<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
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)) [ ]
Definitive Proxy Statement [X]
Definitive Additional Materials [ ]
Soliciting Material Pursuant to Section 240.14a-11(c) or Section 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.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
[THE SHAW GROUP INC. LOGO]
THE SHAW GROUP INC.
8545 UNITED PLAZA BOULEVARD
BATON ROUGE, LOUISIANA 70809
NOTICE OF THE 2000 ANNUAL MEETING
OF SHAREHOLDERS
PLEASE TAKE NOTICE that the 2000 Annual Meeting of Shareholders of The Shaw
Group Inc., a Louisiana corporation (the "Company"), will be held at the
Radisson Hotel, 4728 Constitution Avenue, Baton Rouge, Louisiana, on January 28,
2000, at 9:00 a.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 and any
adjournments thereof.
The Board of Directors has fixed the close of business on December 6, 1999,
as the record date for the determination of shareholders entitled to notice of,
and to vote at, the meeting.
Your proxy card is enclosed. You are cordially invited to attend the 2000
Annual Meeting, but if you do not expect to attend or if you plan to attend but
it is more convenient for the designated proxies to vote your shares, please
execute, date and return the enclosed proxy card in the enclosed postage-paid
envelope as soon as possible to ensure that your shares will be voted at the
Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ GARY P. GRAPHIA
--------------------------
Gary P. Graphia, Secretary
December 17, 1999
Baton Rouge, Louisiana
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> 3
THE SHAW GROUP INC.
8545 UNITED PLAZA BOULEVARD
BATON ROUGE, LOUISIANA 70809
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 2000 Annual Meeting of
Shareholders to be held on January 28, 2000, at 9:00 a.m., at the Radisson
Hotel, 4728 Constitution Avenue, Baton Rouge, Louisiana, and any adjournments
thereof. Only shareholders of record at the close of business on December 6,
1999, 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 17,
1999.
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 and 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 $4,750 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.
1
<PAGE> 4
On November 30, 1999, the Company had issued and outstanding and entitled
to vote 15,208,046 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 6, 1999) will be
entitled to one vote per share. Thus, shares owned on or before December 6,
1995, 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
offerings in December 1996, January 1997, and November 1999, will be entitled to
only one vote per share. See "Determination of Beneficial Ownership" below 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, 1999, (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 and
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 that is outstanding.
<TABLE>
<CAPTION>
PERCENT OF
BENEFICIAL OWNERSHIP VOTING
NAME OF BENEFICIAL OWNER SHARES PERCENT POWER(14)
- ------------------------ ---------- --------- ----------
<S> <C> <C> <C>
J. M. Bernhard, Jr.(1)...................................... 1,510,566 9.6% 30.2%
8545 United Plaza Blvd.
Baton Rouge, Louisiana 70809
G. Ray Wilkie, Jr.(2)....................................... 234,863 1.5% 4.3%
Albert McAlister(3)......................................... 77,302 * 1.5%
Richard F. Gill(4).......................................... 85,938 * *
John W. Sinders, Jr.(5)..................................... 25,250 * *
George P. Bevan(6).......................................... 34,646 * *
David W. Hoyle(7)........................................... 22,000 * *
L. Lane Grigsby(8).......................................... 14,100 * *
N. Andrew Dupuy, Jr.(9)..................................... 12,500 * *
Robert L. Belk(10).......................................... 23,750 * *
William H. Grigg(11)........................................ 6,000 -- --
Michael H. Wootton(12)...................................... 45,350 -- --
All executive officers and directors as a group (12
persons)(13).............................................. 2,092,265 13.3% 37.1%
</TABLE>
- ---------------
* less than 1%
(1) Includes 50,000 shares of which Mr. Bernhard may be deemed to be beneficial
owner as a result of rights that he may exercise to acquire beneficial
ownership within 60 days.
(2) Includes 40,625 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.
(3) Includes 8,250 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.
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<PAGE> 5
(4) Includes 40,000 shares owned by a company in which Mr. Gill has an
ownership interest and 23,438 shares of which Mr. Gill may be deemed to be
beneficial owner as a result of rights that he may exercise to acquire
beneficial ownership within 60 days.
(5) Includes 8,250 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.
(6) Includes 5,740 shares owned of record by Mr. Bevan's spouse and 28,906
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.
(7) Includes 3,000 shares owned of record by Mr. Hoyle's spouse and 8,250
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.
(8) Includes 8,250 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.
