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Conrad Industries Inc · DEF 14A · For 5/27/99

Filed On 4/22/99 · SEC File 0-24263 · Accession Number 899243-99-777

  As Of               Filer                 Filing     On/For/As Docs:Pgs              Issuer               Agent

 4/22/99  Conrad Industries Inc             DEF 14A     5/27/99    1:41                                     899243

Definitive Proxy Solicitation Material · Schedule 14A
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: DEF 14A     Definitive Proxy Statement                            41    202K

Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (RTF, XML, et al.) Board Committees and their Functions Bonus Shares Change in Control Compensation Committee Interlocks and Insider Participation Compliance with Section 16(a) Directors' Meetings and Compensation Discretionary Voting of Proxies on Other Matters Executive Compensation Louis J. Michot, Jr Nominees for Director Phantom Shares Proposal Number 2: Approval of Increase in the Number of Shares Available Under the 1998 Stock Plan Proposals Proposal Number 1: Election of Directors Report of the Compensation Committee Stockholder Proposals for the 2000 Annual Meeting Stock Plan Transactions with Certain Affiliates Voting Information General Instructions on How to Vote Your Proxy 1998 Form 10-K
1	1st Page
5	Voting Information General Instructions on How to Vote Your Proxy
8	Proposals Proposal Number 1: Election of Directors
"	Nominees for Director
"	Louis J. Michot, Jr
9	Proposal Number 2: Approval of Increase in the Number of Shares Available Under the 1998 Stock Plan
10	Phantom Shares
"	Bonus Shares
11	Change in Control
15	Directors' Meetings and Compensation
"	Board Committees and their Functions
16	Compensation Committee Interlocks and Insider Participation
17	Report of the Compensation Committee
20	Executive Compensation
24	Stock Plan
25	Transactions with Certain Affiliates
28	Compliance with Section 16(a)
"	Stockholder Proposals for the 2000 Annual Meeting
"	Discretionary Voting of Proxies on Other Matters
29	1998 Form 10-K

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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

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 (S) 240.14a-11(c) or (S) 240.14a-12

CONRAD INDUSTRIES, INC.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)

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(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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CONRAD INDUSTRIES, INC.
1501 Front Street
Morgan City, Louisiana 70381

April 23, 1999

TO OUR STOCKHOLDERS:

You are cordially invited to attend the 1999 Annual Meeting of Stockholders
of Conrad Industries, Inc. to be held on Thursday, May 27, 1999, at 9:00 a.m.,
local time, at the Petroleum Club of Morgan City, 500 Roderick, Morgan City,
Louisiana. A Notice of the Annual Meeting, proxy statement and form of proxy
card are enclosed with this letter.

We encourage you to read the Notice of the Annual Meeting and proxy statement
so that you may be informed about the business to come before the meeting. Your
participation in Conrad Industries' business is important, regardless of the
number of shares that you hold. To ensure your representation at the meeting,
please promptly sign and return the accompanying proxy card in the enclosed
postage-paid envelope.

We look forward to seeing you on May 27, 1999.

Sincerely,

/s/ William H. Hidalgo
----------------------------
William H. Hidalgo
President and Chief Executive
Officer

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CONRAD INDUSTRIES, INC.
1501 Front Street
Morgan City, Louisiana 70381

----------------

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 27, 1999

To the Stockholders of Conrad Industries, Inc.:

When and Where. The 1999 Annual Meeting of Stockholders of Conrad
Industries, Inc. will be held on Thursday, May 27, 1999, at 9:00 a.m., local
time, at the Petroleum Club of Morgan City, 500 Roderick, Morgan City,
Louisiana.

Record Date. Only stockholders of record at the close of business on April
12, 1999 will be entitled to notice of and to vote at the Annual Meeting.

Purpose of the Meeting. The Annual Meeting has been called for the
following purposes:

1. To elect two Class I directors of Conrad Industries, each to serve for
three-year terms until the company's 2002 Annual Meeting of
Stockholders or until their respective successors have been duly
elected and qualified;

2. To approve an increase in the number of shares of common stock subject
to the Conrad Industries, Inc. 1998 Stock Plan;

3. To ratify the appointment of Deloitte & Touche LLP as Conrad
Industries' independent public accountants for its fiscal year ending
December 31, 1999; and

4. To consider and act upon such other business as may properly come
before the meeting or any adjournments thereof.

You will find more information on the nominees for director and the
proposals in the proxy statement. You will find further instructions on how to
vote beginning on page 2 of the proxy statement.

Your Vote Counts! It is important that your shares be represented at the
Annual Meeting regardless of whether you plan to attend. This will ensure the
presence of a quorum at the meeting. Please complete, sign and date the
enclosed proxy card and return it in the envelope provided as promptly as
possible, even if you intend to be present at the meeting. You may revoke your
proxy at any time before it is voted.

By Order of the Board of Directors,

/s/ Cecil A. Hernandez
------------------------------------
Cecil A. Hernandez
Secretary

Morgan City, Louisiana
April 23, 1999

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CONRAD INDUSTRIES, INC.
1501 Front Street
Morgan City, Louisiana 70381

----------------

PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS

To Be Held May 27, 1999

· Download Table

CONTENTS OF 1999 PROXY STATEMENT Page
-------------------------------- ----

Voting Information
General Instructions on How to Vote Your Proxy.......................... 2
Voting Rules............................................................ 3
Proposals
Proposal Number 1: Election of Directors................................ 5
Proposal Number 2: Increase in the number of shares subject to 1998
Stock Plan............................................................. 6
Proposal Number 3: Appointment of Independent Public Accountants........ 10
Company Information
Information about Current and Continuing Directors...................... 11
Directors' Meetings and Compensation.................................... 12
Board Committees and their Functions.................................... 12
Compensation Committee Interlocks and Insider Participation............. 13
Report of the Compensation Committee.................................... 14
Executive Compensation.................................................. 17
Transactions with Certain Affiliates.................................... 22
Stock Ownership by Conrad Industries' Largest Stockholders and
Management............................................................. 24
Compliance with Section 16(a)........................................... 25
Stockholder Proposals for the 2000 Annual Meeting....................... 25
Discretionary Voting of Proxies on Other Matters........................ 25
1998 Form 10-K.......................................................... 26
Appendix A
Conrad Industries, Inc. Amended and Restated 1998 Stock Plan

The principal executive offices of Conrad Industries are located at 1501
Front Street, Morgan City, Louisiana 70381. This proxy statement, and the
accompanying Notice of 1999 Annual Meeting of Stockholders and proxy card,
are first being mailed to our stockholders on or about April 23, 1999.

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VOTING INFORMATION

GENERAL INSTRUCTIONS ON HOW TO VOTE YOUR PROXY:

Below are instructions on how to vote, as well as information on your
rights as a stockholder as they relate to voting. Some of the instructions
will differ depending on how your stock is held. It is important to follow the
instructions that apply to your situation.

If your shares are held in "street name," you should vote your shares in
the method directed by your broker or other nominee.

If you plan to attend the meeting and vote in person, your instructions
will depend on how your shares are held:

. Shares registered in your name--Check the appropriate box on the
enclosed proxy card and bring evidence of your stock ownership with
you to the meeting. The proxy card and the evidence of your ownership
will serve as your authorization to vote in person.

. Shares registered in the name of your broker or other nominee--Ask
your broker to provide you with a broker's proxy card in your name
(which will allow you to vote your shares in person at the meeting)
and bring evidence of your stock ownership from your broker.

Remember that attendance at the meeting will be limited to stockholders as of
the record date (or their authorized representatives) with evidence of their
share ownership and guests of Conrad Industries.

