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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
HALTER MARINE GROUP, INC.
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(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
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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 with 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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Notes:
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[LOGO OF HALTER MARINE GROUP, INC. APPEARS HERE]
13085 SEAWAY ROAD
GULFPORT, MISSISSIPPI 39503
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 28, 1998
Notice is hereby given that the 1998 Annual Meeting of Stockholders of
Halter Marine Group, Inc. (the "Company"), a Delaware corporation, will be
held at the Great Southern Club, One Hancock Plaza, Suite 1112, Gulfport,
Mississippi 39501, on Tuesday, July 28, 1998, at 10:00 a.m., Central Daylight
Time, for the following purposes:
1) to elect two (2) directors to hold office until the Annual Meeting of
Stockholders in the year 2001 and until their successors are elected and
qualified;
2) to approve an amendment to the Halter Marine Group, Inc. Restated
Certificate of Incorporation providing for an increase in the number of
shares of common stock authorized for issuance by the Company from
50,000,000 to 150,000,000; and
3) to transact such other business as may properly come before the
meeting or any adjournment thereof.
Only stockholders of record at the close of business on June 1, 1998 will be
entitled to notice of, and to vote at, the 1998 Annual Meeting or any
adjournment thereof, notwithstanding the transfer of any stock on the books of
the Company after such record date. A list of the stockholders will be open
for examination by any stockholder, for any purpose germane to the 1998 Annual
Meeting, for a period of ten (10) days prior to the meeting at the Company's
offices, 13085 Seaway Road, Gulfport, Mississippi 39503.
Please forward your proxy in order that you will be represented at the 1998
Annual Meeting, whether or not you expect to attend in person. Stockholders
who attend the 1998 Annual Meeting may revoke their proxies and vote in
person, if they so desire.
By Order of the Board of Directors
MAUREEN O'CONNOR SULLIVAN
Senior Vice President and Secretary
Gulfport, Mississippi
July 2, 1998
<PAGE>
HALTER MARINE GROUP, INC.
13085 SEAWAY ROAD
GULFPORT, MISSISSIPPI 39503
The 1998 Annual Report to Stockholders, including financial statements, is
being mailed to stockholders together with these proxy materials on or about
July 2, 1998.
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 28, 1998
This Proxy Statement is furnished to the stockholders of Halter Marine
Group, Inc. (the "Company") in connection with the solicitation of proxies by
the Board of Directors of the Company (the "Board of Directors" or the
"Board") for use at the Annual Meeting of Stockholders of the Company to be
held at the Great Southern Club, One Hancock Plaza, Suite 1112, Gulfport,
Mississippi 39501, on Tuesday, July 28, 1998, at 10:00 a.m., Central Daylight
Time (the "1998 Annual Meeting"), or at any adjournment thereof, for the
purposes set forth in the accompanying Notice of Annual Meeting of
Stockholders.
ABOUT THE 1998 ANNUAL MEETING
Voting Procedures
Stockholders of record at the close of business on June 1, 1998 (the "Record
Date") will be entitled to vote at the Meeting. On the Record Date, there were
outstanding 28,823,158 shares of the Company's Common Stock (the "Company
Shares"). The holders of a majority of the Company Shares issued and
outstanding and entitled to vote at the Meeting, present in person or
represented by proxy, will constitute a quorum. The persons whom the Company
appoints to act as inspectors of election will treat all Company Shares
represented by a returned, properly executed proxy as present for purposes of
determining the existence of a quorum at the Meeting. The Company Shares
present at the meeting, in person or by proxy, that are abstained from voting
or that are the subject of broker non-votes will be counted as present for
determining the existence of a quorum. A broker non-vote occurs when a nominee
holding Company Shares for a beneficial owner does not vote on a matter
because the nominee does not have discretionary voting power with respect to
the matter and has not received voting instructions from the beneficial owner.
Each of the Company Shares will entitle the holder to one vote. In connection
with the election of directors, a plurality of votes cast at the meeting is
required for election and cumulative voting is not permitted. All other
matters to be submitted to the stockholders require an affirmative vote of the
majority of votes cast. Votes cast at the meeting will be counted by the
inspectors of election.
The Board of Directors is soliciting your proxy on the enclosed form to
provide you with an opportunity to vote on all matters to come before the
meeting, whether or not you attend in person. If you properly execute and
return a proxy in the enclosed form, your shares will be voted as you specify.
If you make no specifications, your shares will be voted in accordance with
the recommendations of the Board as set forth below. If you submit a proxy,
you may subsequently revoke it by submitting a revised proxy or a written
revocation at any time before the original proxy is voted. You may also attend
the meeting in person and vote in person by ballot, which would cancel any
proxy you previously gave. Unless you revoke your proxy, it will be voted at
the 1998 Annual Meeting, and at any adjournment thereof, in the manner
specified therein, or if not specified, in the following manner:
(1) FOR election of the two (2) nominees, Mr. Kenneth W. Lewis and Mr.
Rick S. Rees, as members of the Board of Directors of the Company to hold
office until the Annual Meeting of Stockholders in the year 2001, and until
their successors are elected and qualified;
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(2) FOR approval of an amendment to the Company's Restated Certificate of
Incorporation allowing for an increase, from 50,000,000 to 150,000,000, in
the number of shares of Common Stock of the Company authorized for
issuance; and
(3) At the discretion of the persons named in the enclosed form of proxy,
on any other matter that may properly come before the 1998 Annual Meeting,
or any adjournment thereof.
Proxy Solicitation
The enclosed proxy is solicited by and on behalf of the Board of Directors
of the Company. In addition to solicitations by mail, arrangements have been
made for brokers or nominees to send proxy materials to their principals, and
the Company will reimburse them for their reasonable expenses in doing so. The
Company has retained Corporate Investor Communications, Inc. to assist with
the solicitation from brokers and nominees. The fee for this service is
estimated to be $1,200, plus reasonable out-of-pocket expenses. The expense of
the solicitation of proxies for the 1998 Annual Meeting, including the cost of
mailing, will be borne by the Company. Certain regular employees of the
Company, at no additional compensation, may also solicit proxies personally,
by telephone, facsimile or mail. Stockholders are urged to send in their
proxies without delay to avoid additional expense to the Company.
