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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
(Amendment No. 1)
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Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] 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:
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(2) Aggregate number of securities to which transaction applies:
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(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:
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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PRELIMINARY PROXY MATERIALS
AS OF OCTOBER 31, 2002
[UNIFAB LOGO TO BE INSERTED]
UNIFAB INTERNATIONAL, INC.
5007 Port Road
New Iberia, Louisiana 70562
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 13, 2002
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Date: Friday, December 13, 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 _______________ as our
independent auditors to audit our financial statements for
2002;
5. To amend our articles of incorporation to increase the
number of authorized shares of our common stock to
150,000,000;
6. To amend our articles of incorporation to effect a
one-for-five reverse stock split pursuant to which every
five shares of our common stock would be converted into one
share of our common stock; and
7. 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
New Iberia, Louisiana Martin K. Bech
November __, 2002 SECRETARY
UNIFAB INTERNATIONAL, INC.
5007 Port Road
New Iberia, Louisiana 70562
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 13, 2002
WE WILL BEGIN MAILING THIS PROXY STATEMENT TO OUR SHAREHOLDERS ON OR ABOUT
NOVEMBER __, 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 13, 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, ____________ 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. Proposals Five and Six will be decided by a majority of
the votes 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
Proposals One, Five and Six, 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.
As discussed in Proposal Five, 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 and, as discussed under "Transactions with
Midland," Midland has agreed to vote in favor of Proposal Five. Midland has
informed us that it intends to cast its votes in favor of Proposals One, Two,
Four, Five, Six and Seven 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, Five, Six and Seven 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 July __,
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 November __, 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:
o 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.
o 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.
o Midland agreed to assist us in obtaining a $7 million line of credit, and
we and Midland subsequently agreed that this line of credit would be in the
amount of $8 million. We expect to establish the line of credit with a
commercial bank in the near future, and we anticipate that Midland or an
affiliate of Midland will guarantee our obligations under it.
o 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.
o 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.
o Midland agreed to cause its designees to our board of directors to approve
the calling of a meeting of shareholders for the purpose of voting on an
increase in the authorized number of shares of our common stock, as
contemplated by Proposal Five in this proxy statement, and to approve the
rights offering described in Proposal Five. Midland also agreed to vote its
shares in favor of the proposed increase in the authorized number of our
shares.
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Upon consummation of the Midland agreement on August 13, 2002:
o $10,000,000 of the amount we owed Midland under the credit agreement was
cancelled in exchange for 738 shares of our series A preferred stock. Each
share of this preferred stock has voting rights equal to 100,000 shares of
our common stock, and will convert into 100,000 shares of our common stock
when the authorized number of our unissued and unreserved common shares is
at least 100 million, as will occur if Proposal Five is approved by our
shareholders.
o $12,791,024 of the amount we owed Midland under the credit agreement was
converted into the following, which continue to constitute secured
indebtedness under the credit agreement: (i) a convertible debenture in the
principal amount of $10,651,564 payable in five equal annual installments,
bearing interest at Wall Street Journal Prime (that is, the prime rate of
interest reported in the Wall Street Journal in its daily table of "Money
Rates") plus 2.5 percentage points and convertible into shares of our
common stock at $0.35 per share (the closing price of our common stock on
the Nasdaq National Market on March 6, 2002, the date we concluded
negotiations on the terms of the convertible debenture and the rights
offering described in Proposal Five); and (ii) a promissory note in the
principal amount of $2,139,500 (the amount of the advances made to us by
Midland after we entered into the Midland agreement), which is payable
August 13, 2005 and bears interest at the rate of Wall Street Journal Prime
plus 3.0 percentage points.
o 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.
o $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.
o $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.
o 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.
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 $371,208 at September 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 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
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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" and
under Proposal Five, 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 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.
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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 October 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
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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 Chief 2002
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 consultant to
McDermott International, Inc. since 2001. In February 2000,
The Babcock & Wilcox Company, a subsidiary of McDermott
International, Inc., filed a petition to reorganize under
Chapter 11 of the U.S. Bankruptcy Code in order to determine
and resolve its asbestos-related liabilities; at the time
this petition was filed, Mr. Gaubert was serving as the
Chief Financial Officer of The Babcock & Wilcox Company.
William A. Hines, 66............... Mr. Hines serves as our Chairman of the Board 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.
