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SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
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Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Under Rule 14a-12
UNIFAB INTERNATIONAL, INC.
(Name of registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14(a)-6(i)(1),
14(a)-6(i)(2) or Item 22(a)(2) of Schedule 14A
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
___________________________________
(2) Aggregate number of securities to which transaction applies:
___________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined:____________
(4) Proposed maximum aggregate value of transaction:_____________________
(5) Total fee paid:______________________________________________________
[_] Fee paid previously by written preliminary materials
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:______________________________________________
(2) Form, Schedule or Registration Statement No.:________________________
(3) Filing Party:________________________________________________________
(4) Date Filed:__________________________________________________________
[UNIFAB LOGO TO BE INSERTED]
UNIFAB INTERNATIONAL, INC.
5007 Port Road
New Iberia, Louisiana 70562
_____________________________________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 27, 2002
_____________________________________________________
Date: Friday, December 27, 2002
Time: 10:00 A.M. C.D.T.
Place: 5007 Port Road, New Iberia, Louisiana
Purposes: To consider and vote upon the following proposals and to
transact such other business as may properly come before the
annual meeting:
1. To amend our articles of incorporation to declassify our
board of directors and require the annual election of all
directors;
2. To elect eight directors to serve until our 2003 annual
meeting or until their respective successors are duly
elected and qualified, in the event Proposal One is
approved at the annual meeting;
3. Alternatively, to elect two Class II directors to serve
until our 2005 annual meeting or until their respective
successors are duly elected and qualified, in the event
Proposal One is not approved at the annual meeting;
4. To ratify the appointment of Deloitte & Touche LLP as our
independent auditors to audit our financial statements for
2002; and
5. To amend our long-term incentive plan.
Record Date: Close of business on November 11, 2002
Your vote is important. Whether or not you plan to attend the meeting,
please complete, sign and date the enclosed proxy card and return it promptly in
the enclosed envelope. You may revoke your proxy at any time before it is voted.
We appreciate your cooperation.
By Order of the Board of Directors
/s/ Martin K. Bech
------------------------------------
New Iberia, Louisiana Martin K. Bech
December 13, 2002 Secretary
UNIFAB INTERNATIONAL, INC.
5007 Port Road
New Iberia, Louisiana 70562
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 27, 2002
We will begin mailing this proxy statement to our shareholders on or about
December 13, 2002.
We are furnishing this proxy statement to our shareholders in connection
with the solicitation of proxies on behalf of our board of directors for use at
our 2002 annual meeting of shareholders to be held on Friday, December 27, 2002,
at 10:00 A.M. C.D.T. at our offices located at 5007 Port Road, New Iberia,
Louisiana.
Who Can Vote
If you held any of our common stock or series A participating preferred
stock ("series A preferred stock") at the close of business on November 11,
2002, then you are entitled to notice of, and to vote at, the annual meeting. On
that date, 8,189,972 shares of our common stock and 738 shares of our series A
preferred stock were outstanding.
Quorum
The presence of the holders of a majority of the total votes entitled to be
cast at the annual meeting, either in person or represented by proxy, is
necessary to constitute a quorum. For purposes of determining a quorum, we will
count as present shares of our stock present at the meeting that abstain from
voting or that are the subject of broker non-votes. A broker non-vote occurs
with respect to a particular matter to be voted on when a broker or broker's
nominee, who holds shares of our stock for a beneficial owner, returns a proxy
representing those shares but does not vote on the matter because the broker or
nominee does not have discretionary voting power with respect to that matter and
has not received voting instructions from the beneficial owner.
Voting Rights
Each share of our common stock that you hold entitles you to one vote on
all matters that come before the annual meeting. Each share of our series A
preferred stock has voting rights equivalent to 100,000 shares of our common
stock (see "Transactions with Midland" below). The holders of our common stock
will vote together with the holder of our series A preferred stock at the annual
meeting. One or more inspectors of election will count votes cast at the annual
meeting. Each director will be elected by a plurality of the shares voted (that
is, the nominee receiving the largest number of votes will be elected). Proposal
One will be decided by a vote of two-thirds of the shares present or represented
at the annual meeting. All other matters voted on will be decided by a majority
of the votes cast, except as otherwise provided by statute.
Broker non-votes are not considered as cast or as being present or
represented at the annual meeting for purposes of any matter expected to come
before the annual meeting, and will have no effect on the outcome. Shares
abstained from voting are not cast but are considered present and represented at
the annual meeting; they will have the effect of a negative vote with respect to
Proposal One, but will have no effect on the outcome of any other matter
expected to come before the annual meeting.
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Expected Vote by Midland Fabricators and Process Systems, L.L.C.
Midland Fabricators and Process Systems, L.L.C. ("Midland") is entitled to
cast approximately 90% of the votes entitled to be cast at the annual meeting.
Midland has informed us that it intends to cast its votes in favor of Proposals
One, Two, Four and Five at the annual meeting and, as a result, we expect each
of these Proposals to be approved.
Dissenter's Rights
Under Louisiana law, our shareholders are not entitled to dissenter's
rights with respect to any of the Proposals to be presented at the annual
meeting, and we will not independently provide our shareholders with any such
rights.
How Your Proxy Will Be Voted
Our board of directors is soliciting a proxy in the enclosed form to
provide you with an opportunity to vote on all matters scheduled to come before
the annual meeting, whether or not you attend in person. If you properly execute
and return a proxy in the enclosed form, your stock will be voted as you
specify. If you make no specifications on your proxy, your stock will be voted
in favor of Proposals One, Four and Five and, depending on whether Proposal One
is approved at the annual meeting, in favor of the proposed director nominees in
Proposal Two or Proposal Three.
We expect no matter to be presented for action at the annual meeting other
than the items described in this proxy statement. The enclosed proxy will,
however, confer discretionary authority with respect to any other matter that
may properly come before the meeting. The persons named in the enclosed proxy
intend to vote in accordance with their judgment on any such matters.
If you submit a proxy, you may subsequently revoke it or submit a revised
proxy at any time before your proxy is voted. You may also attend the annual
meeting in person and vote by ballot, which would cancel any proxy that you
previously submitted.
Proxy Solicitation
We will pay all expenses of soliciting proxies for the annual meeting. In
addition to the use of the mails, proxies may be solicited by personal
interview, telephone, telefax and telegraph. We will request banks, brokerage
houses and other institutions, nominees and fiduciaries to forward solicitation
materials to the beneficial owners of our common stock and, upon their request,
we will reimburse such persons for reasonable out-of-pocket expenses incurred in
doing so.
Shareholder Proposals
If you want us to consider including a proposal in next year's proxy
statement, you must deliver it in writing to Martin K. Bech, Secretary, UNIFAB
International, Inc., 5007 Port Road, New Iberia, Louisiana 70562, by August 15,
2003. However, if the date of our 2003 annual meeting changes more than 30 days
from the date of our coming 2002 annual meeting, we will include the deadline
for delivery of proposals for inclusion in our 2003 proxy statement in our Form
10-K or a Form 10-Q that we will file with the Securities and Exchange
Commission (the "SEC").
Director Nominations
If you want to nominate a person for election to our board of directors at
the annual meeting, you must comply with the notice requirements set forth in
our articles of incorporation. In order to be timely, you must deliver written
notice of your nomination to Martin K. Bech, Secretary, UNIFAB International,
Inc., 5007 Port Road, New Iberia, Louisiana 70562, by December 23, 2002. Your
notice must include the name, age, and principal occupation of your nominee, as
well as your nominee's written consent to being named in our proxy statement as
a nominee and to serve as a director if elected. Your notice should also include
your name, address, and the number
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of shares of our capital stock which you beneficially own. Our articles of
incorporation are filed with the SEC, and you should refer to them for a
complete description of our notice requirements.
