<PAGE> 1
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. )
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 sec. 240.14a-11(c) or sec. 240.14a-12
The Shaw Group 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.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously 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:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[SHAW GROUP LOGO]
THE SHAW GROUP INC.
11100 MEAD ROAD, SECOND FLOOR
BATON ROUGE, LOUISIANA 70816
To the Shareholders of The Shaw Group Inc.
Enclosed is a Notice of the 1998 Annual Meeting of Shareholders of The Shaw
Group Inc. and a Proxy and Proxy Statement relating to the Annual Meeting. The
Annual Meeting will be held on January 23, 1998 at 2:00 p.m., at the Hilton
Hotel, 5500 Hilton Avenue, Baton Rouge, Louisiana. The Proxy Statement describes
the matters to be acted upon at the meeting.
You are urged to sign and return the accompanying Proxy so that you may be
sure that your shares will be voted.
Sincerely,
/s/ J. M. Bernhard, Jr.
J. M. Bernhard, Jr.
Chairman of the Board, President
and Chief Executive Officer
Baton Rouge, Louisiana
December 22, 1997
<PAGE> 3
NOTICE OF THE 1998 ANNUAL MEETING
OF SHAREHOLDERS OF
THE SHAW GROUP INC.
To the Holders of the Common Stock:
PLEASE TAKE NOTICE that the 1998 Annual Meeting of Shareholders of The Shaw
Group Inc., a Louisiana corporation (the "Company"), will be held at the Hilton
Hotel, 5500 Hilton Avenue, Baton Rouge, Louisiana, on January 23, 1998, at 2:00
p.m. to consider and act upon:
(1) the election of six members to the Board of Directors; and
(2) such other business as may properly come before the meeting or any
adjournments thereof.
The Board of Directors has fixed the close of business on December 9, 1997,
as the record date for the determination of shareholders entitled to notice of,
and to vote at, the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ T. A. Barfield, Jr.
T. A. Barfield, Jr.
Secretary
Baton Rouge, Louisiana
December 22, 1997
IMPORTANT
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE INDICATE YOUR WISHES, DATE,
SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY, FOR WHICH A RETURN ENVELOPE IS
PROVIDED.
<PAGE> 4
THE SHAW GROUP INC.
11100 MEAD ROAD, SECOND FLOOR
BATON ROUGE, LOUISIANA 70816
PROXY STATEMENT
The accompanying Proxy is solicited on behalf of the Board of Directors of
The Shaw Group Inc. (the "Company") for use at the 1998 Annual Meeting of
Shareholders to be held on January 23, 1998, at 2:00 p.m., at the Hilton Hotel,
5500 Hilton Avenue, Baton Rouge, Louisiana, and any adjournments thereof. Only
shareholders of record at the close of business on December 9, 1997 will be
entitled to notice of, and to vote at, this Annual Meeting. The Company
anticipates that this Proxy Statement and the accompanying Proxy will be first
sent or given to the Company's shareholders on approximately December 22, 1997.
GENERAL
The purpose of the Annual Meeting is to consider and act upon the matters
which are listed in the accompanying Notice of Annual Meeting and set forth in
this Proxy Statement. The holders of shares having a majority of the voting
power of the Company's common stock, no par value (the "Common Stock"), issued
and outstanding and entitled to vote thereat shall be present in person or
represented by proxy to constitute a quorum for the transaction of business at
the Annual Meeting. The shares held by each shareholder who signs and returns
the enclosed form of Proxy will be counted, in accordance with the voting
procedures outlined below, for purposes of determining the presence of a quorum
at the meeting, whether or not the shareholder abstains on all matters or any
matter to be acted on at the meeting. Abstentions are counted toward the
calculation of a quorum. Broker non-votes (which result when a broker holding
shares for a beneficial owner has not received voting instructions on certain
matters from such beneficial owners) will be counted toward fulfillment of
quorum requirements. Any shareholder giving a Proxy has the power to revoke it
at any time before it is exercised by providing written notice of revocation to
the Secretary of the Company or by filing a Proxy of a later date with the
Secretary of the Company.
The enclosed form of Proxy provides a means for a shareholder to vote for
all the nominees for director listed thereon, to withhold authority to vote for
one or more of such nominees, or to withhold authority to vote for all of such
nominees. The Company's by-laws provide that directors are elected by a
plurality of the votes cast. There is no cumulative voting. Accordingly, the
withholding of authority by a shareholder (including broker non-votes) will not
be counted in computing a plurality and thus will have no effect on the results
of the election of such nominees. Each Proxy will be voted in accordance with
the shareholder's directions.
The enclosed form of Proxy also provides a means for a shareholder to vote
for, against or abstain from voting on any other matters as may properly come
before the Annual Meeting or any adjournments thereof. Approval of any other
matters as may properly come before the Annual Meeting will also require the
affirmative vote of a majority of the voting power present in person or
represented by proxy and entitled to vote at the Annual Meeting.
Unless the shareholder specifies otherwise, a Proxy in the accompanying
form which is properly executed and duly returned will be voted FOR the election
of the six nominees listed hereinafter under the caption "Election of
Directors."
The cost of preparing, assembling, printing and mailing this Proxy
Statement, the form of Proxy, and the Notice of Annual Meeting of Shareholders
will be paid by the Company. In addition to solicitation by use of the mails,
solicitation of Proxies may also be made personally by certain directors,
officers and employees of the Company, and no additional compensation will be
paid to such individuals. Proxies will also be solicited by Corporate Investor
Communications, Inc., whose fee of $3,000 plus out-of-pocket expenses will be
paid by the Company. The Company will also supply brokers or persons holding
stock in their names or in the names of their nominees with such number of
Proxies, proxy materials and annual reports as they may require for mailing to
beneficial owners and will reimburse them for their reasonable expenses incurred
in connection therewith.
<PAGE> 5
On November 30, 1996, the Company had issued and outstanding and entitled
to vote 12,488,393 shares of the Common Stock. The Common Stock is the only
outstanding class of voting securities of the Company.
VOTING RIGHTS OF COMMON STOCK
The Company's articles of incorporation, as restated, provide that each
outstanding share of Common Stock will entitle the holder thereof to five votes,
except that holders of outstanding shares of Common Stock with respect to which
there have been certain specified changes in beneficial ownership during the
four years immediately preceding the record date (December 9, 1997) will be
entitled to one vote per share. Thus, shares owned on or before December 9, 1993
and as to which there has been no such changes in beneficial ownership since
that date, are entitled to five votes per share. Under these provisions, shares
issued in the Company's initial public offering in December 1993 are entitled to
five votes per share (if no intervening change in beneficial ownership has
occurred) but shares issued by the Company in the public offering in December
1996 and January 1997 will be entitled to only one vote per share. See
"Determination of Beneficial Ownership" on page 16 for a more detailed
discussion of the provisions of the Company's articles of incorporation, as
restated, relating to the voting rights of the holders of the shares of Common
Stock and the manner of determination thereof.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Common Stock as of November 30, 1997 (except as otherwise noted) with
respect to (i) each person known by the Company to own beneficially more than 5%
of the outstanding shares of Common Stock, (ii) each executive officer of the
Company as of August 31, 1997, and each executive officer of the Company as of
the date of this Proxy Statement, director and nominee for director of the
Company, and (iii) all such executive officers and directors as a group. Each of
the following shareholders has sole voting and investment power with respect to
shares beneficially owned by such shareholder, except to the extent that
authority is shared by spouses under applicable law or as otherwise noted. The
Common Stock constitutes the only class of equity securities of the Company
which is outstanding.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP PERCENT OF
NAME OF BENEFICIAL OWNER SHARES PERCENT VOTING POWER
------------------------ ---------- --------- ------------
<S> <C> <C> <C>
J. M. Bernhard, Jr. ............................... 1,408,146 11.2% 32.0%
11100 Mead Road
Baton Rouge, Louisiana 70816
G. Ray Wilkie, Jr. (1)............................. 322,738 2.6% 7.1%
A. W. Angelo....................................... 262,757 2.1% 6.0%
Frank Fronek (2)................................... 104,000 * *
Albert McAlister (3)............................... 71,792 * 1.6%
Richard F. Gill (4)................................ 62,500 * *
Ronald D. Brown, Jr. (5)........................... 54,750 * *
George R. Shepherd (6)............................. 27,900 * *
Michael H. Wootton (7)............................. 26,500 * *
John W. Sinders, Jr. (8)........................... 19,750 * *
George P. Bevan (9)................................ 16,990 * *
David W. Hoyle (10)................................ 13,250 * *
John W. Dalton, Sr. ............................... 8,050 * *
L. Lane Grigsby (11)............................... 7,600 * *
Edward L. Pagano................................... 200 * *
N. Andrew Dupuy, Jr................................ -- -- --
William H. Grigg................................... -- -- --
All executive officers, directors and nominees for
director as a group (17 persons) (12)............ 2,405,923 19.1% 48.1%
</TABLE>
- ---------------
* less than 1%
(1) Includes 15,000 shares of which Mr. Wilkie may be deemed to be beneficial
owner as a result of rights that he may exercise to acquire beneficial
ownership within 60 days.