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PRINCIPAL OCCUPATION AND DIRECTORSHIPS IN DIRECTOR
NAME AND AGE OTHER PUBLIC CORPORATION SINCE
------------ ------------------------ -----
Donald L. Moore, 64................ Mr. Moore is currently a Class I director of our company, 2002
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 company, 1980
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 has served as Chairman of
the Board of Supervisors of Louisiana State University since
1997 and was its Vice Chairman from 1996 to 1997.
George C. Yax, 59.................. Mr. Yax is currently a Class II director of our company, 1997
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.
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.
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* * * *
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 October 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. The information below does
not reflect the effect of the one-for-five reverse stock split described in
Proposal Six. 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 COMMON PERCENT OF PREFERRED PERCENT OF
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)................................. 104,244,007 92.7 738 100
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....... 104,233,039(12) 92.7 738 100
Wellington Management Company, LLP................... 412,000(13) 5.0 0 -
All directors and executive officers
as a group (16 persons)......................... 105,635,918 93.9 738 100
- --------------
* Ownership is less than 1%
(1) Includes shares that could be acquired within sixty days after October 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), 99,000 shares.
(2) Based on 8,189,972 shares of our common stock and 738 shares of our series
A preferred stock outstanding as of October 15, 2002.
(3) Based in part on the Schedule 13G Amendment No. 3, dated February 7, 2001,
filed with the SEC, and includes 15,700 shares owned by Mr. Berard's
spouse, with respect to which Mr. Berard shares investment and voting
power, and 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 time period
9
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 Seven 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 73,800,000 shares of our common stock issuable upon conversion
of the 738 shares of our series A preferred stock held by Midland, and
30,433,039 shares of our common stock issuable upon conversion of the
convertible debenture issued by our company in the principal amount of
$10,651,564 (see "Transactions with Midland").
10
(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.
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
11
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.
(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...... 150,000 78.9% $1.11 11/07/11 $82,500
- --------------
(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 total number of
stock options granted to Mr. Chojnacki to determine the total 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.
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
[PERFORMANCE GRAPH]
16
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) 100.00 94.56 73.16 98.40 103.25 70.14
Index
ASSUMES $100 INVESTED ON SEPTEMBER 19, 1997 IN UNIFAB INTERNATIONAL, INC. COMMON
STOCK, S&P 500 INDEX AND S&P OIL & GAS (DRILLING & EQUIPMENT) INDEX
* TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS
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
17
- -----------
* 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 93% 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.
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 _______________
On October __, 2002, upon the recommendation of our audit committee, we
appointed _______________ 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 _______________, neither our company nor
anyone else acting on our behalf consulted _______________ 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
_______________ 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 _______________ not be ratified. No representatives of Ernst
& Young are expected to be present at the annual
18
meeting or to be available to make a statement or respond to questions.
Representatives of _______________ are expected to be present at the annual
meeting and will have the opportunity to make a statement and respond to
appropriate questions.
PROPOSAL FIVE: INCREASE THE AUTHORIZED NUMBER OF SHARES
OF OUR COMMON STOCK
Our board of directors has unanimously adopted a resolution recommending to
our shareholders the approval of an amendment to Article III(A) of our articles
of incorporation to increase the authorized number of shares of our common stock
from 20,000,000 shares to 150,000,000 shares. The additional shares of common
stock to be authorized by approval of Proposal Five would have rights identical
to those of the currently outstanding shares of our common stock. These rights
do not include preemptive rights with respect to the future issuance of any
additional shares.
Our articles of incorporation currently authorize us to issue 25,000,000
shares of capital stock, consisting of 20,000,000 shares of common stock, $0.01
par value per share, and 5,000,000 shares of preferred stock, no par value per
share; 750 shares of our authorized preferred stock have been designated as
series A preferred stock. As of October 15, 2002, 8,189,972 shares of our common
stock and 738 shares of our series A preferred stock were outstanding. Each
share of our series A preferred stock is convertible into 100,000 shares of
common stock (20,000 shares, if the proposed one-for-five reverse stock split
described in Proposal Six becomes effective) and this conversion will occur when
the amendment to our articles of incorporation becomes effective. All 738 shares
of our series A preferred stock are held by Midland. We are not proposing any
change in the authorized number of shares of our preferred stock. However, our
board of directors has approved an amendment to our articles of incorporation
eliminating the provisions designating our series A preferred stock, subject to
shareholder approval of Proposal Five and the effectiveness of the amendment to
our articles of incorporation effecting Proposal Five. Under Louisiana law,
these provisions may be eliminated by our board of directors without shareholder
approval.
