Exhibit 10.3
EMPLOYMENT AGREEMENT
     This Employment Agreement (“Agreement”) is entered into effective as of
July 6, 2006 by and between The Shaw Group Inc., a Louisiana corporation
(collectively with the affiliates and subsidiaries hereinafter referred to as
“Company”), and G. Patrick Thompson (“Employee”).
     WHEREAS, the Company employs Employee and desires to continue such
employment relationship and Employee desires to continue such employment;
     NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties, and agreements contained herein, and for other valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties agree as follows:
     1. Employment. The Company continues to employ Employee, and Employee
hereby accepts continued employment by the Company, on the terms and conditions
set forth in this Agreement.
     2. Term of Employment. Subject to the provisions for earlier termination
provided in this Agreement, the term of this agreement (the “Term”) shall be two
(2) years commencing on the date hereof, and shall be automatically renewed on
each day following the date hereof so that on any given day the unexpired
portion of the Term of this Agreement shall be two (2) years. Notwithstanding
the foregoing provision, at any time after the date

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hereof the Company or Employee may give written notice to the other party that
the Term of this Agreement shall not be further renewed from and after a
subsequent date specified in such notice (the “fixed term date”), in which event
the Term of this Agreement shall become fixed and this Agreement shall terminate
on the third anniversary of the fixed term date.
     3. Employee’s Duties. During the Term of this Agreement, Employee shall
serve as Senior Vice President and Chief Administrative Officer of the Company,
and with such duties and responsibilities as may from time to time be assigned
to him by the Chief Executive Officer, President or Chief Financial Officer or
the board of directors of the Company (the “Board”), provided that such duties
are consistent with the customary duties of such position.
     Employee agrees to devote his full attention and time during normal
business hours to the business and affairs of the Company and to use reasonable
best efforts to perform faithfully and efficiently his duties and
responsibilities. Employee shall not, either directly or indirectly, enter into
any business or employment with or for any person, firm, association or
corporation other than the Company during the Term of this Agreement; provided,
however, that Employee shall not be prohibited from making financial investments
in any other company or business or from serving on the board of directors of
any other company. Employee shall at all times observe and comply with all
lawful directions and instructions of the Board.

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     4. Base Compensation. For services rendered by Employee under this
Agreement, the Company shall pay to Employee his current base salary as of the
date of this Agreement (“Base Compensation”), per annum payable in accordance
with the Company’s customary pay periods and subject to customary withholdings.
The amount of Base Compensation may be reviewed by the Board on an annual basis
as of the close of each fiscal year of the Company and may be increased as the
Board may deem appropriate. In the event the Board deems it appropriate to
increase Employee’s annual base salary, said increased amount shall thereafter
be the “Base Compensation”. Employee’s Base Compensation, as increased from time
to time, may not thereafter be decreased unless agreed to by Employee. Nothing
contained herein shall prevent the Board from paying additional compensation to
Employee in the form of bonuses or otherwise during the Term of this Agreement.
     5. Additional Benefits. In addition to the Base Compensation provided for
in Section 4 herein, Employee shall be entitled to the following:
     (a) Expenses. The Company shall, in accordance with any rules and policies
that it may establish from time to time for executive officers, reimburse
Employee for business expenses reasonably incurred in the performance of his
duties.
     (b) Reserved.

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     (c) Vacation. Employee shall be entitled to three (3) weeks of vacation per
year, without any loss of compensation or benefits. Employee shall be entitled
to carry forward any unused vacation time.
     (d) General Benefits. Employee shall be entitled to participate in the
various employee benefit plans or programs provided to the employees of the
company in general, including but not limited to, health, dental, disability,
401K and life insurance plans, subject to the eligibility requirements with
respect to each of such benefit plans or programs, and such other benefits or
perquisites as may be approved by the Board during the Term of this Agreement.
Nothing in this paragraph shall be deemed to prohibit the Company from making
any changes in any of the plans, programs or benefits described in this
Section 5, provided the change similarly affects all executive officers of the
Company similarly situated.
     (e) Options. Upon the resignation for Good Reason as defined in Section 7
(e), discharge as defined in Section 7 (c) (i), or disability as defined in
Section 7 (d), Employee shall be considered as immediately and totally vested in
any and all stock options, restricted stock and other similar awards previously
made to Employee by the Company or its subsidiaries under a “Long Term