2
<PAGE> 6
(2) Includes 12,500 shares owned of record by Mr. Fronek's spouse and 29,000
shares of which Mr. Fronek may be deemed to be the beneficial owner as a
result of rights that Mr. Fronek may exercise to acquire beneficial
ownership within 60 days.
(3) Includes 2,750 shares of which Mr. McAlister may be deemed to be beneficial
owner as a result of rights that he may exercise to acquire beneficial
ownership within 60 days.
(4) Includes 40,000 shares owned by a company controlled by Mr. Gill.
(5) Includes 8,750 shares of which Mr. Brown may be deemed to be beneficial
owner as a result of rights that he may exercise to acquire beneficial
ownership within 60 days.
(6) Includes 8,750 shares of which Mr. Shepherd may be deemed to be beneficial
owner as a result of rights that he may exercise to acquire beneficial
ownership within 60 days.
(7) Includes 26,500 shares of which Mr. Wootton may be deemed to be beneficial
owner as a result of rights that he may exercise to acquire beneficial
ownership within 60 days.
(8) Includes 2,750 shares of which Mr. Sinders may be deemed to be beneficial
owner as a result of rights that he may exercise to acquire beneficial
ownership within 60 days.
(9) Includes 5,740 shares owned of record by Mr. Bevan's spouse and 11,250
shares of which Mr. Bevan may be deemed to be beneficial owner as a result
of rights that he may exercise to acquire beneficial ownership within 60
days.
(10) Includes 2,000 shares owned of record by Mr. Hoyle's spouse and 2,750
shares of which Mr. Hoyle may be deemed to be beneficial owner as a result
of rights that he may exercise to acquire beneficial ownership within 60
days.
(11) Includes 2,750 shares of which Mr. Grigsby may be deemed to be beneficial
owner as a result of rights that he may exercise to acquire beneficial
ownership within 60 days.
(12) Includes 20,240 shares owned of record by spouses of executive officers and
directors and 110,250 shares of which executive officers and directors may
be deemed to be the beneficial owners as a result of rights they may
exercise to acquire beneficial ownership within 60 days.
ELECTION OF DIRECTORS
During the fiscal year ended August 31, 1997, each of Dale R. Brown and
Bret M. Talbot resigned from the Board of Directors and from the employ of the
Company. Mr. Talbot was the Company's Chief Financial Officer and Treasurer and
Mr. Brown was the Chairman of Alloy Piping Products, Inc., a wholly-owned
subsidiary of the Company. The vacancies created by these resignations were not
filled by the Board of Directors at the time they were created. At its December
8, 1997 meeting, the Board of Directors decreased the number of directorships
from nine to six, and nominated J. M. Bernhard, Jr., Albert McAlister, L. Lane
Grigsby, David W. Hoyle, John W. Sinders, Jr. and William H. Grigg as nominees
for director to be considered at the 1998 Annual Meeting. The terms of present
directors Frank Fronek and George R. Shepherd will expire at the 1998 Annual
Meeting. Each nominee is presently a director of the Company, except Mr. Grigg.
Each director is to be elected for a term of one year and to serve until the
next annual meeting of shareholders or until his successor is elected and
qualified. The enclosed form of Proxy confers discretionary authority with
respect to the election of directors, but no authority under the Proxy will be
exercised to vote for the election of any person as a director, other than the
persons named in this Proxy Statement who have been nominated by the present
Board of Directors, unless, for some reason not presently known, one or more of
such nominees should become unavailable. In such event, it is intended that the
Proxy would be voted for a substitute nominee or nominees who would be
designated by the Board of Directors prior to the shareholders' meeting. In
order to be elected as a director, a nominee must receive a plurality of the
votes cast by the holders of Common Stock. The name and age, principal
occupation or employment, and
3
<PAGE> 7
other data regarding each nominee, based on information received from the
respective nominees, are set forth below:
J. M. BERNHARD, JR., age 43, founder of the Company, has been
President and Chief Executive Officer of the Company since its inception in
September 1987. He has also been a director of the Company since its
inception. Mr. Bernhard has been Chairman of the Board since August 1990.
Mr. Bernhard has spent the last 20 years in the pipe fabrication business.
Immediately prior to his position with the Company, Mr. Bernhard was Vice
President and General Manager of Sunland Services and served on the Board
of Directors of Barnard and Burk Engineers & Constructors.
ALBERT MCALISTER, age 46, has been a director of the Company since
April 1990 and has served on the Company's Audit Committee since November
1993. He also served on the Company's Compensation Committee from November
1993 to March 1995. Since 1975, Mr. McAlister has been a partner in the law
firm of McAlister & McAlister, P.A. in Laurens, South Carolina. He also
served as Chairman of the Democratic Party in South Carolina from 1990
until 1994.
L. LANE GRIGSBY, age 56, has served as a director of the Company since
January 1995 and a member of its Compensation Committee since March 1995.
Mr. Grigsby is also the Chairman of the Board of Cajun Contractors, Inc.,
for which he also served as President and Chief Executive Officer from
April 1973 to June 1994. He has 30 years of experience in the industrial
construction industry. He also serves as an officer or director for several
industry and charitable organizations, including the Associated Builders
and Contractors and the Louisiana Association of Business and Industry.
DAVID W. HOYLE, age 59, has served as a director of the Company since
January 1995 and a member of its Compensation Committee since March 1995.
He has also served as a member of the Audit Committee since September 1996.
For the past eleven years, he has been self-employed primarily as a real
estate developer and has been a member of the Senate Chamber of the North
Carolina General Assembly since 1992. Senator Hoyle serves as a director of
several private corporations, as well as several civic, educational and
charitable organizations.
JOHN W. SINDERS, JR., age 42, has served as a director of the Company
since March 1995. He also served as a member of the Audit Committee from
March 1995 to September 1996. He has served as a managing director of
Jefferies & Company, Inc. since 1993. From 1987 to 1993, Mr. Sinders served
as a managing director of Howard Weil Labouisse Friedrichs Incorporated and
a member of the Board of Directors of Howard Weil from 1990 to 1993. Prior
to joining Howard Weil, he was a partner with the law firm of McGlinchey,
Stafford, Mintz, Cellini & Lang.
WILLIAM H. GRIGG, age 65, is a new nominee for director. Mr. Grigg is
the retired chairman and Chief Executive Officer of Duke Power. Mr. Grigg
began his career at Duke Power in 1963. He served as chairman and Chief
Executive Officer from April 1994 to June 1997. Prior to being elected
chairman, he served as vice chairman for three years. Mr. Grigg is on the
board of directors of Hatteras Income Securities Inc., Nations Fund, Inc.,
Research Triangle Foundation, Associated Electric and Gas Insurance
Services Ltd., and the Charlotte-Mecklenburg Hospital Authority. He is a
member of several civic and charitable organizations, serves on the board
of advisors of Duke University's Fuqua School of Business, and is vice
chairman of Southeastern Electric Exchange.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE SIX NOMINEES FOR
DIRECTOR.
BOARD MEETINGS, COMMITTEES AND COMPENSATION
During the fiscal year ended August 31, 1997 ("fiscal 1997"), nine meetings
of the Board of Directors were held. Each incumbent director who is a nominee
for re-election attended at least 75% of aggregate of the total number of
meetings of the Board of Directors and the total number of meetings held by all
committees of the Board on which each such director served during fiscal 1997.
The Board of Directors has no nominating or other committee performing similar
functions at this time. The following directors presently serve on the Audit
Committee: Albert McAlister and David W. Hoyle. In September 1996, Mr. Hoyle
replaced John W.
