Document:

exv10w3

 

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

 Page 22 of 22exv10w4

 

Exhibit 10.4

THE SHAW GROUP INC.

2001 EMPLOYEE INCENTIVE COMPENSATION PLAN

(As amended and restated through April 6, 2006)

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) 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;

     (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

     (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.

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 9.5 million shares of
Common Stock. 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 9.5 million shares of Common Stock (as adjusted to
reflect a two-for-one Common Stock split distributed on December 15, 2000). 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

     (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, 2.0 million Shares (as adjusted to reflect a two-for-one Common Stock Split
distributed on December 15, 2000) (subject to further 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 ranted 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 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.

     (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 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 after April 6, 2006, a minimum Restriction Period of three (3) years provided that over
such three (3) year period, vesting of the Award may be in three (3) equal annual installments of
33 1⁄3% each, beginning one (1) year from the date of grant; provided, however, that such minimum
Restriction Period shall not apply to Restricted Stock Awards made in connection with a
Participant’s hiring by the Company or any of its Subsidiaries. Restricted Stock Awards made in
connection with a Participant’s hiring and not subject to the three-year minimum Restricted Period
shall not, in the aggregate, exceed five (5%) percent of the total number of Shares reserved for
issuance under the Plan.

     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, 300,000 Shares (subject to further
adjustment as provided in Section 4.4 of the Plan).

     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 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., 4171 Essen Lane, 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 50,000 Shares (as adjusted to
reflect a two-for-one Common Sock split distributed on December 15, 2000) (subject to further
adjustment as provided in Section 4.4 of the Plan) 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 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 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 1

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 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.

     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, provided that, unless the requisite approval of shareholders is obtained, no amendment
shall be made to the Plan if such amendment would (i) increase the number of Shares available for
issuance under the Plan or increase the limits applicable to Awards under the Plan, in each case,
except as provided in Section 4.4; (ii) lower the Exercise Price of an Option or SAR grant value
below 100% of the Fair Market Value of one Share on the date of the Award, except as provided in
Section 4.4; (iii) remove the repricing restriction set forth in Section 17.2; or (iv) require
shareholder approval pursuant to applicable federal, state or local law or under rules of the New
York Stock Exchange, if the Shares are then listed on such exchange. 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); provided, however, that the Committee shall not have the
authority to accept the surrender or cancellation of any Options and any SARs that relate to such
Options outstanding hereunder (to the extent not theretofore exercised) and grant new Options and
any SARs that relate to such new Options hereunder in substitution therefore (to the extent not
theretofore exercised) at an Exercise Price that is less than the Exercise Price of the Options
surrendered or canceled. The foregoing shall not limit any adjustments made under Section 4.4 of
the Plan. Notwithstanding the provisions of this Section 17.2, 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.

4171 Essen Lane

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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