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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
GULF ISLAND FABRICATION, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
[GULF ISLAND LOGO APPEARS HERE]
GULF ISLAND FABRICATION, INC.
583 THOMPSON ROAD
HOUMA, LOUISIANA 70363
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 24, 2002
----------------
TO THE SHAREHOLDERS OF GULF ISLAND FABRICATION, INC.:
The annual meeting of shareholders of Gulf Island Fabrication, Inc. (the
"Company") will be held at 10:00 a.m., local time, on Wednesday, April 24,
2002 at the office of the corporation, 583 Thompson Road, Houma, Louisiana for
the following purposes, more fully described in the accompanying proxy
statement:
1. To elect two Class II directors.
2. To approve a proposal to adopt the 2002 Long-Term Incentive Plan of Gulf
Island Fabrication, Inc.
3. To ratify the appointment of Ernst & Young LLP as the independent
auditors to audit the financial statements of the Company and its
subsidiaries for the year 2002.
4. To transact such other business as may properly come before the meeting
and any adjournments thereof.
The Board of Directors has fixed the close of business on March 8, 2002 as
the record date for the determination of shareholders entitled to notice of
and to vote at the annual meeting and all adjournments thereof.
Your vote is important regardless of the number of shares you own. Whether
or not you plan to attend the annual meeting, please mark, date and sign the
enclosed proxy card and return it promptly in the enclosed stamped envelope.
Furnishing the enclosed proxy will not prevent you from voting in person at
the annual meeting should you wish to do so.
By Order of the Board of Directors
/s/ Valarae L. Bates
VALARAE L. BATES
Secretary
Houma, Louisiana
March 22, 2002
GULF ISLAND FABRICATION, INC.
583 THOMPSON ROAD
HOUMA, LOUISIANA 70363
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 24, 2002
This Proxy Statement is furnished to shareholders of Gulf Island
Fabrication, Inc. (the "Company") in connection with the solicitation of
proxies on behalf of the Company's Board of Directors for use at its annual
meeting of shareholders to be held at the date, time and place set forth in
the accompanying notice and at any adjournment thereof (the "Meeting"). The
date of this Proxy Statement is March 22, 2002.
On March 8, 2002, the record date for determining shareholders entitled to
notice of and to vote at the Meeting, the Company had outstanding 11,708,844
shares of common stock ("Company Stock"), each of which is entitled to one
vote on all matters to be considered at the Meeting.
Shares represented by all properly executed proxies on the enclosed form
received in time for the Meeting will be voted at the Meeting. A proxy may be
revoked at any time before it is exercised by filing with the Secretary of the
Company an instrument revoking it or a duly executed proxy bearing a later
date, or by attending the Meeting and voting in person. Unless revoked, the
proxy will be voted as specified and, if no specifications are made, will be
voted in favor of the proposed nominees, for the adoption of the 2002 Long-
Term Incentive Plan and for the ratification of the appointment of auditors as
described herein.
The cost of soliciting proxies in the enclosed form will be borne by the
Company. In addition to the use of the mails, proxies may be solicited by
personal interview, telephone, telefax and telegraph. Banks, brokerage houses
and other institutions, nominees and fiduciaries will be requested to forward
solicitation materials to the beneficial owners of the shares of Common Stock
of the Company; upon request, the Company will reimburse such persons for
reasonable out-of-pocket expenses incurred in connection therewith.
ELECTION OF DIRECTORS
The Company's Amended and Restated Articles of Incorporation provide for a
Board of Directors consisting of three classes, with the number of directors
to be set forth in the By-laws. The By-laws provide for a Board of Directors
of seven persons. The term of office of the Class II directors will expire at
the Meeting, and the persons listed as the Class II nominees in the table
below will be nominated for election to the Board of Directors for a term
expiring in 2005. The term of office of the Class III directors will expire at
the 2003 annual meeting. The term of office of the Class I directors will
expire at the 2004 annual meeting.
The Board of Directors has nominated two candidates for election at the
Meeting and recommends that shareholders vote FOR the election of the
nominees. Proxies cannot be voted for more than two candidates. In the absence
of contrary instructions, the proxy holders will vote for the election of the
two nominees listed below. In the unanticipated event that either nominee is
unavailable as a candidate for director, the persons named in the accompanying
proxy will vote for a substitute candidate nominated by the Board of
Directors.
The following table sets forth as of March 1, 2002, for each nominee, each
other director of the Company whose term will continue after the Meeting and
each of the executive officers of the Company, the age, positions with the
Company, and principal occupations and employment during the past five years
of each such person, any family relationships among such persons, and, if a
nominee or a director, each person's directorships in other public
corporations and the year that he was first elected a director of the Company
or its predecessor. All executive officers serve at the pleasure of the Board
of Directors of the Company.
Positions with the Company, Principal
Occupations,
Directorships in Other Public Director
Name and Age Corporations, and Family Relationships Since
------------ -------------------------------------- --------
Nominees for Election as Class II Directors (for term expiring in
2005)
Gregory J. Cotter, 53 Director and financial advisor to the 1985
Company. Director, President and Chief
Operating and Financial Officer of
Huey Wilson Interests, Inc., a
financial and business management
company. Chief Financial Officer of
Wilson Jewelers, Inc., a jewelry
merchandiser, until 2001.
John P. ("Jack") Laborde, 52 Director of the Company. President and 1997
Chief Executive Officer of All Aboard
Development Corporation ("All
Aboard"), an independent oil and gas
exploration and production company,
since 1996. Consultant to the Company
from April 1996 to December 1996 and
International Marketing Manager of the
Company from April 1992 to March 1996.
Son of Alden J. Laborde.
Continuing Class III Directors (term expires in 2003)
Kerry J. Chauvin, 54 Chairman of the Board since April 1985
2001, President and Chief Executive
Officer of the Company.
Alden J. ("Doc") Laborde, 86 Director of the Company, held the 1985
position of Chairman of the Board of
the Company from 1985 to April 2001.
Father of John P. Laborde.
Huey J. Wilson, 73 Director of the Company. Chairman of 1997
the Board and Chief Executive Officer
of Huey Wilson Interests. Chairman of
the Board and Chief Executive Officer
of Wilson Jewelers, Inc. until 2001.
Continuing Class I Directors (term expires in 2004)
Thomas E. Fairley, 53 Director of the Company. Director, 1997
President and Chief Executive Officer
of Trico Marine Services, Inc., a
marine vessel operator.
Hugh J. Kelly, 76 Director of the Company. Consultant to 1997
the oil and gas industry.
Executive Officers not Serving as Directors
Murphy A. Bourke, 57 Executive Vice President--Marketing of N/A
the Company. Vice President--Marketing
of the Company until December 1999.
Kirk J. Meche, 39 Executive Vice President--Operations N/A
of the Company. President of Gulf
Island, L.L.C., a wholly-owned
fabrication subsidiary of the Company
since February 2001. President of
Southport, Inc., a wholly-owned
subsidiary of the Company, from
December 1999 to February 2001. Vice
President of Operations for Southport,
Inc. from February 1999 to December
1999. From 1996 to December 1999, a
project manager for the Company.
Joseph P. Gallagher, III, 51 Vice President--Finance, Chief N/A
Financial Officer, and Treasurer of
the Company.
During 2001, the Board of Directors of the Company held six meetings. The
Board of Directors has an Audit Committee (the "Audit Committee"), of which
Messrs. Cotter, Chairman, Fairley, and Kelly are members, and a Compensation
Committee (the "Compensation Committee"), of which Messrs. Wilson, Chairman,
Cotter, Alden J. Laborde, and John P. Laborde, are members. The Board of
Directors does not have a Nominating Committee. The Audit Committee, which met
twice during 2001, reviews the Company's annual audit and meets with the
Company's independent auditors to review the Company's internal controls and
financial management practices. The Compensation Committee, which met twice
during 2001, recommends to the Board of Directors compensation for the
Company's key employees, administers the Company's stock
2
incentive plans, and performs such other functions as may be prescribed by the
Board of Directors. The composition of Board committees is reviewed and re-
determined each year at the initial meeting of the Board after the annual
meeting of shareholders. During 2001, each of the present directors attended
at least 75% of the aggregate of the total meetings of the Board and the total
number of meetings held by all committees of the Board on which he served
during the periods of his Board membership and committee service.
In 2001, each non-employee director received an annual fee of $15,000 for
his services as a director and an attendance fee of $1,200 for each Board or
committee meeting. All directors are reimbursed for reasonable out-of-pocket
expenses incurred in attending Board and committee meetings.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers, controller, and beneficial owners of more than
10% of the Common Stock to file certain beneficial ownership reports with the
Securities and Exchange Commission ("SEC"). All reports due in 2001 were
timely filed.
3
STOCK OWNERSHIP
The following table sets forth, as of March 1, 2002, certain information
regarding beneficial ownership of Company Common Stock by (i) each director of
the Company, (ii) each executive officer of the Company, (iii) all directors
and executive officers of the Company as a group, and (iv) each other
shareholder known by the Company to be the beneficial owner of more than 5% of
the outstanding Common Stock. Unless otherwise indicated, the Company believes
that the shareholders listed below have sole investment and voting power with
respect to their shares based on information furnished to the Company by such
shareholders.
Number of Percent of
Shares Outstanding
Beneficially Common
Name of Beneficial Owner Owned (1) Stock
------------------------ ------------ -----------
Murphy A. Bourke.................................. 51,800 *
Kerry J. Chauvin.................................. 184,000 1.6%
Gregory J. Cotter................................. 5,000(2) *
Thomas E. Fairley................................. 10,000 *
Joseph P. Gallagher, III.......................... 65,400 *
Hugh J. Kelly..................................... 4,000 *
Alden J. Laborde (3).............................. 1,572,000(4) 13.4%
John P. Laborde (5)............................... 83,100(6) *
Kirk J. Meche..................................... 14,468 *
Huey J. Wilson (7)................................ 2,205,000(8) 18.8%
All directors and executive officers as a group
(10 persons)..................................... 4,194,768 35.2%
New South Capital Management, Inc. (9)............ 1,126,634(10) 9.6%
St. Denis J. Villere & Company (11)............... 648,000(12) 5.5%
J.P. Morgan Chase & Co. (13)...................... 612,634(14) 5.2%
- --------
* Less than one percent.
(1) Includes shares that could be acquired within sixty days after March 1,
2002 upon the exercise of options granted pursuant to the Company stock
option plan, as follows: Mr. Bourke, 29,600 shares; Mr. Chauvin, 117,000
shares; Mr. Gallagher, 40,400 shares; Mr. Meche, 13,340 shares; all
directors and executive officers as a group, 200,340 shares.
(2) Does not include any of the shares referred to in note (8) below.
