<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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 Rule 14a-12
</TABLE>
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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(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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<PAGE> 2
[THE SHAW GROUP INC. LOGO]
THE SHAW GROUP INC.
8545 UNITED PLAZA BOULEVARD
BATON ROUGE, LOUISIANA 70809
NOTICE OF THE 2001 ANNUAL MEETING
OF SHAREHOLDERS
PLEASE TAKE NOTICE that the 2001 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 16,
2001, at 9:00 a.m. to consider and act upon:
(1) the election of six members to the Board of Directors, each for a
one-year term;
(2) a proposal to approve the adoption of the Company's 2001 Employee
Incentive Compensation Plan;
(3) a proposal to approve an amendment to the Company's 1996
Non-Employee Director Stock Option Plan to increase by 50,000 shares the
number of shares of the Company's no par value common stock (the "Common
Stock") reserved for issuance thereunder;
(4) a proposal to approve an amendment to Article IV of the
Restatement of the Articles of Incorporation of the Company to increase the
number of authorized shares of the Company's Common Stock from 50,000,000
shares to 200,000,000 shares and the number of authorized shares of the
Company's no par value preferred stock from 5,000,000 shares to 20,000,000
shares; and
(5) 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 5, 2000,
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 2001
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 15, 2000
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 2001 Annual Meeting of
Shareholders to be held on January 16, 2001, 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 5,
2000, 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 15,
2000.
GENERAL
The purpose of the Annual Meeting is to consider and act upon the matters
that 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 in this Proxy Statement, 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 Annual Meeting. Abstentions are
counted towards 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 owner) 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. Article III of the Company's Amended and Restated By-laws provides
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 directors.
The enclosed form of Proxy also provides a means for a shareholder to vote
for, against or abstain from voting on Proposals 2, 3 and 4 on the accompanying
Notice of Annual Meeting. Proposals 2, 3 and 4, respectively, are as follows:
(i) to approve the adoption of the Company's 2001 Employee Incentive
Compensation Plan; (ii) to approve an amendment to the Company's 1996
Non-Employee Director Stock Option Plan to increase by 50,000 the number of
shares of Common Stock reserved for issuance thereunder; and (iii) to approve an
amendment to the Restatement of the Articles of Incorporation of the Company to
increase the number of authorized shares of capital stock of the Company. The
affirmative vote of a majority of the voting power of the Common Stock, present
in person or represented by proxy and entitled to vote at the meeting, is
required for approval of each of Proposals 2, 3 and 4. An abstention with
respect to a proposal will have the same effect as a vote against such proposal.
A broker non-vote with respect to a proposal will not be counted as a vote for
or against such proposal, but will have the effect of reducing the number of
affirmative votes required to approve such proposal because the broker non-vote
will reduce the number of shares present or represented from which the majority
is calculated. 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. Each Proxy will be voted in accordance with the
shareholder's directions indicated thereon.
1
<PAGE> 4
Unless a shareholder specifies otherwise, the enclosed Proxy, if properly
executed and duly returned, will be voted FOR the election of the six nominees
listed hereinafter under the caption "Election of Directors," and FOR each of
Proposals 2, 3 and 4 set forth on the accompanying Notice of Annual Meeting.
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 approximately $5,500 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.
On November 10, 2000, the Company's Board of Directors declared a
two-for-one Common Stock split to be distributed on December 15, 2000, to all
shareholders of record on December 1, 2000. All information set forth in this
Proxy Statement regarding the Common Stock, including the number of option
shares and the exercise prices therefor, has been adjusted to reflect this
two-for-one Common Stock split, even though the information may be as of a date
prior to the effectiveness of the split.
As of November 16, 2000, the Company had issued and outstanding and
entitled to vote approximately 40,440,422 shares of Common Stock. The Common
Stock is the only outstanding class of voting securities of the Company.
The Company's principal executive offices are located at 8545 United Plaza
Boulevard, Baton Rouge, Louisiana 70809, and the Company's telephone number is
(225) 932-2500.
VOTING RIGHTS OF COMMON STOCK
Article IV of the Restatement of the Articles of Incorporation of the
Company provides 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 5, 2000) will be entitled to one vote per share. Thus, shares owned on
or before December 5, 1996, and as to which there have been no such changes in
beneficial ownership since that date, will entitle the holder thereof to five
votes per share. Shares of Common Stock issued as a result of the two-for-one
Common Stock split distributed on December 15, 2000, to all shareholders of
record on December 1, 2000, shall be entitled to the same number of votes as the
originally issued shares with respect to which the additional shares were
distributed, unless there has been a change in beneficial ownership subsequent
to the date of such stock split. The actual voting power of each holder of
Common Stock will be based on stock ownership on the record date as demonstrated
by shareholder records at the time of the Annual Meeting. See "Confirmation of
Beneficial Ownership" below for a more detailed discussion of (i) the provisions
of the Restatement of the Articles of Incorporation of the Company relating to
the voting rights of the holders of the shares of Common Stock and the manner of
determination thereof and (ii) certain procedures shareholders should follow to
confirm to the Company their beneficial ownership of shares of Common Stock.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Common Stock as of October 31, 2000 (as adjusted to reflect the
two-for-one Common Stock split), with respect to (i) each person, or group of
affiliated persons known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock, (ii) each director and nominee for director,
(iii) each executive officer of the Company for whom compensation information is
disclosed under the heading "Executive Compensation," and (iv) all executive
officers and directors as a group. Each of the following shareholders has sole
2
<PAGE> 5
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.
<TABLE>
<CAPTION>
PERCENT OF
BENEFICIAL OWNERSHIP VOTING
NAME OF BENEFICIAL OWNER SHARES PERCENT POWER(12)
------------------------ ---------- --------- ----------
<S> <C> <C> <C>
J. M. Bernhard, Jr.(1)..................................... 2,721,132 6.7% 24.1%
8545 United Plaza Blvd
Baton Rouge, Louisiana 70809
G. Ray Wilkie, Jr.(2)...................................... 257,976 * 1.6%
Albert McAlister(3)........................................ 157,104 * 1.3%
Richard F. Gill(4)......................................... 71,876 * *
Robert L. Belk(5).......................................... 61,000 * *
David W. Hoyle(6).......................................... 44,000 * *
Michael H. Wootton(7)...................................... 30,000 * *
L. Lane Grigsby(8)......................................... 30,700 * *
N. Andrew Dupuy, Jr. ...................................... 20,000 * *
John W. Sinders, Jr.(9).................................... 19,000 * *
William H. Grigg(10)....................................... 12,000 * *
All executive officers and directors as a group (11
persons)(11)............................................. 3,424,788 8.5% 27.7%
</TABLE>
---------------
* less than 1%
(1) Includes 200,000 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. On July 27, 2000, Mr. Bernhard entered
into a one-year collar arrangement with respect to 1,000,000 shares of the
Common Stock to effectively lock in a value of between $18.37 and $24.60
per share. Upon its expiration on July 27, 2001, this arrangement will be
settled for cash if the share price is outside the collared range.
(2) Includes 107,500 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. As of August 31, 2000, Mr. Wilkie ceased serving
as an executive officer of the Company.
(3) Includes 19,000 shares of which Mr. McAlister may be deemed to be
beneficial owner as a result of rights that he may exercise to acquire
beneficial ownership within 60 days.
(4) Includes 12,500 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 45,000 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.
(6) Includes 6,000 shares owned of record by Mr. Hoyle's spouse and 19,000
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.
(7) Represents shares of restricted stock that Mr. Wootton may vote but not
sell or otherwise transfer until July 2, 2001. Mr. Wootton was an executive
officer of the Company during fiscal 2000, but was not an executive officer
at August 31, 2000.
(8) Includes 19,000 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 19,000 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.
(10) Includes 6,000 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.
(11) Includes 3,000 shares owned of record by spouses of executive officers and
directors and 442,000 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.
(12) Based upon information available to the Company as of the date of this
Proxy Statement.
3
<PAGE> 6
ELECTION OF DIRECTORS
By unanimous written consent dated November 7, 2000, the Board of Directors
nominated six individuals for election as directors at the 2001 Annual Meeting.
Each of these nominees 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; provided,
however, that if the number of directors is ever increased to twelve or more,
then at the next shareholders' meeting at which directors are to be elected, the
Board of Directors will be divided into three classes, and directors will serve
staggered three year terms. The enclosed form of Proxy confers discretionary
authority with respect to the election of director-nominees, 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, unless, for some
reason not known as of the date hereof, 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 Annual Meeting. In order to be elected as a director, a
nominee must receive a plurality of the votes cast by the holders of Common
Stock. The name, 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 46, the Company's founder, has been the
Company's President and Chief Executive Officer since its inception in
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 over 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.
Albert McAlister, age 49, 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 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 over 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 61, has served as one of the Company's directors
since January 1995. For the past 12 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 of several civic,
educational and charitable organizations.
John W. Sinders, Jr., age 46, has served as one of the Company's
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 McGlinchey, Stafford law firm in New Orleans.
William H. Grigg, age 68, has served as one of the Company's 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 The Nations Fund family of mutual funds, Associated Electric
and Gas Insurance Services Ltd., a mutual casualty insurance company,
4
<PAGE> 7
Kuhlman Electric Company, Inc., Faison Enterprises, a real estate
development company and the Charlotte-Mecklenburg Hospital Authority, a
local hospital. He is a member of several civic and charitable
organizations.
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, 2000, ("fiscal 2000"), twelve
meetings of the Board of Directors were held. Each incumbent director who is a
nominee for re-election attended at least 75% of the 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 2000. The Board of Directors has no nominating or other committee
performing similar functions at this time. The following directors presently
serve on the Audit Committee: William H. Grigg, Chairman, John W. Sinders, Jr.
and Albert McAlister. The Audit Committee met five times during fiscal 2000. 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 the Committee's
activities.
The following directors presently serve on the Compensation Committee:
David W. Hoyle and L. Lane Grigsby. The Compensation Committee met five times
during fiscal 2000. The primary functions of the Compensation Committee are (i)
to provide a general review of the Company's compensation and benefit plans to
determine if they meet corporate objectives; (ii) to review the Chief Executive
Officer's recommendations on (a) compensation of all officers of the Company and
(b) grants of awards under the Company's 1993 Employee Stock Option Plan and the
Company's other benefit plans, including the proposed 2001 Employee Incentive
Compensation Plan; and (iii) to review and approve 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. ................................. 46 Chairman of the Board of Directors,
President and Chief Executive Officer
Richard F. Gill...................................... 57 Executive Vice President and Chief
Operating Officer; President of Stone &
Webster, Inc.
Robert L. Belk....................................... 51 Executive Vice President, Chief Financial
Officer and Treasurer
N. Andrew Dupuy, Jr. ................................ 44 Senior Vice President -- Construction and
Maintenance
Mitchell A. Rayner................................... 45 Senior Vice President -- Fabrication and
Manufacturing
Gary P. Graphia...................................... 38 Secretary and General Counsel
</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 International
and Construction Operations, one of the
5
<PAGE> 8
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. In August 2000, Mr. Gill was appointed President of Stone & Webster,
Inc., a subsidiary of the Company. Mr. Gill served as President of MERIT from
its founding in January 1982 until the sale of its assets to the Company in
1997. MERIT was an industrial construction and maintenance firm based in Baton
Rouge, Louisiana. Mr. Gill has over 30 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.
N. Andrew Dupuy, Jr., has been employed by the Company since February 1997
when the Company acquired United Crafts, Inc. He served as President of United
Crafts until December 1997. 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. In August 2000, Mr. Dupuy was appointed Senior Vice
President-Construction and Maintenance. 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.
Mitchell A. Rayner has been employed by the Company since February 1997 and
served as Vice President of Shaw Power Services, Inc., one of the Company's
subsidiaries from 1997 until 1998 and Vice President of US Operations from 1998
to 2000. In August 2000, the Company appointed Mr. Rayner as its Senior Vice
President of Fabrication and Manufacturing. Prior to joining the Company, Mr.
Rayner served as one of the principal owners of Pipeline Technology since 1994
and an owner of Performance Contractors from 1980 until 1994. Mr. Rayner has
over 23 years of experience in the industrial construction, fabrication and
maintenance industry.
Gary P. Graphia has been employed by the Company since July 1999 as
Secretary and General Counsel. Prior to joining the Company, Mr. Graphia
practiced law with Kean, Miller, Hawthorne, D'Armond, McCowan & Jarman, L.L.P.
where he was a partner. Mr. Graphia entered the practice of law in 1991 after
four years with the Texas Commerce Bank, Houston, Texas where he became an
Assistant Vice President.
6
<PAGE> 9
EXECUTIVE COMPENSATION
The following table contains compensation data for the last three fiscal
years for the Company's Chief Executive Officer and its five other most highly
compensated executive officers (the "Named Executive Officers"). Mr. Wilkie was
serving as an executive officer as of August 31, 2000, but has retired and is no
longer an executive officer of the Company. Mr. Wootton was an executive officer
of the Company during fiscal 2000, but was not an executive officer at August
31, 2000. In August 2000, Mr. Wootton was appointed Senior Vice President
Business Development of Stone & Webster, Inc., a subsidiary of the Company.
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(3) BONUS(4) (5) OPTIONS(#)(6) PAYOUTS(7) (8)
--------------------------- ------- --------- ---------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
J. M. Bernhard, Jr. ............ 2000 $733,333 $1,000,000 -- 400,000 -- $5,989
President, Chief Executive 1999 $604,038 $ 375,000 $66,741 400,000 -- $6,454
Officer and Chairman of the 1998 $539,343 $ 50,000 $75,318 70,000 -- $4,142
Board
Richard F. Gill................. 2000 $419,031 $ 350,000 -- 160,000 -- $6,030
Executive Vice President 1999 $225,859 $ 200,000 -- 150,000 -- $6,252
and Chief Operating Officer; 1998 $213,221 $ 20,000 -- -- -- $3,132
President, Stone & Webster,
Inc.