How to Revoke Your Proxy. If your shares are registered in your name, you
may revoke your proxy at any time before it is exercised by:

. filing with the Secretary of Conrad Industries a written notice
revoking it,

. executing and returning another proxy bearing a later date, or

. attending the Annual Meeting and expressing a desire to vote your
shares of common stock in person.

If your shares are held in street name, you must contact your broker to
revoke your proxy. Written notices to Conrad Industries must be addressed to
Cecil A. Hernandez, Secretary, Conrad Industries, Inc., 1501 Front Street, P.
O. Box 790, Morgan City, Louisiana 70381. No revocation by written notice will
be effective unless such notice has been received by the Secretary of Conrad
Industries prior to the day of the Annual Meeting or by the inspector of
election at the Annual Meeting.

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VOTING RULES:

Stockholders Entitled to Vote--The Record Date. The close of business on
April 12, 1999 has been fixed as the record date for the determination of
stockholders entitled to vote at the Annual Meeting and any postponement(s) or
adjournment(s) thereof. As of the record date, Conrad Industries had issued and
outstanding 7,077,723 shares of common stock of Conrad Industries. There are no
other classes of voting securities of Conrad Industries outstanding.

Quorum Required. A quorum must exist for us to hold the Annual Meeting. For
a quorum to exist, we will need the presence, either in person or by proxy, of
holders of a majority of the outstanding shares of Conrad Industries' common
stock as of the record date. Abstentions and broker non-votes are counted for
purposes of determining whether a quorum is present. Generally, broker non-
votes occur when shares held by a broker for a beneficial owner are not voted
with respect to a particular proposal because (1) the broker has not received
voting instructions from the beneficial owner and (2) the broker lacks
discretionary voting power to vote such shares.

Number of Votes. You are entitled to one vote per share of Conrad
Industries' common stock that you own as of the record date on each matter that
is called to vote at the Annual Meeting.

Voting to Elect Directors. When voting to elect directors, you have three
options:

. Vote for both of the nominees;

. Vote for only one of the nominees; or

. Withhold authority to vote for all of the nominees.

If a quorum is present at the Annual Meeting, the two persons receiving the
greatest number of votes will be elected to serve as directors. Because of this
rule, any shares that are not voted or any votes that are withheld will not
influence the outcome of the election of directors. Cumulative voting for the
election of directors is not permitted.

Voting on Other Matters. When voting on all other matters, you will also
have three options, but these options are different from those pertaining to
the election of directors:

. Vote "FOR" a given proposal;

. Vote "AGAINST" a given proposal; or

. ABSTAIN from voting on a given proposal.

Each matter, other than the election of directors, requires the affirmative
vote of a majority of the shares present or represented at the Annual Meeting
and entitled to vote on the proposal. An abstention with respect to a
particular proposal will be treated as a vote not cast with respect to such
proposal. Broker non-votes will not affect the results on a proposal because
shares held by brokers who withhold authority to vote will be considered absent
in the voting tallies on these proposals.

A duly executed proxy confers discretionary authority to the persons named
in the proxy authorizing those persons to vote, in their discretion, on any
other matters properly presented at the Annual Meeting. The Board of Directors
is not currently aware of any such other matters to be presented at the
meeting.

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Voting of Proxies with Unmarked Votes. All proxies that are properly
completed, signed and returned prior to the Annual Meeting will be voted. If
you return your proxy with no votes marked, your shares will be voted as
follows:

. "FOR" the election of each of the two nominees for director.

. "FOR" the increase in the number of shares available under the 1998
Stock Plan.

. "FOR" the appointment of Deloitte & Touche LLP as Conrad Industries'
independent public accountants.

It is possible for a proxy to indicate that some of the shares represented
are not being voted as to certain proposals. This occurs, for example, when a
broker is not permitted to vote on a proposal without instructions from the
beneficial owner of the stock. In these cases, non-voted (broker non-votes)
shares are considered absent for those proposals.

Who Counts the Votes. Votes will be counted by American Stock Transfer &
Trust Company, our transfer agent and registrar.

Information about this Solicitation of Proxies. The solicitation of the
proxy accompanying this statement is being made by Conrad Industries' Board of
Directors in connection with the 1999 Annual Meeting of Stockholders. In
addition to the solicitation of proxies by use of this proxy statement,
directors, officers and employees of Conrad Industries may solicit the return
of proxies by mail, personal interview, telephone or telegraph. Officers and
employees of Conrad Industries will not receive additional compensation for
their solicitation efforts, but they will be reimbursed for any out-of-pocket
expenses incurred. Brokerage houses and other custodians, nominees and
fiduciaries will be requested, in connection with the stock registered in
their names, to forward solicitation materials to beneficial owners of such
stock.

All costs of preparing, printing, assembling and mailing the Notice of the
1999 Annual Meeting of Stockholders, this proxy statement, the enclosed form
of proxy card and any additional materials, as well as the cost of forwarding
solicitation materials to the beneficial owners of stock and all other costs
of solicitation, will be borne by Conrad Industries.

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PROPOSALS

PROPOSAL NUMBER 1: ELECTION OF DIRECTORS

Conrad Industries' Charter divides or "classifies" its Board of Directors
into three classes (Classes I, II and III), with respect to the three-year
terms for which the directors in each class individually hold office. Each
class consists, as nearly as possible, of one third of the entire Board. Conrad
Industries' Board of Directors currently has seven members. Each director is
elected to hold office for a term ending on the date of the third annual
meeting following the annual meeting at which such director was elected, except
that the initial terms of office of the current Class I, Class II and Class III
Directors expire at the annual meetings of stockholders to be held in 1999,
2000 and 2001, respectively. The current term for Class I Directors will expire
at this year's Annual Meeting. The current terms for Class II and Class III
Directors will expire at the 2000 and 2001 Annual Meetings of Stockholders,
respectively.

The Board of Directors has nominated and urges you to vote for the election
of the two nominees identified below to serve as Class I directors for a three-
year term or until their successors are duly elected and qualified. Each of the
nominees listed below is a member of Conrad Industries' present Board of
Directors. Proxies solicited hereby will be voted for both nominees unless
stockholders specify otherwise in their proxies.

If, at the time of or prior to the Annual Meeting, any of the nominees
should be unable or decline to serve, the discretionary authority provided in
the proxy may be used to vote for a substitute or substitutes designated by the
Board of Directors. The Board of Directors has no reason to believe that any
substitute nominee or nominees will be required.

Nominees for Director

Class I--Terms Expiring at 2002 Annual Meeting

The two nominees for re-election as Class I directors, and certain
additional information with respect to each of them, are as follows:

· Enlarge/Download Table

Year First
Name Age Position with Conrad Industries Became a Director
---- --- ------------------------------- -----------------

Cecil A. Hernandez...... 42 Vice President--Finance and 1998
Administration, Chief Financial Officer
and Director (Class I)

Louis J. Michot, Jr..... 76 Director (Class I) 1998

Cecil A. Hernandez joined Conrad Industries in January 1998. Mr. Hernandez
has served as Vice President--Finance and Administration, Chief Financial
Officer and Director of Conrad Industries since March 1998. Mr. Hernandez
founded Hernandez & Blackwell CPAs in 1983 and served as its Managing Partner
until December 1997. Hernandez & Blackwell CPAs merged with Darnall, Sikes &
Frederick CPAs in 1996. Additionally, Mr. Hernandez provided accounting and
consulting services for Conrad Industries as the outside Certified Public
Accountant from 1993 until 1997. From 1982 to 1983, Mr. Hernandez served as
Assistant Controller for Oceaneering International, a publicly traded diving
company. Mr. Hernandez was employed at Deloitte Haskins & Sells, an
international accounting firm, from 1979 to 1982.