TRANSACTIONS WITH MIDLAND
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 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 (i) the calling of a meeting of our shareholders for the
purpose of voting on an increase in the authorized number of shares of
our common stock to at least 100 million shares; and (ii) a rights
offering pursuant to which our shareholders other than Midland will
have the opportunity to purchase two additional shares of our common
stock for each share held at a price of $0.35 per share. Midland also
agreed to vote its shares in favor of the increase in the authorized
number of our shares at such meeting of shareholders. We will not
propose this matter for action by our shareholders at the coming
annual meeting; we expect, however, that it will be proposed for
shareholder approval at a meeting to be held in 2003.
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THIS PROXY STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR
SOLICITATION OF AN OFFER TO BUY OUR COMMON STOCK PURSUANT TO THE
RIGHTS OFFERING REFERRED TO IN THE PRECEDING PARAGRAPH OR
OTHERWISE. ANY SUCH OFFER WOULD BE MADE ONLY THROUGH A SEPARATE
PROSPECTUS.
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 increased to at least 100 million.
. $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 and the same price we agreed to with Midland for the
rights offering referred to above); 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.
. We established an $8 million line of credit with Whitney National
Bank, which is secured by our assets. The line of credit is further
secured by the guarantee of Nassau Holding Corporation, the parent
company of Midland.
Since August 13, 2002, we have received advances under the credit
agreement from Midland totaling $125,000, which have been repaid in full.
Accrued and unpaid interest on all amounts owed to Midland was $217,760 at
November 30, 2002.
PROPOSAL ONE: DECLASSIFY OUR BOARD OF DIRECTORS
Our articles of incorporation and by-laws currently divide the members
of our board of directors into three classes serving three-year staggered terms,
with the number of directors in each class being as nearly equal as possible and
directors for one of the three classes being elected each year. Our by-laws
provide for a board of eight natural persons, currently consisting of three
Class I directors, whose terms are scheduled to expire at our 2004 annual
meeting; two Class II directors, whose terms will expire at the annual meeting;
and three Class III directors, whose terms are scheduled to expire at our 2003
annual meeting.
As Proposal One, our board of directors has unanimously adopted a
resolution approving and recommending to our shareholders the adoption of an
amendment to our articles of incorporation to declassify our
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board of directors, such that all of our directors will be elected annually. Our
board of directors has amended our by-laws to make them consistent with this
proposed amendment to our articles of incorporation, subject to the approval of
Proposal One at the annual meeting and the effectiveness of the amendment to our
articles of incorporation. Proposal One would not change the present number of
our directors.
The amendment to our articles of incorporation proposed for adoption in
Proposal One is set forth in full in Appendix A to this proxy statement and is
incorporated herein by reference. If Proposal One is approved at the annual
meeting, the amendment eliminating the staggered three-year terms of our
directors will become effective immediately and will be effective for the annual
meeting so that all of our directors will be elected at the annual meeting to
serve until our next annual meeting or until their successors are duly elected
and qualified.
Purpose of the Amendment
As is the case for many other corporations, our company's primary purpose
in adopting articles of incorporation with a classified board structure was to
discourage persons, or groups of persons, from seeking control of our company by
means of a process that did not involve voluntary agreements reached through
negotiations with our management and board of directors. The staggered,
three-year terms of our directors are designed to discourage such non-negotiated
takeover attempts by delaying the time within which a majority of our board of
directors could be changed after a non-negotiated acquisition of a controlling
block of our voting stock. A classified board has also been viewed as promoting
stability and as helping to maintain a greater continuity of experience on a
company's board of directors because the majority of directors at any given time
will have at least one year of experience with the company.
As discussed in this proxy statement under "Transactions with Midland,"
Midland has, through a process of negotiation with our management and board of
directors that resulted in the Midland agreement, acquired control of our
company. Pursuant to the Midland agreement, Midland now holds approximately 90%
of our total voting power as a result of its ownership of our series A preferred
stock and, upon conversion of that stock, Midland will own approximately 90% of
our outstanding common stock. Also pursuant to the Midland agreement, Midland
designated six directors who were appointed to our eight-member board. As a
result of Midland's control of our company, the purposes of a classified board
no longer apply to our company because Midland, as controlling shareholder, is
in a position to prevent any non-negotiated takeover attempts and is in a
position to assure the stability of our board membership.
Effects of the Amendment
As discussed above, our current articles of incorporation (in Article IV)
and by-laws (in section 3.3) currently provide that our board of directors is
divided into three classes serving three-year, staggered terms, with the
directors for one of the three classes being elected each year and the number of
directors in each class being as nearly equal as possible. Under Proposal One,
these provisions would be eliminated from Article IV and, under Louisiana law,
all of our directors would be elected annually and serve terms until their
successors are elected at the next annual meeting of shareholders and have
qualified. If Proposal One is approved, the amendment of Article IV will become
effective immediately and all of the directors elected at the coming annual
meeting will serve until their respective successors are duly elected at our
2003 annual meeting and have qualified.
Vote Required for Passage of the Amendment
Approval of Proposal One requires the affirmative vote of two-thirds of the
votes present or represented at the annual meeting.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL ONE.
PROPOSAL TWO: ELECTION OF DIRECTORS
If Proposal One is approved at the annual meeting, eight directors are to
be elected to hold office until our 2003 annual meeting or until their
respective successors are duly elected and qualified. Our board of directors has
nominated the eight directors named below and recommends that our shareholders
vote FOR the election of the
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nominees. In the absence of contrary instructions, the proxy holders will vote
for the election of the nominees listed below. In the unanticipated event that
the nominees are unavailable as candidates for director, the persons named in
the accompanying proxy will vote for substitute candidates nominated by our
board of directors. Proposal Two will be voted on only in the event Proposal One
is approved at the annual meeting.
Subject to shareholder approval of Proposal One at the annual meeting, our
Class I and Class III directors, whose terms are otherwise scheduled to expire
at our 2004 and 2003 annual meetings, respectively, have agreed to shorten their
terms to expire at the annual meeting.
The following table sets forth for each person nominated for election to
our board of directors, their age, position, principal occupation and employment
during the past five years and their directorships in other public corporations,
as of November 15, 2002, and the year that they were first elected a director of
our company or its predecessor.
Principal Occupation and Directorships in Director
Name and Age Other Public Corporation Since
------------ ------------------------ -----
Frank J. Cangelosi, Jr., 48 ....... Mr. Cangelosi is currently a Class III director of our 2002
company, whose term is scheduled to expire at our 2003
annual meeting. Mr. Cangelosi, a certified public
accountant, has served as 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 2002
Chief Operating Officer and is currently a Class I
director of our company, whose term is scheduled to
expire at our 2004 annual meeting. 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.
Daniel R. Gaubert, 53 ............. Mr. Gaubert is currently a Class III director of our 2002
company, whose term is scheduled to expire at our 2003
annual meeting. Mr. Gaubert served as the Chief
Financial Officer of McDermott International, Inc. from
1996 until his retirement in 2001, and has served as a
financial 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.
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Principal Occupation and Directorships in Director
Name and Age Other Public Corporation Since
------------ ------------------------ -----
William A. Hines, 66 .............. Mr. Hines serves as our Chairman of the Board and is 2002
currently a Class II director of our company, whose
term is scheduled to expire at the annual meeting. Mr.
Hines is 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 is currently a Class I director of our 2002
company, whose term is scheduled to expire at our 2004
annual meeting. Mr. Moore, a certified public
accountant, was the managing 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.
Allen C. Porter, Jr., 70 .......... Mr. Porter serves as our President and Chief Executive 2002
Officer and is currently a Class III director of our
company, whose term is scheduled to expire at our 2003
annual meeting. 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, 72 .................. Mr. Segura is currently a Class I director of our 1980
company, whose term is scheduled to expire at our 2004
annual meeting. Mr. Segura served as our Chairman of
the Board from April 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 served as its Chairman from 1997 to
1998, and as its Vice Chairman from 1996 to 1997.
