
NONE
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No þ
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or
15(d). Yes o No þ
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 þ No o
Indicate by check mark if disclosure of delinquent filers
pursuant to ITEM 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants 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. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer or a non-accelerated
filer. See definition of accelerated filer and
large accelerated filer in
Rule 12b-2
of the Exchange Act (Check one):
Large accelerated
filer o Accelerated
filer o Non-accelerated
filer þ
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
The aggregate market value of the common equity held by
non-affiliates of the registrant, computed using the average of
the closing price of the common stock of $5.65 per share on
June 30, 2005, as reported on the American Stock Exchange,
was approximately $46,064,970 (affiliates included for this
computation only: directors, executive officers and holders of
more than 5% of the registrants common stock).
As of April 28, 2006 there were 17,350,615 shares of
common stock outstanding.
EXPLANATORY
NOTE
This
Form 10-K/A-1
is being filed by Allis-Chalmers Energy Inc. to provide the
disclosures required under Part III of
Form 10-K,
since our definitive proxy statement for our 2006 annual meeting
of stockholders will not be filed with the Securities and
Exchange Commission, or SEC, within 120 days following
December 31, 2005.
As required by
Rule 12b-15
under the Securities Exchange Act of 1934, as amended, which we
refer to as the Exchange Act, new certifications by our Chief
Executive Officer and Chief Financial Officer are being filed as
exhibits to this
Form 10-K/A-1
under Item 15 of Part IV.
For purposes of this
Form 10-K/A-1,
and in accordance with
Rule 12b-15
under the Exchange Act, each item of our Annual Report on
Form 10-K
for the year ended December 31, 2005, as originally filed
on March 22, 2006, that is affected by this amendment, has
been amended and restated in its entirety. No attempt has been
made in this
Form 10-K/A-1
to modify or update other disclosures as presented in the
original
Form 10-K,
except as required to reflect such amendments.
As used herein, Allis-Chalmers, we,
our and us may refer to Allis-Chalmers
Energy Inc. or its subsidiaries. The use of these terms is not
intended to connote any particular corporate status or
relationships.
2
2005
FORM 10-K/A-1
CONTENTS
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Item
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Page
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PART III
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Directors and Executive Officers
of the Registrant
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4
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Executive Compensation
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10
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Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder
Matters
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14
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Certain Relationships and Related
Transactions
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16
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Principal Accountant Fees and
Services
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PART IV
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Exhibits and Financial Statement
Schedules
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18
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Signatures
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19
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Exhibit Index
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20
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3
PART III
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ITEM 10.
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DIRECTORS
AND EXECUTIVE OFFICERS OF THE REGISTRANT
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Information
Regarding Board of Directors
The following individuals serve on our board of directors for a
term of one year and until their successors are elected and take
office:
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Name
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Age
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Committee
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Director Since
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Jeffrey R. Freedman
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58
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January 2005
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Victor F. Germack
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66
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(1
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January 2005
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Munawar H. Hidayatallah
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61
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May 2001
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Thomas E. Kelly
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50
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(2
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January 2005
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John E. McConnaughy, Jr.
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76
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(1
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May 2004
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Jens H. Mortensen, Jr.
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52
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February 2003
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Robert E. Nederlander
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72
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(1
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)(3)
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May 1989
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Leonard Toboroff
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73
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May 1989
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Thomas O. Whitener, Jr.
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58
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(2
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February 2002
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(1) |
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Member of Audit Committee. |
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(2) |
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Member of Compensation Committee. |
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(3) |
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Member of Nominating Committee. |
Jeffrey R. Freedman was appointed to our board of
directors in January 2005. Mr. Freedman served as our
Executive Vice President Corporate Development
from January 2002 to November 2002. Since January 2003,
Mr. Freedman has been involved in real estate development
in South Florida. From 1994 through March 2002,
Mr. Freedman was Managing Director Oil
Services and Equipment for Prudential Securities with
responsibilities for institutional equity research of oilfield
services and contract drilling companies in the U.S. public
markets. Mr. Freedman has been involved and held various
positions with major institutional brokerage firms in equity
research relating to the oil service sector over the last
20 years.
Victor F. Germack was appointed to our board of directors
in January 2005. Mr. Germack has served since 1980 as
President of Heritage Capital Corp., a company engaged in
investment banking services. In addition, Mr. Germack
formed, and since 2002 has been President of, RateFinancials
Inc., a company that rates and ranks the financial reporting of
U.S. public companies.
Munawar H. Hidayatallah has served as our Chairman of the
Board and Chief Executive Officer since May 2001, and was
President from May 2001 through February 2003.
Mr. Hidayatallah was Chief Executive Officer of OilQuip
Rentals, Inc. from its formation in February 2000 until it
merged with us in May 2001. From December 1994 until August
1999, Mr. Hidayatallah was the Chief Financial Officer and
a director of IRI International, Inc., which was acquired by
National Oilwell, Inc. in early 2000. IRI International, Inc.
manufactured, sold and rented oilfield equipment to the oilfield
and natural gas exploration and production sectors. From August
1999 until February 2001, Mr. Hidayatallah worked as a
consultant to IRI International, Inc. and Riddell Sports Inc.
Thomas E. Kelly was appointed to our board of directors
in January 2005. Mr. Kelly was an owner and founder of
Downhole Injection Systems, LLC (formerly known as Downhole
Injection Services, Inc.), which we purchased in December 2004.
Since 1997, Mr. Kelly has been the Chairman and CEO of
United Fuel & Energy Corp., a provider of fuel,
lubricants and services in the Permian Basin of West Texas.
Mr. Kelly is also a director of BPZ Energy, a Houston based
exploration and production company with properties in Peru and
Ecuador, and was Chief Executive Officer of BPZ Energy from
September 2004 until May 2005. Mr. Kelly has been involved
in oil and natural gas exploration projects since 1981,
including Baytech, Inc., which he co-founded in 1981 and was
involved in until it was sold in 2002. Mr. Kelly currently
serves on the board of directors of BPZ Energy.
4
John E. McConnaughy, Jr. was appointed to our board
of directors in May 2004. Mr. McConnaughy has served as
Chairman and Chief Executive Officer of JEMC Corporation, a
personal holding company, since he founded it in 1985. His
career includes positions of management with Westinghouse
Electric and the Singer Company, as well as service as a
director of numerous public and private companies. In addition,
he previously served as Chairman and Chief Executive Officer of
Peabody International Corp. and Chairman and Chief Executive
Officer of GEO International Corp. He retired from Peabody in
February 1986 and GEO in October 1992. Mr. McConnaughy
currently serves on the boards of Wave Systems Corp., Consumer
Portfolio Services, Inc., Overhill Farms, Inc., Levcor
International, Inc. and Positron Corporation. He also serves as
Chairman of the Board of Trustees of the Strang Cancer
Prevention Center and as Chairman Emeritus for the Harlem School
of the Arts.
