Exhibit 99.1
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement (the "Agreement") between Gulf Island
Fabrication, Inc., a Louisiana corporation (the "Company"), and Xxxxx X. Xxxxxxx
(the "Executive") is dated effective June 17, 2009 (the "Agreement Date").
ARTICLE I
DEFINITIONS
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Whenever the following terms are used in this Agreement, they shall have
the meaning specified below unless the context clearly indicates to the
contrary. The singular pronoun shall include the plural where the context so
indicates.
1.1 "Accrued Salary" has the meaning provided in Section 2.3(a)(i).
1.2 "Affiliate" of any Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For purposes of this definition, "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such person or entity, whether
through the ownership of voting securities or otherwise; and the terms
"controlling" and "controlled" shall have correlative meanings.
1.3 "Base Salary" has the meaning provided in Section 2.2(a).
1.4 "Beneficial Owner" (and variants thereof) with respect to a
security, means a Person who, directly or indirectly (through any contract,
understanding, relationship, or otherwise) has or shares (a) the power to vote,
or direct of the voting of, the security, and (b) the power to dispose of, or to
direct the disposition of, the security.
1.5 "Board" means the Board of Directors of the Company.
1.6 "Business Combination" means the consummation of a reorganization,
merger or consolidation (including a merger or consolidation of the Company or
any direct or indirect subsidiary of the Company), or sale or other disposition
of all or substantially all of the assets of the Company.
1.7 "Cause."
(a) "Cause" means:
(i) the Executive's willful and continued failure to
perform substantially the Executive's duties with the Company or its
Affiliates (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board, which
specifically identifies the manner in which the Board believes that the
Executive has not substantially performed the Executive's duties;
(ii) the willful engaging in conduct that is demonstrably
and materially injurious to the Company or any of its Affiliates,
monetarily or otherwise;
(iii) unauthorized acts or omissions by the Executive that
could reasonably be expected to cause material financial harm to the
Company or materially disrupt Company operations;
(iv) commission by the Executive of an act of dishonesty
(even if not a crime) resulting in the enrichment of the Executive at the
expense of the Company;
(v) the Executive's knowing falsification or knowing
attempted falsification of financial records of the Company in violation
of SEC Rule 13b2-1; or
(vi) the final conviction of the Executive or an entering of
a guilty plea or a plea of no contest by the Executive to a felony.
(b) For purposes of subparagraphs (a)(i) and (a)(ii) above, no
act or failure to act, on the part of the Executive, shall be considered
"willful" unless it is done, or omitted to be done, by the Executive in bad
faith or without reasonable belief that the Executive's action or omission was
in the best interest of the Company or its Affiliates.
(c) Any act, or failure to act, based on authority given pursuant
to a resolution duly adopted by the Board, upon the instructions of a senior
officer of the company, or based upon the advice of counsel for the Company or
its Affiliates shall be conclusively determined to be done, or omitted to be
done, by the Executive in good faith and in the best interest of the Company or
its Affiliates.
(d) The termination of employment of the Executive shall not be
deemed to be for Cause unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted by the affirmative vote of not
less than three-quarters of the entire membership of the Board at a meeting of
the Board called and held for such purpose (after reasonable notice is provided
to the Executive and the Executive, together with counsel, is given an
opportunity to be heard before the Board), finding that, in the good faith
opinion of the Board, the Executive is guilty of conduct described in
subparagraph (a) above, and specifying the particulars of such conduct.
1.8 "Change of Control" means
(a) 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 the Company's then-outstanding securities entitled to
vote generally in the election of directors; provide, however, that for purposes
of this Section 1.8(a), the following acquisitions shall not constitute a Change
of Control:
(i) any acquisition (other than a Business Combination
which constitutes a Change of Control under Section 1.8(c)) of Common
Stock directly from the Company,
(ii) any acquisition of Common Stock by the Company,
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(iii) any acquisition of Common Stock by any employee benefit
plan (or related trust) sponsored or maintained by the Company or its
Affiliates, or
(iv) any acquisition by Xxxxx X. Xxxxxxx, his Immediate
Family Members or any entity controlled by Xxxxx X. Xxxxxxx or his
Immediate Family Members; or
(b) individuals who, as of the Agreement Date, constituted the
Incumbent Board, cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
such date whose election or nomination for election by the Company's
shareholders was approved by a vote of at least two-thirds of the directors then
comprising 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
(c) 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:
(i) the individuals and entities who were the Beneficial
Owners of the Company's outstanding Common Stock and the Company'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 Post-Transaction
Corporation;
(ii) except to the extent that such ownership existed prior
to the Business Combination, no Person (excluding the Post-Transaction
Corporation and any employee benefit plan or related trust of either the
Company, the Post-Transaction Corporation, or any Affiliates of either)
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
(iii) 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
(d) approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
1.9 "Code" means the Internal Revenue Code of 1986, as amended.