George C. Yax, 59 ................. Mr. Yax is currently a Class II director of our 1997
company, whose term is scheduled to expire at the
annual meeting. Mr. Yax is currently a rancher and was
a co-founder of Ceanic 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.
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PROPOSAL THREE: ELECTION OF CLASS II DIRECTORS
In the event Proposal One is not approved at the annual meeting, two
Class II directors are to be elected to hold office until our 2005 annual
meeting or until their respective successors are duly elected and qualified. Our
board of directors has nominated Mr. Hines and Mr. Yax for re-election to our
board of directors as Class II directors in the event Proposal One is not
approved at the annual meeting, and our board recommends that our shareholders
vote FOR the election of Messrs. Hines and Yax. Biographical information for
Messrs. Hines and Yax is set forth above.
In the absence of contrary instructions, the proxy holders will vote
for the election of Messrs. Hines and Yax. In the unanticipated event that
Messrs. Hines and Yax are unavailable as candidates for director, the persons
named in the accompanying proxy will vote for substitute candidates nominated by
our board of directors. As noted above, Proposal Three will only become
effective in the event Proposal One is not approved at the annual meeting.
* * * *
Our board of directors has primary responsibility for directing our
management and affairs. On June 20, 2000, our board of directors elected to
change our fiscal year cycle from one that ends on March 31 to one that ends on
December 31. Our last full fiscal year on the previous cycle was from April 1,
1999 to March 31, 2000 ("fiscal 2000"). The change in our fiscal year cycle
resulted in a nine-month transition period from April 1, 2000 to December 31,
2000 ("transition 2000"). Our first full fiscal year following transition 2000
was from January 1, 2001 to December 31, 2001. During 2001, our board of
directors held four regular meetings and three special meetings. Each director
attended 75% or more of the aggregate number of meetings held during 2001 of the
board of directors and committees of which he was a member.
Our board has established an audit committee and a compensation
committee, each of which met three times during 2001. Our board does not have a
nominating committee. None of the members of these committees is an officer or
employee of our company or any of our subsidiaries.
Our audit committee reviews our quarterly financial statements and
annual audit; meets with our independent auditors to review our internal
controls and financial management practices; and exercises general oversight of
the integrity and reliability of our accounting and financial reporting
practices and the effectiveness of our system of internal controls. The current
members of our audit committee are Frank J. Cangelosi, Jr., Daniel R. Gaubert,
Donald L. Moore, Perry Segura and George C. Yax.
Our compensation committee analyzes, reviews and makes recommendations
to our board concerning compensation programs and administers our long-term
incentive plan. The current members of our compensation committee are Frank J.
Cangelosi, Jr., Donald L. Moore and George C. Yax.
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 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 June 1, 2001, we granted each
non-employee director an option to buy 2,500 shares of our common stock at an
exercise price of $4.75, the fair market value of our common stock on that date.
8
STOCK OWNERSHIP
The following table sets forth, as of November 15, 2002 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 under "Executive Compensation" below, (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)
- ------------------------ -------- -------- ----- --------
Dailey J. Berard ....................................... 430,386(3) 5.3 0 -
Charles E. Broussard ................................... 419,934(4) 5.1 0 -
Jerome E. Chojnacki .................................... 50,000(5) * 0 -
Frank J. Cangelosi, Jr. ................................ 0 - 0 -
Vincent J. Cuevas(6) ................................... 62,712 * 0 -
William A. Downey ...................................... 0(7) - 0 -
Daniel R. Gaubert ...................................... 0 - 0 -
Walter L. Hampton(8) ................................... 53,024 * 0 -
William A. Hines (9) ................................... 30,444,007 78.8 738 100
Donald L. Moore ........................................ 0 - 0 -
Philip J. Patout(10) ................................... 233,259 2.8 0 -
Allen C. Porter, Jr. ................................... 12(7) * 0 -
Peter J. Roman ......................................... 58,041 * 0 -
Perry Segura ........................................... 461,977(11) 5.6 0 -
George C. Yax .......................................... 22,500 * 0 -
Midland Fabricators and Process Systems, L.L.C. ........ 30,433,039(12) 78.8 738 100
Wellington Management Company, LLP. .................... 412,000(13) 5.0 0 -
All directors and executive officers
as a group (16 persons) ........................... 31,838,652 82.2 738 100
______________
* Ownership is less than 1%
(1) Includes shares that could be acquired within sixty days after November
15, 2002, upon the exercise of options granted pursuant to our
long-term incentive plan, as follows: Mr. Broussard, 12,500 shares; Mr.
Roman, 54,000 shares; Mr. Segura, 12,500 shares; Mr. Yax, 12,500
shares; and all directors and executive officers as a group (16
persons), 104,834 shares.
(2) Based on 8,189,972 shares of our common stock and 738 shares of our
series A preferred stock outstanding as of November 15, 2002.
(3) Based in part on the Schedule 13G Amendment No. 3, dated February 7,
2001, filed with the SEC, which reported an aggregate 538,719 shares of
our common stock beneficially owned by Mr. Berard, including 15,700
shares owned by Mr. Berard's spouse, with respect to which Mr. Berard
shares investment and voting power, and exercisable options to purchase
108,333 shares of our common stock. Mr. Berard resigned as an officer
of our company, effective October 2001, at which time he forfeited his
unexercisable options (see "- Agreements with Named Executive
Officers"). Under our long-term incentive plan, Mr. Berard was allowed
one year from the date of his resignation as an officer of our company
in which to exercise his exercisable options. Mr. Berard did not
exercise any of his exercisable options within such
9
time period and, as a result, such options were forfeited. Mr. Berard's
address is 110 Mountainside Drive, Lafayette, Louisiana 70503.
(4) 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. In June 2001, Mr. Broussard, as a non-employee director
of our company, received an option to purchase 2,500 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 in August 2002. Mr. Broussard's address is 23604
South Louisiana Highway 82, Kaplan, Louisiana 70548.
(5) 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.
(6) Shares shown as beneficially owned by Mr. Cuevas include 3,000 shares
held by the custodian of an individual retirement account for the
benefit of Mr. Cuevas. Mr. Cuevas resigned as an officer and employee
of our company in March 2002. Upon his resignation, the unexercisable
options held by Mr. Cuevas were forfeited. Under our long-term
incentive plan, Mr. Cuevas was allowed 30 days from the date of his
resignation in which to exercise his exercisable options. Mr. Cuevas
did not exercise any of his exercisable options within such time and,
as a result, all such options were forfeited. Mr. Cuevas' address is
402 Doyle Drive, Lafayette, Louisiana 70508.
(7) In August 2002, Messrs. Downey and Porter were each granted options
pursuant to our long-term incentive plan to purchase 250,000 shares of
our common stock at an exercise price of $0.39 per share. These grants
are subject to the approval of Proposal Five at the annual meeting.
(8) Mr. Hampton resigned as an officer and employee of Allen Process
Systems, LLC ("Allen Process Systems"), a wholly owned subsidiary of
our company, in March 2002. Upon his resignation, the unexercisable
options held by Mr. Hampton were forfeited. Under our long-term
incentive plan, Mr. Hampton was allowed 30 days from the date of his
resignation in which to exercise his exercisable options. Mr. Hampton
did not exercise any of his exercisable options within such time and,
as a result, all such options were forfeited. Mr. Hampton's address is
13615 Cannody Court, Houston, Texas 77069.
(9) 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 disclaims beneficial ownership
of these shares of our common stock and series A preferred stock. Mr.
Hines is also the direct owner of 10,968 shares of our common stock.