Jens H. Mortensen, Jr. has served as our director
since November 2002 and as Vice-Chairman since February 2005 and
served as our President and Chief Operating Officer from
February 2003 through February 2005. Mr. Mortensen founded
Allis-Chalmers Tubular Services, Inc., formerly known as
Jens Oilfield Service, Inc., one of our subsidiaries, in
1982 after having spent eight years in operations and sales
positions with a South Texas casing crew operator.
Mr. Mortensens experience includes extensive
knowledge of specialized equipment utilized to install the
various strings of casing required to drill and complete oil and
natural gas wells.
Robert E. Nederlander has served as our director since
May 1989. Mr. Nederlander served as our Chairman of the
board of directors from May 1989 to 1993, and as our Vice
Chairman of the board of directors from 1993 to 1996.
Mr. Nederlander has been a Director of Cendant Corp. since
December 1997 and Chairman of the Corporate Governance Committee
of Cendant Corp. since 2002. Mr. Nederlander was a director
of HFS, Inc. from July 1995 to December 1997. Since November
1981, Mr. Nederlander has been President
and/or
Director of the Nederlander Organization, Inc., owner and
operator of legitimate theaters in New York City. Since
December 1998, Mr. Nederlander has been a managing partner
of the Nederlander Company, LLC, operator of legitimate theaters
outside New York City. Mr. Nederlander was Chairman of
the board of directors of Varsity Brands, Inc. (formerly Riddell
Sports Inc.) from April 1988 to September 2003 and was the Chief
Executive Officer of such corporation from 1988 through
April 1, 1993. Mr. Nederlander has been a limited
partner and a director of the New York Yankees since 1973.
Mr. Nederlander has been President of Nederlander
Television and Film Productions, Inc. since October 1985. In
addition, from January 1988 to January 2002,
Mr. Nederlander was Chairman of the Board and Chief
Executive Officer of Mego Financial Corp., doing business as
Leisure Industries Corporation of America, which filed a
voluntary petition under Chapter 11 of the
U.S. federal bankruptcy code in July 2003.
Leonard Toboroff has served as our director and Vice
Chairman of the board of directors since May 1989 and served as
our Executive Vice President from May 1989 until February 2002.
Mr. Toboroff served as a director and Vice President of
Varsity Brands, Inc. (formerly Riddell Sports Inc.) from April
1988 through October 2003, and he is also a director of Engex
Corp. Mr. Toboroff is currently a managing (executive)
director of Corinthian Capital, a private equity firm.
Mr. Toboroff has been a practicing attorney continuously
since 1961.
Thomas O. Whitener, Jr. has served as our director
since February 1, 2002. Mr. Whitener is a founding
partner of Energy Spectrum Capital and has been a partner since
May 1996. Mr. Whitener has also served as a managing
director of Energy Spectrum Securities Corp., a financial
advisory firm for energy companies, since October 1997.
Mr. Whitener has been financing companies in the energy
industry since 1974. From 1987 to 1996, Mr. Whitener was an
investment banker with R. Reid Investments Inc. and Dean Witter
Reynolds.
Board of
Directors; Committees
Our board currently has nine members who serve for a term of one
year or until their successors are elected and take office. Our
board of directors currently has three standing committees: the
Audit Committee, the Nominating Committee and the Compensation
Committee.
5
Audit
Committee
Our Audit Committee consists of three directors,
Mr. McConnaughy and Mr. Germack, who serve as
Co-Chairmen,
and Mr. Nederlander. All of our Audit Committee members are
independent under the applicable American Stock
Exchange and SEC rules regarding audit committee membership. Our
board of directors has determined that Mr. Germack
qualifies as an audit committee financial expert
under applicable SEC rules and regulations governing the
composition of the Audit Committee. We pay Mr. Germack an
additional $30,000 per year for serving as our audit committee
financial expert.
The Audit Committee assists our board of directors in fulfilling
its oversight responsibility by overseeing and evaluating
(i) the conduct of our accounting and financial reporting
process and the integrity of the financial statements that will
be provided to stockholders and others; (ii) the
functioning of our systems of internal accounting and financial
controls; and (iii) the engagement, compensation,
performance, qualifications and independence of our independent
auditors. Our board of directors adopted a written Audit
Committee charter in March 2002, which was amended in May 2004.
The charter is reviewed annually and revised as appropriate. A
copy of the Audit Committee charter is available on our website
(www.alchenergy.com).
The independent auditors have unrestricted access and report
directly to the Audit Committee. The Audit Committee meets
privately with, and has unrestricted access to, the independent
auditors and all of our personnel. The Audit Committee has
selected UHY Mann Frankfort Stein & Lipp CPAs, LLP as
our independent auditors for the fiscal years ended
December 31, 2005 and 2006.
The Audit Committee held 6 meetings during 2005.
Compensation
Committee
The Compensation Committee consists of two independent,
non-employee directors, Thomas E. Kelly and Thomas O.
Whitener, Jr. The Compensation Committee formulates and
oversees the execution of our compensation strategies, including
by making recommendations to our board of directors with respect
to compensation arrangements for senior management, directors
and other key employees. The Compensation Committee also
administers our 2003 Incentive Stock Plan. Our board of
directors has adopted a charter for the Compensation Committee,
a copy of which is available on our website
(www.alchenergy.com).
Nominating
Committee
The Nominating Committee of our board of directors was
established in January 2005 to select nominees for the board of
directors. The Nominating Committee consists of
Mr. Nederlander, as Chairman, and Mr. Whitener, both
of whom are independent as defined for such purpose by the
American Stock Exchange. We have no formal procedure pursuant to
which stockholders may recommend nominees to our board of
directors or Nominating Committee, and the board of directors
believes that the lack of a formal procedure will not hinder the
consideration of qualified nominees. The Nominating Committee
utilizes a variety of methods for identifying and evaluating
nominees for directors. Candidates may come to the attention of
the Nominating Committee through current board members,
stockholders and other persons. Our board of directors has
adopted a charter for the Nominating Committee, a copy of which
is available on our website (www.alchenergy.com).
6
Section 16(a)
Beneficial Ownership Reporting Compliance
Under Section 16(a) of the Exchange Act, directors, certain
officers, and beneficial owners of 10% or more of any class of
our stock, which we refer to as reporting persons, are required
from time to time to file with the SEC and the American Stock
Exchange reports of ownership and changes of ownership.