(9) Includes 12,500 shares of which Mr. Dupuy 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 18,750 shares of which Mr. Belk 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 3,000 shares of which Mr. Grigg 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 23,500 shares of which Mr. Wootton may be deemed to be beneficial
owner as a result of rights that he may exercise to acquire ownership
within 60 days, and 15,000 shares of which Mr. Wootton may vote but not
sell or otherwise transfer until July 2, 2001.
(13) Includes 8,740 shares owned of record by spouses of executive officers and
directors and 233,719 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.
(14) Based upon information available to the Company as of the date of this
Proxy Statement.
ELECTION OF DIRECTORS
At its December 8, 1997 meeting, the Board of Directors decreased the
number of directorships from nine to six. Each nominee is presently a director
of the Company. 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 2000 Annual Meeting
of Shareholders. 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, age,
principal occupation or employment and other data regarding each nominee, based
on information received from the nominee, are set forth below:
J. M. Bernhard, Jr., age 45, the Company's founder, has been the
Company's President and Chief Executive Officer since its inception in
September 1987. He has also been one of the Company's directors since the
Company's 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, a
pipe fabrication company, and served on the board of directors of Barnard
and Burk Engineers & Constructors. Mr. Bernhard also currently serves on
the board of directors of Cajun Constructors, Inc.
3
<PAGE> 6
Albert McAlister, age 48, has been one of the Company's directors
since April 1990. 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 58, has served as one of the Company's directors
since January 1995. Mr. Grigsby is Chairman of the Board of Cajun
Constructors, Inc., for which he also served as President and Chief
Executive Officer from April 1973 until 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 60, has served on the Company's Board of directors
since January 1995. For the past 15 years, he has been self-employed,
primarily as a real estate developer. He 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, including as Chairman
of the Board of Gaston Federal Bank, as well as several civic, educational
and charitable organizations.
John W. Sinders, Jr., age 44, has served on the Company's Board of
directors since March 1995. He has served as Managing Director of RBC
Dominion Securities Corporation, an investment banking firm, since August
1999. From 1993 until 1999, Mr. Sinders served as an Executive Vice
President and as a managing director of Jefferies & Company, Inc., an
investment banking firm. Mr. Sinders served as a Managing Director of
Howard Weil Labouisse Friedrichs Incorporated, an investment banking firm,
from 1987 until 1993. He was a member of the board of directors of Howard
Weil from 1990 until 1993. Prior to joining Howard Weil, he was a partner
with the law firm of McGlinchey, Stafford, Mintz, Cellini & Lang in New
Orleans.
William H. Grigg, age 67, has served on the Company's Board of
directors since January 1998. He is the retired Chairman and Chief
Executive Officer of Duke Power Company, now Duke Energy Corporation. Mr.
Grigg began his career at Duke Power in 1963. He served as Chairman and
Chief Executive Officer from April 1994 until 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., a mutual
fund company, Nations Fund, Inc., a mutual fund company, Associated
Electric and Gas Insurance Services Ltd., a mutual casualty insurance
company and the Charlotte-Mecklenburg Hospital Authority, a local hospital.
He is a member of several civic and charitable organizations, serving as
Chairman of the Board of Foundation for the Carolinas.
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, 1999, ("fiscal 1999"), six 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 1999.
The Board of Directors has no nominating or other committee performing similar
functions at this time. The following directors serve on the Audit Committee: L.
Lane Grigsby and William H. Grigg. The Audit Committee met four times during
fiscal 1999. 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 serve on the Compensation
Committee: David W. Hoyle and John W. Sinders, Jr. The Compensation Committee
met three times in fiscal 1999. 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
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<PAGE> 7
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 the executive
officers of the Company. 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 AGE POSITION
- ---- --- --------
<S> <C> <C>
J. M. Bernhard, Jr. ......................... 45 Chairman of the Board of Directors, President
and Chief Executive Officer
Richard F. Gill.............................. 56 Executive Vice President and Chief Operating
Officer
Robert L. Belk............................... 50 Executive Vice President, Chief Financial
Officer and Treasurer
G. Ray Wilkie, Jr. .......................... 54 Senior Vice President -- U.S. Operations
George P. Bevan.............................. 52 Senior Vice President
N. Andrew Dupuy, Jr. ........................ 44 Senior Vice President -- International and
Construction Operations
Michael H. Wootton........................... 51 Senior Vice President of Business Development