(10) Mr. Patout resigned as an officer of Oil Barges, Inc. ("Oil Barges"), a
wholly owned subsidiary of our company, in December 2001, and as an
employee of Oil Barges in January 2002. Upon his resignation, the
unexercisable options held by Mr. Patout were forfeited. Under our
long-term incentive plan, Mr. Patout was allowed 30 days from the date
of his resignation in which to exercise his exercisable options. Mr.
Patout did not exercise any of his exercisable options within such time
and, as a result, all such options were forfeited. Mr. Patout's address
is 221 Ramblewood Drive, Lafayette, Louisiana 70508.
(11) Includes 373,591 shares owned by a company controlled by Mr. Segura.
(12) Represents the shares of our common stock issuable upon conversion of
the convertible debenture issued by our company to Midland in the
principal amount of $10,651,564 (see "Transactions with Midland").
(13) Based on the Schedule 13G, dated February 14, 2002, filed with the SEC.
Wellington Management Company, LLP shares voting power with respect to
327,000 of these shares and shares investment power with respect to all
shares shown. Wellington Management Company, LLP's address is 75 State
Street, Boston, Massachusetts 02109.
10
EXECUTIVE COMPENSATION
The following table provides you with information about the
compensation we paid in 2001 (January 1, 2001 to December 31, 2001), transition
2000 (April 1, 2000 to December 31, 2000), fiscal 2000 (April 1, 1999 to March
31, 2000), and fiscal 1999 (April 1, 1998 to March 31, 1999), to our chief
executive officers and our other executive officers whose individual salary and
bonus for the calendar year 2001 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 .................................. 2001 $ 75,000 $50,000 $55,500(3) 150,000 $1,944(4)
President and Chief Executive Officer (2)
Dailey J. Berard ..................................... 2001 193,404 0 - 0 3,933
President and Chief Executive Officer (5) 2000* 135,000 0 - 40,000 2,700
2000** 180,000 0 - 0 3,600
1999 180,000 75,600 - 30,000 3,600
Vincent J. Cuevas(6) ................................. 2001 129,267 0 - 0 3,760
Vice President 2000* 100,254 0 - 30,000 2,857
2000** 130,330 0 - 0 3,760
1999 83,433 0 - 15,000 2,498
Walter L. Hampton(7) ................................. 2001 127,636 0 - 0 3,910
Vice President 2000* 100,254 0 - 16,000 3,008
2000** 130,330 0 - 0 4,060
1999 83,433 0 - 8,000 4,590
Peter J. Roman ....................................... 2001 104,770 0 - 0 0
Vice President 2000* 67,500 0 - 30,000 113
2000** 90,000 37,800 - 0 1,575
1999 90,000 37,800 - 20,000 1,350
Phillip J. Patout(8) ................................. 2001 100,000 0 - 0 2,106
Vice President 2000* 75,000 0 - 30,000 2,250
2000** 94,308 0 - 0 1,442
______________
* 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. Mr. Chojnacki did not
participate in 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) Represents premium payments for a life insurance policy for the benefit
of Mr. Chojnacki.
11
(5) Mr. Berard resigned as an officer of our company effective October 2001;
as a condition to Mr. Berard's resignation, we agreed to honor his
employment agreement through its expiration in September 2002. In April
2002, Mr. Berard received a one-time payment of $75,000 in connection
with the termination of his employment agreement with our company (see
"-Agreements with Named Executive Officers").
(6) Mr. Cuevas resigned as an officer and employee of our company in March
2002.
(7) Mr. Hampton joined our company in July 1998 in connection with our
acquisition of Allen Tank, Inc. (the predecessor of Allen Process
Systems), of which Mr. Hampton was a shareholder. Mr. Hampton resigned as
an officer and employee of Allen Process Systems in March 2002.
(8) Mr. Patout joined our company in April 1999 as an employee of Oil Barges
in connection with our April 1999 acquisition of Oil Barges, of which Mr.
Patout was a shareholder. Mr. Patout resigned as an officer of Oil Barges
in December 2001, and as an employee of Oil Barges in January 2002 (see
"-Agreements with Named Executive Officers").
Stock Option Grants
The following table provides you with information about the stock options
that we granted to Mr. Chojnacki in 2001. We did not grant stock options to any
of our other Named Executive Officers in 2001.
Option Grants in 2001
Grant Date
Individual Grants Value
----------------------------------------------------------------------------- -------------
Number of
Securities
Underlying % of Total Options Grant Date
Options Granted to Exercise or Base Present
Name Granted (#)(1) Employees in 2001 Price ($/Sh) Expiration Date Value (2)
- ------------------------------- ------------------ --------------------- ------------------ ----------------- -------------
Jerome E. Chojnacki ......... 50,000 26.3% $1.11 11/07/11 $27,500
100,000 52.6% $1.11 11/07/11 $55,000
______________
(1) Of the options granted to Mr. Chojnacki, 50,000 were exercisable on the
grant date and 100,000 were to become exercisable upon replacement of our
prior credit agreement with Bank One, Louisiana, N.A., and three other
commercial banks. 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.
(2) We used the Black-Scholes option pricing model to determine the grant
date present value of the stock options that we granted in 2001 to Mr.
Chojnacki. 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 $0.55. We used the following facts and assumptions in
making such calculation: (a) an exercise price of $1.11 for each such
stock option; (b) a fair market value of $0.65 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 90.7%,
based on an analysis of monthly closing stock prices of shares of our
common stock during a 217-week period; and (f) an assumed risk-free
interest rate of 2.77%, 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 $0.55
for each stock option by the number of stock options granted to Mr.
Chojnacki to determine the grant date present value of such stock
options.
12
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,
2001. None of our Named Executive Officers exercised stock options in 2001.
Aggregated Options as of December 31, 2001
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options at 12/31/01(#) 12/31/01(1)
---------------------- -----------
Exercisable/Unexercisable Exercisable/Unexercisable
------------------------- -------------------------
Jerome E. Chojnacki(2) ..................... 50,000/100,000 $0/0
Dailey J. Berard(3) ........................ 121,667/0 0/0
Vincent J. Cuevas(4) ....................... 35,000/10,000 0/0
Walter L. Hampton(4) ....................... 18,667/5,333 0/0
Peter J. Roman ............................. 44,000/10,000 0/0
Phillip J. Patout(4) ....................... 20,000/10,000 0/0
______________
(1) On December 31, 2001, the closing sales price of our common stock on the
Nasdaq National Market was $0.65 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.
(3) Mr. Berard resigned as an officer of our company effective October 2001,
at which time he forfeited his unexercisable options. Under our long-term
incentive plan, Mr. Berard was allowed one year from the date of his
resignation as an officer of our company in which to exercise his
exercisable options. Mr. Berard did not exercise any of his exercisable
options within such time period and, as a result, such options were
forfeited.
(4) Mr. Cuevas resigned as an officer and employee of our company in March
2002. Mr. Hampton resigned as an officer and employee of Allen Process
Systems in March 2002. Mr. Patout resigned as an officer of Oil Barges in
December 2001, and as an employee of Oil Barges in January 2002. Upon
their respective resignations, the unexercisable options held by Messrs.
Cuevas, Hampton and Patout were forfeited. Under our long-term incentive
plan, Messrs. Cuevas, Hampton and Patout were each allowed 30 days from
the date of their respective resignations in which to exercise their
exercisable options. Messrs. Cuevas, Hampton and Patout did not exercise
any of their exercisable options within such time and, as a result, all
such options were forfeited.
Agreements with Named Executive Officers
Agreements with Mr. Berard
Upon the completion of our initial public offering in September 1997, we
entered into an employment agreement with Mr. Berard providing for a five-year
term through September 2002 and an annual salary of $180,000. On the date of the
agreement, Mr. Berard received an option to purchase 65,000 shares of our common
stock at an exercise price of $18.00 per share. Mr. Berard was entitled under
the agreement to receive annual bonuses of up to 100% of his annual salary
depending on our annual net income return on capital. Mr. Berard's employment
agreement also provided that he would not compete with our company within the
geographic areas specified in the agreement for a period of two years following
the expiration of the agreement. The agreement also required Mr. Berard to keep
confidential all trade secrets and confidential information obtained during his
employment, and to assign to us any inventions or discoveries made during the
term of his employment. In March 2001, our compensation committee approved an
increase in Mr. Berard's annual salary to $200,000 (see "- Compensation
Committee Report on Executive Compensation").