OWNERSHIP OF COMPANY STOCK BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Beneficial Ownership of Directors and of Certain Executive Officers
The following table shows the number of shares of Common Stock beneficially
owned by each director; by the Company's Chief Executive Officer; by each
executive officer of the Company named in the "Summary Compensation Table" set
forth below under "Executive Compensation and Other Matters"; by all directors
and executive officers (11 persons) as a group; and by such persons known to
the Company to own beneficially more than five (5%) of the outstanding Common
Stock of the Company. The information set forth below, except where indicated,
is as of the Record Date, is based upon information supplied by the named
individuals, and is adjusted for the effect of a three for two split of the
Common Stock of the Company on October 31, 1997:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME BENEFICIALLY OWNED(1) OF CLASS
---- --------------------- --------
<S> <C> <C>
Angus R. Cooper, II........................... 46,500(5) *
Don O. Covington.............................. 48,000(5) *
John Dane III................................. 342,778(2)(4)(5) 1.2%
Barry J. Galt................................. 586 *
Burt H. Keenan................................ 3,000(3)(5) *
Kenneth W. Lewis.............................. 34,273(5) *
Richard T. McCreary........................... 12,290(2)(4)(5) *
Daniel J. Mortimer............................ 106,107(4)(5) *
Rick S. Rees.................................. 134,500(5) *
Directors and Executive Officers as a Group... 751,837(4)(5) 2.6%
Pioneering Management Corporation............. 2,738,400(6) 9.5%
FMR Corp...................................... 1,798,275(6) 6.2%
</TABLE>
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* Less than one percent (1%)
(1) Unless otherwise noted, all shares are owned directly and the owner has
the right to vote the shares.
(2) Includes shares held beneficially under the Company's 401(k) plan by
Messrs. Dane and McCreary, of 1,604 and 459 shares, respectively, as of
April 30, 1998.
(3) Does not include 600 shares owned by Mr. Keenan's wife, as to which he
disclaims any beneficial interest.
(4) Includes certain restricted shares to be issued within sixty (60) days of
June 1, 1998, for Mr. Dane (16,000 shares); Mr. Mortimer (2,897 shares);
Mr. McCreary (1,931 shares). At the election of the payee, executive
2
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officers may receive all, or a designated part of that portion (50%) of
annual bonus earned in restricted shares, which would otherwise be deferred
for cash payment in the following year.
(5) Includes shares which the individual has the right to acquire within sixty
(60) days of June 1, 1998, pursuant to exercise of options granted under
the Stock Option Plan for Mr. Cooper (1,500 shares); Mr. Covington (18,000
shares); Mr. Dane (180,000 shares); Mr. Keenan (1,500 shares); Mr. Lewis
(1,500 shares); Mr. McCreary (9,900 shares); Mr. Mortimer (1,500 shares);
Mr. Rees (76,500 shares).
(6) Based on information included in Schedules 13G filed by Pioneering
Management Corporation and FMR Corp. with the Commission on January 21,
1998 and May 10, 1998, respectively. The shares of Common Stock to which
such Schedule 13G of FMR Corp. relate are held directly by various mutual
funds that are members of the Fidelity family of funds. The shares of
Common Stock to which such Schedule 13G of Pioneering Management
Corporation relate are held directly by one or more mutual funds in the
Pioneer family of funds.
MATTERS TO BE PRESENTED TO THE STOCKHOLDERS AT THE MEETING
ITEM 1--ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation and Bylaws provide that
the Board of Directors is divided into three classes. Each year the
stockholders are asked to elect the members of a class for a term of three
years.
At the 1998 Annual Meeting, two (2) directors are to be elected who will
hold office until the Annual Meeting of Stockholders in the year 2001 and
until their respective successors are duly elected and qualified. The persons
named as proxies in the enclosed form of proxy intend to vote for the election
of each of the two (2) nominees listed below, unless otherwise directed. The
Board has nominated Mr. Kenneth W. Lewis and Mr. Rick S. Rees, the directors
whose terms are expiring this year, for election as members of the Board to
serve for three year terms until the Annual Meeting of Stockholders in 2001.
The nominees have consented to be named herein and to serve, if elected.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF THE
TWO (2) NOMINEES: MR. LEWIS AND MR. REES
INFORMATION ABOUT NOMINEES AND CONTINUING DIRECTORS
Nominees for Election at the 1998 Meeting
Terms Expiring in 1998
KENNETH W. LEWIS, age 59. Director since 1996. Mr. Lewis was Senior Vice
President and Chief Financial Officer of Trinity Industries, Inc. at the time
of his retirement in January 1996 after 32 years of service. He is a director
of McConway & Torley Corporation, a privately held manufacturer of products
for the railcar industry, and a director of Lambert Fenchurch US Holdings,
Inc., which is owned principally by Lambert Fenchurch Group Holdings PLC, an
international broker conducting all classes of insurance and reinsurance
brokering and risk management headquartered in London, England and having
offices worldwide.
RICK S. REES, age 45. Director since 1996. Mr. Rees joined the Company in
April 1997 and is an Executive Vice President and the Chief Financial Officer.
Mr. Rees has been involved in the marine industry since obtaining his MBA from
A. B. Freeman School of Business, Tulane University in 1975. Prior to joining
the Company, Mr. Rees was President of Maritime Holdings, Inc., the parent
company of Texas Drydock, Inc., a company with operations in the offshore rig
construction, conversion and repair business. From 1989 to 1996, he was
President of Maritime Capital Corporation, a marine finance company. From 1975
to 1983, he was with Halter Marine, Inc., an antecedent of Halter Marine
Group, Inc., and served in several capacities, including Chief Financial
Officer and a director of the Company. Mr. Rees is a certified public
accountant.
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Continuing Directors
Terms Expiring in 1999
ANGUS R. COOPER, II, age 57. Director since April 1, 1997. Mr. Cooper is
Chairman of the Board and Chief Executive Officer of Cooper/T. Smith
Corporation, a shipping service company headquartered in Mobile, Alabama which
operates in 30 ports on the East, Gulf and West Coasts of the United States,
plus operations in Brazil, Colombia, Mexico and Venezuela. He currently serves
on the Board of Directors of the Federal Reserve Bank of Atlanta, New Orleans
Branch, Whitney National Bank, Coast Guard Foundation, World Business Council
and the Executive Hall of Fame.
BURT H. KEENAN, age 59. Director since April 1, 1997. Mr. Keenan is Chairman
of the Board and Chief Executive Officer of Independent Energy Holdings, a
London listed United Kingdom corporation, that develops and markets
electricity in the United Kingdom's deregulated electricity industry. He is a
director of Telescan, a NASDAQ quoted company which conducts an interactive
online information business. From 1969 to 1986, Mr. Keenan was the Chairman
and Chief Executive Officer of Offshore Logistics, Inc., a NASDAQ listed
marine and aviation oil and gas service company. Since 1987, he has been
associated with Chaffe and Associates, Inc., an investment banking firm in New
Orleans, Louisiana. Under the Carter and Reagan Administrations, Mr. Keenan
was a member of the National Advisory Council on Oceans and Atmosphere, a
United States Presidential Commission.
Terms Expiring in 2000
JOHN DANE III, age 47. Director since 1987, Chairman of the Board and
President and Chief Executive Officer of the Company. Mr. Dane has over 23
years of marine management experience. He founded Moss Point Marine, Inc. in
1980, which was acquired in 1987 by Trinity Industries, Inc., at which time he
became president of Trinity Marine Group, the predecessor of the Company.