(3) The address of Mr. Laborde is 400 Poydras Street, Suite 1560, New Orleans,
Louisiana 70130.
(4) Mr. Laborde has sole voting and dispositive power and beneficial ownership
with respect to 27,300 shares. Mr. Laborde shares the voting and
dispositive power on 1,544,700 shares, of which 1,524,700 are held
directly by Starboard Enterprises, L.L.C. ("Starboard") and 20,000 shares
are held by All Aboard Development Corporation ("All Aboard"), the
majority of the equity interest of which are held by Mr. Laborde. The
address of each of Starboard and All Aboard is 400 Poydras Street, Suite
1560, New Orleans, LA 70130.
(5) Mr. Laborde owns .2% and .1%, respectively, of Starboard and All Aboard
referenced in Note (4) above.
(6) Includes 51,000 shares owned by Mr. Laborde's two children.
(7) The address of Mr. Wilson is 3636 South Sherwood Forest Boulevard, Suite
650, Baton Rouge, Louisiana 70816.
(8) Includes 135,000 shares held by a charitable foundation of which Messrs.
Cotter and Wilson are trustees. Messrs. Cotter and Wilson disclaim
beneficial ownership of these shares.
(9) The address of New South Capital Management, Inc. is 1000 Ridgeway Loop
Road, Suite 233, Memphis, Tennessee 38120.
4
(10) Based on such holder's Schedule 13G/A filed with the SEC on February 14,
2002, New South Capital Management, Inc. has sole power to vote 872,734
shares, sole power to dispose or direct the disposition of 1,087,634
shares and shared power to dispose or direct the disposition of 39,000
shares.
(11) The address of St. Denis J. Villere & Company is 210 Baronne Street,
Suite 808, New Orleans, LA 70112-1727.
(12) Based on such holder's Schedule 13G filed with the SEC on February 1,
2002, St. Denis J. Villere & Company has sole power to vote and sole
power to dispose or direct the disposition of 49,900 shares, and shared
power to vote and shared power to dispose or direct the disposition of
598,100 shares.
(13) The address of J.P. Morgan Chase & Co. is 270 Park Avenue, New York, NY
10017.
(14) Based on such holder's Schedule 13G filed with the SEC on February 14,
2002, J.P. Morgan Chase & Co. has sole power to vote 563,894 shares, sole
power to dispose or direct the disposition of 477,634 shares and shared
power to dispose or direct the disposition of 135,000 shares.
5
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid in 2001, 2000, and
1999 by the Company to its Chief Executive Officer and each of its most highly
compensated executive officers whose salary and bonus exceeded $100,000 for
2001 (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Awards
------------
Annual
Compensation Securities
----------------- Underlying All Other
Name and Principal Position Year Salary Bonus(1) Options (#) Compensation(2)
--------------------------- ---- -------- -------- ------------ ---------------
Kerry J. Chauvin............ 2001 $301,951 $118,051 20,000 $7,636
Chairman of the Board, 2000 262,882 69,839 50,000 6,868
President and Chief
Executive Officer 1999 259,448 35,037 15,000 6,985
Kirk J. Meche............... 2001 $138,846 $ 46,294 10,000 $7,325
Executive Vice President--
Operations, 2000 86,586 8,901 17,500 3,748
President Gulf Island,
L.L.C. 1999 81,080 4,495 8,000 3,571
(fabrication subsidiary)
Murphy A. Bourke............ 2001 $160,335 $ 49,766 10,000 $7,635
Executive Vice President-- 2000 138,202 29,442 23,000 6,092
Marketing 1999 137,396 14,808 6,000 6,985
Joseph P. Gallagher, III.... 2001 $145,296 $ 47,452 10,000 $7,568
Vice President--Finance,
Chief Financial Officer 2000 131,338 28,073 23,000 5,771
and Treasurer 1999 129,572 13,962 6,000 6,985
- --------
(1) For 2001, the Company's executive officers were paid bonuses equal to a
specified percentage of the Company's income before taxes and before
deduction of the executive bonuses. The percentages for Messrs. Chauvin,
Meche, Bourke and Gallagher were 1.02%, .40%, .43% and .41%, respectively.
(2) Includes (i) matching and profit-sharing contributions of $7,247, $6,936,
$7,246 and $7,179 in 2001, $6,468, $3,447, $5,692 and $5,371 in 2000, and
$6,596, $3,221, $6,596, and $6,596 in 1999 to the Company's 401(k) plan on
behalf of Messrs. Chauvin, Meche, Bourke and Gallagher, respectively, and
(ii) premium payments of $389, $389, $389, and $389 in 2001, $400, $301,
$400, and $400 in 2000, and $389, $350, $389 and $389 in 1999 for Messrs.
Chauvin, Meche, Bourke and Gallagher, respectively, under a long-term
disability insurance plan, which premium payments are attributable to
benefits in excess of those benefits provided generally for other
employees.
6
Stock Option Grants
The following table sets forth information with respect to all stock
options granted in 2001 by the Company to each of the Named Executive
Officers.
Option Grants in 2001
Grant Date
Individual Grants Value
------------------------------------------------------- ----------
Number of % of Total Exercise
Securities Options Granted or Base Grant Date
Underlying To Employees in Price Expiration Present
Name Options Granted (1) 2001 ($/Sh) Date Value ($)
---- ------------------- --------------- -------- ---------- ----------
Kerry J. Chauvin.......... 20,000 12.5% 11.68 12/11/11 137,800(2)
Kirk J. Meche............. 10,000 6.3% 11.68 12/11/11 68,900(2)
Murphy A. Bourke.......... 10,000 6.3% 11.68 12/11/11 68,900(2)
Joseph P. Gallagher, III.. 10,000 6.3% 11.68 12/11/11 68,900(2)
- --------
(1) Each of the stock options granted in 2001 by the Company to the Named
Executive Officers will become exercisable in one-fifth increments over a
five-year period. The stock options will become immediately exercisable in
their entirety upon (i) a reorganization, merger or consolidation of the
Company in which the Company is not the surviving entity, (ii) the sale of
all or substantially all of the assets of the Company, (iii) a liquidation
or dissolution of the Company, (iv) a person or group of persons, other
than Alden J. Laborde or Huey J. Wilson or any employee benefit plan of
the Company, becoming the beneficial owner of 30% or more of the Company's
voting stock or (v) the replacement of a majority of the Board of
Directors in a contested election (each is a "Significant Transaction").
The Compensation Committee also has the authority to take several actions
regarding outstanding stock options upon the occurrence of a Significant
Transaction, including requiring that outstanding stock options remain
exercisable only for a limited time, providing for mandatory conversion of
outstanding stock options in exchange for either a cash payment or Common
Stock, making equitable adjustments to stock options or providing that
outstanding stock options will become stock options relating to securities
to which a participant would have been entitled in connection with the
Significant Transaction if the stock options had been exercised.
(2) The Black-Scholes option-pricing model was used to determine the grant
date present value of the stock options granted in December 2001 by the
Company to the Named Executive Officers. Under the Black-Scholes option-
pricing model, the grant date present value of each stock option referred
to in the table was calculated to be $6.89. The following facts and
assumptions were used in making such calculation: (i) an exercise price of
$11.68 for each such stock option; (ii) a fair market value of $11.68 for
one share of Common Stock on the date of grant; (iii) no dividend payments
on Common Stock; (iv) a stock option term of 10 years; (v) a stock
volatility of 45.0%, based on an analysis of monthly closing stock prices
of shares of Common Stock during a 24-month period; and (vi) an assumed
risk-free interest rate of 5.74%, which is equivalent to the yield on a
ten-year treasury note on the date of grant. No other discounts or
restrictions related to vesting or the likelihood of vesting of stock
options were applied. The resulting grant date present value of $6.89 for
each stock option was multiplied by the total number of stock options
granted to each of the Named Executive Officers to determine the total
grant date present value of such stock options granted to each Named
Executive Officer, respectively.
7
Stock Option Exercises and Outstanding Stock Options
The following table sets forth information with respect to all Company
stock option exercises in 2001 by each of the Named Executive Officers and all
outstanding Company stock options held by each of the Named Executive Officers
as of December 31, 2001.
Aggregated Option Exercises in 2001 and Option Values as of December 31, 2001
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Options at 12/31/01 at 12/31/01 ($)
Acquired Value ------------------------- -------------------------
on Exercise Realized ($) Exercisable Unexercisable Exercisable Unexercisable
----------- ------------ ----------- ------------- ----------- -------------
Kerry J. Chauvin........ 0 0 86,800 94,200 356,978 221,457
Kirk J. Meche........... 0 0 10,540 29,760 20,844 48,596
Murphy A. Bourke........ 0 0 17,400 42,400 51,960 89,438
Joseph P. Gallagher,
III.................... 0 0 29,800 40,800 114,534 81,422
Compensation Committee Interlocks and Insider Participation
During the last fiscal year, none of Messrs. Wilson, Chairman, Cotter,
Alden J. Laborde, or John P. Laborde, who comprise the Compensation Committee,
were officers or employees of the Company or any of its subsidiaries. Alden J.
Laborde was Chief Executive Officer of the Company from 1986 to 1990. No other
member of the Compensation Committee is a former officer of the Company.
In connection with the initial public offering of its Common Stock, the
Company entered into registration rights agreements (the "Registration Rights
Agreements") with Alden J. Laborde and Huey J. Wilson, pursuant to which each
of them has one remaining right to require the Company to register shares of
Common Stock owned by him under the Securities Act. If either one of them
makes such a demand, the other one is entitled to include his shares in such
registration. If the Company proposes to register any Common Stock under the
Securities Act in connection with a public offering, each of Messrs. Laborde
and Wilson may require the Company to include all or a portion of the shares
of Common Stock held by such shareholder. The Company has agreed under the
Registration Rights Agreements to pay all the expenses of registration, other
than underwriting discounts and commissions.
Compensation Committee Report on Executive Compensation
The Compensation Committee has the authority, among other things, to
review, analyze, and recommend compensation programs to the Board of Directors
and to administer and grant awards under the Company's employee benefit plans.
The Company's executive compensation is comprised primarily of (i)
salaries, (ii) annual cash incentive bonuses and (iii) long-term incentive
compensation in the form of stock options granted under the Long-Term
Incentive Plan of the Company. The salaries of Kerry J. Chauvin, the Chairman
of the Board, President and Chief Executive Officer, and the other executive
officers of the Company are based on their individual levels of responsibility
and the subjective assessment of their performances.
The Company has no formal bonus plan, but it has adopted an executive
compensation policy that ties a portion of executive compensation to the
short-term performance of the Company. This policy is described in footnote 1
to the "Summary Compensation Table".