4
<PAGE> 8
Sinders, Jr. on the Audit Committee. The Audit Committee met three times during
fiscal 1997. The primary functions of the Audit Committee are as follows: to
review the scope and timing of the audit and non-audit services rendered by the
Company's independent accountants; to review their reports upon completion of
their audits; to review the appropriateness of the Company's accounting
policies, the adequacy of its financial controls and the reliability of the
financial information reported to the public; and to report to the Board of
Directors on its activities. The following directors presently serve on the
Compensation Committee: L. Lane Grigsby and David W. Hoyle. The Compensation
Committee met five times in fiscal 1997. The primary functions of the
Compensation Committee are to provide a general review of the Company's
compensation and benefit plans to determine if they meet corporate objectives.
In addition, the Compensation Committee reviews the Chief Executive Officer's
recommendations on (i) compensation of all officers of the Company, (ii)
granting of awards under the Company's 1993 Employee Stock Option Plan and its
other benefit plans, and (iii) the adoption of and/or changes to major Company
compensation policies and practices.
MANAGEMENT OF THE COMPANY
The following table provides information with respect to (i) all persons
who were serving as executive officers of the Company on August 31, 1997, and
(ii) all persons who, as of the date of this Proxy Statement, are serving as
executive officers of the Company. As a result of recent corporate
restructuring, Messrs. Dalton, Fronek and Wootton, while still employed as
officers of Company subsidiaries, are no longer serving as executive officers of
the Company. Mr. Dupuy was not serving as an executive officer of the Company as
of August 31, 1997. Each executive officer has been elected to serve until his
successor is duly appointed or elected by the Board of Directors or his earlier
removal or resignation from office.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
J. M. Bernhard, Jr...................... President and Chief Executive Officer
Edward L. Pagano........................ Chief Financial Officer and Treasurer
George R. Shepherd...................... Executive Vice President
A. W. Angelo............................ Executive Vice President
G. Ray Wilkie, Jr....................... Executive Vice President
George P. Bevan......................... Executive Vice President
Ronald D. Brown, Jr..................... President of Shaw Manufacturing &
Services, Inc.*
N. Andrew Dupuy, Jr..................... President of Shaw Power Services, Inc.*
Richard F. Gill......................... President of Shaw Process & Industrial
Group, Inc.*
Frank Fronek............................ Executive Vice President of Shaw Power
Services, Inc.*
John W. Dalton, Sr...................... Executive Vice President of Shaw Process
and Industrial Group, Inc.*
Michael H. Wootton...................... Executive Vice President of Shaw Power
Services, Inc.*
</TABLE>
- ---------------
* wholly-owned subsidiaries of the Company
J.M. BERNHARD, JR. -- See "Election of Directors".
EDWARD L. PAGANO, age 39, joined the Company in May 1997, and has been the
Company's Chief Financial Officer and Treasurer since that time. Prior to his
employment with the Company, Mr. Pagano spent eight years with Kvaerner John
Brown, where he was Senior Vice President and Chief Financial Officer for its
U.S. operations. Kvaerner John Brown, a division of Kvaerner a.s. of Oslo,
Norway, is the third largest engineering and construction company in the world,
specializing in providing total turnkey projects in the chemical, hydrocarbon
and pharmaceutical industries. Previously, Mr. Pagano worked for four years as
Controller for URS Consultants, Inc., an engineering and construction consulting
firm located in Paramus, New Jersey.
5
<PAGE> 9
GEORGE R. SHEPHERD, age 59, joined the Company in August 1993 as its Vice
President of Operations and served as its Chief Operating Officer from November
1995 to December 1997. Mr. Shepherd has been a director of the Company since
March 1995, but is not standing for reelection at the 1998 Annual Meeting. Prior
to joining the Company, Mr. Shepherd served as President of International Piping
Systems, Inc. from March 1984 to July 1993. He has spent the last 39 years in
the pipe fabrication business.
A. W. ANGELO, age 65, joined the Company in September 1987 and has been
Executive Vice President of the Company since September 1990. Mr. Angelo served
as a director of the Company from August 1990 to March 1995. Mr. Angelo served
as President of Lone Star Fabricators, Inc., a wholly-owned subsidiary of the
Company located in Texas City, Texas which was closed in August of 1994, from
March 1990 until July 1993. Mr. Angelo has spent the last 41 years in the pipe
fabrication business.
G. RAY WILKIE, JR., age 52, joined the Company in March 1988 and served as
Vice President of B. F. Shaw, Inc., a wholly-owned subsidiary of the Company,
from September 1990 until May 1993 and President of B. F. Shaw, Inc. from May
1993 until November 1995, when he was appointed Executive Vice President of the
Company. Mr. Wilkie also served as a director of the Company from January 1993
to March 1995. Mr. Wilkie has spent the last 30 years in the pipe fabrication
business.
GEORGE P. BEVAN, age 50, has been employed by the Company since September
1994, and has been Executive Vice President of the Company since April 1997. Mr.
Bevan was previously a Vice President of the Company. Prior to joining the
Company, Mr. Bevan was a senior partner in the law firm of Bevan-Hernandez,
which he began in 1991. He was also President of Southern United Financial
Corporation, an insurance and financial services company from 1987 to 1994.
RONALD D. BROWN, JR., age 44, has been employed by the Company since April
5, 1996, when the Company purchased all of the outstanding capital stock of his
family's business, Alloy Piping Products, Inc. ("APP"), a manufacturer of
specialty stainless and carbon steel pipe fittings and other stainless pipe
products located in Shreveport, Louisiana. Upon acquisition, Mr. Brown became
APP's President. Mr. Brown now serves as the President of Shaw Manufacturing and
Services, Inc., a wholly-owned subsidiary of the Company. Mr. Brown has over 25
years experience in the pipe fittings manufacturing business.
N. ANDREW DUPUY, JR., age 42, has been employed by the Company since
February 20, 1997, when the Company purchased all of the outstanding capital
stock of United Crafts, Inc. ("UCI"), an industrial construction and maintenance
company based in Baton Rouge, Louisiana. After the acquisition, Mr. Dupuy
remained as UCI's President, a position he held until December 1997. Mr. Dupuy
is now President of Shaw Power Services, Inc., a wholly-owned subsidiary of the
Company. Mr. Dupuy has over 24 years experience in the industrial construction
and maintenance industry.
RICHARD F. GILL, age 54, has been employed by the Company since March 20,
1997, when the Company acquired certain assets of Merit Industrial Constructors,
Inc. and other affiliated entities ("Merit"), which companies were owned by Mr.
Gill and members of his family. Mr. Gill is the President of Shaw Process and
Industrial Group, Inc., a wholly-owned subsidiary of the Company. Mr. Gill was
President of Merit since it was founded in January 1982. Merit was an industrial
construction and maintenance firm based in Baton Rouge, Louisiana. Mr. Gill has
over 30 years experience in the industrial construction and maintenance
industry.
FRANK FRONEK, age 49, has served the Company as the President of Fronek
Company and F.C.I. Pipe Support Sales since April 1994, when such businesses
were acquired by the Company. Mr. Fronek has been a director of the Company
since May 1994, but is not standing for reelection at the 1998 Annual Meeting.
Prior to joining the Company, Mr. Fronek was the owner and President of such
businesses, which he founded in 1980 and 1986, respectively. He has 26 years
experience in the engineering and design of piping systems and piping support
systems.
6
<PAGE> 10
JOHN W. DALTON, SR., age 47, was an Executive Vice President of the Company
from April 1995 to August 1997, and is now an Executive Vice President of Shaw
Process and Industrial Group, Inc., a wholly-owned subsidiary of the Company.
Immediately prior to joining the Company, he was employed by the Bechtel Group
(an engineering and construction firm) in various positions for 19 years, most
recently as Manager of Business Development. His experience includes, among
other things, positions in construction, manufacturing, project management,
procurement and contracts, as well as managerial and financial functions.
MICHAEL H. WOOTTON, age 51, has been employed by the Company since October
1991, was President of Shaw International, Inc., a wholly-owned subsidiary of
the Company, since April 1993 and is now an Executive Vice President of Shaw
Power Services, Inc., a wholly-owned subsidiary of the Company. Prior to his
employment with the Company, Mr. Wootton was President of Connex Pipe Systems.
Mr. Wootton has spent the last 28 years in the pipe fabrication business.