During his tenure, Trinity Marine Group grew to 22 shipyards with revenues
exceeding $400 million. Mr. Dane holds a B.S. and a Ph.D in civil engineering
from Tulane University. He is a member of the Board of Advisors for the Tulane
School of Engineering, the Navy League, the U.S. Coast Guard Foundation, and
the Society of Naval Architects. He is a registered engineer and a member of
the American Bureau of Shipping.
DANIEL J. MORTIMER, age 51. Director since April 1, 1997 and Executive Vice
President and Chief Operating Officer since November 1997. Mr. Mortimer has 30
years of experience in maritime construction and shipbuilding. He was formerly
Chairman of the Board and President of Gulf Coast Fabrication, Inc., a marine
construction company which was acquired in 1994 by the Company. Mr. Mortimer
serves on the boards of various organizations, including the Southern
Development Association, and is the current President of the Mississippi Coast
Crime Commission. In 1991, he was Mississippi Governor Mabus' Appointee to the
Board of Directors for The Job Training Partnership Act. He is active in the
Society of Naval Architects and Marine Engineers, American Welding Society and
American Institute of Steel Construction.
Term Expiring in 2001
BARRY J. GALT, age 64. Director since November 8, 1997. Mr. Galt is Chairman
of the Board and Chief Executive Officer of Seagull Energy Corporation
(NYSE:SGO), Houston, Texas since 1983. Seagull Energy engages in oil and gas
exploration and development worldwide. He serves on the boards of Trinity
Industries, Inc., Standard Insurance Company, the American Petroleum Institute
and the Independent Petroleum Association of America. He has also served as
regional vice chairman of the National Association of Manufacturers and is a
director of the Salvation Army in Houston. He holds a B.A. and an L.L.B. from
the University of Oklahoma and served in the U.S. Navy as an aviator.
4
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ITEM 2--APPROVAL OF AMENDMENT TO RESTATED CERTIFICATE OF
INCORPORATION INCREASING NUMBER OF SHARES AUTHORIZED
The Board of Directors has adopted, and recommends that the stockholders
approve, an amendment of the Halter Marine Group, Inc. Restated Certificate of
Incorporation to allow for an increase in the number of shares of Common Stock
of the Company that may be issued, having unanimously adopted the following
resolution:
Resolved, that the Board of Directors of the Company does hereby propose
and recommend to the stockholders at the 1998 Annual Meeting of
Stockholders that the Company's Restated Certificate of Incorporation be
amended so as to increase the total number of shares of Common Stock, par
value $.01 per share, which the Company shall have authority to issue from
50,000,000 shares to 150,000,000 shares.
The purpose of the proposed amendment is to allow for issuance of an
additional 100,000,000 shares of Common Stock of the Company at such time and
under such circumstance as the Board may consider necessary, advisable and in
the best interests of the Company. Although there is no current intention to
issue shares of Common Stock in excess of the 50,000,000 shares currently
authorized by the Company's Restated Certificate of Incorporation, the
proposed amendment will allow for such issuance in the future at the Board's
discretion.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE AMENDMENT TO THE
COMPANY'S RESTATED CERTIFICATE OF INCORPORATION AUTHORIZING AN INCREASE IN THE
NUMBER OF SHARES OF COMMON STOCK AUTHORIZED FOR ISSUANCE.
CORPORATE GOVERNANCE
The Board of Directors
During fiscal 1998, the Board acted to increase its membership from six
directors to seven and on November 8, 1997, Mr. Barry J. Galt was unanimously
elected to serve for a three year term expiring in 2001. Mr. Galt was
appointed to the Audit and Compensation Committees and was selected to chair
the Audit Committee. The directors hold regular quarterly meetings, attend
special meetings, as required, and spend such time on the affairs of the
Company as their duties require. During the Company's fiscal year ended March
31, 1998, the Board of Directors held a total of ten (10) meetings, quarterly
and special. All directors of the Company attended at least seventy-five
percent (75%) of the meetings of the Board of Directors, and the committees on
which they served, during fiscal 1998.
Committees of the Board
The Board of Directors has established an Audit Committee, the current
members of which are Messrs. Barry J. Galt, Chairman, Kenneth W. Lewis, Burt
H. Keenan and Angus R. Cooper II. The responsibilities and authorities of the
Audit Committee include: (1) to recommend to the Board of Directors the firm
or persons to be employed by the Company as its independent auditors (subject
to contractual obligations of the Company, if any, relating to the retention
of independent auditors), (2) to consult with the independent auditors as to
their plan of audit and to review non-audit services to be performed for the
Company, (3) to review and evaluate with the independent auditors the results
of their audit, their audit report and any related management letter and the
annual financial statements of the Company, (4) to review and evaluate with
senior financial management of the Company and the independent auditors the
appropriateness of and compliance with the Company's accounting policies,
internal control systems, business practices and ethics policies, and
financial record keeping and reporting procedures, and (5) to take such other
actions as may be appropriate or as directed by the Board of Directors to
assure that the financial information to be provided by the Company to its
stockholders and others is reliable and the policies, systems of control and
procedures established by management effectively safeguard the assets and
other interests of the Company. During fiscal 1998, the Audit Committee held
three (3) meetings.
The Board of Directors also has established a Compensation Committee, the
current members of which are Messrs. Kenneth W. Lewis, Chairman; Angus R.
Cooper, II; Burt H. Keenan and Barry J. Galt. The
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responsibilities and authorities of the Compensation Committee include: (1) to
determine the salaries, incentive compensation and other remuneration of all
officers of the Company, (2) to review the compensation policies and general
guidelines being used to compensate employees of the Company who are officers,
(3) to make grants and awards under the Company's 1996 Stock Option and
Incentive Plan , as amended and supplemented (the "Stock Option Plan"), (4) to
grant contingent performance bonuses to officers and other key employees of
the Company under the Stock Option Plan and the Company's Annual Incentive
Compensation Plan in such amounts and subject to such terms and conditions,
including conditions to vesting, as the Compensation Committee may deem
appropriate, and (5) to take such other actions as may be appropriate or as
directed by the Board of Directors to assure that the compensation policies of
the Company are reasonable and fair. During fiscal year 1998, the Compensation
Committee held four (4) meetings.
The entire Board of Directors acts as a Nominating Committee.
Compensation of Directors
Each director who is not a compensated officer or employee of the Company
currently receives $1,250 for each meeting of the Board attended, plus
reimbursement of reasonable out-of-pocket expenses incurred in connection
therewith. Each director who is not a compensated officer or employee of the
Company also receives a fee of $30,000 per annum, payable in equal monthly
installments, for serving as a director. The Chairman of the Audit and
Compensation committees each receive an additional $2,000 per annum for
serving in those capacities, and each member of these committees receives
$1,250 for each meeting attended. In addition, each director who is not a
compensated officer or employee of the Company is granted under the Stock
Option Plan, on an annual basis, options to purchase 7,500 shares of the
Common Stock of the Company at the closing price per share as of the date of
the Company's Annual Meeting of Stockholders for that year, except for fiscal
1998, such grant occurred on April 27, 1998, with an exercise price per share
equal to the closing price per share on that date.