1.10 "Common Stock" means the common stock, no par value per share, of
the Company.
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1.11 "Company" means the Company as defined above and any successor to
or assignee of (whether direct or indirect, by purchase, merger, consolidation,
or otherwise) all or substantially all of the assets of the Company.
1.12 "Confidential Information" means any information, knowledge, or
data of any nature and in any form (including information that is electronically
transmitted or stored on any form of magnetic or electronic storage media)
relating to the past, current, or prospective business or operations of the
Company and its Affiliates, that at the time or times concerned is not generally
known to persons engaged in businesses similar to those conducted or
contemplated by the Company and its Affiliates (other than information known by
such persons through a violation of an obligation of confidentiality to the
Company), whether produced by the Company and its Affiliates or any of their
consultants, agents, or independent contractors or by Executive, and whether or
not marked confidential, including without limitation information relating to
the Company's or its Affiliates' products and services, business plans, business
acquisitions, processes, product or service research and development ideas,
methods or techniques, training methods and materials, and other operational
methods or techniques, quality assurance procedures or standards, operating
procedures, files, plans, specifications, proposals, drawings, charts, graphs,
support data, trade secrets, supplier lists, supplier information, purchasing
methods or practices, distribution and selling activities, consultants' reports,
marketing and engineering or other technical studies, maintenance records,
employment or personnel data, marketing data, strategies or techniques,
financial reports, budgets, projections, cost analyses, price lists, formulae
and analyses, employee lists, customer records, customer lists, customer source
lists, proprietary computer software, and internal notes and memoranda relating
to any of the foregoing.
1.13 "Continuation Period" has the meaning provided in Section
2.3(c)(iii).
1.14 "Disability" means a condition that would entitle the Executive to
receive benefits under the Company's long-term disability insurance policy in
effect at the time either because he is Totally Disabled or Partially Disabled,
as such terms are defined in the Company's policy in effect as of the Agreement
Date or as similar terms are defined in any successor policy. If the Company has
no long-term disability plan in effect, "Disability" shall occur if (a) the
Executive is rendered incapable because of physical or mental illness of
satisfactorily discharging his duties and responsibilities to the Company for a
period of 90 consecutive days, (b) a duly qualified physician chosen by the
Company and acceptable to the Executive or his legal representatives so
certifies in writing, and (c) the Board determines that the Executive has become
disabled.
1.15 "Employment Term" has the meaning provided in Section 2.1(a).
1.16 "Expiration Date" has the meaning provided in Section 2.1(a).
1.17 "Good Reason" means any action or inaction during the Employment
Term that constitutes a material negative change in the service relationship
between the Executive and the Company and a material breach by the Company of
its obligations under the terms of this Agreement, provided that the Executive
shall have provided written notice to the Company within 90 days of the initial
existence of the condition described in this Section 1.17 and such event or
condition continues uncured for a period of 30 days after written notice thereof
is given by the Executive to the Company. A termination by the Executive with
Good Reason shall constitute an involuntary termination for purposes of Section
409A of the Internal Revenue Code of 1986, as amended.
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1.18 "Immediate Family Members" means the spouse and the natural or
adopted children or grandchildren of a specified individual.
1.19 "Incumbent Board" means individuals who, as of a specified date,
constituted the Board of Directors of the Company.
1.20 "Person" means a natural person, company, limited partnership,
general partnership, limited liability company or partnership, joint venture,
association, trust, bank, trust company, land trust, business trust or other
organization, whether or not a legal entity, and a government or agency or
political subdivision thereof.
1.21 "Post-Transaction Corporation."
(a) Unless a Change of Control includes a Business Combination,
Post-Transaction Corporation means the Company after the Change of Control.
(b) If a Change of Control includes a Business Combination,
Post-Transaction Corporation means the corporation resulting from the Business
Combination unless, as a result of such Business Combination, an ultimate parent
corporation controls the Company or all or substantially all of the Company's
assets either directly or indirectly, in which case, Post-Transaction
Corporation shall mean such ultimate parent corporation.
1.22 "Pro Rata Bonus" has the meaning provided in Section 2.3(a)(ii).
1.23 "Section 409A" means Section 409A of the Code, as amended, and the
regulations and guidance issued thereunder.
1.24 "Termination Date" means, if Executive's status as an officer and
employee is terminated (a) by reason of Executive's death, the date of
Executive's death; (b) by reason of Disability, the date on which termination of
Executive's status as an officer and employee becomes effective due to
Disability; (c) by the Company other than by reason of death or Disability, the
date of delivery of the notice of termination or any later date specified in the
notice of termination, which date will not be more than 30 days after the giving
of the notice; or (d) by the Executive other than by reason of death, the date
of delivery of the notice of termination or any later date specified in the
notice of termination, which date will not be more than 30 days after the giving
of the notice.