The Company also provides long-term incentives to executive officers in the
form of stock options granted under the Long-Term Incentive Plan. The stock
option awards are intended to reinforce the relationship between compensation
and increases in the market price of the Company's Common Stock and to align
the executive
8
officers' financial interests with that of the Company's shareholders. The
size of awards is based upon the position of each participating officer and a
subjective assessment of each participant's individual performance. The table
entitled "Option Grants in 2001" under the heading "Executive Compensation"
sets forth the stock options granted in 2001 to the Named Executive Officers,
including Mr. Chauvin, the Chief Executive Officer, based upon position and
subjective assessment.
Section 162(m) of the Internal Revenue Code limits the tax deduction to $1
million for compensation paid to certain highly compensated executive
officers. Qualified performance-based compensation is excluded from this
deduction limitation if certain requirements are met. The Compensation
Committee believes that the stock options granted to executive officers, as
discussed above, qualify for the exclusion from the deduction limitation under
Section 162(m). The Compensation Committee does not anticipate that the cash
compensation paid to each executive officer in any year will exceed $1 million
and therefore all compensation should continue to qualify for deductibility.
The Compensation Committee
Huey J. Wilson, Chairman Gregory J. Cotter Alden J. Laborde John P. Laborde
9
Performance Graph
The following graph compares the cumulative total shareholder return on the
Common Stock from April 3, 1997, which is the date that the Common Stock was
initially offered to the public and registered pursuant to Section 12 of the
Securities Exchange Act of 1934, to December 31, 2001, with the cumulative
total return of the Standard & Poor 500 Stock Index and the Standard & Poor
500 Oil & Gas (Drilling & Equipment) Index for the same period. The returns
are based on an assumed investment of $100 on April 3, 1997 in Common Stock
and in each of the indexes and on the assumption that dividends were
reinvested.
Comparison of Cumulative Total Return
Gulf Island Fabrication, Inc., S&P 500 Index &
S&P 500 Oil & Gas (Drilling & Equipment) Index
[CHART APPEARS HERE]
Dec. Dec. Dec. Dec. Dec.
April 31, 31, 31, 31, 31,
3, 1997 1997 1998 1999 2000 2001
------- ------- ------- ------- ------- -------
Gulf Island Fabrication,
Inc. ........................ $100.00 $266.67 $103.33 $125.00 $242.51 $166.80
S&P 500 Index................. 100.00 130.90 168.31 203.72 185.18 163.17
S&P 500 Oil & Gas (Drilling &
Equipment) Index............. 100.00 151.14 86.43 117.94 160.20 108.89
ASSUMES $100 INVESTED ON APRIL 3, 1997 IN GULF ISLAND FABRICATION, INC.
COMMON STOCK, S&P 500 INDEX & S&P 500 OIL & GAS (DRILLING & EQUIPMENT) INDEX
10
Audit Committee Report
The Audit Committee of the Board of Directors of the Company (the "Audit
Committee") is composed of three directors and operates under a written
charter adopted by the Board of Directors, which is attached as Appendix A to
this proxy statement. The members of the Audit Committee are independent for
purposes of the National Association of Security Dealers' listing standards.
The members of the Audit Committee are Gregory J. Cotter, Chairman, Thomas E.
Fairley, and Hugh J. Kelly. The Audit Committee recommends to the Board of
Directors, subject to shareholder ratification, the selection of the
independent auditors of the Company.
Management is responsible for the internal controls and the financial
reporting process of the Company. The independent auditors are responsible for
performing an independent audit of the consolidated financial statements of
the Company in accordance with generally accepted auditing standards and to
issue a report thereon. The Audit Committee's responsibility is to monitor and
to oversee these processes.
In this context, the Audit Committee met and held discussions with
management and the independent auditors. Management represented to the Audit
Committee that the consolidated financial statements of the Company for 2001
were prepared in accordance with generally accepted accounting principles, and
the Audit Committee reviewed and discussed the audited consolidated financial
statements for 2001 with management and the independent auditors. The Audit
Committee reviewed with the independent auditors, who are responsible for
expressing an opinion on the conformity of those audited financial statements
with generally accepted accounting principles, their judgements as to the
quality, not just the acceptability, of the Company's accounting principles
and such other matters as are required to be discussed with the Audit
Committee under generally accepted auditing standards. The Audit Committee
discussed with the independent auditors the matters required to be discussed
by Statement on Auditing Standards No. 61 (Communication with Audit
Committees). The independent auditors of the Company also provided to the
Audit Committee the written disclosures and the letter required by
Independence Standards Board Standard No. 1 (Independence Discussions with
Audit Committees), and the Audit Committee discussed with the independent
auditors that firm's independence. The Audit Committee considered whether the
provision of the services covered below under the caption "All Other Fees" is
compatible with maintaining the principal auditor's independence.
Based upon the Audit Committee's review and discussions described above and
the Audit Committee's review of the report of the independent auditors to the
Audit Committee, the Audit Committee recommended that the Board of Directors
include the audited consolidated financial statements in the Annual Report on
Form 10-K of the Company for the year ended December 31, 2001 filed with the
Securities and Exchange Commission.
The Audit Committee
Gregory J. Cotter, Chairman Thomas E. Fairley Hugh J. Kelly
PROPOSAL TO APPROVE THE GULF ISLAND FABRICATION, INC.
2002 LONG-TERM INCENTIVE PLAN
General
The Board believes that the growth of the Company depends upon the efforts
of its officers, directors and key employees and that the Gulf Island
Fabrication, Inc. 2002 Long-Term Incentive Plan (the "Plan") will provide an
effective means of attracting and retaining qualified key personnel while
enhancing their long-term focus on maximizing shareholder value. The Plan has
been adopted by the Board of Directors, subject to approval by the
shareholders at the Meeting. The principal features of the Plan are summarized
below. This summary is qualified in its entirety, however, by reference to the
Plan, which is attached to this Proxy Statement as Appendix B.
11
Purpose Of The Proposal
The Board of Directors believes that providing officers, directors and key
personnel with a proprietary interest in the growth and performance of the
Company is crucial to stimulating individual performance while at the same
time enhancing shareholder value. Currently, approximately 5,000 shares of
Common Stock remain available for grant under the Company's previous long-term
incentive plan. The Board believes that adoption of the new Plan is necessary
to provide the Company with the continued ability to attract, retain and
motivate key personnel in a manner that is tied to the interests of
shareholders.
Terms Of The Plan
Administration Of The Plan. The Compensation Committee of the Board (the
"Committee") administers the Plan and has authority to make awards under the
Plan, to set the terms of the awards, to interpret the Plan, to establish any
rules or regulations relating to the Plan that it determines to be appropriate
and to make any other determination that it believes necessary or advisable
for the proper administration of the Plan. Subject to the limitations
specified in the Plan, the Committee may delegate its authority to appropriate
personnel of the Company.
Eligibility. Officers and key employees of the Company (including officers
who are also directors of the Company) will be eligible to receive awards
("Incentives") under the Plan when designated as plan participants. The
Company currently has approximately seven (7) officers and fifty-five (55) key
employees eligible to receive Incentives under the Plan. Over the past several
years the Company has granted awards to all of its officers and key employees
under its predecessor incentive compensation plan. In addition, directors of
the Company who are not employees of the Company ("Outside Directors") may be
granted non-qualified stock options under the Plan on an annual basis. There
are currently six (6) Outside Directors. The Plan also permits consultants and
advisors to receive Incentives, although neither the Company nor the Committee
has any current intention of awarding Incentives to consultants or advisors.
Incentives under the Plan may be granted in any one or a combination of the
following forms:
. incentive stock options under Section 422 of the Internal Revenue Code
(the "Code");
. non-qualified stock options;
. restricted stock; and
. other stock-based awards.
Shares Issuable Through The Plan. A total of 500,000 shares of Common Stock
are authorized to be issued under the Plan, representing approximately 4.3% of
the outstanding shares of Common Stock. There are currently options to acquire
approximately 889,000 shares of Common Stock outstanding under the Company's
predecessor incentive compensation plan. The closing sale price of a share of
Common Stock, as quoted on the Nasdaq Stock Market on March 1, 2002 was
$13.64.
Limitations And Adjustments To Shares Issuable Through The Plan. Incentives
relating to no more than 200,000 shares of Common Stock may be granted to a
single participant in one calendar year. The maximum amount of cash
compensation that may be paid as an other stock-based award to a participant
in any calendar year is $200,000. No more than 50,000 shares of Common Stock
may be issued as restricted stock or other stock-based awards.
For purposes of determining the maximum number of shares of Common Stock
available for delivery under the Plan, shares of Common Stock that are not
delivered because the Incentive is forfeited, canceled or settled in cash and
shares that are withheld to satisfy participants' applicable tax withholding
obligations will not be deemed to have been delivered under the Plan. Also, if
the exercise price of any stock option granted under the Plan is satisfied by
tendering shares of Common Stock, only the number of shares issued net of the
shares tendered will be deemed delivered for purposes of determining the
maximum number of shares of Common
12
Stock available for delivery under the Plan. However, no more than 500,000
shares may be delivered upon exercise of stock options intended to qualify as
incentive stock options under Section 422 of the Code, and shares withheld to
cover taxes or shares delivered in payment of the exercise price will not be
credited against the 500,000 share limit applicable to incentive stock
options.
Proportionate adjustments will be made to all of the share limitations
provided in the Plan, including shares subject to outstanding Incentives, in
the event of any recapitalization, stock dividend, stock split, combination of
shares or other change in the shares of Common Stock, and the terms of any
Incentive will be adjusted to the extent appropriate to provide participants
with the same relative rights before and after the occurrence of any such
event.
Amendments To The Plan. The Board may amend or discontinue the Plan at any
time. However, the shareholders must approve any amendment that would:
. materially increase the benefits accruing to participants under the
Plan;
. increase the number of shares of Common Stock that may be issued under
the Plan; or
. materially expand the classes of persons eligible to participate in the
Plan.
No amendment or discontinuance of the Plan may materially impair any
previously granted Incentive without the consent of the recipient.
Types Of Incentives. Each of the types of Incentives that may be granted
under the Plan is described below:
Stock Options. The Committee may grant non-qualified stock options or
incentive stock options to purchase shares of Common Stock. The Committee will
determine the number and exercise price of the options, and the time or times
that the options become exercisable, provided that the option exercise price
may not be less than the fair market value of the shares of Common Stock on
the date of grant except as provided in the Agreement. The term of an option
will also be determined by the Committee; provided that the term of an
incentive stock option may not exceed 10 years. The Committee may accelerate
the exercisability of any stock option at any time. The Committee may also
approve the purchase by the Company of an unexercised stock option from the
optionee by mutual agreement for the difference between the exercise price and
the fair market value of the shares covered by the option.