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Incentive Plan” duly adopted by the Board (such options or similar awards are
hereinafter collectively referred to as “Options”). In the event that the
Options become vested under this paragraph, employee will be allowed not less
than one year from the date of such vesting in which to exercise such options.
     6. Confidential Information. Employee, during the Term, may have access to
and become familiar with confidential information, secrets and proprietary
information concerning the business and affairs of the Company. As to such
confidential information, Employee agrees as follows:
     (a) During the employment of Employee with the Company and thereafter
Employee will not, either directly or indirectly, disclose to any third party
without the written permission of the Company, nor use in any way (except as
required in the course of his employment with the Company) any confidential
information, secret or proprietary information of the Company. In the event of a
breach or threatened breach of the provisions of this Section 6 (a), the Company
shall be entitled, in addition to any other remedies available to the Company,
to an injunction restraining Employee from disclosing such confidential
information.
     (b) Upon termination of employment of Employee, for whatever reason,
Employee shall surrender to the Company any

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and all documents, manuals, correspondence, reports, records and similar items
then or thereafter coming into the possession of Employee which contain any
confidential, secret or proprietary information of the Company.
     7. Termination This Agreement may be terminated prior to the end of its
Term as set forth below:
     (a) Resignation (other than for Good Reason). Employee may resign,
including by reason of retirement, his position at any time by providing written
notice of resignation to the Company in accordance with Section 11 hereof. In
the event of such resignation, except in the case of resignation for Good Reason
(as defined below), this Agreement shall terminate and Employee shall not be
entitled to further compensation pursuant to this Agreement other than the
payment of any unpaid Base Compensation accrued hereunder as of the date of
Employee’s resignation.
     (b) Death. If Employee’s employment is terminated due to his death, one
(1) year of Employee’s Base Compensation shall be paid by the Company in lump
sum in cash within thirty (30) days after Employee’s death to Employee’s
surviving spouse or estate, and one (1) year of paid group health and dental
insurance benefits shall be provided by the Company to Employee’s surviving
spouse

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and the minor children, and after said payments and provision of insurance
benefits, this Agreement shall terminate and the Company shall have no
obligations to Employee or his legal representatives with respect to this
Agreement other than the payment of any unpaid Base Compensation previously
accrued hereunder. In addition, Employee shall be considered as immediately and
totally vested in any and all Options previously made to Employee by Company or
its subsidiaries. This provision shall not be exclusive, and shall be in
adddition to death benefits payable by the Company or Insurer under any plan.
     (c) Discharge.
     (i) The Company may terminate Employee’s employment for any reason at any
time upon written notice thereof delivered to Employee in accordance with
Section 11 hereof. In the event that Employee’s employment is terminated during
the Term by the Company for any reason other than his Misconduct or Disability
(both as defined below), then (A) the Company shall pay in lump sum in cash to
Employee, within fifteen (15) days following the date of termination, an amount
equal to the product of (i) Employee’s Base Compensation as in effect
immediately prior to Employee’s termination, multiplied by (ii) the

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Remaining Term, (B) for the Remaining Term, the Company, at its cost, shall
provide or arrange to provide Employee (and, as applicable, Employee’s
dependents) with disability, accident and group health insurance benefits
substantially similar to those which Employee (and Employee’s dependents) were
receiving immediately prior to Employee’s termination; however, the welfare
benefits otherwise receivable by Employee pursuant to this clause (B) shall be
reduced to the extent comparable welfare benefits are actually received by
Employee (and/or Employee’s dependents) during such period under any other
employer’s welfare plan(s) or program(s) , with Employee being obligated to
promptly disclose to the Company any such comparable welfare benefits, (C) in
addition to the aforementioned compensation and benefits, the Company shall pay
in lump sum in cash to Employee within fifteen (15) days following the date of
termination an amount equal to the product of (i) Employee’s highest bonus paid
by the Company during the most recent two (2) years immediately prior to the
Date of Termination, multiplied by (ii) the Remaining Term, and (D) Employee
shall be considered as immediately and totally

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vested in any and all Options previously made to Employee by Company or its
subsidiaries.
     (ii) Notwithstanding the foregoing provisions of this Section 7, in the
event Employee is terminated because of Misconduct, the Company shall have no
obligations pursuant to this Agreement after the Date of Termination other than
the payment of any unpaid Base Compensation accrued through the Date of
Termination. As used herein, “Misconduct” means (a) the continued failure by
Employee to substantially perform his duties with the Company (other than any
such failure resulting from Employee’s incapacity due to physical or mental
illness or any such actual or anticipated failure after the issuance of a Notice
of Termination by Employee for Good Reason), after a written demand for
substantial performance is delivered to Employee by the Board, which demand
specifically identifies the manner in which the Board believes that Employee has
not substantially performed his duties, (b) the-engaging by Employee in conduct
which is demonstrably and materially injurious to the Company, monetarily or
otherwise (other than such conduct resulting from Employee’s incapacity due to
physical or mental illness or any such actual or