ARTICLE II
CHANGE OF CONTROL BENEFIT
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2.1 Employment Term and Capacity after Change of Control.
(a) This Agreement shall commence on the Agreement Date and
continue in effect through December 31, 2010 (the "Expiration Date"). If the
Executive continues to serve as an officer of the Company and a Change of
Control occurs on or before the Expiration Date, then the Executive's employment
term (the "Employment Term") shall continue for a period of twenty-four months
following the Change of Control, subject to any earlier termination of
Executive's status as an officer and employee pursuant to this Agreement.
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(b) After a Change of Control and during the Employment Term, (i)
the Executive's position (including status, offices, titles, and reporting
requirements), authority, duties, and responsibilities shall be at least
commensurate in all material respects with the most significant of those held,
exercised, and assigned at any time during the 120-day period immediately
preceding the Change of Control; and (ii) the Executive's services shall be
performed at the location where the Executive was employed immediately preceding
the Change of Control or any office or location less than 50 miles from such
location. Executive's position, authority, duties, and responsibilities after a
Change of Control shall not be considered commensurate in all material respects
with Executive's position, authority, duties, and responsibilities prior to a
Change of Control unless after the Change of Control the Executive holds an
equivalent position in the Post-Transaction Corporation.
2.2 Compensation and Benefits. During the Employment Term, the
Executive shall be entitled to the following compensation and benefits:
(a) Salary. An annual salary ("Base Salary") at the highest rate
in effect for the Executive at any time during the 120-day period immediately
preceding the Change of Control, payable to the Executive at such intervals no
less frequent than the most frequent intervals in effect at any time during the
120-day period immediately preceding the Change of Control or, if more favorable
to the Executive, the intervals in effect at any time after the Change of
Control for other most senior executives of the Post-Transaction Corporation and
its Affiliates.
(b) Bonus. Executive shall be entitled to participate in an
annual incentive bonus program applicable to other most senior executives of the
Post-Transaction Corporation and its Affiliates but in no event shall such
program provide the Executive with incentive opportunities less favorable than
the most favorable of those provided by the Company and its Affiliates for the
Executive under the Company's annual cash plan as in effect for Executive at any
time during the 120-day period immediately preceding the Change of Control or,
if more favorable to the Executive, those provided generally at any time after
the Change of Control to other most senior executives of the Post-Transaction
Corporation and its Affiliates. Any such bonus shall be paid in cash no later
than two and a half months following the close of the fiscal year for which it
is earned.
(c) Fringe Benefits. The Executive shall be entitled to fringe
benefits (including, but not limited to, automobile allowance, air travel, and
reimbursement for club membership dues) in accordance with the most favorable
agreements, plans, practices, programs, and policies of the Company and its
Affiliates in effect for the Executive at any time during the 120-day period
immediately preceding the Change of Control or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
most senior executives of the Post-Transaction Corporation and its Affiliates.
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(d) Expenses. The Executive shall be entitled to receive prompt
reimbursement for all reasonable business expenses (including food and lodging)
incurred by the Executive in accordance with the most favorable agreements,
policies, practices, and procedures of the Company and its Affiliates in effect
for the Executive at any time during the 120-day period immediately preceding
the Change of Control or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other most senior executives of
the Post-Transaction Corporation and its Affiliates.
(e) Incentive, Savings and Retirement Plans. The Executive shall
be entitled to participate in all incentive, savings and retirement plans,
practices, policies, and programs applicable generally to other most senior
executives of the Post-Transaction Corporation and its Affiliates, but in no
event shall such plans, practices, policies, and programs provide the Executive
with incentive opportunities (measured with respect to both regular and special
incentive opportunities, to the extent, if any, that such distinction is
applicable), savings opportunities and retirement benefit opportunities, in each
case, less favorable than the most favorable of those provided by the Company
and its Affiliates for the Executive under any agreements, plans, practices,
policies, and programs as in effect at any time during the 120-day period
immediately preceding the Change of Control.
(f) Welfare Benefit Plans. The Executive and the Executive's
family shall be eligible for participation in and shall receive all benefits
under welfare benefit plans, practices, policies, and programs provided by the
Post-Transaction Corporation and its Affiliates (including, without limitation,
medical, prescription, dental, disability, employee life, group life, accidental
death, and travel accident insurance plans and programs) to the extent
applicable generally to other most senior executives of the Post-Transaction
Corporation and its Affiliates, but in no event shall such plans, practices,
policies, and programs provide the Executive with benefits, in each case, less
favorable than the most favorable of any agreements, plans, practices, policies
and programs of the Company and its Affiliates in effect for the Executive at
any time during the 120-day period immediately preceding the Change of Control.