6
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EXECUTIVE COMPENSATION AND OTHER MATTERS
Cash Compensation
The following table sets forth information for the Company's fiscal year
ended March 31, 1998, with regard to the compensation for their services to
the Company and its subsidiaries in all capacities of the Chief Executive
Officer and each of the other four (4) most highly compensated executive
officers of the Company at the close of fiscal 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------- ------------
STOCK OPTION
NAME AND PRINCIPAL OTHER ANNUAL AWARDS ALL OTHER
POSITION YEAR SALARY BONUS(1) COMPENSATION(2) (SHARES) COMPENSATION(3)
------------------ ---- ------ -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
John Dane III........... 1998 $550,000 $580,000 $113,000 750,000 $ 28,625
Chairman, President and 1997 491,667 857,800 134,947 150,000 18,312
Chief Executive Officer 1996 450,000 36,810 48,681 -- 19,699
Rick S. Rees............ 1998 $344,340 $280,000 $ 62,434 375,000 $ 22,219
Executive Vice
President and 1997 -- -- -- -- --
Chief Financial Officer 1996 -- -- -- -- --
Daniel J. Mortimer...... 1998 $176,532 $105,000 $ 28,153 207,500 $371,250
Executive Vice
President and 1997 -- -- -- -- --
Chief Operating Officer 1996 -- -- -- -- --
Don O. Covington........ 1998 $278,663 $125,000 -- 90,000 --
Group President, 1997 -- -- -- -- --
TDI--Halter, L.P. 1996 -- -- -- -- --
Richard T. McCreary..... 1998 $160,235 $ 70,000 -- 49,500 $ 7,675
Senior Vice President-- 1997 -- -- -- -- --
Administration 1996 -- -- -- -- --
</TABLE>
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(1) Annual incentive bonuses are paid only upon the achievement of a
predetermined financial goal set for each executive at the beginning of
the fiscal year. One-half (50%) of the annual incentive bonus is paid
within ninety (90) days of the close of the Company's fiscal year, except
for Mr. Covington for whom no deferral was made. The remaining one-half
(50%) may, at the payee's option, be received, in whole or part, in
restricted Company stock issued on or after ninety (90) days of the close
of the Company's fiscal year, or be received in cash within ninety (90)
days of the close of the Company's succeeding fiscal year, provided that
the executive's employment with the Company has not been terminated for
any reason other than death, disability, retirement, or change of control
prior to payment (in the case of cash deferrals), or prior to removal of
restrictions (in the case of receipt of restricted Company shares). The
amounts shown for bonuses in the foregoing table, except for Mr.
Covington, include the one-half (50%) subject to deferral to the
succeeding year, which deferred bonus amounts total for Messrs. Dane,
$290,000; Rees, $140,000; Mortimer, $52,500; and McCreary, $35,000, except
that the following individuals elected to receive all of their deferred
bonus for fiscal 1998 in restricted Company stock to be issued within
sixty (60) days of June 1, 1998: Messrs. Dane, 16,000 shares; Mortimer,
2,897 shares; McCreary, 1,931 shares. The bonus amount for fiscal 1997
includes a one-time special bonus awarded by the Compensation Committee
for the year to certain officers and employees, the amount of which was
$442,000 for Mr. Dane.
(2) An amount equal to ten percent (10%) of the salary and incentive bonus of
Messrs. Dane, Rees, and Mortimer is set aside annually pursuant to a long-
term deferred compensation plan.
(3) All Other Compensation consists principally of the Company's matching
contribution under the 401(k) plan previously available to executives and
under the non-qualified deferred compensation plan currently available to
executives, director fees (as applicable), and automobile allowances,
except for Mr. Mortimer whose Other Compensation during fiscal 1998
included consulting fees of $336,000 paid to him by the Company prior to
his employment by the Company.
7
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INCENTIVE AND OTHER EMPLOYEE BENEFIT PLANS
1996 Stock Option and Incentive Plan
The Company has adopted the Amended and Restated 1996 Stock Option and
Incentive Plan (the "Stock Option Plan") in order to attract and retain key
employees and directors of the Company, to encourage the sense of
proprietorship of such persons and to stimulate the active interest of such
persons in the development and financial success of the Company. These
objectives are to be accomplished by making awards under the Stock Option Plan
and thereby providing participants with a proprietary interest in the growth
and performance of the Company.
The Compensation Committee of the Board of Directors determines the officers
and key employees to whom options are granted, the type of options, the number
of shares covered by such options and the option vesting schedule. In the case
of incentive stock options, the Internal Revenue Code requires that the option
exercise price must not be less than the fair market value of the stock at the
time that the option is granted. Options become exercisable as set forth in
the option agreements pursuant to which they are issued, but in no event are
incentive stock options exercisable after the expiration of ten (10) years
from the date of grant (or, in the case of an employee owning directly or
indirectly more than ten (10%) percent of the total outstanding Common Stock,
five (5) years from the date of grant). Regardless of any vesting schedule
contained in an option agreement, the plan provides for the acceleration of
vesting in certain events, including the optionee's death, disability or
retirement, the dissolution or liquidation of the Company, certain
reorganizations of the Company or the acquisition of thirty percent (30%) or
more of the Company's outstanding Common Stock as a result of a tender or
exchange offer other than by the Company. The following types of awards may be
made pursuant to the Stock Option Plan: (i) stock option, including incentive
stock options; (ii) stock appreciation right, in tandem with stock options or
freestanding; (iii) restricted stock; (iv) performance awards; (v) dividend
equivalent rights, in tandem with other awards or freestanding; and (vi) other
awards based on, payable in, or otherwise related to Common Stock. The Stock
Option Plan provides that the maximum number of shares of Common Stock
available for grant with respect to which awards may be granted is 3,600,000
shares. As awards under such plan expire, terminate, or are surrendered
unexercised, the shares underlying such awards are available for further
awards. The terms of the plan currently provide that all rights to exercise an
option terminate immediately upon an employee's discharge for cause; ten days
after an employee's resignation; three months after an employee's disability;
twelve months after an employee's death and three months after the employee's
retirement. The Stock Option Plan provides that if the terms of a non-
qualified option prohibit its exercise before the expiration of a specified
period of time and if the optionee ceases to be an officer, director or
employee for any reason other than discharge for cause, then the vested
portion of the option will not terminate until three months after the
expiration of the period during which the exercise of the option is
prohibited.
Recipients of options may pay the option exercise price in cash or by
delivering to the Company shares of the Company's Common Stock already owned
by the optionee having a fair market value equal to the option exercise price.