EXECUTIVE COMPENSATION
The following table contains compensation data for the last three fiscal
years for the Company's Chief Executive Officer and its four other most highly
compensated executive officers during fiscal 1997 (the "Named Executive
Officers"). As noted above, Messrs. Fronek, Wootton and Dalton were executive
officers of the Company as of August 31, 1997, but are not as of the date
hereof.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------------------- SECURITIES
FISCAL OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR(1) SALARY BONUS COMPENSATION(5) OPTIONS(#) COMPENSATION
--------------------------- ------- -------- ------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
J. M. Bernhard, Jr. 1997 $500,000 -- $54,531(5) -- $ 4,750(8)
President, Chief Executive 1996 $500,000 -- -- -- $ 2,630
Officer and Chairman of the Board 1995 $500,000 -- -- -- $ 2,265
Frank Fronek 1997 $225,000 $65,000(3) -- 12,000(6) $ 4,750(8)
Executive Vice President of 1996 $219,231 $65,000(3) -- 12,000(6) $ 4,750
Shaw Power Services, Inc. 1995 $200,000 -- -- 5,000(6) $ 4,620
George R. Shepherd 1997 $225,000 -- -- -- $ 5,875(9)
Executive Vice President 1996 $183,750 -- -- -- $ 2,928
1995 $165,000 --(4) 35,000(7) $ 2,984
Michael H. Wootton 1997 $215,000 -- -- -- $ 4,750(7)
Executive Vice President of 1996 $178,333 -- -- -- $ 3,208
Shaw Power Services, Inc. 1995 $162,500 --(4) -- 65,000(7) $ 3,805
John W. Dalton, Sr. 1997 $191,667 -- -- -- $64,650(10)
Executive Vice President of Shaw 1996 $175,000 -- -- -- $ 750
Process and Industrial Group, Inc. 1995 $ 62,500(2) -- -- 35,000(7) $ 0
</TABLE>
- ---------------
(1) The Company's fiscal year ends on August 31.
(2) Mr. Dalton did not join the Company until April 1995.
(3) The bonuses for fiscal 1996 and 1997 were awarded to Mr. Fronek under his
employment agreement with the Company. See "Employment Agreements."
(4) Bonuses were awarded for fiscal 1995 to several named executive officers
under the Company's Annual Incentive Compensation Plan. The fiscal 1995
bonuses, however, were awarded in performance shares and not cash. Such
performance shares will vest in three years, have a value that increases or
decreases
7
<PAGE> 11
proportionally with the Company's book value and are to be redeemed in cash
within 90 days after the end of the fiscal year ending August 31, 1998. The
values as of August 31, 1995 of the performance shares awarded to Messrs.
Shepherd and Wootton were $6,600, and $6,400, respectively.
(5) Personal benefits, except those in 1997 for Mr. Bernhard, have not been
disclosed in the "Other Annual Compensation" column since, in the
aggregate, they did not exceed the lesser of either $50,000 or 10% of the
total salary and bonus. As a result of Company recordkeeping procedures,
the amount disclosed in the 1997 column for Mr. Bernhard constitutes total
personal benefits for the period January 1, 1996 through December 31, 1996.
Of the total, $37,909 represents Mr. Bernhard's personal use of Company
transportation.
(6) Denotes shares of Common Stock of the Company that may be purchased upon
exercise of options granted under Mr. Fronek's employment agreement with
the Company. The options reported in the fiscal 1995 column were awarded to
Mr. Fronek during fiscal 1994, but were "repriced" during fiscal 1995, and,
as a result, have been reported in the fiscal 1995 column. The options
awarded during fiscal 1996 and 1997 are also subject to the Company's 1993
Employee Stock Option Plan. See "Employment Agreements."
(7) Denotes shares of Common Stock of the Company that may be purchased upon
exercise of options granted under the Company's 1993 Employee Stock Option
Plan. Such options were awarded to Messrs. Shepherd and Wootton during
fiscal 1994, but were "repriced" during fiscal 1995, and, as a result, have
been reported in the fiscal 1995 column.
(8) Represents the Company's contribution on behalf of the officer to the
Company's 401(k) plan.
(9) Of such amount, $4,750 represents the Company's contribution on behalf of
Mr. Shepherd to the Company's 401(k) plan and $1,125 represents term life
insurance premiums paid by the Company for life insurance coverage for him.
(10) Represents (i) a $4,750 contribution by the Company on Mr. Dalton's behalf
to the Company's 401(k) plan and (ii) the forgiveness during fiscal 1997 of
a $59,900 loan previously made by the Company to Mr. Dalton.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding the grants of options
to purchase shares of the Company's Common Stock that were made under the
Company's 1993 Employee Stock Option Plan to any of the Company's Chief
Executive Officer and the Named Executive Officers during fiscal 1997:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATE OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(2)
OPTIONS EMPLOYEES PRICE EXPIRATION ---------------------
NAME GRANTED(1) FISCAL YEAR $/SHARE DATE 5% 10%
---- ---------- ----------- -------- --------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Frank Fronek............ 12,000 13.31% $32.875 August 31, 2007 $248,099 $628,731
</TABLE>
- ---------------
(1) The options are subject to the terms of the 1993 Employee Stock Option Plan.
(2) Based upon the closing price of a share of the Company's Common Stock listed
on the New York Stock Exchange on the last trading day of the Company's
fiscal year ended August 31, 1996.
8
<PAGE> 12
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth (i) the shares acquired upon exercise of
options by any of the Company's Chief Executive Officer and the Named Executive
Officers during fiscal 1997 and the aggregate value realized therefrom and (ii)
the value at August 31, 1997 of the unexercised options held by any of the Chief
Executive Officer and Named Executive Officers during fiscal 1997:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF
SHARES
UNDERLYING
UNEXERCISED
OPTIONS VALUE OF UNEXERCISED
FISCAL YEAR-END IN-THE-MONEY OPTIONS AT FISCAL YEAR END
SHARES ACQUIRED VALUE EXERCISABLE/ ---------------------------------------
NAME ON EXERCISE(#) REALIZED($)(1) UNEXERCISABLE EXERCISABLE(2)(3) UNEXERCISABLE(3)(4)
---- --------------- -------------- --------------- ----------------- -------------------
<S> <C> <C> <C> <C> <C>
Frank Fronek.......... -- -- 29,000/0 $223,122 --
George R. Shepherd.... 17,500 $246,103 0/17,500 -- $275,625
Michael H. Wootton.... 6,000 $ 76,500 10,250/32,500 $161,438 $511,875
John W. Dalton,
Sr. ................ 8,750 $ 90,781 0/17,500 -- $260,313
</TABLE>
- ---------------
(1) The exercise price of each reported option exercise ranged from $5.875 to
$6.75 per share with a weighted average exercise price of $6.11, and the
fair market value of the Common Stock at the time of each exercise ranged
from $17.125 to $19.938 per share with a weighted average fair market value
of $18.93 per share.
(2) The exercise prices of the reported options range from $5.875 per share to
$9.594 per share with a weighted average exercise price of $7.51.
(3) The values are based upon the closing price reported on the New York Stock
Exchange of the Common Stock on August 31, 1997 ($21.625).
(4) The exercise prices of the reported options range from $5.875 per share to
$6.75 per share with a weighted average exercise price of $6.10.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The persons serving as members of the Compensation Committee of the Board
of Directors during fiscal 1997 were L. Lane Grigsby and David W. Hoyle. No
member of the Compensation Committee was an officer or employee of the Company
or any of its subsidiaries during fiscal 1996. No executive officer of the
Company served during fiscal 1997 as a director or as a member of the
Compensation Committee of another entity, one of whose executive officers served
as a director or on the Compensation Committee of the Company.
DIRECTOR COMPENSATION
Each non-employee director of the Company receives a fee of $10,000 per
year and $750 for each meeting of the Company's Board of Directors attended.
Each non-employee director serving on a committee of the Board receives a fee of
$250 for each committee meeting attended. Directors are also reimbursed for
certain expenses in connection with their attendance at board and committee
meetings. In addition, pursuant to the Company's 1996 Non-Employee Director
Stock Option Plan (the "Director Plan"), each non-employee director received an
option to purchase 5,000 shares of the Company's Common Stock on the effective
date (July 14, 1996) of the Director Plan. These options vest in 25% increments
in each of the four years following grant. In addition, each non-employee
director will be awarded an additional option to purchase 1,500 shares of the
Company's Common Stock on an annual basis upon his or her election or reelection
to the Board. Such options will vest one year from the date of award. The
exercise price for all options granted under the Director Plan is the closing
price of a share of the Company's Common Stock reported on the New York Stock
Exchange on the date of award.