The option exercise price may be paid in cash; by check; in shares of
Common Stock, subject to certain limitations; through a "cashless" exercise
arrangement with a broker approved in advance by the Company; or in any other
manner authorized by the Committee.
Incentive stock options will be subject to certain additional requirements
necessary in order to qualify as incentive stock options under Section 422 of
the Code.
Restricted Stock. Shares of Common Stock may be granted by the Committee to
an eligible employee and made subject to restrictions on sale, pledge or other
transfer by the employee for a certain period (the "restricted period").
Except for shares of restricted stock that vest based on the attainment of
performance goals, the restricted period must be a minimum of three years with
incremental vesting of portions of the award over the three-year period
permitted. If vesting of the shares is subject to the attainment of specified
performance goals, the restricted period may be one year or more, with
incremental vesting of portions of the award allowed. All shares of restricted
stock will be subject to such restrictions as the Committee may provide in an
agreement with the participant, including provisions obligating the
participant to forfeit or resell the shares to the Company in the event of
termination of employment or if specified performance goals or targets are not
met. Subject to the restrictions provided in the agreement and the Plan, a
participant receiving restricted stock shall have all of the rights of a
shareholder as to such shares.
Other Stock-Based Awards. The Plan also authorizes the Committee to grant
participants awards of Common Stock and other awards that are denominated in,
payable in, valued in whole or in part by reference to, or are otherwise based
on the value of, or the appreciation in value of, shares of Common Stock
("other stock-
13
based awards"). The Committee has discretion to determine the participants to
whom other stock-based awards are to be made, the times at which such awards
are to be made, the size of such awards, the form of payment, and all other
conditions of such awards, including any restrictions, deferral periods or
performance requirements. Other stock-based awards are subject to the same
minimum vesting requirements described above for restricted stock, except that
the Committee may make special grants of other stock-based awards with respect
to an aggregate of up to 25,000 shares of Common Stock (subject to adjustment
as permitted in the Plan) that do not meet the minimum vesting requirements.
Performance-Based Compensation Under Section 162(m). Stock options granted
in accordance with the terms of the Plan will qualify as performance-based
compensation under Section 162(m) of the Code (as described under "Executive
Compensation--Compensation Committee Report on Executive Compensation.")
Grants of any restricted stock or other stock-based awards that the Company
intends to qualify as performance-based compensation under Section 162(m) must
be made subject to the achievement of pre-established performance goals. The
pre-established performance goals will be based upon any or a combination of
the following business criteria: earnings per share, return on assets, an
economic value added measure, shareholder return, earnings, stock price,
return on equity, return on total capital, safety performance, reduction of
expenses or increases in cash flow. For any performance period, the
performance goals may be measured on an absolute basis or relative to a group
of peer companies selected by the Committee, relative to internal goals, or
relative to levels attained in prior years.
The Committee has authority to use different targets from time to time
under the performance goals provided in the Plan. As a result, the regulations
under Section 162(m) require that the material terms of the performance goals
be reapproved by the shareholders every five years. To qualify as performance-
based compensation, grants of restricted stock and other stock-based awards
will be required to satisfy the other applicable requirements of Section
162(m).
Termination Of Employment. If an employee participant ceases to be an
employee of the Company for any reason, including death, his outstanding
Incentives may be exercised or shall expire at such time or times as may be
determined by the Committee and described in the Incentive agreement.
Change Of Control. In the event of a change of control of the Company, as
defined in the Plan, all Incentives will become fully vested and exercisable,
all restrictions or limitations on any Incentives will generally lapse and,
unless otherwise provided in the Incentive agreement, all performance criteria
and other conditions relating to the payment of Incentives will generally be
deemed to be achieved or waived.
In addition to the foregoing, upon a change of control the Committee will
have the authority to take a variety of actions regarding outstanding
Incentives. Within certain time periods, the Committee may (i) require that
all outstanding Incentives remain exercisable only for a limited time, after
which time all such Incentives will terminate, (ii) require the surrender to
the Company of some or all outstanding Incentives in exchange for a stock or
cash payment for each Incentive equal in value to the per-share change of
control value, calculated as described in the Plan, over the exercise or base
price, (iii) make any equitable adjustments to outstanding Incentives as the
Committee deems necessary to reflect the corporate change or (iv) provide that
an Incentive shall become an Incentive relating to the number and class of
shares of stock or other securities or property (including cash) to which the
participant would have been entitled in connection with the change of control
if the participant had been a shareholder.
Transferability Of Incentives. The Incentives awarded under the Plan may
not be transferred except
. by will;
. by the laws of descent and distribution;
. pursuant to a domestic relations order; or
. in the case of stock options only, to immediate family members or to a
partnership, limited liability company or trust for which the sole
owners, members or beneficiaries are immediate family members, if
permitted by the Committee and if so provided in the stock option
agreement.
14
Payment Of Withholding Taxes. The Company may withhold from any payments or
stock issuances under the Plan, or collect as a condition of payment, any
taxes required by law to be withheld. Any participant may, but is not required
to, satisfy his or her withholding tax obligation by electing to deliver
currently owned shares of Common Stock or to have the Company withhold, from
the shares the participant would otherwise receive, shares of Common Stock, in
each case having a value equal to the minimum amount required to be withheld.
This election must be made prior to the date on which the amount of tax to be
withheld is determined and is subject to the Committee's right of disapproval.
Grants to Outside Directors. The Plan permits the grant each year to each
Outside Director of options to acquire up to 5,000 shares of Common Stock. The
exact number of options that the Outside Director will receive will be set
from time to time by the Committee.
The options granted to Outside Directors generally become exercisable six
months after grant and have a term of ten years. The per share exercise price
of the options granted to Outside Directors will be equal to the fair market
value of a share of Common Stock on the date of grant. If an Outside Director
ceases to serve on the Board due to death or disability, options granted under
the Plan that have become exercisable at the time of death or disability must
be exercised within two years from the date of termination of Board service.
In the event of retirement from the Board on or after reaching age 65 or after
completing five years of service, exercisable options that have become
exercisable at the time of retirement must be exercised within five years
following retirement. If an Outside Director's service terminates for any
other reason, exercisable options must be exercised within one year. Options
that have not become exercisable at the time of termination of Board service
will be forfeited.
Awards To Be Granted
Grants of awards under the Plan will be made in the future by the Committee
as necessary to attract and retain key personnel.
Federal Income Tax Consequences Of Stock Options
Under existing federal income tax provisions, a participant who is granted
a stock option normally will not realize any income, nor will the Company
normally receive any deduction for federal income tax purposes, in the year
the option is granted.
When a non-qualified stock option granted pursuant to the Plan is
exercised, the participant will realize ordinary income measured by the
difference between the aggregate purchase price of the shares of Common Stock
acquired and the aggregate fair market value of the shares of Common Stock
acquired on the exercise date and, subject to the limitations of Section
162(m) of the Code, the Company will be entitled to a deduction in the year
the option is exercised equal to the amount the participant is required to
treat as ordinary income.
An employee generally will not recognize any income upon the exercise of
any incentive stock option, but the excess of the fair market value of the
shares at the time of exercise over the option price will be an item of tax
preference, which may, depending on particular factors relating to the
employee, subject the employee to the alternative minimum tax imposed by
Section 55 of the Code. The alternative minimum tax is imposed in addition to
the federal individual income tax, and it is intended to ensure that
individual taxpayers do not completely avoid federal income tax by using
preference items. An employee will recognize capital gain or loss in the
amount of the difference between the exercise price and the sale price on the
sale or exchange of stock acquired pursuant to the exercise of an incentive
stock option, provided the employee does not dispose of such stock within two
years from the date of grant and one year from the date of exercise of the
incentive stock option (the "holding periods"). An employee disposing of such
shares before the expiration of the holding periods will recognize ordinary
income generally equal to the difference between the option price and the fair
market value of the stock on the date of exercise. The remaining gain, if any,
will be capital gain. The Company will not be entitled to a federal income tax
deduction in connection with the exercise of an incentive stock option, except
where the employee disposes of the shares of Common Stock received upon
exercise before the expiration of the holding periods.
15
If the exercise price of a non-qualified option is paid by the surrender of
previously owned shares, the basis and the holding period of the previously
owned shares carries over to the same number of shares received in exchange
for the previously owned shares. The compensation income recognized on
exercise of these options is added to the basis of the shares received. If the
exercised option is an incentive stock option and the shares surrendered were
acquired through the exercise of an incentive stock option and have not been
held for the holding periods, the optionee will recognize income on such
exchange, and the basis of the shares received will be equal to the fair
market value of the shares surrendered. If the applicable holding period has
been met on the date of exercise, there will be no income recognition and the
basis and the holding period of the previously owned shares will carry over to
the same number of shares received in exchange, and the remaining shares will
begin a new holding period and have a zero basis.
If, upon a change in control of the Company, the exercisability or vesting
of an Incentive is accelerated, any excess on the date of the change in
control of the fair market value of the shares or cash issued under
accelerated Incentives over the purchase price of such shares, if any, may be
characterized as "parachute payments" (within the meaning of Section 280G of
the Code) if the sum of such amounts and any other such contingent payments
received by the employee exceeds an amount equal to three times the "base
amount" for such employee. The base amount generally is the average of the
annual compensation of such employee for the five years preceding such change
in ownership or control. An "excess parachute payment", with respect to any
employee, is the excess of the parachute payments to such person, in the
aggregate, over and above such person's base amount. If the amounts received
by an employee upon a change in control are characterized as parachute
payments, such employee will be subject to a 20% excise tax on the excess
parachute payment and the Company will be denied any deduction with respect to
such excess parachute payment.
This summary of federal income tax consequences of non-qualified and
incentive stock options does not purport to be complete. Reference should be
made to the applicable provisions of the Code. There also may be state and
local income tax consequences applicable to transactions involving options.
Equity Compensation Plan Information
The following table provides information about our shares of Common Stock
that may be issued upon the exercise of options, warrants and rights under all
of our existing equity compensation plans as of December 31, 2001.
Number of securities
remaining available for
future issuance under
Number of securities to be equity compensation
issued upon exercise of Weighted average exercise plans (excluding
outstanding options, price of outstanding securities
warrants and rights options, warrants and rights reflected in column (a))
Plan Category (a) (b) (c)
------------- -------------------------- ---------------------------- ------------------------
Equity compensation
plans approved by
security holders....... 889,000 $12.853 5,000
Equity compensation
plans not approved by
security holders....... 0 0 0
------- -----
Total................. 889,000 5,000
======= =====
Vote Required
Approval of the Plan by our shareholders requires the affirmative vote of
the holders of at least a majority of the votes actually cast at the Meeting.
16
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
PROPOSAL TO APPROVE THE GULF ISLAND FABRICATION, INC. 2002 LONG-TERM INCENTIVE
PLAN.