</TABLE>
J. M. Bernhard, Jr. -- See "Election of Directors."
Richard F. Gill has been employed by the Company since 1997 when the
Company acquired certain assets of MERIT Industrial Constructors, Inc. and other
affiliated entities. Mr. Gill served as the President of Shaw Process and
Industrial Group, Inc., a wholly-owned subsidiary of the Company, from March
1997 until August 1998, and as Senior Vice President in charge of Construction
and International Operations, one of the Company's two principal operating
divisions from September 1998 until May 1999. In May 1999, Mr. Gill was
appointed Executive Vice President and Chief Operating Officer. Mr. Gill served
as President of MERIT from its founding in January 1982 until its sale to the
Company in 1997. MERIT was an industrial construction and maintenance firm based
in Baton Rouge, Louisiana. Mr. Gill has over 31 years of experience in the
industrial construction and maintenance industry.
Robert L. Belk joined the Company in October 1998 as Executive Vice
President, Chief Financial Officer and Treasurer. Prior to joining the Company,
Mr. Belk served Ocean Energy, Inc. as its Executive Vice President of
Administration from March 1998 until October 1998, as its Executive Vice
President and Chief Financial Officer from June 1997 until March 1998, and as
its Senior Vice President, Chief Financial Officer and Treasurer from 1993 until
1997. Prior to joining Ocean Energy, Inc., Mr. Belk was engaged in public
accounting with national and local firms and as a sole-practitioner.
G. Ray Wilkie, Jr., 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, as President of B. F. Shaw, Inc. from May 1993
until November 1995, and as the Company's Executive Vice President from November
1995 until August 1998. In September 1998, Mr. Wilkie was appointed the
Company's Senior Vice President in charge of its U.S. Operations, one of the
Company's two principal operating divisions. Mr. Wilkie also served as one of
the Company's directors from January 1993 until March 1995. Mr. Wilkie has spent
the last 31 years in the pipe fabrication business.
George P. Bevan has been employed by the Company since September 1994, and
served as an Executive Vice President from April 1997 until August 1998. In
September 1998, he was appointed a Senior Vice President and prior to that time
was a Vice President. Prior to joining the Company, Mr. Bevan was a senior
partner in the law firm of Bevan-Hernandez, which he formed in 1991. He also
served as President of Southern United Financial Corporation, an insurance and
financial services company from 1987 until 1994.
5
<PAGE> 8
N. Andrew Dupuy, Jr., has been employed by the Company since February 1997
when the Company acquired United Crafts, Inc. Mr. Dupuy served as President of
Shaw Power Services, Inc., one of the Company's subsidiaries, from December 1997
until August 1998 and as Vice President of the Company's international and
construction operations from August 1998 until May 1999. In May 1999, Mr. Dupuy
was appointed Senior Vice President of International and Construction
Operations. Mr. Dupuy co-founded United Crafts, Inc. in 1978 and was its
President from 1986 until its sale to the Company. Mr. Dupuy has over 25 years
of experience in the industrial construction and maintenance industry.
Michael H. Wootton joined the Company in September 1990 and served as the
Company's Vice President of Power and Business Development from 1990 until 1992
and as President of Shaw International, Inc., one of the Company's wholly-owned
subsidiaries, from 1992 until 1999. In May 1999, the Company appointed Mr.
Wootton as its Senior Vice President of Business Development. Prior to joining
the Company, Mr. Wootton served as President of the pipe fabrication division of
Dravo Corporation from 1973 until 1990. Mr. Wootton has over 29 years of
experience in the pipe fabrication and construction industry.
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 1999 (the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
--------------------------
ANNUAL COMPENSATION AWARDS
----------------------------------- ------------- PAYOUTS
OTHER ANNUAL SECURITIES ---------- ALL OTHER
FISCAL COMPENSATION UNDERLYING LTIP COMPENSATION
NAME AND PRINCIPAL POSITION YEAR(1) SALARY(4) BONUS (5) OPTIONS(#)(6) PAYOUTS(7) (8)
- --------------------------- ------- --------- -------- ------------ ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
J. M. Bernhard, Jr.,
President,.................... 1999 $604,038 $375,000 $66,741 200,000 -- $6,454
Chief Executive Officer and 1998 $539,343 $ 50,000 $75,318 35,000 -- $4,142
Chairman of the Board 1997 $500,000 -- $54,531 -- -- $4,750
Richard F. Gill(2)............ 1999 $225,859 $200,000 -- 75,000 -- $6,252
Executive Vice President 1998 $213,221 $ 20,000 -- -- -- $3,132
and Chief Operating Officer 1997 $ 76,667 -- -- 25,000 -- --
G. Ray Wilkie, Jr. ........... 1999 $225,080 $130,000 -- 42,500 $11,917 $5,881
Senior Vice
President -- U.S. 1998 $185,593 $ 18,500 -- -- -- $4,816
Operations 1997 $185,000 -- -- -- -- $5,448
Michael H. Wootton............ 1999 $211,961 $ 60,000 -- 30,000 $14,119 $3,770
Senior Vice President of 1998 $216,946 $ 20,000 -- -- -- $6,386
Business Development 1997 $215,000 -- -- -- -- $4,750
Robert L. Belk(3)............. 1999 $203,365 $147,500 -- 75,000 -- --
Executive Vice President 1998 -- -- -- -- -- --
and Chief Financial Officer 1997 -- -- -- -- -- --
</TABLE>
- ---------------
(1) The Company's fiscal year ends on August 31.