When the optionee surrenders stock already owned by him in payment of the
exercise price, the optionee will be granted, except in limited instances, a
new option on shares equal in number to those surrendered at an option
exercise price that is the fair market value of the Company's Common Stock on
the date of the new grant and exercisable no earlier than six months after the
date of such new grant. An optionee also may elect to satisfy the income tax
withholding requirement upon the exercise of a non-incentive stock option
either by payment of the amount of such withholding obligation in cash or
through the retention by the Company of a number of shares of Common Stock out
of the shares being purchased with a fair market value equal to the amount of
the withholding obligation, but no new option is awarded for the shares
retained to satisfy the employee's income tax withholding requirement.
The provisions of the Stock Option Plan may be modified or amended at any
time or from time to time by the Board of Directors; provided, however, no
option at any time outstanding may be impaired or canceled adversely to the
holder without the consent of the holder thereof, and no amendment can
increase the maximum number of shares subject to the plan, to materially
increase the benefits accruing to participants, or materially modify the
requirements as to eligibility for participation in the plan, without
stockholder approval.
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<PAGE>
The following table contains information concerning the grant of stock
options to each of the executives named in the Summary Compensation Table with
respect to fiscal 1998.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS (1) FOR OPTION TERM
----------------------------------------------------------------------- ----------------------
PERCENT OF MARKET
TOTAL PRICE
OPTIONS EXERCISE ON
GRANTED TO OR BASE DATE AT 5% AT 10%
OPTIONS EMPLOYEES IN PRICE OF EXPIRATION ANNUAL ANNUAL
NAME GRANTED FISCAL YEAR ($/SH) GRANT DATE GROWTH GROWTH
---- ------- ------------ -------- ------ ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
John Dane III........... 750,000 28.5% $10.33 $10.33 04/10/07 $4,872,361 $12,347,520
Rick S. Rees............ 375,000 14.2% $10.33 $10.33 04/10/07 $2,436,181 $ 6,173,760
Daniel J. Mortimer...... 7,500 0.3% $10.33 $10.33 04/10/07 $ 48,724 $ 123,475
200,000 7.6% $30.50 $30.50 11/21/07 $3,836,257 $ 9,721,829
Don O. Covington........ 90,000 3.4% $19.33 $19.33 07/15/07 $1,094,088 $ 2,772,634
Richard T. McCreary..... 49,500 1.9% $12.42 $12.42 04/22/07 $ 386,638 $ 979,817
</TABLE>
- --------
(1) The stock options shown in the table were granted pursuant to the
Company's Stock Option Plan. The Company has not granted any stock
appreciation rights but the Company's stock option agreements provide that
the option may be surrendered for cash for the difference between the then
market value of the shares and the option exercise price within thirty
(30) days after the acquisition of thirty percent (30%) of the Company's
Common Stock pursuant to a tender or exchange offer other than one made by
the Company.
The table below sets forth information concerning each exercise of stock
options by each of the named executive officers during the most recently
completed fiscal year and the number of exercisable and unexercisable stock
options held by them and the fiscal year-end value of the exercisable and
unexercisable options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
YEAR-END FISCAL YEAR-END
------------------------- -------------------------
SHARES
ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
John Dane III........... -- -- 30,000 $ 256,230
870,000 $5,181,420
Rick S. Rees............ -- -- 1,500 $ 12,812
381,000 $2,129,496
Daniel J. Mortimer...... -- -- 0 $ 0
207,500 $ 41,565
Don O. Covington........ -- -- 0 $ 0
90,000 $ 0
Richard T. McCreary..... -- -- 0 $ 0
49,500 $ 171,171
</TABLE>
Retirement Plans
Defined Benefit Plan. The Company has a non-contributory, defined benefit
retirement plan (the "defined benefit plan") which was, until March 31, 1998,
available to all eligible employees who had completed a specified period of
employment. The Company has decided to terminate the defined benefit plan and
may do so, depending on certain variables, as soon as December 31, 1998. The
plan provides for the payment of monthly retirement benefits determined under
a calculation based on credited years of service and a percentage of average
monthly compensation over a five consecutive year period.
9
<PAGE>
Retirement benefits are paid to participants upon retirement, as defined in
the plan. A participant is one hundred percent (100%) vested after five or
more years of service but forfeits his benefits in case of a severance from
service before five years except upon death or actual retirement. The plan
also provides for the payment of certain benefits upon the death of a vested
participant.
Effective March 31, 1998, the defined benefit plan was frozen. No employees
or officers will become participants in this plan after March 31, 1998, and no
additional benefits will accrue for participants after March 31, 1998. Of the
individuals listed in the "Summary Compensation Table" in this proxy
statement, only Mr. Dane has had sufficient years of service, which includes
certain service with Trinity, for payment of benefits under the defined
benefit plan.
Supplemental Retirement Plan. The Company has established a supplemental
retirement plan (the "supplemental retirement plan"), which is a non-
qualified, deferred compensation plan available to a select group of highly
compensated employees providing benefits in an amount equal to the amount
participants would have received under the defined benefit plan, but for the
limitations of Section 401(a)(17) and Section 415 of the Internal Revenue
Code. A participant is entitled to benefits upon his retirement.
In light of the freezing of the Company's defined benefit plan, effective
March 31, 1998, there will be no further benefit accruals under this
supplemental retirement plan after March 31, 1998. All benefits under this
supplemental retirement plan will be paid out of the general assets of the
Company.
The approximate level of annual benefit payable to Mr. Dane under the
deferred benefit plan and the supplemental retirement plan, assuming
retirement from the Company at age 65 and an average annual compensation in
the five years preceding retirement of $1,100,000, is $90,750.
Section 401(k) Plan. The Company maintains a Section 401(k) plan (the
"401(k) plan") that permits employees to elect to contribute not less than two
percent (2%) or more than fifteen percent (15%) of their compensation to a
trust to pay future retirement benefits, subject to the maximum limit on the
amount of compensation permitted to be deferred for this purpose. The Company,
in its discretion for each plan year, makes monthly contributions to the plan.
The Company currently matches fifty percent (50%) of the lesser of (i) the
amount of the employee's contribution or (ii) six percent (6%) of the
employee's compensation. Participants are 100% vested in the salary reduction
contributions made by them, and vest in the employer contributions over a four
(4) year period at the rate of twenty-five percent (25%) per year or upon
normal retirement, death or disability. Effective April 1, 1998, highly
compensated employees, including each individual listed in the "Summary
Compensation Table," are no longer eligible to participate in the Company's
401(k) plan.