RATIFICATION OF THE APPOINTMENT OF AUDITORS
The Board of Directors seeks shareholder ratification of the Board's
appointment of Ernst & Young LLP to act as the independent auditors of the
financial statements of the Company and its subsidiaries for 2002. The Board
has not determined what, if any, action would be taken should the appointment
of Ernst & Young LLP not be ratified. One or more representatives of Ernst &
Young LLP will be available at the Meeting to respond to appropriate
questions, and those representatives will also have an opportunity to make a
statement.
Audit Fees
The aggregate fees billed by Ernst & Young LLP for professional services
rendered for the audit of the annual financial statements of the Company for
2001 and the reviews of the financial statements included in the quarterly
reports on Form 10-Q of the Company for 2001 were $59,000.
All Other Fees
The aggregate fees billed for all other services rendered by Ernst & Young
LLP for 2001 were $88,000. No fees were billed by Ernst & Young LLP in 2001
for providing financial information systems design and implementation.
OTHER MATTERS
Quorum and Voting
The presence, in person or by proxy, of a majority of the outstanding
shares of Common Stock of the Company is necessary to constitute a quorum.
Shareholders voting, or abstaining from voting, by proxy on any issue will be
counted as present for purposes of constituting a quorum. If a quorum is
present, (i) the election of the two directors to be elected at the Meeting
will be determined by plurality vote (that is, the two nominees receiving the
largest number of votes will be elected) and (ii) a majority of votes actually
cast will decide any other matter properly brought before the Meeting for a
vote of shareholders. Shareholders for which proxy authority to vote for any
nominee for election as a director is withheld by the shareholder and shares
that have not been voted by brokers who may hold shares on behalf of the
beneficial owners ("broker non-votes") will not be counted as voted for the
affected nominee. With respect to all other matters, shares not voted as a
result of abstentions will have the same effect as votes against those
matters, but broker non-votes will not be considered as voted for purposes of
determining whether or not a majority of votes were cast for such matters.
Other Business
Management has not received any notice that a shareholder desires to
present any matter for action by shareholders at the Meeting and is unaware of
any matter for action by shareholders at the Meeting other than the matters
described in the accompanying notice. The enclosed proxy will, however, confer
discretionary authority with respect to any other matter that may properly
come before the Meeting or any adjournment thereof. It is the intention of the
persons named in the enclosed proxy to vote in accordance with their best
judgment on any such matter.
Shareholder Proposals
Any shareholder who desires to present a proposal qualified for inclusion
in the Company's proxy materials for the annual meeting of shareholders to be
held in 2003 (the "2003 Annual Meeting") must forward the
17
proposal in writing to the Secretary of the Company at the address shown on
the first page of this proxy statement in time to arrive at the Company no
later than November 22, 2002 and the proposal must comply with applicable
federal proxy rules. In addition the Amended and Restated Articles of
Incorporation of the Company provide that shareholders intending to nominate a
director must furnish timely written notice containing specified information
concerning, among other things, information about the nominee and the
shareholder making the nomination. In general, to be timely a shareholder's
notice must be received by the Secretary of the Company not less than 45 days
or more than 90 days prior to the shareholder's meeting. The Company will be
permitted to disregard any nomination that fails to comply with these
procedures. Proxies solicited on behalf of the Board of Directors for the 2003
Annual Meeting will confer discretionary authority to vote with respect to any
other matter properly submitted by a shareholder for action at the 2003 Annual
Meeting if the Company does not, on or before February 5, 2003, receive
written notice, addressed to the Secretary of the Company at the address shown
on the first page of this proxy statement, that the shareholder intends to do
so.
By Order of the Board of Directors
/s/ Valarae L. Bates
VALARAE L. BATES
Secretary
Houma, Louisiana
March 22, 2002
18
APPENDIX A
THE CHARTER OF
THE AUDIT COMMITTEE OF
THE BOARD OF DIRECTORS OF
GULF ISLAND FABRICATION, INC.
Organization
This charter governs the operations of the audit committee. The charter
complies with certain rules adopted by the Securities and Exchange Commission,
the Auditing Standards Board, and the National Association of Securities
Dealers, Inc. (the "NASD") relevant to audit committees, including rules
derived from recommendations made by the Blue Ribbon Committee on Improving the
Effectiveness of Corporate Audit Committees. The committee shall review and
reassess the charter at least annually and report its recommendations to the
board of directors. The committee shall be appointed by the board of directors
and shall comprise at least three directors, each of whom shall be an
"independent director" under NASD Rule 4200(a)(14). All committee members shall
meet the financial literacy requirements set forth in the first sentence of
NASD Rule 4310(c)(26)(B)(i), and at least one member shall have the accounting
or related financial management expertise described in the second sentence of
NASD Rule 4310(c)(26)(B)(i).
Statement of Policy
The audit committee shall provide assistance to the board of directors in
fulfilling their oversight responsibility to the shareholders, potential
shareholders, the investment community, and others relating to the Company's
financial statements and the financial reporting process, the systems of
internal accounting and financial controls, the internal audit function, and
the annual independent audit of the Company's financial statements. In so
doing, it is the responsibility of the committee to maintain free and open
communication between the committee, independent auditors, the internal
auditors and management of the Company. In discharging its oversight role, the
committee is empowered to investigate any matter brought to its attention with
full access to all books, records, facilities, and personnel of the Company and
the power to retain outside counsel or other experts for this purpose.
Responsibilities and Processes
The primary responsibility of the audit committee is to oversee the
Company's financial reporting process on behalf of the board and report the
results of their activities to the board. The committee in carrying out its
responsibilities believes its policies and procedures should remain flexible in
order to react to changing conditions and circumstances.
The following shall be the principal recurring processes of the audit
committee in carrying out its oversight responsibilities. The processes are set
forth as a guide with the understanding that the committee may supplement them
as appropriate.
. The committee shall have a clear understanding with management and the
independent auditors that the independent auditors are ultimately
accountable to the board and the audit committee, as representatives of
the Company's shareholders. The board and the committee shall have the
ultimate authority and responsibility to select, to evaluate and, if
appropriate, to replace the independent auditors. The committee shall
(i) receive from the auditors the letter and the written disclosures
delineating all relationships between the auditor and the Company, as
required by Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees, (ii) discuss with the auditors their
independence from management and the Company and the matters included in
those written disclosures, including any disclosed relationships or
services that may impact the objectivity
A-1
and independence of the auditor, and (iii) take, or recommend that the
board take, appropriate action to oversee the independence of the
auditor. Annually, the committee shall review and recommend to the board
the selection of the Company's independent auditors, subject to
shareholder approval.
. The committee shall discuss with the internal auditors and the
independent auditors the overall scope and plans for their respective
audits including the adequacy of staffing and compensation. The internal
audit function may be contracted to a third party, which may be the
independent auditors. Also, the committee shall discuss with management,
the internal auditors, and the independent auditors the adequacy and
effectiveness of the accounting and financial controls. Further, the
committee shall meet separately with the internal auditors and the
independent auditors, with and without management present, to discuss
the results of their examinations.
. The committee shall review the interim financial statements with
management and the independent auditors prior to the filing of the
Company's Quarterly Report on Form 10-Q. Also, the committee shall
discuss the results of the quarterly review and any other matters
required to be communicated to the committee by the independent auditors
under generally accepted auditing standards. The chair of the committee
may represent the entire committee for the purposes of this review.
. The committee shall review and discuss with management and the
independent auditors the financial statements proposed to be included in
the Company's Annual Report on Form 10-K and, based on the review and
discussions, recommend to the board whether they are acceptable for
inclusion in the Annual Report on Form 10-K. The committee shall discuss
the results of the annual audit and any other matters required to be
communicated to the committee by the independent auditors under
Statements on Auditing Standard No. 61, Communication with Audit
Committees.
A-2
APPENDIX B
GULF ISLAND FABRICATION, INC.
2002 LONG-TERM INCENTIVE PLAN
1. Purpose. The purpose of the 2002 Long-Term Incentive Plan (the "Plan")
of Gulf Island Fabrication, Inc. ("Gulf Island") is to increase shareholder
value and to advance the interests of Gulf Island and its subsidiaries
(collectively, the "Company") by furnishing stock-based economic incentives
(the "Incentives") designed to attract, retain, reward and motivate key
employees, officers, directors and consultants or advisors to the Company and
to strengthen the mutuality of interests between such employees, officers and
directors and Gulf Island's shareholders. Incentives consist of opportunities
to purchase or receive shares of common stock, no par value per share, of Gulf
Island (the "Common Stock"), on terms determined under the Plan. As used in
the Plan, the term "subsidiary" means any corporation, limited liability
company or other entity, of which Gulf Island owns (directly or indirectly)
within the meaning of Section 424(f) of the Internal Revenue Code of 1986, as
amended (the "Code"), 50% or more of the total combined voting power of all
classes of stock, membership interests or other equity interests issued
thereby.
2. Administration.
2.1 Composition. The Plan shall be administered by the Compensation
Committee of the Board of Directors of Gulf Island or by a subcommittee
thereof (the "Committee"). The Committee shall consist of not fewer than
two members of the Board of Directors, each of whom shall (a) qualify as a
"non-employee director" under Rule 16b-3 under the Securities Exchange Act
of 1934 (the "1934 Act") or any successor rule, and (b) qualify as an
"outside director" under Section 162(m) of the Code ("Section 162(m)").
2.2 Authority. The Committee shall have plenary authority to award
Incentives under the Plan, to interpret the Plan, to establish any rules or
regulations relating to the Plan that it determines to be appropriate, to
enter into agreements with or provide notices to participants as to the
terms of the Incentives (the "Incentive Agreements") and to make any other
determination that it believes necessary or advisable for the proper
administration of the Plan. Its decisions in matters relating to the Plan
shall be final and conclusive on the Company and participants. The
Committee may delegate its authority hereunder to the extent provided in
Section 3 hereof. Directors who are not also employees of the Company
("Outside Directors") may receive awards under the Plan only as
specifically provided in Section 10 hereof.
3. Eligible Participants. Key employees, officers and directors of the
Company and persons providing services as consultants or advisors to the
Company shall become eligible to receive Incentives under the Plan when
designated by the Committee. Employees may be designated individually or by
groups or categories, as the Committee deems appropriate. With respect to
participants not subject to Section 16 of the 1934 Act or Section 162(m) of
the Code, the Committee may delegate to appropriate officers of the Company
its authority to designate participants, to determine the size and type of
Incentives to be received by those participants and to set and modify the
terms of the Incentives; provided, however, that the per share exercise price
of any options granted by an officer, rather than by the Committee, shall be
equal to the Fair Market Value (as defined in Section 11.11) of a share of
common stock. Outside Directors may participate in the Plan only as
specifically provided in Section 10 hereof.