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anticipated conduct after the issuance of a Notice of Termination by Employee
for Good Reason), or (c) Employee’s conviction for the commission of a felony.
Anything contained in this Agreement to the contrary notwithstanding, the Chief
Executive officer of the Company shall have the sole power and authority to
terminate the employment of Employee on behalf of the Company.
     (d) Disability. If Employee shall have been absent from the full-time
performance of Employee’s duties with the Company for ninety (90) consecutive
calendar days as a result of Employee’s incapacity due to physical or mental
illness, Employee’s employment may be terminated by the Company for “Disability”
and Employee shall not be entitled to further compensation pursuant to this
Agreement, except that Employee shall (1) be paid monthly (but only for up to a
twelve (12) month period beginning with the Date of Termination) the amount by
which Employee’s monthly Base Compensation exceeds the monthly benefit received
by Employee pursuant to any disability insurance covering Employee; (2) continue
to receive paid group health and dental insurance benefits for Employee and his
dependents for up to twelve (12) month period beginning with Date of
Termination; and (3) be considered as immediately and totally vested in any and
all

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Options previously granted to Employee by Company or its subsidiaries.
     (e) Resignation for Good Reason. Employee shall be entitled to terminate
his employment for Good Reason as defined herein. If Employee terminates his
employment for Good Reason he shall be entitled to the compensation and benefits
provided in Paragraph 7 (c) (i) hereof. “Good Reason” shall mean the occurrence
of any of the following circumstances without Employee’s express written consent
unless such breach or circumstances are fully corrected prior to the Date of
Termination specified in the Notice of Termination given in respect hereof:
     (1) the material breach of any of the Company’s obligations under this
Agreement without Employee’s express written consent,
     (2) the continued assignment to Employee of any duties inconsistent with
his position;
     (3) the failure by the Company to pay to Employee any portion of Employee’s
compensation on the date such compensation is due;
     (4) the failure by the Company to continue to provide Employee with
benefits substantially similar to those enjoyed by other executive officers who
have entered into similar

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employment agreements with Employer under any of the Company’s medical, health,
accident, and/or disability plans in which Employee was participating
immediately prior to such time; or
     In addition, the occurrence of any Corporate Change (as defined below),
shall constitute “Good Reason” hereunder, but only if Employee gives notice of
his intent to terminates his employment within ninety (90) days following the
effective date of such Corporate Change.
     A “Corporate Change” shall occur if (i) the Company shall not be the
surviving entity in any merger or consolidation (or survives only as a
subsidiary of another entity), (ii) the Company sells all or substantially all
of its assets to any other person or entity (other than a wholly-owned
subsidiary), and in either event Employee is not retained in his current or
comparable position, (iii) the Company is to be dissolved and liquidated,
(iv) when any “person” as defined in Section 3(a)(9) of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), and as used in Sections 13 (d) and
14 (d) thereof, including a “group” as defined in Section 13 (d) of the Exchange
Act but excluding any 10% or larger shareholder of record of the Company as of
January 10, 2004, directly or indirectly, becomes the “beneficial owner” (as
defined in

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Rule 13d-3 under the Exchange Act, as amended from time to time), 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 the directors of the Company; or (v) as a result of or in
connection with a contested election the members of the Board as of the date of
this Agreement shall cease to constitute a majority of the Board. “Contested” as
used herein shall not include election by a majority of the current Board.
     (f) Notice of Termination. Any purported termination of Employee’s
employment by the Company under Sections 7(c)(ii) or 7(d), or by Employee under
Section 7(e), shall be communicated by written Notice of Termination to the
other party hereto in accordance with Section 11 hereof. For purposes of this
Agreement, a “Notice of Termination” shall mean a notice which, if by the
Company and is for Misconduct or Disability, shall set forth in reasonable
detail the reason for such termination of Employee’s employment, or in the case
of resignation by Employee for Good Reason, said notice must specify in
reasonable detail the basis for such resignation. A Notice of Termination given
by Employee pursuant to Section 7(e) shall be effective even if given after the
receipt by Employee of notice that the Board has set a meeting to