(2) Mr. Gill did not join the Company until March 1997.
(3) Mr. Belk did not join the Company until October 1998.
(4) From time to time, executive officers receive raises that are made
retroactive to prior periods. These raises may overlap fiscal periods. The
entire amount of the retroactive payment is reported in the year such amount
is received.
(5) Perquisites and other personal benefits, except those 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
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<PAGE> 9
$50,000 or 10% of the total salary and bonus. As a result of Company record
keeping procedures, the amounts disclosed in the 1999, 1998 and 1997 columns
for Mr. Bernhard constitute total personal benefits for the calendar years
of 1998, 1997 and 1996, respectively. Of the totals, $51,634, $49,616 and
$37,909 represent Mr. Bernhard's personal use of Company transportation for
the calendar years 1998, 1997 and 1996, respectively.
(6) Denotes shares of Common Stock of the Company that may be purchased upon
exercise of options awarded pursuant to the Company's 1993 Employee Stock
Option Plan, as amended. The options awarded in 1998 to Mr. Bernhard to
purchase 35,000 shares of Common Stock have been cancelled and replaced by
the 1999 award of options to purchase 35,000 shares of Common Stock, which
award is included in the 200,000 shares reflected for 1999. The options to
purchase 25,000 shares of Common Stock awarded to Mr. Gill in 1997 have been
adjusted as follows: (i) options to purchase 18,750 shares of Common Stock
have been cancelled and replaced by options to purchase 18,750 shares
awarded in 1999, and (ii) options to purchase 6,250 shares of Common Stock
were repriced by adjusting during 1999 the exercise price of such options.
These options to purchase a total of 25,000 shares that have been either
awarded to replace outstanding options or which were the result of an
amendment to the exercise price of outstanding options are included in the
75,000 shares reflected for 1999. See "Ten-Year Option Repricings" below.
(7) Payments under the long-term incentive plan ("LTIP") with respect to awards
made during fiscal 1995.
(8) Represents the Company's contribution on behalf of the officers to the
Company's 401(k) plan.
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, as amended, to any of the Company's
Chief Executive Officer and the Named Executive Officers during fiscal 1999:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATE OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM (2)
OPTIONS EMPLOYEES IN PRICE -----------------------------
NAME GRANTED (1) FISCAL YEAR $/SHARES (2) EXPIRATION DATE 5% 10%
- ---- ----------- ------------ ------------ ---------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
J. M. Bernhard,
Jr.(3)............... 200,000 18% $8.38 October 19, 2008 $1,053,398 $2,669,519
G. Ray Wilkie, Jr. .... 42,500 4% $8.38 October 19, 2008 $ 223,847 $ 567,273
Michael H. Wootton..... 30,000 3% $8.38 October 19, 2008 $ 158,010 $ 400,428
Richard F. Gill(4)..... 50,000 5% $8.38 October 19, 2008 $ 263,350 $ 667,380
Richard F. Gill(5)..... 6,250 1% $8.38 October 19, 2008 $ 32,919 $ 83,422
Richard F. Gill........ 18,750 2% $8.38 January 4, 2009 $ 98,756 $ 250,267
Robert L. Belk......... 75,000 7% $8.38 October 19, 2008 $ 395,024 $1,001,069
</TABLE>
- ---------------
(1) The options are subject to the terms of the 1993 Employee Stock Option Plan,
as amended, and are generally exercisable in 25% annual installments
beginning one year from the date of grant.
(2) Based upon the closing price of a share of the Company's Common Stock listed
on the New York Stock Exchange on the date of award.