9
<PAGE> 13
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
General. The Compensation Committee of the Board of Directors (the
"Committee") has been appointed by the Board as the administrator of the
Company's compensation program for executive officers and key employees. During
fiscal 1997, the Committee was comprised of two non-employee directors, L. Lane
Grigsby and David W. Hoyle.
The duties of the Committee generally are to review (a) the Company's
compensation and benefit plans to determine if they meet corporate objectives
and (b) the Chief Executive Officer's recommendations regarding (i) the
compensation of all officers of the Company; (ii) awards under the Company's
1993 Employee Stock Option Plan (for which the Committee serves as
administrator) and its other benefit plans; and (iii) the adoption of and/or
changes to major Company compensation policies and practices.
In performing the above described duties, the Committee seeks to attain the
following corporate objectives: (i) to attract, motivate and retain competent
employees focused on enhancing shareholder value; (ii) to correlate compensation
with Company objectives and strategies; (iii) to provide compensation
opportunities that are linked to the performance of the Company; and (iv) to
align employee incentives with those of the Company's shareholders. No specific
weighting is assigned to any of these objectives by the Committee in making
decisions regarding compensation for the Chief Executive Officer (the "CEO") or
executives or key employees of the Company.
Set forth below is a discussion of the Company's executive compensation
program, including a description of the decisions and actions of the Committee
during fiscal 1997 with respect to compensation for the CEO and executive
officers and key employees of the Company as a group.
Management Compensation
Base Salary. In determining appropriate base salaries, the Committee
considers competitive market forces as they relate to attracting and retaining
highly talented executives. The Committee also considers job responsibility,
experience, tenure and the cost of living in the areas where the Company's
offices and facilities are located, among other factors, in setting base salary
levels. Late in fiscal 1996, based upon recommendations of the CEO and in light
of additional responsibilities necessitated by the Company's recent acquisitions
and growth, the Committee approved additional raises for certain members of the
Company's executive and senior management, including Messrs. Fronek, Shepherd,
Wootton and Dalton. The Committee believes that such raises will encourage such
persons to continue in the employ of the Company.
Cash Bonuses. Prior to the fiscal year ended August 31, 1994 ("fiscal
1994"), the Company historically distributed 16% to 20% of its annual earnings
in bonuses, which were discretionary, and the amounts of any such bonus awarded
to particular executives, other than the CEO, were determined by the CEO in
consultation with other executive officers of the Company based on factors such
as performance and overall contributions to the Company. During fiscal 1994, the
performance of the Company was significantly lower than its expectations, and,
as a result, no bonuses were paid to employees. During fiscal 1995, the Company
retained the services of an independent firm to evaluate the compensation
practices of the Company. This firm recommended, and the Committee approved, the
adoption of an Annual Incentive Compensation Plan (the "Incentive Plan") for the
Company. The Incentive Plan provides for annual bonuses to all salaried
employees (other than the CEO) of the Company and its domestic subsidiaries, if
the Company achieves certain targets, which are based upon a minimum return on
equity. The Incentive Plan provides that the bonus pool awarded for payment
shall be 50% of the amount that net profit after taxes exceeds the target. Any
such bonuses will be paid out partially in cash (to be paid as soon as practical
after the end of the fiscal year to which the bonus relates) and partially in
performance shares, which will (i) vest in three years; (ii) have a value that
increases or decreases proportionally with the Company's book value; and (iii)
be paid in cash within 90 days after the third anniversary of the fiscal year
end to which the bonus relates. The Incentive Plan also establishes certain caps
on the aggregate bonus (cash plus performance shares) that can be awarded to any
employee thereunder. The caps are based upon a percentage of the employee's
salary, with the percentages ranging from 15% to 50% depending upon the
employee's position in the Company. Those employees with a higher position in
the Company may receive a greater percentage of their salary in bonuses awarded
under the Incentive Plan.
10
<PAGE> 14
In fiscal 1997, the Company did not attain the threshold required for
payment of bonuses under the Incentive Plan, which threshold was based on net
book value at the beginning of the fiscal year multiplied by the treasury rate
plus 2%. Subsidiaries that were acquired during fiscal 1997 were not included in
the Company's financial results that were used in determining whether the
threshold under the Incentive Plan was achieved for fiscal 1997.
Awards of Stock Options and Restricted Stock. The Company's 1993 Employee
Stock Option Plan (the "Option Plan") is maintained by the Company to provide
key employees, including employee-directors, with an additional incentive to
promote the financial success of the Company as reflected in increased value in
the Company's Common Stock. Stock options granted to key employees and
executives have generally been long-term (10 years) and vest in 25% annual
increments beginning one year from the date of grant. The Company has used, and
plans to continue to use the award of stock options to align the interests of
the recipients with the interests of the Company's shareholders and to provide
an incentive for the key employees or executives to remain in the employ of the
Company. During fiscal 1997, the Committee granted options covering a total of
90,135 shares of Common Stock. In addition, effective as of July 21, 1997, the
Board of Directors of the Company approved an amendment to the Option Plan that
provides for restricted stock as an additional type of award that may be made
thereunder. The Committee has the sole discretion to determine the terms and
conditions of the award of shares of restricted stock, but in no event may
shares of restricted stock vest less than six months after the date of award.
Effective after the end of fiscal 1997, the Committee awarded Mr. Dalton 15,000
shares of restricted stock that vest only if Mr. Dalton is continuously employed
by the Company in a position of equal or greater rank on July 14, 2001. The
Committee believes that awards of restricted stock, such as the one made to Mr.
Dalton, serve to align the officer's interests with that of the Company's
shareholders and provide an incentive to the officer to remain in the Company's
employ.
Compensation of the Chief Executive Officer
In September 1993, prior to the creation of the Committee, the Company's
Board of Directors (other than Mr. Bernhard) determined that Mr. Bernhard's base
salary should be $500,000 annually. At such time, the Board, in setting his base
salary, sought to ensure that Mr. Bernhard would continue with the same
strategies and manner of operating the Company as he had in the past and to
ensure that he would not leave the employ of the Company. The Board, other than
Mr. Bernhard, also determined in 1993 that Mr. Bernhard would be entitled to
such annual bonuses as determined by the Compensation Committee (which, at that
time had not yet been formed), plus other various prerequisites and benefits.
The Board believed at such time, and the Committee continues to believe, that
Mr. Bernhard's actions create value for the Company and its shareholders. The
Board, later in 1993, approved an Employment Agreement between the Company and
Mr. Bernhard that incorporated the compensation package previously approved by
the Board, among other things. Further, in August 1997, Mr. Bernhard's
Employment Agreement was amended to provide for a term expiring on December 31,
2007. See "Employment Agreements" elsewhere in this Proxy Statement, where Mr.
Bernhard's Employment Agreement is discussed in greater detail.
While Mr. Bernhard may be awarded such bonuses as the Committee, in its
discretion, may determine, no bonus was awarded to Mr. Bernhard for fiscal 1997.
Moreover, the Committee has not awarded any stock options or shares of
restricted stock to Mr. Bernhard because of Mr. Bernhard's significant holdings
in the Company's Common Stock. The Committee believes that his interests are
sufficiently aligned with those of the Company's shareholders as a result of
such stock holdings.
THE COMPENSATION COMMITTEE
L. Lane Grigsby
David W. Hoyle
11
<PAGE> 15
EMPLOYMENT AGREEMENTS
The Company and Mr. Bernhard are parties to an Employment Agreement (the
"Employment Agreement") pursuant to which Mr. Bernhard has agreed to serve as
the Company's President and Chief Executive Officer. The initial term of the
Employment Agreement expired on December 31, 1996, but was automatically
extended for a three-year period in accordance with provisions of the Employment
Agreement since either party terminated the agreement in accordance with its
terms. As of August 21, 1997, the Company and Mr. Bernhard amended the
Employment Agreement to provide for a term expiring on December 31, 2007, with
automatic one-year extensions thereafter unless one of the parties notifies the
other in writing of his or its intention to terminate at least three months
prior to the relevant December 31st. The Employment Agreement provides that Mr.