(g) Indemnification and Insurance. The Post-Transaction
Corporation shall indemnify the Executive, to the fullest extent permitted by
applicable law, for any and all claims brought against him arising out his
services during or prior to the Employment Term. In addition, the
Post-Transaction Corporation shall maintain a directors' and officers' insurance
policy covering the Executive substantially in the form of the policy maintained
by the Company and its Affiliates at any time during the 120-day period
immediately preceding the Change of Control or, if more favorable to the
Executive, as provided generally at any time thereafter with respect to other
most senior executives of the Post-Transaction Corporation and its Affiliates.
(h) Office and Support Staff. The Executive shall be entitled to
an office or offices of a size and with furnishings and other appointments, and
to exclusive personal secretarial and other assistance, at least equal to the
most favorable of the foregoing provided to the Executive by the Company and its
Affiliates at any time during the 120-day period immediately preceding the
Change of Control or, if more favorable to the Executive, as provided generally
at any time thereafter with respect to other most senior executives of the
Post-Transaction Corporation and its Affiliates.
(i) Vacation. The Executive shall be entitled to paid vacation in
accordance with the most favorable agreements, plans, policies, programs, and
practices of the Company and its Affiliates as in effect for the Executive at
any time during the 120-day period immediately preceding the Change of Control
or, if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other most senior executives of the Post-Transaction
Corporation and its Affiliates.
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2.3 Obligations upon Termination After a Change of Control.
(a) Termination as a Result of Death, Disability, or Retirement.
If, after a Change of Control and during the Employment Term, (1) the
Executive's status as an officer and employee is terminated by reason of the
Executive's death, (2) the Post-Transaction Corporation terminates the
Executive's status as an officer and employee by reason of Executive's
Disability, or (3) the Executive retires and terminates his status as an officer
and employee, then, subject to Section 2.3(f) and, if applicable, the six-month
delay set forth in Section 2.7:
(i) the Post-Transaction Corporation or an Affiliate will
pay to the Executive or his legal representatives the Executive's Base
Salary earned through the Termination Date to the extent not previously
paid (the "Accrued Salary");
(ii) the Post-Transaction Corporation or an Affiliate will
pay to the Executive or his legal representatives a pro rata bonus in an
amount determined by (1) calculating the average of the annual bonus
received by the Executive in the three most recently completed fiscal
years prior to the Termination Date, then (2) multiplying such bonus
amount by the fraction obtained by dividing the number of days in the
year through the Termination Date by 365 (the "Pro Rata Bonus"); and
(iii) the Post-Transaction Corporation or an Affiliate will
pay or deliver, as appropriate, all other benefits earned by the
Executive or accrued for his benefit pursuant to any employee benefit
plans maintained by the Post-Transaction Corporation or its Affiliates
with respect to services rendered by the Executive prior to the
Termination Date.
(b) Termination by Company for Cause; by Executive for other than
Good Reason. If, after a Change of Control and during the Employment Term, the
Executive's status as an officer and employee is terminated by the
Post-Transaction Corporation or an Affiliate for Cause, or by the Executive for
other than Good Reason, the Post-Transaction Corporation or Affiliate will pay
to the Executive the Accrued Salary without further obligation to the Executive
other than for obligations by law and obligations for any benefits earned by the
Executive or accrued for his benefit pursuant to any employee benefit plans
maintained by the Post-Transaction Corporation or Affiliate with respect to
services rendered by the Executive prior to the Termination Date.