The proposed amendment to Article III(A) of our articles of incorporation
to effect Proposal Five is set forth in Appendix B to this proxy statement and
is incorporated herein by reference. If approved by our shareholders, the
amendment to our articles of incorporation will become effective immediately
after the annual meeting.
PURPOSES OF THE AMENDMENT
We seek to increase the authorized number of shares of our common stock in
order to:
o provide the number of shares of our common stock needed for the conversion
of our series A preferred stock, and cause such conversion to occur;
o provide the number of shares of our common stock necessary to conduct the
rights offering to our shareholders contemplated by the Midland agreement
and described below;
o provide the number of shares of our common stock that would be required in
the event Midland were to convert all of the $10,651,564 convertible
debenture (convertible at $0.35 per share, or $1.75 per share if the
proposed one-for-five reverse stock split described in Proposal Six becomes
effective) issued to it pursuant to the Midland agreement;
o provide the number of shares of our common stock reserved for issuance
under our outstanding options and under our long-term incentive plans; and
o give us the flexibility to conduct a variety of corporate transactions,
such as public offerings, private placements, forward stock splits,
acquisition transactions and other business combinations (none of which are
currently contemplated).
19
The following table summarizes the uses of the proposed number of
authorized shares of our common stock, both before and after taking into account
the effect of the one-for-five reverse stock split described in Proposal Six:
Pre-Split Post-Split
--------- ----------
Shares of common stock outstanding...................................... 8,189,972 1,637,994
Reserve for shares issuable under incentive plans and warrant(1)........ 3,125,000 625,000
Conversion of series A preferred stock held by Midland.................. 73,800,000 14,760,000
Reserve for convertible debenture held by Midland....................... 30,433,039 6,086,608
Reserve for rights offering to shareholders............................. 16,379,944 3,275,988
Unallocated shares...................................................... 18,072,045 123,614,410
---------- -----------
Total proposed authorized shares of common stock ....................... 150,000,000 150,000,000
----------- -----------
- ----------
(1) Assumes that the amendment to our long-term incentive plan proposed in
Proposal Seven is approved by shareholders at the annual meeting.
Except for the issuance of such additional options and rights as may be approved
by our directors pursuant to our long-term incentive plans, we currently have no
plans or commitments to issue any of the unallocated shares.
Upon conversion of its 738 shares of our series A preferred stock, Midland
will own approximately 90% of our outstanding common stock and, if Midland
converts its convertible debenture, it would own approximately 93% of our
outstanding common stock. The rights offering, which we expect to complete in
the second quarter of 2003, will provide an opportunity for our shareholders
other than Midland, as of the record date of the rights offering, to purchase
two additional shares of our common stock for each share held at a price of
$0.35 (or $1.75 per share if the proposed one-for-five reverse stock split
described in Proposal Six becomes effective); shareholders who fully exercise
their subscription rights will also have the opportunity to purchase a portion
of any shares that are not purchased in the rights offering.
Midland agreed in the Midland agreement to cause its designees to our board
of directors to vote in favor of the rights offering. We obtained Midland's
agreement to the rights offering as a way of providing our shareholders with the
opportunity to increase their percentage ownership of our company. If all rights
to be issued in the offering are exercised, our shareholders other than Midland
will hold approximately 25% of the outstanding shares of our common stock, or
approximately 19% if Midland elects to convert its convertible debenture. The
rights offering will be made only by means of a prospectus, which will be a part
of a registration statement that we will file with the SEC for the purpose of
registering the shares of our common stock to be issued in the rights offering.
We intend to use the proceeds of the rights offering, approximately $5.7 million
if the offering is fully subscribed, as working capital. Mr. Hines, who directly
owns 10,968 shares of our common stock, has informed us that he does not intend
to exercise his subscription rights.
THIS PROXY STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION
OF AN OFFER TO BUY OUR COMMON STOCK. ANY OFFER SHALL BE MADE ONLY THROUGH A
SEPARATE PROSPECTUS. OUR BOARD OF DIRECTORS MAKES NO RECOMMENDATION AS TO
WHETHER SHAREHOLDERS SHOULD EXERCISE ANY SUBSCRIPTION RIGHTS THAT MAY BE ISSUED
TO THEM IN THE RIGHTS OFFERING.