4. Types of Incentives. Incentives may be granted under the Plan to
eligible participants in the forms of (a) incentive stock options; (b) non-
qualified stock options; (c) restricted stock and (d) Other Stock-Based Awards
(as defined in Section 8 hereof).
5. Shares Subject to the Plan.
5.1 Number of Shares. Subject to adjustment as provided in Section 11.5,
the maximum number of shares of Common Stock that may be delivered to
participants and their permitted transferrees under the Plan shall be
500,000 shares.
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5.2 Share Counting. To the extent any shares of Common Stock covered by
a stock option are not delivered to a participant or permitted transferee
because the Option is forfeited or canceled, or shares of Common Stock are
not delivered because an Incentive is paid or settled in cash or used to
satisfy the applicable tax withholding obligation, such shares shall not be
deemed to have been delivered for purposes of determining the maximum
number of shares of Common Stock available for delivery under this Plan. In
the event that shares of Common Stock are issued as an Incentive and
thereafter are forfeited or reacquired by the Company pursuant to rights
reserved upon issuance thereof, such forfeited and reacquired Shares may
again be issued under the Plan. If the exercise price of any stock option
granted under the Plan or the applicable withholding tax obligation is
satisfied by tendering shares of Common Stock to the Company (by either
actual delivery or by attestation), only the number of shares of Common
Stock issued net of the shares of Common Stock tendered shall be deemed
delivered for purposes of determining the maximum number of shares of
Common Stock available for delivery under the Plan.
5.3 Limitations on Awards. Subject to Section 11.5, the following
additional limitations are imposed under the Plan:
A. The maximum number of shares of Common Stock that may be issued
upon exercise of stock options intended to qualify as incentive stock
options under Section 422 of the Code shall be 500,000 shares.
Notwithstanding any other provision herein to the contrary, (i) all
shares issuable under incentive stock options shall be counted against
this limit and (ii) shares that are issued and are later forfeited,
cancelled or reacquired by the Company, shares withheld to satisfy
withholding tax obligations and shares delivered in payment of the
option exercise price or withholding taxes shall have no effect on this
limitation.
B. The maximum number of shares of Common Stock that may be covered
by Incentives granted under the Plan to any one individual during any
one calendar-year period shall be 200,000.
C. The maximum number of shares of Common Stock that may be issued
as restricted stock and Other Stock-Based Awards (as defined in Section
8) shall be 50,000 shares.
D. The maximum dollar amount of cash compensation that may be paid
as an Other Stock-Based Award to a participant in any calendar year is
$200,000.
5.4 Type of Common Stock. Common Stock issued under the Plan may be
authorized and unissued shares or issued shares held as treasury shares.
6. Stock Options. A stock option is a right to purchase shares of Common
Stock from Gulf Island. Stock options granted under the Plan may be incentive
stock options (as such term is defined in Section 422 of the Code) or non-
qualified stock options. Any option that is designated as a non-qualified
stock option shall not be treated as an incentive stock option. Each stock
option granted by the Committee under this Plan shall be subject to the
following terms and conditions:
6.1 Price. The exercise price per share shall be determined by the
Committee, subject to adjustment under Section 11.5; provided that in no
event shall the exercise price be less than the Fair Market Value of a
share of Common Stock on the date of grant, except in case of a stock
option granted in assumption or substitution for an outstanding award of a
company acquired by the Company or with which the Company combines.
6.2 Number. The number of shares of Common Stock subject to the option
shall be determined by the Committee, subject to Section 5 and subject to
adjustment as provided in Section 11.5.
6.3 Duration and Time for Exercise. The term of each stock option shall
be determined by the Committee. Each stock option shall become exercisable
at such time or times during its term as shall be determined by the
Committee. Notwithstanding the foregoing, the Committee may accelerate the
exercisability of any stock option at any time, in addition to the
automatic acceleration of stock options under Section 11.10.
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6.4 Repurchase. Upon approval of the Committee, the Company may
repurchase a previously granted stock option from a participant by mutual
agreement before such option has been exercised by payment to the
participant of the amount per share by which: (i) the Fair Market Value (as
defined in Section 11.11) of the Common Stock subject to the option on the
business day immediately preceding the date of purchase exceeds (ii) the
exercise price.
6.5 Manner of Exercise. A stock option may be exercised, in whole or in
part, by giving written notice to the Company, specifying the number of
shares of Common Stock to be purchased. The exercise notice shall be
accompanied by the full purchase price for such shares. The option price
shall be payable in United States dollars and may be paid (a) in cash; (b)
by check; (c) by delivery of shares of Common Stock which, unless otherwise
determined by the Committee, shall have been held by the optionee for at
least six months, and which shares shall be valued for this purpose at the
Fair Market Value on the business day immediately preceding the date such
option is exercised; (d) by delivery of irrevocable written instructions to
a broker approved by the Company (with a copy to the Company) to
immediately sell a portion of the shares issuable under the option and to
deliver promptly to the Company the amount of sale proceeds (or loan
proceeds if the broker lends funds to the participant for delivery to the
Company) to pay the exercise price; or (e) in such other manner as may be
authorized from time to time by the Committee.
6.6 Incentive Stock Options. Notwithstanding anything in the Plan to the
contrary, the following additional provisions shall apply to the grant of
stock options that are intended to qualify as incentive stock options (as
such term is defined in Section 422 of the Code):
A. Any incentive stock option agreement authorized under the Plan
shall contain such other provisions as the Committee shall deem
advisable, but shall in all events be consistent with and contain or be
deemed to contain all provisions required in order to qualify the
options as incentive stock options.
B. All incentive stock options must be granted within ten years from
the date on which this Plan is adopted by the Board of Directors.
C. Unless sooner exercised, all incentive stock options shall expire
no later than ten years after the date of grant.
D. No incentive stock options shall be granted to any participant
who, at the time such option is granted, would own (within the meaning
of Section 422 of the Code) stock possessing more than 10% of the total
combined voting power of all classes of stock of the employer
corporation or of its parent or subsidiary corporation.
E. The aggregate Fair Market Value (determined with respect to each
incentive stock option as of the time such incentive stock option is
granted) of the Common Stock with respect to which incentive stock
options are exercisable for the first time by a participant during any
calendar year (under the Plan or any other plan of Gulf Island or any
of its subsidiaries) shall not exceed $100,000. To the extent that such
limitation is exceeded, such options shall not be treated, for federal
income tax purposes, as incentive stock options.
7. Restricted Stock.
7.1 Grant of Restricted Stock. The Committee may award shares of
restricted stock to such eligible participants as the Committee determines
pursuant to the terms of Section 3. An award of restricted stock shall be
subject to such restrictions on transfer and forfeitability provisions and
such other terms and conditions, including the attainment of specified
performance goals, as the Committee may determine, subject to the
provisions of the Plan. To the extent restricted stock is intended to
qualify as "performance-based compensation" under Section 162(m), it must
be granted subject to the attainment of performance goals as described in
Section 9 below and meet the additional requirements imposed by Section
162(m).
7.2 The Restricted Period. At the time an award of restricted stock is
made, the Committee shall establish a period of time during which the
transfer of the shares of restricted stock shall be restricted and
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after which the shares of restricted stock shall be vested (the "Restricted
Period"). Except for shares of restricted stock that vest based on the
attainment of performance goals, the Restricted Period shall be a minimum
of three years, with incremental vesting of portions of the award over the
three-year period permitted. If the vesting of the shares of restricted
stock is based upon the attainment of performance goals, a minimum
Restricted Period of one year is allowed, with incremental vesting of
portions of the award over the one-year period permitted. Each award of
restricted stock may have a different Restricted Period. The expiration of
the Restricted Period shall also occur as provided under Section 11.3 and
under the conditions described in Section 11.10 hereof.
7.3 Escrow. The participant receiving restricted stock shall enter into
an Incentive Agreement with the Company setting forth the conditions of the
grant. Certificates representing shares of restricted stock shall be
registered in the name of the participant and deposited with the Company,
together with a stock power endorsed in blank by the participant. Each such
certificate shall bear a legend in substantially the following form:
The transferability of this certificate and the shares of Common
Stock represented by it are subject to the terms and conditions
(including conditions of forfeiture) contained in the Gulf Island
Fabrication, Inc. 2002 Long-Term Incentive Plan (the "Plan"), and
an agreement entered into between the registered owner and Gulf
Island Fabrication, Inc. thereunder. Copies of the Plan and the
agreement are on file at the principal office of the Company.
7.4 Dividends on Restricted Stock. Any and all cash and stock dividends
paid with respect to the shares of restricted stock shall be subject to any
restrictions on transfer, forfeitability provisions or reinvestment
requirements as the Committee may, in its discretion, prescribe in the
Incentive Agreement.
7.5 Forfeiture. In the event of the forfeiture of any shares of
restricted stock under the terms provided in the Incentive Agreement
(including any additional shares of restricted stock that may result from
the reinvestment of cash and stock dividends, if so provided in the
Incentive Agreement), such forfeited shares shall be surrendered and the
certificates cancelled. The participants shall have the same rights and
privileges, and be subject to the same forfeiture provisions, with respect
to any additional shares received pursuant to Section 11.5 due to a
recapitalization, merger or other change in capitalization.
7.6 Expiration of Restricted Period. Upon the expiration or termination
of the Restricted Period and the satisfaction of any other conditions
prescribed by the Committee, the restrictions applicable to the restricted
stock shall lapse and a stock certificate for the number of shares of
restricted stock with respect to which the restrictions have lapsed shall
be delivered, free of all such restrictions and legends, except any that
may be imposed by law, to the participant or the participant's estate, as
the case may be.
7.7 Rights as a Shareholder. Subject to the terms and conditions of the
Plan and subject to any restrictions on the receipt of dividends that may
be imposed in the Incentive Agreement, each participant receiving
restricted stock shall have all the rights of a shareholder with respect to
shares of stock during the Restricted Period, including without limitation,
the right to vote any shares of Common Stock.
8. Other Stock-Based Awards.
8.1 Grant of Other Stock-Based Awards. Subject to the limitations
described in Section 8.2 hereof, the Committee may grant to eligible
participants "Other Stock-Based Awards," which shall consist of awards
(other than options or restricted stock in Sections 6 and 7) the value of
which is based in whole or in part on the value of shares of Common Stock.