(c) Termination by Company for Reasons Other than Death,
Disability, or Retirement; Termination by Executive for Good Reason. If, after a
Change of Control and during the Employment Term, (1) the Post-Transaction
Corporation or an Affiliate terminates the Executive's status as an officer and
employee other than for Cause, death, or Disability, or (2) the Executive
terminates his status as an officer and employee for Good Reason, then, subject
to Section 2.3(f):
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(i) The Post-Transaction Corporation or an Affiliate will
pay to the Executive the Accrued Salary;
(ii) The Post-Transaction Corporation or an Affiliate will
pay to the Executive in a lump sum in cash on the first business day that
is more than six months after the Termination Date (A) the Pro Rata
Bonus, and (B) an amount equal to two times the sum of (x) the
Executive's Base Salary in effect at the Termination Date and (y) the
highest annual bonus awarded to the Executive during the three fiscal
years immediately preceding the Termination Date;
(iii) For the period commencing on the Termination Date and
ending on the earlier of (A) December 31st of the first calendar year
following the calendar year in which the Termination Date occurs, or (B)
the date that the Executive accepts new employment (the "Continuation
Period"), the Post-Transaction Corporation or an Affiliate will at its
expense maintain and administer for the continued benefit of Executive
all insurance and welfare benefit plans in which Executive was entitled
to participate as an employee as of the Termination Date; provided that
Executive's continued participation is possible under the general terms
and provisions of such plans and all applicable laws. If the Executive is
a "specified employee" governed by Section 2.7 hereof, to the extent that
any benefits provided to the Executive under this Section 2.3(c)(iii) are
taxable to the Executive, then, with the exception of nontaxable medical
insurance benefits, the value of the aggregate amount of such taxable
benefits provided to the Executive pursuant to this Section 2.3(c)(iii)
during the six-month period following the Termination Date shall be
limited to the amount specified by Section 402(g)(1)(B) of Code for the
year in which the termination occurred. The Executive shall pay the cost
of any benefits that exceed the amount specified in the previous sentence
during the six month period following the date of termination, and shall
be reimbursed in full by the Company during the seventh month after the
Termination Date. The coverage and benefits (including deductibles and
costs) provided under any such benefit plan in accordance with this
paragraph during the Continuation Period will be no less favorable to
Executive than the most favorable of such coverages and benefits as of
the Termination Date. If Executive's participation in any such benefit
plan is barred or any such benefit plan is terminated, the
Post-Transaction Corporation or its Affiliate will provide Executive with
benefits substantially similar or comparable in value to those Executive
would otherwise have been entitled to receive under such plans. At the
end of the Continuation Period, the Executive will have the option to
have assigned to him, at no cost and with no apportionment of prepaid
premiums, any assignable insurance owned by the Post-Transaction
Corporation or its Affiliate that relates specifically to the Executive.
To the maximum extent permitted by law, the Executive will be eligible
for coverage under COBRA at the end of the Continuation Period or earlier
cessation of the Post-Transaction Corporation's obligation under the
foregoing provisions of this paragraph;
(iv) All benefits that the Executive is entitled to receive
pursuant to benefit plans maintained by the Post-Transaction Corporation
or an Affiliate under which benefits are calculated based upon years of
service or age will be calculated by treating the Executive as having
attained two additional years of age and as having provided two
additional years of service as of the Termination Date; and
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(v) The Post-Transaction Corporation or an Affiliate will
pay or deliver, as appropriate, all other benefits earned by the
Executive or accrued for his benefit pursuant to any employee benefit
plans maintained by the Post-Transaction Corporation or Affiliate with
respect to services rendered by the Executive prior to the Termination
Date.
(d) Resignation from Board of Directors. If the Executive is a
director of the Post-Transaction Corporation or any of its Affiliates and his
status as an officer and employee is terminated for any reason other than death,
the Executive will, if requested by the Post-Transaction Corporation,
immediately resign as a director of the Post-Transaction Corporation and its
Affiliates. If such resignation is not received within 20 business days after
the Executive actually receives written notice from the Post-Transaction
Corporation requesting the resignation, the Executive will forfeit any right to
receive any payments pursuant to this Agreement.
(e) Nondisclosure and Proprietary Rights. The rights and
obligations of the Company and the Executive contained in Article III hereof
will continue to apply notwithstanding a termination following a Change of
Control.
(f) Most Favorable Benefits. It is the intention of the parties
that the terms of this Agreement provide payments and benefits to the Executive
that are equivalent or more beneficial to the Executive than are otherwise
available to the Executive under the terms of any applicable benefit plan or
related compensation agreement. To that end, the terms of the Agreement shall
govern the payments and benefits to which the Executive shall be entitled upon
the termination of the Executive's status as an officer and employee as provided
herein, except that if the terms of any applicable benefit plan or related
compensation agreement provide more favorable benefits to the Executive than are
provided hereunder, the terms of such plan or agreement shall control.
2.4 Excise Tax Provision.
(a) Notwithstanding any other provisions of this Agreement, if a
Change of Control occurs during the original or extended term of this Agreement,
in the event that any payment or benefit received or to be received by the
Executive in connection with the Change of Control of the Company or the
termination of the Executive's employment under this Agreement or any other
agreement between the Company and the Executive (all such payments and benefits,
including the payments and benefits under Section 2.3(c) hereof, being
hereinafter called "Total Payments") would be subject (in whole or in part), to
an excise tax imposed by section 4999 of the Code (the "Excise Tax"), then the
cash payments under Section 2.3(c) hereof shall first be reduced, and the
noncash payments and benefits under the other sections hereof shall thereafter
be reduced, to the extent necessary so that no portion of the Total Payments is
subject to the Excise Tax but only if (A) the net amount of such Total Payments,
as so reduced (and after subtracting the net amount of federal, state and local
income and employment taxes on such reduced Total Payments) is greater than or
equal to (B) the net amount of such Total Payments without such reduction (but
after subtracting the net amount of federal, state and local income and
employment taxes on such Total Payments and the amount of Excise Tax to which
the Employee would be subject in respect of such unreduced Total Payments);
provided, however, that the Executive may elect to have the noncash payments and
benefits hereof reduced (or eliminated) prior to any reduction of the cash
payments under Section 2.3(c) hereof.