Midland and Mr. Hines, by way of his ownership interest in Midland (see
"Transactions with Midland"), have an interest in having Proposal Five approved
by our shareholders because, without the amendment to our articles of
incorporation to increase the authorized number of shares of our common stock,
there would be an insufficient number of authorized shares of our common stock
to permit the conversion of Midland's shares of series A preferred stock or its
convertible debenture (although Midland has advised us that it does not
currently intend to convert its debenture, either in whole or in part, nor does
it have an obligation to do so). As noted above, the issuance of shares of our
common stock to Midland in conversion of either or both of the convertible
debenture or series A preferred stock will reduce the proportionate interests in
our company held by the current holders of our
20
common stock. For further information regarding the convertible debenture and
series A preferred stock, please see "Transactions with Midland."
EFFECTS OF THE AMENDMENT
The number of authorized shares of our common stock is currently
insufficient to cover all of the contemplated uses of those shares described
above. Approval of Proposal Five will permit us to issue a sufficient number of
shares of our common stock to satisfy those uses, and will leave approximately
124 million shares that are unallocated to currently contemplated uses (after
taking into account the effect of the one-for-five reverse stock split described
in Proposal Six). The issuance of the unallocated shares could be approved by
our board of directors on terms determined by our board without further action
by our shareholders, unless shareholder approval were required by Louisiana law
or by the listing requirements of The Nasdaq Stock Market. Under our articles of
incorporation, shareholders have no preemptive rights to subscribe to or
purchase any shares of our common stock or other securities. The issuance of
additional shares of our common stock other than on a pro rata basis to all
current holders of shares of our common stock will reduce the proportionate
interests in our company held by current holders of our common stock.
VOTE REQUIRED FOR PASSAGE OF THE AMENDMENT
Approval of Proposal Five requires the affirmative vote of a majority of
the votes present or represented at the annual meeting.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL FIVE.
PROPOSAL SIX: EFFECT A ONE-FOR-FIVE REVERSE STOCK SPLIT
Our board of directors has unanimously approved, and recommended for
shareholder approval, a proposal to amend Article III of our articles of
incorporation that would effect a one-for-five reverse stock split of the
outstanding shares of our common stock (the "reverse stock split").
Under Proposal Six, each five shares of our common stock outstanding as of
the close of business on the effective date of the amendment will be
automatically converted into one share of our common stock. No fractional shares
of our common stock will be issued in connection with the reverse stock split.
In lieu thereof, each shareholder otherwise entitled to a fractional share of
our common stock will receive one whole share of our common stock. This
amendment will not change the $0.01 par value per share of our common stock or
the number of authorized shares of our common stock, although an increase in the
authorized number of shares of our common stock will be proposed for approval by
shareholders at the annual meeting and is described in Proposal Five of this
proxy statement.
The proposed amendment to Article III of our articles of incorporation to
effect the reverse stock split is set forth in Appendix C to this proxy
statement and is incorporated herein by reference. If approved by our
shareholders, the reverse stock split will become effective upon the filing of
articles of amendment to our articles of incorporation with the Louisiana
Secretary of State. We plan to file the articles of amendment as soon as
practicable if the reverse stock split is approved at the annual meeting;
however, in connection with the proposed reverse stock split, we are requesting
that our shareholders grant to our board of directors the right to defer the
filing of the articles of amendment or to abandon the proposed amendment before
it becomes effective, whether before or after the annual meeting, if for any
reason our board deems it advisable to do so.
PURPOSE OF THE REVERSE STOCK SPLIT
The purpose of the reverse stock split is to decrease the number of
outstanding shares of our common stock in order to increase the market value of
each share of our common stock. Our common stock is currently listed for trading
on The Nasdaq SmallCap Market under the symbol "UFAB." In order for our common
stock to continue to be listed, we must satisfy the listing maintenance
standards established by Nasdaq. Under Nasdaq's listing maintenance standards,
if the closing bid price of our common stock is less than $1.00 per share for 30
consecutive
21
trading days and does not thereafter reach $1.00 per share or higher for a
minimum of ten consecutive trading days during the 90 calendar days following
notification by Nasdaq, Nasdaq may de-list our common stock from trading.