Reporting persons are required to furnish us with copies of all
Section 16(a) reports they file. Based solely on our review
of forms and written representations received from reporting
persons by us with respect to the fiscal year ended
December 31, 2005, we believe that all filing requirements
applicable to our officers, directors and greater than 10%
stockholders have been met, except as follows:
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Known
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Number of
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Failures to
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Number
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Transactions
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File a
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of Late
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Not Timely
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Required
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Name
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Reports
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Reported
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Description of Late
Reports
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Form
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David K. Bryan
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2
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2
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(1) Form 3 reflecting
Mr. Bryans appointment as an officer of our company;
and
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(2) Form 4 reflecting the
grant of stock options to Mr. Bryan in May 2005.
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Alya H. Hidayatallah
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1
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1
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(1) Form 4 reflecting the
grant of stock options to Ms. Hidayatallah in December 2005.
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Munawar H. Hidayatallah
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1
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1
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(1) Form 4 reflecting the
grant of stock options to Mr. Hidayatallah in December 2005.
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Terrence P. Keane
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2
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(1) Form 4 reflecting the
grant of stock options to Mr. Keane in May 2005; and
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(2) Form 4 reflecting the
grant of stock options to Mr. Keane in December 2005.
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Victor M. Perez
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1
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(1) Form 4 reflecting the
grant of stock options to Mr. Perez in December 2005.
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Theodore F. Pound III
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1
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1
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(1) Form 4 reflecting the
grant of stock options to Mr. Pound in December 2005.
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Bruce Sauers
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1
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(1) Form 4 reflecting the
grant of stock options to Mr. Sauers in December 2005.
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David Wilde
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1
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(1) Form 4 reflecting the
grant of stock options to Mr. Wilde in December 2005.
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Code of
Ethics
We have adopted a Code of Ethics applicable to all of our
executive officers and directors, including our principal
executive officer, principal financial officer, principal
accounting officer and controller, and persons performing
similar functions. The purpose of the Code of Ethics is:
(i) to deter wrongdoing; (ii) to promote honest and
ethical conduct, including the ethical handling of actual or
apparent conflicts of interest between personal and professional
relationships; (iii) to promote full, fair, accurate,
timely and understandable disclosure in reports and documents
that we file with the SEC or otherwise communicate to the
public; (iv) to promote compliance with applicable
governmental laws, rules and regulations; (v) to promote
prompt internal reporting of violations of the code to an
appropriate person; and (vi) to promote accountability for
adherence to the code.
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We will provide a copy of the Code of Ethics without charge to
any person upon request. Requests may be made to our chief
financial officer in writing to our address shown on the first
page of this report or by calling
(713) 369-0550.
A copy of the Code of Ethics is also available on our website
(www.alchenergy.com).
Information
Regarding Executive Officers
The names of our executive officers and certain information
about them are set forth below:
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Name
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Age
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Position
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Munawar H. Hidayatallah
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61
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Chairman and Chief Executive
Officer
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David Wilde
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51
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President and Chief Operating
Officer
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Victor M. Perez
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53
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Chief Financial Officer
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Theodore F. Pound III
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51
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General Counsel and Secretary
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Bruce Sauers
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42
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Vice President and Corporate
Controller
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Alya H. Hidayatallah
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30
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Vice
President Planning and Development
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David K. Bryan
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48
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President and Chief Operating
Officer of Strata Directional Technology, Inc.
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Steve Collins
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54
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President of Allis-Chalmers
Production Services, Inc.
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James Davey
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52
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President of Allis-Chalmers Rental
Tools Inc.
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Gary Edwards
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54
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President of Allis-Chalmers
Tubular Services Inc.
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Terrence P. Keane
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53
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President and Chief Executive
Officer of AirComp L.L.C.
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Munawar H. Hidayatallah has served as our Chairman of the
Board and Chief Executive Officer since May 2001, and was
President from May 2001 through February 2003.
Mr. Hidayatallah was Chief Executive Officer of OilQuip
Rentals, Inc. from its formation in February 2000 until it
merged with us in May 2001. From December 1994 until August
1999, Mr. Hidayatallah was the Chief Financial Officer and
a director of IRI International, Inc., which was acquired by
National Oilwell, Inc. in early 2000. IRI International, Inc.
manufactured, sold and rented oilfield equipment to the oilfield
and natural gas exploration and production sectors. From August
1999 until February 2001, Mr. Hidayatallah worked as a
consultant to IRI International, Inc. and Riddell Sports Inc.
David Wilde became our President and Chief Operating
Officer in February 2005. Mr. Wilde was President and Chief
Executive Officer of Strata Directional Technology, Inc., or
Strata, from October 2003 through February 2005 and served as
Stratas President and Chief Operating Officer from July
2003 until October 2003. From February 2002 until July 2003,
Mr. Wilde was our Executive Vice President of Sales and
Marketing. From May 1999 until February 2002, Mr. Wilde
served as Sales and Operations Manager at Strata. Mr. Wilde
has more than 30 years experience in the directional
drilling and rental tool sectors of the oilfield services
industry.
Victor M. Perez became our Chief Financial Officer in
August 2004. From July 2003 to July 2004, Mr. Perez was a
private consultant engaged in corporate and international
finance advisory. From February 1995 to June 2003,
Mr. Perez was Vice President and Chief Financial Officer of
Trico Marine Services, Inc., a marine transportation company
serving the offshore energy industry. Trico Marine Services,
Inc. filed a petition under the federal bankruptcy laws in
December 2004. Mr. Perez was Vice President of Corporate
Finance with Offshore Pipelines, Inc., an oilfield marine
construction company, from October 1990 to January 1995, when
that company merged with a subsidiary of McDermott
International. Mr. Perez also has 15 years of
experience in international energy banking. Mr. Perez is a
director of Safeguard Security Holdings.
Theodore F. Pound III became our General Counsel in
October 2004 and was elected Secretary in January 2005. For ten
years prior to joining us, he practiced law with the law firm of
Wilson, Cribbs & Goren, P.C.,
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Houston, Texas. Mr. Pound has practiced law for more than
25 years. Mr. Pound represented us as our lead counsel
in each of our acquisitions beginning in 2001.
Bruce Sauers has served as our Vice President and
Corporate Controller since July 2005. From January 2005 until
July 2005, Mr. Sauers was Controller of Blast Energy Inc.,
an oilfield services company. From June 2004 until January 2005,
Mr. Sauers worked as a financial and accounting consultant.
From July 2003 until June 2004, Mr. Sauers served as
controller for HMT, Inc., an above ground storage tank company.
From February 2003 until July 2003, Mr. Sauers served as
assistant controller at Todco, an offshore drilling contractor.
From August 2002 until January 2003, Mr. Sauers acted as a
consultant on SEC accounting and financial matters. From
December 2001 through June 2002, Mr. Sauers was corporate
controller at OSCA, Inc., an oilfield services company, which
merged with BJ Service Company. From December 1996 until
December 2001, Mr. Sauers was a corporate controller at UTI
Energy Corp., a land drilling contractor, which merged and
became Patterson-UTI Energy, Inc. Mr. Sauers is a certified
public accountant and has served as an accountant for
approximately 20 years.