13
Mr. Berard resigned as an officer of our company effective October 2001;
as a condition to Mr. Berard's resignation, we agreed to honor his employment
agreement through its expiration in September 2002. However, the Midland
agreement subsequently required us to terminate Mr. Berard's employment
agreement effective April 2002, make a one-time cash payment of $75,000 to Mr.
Berard in exchange for the termination of his employment agreement, and cause
Mr. Berard to resign as a director of our company. Accordingly, we and Mr.
Berard entered into a waiver and release agreement, effective April 2002,
terminating his employment agreement, releasing us from any claims of Mr. Berard
arising out of his employment with our company, releasing Mr. Berard from the
noncompetition and other obligations of his employment agreement, and providing
for the required cash payment to Mr. Berard. As required by the Midland
agreement, Mr. Berard resigned as a director of our company in April 2002.
Agreements 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.
Agreements with Mr. Patout
In April 1999, in connection with our acquisition of Oil Barges, Mr.
Patout entered into an employment agreement and a noncompetition,
nonsolicitation, invention and secrecy agreement (the "noncompetition
agreement") with Oil Barges, of which Mr. Patout was a shareholder. Mr. Patout's
employment agreement provided for a three-year term and an annual salary of
$100,000. Mr. Patout was eligible under the employment agreement to receive
annual bonuses and stock options established by our board of directors and
compensation committee. The noncompetition agreement provided that Mr. Patout
would not compete with Oil Barges, nor solicit the customers or employees of Oil
Barges, within the geographic areas specified in the agreement during the term
of his employment and for a period of two years thereafter. The noncompetition
agreement also required Mr. Patout to keep confidential all trade secrets and
confidential information of Oil Barges, and to assign to Oil Barges any
inventions or discoveries made during the term of his employment.
In connection with his resignation from Oil Barges in January 2002, Mr.
Patout and Oil Barges entered into an agreement terminating the employment
agreement and the noncompetition agreement.
Compensation Committee Interlocks and Insider Participation
During 2001, Messrs. Broussard and Yax comprised our compensation
committee. Messrs. Broussard and Yax have never served as an officer or employee
of our company or any of our subsidiaries. In 2001, 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.
14
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. The annual salary of Dailey J. Berard, who resigned as the
company's president and chief executive officer effective October 2001, was set
at $180,000 in his employment agreement, which was negotiated between the board
of directors and Mr. Berard. In March 2001, our compensation committee approved
an increase in the annual salary of Mr. Berard to $200,000, and an increase in
the salary of Peter J. Roman, one of the company's vice presidents, to $105,000.
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, if any, payable to Mr. Berard was
determined in accordance with the terms of his employment agreement, which
provided that he would be entitled to receive, as an annual incentive bonus, a
percentage of his annual salary ranging from 50% to 100%, depending on the
percentage net income return on the company's capital. The company must have
achieved a minimum 15% net income return on its capital for Mr. Berard to
receive a minimum bonus of 50% of his annual salary, and Mr. Berard could have
received the maximum bonus of 100% of his annual salary if the company achieved
a 30% or greater net income return on its capital. The company did not achieve a
minimum 15% net income return on its capital in 2001, and Mr. Berard was not
paid a bonus. The amounts of the incentive bonuses awarded to Mr. Berard in
fiscal 2000, transition 2000 and fiscal 1999 are included in the "Summary
Compensation Table" in the section of this proxy statement entitled "Executive
Compensation."
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. Because the company had negative EBITDA for 2001, Mr. Chojnacki was
paid the minimum bonus of $50,000.
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 2001; 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 consulting
agreement, Mr. Chojnacki was granted options to acquire 150,000 shares of the
company's common stock for $1.11 per share in 2001. No other named executive
officer received a stock option grant in 2001. The table entitled "Option Grants
in 2001" in the section of this proxy statement entitled "Executive
Compensation" sets forth certain information about the stock options granted to
Mr. Chojnacki in 2001. Also included in the "Summary Compensation Table" in the
section of this proxy statement entitled "Executive Compensation" are the number
of securities underlying stock options granted to certain of our executive
officers in fiscal 2000, transition 2000 and fiscal 1999.
15
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 2001. Our compensation
committee believes that the stock options granted to Mr. Chojnacki, 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
- ------------
* 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, subsequent to the committee's
deliberations concerning our executive compensation for 2001.
16
Performance Graph
The following graph compares the cumulative total shareholder return on
our common stock from September 19, 1997, the date of our initial public
offering, through December 31, 2001, with the cumulative total return of the
Standard & Poor's 500 Stock Index and the Standard & Poor's Oil & Gas (Drilling
& Equipment) Index for the same period. The returns are based on an assumed
investment of $100 on September 19, 1997 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 $32.00 per share, the closing
price on September 19, 1997, the first day of trading after the effective date
of our initial public offering. Our common stock was sold in our initial public
offering at $18.00 per share.
Comparison of Cumulative Total Return*
UNIFAB International, Inc., S&P 500 Index &
S&P Oil & Gas (Drilling & Equipment) Index
[GRAPH]
September 19, March 31, March 31, March 31, December 31, December 31,
1997 1998 1999 2000 2000 2001
--------------- ----------- ----------- ----------- -------------- --------------
UNIFAB International, Inc. $100.00 $ 54.69 $ 25.39 $ 25.00 $ 29.69 $ 2.03
S&P 500 100.00 116.87 138.44 163.29 145.10 127.85
S&P Oil & Gas (Drilling & Equipment) Index 100.00 94.56 73.16 98.40 103.25 70.14
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
17
AUDIT COMMITTEE REPORT
At December 31, 2001, our audit committee was composed of two
directors: Perry Segura and George C. Yax. The two members of our committee are
independent, as defined in the listing standards applicable to companies listed
on The Nasdaq Stock Market. The committee operates under a written charter
approved by the committee and adopted by the board of directors. The following
is the report of our audit committee.
Financial Statement Review; Discussions with Management and Independent Auditors
We have reviewed and discussed the company's audited financial
statements for 2001 with management and Ernst & Young LLP, who provided the
independent auditors' report on those financial statements. Management
represented to us that the audited financial statements were prepared in
accordance with accounting principles generally accepted in the United States.
We have received and reviewed the written disclosures and the letter
from the independent auditors required by Independence Standards Board Standard
No. 1, "Independence Discussions with Audit Committees," as amended, by the
Independence Standards Board, and have discussed with the independent auditors
their independence from the company and management. We have also discussed with
the independent auditors the matters required to be discussed by Statement on
Auditing Standards No. 61, "Communication with Audit Committees," as amended, by
the Auditing Standards Board of the American Institute of Certified Public
Accountants.
In addition, we have discussed with the independent auditors the
overall scope and plans for their audit, and have met with the independent
auditors and management to discuss the results of their examination, their
understanding and evaluation of the company's internal controls as they
considered necessary to support their opinions on the financial statements for
2001, and various factors affecting the overall quality of the company's
financial reporting. The independent auditors also have had opportunities to
meet with us without management being present to discuss any of these matters.
Based on these reviews and discussions, we recommended to the board of
directors that the financial statements for 2001 referred to above be included
in the company's annual report on Form 10-K for the year ending December 31,
2001.
Consideration of Auditors' Independence
We have considered whether the provision of the services covered under
the section below entitled "All Other Fees" for 2001 is compatible with
maintaining the auditors' independence and have discussed with the auditors
their independence from the company and management.