Nonqualified Deferred Compensation Plan. The Company had established a
Supplemental Profit Sharing Plan which, effective April 1, 1998, has been
amended and renamed as the Company's Non-qualified Deferred Compensation Plan
(the "nonqualified deferred compensation plan"). Under this non-qualified
deferred compensation plan, certain highly compensated employees are permitted
to defer compensation, and the Company credits to an account for each such
employee an amount equal to the deferred portion of his compensation plus
matching contribution. For deferrals made on or after April 1, 1998, the
Company matches fifty (50%) percent of the amount of the employee's base
salary deferrals, not in excess of six (6%) percent of base salary. The
Company may also make additional contributions on behalf of one or more
participants in its discretion for each plan year. The bookkeeping accounts
that are maintained on behalf of participants under this plan are credited
with earnings and losses based on deemed investments made at the direction of
the participant in specified investment funds. The Company has also assumed an
obligation to provide benefits under its non-qualified deferred compensation
plan based on deferrals and matching contributions made by certain Company
employees to a deferred compensation plan maintained by Trinity. Benefits are
paid in a lump sum payment at termination of employment or may be paid in
installments if the participant retires after age 55. Certain pre-termination
distributions are also available. Contributions to the non-qualified deferred
compensation plan are not deductible by the Company for federal income tax
purposes until benefits are paid to participants. The Company has established
a grantor trust under the plan, and the assets of the trust are considered
part of the general assets of the Company.
10
<PAGE>
Change of Control Agreements
The Company has entered or will enter into agreements (the "Change of
Control Agreements") with certain of the executive officers named in the
Summary Compensation Table and others to provide certain severance benefits in
the event of a termination of employment following a change of control (as
defined in the Change of Control Agreements) of the Company. Each Change of
Control Agreement provides that, following a change of control of the Company,
if the Company terminates the executive's employment other than as a result of
the executive's death, disability or retirement, or for cause (as defined in
the Change of Control Agreements), or if the executive terminates his
employment for good reason (as defined in the Change of Control Agreements),
then the Company will pay to such executive a lump sum equal to 2.99 times the
amount of the executive's base salary and bonus paid by the Company and its
subsidiaries to the executive during the twelve (12) months prior to
termination or, if higher, the twelve (12) months prior to the change of
control.
The severance benefits provided by the agreements also include certain
fringe benefits to which each executive would have been entitled if the
executive had remained in the employment of the Company and a supplemental
benefit based on the Company's pension plan, which benefit is payable in a
series of cash payments.
The Change of Control Agreements provide that, if any payment to which the
executive is entitled would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code, then the Company will pay to the executive
an additional amount so that the net amount retained by the executive is equal
to the amount that otherwise would be payable to the executive if no such
excise tax had been imposed.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The following report is submitted by the Compensation Committee for
inclusion in this proxy pursuant to the rules of the Securities and Exchange
Commission with respect to Executive Compensation:
The Compensation Committee (the "Committee"), subject to direction from the
Board of Directors, determines the general compensation policies of the
Company, determines the compensation to be paid to certain officers and
certain other persons in senior management positions and administers the
Company's Stock Option Plan. The Committee is composed of four independent,
non-employee directors.
Philosophy of Compensation
The objectives of the Company's compensation policies are (i) to attract and
retain the best possible executive talent, (ii) to motivate executives to
achieve the Company's goals, (iii) to link the executive and stockholder
interests through performance rewards, and (iv) to provide compensation that
appropriately recognizes individual and corporate contributions. The
Committee's compensation programs are designed to make a substantial component
of each executives' potential compensation dependent upon improving the
profitability of the Company. The Committee will do this by providing
incentives to achieve short-term and long-term objectives and by rewarding
exceptional performance and accomplishments. The Committee engages outside
compensation consultants to assist the Committee in determining appropriate
levels of compensation.
Types of Compensation
The Company provides two main types of compensation:
(1) Annual compensation, consisting generally of a base salary and an
incentive bonus payable only when profits for the year meet specified
target levels; and
(2) Long-term compensation, consisting primarily of stock options,
deferred compensation and other long-term incentive awards. The value of
awards of stock options and restricted shares is directly related to an
increase in the value of a share of the Company's Common Stock.
11
<PAGE>
Annual Compensation
At least once each year, the Committee reviews the Company's executive
compensation program. The Committee predetermines for each executive a base
salary and an incentive bonus formula. The annual base salary of each
executive is determined by a number of factors, including position in the
Company, the executive's duties and responsibilities, the executive's past and
expected future financial and other performance, the executive's leadership
ability, initiative, development of a team spirit, adaptability in a rapidly
changing competitive environment, strategic decisions, relative position in
the salary structure of the Company and information relating to compensation
paid to other executive officers in similar positions. The Committee expects a
recommendation from the Company's Chief Executive Officer but will exercise
its own judgment and make its own determination. A competitive base salary is
consistent with the Company's long-term business objectives of attracting and
retaining highly qualified, competent executives.
The incentive bonus is particularly aligned with the interests of the
Company's stockholders. The incentive bonuses as paid to executives in fiscal
1998, including the Company's Chief Executive Officer, were based upon the
achievement of predetermined goals. The formula was based upon a percentage of
base salary in relation to the Company's financial performance for the year.
The maximum incentive bonus is limited to a percentage of base salary.
Long-Term Compensation
The Company has adopted the Stock Option Plan, which permits the Committee
to make the following types of awards: (1) stock options, including incentive
stock options; (2) stock appreciation rights, in tandem with stock options or
freestanding, (3) restricted stock; (4) performance awards; (5) dividend
equivalent rights, in tandem with other awards or freestanding; and (6) other
awards based on, payable in, or otherwise related to the Common Stock of the
Company. Stock options were awarded but the Committee did not make any other
type of award in fiscal 1998.
The Committee considers stock options to be an important part of the
Company's long-term incentive program. The employees who are awarded stock
options gain only when the Company's stockholders gain--when the value of a
share of Common Stock increases. The Committee believes that stock options
come closer to aligning stockholder and executive interests than almost any
other type of long-term incentive compensation that the Committee can award at
this time. The number of shares for which options were granted in fiscal 1998
to the Chief Executive Officer and to the next four most highly compensated
executive officers are set forth in the table, "Option Grants in the Last
Fiscal Year" contained in this proxy.
Compensation of Chief Executive Officer in Fiscal 1998
Mr. Dane's total compensation reflects the Committee's positive evaluation
of his effective leadership of the Company during the past fiscal year and his
implementation of the Company's strategic goals during the period. Having led
the Company in its initial public offering and through its separation from
Trinity, Mr. Dane continued his leadership role during fiscal 1998 by
significantly expanding the Company's product lines and markets and by
enhancing the Company's management team. The acquisition of Texas Drydock,
Inc. was completed, which allows the Company to compete in the offshore
drilling rig market. In addition, Mr. Dane guided the Company in five (5)
additional strategic acquisitions, including the acquisition of certain assets
of AmClyde Engineered Products, Inc., which forms the basis of the Company's
new Engineered Products Group. Under Mr. Dane's guidance, the Company's
contract revenue earned in fiscal 1998 increased by sixty-five (65%) percent
to $670.2 million and the Company's net income rose by forty (40%) percent to
$22.5 million.