Alya H. Hidayatallah became our Vice
President Planning and Development in April
2005. From January 2005 to March 2005, Ms. Hidayatallah was
a senior financial analyst for Panda Restaurant Group. From
November 2004 through December 2004, she worked as a financial
analyst for Lexicon Marketing. From February 2000 until April
2004, Ms. Hidayatallah was a Financial Analyst and Senior
Financial Analyst in the Financial Restructuring Group of
Houlihan Lokey Howard & Zukin. Ms. Hidayatallah
has a degree in Business Economics from the University of
California at Los Angeles awarded in 1997. Ms. Hidayatallah
is Mr. Hidayatallahs daughter.
David K. Bryan has served as President and Chief
Operating Officer of Strata since February 2005. Mr. Bryan
served as Vice President of Strata from June 2002 until February
2005. From February 2002 to June 2002, he served as General
Manager, and from May 1999 through February 2002, he served as
Operations Manager of Strata. Mr. Bryan has been involved
in the directional drilling sector since 1979.
Steven Collins has served as President of Allis-Chalmers
Production Services, Inc., or Production Services, since
December 2005. Mr. Collins was our corporate Vice President
of Sales and Marketing from June 2005 to December 2005. From
2002 to 2005, Mr. Collins served as Sales Manager of Well
Testing and Corporate Strategic Accounts Manager for TETRA
Technologies. From 1997 to 2002, Mr. Collins was in sales
for Production Well Testers. Mr. Collins has over
25 years experience in various sales and management
positions in the oilfield services industry.
James Davey has served as President of Allis-Chalmers
Rental Tools Inc., or Rental Tools, since April 2005.
Mr. Davey was President of Safco Oilfield Products from
September 2004 through 2005 and served as our Executive Vice
President of Business Development and Acquisitions in October
2003 until 2004. Prior to joining us, Mr. Davey had been
employed with CooperCameron for 28 years in various
positions.
Gary Edwards has served as President of Allis-Chalmers
Tubular Services Inc., or Tubular Services, since December 2005
after serving as Executive Vice President of Tubular Services
since September 2005. From April 1997 to September 2005,
Mr. Edwards served as Operations Manager for International
Hammer/Spindletop Tubular Services, a division of Patterson
Services, Inc. Mr. Edwards has been in the casing and
tubing industry for the past 29 years.
Terrence P. Keane has served as President and Chief
Executive Officer of our AirComp L.L.C. subsidiary since its
formation on July 1, 2003, and served as a consultant to
M-I, LLC in the area of compressed air drilling from July 2002
until June 2003. From March 1999 until June 2002, Mr. Keane
served as Vice President and General
Manager Exploration, Production and Processing
Services for Gas Technology Institute where Mr. Keane was
responsible for all sales, marketing, operations and research
and development of the exploration, production and processing
business unit. For more than ten years prior to joining the Gas
Technology Institute, Mr. Keane had various positions with
Smith International, Inc., Houston, Texas, most recently in the
position of Vice President Worldwide Operations and Sales for
Smith Tool.
9
|
|
ITEM 11.
|
EXECUTIVE
COMPENSATION
|
The following table sets forth the compensation paid or awarded
by us in 2005, 2004 and 2003 to (i) our Chief Executive
Officer and (ii) our four other most highly compensated
executive officers as of December 31, 2005. In this report,
we refer to the individuals described in the immediately
preceding sentence as our named executive officers.
Summary
Compensation Table
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Long Term
|
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|
Compensation
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Annual Compensation
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Awards
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Salary
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Bonus
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Other Annual
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Securities Underlying
|
Name and Principal
Position
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Year
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($)
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($)
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Compensation(1)
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|
Options/SARs (#)
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|
Munawar H. Hidayatallah,
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2005
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|
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395,833
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200,000
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3,000
|
|
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725,000
|
|
Chairman & Chief Executive
Officer
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2004
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337,500
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580,000
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(2)(3)
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3,375
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2003
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300,000
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(4)
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81,775
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(3)
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3,000
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400,000
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David Wilde,
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2005
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299,004
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100,000
|
|
|
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2,340
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290,000
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President and Chief Operating
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2004
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209,964
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275,000
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(6)
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1,672
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110,000
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Officer(5)
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2003
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137,500
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75,445
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(7)
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1,876
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100,000
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Victor M. Perez,
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2005
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240,000
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60,000
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600
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45,000
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Chief Financial Officer(8)
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2004
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105,000
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5,500
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2,500
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55,000
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Terrence P. Keane,
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2005
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164,000
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82,000
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(10)
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1,640
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50,000
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Divisional President and Chief
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2004
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146,308
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51,650
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(11)
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Executive Officer of AirComp(9)
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2003
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68,440
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David Bryan,
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2005
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176,917
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150,000
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(13)
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1,849
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40,000
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President and Chief Operating
Officer
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2004
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156,050
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100,000
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(14)
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1,800
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of Strata(12)
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2003
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140,000
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14,000
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(15)
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4,050
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30,000
|
|
|
|
|
(1) |
|
Represents contributions to 401(k) plans. We match contributions
made by all employees up to a maximum 1% of each employees
salary. |
|
(2) |
|
Of this amount $175,000 was paid in 2005. |
|
(3) |
|
The bonus awarded to Mr. Hidayatallah for fiscal year 2003
was determined pursuant to his 2001 employment agreement, based
on acquisitions completed for fiscal year 2003, and the bonus
for fiscal year 2004 was based on Mr. Hidayatallahs
attaining certain strategic objectives set forth in his 2004
employment agreement (see Employment
Agreements with Management below). |
|
(4) |
|
Of this amount, $60,000 was deferred and paid during 2004. |
|
(5) |
|
Mr. Wilde was President and Chief Executive Officer of
Strata, one of our subsidiaries, until February 2005, when he
was named as our President and Chief Operating Officer. |
|
(6) |
|
Of this amount, $62,500 was paid in 2005. |
|
(7) |
|
Of this amount, $30,000 was paid in 2004. |
|
(8) |
|
Mr. Perez became our Chief Financial Officer in August 2004. |
|
(9) |
|
Mr. Keane serves as the President and Chief Executive
Officer of AirComp, one of our subsidiaries and, as such, is
considered an executive officer. |
|
(10) |
|
Of this amount, $82,000 was paid in 2006. |
|
(11) |
|
Of this amount, $16,150 was paid in 2005. |
|
(12) |
|
Mr. Bryan serves as the President and Chief Operating
Officer of Strata and, as such, is considered an executive
officer. |
|
(13) |
|
Of this amount, $20,794 was paid in 2006. |
|
(14) |
|
Of this amount, $31,250 was paid in 2005. |
|
(15) |
|
Of this amount, $14,000 was paid in 2004. |
10
Option
Grants In Last Fiscal Year
The following table provides information concerning stock
options granted to our named executive officers during 2005. All
the grants were options to purchase shares of common stock and
were made under our 2003 Incentive Stock Plan. No stock
appreciation rights were granted during 2005.