Other Stock-Based Awards may be awards of shares of Common Stock or may be
denominated or payable in, valued in whole or in part by reference to, or
otherwise based on or related to, shares of, or appreciation in the value
of, Common Stock (including, without limitation, securities convertible or
exchangeable into or exercisable for shares of Common Stock), as deemed by
the Committee consistent with the purposes of this Plan. The Committee
shall determine the terms and conditions of any Other Stock-Based Award
(including which rights of a shareholder, if any, the recipient shall have
with respect to Common Stock associated with any such award) and may
provide that
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such award is payable in whole or in part in cash. An Other Stock-Based
Award may be subject to the attainment of such specified performance goals
or targets as the Committee may determine, subject to the provisions of
this Plan. To the extent that an Other Stock-Based Award is intended to
qualify as "performance-based compensation" under Section 162(m), it must
be granted subject to the attainment of performance goals as described in
Section 9 below and meet the additional requirements imposed by
Section 162(m).
8.2 Limitations. Other Stock-Based Awards granted under this Section 8
shall be subject to a vesting period of at least three years, with
incremental vesting of portions of the award over the three-year period
permitted; provided, however, that if the vesting of the award is based
upon the attainment of performance goals, a minimum vesting period of one
year is allowed, with incremental vesting of portions of the award over the
one-year period permitted, and further provided that the Committee may make
special awards under this Section 8 with respect to an aggregate of no more
than 25,000 shares of Common Stock, as adjusted under Section 11.5, which
special awards shall not be subject to any minimum vesting requirements.
9. Section 162(m) Awards.
9.1 Performance Goals. To the extent that shares of restricted stock or
Other Stock-Based Awards granted under the Plan are intended to qualify as
"performance-based compensation" under Section 162(m), the vesting, grant
or payment of such awards shall be conditioned on the achievement of one or
more performance goals and must satisfy the other requirements of Section
162(m). The performance goals pursuant to which such awards shall vest, be
granted or be paid out shall be any or a combination of the following
performance measures applied to the Company, Gulf Island, a division or a
subsidiary: earnings per share, return on assets, an economic value added
measure, shareholder return, earnings, stock price, return on equity,
return on total capital, safety performance, reduction of expenses or
increase in cash flow. For any performance period, such performance
objectives may be measured on an absolute basis or relative to a group of
peer companies selected by the Committee, relative to internal goals or
relative to levels attained in prior years. For performance-based
compensation under Section 162(m), the Committee may not waive any of the
pre-established performance goal objectives, except for an automatic waiver
under Section 11.10 hereof, or as may be provided by the Committee in the
event of death or disability.
9.2 Adjustments to Performance Goals. The terms used in Section 9.1 to
describe the performance goals shall have the same meanings as used in the
Company's financial statements, or if the terms are not used in the
Company's financial statements, they shall have the meanings generally
applied pursuant to generally accepted accounting principles, or as used in
the industry, as applicable. The Committee may appropriately adjust any
evaluation of performance under a performance goal to exclude any of the
following events that occurs during a performance period: (i) asset write-
downs, (ii) litigation or claim judgments or settlements, (iii) the effect
of changes in tax law, accounting principles or other such laws or
provisions affecting reported results, (iv) accruals for reorganization and
restructuring programs, and (v) extraordinary, non-recurring items as
described in Accounting Principles Board Opinion No. 30 and/or in
management's discussion and analysis of financial condition and results of
operations appearing in the Company's annual report to shareholders for the
applicable year.
10. Stock Options for Outside Directors.
10.1 Grant of Options. During each calendar year that the Plan remains
in effect, each Outside Director may be granted, in the discretion of the
Committee, non-qualified stock options to purchase up to 5,000 shares of
Common Stock, the exact number of which shall be set each year by the
Committee.
10.2 Exercisability of Stock Options. The stock options granted to
Outside Directors under this Section 10 shall be exercisable six months
after the date of grant and shall expire no later than ten years following
the date of grant.
10.3 Exercise Price. The Exercise Price of the Stock Options granted to
Outside Directors shall be equal to the Fair Market Value, as defined in
the Plan, of a share of Common Stock on the date of grant. The Exercise
Price may be paid as provided in Section 6.5 hereof.
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10.4 Exercise After Termination of Board Service. In the event an
Outside Director ceases to serve on the Board, the stock options granted
hereunder must be exercised, to the extent otherwise exercisable at the
time of termination of Board service, within one year from termination of
Board service; provided, however, that
A. In the event of termination of Board service as a result of death
or disability, the stock options may be exercised within two years from
the date of termination of Board service; and
B. In the event of termination of Board service as a result of
retirement (at age 65 or later or after having completed five or more
years of service on the Board), the stock options may be exercised
within five years from the date of termination of Board service;
and further provided, that no stock options may be exercised later than
ten years after the date of grant.
11. General.
11.1 Duration. Subject to Section 11.9, the Plan shall remain in effect
until all Incentives granted under the Plan have either been satisfied by
the issuance of shares of Common Stock or otherwise been terminated under
the terms of the Plan and all restrictions imposed on shares of Common
Stock in connection with their issuance under the Plan have lapsed.
11.2 Transferability. No Incentives granted hereunder may be
transferred, pledged, assigned or otherwise encumbered by a participant
except: (a) by will; (b) by the laws of descent and distribution; (c)
pursuant to a domestic relations order, as defined in the Code; or (d) as
to options only, if permitted by the Committee and so provided in the
Incentive Agreement or an amendment thereto, (i) to Immediate Family
Members, (ii) to a partnership in which Immediate Family Members, or
entities in which Immediate Family Members are the sole owners, members or
beneficiaries, as appropriate, are the sole partners, (iii) to a limited
liability company in which Immediate Family Members, or entities in which
Immediate Family Members are the sole owners, members or beneficiaries, as
appropriate, are the sole members, or (iv) to a trust for the sole benefit
of Immediate Family Members. "Immediate Family Members" shall be defined as
the spouse and natural or adopted children or grandchildren of the
participant and their spouses. To the extent that an incentive stock option
is permitted to be transferred during the lifetime of the participant, it
shall be treated thereafter as a nonqualified stock option. Any attempted
assignment, transfer, pledge, hypothecation or other disposition of
Incentives, or levy of attachment or similar process upon Incentives not
specifically permitted herein, shall be null and void and without effect.
11.3 Effect of Termination of Employment or Death. Except as provided in
Section 10.4 with respect to Outside Directors, in the event that a
participant ceases to be an employee of the Company or to provide services
to the Company for any reason, including death, disability, early
retirement or normal retirement, any Incentives may be exercised, shall
vest or shall expire at such times as may be determined by the Committee
and provided in the Incentive Agreement.
11.4 Additional Conditions. Anything in this Plan to the contrary
notwithstanding: (a) the Company may, if it shall determine it necessary or
desirable for any reason, at the time of award of any Incentive or the
issuance of any shares of Common Stock pursuant to any Incentive, require
the recipient of the Incentive, as a condition to the receipt thereof or to
the receipt of shares of Common Stock issued pursuant thereto, to deliver
to the Company a written representation of present intention to acquire the
Incentive or the shares of Common Stock issued pursuant thereto for his own
account for investment and not for distribution; and (b) if at any time the
Company further determines, in its sole discretion, that the listing,
registration or qualification (or any updating of any such document) of any
Incentive or the shares of Common Stock issuable pursuant thereto is
necessary on any securities exchange or under any federal or state
securities or blue sky law, or that the consent or approval of any
governmental regulatory body is necessary or desirable as a condition of,
or in connection with the award of any Incentive, the issuance of shares of
Common Stock pursuant thereto, or the removal of any restrictions imposed
on such shares, such Incentive shall not be awarded or such shares of
Common Stock shall not be issued or such restrictions
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shall not be removed, as the case may be, in whole or in part, unless such
listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Company.
11.5 Adjustment. In the event of any merger, consolidation or
reorganization of the Company with any other corporation or corporations,
there shall be substituted for each of the shares of Common Stock then
subject to the Plan, including shares subject to restrictions, options or
achievement of performance objectives, the number and kind of shares of
stock, other securities or property (including cash) to which the holders
of the shares of Common Stock are entitled pursuant to the transaction. In
the event of any recapitalization, stock dividend, stock split, combination
of shares or other similar change in the Common Stock, the number of shares
of Common Stock then subject to the Plan, including shares subject to
outstanding Incentives, and all limitations on the number of shares that
may be issued hereunder shall be adjusted in proportion to the change in
outstanding shares of Common Stock. In the event of any such adjustments,
the purchase price of any option and the performance objectives of any
Incentive, shall also be adjusted as and to the extent appropriate, in the
reasonable discretion of the Committee, to provide participants with the
same relative rights before and after such adjustment. No substitution or
adjustment shall require the Company to issue a fractional share under the
Plan and the substitution or adjustment shall be limited by deleting any
fractional share.
11.6 Withholding.
A. The Company shall have the right to withhold from any payments
made or stock issued under the Plan or to collect as a condition of
payment, issuance or vesting, any taxes required by law to be withheld.
At any time that a participant is required to pay to the Company an
amount required to be withheld under applicable income tax laws in
connection with the lapse of restrictions on Common Stock or the
exercise of an option, the participant may, subject to disapproval by
the Committee, satisfy this obligation in whole or in part by electing
(the "Election") to deliver currently owned shares of Common Stock or
to have the Company withhold shares of Common Stock, in each case
having a value equal to the minimum statutory amount required to be
withheld under federal, state and local law. The value of the shares to
be delivered or withheld shall be based on the Fair Market Value of the
Common Stock on the date that the amount of tax to be withheld shall be
determined ("Tax Date").
B. Each Election must be made prior to the Tax Date. The Committee
may disapprove of any Election, may suspend or terminate the right to
make Elections, or may provide with respect to any Incentive that the
right to make Elections shall not apply to such Incentive. If a
participant makes an election under Section 83(b) of the Code with
respect to shares of restricted stock, an Election to have shares
withheld to satisfy withholding taxes is not permitted to be made.
11.7 No Continued Employment. No participant under the Plan shall have
any right, because of his or her participation, to continue in the employ
of the Company for any period of time or to any right to continue his or
her present or any other rate of compensation.
11.8 Deferral Permitted. Payment of an Incentive may be deferred at the
option of the participant if permitted in the Incentive Agreement.
11.9 Amendments to or Termination of the Plan. The Board may amend or
discontinue this Plan at any time; provided, however, that no such
amendment may:
A. without the approval of the shareholders, (i) except for
adjustments permitted herein, increase the maximum number of shares of
Common Stock that may be issued through the Plan, (ii) materially
increase the benefits accruing to participants under the Plan or (iii)
materially expand the classes of persons eligible to participate in the
Plan, or
B. materially impair, without the consent of the recipient, an
Incentive previously granted.
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11.10 Change of Control.