Bernhard will receive, among other things, an annual base salary in the amount
of $500,000, participation in the Company's bonus plan as determined by the
Compensation Committee of the Board of Directors and the inclusion of Mr.
Bernhard in all plans and programs of the Company which are made available to
the Company's executives and other salaried employees generally, including group
life insurance, accidental death and dismemberment insurance, hospitalization,
long-term disability, vacations and holidays. Mr. Bernhard is also entitled
under the Employment Agreement to other benefits in addition to those made
available to the Company's management, including providing him with acceptable
Company vehicles and other means of transportation for his personal use and
benefit.
In the event Mr. Bernhard's employment is terminated as a result of his
death or disability (as defined in the Employment Agreement), he or his legal
representative will receive, among other payments, all amounts owed under his
Employment Agreement as of the date of his death or disability. In the event Mr.
Bernhard's employment is terminated by the Company for Cause (as defined in the
Employment Agreement), Mr. Bernhard will receive all amounts owed to him under
his Employment Agreement as of the date of termination. In the event Mr.
Bernhard's employment is terminated by the Company other than for Cause, Mr.
Bernhard will receive a lump sum payment equal to the full amount payable under
the Employment Agreement.
In connection with the acquisition by the Company of all of the outstanding
capital stock of Alloy Piping Products, Inc. ("APP"), APP entered into an
Employment Agreement with Mr. Brown whereby APP has agreed to employ him at an
annual salary of $150,000 per year for a term of three years. Under the
Agreement, Mr. Brown is also subject to certain non-competition and
confidentiality covenants. The Company has also entered into a Consulting and
Non-Competition Agreement (the "Non-Compete Agreement") with Mr. Brown under
which the Company has agreed to retain Mr. Brown as a consultant and Mr. Brown
has agreed to certain non-competition and confidentiality covenants in favor of
the Company and its affiliates. The term of the Non-Compete Agreement is sixty
(60) months, each month during which Shaw has agreed to pay Mr. Brown $41,667.
In connection with his employment, the Company also awarded to Mr. Brown options
to purchase 35,000 shares of Shaw Common Stock under the Company's 1993 Employee
Stock Option Plan. The options have an exercise price of $19.50 per share and
are exercisable in 25% increments on each of April 5, 1997, 1998, 1999 and 2000
based upon continued employment.
In connection with the Company's acquisition from Mr. Fronek in April 1994
of the businesses of Fronek Company and F.C.I. Pipe Support Sales, Mr. Fronek
entered into a three-year employment agreement with the Company under which he
is to receive an annual base salary of $200,000 and participation in the
Company's bonus plan as determined by the Compensation Committee of the Board of
Directors. He is also entitled to participation in all plans and programs of the
Company which are made available to the Company's executives and other salaried
employees generally. In addition, Mr. Fronek received options to acquire 5,000
shares of Common Stock, and the Company agreed to award other options to acquire
up to 57,000 shares of Common Stock and make cash payments of up to $300,000
conditioned upon the future performance of the acquired businesses through the
fiscal year ending August 31, 1997. Mr. Fronek did not receive any options or
cash payments for the fiscal year ended August 31, 1995 because the acquired
businesses did not attain the minimum performance set forth in his Employment
Agreement. For fiscal 1996, the performance of the acquired businesses resulted
in the award of options to purchase 12,000 shares of Common Stock at an exercise
price of $9.59 per share (the fair market value at the date of award) and a
bonus of $65,000 in cash. The options and cash bonus for fiscal 1996 have been
adjusted from amounts previously disclosed (9,000
12
<PAGE> 16
options/$50,000 cash) because of further negotiations between the Company and
Mr. Fronek related to the performance of the acquired businesses. Further, Mr.
Fronek has been awarded options to purchase 12,000 shares of Common Stock at an
exercise price of $32.875 and a cash bonus of $65,000 as a result of the
performance of the acquired businesses during fiscal 1997. Mr. Fronek's
employment agreement with the Company is now terminated.
In addition, the Company and Mr. Gill are parties to an Employment and
Non-Competition Agreement dated March 20, 1997 entered into in connection with
the acquisition of certain assets from Mr. Gill's businesses. See "Certain
Relationships and Related Transactions."
STOCK PERFORMANCE GRAPH
For the period commencing December 8, 1993 (the date of the Company's
initial inclusion on the Nasdaq Stock Market) and ending August 31, 1997, the
following line graphs provide a comparison of the total shareholder return on
the Company's Common Stock with the return the Nasdaq Stock Market -- U.S. &
Foreign Index (also called the Nasdaq Composite Index), the Standard & Poor's
Small Cap 600 Index and the Russell 2000 Index. Because the Company is the only
company with securities publicly traded in the United States securities markets
that is primarily engaged in the business of fabricating piping systems, there
is no similar industry peer group with which to compare the Company. Thus, the
Company has selected as the most appropriate peer group the Russell 2000 Index,
which is an index of companies with comparable market capitalizations. Further,
on October 18, 1996, the Company's Common Stock began trading on the New York
Stock Exchange, and prior to that time the stock was traded on the Nasdaq Stock
Market. Because of such occurrences the Company has chosen the Standard & Poor's
Small Cap 600 Index, rather than the Nasdaq Composite Index, as the broad equity
market index to which the return of the Company's Common Stock will be compared.
All amounts have been calculated as if all dividends, if any, were reinvested.
COMPARISON OF THE 45 MONTH CUMULATIVE TOTAL RETURN AMONG THE SHAW GROUP INC.,
THE NASDAQ STOCK MARKET-U.S. & FOREIGN INDEX, THE STANDARD & POOR'S SMALL CAP
600 INDEX AND THE RUSSELL 2000 INDEX
<TABLE>
<CAPTION>
NASDAQ
STOCK MARKET-
MEASUREMENT PERIOD THE SHAW U.S.&FOREIGN S&P SMALLCAP RUSSELL 2000
(FISCAL YEAR COVERED) GROUP INC.(1) INDEX 600 INDEX INDEX
<S> <C> <C> <C> <C>
DEC-8-1993 100 100 100 100
AUG-31-1994 88 102 102 104
AUG-31-1995 66 140 124 125
AUG-31-1996 227 152 141 139
AUG-31-1997 149 212 189 179
</TABLE>
- ---------------
(1) Based upon the price of $14.50 per share, the initial public offering price
per share of the Common Stock.
13
<PAGE> 17
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Effective February 1, 1997, the Company acquired all of the outstanding
capital stock of United Crafts, Inc. ("UCI") from the shareholders of UCI (the
"Sellers"), N. Andrew Dupuy, Jr. ("Andy Dupuy"), his brothers Stephen P. Dupuy
and Gregg A. Dupuy, his sister, Stacey Dupuy Fussell and his brother-in-law,
Douglas L. Fussell ("Doug Fussell") for $8 million cash. The transaction was
made pursuant to a Stock Purchase Agreement (the "Agreement") dated February 26,
1997 between the Company and the Sellers. The Agreement contains certain
representations, warranties and covenants by the Sellers, including, among other
things, a covenant not to compete for a period of two years. Further, to secure
the Sellers' indemnity obligations under the Agreement, the Sellers placed
$800,000 of the purchase price in escrow, for a period of one year or until
claims for indemnity made during that period are disposed.
Also in connection with the transaction, UCI entered into Employment and
Non-Competition Agreements with Andy Dupuy and Doug Fussell with terms of three
years and at annual salaries of $125,000 and $90,000 respectively. The
agreements also contain a covenant not to compete for a period of two years
following termination of employment. Also in connection with their employment,
the Company awarded to Andy Dupuy and Doug Fussell, respectively, options to
purchase 10,000 and 7,500 shares of Common Stock under the Company's 1993
Employee Stock Option Plan. The options have an exercise price of $20.25 per
share and are exercisable in 25% increments on each of February 26, 1998, 1999,
2000 and 20001, based upon continued employment.
On March 20, 1997, the Company acquired certain assets (including a
non-compete covenant) of Merit Industrial Constructors, Inc. ("Merit") and an
affiliated entity for approximately $1.3 million in cash, 22,500 shares of Shaw
Common Stock and the assumption of approximately $340,000 in debt. The
transaction was effected pursuant to an Asset Purchase, Non-Competition and
Consultation Agreement (the "Asset Purchase Agreement") among the Company, Merit
and Richard F. Gill, as well as a Purchase Agreement between the Company and an
affiliate of Mr. Gill and Merit. The Asset Purchase Agreement contains certain
representations, warranties and covenants by Merit and Mr. Gill, including a
two-year non-compete agreement. The Asset Purchase Agreement also contains an
agreement by Mr. Gill to provide certain consulting services to the Company for
a period of five years.