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(b) For purposes of determining whether and the extent to which
the Total Payments will be subject to the Excise Tax, (i) no portion of the
Total Payments the receipt or enjoyment of which the Executive shall have waived
at such time and in such manner as not to constitute a "payment" within the
meaning of section 280G(b) of the Code shall be taken into account, (ii) no
portion of the Total Payments shall be taken into account which, in the opinion
of tax counsel ("Tax Counsel") reasonably acceptable to the Executive and
selected by the accounting firm (the "Auditor") which was, immediately prior to
a Change of Control or other event giving rise to a potential Excise Tax, the
Company's independent auditor, does not constitute a "parachute payment" within
the meaning of section 280G(b)(2) of the Code (including by reason of section
280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no portion of
such Total Payments shall be taken into account which, in the opinion of Tax
Counsel, constitutes reasonable compensation for services actually rendered,
within the meaning of section 280G(b)(4)(B) of the Code, in excess of the "Base
Amount" (within the meaning set forth in section 280G(b)(3) of the Code)
allocable to such reasonable compensation, and (iii) the value of any non cash
benefit or any deferred payment or benefit included in the Total Payments shall
be determined by the Auditor in accordance with the principles of sections
280G(d)(3) and (4) of the Code.
(c) At the time that payments are made under this Agreement, the
Post-Transaction Corporation shall provide the Executive with a written
statement setting forth the manner in which such payments were calculated and
the basis for such calculations including, without limitation, any opinions or
other advice the Post-Transaction Corporation has received from Tax Counsel, the
Auditor, or other advisors or consultants (and any such opinions or advice which
are in writing shall be attached to the statement).
2.5 Stock Options; Restricted Stock. The foregoing benefits are
intended to be in addition to the value of any options to acquire Common Stock
of the Company, the exercisability of which is accelerated pursuant to the terms
of any stock option agreement, any restricted stock the vesting of which is
accelerated pursuant to the terms of the restricted stock agreement, and any
other incentive or similar plan heretofore or hereafter adopted by the Company.
2.6 Legal Fees. The Company agrees to pay as incurred all legal fees
and expenses that the Executive may reasonably incur as a result of any contest
(regardless of the outcome thereof) by the Company, the Executive or others of
the validity or enforceability of, or liability under, any provision of this
Agreement (including as a result of any contest by the Executive about the
amount or timing of any payment pursuant to this Agreement).
2.7 Section 409A.
(a) It is the intention of the parties that payments or benefits
payable under this Agreement not be subject to the additional tax imposed
pursuant to Section 409A, and the provisions of this Agreement shall be
construed and administered in accordance with such intent. To the extent any
potential payments or benefits could become subject to Section 409A, the parties
shall cooperate to amend this Agreement with the goal of giving the Executive
the economic benefits described herein in a manner that does not result in such
tax being imposed. If the parties are unable to agree on a mutually acceptable
amendment, the Company may, without the Executive's consent and in such manner
as it deems appropriate, amend or modify this Agreement or delay the payment of
any amounts hereunder to the minimum extent necessary to meet the requirements
of Section 409A.
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(b) No payments or benefits provided herein that are paid because
of a termination of employment under circumstances described herein shall be
paid, unless such termination of employment also constitutes a "separation from
service" within the meaning of Section 409A.
(c) If Executive is a "specified employee," any payments payable
as a result of Executive's termination of employment (other than as a result of
death) shall not be payable before the earlier of (i) the first business day
that is more than six months after Executive's Termination Date, (ii) the date
of Executive's death, or (iii) the date that otherwise complies with the
requirements of Section 409A. "Specified employee" shall mean the Executive if
the Executive is a key employee under Treasury Regulations Section 1.409A-1(i)
because of final and binding action taken by the Board or its compensation
committee, or by operation of law or such regulation.
(d) No acceleration of payments and benefits provided for in this
Agreement shall be permitted, except that the Company may accelerate payment, if
permitted by Section 409A, as necessary to allow the Executive to pay FICA taxes
on amounts payable hereunder and additional taxes resulting from the payment of
such FICA amount, or as necessary to pay taxes and penalties arising as a result
of the payments provided for in this Agreement failing to meet the requirements
of Section 409A. In no event shall the Executive, directly or indirectly,
designate the calendar year of payment.