(3) Includes options to purchase 35,000 shares of Common Stock that replaced a
1998 award of options to purchase the same number of shares.
(4) Includes options to purchase 18,750 shares of Common Stock that replaced a
1997 award of options to purchase the same number of shares.
(5) Represents the repricing of options to purchase 6,250 shares of Common Stock
previously awarded in 1997.
7
<PAGE> 10
FISCAL YEAR-END OPTION VALUES
The following table sets forth the value at August 31, 1999, of the
unexercised options held by any of the Chief Executive Officer and the Named
Executive Officers during fiscal 1999:
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SHARES UNDERLYING IN-THE-MONEY OPTIONS AT FISCAL YEAR END
UNEXERCISED OPTIONS AT FISCAL YEAR-END -----------------------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE (1)(2) UNEXERCISABLE (2)(3)
- ---- -------------------------------------- ------------------ --------------------
<S> <C> <C> <C>
J. M. Bernhard, Jr. .......... 0/200,000 $ -- $2,425,000
G. Ray Wilkie, Jr. ........... 30,000/42,500 $412,500 $ 515,313
Michael H. Wootton............ 16,250/30,000 $237,656 $ 363,750
Richard F. Gill............... 6,250/68,750 $ 75,781 $ 833,594
Robert L. Belk................ 0/75,000 $ -- $ 909,375
</TABLE>
- ---------------
(1) The exercise prices of the reported options range from $5.88 per share to
$8.38 per share with a weighted average exercise price of $6.67.
(2) The values are based upon the closing price reported on the New York Stock
Exchange of the Common Stock on August 31, 1999 ($20.50).
(3) The exercise prices of the reported options are $8.38 per share.
TEN-YEAR OPTION REPRICINGS
The following table sets forth information regarding the repricing of
options held by any of the Company's Chief Executive Officer and the Named
Executive Officers during the ten year period ended August 31, 1999. For a
further discussion of the option repricing that occurred during fiscal 1999, see
"Compensation Committee Report on Executive Compensation" below.
<TABLE>
<CAPTION>
LENGTH OF
MARKET PRICE OF ORIGINAL TERM
NUMBER OF STOCK AT THE EXERCISE PRICE REMAINING AT
OPTIONS TIME OF AT TIME OF NEW EXERCISE DATE OF
NAME DATE AMENDED(#) AMENDMENT($) AMENDMENT($) PRICE($) AMENDMENT
- ---- -------- ---------- --------------- -------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Michael H. Wootton.... 09/13/94 65,000(1) $11.50 $15.00 $11.50 12/07/03
Michael H. Wootton.... 11/30/94 65,000(1) $ 4.56 $11.50 $ 5.88(2) 09/13/04
Richard F. Gill....... 10/19/98 25,000 $ 8.38 $20.25 $ 8.38 03/20/07
J. M. Bernhard,
Jr. ................ 10/19/98 35,000 $ 8.38 $24.00 $ 8.38 02/09/08
</TABLE>
- ---------------
(1) These options were amended twice, such that the entries do not reflect
additional options, but two separate amendments to the same options held by
the Named Executive Officer.
(2) The book value of a share of the Company's Common Stock on August 31, 1994,
was $5.83 per share.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The persons serving as members of the Compensation Committee of the Board
of Directors during fiscal 1999 were John W. Sinders 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 1999. No executive officer of the
Company served during fiscal 1999 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 $20,000 each
year and $1,000 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
8
<PAGE> 11
to the Company's 1996 Non-Employee Director Stock Option Plan (the "Director
Plan"), each non-employee director serving as of the effective date (July 14,
1996) of the Director Plan received an option to purchase 5,000 shares of the
Company's Common Stock. 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 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.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
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 1999, the
Committee was comprised of two non-employee directors. David W. Hoyle and John
W. Sinders, Jr. served on the Committee for the entire fiscal year.
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 (a) to attract, motivate and retain competent
employees focused on enhancing shareholder value, (b) to correlate compensation
with Company objectives and strategies, (c) to provide compensation
opportunities that are linked to the performance of the Company, and (d) 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 1999 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. In fiscal 1999, based upon recommendations of the CEO and in light of
the increased duties and responsibilities associated with the continued
expansion of the Company's operations, the Committee approved raises for certain
members of the Company's executive and senior management, including Messrs.
Bernhard, Gill and Wilkie. The Committee believes that such raises will
generally motivate and encourage such persons to continue in the employ of the
Company.