The Company, in connection with the foregoing, entered into a lease with an
affiliate of Merit and Mr. Gill for an office building and related real estate
located in Baton Rouge, Louisiana. The lease is for a five year term at a
monthly rental of $5,400. The lease contains an option to purchase the office
building and related real estate in favor of the Company, for which option the
Company paid 40,000 shares of Common Stock. Also, in connection with the
transaction, Mr. Gill and an affiliate placed the 62,500 shares of Common Stock
in escrow to cover potential claims by the Company for indemnity pursuant to the
Asset Purchase Agreement. The escrow arrangement is for a period of two years or
until all claims for indemnity made during such period have been disposed.
Furthermore, the Company entered into an Employment and Non-Competition
Agreement with Mr. Gill whereby the Company agreed to employ Mr. Gill for a two
year period at an annual salary of $200,000. The agreement also provides for an
agreement by Mr. Gill not to compete with the Company for a period of two years
following termination of employment. In connection with the employment of Mr.
Gill, the Company also awarded to him options to purchase 25,000 shares of
Common Stock pursuant to the terms of the Company's 1993 Employee Stock Option
Plan. The options have an exercise price of $20.25 per share and are exercisable
in 25% increments on each of March 20, 1998, 1999, 2000 and 2001, based upon
continual employment.
John W. Sinders, Jr., a director of the Company, is a managing director of
Jefferies & Company, Inc., an investment banking firm that was an underwriter
and acted as one of the representatives of the underwriters for the public
offering of 2,659,118 shares of Common Stock, 2,000,000 of which were offered by
the Company and 659,118 of which were offered by certain selling shareholders of
the Company. The closing of such public offering was completed on December 23,
1996 at a price of $21.00 per share, less the underwriting discounts and
commissions set forth in the Prospectus dated December 17, 1996 relating
thereto. The Company also granted to the underwriters an option to purchase up
to an additional 398,000 shares of Common Stock pursuant to such terms to cover
over-allotments, which over-allotment option was exercised,
14
<PAGE> 18
and in connection therewith, the Company sold the additional 398,000 shares of
Common Stock to the underwriters on January 15, 1997. The selling shareholders
included J.M. Bernhard, Jr., Ron Brown and his father, Dale Brown, who sold
300,000; 100,000; and 94,118 shares of Common Stock, respectively, in such
offering.
The Company has, from time to time, made loans to certain of its executive
officers and/or entities in which such persons have a material interest. Each
such loan in which the indebtedness exceeded $60,000 at any time since the
beginning of fiscal 1997 is listed below with the following information
indicated for each: (i) the name of the borrower; (ii) the nature of the
borrower's relationship with the Company; (iii) the largest amount of
indebtedness outstanding at any time since the beginning of fiscal 1997; (iv)
the nature of the loan and of the transaction in which it was incurred; (v) the
amount outstanding as of November 30, 1997; and (vi) the interest rate charged
thereon.
(i) Merit Industrial Constructors, Inc. ("Merit"); (ii) controlled by
Richard F. Gill, an executive officer of the Company; (iii) $475,000; (iv)
made in connection with the acquisition by the Company of certain assets of
Merit; (v) $475,000; (vi) 8%.
(i) Edward L. Pagano; (ii) executive officer of the Company; (iii)
$200,000; (iv) made in connection with Mr. Pagano's agreement to become
employed by the Company; (v) $200,000; (vi) 0%.
(i) George P. Bevan; (ii) executive officer of the Company; (iii)
$130,000; (iv) made in connection with Mr. Bevan's employment; (v)
$130,000; (vi) 0%.
The Company imputes interest on the loans to Messrs. Bevan and Pagano at the
applicable federal rate and includes such amounts in their compensation for
federal income tax purposes.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended ("Section
16"), requires the Company's directors and certain officers and beneficial
owners of the Common Stock (collectively, the "reporting persons") to file with
the Securities and Exchange Commission (the "SEC") reports of ownership and
changes in ownership of the Common Stock. The reporting persons are required to
furnish the Company with copies of all reports filed pursuant to Section 16(a).
Based solely upon a review of such reports received by it, or written
representations from certain reporting persons that no Form 5 reports were
required for those persons, the Company believes that, during fiscal 1997, all
filing obligations applicable to the reporting persons were complied with except
as follows: Mr. Wootton failed to file timely a Form 4 report for a purchase of
Common Stock in April 1997. In addition, solely as a result of a technical
problem the Company encountered when attempting to make filings pursuant to
EDGAR, Form 5 reports were filed one day late for Messrs. Sinders, Hoyle,
McAlister, Grigsby, Fronek, Shepherd and Wilkie.
AUDITOR SERVICES
The Company's consolidated financial statements for the fiscal year ended
August 31, 1997, were audited by the firms of Arthur Andersen LLP and Hannis T.
Bourgeois & Co., L.L.P., and such firms will remain as the Company's auditors
until replaced by the Board of Directors. A representative of each such firm
will be present at the 1998 Annual Meeting of Shareholders to respond to any
appropriate questions and will have the opportunity to make a statement, if
either of them so desires.
SHAREHOLDER PROPOSALS
Any shareholder proposal to be considered by the Company for inclusion in
the proxy materials for the 1999 Annual Meeting of Shareholders must be
submitted in accordance with applicable regulations of the Securities and
Exchange Commission and received by the Company at its principal executive
offices no later than August 24, 1998.
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<PAGE> 19
In order for a shareholder to bring any business or nominations before the
1998 Annual Meeting of Shareholders, certain conditions set forth in Section
7(b) of the amended and restated by-laws of the Company must be complied with,
including, but not limited to, the delivery of a notice to the Secretary of the
Company not less than 30 nor more than 60 days in advance of the 1998 Annual
Meeting, or if fewer than 40 days notice or prior disclosure of the date of the
1998 Annual Meeting is given or made to the shareholders, not later than the
tenth day following the day on which the notice of the date of the 1998 Annual
Meeting was mailed or such prior disclosure was made. The requirements as to the
form and content of such advance notice are set forth in Section 7(b) of the
Company's amended and restated by-laws, a copy of which may be obtained by
contacting the Company's Secretary at (504) 296-1140.
DETERMINATION OF BENEFICIAL OWNERSHIP
As described below, the number of votes that each shareholder will be
entitled to cast at the Annual Meeting will depend on when the shares were
acquired and whether or not there has been a change in beneficial ownership
since the date of acquisition with respect to each of such holder's shares.
In certain cases record ownership may change but beneficial ownership for
voting purposes does not change. The Company's articles of incorporation, as
restated, states the exceptions where beneficial ownership is deemed not to have
changed upon the transfer of shares of Common Stock.
The Company's articles of incorporation, as restated, provide that each
outstanding share of Common Stock will entitle the holder thereof to five votes
on each matter properly submitted to the shareholders of the Company for their
vote, waiver, release or other action; except that no holder of outstanding
shares of Common Stock will be entitled to exercise more than one vote on any
such matter in respect of any share of Common Stock with respect to which there
has been a change in beneficial ownership during the four years immediately
preceding the date on which a determination is made of the shareholders of the
Company who are entitled to vote or to take any other action. A change in
beneficial ownership of an outstanding share of Common Stock will be deemed to
have occurred whenever a change occurs in any person or persons who, directly or
indirectly, through any contract, agreement, arrangement, understanding,
relationship or otherwise has or shares any of the following:
(a) voting power, which includes, without limitation, the power to
vote or to direct the voting power of such share of Common Stock;
(b) investment power, which includes, without limitation, the power to
direct the sale or other disposition of such share of Common Stock;
(c) the right to receive or to retain the proceeds of any sale or
other disposition of such share of Common Stock; or
(d) the right to receive or retain any distributions, including,
without limitation, cash dividends, in respect of such share of Common
Stock.