(e) To the extent that the amounts payable under this Article II
are reimbursements and other separation payments described under Treasury
Regulations Section 1.409A-1(b)(9)(v), such payments do not provide for the
deferral of compensation. If they do constitute deferral of compensation
governed by Section 409A, they shall be deemed to be reimbursements or in-kind
benefits governed by Treasury Regulations Section 1.409A-3(i)(1)(iv). If the
previous sentence applies, (i) the amount of expenses eligible for reimbursement
or in-kind benefits provided during the Executive's taxable year shall not
affect the expenses eligible for reimbursement or in-kind benefits in any other
taxable year, (ii) the reimbursement of an eligible expense must be made on or
before the last day of the Executive's taxable year following the taxable year
in which the expense was incurred, and (iii) the right to reimbursement or
in-kind benefits shall not be subject to liquidation or exchange for another
benefit.
ARTICLE III
NONDISCLOSURE AND PROPRIETARY RIGHTS
------------------------------------
3.1 Non-disclosure of Confidential Information. Executive will hold in
a fiduciary capacity for the benefit of the Company all Confidential Information
obtained by Executive during Executive's employment (whether prior to or after
the Agreement Date) and will use such Confidential Information solely within the
scope of his employment with and for the exclusive benefit of the Company. For a
period of two years after the Termination Date, Executive agrees (a) not to
communicate, divulge or make available to any person or entity (other than the
Company) any such Confidential Information, except upon the prior written
authorization of the Company or as may be required by law or legal process; and
(b) to deliver promptly to the Company any Confidential Information in his
possession, including any duplicates thereof and any notes or other records
Executive has prepared with respect thereto. In the event that the provisions of
any applicable law or the order of any court would require Executive to disclose
or otherwise make available any Confidential Information, Executive will give
the Company prompt prior written notice of such required disclosure and an
opportunity to contest the requirement of such disclosure or apply for a
protective order with respect to such Confidential Information by appropriate
proceedings.
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3.2 Injunctive Relief; Other Remedies. Executive acknowledges that a
breach by Executive of Section 3.1 would cause immediate and irreparable harm to
the Company for which an adequate monetary remedy does not exist; hence,
Executive agrees that, in the event of a breach or threatened breach by
Executive of the provisions of Section 3.1, the Company will be entitled to
injunctive relief restraining Executive from such violation without the
necessity of proof of actual damage or the posting of any bond, except as
required by non waivable, applicable law. Nothing herein, however, will be
construed as prohibiting the Company from pursuing any other remedy at law or in
equity to which the Company may be entitled under applicable law in the event of
a breach or threatened breach of this Agreement by Executive, including without
limitation the recovery of damages and/or costs and expenses, such as reasonable
attorneys' fees, incurred by the Company as a result of any such breach or
threatened breach. In addition to the exercise of the foregoing remedies, the
Company will have the right upon the occurrence of any such breach to offset the
damages of such breach as determined by the Company, against any unpaid salary,
bonus, commissions, or reimbursements otherwise owed to Executive. In
particular, Executive acknowledges that the payments provided under Article II
are conditioned upon Executive fulfilling the nondisclosure agreements contained
in this Article III. If Executive at any time materially breaches nondisclosure
agreements contained in this Article III, then the Company may offset the
damages of such breach, as determined solely by the Company, against payments
otherwise due to Executive under Article II or, at the Company's option, suspend
payments otherwise due to Executive under Article II during the period of such
breach. Executive acknowledges that any such offset or suspension of payments
would be an exercise of the Company's right to offset or suspend its performance
hereunder upon Executive's breach of this Agreement; such offset or suspension
of payments would not constitute, and shall not be characterized as, the
imposition of liquidated damages.
3.3 Governing Law of this Article III; Consent to Jurisdiction. Any
dispute regarding the reasonableness of the covenants and agreements set forth
in this Article III or duration thereof, or the remedies available to the
Company upon any breach of such covenants and agreements, will be governed by
and interpreted in accordance with the laws of the State of the United States or
other jurisdiction in which the alleged prohibited disclosure occurs, and, with
respect to each such dispute, the Company and Executive each hereby consent to
the jurisdiction of the state and federal courts sitting in the relevant State
(or, in the case of any jurisdiction outside the United States, the relevant
courts of such jurisdiction) for resolution of such dispute, and agree that
service of process may be made upon him or it in any legal proceeding relating
to this Article III by any means allowed under the laws of such jurisdiction.
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3.4 Executive's Understanding of this Article. Executive hereby
represents to the Company that he has read and understands, and agrees to be
bound by, the terms of this Article III. Executive acknowledges that the
duration of the covenants contained in Article III are the result of arm's
length bargaining and are fair and reasonable in light of (a) the importance of
the functions performed by Executive and the length of time it would take the
Company to find and train a suitable replacement, and (b) Executive's level of
control over and contact with the business and operations of the Company and its
Affiliates in various jurisdictions where same are conducted. It is the desire
and intent of the parties that the provisions of this Agreement be enforced to
the fullest extent permitted under applicable law, whether now or hereafter in
effect and, therefore, to the extent permitted by applicable law, the parties
hereto waive any provision of applicable law that would render any provision of
this Article III invalid or unenforceable.