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Individual Grants
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Potential Realized
|
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Number of
|
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% of Total
|
|
|
|
|
|
Value at Assumed Annual
|
|
|
Securities
|
|
Options/SARs
|
|
Exercise
|
|
|
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Rates of Stock Price
|
|
|
Underlying
|
|
Granted to
|
|
Price
|
|
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Appreciation for Option
|
|
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Options/SARs
|
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Employees
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per Share
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Expiration
|
|
Terms(3)
|
Name
|
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Granted(1)
|
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in 2005
|
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($/Sh)(2)
|
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Date
|
|
5% ($)
|
|
10% ($)
|
|
Munawar H. Hidayatallah
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125,000
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7.47
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%
|
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$
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10.85
|
|
|
|
12/16/2015
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|
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$
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852,938
|
|
|
$
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2,161,513
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600,000
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35.86
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%
|
|
$
|
3.86
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2/02/2015
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$
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1,456,520
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$
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3,691,108
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David Wilde
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90,000
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5.38
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%
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$
|
10.85
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|
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|
12/16/2015
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$
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614,116
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$
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1,556,290
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200,000
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11.95
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%
|
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$
|
3.86
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2/02/2015
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$
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485,507
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$
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1,230,369
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Victor M. Perez
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45,000
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2.69
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%
|
|
$
|
10.85
|
|
|
|
12/16/2015
|
|
|
$
|
307,058
|
|
|
$
|
778,145
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|
Terrence P. Keane
|
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25,000
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|
|
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1.49
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%
|
|
$
|
4.87
|
|
|
|
5/25/2015
|
|
|
$
|
76,568
|
|
|
$
|
194,038
|
|
|
|
|
25,000
|
|
|
|
1.49
|
%
|
|
$
|
10.85
|
|
|
|
12/16/2015
|
|
|
$
|
170,588
|
|
|
$
|
432,303
|
|
David Bryan
|
|
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20,000
|
|
|
|
1.20
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%
|
|
$
|
3.86
|
|
|
|
2/02/2015
|
|
|
$
|
48,551
|
|
|
$
|
123,037
|
|
|
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|
20,000
|
|
|
|
1.20
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%
|
|
$
|
4.87
|
|
|
|
5/25/2015
|
|
|
$
|
61,254
|
|
|
$
|
155,231
|
|
|
|
|
(1) |
|
All options were granted under our 2003 Incentive Stock Plan.
All options granted by us to date vest and become exercisable in
three equal installments, one of which vested upon the grant of
the options and one of which will vest upon each of the first
and second anniversaries of the date of grant of option,
provided that all options will become fully exercisable upon the
occurrence of a change of control (as defined in the 2003
Incentive Stock Plan). |
|
(2) |
|
The exercise price for these options is equal to the fair market
value of the common stock on the date of grant. The exercise
price may be paid in cash or in shares of common stock valued at
the fair market value on the exercise date. |
|
(3) |
|
The 5% and 10% assumed rates of appreciation are prescribed by
the rules and regulations of the SEC and do not represent our
estimate or projection of the future trading prices of our
common stock. The calculations assume annual compounding and
continued retention of the options or the underlying common
stock by the optionee for the full option term of ten years.
Unless the market price of the common stock actually appreciates
over the option term, no value will be realized by the optionee
from these option grants. Actual gains, if any, on stock option
exercises are dependent on numerous factors, including, without
limitation, our future performance, overall business and market
conditions, and the optionees continued employment with us
throughout the entire vesting period and option term, which
factors are not reflected in this table. |
11
Option
Exercises and Year-End Option Values
The following table sets forth, with respect to our named
executive officers, the number of options exercised during 2005,
the value of unexercised options held at December 31, 2005,
and the value of all options held by such persons on
December 31, 2005, based upon the closing price of our
common stock on such date.
Aggregated
Option/ SAR Exercises In Last Fiscal Year
and FY-End Option/ SAR Values
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
Value of Unexercised
|
|
|
|
|
|
|
|
|
|
Underlying Unexercised
|
|
|
In-the-Money
|
|
|
|
|
|
|
|
|
|
Options/SARs
|
|
|
Options/SARs
|
|
|
|
Shares
|
|
|
Value Realized
|
|
|
at Fiscal Year-End (#)
|
|
|
at Fiscal Year-End
($)(1)
|
|
Name
|
|
Acquired (#)
|
|
|
($)
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Munawar H. Hidayatallah
|
|
|
|
|
|
|
|
|
|
|
841,667
|
|
|
|
283,333
|
|
|
|
7,399,501
|
|
|
|
1,856,995
|
|
David Wilde
|
|
|
|
|
|
|
|
|
|
|
336,666
|
|
|
|
163,334
|
|
|
|
2,727,395
|
|
|
|
950,605
|
|
Victor M. Perez
|
|
|
|
|
|
|
|
|
|
|
51,667
|
|
|
|
48,333
|
|
|
|
303,703
|
|
|
|
188,297
|
|
Terrence P. Keane
|
|
|
|
|
|
|
|
|
|
|
16,666
|
|
|
|
33,334
|
|
|
|
76,830
|
|
|
|
153,620
|
|
David Bryan
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
20,000
|
|
|
|
457,066
|
|
|
|
158,734
|
|
|
|
|
(1) |
|
Based on a value of $12.47 per share, the closing price per
share on the American Stock Exchange on December 31, 2005,
less the exercise price. |
Employment
Agreements With Management
We have entered into written employment agreements with our
executive officers as described below. Each employment agreement
(other than the agreement of Mr. Keane, which is described
below) provides that if the executive officers employment
is terminated by us for any reason other than cause,
as defined in the employment agreement, or death or disability,
or if the executive officer is Constructively
Terminated, as defined in the agreement (which definition
includes a change in control of us if the executive officer does
not continue employment with us or our successor), then he is
entitled to receive his then current salary for the entire term
of his contract, reduced by any amounts he earns for services
during the severance period.
Munawar H. Hidayatallah serves as our Chairman and Chief
Executive Officer pursuant to the terms of a three-year
employment agreement dated as of April 1, 2004. Under the
terms of the employment agreement, Mr. Hidayatallah
receives an annual base salary of $400,000 subject to annual
increase in the discretion of the board of directors. In
addition, Mr. Hidayatallah is entitled to receive a bonus
in an amount equal to 100% of his base salary if he meets
certain strategic objectives specified in the agreement, and if
he meets some but not all of such objectives may be granted a
bonus as determined by the Compensation Committee of the board
of directors. Mr. Hidayatallah received a signing bonus of
$230,000 but will be required to return a pro rata portion of
such bonus if his employment is terminated for any reason prior
to April 1, 2007. Pursuant to the agreement, we also
maintain a term life insurance policy in the amount of
$2,500,000 the proceeds of which would be used to repurchase
shares of our common stock from Mr. Hidayatallahs
estate in the event of his death. The number of shares purchased
would be determined based upon the fair market value of our
common stock, as determined by a third party experienced in
valuations of this type, appointed by us.