Mr. Dane's base salary for fiscal 1998 was $550,000 and, under the
predetermined formula as a percentage of salary based upon profits of the
Company for the fiscal year, he earned a bonus of $580,000. The terms of the
incentive formula for Mr. Dane limit his maximum incentive bonus in any
particular year to two hundred percent (200%) of base salary. Mr. Dane also
earned $113,000 under a deferred compensation plan under which an
12
<PAGE>
amount equal to ten percent (10%) of the participant's annual base salary and
incentive compensation is accrued to his deferred account on the books of the
Company, with interest at the prime rate from time to time at Texas Commerce
Bank. The amount in his deferred account will be paid to him only after
retirement or other termination of employment.
During fiscal 1998, Mr. Dane was granted, under the terms and conditions of
the Stock Option Plan, options to acquire 750,000 shares of the Company's
Common Stock at a price of $10.33 per share.
Policy on Deductibility of Compensation
Section 162(m) of the Internal Revenue Code of 1986 limits the deductibility
for federal income taxes of compensation in excess of $1 million paid to a
publicly held company's chief executive officer and any of the other four
highest-paid executive officers, except for "performance-based" compensation.
The Committee is aware of this limitation and intends to consider the effects
of Section 162(m) on the Company when making compensation decisions.
Compensation Committee
Kenneth W. Lewis, Chairman
Angus R. Cooper II, Member
Burt H. Keenan, Member
Barry J. Galt, Member
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
At the Company's initial public offering in September 1996, the Board
appointed a Compensation Committee, composed of Messrs. Kenneth W. Lewis and
Rick S. Rees, the only directors at that time who were not employees of the
Company or of Trinity, and decisions of the Committee were subject to the
approval of the Chairman and Chief Executive Officer of Trinity. In April
1997, after the Company's separation from Trinity and the resignation of those
members of the Company's Board then employed by Trinity, the Board named
Messrs. Lewis, Keenan and Cooper to its Compensation Committee, and in fiscal
1998, Mr. Galt was added to the Committee after his election to the Board. No
member of the Compensation Committee is or was a current or former officer or
employee of the Company and no Company executive officer serves as a director
or member of the compensation committee of any entity in which a Company
director or executive officer is a director or executive officer.
13
<PAGE>
PERFORMANCE GRAPH
The following graph shows a comparison of cumulative return (assuming
reinvestment of any dividends) for the Company, the S&P Small Cap 600 Index and
a peer group composed of Avondale Industries, Inc., Friede Goldman Intl., Inc.,
Gulf Island Fabrication, Inc., McDermott Incorporated and Unifab International.
The graph also reflects a comparison of such cumulative return for a peer group
composed of Avondale Industries, Inc., Global Industries Ltd., McDermott
Incorporated and Varco International, Inc., which peer group was utilized by
the Company for comparison in its last fiscal year's proxy statement. Since
there is no widely recognized standard industry group comprising the Company
and peer companies, the peer groups are composed of companies which have one or
more products that compete with products of the Company and are believed by the
Company to be companies that analysts frequently use to compare with an
investment in the Company. The change in the Company's peer group (as compared
to the peer group utilized for the preceding fiscal year) was made in part
because the Company, during fiscal year 1998, entered the market for
construction, modification and repair of mobile offshore rigs as a result of
its acquisition of Texas Drydock, Inc., completed in May 1997. Such change was
also made as a result of certain new peer group companies becoming reporting
companies under the Securities Exchange Act of 1934, as amended, during fiscal
year 1998. The information contained in this table was compiled by Research
Data Group.
LOGO
[Graph appears here]
14
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE
ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and persons who own more than ten percent (10%)
of the Company's Common Stock to file initial reports of ownership and changes
in ownership with the Securities and Exchange Commission ("SEC"). These
reports are also filed with the American Stock Exchange and a copy of each
report is required to be furnished to the Company.
Additionally, SEC regulations require that the Company identify any
individuals for whom one of the referenced reports was not filed on a timely
basis during the most recent fiscal year. To the Company's knowledge, based
solely on review of reports furnished to it and written representations that
no other reports were required during and with respect to the fiscal year
ended March 31, 1998, each individual who was required to file such reports
during the fiscal year complied with the applicable filing requirements,
except certain untimely filings by Mr. Dane (one Form 4 involving one
transaction and one Form 4 involving two transactions), Mr. Covington (Form 3
and Form 4 involving two transactions), and Mr. McCreary (Form 3).
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
With John Dane III, Chairman of the Board and Chief Executive Officer
Mr. Dane acquired 25% of the stock of United States Marine, Inc. ("USMI") in
June 1996 and an additional 10% in July 1997 with a commitment to acquire up
to an additional 40% over the next four years. USMI performs services for the
Company as a subcontractor with respect to the production of high-speed
composite vessels for the U.S. Navy, and the Company paid USMI approximately
$4.8 million during fiscal 1998 for subcontractor services. The Company
believes that the terms on which the Company has been supplied subcontractor
services by USMI were at least as favorable as those which could have been
obtained by the Company in arm's-length transactions with unrelated parties.
Nevertheless, Mr. Dane will transfer all of his rights and interest in USMI to
a trust for the benefit of family members and, to the extent the Company does
business with USMI, the manner in which such business is conducted will be
reviewed and approved by a member of the Audit Committee. During fiscal 1998,
the Company paid to entities owned 50% by Mr. Dane, a total of $51,600 in
lease payments for real and personal property, including a vessel, used in
connection with the Company's business. With the approval of the Board, during
fiscal 1998, the Company acquired the vessel, previously under charter to the
Company, for $400,000, its appraised value.
With Rick S. Rees, Director, Executive Vice President and Chief Financial
Officer
Prior to Mr. Rees' association with the Company, he was a stockholder of
Maritime Holdings, Inc. ("MHI") and its President. MHI owned 80% of the
outstanding capital stock of Texas Drydock, Inc. ("TDI"). On February 14,
1997, the Company contracted to acquire 51% of the outstanding capital stock
of MHI; 51% of the remaining 20% of the capital stock of TDI not owned by MHI;
and options to acquire the other 49%. At the closing in April 1997, at which
time Mr. Rees was a director of the Company, he received $2,814,621. On May
16, 1997, the Company purchased the other 49% of the outstanding stock of MHI.
At the second closing, Mr. Rees received a note from the Company in the
principal sum of $4,070,942, bearing interest at the rate of 7.1% per annum,
payable in full, principal and interest, on January 15, 1998 (the "Purchase
Price Note"), and a 15.18% interest in a $1,000,000 note, payable by the
Company and delivered in escrow, providing a similar interest rate (the
"Escrow Note"). During fiscal 1998, the Company pre-paid the Purchase Price
Note, principal and interest, in the amount of $4,154,090 and, under the
Escrow Note, interest earned under the Escrow Note of $4,576. In addition,
during fiscal 1998, the Company purchased industrial products for a total of
$179,018 from Southeastern Pump and Compressor, Inc., a company in which Mr.
Rees owns an 18.6% interest.
15
<PAGE>
With Don O. Covington, Executive Officer and Group President of TDI-Halter,
L.P.