Louis J. Michot, Jr. has been a Director of Conrad Industries since the
consummation of the initial public offering in June 1998. Since 1991, Mr.
Michot has been Chairman of the Board of Louis J. Michot & Associates, Inc., a
family-owned holding company which at present deals principally in real estate
sales, development and rentals. From 1952 to 1991, Mr. Michot served as its
President and CEO, during which time

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he developed a chain of 45 fast food restaurants in Louisiana, Mississippi and
Texas and became actively engaged in other business ventures. Mr. Michot was
one of the organizers of the Bank of Lafayette and served on its Board of
Directors from 1975 to 1980. He served in the Louisiana Legislature from 1960
to 1964, on the State Board of Education from 1968 to 1972 and as the State
Superintendent of Education from 1972 to 1976. Mr. Michot's wife is a first
cousin of J. Parker Conrad.

The Board of Directors recommends that stockholders vote "FOR" the election
of Messrs. Hernandez and Michot as directors to hold office until the 2002
Annual Meeting of Stockholders and until their successors are elected and
qualified. Proxies executed and returned will be so voted unless contrary
instructions are indicated thereon.

PROPOSAL NUMBER 2: APPROVAL OF INCREASE IN THE NUMBER OF SHARES
AVAILABLE UNDER THE 1998 STOCK PLAN

In March 1998, the Board of Directors and the stockholders approved and
adopted the Conrad Industries, Inc. 1998 Stock Plan. The 1998 Stock Plan
permits the granting of any or all of the following types of awards: stock
appreciation rights, stock options, restricted stock, dividend equivalents,
performance units, automatic director options, phantom shares, limited stock
appreciation rights, bonus stock and cash tax rights.

The Board believes the 1998 Stock Plan provides an enhanced mechanism for
compensating officers and employees of, and any consultants to, Conrad
Industries and its affiliates on the basis of individual and corporate
performance. As of the date of this Proxy Statement, there are 207,457 shares
of common stock remaining for grants of awards under the 1998 Stock Plan.

Conrad Industries' philosophy with respect to management and employee
compensation has been to attract and retain executive and employee talent of
the highest quality through emphasizing equity appreciation incentives without
incurring excessive cash obligations. We expect to continue to emphasize stock-
based incentive compensation in order to closely align the interests of the
executive officers and key members of its workforce with the interests of
Conrad Industries' stockholders. The Board of Directors believes that it is the
recruitment and retention of such individuals upon whom, in large measure, the
sustained progress, growth and profitability of Conrad Industries will depend.
By providing relatively higher stock incentives, Conrad Industries is also able
to maintain salaries of management personnel at reasonable levels. The Board of
Directors believes that its compensation strategy can be implemented for the
foreseeable future if Proposal Number 2 is approved.

The Board has adopted and recommended for approval by the stockholders an
increase in the number of shares of common stock available under the 1998 Stock
Plan. The amendment will increase the number of shares of common stock that may
be issued pursuant to the 1998 Stock Plan from 700,000 to 950,000. Options to
purchase an aggregate of 492,543 shares of common stock have been granted as of
the date of this Proxy Statement under the 1998 Stock Plan. The Board believes
it is in the best interests of Conrad Industries to increase the number of
shares available under the 1998 Stock Plan so as to enable Conrad Industries to
make future grants of options and certain other awards pursuant to the 1998
Stock Plan. Additionally, during the third quarter of 1998, certain executives
of Conrad Industries surrendered and the company canceled 247,277 shares of
restricted stock, decreasing the total number of shares of Conrad Industries
common stock outstanding. A copy of the proposed amended and restated 1998
Stock Plan is set forth as Appendix A to this Proxy Statement. The following
summary of the 1998 Stock Plan is qualified in its entirety to the more
detailed provisions of the 1998 Stock Plan.

Eligibility for Participation. All employees, including officers, of Conrad
Industries and its subsidiaries are eligible for participation in all Awards
under the 1998 Stock Plan, other than automatic Director options. Only
nonemployee directors of Conrad Industries will receive automatic grants of
Director options.

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Administration. The 1998 Stock Plan is administered by the Compensation
Committee of the Board of Directors. Except with respect to the automatic grant
of Director options, the Compensation Committee will select the employees who
will receive Awards, determine the type and terms of Awards to be granted and
interpret and administer the 1998 Stock Plan.

Employee Stock Options. Stock options granted to employees are subject to
such terms and conditions as may be established by the Compensation Committee,
which may include conditioning the exercisability of an option on the
achievement of one or more performance goals, except that in all events: (1) no
stock options may be granted after the termination of the 1998 Stock Plan; (2)
the option exercise price cannot be less than the market value per share of the
common stock of Conrad Industries at the date of grant (unless it is a
replacement option granted to new employees in conjunction with an acquisition
of the stock or property of another corporation); and (3) no stock option may
be exercised more than 10 years after it is granted. Stock options may be
granted either as incentive stock options ("ISOs") under Section 422 of the
Internal Revenue Code of 1986 (the "Code"), non-qualified stock options or a
combination thereof.

The Compensation Committee will determine the form in which payment of the
optionee's exercise price may be made, which may include cash, shares of common
stock of Conrad Industries already owned by the optionee for more than six
months, a "cashless broker exercise" through procedures established by Conrad
Industries, other property approved by the Compensation Committee or any
combination thereof.

Director Stock Options. The 1998 Stock Plan provides that each nonemployee
director of Conrad Industries shall automatically receive on the date of each
annual meeting of Conrad Industries' stockholders (beginning with the 1999
Annual Stockholders' Meeting) an immediately vested option to purchase 1,000
shares of common stock of Conrad Industries at an exercise price per share
equal to the fair market value of the common stock of Conrad Industries on the
date of grant. Each person who becomes a nonemployee director of Conrad
Industries shall automatically receive an immediately vested option to purchase
1,000 shares of common stock of Conrad Industries on the date of such person's
election or appointment at an exercise price per share equal to the fair market
value of the common stock of Conrad Industries on the date of grant. Neither
the Compensation Committee nor the Board of Directors has any discretion with
respect to Director options. Each Director option shall have a term of 10
years, subject to earlier termination depending upon continuity of service on
the Board.

Phantom Shares. The Compensation Committee may grant phantom shares of
common stock of Conrad Industries to employees, which may be payable in cash,
shares of common stock of Conrad Industries or a combination thereof, subject
to the achievement of specified performance goals. The Compensation Committee
shall determine the performance goals to be achieved and the length of the
performance period.

Performance Awards. The Compensation Committee may also grant performance
awards to employees. Performance awards are units equivalent to such value as
the Compensation Committee determines and may consist of payments in cash,
shares of common stock of Conrad Industries or a combination thereof, payable
upon the achievement of specified performance goals. The Compensation Committee
shall determine the performance goals to be achieved and the length of the
performance period.

Bonus Shares. The Compensation Committee may deliver unrestricted shares of
common stock of Conrad Industries to an employee as additional compensation for
the person's services to the company or a subsidiary in lieu of or in addition
to a cash bonus.

Other Stock-Based Awards. The Compensation Committee, in its discretion, may
grant other forms of Awards based on, or payable in, shares of common stock of
Conrad Industries. Subject to certain limitations, participants, including
directors, may elect to defer the receipt of an Award or other compensation in
the form of phantom shares for limited periods.

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Performance Goals. The Compensation Committee shall subject grants of
phantom shares and performance units and, in its discretion, may condition the
exercisability of employee stock options, on the attainment of certain
performance goals. Such performance goals, which may be described in terms of
company-wide objectives, in terms of objectives that are related to performance
of the division, department or function within the company or a subsidiary in
which the employee receiving the Award is employed or in individual or other
terms, and which will relate to a period of time determined by the Compensation
Committee. The performance goals that may be used include one or more of the
following: net income; earnings before interest, taxes, depreciation, and
amortization expenses and noncash compensation expense related to the issuance
of stock and stock options to employees; profit margins, economic value added,
sales; return on equity; return on assets; earnings per share; and cash flows.
Which objectives to use with respect to an Award, the weighting of the
objectives if more than one is used, and whether the objective is to be
measured against a company-established budget or target, an index or a peer
group of companies, shall be determined by the Compensation Committee in its
discretion at the time of grant of the Award. A performance goal need not be
based on an increase or a positive result and may include, for example,
maintaining the status quo or limiting economic losses.