Robert L. Belk(2)............... 2000 $318,750 $ 250,000 -- 150,000 -- $5,250
Executive Vice President and 1999 $203,365 $ 147,500 -- 150,000 -- --
Chief Financial Officer 1998 -- -- -- -- -- --
N. Andrew Dupuy, Jr. ........... 2000 $235,004 $ 50,000 -- 30,000 -- $6,211
Senior Vice President -- 1999 $196,931 $ 112,000 -- 80,000 -- $4,616
Construction and Maintenance 1998 $189,803 $ 12,000 -- 30,000 -- $3,548
G. Ray Wilkie, Jr. ............. 2000 $281,988 -- -- -- -- $6,160
Former Senior Vice
President -- 1999 $225,080 $ 130,000 -- 85,000 $11,917 $5,881
U.S. Operations 1998 $185,593 $ 18,500 -- -- -- $4,816
Michael H. Wootton.............. 2000 $260,742 $ 50,000 -- 30,000 -- $4,676
Senior Vice President Business 1999 $211,961 $ 60,000 -- 60,000 $14,119 $3,770
Development of Stone & 1998 $216,946 $ 20,000 -- -- -- $6,386
Webster, Inc.
</TABLE>
---------------
(1) The Company's fiscal year ends on August 31.
(2) Mr. Belk did not join the Company until October 1998.
(3) 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.
(4) Bonuses paid at the discretion of the Compensation Committee of the Board of
Directors. For more information, see "Compensation Committee Report on
Executive Compensation" below.
(5) Perquisites and other personal benefits, except those for Mr. Bernhard in
1999 and 1998, have not been disclosed in the "Other Annual Compensation"
column since, in the aggregate, they did not exceed the lesser of either
$50,000 or 10% of the total salary and bonus. As a result of Company record
keeping procedures, the amounts disclosed in the 1999 and 1998 columns for
Mr. Bernhard constitute total personal benefits for the calendar years of
1998 and 1997, respectively. Of such totals, $51,634 and $49,616 represent
Mr. Bernhard's personal use of Company transportation for the calendar years
1998 and 1997, respectively.
7
<PAGE> 10
(6) As adjusted to reflect the two-for-one Common Stock split. 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. All options have been granted at an exercise price of 100% of the
fair market value of the Common Stock on the date of grant. For additional
information regarding options granted during fiscal 2000, see "Option Grants
in Last Fiscal Year" and for information regarding current holdings of
options, see "Options Exercised and Fiscal Year-End Option Values." The
options awarded in 1998 to Mr. Bernhard to purchase 70,000 shares of Common
Stock have been cancelled and replaced by a 1999 award of options to
purchase 70,000 shares of Common Stock, which award is included in the
400,000 shares reflected for 1999.
(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 to any of the Company's Chief
Executive Officer and the Named Executive Officers during fiscal 2000:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATE OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(3)
OPTIONS EMPLOYEES IN PRICE ------------------------
NAME GRANTED(1)(2) FISCAL YEAR $/SHARE(1)(3) EXPIRATION DATE 5% 10%
---- ------------- ------------ ------------- --------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
J.M. Bernhard, Jr. ........ 400,000 19% $21.00 July 28, 2010 $5,282,715 $13,387,437
Richard F. Gill............ 160,000 8 21.00 July 28, 2010 2,113,086 5,354,975
Robert L. Belk............. 150,000 7 21.00 July 28, 2010 1,981,018 5,020,289
N. Andrew Dupuy, Jr. ...... 30,000 1 21.00 July 28, 2010 396,204 1,004,058
Michael H. Wootton......... 30,000 1 21.00 July 28, 2010 396,204 1,004,058
</TABLE>
---------------
(1) As adjusted to reflect the two-for-one Common Stock split.
(2) The options are subject to the terms of the 1993 Employee Stock Option Plan,
as amended and are generally exercisable in four 25% annual installments
beginning one year from the date of grant, with exercise prices equal to the
fair market value of a share of Common Stock on the date of grant.
(3) Based upon the closing price of a share of the Company's Common Stock listed
on the New York Stock Exchange on the date of award, as adjusted to reflect
the two-for-one Common Stock split.
OPTIONS EXERCISED AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information, as of August 31, 2000 (as
adjusted to reflect the two-for-one Common Stock split), regarding the number of
shares received and the value realized upon exercise of stock options and the
number and value of exercised and unexercised options held by any of the Chief
Executive Officer and the Named Executive Officers.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SHARES IN-THE-MONEY OPTIONS AT
UNDERLYING UNEXERCISED FISCAL YEAR END
SHARES OPTIONS AT FISCAL ---------------------------
ACQUIRED ON VALUE YEAR-END EXERCISABLE UNEXERCISABLE
NAME EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE (1)(2) (2)(3)
---- ----------- ----------- ------------------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
J. M. Bernhard, Jr. .... -- -- 100,000/700,000 $2,365,650 $9,834,550
Richard F. Gill......... 46,876 $196,293 0/263,124 -- 3,534,593
Robert L. Belk.......... 30,000 125,625 7,500/262,500 177,424 3,687,956
N. Andrew Dupuy, Jr. ... 25,000 104,688 0/90,000 -- 1,624,710
G. Ray Wilkie, Jr. ..... -- -- 81,250/63,750 1,970,841 1,508,102
Michael H. Wootton...... 41,200 135,025 6,300/75,000 152,161 1,269,863
</TABLE>
8
<PAGE> 11
---------------
(1) The exercise prices of the exercisable options range from $2.94 per share to
$4.19 per share with a weighted average exercise price of $3.92 (as adjusted
to reflect the two-for-one Common Stock split).
(2) The values are based upon the closing price reported on the New York Stock
Exchange of the Common Stock on August 31, 2000, as adjusted to reflect the
two-for-one Common Stock split ($27.84).
(3) The exercise prices of the unexercisable options vary from $4.19 to $21.00
per share with a weighted average exercise price of $13.09 (as adjusted to
reflect the two-for-one Common Stock split).
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The persons serving as members of the Compensation Committee of the Board
of Directors during fiscal 2000 were David W. Hoyle and L. Lane Grigsby. No
member of the Compensation Committee was an officer or employee of the Company
or any of its subsidiaries during fiscal 2000. No executive officer of the
Company served during fiscal 2000 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
During fiscal 2000, each non-employee director of the Company received a
fee of $20,000 and $1,000 for each meeting of the Company's Board of Directors
attended. During fiscal 2000, each non-employee director serving on a committee
of the Board received a fee of $250 for each committee meeting attended.
Directors are reimbursed for certain expenses in connection with their
attendance at Board and committee meetings. The fees for fiscal 2001 have been
increased as follows: $11,000 per quarter, plus $1,000 for each Board meeting
attended and $250 for each Board committee meeting attended. In addition,
pursuant 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 vested 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. A
proposal to increase the number of shares of Common Stock reserved for issuance
pursuant to the Director Plan is being submitted for approval at the 2001 Annual
Meeting. See "Proposal 3 -- To Approve an Amendment to the Company's 1996
Non-Employee Director Stock Option Plan."
AUDIT COMMITTEE REPORT
The following directors are members of the Audit Committee: William H.
Grigg, Chairman, John W. Sinders, Jr., and Albert McAlister, each of whom are
not officers of the Company and each of whom are considered "independent."
Because of Mr. Sinders' former affiliation with Jefferies & Company, Inc. and
his present affiliation with RBC Dominion Securities Corporation, each an
investment banking firm that has performed investment banking services for and
on the Company's behalf, the Board of Directors has determined, in its business
judgment, that such relationships do not interfere with his exercise of
independent judgment on behalf of the Company. Furthermore, the Board believes
that because of Mr. Sinders' significant accounting and related financial
management experience, he is well-qualified to serve on the Committee.
The Board of Directors has adopted a written charter for the Audit
Committee, which is included as an Appendix to this Proxy Statement.
The Audit Committee held five meetings during fiscal 2000. The meetings
were designed to facilitate and encourage communication between the Audit
Committee, the Company's internal auditors and the Company's independent public
accountants, Arthur Andersen, LLP.
During these meetings, the Audit Committee reviewed and discussed the
audited financial statements to be included in the Company's Annual Report on
Form 10-K for the fiscal year ended August 31, 2000, with
9
<PAGE> 12
management and representatives of Arthur Andersen. The discussions with
representatives of Arthur Andersen also included the matters required by
Statement on Auditing Standards No. 61, Communication with Audit Committees. The
Audit Committee has received from Arthur Andersen written disclosures and the
letter as required by Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees. Additionally, the Audit Committee has
discussed with representatives of Arthur Andersen the issue of the independence
of Arthur Andersen from the Company.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors (and the Board has approved)
that the audited financial statements be included in the Company's Annual Report
on Form 10-K for the fiscal year ended August 31, 2000, for filing with the
Securities and Exchange Commission.
The Audit Committee of the Board of Directors
William H. Grigg, Chairman
John W. Sinders, Jr.
Albert McAlister
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors has been appointed by
the Board as the administrator of the Company's compensation programs for
executive officers and key employees. During fiscal 2000, the Committee was
comprised of two non-employee directors. David W. Hoyle and L. Lane Grigsby
presently serve on the Committee. Mr. Hoyle served for the entire fiscal year
and Mr. Grigsby served since January 2000. Prior to January 2000, John W.
Sinders, Jr. was a member of the Committee.
The duties of the Committee generally are: (i) to review the Company's
compensation and benefit plans to determine if they meet corporate objectives,
(ii) to review the Chief Executive Officer's recommendations regarding (a) the
compensation of all officers of the Company; and (b) awards under the Company's
1993 Employee Stock Option Plan (for which the Committee serves as
administrator) and its other benefit plans, including the proposed 2001 Employee
Incentive Compensation Plan; and (iii) to review and approve 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
other executive officers 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 2000 with respect to compensation for the CEO and other 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 2000, based upon recommendations of the CEO and in light of
the increased duties and responsibilities associated with the significant
expansion of the Company's operations, the Committee approved raises for certain
members of the Company's executive and senior management, including Messrs.
Bernhard, Belk, Gill, Dupuy, Rayner and Graphia. The Committee believes that
such raises will generally motivate and encourage such persons to continue in
the employ of the Company. For more discussion of Mr. Bernhard's compensation,
see "Compensation of the Chief Executive Officer" below.
10
<PAGE> 13
Cash Bonuses. During fiscal 1999, the Committee approved discretionary
cash bonuses that were paid to certain executive officers and other members of
senior management. For fiscal 2000, the Committee approved discretionary cash
bonuses that were paid to executive and key officers as a result of record
operating results achieved by the Company in fiscal 2000 as well as to reward
certain employees for their contributions to the acquisition by the Company of
Stone & Webster in July 2000 and the Entergy/Shaw joint venture. For further
information concerning bonuses paid to Messrs. Bernhard, Gill, Belk and Dupuy,
see the "Summary Compensation Table" set forth above and "Compensation of Chief
Executive Officer" below.
Awards of Stock Options. During fiscal 2000, stock options covering an
aggregate of 2,116,000 shares of Common Stock (as adjusted to reflect the
two-for-one Common Stock split) were awarded to officers and key employees of
the Company. A substantial portion of the total awards, as noted below, were
made in connection with the acquisition of Stone & Webster. The options have
exercise prices ranging from $10.69 to $21.00 per share (the fair market value
on the date of grants as adjusted to reflect the two-for-one Common Stock split)
and vest in four 25% annual increments beginning one year following the date of
award. 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 (and
executives) to remain in the employ of the Company. The award of stock options
provides 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.
The Committee and the Board of Directors of the Company have approved the
adoption of the Company's 2001 Employee Incentive Compensation Plan (the "2001
Plan"). The 2001 Plan provides for awards of stock options and restricted stock
as well as stock appreciation rights and performance shares, and provides the
Committee with wide discretion with respect to the terms and conditions that may
be included in such equity awards. The Committee believes that such discretion
will allow it to tailor awards under the 2001 Plan to the specific facts and
circumstances of each individual and the Committee's intentions with respect to
each individual. However, the Committee believes that stock options vesting in
25% annual increments will continue to be the most important equity incentive
utilized under the 2001 Plan in the near term. A detailed discussion of the
terms and provisions of the 2001 Plan is contained below in "Proposal 2 -- To
Approve The Shaw Group Inc. 2001 Employee Incentive Compensation Plan."
During fiscal 2000, the Committee recommended and the Board of Directors
approved the Stone & Webster Acquisition Stock Option Plan (the "S&W Plan"),
which was implemented solely in connection with the Company's acquisition of
Stone & Webster to award non-qualified stock options to (i) certain non-
executive officers and key employees of the Company who contributed
significantly to such acquisition and (ii) certain key employees of Stone &
Webster who were retained by the Company. Non-qualified options covering
1,061,000 shares of Common Stock (as adjusted to reflect the two-for-one Common
Stock split) were awarded at an exercise price of $21.00 per share (as adjusted
to reflect the two-for-one Common Stock split), and each award vests in four
equal 25% annual installments beginning one year from the award date. The total
number of shares of Common Stock reserved for issuance under the S&W Plan is
1,061,000 shares, which has been exhausted through awards of options.
Further, during fiscal 2000, the Committee recommended, and the Board of
Directors approved awards of stock options under the 1993 Employee Stock Option
Plan covering 790,000 shares of Common Stock (as adjusted to reflect the
two-for-one Common Stock split) to certain executive officers of the Company,
including the Chief Executive Officer. Such options have an exercise price of
$21.00 per share (as adjusted to reflect the two-for-one Common Stock split) and
vest in four 25% annual installments from the date of award. For specific
information regarding grants to the Named Executive Officers, see "Option Grants
in Last Fiscal Year."