Our common stock was previously listed on the Nasdaq National Market. On
February 14, 2002, we received a letter from Nasdaq advising us that our common
stock had failed to meet Nasdaq's minimum bid price requirement and that, if we
were unable to demonstrate compliance with this requirement by May 15, 2002, our
common stock would be subject to de-listing from the Nasdaq National Market. On
June 10, 2002, we transferred our common stock from the Nasdaq National Market
to The Nasdaq SmallCap Market, which afforded us the remaining balance of The
Nasdaq SmallCap Market's 180-day grace period. As a result, we had until August
13, 2002 to demonstrate compliance with Nasdaq's minimum bid price requirement,
which we failed to do. On August 14, 2002, we received a second letter from
Nasdaq advising us that our common stock would be delisted if it fails to meet
Nasdaq's minimum bid price requirement during the 90 calendar days ending
February 10, 2003. On October 15, 2002, the closing price of our common stock on
The Nasdaq SmallCap Market was $0.32 per share. Our common stock has not traded
at or above $1.00 per share since April 11, 2002, when the high trading price
was $1.00 per share.
Under Nasdaq rules, we may appeal any decision by Nasdaq to de-list our
common stock. Any delisting of our common stock from The Nasdaq SmallCap Market
would impair a holder's ability to sell, or to obtain accurate quotations as to
the market value of, our common stock. If a de-listing were to occur, trading in
our common stock may continue on the OTC Bulletin Board or in the "pink sheets"
maintained by the National Quotation Bureau, Inc., although no such continued
trading can be assured.
Our board of directors believes that the key to increasing the price
investors are willing to pay for a share of our common stock is to increase our
company's revenues and earnings. However, our board of directors also believes
that reducing the number of shares of our common stock outstanding will
substantially improve the likelihood that the market price for our common stock
on The Nasdaq SmallCap Market will increase to a level that exceeds the minimum
bid price of $1.00 per share required to maintain our Nasdaq listing.
It is nevertheless uncertain whether the market price per share of our
common stock after a reverse stock split will exceed or remain in excess of
Nasdaq's $1.00 minimum bid price requirement. The history of reverse stock
splits for companies in circumstances similar to ours is varied. Although the
market price for an equity security should increase by approximately 500% in
connection with a one-for-five reverse stock split of an exchange-traded
security with a high trading volume, the reaction of the market to a reverse
stock split in a security that is thinly traded, such as our common stock, is
not as predictable. The market price of our common stock after a reverse stock
split will also be affected by our performance and other factors unrelated to
the proposed reduction in the number of our outstanding shares. Consequently,
the trading price for our common stock may not increase five-fold, or at all, as
a result of the proposed reverse stock split.
EFFECTS OF THE REVERSE STOCK SPLIT
If Proposal Six is approved at the annual meeting and becomes effective,
each outstanding share of our common stock as of the effective date of the
reverse stock split will immediately and automatically be changed into one-fifth
of a share of our common stock. No fractional shares of common stock will be
issued in connection with the proposed reverse stock split. Holders of our
common stock who would otherwise receive a fractional share of common stock
pursuant to the reverse stock split will have their fractional share rounded up
to one full share of our common stock.
As of November 11, 2002, the record date for the annual meeting, there were
________ shares of our common stock issued and outstanding. Assuming the reverse
stock split were to occur on that date, the number of our shares issued and
outstanding would be approximately __________ shares (subject to adjustment due
to rounding of fractional shares). Moreover, the number of shares of our common
stock that may be received upon the conversion or exercise of our outstanding
securities convertible or exercisable for shares of our common stock, such as
the stock options granted under our long-term incentive plans and the series A
preferred stock and convertible debenture held by Midland, would be adjusted
appropriately as of the effective date of the reverse stock split. For further
information regarding the series A preferred stock and convertible debenture
issued to Midland, please see "Transactions with Midland."
22
The reverse stock split will also, in effect, increase the number of shares
of our common stock authorized for future issuance because the number of
outstanding shares of our common stock would be reduced from ________ shares to
approximately __________ shares as a result of the reverse stock split. For a
description of the effects of an increase in our shares of common stock
available for issuance and our uses of the additional shares that would be
available for issuance as a result of the proposed reverse stock split, please
see Proposal Five in this proxy statement.