Without limiting the generality of the foregoing, the following events or
conditions will be deemed to involve a change in beneficial ownership of a share
of Common Stock:
(a) in the absence of proof to the contrary provided in accordance
with certain procedures set forth below, a change in beneficial ownership
will be deemed to have occurred (i) whenever an outstanding share of Common
Stock is transferred of record into the name of any other person and (ii)
upon the issuance of shares in a public offering;
(b) in the case of an outstanding share of Common Stock held of record
in the name of a corporation, general partnership, limited partnership,
voting trustee, bank, trust company, broker, nominee or clearing agency, if
it has not been established pursuant to the procedures set forth below that
there has been no change in the person or persons who or that direct the
exercise of the rights referred to in subparagraphs (a) through (d),
inclusive, of the preceding paragraph with respect to such outstanding
share of Common Stock during the four years immediately preceding the date
on which a determination
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is made of the shareholders of the Company entitled to vote or to take any
other action, then a change in beneficial ownership of such share of Common
Stock shall be deemed to have occurred during such period;
(c) in the case of an outstanding share of Common Stock held of record
in the name of any person as a trustee, agent, guardian or custodian under
the Uniform Gifts to Minors Act as in effect in any jurisdiction, a change
in beneficial ownership will be deemed to have occurred whenever there is a
change in the beneficiary of such trust, the principal of such agent, the
ward of such guardian, the minor for whom such custodian is acting or a
change in such trustee agent, guardian or custodian; or
(d) in the case of outstanding shares of Common Stock beneficially
owned by a person or group of persons who, after acquiring, directly or
indirectly, the beneficial ownership of 5% of the outstanding shares of
Common Stock, fails to notify the Company of such ownership within ten days
after such acquisition, a change in beneficial ownership of such shares of
Common Stock will be deemed to occur on each day while such failure
continues.
Notwithstanding any other provision in the Company's articles of
incorporation, as restated, to the contrary, no change in beneficial ownership
of an outstanding share of Common Stock shall be deemed to have occurred solely
as a result of:
(a) any transfer of any interest in an outstanding share of Common
Stock pursuant to a bequest or inheritance, by operation of law upon the
death of any individual, or by any other transfer without valuable
consideration, including, without limitation, a gift that is made in good
faith and not for the purpose of circumventing the provisions of the
Company's articles of incorporation, as restated;
(b) any changes in beneficiary of any trust, or any distribution of an
outstanding share of Common Stock from trust, by reason of the birth,
death, marriage or divorce of any natural person; the adoption of any
natural person prior to age 18; or the passage of a given period of time or
the attainment by any natural person of a specific age; or the creation or
termination of any guardianship or custodial arrangement;
(c) any appointment of a successor trustee, agent, guardian or
custodian with respect to an outstanding share of Common Stock if neither
such successor has, nor its predecessor had, the power to vote or to
dispose of such share of Common Stock without further instructions from
others;
(d) any change in the person to whom dividends or other distributions
in respect of an outstanding share of Common Stock are to be paid pursuant
to the issuance or modification of a revocable dividend payment order;
(e) any issuance of a share of Common Stock by the Company or any
transfer by the Company of a share of Common Stock held in treasury other
than in a public offering thereof, unless otherwise determined by the Board
of Directors at the time of authorizing such issuance or transfer;
(f) any giving of a proxy in connection with a solicitation of proxies
subject to the provisions of Section 14 of the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder;
(g) any transfer, whether or not with consideration, among individuals
related or formerly related by blood, marriage or adoption ("relatives") or
between a relative and any person controlled by one or more relatives where
the principal purpose for the transfer is to further the estate tax
planning objectives of the transferor or of relatives of the transferor;
(h) any appointment of a successor trustee as a result of the death of
the predecessor trustee (which predecessor trustee shall have been a
natural person);
(i) any appointment of a successor trustee who or which was
specifically named in a trust instrument prior to December 8, 1993; or
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<PAGE> 21
(j) any appointment of a successor trustee as a result of the
resignation, removal or failure to qualify of a predecessor trustee or as a
result of mandatory retirement pursuant to the express terms of a trust
instrument; provided, that less than 50% of the trustees administering any
single trust will have changed (including in such percentage the
appointment of the successor trustee) during the four-year period preceding
the appointment of such successor trustee.
All determinations concerning changes in beneficial ownership, or the
absence of any such change, shall be made by the Board of Directors of the
Company or, at any time when the Company employs a transfer agent with respect
to the shares of Common Stock, at the Company's request, by such transfer agent
on the Company's behalf. In accordance with the Company's articles of
incorporation, as restated, written procedures designated to facilitate such
determinations are to be established and may be amended from time to time by the
Board of Directors. Such procedures will provide, among other things, the manner
of proof of facts that will be accepted and the frequency with which such proof
may be required to be renewed. The Company and any transfer agent will be
entitled to rely on any and all information concerning beneficial ownership of
the outstanding shares of Common Stock coming to their attention from any source
and in any manner reasonably deemed by them to be reliable, but neither the
Company nor any transfer agent shall be charged with any other knowledge
concerning the beneficial ownership of outstanding shares of Common Stock.
In the event of any stock split or stock dividend with respect to the
outstanding shares of Common Stock, each share of Common Stock acquired by
reason of such split or dividend will be deemed to have been beneficially owned
by the same person from the same date as that on which beneficial ownership of
the outstanding share or shares of Common Stock, with respect to which such
share of Common Stock was distributed, was acquired. Each outstanding share of
Common Stock, whether at any particular time the holder thereof is entitled to
exercise five votes or one vote, shall be identical to all other shares of
Common Stock in all respects, and together the outstanding shares of Common
Stock constitute a single class of shares of the Company.
By resolution duly adopted by the Board of Directors of the Company
pursuant to the foregoing provisions of the Company's articles of incorporation,
as restated, the following procedures have been adopted for use in determining
the number of votes to which a shareholder is entitled:
(i) The Company may accept the written and signed statement of a
shareholder to the effect that no change in beneficial ownership has
occurred during the period following December 9, 1993, and until the date
(December 9, 1997) on which a determination is made of the shareholders of
the Company who are entitled to vote or take any other action at the Annual
Meeting. Such statement may be abbreviated to state only the number of
shares as to which such shareholder is entitled to exercise five votes or
one vote.
(ii) In the event the General Counsel of the Company, in his sole
discretion, taking into account the standards set forth in the Company's
articles of incorporation, as restated, deems any such statement to be
inadequate or for any reason deems it in the best interest of the Company
to require further evidence of the absence of change of beneficial
ownership during such period preceding the record date, he may require such
additional evidence and, until it is provided in form and substance
satisfactory to him, a change in beneficial ownership during such period
shall be deemed to have taken place.
(iii) Information supplementing that contemplated by paragraph (i) and
additional evidence contemplated by paragraph (ii) may be provided by a
shareholder at any time but must be furnished at least three business days
prior to any meeting of shareholders at which such shares are to be voted
for any change to be effective at such meeting.
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<PAGE> 22
OTHER MATTERS
The Board of Directors knows of no other matters which may be properly, or
are likely to be, brought before the meeting. However, if any proper matters are
brought before the meeting, the persons named in the enclosed Proxy will vote
thereon as the Board of Directors recommends.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ T. A. Barfield, Jr.
T. A. Barfield, Jr.
Secretary
Baton Rouge, Louisiana
December 22, 1997
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<PAGE> 23
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THE SHAW GROUP INC.
11100 MEAD ROAD, SECOND FLOOR, BATON ROUGE, LA 70816
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints J. M. Bernhard, Jr. and Edward L. Pagano as
Proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated below, all the shares of common
stock of The Shaw Group Inc. held of record by the undersigned on December 9,
1997, at the annual meeting of shareholders to be held on January 23, 1998, or
any adjournment hereof.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing an attorney, as executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
1. ELECTION OF DIRECTORS
<TABLE>
<S> <C>
[ ] FOR all nominees listed in this in this [ ] WITHHOLD AUTHORITY to vote for all
block (except as marked to the contrary) nominees listed in this block
</TABLE>
NOMINEES: Albert McAlister, J.M. Bernhard, Jr., William H. Grigg, L. Lane
Grigsby, David W. Hoyle and John W. Sinders, Jr.
(INSTRUCTION: To withhold authority to vote any individual nominee write that
nominee's name on the space provided below:)
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2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Please Date and Sign on Reverse)
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THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER, IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED "FOR" PROPOSALS 1 and 2.
I PLAN TO ATTEND MEETING [ ]
Dated
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Signature
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Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
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