11
<PAGE> 14
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
In September 1993, prior to the creation of the Compensation 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 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 light of, among other things, Mr. Bernhard's contributions to the
Company's continued growth in revenues and earnings since 1993 and its
significant expansion of activities, as well as his leadership in developing the
Company's strategy and vision, the Committee raised his annual salary for fiscal
2000 to $975,000. The Committee believes that this increased salary will help
retain his services and motivate his future performance. In fiscal 2000, the
Committee approved a $1 million cash bonus to Mr. Bernhard to recognize and
reward his contributions to the Company's record performance in fiscal 2000, as
well as his contributions to the Stone & Webster acquisition and the
Entergy/Shaw joint venture. Furthermore, the Committee approved during fiscal
2000 an award of options to Mr. Bernhard covering 400,000 shares of Common Stock
(as adjusted to reflect the two-for-one Common Stock split). Such options are
exercisable in four 25% annual increments beginning one year from the date of
award and have an exercise price of $21.00 per share (as adjusted to reflect the
two-for-one Common Stock split). 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 strengthens the alignment of his
interests with those of the Company's shareholders in general.
THE COMPENSATION COMMITTEE
David W. Hoyle L. Lane Grigsby
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. 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 (for fiscal 2000
raised to $975,000), participation in the Company's bonus plan as determined by
the Compensation Committee of the Board of Directors and the inclusion of Mr.
Bernhard in all plans and programs of the Company which are made available to
the Company's executives and other salaried employees generally, including group
life insurance, accidental death and dismemberment insurance, hospitalization,
long-term disability, vacations and holidays. Mr. Bernhard is also entitled
under the Employment Agreement to other benefits in addition to those made
available to the Company's management, including providing him with acceptable
Company vehicles and other means of transportation for his personal use and
benefit.
In the event Mr. Bernhard's employment is terminated as a result of his
death or disability (as defined in the Employment Agreement), he or his legal
representative will receive, among other payments, all amounts
12
<PAGE> 15
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.
The Company and Mr. Gill are parties to an Employment Agreement dated May
5, 2000 (the "Gill Agreement"), pursuant to which Mr. Gill has agreed to serve
as the Company's Executive Vice President and Chief Operating Officer. The Gill
Agreement has a term that is automatically renewed each day following the date
of the Gill Agreement for two years so that on any given day, the remaining term
of such agreement shall be two years. Notwithstanding the foregoing, the Company
or Mr. Gill may give notice that the Gill Agreement shall not be further renewed
and that after the date fixed in such notice, the term of the Gill Agreement
shall expire in two years. Pursuant to the Gill Agreement, Mr. Gill is entitled
to a base annual salary of $415,000, bonuses as paid in the discretion of the
Board, reimbursement of expenses, an automobile allowance and participation in
the various employee benefit plans or programs provided to employees of the
Company in general. The base salary payable to Mr. Gill may be increased but may
not be decreased without Mr. Gill's consent.
In the event of the resignation by Mr. Gill for Good Reason (as defined in
the Gill Agreement to include, among other things, the occurrence of certain
events that constitute a change of control), termination as a result of his
disability, or termination by the Company for any reason other than Mr. Gill's
Misconduct (as defined therein), all stock options and similar awards previously
granted to such officer shall become fully vested. Further, if Mr. Gill resigns
for Good Reason or is terminated by the Company for any reason other than
Misconduct or disability, the Company shall be obligated to (i) pay him, in a
lump sum, his base salary in effect prior to termination plus his highest bonus
paid over the course of the two years prior to termination multiplied by the
number of years left in the term of the Gill Agreement (which, unless notice has
been properly given, shall be two years); and (ii) provide disability, accident
and group health benefits for the remainder of the term of such agreement. In
the event of Mr. Gill's death, his estate shall be entitled to a lump sum
payment of one year's base salary and his surviving spouse and children shall be
entitled to receive one year of paid group health and dental insurance benefits.
The Company and Mr. Belk are parties to an Employment Agreement dated May
1, 2000 pursuant to which Mr. Belk has agreed to serve as the Company's
Executive Vice President and Chief Financial Officer. Mr. Belk's agreement is
substantially similar to the Gill Agreement described above, except that such
agreement provides for a three year rolling term and a base annual salary of
$350,000. In addition, Mr. Belk may terminate his agreement for Good Reason for
among other reasons, the occurrence of certain events constituting a change of
control, or if Mr. Bernhard ceases to be Chairman and Chief Executive Officer of
the Company.
13
<PAGE> 16
STOCK PERFORMANCE GRAPH
For the period commencing August 31, 1995, and ending August 31, 2000, the
following line graph provides 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
vertically-integrated provider of complete piping systems and comprehensive
engineering, procurement and construction services to the power generation
industry, 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
[GRAPH]
<TABLE>
<CAPTION>
8/95 8/96 8/97 8/98 8/99 8/00
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
The Shaw Group Inc. ........................... 100.00 342.67 225.41 84.04 213.68 580.46
S&P Smallcap 600 Index......................... 100.00 113.29 151.93 129.20 160.48 205.72
Russell 2000 Index............................. 100.00 110.82 142.91 115.19 147.86 169.47
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
John W. Sinders, Jr., a director of the Company, was a managing director of
Jefferies & Company, Inc., while such investment banking firm handled the
repurchase of some of the shares of the Company's Common Stock, beginning in
fiscal 1999, earning Jefferies $74,330 in commissions. Mr. Sinders is now
Managing
14
<PAGE> 17
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 the public offering and earned approximately $150,000 in
connection with such offering. Also, in October 2000, the Company sold 2,418,669
shares of Common Stock in an underwritten public offering in which RBC was a
participating underwriter.
The Company has, from time to time, made loans to certain of its executive
officers and/or entities in which such executive officers have a material
interest. Each such loan in which the indebtedness exceeded $60,000 at any time
since the beginning of fiscal 2000 is listed below with the following
information indicated for each (i) the name of the borrower, (ii) the nature of
the borrower's relationship with the Company, (iii) the largest amount of
indebtedness outstanding at any time since the beginning of fiscal 2000, (iv)
the nature of the loan and of the transaction in which it was incurred, (v) the
amount outstanding as of December 15, 2000, and (vi) the interest rate charges
thereon.
(a) (i) MERIT Industrial Constructors, Inc. ("MERIT"); (ii) controlled
by Richard F. Gill, an executive officer of the Company; (iii) $500,000;
(iv) made in connection with the acquisition by the Company of certain
assets of MERIT; (v) -0-; (vi) 8%.
(b) (i) Richard F. Gill; (ii) executive officer of the Company; (iii)
$837,500; (iv) made in connection with Mr. Gill's employment; (v) -0-; (vi)
8%.
The Company, in the ordinary course of business, makes advances for travel and
other Company-related expenses to certain of its executive officers. Such
advances are generally repaid by the executive in the period in which they are
made, or shortly thereafter. As of the date hereof, no advances are outstanding
and due to the Company.
PROPOSAL 2 -- TO APPROVE THE SHAW GROUP INC.
2001 EMPLOYEE INCENTIVE COMPENSATION PLAN
The Board of Directors of the Company approved and adopted effective as of
November 27, 2000, subject to approval by the shareholders of the Company, The
Shaw Group Inc. 2001 Employee Incentive Compensation Plan (the "2001 Plan"). The
following description of the 2001 Plan is qualified in its entirety by the
complete text thereof, a copy of which is attached hereto as Exhibit "A," and
which should be carefully reviewed in connection with a shareholder's
consideration thereof.
PURPOSE
The purpose of the 2001 Plan is to (i) attract and retain persons eligible
to participate in the 2001 Plan; (ii) motivate participants, through means of
appropriate incentives, to achieve long-range goals; (iii) provide incentive
opportunities that are competitive with those of similar companies; and (iv)
identify the interests of participants with those of the Company's shareholders
through the award of equity-based compensation.
TYPES OF AWARDS
The Compensation Committee of the Board of Directors (the "Committee") has
the authority to award, under the 2001 Plan, (i) options to purchase Common
Stock of the Company ("Options"), including options intended to qualify as
incentive stock options ("incentive stock options" or "ISO's") under Section 422
of the Internal Revenue Code of 1986, as amended (the "Code") and those not
intended by the Committee to be ISOs ("NQSOs"); (ii) restricted shares of Common
Stock ("Restricted Stock"); (iii) stock appreciation rights ("SARs"); (iv)
performance shares ("Performance Shares"); and (v) incentive bonuses ("Incentive
Bonuses").
LIMITATION ON NUMBER OF SHARES AND AWARDS
The aggregate number of shares of Common Stock reserved for issuance as
awards under the 2001 Plan is 2.0 million shares (as adjusted to reflect the
two-for-one Common Stock split), approximately 4.9% of the
15
<PAGE> 18
outstanding shares of Common Stock as of November 16, 2000. The maximum number
of shares that may be awarded as Options over the term of the 2001 Plan is 2.0
million shares (as adjusted to reflect the two-for-one Common Stock split). The
maximum number of shares of Common Stock that may be allotted by the Committee
pursuant to Options and SARs awarded to any individual participant may not
exceed 2.0 million shares (as adjusted to reflect the two-for-one Common Stock
split) each fiscal year. The number of shares of Common Stock that may be
allotted pursuant to Restricted Stock granted to any individual participant is
limited to 25,000 shares (subject to adjustment) each fiscal year. No more than
25,000 shares of Common Stock (subject to adjustment) may be subject to any
Performance Share awards to any individual participant in any fiscal year.
Finally, no individual participant may receive an Incentive Bonus for an amount
in excess of $5.0 million in any fiscal year.
PARTICIPATION AND ADMINISTRATION
Individuals eligible for awards under the 2001 Plan shall include those
officers, employees of and consultants to the Company and its subsidiaries as
may be designated by the Committee. The 2001 Plan shall be administered,
construed and interpreted by the Committee.
TERMS AND CONDITIONS OF AWARDS
Options and SARs. The Committee shall have the full and complete
discretion to provide the terms and conditions (including performance
conditions) of awards of Options and SARs, except that Options or SARs awarded
to "Officers" (as defined in the 2001 Plan) may not be exercisable until the
expiration of six months from the date of award and the exercise price of an
Option or SAR may not be less than 100% of the fair market value of a share of
Common Stock on the date of grant. The exercise price of an Option may be paid
(i) in cash (by certified check, bank draft or money order); (ii) with the
consent of the Committee, by delivering the participant's duly executed
promissory note and related documents; (iii) with the consent of the Committee,
by delivering shares of Common Stock already owned by the participant; or (iv)
with the consent of the Committee, by irrevocably authorizing a third party to
sell shares of Common Stock acquired upon exercise to pay the exercise price and
withholding taxes.
Restricted Stock. The Committee shall have the full and complete authority
to establish the terms and conditions of awards of Restricted Stock. However,
Restricted Stock awarded to an "Officer" (as defined in the 2001 Plan) shall not
vest until six months from the date of grant. Further, shares of Restricted
Stock may not be transferred until such shares are fully vested and the
certificate representing such shares shall contain a restrictive legend, and
such certificates shall be held by the Company until the shares represented
thereby have vested. Shares of Restricted Stock shall vest immediately upon the
death, retirement or disability of the participant; provided however, that the
shares shall not vest unless and until any performance condition placed upon
such award has been met.
Performance Shares. The Committee shall have the discretion to award
Performance Shares under the 2001 Plan upon such terms and conditions as it
shall establish. Each Performance Share, however, shall have an initial value
equal to the fair market value of a share of Common Stock on the date of grant.
If the performance goals are met, the Committee has the discretion to pay earned
Performance Shares in cash, shares of Common Stock or both.
Incentive Bonuses. The Committee shall have discretionary authority to
designate the participants to whom Incentive Bonuses shall be paid and the terms
and conditions thereof.
LIMITED TRANSFERABILITY
Options, SARs, Restricted Stock and Performance Shares awarded under the
2001 Plan, generally, may not be transferred other than by will or the laws of
descent and distribution. However, the Committee has the authority to award
NQSOs that are transferable to members of a participant's immediate family,
including trusts for the benefit of such family members and partnerships in
which such family members are the only partners.
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CHANGE OF CONTROL
All Options and SARs shall become fully exercisable, all shares of
Restricted Stock and Performance Shares shall fully vest free of restrictions
and all approved and accrued Incentive Bonuses shall be fully payable upon the
occurrence of a Change of Control as defined in the 2001 Plan. A "Change of
Control" is defined generally as the happening of any of the following: (i) when
any person (except any shareholder who, as of January 1, 2000, owned 10% or more
of the combined voting power of the Company) becomes the beneficial owner of 20%
or more of the combined voting power of the Company; (ii) when, during a period
of 24 consecutive months, the individuals who, at the beginning of such period,
constitute the members of the Company's Board of Directors cease for any reason
other than death or disability to constitute at least a majority thereof; (iii)
the acquisition of the Company or all or substantially all of the Company's
assets by a third party; or (iv) the Company files a report or proxy statement
with the Securities and Exchange Commission disclosing that a change of control
of the Company has or may have occurred or will or may occur in the future
pursuant to any then-existing contract or transaction.
PERFORMANCE MEASURES
The performance measures that the Committee may utilize when setting
performance objectives for an award that is intended to qualify as
"performance-based compensation" pursuant to Section 162(m) of the Code, are
limited to the achievement of earnings per share, return measures, stock price,
net income, earnings before or after taxes, gross revenues, working capital
measures and backlog. As part of the approval of the 2001 Plan by the
shareholders, the Board of Directors is seeking shareholder approval of the
foregoing performance objectives in order to qualify certain awards to be made
under the 2001 Plan as performance-based compensation under Section 162(m) of
the Code so that such compensation is tax deductible to the Company.
ADJUSTMENT OF SHARES AND PRICE
In the event that the shares of Common Stock are changed into or exchanged
for a different kind or number of shares of stock or securities of the Company
as the result of any stock dividend, stock split, combination of shares,
exchange of shares, merger, consolidation, reorganization, recapitalization or
other change in capital structure, the Committee may adjust awards and the
number of shares of Common Stock subject to the Plan to preserve the benefits or
potential benefits of awards thereunder. Such action by the Committee may
include adjustments to the number of shares subject to the 2001 Plan and to
awards granted thereunder and the purchase or exercise price for such shares.
TERM OF PLAN; AMENDMENTS
The 2001 Plan shall terminate automatically on November 27, 2010, and the
Board of Directors may suspend or terminate the 2001 Plan at any earlier time.
The Board of Directors may amend the 2001 Plan from time to time in its sole
discretion unless the amendment would, under applicable federal, state or local
law, require shareholder approval. Further, no amendment may impair the rights
of any participant without his or her consent.