The reverse stock split will apply to all issued and outstanding shares of
our common stock and to all outstanding rights to purchase our common stock and
to convert other securities into our common stock. The proposed reverse stock
split will not alter the relative rights and preferences of our existing
shareholders, except to the extent that holders of fractional shares resulting
from the reverse stock split receive one whole share of our common stock in lieu
of a fractional share. We estimate that the number of new shares of our common
stock issued to round up fractional shares will be approximately 1,000 whole
shares, or approximately .012% of our currently outstanding shares of common
stock. Consequently, the amount of dilution of any shareholder caused by the
rounding up of fractional shares will be very small.
If Proposal Six is approved and becomes effective, some shareholders will,
as a result of the split, own less than one hundred shares of our common stock.
A purchase or sale of less than one hundred shares (an "odd lot" transaction)
may result in incrementally higher trading costs through certain brokers,
particularly "full service" brokers. Therefore, those shareholders who own less
than one hundred shares following the reverse stock split may be required to pay
higher transaction costs should they then determine to sell their shares of our
common stock. In addition, the reduced number of shares of our common stock
outstanding as a result of the reverse stock split could adversely affect the
liquidity of our common stock. We have no current intention to repurchase any
odd-lot holdings or any other shares of our common stock.
As noted above, the reverse stock split will not affect the par value per
share of our common stock. As a result, on the effective date of the reverse
stock split, the stated capital on our balance sheet attributable to our common
stock will be reduced to approximately one-fifth of its present amount, and our
additional paid-in-capital account will be credited with the amount by which the
stated capital is reduced. The per-share net income or loss and net book value
of our common stock will be increased because there will be fewer shares of our
common stock outstanding as a result of the reverse stock split.
The proposed reverse stock split is not intended as, and will not have the
effect of, a "going private transaction" covered by Rule 13e-3 under the
Securities Exchange Act of 1934 (the "Exchange Act"). Our common stock will
continue to be registered under the Exchange Act and we will continue to be
subject to the Exchange Act's periodic reporting requirements.
FEDERAL INCOME TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT
THE FOLLOWING DISCUSSION SUMMARIZES CERTAIN FEDERAL INCOME TAX CONSEQUENCES
OF THE PROPOSED REVERSE STOCK SPLIT TO OUR SHAREHOLDERS WHO ARE CITIZENS OR
RESIDENTS OF THE UNITED STATES. THIS DISCUSSION IS INCLUDED FOR GENERAL
INFORMATION ONLY. NO OPINION OF COUNSEL OR RULING FROM THE INTERNAL REVENUE
SERVICE HAS BEEN SOUGHT OR OBTAINED WITH RESPECT TO THE FEDERAL, STATE, LOCAL OR
FOREIGN TAX CONSEQUENCES OF THE PROPOSED REVERSE STOCK SPLIT. BECAUSE OF THE
COMPLEXITY OF THE INTERNAL REVENUE CODE AND OTHER TAX LAWS, AND BECAUSE TAX
CONSEQUENCES MAY VARY DEPENDING ON THE PARTICULAR FACTS RELATING TO EACH
SHAREHOLDER, SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE
FEDERAL, STATE, LOCAL AND FOREIGN TAX EFFECTS OF THE REVERSE STOCK SPLIT IN
LIGHT OF THEIR INDIVIDUAL CIRCUMSTANCES.
The proposed reverse stock split will not be a taxable transaction to our
company as the transaction qualifies for non-recognition treatment under the
Internal Revenue Code of 1986, as amended (the "Code"). Shareholders will not
recognize gain or loss as a result of the reverse stock split.
Each shareholder's aggregate basis in our common stock received as a result
of the reverse stock split will equal the shareholder's aggregate basis in our
common stock prior to the effective date of the reverse stock split and
23
generally will be allocated among the shares of our common stock held following
the reverse stock split on a pro-rata basis. Shareholders who have used the
specific identification method to identify their basis in shares of our common
stock combined in the reverse stock split should consult their own tax advisors
to determine their basis in the post-reverse stock split shares of our common
stock. A shareholder's holding period for shares of our common stock received as
a result of the reverse stock split will be the same as the holding period of
the shares of our common stock exchanged therefor.
EXCHANGE OF STOCK CERTIFICATES
If Proposal Six is approved at the annual meeting and effected by our board
of directors, each certificate representing shares of our common stock that is
issued and outstanding, or issued and held by our company, shall immediately on
the effective date be deemed to represent one-fifth of a share of our common
stock for each share of our common stock now represented by such certificate.