Cash Bonuses. During the Company's fiscal year ended August 31, 1995, the
Company adopted an Annual Incentive Compensation Plan (the "1995 Incentive
Plan"). The 1995 Incentive Plan provided for annual bonuses to all salaried
employees (other than the CEO) of the Company and its domestic subsidiaries, if
the Company achieved certain targets, which were based upon a minimum return on
equity. The 1995 Incentive Plan provided that the bonus pool was to be 50% of
the amount that net profit after taxes exceeds the target. In its fiscal years
ended August 31, 1996 and 1997, the Company did not attain the threshold
required for payment of bonuses under the 1995 Incentive Plan.
In fiscal 1998, the Committee terminated the 1995 Incentive Plan and
approved a new incentive plan (the "1998 Incentive Plan") proposed by the
Company's management. The 1998 Incentive Plan provides that a member of the
Company's senior management will receive a bonus if certain budgeted performance
goals
9
<PAGE> 12
are met or exceeded by such member's specific profit center or operating group.
In addition, in an effort to encourage the Company's overall efficiency and
promote the synergistic cooperation of its operating groups, members of senior
management receive a bonus if the Company as a whole meets or exceeds certain
budgeted performance goals. Under the 1998 Incentive Plan, the aggregate bonus
of any member of senior management is capped at 20% to 75% of salary depending
on position, with employees in higher positions being eligible to receive a
greater percentage of their salary in bonuses. Subject to such cap, the amount
of any bonus increases if budgeted goals are exceeded by certain threshold
percentages.
In fiscal 1998, neither the Company as a whole nor any of the Company's
principal operating groups met or exceeded their budgeted performance goals, and
accordingly no bonuses were paid to any of the Company's executive officers
under the 1998 Incentive Plan. Certain non-executive members of senior
management, however, received bonuses under the 1998 Incentive Plan based upon
certain profit centers meeting or exceeding their budgeted performance goals.
The Committee did approve, however, an aggregate of $310,000 in discretionary
bonuses to executive officers, senior managers and other employees.
In fiscal 1999, the 1998 Plan was terminated. During fiscal 1999, the
Company did not have in place a formal bonus plan, however, in light of the
Company's record performance in backlog and earnings from continuing operations
in fiscal 1999, the Committee approved approximately $1,000,000 in discretionary
cash bonuses that were paid to certain executive officers and other members of
senior management for their contributions to such record performance.
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 1999, the Committee granted options covering a total of
1,086,250 shares of Common Stock.
The Option Plan also 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. In fiscal 1999, the Committee did not award any shares of
restricted stock.
During fiscal 1999, the Committee authorized awards of stock options based
upon management recommendations. The options, which in the aggregate cover
1,086,250 shares of Common Stock, were awarded to key employees in crucial
positions that will affect the Company's overall growth and performance over the
next several years. A substantial portion of the total awards were made to cause
what the Committee believes to be a more equitable distribution of options to
key employees, based upon current levels of responsibility. The options have
exercise prices ranging from $8.375 to $19.813 per share (the fair market value
on the date of grant) and vest in four 25% increments annually following the
date of award. Certain of the options granted on October 19, 1998, replaced
options (the "Replaced Options") to acquire an aggregate of 106,875 shares of
Common Stock (with exercise prices ranging from $17.375 to $24.00 per share)
previously awarded under the Option Plan. The options granted on October 19,
1998, have extended vesting dates as compared to the Replaced Options.
In addition, on October 19, 1998, the Committee amended options (the
"Amended Options") to purchase 38,125 shares of Common Stock (with exercise
prices ranging from $7.375 to $20.25 per share) previously awarded under the
Option Plan to certain officers and key employees of the Company to provide for,
among other things, a reduction in the exercise prices thereof to $8.375 per
share (which was the closing price listed on the New York Stock Exchange on
October 19, 1998).
10
<PAGE> 13
The Committee's actions with respect to the Replaced Options and the
Amended Options are a result of the Committee's determination that, in light of
a drop in the market price of the Common Stock during fiscal 1999, the exercise
prices of such options were too high to provide meaningful incentives and
motivation to the officers and other key employees of the Company holding such
options. The Committee also determined that replacing or amending options which
are not "in-the-money" to bring the exercise prices thereof reasonably close to
current market prices serves to align more closely the interests of the officers
and key employees with the interests of the Company's shareholders.