The Audit Committee*
Perry Segura
George C. Yax
- -----------
* Messrs. Cangelosi, Gaubert and Moore were appointed to our audit committee
in August 2002, subsequent to the discussions, reviews and meetings described in
this report. Messrs. Gaubert and Moore meet the independence requirements
applicable to the audit committees of companies listed on The Nasdaq Stock
Market. 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 79% of the company's outstanding common stock (see "Stock
Ownership"), he does not meet these 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 audit committee was required by the best interests of the company and its
shareholders.
18
RELATIONSHIP WITH INDEPENDENT AUDITORS
Fees for Accounting Services
Audit Fees. Ernst & Young LLP billed our company approximately $91,034
for the audit of our financial statements for 2001 and for the reviews of the
unaudited interim financial statements included in our Forms 10-Q for 2001.
Financial Information Systems Design and Implementation Fees. We did
not incur any fees for financial information systems design and implementation
services for 2001.
All Other Fees. Ernst & Young billed our company $3,670 for all other
services, including audit-related services, for 2001. These services included
accounting consultations and assistance with federal income tax returns.
Resignation of Ernst & Young
Ernst & Young, which served as our independent auditor since our
initial public offering in September 1997, resigned effective August 15, 2002.
Ernst & Young notified us of its resignation on August 13, 2002. Ernst & Young's
resignation was not recommended or approved by our board of directors or audit
committee. Ernst & Young's report on our financial statements for the year ended
December 31, 2001 included an explanatory paragraph stating that there was
substantial doubt regarding our ability to continue as a going concern. This was
the only such statement included in a report of Ernst & Young on our financial
statements during its five-year engagement as our independent auditor. During
the five-year period of this engagement through August 15, 2002, we did not have
any disagreement with Ernst & Young on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreement, if not resolved to Ernst & Young's satisfaction, would have caused
Ernst & Young to make reference to the subject matter of the disagreement in
connection with its report on our financial statements.
Appointment of Deloitte & Touche
On November 6, 2002, upon the recommendation of our audit committee, we
appointed Deloitte & Touche as the independent auditors of our financial
statements for 2002, subject to the approval of our shareholders which we are
seeking in Proposal Four. During fiscal 2000, transition 2000, 2001, and the
period prior to the engagement of Deloitte & Touche, neither our company nor
anyone else acting on our behalf consulted Deloitte & Touche regarding the
application of accounting principles to a specified transaction, the type of
audit opinion that might be rendered on our financial statements, or any matter
that was either the subject of a disagreement or a reportable event during our
engagement of Ernst & Young as our independent auditor.
PROPOSAL FOUR: RATIFY THE APPOINTMENT OF OUR INDEPENDENT AUDITORS
As a result of Ernst & Young's resignation as our independent auditors,
our board of directors seeks shareholder ratification of its appointment of
Deloitte & Touche to act as the independent auditors of our financial statements
for 2002. Our board has not determined what, if any, action it would take should
the appointment of Deloitte & Touche not be ratified. No representatives of
Ernst & Young are expected to be present at the annual meeting or to be
available to make a statement or respond to questions. Representatives of
Deloitte & Touche are expected to be present at the annual meeting and will have
the opportunity to make a statement and respond to appropriate questions.
19
PROPOSAL FIVE: AMEND OUR LONG-TERM INCENTIVE PLAN
Our board of directors believes that the growth of our company depends
significantly upon the efforts of our officers and key employees and that such
individuals are best motivated to put forth maximum effort on behalf of our
company if they own an equity interest in our company. In accordance with this
philosophy, in 1997 our board of directors adopted, and our shareholders
approved, our long-term incentive plan (the "plan"). Only 164,836 shares of our
common stock remained available for grant under the plan prior to the
conditional grants to Messrs. Porter and Downey described below under "- Awards
to be Granted." Our board of directors believes that amendment of the plan is
necessary to provide our company with the continued ability to attract, retain
and motivate key personnel in a manner that is tied to the interests of our
shareholders.
Accordingly, our board of directors has amended the plan, subject to
shareholder approval at the annual meeting, to increase the number of shares of
our common stock subject to the plan to 2,500,000 from 460,000, and to increase
the shares of our common stock that can be granted to a single participant in a
calendar year through awards under the plan to 250,000 from 200,000. Our board
of directors has directed that Proposal Five be submitted for approval by our
shareholders at the annual meeting.
Terms Of The Plan
The principal features of the plan, as amended, are summarized below.
Administration Of The Plan. The compensation committee of our board of
directors (the "committee") administers the plan and has authority to make
awards under the plan, to set the terms of the awards, to interpret the plan, to
establish any rules or regulations relating to the plan that it determines to be
appropriate and to make any other determination that it believes necessary or
advisable for the proper administration of the plan. Subject to the limitations
specified in the plan, the committee may delegate its authority to appropriate
personnel of our company.
Eligibility. Officers and key employees of our company (including
officers who are also directors of our company) will be eligible to receive
awards ("incentives") under the plan when designated as plan participants. Our
company currently has 5 officers and approximately 30 key employees eligible to
receive incentives under the plan. In addition, directors of our company who are
not employees of our company ("outside directors") may be granted non-qualified
stock options under the plan on an annual basis. We currently have four outside
directors. The plan also permits consultants and advisors to receive incentives,
although neither our company nor the committee has any current intention of
awarding incentives to consultants or advisors. Incentives under the plan may be
granted in any one or a combination of the following forms:
. incentive stock options under section 422 of the Code;
. non-qualified stock options;
. restricted stock; and
. other stock-based awards.
Shares Issuable Through The Plan. If Proposal Five is approved at the
annual meeting, up to 2,500,000 shares of our common stock may be issued through
the plan. As of November 15, 2002, there were options to acquire 282,333 shares
of our common stock outstanding under the plan, excluding the conditional grant
of options to purchase 500,000 shares to Messrs. Porter and Downey described
under "- Awards to be Granted." As of November 15, 2002, there were also options
to acquire 115,300 shares of our common stock outstanding under our employee
long-term incentive plan described below under "- Employee Long-Term Incentive
Plan." On December 3, 2002, the closing price of our common stock on The Nasdaq
SmallCap Market was $0.23 per share.
Limitations And Adjustments To Shares Issuable Through The Plan.
Pursuant to Proposal Five, incentives relating to no more than 250,000 shares of
our common stock may be granted to a single participant in one calendar year.
For purposes of determining the maximum number of shares of our common stock
available for delivery under the plan, shares of our common stock that are not
delivered because the incentive is forfeited, canceled or settled in cash will
not be deemed to have been delivered under the plan.
20
Proportionate adjustments will be made to all of the share limitations
provided in the plan, including shares subject to outstanding incentives, in the
event of any recapitalization, stock dividend, stock split, combination of
shares or other change in the shares of our common stock, and the terms of any
incentive will be adjusted to the extent appropriate to provide participants
with the same relative rights before and after the occurrence of any such event.
Amendments To The Plan. Our board of directors may amend or discontinue
the plan at any time. However, no amendment shall be made without shareholder
approval if such approval is necessary to comply with any tax or regulatory
requirement.
Types Of Incentives. Each of the types of incentives that may be
granted under the plan is described below:
Stock Options. The committee may grant non-qualified stock options or
incentive stock options to purchase shares of our common stock. The committee
will determine the number and exercise price of the options, and the time or
times that the options become exercisable. The option exercise price may not be
less than the fair market value of the shares of our common stock on the date of
grant except that, in connection with an acquisition or other extraordinary
transaction, options may be granted at less than fair market value to replace
options previously granted by another party to the transaction. The term of an
option will also be determined by the committee, provided that the term of an
incentive stock option may not exceed 10 years. The committee may accelerate the
exercisability of any stock option at any time.