AWARDS GRANTED
Since the date the 2001 Plan was approved and adopted by the Board of
Directors, through the date hereof, no awards have been made to any of the Named
Executive Officers or to any other participant in the 2001 Plan.
FEDERAL INCOME TAX CONSEQUENCES OF THE ISSUANCE AND EXERCISE OF OPTIONS
The following summary sets forth, in general, certain United States income
tax consequences on the issuance and exercise of Options under the Plan. The
following statements are based on current interpretations of existing United
States income tax law. The law is technical and complex and the statements below
represent only a general summary of some of the applicable provisions.
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Incentive Stock Options. An employee who receives an ISO generally does
not recognize taxable income on the date that the ISO is granted or exercised
(except that the alternative minimum tax provisions may apply to the employee).
However, the Company cannot deduct the ISO grant as compensation expense. If the
ISO is exercised more than three months after the employee has left the employ
of the Company (the three month period is extended to 12 months in the event of
disability and is waived in the event of death), the favorable tax treatment is
not available to the employee.
With respect to the disposition of the Common Stock received pursuant to
the exercise of an ISO, the tax treatment depends upon whether the shares of
Common Stock were disposed of within the statutory holding period. The holding
period is the later of two years from the date of the grant of the ISO or one
year from the date that the shares were transferred to the employee upon
exercise. If the employee disposes of the stock received pursuant to the
exercise of the ISO after the expiration of the holding period, the employee
will recognize as capital gain, income on the difference between the amount
received as a result of the disposition over the employee's basis in the stock.
If the employee disposes of the shares prior to the expiration of the holding
period, the employee must recognize as ordinary income the gain on the
disposition of the Common Stock and the Company may deduct from income an amount
equal to the amount that the employee recognized as ordinary income.
NQSOs. A participant who is awarded an NQSO will generally incur no
taxable income as a result of the grant thereof. The Company can claim no tax
deduction on the date the NQSO is granted. With the exception of those instances
allowed in the 2001 Plan, and discussed above, a NQSO is not transferable by the
participant. If the NQSO is transferred in a non-arms's length transaction, the
participant may be required to realize ordinary income at the time of the
transfer to the extent of the amount realized from the disposition of the NQSO.
Upon the exercise of the NQSO, the participant will be required to recognize
ordinary income equal to the excess of the fair market value of the shares of
Common Stock on the exercise date over the exercise price of the NQSO. The
Company will be entitled to a corresponding deduction equal to the amount of
income recognized by the participant. Upon disposition of the Common Stock, any
appreciation (or depreciation) occurring after the date of the NQSO was
exercised is treated as short-term or long-term capital gain or loss, depending
upon the length of time that the participant has held the shares of Common
Stock.
REQUIRED VOTE
Approval of the 2001 Plan requires the affirmative vote of a majority of
the total voting power of the Common Stock present in person or represented by
proxy at the 2001 Annual Meeting. The enclosed form of Proxy provides a means
for the shareholders to vote for the 2001 Plan, to vote against the 2001 Plan or
to abstain from voting with respect to the 2001 Plan. Each properly executed
Proxy received in time for the 2001 Annual Meeting will be voted as specified
therein.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
APPROVAL OF THE SHAW GROUP INC. 2001 EMPLOYEE INCENTIVE COMPENSATION PLAN.
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PROPOSAL 3 -- TO APPROVE AN AMENDMENT TO THE COMPANY'S
1996 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
GENERAL
The Board of Directors is recommending for approval of the shareholders an
amendment to the Company's 1996 Non-Employee Director Stock Option Plan (the
"Director Plan") to increase the number of shares of Common Stock reserved for
issuance thereunder from 100,000 shares (as adjusted to reflect the two-for-one
Common Stock split) to 150,000 shares.
On July 14, 1996, the Company's Board of Directors, with the non-employee
directors abstaining, adopted the Director Plan and such plan was approved by
the Company's shareholders at the 1997 Annual Meeting of Shareholders. The
purpose of the Director Plan is to assist the Company in attracting and
retaining highly qualified and experienced directors who are not officers or
employees of the Company or any of its subsidiaries or affiliates. Each member
of the Board who is not, and who has not been during the one year period
immediately preceding the date the director is first elected to the Board, an
officer or employee of the Company or any of its subsidiaries or affiliates
shall be eligible to participate in the Director Plan. Each eligible director as
of July 14, 1996, received an option to purchase 5,000 shares of Common Stock at
an exercise price of $21.75, the fair market value of a share of Common Stock on
the date of grant. Such options, as a result of the two-for-one Common Stock
split, cover 10,000 shares each and have an exercise price of $10.88 per share.
Such options vested in 25% annual increments beginning one year from the date of
award. In addition, each eligible director is entitled to an award of an option
to acquire 1,500 shares of Common Stock on an annual basis upon his or her
election or reelection to the Board. The exercise price of such options is the
fair market value of a share of Common Stock on the date of award and such
options vest one year after the date of award.
A committee of members of the Board who are not eligible to receive grants
under the Director Plan administers, construes and interprets the Director Plan.
Shares released upon forfeiture of an option shall again be available for grants
of options under the Director Plan. All options under the Director Plan are non-
transferable other than by will or the laws of descent and distribution in the
event of the death of an optionee or by a qualified domestic relations order;
however, the committee has the authority to grant options that are transferable
to members of an eligible director's immediate family, including trusts for
their benefit and partnerships in which they are the only members. Each option
granted under the Director Plan shall remain exercisable for a period of ten
years after the date of grant, and in the event that an optionee ceases to be a
member of the Board prior to the vesting of an option or applicable part
thereof, the option or the unvested portion thereof shall be forfeited.
AWARDS GRANTED
If the proposed amendment to the Director Plan is approved, pursuant to the
terms of the Director Plan, each non-employee nominee for director, if elected,
will receive an option to purchase 1,500 shares of Common Stock exercisable in
one year at an exercise price equal to the fair market value of a share of
Common Stock on the date of award.
FEDERAL INCOME TAX CONSEQUENCES
The following statements are based on current interpretation of existing
federal income tax law. The law is technical and complex and the statements
below represent only a general summary of some of the applicable provisions. The
following discussion sets forth federal tax consequences on the grant and
exercises of an option under the Director Plan.
Options awarded under the Director Plan shall be non-statutory options. An
eligible director of the Company who is awarded an option under the Director
Plan will generally incur no taxable income as a result of the grant. The
Company can claim no tax deduction on the date the option is granted. The option
cannot be transferred by the optionee except as provided in the Director Plan.
If the option is transferred in a non-arm's length transaction, the optionee may
be required to realize ordinary income at the time of the transfer to the
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extent of the amount realized from the disposition of the option. Upon the
exercise of the option, the optionee will be required to recognize ordinary
income equal to the excess of the fair market value of the shares of Common
Stock on the exercise date over the exercise price of the option. Upon the
optionee's exercise, the Company will be entitled to a corresponding deduction
equal to the amount of the income recognized by the optionee.
AMENDMENT OR TERMINATION OF THE DIRECTOR PLAN
The Board of Directors may amend the Director Plan from time to time in its
sole discretion, provided that no such amendment shall impair the rights of any
person to whom an option has been granted, without such person's consent. The
Director Plan terminates on July 14, 2006, and the Board may suspend or
terminate the Director Plan at any earlier time; however, the terms of the
Director Plan shall continue in full force and effect with respect to
outstanding and unexercised options issued thereunder.
REQUIRED VOTE
Approval of the proposed amendment to the Director Plan requires the
affirmative vote of a majority of the total voting power of the Common Stock
present in person or represented by proxy at the 2001 Annual Meeting. The
enclosed form of Proxy provides a means for the shareholders to vote for the
proposed amendment, to vote against the proposed amendment or to abstain from
voting with respect to the proposed amendment. Each properly executed Proxy
received in time for the 2001 Annual Meeting will be voted as specified therein.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
APPROVAL OF THE PROPOSED AMENDMENT TO THE 1996 NON-EMPLOYEE DIRECTOR STOCK
OPTION PLAN.
PROPOSAL 4 -- AN AMENDMENT TO ARTICLE IV OF THE
RESTATEMENT OF THE ARTICLES OF INCORPORATION OF
THE SHAW GROUP INC.
On September 17, 2000, subject to shareholder approval, the Board of
Directors adopted a resolution approving a proposed amendment to Article IV of
the Restatement of the Articles of Incorporation of the Company to increase the
number of authorized shares of the Common Stock from 50,000,000 shares to
200,000,000 shares and the number of authorized shares of the no par value
preferred stock (the "Preferred Stock") from 5,000,000 shares to 20,000,000
shares. As of November 16, 2000, 40,440,422 shares of Common Stock (as adjusted
to reflect the two-for-one Common Stock split) were issued and outstanding and
3,872,736 shares of Common Stock (as adjusted to reflect the two-for-one Common
Stock split) were also reserved for issuance pursuant to the Company's stock
option plans. No shares of Preferred Stock are presently issued and outstanding.
The authorized but unissued Preferred Stock may be issued with such rights,
preferences and limitations as the Board of Directors may determine from time to
time.
The purpose of increasing the number of authorized shares of Common Stock
and Preferred Stock is to provide additional shares that could be used for
proper corporate purposes, including corporate financings, investments and
acquisitions, stock splits and/or dividends, employee and management incentive,
benefit, and savings plans, non-employee director plans, dividend reinvestment
plans, responses to takeover attempts, and other proper purposes. Except for
shares reserved for issuance pursuant to the Company's stock option plans, the
Company has no present plans, understandings or agreements for the issuance or
use of the proposed additional shares of Common Stock or Preferred Stock.
The Board of Directors believes that the proposed increase in authorized
shares is desirable in order to increase its flexibility in issuing shares of
Common Stock or Preferred Stock as the need may arise without the expense and
delay of a special shareholders' meeting to authorize an increase in the number
of authorized shares.
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If the proposed amendment to Article IV of the Restatement of the Articles
of Incorporation is approved, the Board of Directors will have authority to
issue the additional authorized shares of Common Stock or any part thereof to
such persons and for such consideration as it may deem appropriate without
further action by the shareholders, except as shareholder action may be required
by applicable law or pursuant to the requirements of the New York Stock Exchange
or other exchange upon which such securities are then trading. Each additional
share of Common Stock authorized by the proposed amendment will have the same
rights and privileges as each share of the outstanding Common Stock. Pursuant to
Article IV of the Restatement of the Articles of Incorporation of the Company,
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 determination date shall entitle the
holder thereof to one vote per share. See "Confirmation of Beneficial
Ownership." Shareholders of Common Stock have no preemptive rights to receive or
purchase any shares of the presently authorized but unissued Common Stock or the
shares authorized by the proposed amendment.
With respect to the Preferred Stock, the Board of Directors will have
authority to amend the Restatement of the Articles of Incorporation to fix and
determine the terms, limitations and relative rights and preferences of the
Preferred Stock including, without limitation, any voting rights, dividends and
terms, redemption rights and price, conversion features, and to divide and issue
the Preferred Stock in series and to fix and determine the variations among
series to the extent permitted by law.
Although the Board of Directors has no present intention of doing so, the
Company's authorized but unissued Common Stock and Preferred Stock could be
issued in one or more transactions which would make more difficult or costly,
and less likely, a takeover of the Company. Issuing additional shares of stock
could also have the effect of diluting the stock ownership of persons seeking to
obtain control of the Company. The proposed amendment to the Restatement of the
Articles of Incorporation of the Company is not being recommended in response to
any specific effort of which the Company is aware to obtain control of the
Company, nor is the Board of Directors currently proposing to the shareholders
any anti-takeover measures.
The directors of the Company have unanimously approved the proposed
amendment. However, the proposed amendment will not be adopted unless the
holders of at least a majority of the voting power of Common Stock present or
represented at the Annual Meeting of the Shareholders vote "FOR" the adoption of
such amendment. The enclosed form of Proxy provides a means for shareholders to
vote for the proposed amendment, to vote against the proposed amendment or to
abstain from voting with respect to the proposed amendment. Each properly
executed Proxy received in time for the 2001 Annual Meeting will be voted as
specified therein.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
ADOPTION OF THE ABOVE DESCRIBED AMENDMENT TO THE RESTATEMENT OF THE ARTICLES OF
INCORPORATION.
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 2000, all
filing obligations applicable to the reporting persons were complied with except
as follows: Each of the executive officers of the Company, namely, Messrs.
Bernhard, Belk, Gill, Dupuy, Rayner and Graphia, failed to file timely a Form 5
for the fiscal 2000 year end to report certain exempt awards of stock options
under the Company's 1993 Employee Stock Option Plan.
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AUDITOR SERVICES
The Company's consolidated financial statements for the fiscal year ended
August 31, 2000, 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 2001 Annual Meeting 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 believed 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 2002 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 17, 2001.
In order for a shareholder to bring any business or nominations before the
2001 Annual Meeting of Shareholders, certain conditions set forth in 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 2001 Annual Meeting, or if fewer
than 40 days notice or prior disclosure of the date of the 2001 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 2001 Annual Meeting was mailed or
such prior disclosure was made. The requirements as to the form and content of
such advance notice are set forth in 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.
CONFIRMATION 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 the date on which 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 will not change. The Restatement of the Articles of
Incorporation of the Company state the exceptions where beneficial ownership is
deemed not to have changed upon the transfer of shares of Common Stock.
Article IV of the Restatement of the Articles of Incorporation of the
Company provides 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 shares 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
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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 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 Restatement of the Articles of
Incorporation of the Company, 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
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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.
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 Restatement of the Articles of
Incorporation of the Company, 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.
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Shares of Common Stock issued as a result of the two-for-one Common Stock
split distributed on December 15, 2000, to shareholders of record on December 1,
2000, shall be entitled to the same number of votes as the originally issued
shares with respect to which they were distributed, unless there has been a
change in beneficial ownership subsequent to the date of such stock split.