David Wilde serves as President and Chief Operating Officer
pursuant to the terms of a three-year employment agreement dated
as of April 1, 2004. Under the terms of the employment
agreement, Mr. Wilde receives an annual base salary of
$300,000 subject to annual review and potentially an increase by
our board of directors, and Mr. Wilde is entitled to
receive a bonus in an amount equal to up to 100% of his base
salary, 50% of which is based on meeting quarterly and annual
operating income targets. The bonus calculation is subject to
adjustment in subsequent years.
Victor M. Perez serves as our Chief Financial Officer pursuant
to the terms of a three-year employment agreement dated as of
July 26, 2004. Under the terms of the employment agreement,
Mr. Perez receives an
12
annual base salary of $240,000 subject to annual review and
potentially an increase by our board of directors. In addition,
Mr. Perez is entitled to receive a bonus in an amount equal
to up to 50% of his base salary if he meets certain strategic
objectives specified in his employment agreement.
Terrence P. Keane, President and Chief Executive Officer of our
subsidiary AirComp L.L.C., a Delaware limited liability company,
is employed pursuant to an employment agreement dated
July 1, 2003, which has a term of four years. Under the
terms of this agreement, Mr. Keane is entitled to base
salary of $164,000 and to a bonus of up to 90% of his base
salary based upon AirComp meeting earnings targets established
by AirComps Management Committee. If Mr. Keanes
employment is terminated by AirComp without cause or by
Mr. Keane for good reason (as such terms are defined in the
agreement), Mr. Keane will be entitled to receive his
accrued bonus, if any, and to continue to receive salary and
medical benefits for a period of six months. In addition, if a
change in control (as defined in the agreement) occurs with
respect to AirComp, and Mr. Keane does not accept
employment with AirComps successor, then Mr. Keane
will be entitled to receive his accrued bonus, if any, to
continue to receive salary for a period of 24 months, and
to continue to receive medical benefits for a period of
12 months.
David Bryan was appointed as the President and Chief Operating
Officer of Strata in February 2005 pursuant to the terms of a
three-year employment agreement dated as of April 1, 2004.
Under the terms of the employment agreement, Mr. Bryan
receives an annual base salary of $175,000 subject to annual
review and potentially an increase by our board of directors. In
addition, Mr. Bryan is entitled to receive a bonus based on
Stratas earnings before taxes, interest and depreciation
provided that Strata met designated minimum earnings targets and
provided further that such bonus shall not exceed 100% of
Mr. Bryans base salary. The bonus calculation is
subject to adjustment in subsequent years.
Board
Compensation
Our policy is to pay our independent directors a fee of
$5,000 per quarter beginning in 2005.
Messrs. Hidayatallah, Mortensen and Toboroff are not deemed
independent for this purpose. Each independent director serving
on a committee of the board of directors will receive $1,250
quarterly for service on such committee and each independent
director serving as chairman of a committee of the board of
directors will receive an additional $1,250 per quarter for
acting as chairman of such committee. In addition, our
audit committee financial expert receives $7,500 on
a quarterly basis. In 2004 we did not pay directors any
compensation for their services as directors. Directors are also
compensated for
out-of-pocket
travel expenses.
In April 2004, we entered into an oral consulting agreement with
Mr. Toboroff pursuant to which we paid him $10,000 per
month during the 2005 fiscal year to advise us regarding
financing and acquisition opportunities. Effective as of the
first quarter of 2006, we pay Mr. Toboroff $12,000 per
month pursuant to the agreement.
Compensation
Committee Interlocks and Insider Participation
The Compensation Committee of our board currently consists of
Messrs. Kelly and Whitener. Neither of these individuals
has been our officer or employee at any time. No current
executive officer has ever served as a member of the board of
directors or compensation committee of any other entity (other
than our subsidiaries) that has or has had one or more executive
officers serving as a member of our board or our Compensation
Committee.
Mr. Whitener is a principal of Energy Spectrum, from whom
we acquired Strata in February 2002. On April 2, 2004,
Energy Spectrum converted all of its Series A Preferred
Stock, including accrued dividend rights, into
1,718,090 shares of common stock and has subsequently sold
such common stock.
Mr. Kelly was an owner and founder of Downhole Injection
Systems, LLC, which we purchased in December 2004.
Mr. Kelly received 117,138 shares of our common stock
and $306,800 for his interest in Downhole Injection Systems,
LLC. Mr. Kelly subsequently sold all but 14,201 of his
shares in August of 2005.
13
|
|
ITEM 12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
|
Security
Ownership of Certain Beneficial Owners and Management
The following table sets forth the beneficial ownership of
outstanding shares of our common stock as of April 28, 2006
for:
|
|
|
|
|
our named executive officers;
|
|
|
|
each of our other directors;
|
|
|
|
all of our directors and executive officers as a group; and
|
|
|
|
each other person known by us to be a beneficial owner of more
than 5.0% of our outstanding common stock.