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consider terminating Employee for Misconduct. Any purported termination for
which a Notice of Termination is required which is not effected pursuant to this
Section 7(f) shall not be effective.
     (g) Date of Termination, Etc. “Date of Termination” shall mean the date
specified in the Notice of Termination, provided that the Date of Termination
shall be at least 15 days following the date the Notice of Termination is given.
Notwithstanding the foregoing, in the event Employee is terminated for
Misconduct, the Company may refuse to allow Employee access to the Company’s
offices (other than to allow Employee to collect his personal belongings under
the Company’s supervision) prior to the Date of Termination.
     (h) Mitigation. Employee shall not be required to mitigate the amount of
any payment provided for in this Section 7 by seeking other employment or
otherwise, nor shall the amount of any payment provided for in this Agreement be
reduced by any compensation earned by Employee as a result of employment by
another employer, except that any severance amounts payable to Employee pursuant
to the Company’s severance plan or policy for employees in general shall reduce
the amount otherwise payable pursuant to Sections 7(c)(i) or 7(e).
     (i) Excess Parachute Payments. Notwithstanding anything in this Agreement
to the contrary, to the extent that any

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payment or benefit received or to be received by Employee hereunder in
connection with the termination of Employee’s employment would, as determined by
tax counsel selected by the Company, constitute an “Excess Parachute Payment”
(as defined in Section 280G of the Internal Revenue Code), the Company shall
fully “gross-up” such payment so that Employee is in the same “net” after-tax
position he would have been if such payment and gross-up payments had not
constituted Excess Parachute Payments.
     8. Non-Compete.
     8.1 No Other Activities. Employee agrees that during the term of this
Agreement, he shall not, directly or indirectly, represent or otherwise engage
in or participate in, the business or ventures of any person, firm, partnership,
association, or corporation other than the Company, without first obtaining the
written consent of the Company. Employee further agrees that during the term of
this Agreement, he shall not, directly or indirectly, solicit or attempt to
solicit any products or agreements for the purpose of using the products or
agreements in the formation of a business outside of the Company, regardless of
whether any such products or the subject of such agreements are then being
handled by the Company.
     8.2 Non-Disclosure. Employee further agrees that he will not, during or
after the term of his employment, disclose to any person, firm, partnership,

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association, or corporation, the names and addresses of any past or present
customers, or prospective customers, of the Company, any of their methods or
practices of obtaining business, their trade secrets, consultant contracts and
the details thereof, their pricing policies, their operational methods, their
marketing plans or strategies, their business acquisition plans and all other
information pertaining to the business of the Company that is not publicly
available. Employee agrees to keep all information gained as a result of his
relationship with the Company on a confidential basis and shall not disclose
that information to anyone not authorized by the Company to receive information.
If Employee should cease, either voluntarily or involuntarily, to be an employee
of the Company, he hereby expressly agrees that, for a period of two (2) years
following termination of his employment, he shall not assist any competitor or
prospective competitor located in the territories serviced by the Company (as
set forth in Attachment 1 or otherwise) during his employment in any way
detrimental to the Company through the use of any information gained as a result
of his employment with the Company. Employee agrees that all computer programs,
print-outs, customer lists, methods, forms, systems and procedures used by the
Company constitute the exclusive property and will remain the exclusive property
of the Company and agrees that he will not disclose any of these matters without
the prior written permission of the Company.

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     8.3 Non-Solicitation, etc. In further consideration of the other terms and
provisions of this Agreement, and to protect the vital interests of the Company,
upon termination of his employment for any reason, for a period of two (2) years
after the termination of his employment, Employee agrees and binds himself that
he shall not, directly or indirectly, or as a member, shareholder, officer,
director, consultant or employee of any other person or entity, compete with the
Company or own, manage, operate, join, control or participate in the ownership,
management, operation, or control of, or become employed by, consult or advise,
or be connected in any manner with any business or activity which is in actual,
direct or indirect competition or anticipated competition with the Company,
within those counties, parishes, municipalities or other places listed in
Attachment 1 annexed hereto and made a part hereof, so long as the Company, or
carries on the business presently conducted by the Company,. Not by way of
limitation or exclusion, Employee shall not, within the aforesaid locations and
during the aforesaid time period, call upon, solicit, advise or otherwise do, or
attempt to do, business with any customers or distributors of the Company, with
whom the Company had any dealings during the period of Employee’s employment
hereunder or take away or interfere or attempt to interfere with any custom,
trade, business or patronage of the Company, or interfere with or attempt to
interfere with any officers, employees, distributors, representatives or agents
of the Company, or employ or induce or attempt to induce any of them to leave
the employ of the