By resolution duly adopted by the Board of Directors of the Company
pursuant to the foregoing provisions of the Restatement of the Articles of
Incorporation of the Company, 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 5, 1996, and until the date
December 5, 2000, 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 2001 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 (3) 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.
Individual shareholders of record as of December 5, 2000 (i.e., those
shareholders whose shares of Common Stock are not held by a broker or a bank or
in nominee name) will be entitled to the number of votes per share as shown on
the records of the Company. Such shareholders of record may confirm to the
Company, in accordance with the procedures set forth above, beneficial ownership
in the event such shareholders believe that the records of the Company may not
be correct.
Shareholders whose shares of Common Stock are held by brokers or banks or
in nominee name are requested to confirm to the Company how many of the shares
they own as of December 5, 2000 were beneficially owned on or before December 5,
1996, entitling such shareholder to five votes per share, and how many were
acquired after December 5, 1996, entitling such shareholder to one vote per
share. IF NO CONFIRMATION OF BENEFICIAL OWNERSHIP IS RECEIVED FROM A SHAREHOLDER
AT LEAST THREE (3) BUSINESS DAYS PRIOR TO THE ANNUAL MEETING, IT WILL BE DEEMED
BY THE COMPANY THAT BENEFICIAL OWNERSHIP OF ALL SHARES WAS EFFECTED AFTER
DECEMBER 5, 1996, AND THAT THE SHAREHOLDER WILL BE ENTITLED TO ONE VOTE FOR EACH
SHARE. If a shareholder provides incorrect information, he or she may provide
correct information at any time at least three (3) business days prior to the
Annual Meeting.
If a shareholder has any questions concerning the foregoing procedures, he
or she should contact the Company's Secretary, Gary P. Graphia, by telephone at
(225) 932-2500 (or toll free at (800) 747-3322) or by e-mailing [email protected].
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OTHER MATTERS
The Board of Directors knows of no other matters, which may be properly, or
are likely to be, brought before the 2001 Annual Meeting. However, if any proper
matters are brought before the 2001 Annual Meeting, the persons named as Proxies
in the enclosed form of 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 15, 2000
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EXHIBIT A
THE SHAW GROUP INC.
2001 EMPLOYEE INCENTIVE COMPENSATION PLAN
1. PURPOSE OF PLAN.
The Shaw Group Inc. 2001 Employee Incentive Compensation Plan has been
established by the Company to (i) attract and retain persons eligible to
participate in the Plan; (ii) motivate participants, by means of appropriate
incentives, to achieve long-range goals; (iii) provide incentive compensation
opportunities that are competitive with those of other similar companies; and
(iv) further identify participants' interests with those of the Company's other
shareholders through compensation that is based on the Common Stock thereby
promoting the long-term financial interest of the Company and its Subsidiaries,
including the growth in value of the Company's equity and enhancement of
long-term shareholder return.
2. DEFINITIONS.
Unless otherwise required by the context, the following terms when used in
the Plan shall have the meanings set forth in this Section 2:
(a) "Agreement": An agreement evidencing an Award in such form as
adopted from time to time by the Committee pursuant to the Plan.
(b) "Award": Any award or benefit granted under the Plan, including
without limitation, the grant of Options, SARs, Restricted Stock,
Performance Shares or Incentive Bonuses, or any combination thereof, under
the Plan.
(c) "Board of Directors": The Board of Directors of the Company.
(d) "Cause": For purposes of the Plan, whether the termination of a
Participant's employment shall have been for Cause shall be determined by
the Committee in its sole discretion, if said Participant has: (i) been
convicted of, or has pleaded guilty or nolo contendere to a charge that he
committed a felony under the laws of the United States or any state or a
crime involving moral turpitude, including but not limited to fraud, theft,
embezzlement or any crime that results in or is intended to result in
personal enrichment at the expense of the Company or its Subsidiaries; (ii)
perpetrated a fraud against, or theft of property of the Company or any of
its Subsidiaries; (iii) committed acts amounting to gross negligence,
intentional neglect or willful misconduct in carrying out his duties and
responsibilities as an employee of the Company or one or more of its
Subsidiaries; (iv) willfully or persistently failed to attend to his duties
as an employee of the Company or one or more of its Subsidiaries; or (v) as
a result of his gross negligence or willful misconduct, committed any act
that causes, or has knowingly failed to take reasonable and appropriate
action to prevent, any material injury to the financial condition or
business reputation of the Company or any of its Subsidiaries.
(e) "Change of Control": For the purposes of the Plan, the term Change
in Control shall mean the happening of any of the following:
(i) When any "person" as defined in Section 3(a)(9) of the Exchange
Act, and as used in Section 13(d) and 14(d) thereof, including a "group"
as defined in Section 13(d) of the Exchange Act (but excluding any
shareholder of record of the Company as of January 1, 2000, owning 10%
or more of the combined voting power of the Company's securities which
are entitled to vote in the election of directors of the Company)
directly or indirectly becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), of securities of the Company
representing 20% or more of the combined voting power of the Company's
then outstanding securities which are entitled to vote with respect to
the election of directors;
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(ii) When, during any period of 24 consecutive months, the
individuals who, at the beginning of such period, constitute the Board
of Directors of the Company (the "Incumbent Directors") cease for any
reason other than death or disability to constitute at least a majority
thereof; provided, however, that a director who was not a director at
the beginning of such 24-month period shall be deemed to have satisfied
such 24-month requirement (and be an Incumbent Director) if such
director was elected by, or on the recommendation of or with approval
of, at least two-thirds of the directors who then qualified as Incumbent
Directors either actually (because they were directors at the beginning
of such 24-month period) or by operation of this provision;
(iii) The acquisition of the Company or all or substantially all of
the Company's assets by an entity other than the Company (or a
Subsidiary) through purchase of assets, or by merger, or otherwise,
except in the case of a transaction pursuant to which, immediately after
the transaction, the Company's shareholders immediately prior to the
transaction own immediately after the transaction at least a majority of
the combined voting power of the surviving entity's then outstanding
securities which are entitled to vote with respect to the election of
directors of such entity; or
(iv) The Company files a report or proxy statement with the
Commission pursuant to the Exchange Act disclosing in response to Form
8-K, Form 10-K or Schedule 14A (or any successor schedule, form or
report or item therein) that a change in control of the Company has or
may have occurred or will or may occur in the future pursuant to any
then-existing contract or transaction.
(f) "Code": The Internal Revenue Code of 1986, as amended from time to
time.
(g) "Commission": The Securities and Exchange Commission.
(h) "Committee": The Compensation Committee of the Board of Directors
or such other committee appointed by the Board of Directors which meets the
requirements set forth in Section 14.1 hereof.
(i) "Company": The Shaw Group Inc., a Louisiana corporation.
(j) "Consultant": Any professional advisor to the Company or its
Subsidiaries as well as any employee, officer or director of a corporation
that serves as an advisor, consultant or independent contractor to the
Company or its Subsidiaries. The term "Consultant" shall not, however,
include any director, officer or employee of the Company or its
Subsidiaries.
(k) "Effective Date": The date on which the Plan shall become
effective as set forth in Section 16 hereof.
(l) "Exchange Act": The Securities Exchange Act of 1934, as amended,
together with all regulations and rules issued thereunder.
(m) "Exercise Price": (i) In the case of an Option, the price per
Share at which the Shares subject to such Option may be purchased upon
exercise of such Option and (ii) in the case of an SAR, the price per Share
which upon grant, the Committee determines shall be used in calculating the
aggregate value which a Participant shall be entitled to receive upon
exercise of such SAR.
(n) "Fair Market Value": As applied to a specific date, the fair
market value of a Share on such date as determined in good faith by the
Committee in the following manner:
(i) If the Shares are then listed on any national or regional stock
exchange, the Fair Market Value shall be the last quoted sales price of
a Share on the date in question, or if there are no reported sales on
such date, on the last preceding date on which sales were reported;
(ii) If the Shares are not so listed, then the Fair Market Value
shall be the mean between the bid and ask prices quoted by a market
maker or other recognized specialist in the Shares at the close of the
date in question; or
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(iii) In the absence of either of the foregoing, the Fair Market
Value shall be determined by the Committee in its absolute discretion
after giving consideration to the book value, the revenues, the earnings
history and the prospects of the Company in light of market conditions
generally.
The Fair Market Value determined in such manner shall be final, binding
and conclusive on all parties.
(o) "Incentive Bonus": An Award granted pursuant to Section 8 of the
Plan.
(p) "ISO": An Option intended to qualify as an "incentive stock
option," as defined in Section 422 of the Code or any statutory provision
that may replace such Section and designated as an incentive stock option
by the Committee.
(q) "Officer": An officer of the Company or its Subsidiaries meeting
the definition of "officer" in Rule 16a-1(f) (or any successor provision)
promulgated by the Commission under the Exchange Act.
(r) "NQSO": An Option not intended to be an ISO and designated as a
nonqualified stock option by the Committee.
(s) "Option": Any ISO or NQSO granted under the Plan.
(t) "Participant": An officer or other employee of or Consultant to
the Company or any of its Subsidiaries who has been granted an Award under
the Plan.
(u) "Performance Measures": The Performance Measures described in
Section 9.1 of the Plan.
(v) "Performance Period": For the purposes of the grant of Performance
Shares, the time period during which the applicable performance goal(s)
must be met.
(w) "Performance Shares": An Award granted pursuant to Section 7 of
the Plan.
(x) "Plan": This The Shaw Group Inc. 2001 Employee Incentive
Compensation Plan, as the same may be amended from time to time.
(y) "Related": (i) In the case of an SAR, an SAR that is granted in
connection with, and to the extent exercisable, in whole or in part, in
lieu of, an Option or another SAR; and (ii) in the case of an Option, an
Option with respect to which and to the extent an SAR is exercisable, in
whole or in part, in lieu thereof, has been granted.
(z) "Restricted Stock": Shares which have been awarded to a
Participant under Section 6 hereof.
(aa) "Restriction Period": The time period during which Restricted
Stock awarded under the Plan must be held before it becomes fully vested,
unless additional conditions have been placed upon the vesting thereof.
(bb) "SAR": A stock appreciation right awarded to a Participant under
Section 5.3 hereto.
(cc) "Shares": Shares of the Company's authorized but unissued or
reacquired no par value per share common stock, or such other class or kind
of shares or other securities as may be applicable pursuant to the
provisions of Section 4.4 hereof.
(dd) "Subsidiary": Any "subsidiary corporation" of the Company, as
such term is defined in Section 424(f) of the Code.
3. PARTICIPATION.
Participants shall be selected by the Committee from the officers (whether
or not they are directors), employees of the Company or its Subsidiaries (either
full or part-time) and Consultants. An Award may be granted to an employee, in
connection with hiring, retention or otherwise, prior to the date the employee
first performs services for the Company or the Subsidiaries, provided that such
Awards shall not become vested prior to the date the employee first performs
such services.
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4. SHARES SUBJECT TO PLAN.
4.1 Shares Subject to the Plan. The maximum number of Shares that may be
delivered to Participants and their beneficiaries pursuant to the Plan shall be
equal to the sum of: (i) 1.0 million shares of Common Stock and (ii) any shares
of Common Stock that are represented by awards granted under the Company's 1993
Employee Stock Option Plan, as amended and restated, which are forfeited, expire
or are canceled without the delivery of shares of Common Stock or which result
in the forfeiture of shares of Common Stock back to the Company. The limitations
established by the preceding sentence shall be subject to adjustment as provided
in Section 4.4 of the Plan.
4.2 Accounting for Number of Shares. For purposes of determining the
aggregate number of Shares available for delivery to Participants pursuant to
the Plan, any Shares granted under the Plan which are forfeited back to the
Company because of the failure to meet an award contingency or condition shall
again be available for delivery pursuant to new Awards granted under the Plan.
Any Shares covered by an Award (or portion of an Award) granted under the Plan,
which is forfeited or canceled, expires or is settled in cash, shall be deemed
not to have been delivered for purposes of determining the maximum number of
Shares available for delivery under the Plan. Likewise, if any Option is
exercised by tendering Shares to the Company as full or partial payment in
connection with the exercise of an Option under this Plan or the Prior Plan,
only the number of Shares issued net of the Shares tendered shall be deemed
delivered for purposes of determining the maximum number of Shares available for
delivery under the Plan. Further, Shares issued under the Plan through the
settlement, assumption or substitution of outstanding Awards or obligations to
grant future Awards as a result of acquiring another entity shall not reduce the
maximum number of Shares available for delivery under the Plan.
4.3 Maximum Total Option and SAR Awards. Notwithstanding the provisions
of Section 4.1, over the term of the Plan, the total number of Shares that may
be issued upon exercise of all Options and SARs granted under the Plan shall not
exceed 1.0 million shares of Common Stock. The limitations in this Section 4.3
shall be subject to adjustment as provided in Section 4.4 below.
4.4 Adjustments. In the event of a corporate transaction involving the
Company (including, without limitation, any stock dividend, stock split,
extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination or exchange of shares, or other
similar transactions or award), the Committee may adjust Awards as well as the
total number of shares subject to the Plan to preserve the benefits or potential
benefits of the Awards. Action by the Committee may include: (i) adjustment of
the number and kind of Shares (or other securities or property) which may be
delivered under the Plan; (ii) adjustment of the number and kind of Shares (or
the securities or property) subject to outstanding Awards; (iii) adjustment of
the Exercise Price of outstanding Options and SARs; and (iv) any other
adjustments that the Committee determines to be equitable, in its sole
discretion.
5. AWARDS OF OPTIONS AND SARS.
5.1 General Terms And Conditions. The Committee shall have full and
complete authority and discretion, except as expressly limited by the Plan, to
grant Options and SARs and to provide any and all terms and conditions (which
need not be identical among the Participants) thereof. In particular, the
Committee shall prescribe the following terms and conditions:
(a) The Exercise Price of the Option or SAR, which may not be less
than 100% of the Fair Market Value per Share at the date of grant of the
Option or SAR;
(b) The number of Shares subject to, and the expiration date of, the
Option or SAR;
(c) The manner, time and rate (cumulative or otherwise) of exercise of
the Option or SAR; provided, however, that except as otherwise specified in
the Plan, no Option or SAR awarded to a Participant who is an Officer shall
expressly provide for exercise prior to the expiration of six months from
the date of grant; and
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(d) The restrictions or conditions (such as performance goals), if
any, to be placed upon the Option or SAR, the exercisability of the Option
or SAR or upon the Shares which may be issued upon exercise of the Option
or SAR. The Committee may, as a condition of granting an Option or SAR,
require that a Participant agree not to thereafter exercise one or more
Options or SARs previously granted to such Participant.