|
Beneficial ownership is determined in accordance with the rules
of the SEC. Under the rules of the SEC, a person is deemed to be
a beneficial owner of a security if that person has
or shares voting power, which includes the power to
vote or to direct the voting of such security, or
investment power, which includes the power to
dispose of or to direct the disposition of such security. A
person is also deemed to be a beneficial owner of any securities
of which that person has a right to acquire beneficial ownership
within 60 days. Under these rules, more than one person may
be deemed a beneficial owner of the same securities and a person
may be deemed a beneficial owner of securities as to which he
has no economic interest. Except as indicated by footnote, the
persons named in the table below have sole voting and investment
power with respect to all shares shown as beneficially owned by
them, subject to community property laws where applicable.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial
|
|
|
|
Number of Shares
|
|
|
Ownership
|
|
Name and Address
|
|
Beneficially Owned
|
|
|
Percentage
|
|
|
Named Executive
Officers:
|
|
|
|
|
|
|
|
|
Munawar H. Hidayatallah(1)
|
|
|
1,686,666
|
|
|
|
9.3
|
|
David Wilde(2)
|
|
|
341,666
|
|
|
|
1.9
|
|
Victor M. Perez(3)
|
|
|
51,667
|
|
|
|
*
|
|
Terence P. Keane(4)
|
|
|
25,000
|
|
|
|
*
|
|
David Bryan(5)
|
|
|
68,666
|
|
|
|
*
|
|
Directors:
|
|
|
|
|
|
|
|
|
Jens H. Mortensen, Jr.(6)
|
|
|
1,600,591
|
|
|
|
9.2
|
|
John E. McConnaughy, Jr.(7)
|
|
|
100,000
|
|
|
|
*
|
|
Victor F. Germack(8)
|
|
|
|
|
|
|
|
|
Thomas E. Kelly(9)
|
|
|
14,201
|
|
|
|
*
|
|
Thomas O. Whitener, Jr.(10)
|
|
|
|
|
|
|
|
|
Robert E. Nederlander(11)
|
|
|
717,594
|
|
|
|
4.1
|
|
Jeffrey R. Freedman(12)
|
|
|
119,000
|
|
|
|
*
|
|
Leonard Toboroff(13)
|
|
|
695,594
|
|
|
|
4.0
|
|
All directors and executive
officers as a group
(19 persons)
|
|
|
5,543,976
|
|
|
|
28.8
|
|
Other 5% Holders:
|
|
|
|
|
|
|
|
|
Palo Alto Investors(14)
|
|
|
2,208,767
|
|
|
|
12.7
|
|
Steve Emerson(15)
|
|
|
1,065,900
|
|
|
|
6.3
|
|
|
|
|
* |
|
Less than one percent. |
|
(1) |
|
Mr. Hidayatallah is the trustee of the Hidayatallah Family
Trust, which is the record owner of 845,000 shares of our
common stock, and Mr. Hidayatallah holds options to
purchase 1,125,000 shares of common stock, of which options
to purchase 841,666 shares are exercisable within
60 days. Mr. Hidayatallahs address is
5075 Westheimer, Suite 890, Houston, TX 77056. |
14
|
|
|
(2) |
|
Includes (a) 5,000 shares of common stock owned of
record by Mr. Wilde and (b) options to purchase
500,000 shares of common stock, of which 336,666 are
exercisable within 60 days. Mr. Wildes address
is 5075 Westheimer, Suite 890, Houston, TX 77056. |
|
(3) |
|
Includes options to purchase 100,000 shares of common
stock, of which 51,667 are exercisable within 60 days.
Mr. Perezs address is 5075 Westheimer,
Suite 890, Houston, TX 77056. |
|
(4) |
|
Includes options to purchase 50,000 shares of common stock,
of which 25,000 are exercisable within 60 days.
Mr. Keanes address is 5075 Westheimer,
Suite 890, Houston, TX 77056. |
|
(5) |
|
Includes (a) 12,000 shares of common stock owned of
record by Mr. Bryan and (b) options to purchase
70,000 shares of common stock, of which 56,666 are
exercisable within 60 days. Mr. Bryans address
is 5075 Westheimer, Suite 890, Houston, TX 77056. |
|
(6) |
|
Includes (a) 1,500,591 shares of common stock owned of
record by Mr. Mortensen and (b) options to purchase
100,000 shares of common stock, all of which are
exercisable within 60 days. Mr. Mortensens
address is 5075 Westheimer, Suite 890, Houston, TX 77056. |
|
(7) |
|
Mr. McConnaughys address is 2 Parklands Drive,
Darien, CT 06820. |
|
(8) |
|
Mr. Germacks address is 845 3rd Avenue,
Suite 1410, New York, NY 10022. |
|
(9) |
|
Mr. Kellys address is 450 North Marienfield,
Suite 200, Midland, TX 79701. |
|
(10) |
|
Mr. Whiteners address is 5956 Sherry Lane,
Suite 900, Dallas, TX 75225. |
|
(11) |
|
Includes (a) 715,594 shares of common stock owned
directly by Mr. Nederlander or by RER Corp. or QEN Corp.,
corporations controlled by Mr. Nederlander, and
(b) currently exercisable options to purchase
2,000 shares of common stock owned directly by
Mr. Nederlander or RER Corp. Mr. Nederlanders
address is 1450 Broadway, Suite 2001, New York, NY
10018. |
|
(12) |
|
Mr. Freedmans address is 123 Via Verde Way, Palm
Beach, FL 33418. |
|
(13) |
|
Includes (a) 595,194 shares of common stock owned
directly by Mr. Toboroff or Lenny Corp., a corporation
wholly-owned by Mr. Toboroff, and (b) currently
exercisable options to purchase 100,400 shares of common
stock owned directly by Mr. Toboroff.
Mr. Toboroffs address is 1450 Broadway,
Suite 2001, New York, NY 10018. |
|
(14) |
|
Owned collectively by Micro Cap Partners, L.P., UBTI Free, L.P.
and Palo Alto Global Energy Fund, L.P. Palo Alto Investors,
LLC acts as the general partner of Micro Cap Partners, L.P.,
UBTI Free, L.P. and Palo Alto Global Energy Fund, L.P. Palo Alto
Investors, Inc. is the manager of Palo Alto Investors, LLC, and
William L. Edwards is the President of Palo Alto Investors, Inc.
Palo Alto Investors, LLC, Palo Alto Investors, Inc. and William
L. Edwards each have investment and voting authority with
respect to the shares owned by this stockholder. The business
address for each of these persons is 470 University Avenue, Palo
Alto, CA 94301. |
|
(15) |
|
Consists of certain shares owned by J. Steven Emerson IRA
RO II, Bear Stearns Securities Corporation, Custodian, J.
Steven Emerson Roth IRA, Bear Stearns Securities Corporation,
Custodian, and Emerson Partners, respectively. J. Steven Emerson
has investment and voting authority with respect to the shares
owned by J. Steven Emerson IRA RO II, Bear Stearns
Securities Corporation, Custodian, J. Steven Emerson Roth IRA,
Bear Stearns Securities Corporation, Custodian and Emerson
Partners, Bear Stearns Securities Corporation, Custodian.
Mr. Emersons business address is 1522 Ensley Avenue,
Los Angeles, CA 90024. |
15
Equity
Compensation Plan Information
The following table provides information as of December 31,
2005 with respect to the shares of our common stock that may be
issued under our existing equity compensation plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
Securities to be
|
|
|
Weighted
|
|
|
|
|
|
|
Issued Upon
|
|
|
Average Exercise
|
|
|
Number of Securities
|
|
|
|
Exercise of
|
|
|
Price of
|
|
|
Remaining Available
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
for Future Issuance
|
|
|
|
Options, Warrants
|
|
|
Options, Warrants
|
|
|
Under Equity
|
|
Plan Category
|
|
and Rights
|
|
|
and Rights
|
|
|
Compensation Plans
|
|
|
Equity compensation plans approved
by security holders
|
|
|
2,756,067
|
|
|
$
|
5.18
|
|
|
|
210,100
|
|
Equity compensation plans not
approved by security holders
|
|
|
489,243
|
|
|
$
|
2.97
|
|
|
|
|
|
Total
|
|
|
3,245,310
|
|
|
$
|
4.85
|
|
|
|
210,100
|
|
Equity
Compensation Plans Not Approved by Security Holders
These plans comprise the following:
In 1999 and 2000, the Board compensated former and continuing
Board members who had served from 1989 to March 31, 1999
without compensation by issuing promissory notes totaling
$325,000 and by granting stock options to these same
individuals. Options to purchase 4,800 shares of common
stock were granted with an exercise price of $13.75. These
options vested immediately and expire in March 2010. As of
December 31, 2005, none of these options had been exercised.