Annual Award Limits. The maximum number of shares of common stock of Conrad
Industries with respect to which any employee can receive stock options, bonus
stock, phantom shares, and other stock-based awards during any calendar year is
250,000. In addition, no employee can receive performance award grants having a
value in excess of $2 million in any calendar year.

Transferability. Awards under the 1998 Stock Plan generally will not be
transferable other than by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order; provided, however, the
Compensation Committee may, in its discretion, permit a participant to transfer
nonqualified stock options to the participant's "immediate family members", as
defined in the 1998 Stock Plan.

Adjustments. The Compensation Committee may provide for adjustment of Awards
under the 1998 Stock Plan if it determines such adjustment is required to
prevent dilution or enlargement of the rights of participants in the 1998 Stock
Plan that would otherwise result from a stock dividend, stock split,
combination of shares, recapitalization, merger, consolidation, reorganization
or other similar corporate transaction.

Term of the Plan. Unless sooner terminated, the 1998 Stock Plan will
terminate on March 31, 2008 after which date no additional Awards may be made
under it; however all then outstanding Awards will continue pursuant to their
terms.

Tax Withholding. The 1998 Stock Plan permits the Compensation Committee to
allow a participant, upon exercise of an option or payment of an Award, to
satisfy any applicable federal tax withholding requirements in the form of
shares of common stock of Conrad Industries, including shares issuable upon
exercise or payment of such Award.

Change in Control. The 1998 Stock Plan provides that upon a "change in
control" of Conrad Industries, all Awards will become immediately exercisable
or payable, as the case may be. A "change in control" of Conrad Industries
shall be deemed to occur if a person or group acquires 30% or more of the
Company's voting securities, the directors at the beginning of the 1998 Stock
Plan cease to constitute a majority of the Board of Directors (but a director
whose election or nomination was approved by a majority of the current
directors will be deemed a continuing director), the stockholders of the
company approve a merger or consolidation of the Company with any other company
(with certain exceptions), the stockholders of Conrad Industries approve an
agreement for the sale, exchange or disposition by the company of all or a
substantial portion of the company's assets or the stockholders of the Conrad
Industries adopt a plan of complete liquidation of the company, or the date
Conrad Industries files a report or proxy statement with the Securities and
Exchange Commission that a change in control has or may occur pursuant to any
then existing contract or transaction.

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Amendment and Termination. The Board of Directors of Conrad Industries may
amend or terminate the 1998 Stock Plan at any time without stockholder
approval, except for any amendment that applicable law or stock exchange rules
require stockholder approval. Unless the term of the 1998 Stock Plan is
extended or earlier terminated, the 1998 Stock Plan will terminate on March 31,
2008.

Certain Federal Income Tax Consequences. The following is a brief summary of
certain of the federal income tax consequences of certain transactions under
the 1998 Stock Plan based on current federal income tax laws. This summary is
not intended to be exhaustive and does not describe state or local tax
consequences. Additional or different federal tax consequences to the employee,
director or Conrad Industries may result depending upon other considerations
not described below.

In general: (1) no income will be recognized by an optionee at the time a
non-qualified stock option (an option not qualified under Section 422 of the
Code) ("NQO") is granted; (2) at the time of exercise of a NQO, ordinary income
will be recognized by the optionee in an amount equal to the difference between
the option price paid for the shares and the fair market value of the shares if
they are nonrestricted on the date of exercise; (3) at the time of sale of
shares acquired pursuant to the exercise of a NQO, any appreciation (or
depreciation) in the value of the shares after the date of exercise will be
treated as either short term or long term capital gain (or loss) depending on
how long the shares have been held.

No income generally will be recognized by an optionee upon the grant or
exercise of an ISO, although the excess of the fair market value on the date of
exercise over the option price is included in alternative minimum taxable
income for alternative minimum tax purposes. However, if the optionee exercises
the ISO and disposes of the shares of common stock of Conrad Industries in the
same year and the amount realized is less than the fair market value on the
date of exercise, only the difference between the amount realized and the
adjusted basis of the stock will be included in alternative minimum taxable
income. If shares of common stock of Conrad Industries are issued to an
optionee pursuant to the exercise of an ISO and no disposition of the shares is
made by the optionee within two years after the date of grant or within one
year after the transfer of the shares to the optionee (the "Holding Periods"),
then, upon the sale of the shares, any amount realized in excess of the option
price will be taxed to the optionee as long term capital gain and any loss
sustained will be a long term capital loss.

If shares of common stock of Conrad Industries acquired upon the exercise of
an ISO are disposed of prior to the expiration of either Holding Period
described above, the optionee generally will recognize ordinary income in the
year of disposition in an amount of equal to any excess of the fair market
value of the shares at the time of exercise (or, if less, the amount realized
on the disposition of the shares in a sale or exchange) over the option price
paid for the shares. Any further gain (or loss) realized by the optionee
generally will be taxed as short term or long term capital gain (or loss)
depending on the holding period.

No income generally will be recognized upon the grant of phantom shares or
performance awards. Upon payment in respect of phantom shares or earned
performance awards, the recipient generally will be required to include as
taxable ordinary income in the year of receipt an amount equal to the amount of
cash received and the fair market value of any nonrestricted shares of common
stock of Conrad Industries received less any amount paid for such award at the
time of payment or transfer pursuant to the fulfillment of the specified
conditions or the achievement of the performance goals.

The recipient of bonus stock generally will be subject to tax at ordinary
income rates on the fair market value of the shares of common stock of Conrad
Industries on the date that such shares are transferred to the recipient, and
the capital gain or loss holding period for such shares will also commence on
that date.

To the extent that a participant recognizes ordinary income in the
circumstances described above, Conrad Industries or subsidiary for which the
participant performs services will be entitled to a corresponding

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deduction for federal income tax purposes provided that, among other things,
(1) the income meets the test of reasonableness, is an ordinary and necessary
business expense, (2) is not an "excess parachute payment" within the meeting
of Section 280G of the Code, (3) if the $1.0 million limitation of Section
162(m) of the Code is exceeded, the compensation qualifies as "performance
based" under such section, and (4) Conrad Industries has timely and properly
reported such compensation income to the Internal Revenue Service.

The Board of Directors recommends that stockholders vote "FOR" the approval
of an increase in the number of shares available under the 1998 Stock Plan.
Proxies executed and returned will be so voted unless contrary instructions are
indicated thereon.

PROPOSAL NUMBER 3: RATIFICATION AND APPROVAL OF INDEPENDENT PUBLIC
ACCOUNTANTS

The Board of Directors has appointed the firm of Deloitte & Touche LLP as
Conrad Industries' independent public accountants to make an examination of the
accounts of Conrad Industries for the fiscal year ending December 31, 1999,
subject to ratification by Conrad Industries' stockholders. Representatives of
Deloitte & Touche LLP will be present at the Annual Meeting and will have an
opportunity to make a statement, if they desire to do so. They will also be
available to respond to appropriate questions from stockholders attending the
Annual Meeting.

The Board of Directors recommends that stockholders vote "FOR" ratification
and approval of Deloitte & Touche LLP's appointment. Proxies executed and
returned will be so voted unless contrary instructions are indicated thereon.