5.2 Maximum Award Of Options and SARs. The number of Shares that may be
allotted by the Committee pursuant to Options and SARs awarded to any individual
Participant shall not exceed, in any fiscal year, 1.0 million Shares (subject to
adjustment pursuant to Section 4.4 of the Plan). If an Option is in tandem with
an SAR, such that the exercise of the Option or SAR with respect to a Share
cancels the tandem SAR or Option right, respectively, with respect to such
Share, the tandem Option and SAR rights with respect to such Share shall be
counted as covering but one Share for purposes of applying the limitations of
this Section 5.2.
5.3 SAR Awards.
(a) Grant of SARs. An SAR shall, upon its exercise, entitle the
Participant to whom such SAR was granted to receive a number of Shares or
cash or combination thereof, as the Committee in its discretion shall
determine, the aggregate value of which (i.e., the sum of the amount of
cash and/or Fair Market Value of such Shares on date of exercise) shall
equal the amount by which the Fair Market Value per Share on the date of
such exercise shall exceed the Exercise Price of such SAR multiplied by the
number of Shares with respect of which such SAR shall have been exercised.
An SAR may be related to an Option or may be granted independently of an
Option, as the Committee shall from time to time in each case determine. A
Related SAR may be granted at the time of grant of an Option or, in the
case of an NQSO, at any time thereafter during the term of the NQSO.
(b) Related SARs. The Exercise Price of a Related SAR shall be the
same as the Exercise Price of the Related Option. A Related SAR shall be
exercisable only at such time or times and only to the extent that the
Related Option is exercisable and then only when the Fair Market Value per
Share on the date of exercise exceeds the Exercise Price. A Related SAR
shall expire no later than the Related Option. Upon exercise of a Related
SAR, in whole or in part, the Related Option shall be cancelled
automatically to the extent of the number of Shares covered by such
exercise, and such Shares shall no longer be available for delivery
pursuant to future Awards. Conversely, if the Related Option is exercised,
in whole or in part, the Related SAR shall be cancelled automatically to
the extent of the number of Shares covered by the Option exercise.
5.4 Exercise of Options and SARs.
(a) General Exercise Rights. Except as provided in Section 5.9, an
Option or SAR granted under the Plan shall be exercisable during the
lifetime of the Participant to whom such Option or SAR was granted only by
such Participant, and except as provided in Section 5.4(c) and Section 5.9
hereof, no Option or SAR may be exercised unless at the time such
Participant exercises such Option or SAR, such Participant is an employee
of and has continuously since the grant thereof been an employee of, the
Company or an any of its Subsidiaries. Transfer of employment between
Subsidiaries or between Subsidiary and the Company shall not be considered
an interruption or termination of employment for any purpose under this
Plan. Neither shall a leave of absence at the request, or with the
approval, of the Company or Subsidiary be deemed an interruption or
termination of employment, so long as the period of such leave does not
exceed 90 days, or, if longer, so long as the Participant's right to
re-employment with the Company or Subsidiary is guaranteed by contract. An
Option or SAR also shall contain such conditions upon exercise (including,
without limitation, conditions limiting the time of exercise to specified
periods) as may be required to satisfy applicable regulatory requirements,
including, without limitation, Rule 16b-3 (or any successor rule)
promulgated by the Commission.
(b) Notice Of Exercise. An Option or SAR may not be exercised with
respect to less than 100 Shares, unless the exercise relates to all Shares
covered by the Option or SAR at the date of exercise. An Option or SAR may
be exercised by delivery of a written notice to the Company, which shall
state the election to exercise the Option or SAR and the number of whole
Shares in respect of which it is being
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exercised, and shall be signed by the person or persons so exercising the
Option or SAR. In the case of an exercise of an Option or SAR, such notice
shall either: (i) if applicable, be accompanied by payment of the full
Exercise Price and all applicable withholding taxes, in which event the
Company shall deliver any certificate(s) representing Shares to which the
Participant is entitled as a result of the exercise as soon as practicable
after the notice has been received; or (ii) fix a date (not less than 5 nor
more than 15 business days from the date such notice has been received by
the Company) for the payment of the full Exercise Price and all applicable
withholding taxes, against delivery by the Company of any certificate(s)
representing Shares to which the Participant is entitled to receive as a
result of the exercise. Payment of such Exercise Price and withholding
taxes shall be made as provided in Sections 5.4(d) and 13, respectively. In
the event the Option or SAR shall be exercised pursuant to Section
5.4(c)(i) or Section 5.9 hereof, by any person or persons other than the
Participant, such notice shall be accompanied by appropriate proof of the
right of such person or persons to exercise the Option or SAR.
(c) Exercise After Termination Of Employment. Except as otherwise
determined by the Committee at the date of grant of the Option or SAR and
as is provided in the applicable Agreement evidencing the Award, upon
termination of a Participant's employment with the Company or any of its
Subsidiaries, such Participant (or in the case of death, the person(s) to
whom the Option is transferred by will or the laws of descent and
distribution) may exercise such Option or SAR during the following periods
of time (but in no event after the expiration date of such Option or SAR)
to the extent that such Participant was entitled to exercise such Option or
SAR (or portion thereof) at the date of such termination (i.e., the Option
or SAR (or portion thereof) must be "vested" at the time of termination to
be exercisable thereafter):
(i) In the case of termination as a result of death, disability or
retirement of the Participant, the Option or SAR shall remain
exercisable for a one-year period following such termination; for this
purpose, "disability" shall exist when the Participant is unable to
engage in any substantial, gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to
result in death or which has lasted or can be expected to last for a
continuous period of not less than 12 months, as determined by the
Committee in its sole discretion, and "retirement" shall mean voluntary
retirement at or after the Participant's normal retirement date as
determined by the Committee in its sole discretion;
(ii) In the case of termination for Cause, the Option shall
immediately terminate and shall no longer be exercisable; and
(iii) In the case of termination for any reason other than those
set forth in subparagraphs (i) and (ii) above, the Option or SAR shall
remain exercisable for three months after the date of termination.
To the extent the Option or SAR is not exercised within the foregoing
periods of time, the Option or SAR shall automatically terminate at the
end of the applicable period of time. Notwithstanding the foregoing
provisions, failure to exercise an ISO within the periods of time
prescribed under Sections 421 and 422 of the Code shall cause an ISO to
cease to be treated as an "incentive stock option" for purposes of
Section 421 of the Code.
(d) Payment of Option Exercise Price. Upon the exercise of an Option,
payment of the Exercise Price shall be made either (i) in cash (by a
certified check, bank draft or money order payable in United States
dollars), (ii) with the consent of the Committee and subject to Section
5.4(e) hereof, by delivering the Participant's duly-executed promissory
note and related documents, (iii) with the consent of the Committee, by
delivering Shares already owned by the Participant valued at Fair Market
Value as of the date of exercise, (iv) with the consent of the Committee,
by irrevocably authorizing a third party to sell shares of Common Stock (or
a sufficient portion of such shares) acquired upon exercise of the Option
and remit to the Company a sufficient portion of the sales proceeds to pay
the entire Exercise Price and any tax withholding resulting from such
exercise, or (v) by a combination of the foregoing forms of payment.
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(e) Payment With Loan. The Committee may, in its sole discretion,
assist any Participant in the exercise of one or more Options granted to
such Participant under the Plan by authorizing the extension of a loan to
such Participant from the Company. Except as otherwise provided in this
Section 5.4(e), the terms of any loan (including the interest rate and
terms of repayment) shall be established by the Committee in its sole
discretion. Any such loan by the Company shall be with full recourse
against the Participant to whom the loan is granted, shall be secured in
whole or in part by the Shares so purchased, and shall bear interest at a
rate not less than the minimum interest rate required at the time of
purchase of the Shares in order to avoid having imputed interest or
original issue discount under Sections 483 or 1272 of the Code. In
addition, any such loan by the Company shall become immediately due and
payable in full, at the option of the Company, upon termination of the
Participant's employment with the Company or its Subsidiaries for any
reason or upon the sale of any Shares acquired with such loan to the extent
of the cash and fair market value of any property received by the
Participant in such sale. The Committee may make arrangements for the
application of payroll deductions from compensation payable to the
Participant to amounts owing to the Company under any such loan. Until any
loan by the Company under this Section 5.4(e) is fully paid in cash, the
Shares shall be pledged to the Company as security for such loan and the
Company shall retain physical possession of the stock certificates
evidencing the Shares so purchased together with a duly executed stock
power for such Shares. No loan shall be made hereunder unless counsel for
the Company shall be satisfied that the loan and the issuance of Shares
funded thereby will be in compliance with all applicable federal, state and
local laws, and such counsel shall be consulted prior to the funding of any
such loan.
5.5 Settlement of Awards of Options and SARs. Settlement of Awards of
Options and SARs is subject to Section 10.
5.6 Options or SARs Awarded To Consultants. Any provision of this Section
5 to the contrary notwithstanding, (i) an Option or SAR may be exercised at any
time by a Participant who is a Consultant during the applicable period in the
manner provided in Section 5.4(b) above; provided, that in the event of the
death of a Participant who is a Consultant, the Option or SAR may be exercised
by the executors or administrators of the estate of such Consultant or by the
person or persons who shall have acquired the Option or SAR directly by bequest
or inheritance; and (ii) the Exercise Price for an Option or SAR awarded to a
Consultant must be paid in cash (by a certified check, bank draft of money
order).
5.7 Rights As A Shareholder. A Participant shall have no rights as a
shareholder with respect to any Shares issuable on exercise of an Option or SAR
until the date of the issuance of a stock certificate to the Participant for
such Shares. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to the date such stock
certificate is issued, except as provided in Section 4.4 hereof.
5.8 Special Provisions for ISOs.
Any provision of the Plan to the contrary notwithstanding, the following
special provisions shall apply to all ISOs granted under the Plan:
(a) The Option must be expressly designated as an ISO by the Committee
and in the Agreement evidencing the Option;
(b) No ISO shall be granted more than ten years from the Effective
Date of the Plan and no ISO shall be exercisable more than ten years from
the date such ISO is granted;
(c) The Exercise Price of any ISO shall not be less than the Fair
Market Value per Share on the date such ISO is granted;
(d) Any ISO shall not be transferable by the Participant to whom such
ISO is granted other than by will or the laws of descent and distribution
and shall be exercisable during such Participant's lifetime only by such
Participant;
(e) No ISO shall be granted to any individual who, at the time such
ISO is granted, owns stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or
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any Subsidiary unless the Exercise Price of such ISO is at least 110% of
the Fair Market Value per Share at the date of grant and such ISO is not
exercisable after the expiration of five years from the date such ISO is
granted;
(f) The aggregate Fair Market Value (determined as of the time any ISO
is granted) of any Company stock with respect to which any ISOs granted to
a Participant are exercisable for the first time by such Participant during
any calendar year (under this Plan and all other stock option plans of the
Company and any of its Subsidiary and any predecessor of any such
corporations) shall not exceed $100,000 as required under Section 422(d)(i)
of the Code. (To the extent the $100,000 limit is exceeded, the $100,000 in
Options, measured as described above, granted earliest in time will be
treated as ISOs); and
(g) any other terms and conditions as may be required in order that
the ISO qualifies as an "incentive stock option" under Section 422 of the
Code or successor provision.
Notwithstanding the provisions of Section 5.4(c)(i), the favorable tax treatment
available pursuant to Section 422 of the Code upon the exercise of an ISO will
not be available to a Participant who exercises any ISO more than (i) 12 months
after the date of termination of employment due to the Participant's disability
or (ii) three months after the date of termination of employment due to
retirement of the Participant.
5.9 Limited Transferability. No Option or SAR, nor any interest therein,
may be assigned, encumbered or transferred except, in the event of the death of
a Participant, by will or the laws of descent and distribution. Notwithstanding
the foregoing, the Committee shall have the discretionary authority to grant
NQSOs and SARs (that are not Related to an ISO) that are transferable by the
Participant to the Participant's children, grandchildren, spouse, one or more
trusts for the benefit of such family members, or a partnership in which such
family members were the only partners. The holder of an NQSO or SAR transferred
pursuant to this Section 5.9 shall be bound by the terms and conditions that
govern the NQSO or SAR during the period that it was held by the Participant;
provided, however, that such transferee may not transfer the NQSO or SAR except
by will or the laws of descent and distribution.
6. RESTRICTED STOCK.
6.1 General Terms/Conditions. The Committee may, in its discretion, grant
one or more Awards of Restricted Stock to any Participant. Each Award of
Restricted Stock shall be evidenced by an Agreement which shall specify the
number of Shares to be issued to the Participant, the date of such issuance, the
price, if any, to be paid for such Shares by the Participant, the Restriction
Period and any other conditions imposed on such Shares as the Committee, in its
discretion, shall determine. Notwithstanding the foregoing, the Committee shall
impose upon each Award of Restricted Stock made to a Participant who is an
Officer a Restriction Period expiring no earlier than six months after the date
of grant of the Restricted Stock.
6.2 Maximum Award Of Restricted Stock. The maximum number of Shares that
may be allotted by the Committee pursuant to Restricted Stock awarded to any
individual Participant shall not exceed, in any fiscal year, 25,000 Shares.
6.3 Restrictions And Forfeitures.
(a) Shares included in Restricted Stock Awards may not be sold,
assigned, transferred, pledged or otherwise disposed of or encumbered,
either voluntarily or involuntarily, until such Shares have fully vested.