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 perks 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, among other things, a ten-year term. See
"Employment Agreements" below, where Mr. Bernhard's Employment Agreement is
discussed in greater detail.
In fiscal 1999, the Committee approved a $375,000 discretionary cash bonus
to Mr. Bernhard to recognize and reward his contributions to the Company's
record performance in fiscal 1999. In addition, in light of, among other things,
Mr. Bernhard's contributions toward the Company's continued growth in revenues
and earnings since 1993 and its significant expansion of activities, as well as
the his leadership in developing the Company's strategy and vision, the
Committee raised his annual salary to $650,000 and granted him an option to
acquire 200,000 shares of Common Stock pursuant to the Company's 1993 Employee
Stock Option Plan which replaced an option to acquire 35,000 shares of Common
Stock. The Committee believes that these actions will help retain his services
and motivate his future performance. While Mr. Bernhard's significant holdings
of Common Stock align his interests with those of the Company's shareholders,
the Committee believes that the award of stock options provides meaningful
incentive and motivation for his performance, as well as strengthen the
alignment of his interests with those of the Company's shareholders in general.
THE COMPENSATION COMMITTEE
David W. Hoyle John W. Sinders, Jr.
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 neither 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, as amended,
provides that Mr. Bernhard will receive, among other things, an annual base
salary in the amount of $575,000 (subsequently adjusted to $650,000),
participation in the Company's bonus plan as determined by the Compensation
Committee of the Board of Directors and the inclusion of
11
<PAGE> 14
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 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" below.
12
<PAGE> 15
STOCK PERFORMANCE GRAPH
For the period commencing August 31, 1994, and ending August 31, 1999, the
following line graph provide a comparison of the total shareholder return on the
Company's Common Stock with the return 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. All amounts have
been calculated as if all dividends, if any, were reinvested.
COMPARISON OF THE FIVE YEAR CUMULATIVE TOTAL RETURN AMONG THE SHAW GROUP INC.,
THE STANDARD & POOR'S SMALL CAP 600 INDEX AND THE RUSSELL 2000 INDEX
[SHAW GROUP PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
8/94 8/95 8/96 8/97 8/98 8/99
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
The Shaw Group Inc.................................. 100 75 258 170 63 161
S&P Smallcap 600 Index.............................. 100 122 139 186 158 196
Russell 2000 Index.................................. 100 121 134 173 142 180
</TABLE>
13
<PAGE> 16
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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 the
Company's 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 was for a five-year term at a
monthly rental of $5,400. The lease contained 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. This option to purchase the office
building and related real estate was exercised in fiscal 1999. Also, in
connection with the transaction, Mr. Gill and an affiliate placed the 62,500
shares of the Company's 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
(subsequently raised). 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 the Company's Common Stock
pursuant to the terms of the Company's 1993 Employee Stock Option Plan. The
options had an exercise price of $20.25 per share and were exercisable in 25%
increments on each of March 20, 1998, 1999, 2000 and 2001, based upon continual
employment. During fiscal 1999, options to purchase 18,750 of these shares were
cancelled and replaced and the exercise price of the options to purchase the
remaining 6,250 shares was amended. See "Ten-Year Option Repricings" above.
John W. Sinders, Jr., a director of the Company, was a managing director of
Jefferies & Company, Inc., an investment banking firm that handled the
repurchase of some of the shares of the Company's Common Stock which
prepurchases began in fiscal 1999, earning $74,330 in commissions. Mr. Sinders
is now Managing Director of RBC Dominion Securities Corporation ("RBC"), also an
investment banking firm. In November, 1999, the Company sold 3.45 million shares
of Common Stock in an underwritten public offering. RBC was one of the managing
underwriters for this public 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 1999 is listed below with the following information
indicated for each (a) the name of the borrower, (b) the nature of the
borrower's relationship with the Company', (c) the largest amount of
indebtedness outstanding at any time since the beginning of fiscal 1999, (d) the
nature of the loan and of the transaction in which it was incurred, (e) the
amount outstanding as of September 30, 1999, and (f) the interest rate charges
thereon.
(1) MERIT Industrial Constructors, Inc. ("MERIT"); (i) controlled by
Richard F. Gill, an executive officer of the Company; (ii) $500,000; (iii)
made in connection with the acquisition by the Company of certain assets of
MERIT; (iv) $500,000; (v) 8%.
(2) Richard F. Gill; (i) executive officer of the Company; (ii)
$837,500 (iii) made in connection with Mr. Gill's employment; (iv)
$837,500; (v) 8%.