On May 31, 2001, our Board granted to one of our directors,
Leonard Toboroff, an option to purchase 100,000 shares of
common stock at $2.50 per share, expiring in October 2011.
The option was granted for services provided by
Mr. Toboroff to OilQuip prior to our merger with OilQuip
Rentals, Inc., including providing financial advisory services,
assisting in OilQuips capital structure and assisting
OilQuip in finding strategic acquisition opportunities. As of
December 31, 2005, none of these options have been
exercised.
In February 2001, we issued warrants to purchase
233,000 shares of our common stock at an exercise price of
$0.75 per share and warrants to purchase 67,000 shares
of our common stock at an exercise price of $5.00 per share
in connection with a subordinated debt financing. The warrants
to purchase 233,000 shares were redeemed during December
2004 for $1.5 million. The remaining 67,000 warrants are
currently outstanding and expire in February 2011.
In connection with the private placement in April 2004, we
issued warrants for the purchase of 800,000 shares of our
common stock at an exercise price of $2.50 per share. A
total of 486,557 of these warrants were exercised in 2005.
Warrants for 4,000 shares of our common stock at an
exercise price of $4.65 were also issued in May 2004 and remain
outstanding as of December 31, 2005.
|
|
ITEM 13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
|
In July 2005, we entered into a lease of a yard in Buffalo,
Texas which is part owned by our Chief Operating Officer, David
Wilde. The monthly rent is $3,500. In September of 2005, we
entered into a four year lease for a yard in Kilgore, Texas for
$4,300 per month and a four-year lease for a yard in Corpus
Christi, Texas for $3,500 per month with Gary Edwards, the
President of Allis-Chalmers Tubular Services, Inc.
Alya H. Hidayatallah, the daughter of our Chairman and Chief
Executive Officer, Munawar H. Hidayatallah, has served as our
Vice President Planning and Development since
April 2005. In 2005, we paid Ms. Hidayatallah a salary at a
rate of $80,000 per annum.
In April 2004, we entered into an oral consulting agreement with
Leonard Toboroff pursuant to which we paid him $10,000 per
month during the 2005 fiscal year to advise us regarding
financing and acquisition
16
opportunities. Effective as of the first quarter of 2006, we pay
Mr. Toboroff $12,000 per month pursuant to the
agreement.
As of December 31, 2005, Jens Mortensen, one of our
directors, was the holder of a subordinated note payable (having
a stated principal amount of $4.0 million and an annual
interest rate of 7.5%), which we issued to him in connection
with our acquisition of Tubular Services (of which
Mr. Mortensen is a former equity holder). As of
December 31, 2005, we owed Mr. Mortensen
$3.0 million in principal and $60,000 in accrued interest
on the subordinated note, all of which we paid in January 2006.
We also owe Mr. Mortensen $267,000 under the terms of a
non-compete agreement. During the year ended December 31,
2005, we paid $247,000 to Mr. Mortensen under the terms of
this non-compete agreement. We also leased a yard from
Mr. Mortensen on a monthly basis and paid rent of $16,800
during the year ended December 31, 2005.
|
|
ITEM 14.
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
|
The following table shows the aggregate fees we paid to our
independent accountant, UHY Mann Frankfort Stein & Lipp
CPAs LLP, for services rendered during the years ended
December 31, 2005 and 2004 and to Gordon, Hughes &
Banks, LLP, for services rendered during the year ended
December 31, 2004.
Description of Fees To:
|
|
|
|
|
|
|
|
|
UHY Mann Frankfort
Stein & Lipp CPAs LLP
|
|
2005
|
|
|
2004
|
|
|
Audit fees(1)
|
|
$
|
325,542
|
|
|
$
|
210,453
|
|
Audit related fees(2)
|
|
$
|
307,070
|
|
|
$
|
|
|
Tax fees(3)
|
|
$
|
88,273
|
|
|
$
|
15,028
|
|
All other fees(4)
|
|
$
|
121,755
|
|
|
$
|
14,000
|
|
|
|
|
|
|
|
|
|
|
Gordon Hughes & Banks,
LLP
|
|
|
|
|
|
|
|
Audit fees(1)
|
|
$
|
|
|
|
$
|
|
|
Audit related fees(2)
|
|
$
|
|
|
|
$
|
|
|
Tax fees(3)
|
|
$
|
|
|
|
$
|
|
|
All other fees(4)
|
|
$
|
59,216
|
|
|
$
|
58,754
|
|
|
|
|
(1) |
|
Includes fees paid for audit of our annual financial statements
and reviews of the related quarterly financial statements. 100%
of these fees were pre-approved by our Audit Committee. |
|
(2) |
|
Includes fees paid for assurance and related services that are
reasonably related to the performance of the audit or review of
our financial statements and are not reported under Audit
fees. These services include issuance of consents and
other accounting and reporting consultations. 100% of these fees
were pre-approved by our Audit Committee. |
|
(3) |
|
Includes tax planning and tax return preparation fees. These
services and fees were not pre-approved by our Audit Committee. |
|
(4) |
|
Includes fees related to the review and issuance of consents
related to our registration statements on
Form S-1
and other SEC filings. These services and fees were not
pre-approved by our Audit Committee. |
Pre-approval
Policies and Procedures
We adopted a policy that the Audit Committee must approve in
advance all audit and audit related services provided by our
independent accountants. All of the audit and audit related
services provided to us in 2005 and 2004 were pre-approved by
the Audit Committee.
17
PART IV
|
|
ITEM 15.
|
EXHIBITS AND
FINANCIAL STATEMENT SCHEDULES
|
(b) Exhibits
The exhibits listed on the Exhibit Index set forth
immediately following the signature page of this Annual Report
on
Form 10-K/A-1
are filed as part of this
Form 10-K/A-1.
18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, the registrant has
duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized on May 1, 2006.
/s/ MUNAWAR H. HIDAYATALLAH
Munawar H. Hidayatallah
Chief Executive Officer and Chairman
19
EXHIBIT INDEX
|
|
|
|
|
Exhibit
|
|
Description
|
|
|
31
|
.1
|
|
Certification of Chief Executive
Officer pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
|
|
31
|
.2
|
|
Certification of Chief Financial
Officer pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
|
20