Prior to his association with the Company, Mr. Covington was a stockholder
of TDI, owning the 20% of the outstanding capital stock of TDI not owned by
MHI. At the closing in April 1997, at which time Mr. Covington was an officer
of the Company, Mr. Covington received $3,874,500. At the second closing,
referenced above with respect to Mr. Rees, Mr. Covington received a Purchase
Price Note from the Company in the principal amount of $5,400,000, bearing
interest at the rate of 7.1% per annum, payable in full, principal and
interest, on January 5, 1998 and 20% interest of the Escrow Note. During
fiscal 1998, the Company paid Mr. Covington under his Purchase Price Note,
principal and interest of $5,366,208 and interest earned under the Escrow Note
of $7,542.
With Daniel J. Mortimer, Executive Vice President and Chief Operating Officer
During fiscal 1998, the Company leased certain equipment and purchased
certain materials from Gulf Coast Industries, Inc. ("GCI"), a company 50%
percent owned by Mr. Mortimer, making payments totalling $215,983. During
fiscal 1998, GCI acquired Cajan Wire, Inc., which, from time to time, is a
vendor to the Company. During fiscal 1998, the Company paid Cajan Wire a total
of $294,983. Mr. Mortimer also owns 50% of an entity which owns an aircraft
which, from time to time, is chartered by the Company. During fiscal 1998, the
Company paid such entity $117,593 for use of the aircraft in connection with
its business and operations.
During fiscal 1998, Mr. Mortimer received a payment of $250,000 in respect
of a non-compete covenant, the first of three installments. Such non-compete
covenant relates to the preservation of goodwill of Gulf Coast Fabrication,
Inc., which was acquired by the Company from Mr. Mortimer and another person
in 1994. At the Company's option, the covenant may be extended for additional
years for additional consideration.
With The Independent Auditors
Ernst & Young LLP, independent auditors, or a predecessor of that firm, were
the auditors of Trinity Industries, Inc. for many years and are the
independent auditors of the accounts of the Company for its fiscal year ended
March 31, 1998. It is anticipated that representatives of Ernst & Young LLP
will be present at the 1998 Annual Meeting, will have the opportunity to make
a statement if they so desire, and will be available to respond to appropriate
questions raised at the 1998 Annual Meeting or submitted to them in writing
before the 1998 Annual Meeting.
Ernst & Young LLP has informed the Company that it does not have any direct
financial interest in the Company and that it has not had any direct
connection with the Company in the capacity of promoter, underwriter,
director, officer or employee.
Under certain agreements entered into with Trinity Industries, Inc. in
connection with the Company's initial public offering on September 26, 1996,
for a period of three (3) years, the Company agreed to retain Ernst & Young
LLP as its auditing firm.
OTHER MATTERS
Management of the Company is not aware of other matters to be presented for
action at the 1998 Annual Meeting; however, if other matters are presented, it
is the intention of the persons named in the accompanying form of proxy to
vote in accordance with their judgment on such matters.
16
<PAGE>
STOCKHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING
Stockholders' proposals to be presented at the 1999 Annual Meeting of
Stockholders, for inclusion in the Company's proxy statement and form of proxy
relating to that meeting, must be received by the Company at its offices in
Gulfport, Mississippi, addressed to the Secretary of the Company, not later
than February 26, 1999. Upon timely receipt of any such proposal, the Company
will determine whether or not to include such proposal in the proxy materials
for the 1999 Annual Meeting, all in accordance with applicable regulations and
provisions governing the solicitation of proxies.
PLEASE SIGN, DATE, AND RETURN YOUR PROXY PROMPTLY TO AVOID UNNECESSARY
EXPENSE. ALL STOCKHOLDERS ARE URGED, REGARDLESS OF THE NUMBER SHARES OWNED, TO
PARTICIPATE IN THE 1998 ANNUAL MEETING BY RETURNING THEIR PROXY IN THE
ENCLOSED BUSINESS REPLY ENVELOPE.
By Order of the Board of Directors
MAUREEN O'CONNOR SULLIVAN
Senior Vice President and
Secretary
Gulfport, Mississippi
July 2, 1998
17
<PAGE>
[ ]
<TABLE>
<S> <C> <C> <C>
(1) Election of two (2) Directors: FOR all nominees [X] WITHHOLD authority to vote [X] *EXCEPTIONS [X]
listed below for all nominees listed below.
Nominees: Rick S. Rees and Kenneth W. Lewis.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and strike a line through that nominee's name.)
(2) Approval of the amendment to the Halter Marine Group, Inc. (3) In their discretion on such other matters as may properly
Restated Certificate of Incorporation, providing for an come before the meeting.
increase in the number of shares of common stock authorized
for issuance by the Company from 50,000,000 to 150,000,000.
FOR [X] AGAINST [X] ABSTAIN [X]
Change of Address and
or Comments Mark Here [X]
Please sign exactly as your name appears on the proxy. If
your stock is jointly owned, both parties must sign.
Fiduciaries and representatives should so indicate when
signing, and when more than one is named, a majority
should sign. If signed by a corporation, its seal should
be affixed.
Dated: _______________________________________________
______________________________________________________
Signature
______________________________________________________
Signature
Please DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED Votes must be indicated
ENVELOPE. NO POSTAGE IS REQUIRED. (x) in Black or Blue ink.
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HALTER MARINE GROUP, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS - July 28, 1998
The undersigned hereby appoints Barry J. Galt and Angus R. Cooper II and
each of them, with full power of substitution, as the attorneys, agents and
proxies of the undersigned to vote as directed on the reverse side hereof the
shares of stock which the undersigned would be entitled to vote, if personally
present, at the Annual Meeting of Stockholders of Halter Marine Group, Inc. to
be held at the Great Southern Club, One Hancock Plaza, Suite 1112, Gulfport,
Mississippi 39501, on Tuesday, July 28, 1998 at 10:00 a.m. Central Daylight
Time, and at any adjournment or adjournments thereof. Either of the above
proxies present, in person or by substitution, at such meeting or at any
adjournment thereof, so present and voting, either in person or by substitution,
shall exercise all of the powers hereby given. The undersigned hereby revokes
any proxy or proxies heretofore given to vote upon or act with respect to such
shares of stock and hereby ratifies and confirms all that said proxies, their
substitutes, or any of them, may lawfully do by virtue hereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED. IF
NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR EACH OF THE NAMED NOMINEES
FOR DIRECTOR AND FOR THE APPROVAL OF THE AMENDMENT TO THE HALTER MARINE GROUP,
INC. RESTATED CERTIFICATE OF INCORPORATION, PROVIDING FOR AN INCREASE IN THE
NUMBER OF SHARES OF COMMON STOCK AUTHORIZED FOR ISSUANCE BY THE COMPANY FROM
50,000,000 TO 150,000,000.
(Continued and to be marked, dated and signed on reverse side)
HALTER MARINE GROUP, INC.
P.O. BOX 11417
NEW YORK, N.Y. 10203-0417