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COMPANY INFORMATION

INFORMATION ABOUT THE CURRENT AND CONTINUING DIRECTORS

· Enlarge/Download Table

Name Age Position
---- --- --------

J. Parker Conrad.................... 83 Co-Chairman of the Board of Directors (Class III)

John P. Conrad, Jr.................. 55 Co-Chairman of the Board of Directors (Class III)

William H. Hidalgo.................. 59 President, Chief Executive Officer and Director (Class II)

Cecil A. Hernandez.................. 42 Vice President--Finance and Administration,
Chief Financial Officer and Director (Class I)

Michael J. Harris................... 49 Director (Class II)

Louis J. Michot, Jr................. 76 Director (Class I)

Richard E. Roberson, Jr............. 63 Director (Class III)

Information regarding the business experience of Mr. Hernandez and Mr.
Michot is set forth above under the heading "--Nominees for Director."

J. Parker Conrad founded Conrad Industries and has served as Chairman of the
Board of Conrad Industries from its inception in 1948 and as President of
Conrad Industries from 1948 until 1994. Mr. Conrad has served as Co-Chairman of
the Board of Conrad Industries since March 1998. Mr. Conrad is the father of
John P. Conrad, Jr.

John P. Conrad, Jr. has been with Conrad Industries since 1962, serving as
Vice President of Conrad Industries since 1982 and as Co-Chairman of the Board
of Conrad Industries since March 1998. Mr. Conrad founded Johnny's Propeller
Shop, a marine-related service company, in 1963 and has been Chairman of the
Board of this Company since its inception. Mr. Conrad is also the Chairman and
President of Bay Star, a Houston-based paging company which Mr. Conrad founded
in 1986. Additionally, Mr. Conrad is founder of Venture Transport, Inc., a
specialized carrier in oil field and energy equipment, and has served on its
Board of Directors since its inception in 1987.

William H. Hidalgo has served as President and Chief Executive Officer of
Conrad Industries since May 1994. Mr. Hidalgo has served as President, Chief
Executive Officer and Director of Conrad Industries since March 1998. Prior to
joining Conrad Industries, Mr. Hidalgo was employed by Oil & Gas Marine
Service, Inc., a marine-related service company, from 1977 to 1994, and from
1988 to 1994 was responsible for all marine operations as Vice President and
General Manager. Mr. Hidalgo has 35 years experience in the marine business and
has been actively involved in the design, construction, repair, conversion,
modification, and operation of marine vessels throughout his career. Mr.
Hidalgo is a licensed professional Civil Engineer with extensive experience in
the design and construction of energy related marine structures.

Michael J. Harris has been a Director of Conrad Industries since the
consummation of the initial public offering in June 1998. Mr. Harris is a
Managing Director of Morgan Keegan & Company, Inc., where he has been employed
since 1986. Morgan Keegan & Company, Inc. is a subsidiary of Morgan Keegan,
Inc., a publicly traded firm providing securities brokerage, investment banking
and other financial services. Mr. Harris has headed the Energy Investment
Banking Group of Morgan Keegan since 1994 and prior to 1994 was the senior
energy securities analyst.

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Richard E. Roberson, Jr. has been a Director of Conrad Industries since the
consummation of the initial public offering in June 1998. Mr. Roberson served
as Vice President, Chief Financial Officer, Treasurer and director of Global
Industries, Ltd. from December 1992 to May 1996, when he retired. From March
1986 until September 1991, Mr. Roberson served as Vice President--Finance for
Ocean Drilling & Exploration Company. Additionally, Mr. Roberson served as a
director of UNIFAB International, Inc. from September 1997 to August 1998. Mr.
Roberson has over 30 years of experience in the oil and gas and oil service
industry, including over 20 years as an accounting and financial officer.

DIRECTORS' MEETINGS AND COMPENSATION

During 1998, the Board of Directors met three times and took certain
additional actions by unanimous written consent in lieu of meetings. During
1998, no director of Conrad Industries attended fewer than 75 percent of the
meetings of the Board of Directors.

Conrad Industries' directors who are employees do not receive any cash
compensation for service on the Board of Directors or any committee. The
directors are, however, reimbursed for expenses incurred in connection with
attending each board and committee meeting, and for other expenses incurred in
their capacity as Directors. Directors who are not employees of Conrad
Industries receive a fee of $12,000 annually, $1,000 for attendance at each
Board of Directors meeting and $500 for each committee meeting attended
(unless held on the same day as the Board of Directors meeting). Under the
1998 Stock Plan, each non-employee director receives (1) the grant of options
to purchase 1,000 shares of Conrad Industries' common stock upon his initial
election to the Board and (2) an annual grant of options to purchase 1,000
shares of Conrad Industries' common stock, in each case at the closing sales
price of the common stock on the date of grant.

BOARD COMMITTEES AND THEIR FUNCTIONS

Conrad Industries' Board of Directors has an Audit Committee and a
Compensation Committee, and does not have a Nominating Committee.

The Audit Committee's functions include:

. overseeing the performance and reviewing the scope of the audit
function of the company's independent auditors;

. reviewing audit plans and procedures;

. reviewing the company's policies with respect to conflicts of
interest;

. reviewing the prohibition on the use of corporate funds or assets for
improper purposes;

. reviewing changes in accounting policies; and

. reviewing the use of independent auditors for non-audit services.

In addition, the Audit Committee makes annual recommendations to the Board
of Directors for the appointment of independent public accountants for the
ensuing year. Messrs. Harris, Roberson and Michot served as the members of the
Audit Committee during 1998.

The Compensation Committee's functions include:

. reviewing salaries and other compensation of officers and key
employees on an annual basis or whenever it is requested by the Board
of Directors or the Chief Executive Officer;

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. preparing a report and submitting recommendations to the Board of
Directors regarding salaries and compensation;

. selecting officers and key employees for participation in incentive
compensation plans and establishing performance goals for those
officers and key employees and reporting to the full Board of
Directors;

. reviewing and monitoring benefits under all employee plans of the
company and reporting, if the Compensation Committee deems it
appropriate, to the full Board of Directors;

. considering and making recommendations to the Board of Directors from
time to time with respect to the management organization of the
company, including recommending the election and appointment of
officers of the company and reviewing plans providing for the orderly
succession of the officers of the company; and

. administering incentive compensation and stock plans, including the
1998 Stock Plan, as may be required by such plans, subject to the
continuing supervision and control of the Board of Directors.

The Compensation Committee also administers Conrad Industries' 1998 Stock
Plan or other similar plan benefiting the employees and officers of Conrad
Industries. Messrs. Harris, Roberson and Michot served as members of the
Compensation Committee during 1998.

During 1998, the Audit Committee met two times and the Compensation
Committee met two times. During 1998, no director of Conrad Industries attended
fewer than 75 percent of the number of meetings of committees on which he
served.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Prior to April 1998, the Board of Directors had no Compensation Committee,
and J. Parker Conrad, John P. Conrad Jr., William H. Hidalgo and Cecil A.
Hernandez participated in deliberations of Conrad Industries' Board of
Directors concerning executive officer compensation.

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REPORT OF THE COMPENSATION COMMITTEE

The Compensation Committee of the Board of Directors currently consists of
Michael J. Harris, Louis Michot, Jr. and Richard E. Roberson, Jr., none of whom
are officers or employees of Conrad Industries. The Compensation Committee is
responsible for evaluating the performance of management, determining salaries
and bonuses for certain executive officers and key employees of Conrad
Industries and administering Conrad Industries' 1998 Stock Plan. The Committee
has furnished the following report on executive compensation for 1998:

Under the supervision of the Compensation Committee, Conrad Industries has
developed a compensation policy which is designated to attract and retain
talented executives and employees responsible for the success of Conrad
Industries and to motivate management to enhance long-term stockholder value.
The annual compensation package for executive officers primarily consists of:

. a cash salary which reflects the responsibilities relating to the
position and individual performance;

. variable performance awards payable in cash or stock and tied to the
individual's or the company's achievement of certain goals or
milestones; and

. long-term stock based incentive awards which strengthen the mutuality
of interests between the executive officers and key employees and the
company's stockholders.