Each holder of a certificate for one or more shares of our common stock (a
"registered shareholder"), as of the effective date, shall be entitled to
receive, as soon as practicable after the effective date and upon surrender of
the certificate to our transfer agent, a new certificate representing one-fifth
of a share of our common stock (subject to the rounding procedures previously
discussed) for each share of our common stock represented by the existing
certificate immediately prior to the effective date.
If Proposal Six is approved and effected by our board of directors and you
are a registered shareholder, you may contact our transfer agent, Computershare
Investor Services, in writing at 350 Indiana Street, Suite 800, Golden,
Colorado, 80401, Attention: Shareholder Services, or by telephone at (303)
262-0600, for information regarding the procedures for surrendering and
exchanging your stock certificates. Please note that registered shareholders are
not required to exchange their certificates. Please also note that registered
shareholders will not be able to exchange their certificates until after the
effective date of the reverse stock split. We will issue a press release on the
effective date announcing the effectiveness of the reverse stock split, and will
file a Form 8-K with the SEC containing our press release. Registered
shareholders who do elect to surrender their certificates in exchange for new
certificates reflecting the reverse stock split will be required to pay a $20.00
exchange fee per certificate. Any legends set forth on any existing certificate
will also be set forth on the corresponding new certificate. If not exchanged
after the reverse stock split becomes effective, existing certificates will
thereafter represent one-fifth of the number of shares that they previously
represented, plus one whole share in lieu of any fractional share.
The account of each shareholder who holds shares of our common stock in
"street name" through a broker, bank or other institution will be automatically
changed to reflect the appropriate number of shares to be held by the
shareholder after the effective date of the reverse stock split without the need
for any action on the part of the shareholder.
VOTE REQUIRED FOR PASSAGE OF THE REVERSE STOCK SPLIT
Approval of Proposal Six requires the affirmative vote of a majority of the
votes present or represented at the annual meeting.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL SIX.
PROPOSAL SEVEN: 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
24
awards under the plan to 250,000 from 200,000. If Proposal Seven and the
one-for-five reverse stock split described in Proposal Six are approved, the
total number of shares subject to the plan would be reduced to 500,000 to
reflect the reverse stock split and the maximum number of shares that could be
awarded to a single participant in a calendar year would be reduced to 50,000
shares. Our board of directors has directed that Proposal Seven be submitted for
approval by the 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:
o incentive stock options under section 422 of the Code;
o non-qualified stock options;
o restricted stock; and
o other stock-based awards.
SHARES ISSUABLE THROUGH THE PLAN. If Proposal Seven is approved at the
annual meeting, up to 2,500,000 shares of our common stock (500,000 shares
post-split) may be issued through the plan. As of October 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
October 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 October 15, 2002, the
closing price of our common stock on The Nasdaq SmallCap Market was $0.32 per
share.
LIMITATIONS AND ADJUSTMENTS TO SHARES ISSUABLE THROUGH THE PLAN. Pursuant
to Proposal Seven, 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.
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.
25
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.
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.
26
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
o by will;
o by the laws of descent and distribution;
o pursuant to a domestic relations order; or
o 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.
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 Seven 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 Seven 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.
27
Amended Plan Benefits
Number of Securities
Name Underlying Options(1)
---------------------------------------- -------------------------
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
- --------------------
(1) The grants listed in this table have not been adjusted to reflect the
proposed one-for-five reverse stock split described in Proposal Six.
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 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
28
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. The
information in this table has not been adjusted to reflect the proposed
one-for-five reverse stock split described in Proposal Six
Number of securities
remaining available for
Number of securities to be Weighted-average exercise future issuance under equity
issued upon exercise of price of outstanding compensation plans (excluding
outstanding options, options, warrants and securities reflected in
warrants and rights rights 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 Seven.
(4) Options to purchase 359,000 shares granted under the long-term incentive
plan have been forfeited since December 31, 2001.
29
(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 SEVEN.
INCORPORATION BY REFERENCE
The following items are incorporated by reference from our Annual Report on
Form 10-K for the year ended December 31, 2001, filed with the SEC on April 16,
2002 (Commission file number: 0-29416):
o Financial Statements and Supplementary Data;
o Management's Discussion and Analysis of Financial Condition and Results of
Operations; and
o Quantitative and Qualitative Disclosures about Market Risk.