(3) George P. Bevan; (i) executive officer of the Company; (ii)
$130,000; (iii) made in connection with Mr. Bevan's employment; (iv)
$51,210; (v) 0% on $26,666 and 8.5% on $24,544.
14
<PAGE> 17
The Company imputes interest on the loan to Mr. Bevan with a 0% interest rate at
the applicable federal rate and includes such amount in his compensation for
federal income 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 1999, all
filing obligations applicable to the reporting persons were complied with except
as follows: Messrs. McAlister, Hoyle and Sinders failed to file timely Form 5
reports with respect to grants of options to purchase Common Stock under the
Company's 1996 Non-Employee Director Stock Option Plan in connection with their
re-election to the Company's Board of Directors at the 1998 Annual Meeting of
Shareholders. Messrs. Bernhard, Dupuy and Gill failed to report timely certain
option transactions pursuant to the Company's 1993 Employee Stock Option Plan on
a Form 5 report that each such reporting person otherwise timely filed with the
SEC.
AUDITOR SERVICES
The Company's consolidated financial statements for the fiscal year ended
August 31, 1999, were audited by the firm of Arthur Anderson, LLP, New Orleans,
Louisiana, ("AA"), and such firm shall remain as the Company's auditors until
replaced by the Board of Directors. A representative of AA will be present at
the 2000 Annual Meeting of Shareholders to respond to any appropriate questions
and will have the opportunity to make a statement, if so desired.
A Current Report on Form 8-K was filed on September 22, 1999, to announce a
change in the Company's independent public accountants. The Company engaged AA
as its sole independent auditor for the fiscal year ended August 31, 1999.
Previously, the Company engaged both Hannis T. Bourgeois, LLP ("HTB") and AA as
its independent auditors. The single jointly signed audit report by HTB and AA
was considered to be the equivalent of two separately signed auditors' reports.
Thus, previously each firm represented that it had complied with generally
accepted auditing standards and was in a position that would justify it being
the only signatory of the report. Given the Company's expansion of its overseas
operations, HTB believes it would be unable to continue to make this
representation after fiscal 1998. Therefore, HTB decided to resign as one of the
Company's independent auditors effective September 22, 1999.
During the period from September 1, 1996, through the date hereof, there
have been no disagreements on accounting principles or practices, financial
statement disclosure or auditing scope or procedure between the Company and AA
or HTB.
SHAREHOLDER PROPOSALS
Any shareholder proposal to be considered by the Company for inclusion in
the proxy materials for the 2001 Annual Meeting of Shareholders must be
submitted in accordance with applicable regulations of the SEC and received by
the Company at its principal executive offices no later than August 21, 2000.
In order for a shareholder to bring any business or nominations before the
2000 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 2000 Annual
Meeting, or if fewer than 40 days notice or prior disclosure of the date of the
2000 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 2000 Annual
Meeting was mailed or such prior disclosure was made. The requirements as to the
form and content of such advance notice
15
<PAGE> 18
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 (225)
932-2500.
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, state 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 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
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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
(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.
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<PAGE> 20
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 to facilitate such determinations
have been established and may be amended from time to time by the Board of
Directors. Such procedures 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:
(a) 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 6, 1995, and until the date
December 6, 1999, the date 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 to which such shareholder is entitled to exercise
five votes or one vote.
(b) 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.
(c) Information supplementing that contemplated by paragraph (a) and
additional evidence contemplated by paragraph (b) 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> 21
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/ GARY P. GRAPHIA
--------------------------
Gary P. Graphia, Secretary
Baton Rouge, Louisiana
December 17, 1999
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<PAGE> 22
THE SHAW GROUP INC.
8545 UNITED PLAZA BOULEVARD
BATON ROUGE, LOUISIANA, 70809
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints J. M. Bernhard, Jr., and Robert L. Belk 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 Company held of record by the undersigned on December 6, 1999, at
the annual meeting of shareholders to be held on January 28, 2000, and any
adjournment hereof.
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed in this block (except as marked to the contrary)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed in this block
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 for any individual nominee, write that nominee's name in
the space provided below:
--------------------------------------------------------------------------
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" PROPOSAL 1.
I PLAN TO ATTEND MEETING [ ]
Dated
-----------------------------
Signature
------------------------------------------
Signature (if held jointly)
------------------------------------------
Title
------------------------------------------
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE. Please sign exactly as name appears below. When shares are held by
joint tenants, both should sign. When signing as 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.