In determining the level and composition of compensation of each of Conrad
Industries' executive officers, including its Chief Executive Officer, the
Compensation Committee takes into account various qualitative and quantitative
indicators of corporate and individual performance. Although no specific target
has been established, the Compensation Committee may review salaries of
comparable peer group companies. In setting such salaries, the Compensation
Committee considers its peer group to be certain companies in the ship building
industry with market capitalizations similar to that of Conrad Industries.
Consequently, in evaluating the performance of management, including that of
the Chief Executive Officer, the Compensation Committee takes into
consideration such factors as the company's financial results and operating
performance in comparison with those of other companies in the industry. In
addition, the Compensation Committee recognizes performance and achievements
that are more difficult to quantify, such as the successful supervision of
major corporate projects, demonstrated leadership ability and contributions to
the industry and community development.

Base compensation for executive officers, including the Chief Executive
Officer, is generally established through negotiation between Conrad Industries
and the executive officer at the time the executive is hired, and then
subsequently adjusted when such officer's base compensation is subject to
review or reconsideration. In 1998, Conrad Industries entered into employment
agreements with J. Parker Conrad, John P. Conrad, Jr., William H. Hidalgo and
Cecil A. Hernandez, and a subsidiary of Conrad Industries entered into an
employment agreement with Ralph C. Thon. Such agreements provide for annual
base salaries of $220,500, $200,000, $195,290, $150,000 and $85,000,
respectively, which base salaries may be increased by the Board of Directors.
The Board of Directors has not taken any action to increase the base salaries
of such executive officers for the 1999 calendar year. When establishing or
reviewing base compensation levels for each executive officer, the Compensation
Committee, in accordance with its general compensation policy, considers
numerous factors, including the responsibilities relating to the position, the
qualifications of the executive and the relevant experience the individual
brings to Conrad Industries, strategic goals for which the executive has
responsibility, and compensation levels of comparable companies, and annual
performance of the individual. No pre-determined weights are given to any one
of such factors.

In the first quarter of 1998, Conrad Industries issued shares of common
stock to William H. Hidalgo, the President and Chief Executive Officer, and
Cecil A. Hernandez, the Vice President--Finance and

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Administration and Chief Financial Officer, in consideration of past services
rendered. The agreements related to such restricted stock provided that 50% of
the shares of common stock issued to each such executive would be subject to
forfeiture in the event of the voluntary termination of employment by such
executive for other than "good reason" prior to the expiration of the initial
three-year term of employment specified in the employment agreement of such
executive, provided that such restriction would lapse in the event of (1) the
termination by the company of such executive's employment for reasons other
than "cause" (as defined) or (2) the death, disability or retirement (at or
after the age of 65) of such executive and would also lapse with respect to
33 1/3% of such restricted shares on each of the first three anniversaries of
the completion of the company's initial public offering in June 1998. The shares
of common stock of Conrad Industries issued to Mr. Hidalgo and Mr. Hernandez
were exchanged, respectively, for 385,695 and 153,819 shares of common stock of
the company pursuant to the reorganization of the company completed prior to the
initial public offering. In connection with the issuance of shares of Conrad
Industries common stock, Mr. Hidalgo and Mr. Hernandez, executed promissory
notes in the amounts of $239,870 and $97,400, respectively, representing their
tax liabilities paid by the company. These tax notes were repaid in full by Mr.
Hidalgo and Mr. Hernandez in July 1998. In connection with the issuance of these
shares to Messrs. Hidalgo and Hernandez, the company estimated it would
recognize aggregate compensation expense of $8.6 million, of which $4.3 million
was recognized in the first quarter of 1998 and the remainder was estimated to
be recognized over a three-year vesting period, of which $360,000 was expended
in the second quarter of 1998. During the third quarter of 1998, the executives
surrendered and the company canceled 247,277 of their restricted shares in order
to eliminate the recurring compensation expense associated with the lapse of the
restrictions. As a result of the cancellation of the shares, the remainder of
the estimated compensation expense of $4.0 million will not be recognized in the
future. On November 3, 1998, Mr. Hidalgo and Mr. Hernandez were granted stock
options to purchase 250,000 and 114,043 shares, respectively, of common stock at
$6.75 per share, the market price of the stock on the date of the award.

In addition to each executive officer's base compensation, the Compensation
Committee may award cash bonuses under an annual incentive plan and/or grant
awards under Conrad Industries' 1998 Stock Plan to chosen executive officers
depending on the extent to which certain defined personal and corporate
performance goals are achieved. The Board of Directors has determined not to
pay any cash bonuses under the annual incentive plan or make any award under
the 1998 Stock Plan to any executive officer for 1998, except as described
above.

All employees of Conrad Industries, including its executive officers, are
eligible to receive long-term stock based incentive awards under Conrad
Industries' 1998 Stock Plan as a means of providing such individuals with a
continuing proprietary interest in Conrad Industries. Such grants further the
mutuality of interest between Conrad Industries' employees and its stockholders
by providing significant incentives for such employees to achieve and maintain
high levels of performance. Conrad Industries' 1998 Stock Plan enhances the
company's ability to attract and retain the services of qualified individuals.
Factors considered in determining whether such awards are granted to an
executive officer of Conrad Industries include:

. the executive's position in Conrad Industries, his or her performance
and responsibilities;

. the amount of stock options, if any, currently held by the officer;

. the vesting schedules of any such options; and

. the executive officer's other compensation.

While the Compensation Committee does not adhere to any firmly established
formulas or schedules for the issuance of awards such as options or restricted
stock, the Compensation Committee will generally tailor the terms of any such
grant to achieve its goal as a long-term incentive award by providing for a
vesting schedule encompassing several years or tying the vesting dates to
particular corporate or personal milestones.

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The management of Conrad reviewed with the Compensation Committee the
substantial decline in the price of Conrad common stock from the date of the
initial public offering to November 3, 1998, compared the Conrad common stock
performance during this period with the common stock performance of Conrad's
peer group, noted that given these facts, competitors could make job offers to
key Conrad employees which could include stock option awards more valuable than
the Conrad stock option awards held by employees, and recommended that the
Compensation Committee consider repricing all of the Conrad stock option awards
outstanding. In the fourth quarter of 1998, 125,500 employee stock options
which had previously been issued to employees with an original exercise price
of $12.00 per share were repriced at $6.75 per share, the market price of the
common stock of Conrad Industries on the date of repricing. These included
12,000 options originally issued to Mr. Ralph C. Thon. Additionally, the Board
of Directors determined that it was advisable to reprice options to the non-
employee directors in order to encourage their continued involvement as
directors of Conrad Industries. As a result, 1,000 employee stock options which
had been issued to each of the non-employee directors, Messrs. Harris, Roberson
and Michot, with an original exercise price of $12.00 per share, were also
repriced during the fourth quarter of 1998. The new exercise price of the stock
options, $6.75, represents the market price of the common stock of Conrad
Industries on the date of repricing. The stock option repricing was approved or
ratified by the entire Board of Directors.

The foregoing report is given by the following members of the Compensation
Committee:

Michael J. Harris
Richard E. Roberson, Jr.
Louis Michot, Jr.

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EXECUTIVE COMPENSATION

Executive Officers

Set forth below is certain information concerning the executive officers of
Conrad Industries, including the business experience of each during the past
five years.