A. A Change of Control shall mean:
(i) the acquisition by any person of beneficial ownership of 30%
or more of the outstanding shares of the Common Stock or 30%
or more of the combined voting power of Gulf Island's then
outstanding securities entitled to vote generally in the
election of directors; provided, however, that for purposes of
this subsection (i), the following acquisitions shall not
constitute a Change of Control:
(a) any acquisition (other than a Business Combination (as
defined below) which constitutes a Change of Control under
Section 11.10(A)(iii) hereof) of Common Stock directly
from the Company,
(b) any acquisition of Common Stock by the Company,
(c) any acquisition of Common Stock by any employee benefit
plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company, or
(d) any acquisition of Common Stock by any corporation
pursuant to a Business Combination that does not
constitute a Change of Control under Section 11.10(A)(iii)
hereof; or
(e) any acquisition by Huey J. Wilson, Alden J. Laborde, their
Immediate Family Members or any entity controlled by Huey
J. Wilson, Alden J. Laborde or their Immediate Family
Members, or
(ii) individuals who, as of January 1, 2002, constituted the Board
of Directors of Gulf Island (the "Incumbent Board") cease for
any reason to constitute at least a majority of the Board of
Directors; provided, however, that any individual becoming a
director subsequent to such date whose election, or
nomination for election by Gulf Island's shareholders, was
approved by a vote of at least two-thirds of the directors
then comprising the Incumbent Board shall be considered a
member of the Incumbent Board, unless such individual's
initial assumption of office occurs as a result of an actual
or threatened election contest with respect to the election
or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a
person other than the Incumbent Board; or
(iii) consummation of a reorganization, share exchange, merger or
consolidation (including any such transaction involving any
direct or indirect subsidiary of Gulf Island) or sale or
other disposition of all or substantially all of the assets
of the Company (a "Business Combination"); provided,
however, that in no such case shall any such transaction
constitute a Change of Control if immediately following such
Business Combination:
(a) the individuals and entities who were the beneficial
owners of Gulf Island's outstanding Common Stock and Gulf
Island's voting securities entitled to vote generally in
the election of directors immediately prior to such
Business Combination have direct or indirect beneficial
ownership, respectively, of more than 50% of the then
outstanding shares of common stock, and more than 50% of
the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of
directors of the surviving or successor corporation, or,
if applicable, the ultimate parent company thereof (the
"Post-Transaction Corporation"), and
(b) except to the extent that such ownership existed prior to
the Business Combination, no person (excluding the Post-
Transaction Corporation and any employee benefit
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plan or related trust of either Gulf Island, the Post-
Transaction Corporation or any subsidiary of either
corporation) beneficially owns, directly or indirectly, 25%
or more of the then outstanding shares of common stock of
the corporation resulting from such Business Combination or
25% or more of the combined voting power of the then
outstanding voting securities of such corporation, and
(c) at least a majority of the members of the board of
directors of the Post-Transaction Corporation were members
of the Incumbent Board at the time of the execution of the
initial agreement, or of the action of the Board of
Directors, providing for such Business Combination; or
(iv) approval by the shareholders of Gulf Island of a complete
liquidation or dissolution of Gulf Island.
For purposes of this Section 11.10, the term "person" shall mean a
natural person or entity, and shall also mean the group or syndicate
created when two or more persons act as a syndicate or other group
(including, without limitation, a partnership or limited partnership)
for the purpose of acquiring, holding, or disposing of a security,
except that "person" shall not include an underwriter temporarily
holding a security pursuant to an offering of the security.
B. Upon a Change of Control of the type described in clause (A)(i) or
(A)(ii) of this Section 11.10 or immediately prior to any Change of
Control of the type described in clause (A)(iii) or (A)(iv) of this
Section 11.10, all outstanding Incentives granted pursuant to this Plan
shall automatically become fully vested and exercisable, all
restrictions or limitations on any Incentives shall automatically lapse
and, unless otherwise provided in the applicable Incentive Agreement,
all performance criteria and other conditions relating to the payment of
Incentives shall be deemed to be achieved or waived by Gulf Island
without the necessity of action by any person. As used in the
immediately preceding sentence, "immediately prior' to the Change of
Control shall mean sufficiently in advance of the Change of Control to
permit the grantee to take all steps reasonably necessary (i) if an
optionee, to exercise any such option fully and (ii) to deal with the
shares purchased or acquired under any such option or any Other Stock-
Based Award and any formerly restricted shares on which restrictions
have lapsed so that all types of shares may be treated in the same
manner in connection with the Change of Control as the shares of Common
Stock of other shareholders.
C. No later than 30 days after a Change of Control of the type
described in subsections (A)(i) or (A)(ii) of this Section 11.10 and no
later than 30 days after the approval by the Board of a Change of
Control of the type described in subsections (A)(iii) or (A)(iv) of this
Section 11.10, the Committee, acting in its sole discretion without the
consent or approval of any participant (and notwithstanding any removal
or attempted removal of some or all of the members thereof as directors
or Committee members), may act to effect one or more of the alternatives
listed below, which may vary among individual participants and which may
vary among Incentives held by any individual participant:
(i) require that all outstanding options or Other Stock-Based
Awards be exercised on or before a specified date (before or
after such Change of Control) fixed by the Committee, after
which specified date all unexercised options and Other Stock-
Based Awards and all rights of participants thereunder shall
terminate,
(ii) make such equitable adjustments to Incentives then
outstanding as the Committee deems appropriate to reflect
such Change of Control (provided, however, that the Committee
may determine in its sole discretion that no adjustment is
necessary),
(iii) provide for mandatory conversion of some or all of the
outstanding options or Other Stock-Based Awards held by some
or all participants as of a date, before or after such
Change of Control, specified by the Committee, in which
event such options and Other Stock-Based Awards shall be
deemed automatically cancelled and the Company shall
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pay, or cause to be paid, to each such participant an amount of
cash per share equal to the excess, if any, of the Change of
Control Value of the shares subject to such option or Other
Stock-Based Award, as defined and calculated below, over the
exercise price of such options or the exercise or base price of
such Other Stock-Based Awards or, in lieu of such cash payment,
the issuance of Common Stock or securities of an acquiring
entity having a Fair Market Value equal to such excess, or
(iv) provide that thereafter, upon any exercise of an option or
Other Stock-Based Award that entitles the holder to receive
Common Stock, the holder shall be entitled to purchase or
receive under such option or Other Stock-Based Award, in lieu
of the number of shares of Common Stock then covered by such
option or Other Stock-Based Award, the number and class of
shares of stock or other securities or property (including,
without limitation, cash) to which the holder would have been
entitled pursuant to the terms of the agreement providing for
the reorganization, share exchange, merger, consolidation or
asset sale, if, immediately prior to such Change of Control,
the holder had been the record owner of the number of shares
of Common Stock then covered by such option or Other Stock-
Based Award.
D. For the purposes of paragraph (iii) of Section 11.10(C), the
"Change of Control Value" shall equal the amount determined by whichever
of the following items is applicable:
(i) the per share price to be paid to shareholders of Gulf Island
in any such merger, consolidation or other reorganization,
(ii) the price per share offered to shareholders of Gulf Island in
any tender offer or exchange offer whereby a Change of
Control takes place,
(iii) in all other events, the fair market value per share of
Common Stock into which such options being converted are
exercisable, as determined by the Committee as of the date
determined by the Committee to be the date of conversion of
such options, or
(iv) in the event that the consideration offered to shareholders
of Gulf Island in any transaction described in this Section
11.10 consists of anything other than cash, the Committee
shall determine the fair cash equivalent of the portion of
the consideration offered that is other than cash.
11.11 Definition of Fair Market Value. Whenever "Fair Market Value" of
Common Stock shall be determined for purposes of this Plan, it shall be
determined as follows: (i) if the Common Stock is listed on an established
stock exchange or any automated quotation system that provides sale
quotations, the closing sale price for a share of the Common Stock on such
exchange or quotation system on the applicable date, or if no sale of the
Common Stock shall have been made on that day, on the next preceding day on
which there was a sale of the Common Stock; (ii) if the Common Stock is not
listed on any exchange or quotation system, but bid and asked prices are
quoted and published, the mean between the quoted bid and asked prices on
the applicable date, and if bid and asked prices are not available on such
day, on the next preceding day on which such prices were available; and
(iii) if the Common Stock is not regularly quoted, the fair market value of
a share of Common Stock on the applicable date as established by the
Committee in good faith.
This Plan is executed effective the day of , 2002.
GULF ISLAND FABRICATION, INC.
By:
-------------------------------------
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8888
This Proxy Is Solicited on Behalf of the Board of Directors of
GULF ISLAND FABRICATION, INC.
The undersigned hereby constitutes and appoints Kerry J. Chauvin and Joseph
P. Gallagher, III, or either of them, proxy for the undersigned, with full power
of substitution, to represent the undersigned and to vote, as designated on the
reverse side, all of the shares of Common Stock of Gulf Island Fabrication, Inc.
(the "Company") that the undersigned is entitled to vote held of record by the
undersigned on March 8, 2002, at the annual meeting of shareholders of the
Company to be held on April 24, 2002 (the "Annual Meeting"), and at all
adjournments thereof.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy will
be voted FOR the nominees and FOR the proposals listed on the reverse side. The
individuals designated above will vote in their discretion on any other matter
that may properly come before the meeting.
(Please See Reverse Side)
Please mark, sign, date and return your
proxy card as soon as possible!
Annual Meeting of Shareholders
GULF ISLAND FABRICATION, INC.
April 24, 2002
Please Detach and Mail in the Envelope Provided
[X] Please mark your |
votes as in this |
example. |_____
FOR all nominees WITHHOLD The Board of Directors recommends a vote FOR the nominee listed below
listed to the right AUTHORITY and FOR Proposals 2 and 3.
(except as marked to to vote for all nominees
the contrary below) listed to the right Nominees:
1. To elect [_] [_] Gregory J. Cotter
Class II John P. ("Jack") Leborde
directors. FOR AGAINST ABSTAIN
INSTRUCTIONS: To withhold authority to vote for any 2. To approve a proposal to adopt the [_] [_] [_]
individual nominee, strike a line through the nominee's 2002 Long Term Incentive Plan of
name in the list to the right. Gulf Island Fabrication, Inc.
3. To ratify the appointment of [_] [_] [_]
Ernst & Young LLP as the independent
auditors to audit the financial
statements of the Company and its
subsidiaries for the year 2002.
4. To intersect such other business as may properly come before the
meeting and any adjournments thereof.
Please mark, sign, date and return this proxy promptly using the
enclosed envelope.
Signature of Shareholder ___________________________ Signature if held jointly ____________________ Date: __________________ , 2002
5. Please sign exactly as name appears on the certificate or certificates representing shares to be voted by this proxy, as shown on
the label above. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If a
corporation, please sign full corporate name by president or other authorized officer. If a partnership, please sign in
partnership name by authorized persons.