(b) Participants holding shares of Restricted Stock granted hereunder
may be granted the right to exercise full voting rights with respect to
those Shares during the Restriction Period. During the Restriction Period,
Participants holding shares of Restricted Stock granted hereunder may be
credited with regular cash dividends paid with respect to the underlying
Shares while they are so held. The Committee may apply any restrictions to
the dividends that the Committee deems appropriate. Without limiting the
generality of the preceding sentence, if the grant or vesting of Restricted
Stock is designed to comply with one or more of the Performance Measures
set forth in Section 9.1, the Committee may
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apply any restrictions it deems appropriate to the payment of dividends
declared with respect to such Restricted Stock, such that the dividends
and/or the Restricted Stock maintain eligibility under Section 162(m) of
the Code.
(c) In the event that the Participant shall have paid any cash for the
Restricted Stock, the Agreement shall specify whether and to what extent
such cash shall be returned upon a forfeiture (with or without an earnings
factor).
(d) The Restricted Stock shall be evidenced by a stock certificate
registered only in the name of the Participant, which stock certificate
shall be held by the Company until the Restricted Stock has fully vested.
(e) The occurrence of any of the following events shall cause the
immediate vesting of the Restricted Stock:
(i) the death of the Participant;
(ii) the retirement of the Participant on or after the
Participant's normal retirement date;
(iii) the disability of the Participant.
For the purposes of this Subsection, the term "disability" shall be
defined as such term is defined in Section 5.4(c)(i). Notwithstanding
the foregoing, to the extent a condition(s) other than a Restriction
Period has been imposed by the Committee upon the Restricted Stock, the
occurrence of the foregoing shall not cause immediate vesting unless and
until such condition(s) has been met.
(f) A Restricted Stock Award shall be entirely forfeited by the
Participant in the event that prior to vesting, the Participant breaches
any terms or conditions of the Plan, the Participant resigns from or is
terminated by the Company, or any condition(s) imposed upon vesting are not
met.
6.4 Legend On Certificates. Each certificate evidencing a Restricted
Stock Award under the Plan shall be registered in the name of the Participant
and deposited by the Participant, together with a stock power endorsed in blank,
with the Company and shall bear the following (or a similar) legend:
"The transferability of this certificate and the shares of Common
Stock represented hereby are subject to the terms and conditions (including
forfeiture) contained in The Shaw Group Inc. 2001 Employee Incentive
Compensation Plan and a Restricted Stock Agreement entered into between the
registered owner and The Shaw Group Inc. Copies of such Plan and Agreement
are on file in the offices of the Secretary of The Shaw Group Inc., 8545
United Plaza Boulevard, Baton Rouge, Louisiana 70809."
6.5 Section 83(b) Elections. Within 30 days after the issuance of shares
of Restricted Stock to a Participant under the Plan, the Participant shall
decide whether or not to file an election pursuant to Section 83(b) of the Code
and Treasury Regulation Section 1.83-2 (and state law counterparts) with respect
to such Restricted Stock. If the Participant does file such an election, the
Participant shall promptly furnish the Company with a copy of such election.
7. PERFORMANCE SHARES.
7.1 Grant of Performance Shares. Subject to the terms of the Plan,
Performance Shares may be granted to Participants in such amounts and upon such
terms, and at any time and from time to time, as shall be determined by the
Committee, provided that no more than 25,000 Shares may be subject to any
Performance Share Awards granted to any individual Participant in any fiscal
year.
7.2 Value of Performance Shares. Each Performance Share shall have an
initial value equal to the Fair Market Value of a Share on the date of grant.
The Committee shall set performance goals in its discretion which, depending on
the extent to which they are met, will determine the number and/or value of
Performance Shares that will be paid out to the Participant.
7.3 Earning of Performance Shares. Subject to the terms of the Plan,
after the applicable Performance Period has ended, the holder of Performance
Shares shall be entitled to receive payout on the number
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and value of Performance Shares earned by the Participant over the Performance
Period, to be determined as a function of the extent to which the corresponding
performance goals have been achieved.
7.4 Form and Timing of Payment of Performance Shares. Payment of earned
Performance Shares shall be made in a single lump sum following the close of the
applicable Performance Period. Subject to the terms of this Plan, the Committee,
in its sole discretion, may pay earned Performance Shares in the form of cash or
in Shares (or in a combination thereof) which have an aggregate Fair Market
Value equal to the value of the earned Performance Shares at the close of the
applicable Performance Period. Such Shares may be granted subject to any
restrictions deemed appropriate by the Committee. The determination of the
Committee with respect to the form of payout of such Awards shall be set forth
in the Agreement pertaining to the grant of the Award of Performance Shares.
At the discretion of the Committee, Participants may be entitled to receive
any dividends declared with respect to Shares which have been earned in
connection with grants of Performance Shares which have been earned, but not yet
distributed to Participants (such dividends shall be subject to the same
accrual, forfeiture, and payout restrictions as apply to dividends earned with
respect to Shares of Restricted Stock, as set forth in Section 6 hereof). In
addition, Participants may, at the discretion of the Committee, be entitled to
exercise their voting rights with respect to such Shares.
7.5 Termination of Employment Due to Death, Disability, or
Retirement. Unless determined otherwise by the Committee and set forth in the
Agreement evidencing an Award of Performance Shares, in the event the employment
of a Participant is terminated by reason of death, disability, or retirement
during a Performance Period, the Participant or his legal representative shall
receive a payout of the Performance Shares which is prorated, as specified by
the Committee, in its sole discretion. For purposes of this Section 7.5, the
term "disability" shall be defined as such term is defined in Section 5.4(c)(i).
Payment of earned Performance Shares shall be made at a time specified by
the Committee in its sole discretion and set forth in the Agreement evidencing
such Award. Notwithstanding the foregoing, with respect to Performance Shares
that have been awarded with the intention of qualifying as "performance-based
compensation" under Section 162(m) of the Code to a Participant who retires
during a Performance Period, payment shall be made pursuant to such Performance
Share Award at the same time as payments are made to Participants who did not
terminate employment during the applicable Performance Period.
7.6 Termination of Employment for Other Reasons. In the event that a
Participant's employment terminates for any reason other than those reasons set
forth in Section 7.5 above, all Performance Shares shall be forfeited by the
Participant to the Company unless determined otherwise by the Committee, as set
forth in the Agreement evidencing such Award.
7.7 Non-Transferability. Except as otherwise provided in an Agreement
evidencing such Award of Performance Shares, Performance Shares may not be sold,
assigned, transferred, pledged or otherwise disposed of or encumbered, either
voluntarily or involuntarily, until such Performance Shares have fully vested.
Further, except as otherwise provided in an Agreement evidencing such Award of
Performance Shares, a Participant's rights under the Plan shall be exercisable
during the Participant's lifetime only by the Participant or the Participant's
legal representative.
8. INCENTIVE BONUSES.
8.1 Awards of Incentive Bonuses. The Committee shall have the
discretionary authority to designate Participants to whom Incentive Bonuses are
to be paid. Incentive Bonuses shall be determined exclusively by the Committee
pursuant to procedures established by the Committee; provided, however, that for
any fiscal year, no individual Participant may receive Incentive Bonuses
aggregating more than $5 million.
8.2 Terms and Conditions. The Committee, at the time an Incentive Bonus
is made, shall specify the terms and conditions that govern the granting
thereof. Such terms and conditions may include, by way of example and not
limitation, requirements that the Participant complete a specified period of
employment with the Company or a Subsidiary, or that the Company or Subsidiary
or the Participant attain stated objectives or goals as a prerequisite to
payment under an Incentive Bonus. The Committee, at the time the Incentive Bonus
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is granted shall also specify what amount shall be payable under the Incentive
Bonus and whether amounts shall be payable in the event of the Participant's
death, disability or retirement.
8.3 Settlement of Incentive Bonuses. Settlement of Incentive Bonuses is
subject to Section 10.
9. PERFORMANCE-BASED COMPENSATION.
9.1 Performance Measures. The Committee may designate whether an Award
being granted to any Participant is intended to be "performance-based
compensation" as that term is used in Section 162(m) of the Code. Any such
Awards designated by the Committee to be "performance-based compensation" shall
be conditioned on the achievement of one or more Performance Measures, to the
extent required by Code Section 162(m). The Performance Measures that may be
used by the Committee for such Awards shall be based on any one or more of the
following, as selected by the Committee:
(a) Earnings per share;
(b) Net income (before or after taxes);
(c) Return measures (including, but not limited to, return on assets,
capital, equity or sales);
(d) Earnings before or after taxes;
(e) Share price (including, but not limited to, growth measure and
total shareholder return);
(f) Gross revenues;
(g) Working capital measures; or
(h) Backlog.
For Awards under this Section 9 intended to be "performance-based compensation,"
(i) the grant of the Awards and the establishment of the Performance Measures
shall be made during the period required by Section 162(m) of the Code and (ii)
the Committee shall certify in writing that the Performance Measure has been
met. The Committee shall have the discretion to define the Performance Measures
on a corporation or subsidiary or business division basis or in comparison with
peer group performance.
9.2 Board Authority. In the event that applicable tax and/or securities
laws change to permit the Committee discretion to alter the governing
Performance Measures without obtaining shareholder approval of such changes, the
Board of Directors of the Company shall have the sole discretion to make changes
in the Performance Measures without shareholder approval.
10. SETTLEMENT OF AWARDS.
The obligation to make payments and distributions with respect to Awards
may be satisfied through cash payments, the delivery of shares of Common Stock,
the granting of replacement Awards, or combination thereof as the Committee
shall determine, in its sole discretion. Satisfaction of any such obligations
under an Award, which is sometimes referred to as "settlement" of the Award, may
be subject to such conditions, restrictions, and contingencies as the Committee
shall determine. The Committee may permit or require the deferral of any Award
payment, subject to such rules and procedures as it may establish, which may
include provisions for the payment or crediting of interest or dividend
equivalents. Each Subsidiary shall be liable for payment of cash due under the
Plan with respect to any Participant to the extent that such benefits are
attributable to the services rendered for that Subsidiary by the Participant.
Any disputes relating to liability of a Subsidiary for cash payments shall be
resolved by the Committee.
11. CONSULTANTS.
An Award made to a Consultant hereunder must be supported by bona fide
services actually rendered by the Company to the Consultant. However, in no
event shall an Award be made to a Consultant (i) for services
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rendered by the Consultant in connection with the offer or sale of securities in
a capital raising transaction or (ii) who directly or indirectly promotes or
maintains a market for the Company's securities.
12. GOVERNMENT REGULATIONS.
This Plan, the granting of Awards under this Plan and the issuance or
transfer of Shares (and/or the payment of money) pursuant thereto are subject to
all applicable federal and state laws, rules and regulations and to such
approvals by any regulatory or governmental agency (including without limitation
"no action" positions of the Commission) which may, in the opinion of counsel
for the Company, be necessary or advisable in connection therewith. Without
limiting the generality of the foregoing, no Awards may be granted under this
Plan, and no Shares shall be issued by the Company, pursuant to or in connection
with any such Award, unless and until, in each such case, all legal requirements
applicable to the issuance or payment have, in the opinion of counsel to the
Company, been complied with. In connection with any stock issuance or transfer,
the person acquiring the Shares shall, if requested by the Company, give
assurances satisfactory to counsel to the Company in respect of such matters as
the Company may deem desirable to assure compliance with all applicable legal
requirements. The Company shall not be required to deliver any Shares under the
Plan prior to (i) the admission of such Shares to listing or for quotation on
any stock exchange or automated quotation system on which Shares may then be
listed or quoted, and (ii) the completion and effectiveness of such registration
or other qualification of such Shares under any state or federal law, rule or
regulation, as the Committee shall determine to be necessary or advisable.
13. TAX WITHHOLDING.
The Company shall have the right to withhold from amounts due Participants,
or to collect from Participants directly, the amount which the Company deems
necessary to satisfy any taxes required by law to be withheld at any time by
reason of participation in the Plan, and the obligations of the Company under
the Plan shall be conditional on payment of such taxes. The Participant may,
prior to the due date of any taxes, pay such amounts to the Company in cash, or
with the consent of the Committee, in Shares (which shall be valued at their
Fair Market Value on the date of payment). There is no obligation under this
Plan that any Participant be advised of the existence of the tax or the amount
required to be withheld. Without limiting the generality of the foregoing, in
any case where it determines that a tax is or will be required to be withheld in
connection with the issuance or transfer or vesting of Shares under this Plan,
the Company may pursuant to such rules as the Committee may establish, reduce
the number of such Shares so issued or transferred by such number of Shares as
the Company may deem appropriate in its sole discretion to accomplish such
withholding or make such other arrangements as it deems satisfactory.
Notwithstanding any other provision of this Plan, the Committee may impose such
conditions on the payment of any withholding obligation as may be required to
satisfy applicable regulatory requirements, including, without limitation, Rule
16b-3 (or successor provision) promulgated by the Commission.
14. ADMINISTRATION OF PLAN.
14.1 The Committee. The Plan shall be administered by the Committee,
which shall be comprised of two or more members of the Board of Directors, each
of whom shall be a "Non-Employee Director" as defined in Rule 16b-3(b)(3) (or
any successor provision) promulgated by the Commission and each of whom shall
qualify as an "outside director" as defined in Section 162(m) of the Code.
14.2 Committee Action. A majority of the members of the Committee at the
time in office shall constitute a quorum for the transaction of business, and
any determination or action may be taken at a meeting by a majority vote or may
be taken without a meeting by a written resolution signed by all members of the
Committee. All decisions and determinations of the Committee shall be final,
conclusive and binding upon all Participants and upon all other persons claiming
any rights under the Plan with respect to any Award. Members of the Board of
Directors and members of the Committee acting under the Plan shall be fully
protected in relying in good faith upon the advice of counsel and shall incur no
liability except for willful misconduct in the performance of their duties.