· Download Table

Name Age Position with Conrad Industries
---- --- -------------------------------

J. Parker Conrad.................... 83 Co-Chairman of the Board
John P. Conrad, Jr.................. 56 Co-Chairman of the Board
William H. Hidalgo.................. 58 President and Chief Executive Officer
Cecil A. Hernandez.................. 42 Vice President--Finance and Administration,
Chief Financial Officer
Ralph C. Thon....................... 56 General Manager--Orange Shipbuilding

Information regarding the business experience of Messrs. Conrad, Conrad,
Jr., Hidalgo and Hernandez is set forth above under the heading "Information
about Current and Continuing Directors."

Ralph C. Thon has been employed by Orange Shipbuilding as Chief Engineer
from 1980 until 1997 and as General Manager since 1997. Mr. Thon has 37 years
of experience in shipbuilding management.

Compensation of Executive Officers

Summary Compensation Table

The following table provides certain summary information concerning
compensation paid or accrued during the last two fiscal years to Conrad
Industries' Chief Executive Officer and to each of the other executive officers
of the company, determined as of the end of the last fiscal year, whose annual
compensation exceeded $100,000. Further information with respect to each of the
named executive officer's compensation is described below the table.

· Enlarge/Download Table

Annual Compensation Long-Term Compensation
-------------------------------------- ----------------------
Other Restricted Securities
Name and Principal Annual Stock Underlying All Other
Position Year Salary Bonus Compensation(1) Awards Options (#) Compensation(2)
------------------ ---- -------- -------- --------------- ---------- ----------- ---------------

J. Parker Conrad........ 1998 $220,500 -- -- -- -- --
Co-Chairman of the 1997 $210,000 -- -- -- -- --
Board
John P. Conrad, Jr. .... 1998 $200,000 -- -- -- -- --
Co-Chairman of the 1997 $150,000 $ 75,000 -- -- -- --
Board
William H. Hidalgo...... 1998 $195,290 -- -- (4) 250,000 $2,500
President and Chief 1997 $185,990 $245,000 -- -- -- $2,375
Executive Officer
Cecil A. Hernandez(3)... 1998 $150,000 -- -- (4) 114,043 $1,515
Vice President--Finance
and Administration and
Chief Financial Officer
Financial Officer
Ralph C. Thon........... 1998 $ 85,000 $ 32,000 -- -- 12,000 $2,500
General Manager--Orange
Shipbuilding

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--------
(1) None of the executive officers has received perquisites, the value of which
exceeded the lesser of $50,000 or 10% of the salary of such executive
officer.
(2) Consists of payments made by Conrad Industries under the company's 401(k)
plan for the benefit of the executive officers.
(3) Cecil A. Hernandez was not an employee of Conrad Industries in 1997.
(4) Prior to the initial public offering of Conrad Industries, Messrs. Hidalgo
and Hernandez were issued 385,695 and 153,819 shares of restricted common
stock of Conrad Industries, respectively. Subsequently, 176,777 and 70,500
shares of such restricted stock, respectively, were surrendered by such
executive officers. As of December 31, 1998, Messrs. Hidalgo and Hernandez
held 208,918 and 83,319 shares of restricted common stock, respectively,
which at the time of grant, prior to the initial public offering of Conrad
Industries and therefore the existence of a public market for such stock,
were valued at $401,123 and $159,972, respectively. As of March 31, 1999,
using the closing sales price of Conrad Industries' common stock as
reported by the Nasdaq Stock Market of $3.625, such shares of restricted
stock were valued at $757,328 and $302,031, respectively. Of the 208,918
and 83,319 shares of restricted stock held by Messrs. Hidalgo and
Hernandez, respectively, 192,848 and 76,910 shares of restricted stock,
respectively, vested on March 31, 1998, and 16,070 and 6,409 shares of
restricted stock, respectively, will vest on June 10, 1999. Dividends will
be paid on the restricted stock reported if any are declared by the
company.

Option Grants During 1998

The following table provides certain information with respect to options
granted to the Chief Executive Officer and to each of the executive officers
named below during the fiscal year ended December 31, 1998, under our 1998
Stock Plan. The Securities and Exchange Commission requires disclosure of the
potential realizable value or present value of each grant. The disclosure
assumes the options will be held for the full 10-year term prior to exercise.
These options may be exercised prior to November 2, 2008. The actual value, if
any, an executive officer may realize will depend upon the excess of the stock
price over the exercise price on the date the option is exercised. There can be
no assurance that the stock price will appreciate at the rates shown in the
table. As of March 31, 1999, the closing sales price of our common stock, as
reported by the Nasdaq Stock Market, was $3.625 per share.

· Enlarge/Download Table

Individual Grants
----------------------------------------------------
Potential Realizable
Value at Assumed
Number of Percent of Annual Rates of Stock
Securities Total Options Price Appreciation
Underlying Granted to Exercise for Option Term
Options Employees in Price per Expiration ---------------------
Name Granted (#) Fiscal Year Share Date 5% 10%
------------------------ ----------- ------------- --------- ---------------- ---------- ----------

William H. Hidalgo...... 250,000 100% $6.75 November 2, 2008 $1,062,500 $2,690,000
Cecil A. Hernandez...... 114,043 100% $6.75 November 2, 2008 $ 484,683 $1,227,103

Fiscal Year-End Option Values

The following table sets forth certain information regarding (1) the number
of shares of common stock underlying unexercised options held by the Chief
Executive Officer and each Named Executive Officer as of December 31, 1998, and
(2) the value, at December 31, 1998, of exercisable and unexercisable "in-the-
money" stock options held by the Chief Executive Officer and each executive
officer named in the Summary Compensation Table. Neither the Chief Executive
Officer nor any other Named Executive Officer exercised any stock options
during the year ended December 31, 1998. A stock option is "in-the-money" if
the closing market price of the company's common stock exceeds the exercise
price of the stock option. The value of "in-the-money" unexercised stock
options set forth in the foregoing table represents the difference between the
exercise price of these options and the closing sales price of our common stock
on December 31, 1998, as reported by the Nasdaq Stock Market, $3.906 per share.

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1998 Option Values

· Download Table

Number of Securities
Underlying Unexercised Value of Unexercised
Options at Fiscal In-the-Money Options at
Year-End Fiscal Year End
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------

William H. Hidalgo.......... -- 250,000 -- --
Cecil A. Hernandez.......... -- 114,043 -- --
Ralph C. Thon............... 4,000 8,000 -- --

Report on Repricing of Options

The following table sets forth information concerning options to purchase
common stock held by executive officers which were repriced on November 3,
1998. Amounts represent new stock options granted under Conrad Industries' 1998
Stock Plan and include both incentive and non-qualified stock options. One-
third of such options become exercisable on each of December 10, 1998, June 10,
1999 and June 10, 2000. The exercise price of each option represents the market
price of the common stock on the date of grant.

· Download Table

Length of
Original
Option
Term
Number of Market Remaining
Securities Price of Exercise at Date of
Date Underlying Stock at Price at New Repricing
Name and Principal Options Options Time of Time of Exercise----------
Position Repriced Repriced Repricing Repricing Price Years Days
------------------ -------- ---------- --------- --------- -------- ----- ----

Ralph C. Thon........... 11/3/98 12,000 $6.75 $12.00 $6.75 9 219
General Manager--Orange
Shipbuilding

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Performance Graph

The following performance graph compares Conrad Industries' cumulative total
stockholder return on its common stock to the cumulative total return of the
Nasdaq Composite Index and to a peer group stock index which consists of the
publicly-traded companies which perform construction, conversion and repair of
marine vessels. The companies that comprise the peer group index are: Halter
Marine Inc. and Friede Goldman International Inc. The graph covers the period
from June 10, 1998 (the initial trading date of the common stock) to December
31, 1998. The graph assumes that the value of the investment in Conrad
Industries' common stock and each index was 100 at June 10, 1998 and that all
dividends were reinvested.