The option exercise price may be paid in cash; by check; in shares of
our common stock, subject to certain limitations; unless otherwise determined by
the committee, through a "cashless" exercise arrangement with a broker approved
in advance by our company; or in any other manner authorized by the committee.
Incentive stock options will be subject to certain additional
requirements necessary in order to qualify as incentive stock options under
section 422 of the Code.
Restricted Stock. Shares of our common stock may be granted by the
committee to an eligible employee and made subject to restrictions on sale,
pledge or other transfer by the employee for a certain period (the "restricted
period"). Except for shares of restricted stock that vest based on the
attainment of performance goals, the restricted period must be a minimum of
three years. If vesting of the shares is subject to the attainment of specified
performance goals, the restricted period may be one year or more. All shares of
restricted stock will be subject to such restrictions as the committee may
provide in an agreement with the participant, including provisions obligating
the participant to forfeit or resell the shares to our company in the event of
termination of employment or if specified performance goals or targets are not
met. Subject to the restrictions provided in the agreement and the plan, a
participant receiving restricted stock shall have all of the rights of a
shareholder as to such shares.
Other Stock-Based Awards. The plan also authorizes the committee to
grant participants awards of our common stock and other awards that are
denominated in, payable in, valued in whole or in part by reference to, or are
otherwise based on or related to shares of our common stock ("other stock-based
awards"). The committee has discretion to determine the participants to whom
other stock-based awards are to be made, the times at which such awards are to
be made, the size of such awards, the form of payment, and all other conditions
of such awards, including any restrictions, deferral periods or performance
requirements.
Performance-Based Compensation Under Section 162(m). Stock options
granted in accordance with the terms of the plan will qualify as
performance-based compensation under section 162(m) of the Code (as described in
the section of this proxy statement entitled "Executive Compensation -
Compensation Committee Report on Executive Compensation"). Grants of any
restricted stock or other stock-based awards that our company intends to qualify
as performance-based compensation under section 162(m) must be made subject to
the achievement of pre-established performance goals. The pre-established
performance goals will be based upon any or a combination of the following
business criteria: earnings per share, return on assets, an economic value added
measure, shareholder return, earnings, stock price, return on equity, return on
total capital, safety performance, reduction of expenses or increase in cash
flow. For any performance period, the performance goals may be measured on an
absolute basis or relative to a group of peer companies selected by the
committee, relative to internal goals, or relative to levels attained in prior
years.
21
The committee has authority to use different targets from time to time
under the performance goals provided in the plan. As a result, the regulations
under section 162(m) require that the material terms of the performance goals be
reapproved by the shareholders every five years. To qualify as performance-based
compensation, grants of restricted stock and other stock-based awards will be
required to satisfy the other applicable requirements of section 162(m).
Termination Of Employment. If an employee participant ceases to be an
employee of our company for any reason, including death, his outstanding
incentives may be exercised or shall expire at such time or times as may be
determined by the committee and described in the incentive agreement.
Change Of Control. In the event of a change of control of our company,
as defined in the plan, all incentives will become fully vested and exercisable,
all restrictions or limitations on any incentives will generally lapse and,
unless otherwise provided in the incentive agreement, all performance criteria
and other conditions relating to the payment of incentives will generally be
deemed to be achieved or waived.
In addition to the foregoing, upon a change of control the committee
will have the authority to take a variety of actions regarding outstanding
incentives. Within certain time periods, the committee may (i) require that all
outstanding options remain exercisable only for a limited time, after which time
all unexercised options shall terminate, (ii) require the surrender to our
company of some or all outstanding options in exchange for a stock or cash
payment for each incentive equal in value to the per-share change of control
value, calculated as described in the plan, over the exercise or base price,
(iii) make any equitable adjustments to outstanding incentives as the committee
deems necessary to reflect the corporate change or (iv) provide that an
incentive shall become an incentive relating to the number and class of shares
of stock or other securities or property (including cash) to which the
participant would have been entitled in connection with the change of control if
the participant had been a shareholder.
Transferability Of Incentives. The incentives awarded under the plan
may not be transferred except
. by will;
. by the laws of descent and distribution;
. pursuant to a domestic relations order; or
. in the case of stock options only, to immediate family members or
to a partnership, limited liability company or trust for which the
sole owners, members or beneficiaries are immediate family members,
if permitted by the committee and if so provided in the stock
option agreement.
Payment of Withholding Taxes. Our company may withhold from any
payments or stock issuances under the plan, or collect as a condition of
payment, any taxes required by law to be withheld. Any participant may, but is
not required to, satisfy his or her withholding tax obligation by having our
company withhold, from the shares the participant would otherwise receive,
shares of our common stock having a value equal to the minimum amount required
to be withheld. This election must be made prior to the date on which the amount
of tax to be withheld is determined and is subject to the committee's right of
disapproval.
Grants to Outside Directors. The plan permits the grant each year to
each outside director of options to acquire up to 2,500 shares of our common
stock. The exact number of options that the outside director will receive will
be set from time to time by the committee.
The options granted to outside directors generally become exercisable
immediately and have a term of ten years. The per share exercise price of the
options granted to outside directors will be equal to the fair market value of a
share of our common stock on the date of grant. If an outside director ceases to
serve on our board of directors for any reason other than retirement, options
granted under the plan may be exercised within one year from the date of
termination of board service, but no later than ten years after the grant date
of the options. In the event of retirement from our board of directors on or
after reaching age 65, options may be exercised within five years following
retirement, but no later than ten years after the grant date of the options.
22
Awards To Be Granted
Grants of awards under the plan will be made in the future by the
committee as necessary to attract and retain key personnel. The committee has
granted, subject to approval of Proposal Five at the annual meeting, options to
purchase an aggregate of 500,000 shares of our common stock to the two executive
officers of our company set forth in the following table. In addition, subject
to approval of Proposal Five at the annual meeting and as provided in the plan,
each outside director shall be automatically granted options to purchase 2,500
shares of our common stock on the day of the annual meeting.
Amended Plan Benefits
Number of Securities
Name Underlying Options
--------------------------------------------- ------------------------------
Allen C. Porter, Jr., President and
Chief Executive Officer 250,000
William A. Downey, Executive
Vice President and Chief Operating
Officer 250,000
Donald L. Moore, Director 2,500
Daniel R. Gaubert, Director 2,500
Perry Segura, Director 2,500
George C. Yax, Director 2,500
Executive Group 500,000
Outside Director Group 10,000
Federal Income Tax Consequences Of Stock Options
Under existing federal income tax provisions, a participant who is
granted a stock option normally will not realize any income, nor will our
company normally receive any deduction for federal income tax purposes, in the
year the option is granted.
When a non-qualified stock option granted pursuant to the plan is
exercised, the participant will realize ordinary income measured by the
difference between the aggregate purchase price of the shares of our common
stock acquired and the aggregate fair market value of the shares of our common
stock acquired on the exercise date and, subject to the limitations of section
162(m) of the Code, our company will be entitled to a deduction in the year the
option is exercised equal to the amount the participant is required to treat as
ordinary income.
An employee generally will not recognize any income upon the exercise
of any incentive stock option, but the excess of the fair market value of the
shares at the time of exercise over the option price will be an item of tax
preference, which may, depending on particular factors relating to the employee,
subject the employee to the alternative minimum tax imposed by section 55 of the
Code. The alternative minimum tax is imposed in addition to the federal
individual income tax, and it is intended to ensure that individual taxpayers do
not completely avoid federal income tax by using preference items. An employee
will recognize capital gain or loss in the amount of the difference between the
exercise price and the sale price on the sale or exchange of stock acquired
pursuant to the exercise of an incentive stock option, provided the employee
does not dispose of such stock within two years from the date of grant and one
year from the date of exercise of the incentive stock option (the "holding
periods"). An employee disposing of such shares before the expiration of the
holding periods will recognize ordinary income generally equal to the difference
between the option price and the fair market value of the stock on the date of
exercise. The remaining gain, if any, will be capital gain. Our company will not
be entitled to a federal income tax
23
deduction in connection with the exercise of an incentive stock option, except
where the employee disposes of the shares of our common stock received upon
exercise before the expiration of the holding periods.