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Company or violate the terms of their contracts, or any employment arrangements,
with the Company. Employee acknowledges and agrees that any breach of the
foregoing covenant not to compete would cause irreparable injury to the Company
and that the amount of injury would be impossible or difficult to fully
ascertain. Employee agrees that the Company shall, therefore, be entitled to
obtain an injunction restraining any violation, further violation or threatened
violation of the covenant not to compete hereinabove set forth, in addition to
any other remedies that the Company may pursue.
     8.4 Duration. If the two (2) year period referred to in any of this
Article 8 shall be finally determined by a court to exceed the maximum period
which is permissible by applicable law, the said period shall be reduced to the
maximum period permitted by such law.
     9. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit Employee’s continuing or future participation in any benefit, bonus,
incentive, or other plan or program provided by the Company or any of its
affiliated companies and for which Employee may qualify, nor shall anything
herein limit or otherwise adversely affect such rights as Employee may have
under any Options with the Company or any of its affiliated companies.
     10. Assignability. The obligations of Employee hereunder are personal and
may not be assigned or delegated by him or transferred in any manner whatsoever,
nor are such obligations subject to involuntary alienation, assignment or
transfer. The Company shall have the right to assign this

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Agreement and to delegate all rights, duties and obligations hereunder, either
in whole or in part, to any parent, affiliate, successor or subsidiary
organization or company of the Company, so long as the obligations of the
Company under this Agreement remain the obligations of the Company.
     11. Notice. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
Company at its principal office address, directed to the attention of the Board
with a copy to the Secretary of the Company, and to Employee at Employee’s
residence address on the records of the Company or to such other address as
either party may have furnished to the other in writing in accordance herewith
except that notice of change of address shall be effective only upon receipt.
     12. Validity. The invalidity or unenforcability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
     13. Successors; Binding Agreement.
     (a) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the

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Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle
Employee to compensation from the Company in the same amount and on the same
terms as he would be entitled to hereunder if he terminated his employment for
Good Reason, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date of
Termination. As used herein, the term “Company” shall include any successor to
its business and/or assets as aforesaid which executes and delivers the
Agreement provided for in this Section 13 or which otherwise becomes bound by
all terms and provisions of this Agreement by operation of law.
     (b) This Agreement and all rights of Employee hereunder shall inure to the
benefit of and be enforceable by Employee’s personal or legal representatives,
executors, administrators, successors, heirs distributees, devisees and
legatees. if Employee should die while any amounts would be payable to him
hereunder if he had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this

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Agreement to Employee’s devisee, legatee, or other designee or, if there be no
such designee, to Employee’s estate.
     14. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by Employee and such officer as may be specifically
authorized by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or in compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. This Agreement is an integration of the parties
agreement; no agreement or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party, except those which are set forth expressly in this Agreement. THE
VALIDITY, INTERPRETATION, CONSTRUCTION AND PERFORMANCE OF THIS AGREEMENT SHALL
BE GOVERNED BY THE LAWS OF THE STATE OF LOUISIANA.
     15. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to ‘be an original but all of which
together will constitute one and the same instrument.
     16. Arbitration. Either party may elect that any dispute or controversy
arising under or in connection with this Agreement be settled by arbitration in
Baton Rouge, Louisiana in accordance with the rules of the American

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Arbitration Association then in effect. If the parties cannot mutually agree on
an arbitrator, then the arbitration shall be conducted by a three arbitrator
panel, with each party selecting one arbitrator and the two arbitrators so
selected selecting a third arbitrator. The findings of the arbitrator(s) shall
be final and binding, and judgment may be entered thereon in any court having
Jurisdiction. The findings of the arbitrator(s) shall not be subject to appeal
to any court, except as otherwise provided by applicable law. The arbitrator(s)
may, in his or her (or their) own discretion, award legal fees and costs to the
prevailing party.
     IN WITNESS WHEREOF, the parties have executed this Agreement on July 7,
2006, effective for all purposes as provided above.

                  THE SHAW GROUP INC.    
 
           
 
  By :   Gary P. Graphia    
 
  Name:   /s/ Gary P. Graphia    
 
           
EMPLOYEE:
  Title:   Secretary and General Counsel    

Name: /s/ G. Patrick Thompson
           G. Patrick Thompson

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