COMPARISON OF 6 MONTH CUMULATIVE TOTAL RETURN*
AMONG CONRAD INDUSTRIES, INC., THE S & P SMALLCAP 600 INDEX
AND A PEER GROUP

[Performance Graph Appears Here]

6/10/98 12/31/98
--------- ----------
Conrad Industries, Inc. 100 33
Peer Group 100 34
S&P Smallcap 600 100 97

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Stock Plan

The Conrad Industries, Inc. 1998 Stock Plan was adopted by the Board of
Directors of the company and approved by the company's stockholders in March
1998. The 1998 Stock Plan permits the granting of any or all of the following
types of awards ("Awards"): stock appreciation rights, stock options,
restricted stock, dividend equivalents, performance units, automatic director
options, phantom shares, limited stock appreciation rights ("LSARs"), bonus
stock and cash tax rights. All officers and employees of, and any consultants
to, the company or any affiliate of the company will be eligible for
participation in all Awards under the 1998 Stock Plan other than director
options. Each non-employee director of the company is entitled to receive (1)
the grant of options to purchase 1,000 shares of Conrad Industries' common
stock upon his initial election to the Board and (2) an annual grant of options
to purchase 1,000 shares of Conrad Industries' common stock, in each case at
the closing sale price of the common stock on the date of grant.

An aggregate of 700,000 shares of common stock have been authorized and
reserved for issuance pursuant to the 1998 Stock Plan. As of the date of this
Proxy Statement, options to purchase an aggregate of 492,543 shares of common
stock have been granted under the 1998 Stock Plan. The 1998 Stock Plan is
administered by the Compensation Committee of the company's Board of Directors.
The Compensation Committee selects the participants who will receive Awards,
determine the type and terms of Awards to be granted and interpret and
administer the 1998 Stock Plan. No Awards may be granted under the 1998 Stock
Plan after March 31, 2008.

The Board of Directors has approved, subject to stockholder approval, an
amendment to the 1998 Stock Plan to increase the maximum number of shares of
common stock issuable under the 1998 Stock Plan from 700,000 shares to 950,000
shares. See "Proposal Number 2: Approval of Increase in the Number of Shares
Available Under the 1998 Stock Plan."

401(k) Plan

Conrad Industries maintains a retirement savings plan, effective as of
August 1997, in which eligible employees of Conrad Industries may elect to
participate. The plan is an individual account plan providing for deferred
compensation as described in Section 401(k) of the Code and is subject to, and
intended to comply with, the Employee Retirement Income Security Act of 1974.
Each eligible employee is permitted to defer receipt of up to 15% of his annual
salary up to the applicable statutory maximum prescribed in the Code. Conrad
Industries may, in its discretion, match employee deferrals in cash, but this
company contribution may not exceed an amount equal to five percent of the
employee's salary. Conrad Industries currently has elected to match $0.25 for
each $1.00 of employee deferral. The amounts held under the 401(k) Plan are
invested among various investment funds maintained under the 401(k) Plan in
accordance with the directions of each participant. Salary deferral
contributions under the 401(k) Plan are 100% vested. Matching contributions
vest over a period of four years after an employee completes two years of
service with Conrad Industries. Participants or their beneficiaries are
entitled to payment of vested benefits upon termination of employment. Conrad
Industries made contributions of approximately $88,000 under the 401(k) plan in
1998.

Annual Incentive Plan

Conrad Industries has established an annual incentive plan under which key
employees will be awarded cash payments based upon the achievement of certain
performance goals. The aggregate amount shall not exceed five percent of the
company's EBITDA (defined as operating income before depreciation, amortization
and non-cash compensation expenses related to issuance of stock and stock
options to employees). The Board of Directors will determine the actual amount
of the bonus pool, subject to this limitation, and the key employees who would
be recipients of any such cash bonuses and the individual amount of the cash
bonus for each such key employee.

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Employment Agreements with Directors and Executive Officers

Conrad Industries has entered into employment and non-competition agreements
with each of J. Parker Conrad, John P. Conrad, Jr., William H. Hidalgo and
Cecil A. Hernandez. Orange Shipbuilding has entered into a similar agreement
with Ralph C. Thon. These agreements prohibit such officers from disclosing
Conrad Industries' confidential information and trade secrets and generally
restrict these individuals from competing with Conrad Industries for a period
of two years after the termination of their employment. Each of these
agreements has an initial term of three years and provides for annual
extensions at the end of its initial term, subject to the parties' mutual
agreement, and is terminable by the employer for "cause" upon ten day's notice
and without "cause" (1) by the employee upon 30 days' written notice and (2) by
the employer upon approval by a majority of the Board of Directors. The
employment agreements provide that the employer shall pay a base salary of
$220,500 to J. Parker Conrad, $200,000 to John P. Conrad, Jr., $195,290 to
William H. Hidalgo, $150,000 to Cecil A. Hernandez and $85,000 to Ralph C.
Thon, which base salaries may be increased by the Board of Directors. Such
agreements also provide that each executive officer will be reimbursed for out-
of-pocket business expenses and that each executive officer shall be eligible
to participate in all benefit plans and programs as are maintained from time to
time by the employer. Each employment agreement provides that if the officer's
employment is terminated by the employer without "cause" or is terminated by
the officer for "good reason," the officer shall be entitled to receive a lump
sum severance payment at the effective time of termination equal to the base
salary (at the rate then in effect) for the greater of (1) the time period
remaining under the term of the agreement or (2) one year. In addition, the
time period during which such officer is restricted from competing with Conrad
Industries will be shortened from two years to one year.

The employment agreements also provide that if the officer's employment is
terminated within two years following a change in control by Conrad Industries
other than for "cause" or by the officer for "good reason," or the officer is
terminated by Conrad Industries within three months prior to the change in
control at the request for the acquirer in anticipation of the change in
control, (1) the officer will be entitled to receive a lump sum severance
amount equal to the greater of (a) in the case of J. Parker Conrad, John P.
Conrad, Jr., and William H. Hidalgo, three years' base salary and, in the case
of Cecil A. Hernandez and Ralph C. Thon, two years' base salary or (b) the base
salary for whatever period is then remaining on the initial term; (2) the
provisions which restrict competition with Conrad Industries shall not apply;
and (3) if any payment to the officer is subject to the 20% excise tax on
excess parachute payments, the officers shall be made "whole" on a net after
tax basis. A change in control is generally defined to occur upon (1) the
acquisition by any person of 50% or more of the total voting power of the
outstanding securities of Conrad Industries, (2) the first purchase pursuant to
a tender or exchange offer for Common Stock, (3) the approval by the
stockholders of Conrad Industries of certain mergers, sale of substantially all
the assets, or dissolution of Conrad Industries or (4) a change in a majority
of the members of Conrad Industries' Board of Directors.

In general, a "parachute payment" is any payment made by Conrad Industries
in the nature of compensation that is contingent on a change in control of
Conrad Industries and includes the present value of the accelerations of
vesting and the payment of options and other deferred compensation amounts upon
a change in control. If the aggregate present value of the parachute payments
to certain individuals, including officers, equals or exceeds three times that
individual's "base amount" (generally, the individual's average annual
compensation from Conrad Industries for the five calendar years ending before
the date of the exchange in control), then all parachute amounts in excess of
the base amount are "excess" parachute payments. An individual will be subject
to a 20% excise tax on excess parachute amounts and Conrad Industries will not
be entitled to a tax deduction for such payments.

TRANSACTIONS WITH CERTAIN AFFILIATES

During 1998, Conrad Industries purchased in its ordinary course of business
certain components from Johnny's Propeller Shop, a company wholly owned by John
P. Conrad, Jr., Co-Chairman of the Board of

DEF 14A 26th Page of 41 TOC 1st Previous Next Bottom Just

Conrad Industries Inc · DEF 14A · For 5/27/99

Filed On 4/22/99 · SEC File 0-24263 · Accession Number 899243-99-777

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