If the exercise price of a non-qualified option is paid by the
surrender of previously owned shares, the basis and the holding period of the
previously owned shares carries over to the same number of shares received in
exchange for the previously owned shares. The compensation income recognized on
exercise of these options is added to the basis of the shares received. If the
exercised option is an incentive stock option and the shares surrendered were
acquired through the exercise of an incentive stock option and have not been
held for the holding periods, the optionee will recognize income on such
exchange, and the basis of the shares received will be equal to the fair market
value of the shares surrendered. If the applicable holding period has been met
on the date of exercise, there will be no income recognition and the basis and
the holding period of the previously owned shares will carry over to the same
number of shares received in exchange, and the remaining shares will begin a new
holding period and have a zero basis.
If, upon a change in control of our company, the exercisability or
vesting of an incentive is accelerated, any excess on the date of the change in
control of the fair market value of the shares or cash issued under accelerated
incentives over the purchase price of such shares, if any, may be characterized
as "parachute payments" (within the meaning of section 280G of the Code) if the
sum of such amounts and any other such contingent payments received by the
employee exceeds an amount equal to three times the "base amount" for such
employee. The base amount generally is the average of the annual compensation of
such employee for the five years preceding such change in ownership or control.
An "excess parachute payment", with respect to any employee, is the excess of
the parachute payments to such person, in the aggregate, over and above such
person's base amount. If the amounts received by an employee upon a change in
control are characterized as parachute payments, such employee will be subject
to a 20% excise tax on the excess parachute payment and our company will be
denied any deduction with respect to such excess parachute payment.
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, 2001.
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) .................... 641,333(3)(4) $7.38 --(4)
Equity compensation plans
not approved by security
holders(2) .................... 200,000(5) 6.90 345,000(5)
---------------------------- --------------------------- --------------------------------
Total ................ 841,333(3)(4)(5) $7.21 345,000(4)(5)
============================ =========================== ================================
(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) Since December 31, 2001, our company granted options to purchase an
additional 500,000 shares subject to shareholder approval of the amendment
of the plan, which is the subject of this Proposal Five.
24
(4) Options to purchase 359,000 shares granted under the long-term incentive
plan have been forfeited since December 31, 2001.
(5) Options to purchase 84,700 shares granted under the employee long-term
incentive plan have been forfeited since December 31, 2001.
Employee Long-Term Incentive Plan
In 2000, our board of directors adopted our employee long-term incentive
plan (the "2000 plan") to provide long-term incentives to our key employees who
are not officers or directors of our company. The 2000 plan has not been
approved by our shareholders. Under the 2000 plan, which is administered by the
chairman of our board and our chief executive officer, our company may grant
incentive stock options, nonqualified stock options, restricted stock, other
stock-based awards or any combination thereof to our key employees. The
committee reviews and approves awards made under the 2000 plan and approves the
exercise price of any stock options granted under the 2000 plan. The exercise
price may not be less than the fair market value of our common stock on the date
of grant.
Vote Required for Passage of the Amendment
Approval of the amendment to our long-term incentive plan requires the
affirmative vote of a majority of the votes actually cast at the annual meeting.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL FIVE.
By Order of the Board of Directors
/s/ Martin K. Bech
-----------------------------------
New Iberia, Louisiana Martin K. Bech
December 13, 2002 Secretary
25
Appendix A
PROPOSED AMENDMENT TO OUR ARTICLES OF INCORPORATION
TO DECLASSIFY OUR BOARD OF DIRECTORS
Effective immediately prior to the election of directors at the
Meeting, Article IV of the Articles, entitled "Directors," is amended to (i)
delete paragraph B in its entirety; (ii) redesignate paragraphs C, D, E, and F
as paragraphs B, C, D, and E, respectively; and (iii) restate paragraph A in its
entirety as follows:
A. Number of Directors; Term. The Board of Directors shall
consist of such number of persons as shall be designated from time to
time in the by-laws of the Corporation, or, if not so designated, as
may be designated from time to time by resolution of the Board of
Directors, provided that no decrease in the number of directors shall
shorten the term of any incumbent director.
A-1
This Proxy is Solicited on Behalf of the Board of Directors of
UNIFAB INTERNATIONAL, INC.
The undersigned hereby constitutes and appoints Allen C. Porter, Jr. and
Martin K. Bech, or either of them, proxy for the undersigned, with full power of
substitution, to represent the undersigned and to vote, as designated on the
reverse side, all of the shares of Common Stock of UNIFAB International, Inc.
(the "Company") that the undersigned is entitled to vote at the annual meeting
of shareholders of the Company to be held on December 27, 2002, and at any and
all adjournments thereof (the "Annual Meeting").
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, the shares
represented by this proxy will be voted (A) FOR Proposal 1 to declassify the
Company's board of directors and require the annual election of all directors;
(B) if Proposal 1 is approved, FOR Proposal 2 to elect as directors the eight
nominees listed; (C) if Proposal 1 is NOT approved, FOR Proposal 3 to elect as
Class II directors the two nominees listed; (D) FOR Proposal 4 to ratify the
appointment of Deloitte & Touche LLP as the Company's independent auditors; and
(E) FOR Proposal 5 to amend the Company's long-term incentive plan.
If the undersigned shareholder directs a vote FOR Proposal 2 AND Proposal
3, the proxy will be voted ONLY for Proposal 2 if Proposal 1 has been approved,
and ONLY for Proposal 3 if Proposal 1 has not been approved. The individuals
designated above will vote in their discretion on any other matter that may
properly come before the Annual Meeting.
(Please See Reverse Side)
[X] Please mark your votes as in this example
Proposal 1 To amend the Company's articles of incorporation to declassify
the board of directors and require the annual election of all
directors.
[_] FOR [_] AGAINST [_] ABSTAIN
Proposal 2 To elect eight directors to serve until the Company's 2003 annual
meeting or until their respective successors are duly elected and
qualified, in the event Proposal 1 is approved at the Annual
Meeting.
[_] FOR all nominees listed below (except as marked to the
contrary)
[_] WITHHOLD AUTHORITY to vote for all nominees listed below
INSTRUCTIONS: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list below:
Frank J. Cangelosi, Jr. / William A. Downey / Daniel R. Gaubert / William
A. Hines / Donald L. Moore Allen C. Porter, Jr. / Perry
Segura / George C. Yax
Proposal 3 Alternatively, to elect two Class II directors to serve until the
Company's 2005 annual meeting or until their respective
successors are duly elected and qualified, in the event Proposal
1 is not approved at the Annual Meeting.
[_] FOR all nominees listed below (except as marked to the
contrary)
[_] WITHHOLD AUTHORITY to vote for all nominees listed below
INSTRUCTIONS: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list below:
William A. Hines / George C. Yax
Proposal 4 To ratify the appointment of Deloitte & Touche LLP as the
Company's independent auditors to audit its financial statements
for 2002.
[_] FOR [_] AGAINST [_] ABSTAIN
Proposal 5 To amend the Company's long-term incentive plan.
[_] FOR [_] AGAINST [_] ABSTAIN
___________________, 2002 ___________________________
DATE NAME (PLEASE PRINT)
__________________________________________________
SIGNATURE
__________________________________________________
ADDITIONAL SIGNATURE (IF JOINTLY HELD)
Please sign exactly as name appears on the certificate or certificates
representing shares to be voted by this proxy. When signing as executor,
administrator, attorney, trustee or guardian, please give full title as such. If
a corporation, please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in partnership name by
authorized persons.