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14.3 Committee Authority. In amplification of the Committee's powers and
duties, but not by way of limitation, the Committee shall have full authority
and power to:
(a) Construe and interpret the provisions of the Plan and establish,
amend and rescind rules and regulations relating to the Plan and to make
all other determinations that may be necessary or advisable for the
administration of the Plan not inconsistent with the Plan;
(b) Decide all questions of eligibility for Plan participation and for
the grant of Awards;
(c) Determine the types of Awards and the number of Shares covered by
the Awards, if any, to be granted to any Participant, to establish the
terms, conditions, Performance Measures, restrictions and other provisions
of such Awards, and (subject to the restrictions imposed by Section 17) to
cancel or suspend Awards;
(d) Adopt forms of agreements and other documents consistent with the
Plan;
(e) Engage agents to perform legal, accounting and other such
professional services as it may deem proper for administering the Plan; and
(f) Take such other actions as may be reasonably required or
appropriate to administer the Plan or to carry out the Committee activities
contemplated by other sections of this Plan.
14.4 Indemnification. In addition to such other rights of indemnification
as they may have as directors or as members of the Committee, the Board of
Directors and the members of the Committee shall be indemnified by the Company
against the reasonable expenses, including court costs and reasonable attorneys'
fees, actually incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan or any Award granted hereunder, and against all amounts
paid by them in settlement thereof or paid by them in satisfaction of a judgment
in any such action, suit or proceeding, except where such indemnification is
expressly prohibited by applicable law.
15. CHANGE OF CONTROL.
Subject to the provisions of Section 4.4 (relating to the adjustment of
Shares), or except as otherwise provided in the Agreement evidencing the Award,
upon the occurrence of a Change of Control:
(a) all outstanding Options (regardless of whether in tandem with
SARs) shall become fully exercisable,
(b) all outstanding SARs (regardless of whether in tandem with
Options) shall become fully exercisable,
(c) all Restricted Stock and Performance Shares shall become fully
vested, and
(d) All Incentive Bonuses that have been approved and accrued shall
become fully payable.
16. EFFECTIVE DATE AND SHAREHOLDER APPROVAL.
The Effective Date of the Plan shall be November 27, 2000 (the date the
Plan was approved by the Board of Directors) subject to receipt within one year
of such date the approval of the Plan by the holders of a majority of the total
voting power of the voting securities of the Company present in person or
represented by proxy at a meeting of shareholders at which the approval of such
Plan is considered.
17. AMENDMENT AND TERMINATION.
17.1 The Plan
(a) Amendment. The Board of Directors may amend the Plan from time to
time in its sole discretion unless the amendment would, pursuant to any
applicable federal, state or local law or pursuant to the rules of the
exchange upon which the Common Stock is then trading, require shareholder
approval,
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in which event such approval shall be obtained. However, no amendment shall
adversely affect the rights of any Participant under any Award theretofore
made under the Plan, without the Participant's consent.
(b) Termination. The Plan shall terminate automatically on the tenth
anniversary of the Effective Date, and the Board of Directors may suspend
or terminate the Plan at any earlier time. Upon termination of the Plan, no
additional Awards shall be granted under the Plan; provided, however, that
the terms of the Plan shall continue in full force and effect with respect
to outstanding Awards and Shares issued under the Plan.
17.2 Awards. Subject to the terms and conditions and the limitations of
the Plan, the Committee may in the exercise of its sole discretion modify,
extend or renew the terms of outstanding Awards granted under the Plan, or
accept the surrender of outstanding Awards (to the extent not theretofore
exercised). Notwithstanding the foregoing, however, no modification of an Award
shall, without the consent of the Participant, impair any rights or obligations
under any Awards theretofore granted under the Plan.
18. MISCELLANEOUS.
18.1 No Individual Rights. No person shall have any claim or right to be
granted an Award under the Plan, or having been selected as a Participant for
one Award, to be so selected again. Neither the establishment of the Plan nor
any amendments thereto, nor the granting of any Award under the Plan, shall be
construed as in any way modifying or affecting, or evidencing any intention or
understanding with respect to, the terms of the employment of any Participant
with the Company or any of its Subsidiaries.
18.2 Multiple Awards. Subject to the terms and restrictions set forth in
the Plan, a Participant may hold more than one Award.
18.3 Written Notice. As used herein, any notices required hereunder shall
be in writing and shall be given on the forms, if any, provided or specified by
the Committee. Written notice shall be effective upon actual receipt by the
person to whom such notice is to be given; provided, however, that in the case
of notices to Participants and their transferees, heirs, legatees and legal
representatives, notice shall be effective upon delivery if delivered personally
or three business days after mailing, registered first class postage prepaid to
the last known address of the person to whom notice is given. Written notice
shall be given to the Committee and the Company at the following address or such
other address as may be specified from time to time:
The Shaw Group Inc.
8545 United Plaza Boulevard
Baton Rouge, Louisiana 70809
Attention: Secretary
18.4 Unfunded Plan. The Plan shall be unfunded and shall not create (and
shall not be construed to create) a trust or a separate fund or funds. The Plan
shall not establish any fiduciary relationship between the Company and any
Participant. To the extent any person holds any obligation of the Company by an
Award granted under the Plan, such obligation shall merely constitute a general
unsecured liability of the Company and accordingly, shall not confer upon such
person any right, title or interest in any assets of the Company.
18.5 Applicable Law; Severability. The Plan shall be governed by and
construed in all respects in accordance with the laws of the State of Louisiana.
If any provision of the Plan shall be held by a court of competent jurisdiction
to be invalid or unenforceable, the remaining provisions of the Plan shall
continue to be fully effective.
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APPENDIX
THE SHAW GROUP INC.
AUDIT COMMITTEE
CHARTER
PURPOSE
The primary purpose of the Audit Committee (the "Committee") of The Shaw
Group Inc. (the "Company") is to assist the Board of Directors (the "Board") in
fulfilling its responsibility to oversee management's conduct of the Company's
financial reporting process, including by overviewing the integrity of financial
reports and other financial information provided by the Company to any
governmental or regulatory body, the public or other users thereof, the
Company's systems of internal accounting and financial controls, and the annual
independent audit of the Company's financial statements and the Company's legal
compliance and ethics programs as established by management and the Board.
In discharging its oversight role, the Committee is empowered to
investigate any matter brought to its attention with full access to all books,
records, facilities and personnel of the Company and the power to retain outside
counsel, auditors or consultants, or incur other expenses for this purpose. The
Board and the Committee are in place to represent the Company's shareholders;
accordingly, the outside auditor is ultimately accountable to the Board and the
Committee.
MEMBERSHIP
The Committee shall be comprised of not less than three members of the
Board, and the Committee's composition will meet the independence and experience
requirements of the Audit Committee Policy of the New York Stock Exchange.
Accordingly, all of the members will be directors:
1. Who have no relationship to the Company that may interfere with the
exercise of their independence from management and the Company; and
2. Who are financially literate or who become financially literate
within a reasonable period of time after appointment to the Committee. In
addition, at least one member of the Committee will have accounting or
related financial management expertise.
KEY RESPONSIBILITIES
The Committee's job is one of oversight and it recognizes that the
Company's management is responsible for preparing the Company's financial
statements and that the outside auditors are responsible for auditing those
financial statements. Additionally, the Committee recognizes that financial
management, including the internal audit staff, as well as the outside auditors,
have more time, knowledge and more detailed information on the Company than do
Committee members; consequently, in carrying out its oversight responsibilities,
the Committee is not providing any expert or special assurance as to the
Company's financial statements or any professional certification as to the
outside auditor's work.
The following functions shall be the common recurring activities of the
Committee in carrying out its oversight function. These functions are set forth
as a guide with the understanding that the Committee may diverge from this guide
as appropriate given the circumstances.
1. Review and reassess the adequacy of this Charter annually and
recommend any proposed changes to the Board for approval.
2. Review the annual audited financial statements with management,
including major issues regarding accounting and auditing principles and
practices as well as the adequacy of internal controls that could
significantly affect the Company's financial statements.
<PAGE> 44
3. Review any analysis prepared by management and the independent
auditor of significant financial reporting issues and judgments made in
connection with the preparation of the Company's financial statements.
4. Review with management and the independent auditor the Company's
quarterly financial statements prior to the filing of its Form 10-Q.
5. Meet periodically with management to review the Company's major
financial risk exposures and the steps management has taken to monitor and
control such exposures.
6. Review major changes to the Company's auditing and accounting
principles and practices as suggested by the independent auditor, internal
auditors or management.
7. Recommend to the Board the appointment of the independent auditor,
which firm is ultimately accountable to the Audit Committee and the Board.
8. Approve the fees to be paid to the independent auditor.
9. Receive periodic reports form the independent auditor regarding the
auditor's independence, discuss such reports with the auditor, and if so
determined by the Audit Committee, recommend that the Board take
appropriate action to satisfy itself of the independence of the auditor.
10. Evaluate together with the Board the performance of the
independent auditor and, if so determine by the Audit Committee, recommend
that the Board replace the independent auditor.
11. Review the appointment and replacement of the senior internal
auditing executive.
12. Review the significant reports to management prepared by the
internal auditing department and management's responses.
13. Meet with the independent auditor prior to the audit to review the
planning and staffing of the audit.
14. Obtain from the independent auditor assurance that Section 10A of
the Securities Exchange Act of 1934 has not been implicated.
15. Obtain reports from management, the Company's senior internal
auditing executive and the independent auditor that the Company's
subsidiary/foreign affiliated entities are in conformity with applicable
legal requirements and the Company's code of conduct.
16. Discuss with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the conduct
of the audit.
17. Review with the independent auditor any problems or difficulties
the auditor may have encountered and any management letter provided by the
auditor and the Company's response to that letter. Such review should
include:
a. Any difficulties encountered in the course of the audit work,
including any restrictions on the scope of activities or access to
required information.
b. Any changes required in the planned scope of the internal audit.
c. The internal audit department responsibilities, budget and
staffing.
18. Prepare the report required by the rules of the Securities and
Exchange Commission to be included in the Company's annual proxy statement.
19. Advise the Board with respect to the Company's policies and
procedures regarding compliance with applicable laws and regulations and
with the Company's code of conduct.
20. Review with the Company's General Counsel legal matters that my
have a material impact on the financial statements, the Company's
compliance policies and any material reports or inquiries received from
regulators or governmental agencies.
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21. Meet at least annually with the chief financial officer, the
senior internal auditing executive and the independent auditor in separate
executive sessions.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
This is the responsibility of management and the independent auditor. Nor is it
the duty of the Audit committee to conduct investigations, to resolve
disagreements, if any, between management and the independent auditor or to
assure compliance with laws and regulations and the Company's code of conduct.
Adopted this 29th day of March 2000.
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o FOLD AND DETACH HERE o
--------------------------------------------------------------------------------
THE SOLICITATION OF THIS PROXY IS MADE ON BEHALF OF THE BOARD OF
DIRECTORS
THE SHAW GROUP INC.
8545 UNITED PLAZA BOULEVARD o BATON ROUGE, LOUISIANA 70809
The undersigned hereby appoints J.M. Bernhard, Jr. and Robert L. Belk, and
each of them with full power of substitution, the attorney and proxy of
the undersigned to attend the Annual Meeting of Shareholders of THE SHAW
GROUP INC. to be held at The Radisson Hotel, 4728 Constitution Avenue,
Baton Rouge, Louisiana, at 9:00 a.m. on January 16, 2001, or any
postponement or adjournment thereof, and to vote all shares of common
stock held of record by the undersigned on December 5, 2000, with all
powers the undersigned would possess if present upon the following matters
and upon any other business that may properly come before the meeting or
any postponement or adjournment thereof. The Board of Directors recommends
a vote for the following items:
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed in this block [ ] WITHHOLD AUTHORITY
(except as marked to the contrary) to vote for all
nominees listed in
this block
NOMINEES: J.M. Bernhard, Jr., William H. Grigg, L. Lane Grigsby,
David W. Hoyle, Albert McAlister and John W. Sinders, Jr.
INSTRUCTION: To withhold authority to vote for any individual
nominee, write that nominee's name on the space provided below:
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2. To approve the adoption of The Shaw Group Inc. 2001 Employee
Incentive Compensation Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To approve an amendment to The Shaw Group Inc. 1996 Non-Employee
Director Stock Option Plan to increase by 50,000 shares the number
of shares of the Company's no par value common stock reserved for
issuance thereunder.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To approve an amendment to Article IV of the Restatement of the
Articles of Incorporation of the Company to increase the authorized
shares of the Company's no par value common stock from 50,000,000
shares to 200,000,000 shares and the number of authorized shares of
the Company's no par value preferred stock from 5,000,000 shares to
20,000,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
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THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS SPECIFIED HEREIN. IF NO
SPECIFICATION IS MADE, IT IS THE INTENTION OF THE PROXIES TO VOTE FOR
PROPOSALS 1, 2, 3, 4 AND 5.
Shareholders are requested to confirm to the Company how many of the
shares they own as of December 5, 2000 were beneficially owned on or
before December 5, 1996, entitling such shareholder to five votes per
share, and how many were acquired after December 5, 1996, entitling
such shareholder to one vote per share. IF NO CONFIRMATION OF
BENEFICIAL OWNERSHIP IS RECEIVED FROM A SHAREHOLDER AT LEAST THREE (3)
BUSINESS DAYS PRIOR TO THE ANNUAL MEETING, IT WILL BE DEEMED BY THE
COMPANY THAT BENEFICIAL OWNERSHIP OF ALL SHARES WAS EFFECTED AFTER
DECEMBER 5, 1996, AND THAT THE SHAREHOLDER WILL BE ENTITLED TO ONE
VOTE FOR EACH SHARE. If a shareholder provides incorrect information,
he or she may provide correct information at any time at least three
(3) business days prior to the Annual Meeting.
PLEASE MARK, SIGN, DATE AND RETURN
THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE
I PLAN TO ATTEND MEETING [ ]
Dated:
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Signature
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Signature if held jointly
INSTRUCTIONS: This proxy, signed
and dated, must be returned for
your shares to be represented at
the Annual Meeting. To vote, please
mark the appropriate box for each
proposal in blue or black ink, date
and sign this proxy exactly as your
name appear(s) hereon. If stock is
held jointly, signature should
include both names. Executors,
administrators, trustees, guardians
and others signing in a
representative capacity should give
their full title.
SEE REVERSE SIDE