The following items are incorporated by reference from our Quarterly Report
on Form 10-Q for the quarter ended June 30, 2002, filed with the SEC on August
14, 2002:
o Financial Statements;
o Management's Discussion and Analysis of Financial Condition and Results of
Operations; and
o Quantitative and Qualitative Disclosures about Market Risk.
A copy of our Annual Report on Form 10-K is included in our annual report
to shareholders for the year ended December 31, 2001. The annual report to
shareholders, and our Quarterly Report on Form 10-Q for the quarter ended June
30, 2002, accompany this proxy statement.
By Order of the Board of Directors
New Iberia, Louisiana
November __, 2002. Martin K. Bech
30
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
Appendix B
PROPOSED AMENDMENT TO OUR ARTICLES OF INCORPORATION
TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF OUR COMMON STOCK
Effective immediately after the Meeting, Article III of the Articles,
entitled "Capital," is amended to restate paragraph A in its entirety as
follows:
A. Authorized Stock. The Corporation shall have the
authority to issue an aggregate of 155,000,000 shares of capital
stock, of which 150,000,000 shares shall be Common Stock, $0.01 par
value per share, and 5,000,000 shares shall be Preferred Stock, no par
value per share.
B-1
Appendix C
PROPOSED AMENDMENT TO OUR ARTICLES OF INCORPORATION
TO EFFECT THE PROPOSED ONE-FOR-FIVE REVERSE STOCK SPLIT
Article III of the Articles, entitled "Capital," is amended to add at the
end thereof a new paragraph C as follows:
C. Reverse Stock Split. At the close of business on [date]
("Effective Date"), each five outstanding shares of the Corporation's
Common Stock, $0.01 par value per share, held of record on the Effective
Date, shall be and hereby are automatically reclassified and converted,
without further action, into one share of the Corporation's Common Stock,
$0.01 par value per share. Each certificate representing shares of Common
Stock issued and outstanding, or issued and held by the Corporation, on the
Effective Date, shall thereafter for all purposes be deemed to represent
one share of Common Stock for each five shares of Common Stock theretofore
represented by such certificate. No scrip or fractions of shares shall be
issued as a result of this amendment to Article III. In lieu of receiving
fractions of shares, each shareholder of record otherwise entitled to
receive fractions of shares of Common Stock as a result of this amendment
to Article III shall be entitled to receive one whole share of Common
Stock. The shares of Common Stock represented by certificates issued
pursuant to this paragraph shall be validly issued, fully paid and
nonassessable. This amendment to Article III shall not affect the number of
authorized shares of Common Stock or the par value per share of the Common
Stock. On the Effective Date, the Corporation's stated capital attributable
to the Common Stock shall be reduced to one-fifth of its amount prior to
the Effective Date, and the Corporation's capital surplus shall be credited
with the amount by which the Corporation's stated capital is so reduced.
C-1
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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 13, 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 TO REQUIRE ANNUAL ELECTION OF 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 _________________ AS THE COMPANY'S INDEPENDENT AUDITOR; (E) FOR PROPOSAL 5 TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF THE COMPANY'S COMMON STOCK TO
150,000,000; (F) FOR PROPOSAL 6 TO EFFECT A ONE-FOR-FIVE REVERSE STOCK SPLIT
PURSUANT TO WHICH EVERY FIVE SHARES OF THE COMPANY'S COMMON STOCK WOULD BE
CONVERTED INTO ONE SHARE OF COMMON STOCK; AND (G) FOR PROPOSAL 7 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 that 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 _______________ as the Company's
Independent Auditor to audit its financial statements for 2002.
|_| FOR |_| AGAINST |_| ABSTAIN
PROPOSAL 5 To amend the Company's Articles of Incorporation to increase the
number of authorized shares of the Company's Common Stock to
150,000,000.
|_| FOR |_| AGAINST |_| ABSTAIN
PROPOSAL 6 To amend the Company's Articles of Incorporation to effect a
one-for-five reverse stock split pursuant to which every five
shares of the Company's Common Stock would be converted into one
share of Common Stock.
|_| FOR |_| AGAINST |_| ABSTAIN
PROPOSAL 7 To amend the Company's long-term incentive plan.
|_| FOR |_| AGAINST |_| ABSTAIN
, 2002
------------ -------------------------
DATE NAME (PLEASE PRINT)
-----------------------------------------
SIGNATURE
-----------------------------------------
ADDITIONAL SIGNATURE (IF JOINTLY HELD)
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