ARTICLE IV
MISCELLANEOUS
-------------
4.1 Binding Effect; Successors.
(a) This Agreement shall be binding upon and inure to the benefit
of the Company and any of its successors or assigns.
(b) This Agreement is personal to the Executive and shall not be
assignable by the Executive without the consent of the Company (there being no
obligation to give such consent) other than such rights or benefits as are
transferred by will or the laws of descent and distribution.
(c) The Company shall require any successor to or assignee of
(whether direct or indirect, by purchase, merger, consolidation, or otherwise)
all or substantially all of the assets or businesses of the Company (i) to
assume unconditionally and expressly this Agreement and (ii) to agree to perform
or to cause to be performed all of the obligations under this Agreement in the
same manner and to the same extent as would have been required of the Company
had no assignment or succession occurred, such assumption to be set forth in a
writing reasonably satisfactory to the Executive.
(d) The Company shall also require all entities that control or
that after the transaction will control (directly or indirectly) the Company or
any such successor or assignee to agree to cause to be performed all of the
obligations under this Agreement, such agreement to be set forth in a writing
reasonably satisfactory to the Executive.
4.2 Notices. All notices hereunder must be in writing and, unless
otherwise specifically provided herein, will be deemed to have been given upon
receipt of delivery by: (a) hand (against a receipt therefor), (b) certified or
registered mail, postage prepaid, return receipt requested, (c) a nationally
recognized overnight courier service (against a receipt therefor) or (d)
telecopy transmission with confirmation of receipt. All such notices must be
addressed as follows:
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If to the Company:
Gulf Island Fabrication, Inc.
Attn: Xxxxx X. Xxxxxxx, Chairman, Compensation Committee
000 Xxxxxxxx Xxxx
Xxxxx, Xxxxxxxxx 00000
If to the Executive:
Xxxxx X. Xxxxxxx
------------------------------
------------------------------
or such other address as to which any party hereto may have notified the other
in writing.
4.3 Governing Law. Except as provided in Article III hereof, this
Agreement shall be construed and enforced in accordance with and governed by the
internal laws of the State of Louisiana without regard to principles of conflict
of laws.
4.4 Withholding. The Executive agrees that the Company has the right to
withhold, from the amounts payable pursuant to this Agreement, all amounts
required to be withheld under applicable income and/or employment tax laws, or
as otherwise stated in documents granting rights that are affected by this
Agreement.
4.5 Amendment; Waiver. No provision of this Agreement may be modified,
amended, or waived except by an instrument in writing signed by both parties,
unless permitted by Section 2.7(a).
4.6 Severability. If any term or provision of this Agreement, or the
application thereof to any person or circumstance, shall at any time or to any
extent be invalid, illegal or unenforceable in any respect as written, Executive
and the Company intend for any court construing this Agreement to modify or
limit such provision so as to render it valid and enforceable to the fullest
extent allowed by law. Any such provision that is not susceptible of such
reformation shall be ignored so as to not affect any other term or provision
hereof, and the remainder of this Agreement, or the application of such term or
provision to persons or circumstances other than those as to which it is held
invalid, illegal or unenforceable, shall not be affected thereby and each term
and provision of this Agreement shall be valid and enforced to the fullest
extent permitted by law.
4.7 Waiver of Breach. The waiver by either party of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach thereof.
4.8 Remedies Not Exclusive. No remedy specified herein shall be deemed
to be such party's exclusive remedy, and accordingly, in addition to all of the
rights and remedies provided for in this Agreement, the parties shall have all
other rights and remedies provided to them by applicable law, rule or
regulation.
4.9 Company's Reservation of Rights. Executive acknowledges and
understands that the Executive serves at the pleasure of the Board and that the
Company has the right at any time to terminate Executive's status as an employee
of the Company or any of its Affiliates, or to change or diminish his status
during the Employment Term, subject to the rights of the Executive to claim the
benefits conferred by this Agreement.
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4.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
* * * * *
IN WITNESS WHEREOF, the Company and the Executive have caused this
Agreement to be executed as of the Agreement Date.
GULF ISLAND FABRICATION, INC.
/s/ Xxxxx X. Xxxxxxx
---------------------------------------
Xxxxx X. Xxxxxxx
Chairman, Compensation Committee
EXECUTIVE
/s/ Xxxxx X. Xxxxxxx
---------------------------------------
Xxxxx X. Xxxxxxx
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